Diversified Energy Company PLC (LSE:DEC, NYSE:DEC, FRA:DG20) has agreed its largest-ever acquisition, paying about $1.8 billion for Permian Basin producer Birch in a transaction expected to increase group production by around 35% and adjusted EBITDA by roughly 55%.
Birch brings approximately 68,000 barrels of oil equivalent per day of net production and an estimated $548 million of annualised adjusted EBITDA.
Its portfolio includes 480 net wells and around 46,000 net mineral acres, alongside gathering, processing and water infrastructure, with Diversified estimating EBITDA margins of about 80%.
The deal is expected to be immediately accretive on key per-share financial measures and would take pro forma gross volumes under Diversified's operated control to around 2.5 Bcfepd, equivalent to approximately 1.6 Bcfepd net. The Birch production mix is around 38% oil, 32% natural gas liquids and 30% gas.
Diversified plans to fund the purchase primarily through an approximately $1.5 billion asset-backed securitisation arranged through Carlyle, alongside existing liquidity and other customary financing sources.
Separately, the pair have expanded their strategic partnership from a $2 billion framework to potentially pursue as much as $10 billion of future proved-developed-producing asset acquisitions.
Chairman and chief executive Rusty Hutson Jr called Birch an “important milestone” in Diversified's development, saying the transaction would establish it as a scaled Permian operator. Completion is expected during the fourth quarter of 2026, subject to regulatory approvals and other customary conditions.
Peel Hunt says the deal transforms DEC's Permian arm, while having a material impact on its finances.
Pro forma EBITDA reaches US$1.5bn and free cash flow US$895m. Management expects further margin gains as Birch is folded into DEC's operating model.
The broker rates the shares 'buy' up to 3,000p. In afternoon trading, the stock was changing hands for 1,123.32p, down around 0.8% on the day.
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