Diversified Energy Company PLC Q2 FY2026 earnings call

This call centers on strategic decisions following the Camino acquisition, which enabled the launch of the company's first operated drilling program. Key highlights are below:

• Strategic Rationale for Operated Drilling
  • After completing the Camino acquisition, the company received multiple third-party offers to develop the acreage via its traditional non-operated joint venture model, and management evaluated all available options
  • The acquired Camino acreage has a 90% working interest, a highly concentrated, consolidated position that reduces pre-development work and creates long-term optionality
  • Existing well data from Camino's prior drilling gives management clear visibility into expected project returns, reducing uncertainty
  • Operating the program internally gives management full control over the pace of capital spending, which is a key strategic benefit
• Core Production Strategy
  • The company's core goal is to offset its base production decline rate of 9-10% with new drilling activity, rather than pursuing aggressive, high-growth expansion
  • The company maintains a large existing foundational production base that already has a lower natural decline rate, creating structural stability relative to peers that rely heavily on continuous new drilling

No segment-level financial performance data, including absolute revenue figures or revenue contribution percentages, was disclosed in the provided transcript.

• Capital expenditure: Management set a total annual capital run rate guidance of 250 million to 300 million yen, which covers both operated drilling activities and maintenance capital for the company's proved developed producing (PDP) portfolio, and is sized to offset base production decline. If the company maintains its current one-rig operated program over the next one to two years, this capital level will hold as the sustained run rate, and the program pace is a flexible management decision. • Non-operated drilling with partners Newborn, Continental, and a private operator planned for the second half of 2026: Most production from these projects is expected to come online in 2027, and the company will only participate if projects meet its required return thresholds, based on strong existing results in the BMW play and Northwest Shelf.

• Commodity price risk: The company's drilling program pace is tied to oil and gas price movements; low prices could lead management to pause or scale back the program, while high prices could support expansion. No explicit break-even price was provided, but initial planning uses a conservative 65 USD flat price deck to ensure returns meet requirements. • Base production decline: The company faces a natural 9-10% annual base production decline that must be offset by new drilling activity. • Accelerated overall decline risk: Adding new wells could theoretically increase the overall corporate decline rate, though management does not expect this impact to be material.

Q: After the Camino acquisition, did the company receive third-party offers to develop the acreage via its traditional non-operated model, and why did management choose to launch an operated program instead? / A: Management did receive multiple inbound offers for non-operated development, and evaluated all available options. The 90% working interest and existing well data from Camino's prior drilling gave clear return visibility, and operating internally lets management control capital spending pace, making the operated program the preferred strategic choice.

Q: Is the 250 million to 300 million annual CapEx run rate a maintenance level sufficient to keep production flat by offsetting decline? / A: The 250 million to 300 million range covers all capital for operated activity and maintenance CapEx for the PDP portfolio, and is sized to offset base production decline. If the company maintains the current one-rig program over the next one to two years, this will remain the steady run rate, as program pace is a flexible management decision.

Q: Can management share expectations for the 2026 non-operated programs with Newborn, Continental, and the private operator? / A: No specific production or activity guidance has been set, as all projects compete for internal capital and must meet required return thresholds. Most production from these projects, which are scheduled to start in the second half of 2026, will come online in 2027, and the company is participating based on strong historical results in the target plays.

Q: How will the corporate base decline rate change as the company adds new wells from operated and non-operated programs? / A: Management does not expect material increases to the overall corporate decline rate. New high-decline new wells will be blended with the large existing base of mature wells that already have lower natural decline rates, so the overall impact will be marginal. The company's stable mature base is a structural advantage over peers that rely heavily on continuous new drilling.