WTI (Apr) $67.18 +63c, Brent (May) $70.58 +70c, Diff -$3.40 +7c
USNG (Apr) $4.10-1c, UKNG (Apr) 102.45p +2.18p, TTF (Apr) €41.51 -€0.99

Oil price

Oil is actually quite solid right now and looking at equity markets right now it is actually doing quite well, eking out a small rise on the week put it amongst the best sectors around. The US has upped its attacks on the Houthi rebels, reminding Iran that any of their friends is on the hit list.

Diversified Energy Company

Diversified has announced its operational and final audited results for the year ended December 31, 2024.

Diversified remains a differentiated key player in acquiring and building a portfolio of assets through value-accretive transactions while simultaneously unlocking hidden value through its unique operational framework, strategic development partnerships, and growing adjacent business segments, including coal mine methane (CMM), energy marketing and well-retirement. By completing over $4.0 billion of acquisitions since its public listing in 2017, Diversified has built a large-scale integration and operating company that remains focused on delivering de-risked, reliable cash flow for its shareholders. With the combination of maturing assets and M&A activity leading to growth-oriented E&P’s recycling capital through divestment, there remains an ample opportunity set for Diversified’s continued growth. Additionally, with most upstream acquisitions today focusing on increasing undeveloped inventory, Diversified provides a creative and actionable solution as the PDP purchasing partner for those E&P’s that only value inventory.

Only Publicly Traded Champion of the PDP Subsector with Unique Strategic Advantages

• Large Operational Scale: Multiple geographies in core basins including Western Anadarko (largest producer), Permian, Appalachia, Barnett and Ark-La-Tex with commodity product diversification
• Vertical Integration: In-house marketing, extensive midstream network, wholly-owned processing infrastructure, and a well retirement business segment
• Leading Technology Platform: 100% cloud architecture, supporting well level data capture, information for actionable production optimization, and real-time monitoring which mitigates production downtime
• Beneficial Financing Solution: Demonstrated ability to access numerous capital solutions, including investment grade, low-cost Asset Backed Securities, commercial banking facilities and equity investment partners
• Flexible Capital Allocation: shareholder returns-focused model prioritizing Free Cash Flow for systematic debt reduction, fixed dividend payments, opportunistic share repurchases, and accretive acquisitions
• Proven Process to Capture Synergies: established integration playbook and sophisticated corporate infrastructure provides considerable expense savings and unlocks sustainable value

Delivering Consistent and Reliable Results in 2024

• Delivered average net daily production: 791 MMcfepd (132 MBoepd)
  • December exit rate of 864 MMcfepd (144 MBoepd)
• Year end 2024 reserves of 4.5 Tcfe (747 MMBoe; PV10 of $3.3 billion(b))
• Total Revenue, inclusive of hedges of $946 million(e), net of $151 million in commodity cash hedge receipts that supplemented Total Revenue of $795 million
• Operating Cash Flow of $346 million; Net loss of $87 million, inclusive of $141 million tax-effected, non-cash unsettled derivative fair value adjustments
• Adjusted EBITDA of $472 million(c); Adjusted Free Cash Flow of $211 million(d)
  • 2024 Adjusted EBITDA Margin of 51%(c)
  • 2024 Adjusted Operating Cost per unit of $1.70/Mcfe ($10.22/Boe)

Achieving Expectations

• Recommend a final quarterly dividend of $0.29 per share
• Generated $49 million of cash proceeds through land sales and Coal Mine Methane Revenues
• Retired over $200 million in debt principal through amortizing debt payments
• Returned $105 million to shareholders, including $21 million in share buybacks(h)
• Completed $585 million (gross) in strategic and bolt-on acquisitions during 2024
• Retired 202 Diversified wells in Appalachia, marking third consecutive year to exceed 200 wells
• OGMP Gold Standard and MSCI AA Rating for third and second consecutive year, respectively
• Decreased Scope 1 methane intensity to 0.7 MT CO2e per MMcfe, a 13% reduction from 2023

