Greetings. Welcome to Diversified Energy's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Is now my pleasure to introduce Douglas Krisz, Senior Vice President, Investor Relations and Corporate Communications Thank you. You may begin.

Good morning.

And thank you all for joining us today. And welcome to our first quarter twenty twenty five results conference call. With me today are Diversified's Founder and CEO, Rusty Hudson and President, and CFO, Brad Gray. We get started, I will remind everyone that the remarks on this call reflect the financial and operational outlook as of today, 05/12/2025. These outlooks entail assumptions and expectations that involve risks and uncertainties. A discussion of these risks can be found our regulatory filings. During this call, we also reference certain non GAAP and non IFRS financial measures. Our disclosures regarding those items are found in our earnings materials, on our website and in our regulatory filings. Additionally, as noted in the first quarter twenty twenty five results announcement issued this morning, all financial and operational metrics and our underlying results represent only two weeks of contribution from our recently closed Maverick Natural Resources acquisition. I will now turn the call over to Rustic. Thank you, Doug, and thank you all for joining the call today. Before I start my prepared remarks, I want to highlight an emphasize that we have significantly transformed and strengthened our company since the start of the year.

I appreciate the tremendous efforts of our employees to deliver outstanding results and live by our culture of getting stuff done to help us be one and every day. This team has positioned Diversified for an exciting future. I'm confident that our presentation will reinforce my excitement. Additionally, while we recognize the current uncertainty increased volatility and sharp market sell offs, related to tariffs and other factors we also believe it is essential to address why these items do not affect Diversified's fundamental business.

Here are a couple of important unique and differentiated factors of the Diversified Business Model. We are predominantly a natural gas focused company with the commodity seeming to have a positive macro outlook and tailwind. We are the only publicly traded PDP champion with a focus on the management of mature producing assets. We are a high cash margin business with a large protective hedge book paying a fixed rate dividend and maintaining an active share repurchase program. We have built vertical integration and economies of scale to help insulate against inflation. We have built near adjacent businesses in [indiscernible] and well retirement. We are financially sound with approximately $450,000,000 in liquidity. Our model is to use low cost capital to acquire and take advantage of an often overlooked segment of the oil and gas sector that is historically highly cash generative. Bottom line, the magnitude of any tariffs direct or indirect impact on our bottom line financial health is extremely limited. While it's sometimes a challenging environment to operate in, we know that if it's hard, there's opportunity. For those of you following along with our first quarter twenty twenty five results slide deck, which we posted to our IR website this morning, I will cover a few slides and then turn the call over to Brad to discuss a few highlights from our financial results.

After Brad, I will provide some additional thoughts on our guidance for a our powerful path forward in 2025 before opening the call for your questions. Starting on Slide three, we continue to focus the core of our capital allocation strategy around four key pillars that are really deliverables to judge us by. Systematic debt reduction, returning capital to shareholders through dividend distributions and through share repurchases, and growing the company through accretive and strategic acquisitions. Last year, we checked that box. We continue to build that credibility in 2025. You can see here our progress year to date in 2025. Debt principal reduction totaled approximately $51,000,000 during the first quarter of twenty twenty five, Additionally, we returned approximately $59,000,000 to shareholders in the form of dividends and strategic share repurchases. Importantly, we believe our shares remain a compelling investment at current levels and we will continue to take advantage of the current cycle and market dislocation to opportunistically repurchase shares. And we accomplished all this while continuing to focus on our growth initiatives with approximately $2,000,000,000 in announced acquisitions, inclusive of the recently closed transformational Maverick acquisition. We maintain flexibility in our capital allocation strategy strategy to ensure we deploy capital to the highest value opportunities.

