DEC Diversified Energy Company Plc

February 20, 2025

Diversified Energy Company plc

("Diversified" or the "Company")

Publication of Prospectus and Circular and Acquisition Update

Diversified Energy Company PLC (LSE: DEC; NYSE: DEC) ("Diversified" or the "Company"), is pleased to confirm that further to its announcement earlier today, the Financial Conduct Authority (the "FCA") has approved the prospectus dated 20 February 2025 (the "Prospectus") and the Prospectus has been published by the Company on its website at https://ir.div.energy/. The Prospectus relates to, among other things, the admission of the Company's ordinary shares of £0.20 each allotted and issued pursuant to the capital raise announced earlier today ("Shares") to the equity shares (commercial companies) category of the Official List of the FCA and to trading on the main market of the London Stock Exchange plc ("Admission"). It is expected that Admission will become effective at 8.00 am (London time) on 24 February 2025. The Shares will also be listed, and commence trading, on the New York Stock Exchange on 21 February 2025.

In addition, further to its announcement on 27 January 2025 in connection with the proposed acquisition of Maverick Natural Resources, LLC (the "Acquisition"), the Company has posted a circular and notice of general meeting and related documents (the "Circular") to shareholders convening the general meeting ("General Meeting"). The General Meeting will be held at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD, United Kingdom on 10 March 2025 at 1 p.m. (London time) / 9 a.m. (New York time). A copy of the Circular is also available on the Company's website: https://ir.div.energy/.

A copy of the Prospectus and the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Acquisition Update

As announced on 27 January 2025, the Acquisition, because of its size in relation to Diversified, constitutes a "significant transaction" for the purposes of the Listing Rules, and is therefore notifiable in accordance with UKLR 7.3.1R and 7.3.2R. Additional details in relation to the Acquisition, as required under UKLR Annex 2 Part 3 are as set in Appendix I below.

Capitalized terms used but not otherwise defined in this announcement have the same meaning given to them in the Prospectus.

CONTACTS

About Diversified

Diversified is a leading publicly traded energy company focused on natural gas and liquids production, transport, marketing, and well retirement. Through our unique differentiated strategy, we acquire existing, long-life assets and invest in them to improve environmental and operational performance until retiring those assets in a safe and environmentally secure manner. Recognized by ratings agencies and organizations for our sustainability leadership, this solutions-oriented, stewardship approach makes Diversified the Right Company at the Right Time to responsibly produce energy, deliver reliable free cash flow, and generate shareholder value.

Forward-Looking Statements

This press release includes forward-looking statements. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "targets", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "projects", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of management or the Company concerning, among other things, expectations regarding the completion of the proposed securities offering. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company's control and all of which are based on management's current beliefs and expectations about future events, including market conditions, failure of customary closing conditions and the risk factors and other matters set forth in the Company's filings with the SEC and other important factors that could cause actual results to differ materially from those projected.

Appendix I

1.             Litigation

The Group

There are no, and have not been, any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) which may have, or have had during the 12 months preceding the date of this document, a significant effect on the Company's or the Group's financial position or profitability.

The Maverick Group

There are no, and have not been, any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Maverick is aware) which may have, or have had during the 12 months preceding the date of this document, a significant effect on Maverick's or the Maverick Group's financial position or profitability.

2.             No significant change

The Group

Save as set out below, there has been no significant change in the financial position or performance of the Group since 30 June 2024, being the end of the last financial period for which financial information of the Group has been published:

(i)     on 15 August 2024, the Company completed the acquisition of the Crescent Pass Assets, as described in further detail in section 3.1(f) (Crescent Pass purchase and sale agreement) below;

(ii)        on 30 October 2024, the Company completed acquisition of the East Texas Assets, as described in further detail in section 3.1(e) (East Texas Assets purchase and sale agreement) below;

(iii)       during July and August 2024, the Company purchased 561,629 ordinary shares in the capital of the Company.

The Maverick Group

Save as set out below, there has been no significant change in the financial position or performance of the Maverick Group since 30 September 2024, being the end of the last financial period for which financial information of the Maverick Group has been published:

(i)          on 30 October 2024, Maverick completed the sale of the East Texas Assets, as described in further detail in section 3.1(e) (East Texas Assets purchase and sale agreement) below.

3.             Material Contracts

The Group

3.1          The following is a summary of those material contracts, not being contracts entered into in the ordinary course of business, which have been entered into by the Company or any member of the Group within the two years immediately preceding the date of this document and of those other contracts, not being contracts entered into in the ordinary course of business by any member of the Group, that contain provisions under which the Company and/or any member of the Group has an obligation or entitlement which is or may be material to the Group as at the date of this document:

(a)           Registration Rights Agreement

At Completion, the Company will enter into a registration rights agreement with Maverick unitholders receiving at least 1% of the Ordinary Shares outstanding as at Completion pursuant to which the Company will agree to, on the terms set forth therein, file with the U.S. Securities and Exchange Commission a registration statement registering for resale of Ordinary Shares comprising the Consideration Shares. The registration rights agreement provides for a lockup of six months for 33% of the Consideration Shares, nine months for an additional 33% of the Consideration Shares, and one year for the remaining 34% of Consideration Shares.

(b)           Relationship Agreement

At Completion, the Company will enter into a relationship agreement with EIG pursuant to which, for so long as EIG (together with its affiliates) holds, in the aggregate (i) no fewer than 20% of the Ordinary Shares in the Company, EIG shall be entitled to nominate for appointment two non-executive directors to the Board, and (ii) fewer than 20% but no fewer than 10% of the Ordinary Shares in the Company, EIG shall be entitled to nominate for appointment one non-executive director to the Board. The Relationship Agreement will be governed by English law.

(c)           2025 Prospectus Sponsor Agreement

On 20 February 2025, the Company and Stifel entered into a sponsor agreement pursuant to which Stifel agreed to act as the Company's sponsor under the Listing Rules in connection with the New Shares Admission and publication of this document as required under the Listing Rules (the "Prospectus Sponsor Agreement"). The Sponsor Agreement provided for the payment of certain fees and expenses by the Company to Stifel as sponsor.

