Hedge hits, higher output shape Diversified Energy (DEC) Q1 2026
Filing Impact
Filing Sentiment
Form Type
10-Q
Diversified Energy Company reported sharply higher Q1 2026 activity, with commodity revenue of $556.2M, up 69% year over year, but a net loss of $160.7M or $(2.13) per share driven largely by a $548.4M loss on derivatives.
Production rose 39% to 107,810 MMcfe as prior Maverick, Summit and Canvas acquisitions boosted volumes and increased liquids exposure, which lifted realized prices but also operating costs. Operating cash flow improved to $168.7M, while total debt stood at $2.93B with quarterly interest expense of $63.4M.
The company continued reshaping its portfolio, divesting non-core acreage for $101M, completing a $248M Sheridan acquisition in April, and agreeing to a $1.2B Camino transaction alongside a Carlyle-funded SPV. It also tapped an extra $200M of Nordic Bonds and repurchased about 7% of shares outstanding.
Positive
- None.
Negative
- None.
Insights
Higher volumes and deals contrast with hedge-driven losses and heavy leverage.
Diversified Energy grew Q1 2026 commodity revenue to $556.2M, up 69%, on 39% higher production and more liquids. However, a $548.4M derivatives loss turned operations into a $160.7M net loss despite stronger underlying pricing and volumes.
Operating cash flow of $168.7M helped support a sizeable $2.93B debt load and quarterly interest expense of $63.4M. Multiple ABS structures and $500M of Nordic Bonds diversify funding but embed covenant and refinancing obligations that will matter as large maturities cluster around 2029–2033.
Strategically, the business remains deal-heavy, with a completed $248M Sheridan acquisition and a planned $1.2B Camino transaction with Carlyle funding 60% of producing assets via an SPV. Future filings may clarify how these moves affect leverage metrics, hedge needs, and free cash generation once integrations mature.
Key Figures
Commodity revenue: $556.2M
Net income (loss): $(160.7M)
Earnings (loss) per share: $(2.13)/share
+5 more
8 metrics
Commodity revenue
$556.2M
For the three months ended March 31, 2026; up 69% year over year
Net income (loss)
$(160.7M)
For the three months ended March 31, 2026 attributable to DEC
Earnings (loss) per share
$(2.13)/share
Basic and diluted EPS for the three months ended March 31, 2026
Operating cash flow
$168.7M
Net cash provided by operating activities in Q1 2026
Total debt
$2.93B
Total borrowings outstanding as of March 31, 2026 before discounts/premiums
Derivatives loss
$548.4M
Total loss on derivatives for the three months ended March 31, 2026
Production volume
107,810 MMcfe
Total net production for the three months ended March 31, 2026
Share repurchases
$71M / 5.03M shares
Stock repurchased in Q1 2026 at $14.20 average price, ~7% of shares
Key Terms
asset-backed securities, asset retirement obligations, marginal well tax credit, Monte Carlo simulation, +2 more
6 terms
asset-backed securities financial
"to issue asset-backed securities with a total principal amount of $160 million at par"
A type of investment created by pooling many similar cash‑flowing assets — like mortgages, car loans, or credit card receivables — and selling slices of that bundle to investors who then receive the payments those assets generate. Think of it as a fruit basket where buyers earn the fruit sales: investors get steady income but also take on the risk that the underlying loans stop performing or are paid off early. Investors care because these securities can provide predictable yield, portfolio diversification, and varying levels of credit and liquidity risk depending on the quality of the underlying assets.
asset retirement obligations financial
"The Company records a liability for the present value of the estimated future decommissioning costs associated with its natural gas and oil properties."
Asset retirement obligations are a company’s recorded promise to pay for dismantling, cleaning up, or restoring property when a long-lived asset is retired — for example decommissioning a plant or removing equipment. Companies estimate the future cleanup cost today and book it as a liability (and add the cost to the asset), so it affects the balance sheet, reported profits over time, and future cash needs; investors watch it like a planned bill that can reduce cash available for returns.
marginal well tax credit financial
"primarily impacted by the recognition of the federal marginal well tax credit available to qualified producers"
Monte Carlo simulation financial
"The fair value of the Company’s PSUs is determined using a Monte Carlo simulation model as of the grant date."
A Monte Carlo simulation is a computerized way to model many possible future outcomes by running thousands of randomized “what-if” scenarios, like rolling dice repeatedly to see the range of results. For investors it shows the probability of different returns, losses, or timing outcomes under varied assumptions, helping quantify uncertainty and compare risk — similar to using many practice runs to judge how often a plan succeeds or fails.
Henry Hub financial
"drove an average Henry Hub price of approximately $5.04 per MMBtu for the quarter."
Henry Hub is a physical natural gas pipeline junction in Louisiana that serves as the standard pricing point for U.S. natural gas contracts and the benchmark used in major futures markets. Think of it as the central marketplace where a single quoted price is set; that price acts like a reference tag that influences energy company revenues, utility costs, commodity trading and related stock valuations, so movements there can ripple through broader markets.
MMcfe financial
"Total production (MMcfe) | 107,810 | 77,724 | 30,086 | 39%"
mmcfe stands for million cubic feet equivalent, a unit that expresses quantities of natural gas and other hydrocarbon liquids as if they were all gas volumes. Investors use it to compare and sum different kinds of fuel production or reserves on a single scale—like converting dollars in different currencies to one common money—so it clarifies output, reserve size and revenue potential across mixed energy products.
Earnings Snapshot
Commodity revenue: $556.2M
Q1 2026
Commodity revenue
$556.2M
+69% YoY
Net income (loss)
$(160.7M)
vs $(323.2M) prior-year quarter
Total production
107,810 MMcfe
+39% YoY
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 2026
or
For the transition period from to
Commission file number: 001-41870
(Exact name of registrant as specified in its charter) | ||||
State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: | ( |
Securities registered, pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered, pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
þ | Accelerated filer | ¨ | Non-accelerated filer | ¨ | |||||
Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The registrant had 72,323,471 shares of common stock outstanding (excluding shares held by the Employee Benefit Trust) as of May 6, 2026.
Table of Contents
Page | ||
Part I | Financial Information | |
Item 1. | Financial Statements | 4 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 35 |
Item 4. | Controls and Procedures | 36 |
Part II | Other Information | |
Item 1. | Legal Proceedings | 37 |
Item 1A. | Risk Factors | 37 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 37 |
Item 3. | Defaults Upon Senior Securities | 37 |
Item 4. | Mine Safety Disclosures | 37 |
Item 5. | Other Information | 38 |
Item 6. | Exhibits | 38 |
Signatures | 39 |
Table of Contents | Form 10-Q | Diversified Energy Company |
Glossary of Terms
ABS - Asset-Backed Security
ASU - Accounting Standards Update
Bbl - Barrel or barrels of oil or natural gas liquids
Btu - A British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one
degree Fahrenheit.
E&P - Exploration and production
EBITDAX - Earnings before interest, tax, depreciation, amortization and exploration expense
EPS - Earnings per share
GAAP - U.S. Generally Accepted Accounting Principles
Henry Hub - A natural gas pipeline delivery point that serves as the benchmark natural gas price underlying NYMEX natural gas
futures contracts.
Mbbls - Thousand barrels
Mcf - Thousand cubic feet of natural gas
Mcfe - Thousand cubic feet of natural gas equivalent
Midstream - Midstream activities include the processing, storing, transporting and marketing of natural gas, NGLs and oil.
Mmbtu - Million British thermal units
Mmcf - Million cubic feet of natural gas
Mmcfe - Million cubic feet of natural gas equivalent
Mmcfepd - Million cubic feet of natural gas equivalent per day
Mont Belvieu - A mature trading hub with a high level of liquidity and transparency that sets spot and futures prices for NGLs.
NGLs - Natural gas liquids, such as ethane, propane, butane and natural gasoline that are extracted from natural gas production
streams.
NYMEX - New York Mercantile Exchange
NYSE - New York Stock Exchange
Oil - Includes crude oil and condensate
PSU - Performance-based restricted stock unit
Realized price - The cash market price, less all expected quality, transportation and demand adjustments.
ROU - Right-of-use asset
RSU - Restricted stock unit
SOFR - Secured Overnight Financing Rate
UK - United Kingdom
Upstream - Upstream activities include exploration, discovery, and extraction of natural gas, NGLs, and oil. Often referred to as
exploration and production activities, or E&P.
WTI - West Texas Intermediate grade crude oil, used as a pricing benchmark for sales contracts and NYMEX oil futures contracts.
Table of Contents | Form 10-Q | Diversified Energy Company |
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that can be identified by the following terminology,
including the terms “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,”
“estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible,” or the negative of these terms or other variations or
comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report on
Form 10-Q and include, but are not limited to, statements regarding our intentions, beliefs or current expectations concerning, among
other things, our results of operations, financial positions, liquidity, prospects, growth, strategies and the natural gas and oil industry.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance and the actual results of our operations, financial position and
liquidity, and the development of the markets and the industry in which we operate, may differ materially from those described in, or
suggested by, the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if the results of
operations, financial position and liquidity, and the development of the markets and the industry in which we operate are consistent
with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results or developments may not be
indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ
materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and
business conditions, the behavior of other market participants, industry trends, competition, commodity prices, changes in regulation,
currency fluctuations, our ability to recover our reserves, our ability to successfully integrate acquisitions, our ability to obtain
financing to meet liquidity needs, changes in our business strategy, political and economic uncertainty.
Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this Quarterly
Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q, reflect our current view with respect to future
events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to our operations, results
of operations, growth strategy and liquidity. Investors should specifically consider the factors identified in this Quarterly Report on
Form 10-Q and in other documents that we file with or furnish to the SEC which could cause actual results to differ. We explicitly
disclaim any obligation or undertaking to revise any forward-looking statements in this Quarterly Report on Form 10-Q that may
occur due to any change in our expectations or to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q
except as may be required by applicable law.
