Diversified Energy has agreed to acquire Permian Basin producer Birch Permian Holdings and affiliated companies for approximately $1.8 billion, marking the largest acquisition in Diversified’s 25-year history.
The deal will add approximately 68,000 barrels of oil equivalent per day of net production, based on Birch’s estimated July 2026 output. Diversified said the transaction is expected to increase its production by roughly 35% and adjusted EBITDA by about 55%.
Birch’s production is approximately 38% oil, 32% natural gas liquids, and 30% natural gas. The company has around 46,000 net mineral acres in the Permian and 480 net wells, with roughly 96% of production operated. About three-quarters of the wells date from 2022 or earlier.
The acquisition represents a significant expansion of Diversified’s Permian operations and fits its strategy of acquiring mature, producing oil and gas properties rather than relying primarily on new drilling for growth.
Birch is expected to contribute approximately $548 million in annualized adjusted EBITDA, according to Diversified’s estimates based on August 17 strip pricing, including general and administrative expenses and hedges. The company puts the acquisition multiple at approximately 3.3 times adjusted EBITDA.
The assets also include gathering, processing and water infrastructure. Birch operates 12 primary central production facilities and nine well gathering facilities, along with more than 60 miles of gathering pipelines. Diversified said Birch also has more than 150 permitted enhanced oil recovery locations, potentially providing another way to extend production from the acquired properties.
The transaction comes as Diversified positions itself to consolidate producing assets in the Permian as portions of the basin’s enormous inventory mature. The strategy mirrors the company’s established model of acquiring proved developed producing, or PDP, properties and attempting to maximize cash generation from existing wells.
Diversified plans to finance most of the purchase through approximately $1.5 billion of asset-backed securitization financing structured through Carlyle, supplemented by other financing sources including liquidity under its revolving credit facility.
The companies are also substantially expanding their broader financing partnership. Diversified and Carlyle have agreed to pursue as much as $10 billion of potential PDP acquisition opportunities over time, up from their previous $2 billion framework. Individual transactions remain subject to mutual agreement and their own approvals, meaning the $10 billion figure represents potential acquisition capacity rather than committed spending.
If completed, the Birch transaction would give Diversified approximately 2.5 Bcfe per day of gross volumes under its operated control, with around 1.6 Bcfe per day net.
The acquisition is expected to close in the fourth quarter of 2026, subject to regulatory approvals and other customary closing conditions. The agreement includes a $50 million break fee.
By Charles Kennedy for Oilprice.com
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