Greetings, and welcome to the Diversified Energy Company 2022 Interim Results Conference Call. At this time, all participants are in a listen-only mode. A question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rusty Hutson. Please go ahead.
Thank you. Appreciate it. Thank you, everybody, for joining this morning. We are going to spend a few minutes this morning walking through our mid-year earnings for 2022. As you all know, we released those earnings this morning at 7:00 A.M., so those should be available to everybody by RNS and on our website, so you can access them there. We're gonna take a little different approach this morning. I'm gonna speak a little bit about you know, our strategic objectives and that we've laid out for the last five years, and we've spoken to a lot of the investors and analysts about. I'm gonna talk about how we've kind of where we stand, the gauge on where we're at on those.
Also speak a little bit about how that's translated into our shareholder returns. Then speak a little bit about kind of how we are compared and how we look in as it relates to the other sectors and from a shareholder return perspective and metric perspective. Then I'll give a quick overview of some of the first quarter or first half highlights, and then turn it over to Brad and Eric to give you some specifics around the operations and the financials. With that, we'll turn to page four and start.
You know, five years ago, when we took the company public, a little over five years ago, I guess, we laid out some direct strategic objectives, and we told our investors exactly what we wanted to accomplish, and that we would stay consistent in our approach to that. You know, as we look at some of those objectives, first and foremost in that was prioritizing shareholder returns. You know, we providing a sustainable dividend that would grow with acquisitions and as we grew the company. You know, as we sit here today, we have the highest dividend yield among the upstream energy sector, and 5x the S&P 500 average. We've been pretty successful in accomplishing that.
We also said we would allocate our incremental free cash flow differently than some of the other companies in the sector. Instead of putting a lot of CapEx into the drill bit and completions, we would use our free cash flow to return returns for our shareholders, to reduce our leverage and to grow the company in a non-dilutive way. We've been very successful in doing that. Our accretive acquisition opportunities continue to be very robust, mainstay of our business model. We continue to be very successful in being able to accomplish that. We've obviously announced three acquisitions so far in 2022, and we'll talk a little bit more about those later on in the presentation.
We've done 21 acquisitions since IPO, which I think is astounding as we sit here today over a five-year period. 2022 and really all of 2021 was our new entry into the central region. That's been a very successful venture for us. We've done a couple of acquisitions this year already, ranging at a PV-17 to PV-40 on a discounted cash flow basis, and a 2x purchase price multiple. We've been very successful and continue to maintain our ability to stay very disciplined in our approach to acquiring assets, even in a high- price environment. Cash margins continue to be very robust. Ended the first half of the year at a 48% cash margin.
We're, you know, we continue to replace cash flows with organic cash or replace those cash flows with organic growth, which is extremely important to the business model as we've grown it over the last five years. The latest acquisition that we announced recently from ConocoPhillips added about $300 million of PV-10 value with 70% cash margin. We continue to add assets and add acquisitions that are very accretive to the business model. Back in November of last year, as most of you know, we made a lot of commitments around our ESG initiatives and how to approach both the identification and the reduction of methane emissions. We said we're gonna get very aggressive on that, and we have.
We've flown over 6,000 mi of pipeline year- to- date with our flyover LIDAR. The program is on track to survey approximately 15,000 mi by the end of 2022, which is 90% of our midstream portfolio. More importantly, as we identify, we're you know correcting those identified emissions very quickly, and Brad will get into some of the specifics around that. We've also deployed our handheld emission devices across our Appalachian operation and continue to make a lot of progress. We've moved up our goals in terms of the number of wells that we'll be able to visit by the end of September. Brad will get into some more of that.
We are utilizing those handhelds to see a very nice reduction in our overall emissions as a benefit of not only identifying them but fixing them as we do identify them. The last thing as it relates to our initiatives, we've said all along that we're not going to put our balance sheet at risk just for the sake of growth, and that we'll continue to ensure the financial strength of the company and the business model as we move forward. You've seen us kind of migrate more to an amortizing debt structure, being really the first company to utilize the ABS structures back in 2019, and we continue to use them over the last few years. Now we've done five different ABS transactions.
100% of our debt is now on amortizing notes, fixed coupon, you know, fixing the cost of that debt so that we have a clear understanding of what it's costing us. More importantly, amortizing that debt off over a period of time is the right thing for us to do because it matches our asset base so well. Long life, low decline assets. Really at the core of that is the fact that we have the lowest PDP decline profile in the industry, and utilizing our hedging strategy, which is core to our, also core to our business in maintaining visible cash flows that give us the ability to pay that debt down over a period of time.
Really as we look at those strategic objectives, we've really hit our goals of what we wanted to accomplish, probably a lot quicker than what we even anticipated back when we went public in 2017. Moving over to page five, you can kind of see how this has translated to very aggressive returns for our shareholders. If you look at the since IPO, we've returned to our shareholders 250% total shareholder returns. You can see that we've accomplished that regardless of the commodity price cycles.