Powerful Step Forward

• Closed transformative $1.3 billion acquisition of Maverick Natural Resources (“Maverick”)
  • Largest Producer in the Western Anadarko Basin (WAB)
  • Entry into the Permian basin
  • Expecting to achieve over $50 million in annual synergies by year-end 2025
• Closed the accretive bolt-on acquisition of assets from Summit Natural Resources
  • Anticipate over 300% increase in cash flow from CMM environmental credit sales in the next 24 months
• Developed a unique partnership to create an innovative, reliable, net-zero data center power solution
• Enhancing free cash flow growth in 2025 by advantageously added natural gas hedges (related to ABS & recent acquisitions) and planning approximately $40 million from the divestiture of undeveloped leasehold during the first half of 2025

CEO Rusty Hutson, Jr. commented:
“Our over 1,600 women and men of Diversified remain the driving force behind our strong operational and financial performance in 2024. Whether it’s natural gas to power the technology of the future or the everyday needs of families and businesses across our operating region, Diversified provides the reliable and sustainable energy needed, and we continue to invest in growing our business while expanding our opportunity set of cash flow generation through verticals in a variety of end markets.

We have built a Company that remains highly focused on long-term value creation through the growth of our platform and our ability to leverage vertical integration and scale to operate a structurally and dependably higher-margin business that delivers de-risked, consistent cash flow. Our focused strategy, disciplined leadership team, sound operating practices, and the strong demand for natural gas provide us with momentum as we begin the year and the confidence to achieve our full-year 2025 expectations while executing against our capital allocation strategy. We are starting the year in a position of strength as a bigger, better business, and there has never been a more exciting time for our Company and the energy industry. We feel privileged to be at the heart of the energy renaissance as the Right Company at the Right Time to help provide essential energy needs.”

Coming off another impressive company webcast one gets the distinct impression that the company feels that the shares are cheap, particularly in comparison to their peer group. And looking at this set of figures I can only agree, production, cash flow, ebitda margins, operational excellence on a huge asset portfolio and acquisitive success makes DEC a formidable peer.

The figures are historic and are made even more irrelevant by the recent acquisitions of Summit and Maverick which are substantial as well as the move into data centres in partnership with Tesiac and Fuel Cell Energy. The deals bring to the party an old friend of mine and that is Coal Mine Methane which I expect DEC to excel at, and in the data centres the company will ‘definitely’ sell gas to the project. 

As a result of this exceptional free cash generation, long term value creation and outstanding margin success DEC remains in a very strong position with regard to shareholder rewards. The dividend is fixed over three years and paid per share whatever that number might be, showing immense confidence in the model, and the point I made above about management feeling is expressed via the share buy-back, the 10% approved last April looks highly likely going to be bought back and then shareholder approval will be asked again this April. 

Finally that guidance, in the mid point 1 BCF of gas, more if you pro-forma the Maverick contribution, $850m of EBITDA , c.$420m of FCF and some $50m of synergies. I’m very bullish about the CMM opportunities and also the data centres and power market has the potential to be huge and DEC are in with the earliest of early movers here.

The company confirmed that the US listing has been warmly received and I expect the company profile to rise and the short term price weakness must soon be reversed, DEC is in the Bucket List for a good reason as it is a huge pool of value and only getting more valuable.

Combined Company 2025 Outlook

Following the recently completed acquisition of Maverick, Diversified expects to realize significant operational synergies associated with a larger, consolidated position in Oklahoma and the ability to improve the overall cost structure of the Maverick Natural Resources assets while continuing to prioritize returns and Free Cash Flow generation.

The following outlook incorporates a nine-month contribution from the recently acquired Maverick.

Reabold Resources

Reabold has announced the appointment of Mr. Paul Harris as an independent non-executive director of the Board of Rathlin Energy with immediate effect.

Mr Harris has 35 years’ experience within the energy sector with significant roles including CEO and COO at UK operator NEO Energy, President of Nexen Petroleum USA (CNOOC International), VP Engineering & Construction (Nexen Energy) & Developments Director (Nexen UK). Mr Harris is a Chartered Engineer with extensive technical, regulatory and commercial background with track record of delivering UK oil and gas projects.

Initially as COO and latterly as combined CEO / COO, Mr Harris helped to establish NEO Energy as the 5th largest UK producer with working interest in some 28 producing fields and hubs over a 5-year period through four large acquisitions and several organic growth opportunities during a period of uncertainty in the sector. Mr Harris served as a non-executive director on the Board of Offshore Energies UK (“OEUK”), representing NEO’s interests in the joint operating council for OEUK, as well as managing critical stakeholder relationships including partners, government, regulatory bodies, banks and the supply chain.

