Diversified Energy to buy Birch for $1.8bn

Diversified Energy Company Plc (DEC) has executed definitive agreements to acquire Birch Permian Holdings, Inc. and certain affiliated companies for a gross purchase price of approximately $1.8 billion. The transaction is described by the company as accretive and represents its largest acquisition in its 25-year history. The deal is structured with customary purchase price adjustments and effective date cash flows that will determine the final net purchase price.

The acquisition centers on a large-scale Permian Basin portfolio that Diversified expects will materially expand its footprint in the region. Pro forma, the company anticipates that gross operated volumes under its control will reach about 2.5 Bcfepd, or roughly 1.6 Bcfepd on a net basis once the acquisition is completed.

The acquired assets currently produce approximately 68 thousand barrels of oil equivalent per day, equivalent to about 409 million cubic feet equivalent per day on a net basis. The production mix is about 38% oil, 32% natural gas liquids and 30% natural gas, providing a diversified commodity profile. The package includes around 500 gross operated wells, of which 480 are net, with about 96% of the wells operated and an average lease net revenue interest of roughly 77%.

Birch’s portfolio also brings substantial reserves and economic value. Proved reserves are estimated at approximately 1,168 billion cubic feet equivalent, and the proved developed producing reserves are associated with a PV-10 value of about $2.0 billion. In addition, the assets include roughly 46,000 net mineral acres, providing an extensive position in the Permian Basin.

Alongside the upstream assets, the acquisition includes an integrated midstream infrastructure position. This footprint encompasses 12 primary central production facilities and nine well gathering facilities. It also includes more than 60 miles of gathering pipeline, as well as water disposal and recycling infrastructure that supports ongoing operations.

The combination of producing wells, reserves, acreage and midstream assets is expected to create a scaled, vertically integrated position in the Permian Basin for Diversified. The company views this platform as anchored by a high-quality producing asset base that can support its expanded operations after closing.

Diversified expects the acquisition to increase its production by approximately 35% once the transaction closes. The company also projects that Adjusted EBITDA will rise by about 55%, with the acquired assets adding an estimated $548 million of annualized Adjusted EBITDA. Based on these figures, the company estimates that the acquired assets will deliver EBITDA margins of roughly 80%.

To finance the transaction, Diversified plans to primarily use an asset-backed securitization of approximately $1.5 billion arranged with Carlyle. The remainder of the funding is expected to come from other customary financing sources, including available liquidity under the company’s revolving credit facility. The transaction carries a $50 million break fee.

The acquisition is subject to customary closing conditions, including receipt of required regulatory approvals. Diversified expects the transaction to close during the fourth quarter of 2026. Until those conditions are satisfied and the deal closes, Birch’s assets will remain separate from Diversified’s existing portfolio.

To provide further detail on the transaction, Diversified plans to host a conference call on September 3, 2026 at 8:00 AM Eastern Time. During the call, management is expected to discuss the strategic rationale, financial implications and operational plans related to integrating the Birch assets into the company’s broader business.