You can see over the period of the last five and a half years, that even when the prices dipped in 2019, 2020, we were still able to generate dividends that were, you know, in that eleven percent range, and really continued to show to our shareholders that we have a sustainable shareholder return profile that we can continue into the future. You can see we paid over $492 million in dividends since the IPO. That dividend yield has averaged around 11% over that period of time. We continue to protect those cash flows with a very robust hedge strategy with the remainder of 2022 hedged around 90%.
We've seen a 48% EBITDA margin in the first half of 2022, even in the midst of some of the highest commodity prices we've seen now in over 10 years, and having a much lower hedge price. We've seen those margins compress, but only 2% or 3% from their 2020 and early 2021 levels. Not a significant difference in even with those high commodity prices. We continue to see this, one of the strongest free cash flow yields in the industry, which we'll talk about at 22%, which we'll talk about on another slide. Flipping to page six.
Looking at our overall trading metrics in relation to some of these other sectors, you know, I think it's important to show that we have one of the highest free cash flow yields to enterprise value, not just to market value, market price, but to enterprise value at almost 13%. When you really compare that to the other industries, much higher and outperforming pretty much every sector out there. If you look at the left side of the chart, you'll see that on an enterprise value to adjusted EBITDA, we're still from a trading multiple, still trading under all of those same sectors.
I've even noticed this even with it as it relates to the sector in general. It's 1.5%. The E&P sector is 1.5% of the S&P 500, but represents almost 40% of the free cash flow of the S&P 500 as we sit here today. There's a huge disconnect, and we're trading at a significantly lower multiple, when we should be, but trading at a much higher free cash flow yield. It's kind of disconnected in some ways.
Flipping to page seven, you can see, you know, we have one of the top 10 dividend yields in the upstream sector at almost 11% as we sit here today, which is higher than all the, you know, the other peers that we have in the group. Much higher than a lot of the other sectors and indexes out there, you know, as you can see on to the right of the chart. If you look at the free cash flow yield, we're number 2 out of the top 10 peers at 32 point. And this is in relation to the market cap of the company and on 2022 estimates, much higher than the rest of the sectors.
More importantly, I think what's really important to note in this slide is, as we talk about consistency, which has been the core of our business model. If you look at a three-year historic average, the dividend yield's been at 10.2% compared to the rest of the upstream of less than 3%. Then from a free cash flow yield, which I think this one is really, really important, we're at 23.5% three-year average versus the rest of the sector, which is 10.2%. It's not just about a one-year rise in commodity prices. This has been a consistent element of our business model over the whole five and a half years that we've been out as a public company.
It's all about consistency, doing what we say we're gonna do, and do it on a consistent basis. On page eight, as you look at our share price relative, you know, to natural gas prices, you can see that disconnect has really taken off, and really increased as commodity prices have made a run. The ten-year NYMEX strip from the year-end 2021, our future cash flows are just underappreciated. Now this is not just us. The sector is similar, the rest of the sector. With us, it seems like it's a little more advanced compared to the rest of the sector. You can see that, there's a, you know, a fairly large disconnect since the middle of last year as commodity prices have went up.
A lot of people say, "Well, you're highly hedged," but if you go to the right side of this page, you'll see our current share price trading at $1.48. There's a 50% discount between that and what the share price should be on a PV-10, less debt and adjusted for hedges. You can see that on that basis, it should be trading at around $2.82. So we're still seeing a significant discount in our share price to what we should be trading at on a PV-10 basis, even adjusted for debt and hedges. So there continues to be an underappreciation of Diversified shares in the market. On page nine, the natural gas macro obviously still remains very, very strong.
You know, the production growth in the market in the U.S. has really remained muted because of takeaway capacity, and the ability to really move the gas out of some of the higher producing regions like the Marcellus. There's just been a much more disciplined approach to production by the companies that drill and complete wells in these basins. The Haynesville continues to see some increases, but it obviously has access to those LNG markets, which are continuing to be very robust. Freeport, which was out of service from a fire, it's scheduled now to be back online at the beginning of October, which will add to the supply-demand shortage or tightness.
With more LNG expected to come on in 2025, 2026, around 13 Bcf additional, it's gonna make this Gulf Coast gas, I believe, a premium price market into the future, and we'll talk a little bit about that in a minute. Heat waves continue. We've seen a lot of demand, power demand in the U.S. and really internationally across the globe. You know, global balances have become very tight, especially with the Russian pipeline situation. Just at the end of the day, the reluctance of the producers to add production and to stay disciplined in their cash flow approaches have continued to make the natural gas macro, I believe, very strong. Really quickly, let's talk on page 11 about the first half performance.
I think the first half was a great beginning to the year. We obviously have announced three acquisitions, $150 million East Texas asset from Legacy that we believe is a great addition to our central region portfolio. The ConocoPhillips deal obviously, which we announced last week, I believe, is a great Oklahoma transaction for us and will give us a lot of scale and size and efficiency opportunities there. The acquisition strategy will continue there in the central region. Production about 139,000 BOE per day in June, up from that first half or first quarter trading update, as we've seen some of those weather related impacts kind of roll off. With a 20% increase over last year June.
