Summary
- Diversified Energy offers a contrarian play by acquiring and refurbishing end-of-life wells at low multiples, focusing on predictable, lower output.
- DEC maintains a healthy 2.4x net debt/EBITDA ratio, pays a 7.57% forward yield, and channels significant cash flow to shareholders.
- Key risks center on massive future plugging obligations—potentially $1.4–$10 billion—tied to 70,000 wells, with long-term asset retirement liabilit…
Summary
- Diversified Energy offers a contrarian play by acquiring and refurbishing end-of-life wells at low multiples, focusing on predictable, lower output.
- DEC maintains a healthy 2.4x net debt/EBITDA ratio, pays a 7.57% forward yield, and channels significant cash flow to shareholders.
- Key risks center on massive future plugging obligations—potentially $1.4–$10 billion—tied to 70,000 wells, with long-term asset retirement liabilities rising.
- I rate DEC a hold: dividend value is attractive, but debt risk and uncertain long-term asset obligations temper upside despite low valuation multiples.
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Investment Thesis
Diversified Energy (DEC) is a contrarian opportunity in the energy market as it focuses rather on end-of-life wells, which larger conglomerates want to sell to avoid paying the plugging cost on these, which often
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Quick Insights
DEC uses bankruptcy-remote ABS structures, isolating well cash flows and reducing default risk, while acquiring assets at 2–4x EBITDA to maintain capital efficiency.