DEC

Greetings, welcome to the Diversified Energy first quarter 2026 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Douglas Kris, Senior Vice President, Investor Relations and Corporate Communications. Thank you. You may begin.

Good morning, and thank you all for joining us today, and welcome to the first quarter 2026 results and Camino Acquisition conference call. With me today are Diversified's Founder and Chief Executive Officer, Rusty Hutson, and President and Chief Financial Officer, Brad Gray. Before we get started, I will remind everyone that the remarks on this call reflect the financial and operational outlook as of today, May 7th, 2026. Certain statements made on today's call are forward-looking and may be subject to risks and uncertainties related to future events and the future financial performance of the company. Actual results could differ materially from those that are anticipated.

The risk factors that may affect results are detailed in the company's public filings with the SEC, including the annual report on Form 10-K for the fiscal year ended December 31st, 2025, filed on February 26th, 2026. During this call, we also make reference to certain non-GAAP financial measures. Our disclosures regarding those items are found in our earnings materials, on our website, and in our regulatory filings. I'll now turn the call over to Rusty.

Thank you, Doug, and thank you all for joining the call today. For those of you following along with our acquisition and results slide deck, which we posted to our IR website last night, I plan to cover a few slides focusing on the acquisition of assets from Camino Natural Resources that we announced last night, and then turn the call over to Brad to discuss highlights from our financial results. After Brad's remarks, I will provide some closing thoughts before opening the call for your questions. Starting on slide 4. Before we get into the quarterly results, I want to spend some time on what I believe is a truly defining moment for Diversified Energy, our acquisition with Carlyle of assets from Camino Natural Resources, and our continued innovation in financing the acquisition of established energy assets.

Let me walk you through the structure because I think it speaks directly to how we think about capital allocation and value creation for our shareholders. In partnership with Carlyle, we are acquiring assets from Camino Natural Resources for $1.175 billion. The financing of the acquisition will consist of ABS debt facilitated by our partners at Carlyle and by cash contributions from both Carlyle and Diversified. A special purpose vehicle or an SPV will be established to jointly own the developed assets as well as issue the ABS notes. The initial ownership percentage in the SPV is 60% Carlyle, 40% Diversified. The acquired assets from Camino include production from PDP wells, of which Diversified will operate, as well as undeveloped acreage. Notably, Diversified will own 100% of the undeveloped acreage and related proven undeveloped reserves.

Diversified's total consideration paid for this acquisition is anticipated to be approximately $210 million or approximately only 20% of the transaction value. We plan to utilize existing liquidity to fund our contribution as we do not intend to issue equity for this acquisition. Based on the innovative financing structure, with Carlyle owning 60% of the SPV, this acquisition is accounted for as an off-balance sheet transaction receiving equity method accounting treatment, which means the leverage associated with this acquisition stays at the SPV level and is not included in our consolidated balance sheet. Now that I've provided some details on the acquisition structure and financing, let me share a more straightforward explanation.

Our partnership with Carlyle and this innovative financing structure allows us to acquire a $1.2 billion asset with a fraction of the balance sheet impact a traditional acquisition would carry. Importantly, we can access an asset of this size and scale without the need to issue additional equity that could dilute our current shareholders. In terms of reporting, Diversified will receive 40% of the residual cash flow generated by the SPV. In addition, Diversified will receive a fee for the administration of the ABS and operation of the assets. As I previously stated, Diversified retains full ownership and control of the valuable undeveloped acreage in all undeveloped locations. This upside sits entirely within our company. With our Carlyle partnership, we also have a future built-in pathway to buy out Carlyle's equity interest as the asset matures and delevers.

Not only are we benefiting on day one, but this structure also sets up a natural future acquisition for us, which is fully consistent with our business model. We expect the transaction to close in quarter three of 2026, subject to customary closing conditions. I want to go a level deeper on what this structure actually delivers for Diversified shareholders because there are multiple value levers in this transaction that I don't want to get lost. First, 40% of the assets residual cash flow comes to the Diversified parent. The assets sit at the SPV level, so we receive the cash flow without the leverage. Second, this is a point I want to re-emphasize. 100% of the acreage in all undeveloped inventory stays with Diversified. The optionality and upside of that undeveloped position is entirely ours.

Third, Diversified Energy earns a management fee plus a future ownership percentage promote once Carlyle achieves certain return thresholds. That's incremental high margin cash flow from that further enhances our returns on what is already an attractively priced asset. Fourth, as I mentioned, the Carlyle agreement includes a pathway for Diversified Energy to buy out Carlyle's full interest in a future period. This feature is a built-in future acquisition. We get to operate the asset, integrate it, realize the synergies, and then step into full ownership when the timing is right. This deal is exactly the kind of innovative, creative, and very shareholder-friendly structure we've been developing our capabilities to execute. We believe it's a template for how Diversified Energy can access large, high-quality asset packages while minimizing potential shareholder dilution and balance sheet risk. Turning to slide five.

Moving to the asset itself, Camino is a transformative contiguous bolt-on to our leading Oklahoma position. We think the strategic logic here is as clear as any deal we've done. Camino brings approximately 51,000 net BOE per day of production from approximately 200 net operated wells across roughly 101,000 net acres. Notably, these assets sit directly adjacent to our existing Oklahoma footprint. When you look at the map, you can see this is not a reach into a new basin. This is a density play in the heart of our core Oklahoma operating territory. The production mix is approximately 15% oil, 30% NGLs, and 55% gas, which increases our overall liquids weighting and further adds commodity diversification to our portfolio.

From a financial standpoint, Camino carries an estimated next 12 months EBITDA of approximately $397 million, with the reserves of approximately 1.5 TCF equivalent. We're acquiring this asset at a valuation that we believe is meaningfully below what comparable Oklahoma transactions have commanded. The contiguous nature of these assets is also what makes the integration thesis so compelling. We have line of sight to approximately $7 million in operating synergies and more than $20 million in G&A synergies. Our track record of integration gives us high confidence in our ability to quickly achieve these numbers. Additionally, through our disciplined underwriting process, we have identified approximately 100 actionable, drill-ready inventory locations on the Camino acreage. These locations have been run through our in-house engineering process, which is the same rigorous review we apply to every development decision across our portfolio.

Our engineering teams have high graded these 100 locations by considering spacing, pricing, and appropriate type curves. Now, inclusive of the Camino inventory, Diversified holds 1,000 Oklahoma locations in total, including more than 450 that meet our robust investment hurdles at $65 oil. It is exciting for me to share this information that in our 25th year of business, we are blessed to have a robust inventory of future reserves. 450 economic locations in the state of Oklahoma is real value that we have accumulated. That's a significant inventory runway, and at a 1-rig pace, for example, would equate to over 30 years of inventory. Turning to slide six. I want to spend a moment on valuation discipline because it is a cornerstone of how we operate and how we evaluate every deal we bring to our shareholders.

Since November of 2023, there have been eight comparable Oklahoma transactions. The peer average on an enterprise value per flowing BOE basis is approximately $28,100. The peak valuation paid in this period was $34,000 per flowing BOE. Camino was transacted at $23,030 per flowing BOE per day. Our Canvas acquisition came in at $22,925. That means we have consistently priced these deals approximately 18% below the prevailing market average and nearly a third below the recent cycle peak, which was within the last quarter. And I'd note that when Reuters reported in January of 2025 that NGP was seeking a $2 billion valuation for Camino, market expectations were substantially higher than where we ultimately transacted.

While we were invited to participate then and throughout the on-again, off-again process, we stuck with our valuation methodology, and that discipline has delivered a great result. This acquisition valuation metric for us is not an accident. It reflects the relationships we've built, the speed and certainty we bring to the deal table, and the discipline to walk away when a deal doesn't meet our return thresholds. We are a proven buyer in this basin, and we believe that our reputation continues to create deal flow and pricing advantages for our shareholders. Turning to slide seven. With Camino, our Portfolio Optimization Program, what we call POP, takes another meaningful step forward. Our POP toolkit encompasses three primary value levers related to this asset: acreage sales, select non-operated programs, and operated drilling.

