Diversified Energy Company, a Birmingham-based acquirer and manager of natural gas and oil-focused assets, announced on Monday (Jan. 27) that it acquired a private Houston-based oil and gas company, Maverick Natural Resources, for $1.275 billion.
The firm acquired the Houston-based company from EIG Partners, a Washington, D.C.-based investment firm of which Maverick has been a portfolio company since 2015.
The acquisition further supports Diversified’s long-term strategy of entering deals focusing on undeveloped land in profitable basin areas through joint venture partnerships, enabling it to work on multiple developments concurrently.
“This acquisition expands our unique and highly focused energy production company with a complementary portfolio of attractive, high-quality assets,” Rusty Hutson, Jr., CEO of Diversified, said in a recent release.
Diversified is expected to pay out the nearly $1.3 billion acquisition figure by assuming $700 million of Maverick’s debt, issuing 21.2 million new shares worth $345 million and paying $207 million in cash. Additionally, a new $1.5 billion credit facility, including Diversified and Maverick’s RBL assets, will aid in financing the deal and refinancing Maverick’s RBL.
The initial transaction details also state that EIG will still own nearly 20 percent of the Maverick’s shares, including those held previously.
Furthermore, a break fee of $50 million may be given to Diversified in specific circumstances.
Diversified’s advisors on the agreement included Citi as its financial and transaction advisor and Truist and Stifel, who served as additional advisors.
The firm’s Pittsburgh-based Chief Legal and Risk Officer, Ben Sullivan, tapped Latham & Watkins’ London branch and Gibson, Dunn & Crutcher as its outside counsel on the deal.
The Gibson team included partner Tull Florey (Houston), partner Rahul Vashi (Houston), partner Hillary Holmes(Houston/Dallas), of counsel Justine Robinson (Houston), and associates Jonathan Sapp (Dallas), Graham Valenta(Houston), Joseph Kmetz (Houston), Caroline Bakewell (Houston), Mariana Lozano (Houston) and Malakeh Hijazi(Houston). Additionally, partner Michael Cannon (Dallas/Houston) and associates Josiah Bethards (Dallas) and Duncan Hamilton (Dallas) advised on taxes, and partner Krista Hanvey (Dallas) and associate John Curran (New York) advised on benefits.
For Maverick and EIG, Jefferies served as financial advisor to both, and Maverick’s Houston-based in-house counsel, Roy Mitchell, tapped Kirkland & Ellis as its outside counsel.
The Kirkland team included corporate lawyers Sean Wheeler (Houston/New York), Debbie Yee (Houston), Emily Lichtenheld (Austin), Chris Heasley (Austin/Houston), Lindsey Jaquillard (Houston), Stuart Boyd (London) and Alexandra David (Houston). Additionally, debt finance lawyers Mary Kogut (Houston) and Brittany Taylor(Houston), capital markets lawyers Michael Rigdon (Houston) and Robbie Dillard (Houston), tax lawyers Mark Dundon(Houston) and Rebecca Leigh Fine (Dallas), and executive compensation lawyers Robert Fowler (Houston) and Rebekah Kostelak (Houston) contributed to the deal.
Furthermore, KeyBanc served as the administrative agent, and KeyBanc Capital Markets served as the lead arranger on the debt financing for the entire deal.
Through the acquisition, the Houston-based firm will increase Diversified’s overall liquid production, generate long-term free cash flow and enable the newly combined company to operate across five different operating regions.
The agreement will also enhance the Birmingham-based firm’s Western Anadarko position by leveraging active development in the Cherokee Play while offering a new asset base in Permian with additional zones in the Northern Delaware Basin.
Following the transaction’s closing, Diversified CEO Rusty Hutson, Jr. will run the company, and the newly combined company’s value will be approximately $3.8 billion, with a production base of about 1,200 MMcfe/d.