Diversified Energy Makes $1.8B Birch Deal, Supercharging Its Permian Footprint

Key Points

• Diversified Energy agreed to acquire Birch Resources for approximately $1.8 billion, with closing expected in the fourth quarter of 2026. The deal would add 480 net wells, roughly 68,000 barrels of oil equivalent per day and 1.2 trillion cubic feet equivalent of reserves.
• The acquisition would significantly expand Diversified’s Permian presence, lifting production from about 9,000 to 77,000 barrels of oil equivalent per day and increasing projected Permian adjusted EBITDA from $64 million to $612 million. The assets are about 70% liquids-weighted and include related infrastructure.
• Diversified plans to finance the purchase mainly with asset-backed securities and expects operational synergies, while targeting nearly $2 billion of deleveraging over four years. The company said the transaction should increase total production by 35%, adjusted EBITDA by 55% and more than double free cash flow.

Diversified Energy NYSE: DEC said it has agreed to acquire Birch Resources for approximately $1.8 billion, in what Chief Executive Officer Rusty Hutson described as the company’s largest acquisition to date. The transaction is expected to close in the fourth quarter of 2026, subject to customary closing conditions.

Hutson said the purchase expands Diversified’s position in the Permian Basin and remains consistent with its longstanding strategy of buying established, low-decline producing assets and operating them for durable cash flow. The company did not update guidance during the call, saying it expects to do so after the transaction closes.

Transaction Adds Permian Scale

The Birch acquisition includes approximately 480 net wells producing about 68,000 barrels of oil equivalent per day and approximately 1.2 trillion cubic feet equivalent of reserves, according to Diversified. The asset base is largely composed of proved developed producing, or PDP, assets, rather than undeveloped drilling inventory.

Diversified also will acquire associated infrastructure, including 12 centralized production facilities, gathering pipelines and water-disposal systems. Hutson said the assets are located alongside Diversified’s existing Texas operations, creating potential operating synergies through greater geographic concentration.

The acquired production is approximately 70% liquids-weighted. Hutson said the transaction would materially rebalance Diversified’s commodity mix and add a larger oil-based revenue component to cash flow.

Following the acquisition, Diversified’s Permian production is expected to rise from approximately 9,000 barrels of oil equivalent per day to 77,000 barrels of oil equivalent per day. Permian adjusted EBITDA is projected to increase from $64 million to $612 million, based on figures presented by the company.

Hutson said the transaction would increase Diversified’s overall production by 35% and adjusted EBITDA by 55%. He also said the acquisition is expected to more than double the company’s free cash flow generation.

Financing and Valuation

The company said it is acquiring Birch for roughly a PV-14 value and approximately 3.3 times EBITDA, before anticipated synergies and optimization efforts. The purchase price is subject to customary purchase-price and effective-date cash-flow adjustments.

Diversified plans to fund the transaction primarily through asset-backed securities financing facilitated by Carlyle, together with available liquidity under its senior secured bank facility. The acquisition will remain on Diversified’s balance sheet, with the company retaining full ownership of the assets and their production.

President and Chief Financial Officer Brad Gray said the on-balance-sheet structure made sense because of the transaction’s anticipated cash-flow contribution and the scale it provides in the Permian. He added that Carlyle remains involved in syndicating the asset-backed debt financing.

Diversified also said its strategic relationship with Carlyle has expanded, with up to $10 billion of asset-backed financing capacity now earmarked for future PDP acquisition opportunities. Hutson said the company does not currently need another strategic financing partner, though it could pursue other partnerships if opportunities arose.

Addressing leverage, Hutson said Diversified expects to deleverage by close to $2 billion over the next four years through amortization of its asset-backed securities notes. Gray said the company’s balance sheet, liquidity and bank support are currently the strongest they have been in its history.

Operations and Optimization Opportunities

Birch’s operating costs currently run at approximately $5.70 per barrel of oil equivalent, with adjusted EBITDA margins of about 81%, according to Hutson. He said Diversified expects to seek further efficiencies by integrating the assets into its operating systems and consolidating applicable field, corporate and technology functions.

Gray and Executive Vice President and Chief Operating Officer Rick Gideon said Diversified intends to apply its Smarter Asset Management and Portfolio Optimization programs to the newly acquired properties. Gideon said additional scale can help reduce costs related to lift methods, chemicals and compression programs, though the company did not provide a future operating-cost target.

Gray said the Birch assets are expected to have a mid-teens decline rate for the next several years. Gideon characterized the properties as mature assets with a mix of lift methods, including gas lift, rod pumps and some electric submersible pumps.

The deal also includes 150 permitted enhanced oil recovery locations and additional mineral acreage. Gideon said the permitted locations provide optionality for future secondary-recovery and enhanced-oil-recovery projects, while Hutson emphasized that they are not a current drilling program.

“It’s a straight up PDP deal for us,” Hutson said in response to a question about operated drilling. “Free cash flow generation” remains the focus, he said.

Hutson said the acquisition establishes the Permian as Diversified’s fourth scaled core basin, alongside Appalachia, the Oklahoma Mid-Continent, and East Texas, Haynesville and Cotton Valley operations. The company said the Permian would become its largest basin by PV-10 reserve value, at $2.3 billion, and by adjusted EBITDA.

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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