Greetings. Welcome to Diversified Energy's First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Douglas Kris, Senior Vice President, Investor Relations and Corporate Communications. Thank you. You may begin.

Good morning. And thank you all for joining us today. And welcome to our first quarter 2025 results conference call. With me today are Diversified's Founder and CEO, Rusty Hutson; and President and CFO, Brad Gray. Before we get started, I will remind everyone that the remarks on this call reflect the financial and operational outlook as of today, May 12, 2025. These outlooks entail assumptions and expectations that involve risks and uncertainties. A discussion of these risks can be found in our regulatory filings. During this call, we also reference certain non-GAAP and non-IFRS financial measures. Our disclosures regarding those items are found in our earnings materials, on our Web site and in our regulatory filings. Additionally, as noted in the first quarter 2025 results announcement issued this morning, all financial and operational metrics and our underlying results represent only two weeks of contribution from our recently closed Maverick Natural Resources acquisition. I will now turn the call over to Rusty.

Thank you, Doug. And thank you all for joining the call today. Before I start my prepared remarks, I want to highlight and emphasize that we have significantly transformed and strengthened our company since the start of the year. I appreciate the tremendous efforts of our employees to deliver outstanding results and live by our culture of getting stuff done to help us be [indiscernible] every day. This team has positioned Diversified for an exciting future. I'm confident that our presentation will reinforce my excitement. Additionally, while we recognize the current uncertainty, increased volatility and sharp market sell offs related to tariffs and other factors, we also believe it is essential to address why these items do not affect Diversified's fundamental business. Here are a couple of important, unique and differentiated factors of the Diversified business model. We are predominantly a natural gas focused company with the commodity seeming to have a positive macro outlook and tailwind. We are the only publicly traded PDP champion with a focus on the management of mature producing assets. We are a high cash margin business with a large protective hedge book paying a fixed rate dividend and maintaining an active share repurchase program. We have built vertical integration and economies of scale to help insulate against inflation. We have built near adjacent businesses in coal mine methane and well retirement. We are financially sound with approximately $450 million in liquidity. Our model is to use low cost capital to acquire and take advantage of an often overlooked segment of the oil and gas sector that is historically highly cash generative. Bottom line, the magnitude of any tariffs direct or indirect impact on our bottom line financial health is extremely limited. While it's sometimes a challenging environment to operate in, we know that if…

Thank you, Rusty. Let me share the highlights of our financial and operational results for the first quarter. We'll start with production. The average daily production exit rate for March was approximately 1.149 million cubic feet equivalent per day and our quarterly production averaged over 860 million cubic feet equivalent per day. Over 50% of our produced volumes were generated in our central region. The growth in our production base has put the company in a fantastic position to participate in both LNG exports and data center needs while continuing to supply energy to our local communities and commercial customers. Our total revenue was approximately $295 million and adjusted EBITDA was $138 million, which represents an approximate 47% adjusted EBITDA margin, which was relatively flat quarter-over-quarter despite dramatic decline in oil prices. Notably, as we continue our integration process and improve the combined company cost structure, coupled with a recovery in liquids pricing, we anticipate margin expansion to grow above our historic 50% level. This quarter's free cash flow was $62 million, delivering an approximate 45% free cash flow conversion rate. Our net debt stood at approximately $2.56 billion. And as part of the Maverick transaction, the company's RBL capacity increased to $900 million. And today, we have the largest but most importantly, we have the strongest balance sheet we have had. With a net leverage reduction quarter-over-quarter and over $450 million in liquidity, our balance sheet strength is giving us the financial optionality and the financial flexibility to navigate and potentially take advantage of volatile markets as well as commodity price cycles. Our investment grade rated and stable longer term ABS structures help contribute to our financial resilience. In summary, the strong execution of our strategy from all of our teams during the year delivered our positive results, enabling…

Thanks, Brad. Let me provide a couple of thoughts on our now combined company outlook and how we believe the combined company will look in the coming year before we take questions. On Slide 9, we continue to maintain momentum into the second quarter with the Maverick integration progressing in a way that we believe will exceed our targeted run rate synergies of $50 million. Importantly, with our targeted production of over 1 Bcf per day and more than doubling the free cash flow compared to Diversified on a standalone basis to over $420 million, the company is positioned on a path that creates a unique and compelling investment opportunity. Turning to Slide 10. As we continue to emphasize, we are a differentiated energy producer that seeks to optimize existing long life and often overlooked and undervalued US energy assets. We seek to drive shareholder returns in a unique way by minimizing traditional E&P risk, optimizing our low decline production and by being good stewards of our capital while driving meaningful and consistent cash flow. Our results reflect our continued focus on building a strategic resilient energy producer. We believe we are the champion of the PDP subsector within the upstream E&P space. We are the one and only publicly traded company executing this strategy, offering investors a vehicle to invest in a similar fashion to the private equity PDP roll up strategy. Importantly, compared to those private entities, Diversified offers unique value creation attributes, which provide us with a competitive advantage. With our large operational scale, vertical integration and corporate infrastructure that leverages a leading technology platform, we have a proven process of integration that allows us to streamline and capture meaningful synergies. We have executed that playbook 27 times over the past seven years and we are well…

[Operator Instructions] Our first question is from Tim Rezvan with KeyBanc Capital Markets.

