Key Highlights

  • Net loss was USD 202.2 million, or USD 2.86 per share, against Net Income of USD 171.3 million, or USD 2.14 diluted, a year earlier, because of derivative losses.
  • Commodity Revenue rose 26% to USD 469.6 million, yet total revenue fell to USD 108.5 million from USD 499.8 million after a USD 378.4 million loss on derivatives.
  • Production rose 5% to 109,369 MMcfe, or 1,189 MMcfe per day, while the average realized price before hedges rose 19% to USD 4.29 per Mcfe.
  • In September 2026 the company agreed to acquire Birch for a gross price of about USD 1.8 billion and paid a USD 50 million deposit.

Unrealized Hedge Losses Erase a 26% Revenue Gain

Diversified Energy (NYSE:DEC) filed its Quarterly Report on November 4, 2026 for the three months ended September 30, 2026. Commodity revenue of USD 469.6 million rose 26%, with oil revenue up to USD 219.3 million, NGLs to USD 79.3 million and Natural Gas slightly lower at USD 170.9 million. Total revenue, however, collapsed to USD 108.5 million because of a USD 378.4 million loss on derivatives, of which USD 348.3 million was an unsettled Fair Value adjustment driven by higher liquids prices. Cash settlements were a USD 30.0 million loss. The loss from operations was USD 235.3 million, and a USD 132.1 million income tax benefit narrowed the net loss to USD 202.2 million.

Production Growth, Realized Prices and the DP Eagle Stake

The company is a US natural gas and oil producer that grows by buying mature wells and hedging output. Production climbed 5% on the Canvas and Sheridan acquisitions and non-operated development, partly offset by the Barnett sale. Realized price including hedge settlements was USD 4.02 per Mcfe versus USD 3.99, so hedge settlements absorbed nearly all of the 19% unhedged price gain (calculated), and about 80% of production over the next 12 months is fixed through derivatives. Lease Operating Expense rose 8% to USD 135.9 million. Diversified Energy (NYSE:DEC) also booked a USD 37.3 million loss from DP Eagle, its 40% Equity affiliate with Carlyle, mainly from unsettled derivatives.

Birch Acquisition Financing and Liquidity

The planned Birch purchase is expected to close in the fourth quarter of 2026 and be funded mainly by about USD 1.5 billion of asset-backed financing through the Carlyle partnership, plus the Credit facility. Liquidity at September 30, 2026 was about USD 506 million, made up of USD 6 million of cash and USD 500 million of availability. Nine-month Operating Cash Flow rose 39% to USD 393.3 million, and capital expenditures were USD 138 million. Scheduled borrowing principal payments and maturities total USD 3.15 billion, mostly due in 2029 or later. Risks include commodity price swings, the size of the financing needed and the large unsettled derivative position, which can reverse as prices move.

Where Things Stand

Hedging accounting, not operations, produced the loss. Diversified Energy (NYSE:DEC) grew production 5% and commodity revenue 26%, but a USD 378.4 million derivative loss, mostly unsettled, swung results to a USD 202.2 million net loss. Cash flow from operations stayed strong, and the hedge book trades some price upside for steadier cash flow, which is why higher oil prices produced a loss. Next markers are the expected fourth-quarter close of the Birch acquisition, how the ABS financing prices, and whether liquids prices reverse and reduce the unsettled hedge loss.