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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
¨  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
þ  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from        to       
Commission file number: 001-41870
06_426107-1_logo_DE.jpg
Diversified Energy Company PLC
(Exact name of Registrant as specified in its charter)
Not Applicable
England and Wales
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
1600 Corporate Drive Birmingham, Alabama 35242
Tel: +1 205 408 0909
Bradley G. Gray
Diversified Energy Company PLC
1600 Corporate Drive
Birmingham, Alabama 35242
Tel: +1 205 408 0909
(Address of principal executive offices)
(Name, Telephone, E-mail and/or Facsimile number and Address of
Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Ordinary shares, nominal (par) value £0.20 per share
DEC
New York Stock Exchange
Ordinary shares, nominal (par) value £0.20 per share
DEC
London Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report: N/A
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨ No þ
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.  Yes  ¨ No þ
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large
accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
¨ Large accelerated filer
þ Accelerated filer
¨ Non-accelerated filer
¨ Emerging growth company
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
¨ U.S. GAAP
þ International Financial Reporting Standards as issued by the International Accounting Standards Board
¨ Other
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.  Item 17 ¨  Item 18
¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No þ
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.  Yes ¨ No ¨
DE Logo Horiz-RGB-BLU+BLK.jpg
Diversified Energy Company PLC
2024 Annual Report & Form 20-F
For the Year Ended December 31, 2024
Table of Contents
Page
We have prepared our financial statements and the notes thereto in accordance with IFRS as issued by the International Accounting Standards Board.
To provide metrics that we believe enhance the comparability of our results to similar companies, throughout this Annual Report & Form 20-F, we refer
to Alternative Performance Measures (“APMs”). APMs are intended to be used in addition to, and not as an alternative for the financial information
contained within the Group Financial Statements, nor as a substitute for IFRS. In APMs within this Annual Report & Form 20-F, we define, provide
calculations and reconcile each APM to its nearest IFRS measure. These APMs include “adjusted EBITDA,” “net debt,” “net debt-to-adjusted EBITDA,”
“total revenue, inclusive of settled hedges,” “adjusted EBITDA margin,” “free cash flow,” “adjusted operating cost per Mcfe,” “employees, administrative
costs and professional services,” and “PV-10.”
1
Cross Reference to Form 20-F
Pages
Part I
Item 1.
Identity of Directors, Senior Management and Advisers
N/A
Item 2.
Offer Statistics and Expected Timetable
N/A
Item 3.
Key Information
A.
[Reserved]
B.
Capitalization and indebtedness
N/A
C.
Reasons for the offer and use of proceeds
N/A
D.
Risk factors
Item 4.
Information on the Group
A.
History and development of the Group
3, 7, 103
B.
Business overview
C.
Organizational structure
D.
Property, plant and equipment
Item 4A.
Unresolved Staff Comments
N/A
Item 5.
Operating and Financial Review and Prospects
A.
Operating results
B.
Liquidity and capital resources
C.
Research and development, patents and licenses, etc.
N/A
D.
Trend information
E.
Critical accounting estimates
Item 6.
Directors, Senior Management and Employees
A.
Directors and senior management
B.
Compensation
C.
Board practices
D.
Employees
E.
Share ownership
F.
Disclosure of a registrant’s action to recover erroneously awarded compensation
N/A
Item 7.
Major Shareholders and Related Party Transactions
A.
Major shareholders
B.
Related party transactions
C.
Interests of experts and counsel
N/A
Item 8.
Financial Information
A.
Consolidated Statements and Other Financial Information
B.
Significant Changes
N/A
Item 9.
The Offer and Listing
A.
Offer and listing details
B.
Plan of distribution
N/A
C.
Markets
D.
Selling shareholders
N/A
E.
Dilution
N/A
F.
Expenses of the issue
N/A
2
Pages
Item 10.
Additional Information
A.
Share capital
N/A
B.
Memorandum and articles of association
[OPEN]
C.
Material contracts
D.
Exchange controls
E.
Taxation
F.
Dividends and paying agents
N/A
G.
Statement by experts
N/A
H.
Documents on display
I.
Subsidiary information
N/A
J.
Annual report to security holders
N/A
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
Item 12.
Description of Securities Other than Equity Securities
A.
Debt securities
N/A
B.
Warrants and rights
N/A
C.
Other securities
N/A
D.
American depositary shares
N/A
Part II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
N/A
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
N/A
Item 15.
Controls and Procedures
A.
Disclosure Controls and Procedures
B.
Management’s annual report on internal control over financial reporting
C.
Attestation report of the registered public accounting firm
D.
Changes in internal control over financial reporting
N/A
Item 16.
[Reserved]
N/A
Item 16A.
Audit Committee Financial Expert
Item 16B.
Code of Ethics
Item 16C.
Principal Accountant Fees and Services
Item 16D.
Exemptions from the Listing Standards for Audit Committees
N/A
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F.
Change in Registrant’s Certifying Accountant
N/A
Item 16G.
Corporate Governance
N/A
Item 16H.
Mine Safety Disclosure
N/A
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
N/A
Item 16J.
Insider Trading Policies
Item 16K.
Cybersecurity
Part III
Item 17.
Financial Statements
N/A
Item 18.
Financial Statements
Item 19.
Exhibits
3
Strategic Report
Overview of Our Business
Diversified Energy Company PLC (the “Parent” or “Company”) and its wholly owned subsidiaries (the
“Group,” “DEC,” or “Diversified”) is an independent energy company engaged in the production,
transportation and marketing of natural gas, natural gas liquids and crude oil.
Our proven business model creates sustainable value in today's energy markets by investing in producing assets, reducing emissions and improving asset
integrity while generating significant, hedge-protected cash flows. We acquire, optimize, produce and transport natural gas, natural gas liquids and oil from
existing wells and then retire our wells at the end of their lives to optimally steward the resource previously developed by our peers, reducing the environmental
footprint, while sustaining important jobs and tax revenues for many local communities. While most companies in our sector are built to explore and develop new
reserves, we fully exploit existing reserves through our focus on safely and efficiently operating existing wells to maximize their productive lives and economic
capabilities, which in turn reduces the industry’s footprint on our planet.
A Differentiated Business Model
Our business model is unique among the natural gas and oil industry in that we do not rely on capital-intensive drilling and development. Rather, our
stewardship model focuses on acquiring existing long-life, low-decline producing wells and, at times, their associated midstream assets, and then
efficiently managing the assets to improve or restore production, reduce unit operating costs, improve operational safety, reduce emissions and
generate consistent free cash flow before safely and permanently retiring those assets at the end of their useful lives.
Daily Operating Priorities
Our guiding daily principles underline our commitment to value creation without compromising the safety of employees. These principles - Safety,
Production, Efficiency and Enjoyment - drive the success of our business model. Our workforce gives precedence to these principles in their daily work.
Geographic Operating Areas
Appalachian Region
The Appalachian Region spans Pennsylvania, Virginia, West Virginia, Kentucky, Tennessee and Ohio and consists of two productive unconventional shale
formations, along with numerous conventional formations. We entered the Appalachian Region in 2001 and currently operate within the Marcellus Shale
and the slightly deeper Utica Shale, as well as many conventional formations.
Central Region
Our Central Region includes parts of Texas, Louisiana and Oklahoma, and is home to a number of asset rich natural gas and oil formations. We entered
the Central Region in 2021 and currently operate within the Haynesville, Bossier, Cotton Valley, Barnett and Mid Continent plays.
4
Key Facts for 2024
Net Loss
Total Revenue
Adjusted EBITDA Margin(a)
Adjusted EBITDA(a)
$87 million
$795 million
50%
$472 million
Production Mix
Production
PV-10 Value of Reserves
Asset Acquisitions
84%
natural gas
244,298
natural gas (MMcf)
$1.6
billion(b)
3 acquisitions
12%
NGLs
5,980
NGLs (MBbls)
3,627,589
MMcfe
$585 million, gross
4%
oil
1,568
oil (MBbls)
$388 million, net
Scope 1 Methane
Emissions Intensity
No-Leak Rate
on Surveyed Assets
Total Recordable
Incident Rate
Reportable
Spill Intensity
0.7
MT CO2e/MMcfe
98%
Group-wide
0.89
per 200,000
work hours
0.08
oil & water
per MBbl
(a)Refer to APMs within this Annual Report & Form 20-F for information on how this metric is calculated and reconciled to IFRS measures.
(b)Based on SEC pricing.
Strategy
Our growth and ability to generate consistent shareholder returns stems from our unique business model and successful execution of low-risk,
disciplined and proven operating techniques.
1   Acquire long-life stable assets
We practice a disciplined approach to acquire long-life stable assets by targeting low-decline producing assets that are value accretive, high margin and
strategically complementary, while also applying extensive environmental, social, land and legal due diligence.
2024 Achievements
Targets for 2025
•Completed three acquisitions in our Central Region, including:
•Oaktree working interest acquisition for gross consideration of
$410 million and net consideration of $222 million, contributing
approximately $66 million MMcfepd to 2024 revenue.
•Crescent Pass acquisition for gross consideration of $106 million
and net consideration of $98 million, contributing approximately
$10 million MMcfepd to 2024 revenue.
•East Texas II acquisition for gross consideration of $69 million
and net consideration of $68 million, contributing approximately
$5 million MMcfepd to 2024 revenue.
•Successfully merge assets acquired in the recently completed
acquisition of Maverick Natural Resources, LLC (“Maverick”) to
build scale and achieve synergies.
•Effectively integrate acquisitions into our existing operations,
ensuring seamless transitions and alignment with our strategic
objectives to drive growth and maximize synergies.
•We will continue our disciplined acquisition strategy, targeting
assets that meet our strict investment standards.
•We will maintain liquidity rigor, ensuring we are well-positioned to
capitalize on market opportunities as they emerge.
•Our growth strategy will prioritize expanding in complementary
and synergistic ways, while building strong partnerships with
development-focused producers in our key operating regions.
Link to Risks:
1 2 4
Link to KPIs:
1 5
2   Operate our assets in a safe, efficient and responsible manner
Our operational strategy and success is closely aligned with the culture we created with our daily operational priorities. Our team embodies these
priorities through our Smarter Asset Management (“SAM”) program, working tirelessly to ensure the safe delivery of clean, affordable and reliable
energy.
2024 Achievements
Targets for 2025
•Annual production of 791 MMcfepd.
•Exit rate of 864 MMcfepd.
•Adjusted EBITDA margin of 50%.
•Achieved a 98% no-leak rate on surveyed assets.
•LTIR of 0.38 per 200,000 work hours, a decline of 63% year-over-
year.
•We will remain committed to our daily operating priorities: Safety,
Production, Efficiency, and Enjoyment.
•Our dedication to responsible stewardship remains steadfast. We
will focus intently on continuous improvement in all aspects of
sustainability, striving to exceed our stakeholders’ expectations.
•We will continue to prioritize the SAM program to sustain margins,
mitigate natural declines, and leverage expense efficiency
opportunities.
Link to Risks:
1 2 4 5 6 7
Link to KPIs:
3 4 5 6 7
5
3   Generate Reliable Free Cash Flow
Our business model is inherently designed to generate free cash flow. Furthermore, we aspire to make cash flows predictable and reliable so we can
consistently generate shareholder return, pay down debt, fund acquisitive growth, and accomplish our sustainability goals and ambitions.
2024 Achievements
Targets for 2025
•Repaid $206 million in asset-backed debt securitizations.
•Repurchased 1,638,030 shares, representing $21 million in
shareholder value above and beyond the $84 million in dividend
distributions.
•$151 million gain on settled derivative instruments.
•Recorded $8 million in coal mine methane revenues.
•Divested certain non-core undeveloped acreage across our
footprint for a total of $59 million.
•We will continue our effective hedging strategy to protect cash
flows. Additionally, we will capitalize on accretive market
opportunities to elevate our hedge book floor.
•We will continue to apply our Smarter Asset Management program
to maintain low decline rates across our producing assets and
review opportunities to optimize both core and non-core assets.
•We will remain dedicated to prudent cash flow growth through
accretive acquisitions that complement our existing asset base.
Link to Risks:
1 2 3 4 7
Link to KPIs:
1 2 3 4 5
4   Retire assets safely and responsibly
At the end of a well’s economic life, our safe and systematic asset retirement program ensures wells are permanently retired and well sites are
responsibly restored to their natural condition. Our retirement program underscores our strong commitment to a healthy environment, the surrounding
community, our neighbors, and state regulatory authorities.
2024 Achievements
Targets for 2025
•Expanded our asset retirement operations to 18 teams and 18
rigs.
•Retired 202 DEC-owned wells in the Appalachian Region and a
further 13 DEC-owned wells in our Central Region, surpassing our
goal to retire 200 wells in 2024 and exceeding our collective state
commitments in Appalachia.
•Additionally, we retired 85 third party-owned wells in the
Appalachian Region, including 51 state and federal orphan wells
and 34 for third party operators, bringing the total wells retired by
the Next LVL team to 287 wells.
•We will continue to safely retire wells, aiming to exceed state
asset retirement program commitments by identifying and retiring
wells at the end of their productive lives.
•We will continue to leverage the benefits of vertical integration
through our expanded internal asset retirement capacity.
•We will maintain constructive and collaborative dialogue with
states and industry associations to innovate and ensure best
practices in well retirement.
Link to Risks:
1 2   4 5 6
Link to KPIs:
2 4 5 6
Key Performance Indicators
In assessing our performance, the Directors use key performance indicators (“KPIs”) to track our success against our stated strategy. The Directors
assess our KPIs on an annual basis and modify them as needed, taking into account current business developments. The following KPIs focus on
corporate and environmental responsibility, consistent cash flow generation underpinned by prudent cost management, low leverage and adequate
liquidity to protect the sustainability of the business.
Refer to APMs within this Annual Report & Form 20-F for information on how these metrics are calculated and reconciled to IFRS measures.
1   Net Debt-to-Adjusted EBITDA
2024
2023
2022
Net debt-to-pro forma adjusted EBITDA
3.0x
2.2x
2.4x
During 2024 our leverage ratio increased to 3.0x primarily due to financing the majority of our acquisitions with debt. We actively manage our balance
sheet and seek to maintain a long-term leverage ratio of approximately 2.5x.
Link to Strategy:
1 3
Link to Risks:
1 3 4 5 6 7
2   Adjusted EBITDA Margin
2024
2023
2022
Adjusted EBITDA Margin
50%
52%
49%
Total revenue, inclusive of settled hedges and adjusted EBITDA decreased 10% and 14%, respectively, in 2024, while adjusted EBITDA margin
remained relatively consistent at 50%. The decrease in total revenue, inclusive of settled hedges was primarily due to a decrease in the average realized
sales price, lower production, a decline in hedge settlement gains, and normal declines. The decrease in adjusted EBITDA was driven by a decrease in
commodity pricing and lower production.
Link to Strategy:
3 4
Link to Risks:
1 2 3 4 5 6 7
6
3   Adjusted Operating Cost per Mcfe
2024
2023
2022
Adjusted Operating Cost per Mcfe
$1.78
$1.76
$1.77
Adjusted operating cost per Mcfe for 2024 was $1.78, an increase of 1% compared with 2023. This increase was primarily due to higher employees,
administrative costs and professional services due to investments made in staff and systems and costs related to litigation expense.
Link to Strategy:
2 3
Link to Risks
1 4 5 6
4   Net Cash Provided by Operating Activities
2024
2023
2022
Net Cash Provided by Operating Activities (in millions)
$346
$410
$388
Net cash provided by operating activities for 2024 was $346 million, a decrease of 16% compared with 2023. This decrease was due to the decrease in
total revenue resulting from decreases in pricing and production. However, this was partially offset by changes in working capital, which generated $50
million less in cash outflows compared to 2023.
Link to Strategy:
2 3 4
Link to Risks:
1 2 3 5 6 7
5   Emissions Intensity
2024
2023
2022
Emissions Intensity (MT CO2e/MMcfe)
0.7
0.8
1.2
Realized a 13% year-over-year reduction in Scope 1 methane emissions intensity, achieved through investments in leak detection technologies,
replacing natural gas-driven pneumatics with instrument air or solar solutions, and enhanced aerial emissions surveillance in our Central Region.
Link to Strategy:
1 2 3 4
Link to Risks:
2 5
6   Meet or Exceed State Asset Retirement Goals
2024
2023
2022
DEC-owned well retirements(a)
215
222
214
Wells retired by Next LVL
287
383
262
(a)DEC wells inclusive of 13, 21 and 14 Central Region wells retired during 2024, 2023 and 2022, respectively.
A total of 215 DEC-owned wells, including 13 in the Central Region, were retired across our operating footprint, surpassing our goal to retire 200 wells
and exceeding our collective state commitments in Appalachia. Additionally, Next LVL Energy plugged a total of 287 wells in Appalachia, including 202
DEC-owned wells and 85 third party-owned wells consisting of 51 state and federal orphan wells and 34 for third party operators.
Link to Strategy:
.4.
Link to Risks:
2 4 5
7   Safety Performance
2024
2023
2022
TRIR (per 200,000 work hours)
0.89
1.28
0.73
LTIR (per 200,000 work hours)
0.38
1.04
0.66
MVA (incidents per million miles)
0.34
0.55
0.69
Our 2024 TRIR was 0.89, a 30% improvement from 2023, driven by a foreman-led safety approach, enhanced good catch/near miss reporting, and a
new safety program for short-service field employees. Additionally, our 2024 LTIR was 0.38, reflecting a 63% improvement from 2023, attributable to
the same initiatives.
Moreover, our 2024 MVA rate was 0.34, a 38% improvement from 2023. This improvement was primarily due to specific actions taken to enhance
performance and accountability, including the implementation of vehicle telemetric monitoring.
Link to Strategy:
.2.
Link to Risks:
5 6
7
Our Business
History & Development of the Business
We are an independent energy company focused on natural gas and liquids production, transportation, marketing and well retirement, primarily located
within the Appalachian and Central regions of the United States. We were incorporated in 2014 in the United Kingdom, and our predecessor business
was co-founded in 2001 by our Chief Executive Officer, Robert Russell (“Rusty”) Hutson, Jr., with an initial focus on primarily natural gas and oil
production in West Virginia. In recent years, we have grown rapidly by capitalizing on opportunities to acquire and enhance producing assets and by
leveraging the operating efficiencies that result from economies of scale. As of December 31, 2024, we have completed 27 acquisitions since 2017 for a
combined purchase price of approximately $3.1 billion. In addition, on March 14, 2025, we completed our previously announced acquisition of Maverick
for a gross purchase price of approximately $1,275 million.
Throughout our history, we have prioritized sustainability and efficiency in our operations. Recognizing the global reliance on natural gas, we emphasize
the importance of responsible ownership and environmental stewardship in managing natural gas and crude oil wells and pipelines. Our proven track
record of acquiring, integrating and responsibly operating assets reflects this commitment. With our focus on efficient and environmentally sound energy
production, we are well-positioned to assist in meeting national and global energy demands.
Other Information
We were incorporated as a public limited company with the legal name Diversified Gas & Oil PLC under the laws of the United Kingdom on July 31, 2014
with the company number 09156132. On May 6, 2021, we changed our company name to Diversified Energy Company PLC.
Our registered office is located at 4th Floor Phoenix House, 1 Station Hill, Reading, Berkshire United Kingdom, RG1 1NB. In February 2017, our shares
were admitted to trading on the AIM Market of the London Stock Exchange (“AIM”) under the ticker “DGOC.” In May 2020, our shares were admitted to
the premium listing of the Official List of the Financial Conduct Authority and to trading on the Main Market of the LSE. With the change in corporate
name in 2021, our shares listed on the LSE began trading under the new ticker “DEC.” In December 2023, the Group’s shares were admitted to trading
on the New York Stock Exchange (“NYSE”) under the ticker “DEC.” Following the changes to the UK Listing Rules on July 29, 2024, the Company
continues to remain listed on the new equity shares (commercial companies) category of the Official List of the Financial Conduct Authority. As of
December 31, 2024, the principal trading market for the Group’s ordinary shares was the LSE.
Our principal executive offices are located at 1600 Corporate Drive, Birmingham, Alabama 35242, and our telephone number at that location is +1 205
408 0909. Our website address is www.div.energy. The information contained on, or that can be accessed from, our website does not form part of this
Annual Report & Form 20-F. We have included our website address solely as an inactive textual reference.
Business Overview
Our Business Model
•Acquire - We maintain a disciplined approach to evaluating opportunities to ensure that we only pursue those properties that possess a consistent
asset profile. We target existing long-life, stable assets with synergistic opportunities that produce predictable and stable cash flows, are value
accretive, margin enhancing and strategically complementary.
•Optimize - The primarily mature nature of the assets we acquire provides us with a portfolio of low-cost optimization opportunities. These
optimization activities, applied through our internally developed SAM program, are strategically important as they aid in offsetting natural
production declines, creating expense efficiency and reducing emissions.
•Produce - Our culture makes the difference as our team of industry veterans strive to efficiently produce as many units as possible in a safe and
environmentally responsible manner, aligning safety, environmental and financial best interests.
•Transport - We seek to acquire midstream systems into which we are a large producer and more fully integrate those assets into our upstream
portfolio to provide immediate and long-term synergies.
•Retire - We embrace our commitment to be a responsible operator of existing assets. With safety and environmental stewardship as top priorities,
we design our asset retirement program to permanently retire wells that have reached the end of their producing lives. Between 2022 and 2024,
we made investments that allowed us to expand our asset retirement capabilities through a series of acquisitions.
Our Strengths
•Low-risk and low-cost portfolio of assets
•Long-life and low-decline production
•High margin assets that leverage significant scale, supported by owned midstream and asset retirement infrastructure, along with an internal
product marketing team
•A management and operational team with extensive experience
•Proven history of successfully consolidating and integrating acquired assets
Outlook
Looking ahead, we will continue to prudently manage our long-life, low-decline asset portfolio and the consistent cash flows they generate. We plan to
maintain our hedging strategy to safeguard cash flow. Our goal is to retain our strategic advantages through purposeful growth, employing a disciplined
acquisition strategy that secures low-cost financing to support acquisitive growth while maintaining low leverage and prudent liquidity. Additionally, we
intend to stay proactive in our sustainability efforts by continuing to allocate capital to future sustainability initiatives.
8
Reserve Data
Summary of Reserves
The following table presents our estimated net proved reserves, Standardized Measure and PV-10 as of December 31, 2024, using SEC pricing.
Standardized Measure and PV-10 are based on the proved reserve report as of such date by Netherland, Sewell & Associates, Inc. (“NSAI”), our
independent petroleum engineering firm. A copy of the proved reserve report is included as an exhibit to this Annual Report & Form 20-F. Refer to
Preparation of Reserve Estimates and Estimation of Proved Reserves within this Annual Report & Form 20-F for a definition of proved reserves and the
technologies and economic data used in their estimation.
December 31, 2024
SEC Pricing(a)
Proved developed reserves
Natural gas (MMcf)
2,895,619
NGLs (MBbls)
103,471
Oil (MBbls)
18,524
Total proved developed reserves (MMcfe)
3,627,589
Proved undeveloped reserves
Natural gas (MMcf)
—
NGLs (MBbls)
—
Oil (MBbls)
—
Total proved undeveloped reserves (MMcfe)
—
Total proved reserves
Natural gas (MMcf)
2,895,619
NGLs (MBbls)
103,471
Oil (MBbls)
18,524
Total proved reserves (MMcfe)
3,627,589
Prices used
Natural gas (Mmbtu)
$2.13
Oil and NGLs (Bbls)
$76.32
PV-10 (thousands)
Pre-tax (Non-GAAP)(b)
$1,591,772
PV of Taxes
(194,851)
Standardized Measure
$1,396,921
Percent of estimated total proved reserves that are:
Natural gas
80%
Proved developed
100%
Proved undeveloped
—%
(a)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 volumes, the average Henry Hub spot price of $2.13 per MMBtu as of December 31, 2024 was adjusted for gravity, quality, local conditions, gathering and
transportation fees, and distance from market. For NGLs and oil volumes, the average WTI price of $76.32 per Bbl as of December 31, 2024 was similarly 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.
(b)The PV-10 of our proved reserves as of December 31, 2024 was prepared without giving effect to taxes or hedges. PV-10 is a non-GAAP and non-IFRS 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.
9
Proved Reserves
As of December 31, 2024, our estimated proved reserves totaled 3,627,589 MMcfe, a decrease of 6% from the prior year-end, with a Standardized
Measure of $1.4 billion. Natural gas constituted approximately 80% of our total estimated proved reserves and 80% of our total estimated proved
developed reserves. The following table provides a summary of the changes in our proved reserves during the years ended December 31, 2024, 2023
and 2022.
Total (MMcfe)
Total proved reserves as of December 31, 2021
4,629,029
Extensions and discoveries
13,326
Revisions to previous estimates
379,812
Purchase of reserves in place
331,043
Sales of reserves in place
(6,912)
Production
(296,121)
Total proved reserves as of December 31, 2022
5,050,177
Extensions and discoveries
1,012
Revisions to previous estimates
(659,379)
Purchase of reserves in place
126,803
Sales of reserves in place
(369,035)
Production
(299,632)
Total proved reserves as of December 31, 2023
3,849,946
Extensions and discoveries
1,287
Revisions to previous estimates
(106,936)
Purchase of reserves in place
173,056
Sales of reserves in place
(178)
Production
(289,586)
Total proved reserves as of December 31, 2024
3,627,589
Extensions and Discoveries
During 2024, 1,287 MMcfe were adjusted due to well assignments recorded in the accounting actuals.
During 2023, 1,012 MMcfe were adjusted due to well assignments recorded in the accounting actuals.
During 2022, we elected to participate in select development activities on a non-operated basis generating 13,326 MMcfe in reserves.
Revisions to Previous Estimates
During 2024, we recorded 106,936 MMcfe in revisions to previous estimates. The downward revisions were primarily associated with changes in the
trailing 12-month average realized Henry Hub first day spot price, which decreased approximately 19% as compared to the December 31, 2023. These
factors drove a net downward revision that impacted well economics and well life.
During 2023, we recorded 659,379 MMcfe in revisions to previous estimates. The downward revisions were primarily associated with changes in the
trailing 12-month average realized Henry Hub first day spot price, which decreased approximately 58% as compared to December 31, 2022 along with a
17% decrease in the 12 month average WTI first day spot price. These factors primarily drove a net downward revision that impacted well economics
and well life.
During 2022, we recorded 379,812 MMcfe in revisions to previous estimates. These positive performance revisions were primarily associated with
changes in the trailing 12-month average realized Henry Hub spot price, which increased approximately 77% as compared to the December 31, 2021
Henry Hub spot price due to the war between Russia and Ukraine, as well as other geopolitical factors. These factors primarily drove a net upward
revision of 386,064 MMcfe due to changes in pricing that impacted well economics. These increases were offset by a 6,252 MMcfe downward revision
for changes in timing.
Purchase of Reserves in Place
During 2024, 173,056 MMcfe of purchases of reserves in place were associated with the Oaktree, Crescent Pass and East Texas II acquisitions.
During 2023, 126,803 MMcfe of purchases of reserves in place were associated with the Tanos II acquisition.
During 2022, 331,043 MMcfe of purchases of reserves in place were associated with the East Texas and ConocoPhillips acquisitions.
Refer to Note 5 in the Notes to the Group Financial Statements for additional information about acquisitions and divestitures.
Sales of Reserves in Place
During 2024, 178 MMcfe of sales of reserves in place were primarily associated with the divestitures of non-core assets.
During 2023, 369,035 MMcfe of sales of reserves in place were primarily associated with the divestitures of non-core assets.
During 2022, 6,912 MMcfe of sales of reserves in place were primarily associated with the divestitures of non-core assets.
10
Refer to Note 5 in the Notes to the Group Financial Statements for additional information about acquisitions and divestitures.
Proved Undeveloped Reserves
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 will
engage third parties to complete the existing development activities, and such reserves are included below as proved undeveloped reserves. We do not
have a development program and, as a result, any additional undrilled locations that we hold cannot be classified as undeveloped reserves in
accordance with SEC rules unless a development plan is in place. As of December 31, 2024, we had no such development plans and therefore have not
classified these undrilled locations as proved undeveloped reserves.
The following table summarizes the changes in our estimated proved undeveloped reserves during the years ended December 31, 2024, 2023 and 2022:
Total (MMcfe)
Proved undeveloped reserves as of December 31, 2021
3,505
Extensions and discoveries
8,832
Revisions to previous estimates
—
Purchase of reserves in place
—
Sales of reserves in place
—
Converted to proved developed reserves
(3,505)
Proved undeveloped reserves as of December 31, 2022
8,832
Extensions and discoveries
—
Revisions to previous estimates
—
Purchase of reserves in place
24,821
Sales of reserves in place
(8,832)
Converted to proved developed reserves
—
Proved undeveloped reserves as of December 31, 2023
24,821
Extensions and discoveries
—
Revisions to previous estimates
(8,528)
Purchase of reserves in place
—
Sales of reserves in place
—
Converted to proved developed reserves
(16,293)
Proved undeveloped reserves as of December 31, 2024
—
Extensions and Discoveries
During 2024, no reserves were added from extension or discovery activities.
During 2023, no reserves were added from extension or discovery activities.
During 2022, we elected to participate in select development activities where third parties were engaged to complete the development. Seven of these
wells were in progress as of December 31, 2023, generating 8,832 MMcfe in proved undeveloped reserves.
Revisions of Previous Estimates
During 2024, there were 8,528 MMcfe of revisions to previous estimates as a result of changes in engineering assumptions due to performance. These
revisions were related to the completion of one Tanos II well in 2024 that was under development as of December 31, 2023.
During 2023, no reserves were added from extension or discovery activities.
During 2022, no reserves were added from extension or discovery activities.
Purchase of Reserves in Place
During 2024, there were no purchases of proved undeveloped reserves in place.
During 2023, the 24,821 MMcfe of purchase of reserves in place were associated with the Tanos II acquisition and related to four wells in progress that
have been drilled and are awaiting hydraulic fracture stimulation.
During 2022, there were no purchases of proved undeveloped reserves in place.
Refer to Note 5 in the Notes to the Group Financial Statements for additional information about acquisitions and divestitures.
Sales of Reserves in Place
During 2024, there were no sales of reserves in place.
During 2023, the 8,832 in sales of reserves in place were divested as part of the sale of 80% of the equity interest in DP Lion Equity Holdco LLC in
December 2023.
11
During 2022, there were no sales of reserves in place.
Refer to Note 5 in the Notes to the Group Financial Statements for additional information about acquisitions and divestitures.
Converted to Proved Developed Reserves
During 2024, there were 16,293 undeveloped reserves converted to developed reserves as a result of completing three Tanos II wells in 2024 that were
under development as of December 31, 2023.
During 2023, the were no undeveloped reserves converted to developed reserves.
During 2022, 3,505 MMcfe of undeveloped reserves were converted to developed reserves as a result of completing five Tapstone wells in 2022 that
were under development as of December 31, 2021.
Developed and Undeveloped Acreage
The following table sets forth certain information regarding the total developed and undeveloped acreage in which we owned an interest as of
December 31, 2024. Developed acres are acres spaced or assigned to productive wells and do not include undrilled acreage held by production under
the terms of the lease. Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of
commercial quantities of oil or natural gas, regardless of whether such acreage contains proved reserves. Approximately 99.9% of our acreage was held
by production at December 31, 2024.
Developed Acreage
Undeveloped Acreage
Total Acreage
Gross(a)
Net(b)
Gross(a)
Net(b)
Gross(a)
Net(b)
As of December 31, 2024
7,073,071
3,917,121
8,418,195
5,572,567
15,491,266
9,489,688
(a)A gross acre is an acre in which a working interest is owned. The number of gross acres is the total number of acres in which a working interest is owned.
(b)A net acre is deemed to exist when the sum of the fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional
working interests owned in gross acres expressed as whole numbers and fractions thereof.
The undeveloped acreage numbers presented in the table above have been compiled using best efforts to review and determine acreage that is not
currently drilled but may be available for drilling at the current time under certain circumstances. Whether or not undrilled acreage may be drilled and
thereafter produce economic quantities of oil or gas is related to many factors which may change over time, including natural gas and oil prices, service
vendor availability, regulatory regimes, midstream markets, end user demand, and macro and micro financial conditions; the undeveloped acreage
described herein is presented without an opinion as to economic viability, as a result of the aforesaid factors. Additionally, it is noted that certain
formations on a land tract may be already developed while other formations are undeveloped.
The following table sets forth the number of total gross and net undeveloped acres as of December 31, 2024 that will expire in 2025, 2026 and 2027
unless production is established within the spacing units covering the acreage prior to the expiration dates or unless such acreage is extended or
renewed.
Gross
Net
2025
25,721
2,884
2026
2,690
59
2027
—
—
Our primary focus is to operate our existing producing assets safely, efficiently and responsibly. However we also evaluate areas nearing lease
expiration for potential development opportunities when it is prudent to do so. As of December 31, 2024, we had no development plans and therefore
have not classified any other potential undrilled locations on this acreage as proved undeveloped reserves.
Preparation of Reserve Estimates
Our reserve estimates as of December 31, 2024 included in this Annual Report & Form 20-F were evaluated 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.
NSAI is a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies. NSAI was founded in 1961
and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-2699. Within NSAI, the
technical persons primarily responsible for auditing the estimates set forth in the NSAI reserves report incorporated herein are Mr. Robert C. Barg and
Mr. William J. Knights. Mr. Barg, a Licensed Professional Engineer in the State of Texas (No. 71658), has been practicing consulting petroleum
engineering at NSAI since 1989 and has over six years of prior industry experience. He graduated from Purdue University in 1983 with a Bachelor of
Science Degree in Mechanical Engineering. Mr. Knights, a Licensed Professional Geoscientist in the State of Texas, Geology (No. 1532), has been
practicing consulting petroleum geoscience at NSAI since 1991 and has over 10 years of prior industry experience. He graduated from Texas Christian
University in 1981 with a Bachelor of Science Degree in Geology and in 1984 with a Master of Science Degree in Geology. Both technical principals meet
or exceed the education, training and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas
Reserves Information promulgated by the Society of Petroleum Engineers; both are proficient in judiciously applying industry standard practices to
engineering and geoscience evaluations, as well as applying SEC and other industry reserves definitions and guidelines.
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 Group since 2018 with 26 years of experience in petroleum engineering and over 23 years of experience evaluating
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natural gas and oil reserves. Prior to joining the Group 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 quantities of natural gas, NGLs and oil that are ultimately
recovered. Estimates of economically recoverable natural gas, NGLs and oil and of future net cash flows are based on a number of variables and
assumptions, all of which may vary from actual results, including geologic interpretation, prices and future production rates and costs. See Risk Factors
for additional information.
Productive Wells
Productive wells consist of producing wells, wells capable of production and wells awaiting connection to production facilities. Gross wells are the total
number of producing wells in which we have an interest, operated and non-operated, and net wells are the sum of our fractional working interest owned
in gross wells. The following table summarizes our productive natural gas and oil wells as of December 31, 2024.
As of
December 31, 2024
Natural gas wells
73,055
Oil wells
3,455
Total gross productive wells
76,510
Natural gas wells
62,384
Oil wells
1,796
Total net productive wells
64,180
As of
December 31, 2024
Total gross in progress wells
—
Total net in progress wells
—
Exploratory and Development Drilling Activities
Information regarding our drilling and development activities is set forth below:
Development
Productive Wells
Dry Wells
Total
Year
Gross
Net
Gross
Net
Gross
Net
2024
—
—
—
—
—
—
2023
4
4
—
—
4
4
2022
5
2
—
—
5
2
We drilled no exploratory wells (productive or dry) during the years ended December 31, 2024, 2023 and 2022.
During 2022, we completed the development of the five wells that had been under development as of December 31, 2021. We then elected to
participate in seven development opportunities on a non-operating basis in our Appalachian Region. All seven of the Appalachian development wells
remained in progress as of December 31, 2022.
During 2023, we completed the development of two of the seven Appalachian wells that were under development as of December 31, 2022. The
remaining five Appalachian wells were divested in connection with the sale of 80% of the equity interest in DP Lion Equity Holdco LLC in December
2023. On March 1, 2023, we also completed the Tanos II acquisition, which included five wells in the Central Region that were under development at
the date of acquisition. During 2023, we completed one of these five wells. Four Central Region development wells remain in progress as of December
31, 2023.
During 2024, we completed the development of the four remaining wells acquired in the Tanos II acquisition that had been under development as of
December 31, 2023. As of December 31, 2024, we had no development wells in progress.
Refer to Note 5 in the Notes to the Group Financial Statements for additional information regarding the acquisitions and divestitures.
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Production Volumes, Average Sales Prices and Operating Costs
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Production
Natural Gas (MMcf)
244,298
256,378
255,597
NGLs (MBbls)
5,980
5,832
5,200
Oil (MBbls)
1,568
1,377
1,554
Total production (MMcfe)
289,586
299,632
296,121
Average realized sales price
(excluding impact of derivatives settled in cash)
Natural gas (Mcf)
$1.90
$2.17
$6.04
NGLs (Bbls)
25.17
24.23
36.29
Oil (Bbls)
74.71
75.46
89.85
Total (Mcfe)
$2.53
$2.68
$6.33
Average realized sales price
(including impact of derivatives settled in cash)
Natural gas (Mcf)
$2.57
$2.86
$2.98
NGLs (Bbls)
24.32
26.05
19.84
Oil (Bbls)
69.54
68.44
72.00
Total (Mcfe)
$3.05
$3.27
$3.30
Operating costs per Mcfe
LOE(a)
$0.80
$0.71
$0.62
Production taxes(b)
0.12
0.21
0.25
Midstream operating expense(c)
0.24
0.23
0.24
Transportation expense(d)
0.31
0.32
0.40
Total operating expense per Mcfe
$1.47
$1.47
$1.51
(a)LOE is defined as the sum of employee and benefit expenses, well operating expense (net), automobile expense and insurance cost.
(b)Production taxes include severance and property taxes. Severance taxes are generally paid on produced natural gas, NGLs and oil production at fixed rates established
by federal, state or local taxing authorities. Property taxes are generally based on the taxing jurisdictions’ valuation of our natural gas and oil properties and midstream
assets.
(c)Midstream operating expenses are daily costs incurred to operate our owned midstream assets inclusive of employee and benefit expenses.
(d)Transportation expenses are daily costs incurred from third-party systems to gather, process and transport our natural gas, NGLs and oil.
Significant Fields
We operate in four primary producing areas: (i) Appalachia, (ii) East Texas and Louisiana, (iii) the Barnett Shale, and (iv) the mid-continent region. The
following table presents production for our Appalachian Region, which is considered significant, or greater than 15% of our total proved reserves, for the
periods presented.
Year Ended
APPALACHIA
December 31, 2024
December 31, 2023
December 31, 2022
Production
Natural Gas (MMcf)
139,900
167,930
180,194
NGLs (MBbls)
2,931
3,018
2,810
Oil (MBbls)
390
394
423
Total production (MMcfe)
159,826
188,402
199,592
Customers
Our production is generally sold on month-to-month contracts at prevailing market prices.
During the years ended December 31, 2024, 2023 and 2022, no customers individually comprised more than 10% of total revenues.
Given the availability of alternative purchasers for oil and natural gas, we believe that losing any single purchaser would not materially impact our ability
to sell future production. To mitigate potential credit risk, we may occasionally require customers to provide financial security.
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Delivery Commitments
We have contractually agreed to deliver firm quantities of natural gas to various customers, which we expect to fulfill with production from existing
reserves. We regularly monitor our proved developed reserves to ensure sufficient availability to meet these commitments. The following table
summarizes our total gross commitments, compiled using best estimates based on our sales strategy, as of December 31, 2024.
Natural gas (MMcf)
2025
77,187
2026
52,802
2027
130,911
Thereafter
242,276
Transportation and Marketing
Diversified Energy Marketing, LLC, our wholly owned marketing subsidiary, focuses on commodity marketing, asset optimization, producer services and
strategic management of our transportation portfolio. Our mission is to enhance operational efficiency and profitability by leveraging market insights,
operational expertise and strategic asset management to ensure reliable flow market access.
We offer a comprehensive suite of services, including the marketing of natural gas, NGL’s and oil, risk management, logistical support and strategic
transportation management. This approach maximizes market presence, financial outcomes and consistent product flow, capitalizing on our
transportation infrastructure and vertically integrated midstream systems. Our midstream infrastructure and strategic arrangements provide access to
high-demand markets, particularly in the U.S. Gulf Coast, while utilizing low-cost transportation in Appalachia. This synergy with our asset profile
ensures advantageous pricing and flow assurance with minimal firm transportation agreements. As of December 31, 2024, our transportation
arrangements provide access to 522 MMcfepd of takeaway capacity.
As a dedicated arm of DEC, our marketing team aligns closely with our broader goals. With experienced professionals and a deep understanding of the
energy market, we are committed to delivering value and reliability to our stakeholders, navigating industry complexities to achieve operational
excellence.
Competition
Our marketing activities face competition from numerous companies, many with greater financial and other resources. Competitors include other
producers and affiliates with extensive pipeline systems for transportation from producers to end users. Competition is also influenced by the cost and
availability of alternative fuels, consumer demand, and the cost of and proximity of pipelines and other transportation facilities. We believe that our
future success in the marketing segment depends on establishing and maintaining strong customer relationships.
Seasonality
Demand for natural gas typically decreases in spring and fall, and increases in summer and winter. However, seasonal anomalies and consumer
procurement initiatives can mitigate these fluctuations. Seasonal anomalies can also heighten competition for equipment, supplies, and personnel,
potentially causing shortages, increased costs or, operational delays.
Title to Properties
We believe we hold satisfactory title to nearly all our active properties, adhering to industry standards. Our properties are subject to customary royalties,
contracts, consents, preferential purchase rights, tax liens, laws and other encumbrances, which we believe do not materially affect their use or value.
Before acquiring producing wells, we conduct thorough title investigations consistent with industry standards. For properties we operate, we address
significant title defects as needed. We believe our title reviews are reasonable and protective for a representative cross-section of our wells.
Government Regulation
General
Our operations in the United States are subject to various U.S. federal, state and local (including county and municipal level) laws and regulations.
These laws and regulations cover virtually every aspect of our operations including, among other things: use of public roads; construction of well pads,
impoundments, tanks and roads; pooling and unitizations; water withdrawal and procurement for well stimulation purposes; wastewater discharge, well
drilling, casing and hydraulic fracturing; stormwater management; well production; well plugging; venting or flaring of natural gas; pipeline construction
and the compression and transportation of natural gas and liquids; reclamation and restoration of properties after natural gas and oil operations are
completed; handling, storage, transportation and disposal of materials used or generated by natural gas and oil operations; the calculation, reporting
and payment of taxes on natural gas and oil production; and gathering of natural gas production. Various governmental permits, authorizations and
approvals under these laws and regulations are required for exploration and production as well as midstream operations. These laws and regulations,
and the permits, authorizations and approvals issued pursuant to such laws and regulations are intended to protect, among other things: air quality;
ground water and surface water resources, including drinking water supplies; wetlands; waterways; protected plants and animal species; natural
resources; and the health and safety of our employees and the communities in which we operate.
We endeavor to conduct our operations in compliance with all applicable U.S. federal, state and local laws (including county and municipal level) and
regulations. However, because of extensive and comprehensive regulatory requirements against a backdrop of variable geologic and seasonal
conditions, non-compliance during operations can occur. Certain non-compliance may result in fines or penalties, but depending on the nature of the
non-compliance could also result in civil or criminal enforcement actions, additional restrictions on our operations, or make it more difficult for us to
obtain necessary permits in the future. The possibility exists that new laws or regulations may be adopted which could have a significant impact on our
operations or on our customers’ ability to use our natural gas, natural gas liquids and oil, and may require us or our customers to change their
operations significantly or incur substantial costs.
Environmental Laws
Many of the U.S. laws and regulations referred to above vary according to the jurisdiction in which we conduct our operations. In addition to state or
local laws and regulations, our operations are also subject to numerous federal environmental laws and regulations. Below is a discussion of some of the
more significant federal laws and regulations applicable to our operations.
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Clean Air Act
The federal Clean Air Act and associated federal and state regulations regulate air emissions through permitting and/or emissions control requirements.
These regulations affect the entire value chain from oil and natural gas production, to gathering, to processing, to transmission and storage, and then to
distribution operations. Various equipment and activities in our assets are subject to regulation, including compressors, engines, dehydrators, storage
tanks, pneumatic devices, fugitive components, and blowdowns. We obtain permits, typically from state or local authorities, or document exemptions
necessary to authorize these activities. Further, we are required to obtain pre-approval for construction or modification of certain facilities, and/or to use
specific equipment, technologies or best management practices to control emissions. Some states also require a separate operating permit to be
obtained for on-going operations.
Federal and state governmental agencies continue to review and revise the air quality regulations affecting oil and natural gas activities, and further
regulation could increase our cost or otherwise affect our ability to produce. For instance, on March 8, 2024, the U.S. Environmental Protection Agency
(“EPA”) finalized New Source Performance Standard Subpart OOOOb (“NSPS OOOOb”) for new, modified, and reconstructed sources after December 6,
2022, and Emissions Guideline Subpart OOOOc (“EG OOOOc”) for sources existing prior to December 6, 2022. Most provisions of NSPS OOOOb took
effect immediately while certain requirements have phase-in periods. EG OOOOc requires individual states to incorporate similar provisions into their
regulations (or rely upon EPA’s model requirements) and will require approximately five years to be implemented. The affected source categories under
NSPS OOOOb and EG OOOOc include well completions, fugitive emissions, liquids unloading, process controllers, process pumps, storage vessels, and
associated gas.
EPA last year also proposed two interrelated regulations. On August 1, 2023, EPA proposed revisions to the greenhouse gas reporting rule for the oil and
natural gas industry to change the calculation methodology to be primarily based on actual emission measurements rather than emission factors. These
changes facilitate the implementation of a methane fee under the Waste Emission Charge (“WEC”) rule which was proposed on January 26, 2024. Both
rules were finalized in late 2024 as required by the Inflation Reduction Act (“IRA”) of 2022. Under the WEC rule, reporters would be subject to a fee
beginning in 2025 at $900 per ton of methane emissions that exceed thresholds prescribed under the rule. These methane emissions would be based on
those reported under the greenhouse gas reporting rule. We achieved zero excess emissions under the WEC program in 2024 and therefore, are not
required to pay any WEC fees in 2025. President Trump announced following his election in November 2024 an intent to work with the Republican-
majority Congress to repeal any such “methane fee” (the WEC). In February 2025, Congress passed joint resolution H.J. Res. 35 disapproving EPA’s
2024 WEC rule under the Congressional Review Act; if the joint resolution becomes law, the WEC rule will have no force or effect.
Clean Water Act
The federal Clean Water Act (“CWA”) and corresponding state laws affect our operations by regulating storm water or other discharges of substances,
including pollutants, sediment, and spills and releases of oil, brine and other substances, into surface waters, and in certain instances imposing
requirements to dispose of produced wastes and other oil and gas wastes at approved disposal facilities. The discharge of pollutants into jurisdictional
waters is prohibited, except in accordance with the terms of a permit issued by the EPA, the U.S. Army Corps of Engineers, or a delegated state agency.
These permits require regular monitoring and compliance with effluent limitations, and include reporting requirements. Federal and state regulatory
agencies can impose administrative, civil and/or criminal penalties for non-compliance with discharge permits or other requirements of the CWA and
analogous state laws and regulations.
Endangered Species and Migratory Birds
The Endangered Species Act and related state laws and regulations protect plant and animal species that are threatened or endangered. The Migratory
Bird Treaty Act and the Bald and Golden Eagle Protection Act provides similar protections to migratory birds and bald and golden eagles, respectively.
Some of our operations are located in areas that are or may be designated as protected habitats for endangered or threatened species, or in areas
where migratory birds or bald and golden eagles are known to exist. Laws and regulations intended to protect threatened and endangered species,
migratory birds, or bald and golden eagles could have a seasonal impact on our construction activities and operations. New or additional species that
may be identified as requiring protection or consideration could also lead to delays in obtaining permits and/or other restrictions, including
operational restrictions.
Safety of Gas Transmission and Gathering Pipelines
Natural gas pipelines serving our operations are subject to regulation by the U.S. Department of Transportation’s Pipeline and Hazardous Materials
Safety Administration (“PHMSA”) pursuant to the Natural Gas Pipeline Safety Act of 1968 (“NGPSA”), as amended by the Pipeline Safety Act of 1992, the
Accountable Pipeline Safety and Partnership Act of 1996, the Pipeline Safety Improvement Act of 2002 (“PSIA”), the Pipeline Inspection, Protection,
Enforcement and Safety Act of 2006, and the 2011 Pipeline Safety Act. The NGPSA regulates safety requirements in the design, construction, operation
and maintenance of natural gas pipeline facilities, while the PSIA establishes mandatory inspections for all U.S. oil and natural gas transmission pipelines
in high-consequence areas. Additionally, certain states, such as West Virginia, also maintain jurisdiction over intrastate natural gas lines. In October
2019, PHMSA finalized the first of three rules that, collectively, are referred to as the natural gas “Mega Rule.” The first rule imposed additional safety
requirements on natural gas transmission pipelines, including maximum operating pressure and integrity management near HCAs for onshore gas
transmission pipelines. PHMSA finalized the second rule extending federal safety requirements to onshore gas gathering pipelines with large diameters
and high operating pressures in November 2021. PHMSA published the final of the three components of the Mega Rule in August 2022, which took
effect in May 2023. The final rule applies to onshore gas transmission pipelines, clarifies integrity management regulations, expands corrosion control
requirements, mandates inspection after extreme weather events, and updates existing repair criteria for both HCA and non-HCA pipelines.
Finally, on January 17, 2025, PHMSA published the final rule instituting more stringent gas pipeline leak detection and repair requirements, performance
standards for advanced leak detection programs, methane emission mitigation requirements, pressure control design and maintenance requirements,
reporting and recordkeeping. This forthcoming final rule is to be effective 180 days from formal publishing in the Federal Register. On January 20, 2025
the Trump Administration issued an Executive Order, Regulatory Freeze Pending Review, which withdrew all rules which had been sent to the Office of
the Federal Register but not yet published, so they could be reviewed and approved. This PHMSA final rule has yet to be published in the Federal
Register. The adoption of laws or regulations that apply more comprehensive or stringent safety standards can increase the expenses we incur for
gathering service.
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Resource Conservation and Recovery Act
The Federal Resource Conservation and Recovery Act (“RCRA”) and corresponding state laws and regulations impose requirements for the management,
treatment, storage and disposal of hazardous and non-hazardous wastes, including wastes generated by our operations. Drilling fluids, produced waters
and most of the other wastes associated with the exploration, development and production of natural gas and oil are currently regulated under RCRA’s
solid (non-hazardous) waste provisions. However, legislation has been proposed from time to time, and various environmental groups have filed lawsuits
that, if successful, could result in the reclassification of certain natural gas and oil exploration and production wastes as “hazardous wastes,” which
would make such wastes subject to much more stringent handling, disposal and clean-up requirements. A change in the RCRA exclusion for drilling
fluids, produced waters and related wastes could result in an increase in our costs to manage and dispose of generated wastes, which could have a
material adverse effect on the industry as well as on our results of operations and financial position.
Comprehensive Environmental Response, Compensation, and Liability Act
The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”) imposes joint and several liability for costs of
investigation and remediation, and for natural resource damages without regard to fault or the legality of the original conduct, on certain classes of
persons with respect to the release into the environment of substances designated under CERCLA as hazardous substances. These classes of persons,
called potentially responsible parties (“PRP”), include the current and past owners or operators of a site where the release occurred and anyone who
disposed, transported, or arranged for the disposal, transportation, or treatment of a hazardous substance found at the site. CERCLA also authorizes the
EPA and, in some instances, third parties to take actions in response to threats to public health or the environment, and to seek to recover from PRPs
for the costs of such action. Many states, including states in which we operate, have adopted comparable state statutes.
Although CERCLA generally exempts “petroleum” from regulation, in the course of our operations we have generated and will generate wastes that may
fall within CERCLA’s definition of hazardous substances, and may have disposed of these wastes at disposal sites owned and operated by others. We
may also be the owner or operator of sites on which hazardous substances have been released. In the event contamination is discovered at a site on
which we are or have been an owner or operator, or to which we have sent hazardous substances, we could be jointly and severally liable for the costs
of investigation and remediation, and for natural resource damages. Further, it is not uncommon for neighboring landowners and other third parties to
file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment.
Oil Pollution Act
The primary federal law related to oil spill liability is the Oil Pollution Act (“OPA”), which amends and augments oil spill provisions of the CWA and
imposes certain duties and liabilities on certain “responsible parties” related to the prevention of oil spills and damages resulting from such spills in or
threatening waters of the United States or adjoining shorelines. A liable “responsible party” includes the owner or operator of a facility, vessel or pipeline
that is a source of an oil discharge or that poses the substantial threat of discharge. The OPA assigns joint and several liability, without regard to fault,
to each responsible party for oil removal costs and a variety of public and private damages. Although defenses exist to the liability imposed by the OPA,
they are limited. In the event of an oil discharge or substantial threat of discharge, we may be liable for costs and damages.
Regulation of the Sale and Transportation of Natural Gas, NGLs and Oil
The transportation and sale, or resale, of natural gas in interstate commerce are regulated by the Federal Energy Regulatory Commission (“FERC”)
under the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978, and regulations issued under those statutes. FERC regulates interstate natural
gas transportation rates, and the terms and conditions of service, which affects the marketing of natural gas that we produce, as well as the revenues
we receive for sales of our natural gas. FERC regulations require that rates, terms and conditions of service for interstate service pipelines that transport
crude oil and refined products and certain other liquids be just and reasonable and must not be unduly discriminatory or confer any undue preference
upon any shipper. FERC regulations also require interstate common carrier petroleum pipelines to file with FERC and publicly post tariffs stating their
interstate transportation rates, terms and conditions of service.
Section 1(b) of the Natural Gas Act exempts from regulation by FERC facilities used for the production and gathering of natural gas. However, the
distinction between federally unregulated gathering facilities and FERC regulated transmission facilities is a fact-based determination, and the
classification of facilities has recently been the subject of regulatory dispute. We own certain natural gas pipeline facilities that we believe meet the
traditional tests FERC has used to establish a pipeline’s primary function as “gathering,” thus exempting it from the jurisdiction of FERC under the
Natural Gas Act.
Intrastate natural gas transportation is also subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural gas
transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state.
Like the regulation of interstate transportation rates, the regulation of intrastate transportation rates affects the marketing of natural gas that we
produce, as well as the revenues we receive for sales of our natural gas.
FERC regulates the rates and terms and conditions of service for transportation of oil and NGLs on interstate pipelines under the provisions of the
Interstate Commerce Act, the Energy Policy Act of 1992 and amendments to and regulations issued under those statutes. Intrastate transportation of
oil, NGLs and other products is dependent on pipelines whose rates, terms and conditions of service are subject to regulation by state regulatory bodies
under state statutes.
The price of natural gas, NGLs, and crude oil are currently not directly regulated, but Congress historically has been active in the area of natural gas,
NGLs and crude oil regulation. We cannot predict whether new legislation to regulate sales might be enacted in the future or what effect, if any, any
such legislation might have on our operations.
Health and Safety Laws
Our operations are subject to regulation under the federal Occupational Safety and Health Act (“OSHA”) and comparable state laws in some states, all of
which regulate health and safety of employees at our operations. Additionally, OSHA’s hazardous communication standard, the EPA community right-to-
know regulations under Title III of the federal Superfund Amendment and Reauthorization Act, and comparable state laws require that information be
maintained about hazardous materials used or produced by our operations and that this information be provided to employees, state and local
governments and the public.
Emissions Laws and Regulations
There are a number of proposed and recently-enacted laws and regulations at the international, federal, state, regional and local level that seek to limit
or require disclosure regarding greenhouse gas emissions and climate-related matters. Such laws and regulations could increase our costs, including
requirements that necessitate the installation of new equipment or the purchase of emission allowances. These laws and regulations could also impact
our customers, including the electric generation industry, making alternative sources of energy more competitive and thereby decreasing demand for
17
the natural gas and oil we produce. Additional regulation could also lead to permitting delays and additional monitoring and administrative requirements,
in turn impacting electricity generating operations.
At the international level, the UN-sponsored “Paris Agreement,” for nations to limit their greenhouse gas emissions through non-binding, individually-
determined reduction goals every five years after 2020. In November 2021, the international community gathered in Glasgow at the 26th Conference of
the Parties to the UN Framework Convention on Climate Change, during which multiple announcements were made, including a call for parties to
eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide greenhouse gases. In a related gesture, the United States and the
European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution by at least 30% by 2030
relative to 2020 levels, including “all feasible reductions” in the energy sector. Such commitments were re-affirmed at the 27th Conference of the Parties
in Sharm El Sheikh. However, the United States indicated in January 2025 it will withdraw from the Paris Agreement, and changes undertaken by the
new U.S. Presidential Administration have or may in the future reverse or rescind climate-related initiatives and regulations adopted by prior
administrations and focus on driving increased U.S. energy production. Although it is not possible at this time to predict how legislation or new
regulations that may be adopted pursuant to the Paris Agreement to address greenhouse gas emissions would impact our business, any such future
laws and regulations imposing reporting obligations on, or limiting emissions of greenhouse gases from, our equipment and operations could require us
to incur costs to implement such measures associated with our operations.
In addition, activists concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies,
which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in natural gas and oil
activities. Ultimately, this could make it more difficult to secure funding for exploration and production activities. Litigation risks are also increasing, as a
number of cities and other local governments have sought to bring suits against the largest oil and natural gas exploration and production companies in
state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to global climate
change effects, such as rising sea levels, and therefore are responsible for roadway and infrastructure damages, or alleging that the companies have
been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.
Sustainability Review
We are committed to addressing key environmental issues from our operations, as well as relevant social issues for the people across our operations,
while upholding the values and principles upon which we were founded. We adhere to high operating standards with a strong focus on environmental
protection, employee health and safety, and positive community engagement.
We proudly accept the responsibility and privilege of being part of the solution to the significant challenges of our nation’s energy, environment, and
economic security. By providing a reliable supply of abundant domestic energy from assets with a smaller environmental footprint than newly drilled
wells, we support our nation’s energy security. We invest in and implement measures to reduce emissions at our facilities, produce differentiated natural
gas through industry-recognized emissions detection, measurement, and mitigation processes, and retire orphan wells for several states, contributing to
environmental best practices. Additionally, we provide affordable and sustainable domestic energy, direct and indirect employment, mineral royalties,
and support tax revenues for the communities where we operate, contributing to economic prosperity, opportunity, and security.
We invite you to explore our annual Sustainability Report, typically released in the second calendar quarter, to gain insights into our actions aimed at
identifying, improving, and monitoring our sustainability efforts focused on planet, people, and principles. Our Sustainability Reports are available on our
website at www.div.energy.
Incentivizing Performance
Our commitment to climate and business resiliency is reflected, in part, in our compensation plans for executives and senior leaders. Depending on their
respective roles in the Group, these leaders have a proportion of their variable pay each year tied to the delivery of sustainability and climate-related
targets.
The Board and its Remuneration Committee annually review the appropriateness of the measures incorporated into the Executive Director’s annual
bonus plan and have consistently increased the non-financial sustainability-related component within the plan. For the year ended 2024, this component
represented 30% of the total eligible bonus, including a 15% environmental component directly related to methane intensity reductions and pneumatic
valve replacements. This plan and its results are audited annually.
Since 2022, 20% of the Executive Director’s long-term incentive plan (“LTIP”) also has been tied to non-financial climate targets. Audited annually, the
LTIP contains a three-year vesting period with 20% of the incentive specifically tied to tactical methods to achieve additional methane intensity
reductions in our climate journey.
For the Executive Director in the 2025 calendar year, the annual bonus and LTIP percentages tied to non-financial sustainability-related performance
remain at 25% and 20%, respectively.
Similar short- and long-term climate-related incentive compensation metrics are also applicable to members of senior leadership who play an active role
in executing the Group’s tactical emission reduction plans as well as executing other operational and environmental stewardship initiatives.
For more information on the performance conditions attached to executive remuneration incentive arrangements, refer to the Remuneration
Committee's Report within this Annual Report & Form 20-F.
18
Section 172 Companies Act Statement
In compliance with sections 172 (‘Section 172”) and 414CZA of the UK Companies Act, the Board makes the following statement in relation to the year
ended December 31, 2024:
Our stakeholders are the many individuals and organizations that are affected by or interact with our operations and with whom we therefore seek to
proactively and positively engage. We strive to maintain productive, mutually beneficial relationships with each stakeholder group by treating all
stakeholders with fairness and respect and by providing timely and effective information and responses.
We maintain several communication methods that afford two-way engagement with our stakeholder groups, including interactions via face-to-face,
telephone, or email exchange; published company reports, press releases, and investor presentations; industry or conference participation; and other
company engagement.
As the owner and operator of long-life assets, we aim to make decisions that consider both the long-term success of Diversified and value creation for
our stakeholders. Engaging with our stakeholders informs our decision-making, including consideration of our long-term strategic objectives and the
activities that support these aims, such as merger and acquisition diligence and the management of climate risk.
The following information provides a summary of stakeholder engagements from 2024.
Employees
We know our employees are essential to our success and growth. We recognize the need for a skilled and committed workforce, with a diverse range of
experience and perspectives, and we value the contribution it affords.
Key Areas of Focus
•Incident management
•Employee, driver and process safety
•Employee development
•Workplace culture
Action and Engagement
Our CEO and other executive management periodically conduct town hall meetings and field visits to personally and directly engage with employees and
to provide opportunities for employees to have direct management engagement. Our Board’s Non-Executive Director Employee Representative, Sandra
M. Stash, also periodically engages with the workforce to receive employee feedback on our business strategy, corporate culture and remuneration
policies, and shares this feedback with the Board. The valuable feedback from these meetings, along with that resulting from a periodic corporate-wide
Employee Experience Survey, when applicable, is used to strengthen future employee engagement and initiatives. We also regularly conduct new hire
surveys regarding the onboarding process and exit interviews, both important tools to further improve employee experiences.
In 2024, our CEO, accompanied by members of the executive and senior management teams, visited several locations across our operating footprint,
conducting town hall meetings with some 60% of total employees and presenting updates on strategic operational and financial company initiatives. To
better support our employees, we expanded our family-focused programs to include an Employee Adoption Program, which provides financial assistance
and maternal or paternal leave for the adoption process, and further continued our focus on mental and physical well-being through health and fitness
challenges and educational webinars.
Communities
We actively support sustainable socio-economic development in the communities in which we live and work and aim to minimize any potential negative
impacts from our operations. Community engagement includes developing and maintaining trusted relationships with our land and mineral owners with
the recognition that these relationships are key to our acquisitive business strategy and ability to achieve our operational goals. From personal and
socio-economic investment to strategic academic and educational support, our employees engage and serve their local communities through effective
partnerships that make a real difference.
Key Areas of Focus
•Incident management
•Effective grievance mechanisms
•Environmental protection
•Royalty payments
•Socio-economic investment and outreach
•Local hiring
Action and Engagement
Through our formalized Community Giving and Engagement Program and other corporate initiatives throughout our operating footprint, in 2024 we
provided approximately $2.1 million in financial support to numerous organizations, including adult and children’s health and well-being programs, local
food banks, secondary and higher educational programs and initiatives, student athlete-related ventures and engagements, and municipal services. We
were especially pleased to support children’s initiatives which included, for the fourth consecutive year, distributing $205,000 worth of winter coats to
more than 2,700 children in nine schools through Operation Warm. We also supported 12 different foster care organizations and provided meals for the
associated families and workers within these organizations.
Our employees responded to more than 33,000 inquiries from our royalty and surface owners through our corporate call center. We also distributed
approximately $167 million in royalty payments to more than 84,000 royalty owners in 2024.
Equity and Debt Investors
We actively engage with our capital market partners, financial institutions and rating agencies to support a full understanding of our business and
progress against our strategic priorities.
19
Key Areas of Focus
•Emissions reductions
•Climate risk and energy transition
•Incident management
•Risk management
•Corporate Governance
•Financial stability
•Access to funding
Action and Engagement
We regularly provide financial, operational and other sustainability performance updates to our equity and debt investors. These updates may be in the
form of investor relations presentations, press releases, website updates, or direct calls and meetings, inclusive of the CEO, CFO, SVP-Investor
Relations, SVP-Sustainability, SVP-EHS and/or Board Chairman, as applicable. The Annual General Meeting (“AGM”) also provides an opportunity for
shareholders to engage with the Board and Executive Management.
Our increasing participation in energy conferences, industry events and non-deal roadshows has provided added opportunities for discussions with
current and potential Credit Facility lenders and ABS investors particularly interested in our sustainability and emissions reductions strategies, activities
and results. Reflective of that interest by ABS investors and our commitment to climate and operating targets, certain of our ABS transactions, as well as
our sustainability-linked Credit Facility, have included interest rate impacts tied to certain of these sustainability targets.
Governments
We seek to develop and maintain positive relationships and regular dialogue with various stakeholder groups within our federal, state and local
governments.
Key Areas of Focus
•Legal compliance
•Tax payments to governments
•Safe and efficient asset retirement
•Emissions reductions
•Risk management
•Environmental protection
Action and Engagement
Executive and operational management engage with federal, state and local regulators to address legislative, regulatory and operational matters
important to our company and our industry. With risk identification and protection of the local environment and biodiversity in mind, we proactively
engage applicable regulatory agencies before commencing a project to foster transparent dialogue during the completion and approval of applicable
environmental assessments and related actions.
We seek to keep regulatory agencies appraised of our operational and well retirement activities and to provide objective and measurable progress
indicators. Our Next LVL Energy well retirement subsidiary supports company efforts to exceed annual state plugging requirements and well retirement
needs of other oil and gas operators in the Appalachia Region as well as the individual states in their respective federal orphan well retirement
programs.
Customers
We believe hydrocarbon production is, and will continue to be, essential to supporting modern human life. Therefore, we work hard to deliver
environmentally-focused, responsibly produced natural gas, NGLs and oil that satisfy regulatory requirements and meet the energy demands of our local
communities and customers while supporting our climate goals.
Key Areas of Focus
•Incident management
•Process safety
•Access to funding
Action and Engagement
We delivered 791 MMcfepd in 2024 with no cited process and pipeline safety events or associated civil penalties. We continue to use our
pipeline awareness programs to provide relevant information and education to those who interact with our assets or employees.
Business Partners
We aim to establish mutually beneficial relationships with our business partners. As operator, we work on behalf of our joint operating partners to safely
and efficiently manage the assets and deliver our products. Further, we strive to develop strong relationships with our contractors and suppliers that are
built on trust, transparency and quality products and services.
Key Areas of Focus
•Access to funding
•Risk management
•Employee and process safety
•Accident prevention
•Procurement management
20
Action and Engagement
We fulfill our responsibility as operator by responsibly managing the wells, ensuring payment of related expenses, and distributing to our joint interest
partners the applicable revenues and royalties from the wells’ commodity sales.
We use local contractors and suppliers in each of the states in which we conduct our operations. We engage the expertise and capability of a leading
supply chain risk management firm to continuously screen and monitor contractor safety performance and compliance through stringent operating
guidelines. With a network of approximately 700 contractors, this real-time monitoring helps to ensure our contractors are providing us with the
necessary product and service quality to meet the expectations of our stakeholders and supports ongoing agreements with those contractors who satisfy
our safety thresholds.
Financial Review
Operating Results
Key Factors Affecting Our Performance
Our financial condition and results of operations have been, and will continue to be, affected by a number of important factors, including the following:
Strategic Acquisitions
We have made, and will continue to make, strategic acquisitions to strengthen our current market presence and expand into new markets. We have
made the following business combinations or asset acquisitions for a total aggregate consideration of $939 million during the years ended December 31,
2024, 2023 and 2022, comprised of:
•October 2024: The East Texas II Acquisition, in which we acquired certain upstream assets and related infrastructure in the Central Region;
•August 2024: The Crescent Pass Acquisition, in which we acquired certain upstream assets and related infrastructure in the Central Region;
•June 2024: The Oaktree Acquisition, in which we acquired Oaktree’s proportionate working interest in the East Texas, Tapstone, Tanos and Indigo
acquisitions;
•March 2023: The Tanos II Assets Acquisition, in which we acquired certain upstream assets and related infrastructure in the Central Region;
•September 2022: The ConocoPhillips Assets Acquisition, in which we acquired certain upstream assets and related gathering infrastructure in the
Central Region;
•July 2022: Certain plugging infrastructure in the Appalachian Region;
•May 2022: Certain plugging infrastructure in the Appalachian Region;
•April 2022:
•The East Texas I Acquisition, in which we acquired working interests in certain upstream assets and related facilities within the Central Region
from a private seller, in conjunction with Oaktree;
•Certain midstream assets, inclusive of a processing facility, in the Central Region that was contiguous to our East Texas I assets; and
•February 2022: Certain plugging infrastructure in the Appalachian Region.
Our strategic acquisitions may impact the comparability of our financial results across different periods. We plan to continue selectively pursuing
acquisitions to continue to produce reliable free cash flow for our shareholders. We will evaluate and execute opportunities that complement and scale
our business, optimize profitability, expand into adjacent markets, and add new capabilities.
Recent Developments
•In March 2025, the Group announced the completion of its previously announced Maverick acquisition for a gross purchase price of approximately
$1,275 million. The transaction was funded through the assumption of approximately $700 million of Maverick debt outstanding, the issuance of
21,194,213 new ordinary shares direct to the unitholders of Maverick, and approximately $207 million in cash on hand.
•In March 2025, in connection with the close of the Maverick acquisition, the Group amended and restated the credit agreement governing its Credit
Facility. The amendment extended the maturity of the Credit Facility to March 2029 and increased the borrowing base to $900 million, primarily
resulting from the additional collateral acquired from Maverick. There were no other material changes to pricing or terms. The Group utilized the
proceeds from the upsized borrowing base to fund a portion of the Maverick acquisition and repay the outstanding principal on Term Loan II.
•In February 2025, the Group 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 at par value (“the ABS X Notes”). The Group utilized the proceeds from
the ABS X Notes to refinance the ABS I Notes, ABS II Notes, and Term Loan I, and to fund the Summit Natural Resources (“Summit”) transaction.
•In February 2025, the Group announced the completion of its previously announced acquisition of certain upstream assets and related
infrastructure within Virginia, West Virginia, and Alabama of the Appalachian Region from Summit for a gross purchase price of approximately $45
million before customary purchase price adjustments. The transaction was funded through the new ABS X Notes collateralized, in part, by the
acquired assets.
•In February 2025, the Company issued 8,500,000 new ordinary shares at $14.50 per share to raise gross proceeds of $123 million. In addition, the
Company has granted the underwriters a 30-day option to purchase up to an additional 850,000 ordinary shares at the public offering price, less
underwriting discount. The Group used the net proceeds to repay a portion of the debt to be incurred in connection with the Maverick transaction.
Refer to Notes 5, 16, and 21 in the Notes to the Group Financial Statements for additional information regarding acquisitions, share capital, and debt.
Segment Reporting
Our operations consist of one reportable segment in the United States under IFRS 8. Refer to Note 2 in the Notes to the Group Financial Statements for
a description of our segment reporting.
Results of Operations
Refer to APMs within this Annual Report & Form 20-F for information on how certain of the metrics below are calculated and reconciled to IFRS
measures. Discussion related to prior period results can be found in the Results of Operations section of our 2023 Annual Report & Form 20-F on our
website at www.div.energy.
21
Year Ended
December 31, 2024
December 31, 2023
Change
% Change
Net production
Natural gas (MMcf)
244,298
256,378
(12,080)
(5%)
NGLs (MBbls)
5,980
5,832
148
3%
Oil (MBbls)
1,568
1,377
191
14%
Total production (MMcfe)
289,586
299,632
(10,046)
(3%)
Average daily production (MMcfepd)
791
821
(30)
(4%)
% Natural gas (Mcfe basis)
84%
86%
Average realized sales price
(excluding impact of derivatives settled in cash)
Natural gas (Mcf)
$1.90
$2.17
$(0.27)
(12%)
NGLs (Bbls)
25.17
24.23
0.94
4%
Oil (Bbls)
74.71
75.46
(0.75)
(1%)
Total (Mcfe)
$2.53
$2.68
$(0.15)
(6%)
Average realized sales price
(including impact of derivatives settled in cash)
Natural gas (Mcf)
$2.57
$2.86
$(0.29)
(10%)
NGLs (Bbls)
24.32
26.05
(1.73)
(7%)
Oil (Bbls)
69.54
68.44
1.10
2%
Total (Mcfe)
$3.05
$3.27
$(0.22)
(7%)
Revenue (in thousands)
Natural gas
$464,600
$557,167
$(92,567)
(17%)
NGLs
150,513
141,321
9,192
7%
Oil
117,146
103,911
13,235
13%
Total commodity revenue
$732,259
$802,399
$(70,140)
(9%)
Midstream revenue
32,535
30,565
1,970
6%
Other revenue
30,047
35,299
(5,252)
(15%)
Total revenue
$794,841
$868,263
$(73,422)
(8%)
Gain (loss) on derivative settlements
(in thousands)
Natural gas
$164,452
$177,139
$(12,687)
(7%)
NGLs
(5,055)
10,594
(15,649)
(148%)
Oil
(8,108)
(9,669)
1,561
(16%)
Net gain (loss) on commodity derivative settlements(a)
$151,289
$178,064
$(26,775)
(15%)
Total revenue, inclusive of settled hedges
$946,130
$1,046,327
$(100,197)
(10%)
22
Year Ended
December 31, 2024
December 31, 2023
Change
% Change
Per Mcfe Metrics
Average realized sales price
(including impact of derivatives settled in cash)
$3.05
$3.27
$(0.22)
(7%)
Midstream and other revenue
0.22
0.22
—
—%
LOE
(0.80)
(0.71)
(0.09)
13%
Midstream operating expense
(0.24)
(0.23)
(0.01)
4%
Employees, administrative costs and professional services
(0.30)
(0.26)
(0.04)
15%
Recurring allowance for credit losses
—
(0.03)
0.03
(100%)
Production taxes
(0.12)
(0.21)
0.09
(43%)
Transportation expense
(0.31)
(0.32)
0.01
(3%)
Proceeds received from leasehold sales(b)
0.14
0.09
0.05
56%
Adjusted EBITDA per Mcfe
$1.64
$1.82
$(0.18)
(10%)
Adjusted EBITDA margin
50%
52%
Other financial metrics (in thousands)
Operating profit (loss)
$(43,026)
$1,161,051
$(1,204,077)
(104%)
Net income (loss)
$(87,001)
$759,701
$(846,702)
(111%)
Adjusted EBITDA
$472,309
$546,788
$(74,479)
(14%)
(a)Net gain (loss) on commodity derivative settlements represents cash (paid) or received on commodity derivative contracts. This excludes settlements on foreign
currency and interest rate derivatives as well as the gain (loss) on fair value adjustments for unsettled financial instruments for each of the periods presented.
(b)Proceeds received from leasehold sales consists of $27 million, $24 million and $2 million in cash proceeds received for leasehold sales during the years ended
December 31, 2024, 2023 and 2022, respectively, less $14 million and $4 million of basis in leasehold sales for the years ended December 31, 2024 and 2023,
respectively.
Forward-Looking Statements
This Annual Report & Form 20-F contains forward-looking statements that can be identified by the following terminology, including the terms “may,”
“might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,”
“contemplate,” “possible,” or the negative of these terms or other variations or comparable terminology, or by discussions of strategy, plans, objectives,
goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places
throughout this Annual Report & Form 20-F and include, but are not limited to, statements regarding our intentions, beliefs or current expectations
concerning, among other things, our results of operations, financial positions, liquidity, prospects, growth, strategies and the natural gas and oil
industry. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance and the actual results of our operations, financial position and liquidity, and the
development of the markets and the industry in which we operate, may differ materially from those described in, or suggested by, the forward-looking
statements contained in this Annual Report & Form 20-F. In addition, even if the results of operations, financial position and liquidity, and the
development of the markets and the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report &
Form 20-F, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause
results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general
economic and business conditions, the behavior of other market participants, industry trends, competition, commodity prices, changes in regulation,
currency fluctuations, our ability to recover our reserves, our ability to successfully integrate acquisitions, our ability to obtain financing to meet liquidity
needs, changes in our business strategy, political and economic uncertainty.
Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this Annual Report & Form 20-F
speak only as of the date of this Annual Report & Form 20-F, reflect our current view with respect to future events and are subject to risks relating to
future events and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. Investors
should specifically consider the factors identified in this Annual Report & Form 20-F which could cause actual results to differ before making an
investment decision. Subject to the requirements of the Prospectus Rules, the Disclosure and Transparency Rules and the Listing Rules or applicable
law, we explicitly disclaim any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this Annual
Report & Form 20-F that may occur due to any change in our expectations or to reflect events or circumstances after the date of this Annual Report &
Form 20-F. 
Production, Revenue & Hedging
Total revenue in the year ended December 31, 2024 of $795 million decreased 8% from $868 million reported for the year ended December 31, 2023,
primarily due to a 6% decrease in the average realized sales price, excluding the impact of derivatives settled in cash, and 3% lower production which
was primarily related to the sale of equity interest in DP Lion Equity Holdco in December 2023 along with normal declines. This decrease was partially
offset by increased production as a result of the Oaktree, Crescent Pass, and East Texas II acquisitions in 2024. Including commodity hedge settlement
gains of $151 million and $178 million in 2024 and 2023, respectively, total revenue, inclusive of settled hedges, decreased by 10% to $946 million in
2024 from $1,046 million in 2023.
23
The following table summarizes average commodity prices for the periods presented with Henry Hub on a per Mcf basis and Mont Belvieu and WTI on a
per Bbl basis:
Year Ended
December 31, 2024
December 31, 2023
$ Change
% Change
Henry Hub
$2.27
$2.74
$(0.47)
(17%)
Mont Belvieu
38.16
34.11
4.05
12%
WTI
75.72
77.62
(1.90)
(2%)
Commodity Revenue
The following table reconciles the change in commodity revenue (excluding the impact of hedges settled in cash) by reflecting the effect of changes in
volume and in the underlying prices:
(In thousands)
Natural Gas
NGLs
Oil
Total
Commodity revenue for the year ended December 31, 2022
$1,544,658
$188,733
$139,620
$1,873,011
Volume increase (decrease)
4,717
22,935
(15,903)
11,749
Price increase (decrease)
(992,208)
(70,347)
(19,806)
(1,082,361)
Net increase (decrease)
(987,491)
(47,412)
(35,709)
(1,070,612)
Commodity revenue for the year ended December 31, 2023
$557,167
$141,321
$103,911
$802,399
Volume increase (decrease)
(26,214)
3,586
14,413
(8,215)
Price increase (decrease)
(66,353)
5,606
(1,178)
(61,925)
Net increase (decrease)
(92,567)
9,192
13,235
(70,140)
Commodity revenue for the year ended December 31, 2024
$464,600
$150,513
$117,146
$732,259
To manage our cash flows in a volatile commodity price environment and as required by our SPV-level asset-backed securities, we utilize derivative
hedging contracts that allow us to fix the per unit sales prices for our production. As of December 31, 2024, approximately 86% of our production was
fixed through derivative hedging contracts over the next twelve months. The tables below set forth the commodity hedge impact on commodity
revenue, excluding and including cash received for commodity hedge settlements:
(In thousands, except per
unit data)
Year Ended December 31, 2024
Natural Gas
NGLs
Oil
Total Commodity
Revenue
Realized $
Revenue
Realized $
Revenue
Realized $
Revenue
Realized $
per Mcf
per Bbl
per Bbl
per Mcfe
Excluding hedge impact
$464,600
$1.90
$150,513
$25.17
$117,146
$74.71
$732,259
$2.53
Commodity hedge impact
164,452
0.67
(5,055)
(0.85)
(8,108)
(5.17)
151,289
0.52
Including hedge impact
$629,052
$2.57
$145,458
$24.32
$109,038
$69.54
$883,548
$3.05
(In thousands, except per
unit data)
Year Ended December 31, 2023
Natural Gas
NGLs
Oil
Total Commodity
Revenue
Realized $
Revenue
Realized $
Revenue
Realized $
Revenue
Realized $
per Mcf
per Bbl
per Bbl
per Mcfe
Excluding hedge impact
$557,167
$2.17
$141,321
$24.23
$103,911
$75.46
$802,399
$2.68
Commodity hedge impact
177,139
0.69
10,594
1.82
(9,669)
(7.02)
178,064
0.59
Including hedge impact
$734,306
$2.86
$151,915
$26.05
$94,242
$68.44
$980,463
$3.27
Refer to Note 13 in the Notes to the Group Financial Statements for additional information regarding derivative financial instruments.
24
Expenses
(In thousands, except per unit data)
Year Ended
December
31, 2024
December
31, 2023
Total Change
Per Mcfe Change
Per Mcfe
Per Mcfe
$
%
$
%
LOE(a)
$231,651
$0.80
$213,078
$0.71
$18,573
9%
$0.09
13%
Production taxes(b)
36,043
0.12
61,474
0.21
(25,431)
(41%)
(0.09)
(43%)
Midstream operating expenses(c)
70,747
0.24
69,792
0.23
955
1%
0.01
4%
Transportation expenses(d)
90,461
0.31
96,218
0.32
(5,757)
(6%)
(0.01)
(3%)
Total operating expenses
$428,902
$1.47
$440,562
$1.47
$(11,660)
(3%)
$—
—%
Employees, administrative costs and
professional services(e)
86,885
0.30
78,659
0.26
8,226
10%
0.04
15%
Costs associated with acquisitions(f)
11,573
0.04
16,775
0.06
(5,202)
(31%)
(0.02)
(33%)
Other adjusting costs(g)
22,375
0.08
17,794
0.06
4,581
26%
0.02
33%
Non-cash equity compensation(h)
8,286
0.03
6,494
0.02
1,792
28%
0.01
50%
Total operating and G&A expenses
$558,021
$1.92
$560,284
$1.87
$(2,263)
—%
$0.05
3%
Depreciation, depletion and amortization
256,484
0.89
224,546
0.75
31,938
14%
0.14
19%
Allowance for credit losses(i)
101
—
8,478
0.03
(8,377)
(99%)
(0.03)
(100%)
Total expenses
$814,606
$2.81
$793,308
$2.65
$21,298
3%
$0.16
6%
(a)LOE encompasses costs incurred to maintain producing properties. These costs include direct and contract labor, repairs and maintenance, emissions reduction
initiatives, water hauling, compression, automobile, insurance, and materials and supplies expenses.
(b)Production taxes consist of severance and property taxes. Severance taxes are typically paid on produced natural gas, NGLs and oil at fixed rates set by federal, state or
local taxing authorities. Property taxes are generally based on the valuation of the Group’s natural gas and oil properties and midstream assets by the taxing
jurisdictions.
(c)Midstream operating expenses are the daily costs of operating the Group’s owned midstream assets, including employee and benefit expenses.
(d)Transportation expenses are the daily costs incurred from third-party systems to gather, process, and transport the Group’s natural gas, NGLs and oil.
(e)Employees, administrative costs and professional services include payroll and benefits for our administrative and corporate staff, costs of maintaining administrative and
corporate offices, managing our production operations, franchise taxes, public company costs, fees for audit and other professional services, and legal compliance.
(f)Costs associated with acquisitions are related to the integration of acquisitions, which vary for each acquisition. For acquisitions classified as business combinations,
these costs include transaction costs directly associated with a successful acquisition. They also encompass costs related to transition service arrangements, where the
Group pays the seller of the acquired entity a fee to manage G&A functions until full integration of the assets. Additionally, these costs include costs to cover expenses
for integrating IT systems, consulting, and internal workforce efforts directly related to incorporating acquisitions into the Group’s systems.
(g)Other adjusting costs include items that affect the comparability of results or are not indicative of ongoing business trends. These costs consist of one-time projects,
contemplated transactions or financing arrangements, contract terminations, deal breakage and/or sourcing costs for acquisitions, and unused firm transportation.
(h)Non-cash equity compensation represents the expense recognition for share-based compensation provided to key members of the management team. Refer to Note 17
in the Notes to the Group Financial Statements for additional details on non-cash share-based compensation.
(i)Allowance for credit losses consists of the recognition and reversal of credit losses. Refer to Note 14 in the Notes to the Group Financial Statements for additional
information regarding credit losses.
Operating Expenses
Per unit operating expense remained flat year-over-year, resulting from:
•Higher per unit LOE that increased 13%, or $0.09 per Mcfe, which is reflective of the Oaktree, Crescent Pass, and East Texas II acquisitions in 2024.
•Lower per unit production taxes that declined 43%, or $0.09 per Mcfe were primarily attributable to a decrease in severance and property taxes as a
result of a decrease in revenue due to lower production and commodity prices, as well as lower valuations for property taxes experienced during the
year;
•Higher per unit midstream operating expense that increased 4%, or $0.01 per Mcfe were primarily attributable to the growth in our midstream
operations due to Central region expansion; and
•Lower per unit transportation expenses that declined 3%, or $0.01 per Mcfe, were primarily related to decreases in commodity price-linked
components of third-party midstream rates and costs.
General and Administrative Expense
G&A expense increased primarily due to:
•Higher employees, administrative costs and professional services resulting in additional cost to support our ongoing growth through acquisitions. On
a per Mcfe basis, these costs increased 15%, or $0.04 per Mcfe;
•Lower costs associated with acquisitions primarily related to a reduction in legal and consulting services incurred in 2024 as compared to 2023. On a
per Mcfe basis, these costs decreased 33% or $0.02 per Mcfe;
•Higher other adjusting costs primarily related to increased costs associated with litigation expense. These costs were partially offset by decreases in
costs related to unused firm transportation and employee severance costs. On a per Mcfe basis, these costs increased 33%, or $0.02 per Mcfe; and
25
•Higher non-cash equity compensation due to an increase in the number of participants in the long-term incentive plan in 2024. On a per Mcfe basis,
these costs increased 50%, or $0.01 per Mcfe.
Other Expenses
Depreciation, depletion and amortization (“DD&A”) increased due to:
•Higher depletion expense as a result of an increase in our DD&A rate, which was partially offset by a 3% decrease in production over the period.
The increase in our DD&A rate was due to the decrease in our estimated proved reserves relative to our depreciable base, driven primarily by
changes in commodity prices year-over-year as well as the sale of equity interest in DP Lion Equity Holdco LLC in December 2023. The proved
reserves decrease was partially offset by the acquisition of the Oaktree, Crescent Pass, and East Texas II assets in 2024.
Allowance for credit losses decreased due to:
•The impact on anticipated credit losses on joint interest owner receivables has a direct relationship with pricing and distributions to individual
owners. As the pricing environment declined in 2023, the underlying well economics did as well, and as a result, in 2023, we increased our reserve
by $8 million. In 2024, with pricing more stable, no such adjustment to the reserve was deemed necessary.
Refer to Notes 5, 10, 11 and 13 in the Notes to the Group Financial Statements for additional information regarding acquisitions, natural gas and oil
properties, property, plant and equipment and derivative financial instruments, respectively.
Derivative Financial Instruments
We recorded the following gain (loss) on derivative financial instruments in the Consolidated Statement of Comprehensive Income for the periods
presented:
(In thousands)
Year Ended
December 31, 2024
December 31, 2023
$ Change
% Change
Net gain (loss) on commodity derivatives
settlements(a)
$151,289
$178,064
$(26,775)
(15%)
Net gain (loss) on interest rate swap(a)
190
(2,722)
2,912
(107%)
Gain (loss) on foreign currency hedges(a)
—
(521)
521
(100%)
Total gain (loss) on settled derivative
instruments
$151,479
$174,821
$(23,342)
(13%)
Gain (loss) on fair value adjustments of unsettled
financial instruments(b)
(189,030)
905,695
(1,094,725)
(121%)
Total gain (loss) on derivative financial
instruments
$(37,551)
$1,080,516
$(1,118,067)
(103%)
(a)Represents the cash settlement of hedges that settled during the period.
(b)Represents the change in fair value of financial instruments net of removing the carrying value of hedges that settled during the period.
For the year ended December 31, 2024, we recognized a loss on derivative financial instruments of $38 million compared to a gain of $1,081 million in
2023. Adjusting our unsettled derivative contracts to their fair values drove a loss of $189 million in 2024, as compared to a gain of $906 million in 2023,
which is reflective of higher commodity prices on the forward curve.
For the year ended December 31, 2024, we recognized a gain on settled derivative instruments of $151 million as compared to a gain of $175 million in
2023. The gain on settled derivative instruments relates to lower commodity market prices than those we secured through our derivative contracts. With
consistent reliable cash flows central to our strategy, we routinely hedge at levels that, based on our operating and overhead costs, provide a significant
adjusted EBITDA margin even if it means forgoing potential price upside.
Refer to Note 13 in the Notes to the Group Financial Statements for additional information regarding derivative financial instruments.
Finance Costs
(In thousands)
Year Ended
December 31, 2024
December 31, 2023
$ Change
% Change
Interest expense, net of capitalized and income
amounts(a)
$120,773
$117,808
$2,965
3%
Amortization of discount and deferred finance costs
16,870
16,358
512
3%
Total finance costs
$137,643
$134,166
$3,477
3%
(a)Includes payments related to borrowings and leases.
For the year ended December 31, 2024, interest expense of $121 million increased by $3 million compared to $118 million in 2023, primarily related to
interest on the new ABS IX Notes, Oaktree Seller’s Note, and Term Loan II. These increases were partially offset by lower outstanding balances on our
existing ABS structures.
As of December 31, 2024 and 2023, total borrowings were $1,736 million and $1,325 million, respectively. For the period ended December 31, 2024,
the weighted average interest rate on borrowings was 7.37% as compared to 6.03% as of December 31, 2023. As of December 31, 2024, 83% of our
borrowings reside in fixed-rate, hedge-protected, amortizing structures compared to 87% as of December 31, 2023.
26
Refer to Notes 5, 20, and 21 in the Notes to the Group Financial Statements for additional information regarding acquisitions, leases and borrowings,
respectively.
Taxation
The effective tax rate is calculated on the face of the Statement of Comprehensive Income by dividing the amount of recorded income tax benefit
(expense) by the income (loss) before taxation as follows:
(In thousands)
Year Ended
December 31, 2024
December 31, 2023
$ Change
% Change
Income (loss) before taxation
$(223,952)
$1,000,344
$(1,224,296)
(122%)
Income tax benefit (expenses)
136,951
(240,643)
377,594
(157%)
Effective tax rate
61.2%
24.1%
The differences between the statutory U.S. federal income tax rate and the effective tax rates are summarized as follows:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Expected tax at statutory U.S. federal income tax rate
21.0%
21.0%
21.0%
State income taxes, net of federal tax benefit
3.7%
3.1%
1.2%
Federal credits
41.3%
—%
—%
Other, net
(4.8%)
—%
0.2%
Effective tax rate
61.2%
24.1%
22.4%
For the year ended December 31, 2024, we reported a tax benefit of $137 million, a change of $378 million, compared to expense of $241 million in
2023 which was a result of the change in the loss before taxation and a change in the amount of tax credits generated relative to the pre-tax loss. The
resulting effective tax rates for the years ended December 31, 2024 and 2023 were 61.2% and 24.1%, respectively. The effective tax rate can be
materially impacted by the recognition of the marginal well tax credit available to qualified producers as noted in our 2024 effective tax rate. A marginal
well tax credit was not available for the 2023 tax year. The federal government provides these credits to encourage companies to continue operating
lower-volume wells during periods of low prices to maintain production and the underlying jobs they create and the state and local tax revenues they
generate for communities to support schools, social programs, law enforcement and other similar public services.
Refer to Note 8 in the Notes to the Group Financial Statements for additional information regarding taxation.
Operating Profit, Net Income, Adjusted EBITDA & EPS
(In thousands, except per unit data)
Year Ended
December 31, 2024
December 31, 2023
$ Change
% Change
Operating profit (loss)
$(43,026)
$1,161,051
$(1,204,077)
(104%)
Net income (loss) attributable to Owners of Diversified
Energy Company PLC
(88,272)
758,018
(846,290)
(112%)
Adjusted EBITDA
472,309
546,788
(74,479)
(14%)
Earnings (loss) per share - basic
$(1.84)
$16.07
$(17.91)
(111%)
Earnings (loss) per share - diluted
$(1.84)
$15.95
$(17.79)
(112%)
For the year ended December 31, 2024, we reported a net loss of $88 million and basic and diluted loss per share of $1.84 compared to net income of
$758 million and basic EPS of $16.07 ($15.95 diluted EPS) in 2023, a decrease of 112%. We also reported an operating loss of $43 million compared
with an operating profit of $1,161 million for the years ended December 31, 2024 and 2023, respectively. This year-over-year decrease in net income
was primarily attributable to a $1,118 million decrease in gains on derivatives due to changes in commodity prices on the forward curve, a $24 million
decrease in gains on sale of assets, a decrease in gross profit of $94 million, a $3 million increase in finance costs, partially offset by a $378 million
swing in income tax expense to a benefit as compared to 2023, as a result of marginal well credits.
Excluding the mark-to-market loss on long-dated derivative valuations, as well as other customary adjustments, we reported adjusted EBITDA of $472
million for the year ended December 31, 2024 compared to $547 million for the year ended December 31, 2023, representing a decrease of 14% driven
by a decrease in commodity pricing and production from prior year, primarily as a result of our sale of equity interest in DP Lion Equity Holdco in
December 2023, in addition to normal declines. These decreases were partially offset by adjusted EBITDA growth through the Oaktree, Crescent Pass,
and East Texas II acquisitions in 2024.
Liquidity & Capital Resources
Overview
Our principal sources of liquidity are cash generated from operations and available borrowings under our Credit Facility. To minimize interest expense,
we use our excess cash flow to reduce borrowings on our Credit Facility. Consequently, we have historically maintained low cash balances on our
Consolidated Statement of Financial Position, as evidenced by the $6 million and $4 million in cash and cash equivalents as of December 31, 2024 and
2023, respectively.
27
When we acquire assets for growth, we complement our Credit Facility with long-term, fixed rate, fully-amortizing, asset-backed debt secured by certain
natural gas and oil assets. This financing strategy aligns with the long-life nature of our assets, offering us lower borrowing rates and a clear path to
reduce leverage through scheduled principal payments. For larger, value-adding acquisitions, and to maintain an appropriate leverage profile for the
assets we acquire, we also periodically raise funds through secondary equity offerings.
We closely monitor our working capital to ensure it remains sufficient for business operations, using any excess liquidity primarily to repay debt.
Alongside managing working capital, we take a disciplined approach to controlling operating costs and allocating capital resources. This approach
ensures that capital investments generate returns that support our strategic initiatives.
Capital expenditures were $52 million for the year ended December 31, 2024, compared to $74 million for the year ended December 31, 2023. This
decrease was primarily driven by the completion of wells in 2023 that were under development at the time of the March 2023 Tanos II acquisition.
Although we completed additional wells in 2024, the capital expenditures required for their development were less significant than those in 2023.
Additionally, we made improvements at our Black Bear facility in the Central Region in 2024, which contributed to the overall capital expenditure. We
expect to meet our capital expenditure needs for the foreseeable future from our operating cash flows and our existing cash and cash equivalents. Our
future capital requirements will depend on several factors, including our growth rate, commodity prices and future acquisitions.
With respect to our other known current obligations, we believe that our sources of liquidity and capital resources will be sufficient to meet our existing
business needs for at least the next 12 months. However, our ability to satisfy our working capital requirements, debt service obligations and planned
capital expenditures will depend upon our future operating performance, which will be affected by prevailing economic conditions in the natural gas and
oil industry and other financial and business factors, some of which are beyond our control.
Refer to Note 21 in the Notes to the Group Financial Statements for additional information regarding our current debt obligations.
Liquidity
The table below represents our liquidity position as of December 31, 2024 and 2023.
As of
(In thousands)
December 31, 2024
December 31, 2023
Cash and cash equivalents
$5,990
$3,753
Available borrowings under the Credit Facility(a)
86,690
134,817
Liquidity
$92,680
$138,570
(a)Represents available borrowings under the Credit Facility of $101 million as of December 31, 2024 less outstanding letters of credit of $14 million as of such date.
Represents available borrowings under the Credit Facility of $146 million as of December 31, 2023 less outstanding letters of credit of $11 million as of such date.
Debt
Our net borrowings consisted of the following as of the reporting date:
As of
(In thousands)
December 31, 2024
December 31, 2023
Total debt
$1,693,242
$1,276,627
LESS: Cash
5,990
3,753
LESS: Restricted cash(a)
46,269
36,252
Net debt
$1,640,983
$1,236,622
(a)The increase of restricted cash as of December 31, 2024, is due to the addition of $21 million and $3 million in restricted cash for the ABS VIII Notes and ABS IX Notes,
respectively, offset by $7 million and $9 million for the retirement of the ABS III Notes and ABS V Notes, respectively.
Our Capital Expenditure Program
The majority of our capital expenditures are directed towards upstream and midstream operations, including pipelines and compression. The remaining
expenditures focus on production optimization, technology, plugging capacity expansion, fleet, reducing emissions, and, when prudent, development
activities aimed at replacing production. Our strategy to acquire and operate mature wells with shallow decline rates allows us to avoid the large capital
expenditures associated with drilling and completion activities of development focused companies.
We actively manage our balance sheet and seek to maintain a long-term leverage ratio of approximately 2.5x. We believe this leverage range is
supported by our differentiated business model, characterized by long-life, low-decline production that ensures resilient cash flows. Our strategic
financial framework, strengthened by hedging and amortizing debt instruments, further supports this leverage target.
Looking ahead, we aim to maximize cash flow by maintaining our hedging strategy and capitalizing on market opportunities to enhance the floor price of
our risk management program. We will preserve our strategic advantages through purposeful growth, supported by a disciplined capital expenditure
program. This approach will ensure we secure low-cost financing for acquisitive growth while maintaining appropriate leverage and sufficient liquidity.
Asset Retirement Obligations
We remain proactive and innovative in our approach to asset retirement. Following our LSE IPO in 2017, we initiated meetings with state officials to
develop a long-term plan for retiring our expanding portfolio of long-life wells. By collaborating with state regulators, we have designed our retirement
activities to be equitable for all stakeholders, with a strong emphasis on environmental responsibility.
28
Asset retirements for the year ended December 31, 2024 were as follows:
DEC-owned Appalachian well retirements
202
3rd party-owned Appalachian well retirements(a)
85
Total Appalachian wells retired by Next LVL
287
DEC-owned Central Region well retirements
13
Total wells retired
300
(a)Includes 51 state and federal orphan wells and 34 wells for other operators.
We expanded asset retirement operations from 17 rigs at December 31, 2023 to 18 rigs by December 31, 2024. Our continued growth in capacity
enhances our ability to integrate asset retirement operations and achieve cost efficiencies across a broader footprint. Additionally, it enables us to
generate third-party revenues by offering a suite of services to other production companies and state orphan well programs, which can help fund our
own asset retirement program. Consequently, we aim to achieve a prudent mix of cost reduction and third-party revenues to maximize the benefits of
our internal asset retirement program.
Our asset retirement program demonstrates our strong commitment to a healthy environment and the surrounding communities. We anticipate
continued investment and innovation in this area. In 2025, we will focus on realizing the benefits of vertical integration by expanding our internal asset
retirement capacity. This will help us reduce reliance on third-party contractors, mitigate outsource risks, improve process quality and responsiveness,
and enhance control over environmental remediation and costs.
The composition of the provision for asset retirement obligations at the reporting date was as follows for the periods presented:
Year Ended
(In thousands)
December 31, 2024
December 31, 2023
Balance at beginning of period
$506,648
$457,083
Additions(a)
111,265
3,250
Accretion
30,868
26,926
Asset retirement costs
(6,724)
(5,961)
Disposals(b)
—
(17,300)
Revisions to estimate(c)
6,521
42,650
Balance at end of period
$648,578
$506,648
Less: Current asset retirement obligations
6,436
5,402
Non-current asset retirement obligations
$642,142
$501,246
(a)Refer to Note 5 in the Notes to the Group Financial Statements for additional information regarding acquisitions and divestitures.
(b)Associated with the divestiture of natural gas and oil properties. Refer to Note 5 in the Notes to the Group Financial Statements for additional information.
(c)As of December 31, 2024, we performed normal revisions to our asset retirement obligations, which resulted in a $7 million million increase in the liability. This increase
was comprised of increases of $95 million for cost revisions, which was partially offset by an $89 million decrease attributable to a higher discount rate as a result of an
increase in bond yield volatility during the year. As of December 31, 2023, we performed normal revisions to our asset retirement obligations, which resulted in a $43
million increase in the liability. This increase was comprised of a $28 million increase attributable to a lower discount rate as a result of slightly decreased bond yields as
compared to 2022 as inflation began to increase at a lower rate and $16 million in cost revisions. Partially offsetting these decreases was a $1 million change attributed
to timing.
The anticipated future cash outflows for our asset retirement obligations on an undiscounted and discounted basis are set forth in the tables below as of
December 31, 2024 and 2023. When discounting the obligation, we apply annual inflationary cost increases to our current cost expectations and then
discount the resulting cash flows using a credit adjusted risk free discount rate resulting in a net discount rate of 3.7% and 3.4% for the periods
indicated, respectively. While the rate is comparatively small to the commonly utilized PV-10 metric in our industry, the impact is significant due to the
long-life low-decline nature of our portfolio. Although productive life varies within our well portfolio, presently we expect all of our existing wells to have
reached the end of their productive lives and be retired by approximately 2098.
When evaluating our ability to meet our asset retirement obligations we review reserves models which utilize the income approach to determine the
expected discounted future net cash flows from estimated reserve quantities. These models determine future revenues associated with production using
forward pricing then consider the costs to produce and develop reserves, as well as the cost of asset retirement at the end of a well’s life. These future
net cash flows are discounted using a weighted average cost of capital of 10% to produce the PV-10 of our reserves. After considering the asset
retirement costs in these models, our PV-10 was approximately $1.6 billion, $2.1 billion and $8.8 billion as of December 31, 2024, 2023 and 2022,
respectively.
As of December 31, 2024:
(In thousands)
Not Later Than
One Year
Later Than One
Year and Not Later
Than Five Years
Later Than
Five Years
Total
Undiscounted
$6,436
$27,913
$2,432,934
$2,467,283
Discounted
6,436
24,450
617,692
648,578
29
As of December 31, 2023:
(In thousands)
Not Later Than
One Year
Later Than One
Year and Not Later
Than Five Years
Later Than
Five Years
Total
Undiscounted
$5,402
$20,365
$1,778,876
$1,804,643
Discounted
5,402
17,975
483,271
506,648
Cash Flows
Our principal sources of liquidity have historically been cash generated from operating activities. To minimize financing costs, we apply our excess cash
flow to reduce borrowings on our Credit Facility.
We monitor our working capital to ensure that the levels remain adequate to operate the business with excess cash primarily being utilized for the
repayment of debt or shareholder distributions. In addition to working capital management, we have a disciplined approach to managing operating costs
and allocating capital resources, ensuring that we are generating returns on our capital investments to support the strategic initiatives in our
business operations.
(In thousands)
Year Ended
December 31, 2024
December 31, 2023
$ Change
% Change
Net cash provided by operating activities
$345,663
$410,132
$(64,469)
(16%)
Net cash used in investing activities
(272,916)
(239,369)
(33,547)
14%
Net cash used in financing activities
(70,510)
(174,339)
103,829
(60%)
Net change in cash and cash equivalents
$2,237
$(3,576)
$5,813
(163%)
Net Cash Provided by Operating Activities
For the year ended December 31, 2024, net cash provided by operating activities of $346 million decreased by $64 million, or 16%, when compared to
$410 million in 2023. The change in net cash provided by operating activities was predominantly attributable to the following:
•A decrease in net income of $847 million, driven by a decrease in the fair value adjustments of unsettled derivative financial instruments of $1,095
million, and a decrease of $378 million in income tax expense as a result of marginal well credits; and
•Changes in working capital generated reduced cash outflows of $50 million compared to 2023.
Production, realized prices, operating expenses, and G&A are discussed above.
Net Cash Used in Investing Activities
For the year ended December 31, 2024, net cash used in investing activities of $273 million increased by $34 million, or 14%, from outflows of $239
million in 2023. The change in net cash used in investing activities was primarily attributable to the following:
•A net increase in cash outflows of $58 million for acquisition, divestiture and disposal activity. Net cash outflows associated with acquisitions,
divestitures and disposals was $220 million during the year ended December 31, 2024 when compared to $162 million for the year ended
December 31, 2023. Refer to Note 5 and Note 11 in the Notes to the Group Financial Statements for additional information regarding acquisitions,
divestitures and disposals; and
•A decrease in cash outflows of $22 million for capital expenditures. Capital expenditures were $52 million for the year ended December 31, 2024
compared to $74 million for the year ended December 31, 2023. This decrease was primarily driven by the completion of wells in 2023 that were
under development at the time of the March 2023 Tanos II acquisition. Although we completed additional wells in 2024, the capital expenditures
required for their development were less significant than those in 2023. Additionally, we made improvements at our Black Bear facility in the
Central Region in 2024, which contributed to the overall capital expenditure.
Net Cash Used in Financing Activities
For the year ended December 31, 2024, net cash used in financing activities of $71 million decreased by $103 million, or 59%, as compared to $174
million in 2023. This change in net cash used in financing activities was primarily attributable to the following:
•An increase in cash inflows of $202 million related to debt activity. Debt activity resulted in proceeds, or a net cash inflow of $191 million (including
$805 million in repayments of amortizing debt, inclusive of the retirement of ABS III and V Notes and the ABS Warehouse Facility) in 2024 versus
payments, or a net cash outflow, of $11 million in 2023, with much of the change attributable to the issuance of the ABS VIII and IX Notes and the
Term Loan II during 2024, which was partially offset by the retirement of the ABS III and V Notes;
•A decrease of $84 million due to a reduction in dividends paid in 2024 as compared to 2023;
•A decrease of $6 million due to reduced hedge modifications associated with ABS notes in 2024 as compared to 2023;
•An increase of $9 million due to proceeds received as a result of a lease modification for our fleet that was executed in 2024;
•A decrease of $157 million in proceeds from the equity issuance in 2023 that did not occur in 2024;
•An increase of $29 million due to increased finance costs and restricted cash requirements, primarily attributable to the ABS VIII and IX Notes, and
the Oaktree Seller’s Note issued in 2024, partially offset by the retirement of the ABS III and V Notes; and
•An increase of $10 million due to an increase in share repurchases in 2024.
Refer to Notes 16, 18 and 21 in the Notes to the Group Financial Statements for additional information regarding share capital, dividends and
borrowings, respectively.
30
Off-Balance Sheet Arrangements
We may enter into off-balance sheet arrangements and transactions that give rise to material off-balance sheet obligations. As of December 31, 2024
and December 31, 2023, our material off-balance sheet arrangements and transactions include operating service arrangements of $158 million and $14
million in letters of credit outstanding against our Credit Facility. Refer to Contractual Obligations & Contingent Liabilities & Commitments for additional
information regarding off-balance sheet operating service arrangements.
There are no other transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to
materially affect our liquidity or availability of capital resources.
Contractual Obligations & Contingent Liabilities & Commitments
We have various contractual obligations in the normal course of our operations and financing activities. Significant contractual obligations as of
December 31, 2024 were as follows:
(In thousands)
Not Later Than
One Year
Later Than
One Year and
Not Later Than
Five Years
Later Than
Five Years
Total
Recorded contractual obligations
Trade and other payables
$35,013
$—
$—
$35,013
Borrowings
209,463
940,780
585,330
1,735,573
Leases
13,776
30,733
91
44,600
Asset retirement obligation(a)
6,436
27,913
2,432,934
2,467,283
Other liabilities(b)
161,467
5,384
—
166,851
Off-Balance Sheet contractual obligations
Firm Transportation(c)
51,795
106,324
—
158,119
Total
$477,950
$1,111,134
$3,018,355
$4,607,439
(a)Represents our asset retirement obligation on an undiscounted basis. On a discounted basis the liability is $649 million as of December 31, 2024 as presented in the
Consolidated Statement of Financial Position.
(b)Represents accrued expenses and net revenue clearing. Excludes asset retirement obligations and revenue to be distributed. Refer to Note 23 in the Notes to the Group
Financial Statements for information.
(c)Represents reserved capacity to transport gas from production locations through pipelines to the ultimate sales meters.
We believe that our operational cash flows and existing liquidity will be sufficient to meet our contractual obligations and commitments over the next
twelve months, even in a stressed scenario, as demonstrated by our Viability and Going Concern assessment. Cash flows from operations were $346
million for the year ended December 31, 2024, which includes partial-year contributions from the Oaktree, Crescent Pass and East Texas II acquisitions
in 2024. Cash flows from operations were $410 million for the year ended December 31, 2023, which similarly included partial-year contributions from
the Tanos II acquisition in 2023. As of December 31, 2024 and 2023, we had current assets of $304 million and $305 million, respectively, and available
borrowings on our Credit Facility of $101 million and $146 million, respectively, (excluding $14 million and $11 million in outstanding letters of credit,
respectively), which could also be used to service our contractual obligations and commitments over the next twelve months.
Litigation and Regulatory Proceedings
From time to time, we may be involved in legal proceedings in the ordinary course of business. Currently, we are not a party to any material litigation
proceedings that, if determined adversely, are reasonably expected to have a material and adverse effect on our business, financial position, or results
of operations. Additionally, we are not aware of any material legal or administrative proceedings that are contemplated to be brought against us.
We have no other contingent liabilities that would have a material impact on our financial position, results of operations, or cash flows.
Environmental Matters
Our operations are subject to environmental laws and regulations in all the jurisdictions where we operate. We cannot predict the impact of additional
environmental laws and regulations that may be adopted in the future, including whether they would adversely affect our operations. We can offer no
assurance regarding the significance or cost of compliance with any new environmental legislation or regulation once implemented.
Recently Issued Accounting Pronouncements
Refer to Note 3 in the Notes to the Group Financial Statements for information regarding recent accounting pronouncements applicable to our
Consolidated Financial Statements.
Significant Accounting Policies & Estimates
Refer to Note 3 and 4 in the Notes to the Group Financial Statements for information regarding our significant accounting policies, judgments and
estimates.
Quantitative & Qualitative Disclosure About Market Risk
Refer to Note 25 in the Notes to the Group Financial Statements for information regarding market risk.
Internal Control Over Financial Reporting
We are subject to Section 404 of the Sarbanes-Oxley Act of 2002 which requires that we include a report of management on our internal control over
financial reporting in our Annual Report & Form 20-F. In addition, our independent registered public accounting firm must attest to and report on the
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effectiveness of our internal control over financial reporting in our Annual Report & Form 20-F. No material weakness in financial reporting was identified
for the years ended December 31, 2024, 2023, or 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Refer to Risk Factors for additional information.
Trend Information
Other than as disclosed elsewhere in this Annual Report & Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events
since December 31, 2024 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources,
or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. For a discussion
of trend information, refer to Financial Review for additional information.
Risk Management Framework
Our Enterprise Risk Management (“ERM”) program underscores the significance of risk awareness and mitigation throughout the organization. We
proactively identify, assess, prioritize, monitor, and mitigate risks, enabling us to achieve the strategic objectives outlined in our business model. The
Board conducts thorough assessments of our principal and emerging risks regularly. Principal risks are actively managed due to their potential to
jeopardize our business model, future performance, or financial stability. Emerging risks are new, uncertain, or evolving threats that require ongoing
monitoring, as they may escalate to principal risks over time.
Our ERM program relies on systematic processes to continuously evaluate and enhance based on experience and industry best practices. As directed by
the Audit & Risk Committee, our Senior Leadership Team regularly engages in risk discussions across all operational areas. This proactive dialogue
fosters a culture that highly values risk mitigation, thereby preserving and creating value for our stakeholders. We consider risk management a collective
responsibility and empower all employees to enhance our processes and procedures to mitigate risks effectively. Our ERM program offers reasonable
assurance, not absolute certainty, that our risks are being effectively managed.
Risk Identification
In the risk identification phase of our ERM program, we capture potential and emerging risks arising from changes in circumstances or new
developments. To strengthen our risk identification, we undertake the following activities:
•Continuous monitoring of the risk universe for new or emerging risks;
•Re-evaluating the risk universe at least annually;
•Enhancing our risk awareness culture and identifying risk ownership;
•Interviewing risk owners about current mitigation activities; and
•Designing and implementing a risk mitigation control framework.
Risk Assessment
We assess business risks using a scorecard approach that evaluates (i) likelihood, (ii) potential impact, and (iii) speed of impact. Our assessment
includes both financial and non-financial exposures. For each identified principal risk, we develop a list of mitigating activities and potential opportunities
to offset or minimize the risk.
Risk Response
Risk management begins with the Board, responsible for ensuring that risks are addressed and mitigated through our corporate strategy, business
model, and within the Board’s risk appetite. The Board actively monitors company performance on mitigation activities by engaging with executive and
senior management.
Principal Risks and Uncertainties
By leveraging our comprehensive risk management framework, we ensure a proactive approach to mitigating potential threats, which is crucial for
maintaining our stability and achieving our strategic goals. Below, we outline our principal risks and corresponding risk responses.
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Strategic Risks
1   Corporate Strategy & Acquisition Risk
Our future growth depends heavily on successfully completing acquisitions that align with our strategic goals. The process of executing and seamlessly
integrating acquisitions could place significant demands on our managerial, operational, and financial resources. If we fail to properly assess, execute,
and integrate acquisitions, it could negatively affect our business operations, financial performance, and overall prospects.
Link to Strategy:
.1. .2. .3. .4.
Link to KPIs:
.1. .2. .3. .4.
Response/Mitigation
•Maintaining a disciplined commitment to our core strategy is essential. By focusing on acquiring low-cost, long-life, and relatively low-decline
producing assets, along with complementary and synergistic midstream assets, we can ensure sustainable growth and stability. This approach
helps us maximize value and efficiency while minimizing risks.
•Our Commercial Development, Land, Reserves, Strategic Planning, and Financial Planning & Analysis teams collaborate closely to identify and
evaluate potential acquisition opportunities that align with our strategic objectives. This teamwork ensures that all potential acquisitions are
thoroughly vetted to meet our criteria.
•Our organization leverages its extensive experience and knowledge to identify and recognize potential opportunities.
•We conduct thorough risk assessments and a comprehensive due diligence process for all potential new acquisitions. This process ensures we
understand the full scope of risks and opportunities associated with each acquisitions, aligning with our commitment to sustainability and strategic
growth.
•We incorporate feedback and evaluations from external experts during the due diligence process. This feedback ensures that we benefit from
specialized knowledge and objective insights, enhancing the thoroughness and accuracy of our assessments.
•We strive to maintain a strong balance sheet with significant liquidity, enabling us to fund growth through acquisitions effectively. This financial
strength ensures we can seize opportunities as they arise, supporting our strategic objectives and long-term success.
2   Climate Risk
Climate-related matters remain central to numerous global corporate discussions and decisions. While opportunities related to climate continue to arise
in this swiftly changing landscape, we acknowledge that these issues may pose risks for DEC. Environmental regulations, climate change concerns, and
investor-driven changes may lead to (i) increased business costs, (ii) challenges in executing our strategy, and (iii) restricted access to specific markets
or investors.
Link to Strategy:
.1. .2. .3. .4.
Link to KPIs:
.2. .5. .6.
Response/Mitigation
•Our Board oversees the development of our climate risk strategy which aims to position us at the heart of the energy transition based on
responsible stewardship of existing natural gas and oil assets. The Board’s decision-making is informed by regular climate subject matter updates
from each of our key Board committees.
•Through our annual TCFD reporting process, we identify and assess climate-related risks for consideration of appropriate risk mitigation actions.
•Our core business strategy aligns with numerous sustainability initiatives. We acquire reliable, long-life, producing wells that often have not reached
their full potential under their former owners. This stewardship model allows us to avoid the high cost and sometimes sizeable environmental
impact often associated with exploration and drilling, which is the intended target of many sustainability initiatives.
•Alongside our zero-tolerance operating principle for fugitive emissions, we invest capital funds towards emission reduction technologies and
projects and regularly deploy SAM optimization techniques that allow us to eliminate or reduce our carbon footprint.
•Our core KPI of methane intensity reduction is central to our corporate goals to reduce both methane and GHG emissions.
•We again expanded our asset retirement capabilities, managed through our Next LVL subsidiary, that will permit us to exceed our long-term
Appalachian asset retirement agreements, reflective of our core KPI to meet or exceed state asset retirement goals.
Financial Risks
3   Commodity Price Volatility Risk
Changes in commodity prices may affect the value of our natural gas and oil reserves, operating cash flows and adjusted EBITDA, regardless of our
operating performance.
Link to Strategy:
.3.
Link to KPIs:
.1. .2. .4.
Response/Mitigation
•Our Senior Leadership Team monitors commodity markets on a daily basis and internal models are routinely updated to evaluate market changes.
This monitoring process includes reviewing realized pricing, forward pricing curves, and basis differentials. This active monitoring is critical to risk
mitigation and the successful execution of our hedge strategy.
•Our hedging policy continues to be guided by our goal to generate reliable free cash flow in any commodity pricing environment and secure our
debt and dividend payments. Our hedge strategy of proactively layering on appropriately structured hedge contracts at advantageous prices and
tenors allows us to capitalize on beneficial price movements in a constantly changing, forward natural gas price market.
•External specialists are consulted on a regular basis to assist in the execution of our hedging strategy.
4   Financial Strength & Flexibility Risk
Liquidity and access to capital risks arise from our inability to generate cash flows from operations to fund our business requirements or our inability to
access external sources of funding. These risks can result in difficulty in meeting our financial obligations as they become due.
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Link to Strategy:
.1. .2. .3. .4.
Link to KPIs:
.1. .2. .3. .6.
Response/Mitigation
•Our Senior Leadership Team actively monitors debt levels and available borrowing capacity on our Credit Facility.
•Our Senior Leadership Team updates the Board at least quarterly on our debt and liquidity position.
•Our business model of stable production contributes to predictable cash flows, which facilitates an efficient forecasting ability.
•Strong access to bank capital as our borrowing base in the Fall 2024 redetermination was reaffirmed unanimously by our 12-bank group syndicate.
•Maintain access to multiple avenues of funding beyond our Credit Facility: equity issuance, asset-backed securitizations, and bond issuance.
•Proactive hedge program to protect against commodity price volatility and stabilize operating cash flows.
•Continuous management review of funding and financing alternatives.
Legal, Regulatory and Reputational Risks
5   Regulatory & Political Risk
Our operations are governed by regulations in every jurisdictions where we operate. We cannot predict the impact of potential future laws or
regulations, including whether they could negatively affect our operations. We cannot guarantee that any new legislation, if enacted, will not require us
to incur substantial costs, make significant investments, or reduce production.
Link to Strategy:
.2. .4.
Link to KPIs:
.1. .2. .3. .4. .5. .6. .7.
Response/Mitigation
•Operate to the highest industry standards with regulators and monitor compliance with our contracts, asset retirement program and taxation
requirements.
•External specialists utilized on legal, regulatory, and tax issues as required.
•Foster strong relationships with local, state, and federal authorities, as well as other government bodies and key stakeholders.
•Continuous monitoring of the political and regulatory environments in which we operate.
•Working responsibly and community/stakeholder engagement and outreach is an important factor in maintaining positive relationships in the
communities in which we operate.
•We encourage our employees to become actively involved in their communities through industry associations in their respective operating areas. By
leading, participating in and championing a variety of these organizations, we believe that our support of the energy industry’s associations adds
value to our business through the sharing of operating best practices, technical knowledge and legislation updates, ultimately to the benefit of all
our stakeholders.
6   Health & Safety Risk
Potential impacts from a lack of adherence to health and safety policies may result in fines and penalties, serious injury or death, environmental
impacts, statutory liability for environmental redemption and other financial and reputational consequences that could be significant.
Link to Strategy:
.2. .4.
Link to KPIs:
.1. .2. .3. .4. .7.
Response/Mitigation
•Effectively managing Health and Safety Risk exposure is the first priority for the Board and Senior Leadership Team. The Sustainability & Safety
Committee of the Board regularly reviews health and safety programs and mitigations.
•Health and safety training is included as part of all staff and contractor inductions.
•Detailed training on our field manual procedures has been provided to key stakeholders to ensure processes and procedures are embedded
throughout the organization and all operations.
•Establishing processes for continually assessing our overall operating and EHS capabilities, including evaluations to determine the level of oversight
required.
•Effective execution of the field operating manual in operations.
•Crisis and emergency response procedures and equipment are maintained and regularly tested to ensure we are able to respond to an emergency
quickly, safely and effectively.
•Leading and lagging indicators and targets developed in line with industry guidelines and benchmarks.
•Findings from ‘lessons learned’ reviews are implemented on future operations.
•All employees maintain work stoppage ability.
Operational Risk
7   Cybersecurity Risk
Cybersecurity risks for companies have increased significantly in recent years due to the mounting threat and sophistication of cybercrime. A
cybersecurity breach, incident, or failure of our IT systems could disrupt our businesses, put employees at risk, result in the disclosure of confidential
information, damage our reputation, and create significant financial and legal exposure for DEC.
Our network is designed using a Zero Trust Approach (“ZTA”) and is segmented to provide additional layers of security. We have established several
layers of security, including least privilege access, conditional access policies, and multi-factor authentication (“MFA”). Our ZTA extends beyond our
network to encompass identity, endpoints, infrastructure, data, and applications. This integrated ecosystem enables enhanced visibility, intelligence, and
automation for our security team. Due to our 100% cloud environment, we focus on continuous testing of our security posture from both trusted and
untrusted sources—both external and internal to our networks—rather than relying on a one-time penetration testing approach. Additionally, we
collaborate with third-party managed security service providers and utilize internal resources for round-the-clock incident monitoring.
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Link to Strategy:
.2. .3.
Link to KPIs:
.1. .2. .4.
Response/Mitigation
•Employees are our first line of defense against cyberattacks, and we promote secure behaviors to help mitigate this growing risk. We focus on
practical rules through robust mandatory annual training and e-learning sessions delivered by our digital security team. One of these rules
addresses phishing and reminds staff to ‘think before they click’.
•We engage with key technology partners and suppliers to ensure potentially vulnerable systems are identified and secured.
•We test our cybersecurity crisis management and business continuity plans, recognizing the evolving nature and pace of the threat landscape.
•We continuously implement and monitor our IT Security Policy, which includes measures to protect against cyberattacks.
•Advanced network security detection with regular threat testing.
•Control and protection of confidential information.
•Our Information Security Management Team, which includes certain members of the Senior Leadership Team including the Chief Financial Officer,
Chief Information Officer, Chief Information Security Officer and General Counsel, meets at least once a quarter to discuss cybersecurity issues,
risks and strategies. The Information Security Management Team regularly briefs the Board of Directors on information security matters, including
assessing risks, efforts to improve our network security systems and enhanced employee trainings. The membership of this committee is
adequately trained and educated to provide proper governance, risk management, and control of the cybersecurity program utilizing the National
Institute of Standards and Technology framework.
There were no cybersecurity incidents during the year ended December 31, 2024, that resulted in an interruption to our operations, known losses of any
critical data, or otherwise had a material impact on our strategy, financial condition, or results of operations. However, the scope and impact of any
future incident cannot be predicted.
Risk Factors
You should carefully consider the risks described below, together with all of the other information in this Annual Report & Form 20-F. The risks and
uncertainties below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may
also adversely affect our business. If any of the following risks occur, our business, financial condition, and results of operations could be seriously
harmed and you could lose all or part of your investment. This Annual Report & Form 20-F also contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors,
including the risks described below and elsewhere in this Annual Report & Form 20-F.
Summary of Risk Factors
We are subject to a variety of risks and uncertainties which could have a material adverse effect on our business, financial condition, and results of
operations. The summary below is not exhaustive and is qualified by reference to the full set of risk factors set forth in this “Risk Factors” section.
•Volatility and future decreases in natural gas, NGLs and oil prices could materially and adversely affect our business, results of operations, financial
condition, cash flows or prospects.
•We face production risks and hazards that may affect our ability to produce natural gas, NGLs and oil at expected levels, quality and costs that may
result in additional liabilities to us.
•The levels of our natural gas and oil reserves and resources, their quality and production volumes may be lower than estimated or expected.
•The present value of future net cash flows from our reserves, or PV-10, will not necessarily be the same as the current market value of our
estimated natural gas, NGL and oil reserves.
•We may face unanticipated increased or incremental costs in connection with decommissioning obligations such as plugging.
•We may not be able to keep pace with technological developments in our industry or be able to implement them effectively.
•Deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial downturn, or
negative credit market conditions could have a material adverse effect on our liquidity, results of operations, business and financial condition that
we cannot predict.
•Our operations are subject to a series of risks relating to climate change.
•We rely on third-party infrastructure such as TC Energy (formerly TransCanada), Enbridge, CNX, Dominion Energy Transmission, Enlink, Williams
and MarkWest (defined herein) that we do not control and/or, in each case, are subject to tariff charges that we do not control.
•Failure by us, our contractors or our primary offtakers to obtain access to necessary equipment and transportation systems could materially and
adversely affect our business, results of operations, financial condition, cash flows or prospects.
•A proportion of our equipment has substantial prior use and significant expenditure may be required to maintain operability and operations
integrity.
•We depend on our directors, key members of management, independent experts, technical and operational service providers and on our ability to
retain and hire such persons to effectively manage our growing business.
•We may face unanticipated water and other waste disposal costs.
•We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.
•Inflation may adversely affect us by increasing costs beyond what we can recover through price increases and limit our ability to enter into future
debt financing.
•There are risks inherent in our acquisitions of natural gas and oil assets, including our recent acquisition of Maverick.
•We may not have good title to all our assets and licenses.
•We may issue additional ordinary shares in connection with acquisitions or other growth opportunities, any share incentive or share option plan or
otherwise that may dilute other shareholdings.
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•Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.
•The securitizations of our limited purpose, bankruptcy-remote, wholly owned subsidiaries may expose us to financing and other risks, and there can
be no assurance that we will be able to access the securitization market in the future, which may require us to seek more costly financing.
•We are subject to regulation and liability under environmental, health and safety regulations, the violation of which may affect our financial
condition and operations.
•Our operations are dependent on our compliance with obligations under permits, licenses, contracts and field development plans.
•Our internal systems and website may be subject to intentional and unintentional disruption, and our confidential information may be
misappropriated, stolen or misused, which could adversely impact our reputation and future sales.
•Our operations are subject to the risk of litigation.
•The dual listing of our ordinary shares may adversely affect the liquidity and value of our ordinary shares.
•Failure to comply with requirements to design, implement and maintain effective internal control over financial reporting could have a material
adverse effect on our business.
•We are subject to certain tax risks, including changes in tax legislation in the United Kingdom and the United States.
Risks Related to Our Business, Operations and Industry
Volatility and future decreases in natural gas, NGLs and oil prices could materially and adversely affect our business, results of
operations, financial condition, cash flows or prospects.
Our business, results of operations, financial condition, cash flows or prospects depend substantially upon prevailing natural gas, NGL and oil prices,
which may be adversely impacted by unfavorable global, regional and national macroeconomic conditions, including but not limited to instability related
to the military conflict in Ukraine. Natural gas, NGLs and oil are commodities for which prices are determined based on global and regional demand,
supply and other factors, all of which are beyond our control.
Historically, prices for natural gas, NGLs and oil have fluctuated widely for many reasons, including:
•Global and regional supply and demand, and expectations regarding future supply and demand, for gas and oil products;
•Global and regional economic conditions;
•Evolution of stocks of oil and related products;
•Increased production due to new extraction developments and improved extraction and production methods;
•Geopolitical uncertainty;
•Threats or acts of terrorism, war or threat of war, which may affect supply, transportation or demand;
•Weather conditions, natural disasters, climate change and environmental incidents;
•Access to pipelines, storage platforms, shipping vessels and other means of transporting, storing and refining gas and oil, including without
limitation, changes in availability of, and access to, pipeline ullage;
•Prices and availability of alternative fuels;
•Prices and availability of new technologies affecting energy consumption;
•Increasing competition from alternative energy sources;
•The ability of OPEC and other oil-producing nations, to set and maintain specified levels of production and prices;
•Political, economic and military developments in gas and oil producing regions generally;
•Governmental regulations and actions, including the imposition of tariffs, export restrictions and taxes and environmental requirements and
restrictions as well as anti-hydrocarbon production policies;
•Trading activities by market participants and others either seeking to secure access to natural gas, NGLs and oil or to hedge against commercial
risks, or as part of an investment portfolio; and
•Market uncertainty, including fluctuations in currency exchange rates, and speculative activities by those who buy and sell natural gas, NGLs and oil
on the world markets.
It is impossible to accurately predict future gas, NGL and oil price movements. Historically, natural gas prices have been highly volatile and subject to
large fluctuations in response to relatively minor changes in the demand for natural gas. According to the U.S. Energy Information Administration, the
historical high and low Henry Hub natural gas spot prices per MMBtu for the following periods were as follows: in 2022, high of $9.85 and low of $3.46;
in 2023, high of $3.78 and low of $1.74, and in 2024, high of $13.20 and low of $1.20 — highlighting the volatile nature of commodity prices.
The economics of producing from some wells and assets may also result in a reduction in the volumes of our reserves which can be produced
commercially, resulting in decreases to our reported reserves. Additionally, further reductions in commodity prices may result in a reduction in the
volumes of our reserves. We might also elect not to continue production from certain wells at lower prices, or our license partners may not want to
continue production regardless of our position.
Each of these factors could result in a material decrease in the value of our reserves, which could lead to a reduction in our natural gas, NGLs and oil
development activities and acquisition of additional reserves. In addition, certain development projects or potential future acquisitions could become
unprofitable as a result of a decline in price and could result in us postponing or canceling a planned project or potential acquisition, or if it is not
possible to cancel, to carry out the project or acquisition with negative economic impacts. Further, a reduction in natural gas, NGL or oil prices may lead
our producing fields to be shut down and to be entered into the decommissioning phase earlier than estimated.
Our revenues, cash flows, operating results, profitability, dividends, future rate of growth and the carrying value of our gas and oil properties depend
heavily on the prices we receive for natural gas, NGLs and oil sales. Commodity prices also affect our cash flows available for capital investments and
other items, including the amount and value of our gas and oil reserves. In addition, we may face gas and oil property impairments if prices fall
significantly. In light of the continuing increase in supply coming from the Utica and Marcellus shale plays of the Appalachian Basin, no assurance can be
given that commodity prices will remain at levels which enable us to do business profitably or at levels that make it economically viable to produce from
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certain wells and any material decline in such prices could result in a reduction of our net production volumes and revenue and a decrease in the
valuation of our production properties, which could negatively impact our business, results of operations, financial condition, cash flows or prospects.
We conduct our business in a highly competitive industry.
The gas and oil industry is highly competitive. The key areas in which we face competition include:
•Engagement of third-party service providers whose capacity to provide key services may be limited;
•Acquisition of other companies that may already own licenses or existing producing assets;
•Acquisition of assets offered for sale by other companies;
•Access to capital (debt and equity) for financing and operational purposes;
•Purchasing, leasing, hiring, chartering or other procuring of equipment that may be scarce; and
•Employment of qualified and experienced skilled management and gas and oil professionals and field operations personnel.
Competition in our markets is intense and depends, among other things, on the number of competitors in the market, their financial resources, their
degree of geological, geophysical, engineering and management expertise and capabilities, their degree of vertical integration and pricing policies, their
ability to develop properties on time and on budget, their ability to select, acquire and develop reserves and their ability to foster and maintain
relationships with the relevant authorities. The cost to attract and retain qualified and experienced personnel has increased and may increase
substantially in the future.
Our competitors also include those entities with greater technical, physical and financial resources than us. Finally, companies and certain private equity
firms not previously investing in natural gas and oil may choose to acquire reserves to establish a firm supply or simply as an investment. Any such
companies will also increase market competition which may directly affect us.
The effects of operating in a competitive industry may include:
•Higher than anticipated prices for the acquisition of licenses or assets;
•The hiring by competitors of key management or other personnel; and
•Restrictions on the availability of equipment or services.
If we are unsuccessful in competing against other companies, our business, results of operations, financial condition, cash flows or prospects could be
materially adversely affected.
We may experience delays in production, transportation and marketing.
Various production, transportation and marketing conditions may cause delays in natural gas, NGLs and oil production and adversely affect our business.
For example, the gas gathering systems that we own connect to other pipelines or facilities which are owned and operated by third parties. These
pipelines and other midstream facilities and others upon which we rely may become unavailable because of testing, turnarounds, line repair, reduced
operating pressure, lack of operating capacity, regulatory requirements, curtailments of receipt or deliveries due to insufficient capacity or because of
damage. In periods where NGL prices are high, we benefit greatly from the ability to process NGLs. Our largest processor of NGLs is the MarkWest
Energy Partners, L.P., (“MarkWest”) plant located in Langley, Kentucky. If we were to lose the ability to process NGLs at MarkWest’s plant during a
period of high pricing, our revenues would be negatively impacted. As a short-term measure, we could divert the natural gas through other pipeline
routes; however, certain pipeline operators would eventually decline to transport the gas due to its liquid content at a level that would exceed tariff
specifications for those pipelines. The lack of available capacity on third-party systems and facilities could reduce the price offered for our production or
result in the shut-in of producing wells. Any significant changes affecting these infrastructure systems and facilities, as well as any delays in constructing
new infrastructure systems and facilities, could delay our production, which could negatively impact our business, results of operations, financial
condition, cash flows or prospects.
We face production risks and hazards that may affect our ability to produce natural gas, NGLs and oil at expected levels, quality and
costs that may result in additional liabilities to us.
Our natural gas and oil production operations are subject to numerous risks common to our industry, including, but not limited to, premature decline of
reservoirs, incorrect production estimates, invasion of water into producing formations, geological uncertainties such as unusual or unexpected rock
formations and abnormal geological pressures, low permeability of reservoirs, contamination of natural gas and oil, blowouts, oil and other chemical
spills, explosions, fires, equipment damage or failure, challenges relating to transportation, pipeline infrastructure, natural disasters, uncontrollable flows
of oil, natural gas or well fluids, adverse weather conditions, shortages of skilled labor, delays in obtaining regulatory approvals or consents, pollution
and other environmental risks.
If any of the above events occur, environmental damage, including biodiversity loss or habitat destruction, injury to persons or property and other
species and organisms, loss of life, failure to produce natural gas, NGLs and oil in commercial quantities or an inability to fully produce discovered
reserves could result. These events could also cause substantial damage to our property or the property of others and our reputation and put at risk
some or all of our interests in licenses, which enable us to produce, and could result in the incurrence of fines or penalties, criminal sanctions potentially
being enforced against us and our management, as well as other governmental and third-party claims. Consequent production delays and declines from
normal field operating conditions and other adverse actions taken by third parties may result in revenue and cash flow levels being adversely affected.
Moreover, should any of these risks materialize, we could incur legal defense costs, remedial costs and substantial losses, including those due to injury
or loss of life, human health risks, severe damage to or destruction of property, natural resources and equipment, environmental damage, unplanned
production outages, clean-up responsibilities, regulatory investigations and penalties, increased public interest in our operational performance and
suspension of operations, which could negatively impact our business, results of operations, financial condition, cash flows or prospects.
The levels of our natural gas and oil reserves and resources, their quality and production volumes may be lower than estimated or
expected.
The reserves data as of December 31, 2024, 2023 and 2022 contained in this Annual Report & Form 20-F has been audited by NSAI unless stated
otherwise. The standards utilized to prepare the reserves information that has been extracted in this document may be different from the standards of
reporting adopted in other jurisdictions. Investors, therefore, should not assume that the data found in the reserves information set forth in this Annual
37
Report & Form 20-F is directly comparable to similar information that has been prepared in accordance with the reserve reporting standards of other
jurisdictions, such as the United Kingdom.
In general, estimates of economically recoverable natural gas, NGLs and oil reserves are based on a number of factors and assumptions made as of the
date on which the reserves estimates were determined, such as geological, geophysical and engineering estimates (which have inherent uncertainties),
historical production from the properties or analogous reserves, the assumed effects of regulation by governmental agencies and estimates of future
commodity prices, operating costs, gathering and transportation costs and production related taxes, all of which may vary considerably from actual
results.
Underground accumulations of hydrocarbons cannot be measured in an exact manner and estimates thereof are a subjective process aimed at
understanding the statistical probabilities of recovery. Estimates of the quantity of economically recoverable natural gas and oil reserves, rates of
production and, where applicable, the timing of development expenditures depend upon several variables and assumptions, including the following:
•Production history compared with production from other comparable producing areas;
•Quality and quantity of available data;
•Interpretation of the available geological and geophysical data;
•Effects of regulations adopted by governmental agencies;
•Future percentages of sales;
•Future natural gas, NGLs and oil prices;
•Capital investments;
•Effectiveness of the applied technologies and equipment;
•Effectiveness of our field operations employees to extract the reserves;
•Natural events or the negative impacts of natural disasters;
•Future operating costs, tax on the extraction of commercial minerals, development costs and workover and remedial costs; and
•The judgment of the persons preparing the estimate.
As all reserve estimates are subjective, each of the following items may differ materially from those assumed in estimating reserves:
•The quantities and qualities that are ultimately recovered;
•The timing of the recovery of natural gas and oil reserves;
•The production and operating costs incurred;
•The amount and timing of development expenditures, to the extent applicable;
•Future hydrocarbon sales prices; and
•Decommissioning costs and changes to regulatory requirements for decommissioning.
Many of the factors in respect of which assumptions are made when estimating reserves are beyond our control and therefore these estimates may
prove to be incorrect over time. Evaluations of reserves necessarily involve multiple uncertainties. The accuracy of any reserves evaluation depends on
the quality of available information and natural gas, NGLs and oil engineering and geological interpretation. Furthermore, less historical well production
data is available for unconventional wells because they have only become technologically viable in the past twenty years and the long-term production
data is not always sufficient to determine terminal decline rates. In comparison, some conventional wells in our portfolio have been productive for a
much longer time. As a result, there is a risk that estimates of our shale reserves are not as reliable as estimates of the conventional well reserves that
have a longer historical profile to draw on. Interpretation, testing and production after the date of the estimates may require substantial upward or
downward revisions in our reserves and resources data. Moreover, different reserves engineers may make different estimates of reserves and cash flows
based on the same available data. Actual production, revenues and expenditures with respect to reserves will vary from estimates and the variances
may be material.
If the assumptions upon which the estimates of our natural gas and oil reserves prove to be incorrect or if the actual reserves available to us (or the
operator of an asset in we have an interest) are otherwise less than the current estimates or of lesser quality than expected, we may be unable to
recover and produce the estimated levels or quality of natural gas, NGLs or oil set out in this document and this may materially and adversely affect our
business, results of operations, financial condition, cash flows or prospects.
The PV-10, will not necessarily be the same as the current market value of our estimated natural gas, NGL and oil reserves.
You should not assume that the present value of future net cash flows from our reserves is the current market value of our estimated natural gas, NGL
and oil reserves. Actual future net cash flows from our natural gas and oil properties will be affected by factors such as:
•Actual prices we receive for natural gas, NGL and oil;
•Actual cost of development and production expenditures;
•The amount and timing of actual production;
•Transportation and processing; and
•Changes in governmental regulations or taxation.
The timing of both our production and our incurrence of expenses in connection with the development and production of our natural gas and oil
properties will affect the timing and amount of actual future net cash flows from reserves, and thus their actual present value. In addition, the 10%
discount factor we use when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in
effect from time to time and risks associated with us or the natural gas and oil industry in general. Actual future prices and costs may differ materially
from those used in the present value estimate. Refer to APMs within this Annual Report & Form 20-F for additional information regarding our use of
PV-10.
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We may face unanticipated increased or incremental costs in connection with decommissioning obligations such as plugging.
In the future, we may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which we use for the
processing of natural gas and oil reserves. With regards to plugging, we are party to agreements with regulators in the states of Ohio, West Virginia,
Kentucky and Pennsylvania, four of our largest wellbore states, setting forth plugging and abandonment schedules spanning a period ranging from 10 to 15
years. We will incur such decommissioning costs at the end of the operating life of some of our properties. The ultimate decommissioning costs are
uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration
techniques, the shortage of plugging vendors, difficult terrain or weather conditions or experience at other production sites. The expected timing and
amount of expenditure can also change, for example, in response to changes in reserves, wells losing commercial viability sooner than forecasted or
changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the provisions established which would affect
future financial results. The use of other funds to satisfy such decommissioning costs may impair our ability to focus capital investment in other areas of our
business, which could materially and adversely affect our business, results of operations, financial condition, cash flows or prospects.
We may not be able to keep pace with technological developments in our industry or be able to implement them effectively.
The natural gas and oil industry is characterized by rapid and significant technological advancements and introductions of new products and services
using new technologies, such as emissions controls and processing technologies. Rapid technological advancements in information technology and
operational technology domains require seamless integration. Failure to integrate these technologies efficiently may result in operational inefficiencies,
security vulnerabilities, and increased costs. During mergers and acquisitions, integrating technology assets from acquired companies can be complex.
Poor integration may lead to data inconsistencies, security gaps and operational disruptions. Technology systems are also susceptible to cybersecurity
threats, including malware, data breaches, and ransomware attacks. These threats may disrupt operations, compromise sensitive data and lead to
significant financial losses. Further, inefficient data management practices may result in data breaches, data loss and missed opportunities for
operational insights. The presence of legacy technology systems can also pose challenges, as they may lack modern security features, making them
vulnerable to cyber threats and necessitating costly upgrades. As others use or develop new technologies (including technologies related to artificial
intelligence), we may be placed at a competitive disadvantage or may be forced by competitive pressures to implement those new technologies at
substantial costs. In addition, other natural gas and oil companies may have greater financial, technical and personnel resources that allow them to
enjoy technological advantages, which may in the future allow them to implement new technologies before we can. Additionally, reliance on global
supply chains for information technology hardware, software and operational technology equipment exposes the industry to supply chain disruptions,
shortages and cybersecurity risks.
If we do not have access to capital on favorable terms, on the timeline we require, or at all, our financial condition and results of
operations could be materially adversely affected.
We require capital to complete acquisitions that we believe will enhance shareholder return. Significant volatility or disruption in the global financial
markets may result in us not being able to obtain additional financing on favorable terms, on the timeline we anticipate, or at all, and we may not be able
to refinance, if necessary, any outstanding debt when due, all of which could have a material adverse effect on our financial condition. Any inability to
obtain additional funding on favorable terms, on the timeline we anticipate, or at all, may prevent us from acquiring new assets, cause us to curtail our
operations significantly, reduce planned capital expenditures or obtain funds through arrangements that management does not currently anticipate,
including disposing of our assets, the occurrence of any of which may significantly impair our ability to deliver shareholder returns. If our operating results
falter, our cash flow or capital resources prove inadequate, or if interest rates increase significantly, we could face liquidity problems that could materially
and adversely affect our results of operations and financial condition.
Deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial
downturn, or negative credit market conditions could have a material adverse effect on our liquidity, results of operations, business
and financial condition that we cannot predict.
Economic conditions in a number of industries in which our customers operate have experienced substantial deterioration in the past, resulting in
reduced demand for natural gas and oil. Renewed or continued weakness in the economic conditions of any of the industries we serve or that are
served by our customers, or the increased focus by markets on carbon-neutrality, could adversely affect our business, financial condition, results of
operation and liquidity in a number of ways. For example:
•Demand for natural gas and electricity in the United States is impacted by industrial production, which if weakened would negatively impact the
revenues, margins and profitability of our natural gas business;
•A decrease in international demand for natural gas or NGLs produced in the United States could adversely affect the pricing for such products,
which could adversely affect our results of operations and liquidity;
•The tightening of credit or lack of credit availability to our customers could adversely affect our liquidity, as our ability to receive payment for our
products sold and delivered depends on the continued creditworthiness of our customers;
•Our ability to refinance our Credit Facility may be limited and the terms on which we are able to do so may be less favorable to us depending on
the strength of the capital markets or our credit ratings;
•Our ability to access the capital markets may be restricted at a time when we would like, or need, to raise capital for our business including for
exploration and/or development of our natural gas reserves;
•Increased capital markets scrutiny of oil and gas companies may lead to increased costs of capital or lack of credit availability; and
•A decline in our creditworthiness may require us to post letters of credit, cash collateral, or surety bonds to secure certain obligations, all of which
would have an adverse effect on our liquidity.
Our operations are subject to a series of risks relating to climate change.
Continued public concern regarding climate change and potential mitigation through regulation could have a material impact on our business.
International agreements, national, regional, state and local legislation, and regulatory measures to limit GHG emissions or mandate related disclosures
are currently in place or in various stages of discussion or implementation. Given that some of our operations are associated with emissions of GHGs,
these and other GHG emissions-related laws, policies and regulations may result in substantial capital, compliance, operating and maintenance costs.
The level of expenditure required to comply with these laws and regulations is uncertain and is expected to vary depending on the laws enacted by
particular countries, states, provinces and municipalities.
Additionally, regulatory, market and other changes to respond to climate change may adversely impact our business, financial condition or results of
operations. Reporting expectations are also increasing, with a variety of customers, capital providers and regulators seeking increased information on
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climate-related risks. For example, U.S. states have adopted or proposed climate-related disclosures rules that may require us to incur significant costs
to assess and disclose on a range of climate-related data and risks.
Internationally, the United Nations-sponsored “Paris Agreement” requires member nations to individually determine and submit non-binding emissions
reduction targets every five years after 2020. In November 2021, the international community gathered in Glasgow at the 26th Conference of the
Parties to the UN Framework Convention on Climate Change, during which multiple announcements were made, including a call for parties to eliminate
certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs. Relatedly, the United States and European Union jointly announced
the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all
feasible reductions” in the energy sector. Such commitments were re-affirmed at the 27th Conference of the Parties in Sharm El Sheikh. However, the
United States indicated in January 2025 its intent to withdraw from the Paris Agreement, and changes undertaken by the new U.S. Presidential
Administration have or may in the future reverse or rescind climate-related initiatives and regulations adopted by prior administrations and to focus on
driving increased U.S. energy production. The emission reduction targets and other provisions of legislative or regulatory initiatives and policies enacted
in the future by the states in which we operate, could adversely impact our business by imposing increased costs in the form of higher taxes or
increases in the prices of emission allowances, limiting our ability to develop new gas and oil reserves, transport hydrocarbons through pipelines or other
methods to market, decreasing the value of our assets, or reducing the demand for hydrocarbons and refined petroleum products. With increased
pressure to reduce GHG emissions by replacing fossil fuel energy generation with alternative energy generation, it is possible that peak demand for gas
and oil will be reached, and gas and oil prices will be adversely impacted as and when this happens. Further, the consequences of the effects of global
climate change, and the continued political and societal attention afforded to mitigating the effects of climate change, may generate adverse investor
and stakeholder sentiment towards the hydrocarbon industry and negatively impact the ability to invest in the sector. Similarly, longer term reduction in
the demand for hydrocarbon products due to the pace of commercial deployment of alternative energy technologies or due to shifts in consumer
preference for lower GHG emissions products could reduce the demand for the hydrocarbons that we produce.
Further, in response to concerns related to climate change, companies in the fossil fuel sector may be exposed to increasing financial risks. Financial
institutions, including investment advisors and certain sovereign wealth, pension and endowment funds, may elect in the future to shift some or all of their
investment into non-fossil fuel related sectors. Institutional lenders who provide financing to fossil-fuel energy companies have also become more attentive
to sustainable lending practices, and some of them may elect in the future not to provide funding for fossil fuel energy companies. A material reduction in
the capital available to the fossil fuel industry could make it more difficult to secure funding for exploration, development, production, and transportation
activities, which could in turn negatively affect our operations.
The Group may also be subject to activism from environmental non-governmental organizations (“NGOs”) campaigning against fossil fuel extraction or
negative publicity from media alleging inadequate remedial actions to retire non-producing wells effectively, which could affect our reputation, disrupt our
programs, require us to incur significant, unplanned expense to respond or react to intentionally disruptive campaigns or media reports, create blockades to
interfere with operations or otherwise negatively impact our business, results of operations, financial condition, cash flows or prospects. Litigation risks are
also increasing as a number of entities have sought to bring suit against various oil and natural gas companies in state or federal court, alleging among
other things, that such companies created public nuisances by producing fuels that contributed to climate change or alleging that the companies have been
aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts.
Finally, our operations are subject to disruption from the physical effects that may be caused or aggravated by climate change. These include risks from
extreme weather events, such as hurricanes, severe storms, floods, heat waves, and ambient temperature increases, as well as wildfires, each of which
may become more frequent or more severe as a result of climate change.
We rely on third-party infrastructure that we do not control and/or, in each case, are subject to tariff charges that we do not control.
A significant portion of our production passes through third-party owned and controlled infrastructure. If these third-party pipelines or liquids processing
facilities experience any event that causes an interruption in operations or a shut-down such as mechanical problems, an explosion, adverse weather
conditions, a terrorist attack or labor dispute, our ability to produce or transport natural gas could be severely affected. For example, we have an
agreement with a third-party where approximately 39% of the NGLs we sold during the year ending December 31, 2024 were processed at the third-
party’s facility in Kentucky. Any material decreases in our ability to process or transport our natural gas through third-party infrastructure could have a
material adverse effect on our business, results of operations, financial condition, cash flows or prospects.
Our use of third-party infrastructure may be subject to tariff charges. Although we seek to manage our flow via our midstream infrastructure, we may not
always be able to avoid higher tariffs or basis blowouts due to the lack of interconnections. In such instances, the tariff charges can be substantial and the
cost is not subject to our direct control, although we may have certain contractual or governmental protections and rights. Generally, the operator of the
gathering or transmission pipelines sets these tariffs and expenses on a cost sharing basis according to our proportionate hydrocarbon through-put of that
facility. A provisional tariff rate is applied during the relevant year and then finalized the following year based on the actual final costs and final through-put
volumes. Such tariffs are dependent on continued production from assets owned by third parties and, may be priced at such a level as to lead to
production from our assets ceasing to be economic and thus may have a material adverse effect on our business, results of operations, financial condition,
cash flows or prospects.
Furthermore, our use of third-party infrastructure exposes us to the possibility that such infrastructure will cease to be operational or be
decommissioned and therefore require us to source alternative export routes and/or prevent economic production from our assets. This could also have
a material adverse effect on our business, results of operations, financial condition, cash flows or prospects.
Failure by us, our contractors or our primary offtakers to obtain access to necessary equipment and transportation systems could
materially and adversely affect our business, results of operations, financial condition, cash flows or prospects.
We rely on our natural gas and oil field suppliers and contractors to provide materials and services that facilitate our production activities, including
plugging and abandonment contractors. Any competitive pressures on the oil field suppliers and contractors could result in a material increase of costs
for the materials and services required to conduct our business and operations. For example, we are dependent on the availability of plugging vendors
to help us satisfy abandonment schedules that we have agreed to with the states of Ohio, West Virginia, Kentucky and Pennsylvania. Such personnel
and services can be scarce and may not be readily available at the times and places required. Future cost increases could have a material adverse effect
on our asset retirement liability, operating income, cash flows and borrowing capacity and may require a reduction in the carrying value of our
properties, our planned level of spending for development and the level of our reserves. Prices for the materials and services we depend on to conduct
our business may not be sustained at levels that enable us to operate profitably.
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We and our offtakers rely, and any future offtakers will rely, upon the availability of pipeline and storage capacity systems, including such infrastructure
systems that are owned and operated by third parties. As a result, we may be unable to access or source alternatives for the infrastructure and systems
which we currently use or plan to use, or otherwise be subject to interruptions or delays in the availability of infrastructure and systems necessary for
the delivery of our natural gas, NGLs and oil to commercial markets. In addition, such infrastructure may be close to its design life and decisions may be
taken to decommission such infrastructure or perform life extension work to maintain continued operations. Any of these events could result in
disruptions to our projects and thereby impact our ability to deliver natural gas, NGLs and oil to commercial markets and/or may increase our costs
associated with the production of natural gas, NGLs and oil reliant upon such infrastructure and systems. Further, our offtakers could become subject to
increased tariffs imposed by government regulators or the third-party operators or owners of the transportation systems available for the transport of
our natural gas, NGLs and oil, which could result in decreased offtaker demand and downward pricing pressure.
If we are unable to access infrastructure systems facilitating the delivery of our natural gas, NGLs and oil to commercial markets due to our contractors
or primary offtakers being unable to access the necessary equipment or transportation systems, our operations will be adversely affected. If we are
unable to source the most efficient and expedient infrastructure systems for our assets then delivery of our natural gas, NGLs and oil to the commercial
markets may be negatively impacted, as may our costs associated with the production of natural gas, NGLs and oil reliant upon such infrastructure and
systems.
A proportion of our equipment has substantial prior use and significant expenditure may be required to maintain operability and
operations integrity.
A part of our business strategy is to optimize or refurbish producing assets where possible to maximize the efficiency of our operations while avoiding
significant expenses associated with purchasing new equipment. Our producing assets and midstream infrastructure require ongoing maintenance to
ensure continued operational integrity. For example, some older wells may struggle to produce suitable line pressure and will require the addition of
compression to push natural gas. Despite our planned operating and capital expenditures, there can be no guarantee that our assets or the assets we
use will continue to operate without fault and not suffer material damage in this period through, for example, wear and tear, severe weather conditions,
natural disasters or industrial accidents. If our assets, or the assets we use, do not operate at or above expected efficiencies, we may be required to
make substantial expenditures beyond the amounts budgeted. Any material damage to these assets or significant capital expenditure on these assets for
improvement or maintenance may have a material adverse effect on our business, results of operations, financial condition, cash flows or prospects. In
addition, as with planned operating and capital expenditure, there is no guarantee that the amounts expended will ensure continued operation without
fault or address the effects of wear and tear, severe weather conditions, natural disasters or industrial accidents. We cannot guarantee that such
optimization or refurbishment will be commercially feasible to undertake in the future and we cannot provide assurance that we will not face unexpected
costs during the optimization or refurbishment process.
We depend on our directors, key members of management, independent experts, technical and operational service providers and on
our ability to retain and hire such persons to effectively manage our growing business.
Our future operating results depend in significant part upon the continued contribution of our directors, key senior management and technical, financial
and operations personnel. Management of our growth will require, among other things, stringent control of financial systems and operations, the
continued development of our control environment, the ability to attract and retain sufficient numbers of qualified management and other personnel, the
continued training of such personnel and the presence of adequate supervision.
In addition, the personal connections and relationships of our directors and key management are important to the conduct of our business. If we were
to unexpectedly lose a member of our key management or fail to maintain one of the strategic relationships of our key management team, our business,
results of operations, financial condition, cash flows or prospects could be materially adversely affected. In particular, we are highly dependent on our
Chief Executive Officer, Robert Russell (“Rusty”) Hutson, Jr. Acquisitions are a key part of our strategy, and Mr. Hutson has been instrumental in
sourcing them and securing their financing. Furthermore, as our founder, Mr. Hutson is strongly associated with our success, and if he were to cease
being the Chief Executive Officer, perception of our future prospects may be diminished.
Attracting and retaining additional skilled personnel will be fundamental to the continued growth and operation of our business. We require skilled
personnel in the areas of development, operations, engineering, business development, natural gas, NGLs and oil marketing, finance and accounting
relating to our projects. Personnel costs, including salaries, are increasing as industry wide demand for suitably qualified personnel increases. We may
not successfully attract new personnel and retain existing personnel required to continue to expand our business and to successfully execute and
implement our business strategy.
We may face unanticipated water and other waste disposal costs.
We may be subject to regulation that restricts our ability to discharge water produced as part of our natural gas, oil and NGL production operations.
Productive zones frequently contain water that must be removed for the natural gas, oil and NGL to produce, and our ability to remove and dispose of
sufficient quantities of water from the various zones will determine whether we can produce natural gas, oil and NGL in commercial quantities. The
produced water must be transported from the leasehold and/or injected into disposal wells. The availability of disposal wells with sufficient capacity to
receive all of the water produced from our wells may affect our ability to produce our wells. Also, the cost to transport and dispose of that water,
including the cost of complying with regulations concerning water disposal, may reduce our profitability. We have entered into various water
management services agreements in the Appalachian Region which provide for the disposal of our produced water by established counterparties with
large integrated pipeline networks. If these counterparties fail to perform, we may have to shut in wells, reduce drilling activities, or upgrade facilities for
water handling or treatment. The costs to dispose of this produced water may increase for a number of reasons, including if new laws and regulations
require water to be disposed in a different manner.
In 2016, the EPA adopted effluent limitations for the treatment and discharge of wastewater resulting from onshore unconventional natural gas, oil and
NGL extraction facilities to publicly owned treatment works. In addition, the injection of fluids gathered from natural gas, oil and NGL producing
operations in underground disposal wells has been identified by some groups and regulators as a potential cause of increased seismic events in certain
areas of the country, including the states of West Virginia, Ohio and Kentucky in the Appalachian Region as well as Oklahoma, Texas and Louisiana in
our Central Region. Certain states, including those located in the Appalachian Region have adopted, or are considering adopting, laws and regulations
that may restrict or prohibit oilfield fluid disposal in certain areas or underground disposal wells, and state agencies implementing those requirements
may issue orders directing certain wells in areas where seismic events have occurred to restrict or suspend disposal well permits or operations or impose
certain conditions related to disposal well construction, monitoring, or operations. Any of these developments could increase our cost to dispose of our
produced water.
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We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.
Pursuant to the authority under the Natural Gas Pipeline Safety Act of 1968 (“NGPSA”) and Hazardous Liquid Pipeline Safety Act of 1979 (“HLPSA”), as
amended by the Pipeline Safety Improvement Act of 2002 (“PSIA”), the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 (“PIPESA”)
and the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (the “2011 Pipeline Safety Act”), the Pipeline and Hazardous Materials Safety
Administration (“PHMSA”) has promulgated regulations requiring pipeline operators to develop and implement integrity management programs for
certain gas and hazardous liquid pipelines that, in the event of a pipeline leak or rupture could affect high consequence areas (“HCAs”), which are areas
where a release could have the most significant adverse consequences, including high-population areas, certain drinking water sources and unusually
sensitive ecological areas. These regulations require operators of covered pipelines to:
•Perform ongoing assessments of pipeline integrity;
•Identify and characterize applicable threats to pipeline segments that could impact HCAs;
•Improve data collection, integration and analysis;
•Repair and remediate the pipeline as necessary; and
•Implement preventive and mitigating actions.
In addition, states have adopted regulations similar to existing PHMSA regulations for certain intrastate gas and hazardous liquid pipelines. At this time,
we cannot predict the ultimate cost of compliance with applicable pipeline integrity management regulations, as the cost will vary significantly depending
on the number and extent of any repairs found to be necessary as a result of pipeline integrity testing, but the results of these tests could cause us to
incur significant and unanticipated capital and operating expenditures for repairs or upgrades deemed necessary to ensure the safe and reliable
operation of our pipelines.
The 2011 Pipeline Safety Act amends the NGPSA and HLPSA pipeline safety laws, requiring increased safety measures for gas and hazardous liquids
pipelines. Among other things, the 2011 Pipeline Safety Act directs the Secretary of Transportation to promulgate regulations relating to expanded
integrity management requirements, automatic or remote-controlled valve use, excess flow valve use, leak detection system installation, testing to
confirm the material strength of certain pipelines, and operator verification of records confirming the maximum allowable pressure of certain intrastate
gas transmission pipelines. Additionally, pursuant to one of the requirements of the 2011 Pipeline Safety Act, in May 2016, PHMSA proposed rules that
would, if adopted, impose more stringent requirements for certain gas lines, extend certain of PHMSA’s current regulatory safety programs for gas
pipelines beyond HCAs to cover gas pipelines found in newly defined “moderate consequence areas” that contain as few as five dwellings within the
potential impact area and require gas pipelines installed before 1970 that were exempted from certain pressure testing obligations to be tested to
determine their maximum allowable operating pressures (“MAOP”). Other requirements proposed by PHMSA under the rulemaking include: reporting to
PHMSA in the event of certain MAOP exceedances; strengthening PHMSA integrity management requirements; considering seismicity in evaluating
threats to a pipeline; conducting hydrostatic testing for all pipeline segments manufactured using longitudinal seam welds; and using more detailed
guidance from PHMSA in the selection of assessment methods to inspect pipelines. The proposed rulemaking also seeks to impose a number of
requirements on gathering lines. In January 2017, PHMSA finalized new regulations for hazardous liquid pipelines that significantly extend and expand
the reach of certain PHMSA integrity management requirements (i.e., periodic assessments, repairs and leak detection), regardless of the pipeline’s
proximity to an HCA. The final rule also requires all pipelines in or affecting an HCA to be capable of accommodating in-line inspection tools within the
next 20 years. In addition, the final rule extends annual and accident reporting requirements to gravity lines and all gathering lines and also imposes
inspection requirements on pipelines in areas affected by extreme weather events and natural disasters, such as hurricanes, landslides, floods,
earthquakes, or other similar events that are likely to damage infrastructure PHMSA regularly revises its pipeline safety regulations. For example, in June
2016, the President signed the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (the “2016 PIPES Act”) into law. The 2016
PIPES Act reauthorizes PHMSA through 2019, and facilitates greater pipeline safety by providing PHMSA with emergency order authority, including
authority to issue prohibitions and safety measures on owners and operators of gas or hazardous liquid pipeline facilities to address imminent hazards,
without prior notice or an opportunity for a hearing, as well as enhanced release reporting requirements, requiring a review of both natural gas and
hazardous liquid integrity management programs, and mandating the creation of a working group to consider the development of an information-
sharing system related to integrity risk analyses. The 2016 PIPES Act also requires that PHMSA publish periodic updates on the status of those mandates
outstanding from the 2011 Pipeline Safety Act PHMSA has recently published three parts of its so-called “Mega Rule,” including rules focused on: the
safety of gas transmission pipelines, the safety of hazardous liquid pipelines and enhanced emergency order procedures. PHMSA finalized the first part
of the rule, which primarily addressed maximum operating pressure and integrity management near HCAs for onshore gas transmission pipelines, in
October 2019. PHMSA finalized the second part of the rule, which extended federal safety requirements to onshore gas gathering pipelines with large
diameters and high operating pressures, in November 2021. PHMSA published the final of the three components of the Mega Rule in August 2022,
which took effect in May 2023. The final rule applies to onshore gas transmission pipelines, and clarifies integrity management regulations, expands
corrosion control requirements, mandates inspection after extreme weather events, and updates existing repair criteria for both HCA and non-HCA
pipelines. Finally, PHMSA published a Notice of Proposed Rulemaking regarding more stringent gas pipeline leak detection and repair requirements to
reduce natural gas emissions on May 18, 2023.
At this time, we cannot predict the cost of such requirements, but they could be significant. Moreover, federal and state legislative and regulatory
initiatives relating to pipeline safety that require the use of new or more stringent safety controls or result in more stringent enforcement of applicable
legal requirements could subject us to increased capital costs, operational delays and costs of operation.
Moreover as of January 2023, the maximum civil penalties PHMSA can impose are $257,664 per pipeline safety violation per day, with a maximum of
$2,576,627 for a related series of violations. The safety enhancement requirements and other provisions of the 2011 Pipeline Safety Act as well as any
implementation of PHMSA regulations thereunder or any issuance or reinterpretation of guidance by PHMSA or any state agencies with respect thereto
could require us to install new or modified safety controls, pursue additional capital projects or conduct maintenance programs on an accelerated basis,
any or all of which tasks could result in our incurring increased operating costs that could have a material adverse effect on our results of operations or
financial position. States are also pursuing regulatory programs intended to safely build pipeline infrastructure. The adoption of new or amended
regulations by PHMSA or the states that result in more stringent or costly pipeline integrity management or safety standards could have a significant
adverse effect on us and similarly situated midstream operators.
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We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted
by geopolitical instability due to the ongoing military conflict between Russia and Ukraine, and more recently, the Israel-Hamas war.
Our business may be adversely affected by any negative impact on the global economy and capital markets resulting from the conflict
in Ukraine or any other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict
between Russia and Ukraine. In February 2022, a full-scale military invasion of Ukraine by Russian troops transpired. Although the length and impact of
the ongoing military conflict is highly unpredictable, the conflict in Ukraine has led, and could continue to lead, to market disruptions, including
significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
Additionally, on October 7, 2023, Hamas, a U.S. designated terrorist organization, launched a series of coordinated attacks from the Gaza Strip onto
Israel. On October 8, 2023, Israel formally declared war on Hamas, and the armed conflict is ongoing as of the date of this filing. Hostilities between
Israel and Hamas could escalate and involve surrounding countries in the Middle East. We are actively monitoring the situation in Ukraine and Israel and
assessing their impact on our business. To date we have not experienced any material interruptions in our infrastructure, supplies, technology systems
or networks needed to support our operations given our operating areas are exclusively located within the Appalachian Region and Central Region of the
U.S. We have no way to predict the progress or outcome of the conflicts in Ukraine or Israel or their impacts in Ukraine, Russia, Belarus, Israel or the
Gaza Strip as the conflicts, and any resulting government reactions, are rapidly developing and beyond our control. The extent and duration of the
military actions, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and
our business for an unknown period of time. Any of the aforementioned factors could affect our business, financial condition and results of operations.
Any such disruptions may also magnify the impact of other risks described in this Annual Report & Form 20-F.
Risks Relating to Our Financing, Acquisitions, Investment and Indebtedness
Inflation may adversely affect us by increasing costs beyond what we can recover through price increases and limit our ability to
enter into future debt financing.
Inflation can adversely affect us by increasing costs of materials, equipment, labor and other services. In addition, inflation is often accompanied by
higher interest rates. Continued inflationary pressures could impact our profitability. Though we believe that the rates of inflation in recent years,
including the 12 months ended December 31, 2024, have not had a significant impact on our operations, a continued increase in inflation, including
inflationary pressure on labor, could result in increases to our operating costs, and we may be unable to pass these costs on to our customers. These
inflationary pressures could also adversely impact our ability to procure materials and equipment in a cost-effective manner, which could result in
reduced margins and production delays and, as a result, our business, financial condition, results of operations and cash flows could be materially and
adversely affected. We continue to undertake actions and implement plans to address these inflationary pressures and protect the requisite access to
materials and equipment. With respect to our costs of capital, our ABS Notes (as defined in the Notes to the Group Financial Statements) are fixed-rate
instruments (subject to adjustment pursuant to the sustainability-linked features described in Note 21 in the Notes to the Group Financial Statements)
and as of December 31, 2024 we had $284 million outstanding on our Credit Facility. Nevertheless, inflation may also affect our ability to enter into
future debt financing, including refinancing of our Credit Facility or issuing additional SPV-level asset backed securities, as high inflation may result in a
relative increase in the cost of debt capital.
We are taking efforts to mitigate inflationary pressures, by working closely with other suppliers and service providers to ensure procurement of materials
and equipment in a cost-effective manner. However, these mitigation efforts may not succeed or may be insufficient.
Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices. If the economic
climate in the United States or abroad deteriorates, worldwide demand for petroleum products could diminish further, which could impact the price at
which natural gas, NGLs and oil can be sold, which could affect our results of operations, financial condition, cash flows and prospects.
There are risks inherent in our acquisitions of natural gas and oil assets.
Acquisitions are an essential part of our strategy for protecting and growing cash flow, particularly in relation to the risk that some of our wells may
have a higher than anticipated production decline rate. Over the past several years, we have undertaken a number of acquisitions of natural gas and oil
assets (and of companies holding such assets). Our ability to complete future acquisitions will depend on us being able to identify suitable acquisition
candidates and negotiate favorable terms for their acquisition, in each case, before any attractive candidates are purchased by other parties such as
private equity firms, some of whom have substantially greater financial and other resources than we do. We may face competition for attractive
acquisition targets that may also increase the price of the target business. As a result, there is no assurance that we will always be able to source and
execute acquisitions in the future at attractive valuations.
Furthermore, to further our growth, we have made acquisitions outside the Appalachian Region, a region in which we have developed our operational
experience into the Bossier and Haynesville shales, the Barnett Shale Play, and the Cotton Valley and Mid-Continent producing areas. Accordingly, an
acquisition in a new area in which we lack experience may present unanticipated risks and challenges that were not accounted for or previously
experienced. Ordinarily, our due diligence efforts are focused on higher valued and material properties or assets. Even an in-depth review of all
properties and records may not reveal all existing or potential problems, nor will such review always permit a buyer to become sufficiently familiar with
the properties to fully assess their deficiencies and capabilities. Generally, physical inspections are not performed on every well or facility, and structural
or environmental problems are not necessarily observable even when an inspection is undertaken.
There can be no assurance that our prior acquisitions or any other potential acquisition will perform operationally as anticipated or be profitable. We
could fail to appropriately value any acquired business and the value of any business, company or property that we acquire or invest in may actually be
less than the amount paid for it or its estimated production capacity. We may be required to assume pre-closing liabilities with respect to an acquisition,
including known and unknown title, contractual, and environmental and decommissioning liabilities, and may acquire interests in properties on an “as is”
basis without recourse to the seller of such interest or the seller may have limited resources to provide post-sale indemnities.
In addition, successful acquisitions of gas and oil assets require an assessment of a number of factors, including estimates of recoverable reserves, the
time of recovering reserves, exploration potential, future natural gas, NGLs and oil prices and operating costs. Such assessments are inexact, and we
cannot guarantee that we make these assessments with a high degree of accuracy. In connection with assessments, we perform a review of the
acquired assets. However, such a review will not reveal all existing or potential problems. Furthermore, review may not permit us to become sufficiently
familiar with the assets to fully assess their deficiencies and capabilities.
Integrating operations, technology, systems, management, back office personnel and pre- or post-completion costs for future acquisitions may prove
more difficult or expensive than anticipated, thereby rendering the value of any company or assets acquired less than the amount paid. We may also
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take on unexpected liabilities which are uncapped, have to undertake unanticipated capital expenditures in connection with a new acquisition or provide
uncapped liabilities in connection with the purchase and sale of assets, which are customary in such agreements. The integration of acquired businesses
or assets requires significant time and effort on the part of our management. Following such integration efforts, prior acquisitions may still not achieve
the level of financial or operational performance that was anticipated when they were acquired. In addition, the integration of new acquisitions can be
difficult and disrupt our own business because our operational and business culture may differ from the cultures of the acquired businesses, unpopular
cost-cutting measures may be required, internal controls may be more difficult to maintain and control over cash flows and expenditures may be difficult
to establish. If we encounter any of the foregoing issues in relation to one of our acquisitions this could have a material adverse effect on our business,
results of operations, financial condition, cash flows or prospects.
We may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may
disrupt our business and hinder our ability to grow.
In the future we may make acquisitions of businesses that complement or expand our current business. However, we may not be able to identify
attractive acquisition opportunities. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so
on commercially acceptable terms.
The success of any completed acquisition will depend on our ability to integrate effectively the acquired business into our existing operations. The
process of integrating acquired businesses may involve unforeseen difficulties and may require a disproportionate amount of our managerial and
financial resources. In addition, possible future acquisitions may be larger and for purchase prices significantly higher than those paid for earlier
acquisitions. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain
financing for acquisitions on acceptable terms or successfully acquire identified targets. Our failure to achieve consolidation savings, to integrate the
acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material
adverse effect on our financial condition and results of operations.
Our Credit Facility also limits our ability to incur certain indebtedness, which could indirectly limit our ability to engage in acquisitions of businesses.
The Group’s success will be dependent upon its ability to fully integrate Maverick and deliver the value of the combined underlying
businesses; the full financial benefits expected from the Group may not be fully achieved.
The Group and Maverick have previously operated independently and there can be no assurance that their businesses can be fully integrated effectively.
The success of the combined business will depend, in part, on the effectiveness of the integration process and the ability to realize the anticipated
financial benefits from combining the respective businesses.
While the Group believes that the financial benefits of the Maverick acquisition and the costs associated with the Maverick acquisition have been
reasonably estimated, unanticipated events or liabilities may arise or become apparent which may, in turn, result in a delay or reduction in the benefits
anticipated to be derived from the Maverick acquisition, or in costs significantly in excess of those estimated. No assurance can be given that the
integration process will deliver all or substantially all of the expected benefits or realize any such benefits within the assumed timeframe, or that the
costs to integrate and achieve the financial benefits will not be higher than anticipated.
Further, the demands that the integration process may have on management time could result in diversion of the attention of the Group's management
and employees from ongoing operations, pursuing other potential business opportunities and may cause a delay in other projects currently
contemplated by the Group. To the extent that the combined company is unable to efficiently integrate the operations of the Group and Maverick,
realize anticipated financial benefits, retain key personnel and avoid unforeseen costs or delay, there may be a material adverse effect on the business,
results of operations, financial condition, cash flows or prospects of the Group.
We may not have good title to all our assets and licenses.
Although we believe that we take due care and conduct due diligence on new acquisitions in a manner that is consistent with industry practice, there
can be no assurance that we have good title to all our assets and the rights to develop and produce natural gas and oil from our assets. Such reviews
are inherently incomplete and it is generally not feasible to review in depth every individual well or field involved in each acquisition. There can be no
assurance that any due diligence carried out by us or by third parties on our behalf in connection with any assets that we acquire will reveal all of the
risks associated with those assets, and the assets may be subject to preferential purchase rights, consents and title defects that were not apparent at
the time of acquisition. We may acquire interests in properties on an “as is” basis without recourse to the seller of such interest or the seller may have
limited resources to provide post-sale indemnities. In addition, changes in law or change in the interpretation of law or political events may arise to
defeat or impair our claim to certain properties which we currently own or may acquire which could result in a material adverse effect on our business,
results of operations, financial condition, cash flows or prospects.
The issuance of additional ordinary shares in the Group in connection with acquisitions or other growth opportunities, any share
incentive or share option plan or otherwise may dilute all other shareholdings.
We may seek to raise financing to fund future acquisitions and other growth opportunities. We may, for these and other purposes, issue additional
equity or convertible equity securities. As a result, existing holders of ordinary shares may suffer dilution in their percentage ownership or the market
price of the ordinary shares may be adversely affected. For example, consideration for the Maverick acquisition included the issuance of 21,194,213 new
ordinary shares directly to the unitholders of Maverick.
As of December 31, 2024, we have issued options under our equity incentive plans to employees and executive directors for a total of 153,631 new
ordinary shares of the Group, all of which are currently outstanding, and have also entered into restricted stock unit agreements and performance stock
unit agreements with certain employees, of which 976,222 restricted stock units and 965,303 performance stock units are outstanding, as of said date.
We may, in the future, issue further options and/or warrants to subscribe for new ordinary shares to certain advisers, employees, directors, senior
management and/or consultants of the Group. The exercise of any such options would result in a dilution of the shareholdings of other investors.
Subject to any applicable pre-emption rights, any future issues of ordinary shares by the Group may have a dilutive effect on the holdings of
shareholders and could have a material adverse effect on the market price of ordinary shares as a whole.
Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.
Our Credit Facility and other debt agreements contain a number of significant covenants that may limit our ability to, among other things:
•Incur additional indebtedness;
•Incur liens;
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•Sell assets;
•Make certain debt payments;
•Enter into agreements that restrict or prohibit the payment of dividends;
•Limits our subsidiaries’ ability to make certain payments with respect to their equity, based on the pro forma effect thereof on certain financial
ratios, which would be the source of distributable profits from which we may issue a dividend; and
•Conduct hedging activities.
In addition, our Credit Facility and other debt agreements require us to maintain compliance with certain financial covenants.
We may also be prevented from taking advantage of business opportunities that arise because of the limitations from the restrictive covenants under
our Credit Facility. These restrictions may limit our ability to obtain future financings to withstand a future downturn in our business or the economy in
general, or to otherwise conduct necessary corporate activities.
A material uncured breach of any covenant in our Credit Facility and other debt agreements will result in a default under the agreement and may result
in an event of default if such default is not cured during any applicable grace period. An event of default, if not waived, could result in acceleration of
the indebtedness outstanding and in an event of default with respect to, and an acceleration of, the indebtedness outstanding under any other debt
agreements to which we are a party. Any such accelerated indebtedness would become immediately due and payable. If that occurs, we may not be
able to make all of the required payments or borrow sufficient funds to refinance such indebtedness. Even if new financing were available at that time, it
may not be on terms that are acceptable to us.
Any significant reduction in our borrowing base under our Credit Facility as a result of periodic borrowing base redeterminations or
otherwise may negatively impact our ability to fund our operations.
Our Credit Facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion, unilaterally determine
based upon our reserve reports for the applicable period and other data and reports. Such determinations will be made on a regular basis semi-annually
(each a “Scheduled Redetermination”) and at the option of the lenders with more than 66.6% of the loans and commitments under the Credit Facility,
no more than one time in between each Scheduled Redetermination. As of the date of this report, our borrowing base is $900 million.
In the future, we may not be able to access adequate funding under our Credit Facility as a result of a decrease in our borrowing base due to the
issuance of new indebtedness, the outcome of a borrowing base redetermination, or an unwillingness or inability on the part of lending counterparties to
meet their funding obligations and the inability of other lenders to provide additional funding to cover a defaulting lender’s portion. Declines in
commodity prices from their current levels could result in a determination to lower the borrowing base and, in such a case, we could be required to
repay any indebtedness in excess of the redetermined borrowing base. As a result, we may be unable to make acquisitions or otherwise carry out
business plans, which could have a material adverse effect on our business, results of operations, financial condition, cash flows or prospects.
The securitizations of our limited purpose, bankruptcy-remote, wholly owned subsidiaries may expose us to financing and other risks,
and there can be no assurance that we will be able to access the securitization market in the future, which may require us to seek
more costly financing.
Through limited purpose, bankruptcy-remote, wholly owned subsidiaries (“SPVs”), we have securitized and expect to securitize in the future, certain of
our assets to generate financing. In such transactions, we convey a pool of assets to an SPV, that, in turn, issues certain securities or enters into certain
debt agreements. The securities issued by the SPVs are each collateralized by a pool of assets. In exchange for the transfer of finance receivables to the
SPV, we typically receive the cash proceeds from the sale of the securities or entering into term loans.
Although our SPVs have successfully completed securitizations in connection with the ABS IV Notes, ABS VI Notes, ABS VII Notes, ABS VIII Notes (which
now covers ABS III Notes and ABS V Notes), ABS IX Notes, and ABS X Notes (which now covers Term Loan I, ABS I Notes, and ABS II Notes) (each as
defined herein), there can be no assurance that we, through our SPVs, will be able to complete additional securitizations, particularly if the securitization
markets become constrained. In addition, the value of any securities that our limited purpose, bankruptcy-remote, wholly owned subsidiaries retain in
our securitizations, including securities retained to comply with applicable risk retention rules, might be reduced or, in some cases, eliminated as a result
of an adverse change in economic conditions or the financial markets. In addition, our ABS IV Notes, ABS VI Notes, ABS VII Notes, ABS VIII Notes
(which now covers ABS III Notes and ABS V Notes), ABS IX Notes, and ABS X Notes (which now covers Term Loan I, ABS I Notes, and ABS II Notes)
are subject to customary accelerated amortization events, including events tied to the failure to maintain stated debt service coverage ratios.
If it is not possible or economical for us to securitize our assets in the future, we would need to seek alternative financing to support our operations and
to meet our existing debt obligations, which may be less efficient and more expensive than raising capital via securitizations and may have a material
adverse effect on our results of operations, financial condition, cash flows and liquidity.
An increase in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability, decrease our
liquidity and impact our solvency.
Our Credit Facility provides for, and our future debt agreements may provide for, debt incurred thereunder to bear interest at variable rates. As of
December 31, 2024, we had $284 million outstanding on our Credit Facility. Increases in interest rates would increase the cost of servicing indebtedness
under our Credit Facility or under future debt agreements subject to interest at variable rates, and materially reduce our profitability, decrease our
liquidity and impact our solvency.
Our hedging activities could result in financial losses or could reduce our net income.
To achieve more predictable cash flows, we employ a hedging strategy involving opportunistically hedging a majority of our first two years of production
as well as hedging a significant percentage of production beyond our first two years of forecasted production. Even so, the remainder of our production
that is unhedged is exposed to the continuing and prolonged declines in the prices of natural gas, NGLs and oil. Our results of operations and financial
condition would be negatively impacted if the prices of natural gas, NGLs or oil were to remain depressed or decline materially from current levels. To
achieve more predictable cash flows and to reduce our exposure to fluctuations in the prices of natural gas, NGLS and oil, we may enter into additional
hedging arrangements for a significant portion of our production.
Our derivative contracts may result in substantial gains or losses. For example, we reported an operating loss of $43 million for the year ended
December 31, 2024, compared with an operating profit of $1,161 million for the year ended December 31, 2023 and an operating loss of $671 million
for the year ended December 31, 2022. While our earnings are impacted by a variety of factors as described in Results of Operations, a key driver of our
year-over-year change from an operating profit to loss was attributable to a change of $1,095 million in the mark-to-market valuation adjustment on our
45
derivative financial instrument valuations to $189 million loss in 2024 from $906 million gain in 2023. There can be no assurance that we will not realize
additional losses due to our hedging activities in the future. In addition, if we enter into any derivative contracts and experience a sustained material
interruption in our production, we might be forced to satisfy all or a portion of our hedging obligations without the benefit of the cash flows from our
sale of the underlying physical commodity, resulting in a substantial diminution of our liquidity. Our ability to use hedging transactions to protect us from
future natural gas, NGL and oil price volatility will be dependent upon natural gas, NGL and oil prices at the time we enter into future hedging
transactions and our future levels of hedging and, as a result, our future net cash flows may be more sensitive to commodity price changes. In addition,
if commodity prices remain low, we will not be able to replace our hedges or enter into new hedges at favorable prices.
Our price hedging strategy and future hedging transactions will be determined at our discretion, subject to the terms of certain agreements governing
our indebtedness. The prices at which we hedge our production in the future will be dependent upon commodity prices at the time we enter into these
transactions, which may be substantially higher or lower than current prices. Accordingly, our price hedging strategy may not protect us from significant
declines in prices received for our future production. Conversely, our hedging strategy may limit our ability to realize cash flows from commodity price
increases. It is also possible that a substantially larger percentage of our future production will not be hedged as compared with the next few years,
which would result in our natural gas, NGL and oil revenues becoming more sensitive to commodity price fluctuations.
The failure of our hedge counterparties to meet their obligations to us may adversely affect our financial results.
An attendant risk exists in hedging activities that the counterparty in any derivative transaction cannot or will not perform under the instrument and that
we will not realize the benefit of the hedge. Disruptions in the financial markets could lead to sudden decreases in a counterparty’s liquidity, which could
make them unable to perform under the terms of the derivative contract and we may not be able to realize the benefit of the derivative contract. Any
default by the counterparty to these derivative contracts when they become due would have a material adverse effect on our results of operations,
financial condition, cash flows and prospects.
We may not be able to enter into commodity derivatives on favorable terms or at all.
To achieve a more predictable cash flow, we employ a hedging strategy involving opportunistically hedging a majority of our first two years of
production as well as hedging a significant percentage of production beyond our first two years of forecasted production. If we are unable to maintain
sufficient hedging capacity with our counterparties, we could have greater exposure to changes in commodity prices and interest rates, which could
have a material adverse impact on our business, results of operations, financial condition, cash flows or prospects.
Risks Relating to Legal, Tax, Environmental and Regulatory Matters
We are subject to regulation and liability under environmental, health and safety regulations, the violation of which may affect our
financial condition and operations.
We operate in an industry that has certain inherent hazards and risks, and consequently we are subject to stringent and comprehensive laws and
regulations, especially with regard to the protection of health, safety and the environment. For example, we are subject to laws and regulations related
to occupational safety and health, hydraulic fracturing activities, air emissions, soil and water quality, the protection of threatened and endangered plant
and animal species, biodiversity and ecosystems, and the safety of our assets and employees. Although we believe that we have adequate procedures in
place to mitigate operational risks, there can be no assurances that these procedures will be adequate to address every potential health, safety and
environmental hazard, and a failure to adequately mitigate risks may result in loss of life, injury, or adverse impacts on the health of employees,
contractors and third-parties or the environment. Any failure by us or one of our subcontractors, whether inadvertent or otherwise, to comply with
applicable legal or regulatory requirements may give rise to civil, administrative and/or criminal liabilities, civil fines and penalties, delays or restrictions
in acquiring or disposing of assets and/or delays in securing or maintaining required permits, licenses and approvals. Further, a lack of regulatory
compliance may lead to denial, suspension, or termination of permits, licenses, or approvals that are required to operate our sites or could result in
other operational restrictions or obligations. Our health, safety and environmental policies require us to observe local, state and national legal and
regulatory requirements and to apply generally accepted industry best practices where legislation or regulation does not exist.
The terms and conditions of licenses, permits, regulatory orders, approvals or permissions may include more stringent operational, environmental and/or
health and safety requirements. Obtaining development or production licenses and permits may become more difficult or may be delayed due to federal,
regional, state or local governmental constraints, considerations, or requirements on issuing. Furthermore, third-parties such as environmental NGOs
may administratively or judicially contest or protest licenses and permits already granted by relevant authorities or applications for the same and
operations may be subject to other administrative or judicial challenges.
In addition, under certain environmental laws and regulations, we could be subject to joint and several strict liability for the removal or remediation of
previously released materials, pollution, or property contamination regardless of whether we were responsible for the release or contamination or
whether the operations were in compliance with all applicable laws at the time those actions were taken. Private parties, including the owners of
properties on or adjacent to well sites and facilities where petroleum hydrocarbons or wastes are taken for reclamation or disposal, may also have the
right to pursue legal actions as well as to seek damages for non-compliance with environmental laws and regulations or for personal injury or property
damage. In addition, the risk of accidental spills or releases of pollutants or contaminants could expose us to significant liabilities that could have a
material adverse effect on our business, financial condition and results of operations.
We incur, and expect to continue to incur, capital and operating costs in an effort to comply with increasingly complex operational health and safety and
environmental laws and regulations. New laws and regulations, the imposition of more stringent requirements in permits and licenses, increasingly strict
enforcement of, or new interpretations of, existing laws, regulations and permits and licenses, or the discovery of previously unknown contamination or
hazards may require further costly expenditures to, for example:
•Modify operations, including an increase in plugging and abandonment operations;
•Install or upgrade pollution or emissions control equipment;
•Perform site clean ups, including the remediation and reclamation of gas and oil sites;
•Curtail or cease certain operations;
•Provide financial securities, bonds, and/or take out insurance; or
•Pay fees or fines or make other payments for pollution, discharges to the environment or other breaches of environmental or health and safety
requirements or consent agreements with regulatory agencies.
We cannot predict with any certainty the full impact of any new laws, regulations, or policies on our operations or on the cost or availability of insurance
to cover the risks associated with such operations. The costs of such measures and liabilities related to potential operational health and safety or
46
environmental risks associated with the Group may increase, which could materially and adversely affect our business, results of operations, financial
condition, cash flows or prospects. In addition, it is not possible to predict what future operational health and safety or environmental laws and
regulations will be enacted or how current or future operational, health, safety or environmental laws and regulations will be applied or enforced. We
may have to incur significant expenditure for the installation and operation of additional systems and equipment for monitoring and carry out remedial
measures in the event that operational health and, safety and environmental regulations become more stringent or costly reform is implemented by
regulators. Any such expenditure may have a material adverse effect on our business, results of operations, financial condition, cash flows or prospects.
No assurance can be given that compliance with occupational health and safety and environmental laws or regulations in the regions where we operate
will not result in a curtailment of production or a material increase in the cost of production or development activities.
Increasing attention to sustainability matters may impact our business and financial results.
Increasing attention has been given to corporate activities related to sustainability matters in public discourse and the investment community. A number
of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public
companies related to sustainability matters, including through the investment and voting practices of investment advisers, public pension funds, activist
investors, universities and other members of the investing community. These activities include increasing attention and demands for action related to
climate change and promoting the use of alternative forms of energy. These activities may result in demand shifts for oil and natural gas products and
additional governmental investigations and private litigation against us. In addition, stakeholder views continue to evolve and vary, and our initiatives
related to these matters are unlikely to satisfy all stakeholders. Our failure to comply with evolving investor or customer expectations and standards
(which may support or disfavor sustainability initiatives) or if we are perceived to not have responded appropriately to the growing concern for
sustainability issues, regardless of whether there is a legal requirement to do so, could cause reputational harm to our business, increase our risk of
litigation, and could have a material adverse effect on our results of operation.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings systems for
evaluating companies on their approach to sustainability matters. These ratings are used by some investors to inform their investment and voting
decisions. Unfavorable sustainability ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of
investment to other companies or industries, which could have a negative impact on our stock price and our access to and costs of capital. Also,
institutional lenders may decide not to provide funding for oil and natural gas companies based on climate change related concerns, which could affect
our access to capital for potential growth projects.
The U.S. administration, acting through the executive branch and/or in coordination with Congress, could enact or rescind rules and
regulations that may impact our operations.
Governmental, scientific and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the
United States, including climate change-related commitments and skepticism expressed by some political candidates who are now, or may in the future
be, in political office.
While our operations are largely not conducted on federal lands, we may in the future consider acquisitions of natural gas and oil assets located in areas
in which the development of such assets would require permits and authorizations to be obtained from or issued by federal agencies. To conduct these
operations, we may be required to file applications for permits, seek agency authorizations and comply with various other statutory and regulatory
requirements. Further, new oil and gas leasing on public lands has been the subject of recent proposed executive action rescinding climate change-
related initiatives and requirements by the prior Administration. Complying with these evolving requirements may adversely affect our ability to conduct
operations at the costs and in the time periods anticipated, and may consequently adversely impact our anticipated returns from our operations.
Any such measures or increased costs could have a material adverse effect on our business, results of operations, financial condition, cash flows or
prospects.
Our operations are dependent on our compliance with obligations under permits, licenses, contracts and field development plans.
Our operations must be carried out in accordance with the terms of permits, licenses, operating agreements, annual work programs and budgets. Fines,
penalties, or enforcement actions may be imposed and a permit or license may be suspended or terminated if a permit or license holder, or party to a
related agreement, fails to comply with its obligations under such permit, license or agreement, or fails to make timely payments of levies and taxes for
the licensed activity, or fails to provide the required geological information or meet other reporting requirements. It may from time to time be difficult to
ascertain whether we have complied with obligations under permits or licenses as the extent of such obligations may be unclear or ambiguous and
regulatory authorities in jurisdictions in which we do business, or in which we may do business in the future, may not be forthcoming with confirmatory
statements that work obligations have been fulfilled, which can lead to further operational uncertainty.
In addition, we and our commercial partners, as applicable, have obligations to operate assets in accordance with specific requirements under certain
licenses and related agreements, field development agreements, laws and regulations. If we or our partners were to fail to satisfy such obligations with
respect to a specific field, the license or related agreements for that field may be suspended, revoked or terminated. Although we have in the past
acquired and may in the future acquire shale assets, a significant source of our natural gas and crude oil remains conventional wells. In some instances,
these conventional wells are located on the same property as unconventional wells that produce shale oil. In these cases, the rights to access the shale
layers of the property will typically be conditioned on the ongoing productivity of conventional wells on the property. Furthermore, the shale rights may
be owned by a third party, and in such instances, we will enter into a joint use agreement with the third party. This joint use agreement may stipulate
that in consideration for permission to operate the conventional wells, we are to use reasonable efforts to maintain production so that the third party
retains the shale licenses. If we fail to maintain production in the conventional wells, under the joint use agreement, we may be liable to the third party for
replacing the lost land rights. The relevant authorities are typically authorized to, and do from time to time, inspect to verify compliance by us or our
commercial partners, as applicable, with relevant laws and the licenses or the agreements pursuant to which we conduct our business. There can be no
assurance that the views of the relevant government agencies regarding the development of the fields that we operate or the compliance with the terms of
the licenses pursuant to which we conduct such operations will coincide with our views, which might lead to disagreements that may not be resolved.
The suspension, revocation, withdrawal or termination of any of the permits, licenses or related agreements pursuant to which we may conduct
business, as well as any delays in the continuous development of or production at our fields caused by the issues detailed above could materially and
adversely affect our business, results of operations, financial condition, cash flows or prospects. In addition, failure to comply with the obligations under
the permits, licenses or agreements pursuant to which we conduct business, whether inadvertent or otherwise, may lead to fines, penalties, restrictions,
enforcement actions brought by governmental authorities, withdrawal of licenses and termination of related agreements.
47
We do not insure against certain risks and our insurance coverage may not be adequate for covering losses arising from potential
operational hazards and unforeseen interruptions.
We insure our operations in accordance with industry practice and plan to continue to insure the risks we consider appropriate for our needs and
circumstances. However, we may elect not to have insurance for certain risks, due to the high premium costs associated with insuring those risks or for
various other reasons, including an assessment in some cases that the risks are remote.
Our insurance may not be adequate to cover all losses or liabilities we may suffer. We cannot assure that we will be able to obtain insurance coverage
at reasonable rates (or at all), or that any coverage we or the relevant operator obtain, and any proceeds of insurance, will be adequate and available to
cover any claims arising. We may become subject to liability for pollution, blow-outs or other hazards against which we have not insured or cannot
insure, including those in respect of past activities for which we were not responsible. Any indemnities we may receive from sub-contractors, operators
or joint venture partners may be difficult to enforce if such sub-contractors, operators or joint venture partners lack adequate resources.
Operational insurance policies are usually placed in one year contracts and the insurance market can withdraw cover for certain risks due to events
occurring in other parts of the industry, thus greatly increasing the costs of risk transfer. For example, in September 2018, a gas pipeline operated by
another midstream company exploded in Beaver County, Pennsylvania, a state in which we have operations. The explosion resulted in the destruction of
residential property and motor vehicles as well as the evacuation of nearby households. Catastrophic events such as these may cause the insurance
costs for our midstream operations to rise, despite us not being involved in the catastrophic event. In the event that insurance coverage is not available
or our insurance is insufficient to fully cover any losses, including losses incurred due to lost revenues resulting from third party operations or processing
plants, claims and/or liabilities incurred, or indemnities are difficult to enforce, our business and operations, financial results or financial position may be
disrupted and adversely affected.
The payment by our insurers of any insurance claims may result in increases in the premiums payable by us for our insurance coverage and could
adversely affect our financial performance. In the future, some or all of our insurance coverage may become unavailable or prohibitively expensive.
Our internal systems and website may be subject to intentional and unintentional disruption, and our confidential information may be
misappropriated, stolen or misused, which could adversely impact our reputation and future sales.
We have faced, and may in the future continue to face, cyber-attacks and data security breaches. Such cyber-attacks and breaches are designed to
penetrate our network security or the security of our internal systems, misappropriate proprietary information and/or cause interruptions to our services,
and we expect to continue to face similar threats in the future. We cannot guarantee that we will be able to successfully prevent all attacks in the future.
Such future attacks could include hackers obtaining access to our systems, the introduction of malicious computer code or denial of service attacks. If an
actual or perceived breach of our network security occurs, it could adversely affect our business or reputation, and may expose us to the loss of
information, litigation and possible liability. An actual security breach could also impair our ability to operate our business and provide products and
services to our customers. Additionally, malicious attacks, including cyber-attacks, may damage our assets, prevent production at our producing assets
and otherwise significantly affect corporate activities. For example, we utilize electronic monitoring of meters and flow rate devices to monitor pressure
build-up in our production wells. If there were a cyber-attack that penetrated our monitoring systems such that they provided false readings, this could
result in an unknown pressure build-up, creating a dangerous situation which could end up in an explosion. As techniques used to obtain unauthorized
access to or to sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be
unable to anticipate or implement adequate measures to protect against these attacks and our service providers may likewise be unable to do so. Such
an outcome would have a material adverse impact on our business, results of operations, financial condition, cash flows or prospects.
In addition, confidential or financial payment information that we maintain may be subject to misappropriation, theft and deliberate or unintentional
misuse by current or former employees, third-party contractors or other parties who have had access to such information. Any such misappropriation
and/or misuse of our information could result in the Group, among other things, being in breach of certain data protection requirements and related
legislation as well as incurring liability to third parties. We expect that we will need to continue closely monitoring the accessibility and use of
confidential information in our business, educate our employees and third-party contractors about the risks and consequences of any misuse of
confidential information and, to the extent necessary, pursue legal or other remedies to enforce our policies and deter future misuse. If our confidential
information is misappropriated, stolen or misused as a result of a disruption to our website or internal systems this could have a material adverse effect
on our business, results of operations, financial condition, cash flows or prospects.
Although we maintain insurance to protect against losses resulting from certain of data protection breaches and cyber-attacks, our coverage for
protecting against such risks may not be sufficient.
Our operations are subject to the risk of litigation.
From time to time, we may be subject, directly or indirectly, to litigation arising out of our operations and the regulatory environments in our areas of
operations. Historically, categories of litigation that we have faced included actions by royalty owners over payment disputes, personal injury claims and
property related claims, including claims over property damage, trespass or nuisance. Although we currently face no material litigation that is reasonably
expected to have an adverse material impact for which we are not sufficiently indemnified or insured, damages claimed under such litigation in the
future may be material or may be indeterminate, and the outcome of such litigation, if determined adversely to us, could individually or in the
aggregate, be reasonably expected to have a material and adverse effect on our business, financial position or results of operations. While we assess
the merits of each lawsuit and defend ourselves accordingly, we may be required to incur significant expenses or devote significant resources to defend
against such litigation. In addition, the adverse publicity surrounding such claims may have a material adverse effect on our business.
We are subject to certain tax risks.
Any change in our tax status or in taxation legislation in the United Kingdom or the United States could affect our ability to provide returns to
shareholders. Statements in this document concerning the taxation of holders of our ordinary shares are based on current law and practice, which is
subject to change.
We are subject to income taxes in the United Kingdom and the United States, and there can be no certainty that the current taxation regime in the
United Kingdom, the United States or other jurisdictions within which we currently operate or may operate in the future will remain in force or that the
current levels of corporation taxation will remain unchanged. For example, the U.S. government has imposed a minimum tax on corporations and
proposed and may enact significant changes to the taxation of business entities including, among others, an increase in the U.S. federal income tax rate
applicable to corporations, like us, and surtaxes on certain types of income. Certain U.S. localities also maintain a severance tax or impact fee on the
removal of oil and natural gas from the ground and such tax rates may be increased or new severance taxes or impact fees may be implemented. The
United Kingdom announced on May 26, 2022 a new “Energy Profits Levy” on oil and gas exploration and production companies operating in the United
48
Kingdom and the UK Continental Shelf at a rate of 25% (subsequently increased to 35% and then to 38% from November 1, 2024). As we do not
operate our exploration, production or extraction activities in the United Kingdom or in the UK Continental Shelf, we do not expect the Energy Profits
Levy to impact our headline corporation tax rate in the United Kingdom, however, the taxation of energy companies remains uncertain, particularly in
the context of current global events, and the future stability of such tax regimes cannot be guaranteed.
Our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our effective tax rate could be adversely
affected by changes in the mix of earnings and losses in taxing jurisdictions with differing statutory tax rates, certain non-deductible expenses, the
valuation of deferred tax assets and liabilities and changes in federal, state or international tax laws and accounting principles. Increases in our effective
tax rate could materially affect our net financial results. Although we believe that our income tax liabilities are reasonably estimated and accounted for in
accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material adverse
effect on our business, results of operations, financial condition, cash flows or prospects.
In the past we have been able to offset a large portion of our U.S. federal income tax burden with marginal well tax credits that are available to
qualified producers who operate lower-volume wells during a low commodity pricing environment. There can be no assurance that there will be no
amendment to the existing taxation laws applicable to us, which may have a material adverse effect on our financial position. Our ability to utilize marginal
well tax credits in the United States could be or become subject to limitations (for example, if we are deemed to undergo an “ownership change” for
applicable U.S. federal income tax purposes).
The nature and amount of tax that we expect to pay and the reliefs expected to be available to us are each dependent upon several assumptions, any
one of which may change and which would, if so changed, affect the nature and amount of tax payable and reliefs available. In particular, the nature
and amount of tax payable may be dependent on the availability of relief under tax treaties and is subject to changes to the tax laws or practice in any
of the jurisdictions we currently are subject to or may be subject to in the future. Any limitation in the availability of relief under these treaties, any
change in the terms of any such treaty or any changes in tax law, interpretation or practice could increase the amount of tax payable by us.
Finally, because we are an entity incorporated in the United Kingdom that is treated as a U.S. corporation for all purposes of U.S. federal income tax
law, any changes in U.S. federal income tax law could negatively impact our effective tax rate and cash flows, which could cause our business, results of
operations, financial condition, cash flows or prospects to be materially adversely affected.
The taxation of an investment in our ordinary shares depends on the individual circumstances of the holders of our ordinary shares. Holders of our
ordinary shares are strongly advised to consult their professional tax advisers.
Tax legislation may be enacted in the future that could negatively impact our current or future tax structure and effective tax rates.
Long-standing international tax initiatives that determine each country’s jurisdiction to tax cross-border international trade and profits are evolving as a
result of, among other things, initiatives such as the Anti-Tax Avoidance Directives, as well as the Base Erosion and Profit Shifting (“BEPS”) reporting
requirements, mandated and/or recommended by the EU, G8, G20 and Organization for Economic Cooperation and Development (“OECD”), including
the imposition of a minimum global effective tax rate for multinational businesses regardless of the jurisdiction of operation and where profits are
generated (Pillar Two). Many countries around the world, including the United Kingdom, have introduced new, or amended existing, tax laws applicable
to multinational businesses to implement Pillar Two. As these and other tax laws and related regulations change (including changes in the interpretation,
approach and guidance of tax authorities), our financial results could be materially impacted. Given the unpredictability of these possible changes and
their potential interdependency, it is difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or
negative for our earnings and cash flow, but such changes could adversely affect our financial results.
Risks Relating to Our Ordinary Shares
The requirements of being a U.S. listed company, including compliance with the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase
our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As we became a U.S. listed company in December 2023, we are required to comply with new laws, regulations and requirements, certain corporate
governance provisions of Sarbanes-Oxley Act, related regulations of the SEC and the requirements of the NYSE, with which we were not required to
comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of our time and will
significantly increase our costs and expenses. We will need to: institute a more comprehensive compliance function to test and conclude on the
sufficiency of our internal control over financial reporting; comply with rules promulgated by the NYSE; prepare and distribute periodic public reports;
establish new internal policies, such as those relating to insider trading; and involve and retain to a greater degree outside professionals in the above
activities. At any time, we may conclude that our internal controls, once tested, are not operating as designed or that the system of internal controls
does not address all relevant financial statement risks. Compliance with Sarbanes-Oxley Act requirements may strain our resources, increase our costs
and distract management; and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a new U.S. listed company, we are subject to significant regulatory oversight and reporting obligations under U.S. federal securities laws and the
continuous scrutiny of securities analysts and investors. In addition, most members of our management team have limited experience managing a U.S.
listed company, interacting with U.S. public company investors, and complying with the increasingly complex laws pertaining to U.S. listed companies.
Our management team may not successfully or efficiently manage us as a U.S. listed company. These new obligations and constituents require
significant attention from our management team and could divert our management team’s attention away from the day-to-day management of our
business, which could adversely affect our business, results of operations and financial condition.
Further, we expect that, as a new U.S. listed company, being subject to these rules and regulations may make it more difficult and more expensive for
us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board
of directors or as executive officers. We are currently evaluating these rules, and we cannot predict or estimate the amount of additional costs we may
incur or the timing of such costs.
We qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act
reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the
Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the
sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
(ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who
49
profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on
Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant
events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while
U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year.
Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material
information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers,
some investors may find the ordinary shares less attractive, and there may be a less active trading market for the ordinary shares.
To the extent we no longer qualify as a foreign private issuer as of June 30, 2025 (the end of our second fiscal quarter), we would be required to
comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers, which are more
detailed and extensive than the requirements for foreign private issuers, as of January 1, 2026, including the requirement to prepare our financial
statements in accordance with U.S. generally accepted accounting principles. We may also be required to make changes in our corporate governance
practices in accordance with various SEC and NYSE rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to
comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign
private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make
some activities highly time consuming and costly. If we lose foreign private issuer status and are unable to comply with the reporting requirements
applicable to a U.S. domestic issuer by the applicable deadlines, we would not be in compliance with applicable SEC rules or the rules of NYSE, which
could cause investors could lose confidence in our public reports and could have a material adverse effect on the trading price of our ordinary shares.
We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs
to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that
differ significantly from the corporate governance listing standards of the NYSE. These practices may afford less protection to
shareholders than they would enjoy if we complied fully with the corporate governance listing standards of the NYSE.
As a foreign private issuer listed on the NYSE, we are subject to corporate governance listing standards. However, NYSE rules permit a foreign private
issuer like us to follow the corporate governance practices of its home country in lieu of certain NYSE corporate governance listing standards, provided
that we disclose which requirements that we have not complied with in any year and confirm the UK corporate governance practices we have complied
with. Certain corporate governance practices in the United Kingdom, which is our home country, may differ significantly from the NYSE corporate
governance listing standards. Although we adhere to the higher corporate governance standards of the UK Corporate Governance Code, we could
include non-independent directors as members of our nomination and remuneration committee, and our independent directors would not necessarily
hold regularly scheduled meetings at which only independent directors are present. We may in the future elect to follow home country practices in the
United Kingdom with regard to other matters. Therefore, our shareholders may be afforded less protection than they otherwise would have under the
NYSE corporate governance listing standards applicable to U.S. domestic issuers.
Failure to comply with requirements to design, implement and maintain effective internal control over financial reporting could have a
material adverse effect on our business.
The process of designing and implementing effective internal control over financial reporting is a continuous effort that requires us to anticipate and
react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain internal control over
financial reporting that is adequate to satisfy our reporting obligations as a U.S. listed company. If we are unable to maintain adequate internal control
over financial reporting, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated
financial statements and harm our results of operations. In addition, we are required, pursuant to the rules and regulations of the SEC, to furnish a
report by management on the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material
weaknesses identified by our management in our internal control over financial reporting. Assessing the effectiveness of our internal control over
financial reporting requires significant documentation, testing and possible remediation.
We may not be able to conclude on an annual basis that we have effective internal control over financial reporting or our independent registered public
accounting firm may not issue an unqualified opinion on the effectiveness of our internal control over financial reporting. If either we are unable to
conclude that we have effective internal control over financial reporting or our independent registered public accounting firm is unable to issue an
unqualified opinion on the effectiveness of internal control over financial reporting, investors could lose confidence in our reported financial information,
which could have a material adverse effect on the trading price of our ordinary shares.
We have incurred and will continue to incur increased costs as a result of operating as a public company in the United States, and our
management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a U.S. listed company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur previously.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of NYSE and other applicable
securities rules and regulations impose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of
disclosure controls and procedures, internal control over financial reporting and corporate governance practices. Our management and other personnel
will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and
financial compliance costs and will make some activities more time consuming and costly. For example, we expect that these rules and regulations may
increase the cost of our director and officer liability insurance.
However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their
application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
There is no guarantee that we will continue to pay dividends on our ordinary shares in the future.
Our ability and the Board’s decision to pay dividends is dependent upon our performance and financial condition, cash requirements, future prospects,
commodity prices, the performance and dividend yield of our peers, compliance with the financial covenants and restricted payments covenant in our
Credit Facility, profits available for distribution and other factors deemed to be relevant at the time and on the continued health of the markets in which
we operate. Further, subsequent to our listing on the NYSE, while our Board’s evaluation of our ability or need to pay dividends will primarily remain a
question of the foregoing factors, it will also take into account the performance of our ordinary shares, including relative to our peer group. There can
be no guarantee that we will continue to pay dividends in the future on our ordinary shares.
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The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under English law. The rights of holders of ordinary shares are governed by English law, including the provisions of the UK
Companies Act 2006 (the “Companies Act 2006”), and by our Articles of Association. These rights differ in certain respects from the rights of
shareholders in typical U.S. corporations. Refer to Memorandum and Articles of Association in this Annual Report & Form 20-F for a description of the
principal differences between the provisions of the Companies Act 2006 applicable to us and, for example, the Delaware General Corporation Law
relating to shareholders’ rights and protections.
Claims of U.S. civil liabilities may not be enforceable against us.
We are incorporated under the laws of the United Kingdom. In addition, certain of our directors and officers reside outside the United States. As a
result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce judgments obtained in
U.S. courts against them or us, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws.
The United States and the United Kingdom do not currently have a treaty providing for recognition and enforcement of judgments (other than
arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not
predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in the United Kingdom. In addition, uncertainty exists
as to whether UK courts would entertain original actions brought in the UK against us or our directors or senior management predicated upon the
securities laws of the United States or any state in the United States. Provided that certain requirements are met, a final and conclusive monetary
judgment for a definite sum obtained against us in U.S. courts (that is not a sum payable in respect of taxes or similar charges or in respect of a fine or
a penalty), would be treated by the courts of the UK as a cause of action in itself and sued upon as a debt at common law without any retrial of the
issue. Whether the relevant requirements are met in respect of a judgment based upon the civil liability provisions of the U.S. securities laws, including
whether the award of monetary damages under such laws would constitute a penalty, is an issue for the court making such decision. If a UK court gives
judgment for the sum payable under a U.S. judgment, the UK judgment will be enforceable by methods generally available for this purpose. These
methods generally permit the UK court discretion to prescribe the manner of enforcement.
As a result, U.S. investors may not be able to enforce against us or our executive officers, board of directors or certain experts named herein who are
residents of the United Kingdom or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters,
including judgments under the U.S. federal securities laws.
Viability and Going Concern
In accordance with Provision 31 section 4 of the UK Corporate Governance Code, and taking into account our current financial position and principal
risks for a period longer than the 12 months required by the going concern statement, the Senior Leadership Team prepared a viability analysis which
was assessed by the Board for approval.
Assessment Process and Key Assumptions
Our financial outlook is assessed primarily through a detailed annual business planning process and a more general multi-year forecast. The Senior
Leadership Team provides the Board with a detailed overview as part of its annual budget approval while providing regular updates at each Board
meeting throughout the year. The Board uses this information, along with any other detail it requests, to assess our current performance and longer-
term outlook.
The outputs from the business planning process include a set of key performance objectives, an assessment of our primary risks, the anticipated
operational outlook and a set of financial forecasts that consider the sources of funding available to DEC (the “Base Plan”).
Key assumptions, which underpin the annual business planning process, include the forward price strip for each commodity (natural gas, NGLs and oil),
forecasted operating cost and capital expenditure levels, production profiles, and the availability of liquidity or additional financing. We regularly produce
cash flow projections, which we sensitize for different scenarios including, but not limited to, changes in commodity prices and production rates from our
wells. The Directors and Senior Leadership Team closely monitor these forecast assumptions and projections and seek to mitigate our operating and
liquidity risks.
Based on our financial scenario planning process, the Directors and Senior Leadership Team believe that stress testing forecast results over the Base
Plan for a two-year period through March 2027 forms a reasonable expectation of our viability. At least annually, we perform our two-year Base Plan
forecast for our medium-term strategic planning period. The Directors and Senior Leadership Team are confident that they appropriately monitor and
manage operational risks effectively within the two-year Base Plan, and our scenario planning is focused primarily on plausible changes in external
factors, providing a reasonable degree of confidence.
Viability
The principal risks and uncertainties that affect the Directors’ assessment of our viability in this period are:
•The effect of volatile natural gas prices on the business;
•Operational production performance of the producing assets; and
•Operating cost levels and our ability to control costs.
The Base Plan incorporates key assumptions that reflect these principal risks as follows:
•Projected operating cash flows are calculated using a production profile which is consistent with current operating results and decline rates;
•Assumes commodity prices are in line with the current forward curve which considers basis differentials;
•Operating cost levels stay consistent with historical trends which have been recently elevated due to the inflationary environment;
•The financial impact of our current hedging contracts in place, being approximately 86% and 82%, of total production volumes hedged for the
years ending December 31, 2025 and 2026, respectively; and
•The scenario also includes the scheduled principal and interest payments on our current debt arrangements.
To assess our viability, the Directors and Senior Leadership Team considered various scenarios around the Base Plan that primarily reflect a more
severe, but plausible, downside impact of the principal risks, both individually and in the aggregate, as well as the additional capital requirements that
downside scenarios could place on us. Conservatively, our viability statement considered the combined impact of all three listed scenarios in:
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Scenario 1: Cyclically low gas prices for a year (Henry Hub prices of $2.00 per MMbtu before returning to strip pricing), which have been historically
observed in the market.
Scenario 2: Considered the impact of climate change by assuming a two-week period of lost production in our East Texas/Louisiana region, which is
susceptible to hurricanes, due to a natural disaster (assumed to occur once in each year of the assessment period).
Scenario 3: Considered the impact of climate change by assuming a two-week period of lost production in our Appalachia region (assumption of lost
production in 25% of the total region), which is susceptible to flooding, due to a natural disaster (assumed to occur once in each year of the assessment
period).
The Directors and Senior Leadership Team considered the impact that these principal risks could, in certain circumstances, have on our prospects within
the assessment period, and accordingly appraised the opportunities to actively mitigate the risk of these severe, but plausible, downside scenarios.
Based on their evaluation, the Directors and Senior Leadership Team have a reasonable expectation that we will be able to continue in operation and
meet our liabilities as they fall due during the assessment period.
Going Concern
In assessing our going concern status, we have taken account of our financial position, anticipated future trading performance, borrowings and other
available credit facilities, forecasted compliance with covenants on those borrowings, and capital expenditure commitments and plans. Our cash
generation and liquidity remain adequate and we believe we will be able to operate within existing facilities.
The Directors are satisfied that our forecasts and projections, that take into account reasonably possible changes in trading performance, show that we
have adequate resources to continue in operational existence for at least 12 months from the date of this Annual Report & Form 20-F and that it is
appropriate to adopt the going concern basis in preparing our consolidated financial statements for the year ended December 31, 2024.
The Strategic Report was approved by the Board of Directors and signed on its behalf by:
/s/ David E. Johnson
David E. Johnson
Chairman of the Board
March 17, 2025
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Corporate Governance
The Chairman’s Governance Statement
Dear Shareholder,
As a Board, we have been driving our governance standards towards meeting best practice, and it has been my privilege to work with this Board which
is committed to maintaining high standards of corporate governance. As Chairman of the Group, my role is to provide leadership, ensuring that the
Board performs its role effectively and has the capacity, ability, structure, corporate governance systems and support to enable it to continue to do so.
This Governance section of this Annual Report & Form 20-F provides an update on our Board and Corporate Governance Policy. It includes our UK
Corporate Governance Code compliance statements and the reports of the Board committees, namely the Audit & Risk, Nomination & Governance,
Remuneration, and Sustainability & Safety Committees.
In these reports, we set out our governance structures and explain how we have applied the UK Corporate Governance Code and applicable NYSE and
SEC rules.
/s/ David E. Johnson
David E. Johnson
Chairman of the Board
March 17, 2025
Governance Framework
The Group’s success is directly linked to sound and effective governance and we remain committed to achieving high standards in all we do. The
Directors recognize the importance of strong corporate governance and have developed a corporate governance framework and policies appropriate to
the size of the Group.
As the Group grows, the Directors and Senior Leadership Team continue to review and adjust our approach, make ongoing improvements to the Group’s
corporate governance framework and policies and procedures as part of building a successful and sustainable company.
Good governance creates the opportunity for appropriate decisions to be made by the right people at the right time to support the delivery of our
strategy and manage any risks associated with delivery of that strategy.
Board Agenda and Activities During the Year
The Board is responsible for the direction and overall performance of the Group with an emphasis on policy and strategy, financial results and major
operational issues.
During the year, the matters reserved for the Board’s decision have been reviewed and re-affirmed. Specific matters for the Board’s consideration
include:
•Approval of the Group’s strategic plan;
•Review of the performance of the Group’s strategy, objectives, business plans and budgets;
•Review and assess the Group’s sustainability goals, including the Group’s GHG emission intensity reduction targets;
•Review and assess the Group’s health and safety metrics and goals;
•Approval of the Group’s operating and capital expenditure budgets and any material changes to them;
•Review of material changes to the Group’s corporate structure and management and control structure;
•Review of changes to governance and business policies;
•Monitoring efforts related to community and stakeholder engagement;
•Ensuring an effective system of internal control and risk management;
•Ensure that appropriate succession planning procedures are in-place;
•Approval of annual and interim reports and accounts, and preliminary announcements of year-end results; and
•Review of the effectiveness of the Board and its committees.
The Board delegates matters not reserved for the Board to the Senior Leadership Team.
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Board of Directors
Defines business strategy, assesses risks and monitors performance
Remuneration Committee
Sustainability & Safety
Committee
Nomination & Governance
Committee
Audit & Risk Committee
Responsible for the Group’s
remuneration policy, and for setting
pay levels and bonuses for senior
management in line with individual
performance. Ensures safety and
sustainability KPIs are included in
remuneration packages.
Monitors the Group’s social, ethical,
environmental and safety
performance, and oversees all
sustainable development issues on
behalf of the Board.
Ensures a balance of skills,
knowledge, independence and
experience on the Board and its
committees. Monitors the Group’s
governance structure.
Supports the Board in monitoring
the integrity of the Group’s financial
statements and reviews the
effectiveness of the Group’s system
of internal controls and risk
management systems.
CEO
Takes ultimate responsibility for delivering on strategy, financial and operating performance.
President & Chief
Financial Officer
Executive Vice
President of
Operations
Chief Legal &
Risk Officer
Executive Vice
President &
Investment
Officer
Executive Vice
President of
Energy Marketing
Chief Human
Resources Officer
Description of
Role
Manages the
finance and
accounting activities
of the Group and
ensures that its
financial reports are
accurate and
completed in a
timely manner.
Oversees the
Group’s information
technology function
to ensure safety
and soundness of
internal controls
and systems.
Coordinates
operating activities
and sustainability
initiatives to ensure
transparency and
long-term value for
DEC’s stakeholders.
Responsible for
legal and
compliance,
government, policy
engagement,
community
engagement and
land and mineral
owner engagement.
Responsible for
identifying and
valuing acquisition
targets.
Responsible for
developing and
implementing a
commodity
marketing strategy
to maximize
commodity
revenues.
Responsible for HR
function and
employee relations,
policies, practices
and operations.
Responsibility
Treasury,
Accounting &
Financial Reporting,
Investor Relations,
Information
Technology &
Sustainability
Reporting
Operations, EHS &
Regulatory
Legal &
Compliance, Land,
Policy Engagement
& Community
Relations
Acquisitions
Marketing
Human Resource
Risk
Management
Guidelines
Employee
Handbook, Code of
Business Conduct &
Ethics, Tax Policy &
Anti-Bribery &
Corruption Policy
Employee
Handbook, Code of
Business Conduct &
Ethics, EHS Policy,
Climate Policy,
Socio-Economic
Policy & Field
Operating
Guidelines
Employee
Handbook, Code of
Business Conduct &
Ethics, Anti-Bribery
& Corruption Policy,
Whistleblowing
Policy & Securities
Dealing Policy
Employee
Handbook, Code of
Business Conduct &
Ethics & Anti-
Bribery &
Corruption Policies
Employee
Handbook, Code of
Business Conduct &
Ethics & Anti-
Bribery &
Corruption Policies
Employee
Handbook and
Code of Business
Conduct & Ethics,
Employee Relations,
Human Rights, Anti-
Bribery &
Corruption Policies
& Whistleblowing
Policy
Stakeholder
Engagement
Responsibility
Employees, Rating
Agencies, Financial
Institutions & Debt
& Equity Investors
Communities,
Employees &
Business Partners
Employees,
Industry
Associations,
Communities, Land
& Mineral Owners &
Government &
Regulators
Customers
Customers
Employees &
Communities
Board Effectiveness, Composition and Independence
As of December 31, 2024, the Board was comprised of seven Directors being the Group’s CEO, the Non-Executive Chairman (who was independent
upon appointment) and five other Non-Executive Directors, all of whom were deemed Independent Non-Executive Directors under the UK Corporate
Governance Code, except one. As Mr. Thomas has served on the Board for ten years as of January 1, 2025, the Board no longer considers him
independent. In January 2025, Ms. Kerrigan retired from the Board due to other commitments.
54
As a foreign private issuer, under the listing requirements and rules of the NYSE, we are not required to have independent directors on our Board,
except that our audit committee is required to consist fully of independent directors, subject to certain phase-in schedules. Our Board has determined
that five of our six Directors do not have a relationship that would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of the NYSE.
The skills and experience of the Non-Executive Directors are wide and varied and contribute to productive and challenging discussions in the boardroom
ensuring the Board has appropriate independent oversight. For more details on the skills, knowledge and experience of our Board refer to the Directors’
biographies in Board of Directors within this Annual Report & Form 20-F.
With a Non-Executive Chairman, and, as of January 1, 2025, four other Independent Non-Executive Directors, over half of the Board is independent and
the Audit & Risk and Remuneration Committees were completely independent. Female representation at the Board level increased from 29% in
late-2019 to 43% as of December 31, 2024 (three out of seven Board members being female).
Recognizing the importance of workforce engagement, Sandra M. Stash serves as the Director responsible for workforce engagement as required under
the UK Corporate Governance Code. The Non-Executive Director Employee Representative directly engages with employees and provides a forum for
feedback to management. These discussions cover a variety of topics including the Group’s culture, policies and actions. Ms. Stash has served as the
Non-Executive Director Employee Representative since 2019. Further information on her role and the work undertaken can be found in the Directors’
Report within this Annual Report & Form 20-F.
The Board provides effective leadership and overall management of the Group’s affairs. It approves the Group’s strategy and investment plans and
regularly reviews operational and financial performance and risk management matters. A schedule of matters reserved for the Board is included in the
previous section.
The Board and its committees hold regularly scheduled meetings each year. Additional meetings are held when necessary to consider matters of
importance that cannot be held over until the next scheduled meeting.
All Directors have access to the advice and services of the Group’s solicitors and the Group’s Corporate Secretary, who is responsible for ensuring that all
Board procedures are followed. Any Director may take independent professional advice at the Group’s expense in the furtherance of their duties.
In accordance with the UK Corporate Governance Code, the Directors must stand for re-election annually. The Group’s Articles of Association also
require any new Director appointed by the Board during the year to retire at the next Annual General Meeting (“AGM”) and offer themselves for re-
election.
The Board delegates certain responsibilities to the Board committees, listed below, which have clearly defined terms of reference.
These terms of reference are reviewed annually to ensure they remain fit for purpose and can be viewed on the Group’s website.
Board Committees
The Directors have established four Board committees: an Audit & Risk Committee, Remuneration Committee, Nomination & Governance Committee,
and Sustainability & Safety Committee. The members of these committees were constituted in accordance with the requirements of the UK Corporate
Governance Code, as applicable. The terms of reference of the committees have been prepared in line with prevailing best practice, including the
provisions of the Code. A summary of the delegated duties and responsibilities, terms of reference of the committees and their activities for the year are
presented in their committee reports set out below.
Board Composition
The Board’s composition prioritizes a broad range of perspectives, emphasizing professional experience, industry knowledge, and cognitive diversity. In
recent years, the Board has strategically recruited members to enhance these attributes and is now focusing on a period of stability before considering
further additions. Although the Board does not currently have any ethnically diverse members, it acknowledges the UK Listing Rules’ diversity targets,
which the Group intends to continue to closely examine and evaluate in 2025.
In 2024, the Board complied with the UK Listing Rules’ targets of (i) more than 40% female representation on the Board, with 43% of the Board being
female and (ii) a female holding a senior Board position, with Ms. Kerrigan serving as the Senior Independent Director for the entirety through January
24, 2025 and Ms. Stash appointed to that role upon Ms. Kerrigan’s retirement from the Board.
Board and Executive Management Composition
As required to be presented in accordance with UK Listing Rule 6.6.6R(10) as of December 31, 2024:
Gender Identity or Sex(a)
Number of Board
Members
Percentage of the
Board
Number of Senior
Positions on the
Board (CEO, CFO,
SID & Chair)(a)
Number in
Executive
Management
Percentage of
Executive
Management
Male
4
57%
3
6
67%
Female
3
43%
1
3
33%
Other categories
—
—%
—
—
—%
Not specified/prefer not to say
—
—%
—
—
—%
55
Ethnic Background
Number of Board
Members
Percentage of the
Board
Number of Senior
Positions on the
Board (CEO, CFO,
SID & Chair)(a)
Number in
Executive
Management
Percentage of
Executive
Management
White British or other
White (including
minority-white groups)
7
100%
4
9
100%
Mixed/Multiple Ethnic Groups
—
—%
—
—
—%
Asian/Asian British
—
—%
—
—
—%
Black/African/Caribbean/Black
British
—
—%
—
—
—%
Other ethnic group, including
Arab
—
—%
—
—
—%
Not specific/prefer not to say
—
—%
—
—
—%
(a)The data reported on the basis of gender identity.
The Board’s Directors are from the U.S. as well as the UK, bringing a range of domestic and international experience to the Board. The Board’s diverse
range of experience and expertise covers not only a wealth of experience of operating in the natural gas and oil industry but also extensive technical,
operational, financial, legal and environmental expertise.
UK Corporate Governance Code Compliance Statement
The Directors support high standards of corporate governance, and it is the policy of the Group to comply with current best practice in UK corporate
governance.
The UK Corporate Governance Code published in July 2018 by the Financial Reporting Council (“FRC”), as amended from time to time, (the “Corporate
Governance Code”) recommends that: (i) the Chair of the Board of Directors should meet the independence criteria set out in the Corporate Governance
Code on appointment; and (ii) the Board should appoint one of the Independent Non-Executive Directors to be the Senior Independent Director. The
Chair of the Board is David E. Johnson, who was independent as of his appointment and whom the Group continues to consider independent, and the
Senior Independent Director for the year ended December 31, 2024 was Sylvia Kerrigan. The Board also considers Sandra M. Stash, David J. Turner, Jr.,
Sylvia Kerrigan and Kathryn Z. Klaber to meet the independence criteria set out in the Corporate Governance Code. Following the resignation of Sylvia
Kerrigan from the Board on January 24, 2025, Sandra Stash has been appointed as the Senior Independent Director. Since January 1, 2025, the
Company has been subject to the UK Corporate Governance Code 2024 (the ”2024 Code”) and will report on its compliance with the principles and
provisions of the 2024 Code in its 2025 Annual Report.
Currently, the Board is of the opinion that as of the date of this report it fully complies with the requirements of the Corporate Governance Code.
Additionally, the Directors acknowledge the requirement to implement a diversity policy that will be applicable to the Group’s administrative,
management and supervisory bodies and the Remuneration, Audit & Risk and Nomination & Governance committees. For more details, refer to Board
Composition and Workforce Composition within this Annual Report & Form 20-F.
Our Approach to Governance
As of the date of this Annual Report & Form 20-F, our Board is made up of six Directors: one Executive Director, chairman and four Non-Executive
Directors (all of whom are independent, except one).
Alongside the continued focus on our business strategy, we achieved significant milestones in 2024 in strengthening core areas of the business. One
such area of focus was corporate governance, where we engaged external consultants to advise on Board best practices, including independence,
composition and expertise.
Key Governance Improvements During 2024
The Board recognizes the benefits of good governance and is seeking to apply this in a meaningful way. DEC is a rapidly evolving company that is in an
expansion and transition phase. Accordingly, the Board is acutely aware of the need to rapidly and effectively integrate new businesses into the
reporting and governance framework of the Group, as determined by the Board. It is recognized that the Board has a key role in balancing the
fundamental elements of good governance, namely to deliver business growth and build trust while maintaining a dynamic management framework.
The Board appreciates the importance of good and effective communication and remains in close contact with its shareholders and other stakeholders.
The Board is actively engaged in the process of solidifying its governance framework for its rapidly expanding business. The Board concluded that
overall compliance with governance best practice has improved during the year under review, with the following having been achieved:
•The Board re-affirmed several key governance policies including the following: Securities Dealing Policy, Whistleblowing Policy, Anti-Bribery &
Corruption Policy, Socio-Economic Policy, Modern Slavery Policy, EHS Policy, Climate Policy, Employee Relations Policy, Human Rights Policy,
Business Partners Policy, Biodiversity Policy, Code of Business Conduct & Ethics, and Tax Policy.
•The Board achieved further progression of the Group’s overall corporate governance framework and practices, taking into account evolving market
best practices and the Group’s NYSE-listing, including, among other things, a continued review and update of the Group’s committee charters and
governance policies.
•The Audit & Risk Committee is fully independent and continues to adopt best practice.
•The Remuneration Committee is also independent with three Non-Executive Directors and the Non-Executive Chairman, and, together with a third-
party consultant, conducted a thorough review of the remuneration policy and practices and undertook a consultation exercise with the Group’s
largest shareholders.
56
•Each committee completed a thorough charter evaluation to identify gaps in coverage, relevance and applicability as well as potential areas of
improvement.
•Together with the executive management team, the Chairman and the Nomination & Governance Committee continued to formulate succession
planning procedures and plans around key-roles in management.
•The Board encouraged employee outreach and training regarding the Group’s Whistleblowing Policy and was satisfied by measures taken, including
the placement of awareness posters with hotline details in all major offices.
•Sylvia Kerrigan continued to serve as Senior Independent Director (for the entirety of 2024 and resigned as a director on January 24, 2025).
Corporate Governance Practices and Foreign Private Issuer Status
Companies listed on the NYSE must comply with the corporate governance standards provided under Section 303A of the NYSE Listed Company Manual.
As a “foreign private issuer,” as defined by the SEC, we are permitted to follow home country corporate governance practices, instead of certain
corporate governance practices required by the NYSE for U.S. domestic issuers, except that we are required to comply with Sections 303A.06, 303A.11
and 303A.12(b) and (c) of the Listed Company Manual. Under Section 303A.06, we must have an audit committee that meets the independence
requirements of Rule 10A-3 under the Exchange Act. Under Section 303A.06, we must disclose any significant ways in which our corporate governance
practices differ from those followed by domestic companies under NYSE listing standards. Finally, under Section 303A.12(b) and (c), we must promptly
notify the NYSE in writing after becoming aware of any non-compliance with any applicable provisions of this Section 303A and must annually make a
written affirmation to the NYSE. Further, an LSE listed company must disclose in its annual financial report a statement of how the listed company has
applied the principles set out in the UK Corporate Governance Code, in a manner that would enable shareholders to evaluate how the principles have
been applied, and a statement as to whether the listed company has (a) complied throughout the accounting period with all relevant provisions set out
in the UK Corporate Governance Code; or (b) not complied throughout the accounting period with all relevant provisions set out in the UK Corporate
Governance Code and if so, setting out: (i) those provisions, if any it has not complied with; (ii) in the case of provisions whose requirements are of a
continuing nature, the period within which, if any, it did not comply with some or all of those provisions; and (iii) the company’s reasons for
non-compliance.
For the purposes of NYSE rules, so long as the Group qualifies as a foreign private issuer, we are eligible to take advantage of certain exemptions from
NYSE corporate governance requirements provided in the NYSE rules. We are required to disclose the significant ways in which our corporate
governance practices differ from those that apply to U.S. companies under NYSE listing standards.
Section 312.03 of the NYSE Rules requires that a listed company obtain, in specified circumstances, (1) shareholder approval to adopt or materially
revise equity compensation plans, as well as (2) shareholder approval prior to an issuance (a) of more than 1% of its ordinary shares (including
derivative securities thereof) in either number or voting power to related parties, (b) of more than 20% of its outstanding ordinary shares (including
derivative securities thereof) in either number or voting power or (c) that would result in a change of control. The Group intends to follow home country
law in determining whether shareholder approval is required. Section 302 of the NYSE Rules also requires that a listed company hold an annual
shareholders’ meeting for holders of securities during each fiscal year. We will follow home country law in determining whether and when such
shareholders’ meetings are required.
The Group may in the future decide to use other foreign private issuer exemptions with respect to some or all of the other requirements under the NYSE
Rules. Following our home country governance practices may provide less protection than is accorded to investors under the NYSE listing requirements
applicable to domestic issuers. We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable
corporate governance requirements of the Sarbanes-Oxley Act of 2002, the rules adopted by the SEC and NYSE listing standards. Because we are a
foreign private issuer, our directors and senior management are not subject to short swing profit and insider trading reporting obligations under Section
16 of the Exchange Act. They will, however, be subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act
and related SEC rules.
57
Board of Directors
The Group has a commitment to strong governance, reporting and operating standards. During 2024, the Board comprised of seven Directors: including
a Non-Executive Chair (who was independent upon appointment and whom the Group continues to consider independent), a Non-Executive Vice-Chair,
an Executive Director, the Senior Independent Director, three additional independent Non-Executive Directors.
David E. Johnson
Rusty Hutson, Jr.
Martin K. Thomas
Non-Executive Chairman, independent
upon appointment
Co-Founder and Chief Executive Officer
Non-Executive Vice Chair, independent
through December 31, 2023
Age
64
55
60
Appointed
February 3, 2017 and as Chair of the
Board on April 30, 2019
July 31, 2014
January 1, 2015
Committee
Membership
Remuneration Committee, Sustainability &
Safety Committee
None
Nomination & Governance Committee
Experience
Mr. Johnson has served on our Board of
Directors since February 2017 and as the
Independent Chairman since April 2019.
He has worked at a number of leading