We've generated about $224 million in adjusted EBITDA. Cash margins, as I said earlier, around 48%, with a free cash flow yield of 22%. We continue to be very strong from the cash flow perspective. Leverage continues to stay in our stated range of 2.2x. We continue to see great progress in our ESG initiatives, which we published our 2021 sustainability report, which I believe was first class and best in class, in terms of the content and the disclosures. The ESG initiatives, which Brad will get into in his operations section. With that, I'm gonna turn it over to Brad and let him talk a little bit about the operating highlights of that first half.
Okay. Thank you, Rusty. I'm really pleased to share some of the highlights and the accomplishments and results that our teams delivered for the first six months of 2022. Not only have our teams delivered favorable financial results for this period, our teams are also hard at work each day to add future value to our shareholders by developing and executing numerous projects with our vast inventory of assets. These projects include emissions monitoring and reduction strategies, production optimization, as well as expense efficiency measures. I continue to appreciate the commitment and diligence from our employees as they professionally manage and safely operate our assets and as they efficiently integrate our acquisitions. I do wanna say a job well done to our Diversified team members.
I'm gonna start on page 13, and first I wanna highlight our continued progress and leadership with the E portion of our ESG programs. In November 2021, we established a detailed plan to make positive impacts on the environmental aspects of our operations, with specific emphasis on methane emission reduction, asset retirement activity, as well as standardized reporting. We have aggressively implemented our upstream emissions surveys utilizing our handheld detection devices. As of June 30th, we completed 49,000 well site surveys, of which 90% of those surveys indicated that there were zero detectable emissions. You know, although we're pleased with such a low percent of emissions, we're really not surprised due to our zero tolerance emissions policy that has always been in place. We anticipate that emission surveys for all Appalachia wells will be completed by the end of our third quarter.
For our central region assets, we're already making plans to implement these emission surveys in the first quarter of 2023. Our partnership with Bridger Photonics to fly our Appalachia midstream assets is going very well. Bridger is a great partner, and our teams are fully integrated and executing a terrific program. We have flown approximately 6,000 mi of pipeline, which represents about 40% of these pipeline assets in Appalachia. We've successfully repaired 75% of the confirmed leaks. When we fly the pipelines, we determine a leak, we go confirm it, and we've been able to repair 75% of those. We'll continue to fly our assets for the second half of 2022, and we'll do so until the weather impacts our ability and effectiveness.
We've been very active with increasing the capacity of our asset retirement programs. Through the end of July, we completed three acquisitions of plugging companies in the Appalachian Basin. We acquired Next LVL Energy first in February, Nick's Well Plugging in May, and most recently, one of West Virginia's most respected plugging companies, Conserve, in July. We're operating our plugging company under the name of Next LVL Energy. Our plugging teams have grown from one internal team in the fourth quarter of last year to now we have 15 plugging rigs, which include three larger derrick rigs, and we have a vast inventory of supporting equipment of wireline trucks, cement trucks, yellow iron, earth-moving equipment, as well as transportation assets.
We're on track to achieve our objective to plug 200 internal wells this year, while at the same time, we are positioned well to generate external revenue by plugging wells for the Appalachia states and other regional operators. We've added some very experienced team members, and we're excited about the contribution our new plugging team employees will bring to us. We've successfully submitted our application with the Oil & Gas Methane Partnership program of the United Nations. This program is also known as the OGMP 2.0, and this program is quickly becoming a standard certification framework for emissions detection, monitoring, and reporting. We are actively working with the United Nations to further our program as we strive to achieve their gold standard certification in 2023.
Finally, we're also well on our way with the conversion of the energy source of our pneumatic devices from natural gas to compressed air. Our focus has been on our larger unconventional wells in Pennsylvania and our multi-well pad sites in our Barnett assets. This conversion project, which involves installing air compressors, is reducing emissions at our well pads and also at a lower cost than we had initially anticipated. Moving on to page 14. As I highlighted on the previous page, we made the strategic decision to grow our asset retirement program during 2021, and we are pleased with the progress that we've done in the first six months of this year. What I also want to highlight is our intentional efforts to responsibly manage our asset retirement obligations started many years ago.
We proactively engaged the four states with our largest well counts by entering into defined plugging agreements that go back to early 2018. We continued to work with these states and extended our commitments, and now we have agreements with terms of 10 and 15 years in place. In 2021, we made the decision to stand up our internal plugging team in West Virginia, and we committed to the well plugging goals of 200 wells by 2023. As I've already mentioned, we're on track to achieve this goal, which is one year ahead of the original schedule. As highlighted, we have aggressively grown our plugging capacity this year with three successful acquisitions in our Appalachia operating area.
