First Berlin Equity Research has published a research update on Diversified Energy PLC (ISIN: GB00BYX7JT74). Analyst Simon Scholes upgraded the stock to BUY and increased the price target from GBp 150.00 to GBp 160.00.
Q1/22 results were close to our forecasts with hedged EBITDA up by ca. 40% at ca. USD109m (FBe: USD109.8m; Q1/21: USD78.0m) on the back of increases in volume and realised unit pricing of 31% and 15% respectively. Following the completion of five acquisitions over the past twelve months, we estimate that the Central Region (Texas, Louisiana, Oklahoma) now accounts for ca. 35% of DEC’s revenue. In April, DEC acquired midstream assets in the Central Region in order to improve margins through reduced use of third party infrastructure and potential transport of third party volume. We expect scale-building acquisitions and use of the Smarter Asset Management techniques successfully deployed in Appalachia to further lower unit costs in the Central Region in the near term. We have increased our price target from GBp150 to GBp160 to reflect a more realistic 7% annual lifetime production decline rate than the 8.5% we have used up to now. The rating goes from Add to Buy.