Under the terms of the Sponsor Agreement, the Company agreed to provide certain customary warranties, representations and undertakings in favor of Stifel as sponsor in relation to, amongst other things, the accuracy of information in this document and other matters relating to the Group and the acquisition. The Company has also agreed to indemnify the Stifel as sponsor and its affiliates against, among other things, claims made against them or losses incurred by them in connection with the acquisition, subject to certain exceptions.

The Sponsor Agreement is governed by English law.

(d)           Underwriting Agreement

On 19 February 2025, the Company entered into an underwriting agreement (the "Underwriting Agreement") with Citigroup Global Markets Inc. and Mizuho Securities USA LLC, acting as the representative for the underwriters in the Capital Raise (the "Underwriters"). Subject to the terms and conditions stated in the Underwriting Agreement, each Underwriter severally agreed to purchase, and the Company agreed to sell to that Underwriter, 8,500,000 Ordinary Shares (and up to an additional 850,000 ordinary shares pursuant to an over-allotment option). The Underwriting Agreement provided that the obligations of the Underwriters to subscribe for the Ordinary Shares were subject to approval of legal matters by counsel and to other conditions.

The Company has also granted to the Underwriters an option, exercisable for 30 days from the date of the Underwriting Agreement to subscribe for up to 850,000 new Ordinary Shares, at $14.50 per Ordinary Share, being the price at which the Equity Raise Shares were issued and allotted in the Equity Raise. To the extent the option is exercised, each Underwriter is required to subscribe for a number of additional Ordinary Shares approximately proportionate to that Underwriter's initial purchase commitment.

The Underwriting Agreement is governed by New York law.

(e)           East Texas Assets purchase and sale agreement

On 19 August 2024, the Company executed a conditional purchase and sale agreement (the "East Texas Assets PSA") in connection with the acquisition of operated natural gas properties located within eastern Texas (the "East Texas Assets") from Maverick, which was completed on 30 October 2024. The total gross purchase for this acquisition payable by the Group was $69 million before customary purchase price adjustments and the net consideration for the East Texas Assets consisted of a combination of the allotment and issue of 2,342,445 Ordinary Shares and cash consideration of $41 million.

The East Texas Assets PSA is governed by the laws of the state of Texas, United States.

(f)            Crescent Pass purchase and sale agreement

On 9 July 2024, the Company executed a conditional purchase and sale agreement (the "Crescent Pass PSA") in connection with the acquisition of high-working interest, operated natural gas properties and related facilities located within eastern Texas (the "Crescent Pass Assets") from Crescent Pass Energy ("Crescent Pass"), which was completed on 15 August 2024. The gross consideration for this acquisition amounted to $101 million and after customary purchase price adjustments. The net consideration for the acquisition of the Crescent Pass Assets comprised the issue of 2,249,650 new Ordinary Shares to Crescent Pass (subject to a customary commercial lock-up agreement), and cash consideration of $71 million.

The Crescent Pass PSA is governed by the laws of the state of Texas, United States.

(g)           Oaktree membership interest purchase agreement

On 18 March, 2024 the Company's subsidiaries, Diversified Production LLC and Diversified Gas & Oil Corporation entered into a membership interest purchase agreement (the "Oaktree MIPA") with OCM Denali INT Holdings PT, LLC, a subsidiary of Oaktree Capital Management, L.P. to acquire 100% of the limited liability company interests in OCM Denali Holdings, LLC the limited liability company interests, the ("Oaktree Assets") from Seller, which was completed on 7 June 2024. The gross purchase price for this acquisition amounted to $410 million and after customary purchase price adjustments, the net purchase price was approximately $377 million.

The Oaktree MIPA is governed by the laws of Delaware, United States.

(h)           2024 Oaktree Acquisition Sponsor Agreement

On 9 May 2024, the Company and Stifel entered into a sponsor agreement pursuant to which Stifel agreed to act as the Company's sponsor under the Listing Rules in connection with the acquisition of the Oaktree Assets and the publication of the circular as required under the Listing Rules (the "Oaktree Acquisition Sponsor Agreement"). The Oaktree Acquisition Sponsor Agreement also provided for the payment of certain fees and expenses by the Company to Stifel as sponsor.

Under the terms of the Oaktree Acquisition Sponsor Agreement, the Company agreed to provide certain customary warranties, representations and undertakings in favor of Stifel as sponsor in relation to, amongst other things, the accuracy of information in this document and other matters relating to the Group and the acquisition. The Company has also agreed to indemnify the Stifel as sponsor and its affiliates against, among other things, claims made against them or losses incurred by them in connection with the acquisition, subject to certain exceptions.

The Oaktree Acquisition Sponsor Agreement is governed by English law.

(i)            Undeveloped Oklahoma Acreage Assets asset sale agreement

On 12 July 2023, the Company executed an Asset Purchase Agreement (the "Oklahoma Acreage APA") in connection with the divestment by the Company of certain undeveloped acreage in Oklahoma (the "Undeveloped Oklahoma Acreage Assets"), within the Company's Central Region, to an undisclosed buyer, which was completed on 12 July 2023. The cash consideration for this divestment amounted to approximately $16 million.

The Oklahoma Acreage APA is governed by the laws of Oklahoma, United States.

(j)            Non-Operated Central Region Assets asset sale agreement

On 17 April 2023, the Company executed a Purchase and Sale Agreement (the "Central Region PSA") in connection with the divestment by the Company of certain non-operated wells in Oklahoma and Texas (the "Non-Operated Central Region Assets"), within the Company's Central Region, to an undisclosed buyer, which was completed on 27 June 2023. The cash consideration for this divestment amounted to approximately $40 million.

The Central Region PSA is governed by the laws of Texas, United States.

(k)           ABS I Notes

In November 2019, the Group formed Diversified ABS LLC ("ABS I"), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB- rated asset-backed securities for an aggregate principal amount of $200 million at par. The ABS I Notes are secured by certain of the Group's upstream producing Appalachian assets. Natural gas production associated with these assets was hedged at 85% at the close of the agreement with long-term derivative contracts.