investment firms, as both an investment
analyst and a manager, and more recently
in equity sales and investment
management. Mr. Johnson currently serves
on the board of Chelverton Equity
Partners, an AIM-listed holding company,
where he serves as a member of the
Remuneration, Audit and Nomination
committees. Previously, Mr. Johnson was a
consultant at Chelverton Asset
Management from August 2016 to
February 2019. Prior to that, he worked as
a fund manager for the investment
department a large insurance company
and then as Head of Sales and Head of
Equities at a London investment bank. Mr.
Johnson earned a Bachelor of Arts in
Economics from the University of Reading.
Mr. Hutson is our co-founder and has
served as our Chief Executive Officer since
the founding of our predecessor entity in
2001. Mr. Hutson also serves on our Board
of Directors. Mr. Hutson is the fourth
generation in his family to immerse himself
in the natural gas and oil industry, with
family roots dating back to the early
1900s. Mr. Hutson spent many summers of
his youth working with his father and
grandfather in the oilfields of West
Virginia. He graduated from Fairmont State
College (WV) with a degree in accounting.
After college, Mr. Hutson spent 13 years
steadily progressing into multiple
leadership roles at well-known banking
institutions such as Bank One and
Compass Bank. His final years in the
banking industry were spent as CFO of
Compass Financial Services. Building upon
his experiences in the natural gas and oil
industry, as well as the financial sector,
Mr. Hutson established Diversified Energy
Company in 2001. After years of refining
his strategy, Mr. Hutson and his team took
Diversified public in 2017. He continues to
lead his team and expand the Group’s
footprint. With a rapidly growing portfolio,
Mr. Hutson remains focused on operational
excellence and creating shareholder value.
Mr. Thomas has served on our Board of
Directors since January 2015. Since
January 2022, Mr. Thomas has served as a
consultant at the law firm Wedlake Bell
LLP, from where he was previously a
Partner from January 2018 to December
2021. During his more than 30-year legal
career, Mr. Thomas has also served as
Partner of Watson Farley & Williams LLP
from February 2015 to April 2017 and as
consultant of the same firm from May 2017
to May 2018. Mr. Thomas earned a
Bachelor of Laws from the University of
Reading and completed his Law Society
Final Examinations at The College of Law
in the UK.
Key
Strengths
Investment sector knowledge; finance;
providing strong leadership to the Board in
connection with the Board’s role of
overseeing strategy and developing
stakeholder relations.
Deep understanding and leadership in the
natural gas and oil sector; strong track
record in developing and delivering results
in line with strategy; finance; risk
management.
Corporate law; advising on mergers and
acquisitions; public offerings.
Current
External
Roles
Chelverton Equity Partners (Director), an
AIM-listed holding company
Board of Governors of West Virginia
University
Wedlake Bell LLP (Consultant) and Jasper
Consultants Limited (Director)
58
Board of Directors (continued)
Sandra M. Stash
David J. Turner, Jr.
Kathryn Z. Klaber
Independent Non-Executive Director &
Non-Executive Director Employee
Representative
Independent Non-Executive Director
Independent Non-Executive Director
Age
65
61
58
Appointed
October 21, 2019
May 27, 2019
January 1, 2023
Committee
Membership
Sustainability & Safety Committee (Chair),
Remuneration Committee, Audit & Risk
Committee
Audit & Risk Committee (Chair),
Remuneration Committee (appointed Chair
on January 24, 2025), Nomination &
Governance Committee
Nomination & Governance Committee
(Chair), Audit & Risk Committee,
Sustainability & Safety Committee
Experience
Ms. Stash has served on our Board of
Directors since October 2019. Ms. Stash
joined Tullow Oil in October 2013 serving
as Executive Vice President of Safety,
Operations and Engineering, and External
Affairs where she served until March 2020.
Ms. Stash is a Certified Director of the US
National Association of Corporate Directors
and a Fellow of the Canadian Academy of
Engineering and currently serves on the
boards of Medallion Midstream LLC, Trans
Mountain Company, Warriors and Quiet
Waters as Chair, the Colorado School of
Mines Board of Governors, First Montana
Bank, and the African Gifted Foundation.
Ms. Stash earned a Bachelor of Science in
Petroleum Engineering from the Colorado
School of Mines and is a Registered
Professional Engineer
Mr. Turner has served on our Board of
Directors since May 2019. Mr. Turner has
served as Chief Financial Officer of Regions
Financial Corporation (NYSE: RF) since
2010 where he leads all finance
operations, including mergers and
acquisitions, financial systems, investor
relations, corporate treasury, corporate
tax, management planning and reporting
and accounting. Prior to his appointment
as Chief Financial Officer, Mr. Turner
oversaw the Internal Audit Division for
AmSouth Bank (which merged with
Regions Financial Corporation in 2006)
from April 2005 to March 2010. Before
beginning his banking career, Mr. Turner
was a certified public accountant and an
Audit Partner with Arthur Andersen and
KPMG specializing in financial services
clients. He earned a Bachelor of Science in
Accounting from the University of
Alabama.
Ms. Klaber has served on our Board of
Directors since January 2023. Since 2014,
Ms. Klaber has served as the Managing
Director of The Klaber Group, which
provides strategic consulting services to
businesses and organizations with a focus
on energy development in the United
States and abroad. Prior to founding The
Klaber Group, Ms. Klaber launched the
Marcellus Shale Coalition, serving as its
first CEO from 2009 to 2013. Previously in
her career, Ms. Klaber also served as the
Executive Vice President for
Competitiveness at the Allegheny
Conference on Community Development,
Executive Director of the Pennsylvania
Economy League, and consultant at
Environmental Resources Management,
where she gained significant experience in
EHS strategy and compliance. Ms. Klaber
received her B.A. in Environmental Science
from Bucknell University and her MBA from
Carnegie Mellon University.
Key
Strengths
Risk management & sustainability;
operations & engineering;
employee engagement.
Financial expert with recent and relevant
experience; capital markets; financial
operations; audit experience; risk
management.
Regulatory compliance, energy specific
sustainability programs; EHS processes
industry knowledge, risk management;
governance.
Current
External
Roles
Colorado School of Mines (Board of
Governors member), Trans Mountain
Company, Warriors and Quiet Waters, a
Canadian Crown Corporation (Chair and
Director), First Montana Bank (Director),
and Medallion Midstream, LLC (Director)
Regions Financial Corporation (CFO),
Junior Achievement of Alabama, Inc.
(Board and Executive Committee),
Leadership Alabama (Director), a nonprofit
organization, and Five Star Preserve
(Director), a nonprofit organization
RLG International (Director), Junior
Achievement of Western Pennsylvania
(Director and immediate past-Chair), and
Beaver County Chamber of Commerce
(Beaver County, Pennsylvania) (Chair)
59
Board of Directors (continued)
Senior Management
Sylvia Kerrigan
Bradley G. Gray
Ben Sullivan
Senior Independent Non-Executive
Director (ceased to be a director on
January 24, 2025)
President and Chief Financial Officer
Senior Executive Vice President, Chief
Legal & Risk Officer, and Corporate
Secretary
Age
59
56
46
Appointed
October 11, 2021
Committee
Membership
Remuneration Committee (Chair for
entirety of 2024 through January 24,
2025), Nomination & Governance
Committee
Experience
Ms. Kerrigan has served on our Board of
Directors since October 2021. Currently,
she is the Chief Legal Officer at Occidental
Petroleum Corporation (NYSE: OXY). Prior
to joining Occidental, Ms. Kerrigan served
as the Executive Director of the Kay Bailey
Hutchinson Center for Energy, Law and
Business at the University of Texas, where
she remains a member of the Executive
Council. In Ms. Kerrigan’s more than 20
years with Marathon Oil Corporation, she
served in a number of roles overseeing
public policy, legal and compliance,
corporate positioning and external
communications before retiring in 2017
after eight years as the Executive Vice
President, General Counsel and Corporate
Secretary. Ms. Kerrigan has also served as
a director for Hornbeck Offshore Services,
Inc. since August 2022 and Board of
Trustees for Southwestern University since
March 2014. Ms. Kerrigan holds a
Directorship Certification through the
National Association of Corporate
Directors. Ms. Kerrigan earned a Bachelor
of Arts from Southwestern University and a
Doctor of Jurisprudence from the
University of Texas at Austin School of
Law.
Mr. Gray has served as our President and
Chief Financial Officer since September
2023. Mr. Gray has also served as the
Group’s Executive Vice President, Chief
Operating Officer since October 2016 to
September 2023. Mr. Gray has also served
on the Board of Directors until September
2023. Prior to joining the Group, Mr. Gray
served as the Senior Vice President and
Chief Financial Officer for Royal Cup, Inc.
from August 2014 to October 2016. Prior
to that, from 2006 to 2014, Mr. Gray
served in various roles at The McPherson
Companies, Inc., most recently as
Executive Vice President and Chief
Financial Officer from September 2006 to
December 2013. Mr. Gray previously
worked in various financial and operational
roles at Saks Incorporated from 1997 to
2006. Mr. Gray has a B.S. degree in
Accounting from the University of Alabama
and was formerly a licensed CPA
(Alabama).
Mr. Sullivan has served as our Senior
Executive Vice President, Chief Legal &
Risk Officer, and Corporate Secretary since
September 2023, and prior to that served
as Executive Vice President, General
Counsel and Corporate Secretary since
2019. Prior to joining us, Mr. Sullivan
worked with Greylock Energy, LLC (an
ArcLight Capital Partners portfolio
company) and its predecessor, Energy
Corporation of America, from 2012 to
2017, most recently as Executive Vice
President, General Counsel and Corporate
Secretary from 2017 to 2019. Prior to that,
Mr. Sullivan served as counsel for EQT
Corporation from 2006 to 2012. He is a
member of the leadership and board of
directors of several commerce, legal and
industry groups, and has considerable
experience in corporate governance and
reporting, corporate responsibility and
sustainability matters, complex commercial
transactions, land/real estate, acquisitions
& divestitures, financing, government
investigations and corporate workouts and
restructurings. Mr. Sullivan received a B.A.
from the University of Kentucky and a J.D.
degree from the West Virginia University
College of Law. He holds licenses to
practice law in several states, including
Pennsylvania and West Virginia.
Key
Strengths
Corporate law; governance; merger and
acquisition; regulatory; risk management;
cybersecurity and information privacy
matters; corporate responsibility
and sustainability.
Corporate structure; operational processes
and management; finance; strategic
support to the CEO; mergers and
acquisitions; acquisition integration;
information technology; personnel
leadership.
Legal expert, mergers and acquisitions,
land/real estate, regulatory compliance
and governance, risk management and
strategic support to the CEO.
Current
External
Roles
Occidental Petroleum (Chief Legal Officer),
Kay Bailey Hutchinson Center for Energy,
Law and Business at the University of
Texas (Director), and Hornbeck Offshore
Services, Inc. (Director)
None
None
60
Directors’ Report
The Directors present their report on the Group, together with the audited Group Financial Statements, for the year ended December 31, 2024.
Board of Directors
The Directors of the Group who were in office during the year and up to the date of signing the financial statements were:
•David E. Johnson - Non-Executive Chair (independent upon appointment)
•Rusty Hutson, Jr. - Chief Executive Officer and Executive Director
•Martin K. Thomas - Non-Executive Vice Chair
•David J. Turner, Jr. - Independent Non-Executive Director
•Sandra M. Stash - Independent Non-Executive Director
•Sylvia Kerrigan - Senior Independent Non-Executive Director (for the entirety of 2024 through January 24, 2025)
•Kathryn Z. Klaber - Independent Non-Executive Director
Incorporation and Listing
The Company was incorporated on July 31, 2014, and completed the transfer to the Official List of the Financial Conduct Authority (“FCA”) and
admission to the Main Market of the LSE from AIM in May 2020. The Company commenced trading on the New York Stock Exchange (“NYSE”) on
December 18, 2023. Following the changes to the UK Listing Rules on 29 July 2024, the Premium Listing Segment was replaced by the Equity Shares
(Commercial Companies) category and the Company continues to remain listed on the new equity shares (commercial companies) category of the
Official List of the Financial Conduct Authority.
Review of Business, Outlook & Dividends
The Group is a natural gas, NGLs and oil producer and midstream operator and is focused on acquiring and operating mature producing wells with long
lives and low-decline profiles. The Group’s assets have historically been located within the Appalachian Region, but the Group has acquired assets
expanding its footprint into the Central Region, consisting of the states of Louisiana, Texas and Oklahoma. The Group is headquartered in Birmingham,
Alabama, U.S., and has field offices located throughout the states in which it operates.
Details of the Group’s progress during the year and its future prospects are provided in the Strategic Report within this Annual Report & Form 20-F.
Results
The Group’s reported statutory loss for 2024 was $87 million, or $1.84 per share, and when adjusted for certain non-cash items, it reported adjusted
EBITDA of $472 million. The Group’s adjusted EBITDA for 2023 was $547 million. For more information on adjusted EBITDA refer to APMs within this
Annual Report & Form 20-F.
Dividend Approach
The Board’s target has been to return free cash flow to shareholders by way of dividend, on a quarterly basis, in line with the strength and consistency
of the Group’s cash flows.
For the three months ended March 31, 2024, the Group paid a dividend of $0.290 per share on September 27, 2024. For the three months ended
June 30, 2024, the Group paid a dividend of $0.290 per share on December 27, 2024. For the three months ended September 30, 2024, the Group
expects to pay a dividend of $0.290 per share on March 31, 2025. For the three months ended December 31, 2024, the Group expects to pay a dividend
of $0.29 per share.
The Directors may further revise the Group’s approach to dividends from time to time in line with the Group’s actual results and financial position. The
Board’s approach to its dividend reflects the Group’s current and expected future cash flow generation potential.
Disclosure of Information under UKLR 6.6.1R
The information that fulfills the reporting requirements under this rule can be found in the locations identified below.
Section
Topic
Location
(1)
Interest capitalized
Not applicable
(2)
Publication of unaudited financial information
Not applicable
(4)
Details of long-term incentive schemes
(5)
Waiver of emoluments by a Director
Not applicable
(6)
Waiver of future emoluments by a Director
Not applicable
(7)
Non pre-emptive issues of equity for cash
(8)
As item (7), in relation to major subsidiary undertakings
Not applicable
(9)
Parent participation in a placing by a listed subsidiary
Not applicable
(10)
Contracts of significance
(11)
Provision of services by a controlling shareholder
Not applicable
(12)
Shareholder waivers of dividends
Not applicable
(13)
Shareholder waivers of future dividends
Not applicable
(14)
Agreements with controlling shareholders
Not applicable
61
Directors’ Interest in Shares
The Directors’ beneficial interests in the Group’s share capital, including family interests, on December 31, 2024 are shown below. These interests are
based on the issued share capital at that time. As of February 28, 2025, there have been no changes to the Directors’ interests. The Non-Executive
Directors will purchase shares after the release of this Annual Report & Form 20-F pursuant to the Non-Executive Director Share Purchase Program
implemented in 2022.
Director
Appointed
Shares of £0.20
% of Issued Share Capital
Rusty Hutson, Jr.
July 31, 2014
1,234,134
2.41%
Martin K. Thomas
January 1, 2015
113,850
0.22%
David E. Johnson
February 3, 2017
23,750
0.05%
David J. Turner, Jr.
May 27, 2019
33,087
0.06%
Sandra M. Stash
October 21, 2019
4,092
0.01%
Kathryn Klaber
January 1, 2023
2,912
0.01%
Sylvia Kerrigan
October 11, 2021
3,181
0.01%
1,415,006
2.77%
Future Developments
The Directors continue to review and evaluate strategic acquisition opportunities recommended by the Senior Leadership Team, which align with the
strategy and requirements of the Group. Additional details are disclosed in Strategy within this Annual Report & Form 20-F.
Share Capital
As of December 31, 2024, the Group’s issued share capital consisted of 51,295,942 shares with a par value of £0.20 each, with ~45% of record holders
in the U.S. and ~55% of record holders in the UK. The Group has only one class of share and each share carries the right to one vote at the Group’s
AGM. No person has any special rights of control over the Group’s share capital and all issued shares are fully paid. There are no specific restrictions on
the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Group’s Articles of Association and
prevailing legislation. The Directors are not aware of any agreements between holders of the Group’s shares that may result in restrictions on the
transfer of securities or on voting rights.
The Group was authorized by shareholders at the 2024 AGM held on May 10, 2024 to purchase in the market up to 10% of its issued shares (excluding
any treasury shares), subject to certain conditions laid out in the authorizing resolution. The standard authority is renewable annually; the Directors will
seek to renew this authority at the upcoming AGM. Details of shares issued and repurchased by the Group during the period are set out in Note 16 in
the Notes to the Group Financial Statements.
In the second half of 2024, the Company issued 4,592,095 new ordinary shares at an average $12.13 per share (£9.41) for aggregate gross proceeds of
$56 million to fund a portion of the East Texas II and Crescent Pass transactions, discussed in Note 5. The new shares issued represented 9% of the
Company’s existing share capital as of December 31, 2024.
Employee Benefit Trust
An Employee Benefit Trust (“EBT”) was established in 2022 to purchase shares already in the market and is operated through a third-party trustee. The
objective of the EBT is to benefit the Group’s employees and in particular, to provide a mechanism to satisfy rights to shares arising on the exercise or
vesting of awards under the Group’s share-based incentive plans and reduce dilution for shareholders. As of February 28, 2025, the EBT holds 646,098
shares and has distributed 561,566 shares under the Group’s share-based incentive plans.
Financial Instruments
Details of the Group’s principal risks and uncertainties relating to financial instruments are detailed below and in Note 25 in the Notes to the Group
Financial Statements.
Risk Management
Risk management is integral to all of the Group’s activities. Each member of executive management is responsible for continuously monitoring and
managing risk within the relevant business areas. Every material decision is preceded by an evaluation of applicable business risks. Reports on the
Group’s risk exposure and reviews of its risk management are regularly undertaken and presented to the Board. Additional details regarding the Group’s
risk management can be found in Principal Risks and Uncertainties in the Strategic Report within this Annual Report & Form 20-F.
Securities Dealing Code
The Group adopted a Securities Dealing Code for share dealings reasonably designed for a company listed on the equity shares (commercial companies)
category of the Official List of the FCA and admitted to the Main Market of the LSE and NYSE-listed company to promote compliance with insider trading
laws, rules, regulations and applicable listing standards. The code applies to the Directors, members of the Senior Leadership Team and other relevant
employees of the Group and is monitored by the Group’s compliance-focused employees.
Other Corporate Governance Policies
The Board reviewed, updated, and reaffirmed several key governance policies in 2024, including the following:
•Whistleblowing Policy - aims to provide guidance as to how individuals may raise their concerns and to ensure that they may do so confidently
and confidentially.
•Anti-Bribery & Corruption Policy - acknowledges the Group’s commitment to right and ethical practices and addresses bribery and corruption
risk as a part of the Group’s overall risk management strategy.
62
•Socio-Economic Policy - affirms the Group’s commitment to being recognized as a leader in the field of corporate responsibility and recognizes
the added value for our shareholders.
•Modern Slavery Policy - recognizes that modern slavery is a significant global human rights issue and has many forms including human
trafficking, forced labor, child labor, domestic servitude, people trafficking and workplace abuse. The Group is committed to respecting
internationally recognized human rights, including ensuring that we are in no way involved or associated with the issue of forced or involuntary
labor and that modern slavery and human trafficking are not taking place in any part of our business.
•EHS Policy - guides activities to protect employees, contractors, the public and the environment.
•Climate Policy - recognizes that climate change is a complex global issue that may have an impact of the Group’s operations, processes,
equipment and capabilities.
•Employee Relations Policy - acknowledges the value of the Group’s employees and highlights the Group’s commitments to promote employee
safety, health and well-being.
•Human Rights Policy - recognizes the Group’s commitment and responsibility to ensure that human rights are upheld in every of its business
operations and to promote human rights where it can make a positive contribution.
•Business Partners Policy - provides the standards the Group expects from its consultants, outsourced providers, subcontractors, vendors and
suppliers to adhere to in their business activities with the Group.
•Biodiversity Policy - outlines the Group’s commitment to promote a net positive impact on the environment and its natural biodiversity.
•Code of Business Conduct & Ethics - provides the standards the Group expects from its Directors, officers and employees, including honest and
ethical conduct, compliance with applicable laws and prompt internal reporting and accountability for adherence to the code.
•Tax Policy - outlines the Group’s tax objections and the foundation of the Group’s tax approach.
These corporate governance policies can be viewed on the Group’s website at www.div.energy/about-us/corporate-governance.
Subsequent Events
Refer to Note 28 in the Notes to the Group Financial Statements.
Director Attendance at Board and Committee Meetings
Directors are expected to attend and participate in all Board meetings and meetings of committees on which they serve and are expected to be available
for consultation with management as requested from time to time. Regular Board and committee meetings are held at such times as the Board and
committees, respectively, may determine. Special meetings may be called upon appropriate notice at any time.
The following table shows the number of Board and committee meetings required to be held and actually held in 2024:
Type of Meeting
Number of Meetings
Required to be Held
Number of
Meetings Held
Board of Directors
—
10
Audit & Risk Committee
3
5
Nomination & Governance Committee
2
3
Remuneration Committee
2
3
Sustainability & Safety Committee
2
6
Members of the Board attended Board and committee meetings (to the extent they were members of such committee in 2024) as summarized in the
following table.
Director
Committee Seats
(during 2024)
Board
Audit & Risk
Committee
Nomination &
Governance
Committee
Sustainability &
Safety
Committee
Remuneration
Committee
Rusty Hutson, Jr.
None
10
—
—
—
—
David E. Johnson
R,S
10
—
—
6
3
Martin K. Thomas
N
10
—
3
—
—
Kathryn Z. Klaber
N,A,S
10
5
3
6
—
Sandra M. Stash
S,A,R
10
5
—
6
3
David J. Turner, Jr.
A,R
10
5
—
—
3
Sylvia Kerrigan
R,N
10
—
3
—
3
Directors’ Indemnities
As permitted by the Group’s Articles of Association, the Directors have the benefit of an indemnity, which is a qualifying third-party indemnity provision
as defined by Section 234 of the Companies Act 2006. The indemnity was in force during the financial year and remains in force at the date of this
report. The Group also purchased and maintained throughout the financial period Directors’ and officers’ liability insurance in respect of itself and its
Directors. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
63
Conflict of Interest
There are no potential conflicts of interest between any duties owed by the Directors or members of the Senior Leadership Team to the Group and their
private interests and/or other duties. In addition, there are no arrangements or understandings with any of the shareholders of the Group, customers,
suppliers or others pursuant to which any Director or member of the Senior Leadership Team was selected to be a Director or Senior Manager. The
Group tests regularly to ensure awareness of any future potential conflicts of interest and related party transactions. Directors are required to declare
any additional or changed interests at the beginning of each Board meeting. In the event a conflict should arise, the pertinent Director would not take
part in decision making related to the conflict. Additionally, there are no family relationships among any of our Directors or Senior Managers
Substantial Shareholders
As of February 26, 2025, the following shareholders hold greater than 3% of the Group’s issued shares with voting rights:
Shareholders(a)
Number of Shares
% of Issued Share
Capital
BlackRock
4,909,399
8.21%
Columbia Management Investment Advisers
3,251,605
5.44%
Jupiter Asset Management
2,792,978
4.67%
Maverick Natural Resources
2,342,445
3.92%
Hargreaves Landsdown
2,108,083
3.53%
Interactive Investor
2,052,048
3.43%
(a)The Group derives the information from TR1 notifications, its third-party performed annual shareholder analysis to support its Foreign Private Issuer status as a U.S.
Corporation listed on the LSE, and from periodic third-party share register reports it receives.
Independent Auditors
The independent auditors, PricewaterhouseCoopers LLP (“PwC”), have expressed their willingness to continue in office as auditors and a resolution to
reappoint PricewaterhouseCoopers LLP will be proposed at the forthcoming AGM.
Corporate Governance Statement
The Directors recognize the importance of sound corporate governance and their associated report is set out in the Chairman’s Governance Statement
within this Annual Report & Form 20-F. The Group reports against the UK Corporate Governance Code.
As further described in the UK Corporate Governance Code Compliance Statement provided within this Annual Report & Form 20-F, the Group is
currently in compliance with the Corporate Governance Code other than as set out therein.
Engagement with Employees’ Statement
The Group is exempted from some reporting requirements, as it did not employ more than 250 employees in the UK during the year under review. As of
December 31, 2024, the Group had 1,589 full-time employees, with 1,187 production employees and 402 production support employees across our ten-
state operating footprint in the U.S.
In line with industry standards in the country of employment, our employees maintain a range of relationships with union groups. The Group has not
previously experienced labor-related work stoppages or strikes and believe that our relations with union groups and our employees are satisfactory.
As per Section 54(1) of the Modern Slavery Act 2015, our Modern Slavery Policy is reviewed and approved by the Board annually and published on our
website. The statement covers the activities of the Group and details policies, processes and actions we have taken to ensure that slavery and human
trafficking are not taking place in our supply chains or any part of our business. More information on our Modern Slavery Policy can be found on our
website.
Pursuant to the Group’s Employee Handbook, the Group will endeavor to make reasonable accommodation to the known physical or mental limitations
of qualified employees with disabilities.
Engagement with Stakeholders’ Statement
The Group adheres to best-in-class operating standards, with a strong focus on EHS to ensure the safety of its employees, local communities and the
environment in which the Group operates. This element of reporting is discussed in the Section 172 Statement and Sustainability & Safety Committee’s
Report within this Annual Report & Form 20-F. Furthermore, the Director designated to engage with the workforce as required under the Corporate
Governance Code is currently Sandra M. Stash.
Relations with Shareholders
The Group aims to maintain its committed approach to long-term sustainability, which, alongside its strict fiscal discipline and stewardship, maximizes
returns to its shareholders. The Directors attach great importance to maintaining good relationships with shareholders. Extensive information about the
Group’s activities is included in its annual and interim reports and accounts and related presentations. The Group also issues regular updates
to shareholders.
Persons possessing market sensitive information are notified in accordance with the Market Abuse Regulation. The Group is active in communicating
with both its institutional and private shareholders. The AGM provides an opportunity for all shareholders to communicate with and to question the
Board on any aspect of the Group’s activities. The Group maintains a corporate website at www.div.energy where information on the Group is regularly
updated, including Annual and Interim Reports and all announcements.
The Directors are available for communication with shareholders and all shareholders have the opportunity, and are encouraged, to attend and vote at
the AGM of the Group during which the Board will be available to discuss issues affecting the Group. The Board stays informed of shareholders’ views
via regular meetings and other communications they may have with shareholders.
64
At the 2024 AGM, while shareholders approved most of the resolutions with majorities in excess of 99%, Resolution 19 (Amendment to 2017 Equity
Incentive Plan to increase the number of shares available under the Plan), while receiving 74% of the vote "FOR", did not meet the 75% threshold to
pass. Following the AGM, the Group consulted and engaged with a number of shareholders who voted against the resolutions to better understand their
concerns. The Directors are thankful to the shareholders for sharing their views. They understand that the negative vote was principally related to the
disconnect between traditional equity compensation plans in the United States, the Group’s primary operating market, in relation to traditional
compensation practices in the United Kingdom and the mechanics of recalibrating the Equity Incentive Plan after approximately seven years of
existence. The dialogue with the shareholders has highlighted that there remains strong support for the Group’s equity incentive arrangements.
The Board has discussed the feedback received in detail and continues to actively dialogue with shareholders on the equity incentive and compensation
arrangements.
Environmental Information
The Group adheres to best-in-class operating standards, with a strong focus on EHS to ensure the safety of its employees. There is extensive coverage
of these issues within the Group’s 2024 Sustainability Report which will be available on its website at www.div.energy and in the Sustainability & Safety
Committee’s Report within this Annual Report & Form 20-F.
Workforce Composition
We believe that a workforce with a broad range of skills, experiences, and perspectives contributes to a successful and sustainable business. We value
the unique talents, expertise, and creativity that individuals bring to the Group.
The Group is committed to fostering a work environment where employees are evaluated based on their contributions and abilities. Decisions related to
recruitment, selection, development, and promotion are based on merit and qualifications, ensuring that individuals are considered fairly. The Group
does not discriminate on the basis of race, color, religion, national origin, ancestry, citizenship, age, disability, sex, marital status, pregnancy, veteran
status, sexual orientation, gender identity, genetic information, or any other characteristic protected by applicable law. All applicants receive full and fair
consideration for employment opportunities, and career development, compensation, and advancement are based on objective criteria. Additionally,
employees who experience changes in their abilities while working within the Group are supported through retraining and other resources to facilitate
their continued success.
Charitable & Political Donations
The Group did not make any political donations or incur any political expenditures to candidates or political campaigns or candidates during the period.
During the year, the Group contributed nearly $2.1 million to numerous community organizations.
Going Concern
The Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements. The
validity of the going concern concept is dependent on funding being available for the working capital requirements of the Group in order to finance the
continuing development of its existing projects for at least the next 12 months. Sufficient funds are available in the short-term to fund the working
capital requirements of the Group. The Directors believe that this will enable the Group to continue in operational existence for the foreseeable future
and to continue to meet obligations as they fall due. Refer to Viability and Going Concern within this Annual Report & Form 20-F for a summary of the
Directors’ assessment.
Annual General Meeting
The AGM of the Group will be held in London on April 9, 2025. Full details of these proposals will be set out in a separate Notice of AGM sent to
all shareholders.
Shareholders are invited to complete the proxy form/form of instruction received either by post or vote electronically in CREST in accordance with the
Notes contained in the Notice of the AGM. The Notice of the AGM and Proxy Form/form of instruction are available on the Group’s website at
www.div.energy.
Additional Disclosures
Supporting information that is relevant to the Directors’ report, which is incorporated by reference into this report, can be found throughout this Annual
Report & Form 20-F.
For considerations of post balance sheet events refer to Note 28 in the Notes to the Group Financial Statements within this Annual Report & Form 20-F. 
Statement of Directors’ Responsibilities in Respect of the Financial Statements
The Directors are responsible for preparing the Annual Report & Form 20-F and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group
Financial Statements in accordance with UK-adopted international accounting standards and the Company Financial Statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland”, and applicable law). In preparing the group financial statements, the directors have also elected to comply
with International Financial Reporting Standards issued by the International Accounting Standards Board (IFRSs as issued by IASB).
Under company law, Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing the financial statements, the Directors are required
to:
•Select suitable accounting policies and then apply them consistently;
•State whether applicable UK-adopted international accounting standards and IFRSs issued by IASB have been followed for the Group Financial
Statements and United Kingdom Accounting Standards, comprising FRS 102 have been followed for the Company Financial Statements, subject to
any material departures disclosed and explained in the financial statements;
•Make judgments and accounting estimates that are reasonable and prudent; and
65
•Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in
business.
The Directors are responsible for safeguarding the assets of the Group and Company and, hence, for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ Confirmations
The Directors consider that the Annual Report & Form 20-F and accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s and Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in Directors' Report confirm that, to the best of their knowledge:
•The Group Financial Statements, which have been prepared in accordance with UK-adopted international accounting standards and IFRSs issued by
IASB, give a true and fair view of the assets, liabilities, financial position and loss of the Group;
•The Company Financial Statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102,
give a true and fair view of the assets, liabilities, and financial position of the Company; and
•The Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the Company,
together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’ Report is approved:
•So far as that Director is aware, there is no relevant audit information of which the Group’s and the Company’s auditors are unaware; and
•They have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and
to establish that the Group’s and Company’s auditors are aware of that information.
This Annual Report & Form 20-F was approved by the Board of Directors and authorized to be issued on March 17, 2025.
On behalf of the Board:
/s/ David E. Johnson
David E. Johnson
Chairman of the Board
March 17, 2025
The Nomination & Governance Committee’s Report
Committee Composition
•Kathryn Z. Klaber, Chair
•Martin K. Thomas
•Sylvia Kerrigan (for the entirety of 2024 through January 24, 2025)
•David J. Turner, Jr. (joined as of January 24, 2025)
Key Objective
The Nomination & Governance Committee assists the Board in (i) discharging its responsibilities related to reviewing its structure, size and composition,
(ii) recommending to the Board any changes required for succession planning and monitoring governance trends and best practices, and (iii) identifying
and nominating for approval Board candidates to fill vacancies as and when they arise. The Nomination & Governance Committee is responsible for
leading the process for appointments, ensuring plans are in place for orderly succession for both the Board and senior management positions, and
overseeing the development of a diverse pipeline for succession.
The Nomination & Governance Committee is responsible for reviewing the results of the Board’s Performance Review process and for making
recommendations to the Board concerning suitable candidates for the role of Senior Independent Director, the membership of the Board’s committees
and the election or re-election of Directors at each AGM.
The Nomination & Governance Committee also oversees the Group’s governance structure and monitors trends and compliance with governance
best practices.
Key Matters Discussed by the Committee
During the past year the Nomination & Governance Committee:
•Led the annual Board Performance Review process over the course of the year, which included (i) an evaluation of the structure, agendas and
outcomes of Board and Board committee meetings and (ii) a comprehensive report and roundtable exercise with the entire Board;
•Took steps with senior management to develop a training regime for the entire Board for the 2024 year and beyond, with training from internal
personnel and external resources on topical subjects such as governance, oversight and Director responsibilities;
•Assessed the member composition of each Board committee to ensure alignment with best practices for Board and committee independence.
•Conducted (together with senior management) a committee-by-committee assessment process to evaluate and provide feedback to each committee
chair;
66
•Worked with the Senior Independent Director and senior management to facilitate the Senior Independent Director’s review of the Chairman;
•Worked with the Chairman and senior management to facilitate the review of the CEO;
•Worked with the Chief Human Resources Officer and Chief Legal & Risk Officer to formulate succession planning procedures and plans around key-
roles in management;
•Worked with the Chief Legal & Risk Officer on an evaluation of trends in hiring and onboarding practices and legal risk mitigation related to the
same;
•Reviewed management’s stakeholder engagement efforts and advised on strategy and best practices;
•Reviewed and updated the Nomination & Governance Committee’s Terms of Reference to reflect best practices;
•Continued to work with external advisors and senior management to analyze, assess and implement an enhanced governance framework related to
the Group’s NYSE and LSE listings, including, among other things, a review and update of the Group’s committee charters and governance policies;
and
•Encouraged and maintained oversight of employee outreach and training regarding the Group’s Whistleblowing Policy and was satisfied by measures
taken, including the placement of awareness posters with hotline details in all major offices.
Committee Effectiveness
The Nomination & Governance Committee performed a critical analysis internal review and evaluation on itself, as part of its annual self-review process.
No significant areas of concern were raised.
Membership
For 2024, the Nomination & Governance Committee comprised of three Non-Executive Directors, two of whom were considered independent: Ms. Klaber
(independent), the Nomination & Governance Committee Chair, Mr. Thomas, and Ms. Kerrigan (independent). Ms. Kerrigan served on the Nomination &
Governance Committee for the entirety of 2024 and resigned from the Board of Directors on January 24, 2025. Mr. Turner has been appointed to the
Nomination & Governance Committee with effect from January 25, 2025. Benjamin Sullivan, Senior Executive Vice President, Chief Legal & Risk Officer
and Corporate Secretary acts as Secretary to the Nomination & Governance Committee.
Meetings and Attendance
The Nomination & Governance Committee met three times in 2024 and has met once thus far in 2025. At the end of each Nomination & Governance
Committee meeting, the committee typically meets in private executive session without management present to ensure that points of common concern
are identified and that priorities for future attention by the committee are agreed upon. The Chair of the Nomination & Governance Committee keeps in
close contact with the Chief Executive Officer and Chief Legal & Risk Officer between committee meetings. For Nomination & Governance Committee
meeting attendance for each Director see the Directors’ Report within this Annual Report & Form 20-F.
Responsibilities and Terms of Reference
The Nomination & Governance Committee’s main duties are:
•Reviewing the structure, size and composition of the Board (including the skills, knowledge and experience of its members) and making
recommendations to the Board with regard to any changes required;
•Identifying and nominating, for Board approval, candidates to fill Board vacancies as and when they arise;
•Succession planning for Directors and other senior managers;
•Reviewing annually the time commitment required of Non-Executive Directors; and
•Overseeing the Group’s governance structure as well as trends and compliance in governance best practices.
The Nomination & Governance Committee has formal terms of reference which can be viewed on the Group’s website.
Due to other commitments, Ms. Kerrigan resigned from the Group’s Board of Directors effective as of January 24, 2025. Ms. Kerrigan provided
invaluable leadership, experience, insight, and steadfast support throughout her tenure on the Board, including on legal and industry related matters. As
succession planning is one of the Nomination & Governance Committee’s main duties, it will be reviewing whether Ms. Kerrigan’s resignation would lend
itself to a determination that the Group should identify and nominate of a new board member who embodies similar leadership and skills in 2025. It is
noted that the Board already has experts with both legal and industry backgrounds.
Corporate Responsibility in Hiring
The Nomination & Governance Committee and Board are proud of the progress made to date on diversity within the Group, including achieving the UK
Listing Rules’ targets for 2024 of (i) more than 40% female representation on the Board through the entirety of 2024, with 43% female Board members,
and (ii) a female holding a senior Board position, with Ms. Kerrigan serving as the Senior Independent Director during 2024 and through her resignation
on January 24, 2025, and Ms. Stash now serving as the Senior Independent Director.
The Group continued its efforts in gender balance in 2024. Evidencing this improvement, the FTSE Women Leaders Review 2024 indicated Diversified
ranks in 57th place among the FTSE 250. It also recognized 43% female representation at Board level and 39% in the executive committee and direct
reports category (which is comprised of 36 females and 56 males). Within the energy sector, the Group is in 3rd place. The FTSE Women Leaders
Review is an independent framework supported by the Government that builds on the excellent work of both the Hampton-Alexander and Davies
Reviews which ensures that talented women at the top of business are recognized, promoted and rewarded.
The Nomination & Governance Committee also acknowledges the UK Listing Rule ethnic diversity targets, which the Group intends to continue to closely
examine and evaluate in 2025 in terms of Board membership, additions, recruitment and retention.
The Group believes that a diverse and engaged workforce and Board is an important goal. In particular, the Group continues to focus on support for and
communication with all groups in the communities in which it operates. It is the Nomination & Governance Committee’s hope that these efforts will
increase interest in our industry and assist in the continued development of qualified candidates.
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Board Performance Review
The Nomination & Governance Committee assisted the Chair with the Board Performance Review. The Board Performance Review focused on the
following topics, among other things:
•Strategy development and implementation;
•Risk awareness, monitoring and reporting;
•Cooperation with and evaluation process of the CEO and Senior Leadership Team;
•Board composition and dynamics;
•Onboarding and induction program;
•Meeting structure and operation;
•Meeting effectiveness;
•Shareholder and stakeholder relations;
•Committee, Senior Independent Director and Vice Chairman value contribution; and
•Individual evaluation of the Chairman and all Board members.
The Board Performance Review utilized an online questionnaire and thorough analysis of questionnaire results. The evaluation, analysis and reporting
took place from September to November 2024 and confirmed that the Board and its Directors effectively perform their respective roles. The review
highlighted certain areas for improvement such as restructuring meeting agendas to enhancing strategic discussions.
/s/ Kathryn Z. Klaber
Kathryn Z. Klaber
Chair of the Nomination & Governance Committee
March 17, 2025
The Audit & Risk Committee’s Report
Committee Composition
•David J. Turner, Jr., Chair
•Sandra M. Stash
•Kathryn Z. Klaber
This report covers the activities of the Audit & Risk Committee in 2024 and in the period up to the approval of the Annual Report & Form 20-F for the
year ended December 31, 2024.
Key Objective
The Audit & Risk Committee acts on behalf of the Board and the shareholders to ensure the integrity of the Group’s financial reporting. The Audit & Risk
Committee’s main functions include, among other things, reviewing and monitoring internal financial control systems and risk management systems on
which the Group is reliant, reviewing annual and interim accounts and auditors’ reports; making recommendations to the Board in relation to the
appointment and remuneration of the Group’s external auditors; and monitoring and reviewing annually the external auditors’ independence, objectivity,
effectiveness and qualifications.
Key Matters Discussed by the Committee
During the past year the Audit & Risk Committee:
•Reviewed and challenged interim and annual financial reporting;
•Reviewed and approved the Group’s Hedging Policy;
•Reviewed the Group’s system of internal controls and assessed its effectiveness;
•Continued to engage with management on the post-U.S. listing integration of the applicable NYSE Rules and SEC Rules into the Group’s framework;
•Reviewed and assessed the Group’s approach to its asset retirement obligations and overall liquidity;
•Reviewed and updated the Audit & Risk Committee’s Terms of Reference to reflect best practices;
•Reviewed the Enterprise Risk Management control strategy and function;
•Reviewed the Group’s procedures for detecting fraud, prevention of bribery, and anti-money laundering systems and controls;
•Reviewed the adequacy and security of processes for employees and contractors to raise concerns confidentially about possible wrongdoing in
financial reporting or other matters;
•Engaged with management regarding internal investigations and compliance reviews;
•Continued to engage with Joyce Collins, Vice President of Internal Audit, to further enhance the Group’s internal audit function and consult with Ms.
Collins during private executive sessions;
•Approved the external audit plan presented by PwC, reviewed the effectiveness of the external audit and held independent discussions with the
lead audit partner as well as private confirmatory meetings with members of the PwC audit team;
•Implemented a formal written policy for non-audit services to preserve independence and objectivity of the external auditor in performing statutory
audits;
•Reviewed correspondence with the Financial Reporting Council (the “FRC”) related to financial reporting; and
•Enhanced our internal control procedures and financial reporting mechanisms to assist the Group’s ability to achieve compliance with Sarbanes-
Oxley Act.
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Independence
The Audit & Risk Committee regards independence of the external auditor as crucial in safeguarding the integrity of the audit process and takes
responsibility for ensuring an effective three-way relationship between the committee, the external auditor and management. The Audit & Risk
Committee confirmed that the external auditors, PwC, remain independent and that non-audit fees remain appropriate and reasonable.
Committee Effectiveness
The Audit & Risk Committee completed a critical review of its operations and effectiveness during 2024 as part of its annual self-review process. No
significant areas of concern were raised.
Areas of Focus in 2025
•Review the Group’s procedures in relation to maintaining high standards across all ethics and compliance matters; and
•Ensure that all risks are appropriately identified, prioritized, addressed, and are managed by the respective risk owner.
Membership
In line with the recommendations set by the UK Corporate Governance Code, the Audit & Risk Committee is comprised of three Independent Non-
Executive Directors members: David J. Turner, Jr., the Audit & Risk Committee Chair and Financial Expert, Sandra M. Stash and Kathryn Z. Klaber.
Benjamin Sullivan, Senior Executive Vice President, Chief Legal & Risk Officer and Corporate Secretary acts as Secretary to the Audit & Risk Committee.
The Audit & Risk Committee has recent and relevant financial experience through the leadership of Mr. Turner, who is presently the Chief Financial
Officer at Regions Financial Corporation, a publicly traded U.S. bank that is a member of the S&P 500 Index. Each Audit & Risk Committee member has
been selected to provide a wide range of financial and commercial expertise necessary to fulfil the committee’s responsibilities.
No members of the Audit & Risk Committee have outside connections with the Group’s external auditors.
Meetings and Attendance
The Audit & Risk Committee met five times in 2024 and has met twice thus far in 2025. Before each meeting, the Audit & Risk Committee Chair met
with the members of the finance team to ensure there was a shared understanding of the key issues to be discussed. Audit & Risk Committee meetings
are held in advance of Board meetings to facilitate an effective and timely reporting process. The Audit & Risk Committee Chair provided a report to the
Board following each meeting. For Audit & Risk Committee meeting attendance for each Director see the Directors’ Report within this Annual Report &
Form 20-F.
The Audit & Risk Committee regularly meets in private executive sessions without management present, one with the Vice President of Internal Audit
and one with committee members only, to ensure that points of common concern are identified and that priorities for future attention by the committee
are agreed upon. It also conducts private discussions with PwC as appropriate to ensure that the Audit & Risk Committee has a clear and unobstructed
line of communication with its external auditors. The Chair of the Audit & Risk Committee keeps in close contact with the Chief Legal & Risk Officer, the
Vice President of Internal Audit, the President and Chief Financial Officer, Corporate Controller, the finance team and the external auditors between
committee meetings.
The list below details the members of the Senior Leadership Team who were invited to attend meetings as appropriate during the calendar year. In
addition, PwC attended certain of the meetings by invitation as auditors to the Group.
•Rusty Hutson, Jr. (Chief Executive Officer)
•Bradley G. Gray (President and Chief Financial Officer)
•Benjamin Sullivan (Senior Executive Vice President, Chief Legal & Risk Officer, and Corporate Secretary)
•Michael Garrett (Senior Vice President of Accounting and Corporate Controller)
•Joyce Collins (Vice President of Internal Audit)
•Representatives from PwC UK and PwC U.S.
Responsibilities and Terms of Reference
The main responsibilities of the Audit & Risk Committee are:
•Reviewing accounting policies and the integrity and content of the financial statements, including focusing on significant judgments and estimates
used in the accounts;
•Monitoring disclosure controls and procedures and the adequacy and effectiveness of the Group’s internal financial controls and risk management
systems;
•Oversee and advise the Board on various risk strategies, including cybersecurity, operational, and reputational risks;
•Monitoring the integrity of the financial statements of the Group to assist the Board in ensuring that the Annual Report & Form 20-F, when taken as
a whole, are fair, balanced and understandable;
•Considering the adequacy and scope of external audits and overseeing the relationship with the external auditors, including appraising the
effectiveness of their work prior to considering their reappointment and considering whether to put the external audit contract out to tender;
•Reviewing and approving the statements to be included in annual reports on internal control and risk management; and
•Reviewing and reporting on the significant issues considered in relation to the financial statements and how they are addressed.
In 2024, the Board undertook a formal assessment of the Group’s primary financial service vendors, including its external auditors’, PwC, independence
and will continue to do so as part of the annual audit process and prior to making a recommendation to the Board for the auditors’ re-appointment. This
assessment in 2024 included:
•Reviewing PwC’s non-audit services provided to the Group, including Audit Related Assurance Services provided and the related fees;
•Reviewing PwC’s procedures for ensuring the independence of the audit firm, and parties and staff involved in the audit; and
•Obtaining confirmation from the auditors that, in their professional judgment, they are independent.
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The Audit & Risk Committee has formal terms of reference which can be viewed on the Group’s website.
Actions Undertaken During the Year
The key activities for the Audit & Risk Committee for the period under review are set out below.
Review of the Financial Statements
The Audit & Risk Committee monitored the integrity of the annual financial statements and reviewed the significant financial reporting matters and
accounting policies and disclosures in the financial reports. The external auditors attended an Audit & Risk Committee meeting as part of the full-year
accounts approval process. The process included the consideration of reports from the external auditors in respect of the audit approach, and their
findings in respect of the audit of the 2024 financial statements.
Financial Statements & Presentation of Results
The Audit & Risk Committee reviewed the presentation of the Group’s audited results for the year ended December 31, 2024 and the unaudited results
for the six months ended June 30, 2024 to ensure they were fair, balanced and understandable, when taken as a whole. The results were assessed to
ensure they provide sufficient information for shareholders and other users of the accounts to assess the Group’s position and performance, business
model and strategy. In conducting this review, particular focus was given to the disclosures included in the basis of preparation in Note 2 in the Notes to
the Group Financial Statements in relation to the Group’s funding position and the suitability of the going concern assumption.
The Audit & Risk Committee reviewed the significant judgments associated with the 2024 financial statements, including “key audit matters”, and also
reviewed the supporting evidence for the Group’s going concern assessment.
The Board is required to provide its opinion on whether it considers that the Group’s 2024 Annual Report & Form 20-F, taken as a whole, is fair,
balanced and understandable, and provide the information necessary for shareholders to assess the Group’s position and performance, business model
and strategy. The Audit & Risk Committee discussed the preparation of the Group’s 2024 Annual Report & Form 20-F with the Board. To support the
Board in providing its opinion, the Audit & Risk Committee considered the content and overall cohesion and clarity of the Annual Report & Form 20-F
and assessed the quality of reporting through discussion with management and the external auditors. This included ensuring that feedback from
stakeholders and other individuals had been addressed and that examples of best practice had carefully been considered in the context of the Group.
The process included considering each of the elements (fair, balanced and understandable) on an individual basis to ensure the Group’s reporting was
comprehensive in a clear and consistent way, and in compliance with accounting standards and regulatory and legal requirements and guidelines. The
reviews carried out by internal functions within the Group and independent reviewers were undertaken with a view to ensuring that all material matters
have been correctly reflected in the Group’s 2024 Annual Report & Form 20-F. In summary, the Audit & Risk Committee is comfortable that the overall
disclosures in the 2024 Annual Report & Form 20-F are fair, balanced and understandable, when taken as a whole.
Attention continues to be paid to the presentation of the results and financial position in the Annual Report & Form 20-F as well as APMs as indicators of
performance. The Board considers current treatment, which retains reference to “adjusted EBITDA” and “EBITDA” to remain appropriate. The Board
regards these measures as an appropriate way to present the underlying performance and development of the business since it reflects the continuing
investment being made by the Group, particularly in relation to recent and future acquisition activity. Additionally, this is how the Board monitors the
progress of the existing Group businesses. Accordingly, the Audit & Risk Committee believes that adjusted EBITDA provides useful information to
investors and the market generally in understanding and evaluating the Group’s performance.
Valuation of Natural Gas & Oil Properties & Related Assets
The Audit & Risk Committee considered the carrying value of the Group’s assets and any potential impairment triggers. It reviewed management’s
recommendations, which were also reviewed by the external auditors, including an evaluation of the appropriateness of the identification of cash-
generating units. The Audit & Risk Committee was satisfied with the assumptions and judgments applied by management as well as the triggering event
assessment, which concluded that no impairment triggers were present. Accordingly, there were no impairment charges recorded for the year ended
December 31, 2024. Refer to Note 10 in the Notes to the Group Financial Statements.
The Audit & Risk Committee also considered management’s determination of the fair values of the acquisitions made during 2024 and challenged
management on such determination. It reviewed management’s assumptions and judgements, which were also reviewed by the external auditors. The
Audit & Risk Committee was satisfied with the fair values calculated.
Viability & Going Concern
Management presented to the Audit & Risk Committee an assessment of the Group’s future cash flow forecasts and profit projections, available facilities,
facility headroom, banking covenants and the results of its sensitivity analysis. Detailed discussions were held with management concerning the matters
outlined in the Viability and Going Concern section and Note 2 in the Notes to the Group Financial Statements within this Annual Report & Form 20-F.
The Audit & Risk Committee discussed the assessment with management and was satisfied that the going concern basis of preparation, including the
change in the viability period, continues to be appropriate for the Group and advised the Board accordingly. In addition, the Audit & Risk Committee
reviewed the going concern assumptions with PwC, including PwC’s review of management’s assessment of the Group’s ability to continue as a
going concern. The financial statements of Diversified Energy Company PLC have been prepared on a going concern basis.
The Audit & Risk Committee reviewed and challenged management’s process and assessment of viability by considering various scenarios on forecasted
cash flows, including a base case and downside scenario analysis which reflects the more severe impact of the principal risks and includes future climate
change impacts. In reaching its view, the Audit & Risk Committee also considered: (i) financial forecasts and the appropriate period for the viability
outlook; (ii) the Group’s financing facilities including covenant tests and future funding plans, and (iii) the external auditors’ findings and conclusions on
this matter. The Audit & Risk Committee also considered the adequacy and accuracy of the disclosures in the 2024 Annual Report & Form 20-F in
respect of the Group’s future viability. Following this thorough assessment, the Audit & Risk Committee considered the extent of the assessment made
by management to be appropriate and recommended the viability statement, including the change to the viability period, and related disclosures (for
inclusion in the 2024 Annual Report & Form 20-F) for approval by the Board.
Risk Management
Effective risk management and controls are key to executing the Group’s business strategy and objectives. Risk management and control processes are
designed to identify, assess, mitigate and monitor significant risks, and can only provide reasonable and not absolute assurance that the Group will be
successful in delivering its objectives. The Board is responsible for the oversight of how the Group’s strategic, operational, cyber, financial, human and
personnel, legal and regulatory risks are managed and for assessing the effectiveness of the risk management and internal control framework.
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Embedding the enterprise risk management framework and assessing management’s response to the Group’s material risks continues to be an area of
focus with the Audit & Risk Committee providing challenge and direction as appropriate. During 2024, the Audit & Risk Committee continued to consider
the process for identifying and managing risk within the business and assisted the Board in relation to compliance with the UK Corporate Governance
Code and FRC guidance. Recognizing the evolving nature of the risk landscape, due to the increasing pace of change in the industry, the continued
impact of the macroeconomic environment and global instability, more than ever, the Group needs to manage risks smartly to achieve its vision, deliver
strategy and create sustainable shareholder value.
The Group maintains a risk management program to identify principal risks and risk mitigation activities that includes reviewing the impact, likelihood,
velocity, mitigation measures and residual risk. A description of the Group’s risk management program, principal risks, and risk mitigation activities is
provided in Principal Risks and Uncertainties within this Annual Report & Form 20-F.
In addition to the risks that management identifies through the ongoing processes of reporting and performance analysis, the Audit & Risk Committee
has additional risk identification processes, which include:
•A risk and control process for identifying, evaluating and managing major business risks;
•External experts, who comment on controls to manage identified risks; and
•A confidential and externally managed whistleblowing hotline and a compliance reporting website for employees to contact the Chair of the Audit &
Risk Committee, Chief Legal & Risk Officer and Head of Human Resources in confidence.
Internal Audit
The work performed by the Internal Audit team in 2024 and the results of testing the risk framework continue to support a favorable outcome on the
adequacy and effectiveness of the Group’s internal controls. The Internal Audit team leveraged both audit work previously completed and knowledge of
the Group to arrive at that conclusion. Internal testing was performed (and continues to take place) on the key controls identified throughout the
business processes that impact the financial statements. There was additional focus around the completeness and accuracy element of support,
updating process documentation, and completing walkthroughs of the processes with the Group’s external auditors.
At each Audit & Risk Committee meeting, an update on Internal Audit is provided covering an overview of the work undertaken in the period, actions
arising from audits conducted, the tracking of remedial actions, and progress against the internal audit plan. The team continues to be led by the Vice
President of Internal Audit who has significant prior experience in leading natural gas and oil industry internal audits and has a straight line of
communication available with the Audit & Risk Committee. The team also consists of a highly experienced audit manager as well as three additional staff
auditors, all of whom have years of industry experience. Collectively, this team works under the oversight of the Corporate Controller and reports to the
Chief Financial Officer who is responsible for the Group’s ERM and internal controls framework.
The Group’s internal controls over financial reporting and the preparation of consolidated financial information include policies and procedures that
provide reasonable assurance that transactions have been recorded and presented accurately. Management regularly conducts reviews of the internal
controls in place in order to provide a sufficient level of assurance over the reliability of the financial statements.
Internal Control Systems
The Audit & Risk Committee is responsible for overseeing management’s establishment and maintenance of the Group’s system of internal control and
reviewing its effectiveness. Internal control systems are designed to meet the particular needs of the Group and the particular risks to which it is
exposed. The Board has reviewed the Group’s risk management and control systems noting they were in place for the year under review and up to the
date of approval of the 2024 Annual Report & Form 20-F and believes that the controls are satisfactory, given the nature and size of the Group.
The internal controls, which provide assurance to the Audit & Risk Committee of effective and efficient operations, internal financial controls and
compliance with laws and regulations include:
•A formal authorization process for investments;
•An organizational structure where authorities and responsibilities for financial management and the maintenance of financial controls are clearly
defined;
•Anti-bribery and corruption policies and procedures and a dedicated telephone number and website designed to address the specific areas of
corruption risk faced by the Group; and
•A comprehensive financial review cycle where annual budgets are formally approved by the Board and monthly variances are reviewed against
detailed financial and operating plans.
The Audit & Risk Committee considered the inherent risk of management override of internal controls as defined by Auditing Standards and performed
the following actions during 2024:
•Reviewed management’s report on the Group’s fraud prevention framework and the key controls in place in its operations designed to prevent and
detect fraud, as well as future plans for enhancement of the relevant controls;
•Identified the Group’s population of application fraud controls within the financial processes and conducted testing around those specific items to
assure the Group’s risk control framework is whole and controls are working as anticipated to provide further confidence in the strength of fraud
prevention;
•Reviewed and assessed cybersecurity risk trends and other related matters with the Group’s Chief Information Technology Officer;
•Discussed the steps management had taken, including designing a fraud detection process for the specific fraud risks identified;
•Financial processes identified with critical fraud risk potential were reviewed at an elevated level and controls adjusted accordingly per discussion
with management;
•Assessed the measures in place, including segregation of duties ensuring independent review, to mitigate against the risk of management override
of controls;
•Discussed PwC’s audit procedures, including the results of their conclusions relating to the fraud risk in revenue recognition with a particular focus
on ensuring the existence of revenue transactions;
•Challenged management on the robustness of the controls; and
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•Reviewed the overall robustness of the control environment, including consideration of the Group’s whistleblowing and compliance arrangements
(including with respect to compliance with the Sarbanes-Oxley Act).
The Audit & Risk Committee agreed with management’s assessment that the overall control framework remained effective and, with a focus on high-risk
and material areas, additional controls introduced had mitigated risk.
Safeguards & Effectiveness of the External Auditors
The Audit & Risk Committee is responsible for oversight and for managing the relationship with our external auditors. The Audit & Risk Committee
recognizes the importance of safeguarding the independence and objectivity of the external auditors. The following safeguards are in place to ensure
that the independence of the auditors is not compromised.
•The Audit & Risk Committee has a formal written policy on the provision of non-audit services by external auditors.
•The Audit & Risk Committee carries out an annual review of the external auditors regarding their independence from the Group and that they are
adequately resourced and technically capable to deliver an objective audit to shareholders. Based on this review, the Audit & Risk Committee
recommends to the Board the continuation, or removal and replacement, of the external auditors;
•The external auditors may only provide non-audit services permitted by the FRC’s Revised Ethical Standard 2019 (the “Ethical Standard”) which
was issued in December 2019. These services include audit-related services such as regulatory and statutory reporting as well as other items
relating to shareholder and other circulars;
•The Audit & Risk Committee reviews all fees paid for audit and audit-related services on a regular basis to assess the reasonableness of fees, value
of delivery and any independence issues that may have arisen or may potentially arise in the future;
•The external auditors report to the Directors and the Audit & Risk Committee regarding their independence in accordance with relevant standards;
•Non-audit services carried out by the external auditors are limited to work that is closely related to the annual audit or where the work is of such a
nature that a detailed understanding of the business is beneficial, and utilizes subject matter experts not conducting audit services;
•The Audit & Risk Committee monitors costs for non-audit services in absolute terms and in the context of the audit fee for the year to ensure that
the potential to affect the independence and objectivity of the auditors does not arise. During 2024, non-audit services included work around the
Group’s half-year review and acquisitions which did not affect the independence and objectivity of the auditors; and
•Information related to audit fees for 2024 is detailed in Note 7 in the Notes to the Group Financial Statements.
This is the external auditor’s fifth year as the Group’s external auditor following a formal tender process during 2020 and subsequent appointment at the
2020 AGM.
The Audit & Risk Committee confirms that the Group has complied with the requirements of the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 for the financial year under review.
The Audit & Risk Committee is cognizant of the fact that assessing external audit quality is a key responsibility within its remit which stakeholders look
to the committee to discharge. The Audit & Risk Committee continually monitors the effectiveness of the external audit. To comply with this
requirement, the Audit & Risk Committee reviewed and commented on PwC’s detailed audit plans and strategy, including the intended scope of the
audit, identification of significant and elevated audit risks, the level of materiality proposed and the principles of PwC’s centrally directed audit approach.
Many elements of the audit plan approach remained consistent with the 2023 audit, and the Audit & Risk Committee welcomed the plan to enhance the
focus on utilizing data‑enabled auditing approaches to maximize efficiencies and insight from the auditors’ testing. Following discussion and challenge,
the Audit & Risk Committee agreed on the methodology adopted for determining materiality and the scope of the audit.
It then considered progress during the year by assessing the major findings of its work, the perceptiveness of observations, the implementation of
recommendations and the management of feedback. At the request of the Board, the Audit & Risk Committee also monitors the integrity of the financial
information in the Annual Report & Form 20-F, half-year results statements, and the significant financial reporting judgments contained in them. Further
details of the Audit & Risk Committee’s procedures to review the effectiveness of the Group’s systems of internal control during the year can be found in
the section on effective risk management and internal control above.
The Audit & Risk Committee recognizes that all financial statements include estimates and judgments by management. The key audit areas are agreed
upon with management and the external auditors as part of the year-end audit planning process. This includes an assessment by management of the
significant areas requiring management judgment and the Audit & Risk Committee challenging management’s judgments. These areas are reviewed with
the auditors to ensure that appropriate levels of audit work are completed, and the Audit & Risk Committee reviews the results of this work. The
numerous interactions with the auditor provided the Audit & Risk Committee with an insight into the quality of the audit process and the audit leadership
team, and with the opportunity to assess the auditor’s challenge of management’s views.
Assurance Measures
On behalf of the Board, the Audit & Risk Committee examines the effectiveness of:
•The systems of internal control, primarily through reviews of the financial controls for financial reporting of the annual, preliminary and half-yearly
financial statements;
•The management of risk by reviewing evidence of risk assessment and management; and
•Any action taken to manage critical risks or to remedy any control failings or weaknesses identified, ensuring these are managed through to
closure.
Where appropriate, the Audit & Risk Committee ensures that necessary actions have or are being taken to remedy or mitigate significant failings or
weaknesses identified during the year either from internal review or from recommendations raised by the external auditors. In 2024, the Audit & Risk
Committee did not identify any significant failings or weaknesses in the system of risk management and internal control. The Group’s internal controls
over the financial reporting and consolidation processes are designed under the supervision of the Group’s President and Chief Financial Officer to
provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of the Group’s published financial
statements for external reporting purposes, in accordance with UK-adopted International Accounting Standards and International Financial Reporting
Standards as issued by the International Accounting Standards Board.
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Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance and may not prevent or detect all
misstatements whether caused by error or fraud. The Group’s internal controls over financial reporting and the preparation of consolidated financial
information include policies and procedures that provide reasonable assurance that transactions have been recorded and presented accurately.
Management regularly conducts reviews of the internal controls in place in respect of the processes of preparing consolidated financial information and
financial reporting. During the year, there has been a significant investment in resources, processes and personnel relating to the internal controls of
these processes to reflect the growth of the Group. This is in order to provide a sufficient level of assurance over the reliability of the financial
statements.
Summary
For the year under review, and beyond, the Audit & Risk Committee will continue its monitoring of financial reporting and of internal controls and risk
management, as these evolve in response to the Group’s continuing growth and new opportunities as they arise.
/s/ David J. Turner, Jr.
David J. Turner, Jr.
Chair of the Audit & Risk Committee
March 17, 2025
The Remuneration Committee’s Report
Committee Composition
•Sylvia Kerrigan, Chair (for the entirety of 2024 through January 24, 2025)
•David J. Turner, Jr., Chair (appointed on January 24, 2025)
•David E. Johnson
•Sandra M. Stash
Letter from Chair of the Remuneration Committee
We are pleased to present our 2024 Directors’ Remuneration Report on behalf of the Board. Included within this report is the Annual Report on
Remuneration, which sets out payments and awards made to the Directors for the year ended 2024, and the proposed new Directors’ Remuneration
Policy, which, if approved at the Group’s 2025 Annual General Meeting (“AGM”), will operate for the year ended December 31, 2025, and the
subsequent years until the AGM in 2028. The Director’s Remuneration Report will be presented to shareholders for approval at the 2025 AGM.
Key Objective
The Remuneration Committee oversees the remuneration program of Executive Directors and the Senior Leadership Team (“Executives”) on behalf of
the Board. The Remuneration Committee is focused on ensuring that remuneration is designed to emphasize "pay for performance” by:
•Providing performance-driven remuneration opportunities that attract, retain and motivate executives to achieve optimal results for the Group and
its shareholders;
•Aligning remuneration with the Group’s short- and long-term business objectives while providing sufficient flexibility to address the unique
dynamics of the Group’s business model; and
•Emphasizing the use of equity-based remuneration to motivate the long-term retention of the Group’s executives and align their interests with
those of shareholders.
As an executive's seniority increases, and the scope, duties and responsibilities of the executive's position expand, the Remuneration Committee believes
a greater portion of total remuneration should be performance driven and earned over a longer time horizon. Fixed remuneration should therefore be a
relatively smaller portion of senior executive total remuneration with the majority of an executive’s realized remuneration linked to the performance of
the Group and delivered in shares.
DEC’s Performance in 2024
2024 was a year of continued execution and transition. The Group brought a focused execution on increased cash flow generation, capital discipline,
and balance sheet management. The year also marked a transition as the Group closed the Oaktree, Crescent Pass and East Texas II acquisitions, which
continued the Group’s expansion in the Central Region upstream and midstream assets, expanded access to U.S. investors and improved trading
liquidity with dual listing on the LSE and NYSE, and completed its eighth and ninth asset-backed securitizations that further enhanced the Group’s
liquidity.
Through its continual, daily focus on SAM and its zero tolerance policy for fugitive emissions, the Group made significant progress in its emissions
reduction goals, including through its handheld and aerial leak detection and repair programs and methane-driven pneumatic device conversions to
compressed air. Further, the Group expanded asset retirement operations, deploying 18 rigs across Appalachia to retire a combined 287 wells –
including 85 third-party owned wells and 202 Diversified-owned wells.
The Group’s formal Community Giving and Engagement Program also made meaningful contributions to surrounding communities, with more than $2
million contributed to various charitable, educational, student and youth athletic, and community and stakeholder engagement and outreach groups,
and community organizations, including to food pantries, arts and educational programs, health and wellness organizations, and municipal services.
These achievements combined with the year’s equity performance has impacted the performance-related pay outcomes for the Executive team. With
respect to the 2024 annual bonus, as reported elsewhere in this Annual Report & Form 20-F, DEC’s adjusted EBITDA for 2024 was $472 million. This
equated to adjusted EBITDA per diluted share of $10.79, after making certain adjustments for acquisitions and share dilution as described in Annual
Bonus for Executive Directors within this Annual Report & Form 20-F. The threshold, target and stretch metric was $8.00, $8.21 and $8.42 per share,
respectively. Metrics were established using the 2024 budget, with the stretch metric achievable from over-performing in production, management of
costs, and/or executing on acquisitions. Due to adjusted EBITDA per share being above maximum performance target levels the Remuneration
Committee awarded 50% for this metric out of a potential 50%.
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Under the cash cost metric the Group achieved $1.35 per Mcfe, which is similar to the Group’s KPI for adjusted operating cost per Mcfe, yet excludes
certain adjustments for acquisitions and production taxes. The threshold, target and stretch metric was $1.35, $1.30 and $1.27 per Mcfe, respectively.
As such, the Remuneration Committee awarded 5% for this metric out of a potential 20%.
In relation to the non-financial elements which account for the remainder of the annual award, the Executive Director (CEO) was determined to have
performed towards the top end of the objectives (30% of potential 30%). The Group’s overall performance resulted in awards of 148.8% of salary out
of a maximum of 175% of salary being awarded to the CEO under the annual bonus plan.
The 2024 financial year was the end of the three-year performance period for the Performance Share Award granted in 2022. The performance
conditions are a mix of Return on Equity (“ROE”) (40%), Absolute TSR (30%), Relative TSR (10%), and Methane Intensity Reduction (20%) targets
measured over three years. The overall payout for the award is 67% of maximum.
The Remuneration Committee considers that the Remuneration Policy operated as intended during 2024 and that the remuneration outcomes described
above reflect the overall performance by the Group. The Remuneration Committee determined that no discretion needed to be applied for the above
remuneration outcomes.
Key Matters Discussed by the Committee
During the past year the Remuneration Committee:
•Determined 2024 annual bonus outcomes for the Executive Director;
•Determined base salary of the Executive Director for the period starting January 2024;
•Reviewed the annual total remuneration of the Group’s executives;
•Reviewed the Group’s Directors’ Remuneration Policy and consulted on proposed changes with the Group’s largest shareholders;
•Reviewed the Group’s overall workforce remuneration and benefits plans, ensuring alignment of incentives and rewards with culture;
•Reviewed and approving the 2025 Executive Director Bonus Plan and Performance Share Award targets; 
•Discussed the voting results of the 2024 AGM;
•Determined that the remuneration policy for 2024 operated as intended;
•Prepared the Directors’ Remuneration Report; and
•Reviewed and updated the Remuneration Committee’s Terms of Reference to reflect best practices.
Directors’ Remuneration Policy for 2025
Diversified is an energy company focused on solutions that optimize existing, long-life, and often undervalued U.S. energy assets. The Group’s unique
modern field management philosophy leverages technology that integrates digital tools, scale, vertical integration, and human experience to responsibly
manage mature existing assets, improve environmental performance, and unlock overlooked value. As the only public company executing this strategy,
Diversified is differentiated by this focus that minimizes traditional exploration and production risks, delivers consistent free cash flow, and serves a
fundamental role in U.S. energy markets.
Ensuring that the Group has the right talent has enabled Diversified to deliver its strategic vision of building a portfolio of high-performing assets since
the Group went public on the NYSE, and it has continued the track record of delivering on that vision with the closing of the Oaktree, the Crescent Pass,
and East Texas acquisitions. The CEO recruited and developed this talent and is largely responsible for its success. The Group remains committed to a
balanced capital allocations framework, with the diversity and strength of the asset base providing a solid foundation for accretive growth and value
creation for our shareholders.
The current policy was approved by shareholders in a binding vote at the 2022 AGM with just under 83% of votes cast in favor.
This policy was traditionally aligned with the UK market and met the expectations of our shareholders when it was introduced. In preparation for the
shareholder vote on a new Remuneration Policy at the 2025 AGM, the Remuneration Committee has engaged an independent subject matter expert to
conduct a detailed review of the remuneration arrangements to ensure that they are appropriate in light of the performance of the business and our
current strategy. Of particular focus for the Remuneration Committee was the need to ensure that going forward the policy is capable of delivering
competitive compensation in the U.S., where all of Diversified’s executives, employees, and operations are based, whilst meeting the expectations of our
UK investor base in terms of the design and structure of the arrangements and ensuring the interests of our shareholders and executives are aligned.
The key conclusions of the review were that:
•The current policy approved by the shareholders at the Group’s 2022 annual general shareholder meeting, whilst being traditionally aligned to the
UK market, contains features not present in the U.S. market and is not well aligned with the U.S. in terms of quantum or structure, leading to
concerns of the Remuneration Committee and the Group’s ability to replace and attract future Executive Directors as well as other members of the
Group’s senior management team;
•Current total direct compensation (base + on-target bonus + the expected value of LTIP) for the Executive Directors, specifically with respect to
the CEO, is approximately 30% below the median of other North American gas producers of a similar size in terms of market capitalization;
•Although almost all of our peers in the U.S. grant a mix of performance shares and restricted (i.e. service-based vesting) shares as part of the
compensation for executives, our current policy does not offer restricted shares to the Executive Directors, which places the Group at a significant
disadvantage, particularly should it need to recruit senior talent in the future;
•The Group already grants a mix of performance shares and restricted shares to its employees and a move to include restricted shares in Executive
Directors’ pay aligns with our existing internal reward structure ensuring consistency and alignment within our senior team; and
•With Diversified’s unique U.S. focus and exposure to the U.S. market, there is a clear and compelling rationale to granting hybrid awards (i.e. a mix
of performance and restricted shares), even though hybrid awards are a relatively new development for UK-listed companies (with the practice
having been recently acknowledged by the Investment Association in its October 8, 2024, updated “Principles of Remuneration” as being an
appropriate feature for consideration in certain circumstances).
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Shareholder consultation regarding proposed changes to remuneration
The policy proposals were developed and consulted upon with a significant number of the Group’s largest shareholders and proxy advisors (the majority
of whom were supportive). The Remuneration Committee would like to thank those who provided constructive feedback, which enabled it to re-assess
and, in certain parts, reduce its proposals (including, in particular, the proposed restricted share award level) and make changes in response to that
feedback where appropriate. Importantly, it should be noted that with the adoption of the proposed remuneration policy for 2025, the CEO’s total direct
compensation in 2025 when all changes are implemented will be still positioned slightly below the median level of U.S. peers. See Part A: Directors’
Remuneration Policy for a list of the main changes from the previous policy.
Summary of Main Changes to the Directors’ Remuneration Policy
Annual Bonus - The maximum annual bonus opportunity of the CEO would increase from 175% to 200% of salary. For Executive Directors who have not
yet achieved the required shareholding, 50% will be deferred as either shares or cash for two years provided continued service. Current Executive
Directors who have met their shareholding guidelines will not be required to defer any of annual bonuses.
Long-Term Incentive (“LTI”)
The policy maximum for performance share awards would remain unchanged at 325% of salary for the CEO and a new restricted share award of 100%
of salary will be introduced. Other non-CEO Executive Directors would be eligible for performance awards of up to 250% of salary and 75% of salary in
restricted shares.
Both the performance and restricted share awards will be subject to three-year performance and vesting period, and a two-year post-vesting holding
period, resulting in a total five-year period from grant until rewards are realized. The restricted share awards will vest on a cliff-basis at the end of the
three-year vesting period. Consistent with the UK Corporate Governance Code and investor guidelines, the Remuneration Committee will have discretion
to override vesting outcomes in certain circumstances where the Remuneration Committee determines that vesting is not warranted.
The Remuneration Committee acknowledges that shareholders would often expect a reduction in award face value when replacing performance shares
with restricted shares. However, in addition to structuring the compensation program to be retentive and give future flexibility for attracting senior
talent, the Remuneration Committee is also seeking to address an approximate 30% shortfall in the level of CEO remuneration compared to a peer
group of U.S. listed oil & gas producers comprising: Amplify Energy Corp; Berry Corporation; CNX Resources Corp; Granite Ridge Resources; Highpeak
Energy; Mach Natural Resources; Northern Oil and Gas; Riley Exploration Permian; Ring Energy; TXO Partners; Vital Energy; and W&T Offshore. This
peer group was chosen upon considerable review and with assistance from the Remuneration Committee’s independent compensation expert. The
group was selected from a long list of natural gas and oil companies headquartered in the U.S. that focus on natural gas extraction with wells and
systems. The results were further filtered by similarity of operational footprint to Diversified and which are similar in terms of median market
capitalization and revenue. Taken together, the proposed changes would result in the remuneration of the CEO being positioned slightly below the
median of the U.S. peers and with a market aligned mix between performance shares and restricted shares. The proposed award limits also take
account of feedback from shareholders consulted on our initial thinking as to the most appropriate mix between performance and non-performance
based awards, as shown in the charts below.
DRR_CEO Opportunity Mix.jpg
DRR_CEO Pay Mix.jpg
The metrics on which the LTI performance share awards are based have not yet been finalized but will be fully disclosed to shareholders in advance of
the 2025 AGM. The Remuneration Committee’s current thinking is that the metrics will be as follows:
•ROE (40%),
•Absolute TSR (20%),
•Relative TSR vs a bespoke peer group of primarily U.S. gas producers (20%), and
•Emissions Reduction (20%)
Share Ownership Guidelines
In order that Executive Directors’ interests are further linked with those of shareholders, the shareholding that Directors are expected to build up and
maintain in the Group are being increased to align with the market. The Remuneration Committee proposed to increase the shareholding requirements
to 600% for the CEO and 300% for other Executive Directors. Also, a two-year post cessation shareholding guideline will continue.
Notations Regarding Other Elements of the Remuneration Policy
The Remuneration Committee believes the remainder of the Remuneration Policy remains largely fit for purpose and we only have proposed minor
changes to the Remuneration Policy in line evolving market best practice.
The CEO’s salary increase for 2025 is in-line with the average increase awarded to the workforce at 3.5%.
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Proposed changes to the Equity Incentive Plan Rules
Under our current Equity Incentive Plan (“EIP”) that governs equity-based awards, we are subject to two restrictions on dilution: a hard cap of
3,284,031 shares and, in alignment with UK best practices, a cap allocated under the plan over any ten-year period amounting to 10% of our issued
share capital (equivalent to 5,979,594 shares as of February 28, 2025). The Remuneration Committee proposes to streamline these limits by removing
the hard cap of 3,284,031 shares while and retaining the cap of 10% over ten years, in accordance with UK best practice. Additionally, shares held by
the Employee Benefit Trust (the “EBT”) will occasionally be utilized to cover vested equity-based awards. The EBT will also periodically purchase shares
in the open market. Consistent with best practices, shares purchased in the market issued by the EBT will not count towards the 10% cap because they
are not dilutive to the share value.
Format of the Report and Matters to be Approved at our Annual General Meeting
At the 2025 AGM, shareholders will be asked to approve three resolutions related to Directors’ remuneration matters:
•To approve the Directors’ Remuneration Policy as set out in Part A of this Directors’ Remuneration Report;
•To approve the Directors' Remuneration Report other than Part A; and
•To approve changes to the EIP dilution limits as outlined above.
Our approach to executive pay is designed to address the challenge of balancing a U.S. based management team with the expectations of a UK and U.S.
listed company. We hope that our shareholders will remain supportive of the approach and that you will vote in favor of the remuneration resolution at
the 2025 AGM.
/s/ David J. Turner, Jr.
/s/ David E. Johnson
/s/ Sandra M. Stash
David J. Turner, Jr.
David E. Johnson
Sandra M. Stash
Chair of the Remuneration
Committee
Chair of the Board and Member of
the Remuneration Committee
Member of the Remuneration
Committee
March 17, 2025
March 17, 2025
March 17, 2025
Membership
The Remuneration Committee is currently comprised of the Non-Executive Chairman and two Independent Non-Executive Directors: David J. Turner, Jr.,
the Remuneration Committee Chair, Sandra M. Stash, the Senior Independent Director as of January 24, 2025, and David E. Johnson. Sylvia Kerrigan
served as Remuneration Committee Chair for the entirety of 2024 and resigned effective January 24, 2025. Benjamin Sullivan, Senior Executive Vice
President, Chief Legal & Risk Officer and Corporate Secretary acts as Secretary to the Remuneration Committee.
Meetings and Attendance
The Remuneration Committee met formally three times during the year and has met twice thus far in 2025. The Remuneration Committee regularly
meets in private executive session at the end of its committee meetings, without management present to ensure that points of common concern are
identified and that priorities for future attention by the committee are agreed upon. The Chair of the Remuneration Committee keeps in close contact
with the Chief Legal & Risk Officer and Human Resources team between committee meetings. For Remuneration Committee meeting attendance for
each Director see the Directors’ Report within this Annual Report & Form 20-F.
Committee Effectiveness
The Remuneration Committee performed a critical analysis internal review and evaluation on itself, as part of its annual self-review process. No
significant areas of concern were raised.
Responsibilities and Terms of Reference
A key objective of the Remuneration Committee is to help attract, retain and motivate talented executives by ensuring competitive remuneration and
motivating incentives. The incentives are linked to the overall performance of the Group and, in turn, to the interests of all shareholders.
The Remuneration Committee is responsible for:
•Discussing and determining the Group’s framework for executive remuneration;
•Determining the remuneration for the Executive Director;
•Reviewing remuneration for other members of the Senior Leadership Team;
•Reviewing and recommending to the Board the remuneration of the Non-Executive Directors; and
•Overseeing and reviewing the structure and operation of the remuneration policy.
The Remuneration Committee has formal terms of reference which can be viewed on the Group’s website at www.div.energy.
Role of Management
The Group’s Human Resources Department assists the Remuneration Committee and its independent compensation consultant (as applicable) in
gathering the information needed for their respective reviews of the Group’s compensation program with respect to the Senior Leadership Team. This
assistance includes assembling requested compensation data. The CEO develops pay recommendations for members of the Senior Leadership Team for
review and discussion by the Remuneration Committee. The Remuneration Committee, in private session and without executive officers present,
approves the CEO’s pay levels.
External Advisors
During the year, FIT Remuneration Consultants LLP (“FIT”) and Mercer Limited (“Mercer”) provided assistance to the Remuneration Committee. Both
FIT and Mercer are signatories to the Remuneration Consultants Group’s Code of Conduct. FIT provided advice to the Remuneration Committee on all
matters relating to remuneration, including best practice. Mercer provided specialist advice to support the review of the proposed Director’s
Remuneration Policy and shareholder engagement. FIT provided no other services to the Group or its Directors and do not have any other connection
with the Group or its Directors. Mercer provides pay benchmarking and survey data to the Group’s management but otherwise does not have any other
connection with the Group or its Directors. Accordingly, the Remuneration Committee was satisfied that the advice provided by FIT and Mercer was
76
objective and independent. The Remuneration Committee selected and appointed FIT based on the positive experience with FIT in prior years, among
other factors. Mercer was appointed to advise both the Group and the Remuneration Committee on development of the new Remuneration Policy, based
on the Group’s experience of working with its lead advisor on the development of the previous Remuneration Policy. FIT’s and Mercer’s fees in respect
of 2024 were $37,507 (GBP: £29,302), and $126,080 (GBP: £98,500), respectively. Both FIT’s and Mercer’s fees are charged on the basis of time and
materials.
Remuneration at a Glance
Proposed Remuneration Policy & Implementation
Stated Objective
Overview of Proposed Remuneration Policy
Proposed Implementation for 2025
Base salary
•Reviewed annually.
•Consideration given to the performance of the Group, the
individual’s performance, the individual responsibilities or
scope of the role, and pay practices in relevant comparator
companies in the U.S.
Executive Director (Effective January 1, 2025 and represents a
3.5% increase for Rusty Hutson, Jr. over 2024. This compares
to increases across the Group ranging from 0% to 7% based on
performance, with an average of 3.5%.)
•CEO: Rusty Hutson, Jr.: $807,128
Pension &
benefits
•The current Executive Director does not receive a pension
contribution and any future provision will be aligned to the
wider workforce.
•The current Executive Director does not receive a pension
contribution.
•Consistent with the approach taken for all employees, the
Group offers a retirement plan in accordance with subsection
401(k) of the Internal Revenue Code in which the Executive
Director may make voluntary pre-tax contributions towards
his own retirement. The Group matches the Executive
Director’s contributions up to $26 thousand per annum.
•Benefits consist of standard car and health/insurance related
benefits.
Annual Bonus
Short-Term
Incentives
•Maximum of 200% of salary for Rusty Hutson, Jr. and 125%
of salary for other Executive Directors.
•For Executive Directors who have not yet achieved the
required shareholding, 50% will normally be paid in cash,
with the remainder deferred as either shares or cash for two
years provided continued service.
•Deferral is not required for existing Executive Directors who,
at the time this Remuneration Policy is approved, have
achieved the required shareholding, i.e. 100% of their award
will normally be paid in cash, with no deferral.
•Subject to the achievement of relevant performance
conditions, both qualitative and quantitative.
•Subject to malus and clawback provisions.
Potential awards for 2025 performance period:
•Rusty Hutson, Jr.: 200% of salary
•Other Executive Directors: 125% of salary
•Performance conditions, which will have defined Threshold,
Target, and Stretch payout criteria:
•50% adjusted EBITDA per share
•25% cash cost per Mcfe
•25% sustainability measures
Long-Term
Incentives
•Performance Share Awards, subject to service and
performance over a three-year period, and eligible for
payment of applicable Dividend Equivalent Rights during the
vesting period. Maximum award of 325% of salary for
Rusty Hutson, Jr. and 250% of salary for other Executive
Directors.
•Restricted Share Awards, subject to service over a three-year
period, and eligible for payment of applicable Dividend
Equivalent Rights during the vesting period. Maximum award
of 100% of salary for Rusty Hutson, Jr. and 75% of salary for
other Executive Directors.
•Subject to malus and clawback provisions.
Potential awards for 2025:
•Rusty Hutson, Jr.: 325% of salary of performance share
awards; 100% of salary of restricted share award
•Other Executive Directors: 250% of salary of performance
share awards; 75% of salary of restricted share awards
•Performance conditions:
•40% return on equity
•20% relative TSR
•20% absolute TSR
•20% emissions
Share Ownership
Requirements
•Rusty Hutson, Jr.: 600% of salary
•Other Executive Directors: 300% of salary
•Lower of shares acquired from LTIP awards held at
termination or normal share ownership requirement
continues to apply for first year following termination,
reducing to 200% of salary for the second year.
Rusty Hutson, Jr. meets the requirement.
Introduction
Part A: Represents the proposed policy which will take effect, subject to the approval of the shareholders, immediately after the 2025 AGM (the
“Directors’ Remuneration Policy”).
Part B: Constitutes the Annual Report on Remuneration sections of the Executive Directors’ Remuneration Report.
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Part A: Directors’ Remuneration Policy
The Directors’ Remuneration Policy below sets out the information required by Part 4 of Schedule 8 to the Large and Medium-Sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended).
If approved by Shareholders at the forthcoming AGM on April 9, 2025, the Directors’ Remuneration Policy set out below will replace the existing policy
for which shareholder approval was obtained at the 2022 AGM, and will become binding immediately thereafter.
The main changes from the previous policy are:
•Annual Bonus maximum for the CEO is to be increased to 200% of salary and add an annual bonus maximum for other Executive Directors at
125% of salary with a deferral of 50% of any bonus earned compulsory to which existing Executive Directors who have met their shareholding
requirement are not subject. No deferral will be applicable to any bonus for an existing Executive Director who has met their shareholding
requirement;
•Performance Share Awards maximum is to remain at 325% per annum for the CEO and a new Restricted Share Award of 100% of salary is
introduced; and
•New Performance Share Awards maximum for other Executive Directors at 250% per annum and Restricted Share Award of 75% of salary is
introduced in order to future-proof the policy.
The following table summarizes the Group’s policies in respect of the key elements of our Directors’ remuneration:
Element and
Purpose
Remuneration Policy and Operation
Maximum
Performance Measures
Base salary
This is the core
element of pay and
reflects the
individual’s role
and position within
the Group with
some adjustment
to reflect their
capability and
contribution.
•Base salaries will typically be reviewed
annually, with consideration given to
the performance of the Group and the
individual, any changes in
responsibilities or scope of the role and
pay practices in relevant U.S.
comparator companies of a broadly
similar size and complexity, with due
account taken of both market
capitalization and turnover.
•The Remuneration Committee does not
strictly follow benchmark pay data, but
instead uses it as one of a number of
reference points when considering, in
its judgment, the appropriate level of
salary. Base salary is paid monthly in
cash.
•It is anticipated that salary increases
will generally be in line with those
awarded to the general workforce.
That said, in certain circumstances
(including, but not limited to, changes
in role and responsibilities, market
levels, individual and Group
performance), the Remuneration
Committee may make larger salary
increases to ensure they are market
competitive. The rationale for any such
increase will be disclosed in the
relevant Annual Report & Form 20-F.
n/a
Benefits
To provide benefits
valued by
recipients.
•The Executive Director currently
receives standard car and health/
insurance related benefits.
•Where appropriate, the Group will
meet certain costs relating to Executive
Director relocations.
•In line with the approach taken for all
employees, the Group offers a
retirement plan in accordance with
subsection 401(k) of the Internal
Revenue Code in which the Executive
Director may make voluntary pre-tax
contributions towards his own
retirement. The Group matches the
Executive Director’s contributions up to
$26 thousand per annum.
•The Remuneration Committee reserves
the discretion to introduce new benefits
where it concludes that it is appropriate
to do so, having regard to the
particular circumstances and to
market practice.
•It is not possible to prescribe the likely
change in the cost of insured benefits
or the cost of some of the other
reported benefits year to year.
•Relocation expenses are subject to a
maximum limit of 100% of base salary,
provided that such expenses may be
paid only in the year of appointment
and for a further two financial years.
•With limited exceptions, the U.S.
Section 401(k) defined contribution
plan currently provides company
matching contributions up to a
maximum of $26 thousand per annum.
•The Remuneration Committee will
monitor the costs of benefits in practice
and will ensure that the overall costs
do not increase by more than what the
committee considers appropriate in all
the circumstances.
n/a
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Element and
Purpose
Remuneration Policy and Operation
Maximum
Performance Measures
Pension
To provide
retirement benefits.
•Currently, no element of the Directors’
remuneration is pensionable, and the
Group does not operate any pension
scheme or other scheme providing
retirement or similar benefits.
•The Remuneration Committee reserves
the discretion to introduce new benefits
where it concludes that it is appropriate
to do so, having regard to the
particular circumstances and to
market practice.
•The current Executive Director does
not receive a pension contribution.
•Any future pension provision will be
limited to levels aligned to the
contribution levels for the majority of
the workforce.
n/a
Annual bonus
plan
To motivate the
Executive Director
and incentivize the
delivery of
performance over a
one-year operating
cycle, focusing on
the short- to
medium-term
elements of our
strategic aims.
•Annual bonus plan levels and the
appropriateness of measures are
reviewed annually at the
commencement of each financial year
to ensure they continue to support our
strategy.
•Once set, performance measures and
targets will generally remain
unchanged for the year, except to
reflect events such as corporate
acquisitions or other major transactions
where the Remuneration Committee
considers it to be necessary in its
opinion to make appropriate
adjustments.
•For Executive Directors who have not
yet achieved the required shareholding,
50% will normally be paid in cash, with
the remainder deferred as either
shares or cash for two years provided
continued service.
•Deferral is not required for existing
Executive Directors who at the time
this Remuneration Policy is approved
have achieved the required
shareholding.
•Clawback provisions apply to the
annual bonus plan, and malus and
clawback will apply to deferred shares
in accordance with the Group’s
clawback and malus policies.
•The maximum level of annual bonus
plan outcomes is 200% of base salary
for the CEO and 125% of base salary
for other Executive Directors.
•The performance measures applied
may be financial or non-financial;
quantitative and qualitative; and
corporate, divisional or individual and
with such weightings as the
Remuneration Committee considers
appropriate. The metrics and
weightings applicable for 2025 are
intended to be as follows:
•50% adjusted EBITDA per share
•25% cash cost per Mcfe
•25% sustainability measures
•Where a sliding scale of targets is
used, attaining the threshold level of
performance for any measure will not
typically produce a payout of more
than 25% of the maximum portion of
the overall annual bonus attributable to
that measure, with a sliding scale to
full payout for maximum performance.
•However, the annual bonus plan
remains a discretionary arrangement
and the Remuneration Committee
retains a standard power to apply its
discretion to adjust the outcome of the
annual bonus plan for any performance
measure (from zero to any cap), should
it consider that to be appropriate.
79
Element and
Purpose
Remuneration Policy and Operation
Maximum
Performance Measures
Long-term
incentives
To motivate and
incentivize the
delivery of
sustained
performance over
the long-term, and
to promote
alignment with
shareholders’
interests, the
Group grants
Performance Share
Awards.
•Performance Share Awards vest over a
period of three years, and are eligible
for accrual of applicable Dividend
Equivalent Rights during the vesting
period.
•Restricted Share Awards are subject to
service over a three-year period, and
are eligible for accrual of applicable
Dividend Equivalent Rights during the
vesting period.
•Once vested the net of tax shares from
both the Performance Share and
Restricted Awards are subject to a
holding period of two years.
•Clawback and malus provisions apply
to Performance Share Awards and
Restricted Share Awards.
•Performance Share Awards may be
granted with a maximum value of
325% of salary for the CEO and 250%
of salary for the other Executive
Directors.
•Restricted Share Awards may be
granted with a maximum value of
100% of salary for the CEO and 75%
of salary for other Executive Directors.
•In determining the number of shares
subject to an award, the market value
of a share shall, unless the
Remuneration Committee determines
otherwise, be assumed to be the
average share price for the five days
following the announcement of the
Group’s results for the previous
financial year.
•The Remuneration Committee may set
such performance conditions on
Performance Share Awards as it
considers appropriate, whether
financial or non-financial and whether
corporate, divisional or individual.
Performance periods may be over such
periods as the Remuneration
Committee selects at grant, which will
not be less than, but may be longer
than, three years.
•It is intended that the metrics and
weightings applicable in 2025 will be
as follows:
•40% Return on Equity
•20% Absolute TSR
•20% Relative TSR
•20% Emissions
•No more than 15% of awards vest for
attaining the threshold level of
performance conditions. The
Remuneration Committee also has a
standard power to apply its judgment
to adjust the vesting outcome of
Performance Share Awards and
Restricted Share Awards to take
account of any circumstances
(including the performance of the
Group, any individual or business)
should it consider that to be
appropriate.
80
Element and
Purpose
Remuneration Policy and Operation
Maximum
Performance Measures
Share ownership
guidelines
To further align the
interests of the
Executive Director
with those of
shareholders.
•Each Executive Director is expected to
build up a prescribed level of
shareholding.
•Minimum shareholding is 600% of base
salary for the CEO and 300% of base
salary for other Executive Officers. The
Remuneration Committee reserves the
power to amend, but not reduce, these
levels in future years.
•To the extent that the prescribed level
has not been reached, the Executive
Director will be expected to retain a
proportion of the shares vesting under
the Group’s share plans until the
guideline is met.
•Any vested shares from long-term
incentives subject to a holding period
and any shares awarded in connection
with annual bonus deferral will be
included for the purpose of the
guidelines (discounted for anticipated
tax liabilities).
•A post-employment shareholding
requirement normally applies to shares
from long-term investments vesting
after the effective date of the Directors’
Remuneration Policy for 2025. The
policy requires the Executive Director
to hold the shares equivalent to his
share ownership guideline at that date,
for a period of one year post-
employment and reducing to 200% of
salary for the second year post-
employment.
n/a
n/a
Chairman’s and
Non-Executive
Directors’ fees
To enable the
Group to recruit
and retain a
Chairman of the
Board and Non-
Executive Directors
of the highest
caliber.
•The fees paid to the Chairman and
Non-Executive Directors aim to be
competitive with other U.S. and UK
listed peers of equivalent size and
complexity.
•The fees payable are determined by
the Board, and will include incremental
committee Chair and additional
responsibility fees (as applicable).
Directors do not participate in decisions
regarding their own fees.
•Non-Executive Directors are
reimbursed all necessary and
reasonable expenses incurred in
connection with the performance of
their duties and any tax thereon in
accordance with the Group’s Non-
Executive Director Expense
Reimbursement Policy.
•No other benefits are envisaged for the
Chairman and Non-Executive Directors,
but the Group reserves the right to
provide benefits, including company
related travel and office support.
•Fees are paid monthly in cash.
•A proportion of each Non-Executive
Directors’ fees may be required to be
used for the acquisition of Group
shares which must then be held until
they cease to be a Director.
•The aggregate fees and any benefits of
the Chairman and Non-Executive
Directors will not exceed the limit from
time to time prescribed within the
Group’s Articles of Association for such
fees.
•Any increases actually made will be
appropriately disclosed.
n/a
81
Choice of Performance Metrics
Diversified’s strategy is to focus on solutions that optimize existing, long-life, and often undervalued U.S. energy assets. This requires a unique modern
field management philosophy that leverages digital tools, scale, vertical integration, and human experience to responsibly manage mature existing
assets, improve environmental performance, and unlock overlooked value. This minimizes traditional exploration and production risks, delivers consistent
free cash flow, and serves a fundamental role in U.S. energy markets. Targets are reviewed each year by the Remuneration Committee and set taking
account of Diversified’s in-year and longer-term goals.
The proposed 2025 annual bonus metrics which comprise adjusted EBITDA per share (50%), cash cost per Mcfe (25%), and sustainability measures
(25%) have been selected as these incentivize a disciplined and responsible approach to growth and delivery of returns to shareholders.
The proposed scorecard of metrics selected for the grants of Performance Share Awards in 2025 comprises Return on Equity (40%), Absolute TSR
(20%), Relative TSR (20%), and Emissions (20%). These have been selected as they reward strong capital management, encourage value enhancing
acquisitions, reward the generation of superior returns to shareholders across the cycle as well as a focus on sustainability.
Service Contracts & Letters of Appointment
The following table summarizes key dates for the service contracts of Rusty Hutson, Jr. effective as of December 31, 2024:
Name
Date of Service Contract
Duration
Rusty Hutson, Jr.
January 30, 2017
Executive Director’s service agreement should be of indefinite duration, subject to termination by the
Group or the individual on six months’ notice. The service agreements of all current Executive
Directors comply with that policy.
The contract of the current Executive Director, which is available for inspection at the Group’s registered office, contains a payment in lieu of notice
clause which is limited to base salary only. In line with U.S. practice, depending on the circumstances of their severance from service, the Executive
Director may be entitled to certain payments, including previously accrued salary plus 12 months salary. For each current Non-Executive Director, the
effective date of their latest letter of appointment is:
Name
Date of Letter of Appointment
Duration
David E. Johnson
February 3, 2017
Martin K. Thomas
January 1, 2015
Initial period of 12 months, subject to re-election at each AGM of the Group and are
terminable on three months’ notice given by either party.
David J. Turner, Jr.
May 27, 2019
Sandra M. Stash
October 21, 2019
Kathryn Klaber
January 1, 2023
Malus and Clawback
The Remuneration Committee may apply malus and clawback to a Performance Share Award, Restricted Share Award, deferred shares under the Annual
Bonus Plan and to cash amounts under the annual bonus plan (clawback only). The relevant circumstances where these powers of recovery may
operate include:
•Any accounting restatement required as a result of the financial statements of any member of the Group’s being materially misstated as a result of
the relevant employee’s material non-compliance with the Group’s financial reporting requirements under all applicable laws and policies;
•Any fraudulent act of the relevant employee (whether proven, admitted or otherwise);
•Any material breach of any term of employment;
•Any material failure in supervision and oversight by the relevant employee;
•Any gross misconduct, material wrongdoing or any material breach of any term of employment by the relevant employee;
•A material error in the calculation of the relevant employee’s performance conditions; or
•Such other exceptional negative circumstances caused by the relevant employee as the Remuneration Committee may reasonably determine,
which may include the Group suffering any serious reputational damage, financial downturn, failure of risk management or corporate failure as a
result of the relevant employee’s action or inaction.
Normally, clawback can operate for up to two years following the vesting of an award or bonus payment.
Travel and Hospitality
The Remuneration Committee has been advised that corporate hospitality, whether paid for by the Group or another, and travel for Directors (and in
exceptional circumstances their families) and any tax thereon may technically come within the applicable rules. As a result, the Remuneration Committee
expressly reserves the right for the committee to authorize such activities within its agreed policies. Note that the Remuneration Committee does not
consider travel and hospitality or the reimbursement of these expenses to form part of benefits in the normal usage of that term.
Differences Between the Policy on Remuneration for Directors from the Policy on Remuneration of Other Staff
While the appropriate benchmarks vary by role, the Group seeks to apply the philosophy behind this policy across the Group as a whole. Where the
Group’s pay policy for Directors differs from its pay policies for groups of staff, this reflects the appropriate market rate position and/or typical practice
for the relevant roles. The Group takes into account pay levels, bonus opportunity and share awards applied across the Group as a whole when setting
the Directors’ Remuneration Policy.
Committee Discretions
The Remuneration Committee will operate the annual bonus plan, Performance Share Awards and Restricted Share Awards according to their respective
rules and the above policy table. The Remuneration Committee retains discretion, consistent with market practice, in a number of respects, in relation to
the operation and administration of these plans.
These discretions include, but are not limited to, the following:
82
•The selection of participants;
•The timing of grant of an award/bonus opportunity;
•The size of an award/bonus opportunity subject to the maximum limits set out in the policy table;
•Discretion required when dealing with a change of control or restructuring of the Group;
•Determination of the treatment of leavers based on the rules of the plan and the appropriate treatment chosen;
•Adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends); and
•The annual review of performance measures, weightings and targets from year to year and resulting vesting/bonus pay-outs.
While performance measures and targets for annual bonus and Performance Share Awards will generally remain unchanged once set, the Remuneration
Committee has the usual discretions to amend the measures, weightings and targets in exceptional circumstances (such as a major transaction) where
the original conditions would cease to operate as intended. Any such changes would be explained in the subsequent Directors’ Remuneration Report
and, if appropriate, be the subject of consultation with the Group’s major shareholders.
Any use of these discretions would, where relevant, be explained in the Directors’ Remuneration Report.
Recruitment Remuneration Policy
The Group’s recruitment remuneration policy aims to give the Remuneration Committee sufficient flexibility to secure the appointment and promotion of
high-caliber executives to strengthen the management team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new Executive Director, the starting point for the Remuneration Committee will be to apply the
general policy for Executive Directors and structure a package in accordance with that policy, consistent with the relevant requirements.
The annual bonus plan, Performance Share Awards, and Restricted Share Awards including the maximum award levels, will operate as detailed in the
general policy in relation to any newly appointed Executive Director, although, depending on the circumstances, different metrics and or targets may be
set in the first year of appointment. For an internal appointment, any variable pay element awarded in respect of the prior role may either continue on
its original terms or be adjusted to reflect the new appointment as appropriate. For external and internal appointments, the Remuneration Committee
may agree that the Group will meet certain relocation expenses in the year of appointment and for a further two financial years, as it considers
appropriate. For external candidates, it may be necessary to make additional awards in connection with the recruitment to buy-out awards and
entitlements forfeited by the individual on leaving a previous employer.
For the avoidance of doubt, buy-out awards are not subject to a formal cap. Any awards to a newly recruited Executive Director which are not buy-outs
will be subject to the limits for the annual bonus plan and Performance Share Awards as stated in the general policy.
For any buy-outs the Group will not pay more than is necessary in the view of the Remuneration Committee, and will in all cases seek, in the first
instance, to deliver any such awards under the terms of the existing annual bonus plan, Performance Share Awards and Restricted Share Awards. It
may, however, be necessary in some cases to make buy-out awards on terms that are more bespoke than the existing annual bonus plan and
Performance Share Awards and Restricted Share Awards (for example, specific arrangements under Listing Rule 9.4.2).
All buy-outs, whether under the annual bonus plan, Performance Share Awards, Restricted Share Awards or otherwise, will take due account of the
service obligations and performance requirements for any remuneration relinquished by the individual when leaving a previous employer. The
Remuneration Committee will seek, where it is practicable to do so, to make buy-outs subject to what are, in its opinion, comparable requirements in
respect of service and performance.
A new Non-Executive Director would be recruited on the terms outlined in the Remuneration Policy.
Termination Policy Summary
The Remuneration Committee will consider treatments on a termination having regard to all of the relevant facts and circumstances available at that
time. This policy applies both to any negotiations linked to notice periods on a termination and any treatments that the Remuneration Committee may
choose to apply under the discretions available to it under the terms of the relevant plan. The potential treatments on termination under these plans are
as follows:
Annual Bonus Plan
If an Executive Director resigns without “good reason” (e.g. demotion, material reduction in compensation, relocation of principal office location of more
than 200 miles) or is dismissed for cause before the end of the bonus plan year, the right to receive any bonus normally lapses. If an Executive Director
ceases employment before such date by reason of death, injury, ill health, disability, retirement, resignation for good reason, or termination without
cause, or any other reason determined by the Remuneration Committee, the committee may determine that such bonus will be payable pro rata for the
period of time during the year (performance period) that the Executive Director was employed. Similar treatment will apply in the event of a change in
control of the Group, provided, however, that if the Executive Director is terminated without cause or resigns for good reason within 180 days prior to
such change in control, the bonus will be payable without reduction. The rationale is to ensure that the Executive Directors remain with the Group
through completion of the change in control, so as to affect an orderly transition for the Group.
Deferred bonus awards may be accelerated if the Executive Director’s leaving was for reason of death, injury, ill health, disability, retirement, resignation
for good reason, or termination without cause.
Performance Share Awards and Restricted Share Awards
If, during the performance or vesting period, a participant:
•Resigns without good reason or is dismissed for cause, awards lapse in full;
•Dies, awards will be pro-rated by reference to the proportion of the performance or vesting period for which the participant remained employed
subject, in the case of Performance Share Awards to the Group’s performance; or
•Ceases to be employed due to injury, ill health, disability, retirement, resignation for good reason, or termination without cause, or for any other
reason the Remuneration Committee determines, awards are retained subject to the performance conditions, and continue to vest on the original
schedule. In such instance, awards will be pro-rated by reference to the proportion of the performance or vesting period for which the participant
83
remained employed. The Remuneration Committee has a standard ability to vary time pro-rating. The Remuneration Committee may exercise its
discretion to allow awards to vest early on cessation in suitable cases. In the event the participant dies or suffers a disability during the holding
period, the holding period may be accelerated.
Performance share awards and Restricted share awards will normally vest in the event of a change of control and shall take into account, amongst other
things, the extent to which any performance criteria have been met (over the shortened performance periods) and the time elapsed since grant (i.e.
prorated).
The Group has the power to enter into settlement agreements with Directors and to pay compensation to settle potential legal claims. In addition, and
consistent with market practice, in the event of the termination of an Executive Director, the Group may make a contribution towards that individual’s
legal fees and fees for outplacement services as part of a negotiated settlement. Any such fees will be disclosed as part of the detail of termination
arrangements. For the avoidance of doubt, the policy does not include an explicit cap on the cost of termination payments.
Consideration of Employment Conditions Elsewhere in the Group
The Group’s general pay and employment conditions will be taken into account when setting Executive Directors’ remuneration.
The same reward principles guide reward decisions for all Group employees, including Executive Directors, although remuneration packages differ to
take into account appropriate factors in different areas of the business:
Base Salary/Benefits/Pension
The Remuneration Committee receives an annual report summarizing the base salaries, benefits and pension
arrangements received by each category of Group staff.
Annual Bonus
The majority of salaried employees participate in an annual bonus plan, although the quantum and balance of
group, business unit and individual objectives varies by level and nature of role. The Remuneration Committee
receives an annual report summarizing the bonus potential and performance metrics used in each of the annual
bonus schemes in operation across the Group.
Long-Term Incentives
Key Group employees may receive share incentive awards, both performance and restricted, and may receive
awards based on the same or different performance conditions as those for Executive Directors (although the
Remuneration Committee reserves the discretion to vary the performance conditions for awards made to
employees below Board level). The Remuneration Committee is provided a summary of the long-term incentive
plans.
As highlighted in the Engagement with Employees Statement in the Directors’ Report within this Annual Report & Form 20-F, the Group engages with
employees on a range of matters. Employees are not directly consulted in the development of the Remuneration Policy, however, as part of this
employee engagement process there is the opportunity for employees to ask questions and provide feedback on the strategy of the Group, including
how this links to remuneration and how executive remuneration aligns with the wider company pay policy and the Group’s strategy and objectives.
Consideration of Shareholder Views
The Remuneration Committee considers shareholder views received during the year and at each AGM, as well as guidance from shareholder
representative bodies more broadly, when determining the remuneration policy and its implementation. Specifically in connection with the proposed
remuneration policy for 2025, the Remuneration Committee consulted with major shareholders in late-2024 and into 2025 to collect feedback and gauge
shareholder response as a result of which changes have been made to the quantum of the proposals and also to performance metrics used for awards
granted in the Remuneration Policy’s first year.
The Remuneration Committee seeks to build an active and productive dialogue with investors on developments on the remuneration aspects of
corporate governance generally and it will consult with major shareholders in advance of any material change to the structure and/or operation of the
policy and will seek formal shareholder approval for any such change if required.
External Appointments
The Group’s policy is to permit an Executive Director to serve as a non-executive director elsewhere when this does not conflict with the individual’s
duties to the Group, and where an Executive Director takes such a role they may be entitled to retain any fees which they earn from that appointment.
Such appointments are subject to approval by the Chairman.
84
Illustrations of Application of Executive Director Remuneration Policy
The following charts show how the remuneration policy for the Executive Director will be applied in 2025 using the assumptions shown overleaf:
Minimum
•Consists of base salary, benefits and pension.
•Base salary is the salary to be paid in 2025.
•Long-Term Incentives (“LTI”): Consists of full vesting (100%) of Restricted Share Awards (maximum of 100% of base
salary).
•No pension is provided, only 401(k) match to the extent applicable.
Target
Based on what the Executive Director would receive if performance was on-target (excluding share price appreciation and
dividends):
•Annual bonus: Consists of the target bonus (50% of maximum opportunity used for illustrative purposes).
•LTI: Consists of the target level of vesting (50%) of Performance Share Awards (maximum of 325% of base salary) and full
vesting (100%) of Restricted Share Awards (maximum of 100% of base salary).
Maximum
Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
•Annual bonus: Consists of maximum bonus of 200% of base salary.
•LTI: Consists of full vesting (100%) of Performance Share Awards (maximum of 325% of base salary) and full vesting
(100%) of Restricted Share Awards (maximum of 100% of base salary).
Maximum with
share price growth
Based on the Maximum scenario set out above but with a 50% share price increase applied to the value of Performance Share
Awards.
($ thousands)
Base Salary
RSU Award
Benefits
Benefit Plan(a)
Total Fixed
Rusty Hutson, Jr.
$807
$807
$17
$42
$1,673
(a)Reflects amounts received under the Group’s 401(k) contribution plan and health insurance benefits.
Robert R. (Rusty) Hutson, Jr.
DRR.jpg
85
Part B: Annual Report on Remuneration
The remuneration for the Executive and Non-Executive Directors of the Group who performed qualifying services during the year is detailed below. For
the year ended December 31, 2024, the aggregate compensation paid to the members of our board of directors and our executive officers for services
in all capacities was approximately $4 million.
Executive officers are entitled to matching contributions from the Group of up to $26 thousand per annum into their 401(k) retirement plans. They also
receive a range of core benefits such as life insurance, private medical coverage and annual health screens.
The Non-Executive Directors received no remuneration other than their annual fee. The aggregate fees and any benefits of the Chairman of the Board
and Non-Executive Directors will not exceed the limit from time-to-time prescribed within the Group’s Articles of Association for such fees which is
currently £1,055,000 (approximately $1,350,400) per annum. In addition, non-executive directors are reimbursed all necessary and reasonable expenses
incurred in connection with the performance of their duties and any tax thereon in accordance with the Group’s Non-Executive Director Expense
Reimbursement Policy.
Directors’ remuneration for the years ended December 31, 2024 and 2023:
Executive Director
Rusty Hutson, Jr.
(In thousands)
December 31, 2024
December 31, 2023
Salary/fees
$780
$750
Taxable benefits(a)
17
12
Benefit plan(b)
42
31
Pension(c)
—
—
Total fixed pay
$839
$793
Bonus(d)
1,160
825
Long-term incentives(e)
1,008
303
Total variable pay
$2,169
$1,128
Total remuneration
$3,007
$1,921
Non-Executive Directors - Total Remuneration (In thousands)
December 31, 2024
December 31, 2023
David E. Johnson
$223
$216
Martin K. Thomas
160
155
David J. Turner, Jr.
173
168
Sandra M. Stash
160
156
Kathryn Z. Klaber
160
139
Sylvia Kerrigan
173
160
(a)Taxable benefits were comprised of Group paid life insurance premiums and automobile reimbursements.
(b)Reflects matching contributions under the Group’s 401(k) plan and health insurance benefits.
(c)The Executive Director does not receive a pension provision.
(d)Further details of the bonus outcome for 2024 can be found in Annual Bonus for Executive Directors within this Annual Report & Form 20-F. For 2024, the bonus total
for Rusty Hutson, Jr. represents 148.8% of approved base salary. Subject to the Remuneration Policy, amounts above 100% of salary will be deferred into cash for one
year provided continued service, without additional performance conditions. For 2023, the bonus total for Rusty Hutson, Jr. represented 110.1% of base salary.
Amounts above 100% of salary were deferred into cash for one year provided continued service, without additional performance conditions.
(e)For 2024, the value of the Performance Share Award granted in 2022, including dividend equivalent units (“DEUs”) accrued to date, has been based on the number of
shares and DEUs that will vest and the three-month average share price for the period to December 31, 2024 of $13.96 (£10.87) per share. The overall payout for the
Performance Share Award was 67% and the grant share price for the awards was $30.47 (£23.36) per share and, accordingly, the relevant figures are reflective of a
decrease of 54% in the Group’s share price over the three year period. For 2023, the value of the Performance Share Award granted in 2021, including DEUs accrued to
the vesting date, has been restated to reflect the actual share price on the vesting date of $11.60 per share. The values disclosed last year were estimated using the
three-month average share price for the period to December 31, 2023 of £13.62 per share using an exchange rate of £1:$1.24055.
2024 Annual Bonus for Executive Director
For 2024 the overall bonus plan for the Executive Director was a maximum of 175% of base salary with an actual achieved formulaic bonus of 148.8%.
The Group delivered a strong operational performance in 2024. The following table summarizes the performance targets and outcomes which led to the
Remuneration Committee’s decisions as to the payout percentages.
86
The targets were as follows:
Measure
Threshold(a)
Target(a)
Maximum
(100% Payout)
Actual
Performance
% of Total
Bonus
Payout %
Adjusted EBITDA per share(b)
$8.00
$8.21
$8.42
$10.79
100%
50%
50%
Cash cost per Mcfe(c)
$1.35
$1.30
$1.27
$1.35
25%
20%
5%
Sustainability (see below)
30%
30%
Total % of maximum
85%
Total % of salary - Rusty Hutson, Jr.
148.8%
(a)Threshold was 25% and Target was 75% for the adjusted EBITDA per share and cash cost per Mcfe measures and 0% to 50% and 0% to 75%, respectively, for the
sustainability measures, but for all measures stretch allowed inclusion of acquisitions.
(b)Actual results for the adjusted EBITDA per share measure utilized fully diluted weighted average shares outstanding.
(c)Actual results for the cash cost per Mcfe measure excluded 2024 acquisitions and irregular G&A expense.
In respect of the non-financial performance targets set for the Executive Director, these were set against a range of strategic targets at the start of the
year. The targets set were aligned to the Group’s corporate objectives and strategy. Details of the measures, to the extent they are not commercially
sensitive are shown below.
SUSTAINABILITY - ENVIRONMENTAL
Target
Actual
Performance
% of Total Bonus
Payout %
Reduce methane intensity(a)
Threshold: 0.80 / Target: 0.76 / Stretch: 0.70
0.70
Achieved: 100%
10.00%
10.00%
Pneumatic valve replacement(b)
Threshold: N/A / Target: N/A / Stretch: 100%
100%
Achieved: 100%
5.00%
5.00%
15.00%
15.00%
SUSTAINABILITY - SOCIAL
Target
Actual
Performance
% of Total Bonus
Payout %
Reduce TRIR(a)
Threshold: 1.19 / Target: 1.07 / Stretch: 0.95
0.89
Achieved: 100%
2.50%
2.50%
Reduce LTIR(a)
Threshold: 0.88 / Target: 0.80 / Stretch: 0.71
0.38
Achieved: 100%
2.50%
2.50%
Reduce MVA(a)
Threshold: 0.65 / Target: 0.59 / Stretch: 0.52
0.34
Achieved: 100%
5.00%
5.00%
10.00%
10.00%
SUSTAINABILITY - GOVERNANCE
Target
Actual
Performance
% of Total Bonus
Payout %
Development training(c)
Threshold: 50% / Target: 60% / Stretch: 75%
86%
Achieved: 100%
5.00%
5.00%
5.00%
5.00%
(a)Refer to Key Performance Indicators within this Annual Report & Form 20-F for additional information regarding these metrics.
(b)The actual result reflects the percentage of pneumatic valves eliminated or replaced with site-specific instrument air or solar solutions.
(c)The actual result reflects the percentage of LinkedIn Learning development training courses that were completed during the year ended December 31, 2024.
87
Long-Term Incentives Outcome
2022 LTIP Awards
The performance period in respect of the Performance Share Award granted in 2022 came to an end on December 31, 2024. Performance conditions
were Return on Equity (40%), Absolute TSR (30%), Relative TSR (10%) and Methane Intensity (20%) targets measured over three years. The targets
and outcomes are set out below:
% of Total
Award
Threshold
Maximum
(15% of
maximum)
Achieved
(100% of
maximum)
Vesting % of
Component
Payout %(a)
Three-Year Average ROE(b)
40%
15%
25%
30%
100%
40%
Absolute TSR (per annum)
30%
10%
20%
0%
0%
0%
Three-Year TSR v FTSE 250
10%
50th percentile
75th percentile
65th percentile
65%
7%
Three-Year Methane Intensity Reduction
20%
10%
20%
22%
100%
20%
Performance factor
67%
(a)Calculated as % of total award multiplied by vesting % of component.
(b)Calculated as (adjusted EBITDA - recurring capital expenditures - interest expense) / invested equity.
Based on the vesting percentages above, the number of shares expected to vest in March 2025 and their estimated value (based on the three-month
average share price to December 31, 2024 of £10.870 per share ($13.96 per share based upon a GBP:USD exchange rate of £1:$1.2837) are as follows:
Maximum
number of
shares(a)
Number of shares
to lapse(b)
Number of
Shares to vest(c)
Estimated value
at vesting(d)
Grant date face
value of awards
vesting(e)
Impact of share
price on vesting(f)
Rusty Hutson, Jr.
107,830
35,591
72,239
$1,008,456
$2,201,122
$(1,192,666)
(a)Includes 37,729 dividend equivalent units accrued over the performance period to date in the maximum number of shares that will vest in March 2025.
(b)Includes 12,457 dividend equivalent units accrued over the performance period to date in the number of shares to lapse in March 2025.
(c)Includes 25,272 dividend equivalent units accrued over the performance period to date in the number of shares to vest in March 2025.
(d)Based on the three-month average share price to December 31, 2024 of $13.96 (£10.87) per share.
(e)Based on the number of shares vesting multiplied by the share price used to calculate the award of $30.47 (£23.36), being the average share price over the five-day
period commencing on March 22, 2022, the date the Group issued its final 2021 results. The award was based upon a GBP:USD exchange rate of £1:$1.3042. The date
of grant was March 15, 2022.
(f)The grant share price for the award was $30.47 (£23.36) and accordingly the relevant figures are reflective of a decrease of 54% in the Group’s share price over the
three year period.
Share Awards Granted in 2024
2024 LTIP Awards
During the year, the Executive Director received a Performance Share Award (conditional shares), which may vest after a three-year performance period
which will end on December 31, 2026, based on the achievement of stretching performance conditions.
Value of Award as a
% of Base Salary
Face Value of
Award ($)
Number of Shares
Rusty Hutson, Jr.
325%
$2,535,000
227,151
In accordance with the ongoing policy, the share price used to calculate the award was $11.16 (£8.83), being the average share price over the five-day
period commencing on March 19, 2024, the date that the Group issued its final 2023 results. The awards are based upon a GBP:USD exchange rate of
£1:$1.264, which was the exchange rate at the date of grant. The date of grant was March 25, 2024. The 2024 LTIP Awards will vest following
completion of the performance period (January 1, 2024 - December 31, 2026), and no later than March 31, 2027, and vested shares will also be subject
to a further two-year holding period. Before approving the number of shares to be awarded the Committee engaged in fulsome discussion as to whether
to apply its discretion to reduce the award value in light of the lower share price compared to the share price used for the prior year’s grant. The
Remuneration Committee determined that using the average share price over the five day period prior to grant remained appropriate in the
circumstances, as has been the Group’s policy for several years. The Remuneration Committee has certain discretion to review the outcome of the
award upon vesting and may consider adjustments in certain circumstances if the share price used could result in an unintended result. In its
deliberation, the Remuneration Committee considered the stretching and robust nature of the performance conditions used in the LTIP, and noted that
the most recent LTIP vesting outcomes were significantly lower than maximum at 67% and 40%, respectively. As of the date of this report the share
price in March 2025 is similar to the share price at the time the 2024 LTIP award was made, which indicates so far that a reduction in the value of the
award was not necessary. The Remuneration Committee will keep this under review.
The performance conditions are a weighted mix of Return on Equity (40%), Absolute TSR (30%), Relative TSR (10%) and Emissions (20%) targets
measured over three years as described below. These measures encourage the generation of sustainable long-term returns to shareholders. In
determining the level of vesting, the Remuneration Committee will consider that the outcome of the measurement reflects the underlying performance
or financial health of the Group.
88
Return on Equity (40% of Total Award)
Absolute TSR (30% of Total Award)
Three-Year Average ROE(a)
% of that Part of the Award
that Vests
Three-Year TSR
% of that Part of the Award
that Vests
Below 15% per annum
0%
Below 10% per annum
0%
15% per annum
15%
10% per annum
15%
25% per annum or above
100%
20% per annum or above
100%
15% to 25% per annum
Pro rata straight-line between
15% and 100% 
10% to 20% per annum
Pro rata straight-line between
15% and 100% 
Relative TSR (10% of Total Award)
Emissions (20% of Total Award)
Three-Year TSR v FTSE 250
% of that Part of the Award
that Vests
Emissions over Three Years
% of that Part of the Award
that Vests
Below median
0%
Below 8% Methane Intensity
Reduction
0%
Median
15%
8% Methane Intensity Reduction
15%
Upper quartile or above
100%
15% Methane Intensity Reduction
100%
Median to upper quartile
Pro rata straight-line between 15%
and 100%
8% to 15% Methane Intensity
Reduction
Pro rata straight-line between 15%
and 100%
(a)Calculated as adjusted EBITDA - recurring capital expenditures - interest expense) / invested equity.
89
Outstanding Executive Director Share Plan Awards
Details of all outstanding share awards as of December 31, 2024 made to Executive Director are set out below:
Rusty Hutson, Jr.
Award
Type
Exercise
Price
(£)
Grant Date
Interest at
January 1,
2024
Awards
Granted in
the Year
Accrued
Dividend
Equivalents
Awards
Exercised in
the Year
Awards
Lapsed in
the Year
Interest at
December
31, 2024(a)
Exercise/Vesting
Period
PSU
March 24, 2024
—
227,151
37,880
—
—
265,031
March 2027
(b)
PSU
March 21, 2023
124,051
—
10,697
—
—
134,748
March 2026
(c)
PSU
March 15, 2022
99,269
—
8,561
—
35,591
72,239
March 2025
(d)
Options
£24.00
May 9, 2019
6,600
—
—
—
—
6,600
May 2022
- May 2029
(e)
Options
£16.80
April 14, 2018
64,333
—
—
—
—
64,333
May 2021
- May 2028
(f)
(a)A performance factor of 67% was applied to 70,101 of the awards granted to Mr. Hutson in March 2022, and 37,729 dividend equivalent units accrued over the
performance period to date, resulting in remaining interest of 72,239 total units vesting in March 2025.
(b)Refer to Share Awards Granted in 2024 above for details of performance conditions.
(c)Refer to the Group's 2023 Annual Report & Form 20-F for details of performance conditions.
(d)Refer to the Group's 2022 Annual Report & Form 20-F for details of performance conditions.
(e)Options granted on May 9, 2019 with an exercise price of £24.00 per share. Consists entirely of vested but unexercised options.
(f)Options granted on April 14, 2018 with an exercise price of £16.80 per share with a three-year ratable vesting period. Consists entirely of vested but unexercised options.
During the year ended December 31, 2024, the highest closing price of the Group’s shares was $16.97 (£13.44) and the lowest closing price was $10.90
