Stifel has resumed coverage of Diversified Energy Company PLC (LSE:DEC, NYSE:DEC) with a bullish outlook, highlighting the firm's strategic growth initiatives, value enhancement through acquisitions, and efficient capital reallocation.
Diversified's recent acquisition of Oaktree Capital's interest in certain Central Region assets, valued at approximately $410 million, represents the group's largest venture in the Central Region of the US to date and is expected to significantly bolster its financial positioning.
The acquired assets are forecast to generate an adjusted EBITDA of $126 million in 2024, with an expected payback period of less than five years.
“In our view, these steps put Diversified in a much improved financial position that enables management to make the best value-creation decisions going forward, and ultimately should remove many of the market's funding concerns,” said Stifel.
“Investors taking a fresh look at Diversified today will see a well-managed growth business that generates best-in-class cash flows, despite low gas prices, and still pays a leading dividend.
Stifel reiterated its Buy rating with a 2,800p price target against an 881p price at publication.