Diversified Energy Company · NYSE:DEC
Diversified Energy — FY2023 Earnings Presentation
28 slides from Diversified Energy's earnings presentation, March 2024
Slide 1: 2023 Final Results & Acquisition Highlights
2023 Final Results & Acquisition Highlights
Slide 2: Final Results disclaimer
The information contained in this document (the "Presentation") has been prepared by Diversified Energy In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the recipient with Company PLC (“Diversified” or the "Company”). This Presentation is not to b
Slide 3: Relentless Focus on Increasing Value: 2023 Strategic Successes
RELENTLESS FOCUS ON INCREASING VALUE 2023 Strategic Successes Commenced trading on the New York Stock Exchange Generated $219 million of Free Cash Flow 821 137 MMcfepd 10 % Production Declines Mboepd Industry-leading 2023 Avg Production Decreased leverage to 2.3x; realized ~15% Debt reduction
Slide 4: Delivering on a De-Risked Production Model
DELIVERING ON A DE-RISKED PRODUCTION MODEL Commodity Price Risk Diversified’s business model reduces Dynamic hedging sustains realized pricing and delivers exposure to typical industry risk factors consistent cash margins Oil & Gas Development Risk Spectrum High Risk Low Risk Development/Operation
Slide 5: Low Production Declines Create Distinct Advantages
LOW PRODUCTION DECLINES CREATE DISTINCT ADVANTAGES 35% 32% 33% 2023 Annual Prod. Decline (%) Peer Average 28% 25% 23% 23% ~10% DEC Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Capital Intensity $0.25/Mcfe $0.79/Mcfe $0.86/Mcfe $0.95/Mcfe $1.09/Mcfe $1.28/Mcfe $1.44/Mcfe Superior Capital Intensity Enhan
Slide 6: Hedging Strategy Mitigates Risks, Enhances Returns
HEDGING STRATEGY MITIGATES RISKS, ENHANCES RETURNS Diversified Stands Out with Natural Gas Price Protection % of Production Hedged Hedged Benchmark Price $3.09 % of 2024 Natural Gas Production Hedged 85% 82% 71% $2.45 56% 55% 2024 Avg 44% 47% Strip Price 43% 27% 14% 4% Diversified Peer Average Peer
Slide 7: Innovative Asset Sale Provides Liquidity and Reduces Debt
INNOVATIVE ASSET SALE PROVIDES LIQUIDITY AND REDUCES DEBT Illustrative Liquidity Enhancement Industry-First Transaction Borrowing Base Liquidity Enhanement $90 million in liquidity uplift Unlocks Value of Assets $30 First-in industry sale of equity cash flows on amortizing debt $60 $150 Robust e
Slide 8: Financial and Operating Highlights
Financial and Operating Highlights
Slide 9: Summary Financial and Operating Results
SUMMARY FINANCIAL AND OPERATING RESULTS Generating Robust Operating Margins Driving Value With with Production and Cash Flows Sustainable Operations 821 MMcfepd $3.48 per Mcfe $28.26 /share 222 | 384 137 Mboepd $20.87 per Boe 2023 Average Production Average Realized Price(a) NAV per Share(c) DEC / T
Slide 10: Measuring Success: Key Performance Indicators
MEASURING SUCCESS: KEY PERFORMANCE INDICATORS Maintain Leverage at or Below 2.5x Consistent Adj. EBITDA Margin Adjusted Operating Cost per Mcfe Methane Emissions Intensity (Net Debt / Adj. EBITDA) (%) ($/Mcfe) (MT CO2e/MMcfe) 1.5 52% $1.77 $1.76 2.5x 50% 49% 2.3x 1.2 2.1x $1.32 0.8 2021 2022 2023 20
Slide 11: Substantially Hedged to Secure Cash Flows
SUBSTANTIALLY HEDGED TO SECURE CASH FLOWS Natural Gas NGLs (MMBTu/d) (Bbl/d) Swaps 2-Way Collars Unhedged Volume Swaps Unhedged Volume 700,000 16,000 $37.71 $37.72 $37.75 $37.77 $3.09 $3.10 $3.10 $3.06 11,000 600,000 6,000 9,299 9,135 8,897 8,750 28,126 13,821 1,000 500,000 1Q24 2Q24 3Q24 4Q24 400,0
Slide 12: Robust Margins in Any Price Environment
ROBUST MARGINS IN ANY PRICE ENVIRONMENT Total Revenue, Inclusive of Hedges Adjusted Operating Cost per Unit Hedged to Maintain Pricing 2023 hedge settlements of $178 Mn $1,046 Mn mitigated commodity price impact 49% 52% $1,024 Mn Cash Margin Cash Margin $1.73/Mcfe $1.69/Mcfe Improvement in Unit Cost
Slide 13: Modernizing Operations Through Technology
MODERNIZING OPERATIONS THROUGH TECHNOLOGY Modern Field Developing a Scalable Platform Management Philosophy with Low Total Cost of Ownership Common Systems enhance process efficiency, reliability Cloud First / Wireless First eliminate technical debt, and improves data collection, warehousing and
Slide 14: Smarter Asset Management in Action
SMARTER ASSET MANAGEMENT IN ACTION Central Region Workovers Improve Production Case Study: Impact of 2023 Workovers Includes capitalized and expensed maintenance Central Region, Capitalized and Expensed High-return projects pay back in under two months Offsets declines, extends economic produc
