Diversified Energy Company PLC (LSE:DEC, OTCQX:DECPF) (DEC) chief executive Rusty Hutson told investors he’s “pleased with the progress” as the firm’s first-quarter trading update confirmed production averaging 136,000 barrels oil equivalent per day.
During the quarter, DEC acquired further producing assets in its ‘central region’, picking up wells in East Texas, along with a deal for midstream and processing facility assets in the region, whilst its Appalachian operations were bolstered with an acquisition of a second well-plugging company.
“I'm pleased with the progress we are making to integrate and optimise these assets while adding to their scale and vertical integration to reduce costs,” Hutson said in a statement.
“Mindful of cash flow and cash operating margins, we also added to our hedge positions to capture value from the higher forward commodity price curve."
He added: "We continue to deliver on our sustainability commitments, and we have made further investments to expand our in-house well retirement crews.
“With growing internal well plugging capacity, we expect not only to exceed agreed levels under State agreements but also to become a leading provider of well retirement services to third-party operators and to the Appalachian States themselves.”
Hutson also highlighted that the company’s investments in emissions measurement technology and said that he is increasingly confident in the company’s ability to hit committed targets of lowering methane emissions intensity by 30% by 2026 and 50% by 2030.
Production update
DEC recorded an exit rate of 136,000 boepd at the end of March, and noted that the performance was in-line with its anticipated 8%-9% annual decline rate and temporary winter weather related impacts.
It added that production levels continue to improve in the second quarter as weather moderates, and with the addition of the East Texas assets, which bring 3,700 boepd.
The company said that it had a cash margin of 48% in the first quarter. Realised prices increased 1.2% in the quarter, partially offsetting higher price-linked costs and higher variable costs.
DEC expects it will seek to build further scale in the central region adding further vertical integration and midstream operations which will further reduce unit expenses and improve margins.
The company noted that it added to its hedge position, which now has an average floor price of US$4.69 per thousand Btu and US$3.67 per thousand Btu for 2023 and 2024 respectively, marking a 53% and 26% premium to the company’s 2022 hedge position.