Diversified Energy NYSE: DEC reported record first-quarter adjusted EBITDA and detailed a $1.175 billion acquisition of assets from Camino Natural Resources, a transaction executives described as a significant expansion of the company’s Oklahoma footprint and a test case for larger acquisitions financed through a partnership with Carlyle.
On the company’s first-quarter 2026 earnings call, Founder and Chief Executive Officer Rusty Hutson said Diversified and Carlyle will acquire Camino assets through a special purpose vehicle, with Carlyle initially owning 60% and Diversified owning 40%. The company expects the transaction to close in the third quarter of 2026, subject to customary closing conditions.
Hutson said Diversified expects to contribute approximately $210 million, or about 20% of the transaction value, using existing liquidity and without issuing equity. The SPV will issue asset-backed securities debt, and Hutson said the structure is expected to receive equity method accounting treatment, meaning the debt would remain at the SPV level and not be included on Diversified’s consolidated balance sheet.
Camino Deal Expands Oklahoma Position
The Camino assets include production from proved developed producing wells, which Diversified will operate, as well as undeveloped acreage. Hutson said Diversified will own 100% of the undeveloped acreage and related proved undeveloped reserves, while receiving 40% of the SPV’s residual cash flow and a fee for administration of the ABS and operation of the assets.
“Our partnership with Carlyle and this innovative financing structure allows us to acquire a $1.2 billion asset with a fraction of the balance sheet impact a traditional acquisition would carry,” Hutson said. He added that the agreement includes a future pathway for Diversified to buy out Carlyle’s equity interest as the asset matures and delevers.
The acquired Camino assets bring approximately 51,000 net barrels of oil equivalent per day of production from roughly 200 net operated wells across about 101,000 net acres. Hutson said the assets are contiguous with Diversified’s existing Oklahoma operations and have a production mix of approximately 15% oil, 30% natural gas liquids and 55% natural gas.
According to Hutson, Camino has estimated next-12-month EBITDA of about $397 million and reserves of roughly 1.5 trillion cubic feet equivalent. Diversified has identified approximately $7 million in field-level operating synergies and more than $20 million in general and administrative synergies, largely from integrating the wells into its existing Oklahoma operations.
Management Highlights Valuation Discipline and Inventory
Hutson said Diversified is acquiring Camino at $23,030 per flowing BOE per day, compared with an average of approximately $28,100 for eight comparable Oklahoma transactions since November 2023. He said the company’s Canvas acquisition was priced at $22,925 per flowing BOE per day, adding that both transactions were completed at about an 18% discount to the peer average.
The company has identified approximately 100 actionable, drill-ready locations on the Camino acreage after internal engineering review. Including Camino, Hutson said Diversified now holds 1,000 Oklahoma locations, more than 450 of which meet the company’s investment hurdles at $65 oil. He said a one-rig pace would represent more than 30 years of inventory.
During the question-and-answer portion of the call, Hutson said Diversified is considering several options for the undeveloped acreage, including acreage sales, joint ventures or potentially operating its own drilling rig. He emphasized that development is “an option, not a mandate,” and said the company would evaluate alternatives based on economic returns.
Asked about whether Diversified would run an operated drilling program, Hutson said all three options remain viable. President and Chief Financial Officer Brad Gray said the company gained technical and operational talent through its Maverick Natural Resources acquisition, including Chief Operating Officer Rick Gideon, and “is not starting from scratch” if it chooses to pursue operated drilling.
First-Quarter Results Include Record Adjusted EBITDA
For the first quarter of 2026, Gray said Diversified’s production averaged approximately 1.2 billion cubic feet equivalent per day, with a March daily production exit rate of about 1.23 Bcfe per day. He said production was affected by Winter Storm Fern and other regional weather events, but the exit rate was in line with guidance.
Total commodity revenue was $556 million, while adjusted EBITDA reached a record $287 million. Gray said the company’s adjusted EBITDA margin was 68%. Adjusted free cash flow was $160 million, which included about $11 million of transaction costs and some effects from natural gas pricing volatility in February.
Diversified generated approximately $101 million in additional cash proceeds through its Portfolio Optimization Program during the quarter. Gray said about $50 million of that amount came from an agreement to sell working interests in acreage to a drilling program operated by Continental Resources, giving Diversified both cash proceeds and the opportunity to participate in future production and reserves.
Net debt stood at about $2.7 billion at quarter-end, and the company reduced debt principal by approximately $92 million during the quarter. Gray said pro forma leverage improved by about 20% to 2.2 times, within Diversified’s target range of 2.0 times to 2.5 times net debt to EBITDA. Liquidity was approximately $529 million.
Guidance Reiterated, Capital Returns Continue
Diversified reiterated its full-year 2026 guidance. The company expects total production of 1.17 to 1.21 Bcfe per day, with a mix of approximately 28% liquids and 72% natural gas. Adjusted EBITDA is expected to range from $925 million to $975 million, and adjusted free cash flow is expected to be approximately $430 million.
Total capital expenditures are projected at $205 million to $235 million, including $135 million to $155 million of non-operated capital spending and $70 million to $80 million of maintenance capital expenditures. Gray noted that the recently closed Sheridan acquisition and the announced Camino transaction are not fully reflected in the guidance figures.
Hutson said Diversified returned approximately $94 million to shareholders during the first quarter through dividends and share repurchases. Since its 2017 IPO, he said the company has delivered approximately $2.3 billion in shareholder returns and debt principal repayments, including about $1.2 billion in dividends and share repurchases.
Asked to rank capital allocation priorities, Hutson said debt reduction, dividends, share repurchases and acquisitions are all important and that the company evaluates them based on conditions at the time. He said systematic debt reduction remains a constant feature of the business through the ABS structures, while buybacks are used opportunistically when management believes the stock is mispriced.
Executives See More Acquisition Opportunities
Hutson said the Carlyle partnership gives Diversified the ability to pursue larger acquisitions without shareholder dilution or balance sheet strain. In response to an analyst question, he said the original Carlyle agreement included a $2 billion commitment because the companies “had to put a number” in the agreement, but he described the opportunity set as larger and said Carlyle has capital available.
Hutson said the company expects the Carlyle structure to be used for many larger transactions, while smaller bolt-ons or corporate transactions may still be completed on balance sheet. He also said Diversified is seeing a more active divestiture market, particularly for liquids-rich assets, although some gas assets remain available.
“We step up when others step away,” Hutson said in closing remarks on the company’s strategy, citing the Camino acquisition alongside recent transactions such as Maverick, Canvas and Sheridan.
About Diversified Energy NYSE: DEC
Diversified Energy Company PLC NYSE: DEC is an independent oil and natural gas producer focused on the acquisition and optimization of legacy onshore assets in the United States. The company’s portfolio spans thousands of producing wells and extensive leasehold positions across core regions such as Appalachia, the Permian Basin and the Mid-Continent. By targeting mature properties, Diversified Energy seeks to enhance long-term recovery through operational efficiencies and capital discipline.
The company’s business model centers on fee-based infrastructure and midstream services that provide stable and predictable cash flows.
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