4
Table of Contents | Form 10-Q | Diversified Energy Company |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page | |
Condensed Consolidated Financial Statements (Unaudited) | 5 |
Condensed Consolidated Balance Sheets | 5 |
Condensed Consolidated Statements of Comprehensive Income (Loss) | 6 |
Condensed Consolidated Statements of Changes in Stockholders' Equity | 7 |
Condensed Consolidated Statements of Cash Flows | 8 |
Notes to the Condensed Consolidated Financial Statements | 9 |
5
Table of Contents | Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy Company |
Condensed Consolidated Balance Sheets (Unaudited)
As of | ||
(In thousands, except par and share data) | March 31, 2026 | December 31, 2025 |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ | $ |
Restricted cash | ||
Accounts receivable, net | ||
Derivatives | ||
Prepaid expenses and other current assets | ||
Total current assets | $ | $ |
Noncurrent assets: | ||
Natural gas and oil properties (successful efforts method): | ||
Proved natural gas and oil properties | $ | $ |
Unproved natural gas and oil properties | ||
Accumulated depletion | ( | ( |
Natural gas and oil properties, net | ||
Property, plant, and equipment, net | ||
Restricted cash | ||
Deferred tax assets | ||
Other assets | ||
Total assets | $ | $ |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable | $ | $ |
Accrued liabilities | ||
Revenue to be distributed | ||
Current portion of long-term debt, net | ||
Derivatives | ||
Derivatives settlements payable | ||
Other current liabilities | ||
Total current liabilities | $ | $ |
Noncurrent liabilities: | ||
Asset retirement obligations | $ | $ |
Long-term debt, net | ||
Derivatives | ||
Other liabilities | ||
Total liabilities | $ | $ |
Commitments and contingent liabilities (Note 12) | ||
Stockholders' equity: | ||
Common stock ($ shares issued and outstanding) | $ | $ |
Additional paid in capital | ||
Accumulated other comprehensive income (loss) | ( | ( |
Retained earnings (accumulated deficit) | ( | ( |
Total stockholders' equity attributable to DEC | $ | $ |
Noncontrolling interests | ||
Total stockholders' equity | $ | $ |
Total liabilities and stockholders' equity | $ | $ |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
6
Table of Contents | Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy Company |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands, except share and per share data) | For the Three Months Ended | |
March 31, 2026 | March 31, 2025 | |
Revenue | ||
Natural gas | $ | $ |
NGLs | ||
Oil | ||
Total commodity revenue | $ | $ |
Gain (loss) on derivatives | ( | ( |
Midstream | ||
Other | ||
Total revenue | $ | $ |
Operating expense | ||
Lease operating expense | $( | $( |
Production taxes | ( | ( |
Midstream operating expense | ( | ( |
Transportation expense | ( | ( |
Accretion of asset retirement obligation | ( | ( |
General and administrative expense | ( | ( |
Depreciation, depletion and amortization | ( | ( |
Gain (loss) on natural gas and oil properties and equipment | ||
Total operating expense | $( | $( |
Income (loss) from operations | $( | $( |
Other income (expense) | ||
Interest expense | $( | $( |
Loss on debt extinguishment | ( | |
Other income (expense) | ||
Income (loss) before taxation | $( | $( |
Income tax benefit (expense) | ( | |
Net income (loss) | $( | $( |
Other comprehensive income (loss) | ( | |
Total comprehensive income (loss) | $( | $( |
Net income (loss) attributable to: | ||
DEC | $( | $( |
Noncontrolling interest | ( | |
Net income (loss) | $( | $( |
Earnings (loss) per share attributable to DEC | ||
Basic | $( | $( |
Diluted | $( | $( |
Weighted average shares outstanding | ||
Basic | ||
Diluted | ||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
7
Table of Contents | Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy Company |
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Common Stock | ||||||||
Shares | Amount | Additional Paid in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders' Equity Attributable to DEC | Noncontrolling Interest | Total Stockholders ' Equity | |
Balance as of December 31, 2024 | $ | $ | $( | $( | $ | $ | $ | |
Net income (loss) | — | — | — | — | ( | ( | ( | |
Other comprehensive income (loss) | — | — | — | ( | — | ( | — | ( |
Issuances of common stock | — | — | — | |||||
Repurchases of common stock | ( | — | ( | — | — | ( | — | ( |
Share-based compensation | — | — | ( | — | ||||
Dividends declared | — | — | — | ( | — | |||
Distributions to noncontrolling interest owners | — | — | — | — | — | — | ( | ( |
Balance as of March 31, 2025 | $ | $ | $( | $( | $ | $ | $ | |
Balance as of December 31, 2025 | $ | $ | $( | $( | $ | $ | $ | |
Net income (loss) | — | — | — | — | ( | ( | ( | ( |
Other comprehensive income (loss) | — | — | — | — | — | — | — | — |
Repurchases of common stock | ( | ( | ( | — | — | ( | — | ( |
Share-based compensation | — | ( | — | |||||
Dividends declared | — | — | ( | — | ( | ( | — | ( |
Distributions to noncontrolling interest owners | — | — | — | — | — | — | ( | ( |
Balance as of March 31, 2026 | $ | $ | $( | $( | $ | $ | $ | |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
8
Table of Contents | Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy Company |
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended | ||
(In thousands) | March 31, 2026 | March 31, 2025 |
Cash flows from operating activities: | ||
Net income (loss) | $( | $( |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||
Depreciation, depletion and amortization | ||
Accretion of asset retirement obligations | ||
Income tax (benefit) expense | ( | |
(Gain) loss on derivatives | ||
Cash proceeds (payments) on settlement of derivatives | ( | ( |
Settlement of asset retirement costs | ( | ( |
(Gain) loss on natural gas and oil properties and equipment | ( | ( |
Loss on early retirement of debt | ||
Non-cash share-based compensation | ||
Other | ||
Changes in working capital: | ||
Accounts receivable, net | ( | |
Other assets | ( | ( |
Accounts payable | ( | |
Other liabilities | ( | |
Net cash provided by operating activities | ||
Cash flows from investing activities: | ||
Consideration for business acquisitions, net of cash acquired | ( | |
Consideration for asset acquisitions, net of cash acquired | ( | ( |
Proceeds from divestitures | ||
Capital expenditures | ( | ( |
Net cash provided by (used in) investing activities | ( | |
Cash flows from financing activities: | ||
Repayment of borrowings | ( | ( |
Proceeds from borrowings | ||
Debt issuance costs | ( | ( |
Hedge modifications associated with ABS Notes | ( | |
Proceeds from equity issuance, net | ||
Principal element of lease payments | ( | ( |
Dividends to stockholders | ( | ( |
Distributions to noncontrolling interest owners | ( | ( |
Repurchases of common stock (stock repurchase program) | ( | |
Net cash provided by (used in) financing activities | $( | $ |
Net change in cash, cash equivalents and restricted cash | ||
Cash, cash equivalents and restricted cash, beginning of period | ||
Cash, cash equivalents and restricted cash, end of period | $ | $ |
Cash and cash equivalents | ||
Restricted cash | ||
Total cash, cash equivalents and restricted cash | $ | $ |
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
9
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
Index to the Notes to the Condensed Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies | 9 | Note 8 - Compensation Plans | 17 | |
Note 2 - Acquisitions & Divestitures | 10 | Note 9 - Asset Retirement Obligations | 19 | |
Note 3 - Income Tax | 13 | Note 10 - Borrowings | 20 | |
Note 4 - Earnings (Loss) Per Share | 13 | Note 11 - Fair Value | 24 | |
Note 5 - Natural Gas & Oil Properties | 14 | Note 12 - Commitments & Contingencies | 25 | |
Note 6 - Derivatives | 14 | Note 13 - Supplemental Cash Flow Information | 26 | |
Note 7 - Stockholders' Equity | 16 | Note 14 - Subsequent Events | 26 |
Diversified Energy Company, a Delaware corporation (“Diversified,” “DEC,” “we,” “us,” “our,” or collectively with its wholly owned
subsidiaries, the “Company”) is an independent energy company engaged in the production, transportation and marketing of natural
gas, oil and NGLs. The Company’s assets are located in the United States within the following geographical operating areas:
•Appalachian Region, which spans Ohio, Indiana, Pennsylvania, Virginia, West Virginia, Kentucky, Tennessee and Alabama;
•Central Region, which includes Texas, Oklahoma, New Mexico, and Louisiana;
•Other, which includes Florida and Wyoming.
accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to
statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended
December 31, 2025, as included in the Company’s annual report on Form 10-K. The accompanying unaudited condensed consolidated
financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of
our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly
owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been
eliminated.
Certain reclassifications have been made to prior period financial statements and related disclosures to conform to current period
presentation. These reclassifications have no impact on previously reported total assets, total liabilities, net income or total operating
cash flows.
In accordance with ASC 280, Segment Reporting, the Company establishes operating segments based on the components of the
business that are regularly reviewed by the chief executive officer, who serves as the chief operating decision maker (“CODM”), for
purposes of allocating resources and assessing performance. The CODM evaluates the Company’s operations in a consolidated
manner. Accordingly, the Company has one reportable segment.
The CODM uses consolidated income (loss) before income taxes for purposes of allocating resources and assessing operating
performance. The CODM is also regularly provided information on lease operating expense, transportation expense, production taxes,
and general and administrative expense, which represent significant segment expenses. Other segment items primarily consist of
depreciation, depletion and amortization, interest expense, and income tax expense (benefit). These amounts are derived from, and can
be found within, the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss).
Segment profit or loss reconciles to consolidated income (loss) before income taxes with no reconciling items.
There have been no material changes in the Company’s reportable segment, the CODM, or the measures used to assess segment
performance since December 31, 2025. There were no material changes in segment assets from those reported in the Company’s
annual report on Form 10-K for the year ended December 31, 2025.
Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less. The Company
maintains cash balances at financial institutions, which at times may exceed federally insured limits. The Company has not
10
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash
equivalents.
Restricted cash represents cash whose withdrawal or use is limited by contractual or regulatory requirements and is not available for
general corporate purposes. Restricted cash is presented as either a current or noncurrent asset based on the expected timing of the
related obligations.
Restricted cash primarily consists of:
•Amounts held as collateral for surety bonds or required by state agencies for well abandonment obligations; and
•Cash reserves required for interest payments and fees related to the Company’s asset-backed securitization arrangements,
which are administered by an independent indenture trustee.
The Company’s accounting policy and the nature of its restricted cash arrangements are consistent with those described in its annual
report on Form 10-K for the year ended December 31, 2025, and there were no material changes during the interim period.
ASU Number | Description | Effective Date |
ASU 2024-04 | Debt—Debt with Conversion and Other Options | January 1, 2026 |
ASU 2025-05 | Measurement of credit losses for accounts receivable and contract assets from transactions accounted for under Topic 606 | January 1, 2026 |
The adoption of these standards did not have a significant impact on the amounts reported in the Condensed Consolidated Financial
Statements.
During the three months ended March 31, 2026, the Company collectively acquired certain midstream and plugging assets for total
consideration of $17 million, inclusive of customary purchase price adjustments, and transaction costs. Additionally, in February
2026, the Company paid a deposit of $25 million for the acquisition of certain producing properties from Sheridan Holding Company
III, LLC (“Sheridan”). This acquisition was completed in April 2026 and is discussed in Note 14.
During the three months ended March 31, 2026, the Company divested certain non-core undeveloped acreage for consideration of
$101 million. The consideration received exceeded the carrying amount of the net assets divested resulting in a gain on natural gas and
oil properties and equipment of $101 million. Additionally, the disposal of various property, plant and equipment in the normal course
of business resulted in cash proceeds of $1 million and a loss on natural gas and oil properties and equipment of $3 million.
11
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
On November 24, 2025, the Company acquired Canvas. The Company determined that substantially all of the fair value of the gross
assets acquired was concentrated in a single asset group; therefore, the transaction was accounted for as an asset acquisition. The
Company paid purchase consideration of $533 million, inclusive of customary purchase price adjustments. The purchase consideration
consisted of the issuance of 3,718,209 shares of common stock and $399 million in cash, inclusive of transaction costs of $13 million.
On the date of the acquisition, the Company settled the outstanding balance of $81 million on Canvas’s credit facility.
Refer to Notes 7 and 10 for additional information regarding stockholders’ equity and debt.
fair values as of November 24, 2025 were as follows (in thousands):
Consideration paid | |
Cash consideration | $ |
Fair value of common stock issued(a) | |
Payoff of existing credit facility | |
Total consideration | $ |
Net assets acquired | |
Cash | $ |
Natural gas and oil properties | |
Property, plant and equipment, net | |
Other noncurrent assets | |
Accounts receivable, net | |
Other current assets | |
Asset retirement obligations | ( |
Deferred tax liability | ( |
Other noncurrent liabilities | ( |
Accounts payable | ( |
Other current liabilities | ( |
Net assets acquired | $ |
(a)The fair value of the common stock issued was based on the closing price of the Company’s common stock on November 24, 2025
of $14.51 . The fair value of our common stock is a Level 1 input as our stock price is a quoted price in an active market.
On March 14, 2025, the Company acquired Maverick. The Company determined the transaction did not have a significant
concentration of assets and that it acquired an identifiable set of inputs, processes, and outputs. As a result, the Company concluded
the transaction was a business combination. The Company paid purchase consideration of approximately $666 million, inclusive of
customary purchase price adjustments. The purchase consideration consisted of the issuance of 21,194,213 shares of common stock
and $211 million in cash. As part of the acquisition, the Company paid off on the acquisition date the $202 million balance
outstanding on Maverick’s credit facility and assumed $518 million of ABS Maverick Notes outstanding. Transaction costs associated
with the acquisition were $21 million and are included within G&A expense in the Consolidated Statements of Comprehensive
Income (Loss).
Refer to Notes 7 and 10 for additional information regarding stockholders’ equity and debt.
12
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
2025 were as follows (in thousands):
Consideration paid | |
Cash consideration | $ |
Fair value of common stock issued(a) | |
Payoff of existing credit facility | |
Total consideration | $ |
Net assets acquired | |
Cash | $ |
Natural gas and oil properties | |
Property, plant and equipment, net | |
Restricted cash | |
Other noncurrent assets | |
Derivatives, net | |
Accounts receivable, net | |
Other current assets | |
Asset retirement obligations | ( |
Borrowings | ( |
Other noncurrent liabilities | ( |
Accounts payable | ( |
Accrued operating expenses | ( |
Revenues payable | ( |
Other current liabilities | ( |
Net assets acquired | $ |
(a)The fair value of the common stock issued was based on the closing price of the Company’s common stock on March 14, 2025 of
$11.95 . The fair value of our common stock is a Level 1 input as our stock price is a quoted price in an active market.
The fair value of the natural gas and oil properties was based on estimated future production volumes, adjusted for risk characteristics
associated with the classification of the acquired reserves, and related future net cash flows discounted using a weighted average cost
of capital. The Company utilized NYMEX strip pricing adjusted for inflation. Management utilized the assistance of a third-party
valuation expert to estimate the fair value of the natural gas and oil properties acquired. The Company considers the discount rate,
commodity pricing, production and operating expense to be the assumptions most sensitive to the fair value of the acquired natural gas
and oil properties and represent Level 3 inputs, other than NYMEX strip pricing which represents a Level 1 input.
On February 27, 2025, the Company acquired certain upstream assets and related infrastructure within Virginia, West Virginia, and
Alabama of the Appalachian Region from Summit. Given the concentration of assets, this transaction was considered an asset
acquisition rather than a business combination. The Company paid consideration of $42 million, inclusive of transaction costs of $0.4
million and customary purchase price adjustments, substantially all of which was accounted for as natural gas and oil properties. The
transaction was funded through proceeds from the ABS X Notes collateralized, in part, by the acquired assets. Refer to Note 10 for
additional information regarding debt.
During the three months ended March 31, 2025, the Company acquired certain midstream and upstream assets that are contiguous to
its existing Central Region assets. The Company paid total consideration of $16 million, inclusive of non-cash consideration of $4
million, customary purchase price adjustments, and transaction costs. Given the concentration of assets, these transactions were
considered asset acquisitions rather than business combinations.
During the three months ended March 31, 2025, the Company divested certain non-core undeveloped acreage across its operating
footprint for consideration of $2 million. The consideration received exceeded the carrying amount of the net assets divested resulting
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Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income,
plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes
for the three months ended March 31, 2026 and 2025 differs from the amount that would be provided by applying the statutory U.S.
federal income tax rate of 21% to pre-tax income primarily due to the impact of federal tax credits (principally the marginal well tax
credit), state income taxes, permanent differences, and discrete items recognized in the interim period.
