Hi, I'm an Account Manager here at Three Part Advisors. I would like to introduce to you all Diversified Energy, who's up next. Ticker on the New York Stock Exchange is DEC. Representing the company today is Senior Vice President, Investor Relations and Corporate Communications, Doug Kris. Doug?
Great, thank you.
Good morning. Thank you, everyone, for being here and appreciate the opportunity to talk to you all today. Thank you to Three Part Advisors for hosting us here again at this conference. It's good to be back in Chicago in nice weather. As he mentioned, my name is Douglas Kris. I'm the Senior Vice President of Investor Relations and Corporate Communications here at Diversified Energy. With me today is Kevin O'Brien. He is our Director of Investor Relations as well. We are both here and happy to answer any questions, post a call, or feel free to reach out to us. I'm going to get started here. You can go back and read this at your leisure if you are so inclined. This first slide is just an overview of our asset base and where we sit.
By metrics, we are about a $1.3 billion market cap company, $3.6 billion enterprise value company. As mentioned, we trade both on the New York Stock Exchange and the London Stock Exchange. For clarification, we are not an ADR. We are a truly dual-listed security. Same CUSIP, same ISIN, trades completely fungible between the two markets. We are an approximately 1.2 BCFE per day producer of natural gas, or approximately just under 200 MBOEs of oil equivalent on a daily basis. Diversified is a company and we focus on optimizing free cash flow. We operate from multiple basins, as you can see here on the map. Our free cash flow generation is supported by strategic acquisitions, and that is how we have been growing the company over the last seven years as a public entity. We are committed to maintaining a balanced capital allocation strategy.
The success of this growth and acquisition strategy is driven by a dedicated, systematic, and disciplined evaluation approach and a framework for evaluating acquisitions that allows us to utilize our operational excellence to optimize production, improve that production, and improve not only the economic performance but the environmental performance, and breathe through cost synergies through vertical integration and scale that others might not have the opportunity to. We are committed to operating these assets in a sustainable and environmentally safe way. Some companies are made, as I'm sure you see in the upstream sector, to focus on development. Diversified is a company that is focused on managing mature producing assets. We built the company to operate assets that have been developed by some great companies, but just lack the focus in their business model to focus on the mature producing assets.
We believe that our business model is needed for the industry, that there's a large opportunity set that's growing of acquisitions for us to bring into our fold, and that we are, as our namesake says, the right company at the right time for operating these U.S. upstream assets. Our growth up until 2020, as you can see here on the maps, was really in the Appalachian Basin. That's where we kind of grew out of, making a number of different acquisitions. In 2021, and since then, we have predominantly focused on what is our Central Region, so Oklahoma, Texas, Louisiana. Today, as we sit here in terms of that production base that I mentioned, we are about 65% production from the Central Region and about 35% from the Appalachian region. Importantly, in March of this year, we completed the acquisition of Maverick Natural Resources.
That was a $1.3 billion purchase price and was our largest acquisition to date. The acquisition brought us scale in the Oklahoma region, making us the largest producer in the Western Anadarko area, and also allowed us to have an entry into the Permian Basin with that asset base at a very attractive valuation. In addition to operating energy assets in multiple basins, we also use vertical integration and scale, as I mentioned, to really high grade the costs and improve the efficiencies of the valuation of these assets. Importantly, we also operate a full-service incorporated asset retirement company branded as Next LVL. Next LVL allows us to cost-effectively retire not only our own wells when it becomes the end of their useful life, but also be a third-party provider to other operators in the region, as well as the states on their orphan well programs.
This allows us to generate incremental revenue and cash flow for our business. As I mentioned, we are a buyer of mature assets, and we believe that Diversified is the publicly traded champion of onshore PDP assets. With over 30 acquisitions, our extensive operations, and our significant investment in cost-effective technology, our commitment to operating these assets in a sound environment and with a creative financing capability, we are well positioned to continue to grow and add cash-generating assets to our portfolio. You know, importantly, when you look across the bottom of this slide at all of these value creation levers, we believe that we have a lot of what I would characterize as opportunities to utilize these attributes to grow our portfolio in a way that is a publicly traded strategy, which is normally utilized by private operators.