Together, these tools have historically generated more than $400 million in cash flows since the beginning of 2023. We see a continued runway ahead with our Oklahoma assets. On the Camino acreage specifically, we've used our in-house engineering and landman expertise to high-grade approximately 300 sell-side locations down to 100 actionable drill-ready locations. These are locations that clear our investment hurdles at $65 oil after completing our internal upspacing analysis and after running risk type curves versus using the analysis provided by the seller. As an example, a 1-rig program from Camino's assets, which is down from the 3-rig program Camino had been running, complements our existing high return, non-operated drilling activity while keeping our reinvestment rate conservative and our capital discipline intact. I want to be clear, we view this inventory as an option, not a mandate.

Our reinvestment rate remains disciplined, and we will continue to evaluate development against outright sale, M&A, partnerships, and return of capital alternatives. Turning to slide 8. Let me briefly address synergies, as I know this is an area where we've established credibility with our shareholder base. We've identified approximately $7 million in field-level operating synergies, primarily through integration of Camino's wells into our smarter asset management framework, which allows us to reduce LOE through centralized vendor management, optimized field operations, and through our efficient technology platform. On the G&A side, we see more than $20 million in near-term synergies from deploying our integration playbook. The contiguous nature of the Camino assets means we're not standing up a new regional infrastructure, nor are we adding administrative or back-office resources. We're folding these wells into an operating machine that already exists.

We have an experienced Oklahoma team that has integrated over $2 billion of assets recently. With approximately 200 net wells across contiguous acreage, we expect this integration to move quickly and carry low execution risk. Turning to slide 9. Before moving to the results portion of the presentation, I thought I would just bring it all together on Camino. This transaction checks every box in our acquisition framework. It brings a best-in-class asset management opportunity across an expanded and contiguous Oklahoma footprint. It demonstrates our innovative financing capabilities using the Carlyle partnership and ABS structure to access a $1.2 billion asset with no equity issuance and achieving off-balance sheet accounting treatment for the issued ABS debt. It keeps the undeveloped upside 100% with Diversified and further enhances our returns with the management fee structure.

It has a built-in future acquisition pathway structured into the Carlyle agreement. We are confident this deal strengthens the long-term cash flow generation and shareholder return yield of this company, and we are excited about the future cash flow generation it provides to our shareholders as that asset matures and delevers over the coming years. As we have stated before, the opportunity set in front of this company is larger today than it has ever been. There are assets in every basin we operate, along with other basins that are undermanaged, undercapitalized, and underoptimized. There are sellers who need certainty, who need a buyer with operational expertise and financial credibility to close transactions quickly and effectively. That is our brand and reputation.

The Carlyle partnership has supercharged us, giving the company the ability to reach up and acquire large assets without shareholder dilution or balance sheet strain. We are just getting started with that capability. With that, let me turn to our first quarter results. Turning to slide 11. This slide tells the story of our disciplined capital allocation priorities, which are core to our differentiated business model. Not only is our business model differentiated, it is proven. Our model continues to deliver on our four key priorities for capital allocation, which are as follows: systematic debt reduction, return of capital through dividend distributions and share repurchases, and growing our portfolio of cash-generating assets through accretive strategic acquisitions. We are off to a terrific start in the first quarter of our 25th year in business. I'm extremely proud of our team for delivering outstanding results in our year of celebration.

As you can see on this page, we reinforced our track record across all of our shareholder priorities during the first quarter of 2026. During the first quarter, we repaid approximately $92 million in debt principal. This is not just financial housekeeping, it's strategic. Every dollar of debt we retire strengthens our balance sheet, reduces our cost of capital, and expands our capacity to execute the next acquisition. With our pro forma leverage at 2.2x, we have the confidence to move decisively on opportunities like Camino without putting our balance sheet at unnecessary risk. We returned approximately $94 million to shareholders through dividends and strategic share repurchases. I want to be clear about how we think about share repurchases because it's opportunistic by design.

When we believe the market significantly misprices our stock, we act because we know what the business is worth, and we are willing to back that conviction with capital. We don't view market dislocations as a threat. They are a buying opportunity, shareholders benefit. Worth noting, we have demonstrated a track record of robust and disciplined capital allocation with approximately $2.3 billion in shareholder returns and debt principal repayments since our IPO in 2017. Together, these actions demonstrate the power of our disciplined and flexible capital allocation priorities and the quality and consistency, the cash generation capabilities of our portfolio of assets. As a result, our free cash flow engine is expected to generate approximately $430 million this year.

I'll now turn the call over to Brad to discuss our financial performance and portfolio optimization results in greater detail.

Thank you, Rusty. I share Rusty's excitement for Diversified's future, and my confidence in our teams and our assets and in our ability to generate consistent, reliable cash flow has never been higher. I appreciate the dedication and commitment of our teams to deliver quality results each and every day. Now turning to slide 12. Before sharing the highlights of our financial and operational results for the first quarter of 2026, I would like to focus on the right side of this slide. This presentation very simply illustrates how our accretive growth of cash generating energy assets paired with best-in-class operational and corporate infrastructure translates into material bottom-line growth.

For the first quarter of 2026, starting with production, the daily production exit rate for March was approximately 1.23 Bcfe per day, and our production for the quarter averaged approximately 1.2 Bcfe per day. Like others, our production was impacted by Winter Storm Fern and other regional weather events. Importantly, our deeply experienced operational teams were able to manage through those challenges, and our production exit rate stands in line with our guidance. Total commodity revenue was $556 million, and adjusted EBITDA was a record $287 million for the quarter, with our adjusted EBITDA margin landing at 68%. Notably, our portfolio optimization processes, or better known as our POP program, allow us to generate approximately $101 million in additional cash proceeds during the quarter.

I would note that approximately $50 million of the $101 was an agreement sold working interest in acreage to a drilling program run by Continental Resources, receiving not only cash proceeds, but the opportunity to add production and overall reserves. These results are exciting to reflect on, but the real excitement is about the opportunities in front of us and the capabilities of our team to capture those opportunities. Our adjusted free cash flow for the first quarter was $160 million and was burdened with approximately $11 million of transaction costs and also reflected some friction related to natural gas first of month and mid-month pricing volatility, specifically in the month of February.

Our net debt stood at approximately $2.7 billion at the end of the first quarter. We improved our overall pro forma leverage by approximately 20% to 2.2x. That leverage ratio sits comfortably within our target level of 2.0x to -2.5x net debt to EBITDA. With approximately $529 million in liquidity, our balance sheet is providing us the optionality and flexibility to navigate and take advantage of opportunities that we believe are available, including our recent Sheridan acquisition and notably the Camino acquisition. Additionally, our investment grade rated non-recourse ABS notes help contribute to our financial resilience and ensure we maintain our discipline to consistently repay outstanding debt, of which we repaid $92 million during the first quarter.

In summary, our team's strong execution of our strategy to acquire and optimize stable, consistent cash-generating energy assets enabled strong free cash flow generation and allowed us to continue to prioritize returning capital to shareholders and paying down debt. This is what operational innovation looks like in the real world. A relentless, systematic, compounding improvement in everything that we do, and our financial results reflect it. Now, turning to slide 13, I wanna highlight the continued momentum in our joint venture non-operated partnership program, which is adding high return production with capital efficiency that we couldn't otherwise achieve on a standalone basis. We now have three active partnerships, the Mewbourne Anadarko program in Oklahoma and two new Permian Basin programs, one with a private op-operator on the Northwest Shelf in New Mexico, and one with Continental Resources on the Central Basin Platform in Texas.

The Oklahoma program continues to deliver greater than 60% program IRRs. The two new Permian programs are expected to begin initial drilling in the second and fourth quarters of this year, respectively. Our non-operated development total production exit rate in 2026 is expected to be approximately 12,500 BOE per day, which meaningfully offsets our core business base production decline. By contributing acreage into these JVs, we're accessing well level economics that aren't otherwise available in our existing PDP portfolio. It is worth noting that with the addition of Camino to our Oklahoma undeveloped inventory location count, we not only have the ability to expand our POP program, but further opportunity to expand the company's underlying reserve value that can potentially facilitate the opportunity to expand our capital structure in the U.S. credit market and lower our cost of capital.

