Diversified Energy Co Q1 FY2025 earnings call

• Core capital allocation pillars: systematic debt reduction, returning capital to shareholders, growing through accretive and strategic acquisitions. YTD 2025: debt principal reduction totaled approx $51 million, returned approx $59 million to shareholders, ~$2 billion in announced acquisitions including recently closed Maverick acquisition.
• Production growth: Average daily production exit rate for March was ~1.149 M Mcf equivalent per day, quarterly average over 860 M Mcf equivalent per day, over 50% from central region.
• Financial results: Total revenue ~$295M, adjusted EBITDA $138M (47% margin), free cash flow $62M (45% conversion rate), net debt ~$2.56B, RBL capacity $900M.
• Maverick transaction: Combined company benefits from low decline production profile, commodity diversification, disciplined hedging, and potential operational/administrative synergies; 2025 guidance for combined free cash flow totaled $420M, ~200% uplift from Diversified standalone results in 2024.
• Synergies: Identified and achieved synergies in field operations, processes, staffing through stewardship operating model and smarter asset management practices.
• Share price outlook: Believes share price is undervalued, with near-term catalysts like Maverick integration, hidden acreage value, coal mine methane opportunity.

Production: Average daily production exit rate for March was approximately 1.149 million cubic feet equivalent per day, with quarterly production averaging over 860 million cubic feet equivalent per day, over 50% of which was generated in the central region. Financials: Total revenue was approximately $295 million, adjusted EBITDA was $138 million (approx 47% adjusted EBITDA margin, relatively flat q-o-q), free cash flow was $62 million (approx 45% free cash flow conversion rate). Net debt stood at approximately $2.56 billion, and RBL capacity increased to $900 million.

• 2025 combined free cash flow guidance $420M, ~200% uplift from 2024 standalone.
• Continue to take advantage of market dislocation to opportunistically repurchase shares.
• Maverick integration expected to exceed targeted run rate synergies of $50M.

• Market uncertainty, volatility, and tariffs pose risks, but Diversified's fundamental business is relatively unaffected.
• Severe weather events in early 2025 impacted production and led to higher unit lease operating expenses temporarily.

Q: Tim Rezvan asked about the Permian joint development opportunity, CapEx considering oil price fluctuations.

A: Rusty Hutson said most CapEx committed is in Cherokee and Oklahoma, production there is one third oil, one third NGLs, one third natural gas, so downturn in oil prices hasn't impacted significantly, currently on course as originally anticipated.

Q: Sam Wahab inquired about JV activity in Oklahoma timing and success, and coal mine methane outlook.

A: Rusty Hutson said JV schedule has minor tweaks but on track, wells look great with high IRRs; Brad Gray added they have a quality partner. Regarding coal mine methane, first quarter saw additional cash flow from Summit acquisition, confident activity will continue.

Q: Paul Diamond asked about M&A landscape on oil vs gas side.

A: Rusty Hutson said oil companies less likely to sell due to market uncertainty; natural gas side more vibrant; also focused on small cap oil and gas companies for potential value through G&A reductions.

Q: Simon Scholes asked about unit lease operating expense outlook.

A: Rusty Hutson said liquids weighting impacts it; Brad Gray added as year progresses, will see more consistency as Maverick is integrated, synergies being achieved; early January/February severe weather impacted production, but volumes have returned to plan.