Diversified Energy Co (DEC)

Price£11.28Cached quoteAs of 2026-09-05 08:46 UTC

AI: Undervalued

Price checkThe shares look cheap next to the cash the business should generate this year.

At the latest close, buying every share cost roughly $1 billion; adding $2.8 billion of net debt (debt minus cash) values the whole business near $3.9 billion. Management expects almost $1 billion of cash operating profit this year — earnings before accounting charges like equipment wear — and about $440 million of cash left after investment. Buyers therefore pay under four times this year's profit, and the leftover cash equals more than a tenth of the business price annually. The stock also trades far below the average analyst target of $22.50. Those gaps support an undervalued verdict, provided guidance proves accurate.

Big pictureDiversified buys old, slowly declining oil and gas wells and turns them into steady cash.

The company owns thousands of aging American wells that lose only about a tenth of their output each year, unlike shale wells that fade quickly. Over the past year it completed more than $2 billion of acquisitions — Maverick, Canvas, Sheridan and the Carlyle-partnered Camino deal — lifting production to roughly 1.3 billion cubic feet daily and deepening its Oklahoma position. Revenue jumped from about $800 million two years ago to $1.8 billion last year, reflecting purchased production more than organic growth. Because income swings with commodity prices, the company locks in many selling prices months ahead through contracts called hedges.

Business strengthCash generation is strong and the large debt load is structured and currently shrinking.

First-half operating cash flow reached $258 million, and management tallies about $275 million of free cash flow — money left after running and investing in the business. Roughly 76 percent of its $2.9 billion debt sits in asset-backed loans tied to specific wells, whose lenders cannot pursue the parent if wells disappoint; the company retired $233 million of debt in the first half. Leverage — debt measured against yearly cash profit — stands at 2.45 times, inside its stated target, with $678 million of liquidity. Caveats: $881 million of well-cleanup obligations and thin equity limit the cushion if gas prices slump.

What could change the storyPersistently cheap natural gas or a disappointing drilling push would undermine today's bargain price.

Bulls point to proof already delivered: buybacks removed about nine percent of shares this year, reversing dilution from earlier stock-funded deals, while export terminals and data centers lift gas demand. Bears counter that persistently cheap gas would squeeze the $440 million cash-flow forecast, slowing debt paydown and straining the 2.45-times leverage ceiling. The newly launched Oklahoma drilling program — roughly half of a $250-to-$300-million yearly budget — must earn adequate returns, and the model relies on asset-backed lending markets staying open. Today's price essentially assumes guidance is met, gas prices hold near current levels, and borrowing channels remain friendly.

AI: News

Second-quarter cash results impressedStrong quarterly cash flow and raised full-year guidance sent the stock noticeably higher this month.

Earlier this month the company reported second-quarter results: $240 million of adjusted cash operating profit, $115 million of free cash flow, and production near 1.3 billion cubic feet daily. Accounting profit included a paper gain on unsettled price contracts, and one earnings measure missed analyst estimates. Management nonetheless nudged full-year free cash flow guidance up to about $440 million, and the shares rose roughly nine percent over the following week — though crediting the results alone for that move is uncertain.

First owned drilling rig in decadesThe company started drilling its own Oklahoma wells for the first time in twenty-five years.

Last month the Camino acquisition closed — a $1.175 billion Oklahoma purchase shared sixty-forty with private-equity firm Carlyle, keeping most related debt off Diversified's balance sheet. Mid-month the company sent out its first self-operated drilling rig in a quarter century, targeting seventeen net wells over the coming year with roughly $145 million of annual capital. Management expects the new wells to replace about half the portfolio's natural production decline, defending future cash flow rather than chasing rapid growth.

Buybacks retire nearly a tenth of sharesThe company is buying back its own shares quickly, shrinking the count and boosting each owner's slice.

Through early August the company had repurchased about 6.6 million shares, roughly nine percent of shares outstanding, and paid $43 million of first-half dividends — about $136 million returned to shareholders overall. The share count has fallen from 77 million at year-end to about 71 million. That reverses a long dilution history: shares outstanding nearly doubled over five years as earlier deals used stock as currency. Retiring shares raises each remaining owner's claim on cash flow, though it diverts money that could otherwise repay debt.

Analysts raise targets after resultsSeveral Wall Street firms raised price targets recently, signaling they see much more value than today.

In recent weeks brokerage opinions turned friendlier: Truist raised its target from $17 to $20, Mizuho set $32, and Jefferies upgraded the stock, after Citigroup had trimmed its target last month. The average target now sits near $22.50, more than fifty percent above recent trading levels, with seven buy ratings against three holds. Such moves often reinforce rallies because some funds track analyst sentiment, but targets are opinions that have been cut before — Citigroup lowered theirs just weeks ago.

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Financial statements

	2025	2024	2023	2022	2021
Revenue	$1.83B	$794.8M	$868.3M	$1.92B	$1.01B
Gross profit	$460.2M	$109.5M	$203.2M	$1.25B	$548.7M
Gross margin	25.16%	13.77%	23.40%	65.19%	54.46%
Operating expenses	$1.29B	$428.9M	$440.6M	$445.9M	$291.2M
Operating income	$535.0M	−$43.0M	$1.16B	−$671.4M	−$467.1M
Operating margin	29.25%	−5.41%	133.72%	−34.98%	−46.36%
EBITDA	$947.5M	$213.5M	$1.39B	−$449.1M	−$299.4M
EBITDA margin	51.80%	26.86%	159.58%	−23.40%	−29.72%
Net income	$341.1M	−$87.0M	$759.7M	−$620.6M	−$325.2M
Net profit margin	18.65%	−10.95%	87.50%	−32.33%	−32.28%
Basic EPSper basic share	$4.67	-$1.84	$16.07	-$14.82	-$8.20
Diluted EPSper diluted share	$4.58	-$1.84	$15.95	-$14.82	-$8.20

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Diversified Energy Co (DEC)

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