Diversified Energy Co (DEC) Business

Item 1. Business

Business Overview

We are engaged in the production, transportation, and marketing of natural gas, NGLs, and oil, managing a diversified portfolio of

mature, long-life assets. Our assets are located in the United States within the following geographical operating areas:

•Appalachian Region, which spans Ohio, Pennsylvania, Virginia, West Virginia, Kentucky, Tennessee and Alabama;

•Central Region, which includes Texas, Oklahoma, New Mexico, Louisiana and Arkansas;

•Other, which includes Florida and Wyoming.

Our business model emphasizes responsible stewardship and operational excellence, focusing on maximizing value from existing

reserves.

Our disciplined, full-lifecycle asset management approach is central to our success. We focus on optimizing and extending the

productive life of existing wells, using advanced monitoring technologies and data analytics to drive operational efficiency and safety.

In addition to our work on our producing wells, we have an extensive and innovative asset retirement program that consists of a

vertically integrated plugging company based in our Appalachian Region. With over 69,000 total net productive wells, we produced

an annual average of 1,086 MMcfepd during the year ended December 31, 2025, and we are well-positioned to maximize asset value

while maintaining a sound balance sheet and upholding high standards for safety and environmental responsibility.

Our strategy is designed to deliver consistent shareholder returns and long-term value through disciplined growth and operational

excellence.

•We maintain a diversified asset base that supports stable and predictable production.

•Our efficient capital investment process enables us to pursue growth opportunities and optimize returns.

•Operational reliability is enhanced by robust infrastructure and a focus on preventative maintenance.

•We execute a disciplined commodity hedging program that is designed to mitigate price volatility.

•Our experienced leadership team drives disciplined execution and strategic decision-making.

•We have a proven track record of integrating new assets efficiently and realizing operational synergies.

2025 Highlights

•Average daily production of 1,086 MMcfepd representing an increase of 37% when compared to 791 MMcfepd for the same

period in 2024;

•In November 2025, we acquired Canvas Energy Inc. (“Canvas”) for total consideration of approximately $533 million. The

transaction was funded through the issuance of 3,718,209 shares of common stock and approximately $399 million in cash. The

cash portion of the consideration was primarily funded through the issuance of the ABS XI Notes with a total principal amount of

$400 million. The ABS XI Notes are secured by certain upstream producing assets acquired in the Canvas acquisition;

•In November 2025, we completed the U.S. Domestication, resulting in Diversified Energy Company, a Delaware corporation,

becoming our publicly traded parent company;

•In October 2025, we launched a well plugging fund with the state of West Virginia dedicated to retiring oil and gas wells. Over

the initial 20 year period of the agreement, we plan to invest $70 million, which is held and guaranteed by OneNexus, an

insurance provider for asset retirement obligations, to ensure we have provided financial assurance so that all of our wells in the

state are safely retired. The State of West Virginia is a third party beneficiary of the plugging fund;

•In April 2025, we issued $300 million of new senior secured notes in the Nordic bond market at a 2% discount, resulting in net

proceeds of $294 million (the “Nordic Bonds”);

•In March 2025, we acquired Maverick Natural Resources, LLC (“Maverick”) for net consideration of $666 million. The gross

value of the transaction was approximately $1.3 billion and was funded through the issuance of 21,194,213 shares of common

stock direct to the unitholders of Maverick, and approximately $211 million in cash. The transaction also included the assumption

of approximately $518 million of ABS Maverick Notes outstanding and the payoff of $202 million outstanding on Maverick’s

credit facility on the acquisition date;

•In March 2025, concurrent with the Maverick acquisition, we amended and restated the credit agreement governing our revolving

loan facility (the “Credit Facility”), increasing the borrowing base to $900 million and extending the maturity to March 2029.

During our semi-annual redetermination in October 2025, the borrowing base was reduced to $825 million;

•In February 2025, we formed Diversified ABS Phase X LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary

(“ABS X”), to issue asset-backed securities with a total principal amount of $530 million (the “ABS X Notes”);

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•In February 2025 , we issued 8,500,000 shares of common stock at $14.50 per share to raise gross proceeds of $123 million;

•In February 2025, we acquired certain upstream assets and related infrastructure in the Appalachian Region from Summit Natural

Resources, LLC (“Summit”) for $42 million; and

•In 2025, we divested certain non-core undeveloped acreage across our operating footprint for consideration of approximately

$160 million.

Refer to Notes 3, 11, and 15 in the Notes to the Consolidated Financial Statements for additional information regarding acquisitions,

common stock, and debt.

Geographical Operating Areas

Our operations are primarily concentrated within the Appalachian and Central regions of the United States. Our Appalachian Region

spans Pennsylvania, Ohio, Virginia, West Virginia, Kentucky, Tennessee and Alabama and consists of multiple productive, shallow

conventional formations and two productive, deeper unconventional shale formations, the Marcellus Shale and the slightly deeper

Utica Shale. Our Central Region consists of the Bossier and Haynesville shale formations and the Cotton Valley sandstones in East

Texas and West Louisiana, the Barnett Shale in North Texas and the Mid-Continent producing areas across Central Texas, along with

the Anadarko Basin across North Texas and Oklahoma and Permian Basin in West Texas and New Mexico.

Reserve Data

Summary of Reserves

The following table sets forth summary information with respect to our estimated proved reserves, standardized measure of discounted

future net cash flows (“Standardized Measure”) and PV-10 as of December 31, 2025. Our estimated proved reserves were prepared by

Netherland, Sewell & Associates, Inc. (“NSAI”), our independent third-party reserve engineers. A copy of the reserve report is

included as an exhibit to this Annual Report on Form 10-K. We used SEC pricing in the calculation of our estimated proved reserves

and PV-10.

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(a)The basis for converting oil and NGL volumes (MBbls) to natural gas equivalent volumes (MMcfe) is determined by using the

ratio of one Bbl of oil or NGLs to six Mcf of natural gas.

(b)Our estimated net proved reserves were determined using average first-day-of-the-month prices for the prior 12 months in

accordance with SEC guidance. For natural gas, NGLs, and oil volumes, the average Henry Hub spot price and WTI price were

adjusted for gravity, quality, local conditions, gathering and transportation fees, and distance from market. All prices are held

constant throughout the lives of the properties.

(c)The PV-10 of our proved reserves were prepared without giving effect to taxes or hedges. PV-10 is a non-GAAP financial

measure and generally differs from Standardized Measure, the most directly comparable GAAP measure, because it does not

include the effects of income taxes on future net cash flows. We believe that the presentation of PV-10 is relevant and useful to our

investors as supplemental disclosure to the Standardized Measure because it presents the discounted future net cash flows

attributable to our reserves prior to taking into account future corporate income taxes and our current tax structure. While the

Standardized Measure is free cash dependent on the unique tax situation of each company, PV-10 is based on a pricing

methodology and discount factors that are consistent for all companies. Because of this, PV-10 can be used within the industry

and by creditors and securities analysts to evaluate estimated net cash flows from proved reserves on a more comparable basis.

Investors should be cautioned that neither PV-10 nor the Standardized Measure represents an estimate of the fair market value of

our proved reserves.

Reconciliation of Standardized Measure (GAAP) to PV-10 (Non-GAAP)

Proved Reserves

As of December 31, 2025, our estimated proved reserves totaled 6,082,483 MMcfe, an increase of 68% from the prior year-end, with a

Standardized Measure of $4.2 billion. Natural gas constituted approximately 73% of our total estimated proved reserves and 74% of

our total estimated proved developed reserves. The following table provides a summary of the changes in our proved reserves during

the year ended December 31, 2025.

(a)The basis for converting oil and NGL volumes (MBbls) to natural gas equivalent volumes (MMcfe) is determined by using the

ratio of one Bbl of oil or NGLs to six Mcf of natural gas.

Revisions to Previous Estimates

During 2025, we recorded 793,516 MMcfe in revisions to previous estimates. The upward revisions were primarily associated with

changes in the trailing 12-month average realized Henry Hub first day of the month spot price, which increased approximately 59% as

compared to December 31, 2024.

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Purchase of Reserves in Place

During 2025, 2,041,296 MMcfe of purchases of reserves in place were associated with the Summit, Maverick, and Canvas

acquisitions. Refer to Note 3 in the Notes to the Consolidated Financial Statements for additional information about acquisitions and

divestitures.

Proved Undeveloped Reserves (“PUDs”)

We aim to obtain proved developed producing wells through acquisitions in accordance with our growth strategy rather than through

development activities. We accordingly contribute limited capital to development activities. From time to time, when acquiring

packages of wells, we also acquire certain locations that are in development by the acquiree at the time of the acquisition or could be

developed in the future. When economic, we may engage third parties to complete the existing development activities or may

participate in the development of acquired non-operated locations, and such reserves are included below as PUDs. As of December 31,

2025, we are actively engaged or have plans to engage in developing certain locations acquired in the Maverick and Canvas

acquisitions. Therefore, we have classified these undrilled locations as PUDs.

The following table summarizes the changes in our estimated PUDs during the year ended December 31, 2025:

Purchase of Reserves in Place

During 2025, there were 365,634 MMcfe of purchases of PUDs in place related to the Maverick and Canvas acquisitions. Refer to

Note 3 in the Notes to the Consolidated Financial Statements for additional information about acquisitions and divestitures.

Preparation of Reserve Estimates

Our reserve estimates as of December 31, 2025 included in this Annual Report on Form 10-K were prepared by our independent

reserves auditors, Netherland, Sewell & Associates, Inc. (“NSAI”), in accordance with petroleum engineering and evaluation

standards published by The Petroleum Resources Management System jointly sponsored by the Society of Petroleum Engineers, the

World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers.

These estimates have been prepared in accordance with the definitions and regulations of the SEC.

Our internal staff of petroleum engineers and geoscience professionals work diligently to ensure the integrity, accuracy and timeliness

of data furnished to our independent reserves auditors for their reserve evaluation process. Our technical team regularly meets with the

independent reserves auditors to review properties and discuss methods and assumptions used to prepare reserve estimates. The

reserve estimates and related reports are reviewed and approved by our Vice President of Reservoir Engineering. The Vice President

of Reservoir Engineering holds a Bachelor of Science in Petroleum Engineering and has been with the Company since 2018 with 27

years of experience in petroleum engineering and over 24 years of experience evaluating natural gas and oil reserves. Prior to joining

the Company in 2018, our Vice President of Reservoir Engineering, who is an active member of the Society of Petroleum Engineers,

served in various reservoir engineering roles for public companies engaged in exploration and production operations.

Estimation of Proved Reserves

Proved reserves are quantities of natural gas or oil which, by analysis of geoscience and engineering data, can be estimated with

reasonable certainty to be commercially recoverable from known reservoirs under existing economic and operating conditions. The

term “reasonable certainty” implies a high degree of confidence that the quantities of natural gas or oil actually recovered will equal or

exceed the estimate. To achieve reasonable certainty, DEC and the independent reserves auditors employed technologies that have

been demonstrated to yield results with consistency and repeatability. The technologies and economic data used in the estimation of

our proved reserves may include, but are not limited to, well logs, geologic maps and available downhole and production data, and

well-test data.

Reserves engineering is and must be recognized as a subjective process of estimating volumes of economically recoverable oil and

natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available

data and of engineering and geological interpretation. As a result, the estimates of different engineers often vary. In addition, the

results of drilling, testing and production may justify revisions of such estimates. Accordingly, reserve estimates often differ from the

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