Interest and principal payments on the ABS I Notes are payable on a monthly basis. During the years ended 31 December 2023, 2022 and 2021, the Group incurred $5.66 million, $7.11 million and $8.46 million of interest related to the ABS I Notes, respectively. The legal final maturity date is January 2037 with an amortizing maturity of December 2029. The ABS I Notes accrue interest at a stated 5% rate per annum. The fair value of the ABS I Notes was approximately $94.52 million as of December 31, 2023.

In the event that ABS I has cash flow in excess of the required payments, ABS I is required to pay between 50% to 100% of the excess cash flow, contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular, (a) with respect to any payment date prior to 1 March 2030, (i) if the debt service coverage ratio (the "DSCR") as of such payment date is greater than or equal to 1.25 to 1.00, then 25%, (ii) if the DSCR as of such payment date is less than 1.25 to 1.00 but greater than or equal to 1.15 to 1.00, then 50%, and (iii) if the DSCR as of such payment date is less than 1.15 to 1.00, the production tracking rate for ABS I is less than 80%, or the loan to value ratio is greater than 85%, then 100%, and (b) with respect to any payment date on or after 1 March 2030, 100%. During the year ended 31 December 2023, the Group paid $7.89 million in excess cash flow payments on the ABS I Notes.

(l)            ABS II Notes

In April 2020, the Group formed Diversified ABS Phase II LLC ("ABS II"), a limited-purpose, bankruptcy-remote, wholly owned subsidiary, to issue BBB- rated asset-backed securities in an aggregate principal amount of $200 million. The ABS II Notes were issued at a 2.775% discount. The Group used the proceeds of $183.62 million, net of discount, capital reserve requirement, and debt issuance costs, to pay down its Credit Facility. The ABS II Notes are secured by certain of the Group's upstream producing Appalachian assets. Natural gas production associated with these assets was hedged at 85% at the close of the agreement with long-term derivative contracts.

The ABS II Notes accrue interest at a stated 5.25% rate per annum and have a maturity date of July 2037 with an amortizing maturity of September 2028. Interest and principal payments on the ABS II Notes are payable on a monthly basis. During the years ended 31 December 2023, 2022 and 2021, the Group incurred $8.04 million, $9.29 million and $10.53 million in interest related to the ABS II Notes, respectively. The fair value of the ABS II Notes was approximately $119.52 million as of 31 December 2023.

In the event that ABS II has cash flow in excess of the required payments, ABS II is required to pay between 50% to 100% of the excess cash flow, contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular, (a) (i) if the DSCR as of any payment date is less than 1.15 to 1.00, then 100%, (ii) if the DSCR as of such payment date is greater than or equal to 1.15 to 1.00 and less than 1.25 to 1.00, then 50%, or (iii) if the DSCR as of such payment date is greater than or equal to 1.25 to 1.00, then 0%; (b) if the production tracking rate for ABS II is less than 80.0%, then 100%, else 0%; (c) if the loan-to-value ratio ("LTV") as of such payment date is greater than 65.0%, then 100%, else 0%; (d) with respect to any payment date after 1 July 2024 and prior to 1 July 2025, if LTV is greater than 40.0% and ABS II has executed hedging agreements for a minimum period of 30 months starting July 2026 covering production volumes of at least 85% but no more than 95% (the "Extended Hedging Condition"), then 50%, else 0%; (e) with respect to any payment date after 1 July 2025 and prior to 1 October 2025, if LTV is greater than 40.0% or ABS II has not satisfied the Extended Hedging Condition, then 50%, else 0%; and (f) with respect to any payment date after 1 October 2025, if LTV is greater than 40.0% or ABS II has not satisfied the Extended Hedging Condition, then 100%, else 0%. During the year ended 31 December 2023, the Group made no excess cash flow payments on the ABS II Notes.

(m)          ABS III Notes

In February 2022, the Group formed Diversified ABS III LLC ("ABS III"), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB rated asset-backed securities in an aggregate principal amount of $365 million at par. The ABS III Notes are secured by certain of the Group's upstream producing, as well as certain midstream, Appalachian assets.

The ABS III Notes accrue interest at a stated 4.875% rate per annum and have a final maturity date of April 2039 with an amortizing maturity of November 2030. Interest and principal payments on the ABS III Notes are payable on a monthly basis. During the years ended 31 December 2023 and 2022, the Group incurred $14.52 million and $15.33 million in interest related to the ABS III Notes, respectively. The fair value of the ABS III Notes was approximately $250.16 million as of 31 December 2023.

In the event that ABS III has cash flow in excess of the required payments, ABS III is required to pay between 50% to 100% of the excess cash flow, contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular, (a) (i) if the DSCR as of any payment date is greater than or equal to 1.25 to 1.00, then 0%, (ii) if the DSCR as of such payment date is less than 1.25 to 1.00 but greater than or equal to 1.15 to 1.00, then 50%, and (iii) if the DSCR as of such Payment Date is less than 1.15 to 1.00, then 100%; (b) if the production tracking rate for ABS III (as described in the ABS III Indenture) is less than 80%, then 100%, else 0%; and (c) if the LTV for ABS III is greater than 65%, then 100%, else 0%. During the year ended 31 December 2023, the Group made no excess cash flow payments on the ABS III Notes.

In connection with the issuance of the ABS III Notes, the Group retained an independent international provider of sustainability research and services to provide and maintain a "sustainability score" with respect to the Diversified PLC and to the extent such score is below a minimum threshold established at the time of issue of the ABS III Notes, the interest payable with respect to the subsequent interest accrual period will increase by five basis points. This score is not dependent on the Group meeting or exceeding any sustainability performance metrics but rather an overall assessment of the Group's corporate sustainability profile. Further, this score is not dependent on the use of proceeds of the ABS III Notes and there were no such restrictions on the use of proceeds other than pursuant to the terms of the Group's Credit Facility. The Group informs the ABS III note holders in monthly note holder statements as to any change in interest rate payable on the ABS III Notes as a result of the change in this sustainability score. As of 31 December 2023, the Group met or was in compliance with all sustainability-linked debt metrics.