Turning to slide 14, we are reiterating our full year 2026 guidance today. We expect total production in the range of 1.17-1.21 MMCFE per day, with a mix of approximately 28% liquids and 72% natural gas. Adjusted EBITDA guidance remains in a range of $925 million-$975 million, with adjusted free cash flow of approximately $430 million. Total capital expenditures are expected in the range of $205 million-$235 million, with non-operated CapEx of $135 million-$155 million, and maintenance CapEx in a range of $70 million-$80 million. We remain committed to our leverage target of 2.0x to -2.5x.

The recently closed Sheridan acquisition and the Camino transaction we announced last night are not fully reflected in these guidance figures. We look forward to providing further information on the combined financial profile as we approach our third quarter. Now turning to slide 15. We believe Diversified Energy represents a truly compelling and differentiated investment. When you look at our investment attributes, you see something that's genuinely rare in the energy sector. We are a business that is simultaneously a growth story, a value story, and an income story. We believe the market is still in the early stages of fully recognizing these attributes. The work that we are doing is closing the gap.

We have a viable path and a plan to grow that valuation, supported by the recognition that our core business delivers durable, consistent cash generation, similar to cash generation attributes of sectors that receive much higher valuation multiples in the equity markets. The value is even more magnified in the credit markets, where quality cash flow is rewarded with investment-grade ratings and lower cost of capital. Our continued success in the ABS market illustrates a compelling path to close the current valuation gap and provide a higher long-term valuation. Finally, I would like to extend my congratulations to Rusty on the achievement of his 25th year leading Diversified Energy. The proven nature of our business model is one thing, but the resilience, dedication, grit, and creativity of its leader is equally, if not more important. Now back to Rusty.

Thanks, Brad. Before we take questions, I want to step back for a moment to provide some final thoughts on our investment thesis and our strategic outlook. On slide 16, today we're in a highly volatile geopolitical and commodity price environment where many producers are still evaluating or pulling back from M&A and new commitments. At Diversified, our entire history has been built on doing exactly the opposite. We step up when others step away. We did it when we built this company from the ground up in Appalachia when other operators were chasing the drill bit and moving away from conventional production operations. We did it with recent transactions like Maverick, Canvas, and Sheridan. We're doing it now with Camino. We didn't inherit this model. We didn't copy this model. We invented it. The barrier to entry isn't just capital.

It's operational muscle, institutional knowledge, technological innovation, and relationship infrastructure that underpin everything we do. We don't just generate cash flow, we engineer it, make it durable, and make it consistent. The result, 25 years in, is a company that has returned approximately $1.2 billion to shareholders in dividends and share repurchases since IPO, that has grown EBITDA per share at a 12% compounded annual growth rate over the last five years, and that will control over 1,000 Oklahoma undeveloped drilling locations, over 38,000 mi of midstream pipeline, operations in four distinct basins, including high-quality Permian assets, and a daily production platform of over 1.2 BCF per day. When I look at the execution and results displayed here, it is important to note that that kind of consistency doesn't just happen by accident.

It happens because we have built something that most companies in this industry haven't, a true operating platform. It's not just a collection of wells. It's a technology-driven, vertically integrated, continuously improving system that wrings every dollar of value out of every asset and acquisition. In a volatile world, in an industry filled with uncertainty, the market rewards stability, and we are the constant. 25 years in, with more opportunity ahead of us than behind us, we are proven, and we're just getting started. With that, I'd like to turn it over to the operator for the Q&A portion of today's call. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question please press star one on your telephone keypad. A confirmation tone will indicate you're line is in the question queue. You may pres star two to remove yourself on the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star key. Your first question comes from Neal Dingmann with William Blair. Please go ahead.

Good morning, guys. Nice quarter. Rusty, my first question is on your potential operational activity. Specifically on slide 7, you all mentioned the potential for a rig from Camino's on Camino's assets to complement your non-op. I'm just wondering what will determine if and when you would bring in a rig like this? Then remind me, you know, other areas where you also have optionality like this to potentially bring in a rig to, you know, sort of juice things.

Yeah, no, I think that's a great question, Neal Dingmann. We really look at it, we have alternatives. It's optionality. We can You know, we have the acreage. I'll just, you know, be frank, I've received multiple calls already regarding the acreage we're picking up with this Camino transaction, you know, wanting to partner, drill, whatever. We've got options here. We can, you know, acreage sales are always on the table. JVs with other partners like our Mewbourne operator relationship in the Cherokee, the one that we just announced with Continental in the Permian. Or to your point, adding a rig ourselves. All of those options are on the table. They're very As we stated in here, we have 100 locations that are highly economic at $65 oil.

You can imagine one of those three options would be something we would be looking at doing fairly quickly after we close the transaction.

Neal, this is Brad, I would just add, as Rusty indicated in his comments, we do have 1,000 locations down in Oklahoma that we've accumulated with Canvas, Camino, Tapstone, and.

Echo.

One other. 450 of those locations are highly economic, you know, at a $65 oil price. You know, that number of opportunities really, as Rusty indicated, creates tremendous optionality for us.

Brad, that sort of leads me to my second question, was gonna be around slide five. You know, where you classify, as you said, just with Diversified alone over 350,000, another 100,000 for Camino, which you all term actionable Oklahoma inventory. I'm just wondering what metrics are you using to put it in that, you know, to call it the actionable and, you know, what would be potential timing of development of this area?

Yeah. Generally, we've underwritten these assets at $65 oil, $3.75 gas. That's the primary. Then we've been, as also as Rusty indicated, running through our in-house engineering and rigorous process. We've really de-risked these locations. You know, as we said, there's a thousand out there, but 450 are economic here. You know, it's a big inventory. I mean, if you ran one rig on that number of locations, you could have 30 years of inventory. It's a good opportunity for us.

Neal, you know, from our perspective, you know, we have acquisitions that IRR hurdles that we have to look at. This would have to compare to it. Everything is, you know, obviously compared on an IRR basis. These, those 100 would obviously fit that mold. The one thing for us now is how do we leg into it and which degree that we leg into it, you know, outright sale, JV, or with our own rig. I would say that from a timing perspective, you know, it's not something we would sit on for a year or two, that's for sure.

That makes sense, guys. A great time to have massive acreage. Thank you.

Next question, Charles Meade with Johnson Rice. Please go ahead.

Good morning, Rusty and Brad, and to the rest of the Diversified Energy team there. I wanted to ask about the, yeah, I know there's probably more details than we could or should get into on this call, but about the Camino SPV and the mechanics of the mechanics of it and how Diversified Energy owns the, I guess, the undeveloped portions. Does the SPV just own an interest in the existing wellbores? If that's the case, then what is the What's the structure or the mechanism whereby Diversified Energy kinda owns the rest? Is there any kind of duration on this SPV that you could point us to?

Neil, first of all, as we indicated in our comments, the undeveloped inventory, the undeveloped acreage is 100% owned by Diversified. It is not included within the SPV. We have full ability to, you know, benefit from the value there. The SPV does own the wellbores of the producing PDP wells. The ownership percentage of that SPV is 60% Carlyle, 40% Diversified Energy. The SPV will also have the debt, will issue the ABS debt, as we indicated, it will not be consolidated on our balance sheet. Really, I mean, you could look at this transaction in two different transactions, one with an undeveloped component and one with a PDP component. The SPV has the PDP, Diversified has the undeveloped, along with its equity interest in the SPV.

Got it, Brad. You understood where I was going with that. Thank you. Then if I could actually go back to what Neil was just asking about, 'cause I wanna make sure I understand this. Is Diversified now considering running an operated drilling program, I mean, it sounds like you are considering running an operated drilling program, but you're not committed to it. I know in the past you've talked about it's like if you're gonna run an operated drilling program, that means there's a whole set of, you know, professional, you know, competencies that you have to have in your organization, which historically, I believe you haven't.