Not only have we significantly increased our plugging capacity, we believe that we will continue to gain cost efficiencies while also generating revenue from third-party operators and state agencies. Moving to page 15. We've got a very good team that are focused on finding acquisitions, negotiating acquisitions, and funding acquisitions. Equally important is what we do after the acquisition is complete. We also take a very disciplined approach to our employee onboardings, asset integrations, and system conversions. For new employees, we wanna provide a great transition as well as communicate the opportunities they have with our company. For asset integrations, we want to deploy our smarter asset management philosophy, which is focused on optimizing production and driving expense efficiencies. For our system integrations, we are committed to safe and secure networks while deploying our one DEC philosophy for all technical applications.
For our 2021 applications, we have completed our integration and conversion processes, and our Smarter Asset Management programs are fully engaged. For our 2022 acquisitions, our teams are working our processes to ensure that we achieve our timelines and our goals. All three acquisitions thus far in 2022, we believe are great opportunities for us to increase our scale and drive improved operating margins. Moving to page 16. Our Smarter Asset Management programs continue to deliver value to our operations. We constantly challenge our teams to successfully achieve our four daily priorities, which are safety, production, efficiency, and enjoyment. Our Smarter Asset Management program is fully aligned with these priorities. We've always said that our SAM program consists of many small victories adding up to big wins for our company.
On page 16, we're highlighting some of our larger successes within our Appalachia operations this year. We continue to implement low cost projects to return wells to production. We are always challenging our vendors to optimize costs, which we were able to achieve with our water hauling and our lease compressor programs this year. We also successfully completed the divestiture of some non-core wells in our Ohio operations, which generated about $1.5 million in proceeds and also eliminated future plugging liabilities. Our marketing and midstream teams have successfully increased the profitability of our natural gas storage assets by signing a new $2.5 million revenue agreement. Our Smarter Asset Management program has always been a value driver for us. During these periods of inflation, our philosophies and practices become even more beneficial. Moving on to page 17.
Our expansion into the central region has created many value opportunities, and we've successfully executed numerous transactions and projects with our new assets that we believe. We believe that more value is available to be achieved. We have returned 150 wells to production, and these wells are contributing to positive cash flow. The acquisition of midstream assets in Louisiana has lowered our gathering and transportation costs, while it's also positioned us for numerous future revenue opportunities. We're very active with our central region workover program. Our production engineering team is doing terrific work with our field teams, and we have completed approximately 120 profitable workover projects. The average cash-on-cash payback period for these projects is two to three months. Finally, we've completed the drilling and completion of eight wells that came with our Tapstone acquisition.
These wells generate crude oil, natural gas, and some NGLs, and their contribution has been very favorable. The success of these projects has added value to these central region acquisitions, which effectively allows for improved economics on our acquisition price that we estimate to be approximately a 15% multiple improvement. Moving to page 18. With the favorable impact of our central region acquisitions, our production rates continue to increase, as do our PDP reserves. I'm pleased with our production volumes, but I'm really excited about the value of our future reserves. With the strong demand for natural gas predicted for many years to come, the increase in our future reserves provides great value to our shareholders as well as to our employees.
Our pro forma production rate, after including the impact of the recently announced ConocoPhillips assets, is 147,000 BOE per day, and the PV-10 of our PDP reserves has grown to $4.2 billion. Additionally, with our industry-leading corporate declines of approximately 8.5%, our reserves to production ratio is at a very healthy level of 15x . Finally, I'll wrap up on page 19. We're highlighting the comparison of our industry-leading and low corporate decline rate of 8.5% versus six other peer companies. As you can see on this page, our corporate decline rate for our producing inventory is 3x lower than our peers. This low decline rate, coupled with our disciplined hedging program, allows for stability and predictability of cash flows.
A unique characteristic of our production profile is the low capital requirement we need to maintain this corporate decline rate. We have an efficient capital spend for our upstream production optimization programs, and this upstream capital spend, along with our smarter asset management programs, have a very favorable impact on maintaining our low corporate decline rate. With that, I'll turn it over to our Chief Financial Officer, Eric Williams, who will discuss our financial results.
Thanks, Brad. Turning to slide 21, we begin with a quick snapshot of some IFRS and alternative performance metrics, or APMs. I encourage everyone to read the entire half year report we released earlier this morning and that we've made available on our website. Our presentation appendix includes supplemental information beginning on page 46 that includes our unaudited financial statements and reconciliations of our APMs to IFRS measures. We reported record revenues totaling nearly $1 billion and gross profit of over $600 million. Though, of course, these amounts exclude the $469 million of hedge payments we made during the period as commodity prices rose meaningfully above the prices at which we'd hedged. Inclusive of these hedge settlements, our hedge-adjusted revenue was still an impressive $465 million.