In May 2024, the Group used proceeds from the ABS VIII Notes to repay the outstanding principal of the ABS III & ABS V Notes, thereby retiring the ABS III & ABS V Notes from the Group's outstanding debt and resulting in a loss on the early retirement of debt of $10.6 million. Diversified ABS III LLC & Diversified ABS V LLC were concurrently dissolved. The ABS VIII Notes are secured by the collateral previously securing the ABS III & V notes.

(n)           ABS IV Notes

In February 2022, the Group formed Diversified ABS Phase IV LLC ("ABS IV"), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB rated asset-backed securities in an aggregate principal amount of $160 million at par. The ABS IV Notes are secured by a portion of the upstream producing assets acquired in connection with the Blackbeard Acquisition.

The ABS IV Notes accrue interest at a stated 4.95% rate per annum and have a final maturity date of February 2037 with an amortizing maturity of September 2030. Interest and principal payments on the ABS IV Notes are payable on a monthly basis. During the year ended 31 December 2023 and 2022, the Group incurred $5.70 million and $6.24 million in interest related to the ABS IV Notes, respectively. The fair value of the ABS IV Notes was approximately $92.35 million as of 31 December 2023.

In the event that ABS IV has cash flow in excess of the required payments, ABS IV is required to pay between 50% and 100% of the excess cash flow, contingent on certain performance metrics, as additional principal, with the remaining excess cash flow, if any, remaining with the Group. In particular, (a) if the DSCR as of any payment date is greater than or equal to 1.25 to 1.00, then 0%, (ii) if the DSCR as of such payment date is less than 1.25 to 1.00 but greater than or equal to 1.15 to 1.00, then 50%, and (iii) if the DSCR as of such Payment Date is less than 1.15 to 1.00, then 100%; (b) if the production tracking rate for ABS IV is less than 80%, then 100%, else 0%; and (c) if the LTV for ABS IV is greater than 65%, then 100%, else 0%.

In addition, in connection with the issuance of the ABS IV Notes, the Group retained an independent international provider of sustainability research and services to provide and maintain a "sustainability score" with respect to the Diversified Energy Company PLC and to the extent such score is below a minimum threshold established at the time of issue of the ABS IV Notes, the interest payable with respect to the subsequent interest accrual period will increase by five basis points. This score is not dependent on the Group meeting or exceeding any sustainability performance metrics but rather an overall assessment of the Group's corporate sustainability profile. Further, this score is not dependent on the use of proceeds of the ABS IV Notes and there were no such restrictions on the use of proceeds other than pursuant to the terms of the Group's Credit Facility. The Group informs the ABS IV note holders in monthly note holder statements as to any change in interest rate payable on the ABS IV Notes as a result of the change in this sustainability score. As of 31 December 2023, the Group met or was in compliance with all sustainability-linked debt metrics. During the year ended 31 December 2023, the Group made no excess cash flow payments on the ABS IV Notes.

(o)           ABS V Notes

In May 2022, the Group formed Diversified ABS V LLC ("ABS V"), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB rated asset-backed securities in an aggregate principal amount of $445 million at par. The ABS V Notes are secured by a majority of the Group's remaining upstream assets in Appalachia that were not securitized by previous ABS transactions.

The ABS V Notes accrue interest at a stated 5.78% rate per annum and have a final maturity date of May 2039 with an amortizing maturity of December 2030. Interest and principal payments on the ABS V Notes are payable on a monthly basis. During the year ended 31 December 2023 and 2022, the Group incurred $19.33 million and $14.32 million in interest related to the ABS V Notes, respectively. The fair value of the ABS V Notes was approximately $274.06 million as of 31 December 2023.

Based on whether certain performance metrics are achieved, ABS V could be required to apply 50% to 100% of any excess cash flow to make additional principal payments. In particular, (a) (i) if the DSCR as of any payment date is greater than or equal to 1.25 to 1.00, then 0%, (ii) if the DSCR as of such payment date is less than 1.25 to 1.00 but greater than or equal to 1.15 to 1.00, then 50%, and (iii) if the DSCR as of such payment date is less than 1.15 to 1.00, then 100%; (b) if the production tracking rate for ABS V is less than 80%, then 100%, else 0%; and (c) if the LTV for ABS V is greater than 65%, then 100%, else 0%. During the year ended 31 December 2023, the Group made no excess cash flow payments on the ABS V Notes.

In addition, a "second party opinion provider" certified the terms of the ABS V Notes as being aligned with the framework for sustainability-linked bonds of the International Capital Markets Association ("ICMA"), applicable to bond instruments for which the financial and/or structural characteristics vary depending on whether predefined sustainability objectives, or SPTs, are achieved. The framework has five key components (1) the selection of key performance indicators ("KPIs"), (2) the calibration of SPTs, (3) variation of bond characteristics depending on whether the KPIs meet the SPTs, (4) regular reporting of the status of the KPIs and whether SPTs have been met and (5) independent verification of SPT performance by an external reviewer such as an auditor or environmental consultant. Unlike the ICMA's framework for green bonds, its framework for sustainability-linked bonds do not require a specific use of proceeds.

The ABS V Notes contain two SPTs. The Group must achieve, and have certified by 28 April 2027 (1) a reduction in Scope 1 and Scope 2 GHG emissions intensity to 2.85 MT CO2e/MMcfe, and/or (2) a reduction in Scope 1 methane emissions intensity to 1.12 MT CO2e/MMcfe. For each of these SPTs that the Group fails to meet, or fail to have certified by an external verifier that the Group has not met, by 28 April 2027, the interest rate payable with respect to the ABS V Notes will be increased by 25 basis points. In each case, an independent third-party assurance provider will be required to certify the Group's performance of the above SPTs by the applicable deadlines. As of 31 December 2023, the Group met or was in compliance with all sustainability-linked debt metrics.

In May 2024, the Group used proceeds from the ABS VIII Notes to repay the outstanding principal of the ABS III & ABS V Notes, thereby retiring the ABS III & ABS V Notes from the Group's outstanding debt and resulting in a loss on the early retirement of debt of $10.6 million. Diversified ABS III LLC & Diversified ABS V LLC were concurrently dissolved. The ABS VIII Notes are secured by the collateral previously securing the ABS III & V notes.