First one I had today, it makes sense with Maverick having just recently closed that you would leave the 2025 outlook unchanged. Obviously, gas tailwinds are at your back. But I was curious on the Permian joint development opportunity, which is sort of the biggest component of your CapEx comes from Maverick. Can you talk about how set in stone that program is? I know WTI 63 today but it's been weak. Just kind of curious on how you're thinking about that CapEx should we see oil kind of retrench back into the 50s?

I think maybe just for clarification purposes, the largest JV opportunity we have is in the Cherokee and Oklahoma. We do have some smaller JV opportunities running right now in the Permian. But right now, most of the CapEx that we've committed to has been in the Permian -- or in the Cherokee in Oklahoma. That said, a lot of that production there is really one third, one third, one third. And what I mean by that is one third oil, one third NGLs and then one third natural gas. So the overall -- even with the downturn in oil prices that really hasn't been impacted significantly as a one that was pure oil in the Permian. So we continue to monitor it with our operator, with our partner. But as of right now, I would say that it's primarily on course for what we originally anticipated. Obviously, if gas and oil both go down throughout the year, we'd have to take a look at that. But right now, I think it's business as usual on that program.

But and then your Permian activity, you feel pretty good about 2025?

I mean, it's minimal compared to what we have going on in Oklahoma, to be honest. And so we're going through a full assessment of all of our acreage in the Permian right now, acre by acre, to see where our best value is to be obtained for that acreage, whether that'd be JV-ing it with someone to drill it, whether it's something that we don't think will be on our radar, therefore, we should monetize. But for the most part, even -- we have very little capital for this year for the Permian allocated but what we do have is still on tap for the rest of the year.

And then as my follow-up, I thought Brad's comments were interesting. It kind of seems like you all are -- even though you just closed Maverick, you're on your front foot for potential incremental M&A. I think you said that you're ready to take advantage of things and you highlighted the strengthening balance sheet. So if you could just -- can you talk about your inclination to do M&A if an opportunity arises, do you feel like despite integration, you're ready to transact if something comes up?

Tim, I think that's a great question about talking about the integration. Really the integration, even for the little bit of time a little over a month now that we've been working on it, we've identified, as I've said in my comments, synergies above and beyond what we originally anticipated when we announced and closed the deal. So we feel like that's going -- that's on course to happen throughout the rest of the year. The integration has gone very smoothly. For two large companies, this has been a very clean, very cooperative integration so far. And so we've had very little and minimal impacts. We're moving forward with all the stuff that we knew we needed to do. So integration is going well. And so the key to -- I say this pretty much every time we talk, but we can't choose when things become available. And so we're always monitoring, we're always looking, we're always seeing -- we have a list of things that we feel like are the best things we could do if they ever became available and we always want to be ready when that happens. The good news is we're sitting here, we have the ability to do something. Doesn't mean we will. But we could sit here for the next month after month after month and just operate and get our synergies and do what we're doing, and we will be -- do very well. But we're also always on the lookout for the things that are going to add significant shareholder value into the future. And so what we're doing is we've got the balance sheet in a very good place, we've got significant liquidity and we'll sit here and we'll free cash flow the business like we have through the first quarter and we'll have our options in front of us and we'll take advantage of the ones that we believe will add the most shareholder value. And so that's kind of where we are at this point.

[Operator Instructions] Our next question is from Sam Wahab with Peel Hunt.

It's really a follow-up to Tim's question around the JV activity in Oklahoma in particular. It's more around sort of the timing of that, what the activity looks like and what success would look like following that CapEx spend?

I think, it's just like I said, the original schedule that we had with our partner has had just minor tweaks here and there. And honestly, we don't see any kind of change from what we anticipated when we announced the deal back in March. So complete -- look, these drilling programs, you set a schedule and there's some adjustments here and there, because completions don't happen on time or whatever but ours -- right now, we look great. And from our perspective, there's no reason to make any great adjustments, because we -- obviously, we have a different revenue stream on these wells than we would say in the pure Permian, which would be mostly oil. So these have a little more gas to them in NGLs and the overall returns look great. The IRRs are still high and definitely above our low end and where we would anticipate for us to not participate would be we're way above that. So I don't think there's any reason to make any adjustments at this point. We're going to just hang in there with our operator and our partner and stay on schedule, the wells look great.

