Diversified Energy Company

Greetings. Welcome to the first Diversified Energy's 2024 final results. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Douglas Criss, Senior Vice President, Investor Relations and Corporate Communications. Thank you, sir. You may begin.

Good morning, and thank you, everyone, for joining us today, and welcome to our year-end 2024 Results Conference Call. With me here today are Diversified's founder and CEO, Rusty Hudson, and President and CFO, Brad Gray. Before we get started, I will remind everyone that the remarks on the call today reflect the financial and operational outlook as of March 17, 2025. These outlooks entail assumptions and expectations that involve risks and uncertainties. A discussion of these risks and uncertainties can be found in our regulatory filings. During this call, we also reference certain non-GAAP and non-IFRS financial measures. All of our disclosures around those items are found in our earnings materials, on our website, and on our regulatory filings. I will now turn the call over to Rusty.

Thank you, Doug, and thank you all for joining the call today. Before I start my prepared remarks, I want to highlight and emphasize that we have significantly strengthened our company during the past year. I appreciate the tremendous efforts of our employees to deliver outstanding results and position Diversified for an exciting future. I'm confident that our presentation will reinforce my excitement. For those of you following along with our year-end 2024 results slide deck, which we posted to our IR website this morning. I will cover a few slides and then turn the call over to Brad to discuss a few highlights from our financial results. After Brad, I will provide some additional thoughts on our transformational Maverick acquisition and initial guidance for our powerful path forward in 2025 before opening the call for your questions. I'll start on slide three. We are a differentiated energy producer that seeks to optimize existing, long life, and often overlooked and undervalued U.S. energy assets. We seek to drive shareholder returns in a unique way by minimizing traditional E&P risks, by optimizing our low-declined production, and by being good stewards of our capital while driving meaningful and consistent cash flow. Our results reflect our continued focus on building a strategic, resilient energy producer. We believe we are the champion of the PDP subsector within the upstream EMP space. We are the one and only publicly traded company executing this strategy, offering investors a vehicle to invest in a similar fashion to the private equity PDP role of strategy. Importantly, compared to those private entities, Diversified offers unique value creation attributes, which provide us with a competitive advantage. With our large operational scale, vertical integration, and corporate infrastructure that leverages a leading technology platform, we have a proven process of integration that allows us to streamline and capture meaningful synergies. We have executed that playbook 27 times over the past seven years, and we look forward to accomplishing that again for the transformational Maverick Natural Resources acquisition that we just announced closing on Friday. And over the past 12 months, we have executed over $2 billion in acquisitions during an advantageous pricing environment. We remain focused on building a portfolio of assets through value accretive transactions, while simultaneously unlocking hidden value through our unique operational framework, strategic development partnerships, and growing adjacent business segments, including coal mine methane. With the combination of maturing assets and M&A activity leading to growth-oriented EMPs recycling capital through divestment of assets, in many cases mature producing assets, there remains an ample opportunity for Diversified's continued growth. Additionally, given our industry-wide reputation and the current upstream market dynamic of EMPs making acquisitions to backfill and expand undeveloped inventory, Diversify provides a creative and actionable solution as a PDP partner in a joint acquisition. We have been steadfast in executing our strategy since our IPO, driving strong financial and operational performance. The right company, right time mindset for the type of assets we manage delivers consistent free cash flow and returns to shareholders and serves a fundamental role in sustaining the U.S. energy markets. Turning to slide five, Throughout the year, we have talked about our focus on four key deliverables. Systematic debt reduction, returning capital to shareholders through dividend distributions and through share repurchases, and growing the company through accretive and strategic acquisitions. You can see here we have delivered on the promise we made one year ago, and our progress in 2024 is detailed on this slide. Debt principal reduction totaled approximately $205 million in 2024. Additionally, we returned approximately $105 million to shareholders in the form of dividends and approximately $20 million in strategic share repurchases. And we did this while continuing to focus on our growth initiatives with approximately $2 billion in announced acquisitions, inclusive of the recently closed Summit and Maverick acquisitions. We maintain flexibility in our capital allocation strategy to ensure we deploy capital to the highest value opportunities. Additionally, we will actively execute a regimented share repurchase program when we believe there is market dislocation and the shares are undervalued. Importantly, we believe those conditions currently exist in our shares and intend to be very active with our share repurchase program. Taken together, we believe our capital allocation strategy balances investment in the business and growth initiatives while enabling a tangible shareholder return framework, all of which creates long-term value for our stakeholders. And we will remain focused on these key strategic pillars. Turning to slide six, you can see here a very consistent average cash margin of over 50% since our IPO. This is something that we frequently highlight. These high cash margins are the result of our differentiated operations, including high capital efficiency and an effective hedging program. In addition, our proven track record of strategic bolt-on acquisitions has both increased our scale and positively impacted our per unit cost, which also contributes to our high cash margins. Notably, whether we are making a $1.3 billion acquisition or a $40 million acquisition, we are constantly reviewing those opportunities to see where we can capture value that others can't see. Most recently, with our Summit resources acquisition, we acquired some very strategic Appalachian pipeline infrastructure that will now allow us to gain further access to Transco Zone 5 pricing, not only for Summit's production, but our own already produced natural gas, which has historically traded at a premium, and specifically at a meaningful premium in the next few years, as illustrated on the chart on the right of the page. So while a very volatile natural gas market has made it increasingly difficult for most companies to maintain consistently high cash margins and has necessitated other operators' moderation of production and activity levels, we've been able to deliver those results due to the outstanding work of our field operational teams. Turning to slide seven, we have previously mentioned how the acquisition evaluation framework we apply does not ascribe any value to the undeveloped acreage. On this slide, I want to highlight the underlying value of that undeveloped acreage. I would note that we have historically received this acreage basically for free. Today, we have approximately 8.6 million net acres within our operating footprint, and this acreage is essentially all held by production. Of those 8.6 million net acres, 65% is undeveloped. Approximately 5.6 million This acreage represents significant untapped value. Over the last several years, we've begun to realize additional value through acreage sales, including the sale of approximately 42 million of non-core undeveloped acreage divestitures across our operational footprint during the year. We expect to execute additional sales throughout 2025, and we remain focused on unlocking the significant untapped value of our undeveloped acreage. To realize this value, we are focused on a variety of strategies, including outright sales, organic development, advantageous joint ventures, and drill codes, which also includes the inherited partnership for Maverick with a highly experienced, high-quality operator. Importantly, this untapped potential value serves as a source of capital for debt reduction, shareholder return of capital, and accretive bolt-on acquisitions. With that, I'll turn it over to Brad to discuss our financials in additional detail.