BIRMINGHAM - Diversified Energy Company PLC (LSE:DEC);(NYSE:DEC) ('Diversified,' 'DEC,' or the 'Company') is pleased to announce its final audited results for the year ended December 31, 2023.

Additionally, the Company is pleased to announce that it has entered into a conditional agreement with Oaktree Capital Management, L.P. ('Oaktree' or 'OCM') for the strategic acquisition of working interests in certain assets operated in the Central Region ('Acquisition'). Further, the Company also announces a revised capital allocation framework designed to strengthen the balance sheet and provide sustainable shareholder returns.

FY 2023 Final Results: Operating and Financial Highlights

Record average net daily production: 821 MMcfepd (137 MBoepd) o December exit rate of 775 MMcfepd(a) (129.2 MBoepd)

Peer-leading consolidated corporate production decline rate of 10%(b)

Year end 2023 reserves of 3.8 Tcfe (642 MMBoe; PV10 of $3.2 billion)

Net income of $760 million, inclusive of $688 million tax-effected, non-cash unsettled derivative fair value adjustments

Adjusted EBITDA of $543 million(d) generating Free Cash Flow of $219 million(e)

Adjusted EBITDA Margin of 52%(f)

Total Revenue, inclusive of hedges, grew2% to $1 billion(g), net of $178 million in commodity cash hedge receipts that supplemented Total Revenue of $868 million

Year-end liquidity of $139 million(h) and Leverage (Net Debt-to-Adjusted EBITDA) of 2.3x(i)

Commenced trading on the New York Stock Exchange

Recommending a final quarterly dividend of $0.29 per share

2023 Sustainability Highlights

Achieved 2030 Scope 1 methane intensity goal (-50% from 2020) seven years ahead of schedule 33% reduction in Scope 1 methane intensity to 0.8 MT CO2e/MMcfe from 1.2 in 2022

NGSI(j) Methane Emissions Intensity 0.11% CO2e/MMcfe vs. 0.21% in 2022

Won ESG Report of the Year from ESG Awards 2023

Awarded OGMP 2.0's Gold Standard for emissions reporting for the second consecutive year

Increased MSCI sustainability rating to AA leadership status

The Company anticipates issuing its 2023 Sustainability Report in April 2024

Highly Synergistic and Accretive Acquisition of Oaktree Interest

Key Acquisition Highlights

Consolidates working interest in existing DEC operated wells in the Central Region by adding 510 Bcfe of PDP reserves at an attractive value of approximately a PV17 of PDP reserves (PV10 value of $462 million)(k)

Estimated gross purchase price of $410 million (approximately $386 million net, including customary purchase price adjustments)

Favorable per unit cost benefit resulting from no additional G&A Expense

Offsets natural declines with expected 122 MMcfepd in additional production (80% Natural Gas)

Provides a 15% increase in overall Company production

Provides robust cash flow with 2024 Adjusted EBITDA of $126 million(l) o Represents 3.1x 2024 Adjusted EBITDA multiple

Increases Diversified's exposure to favorable Gulf Coast pricing and takeaway capacity

Creates opportunity to layer additional hedges into a stronger commodity price environment

Acquisition Details

The Acquisition represents a continuation of Diversified's successful multi-year track record of strategic asset purchases, whereby the Company will acquire Oaktree's proportionate interest in the previously announced Indigo, Tanos III, East Texas, and Tapstone acquisitions (the 'Assets') for an estimated gross purchase price of $410 million (approximately $386 million net), which includes the assumption of approximately $120 million in amortizing notes and a hedge book with a positive mark-to-market of approximately $70 million. Diversified's average working interest in the Assets will increase by approximately 100% as a result of the Transaction, highlighting the Company's emphasis on efficient operation of high ownership interest assets to maximize cash returns for the life of the acquired assets.