We did report a net loss of $935 million that was predominantly driven by a $1.2 billion pre-tax non-cash loss that we recorded to adjust our long-dated hedge portfolio to their fair market values. Because we use long-dated hedges to secure prices at which we earn healthy cash margins, we have a large multi-year portfolio of hedges, and accounting rules require that we mark them to their fair values each period with a charge to current earnings. While these non-cash charges are large, higher prices are certainly very positive for the company and, as Brad described, increased the value of our proved reserves and future cash flows. Fundamental to our strategy is using hedges that, when matched with our integrated cost structure, generate healthy cash margins that provide visibility into our ability to repay our borrowings and sustain our dividends-
Ladies and gentlemen, please remain online while we reconnect the management.
Ladies and gentlemen, we are being rejoined by Brad and Eric.
Hi, Irene. This is Brad Gray, [inaudible] .
We have been rejoined by Brad and Eric. You can go ahead.
Okay. Let's see. Russ, on your side, where did y'all lose us? I'll pick up where I left off.
Yeah, basically, you were wrapping up on slide 21.
Well, I will pick up on slide 22. Turning to page 22, we'll dive a little deeper into the elements that drove our high realized cash margins, mainly our unit realized price and expenses. The graph includes 100% of our operating and corporate overhead expenses that include base LOE, including all of our well maintenance and payroll costs, our midstream system costs, our cost to transport our production on third-party systems, production taxes, and G&A. If you progress a step further to include debt service, our interest expense adds just about $0.20 per Mcfe, thanks to our low coupon, largely investment-grade rate financing with a blended rate of about 5%. As we grow, we've structured our debt to decline as we make disciplined, systematic principal repayments.
These principal repayments drive that $0.20 even lower as we drive down that principal balance. For those interested, we continue to include the component level detail of our expenses on page 37 within the appendix and within our half year report. You'll recall that our entry into the Central region provided us access to premium pricing markets like the Gulf Coast. This access will become increasingly valuable as the U.S. resumes LNG exports, with the Freeport LNG plant expected to resume operations ahead of schedule. While we enjoy higher prices in the region, we do incur higher, largely variable operating expenses like gathering, transportation, and production taxes. While cost structures differ a bit between Appalachia and Central, we enjoy similar margins in both regions.
You'll see that our realized price increased by about $3 from $16-$19 per BOE , while operating expenses rose by about $2 from $8-$10 per BOE. We realized a slight 2-point reduction in our cash margins, moving from 50 to 48. I'm encouraged by a couple of points. First, the significant increase in unhedged cash margins, increasing to 76% from 53%, means that we'll realize higher margins on our unhedged production. Second, higher commodity prices means that we can hedge future production at prices that better match our price-linked expenses like production taxes.
While hedging a large part of our production in a sub-$3 price environment caused some near term modest margin squeeze, I expect margins to rise as our older hedges roll off, and we begin to realize higher hedge and market prices. Ultimately, we believe our simple strategy creates meaningful value for shareholders, and the five-year track record that Rusty discussed earlier supports that belief. I'll move quickly through slide 23 with a quick refresher on our hedge strategy focused on two key objectives. First, we hedge to ensure that we generate stable cash flows from our stable production. We use these predictable cash flows to support our debt repayments and dividend distribution. Secondly, hedging is integral to our financing strategy of liquidity enhancing low fixed coupon amortizing ABS.
Broadly, we've established the hedge coverage targets you see here, though our ABS notes will affect the duration of our hedge book and coverage levels. To obtain an investment-grade rating, ABS generally requires that we hedge around 85% of the assets production for a five to seven-year period. Though our credit facility does not require these hedging levels, and so assets secured on that line serve to lower our blended hedge duration and coverage. Slide 24 features a few points. You can see that from 2017 to 2022, we've held our leverage ratio stable within or below our stated range of 2x-2.5x.
We've achieved this while growing our business and its associated free cash generation significantly, which demonstrates our commitment to never risking the balance sheet for growth. We've migrated our borrowings into fixed rate, fully amortizing notes that better match the tenor of our assets. This shift is important since credit facility borrowings include no scheduled principal amortization, come with a variable rate, and add uncertainty with a borrowing base that the bank syndicate redetermines at least twice a year. Commercially, ABS notes fully amortized, provide low fixed rates reflective of their investment grade and ESG linked structures. Additionally, ABS unlocks liquidity from our assets.
Having closed nearly $1 billion of ABS financing since February, we not only enjoy the benefits I just mentioned, but we increased our liquidity by 80% from $261 million at the end of 2021 to $469 million at the end of June. That's inclusive of the $64 million we invested in our East Texas and Central Region midstream acquisition. Ultimately, we've secured our debt for an average fixed rate of just 5% that fully amortizes decades ahead of the assets' expected producing lives as affirmed by independent engineering. We've unlocked significant liquidity and consistent with the broad commitments we've made to steward these assets into the future. The vast majority of our financings today, including our credit facility, are ESG linked and aligned with our ESG targets.