Taken together, we believe our capital allocation strategy balances investment in the business, and growth initiatives while enabling a tangible shareholder return framework all of which creates long term value to our stakeholders. And we will remain focused on these key strategic pillars. With that, I'll turn it over to Brad to discuss our financials in additional detail. Thank you, Rusty. Let me share the highlights of our financial and operational results for the first quarter. We'll start with production, The average daily production exit rate for March approximately 1,149,000 cubic feet equivalent per day and our quarterly production averaged over eight sixty million cubic feet equivalent per day. Over 50% of our produced volumes were generated in our central region. The growth in our production base has put the company in a fantastic position to participate in both LNG exports and data center needs while continuing to supply energy to our local communities and commercial customers. Our total revenue was approximately $295,000,000 and adjusted EBITDA was 138,000,000 which represents an approximate 47% adjusted EBITDA margin which was relatively flat quarter over quarter despite dramatic decline in oil prices. Notably, as we continue our integration process, and improve the combined company cost structure, coupled with a recovery in liquids pricing we anticipate margin expansion to grow above our historic 50% level.

This quarter's free cash flow was $62,000,000 delivering an approximate 45% free cash flow conversion rate. Our net debt stood at approximately $2,560,000,000 And as part of the Maverick transaction, the company's RBL capacity increased to $900,000,000 and today we have the largest but most importantly, we have the strongest balance sheet we have had. With a net leverage reduction quarter over quarter and over $450,000,000 in liquidity, our balance sheet strength is giving us the financial optionality, and the financial flexibility to navigate and potentially take advantage of volatile markets as well as commodity price cycles. Our investment grade rated and stable longer term ABS structures help contribute to our financial resilience. In summary, the strong execution of our strategy from all of our teams during the year delivered our positive results. Enabling strong free cash flow generation and allowing us to continue to prioritize returning capital to shareholders and paying down debt. Now, we'll turn over to slide five. One of the main benefits of our recently closed Maverick transaction is that we have multiple drivers of cash flow growth. The combined company will benefit from our low decline production profile, commodity diversification, a continued disciplined hedging program and the potential for additional upside from anticipated operational administrative synergies with this acquisition.

As a result, the chart on the right side of the page shows that the 2025 guidance for combined free cash flow totaled $420,000,000 an approximate 200% uplift from Diversified standalone results in 2024. Now we'll turn over to slide six Our differentiated business model including our low capital intensity combined with our strong cash margins result in a strong free cash flow conversion rate of 45% as seen on this slide. Within our natural gas peers, you can see how Diversified's business model is differentiated. [indiscernible] we continue to be a leader in the natural gas sector besting many companies with market capitalizations enterprise values and production profiles meaningful larger than ours. With our impressive free cash flow conversion rate, of approximately three times our peer group average. Additionally, our fixed rate investment grade debt from our ABS notes helps lower interest expense which also benefits our free cash flow. Our ability to generate strong free cash flow allows us to direct cash towards the four pillars of our capital allocation strategy. Turning now to slide seven. We have a proven approach and an ability to identify and achieve synergies in our acquisitions. Our stewardship operating model supported by our long tested smarter asset management practices, is all about optimizing the assets we acquire through production enhancements, and expense efficiency.

We use every lever at our disposal to increase cash margins increase returns, and increase free cash flow from our investments. With this acquisition, we have already identified and achieved synergies by increasing asset density in our field operations, We've integrated processes and we're improving material contract turns which deliver better compression and chemical cost.

Additionally, we have upgraded and reduced redundancies and staffings in several areas across our organization. Anytime you have the opportunity to bring talented groups together, there is the opportunity to utilize the best from each other.

Whether that be professional experiences, tools, processes or procedures. Now turning over to slide eight. We continue to believe our share price is undervalued and has been impacted by macro headwinds that are not connected with our company's fundamentals or our consistent and compelling performance. Based on the EV to EBITDA metrics, where we have historically traded, and compared to multiples of our natural gas peers we strongly believe there is a real opportunity for our rerate in our shares. With a number of near term catalysts on the horizon, including the integration of Maverick, with meaningful identified and quantified synergies, the unlocking of additional hidden acreage value our emerging coal mine methane opportunity and the continually consolidating landscape of North American operators we believe that there is a meaningful shareholder value to be captured from our differentiated business model. It's worth noting that one of our capital allocation pillars is strategic share repurchases. And as Rusty briefly mentioned earlier, we will continue to take advantage of the market dislocation and valuation to repurchase our shares. With that and those comments, I'll turn the presentation back to Rusty for his additional comments. Thanks, Brad. Let me provide a couple of thoughts on our now combined company outlook and how we believe the combined company will look in the coming year before we take questions.

On Slide nine, continue to maintain momentum into the second quarter with the Maverick integration progressing in a way that we believe will exceed our targeted run rate synergies of $50,000,000 Importantly, with our targeted production of over one Bcf per day, and more than doubling the free cash flow compared to Diversified on a standalone basis to over $420,000,000 the company is positioned on a path that creates a unique and compelling investment opportunity. Turning to Slide 10, as we continue to emphasize, we are a differentiated energy producer that seeks to optimize existing long life and often overlook and undervalued U. S. Energy assets. We seek to drive shareholder returns in a unique way by minimizing traditional E and P risk, optimizing our low decline production, and by being good stewards of our capital while driving meaningful and consistent cash flow. Our results reflect our continued focus on building a strategic resilient energy producer. We believe we are the champion of the subsector within the upstream E and P space. We are that one and only publicly traded company executing this strategy offering investors a vehicle to invest in a similar fashion to the private equity PDP roll up strategy.

Importantly, compared to those private entities, Diversified offers unique value creation attributes which provide us with a competitive advantage. With our large operational scale, vertical integration and corporate infrastructure that leverages a leading technology platform, we have a proven process of integration that allows us to streamline and capture meaningful synergies. We have executed that playbook 27 times over the past seven years, and we are well on our way to accomplishing that again for the transformational Maverick Natural Resources acquisition. Every industry sub sector needs a standout or go to investment which usually has several strategic advantages to its business model. Today as the only publicly traded PDP focused company, we believe diverse Diversified is that winning investment and has a distinct opportunity to grow our business and re rate the shares. We are excited about the prospect of transforming the valuation of the business through continued execution of our strategy. And we thank our shareholders for their continued support. We remain focused on building a portfolio of assets through a value accretive transactions while simultaneously unlocking hidden value through our unique operational framework strategic development partnerships, and growing adjacent business segments including coal mine methane. With the combination of maturing assets and M and A activity leading to growth oriented E and Ps recycling capital, through divestment of assets in many cases mature producing assets there remains an ample opportunity for Diversified's continued growth.

Additionally, given our industry wide reputation in the current upstream market dynamic, of E and Ps making acquisitions to backfill and expand undeveloped inventory, Diversified provides a creative and actionable solution as a PDP partner in joint acquisitions. We have been steadfast in executing our strategy since our IPO driving strong financial and operational performance. The right company, right time mindset for the type of assets we manage delivers consistent free cash flow and returns to shareholders and serves a fundamental role in sustaining The U. S. Energy markets. Before I turn the call over to the operator for Q and A, I'd like to take a minute to recognize our employees for their outstanding achievements and contributions during the year. Without their excellent work in the field and in the corporate office, these results would not be achievable. With that, I'd like to turn it over to the operator for the Q and A portion of today's call. Operator?

Thank you. Our first question is from Tim Rezvan with KeyBanc Capital Markets. Please proceed.

Good morning, folks, and thank you for taking our questions. First one I had today, it makes sense with Maverick having just recently closed that you would leave the 2025 outlook unchanged. Obviously, gas tailwinds are at your back. I was curious on the Permian joint development opportunity, which is sort of the biggest component of your CapEx, comes from Maverick. You talk about how how set in stone that program is? I know WTI 63 today, but it's it's been weak. Just kind of curious on how you're thinking about that CapEx should we see oil kind of retrench back into the 50s? Thank you. Thanks, Tim. I think maybe just for clarification purposes, the largest JV opportunity we have is in the Cherokee and Oklahoma. Oklahoma. We do have some smaller JV opportunities running right now in the Permian. But right now, most of the CapEx that committed to has been in the Permian or in the Cherokee in Oklahoma. That said, a lot of that production areas really one third, one third, one third. And what I mean by that is one third oil, one third NGLs, and then one third natural gas. So the overall even with the down turn in oil prices that really hasn't been impacted significantly as a one that was pure oil in the Permian.