The effective tax rates for the three months ended March 31, 2026 and 2025 were 48.7 % and (25.4 )%, respectively. For the three
months ended March 31, 2026, we reported a tax benefit of $153 million, a change of $218 million, compared to a tax expense of $65
million in 2025. The effective tax rate for March 31, 2026 was primarily impacted by the recognition of the federal marginal well tax
credit available to qualified producers and due to management’s estimate of the annual effective tax rate expected for the full financial
year. The federal government provides these credits to encourage companies to continue producing lower-volume wells during periods
of low prices to maintain the underlying jobs they create and the state and local tax revenues they generate for communities to support
schools, social programs, law enforcement and other similar public services. The differences between the statutory U.S. federal
income tax rate and the effective tax rates are summarized as follows:
Three Months Ended | ||
March 31, 2026 | March 31, 2025 | |
U.S. federal statutory tax rate | ||
State income taxes, net of federal tax benefit | ||
Federal credits(a) | ( | |
Other, net | ( | |
Effective tax rate | ( | |
(a)Federal tax credits consist primarily of the marginal well tax credit. Because the credit is a dollar amount determined
independently of pre-tax results, its impact, expressed as a percentage of pre-tax income (loss), can be positive or negative and
can vary significantly between periods depending on the sign and magnitude of the Company's forecasted annual pre-tax book
income (loss) used in the estimated annual effective tax rate.
Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to common shareholders by the
weighted average number of shares of common stock outstanding during the period, excluding shares held in treasury (if any) and the
Employee Benefit Trust (“EBT”). Diluted EPS reflects the potential dilution that could occur if share-based compensation awards
were exercised or converted into shares, except when their effect would be anti-dilutive. Refer to Note 7 for additional information
regarding the EBT.
the periods presented:
Three Months Ended | ||
(in thousands, except share and per share data) | March 31, 2026 | March 31, 2025 |
Net income (loss) attributable to DEC | $( | $( |
Weighted average shares outstanding - basic | ||
Dilutive impact of potential shares | ||
Weighted average shares outstanding - diluted | ||
Basic earnings (loss) per share | $( | $( |
Diluted earnings (loss) per share | $( | $( |
Potentially dilutive shares(a) | ||
(a)Share-based compensation awards excluded from the diluted EPS calculation because their effect would have been anti-dilutive.
14
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
As of | |
(in thousands) | March 31, 2026 |
Costs | |
Beginning balance | $ |
Additions(a) | |
Disposals | ( |
Ending balance | $ |
Depletion and impairment | |
Beginning balance | $( |
Depletion expense | ( |
Ending balance | $( |
Net book value | $ |
(a)During the three months ended March 31, 2026, the Company’s additions were primarily due to development and recurring
capital expenditures.
The Company faces volatility in market prices and basis differentials for natural gas, NGLs and oil, affecting the predictability of its
cash flows from commodity sales. Additionally, the Company’s cash flows related to interest payments on variable rate debt
obligations can be impacted by fluctuations in interest rate markets, depending on its debt structure. To manage these risks, the
Company enters into derivative contracts primarily with major financial institutions and energy trading counterparties. As of March
31, 2026, these instruments included swaps, collars, basis swaps, and stand-alone put and call options. The Company does not intend
to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative
instruments for hedge accounting treatment. Below is a description of these instruments:
Swaps: | When the Company sells a swap, it agrees to receive a fixed price for the contract while paying a floating market price to the counterparty; |
Collars: | Arrangements that include a fixed floor price (purchased put option) and a fixed ceiling price (sold call option) based on an index price have no net costs overall. At the contract settlement date, (1) when the index price is higher than the ceiling price, the Company pays the counterparty the difference between the index price and ceiling price, (2) when the index price is between the floor and ceiling prices, no payments are due from either party, and (3) when the index price is below the floor price, the Company will receive the difference between the floor price and the index price. Some collar arrangements may also include a sold put option with a strike price below the purchased put option. Known as a three-way collar, the structure operates similarly to the standard collar. However, when the index price settles below the sold put option, the Company pays the counterparty the difference between the index price and sold put option, effectively enhancing realized pricing by the difference between the price of the sold and purchased put options; |
Basis swaps: | Arrangements that guarantee a price differential for commodities from a specified delivery point. When the Company sells a basis swap, it receives a payment from the counterparty if the price differential exceeds the stated terms of the contract. Conversely, if the price differential is less than the stated terms, the Company pays the counterparty; |
Put options: | The Company purchases and sells put options in exchange for a premium. When the Company purchases a put option, it receives from the counterparty the excess amount (if any) by which the market price falls below the strike price of the put option at the time of settlement. If the market price is above the put option’s strike price, no payment is required from either party. Conversely, when the Company sells a put option, it pays the counterparty the excess amount (if any) by which the market price falls below the strike price of the put option at the time of settlement. If the market price is above the put option’s strike price, no payment is required from either party; |
Call options: | The Company purchases and sells call options in exchange for a premium. When the Company purchases a call option, it receives from the counterparty the excess amount (if any) by which the market price exceeds the strike price of the call option at the time of settlement. If the market price is below the call option’s strike price, no payment is required from either party. When the Company sells a call option, it pays the counterparty the excess amount (if any) by which the market price exceeds the strike price of the call option at the time of settlement. If the market price is below the call option’s strike price, no payment is required from either party; and |
15
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
The Company may elect to enter into offsetting transactions for the above instruments for the purpose of cancelling or terminating
certain positions.
As of March 31, 2026 | ||
(in thousands, except volume data) | Volume | Fair Value |
Natural gas (Mmbtu) | ||
Swaps | $( | |
Two-way collars | ||
Three-way collars | ( | |
Stand-alone calls(a) | ( | |
Basis swaps | ||
Purchased puts | ||
Sold puts | ( | |
Total natural gas | $( | |
NGLs (MBbls) | ||
Swaps | $( | |
Stand-alone calls | ( | |
Total NGLs | $( | |
Oil (MBbls) | ||
Swaps | $( | |
Three-way collars | ( | |
Sold calls | ( | |
Total oil | $( | |
Interest | ||
SOFR interest rate swap ($ | $ | |
Total interest | $ | |
Total fair value of derivatives | $( | |
arrangement. The Company elected to present these derivative assets and liabilities on a net basis when these conditions are satisfied.
(in thousands) | As of | |
Derivatives | Consolidated Statement of Financial Position | March 31, 2026 |
Assets: | ||
Current assets | Derivatives | $ |
Noncurrent assets | Other assets | |
Total assets | $ | |
Liabilities | ||
Current liabilities | Derivatives | $( |
Noncurrent liabilities | Derivatives | ( |
Total liabilities | $( | |
Net assets (liabilities): | ||
Net assets (liabilities) - current | Derivatives | $( |
Net assets (liabilities) - noncurrent | Other assets / Derivatives | ( |
Total net assets (liabilities) | $( |
16
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
The Company presents the fair value of derivative contracts on a net basis in the Consolidated Statement of Financial Position. Below
is the impact of this presentation on the Company’s recognized assets and liabilities for the date presented:
As of March 31, 2026 | |||
(in thousands) | Presented without Effects of Netting | Effects of Netting | As Presented with Effects of Netting |
Current assets | $ | $( | $ |
Noncurrent assets | ( | ||
Total assets | $ | $( | $ |
Current liabilities | ( | ( | |
Noncurrent liabilities | ( | ( | |
Total liabilities | $( | $ | $( |
Total net assets (liabilities) | $( | $— | $( |
periods:
Three Months Ended | ||
(in thousands) | March 31, 2026 | March 31, 2025 |
Net gain (loss) on commodity derivatives settlements | $( | $( |
Net gain (loss) on interest rate swaps | ||
Total gain (loss) on settled derivatives(a) | $( | $( |
Gain (loss) on fair value adjustments of unsettled derivatives(b) | ( | ( |
Total gain (loss) on derivatives | $( | $( |
(a)Represents the cash settlement of derivatives that were settled during the period.
(b)Represents the change in fair value of derivatives, net of the carrying value of derivatives that were settled during the period.
All derivatives are classified as Level 2 instruments under ASC 820, as their valuation relies on observable market inputs other than
quoted prices. For further details related to fair value measurements, refer to Note 11.
Occasionally, such as during the acquisition of producing assets, the completion of ABS financings, or in response to fluctuating price
environments, the Company may strategically modify, offset, terminate, or expand certain existing hedge positions. These
modifications can involve changes to the volume of production covered by contracts, the swap or strike price of specific derivative
contracts, and other similar aspects of the derivative agreements. The Company manages distinct, long-dated derivative contract
portfolios for its ABS financings and Term Loans. Additionally, the Company maintains a separate derivative contract portfolio for
assets secured by the Credit Facility. These derivative contract portfolios associated with the Company’s ABS financings, Term
Loans, and Credit Facility are presented in the Company’s Statement of Financial Position.
In February 2025, the Company adjusted portions of its commodity derivative portfolio across its legal entities for approximately
$150 million in connection with the completion of the ABS X financing arrangement. The Company made further adjustments to its
commodity derivative portfolio for approximately $21 million for the retirement of the ABS I and Term Loan I financing
The Company is authorized to issue up to 350,000,000 0.01
December 31, 2025, the Company had 72,323,471 76,979,625
The Company is authorized to issue 30,000,000 shares of preferred stock, par value $0.01 per share. No
issued or are outstanding.
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Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
In March 2025, the Company announced the completion of its previously announced acquisition of Maverick. The transaction was
funded in part through the issuance of 21,194,213 new shares of common stock directly to the unitholders of Maverick. The total value
of the stock consideration was $253 million, excluding transaction costs of $0.4 million, based on the Company’s stock price on the
NYSE on the closing date of the Maverick transaction.
In February 2025, the Company issued 8,500,000 new shares of common stock at $14.50 per share to raise gross proceeds of $123
million, excluding transaction costs of $6 million. The Company used the net proceeds to repay a portion of the debt incurred in
connection with the Maverick acquisition.
For further details related to acquisitions, refer to Note 2.
The Company’s holdings in its own equity instruments are classified as treasury stock. The consideration paid, along with any directly
attributable incremental costs, is deducted from the Company’s stockholders’ equity until the shares are either cancelled or reissued.
No gain or loss is recognized in the Consolidated Statements of Comprehensive Income (Loss) upon the purchase, sale, issuance, or
cancellation of treasury stock.
In March 2022, the Company established the EBT to benefit its employees. The Company provides funding to the EBT to facilitate the
acquisition of shares. These shares are held in the EBT to fulfill awards and grants under the Company’s 2017 and 2025 Equity
Incentive Plans and the Employee Stock Purchase Plan (the “ESPP”). Shares held in the EBT are treated in the same manner as
treasury stock and are thus included in the Condensed Consolidated Financial Statements as treasury stock. No
by the EBT during the three months ended March 31, 2026 and 2025. As of March 31, 2026, the EBT held a total of 1,671,493 shares.
For further details related to share-based compensation, refer to Note 8.
During the three months ended March 31, 2026, the Company repurchased 5,033,364 shares of common stock at an average price of
$14.20 per share, amounting to a total of $71 million and representing 7 % of common stock issued and outstanding as of March 31,
2026. During the three months ended March 31, 2025, the Company repurchased 169,194 shares of common stock at an average price
of $13.61 per share, amounting to a total of $2 million and representing 0.2 % of common stock issued and outstanding as of March 31,
2025.
The Company has recorded the repurchase of these shares of common stock as a reduction in common stock and additional paid in
capital. All repurchased shares of common stock were cancelled upon repurchase. As of March 31, 2026 and December 31, 2025, the
par value of the cancelled shares was retired from common stock in the Condensed Consolidated Balance Sheets.
Dividends are declared at the discretion of the Board of Directors and are subject to applicable law and contractual restrictions.
Dividends are paid to holders of record as of the record date. Dividends are waived on shares held in the EBT.
The Company’s ability to pay dividends is subject to certain restrictions under its Credit Facility and other debt agreements, which
may limit dividend payments based on leverage ratios and other financial covenants. Refer to Note 10 for additional information.
The 2017 Equity Incentive Plan (the “2017 Plan”), as amended through April 9, 2025, authorized issuances up to 10 % of the
Company’s outstanding common stock and had 3,947,882 shares subject to outstanding awards as of November 21, 2025. On that
date, the Company adopted the 2025 Equity Incentive Plan (the “2025 Plan”), which authorized and reserved 6,892,551
common stock, consisting of 2,944,669 newly authorized shares plus shares underlying outstanding awards under the 2017 Plan that
may become available upon forfeiture, cancellation, expiration, cash settlement, or withholding for taxes or exercise prices. Upon
adoption of the 2025 Plan, no further awards may be granted under the 2017 Plan, and only shares underlying awards outstanding as
of November 21, 2025 may be issued thereunder. As of March 31, 2026, 1,463,725 shares remained available for grant under the 2025
Plan, under which all future equity awards will be made.
