Diversified Energy Agrees to Buy Birch Permian From Elliott Affiliates for About $1.8 Billion

by Maya Okafor · September 3, 2026

Deals & Listings Reporter, The SmallCap Signal

Diversified Energy Company, the dual-listed producer known for buying long-lived, low-decline wells rather than drilling new ones, has agreed to acquire Birch Permian Holdings for approximately $1.8 billion, according to the company's Sept. 2 announcement. The seller is a group of affiliates of Elliott Investment Management.

“This $1.8 billion acquisition is our largest in the Company’s 25-year history,” chairman and chief executive Rusty Hutson Jr. said in the announcement. Diversified trades on both the New York Stock Exchange and the London Stock Exchange under the ticker DEC.

The company expects the transaction to close in the fourth quarter of 2026, subject to customary regulatory approvals. The agreement is signed but not yet closed, so the assets remain Birch’s for now. A $50 million break fee applies if the agreement is terminated under specified circumstances, the release said.

What Diversified would be buying

Birch's package is a producing Permian Basin position rather than an undeveloped land bank. According to the announcement, it carries current net production of roughly 68 thousand barrels of oil equivalent per day, which Diversified converts to about 409 million cubic feet equivalent per day. The stream is about 38% oil, 32% natural gas liquids and 30% natural gas.

The footprint spans roughly 46,000 net mineral acres and 480 net total wells, with 12 primary central production facilities and nine well gathering facilities attached. Proved reserves are put at about 1,168 billion cubic feet equivalent with a PV-10 value of roughly $2.0 billion, a standardized measure that discounts pre-tax future net cash flows at 10% and is not the same thing as market value.

Diversified estimates the assets generate about $548 million in annualized adjusted EBITDA, a non-GAAP figure, at roughly 80% margins. On a pro forma basis the company says production would rise about 35% and adjusted EBITDA about 55%, taking volumes to approximately 2.5 billion cubic feet equivalent per day gross, or about 1.6 billion cubic feet equivalent per day net.

The financing, and why it matters

The structure is the most consequential detail for existing holders. Diversified plans to fund the purchase primarily through an approximately $1.5 billion asset-backed securitization arranged with Carlyle, supported by the acquired proved-developed-producing assets, with the balance drawn from existing credit facility liquidity. The Sept. 2 release does not disclose an issuance of new common shares to pay for the assets.

That is a debt-heavy path by design. Diversified has built its model on securitizing predictable cash flows from mature wells, and the two companies said they are expanding their existing arrangement to pursue up to $10 billion of future producing-asset acquisitions, up from a $2 billion framework. The scale of that ambition is a change in kind, not just degree.

It also raises the balance-sheet question plainly. In its second-quarter release filed with the SEC, Diversified reported a leverage ratio of 2.45 times as of June 30, 2026, with $678 million of credit facility availability and unrestricted cash, and said it had reduced ABS principal by $233 million in the first half of the year. Layering roughly $1.5 billion of new securitized debt onto that base is a meaningful step up in obligations, and the interest cost of the ABS was not detailed in Wednesday’s announcement.

Recent operating base

For the second quarter of 2026, Diversified reported GAAP net income of $248 million and adjusted EBITDA of $240 million, a non-GAAP measure, on total commodity revenue of $504 million. Average production was 1,253 million cubic feet equivalent per day, with a mix skewed roughly 71% to natural gas.

Operating cash flow was $89 million in the quarter and adjusted free cash flow, another non-GAAP measure, was $115 million. The company said it had returned about $136 million to shareholders year to date, including $93 million of buybacks, and guided to full-year 2026 adjusted EBITDA of $960 million to $1,010 million on production of 1,180 to 1,210 million cubic feet equivalent per day.

Set against that guidance, Birch's estimated $548 million of annualized adjusted EBITDA is the arithmetic behind the 55% claim. It also shifts the commodity mix materially toward oil and NGLs for a company whose current production is predominantly gas, which changes the hedging and price-exposure profile investors have been underwriting.

A busy stretch for deal flow

Diversified’s announcement landed inside an unusually dense stretch of mid-market M&A. RTTNews recorded Vertiv agreeing on Sept. 2 to acquire UtilityInnovation Group for $1.45 billion plus earnouts and Halma acquiring Pyxis for $170 million the same day, followed before the open on Sept. 3 by CDW agreeing to buy data and artificial intelligence services firm Lovelytics for approximately $525 million.

In healthcare services, Fortrea said on Sept. 2 it will acquire the clinical pharmacology unit and bioanalytical laboratory operations of Worldwide Clinical Trials in an all-cash transaction valued at approximately $45 million, adding a 60,000-square-foot bioanalytical laboratory in Austin, Texas and a 200-bed clinical pharmacology unit in San Antonio. That deal is contingent on regulatory and licensing approvals and on the parties entering into certain services agreements, and the release gave no projected closing date. For Diversified specifically, the fourth-quarter target leaves a full quarter of regulatory and financing execution ahead, and the securitization’s final terms have yet to be disclosed.