You picked up a lot of talent with Maverick, and it's possible you're picking up more talent here with Camino. Could you just, you know, elaborate on that?

Yeah, Charles. I'll call you Charles. Brad called you Neil. I'll call you Charles.

Oh, I'm sorry.

I caught that too.

Sorry.

No. Yeah, you're absolutely right. Again, keep in mind, we have three options here, okay? The one that will make the most economic viability to us is the one we would take. We can sell the acreage, we can JV it, which we've done twice now with Mewbourne and then also now with Continental in the Permian. In both of those cases, as you know, that brings their expertise to the table, and we're just participating alongside of them. They're paying us for that value, and then we're participating alongside of them. In some cases, we could consider bringing on a rig ourself. All three of those options are viable. For us, it'll just be evaluating which one makes the most sense, most economic sense to us, as we move forward.

Charles, I gotta write this down.

Yeah.

You did mention an accurate statement that we did pick up a lot of very solid, strong talent in our Maverick Natural Resources acquisition. Rick Gideon, who's our Chief Operating Officer, you know, has extensive experience in the lower 48, including in Oklahoma, in developing wells. We picked up some very capable technical talent from an engineering perspective at all different parts. We've got experience with some with our employees that have worked in drilling programs, drilling and completion programs in the past. We're not starting from scratch if that's the path that we decide to go down.

Yeah. Charles, I will also just elaborate further, that experience that Rick and his team, the engineering team and such, brought to the table from the Maverick deal was also one of the reasons why you have seen us be so successful in our POP program. You know, being able to, for the first time, really get behind the scenes, evaluate all of our acreage position across the company, and really determine value that we can then go out and extract for things that we didn't pay for when we did these transactions. Rick and his team have helped us tremendously from that standpoint.

Got it. Thank you, gentlemen.

Thank you.

Next question, Jonathan Mardini with KeyBanc Capital Markets, please proceed.

Hi, good morning, and thank you for taking my questions. You alluded to this a little bit, but in the, in the per-prepared remarks and just broadly, historically, you've talked about the potential to buy out Carlyle's equity interest, in this case, you know, in the Camino assets as they mature and, you know, the ABS within the SPV delevers over time. Just curious how you would think about the various milestones or the timing that could drive a potential buyout of the structure.

It's really I wouldn't say that there's any specific thing that we would put our finger on to say, "That's the time to do it." For us, you know, there are a lot of variables in there. There's obviously the de-levering, the asset maturity, the reversion aspect of the SPV, you know, to that to be triggered, where we would automatically receive a reversion. All of those things would come into play. A lot of it just goes back to, you know, the one thing that's really attractive about this partnership is we're able to really accumulate a lot more assets at a much faster pace than we would if we were trying to do all this on our own balance sheet.

It's setting up a massive inventory that we can acquire. You know, as we sit here every so often, we hear questions. They say, "What, you know, how are you gonna grow the business long term? What acquisitions?" This is going to be a big inventory of assets that we can continue to acquire back from Carlyle just by buying out their residual equity value in the SPV and bringing it on balance sheet. I don't think there's any triggering moment. It's really based on just from Diversified's perspective, what's the right timing and the, you know, and the need to grow, you know, the business on a going forward basis.

Jonathan, one other aspect. You know, we have a track record of issuing ABS notes, allowing them to de-lever, and then creating equity value in those structures. And then we've been able to refinance and tap into that equity value, just like you would in your home mortgage that you're paying down. We've been able to tap into that equity value and use that liquidity to continue to grow the business. There would be some similar characteristics that we would look at in this Carlyle structure with the ABS notes that we're putting on that.

Okay. Yeah, that's clear. Appreciate the detail. If I could just pivot on your non-op JVs. You referenced asset sales to Continental this year related to a joint development program starting in 4Q. Can you just maybe talk about or help frame the scope of that JDA, whether, you know, in terms of well or rig commitments or maybe expected contribution to production over time?

It's, yeah, it's an ongoing. To be fair, you know, we just signed it up. I mean, literally just, couple, yeah. Sitting down with them, walking through the drill schedule that they have anticipated, you know, they paid us for 50% of that acreage position up front, and then we'll participate alongside of them on a going forward basis. Most of that contribution will be in 2027, obviously, because they're not really picking up a rig until the end of the year. They're still working through the mechanics of the timing and how many wells and when they're gonna drill them.

On top of that, you know, we've talked about in the past that we've got non-core acreage. We don't really consider this acreage position that we had that we contributed to Continental as non-core. I mean, it's very proven acreage. We just believed through our analysis by Rick Gideon and his team that the best way to generate value for Diversified Energy was to contribute, receive cash, and then utilize the expertise of Continental in that area. This is very good acreage, and we just, through our economic analysis, believed that this was the best path.

Right. Okay, great. Thank you for the time. I'll leave it there.

Thank you.

Next question, Jared Giroux with Stephens, please go ahead.

Hey, good morning, guys. Thanks for taking my questions.

Good morning.

My first one's just on the Camino acquisition. Thank you, Rusty, for the details on why you're funding the acquisition utilizing the off-balance sheet equity method of accounting. I guess my question is for future acquisitions, how do you guys decide if that's the route you'll go if utilizing the off-balance sheet financing? Can you just give an update on your partnership with Carlyle? I believe the original agreement was up to $2 billion in PDP acquisitions. I guess after the Camino, what's still remaining, or can you guys go higher than the total $2 billion?

Yeah. Well, let me address the first question. In terms of, you know, forward acquisitions, whether we use the Carlyle partnership or not, I would say a lot of the transactions that we're looking at sitting here to date, the Carlyle structure would be highly utilized through that through that acquisition opportunity set. You know, for us, we're seeing a very robust market right now. You know, I think, you know, just the overall market for divestitures has opened up quite a bit in the last 30 days, and I think we're gonna, you know, be involved in several of those. I think that off-balance sheet, non-dilutive structure to us is very attractive. We're able to do more without stressing the balance sheet.

I would say that's probably gonna be a majority of what we do moving forward here over the next several months. On the other hand, you know, as it relates to their You know, the agreement we had with them, stated a $2 billion commitment, but the opportunity is way bigger, and they have made the commitment. It was $2 billion, we put it in our agreement just because we had to put a number. It's unlimited. I mean, they have capital. We, you know, we have opportunity set. They're ready to put money to work as we are. I would say that there's no restrictions, at least right now, in terms of the opportunities and what they're willing to step up for.

That's great color. Thank you for that. Yeah, just my second question on capital return priorities. If you had to rank debt reduction, share purchases, the fixed dividend, and acquisitions, how would you rank those most important to least important to Diversified?

It's You know, look, they're all very, very important. I wouldn't rank them. I would say we would always put them in the order of which one makes the most sense at that specific time. You know, we're on a systematic debt reduction process with the ABSes. Every quarter, or really every month, we have debt reduction. That's ongoing. That's a very important factor in our business. We obviously, as Brad said earlier, these ABSes, we want them to pay down. We want them to create equity value that we can then utilize to grow the business going forward. That one is probably If I had to rank them as I sat here today, that one's always gonna be right at the top because you're doing it every quarter.

As it relates to dividends, that's a very, very important piece of our business. We've set that dividend. We've said that it's stable and it's very, you know, dependable, and no one should worry about that fixed dividend. Share repurchases, as I said in my comments, they really just kinda factor on, you know, are the shares being mispriced? When they are, we're gonna be, you know, opportunistic to step in there and buy them, because we believe that's a very, very good use of our cash to reduce our share count and create value for the ones that are still holding it. All in all, I think we're all in a, you know, all four of them are important, but, you know, as is growing the business, 'cause you have to grow.

I think it's really just based on that specific moment, which one makes the most sense.

What I like about the business model and the business that we've built is the fact that we do have flexibility on all of those. The durability and consistency of our cash flows and the way we've capitalized the business give us the ability to balance all four.

That's great. Thanks for the color, and thanks for taking my questions, and congrats on the acquisition.