(£8.20). At December 31, 2024 the closing share price was $16.80 (£13.44).
Statement of Directors’ Shareholding & Share Interests
The table below details, for each Director, the total number of Directors’ interests in shares at December 31, 2024, which has not changed as of the
date of this report:
Shareholding
Shareholding
Required (% of
Salary)
Compliance With
Share Ownership
Guidelines
Share Interests
Rusty Hutson, Jr.
1,234,134
300%
ü
542,951
(a)
David E. Johnson
23,750
–
(b)
—
Martin K. Thomas
113,850
–
(b)
—
David J. Turner, Jr.
33,087
–
(b)
—
Sandra M. Stash
4,092
–
(b)
—
Kathryn Z. Klaber
2,912
–
(b)
—
Sylvia Kerrigan
3,181
–
(b)
—
(a)A performance factor of 67% was applied to 70,101 of the awards granted to Mr. Hutson in March 2022 and 37,729 dividend equivalent units accrued over the
performance period to date, resulting in remaining interest of 72,239 total units vesting in March 2025. As of December 31, 2024, 70,933 vested options remained
unexercised. All other awards were unvested as of December 31, 2024.
(b)The Non-Executive Directors purchase shares twice annually pursuant to the Non-Executive Director Share Purchase Program implemented in 2022. Shares purchased
under the Non-Executive Director Share Purchase Program must be held until retirement from the Board. While this is not part of the Share Ownership Guidelines, each
Non-Executive Director is in compliance with the parameters of the Non-Executive Director Share Purchase Program.
Payments to Past Directors
Robert Post retired as a Board member in April 2020. Mr. Post continued to provide advice to the Board post-retirement as a consultant, receiving fees
in 2024 of $97,500.
Payments for Loss of Office
No payments for loss of office were made during the year.
Executive Director Serving as Non-Executive Directors of Other Companies
During the year, the Executive Director did not receive any Board-related remuneration for his service as a Non-Executive Director of any other
company.
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Performance Graph & CEO Remuneration Table
The Regulations require a line graph showing the TSR on a holding of shares in the Group since admission to the Premium Segment of the Main Market
of the LSE to the most recent financial year end following such admission, as well as the TSR for a hypothetical holding of shares in a broad equity
market index for the same period. The Group was admitted to the Main Market on May 18, 2020 and the graph below covers that period, comparing the
Group’s TSR to that of the FTSE 250 (excluding Investment Trusts), an index of which the Group is a constituent. The Remuneration Committee is
satisfied that the CEO’s remuneration is supported by the TSR performance data presented below.
Total Shareholder Return
Rebased at 100 on May 18, 2020
TSR.jpg
Source: Eikon by Refinitiv
The table below details certain elements of the CEO’s remuneration over the same period as presented in the TSR Index graph:
(In thousands)
Year
CEO
Single Figure of Total
Remuneration(a)
Annual Bonus Pay-Out
Against Maximum %
Long-Term Incentive
Vesting Rates Against
Maximum Opportunity %
2024
Rusty Hutson, Jr.
$3,007
85%
67%
2023
Rusty Hutson, Jr.
$1,921
63%
40%
2022
Rusty Hutson, Jr.
$4,431
85%
71%
2021
Rusty Hutson, Jr.
$2,795
85%
45%
2020
Rusty Hutson, Jr.
$2,965
94%
100%
(a)For 2024, the single figure of total remuneration includes an estimated value for the LTIP component. For the years 2023, 2022, 2021, and 2020, the single figure of
total remuneration has been restated to reflect the actual value for the LTIP component. Refer to the Directors’ remuneration table in Part B: Annual Report on
Remuneration within this Annual Report & Form 20-F for additional information.
91
Annual Change in Remuneration of Each Director Compared to Employees
The table below presents the year-on-year (2020-2024) percentage change in remuneration for each Director and all employees of the Group and its
subsidiaries.
% Change from 2023 to
2024
% Change from 2022 to
2023
% Change from 2021 to
2022
% Change from 2020 to
2021
% Change from 2019 to
2020
Name
Salary/
Fee
Annual
Bonus
Taxable
Benefits
Salary/
Fee
Annual
Bonus
Taxable
Benefits
Salary/
Fee
Annual
Bonus
Taxable
Benefits
Salary/
Fee
Annual
Bonus
Taxable
Benefits
Salary/
Fee
Annual
Bonus
Taxable
Benefits
Rusty Hutson, Jr.
4%
41%
42%
4%
(23%)
—%
4%
21%
20%
3%
(7%)
400%
59%
55%
—%
David E. Johnson
3%
—%
—%
8%
—%
—%
19%
—%
—%
3%
—%
—%
66%
—%
—%
Martin K. Thomas
3%
—%
—%
7%
—%
—%
14%
—%
—%
2%
—%
—%
27%
—%
—%
David J. Turner, Jr.
3%
—%
—%
8%
—%
—%
16%
—%
—%
3%
—%
—%
132%
—%
—%
Sandra M. Stash
3%
—%
—%
8%
—%
—%
14%
—%
—%
2%
—%
—%
520%
—%
—%
Kathryn Z. Klaber(a)
15%
—%
—%
100%
—%
—%
—%
—%
—%
2%
—%
—%
—%
—%
—%
Sylvia Kerrigan(b)
8%
—%
—%
33%
—%
—%
445%
—%
—%
100%
—%
—%
—%
—%
—%
All employees, excluding
Directors
4%
4%
—%
4%
4%
—%
5%
5%
—%
11%
(2%)
—%
4%
4%
—%
(a)David J. Turner, Jr. was appointed to the Board on May 27, 2019.
(b)Sandra M. Stash was appointed to the Board on October 21, 2019.
(c)Kathryn Z. Klaber was appointed to the Board on January 1, 2023.
(d)Sylvia Kerrigan was appointed to the Board on October 11, 2021.
CEO to Employee Pay Ratio
Although the Group does not have 250 full time equivalent UK employees, the Group provides a CEO to employee pay ratio on a voluntary basis below.
The Remuneration Committee is satisfied that the CEO to employee pay ratio is consistent with the Group’s overall aim to ensure its employees are
rewarded fairly and competitively for their contributions.
Year
Method
25th Percentile Pay Ratio
Mean Pay Ratio
75th Percentile Pay Ratio
2024
Option A
27:1
19:1
18:1
2023
Option A
25:1
17:1
16:1
2022
Option A
28:1
19:1
17:1
2021
Option A
44:1
30:1
28:1
2020
Option A
55:1
30:1
14:1
Notes to the CEO to employee pay ratio:
(1)We have used Option A with figures as of December 31, 2024, following guidance that this is the preferred approach of some proxy advisors and
institutional shareholders. Option A captures all relevant pay and benefits for all employees.
(2)The ratios shown are representative of the 25th percentile, mean and 75th percentile pay for all employees within the Group during the 2024
calendar year.
(3)The CEO pay ratio is based on the taxable income for all employees employed for the duration of calendar year 2024 as reported on U.S. IRS Form
W-2, Wage and Tax Statement.
Relative Importance of Spend on Pay
The table below details the change in total employee pay between 2023 and 2024, compared with distributions to shareholders by way of dividend or
share buybacks.
(In thousands)
2024
2023
% Change
Total gross employee pay
$133,024
$124,834
7%
Dividends/share buybacks
104,994
179,089
(41%)
The number of employees as of December 31, 2024 was 1,589, as compared to 1,603 employees as of December 31, 2023.
92
Statement of Voting at General Meeting
The following table shows the results of the binding Remuneration Policy vote at the April 26, 2022 AGM and the advisory Directors’ Remuneration
Report vote at the May 10, 2024 AGM.
(Binding Vote)
(Advisory Vote)
Approval of the Directors’ Remuneration Policy
Director Remuneration Report
Total number of votes
% of votes cast
Total number of votes
% of votes cast
For
27,783,031
83%
25,389,754
92%
Against
5,793,079
17%
2,133,133
8%
Votes withheld
1,164,541
143,368
Shareholder Engagement
At the 2024 AGM, while shareholders approved most of the resolutions with majorities in excess of 99%, Resolution 19 (Amendment to 2017 Equity
Incentive Plan to increase the number of shares available under the Plan), while receiving 74% of the vote "FOR", did not meet the 75% threshold to
pass. The UK Corporate Governance Code requires that companies provide an update to the market within six months of an AGM where more than 20%
of shareholders have voted against a resolution. This statement provides an update on the actions that the Group has taken.
Following the AGM, the Group consulted and engaged with a number of shareholders who voted against the resolutions to better understand their
concerns. The Directors are thankful to the shareholders for sharing their views. They understand that the negative vote was principally related to the
disconnect between traditional equity compensation plans in the United States, the Group’s primary operating market. In particular, UK shareholders
were concerned that the proposed changes could have resulted in new issuances under the plan that would be in excess of the normal 10% in 10 years
dilution limit. The dialogue with the shareholders has highlighted that there remains strong support for the Group’s equity incentive arrangements and at
the upcoming AGM shareholders will be asked to approve changes to the dilution limits, in order to simplify them and to bring them into line with UK
norms, including a 10% in 10 years limit on the use of new issue or treasury shares.
The Board has discussed the feedback received in detail and continues to actively dialogue with shareholders on the equity incentive and compensation
arrangements.
Implementation of Remuneration Policy for 2025
Base Salary
The Executive Director’s base salary for 2025 will be as follows:
•Rusty Hutson, Jr: $807,128
For 2025, the Remuneration Committee approved an increase to the CEO’s salary by 3.5%. This compares to increases across the Group ranging from
0% to 7% based on performance, with an average of 3.5%. It is anticipated that increases for the remainder of the life of the policy will be in-line with
the range of the workforce.
Pension: The Executive Director does not receive a pension provision.
Benefits: The Executive Director receives life insurance and automobile benefits, and matching contributions under the Group’s 401(k) plan. There is
no current intention to introduce additional benefits in 2025.
Annual Bonus: Subject to approval of the Policy, the overall 2025 bonus plan maximum will be 200% of base salary for Rusty Hutson, Jr. and will be
based on a range of targets relating to adjusted EBITDA per share (50%), cash cost per Mcfe (25%), and sustainability measures (25%).
Due to issues of commercial sensitivity, we do not believe it is in shareholders’ interests to disclose any further details of these targets on a prospective
basis. However, the Remuneration Committee is committed to adhering to principles of transparency in terms of retrospective annual bonus target
disclosure and will, therefore, provide appropriate and relevant levels of disclosure for the bonus targets applied to the 2025 bonus (and performance
against these targets) in next year’s Director’s Remuneration Report.
Bonuses are payable in cash. For Executive Directors who have not yet achieved the required shareholding, 50% will be deferred as either shares or
cash for two years provided continued service. Current Executive Directors who have met their shareholding guidelines will not be required to defer any
of the annual bonus.
Long-Term Incentives: Subject to approval of the Policy, Performance Share Awards will be made in 2025 to Rusty Hutson, Jr. with shares worth
325% of salary and Restricted Share Awards with shares worth 100% of salary. The share price used to calculate the number of shares subject to the
award will be based on the average share price over the five-day period commencing on the date that the Group issues its final 2024 results. These
awards will vest three years after grant, and will also be subject to a further two-year holding period after the initial three-year period to vesting.
The performance conditions for the Performance Share Award will be a mix of Return on Equity (40%), Absolute TSR (20%), Relative TSR (20%) and
Emissions (20%) targets measured over three years as described below. These are measures which encourage the generation of sustainable long-term
returns to shareholders. When determining the level of vesting the Remuneration Committee will also consider that the outcome of the measurement
reflects the underlying performance or financial health of the Group.
93
Return on Equity (40% of Total Award)
Absolute TSR (20% of Total Award)
Three-Year Average ROE
% of that Part of the Award
that Vests
Three-Year Absolute TSR
% of that Part of the Award
that Vests
Below 15% per annum
—%
Below 10% per annum
—%
15% per annum
15%
10% per annum
15%
25% per annum or above
100%
20% per annum or above
100%
15% to 25% per annum
Pro rata straight-line between 15%
and 100%
10% to 20% per annum
Pro rata straight-line between 15%
and 100%
Relative TSR (20% of Total Award)
Emissions (20% of Total Award)
Three-Year TSR v Bespoke Peer
Group(a)
% of that Part of the Award
that Vests
Emissions during 2026 - 2027
over Baseline(b)
% of that Part of the Award
that Vests
Below median
—%
Below 5% emissions reduction
—%
Median
15%
5% emissions reduction
15%
Upper quartile or above
100%
10% emissions reduction
100%
Median to upper quartile
Pro rata straight-line between 15%
and 100%
5% to 10% emissions reduction
Pro rata straight-line between 15%
and 100%
(a)Comprised of Amplify Energy Corp, Berry Corporation, CNX Resources Corp, Granite Ridge Resources, Highpeak Energy, Mach Natural Resources, Northern Oil and Gas,
Riley Exploration Permian, Ring Energy, TXO Partners, Vital Energy, and W&T Offshore.
(b)Baseline emissions number against which the reductions will be measured will be calculated over the course of 2025 and subject to final Remuneration Committee
approval.
Non-Executive Directors’ Fees
David E. Johnson will receive an annual fee of £174,000 (or $222,720) as Chairman. Each Non-Executive Director receives a base annual fee of
£105,000 (or $134,400), with additional fees as noted below (table in thousands, except rates).
GBP
Exchange Rate
USD
David J. Turner, Jr.(a)
£135
1.28
$173
Sandra M. Stash(b)
125
1.28
160
Sylvia Kerrigan(c)
135
1.28
173
David E. Johnson
174
1.28
223
Martin K. Thomas(d)
125
1.28
160
Kathryn Z. Klaber(e)
125
1.28
160
Total
£819
$1,049
(a)Includes Audit & Risk Committee Chair fee of £30,000 (or $38,400).
(b)Includes Sustainability & Safety Committee Chair fee of £20,000 (or $25,600).
(c)Includes Senior Independent Director fee of £10,000 (or $12,800) and Remuneration Committee Chair fee of £20,000 (or $25,600).
(d)Includes Vice Chair fee of £20,000 (or $25,600).
(e)Includes Nomination & Governance Committee Chair fee of £20,000 (or $25,600).
/s/ David J. Turner, Jr.
/s/ David E. Johnson
/s/ Sandra M. Stash
David J. Turner, Jr.
David E. Johnson
Sandra M. Stash
Chair of the Remuneration
Committee
Chair of the Board and Member of
the Remuneration Committee
Member of the Remuneration
Committee
March 17, 2025
March 17, 2025
March 17, 2025
The Sustainability & Safety Committee’s Report
Committee Composition
•Sandra M. Stash, Chair
•David E. Johnson
•Kathryn Z. Klaber
Key Objective
The Sustainability & Safety Committee acts on behalf of the Board and the shareholders to oversee the practices and performance of the Group with
respect to health and safety, business ethics, conduct and responsibility, social affairs, the environment and broader sustainability issues. As part of the
Group’s overall sustainability actions, the Sustainability & Safety Committee oversees the Group’s climate scenario analysis planning and performance
against goals and ensures adherence to the recommended TCFD disclosures for use by investors, lenders, insurers and other stakeholders.
94
Overview
The Sustainability & Safety Committee assesses the Group’s overall sustainability performance and provides input into the Annual Report & Form 20-F,
the Sustainability Report and other disclosures on sustainability. It also advises the Remuneration Committee on metrics relating to sustainable
development, GHG and other emissions, regulatory compliance, community engagement and other social goals, as well as health and safety that apply
to executive remuneration.
The Sustainability & Safety Committee reviews the Group’s Sustainability and Safety plans and reviews execution of the plan and audit outcomes. In
addition, the Sustainability & Safety Committee reviews and considers external stakeholder perspectives in relation to the Group’s business, and reviews
how the Group addresses issues of stakeholder concern that could affect its reputation and license to operate.
The overall accountability for sustainability and safety is with the President and Chief Financial Officer and the Senior Leadership Team, including the
Executive Vice President of Operations, Chief Human Resources Officer, the Senior Vice President of EHS and the Senior Vice President of Sustainability,
who are assisted by the EHS team.
Key Matters Discussed by the Committee
During the past year the Sustainability & Safety Committee:
•Established and reviewed the Group’s sustainability and safety strategies and assessed the Group’s performance;
•Continued the review program to align executive management remuneration with key safety and sustainability performance indicators and metrics,
including factoring GHG reductions into long-term incentives, that has been communicated to the Remuneration Committee;
•Engaged with the leadership of the Group to understand the diversity profile of the Group’s workforce;
•Engaged with a consortium of advisers, comprising leading global environmental consultancies and other strategic advisers, and continued to
implement the recommendations set forth by the TCFD with the exception of reporting on Scope 3; and
•Reviewed the Group’s sustainability related communications, including the composition and approval of the Group’s 2023 Sustainability Report
and preparation for issuance of the 2024 Sustainability Report.
Committee Activities by Focus Area
During 2024, the Sustainability & Safety Committee met regularly to review and discuss a range of prioritized topics. These topics included (i) the
safe and responsible operation of the Group’s upstream and midstream assets; (ii) environmental protection and conservation activities; (iii) the Group’s
approach to managing climate risk, (iv) the Group’s emissions reduction capital programs; and (v) the Group’s plugging business. The Sustainability &
Safety Committee also focused on the following:
Process Safety
The Executive Vice President of Operations presented an overview of the Group’s process safety approach and identification of high-risk facility
performance, as well as comparable performance benchmarking against industry peers.
Corporate Scorecard Metrics Oversight
•The Sustainability & Safety Committee reviewed the quantitative and qualitative drivers impacting the Group’s personnel safety, emissions
management, environmental performance, and asset retirement metrics that support performance analysis.
•The Sustainability & Safety Committee reviewed and discussed the Group’s incident rate for the year. The Group created and empowered a new
Safety Strategy Committee to address safety culture survey findings, including identifying and advancing specific areas for improvement and
accountability. The Group also established monthly Foreman-Led safety meetings and regular Safety Task Force meetings, which have lead to
meaning improvements and interactions.
Sustainability Rating Agency Scorecard
The Sustainability & Safety Committee reviewed the Group’s various third-party sustainability rating scores, including analysis of the process and review
of scorecards to determine targeted areas of improvement.
Climate Review
The Sustainability & Safety Committee engaged the support of industry and internationally recognized consultants and advisers to help the Group
update its climate scenario analysis and advance its work on governance, strategy, risk management and metrics as set forth under the TCFD. The
Sustainability & Safety Committee oversaw the Group’s engagement with the GHG emissions inventory and associated scenario analyses and remains
actively engaged in setting targets in accordance with the recommendations. The Sustainability & Safety Committee has considered the relevance of
material climate-related matters when preparing this Annual Report & Form 20-F.
Climate topics reviewed at the Sustainability Committee meetings and/or effectuated during 2024 included:
•Progress on 2024 emission reduction goals
•Long-term strategy for asset retirement of Company-owned wells and third-party owned or abandoned wells
•U.S. and UK climate regulations and reporting requirements and potential impact thereof
•Capital budgets and expenditures for emission reduction and other climate initiatives
•Environmental-related KPIs for executive remuneration
•Environmental considerations in M&A screening and due diligence processes
•OGMP 2.0 Gold Standard certification progress and actions
•Emergency response readiness, including stakeholder communications and business continuity
Acquisition Due Diligence
Adding emphasis to its oversight of the Group’s investment activities, the Sustainability & Safety Committee stayed apprised of the progress and
assessment of the Group’s emissions screening efforts to aid in its assessment that proposed acquisitions and other capital investments have on its
consolidated GHG emissions profile and associated publicly stated targets.
95
Emission Reduction Initiative
The Sustainability & Safety Committee engaged in strategic discussions with senior management regarding its capital program for emissions reductions,
including regular updates on the deployment and success of handheld detection equipment and aerial LiDAR surveys, as well as the replacement of
pneumatic valves.
Oil & Gas Methane Partnership Recognition
The Sustainability & Safety Committee supported the Group’s efforts in achieving the OGMP 2.0 Gold Standard Pathway designation in recognition of the
Group’s demonstrated commitment to set aggressive and achievable multi-year plans designed to accurately measure and transparently report its efforts
to reduce methane emissions.
Committee Effectiveness
The Sustainability & Safety Committee performed a critical analysis internal review and evaluation on itself, as part of its annual self-review process. No
significant areas of concern were raised.
Membership
The formation of a Sustainability & Safety Committee is not a recommendation under the current UK Corporate Governance Code. The Group and the
Board, however, consider such a committee to be an imperative given the operational footprint of the business and the evolving operational, regulatory,
social and investment markets within which the Group operates.
The Sustainability & Safety Committee is currently comprised of the Non-Executive Chairman and two Independent Non-Executive Directors: Sandra M.
Stash, the Sustainability & Safety Committee Chair, David E. Johnson and Kathryn Z. Klaber. Benjamin Sullivan, Senior Executive Vice President, Chief
Legal & Risk Officer and Corporate Secretary acts as Secretary to the committee.
The Sustainability & Safety Committee has extensive and relevant experience in EHS and social matters through their other business activities. For one
example, Ms. Stash formerly served as Executive Vice President — Safety, Operations, Engineering, and External Affairs for Tullow Oil until her
retirement.
Meetings and Attendance
The Sustainability & Safety Committee met six times during 2024 and twice thus far in 2025. The Sustainability & Safety Committee also regularly meets
in private executive session at the end of its committee meetings, without management present, to ensure that points of common concern are identified
and that priorities for future attention by the committee are agreed upon. The Chair of the Sustainability & Safety Committee keeps in close contact with
the Chief Legal & Risk Officer, the Senior Vice President of Sustainability, the Senior Vice President of EHS and the EHS team and external consultants
between meetings of the committee. For Sustainability & Safety Committee meeting attendance for each Director refer to the Directors’ Report within
this Annual Report & Form 20-F.
The list below details the members of the Senior Leadership Team who were invited to attend meetings as appropriate during the calendar year.
•Bradley G. Gray (President and Chief Financial Officer)
•Benjamin Sullivan (Senior Executive Vice President, Chief Legal & Risk Officer, and Corporate Secretary)
•Maverick Bentley (Executive Vice President of Operations)
•Paul Espenan (Senior Vice President of Environmental, Health and Safety)
•Teresa Odom (Senior Vice President of Sustainability)
•Mark Kirkendall (Executive Vice President, Chief Human Resources Officer)
Responsibilities and Terms of Reference
The Sustainability & Safety Committee’s main duties are:
•Overseeing the development and implementation by management of policies, compliance systems, and monitoring processes to ensure compliance
by the Group with applicable legislation, rules and regulations;
•Establishing with management long-term emissions, climate and social sustainability and, EHS goals and evaluating the Group’s progress against
those goals;
•Advising management on implementing, maintaining and improving environmental and social sustainability and EHS strategies, implementation of
which creates value consistent with long-term preservation and enhancement of shareholder value;
•Considering and advising management of emerging environmental and social sustainability issues that may affect the business, performance or
reputation of the Group and makes recommendations, as appropriate, on how management can address such issues;
•Monitoring the Group’s risk management processes related to environmental and social sustainability and EHS with particular attention to managing
and reducing environmental risks and impacts; and
•Reviewing handling of incident reports, results of investigations into material events, findings from environmental and social sustainability and EHS
audits and the action plans proposed pursuant to those findings.
The Sustainability & Safety Committee has formal terms of reference which can be viewed on the Group’s website.
/s/ Sandra M. Stash
Sandra M. Stash
Chair of the Sustainability & Safety Committee
March 17, 2025
96
Group Financial Statements
Page
Notes to the Group Financial Statements
97
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Diversified Energy Company Plc
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statement of financial position of Diversified Energy Company Plc and its subsidiaries (the "Company")
as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for each
of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial
statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in
conformity with International Financial Reporting Standards issued by the International Accounting Standards Board. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over
Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the
consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The Impact of Proved Developed Natural Gas, Oil, and Natural Gas Liquids (NGL) Reserves on Natural Gas and Oil Properties, Net
As described in Notes 3, 4 and 10 to the consolidated financial statements, the Company's natural gas and oil properties, net balance was $2.91 billion
as of December 31, 2024, and the related depletion expense for the year ended December 31, 2024 was $197 million. Natural gas and oil activities are
accounted for using the principles of the successful efforts method of accounting. Costs incurred to purchase, lease, or otherwise acquire a property are
capitalized when incurred. Proved natural gas, oil and NGL reserve volumes are used as the basis to calculate unit-of-production depletion rates. In
estimating proved natural gas, oil and NGL reserves, management relies on interpretations and judgment of available geological, geophysical,
engineering and production data, as well as the use of certain economic assumptions such as commodity pricing. Additional assumptions include
operating expenses, capital expenditures, and taxes. As disclosed by management, the Company's internal staff of petroleum engineers and geoscience
professionals work closely with the independent reserve engineers (together referred to as "management's specialists").
The principal considerations for our determination that performing procedures relating to the impact of proved developed natural gas, oil and NGL
reserves on natural gas and oil properties, net is a critical audit matter are (i) the significant judgment by management, including the use of
management's specialists, when developing the estimates of proved developed natural gas, oil and NGL reserve volumes, and (ii) a high degree of
98
auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to data, methods, and assumptions
used by management and its specialists in developing the estimates of proved developed natural gas, oil and NGL reserve volumes.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of controls relating to management’s estimates of proved developed natural
gas, oil and NGL reserves. The work of management's specialists was used in performing the procedures to evaluate the reasonableness of the proved
natural gas, oil and NGL reserve volumes. As a basis for using this work, the specialists' qualifications were understood and the Company's relationship
with the specialists was assessed. The procedures performed also included evaluating the methods and assumptions used by the specialists, testing the
completeness and accuracy of data used by the specialists, and evaluating the specialists' findings related to estimated future production volumes by
comparing the estimate to relevant historical and current period information, as applicable. Additionally, these procedures included evaluating whether
the assumptions applied to the data related to commodity pricing and operating expenses that were used in developing the estimate of proved
developed natural gas, oil and NGL reserve volumes were reasonable considering the past performance of the Company.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 17, 2025
We have served as the Company’s auditor since 2020.
99
Consolidated Statement of Comprehensive Income
(Amounts in thousands, except share, per share and per unit data)
Year Ended
Notes
December 31, 2024
December 31, 2023
December 31, 2022
Revenue
6
$794,841
$868,263
$1,919,349
Operating expenses
7
(428,902)
(440,562)
(445,893)
Depreciation, depletion and amortization
7
(256,484)
(224,546)
(222,257)
Gross profit
$109,455
$203,155
$1,251,199
General and administrative expenses
7
(129,119)
(119,722)
(170,735)
Allowance for expected credit losses
7
(101)
(8,478)
—
Gain (loss) on natural gas and oil properties and equipment
10,11
25,678
24,146
2,379
Gain (loss) on sale of equity interest
5
(7,375)
18,440
—
Unrealized gain (loss) on investment
5
(4,013)
4,610
—
Gain (loss) on derivative financial instruments
13
(37,551)
1,080,516
(1,758,693)
Gain on bargain purchases
5
—
—
4,447
Impairment of proved properties
10
—
(41,616)
—
Operating profit (loss)
$(43,026)
$1,161,051
$(671,403)
Finance costs
21
(137,643)
(134,166)
(100,799)
Accretion of asset retirement obligation
19
(30,868)
(26,926)
(27,569)
Loss on early retirement of debt
21
(14,753)
—
—
Other income (expense)
2,338
385
269
Income (loss) before taxation
$(223,952)
$1,000,344
$(799,502)
Income tax benefit (expenses)
8
136,951
(240,643)
178,904
Net income (loss)
$(87,001)
$759,701
$(620,598)
Other comprehensive income (loss)
(1,822)
(270)
940
Total comprehensive income (loss)
$(88,823)
$759,431
$(619,658)
Net income (loss) attributable to:
Owners of Diversified Energy Company PLC
$(88,272)
$758,018
$(625,410)
Non-controlling interest
1,271
1,683
4,812
Net income (loss)
$(87,001)
$759,701
$(620,598)
Earnings (loss) per share attributable to Owners of Diversified Energy Company PLC
Weighted average shares outstanding - basic
9
48,031,916
47,165,380
42,203,974
Weighted average shares outstanding - diluted
9
48,031,916
47,514,521
42,203,974
Earnings (loss) per share - basic
9
$(1.84)
$16.07
$(14.82)
Earnings (loss) per share - diluted
9
$(1.84)
$15.95
$(14.82)
The notes on pages 103 to 144 are an integral part of the Group Financial Statements.
100
Consolidated Statement of Financial Position
(Amounts in thousands, except share, per share and per unit data)
Notes
December 31, 2024
December 31, 2023
ASSETS
Non-current assets:
Natural gas and oil properties, net
10
$2,905,702
$2,490,375
Property, plant and equipment, net
11
449,540
456,208
Intangible assets
12
15,180
19,351
Restricted cash
3
34,843
25,057
Derivative financial instruments
13
28,439
24,401
Deferred tax assets
8
259,287
144,860
Other non-current assets
15
6,270
9,172
Total non-current assets
3,699,261
3,169,424
Current assets:
Trade receivables, net
14
$234,421
$190,207
Cash and cash equivalents
3
5,990
3,753
Restricted cash
3
11,426
11,195
Derivative financial instruments
13
33,759
87,659
Other current assets
15
18,668
11,784
Total current assets
304,264
304,598
Total assets
$4,003,525
$3,474,022
EQUITY AND LIABILITIES
Shareholders' equity:
Share capital
16
$13,762
$12,897
Share premium
16
1,262,711
1,208,192
Treasury reserve
(119,006)
(102,470)
Share based payment and other reserves
20,170
14,442
Retained earnings (accumulated deficit)
(724,960)
(547,255)
Equity attributable to Owners of Diversified Energy Company PLC:
452,677
585,806
Non-controlling interests
3
11,879
12,604
Total equity
464,556
598,410
Non-current liabilities:
Asset retirement obligations
19
$642,142
$501,246
Leases
20
30,824
20,559
Borrowings
21
1,483,779
1,075,805
Deferred tax liability
8
8,011
13,654
Derivative financial instruments
13
608,869
623,684
Other non-current liabilities
23
5,384
2,224
Total non-current liabilities
2,779,009
2,237,172
Current liabilities:
Trade and other payables
22
$35,013
$53,490
Taxes payable
33,498
50,226
Leases
20
13,776
10,563
Borrowings
21
209,463
200,822
Derivative financial instruments
13
163,676
45,836
Other current liabilities
23
304,534
277,503
Total current liabilities
759,960
638,440
Total liabilities
3,538,969
2,875,612
Total equity and liabilities
$4,003,525
$3,474,022
The notes on pages 103 to 144 are an integral part of the Group Financial Statements.
The Group Financial Statements were approved and authorized for issue by the Board on March 17, 2025 and were signed on its behalf by:
/s/ David E. Johnson
David E. Johnson
Chairman of the Board
March 17, 2025
101
Consolidated Statement of Changes in Equity
(Amounts in thousands, except share, per share and per unit data)
Notes
Share
Capital
Share
Premium
Treasury
Reserve
Share
Based
Payment
and
Other
Reserves
Retained
Earnings
(Accumulated
Deficit)
Equity
Attributable
to Owners
of
Diversified
Energy
Company
PLC
Non-
Controlling
Interest
Total
Equity
Balance as of January 1, 2022
$11,571
$1,052,959
$(68,537)
$14,156
$(362,740)
$647,409
$16,541
$663,950
Net income (loss)
—
—
—
—
(625,410)
(625,410)
4,812
(620,598)
Other comprehensive income (loss)
—
—
—
—
940
940
—
940
Total comprehensive income (loss)
$—
$—
$—
$—
$(624,470)
$(624,470)
$4,812
$(619,658)
Issuance of share capital (settlement of
warrants)
16
5
—
—
452
—
457
—
457
Issuance of share capital (equity
compensation)
7
—
—
5,682
(3,307)
2,382
—
2,382
Issuance of EBT shares (equity
compensation)
16
—
—
2,400
(2,400)
—
—
—
—
Repurchase of shares (EBT)
16
—
—
(22,931)
—
—
(22,931)
—
(22,931)
Repurchase of shares (share buyback
program)
16
(80)
—
(11,760)
80
—
(11,760)
—
(11,760)
Dividends
18
—
—
—
—
(143,455)
(143,455)
—
(143,455)
Distributions to non-controlling interest
owners
—
—
—
—
—
—
(6,389)
(6,389)
Cancellation of warrants
16
—
—
—
(320)
—
(320)
—
(320)
Transactions with shareholders
$(68)
$—
$(32,291)
$3,494
$(146,762)
$(175,627)
$(6,389)
$(182,016)
Balance as of December 31, 2022
$11,503
$1,052,959
$(100,828)
$17,650
$(1,133,972)
$(152,688)
$14,964
$(137,724)
Net income (loss)
—
—
—
—
758,018
758,018
1,683
759,701
Other comprehensive income (loss)
—
—
—
—
(270)
(270)
—
(270)
Total comprehensive income (loss)
$—
$—
$—
$—
$757,748
$757,748
$1,683
$759,431
Issuance of share capital (equity
placement)
16
1,555
155,233
—
—
—
156,788
—
156,788
Issuance of share capital (equity
compensation)
—
—
—
6,037
(2,990)
3,047
—
3,047
Issuance of EBT shares (equity
compensation)
16
—
—
9,406
(9,406)
—
—
—
—
Repurchase of shares (share buyback
program)
16
(161)
—
(11,048)
161
—
(11,048)
—
(11,048)
Dividends
18
—
—
—
—
(168,041)
(168,041)
—
(168,041)
Distributions to non-controlling interest
owners
—
—
—
—
—
—
(4,043)
(4,043)
Transactions with shareholders
$1,394
$155,233
$(1,642)
$(3,208)
$(171,031)
$(19,254)
$(4,043)
$(23,297)
Balance as of December 31, 2023
$12,897
$1,208,192
$(102,470)
$14,442
$(547,255)
$585,806
$12,604
$598,410
Net income (loss)
—
—
—
—
(88,272)
(88,272)
1,271
(87,001)
Other comprehensive income (loss)
—
—
—
—
(1,822)
(1,822)
—
(1,822)
Total comprehensive income (loss)
$—
$—
$—
$—
$(90,094)
$(90,094)
$1,271
$(88,823)
Issuance of share capital (acquisition
consideration)
16
1,185
54,519
—
—
—
55,704
—
55,704
Issuance of share capital (equity
compensation)
—
—
—
10,002
(3,747)
6,255
—
6,255
Issuance of EBT shares (equity
compensation)
16
—
—
4,594
(4,594)
—
—
—
—
Repurchase of shares (EBT)
16
—
—
(5,229)
—
—
(5,229)
—
(5,229)
Repurchase of shares (share buyback
program)
16
(320)
—
(15,901)
320
—
(15,901)
—
(15,901)
Dividends
18
—
—
—
—
(83,864)
(83,864)
—
(83,864)
Distributions to non-controlling interest
owners
—
—
—
—
—
—
(1,996)
(1,996)
Transactions with shareholders
$865
$54,519
$(16,536)
$5,728
$(87,611)
$(43,035)
$(1,996)
$(45,031)
Balance as of December 31, 2024
$13,762
$1,262,711
$(119,006)
$20,170
$(724,960)
$452,677
$11,879
$464,556
The notes on pages 103 to 144 are an integral part of the Group Financial Statements.
102
Consolidated Statement of Cash Flows
(Amounts in thousands, except share, per share and per unit data)
Year Ended
Notes
December 31, 2024
December 31, 2023
December 31, 2022
Cash flows from operating activities:
Net income (loss)
$(87,001)
$759,701
$(620,598)
Cash flows from operations reconciliation:
Depreciation, depletion and amortization
7
256,484
224,546
222,257
Accretion of asset retirement obligations
19
30,868
26,926
27,569
Impairment of proved properties
10
—
41,616
—
Income tax (benefit) expense
8
(136,951)
240,643
(178,904)
(Gain) loss on fair value adjustments of unsettled financial instruments
13
189,030
(905,695)
861,457
Asset retirement costs
19
(8,375)
(5,961)
(4,889)
(Gain) loss on natural gas and oil properties and equipment
5,10,11
(25,678)
(24,146)
(2,379)
(Gain) loss on sale of equity interest
5
7,375
(18,440)
—
Unrealized (gain) loss on investment
5
4,013
(4,610)
—
Gain on bargain purchases
5
—
—
(4,447)
Finance costs
21
137,643
134,166
100,799
Loss on early retirement of debt
21
14,753
—
—
Hedge modifications
13
—
26,686
(133,573)
Non-cash equity compensation
17
8,286
6,494
8,051
Working capital adjustments:
Change in trade receivables and other current assets
(27,555)
104,571
13,760
Change in other non-current assets
(923)
1,661
(580)
Change in trade and other payables and other current liabilities
(6,204)
(183,530)
132,349
Change in other non-current liabilities
1,319
(6,236)
(6,794)
Cash generated from operations
$357,084
$418,392
$414,078
Cash paid for income taxes
(11,421)
(8,260)
(26,314)
Net cash provided by operating activities
$345,663
$410,132
$387,764
Cash flows from investing activities:
Consideration for business acquisitions, net of cash acquired
5
$—
$—
$(24,088)
Consideration for asset acquisitions
5
(288,489)
(262,329)
(264,672)
Proceeds from divestitures
5
59,048
95,749
—
Expenditures on natural gas and oil properties and equipment
10,11
(52,100)
(74,252)
(86,079)
Proceeds on disposals of natural gas and oil properties and equipment
10,11
9,675
4,083
12,189
Deferred consideration payments
5
(1,050)
(2,620)
—
Contingent consideration payments
24
—
—
(23,807)
Net cash used in investing activities
$(272,916)
$(239,369)
$(386,457)
Cash flows from financing activities:
Repayment of borrowings
21
$(1,653,489)
$(1,547,912)
$(2,139,686)
Proceeds from borrowings
21
1,844,768
1,537,230
2,587,554
Prepayment charge on early retirement of debt
21
(1,752)
—
—
Cash paid for interest
21
(123,141)
(116,784)
(83,958)
Debt issuance costs
21
(20,267)
(13,776)
(34,234)
Decrease (increase) in restricted cash
3
(3,864)
11,792
(36,287)
Hedge modifications associated with ABS Notes
13, 21
—
(6,376)
(105,316)
Proceeds from equity issuance, net
16
—
156,788
—
Proceeds from lease modifications
20
8,568
—
—
Principal element of lease payments
20
(14,343)
(12,169)
(10,211)
Cancellation (settlement) of warrants, net
16
—
—
137
Dividends to shareholders
18
(83,864)
(168,041)
(143,455)
Distributions to non-controlling interest owners
3
(1,996)
(4,043)
(6,389)
Repurchase of shares by the EBT
16
(5,229)
—
(22,931)
Repurchase of shares
16
(15,901)
(11,048)
(11,760)
Net cash used in financing activities
$(70,510)
$(174,339)
$(6,536)
Net change in cash and cash equivalents
2,237
(3,576)
(5,229)
Cash and cash equivalents, beginning of period
3,753
7,329
12,558
Cash and cash equivalents, end of period
$5,990
$3,753
$7,329
The notes on pages 103 to 144 are an integral part of the Group Financial Statements.
103
Notes to the Group Financial Statements
(Amounts in thousands, except share, per share and per unit data)
Note 1 - General Information
(Amounts in thousands, except share, per share and per unit data)
Diversified Energy Company PLC (the “Parent” or “Company”), and its wholly owned subsidiaries (the “Group”) is an independent energy company
engaged in the production, transportation and marketing of primarily natural gas related to its synergistic U.S. onshore upstream and midstream assets.
The Group’s assets are located within the Appalachian Region and Central Region in the U.S.
The Company was incorporated on July 31, 2014 in the United Kingdom and is registered in England and Wales under the Companies Act 2006 as a
public limited company under company number 09156132. The Group‘s registered office is located at 4th floor Phoenix House, 1 Station Hill, Reading,
Berkshire, RG1 1NB, UK.
In May 2020, the Company’s shares were admitted to trading on the LSE’s Main Market for listed securities under the ticker “DEC”. In December 2023,
the Company’s shares were admitted to trading on the New York Stock Exchange (“NYSE”) under the ticker “DEC.” As of December 31, 2024, the
principal trading market for the Company’s ordinary shares was the LSE.
Note 2 - Basis of Preparation
(Amounts in thousands, except share, per share and per unit data)
Basis of Preparation
The Group's consolidated financial statements (the “Group Financial Statements”) have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The principal accounting policies set out below have
been applied consistently throughout the year and are consistent with prior year unless otherwise stated.
Unless otherwise stated, the Group Financial Statements are presented in U.S. Dollars, which is the Group’s subsidiaries’ functional currency and the
currency of the primary economic environment in which the Group operates, and all values are rounded to the nearest thousand dollars except share,
per share and per unit amounts and where otherwise indicated.
Transactions in foreign currencies are translated into U.S. Dollars at the rate of exchange on the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the exchange rate at the date of the Consolidated Statement of Financial Position. Where the
Group’s subsidiaries have a different functional currency, their results and financial position are translated into the presentation currency as follows:
•Assets and liabilities in the Consolidated Statement of Financial Position are translated at the closing rate at the date of that Consolidated Statement
of Financial Position;
•Income and expenses in the Consolidated Statement of Comprehensive Income are translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
•All resulting exchange differences are reflected within other comprehensive income in the Consolidated Statement of Comprehensive Income.
The Group Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities
(including derivative instruments) held at fair value through profit and loss or through other comprehensive income.
Segment Reporting
The Group is an independent owner and operator of producing natural gas and oil wells with properties located in the states of Tennessee, Kentucky,
Virginia, West Virginia, Ohio, Pennsylvania, Oklahoma, Texas and Louisiana. The Group’s strategy is to acquire long-life producing assets, efficiently
operate those assets to generate free cash flow for shareholders and then to retire assets safely and responsibly at the end of their useful life. The
Group’s assets consist of natural gas and oil wells, pipelines and a network of gathering lines and compression facilities which are complementary to the
Group’s assets.
In accordance with IFRS the Group establishes segments on the basis on which those components of the Group are evaluated regularly by the chief
executive officer, the Group’s chief operating decision maker (“CODM”), when deciding how to allocate resources and in assessing performance. When
evaluating performance as well as when acquiring and managing assets the CODM does so in a consolidated and complementary fashion to vertically
integrate and improve margins. Accordingly, when determining operating segments under IFRS 8, the Group has identified one reportable segment that
produces and transports natural gas, NGLs and oil in the U.S.
Going Concern
The Group Financial Statements have been prepared on the going concern basis, assuming the continuation of normal business activities, the realization
of assets, and the settlement of liabilities in the ordinary course of business. After reviewing the Group’s overall position and outlook, the Directors
believe that the Group is adequately funded to continue operating as a going concern for at least the next twelve months from the date of approval of
this Annual Report & Form 20-F.
The Directors diligently oversee and manage the Group’s liquidity risk. While our financial outlook is primarily evaluated through the annual business
planning process, it is also closely monitored on a monthly basis. This involves regular Board discussions, led by senior leadership, to assess the Group’s
current performance and future outlook. The business planning process produces key performance objectives, an assessment of the Group’s primary
risks, the anticipated operational outlook, and a set of financial forecasts that consider the available funding sources (the “Base Plan”).
The Base Plan was formed on key assumptions that support the business planning process. These assumptions include:
•Projected operating cash flows are calculated based on a production profile that aligns with current operating results and observed decline rates;
•Assumes commodity prices align with the current forward curve, taking into account basis differentials;
•Operating cost levels remain consistent with historical trends;
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•The financial impact of our current hedging contracts for the assessment period, covering approximately 86% and 82% of total production volumes
for the years ending December 31, 2025 and 2026, respectively; and
•The scenario also accounts for the scheduled principal and interest payments on our existing debt arrangements.
The Directors and management also evaluate various scenarios around the Base Plan, focusing on more severe but plausible downside impacts of the
principal risks, both individually and collectively. They also consider the additional capital requirements these downside scenarios might impose. These
scenarios include:
Scenario 1: Cyclically low gas prices for a year, with Henry Hub prices at $2.00 per MMbtu before returning to strip pricing, reflecting historically
observed market conditions.
Scenario 2: Considered the impact of climate change by assuming a two-week period of lost production in our East Texas/Louisiana region, which is
prone to hurricanes, due to a natural disaster (assumed to occur once each year during the assessment period).
Scenario 3: Considered the impact of climate change by assuming a two-week period of lost production in our Appalachian region (assumption of lost
production affecting 25% of the region), which is prone to flooding, due to a natural disaster (assumed to occur once each year during the assessment
period).
Under these downside sensitivity scenarios, the Group continues to meet its working capital requirements, primarily consisting of derivative liabilities.
These liabilities, when settled, will be funded using the higher commodity revenues from which they were derived. Additionally, the Group will continue
to meet the covenant requirements under its Credit Facility and other existing borrowing instruments.
The Directors and management assess the potential impact of these principal risks on the Group’s prospects within the assessment period and evaluate
opportunities to actively mitigate the risk of these severe but plausible downside scenarios. In addition to modeling downside going concern scenarios,
the Board has stress-tested the model to determine the extent of downturn that would result in a breach of covenants. Assuming similar levels of cash
conversion as seen in 2024, a significant decline in production volume and pricing, well beyond historical experiences, would need to persist throughout
the going concern period for a covenant breach to occur, which is considered very unlikely.
In addition to the scenarios mentioned, the Directors also considered the current geopolitical environment and the inflationary pressures affecting the
U.S., which the Group is closely monitoring. Despite modeling specific hypothetical scenarios, the Group believes that the impact of these events will
largely continue to be reflected in commodity markets, extending the recent volatility. The Group views commodity price risk a principal risk and will
continue to actively monitor and mitigate this risk through its hedging program.
Based on this assessment, the Directors have reviewed the Group’s overall position and outlook and believe that the Group is sufficiently funded to
operate as a going concern for the next twelve months from the date of approval of the Group Financial Statements.
Basis of Consolidation
Group companies included in the Group Financial Statements for the year ended December 31, 2024 are Parent and all subsidiary undertakings, which
are those entities controlled by the Parent. Control exists when the Group has the power to direct the activities of an entity so as to affect the return on
investment.
The net assets and results of acquired businesses are included in the Group Financial Statements from their respective dates of acquisition, being the
date on which the Group obtains control.
The results of disposed businesses are included in the consolidated financial statements up to their date of disposal, being the date control ceases.
Intra-Group transactions and balances are eliminated.
The Group Financial Statements for the year ended December 31, 2024 reflect the following corporate structure of the Group, and its wholly owned
subsidiaries:
•Diversified Energy Company PLC (“DEC”) as
well as its wholly owned subsidiaries
•Diversified Gas & Oil Corporation
•Diversified Production LLC
•Diversified ABS Holdings LLC
•Diversified ABS LLC
•Diversified ABS Phase II Holdings LLC
•Diversified ABS Phase II LLC
•Diversified ABS Phase IV Holdings LLC
•Diversified ABS Phase IV LLC
•DP Bluegrass Holdings LLC
•DP Bluegrass LLC
•Chesapeake Granite Wash Trust(a)
•BlueStone Natural Resources II, LLC
•Sooner State Joint ABS Holdings LLC(b)
•Diversified ABS Phase VI Holdings LLC
•Diversified ABS Phase VI LLC
•Diversified ABS VI Upstream LLC
•Oaktree ABS VI Upstream LLC
•DP Lion Equity Holdco LLC(c)
•DP Lion Holdco LLC
•Diversified ABS VIII Holdings LLC
•Diversified ABS VIII LLC
•Diversified ABS III Upstream LLC
•Diversified ABS V Upstream LLC
•DP Yellowjacket Equity Holdco LLC
•DP Yellowjacket Holdco LLC
•DM Yellowjacket Holdco LLC
•Tanos TX Holdco LLC
•Diversified ABS IX Holdings LLC
•Diversified Mustang Holdco LLC
•DP RBL Co LLC
•DP Legacy Central LLC
•Diversified Energy Marketing, LLC
•OCM Denali Holdings, LLC
•DP Tapstone Energy Holdings, LLC
•DP Legacy Tapstone LLC
•Giant Land, LLC(d)
•Link Land, LLC(d)
•Old Faithful Land, LLC(d)
•Riverside Land, LLC(d)
•Splendid Land, LLC(d)
•Diversified Midstream LLC
•Cranberry Pipeline Corporation
•Coalfield Pipeline Company
•DM Bluebonnet LLC
•Black Bear Midstream Holdings LLC
•Black Bear Midstream LLC
•Black Bear Liquids LLC
•Black Bear Liquids Marketing LLC
•DM Pennsylvania Holdco LLC
•Diversified Energy Group LLC
•Diversified Energy Company LLC
•Next LVL Energy, LLC
•Diversified ABS IX Holdings LLC
•Diversified ABS X Holdings LLC
•Diversified ABS X LLC
(a)Diversified Production, LLC holds 50.8% of the issued and outstanding common shares of Chesapeake Granite Wash Trust.
(b)Owned 51.25% by Diversified Production LLC and 48.75% by OCM Denali Holdings LLC, both wholly owned subsidiaries of the Group.
(c)Diversified Production, LLC holds 20% of the issued and outstanding equity of DP Lion Equity Holdco LLC. This entity is not consolidated within the Group’s financial
statements as of December 31, 2024. Refer to Note 5 for additional information.
(d)Owned approximately 55% by Diversified Energy Company PLC.
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Note 3 - Material Accounting Policies
(Amounts in thousands, except share, per share and per unit data)
The preparation of the Group Financial Statements in compliance with IFRS as issued by the IASB requires management to make estimates and exercise
judgment in applying the Group’s accounting policies. In preparing the Group Financial Statements, the significant judgments made by management in
applying the Group’s accounting policies and the key sources of estimation uncertainty are disclosed in Note 4.
Business Combinations and Asset Acquisitions
The Group performs an assessment of each acquisition to determine whether the acquisition should be accounted for as an asset acquisition or a
business combination. For each transaction, the Group may elect to apply the concentration test to determine if the fair value of assets acquired is
substantially concentrated in a single asset (or a group of similar assets). If this concentration test is met, the acquisition qualifies as an acquisition of a
group of assets and liabilities, not of a business.
Accounting for business combinations under IFRS 3 is applied once it is determined that a business has been acquired. Under IFRS 3, a business is
defined as an integrated set of activities and assets conducted and managed for the purpose of providing a return to investors. A business generally
consists of inputs, processes applied to those inputs, and resulting outputs that are, or will be, used to generate revenues.
In a business combination, assets acquired and liabilities assumed are recorded at fair value and any excess in the consideration paid over the fair value
of the net assets acquired is recorded as goodwill, while any excess fair value of the net assets acquired over the consideration fair value is recognized
as a gain on bargain purchase.
When less than the entire interest of an entity is acquired, the choice of measurement of the non-controlling interest, either at fair value or at the
proportionate share of the acquiree’s identifiable net assets, is determined on a transaction by transaction basis.
More information regarding the judgments and conclusions reached with respect to business combinations and asset acquisitions is included in Notes 4
and 5.
Oaktree Capital Management, L.P. (“Oaktree”) Participation Agreement
In October 2020, the Group entered into a three-year definitive participation agreement with funds managed by Oaktree to jointly identify and fund
future proved developed producing acquisition opportunities (“PDP acquisitions”) that the Group identified. The Oaktree Funding Commitment provided
for up to $1,000,000 in aggregate over three years for mutually agreed upon PDP acquisitions with transaction valuations typically greater than
$250,000. The Group and Oaktree each funded 50% of the net purchase price in exchange for proportionate working interests of 51.25% and 48.75%
during Tranche I deals, or joint acquisitions made during the first 18 months of the agreement, and 52.5% and 47.5% during Tranche II deals, or joint
acquisitions made during the second 18 months of the agreement, respectively. The Group's greater share reflected the upfront promote it received
from Oaktree which was intended to compensate the Group for the increase in general and administrative expenses needed to operate an entity that
increases with acquired growth.
Additionally, upon Oaktree achieving a 10% unlevered internal rate of return, Oaktree would convey a back-end promote to the Group which would
increase the Group’s working interest to 59.625% for both Tranche I and Tranche II deals. The Group also maintained the right of first offer to acquire
Oaktree’s interest if and when Oaktree decided to divest. The Group and Oaktree each had the right to participate in a sale by the other party with a
third-party upon comparable terms.
The Group accounted for the Oaktree Participation Agreement as a joint operation under IFRS 11, Joint Arrangements (“IFRS 11”). Accordingly, the
Group included its proportionate share of assets, liabilities, revenues and expenses within the consolidated financial statements.
The Oaktree Participation Agreement ended in October 2023. On June 6, 2024 the Group acquired Oaktree’s proportionate working interest in all
Tranche I and Tranche II deals. Details of the acquisition are disclosed in Note 5.
Inventory
Natural gas inventory is stated at the lower of cost and net realizable value, cost being determined on a weighted average cost basis. Inventory also
consists of material and supplies used in connection with the Group’s maintenance, storage and handling. Inventory is stated at the lower of cost or net
realizable value.
Cash and Cash Equivalents
Cash on the balance sheet comprises cash at banks. Balances held at banks, at times, exceed U.S. federally insured amounts. The Group has not experienced
any losses in such accounts and the Directors believe the Group is not exposed to any significant credit risk on its cash.
Trade Receivables
Trade receivables are recorded at their historical carrying amount, net of any required provisions. These receivables are due from customers across the
natural gas and oil industry. While they are spread among several customers, their collectability depends on each customer’s financial health and the
overall economic conditions of the industry. Management evaluates customers’ financial conditions before extending credit and typically do not require
collateral to secure the recoverability of the Group’s trade receivables. Any adjustments to the Group’s allowance for expected credit losses during the
year are recognized in the Consolidated Statement of Comprehensive Income. Trade receivables also include amounts due from third-party working
interest owners and hedge settlement receivables. The Group consistently assesses the collectability of these receivables. As of December 31, 2024 and
2023, the Group considered a portion of these working interest receivables uncollectable and recorded an allowance for credit losses in the amount of
$15,959 and $16,529, respectively. Refer to Note 14 for additional information.
Impairment of Financial Assets
IFRS 9 requires the application of an expected credit loss model in considering the impairment of financial assets. The expected credit loss model
requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit
risk since initial recognition of the financial assets. The credit event does not have to occur before credit losses are recognized. IFRS 9 allows for a
simplified approach for measuring the allowance at an amount equal to lifetime expected credit losses for trade receivables.
The Group applies the simplified approach to the expected credit loss model to trade receivables arising from:
•Sales of natural gas, NGLs and oil;
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•Sales of gathering and transportation of third-party natural gas; and
•The provision of other services.
Borrowings
Borrowings are initially recognized at fair value, net of any transaction costs incurred. They are then carried at amortized cost. The difference between
the net proceeds and the redemption value is recognized in the Consolidated Statement of Comprehensive Income over the period of the borrowings
using the effective interest method.
Interest on borrowings is accrued according to each class of borrowing.
Derivative Financial Instruments
Derivatives are utilized as part of the Group’s strategy to mitigate risks associated with the cash flow unpredictability due to commodity price volatility.
Additional details on the Group’s exposure to these risks can be found in Note 25. The Group has entered into financial instruments which are
considered derivative contracts, such as swaps and collars, which result in net cash settlements each month without physical deliveries. The derivative
contracts are initially recognized at fair value on the contract date and remeasured to fair value at each balance sheet date. The resulting gain or loss is
recognized in the Consolidated Statement of Comprehensive Income under the gain (loss) on derivative financial instruments line item for the year
incurred.
Restricted Cash
Cash held on deposit for bonding purposes is classified as restricted cash and recorded within current and non-current assets. This cash is either (1)
restricted by state governmental agencies for use if the operator abandons any wells, or (2) held as collateral by the Group’s surety bond providers.
Additionally, the Group is required to maintain certain cash reserves for interest payments related to its asset-backed securitizations, as detailed in Note
21. These reserves typically cover one to six months of interest and any associated fees. The Group classifies restricted cash as either current or non-
current, depending on the classification of the related asset or liability. This reserve cash is managed by an independent indenture trustee, who
monitors the reserves monthly to ensure the correct amount is maintained. The deposit conditions restrict the Group from accessing the reserve cash on
demand, meaning it no longer qualifies as cash and cash equivalents.
December 31, 2024
December 31, 2023
Cash restricted by asset-backed securitizations
$45,880
$35,870
Other restricted cash
389
382
Total restricted cash
$46,269
$36,252
Classified as:
Current asset
$11,426
$11,195
Non-current asset
34,843
25,057
Total
$46,269
$36,252
Natural Gas and Oil Properties
Natural gas and oil activities are accounted for using the principles of the successful efforts method of accounting as described below.
Development & Acquisition Costs
Costs incurred to purchase, lease, or otherwise acquire a property are capitalized when incurred. Expenditures related to the construction, installation or
completion of infrastructure facilities, such as platforms, and the drilling of development wells, including delineation wells, are capitalized within natural
gas and oil properties. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset
into operation, and the initial estimate of the asset retirement obligation.
Depletion
Proved natural gas, oil and NGL reserve volumes are used as the basis to calculate unit-of-production depletion rates. Leasehold costs are depleted on
the unit-of-production basis over the total proved reserves of the relevant area while production and development wells are depleted over proved
producing reserves.
Intangible Assets
Software Development
Development costs that are directly attributable to the design and testing of identifiable and unique software products developed by third parties and
controlled by the Group are recognized as intangible assets where the following criteria are met:
•It is technically feasible to complete the software so that it will be available for use;
•The Directors intend to complete the software and use it;
•There is an ability to use the software;
•It can be demonstrated how the software will generate probable future economic benefits;
•Adequate technical, financial and other resources to complete the development and to use the software are available; and
•The expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalized as part of the software include cost incurred by third parties, employee costs and an appropriate portion of
relevant overheads. Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use.
Costs associated with maintaining software programs are recognized as an expense as incurred.
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Impairment of Intangible Assets
Intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An
impairment loss is recognized when the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs of disposal and its value in use. For impairment assessment purposes, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Intangible assets that have suffered
an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Amortization
The Group amortizes intangible assets with a limited useful life, using the straight-line method over the following periods:
Range in Years
Software
3
Other acquired intangibles(a)
3
(a)Represents intangible assets acquired in business combinations and asset acquisitions.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. The initial recognized cost includes the purchase price
and any costs directly attributable to bringing the asset to the location and condition necessary for it to operate as intended by the Directors.
Property, plant and equipment are generally depreciated on a straight-line basis over their estimated useful lives:
Range in Years
Buildings and leasehold improvements
40
Equipment
5 - 10
Motor vehicles
5
Midstream assets
10 - 15
Other property and equipment
5 - 10
Property, plant and equipment held under leases are depreciated over the shorter of the lease term or estimated useful life.
Impairment of Non-Financial Assets
At each reporting date, the Group assesses whether there are indications that an asset may be impaired. If such indications exist, or if annual
impairment testing is required, the Group estimates the asset’s recoverable amount. The recoverable amount is the higher of an asset’s or cash
generating unit’s fair value less disposal costs and its value-in-use. This is determined for an individual asset unless the asset does not generate largely
independent cash inflows from other assets or groups of assets. If the carrying amount of an asset or cash-generating unit exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the Group discounts the estimated
future cash flows to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset. When determining fair value less disposal costs, the Group considers recent market transactions, if available. If no such transactions are
identified, an appropriate valuation model is used.
Non-Controlling Interests
Non-controlling interests represent the equity in subsidiaries that is not attributable to the Group’s shareholders. The acquisition of a non-controlling
interest in a subsidiary and the sale of an interest while retaining control are accounted for as transactions within equity and are reported within non-
controlling interests in the consolidated financial statements.
During the years ended December 31, 2024, 2023 and 2022, the Group recorded net income of $1,271, $1,683 and $4,812, respectively, attributable to
non-controlling interests. As of December 31, 2024 and 2023, the Group had a non-controlling interests balance of $11,879 and $12,604, respectively.
During the years ended December 31, 2024, 2023 and 2022, the Group paid $1,996, $4,043 and $6,389, respectively, in distributions to non-controlling
interest owners.
Leases
The Group recognizes a right-of-use asset and a lease liability at the commencement date of contracts (or separate components of a contract) that
convey the right to control the use of an identified asset for a period of time in exchange for consideration, when such contracts meet the definition of a
lease as determined by IFRS 16, Leases (“IFRS 16”). The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at inception date.
The Group initially measures the lease liability at the present value of the future lease payments, discounted using the interest rate implicit in the lease.
If this rate cannot be readily determined, the Group uses its incremental borrowing rate. After the commencement date, the lease liability is reduced by
payments made and increased by interest on the lease liability.
Right-of-use assets are initially measured at cost, which comprises:
•The amount of the initial measurement of the lease liability;
•Any lease payments made at or before the commencement date, less any lease incentives received;
•Any initial direct costs incurred by the lessee; and
•An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located, or
restoring the underlying asset to the condition required by the lease terms, unless those costs are incurred to produce inventories.
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Subsequent to the measurement date, the right-of-use asset is depreciated on a straight line basis over the period that reflects the life of the underlying
asset and is also adjusted for the remeasurement of any lease liability.
Asset Retirement Obligations
When a liability exists for the retirement of a well, removal of production equipment, and site restoration at the end of a well’s productive life, the Group
recognizes an asset retirement liability. The amount recognized is the present value of estimated future net expenditures, determined in accordance
with our anticipated retirement plans and local conditions and requirements. The unwinding of the discount on the decommissioning liability is included
as accretion of the decommissioning provision. The cost of the relevant property, plant and equipment asset is increased by an amount equivalent to the
liability and depreciated on a unit of production basis. The Group recognizes changes in estimates prospectively, with corresponding adjustments to the
liability and the associated non-current asset.
Taxation
Deferred Taxation
Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
Group Financial Statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance
sheet date and are expected to apply when the related deferred tax asset is realized or the deferred liability is settled.
Deferred tax assets are recognized to the extent that it is probable that the future taxable profit will be available against which the temporary
differences can be utilized. The Group offsets deferred tax assets and liabilities when it has a legally enforceable right to set off current tax assets
against current tax liabilities, provided that the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority.
Current Taxation
Current income tax assets and liabilities for the years ended December 31, 2024 and 2023 were measured at the amounts to be recovered from, or paid
to, the taxation authorities. The tax rates (and laws) used to compute these amounts are those enacted or substantively enacted at the reporting date in
the jurisdictions where the Group operates and generates taxable income.
Uncertain Tax Positions
Management periodically evaluates positions taken in tax returns where applicable tax regulation is subject to interpretation and considers whether it is
probable that a taxation authority will accept an uncertain tax treatment. The Group measures its tax balances based on either the most likely amount
or the expected value, depending on which method better predicts the resolution of the uncertainty.
Revenue Recognition
Natural Gas, NGLs & Oil Revenue (“Commodity Revenue”)
Commodity revenue is derived from sales of natural gas, NGLs and oil products and is recognized when the customer obtains control of the commodity.
This transfer generally occurs when the product is physically transferred into a vessel, pipe, sales meter, or other delivery mechanism. This also
represents the point at which the Group fulfills its single performance obligation to its customer under contracts for the sale of natural gas, NGLs and oil
as per IFRS 15, Revenue from Contracts with Customers (“IFRS 15”).
Commodity revenue in which the Group has an interest with other producers is recognized proportionately based on the Group’s working interest and
the terms of the relevant production sharing contracts. Royalty payments or counterparty distributions, representing the portion of revenue due to
minority working interests, are recorded as a liability, described in Note 23.
Commodity revenue is recorded based on the volumes accepted each day by customers at the delivery point and is measured using the respective
market price index for the applicable commodity, adjusted by the applicable basis differential based on the quality of the product.
Third-Party Gathering Revenue
Revenue from gathering and transporting third-party natural gas is recognized when the customer transfers its natural gas to the entry point in the
Group’s midstream network and becomes entitled to withdraw an equivalent volume of natural gas from the exit point in the Group’s midstream
network. This transfer generally occurs when product is physically transferred into the Group’s vessel, pipe, or sales meter. The customer’s entitlement
to withdraw an equivalent volume of natural gas is broadly coterminous with the transfer of natural gas into the Group’s midstream network. Customers
are invoiced, and revenue is recognized each month based on the volume of natural gas transported at a contractually agreed-upon price per unit.
Third-Party Plugging Revenue
Revenue from third-party asset retirement services is recognized as earned in the month the work is performed, in accordance with the Group’s
contractual obligations. These contractual obligations are considered the Group’s performance obligations for purposes of IFRS 15.
Other Revenue
Revenue from the operation of third-party wells is recognized as earned in the month the work is performed, in accordance with the Group’s contractual
obligations. These contractual obligations are considered the Group’s performance obligations for purposes of IFRS 15.
Revenue from the sale of water disposal services to third parties into the Group’s disposal wells is recognized as earned in the month the water is
physically disposed of at a contractually agreed-upon price per unit. The disposal of the water is considered the Group’s performance obligation under
these contracts.
Revenue is stated after deducting sales taxes, excise duties, and similar levies.
Share-Based Payments
The Group accounts for share-based payments under IFRS 2, Share-Based Payment (“IFRS 2”). All of the Group’s share-based awards are equity
settled, with their fair value determined at the grant date. As of December 31, 2024, 2023 and 2022, the Group had three types of share-based
payment awards: RSUs, PSUs and Options. The fair value of the Group’s RSUs is measured using the stock price at the grant date. The fair value of the
Group’s PSUs is measured using a Monte Carlo simulation model. The inputs to the Monte Carlo simulation model included:
•The share price at the date of grant;
•Expected volatility;
•Expected dividends;
•Risk free rate of interest; and
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•Patterns of exercise by the plan participants.
The fair value of the Group’s Options was calculated using the Black-Scholes model as of the grant date. The inputs to the Black-Scholes model
included:
•The share price at the grant date;
•Exercise price;
•Expected volatility; and
•Risk-free rate of interest.
The grant date fair value of share-based awards, adjusted for market-based performance conditions, is expensed uniformly over the vesting period.
New or Amended Accounting Standards - Adopted
The following accounting standards, amendments and interpretations became effective in the current year:
Standard
Amendment
Effective Date
IAS 1
Classification of Liabilities as Current or Non-Current and Non-Current
Liabilities with Covenants
Annual periods beginning on or after January 1, 2024
The application of this standard and interpretations effective for the first time in the current year has had no significant impact on the amounts reported
in the Group Financial Statements.
New or Amended Accounting Standards - Not Yet Adopted
At the date of authorization of the Group Financial Statements, the following standards and interpretations, which have not been applied in the Group
Financial Statements, were in issue but not yet effective. It is expected that where applicable, these standards and amendments will be adopted on each
respective effective date. The Group is still assessing the effect of these standards, though they are not expected to have a material impact.
Standard
Amendment
Effective Date
IAS 21
The Effects of Changes in Foreign Exchange Rates - Lack of Exchangeability
Annual periods beginning on or after January 1, 2025
IFRS 9
Financial Instruments - Lessee Derecognition of Lease Liabilities
Annual periods beginning on or after January 1, 2026
IFRS 7 &
IFRS 9
Financial Instruments and Disclosures - Amendments to the Classification and
Measurement of Financial Instruments
Annual periods beginning on or after January 1, 2026
IAS 7
Statement of Cash Flows - Cost Method
Annual periods beginning on or after January 1, 2026
IFRS 18
Presentation and Disclosures in Financial Statements - Primary Financial
Statements
Annual periods beginning on or after January 1, 2027
IFRS 19
Subsidiaries without Public Accountability: Disclosures - Disclosure Initiative -
Subsidiaries without Public Accountability: Disclosures
Annual periods beginning on or after January 1, 2027
Note 4 - Significant Accounting Judgments & Estimates
(Amounts in thousands, except share, per share and per unit data)
In applying the Group's accounting policies described in Note 3, the Directors made the following judgments and estimates, which may significantly
affect the amounts recognized in the Group Financial Statements.
Significant Judgments
Business Combinations & Asset Acquisitions
The Group follows the guidance in IFRS 3, Business Combinations (“IFRS 3”) for determining the appropriate accounting treatment for acquisitions. IFRS
3 permits an initial fair value assessment to determine if substantially all of the fair value of the assets acquired is concentrated in a single asset or
group of similar assets, known as the “concentration test”. If the initial screening test is not met, the asset may be considered a business based on
whether there are inputs and substantive processes in place. The accounting treatment is derived based on the results of this analysis and the
conclusion on an acquisition’s classification as a business combination or an asset acquisition.
If the acquisition is deemed to be a business, the acquisition method of accounting is applied. Identifiable assets acquired and liabilities assumed at the
acquisition date are recorded at fair value. When the fair value exceeds the consideration transferred, a bargain purchase gain is recognized.
Conversely, when the consideration transferred exceeds the fair value, goodwill is recorded. If the transaction is deemed to be an asset purchase, the
cost accumulation and allocation model is used whereby the assets and liabilities are recorded based on the purchase price and allocated to the
individual assets and liabilities based on relative fair values. As a result, gains on bargain purchases are not recognized on asset acquisitions.
Additionally, in instances when the acquisition of a group of assets contains contingent consideration, the Group records changes in the fair value of the
contingent consideration through the basis of the asset acquired rather than through the Consolidated Statement of Comprehensive Income. More
information regarding conclusions reached with respect to this judgment is included in Note 5.
The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed in a business combination are based on various
market participant assumptions and valuation methodologies, requiring considerable judgment by management. The most significant variables in these
valuations are discount rates and other assumptions and estimates used to determine the cash inflows and outflows. Management determines discount
rates based on the risk inherent in the acquired assets, specific risks, industry beta, and the capital structure of guideline companies. The valuation of an
acquired business is based on available information at the acquisition date and assumptions that are believed to be reasonable. However, a change in
facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year
from the acquisition date.
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Significant Estimates
Estimating the Fair Value of Acquired Natural Gas & Oil Properties
The Group determines the fair value of its natural gas and oil properties acquired through business combinations using the income approach. This
approach is based on expected discounted future cash flows, which are derived from estimated reserve quantities, production and development costs,
and forward prices for natural gas and oil. Future net cash flows are discounted using a weighted average cost of capital and additional risk factors.
Proved reserves are estimated using available geological and engineering data and include only those volumes for which market access is reasonably
certain. These estimates are inherently imprecise, requiring judgment and regular revisions. Revisions may be based on new information from additional
drilling, long-term reservoir performance observations, and changes in economic factors such as product prices, contract terms, or operating expenses.
Impairment of Natural Gas & Oil Properties
When preparing the Group Financial Statements, the Group considers whether there is any evidence of impairment in the natural gas and oil properties.
This assessment involves reviewing producing assets for impairment indicators at the balance sheet date. Indicators can include significant or prolonged
decreases in commodity pricing, negative market changes, downward revisions of reserve estimates, or increases in operating costs.
The Group reviews the carrying value of its natural gas and oil properties on a field basis annually or when an indicator of impairment is identified. The
impairment test compares the carrying value of these properties to their recoverable amount, which is based on the present value of estimated future
net cash flows from proved reserves. These future cash flows are calculated using estimated reserve quantities, production and development costs, and
forward prices for natural gas and oil. If the carrying value exceeds fair value, the Group recognizes an impairment by writing down the value of the
properties to their fair value. For the year ended December 31, 2024, no such impairments were recorded.
For the year ended December 31, 2023, the Group determined that the carrying amounts of certain proved properties for two fields were not
recoverable from future cash flows and recognized an impairment charge of $41,616. No such impairment was recorded during the year ended
December 31, 2022. Refer to Note 10 for additional information regarding the Group’s impairment assessment.
If there has been an impairment charge in a previous period, it will be reversed in a later period if circumstances change and the recoverable amount
exceeds the net book value at the time. When reversing impairment losses, the asset’s carrying amount will be increased to the lower of its original
carrying value or the carrying value that would have been determined (net of depletion) if no impairment loss had been recognized in prior years. No
such recoveries were recorded during the years ended December 31, 2024, 2023, and 2022. For more details, refer to Note 10.
When applicable, the Group recognizes impairment losses in the Consolidated Statement of Comprehensive Income, categorizing them according to the
function of the impaired asset.
Reserve Volume Estimates
Proved reserves are the estimated volumes of natural gas, oil and NGLs that can be economically produced with reasonable certainty from known
reservoirs, given current economic conditions and operating methods.
To estimate these reserves, we depend on the interpretation and judgment of engineering and production data, along with certain economic data such
as commodity prices, operating expenses, capital expenditures, and taxes. Since many factors, assumptions, and variables involved in estimating proved
reserves can change over time, the estimates of natural gas, oil and NGL reserve volumes are subject to revision.
Taxation
The Group makes certain estimates when calculating deferred tax assets and liabilities, as well as income tax expense. These estimates often require
judgment regarding the timing and recognition of differences of revenue and expenses for tax and financial reporting purposes, as well as the tax basis
of our assets and liabilities at the balance sheet date before tax returns are completed. Additionally, the Group must evaluate the likelihood of
recovering or utilizing its deferred tax assets and may record a valuation allowance against these assets when it is not expected that they will be
realized. In determining whether to apply a valuation allowance, the Group considers evidence such as future taxable income, among other factors. This
process involves numerous judgments and assumptions, including estimates of commodity prices, production, and other operating conditions. If any of
these factors, assumptions, or judgments change, the deferred tax asset could be adjusted, particularly decreasing if it is determined that the asset is
unlikely to be realized. Conversely, a valuation allowance may be reversed if it is determined that the asset is likely to be realized.
Asset Retirement Obligations
The costs associated with asset retirement obligations are inherently uncertain and can fluctuate due to various factors, such as changes in legal
requirements, the development of new restoration techniques, or experiences at other production sites. The expected timing and amount of these
expenditures can also vary, for instance, due to changes in reserves or modifications in laws and regulations or their interpretation. Consequently,
significant estimates and assumptions are necessary to determine the provision for asset retirement. These assumptions include the costs to retire the
wells, the Group’s retirement plan, an assumed inflation rate, and the discount rate. Changes in these assumptions could lead to a substantial change in
the carrying value of the asset retirement obligations within the next financial year. For more details and sensitivity analysis, refer to Note 19.
Note 5 - Acquisitions & Divestitures
(Amounts in thousands, except share, per share and per unit data)
The assets acquired in all acquisitions include the necessary permits, rights to production, royalties, assignments, contracts and agreements that support
the production from wells and operation of pipelines. The Group determines the accounting treatment of acquisitions using IFRS 3.
2024 Acquisitions
East Texas II Asset Acquisition
On October 29, 2024, the Group acquired certain developed producing assets in the East Texas area of the Central Region from a regional operator (the
“Seller”) (altogether, the “East Texas II transaction”). The Group assessed the acquired assets and determined that this transaction was considered an
asset acquisition rather than a business combination. When making this determination, management evaluated IFRS 3 and concluded that the acquired
assets did not meet the definition of a business. The Group paid purchase consideration of $67,782, inclusive of transaction costs of $744 and
customary purchase price adjustments. The transaction was funded through a combination of cash consideration of $40,329, drawing from a senior
secured bank facility supported by the acquired assets and existing liquidity, and the issuance of 2,342,445 new ordinary shares direct to the Seller.
Refer to Notes 16 and 21 for additional information regarding share capital and debt, respectively. In the period from its acquisition to December 31,
2024 the East Texas II assets increased the Group’s revenue and operating expense by $4,889 and $1,598, respectively.
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The assets acquired and liabilities assumed were as follows:
Consideration paid
Cash consideration
$40,329
Value of shares issued as consideration
27,453
Total consideration
$67,782
Net assets acquired
Natural gas and oil properties
$78,087
Asset retirement obligations, asset portion
11,902
Property, plant and equipment
1,045
Asset retirement obligations, liability portion
(11,902)
Other current liabilities
(11,350)
Net assets acquired
$67,782
Crescent Pass Energy (“Crescent Pass”) Asset Acquisition
On August 15, 2024, the Group acquired certain upstream assets and related infrastructure in the East Texas area of the Central Region from Crescent
Pass. The Group assessed the acquired assets and determined that this transaction was considered an asset acquisition rather than a business
combination. When making this determination, management evaluated IFRS 3 and concluded that the acquired assets did not meet the definition of a
business. The Group paid purchase consideration of $97,678, inclusive of transaction costs of $846 and customary purchase price adjustments. The
transaction was funded through a combination of the issuance of 2,249,650 new ordinary shares direct to Crescent Pass and cash consideration of
$69,265 from the new Term Loan II supported by the acquired assets. Refer to Notes 16 and 21 for additional information regarding share capital and
debt, respectively. In the period from its acquisition to December 31, 2024 the Crescent Pass assets increased the Group’s revenue and operating
expense by $10,283 and $6,101, respectively.
The assets acquired and liabilities assumed were as follows:
Consideration paid
Cash consideration
$69,265
Value of shares issued as consideration
28,413
Total consideration
$97,678
Net assets acquired
Natural gas and oil properties
$105,737
Asset retirement obligations, asset portion
34,247
Property, plant and equipment
534
Trade receivables, net
1,926
Asset retirement obligations, liability portion
(34,247)
Other current liabilities
(10,519)
Net assets acquired
$97,678
Oaktree Capital Management, L.P. (“Oaktree”) Working Interest Asset Acquisition
On June 6, 2024 the Group acquired Oaktree’s proportionate working interest in the East Texas, Tapstone, Tanos and Indigo acquisitions. The Group
assessed the acquired assets and determined that this transaction was considered an asset acquisition rather than a business combination. When
making this determination, management evaluated IFRS 3 and concluded that the acquired assets did not meet the definition of a business. The Group
paid purchase consideration of $221,660, inclusive of transaction costs of $2,064 and customary purchase price adjustments. As part of this transaction,
the Group assumed Oaktree’s proportionate debt of $132,576 associated with the ABS VI Notes. The Group funded the purchase through a combination
of existing and expanded liquidity and issued approximately $83,348 in notes payable to Oaktree. Refer to Note 21 for additional information regarding
debt. In the period from its acquisition to December 31, 2024 the Oaktree assets increased the Group’s revenue and operating expense by $65,708 and
$31,626, respectively.
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The assets acquired and liabilities assumed were as follows:
Consideration paid
Cash consideration
$177,550
Oaktree Seller's Note
83,348
Elimination of Oaktree liability
(39,238)
Total consideration
$221,660
Net assets acquired
Natural gas and oil properties
$315,611
Asset retirement obligations, asset portion
63,770
Property, plant and equipment
457
Restricted cash
6,153
Derivative financial instruments, net
39,841
Asset retirement obligations, liability portion
(63,770)
Borrowings
(132,576)
Other current liabilities
(7,826)
Net assets acquired
$221,660
Other Acquisitions
On December 30, 2024 the Group acquired certain upstream assets in the Central Region that are contiguous to its existing East Texas assets. The
Group paid purchase consideration of $1,181, inclusive of customary purchase price adjustments and transaction costs. Given the concentration of
assets, this transaction was considered an asset acquisition rather than a business combination.
2024 Divestitures
During the year ended December 31, 2024, the Group divested certain other non-core undeveloped acreage across its operating footprint for
consideration of approximately $59,048. The consideration received exceeded the carrying value of the net assets divested resulting in a gain on natural
gas and oil properties and equipment of $26,312.
2023 Acquisitions
Tanos Energy Holdings II LLC (“Tanos II”) Asset Acquisition
On March 1, 2023 the Group acquired certain upstream assets and related infrastructure in the Central Region from Tanos II. Given the concentration of
assets, this transaction was considered an asset acquisition rather than a business combination. When making this determination management
performed an asset concentration test considering the fair value of the acquired assets. The Group paid purchase consideration of $262,329, inclusive of
transaction costs of $936 and customary purchase price adjustments. The Group funded the purchase with proceeds from the February 2023 equity
raise, cash on hand and existing availability on the Credit Facility for which the borrowing base was upsized concurrent to the closing of the Tanos II
transaction. Refer to Notes 16 and 21 for additional information regarding the Group’s share capital and borrowings. In the period from its acquisition to
December 31, 2023 the Tanos II assets increased the Group’s revenue by $45,589.
2023 Divestitures
Sale of Equity Interest in DP Lion Equity HoldCo LLC
In November 2023, the Group formed DP Lion Equity Holdco LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue Class A and
Class B asset-backed securities (collectively “ABS VII”) which are secured by certain upstream producing assets in Appalachia. The Class A and B asset
backed securities were issued in aggregate principal amounts of $142,000 and $20,000, respectively.
In December 2023, the Group divested 80% of the equity ownership in DP Lion Equity Holdco LLC to outside investors, generating cash proceeds of
$30,000. The Group evaluated the remaining 20% interest in DP Lion Equity Holdco LLC and determined that the governance structure is such that the
Group does not have the ability to exercise control, joint control, or significant influence over the DP Lion Equity Holdco LLC entity. Accordingly, this
entity is not consolidated within the Group’s financial statements as of December 31, 2023.
The consideration exceeded the fair value of the Group’s portion of the assets and liabilities divested resulting in a gain on sale of the equity interest of
$18,440. The Group’s remaining investment in the LLC is accounted for as an equity instrument at fair value in accordance with IFRS 9, Financial
Instruments (“IFRS 9”) and was $7,500 at December 31, 2023, which generated an unrealized gain of $4,610.
During 2024, the Group identified that the liability for revenues to be distributed of $7,375 associated with the divested wells in the DP Lion Holdco LLC
transaction was inappropriately relieved and should have remained consolidated within the Group Financial Statements. The Group assessed the error
and determined that it is immaterial, quantitatively and qualitatively, to the 2023 and 2024 Group Financial Statements. Accordingly, the error has been
corrected as an out of period adjustment in the current year within the “Gain (loss) on sale of equity interest” line item in the Group’s Statement of
Comprehensive Income.
Other 2023 Divestitures
On July 17, 2023, the Group sold undeveloped acreage in Oklahoma, within the Group’s Central Region, for net consideration of approximately $16,060.
The consideration received exceeded the fair value of the net assets divested resulting in a gain on natural gas and oil properties and equipment of
$13,619.
On June 27, 2023, the Group sold certain non-core, non-operated assets within its Central Region for gross consideration of approximately $37,589. The
divested assets were located in Texas and Oklahoma and consisted of non-operated wells and the associated leasehold acreage that was acquired as
113
part of the ConocoPhillips Asset Acquisition in September 2022. This sale of non-operated and non-core assets aligns with the Group’s application of the
Smarter Asset Management strategy and its strategic focus on operated proved developed producing assets.
Additionally, during the year ended December 31, 2023, the Group divested certain other non-core undeveloped acreage across its operating footprint
for consideration of approximately $12,100. The consideration received exceeded the fair value of the net assets divested resulting in a gain on natural
gas and oil properties and equipment of $10,547.
2022 Acquisitions
ConocoPhillips Asset Acquisition
On September 27, 2022 the Group acquired certain upstream assets and related facilities within the Central Region from ConocoPhillips. Given the
concentration of assets, this transaction was considered an asset acquisition rather than a business combination. When making this determination
management performed an asset concentration test considering the fair value of the acquired assets. The Group paid purchase consideration of
$209,766, including customary purchase price adjustments. Transaction costs associated with the acquisition were negligible. The Group funded the
purchase with available cash on hand and a draw on the Credit Facility. In the period from its acquisition to December 31, 2022 the ConocoPhillips
assets increased the Group’s revenue by $25,217.
East Texas Asset Acquisition (“East Texas I”)
On April 25, 2022, the Group acquired a proportionate 52.5% working interest in certain upstream assets and related facilities within the Central Region
from a private seller in conjunction with Oaktree, via the previously disclosed participation agreement between the two parties. Given the concentration
of assets, this transaction was considered an asset acquisition rather than a business combination. When making this determination, the Group
performed an asset concentration test considering the fair value of the acquired assets. The Group paid purchase consideration of $47,468, including
customary purchase price adjustments. Transaction costs associated with the acquisition were $1,550. The Group funded the purchase with available
cash on hand and a draw on the Credit Facility.
Other 2022 Acquisitions
During the period ended December 31, 2022 the Group acquired three asset retirement companies for an aggregate consideration of $13,949, inclusive
of customary purchase price adjustments. The Group also paid an additional $3,150 in deferred consideration through November 2024. During the year
ended December 31, 2024 and 2023, the Group paid $1,050 and $2,100, respectively, of the deferred consideration. When evaluating these
transactions, the Group determined they did not have significant asset concentrations and as a result it had acquired identifiable sets of inputs,
processes and outputs and concluded the transactions were business combinations.
On April 1, 2022 the Group acquired certain midstream assets, inclusive of a processing facility, in the Central Region that are contiguous to its existing
East Texas assets. The Group paid purchase consideration of $10,139, inclusive of customary purchase price adjustments and transaction costs. When
evaluating the transaction, the Group determined it did not have significant asset concentration and as a result it had acquired an identifiable set of
inputs, processes and outputs and accordingly concluded the transaction was a business combination. The fair value of the net assets acquired was
$10,742 generating a bargain purchase gain of $603.
On November 21, 2022 the Group acquired certain midstream assets in the Central Region that are contiguous to its existing East Texas assets. The
Group paid purchase consideration of $7,438, inclusive of customary purchase price adjustments and transaction costs. Given the concentration of
assets, this transaction was considered an asset acquisition rather than a business combination.
Transaction costs associated with the other acquisitions noted above were insignificant and the Group funded the aggregate cash consideration with
existing cash on hand.
Subsequent Events
On February 27, 2025, the Group announced the completion of its previously announced acquisition of certain upstream assets and related
infrastructure within Virginia, West Virginia, and Alabama of the Appalachian Region from Summit for a gross purchase price of approximately $45,000
before customary purchase price adjustments. The transaction was funded through the new ABS X Notes collateralized, in part, by the acquired assets.
Refer to Note 21 for additional information regarding debt.
On March 14, 2025, the Group announced the completion of its previously announced Maverick acquisition for a gross purchase price of approximately
$1,275,000. The transaction was funded through the assumption of approximately $700,000 of Maverick debt outstanding, the issuance of 21,194,213
new ordinary shares direct to the unitholders of Maverick, and approximately $207,000 in cash on hand. Refer to Notes 16 and 21 for additional
information regarding share capital and debt.
114
Note 6 - Revenue
(Amounts in thousands, except share, per share and per unit data)
The Group extracts and sells natural gas, NGLs and oil to a variety of customers and operates most of the wells on behalf of customers and other
working interest owners. Additionally, the Group offers gathering and transportation services, as well as asset retirement and other services to third
parties. All revenue is generated within the U.S.
The following table reconciles the Group's revenue for the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Natural gas
$464,600
$557,167
$1,544,658
NGLs
150,513
141,321
188,733
Oil
117,146
103,911
139,620
Total commodity revenue
$732,259
$802,399
$1,873,011
Midstream
32,535
30,565
32,798
Other(a)
30,047
35,299
13,540
Total revenue
$794,841
$868,263
$1,919,349
(a)Includes $16,305, $28,360, and $9,246 in third party plugging revenue and $13,742, $6,939, and $4,294 in other revenue for the years ended December 31, 2024,
2023, and 2022, respectively. Refer to Note 3 for additional information.
A significant portion of the Group’s trade receivables stem from sales of natural gas, NGLs and oil, as well as operational services. These receivables are
uncollateralized and typically collected within 30 to 60 days.
For the years ended December 31, 2024, 2023 and 2022, no single customer accounted for more than 10% of total revenues.
Note 7 - Expenses by Nature
(Amounts in thousands, except share, per share and per unit data)
The table below details the Group's expenses for the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
LOE(a)
$231,651
$213,078
$182,817
Production taxes(b)
36,043
61,474
73,849
Midstream operating expenses(c)
70,747
69,792
71,154
Transportation expenses(d)
90,461
96,218
118,073
Total operating expenses
$428,902
$440,562
$445,893
Depreciation and amortization
59,358
56,453
51,877
Depletion
197,126
168,093
170,380
Total depreciation, depletion and amortization
$256,484
$224,546
$222,257
Employees, administrative costs and professional services(e)
86,885
78,659
77,172
Costs associated with acquisitions(f)
11,573
16,775
15,545
Other adjusting costs(g)
22,375
17,794
69,967
Non-cash equity compensation(h)
8,286
6,494
8,051
Total G&A
$129,119
$119,722
$170,735
Recurring allowance for credit losses(i)
101
8,478
—
Total expenses
$814,606
$793,308
$838,885
Aggregate remuneration (including Directors):
Wages and salaries
$133,024
$124,834
$113,267
Payroll taxes
10,380
10,163
9,516
Benefits
29,252
31,912
23,828
Total employees and benefits expense
$172,656
$166,909
$146,611
(a)LOE encompasses costs incurred to maintain producing properties. These costs include direct and contract labor, repairs and maintenance, emissions reduction
initiatives, water hauling, compression, automobile, insurance, and materials and supplies expenses.
(b)Production taxes consist of severance and property taxes. Severance taxes are typically paid on produced natural gas, NGLs and oil at fixed rates set by federal, state or
local taxing authorities. Property taxes are generally based on the valuation of the Group’s natural gas and oil properties and midstream assets by the taxing
115
jurisdictions.
(c)Midstream operating expenses are the daily costs of operating the Group’s owned midstream assets, including employee and benefit expenses.
(d)Transportation expenses are the daily costs incurred from third-party systems to gather, process, and transport the Group’s natural gas, NGLs and oil.
(e)Employees, administrative costs and professional services include payroll and benefits for our administrative and corporate staff, costs of maintaining administrative and
corporate offices, managing our production operations, franchise taxes, public company costs, fees for audit and other professional services, and legal compliance.
(f)Costs associated with acquisitions are related to the integration of acquisitions, which vary for each acquisition. For acquisitions classified as business combinations,
these costs include transaction costs directly associated with a successful acquisition. They also encompass costs related to transition service arrangements, where the
Group pays the seller of the acquired entity a fee to manage G&A functions until full integration of the assets. Additionally, these costs include costs to cover expenses
for integrating IT systems, consulting, and internal workforce efforts directly related to incorporating acquisitions into the Group’s systems.
(g)Other adjusting costs for the year ended December 31, 2024, were primarily associated with legal and professional fees related to the U.S. listing, legal fees for certain
litigation, and expenses associated with unused firm transportation agreements. For the year ended December 31, 2023, these costs were primarily related to legal and
professional fees for the U.S. listing, legal fees for certain litigation, and expenses for unused firm transportation agreements. For the year ended December 31, 2022,
these costs mainly included $28,345 in contract terminations, which enabled the Group to secure more favorable future pricing, and $31,099 in deal breakage and/or
sourcing costs for acquisitions.
(h)Non-cash equity compensation represents the expense recognition for share-based compensation provided to key members of the management team. Refer to Note 17
for additional details on non-cash share-based compensation.
(i)Allowance for credit losses consists of the recognition and reversal of credit losses. Refer to Note 14 for additional information regarding credit losses.
The following table presents the number of employees as of the dates presented (employee count not shown in thousands):
As of
December 31, 2024
December 31, 2023
December 31, 2022
Number of production support employees, including Executive Directors
402
389
362
Number of production employees
1,187
1,214
1,220
Workforce
1,589
1,603
1,582
The following table presents the average number of employees for the periods presented (employee count not shown in thousands):
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Average workforce, including Executive Directors
1,571
1,593
1,512
The Group defines key management personnel as the executive and non-executive Directors. Bradley G. Gray is excluded from the executive Director
remuneration below for the year ended December 31, 2024 and is included for the years ended December 31, 2023 and 2022. Mr. Gray was a Director
through September 15, 2023. The fixed pay figures included in the table represent Mr. Gray’s prorated compensation for the year ended December
31, 2023. The Directors’ remuneration was as follows for the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Executive Directors
Salary
$780
$1,073
$1,157
Taxable benefits(a)
17
20
24
Benefit plan(b)
42
46
73
Bonus(c)
1,160
1,130
1,631
Long-term incentives(c)
1,541
2,322
3,193
Total Executive Directors' remuneration
3,540
4,591
6,078
Non-Executive Directors
Fees
1,050
994
911
Total Non-Executive Directors' remuneration
1,050
994
911
Total remuneration
$4,590
$5,585
$6,989
(a)Taxable benefits were comprised of Group paid life insurance premiums and automobile reimbursements.
(b)Reflects matching contributions under the Group’s 401(k) plan and health insurance benefits.
(c)Further details of the bonus outcome for 2024 and long-term incentives can be found in the Remuneration Committee’s Report within this Annual Report & Form 20-F.
Details of the highest paid Director’s aggregate emoluments and amounts receivable under long-term incentive schemes are disclosed in the
Remuneration Committee’s Report within this Annual Report & Form 20-F.
116
Auditors’ remuneration for the periods presented was as follows:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Auditors' remuneration
Fees payable to the Group’s external auditors and their associates for the
audit of the consolidated financial statements(a)
$3,198
$2,140
$1,790
Fees payable for the audit of the financial statements of the Company's
subsidiaries(b)
100
150
160
Audit-related assurance services(c)
756
1,078
874
Other assurance services
9
13
—
Total auditors' remuneration
$4,063
$3,381
$2,824
(a)The 2024 and 2023 fees include $348 and $249, respectively, for additional fees agreed upon and billed after signing the 2023 and 2022 consolidated accounts,
respectively.
(b)The 2022 fees were revised to reflect additional scope change for the audit of the subsidiary accounts.
(c)Fees related to the Group’s interim review and capital market activities, which are outside the scope of the audit of the consolidated financial statements. The 2022 fees
were revised to reflect additional work performed for the interim review.
Note 8 - Taxation
(Amounts in thousands, except share, per share and per unit data)
The Group files a consolidated U.S. federal tax return, multiple state tax returns, and a separate UK tax return for the Parent entity. The consolidated
taxable income includes an allocable portion of income from the Group’s previous co-investment with Oaktree and its investment in the Chesapeake
Granite Wash Trust. Income taxes are provided for the tax effects of transactions reported in the Group Financial Statements and consist of taxes
currently due, plus deferred taxes related to differences between the basis of assets and liabilities for financial and income tax reporting.
For the taxable years ended December 31, 2024, 2023, and 2022, the Group had a tax benefit of $136,951, an expense of $240,643, and a benefit of
$178,904, respectively. The effective tax rate used for the year ended December 31, 2024 was 61.2%, compared to 24.1% for the year ended
December 31, 2023, and 22.4% for the year ended December 31, 2022.
The effective tax rate for December 31, 2024 was primarily influenced by the recognition of the federal marginal well tax credit available to qualified
producers. The effective tax rate for December 31, 2023 was mainly affected by changes in state taxes due to acquisitions and recurring permanent
differences. The effective tax rate for December 31, 2022 was primarily impacted by changes in state taxes resulting from acquisitions.
The federal government provides marginal well tax credits to encourage companies to continue operating lower-volume wells during periods of low
prices, thereby maintaining the jobs they create and the state and local tax revenues they generate for communities to support schools, social
programs, law enforcement, and other public services. These credits, prescribed by Internal Revenue Code Section 45I, are available for certain natural
gas production from qualifying wells. These credits benefit wells producing less than 90 Mcfe per day when market prices for natural gas in the previous
tax year are relatively low. The Group benefited from these credits due to its portfolio of long-life, low-decline conventional wells. These credits were not
available for the tax years 2023 and 2022 due to improved commodity prices during 2022 and 2021.
The provision for income taxes in the Consolidated Statement of Comprehensive Income is summarized below:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Current income tax (benefit) expense
Federal (benefit) expense
$(18,238)
$7,289
$(513)
State (benefit) expense
1,122
5,902
2,841
Foreign - UK (benefit) expense
234
—
107
Total current income tax (benefit) expense
$(16,882)
$13,191
$2,435
Deferred income tax (benefit) expense
Federal (benefit) expense
$(111,003)
$202,133
$(169,531)
State (benefit) expense
(9,016)
25,460
(11,863)
Foreign - UK (benefit) expense
(50)
(141)
55
Total deferred income tax (benefit) expense
$(120,069)
$227,452
$(181,339)
Total income tax (benefit) expense
$(136,951)
$240,643
$(178,904)
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The effective tax rates and differences between the statutory U.S. federal income tax rate and the effective tax rates are summarized as follows:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Income (loss) before taxation
$(223,952)
$1,000,344
$(799,502)
Income tax benefit (expenses)
136,951
(240,643)
178,904
Effective tax rate
61.2%
24.1%
22.4%
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Expected tax at statutory U.S. federal income tax rate
21.0%
21.0%
21.0%
State income taxes, net of federal tax benefit
3.7%
3.1%
1.2%
Federal credits
41.3%
0.0%
0.0%
Other, net
(4.8%)
0.0%
0.2%
Effective tax rate
61.2%
24.1%
22.4%
The Group had a net deferred tax asset of $251,276 at December 31, 2024, compared to a net deferred tax asset of $131,206 at December 31, 2023.
This change was primarily due to a poor commodity price environment generating unrealized gains for unsettled derivatives not recognized for tax
purposes as well as the recognition on marginal well credits. The Group had a net deferred tax asset of $131,206 at December 31, 2023, compared to a
net deferred tax asset of $358,666 at December 31, 2022. This change was primarily due to a poor commodity price environment generating unrealized
gains for unsettled derivatives not recognized for tax purposes. The balance sheet presentation considers the offsetting of deferred tax assets and
liabilities within the same tax jurisdiction, where permitted. The overall deferred tax position in a particular tax jurisdiction determines if a deferred tax
balance related to that jurisdiction is presented within deferred tax assets or liabilities.
The table below presents the components of the net deferred tax asset (liability) included in non-current assets (liabilities) as of the periods presented:
December 31, 2024
December 31, 2023
Deferred tax asset
Asset retirement obligations
$157,035
$103,998
Derivative financial instruments
191,512
153,057
Allowance for doubtful accounts
4,099
4,235
Net operating loss carryover
4,425
686
Federal tax credits carryover
233,969
163,158
163(j) interest expense limitation
41,031
24,324
Total deferred tax asset
$632,071
$449,458
Deferred tax liability
Amortization and depreciation
$(352,059)
$(252,587)
Investment in partnerships
(5,233)
(60,067)
Other
(23,503)
(5,598)
Total deferred tax liability
$(380,795)
$(318,252)
Net deferred tax asset (liability)
$251,276
$131,206
Balance sheet presentation
Deferred tax asset
$259,287
$144,860
Deferred tax liability
(8,011)
(13,654)
Net deferred tax asset (liability)
$251,276
$131,206
In assessing the realizability of deferred tax assets, the Group considers whether it is probable that some or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets depends on generating future taxable income during the periods in which those temporary
differences become deductible or before credits expire. The Group evaluates the scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. At this time, the Group has determined it will have sufficient future taxable income to
recognize its deferred tax assets.
The Group reported the effects of deferred tax expense as of and for the year ended December 31, 2024:
118
Opening
Balance
Consolidated
Statement of
Comprehensive
Income
Other(a)
Closing Balance
Asset retirement obligations
$103,998
$53,037
$—
$157,035
Allowance for doubtful accounts
4,235
(136)
—
4,099
Net operating loss carryover
686
3,739
—
4,425
Federal tax credits carryover
163,158
70,811
—
233,969
Property, plant, and equipment and natural gas and oil properties
(252,587)
(99,472)
—
(352,059)
Derivative financial instruments
153,057
38,455
—
191,512
Investment in partnerships
(60,067)
54,834
—
(5,233)
163(j) interest expense limitation
24,324
16,707
41,031
Other
(5,598)
(17,906)
1
(23,503)
Total deferred tax asset (liability)
$131,206
$120,069
$1
$251,276
(a)Amounts primarily relate to deferred taxes acquired as part of acquisition purchase accounting.
The Group reported the effects of deferred tax expense as of and for the year ended December 31, 2023:
Opening
Balance
Consolidated
Statement of
Comprehensive
Income
Other(a)
Closing Balance
Asset retirement obligations
$92,393
$11,605
$—
$103,998
Allowance for doubtful accounts
2,378
1,857
—
4,235
Net operating loss carryover
3,865
(3,179)
—
686
Federal tax credits carryover
184,975
(21,817)
—
163,158
Property, plant, and equipment and natural gas and oil properties
(255,440)
2,853
—
(252,587)
Derivative financial instruments
378,918
(225,861)
—
153,057
Investment in partnerships
(82,930)
8,570
14,293
(60,067)
163(j) interest expense limitation
15,573
8,751
24,324
Other
18,934
(10,231)
(14,301)
(5,598)
Total deferred tax asset (liability)
$358,666
$(227,452)
$(8)
$131,206
(a)Amounts primarily relate to a deferred taxes reclass for comparative purposes.
The Group reported the effects of deferred tax expense as of and for the year ended December 31, 2022:
Opening
Balance
Consolidated
Statement of
Comprehensive
Income
Other(a)
Closing Balance
Asset retirement obligations
$114,182
$(21,789)
$—
$92,393
Allowance for doubtful accounts
1,734
644
—
2,378
Net operating loss carryover
562
3,360
(57)
3,865
Federal tax credits carryover
183,460
1,515
—
184,975
Property, plant, and equipment and natural gas and oil properties
(266,987)
11,360
187
(255,440)
Derivative financial instruments
202,802
176,116
—
378,918
Investment in partnerships
(72,105)
(11,068)
243
(82,930)
163(j) interest expense limitation
—
15,573
—
15,573
Other
13,306
5,628
—
18,934
Total deferred tax asset (liability)
$176,954
$181,339
$373
$358,666
(a)Amounts primarily relate to deferred taxes acquired as part of acquisition purchase accounting.
The Group’s material deferred tax assets and liabilities all originate in the U.S.
119
For U.S. federal tax purposes, the Group is taxed as a single consolidated entity. The Group’s co-investments with Oaktree and its investment in the
Chesapeake Granite Wash Trust are taxed as partnerships that pass through to the Group’s consolidated return. The Group is also subject to additional
taxes in its domiciled jurisdiction of the UK. For the years ended December 31, 2024, 2023, and 2022, the Group incurred a expense of $234, no tax
impact, and an expense of $107 in the UK, respectively.
The Organization for Economic Cooperation and Development (“OECD”) has proposed model rules for a global minimum tax of 15% of reported profits
(“Pillar Two”) that has been agreed upon in principle by over 140 countries. While the U.S. has not yet enacted rules implementing Pillar Two, the U.K.
has. This is relevant to the Company as it is resident in the U.K. for corporation tax purposes. The Finance (No. 2) Act 2023 (the “UK Act”) was enacted
on July 11, 2023, and implements the OECD’s Base Erosion & Profit Shifting (“BEPS”) Pillar Two Income Inclusion Rule and a ‘Qualifying Domestic
Minimum Top-up Tax’ for accounting periods beginning on or after December 31, 2023. The UK Act also includes a transitional safe harbor election for
accounting periods beginning on or before December 31, 2026. Although the Pillar Two rules can lead to additional taxes, including taxes on our profits
in the U.S., the Group anticipates qualifying for a transitional safe harbor under the Pillar Two rules. We have undertaken an assessment and evaluated
the impact of these rules based on the Group’s results for the year ended December 31, 2024 and the Group believes it will not have a material impact
on its financial position, results of operations, or cash flows due to the availability of a transitional safe harbor for the year ended December 31, 2024.
The Group will continue to evaluate the potential consequences of Pillar Two on its longer-term financial position. The Group has applied the exception
to recognizing and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.
The Group had no uncertain tax position liabilities as of December 31, 2024, 2023 or 2022.
As of December 31, 2024, the Group had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $1,570, of which $1,474 are subject to
limitation. Additionally, the Group had $6,494 U.S. state NOLs.
The Group had U.S. marginal well tax credit carryforwards of approximately $233,969 as of December 31, 2024, compared to $163,158 as of
December 31, 2023, and $184,975 as of December 31, 2022. As discussed earlier, the federal tax credit is intended to benefit wells producing less than
90 Mcfe per day when market prices for natural gas are relatively low. Due to the low commodity price environment in 2023, the Group generated
federal tax credits of $91,831 for the year ended December 31, 2024. These tax credits expire between 2040 and 2044.
The Group had $14,203 U.S. federal capital loss carryforwards as of December 31, 2024, compared to none as of December 31, 2023, and $21,401 as
of December 31, 2022. For the year ended December 31, 2024, no capital loss carryforwards expired. The Group utilized some existing capital loss
carryforward in the amount of $10 in 2024, resulting in a capital loss carryforward going into 2025.
The Group completed a Section 382 study through December 31, 2024 in accordance with the Internal Revenue Code of 1986, as amended. The study
concluded that the Group has not experienced an ownership change since the last ownership change on January 31, 2018. If the Group experiences an
ownership change, tax credit carryforwards can be utilized but are limited each year and could expire before being fully utilized. The Directors expect
the tax credit carryforwards, limited by the January 31, 2018 ownership change, to be fully available for utilization by 2025.
Note 9 - Earnings (Loss) Per Share
(Amounts in thousands, except share, per share and per unit data)
Basic earnings (loss) per share are calculated based on net income (loss) and the weighted average number of shares outstanding during the period.
Diluted earnings per share is based on net income and the weighted average number of shares outstanding, plus the weighted average number of
shares that would be issued if dilutive share-based compensation awards were converted into shares on the last day of the reporting period. For both
basic and diluted earnings (loss) per share calculations, the weighted average number of shares outstanding excludes shares held as treasury shares in
the Employee Benefit Trust (“EBT”), which are treated the same as shares held in the treasury reserve for accounting purposes. Refer to Note 16 for
additional information regarding the EBT.
Basic and diluted earnings (loss) per share were calculated as follows for the periods presented:
Year Ended
Calculation
December 31, 2024
December 31, 2023
December 31, 2022
Net income (loss) attributable to Owners of Diversified
Energy Company PLC
A
$(88,272)
$758,018
$(625,410)
Weighted average shares outstanding - basic
B
48,031,916
47,165,380
42,203,974
Dilutive impact of potential shares
—
349,141
—
Weighted average shares outstanding - diluted
C
48,031,916
47,514,521
42,203,974
Earnings (loss) per share - basic
= A/B
$(1.84)
$16.07
$(14.82)
Earnings (loss) per share - diluted
= A/C
$(1.84)
$15.95
$(14.82)
Potentially dilutive shares(a)
640,568
54,133
766,723
(a)Outstanding share-based compensation awards excluded from the diluted EPS calculation because their effect would have been anti-dilutive.
120
Note 10 - Natural Gas & Oil Properties
(Amounts in thousands, except share, per share and per unit data)
The following table summarizes the Group's natural gas and oil properties for the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Costs
Beginning balance
$3,206,739
$3,062,463
$2,866,353
Additions(a)
655,080
353,888
219,490
Disposals(b)
(42,627)
(209,612)
(23,380)
Ending balance
$3,819,192
$3,206,739
$3,062,463
Depletion and impairment
Beginning balance
$(716,364)
$(506,655)
$(336,275)
Depletion expense
(197,126)
(168,093)
(170,380)
Impairment
—
(41,616)
—
Ending balance
$(913,490)
$(716,364)
$(506,655)
Net book value
$2,905,702
$2,490,375
$2,555,808
(a)For the year ended December 31, 2024, the Group added $613,401 from material acquisitions and $6,521 from normal revisions to the Group’s asset retirement
obligations. The remaining changes were primarily due to recurring capital expenditures. In 2023, the Group added $266,306 from acquisitions and $42,650 from
normal revisions to the Group’s asset retirement obligations. The remaining changes were primarily due to recurring capital expenditures. In 2022, the Group added
$285,212 from acquisitions and $98,802 from normal revisions to the Group’s asset retirement obligations. The remaining additions were primarily due to capital
expenditures for completing five Tapstone wells under development as of December 31, 2021, and seven additional wells in which the Group participated with a non-
operating interest in Appalachia. The remaining changes were primarily due to recurring capital expenditures.
(b)For the year ended December 31, 2024, the Group divested $32,736 in undeveloped acreage. In 2023, the Group divested $202,886 in natural gas and oil properties
related to the sale of equity interest in DP Lion Equity Holdco LLC, the divested assets previously acquired as part of the ConocoPhillips Asset Acquisition, and other
proved properties and undeveloped acreage divestitures. Disposals for the year ended December 31, 2022 were associated with divestitures of natural gas and oil
properties in the normal course of business, none of which were material.
Impairment Assessment for Natural Gas and Oil Properties
For the period ended December 31, 2024, the Directors assessed indicators of impairment, noting that commodity prices showed moderate
strengthening. As a result of this assessment, no indicators of impairment were identified for the year ended December 31, 2024.
For the year ended December 31, 2023, the Group determined that the carrying amounts of certain proved properties for two fields were not
recoverable from future cash flows and recognized an impairment charge of $41,616. No such impairment was recorded during the year ended
December 31, 2022.
Note 11 - Property, Plant & Equipment
(Amounts in thousands, except share, per share and per unit data)
The following tables summarize the Group’s property, plant and equipment for the periods presented:
Year Ended December 31, 2024
Buildings and
Leasehold
Improvements
Equipment
Motor Vehicles
Midstream
Assets
Other Property
and Equipment
Total
Costs
Beginning balance
$48,255
$32,236
$71,175
$455,128
$26,293
$633,087
Additions(a)
2,978
3,066
19,243
22,597
2,614
50,498
Disposals
(1,391)
(3,577)
(7,473)
(1,575)
(658)
(14,674)
Ending balance(b)
$49,842
$31,725
$82,945
$476,150
$28,249
$668,911
Accumulated depreciation
Beginning balance
$(4,161)
$(8,722)
$(36,142)
$(123,458)
$(4,396)
$(176,879)
Period changes
(1,626)
(3,400)
(13,990)
(31,054)
(3,412)
(53,482)
Disposals
599
2,325
5,935
1,473
658
10,990
Ending balance
$(5,188)
$(9,797)
$(44,197)
$(153,039)
$(7,150)
$(219,371)
Net book value
$44,654
$21,928
$38,748
$323,111
$21,099
$449,540
121
Year Ended December 31, 2023
Buildings and
Leasehold
Improvements
Equipment
Motor Vehicles
Midstream
Assets
Other Property
and Equipment
Total
Costs
Beginning balance
$47,682
$30,369
$66,389
$433,484
$23,743
$601,667
Additions(a)
1,134
3,964
11,715
21,644
4,039
42,496
Disposals
(561)
(2,097)
(6,929)
—
(1,489)
(11,076)
Ending balance(b)
$48,255
$32,236
$71,175
$455,128
$26,293
$633,087
Accumulated depreciation
Beginning balance
$(3,607)
$(7,627)
$(29,194)
$(95,826)
$(2,553)
$(138,807)
Period changes
(581)
(3,024)
(12,887)
(27,632)
(2,720)
(46,844)
Disposals
27
1,929
5,939
—
877
8,772
Ending balance
$(4,161)
$(8,722)
$(36,142)
$(123,458)
$(4,396)
$(176,879)
Net book value
$44,094
$23,514
$35,033
$331,670
$21,897
$456,208
Year Ended December 31, 2022
Buildings and
Leasehold
Improvements
Equipment
Motor Vehicles
Midstream
Assets
Other Property
and Equipment
Total
Costs
Beginning balance
$41,684
$9,492
$45,562
$398,663
$16,039
$511,440
Additions(a)
9,421
20,886
22,399
34,835
7,704
95,245
Disposals
(3,423)
(9)
(1,572)
(14)
—
(5,018)
Ending balance(b)
$47,682
$30,369
$66,389
$433,484
$23,743
$601,667
Accumulated depreciation
Beginning balance
$(2,078)
$(4,089)
$(20,186)
$(69,501)
$(1,606)
$(97,460)
Period changes
(1,819)
(3,547)
(10,270)
(26,330)
(947)
(42,913)
Disposals
290
9
1,262
5
—
1,566
Ending balance
$(3,607)
$(7,627)
$(29,194)
$(95,826)
$(2,553)
$(138,807)
Net book value
$44,075
$22,742
$37,195
$337,658
$21,190
$462,860
(a)Of the $50,498 in additions for 2024, $2,036 was related to acquisitions and $19,007 was associated with right-of-use asset additions for new leases. Of the $42,496 in
additions for 2023, $234 was related to acquisitions and $13,279 was associated with right-of-use asset additions for new leases. Of the $95,245 in additions for 2022,
$26,815 was related to acquisitions and $11,295 was associated with right-of-use asset additions for new leases. The remaining capital expenditures were due to
recurring capital needs and enhanced sustainability efforts. Refer to Notes 5 and 20 for additional information regarding acquisitions and leases, respectively. The
remaining additions were related to routine capital projects on the Group’s compressor and gathering systems, as well as vehicle and equipment additions.
(b)Buildings and leasehold improvements and motor vehicles include right-of-use assets associated with the Group’s leases. Refer to Note 20 for additional information
regarding leases.
The Group continued to utilize certain fully depreciated assets during the years ended December 31, 2024, 2023 and 2022 with an original cost basis of
$29,179, $6,546 and $9,222, respectively.
122
Note 12 - Intangible Assets
(Amounts in thousands, except share, per share and per unit data)
Intangible assets consisted of the following for the periods presented:
Year Ended December 31, 2024
Software
Other Acquired
Intangibles
Total
Costs
Beginning balance
$44,449
$4,224
$48,673
Additions(a)
1,883
—
1,883
Disposals
(3,990)
(362)
(4,352)
Ending balance
$42,342
$3,862
$46,204
Accumulated amortization
Beginning balance
$(28,500)
$(822)
$(29,322)
Period changes
(5,554)
(500)
(6,054)
Disposals
3,990
362
4,352
Ending balance
$(30,064)
$(960)
$(31,024)
Net book value
$12,278
$2,902
$15,180
Year Ended December 31, 2023
Software
Other Acquired
Intangibles
Total
Costs
Beginning balance
$39,306
$7,124
$46,430
Additions(a)
5,949
—
5,949
Disposals
(806)
(2,900)
(3,706)
Ending balance
$44,449
$4,224
$48,673
Accumulated amortization
Beginning balance
$(22,517)
$(2,815)
$(25,332)
Period changes
(6,789)
(907)
(7,696)
Disposals
806
2,900
3,706
Ending balance
$(28,500)
$(822)
$(29,322)
Net book value
$15,949
$3,402
$19,351
Year Ended December 31, 2022
Software
Other Acquired
Intangibles
Total
Costs
Beginning balance
$28,095
$2,900
$30,995
Additions(a)
11,211
4,224
15,435
Disposals
—
—
—
Ending balance
$39,306
$7,124
$46,430
Accumulated amortization
Beginning balance
$(15,192)
$(1,669)
$(16,861)
Period changes
(7,325)
(1,146)
(8,471)
Disposals
—
—
—
Ending balance
$(22,517)
$(2,815)
$(25,332)
Net book value
$16,789
$4,309
$21,098
(a)For the years ended December 31, 2024, 2023 and 2022 additions were related to software enhancements and other acquired intangibles.
123
Note 13 - Derivative Financial Instruments
(Amounts in thousands, except share, per share and per unit data)
The Group faces volatility in market prices and basis differentials for natural gas, NGLs and oil, affecting the predictability of its cash flows from
commodity sales. Additionally, the Group’s cash flows related to interest payments variable rate debt obligations can be impacted by fluctuations in
interest rate markets, depending on its debt structure. To manage these risks, the Group utilizes various derivative financial instruments. As of
December 31, 2024, these instruments included swaps, collars, basis swaps, stand-alone put and call options, and swaptions. Below is a description of
these instruments:
Swaps:
When the Group sells a swap, it agrees to receive a fixed price for the contract while paying a floating market price to the
counterparty;
Collars:
Arrangements that include a fixed floor price (purchased put option) and a fixed ceiling price (sold call option) based on an index price 
have no net costs overall. At the contract settlement date, (1) when the index price is higher than the ceiling price, the Group pays the
counterparty the difference between the index price and ceiling price, (2) when the index price is between the floor and ceiling prices,
no payments are due from either party, and (3) when the index price is below the floor price, the Group will receive the difference
between the floor price and the index price.
Some collar arrangements may also include a sold put option with a strike price below the purchased put option. Known as a three-
way collar, the structure operates similarly to the standard collar. However, when the index price settles below the sold put option, the
Group pays the counterparty the difference between the index price and sold put option, effectively enhancing realized pricing by the
difference between the price of the sold and purchased put options;
Basis swaps:
Arrangements that guarantee a price differential for commodities from a specified delivery point. When the Group sells a basis swap, it
receives a payment from the counterparty if the price differential exceeds the stated terms of the contract. Conversely, if the price
differential is less than the stated terms, the Group pays the counterparty;
Put options:
The Group purchases and sells put options in exchange for a premium. When the Group purchases a put option, it receives from the
counterparty the excess amount (if any) by which the market price falls below the strike price of the put option at the time of
settlement. If the market price is above the put option’s strike price, no payment is required from either party. Conversely, when the
Group sells a put option, it pays the counterparty the excess amount (if any) by which the market price falls below the strike price of
the put option at the time of settlement. If the market price is above the put option’s strike price, no payment is required from either
party;
Call options:
The Group purchases and sells call options in exchange for a premium. When the Group purchases a call option, it receives from the
counterparty the excess amount (if any) by which the market price exceeds the strike price of the call option at the time of settlement.
If the market price is below the call option’s strike price, no payment is required from either party. When the Group sells a call option,
it pays the counterparty the excess amount (if any) by which the market price exceeds the strike price of the call option at the time of
settlement. If the market price is below the call option’s strike price, no payment is required from either party; and
Swaptions:
When the Group sells a swaption, the counterparty receives the option to enter into a swap contract at a specified price to be paid on
the exercise date. If the counterparty exercises the swaption, the Group pays a floating market price to the counterparty and receives
the fixed swap price from the counterparty.
The Group may elect to enter into offsetting transactions for the above instruments for the purpose of cancelling or terminating certain positions.
The following tables summarize the Group's calculated net fair value of derivative financial instruments as of the reporting date as follows:
Natural Gas Contracts
Weighted Average Price per Mcfe(a)
Volume
Sold
Purchased
Sold
Purchased
Basis
Fair Value at
(Mmbtu)
Swaps
Puts
Puts
Calls
Calls
Differential
December 31, 2024
2025
Swaps
213,686
$3.30
$—
$—
$—
$—
$—
$(67,387)
Two-way collars
3,650
—
—
—
3.83
3.63
—
171
Three-way collars
7,300
—
2.18
3.21
3.63
—
—
(1,635)
Stand-alone calls, net(b)
9,464
—
—
—
3.59
—
—
(10,689)
Basis swaps
232,542
—
—
—
—
—
(0.62)
(23,810)
2026
Swaps
171,222
3.25
—
—
—
—
—
(124,800)
Two-way collars
3,650
—
—
—
5.18
3.11
—
(443)
Stand-alone calls, net(b)
19,777
—
—
—
3.63
—
—
(36,803)
Basis swaps
107,801
—
—
—
—
—
(0.53)
(7,508)
2027
Swaps
147,104
3.25
—
—
—
—
—
(92,004)
Two-way collars
6,409
—
—
3.55
5.94
—
—
929
Stand-alone calls, net(b)
10,950
—
—
—
3.63
—
—
(28,776)
124
Natural Gas Contracts
Weighted Average Price per Mcfe(a)
Volume
Sold
Purchased
Sold
Purchased
Basis
Fair Value at
(Mmbtu)
Swaps
Puts
Puts
Calls
Calls
Differential
December 31, 2024
Basis swaps
23,301
—
—
—
—
—
(0.46)
(1,810)
2028
Swaps
109,226
2.86
—
—
—
—
—
(90,554)
Two-way collars
10,502
—
—
4.14
6.68
—
—
6,578
Stand-alone calls, net(b)
3,660
—
—
—
3.83
—
—
(4,166)
Purchased puts
7,978
—
—
3.11
—
—
—
2,890
Sold puts
7,978
—
3.11
—
—
—
—
(2,890)
Basis swaps
7,557
—
—
—
—
—
(0.36)
(662)
2029
Swaps
73,265
2.70
—
—
—
—
—
(58,058)
Two-way collars
28,251
—
—
3.76
5.07
—
—
7,948
Basis swaps
3,594
—
—
—
—
—
(0.39)
(449)
2030
Swaps
19,448
2.78
—
—
—
—
—
(13,352)
Two-way collars
30,099
—
—
3.63
4.26
—
—
5,934
Three-way collars
6,276
—
1.86
3.14
3.89
—
—
(1,306)
2031
Two-way collars
38,595
—
—
3.63
4.24
—
—
9,728
Three-way collars
5,909
—
1.86
3.14
3.89
—
—
(974)
2032
Two-way collars
9,190
—
—
3.63
4.24
—
—
(327)
Three-way collars
2,824
—
1.86
3.14
3.89
—
—
(428)
Swaptions
4/1/2026-3/31/2030(c)
82,171
2.49
—
—
—
—
—
(89,575)
4/1/2030-3/31/2032(d)
42,627
2.49
—
—
—
—
—
(37,307)
Total natural gas contracts
1,446,006
$(661,535)
(a)Rates have been converted from Btu to Mcfe using a Btu conversion factor of 1.04.
(b)Future cash settlements for deferred premiums.
(c)Option expires on March 23, 2026.
(d)Option expires on March 22, 2030.
NGLs Contracts
Weighted Average Price per Bbl
Volume
Sold
Fair Value at
(MBbls)
Swaps
Calls
December 31, 2024
2025
Swaps
3,692
$33.98
$—
$(13,667)
Stand-alone calls
913
—
30.07
(5,013)
2026
Swaps
3,195
32.38
—
(6,626)
Stand-alone calls
913
—
27.83
(6,757)
2027
Swaps
2,249
32.29
—
(3,459)
2028
Swaps
267
28.91
—
(623)
Total NGLs contracts
11,229
$(36,145)
125
Oil Contracts
Weighted Average Price per Bbl
Volume
Purchased
Sold
Fair Value at
(MBbls)
Swaps
Puts
Calls
December 31, 2024
2025
Swaps
1,409
$62.44
$—
$—
$(7,379)
Sold calls
110
—
—
70.50
(509)
2026
Swaps
779
62.44
—
—
(2,946)
Sold calls
110
—
—
67.50
(832)
2027
Swaps
623
62.67
—
—
(1,236)
Total oil contracts
3,031
$(12,902)
Interest
Principal Hedged
Fair Value at
Fixed-Rate
December 31, 2024
SOFR Interest Rate Swap
$5,520
4.15%
235
Net fair value of derivative financial instruments as of December 31, 2024
$(710,347)
When derivative assets and liabilities are with the same counterparty and a legal right of set-off exists under a master netting arrangement, netting their
fair values for financial reporting purposes is permitted. The Directors have elected to present these derivative assets and liabilities on a net basis when
these conditions are satisfied. The following table outlines the Group’s net derivatives as of the periods presented:
Derivative Financial Instruments
Consolidated Statement of Financial Position
December 31, 2024
December 31, 2023
Assets:
Non-current assets
Derivative financial instruments
$28,439
$24,401
Current assets
Derivative financial instruments
33,759
87,659
Total assets
$62,198
$112,060
Liabilities
Non-current liabilities
Derivative financial instruments
$(608,869)
$(623,684)
Current liabilities
Derivative financial instruments
(163,676)
(45,836)
Total liabilities
$(772,545)
$(669,520)
Net assets (liabilities):
Net assets (liabilities) - non-current
Other non-current assets (liabilities)
$(580,430)
$(599,283)
Net assets (liabilities) - current
Other current assets (liabilities)
(129,917)
41,823
Total net assets (liabilities)
$(710,347)
$(557,460)
The Group presents the fair value of derivative contracts on a net basis in the Consolidated Statement of Financial Position. Below is the impact of this
presentation on the Group’s recognized assets and liabilities for the specified periods:
December 31, 2024
Presented without
Effects of Netting
Effects of Netting
As Presented with
Effects of Netting
Non-current assets
$90,635
$(62,196)
$28,439
Current assets
77,801
(44,042)
33,759
Total assets
$168,436
$(106,238)
$62,198
Non-current liabilities
(671,300)
62,431
(608,869)
Current liabilities
(207,483)
43,807
(163,676)
Total liabilities
$(878,783)
$106,238
$(772,545)
Total net assets (liabilities)
$(710,347)
$—
$(710,347)
126
December 31, 2023
Presented without
Effects of Netting
Effects of Netting
As Presented with
Effects of Netting
Non-current assets
$103,008
$(78,607)
$24,401
Current assets
198,806
(111,147)
87,659
Total assets
$301,814
$(189,754)
$112,060
Non-current liabilities
(678,053)
54,369
(623,684)
Current liabilities
(181,221)
135,385
(45,836)
Total liabilities
$(859,274)
$189,754
$(669,520)
Total net assets (liabilities)
$(557,460)
$—
$(557,460)
The Group recorded the following gains (losses) on derivative financial instruments in the Consolidated Statement of Comprehensive Income for the
specified periods:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Net gain (loss) on commodity derivatives settlements(a)
$151,289
$178,064
$(895,802)
Net gain (loss) on interest rate swaps(a)
190
(2,722)
(1,434)
Gain (loss) on foreign currency hedges(a)
—
(521)
—
Total gain (loss) on settled derivative instruments
$151,479
$174,821
$(897,236)
Gain (loss) on fair value adjustments of unsettled financial instruments(b)
(189,030)
905,695
(861,457)
Total gain (loss) on derivative financial instruments
$(37,551)
$1,080,516
$(1,758,693)
(a)Represents the cash settlement of hedges that were settled during the period.
(b)Represents the change in fair value of financial instruments, net of the carrying value of hedges that were settled during the period.
All derivatives are defined as Level 2 instruments because their valuation relies on inputs other than quoted prices, that are observable for the assets
and liabilities.
Commodity Derivative Contract Modifications and Extinguishments
Occasionally, such as during the acquisition of producing assets, the completion of ABS financings, or in response to fluctuating price environments, the
Group may strategically modify, offset, terminate, or expand certain existing hedge positions. These modifications can involve changes to the volume of
production covered by contracts, the swap or strike price of specific derivative contracts, and other similar aspects of the derivative agreements. The
Group manages distinct, long-dated derivative contract portfolios for its ABS financings and Term Loans. Additionally, the Group maintains a separate
derivative contract portfolio for assets secured by the Credit Facility. These derivative contract portfolios associated with the Group’s ABS financings,
Term Loans, and Credit Facility are presented in the Group’s Statement of Financial Position.
The Group made no modifications in 2024.
2023 Modifications and Extinguishments
In February 2023, the Group sold puts in ABS III for approximately $9,045 and replaced them with swaps to maintain the appropriate level and
composition of derivatives at both the legal entity and full-company level. In August 2023, the Group monetized $9,240 in purchased puts associated
with its ABS hedge books and transitioned the monetized positions into long-dated swap agreements. The Group also monetized an additional $8,401 in
net modifications, primarily comprised of swap terminations. As these modifications were made in the normal course of business for the year ended
December 31, 2023, they are presented as an operating activity in the Consolidated Statement of Cash Flows.
In November 2023, the Group adjusted portions of its commodity derivative portfolio across its legal entities to ensure that it maintained the appropriate
level and composition at both the legal entity and full-Group level for the completion of the ABS VII financing arrangement. These portfolio adjustments
included novations of certain contracts to the legal entities holding the ABS VII Notes. The Group paid $6,376 for these portfolio adjustments. As these
modifications were associated with a borrowing transaction, these amounts are presented as a financing activity in the Consolidated Statement of Cash
Flows. Refer to Note 21 for additional information regarding ABS financing arrangements.
2022 Modifications and Extinguishments
In February 2022, the Group adjusted portions of its commodity derivative portfolio across its legal entities to ensure that it maintained the appropriate
level and composition at both the legal entity and full-Group level for the completion of the ABS III and ABS IV financing arrangements. The Group
completed these adjustments by entering into new commodity derivative contracts and novating certain derivative contracts to the legal entities holding
the ABS III and ABS IV notes. The Group paid $41,823 for these portfolio adjustments, driven primarily by the purchase of long-dated puts for ABS III
and ABS IV that collectively increased the value of the Group’s derivative position by an equal amount, and were required under the respective ABS III
and ABS IV indentures. The Group recorded payments for offsetting positions as new derivative financial instruments and applied extinguishment
payments against the existing commodity contracts in its Consolidated Statement of Financial Position.
In May 2022, and in October 2022 the Group completed the ABS V and ABS VI financing arrangements, respectively, and made similar commodity
derivative portfolio adjustments to maintain the appropriate level and composition of derivatives at both the legal entity and full-Group level. The Group
paid $31,250, driven primarily by the purchase of long-dated puts that increased the value of the Group’s derivative position by an equal amount, and
127
were required under the ABS V indenture. Under the ABS VI financing, the Group paid $32,242 from the proceeds of the financing to increase the value
of certain pre-existing derivative contracts that were novated to the ABS VI legal entity at closing. The Group recorded the payments as new derivative
financial instruments in its Consolidated Statement of Financial Position.
Refer to Note 21 for additional information regarding ABS financing arrangements.
Other commodity derivative contract modifications made during the normal course of business for the year ended December 31, 2022 totaled $133,573
which the Group recorded in its Consolidated Statement of Financial Position. As these modifications were made in the normal course, the Group has
presented these as an operating activity in the Consolidated Statement of Cash Flows. These modifications were primarily associated with elevating the
Group’s weighted average hedge floor to take advantage of the high price environment experienced in 2022 over a longer term. The trades were
primarily comprised of swap enhancements and the extinguishment of standalone call options.
Note 14 - Trade & Other Receivables
(Amounts in thousands, except share, per share and per unit data)
Trade receivables include amounts due from customers, entities that purchase the Group’s natural gas, NGLs and oil production, as well as amounts due
from joint interest owners who hold a working interest in the properties operated by the Group. Most of these trade receivables are current, and the
Group is confident in their collectibility. The table below provides a summary of the Group’s trade receivables. The fair value approximates the carrying
value as of the periods presented:
December 31, 2024
December 31, 2023
Commodity receivables(a)
$175,058
$172,045
Other receivables(b)
75,322
34,691
Total trade receivables
$250,380
$206,736
Allowance for credit losses(c)
(15,959)
(16,529)
Total trade receivables, net
$234,421
$190,207
(a)Commodity receivables include trade receivables and accrued revenues.
(b)Other receivables are predominantly comprised of joint interest receivables.
(c)The allowance for credit losses mainly pertains to amounts owed by joint interest owners.
Note 15 - Other Assets
(Amounts in thousands, except share, per share and per unit data)
The following table includes details of other assets as of the periods presented:
December 31, 2024
December 31, 2023
Other non-current assets
Other non-current assets(a)
$6,270
$9,172
Total other non-current assets
$6,270
$9,172
Other current assets
Prepaid expenses
$9,077
$3,955
Inventory
9,591
7,829
Total other current assets
$18,668
$11,784
(a)Includes the Group’s investment in DP Lion Equity Holdco LLC of $5,566 and $7,500 as of December 31, 2024 and 2023, respectively. Refer to Notes 5 and 21 for
additional information regarding the DP Lion Equity Holdco LLC equity sale.
Note 16 - Share Capital
(Amounts in thousands, except share, per share and per unit data)
The Company has one class of common shares which carry the right to one vote at annual general meetings of the Group. As of December 31, 2024,
the Company had unlimited shares authorized and all shares in issue were fully paid.
Share capital represents the nominal (par) value of shares (£0.20) that have been issued. Share premium includes any premiums received on issue of
share capital above par. Any transaction costs associated with the issuance of shares are deducted from share premium, net of any related income tax
benefits. The components of share capital include:
Issuance of Share Capital
In October 2024, the Company issued 2,342,445 new ordinary shares direct to the Seller to fund a portion of the of the East Texas II transaction. The
total value of the stock consideration was $27,453 based on the Company’s NYSE stock price on the closing date of the East Texas II transaction.
In August 2024, the Company issued 2,249,650 new ordinary shares direct to Crescent Pass to fund a portion of the Crescent Pass transaction. The total
value of the stock consideration was $28,413 based on the Company’s NYSE stock price on the closing date of the Crescent Pass transaction.
In February 2023, the Company placed 6,422,200 new ordinary shares at $25.34 per share (£21.00) to raise gross proceeds of $162,757 (approximately
£134,866). Associated costs of the placing were $5,969. The Group used the proceeds to fund the Tanos II transaction.
128
In 2022, there were no issuances of share capital for purposes other than share-based compensation awards issued at par which were insignificant for
the period.
For detailed information regarding the acquisitions mentioned above, refer to Note 5.
Treasury Shares
The Group’s holdings in its own equity instruments are classified as treasury shares. The consideration paid, along with any directly attributable
incremental costs, is deducted from the Group’s stockholders’ equity until the shares are either cancelled or reissued. No gain or loss is recognized in the
Consolidated Statement of Comprehensive Income upon the purchase, sale, issuance, or cancellation of treasury shares.
Employee Benefit Trust (“EBT”)
In March 2022, the Group established the EBT to benefit its employees. The Group provides funding to the EBT to facilitate the acquisition of shares.
These shares are held in the EBT to fulfill awards and grants under the Group’s 2017 Equity Incentive Plan and the Employee Share Purchase Plan (the
“ESPP”). Shares held in the EBT are treated in the same manner as treasury shares and are thus included in the Consolidated Financial Statements as
treasury shares.
During the year ended December 31, 2024, the EBT purchased 418,151 shares at an average price of $12.51 per share (approximately £9.72) for a total
consideration of $5,229 (approximately £4,065). Additionally, the EBT issued 139,317 shares during the year ended December 31, 2024 to settle vested
share-based awards and ESPP purchases. During the year ended December 31, 2023, the EBT did not purchase any shares. However, during the year
ended December 31, 2023, the EBT issued 334,251 to settle vested share-based awards and ESPP purchases. As of December 31, 2024, the EBT held a
total of 646,098 shares. For further details related to share-based compensation, refer to Note 17 .
Repurchase of Shares
During the year ended December 31, 2024, the Group repurchased 1,219,879 treasury shares at an average price of $13.03 per share, amounting to a
total of $15,901 and representing 2% of issued share capital as of December 31, 2024. During the year ended December 31, 2023, the Group
repurchased 646,762 treasury shares at an average price of $17.08 per share, amounting to a total of $11,048 and representing 1% of issued share
capital as of December 31, 2023.
The Group has recorded the repurchase of these shares as a reduction in the treasury reserve. All repurchased treasury shares were cancelled upon
repurchase. As of December 31, 2024 and 2023, the par value of the cancelled shares amounting to $320 and $161, respectively, was retired into the
capital redemption reserve, which is included within share-based payments and other reserves in the Consolidated Statement of Financial Position.
Settlement of Warrants
In July 2022, the Group entered into an agreement to cancel 6,581 warrants (the "Warrants") held by certain former Mirabaud Securities Limited
("Mirabaud") employees for an aggregate principal amount of approximately $56 (approximately £46). The former employees surrendered the Warrants
to the Group for cancellation. Concurrently, the Group entered into an agreement to exercise 11,176 Warrants held by certain former Mirabaud
employees for an aggregate principal amount of approximately $201 (approximately £166). The former employees surrendered the Warrants to the
Group for cancellation in exchange for an equivalent number of shares of common stock. Following this purchase and exercise, no warrants
remain outstanding.
In February 2022, the Group entered into an agreement to cancel 23,855 Warrants held by certain former Mirabaud Securities Limited ("Mirabaud")
employees for an aggregate principal amount of approximately $265 (approximately £196). The former employees surrendered the Warrants to the
Group for cancellation. Concurrently, the Group entered into an agreement to exercise 14,519 Warrants held by certain former Mirabaud employees for
an aggregate principal amount of approximately $251 (approximately £187). The former employees surrendered the Warrants to the Group for
cancellation in exchange for an equivalent number of shares of common stock. Following this purchase and exercise, 17,757 warrants remained
outstanding.
The following tables summarize the Group's share capital, net of customary transaction costs, for the periods presented:
Number of Shares
Total Share Capital
Total Share Premium
Balance as of December 31, 2021
42,482,733
$11,571
$1,052,959
Issuance of share capital (settlement of warrants)
25,695
5
—
Issuance of share capital (equity compensation)
39,629
7
—
Issuance of EBT shares (equity compensation)
87,998
—
—
Repurchase of shares (EBT)
(789,513)
—
—
Repurchase of shares (share buyback program)
(399,769)
(80)
—
Balance as of December 31, 2022
41,446,773
$11,503
$1,052,959
Issuance of share capital (equity placement)
6,422,200
1,555
155,233
Issuance of EBT shares (equity compensation)
334,251
—
—
Repurchase of shares (share buyback program)
(646,762)
(161)
—
Balance as of December 31, 2023
47,556,462
$12,897
$1,208,192
Issuance of share capital (acquisition consideration)
4,592,095
1,185
54,519
Issuance of EBT shares (equity compensation)
139,317
—
—
Repurchase of shares (EBT)
(418,151)
—
—
Repurchase of shares (share buyback program)
(1,219,879)
(320)
—
Balance as of December 31, 2024
50,649,844
13,762
1,262,711
129
Subsequent Events
On March 14, 2025, the Group announced the completion of its previously announced acquisition of Maverick. The transaction was funded in part
through the issuance of 21,194,213 new ordinary shares direct to the unitholders of Maverick. Refer to Note 5 for additional information regarding
acquisitions.
In February 2025, the Company issued 8,500,000 new ordinary shares at $14.50 per share to raise gross proceeds of $123,250. In addition, the
Company has granted the underwriters a 30-day option to purchase up to an additional 850,000 ordinary shares at the public offering price, less
underwriting discount. The Group used the net proceeds to repay a portion of the debt incurred in connection with the Maverick acquisition.
Note 17 - Non-Cash Share-Based Compensation
(Amounts in thousands, except share, per share and per unit data)
Equity Incentive Plan
The 2017 Equity Incentive Plan (the “Plan”), as amended through April 27, 2021, authorized and reserved for issuance 3,284,031 shares of common
stock, which may be issued upon exercise of vested Options or the vesting of RSUs, PSUs and dividend equivalent units (“DEUs”) that are granted under
the Plan. As of December 31, 2024, 2,073,269 shares have vested and been issued to Plan participants, 2,095,156 shares have been granted but remain
unvested and 461,435 DEUs have accrued and remain unvested. As of December 31, 2023, 1,648,410 shares had vested and been issued to Plan
participants, 1,138,708 shares had been granted but remained unvested and 238,020 DEUs had accrued and remained unvested. Refer to the
Remuneration Committee’s Report within this Annual Report & Form 20-F for additional information regarding the terms of awards issued under the
Plan.
Options Awards
The following table summarizes Options award activity for the respective periods presented:
Number of Options(a)
Weighted Average
Grant Date Fair
Value per Share
Balance as of December 31, 2021
1,094,629
$8.53
Exercised(b)
(398,666)
6.60
Forfeited
(319,999)
11.30
Balance as of December 31, 2022
375,964
$8.21
Exercised(b)
(2,144)
6.60
Forfeited
(153,379)
8.25
Balance as of December 31, 2023
220,441
$8.20
Exercised(b)
—
—
Forfeited
(66,810)
11.14
Balance as of December 31, 2024
153,631
$6.93
(a)As of December 31, 2024, 2023 and 2022, 153,631, 162,108 and 19,000 Options were exercisable, respectively. As of December 31, 2024 all remaining Options
outstanding have an exercise price ranging from £16.80 to £24.00 and a weighted average remaining contractual life of 2.4 years.
(b)No Options were exercised during 2024. The weighted average exercise date share price was $24.29 and $32.35 for Options exercised during 2023 and 2022,
respectively.
The Group’s Options ratably vested over a three-year period and contained both performance and service metrics. The performance metrics included
Adjusted EPS as compared to pre-established benchmarks and a calculation that compared the Group’s TSR to pre-established benchmarks. The number
of units that vested ranged between 0% and 100% of the award. The fair value of the Group’s Options was calculated using the Black-Scholes model as
of the grant date and was uniformly expensed over the vesting periods. No Options were awarded during the years ended December 31, 2024, 2023
and 2022.
130
RSU Awards
The following table summarizes RSU equity award activity for the respective periods presented:
Number of Shares
Weighted Average
Grant Date Fair Value
per Share
Balance as of December 31, 2021
206,681
$26.76
Granted
198,504
27.70
Vested
(63,735)
25.92
Forfeited
(4,445)
27.24
Balance as of December 31, 2022
337,005
$27.47
Granted
252,869
22.35
Vested
(181,275)
23.08
Forfeited
(102,018)
27.54
Balance as of December 31, 2023
306,581
$25.82
Granted
764,411
12.40
Vested
(65,293)
30.97
Forfeited
(29,477)
20.08
Balance as of December 31, 2024
976,222
$15.14
RSUs can vest either on a cliff basis or ratably, depending on the service conditions set forth. The fair value of the Group’s RSUs is calculated using the
stock price at the grant date. This value is then expensed uniformly over the vesting period.
PSU Awards
The following table summarizes PSU equity award activity for the respective periods presented:
Number of Shares
Weighted Average
Grant Date Fair
Value per Share
Balance as of December 31, 2021
340,204
$23.90
Granted
231,980
28.04
Forfeited
(3,695)
26.07
Balance as of December 31, 2022
568,489
$25.57
Granted
349,028
16.66
Vested
(216,313)
23.85
Forfeited
(89,518)
20.30
Balance as of December 31, 2023
611,686
$21.87
Granted
525,596
9.10
Vested
(93,256)
18.90
Forfeited
(78,723)
19.37
Balance as of December 31, 2024
965,303
$15.41
PSUs are subject to cliff vesting based on specific performance criteria evaluated over a three-year period. These criteria include the average adjusted
return on equity over three years, measured against pre-established benchmarks. Additionally, the Group’s three-year TSR is compared to determined
benchmarks and the TSR of a selected group of peer companies. Other performance metrics include the three-year average growth in free cash flow
and the reduction in methane intensity over the same period. Depending on the achievement of these performance targets, the number of units that will
vest can vary from 0% to 100% of the initial award.
The fair value of the Group’s PSUs is determined using a Monte Carlo simulation model as of the grant date. This calculated fair value is then expensed
uniformly over the vesting period. For PSUs granted during the respective periods presented, the inputs to the Monte Carlo model included the
following:
December 31, 2024
December 31, 2023
December 31, 2022
Risk-free rate of interest
4.0%
3.3%
1.3%
Volatility(a)
38%
31%
37%
Correlation with comparator group range
0.02 - 0.32
0.01 - 0.30
0.01 - 0.36
(a)Volatility utilizes the historical volatility for the Group’s share price.
131
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the “ESPP”), implemented in February 2023, authorized and reserved for issuance 300,000 shares of common stock.
During the year ended December 31, 2024, 41,330 shares were purchased by and issued to ESPP participants. During the year ended December 31,
2023, 15,132 shares were purchased by and issued to ESPP participants. As of December 31, 2024, 243,538 shares remain available to be purchased.
Share-Based Compensation Expense
The following table presents the share-based compensation expense for the respective periods presented:
December 31, 2024
December 31, 2023
December 31, 2022
Options
$49
$292
$(749)
RSUs
4,359
2,833
4,210
PSUs
3,827
3,335
4,590
ESPP
51
34
—
Total share-based compensation expense
$8,286
$6,494
$8,051
Note 18 - Dividends
(Amounts in thousands, except share, per share and per unit data)
The following table summarizes the Group's dividends declared and paid on the dates indicated:
Dividend per Share
Record Date
Pay Date
Shares
Outstanding
Gross
Dividends Paid
Date Dividends Declared
USD
GBP
November 15, 2023
$0.875
£0.6844
March 1, 2024
March 28, 2024
47,221,488
$41,319
April 10, 2024
$0.290
£0.2283
May 24, 2024
June 28, 2024
47,062,984
13,648
May 9, 2024
$0.290
£0.2211
August 30, 2024
September 27, 2024
49,005,036
14,211
August 15, 2024
$0.290
£0.2279
November 29, 2024
December 27, 2024
50,642,261
14,686
Paid during the year ended December 31, 2024
$83,864
November 14, 2022
$0.875
£0.7220
March 3, 2023
March 28, 2023
47,868,969
$41,885
March 21, 2023
$0.875
£0.6860
May 26, 2023
June 30, 2023
48,164,650
42,144
May 9, 2023
$0.875
£0.7040
September 1, 2023
September 29, 2023
48,157,129
42,137
September 1, 2023
$0.875
£0.6840
December 1, 2023
December 29, 2023
47,856,570
41,875
Paid during the year ended December 31, 2023
$168,041
October 28, 2021
$0.850
£0.6500
March 4, 2022
March 28, 2022
42,502,328
$36,127
March 22, 2022
$0.850
£0.6860
May 27, 2022
June 30, 2022
42,527,424
36,148
May 16, 2022
$0.850
£0.7320
September 2, 2022
September 26, 2022
42,294,025
35,950
August 8, 2022
$0.850
£0.6900
November 25, 2022
December 28, 2022
41,446,769
35,230
Paid during the year ended December 31, 2022
$143,455
On November 12, 2024 the Group proposed a dividend of $0.29 per share. The dividend will be paid on March 31, 2025 to shareholders on the register
on February 28, 2025. This dividend was not approved by shareholders, thereby qualifying it as an “interim” dividend. No liability was recorded in the
Group Financial Statements in respect of this interim dividend as of December 31, 2024.
Dividends are waived on shares held in the EBT.
Subsequent Events
On March 17, 2025 the Directors recommended a dividend of $0.29 per share. The dividend will be subject to shareholder approval at the AGM.
Provided this dividend was not approved by shareholders as of the reporting date, this represents an “interim” dividend. No liability has been recorded in
the Group Financial Statements in respect of this dividend as of December 31, 2024.
Note 19 - Asset Retirement Obligations
(Amounts in thousands, except share, per share and per unit data)
The Group records a liability for the present value of the estimated future decommissioning costs associated with its natural gas and oil properties.
Although productive life of wells varies within our portfolio, we currently anticipate that all existing wells will reach the end of their productive lives and
be retired by approximately 2098, in alignment with our reserve calculations, which have been independently evaluated by independent reserves
auditors. Additionally, the Group records a liability for the future decommissioning costs of its production facilities and pipelines when required
by contract, statute, or constructive obligation. For the years ended December 31, 2024, 2023 and 2022, no state contractual agreements or statutes
related to production facilities and pipelines are expected to impose material obligations on the Group.
In estimating the present value of future decommissioning costs for its natural gas and oil properties, the Group considers several factors, including the
number and state jurisdictions of wells, current decommissioning costs by state and well type, and the Group’s retirement plan, which is based on state
132
requirements and the Group’s capacity to retire wells over their productive lives. The Directors’ assumptions are grounded in the current economic
environment and are believed to provide a reasonable basis for estimating the future liability. However, actual decommissioning costs will ultimately
depend on future market prices at the time the decommissioning services are performed. Additionally, the timing of decommissioning will vary based on
when the fields cease to produce economically, which is influenced by future natural gas and oil prices, factors that are inherently uncertain.
The Group incorporates annual inflationary cost increases into its current cost expectations and then discounts the resulting cash flows using a credit-
adjusted risk-free discount rate. The inflationary adjustment is based on the U.S. long-term 10-year rate, sourced from consensus economics. In
determining the discount rate of the liability, the Group considers treasury rates as well as the Bloomberg 15-year U.S. Energy BB and BBB bond index,
which aligns economically with the underlying long-term and unsecured liability. Based on this evaluation, the net discount rates used in the calculation
of the decommissioning liability were 3.7% for 2024, 3.4% for 2023, and 3.6% for 2022.
The composition of the provision for asset retirement obligations as of the reporting date is detailed below for the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Balance at beginning of period
$506,648
$457,083
$525,589
Additions(a)
111,265
3,250
24,395
Accretion
30,868
26,926
27,569
Asset retirement costs
(6,724)
(5,961)
(4,889)
Disposals(b)
—
(17,300)
(16,779)
Revisions to estimate(c)
6,521
42,650
(98,802)
Balance at end of period
$648,578
$506,648
$457,083
Less: Current asset retirement obligations
6,436
5,402
4,529
Non-current asset retirement obligations
$642,142
$501,246
$452,554
(a)For further details regarding acquisitions and divestitures, refer to Note 5.
(b)Disposals are related to the divestiture of natural gas and oil properties. For additional information, refer to Note 10.
(c)As of December 31, 2024, the Group performed normal revisions to its asset retirement obligations, which resulted in a $6,521 increase in the liability. This increase was
comprised of a $94,957 increase for cost revisions and a $382 increase attributed to retirement timing. Partially offsetting the increase was a $88,818 decrease
attributable to a higher discount rate as a result of an increase in bond yield volatility during the year. As of December 31, 2023, the Group performed normal revisions
to its asset retirement obligations, which resulted in a $42,650 increase in the liability. This increase was comprised of a $27,830 increase attributable to a lower
discount rate as a result of slightly decreased bond yields as compared to 2022 as inflation began to increase at a lower rate and a $16,059 increase for cost revisions.
Partially offsetting this increase was a $1,239 change attributed to retirement timing. As of December 31, 2022, the Group performed normal revisions to its asset
retirement obligations, which resulted in a $98,802 decrease in the liability. This decrease was comprised of a $144,656 decrease attributable to a higher discount rate
as a result of macroeconomic factors spurred by the increase in bond yields which have elevated with U.S. treasuries to combat the current inflationary environment.
Partially offsetting this decrease was $29,357 in cost revisions and a $16,497 timing revision for the acceleration of the Group’s retirement plans made possible by asset
retirement acquisitions that improved the Group’s asset retirement capacity through the growth of its operational capabilities.
Changes to assumptions used in estimating the Group’s asset retirement obligations could significantly affect the carrying value of the liability. A
reasonably possible adjustment in these assumptions could have the following impact on the Group’s asset retirement obligations as of December 31,
2024:
ARO Sensitivity
Scenario 1(a)
Scenario 2(b)
Discount rate
$(159,039)
$1,189,627
Timing
41,072
(44,722)
Cost
64,956
(64,956)
(a)Scenario 1 assumes an increase of the BBB 15-year discount rate to approximately 7% (which is one of the highest rates observed since 2020), a 10% increase in cost
and a 10% increase in timing by assuming the addition of one plugging rig, which would accelerate retirement plans. All of these scenarios have been either historically
observed or are considered reasonably possible.
(b)Scenario 2 assumes a decrease of the BBB 15-year discount rate to approximately 3% (which is one of the lowest rates observed since 2020), a 10% decrease in cost
and a 10% decrease in timing by assuming the loss of one plugging rig, which would delay retirement plans. All of these scenarios have been either historically observed
or are considered reasonably possible.
As of December 31, 2024 and 2023, the Group had no midstream asset retirement obligations.
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Note 20 - Leases
(Amounts in thousands, except share, per share and per unit data)
The Group leased automobiles, equipment and real estate for the periods indicated below. The following is a reconciliation of leases arising from
financing activities, along with the balance sheet classification of future minimum lease payments as of the reporting periods presented:
Present Value of
Minimum Lease Payments
December 31, 2024
December 31, 2023
December 31, 2022
Balance at beginning of period
$31,122
$28,862
$27,804
Additions(a)
19,253
14,430
11,269
Interest expense(b)
2,649
1,661
1,022
Cash inflows(c)
8,568
—
—
Cash outflows(d)
(16,992)
(13,831)
(11,233)
Balance at end of period
$44,600
$31,122
$28,862
Classified as:
Current liability
$13,776
$10,563
$9,293
Non-current liability
30,824
20,559
19,569
Total
$44,600
$31,122
$28,862
(a)The lease additions of $19,253, $14,430 and $11,269 for the years ended December 31, 2024, 2023 and 2022, respectively, were primarily due to the expansion of the
Group’s fleet, driven by ongoing growth.
(b)Included as a component of finance cost.
(c)Cash inflows consisted of proceeds from a lease modification for our fleet that was executed in 2024.
(d)Cash outflows consisted of $14,343, $12,169, and $10,211 in principal payments for the years ended December 31, 2024, 2023 and 2022, respectively, and $2,649,
$1,661, and $1,022 in interest payments for the same periods, respectively.
Outlined below is the movement in the Group’s right-of-use assets, along with their balance sheet classification as of the reporting periods presented:
Right-of-Use Assets
December 31, 2024
December 31, 2023
December 31, 2022
Balance at beginning of period
$30,014
$27,959
$26,908
Additions(a)
19,007
13,279
11,295
Depreciation
(12,965)
(11,224)
(10,244)
Balance at end of period
$36,056
$30,014
$27,959
Classified as:
Motor vehicles
$32,843
$25,592
$23,782
Midstream
1,785
3,136
3,801
Buildings and leasehold improvements
1,428
1,286
376
Total
$36,056
$30,014
$27,959
(a)The lease additions of $19,007, $13,279 and $11,295 for the years ended December 31, 2024, 2023 and 2022, respectively, were attributable to the expansion of the
Group’s fleet, driven by ongoing growth.
The range of discount rates applied in calculating right-of-use assets and the corresponding lease liabilities, based on the lease term, is detailed below:
December 31, 2024
December 31, 2023
December 31, 2022
Discount rates range
2.9% - 7.3%
1.8% - 7.1%
1.8% - 6.3%
Expenses related to short-term and low-value lease exemptions applied under IFRS 16, primarily associated with short-term compressor rentals,
amounted to $31,129, $30,024 and $25,153 for the years ended December 31, 2024, 2023 and 2022, respectively. These expenses have been included
in the Group’s operating expenses, with a significant portion allocated to LOE.
The table below illustrates the maturity schedule of leases as of the periods presented:
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December 31, 2024
December 31, 2023
December 31, 2022
Not Later Than One Year
$13,776
$10,563
$9,293
Later Than One Year and Not Later Than Five Years
30,733
20,559
19,569
Later Than Five Years
91
—
—
Total
$44,600
$31,122
$28,862
Note 21 - Borrowings
(Amounts in thousands, except share, per share and per unit data)
The Group’s borrowings consist of the following amounts as of the reporting periods presented:
December 31, 2024
December 31, 2023
Credit Facility (interest rate of 8.63% and 8.66%, respectively)(a)
$284,400
$159,000
Term Loan I (interest rate of 6.50%)
88,948
106,470
Term Loan II (interest rate of 8.83%)(a)
83,851
—
ABS I Notes (interest rate of 5.00%)
80,157
100,898
ABS II Notes (interest rate of 5.25%)
102,431
125,922
ABS III Notes (interest rate of 4.875%)
—
274,710
ABS IV Notes (interest rate of 4.95%)
79,653
99,951
ABS V Notes (interest rate of 5.78%)
—
290,913
ABS VI Notes (interest rate of 7.50%)(b)
242,010
159,357
ABS VIII Notes (interest rate of 7.28%)
585,747
—
ABS IX Notes (interest rate of 6.891%)
75,316
—
Other miscellaneous borrowings(c)
113,060
7,627
Total borrowings
$1,735,573
$1,324,848
Less: Current portion of long-term debt
(209,463)
(200,822)
Less: Deferred financing costs
(34,115)
(41,123)
Less: Original issue discounts
(8,216)
(7,098)
Total non-current borrowings, net
$1,483,779
$1,075,805
(a)Represents the variable interest rate as of period end.
(b)Includes $132,576 for the assumption of Oaktree’s proportionate share of the ABS VI debt as part of the Oaktree transaction as of December 31, 2024. Refer to Note 5
for additional information regarding the Oaktree transaction.
(c)Includes $76,100 in notes payable issued as part of the consideration in the Oaktree transaction, and $30,000 in notes payable issued by a third party financial
institution in November 2024, collateralized by two natural gas processing plants and various natural gas compressors and related support equipment in the Central
Region, as of December 31, 2024. Refer to Note 5 for additional information regarding the Oaktree transaction.
Credit Facility
The Group maintains a revolving loan facility (the “Credit Facility”) with a lending syndicate, where the borrowing base is redetermined semi-annually or
as needed. The Group’s wholly-owned subsidiary, DP RBL Co LLC, serves as the borrower under its Credit Facility. The borrowing base is primarily
determined by the value of the natural gas and oil properties that serve as collateral for the lending arrangement, and it may fluctuate due to changes
in collateral, which can result from acquisitions or the establishment of ABS, term loans, or other lending structures.
In August 2022, the Group amended and restated the credit agreement governing its Credit Facility. This amendment aligned the agreement with the
Group’s ESG initiatives by incorporating sustainability performance targets (“SPTs”) similar to those included in the ABS IV, VI and VIII notes, and
extended the maturity of the Credit Facility to August 2026. During the semi-annual redetermination in October 2024, the borrowing base was
reaffirmed at $385,000.
The Credit Facility carries an interest rate of SOFR plus an additional spread ranging from 2.75% to 3.75%, depending on utilization, and is payable
quarterly. As of December 31, 2024, available borrowings under the Credit Facility were $86,690, which includes the impact of $13,910 in letters of
credit issued to certain vendors.
The Credit Facility contains certain customary representations, warranties, and both affirmative and negative covenants. These covenants cover areas
such as maintenance of books and records, financial reporting and notification, compliance with laws, maintenance of properties and insurance, and
limitations on incurrence of indebtedness, liens, fundamental changes, international operations, asset sales, certain debt payments and amendments,
restrictive agreements, investments, restricted payments, and hedging. The restricted payment provision governs the Group’s ability to make
discretionary payments, such as dividends, share repurchases, or other discretionary payments. DP RBL Co LLC must meet the following criteria to make
discretionary payments: (i) leverage is less than 1.5x and borrowing base availability is >25%; (ii) leverage is between 1.5x and 2.0x, free cash flow
must be positive, and borrowing base availability must be >15%; (iii) leverage is between 2.0x and 2.5x, free cash flow must be positive, and borrowing
base availability must be >20%; (iv) when leverage exceeds 2.0x, restricted payments are prohibited.
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Additional covenants require DP RBL Co LLC to maintain a total debt to EBITDAX ratio of no more than 3.25 to 1.00 and a current assets (with certain
adjustments) to current liabilities ratio of no less than 1.00 to 1.00 as of the last day of each fiscal quarter.
As of December 31, 2024, the Group was in compliance with all covenants for its Credit Facility.
Term Loan I
In May 2020, the Group acquired DP Bluegrass LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to facilitate a securitized financing
agreement for $160,000, structured as a secured term loan (the “Term Loan I”). The Group issued Term Loan I at a 1% discount, resulting in net
proceeds of $158,400, which were used to fund the 2020 Carbon and EQT acquisitions. Term Loan I is secured by certain producing assets acquired in
connection with these acquisitions.
Term Loan I accrues interest at an annual rate of 6.50% and has a maturity date of May 2030. Both interest and principal payments on Term Loan I are
made on a monthly basis.
Term Loan II
In August 2024, the Group formed DP Yellow Jacket Holdco LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary to enter into a
securitized financing agreement for a $60,000 term loan and a $5,000 revolving loan for a total borrowing base of $65,000 (the “Term Loan II”). The
proceeds from Term Loan II were used, in part, to fund the Crescent Pass acquisition. For additional information regarding acquisitions, refer to Note 5.
In October 2024, the Group amended the Term Loan II and expanded the term loan to $82,651 and the revolving loan to $12,349 for a total borrowing
base of $95,000. This amendment was accounted for as an extinguishment, which resulted in a loss of $2,470 and which has been recorded in ‘loss on
early retirement of debt’ in the Statement of Comprehensive Income. The expanded borrowing capacity was used to fund a portion of the East Texas II
acquisition, and the acquired assets additionally collateralized the expanded Term Loan II. As of December 31, 2024, available borrowings under the
revolving loan were $11,149.
The Term Loan II is secured by the Crescent Pass and East Texas II assets and carries an interest at SOFR plus an additional spread ranging from
3.75% to 4.75% and is payable quarterly. The term loan is subject to fixed amortization with monthly principal payments of $500 beginning in February
2025 and escalating to $1,000 beginning in July 2025 with the remaining unpaid principal balance due upon maturity in August 2027. The Term Loan II
is to be prepaid if the Group receives cash in connection with an issuance of equity interest or ABS monetization.
ABS I Notes
In November 2019, the Group formed Diversified ABS LLC (“ABS I”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB-
rated asset-backed securities with a total principal amount of $200,000 at par value (the “ABS I Notes”). These notes are secured by specific upstream
producing assets in the Appalachian region owned by the Group. At the time of the agreement, 85% of the natural gas production from these assets
was hedged through long-term derivative contracts. The ABS I Notes carry an annual interest rate of 5% and have a legal final maturity date of January
2037, with an amortizing maturity date of December 2029. Both interest and principal payments on the ABS I Notes are made on a monthly basis.
If ABS I generates cash flow exceeding the required payments, it must allocate between 50% to 100% of this excess cash flow towards additional
principal payments, depending on certain performance metrics, with any remaining excess cash flow retained by the Group. Specifically, (a) for any
payment date before March 1, 2030, (i) if the debt service coverage ratio (the “DSCR”) on that date is at least 1.25 to 1.00, then 25% of the excess
cash flow, (ii) if the DSCR is between 1.15 to 1.00 and 1.25 to 1.00, then 50%, and (iii) if the DSCR is below 1.15 to 1.00, the production tracking rate
for ABS I is below 80%, or the loan to value ratio exceeds 85%, then 100% of the excess cash flow must be used for additional principal payments; and
(b) for any payment date on or after March 1, 2030, 100% of the excess cash flow must be used for additional principal payments.
ABS II Notes
In April 2020, the Group formed Diversified ABS Phase II LLC (“ABS II”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB-
rated asset-backed securities with a total principal amount of $200,000 (the “ABS II Notes”). These notes were issued at a 2.775% discount. The Group
utilized the net proceeds of $183,617, after accounting for the discount, capital reserve requirement, and debt issuance costs, to reduce its Credit
Facility. The ABS II Notes are secured by specific upstream producing assets in the Appalachian region owned by the Group. at the time of the
agreement, 85% of the natural gas production from these assets was hedged through long-term derivative contracts. The ABS II Notes carry an annual
interest rate of 5.25% and have a legal final maturity date of July 2037, with an amortizing maturity date of September 2028. Both interest and principal
payments on the ABS II Notes are made on a monthly basis.
If ABS II generates cash flow exceeding the required payments, it must allocate between 50% to 100% of this excess cash flow towards additional
principal, depending on certain performance metrics, with any remaining excess cash flow retained by the Group. Specifically, (a) (i) if the DSCR on any
payment date is below 1.15 to 1.00, then 100% of the excess cash flow must be used for additional principal payments, (ii) if the DSCR is between 1.15
to 1.00 and 1.25 to 1.00, then 50%, or (iii) if the DSCR is at least 1.25 to 1.00, then 0%; (b) if the production tracking rate for ABS II is below 80%,
then 100%, otherwise 0%; (c) if the loan-to-value ratio (the “LTV”) exceeds 65.0%, then 100%, otherwise 0%; (d) for any payment date after July 1,
2024 and before July 1, 2025, if the LTV exceeds 40% and ABS II has executed hedging agreements for a minimum period of 30 months starting July
2026 covering production volumes of at least 85% but no more than 95% (the “Extended Hedging Condition”), then 50%, otherwise 0%; (e) for any
payment date after July 1, 2025, and before October 1, 2025, if the LTV exceeds 40% or ABS II has not satisfied the Extended Hedging Condition, then
50%, otherwise 0%; and (f) for any payment date after October 1, 2025, if the LTV exceeds 40% or ABS II has not satisfied the Extended Hedging
Condition, then 100%, otherwise 0%.
ABS III Notes
In February 2022, the Group formed Diversified ABS III LLC (“ABS III”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB
rated asset-backed securities with a total principal amount of $365,000 at par value (the “ABS III Notes”). These notes were secured by certain
upstream producing and midstream assets in the Appalachian region owned by the Group. The ABS III Notes carried an interest rate of 4.875% and had
a legal final maturity date of April 2039, with an amortizing maturity date of November 2030. Both interest and principal payments on the ABS III Notes
were made on a monthly basis.
If ABS III generated cash flow exceeding the required payments, it was obligated to allocate between 50% to 100% of this excess cash flow towards
additional principal payments, depending on certain performance metrics, with any remaining excess cash flow retained by the Group. Specifically, (a)
(i) if the DSCR on any payment date was at least 1.25 to 1.00, then 0% of the excess cash flow was used for additional principal payments, (ii) if the
136
DSCR was between 1.15 to 1.00 and 1.25 to 1.00, then 50%, and (iii) if the DSCR was below 1.15 to 1.00, then 100%; (b) if the production tracking
rate for ABS III was below 80%, then 100%, otherwise 0%; and (c) if the LTV for ABS III exceeded 65%, then 100%, otherwise 0%.
In May 2024, the Group utilized proceeds from the ABS VIII Notes to repay the outstanding principal of the ABS III & ABS V notes, thereby retiring
these notes from the Group’s outstanding debt. The transaction resulted in a loss on the early retirement of debt amounting to $10,649. Concurrently,
ABS III and ABS V were dissolved. The ABS VIII Notes are secured by the collateral that previously secured the ABS III & ABS V notes.
ABS IV Notes
In February 2022, the Group formed Diversified ABS IV LLC (“ABS IV”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB
rated asset-backed securities with a total principal amount of $160,000 at par value (the “ABS IV Notes”). These notes are secured by a portion of the
upstream producing assets acquired through the Blackbeard Acquisition. The ABS IV Notes carry an annual interest rate of 4.95% and have a legal final
maturity date of February 2037, with an amortizing maturity date of September 2030. Both interest and principal payments on the ABS IV Notes are
made on a monthly basis.
If ABS IV generates cash flow exceeding the required payments, it must allocate between 50% to 100% of this excess cash flow towards additional
principal payments, depending on certain performance metrics, with any remaining excess cash flow retained by the Group. Specifically, (a) (i) if the
DSCR on any payment date is at least 1.25 to 1.00, then 0% of the excess cash flow was used for additional principal payments, (ii) if the DSCR is
between 1.15 to 1.00 and 1.25 to 1.00, then 50%, and (iii) if the DSCR is below 1.15 to 1.00, then 100%; (b) if the production tracking rate for ABS IV
is below 80%, then 100%, otherwise 0%; and (c) if the LTV for ABS IV exceeds 65%, then 100%, otherwise 0%.
ABS V Notes
In May 2022, the Group formed Diversified ABS V LLC (“ABS V”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue BBB rated
asset-backed securities with a total principal amount of $445,000 at par value (the “ABS V Notes”). These notes are secured by a majority of the Group’s
remaining upstream assets in the Appalachian region that were not included in previous ABS transactions. The ABS V Notes carry an annual interest rate
of 5.78% and have a legal final maturity date of May 2039, with an amortizing maturity date of December 2030. Both interest and principal payments
on the ABS V Notes are made on a monthly basis.
If ABS V generates cash flow exceeding the required payments, it must allocate between 50% to 100% of this excess cash flow towards additional
principal payments, depending on certain performance metrics, with any remaining excess cash flow retained by the Group. Specifically, (a) (i) if the
DSCR on any payment date is at least 1.25 to 1.00, then 0% of the excess cash flow was used for additional principal payments, (ii) if the DSCR is
between 1.15 to 1.00 and 1.25 to 1.00, then 50%, and (iii) if the DSCR is below 1.15 to 1.00, then 100%; (b) if the production tracking rate for ABS V is
below 80%, then 100%, otherwise 0%; and (c) if the LTV for ABS V exceeds 65%, then 100%, otherwise 0%.
In May 2024, the Group utilized proceeds from the ABS VIII Notes to repay the outstanding principal of the ABS III & ABS V notes, thereby retiring
these notes from the Group’s outstanding debt. The transaction resulted in a loss on the early retirement of debt amounting to $10,649. Concurrently,
ABS III and ABS V were dissolved. The ABS VIII Notes are secured by the collateral that previously secured the ABS III & ABS V notes.
ABS VI Notes
In October 2022, the Group formed Diversified ABS VI LLC (“ABS VI”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue, jointly
with Oaktree, BBB+ rated asset-backed securities with a total principal amount of $460,000. The Group’s share amounted to $235,750 before fees,
reflecting its 51.25% ownership interest in the collateral assets (the “ABS VI Notes”). The ABS VI Notes were issued at a 2.63% discount and are
primarily secured by the upstream assets jointly acquired with Oaktree in the Tapstone acquisition. The Group recorded its proportionate share of the
ABS VI Notes in its Consolidated Statement of Financial Position. In June, 2024, as part of the Oaktree transaction, the Group assumed Oaktree’s
proportionate debt of $132,576 associated with the ABS VI Notes. For additional details regarding the Oaktree transaction, refer to Note 5.
These notes carry an annual interest rate of 7.50% and have a legal final maturity date of November 2039, with an amortizing maturity date of October
2031. Both interest and principal payments on the ABS VI Notes are made on a monthly basis.
If ABS VI achieves certain performance metrics, it is required to allocate 50% to 100% of any excess cash flow towards additional principal payments.
Specifically, (a) (i) If the DSCR as of the applicable payment date is below 1.15 to 1.00, then 100% of the excess cash flow was used for additional
principal payments, (ii) if the DSCR is between 1.15 to 1.00 and 1.25 to 1.00, then 50%, or (iii) if the DSCR is at least 1.25 to 1.00, then 0%; (b) if the
production tracking rate for ABS VI is below 80%, then 100%, otherwise 0%; and (c) if the LTV for ABS VI exceeds 75%, then 100%, else 0%.
ABS VII Notes
In November 2023, the Group formed DP Lion Equity Holdco LLC (“ABS VII”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue
Class A and Class B asset-backed securities (the “Class A Notes,” Class B Notes,” and collectively the “ABS VII Notes”). These notes are secured by
certain upstream producing assets in the Appalachia region. The ABS VII Class A Notes, rated BBB+, were issued with a total principal amount of
$142,000, while the ABS VII Class B Notes, rated BB-, were issued with a total principal amount of $20,000. The Class A Notes carry an annual interest
rate of 8.243% and have a legal final maturity date of November 2043, with an amortizing maturity date of February 2034. The Class B Notes carry an
annual interest rate of 12.725% and have a legal final maturity date of November 2043, with an amortizing maturity date of August 2032. Both interest
and principal payments on the Class A and Class B Notes are made on a monthly basis.
In December 2023, the Group divested 80% of the equity ownership in ABS VII to outside investors, generating cash proceeds of $30,000. Upon
evaluating the remaining 20% interest in ABS VII, the Group determined that the governance structure does not allow it to exercise control, joint
control, or significant influence over the entity. Consequently, ABS VII is not consolidated within the Group’s financial statements. The Group’s remaining
investment in ABS VII, initially valued at $7,500 was accounted for at fair value in accordance with IFRS 9, Financial Instruments (“IFRS 9”). For
additional information regarding the ABS VII equity sale, refer to Note 5. As of December 31, 2024, the Group’s investment in ABS VII was valued at
$5,566.
ABS VIII Notes
In May 2024, the Group formed Diversified ABS VIII LLC (“ABS VIII”), a limited-purpose, bankruptcy-remote, wholly-owned subsidiary, to issue Class
A-1 and Class A-2 asset-backed securities (the “Class A-1 Notes,” “Class A-2 Notes,” and collectively the “ABS VIII Notes”). The Class A-1 Notes, rated A,
were issued with a total principal amount of $400,000, while the Class A-2 Notes, rated BBB+, were issued with a total principal amount of $210,000.
The proceeds from these issuances were used to repay the outstanding principal of the ABS III & ABS V notes, effectively retiring those notes from the
Group’s outstanding debt. Consequently, ABS III and ABS V were dissolved. The ABS VIII Notes are secured by the collateral that previously secured the
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ABS III and ABS V notes, which includes certain upstream producing and midstream assets in the Appalachian region owned by the Group, and the
remaining upstream assets in the Appalachian region that were not securitized by previous ABS transactions.
The Class A-1 Notes carry an annual interest rate of 7.076% and have a legal final maturity date of May 2044. The Class A-2 Notes carry an annual
interest rate of 7.670% and have a legal final maturity date of May 2044. Both interest and principal payments on the ABS VIII Notes are made on a
monthly basis.
If ABS VIII achieves certain performance metrics, it is required to allocate 25% to 100% of any excess cash flow towards additional principal payments.
Specifically, (a) (i) if the DSCR as of the applicable payment date is below 1.45 to 1.00, then 100%, (ii) if the DSCR is between 1.45 to 1.00 and 1.50 to
1.00, then 50%, or (iii) if the DSCR is at least 1.50 to 1.00, then 25%; (b) if the production tracking rate for ABS VIII is below 80%, then 100%,
otherwise 25%; or (c) if the LTV for ABS VIII exceeds 75%, then 100%, otherwise 25%.
ABS IX Notes
In June 2024, the Group formed DP Mustang Holdco LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary (“ABS IX,” formerly “ABS
Facility Warehouse”), to secure a bridge loan facility (the “ABS Facility Warehouse Notes”). The initial draw on the ABS Facility Warehouse Notes
amounted to $71,000, which included $66,343 in net proceeds, $3,060 in restricted cash interest reserve, and $1,597 in debt issuance costs. The ABS
Facility Warehouse Notes were secured by certain producing assets that previously collateralized the Credit Facility. It carried an interest rate of SOFR
plus an additional 3.75% and had a legal final maturity date of May 2029. Both interest and principal payments on the ABS Facility Warehouse Notes
were made on a monthly basis.
In September 2024, the Group issued Class A and Class B asset-backed securities (the “Class A Notes,” “Class B Notes,” and collectively the “ABS IX
Notes”) with a total principal amount of $76,500. The Class A Notes were issued with a total principal amount of $71,000, while the Class B Notes were
issued with a total principal amount of $5,500. The proceeds from these issuances were used to repay the outstanding principal of the ABS Facility
Warehouse Notes, effectively retiring it from the Group’s outstanding debt and resulting in a loss on the early retirement of debt amounting to $1,634.
The Class A Notes carry an annual interest rate of 6.555% and have an amortizing maturity date of December 2034. The Class B Notes carry an annual
interest rate of 11.235% and have an amortizing maturity date of September 2030. Both interest and principal payments on the ABS IX Notes are made
on a monthly basis.
Oaktree Seller’s Notes
In June 2024, the Group partially funded the purchase price of the Oaktree transaction with deferred consideration in the form of an unsecured seller’s
note from Oaktree (the “Oaktree Seller’s Note”). The Group issued $83,348 in notes at an annual interest rate of 8%, with a legal final maturity date of
December 2025. Deferred interest and principal payments were scheduled in three installments: December 2024, June 2025, and December 2025.
In October 2024, the Group modified the terms of the Oaktree Seller’s Note, increasing the rate to 9%, extending the maturity date to September 2026,
and changing the payment schedule to monthly interest and principal payments.
The Oaktree Seller’s Note contains certain customary representations and warranties, as well as affirmative and negative covenants. As of December 31,
2024, the Group was in compliance with all covenants associated with the Oaktree Seller’s Note. For additional information regarding the Oaktree
transaction, refer to Note 5.
Debt Covenants
ABS I, II, IV, VI, VIII and IX Notes (collectively, The “ABS Notes”) and Term Loan I and Term Loan II (collectively, the “Term Loans”)
The ABS Notes and Term Loans are governed by a series of covenants and restrictions typical for such transactions, including (i) the requirement for the
issuer to maintain specified reserve accounts to ensure the payment of interest on the ABS Notes and Term Loans, (ii) provisions for optional and
mandatory prepayments, specified make-whole payments under certain conditions, (iii) indemnification payments in the event that the assets pledged
as collateral for the ABS Notes and Term Loans are found to be defective or ineffective, (iv) covenants related to recordkeeping, access to information,
and similar matters, and (v) compliance with all applicable laws and regulations, including the Employee Retirement Income Security Act (“ERISA”),
environmental laws, and the USA Patriot Act (specific to ABS IV only).
The ABS Notes and Term Loans are also subject to customary accelerated amortization events as outlined in the indenture. These events include failure
to maintain specified debt service coverage ratios, failure to meet certain production metrics, certain change of control and management termination
events, and the failure to repay or refinance the ABS Notes and Term Loans by the scheduled maturity date.
Additionally, the ABS Notes and Term Loans are subject to customary events of default, which include non-payment of required interest, principal, or
other amounts due, failure to comply with covenants within specified time frames, certain bankruptcy events, breaches of specified representations and
warranties, failure of security interests to be effective, and certain judgments.
As of December 31, 2024 the Group was in compliance with all financial covenants related to the ABS Notes and Term Loans.
Sustainability-Linked Borrowings
Credit Facility
The Credit Facility contains three sustainability-linked performance targets (“SPTs”) that can influence the applicable margin on borrowings based on the
Group’s performance. These targets are:
•GHG Emissions Intensity: This target measures the Group’s consolidated Scope 1 emissions and Scope 2 emissions, expressed as MT CO2e per
MMcfe;
•Asset Retirement Performance: This target tracks the number of wells the Group successfully retires during any fiscal year; and
•TRIR Performance: This target is based on the TRIR, calculated as the arithmetic average of the two preceding fiscal years and current period. The
TRIR is computed by multiplying the total number of recordable cases (as defined by OSHA) by 200,000 and then dividing by the total hours
worked by all employees during any fiscal year.
The goals set by the Credit Facility for each of these categories are aspirational and represent higher thresholds than those the Group has publicly set
for itself. The economic impact of meeting or failing to meet these thresholds is relatively minor, with adjustments to the applicable margin level ranging
from a reduction of five basis points to an increase of five basis points in any given fiscal year.
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An independent third-party assurance provider is required to certify the Group’s performance against the SPTs.
ABS IV
In connection with the issuance of the ABS IV Notes, the Group engaged an independent international provider of sustainability research and services to
establish and maintain a “sustainability score” for the Group. If this score falls below a minimum threshold set at the time of issuance of the ABS IV
Notes, the interest payable for the subsequent interest accrual period will increase by five basis points. This score is based on an overall assessment of
the Group’s corporate sustainability profile and is not contingent upon the Group meeting or exceeding specific sustainability performance metrics.
Additionally, the sustainability score is not influenced by the use of proceeds from the ABS IV Notes, and there are no restrictions on the use of these
proceeds beyond the terms outlined in the Group’s Credit Facility. The Group provides updates to the ABS IV note holders through monthly note holder
statements, informing them of any changes in the interest rate payable on the ABS IV Notes resulting from changes in the sustainability score.
ABS VI & VIII
A “second party opinion provider” has certified that the terms of the ABS VI and ABS VIII notes align with the International Capital Markets Association
(“ICMA”) framework for sustainability-linked bonds. This framework applies to bond instruments whose financial and/or structural characteristics vary
based on the achievement of predefined sustainability objectives, or SPTs. The framework comprises five key components (1) the selection of key
performance indicators (“KPIs”), (2) the calibration of SPTs, (3) the variation of bond characteristics depending on whether the KPIs meet the SPTs, (4)
regular reporting on the status of the KPIs and whether the SPTs have been met, and (5) independent verification of SPT performance by an external
reviewer, such as an auditor or environmental consultant. Unlike the ICMA’s framework for green bonds, the framework for sustainability-linked bonds
do not mandate a specific use of proceeds.
The ABS VI & ABS VIII Notes contain two SPTs. The Group must achieve and have certified by May 28, 2027, for the ABS VI Notes, and by December
31, 2029, for the ABS VIII Notes, the following targets: (1) a reduction in Scope 1 and Scope 2 GHG emissions intensity to 2.85 MT CO2e/MMcfe for the
ABS VI Notes and 2.73 MT CO2e/MMcfe or the ABS VIII Notes, and/or (2) a reduction in Scope 1 methane emissions intensity to 1.12 MT CO2e/MMcfe
for the ABS VI Notes and 0.75 MT CO2e/MMcfe for the ABS VIII Notes. If the Group fails to meet or have these SPTs certified by an external verifier by
the respective deadlines, the interest rate payable on the ABS VI and ABS VIII notes will increase by 25 basis points for each unmet or uncertified SPT.
An independent third-party assurance provider will be required to certify the Group’s performance against these SPTs by the applicable deadlines.
Compliance
As of December 31, 2024, the Group successfully met or was in compliance with all sustainability-linked debt metrics.
Future Maturities
The table below presents a reconciliation of the Group’s undiscounted future maturities of its total borrowings as of the reporting date:
December 31, 2024
December 31, 2023
Not later than one year
$209,463
$200,822
Later than one year and not later than five years
940,780
864,264
Later than five years
585,330
259,762
Total borrowings
$1,735,573
$1,324,848
Finance Costs
The table details the Group’s finance costs for each of the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Interest expense, net of capitalized and income amounts(a)
$120,773
$117,808
$86,840
Amortization of discount and deferred finance costs
16,870
16,358
13,903
Other
—
—
56
Total finance costs
$137,643
$134,166
$100,799
(a)Includes payments related to both borrowings and leases.
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Interest Incurred
The table below represents the interest incurred related to the Group’s amortizing debt structures for each of the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Term Loan I
$6,531
$7,573
8,643
ABS I Notes
4,571
5,660
$7,110
ABS II Notes
6,787
8,040
9,286
ABS III Notes
5,507
14,515
15,325
ABS IV Notes
4,440
5,703
6,235
ABS V Notes
6,792
19,332
14,319
ABS VI Notes
17,953
15,433
3,300
ABS VIII Notes
25,375
—
—
ABS IX Notes
1,460
—
—
Other miscellaneous borrowings(a)
4,106
—
—
Total interest incurred on amortizing debt
$83,522
$76,256
$64,218
(a)Includes $3,947 and $159 of interest incurred on the Oaktree Seller’s Note and other notes payable, respectively.
Fair Value
The table below represents the fair value of the Group’s debt structures as of the periods presented:
As of
December 31, 2024
December 31, 2023
Credit Facility(a)
$284,400
$159,000
Term Loan I
86,277
101,706
Term Loan II(a)
83,851
—
ABS I Notes
76,821
94,517
ABS II Notes
98,273
119,519
ABS III Notes
—
250,158
ABS IV Notes
74,064
92,345
ABS V Notes
—
274,061
ABS VI Notes
240,150
158,284
ABS VIII Notes
593,653
—
ABS IX Notes
73,897
—
Other miscellaneous borrowings(a)
107,588
—
Total fair value of outstanding debt
$1,718,974
$1,249,590
(a)Carrying value approximates fair value.
Excess Cash Flow Payments
The table below represents excess cash flow payments based on the achievement of certain performance metrics related to the Group’s debt structures
for each of the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
ABS I Notes
$2,401
$7,892
$10,736
ABS VIII Notes
14,753
—
—
ABS IX Notes
884
—
—
Total excess cash flow payments
$18,038
$7,892
$10,736
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Financing Activities
The table below presents a reconciliation of borrowings arising from financing activities for each of the periods presented:
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Balance at beginning of period
$1,276,627
$1,440,329
$1,010,355
Acquired as part of an acquisition
215,924
—
2,437
Sale of equity interest
—
(154,966)
—
Proceeds from borrowings
1,844,768
1,537,230
2,587,554
Repayments of borrowings
(1,653,489)
(1,547,912)
(2,139,686)
Costs incurred to secure financing
(20,267)
(13,776)
(34,234)
Amortization of discount and deferred financing costs
16,870
16,358
13,903
Cash paid for interest
(123,141)
(116,784)
(83,958)
Finance costs and other
135,950
116,148
83,958
Balance at end of period
$1,693,242
$1,276,627
$1,440,329
Subsequent Event
On February 27, 2025, the Group 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 $530,000 at par value (“the ABS X Notes”). The Group utilized the proceeds from the ABS
X Notes to refinance the ABS I Notes, ABS II Notes, and Term Loan I, and to fund the Summit transaction. Refer to Note 5 for additional information
regarding acquisitions.
On March 14, 2025, in connection with the close of the Maverick acquisition, the Group amended and restated the credit agreement governing its Credit
Facility. The amendment extended the maturity of the Credit Facility to March 2029 and increased the borrowing base to $900,000, primarily resulting
from the additional collateral acquired from Maverick. There were no other material changes to pricing or terms. The Group utilized the proceeds from
the upsized borrowing base to fund a portion of the Maverick acquisition and repay the outstanding principal on Term Loan II.
Note 22 - Trade & Other Payables
(Amounts in thousands, except share, per share and per unit data)
The table below details the Group’s trade and other payables. The fair value approximates the carrying value as of the periods presented:
December 31, 2024
December 31, 2023
Trade payables
$31,896
$49,487
Other payables
3,117
4,003
Total trade and other payables
$35,013
$53,490
Trade and other payables are unsecured, do not bear interest, and are settled as they become due.
Note 23 - Other Liabilities
(Amounts in thousands, except share, per share and per unit data)
The table below details the Group’s other liabilities as of the periods presented:
December 31, 2024
December 31, 2023
Other non-current liabilities
Other non-current liabilities
$5,384
$2,224
Total other non-current liabilities
$5,384
$2,224
Other current liabilities
Accrued expenses(a)
$120,532
$99,723
Net revenue clearing(b)
40,935
79,056
Asset retirement obligations - current
6,436
5,402
Revenue to be distributed(c)
136,631
93,322
Total other current liabilities
$304,534
$277,503
(a)As of December 31, 2024 accrued expenses increased primarily due to an $8,347 increase in accrued capital expenditures and a $6,890 increase in hedge settlement
payables. As of December 31, 2023 accrued expenses decreased primarily due to a $50,541 decrease in hedge settlements payables, resulting from lower commodity
prices during that year. For more detailed information on year-over-year changes in other liabilities and their fixed and variable nature, refer to the Financial Review.
(b)Net revenue clearing represents the estimated revenue that is payable to third-party working interest owners. The year-over-year decrease in net revenue clearing was
primarily due to the Oaktree acquisition in June 2024.
141
(c)Revenue to be distributed refers to revenue that is payable to third-party working interest owners but has not yet been paid due to unresolved title, legal, ownership, or
other issues. The Group releases the underlying liability as these issues are resolved. Since the timing of resolution is uncertain, the Group records this balance as a
current liability. The year-over-year increase in revenue to be distributed was attributed to the Group’s growth.
Note 24 - Fair Value & Financial Instruments
(Amounts in thousands, except share, per share and per unit data)
Fair Value
The fair value of an asset or liability is defined as the price that would be received to sell the asset or paid to transfer the liability in an orderly
transaction in the principal market (or most advantageous market if a principal market is not available) for that asset or liability. In estimating fair value,
the Group employs valuation techniques that align with the market approach, income approach, and/or cost approach, ensuring consistent application of
these techniques. The inputs to these valuation techniques include assumptions that market participants would use when pricing an asset or liability.
IFRS 13, Fair Value Measurement (“IFRS 13”), establishes a fair value hierarchy for valuation inputs, prioritizing quoted prices in active markets for
identical assets or liabilities as the highest level of input, and unobservable inputs as the lowest level. The fair value hierarchy is defined as follows:
Level 1:
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2:
Inputs (other than quoted prices included in Level 1) can include the following:
(1) Observable prices in active markets for similar assets or liabilities;
(2) Prices for identical assets or liabilities in markets that are not active;
(3) Directly observable market inputs for substantially the full term of the asset or liability; and
(4) Market inputs that are not directly observable but are derived from or corroborated by observable market data.
Level 3:
Unobservable inputs which reflect the Directors’ best estimates of what market participants would use in pricing the asset or liability at
the measurement date.
Financial Instruments
Working Capital
The carrying values of cash and cash equivalents, trade receivables, other current assets, accounts payable, and other current liabilities in the
Consolidated Statement of Financial Position approximate their fair value due to their short-term nature. For trade receivables, the Group applies the
simplified approach permitted by IFRS 9, Financial Instruments (“IFRS 9”), which requires the recognition of expected lifetime losses from the initial
recognition of the receivables. Financial liabilities are initially measured at fair value and subsequently measured at amortized cost.
For borrowings, derivative financial instruments, and leases, the following methods and assumptions were used to estimate fair value:
Borrowings
The fair values of the Group’s ABS Notes and Term Loans are considered to be Level 2 measurements within the fair value hierarchy. The carrying
values of the borrowings under the Group’s Credit Facility (to the extent utilized) and Term Loan II approximate fair value because the interest rate is
variable and reflective of market rates. The Group also considers the fair value of its Credit Facility to be a Level 2 measurement within the fair
value hierarchy.
Leases
The Group initially measures the lease liability at the present value of the future lease payments. These lease payments are discounted using the
interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate to discount the lease
payments.
Derivative Financial Instruments
The Group measures the fair value of its derivative financial instruments using a pricing model that incorporates market-based inputs. These inputs
include, but are not limited to, the contractual price of the underlying position, current market prices, natural gas and liquids forward curves, discount
rates such as the U.S. Treasury yields, the SOFR curve, and volatility factors.
The Group classifies its derivative financial instruments into the fair value hierarchy based on the data used to determine their fair values. The Group’s
fixed price swaps (Level 2) are estimated using third-party discounted cash flow calculations, utilizing the NYMEX futures index for natural gas and oil
derivatives, and OPIS for NGLs derivatives. For valuing its interest rate derivatives (Level 2), the Group employs discounted cash flow models. The net
derivative values attributable to the Group’s interest rate derivative contracts as of December 31, 2024 are based on (i) the contracted notional
amounts, (ii) active market-quoted SOFR yield curves, and (iii) the applicable credit-adjusted risk-free rate yield curve.
The Group’s call options, put options, collars and swaptions (Level 2) are valued using the Black-Scholes model, an industry-standard option valuation
model. This model takes into account inputs such as contract terms, including maturity, and market parameters, including assumptions of NYMEX and
OPIS futures, interest rates, volatility and creditworthiness. Inputs to the Black-Scholes model, including the volatility input, are obtained from a third-
party pricing source, with independent verification of the most significant inputs on a monthly basis. A change in volatility would result in a
corresponding change in fair value measurement.
The Group’s basis swaps (Level 2) are estimated using third-party calculations based on forward commodity price curves.
There were no transfers between fair value levels for the year ended December 31, 2024.
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The following table includes the Group's financial instruments as of the periods presented:
December 31, 2024
December 31, 2023
Cash and cash equivalents
$5,990
$3,753
Trade receivables, net
234,421
190,207
Other non-current assets
6,270
9,172
Other non-current liabilities(a)
(5,384)
(1,946)
Other current liabilities(b)
(298,098)
(272,101)
Derivative financial instruments at fair value
(710,347)
(557,460)
Leases
(44,600)
(31,122)
Borrowings
(1,718,974)
(1,249,590)
Total
$(2,530,722)
$(1,909,087)
(a)Excludes $278 for the long-term portion of the value associated with the upfront promote received from Oaktree for the year ended December 31, 2023.
(b)Includes accrued expenses, net revenue clearing, and revenue to be distributed. Excludes asset retirement obligations.
Note 25 - Financial Risk Management
(Amounts in thousands, except share, per share and per unit data)
The Group is exposed to various financial risks, including market risk, credit risk, liquidity risk, capital risk, and collateral risk. To manage these risks, the
Group continuously monitors the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance.
The Group’s principal financial liabilities consist of borrowings, leases, and trade and other payables, which are primarily used to finance and provide
financial guarantees for its operations. The Group’s principal financial assets include cash and cash equivalents, as well as trade and other receivables
derived from its operations.
Additionally, the Group also enters into derivative financial instruments, which are recorded as assets or liabilities depending on market dynamics. The
Group leverages its internal resources to design and manage its derivative-related risk management activities, but also engages with third party
providers to assist with the execution of derivative transactions and provide commodity trading and risk management applications.
Market Risk
Market risk refers to the possibility that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market prices. Market
risk is comprised of two main types of risk: interest rate risk and commodity price risk. Financial instruments affected by market risk include borrowings
and derivative financial instruments.
To manage market price risks resulting from changes in commodity prices and foreign exchange rates, the Group uses both derivative and non-
derivative financial instruments. These instruments help mitigate the potential negative effects on the Group’s assets, liabilities, or future expected cash
flows.
Interest Rate Risk
The Group is subject to market risk exposure related to changes in interest rates. The Group’s borrowings primarily consist of fixed-rate amortizing
notes and its variable rate Credit Facility and Term Loan II, as illustrated below.
December 31, 2024
December 31, 2023
Borrowings
Interest Rate(a)
Borrowings
Interest Rate(a)
ABS Notes, Term Loan I, & other(b)
$1,443,013
7.01%
$1,158,221
5.67%
Credit Facility & Term Loan II
$368,251
8.68%
$159,000
8.66%
(a)The interest rate on the ABS Notes, Term Loan I and other notes payable represents the weighted average fixed rate of the notes, while the interest rate presented for
the Credit Facility and Term Loan II represents the floating rate as of December 31, 2024 and 2023, respectively.
(b)Includes $76,100 in notes payable issued as part of the consideration in the Oaktree transaction, and $30,000 in notes payable issued by a third party financial
institution in November 2024 collateralized by two natural gas processing plants and various natural gas compressors and related support equipment in the Central
Region, as of December 31, 2024. Refer to Note 5 for additional information regarding the Oaktree transaction.
For additional information regarding the ABS Notes, Term Loan I, Term Loan II, and Credit Facility, refer to Note 21. The table below illustrates the
impact of a 100 basis point adjustment in the borrowing rate for the Credit Facility and Term Loan II and the corresponding effect on finance costs. This
represents a reasonably possible change in interest rate risk.
Credit Facility & Term Loan II Interest Rate Sensitivity
December 31, 2024
December 31, 2023
+100 Basis Points
$3,683
$1,590
-100 Basis Points
$(3,683)
$(1,590)
The Group strives to maintain a prudent balance of floating and fixed-rate borrowing exposure, particularly during uncertain market conditions. As part
of the Group’s risk mitigation strategy, the Group occasionally enters into swap arrangements to adjust its exposure to floating or fixed interest rates,
depending on changes in the composition of borrowings in its portfolio. Consequently, the total principal hedged through the use of derivative financial
instruments varies from period to period.
143
As of December 31, 2024 and 2023, the fair value of the Group’s interest rate swaps represents an asset of $235 and an asset of $315, respectively. For
additional information regarding derivative financial instruments, refer to Note 13.
Commodity Price Risk
The Group’s revenues are primarily derived from the sale of its natural gas, NGLs, and oil production, making the Group subject to commodity price risk.
Commodity prices for natural gas, NGLs and oil can be volatile and may fluctuate due to relatively small changes in supply, weather conditions,
economic conditions, and government actions. For the years ended December 31, 2024, 2023 and 2022, the Group’s commodity revenue was $732,259,
$802,399, and $1,873,011, respectively.
To mitigate the risk of fluctuations in commodity prices, the Group enters into derivative financial instruments. The total volumes hedged through the
use of these instruments vary from period to period. Generally the Group’s objective is to hedge at least 65% of its anticipated production volumes for
the next 12 months, at least 50% for months 13 to 24, and a minimum of 30% for months 25 to 36. For additional information regarding derivative
financial instruments, refer to Note 13.
By removing price volatility from a significant portion of the Group’s expected production through 2032, the Group has mitigated, but not eliminated, the
potential effects of changing prices on its operating cash flow for those periods. While these derivative contracts help mitigate the negative effects of
falling commodity prices, they also limit the benefits the Group would receive from increases in commodity prices.
Credit and Counterparty Risk
The Group is exposed to credit and counterparty risk from the sale of its natural gas, NGLs and oil. Trade receivables from customers represent amounts
due for the purchase of these commodities, and their collectability depends on the financial condition of each customer. The Group reviews the financial
condition of customers before extending credit and generally does not require collateral to support their trade receivables. As of December 31, 2024 and
2023, the Group had no customers that comprised over 10% of its total trade receivables. The Group’s trade receivables from customers, net of the
applicable allowance for credit losses, were $199,788 and $168,913, respectively, as of December 31, 2024 and 2023.
The Group is also exposed to credit risk from joint interest owners, which are entities that own a working interest in the properties operated by the
Group. Joint interest receivables are classified under trade receivables, net, in the Consolidated Statement of Financial Position. The Group has the
ability to withhold future revenue payments to recover any non-payment of joint interest receivables. As of December 31, 2024 and 2023, the Group’s
joint interest receivables, net of the applicable allowance for credit losses, were $34,633 and $21,294, respectively.
Trade receivables are current, and the Group believes these net receivables are collectible. For additional information, refer to Note 3.
Liquidity Risk
Liquidity risk is the possibility that the Group will not be able to meet its financial obligations as they fall due. The Group manages this risk by
maintaining adequate cash reserves through the use of cash from operations and borrowing capacity on the Credit Facility. Additionally, the Group
continuously monitors its forecast and actual cash flows to ensure it maintains an appropriate level of liquidity. The amounts disclosed in the following
table represent the Group’s contractual undiscounted cash flows.
Not Later Than
One Year
Later Than
One Year and
Not Later Than
Five Years
Later Than
Five Years
Total
For the year ended December 31, 2024
Trade and other payables
$35,013
$—
$—
$35,013
Borrowings
209,463
940,780
585,330
1,735,573
Leases
16,080
33,215
139
49,434
Other liabilities(a)
161,467
5,384
—
166,851
Total
$422,023
$979,379
$585,469
$1,986,871
For the year ended December 31, 2023
Trade and other payables
$53,490
$—
$—
$53,490
Borrowings
200,822
864,264
259,762
1,324,848
Leases
12,358
22,531
—
34,889
Other liabilities(a)
178,779
2,224
—
181,003
Total
$445,449
$889,019
$259,762
$1,594,230
(a)Includes accrued expenses and net revenue clearing. Excludes asset retirement obligations and revenue to be distributed.
Capital Risk
The Group defines capital as the total of equity shareholders’ funds and long-term borrowings net of available cash balances. The Group’s objectives
when managing capital are to provide returns for shareholders, maintain appropriate leverage and safeguard the ability to continue as a going concern.
Additionally, the Group aims to pursue opportunities for growth by identifying and evaluating potential acquisitions and constructing new infrastructure
on existing proved leaseholds.
The Directors do not establish a quantitative return on capital criteria, but instead promote year-over-year adjusted EBITDA growth. The Group actively
manages its balance sheet and seeks to maintain a long-term leverage ratio approximately 2.5x.
144
Collateral Risk
As of December 31, 2024, the Group has pledged 100% of its upstream natural gas and oil properties in the Appalachian and Central regions, along
with certain midstream assets, to fulfill the collateral requirements for borrowings under its debt instruments. The fair value of the collateral is based on
an independent petroleum engineering firm’s reserves calculation, which uses estimated cash flows discounted at 10% and a commodities futures price
schedule. For additional information regarding acquisitions and borrowings, refer to Notes 5 and 21, respectively.
Note 26 - Commitments & Contingencies
(Amounts in thousands, except share, per share and per unit data)
Delivery Commitments
We have contractually agreed to deliver firm quantities of natural gas to various customers, which we expect to fulfill with production from existing
reserves. To ensure we meet these commitments, we regularly monitor our proved developed reserves.
The following table summarizes our total gross commitments, compiled using best estimates based on our sales strategy, as of December 31, 2024.
Natural gas (MMcf)
2025
77,187
2026
52,802
2027
130,911
Thereafter
242,276
Litigation and Regulatory Proceedings
The Group is involved in various pending legal issues that have arisen in the ordinary course of business. The Group accrues for litigation, claims, and
proceedings when a liability is both probable and the amount can be reasonably estimated. As of December 31, 2024 and 2023, the Group did not have
any material amounts accrued related to litigation or regulatory matters.
For any matters not accrued for, it is not possible to estimate the amount of any additional loss or range of loss that is reasonably possible. However,
based on the nature of the claims, management believes that current litigation, claims, and proceedings are not, individually or in aggregate, after
considering insurance coverage and indemnification, likely to have a material adverse impact on the Group’s financial position, results of operations, or
cash flows.
The Group has no other contingent liabilities that would have a material impact on the Group’s financial position, results of operations, or cash flows.
Environmental Matters
The Group’s operations are subject to environmental laws and regulations in all the jurisdictions where it operates, and it was in compliance as of
December 31, 2024 and 2023. However, the Group is unable to predict the impact of additional environmental laws and regulations that may be
adopted in the future, including whether they would adversely affect its operations. The Group can offer no assurance regarding the significance or cost
of compliance associated with any new environmental legislation or regulation once implemented.
Note 27 - Related Party Transactions
(Amounts in thousands, except share, per share and per unit data)
The Group had no related party activity in 2024, 2023 or 2022.
Note 28 - Subsequent Events
(Amounts in thousands, except share, per share and per unit data)
The Group determined the need to disclose the following material transactions that occurred subsequent to December 31, 2024, which have been
described within each relevant footnote as follows:
Description
Footnote
Acquisitions & Divestitures
Note 5
Share Capital
Note 16
Dividends
Note 18
Borrowings
Note 21
145
Supplemental Natural Gas & Oil Information (Unaudited)
(Amounts in thousands, except per unit data)
Estimated Reserves
The process of estimating quantities of “proved” and “proved developed” reserves is very complex, requiring significant subjective decisions in the
evaluation of all available geological, engineering, and economic data for each reservoir. The data for a given reservoir may also change substantially
over time as a result of numerous factors, including additional development activity, evolving production history, and continual reassessment of the
viability of production under varying economic conditions. As a result, revisions to existing reserves estimates may occur from time to time.
Although every reasonable effort is made to ensure that reserves estimates reported represent the most accurate assessments possible, the subjective
decisions and variances in available data for various reservoirs make these estimates generally less precise than other estimates included in the financial
statement disclosures.
For each of the years ended December 31, 2024, 2023 and 2022, the estimated proved reserves were independently evaluated by our independent
reserves auditors, NSAI, in accordance with petroleum engineering and evaluation standards published by the Society of Petroleum Evaluation Engineers
and definitions and guidelines established by the SEC. Accordingly, the following reserves estimates are based on existing economic and operating
conditions. Reserves estimates are inherently imprecise, and the Group’s reserves estimates are generally based on extrapolation of historical production
trends, historical prices of natural gas and oil, and analogy to similar properties and volumetric calculations. Therefore, the Group’s estimates are
expected to change, and such changes could be material and occur in the near term as future information becomes available.
The following table summarizes the changes in the Group’s net proved reserves for the periods presented, all of which were located in the U.S.:
Natural Gas
NGLs
Oil
Total
(MMcf)
(MBbls)
(MBbls)
(MMcfe)
December 31, 2021
4,009,037
89,080
14,252
4,629,029
Revisions of previous estimates(a)
306,696
11,694
492
379,812
Extensions, discoveries and other additions
13,098
1
37
13,326
Production
(255,597)
(5,200)
(1,554)
(296,121)
Purchase of reserves in place(b)
281,345
6,356
1,927
331,043
Sales of reserves in place(c)
(4,968)
—
(324)
(6,912)
December 31, 2022
4,349,611
101,931
14,830
5,050,177
Revisions of previous estimates(a)
(658,917)
153
(230)
(659,379)
Extensions, discoveries and other additions
712
—
50
1,012
Production
(256,378)
(5,832)
(1,377)
(299,632)
Purchase of reserves in place(b)
105,713
2,592
923
126,803
Sales of reserves in place(c)
(340,697)
(3,143)
(1,580)
(369,035)
December 31, 2023
3,200,044
95,701
12,616
3,849,946
Revisions of previous estimates(a)
(212,056)
11,305
6,215
(106,936)
Extensions, discoveries and other additions
897
32
33
1,287
Production
(244,298)
(5,980)
(1,568)
(289,586)
Purchase of reserves in place(b)
151,210
2,413
1,228
173,056
Sales of reserves in place(c)
(178)
—
—
(178)
December 31, 2024
2,895,619
103,471
18,524
3,627,589
(a)During 2024, commodity market pricing decreased driving a net downward revision of 106,936 MMcfe. During 2023, commodity market pricing decreased significantly
driving a net downward revision of 659,379 MMcfe. During 2022, commodity market pricing was volatile and increased significantly due to the war between Russia and
Ukraine as well as other geopolitical factors. These factors primarily drove a net upward revision of 386,064 MMcfe due to changes in pricing that impacted well
economics. These increases were then offset in part by a 6,252 MMcfe downward revision for changes in timing.
(b)During 2024, purchases of reserves in place were primarily related to the Oaktree, Crescent Pass, and East Texas II acquisitions. During 2023, purchases of reserves in
place were primarily related to the Tanos II acquisition. During 2022, purchases of reserves in place were primarily related to the East Texas I and ConocoPhillips
acquisitions. For additional information about acquisitions, refer to Note 5.
(c)During 2024, 2023 and 2022, sales of reserves in place were primarily related to divestitures of non-core assets. For additional information about divestitures, refer to
Note 5.
146
Natural Gas
NGLs
Oil
Total
(MMcf)
(MBbls)
(MBbls)
(MMcfe)
Total proved reserves as of:
December 31, 2022
4,349,611
101,931
14,830
5,050,177
December 31, 2023
3,200,044
95,701
12,616
3,849,946
December 31, 2024
2,895,619
103,471
18,524
3,627,589
Total proved developed reserves as of:
December 31, 2022
4,340,779
101,931
14,830
5,041,345
December 31, 2023
3,184,499
94,391
12,380
3,825,125
December 31, 2024
2,895,619
103,471
18,524
3,627,589
Total proved undeveloped reserves as of:
December 31, 2022
8,832
—
—
8,832
December 31, 2023
15,545
1,310
236
24,821
December 31, 2024
—
—
—
—
Capitalized Costs Relating to Natural Gas and Oil Producing Activities
Capitalized costs relating to natural gas and oil producing activities and related accumulated depreciation, depletion and amortization were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Proved properties
$3,819,192
$3,206,739
$3,062,463
Unproved properties
—
—
—
Total capitalized costs
3,819,192
3,206,739
3,062,463
Less: Accumulated depreciation, depletion and amortization
(913,490)
(716,364)
(506,655)
Net capitalized costs
$2,905,702
$2,490,375
$2,555,808
Costs Incurred in Natural Gas and Oil Property Acquisition, Exploration and Development Activities
Costs incurred in natural gas and oil property acquisition, exploration and development activities were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Proved properties
$469,400
$78,582
$260,817
Unproved properties
—
—
—
Total property acquisition costs
469,400
78,582
260,817
Total exploration and development costs
4,587
10,923
19,670
Capitalized interest
—
—
—
Total costs
$473,987
$89,505
$280,487
Results of Operations for Producing Activities
Revenues and expenses related to the production and sale of natural gas, NGLs, and oil were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Commodity revenue
$732,259
$802,399
$1,873,011
Operating expense
(339,086)
(349,478)
(365,325)
Depreciation, depletion, amortization & accretion
(284,048)
(248,098)
(248,060)
Results of operations
109,125
204,823
1,259,626
Income tax expense
(23,135)
(49,362)
(282,156)
Results of operations, net of income tax expense
$85,990
$155,461
$977,470
Standardized Measure of Discounted Future Net Cash Flows
The following information has been developed based on natural gas and crude oil reserves and production volumes estimated by the Group’s
engineering staff. While it can be used for some comparisons, it should not be the sole method for evaluating the Group or its performance. Additionally,
the following information may not represent realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net
Cash Flows (the “Standardized Measure”) be viewed as representative of the current value of the Group.
The Group believes that the following factors should be considered when reviewing the information:
•Future costs and selling prices will differ from those required to be used in these calculations;
147
•Due to future market conditions and governmental regulations, actual rates of production in future years may vary significantly from the rate of
production assumed in the calculations;
•The selection of a 10% discount rate is arbitrary and may not be a reasonable measure of the relative risk associated with realizing future net
natural gas and oil revenues; and
•Future net cash flows may be subject to different rates of income taxation.
Under the Standardized Measure, future cash inflows were estimated by using the 12-month average index price for the respective commodity,
calculated as the unweighted arithmetic average of the first day of the month price for each month during the year. Prices used for the the Standardized
Measure (adjusted for basis and quality differentials) were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Natural gas (Mcf)
$1.83
$2.49
$6.29
NGLs (Bbls)
20.02
21.59
43.68
Oil (Bbls)
74.76
71.89
94.01
Future cash inflows were reduced by estimated future development and production costs based on year-end costs to arrive at net cash flow before tax.
Future income tax expense was computed by applying year-end statutory tax rates to future pretax net cash flows, less the tax basis of the properties
involved and the utilization of available tax carryforwards related to natural gas and oil operations. The applicable accounting standards require the use
of a 10% discount rate.
Management does not solely rely on the following information when making investment and operating decisions. These decisions are based on a
number of factors, including estimates of proved reserves and varying price and cost assumptions that are considered more representative of a range of
anticipated economic conditions. The Standardized Measure is as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Future cash inflows
$8,600,093
$10,900,742
$32,155,117
Future production costs
(4,497,171)
(5,345,117)
(8,923,660)
Future development costs(a)
(2,655,256)
(1,937,293)
(1,902,297)
Future income tax expense
(303,892)
(653,216)
(5,001,823)
Future net cash flows
1,143,774
2,965,116
16,327,337
10% annual discount for estimated timing of cash flows
253,147
(1,219,580)
(9,584,237)
Standardized Measure
$1,396,921
$1,745,536
$6,743,100
(a)Includes $2,465,291, $1,715,585 and $1,698,105 in asset retirement costs for the years ended December 31, 2024, 2023 and 2022, respectively.
Future cash inflows were reduced by estimated future production and development costs based on year-end costs to determine pre-tax cash inflows.
Future income taxes were computed by applying the year-end statutory tax rate to the excess of pre-tax cash inflows over the Group’s tax basis in the
associated proved natural gas and oil properties, after accounting for permanent differences and tax credits.
Changes in the Standardized Measure were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Standardized Measure, beginning of year
$1,745,536
$6,743,100
$3,333,091
Sales and transfers of natural gas and oil produced, net of production costs
(374,104)
(431,629)
(1,498,272)
Net changes in prices and production costs
(804,229)
(5,850,625)
5,137,373
Extensions, discoveries, and other additions, net of future production and
development costs
(77,393)
(13,682)
28,038
Acquisition of reserves in place
407,175
122,613
555,773
Divestiture of reserves in place
(27)
(377,097)
(8,303)
Revisions of previous quantity estimates
(344)
(1,224,544)
702,585
Net change in income taxes
199,303
1,688,208
(1,378,438)
Changes in estimated future development costs
—
—
22,085
Previously estimated development costs incurred during the year
12,676
—
7,711
Changes in production rates (timing) and other
56,610
206,646
(562,245)
Accretion of discount
231,718
882,546
403,702
Standardized Measure, end of year
$1,396,921
$1,745,536
$6,743,100
148
Additional Information (Unaudited)
Payments to Governments Report 2024
(Amounts in thousands)
This report provides a consolidated overview of the payments made to governments by DEC for the year 2024 as required under Disclosure and
Transparency Rule 4.3A issued by the UK's Financial Conduct Authority ("DTR 4.3A") and in accordance with The Reports on Payments to Governments
Regulations 2014 (as amended in 2015) ("the UK Regulations"). DTR 4.3A mandates that companies listed on a UK stock exchange and operating in the
extractive industry publicly disclose payments to governments in the countries where they engage in the exploration, prospection, discovery,
development, and extraction of natural gas and oil deposits, or other materials.
Basis of Preparation
In accordance with the UK Regulations, DEC prepares a disclosure of payments made to governments for each financial year, covering relevant activities
of both DEC and any of its subsidiary undertakings included in the Group Financial Statements.
Activities within the Scope of the Disclosure
This disclosure includes payments made to governments that pertain to DEC’s activities involving the exploration, development, and production of
natural gas and oil reserves (“extractive activities”). Payments made to governments for activities other than extractive activities are not included in this
disclosure as they fall outside the scope defined by the UK Regulations.
Government
The term “government” encompasses any national, regional, or local authority of a country as well as any department, agency, or entity that operates
as a subsidiary of a government.
Cash Basis
Payments are reported on a cash basis, meaning they are reported in the period in which they are actually paid. This is in contrast to the accrual basis,
where payments are reported in the period in which the liabilities are incurred.
Project Definition
The UK Regulations mandate that payments be reported by project, which is considered a subcategory within a country. A “project” is defined as the
operational activities governed by a single contract, license, lease, concession, or similar legal agreement that form the basis for payment liabilities with
a government. If these agreements are substantially interconnected, they can be treated as a single project. According to the UK Regulations,
“substantially interconnected” refers to a set of operationally and geographically integrated contracts, licenses, leases, concessions, or related
agreements with substantially similar terms, signed with a government, that give rise to payment liabilities. The number of projects will depend on the
contractual arrangements within a country, rather than the scale of activities. Additionally, a project will only be included in this disclosure if relevant
payments were made during the year for that project. The UK Regulations also recognize that some payments may not be attributable to a single
project and may therefore be reported at the country level. Corporate income taxes, which are typically not levied at a project level, serve as an
example of such payments.
Materiality Level
For each type of payment, any total payments to a government that are below £86 are excluded from this report.
Exchange Rate
Payments made in currencies other than USD are converted for this report using the relevant quarterly average foreign exchange rate.
Payment Types
According to the UK Regulations, a “payment” is defined as an amount paid whether in money or in kind, for relevant activities. The payment must fall
into one of the following categories:
Production Entitlements
Under production-sharing agreements (“PSA”), the production is divided between the host government and the other parties to the PSA. The host
government usually receives its share or entitlement in kind rather than in cash. For the year ended December 31, 2024, DEC had no reportable
production entitlements to a government.
Taxes
This report includes taxes levied on income, personnel, production, or profits that are withheld from dividends, royalties, and interest received by DEC.
However, taxes levied on consumption, sales, procurement (contractor’s withholding taxes), environmental, property, customs, and excise are not
reportable under the UK Regulations.
Royalties
Payments for the rights to extract natural gas and oil resources are typically calculated as a set percentage of revenue, minus any allowable deductions.
These payments can be made in cash or in kind (valued similarly to production entitlement).
149
Dividends
Dividend payments, except for those paid to a government as a shareholder of an entity, are not included unless they are paid in lieu of production
entitlements or royalties. For the year ended December 31, 2024, DEC had no reportable dividend payments to a government.
Bonuses
This report includes signature, discovery, and production bonuses, as well as other bonuses payable under licenses or concession agreements. These
bonuses are typically paid upon signing an agreement or a contract, declaring a commercial discovery, commencing production, or reaching a
production milestone. For the year ended December 31, 2024, DEC had no reportable bonus payments to a government.
Fees
In preparing this report, DEC has included license fees, rental fees, entry fees, and all other payments made in consideration for new and existing
licenses and or concessions. Fees paid to governments for administrative services are excluded.
Infrastructure Improvements
Payments related to the construction of infrastructure, such as roads, bridges, or railways, that are not substantially dedicated to extractive activities are
included. However, payments that are of a social investment nature, such as building a school or hospital, are excluded.
Payments Overview
The tables below display the relevant payments to governments made by DEC for the year ended December 31, 2024, categorized by country and
payment type. Of the seven payment types required by the UK Regulations, DEC did not make any payments for production entitlements, dividends,
bonuses, fees, or infrastructure improvements; therefore, those categories are not shown.
SUMMARY OF PAYMENTS TO GOVERNMENTS
(Amounts in Thousands)
Countries
Taxes
Royalties
Total
United Kingdom
$—
$—
$—
United States
86,049
2,735
88,784
Total
$86,049
$2,735
$88,784
United Kingdom
Governments
Taxes
Royalties
Total
Oil and Gas Authority
$—
$—
$—
HM Revenue and Customs
—
—
—
The Crown Estate Scotland
—
—
—
Total
$—
$—
$—
United States
Governments
Taxes
Royalties
Total
Commonwealth of Pennsylvania
$3,977
$—
$3,977
Commonwealth of Virginia
1,661
—
1,661
Internal Revenue Service
18,799
—
18,799
Office of Natural Resources Revenue
—
1,427
1,427
State of Alabama
114
—
114
State of Kentucky
10,585
—
10,585
State of Louisiana
8,520
—
8,520
State of Ohio
2,168
—
2,168
State of Oklahoma
8,906
1,089
9,995
State of Tennessee
185
—
185
State of Texas
17,920
219
18,139
State of West Virginia
13,214
—
13,214
Total
$86,049
$2,735
$88,784
150
Alternative Performance Measures
(Amounts in thousands, except share, per share and per unit data)
We utilize APMs to enhance the comparability of information across reporting periods and to more accurately assess cash flows. This is achieved by
adjusting for uncontrollable or transactional factors that are not comparable period-over-period or by aggregating measures. This approach helps users
of this Annual Report & Form 20-F better understand the activity occurring across the Group. APMs are employed by the Directors for planning and
reporting purposes and should not be viewed as a replacement for IFRS. Additionally, these measures are used in discussions with the investment
analyst community and credit rating agencies.
Adjusted EBITDA
As used herein, EBITDA represents earnings before interest, taxes, depletion, depreciation, and amortization. Adjusted EBITDA further adjusts for items
that are not comparable period-over-period, including accretion of asset retirement obligations, other (income) expense, loss on joint and working
interest owners receivable, (gain) loss on bargain purchases, (gain) loss on fair value adjustments of unsettled financial instruments, (gain) loss on
natural gas and oil property and equipment, costs associated with acquisitions, other adjusting costs, non-cash equity compensation, (gain) loss on
foreign currency hedge, net (gain) loss on interest rate swaps and other similar items.
Adjusted EBITDA should not be considered in isolation or as a substitute for operating profit (loss), net income (loss), or cash flows provided by (used
in) operating, investing, and financing activities. However, we believe this measure is useful to investors in evaluating our financial performance because
it (1) is widely used by investors in the natural gas and oil industry as an indicator of underlying business performance; (2) helps investors more
meaningfully evaluate and compare the results of our operations from period to period by removing the often-volatile revenue impact of changes in the
fair value of derivative instruments prior to settlement; (3) is used in the calculation of a key metric in one of our Credit Facility financial covenants; and
(4) is used by us as a performance measure in determining executive compensation. When evaluating this measure, we believe investors also commonly
find it useful to assess this metric as a percentage of our total revenue, inclusive of settled hedges, which we refer to as adjusted EBITDA margin.
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Net income (loss)
$(87,001)
$759,701
$(620,598)
Finance costs
137,643
134,166
100,799
Accretion of asset retirement obligations
30,868
26,926
27,569
Other (income) expense(a)
(1,257)
(385)
(269)
Income tax (benefit) expense
(136,951)
240,643
(178,904)
Depreciation, depletion and amortization
256,484
224,546
222,257
(Gain) loss on bargain purchases
—
—
(4,447)
(Gain) loss on fair value adjustments of unsettled financial instruments
189,030
(905,695)
861,457
(Gain) loss on natural gas and oil properties and equipment(b)
15,308
4,014
93
(Gain) loss on sale of equity interest
7,375
(18,440)
—
Unrealized (gain) loss on investment
4,013
(4,610)
—
Impairment of proved properties(c)
—
41,616
—
Costs associated with acquisitions
11,573
16,775
15,545
Other adjusting costs(d)
22,375
17,794
69,967
Loss on early retirement of debt
14,753
—
—
Non-cash equity compensation
8,286
6,494
8,051
(Gain) loss on foreign currency hedge
—
521
—
(Gain) loss on interest rate swap
(190)
2,722
1,434
Total adjustments
$559,310
$(212,913)
$1,123,552
Adjusted EBITDA
$472,309
$546,788
$502,954
Pro forma adjusted EBITDA(e)
$548,570
$553,252
$574,414
(a)Excludes $1 million in dividend distributions received for our investment in DP Lion Equity Holdco during the year ended December 31, 2024.
(b)Excludes $27 million, $24 million and $2 million in cash proceeds received for leasehold sales during the years ended December 31, 2024, 2023 and 2022, respectively,
less $14 million and $4 million of basis in leasehold sales for the years ended December 31, 2024 and 2023, respectively.
(c)For the year ended December 31, 2023, the Group determined the carrying amounts of certain proved properties within two fields were not recoverable from future
cash flows, and therefore, were impaired.
(d)Other adjusting costs for the year ended December 31, 2024, were primarily associated with legal and professional fees related to the U.S. listing, legal fees for certain
litigation, and expenses associated with unused firm transportation agreements. For the year ended December 31, 2023, these costs were primarily related to legal and
professional fees for the U.S. listing, legal fees for certain litigation, and expenses for unused firm transportation agreements. For the year ended December 31, 2022,
these costs mainly included $28 million in contract terminations, which enabled the Group to secure more favorable future pricing, and $31 million in deal breakage and/
or sourcing costs for acquisitions.
(e)Includes adjustments for the year ended December 31, 2024 for the Oaktree, Crescent Pass, and East Texas II acquisitions to pro forma their results for the full twelve
months of operations. Similar adjustments were made for the year ended December 31, 2023 for the Tanos II Acquisition, as well as for the year ended December 31,
2022 for the East Texas I and ConocoPhillips acquisitions.
151
Net Debt
As used herein, net debt represents total debt as recognized on the balance sheet, minus cash and restricted cash. Total debt includes borrowings under
our Credit Facility and borrowings under, or issuances of, our subsidiaries’ securitization facilities. We believe net debt is a useful indicator of our
leverage and capital structure.
Net Debt-to-Adjusted EBITDA
As used herein, net debt-to-adjusted EBITDA, also referred to as “leverage” or the “leverage ratio,” is calculated by dividing net debt by adjusted
EBITDA. We believe this metric is a crucial measure of our financial liquidity and flexibility, and it is also used in the calculation of a key metric in one of
our Credit Facility financial covenants.
As of
December 31, 2024
December 31, 2023
December 31, 2022
Total debt(a)
$1,693,242
$1,276,627
$1,440,329
LESS: Cash
5,990
3,753
7,329
LESS: Restricted cash(b)
46,269
36,252
55,388
Net debt
$1,640,983
$1,236,622
$1,377,612
Adjusted EBITDA
$472,309
$546,788
$502,954
Pro forma adjusted EBITDA(c)
$548,570
$553,252
$574,414
Net debt-to-pro forma adjusted EBITDA(d)
3.0x
2.2x
2.4x
(a)Includes adjustments for deferred financing costs and original issue discounts, consistent with presentation on the Statement of Financial Position.
(b)The increase of restricted cash as of December 31, 2024, is due to the addition of $21 million and $3 million in restricted cash for the ABS VIII Notes and ABS IX Notes,
respectively, offset by $7 million and $9 million for the retirement of the ABS III Notes and ABS V Notes, respectively.
(c)Includes adjustments for the year ended December 31, 2024 for the Oaktree, Crescent Pass, and East Texas II acquisitions to pro forma their results for the full twelve
months of operations. Similar adjustments were made for the year ended December 31, 2023 for the Tanos II Acquisition, as well as for the year ended December 31,
2022 for the East Texas I and ConocoPhillips acquisitions.
(d)Does not include adjustments for working capital which are often customary in the market.
Total Revenue, Inclusive of Settled Hedges
As used herein, total revenue, inclusive of settled hedges, accounts for the impact of derivatives settled in cash. We believe that total revenue, inclusive
of settled hedges, is a useful because it enables investors to discern our realized revenue after adjusting for the settlement of derivative contracts.
Adjusted EBITDA Margin
As used herein, adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue, inclusive of settled hedges.
Adjusted EBITDA margin encompasses the direct operating costs and the portion of general and administrative costs required to produce each Mcfe.
This metric includes operating expense, employee costs, administrative costs and professional services, and recurring allowance for credit losses, which
cover both fixed and variable costs components. We believe that adjusted EBITDA margin is a useful measure of our profitability and efficiency, as well
as our earnings quality, because it evaluates the Group on a more comparable basis period-over-period, especially given our frequent involvement in
transactions that are not comparable between periods.
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Total revenue
$794,841
$868,263
$1,919,349
Net gain (loss) on commodity derivative instruments(a)
151,289
178,064
(895,802)
Total revenue, inclusive of settled hedges
$946,130
$1,046,327
$1,023,547
Adjusted EBITDA
$472,309
$546,788
$502,954
Adjusted EBITDA margin
50%
52%
49%
(a)Net gain (loss) on commodity derivative settlements represents the cash paid or received on commodity derivative contracts. This excludes settlements on foreign
currency and interest rate derivatives, as well as the gain (loss) on fair value adjustments for unsettled financial instruments for each of the periods presented.
152
Free Cash Flow
As used herein, free cash flow represents net cash provided by operating activities, less expenditures on natural gas and oil properties and equipment,
and cash paid for interest. We believe that free cash flow is a useful indicator of our ability to generate cash that is available for activities beyond capital
expenditures. The Directors believe that free cash flow provides investors with an important perspective on the cash available to service debt
obligations, make strategic acquisitions and investments, and pay dividends.
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Net cash provided by operating activities
$345,663
$410,132
$387,764
LESS: Expenditures on natural gas and oil properties and equipment
(52,100)
(74,252)
(86,079)
LESS: Cash paid for interest
(123,141)
(116,784)
(83,958)
Free cash flow
$170,422
$219,096
$217,727
Adjusted Operating Cost per Mcfe
Adjusted operating cost per Mcfe is a metric that allows us to measure the direct operating costs and the portion of general and administrative costs
required to produce each Mcfe. Similar to adjusted EBITDA margin, this metric includes operating expenses, employee costs, administrative costs and
professional services, and recurring allowance for credit losses, encompassing both fixed and variable cost components.
Employees, administrative costs and professional services
As used herein, employees, administrative costs and professional services represents total administrative expenses, excluding costs associated with
acquisitions, other adjusting costs, and non-cash expenses. We use this measure because it excludes items that affect the comparability of results or are
not indicative of trends in the ongoing business.
Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Total production (MMcfe)
289,586
299,632
296,121
Total operating expense
$428,902
$440,562
$445,893
Employees, administrative costs and professional services
86,885
78,659
77,172
Recurring allowance for credit losses
101
8,478
—
Adjusted operating cost
$515,888
$527,699
$523,065
Adjusted operating cost per Mcfe
$1.78
$1.76
$1.77
PV-10
PV-10 is a non-IFRS measure because it excludes the effects of applicable income taxes. The Directors believe that presenting the non-IFRS financial
measure of PV-10 provides useful information to investors, as it is widely used by professional analysts and sophisticated investors in evaluating natural
gas and oil companies. PV-10 is not a measure of financial or operating performance under IFRS and should not be considered as an alternative to the
standardized measure as defined under IFRS. For a reconciliation of PV-10 to the standardized measure of discounted future net cash flows, its most
directly comparable IFRS measure, refer to Supplemental Natural Gas and Oil Information within this Annual Report & Form 20-F. PV-10 differs from the
standardized measure of discounted future net cash flows because it does not include the effects of income taxes. Neither PV-10 nor the standardized
measure represents an estimate of the fair market value of our natural gas and oil properties.
As of
December 31, 2024
December 31, 2023
December 31, 2022
SEC Pricing(a)
PV-10
Pre-tax (Non-GAAP)(b)
$1,591,772
$2,139,690
$8,825,462
PV of taxes
(194,851)
(394,154)
(2,082,362)
Standardized Measure
$1,396,921
$1,745,536
$6,743,100
(a)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 volumes, the average Henry Hub spot price of $2.13, $2.64 and $6.36 per MMBtu as of December 31, 2024, 2023 and 2022, respectively. These prices were
adjusted for factors such as gravity, quality, local conditions, gathering and transportation fees, and distance from market. For NGLs and oil volumes, the average WTI
price was $76.32, $78.21 and $94.14 per Bbl as of December 31, 2024, 2023 and 2022, respectively. These prices were similarly 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.
(b)The PV-10 of our proved reserves as of December 31, 2024, 2023 and 2022 was prepared without giving effect to taxes or hedges. PV-10 is a non-GAAP and non-IFRS
financial measure and generally differs from the 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 before accounting for future corporate income taxes and our current tax structure.
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.
153
Officers and Professional Advisors
Directors
David E. Johnson (Non-Executive Chairman (Independent upon appointment))
Martin K. Thomas (Non-Executive Vice Chairman)
Rusty Hutson, Jr. (Chief Executive Officer)
David J. Turner, Jr. (Independent Non-Executive Director)
Sandra M. Stash (Independent Non-Executive Director)
Kathryn Z. Klaber (Independent Non-Executive Director)
Sylvia Kerrigan (Senior Independent Non-Executive Director) (for the entirety of 2024 through January 24,
2025)
Registered Number
09156132 (England and Wales)
Registered Office
4th floor Phoenix House
1 Station Hill
Reading, Berkshire, RG1 1NB
United Kingdom
Headquarters
1600 Corporate Drive
Birmingham, Alabama 35242
United States
Company Secretary
Apex Secretaries LLP
6th Floor 140 London Wall
London EC2V 5DN
United Kingdom
Independent Auditors,
United Kingdom
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
United Kingdom
Independent Registered Public
Accounting Firm,
United States
PricewaterhouseCoopers LLP
569 Brookwood Village #851
Birmingham, AL 35209
United States
Legal Advisor,
United Kingdom
Latham & Watkins (London) LLP
99 Bishopsgate
London ECM2 3XF
United Kingdom
Legal Advisor,
United States
Gibson, Dunn & Crutcher LLP
811 Main Street Suite 3000
Houston, TX 77002
Competent Person
Netherland, Sewell & Associates, Inc.
2100 Ross Avenue, Suite 2200
Dallas, Texas 75201
United States
Share Registrar
ComputerShare Investor Services PLC
The Pavilions, Bridgewater Road
Bristol, BS13 8AE
United Kingdom
Brokers
Tennyson Securities
23rd Floor, 20 Fenchurch Street
London EC3M 3BY
United Kingdom
Stifel Nicolaus Europe Limited
150 Cheapside
London, EC2V 6ET
United Kingdom
Peel Hunt LLP
7th Floor, 100 Liverpool Street
London EC2M 2AT
United Kingdom
154
Shareholder Information
Material Contracts
Our material contracts as of the date of this report include:
•Second Amended and Restated Revolving Credit Agreement, dated as of March 14, 2025, among DP RBL CO LLC, as borrower, KeyBank National
Association, as administrative agent and issuing bank, Keybanc Capital Markets, as coordinating lead arranger and sole book runner, and the
lenders party thereto.
•Indenture, dated February 23, 2022, by and between Diversified ABS Phase IV LLC, as issuer, and UMB Bank, N.A., as indenture trustee and
securities intermediary. For a description of this contract, see Liquidity and Capital Resources.
•Indenture, dated October 27, 2022, among Diversified ABS Phase VI LLC, as issuer, Diversified ABS VI Upstream LLC and Oaktree ABS VI Upstream
LLC, as guarantors and UMB Bank, N.A., as indenture trustee and securities intermediary. For a description of this contract, see Liquidity and
Capital Resources.
•Indenture, dated November 30, 2023, by and between DP Lion Holdco, as issuer and UMB Bank, N.A., as indenture trustee and securities
intermediary. For a description of this contract, see Liquidity and Capital Resources.
•Indenture, dated May 30, 2024, among Diversified ABS Phase VIII LLC, as issuer, ABS Phase III LLC and ABS Phase V LLC, as guarantor and UMB
Bank, N.A., as indenture trustee and securities intermediary.
•Indenture, dated September 19, 2024, among DP Mustang Holdco LLC, as issuer, and UMB Bank, N.A., as indenture trustee and securities
intermediary.
•Credit Agreement, dated as of June 6, 2024, Diversified Gas & Oil Corporation, as borrower, certain subsidiaries of the borrower, as guarantors, the
lenders party thereto and Oaktree Fund Administration, LLC, as administrative agent.
•Base Indenture, dated as of February 27, 2025, by and among Diversified ABS X LLC, as issuer, Diversified ABS LLC, Diversified ABS Phase II LLC,
and Diversified ABS Phase X LLC, as guarantors, and UMB Bank, N.A., as indenture trustee and securities intermediary.
•Registration Rights Agreement dated as of August 15, 2024, between Diversified Energy Company plc and Crescent Pass Energy Holdings, LLC.
•Service Agreement, dated January 30, 2017, by and between Diversified Gas & Oil PLC and Rusty Hutson.
•Service Agreement, dated January 30, 2017, by and between Diversified Gas & Oil PLC and Bradley Gray.
•2017 Equity Incentive Plan, as amended.
•2023 Employee Stock Purchase Plan.
•Merger Agreement, dated as of January 24, 2025, by and among Maverick Natural Resources, LLC, Diversified Energy Company plc, Remington
Merger Sub, LLC, and for certain provisions therein, Diversified Gas & Oil Corporation and EIG Management Company, LLC.
•Registration Rights Agreement, dated as of March 14, 2025, by and between Diversified Energy Company plc, the holders set forth on the signature
pages thereto, and, solely for purposes of Section 2.8 therein, Diversified Gas & Oil Corporation.
•Relationship Agreement, dated March 14, 2025, between Diversified Energy Company plc and EIG Management Company, LLC.
Exchange Controls
Other than certain economic sanctions which may be in place from time to time, there are currently no UK laws, decrees or regulations restricting the
import or export of capital or affecting the remittance of dividends or other payment to holders of ordinary shares who are non-residents of the United
Kingdom. Similarly, other than certain economic sanctions which may be in force from time to time, there are no limitations relating only to nonresidents
of the United Kingdom under English law or the Group’s articles of association on the right to be a holder of, and to vote in respect of, the ordinary
shares.
Taxation
Material United Kingdom Tax Considerations
The following statements are of a general nature and do not purport to be a complete analysis of all potential UK tax consequences of acquiring, holding
and disposing of the ordinary shares. They are based on current UK tax law and on the current published practice of His Majesty’s Revenue and
Customs (“HMRC”) (which may not be binding on HMRC), as of the date of this Annual Report & Form 20-F, all of which are subject to change, possibly
with retrospective effect. They are intended to address only certain UK tax consequences for holders of ordinary shares who are tax resident in (and
only in) the United Kingdom, and in the case of individuals, domiciled in (and only in) the United Kingdom (except where expressly stated otherwise)
who are the absolute beneficial owners of the ordinary shares and any dividends paid on them and who hold the ordinary shares as investments (other
than in an individual savings account or a self-invested personal pension). They do not address the UK tax consequences which may be relevant to
certain classes of shareholders such as traders, brokers, dealers, banks, financial institutions, insurance companies, investment companies, collective
investment schemes, tax-exempt organizations, trustees, persons connected with the Group, persons holding their ordinary shares as part of hedging or
conversion transactions, shareholders who have (or are deemed to have) acquired their ordinary shares by virtue of an office or employment, and
shareholders who are or have been officers or employees of the Group. The statements do not apply to any shareholder who either directly or indirectly
holds or controls 10% or more of the Group’s share capital (or class thereof), voting power or profits.
The following is intended only as a general guide and is not intended to be, nor should it be considered to be, legal or tax advice to any particular
prospective subscriber for, or purchaser of, any ordinary shares. Accordingly, prospective subscribers for, or purchasers of, any ordinary shares who are
in any doubt as to their tax position regarding the acquisition, ownership or disposition of any ordinary shares or who are subject to tax in a jurisdiction
other than the United Kingdom should consult their own tax advisers.
UK taxation of dividends
Withholding Tax
The Group will not be required to withhold UK tax at source when paying dividends. The amount of any liability to UK tax on dividends paid by the
Group will depend on the individual circumstances of a shareholder.
Income Tax
155
An individual shareholder who is resident for tax purposes in the United Kingdom may, depending on his or her particular circumstances, be subject to
UK tax on dividends received from the Group. An individual shareholder who is not resident for tax purposes in the United Kingdom should not be
chargeable to UK income tax on dividends received from the Group unless he or she carries on (whether solely or in partnership) any trade, profession
or vocation in the United Kingdom through a branch or agency to which the ordinary shares are attributable. There are certain exceptions for trading in
the United Kingdom through independent agents, such as some brokers and investment managers.
All dividends received by a UK tax resident individual holder of any ordinary shares from the Group or from other sources will form part of the
shareholder’s total income for income tax purposes and will constitute the top slice of that income. A nil rate of income tax will apply to the first £1,000
(reducing to £500 from April 6, 2024) of taxable dividend income received by the shareholder in a tax year. Income within the nil rate band will be taken
into account in determining whether income in excess of the nil rate band falls within the basic rate, higher rate or additional rate tax bands. Where the
dividend income is above the £1,000 dividend allowance, the first £1,000 of the dividend income will be charged at the nil rate and any excess amount
will be taxed at 8.75% to the extent that the excess amount falls within the basic rate tax band, 33.75% to the extent that the excess amount falls
within the higher rate tax band and 39.35% to the extent that the excess amount falls within the additional rate tax band.
Corporation Tax
Corporate shareholders which are resident for tax purposes in the United Kingdom should not be subject to UK corporation tax on any dividend received
from the Group so long as the dividends qualify for exemption (as is likely) and certain conditions are met (including anti-avoidance conditions). If the
conditions for exemption are not met or cease to be satisfied, or such a shareholder elects for an otherwise exempt dividend to be taxable, the
shareholder will be subject to UK corporation tax on dividends received from the Group, at the rate of corporation tax applicable to that shareholder (the
main rate of UK corporation tax is currently 25%).
Corporate shareholders who are not resident in the United Kingdom will not generally be subject to UK corporation tax on dividends unless they are
carrying on a trade, profession or vocation in the United Kingdom through a permanent establishment in connection with which the ordinary shares are
used, held, or acquired.
A shareholder who is resident outside the United Kingdom may be subject to non-UK taxation on dividend income under local law.
UK taxation of chargeable gains
UK resident shareholders
A disposal or deemed disposal of ordinary shares by an individual or corporate shareholder who is tax resident in the United Kingdom may, depending
on the shareholder’s circumstances and subject to any available exemptions or reliefs, give rise to a chargeable gain or allowable loss for the purposes
of UK taxation of chargeable gains.
Any chargeable gain (or allowable loss) will generally be calculated by reference to the consideration received for the disposal of the ordinary shares less
the allowable cost to the shareholder of acquiring any such ordinary shares.
The applicable tax rates for individual shareholders realizing a gain on the disposal of ordinary shares is, broadly, 10% for basic rate taxpayers and 20%
for higher and additional rate taxpayers. For corporate shareholders, corporation tax is generally charged on chargeable gains at the rate applicable to
the relevant corporate shareholder.
Non-UK shareholders
Shareholders who are not resident in the United Kingdom and, in the case of an individual shareholder, not temporarily non-resident, should not be
liable for UK tax on capital gains realized on a sale or other disposal of ordinary shares unless (i) such ordinary shares are used, held or acquired for the
purposes of a trade, profession or vocation carried on in the United Kingdom through a branch or agency or, in the case of a corporate shareholder,
through a permanent establishment or (ii) where certain conditions are met, the Group derives 75% or more of its gross value from UK land.
Shareholders who are not resident in the United Kingdom may be subject to non-UK taxation on any gain under local law.
Generally, an individual shareholder who has ceased to be resident in the United Kingdom for UK tax purposes for a period of five years or less and who
disposes of any ordinary shares during that period may be liable on their return to the United Kingdom to UK taxation on any capital gain realized
(subject to any available exemption or relief).
UK stamp duty (“stamp duty”) and UK stamp duty reserve tax (“SDRT”)
The statements in this paragraph are intended as a general guide to the current position relating to stamp duty and SDRT and apply to any shareholder
irrespective of their place of tax residence. Certain categories of person, including intermediaries, brokers, dealers and persons connected with
depositary receipt arrangements and clearance services, may not be liable to stamp duty or SDRT or may be liable at a higher rate or may, although not
primarily liable for the tax, be required to notify and account for it under the UK Stamp Duty Reserve Tax Regulations 1986. The discussion below does
not consider any potential change of law.
Issue of shares
As a general rule (and except in relation to depositary receipt systems and clearance services (as to which see below)), no stamp duty or SDRT is
payable on the issue of the ordinary shares.
Clearance systems and depositary receipt issuers
An unconditional agreement to issue or transfer ordinary shares to, or to a nominee or agent for, a person whose business is or includes the issue of
depositary receipts or the provision of clearance services will generally be subject to SDRT (or, where the transfer is effected by a written instrument,
stamp duty) at a higher rate of 1.5% of the amount or value of the consideration given for the transfer unless, in the context of a clearance service, the
clearance service has made and maintained an election under section 97A of the UK Finance Act 1986, or a “section 97A election.” It is understood that
HMRC regards the facilities of DTC as a clearance service for these purposes and we are not aware of any section 97A election having been made by
DTC. However, HMRC clearance has been received by the Group confirming that no stamp duty or SDRT is payable on the transfer of legal title to the
existing ordinary shares into the DTC clearing system, to the extent required in order to implement the U.S. Listing at the effective time. Such HMRC
clearance only applies to transfers into the DTC clearing system made on the Initial Depositary Transfer Date in order to implement the U.S. Listing (and
transfers of ordinary shares held by Restricted Shareholders which are transferred to Computershare Trust Company N.A. (as depositary for the holders
of the Restricted Shares) on the Initial Depositary Transfer Date), and not subsequent transfers into the DTC clearing system (other than certain
transfers of ordinary shares held by Restricted Shareholders on the Initial Depositary Transfer Date).
Transfer of shares and DIs
156
No SDRT should be required to be paid on a paperless transfer of ordinary shares through the clearance service facilities of DTC, provided that no
section 97A election has been made by DTC, and such ordinary shares are held through DTC at the time of any agreement for their transfer.
No stamp duty will in practice be payable on a written instrument transferring an ordinary share provided that the instrument of transfer is executed and
remains at all times outside the United Kingdom. Where these conditions are not met, the transfer of, or agreement to transfer, an ordinary share could,
depending on the circumstances, attract a charge to stamp duty at the rate of 0.5% of the amount or value of the consideration. If it is necessary to
pay stamp duty, it may also be necessary to pay interest and penalties.
The Group has received HMRC clearance confirming that agreements to transfer DIs which represent ordinary shares held within the DTC clearance
system will not be subject to SDRT.
Material United States Federal Income Tax Considerations
The following discussion is a summary of the material U.S. federal income tax consequences to U.S. Holders and Non-U.S. Holders (each, as defined
below) of the purchase, ownership and disposition of an ordinary share issued, but does not purport to be a complete analysis of all potential U.S.
federal tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or non-U.S. tax laws are
not discussed herein. This discussion is based on the Internal Revenue Code, Treasury Regulations promulgated thereunder, judicial decisions, and
published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case in effect as of the date hereof.
These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a
manner that could adversely affect a holder of an ordinary share. We have not sought and will not seek any rulings from the IRS regarding the matters
discussed below. There can be no assurance that the IRS or a court will not take a contrary position to that discussed below regarding the tax
consequences of the purchase, ownership and disposition of our ordinary shares.
This discussion is limited to U.S. Holders and Non-U.S. Holders that each hold an ordinary share as a “capital asset” within the meaning of Section 1221
of the Internal Revenue Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences
relevant to a holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income and the alternative
minimum tax. In addition, it does not address consequences relevant to holders subject to special rules, including, without limitation:
•U.S. expatriates and former citizens or long-term residents of the United States;
•U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
•Persons holding an ordinary share as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other
integrated investment;
•Banks, insurance companies, and other financial institutions;
•Brokers, dealers or traders in securities;
•“Controlled foreign corporations,” passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income
tax;
•Partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes and other pass-through entities (and
investors therein);
•Tax-exempt organizations or governmental organizations;
•Persons deemed to sell an ordinary share under the constructive sale provisions of the Internal Revenue Code;
•Persons who hold or receive an ordinary share pursuant to the exercise of any employee stock option or otherwise as compensation;
•Tax qualified retirement plans;
•“Qualified foreign pension funds” as defined in Section 897(l)(2) of the Internal Revenue Code and entities of all the interests of which are held by
qualified foreign pension funds; and
•Persons subject to special tax accounting rules as a result of any item of gross income with respect to the ordinary shares being taken into account
in an applicable financial statement.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds an ordinary share, the tax treatment of a partner in the
partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level.
Accordingly, partnerships holding an ordinary share and the partners in such partnerships should consult their tax advisors regarding the U.S. federal
income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF AN ORDINARY SHARE ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT
TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
U.S. Tax Status of Diversified Energy
Pursuant to Section 7874 of the Internal Revenue Code, we believe we are and will continue to be treated as a U.S. corporation for all purposes under
the Internal Revenue Code. Since we will be treated as a U.S. corporation for all purposes under the Internal Revenue Code, we will not be treated as a
“passive foreign investment company,” as such rules apply only to non-U.S. corporations for U.S. federal income tax purposes.
U.S. Holders
For purposes of this discussion, a “U.S. Holder” is any beneficial owner of an ordinary share that, for U.S. federal income tax purposes, is or is treated as
any of the following:
•An individual who is a citizen or resident of the United States;
•A corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;
•An estate, the income of which is subject to U.S. federal income tax regardless of its source; or
157
•A trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of
Section 7701(a)(30) of the Internal Revenue Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal
income tax purposes.
Distributions
Distributions, if any, made on the ordinary shares generally will be included in a U.S. Holder’s income as ordinary dividend income to the extent of the
Group’s current or accumulated earnings and profits. Distributions in excess of the Group’s current and accumulated earnings and profits will be treated
as a tax-free return of capital to the
extent of a U.S. Holder’s tax basis in the ordinary shares and thereafter as capital gain from the sale or exchange of such ordinary shares. Dividends
received by a corporate U.S. Holder may be eligible for a dividends-received deduction, subject to applicable limitations. Dividends received by certain
non-corporate U.S. Holders (including individuals) are generally taxed at the lower applicable long-term capital gains rates, provided certain holding
period and other requirements are satisfied.
Sales, Certain Redemptions or Other Taxable Dispositions of Ordinary Shares
Upon the sale, certain redemption or other taxable disposition of an ordinary share, a U.S. Holder generally will recognize gain or loss equal to the
difference between the amount realized and the U.S. Holder’s tax basis in the ordinary shares. Any gain or loss recognized on a taxable disposition of an
ordinary share will be capital gain or loss. Such capital gain or loss will be long-term capital gain or loss if a U.S. Holder’s holding period at the time of
the sale, redemption or other taxable disposition of the ordinary shares is longer than one year. Long-term capital gains recognized by certain non-
corporate U.S. Holders (including individuals) are generally subject to a reduced rate of U.S. federal income tax. The deductibility of capital losses is
subject to limitations.
Non-U.S. Holders
For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of an ordinary share that is neither a U.S. Holder nor an entity or
arrangement treated as a partnership for U.S. federal income tax purposes.
Distributions
If the Group makes distributions of cash or property on the ordinary shares, such distributions will constitute dividends for U.S. federal income tax
purposes to the extent paid from the Group’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-
U.S. Holder’s adjusted tax basis in its ordinary shares, but not below zero. Generally, a distribution that constitutes a return of capital will be subject to
U.S. federal withholding tax at a rate of 15% if the Non-U.S. Holders’ ordinary shares constitute a U.S. real property interest (“USRPI”). However, we
may elect to withhold at a rate of up to 30% of the entire amount of the distribution, even if the Non-U.S. Holders’ ordinary shares do not constitute a
USRPI. For additional information regarding when a Non-U.S. Holder may treat its ownership of the ordinary shares as not constituting a USRPI, refer to
the subsection below titled Sale or Other Taxable Disposition. However, because a Non-U.S. Holder would not have any U.S. federal income tax liability
with respect to a return of capital distribution, a Non-U.S. Holder would be entitled to request a refund of any U.S. federal income tax that is withheld
from a return of capital distribution (generally by timely filing a U.S. federal income tax return for the taxable year in which the tax was withheld). Any
excess will be treated as capital gain and will be treated as described below under the subsection titled Sale or Other Taxable Disposition.
Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder of an ordinary share will be subject to U.S. federal
withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the
Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate).
A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any
excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their
entitlement to benefits under any applicable income tax treaty.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and,
if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends
are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S.
Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-
U.S. Holder’s conduct of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is
a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such
effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties
that may provide for different rules.
Sale or Other Taxable Disposition
Subject to the discussion below on information reporting, backup withholding and FATCA (as defined below), a Non-U.S. Holder will not be subject to
U.S. federal income tax on any gain realized upon the sale or other taxable disposition of an ordinary share unless:
•The gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an
applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable);
•The Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition
and certain other requirements are met; or
•Our ordinary shares constitute a USRPI because we are (or have been during the shorter of the five-year period ending on the date of the
disposition or the Non-U.S. Holder’s holding period) a U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes.
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S.
Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax
treaty) on such effectively connected gain, as adjusted for certain items.
A Non-U.S. Holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by
an applicable income tax treaty) on gain realized upon the sale or other taxable disposition of our ordinary shares, which may be offset by U.S. source
158
capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has
timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, due to the nature of our assets and operations, the Group believes it is (and will continue to be) a USRPHC
under the Internal Revenue Code and the ordinary shares constitute (and we expect the ordinary shares to continue to constitute) a USRPI. Non-U.S.
Holders generally are subject to a 15% withholding tax on the amount realized from a sale or other taxable disposition of a USRPI, such as the ordinary
shares, which is required to be collected from any sale or disposition proceeds. Furthermore, such Non-U.S. Holders are subject to U.S. federal income
tax (at the regular rates) in respect of any gain on their sale or disposition of the ordinary shares and are required to file a U.S. tax return to report such
gain and pay any tax liability that is not satisfied by withholding. Any gain should be determined in U.S. dollars, based on the excess, if any, of the U.S.
dollar value of the consideration received over the Non-U.S. Holder’s basis in the ordinary shares determined in U.S. dollars under the rules applicable to
Non-U.S. Holders. A Non-U.S. Holder may, by filing a U.S. tax return, be able to claim a refund for any withholding tax deducted in excess of the tax
liability on any gain. However, if the ordinary shares are considered “regularly traded on an established securities market” (within the meaning of the
Treasury Regulations) then Non-U.S. Holders will not be subject to the 15% withholding tax on the disposition of their ordinary shares, even if such
ordinary shares constitute USRPIs. Moreover, if the ordinary shares are considered “regularly traded on an established securities market” (within the
meaning of the Treasury Regulations) and the Non-U.S. Holder actually or constructively owns or owned, at all times during the shorter of the five-year
period ending on the date of the disposition or the Non-U.S. Holder’s holding period, 5% or less of the ordinary shares taking into account applicable
constructive ownership rules, such Non-U.S. Holder may treat its ownership of the ordinary shares as not constituting a USRPI and will not be subject to
U.S. federal income tax on any gain realized upon the sale or other taxable disposition of the ordinary shares (in addition to not being subject to the
15% withholding tax described above) or U.S. tax return filing requirements. The Group expects the ordinary shares to be treated as “regularly traded
on an established securities market” so long as the ordinary shares are listed on the NYSE and regularly quoted by brokers or dealers making a market
in such ordinary shares.
Non-U.S. Holders should consult their tax advisors regarding tax consequences of our treatment as a USRPHC and regarding potentially applicable
income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
U.S. Holders
Information reporting requirements generally will apply to payments of distributions on the ordinary shares and the proceeds of a sale of an ordinary
share paid to a U.S. Holder unless the U.S. Holder is an exempt recipient and, if requested, certifies as to that status. Backup withholding generally will
apply to those payments if the U.S. Holder fails to provide an appropriate certification with its correct taxpayer identification number or certification of
exempt status. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a U.S. Holder’s U.S. federal
income tax liability, provided the required information is timely furnished to the IRS.
Non-U.S. Holders
Payments of dividends on the ordinary shares will not be subject to backup withholding, provided the applicable withholding agent does not have actual
knowledge or reason to know the Non-U.S. Holder is a United States person and the Non-U.S. Holder either certifies its non-U.S. status, such as by
furnishing a valid IRS Form W-8BEN, W-8BEN-E, or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be
filed with the IRS in connection with any distributions on our ordinary shares paid to the Non-U.S. Holder, regardless of whether such distributions
constitute dividends or whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our ordinary shares within
the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting if the
applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such holder is a
United States person or the holder otherwise establishes an exemption. Proceeds of a disposition of our ordinary shares conducted through a non-U.S.
office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a
Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Internal Revenue Code (such Sections commonly referred to as the Foreign
Account Tax Compliance Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities.
Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds
from the sale or other disposition of, our ordinary shares paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the
Internal Revenue Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign
entity either certifies it does not have any “substantial United States owners” (as defined in the Internal Revenue Code) or furnishes identifying
information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for
an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it
must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by
certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Internal Revenue Code), annually report
certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other
account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA
may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our
ordinary shares. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of stock,
including our ordinary shares, on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds
entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our ordinary
shares.
159
DOCUMENTS ON DISPLAY
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. All of the SEC filings made electronically by Diversified are available to the public on the SEC website at www.sec.gov
(commission file number 001-41870).
We also make our electronic filings with the SEC available at no cost on our Investor Relations website, www.ir.div.energy, as soon as reasonably
practicable after we file such material with, or furnish it to, the SEC. Our website address is www.div.energy. The information contained on our website
is not incorporated by reference in this document.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Group maintains disclosure controls and procedures, as defined in U.S. Securities Exchange Act of 1934, as amended (“Exchange Act”) Rule
13a-15(e). The Chief Executive Officer and Chief Financial Officer, with the participation of management, have evaluated the effectiveness of the
Group’s disclosure controls and procedures in relation to Exchange Act Rule 13a-15(b), and has concluded that the Group’s disclosure controls and
procedures were effective as of December 31, 2024.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is
a process, designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, and
effected by the Group’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Group’s
internal control over financial reporting include those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
Group;
•Provide reasonable assurances that transactions are recorded as necessary to permit the preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Group are being made only in accordance with the
authorizations of management and Directors of the Group; and
•Provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of the Group’s assets
that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with policies and procedures may deteriorate.
Management of the Group evaluated the effectiveness of the Group’s internal control over financial reporting as of December 31, 2024 based on criteria
established in the Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Following this evaluation, management concluded that the Group’s internal control over financial reporting was effective as of December 31, 2024.
The effectiveness of the Group’s internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which appears within this Annual Report & Form 20-F.
Attestation Report of the Registered Public Accounting Firm
Refer to the Report of Independent Registered Public Accounting Firm within this Annual Report & Form 20-F.
160
Glossary of Terms
£
British pound sterling
$
U.S. dollar
ABS
Asset-Backed Security
Adjusted EBITDA
Adjusted EBITDA is an APM. Refer to APMs within this Annual Report &
Form 20-F for information on how this metric is calculated and
reconciled to IFRS measures.
Adjusted EBITDA margin
Adjusted EBITDA margin is an APM. Refer to APMs within this Annual
Report & Form 20-F for information on how this metric is calculated and
reconciled to IFRS measures.
Adjusted operating cost
Adjusted operating cost is an APM. Refer to APMs within this Annual
Report & Form 20-F for information on how this metric is calculated and
reconciled to IFRS measures.
Adjusted operating cost per Mcfe
Adjusted operating cost per Mcfe is an APM. Refer to APMs within this
Annual Report & Form 20-F for information on how this metric is
calculated and reconciled to IFRS measures.
AIM
Alternative Investment Market
APM
Alternative Performance Measure
Bbl
Barrel or barrels of oil or natural gas liquids
Bcfe
Billions of cubic fee equivalent
Board or BOD
Board of Directors
Boe
Barrel of oil equivalent, determined by using the ratio of one Bbl of oil or
NGLs to six Mcf of natural gas. The ratio of one barrel of oil or NGLs to
six Mcf of natural gas is commonly used in the industry and represents
the approximate energy equivalence of oil or NGLs to natural gas, and
does not represent the economic equivalency of oil and NGLs to natural
gas. The sales price of a barrel of oil or NGLs is considerably higher than
the sales price of six Mcf of natural gas.
Boepd
Barrels of oil equivalent per day
Btu
A British thermal unit, which is a measure of the amount of energy
required to raise the temperature of one pound of water one
degree Fahrenheit.
CO2
Carbon dioxide
CO2e
Carbon dioxide equivalent
CEO
Chief Executive Officer
CFO
Chief Financial Officer
COO
Chief Operating Officer
DD&A
Depreciation, depletion and amortization
E&P
Exploration and production
EBITDA
Earnings before interest, tax, depreciation and amortization
EBITDAX
Earnings before interest, tax, depreciation, amortization and exploration
expense
EHS
Environmental, health & safety
Employees, administrative costs and professional services
Employees, administrative costs and professional services is an APM.
Refer to APMs within this Annual Report & Form 20-F for information on
how this metric is calculated and reconciled to IFRS measures.
EPA
Environmental Protection Agency
EPS
Earnings per share
ERM
Enterprise Risk Management
ESG
Environmental, Social and Governance
EU
European Union
Free cash flow
Free cash flow is an APM. Refer to APMs within this Annual Report &
Form 20-F for information on how this metric is calculated and
reconciled to IFRS measures.
FTSE
Financial Times Stock Exchange
G&A
General and administrative expense
GBP
British pound sterling
Henry Hub
A natural gas pipeline delivery point that serves as the benchmark
natural gas price underlying NYMEX natural gas futures contracts.
IAS
International Accounting Standard
IASB
International Accounting Standards Board
IPO
Initial public offering
IFRS
International Financial Reporting Standards
KWh
Kilowatt hour
LIBOR
London Inter-bank Offered Rate
LOE
Base lease operating expense is defined as the sum of employee and
benefit expenses, well operating expense (net), automobile expense and
insurance cost.
LSE
London Stock Exchange
Lost Time Incident Rate (“LTIR”)
LTIR is the number of work-related lost time incidents per 200,000 work
hours.
M&A
Mergers and acquisitions
Mbbls
Thousand barrels
Mboe
Thousand barrels of oil equivalent
161
Mboepd
Thousand barrels of oil equivalent per day
Mcf
Thousand cubic feet of natural gas
Mcfe
Thousand cubic feet of natural gas equivalent
Midstream
Midstream activities include the processing, storing, transporting and
marketing of natural gas, NGLs and oil.
Mmboe
Million barrels of oil equivalent
Mmbtu
Million British thermal units
Mmcf
Million cubic feet of natural gas
Mmcfe
Million cubic feet of natural gas equivalent
Mont Belvieu
A mature trading hub with a high level of liquidity and transparency that
sets spot and futures prices for NGLs.
MT CO2e
Metric ton of carbon dioxide equivalent
Motor Vehicle Accidents (“MVA”)
MVA is the rate of preventable accidents per million miles driven.
MT
Metric ton
Net debt
Net debt is an APM. Refer to APMs within this Annual Report & Form 20-
F for information on how this metric is calculated and reconciled to
IFRS measures.
Net zero
Achieving an overall balance between carbon emissions produced and
carbon emissions taken out of the atmosphere, which includes making
changes to reduce emissions to the lowest amount and offsetting as a
last resort. For Diversified net zero means total Scope 1 and 2
GHG emissions.
NGLs
Natural gas liquids, such as ethane, propane, butane and natural
gasoline that are extracted from natural gas production streams.
NYMEX
New York Mercantile Exchange
Oil
Includes crude oil and condensate
OGMP 2.0
Oil & Gas Methane Partnership 2.0 is a voluntary measurement-based
methane emissions reporting initiative of the Unites Nations
Environmental Program, where a Gold Standard recognition represents
the highest levels (Level 4/5) of reporting.
OSHA
Occupational Safety and Health Administration
Performance Share Award
Performance stock unit award
PSU
Performance stock unit
PV-10
A calculation of the present value of estimated future natural gas and oil
revenues, net of forecasted direct expenses, and discounted at an
annual rate of 10%. This calculation does not consider income taxes and
utilizes a pricing assumption consistent with the forward curve at
December 31, 2024.
Realized price
The cash market price less all expected quality, transportation and
demand adjustments.
Restricted Share Award
Restricted stock unit award
RSU
Restricted stock unit
SAM
Smarter Asset Management
SOFR
Secured Overnight Financing Rate
TCFD
Task Force on Climate-Related Financial Disclosures
Total Recordable Incident Rate (“TRIR”)
TRIR is the number of work-related injuries per 200,000 work hours.
Total revenue, inclusive of settled hedges
Total revenue, inclusive of settled hedges, is an APM. Refer to APMs
within this Annual Report & Form 20-F for information on how this
metric is calculated and reconciled to IFRS measures.
TSR
Total Shareholder Return
TTM
Trailing twelve months
UK
United Kingdom
U.S.
United States
USD
U.S. dollar
WTI
West Texas Intermediate grade crude oil, used as a pricing benchmark
for sales contracts and NYMEX oil futures contracts.
162
Exhibits
The following documents are filed in the Securities and Exchange Commission (“SEC”) EDGAR system, as part of this Annual Report & Form 20-F, and
can be viewed on the SEC’s website.
Exhibit
No.
Incorporated by reference
Description
Form
Exhibit
Filing Date
1.1
(c)
F1
File No. 333-281669
3.1
8/20/2024
2.1
(c)
20FR12B
File No. 001-41870
2.1
11/16/2023
4.1
(c)(e)(f)
20FR12B
File No. 001-41870
4.28
11/16/2023
4.2
(c)(e)(f)
20FR12B
File No. 001-41870
4.30
11/16/2023
4.3
(c)(e)(f)
20FR12B/A
File No. 001-41870
4.31
12/8/2023
4.4
(c)(e)(f)
F1
File No. 333-281669
4.8
8/20/2024
4.5
(a)(f)
4.6
(c)
F1
File No. 333-281669
10.29
8/20/2024
4.7
(c)
F1
File No. 333-281669
10.32
8/20/2024
4.8
(c)(d)
20FR12B
File No. 001-41870
4.31
11/16/2023
4.9
(c)(d)
20FR12B
File No. 001-41870
4.32
11/16/2023
4.10
(c)
20FR12B
File No. 001-41870
4.33
11/16/2023
4.11
(c)
20FR12B
File No. 001-41870
4.34
11/16/2023
4.12
(a)
4.13
(a)(f)
4.14
(a)
4.15
(a)
4.16
(a)(f)
4.17
(c)(f)
6-K
File No. 001-41870
99.1
1/27/2025
8.1
(a)
11.2
(a)
12.1
(a)
163
Exhibit
No.
Incorporated by reference
Description
Form
Exhibit
Filing Date
13.1
(b)
15.1
(a)
15.2
(a)
15.3
(a)
97.1
(c)
20F
File No. 001-41870
99.1
03/19/2024
101
Inline XBRL data files.
104
Cover page inline interactive data file (formatted as Inline XBRL and contained in
Exhibit 101).
(a)Filed herewith.
(b)Furnished only.
(c)Previously filed.
(d)Management contract.
(e)Certain portions of this exhibit (indicated by “[***]”) have been redacted.
(f)Certain schedules and attachments have been omitted. The registrant hereby undertakes to provide further information regarding such omitted materials to the
Securities and Exchange Commission upon request.
164
Signatures
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this Annual Report & Form 20-F on its behalf.
Diversified Energy Company PLC
(Registrant)
/s/ Robert Russell (“Rusty”) Hutson, Jr.
Robert Russell (“Rusty”) Hutson, Jr.
Chief Executive Officer
March 17, 2025
Exhibit 4.5
Execution Version

____________________________________________________________________
INDENTURE
by and between
DP MUSTANG HOLDCO LLC,
as Issuer,
and
UMB BANK, N.A.,
as Indenture Trustee and Securities Intermediary
Article I
Dated as of September 19, 2024
____________________________________________________________________________



TABLE OF CONTENTS
Article IIPage
Section 1.1    Definitions    2
    ARTICLE II THE NOTES    2
Section 2.1    Form    2
Section 2.2    Execution, Authentication and Delivery    3
Section 2.3    Form of Notes    4
Section 2.4    Transfer Restrictions on Notes    7
Section 2.5    Registration; Registration of Transfer and Exchange    10
Section 2.6    Mutilated, Destroyed, Lost or Stolen Notes    12
Section 2.7    Persons Deemed Owner    13
Section 2.8    Payment of Principal and Interest; Defaulted Interest    13
Section 2.9    Cancellation    14
Section 2.10    Release of Collateral    15
Section 2.11    Definitive Notes    15
Section 2.12    Tax Treatment    15
Section 2.13    CUSIP Numbers    16
    ARTICLE III REPRESENTATIONS AND WARRANTIES    16
Section 3.1    Organization and Good Standing    16
Section 3.2    Authority; No Conflict    16
Section 3.3    Legal Proceedings; Orders    17
Section 3.4    Compliance with Laws and Governmental Authorizations    17
Section 3.5    Title to Property; Leases    18
Section 3.6    Vesting of Title to the Wellbore Interests    18
Section 3.7    Compliance with Leases    18
Section 3.8    Material Indebtedness    18
Section 3.9    Employee Benefit Plans    18
Section 3.10    Use of Proceeds; Margin Regulations    18
Section 3.11    Existing Indebtedness; Future Liens    18
Section 3.12    Foreign Assets Control Regulations, Etc.    19
Section 3.13    Status under Certain Statutes    20
Section 3.14    Single Purpose Entity    20
Section 3.15    Solvency    20
Section 3.16    Security Interest    20
    ARTICLE IV COVENANTS    21
Section 4.1    Payment of Principal and Interest    21
Section 4.2    Maintenance of Office or Agency    21
Section 4.3    Money for Payments to Be Held on behalf of the Noteholders and Hedge Counterparties    21
Section 4.4    Compliance With Law    21
Section 4.5    Insurance    21