Slide 25 frames the appropriateness of our leverage target given the nature of our assets, cost structure, and hedging. Having worked hard to solidify our access to the ABS market with five issuances since 2019 to a growing investor base, we have become a respected issuer in this stable debt market, largely invested by conservative investors like insurance companies. Importantly, ABS offers investment grade rates and eliminates the risk of a bullet maturity since the notes fully amortize over their lives and benefit from stable hedge protected cash flows. Moving to slide 26 and shifting gears a bit, I wanted to provide some financial insights related to the update Brad shared about our acquisition of asset retirement companies.
Core to our integration strategy is to improve stakeholder visibility into our ability to satisfy end-of-life obligations, and to do so at costs consistent with or better than those we use in our financial statements. I shared with you on our last call my excitement about the tremendous progress we've made here, and I'm pleased to report another period of low average well retirement costs. On a blended basis using both third party and internal crews, you can see that we've reduced our average well retirement costs by approaching 20% over the past two years, largely from transitioning away from third party services and relying more on our own teams. As we integrate our recent plugging company acquisitions, I expect us to drive retirement costs even lower.
When you consider the margin that we earn on retiring wells for other operators and the state governments as they manage their orphan wells, our net costs can go even lower, ultimately unlocking significant value for shareholders by leaving more cash flow available for dividends and reinvestment. I'll end on slide 17. Since 2019, we've grown our adjusted EBITDA by 60% from $273 million to $448 million, assuming an annualization of our mid-year value. This growth has allowed us to increase our dividend per share by more than 20%, demonstrating per share adjusted value accretion. While our dividend yield has persisted in the double digits, ranging from 11%-13%, we remain focused on continuously improving our operations that generated stable cash flows and maintain a strong balance sheet.
We believe these simple goals will give investors the confidence to price our shares to a yield more reflective of our unique business model. With that, I'll turn the call back to Rusty for some final comments.
Thanks, Eric. I'll just wrap it up with some, you know, outlook into the remainder of 2022, and really past that. You know, for the rest of the year, obviously with the acquisitions we've announced, we're still focused on optimization, obviously the conversion of those acquisitions. We're gonna be laser focused on our operations and optimizing the expense efficiencies that we see in the portfolio enhancement of existing production. We're gonna be laser focused, especially in that central region, on some of those Smarter Asset Management opportunities. We'll aggressively and continue to aggressively drive reductions in our absolute emissions.
We told you that this was gonna be of the utmost importance to us, and that we were going to spend a significant amount of our resources and time focused on that, and we continue to do that. That will continue to be a big part of the second half of this year and continuing to hit those targets that we've set for our investors. Continue to look at ways to optimize pricing in the portfolio.
We've come out of a period of time where we've seen a significant increase in the price of natural gas, specifically, and we're looking at ways to optimize into much higher pricing on a going forward basis as those continue to roll off, and we said they would over the next 18 months, when we talked about this at the midyears or at the year-end numbers for 2021, that we would continue to leg into a little higher pricing and continue to expand those cash margins as we move forward and take advantage of the higher prices in the forward curve. Continue to look at ways to enhance liquidity. We've been, in my mind, pioneers and trailblazers in coming up with new ways to find additional liquidity outside, you know, raising equity.
We want to be able to grow the company in every way that we can, without in a non-dilutive way. We'll continue to use ABS, but we'll also continue to look at other ways to increase liquidity and reinvest the robust free cash flows that we have. You know, finally, we'll continue to you know, look at and evaluate transactions in the market and look at ways to continue to vertically integrate the business as we have now, with the asset retirement companies that we've acquired and really taking control of that cost. We'll continue to look at ways to increase our scale and size in the central region.
I think it's pretty clear that I have a fondness for the East Texas, Louisiana area in terms of the Gulf Coast pricing and ability to see a much better premium price natural gas commodity price going forward. We'll be evaluating opportunities to acquire with the enhanced liquidity that we have and look to grow the business on a going forward basis in a way that will continue to return to produce returns that we have through these first five and a half years for our shareholders. With that, I'll turn it over back to the moderator to open it up for questions.
At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from David Round of Stifel. Please go ahead.
Great. Thanks. Thanks for the presentation, guys. Can I start with declines, please? Obviously a good achievement to maintain that at 8.5%. Is it possible to say or to split out, you know, what your declines would have been without Smarter Asset Management? Even if that's just at a high level to give us a better sense of the impact that is making to your, I suppose, your current production levels. Also interested to see the latest deal came with more modest declines, which was a bit of a change. Really just interested in whether you're finding more competition for those low decline asset packages.
Yeah. I'm gonna let Brad speak to the Smarter Asset Management. I would say related to that question, though, David, the portfolio has become so much larger now. Being able to when it was just Appalachia, it was pretty easy to calculate that out by itself and come up with a you know rounded number as to what we felt those decline rates would be or how we were moderating those decline rates using Smarter Asset Management. It's becoming a little harder now because the portfolio is so big and so widespread. I'll let Brad speak to that in a second. Going back to the ConocoPhillips acquisition, you know, what I have determined related to ConocoPhillips is that it's an Appalachian- type asset.