So we continue to monitor it with our operator with our partner But as of right now, I would say that it's primarily on course for what we originally anticipated. Obviously, if gas and oil both go down throughout the year, we'd to take a look at that. But right now, I think it's business as usual on that program.

Okay. Apologies. I wasn't very clear on that. But And then, okay. And your Permian activity, you feel pretty good about 2025? Yes. I mean, it's minimal compared to what we have going on in Oklahoma, to be honest. And so we're going through a full assessment of all of our acreage in the Permian right now. Acre by acre to see where our best value is to be obtained for that acreage, whether that be JV ing it with someone to drill it, whether it's something that we don't think will be on our radar. Therefore, we should monetize but for the most part, even we had very little capital for this year for the Permian allocated But what we do have is still on tap for the rest of the year. Okay. I appreciate that clarity. And then as my follow-up, I thought Brad's comments were interesting. It kind of seems like you all are even though you just closed Maverick, you're on your front foot. For potential incremental M and A. I think you said that you're ready to take advantage of things and you highlighted the strengthening balance sheet. So can talk about your inclination to do M and A if an opportunity arises you feel like despite integration you're ready to transact if something comes up?

Yes, Tim, I think that's a great question about talking about the integration. Really the integration even for the little bit of time, little over a month now that we've been working on it We've identified, as I've said in my comments, synergies above and beyond what we had originally anticipated when we announced and closed the deal. So we feel like that's going that's on course to happen throughout the rest of the year. The integration has gone very smoothly. For two large companies, this has been a very clean very cooperative integration so far. And so we've had very little and minimal impacts. We're moving forward with all stuff that we knew we needed to do. So integration is going well and so [indiscernible] say this pretty much every time we talk, but we can't choose when things become available. And so we're always monitoring, we're always looking, we're always seeing, we have a list of things that we feel like are the best things we could do if they ever became available. And we're always want to be ready when that happens. The good news is we're sitting here we have the ability to do something. Doesn't mean we will, We could sit here for the next month after month after month and just operate and get our synergies and do what we're doing.

And we will be do very well. But we're also always on the lookout for the things that are going to add significant shareholder value into the future. And so what we're doing is, we've got the balance sheet in a very good place. We've got significant liquidity and we'll sit here and we'll free cash flow the business like we have through the first quarter. And we'll have our options in front of us and we'll take advantage of the ones that we believe will add the most shareholder value. And so that's kind of where we are at this point.

Okay. I appreciate the comments. Thank you.

Sure.

Our next question is from Sam Wella with Peel Hunt. Please proceed.

Hi, everyone. Thanks for taking my question. It's really the follow-up to Tim's question around the JV activity in Oklahoma in particular. It's more around sort of the timing of that, what the what the activity looks like and what success would look like following that CapEx spend?

Yes, I think it's just like I said, the original schedule that we had with our partner has had just minor tweaks here and there. And honestly, we don't see any kind of change from what we anticipated when we announced the deal back in March. So complete look, these drilling programs you set a schedule and there's some adjustments here and there because completions don't happen on time or whatever. But ours right now we look great. And from our perspective, there's no reason to make any great adjustments because we obviously we have a different revenue stream on these wells than we would say in the pure Permian, which would be mostly oil. So these have a little more gas to them. In NGLs and the overall returns look great. The IRRs are still high and definitely above our low end and where we would anticipate for us to not participate would be way above that. So I don't think there's any reason to make any adjustments at this point. We're going to hang in there with our operator and our partner and stay on schedule. The wells look great. And I would just quickly add, Sam, that it's it's important to have a quality partner and we do that we've got a lot of confidence in So, maintain good dialogue and good visibility there as to what's going on, as Rusty indicated.

And And we're confident that we'll both be able to make good quality business decisions.

That's great. And then just very briefly on the coal mine methane outlook. Obviously, the Summit acquisition, there was increased potential there. Has anything you've seen since that's been integrated that has changed your view or probably increased your outlook on that particular revenue stream?