West Newton Ownership Structure

• Rathlin is the operator of the PEDL 183 Licence which includes the West Newton gas development.
• Rathlin holds a 66.67% interest in PEDL 183.
• Reabold holds a ca. 69.9% economic interest in PEDL 183 through:

o  ca. 79.8% shareholding in Rathlin, and
o  16.665% direct licence interest in PEDL 183.

West Newton is the largest undeveloped onshore gas field in the UK, located near to infrastructure and a gas hungry industrial base. As announced on 13 June 2024, the pre-tax NPV(10) of the West Newton project was calculated to be US$179 million net to Reabold under the full field development plan. Following this transaction and based on Reabold’s increased economic interest in PEDL 183, the pre-tax NPV(10) of the project will be US$224 million net to Reabold.

Stephen Williams, Co-CEO of Reabold, commented: 
“We are delighted to announce the appointment of Paul to the Board of Rathlin. Paul is a strategic international oil and gas leader with a proven track record in progressing UK hydrocarbon projects. Paul has a deep understanding of the technical, regulatory and commercial environment in the UK and this experience will be invaluable in progressing West Newton”

Paul Harris added: 
“I believe strongly in securing the UK’s energy supply and the economic, fiscal and environmental case for doing this with domestically produced gas has never been stronger. As the largest undeveloped onshore gas field in the UK, West Newton is an important UK gas asset which I look forward to helping the team progress forward to production.”

I don’t normally mention NED appointments but this looks to be quite a statement hire, in what is a crucial timeline Reabold seem to have gone to the top of the pool to get Paul Harris, an acknowledged expert in the space.

Sound Energy

Sound has provided an update in relation to the operations at Tendrara:

Name Change

The subsidiary of Sound Energy plc sold to Managem SA, previously named Sound Energy Morocco East Limited has formally changed its name to Mana Energy ltd.

Exploration: Transition progressing well

The Operator is continuing to assemble its subsurface and operational team and is preparing to commence detailed planning alongside finalising the licence formalities with the relevant Government Authorities. A joint venture workshop is scheduled in March, with active participation of the Company, to review the exploration strategy, the planned exploration targets and to commence the technical, contractual and regulatory work required to initiate drilling operations.

Tendrara Concession: Seamless work progress & change of contractual scheme

The transition of Operatorship has not altered the pace of ongoing activities at Tendrara with construction of Phase 1 development facility for the TE-5 Horst continuing to move forward towards completion. The procurement and delivery to site of the gas gathering system equipment required to connect the two existing production wells, TE-6 and TE-7, to the mLNG facility is progressing.  The subsurface well control barriers in the two production wells, whose work over operations were successfully completed last year by the Company, will be removed and the wells will be brought into production. The Operator has advised that the completion of the installation of the gas gathering system and connection to the wells is expected to occur by Q3 2025.

Italfluid GeoEnergy Srl (“Italfluid”), the main contractor tasked with designing, constructing, commissioning, operating and maintaining the mLNG facility and the Operator (on behalf of the Concession JV) have agreed to amend their contractual arrangement by terminating the vendor financed lease agreement announced on 23 December 2020 (the “Lease Agreement”) and entering into an industry standard Engineering-Procurement-Construction contract (the “EPC Contract”). The past capital payments of approximately US$ 9.5 million made under the Lease Agreement were acknowledged by Italfluid as part payment received under the new EPC contract.

Under this new contractual scheme, Italfluid has committed to commission the gas processing and liquefaction plant in Q4 2025.

Under the EPC Contract, the Operator, the Company and Morocco’s L’Office National des Hydrocarbures et des Mines (“ONHYM”) have now agreed to pay, over a period of time, US$ 25 million in exchange for a substantial reduction in operating cost and the removal of the daily rental fees:

• US$ 18 million following a payment schedule in line with the actual work progress, with staged payments through gas processing plant commissioning,
• US$ 7 million paid once the plant is fully commissioned.,
• Removal of the daily rental fees of US$ 38,000 per day

In parallel, the parties are currently preparing an Operations and Maintenance Contract with Italfluid in order to ensure that the plant will continue to meet the required production targets in terms of plant availability, performance and LNG delivery.