Thank you.

Once again, if you would like to ask a question, please press star one on your telephone keypad. Next question comes from Sam Wahab with Peel Hunt. Please go ahead.

Morning, guys. Thanks, thanks for taking my question. Actually, a lot of mine have already been answered, but one that I do have is that just in terms of the off-balance sheet SPV, what sort of differences in terms of return hurdles have you applied to the Camino deal that you wouldn't necessarily do or you would do more if it was on your balance sheet?

The only thing that if it was on our balance sheet, the biggest restriction would be, Sam, is that it would really tie us up from being able to do more transactions of that size in the future. When you bring it on the balance sheet, you've got the, you know, you've got the debt, you've got the, you know, all the other things that come along with a balance sheet transaction. That's something that we wanted to limit. We didn't want the number one, the leverage on our balance sheet, we also didn't want it to result in any kind of dilution to our existing shareholders. That was the big thing. We wanted to grow the business.

We wanna grow the free cash flow profile of the business with as little to no dilution to our shareholders as possible. That would probably be the only difference.

Okay.

I want to, hey, Sam, I'll also add that, you know, with our Carlyle partnership, it's not just a financing partnership. It's a true partnership to really look for value. You know, 'cause they're taking an equity interest in the SPV like we are. We're definitely aligned as it relates to the valuing of the assets.

Yeah, understood. Should we start thinking that that sort of structure will be the dominant funding route for your sort of larger deals, but you remain optimistic as when you see, you know, good fits and synergies potential in your existing sort of on-balance sheet format?

Yeah. I mean, the larger deals for sure would be things that we would look at with them. You know, I would say more, you know, as it relates to our on-balance sheet, smaller bolt-ons, you know, corporate transactions that may not fit the structure, would be the things that we would look at from that standpoint.

If you just play this answer forward into the future, or if we're fortunate enough to be able to stack four or five of these type of transactions over the next couple years, what does that mean three and four years down the road? Well, it creates an inventory of acquisitions that we can bring back onto the balance sheet, bring that cash flow, as we've mentioned, high margin cash flow back onto our financial statements, and that just provides, again, stability, future stability for our company.

Great. Just finally more broadly, you mentioned there, Rusty, that you're seeing a lot more activity up until recently, a lot of divestiture set. Could you just talk a little bit about what's driving that, where you're seeing the opportunity in terms of geography? Also comment on, is it more gas related? Is it more liquids related and where your preference would lie?

No, I think, you know, obviously liquids have become to the forefront here. Obviously, the oil price escalation in the next month or two, I think what people aren't really focused on is you just think, well, oil's up, you know, in the front month, but if you look out over the curve, it's not really that substantially higher than it was 6 months ago. That $2 difference in that curve going forward has caused some of these more liquid rich plays to, or assets to come to market. We still are seeing gas. There's some gas out there that's in the market. It's just not as much as you're seeing on the liquid side right now.

Okay. Great. Thanks very much, and congratulations again on another impressive deal.

Thank you.

Thanks, Sam.

Thank you. I would like to turn the floor over to Rusty Hutson for closing remarks.

Just wanna say thank you all again for joining today. If you have any further questions, obviously reach out to Doug and on our investor relations group, and he'll have all the answers you need. Thank you again.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Greetings, and welcome to the Diversified Energy 2025 Annual Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Douglas Kris, SVP, IR and Corporate Communications. Thank you, Douglas. You may begin.

Good morning, and thank you all for joining us today, and welcome to our fourth quarter and full year 2025 results conference call. With me today are Diversified's Founder and Chief Executive Officer, Rusty Hutson; and President and Chief Financial Officer, Brad Gray. Before we get started, I will remind everyone that the remarks on the call reflect the financial and operational outlook as of today, February 27, 2026. Certain statements made on today's call are forward-looking and may be subject to risks and uncertainties relating to future events and the future financial performance of the company. Actual results could differ materially from those anticipated. The risk factors that may affect results are detailed in the company's most recent public filings with the SEC, including the annual report on Form 10-K for the fiscal year ended December 31, 2025, filed on February 26, 2026. During this call, we also reference certain non-GAAP financial measures. Our disclosures regarding those items are found in our earnings materials on our website and in our regulatory filings. I will now turn the call over to Rusty.

Thank you, Doug, and thank you all for joining the call today. Before diving into the recap of the year and the fantastic operational and financial results that we posted last night, I want to start the call today with some opening remarks around our strategy, our culture and the theme that we believe fits well with our accomplishments in 2025, we are proven. I believe we are at an inflection point for our industry and for our company. The landscape is changing rapidly, not only in upstream but the entirety of the energy value stream. Consolidation is accelerating. Volatility in commodity prices, especially natural gas, is increasing. Competition has never been more intense, and the choices we're making right now matter more than ever. But in the 25 years since I founded Diversified Energy, I believe we are in the best position we have ever been in. I'm truly excited for the future and the next 25 years of Diversified. As the founder and CEO of our company, I'm extremely proud of the business we have built, the professionalism of our team, the quality of our assets, our sound financial condition and the strength of our business model. Importantly, a ticker symbol doesn't drive results. People do. Diversified is a leader, an innovator, a pioneer because of the talent, skill, tenacity and capabilities of every member of our team of professionals. Whether in the field or at a desk, Diversified is a leader because we trust our people and empower them to do their very best work. Our people are the track record. They are the results. They are the proof, and we are proven. For those of you following along with our year-end 2025 results slide deck, which we posted to our IR website last night, I plan to cover a few slides and then turn the call over to Brad to discuss highlights from our financial results. After Brad's remarks, I will provide some closing thoughts before opening the call for your questions. Starting on Slide 3. Given current market dynamics, especially related to the energy sector, I believe it's important for analysts, investors and all stakeholders to understand in simple terms, the investment opportunity we offer. As the founder, I was the first investor 25 years ago. I used my home equity to purchase a small package of wells in West Virginia, which led to a $50 million initial public offering in 2017. Today, I still hold all my shares as the largest individual shareholder with company insiders holding approximately 6% of the shares outstanding, demonstrating the team's belief in the quality of our company and the future prospects for our business. I will not go through all of the investment qualities listed on this slide but the 6 simple attributes that Diversified possesses are not only what we provide but also what we deliver and ultimately tie back to a simple statement listed here as number one. Diversified is the first and currently only publicly traded company focused on acquiring, operating and optimizing established cash-generating energy assets. We believe the first-mover competitive advantage we built continues to bolster our business and is a key component in the record results we achieved in 2025 while allowing us to continue creating value as a proven business model and a compelling investment thesis. For the past 25 years, we focused on acquiring and operating cash-generating energy assets so that we could provide our investors with a consistent and reliable return. We know that this proven focus provides investors with a unique and lower-risk method of investing in oil and gas assets, and I am proud that we were and are the leader in this strategy. Turning to Slide 4. As we look further across the subsectors of the energy investment landscape, it's important to recognize that diversified exhibits several of the positive investment attributes of these subsectors, while notably delivering a significantly higher free cash flow yield. We believe these attributes represent a straightforward thesis for a multiple re-rate in our shares as we currently trade on average 3 turns below those other cash-generative subsectors of the overall energy industry. Given this low relative valuation, we believe our shares offer a triple threat of attractive investment style. As a value stock that trades at an attractive 4x EV to EBITDA multiple and over 25% free cash flow yield, as a growth stock with attractive top line revenue growth of over 140% and free cash flow growth of over 110% year-over-year and as an income stock with an attractive current dividend yield of approximately 8%. Our company remains a unique yet consistent and proven investment opportunity. Turning to Slide 5. When we view the high-level recap of the past calendar year, 3 words come to mind: innovation, transformation and focus. Innovation from the Mountain State Plugging Fund and Carlyle strategic financing partnership, transformation from the approximately $2 billion in accretive acquisitions, inclusive of Maverick Natural Resources and Canvas Energy, focus from delivering on goals to improve financial leverage, expand our investor universe and achieve multiyear sustainability performance. It's impressive to know that we delivered success during a time of commodity, geopolitical and financial market volatility and equally impressive that it was all done in 1 year. Once again, it illustrates we are proven. Turning to Slide 6. We are kicking off 2026 continuing to execute on our proven acquisition playbook, and I will spend a few minutes on the specifics of the deal we announced last evening. We are excited to announce the acquisition of Sheridan Production Partners, a privately held company with assets in East Texas, including a bulk of its leasehold and production in Panola and Harrison Counties. As you can see from the map, the acquisition is a true bolt-on to our existing operations and has the potential to create significant value above the purchase price through the combination of high-quality assets with our proven operating model. We are acquiring an additional 61 MMcfe per day of natural gas production in the sought-after Gulf Coast region and notably in proximity to our 120 MMcf per day Black Bear processing facility. We are acquiring Sheridan for approximately $245 million, which represents a PV-15 valuation. The acquisition is being funded with our current liquidity, which we announced last evening was approximately $577 million. This established producing asset has an extremely low corporate production decline profile of approximately 6% and is anticipated to contribute approximately $52 million in next 12 months EBITDA during calendar year 2026. We believe this accretive acquisition offers a tremendous opportunity, adding contiguous acreage in the operating region, delivering strong, stable production with estimated reserves of approximately 397 Bcfe and immediate line of sight to operating efficiencies from our smarter asset management and the ability to capture meaningful synergies from the increased asset density in field operations, integrating processes and systems under our DEC platform and consolidating corporate functions. We anticipate the acquisition closing during the second quarter of 2026 and look forward to integrating these high-quality assets into our asset base. Turning to Slide 7. As we discussed throughout 2025, we established a goal to move our primary listing, reincorporated in the U.S. and publish U.S. GAAP financials as an SEC regulated accelerated filer. With our SEC 10-K filing last evening after the New York Stock Exchange market close, we fully achieved our listing and reporting objectives going hand-in-hand with our 25-year milestone as an operating company. This achievement and formal move to the U.S. markets mark a new chapter and provide the company with a larger stage to further expand its investor base and ultimately create the opportunity to increase the value of our business. As I reflect on the history of our public company journey as a public company over the past approximately 9 years, the sheer magnitude of our growth in operational and financial scale and capabilities reinforces the art of the possible with our get stuff done culture, and I'm excited for what we can accomplish in the future. Turning to Slide 8. Our proven business model continues to deliver on our 4 key pillars of our capital allocation priorities, which are as follows: Systematic debt reduction; return of capital through dividend distributions and share repurchases; and growing our portfolio of cash-generating assets through accretive strategic acquisitions. As you can see here on this page, we reinforced our track record on all of our priorities for shareholders in 2025. During 2025, we repaid approximately $277 million in principal. We returned approximately $185 million to shareholders through dividends and strategic share repurchases, representing approximately 16% of our current market capitalization. Worth noting, we have demonstrated a track record of robust and disciplined capital allocation with approximately $2.3 billion in shareholder returns and debt principal repayments since our IPO in 2017. Importantly, we believe our shares remain a compelling investment at current levels, and we will continue to take advantage of the current cycle and market dislocation to opportunistically repurchase shares. Together, these actions demonstrate the power of our disciplined and flexible capital allocation priorities and the quality and consistency of the cash generation capabilities of our portfolio of assets. We will remain focused on our key strategic pillars. With that, I'll turn the call over to Brad to discuss our financial performance and portfolio optimization results in greater detail.

Thank you, Rusty. I share Rusty's excitement for Diversified's future and my confidence in our teams, in our assets and in our ability to generate consistent, reliable cash flow has never been higher. I appreciate the dedication and commitment of our teams to deliver quality results each and every day. We'll now turn to Slide 9. Before sharing the highlights of our financial and operational results for the full year 2025, I would like to focus on the right side of this slide. This presentation very simply illustrates how our accretive growth of cash-generating energy assets paired with best-in-class operational and corporate infrastructure translates into material bottom line growth. I'll start with production. The daily production exit rate for December was approximately 1.25 Bcfe per day, and our production for the year averaged approximately 1.1 Bcfe per day. The growth in our low-decline resilient production base has put the company in a great position to participate in LNG exports and data center energy demand and to benefit from the growing demand from our products while continuing to supply energy to our local communities and our commercial customers. And our vertically integrated marketing team provides us with a terrific strategic advantage to get our products to market at the highest possible margin. Total revenue was $1.83 billion, and adjusted EBITDA was $956 million for the year, beating our stated guidance and with our adjusted EBITDA margin landing at 58%. Our adjusted EBITDA was a record for our company. And as the one member of our leadership team who joined Rusty before our public offering, I'm very proud of the quality and scale of the company that we have built. Notably, our portfolio optimization processes or better known as the POP allowed us to generate approximately $170 million in additional cash proceeds. These results are exciting to reflect on, but the real excitement is about the opportunities in front of us and the capabilities of our team to capture those opportunities. Our adjusted free cash flow for 2025 was $440 million, which was burdened with approximately $55 million of transaction costs. Our net debt stood at approximately $2.8 billion at year-end, and we improved our overall leverage by over 20% to 2.3x since year-end 2024, which would allow us to achieve a leverage ratio within our target level of 2 to 2.5x net debt to EBITDA with approximately $577 million in liquidity. Our balance sheet strength is providing us the optionality and the flexibility to navigate and take advantage of the opportunities that we believe are available, notably the Sheridan acquisition. Additionally, our investment-grade rated nonrecourse ABS notes helped contribute to our financial resilience and ensure we maintain our discipline to consistently repay outstanding debt, of which we repaid approximately $277 million in 2025. In summary, our team's strong execution of our strategy to acquire and optimize stable, consistent cash-generating energy assets enabled strong free cash flow generation and allowed us to continue to prioritize returning capital to shareholders and paying down debt. Turning to Slide 10. One can simply describe Diversified Energy as the E&P company without the E. Our model provides a derisked option, which focuses on optimization and innovation in order to deliver outsized results and longer-term financial resilience in any commodity price environment. And on this page, we are zooming out on that multiyear track record of several key financial metrics and bottom line fundamentals that have created per share value for our investors. Notably, a prudent and disciplined strategy to capitalize and integrate acquisitions has delivered a 12% compounded annual growth rate in EBITDA per share. an 11% growth rate in cash flow from operations and an 8% growth rate in free cash flow per share. We believe that these metrics reinforce that our business model is proven. This slide also illustrates how we've been able to generate a solid return of capital for investors by utilizing a more flexible capital allocation framework, which incorporates both strategic share repurchases and consistent dividends. Turning to Slide 11 now. One of the main benefits of our disciplined acquisition strategy is that we have created multiple drivers of cash flow generation and growth. Our expanded asset portfolio benefits from a low decline production profile, commodity diversification, a disciplined hedging program and material upside from anticipated operational and administrative synergies that we generate from our scale and vertical integration. The key metrics at the bottom of this page highlight the impact of our disciplined acquisition framework and the power and advantage that vertical integration and scale provide meaningful value to our shareholders. We have delivered year-over-year growth in free cash flow while also reducing overall leverage. And this was a terrific achievement for our team in such a short period of time. This simple yet proven strategy of acquiring assets at attractive valuations using low-cost investment-grade rated financing allows us to capture a spread and with our operational excellence and portfolio optimization, improve our return on investment. With this proven playbook, we have and plan to continue building a resilient platform of cash flow generating assets. Turning to Slide 12 now. Our proactive portfolio optimization program or our POP is a continuous evaluation and execution process for us. Since 2023, we have taken advantage of increasing opportunities to monetize the large inventory of undeveloped acreage that we have accumulated, which notably was ascribed 0 value as part of our acquisition processes. We utilize our deep operator relationships and market experience to generate additional unlevered free cash flow to deploy toward value-creating opportunities. During 2025, we have generated approximately $160 million in divestment proceeds, and we repositioned that cash for strategic share repurchases and 2 highly accretive acquisitions, which meaningfully lowered our leverage. Moreover, the cumulative $314 million in proceeds from portfolio optimization in the last 3 years has enhanced our return on investment by approximately 10% for the $3.7 billion of acquisitions that we completed since entering the Central region in 2021. Collectively, the numerous optimization opportunities provide cash-generating levers to grow our business, increase free cash flow and bring forward the hidden or unrealized value of our portfolio of assets. And by reallocating the incrementally generated cash flow from our POP programs, we can also support superior shareholder returns. Turning to Slide 13. We continue to see robust results and additional value creation from our non-op joint venture partnership, specifically in the Western Anadarko Basin. This capital-light approach with an industry-leading development partner offers an elegant solution for adding reserve replacement and ultimately free cash flow while delivering a compelling return profile. During 2025, we saw an approximately 60% rate of return on these new wells, which are trending approximately 75% liquids. This additive production meaningfully offsets our approximate 10% annual corporate production decline. For example, we anticipate that non-op production to exit 2026 at just over 12,500 BOE per day. Additionally, we have recently added a new Permian Basin non-op partnership, which provides additional commodity diversification and the potential for even higher project returns. And notably, the upfront proceeds from the sale of the land and the working interest to our Permian development partner offset our capital spending and further increase our ultimate rates of return. Now to Slide 14. Our stewardship operating model is supported by our long-tested smarter asset management practices, which optimizes the cash flow from the assets we acquire through production enhancements and expense efficiency. And our daily priorities require us to look for, find and execute activities that enhance margins. Our daily priorities drive additional cash flow and in the long term, do and will create value for shareholders. These daily priorities, which are safety, production, efficiency and enjoyment are unique to Diversified, and they allow us to continue to generate resilient, consistent free cash flow as the PDP champion. The subtitle on the cover of our earnings presentation says, proven, stepping up when others step away. This statement is about responsible stewardship. We were innovators in buying PDP assets that other companies neglected or lost focus on. Our proven business model steps up to own these assets and make them safer, efficient and more profitable. Simply stated, optimization is stewardship. So to wrap up my comments, I want to say thank you to all of our teams for their excellent work over the past year. Our company is well positioned to grow and generate consistent cash flow for our shareholders. This positioning of strength is due to hard and smart work from our skilled team of professionals. I will now turn the call over to Rusty for some final thoughts.

