Diversified to Acquire Canvas Energy for $550MM

Diversified Energy Company plc said it has entered into an agreement to acquire Canvas Energy for about $550 million.

The acquisition adds complementary operated producing properties and acreage positions in Oklahoma, concentrated in Major, Kingfisher, and Canadian Counties, Diversified said in a news release. It is expected to close in the fourth quarter.

The acquisition, which complements Diversified’s existing Oklahoma asset portfolio, includes approximately 23 high quality wells that have been turned to sales in the last 12 months, the company said.

Diversified noted that there is “significant operational overlap in Central Oklahoma,” with a combined 1.6 million net acres approximately. The acquisition includes “commercially attractive undeveloped acreage with meaningful development locations, providing optionality for portfolio optimization activities,” the company said.

The assets of Canvas have a current net production of around 147 million cubic feet equivalent per day (MMcfepd), or 24,000 barrels of oil equivalent per day (boepd), representing a 13 percent boost to Diversified’s current production, according to the release.

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 Canvas, 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 Diversified’s borrowing capacity, subject to any purchase price adjustments, according to the release.

Diversified 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,” he added.

Last month, Diversified reported second-quarter average production of 1,149 MMcfepd, or 192,000 boepd, consisting of 73 percent natural gas. 13 percent natural gas liquids (NGLs), and 14 percent oil.

“Diversified continues to deliver consistent returns on our assets, along with the expansion of our asset portfolio, reinforcing our position as the U.S. PDP Champion. Our strong first-half performance reflects the resilience of our business model, the quality of our assets, and the dedication of our talented teams. With the successful integration of Maverick progressing on schedule, we are already realizing meaningful synergies and operational efficiencies that enhance our ability to optimize cash flow in our expanded portfolio and drive long-term value from our investments,” Hutson said in an earlier statement.

“As we look ahead, the mega trends of electrification, AI power demand, and U.S. LNG [liquefied natural gas] export growth only strengthen the fundamental outlook for our business. The acceleration of natural gas generation for data center demand in Appalachia creates a line of sight to meaningful in-basin demand, pointing to tighter basis spreads near our footprint in the coming years. While our expansive central region operations are well-positioned to support US Energy dominance in the Gulf Coast, including as a strategic supplier to LNG export terminals,” he added.

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