WTI (Mar) $78.47 +$1.33, Brent (Apr) $85.09 +$1.40, Diff -$6.62 +7c.

USNG (Mar) $2.39 -19c, UKNG (Mar) 135.48p -4.47p, TTF (Mar) €54.65 -€0.75.

Oil price

Another rise in the oil price yesterday as the dollar weakened as the Fed Governor claimed that after the jobs data on Friday the US economy is worse off than expected. The earthquake in Turkey and Syria has clearly been a terrible tragedy and supplies from Ceyhan are uncertain right now.

Mixed inventory stats, aren’t they always at the moment showed crude slightly better than expected but products stocks are building, it’s going to be 60F degrees in New York today, that’s very high for February and so demand for products is low.

Diversified Energy Company

DIVERSIFIED has announced that it has successfully raised gross proceeds of US$163.0 million (approximately £134.9 million) (US$156.4 million net of expenses, approximately £129.4 million net of expenses), by way of a placing of new ordinary shares of £0.01 each in the Company and an offer by the Company on the REX Platform of new ordinary shares of £0.01 each in the Company. The Placing and the Retail Offer shall together constitute the “Fundraising”.

The Fundraising was completed at a price of 105 pence per Fundraising Share. The Fundraising Shares will, subject to the passing of the Resolutions at the General Meeting and Admission, represent 15.2% of the Company’s existing ordinary share capital, or 128,444,000 new Ordinary Shares in total (126,737,763 Placing Shares, 1,706,237 Retail Offer Shares). The Fundraising Price is equal to a 5.2% discount from the closing mid-market price on 8 February 2023.

The Company consulted with and received strong support from many of its largest shareholders prior to the Fundraising. Consistent with each of its prior placings, the Company respected the principles of pre-emption, so far as possible, through the allocation process, both in the Placing and the Retail Offer. The Company’s management team actively participated in the structuring and allocation of the Fundraising.

The Company announced on 8 February 2023 that it had entered into a purchase agreement to acquire certain upstream assets and related infrastructure in its Central Region from Tanos Energy Holdings II LLC. The Acquisition is expected to close on 1 March 2023. Should the Acquisition proceed, it is expected to have a deemed effective date of 1 February 2023.

Subject to completion, the Company will use the net proceeds from the Fundraising to partially fund the US$250 million consideration  pursuant to the Acquisition. The remainder of the Acquisition Consideration will be funded from undrawn funds available from the Company’s existing Revolving Credit Facility. The Fundraising is not conditional on the completion of the Acquisition. Should the Company complete the Fundraising, but not complete the Acquisition, the Company will determine the most appropriate use of the net proceeds, including potentially investing in other acquisition opportunities aligned with its stated strategy.

Posting of Circular and Notice of General Meeting

The Fundraising Shares will be settled in two tranches. The first tranche of Fundraising Shares (the “Firm Shares”) will be issued under the Company’s existing shareholder authorities (representing approximately 9.99% of the Company’s existing share capital) and is expected to settle on 14 February 2023. The issue of the second tranche of Fundraising Shares (the “Conditional Shares”), comprising Fundraising Shares in excess of the Company’s existing shareholder authorities, is conditional on shareholder approval at a General Meeting. Therefore, the Company intends to convene a shareholder meeting, expected to be held on or around 27 February 2023, to approve the allotment of the Conditional Shares on a non-pre-emptive basis. Diversified will publish a Notice of General Meeting setting out the shareholder resolutions requiring approval for allotment of the Conditional Shares on a non-pre-emptive basis, and the Board’s recommended support for it, later today.

Settlement of the Fundraising Shares

Settlement for, and Admission of, the 84,212,278 Firm Shares is expected to take place on or before 8.00 a.m. on 14 February 2023. Settlement for, and Admission of, the 44,231,722 Conditional Shares is expected to take place on or before 8.00 a.m. on 28 February 2023, subject to the Shareholders approving the allotment of the Conditional Shares on a non-pre-emptive basis at the General Meeting. Settlement of the Fundraising is conditional upon, amongst other things, Admission becoming effective and upon the Placing Agreement not being terminated in accordance with its terms.

The Fundraising Shares will be issued credited as fully paid and will, on issue, rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions thereafter declared, made or paid on the enlarged share capital from Admission. The Fundraising Shares will be eligible for the Q3 2022 dividend of 4.375 cents per share, as well as all future dividends. The ex-dividend date of the Q3 2022 dividend is 2 March 2023 and the Q3 Dividend is expected to be paid on 28 March 2023.

Total Voting Rights

Following Admission of the Firm Shares, the Company’s total issued share capital will consist of 927,178,031 Ordinary Shares of £0.01 each in the Company. The Company does not hold any Ordinary Shares in treasury. Therefore, following Admission of the Firm Shares, the total number of voting rights in Diversified Energy Company Plc will be 927,178,031. This figure may be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Capitalised terms not otherwise defined in the text of this Announcement have the meanings given in the Company’s Fundraising announcement dated 8 February 2023.

Commenting on the Fundraising, CEO, Rusty Hutson said:

“Grateful for strong support from our existing holders and excited to welcome new investors to Diversified, I am pleased with the results of today’s fundraise that positions the Company to add high-quality, accretive assets to our portfolio. The assets we are acquiring are accretive to earnings and cash flow and strengthen our balance sheet as we start the year. As we turn towards the work of closing this transaction, I would like to thank our employees for their work for all stakeholders and say that we look forward to welcoming members of the Tanos team to the Diversified family who will join our efforts to optimize and steward these assets for years to come.”

Another excellent acquisition for DEC who have also yet again financed the deal via a placing and a retail offer which was keenly snapped up by mainly existing shareholders, no surprise there. The $250m package of assets bought from Tanos (again) are high quality (again) and accretive (again).

As usual the deal ticks all the boxes with regard to the immediate financial benefits such as FCF and adjusted EBITDA which are up by 20% and 19% respectively on a TTM basis. (to 30 June 20228, and 16% accretion on a price per flowing Mcfe basis)

The offer and the price that the shares have settled at are, as often happens on these occasions, highly attractive for those looking for an entry point and with the massive current yield, together with what will likely be significant capital gain from here, make the shares hugely cheap at this price. 

And finally…

With the teams playing each other twice in four days in the Prem, last night the Red Devils v Leeds was always going to be a cagey affair, the fact that it ended 2-2 might indicate that Sunday should be better.

Fulham beat Sunderland in their FA Cup replay last night and will be watching the highlights of the match above as they will be playing Leeds in the next round.