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Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
Number of Shares | Weighted Average Grant Date Fair Value per Share | |
Balance as of December 31, 2025 | $ | |
Granted | ||
Vested | ( | |
Forfeited | ||
Balance as of March 31, 2026 | $ |
During the three months ended March 31, 2026, the aggregate intrinsic value at date of vesting was $3 million. As of March 31, 2026,
the Company had $32 million of unrecognized share-based compensation expense related to RSUs that will be recognized over a
weighted average period of 1.8 years.
RSUs can vest either on a cliff basis or ratably, depending on the service conditions. The fair value of the Company’s RSUs is
calculated using the closing price of our common stock on the NYSE at the grant date. This value is then expensed uniformly over the
vesting period.
Number of Shares | Weighted Average Grant Date Fair Value per Share | |
Balance as of December 31, 2025 | $ | |
Granted | ||
Vested | ( | |
Forfeited | ||
Balance as of March 31, 2026 | $ |
During the three months ended March 31, 2026, the aggregate intrinsic value at date of vesting was $2 million. As of March 31, 2026,
the Company had $13 million of unrecognized share-based compensation expense related to PSUs that will be recognized over a
weighted average period of 1.8 years.
PSUs are subject to cliff vesting based on specific performance criteria over a three-year period. Depending on the achievement of
these performance targets, the number of units that will vest can vary from 0 % to 250 % of the initial award.
value is then expensed uniformly over the vesting period. For PSUs granted during the respective periods presented, the inputs to the
Monte Carlo model included the following:
Three Months Ended | ||
March 31, 2026 | March 31, 2025 | |
Risk-free rate of interest | ||
Volatility(a) | ||
Correlation with comparator group range | ||
(a)Volatility utilizes the historical volatility for the Company’s share price.
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Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
Three Months Ended | ||
(in thousands) | March 31, 2026 | March 31, 2025 |
RSUs | $ | $ |
PSUs | ||
ESPP | ||
Total share-based compensation expense | $ | $ |
and oil properties. Additionally, the Company records a liability for the future decommissioning costs of its production facilities and
pipelines when required by contract, statute, or legal obligation. For the three months ended March 31, 2026, no state contractual
agreements or statutes related to production facilities and pipelines are expected to impose material obligations on the Company.
In estimating the present value of future decommissioning costs for its natural gas and oil properties, the Company considers several
factors, including the number and state jurisdictions of wells, current decommissioning costs by state and well type, and the
Company’s retirement plan, which is based on state requirements and the Company’s capacity to retire wells over their productive
lives. The Company’s assumptions are grounded in the current economic environment and are believed to provide a reasonable basis
for estimating the future liability. However, actual decommissioning costs will ultimately depend on future market prices at the time
the decommissioning services are performed. Additionally, the timing of decommissioning will vary based on when the fields cease to
produce economically, which is influenced by future natural gas and oil prices and the retirement schedule. These factors are
inherently uncertain.
The Company incorporates annual inflationary cost increases into its current cost expectations and then discounts the resulting cash
Three Months Ended | |
(in thousands) | March 31, 2026 |
Balance at beginning of period | $ |
Accretion expense | |
Asset retirement costs | ( |
Balance at end of period | $ |
Less: Current asset retirement obligations | |
Noncurrent asset retirement obligations | $ |
20
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
As of | |||
Instrument | Interest Rate | March 31, 2026 | |
Credit Facility | (a) | $ | |
ABS IV Notes, due February 2037 | |||
ABS VI Notes, due November 2039 | |||
ABS VIII Notes, due May 2044 | |||
ABS IX Notes, due September 2044 | |||
ABS X Notes, due February 2045 | |||
ABS XI Notes, due November 2045 | |||
ABS Maverick Notes, due December 2038 | |||
Nordic Bonds, due April 2029 | |||
Other miscellaneous borrowings(b) | |||
Total borrowings | $ | ||
Less: Current portion of long-term debt | ( | ||
Less: Deferred financing costs | ( | ||
Plus: Market premiums | |||
Less: Original issue discounts | ( | ||
Total noncurrent borrowings, net | $ | ||
(a)Represents the variable interest rate.
(b)Includes $22 million in notes payable issued by a third party financial institution in November 2024, collateralized by two natural
gas processing plants and various natural gas compressors and related support equipment in the Central Region, as of March 31,
2026.
The Company maintains a Credit Facility with a lending syndicate, the borrowing base for which is redetermined semi-annually or in
certain other situations as described therein. The Company’s wholly owned subsidiary, DP RBL Co LLC, serves as the borrower
under the Credit Facility. The borrowing base is primarily determined by the value of the natural gas and oil properties that serve as
collateral for the lending arrangement, and it may fluctuate due to changes in collateral, which can result from acquisitions or the
establishment of ABS, term loans, or other lending structures.
As of March 31, 2026, the Company’s Credit Facility had a borrowing base of $825 million and a maturity of March 2029. The Credit
Facility has an interest rate of SOFR plus an additional spread ranging from 2.75 % to 3.75 % based on utilization. Interest payments on
the Credit Facility are paid on a quarterly basis. Available borrowings under the Credit Facility were $475 million as of March 31,
2026, which excludes $36 million in letters of credit issued to certain vendors.
In February 2022, the Company formed Diversified ABS IV LLC (“ABS IV”), a limited-purpose, bankruptcy-remote, wholly-owned
subsidiary, to issue asset-backed securities with a total principal amount of $160 million at par (the “ABS IV Notes”). The ABS IV
Notes are secured by a portion of the upstream producing assets acquired through the Blackbeard acquisition. The ABS IV Notes carry
an annual interest rate of 4.95 % and have a legal final maturity date of February 2037, with an amortizing maturity date of September
2030. Both interest and principal payments on the ABS IV Notes are made on a monthly basis.
In October 2022, the Company formed Diversified ABS VI LLC (“ABS VI”), a limited-purpose, bankruptcy-remote, wholly-owned
subsidiary, to issue, jointly with Oaktree Capital Management, L.P. (“Oaktree”), asset-backed securities with a total principal amount
of $460 million. The Company’s share amounted to $236 million before fees, reflecting its 51.25 % ownership interest in the collateral
assets (the “ABS VI Notes”). The ABS VI Notes were issued at a 2.63 % discount and are primarily secured by the upstream assets
jointly acquired with Oaktree in the Tapstone acquisition. The Company recorded its proportionate share of the ABS VI Notes in its
Condensed Consolidated Balance Sheets. In June 2024, as part of the Oaktree acquisition, the Company assumed Oaktree’s
proportionate debt of $133 million associated with the ABS VI Notes.
21
Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
The ABS VI Notes carry an annual interest rate of 7.50 % and have a legal final maturity date of November 2039, with an amortizing
maturity date of October 2031. Both interest and principal payments on the ABS VI Notes are made on a monthly basis.
In May 2024, the Company formed Diversified ABS VIII LLC (“ABS VIII”), a limited-purpose, bankruptcy-remote, wholly-owned
subsidiary, to issue Class A-1 and Class A-2 asset-backed securities (the “Class A-1 Notes,” “Class A-2 Notes,” and collectively the
“ABS VIII Notes”). The Class A-1 Notes were issued with a total principal amount of $400 million, while the Class A-2 Notes were
issued with a total principal amount of $210 million. The proceeds from these issuances were used to repay the outstanding principal
of the ABS III & ABS V notes, effectively retiring those notes from the Company’s outstanding debt. Consequently, ABS III and ABS
V were dissolved. The ABS VIII Notes are secured by the collateral that previously secured the ABS III and ABS V notes, which
includes certain upstream producing and midstream assets in the Appalachian Region owned by the Company, and the remaining
upstream assets in the Appalachian Region that were not securitized by previous ABS transactions.
The Class A-1 Notes carry an annual interest rate of 7.076 %, while the Class A-2 Notes carry an annual interest rate of 7.670 %. These
notes have a legal final maturity date of May 2044, with an amortizing maturity date of March 2033. Both interest and principal
payments on the ABS VIII Notes are made on a monthly basis.
In June 2024, the Company formed DP Mustang Holdco LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary (“ABS
IX,” formerly “ABS Facility Warehouse”), to secure a bridge loan facility (the “ABS Facility Warehouse Notes”). The initial draw on
the ABS Facility Warehouse Notes amounted to $71 million, which included $66 million in net proceeds, $3 million in restricted cash
interest reserve, and $2 million in debt issuance costs. The ABS Facility Warehouse Notes were secured by certain producing assets
that previously collateralized the Credit Facility. It carried an interest rate of SOFR plus an additional 3.75 % and had a legal final
maturity date of May 2029. Both interest and principal payments on the ABS Facility Warehouse Notes were made on a monthly
basis.
In September 2024, the Company issued Class A and Class B asset-backed securities (the “Class A Notes,” “Class B Notes,” and
collectively the “ABS IX Notes”) with a total principal amount of $77 million. The Class A Notes were issued with a total principal
amount of $71 million, while the Class B Notes were issued with a total principal amount of $6 million. The proceeds from these
issuances were used to repay the outstanding principal of the ABS Facility Warehouse Notes, effectively retiring it from the
Company’s outstanding debt and resulting in a loss on the early retirement of debt amounting to $2 million. The Class A Notes carry
an annual interest rate of 6.555 % and have an amortizing maturity date of December 2034. The Class B Notes carry an annual interest
rate of 11.235 % and have an amortizing maturity date of September 2030. Both interest and principal payments on the ABS IX Notes
are made on a monthly basis.
In February 2025, the Company formed Diversified ABS Phase X LLC, a limited-purpose, bankruptcy-remote, wholly-owned
subsidiary (“ABS X”), to issue Class A-1, Class A-2, and Class B asset-backed securities (the “Class A-1 Notes,” “Class A-2 Notes,”
“Class B Notes,” and collectively the “ABS X Notes”) with a total principal amount of $530 million. The Class A-1 Notes, were
issued with a total principal amount of $200 million. The Class A-2 Notes were issued with a total principal amount of $240 million.
The Class B Notes were issued with a total principal amount of $90 million. The proceeds from these issuances were used to repay the
outstanding principal of the ABS I Notes, ABS II Notes, and Term Loan I, effectively retiring those notes from the Company’s
outstanding debt. The ABS X Notes are secured by certain upstream producing assets in the Appalachian Region owned by the
Company, including those that previously collateralized the ABS I Notes, ABS II Notes, and Term Loan I. Excess proceeds from the
issuance of the Notes were used to fund the Summit acquisition and for general corporate purposes. Refer to Note 2 for additional
information regarding acquisitions.
The Class A-1 Notes carry an annual interest rate of 5.945 %. The Class A-2 Notes carry an annual interest rate of 6.751 %. The Class
B Notes carry an annual interest rate of 10.398 %. These notes have a legal final maturity date of February 2045. Both interest and
principal payments on the ABS X Notes are made on a monthly basis.
In February 2025, the Company formed Maverick ABS Holdings LLC, a limited-purpose, bankruptcy-remote, wholly-owned
subsidiary (“ABS Maverick”), to hold the Class A-1, Class A-2, and Class B asset-backed securities (the “Class A-1 Notes,” “Class
A-2 Notes,” “Class B Notes,” and collectively the “ABS Maverick Notes”) assumed as part of the Maverick acquisition. These Notes
had a total principal amount of $640 million upon issuance. The Class A-1 Notes were issued with a total principal amount of
$285 million. The Class A-2 Notes were issued with a total principal amount of $260 million. The Class B Notes were issued with a
total principal amount of $95 million. Upon acquisition, the ABS Maverick Notes carried a 1.6 % market premium and are secured by
certain upstream producing assets in the Western Anadarko Basin acquired in the Maverick acquisition. Refer to Note 2 for additional
information regarding acquisitions.
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Table of Contents | Notes to the Condensed Consolidated Financial Statements (Unaudited) | Diversified Energy |
The Class A-1 Notes carry an annual interest rate of 8.121 %. The Class A-2 Notes carry an annual interest rate of 8.946 %. The Class
B Notes carry an annual interest rate of 12.436 %. These notes have a legal final maturity date of December 2038. Both interest and
principal payments on the ABS Maverick Notes are made on a monthly basis.
In November 2025, the Company formed DP Keeneland Mile LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary
(“ABS XI”), to issue Class A-1, Class A-2, and Class B asset-backed securities (the “Class A-1 Notes,” “Class A-2 Notes,” “Class B
Notes,” and collectively the “ABS XI Notes”) with a total principal amount of $400 million. The Class A-1 Notes were issued with a
total principal amount of $247 million. The Class A-2 Notes were issued with a total principal amount of $91 million. The Class B
Notes were issued with a total principal amount of $62 million. The proceeds from this issuance were used to fund, in part, the Canvas
acquisition and are secured by certain upstream producing assets acquired.
The Class A-1 Notes carry an annual interest rate of 5.757 %. The Class A-2 Notes carry an annual interest rate of 6.547 %. The Class
B Notes carry an annual interest rate of 10.129 %. These notes have a legal final maturity date of November 2045. Both interest and
principal payments on the ABS XI Notes are made on a monthly basis.
In April 2025, the Company issued the Nordic Bonds, consisting of $300 million of new senior secured notes in the Nordic bond
market at a 2 % discount, resulting in net proceeds of $294 million. The proceeds were used to repay existing indebtedness and for
general corporate purposes. The Nordic Bonds mature in April 2029 and bear interest at a fixed rate of 9.75 % per annum, payable
semi-annually in arrears. The Bonds are secured by (i) all of the Company’s U.S. bank accounts, (ii) the equity interests in Diversified
Gas and Oil Company (“DGOC”) as well as DGOC’s equity interests in its direct operating subsidiaries and (iii) interests in certain
intercompany loans.