A lot of PE companies utilize this PDP acquisition strategy, but they don't have the scale, they don't have the vertical integration, they don't have the benefit of financing, a lower cost of financing. Having large scale and cost savings across multiple basins and across multiple operating areas allows us to capture more value ultimately for our shareholders. As I mentioned, our business model is based on acquiring cash-generating assets. We not only don't develop these assets, but we also are looking at these assets from de-risking the traditional upstream business model. As you can see here on the slide, there are four ways in which we de-risk our business. First is development risk. As I mentioned, we don't develop any of these assets. We are acquiring already assets from good producers. Secondly, commodity price risk, and I think this is an important aspect.
We are very, very hedged in our portfolio. In the current, call it rolling 12 months, we are about 80%- 85% hedged on the majority of our commodity prices. As you go out two, three, four years, that scales down to 70%, 60%, but we've got a high degree of hedging, especially as it's associated with the near term. We've taken a lot of the commodity risk off the table. While this approach sometimes makes us look like chumps, I go candidly, in 2022, when natural gas prices were trading at $9, we weren't looking so smart. As we sit here today and having hedges in place that are north of $3.75 and closer to $4, I think it's a good place to be in. Importantly, what this also does, which rolls into the next point on the slide, is the financing risk.
By having this production highly hedged, it allows us to utilize low cost of capital investment-grade financing that allows us to really capture that spread from where we're valuing the acquisitions at to where the cost that it actually costs us to do that and finance those acquisitions. I think that's an important aspect. Though that financing predominantly has utilized the ABS market, some of you might be familiar with that from other sectors, whether it's the REITs or credit card or fintech or some of the industrial manufacturers that utilize ABS. We've got the same type of attributes with our cash flow generation. When you think about an asset base that generates really consistent, reliable cash flow, that's what these ABS investors, who are predominantly insurance companies, are looking for. It allows us to have that low cost of capital.
Finally, what's important to understand is that our team works hard to significantly reduce and eliminate environmental risks, especially those that come from the attacks of other environmental organizations out there. We've done a very good job of, again, when we incorporate these assets into our portfolio, we are not only improving the production of those assets, but utilizing what we characterize as smarter asset management to improve the productivity, the profitability, and the environmental and emissions performance. One of the things I would note is that over the last three years or so, we have meaningfully reduced our emissions footprint in there to the point where we are 99.5% leak-free in terms of our asset base. We do that importantly through the actual measurement of emissions on our properties and our assets.
There's a lot of protocols out there from different organizations where there's theoretical based on emissions, based on what are the vintage of the wells or the vintage of the equipment on those wells. We are actually levering technology and really some cutting-edge emissions monitoring, mitigation, and measurement technologies to reduce our emissions portfolio overall to the point where we were granted the gold standard by the Oil & Gas Methane Partnership, which is the global standard for emissions reduction. It's the partnership between the United Nations and the Environmental Defense Fund. I think we could all recognize that those are not necessarily proponents of the oil and gas industry. By having the seal and stamp of approval from that organization, I think bodes very, very well for us. This is just a snapshot of our recent performance from the quarter.
What I wanted to point to on this slide is really the gold column on the left-hand side, which really shows the growth that we have been able to bring into our company over the last five years. I think the presentation shows a very simple scale of how we have grown over that time period. When you talk about over 310% increase in adjusted EBITDA over that period, all through acquisitions predominantly by steadily growing the value of our production base and the value of the company and the infrastructure that we put in place to reign through all the way to the bottom line. For the second quarter, when you look at our production, we were about 1,150 MMCFE per day, so just under 1.2 BCF. Approximately, as I mentioned earlier, 65% of that production is from the central region.
Importantly, what you also see in here is, again, steady growth in revenue, adjusted EBITDA, and importantly, free cash flow. This slide is what I would characterize as our scorecard. Right here, we're highlighting a number of the strategic pillars when we think about capital allocation for our business and what we're trying to really ultimately drive home in terms of valuation for our shareholders. As you can see, it is a very balanced capital allocation strategy. The pillars talk about systemic debt reduction, which always creates equity value, the returning capital to shareholders in the form of not only dividends, but also shareholder repurchases. During the first half of the year, we repurchased approximately $43 million of shares. That's roughly about 4% of our shares outstanding based on the current shares count. That systematic debt reduction happens with these ABSs.
