Diversified Energy Company PLC (LSE:DEC, OTCQX:DECPF) told investors that results for 2021 will be in line with expectations, when released in March, whilst highlighting that it was a ‘transformative year’.
In the year, DEC launched into a key new territory, acquiring assets which have so far grown to represent a third of the company’s production – in total, it acquired four acquisitions in the territory, referred to as the ‘central region’, spending US$516mln.
Production for the full year averaged 119,000 barrels oil equivalent per day, a 19% rise from the preceding year. Moreover, DEC marked the New Year with a December 31 exit rate of some 139,000 barrels oil equivalent which marks 35% growth year-on-year.
Higher sale prices have preserved cash margins whilst cash expenses increased 13% due to rising transport costs and higher tax on production.
The company noted that through hedging it has secured stable cash flows through 2022 and 2023, which are so far 90% and 70% hedged respectively. The hedging has been done ‘opportunistically’ in the rising price environment, DEC said – locking prices at US$4.00 per thousand cubic feet (mcf), a 33% premium to its previously reported 2022 floor price (US$3.03 per thousand cubic feet, as reported in Q3 2021).
"As I survey our prospects, our outlook is as dynamic as I've seen,” said Rusty Hutson, DEC chief executive.
“We enter 2022 with great momentum bolstered by an improving commodity pricing environment that is catalysing rapid industry consolidation and asset sales at compelling multiples of cash flow.”
“With another successful low-cost, fully-amortising securitisation completed last week, we have greater liquidity to pursue additional value accretive growth while responsibly stewarding the operating assets that underpin our stable cash flows, debt reductions, ESG commitments and dividends."
Hutson added: “Importantly, we continue to create value for all stakeholders.
“We progressed our ESG commitments, targeting ambitious emission reductions with the independent verification of our emissions data under way. This important work complements our success retiring 70% more wells than our initial goal at exceptional costs.”
The DEC chief meanwhile noted that the company continues to make progress on the repayment of its fully-amortizing debt while continuing to delivering tangible shareholder returns.
DEC has raised its dividend - the tenth time it has done so since its 2017 IPO, Hutson highlights – up to 17 cents per share, which will see the company pay out US$130mln to shareholders in 2021.
Stockbroker SP Angel, in a note, described it as a strong year of operational progress for DEC.
“The company's expansion into a new focus region provides an incremental opportunity to develop scale and operational synergies to protect and bolster the high cash operating margins that underpin the company's hedge-protected cash flows,” the broker said.