WTI (Apr) $70.35 +$1.73, Brent (Apr) $74.04 +$1.51, Diff -$3.69 -22c
USNG (Apr) $3.93 -3c, UKNG (Apr)* 108.96p +7.16p, TTF (Apr) €46.36 +€2.39
*Denotes expiry of March contract

Oil price

As we end a month that will see oil slightly down, maybe two bucks, the uncertainties persist and with differing outcomes for oil. Overall economic data is unhelpful, China and the EU of course but the US jobs numbers have injected a modicum of concern there as well although the inflation number looks better. 

Elsewhere next week the tariffs against Canada and Mexico are still slated to come in on Tuesday although last minute changes are pretty likely. Add to that the action against Venezuela via the Chevron move means that the crude mix in the US might be a bit tricky, as we know domestic refineries are set up for heavy crude from abroad and they still don’t take the lighter stuff found onshore.

And Opec + will be talking in the next few days about whether or not they increase exports in April, the market thinks not at the moment which is probably right but it could be that the right type of crude in the right place might become valuable in the very short term. 

Diversified Energy Company

Diversified has announced the close of its previously announced acquisition of operated natural gas properties and related midstream pipeline infrastructure located within Virginia, West Virginia, and Alabama  from Summit Natural Resources.

Additionally, the Company closed on an asset backed securitization (“ABS”) refinancing, creating the ABS X note. Diversified will use the proceeds from the ABS transaction to consolidate and repay the outstanding principal of the previously issued ABS I, ABS II and Term Loan I, utilizing those assets plus additional Summit Natural Resources assets as collateral in the new structure. The ABS transaction will also benefit from an improved hedging profile, creating enhanced margins and cash flows. Additional proceeds from this refinancing will be used to reduce outstanding borrowings and for general corporate purposes.

Acquisition Highlights

• Acquisition net purchase price of ~$42 million
• Current net production of ~12 MMcfepd (2 Mboepd)(a)
• PDP Reserves of 65 Bcfe (11 MMBoe) with PV-10 of ~$55 million(b)
• Purchase price equivalent of ~PV-16(b)
• Estimated 2025 Adjusted EBITDA of ~$12 million(b)(c)
• Existing Coal Mine Methane (“CMM”) volumes with opportunities to extend future production and additional environmental credits
• Appalachian assets overlap existing operations providing synergies for increased cash margins
• Strategic midstream pipeline assets facilitate capability to enhance commodity realizations
• Recent improvements to commodity prices have further-enhanced the transaction economics

ABS Issuance Highlights

• $530 million ABS X note structured as a master trust
• Strategic hedges expected to add ~40% ($38 million) to EBITDA(c) of refinanced assets
• Significantly oversubscribed (6.5x) with orders from 20 unique investors, reflecting the cash flow quality of our assets and Diversified’s reputation as a responsible issuer
• Investment grade rated notes with blended fixed coupon of approximately 6.4% in A tranche
• Improved amortization expected to generate increased cash flows

Sustainability-Linked

Sustainable Fitch has again-provided a Second Party Opinion that the instrument’s Key Performance Indicators (the “KPIs”) align with the International Capital Markets Association (ICMA) framework for sustainability-linked bond principles, highlighting Diversified’s commitment to aligning its financing with the Company’s overall sustainability strategy.

*ratings established by Fitch Ratings,Inc.

Commenting on the Acquisition and ABS transaction, CEO Rusty Hutson, Jr. said:
“We are excited to announce the completion of another acquisition of high-quality, bolt-on assets that are uniquely positioned to benefit from the operational expertise of our field teams, capture higher prices with exposure to premium Transco Zone 5 pricing, and are poised to provide additional revenues from the sale of incremental environmental credits with our growth in the production of coal mine methane. We continue to believe there is a sizeable backlog of organic Coal Mine Methane cash flow growth within our current Appalachian portfolio, and this acquisition highlights our ability to leverage existing capabilities, assets, and intellectual capital to grow this segment of our revenue stream.

Brad Gray, CFO further commented: 
Supported by a growing base of loyal credit investors, we are now a seasoned programmatic issuer, and this ABS transaction achieved record demand with a significant amount of interest from a large group of new participants.  This strategic refinance improves asset level cash flow with higher hedge prices and a  more refined amortization schedule. Our increasing operational scale, track record of stable asset performance, and strength of our business enable us to attract reliable sources of capital and achieve a lower overall cost of capital. This outcome is a testament to how the financial markets value Diversified’s reliable production and consistent cash flows.”

Completion of the Summit deal is good news for DEC as is the upgraded securitisation which at $530m gives the company the opportunity to pay down previous debt and also to add strategic hedges to the tune of c.40% or $38m to EBITDA of refinanced assets. 

It is incredible to note that the issue was 6.5x oversubscribed with orders from ’20 unique investors’ which says something for DEC’s standing in this market as a responsible issuer and the quality of the assets involved. The issue is of investor grade notes, carries a blended fixed coupon of approximately 6.4% in A tranche and gives margin uplift and of course increased cash flows.

I continue to remain very positive about DEC, the shares had seen a very strong performance last year and the listing in the US is having a positive effect, the shares have fallen some 30% from the top as the market digests the recent acquisitions which in my view is a buying opportunity. These deals are what DEC does best, the management team is amongst the best in the energy sector and there is incredible value for both capital and income return. 

Corcel

Corcel has announced yet another TR-1 this morning in which it notifies that Daniel Kaufman has taken a 4.5% stake in the company. 

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog