Diversified Energy is buying Elliott-backed Birch Permian Holdings for about $1.8 billion, its largest deal in 25 years, and using Carlyle-backed asset-backed securities to scale a PDP platform in the Midland Basin without a large equity raise.

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The transaction, announced September 2, 2026, is expected to close in the fourth quarter of 2026, subject to customary conditions and a $50 million break fee. It expands Diversified Energy Company (NYSE/LSE: DEC) from a multi-basin PDP consolidator into a scaled, operated Permian producer with integrated midstream and water infrastructure.

Deal structureGross purchase price is approximately $1.8 billion. Net consideration will reflect customary adjustments and effective-date cash flows. Management framed the price as roughly a PV-14 value of proved developed producing (PDP) reserves and about 3.3x next-12-months Adjusted EBITDA.

Funding is designed to limit parent-company equity dilution:About $1.5 billion of privately rated asset-backed securities originated and structured with Carlyle’s Asset-Backed Finance and Capital Markets teams, collateralized by the acquired PDP assets.
Remaining cash from existing liquidity, including the revolving credit facility.

Diversified and Carlyle also expanded their PDP acquisition partnership from a $2 billion framework to as much as $10 billion of potential future opportunities, subject to mutual agreement. That financing architecture has become central to Diversified’s growth: similar ABS/SPV structures were used on earlier deals such as Camino in Oklahoma.

Advisors include Truist Securities, KeyBanc Capital Markets, and Citigroup for Diversified; Moelis for Birch; and TCG Capital Markets as structuring and placement agent on the ABS. Gibson Dunn is legal counsel to Diversified.

Birch was formed from assets restructured in Breitburn Energy Partners’ 2018 Chapter 11. Elliott Investment Management and co-investors capitalized the business after Elliott’s position as a Breitburn creditor; contemporaneous reporting put that capitalization near $775 million. The sale is a sizable private-equity exit after several years of development and operations.

What Birch bringsCurrent net production is about 68,000 barrels of oil equivalent per day (~409 MMcfepd), with a mix of roughly 38% oil, 32% NGLs, and 30% gas. Diversified says the deal should lift its production by about 35% and Adjusted EBITDA by about 55%, adding an estimated $548 million of annualized Adjusted EBITDA at high margins (~80% EBITDA margins cited by the company). Pro forma gross volumes under Diversified’s operated control are expected near 2.5 Bcfepd (~1.6 Bcfepd net).

• Other asset metrics from the company:~480 net wells (500 gross operated), ~96% operated, ~77% average lease NRI
• ~75% of wells 2022 vintage or older (lower-decline profile than a typical growth- Permian package)
• ~46,000 net mineral acres in the core Permian
• Proved reserves ~1,168 Bcfe; PV-10 ~$2.0 billion (company figures using August 17, 2026 strip and specified terminal prices)
• Integrated midstream: 12 central production facilities (capacity up to 345 Mbblpd oil and 310 Mmcfpd gas), 9 gathering facilities, 60+ miles of gathering line, five water-disposal facilities, and more than 80 miles of water pipeline

Public well data for Birch Operations Inc. concentrates activity in the northern Midland Basin—Martin, Howard, and Dawson counties in Texas—including named units that have produced from the Dean Sandstone and other intervals. That geography sits in the heart of the U.S. oil growth engine and is distinct from Diversified’s earlier Maverick Permian foothold (more Northwest Shelf / Central Basin Platform / northern Delaware).

What it means for the Permian Basin

The Permian remains the largest U.S. oil field, but it is also maturing. Operators are harvesting more existing wells, building midstream and water systems, and looking at EOR and secondary recovery as Tier-1 inventory tightens in places. Diversified’s stated thesis is not to become a high-rig-count horizontal driller. It is to become a large, low-cost operator of long-life producing assets and a consolidator of PDP as majors and growth E&Ps recycle capital.

CEO Rusty Hutson Jr. called Birch “one of the highest-quality operated asset positions” in the core Permian and said the deal “establishes Diversified as a scaled operator in the nation’s most important oil-producing basin.” The company argues contiguous density plus owned infrastructure should lower unit costs and create marketing optionality across oil, gas, and NGLs.

