Diversified Energy Acquires Birch Permian for $1.8 Billion in Largest Deal
On September 2, Diversified Energy (NYSE:DEC) announced the acquisition of Birch Permian Holdings from Elliott Investment Management affiliates for approximately $1.8 billion—the company's largest transaction to date. The deal is expected to increase production by about 35% and Adjusted EBITDA by roughly 55%. Despite these projected gains, Diversified’s stock trades at a forward P/E of just 4.95, signaling skepticism from the market. The acquisition enhances Diversified's position in the Permian Basin with 480 net wells featuring low decline rates and high margins. Management anticipates $548 million in annualized Adjusted EBITDA at close to 80% margins post-transaction. The financing structure includes a $1.5 billion asset-backed securitization through Carlyle, expanding their partnership from an initial $2 billion framework to up to $10 billion for future opportunities. However, the acquisition is debt-funded and raises concerns about leverage on top of existing balance sheet commitments. Recent second-quarter results showed lower cash flow compared to net income due in part to non-cash gains. The market appears skeptical, with short interest at 9.29% and a decline in hedge fund ownership.
Tickers: $CG
Topics: Acquisition Energy Oil & Gas Permian Basin