Diversified Energy Co., the largest owner of US oil and natural gas wells, is being targeted by a short seller claiming the company may not have enough money to meet obligations to plug inactive wells.
Snowcap Research, a London-based activist investor focused on environmental, social and governance matters, said in a 39-page report released Tuesday that Diversified may struggle to meet plugging obligations as soon as 2036. The company’s debt load may hurt its ability to pay dividends within the next 12 months, Snowcap said. “A dividend cut looks imminent,” it said.
Shares of Diversified closed down 3% Tuesday in New York after dropping as much as 20% earlier in the day.
“This report contains numerous inaccuracies, ignores specific financial and operational results and sustainability actions, and is designed for the sole purpose of negatively impacting the company’s share price for the short seller’s own benefit,” Diversified said in an emailed statement. “Diversified continues to take a deliberate approach to capital allocation focused on delivering long-term shareholder value, prioritization of outstanding debt reduction, and continues to evaluate strategic growth and accretive value-additive opportunities.”
The Birmingham, Alabama-based gas producer operates about 65,000 wells from Pennsylvania to Texas and has steadily boosted dividends since going public in 2017.
Run by brothers Chris and Henry Kinnersley, Snowcap says it targets companies where it sees “significant potential for ESG improvement.” In past campaigns, Snowcap invested in Australian utility AGL Energy Ltd. and oil producer Santos Ltd. and pushed for changes.
Snowcap’s Diversified report echoes questions posed last month by Democrats on the US House Energy and Commerce Committee. In response, Diversified told committee members it was focused on cutting methane emissions and responsibly retiring inactive wells.
