First Berlin Equity Research has published a research update on Diversified Energy PLC (ISIN: GB00BYX7JT74). Analyst Simon Scholes downgraded the stock to ADD and maintained his GBp 150.00 price target.
The new acquisition in East Texas (output: 100% natural gas) will raise annualised group production by only ca. 3%. But unlike most of DEC’s existing production, the new acquisition’s output is unhedged and on the basis of the current futures strip its realised price will be over twice the level of the rest of DEC’s output during the next twelve months. We have increased our 2022 hedged adjusted EBITDA forecast by 12.6% with the acquisition contributing over five percentage points of the rise and stronger gas prices the remainder. We expect further acquisitions from DEC in the near term and will wait to assess the impact of these on 2023 numbers before raising our price target, which for the time being remains at GBp150. As the upside to our price target is now less than 25%, we move the rating from Buy to Add.
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