Every quarter, we're paying down debt principal on the debt that we have on the balance sheet. It's a different way to create equity value at the end of the day. Obviously here, accretive acquisitions. Since roughly the spring of last year, we've made over $2 billion of accretive acquisitions where, from a cash flow per share basis, we've improved cash flow per share, even when we have issued more shares outstanding. One of the interesting aspects of the slide as well is when you look at the top kind of key message takeaway. We have returned over the past seven years since being a public company, over $2 billion of value in terms of shareholder dividends, shareholder repurchases, and debt principal repayments. That's a pretty astounding number for a company that has a $1.2 billion market cap and really shows the upside.
I mean, that's almost 1.6x what we've turned to shareholders of our market cap. It is a true cash-generating machine. I'm going to turn to the next slide. One of the things, again, that goes hand in hand with this acquisition strategy is during the second quarter, we announced the strategic investment partnership with The Carlyle Group, which I'm sure many of you in this room know. We've now coupled our operational excellence and our culture with a track record of generating free cash flow with a global investment leader. This is a powerful partnership, and we intend to prioritize acquisition investment capital from this partnership to grow this PDP asset portfolio. With The Carlyle partnership, they have ring-fenced approximately $2 billion for acquisitions in a structure that will allow us to meaningfully grow this asset base. Carlyle, we've had a historic relationship with them.
They've been an investor in a number of our ABS securitizations, and we are pleased that they have come to the forefront and said, "We really like your business model, your strategy, the way you run your assets, the way you value acquisitions, and we want to be partners with you for the longer term." This is a very powerful partnership. I think one of the other things is that Carlyle also sees, as we kind of look out into the future in upstream, the opportunity set that lies out there in terms of acquisitions of mature producing properties. By partnering with us, they are getting exposure to that upside. One of the other hot topics, and I think I would be remiss with not having a slide on AI or data centers in any deck, is just that.
Last month, or about a month and a half ago in Pittsburgh, there was the Energy and Innovation Summit. It was spearheaded by Senator McCormick, and President Trump was actually there at one point. It really brought together the intersection of energy producers and technology providers to talk about, think about, and ultimately finance projects within that data center alley, or the northern part of that data center alley. Importantly, utilizing natural gas as the predominant fuel source in the production of energy for those data centers. During that conference, there was a pledge of a number of headline pledge of a number of projects that would provide significant impact to the State of Pennsylvania, but importantly to others in the region.
I think the important takeaway really here is on the bottom right corner, when you talk about what this will do for natural gas prices in the region, which is really improve that because you've now got and put in place a longer-term demand driver of the supply in the region. Very similar to what you saw in LNG and the demand pull that that has provided to the Gulf Coast and really narrowing basis spreads and improving pricing throughout the basin. Will Diversified ever provide a 1.5 BCF long-term locked-in contract to a power producer to power a data center? No.
We will, number one, be able to be part of that solution longer term with shorter contracts and smaller parts of our production, which will happen again longer term down the road, which is exactly what you saw on the LNG window where we actually do have some shorter-term contracts. We have a three-year contract with an LNG off-taker in that area. Importantly, we will reap the benefits of having tighter basis differential for the longer term and improved pricing. At the end of the day, when you think about these macro or secular trends in natural gas, whether it's growing energy and demand, data center build-out, LNG growth, if you're bullish on any of those trends, then you should be bullish on Diversified longer term.
One of the main attributes and main benefits, especially of our recently closed Maverick acquisition on this slide, is what we're detailing, is the cash flow improvement and cash flow growth that we've seen. The resilience of our expanded asset portfolio will strengthen the low-decline production profile. It provides a little bit of commodity diversification with this acquisition. We've gotten a little bit more oil production. We went from prior to this acquisition being about 83% natural gas production to now being about 72% natural gas production with the balance being liquids. This cash flow generation, again, benefits from the low-decline discipline hedging program that we've put in place. Also with this acquisition, the optimization of revenue and anticipated synergies that we've already quantified and in some cases already realized. The chart on the bottom of this page highlights the results of that expanding asset portfolio.