(p)           ABS VI Notes

In October 2022, the Group formed Diversified ABS Phase VI LLC ("ABS VI"), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue, jointly with Oaktree, BBB+ rated asset-backed securities in an aggregate principal amount of $460 million ($236 million to the Group, before fees, representative of its 51.25% ownership interest in the collateral assets). The ABS VI Notes were issued at a 2.63% discount and are secured primarily by the upstream assets that were jointly acquired with Oaktree in the 2021 Tapstone acquisition. The Group recorded it's proportionate share of the note in its Consolidated Statement of Financial Position. In June 2024, the Group assumed Oaktree's proportionate debt of $132.5 million associated with the ABS VI Notes as part of the Oaktree Acquisition.

The ABS VI Notes accrue interest at a stated 7.50% rate per annum and have a final maturity date of November 2039 with an amortizing maturity of October 2031. Interest and principal payments on the ABS VI Notes are payable on a monthly basis. During the year ended 31 December 2023 and 2022, the Group incurred $15.43 million and $3.30 million in interest related to the ABS VI Notes, respectively. The fair value of the ABS VI Notes was approximately $158.28 million as of 31 December 2023.

Based on whether certain performance metrics are achieved, ABS VI could be required to apply 50% to 100% of any excess cash flow to make additional principal payments. In particular, (a) (i) If the DSCR as of the applicable Payment Date is less than 1.15 to 1.00, then 100%, (ii) if the DSCR as of such Payment Date is greater than or equal to 1.15 to 1.00 and less than 1.25 to 1.00, then 50%, or (iii) if the DSCR as of such Payment Date is greater than or equal to 1.25 to 1.00, then 0%; (b) if the production tracking rate for ABS VI is less than 80%, then 100%, else 0%; and (c) if the LTV for ABS VI is greater than 75%, then 100%, else 0%. During the year ended 31 December 2023, the Group made no excess cash flow payments on the ABS VI Notes.

In addition, a "second party opinion provider" certified the terms of the ABS VI Notes as being aligned with the framework for sustainability-linked bonds of the ICMA, applicable to bond instruments for which the financial and/or structural characteristics vary depending on whether predefined sustainability objectives, or SPTs, are achieved. The framework has five key components (1) the selection of KPIs, (2) the calibration of SPTs, (3) variation of bond characteristics depending on whether the KPIs meet the SPTs, (4) regular reporting of the status of the KPIs and whether SPTs have been met and (5) independent verification of SPT performance by an external reviewer such as an auditor or environmental consultant. Unlike the ICMA's framework for green bonds, its framework for sustainability-linked bonds do not require a specific use of proceeds.

The ABS VI Notes contain two SPTs. The Group must achieve, and have certified by 28 May 2027 (1) a reduction in Scope 1 and Scope 2 GHG emissions intensity to 2.85 MT CO2e/MMcfe, and/or (2) a reduction in Scope 1 methane emissions intensity to 1.12 MT CO2e/MMcfe. For each of these SPTs that the Group fails to meet, or fail to have certified by an external verifier that it has met, by 28 May 2027, the interest rate payable with respect to the ABS VI Notes will be increased by 25 basis points. In each case, an independent third-party assurance provider will be required to certify the Group's performance of the above SPTs by the applicable deadlines. As of 31 December 2023, the Group met or was in compliance with all sustainability-linked debt metrics.

(q)           ABS VII Notes

In November 2023, the Group formed DP Lion Equity Holdco LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue Class A and Class B asset-backed securities (collectively "ABS VII") which are secured by certain upstream producing assets in Appalachia. The ABS VII Class A Notes are rated BBB+ and were issued for an aggregate principal amount of $142 million. The ABS VII Class B Notes are rated BB- and were issued for an aggregate principal amount of $20 million.

The ABS VII Class A Notes accrue interest at a stated 8.243% rate per annum and have a final maturity date of November 2043 with an amortizing maturity of February 2034. The ABS VII Class B Notes accrue interest at a stated 12.725% rate per annum and have a final maturity date of November 2043 with an amortizing maturity of August 2032. Interest and principal payments on the ABS VII Class A and Class B Notes are payable on a monthly basis.

In December 2023, the Group divested 80% of the equity ownership in DP Lion Equity Holdco LLC to outside investors, generating cash proceeds of $30,000. The Group evaluated the remaining 20% interest in DP Lion Equity Holdco LLC and determined that the governance structure is such that the Group does not have the ability to exercise control, joint control, or significant influence over the DP Lion Equity Holdco LLC entity. Accordingly, this entity is not consolidated within the Group's financial statements for the year ended 31 December 2023.

(r)            ABS VIII Notes

In May 2024, the Group formed Diversified ABS VIII LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue Class A-1 and Class A-2 asset-backed securities (collectively "ABS VIII"). The ABS VIII Class A-1 Notes are rated A and were issued for an aggregate principal amount of $400,000. The ABS VIII Class A-2 Notes are rated BBB+ and were issued for an aggregate principal amount of $210 million. The Group used the proceeds to repay the outstanding principal of the ABS III & ABS V Notes, thereby retiring the ABS III & ABS V Notes from the Group's outstanding debt. Diversified ABS III LLC & Diversified ABS V LLC were concurrently dissolved. The ABS VIII Notes are secured by the collateral previously securing the ABS III & ABS V Notes which includes certain of the Group's upstream producing, as well as certain midstream, Appalachian assets and the remaining upstream assets in Appalachia that were not securitised by previous ABS transactions.

The ABS VIII Class A-1 Notes accrue interest at a stated 7.076% rate per annum and have a final maturity date of May 2044 with an amortising maturity of March 2033. The Class A-2 Notes accrue interest at a stated 7.670% rate per annum and have a final maturity date of May 2044 with an amortising maturity of March 2033. Interest and principal payments on the ABS VIII Class A-1 and Class A-2 notes are payable on a monthly basis.

During the six months ended 30 June 2024, the Group incurred $3.9 million in interest related to the ABS VIII Notes. The fair value of the ABS VIII Notes was approximately $617.6 million as of 30 June 2024.