Thanks, Brad. Before we take questions, I want to provide some final thoughts on our outlook for 2026 and the milestone of our 25th anniversary. Turning to Slide 15. We continue to emphasize we are a differentiated energy producer that seeks to optimize established, often overlooked and undervalued cash-generating U.S. energy assets. We maximize value in a unique way by minimizing traditional E&P risk, growing our revenue streams, optimizing our asset portfolio and being good stewards of our capital while generating real, consistent, meaningful cash flow. In 2025, our results were impressive, and we were able to exceed or achieve our guidance on important financial metrics, adjusted EBITDA and adjusted free cash flow. Notably, all of our additional guidance metrics were also within the guidance range. As we embark on our 2026 journey, we have published full year 2026 guidance seen here on the slide using the same operational and financial metrics. I would note that these guidance metrics do not incorporate the Sheridan Production acquisition announced yesterday. Also, as a reminder, we continue to include cash generated from our portfolio optimization programs in adjusted EBITDA and adjusted free cash flow and is anticipated to be approximately $100 million for the full year 2026. Turning to Slide 16. When the founding father set out to build America, they aim to create something that would last, something rooted in hard work, responsibility and the belief that what was created must be cared for and nurtured for it to endure. That same belief defines Diversified Energy. As our nation celebrates its 250th anniversary, we celebrate our milestone 25th anniversary. For 25 years, Diversified has stepped up when others stepped away, investing in established energy assets and committing to their full life cycle from production to responsible retirement. We are, at our core, adaptive out-of-the-box thinkers, innovators and trailblazers. We pioneered a new way of working using scale and vertical integration, leveraging technology and flipped the narrative on natural gas and oil production while also maintaining the discipline and predictability required to make our work profitable. This culture, this mindset, this belief has allowed us to transform one company's divestiture into our consistent cash flow. What started as an idea and one small well package acquisition in West Virginia in 2001 has evolved into a 2,200-plus person organization, a sizable publicly traded entity that generates over $2 billion in revenue annually, a top 3 landholder in the Lower 48 and the largest owner of wells in the U.S. We took a different approach to responsible energy production. We were the underdogs, but we proved ourselves. For 25 years, we made our own rules, crafted our own strategy and created enormous value for stakeholders and shareholders along the way. Now is the moment to consider what we've done and how we got here, what we set out to do, how we were unique and what we proved. Now is the moment that we give each other a collective high five because we are proven and now others follow us. As America looks ahead, Diversified does the same. We are grounded in our values, focus, experience and our commitments. With that, I'd like to turn it over to the operator for the Q&A portion of today's call. Operator?

[Operator Instructions] Our first questions come from the line of Neal Dingmann with William Blair.

Nice details. Rusty, my first question just on capital allocation. In the prepared remarks, you kind of gave the rankings but I'm just curious how you think about -- you've always had a good dividend. Is there a sort of an optimal dividend yield that you all target? And then in that same vein, with leverage, you've been able to take that down. Is there an optimal or kind of a leverage goal as well?

Yes. No, I don't think we really sit around and think about what our dividend yield is. We have a dividend -- fixed dividend that we feel comfortable that the free cash flow will support that will give our shareholders a good return. And then that's where we stay. We don't really look at the dividend yield. That's going to be based on the share price and where it goes, and we just kind of try not to focus on that. We focus on what we feel like we have the financial capabilities of paying with free cash flow. On the other hand, as it relates to leverage, we've stated our business with the type of funding that we use with the ABS, asset-backed securitizations, we're very comfortable having that 2 to 2.5 range. There's times when it could come down closer to 2, and there's times where it may go a little higher than that at 2.5. But staying within that range is a real -- is a goal for us and really important for us as we grow the business through acquisition.

And Neal, one thing I would add as it relates to leverage, one fact that I would not want anybody to just skate over is the fact that we paid down $277 million worth of debt last year. So our business continually deleverages. It should be close to $300 million this upcoming year. So we continually deleverage and build up equity value in these ABS notes.

Great point. And then my second question, just on non-op activity. It seems like you have a lot of -- I was going to ask on acquisitions but I'm just excited on your non-op activity. It seems like there's a lot of upside potential. I mean, whether that's Mewbourne and Mid-Con or others. Could you talk about just what you're currently seeing in the non-op. Are you seeing where -- I know there's a sort of non-operator talked about some private sort of shutting things down. It seems like you're having just the opposite where you're having some sort of fantastic activity. Could you talk about potential upside around your non-op activity?

Yes. Our Western Anadarko, you mentioned with our -- in Oklahoma with Mewbourne. Neal, we've just seen tremendous results there. The commodity prices haven't affected those IRRs to a level where we would ever think about shutting that down. They're just that good. And we've seen great success there. We still have a runway to go. And so we're going to continue to invest alongside of Mewbourne in that program. We're also seeing -- we mentioned it in our comments, we're the largest leaseholder, one of the largest leaseholders in the Lower 48. That gives us a lot of flexibility and a lot of optionality. And so we're leaning into that in our Permian acreage with another non-op partner and fully expect to invest as we move into 2026 and see some pretty good returns there, especially with the uptick in oil that we've seen here recently. So we're excited about the non-op piece. It allows us to have some organic growth within our portfolio without having to put the G&A cost that running a program ourselves would do. And so it's a big piece of what we're going to be doing moving forward.

Our next questions come from the line of Charles Meade with Johnson Rice.

Yes, I'd like to start off with -- ask for a little more color around this, the Sheridan acquisition you guys announced yesterday. It looks like to me, that's an area that has a lot of historic Cotton Valley production, but also it's more recent in the last few years, there's been a lot of horizontal Haynesville production there. And so I wonder if you can talk about -- when I look at the 6% decline you gave us for that though, it really suggests to me that there hasn't been a lot of recent drilling or at least a lot of recent horizontal drilling there. And so I wonder if you could talk about the nature of that production, what zones is coming from? How much is horizontal versus vertical? And really, one of the things I'm aiming at is an idea of how much undeveloped acreage you guys might have there that's a candidate for your portfolio optimization?