The Nordic Bonds were listed for trading on the Oslo Stock Exchange in October 2025.
In February 2026, the Company completed a $200 million tap-on offering, increasing the aggregate principal amount of the
outstanding Nordic Bonds to $500 million. The additional Bonds were issued at a 3.5 % discount, resulting in net proceeds of $193
million before transaction costs and other fees. The proceeds were used for general corporate purposes.
In February 2025, the Company used proceeds from the ABS X Notes to repay the outstanding principal of the ABS I & II notes and
Term Loan I (each as previously defined in the Company’s annual report on Form 10-K for the year ended December 31, 2025),
thereby retiring the ABS I & II notes and Term Loan I from the Company’s outstanding debt and resulting in a loss on the early
retirement of debt of $27 million. Concurrently, Diversified ABS Holdings LLC, Diversified ABS Phase II Holdings LLC, and DP
Bluegrass Holdings LLC were dissolved. The ABS X Notes are secured by the collateral previously securing the ABS I & II notes,
along with a portion of the collateral previously securing Term Loan I.
In March 2025, the Company used proceeds from the upsized borrowing base on the amended and restated credit agreement governing
the Credit Facility to repay the outstanding principal on Term Loan II (as previously defined in the Company’s annual report on Form
10-K for the year ended December 31, 2025), thereby retiring Term Loan II from the Company’s outstanding debt and resulting in a
loss on the early retirement of debt of $0.2 million.
Credit Facility
The Credit Facility contains certain customary representations and warranties and affirmative and negative covenants, including
covenants relating to: maintenance of books and records; financial reporting and notification; compliance with laws; maintenance of
properties and insurance; and limitations on incurrence of indebtedness, liens, fundamental changes, international operations, asset
sales, making certain debt payments and amendments, restrictive agreements, investments, restricted payments and hedging. The
restricted payment provision governs the Company’s ability to make discretionary payments such as dividends, share repurchases, or
other discretionary payments. DP RBL Co LLC must comply with the following restricted payments test in order to make
discretionary payments (i) leverage is less than 1.5 x and borrowing base availability is >20 %, or (ii) leverage is between 1.5 x and
payments are prohibited.
Additional covenants require DP RBL Co LLC to maintain a ratio of total debt to EBITDAX of not more than 3.25 to 1.00 and a ratio
of current assets (with certain adjustments) to current liabilities of not less than 1.00 to 1.00 as of the last day of each fiscal quarter.
As of March 31, 2026, the Company was in compliance with all covenants for its Credit Facility.
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ABS IV, VI, VIII, IX, X, XI, and Maverick Notes (Collectively, the “ABS Notes”) and the Nordic Bonds
The ABS Notes and Nordic Bonds are governed by a series of covenants and restrictions typical for such transactions, including (i) the
requirement for the issuer to maintain specified reserve accounts to ensure the payment of interest on the ABS Notes and Nordic Bond,
(ii) provisions for optional and mandatory prepayments, specified make-whole payments under certain conditions, (iii) indemnification
payments in the event that the assets pledged as collateral for the ABS Notes and Nordic Bond are found to be defective or ineffective,
(iv) covenants related to recordkeeping, access to information and similar matters, and (v) compliance with all applicable laws and
regulations, including the Employee Retirement Income Security Act (“ERISA”), environmental laws, and the USA Patriot Act (ABS
IV only).
The ABS Notes and Nordic Bonds are also subject to customary accelerated amortization events as outlined in the agreements
governing such indebtedness. These events include failure to maintain specified debt service coverage ratios, failure to meet certain
production metrics, certain change of control and management termination events, and the failure to repay or refinance the ABS Notes
and Nordic Bond on the applicable scheduled maturity date.
The ABS Notes and Nordic Bonds are subject to customary events of default, which include non-payment of required interest,
principal, or other amounts due, failure to comply with covenants within specified time frames, certain bankruptcy events, breaches of
specified representations and warranties, failure of security interests to be effective, and certain judgments.
Additionally, the Nordic Bonds contain the following financial covenants (i) the leverage ratio shall not exceed 3.5 x, (ii) the asset
coverage ratio shall not be less than 1.20 to 1.00, (iii) book equity shall not be less than $500 million, and (iv) liquidity shall not be
less than 25 % of the outstanding bonds.
As of March 31, 2026, the Company was in compliance with all covenants related to the ABS Notes and Nordic Bonds.
costs, premiums, and discounts:
(in thousands) | Remainder of 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total debt |
Debt maturity | $ | $ | $ | $ | $ | $ | $ |
Three Months Ended | ||
(In thousands) | March 31, 2026 | March 31, 2025 |
Interest incurred | ||
Borrowings | $ | $ |
Other | ||
Total interest incurred | ||
LESS: Capitalized interest | ||
Interest expense | $ | $ |
As of | |
(in thousands) | March 31, 2026 |
Credit Facility(a) | $ |
ABS notes(b) | |
Nordic Bonds(b) | |
Other miscellaneous borrowings(a) | |
Total fair value of outstanding debt | $ |
(a)Carrying value approximates fair value.
(b)Fair values are measured using a market approach, based upon market rates, which are Level 2 inputs.
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principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use
of unobservable inputs. To determine fair value, the Company applies a hierarchy that consists of three input levels. The first and
second levels are regarded as observable, while the third is categorized as unobservable. These input levels may be utilized in the
measurement of fair value as outlined below:
Level 1: | Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | ||
Level 2: | Inputs (other than quoted prices included in Level 1) can include the following: | ||
(1) Observable prices in active markets for similar assets or liabilities;
(2) Prices for identical assets or liabilities in markets that are not active;
(3) Directly observable market inputs for substantially the full term of the asset or liability; and
(4) Market inputs that are not directly observable but are derived from or corroborated by observable market data.
Level 3: | Unobservable inputs which reflect the Company’s best estimates of what market participants would use in pricing the asset or liability at the measurement date. | ||
There were no transfers between fair value levels for the three months ended March 31, 2026.
Derivatives
The Company measures the fair value of its derivatives in accordance with ASC 820, Fair Value Measurement, utilizing valuation
models that incorporate observable market inputs whenever available. These inputs typically include contractual terms, current market
prices, forward price curves for natural gas, liquids, and oil, relevant interest rate yield curves (such as U.S. Treasury and SOFR), and
volatility factors.
Derivatives are classified within the fair value hierarchy based on the observability of the inputs used in the valuation. The Company’s
fixed price swaps are classified as Level 2 and are valued using third-party discounted cash flow models, which rely on NYMEX
futures for natural gas and oil derivatives and OPIS forward curves for NGL derivatives. Interest rate derivatives, also classified as
Level 2, are valued using discounted cash flow models that incorporate contracted notional amounts, market-quoted SOFR yield
curves, and credit-adjusted risk-free rates.
Options, including call options, put options, and collars, are classified as Level 2 and valued using the Black-Scholes option pricing
model. This model incorporates contract terms such as maturity, market parameters including NYMEX and OPIS futures, interest
rates, volatility, and counterparty credit risk. Volatility and other significant inputs are obtained from independent third-party pricing
sources and are subject to monthly verification.
Basis swaps are classified as Level 2 and are valued using third-party models based on forward commodity price curves.
Changes in key inputs, such as volatility, may result in changes to the fair value measurement of the Company’s derivatives.
As of March 31, 2026 | |||
(in thousands) | Level 1 | Level 2 | Level 3 |
Assets | |||
Derivatives | |||
Liabilities | |||
Derivatives | ( | ||
Total net assets (liabilities) | $ | $( | $ |
Impairment of Proved Natural Gas & Oil Properties
When impairment occurs, the Company estimates the fair value of the impaired proved natural gas and oil properties through a
discounted cash flow method, which incorporates Level 3 inputs that are not directly observable.
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Business combinations
The Company assesses the value of acquired proved properties using an income-based approach as of the acquisition date. This
method is classified as a Level 3 fair value estimate due to its reliance on key assumptions, such as anticipated production volumes,
future commodity pricing, operating costs, weighted average cost of capital (the discount rate) and risk adjustments tailored to the
The carrying values of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued liabilities, and
other current liabilities approximate fair value due to the highly liquid or short-term nature. The Company’s Credit Facility (see Note
10) has a recorded value that approximates fair market value, as it bears interest at a floating rate that approximates a current market
rate.
Delivery Commitments
We have contractually agreed to deliver firm quantities of natural gas to various customers, which we expect to fulfill with production
from existing reserves. To ensure we meet these commitments, we regularly monitor our proved developed reserves.
March 31, 2026.
Remainder of 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | |
Natural gas (MMcf) |
Litigation and Regulatory Proceedings
The Company is involved in various pending legal issues that have arisen in the ordinary course of business. The Company accrues for
litigation, claims, and proceedings when a liability is both probable and the amount can be reasonably estimated. As of March 31,
2026, the Company did not have any material amounts accrued related to litigation or regulatory matters.
For any matters not accrued for, it is not possible to estimate the amount of any additional loss or range of loss that is reasonably
possible. However, based on the nature of the claims, management believes that current litigation, claims, and proceedings are not,
individually or in aggregate, after considering insurance coverage and indemnification, likely to have a material adverse impact on the
Company’s financial position, results of operations, or cash flows.
The Company has no other contingent liabilities that would have a material impact on the Company’s financial position, results of
operations, or cash flows.
Environmental Matters
The Company’s operations are subject to environmental laws and regulations in all the jurisdictions where it operates, and the
Company was in material compliance as of March 31, 2026. However, the Company is unable to predict the impact of additional
environmental laws and regulations that may be adopted in the future, including whether they would adversely affect its operations.
The Company can offer no assurance regarding the significance or cost of compliance associated with any new environmental
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Three Months Ended | ||
(in thousands) | March 31, 2026 | March 31, 2025 |
Supplemental cash flow information: | ||
Cash paid for interest | $ | $ |
Cash paid for income taxes | ||
Cash paid for amounts included in the measurement of operating lease liabilities | ||
Cash paid for amounts included in the measurement of finance lease liabilities | ||
Supplemental disclosure of non-cash transactions: | ||
Issuance of common stock for acquisitions | $ | $ |
Additions to asset retirement obligations | ||
Right-of-use assets obtained in exchange for operating lease liabilities | ||
Right-of-use assets obtained in exchange for finance lease liabilities | ||
Cash paid for amounts included in the measurement of operating lease liabilities represents total lease payments made during the
period. For finance leases, cash paid for amounts included in the measurement of lease liabilities represents the principal portion of
lease payments. Interest paid on finance leases is included in cash paid for interest.
(“Camino”) owning certain producing properties and undeveloped acreage for an estimated gross purchase price of $1.2 billion before
customary purchase price adjustments. Simultaneously, the Company entered into an agreement with Carlyle Global Credit
Investment Management, LLC (“Carlyle”) in which Carlyle agreed to fund 60 % of the purchase price for the producing properties in
exchange for a 60 % ownership interest in a newly formed special purpose vehicle (“SPV”), with the Company retaining a 40 %
ownership interest in the SPV. At closing, the producing assets are expected to be contributed to an indirect subsidiary of the SPV,
which will be controlled by Carlyle. The acquisition of the producing assets will be funded by an ABS collateralized by the acquired
assets, the funds contributed by Carlyle and borrowings under the Company’s Credit Facility. The acquisition of the undeveloped
acreage will be funded by borrowings under the Company’s Credit Facility and the Company will retain 100 % of the ownership in the
undeveloped acreage. The transaction is expected to close in the third quarter of 2026, subject to customary closing conditions.
interests and related assets from Sheridan for a gross purchase price of $248 million before customary purchase price adjustments.
In May 2026, the Company’s Board of Directors declared a cash dividend on the Company’s common stock in the amount of $0.29
per share. The dividend is payable on September 30, 2026 to stockholders on record as of the close of business on August 28, 2026.
In April 2026, the Company completed the semi-annual borrowing base redetermination of the revolving Credit Facility. The
borrowing base under the facility was increased from $825 million to $900 million as a result of the increase in collateral from certain
assets acquired in the Sheridan acquisition.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the
Condensed Consolidated Financial Statements and the notes thereto included in this report. Unless the context otherwise indicates,
references to “Diversified,” the “Company,” “our,” “we” and “us” (i) for periods until the completion of the U.S. Domestication,
refer to Diversified Energy Company PLC and its consolidated subsidiaries, collectively, and (ii) for periods at or after the completion
of the U.S. Domestication, refer to Diversified Energy Company and its consolidated subsidiaries, collectively. For certain industry
specific terms used in this Quarterly Report on Form 10-Q, please refer to the Glossary of Terms.
In this discussion and analysis of financial condition and results of operations, we address topics such as acquisitions, tax matters,
derivatives, stockholders’ equity, asset retirement obligations, and debt. For more detailed information on these areas, refer to Notes
2, 3, 6, 7, 9, and 10 within the Notes to the Condensed Consolidated Financial Statements. These notes provide comprehensive
disclosures and explanations that support the analysis presented in this section.