We've delivered sequential growth and year-over-year growth in free cash flow. Our adjusted EBITDA cash margin for the second quarter alone was 63%, which was enhanced by $70 million in cash flow generation from asset sales. I'm going to talk about that just for 30 seconds, which is really with each of these acquisitions that we make, none of them are cookie cutter, but a lot of them come with hidden value or upside that is embedded in these acquisitions that maybe the prior owner was either not focused on or didn't have the ability to realize. One of those things is that, again, when we're valuing these assets and acquiring these assets, the valuation is focused solely on what is the cash flow generation from the wells, based on what is the current operator's cost structure.
That's the valuation framework and a lot of the calculation and math that goes into how we're valuing these assets. What we bring to the table, again, is that vertical integration, scale, owning that cost structure, bringing those assets into a lower cost base, utilizing synergies to optimize those assets, improves that PV value, and ultimately the returns of those assets. The other hidden gem that comes with a lot of these is undeveloped acreage. While some of it might not be recognized here on day one when you acquire those assets, over the course of time, we've built a huge land portfolio that we've been able to hive off literally on a ratable year-over-year basis to the point where year to date, as announced in our second quarter, we've sold about $70 million worth of undeveloped acreage, which is really a gem of our portfolio.
Last year, we sold about $45 million. The year before, we sold about $45 million. When you think about the company as a whole, we're really acquiring energy assets and optimizing those assets, taking that cash flow and returning that cash flow to shareholders. On this slide, again, this talks a little bit and delves a little bit into some of the things that we do on a day-in, day-out basis, operations in the field, the daily blocking and tackling. You can see here on the right, these are some of the workover rigs that we utilize to either change out pumps, change out ESPs, do some small dollar workovers on wells. All of that, again, gets back to the focus.
Diversified is focused on optimizing the long-term production and profitability of these wells, where not that the wells were bad that we bought, they just were not optimized and not focused because previous operators were more focused on upstream development or were cash strapped in terms of doing capital projects on workovers where they're spending all their dollars on new drilling programs. It's important to understand and recognize what we do as a business on a day-in, day-out basis to optimize these assets. We characterize it as smarter asset management. The example here is just talking about a workover program, but it improves the ultimate production profile of those assets longer term. We want to be, at the end of the day, the company that manages these assets not only in a safe environmental way, but also improves the productivity of the assets for the longer term.
These are assets that, in many cases, last 50- 75 years. Netherland , Sewell, who's our reserve engineer, audits all of that information and qualifies them as having that long-life production. It's an important aspect of the energy profile of this country. Candidly, I would say that in any given day, 12%- 14% of production of both natural gas and oil comes from these mature producing assets. If you were to take this away and let it roll off, you'd lose a significant amount of production in the U.S. Just to wrap up again, one of the things that we do, and we like to characterize, we've got our corporate language and we like to get stuff done.
We are highly focused on improving well performance in the operations field, improving commercial contracts with our midstream, retiring assets in a very thoughtful manner, ultimately driving growth, profitability, and value for shareholders. We continue to emphasize that we are a company that acquires, operates, and optimizes portfolios of cash-generating assets. The energy assets that we seek to acquire are low-decline PDP assets across multiple different basins. We seek to maximize that value again to return that value to shareholders while de-risking your traditional E&P risks. The results that we've presented, not only in the second quarter, but over the course of seven years, have provided significant cash flow generation to our shareholders. We believe we are the champion of these PDP assets. As you look across the upstream sector, there's a lot of subsectors out there.
If you look at minerals, there's a bona fide minerals company that you want to focus on. In many cases, it might be Viper Energy. In non-op production, there's a bona fide champion of the non-op production as a public company, Northern Oil and Gas. We are, right now, the only, but there are fast followers coming up, and some of it's been already filed, that want to unlock the value of these assets because we think there is a longer-term opportunity for us to continue to grow this business, continue to grow our cash flow, and be the operator of choice for these mature producing assets. No one's short and sweet, but hopefully I gave you kind of the quick overview of the company and the attributes that we possess that differentiate us across the upstream sector. Happy to take questions, I guess, now. Sure.
What's the corporate decline rate today, how is that over the next few years, and then how much CapEx do you need to keep production flat?