What I mean by that is, it's very well maintained, obviously, being a ConocoPhillips asset, but it is vertical, long-l ife production, kinda just steady as you go type deal. It's not a lot of new drills or some of the, you know, the wells like we've seen in the East Texas and Louisiana area that are more horizontal. These are just vertical wellbores that we're really starting to, using the term we use in the U.S., lick our chops on because we think that it's going to give us the ability to go in there, do some low cost swabbing and cleaning up of wells, some additional compression projects that should bring up some production, and really fits our bread and butter type asset that we like to operate.
We're really encouraged by what we've seen so far on ConocoPhillips as it relates to our field visits. You know, we still don't see a lot of competition as it relates to some of these assets, not because people don't want them. I just don't think there's a lot of capital available. What we're seeing as our biggest competition for any asset right now is more the hold that, you know, the returns they can keep by just holding onto the assets or the ABS market. The ABS market is now becoming one of our biggest competitors because people are looking at that product as a way to monetize and trying to get a little higher advanced rates on those assets. That's probably it.
Brad, did you wanna speak to Smarter Asset Management?
Sure, Russ. I'll add a couple of comments. Russ is right. We do have a vast inventory of wells and opportunities to optimize production. It is challenging when you're working on a well by well basis. What I will say is that our Smarter Asset Management and optimization programs, it is absolutely helping us maintain that low corporate decline. And in some cases, it can help offset when we have production disruptions from pipeline maintenance projects and things like that. I think it's, you know, somewhat academic to say, David, I know you understand this, that our production would have been lower absent these projects and all this work.
In addition to the production improvements, you know, it's providing. It's also adding future reserves, and it's extending the life of the wells that we have. It's an overall very positive program, but also just from a employee perspective, it's very morale uplifting-
...to allow our teams to get the wins on a daily basis. We're committed to it.
Yeah.
We like it, and we'll continue it.
Then lastly, we'll turn it to the next question, but the best gauge we have is comparing our actual production on a, you know, acquisition by acquisition or, you know, operating area by operating area to our engineered decline rates. If we can do better than our engineered decline rates, then we know that our Smarter Asset Management and other projects are making an impact.
To that point, that I think is illustrative of that, we talk a lot about our securitizations and part of that is that we track asset performance and report that to those investors. We are outperforming the engineering declines, which you'll recall also I said that we're on issuance number five. The reason that we've done well in that market is that we do have a really strong track record of not just asset performance, but also cost controls and the other things that come with our vertical strategy. If you turn back the clock a little bit further, for two years, we held production flat across that Appalachia low decline asset base, and we used to quantify that, and it had grown to over $75 million.
If you think about it, by having rebased or deferred that production decline for two years, that's a permanent adjustment that keeps paying a dividend, no pun intended, I wanna go forward. SAM is real, and I think it's a by-product of being a company that does major on operations rather than majoring on development.
Very clear. Thanks, guys. I'll hand it back.
Our next question is from Alex Smith of Investec. Please go ahead.
Morning, guys. Thanks for the call this morning. Could you speak a bit about and give an overview of the current landscape of the M&A market? I guess you picked up a lot of distressed assets over the years, and, given current pricing. What are you kind of seeing in the market and what's available? Now also, given the current strip, is it more compelling to pick up assets now so you can kind of layer on higher hedges to bring up the current floor price that you have for your hedge portfolio? Lastly, can you confirm how much is left with the Oaktree deal and how that relationship is going at the moment? Thank you.
Sure. Yeah. Well, I say the acquisition market is very robust. There's still a lot of assets that we are evaluating day-to-day. You know, distress is less of a you know, emphasis now. Now it's more along the lines of private equity and other companies looking to divest in a much better price market. We're seeing more and more of that. We have been very focused on staying disciplined in our approach to that, because obviously we don't wanna pay more, you know, based on a higher commodity price.
We're able to do that because as I said on the other answer to the other questions is that there's just not a lot of capital availability out there. Companies are having a lot of trouble accessing capital to do deals. You know, we've talked to two or three different transactions now where people are focused on execution capabilities more so than price. I mean, literally to the point where one told us that they would take a much lower price than what some of the others were offering because they knew we would be able to execute. These are the things that are really driving the ability to do deals now.
Really the biggest competitors are the hold and then the ABS transactions and the ability to do those. So the market remains robust, and it's just not around distress anymore as it once was. You know, as it relates to the Oaktree agreement, we obviously continue to evaluate deals with them. I will tell you that, you know, based on our presentation and what I was showing earlier in terms of the discount that E&Ps are trading at, the sector itself, as it relates to the forward strip and the discount to forward strip that companies are trading at, has got them focused a lot more on public equities right now.
They are heavily focused on the companies that are out there that are trading in their minds at a significant discount to the future curve. They continue to look at deals with us. We still have around, I think, $500 million of additional capacity with them, and we'll continue to evaluate deals with them as we move forward. You know, they still have capacity, and we'll continue to look at deals with them. What was the other part of the question? I'm sorry, I missed it. The second.
It was more that given current strip, is it more compelling-
Oh.
