First Berlin Equity Research has published a research update on Diversified Energy PLC (ISIN: GB00BYX7JT74). Analyst Simon Scholes reiterated his BUY rating and increased the price target from GBp 1500.00 to GBp 1700.00.

Abstract
DEC has expanded its leading position in Oklahoma through the accretive acquisition of Canvas Energy. The acquisition of Maverick Natural Resources in May this year more than doubled DEC’s footprint in Oklahoma to 1.3m developed acres, thereby creating the premier liquids and natural gas producer in the Western Anadarko Basin (WAB). The Canvas Energy deal grows DEC’s presence in the WAB by a further 19% to 1.55m acres. The acquisition consideration is USD550m (3.5x NTM EBITDA) of which ca. 10% is in the form of a share issue to the vendor, USD400m stems from an asset-backed securitisation (ABS) originated by Carlyle, and the balance from existing liquidity under DEC’s borrowing capacity. The acquisition, which is expected to close in Q4, should be accretive as it is expected to boost adjusted EBITDA and free cashflow by 18% and 29% respectively even before taking synergies into account. Meanwhile, the share count rises by only 4%. Net leverage (net debt/NTM adjusted EBITDA) is expected to remain stable at 2.6x. DEC is trading at a 32% discount to its peer group based on 2025E EV/adjusted EBITDA, but has a superior growth track record. Applying a multiple of 5.1x to our 2025 adjusted EBITDA forecast (a 20% discount to the peers due to their higher market caps) produces a per share valuation for DEC of GBp1,705. We set a new price target of GBp1,700. Due to recent sector multiple expansion, our new price target is 13% above our previous price target. We maintain our Buy recommendation (upside: 46%).