Sure. I'm going to kind of take a stab at it in two ways. The corporate decline rate, as you kind of think about the genesis of your question, is roughly about just under 10%. It's been that way in what we've publicly characterized for the past three to five years. What I would say is, to keep that production decline flat, there are two ways to do that. You either acquire more assets or you drill wells. We're not in the business of drilling wells, so we're continuing to acquire assets. The one thing that we've added most recently with the Maverick acquisition is we have stepped into a joint development partnership. Within Oklahoma specifically, we have an area of acreage where we have partnered with a predominant operator in the area. They are drilling wells, and we are a non-op partner in those wells.
The production of the cash flow that we get from that is roughly about 30% per well. That's our working interest in those wells. The CapEx for this year is the guidance is between $165 million and $185 million. About $110 million of that is on that upstream, let's call it, component of the development capital. What that ultimately does is, will it fully offset that joint development partnership, fully offset that 10% decline? No, but it will have a meaningful effect in, let's call it, reducing that corporate decline. The other thing to think about when you think about, again, the genesis of your question is corporate decline, is what is the lost revenue and/or, importantly, cash flow? As much as you think about that as your proxy for, okay, if I'm losing 10% of my production, does that mean I'm losing 10% of my cash flow?
The answer is not necessarily no, because we have other adjacent opportunities that are growth aspects of our business where we are bringing in incremental revenue. One of those is land sales. Year to date, we've generated $70 million of cash flows. Coal mine methane, one of the other things that I didn't talk about in this presentation, but that's emerging as part of our businesses in that Southern Appalachian Basin. I'm going to try and go back to the slide here. If you kind of think about that West Virginia Corridor there, you could see the concentration of assets. If you were to overlay that graphic on a map of where the coal mines are in Appalachia, we basically sit on top of or adjacent all of them.
What we're able to do is capture the gas from those coal mines because they need to get rid of the gas in the coal mines. Normally, they vent it to the atmosphere. We're actually capturing that gas. We're producing that gas. We actually get environmental credits that we generate. Not only are we selling the gas for, pick your day, ±$3, but we're also getting an environmental credit on top of that that improves, and that's pure cash flow, no CapEx associated with it. That improves your natural gas price to the point where we're realizing $9- $10 an MCF on some of that production. That's another, again, incremental revenue generation or cash flow generation. The other one, again, is Next LVL. While it's more of a lower margin oil field service business, we do provide, we do get third-party revenue in that.
That not only helps to offset our costs to retire any of the wells, but provides incremental cash flow to the company overall. The last one is really kind of midstream and marketing revenue. We've built, again, as I mentioned, through vertical integration and scale, our own midstream and marketing company within Diversified. On any given day, we are a top 20 marketer of natural gas in the U.S. It's not a huge revenue item, but it's, you know, call it $30 million, $40 million of incremental revenue that we're generating from that. All of those pieces help to offset that loss of revenue from corporate decline. There's always the up and to the right if you want to have a positive outlook to natural gas prices that helps as well. Hopefully that was a long-winded, but hopefully it gets to the point of your question.
Yeah, thank you.
Yep. Others? Yeah, please.
You talked about the dividend, which is probably 7% right now. The most fun I had would be that being purchasing issued by the guidance as to percentage of cash flow or income or something that you're using to determine the amount that you pay in the dividend or the amount of buybacks. Your dividend hasn't changed very much.
Yes. I'm going to start with the share repurchase because there's definitely less of a framework around that. I would say it's more strategic. Earlier this spring, when we kind of had the Saudi sell-off again from the oil market and Liberation Day, those are the times where we took advantage and really kind of leaned in on the share repurchase program. It's really kind of more strategic in nature. It's not a set it and forget it. We're going to buy a certain amount of shares every day. If we see value, and at this point, we still see value in our shares, but the extreme value because of dislocation, because of something in the market or something like that, that's when we'll start to lean in on the share repurchase program. Historically, it's been on a year-end basis. It's been between 2% and 5% of our shares outstanding.
In terms of the dividend, the 7% yield, again, it's just based on, obviously, on the share price. We've fixed that dividend based on it's $1.16 per share. Even when we issued more shares, we've kind of kept that same amount. It's fixed. As we kind of look out and forecast our cash flows, as our guidance shows this year, we're generating $420 million of free cash flow. It's about 20%- 22% of our free cash flow generation on a year-end basis.
Just as a follow-up, when you're a U.K. company, right, that afford this, I mean, were you a U.S. company that was listed in the U.K., and does that have any kind of financials that you looked at?