The Assets include wells currently operated by Diversified throughout the Central Region and are expected to add production of 122 MMcfepd (80% natural gas), representing an increase of 15% as compared to Diversified's previously announced 2023 average daily production. With an advantageous production-to-reserves ratio for the Assets of 11x, the Company's corporate decline rate remains unchanged at approximately 10% per year.

As part of the Acquisition, Diversified will acquire certain hedging contracts from Oaktree that will provide ongoing protection despite the recent downturn in the gas market at volumes consistent with the Company's overall hedging strategy while also maintaining strong long-term cash upside potential from the Assets.

Consideration for the Acquisition gross purchase price of $410 million (approximately $386 million net) is subject to customary purchase price adjustments and is expected to be satisfied through existing and expanded liquidity, the assumption of Oaktree's proportionate debt of approximately $120 million associated with the ABS VI amortizing note, and approximately $90 million in deferred cash payments to Oaktree.(m) Additional liquidity for the Acquisition may be generated from non-core asset sales and the potential issuance of a private placement preferred instrument. The Company does not plan to issue common equity as part of the Acquisition. The Acquisition has an effective date of November 1, 2023.

Timetable and Conditionality

The Acquisition is classed as a class 1 transaction under the Listing Rules of the Financial Conduct Authority ('FCA') and accordingly it is conditional, amongst other things, on the approval of DEC's shareholders, by ordinary resolution, at a general meeting of DEC (the 'General Meeting').

The circular containing the notice convening the General Meeting will be published in due course. In addition, the Acquisition is subject to the satisfaction of other conditions including receipt of regulatory approvals. It is currently expected that completion of the Acquisition will occur in the second quarter of 2024.

The Path Forward- FOCUS FIVE

In the year ahead, the Company is taking a renewed focus on the principles on which Diversified was founded: investing in strategic, accretive acquisitions, delivering greater operational efficiencies, taking proactive steps to ensure the sustainability of assets, keeping costs low and de-leveraging the balance sheet - all while returning value to shareholders.

Diversified has set in motion its 'Focus Five' in order to demonstrate meaningful expansion of free cash flow generation while growing the company in a disciplined manner. That plan consists of the following core objectives: Optimized cash flow generation

Cost structure optimization

Financial and operational flexibility

Sustainability innovation

Scale through accretive growth

Updated Capital Allocation Framework

Since first initiated in 2017, Diversified has delivered more than $800 million in cash returns to the Company's stockholders, including approximately $700 million in cash dividends, along with approximately $110 million in share repurchases, and the Board remains committed to maintaining a sustainable and competitive shareholder return policy.

The Company has undertaken a reassessment of its capital allocation strategy to weigh the intrinsic value of the current share price level against the historical practice of returning capital through dividends. The Board and executive management team have jointly evaluated a number of potential scenarios to align the dividend level with expected future capital allocation needs, peer trends, current commodity prices, and current equity market dynamics.

The result of this assessment is the Board's realignment of capital allocation and is designed to best position the Company to create long-term shareholder value through the balanced combination of:

Systematic debt reduction

Fixed per-share dividend

Strategic share repurchases

Accretive strategic acquisitions

In conjunction with the asset acquisition and following the Company's capital allocation policy review, the Board has set the new quarterly dividend to $0.29 per share which equates to $1.16 per year. This fixed quarterly dividend payment will be sustainable for at least three years and maintains a top quartile pro forma yield1, among FTSE350 and higher than a majority of US listed peers, while providing the Company financial flexibility to reallocate approximately $110 million annually of capital towards the other elements within the updated capital allocation framework. When combined with our planned debt reduction through amortization of approximately $200 million in 2024, the capital allocation framework will allow for an opportunity to meaningfully reduce leverage and remain within the Company's stated target leverage range of 2.0x to 2.5x. In addition, the Company will have increased flexibility to conduct a strategic and regimented share repurchase program, while also providing for the opportunity to make accretive acquisitions. The updated capital allocation framework will take effect with the recommended final dividend for 2023, payable in June 2024.

