American gas and oil producer Diversified Energy has reported a concerning rise in debt levels, pushing its financial leverage beyond targeted ranges amidst growing investor scrutiny. The company’s net debt has climbed to $1.6 billion by September’s end, marking a significant increase from $1.2 billion recorded at the close of the previous year.
The debt surge follows an aggressive acquisition strategy, with the company spending £585 million on purchasing aged gas wells since January. This expansion has pushed the company’s debt-to-earnings ratio to 2.9 times, exceeding its self-imposed target range of 2 to 2.5 times.
Diversified’s journey began in 2001 when Chief Executive Rusty Hutson Jr acquired a single gas well in West Virginia. The company has since expanded dramatically, accumulating more than 70,000 gas wells predominantly across southern and Appalachian regions, with total investments reaching approximately $2.6 billion since 2017.
Short-sellers have taken significant positions against the stock, making it London’s most heavily shorted company. The mounting pressure led to a dividend reduction in March as part of efforts to strengthen the balance sheet. The company maintains a distinctive debt repayment structure, spreading payments over roughly ten years rather than facing large single-maturity obligations.
Environmental concerns have also surfaced, with US Congress members questioning the company’s well clean-up cost estimates. Diversified has responded by highlighting its methane leakage monitoring systems and confirming progress on its commitment to retire 200 wells this year.
Despite operational challenges, production figures show improvement, with average output reaching 829 million cubic feet equivalent of gas daily in the third quarter, up from 804 million year-on-year. However, realised prices have declined to $3.23 per thousand cubic feet equivalent, down from $3.46 in the previous year. The company’s shares closed at 980p in London, reflecting an 18 per cent decline since the year’s start.
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