Yeah, so it's a very timely point that you bring up. We were initially listed on the London Stock Exchange as a PLC. What we've done, when we moved to the U.S. and kind of had the U.S. listing, we had roughly about 15% of our shareholders were U.S. domiciled. Fast forward 18 months to where we sit here today, call the end of the second quarter as a valuation or analysis period, we are about 70% U.S. domiciled shareholders. What we will be doing over the course of time, over the next six months, is changing that corporate structure where we'll be dissolving the PLC, making the U.S. and New York Stock Exchange our primary listing, and then filing SEC financials starting with the fourth quarter and full year 2025. We're kind of evolving that over the course of the next six months.
Currently, we sit at IFRS, but if you look through our financials, we do provide GAAP financial tables as well. We kind of do both, but we're going to eliminate that kind of U.K. process because less shareholders, and candidly, by having that amount, over 50% of our shareholders U.S.-domiciled, we're now required to file these U.S. finance. There's a leeway that you actually get two years, I think, to do that process. We've been doing it again in the background, so we're just going to accelerate it and start it with the year-end and fourth quarter 2025.
Share with us a little of the background information about the team at the top. The second point is going forward, just how does the relationship partnership with The Carlyle Group work?
Yeah, sure. The company was founded by a gentleman by the name of Rusty Hutson from West Virginia, third-generation oil and gas, went to college, wanted to be an accountant, was actually a commercial banker for a number of years, started to grow his family and wanted some additional cash flow. What I would characterize as this was started out as his side hustle, acquiring oil and gas properties, and he took it and built it into a business, brought in a partner. It's a really good kind of bootstrap growth through acquisition strategy. Started literally with a $250,000 home equity loan and then brought in a partner, did it all privately, and then in 2017, started with a $50 million IPO with just under 50 MMCFE of production.
Fast forward to where we sit today, called seven and a half years later, we're a $1.2 billion market cap company with almost 1.2 BCF of production. He's the founder and the driver and a big focus of the acquisition strategy. Brad Gray is our CFO. Both of those individuals are based in Birmingham, Alabama, at our corporate headquarters, but we've got a far-reaching team. One of the other things I like to say is Diversified made remote work cool before it was a thing. As you can see, just geographically from the maps up here, we've got lots of different operating areas in almost 15 different states. We've got lots of different offices. Our General Counsel, he heads up also our land department, and he's based out of Charleston, West Virginia.
While our Chief Accounting Officer sits in Birmingham, the bulk of our accounts payable, accounts receivable, royalty accounting is in Canton, Ohio. Our Head of Business Development and that team is based in Denver. We've got an office in Houston where our Chief Operating Officer, Rick Gideon, sits, who's got 30+ years of background in the upstream space. The Carlyle Group, when we made that announcement, call it mid-June, it was for acquisition financing. How it would ultimately work is that Carlyle would put forth the debt and an equity component financing. If we were to make a, for example, billion-dollar acquisition, they would take $650 million into a financing ABS structure where they would be the owner of that ABS. There's the residual where they would own over 50% of that equity component, and we would own the balance.
By having Carlyle as the entity over 50% owner, the debt is deconsolidated off of our balance sheet. It's a real elegant way to finance and grow in a more large fashion acquisitions. Carlyle has an appetite to put this money to work because I don't think they ring-fence $2 billion to sit on the sidelines because they've got to earn a return for their investors at the end of the day. That's a simple example of how it would work. The predominance of it would be, again, in this ABS financing structure, which usually has between 6% or 7% cost of capital on a debt side.
Let's see.
No, we're not in competition with them. We are in collaboration with them. As we kind of have, you know, they work hand in hand with our Business Development team and coordinate with our Treasury department on structure and any of the acquisitions that we're going to make. One of the things, again, as I mentioned, they were investors in our ABSs that like the management team, they like the business strategy, they like the cost model. They basically said, you know, when we were doing our last ABS, they wanted to buy the whole, it was a $500 million ABS, they wanted to buy the whole thing, and we couldn't let them do that. We said, if you really want to get involved, here's what we could do. Seems like we're out of time. All right. I appreciate everyone's attendance here today and engagement with the questions.
Again, please feel free to reach out anytime.