Recent Developments
•In May 2026, the Company entered into an agreement to acquire the securities of certain affiliates of Camino Natural Resources,
LLC (“Camino”) owning certain producing properties and undeveloped acreage for an estimated gross purchase price of $1.2
billion before customary purchase price adjustments. Simultaneously, the Company entered into an agreement with Carlyle
Global Credit Investment Management, LLC (“Carlyle”) in which Carlyle agreed to fund 60% of the purchase price for the
producing properties in exchange for a 60% ownership interest in a newly formed special purpose vehicle (“SPV”), with the
Company retaining a 40% ownership interest in the SPV. At closing, the producing assets are expected to be contributed to an
indirect subsidiary of the SPV, which will be controlled by Carlyle. The acquisition of the producing assets will be funded by an
ABS collateralized by the acquired assets, the funds contributed by Carlyle and borrowings under the Company’s Credit Facility.
The acquisition of the undeveloped acreage will be funded by borrowings under the Company’s Credit Facility and the Company
will retain 100% of the ownership in the undeveloped acreage. The transaction is expected to close in the third quarter of 2026,
subject to customary closing conditions.
•In April 2026, the Company completed the previously announced transaction to acquire certain oil and natural gas wells,
leasehold interests and related assets from Sheridan for a gross purchase price of $248 million before customary purchase price
adjustments.
•In April 2026, the Company completed the semi-annual borrowing base redetermination of the revolving Credit Facility. The
borrowing base under the facility was increased from $825 million to $900 million as a result of the increase in collateral from
certain assets acquired in the Sheridan acquisition.
•In February 2026, the Company issued a $200 million tap-on offering, increasing the aggregate principal amount of the
outstanding Nordic Bonds to $500 million. The Bonds were issued at a 3.5% discount, resulting in net proceeds of $193 million
before transaction costs and other fees. The proceeds were used to repay existing indebtedness and for general corporate purposes.
•For the three months ended March 31, 2026, the Company repurchased 5,033,364 shares, representing approximately 7% of the
shares outstanding.
Market Conditions
Our business continued to be influenced by a range of external factors in 2026, including commodity price volatility, geopolitical
developments, regulatory changes, and evolving supply and demand dynamics. We are a U.S. domestic energy producer focused
primarily on natural gas. The ongoing conflict in Iran, strong LNG export demand and colder-than-average weather drove an average
Henry Hub price of approximately $5.04 per MMBtu for the quarter.
Geopolitical conflicts, such as the U.S.-Iran conflict, the Russia-Ukraine war and other instability in the Middle East and Venezuela,
continued to disrupt global energy flows and underscored the strategic importance of U.S. energy production and exports.
Domestically, policy shifts created a more favorable operating environment, although new tariffs on imported energy equipment and
materials introduced some uncertainty for the industry. Our vertically integrated model helps insulate us from direct impacts, and our
hedging program plays a key role in mitigating commodity price risk and supporting cash flow stability.
We also monitored inflationary pressures and supply chain challenges, which affected operating costs across the industry. Despite
ongoing market volatility and policy uncertainty, we remain focused on optimizing our asset base, managing costs, and enhancing
operational efficiency. Our integrated model and strategic positioning continue to enable us to navigate market fluctuations and
capitalize on long-term opportunities in the natural gas and oil sector.
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Results of Operations for the Three Months Ended March 31, 2026 Compared to the Three Months
Ended March 31, 2025
Production Volumes
For the Three Months Ended March 31, | ||||
2026 | 2025 | Change | % Change | |
Net production | ||||
Natural gas (MMcf) | 76,838 | 63,468 | 13,370 | 21% |
NGLs (MBbls) | 2,554 | 1,593 | 961 | 60% |
Oil (MBbls) | 2,608 | 783 | 1,825 | 233% |
Total production (MMcfe) | 107,810 | 77,724 | 30,086 | 39% |
Average daily production (MMcfepd) | 1,198 | 864 | 334 | 39% |
% Natural gas (Mcfe basis) | 71% | 82% | ||
The increase in production volumes for the three months ended March 31, 2026 compared to the three months ended March 31, 2025
was primarily related to the Maverick and Summit acquisitions in the first quarter of 2025 and the Canvas acquisition in the fourth
quarter of 2025, partially offset by normal production declines.
Commodity Pricing
Commodity prices fluctuate due to a variety of factors we can neither control nor predict, including increased production in excess of
demand of natural gas, NGLs or oil, weather conditions, political and economic events, and competition from other energy sources.
These factors impact supply and demand, which in turn determine the sales prices for our production. In addition to these factors, the
prices we realize for our production are affected by our derivative activities and commodity trades by non-physical trading entities, as
well as locational differences in market prices, including basis differentials. We will continue to evaluate the commodity price
environment and adjust the pace of our activity in order to maintain appropriate liquidity and financial flexibility.
The following table summarizes our average realized sales prices and benchmark prices for the periods presented:
For the Three Months Ended March 31, | ||||
2026 | 2025 | Change | % Change | |
Average realized sales prices (before derivative settlements) | ||||
Natural gas (Mcf) | $4.09 | $3.60 | $0.49 | 14% |
NGLs (Bbls) | 23.87 | 30.19 | (6.32) | (21%) |
Oil (Bbls) | 69.44 | 67.45 | 1.99 | 3% |
Total (Mcfe) | $5.16 | $4.24 | $0.92 | 22% |
Average realized sales prices (after derivative settlements) | ||||
Natural gas (Mcf) | $2.44 | $2.95 | $(0.51) | (17%) |
NGLs (Bbls) | 21.81 | 24.46 | (2.65) | (11%) |
Oil (Bbls) | 62.38 | 65.29 | (2.91) | (4%) |
Total (Mcfe) | $3.76 | $3.57 | $0.19 | 5% |
Average benchmark prices | ||||
Henry Hub (Mcf) | $5.04 | $3.65 | $1.39 | 38% |
Mont Belvieu (Bbls) | 31.69 | 41.77 | (10.08) | (24%) |
WTI (Bbls) | 71.93 | 71.42 | 0.51 | 1% |
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Commodity Revenue
The following table reconciles the change in commodity revenue (excluding the impact of hedges settled in cash) by reflecting the
effect of changes in volume and in the underlying prices:
(In thousands) | Natural Gas | NGLs | Oil | Total |
Commodity revenue for the three months ended March 31, 2025 | $228,510 | $48,094 | $52,815 | $329,419 |
Volume increase (decrease) | 48,132 | 29,013 | 123,096 | 200,241 |
Price increase (decrease) | 37,507 | (16,148) | 5,188 | 26,547 |
Net increase (decrease) | 85,639 | 12,865 | 128,284 | 226,788 |
Commodity revenue for the three months ended March 31, 2026 | $314,149 | $60,959 | $181,099 | $556,207 |
Commodity revenue of $556 million for the three months ended March 31, 2026 increased $227 million, or 69%, compared to $329
million for the three months ended March 31, 2025. The increase in commodity revenue was primarily related to the 22% increase in
average realized sales prices, excluding the impact of derivatives settled in cash, and the 39% increase in sold volumes primarily due
to acquisitions as discussed above. The average realized sales price after derivatives settlements increased due to an increase in liquids
exposure from the Maverick and Canvas acquisitions, which resulted in a higher overall realized price.
Commodity Derivatives
To manage our cash flows in a volatile commodity price environment, we utilize commodity derivative contracts that allow us to fix
the per unit sales prices for our production. As of March 31, 2026, approximately 82% of our production was fixed through
commodity derivative contracts over the next twelve months. The tables below set forth the impact of commodity derivatives
settlements on commodity revenue:
(In thousands, except per unit data) | For the Three Months Ended March 31, 2026 | |||||||
Natural Gas | NGLs | Oil | Total Commodity | |||||
Revenue | Realized $ | Revenue | Realized $ | Revenue | Realized $ | Revenue | Realized $ | |
per Mcf | per Bbl | per Bbl | per Mcfe | |||||
Excluding hedge impact | $314,149 | $4.09 | $60,959 | $23.87 | $181,099 | $69.44 | $556,207 | $5.16 |
Gain (loss) on commodity derivatives settlements | (126,833) | (1.65) | (5,253) | (2.06) | (18,413) | (7.06) | (150,499) | (1.40) |
Including hedge impact | $187,316 | $2.44 | $55,706 | $21.81 | $162,686 | $62.38 | $405,708 | $3.76 |
(In thousands, except per unit data) | For the Three Months Ended March 31, 2025 | |||||||
Natural Gas | NGLs | Oil | Total Commodity | |||||
Revenue | Realized $ | Revenue | Realized $ | Revenue | Realized $ | Revenue | Realized $ | |
per Mcf | per Bbl | per Bbl | per Mcfe | |||||
Excluding hedge impact | $228,510 | $3.60 | $48,094 | $30.19 | $52,815 | $67.45 | $329,419 | $4.24 |
Gain (loss) on commodity derivatives settlements | (41,448) | (0.65) | (9,133) | (5.73) | (1,690) | (2.16) | (52,271) | (0.67) |
Including hedge impact | $187,062 | $2.95 | $38,961 | $24.46 | $51,125 | $65.29 | $277,148 | $3.57 |
Gain (Loss) on Derivatives
The table below sets forth the impact of settlements and fair value adjustments on derivatives for the periods presented:
For the Three Months Ended March 31, | ||||
(In thousands) | 2026 | 2025 | $ Change | % Change |
Net gain (loss) on commodity derivatives settlements | $(150,499) | $(52,271) | $(98,228) | 188% |
Net gain (loss) on interest rate swaps | 20 | 35 | (15) | (43%) |
Total gain (loss) on settled derivatives(a) | $(150,479) | $(52,236) | $(98,243) | 188% |
Gain (loss) on fair value adjustments of unsettled derivatives(b) | (397,904) | (232,048) | (165,856) | 71% |
Total gain (loss) on derivatives | $(548,383) | $(284,284) | $(264,099) | 93% |
(a)Represents the cash settlement of derivatives that were settled during the period.
(b)Represents the change in fair value of derivatives, net of the carrying value of derivatives that were settled during the period.
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The change in this metric was driven by a decrease in the value of unsettled derivatives, which resulted in a loss of $398 million in
2026 compared to a loss of $232 million in 2025, a change of $166 million, due to higher forward commodity prices. Additionally, the
value of settled derivatives also decreased, resulting in an additional $98 million in losses on settled derivatives in 2026 compared to
2025 as a result of increased commodity pricing.
Operating Expenses
For the Three Months Ended March 31, | ||||||||
(In thousands, except per unit data) | 2026 | Per Mcfe | 2025 | Per Mcfe | Total Change | Per Mcfe Change | ||
Lease operating expenses | $132,968 | $1.23 | $73,439 | $0.94 | $59,529 | 81% | $0.29 | 31% |
Production taxes | 30,491 | 0.28 | 16,433 | 0.21 | 14,058 | 86% | 0.07 | 33% |
Midstream operating expenses | 20,236 | 0.19 | 18,636 | 0.24 | 1,600 | 9% | (0.05) | (21%) |
Transportation expenses | 28,568 | 0.26 | 26,719 | 0.34 | 1,849 | 7% | (0.08) | (24%) |
Accretion of asset retirement obligation | 13,248 | 0.12 | 8,358 | 0.11 | 4,890 | 59% | 0.01 | 9% |
General and administrative expense | 41,708 | 0.39 | 34,086 | 0.44 | 7,622 | 22% | (0.05) | (11%) |
Depreciation, depletion and amortization | 108,565 | 1.01 | 74,646 | 0.96 | 33,919 | 45% | 0.05 | 5% |
(Gain) loss on oil and gas property and equipment | (98,077) | (0.91) | (1,689) | (0.02) | (96,388) | 5,707% | (0.89) | 4,450% |
Total operating expenses | 277,707 | 2.57 | 250,628 | 3.22 | 27,079 | 11% | (0.65) | (20%) |
Lease Operating Expense (“LOE”): LOE includes costs incurred to maintain producing properties. Such costs include direct and
contract labor, repairs and maintenance, water hauling, compression, automobile, insurance, and materials and supplies expenses.
The increase in LOE was driven by the acquisitions of Summit and Maverick in the first quarter of 2025 and the Canvas acquisition in
the fourth quarter of 2025. Specifically, the increase in LOE per Mcfe was primarily related to a greater exposure to liquids
production. Areas with higher liquids output tend to incur elevated operating costs, although they also benefit from higher realized
prices. In the first quarter of 2026, the Company’s liquids production grew by 115% compared to the first quarter of 2025, primarily
driven by the acquisition of Maverick.
Production Taxes: Production taxes include severance and property taxes. Severance taxes are generally paid on produced natural
gas, NGLs and oil production at fixed rates established by federal, state, or local taxing authorities. Property taxes are generally
based on the taxing jurisdictions’ valuation of our natural gas and oil properties and midstream assets.
The increase in production taxes and production taxes per Mcfe was primarily related to an increase in severance and property taxes as
a result of an increase in revenue due to higher commodity prices and the additional value of added oil revenue, as well as additional
property taxes on assets acquired.
Midstream Operating Expense: Midstream operating expenses are costs incurred to operate our owned midstream assets inclusive of
employee and benefit expenses.