And I would just quickly add, Sam, that it's important to have a quality partner, and we do, that we've got a lot of confidence in. So we'll maintain good dialog and good visibility there as to what's going on as Rusty indicated. And we're confident that we'll both be able to make good quality business decisions.

And then just very briefly on the coal mine methane outlook and obviously, with the Summit acquisition, there was increased potential there. Has anything you've seen since that's been integrated that has changed your view or probably increased your outlook on that particular revenue stream?

We were able to achieve some additional cash flow in the first quarter as a result of closing that Summit acquisition. We're confident that that increased activity will continue throughout the rest of the year. So no changes from that standpoint. We like our acreage position where we are generating these credits. And we believe there's opportunity to continue to grow that revenue stream.

I think we also made the comment that maybe it was back at the year end numbers that we felt that this could be increased up to 300% from 2024 levels by the time 2026 and we're well on our way to do that.

Our next question is from Paul Diamond with Citibank.

I just wanted to quickly touch on the kind of M&A landscape, a bit deeper than we talked about already. Given the current disconnect markets, call it uncertainty, are you seeing more opportunities on the oil side or nat gas side and things, the bid ask widening out? I guess, how are those conversations going, how should we think about like near term opportunities given current dislocations?

As you can imagine, the oil plays or the oil companies aren't really that psyched up about trying to sell in the market where it's at. So I think there definitely has been some freezing up, I would say, on the oil side as people try to get -- try to figure out kind of where it's going. And I mean, one day you're down to 55, next day you're back up to 62, 63, which as we know volatility makes anything hard to price and to value. And so I think you're kind of in a place where you were with natural gas a couple of years ago when everybody just kind of sits, because there's dislocation in terms of value just based on the volatility. On the natural gas side, it's a little more vibrant, I would say, and you're seeing a lot more activity there in terms of just -- prices have been more stable and have held up a little better. And so I think you could see some of those kind of transactions, not necessarily just from us, but in general. I think there's some out there that may transact over the next several months and/or several weeks. And so I think natural gas seems to be the place where there's more -- probably more activity right now. The other thing for us, one thing we've been really focused on too is we believe there's still way too many small cap oil and gas companies and oil and gas stocks and we believe there's value there that can be created through G&A reductions over time. And so that's another area where we're focused on and just watching. And I think that those values will be tough to come back even with the market coming -- having an uptick here, I think those will be harder to come back from. And so we believe there could be some value to be had in that small cap stock universe as time goes by also.

[Operator Instructions] Our next question is from Simon Scholes with First Berlin.

I've just got one. Just looking at lease operating expense, unit lease operating expense in the first quarter, I mean, it's quite a way above what you had last year. I was just wondering if you could give us an indication of where you expect unit lease operating expense to be over the next couple of quarters?

I'll let Brad add some additional color here. But you're going to -- for us, we've just added an acquisition that has a much higher liquids value than we've had in the past. If you go back to last year's first quarter, it would have been 85% nat gas. This year, it's 70% exit rate nat gas and 30% oil and NGLs. With that comes a little higher operating expense on the liquids side but you also get a bigger uplift on the revenue side. Therefore, margins should continue to be pretty strong in terms of where they were even as of last year. I mean, Brad, do you want to add anything to that?

Couple of points. As Rusty indicated, definitely the liquids weighting is going to impact. So we'll -- as the year progresses, you'll start to see more consistency in our lease operating expenses as we roll these in. We just had two weeks of Maverick here but -- and we will also be achieving the synergies, which as Rusty has indicated a couple of times, we're well on our way to do that and very excited about that. The other thing I would just quickly say, there were some pretty severe weather events that occurred early in January and February that did impact some levels of production that may have or they did provide a little bit higher operating expense on a per unit basis. All those production volumes have come back in line with our plans and thoughts. And so there was just a little bit of impact there in the quarter from those pretty severe events. But we -- as I said in my comments, we've got a high level of confidence that the return back to our historic levels of 50% plus margins is well within our grasp.

With no further questions in the queue, I would like to turn the floor back over to Rusty Hutson for closing remarks.

Thank you all for joining today. Again, we're very excited about the first quarter, and looking forward to continuing our success in our operations throughout the year. And thank you all for joining and we'll talk soon. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.