Estimated pro forma dividend yield relative to FTSE 350 constituents and US listed peers as of February 12, 2024.

CEO Rusty Hutson, Jr. commented: 'We finished the year with strong financial, operational, and sustainability results, which reflect the continued execution and success of our business strategy and the contributions of our teams. Despite headwinds in the natural gas market, Diversified grew annual adjusted EBITDA by approximately 8%, increased margins by approximately 6%, and generated $219 million in free cash flow. From a capital allocation perspective, we reduced our outstanding debt by approximately 15% since our interim results while returning $180 million in capital to shareholders in 2023 through dividends and strategic share repurchases. The highly accretive transaction announced today increases our Central Region opportunities and reinforces our commitment to a highly disciplined growth strategy.

'The gas market is sending a clear signal today; there is too much supply in the marketplace. Producers have already started to respond with reduced activity levels and production guidance. We believe Diversified is one of the best-positioned operators to take advantage of this lower commodity price marketplace. We are highly hedged in 2024, and our production base has one of the lowest decline profiles in the gas industry.

As we navigate the path forward in this commodity price environment, we are going on offense to be more opportunistic in our strategic approach with a strengthened balance sheet and to capitalize on any periods of near-term weakness. These times have historically provided extreme valuation disconnects where disciplined businesses have been afforded the ability to meaningfully grow production. We have initiated our Focus Five objectives, which I believe will help to further differentiate the Company from its peers in unlocking corporate value throughout 2024 and into the future.

'Upon rigorous assessment, we are recalibrating our fixed dividend payout to align with current equity market dynamics, peer trends, prevailing commodity prices, and expected future capital allocations. We understand the importance of this decision to our shareholders and do not take the decision lightly. By focusing our capital allocation on a fixed dividend level that is competitive with the industry and the market at large, we are prioritizing the acceleration of our balance sheet de-leveraging, with over $200 million in debt repayments during 2024, creating financial flexibility and a strong foundation to maximize long-term value creation for our shareholder base.

'Diversified's differentiated stewardship business model will thrive amid the backdrop of rising global energy demand, consolidation in the U.S. energy markets, and enhanced expectations for sustainably produced energy. Thanks to our approach - focused on acquiring, improving, and retiring existing, long-life U.S. energy assets, honed through two decades of field experience - Diversified is the Right Company at the Right Time to responsibly manage gas and oil production in a manner that's consistent with environmental stewardship and our focus on being a solutions-based business.'

Termination of Previously Announced Tender Offer

Further to the Company's announcement on 15 February 2024 offering shareholders with an opportunity to elect how they would receive the return of capital of approximately US$42 million, in aggregate (the 'Return of Capital'), including having their shares purchased in a tender offer for cash (the 'Tender Offer') pursuant to the terms and conditions in the circular published on 26 February 2024 in connection with the Return of Capital (the 'Circular'), the board of directors of the Company has decided to terminate the Tender Offer component of the Return of Capital. The decision was made due to conflicting regulations in the United States and United Kingdom and pursuant to the condition precedent to the Tender Offer in the Circular that the Company has concluded, in its reasonable discretion, that the Tender Offer is not in compliance with applicable law in the United States. As a result of the termination, no shares will be purchased pursuant to the Tender Offer, and all shareholders holding securities in proper form as of the record date will receive the cash dividend payment as announced on 15 November 2023.

Contact:

Tel: 44 (0)800 756 3429

About Diversified Energy Company PLC

Diversified is a leading publicly traded energy company focused on natural gas and liquids production, transport, marketing, and well retirement. Through our differentiated strategy, we acquire existing, long-life assets and invest in them to improve environmental and operational performance until retiring those assets in a safe and environmentally secure manner. Recognized by ratings agencies and organizations for our sustainability leadership, this solutions-oriented, stewardship approach makes Diversified the Right Company at the Right Time to responsibly produce energy, deliver reliable free cash flow, and generate shareholder value.

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