Based on whether certain performance metrics are achieved, ABS VIII is required to apply 25% to 100% of any excess cash flow to make additional principal payments. In particular, (a) (i) if the DSCR as of the applicable payment date is less than 1.45 to 1.00, then 100%, (ii) if the DSCR as of such payment date is greater than or equal to 1.45 to 1.00 and less than 1.50 to 1.00, then 50%, or (iii) if the DSCR as of such payment date is greater than or equal to 1.50 to 1.00, then 25%; (b) if the production tracking rate for ABS VIII is less than 80%, then 100%, else 25%; or (c) if the LTV for ABS VIII is greater than 75%, then 100%, else 25%.

During the six months ended 30 June 2024, the Group made no excess cash flow payments on the ABS VIII Notes.

(s)            ABS IX Notes

In June 2024, the Group formed DP Mustang Holdco LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary ("ABS IX", formerly the "ABS Warehouse"), to close on a bridge loan facility (the "ABS Warehouse Facility"). The initial draw on the ABS Warehouse Facility was $71 million, including $66.3 million in net proceeds, $3.1 million in restricted cash interest reserve and $1.6 million in debt issuance costs. The ABS Warehouse Facility is secured by certain producing assets previously collateralising the Credit Facility.

The ABS Warehouse Facility has an interest rate of SOFR plus an additional 3.75% and has a legal final maturity date of May 2029. Interest and principal payments on the ABS Warehouse Facility are payable on a monthly basis. The fair value of the ABS Warehouse Facility approximates the carrying value as of 30 June 2024.

In September 2024, the Group issued Class A and Class B asset-backed securities (collectively the "ABS IX Notes") with a total principal amount of $76.5 million. The Class A Notes were issued with a total principal amount of $71 million, while the Class B Notes were issued with a total principal amount of $5.5 million. The proceeds from these issuances were used to repay the outstanding principal of the ABS Warehouse Facility, effectively retiring it from the Group's outstanding debt and resulting in a loss on the early retirement of debt amounting to $1.6 million. The Class A Notes carry an annual interest rate of 6.555% and have an amortizing maturity date of December 2034. The Class B Notes carry an annual interest rate of 11.235% and have an amortizing maturity date of September 2030. Both interest and principal payments on the ABS IX Notes are made on a monthly basis.

(t)            Oaktree Seller's Note

In June 2024, the Group funded the purchase price of the Oaktree Transaction, in part, with deferred consideration in the form of an unsecured seller's note from Oaktree (the "Oaktree Seller's Note"). The Group issued $83.3 million in notes at a stated 8.0% rate per annum and have a final maturity date of December 2025, which was amended in October 2024 at a stated 9.0% rate per annum and a final maturity date of September 2026. Deferred interest and principal payments are now due on a monthly basis.

During the six months ended 30 June 2024, the Group incurred $0.6 million in interest related to the Oaktree Seller's Note. The fair value of the Oaktree Seller's Note approximates the carrying value as of 30 June 2024.

The Oaktree Seller's Note contains certain customary representations and warranties and affirmative and negative covenants. As of 30 June 2024, the Group was in compliance with all covenants for the Oaktree Seller's Note.

(u)           Credit Facility

The Group maintains a revolving loan facility with a lending syndicate, the borrowing base for which is redetermined on a semi-annual, or as needed, basis. The Group's wholly-owned subsidiary, DP RBL Co LLC, is the borrower under the Credit Facility. The borrowing base is primarily a function of the value of the natural gas and oil properties that collateralise the lending arrangement and will fluctuate with changes in collateral, which may occur as a result of acquisitions or through the establishment of ABS, term loan or other lending structures that result in changes to the Credit Facility collateral base.

In August 2022, the Group amended and restated the credit agreement governing its Credit Facility by entering into the A&R Revolving Credit Facility. The amendment enhanced the alignment with the Group's stated sustainability initiatives by including sustainability performance targets ("SPTs") similar to those included in the ABS III, IV, V and VI notes, extended the maturity of the Credit Facility to August 2026. In September 2023, the Group performed a semi-annual redetermination and the borrowing base was resized to $435 million, In November 2023, the borrowing base was resized to $305 million to reflect the movement of collateral for the issuance of the ABS VII Notes. In June 2024, the borrowing base was resized to $385 million to reflect the acquisition of Oaktree Capital assets and as at the Latest Practicable Date, the Company has received commitments for the increase of the borrowing base to $900 million at Completion to reflect the Acquisition and it is expected that the maturity of the Credit Facility will also be extended to four years following Completion.

The Credit Facility has an interest rate of SOFR plus an additional spread that ranges from 2.75% to 3.75% based on utilisation. Interest payments on the Credit Facility are paid on a quarterly basis. Available borrowings under the Credit Facility were $134.82 million as of 31 December 2023 which includes the impact of $11.2 million in letters of credit issued to certain vendors.

The Credit Facility contains certain customary representations and warranties and affirmative and negative covenants, including covenants relating to: maintenance of books and records; financial reporting and notification; compliance with laws; maintenance of properties and insurance; and limitations on incurrence of indebtedness, liens, fundamental changes, international operations, asset sales, making certain debt payments and amendments, restrictive agreements, investments, restricted payments and hedging. The restricted payment provision governs the Group's ability to make discretionary payments such as dividends, share repurchases, or other discretionary payments. DP RBL Co LLC must comply with the following restricted payments test in order to make discretionary payments (i) leverage is less than 1.5x and borrowing base availability is >25% (ii) leverage is between 1.5x and 2.0x, free cash flow must be positive and borrowing base availability must be >20%, or (iii) when leverage exceeds 2.0x for DP RBL Co LLC, restricted payments are prohibited.

Additional covenants require DP RBL Co LLC to maintain a ratio of total debt to EBITDA of not more than 3.25 to 1.00 and a ratio of current assets (with certain adjustments) to current liabilities of not less than 1.00 to 1.00 as of the last day of each fiscal quarter. The fair value of the Credit Facility approximates the carrying value as of 31 December 2023.