...to look more acquisitions throughout this period to kind of speed that price process up given you can move your hedges from today?
Yeah. Alex, absolutely. In fact, you know, we're looking at deals and for that very reason. You know, obviously in 2022 we're about 90% hedged, less so in 2023. 2023 has some additional upside. As we're layering on, for example, ConocoPhillips, you know, leaving some of that gas exposed is probably a good thing when we close it in September because at the end of the day, it gives us some additional upside that we don't have in the portfolio as we sit here today. Absolutely as we look at deals now, we're not gonna pay, you know, top line strip price for the deals. We're gonna discount them to some degree and try to acquire all these deals at a discount to PV-10 value or NAV value.
That's always gonna be the first and foremost charge as we look at every deal. I do believe that it is compelling. I can't emphasize this enough. East Texas Gulf Coast gas looks like a really good deal for us, and we're gonna be heavily focused there.
Great. Thank you.
Sure.
Our last question is from Mark Wilson of Jefferies. Please go ahead.
Okay. Good morning, guys. I'd like to ask around growth expectations for here, and particularly the shareholder remuneration side of things as well. You rightly pointed out the 11% yield you're seeing. It's ranged 11%-13%. At the same time, you talked about capital constraints in the market for people who are looking to transact, and you've got an advantage there with your structure. Your currency, your capital in that market, I would argue, is your adjusted EBITDA. The $2.24 million in the first half is what you... How that looks going forward is what you bring to the market. Part of that is for distribution, part of that is for financing costs, and part of that is for M&A.
How would you look at the evolution of that going forward, Eric, Rusty, and, you know, do you think there's scope for higher shareholder distributions alongside the growth capital that is required to be deployed? Thank you.
Yeah. No, it's a great question, and I appreciate the question. Yeah, I mean, honestly, as we look at a going forward basis, we obviously always want to be able to maintain. You know, we talked about this. The first few years of our public life, we had to raise more equity as we were trying to grow the business to a scalable size where we could do what we're doing today, and that is utilizing existing organic cashflow to have an impact on the growth, and so that we could at least cover the declines in our revenue stream through organic cashflow. As we move forward, you know, you're right. There's nothing gonna change as it relates to the split between shareholder payouts, dividend.
I'm sorry, debt reduction and coverage, and then, you know, having some amount of cash flow to organically grow. What I would say is, we've said this clear back at the end of last year, is that the dividend will continue to not only be sustainable at its current level, but we're probably going to continue to grow it with deals, but it'll be grown at a much more moderate amount than it has in the past. What I mean by that is we're trading at 11%. We've been trading at 11%. It's a sustainable dividend. We're never gonna cut it.
As we add additional acquisitions and grow the revenue stream, instead of maintaining that 11% dividend yield, what we may do is grow the dividend at a more moderated level, continue to grow it, but moderate it, so that we can then retain more cashflow to de-lever and create liquidity that we can then grow the business and sustain the business over a much longer period of time. I'm in the process of setting up, and we're going through and doing some three-year strategic plans and reviews and coming up with different ways and looking at all the different alternatives to fund and grow the business going forward, providing liquidity and capitalization. All these things are gonna be taken into consideration.
What I will say with a definitive voice is that our existing dividend is non-negotiable, it's sustainable, and as we grow the business going forward, we will continue to focus on those shareholder returns, but we're gonna moderate the growth of the cash outlays, you know, to show that the 11% dividend yield is just it's just too high right now, and we need to bring that back down to a level that the market will price appropriately. And Eric, I don't know if you had anything you wanted to add to that.
No, I think that's really well said, and I think it's why we ended in my comments around working to demonstrate visibility into the results of our business and the low risk nature that as we have conversations this side of the pond, really is differentiated, and should compel our shares to trade at a level that compresses that yield. An important part of that we fully own has been to create scarcity in equity. Rusty's right. We were willing to issue equity along the way to quickly accumulate assets that you've seen us operationally execute flawlessly, thanks to the strategy of retaining the operational talent with those assets.
We've been able to drive costs out of the system, improve margins, and along the way, every time we issued equity, you saw we've increased our EBITDA per share over just the last two years, 20%. Again, that's per share. Now when you look at the significant cash that we can generate organically, the low reinvestment needs that we have, and the multiples at which we're paying, I mean, we've just announced deals this year that were all under 2x as a multiple. Last year the average was 2.5x. If we say that we feel that this business model can comfortably carry 2x-2.5x leverage, there's no need for equity to maintain a healthy balance sheet and continue to grow.
All of that adds or solidifies that dividend, and puts us in a position where we can continue to increase it as we stay on a strong foot, creating scarcity in the shares. I echo what Rusty said entirely, that we wanna make sure we're reinvesting into the business and growing responsibly, and positioning ourselves for safe and growing dividends.
Ladies and gentlemen, we have reached the end of the question and answer session. With that, we conclude today's conference call. Thank you for joining us. You may now disconnect your lines.