7th Jun 2024 12:54
(Alliance News) - The completion by Diversified Energy Co PLC of the acquisition of assets from Oaktree Capital Management LP marks another important step in its growth trajectory, an analyst on Friday said.
On Friday, the US-focused natural gas producer said it had completed the USD377 million purchase, which was originally announced in March.
The purchase price was adjusted from an initial USD410 million after what Diversified termed "customary purchase price adjustments."
In addition, Diversified Energy completed an acquisition-related redetermination of the borrowing base of its revolving credit facility, resulting in a 26% or USD80 million increase in the borrowing base to USD385 million and estimated post-transaction liquidity of around USD130 million.
Chief Executive Rusty Hutson said: "This transaction represents another deliberate step in our disciplined approach to focus on accretive acquisitions that enhance our scale, deliver margin expansion, and expand free cash flow."
He described the transaction as a "unique opportunity to consolidate these assets and represents the culmination of a successful, multi-year partnership with Oaktree".
Peel Hunt said the acquisition of around 20 million barrels of oil equivalent per day net production from Oaktree is a "highly accretive deal."
The broker pointed out the closing price was USD377 million, was down from the headline price of USD410 million due to working capital adjustments, and notably below the guidance of USD386 million.
Peel Hunt noted the company estimates that the 2024 earnings before interest, tax, depreciation and amortisation of the assets is around USD126 million, resulting in an "attractive" purchase price multiple of 3.0x.
The broker explained the closing price includes USD83 million in deferred payments and the assumption of Oaktree's debt of USD120 million.
Overall, the broker believes today’s announcement marks another important step in Diversified's growth trajectory.
Peel Hunt reiterated a 'buy' rating and share price target of 3,000 pence.
Shares in Diversified Energy fell 1.4% to 1,099.50p each in London on Friday.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Diversified Energy