The Credit Facility contains three SPTs which, depending on the Group's performance thereof, may result in adjustments to the applicable margin with respect to borrowings thereunder:

·      GHG Emissions Intensity: The Group's consolidated Scope 1 emissions and Scope 2 emissions, each measured as MT CO2e per MMcfe;

·      Asset Retirement Performance: The number of wells the Group successfully retires during any fiscal year; and

·      TRIR Performance: The arithmetic average of the two preceding fiscal years and current period total recordable injury rate computed as the Total Number of Recordable Cases (as defined by the Occupational Safety and Health Administration) multiplied by 200,000 and then divided by total hours worked by all employees during any fiscal year.

The goals set by the Credit Facility for each of these categories are aspirational and represent higher thresholds than the Group has publicly set for itself. The economic repercussions of achieving or failing to achieve these thresholds, however, are relatively minor, ranging from subtracting five basis points to adding five basis points to the applicable margin level in any given fiscal year.

An independent third-party assurance provider will be required to certify the Group's performance of the SPTs. As of 31 December 2023, the Group met or was in compliance with all sustainability-linked debt metrics.

(v)           Term Loan I

In May 2020, the Group acquired DP Bluegrass LLC ("Bluegrass"), a limited-purpose, bankruptcy-remote, wholly owned subsidiary of the Group to enter into a securitized financing agreement for $160 million which was structured as a secured term loan. The Group issued the Term Loan I at a 1% discount, and used the proceeds of $158 million to fund the acquisition of the Carbon Assets and the EQT Assets. The Term Loan I is currently secured by certain producing assets acquired in connection with the Carbon, Blackbeard and Tapstone acquisitions.

The Term Loan I accrues interest at a stated 6.50% annual rate and has a maturity date of May 2030. Interest and principal payments on the Term Loan I are payable on a monthly basis. During the years ended 31 December 2023, 2022 and 2021, the Group incurred $7.57 million, $8.64 million and $9.86 million in interest related to the Term Loan I, respectively. The fair value of the Term Loan I is approximately $101.71 million as of 31 December 2023.

(w)          CP Loan Facility

In August 2024, the Group formed DP Yellowjacket Holdco LLC, a wholly-owned subsidiary (the "CP Loan Facility"), to close on the Crescent Pass Acquisition. The initial draw on the CP Loan Facility was $60 million, which has been increased to $80 million in October 2024 in connection with the closing of the East Texas Assets acquisition. The refinanced facility consists of a term loan of approximately $83 million and a revolving loan of approximately $12 million. The CP Loan Facility is secured by substantially all the Crescent Pass Energy Assets and the East Texas Assets. The CP Loan Facility has an initial interest rate of SOFR plus an additional 4.00% and has a maturity date of August 2027. Interest and principal payments on the CP Loan Facility are payable on a monthly basis.

The Maverick Group

3.2          The following is a summary of those material contracts, not being contracts entered into in the ordinary course of business, which have been entered into by Maverick or any member of the Maverick Group within the two years immediately preceding the date of this document and of those other contracts, not being contracts entered into in the ordinary course of business by any member of the Maverick Group, that contain provisions under which Maverick and/or any member of the Maverick Group has an obligation or entitlement which is or may be material to the Group as at the date of this document:

(a)           For details of the Agreement, the Registration Rights Agreement and Relationship Agreement, please see section 3.1(a) (Registration Rights Agreement) and 3.1(b) (Relationship Agreement) above.

(b)           For details of the East Texas Assets purchase and sale agreement, please see section 3.1(e) (East Texas Assets purchase and sale agreement) above.

(c)           Maverick Senior Secured Reserve-Based Credit Facility

On 27 January 2022, Maverick entered into an agreement with a syndicate of banks including JPMorgan Chase Bank acting as administrator, Royal Bank of Canada, Citizens Bank, KeyBank National Association acting as co syndication agents, RBC Capital Markets, and KeyBank Capital Markets (the "Maverick Credit Facility"). The agreement is for a maximum $1 billion credit facility with an initial $500 million borrowing base. The maturity date is 1 April 2026. 

The Maverick Credit Facility limits the amounts the Maverick Group can borrow to a borrowing base amount determined by the lenders at their sole discretion based on their valuation of the Maverick Group's proved reserves and their internal criteria. The Maverick Group's obligations under the Maverick Credit Facility are collateralized by substantially all of the Maverick Group's oil and natural gas properties, including mortgage liens on oil and natural gas properties having at least 85% of the reserve value as determined by reserve reports.

The Maverick Credit Facility contains certain customary affirmative and negative covenants, including financial covenants requiring maintenance of the Consolidated Total Debt to EBITDAX Ratio to be less than 3.00 to 1.00 and a Current Ratio of no less than 1.00 to 1.00.

At the Maverick Group's election, borrowings under the Maverick Credit Facility may be made on an Alternate Base Rate ("ABR") or a Secured Overnight Financing Rate ("SOFR") basis plus an applicable margin.  In connection with the Maverick Credit Facility, the applicable margins vary from 2.00% to 3.00% for ABR borrowings and 3.00% to 4.00% for SOFR borrowings depending on the borrowing base.  In addition, the Maverick Group is also required to pay a commitment fee on the amount of any unused commitments at a rate of 0.50% per annum. Interest on ABR borrowings and the commitment fee are generally payable quarterly.  As of 31 December 2023, the effective interest rate of the Maverick Credit Facility was 9.24%.

In June 2022, the Maverick Group entered into an amendment to the Maverick Credit Facility (the "First Amendment") which increased the borrowing base from the initial $500 million to $750 million.  Each lender's borrowing capacity was increased with the exception of Goldman Sachs Bank, and the Maverick Group accounted for the First Amendment as a modification of debt. The Maverick Group incurred deferred financing costs of $2.6 million in relation to this amendment.

In October 2022, the Maverick Group entered into the second amendment to the Maverick Credit Facility (the "Second Amendment"), which increased the borrowing base to $1 billion.  Each lender's borrowing capacity was increased with the exception of Texas Capital Bank, and the Maverick Group accounted for the Second Amendment as a modification of debt. The Maverick Group incurred deferred financing costs of $2.6 million in relation to this amendment.