The shift in contracting methodology from a Lease Agreement to an EPC Contract will result in an increase of the Net Present Value of the project and provides the Operator with greater control to achieve the goal of delivering LNG sales in Q4 2025.  The Company will continue to provide support services to the Operator as required under the existing Technical Services Agreement between them.

Graham Lyon, Executive Chairman of Sound Energy, commented:
“Sound Energy is pleased that ManaEnergy has identified and executed improvements in project delivery and project economics.  The transition is going well, and we look forward to drilling activities and gas sales later this year.”

This is good news for Sound as Mana Energy is clearly already on top of delivering the project and getting drilling going. It is clear that the Operator has significant clout in Morocco to get things done.  

Predator Oil & Gas

Predator has announced an update on the preliminary MOU-5 drilling results in the Guercif Licence onshore Morocco.

Initial drilling results

• MOU-5 was successfully drilled within pre-drill budget forecast to the planned target depth and logged in 10 days.
• The top of the Domerian carbonate primary target was encountered significantly deeper than prognosed due to the presence of mobilised salt above. Encouragingly this increased the thickness and potential effectiveness of the topseal.
• Good quality resistivity and sonic wireline logs were acquired over the top 50 meters of the Domerian carbonate.
• This zone will be further evaluated by a petrographic study of well cutting samples to establish the relationship of the Domerian carbonate section penetrated downdip by MOU-5 to the main development and culmination of the carbonate bank to the northwest of the well.
• The helium chromatograph registered a 1557 ppm helium show 16 metres above the top of the Domerian carbonate. This has been correlated probably with the presence of a flat-lying fault connecting to the area of salt diapiric activity to the east of the well.
• Post-well evaluation of the MOU-5 structure on the 2D seismic line through the well  shows that MOU-5 is located approximately 100 metres below the culmination of the Domerian carbonate bank to the northwest of the well.
• Below the Domerian carbonate MOU-5 unexpectedly encountered approximately 30 metres of good quality gross sand that had never been seen before in the Guercif Basin.

Forward Plan

• The MOU-5 well has been suspended to allow for a re-entry at a later date and Star Valley Rig 101 has been released but will remain stacked at the MOU-5 location.
• Data from MOU-5 will be analysed and incorporated in a new “Jurassic Project” that will focus on the core area of the Domerian structure to the northwest of MOU-5 structure.
• The presence of the Domerian carbonate has now been proven but 3D seismic will be necessary to characterize the carbonate reservoir in the area. A farmout process will be initiated for the 3D seismic acquisition.

Paul Griffiths, Chief Executive Officer of Predator, commented:
“The results of the MOU-5 drilling programme have unlocked a new Jurassic play-opening trend never before tested in the Guercif Basin. A  helium show has provided the  impetus to further assess the helium potential of the MOU-5 structure.

Confirmation of our pre-drill play concept and seismic inversion modelling work based on  limited 2D seismic data allows for the acquisition of more focussed  additional  seismic data to clarify the updip potential.

Penetration of a new, good quality sandstone interval  below the primary target was  unexpected and provides a new target in the basin.

The way forward from this point on is to evaluate the data from the well and then to seek a farminee to join the Jurassic Project. The MOU-5 well has confirmed that the large MOU-5 structure has  to be further investigated based on new seismic data. 

We are very confident, following the MOU-5 drilling results, that a potential farminee will recognise the value proposition assignable to the Jurassic Project

Rationalisation and monetisation must be the drivers to support shareholder value during 2025, which promises to be a particularly volatile year, potentially dominated by trade wars.

We can focus now on ramping up our Trinidad production in 2025 and completing an additional  rigless testing programme for MOU-3 for the shallowest sand encountered in the well and not yet evaluated for a potential CNG initial development option.

Lastly, I would like to congratulate our Drilling Team and Country Manager for delivering the MOU-5 drilling project on schedule, within budget, without incident,  and in a manner that satisfied all of our pre-drill geological objectives. Simplifying last year our management structure and improving internal communications with our project teams has delivered the drilling performance that we had hoped for and has saved costs.”

 This result shows just how long a haul it can be and Predator must have a long way to go at MOU-5.

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