For the basin, a well-capitalized PDP specialist with Carlyle-scale financing is another buyer for mature packages that growth companies no longer want to hold. That can support valuations for producing assets even as new-drill inventory debates continue.

What it means for investors

Positives the company is selling: immediate scale, liquids mix improvement versus Diversified’s historically gas-heavy Appalachia base, high-margin cash flow, accretion on per-share metrics, no large equity issuance at announcement, and a $10 billion partnership runway for more PDP deals. Low-decline wells plus Smarter Asset Management and the Portfolio Optimization Program (POP) are the playbook investors already know.

Risks investors will underwrite:

• Leverage and ABS complexity. Diversified’s model works when securitization markets stay open, and production declines stay predictable. Parent leverage has been a persistent debate even when much debt is structured as amortizing, asset-backed paper.
• Integration of a $1.8 billion operated Permian package versus Diversified’s traditional Appalachia/Central Region density model.
• Commodity mix. More oil and NGLs help in a strong liquids tape and hurt if oil weakens while gas strengthens.
• Closing risk into Q4 2026 and execution on cost synergies.

DEC last traded near $15.25 on September 2. The company’s market cap has been modest relative to the size of recent deals, which is exactly why the Carlyle ABS structure matters: it lets Diversified buy assets many times its equity market value without a transformative share issue. That is attractive if cash flow covers ABS amortization and dividends; it is punishing if declines or costs disappoint.

Pre-deal, some coverage questioned whether a large Permian oil package was “mission drift” from Diversified’s original low-decline gas PDP identity. Hart Energy framed the August talks that way. Management’s counter is that the Permian is simply the next basin where mature, infrastructure-rich production is becoming available at PDP multiples.

Independent sell-side notes specifically on this closed announcement were still thin in the first hours after the release. Broader 2026 coverage of DEC (Stephens Overweight initiation earlier in the year, mixed target revisions from Citi, Truist, Mizuho) has generally focused on valuation discount to gas peers, ABS-funded growth, and free-cash-flow yield rather than a detailed Birch location-by-location model. Investors should treat company-provided $548 million EBITDA and 3.3x multiple as management’s underwriting, not a consensus third-party audit.

Drilling locations and what analysts/operators actually highlight

This is not a classic “10 years of Tier-1 Wolfcamp inventory” growth deal. Diversified attributes value primarily to PDP. The upside it does highlight is optimization and EOR, not a multi-rig development program.

Company-disclosed development-related items:

• More than 150 permitted EOR locations, plus early pilot results the company calls encouraging. Management presents EOR as a new lever inside POP—extend well life and recover more oil from the existing base rather than only drill new laterals.
• ~46,000 net acres described as commercially attractive core Permian leasehold with additional POP opportunity.
  Wells that are largely already drilled; ~75% pre-2023 vintage.

Industry reporting on Birch itself, separate from this sale, showed the company had been an active Dean sandstone horizontal operator in southeastern Dawson County and adjacent Martin/Howard acreage, with strong early oil rates on a relatively small set of wells. That history means Diversified is inheriting both mature vertical/older wells and a more recent unconventional program—not a pure stripper-well package. How much new horizontal capital Diversified will deploy versus harvest, and EOR, will be the key question on the September 3 investor call and in the accompanying presentation.

Diversified already runs capital-light non-operated development in Oklahoma (with partners such as Mewbourne) and has discussed Permian non-op programs. The Birch operated position gives it control, infrastructure, and EOR permits that those JV wells do not. Analysts who cover DEC have generally rewarded inventory only when it is high-graded, capital-light, and does not blow the leverage box. Expect the same filter here: 150 EOR permits are interesting; a sudden multi-rig Midland program would be a strategy change.

Bottom line

Diversified is using Carlyle’s ABS machine to buy a dense, operated, liquids-weighted Permian cash-flow engine from Elliott at a PDP multiple and then try to run it the way it runs Appalachia and Oklahoma: low decline, owned infrastructure, cost control, and bolt-on consolidation. If the wells decline as modeled and EOR/POP work, investors get scale, mix, and a larger dividend/FCF base. If Permian operating costs, water, or decline surprise to the downside, the ABS stack and the size of the check become the story.

The company is hosting a call September 3, 2026 at 8:00 a.m. ET. The investor presentation is posted at Diversified’s IR site.

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