Slide 15: Achieved 2030 Target for Scope 1 Methane Emissions Intensity
ACHIEVED 2030 TARGET FOR SCOPE 1 METHANE EMISSIONS INTENSITY Focus on Reducing Methane Emissions Leak Detection, Quantification & Repair Pipeline Integrity Enhancements Carbon Credits Aerial LiDAR Remote Monitoring Renewable Energy Pneumatic Conversions Smarter Asset Management Future Technologies B
Slide 16: Setting the Standard for Well Retirement
SETTING THE STANDARD FOR WELL RETIREMENT Exceeding State Requirements DEC Wells Total Wells, incl 3rd party 404 Total wells retired continue to significant exceed levels mandated through state agreements Retirement of Orphan Wells Annual Wells Retired (#) 286 Diversified partnered with regulators to
Slide 17: Acquisition Update
Acquisition Update Oaktree Buyout Increases Scale and Improves Margins
Slide 18: Acquisition Overview – Oaktree Working Interest Buyout
ACQUISITION OVERVIEW – OAKTREE WORKING INTEREST BUYOUT Low-Risk, High Return Working Interest Acquisition $386Mn 122 MMcfepd Upsizing production, cash flow and reserves with zero Net Purchase Price(a) 2024 Net Production(b) operational risk and immediate administrative synergies Diversified has op
Slide 19: Adding Scale to Existing Central Region Operations
ADDING SCALE TO EXISTING CENTRAL REGION OPERATIONS Acquisition Doubles Central Region Acreage 7% Increasing PDP Reserves LEGEND 11% Diversified-Only Wells Oaktree Co-investment Wells Significant gas weighting Diversified-Only Acreage ~510 Bcfe Oaktree Co-investment Acreage 1P Reserves Value-enha
Slide 20: Acquisition Is Immediately Synergistic and Enhances Margins
ACQUISITION IS IMMEDIATELY SYNERGISTIC AND ENHANCES MARGINS Adjusted Operating Cost per Unit FY2023 Pro Forma 2% Reduction in Unit Costs Compared to FY2023 operating performance $1.69 $1.66 ($10.14/Boe) ($9.96/Boe) ~$15 Million in Cost Efficiencies No incremental G&A required post-acquisition 54% Pr
Slide 21: Complimentary In-the-Money Hedge Portfolio
COMPLIMENTARY IN-THE-MONEY HEDGE PORTFOLIO Acquired 2024 Hedges Complement Existing Portfolio Volumes Hedged Volumes at Strip Avg Price ($/MMBtu) Premium to Current Hedging $3.89 Average floor price for acquired volumes at 25% premium to current hedge portfolio $3.19 $3.09 Improves Price Protection
Slide 22: Increased Exposure to Premium Gulf Coast Pricing
INCREASED EXPOSURE TO PREMIUM GULF COAST PRICING Advantageously Positioned in the Gulf Coast LNG exports will potentially represent 20-25% of current U.S. natural Assets located in close proximity to several major hubs gas production by 2026 Map Legend Demand Driven by Proximity to LNG Hubs Diversif
Slide 23: Merger Mania Activity Accelerating in Energy Sector
MERGER MANIA ACTIVITY ACCELERATING IN ENERGY SECTOR Public-to-Public Transactions Corporate Transactions Dominating Landscape Upstream equities have outperformed WTI spot prices by 32% since 2022 YTD US E&P’s YTD up ~3% vs. UK E&P’s down ~19% Over $215 billion in LTM corporate transactions, $2
Slide 24: Path for 2024 and Beyond
Path for 2024 and Beyond Focus Five and Capital Allocation
Slide 25: Navigating the Path Forward – Focus Five
NAVIGATING THE PATH FORWARD- “FOCUS FIVE” Financial and Operational Flexibility Reduce debt-servicing costs and increase Optimized Cash access to various capital sources Cost Structure Flow Generation Optimization Unlock hidden asset value, enhance Capture value enhancements hedge book, leverage int
Slide 26: Capital Allocation Framework and Return
CAPITAL ALLOCATION FRAMEWORK AND RETURN Systematically Reduce Debt Sustainable Fixed Dividend Strategic Share Repurchases Accretive Strategic Acquisitions Maintain leverage target Deliver top quartile yield while Maintain financial flexibility for Expand production and cash between 2.0x to 2.5x with
Slide 27: 2024 Action Plan
2024 ACTION PLAN Systematic Debt Fixed per-share Strategic Accretive Reduction Dividend Share Repurchases Acquisitions Reduce borrowings Provide a sustainable Conduct strategic and Grow opportunistically by $200 million capital return structure regimented buybacks at attractive multiples Decrease le
Slide 28: Diversified Brokers
DIVERSIFIED BROKERS Corporate Tennyson Stifel Peel Hunt PO Box 381087 Tennyson Securities Stifel Nicolaus Europe Ltd Peel Hunt LLP Birmingham, Alabama 65 Petty France 150 Cheapside 100 Liverpool Street 35238-1087 (USA) London SW1H 9EU London EC2V 6ET London EC2M 2AT div.energy chton@peelhunt.com Dou
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