The decrease in midstream operating expense per Mcfe was primarily related to maintaining a consistent level of midstream assets
while increasing overall production for the first quarter of 2026, following the acquisitions of Summit and Maverick in the first quarter
of 2025 and the Canvas acquisition in the fourth quarter of 2025. By keeping midstream operations relatively unchanged and
expanding production volumes, the per unit cost of midstream operations declined.
Transportation Expense: Transportation expenses are costs incurred from third-party systems to gather, process and transport our
natural gas, NGLs and oil.
The increase in transportation expense was driven by the Summit and Maverick acquisitions in the first quarter of 2025 and the
Canvas acquisition in the fourth quarter of 2025. The decrease in transportation expense per Mcfe was primarily related to additional
liquids production. Transportation costs are primarily associated with the movement of natural gas volumes. Following the acquisition
of Maverick, the proportion of liquids in the Company’s overall production mix has risen significantly. Specifically, the liquids share
increased to 29% in the first quarter of 2026 from 18% in the first quarter of 2025.
Accretion of Asset Retirement Obligation (“Accretion”): Accretion represents the change in the carrying amount of the asset
retirement obligation (“ARO”) over time. This expense reflects the gradual recognition of the future costs associated with retiring
natural gas and oil wells.
The increase in accretion was primarily related to the expanded obligation as a result of the Maverick acquisition in the first quarter of
2025, as well as normal revisions.
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General & Administrative Expense (“G&A”): G&A includes overhead, including payroll and benefits for our corporate staff, costs of
maintaining our headquarters, costs of managing our operations, franchise taxes, audit and other professional fees, legal compliance,
equity compensation, and non-recurring costs primarily related to acquisitions.
The increase in G&A was the result of the increase in scale, including increased headcount, due to the Summit and Maverick
acquisitions in the first quarter of 2025 and the Canvas acquisition in the fourth quarter of 2025. The decrease in G&A per Mcfe was
primarily related to recognizing administrative synergies and leveraging our existing infrastructure, which offset the acquisition-
related increases.
Depreciation, Depletion & Amortization Expense (“DD&A”): DD&A expenses are non-cash charges that allocate the cost of assets
and natural resources over their useful lives, reflecting their wear and tear, usage, or consumption.
The increase in DD&A was primarily related to an increase in our DD&A rate, as well as a 39% increase in production over the
period. The increase in production and the DD&A rate was due to the Summit and Maverick acquisitions in the first quarter of 2025,
as well as the Canvas acquisition in the fourth quarter of 2025, as these led to an increase in our depreciable base.
Gain (Loss) on Natural Gas and Oil Properties and Equipment: Gains and (losses) on natural gas and oil properties and equipment
represent the difference between cash proceeds and recorded basis of sales of natural gas and oil properties and equipment.
The increase in this metric was primarily related to increased acreage sales, as we strategically pursue the divestiture of select non-
core, undeveloped acreage within our operating portfolio. For the three months ended March 31, 2026, we recognized a gain of $101
million from acreage sales compared to $2 million for three months ended March 31, 2025. Additionally, the disposal of various
property, plant and equipment in the normal course of business resulted in a loss on natural gas and oil properties and equipment of $3
million for the three months ended March 31, 2026, compared to $0.3 million for the three months ended March 31, 2025.
Other Income (Expense)
For the Three Months Ended March 31, | ||||
(In thousands) | 2026 | 2025 | $ Change | % Change |
Interest expense | $(63,412) | $(42,712) | $(20,700) | 48% |
Loss on debt extinguishment | — | (26,971) | 26,971 | (100%) |
Other income (expense) | 548 | 268 | 280 | 104% |
Total other income (expense) | $(62,864) | $(69,415) | $6,551 | (9%) |
Interest Expense
For the Three Months Ended March 31, | ||||
(In thousands) | 2026 | 2025 | $ Change | % Change |
Interest incurred | ||||
Borrowings | $63,507 | $42,694 | $20,813 | 49% |
Other | 741 | 244 | 497 | 204% |
Total interest incurred | 64,248 | 42,938 | 21,310 | 50% |
LESS: Capitalized interest | 836 | 226 | 610 | 270% |
Interest expense | $63,412 | $42,712 | $20,700 | 48% |
The increase in interest expense was primarily related to the issuance of the ABS X Notes and the assumption of the Maverick ABS
Notes as a result of the Maverick acquisition, the issuance of the Nordic Bonds in April 2025, and the issuance of the ABS XI Notes as
a result of the Canvas acquisition in November 2025. This increase was partially offset by lower outstanding balances on our existing
ABS structures.
As of March 31, 2026 and December 31, 2025, total borrowings were $2.9 billion and $3.0 billion, respectively. For the three months
ended March 31, 2026, the weighted average interest rate on borrowings was 7.76% compared to 7.93% for the three months ended
March 31, 2025. As of March 31, 2026, 72% of our borrowings resided in non-recourse, fixed-rate, hedge-protected, amortizing
structures compared to 76% as of March 31, 2025.
Loss on Debt Extinguishment
In February 2025, the proceeds from the ABS X Notes were used to repay the outstanding principal of the ABS I & II Notes and Term
Loan I, retiring these from our outstanding debt and resulting in a loss on debt extinguishment of $27 million.
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Income Tax Benefit (Expense)
The effective tax rates for the three months ended March 31, 2026 and 2025 were 48.7% and (25.4%), respectively. The effective tax
rates can be materially impacted by the recognition of the marginal well tax credit available to qualified producers as reflected in our
2026 and 2025 effective tax rates. The federal government provides these credits to incentivize companies to continue operating
lower-output wells during periods of low prices. This support helps sustain production, preserve the jobs associated with these
operations, and ensures that communities continue to receive state and local tax income. Such revenue is vital for funding schools, law
enforcement, social initiatives, and other essential public services.
The provision for income taxes in the Consolidated Statement of Operations is summarized below:
For the Three Months Ended March 31, | ||||
(In thousands) | 2026 | 2025 | $ Change | % Change |
Income (loss) before taxation | $(313,427) | $(257,528) | $(55,899) | 22% |
Effective tax rate | 48.7% | (25.4%) | ||
Income tax benefit (expense) | $152,762 | $(65,292) | $218,054 | (334%) |
Tax benefit of $153 million for the three months ended March 31, 2026 represented a favorable change of $218 million compared to
an expense of $65 million for the three months ended March 31, 2025. The change was primarily driven by the movement in income
(loss) before taxation and the recognition of marginal well credits.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash generated from operating activities and available capacity under our Credit Facility. As of
March 31, 2026, we had approximately $529 million of liquidity, consisting of $55 million of cash on hand and $475 million of
availability under our Credit Facility.
When we acquire assets, we typically complement our Credit Facility with long-term, fixed-rate, fully-amortizing, asset-backed debt
secured by certain natural gas and oil assets. The asset-backed debt is non-recourse back to the Company. This financing strategy
aligns with the long-life nature of our assets, offering us lower borrowing rates and a clear path to reduce leverage through scheduled
principal payments. For larger acquisitions that require greater capital outlays, we have in the past and may in the future raise funds
through equity offerings to maintain an appropriate leverage profile.
We closely monitor our working capital to ensure it remains sufficient for business operations, as well as for payment of dividends to
shareholders and repurchases of common stock. Alongside managing working capital, we take a disciplined approach to controlling
operating costs and allocating capital resources. This approach ensures that capital investments generate returns that support our
strategic initiatives.
Capital expenditures were $58 million for the three months ended March 31, 2026, compared to $28 million for the three months
ended March 31, 2025. The increase in capital expenditures was primarily related to the development of new wells via a non-operated
development agreement that came with the undeveloped locations acquired in the Maverick acquisition. We expect to meet our capital
expenditure needs for the foreseeable future from our operating cash flows and our existing cash and cash equivalents. Our future
capital requirements will depend on several factors, including the pace of our growth, fluctuations in commodity prices, and future
acquisitions.
The majority of our capital expenditures are directed towards upstream and midstream operations, including pipelines and
compression. The remaining expenditures focus on production optimization, technology, plugging requirements, fleet, reducing
emissions, and, when prudent, development activities aimed at replacing production.
Looking ahead, we aim to create stable cash flows by maintaining our hedging strategy and capitalizing on market opportunities to
enhance the hedged commodity prices of our production. We plan to preserve our strategic advantages through purposeful growth,
supported by a disciplined capital expenditure program. We believe this approach will help ensure we secure low-cost financing for
acquisitive growth while maintaining appropriate leverage and sufficient liquidity.
With respect to other known current obligations, we believe that our sources of liquidity and capital resources will be sufficient to
meet our existing business needs for at least the next 12 months. However, our ability to satisfy our working capital requirements, debt
service obligations, planned capital expenditures, and our ability to pay dividends will depend upon our future operating performance,
which will be affected by prevailing economic conditions in the natural gas and oil industry and other financial and business factors,
some of which are beyond our control.
For additional information regarding debt and debt covenants, refer to Note 10 in the Notes to the Condensed Consolidated Financial
Statements.
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Liquidity
As of | ||
(In thousands) | March 31, 2026 | December 31, 2025 |
Cash and cash equivalents | $54,539 | $29,697 |
Available borrowings under the Credit Facility(a) | 474,687 | 304,912 |
Liquidity | $529,226 | $334,609 |
(a)Represents available borrowings under the Credit Facility of $510 million as of March 31, 2026 less outstanding letters of credit
of $36 million as of such date. Represents available borrowings under the Credit Facility of $340 million as of December 31,
2025 less outstanding letters of credit of $35 million as of such date.
Cash Flows
For the Three Months Ended March 31, | ||||
(In thousands) | 2026 | 2025 | $ Change | % Change |
Net cash provided by operating activities | $168,732 | $84,858 | $83,874 | 99% |
Net cash provided by (used in) investing activities | 1,337 | (405,017) | 406,354 | (100%) |
Net cash provided by (used in) financing activities | (159,677) | 406,552 | (566,229) | (139%) |
Net change in cash, cash equivalents and restricted cash | $10,392 | $86,393 | $(76,001) | (88%) |
Net Cash Provided by Operating Activities
The change in net cash provided by operating activities was primarily related to an increase in production, as a result of the Summit
and Maverick acquisitions in the first quarter of 2025 and the Canvas acquisition in the fourth quarter of 2025, as well as higher prices
for the natural gas, NGL, and oil volumes sold.
Net Cash Provided by (Used in) Investing Activities
The change in net cash used in investing activities was primarily related to the Summit and Maverick acquisitions in the first quarter of
2025, partially offset by increased capital spend in the first quarter of 2026 related to our participation in the development of certain
non-operated wells acquired with Maverick acquisition, as well as increased cash proceeds from the sale of undeveloped acreage.
Net Cash Provided by (Used in) Financing Activities
The change in net cash used in financing activities was primarily related to decreased borrowing activity in the first quarter of 2026, in
which we received proceeds from the tap-on offering of Nordic Bonds, as compared to the first quarter of 2025, which included
proceeds received from the issuance of ABS X as well as our equity offering, partially offset by hedge modification payments and
deferring financing costs incurred in connection with the ABS X transaction. Additionally, during the first quarter of 2026, we also
had increased share repurchases as part of our stock repurchase program as compared to the first quarter of 2025.
Off-Balance Sheet Arrangements
We may enter into off-balance sheet arrangements and transactions that give rise to material off-balance sheet obligations. As of
March 31, 2026, our material off-balance sheet arrangements and transactions include operating service contractual obligations of
$355 million and letters of credit outstanding against our Credit Facility of $36 million. Refer to Contractual Obligations for additional
information.
There are no other transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably
likely to materially affect our liquidity or availability of capital resources.
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Contractual Obligations
We have various contractual obligations in the normal course of our operations and financing activities. Significant contractual
obligations as of March 31, 2026 were as follows:
(In thousands) | Remainder of 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total |
Recorded contractual obligations | |||||||
Accounts payable | $76,427 | $— | $— | $— | $— | $— | $76,427 |
Accrued liabilities | 158,844 | — | — | — | — | — | 158,844 |
Borrowings | 179,247 | 215,797 | 199,320 | 998,896 | 252,994 | 1,082,920 | 2,929,174 |
Operating leases | 9,068 | 7,497 | 5,536 | 2,223 | 1,745 | 238 | 26,307 |
Finance leases | 27,013 | 22,652 | 18,093 | 11,620 | 3,905 | — | 83,283 |
Asset retirement obligation(a) | 21,980 | 28,356 | 25,724 | 51,076 | 19,445 | 3,484,077 | 3,630,658 |
Other liabilities(b) | 88,103 | 24,218 | — | — | — | — | 112,321 |
Off-Balance Sheet contractual obligations | |||||||
Firm transportation(c) | 42,212 | 35,666 | 26,118 | 20,613 | 8,358 | 221,534 | 354,501 |
Total contractual obligations | $602,894 | $334,186 | $274,791 | $1,084,428 | $286,447 | $4,788,769 | $7,371,515 |
(a)Represents our asset retirement obligation on an undiscounted basis. On a discounted basis the liability is $896 million as of
March 31, 2026 as presented in the Consolidated Balance Sheets.
(b)Represents taxes payable, deferred tax liability, and other current and noncurrent liabilities.