i



Section 4.6    No Change in Fiscal Year    22
Section 4.7    Payment of Taxes and Claims    22
Section 4.8    Existence    22
Section 4.9    Books and Records    22
Section 4.10    Performance of Material Agreements    22
Section 4.11    Maintenance of Lien    23
Section 4.12    Further Assurances    23
Section 4.13    Use of Proceeds    23
Section 4.14    Separateness    23
Section 4.15    Transactions with Affiliates    26
Section 4.16    Merger, Consolidation, Etc.    26
Section 4.17    Lines of Business    26
Section 4.18    Economic Sanctions, Etc.    26
Section 4.19    Liens    26
Section 4.20    Sale of Assets, Etc.    26
Section 4.21    Permitted Indebtedness    27
Section 4.22    Amendment to Organizational Documents    27
Section 4.23    No Loans    28
Section 4.24    Permitted Investments; Subsidiaries    28
Section 4.25    Employees; ERISA    28
Section 4.26    Tax Treatment    28
Section 4.27    Replacement of Manager, Back-Up Manager and Operator    28
Section 4.28    Hedge Agreements    29
    ARTICLE V REMEDIES    31
Section 5.1    Events of Default    31
Section 5.2    Acceleration of Maturity; Rescission and Annulment    34
Section 5.3    Collection of Indebtedness and Suits for Enforcement by Indenture Trustee    35
Section 5.4    Remedies; Priorities    37
Section 5.5    Optional Preservation of the Assets    39
Section 5.6    Limitation of Suits    39
Section 5.7    Unconditional Rights of Hedge Counterparties and Noteholders to Receive Principal, Interest, and Payments of Other Obligations    40
Section 5.8    Restoration of Rights and Remedies    40
Section 5.9    Rights and Remedies Cumulative    40
Section 5.10    Delay or Omission Not a Waiver    40
Section 5.11    Control by Noteholders    40
Section 5.12    Waiver of Past Defaults    41
Section 5.13    Undertaking for Costs    41
Section 5.14    Waiver of Stay or Extension Laws    42
Section 5.15    Action on Notes or Hedge Agreements    42
Section 5.16    Performance and Enforcement of Certain Obligations    42
    ARTICLE VI THE INDENTURE TRUSTEE    43

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Section 6.1    Duties of Indenture Trustee    43
Section 6.2    Rights of Indenture Trustee    44
Section 6.3    Individual Rights of Indenture Trustee    48
Section 6.4    Indenture Trustee’s Disclaimer    48
Section 6.5    Notice of Material Manager Defaults    48
Section 6.6    Reports by Indenture Trustee    48
Section 6.7    Compensation and Indemnity    49
Section 6.8    Replacement of Indenture Trustee    50
Section 6.9    Successor Indenture Trustee by Merger    51
Section 6.10    Appointment of Co-Indenture Trustee or Separate Indenture Trustee    51
Section 6.11    Eligibility; Disqualification    52
Section 6.12    Representations and Warranties of the Indenture Trustee    52
    ARTICLE VII INFORMATION REGARDING THE ISSUER    53
Section 7.1    Financial and Business Information    53
Section 7.2    Visitation    55
    ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES    55
Section 8.1    Deposit of Collections    55
Section 8.2    Establishment of Accounts    56
Section 8.3    Collection of Money    61
Section 8.4    Asset Disposition Proceeds    61
Section 8.5    Asset Valuation    62
Section 8.6    Distributions    63
Section 8.7    Liquidity Reserve Account    68
Section 8.8    Statements to Noteholders    69
Section 8.9    [Reserved]    71
Section 8.10    [Reserved]    71
Section 8.11    Original Documents    71
    ARTICLE IX SUPPLEMENTAL INDENTURES    72
Section 9.1    Supplemental Indentures with Consent of Noteholders and Hedge Counterparties    72
Section 9.2    Execution of Supplemental Indentures    74
Section 9.3    Effect of Supplemental Indenture    74
Section 9.4    Reference in Notes to Supplemental Indentures    75
    ARTICLE X REDEMPTION OF NOTES    75
Section 10.1    Redemption    75
Section 10.2    Form of Redemption Notice    75
Section 10.3    Notes Payable on Redemption Date    76
    ARTICLE XI SATISFACTION AND DISCHARGE    76
Section 11.1    Satisfaction and Discharge of Indenture With Respect to the Notes    76

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Section 11.2    Application of Trust Money    78
Section 11.3    Repayment of Monies Held by Paying Agent    78
    ARTICLE XII MISCELLANEOUS    78
Section 12.1    Compliance Certificates and Opinions, etc.    78
Section 12.2    Form of Documents Delivered to Indenture Trustee    79
Section 12.3    Acts of Noteholders    79
Section 12.4    Notices, etc., to Indenture Trustee and Issuer    80
Section 12.5    Notices to Noteholders and Hedge Counterparties; Waiver    81
Section 12.6    Alternate Payment and Notice Provisions    82
Section 12.7    Effect of Headings and Table of Contents    82
Section 12.8    Successors and Assigns    82
Section 12.9    Severability    83
Section 12.10    Benefits of Indenture    83
Section 12.11    Legal Holidays    83
Section 12.12    GOVERNING LAW    83
Section 12.13    Counterparts    84
Section 12.14    Recording of Indenture    84
Section 12.15    No Petition    84
Section 12.16    Inspection    84
Section 12.17    Waiver of Jury Trial    84
Section 12.18    Rating Agency Notice    85
Section 12.19    Rule 17g-5 Information    85


SCHEDULE A    –    Schedule of Assets
SCHEDULE B    –    Scheduled Principal Distribution Amounts
SCHEDULE 3.3    –    Schedule of Legal Proceedings and Orders
SCHEDULE 3.4(b)     –    Schedule of Compliance with Laws and Governmental Authorizations
SCHEDULE 3.7    –    Schedule of Employee Benefit Plans
EXHIBIT A    –    Form of Notes
EXHIBIT B    –    Form of Transferor Certificate
EXHIBIT C    –    Form of Investment Letter
EXHIBIT D    –    Form of Statement to Noteholders


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Article IIITHIS INDENTURE dated as of September 19, 2024 (as it may be amended and supplemented from time to time, this “Indenture”) is between DP Mustang Holdco LLC, a Delaware limited liability company (the “Issuer”), and UMB Bank, N.A., a national banking association, as indenture trustee and not in its individual capacity (the “Indenture Trustee”) and as Securities Intermediary (as defined herein).
Article IVEach party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Secured Parties:
GRANTING CLAUSE
Article VThe Issuer hereby Grants to the Indenture Trustee on the Closing Date, as Indenture Trustee for the benefit of the Secured Parties, all of the Issuer’s right, title and interest, whether now or hereafter acquired, and wherever located, in and to, as applicable (a) the Assets and all monies received thereon and in respect thereof after the Cutoff Date; (b) the Issuer Accounts and Hedge Collateral Accounts (but, as to the Hedge Collateral Accounts, only for the benefit of the Secured Parties who are Hedge Counterparties) and all funds on deposit in, and “financial assets” (as such term is defined in the UCC as from time to time in effect), instruments, money, and other property credited to or on deposit in the Issuer Accounts and Hedge Collateral Accounts, from time to time, including the Liquidity Reserve Account Initial Deposit, and in all investments and proceeds thereof (including all income thereon); (c) the Management Services Agreement; (d) the Hedge Agreements; (e) the Joint Operating Agreement; (f) the Back-Up Management Agreement; (g) the Transfer Agreement; (h) the Pledge Agreement; (i) each other Basic Document to which it is a party; (j) all accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, and other minerals; (k) all proceeds of any and all of the foregoing insofar as relating to the Assets and all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing insofar as relating to the Assets and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing insofar as relating to the Assets, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments, general intangibles and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing; (l) all limited liability company interests in the Issuer, including, without limitation: (i) all governance rights, including, without limitation, all rights to vote, consent to action, and otherwise participate in the management of the business and affairs of the Issuer; and (ii) all informational rights, including, without limitation, all rights to receive notices, company records, tax records and all other information related to the Issuer, and (m) all proceeds of any and all of the foregoing (collectively, the “Collateral”).
Article VIThe foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes and payments owed or owing to the Hedge Counterparties under the applicable Hedge Agreements (including any



termination payments and any other amounts owed thereunder), equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture.
Article VIIThe Indenture Trustee, as Indenture Trustee on behalf of the Holders of the Notes and each Hedge Counterparty, acknowledges such Grant, and accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture.
Article I

DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1Definitions.
Article IICertain capitalized terms used in this Indenture shall have the respective meanings assigned to them in Part I of Appendix A attached hereto. All references herein to “the Indenture” or “this Indenture” are to this Indenture as it may be amended, supplemented or modified from time to time, the exhibits hereto and the capitalized terms used herein which are defined in such Appendix A. All references herein to Articles, Sections, subsections and exhibits are to Articles, Sections, subsections and exhibits contained in or attached to this Indenture unless otherwise specified. All terms defined in this Indenture shall have the defined meanings when used in any certificate, notice, Note or other document made or delivered pursuant hereto unless otherwise defined therein. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Indenture.
Article III

THE NOTES
Section 3.1Form.
(a)The Notes, together with the Indenture Trustee’s certificate of authentication, shall be in substantially the form set forth in Exhibit A to this Indenture with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers of the Issuer executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note.
(b)The Notes, whether in definitive or global form, shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers of the Issuer executing such Notes, as evidenced by their execution of such Notes.
(c)Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A are part of the terms of this Indenture.

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(d)The Notes issued pursuant to this Indenture will be divided into classes (each a “Class” of Notes) and allocated into such Classes upon issuance. Two Classes of Notes will be issued on the Closing Date, in the amount and with the designation specified therein. The Notes comprising and bearing a class designation including the letter “A” are referred to herein as the “Class A Notes,” the Notes comprising and bearing a class designation including the letter “B” are referred to herein as the “Class B Notes.”
(e)The Class A Notes and Class B Notes may be issued as Definitive Notes or Global Notes as specified in the applicable Issuer Order.
Section 3.2Execution, Authentication and Delivery.
(a)The Notes shall be executed on behalf of the Issuer by any of its authorized officers. The signature of any such authorized officer on the Notes may be manual or facsimile.
(b)Notes bearing the manual or facsimile signature of individuals who were at any time authorized officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.
(c)The Indenture Trustee shall upon receipt of an Issuer Order authenticate and deliver (i) the Class A Notes for original issue in an aggregate initial principal amount of $71,000,000 and (ii) the Class B Notes for original issue in an aggregate initial principal amount of $5,500,000. The aggregate principal amount of the Notes outstanding at any time may not exceed such amount except as provided in Section 2.6. Without limiting the generality of the foregoing, the Issuer Order shall specify whether the Class A Notes and the Class B Notes shall be issuable as Definitive Notes or as Book-Entry Notes.
(d)Each Class A Note shall be dated the date of its authentication. Except as otherwise described in this paragraph, the Class A Notes shall be issuable as registered Class A Notes in minimum denominations of $500,000 and in integral multiples of $1,000 in excess thereof. Notwithstanding any other provision in this Indenture or the Note Purchase Agreement, transfers of ownership or beneficial interests or participations in the Class A Notes shall not be recognized if the result of such a transfer or participation is the creation of ownership or beneficial ownership of such Class A Note in a principal amount that is less than the minimum denominations set forth in this Section 2.2(d), provided that if necessary to enable the registration of transfer by a holder of its entire holding of Class A Notes, one Class A Note may be in a denomination of less than the required minimum denomination.
(e)Each Class B Note shall be dated the date of its authentication. Except as otherwise described in this paragraph, the Class B Notes shall be issuable as registered Class B Notes in minimum denominations of $1,000,000 and in integral multiples of $1,000 in excess thereof. Notwithstanding any other provision in this Indenture or the Note Purchase Agreement, transfers of ownership or beneficial interests or participations in the Class B Notes shall not be recognized if the result of such a transfer or participation is the creation of ownership or beneficial ownership of such Class B Note in a principal amount that is less than the minimum denominations set forth in this Section 2.2(e), provided that if necessary to enable the registration of transfer by a holder of its entire holding of Class B Notes to a single assignee, one Class B Note may be in a denomination of less than the required minimum denomination.
(f)No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Indenture Trustee by the manual

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signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.
Section 3.3Form of Notes.
(a)If the Issuer establishes pursuant to Section 2.2(c) that the Notes are to be issued as Book-Entry Notes, then the Issuer will execute and the Indenture Trustee or its agent will, in accordance with Section 2.2, authenticate and deliver, one or more definitive Global Notes, which (1) will represent, and will be denominated in an amount equal to the aggregate initial Note balance to be represented by such Global Note or Notes, or such portion thereof as the Issuer will specify in an Issuer Order, (2) will be registered in the name of the Depository for such Global Note or Notes or its nominee; (3) will be delivered by the Indenture Trustee or its agent to the Depository or pursuant to the Depository’s instruction (and which may be held by the Indenture Trustee or an agent of the Indenture Trustee as custodian for the Depository, if so specified in the related Depository Agreement), (4) if applicable, will bear a legend substantially to the following effect: “Unless this Note is presented by an authorized representative of the Depository, to the Issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of the Depository (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depository), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein” and (5) may bear such other legend as the Issuer, upon advice of counsel, deems to be applicable.
(b)The Note Registrar and the Indenture Trustee may deal with the Depository as the sole Noteholder of the Book-Entry Notes except as otherwise provided in this Indenture.
(c)The rights of the Noteholders may be exercised only through the Depository and will be limited to those established by law and agreements between the Noteholders and the Depository and/or its participants under the Depository Agreement.
(d)The Depository will make book-entry transfers among its participants and receive and transmit payments of principal of and interest on the Book-Entry Notes to the participants.
(e)The Indenture Trustee, the Note Registrar, and the Paying Agent shall have no responsibility or liability for any actions taken or not taken by the Depository.
(f)If this Indenture requires or permits actions to be taken based on instructions or directions of the Noteholders of a stated percentage of the Outstanding Amount of the Notes, the Depository will be deemed to represent those Noteholders only if it has received instructions to that effect from Noteholders and/or the Depository’s participants owning or representing, the required percentage of the beneficial interest of the Notes and has delivered the instructions to the Indenture Trustee.
(g)The Issuer in issuing Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Indenture Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Noteholders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission

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of such numbers. The Issuer will promptly notify the Indenture Trustee and each Noteholder in writing of any change in the “CUSIP” numbers.
(h)Transfers of Global Notes only to Depository Nominees. Notwithstanding any other provisions of this Section 2.3 or of Section 2.4, and subject to the provisions of clause (i) below, unless the terms of a Global Note expressly permits such Global Note to be exchanged in whole or in part for individual Notes, a Global Note may be transferred, in whole but not in part and in the manner provided in Section 2.4, only to a nominee of the Depository for such Global Note, or to the Depository, or a successor Depository for such Global Note selected or approved by the Issuer, or to a nominee of such successor Depository.
(i)Limited Right to Receive Definitive Notes. Except under the limited circumstances described below, Noteholders of beneficial interests in Global Notes will not be entitled to receive Definitive Notes. With respect to issued Notes:
(i)If at any time the Depository for a Global Note notifies the Issuer that it is unwilling or unable to continue to act as Depository for such Global Note, the Issuer will appoint a successor Depository with respect to such Global Note. If a successor Depository for such Global Note is not appointed by the Issuer within ninety (90) days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer will execute, and the Indenture Trustee or its agent will, in accordance with Section 2.4 and with the Issuer Order delivered to the Indenture Trustee or its agent under Section 2.4 requesting the authentication and delivery of individual Notes of such Series or Class in exchange for such Global Note, will authenticate and deliver, individual Notes of such Class of like tenor and terms in an aggregate initial Note balance equal to the initial Note balance of the Global Note in exchange for such Global Note.
(ii)The Issuer may at any time and in its sole discretion determine that the Notes of any Class or portion thereof issued or issuable in the form of one or more Global Notes will no longer be represented by such Global Note or Notes. In such event the Issuer will execute, and the Indenture Trustee or its agent in accordance with Section 2.4 and with an Officer’s Certificate delivered to the Indenture Trustee or its agent for the authentication and delivery of individual Notes in exchange in whole or in part for such Global Note, will authenticate and deliver individual Notes of like tenor and terms in definitive form in an aggregate initial Note balance equal to the initial Note balance of such Global Note or Notes representing such portion thereof in exchange for such Global Note or Notes.
(iii)If specified by the Issuer pursuant to Sections 2.2 and 2.4 with respect to Notes issued or issuable in the form of a Global Note, the Depository for such Global Note may surrender such Global Note in exchange in whole or in part for individual Notes of like tenor and terms in definitive form on such terms as are acceptable to the Issuer and such Depository. Thereupon the Issuer will execute, and the Indenture Trustee or its agent will, in accordance with Section 2.2 and with the Issuer Order delivered to the Indenture Trustee or its agent under Section 2.2, authenticate and deliver, without service charge, (A) to each Person specified by such Depository a new Note or Notes of like tenor and terms and of any authorized denomination as requested by such Person in an aggregate initial Note balance equal to the initial Note balance of the portion of the Global Note or Notes specified by the Depository and in exchange for such Person’s beneficial interest in the Global Note; and (B) to such Depository a new Global Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the initial Note balance of the surrendered Global Note and the aggregate initial Note balance of Notes delivered to the Noteholders thereof.

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(iv)If any Event of Default has occurred with respect to such Global Notes, and Noteholders evidencing more than 50% of the Global Notes (measured by voting interests) advise the Indenture Trustee and the Depository that a Global Note is no longer in the best interest of the Noteholders, the applicable Holder of Global Notes may, at the direction of the applicable beneficial owners, exchange the beneficial interests in such Notes for Definitive Notes in accordance with the exchange provisions herein.
(v)In any exchange provided for in any of the preceding four paragraphs, the Issuer will execute and the Indenture Trustee or its agent will, in accordance with Section 2.2 and with the Issuer Order delivered to the Indenture Trustee or its agent under Section 2.2, authenticate and deliver Definitive Notes in definitive registered form in authorized denominations. Upon the exchange of the entire initial Note balance of a Global Note for Definitive Notes, such Global Note will be canceled by the Indenture Trustee or its agent. Except as provided in the preceding paragraphs, Notes issued in exchange for a Global Note pursuant to this Section will be registered in such names and in such authorized denominations as the Depository for such Global Note, pursuant to instructions from its direct or indirect participants or otherwise, will instruct the Indenture Trustee or the Note Registrar. The Indenture Trustee or the Note Registrar will deliver such Notes to the Persons in whose names such Notes are so registered.
Section 2.3A     Beneficial Ownership of Global Notes.

Until Definitive Notes have been issued to the applicable Noteholders to replace any Global Notes pursuant to Section 2.3(a):

(a)the Issuer and the Indenture Trustee may deal with the applicable clearing agency or Depository and the Depository Participants for all purposes (including the making of payments) as the authorized representatives of the respective Noteholders; and
(b)the rights of the respective Noteholders will be exercised only through the applicable Depository and the Depository Participants and will be limited to those established by law and agreements between such Noteholders and the Depository and/or the Depository Participants. Pursuant to the operating rules of the applicable Depository, unless and until Definitive Notes are issued pursuant to Section 2.3(a), the Depository will make book-entry transfers among the Depository Participants and receive and transmit payments of principal and interest on the related Notes to such Depository Participants.
    For purposes of any provision of this Indenture requiring or permitting actions with the consent of, or at the direction of, Noteholders evidencing a specified percentage of the Outstanding Principal Balance of Outstanding Notes, such direction or consent may be given by Noteholders (acting through the Depository and the Depository Participants) owning interests in or security entitlements to Notes evidencing the requisite percentage of principal amount of Notes.

Section 2.3B     Notices to Depository.

    Whenever any notice or other communication is required to be given to Noteholders with respect to which Book-Entry Notes have been issued, unless and until Definitive Notes will have

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been issued to the related Noteholders, the Indenture Trustee will give all such notices and communications to the applicable Depository, and shall have no obligation to report directly to such Noteholders.
Section 3.4Transfer Restrictions on Notes.
(a)No transfer of any Note or any interest therein (including, without limitation, by pledge or hypothecation) shall be made except in compliance with the restrictions on transfer set forth in this Section 2.4 (including the applicable legend to be set forth on the face of each Note as provided in the Exhibits to this Indenture). Any resale, pledge or other transfer of any of the Notes contrary to the restrictions set forth above and elsewhere in this Indenture shall be deemed void ab initio by the Issuer and Indenture Trustee.
(b)Notwithstanding anything to the contrary contained herein, each Note and this Indenture may be amended or supplemented to modify the restrictions on and procedures for resale and other transfers of the Notes to reflect any change in applicable Law or regulation (or the interpretation thereof). Each Noteholder shall, by its acceptance of such Note, have agreed to any such amendment or supplement.
(c)As of the date of this Indenture, the Notes have not been registered under the Securities Act and will not be listed on any exchange. No Note shall be transferred or assigned, and no interest in any Note shall be transferred or assigned, unless the Noteholder and the transferee or assignee, as applicable, comply with the terms and conditions of this Section 2.4. No transfer of a Note shall be made unless such transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities Laws or is exempt from the registration requirements under the Securities Act and such state securities Laws. Except in a transfer to Diversified or by Diversified to an Affiliate thereof, in the event that a transfer is to be made in reliance upon an exemption from the Securities Act and state securities Laws, in order to assure compliance with the Securities Act and such Laws, the Noteholder desiring to effect such transfer and such Noteholder’s prospective transferee shall each certify to the Issuer, the Indenture Trustee and Diversified in writing the facts surrounding the transfer in substantially the forms set forth in Exhibit B (the “Transferor Certificate”) and Exhibit C (the “Investment Letter”). Each Noteholder desiring to effect such a transfer shall, by its acceptance of such Note, have agreed to indemnify the Issuer, the Indenture Trustee and Diversified (in any capacity) against any liability that may result if the transfer is not so exempt or is not made in accordance with federal and state securities Laws.
(d)Subject to the other terms and provisions hereof, any Noteholder may at any time grant to any participant participations in all or part of the payments due to it, and its rights under this Indenture and the Note Purchase Agreement, in a minimum amount that is not less than the minimum denominations set forth in Section 2.2. No participant shall be entitled to receive any amount in excess of the amount the participating Noteholder would be entitled to receive hereunder or any of the other Basic Documents. In connection with any such transfer to a participant, such Noteholder, at its sole discretion but subject to the provisions of the Note Purchase Agreement, shall be entitled to distribute to any participant any information furnished to such Noteholder pursuant to the Note Purchase Agreement or the Indenture so long as the participant holds a participation or similar interest in the obligation due to such Noteholder in respect of the Noteholder’s respective Note. Each Noteholder, by acceptance of a Note, acknowledges and agrees that any such participation will not alter or affect in any way whatsoever such Noteholder’s direct obligations hereunder or under the Note Purchase Agreement and that, other than as set forth in this Section 2.4(d), none of the Issuer, Diversified Holdings, the Indenture Trustee, the Manager or any other Person shall have any obligation to have any communication or relationship whatsoever with any participant of such Noteholder in order to enforce the obligations of such Noteholder hereunder and under the Note Purchase

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Agreement. Each Noteholder shall provide prior written notice to the Issuer and Diversified in writing of the identity and interest of each participant upon any such participation. Such Noteholder shall provide the Issuer and Diversified with respect to each participant appropriately executed copies of the forms required by this Section 2.4 and Section 2.12 with respect to itself and the related participant, treating the participant as though it were a Noteholder, and including any amendments and resubmissions, (A) prior to or promptly after any such participation and (B) upon the occurrence of any event which would require the amendment or resubmission of any such form previously provided hereunder. Any participation shall be subject to the Noteholder’s compliance with, and causing the participant to comply with, the restrictions on transfer of Notes set forth herein as though a participant were a Noteholder, and the purchaser acknowledgements set forth herein, as though such participant were a Noteholder. Notwithstanding anything herein to the contrary, neither the Indenture Trustee nor the Note Registrar shall have any duty to monitor, record or register any participation in a Note or any transfer of such participation, and regardless of whether the Indenture Trustee or Note Registrar has knowledge of such a participation, the Indenture Trustee and the Note Registrar shall be entitled to deal solely with the Noteholders for all purposes under this Indenture.
(e)By acquiring a Class A Note, each purchaser, transferee and owner of a beneficial interest in such Note will be deemed to represent that either (1) it is not acquiring or holding such Notes with the assets of any Plan or (2) the acquisition or holding of such Notes will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation of Similar Law. By acquiring a Class B Note, each purchaser, transferee and owner of a beneficial interest in such Note will be deemed to represent that (1) it is not acquiring or holding such Notes with the assets of any Plan subject to Title I of ERISA or Section 4975 of the Code and (2) if it is acquiring or holding such Notes with the assets of a Plan subject to Similar Law, its acquisition or holding of such Notes will not give rise to a violation of Similar Law and will not cause the assets of the Issuer to be subject to Similar Law.
(f)With respect to the Class B Notes (the “Transfer-Restricted Notes”), such purchaser (including any transferee thereof):
(i)represents and agrees on its own behalf and on behalf of any beneficial owner for which it is purchasing a Transfer-Restricted Note that (1) (A) either (I) the beneficial owner of such Transfer-Restricted Note is not and so long as such person is a beneficial owner of such Transfer-Restricted Note, will not become for U.S. federal income tax purposes a partnership, Subchapter S corporation or grantor trust (each such entity a “Flow-Through Entity”) or (II) if such beneficial owner is or becomes a Flow-Through Entity, then either (x) none of the direct or indirect beneficial owners of any interest in such Flow-Through Entity has or ever will have more than 50% of the value of its interest in such Flow-Through Entity attributable to the aggregate interest of such Flow-Through Entity in the combined value of the Transfer-Restricted Notes, any other interest in the Issuer or any interest created under this Indenture or (y) it is not and will not be a principal purpose of the arrangement involving the investment of such Flow-Through Entity in any Transfer-Restricted Note to permit the Issuer to satisfy the 100 partner limitation of Treasury Regulations Section 1.7704-1(h)(1)(ii) necessary for the Issuer not to be classified as a publicly traded partnership under the Code, or (B) it will deliver a written opinion of nationally recognized U.S. tax counsel that such transfer will not cause the Issuer to be treated as a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, (2) such beneficial owner will not sell, assign, transfer, pledge or otherwise convey any interest in an amount less than 100% of the minimum denomination of the Transfer-Restricted Note or participating interest in any Transfer-Restricted Note, or purchase or enter into any financial instrument or

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contract the value of which is determined by reference in whole or in part to any Transfer-Restricted Note and (3) such beneficial owner is not acquiring and will not sell, transfer, assign, participate, pledge or otherwise dispose of or cause to be marketed any Transfer-Restricted Note (or interest therein) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treasury Regulations Section 1.7704-1(b), including, without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations;
(ii)will deliver to the Indenture Trustee and the Issuer either (1) a letter of representation in the form of Exhibit C hereto representing to the Issuer and the Indenture Trustee that either (I) for so long as it holds such Transfer-Restricted Note (or a beneficial interest therein), it is not, and will not acquire such Transfer-Restricted Note or interest therein on behalf of a beneficial owner that is classified for U.S. federal income tax purposes as a Flow-Through Entity, or (II) if such beneficial owner is or becomes a Flow-Through Entity, then either (x) none of the direct or indirect beneficial owners of any interest in such Flow-Through Entity has or ever will have more than 50% of the value of its interest in such Flow-Through Entity attributable to the aggregate interest of such Flow-Through Entity in the combined value of the Transfer-Restricted Notes, any other interest in the Issuer or any interest created under this Indenture or (y) it is not and will not be a principal purpose of the arrangement involving the investment of such Flow-Through Entity in any Transfer-Restricted Note to permit the Issuer to satisfy the 100 partner limitation of Treasury Regulations Section 1.7704-1(h)(1)(ii), or (2) a written opinion of nationally recognized U.S. tax counsel that such transfer will not cause the Issuer to be treated as a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes; and
(iii)will deliver a letter of representation to the Indenture Trustee and the Issuer representing in the form of Exhibit C hereto to the Issuer and the Indenture Trustee that it will not sell, transfer, assign, participate, pledge or otherwise dispose of or cause to be marketed any Transfer-Restricted Note (or any interest therein), (1) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treasury Regulations Section 1.7704-1(b), including without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations, or (2) in an amount less than 100% of the minimum denomination of the Transfer-Restricted Note or purchase or enter into any financial instrument or contract the value of which is determined by reference in whole or in part to any Transfer-Restricted Note.
Any transfer in violation of clauses (i) through (iii) above shall be null and void ab initio.
(g)Each purchaser represents and agrees on its own behalf and on behalf of any beneficial owner for which it is purchasing such Transfer-Restricted Notes that it (or, if, for U.S. federal income tax purposes, such purchaser is treated as a disregarded entity, its sole regarded tax owner) is and will remain a “United States person” within the meaning of Section 7701(a)(30) of the Code and will deliver an IRS Form W-9 to the Issuer or its agent. It further agrees that no transfer of the Class B Notes or such other Transfer-Restricted Notes (or any interest therein) will be effective, and no such transfer will be recognized, unless such transferee (or, if, for U.S. federal income tax purposes, such transferee is a disregarded entity, its sole regarded tax owner) is a "United States person" within the meaning of Section 7701(a)(30) of the

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Code that delivers an IRS Form W-9 to the Issuer or its agent. Any transfer in violation of this clause (g) shall be null and void ab initio.
Section 3.5Registration; Registration of Transfer and Exchange.
(a)The Issuer shall cause a note registrar (the “Note Registrar”) to keep a register (the “Note Register”) in which the Note Registrar shall provide for the registration of Notes and the registration of transfers of Notes. All Notes shall be maintained in “registered form” under Treasury Regulations Section 5f.103-1(c), proposed Treasury Regulations Section 1.163-5 and any applicable temporary, final or other successor regulations. The name and address of each Holder of the Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be recorded in such Note Register, together with the principal amount (and stated interest) of the Notes owing to the Holder of the Notes. Prior to due presentment for registration of transfer, the person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Note Registrar shall not be affected by any notice or knowledge to the contrary. No transfer shall be effective unless recorded in the Note Register. The Indenture Trustee initially shall be the Note Registrar for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar.
(b)If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee and the Noteholders prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes; provided that, upon the reasonable request of any Noteholder, the Note Registrar and the Indenture Trustee shall provide a copy of such certificate to such Noteholder.
(c)Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 4.2, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes in any authorized denominations, of a like aggregate principal amount.
(d)At the option of the Holder, Notes may be exchanged for other Notes in any authorized denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, the Notes which the Noteholder making the exchange is entitled to receive.
(e)All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.
(f)Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Note Registrar duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor

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institution” meeting the requirements of the Note Registrar, which requirements may include membership or participation in the Securities Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP.
(g)No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or the Note Registrar may require payment by such Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.6 not involving any transfer.
(h)The preceding provisions of this Section 2.5 notwithstanding, the Issuer shall not be required to make and the Note Registrar need not register transfers or exchanges of Notes selected for redemption or of any Note for a period of fifteen (15) days preceding the due date for any payment with respect to the Note.
(i)Any purported transfer of a Note not in accordance with this Section 2.5 shall be null and void and shall not be given effect for any purpose whatsoever.
(j)     Transfers of Ownership Interests in Global Notes. Transfers of beneficial interests in a Global Note representing Book-Entry Notes may be made only in accordance with the rules and regulations of the Depository and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following:
(i)General Rules Regarding Transfers of Global Notes. Subject to clauses (i) and (ii) of this Section 2.5(j), transfers of a Global Note representing Book-Entry Notes shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depository or to a successor of the Depository or such successor’s nominee.
(ii)Global Note to Definitive Note. Subject to Section 2.3(i)(i), an owner of a beneficial interest in a Global Note deposited with or on behalf of a Depository may at any time transfer such interest for a Definitive Note, upon provision to the Indenture Trustee, the Issuer and the Note Registrar of a Transferor Certificate.
Notwithstanding anything herein to the contrary, the Indenture Trustee shall not be responsible for ascertaining whether any transfer complies with, or for otherwise monitoring or determining compliance with, the requirements or terms of the Securities Act, applicable state securities laws, ERISA, the Code or any other applicable Law.
Section 3.6Mutilated, Destroyed, Lost or Stolen Notes.
(a)If (i) any mutilated Note is surrendered to the Indenture Trustee or Note Registrar, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a protected purchaser, the Issuer shall execute, and upon its request the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven (7)

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days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a protected purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a protected purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.
(b)Upon the issuance of any replacement Note under this Section 2.6, the Issuer shall pay to the Indenture Trustee any reasonable expenses in connection therewith, and the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee) connected therewith.
(c)Every replacement Note issued pursuant to this Section 2.6 in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
(d)The provisions of this Section 2.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.7Persons Deemed Owner. Prior to due presentment for registration of transfer of any Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice or knowledge to the contrary.
Section 3.8Payment of Principal and Interest; Defaulted Interest.
(a)The Notes shall accrue interest during the related Interest Accrual Period at the Interest Rate, and such interest shall be payable on each Payment Date in accordance with the priorities set forth in Section 8.6. Interest on the Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Any and all accrued interest on the Class B Outstanding Principal Balance that is not paid in full on any Payment Date shall be added to the Class B Outstanding Principal Balance (any such amounts, the “Designated Unpaid Interest Amount”) and shall thereafter be considered principal for all purposes and shall accrue interest at the applicable Interest Rate for the Class B Notes.
(b)The Issuer will pay interest on the Notes at the Interest Rate on each Payment Date on the principal amount of the Notes outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date). Any installment of interest or principal payable on a Note that is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name such

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Note is registered on the Record Date by wire transfer in immediately available funds to the account designated by such person or nominee and except for the final installment of principal payable with respect to such Note on a Payment Date or on the applicable Final Scheduled Payment Date (and except for the Redemption Price or Change of Control Redemption Price, as applicable, for any Note called for redemption pursuant to Section 10.1) which shall be payable as provided below.
(c)Prior to the occurrence of an Event of Default and a declaration in accordance with Section 5.2 that the Notes have become immediately due and payable, the Outstanding Amount of the Notes shall be payable in full on the Final Scheduled Payment Date and, to the extent of funds available therefor, in installments on the Payment Dates (if any) preceding the Final Scheduled Payment Date, in the amounts and in accordance with the Priority of Payments set forth in Section 8.6(i).
(d)Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, and either (i) the Indenture Trustee (at the direction of the Majority Noteholders) or the Majority Noteholders have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 or (ii) such Event of Default arises as a result of an event set forth in Section 5.1(a)(iv) or (v). In such case, principal shall be paid in accordance with the priorities set forth in the Special Priority of Payments. The Indenture Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed or transmitted by email prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.2.
(e)If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) at the Interest Rate plus an additional rate of 2.00% per annum default rate to the Interest Rate, in any lawful manner (“Default Interest”). Such Default Interest will be due and payable on the immediately succeeding Payment Date; provided that no Default Interest shall be payable with respect to the Class B Notes until such time as the Class B Notes constitute the Controlling Class.
(f)If, on the Anticipated Repayment Date, the Notes have not been paid in full, then the Interest Rate applicable to each Class of Notes shall be increased by 200 basis points over the initial applicable Interest Rate (the “ARD Rate of Interest”). The ARD Rate of Interest will apply from and including the Anticipated Repayment Date up to, and including, the maturity date of the Notes.
Section 3.9Cancellation. All Notes surrendered for payment, registration of transfer, exchange or redemption shall be delivered to the Indenture Trustee and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 2.9, except as expressly permitted by this Indenture. All cancelled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be returned to it; provided, that such Issuer Order is

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timely and the Notes have not been previously disposed of by the Indenture Trustee. The Indenture Trustee shall provide notice to each Rating Agency of all cancelled Notes.
Section 3.10Release of Collateral. Subject to Section 12.1 and the terms of the Basic Documents, and other than any distribution to the Issuer pursuant to Section 8.6(i)(S), Section 8.6(ii)(H) or Section 8.7(d), the Indenture Trustee shall release property from the lien of this Indenture only in accordance with the terms of this Indenture and upon receipt of (i) an Issuer Request accompanied by an Officer’s Certificate of the Issuer stating that such release is permitted by the terms of this Indenture and that the conditions precedent to such release have been satisfied and (ii) in the event the Issuer requests a release of all or substantially all of the Collateral, a written consent to such release from each Hedge Counterparty and each Holder. With respect to clause (ii) in the foregoing sentence, any release of Collateral shall require 10 Business Days advance written notice from the Issuer to each Holder, the Indenture Trustee and each Hedge Counterparty.
Section 3.11Definitive Notes. Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes as Noteholders.
Section 3.12Tax Treatment.
(a)The Issuer has entered into this Indenture, and the Notes will be issued, with the intention that, for U.S. federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness secured by the Collateral. Each Noteholder, by its acceptance of a Note, agrees to treat Notes (other than Notes held by any equity holder of the Issuer (including any entity whose separate existence from the Issuer or the equity holder of the Issuer is disregarded for U.S. federal income tax purposes), any other persons who are members of an “expanded group” with the Issuer within the meaning of the Treasury Regulations under Section 385 of the Code, but only so long as such Notes are held by such person, or as otherwise required by a change in applicable Law or a final determination pursuant to Section 1313 of the Code) for all purposes including U.S. federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer.
(b)Each Noteholder, by its acceptance of a Note agrees to provide to the Person from whom it receives payments on the Notes (including the Paying Agent) the Noteholder Tax Identification Information and, upon request, to the extent FATCA Withholding Tax is applicable, the Noteholder FATCA Information.
(c)Each Noteholder, by its acceptance of a Note, agrees that the Indenture Trustee has the right to withhold any amounts (properly withholdable under applicable Law and without any corresponding gross-up) payable to a Noteholder or holder of an interest in a Note that fails to comply with the requirements of Section 2.12(b).
Section 3.13CUSIP Numbers. The Issuer shall obtain “CUSIP” numbers in connection with the Notes. The Indenture Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Noteholders; provided, that any such notice may state that no representation is made as to the correctness of such “CUSIP” numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Indenture Trustee in writing of any change in the “CUSIP” numbers.

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Article IV

REPRESENTATIONS AND WARRANTIES
Article VThe Issuer represents and warrants as of the Closing Date as follows:
Section 5.1Organization and Good Standing.
(a)The Issuer (i) is duly organized, validly existing, and in good standing under the Laws of the State of Delaware and (ii) has full power and authority under its Organizational Documents to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use.
Section 5.2Authority; No Conflict.
(a)The execution, delivery, and performance of this Indenture and the Basic Documents and the performance of the Contemplated Transactions have been duly and validly authorized in accordance with the Organizational Documents of the Issuer.
(b)This Indenture has been duly executed and delivered by the Issuer and all instruments executed and delivered by the Issuer at or in connection with the Closing have been duly executed and delivered by the Issuer.
(c)This Indenture constitutes the legally valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and or other similar Laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at Law).
(d)Neither the execution and delivery of this Indenture or the instruments executed in connection herewith by the Issuer nor the consummation or performance of any of the Contemplated Transactions or Basic Documents by the Issuer shall, directly or indirectly (with or without notice or lapse of time or both):
(i)contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Issuer or (B) any resolution adopted by the board of directors, board of managers, stockholders, members, or partners of the Issuer;
(ii)in any material respect, contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to notification of or to challenge any of the Contemplated Transactions or Basic Documents, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any Contract or agreement or any Law or Order to which the Issuer, or any of the Assets, may be subject;
(iii)in any material respect, contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that relates to the Assets; or

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(iv)result in the imposition or creation of any Encumbrance or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of any Lease, Contract, note, bond, mortgage, indenture, license, or other material agreement with respect to any of the Assets, other than any Encumbrance or Lien arising in favor of the Indenture Trustee pursuant to the Basic Documents.
Section 5.3Legal Proceedings; Orders. Except as set forth on Schedule 3.3 hereto, (a) there is no pending Proceeding against the Issuer or any of its Affiliates (i) that relates to or may affect any of the Assets that could reasonably be expected to have a Material Adverse Effect; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise materially interfering with, any of the Contemplated Transactions or Basic Documents, and (b) to the Issuer’s Knowledge, (x) no Proceeding of the type referenced above has been Threatened, (y) there is no Order adversely affecting the use or ownership of the Assets to which the Issuer, or any of the Assets, is subject, and (z) there is no Order or Proceeding restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the Contemplated Transactions or Basic Documents or which could reasonably be expected to result in a material diminution of the benefits contemplated by this Indenture or the Contemplated Transactions or Basic Documents.
Section 5.4Compliance with Laws and Governmental Authorizations.
(a)The Assets have been owned in all material respects in accordance with all Laws of all Governmental Bodies having or asserting jurisdiction relating to the ownership and operation thereof, including the production of Hydrocarbons attributable thereto.
(b)Except as set forth on Schedule 3.4(b) hereto, to the Knowledge of the Diversified Companies, all necessary Governmental Authorizations with regard to the ownership of the Issuer’s interest in the Assets have been obtained and no violations exist or have been recorded in respect of such Governmental Authorizations.
(c)Neither the Issuer nor any of its Affiliates have received any written notice of any violation of any Laws in any material respect or of any Governmental Authorization in connection with the ownership of the Assets that has not been corrected or settled, and there are no Proceedings pending or, to the Issuer’s Knowledge, threatened that might result in any material modification, revocation, termination or suspension of any Governmental Authorization or which would require any material corrective or remedial action by the Issuer or any of its Affiliates.
Section 5.5Title to Property; Leases. The Issuer has good and sufficient title to its properties that individually or in the aggregate are material, including all such properties purported to have been acquired by the Issuer, in each case free and clear of Liens other than Permitted Liens.
Section 5.6Vesting of Title to the Wellbore Interests. Title to the Wellbore Interests is vested in the Issuer, and the Issuer has valid legal and beneficial title thereto, in each case subject to no prior Lien, mortgage, security interest, pledge, adverse claim, charge or other encumbrance, other than the Permitted Liens. Prior to the execution of the Transfer Agreement, the Issuer had valid legal and beneficial title to the Wellbore Interests and had not assigned to any Person any of its right, title or interest in any Wellbore Interests, other than in connection with any Liens that are being released on or before the Closing Date or any Permitted Liens.
Section 5.7Compliance with Leases. The Issuer is in compliance in all material respects with each Lease to the extent relating to an Asset, including all express and

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implied covenants thereunder. No material written demands or notices of default or non-compliance or dispute (including those received electronically) with respect to a Lease to the extent relating to an Asset have been issued to or received by the Issuer that remain uncured or outstanding.
Section 5.8Material Indebtedness. The Issuer has no material Indebtedness other than Permitted Indebtedness and the Existing Indebtedness which is being repaid in full on the Closing Date.
Section 5.9Employee Benefit Plans. Except as set forth on Schedule 3.9 hereto, neither the Issuer nor, to the extent it would reasonably be expected to have a Material Adverse Effect, any ERISA Affiliate maintains or has ever maintained any Plans (including any Non-U.S. Plan) or has ever had any obligations to make any contribution to a Multiemployer Plan.
Section 5.10Use of Proceeds; Margin Regulations. The Issuer will apply the proceeds of the sale of the Notes hereunder (a) to repay the Existing Indebtedness, (b) to fund the Liquidity Reserve Account in an amount equal to the Liquidity Reserve Account Initial Deposit, (c) to pay transaction costs associated with the issuance of the Notes and related transactions, and (d) for general limited liability company purposes (including any dividend payments to Diversified Holdings for further distribution to Diversified Production LLC). No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Issuer in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
Section 5.11Existing Indebtedness; Future Liens.
(a)The Issuer has no, and has never had any, outstanding Indebtedness other than Permitted Indebtedness and the Existing Indebtedness being repaid in full on the Closing Date. There are no outstanding Liens on any property of the Issuer other than Permitted Liens.
(b)Except for Permitted Liens, the Issuer has not, at any time, agreed or consented to cause or permit any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Indebtedness or to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Indebtedness, except the Liens securing the Existing Indebtedness being repaid on the Closing Date.
(c)Other than the Basic Documents and the Loan Agreement, which is being terminated on the Closing Date, the Issuer is not a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Issuer, any agreement relating thereto or any other agreement (including its charter or any other Organizational Document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Issuer.
Section 5.12Foreign Assets Control Regulations, Etc.
(a)Neither the Issuer nor any Controlled Entity (i) is a Blocked Person, (ii) has been notified that its name appears (or may in the future appear) on a State Sanctions List or (iii) to the Issuer’s Knowledge, is a target of sanctions that have been imposed by the United Nations or the European Union.

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(b)Neither the Issuer nor any Controlled Entity (i) is in violation, has been found in violation of, or been charged or convicted under, any applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws or (ii) to the Issuer’s Knowledge, is under investigation by any Governmental Body for possible violation of any applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws.
(c)No part of the proceeds from the sale of the Notes hereunder:
(i)Constitutes or will constitute funds obtained on behalf of any Blocked Person or will otherwise be used by the Issuer or any Controlled Entity, directly or indirectly, (A) in connection with any investment in, or any transactions or dealings with, any Blocked Person in violation of U.S. Economic Sanctions Laws, (B) for any purpose that would cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws, or (C) otherwise in violation of any U.S. Economic Sanctions Laws;
(ii)will be used, directly or indirectly, in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or
(iii)will be used, directly or indirectly, for the purpose of making any improper payments, including bribes, to any Governmental Official or commercial counterparty in order to obtain, retain or direct business or obtain any improper advantage, in each case which would be in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Corruption Laws.
(d)Each of the Issuer and its Affiliates have established procedures and controls which they reasonably believe are adequate (and otherwise comply with applicable Law) to ensure that each of the Issuer and each Controlled Entity is and will continue to be in compliance with all applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws and Anti-Corruption Laws.
Section 5.13Status under Certain Statutes. The Issuer is not subject to regulation under the Investment Company Act, the Public Utility Holding Company Act of 2005, the ICC Termination Act of 1995, or the Federal Power Act. As to the Issuer, (i) the Issuer is not (A) a “commodity pool” as defined in Section 1a(10) of the Commodity and Exchange Act or any rule or regulation relating thereto or any interpretation thereof by the Commodity Futures Trading Commission or (B) a “financial end user,” as defined in either 17 CFR §23.151 or 12 CFR §349.2, and (ii) the Issuer is an “eligible contract participant” as such term is defined in the Commodity and Exchange Act, and will, in the future, maintain such status as to all Hedge Agreements outstanding with any one or more of the Hedge Counterparties until all Obligations thereunder have been fully performed. Neither the Issuer nor the transaction contemplated under the Basic Documents constitutes a “covered fund” for purposes of Section 619 of The Dodd-Frank Wallstreet Reform and Consumer Protection Act, otherwise known as the “Volcker Rule.”
Section 5.14Single Purpose Entity. The Issuer (i) has been formed and organized for limited purposes, including entering into the Basic Documents to which it is a party, and performing its obligations thereunder (including entering into certain agreements in connection therewith), and (ii) does not have any other assets other than those related to its activities in accordance with clause (i) above.
Section 5.15Solvency. The Issuer is solvent, has capital not unreasonably small in relation to its business or any contemplated or undertaken transaction and has assets having a value both at fair valuation and at present fair saleable value greater than the amount required to

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pay its debts as they become due and greater than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. The Issuer does not intend to incur, nor believes that it will incur, debts beyond its ability to pay such debts as they become due. The Issuer does not believe it will be rendered insolvent by the execution and delivery of, and performance of its obligations under, this Indenture, the Notes and the other Basic Documents to which it is a party. The Issuer does not intend to hinder, delay or defraud its creditors by or through the execution and delivery of, or performance of its obligations under, this Indenture, the Notes or the other Basic Documents to which it is a party.
Section 5.16Security Interest. The Indenture, together with the Pledge Agreement and the Mortgages, creates in favor of the Indenture Trustee, as security for the payment of principal of and interest on, and any other amounts owed or owing in respect of, the Notes and the Hedge Agreements (including any termination payments and any other amounts owed or owing thereunder) and for the performance of the provisions of this Indenture, a security interest in or mortgage or deed of trust on all of the right, title, and interest, whether now owned or hereafter acquired, of the Issuer (and in the case of the Collateral subject to the Pledge Agreement, Diversified Holdings) in, to, and under the Collateral. Upon the filing of the applicable UCC-1 financing statements and the Mortgages, all action has been taken as is necessary to perfect such security interest or mortgage or deed of trust, and such security interest, mortgage or deed of trust is of first priority subject in each case to Permitted Liens.
Article VI

COVENANTS
Section 6.1Payment of Principal and Interest. The Issuer will duly and punctually pay the principal of and interest, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to and in accordance with Section 8.6, the Indenture Trustee shall distribute all amounts on deposit in the Collection Account and allocated for distribution to the Noteholders on a Payment Date pursuant to Article VIII hereof for the benefit of the Notes, to the Noteholders. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture.
Section 6.2Maintenance of Office or Agency. The Issuer will maintain in the United States, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. Such office or agency will initially be at Corporate Trust Office of the Indenture Trustee, and the Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes. The Indenture Trustee will give prompt written notice to the Issuer and each Rating Agency of any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands; provided, that the Indenture Trustee shall not be deemed an agent of the Issuer for service of process.
Section 6.3Money for Payments to Be Held on behalf of the Noteholders and Hedge Counterparties. All payments of amounts due and payable with respect to any Notes and Hedge Agreements that are to be made from amounts withdrawn from the Collection Account pursuant to Section 8.6 shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account for payments

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of Notes and Hedge Agreements shall be paid over to the Issuer except as provided in Section 8.6.
Section 6.4Compliance With Law. The Issuer will comply with all Laws and regulations to which it is subject (including ERISA, Environmental Laws, and the USA PATRIOT Act) and will obtain and maintain in effect all licenses, certificates, permits, franchises and other Governmental Authorizations necessary to the ownership of its properties or to the conduct of its businesses, in each case to the extent necessary to ensure compliance in all material respects with such Laws, ordinances or governmental rules or regulations and requirements to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations.
Section 6.5Insurance. From and after the Closing Date, the Issuer will maintain (or cause to be maintained), with financially sound and reputable insurers, insurance with respect to its properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated, and, within thirty (30) days after the Closing Date, the Issuer shall cause the Indenture Trustee to be named as a loss payee or an additional insured. For the avoidance of doubt, any proceeds received by the Issuer or the Manager for the benefit of the Issuer with respect to any claim under such insurance policy shall be deemed to be Collections with respect to the Collection Period in which such proceeds are received and promptly, but in any event within two (2) Business Days, deposited into the Collections Account.
Section 6.6No Change in Fiscal Year. Without the consent of the Majority Noteholders, the Issuer shall not (i) permit its fiscal year to end on a day other than December 31, (ii) change its method of determining fiscal quarters or make or permit any change in accounting policies or reporting practices, except as required by or in accordance with IFRS or GAAP, or (iii) change its federal employer identification number, except, in each case, for any such changes that are not materially adverse to the Holders or the Hedge Counterparties.
Section 6.7Payment of Taxes and Claims. The Issuer will file all U.S. federal and state and any other material Tax returns required to be filed in any jurisdiction and to pay and discharge all Taxes shown to be due and payable on such returns and all other Taxes, assessments, governmental charges, or levies imposed on it or any of its properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Issuer; provided, that the Issuer need not pay any such Tax, assessment, charge, levy or claim if the amount, applicability or validity thereof is contested in good faith by the Issuer by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP.
Section 6.8Existence. Subject to Section 4.17, the Issuer will at all times preserve and keep (i) its limited liability company existence in full force and effect and (ii) all foreign qualifications of the Issuer and all rights and franchises of the Issuer.
Section 6.9Books and Records. The Issuer will maintain or cause to be maintained proper books of record and account in conformity with IFRS or GAAP, and all applicable requirements of any Governmental Body having legal or regulatory jurisdiction over the Issuer. The Issuer will keep or cause to be kept books, records and accounts that, in reasonable detail, accurately reflect all transactions and dispositions of assets. The Issuer or one of its Affiliates has devised a system of internal accounting controls sufficient to provide

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reasonable assurances that the Issuer’s books, records, and accounts accurately reflect all transactions and dispositions of assets, and such a system shall be maintained.
Section 6.10Performance of Material Agreements. From and after the Closing Date, the Issuer will at all times in all material respects (i) observe and perform all obligations, covenants and agreements to be performed by it under, and comply with all conditions under, each material agreement including each Lease to which it is or becomes a party in accordance with the terms thereof and (ii) subject to the terms of this Indenture, diligently exercise, enforce, defend and protect its rights under, and take any action required to collect any and all sums due to it under, each material agreement including each Lease to which it is or becomes a party. The Issuer shall not take any action or permit any action to be taken by others which would release any Person from any of such Person’s covenants or obligations under the Basic Documents or under any instrument or agreement included as part of the Collateral or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except (i) such amendment, hypothecation, subordination, termination or discharge in the ordinary course of business or that does not have a material detriment to the value of the Collateral or (ii) as expressly provided in this Indenture, the other Basic Documents or such other instrument or agreement or as ordered by a bankruptcy or other court.
Section 6.11Maintenance of Lien. From and after the Closing Date and for so long as the Notes and Hedge Agreements are outstanding, the Issuer will, at its expense, timely take or cause to be taken all action required to maintain and preserve the perfection and first priority of the Lien on the Collateral granted under this Indenture, the Pledge Agreement and the Mortgages (subject to Permitted Liens).
Section 6.12Further Assurances. From time to time the Issuer will perform or cause to be performed any other act as required by Law and will execute or cause to be executed any and all further instruments that may be required by Law or reasonably necessary (or reasonably requested by the Indenture Trustee) in order to create, perfect and protect the Lien of the Indenture Trustee on or in the Collateral. The Issuer will promptly do, execute, acknowledge and deliver, or cause to be promptly done, executed, acknowledged and delivered, all such further acts, deeds, conveyances, mortgages, assignments, transfers and assurances as the Indenture Trustee or any Noteholder may reasonably require for the creation, perfection and priority of the Liens being herein provided for (subject to Permitted Liens). The Issuer will pay or cause to be paid all filing, registration and recording Taxes and fees incident to such filing, registration and recording, and all expenses incident to the preparation, execution and acknowledgment of this Indenture, and of any instrument of further assurance, and all federal or state stamp Taxes and other Taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Indenture, the other Basic Documents and such instruments of further assurance. The Issuer hereby authorizes, but does not obligate, the Indenture Trustee to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Issuer. The Issuer acknowledges and agrees, on behalf of itself, that any such financing statement may describe the Collateral as “all assets”, “all personal property” or “all assets and all personal property of Debtor, whether now owned or existing or hereafter acquired or arising, wherever located, together with all products and proceeds thereof, substitutions and replacements therefor, and additions and accessions thereto” of the applicable Person or words of similar effect as may be required by the Indenture Trustee.
Section 6.13Use of Proceeds. The Issuer shall apply the proceeds of the sale of the Notes solely as provided in Section 3.10.
Section 6.14Separateness.

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(a)The Issuer will pay its debts and liabilities (including, as applicable, shared personnel, overhead expenses and any compensation due to its Independent manager or member) solely from its own assets as the same shall become due and payable, except for expenses paid on its behalf pursuant to arm’s length contractual arrangements providing for operating, maintenance or administrative services.
(b)The Issuer will observe all limited liability company or organizational formalities, maintain books, records, financial statements and bank accounts separate from those of its Affiliates, except as permitted by this Indenture and the other Basic Documents. None of the Issuer’s assets will be listed as assets on the financial statement of any other entity except as required by IFRS or GAAP; provided, however, that appropriate notation shall be made on any consolidated statements to indicate its separateness from any Affiliates and to indicate that its assets and credit are not available to satisfy the debt and other obligations of such Affiliate or any other Person except as otherwise contemplated by the Basic Documents.
(c)[reserved].
(d)Other than as contemplated in the Joint Operating Agreement and the other Basic Documents, the Issuer will hold all of its assets in its own name and will not commingle its funds and other assets with those of any Affiliate.
(e)The Issuer will not conduct the business of or act on behalf of any other Person (except as required by the Basic Documents).
(f)The Issuer (i) will at all times have at least one (1) duly elected Independent manager or member and (ii) so long as the Notes and Hedge Agreements remain outstanding, shall not remove or replace any Independent manager or member without cause and only after providing the Indenture Trustee, each Noteholder and each Hedge Counterparty with no less than three (3) days’ prior written notice of (A) any proposed removal of such Independent manager or member, and (B) the identity of the proposed replacement, together with a certification that such replacement satisfies the requirements for an Independent manager or member in the organizational documents for the Issuer and this Indenture. The Issuer will not institute proceedings to be adjudicated bankrupt or insolvent, consent to the institution of bankruptcy or insolvency proceedings against it, or file, or consent to, a petition seeking reorganization or relief under any applicable federal or state Law relating to bankruptcy or insolvency, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer or any substantial part of its property, or make an assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take limited liability company action in furtherance of any such action without the affirmative vote of at least one (1) duly elected Independent manager or member; provided, however, irrespective of such affirmative vote, the occurrence of any of the foregoing is subject to Section 5.1(a)(iv), Section 5.1(a)(v), and any other terms herein or any of the Basic Documents.
(g)The Issuer will be, and at all times will hold itself out to the public and all other Persons as, a legal entity separate and distinct from any other Person (including any Affiliate), correct any known misunderstanding regarding its status as a separate entity, conduct business solely in its own name, and not identify itself as a division of any of its Affiliates or any of its Affiliates as a division of the Issuer (except for income tax purposes). The Issuer will conduct and operate its business in its own name.
(h)The Issuer will not permit its name to be used by any Affiliate of the Issuer in the conduct of such Affiliate’s business, and will not use the name of any Affiliate in the conduct of the Issuer’s business.

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(i)The Issuer will file its own tax returns, if any, as may be required under applicable Law, to the extent (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for tax purposes of another taxpayer, and pay any taxes required to be paid under applicable Law.
(j)The Issuer will maintain its assets, including the Collateral, in such a manner that it would not be costly or difficult to identify, segregate or ascertain its assets from those of any other Person.
(k)Subject to Section 4.15, the Issuer will maintain an arm’s length relationship with its Affiliates, and not enter into any transaction with any Affiliate unless such transaction is (i) on such terms and conditions (including terms relating to amounts paid thereunder) as would be generally available if such business transaction were with an entity that was not an Affiliate in comparable transactions, and (ii) pursuant to enforceable agreements.
(l)The Issuer will not hold out its credit or assets as being available to satisfy the obligations of others nor guarantee the obligation of any Person.
(m)The Issuer will maintain adequate capital in light of its contemplated business purpose, transactions, and liabilities (provided, that no member of the Issuer shall have any obligation to make any contribution of capital to the Issuer).
(n)The Issuer will not grant a security interest in its assets to secure the obligations of any other Person.
(o)The Issuer will not, directly or indirectly, engage in any business or activity other than the actions that are both (i) required or permitted to be performed under Section 3.1 of its limited liability company agreement and (ii) permitted by the terms of the Basic Documents.
(p)The Issuer will not incur any indebtedness, liability, obligation, or expense, or own any assets, other than in each case those that are both (i) necessary to achieve the purposes set forth in Section 3.1 of its limited liability company agreement and (ii) permitted by the Basic Documents;
(q)The Issuer will not make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities of, any Person, other than as permitted by the Basic Documents;
(r)The Issuer will maintain complete records of all transactions (including all transactions with any Affiliate);
(s)The Issuer will comply with all requirements of applicable Law regarding its operations and shall comply with the provisions of this Indenture and its Organizational Documents; and
(t)The Issuer will not form, acquire, or hold any Subsidiary.
Section 6.15Transactions with Affiliates. The Issuer will not enter into directly or indirectly any transaction or group of related transactions (including the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate, except as contemplated by the Basic Documents and except in the ordinary course and pursuant to the reasonable requirements of the Issuer’s business and upon fair and reasonable terms no less

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favorable to the Issuer than would be obtainable in a comparable arm’s length transaction with a Person not an Affiliate.
Section 6.16Merger, Consolidation, Etc. The Issuer will not consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions.
Section 6.17Lines of Business. The Issuer will not at any time engage in any business other than those related to the ownership of the Assets and the transactions contemplated by this Indenture and the other Basic Documents to which it is a party and other activities reasonably incidental thereto; provided, however, that the Issuer shall not engage in any business or activity or enter into any contractual arrangement (other than any business or activity in which the Issuer is engaged on the Closing Date) that would (i) subject the Holders or any Hedge Counterparty to regulation or oversight by any Governmental Body (other than the Governmental Bodies which regulate companies engaged in the oil and gas industry, insurance companies and, following foreclosure, regulations applicable to assets held as a result of such foreclosure) or cause the Holders or any Hedge Counterparty to breach any Law or regulation or guideline of any Governmental Body or require Holders or any Hedge Counterparty to obtain a consent, waiver or clarification by any Governmental Body or (ii) cause any of the representations and warranties of any of the Issuer contained in any of the Basic Documents to be inaccurate as of the date made or deemed made.
Section 6.18Economic Sanctions, Etc. Neither the Issuer nor any Controlled Entity will (a) become (including by virtue of being owned or controlled by a Blocked Person), own or control a Blocked Person or (b) directly or indirectly have any investment in or engage in any dealing or transaction (including any investment, dealing or transaction involving the proceeds of the Notes) with any Person if such investment, dealing or transaction (i) would cause any Noteholder, any Hedge Counterparty or any affiliate of such Holder or any Hedge Counterparty to be in violation of, or subject to sanctions under, any applicable U.S. Economic Sanctions Laws, Anti-Corruption Laws or Anti-Money Laundering Laws, or (ii) is prohibited by or subject to sanctions under any U.S. Economic Sanctions Laws.
Section 6.19Liens. The Issuer will not, directly or indirectly, create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any of its property or assets (including the Collateral), whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except for Permitted Liens.
Section 6.20Sale of Assets, Etc. The Issuer will not sell, transfer, convey, assign, exchange or dispose of any of its properties or assets in any single transaction or series of related transactions of any individual asset, or group of related assets, other than Permitted Dispositions; provided, however, that in the event any Permitted Disposition could reasonably be expected to have a Material Adverse Effect on any Hedge Counterparty or any Noteholder or the Noteholders, the Issuer shall obtain the prior written consent of each such Hedge Counterparty and Noteholder prior to such Permitted Disposition.
Section 6.21Permitted Indebtedness. The Issuer will not create, guarantee, assume or suffer to exist, or in any manner be or become liable in respect of, any Indebtedness of any kind or character, other than the following (such Indebtedness being referred to as “Permitted Indebtedness”):
(a)Indebtedness owing under this Indenture, the Notes or any other Basic Document, including the Hedge Agreements;

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(b)obligations incurred in the ordinary course of its business specified in Section 4.17 in an aggregate amount not to exceed $1,000,000 in the aggregate for the Issuer at any one time; and
(c)other Indebtedness with the prior written consent of the Majority Noteholders; provided, however, any such Indebtedness is subordinate to the Hedge Counterparties and Holders, in all respects.
Section 6.22Amendment to Organizational Documents. The Issuer will not, and will not permit any Person to, amend, modify or otherwise change (i) any material provision of the Organizational Documents of the Issuer, except to the extent such amendment, modification or change would not be materially adverse to the Secured Parties or (ii) its jurisdiction of organization, its location of principal place of business or its name, in each case, without the prior written consent of the Majority Noteholders and the Hedge Counterparties (such consent not to be unreasonably withheld, conditioned or delayed) and unless all actions have been taken to maintain the perfection of the security interest in the Collateral in favor of the Indenture Trustee; provided, however, that the Issuer may amend, modify or otherwise change any provision of the Issuer’s Organizational Documents to: (i) cure any ambiguity, (ii) correct or supplement any provision in a manner consistent with the intent of the Issuer’s Organizational Documents and the other Basic Documents or (iii) otherwise amend, modify or change any immaterial provision of the Issuer’s Organizational Documents, in each case, without obtaining the consent of the Majority Noteholders or the Hedge Counterparties, but with delivery of an Officer’s Certificate to the Indenture Trustee stating that such amendment is so permitted under one or more of the foregoing clauses (i)-(iii) of this proviso. Notwithstanding anything herein to the contrary, any amendment of the Holdings Operating Agreement in connection with, or in order to effect, a sale of up to 80% of the economic interests and 100% of the voting interests of Diversified Holdings (the “Equity Transaction”) shall not require consent from any Noteholder, any Hedge Counterparty, the Indenture Trustee, any independent director nor satisfaction of the Rating Agency Condition; provided that no amendment, modification, alternation or supplement to Section 7, 9(j), 10, 23(b), 26, 29, 31, 34(b) of the Holdings Operating Agreement and the definitions of “Independent Director” and “Special Purpose Provisions” of the Holdings Operating Agreement, in each case, that would adversely affect the Noteholders shall be permitted in connection with any such Equity Transaction without the prior written consent of the Majority Noteholders and satisfaction of the Rating Agency Condition. For the avoidance of doubt, the Holdings Operating Agreement and the Issuer Operating Agreement shall only be amended in accordance with the provisions thereof, including Section 31 of each of the Holdings Operating Agreement and the Issuer Operating Agreement.
Section 6.23No Loans. The Issuer will not, directly or indirectly, make any loan or advance to any Person, other than Permitted Investments.
Section 6.24Permitted Investments; Subsidiaries. The Issuer will not make any Investments other than (a) any Investment in Permitted Investments of monies in any Issuer Account and (b) obligations of account debtors to the Issuer arising in the ordinary course of business, and (c) Investments received as consideration from any Permitted Disposition. Without limiting the generality of the foregoing, the Issuer will not create any Subsidiaries or enter into any partnership or joint venture.
Section 6.25Employees; ERISA. The Issuer will not maintain any employees or maintain any Plan or incur or suffer to exist any obligations to make any contribution to a Multiemployer Plan.
Section 6.26Tax Treatment. Neither the Issuer, nor any party otherwise having the authority to act on behalf of the Issuer, is authorized to, or will, make the election described

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in Treasury Regulations Section 301.7701-3(a) to treat the Issuer as an association taxable as a corporation for U.S. federal income tax purposes, or a similar election under any U.S. state or local Law. The Issuer will treat the Notes (other than Notes held by any equity holder of the Issuer (including any entity whose separate existence from the Issuer or the equity holder of the Issuer is disregarded for U.S. federal income tax purposes), any other persons who are members of an “expanded group” with the Issuer within the meaning of the Treasury Regulations under Section 385 of the Code, but only so long as such Notes are held by such person, or as otherwise required by a change in applicable Law or a final determination pursuant to Section 1313 of the Code) and this Indenture as indebtedness, and not as an equity interest in the Issuer, for all purposes (including U.S. federal, state and local income Tax purposes).
Section 6.27Replacement of Manager, Back-Up Manager and Operator. In the event that the Manager shall be terminated due to a Material Manager Default or an Event of Default shall have occurred or is continuing, the Majority Noteholders will have the right but not the obligation to appoint, a replacement manager as soon as reasonably practicable, but in any event within thirty (30) days following such delivery of notice of termination and notify the Issuer of such appointment. In the event that the Manager shall resign, the Issuer shall appoint a replacement manager with the consent of the Majority Noteholder (such consent not to be unreasonably withheld, conditioned, or delayed) as soon as reasonably practicable, but in any event within thirty (30) days following such delivery of notice of any such resignation and notify the Noteholders of such appointment; provided that if the Issuer shall not have appointed a replacement manager by the end of such thirty (30) day period other than as a result of the failure of the Majority Noteholders to have reasonably consented, the Majority Noteholders may have the right to appoint the replacement manager with the consent of the Issuer (such consent not to be unreasonably withheld, conditioned, or delayed). In addition, if the first sentence of this Section 4.27 is not applicable, in the event that the Manager shall resign, be terminated or otherwise removed, the Issuer shall appoint a replacement back-up manager with the consent of the Majority Noteholder (such consent not to be unreasonably withheld, conditioned, or delayed) as soon as reasonably practicable, but in any event within thirty (30) days following such delivery of notice of any such resignation, termination or removal and notify the Noteholders of such appointment; provided that if the Issuer shall not have appointed a replacement back-up manager or operator by the end of such thirty (30) day period other than as a result of the failure of the Majority Noteholders to have reasonably consented, the Majority Noteholders may have the right to appoint the replacement back-up manager with the consent of the Issuer (such consent not to be unreasonably withheld, conditioned, or delayed).
Section 6.28Hedge Agreements.
(a)Natural Gas Hedging. The Issuer shall enter into on or prior to the Closing Date and thereafter maintain (x) until the earlier of (i) the eight-year anniversary of July 2024 or (ii) the redemption of the Notes in accordance with Article X, and (y) following the three-year anniversary of the Closing Date, until the earlier of (i) the five years thereafter and (ii) the redemption of Notes in accordance with Article X, (the “Natural Gas Hedge Period”), swaps or other non-speculative Hedge Agreement, with an aggregate notional volume of (and fixing the price exposure relative to the NYMEX spot price with respect to) at least 80% but, at all times, including after the Natural Gas Hedge Period, no more than 95% of the projected natural gas output from the Issuer’s Assets for each month classified as “proved, developed and producing” and as described in the Reserve Report (the “Natural Gas Hedge Percentage”), including by way of (1) with respect to the foregoing clause (x), an initial hedging strategy consisting of one or more swap transactions and/or swaptions which establish a minimum price level, and (2) with respect to the foregoing clause (y), a hedging strategy consisting of long put transactions or other options transactions which establish a minimum price level; provided, however, that, in all cases such hedging arrangements shall be based on a Reserve Report updated on at least a semi-annual basis; provided, however, that, in each case, the Issuer shall not enter into or maintain any Hedge

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Agreements for purposes of speculation or investment; provided, however, nothing shall prevent Issuer from novating hedges to maintain compliance with the terms set forth herein even in cases where such novated hedges may differ from prevailing market prices, provided further, (i) for the avoidance of doubt, the foregoing shall not prohibit Issuer from selling call options or swaptions and (ii) the Issuer’s compliance with the 95% limit in the Natural Gas Hedge Percentage shall be determined without giving effect to any offsetting or similar Hedge Agreements that would otherwise result in a position that is opposite and equivalent to all or a portion of an existing Hedge Agreement (including any transaction thereunder). Neither the Issuer, nor any party otherwise having authority to act on behalf of the Issuer, is authorized to, or will, enter into an amendment to any Hedge Agreement without obtaining the prior written consent of each Rating Agency; provided that Rating Agency consent shall not be required (other than in accordance with the Hedge Agreements and other Basic Documents) and nothing in this sentence shall restrict the Issuer (i) from entering into Hedge Agreements during and after the Natural Gas Hedge Period (excluding the entry into any offsetting Hedge Agreements described in the proviso of the immediately preceding sentence) or terminating Hedge Agreements, in part or in whole, in order to maintain compliance with the terms set forth herein; or (ii) from optimizing, novating, transferring, rolling or terminating Hedge Agreements, provided further that the Natural Gas Hedge Percentage and the requirement to maintain the basis hedges under clause (3) is satisfied at all time until the earlier of (i) the Natural Gas Hedge Period ending date or (ii) the redemption of the Notes in accordance with Article X.
(b)Natural Gas Basis Hedging. The Issuer shall enter into on or prior to the Closing Date and thereafter maintain (x) until the earlier of (i) the five-year anniversary of July 2024 or (ii) the redemption of the Notes in accordance with Article X, and (y) following the three-year anniversary of the Closing Date, until the earlier of (i) the two years thereafter and (ii) the redemption of Notes in accordance with Article X, (the “Basis Hedge Period”), swaps, collars, or other non-speculative Hedge Agreement, with an aggregate notional volume of (and fixing the price exposure relative to basis risk with respect to) at least 80% but, at all times, including after the Basis Hedge Period, no more than 95% of the projected natural gas output from the Issuer’s Assets for each month classified as “proved, developed and producing” and as described in the Reserve Report (the “Basis Percentage”); provided, however, that, in each case, the Issuer shall not enter into or maintain any Hedge Agreements for purposes of speculation or investment; provided further, (i) for the avoidance of doubt, the foregoing shall not prohibit Issuer from selling call options or swaptions and (ii) the Issuer’s compliance with the 95% limit in the Basis Hedge Percentage shall be determined without giving effect to any offsetting or similar Hedge Agreements that would otherwise result in a position that is opposite and equivalent to all or a portion of an existing Hedge Agreement (including any transaction thereunder). Neither the Issuer, nor any party otherwise having authority to act on behalf of the Issuer, is authorized to, or will, enter into an amendment to any Hedge Agreement without obtaining the prior written consent of each Rating Agency; provided that nothing in this sentence shall restrict the Issuer (i) from entering into Hedge Agreements during and after the Basis Hedge Period (excluding the entry into any offsetting Hedge Agreements described in the proviso of the immediately preceding sentence) or terminating Hedge Agreements, in part or in whole, in order to maintain compliance with the terms set forth; or (ii) from optimizing, novating, transferring, rolling or terminating Hedge Agreements, provided further that the Basis Hedge Percentage and the requirement to maintain the basis hedges under clause (2) is satisfied at all time until the earlier of (i) the Basis Hedge Period ending date or (ii) the redemption of the Notes in accordance with Article X.
(c)Hedge Terminations. The Issuer shall not terminate, unwind or materially reduce the notional amount of any Hedge Agreement other than (i) in the Issuer’s discretion in connection with an “Event of Default” (where the relevant Hedge Counterparty is the “Defaulting Party”) or “Termination Event” (where the Issuer is a party permitted to terminate pursuant to the terms of the relevant Hedge Agreement) under a Hedge Agreement, as applicable

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or (ii) as a result of a good faith determination by the Issuer or Manager that such Hedge Counterparty or Hedge Agreement should be replaced, terminated or reduced, but not primarily to generate a profit, recognize a gain or mitigate losses, provided, for the avoidance of doubt, that the Issuer remains subject to its obligations to maintain compliance with the hedging requirements set forth in Section 4.28(a), Section 4.28(b) and any supplemental indenture, in connection with any early termination or unwind of any Hedge Agreement. Any amounts received by the Issuer in connection with any termination of a Hedge Agreement (an “Issuer Hedge Termination Receipt”) shall be either (A) promptly, and in any event within five (5) Business Days, applied to the acquisition of a replacement Hedge Agreement or (B) to the extent not applied pursuant to clause (A), transferred to the Collection Account at the direction of the Issuer for treatment as Available Funds and applied in accordance with the Priority of Payments; provided that, to the extent an amount up to such Issuer Hedge Termination Receipt would otherwise be distributed to the Issuer pursuant to clause (S) of the Priority of Payments (after application of clauses (A) through (R) inclusive of the Priority of Payments), then such amount (up to such Issuer Hedge Termination Receipt) (such amount, the “Excess Hedge Amount”) shall be applied in accordance with Section 8.6(iv). For the avoidance of doubt, any determination of the amounts owing pursuant to the foregoing proviso (and paid pursuant to Section 8.6(iv)) shall be determined after giving effect to amounts owing pursuant to clauses (A) through (R) (inclusive) of the Priority of Payments on the applicable Payment Date.
Article VII

REMEDIES
Section 7.1Events of Default.
(a)“Event of Default,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and, subject to Sections 5.1(a)(iv) and 5.1(a)(v), whether it shall be voluntary or involuntary or be effected by operation of Law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(i)the failure to pay the Notes in full by the Final Scheduled Payment Date;
(ii)default in the payment of interest on the Controlling Class when the same becomes due and payable that continues unremedied for two (2) Business Days;
(iii)default in the observance or performance of any covenant or agreement of any Diversified Party made in any Basic Document to which it is a party (other than a covenant or agreement, a default in the observance or performance of which is specifically dealt with elsewhere in this Section 5.1(a)), or any representation or warranty of any Diversified Party made in any Basic Document to which it is a party or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of thirty (30) days (subject to Section 5.1(c) below) after the earlier of (i) Knowledge of a Diversified Company of such default or incorrect representation or warranty or (ii) receipt by the Issuer and a Responsible Officer of the Indenture Trustee from a Noteholder or a Hedge Counterparty, a written notice specifying such default or incorrect representation

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or warranty and requiring it to be remedied and stating that such notice is a notice of Default hereunder, delivered by registered or certified mail;
(iv)the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer, Diversified Holdings or any substantial part of the Collateral in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, Diversified Holdings or for any substantial part of the Collateral, or ordering the winding-up or liquidation of any such parties’ affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days;
(v)the commencement by any of the Issuer or Diversified Holdings of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar Law now or hereafter in effect, or the consent by any of the Issuer or Diversified Holdings to the entry of an order for relief in an involuntary case under any such Law, or the consent by the Issuer or Diversified Holdings to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or Diversified Holdings or for any substantial part of the Collateral, or the making by the Issuer or Diversified Holdings of any general assignment for the benefit of creditors, or the failure by the Issuer or Diversified Holdings generally to pay its debts as such debts become due, or the taking of any action by the Issuer or Diversified Holdings in furtherance of any of the foregoing;
(vi)the failure of the Issuer to cause the Indenture Trustee, for the benefit of the Secured Parties, to have a valid first-priority perfected security interest in any portion of the Collateral (subject to Permitted Liens) by no later than the time under which filings are required under Section 2(g) of the Management Services Agreement as in effect on the Closing Date; provided, that it will not be an Event of Default under this clause(a)(vi) if the value of all of the Collateral for which the Indenture Trustee does not have a valid first-priority perfected security interest in any portion of the Collateral (subject to Permitted Liens) is equal to or less than 1% of the aggregate principal amount of Outstanding Notes;
(vii)other than as contemplated by Section 5.1(a)(vi), the failure of the Indenture Trustee, for the benefit of the Secured Parties, to have a valid first-priority perfected security interest in any portion of the Collateral (subject to Permitted Liens) that is not cured within ten (10) days of the earlier of (i) Knowledge of a Diversified Company of such failure or (ii) receipt by the Issuer from the Indenture Trustee a written notice specifying such failure and requiring it to be remedied and stating that such notice is a notice of Default hereunder, delivered by registered or certified mail; provided, that it will not be an Event of Default under this clause(a)(vii) if the value of all of the Collateral for which the Indenture Trustee does not have a valid first-priority perfected security interest (subject to Permitted Liens) is equal to or less than 1% of the aggregate principal amount of Outstanding Notes;
(viii)the Issuer becomes a corporation or another entity taxable as a corporation for U.S. federal income tax purposes;

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(ix)the filing of non-appealable decrees or orders for relief by a court having jurisdiction in the premises in respect of the Issuer or Diversified Holdings in excess of $500,000 in aggregate and not discharged, satisfied or stayed within thirty (30) days;
(x)the adoption in final form of a statute, rule or regulation by a competent legislative or governmental rule-making body that becomes effective following the Closing Date, or the entry of a final, non-appealable judgment of a court of competent jurisdiction that is rendered following the Closing Date, which has a Material Adverse Effect on (a) the validity or enforceability of any of the Basic Documents, or (b) the ability of the Issuer to make payments on the Notes or its obligations under any of the Hedge Agreements;
(xi)an ERISA or tax lien is created that secures the payment of money owed by the Issuer in excess of $500,000;
(xii)any of the Issuer, Diversified Holdings or the Collateral is required to be registered as an “investment company” under the Investment Company Act;
(xiii)any transactions under any Hedge Agreements remain outstanding as of the date that all principal and interest upon the Notes are paid in full, excluding only any Hedge Agreements for which the Hedge Counterparty thereunder has agreed in writing to accept cash collateral or other security immediately prior to the date of such payment in full;
(xiv)the failure of the Notes to be redeemed upon the occurrence of a Change of Control as required by Section 10.1(b); or
(xv)any of the Manager, the Operator, the Indenture Trustee or the Back-Up Manager shall be terminated, removed or resign, and a replacement manager, operator, indenture trustee or back-up manager satisfactory to the Majority Noteholders shall not have been engaged within sixty (60) days following any such resignation or termination; provided, however, that, with respect to the Indenture Trustee, only the termination or removal of the Indenture Trustee without a replacement indenture trustee being engaged within sixty (60) days following any such termination or removal shall constitute an Event of Default hereunder and no resignation or recusal by the Indenture Trustee itself shall constitute an Event of Default.
(b)The Issuer shall deliver to (1) a Responsible Officer of the Indenture Trustee, (2) each Noteholder, (3) each Hedge Counterparty and (4) each Rating Agency, within five (5) Business Days after the occurrence thereof, written notice in the form of an Officer’s Certificate of any event that with the giving of notice and the lapse of time could become an Event of Default under clause (a)(iii) above, its status and what action the Issuer is taking or proposes to take with respect thereto.
(c)Notwithstanding the foregoing, a breach of any covenant or agreement or representation or warranty of the Issuer referred to under clause (a)(iii) above shall not constitute an Event of Default after such thirty (30) day period (and the notice described under clause (b) above need not be delivered) if (x) the Issuer has commenced in a diligent manner a cure of such breach and (y) such remedial action could not reasonably have been expected to fully cure such breach within such thirty (30) days, but could reasonably be expected to be implemented and fully cure such breach within an additional thirty (30) days (but in no event shall the total cure period exceed a total of ninety (90) days). Upon the occurrence of any such event, each of the

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Issuer and the Indenture Trustee, as applicable, shall not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Indenture and the Issuer or the Indenture Trustee, as applicable, shall provide the Indenture Trustee (if such delay or failure is a result of a delay or failure by the Issuer), the Noteholders, and the Hedge Counterparties prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations.
Section 7.2Acceleration of Maturity; Rescission and Annulment. If an Event of Default should occur and be continuing, then and in every such case the Indenture Trustee at the written direction of the Majority Noteholders (subject to the Indenture Trustee’s indemnification rights set forth herein) or the Majority Noteholders may declare all the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to a Responsible Officer of the Indenture Trustee if given by Noteholders) (a copy of which shall be provided by the Issuer to each Hedge Counterparty and each Rating Agency), and upon any such declaration the unpaid principal amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable; provided, that upon the occurrence of an Event of Default specified in Section 5.1(a)(iv) or (v) all the Notes shall be automatically deemed to be immediately due and payable and upon such event the unpaid principal of such Notes, together with accrued and unpaid interest thereon through the date of such Event of Default specified in Section 5.1(a)(iv) or (v), shall become immediately due and payable, in each case, without notice, declaration or demand by the Indenture Trustee or the Noteholders, all of which are hereby waived by the Issuer.
Article VIIIAt any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as provided hereinafter in this Article V, the Majority Noteholders, by written notice to the Issuer and a Responsible Officer of the Indenture Trustee (with a copy to each Hedge Counterparty and each Rating Agency), may rescind and annul such declaration and its consequences if:
(i)the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:
(A)all payments of principal of and interest on all Notes and all other amounts that would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and
(B)all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; and
(ii)all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12.
Article IXNo such rescission shall affect any subsequent default or impair any right or any exercise of remedies consequent thereto nor shall such rescission in and of itself serve as a waiver of any of the Events of Default.
Section 9.1Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.