Charles, the way we've really looked at this acquisition opportunity, it is a perfect strategic bolt-on to our business franchise there in East Texas. We've got tremendous overlap with our field operations, with our midstream business. And so it is a great tuck-in where we can add in highly -- high-margin production into that area. Along with it, it does come some additional acreage, and I think we highlighted that in the press release. So we'll have some opportunities there. And as we've done with our POP program, we'll look for the best ways to bring value forward, whether that's through some type of development or some type of just sale or some type of non-op relationship. So this is a perfect tuck-in acquisition. It's only $245 million for us. It's adding reserve replace -- it's adding reserves, and it's also adding incremental cash flow to just the overall corporate cash flow that we produce.

And just to add on to that, it's kind of a mix. It obviously has horizontal wells in the package. To your point, they haven't been drilled in the last few years. But the other real important factor here is this is in the proximity of our processing facility in that area. And so it gives us some potential upside there to move gas maybe down to our processing facility and get the liquids exposure as well. The other thing I would say is, too, is that this is an area that's gotten really, really active and hot pretty much the whole area down there. But -- so as Brad was mentioning, we'll look to find the best value for that undeveloped acreage, whether it be a JV like he was saying or a sale or whatever. So there's lots of optionality here, lots of synergies that we can lean into and really key to our acquisitions, take an acquisition, pay for it and get additional value that brings what you pay for it to a better valuation.

Yes. Charles, last comment I'd say is just there's a page in our presentation that talks about the strategic value of in-basin acquisitions, that framework. This one hits every box there.

Yes, it definitely seems like it could be a good fit. On the financing of it, is this already in process with the Carlyle, ABS structure? Or what's the state and path forward for the financing?

Yes. We're -- we've got the liquidity on our credit facility to finance this acquisition, and that's our initial plans to close it with that.

Our next questions come from the line of Jonathan Mardini with KeyBanc Capital Markets.

Just on the non-op side, you said the 2 non-op partnerships together, they're expected to offset about half of the natural decline in 2026. Just looking forward, how are you thinking about the scale that you'd like to get for these non-op partnerships? For example, would you look to have enough partnership activity to offset all of your base decline?

Well, we'd love that. We'd love it. But you ultimately have to have the programs that make sense and that are -- have good rates of return. So these 2 that we've mentioned have that. And so these would be the 2 that we're going to lean into. There could be more coming in the future. And we're -- as I've stated, I believe, the last call that we did, we're high-grading our acreage. We're looking at multiple opportunities to lean into all that value. These are 2 that are extremely important to us and that are already kicked off, but there could be more coming in the future.

Yes. And one thing I would say, we did this Canvas Energy acquisition at the end of 2024 that came with a lot of acreage and a lot of opportunity. And so with commodity price movement, if there is any commodity price movement upward, that price movement will unlock additional development opportunities for us. So like we said in our comments, we've got a lot of cash-generating levers in our portfolio.

The last thing I would say there as well is that don't underestimate Appalachia. We have some acreage in Appalachia that has some really, really good prospects at some point. We're kind of monitoring the situation that's going on there but it could end up being a big, big win for us up there as well.

Understood. That's helpful context. I just want to ask about the asset sales. You previously talked about maybe a $40 million or $50 million run rate of asset sales is a good baseline. We saw 2025 come in over $160 million. With the 2026 guidance, including about $100 million of these proceeds, how do you just think about the updated run rate for these land sales? And are you seeing more buyer interest today?

Yes. I mean I would say there's buyer interest. Again, we're high-grading our portfolio. We're looking at all of our acreage positions. Last year was the first year with all the acreage that we had acquired through Maverick and Canvas. This year, we'll have a little more -- we've seen a little more interest levels in a couple of things that we didn't anticipate last year. But I think -- and Brad, you can comment on this as well. I think $40 million to $50 million is a run rate type expectation on a normal year.

Yes, post 2026, we've already issued expectations and guidance on '26 at $100 million. But on a go-forward basis, we believe that $40 million to $50 million is a comfortable number. We have a vast portfolio of assets and acreage. And so opportunities come our way very often.

And I find it interesting that a lot of the areas that people didn't think about or didn't really put a lot of attention, all of a sudden are regaining interest levels and people are starting to come back and look at different things. So that's what gives us comfort in the guidance.

Our next questions come from the line of Paul Diamond with Citi.

Just drilling down a bit more on the Permian JV. In the Central Basin, we have a bit more of the details. Is there anything else you can disclose on locations, working interest, expected production run rate through the year, anything like that?

I would say we'll have more data around that after the first quarter. Give us a little time on that. But no, look, it's really close to moving forward here and getting kicked off. And so we'll have better data to kind of help you to drill down more so at the end of the first quarter.

Got it. Understood. And then jumping over, can you talk about the bigger news or news last year was the plugging funds. Can you talk about the status of where that sits and the potential opportunity set and I guess how you go about potentially extending that to other states?

Yes. I'm still surprised at how that got kind of gotten -- just kind of blown over by most people. But that was a big win for us as it relates to asset retirement. We're on a -- we have a really, really good financial assurance policy there now that we've made our first payment into that. That will go on for 20 years. We'll continue to plug the wells that we have committed in the state already for the next 20 years as well. We want to utilize that in some of the states where we have the higher well counts for sure, especially in Appalachia, mostly. And so we're working to try to get inroads there. I would tell you that there's a couple of states that would probably do it very quickly, and we'll probably circle back to them this year. But we're working on one as we speak and really want to get that one squared away. So it's a great product. It really -- the whole industry should be looking at this as a way to deal with asset retirement obligations long term. And I think even the states themselves with their orphan well program should be looking at something similar. But no, it was a big win for us. Obviously, my relationship with the politicians in West Virginia gave us the ability to take advantage of that there first. And so we'll continue to work with some of the other states and probably you would probably -- you'll probably see us do something else with a couple of the other states this year.

And Paul, I would just add, this program, as Rusty indicated, we're very excited about. This program, when it works as designed, and it will because it really is just math and time, moves the financial liability for plugging our West Virginia wells off of our balance sheet and away from future cash flows of this business. It is a significant victory for our company.

Our next questions come from the line of Sam Wahab with Peel Hunt.

Congrats on another great set of results. A lot of my questions have been answered but one that still stands out is sort of linked with the Sheridan transaction and the strategic partnership with Carlyle. I noticed, obviously, the Sheridan deal is very much gas weighted compared to Maverick last year, where we introduced a lot more liquids. I mean is that a signal of intent in terms of strategy? You talked earlier about data center demand, LNG opportunities. Would that partnership be more gas weighted going forward? And what does the landscape look like for opportunities? And is gas at the moment a better deal than potentially oil given the uptick in prices?

Yes. Good question. We are -- I've said this before, we're not really focused on whether it's liquids or gas. What we're focused on is the value that we can get from the acquisition. In this case, it was mostly gas, obviously, but it was sitting right in our geographical operating area and just gave us all kinds of opportunities to drive the cost down, increase the -- we bought it on a margin. We think we can increase that margin. And so that's what made it so attractive to us. The Carlyle partnership, they don't really care whether it's liquids or natural gas either. And so -- but they do have a size -- they obviously want to do deals of a little larger than this one. And so that's primarily the reason why we just did this one on our own through our own liquidity. But they are -- they don't have a preference, whether it's liquids or natural gas. We're all about where can we get the best return. That's what we're focused on. And whether it's liquids, whether it's natural gas, it doesn't matter to us.

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Rusty Hutson for closing comments.

Thank you all for attending today. Obviously, if any other questions or have any additional information that you need, please reach out to Doug in his numbers in the press release for you to reach out. Thank you all, and have a great day.

Thank you, ladies and gentlemen. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time, and enjoy the rest of your day.