In July 2023, the Maverick Group entered into the third amendment to the Credit Facility (the "Third Amendment"), which reduced the borrowing base from $1 billion to $750 million. Each lender's borrowing capacity was decreased, and the Maverick Group accounted for the Third Amendment as a modification of debt. Additionally, the Third Amendment allowed for a one-time cash distribution to the Maverick Group's equity holders not to exceed $10 million in aggregate through 30 September 2023. The Maverick Group did not incur deferred financing costs in relation to the Third Amendment.

In October 2023 in conjunction with the Maverick ABS Notes, the Maverick Group entered into the fourth amendment to the Credit Facility (the "Fourth Amendment"), which amended in its entirety the original Credit Facility. Pursuant to the Fourth Amendment, among other things, the borrowing base was reduced from $750 million to $350 million, and the respective reduced commitments of the various lending banks were reallocated among the continuing lenders to assign the exiting lenders' commitment. The Maverick Group accounted for the decreases in a lender's borrowing capacity as a modification and accounted for any lender that exited the credit facility as a debt extinguishment. 

The Maverick Group incurred deferred financing costs of $5.6 million in relation to the Fourth Amendment. At 31 December 2023, the Maverick Group's borrowing base was $350 million, and the aggregate commitment of all lenders was $1 billion. 

Unamortized debt issuance costs associated with the Maverick Credit Facility were $13.2 million as of 31 December 2023.

As of 31 December 2023, the Maverick Group was in compliance with its debt covenants under the Maverick Credit Facility.

(d)           Maverick ABS Notes

On 26 October 2023, Maverick, through its consolidated subsidiaries, raised $640 million through an asset-backed securitization financing transaction. Several new subsidiaries were created including MNR ABS Holdings I, LLC ("Maverick ABS Holdings") and MNR ABS Issuer I, LLC ("Maverick ABS Issuer").

Unbridled Resources, LLC ("Unbridled"), a primary operating subsidiary of Maverick, entered into an asset purchase agreement with Maverick ABS Issuer (the "Purchase and Sale Agreement"), pursuant to which Unbridled agreed to sell and transfer to Maverick ABS Issuer certain operated and non-operated oil and natural gas wells and all oil and natural gas leases, subleases and leasehold covering such wells (the "Maverick ABS Assets" and such transfer, the "Maverick ABS Asset Transfer") for a purchase price of $640 million, of which $630 million was cash and $10 million was a non-cash note payable. In connection with the Maverick ABS Asset Transfer, Maverick Asset Holdings LLC ("MAH") transferred by novation to Maverick ABS Issuer certain hedge agreements ("Maverick Assumed Hedges").

In connection with the transaction, Maverick ABS Issuer entered into an indenture with UMB Bank, N.A. as indenture trustee (the "Indenture Trustee") (the "Indenture") to which Maverick ABS Issuer issued (a) $640 million aggregate principal amount of Series 2023-1 Notes, consisting of (i) $285 million aggregate principal amount of its 8.121% Series 2023-1 Notes, Class A-1 Notes due December 2038, (ii) $260 million aggregate principal amount of its 8.946% Series 2023-1 Notes, Class A-2 Notes due December 2038 and (iii) $95 million aggregate principal amount of its 12.436% Series 2023-1 Notes, Class B Notes due December 2038 (collectively, the "Maverick ABS Notes") and (b) pledged the Maverick ABS Assets to the Indenture Trustee to secure Maverick ABS Issuer's obligations under the Indenture (the "Maverick ABS Financing Transaction").

In addition, the following events occurred in connection with the Maverick ABS Financing Transaction: (i) $10 million of the Maverick ABS Notes were issued to Maverick, (ii) a holdback of $5.4 million related to consents not received at the date of the transaction which is reflected as restricted cash, (iii) a Liquidity Reserve Account was established for $23.6 million and is reflected as restricted cash, (iv) $260 million was an equity distribution and (v) repaid $300 million for the Maverick Credit Facility held by MAH.

The Maverick ABS Notes are secured by certain oil and natural gas interests in currently producing oil and natural gas wells and other assets. The Maverick ABS Notes accrue interest at the respective stated per annum rates and have a final maturity date of 15 December 2038. Interest and principal payments are payable on a monthly basis. During the period ended 31 December 2023, the Maverick Group incurred $10.3 million of interest related to the Maverick ABS Notes.

The Maverick ABS Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Maverick ABS Issuer maintains specified reserve accounts to be used to make required interest payments in respect of the Maverick ABS Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments under certain circumstances, (iii) certain indemnification payments in the event, among other things, that the assets pledged as collateral are used in stated ways defective or ineffective, (iv) covenants related to recordkeeping, access to information and similar matters, and (v) the Maverick ABS Issuer will comply with all laws and regulations which it is subject to. The Maverick ABS Notes are also subject to customary accelerated amortization events provided for in the indenture, including events tied to failure to maintain stated debt service coverage ratios, failure to maintain certain production metrics, and event of default and the failure to repay or refinance the Maverick ABS Notes on the applicable scheduled maturity date. The Maverick ABS Notes are subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Maverick ABS Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.

Under the Indenture, Maverick must maintain the following financial covenants determined as of the last day of the quarter: i) Aggregate Debt Service Coverage Ratio (DSCR) less than 1.05, and ii) Senior DSCR less than 1.25.

As of 31 December 2023, the Maverick Group was in compliance with its covenants under the Maverick ABS Notes.

4.             Related Party Transactions

The Group

Other than as publicly disclosed by the Company, there are no related party transactions within the meaning of UK-adopted international accounting standards as defined in s 474(1) CA 2006 between the Group and its related parties that were entered into during the financial year ended 31 December 2023, during the six-month period ended 30 June 2024 or during the period from and including 1 July 2024 up to and including the Latest Practicable Date.

The Maverick Group

There are no related party transactions within the meaning of UK-adopted international accounting standards as defined in s 474(1) CA 2006 between the Maverick Group and its related parties that were entered into during the financial year ended 31 December 2023 or during the period from and including 1 January 2024 up to and including the Latest Practicable Date.