The Diversified Energy Company PLC's (LSE:DEC, NYSE:DEC) new collaboration with Carlyle opens up further acquisition opportunities, stockbroker Stifel has highlighted.
DEC on Tuesday announced it had secured a $2 billion investment deal with Carlyle, which is to provide the funds to support new acquisitions.
Reacting positively to the news Stifel, in a note, repeated a ‘Buy’ recommendation and a 2,018p per share view of net asset value (compared to DEC’s market price of 1,484p).
“The supportive backdrop for US natural gas right now, we believe, validates management's acquisitive strategy over the years,” Stifel said.
“This strategic partnership is significant as it will provide access to a large pool of non-dilutive funding that will give Diversified a distinct advantage versus other buyers and allow it to pursue a wider range of acquisition opportunities.”
The broker added: “by leveraging Carlyle's expertise in asset-backed finance, Diversified will ensure that it has access to optimal asset-focused financing solutions to maximise capital flexibility and support long-term growth.”
A $2bn investment deal
DEC, through a strategic partnership, Carlyle’s Asset-Backed Finance (ABF) business will invest up to $2 billion in existing, proven and developed producing assets, to be operated and serviced by DEC.
Carlyle will also pursue opportunities to securitise the assets to support long-term financing, DEC added.
“We are excited to partner with Carlyle, a leader in the asset-backed finance space,” DEC chief executive Rusty Hutson said.
Hutson highlighted that the partnership significantly enhances DEC’s ability to pursue and scale strategic acquisitions.
Moreover, he described the market as “a highly compelling environment for PDP asset consolidation.”
Hutson added: “We continue to see a robust pipeline of opportunities and the growing need for operational scale and efficiency.
“With Carlyle’s support, we are well-positioned to capitalise on these trends while aiming to generate sustainable cash flow and value for our shareholders.”
Akhil Bansal, head of asset-backed finance at Carlyle, meanwhile, described DEC as “a leading operator of long-life energy assets and a pioneer in bringing PDP securitisations to institutional markets”.
“We are excited to bring institutional capital to high-quality, cash-yielding energy assets that are core to US domestic energy production and energy security,” Bansal said.