- Diversified Energy Expanding Leadership Position in Oklahoma with Accretive Acquisition of Canvas Energy
- Delivers Approximately 18% and 29% Increase in Adjusted EBITDA and Free Cash Flow, Driven by a 13% Increase in Production While Adding Proved Reserves
- Complementary Producing Assets and Adjacent Acreage Expected to Drive Meaningful Synergies and Asset Optimization Opportunities
- Initial Transaction Utilizing Funds from Carlyle Strategic Partnership
Diversified Energy Company has entered into an agreement to acquire Canvas Energy for total consideration of approx. $550 million. The Acquisition adds complementary operated producing properties and acreage positions in Oklahoma, concentrated in Major, Kingfisher, and Canadian Counties. Included in the Acquisition are approximately 23 high quality wells that have been turned to sales in the last 12 months.
The Acquisition complements Diversified's existing Oklahoma asset portfolio and is underpinned by high EBITDA margins(a) of ~70%, contributing an estimated $155 million of NTM Adjusted EBITDA(c) before any anticipated synergies. Diversified’s established integration playbook and corporate infrastructure are anticipated to unlock significant and sustainable value with fast, effective and efficient integration. Familiarity with the asset base and the combined operational density provides for significant expense saving opportunities supporting Diversified's cash flow optimization focus.
TRANSACTION HIGHLIGHTS
- Purchase price of ~$550 million with a purchase price multiple of ~3.5x on NTM EBITDA(c)
- Current net production of ~147 MMcfepd (24 Mboepd)(b)
- ~13% increase to stand alone Diversified(b)
- Proved PV-10 of ~$690 million(h), and ~200 MMBoe of Total Reserves(g)
- Estimated NTM EBITDA of ~$155 million(c), before anticipated synergies
- ~18% & ~29% expected increase in Adj. EBITDA and Free Cash Flow, respectively
- Anticipate meaningful annual run rate synergies
- Significant operational overlap in Central Oklahoma, with a combined ~1.6 million net acres
- Acquisition includes commercially attractive undeveloped acreage with meaningful development locations, providing optionality for portfolio optimization activities
- Purchase price to be funded through a privately rated bilaterally structured asset-backed securitization originated by Carlyle, existing liquidity, and issuance of ~3.4 million Diversified shares to the Seller with an expected close of the Acquisition during the fourth quarter of 2025
The Acquisition is, in the Board's opinion, in the best interests of the shareholders of the Company as a whole.
Commenting on the Acquisition, CEO Rusty Hutson, Jr. said:
'This purchase strengthens Diversified by further expanding our footprint in our Oklahoma operating area with targeted assets that are a perfect fit for increasing our scale, allowing for synergy capture and providing meaningful opportunities for margin enhancement, that ultimately will grow and bolster our cash flow. We are excited to leverage our strategic partnership with Carlyle for funding accretive acquisitions and are pleased with the collective team's collaboration. This initial transaction serves as an important milestone in our relationship and we look forward to growing our combined portfolio of high quality assets. Importantly, this acquisition extends our proven track record of acquiring cash generating energy assets at attractive valuations. We remain committed to our capital allocation strategy and believe the accretive nature of this transaction on per share metrics creates significant long-term value for shareholders.'
TRANSACTION CONSIDERATION
The Acquisition will be funded through a combination of the issuance of approximately 3.4 million new U.S. dollar-denominated ordinary shares direct to the Seller, a privately rated and bilaterally structured asset-backed securitization originated by Carlyle of up to $400 million supported by the Assets, along with the balance in cash from existing liquidity under the Company's borrowing capacity, subject to any purchase price adjustments. The ordinary shares will be subject to a customary commercial registration lock-up agreement. The Company expects to close the Acquisition during the fourth quarter of 2025.
ADVISORS
Kirkland & Ellis LLP is serving as legal advisor, and KeyBanc Capital Markets is serving as financial advisor to Diversified on the Acquisition. Legado Capital Advisors, LLC and TCG Capital Markets are serving as joint structuring agents and advisors on Diversified’s debt financing in connection with the Acquisition. Evercore is serving as Canvas's financial advisor. BofA Securities, Inc. is also serving as a financial advisor to Canvas. Sidley Austin LLP is serving as legal advisor to Canvas.
Source: Diversified Energy