(c)Represents reserved capacity to transport gas from production locations through pipelines to the ultimate sales meters.
For more detailed information on asset retirement obligations and debt refer to Notes 9 and 10 within the Notes to the Condensed
Consolidated Financial Statements.
Litigation and Regulatory Proceedings & Environmental Matters
For Information regarding legal proceedings and environmental matters refer to Note 12 to the Notes to the Condensed Consolidated
Financial Statements.
Critical Accounting Estimates
There have been no material changes to the Company’s critical accounting estimates from those disclosed in the Company’s annual
report on Form 10-K for the year ended December 31, 2025.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our
potential exposure to market risk. The term “market risk” refers to the risk of loss arising from adverse changes in natural gas, NGLs
and oil prices, as well as interest rates. These disclosures are not meant to be precise indicators of expected future losses, but rather
indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our
ongoing market risk exposures.
Commodity Price Risk
Our revenues are primarily derived from the sale of natural gas, NGLs, and oil production, subjecting us to commodity price risk.
Commodity prices for natural gas, NGLs and oil can be volatile and may fluctuate due to relatively small changes in supply, weather
conditions, economic conditions, and government actions. For the three months ended March 31, 2026, our natural gas, NGLs, and oil
revenue was $314 million, $61 million, and $181 million, respectively. Based on production, natural gas, NGLs and oil revenue for
the three months ended March 31, 2026 would have increased or decreased by approximately $31 million, $6 million, and $18 million,
respectively, for each 10% increase or decrease in prices.
To mitigate the risk of fluctuations in commodity prices, we enter into derivatives. The total volumes hedged through the use of these
instruments vary from period to period. Generally our objective is to hedge approximately 60% to 80% of anticipated production
volumes for the next 12 months, at least 50% for months 13 to 24, and a minimum of 30% for months 25 to 36. For additional
information regarding derivatives, refer to Note 6 in the Notes to the Condensed Consolidated Financial Statements.
By removing price volatility from a significant portion of our expected production through 2028, we have mitigated, but not
eliminated, the potential effects of changing prices on operating cash flow for those periods. While these derivative contracts help
mitigate the negative effects of falling commodity prices, they also limit the benefits we would receive from increases in commodity
prices.
As of March 31, 2026, the fair value of our natural gas derivatives was a net liability of $424 million, NGLs derivatives were in a net
liability position of $113 million, and our oil derivatives were in a net liability position of $222 million. For the three months ended
March 31, 2026, a 10% fluctuation in commodity prices would have a corresponding impact of approximately $42 million, $11
million, and $22 million on natural gas, NGLs and oil derivatives, respectively.
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates. Our borrowings primarily consist of fixed-rate amortizing
notes and a variable rate Credit Facility as illustrated below.
As of March 31, 2026 | ||
(in thousands) | Borrowings | Interest Rate(a) |
ABS Notes, Nordic Bonds, & other(b) | $2,604,319 | 7.89% |
Credit Facility | $314,600 | 6.73% |
(a)The interest rate on the ABS Notes, Nordic Bonds, and other notes payable represents the weighted average fixed rate of the
notes, while the interest rate presented for the Credit Facility represents the floating rate as of March 31, 2026.
(b)Includes $22 million in notes payable issued by a third party financial institution in November 2024 collateralized by two natural
gas processing plants and various natural gas compressors and related support equipment in the Central Region, as of March 31,
2026.
For additional information regarding the Company’s indebtedness, refer to Note 10 in the Notes to the Condensed Consolidated
Financial Statements.
For the three months ended March 31, 2026, a 100 basis point adjustment in the borrowing rate for the Credit Facility would result in a
corresponding annual effect on interest expense of approximately $3 million. This represents a reasonably possible change in interest
rate risk.
We strive to maintain a prudent balance of floating and fixed-rate borrowing exposure, particularly during uncertain market
conditions. As part of our risk mitigation strategy, we occasionally enter into swap arrangements to adjust our exposure to floating or
fixed interest rates, depending on changes in the composition of borrowings in our portfolio. Consequently, the total principal hedged
through the use of derivatives varies from period to period.
As of March 31, 2026, the fair value of our interest rate swaps represents an asset of $0.1 million. For additional information regarding
derivatives, refer to Note 6 in the Notes to the Condensed Consolidated Financial Statements.
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Counterparty & Customer Credit Risk
We are exposed to counterparty and customer credit risk from the hedging and sale of our natural gas, NGLs and oil.
Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we only enter into commodity contracts
with counterparties that are creditworthy financial institutions deemed by us to have acceptable credit strength and competence.
Counterparty non-performance risk is considered in the valuation of our derivative instruments, but has not had an impact on the value
of our derivatives. We also attempt to limit our exposure to non-performance by any single counterparty. As of March 31, 2026, our
commodity contracts derivative instruments were spread among 14 counterparties.
For additional information regarding derivatives, refer to Note 6 in the Notes to the Condensed Consolidated Financial Statements
Accounts receivable from customers represent amounts due for the purchase of these commodities, and their collectability depends on
the financial condition of each customer. We review the financial condition of customers before extending credit and generally do not
require collateral to support their accounts receivable. As of March 31, 2026, we had one customer that comprised over 10% of our
total accounts receivable from customers. Net of the applicable allowance for credit losses, our accounts receivable from customers
were $344 million as of March 31, 2026.
The Company is also exposed to credit risk from joint interest owners, which are entities that own a working interest in the properties
operated by the Company. Joint interest receivables are classified under accounts receivable, net, in the Consolidated Statement of
Financial Position. The Company has the ability to withhold future revenue payments to recover any non-payment of joint interest
receivables. As of March 31, 2026, our joint interest receivables, net of the applicable allowance for credit losses, were $68 million.
Accounts receivable are current, and the Company believes these net receivables are collectible.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in U.S. Securities Exchange Act of 1934, as amended
(“Exchange Act”) Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and
forms of the SEC, and such information is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Chief Executive Officer and
Chief Financial Officer, with the participation of management, have evaluated the effectiveness of the Company’s disclosure controls
and procedures in relation to Exchange Act Rule 13a-15(b), and have concluded that the Company’s disclosure controls and
procedures were effective as of March 31, 2026.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026, which materially
affected, or were reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are a party to various routine legal proceedings, disputes and claims arising in the ordinary course of our business, including those
that arise from interpretation of federal and state laws and regulations affecting the crude oil and natural gas exploration and
development industry, personal injury claims, title disputes, royalty disputes, contract claims, contamination claims relating to crude
oil and natural gas exploration and development and environmental claims, including claims involving assets previously sold to third
parties and no longer part of our current operations. While the ultimate outcome of the pending proceedings, disputes or claims, and
any resulting impact on us, cannot be predicted with certainty, we believe that none of these matters, if ultimately decided adversely,
will have a material adverse effect on our financial condition, results of operations or cash flows.
There have been no additional material developments with respect to the information previously reported under Part I, Item 3. “Legal
Proceedings” of our annual report on Form 10-K for the year ended December 31, 2025.
Item 1A. Risk Factors
There have been no material changes to the Company’s “Risk Factors” previously disclosed in Part I, Item 1A of our annual report on
Form 10-K for the year ended December 31, 2025. For a detailed discussion of the risks that affect our business, please refer to Part I,
Item 1A “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Common Stock
Following are our monthly share repurchases of common stock for the quarter ended March 31, 2026:
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |
January | 983,364 | $13.79 | 983,364 | 6,816,636 |
February | — | — | — | 6,816,636 |
March | 4,050,000 | 14.30 | 4,050,000 | 2,766,636 |
Total | 5,033,364 | $14.20 | 5,033,364 |
All repurchases of common stock were made using cash on hand and liquidity at the time of purchase. Our repurchases of common
stock may occur through open market purchases, private transactions, or pursuant to a Rule 10b5-1 trading plan.
At the 2025 Annual General Meeting on April 9, 2025, our stockholders approved a stock repurchase program authorizing the
Company to repurchase up to a maximum of 8,099,015 shares. This stock repurchase program (the “2025 Repurchase Program”)
commenced upon approval and authorized the repurchase of common stock until the conclusion of the 2026 Annual General Meeting
of the Company or June 30, 2026, whichever is earlier.
On February 25, 2026, the Board approved a stock repurchase program (the “2026 Repurchase Program”) authorizing the Company to
repurchase up to 7,800,000 shares. The 2026 Repurchase Program replaces the 2025 Repurchase Program and authorizes the
repurchase of common stock through March 1, 2027. Repurchases of common stock under the program may be made, from time to
time, in privately negotiated transactions, in open market transactions, or by other means, including through trading plans intended to
qualify under Rule 10b-18 and/or Rule 10b5-1 of the U.S. Securities Exchange Act of 1934, as amended. The amount and timing of
any repurchases made under the program will be in the Company’s sole discretion and will depend on a variety of factors, including
legal requirements, market conditions, other investment opportunities, available liquidity, and the prevailing market price of the
common stock. The program does not obligate the Company to repurchase any dollar amount or number of shares of common stock,
and the program may be suspended or discontinued at any time at the Company’s discretion.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
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Item 5. Other Information
During the three months ended March 31, 2026, no director or officer of the Company adopted terminated
arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits
Exhibit No. | Incorporated by reference | Filed | Furnished | ||||
Description | Form | Exhibit | Filing Date | Herewith | Only | ||
2.1 | † | Purchase and Sale Agreement dated February 26, 2026 by and between Diversified Production, LLC and Sheridan Holding Company III, LLC | 8-K File No. 001-41870 | 2.1 | 3/4/2026 | ||
3.1 | Amended and Restated Certificate of Incorporation of Diversified Energy Company | 8-K File No. 001-41870 | 3.1 | 11/24/2025 | |||
3.2 | Amended and Restated Bylaws of Diversified Energy Company | 8-K File No. 001-41870 | 3.2 | 11/24/2025 | |||
4.1 | Tap Issue Addendum for 9.75% Senior Secured Bonds due 2029 dated February 5, 2026 by and between Diversified Gas & Oil Corporation and Nordic Trustee, AS, as bond trustee | 8-K File No. 001-41870 | 4.2 | 2/10/2026 | |||
10.1 | * | Form of Award Agreement for Short-Term Incentive Plan Award | ü | ||||
10.2 | * | Form of Officer Restricted Stock Unit Award Agreement | ü | ||||
10.3 | * | Form of Officer Performance Stock Unit Award Agreement | ü | ||||
10.4 | * | Form of Officer Long-Term Cash Award Agreement | ü | ||||
31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ü | |||||
31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ü | |||||
32.1 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 | ü | |||||
101 | Interactive Data File. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||||
* | Management contract or compensatory plan or arrangement. |
† | Certain schedules and attachments have been omitted. The registrant hereby undertakes to provide further information regarding such omitted materials to the Securities and Exchange Commission upon request. |
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DIVERSIFIED ENERGY COMPANY | |||
(Registrant) | |||
/s/ Bradley G. Gray | |||
Bradley G. Gray | |||
President and Chief Financial Officer | |||
FAQ
How did Diversified Energy Company (DEC) perform financially in Q1 2026?
Diversified Energy generated $556.2 million in commodity revenue in Q1 2026, up 69% year over year, but reported a net loss of $160.7 million. The loss mainly reflected a $548.4 million derivatives loss, while operating cash flow reached $168.7 million.
What were Diversified Energy’s production levels in Q1 2026?
Diversified Energy produced 107,810 MMcfe in Q1 2026, a 39% increase from 77,724 MMcfe a year earlier. Growth came from the Maverick, Summit and Canvas acquisitions, with liquids volumes rising strongly and natural gas still representing 71% of production on an Mcfe basis.
How did hedging affect Diversified Energy’s Q1 2026 results?
Hedging significantly reduced reported earnings in Q1 2026. The company recorded a $548.4 million loss on derivatives, including $150.5 million in negative cash settlements and $397.9 million of fair value losses, offsetting stronger commodity prices and higher sales volumes.
What is Diversified Energy’s debt and interest burden as of March 31, 2026?
Total borrowings were $2.93 billion as of March 31, 2026, including ABS notes, Nordic Bonds and the Credit Facility. Interest expense for Q1 2026 was $63.4 million, after capitalizing $0.8 million of interest, reflecting the cost of this largely secured, asset-backed capital structure.
What major acquisitions and divestitures has Diversified Energy announced around Q1 2026?
In Q1 2026, the company divested non-core undeveloped acreage for $101 million and later closed a $248 million Sheridan asset acquisition. It also agreed to acquire Camino-affiliated assets for an estimated $1.2 billion, partly via a Carlyle-backed SPV structure expected to close in Q3 2026.
How much stock did Diversified Energy repurchase in Q1 2026?
During Q1 2026, Diversified Energy repurchased 5,033,364 shares of common stock at an average price of $14.20 per share, totaling approximately $71 million. These repurchases represented about 7% of common stock issued and outstanding as of March 31, 2026, and the shares were cancelled.
Did Diversified Energy change its borrowing capacity after Q1 2026?
Yes. In April 2026, after quarter-end, the company’s revolving Credit Facility borrowing base increased from $825 million to $900 million. The redetermination reflected added collateral from the Sheridan acquisition and provides additional liquidity for operations and planned transactions.