Diversified Energy NYSE: DEC reported second-quarter 2026 results marked by $240 million of adjusted EBITDA, $115 million of adjusted free cash flow and an updated full-year outlook that incorporates recent acquisitions and a newly announced operated development program.
Chairman and Chief Executive Officer Rusty Hutson said the company entered the second half of the year in one of the strongest financial positions in its 25-year history, despite completing three acquisitions totaling more than $2 billion in headline value over the past 12 months.
For the second quarter, Diversified produced about 1.3 billion cubic feet equivalent per day, including a June exit rate of approximately 1.3 Bcfe per day. Commodity revenue totaled $504 million, or about $4.23 per Mcfe, while the adjusted EBITDA margin was 52%.
The company ended June with $678 million of liquidity and pro forma leverage of approximately 2.45 times, within its stated target range of 2 times to 2.5 times. Hutson said 76% of the company’s debt is non-recourse, investment-grade-rated asset-backed securities financing.
Capital Returns, Debt Reduction and Portfolio Sales
Diversified repaid approximately $233 million of debt principal during the first half, including debt associated with its recently sold Barnett asset. It also returned approximately $136 million to shareholders through dividends and share repurchases.
Hutson said the company has delivered roughly $2.5 billion in combined shareholder returns and debt principal repayments since its 2017 initial public offering. Management expects the business to generate about $440 million of free cash flow in 2026.
During the first half, the company’s portfolio optimization program generated approximately $126 million of additional cash proceeds through monetization of non-core acreage and surface assets. Diversified also completed the sale of non-core, lower-margin Barnett and Arkansas assets for $147 million.
Hutson said management continues to evaluate additional opportunities to high-grade the portfolio. In response to an analyst question, he described the market for proved developed producing, or PDP, assets as “very strong,” while emphasizing that the company remains selective and walks away from deals that do not meet its criteria.
New Operated Development Program
The principal strategic announcement was Diversified’s plan to add operated drilling to its longstanding strategy of acquiring and optimizing mature producing assets. Hutson characterized the program as an extension of the company’s existing model rather than a strategic pivot.
The company expects to allocate $250 million to $300 million of annual run-rate capital across three areas:
- Approximately 50% to operated development;
- Approximately 30% to non-operated development programs; and
- Approximately 20% to maintenance capital for its core PDP portfolio.
Executive Vice President and Chief Operating Officer Rick Gideon said the initial operated program is centered in Oklahoma, where Diversified has identified approximately 450 economic drilling locations based on assumptions of $65 per barrel oil and $3.25 natural gas.
Between September 2026 and September 2027, the company plans to drill approximately 19 gross wells, or 17 net wells, with an average working interest of about 90%. Annualized net capital is expected to be approximately $145 million. The wells are expected to have average lateral lengths of about 11,000 feet and a production mix of roughly 15% oil, 35% natural gas liquids and 50% natural gas.
Gideon said the initial program is expected to begin contributing production in 2027, given the anticipated timing of drilling and sales. At a one-rig pace, the identified Oklahoma inventory represents more than 20 years of drilling locations, according to the company.
Management said it intends to operate the program flexibly, drilling when expected risk-adjusted returns compare favorably with acquisitions and other uses of capital. Hutson said the company could expand activity if commodity prices rise and returns improve, but it also could slow the program if prices weaken or alternative investments offer stronger returns.
Management did not provide a specific expected production contribution by September 2027, saying it intends to offer more detailed guidance later in the year. Hutson said the operated and non-operated programs together are expected to offset most, if not all, of the company’s existing corporate production decline.
Non-Operated Activity and Financial Outlook
Diversified’s non-operated program has drilled 150 wells to date and has approximately 145 locations remaining, representing about three years of inventory, Gideon said. The company reported program internal rates of return exceeding 60% to date.
In Texas, Diversified expects initial drilling with Continental Resources on the Central Basin Platform during the fourth quarter of 2026. In New Mexico, it expects a private operator to begin drilling on the Northwest Shelf during the third quarter. Management said production from these activities is expected primarily in 2027 because of the timing of operations.
President and Chief Financial Officer Brad Gray said Diversified’s updated 2026 guidance includes the Sheridan and Camino acquisitions, as well as capital spending for operated development. The company now expects:
- Total production of approximately 1.2 Bcfe per day, with 29% liquids and 71% natural gas;
- Adjusted EBITDA of $960 million to $1 billion;
- Adjusted free cash flow of approximately $440 million; and
- Total capital expenditures of $225 million to $255 million, including $35 million to $50 million of operated-development spending in the second half.
Gray said non-operated capital expenditures were reduced to $115 million to $125 million, reflecting a reallocation toward operated development, timing factors and changes in working interest levels. He said the company expects capital allocation flexibility to remain central to its strategy, including debt reduction, shareholder returns, acquisitions and reinvestment.
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.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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