On Wednesday, KeyBanc Capital Markets began coverage on shares of Diversified Energy Company (NYSE:DEC), assigning an Overweight rating and setting a price target of $18.00. The firm highlighted the company's unique position in the energy sector, noting its strategy of managing mature, low-decline natural gas wells rather than engaging in the drilling and completion of new wells.
Diversified Energy's business model involves acquiring these wells from upstream companies that are looking to offload declining assets. According to KeyBanc, this approach sets the company apart from typical exploration and production (E&P) operations. The focus of Diversified Energy's asset management is primarily in the Appalachian region, which includes Pennsylvania, Ohio, West Virginia, Kentucky, and Tennessee, as well as the Central region encompassing Texas, Oklahoma, and Louisiana.
The analyst from KeyBanc stated, "We initiate coverage of Diversified Energy Company PLC (LON:DEC) with an Overweight rating and $18 price target. Diversified is a differentiated E&P." This statement underscores the firm's positive outlook on the company's stock, suggesting confidence in its potential for growth.
Diversified Energy's strategy of managing existing wells contrasts with the industry norm, where companies often prioritize drilling new wells. This distinction could provide a more stable and predictable business model, given the mature status and low decline rates of the wells Diversified Energy targets.
The initiation of coverage by KeyBanc with a favorable rating and a significant price target reflects a positive assessment of Diversified Energy's prospects within the energy sector. The company's shares will likely be watched by investors interested in E&P companies with alternative operational strategies.
In other recent news, Diversified Energy Company has been active with acquisitions and financial results. The company has expanded its presence in East Texas with a $69 million acquisition of natural gas properties. This transaction is expected to contribute an estimated Next Twelve Months (NTM) EBITDA of approximately $19 million. Furthermore, Diversified Energy has declared an interim dividend of $0.29 per share for the second quarter of 2024.
In analyst updates, Truist Securities has raised its price target for Diversified Energy to $20, maintaining a Buy rating. This revised target is based on updated financial forecasts for the years 2024 through 2026, particularly an estimated 2025 EBITDAX of $420 million.
In other developments, Diversified Energy has also acquired natural gas properties from Crescent Pass Energy for $106 million, expected to add 38 million cubic feet equivalent per day of production. Lastly, the company is set to join the Russell 2000 Index, a development expected to increase its visibility in the U.S. investment community.
InvestingPro Insights
As Diversified Energy Company (NYSE:DEC) garners positive attention from KeyBanc with an Overweight rating and a price target of $18, a look at the InvestingPro data and tips can provide a deeper understanding of the company's financial health and market performance. Notably, DEC's market capitalization stands at a modest $589.67M, and the stock offers an attractive dividend yield of 6.38%, which is significant for income-focused investors. The company's commitment to shareholder returns is further evidenced by its track record of raising its dividend for 7 consecutive years, a testament to its financial discipline and operational efficiency.
Despite recent market pressures, reflected in a one-month price total return of -22.0%, the company's strategy of managing mature wells is underscored by a low price-to-earnings (P/E) ratio of 4.21, suggesting that the stock may be undervalued compared to earnings. This is complemented by a price to book value of 1.1, indicating that the stock is trading at a level close to its intrinsic value based on the company's assets. Moreover, analysts predict the company will maintain profitability this year, which may provide a cushion against short-term market volatility.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights and metrics. There are 5 more InvestingPro Tips available at https://www.investing.com/pro/DEC, which can aid in making a well-informed investment decision regarding Diversified Energy Company.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.