Diversified Energy (NYSE:DEC) executives highlighted record 2025 financial results, continued debt reduction and shareholder returns, and a new bolt-on acquisition in East Texas during the company’s annual results conference call held Feb. 27, 2026.
Management emphasized a “proven” model built around mature, cash-generating assets
Founder and CEO Rusty Hutson framed 2025 as a year that underscored the company’s strategy of acquiring and optimizing established producing assets, describing Diversified as the “first and currently only publicly traded company focused on acquiring, operating, and optimizing established cash-generating energy assets.” Hutson also noted insiders own about 6% of shares outstanding and said he remains the largest individual shareholder.
2025 results: revenue of $1.83 billion and record adjusted EBITDA of $956 million
President and CFO Brad Gray reported that production averaged about 1.1 BCFE per day in 2025, with a December daily exit rate of approximately 1.25 BCFE per day. Gray said total revenue for the year was $1.83 billion, while adjusted EBITDA came in at $956 million, exceeding the company’s stated guidance. Adjusted EBITDA margin was 58%, which Gray called a record for the company.
Gray also detailed free cash flow generation and balance sheet metrics for the year:
- Adjusted free cash flow: $440 million in 2025, which Gray said was burdened by approximately $55 million of transaction costs.
- Net debt: approximately $2.8 billion at year-end 2025.
- Leverage: improved over 20% to 2.3x net debt to EBITDA since year-end 2024, placing the company within its 2.0x to 2.5x target range.
- Liquidity: approximately $577 million, which management said provides flexibility for opportunities including the newly announced Sheridan transaction.
Gray said portfolio optimization efforts—referred to as the POP program—generated about $170 million in additional cash proceeds during 2025. In a later slide discussion, he also said the company generated approximately $160 million in divestment proceeds during 2025 and $314 million cumulatively over the last three years, enhancing returns on acquisitions completed since entering the central region in 2021.
Capital allocation: debt reduction, dividends, and buybacks remained priorities
Management reiterated four capital allocation pillars: systematic debt reduction, returning capital through dividends, share repurchases, and accretive acquisitions. Hutson said Diversified repaid approximately $277 million in principal during 2025 and returned about $185 million to shareholders through dividends and strategic share repurchases, which he said represented roughly 16% of the company’s current market capitalization. Hutson added that since the 2017 IPO, the company has delivered approximately $2.3 billion in combined shareholder returns and debt principal repayments.
During the Q&A, management said it does not target an “optimal dividend yield,” emphasizing instead a fixed dividend they believe free cash flow can support. On leverage, Hutson said the company remains comfortable operating in the 2.0x to 2.5x net debt-to-EBITDA range, noting it may fluctuate within that band as the company executes acquisitions. He also stressed the company’s ongoing deleveraging through debt repayments, pointing to the $277 million reduction in 2025 and suggesting paydown should be “close to $300 million” in the upcoming year.
Sheridan Production Partners acquisition set to add low-decline Gulf Coast gas volumes
Hutson announced Diversified’s planned acquisition of Sheridan Production Partners, a privately held company with assets in East Texas focused in Panola and Harrison counties. Management described the deal as a bolt-on to existing operations and highlighted its proximity to Diversified’s 120 MMCF per day Black Bear processing facility.
Key transaction details provided on the call included:
- Purchase price: approximately $245 million, described as a PV-15 valuation.
- Production: an additional 61 MMCFE per day of natural gas production.
- Decline profile: approximately 6% corporate decline for the acquired asset.
- Reserves: estimated at approximately 397 BCFE.
- Expected EBITDA contribution: approximately $52 million over the next 12 months during calendar 2026.
- Funding: expected to be funded with existing liquidity; Gray later confirmed the company plans to close using liquidity on its credit facility.
- Timing: anticipated close in the second quarter of 2026.
In response to analyst questions, Hutson and Gray said the package includes a mix of horizontal and other wells, though they noted horizontal wells in the package have not been drilled in the last few years. Management also said the acquisition includes additional acreage and optionality for value creation through development, divestment, or potential non-operated arrangements, consistent with the company’s POP framework. Gray added that proximity to the processing facility could provide upside by moving gas to the facility and gaining liquids exposure.
Non-operated partnerships and portfolio optimization highlighted as growth levers
Executives also discussed non-operated joint ventures as a capital-light way to add production and reserves. Gray said the company’s non-op partnership in the Western Anadarko Basin generated an approximately 60% rate of return on new wells in 2025 and that the wells are trending about 75% liquids. He said this production helps offset the company’s approximate 10% annual corporate production decline, and added that non-op production is anticipated to exit 2026 at just over 12,500 BOE per day.
Management said it has also added a new Permian Basin non-op partnership to increase commodity diversification and potential returns, though it offered limited details and said more data would be provided after the first quarter.
On POP-related asset sales, management reiterated that a $40 million to $50 million annual run rate is a “normal year” expectation, while pointing to $100 million included in 2026 guidance. Hutson said the company has seen interest in certain opportunities it did not anticipate the prior year and noted that areas previously overlooked are drawing renewed attention.
Finally, Hutson said Diversified has completed its objective to move its primary listing, reincorporate in the U.S., and publish U.S. GAAP financials as an SEC-regulated accelerated filer, following the company’s 10-K filing on Feb. 26, 2026.
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.
