Diversified Energy Plc is still a ‘buy’ according to First Berlin Equity Research which sees further upside for the acquisitive North American firm, despite recent media scrutiny.
First Berlin analyst Simon Scholes noted the recent negative attention from media outlets and politicians on the issue of methane emissions, as the broker upgraded its price target to 150p from 140p.
Impacts of America’s proposed ‘Build Back Better Act’ – which is expected to impose charges on methane emissions – would likely impact DEC by around 3p per share in 2023, according to Scholes.
“The good news is that DEC is committed to reducing emissions,” the analyst said.
“The company outlined its emissions reduction programme in its Sustainability Report published in April and we expect further detail at the Capital Markets Day in Houston on 17 November.
Scholes added: “We find Bloomberg’s assertion that the economic lives of DEC’s wells are overstated very implausible given that these numbers are reviewed annually by Netherland, Sewell and Associates, one of the most reputable reserves auditors in the world.”
The First Berlin analyst noted that his upgrade to the DEC target price was the result of higher forward looking gas prices in the market, but, also that the company is increasing its quarterly dividend – adding 0.25 cents in Q3, up to 4.25 cents per share.
Pitched at 140p, the broker’s target suggests some 34% upside to the current market price of 104.4p.
Last week, DEC told investors it will deploy 500 additional methane emissions detection devices to its Appalachian upstream field operations team, supporting its ongoing commitment to environmental stewardship.
It follows a pilot project that saw 100 devices used across the portfolio. The pilot was effective in identifying small emissions for trained well tenders to eliminate at little-to-no incremental cost, the company noted.
Going forward DEC will use 600 hand-held methane emissions detection devices in its Appalachia operating area to allow its skilled personnel to identify and remediate emissions that would otherwise be undetectable using other techniques.
On Friday, it separately announced a US$72.8mln divestment, US$37.3mln net to DEC, of undeveloped acreage in Texas.