How Diversified Energy blazed a trail for energy companies
Diversified Energy (DEC) is attempting new approaches to the production of natural gas by buying existing wells and updating them for improved production, rather than drilling new ones. The company recently began trading on the New York Stock Exchange in December, but has been trading on the London Stock Exchange since 2017.
Diversified Energy CEO and Co-Founder and CEO Rusty Hutson Jr. joins Yahoo Finance from the floor of the New York Stock Exchange to explain why the company's business model has a multitude of advantages versus its competition and their strategy for being dual listed on those exchanges.
Hutson explains: "Back at that point in time, the company was smaller, we accessed capital through the London Stock Exchange, through AIM. $50 million IPO. But really what it allowed us to do over the last seven years was access a pool of capital that wouldn't have been available to us because of the size of the company here in the US and so we were able to access capital that helped us to grow the company substantially over that period of time that now allowed us to dual list here on the New York Stock Exchange back in December."
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Editor's note: This article was written by Nicholas Jacobino.
Video Transcript
- Diversified Energy is attempting to pave the way for the future of natural gas companies by taking a unique approach to their production. Rather than drilling new wells, they buy existing ones and invest in them to improve production, reduce emissions. The company began trading on the New York Stock Exchange on the ticker DEC in December.
We're joined now by the co-founder and CEO Rusty Hutson Jr. Rusty, thank you so much for joining us today. And I thought, Rusty, we would start just with your business model because as I understand it, Rusty, it is a bit different. What you all specialize in, as I understand, Rusty, is really kind of moving to those relatively older, minimally productive wells. Is that accurate?
RUSTY HUTSON JR: Well, I would call it mature producing wells with low declines and long life tail left still on the production profile. But it's a different model. It's different than the traditional E&P models that are drilling and completing wells every day.
What we look to do is to acquire wells from those types of companies that are looking to drill more and reinvest capital into the drill bit. And we're buying the tail of those assets, enhancing production, doing it more efficiently, driving cash flows, and returning some of that cash back to our shareholders.
JULIE HYMAN: And, Rusty, you are there at the New York Stock Exchange obviously because you guys changed your listing, if I understand it correctly, or maybe now you're dual listed in New York and in the UK. Can you talk us behind the sort of process of doing that and the rationale behind it being listed in Britain in the first place and domiciled there, if I'm not mistaken, and then the listing here as well?
RUSTY HUTSON JR: Yeah, so we listed in the UK back in 2017. Back at that point in time, the company was smaller. We accessed capital through the London Stock Exchange through AIM, $50 million IPO.
But really, what it allowed us to do over the last seven years was access a pool of capital that wouldn't have been available to us because of the size of the company here in the US. And so we were able to access capital that helped us to grow the company substantially over that period of time that now allowed us to dual-list here on the New York Stock Exchange back in December.
- And, Rusty, while I have you, I got to ask you about these headlines, these reports. We saw, Rusty, that House Democrats from what I'm reading, they opened an inquiry into the company. And it sounded like, Rusty, the concern among some was just your, well, retirement and emissions practices at these more mature wells that you all focus on. What is the story there, Rusty?
RUSTY HUTSON JR: Yeah, we received the letter. We obviously have been reviewing it and crafting our response, which we take as an opportunity, really. I mean, we think that being able to respond and tell the story of what we do from an emissions reduction perspective on a daily basis and all the capital that we deploy to not only identify but to reduce and eliminate emissions within our portfolio-- we also have the largest asset retirement company in the Appalachian basin.
We're retiring more wells on an annual basis than anybody else, not only for ourselves, but for the states through their Orphaned Well programs that we bid on their work. So we have a great story. We'll respond in a way that we've responded in the past to these same types of questions. But we think it's a big opportunity to let our constituents and the people read and understand exactly what we do and why we're the right company at the right time to handle-- to manage these wells.