We were able to achieve some additional cash flow in the first quarter as a result of closing that Summit acquisition. We're confident that that increased activity will continue throughout the rest of the year. So, no changes from that standpoint. We like our acreage position where we we are generating these credits, and we believe there's opportunity to continue to grow that revenue stream. Yes, I think we also made a comment maybe it was back at the year end numbers that we felt that this could be increased up to 300% from 2024 levels by the time 2026. So and we're well on our way to do that. Brilliant. Thank you.

Our next question is from Paul Diamond with Citibank. Please proceed.

Thank you. Good morning all. Thanks for taking the call.

Just wanted to quickly touch on the of M and A landscape a bit deeper than we talked about already. Given the current disconnect markets, call it, uncertainty, you seeing more opportunities on the oil side or nat gas side if things the bid ask is widening out, I guess, how are those conversations going? How should we think about like near term opportunities given current dislocations? [indiscernible] As you can imagine, the oil the oil plays or the oil companies aren't really that psyched up about trying to sell in the market where is that. So I think there definitely has been some freezing up I would say on the oil side. As people try to get try to figure out kind of where it's going. And I mean, one day you're down to 55, next day you're back back up to 62, 63, which as we know volatility makes anything hard to price and to value. And so I think you're kind of in a place where you were with natural gas couple of years ago when everybody just kind of sits because there's dislocation in terms of value, just based on the volatility On the natural gas side, it's a little more vibrant, I would say.

And you're seeing a lot more activity there in terms of just prices have been more stable and have held up a little better. And so I think you could see some of those kind of transactions, not necessarily just from us, but in general. I think there's some out there that may transact over the next several months and several weeks. And so I think natural gas seems to be to be the place where there's more probably more activity right now. The other thing for us, one thing we've we've been really focused on too is, we believe there's still way too many small cap oil and gas companies and oil and gas stocks. And we believe there's value there that can be created through G and A [indiscernible] Over time. And so that's another area where we're focused on and just watching And I think that those values will be tough to come back.

Even with the market coming having an uptick here. I think those will be harder to come back from. And so we believe there could be some value to be had in that small cap stock universe as time goes by also.

Makes perfect sense. I appreciate the clarity. Yes, I'll leave it there.

Our next question is from Simon Scholes with First Berlin. Please proceed.

Yes. Hello. Thanks for taking my question. I've just got one.

Just looking at lease operating expense, unit lease operating expense, in the first quarter, I mean it's quite quite a way above what you had last year. I was just wondering if you could give us an indication of where you expect unit lease operating expense to be over the next couple of quarters?

Yes. I'll let Brad add some additional color here, but you're going to for us, we've just added an acquisition that has a much higher liquids value than we've had in the past. If you go back to last year's first quarter it would have been 85% net gas. This year, it's 70% exit rate nat gas and 30% oil and NGLs. With that comes a little higher operating expense on the liquid side but you also get a bigger uplift on the revenue side. Therefore, margins should continue to be pretty strong in terms of where they were even as of last year. Mean, Brad, do want to add anything to that on Couple of points. As Rusty indicated, definitely the liquids weighting is going to impact. So we we'll as the year progresses, you'll start to see more consistency in our lease operating expenses as we roll these in. We just had two weeks of maverick here. But and we will also be at achieving the synergies, which as Rusty has indicated a couple of times, we're well on our way to do that and very excited about that. The other thing I would just quickly say, there were some pretty severe weather events that occurred early in January and February that did impact some levels of production that may have or they did provide a little bit higher operating expense.

On a per unit basis. All those production volumes have come back in line with our plans and thoughts. And so there was just a little bit of impact there in the quarter. From those pretty severe events. But we as I said in my comments, we've got a high level of confidence that the return back to our historic levels of 50 plus percent margins is well within our [indiscernible] Okay. Thanks very much.

With no further questions in the queue, I would like to turn the floor back over to Rusty Hudson for closing remarks.

Thank you all for joining today. Again, Again, we're very excited about the first quarter and looking forward to continuing our success in our operational our operations throughout the year. And thank you all for joining and we'll talk soon. Thank you.

Thank you. This does conclude today's conference. May disconnect your lines at this time and thank you for your participation.