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(a)The Issuer covenants that if (i) an Event of Default specified in Section 5.1(a)(i) has occurred and is continuing or (ii) an Event of Default specified in Section 5.1(a)(ii) has occurred and is continuing, the Issuer will, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the benefit of the Secured Parties, as applicable, (1) the whole amount then due and payable on such Notes for principal and interest, with interest on the overdue principal and, to the extent payment at such rate of interest shall be legally enforceable, on overdue installments of interest at the rate borne by the Notes, (2) any amounts due and payable by the Issuer under the Hedge Agreements, including any termination amounts and any other amounts owed thereunder, and, in addition thereto, and (3) such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel, and all other amounts due and owing to the Indenture Trustee pursuant to Section 6.7.
(b)In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Notes and Hedge Agreements and collect in the manner provided by Law out of the property of the Issuer or other obligor upon such Notes and Hedge Agreements, wherever situated, the monies adjudged or decreed to be payable.
(c)If an Event of Default occurs and is continuing, the Indenture Trustee may, as more particularly provided in Section 5.4, proceed to protect and enforce its rights and the rights of the Noteholders and the Hedge Counterparties, by such appropriate Proceedings as the Indenture Trustee may deem necessary to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by Law.
(d)In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Collateral, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar Law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, or liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise:
(i)to file and prove a claim or claims (A) for the whole amount of principal and interest owing and unpaid in respect of the Notes and (B) any amounts owed and unpaid with respect to any of the Hedge Agreements and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of gross negligence or willful misconduct of the Indenture Trustee), the Noteholders and of the Hedge Counterparties allowed in such Proceedings;

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(ii)unless prohibited by applicable Law and regulations, to vote as directed in writing by the Holders of Notes and the Hedge Counterparties in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings;
(iii)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders, the Hedge Counterparties and the Indenture Trustee on their behalf; and
(iv)to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee, the Holders of Notes and the Hedge Counterparties allowed in any Proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders and Hedge Counterparties to make payments to the Indenture Trustee and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders or the Hedge Counterparties, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of gross negligence or willful misconduct of such party.
(e)Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder or any Hedge Counterparty any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or the Hedge Agreements or the rights of any Hedge Counterparty thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder or any Hedge Counterparty in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.
(f)All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Secured Parties.
(g)In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Notes and the Hedge Counterparties, and it shall not be necessary to make any Noteholder or any Hedge Counterparty a party to any such Proceedings.
Section 9.2Remedies; Priorities.
(a)If an Event of Default shall have occurred and be continuing, the Indenture Trustee may, or at the written direction of the Majority Noteholders (subject to the terms hereof) shall, do one or more of the following (subject to Section 5.5):

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(i)institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes and the Hedge Agreements (including any termination payments and any other amounts owed thereunder) or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained and collect from the Issuer and any other obligor upon such Notes monies adjudged due;
(ii)institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;
(iii)exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee, the Holders of the Notes and the Hedge Counterparties, including, for the avoidance of doubt, the exercise of any remedies available under the Basic Documents; and
(iv)sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by Law; provided, however, that the Indenture Trustee may not sell or otherwise liquidate the Collateral following an Event of Default, other than an Event of Default described in Section 5.1(a)(i) or (ii), unless (A) the Majority Noteholders consent thereto, (B) the proceeds of such sale or liquidation distributable to the Secured Parties are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest and all amounts then due under the Hedge Agreements or that would be due and payable to the Hedge Counterparties if the Hedge Agreements were terminated on the date of such sale (including any termination payments and any other amounts due thereunder or that would be due and payable to the Hedge Counterparties if the Hedge Agreements were terminated on the date of such sale) or (C) the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared immediately due and payable, and the Indenture Trustee obtains the consent of one hundred percent (100%) of the Outstanding Notes; provided, that a sale under clause (A) or clause (C) will not be permitted unless the proceeds of such sale or liquidation distributable to the Secured Parties are sufficient to discharge in full all amounts then due under the Hedge Agreements or that would be due and payable if the Hedge Agreements were terminated on the date of such sale (including any termination payments and any other amounts owed thereunder or that would be due and payable if the Hedge Agreements were terminated on the date of such sale). In determining such sufficiency or insufficiency with respect to clauses (A), (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.
(b)If the Indenture Trustee collects any money or property pursuant to this Article V, it shall promptly after receipt thereof deposit such money or property to the Collection Account as Collections to be applied pursuant to Article VIII hereof.
Article XIf the Indenture Trustee collects any money or property pursuant to this Article V, the Indenture Trustee may fix a record date and payment date for any payment to Noteholders and any Hedge Counterparty pursuant to this Section 5.4. At least fifteen (15) days

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before such record date, the Issuer shall mail, by overnight mail, to each Noteholder (or transmit electronically, to the extent Notes are held in book-entry form) and each Hedge Counterparty and the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid.
Article XIThe Indenture Trustee shall incur no liability as a result of any sale (whether public or private) of the Collateral or any part thereof pursuant to this Section 5.4 that is conducted in a commercially reasonably manner. Each of the Issuer and the Noteholders hereby waives any claim against the Indenture Trustee arising by reason of the fact that the price at which the Collateral may have been sold at such sale (whether public or private) was less than the price that might have been obtained otherwise, even if the Indenture Trustee accepts the first offer received and does not offer the Collateral to more than one offeree, so long as such sale is conducted in a commercially reasonable manner. Each of the Issuer and the Noteholders hereby agree that in respect of any sale of the Collateral pursuant to the terms hereof, the Indenture Trustee is authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable Law, or in order to obtain any required approval of the sale or of the purchaser by any governmental authority or official, and the Issuer and the Noteholders further agree that such compliance shall not, in and of its self, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Indenture Trustee be liable or accountable to the Issuer or any Noteholders for any discount allowed by reason of the fact that the Collateral or any part thereof is sold in compliance with any such limitation or restriction.
Section 11.1Optional Preservation of the Assets. If the Notes have been declared to be immediately due and payable under Section 5.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of the Collateral. In the event that the Indenture Trustee elects to maintain possession of the Collateral, the Indenture Trustee shall provide written notice of such election to each such Rating Agency. It is the desire of the parties hereto and the Secured Parties that there be at all times sufficient funds for the payment of principal of and interest on the Notes and payment of any amounts due under the Hedge Agreements (including any termination payments and any other amounts owed thereunder), and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral, the Indenture Trustee may, but need not, obtain (at the expense of the Issuer) and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.
Section 11.2Limitation of Suits. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(i)such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default;
(ii)the Majority Noteholders have consented to or made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;

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(iii)such Holder or Holders have offered to the Indenture Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;
(iv)the Indenture Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and
(v)no direction inconsistent with such written request has been given to the Indenture Trustee during such sixty (60) day period by the Majority Noteholders.
Article XIIIt is understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or any Hedge Counterparties (provided, however, that the Indenture Trustee shall not have an affirmative obligation to determine whether any such direction affects, disturbs or prejudices the rights of any other Holders of Notes or any Hedge Counterparties), or to obtain or to seek to obtain priority or preference over any other Holders or any Hedge Counterparties, or to enforce any right under this Indenture, except in the manner herein provided.
Section 12.1Unconditional Rights of Hedge Counterparties and Noteholders to Receive Principal, Interest, and Payments of Other Obligations. Notwithstanding any other provisions in this Indenture, (a) the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date), (b) each Hedge Counterparty shall have the right, which is absolute and unconditional, to receive payment of any obligations of the Issuer under the Hedge Agreements (including the termination amounts and any other amounts owed thereunder) on or after the respective due dates thereof expressed in the applicable Hedge Agreement or in this Indenture, and (c) each Noteholder and each Hedge Counterparty shall have the right to institute suit for the enforcement of any such payment or return Posted Collateral, and such right shall not be impaired without the consent of such Holder or the Hedge Counterparties.
Section 12.2Restoration of Rights and Remedies. If the Indenture Trustee, any Noteholder or any Hedge Counterparty has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee, to such Noteholder or to such Hedge Counterparty, then and in every such case the Issuer, the Indenture Trustee, the Noteholders and the Hedge Counterparties shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee, the Noteholders and the Hedge Counterparties shall continue as though no such Proceeding had been instituted.
Section 12.3Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee, to the Noteholders or to the Hedge Counterparties is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by Law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at Law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

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Section 12.4Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee, any Holder of any Note or any Hedge Counterparty to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by Law to the Indenture Trustee, to the Noteholders or to the Hedge Counterparties may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee, by the Noteholders or by the Hedge Counterparties, as the case may be.
Section 12.5Control by Noteholders. The Majority Noteholders shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided, that:
(i)such direction shall not be in conflict with any rule of Law or with this Indenture;
(ii)such rights shall be subject to the express terms of Section 5.4(a)(iv);
(iii)if the conditions set forth in Section 5.5 have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to such Section, then any written direction to the Indenture Trustee by Holders of Notes representing less than one hundred percent (100%) of the Outstanding Amount of the Notes to sell or liquidate the Collateral shall be of no force and effect;
(iv)the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction; and
(v)the Majority Noteholders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such direction.
Notwithstanding the rights of Noteholders set forth in this Section 5.11, subject to Section 6.1, the Indenture Trustee need not take any action that it determines might involve it in liability or might adversely affect the rights of any Noteholders not consenting to such action or the rights of any Hedge Counterparties.
Section 12.6Waiver of Past Defaults. Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.2, the Majority Noteholders may waive any past Default or Event of Default and its consequences except a Default or Event of Default (a) in payment of principal of or interest on any of the Notes, (b) arising under any Hedge Agreement, (c) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note, or (d) occurring as a result of an event specified in Section 5.1(a)(iv) or (v). In the case of any such waiver, the Issuer, the Indenture Trustee, the Holders of the Notes and the Hedge Counterparties shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.
Article XIIIUpon any such waiver, such Default or Event of Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every

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purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. The Indenture Trustee shall promptly give written notice of any such waiver to each Rating Agency.
Section 13.1Undertaking for Costs. All parties to this Indenture agree, and each Holder of a Note by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and reasonable expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding Notes evidencing in the aggregate more than 10% of the Outstanding Amount or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date).
Section 13.2Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension Law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such Law had been enacted.
Section 13.3Action on Notes or Hedge Agreements. The Indenture Trustee’s right to seek and recover judgment on the Notes or the Hedge Agreements or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee, the Noteholders or the Hedge Counterparties shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.4(b).
Section 13.4Performance and Enforcement of Certain Obligations.
(a)The Issuer shall take all such lawful action as the Indenture Trustee, at the direction of the Majority Noteholders, shall request to compel or secure the performance and observance by the Manager of its obligations to the Issuer under or in connection with the Management Services Agreement, by any of the Diversified Parties of its obligations under or in connection with the Transfer Agreement, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Management Services Agreement or by the Issuer under the Transfer Agreement to the extent and in the manner directed by the Indenture Trustee, at the direction of the Majority Noteholders, including the transmission of notices of default under the Management Services Agreement on the part of the Manager thereunder, claims for indemnification by the Issuer against any of the Diversified Parties under the Transfer Agreement, and the institution of legal or administrative actions or proceedings to compel or secure performance by the Manager of its obligations under the

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Management Services Agreement, and by any of the Diversified Parties of its obligations under the Transfer Agreement.
(b)If an Event of Default has occurred and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of the Majority Noteholders, shall, (subject to the terms hereof) exercise all rights, remedies, powers, privileges and claims of the Issuer against the Manager under or in connection with the Management Services Agreement, or against any of the Diversified Parties under or in connection with the Transfer Agreement, including the right or power to take any action to compel or secure performance or observance by the Manager, of its obligations to the Issuer under the Management Services Agreement or by any of the Diversified Parties, of its obligations to the Issuer under the Transfer Agreement, and to give any consent, request, notice, direction, approval, extension or waiver under the Management Services Agreement, the Transfer Agreement, and any right of the Issuer to take such action shall be suspended.
Article XIV

THE INDENTURE TRUSTEE
Section 14.1Duties of Indenture Trustee.
(a)If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
(b)Except as directed in writing by the Majority Noteholders or any other percentage of Noteholders required hereby, the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the other Basic Documents to which it is a party (and no implied covenants or obligations shall be read into this Indenture or such other Basic Documents against the Indenture Trustee). In the absence of gross negligence or willful misconduct on its part, the Indenture Trustee may conclusively rely upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture, as to the truth of the statements and the correctness of the opinions expressed therein; however, in the case of certificates or opinions specifically required by any provision of this Indenture to be furnished to it, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein).
(c)The Indenture Trustee may not be relieved from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that:
(i)this paragraph does not limit the effect of paragraph (b) of this Section 6.1;
(ii)the Indenture Trustee shall not be liable for any error of judgment made in good faith by the Indenture Trustee unless it is proved that the Indenture Trustee was grossly negligent in ascertaining the pertinent facts; and
(iii)the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.11.

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(d)Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to this Section 6.1 and Section 6.2.
(e)The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.
(f)Money held on behalf of the Noteholders by the Indenture Trustee need not be segregated from other funds except to the extent required by Law or the terms of this Indenture or the Management Services Agreement or under any Hedge Agreement by a Hedge Counterparty.
(g)No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Indenture shall in any event require the Indenture Trustee to perform, or be responsible for the performance of, any of the obligations of the Manager or the Back-Up Manager under this Indenture or the Basic Documents.
(h)The Indenture Trustee shall have no duty (i) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any re-recording, refiling or redepositing of any thereof or otherwise to monitor the perfection, continuation of perfection or the sufficiency or validity of any security interest related to the Collateral, (ii) to see to any insurance or (iii) subject to the other provisions of this Indenture and the Basic Documents, to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Collateral.
(i)The Indenture Trustee shall not be charged with knowledge of any Default, Event of Default, Material Manager Default or breach of representation or warranty unless either (1) a Responsible Officer of the Indenture Trustee shall have actual knowledge of such Default, Event of Default, Material Manager Default or breach of representation or warranty or (2) written notice of such Default, Event of Default, Material Manager Default or breach of representation or warranty shall have been given to a Responsible Officer of the Indenture Trustee in accordance with the provisions of this Indenture. For the avoidance of doubt, receipt by the Indenture Trustee of a Payment Date Report shall not constitute actual knowledge of any breach of representation or warranty.
Section 14.2Rights of Indenture Trustee.
(a)The Indenture Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person.
(b)Before the Indenture Trustee acts or refrains from acting, it may require an Officer’s Certificate of the Issuer or an Opinion of Counsel. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officer’s Certificate or Opinion of Counsel.
(c)The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or

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negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed absent gross negligence or willful misconduct.
(d)The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, that the Indenture Trustee’s conduct does not constitute gross negligence or willful misconduct.
(e)The Indenture Trustee may consult with counsel, accountants and other experts of its own selection (which may include counsel to the Issuer, the Noteholders and/or the Hedge Counterparties), and the advice or opinion of such counsel, accountants and other experts with respect to legal or other matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel, accountants and other experts.
(f)The Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto or to honor the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the reasonable costs, expenses, disbursements, advances and liabilities which might be incurred by it, its agents and its counsel in compliance with such request or direction.
(g)The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document (including electronic communications), unless requested in writing to do so by the Holders of Notes representing the Majority Noteholders; provided, that if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require indemnity satisfactory to the Indenture Trustee in its reasonable discretion against such cost, expense or liability as a condition to taking any such action. In no event shall the Indenture Trustee have any responsibility to monitor Diversified’s compliance with or be charged with knowledge of the Credit Risk Retention Rules, nor shall it be liable to any Noteholder or any party whatsoever for violation of such rules or requirements or such similar provisions now or hereafter in effect.
(h)The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture or any other Basic Document to which it is a party shall not be construed as a duty or obligation, and the Indenture Trustee shall not be answerable under this Indenture or any other Basic Document to which it is a party for anything other than its gross negligence or willful misconduct in the performance of such act.
(i)The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, and each agent, custodian and other Person engaged by the Indenture Trustee to act hereunder. In connection with its actions under any other Basic Document to which it is a party, the Indenture Trustee shall also be afforded all of the rights, privileges, protections, immunities and benefits given to it herein, including, without limitation, its right to be indemnified, as if set forth in full therein, mutatis mutandis.

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(j)In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, any act or provision of any present or future law or regulation or governmental authority, strikes, work stoppages, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, epidemics, pandemics, quarantines, and interruptions, loss or malfunctions of utilities, communications or computer (hardware or software) systems and services, or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility; it being understood that the Indenture Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
(k)In no event shall the Indenture Trustee be liable (i) for special, consequential, indirect or punitive damages (including lost profits), (ii) for the acts or omissions of its nominees, correspondents, clearing agencies or securities depositories and (iii) for the acts or omissions of brokers or dealers even if the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(l)In no event shall the Indenture Trustee be liable for the failure to perform its duties hereunder if such failure is a direct or proximate result of another party’s failure to perform its obligations hereunder.
(m)As to any fact or matter the manner of ascertainment of which is not specifically described herein, the Indenture Trustee shall be entitled to receive and may for all purposes hereof conclusively rely on a certificate, signed by an officer of any duly authorized Person, as to such fact or matter, and such certificate shall constitute full protection to the Indenture Trustee for any action taken or omitted to be taken by it in good faith reliance thereon.
(n)Any Opinion of Counsel requested by the Indenture Trustee shall be an expense of the party requesting the Indenture Trustee to act or refrain from acting or otherwise shall be an expense of the Issuer.
(o)The Indenture Trustee or its Affiliates are permitted to receive additional compensation that could be deemed to be in the Indenture Trustee’s economic self-interest for (i) serving as investment adviser, administrator, shareholder servicing agent, custodian or sub-custodian, (ii) using Affiliates to effect transactions in certain investments (if directed) and (iii) effecting transactions in certain investments (if directed). Such compensation shall not be considered an amount that is reimbursable or payable to the Indenture Trustee as part of the compensation hereunder.
(p)Neither the Indenture Trustee nor the Issuer shall be responsible for the acts or omissions of the other, it being understood that this Indenture shall not be construed to render them partners, joint venturers or agents (unless expressly set forth herein) of one another.
(q)The Indenture Trustee shall not have any obligation or liability to take any action or to refrain from taking any action hereunder that requires written direction in the absence of such written direction as provided hereunder.
(r)The Indenture Trustee shall not be required to give any bond or surety with respect to the execution of the trust created hereby or the powers granted hereunder.
(s)The Indenture Trustee may, from time to time, request that the Issuer deliver a certificate (upon which the Indenture Trustee may conclusively rely) setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions

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pursuant to this Indenture or any other Basic Document together with a specimen signature of such authorized officers; provided, however, that from time to time, the Issuer may, by delivering to the Indenture Trustee a revised certificate, change the information previously provided by it pursuant to this Section 6.2(s), but the Indenture Trustee shall be entitled to conclusively rely on the then current certificate until receipt of a superseding certificate.
(t)Except for notices, reports and other documents expressly required to be furnished to the Holders or the Hedge Counterparties by the Indenture Trustee hereunder, the Indenture Trustee shall not have any duty or responsibility to provide any Holder with any information concerning the transaction contemplated hereby, the Issuer, the servicer or any other parties to any other Basic Document which may come into the possession of the Indenture Trustee or any of its officers, directors, employees, representatives or attorneys in fact.
(u)If at any time the Indenture Trustee is served with any arbitral, judicial or administrative order, judgment, award, decree, writ or other form of arbitral, judicial or administrative process which in any way affects this Indenture, the Notes, the Collateral or any part thereof or funds held by it (including, but not limited to, orders of attachment or garnishment or other forms of levies or injunctions), it shall be authorized to comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate; and if the Indenture Trustee complies with any such arbitral, judicial or administrative order, judgment, award, decree, writ or other form of arbitral, judicial or administrative process, the Indenture Trustee shall not be liable to any of the parties hereto or to any other person or entity even though such order, judgment, award, decree, writ or process may be subsequently modified or vacated or otherwise determined
(v)to have been without legal force or effect.
(w)The Indenture Trustee shall not have any obligation to monitor the compliance by the Issuer of its obligations under or with respect to any Hedge Agreement.
(x)Neither the Indenture Trustee nor the Note Registrar shall have any obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any Note or any transfer of any interest in any Book-Entry Note. In connection with any transfer of any Note, the Indenture Trustee and the Note Registrar shall be under no duty to inquire into the validity, legality and due authorization of such transfer.
Section 14.3Individual Rights of Indenture Trustee. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 14.4Indenture Trustee’s Disclaimer. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee’s certificate of authentication.
Section 14.5Notice of Material Manager Defaults or Events of Default. Unless provided by Issuer (or the Manager on its behalf) on an earlier date, if a Material Manager Default, Warm Trigger Event, Rapid Amortization Event, Default or Event of Default occurs and is continuing and if it is known to the Indenture Trustee pursuant to Section 6.1(i), the Indenture Trustee shall mail and email to each Noteholder, the Back-Up Manager, each Hedge

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Counterparty and each Rating Agency notice of the Material Manager Default, Warm Trigger Event, Rapid Amortization Event, Default or Event of Default within five (5) days after receipt of such knowledge.
Section 14.6Reports by Indenture Trustee. The Indenture Trustee shall make available within a reasonable period of time after the end of each calendar year to each Noteholder and each Hedge Counterparty such information furnished to the Indenture Trustee as may be required to enable such Holder or such Hedge Counterparty to prepare its U.S. federal and state income tax returns. On or before each Payment Date, the Indenture Trustee will post a copy of the statement or statements provided to the Indenture Trustee pursuant Section 8.8 hereof with respect to the applicable Payment Date on its internet website promptly following its receipt thereof, for the benefit of the Noteholders, the Back-Up Manager, the Hedge Counterparties, Holders and the Rating Agencies, and upon written request provide a copy thereof to the Hedge Counterparties and the Rating Agencies. The Indenture Trustee shall post copies of the items provided to the Indenture Trustee pursuant to Section 7.1 hereof and the Reserve Report provided pursuant to Section 8.5 hereof on its internet website promptly following its receipt thereof (provided that within five (5) Business Days of posting, the Indenture Trustee will provide e-mail notice of such posting), for the benefit of the Noteholders, the Back-Up Manager, the Hedge Counterparties and Rating Agencies, and upon written request provide a copy thereof to each Noteholder, the Back-Up Manager, each Hedge Counterparty and the Rating Agencies. The Indenture Trustee’s internet website shall initially be located at “www.debtx.com.” The Indenture Trustee may change the way the statements and information are posted or distributed in order to make such distribution more convenient and/or accessible for the Noteholders, the Back-Up Manager, the Hedge Counterparties and the Rating Agencies, and the Indenture Trustee shall provide on the website timely and adequate notification to all parties regarding any such change. As currently configured, the Indenture Trustee’s website will automatically issue an email notification to any Noteholder, Hedge Counterparty, Rating Agency or the Back-Up Manager who has registered its email address with the Indenture Trustee of any posting of information to such website. Promptly after the Closing Date, the Indenture Trustee will send by email a registration link for such website to (i) each Noteholder with an email address listed on Schedule B to the Note Purchase Agreement, (ii) each Hedge Counterparty with an email address listed on a Hedge Counterparty Rights Agreement, (iii) the Back-Up Manager at the email address provided to the Indenture Trustee for the Back-Up Manager and (iv) the Rating Agency at the email address as provided to the Indenture Trustee for the Rating Agency, as applicable, at such email address. Each Noteholder, Hedge Counterparty, Rating Agency and the Back-Up Manager shall be responsible for its own registration for such website and the Indenture Trustee shall not have any obligation to monitor any Noteholder’s, any Hedge Counterparty’s, any rating Agency’s or the Back-Up Manager’s registration status. The Indenture Trustee shall not have any liability in connection with its website failing to automatically deliver the email notifications referenced in this Section 6.6 absent gross negligence or willful misconduct on its part.
Section 14.7Compensation and Indemnity. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services as agreed between the Issuer and the Indenture Trustee in writing from time to time. The Indenture Trustee’s compensation shall not be limited by any Law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable and documented out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable and documented compensation and expenses, disbursements and advances of the Indenture Trustee’s agents, counsel, accountants and experts; provided, that, reimbursement for expenses and disbursements of any legal counsel to the Indenture Trustee may be subject to any limitations separately agreed upon in writing before the date hereof between the Issuer and the Indenture Trustee. The Issuer shall indemnify the Indenture Trustee for, and hold it and its officers, directors, employees, representatives and agents harmless against any and all loss, liability, claim, damage or expense, including

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reasonable and documented legal and consulting fees and expenses and including, without limitation, any legal fees, costs and expenses incurred in connection with any enforcement (including any action, claim or suit brought by the Indenture Trustee of any indemnification or other obligation of the Issuer or the Manager), incurred by it in connection with the administration of this Indenture and the performance of its duties hereunder, including with respect to any Environmental Liabilities, compliance with Environmental Laws and the generation, use, presence or release of Hydrocarbons or Hazardous Materials. The Indenture Trustee shall, to the extent practicable and not prohibited by a court order or other operation of law, notify the Issuer and the Manager promptly of any claim of which the Indenture Trustee has received written notice for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the Manager shall not relieve the Issuer or the Manager of its obligations hereunder. The Issuer may defend any such claim, and the Indenture Trustee may have separate counsel in connection with the defense of any such claim and the Issuer shall pay the fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee’s own gross negligence or willful misconduct.
Article XVThe Issuer’s payment obligations to the Indenture Trustee pursuant to this Section shall survive the resignation or removal of the Indenture Trustee and the discharge of this Indenture. When the Indenture Trustee incurs fees or expenses after the occurrence of a Default specified in Section 5.1(a)(iv) or 5.1(a)(v) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar Law.
Section 15.1Replacement of Indenture Trustee.
(a)No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee shall become effective until the acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.8. The Indenture Trustee may resign at any time with thirty (30) days’ prior written notice by so notifying the Issuer (with a copy to each Noteholder, each Hedge Counterparty and each Rating Agency). The Majority Noteholders may remove the Indenture Trustee with thirty (30) days’ prior written notice by so notifying the Indenture Trustee, Diversified and the Hedge Counterparties and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i)the Indenture Trustee fails to comply with Section 6.11;
(ii)the Indenture Trustee is adjudged bankrupt or insolvent;
(iii)a receiver or other public officer takes charge of the Indenture Trustee or its property; or
(iv)the Indenture Trustee otherwise becomes incapable of acting.
(b)If no Default or Event of Default has occurred and is continuing, and the Indenture Trustee resigns or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall appoint a replacement indenture trustee with the consent of the Majority Noteholders and of the Hedge Counterparties (in either case, such consent not to be unreasonably withheld, conditioned, or delayed) as soon as reasonably practicable, but in any event within thirty (30) days following such event; provided that if the Issuer shall not have appointed a replacement indenture trustee by the end of such thirty (30) day period other than as a

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result of the failure of the Majority Noteholders or the Hedge Counterparties to have reasonably consented, the Majority Noteholders shall have the right to appoint the replacement with the consent of the Issuer and of the Hedge Counterparties (in either case, such consent not to be unreasonably withheld, conditioned, or delayed), and the Issuer shall notify Diversified and each Rating Agency of such appointment. If a Default or Event of Default has occurred and is continuing, any replacement of the Indenture Trustee hereunder shall be done by the Majority Noteholders.
(c)A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee, the Issuer, each Noteholder, and each Hedge Counterparty. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The successor Indenture Trustee shall mail a notice of its succession to Noteholders and the Hedge Counterparties. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.
(d)If a successor Indenture Trustee does not take office within thirty (30) days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Majority Noteholders may, at the expense of the Issuer, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.
(e)If the Indenture Trustee fails to comply with Section 6.11, any Noteholder or any Hedge Counterparty may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.
(f)Notwithstanding the replacement of the Indenture Trustee pursuant to this Section 6.8, the Issuer’s obligations under Section 6.7 shall continue for the benefit of the retiring Indenture Trustee.
Section 15.2Successor Indenture Trustee by Merger. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; provided, that such corporation or banking association shall be otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall provide Diversified, the Holders, each Hedge Counterparty and each Rating Agency with prior written notice of any such transaction.
Section 15.3Appointment of Co-Indenture Trustee or Separate Indenture Trustee.
(a)Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Collateral may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Issuer, and to vest in such Person or Persons, in such capacity and for the benefit of the Secured Parties, such title to the Collateral, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.8 hereof.

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(b)Every separate trustee and co-trustee shall, to the extent permitted by Law, be appointed and act subject to the following provisions and conditions:
(i)all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any Law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii)no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and
(iii)the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
(c)Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee.
(d)Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by Law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by Law, without the appointment of a new or successor trustee.
Section 15.4Eligibility; Disqualification. The Indenture Trustee shall have a combined capital and surplus of at least $500,000,000 as set forth in its most recent published annual report of condition, and the time deposits of the Indenture Trustee shall be rated at least A- (or equivalent) by Fitch and one other NRSRO, to the extent that Fitch rates the Notes, and otherwise, two NRSROs.
Section 15.5Representations and Warranties of the Indenture Trustee. The Indenture Trustee hereby makes the following representations and warranties on which the Issuer, Noteholders and the Hedge Counterparties shall rely:
(a)the Indenture Trustee is a national banking association duly organized and validly existing under the Laws of the jurisdiction of its formation;

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(b)the Indenture Trustee has full power, authority and legal right to execute, deliver, and perform this Indenture and shall have taken all necessary action to authorize the execution, delivery and performance by it of this Indenture;
(c)the execution, delivery and performance by the Indenture Trustee of this Indenture (i) shall not violate any provision of any Law or regulation governing the banking and trust powers of the Indenture Trustee or any order, writ, judgment or decree of any court, arbitrator, or governmental authority applicable to the Indenture Trustee or any of its assets, (ii) shall not violate any provision of the corporate charter or bylaws of the Indenture Trustee and (iii) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Collateral pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have a materially adverse effect on the Indenture Trustee’s performance or ability to perform its duties under this Indenture or on the transactions contemplated in this Indenture;
(d)no consent, license, approval or authorization of, or filing or registration with, any governmental authority, bureau or agency is required to be obtained that has not been obtained by the Indenture Trustee in connection with the execution, delivery or performance by the Indenture Trustee of the Basic Documents; and
(e)this Indenture has been duly executed and delivered by the Indenture Trustee and constitutes the legal, valid and binding agreement of the Indenture Trustee, enforceable in accordance with its terms.
Article XVI

INFORMATION REGARDING THE ISSUER
Section 16.1Financial and Business Information.
(a)Annual Statements — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, within one hundred and twenty (120) days after the end of each fiscal year of the Issuer, commencing with the fiscal year ended December 31, 2024, duplicate copies of the audited consolidated financial statements of Diversified Corp and its consolidated subsidiaries by an independent public accountant, which such independent public accountant shall be PricewaterhouseCoopers or another independent public accountant reasonably acceptable to the Majority Noteholders; provided, that upon receipt of such audited consolidated financial statements, the Indenture Trustee shall promptly make them available to Noteholders, the Hedge Counterparties, and the Rating Agencies on the Indenture Trustee’s internet website.
(b)Quarterly Statements — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, within sixty (60) days after the end of each of the first three quarterly fiscal periods in each fiscal year of the Issuer, commencing with the fiscal quarter of the Issuer ended September 30, 2024, duplicate copies of the following reports; provided, that upon receipt of such reports, the Indenture Trustee shall promptly make them available to Noteholders, the Hedge Counterparties, and the Rating Agencies on the Indenture Trustee’s internet website:
(i)an unaudited consolidated balance sheet of Diversified Corp and its consolidated subsidiaries as at the end of such quarter, and
(ii)unaudited consolidated statements of income, changes in shareholders’ equity and cash flows of Diversified Corp and its consolidated

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subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, in each case setting forth, starting with the fiscal quarter ended September 30, 2024, in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with IFRS or GAAP, applicable to quarterly financial statements generally, and certified by a Senior Financial Officer of Diversified Corp as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments.
(c)Notice of Material Events — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, each Noteholder, the Back-Up Manager and each Hedge Counterparty promptly, and in any event within three (3) Business Days after a Responsible Officer of the Issuer, the Manager or Diversified becomes aware of the existence of (i) any Rapid Amortization Event, (ii) Material Manager Default, (iii) Default, (iv) Event of Default, (v) any default under any Basic Document, (vi) any event that can be reasonably expected to cause a Material Adverse Effect, (vii) information that any Person has given any notice or taken any action with respect to a claimed default hereunder or (viii) Warm Trigger Event, an Officer’s Certificate (with a copy to each Rating Agency) specifying the nature and period of existence and what action the Issuer is taking or proposes to take with respect thereto. The Issuer shall, at the Issuer’s expense (in accordance with Section 8.6), promptly provide the Indenture Trustee, each Noteholder, each Hedge Counterparty, the Manager, the Back-Up Manager and the Rating Agencies with such additional information as any such party may reasonably request from time to time in connection with the matters so reported, and the actions so taken or contemplated to be taken.
(d)Notices from Governmental Body — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, each Noteholder, and each Hedge Counterparty promptly, and in any event within ten (10) days of receipt thereof, copies of any material notice to the Issuer from any Governmental Body (with a copy to each Rating Agency) relating to any order, ruling, statute or other Law or regulation.
(e)Notices under Material Agreement — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, each Noteholder, and each Hedge Counterparty promptly, and in any event within fifteen (15) days after delivery or receipt by the Issuer, copies of all notices of termination, Default or Event of Default, suspension of performance or any force majeure event given or received pursuant to or in respect of any material agreement to which it is a party or any other material notices or documents given or received pursuant to or in respect of any material agreement to which it is a party (with a copy to each Rating Agency).
(f)Payment Date Compliance Certificates — On or before the third (3rd) Business Day prior to each Payment Date, the Issuer shall deliver to the Indenture Trustee, each Noteholder, each Hedge Counterparty, and each Rating Agency, an Officer’s Certificate to the effect that, except as provided in a notice delivered pursuant to Section 7.1(c), no potential Rapid Amortization Event or Rapid Amortization Event, no potential Material Manager Default or Material Manager Default, no potential Warm Trigger Event or Warm Trigger Event, no Default or Event of Default has occurred and is continuing (each, a “Payment Date Compliance Certificate”).
(g)Ratings — Beginning with the year ended December 31, 2024, the Issuer shall annually obtain a ratings letter from at least one Rating Agency in accordance with Section 9.17 of the Note Purchase Agreement; provided, that upon receipt of such ratings letter from the

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Issuer, the Indenture Trustee shall promptly make such ratings letter available to Noteholders, the Hedge Counterparties, and the Rating Agencies on the Indenture Trustee’s internet website.
(h)Reserve Reports — Promptly after completion, the Issuer shall cause each annual audited, semi-annual unaudited, and disposition related Reserve Report to be delivered to the Indenture Trustee, and the Indenture Trustee shall promptly make such Reserve Report available to the Noteholders and Hedge Counterparties on the Indenture Trustee’s internet website.
Section 16.2Visitation.
(a)If no Default or Event of Default then exists, the Issuer shall permit the representatives of each Noteholder that is an Institutional Investor to visit and inspect the offices or properties of the Issuer, to examine all its books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with the Issuer’s officers, employees and independent certified public accountants, at such time as may be reasonably requested in writing; provided, however, that in no event shall the Issuer be required to permit the representatives of a Noteholder to visit more than one (1) time in any twelve-month period. Any visits contemplated by this Section 7.2(a) shall be at the sole expense of the requesting party.
(b)If a Default or Event of Default exists, the Issuer shall permit the representatives of each holder of a Note that is an Institutional Investor, at the expense of the Issuer, upon reasonable prior notice, to visit and inspect the offices or properties of the Issuer, to examine all its books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with the Issuer’s officers, employees and independent certified public accountants, all at such times as may be reasonably requested and as often as may be requested. Any visits contemplated by this Section 7.2(b) shall be at the sole expense of the Issuer and not limited in number.
Article XVII
Article XVIII

ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 18.1Deposit of Collections. The Issuer and the Manager on their behalf, shall direct that all payments with respect to the Assets and all payments received under the Hedge Agreements (whether directly from any Hedge Counterparty or from Diversified Marketing) be made to the Collection Account in accordance with the Basic Documents; provided that amounts posted by a Hedge Counterparty as Posted Collateral to the Issuer under an applicable Hedge Agreement shall be deposited into the applicable Hedge Collateral Account and not be deposited in the Collection Account and shall not constitute Available Funds. The Issuer, and in the event any Collections are received by any Affiliate of the Issuer (other than the Operator, solely in its capacity as such), if applicable, shall remit or cause such Affiliate to remit to the Collection Account within two (2) Business Days of receipt and identification thereof (including receipt of proper instructions regarding where to allocate such payment) all Collections received with respect to the Assets. The Operator, solely in its capacity as such, shall remit to the Collection Account within sixty (60) days of receipt and initial identification thereof (including receipt of proper instructions regarding where to allocate such payment) all Collections received with respect to the Assets (subject in any case to the expense and reimbursement provisions of the Joint Operating Agreement); provided, that, to the extent that

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the Operator definitively identifies Collections attributable to the Issuer pursuant to the Joint Operating Agreement subsequent to the application of funds from such Collection pursuant to the expense and reimbursement provisions thereof, the Operator shall remit such funds to the Collection Account within two (2) Business Days of definitive identification thereof (including receipt of proper instructions regarding where to allocate such payment). Notwithstanding anything contained herein to the contrary, the Indenture Trustee and the Paying Agent shall be authorized to accept instructions from the Manager (which shall be in writing) on behalf of the Issuer on a daily basis regarding withdrawals or order transfers of funds from the Collection Account, to the extent such funds have been mistakenly deposited into the Collection Account (including without limitation funds representing amounts due and payable on wells not part of the Assets). In the case of any withdrawal or transfer pursuant to the foregoing sentence, the Manager, on behalf of the Issuer, shall provide the Noteholders, the Hedge Counterparties, the Paying Agent and the Indenture Trustee with notice of such withdrawal or transfer, together with reasonable supporting details regarding such withdrawal or transfer and the mistaken deposit related thereto, on such date of withdrawal to be delivered by the Manager, on behalf of the Issuer (or in such earlier written notice as may be required by the Indenture Trustee from the Manager, on behalf of the Issuer, from time to time). Notwithstanding anything therein to the contrary, the Indenture Trustee and the Paying Agent shall be entitled to make withdrawals or order transfers of funds from the Collection Account, in the amount of all reasonable out-of-pocket costs and expenses incurred by the Indenture Trustee or the Paying Agent in connection with any misdirected funds described in the second foregoing sentence.
Section 18.2Establishment of Accounts.
(a)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Collection Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties. The Issuer, for the benefit of the Secured Parties, shall deposit, or cause its Affiliate to deposit, any and all funds received pursuant to any Hedge Agreement into the Collection Account, subject only to the terms of the Joint Operating Agreement; provided, however, any such amounts received as “Posted Collateral” pursuant to the terms of a Hedge Agreement as in effect on the date hereof or subsequently put into effect shall be deposited into the Hedge Collateral Account, and the Hedge Collateral Account(s) shall not be deemed to be Collection Accounts.
(b)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Asset Disposition Proceeds Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.
(c)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Liquidity Reserve Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.
(d)The Issuer, for the benefit of the Secured Parties who are Hedge Counterparties, may from to time to time by written direction to the Indenture Trustee cause to be established and maintained with the Securities Intermediary one or more accounts or sub-accounts on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Hedge Collateral Accounts”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Hedge Counterparty for whose benefit the

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Hedge Collateral Account has been established. Amounts posted as Posted Collateral to the Issuer under an applicable Hedge Agreement shall be deposited in such accounts and held therein in accordance with the terms of the applicable Hedge Agreement, including those related to the interest rate applicable to and accrual of interest at such rate on such Posted Collateral. The Manager shall have the power to instruct the Indenture Trustee in writing to establish the Hedge Collateral Accounts and to make withdrawals and returns from the Hedge Collateral Accounts for the purpose of permitting the Issuer to carry out its respective duties under the applicable Hedge Agreement and the Indenture Trustee shall be entitled to rely upon any such written instructions as conclusive evidence of such duties under the relevant Hedge Agreement. Notwithstanding anything contained herein to the contrary, the parties hereby acknowledge and agree that each Hedge Counterparty’s right to the return of any excess Posted Collateral posted under the Hedge Agreement by any such Hedge Counterparty, as determined in accordance with the terms of the relevant Hedge Agreement, and held in the Hedge Collateral Account, shall be senior in all respects to any rights or interests (i) of the Indenture Trustee or (ii) any other Secured Party who is not the Hedge Counterparty who posted any such collateral in such Hedge Collateral Account in accordance with the provisions of the applicable Hedge Agreement.
(e)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “P&A Reserve Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties. To the extent a P&A Reserve Trigger has occurred with respect to the Issuer's most recently completed fiscal year, Available Funds shall be deposited into the P&A Reserve Account in an amount equal to the P&A Reserve Amount in accordance with Section 8.6. On each Payment Date, all amounts then on deposit in the P&A Reserve Account shall be deposited into the Collection Account, where they will be considered part of Available Funds and distributed on such Payment Date pursuant to Section 8.6.
(f)Funds on deposit in each of (i) the Collection Account, (ii) the Asset Disposition Proceeds Account, (iii) the Liquidity Reserve Account and (iv) the P&A Reserve Account (together, the “Issuer Accounts”) shall be invested by the Indenture Trustee in Permitted Investments as directed in writing by the Manager. In the absence of written direction from the Manager, such funds shall remain uninvested. All such Permitted Investments shall be held by the Indenture Trustee for the benefit of the Secured Parties; provided, that on each Payment Determination Date all interest and other Investment Earnings on funds on deposit in the Issuer Accounts shall be deposited into the Collection Account and shall be deemed to constitute a portion of Available Funds for the related Payment Date. Other than as permitted by the Majority Noteholders (with prompt notice to the Hedge Counterparties), funds on deposit in the Issuer Accounts shall be invested in Permitted Investments that will mature (A) not later than the Business Day immediately preceding the next Payment Date or (B) on or before 10:00 a.m. on such next Payment Date if such investment is held in the corporate trust department of the institution with which the Issuer Accounts are then maintained and is invested either (i) in a time deposit of the Indenture Trustee with a credit rating in one of the generic rating categories that signifies investment grade of at least one of the Rating Agencies (such account being maintained within the corporate trust department of the Indenture Trustee), or (ii) in the Indenture Trustee’s common trust fund so long as such fund has a credit rating in one of the generic rating categories that signifies investment grade of at least one of the Rating Agencies; provided, further, that Permitted Investments shall be available for redemption and use by the Indenture Trustee on the relevant Payment Date. In no event shall the Indenture Trustee be held liable for investment losses in Permitted Investments pursuant to this Section 8.2(f), except to the extent it is acting separately in its capacity as obligor thereunder.
(g)The Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Issuer Accounts and, subject to the limitations in Section

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8.2(d), Hedge Collateral Accounts and in all proceeds thereof (including all income thereon) and all such funds, investments, proceeds and income shall be part of the Collateral. The Issuer Accounts shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Secured Parties. If, at any time, any of the Issuer Accounts and/or Hedge Collateral Accounts cease to be an Eligible Account, the Indenture Trustee shall within ten (10) Business Days (or such longer period, not to exceed thirty (30) calendar days with the prior written consent the Majority Noteholders or, as applicable, the Hedge Counterparties) establish a new Issuer Account and/or Hedge Collateral Accounts, as applicable, as an Eligible Account and shall transfer any cash and/or any investments to such new Issuer Account and/or Hedge Collateral Accounts, as applicable. The Indenture Trustee, Paying Agent or the other Person holding the Issuer Accounts and Hedge Collateral Accounts as provided in this Section 8.2(g) shall be the “Securities Intermediary.” On the date hereof, the Securities Intermediary is the Indenture Trustee. If the Securities Intermediary shall be a Person other than the Indenture Trustee, the Manager shall obtain the express written agreement of such Person to the obligations of the Securities Intermediary set forth in this Section 8.2.
(i)The Securities Intermediary agrees, by its acceptance hereof, that:
(A)The Issuer Accounts and Hedge Collateral Accounts are “securities accounts” within the meaning of Section 8-501 of the New York UCC and are accounts to which Financial Assets will be credited.
(B)All securities or other property underlying any Financial Assets credited to the Issuer Accounts and Hedge Collateral Accounts shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any Financial Asset credited to any of the Issuer Accounts or Hedge Collateral Accounts be registered in the name of the Issuer or the Manager, payable to the order of the Issuer or the Manager or specially indorsed to the Manager or Diversified except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank.
(C)All property delivered to the Securities Intermediary pursuant to this Indenture will be promptly credited to the appropriate Issuer Account or Hedge Collateral Accounts, as applicable.
(D)Each item of property (whether investment property, Financial Asset, security, instrument or cash) credited to an Issuer Account or Hedge Collateral Accounts, as applicable, shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the New York UCC.
(E)If at any time the Securities Intermediary shall receive any order from the Indenture Trustee directing transfer or redemption of any Financial Asset or any other entitlement order relating to the Issuer Accounts or Hedge Collateral Accounts, as applicable, the Securities Intermediary shall comply with such entitlement order without further consent by the Issuer, the Manager or any other Person.
(F)The Issuer Accounts and Hedge Collateral Accounts shall be governed by the Laws of the State of New York, regardless of any provision in any other agreement. For purposes of the UCC, New York shall be deemed to be the Securities Intermediary’s jurisdiction and the

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Issuer Accounts and Hedge Collateral Accounts (as well as the securities entitlements (as defined in Section 8-102(a)(17) of the UCC) related thereto) shall be governed by the Laws of the State of New York.
(G)The Securities Intermediary has not entered into, and until the termination of this Indenture will not enter into, any agreement with any other Person relating to the Issuer Accounts or Hedge Collateral Accounts and/or any Financial Assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the New York UCC) of such other person and the Securities Intermediary has not entered into, and until the termination of this Indenture will not enter into, any agreement with the Issuer, the Manager or the Indenture Trustee purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 8.2(g)(i)(E) hereof.
(H)Except for the claims and interest of the Indenture Trustee and of the Issuer in the Issuer Accounts and Hedge Collateral Accounts, the Securities Intermediary knows of no claim to, or interest in, the Issuer Accounts or Hedge Collateral Accounts or in any Financial Asset credited thereto. If any other person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Issuer Accounts, Hedge Collateral Accounts or in any Financial Asset carried therein, the Securities Intermediary will promptly notify the Indenture Trustee, the Manager, each Hedge Counterparty, the Issuer and each Rating Agency.
(I)The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Issuer Accounts and Hedge Collateral Accounts and/or any Issuer Account Property simultaneously to each of the Manager and the Indenture Trustee.
(J)The Securities Intermediary (A) shall be a corporation or national bank that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity hereunder, (B) shall not be an Affiliate of the Issuer, (C) shall have a combined capital and surplus of at least $500,000,000, (D) shall be subject to supervision or examination by United States federal or state authority and (E) shall have a rating of at least “Baa1” or better by Moody’s, “A-” or better by S&P, and “A-” or better by Fitch (if such entity is rated by Fitch).
(K)The Securities Intermediary shall treat the Indenture Trustee as entitled to exercise the rights that comprise each financial asset credited to any Issuer Account and any Hedge Collateral Account.
(L)The Securities Intermediary shall not change the name or the account number of any Issuer Account or Hedge Collateral Account without the prior written consent of the Indenture Trustee (acting at the written direction of the Majority Noteholders as to any Issuer Account or relevant Hedge Counterparty, as to any Hedge Collateral Account).
(M)The Securities Intermediary shall not be a party to any agreement that is inconsistent with this Indenture, or that limits or conditions any of its obligations under this Indenture. The Securities

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Intermediary shall not take any action inconsistent with the provisions of this Indenture applicable to it.
(N)Each item of property credited to each Issuer Account and Hedge Collateral Account shall not be subject to, and the Securities Intermediary hereby waives, any security interest, lien, claim, encumbrance, or right of setoff in favor of the Securities Intermediary or anyone claiming through the Securities Intermediary (other than the Indenture Trustee as to any Issuer Account or Hedge Counterparty as to any Hedge Collateral Account in the name of any such Hedge Counterparty as provided for under a Hedge Agreement).
(O)For purposes of Article 8 of the UCC, the jurisdiction of the Securities Intermediary with respect to the Collateral shall be the State of New York.
(P)It is the intent of the Indenture Trustee and the Issuer that each Issuer Account and Hedge Collateral Account shall be a securities account on behalf of the Indenture Trustee for the benefit of the Secured Parties (as limited by the express provisions of Section 8.2(d)) and not an account of the Issuer.
(ii)The Manager shall have the power to instruct the Indenture Trustee in writing to make withdrawals and payments from the Issuer Accounts and Hedge Collateral Accounts for the purpose of permitting the Manager to carry out its respective duties under the Management Services Agreement or hereunder or permitting the Indenture Trustee to carry out its duties under the Indenture or permitting the Issuer to carry out its obligations under the Hedge Agreements; provided, that the Indenture Trustee shall have no responsibility for monitoring the Manager’s duties and shall rely exclusively on such written direction to determine if a withdrawal or payment should be made.
Section 18.3Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.
Section 18.4Asset Disposition Proceeds.
(a)In the event that the Issuer shall sell, transfer or otherwise dispose of any Assets in a Permitted Disposition or purchased by the Manager from the Issuer pursuant to Section 2(c)(iii) of the Management Services Agreement, then the Issuer shall instruct the Paying Agent, on behalf of the Indenture Trustee, in writing to deposit the Asset Disposition Proceeds into the Asset Disposition Proceeds Account. In the event that the Proceeds Retention Condition is not satisfied, then the Issuer shall instruct the Paying Agent, on behalf of the Indenture Trustee, in writing (A) to redeem Notes with such proceeds up to the total amount of Asset Disposition Proceeds required to satisfy the Proceeds Retention Condition after giving effect to

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such redemption and (B) following such redemption of the Notes, to deposit any remaining net proceeds from such disposition into the Asset Disposition Proceeds Account. For the avoidance of doubt, any amounts deposited in the Asset Disposition Proceeds Account pursuant to the immediately preceding clause (B) shall constitute Asset Disposition Proceeds.
(b)During the Asset Purchase Period, the Issuer shall be permitted to acquire Additional Assets (to the extent such purchase satisfies the requirements under clause (c) of the definition of Permitted Dispositions). In the event of such a purchase of Additional Assets, the Issuer shall provide written direction to the Indenture Trustee to make payment of the purchase price to such Person no later than five (5) Business Days prior to such acquisition; provided, that the Issuer certifies to the Indenture Trustee that (i) no Warm Trigger Event, Material Manager Default, Rapid Amortization Event exists, no Default or Event of Default has occurred and is continuing, (ii) no selection procedures materially adverse to the Noteholders or any of the Hedge Counterparties were used in selecting such Additional Assets for purchase, (iii) the Proceeds Retention Condition shall be satisfied (each on a pro forma basis after giving effect to such contemplated purchase of Additional Assets, the repayment of the Notes or any required hedge termination payment, if any, with any remaining amounts), and (iv) the Rating Agency Condition shall have been satisfied with respect thereto.
(c)In the event that any Asset Disposition Proceeds on deposit in the Asset Disposition Proceeds Account are not applied to the purchase of Additional Assets by the Payment Determination Date of the Collection Period following 180 days subsequent to the end of the Collection Period in which such Asset Disposition Proceeds were deposited into the Asset Disposition Proceeds Account (the “Asset Purchase Period”), the Issuer, or Manager on its behalf, shall direct the Indenture Trustee to deposit such remaining amounts into the Collection Account; provided, however, that the Issuer, or Manager on its behalf, may, in its sole discretion, direct the Paying Agent on behalf of the Indenture Trustee to deposit such remaining amounts into the Collection Account prior to the end of the Asset Purchase Period. For the avoidance of doubt, during the Asset Purchase Period, to the extent any Asset Disposition Proceeds on deposit in the Asset Disposition Proceeds Account are not applied to the purchase of Additional Assets, the Issuer, or the Manager on its behalf, at any time during the Asset Purchase Period may, but at the end of the Asset Purchase Period shall direct any funds to redeem Notes such that after such redemption, the DSCR shall not be less than 1.55 to 1.00, the Production Tracking Rate shall not be less than 80%, the IO DSCR shall not be less than 2.00 to 1.00 and the LTV shall not be greater than 75% on a pro forma basis after giving effect to such sale or exchange and the application of the proceeds therefrom to the purchase of Additional Assets, the repayment of the Notes or any required hedge termination payment, if any (such conditions, the “Proceeds Retention Condition”); but in no event shall the aggregate principal amount of Notes so redeemed be less than the product of (i) 125% and (ii) 55% of the amount of Asset Disposition Proceeds not used to purchase Additional Assets, and any remaining amounts shall be deposited into the Collection Account and be deemed Available Funds for the next Payment Date.
(d)The Back-Up Manager shall be promptly notified (including by email) of the sale, assignment, transfer or other disposition of any Collateral in a Permitted Disposition.
Section 18.5Asset Valuation.
(a)Reserve Reports. The Issuer will be required to deliver, or to cause the Manager to deliver, to the Indenture Trustee, the Back-Up Manager, each Hedge Counterparty and each Rating Agency (i) an updated Reserve Report within ninety (90) days of the commencement of each calendar year (which report shall be audited or prepared by an independent petroleum engineer) and (ii) an updated Reserve Report within sixty (60) days after June 30 of each year (which report shall be internally prepared by the Issuer); provided, that the Issuer must deliver an updated Reserve Report within forty-five (45) days of any Permitted

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Disposition or combination of related Permitted Dispositions of an aggregate amount of Assets exceeding 5% of the PV-10 of the Assets as of the Closing Date (it being understood that (i) such updated Reserve Report may be the same report as the most recently delivered Reserve Report, rolled forward by or under the supervision of the Chief Operating Officer (or similarly titled position) of the Manager and (ii) to the extent a Reserve Report with respect to a Permitted Disposition or combination of related Permitted Dispositions has been so delivered to the Indenture Trustee, the Back-Up Manager and each Rating Agency, the foregoing shall not require the delivery of an additional Reserve Report upon additional related Permitted Dispositions unless and until the aggregate amount of such additional related Permitted Dispositions exceeds 5% of the PV-10 of the Assets as of the Closing Date) (and, following any fiscal year for which the P&A Expense Amount exceeds the P&A Reserve Trigger Amount, such updated Reserve Report shall include a separate schedule identifying the estimated net capital expenditures associated with plugging and abandonment liabilities with respect to the Assets), and, to the extent the Issuer, or the Manager on the Issuer’s behalf, in its discretion obtains an updated Reserve Report prior to any otherwise scheduled annually updated Reserve Report, the Issuer, or the Manager on the Issuer’s behalf, will be required to deliver each such updated Reserve Report to such persons promptly upon its receipt thereof. The Reserve Report shall be prepared by or under the supervision of the Chief Operating Officer (or similarly titled position) of the Manager, who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report (and, with respect to the first Reserve Report delivered by the Issuer under this Indenture, the Transfer Agreement Reserve Report). With the delivery of each Reserve Report, the Issuer shall provide to the Indenture Trustee, the Back-Up Manager, each Hedge Counterparty and each Rating Agency a certificate from a Responsible Officer of the Manager certifying that in all material respects the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct, the Issuer owns good and defensible title to the Assets evaluated in such Reserve Report, such Assets are free of all Liens except for Permitted Liens and that, to the extent there has been a change in the Net Revenue Interest or Working Interest, that change is identified in an exhibit to the certificate. With the delivery of each Reserve Report, the Issuer shall provide to the Indenture Trustee, the Back-Up Manager, each Hedge Counterparty and each Rating Agency a report that shows any change, set forth to the eighth decimal place, in the Net Revenue Interest relating to the prior year or Working Interest relating to the prior year with respect to any Well from the Net Revenue Interest or Working Interest provided in the previous Reserve Report, and except to the extent already included in a report under this Section 8.5. The Indenture Trustee shall promptly make any such Reserve Reports, certificates and other reports delivered pursuant to this Section 8.5 available to the Noteholders and the Hedge Counterparties by posting any such Reserve Reports, certificates or other reports delivered pursuant to this Section 8.5 to its internet website referenced in Section 6.6 hereof subject to the terms thereof.
Section 18.6Distributions.
(i)Except as otherwise provided in clause (ii) below, on each Payment Date, the Issuer, or the Manager on the Issuer’s behalf, shall instruct the Indenture Trustee in writing (based solely on the information contained in the Payment Date Report delivered on the related Payment Determination Date pursuant to this Section 8.6) to apply all Available Funds for payments of the following amounts in the following order of priority; provided, that, with respect to the Payment Date in September 2044, amounts on deposit in the Liquidity Reserve Account shall be deposited into the Collection Account (the “Priority of Payments”):
(A)(1) to the Indenture Trustee, the Indenture Trustee’s (x) fees and any accrued and unpaid fees of the Indenture Trustee with respect

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to prior Payment Dates, plus (y) any Administrative Expenses, owed to the Indenture Trustee; provided, that, in no event shall the cumulative aggregate amount paid to the Indenture Trustee pursuant to this clause (A)(1) exceed $150,000 in any calendar year (provided, that any amounts in excess of $150,000 which are unpaid pursuant to the cap herein or pursuant to the Indenture shall remain due and owing to the Indenture Trustee and payable in the following year and each subsequent year thereafter until repaid in full); provided, however, that upon the occurrence of and during the continuation of an Event of Default, no such cap shall apply, and (2) to the Back-Up Manager, the Back-Up Management Fee and any accrued and unpaid Back-Up Management Fees or indemnity amounts with respect to prior Payment Dates, plus any Administrative Expenses payable to the Back-Up Manager; provided, that, in no event shall the cumulative aggregate amount of payments paid pursuant to this clause (A)(2) exceed (i) $150,000 in any calendar year during which the Back-Up Manager does not perform any Warm Back-Up Management Duties or Hot Back-Up Management Duties (provided, that any amounts in excess of $150,000 which are unpaid pursuant to the cap herein shall remain due and owing to the Back-Up Manager and payable in the following year and each subsequent year thereafter until repaid in full), (ii) $550,000 in any calendar year during which the Back-Up Manager performs Warm Back-Up Management Duties (but not Hot Back-Up Management Duties) (provided, that any amounts in excess of $550,000 which are unpaid pursuant to the cap herein shall remain due and owing to the Back-Up Manager and payable in the following year and each subsequent year thereafter until repaid in full), and (iii) $1,000,000 in any calendar year during which the Back-Up Manager performs Hot Back-Up Management Duties (provided, that any amounts in excess of $1,000,000 which are unpaid pursuant to the cap herein shall remain due and owing to the Back-Up Manager and payable in the following year and each subsequent year thereafter until repaid in full); provided, however, that in the event of a liquidation following an Event of Default, no such cap shall apply; further provided, however, during a period that the Back-Up Manager is required to provide Warm Back-Up Management Duties or Hot Back-Up Management Duties, the Majority Noteholders may approve a further increase of the amounts set forth in clauses (ii) and (iii) above solely in order to take account of any additional increased fees and expenses associated with the provision of such services;
(B)to the Manager, the Administration Fee and any accrued and unpaid Administration Fees with respect to prior Payment Dates; provided, that, in no event shall the cumulative aggregate amount of Administration Fees paid pursuant to this clause (B) exceed $360,000 in any calendar year; provided that to the extent the Manager is terminated pursuant to Section 4.27 hereof, such cap shall be increased to an amount, in the Issuer’s good faith judgment, that is commensurate with similar arrangements for management services by third party providers, to be approved by the Majority Noteholders and the Hedge Counterparties (such approval not to be unreasonably withheld, conditioned or delayed);
(C)pro rata and pari passu, (1) to the Hedge Counterparties, pro rata, any net payments due and payable by the Issuer under the related Hedge Agreements, in each case, other than termination amounts, and (2) to the Class A Noteholders, pro rata, based on the Note Interest due on the

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Class A Notes (other than Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f)), the Note Interest on the Class A Notes for such Payment Date (other than Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f));
(D)to the Liquidity Reserve Account, the amount necessary to cause the balance in the Liquidity Reserve Account to equal the Liquidity Reserve Account Target Amount;
(E)to the Hedge Counterparties, pro rata, termination payments arising from reductions in the notional amount under the related Hedge Agreements in order to maintain compliance with the Indenture;
(F)pro rata and pari passu, (1) to the Class A Noteholders, pro rata, based on the Class A Outstanding Principal Balance, as payment of principal on the Class A Notes, the Class A Principal Distribution Amount with respect to such Payment Date, and (2) to the Hedge Counterparties, pro rata, any termination payments owed as a result of an event of default under Sections 5(a)(i) (Failure to Pay) or 5(a)(vii)(Bankruptcy), in each case where the Issuer is the Defaulting Party (as defined therein) of the related Hedge Agreement (as such Defaulting Party is defined therein);
(G)to the Class A Noteholders, based on the Class A Outstanding Principal Balance, in the case of a Redemption of Class A Notes, pro rata, the applicable Redemption Price;
(H)to the Class A Noteholders, pro rata, based on the Class A Outstanding Principal Balance, the Class A Excess Amortization Amount (if any) with respect to such Payment Date;
(I)to the Class B Noteholders, pro rata, based on the Note Interest due on the Class B Notes (other than Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f)), the Note Interest on the Class B Notes for such Payment Date (other than Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f));
(J)to the Class B Noteholders, pro rata, based on the Class B Outstanding Principal Balance, as payment of principal on the Class B Notes, the Class B Principal Distribution Amount with respect to such Payment Date;
(K)to the Class B Noteholders, pro rata, based on the Class B Outstanding Principal Balance, in the case of a Redemption of Class B Notes, pro rata, the remaining applicable Redemption Price;
(L)pro rata and pari passu (1) to the Class B Noteholders, pro rata, based on the Class B Outstanding Principal Balance, the Class B Excess Amortization Amount (if any) and (2) to the Hedge Counterparties, pro rata, any termination amounts due and payable by the Issuer under the related Hedge Agreements but not paid in accordance with clause (F) above;

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(M)if a P&A Reserve Trigger has occurred with respect to the Issuer’s prior fiscal year, to the P&A Reserve Account, the amount necessary to cause the balance in the P&A Reserve Account to equal the P&A Reserve Amount;
(N)(1) first, pro rata and pari passu (I) to the Class A Noteholders, Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f) on the Class A Notes for such Payment Date and (II) to the Hedge Counterparties, pro rata, any remaining amounts owed to the Hedge Counterparties under the Basic Documents, (2) second, to the extent applicable, to the Class B Noteholders, Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f) on the Class B Notes for such Payment Date, (3) third, to the Class A Noteholders, any remaining amounts owed to the Class A Noteholders under the Basic Documents and (4) fourth, to the Class B Noteholders, any remaining amounts owed to the Class B Noteholders under the Basic Documents;
(O)to the Indenture Trustee and the Back-Up Manager, any amounts owed but not paid in accordance with clause (A) above;
(P)pro rata and pari passu, (a) to the Manager, any unpaid AFE Cover Amounts and any amounts owed but not paid in accordance with clause (B) above;
(Q)to the Operator, any indemnity amount due and payable under the Transfer Agreement;
(R)to the Manager, the Excess Management Fee; and
(S)to the Issuer, all remaining amounts, free and clear of the lien of the Indenture, and any remaining Available Funds, free and clear of the lien of the Indenture; provided, that, during the continuance of any event or condition that, with notice, the lapse of time, or both, that does or would constitute a Rapid Amortization Event, a Warm Trigger Event, an Event of Default or a Material Manager Default (as defined in the Management Services Agreement), any remaining amounts shall remain on deposit in the Collection Account, the Liquidity Reserve Account or the P&A Reserve Account, as applicable, for application as Available Funds.
(ii)On each Payment Date (a) as of which the Notes have been accelerated as a result of an Event of Default, (b) on which a Redemption is scheduled to occur or (c) that is on or after the Final Scheduled Payment Date, in each case as specified solely in the Payment Date Report, Available Funds and all amounts in the Collection Account, the Liquidity Reserve Account, the Asset Disposition Proceeds Account and the P&A Reserve Account shall be distributed by the Indenture Trustee in the following order and priority of payments (the “Special Priority of Payments”):
(A)all payments required and in the order required by clauses (A) and (B) of the Priority of Payments, in each case without giving effect to the provisos stated therein, along with the fees and expenses incurred by

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the Secured Parties in connection with their enforcement of remedies under this Indenture;
(B)first, (1) pro rata and pari passu, to (x) the Class A Noteholders, the Note Interest on the Class A Notes for such Payment Date (other than Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f)); and (y) to each Hedge Counterparty, pro rata, any net payments under the Hedge Agreement (other than any termination amounts) and then, (2) pro rata and pari passu, to (x) the Class A Noteholders, pro rata, the Class A Outstanding Principal Balance until the Class A Outstanding Principal Balance has been paid in full, or in the case of a Redemption of Class A Notes, the Redemption Price for the Class A Notes and (y) to each Hedge Counterparty, pro rata, any amounts due and payable under the Hedge Agreements that have not been paid pursuant to clause (B)(1)(y) above;
(C)first, (1) pro rata and pari passu, to the Class B Noteholders, the Note Interest on the Class B Notes for such Payment Date (other than Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f)) and then, (2) pro rata and pari passu, to the Class B Noteholders, the Class B Outstanding Principal Balance until the Class B Outstanding Principal Balance has been paid in full, or in the case of a Redemption of Class B Notes, the Redemption Price for the Class B Notes;
(D)first, (1) to the Class A Noteholders, Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f) on the Class A Notes for such Payment Date, and then, (2) to the extent applicable, to the Class B Noteholders, Default Interest and Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(f) on the Class B Notes for such Payment Date;
(E)pro rata and pari passu, (1) to the Class A Noteholders, any remaining amounts owed to the Class A Noteholders under the Basic Documents, other than enforcement fees and expenses contemplated in clause (A) of the Special Priority of Payments and (2) to the Hedge Counterparties, pro rata, any remaining amounts owed to the Hedge Counterparties under the Basic Documents;
(F)to the Class B Noteholders, any remaining amounts owed under the Basic Documents, other than enforcement fees and expenses contemplated in clause (A) of the Special Priority of Payments;
(G)pro rata and pari passu, to the Indenture Trustee, the Back-up Manager and the Manager, any amounts owed but not paid in accordance with clause (A) above; and
(H)to the Issuer, all remaining amounts, free and clear of the lien of the Indenture.
(iii)On or prior to the close of business on each Payment Determination Date, the Manager shall calculate all amounts required to be withdrawn from the Issuer Accounts (as applicable) and distributed in accordance with the Priority of Payments or the Special Priority of Payments, as applicable,

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and shall provide such calculation to the Indenture Trustee as set forth in the Payment Date Report.
(iv)Notwithstanding the foregoing, if a Diversified Party other than the Issuer pays any amounts to the Issuer (i) with respect to any matters arising out of or relating to a breach of contract or indemnification obligation under any Basic Document or (ii) under the Transfer Agreement, those amounts less, with respect to subclause (i), the sum of (A) any amounts paid or payable by the Issuer to any third parties as of the time of receipt with respect to the applicable breach or indemnification obligation and (B) any amounts reinvested or reasonably expected to be reinvested by the Issuer (including to cure or remedy any breach or liability) to the extent permitted by the Basic Documents, shall be paid to the Noteholders in a redemption of the Notes in accordance with clause (G) of the Priority of Payments so long as the Class A Notes are Outstanding, and then in accordance with clause (K) of the Priority of Payments with respect to the Class B Notes when the Class A Notes are no longer Outstanding, in each case, without premium or penalty. In addition, any Excess Hedge Amounts shall be paid to the Noteholders in a redemption of the Notes in accordance with clause (G) of the Priority of Payments so long as the Class A Notes are Outstanding, and then in accordance with clause (K) of the Priority of Payments with respect to the Class B Notes when the Class A Notes are no longer Outstanding, in each case, without premium or penalty.
Section 18.7Liquidity Reserve Account.
(a)On the Closing Date, the Issuer shall cause an amount not less than the Liquidity Reserve Account Initial Deposit to be deposited by the Indenture Trustee into the Liquidity Reserve Account.
(b)If the amount on deposit in the Liquidity Reserve Account on any Payment Date (after giving effect to all deposits thereto or withdrawals therefrom on such Payment Date) is greater than the Liquidity Reserve Account Target Amount for such Payment Date, the Manager shall instruct the Indenture Trustee to withdraw such amount from the Liquidity Reserve Account and apply it as Available Funds for such Payment Date as set forth in the Payment Date Report.
(c)Without duplication, in the event that the Available Funds for a Payment Date are not sufficient to make the full amount of the payments and deposits required pursuant to Sections 8.6(i)(A) through (C) (excluding clause (C)(1)) on such Payment Date, the Manager shall instruct the Paying Agent on behalf of the Indenture Trustee to withdraw from the Liquidity Reserve Account on such Payment Date an amount equal to such shortfall, to the extent of funds available therein, and pay or deposit such amount according to the priorities set forth in Sections 8.6(i)(A) through (C) (excluding clause (C)(1)). In addition, if Section 8.6(ii) applies, all amounts shall be withdrawn from the Liquidity Reserve Account and applied as provided in Section 8.6(ii), as set forth in the Payment Date Report.
(d)Following the payment in full of the aggregate Outstanding Amount of the Class A Notes and termination or expiration of all Hedge Agreements and payment in full of all obligations due and payable in connection therewith (including any termination amounts due thereunder) and all other amounts owing or to be distributed hereunder to the Class A Noteholders and the Hedge Counterparties, any amount remaining on deposit in the Liquidity Reserve Account shall be distributed to the Issuer free and clear of the lien of this Indenture upon written direction to the Indenture Trustee by the Manager.

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Section 18.8Statements to Noteholders. On or prior to the close of business on each Payment Determination Date, the Issuer shall cause the Manager to provide to the Indenture Trustee for the Indenture Trustee to (x) post on its internet website pursuant to Section 6.6 of the Indenture or (y) provide to each Hedge Counterparty who does not then have access to such website pursuant to Section 6.6 hereof, a statement substantially in the form of Exhibit D hereto, setting forth at least the following information as to the Notes, to the extent applicable:
(a)the amount of Collections and Asset Disposition Proceeds, if any, received in the Collection Account with respect to the related Collection Period;
(b)confirmation of compliance with the terms of the Indenture and the other Basic Documents;
(c)other reports received or prepared by the Manager in respect of the Wellbore Interests and the Hedge Agreements, along with a summary of all Hedge Agreements in place, including volumes and percentage of production that is hedged, along with a calculation of the hedge ratio;
(d)the amount of Administrative Expenses, Direct Expenses and indemnity payments paid to each party or withheld by the Operator pursuant to the Joint Operating Agreement or the Manager pursuant to the Management Services Agreement during the most recent Collection Period;
(e)the amount of any fees and expenses paid to the Indenture Trustee, the Manager or the Back-Up Manager with respect to the related Collection Period;
(f)if any, the amount of (i) any payment (including breakage or termination payments) paid to a Hedge Counterparty with respect to the related Collection Period, (ii) all deposits into and transfers out of each Hedge Collateral Account from or to each Hedge Counterparty during the Collection Period, and (iii) the balance of Posted Collateral in each Hedge Collateral Account on such Payment Determination Date, including, for the avoidance of doubt, the name of each Hedge Counterparty entitled to the balance identified by the Manager in clause (ii) above; provided, however, if a segregated Hedge Collateral Account is maintained for a Hedge Counterparty, the information set out in clauses (ii) and (iii) need only be provided to each such Hedge Counterparty, individually, the Indenture Trustee and the Securities Intermediary and will not be required to be posted on the Indenture Trustee’s website;
(g)the amount deposited in or withdrawn from the Liquidity Reserve Account on such Payment Determination Date, the amount on deposit in the Liquidity Reserve Account after giving effect to such deposit or withdrawal and the Liquidity Reserve Account Target Amount for such Payment Date;
(h)the amount deposited in or withdrawn from the P&A Reserve Account on such Payment Determination Date, the amount on deposit in the P&A Reserve Account after giving effect to such deposit or withdrawal and the P&A Reserve Amount for such Payment Date;
(i)the Class A Outstanding Principal Balance, the Class A Principal Distribution Amount, the Class B Outstanding Principal Balance, the Class B Principal Distribution Amount, the Class A Excess Amortization Amount (if any) and the Class B Excess Amortization Amount (if any), with respect to such Payment Determination Date;
(j)the Note Interest with respect to such Payment Date;

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(k)the Class A Excess Allocation Percentage and Class B Excess Allocation Percentage, with respect to such Payment Date;
(l)the amount of the DSCR, the IO DSCR, the LTV, the Production Tracking Rate and the Securitized Net Cash Flow, in each case with respect to the related Collection Period;
(m)the amounts on deposit in each Issuer Account as of the related Payment Determination Date;
(n)amounts due and owing and paid to the Noteholders under the Note Purchase Agreement and other Basic Documents;
(o)identification of any Assets repurchased by the Operator by Well number with respect to such Asset (as specified in the Schedule of Assets), to the extent applicable;
(p)a listing of all Permitted Indebtedness outstanding as of such date;
(q)the amount of any AFE Cover Amounts utilized to participate in AFE Operations during the related Collection Period;
(r)a listing of any Additional Assets acquired by the Issuer;
(s)any reports regarding greenhouse gas or other carbon emissions associated with the Issuer’s operations or the products, to the extent publicly disclosed by the Issuer or any of its Affiliates;
(t)the amount of Asset Disposition Proceeds deposited in the Asset Disposition Proceeds Account;
(u)on an annual basis, on the Payment Determination Date occurring in March such report shall include the aggregate P&A Expense Amount for the preceding year and the excess, if any, of the P&A Expense Amount in excess of the P&A Reserve Trigger Amount;
(v)on an annual basis such report shall include any change, set forth to the fourth decimal place, in the Net Revenue Interest or Working Interest with respect to any Well from the Net Revenue Interest or Working Interest reflected in the most recent Reserve Report, except to the extent already expressly identified in a report under this Section 8.8;
(w)reasonably detailed information regarding any Title Failure (as defined in the Transfer Agreement) of which the Issuer has Knowledge and all documentation with respect to any actions, claims or Proceedings under the Transfer Agreement;
(x)any material Environmental Liability of which Issuer, Operator, Manager or any Affiliate thereof obtained Knowledge since the most recent report delivered under this Section 8.8;
(y)the filing or commencement of, or the threat in writing of, any action, suit, investigation, arbitration or proceeding by or before any arbitrator or Governmental Body against Issuer, or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed), that, in either case, if adversely determined, could reasonably be expected to result in liability in excess of $250,000; and
(z)a reasonably detailed description of any Permitted Dispositions.

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Deliveries pursuant to this Section 8.8 or any other Section of this Indenture may be delivered by electronic mail.
Section 18.9[Reserved].
Section 18.10[Reserved].
Section 18.11Original Documents. The Indenture Trustee agrees to hold any assignments of mortgage or deeds of trust that are part of the Collateral received by it. The Indenture Trustee shall keep such documents in its possession separate and apart from all other property that it is holding in its possession and from its own general assets. The Indenture Trustee shall keep records showing that it is holding such documents pursuant to this Indenture. Such documents shall be released by the Indenture Trustee to or at the direction of the Issuer upon the satisfaction and discharge of this Indenture.
Article XIX

SUPPLEMENTAL INDENTURES
Section 19.1Supplemental Indentures with Consent of Noteholders and Hedge Counterparties.
(a)The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, with the consent of the Majority Noteholders by Act of the Noteholders delivered to the Issuer and the Indenture Trustee, and with notice to each Hedge Counterparty (and the consent of any Hedge Counterparty if the rights of such Hedge Counterparty would be adversely affected in any material respect), and, to the extent the Notes are rated by any Rating Agency, written confirmation from such Rating Agency that no immediate withdrawal or reduction with respect to its then-current rating of any class of rated Notes will occur as a result, by Act of the Noteholders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note or any Hedge Counterparty under each Hedge Agreement affected thereby:
(i)change the Final Scheduled Payment Date or the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the Interest Rate thereon or the Applicable Premium or Change of Control Applicable Premium or Redemption Price or Change of Control Redemption Price, as applicable, with respect thereto, change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or interest on the Notes or any payments or priority of payments to any Hedge Counterparty under any Hedge Agreement, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes or under the Hedge Agreements on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date);

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(ii)reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;
(iii)modify or alter the provisions of the proviso to the definition of the term “Outstanding”;
(iv)modify or alter the definitions of the terms “Asset Disposition Proceeds,” “Available Funds,” “Class A Excess Amortization Amount,” “Class A Excess Allocation Percentage,” “Class A Excess Amortization Amount,” “Class A Principal Distribution Amount,” “Class A Scheduled Principal Distribution Amount,” “Class B Excess Allocation Percentage,” “Class B Excess Amortization Amount,” “Class B Principal Distribution Amount,” “Class B Scheduled Principal Distribution Amount,” “DSCR,” “Equity Contribution Cure,” “Hedge Agreement,” “Hedge Counterparty or Hedge Counterparties,” “Hedge Counterparty Rating Requirement,” “IO DSCR,” “Liquidity Reserve Account Target Amount,” “LTV,” “Majority Noteholders,” “P&A Reserve Amount,” “Permitted Dispositions,” “Permitted Liens,” “Production Tracking Rate,” “Rapid Amortization Event,” “Redemption Price,” “Reserve Report,” “Securitized Net Cash Flow,” or “Warm Trigger Event”;
(v)reduce the percentage of the Outstanding Amount of the Notes required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Collateral pursuant to Section 5.4;
(vi)modify any provision of this Section 9.1 except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Basic Documents (excluding the Hedge Agreements) cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby, or if any Hedge Agreements are to be effected thereby, without the consent of the applicable Hedge Counterparties;
(vii)modify Section 8.6 or modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the optional or mandatory redemption of the Notes contained herein;
(viii)permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note or the Hedge Counterparty to any Hedge Agreement of the security provided by the lien of this Indenture; or
(ix)except as provided in Section 5.4(a)(iv), liquidate the Assets when the proceeds of such sale would be insufficient to fully pay the Notes and the obligations of Issuer under the Hedge Agreements.
(b)The Indenture Trustee shall rely exclusively on an Officer’s Certificate of the Issuer and an Opinion of Counsel to determine whether any such action would require the

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consent of the Majority Noteholders, the consent of all of the Noteholders or the consent of any Hedge Counterparty. The Indenture Trustee shall not be liable for reliance on such Officer’s Certificate or Opinion of Counsel.
(c)Reserved.
(d)Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.1, the Indenture Trustee shall transmit to the Holders of the Notes, the Hedge Counterparties, and each Rating Agency a notice (to be provided by the Issuer) setting forth in general terms the substance of such supplemental indenture and a copy of such supplemental indenture. Any failure of the Indenture Trustee to transmit such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
Section 19.2Execution of Supplemental Indentures. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification thereby of the trusts created by this Indenture, the Indenture Trustee shall be provided with and, subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an Officer’s Certificate of the Issuer and an Opinion of Counsel stating that the execution of such supplemental indenture (i) is authorized or permitted by this Indenture and that all conditions precedent under this Indenture for the execution of the supplemental indenture have been complied with, (ii) will not cause the Issuer to become a corporation or another entity taxable as a corporation for U.S. federal income tax purposes, and (iii) will not cause the Notes that were characterized as indebtedness at issuance to be treated as other than indebtedness for U.S. federal income tax purposes; provided, that the Opinion of Counsel described in clause (ii) and clause (iii) will be subject to the same conditions, exclusions and limitations as any Opinion of Counsel with respect to such matters given upon the issuance of the Notes. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise. The Indenture Trustee shall notify each Rating Agency of the execution of any supplemental indentures. The Issuer shall notify the Back-Up Manager of any amendment to the Basic Documents that (x) modifies the duties of the Manager or Operator and (y) adversely affects or increases the duties of the Back-Up Manager. No amendment to a Basic Document or the execution of any supplemental indenture pursuant to this Article IX that adversely affects or increases the duties of the Back-Up Manager will be effective without the consent of the Back-Up Manager.
Section 19.3Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer, the Hedge Counterparties, and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 19.4Reference in Notes to Supplemental Indentures. If the Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.

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Article XX

REDEMPTION OF NOTES
Section 20.1Redemption.
(a)Subject to Section 10.1(b), the Outstanding Notes are subject to redemption in whole, but not in part, at the direction of the Issuer on the Redemption Date. If the Outstanding Notes, or some portion thereof, are to be redeemed pursuant to this Section 10.1(a), the Issuer shall furnish a revocable notice of such election to the Indenture Trustee not later than the close of business fourteen (14) days prior to the applicable Redemption Date, and the Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date with the Paying Agent in the Collection Account the Redemption Price of the applicable Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.2 to each Holder of the Notes, unless the Issuer shall have notified the Indenture Trustee in writing of the revocation of such election prior to the Redemption Date.
(b)Upon the occurrence of a Change of Control, the Outstanding Notes are subject to redemption in whole, but not in part, on the Redemption Date at the applicable Change of Control Redemption Price. If the Outstanding Notes, or some portion thereof, are to be redeemed pursuant to this Section 10.1(b), the Issuer shall furnish a revocable notice of such election to the Indenture Trustee not later than the close of business on the ninetieth (90th) day subsequent to the date on which the Change of Control occurs and the Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date with the Paying Agent in the Collection Account the Change of Control Redemption Price of the Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.2 to each Holder of the Notes, unless the Issuer shall have notified the Indenture Trustee in writing of the revocation of such election prior to the Redemption Date.
Section 20.2Form of Redemption Notice. Following receipt by the Indenture Trustee of the Issuer’s notice of redemption in accordance with Section 10.1, such notice of redemption shall be posted to the Indenture Trustee’s website for distributing information to the Noteholders and given by the Indenture Trustee by first-class mail, overnight mail, postage prepaid not later than ten (10) days prior to the applicable Redemption Date to each Holder of Notes affected thereby and each Hedge Counterparty, as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder’s address appearing in the Note Register and to each Hedge Counterparty at the address appearing in its Hedge Counterparty Rights Agreement. The Indenture Trustee shall provide a copy of such notice to each Rating Agency.
Article XXIAll notices of redemption shall state:
(a)the Redemption Date;
(b)the Redemption Price or Change of Control Redemption Price, as applicable; and
(c)the place where such Notes are to be surrendered for payment of the Redemption Price or Change of Control Redemption Price, as applicable (which shall be the office or agency of the Issuer to be maintained as provided in Section 4.2).

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Article XXIINotice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note.
Article XXIIIUpon redemption of the Notes, the Indenture shall not terminate and shall remain in force and effect with respect to any of the Hedge Counterparties or any of the Hedge Agreements until and unless all of the Hedge Agreements have terminated and all payments thereunder, including the termination value, have been paid in full.
Section 23.1Notes Payable on Redemption Date. The Notes or portions thereof to be redeemed shall, following notice of redemption as required by Section 10.2, on the Redemption Date become due and payable at the Redemption Price or Change of Control Redemption Price, as applicable, and (unless the Issuer shall default in the payment of the Redemption Price or Change of Control Redemption Price, as applicable) no interest shall accrue on the Redemption Price or Change of Control Redemption Price, as applicable, for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price or Change of Control Redemption Price, as applicable. On or before such Redemption Date, Issuer shall cause the aggregate Redemption Price to be deposited to the Collection Account, and such amount shall be paid in accordance with the Special Priority of Payments.
Article XXIV

SATISFACTION AND DISCHARGE
Section 24.1Satisfaction and Discharge of Indenture With Respect to the Notes. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon plus all other amounts due under the Basic Documents, (iv) Sections 4.1, 4.2, 4.3, 4.4, 4.8, 4.11, 4.12, 4.14 and 4.18, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee under Section 11.2) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when:
(A)either:
(1)all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.6 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 4.3) have been delivered to the Indenture Trustee for cancellation; or
(2)all Notes not theretofore delivered to the Indenture Trustee for cancellation:

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(I)have become due and payable, or
(II)are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer,
and the Issuer, in the case of (I) or (II) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Indenture Trustee for cancellation when due to the applicable Final Scheduled Payment Date or Redemption Date (if Notes shall have been called for redemption pursuant to Section 10.1), as the case may be;
(B)the Issuer has paid or caused to be paid all other sums payable by the Issuer hereunder; and
(C)the Issuer has delivered to the Indenture Trustee an Officer’s Certificate, an Opinion of Counsel and, each meeting the applicable requirements of Section 12.1(a) and, subject to Section 12.2, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Article XXVNotwithstanding the foregoing, the foregoing satisfaction and discharge of the Indenture only applies to the Notes and the Noteholders subject to the terms in this Section 11. The Indenture shall not terminate and cease to be of further effect with respect to any of the Hedge Counterparties or any of the Hedge Agreements until and unless all of the Hedge Agreements have terminated and all payments thereunder, including the termination value, have been paid in full and all Posted Collateral returned to each Hedge Counterparty as required by the applicable Hedge Agreement. At any time that the Notes are no longer outstanding, the Hedge Counterparties shall be entitled to exercise any rights and remedies set forth herein or in the other Basic Documents (other than the Note Purchase Agreement) otherwise afforded to the Noteholders or Majority Noteholders, including any rights granted to the foregoing as a Secured Party under any of the other Basic Documents (other than the Note Purchase Agreement).
Section 25.1Application of Trust Money. All monies deposited with the Indenture Trustee pursuant to Section 11.1 hereof shall be held on behalf of the Noteholders and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, (i) to the Holders of the particular Notes for the payment or redemption of which such monies have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest plus all other amounts due under the Basic Documents and (ii) to the Hedge

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Counterparties, of all sums, if any, due or to become due to the applicable Hedge Counterparty under and in accordance with the Hedge Agreements (including any termination value due or becoming due thereunder); but such monies need not be segregated from other funds except to the extent required herein or in the Management Services Agreement or required by Law.
Section 25.2Repayment of Monies Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all monies then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 4.3 and thereupon such Paying Agent shall be released from all further liability with respect to such monies.
Article XXVI

MISCELLANEOUS
Section 26.1Compliance Certificates and Opinions, etc.
(a)Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.
Article XXVIIEvery certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(i)a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;
(ii)a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(iii)a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv)a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.
Section 27.1Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

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(a)Any certificate or opinion of an authorized officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer’s certificate or opinion is based are erroneous. Any such certificate of an authorized officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Manager or the Issuer, stating that the information with respect to such factual matters is in the possession of the Manager or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
(b)Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
(c)Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.
Section 27.2Acts of Noteholders.
(a)Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act of the Noteholders” signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 12.3.
(b)The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.
(c)The ownership of Notes shall be proved by the Note Register.
(d)Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.
Section 27.3Notices, etc., to Indenture Trustee and Issuer. Any request, demand, authorization, direction, notice, consent, waiver or act of Noteholders or Hedge Counterparties or other documents provided or permitted by this Indenture shall be in writing

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and if such request, demand, authorization, direction, notice, consent, waiver or act of Noteholders or the Hedge Counterparties is to be made upon, given or furnished to or filed with:
(i)the Indenture Trustee by any Noteholder, by the Issuer or by any Hedge Counterparty shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (which may be made via e-mail transmission, pdf or overnight delivery) to or with a Responsible Officer of the Indenture Trustee at its Corporate Trust Office;
(ii)the Issuer by the Indenture Trustee, by any Noteholder or by any Hedge Counterparty shall be sufficient for every purpose hereunder if in writing and sent by facsimile or email, in each case with a copy to follow via first-class mail, postage prepaid to the Issuer addressed to: DP Mustang Holdco LLC, at 1600 Corporate Drive, Birmingham, Alabama 35242, facsimile: (205) 408-0870, email: legalnotice@dgoc.com, with copies (which shall not constitute notice) to (i) Benjamin M. Sullivan, 414 Summers Street, Charleston, West Virginia 25301, email: bsullivan@dgoc.com, and (ii) Kirkland & Ellis LLP, Attention: John Kaercher, P.C., at 401 Congress Avenue, Austin, TX 78701, email: john.kaercher@kirkland.com, or, in each case, at any other address previously furnished in writing to the Indenture Trustee by the Issuer or the Manager. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee;
(iii)the Manager by the Indenture Trustee, by any Noteholder or by any Hedge Counterparty shall be sufficient for every purpose hereunder if in writing and sent by facsimile or email, in each case with a copy to follow via first-class mail, postage prepaid to the Manager addressed to: Diversified Production LLC, at 1600 Corporate Drive, Birmingham, Alabama 35242, facsimile: (205) 408-0870, email: legalnotice@dgoc.com, with copies (which shall not constitute notice) to (i) Benjamin M. Sullivan, 414 Summers Street, Charleston, West Virginia 25301, email: bsullivan@dgoc.com, and (ii) Kirkland & Ellis LLP, Attention: John Kaercher, P.C., at 401 Congress Avenue, Austin, TX 78701, email: john.kaercher@kirkland.com, or, in each case, at any other address previously furnished in writing to the Indenture Trustee by the Manager. The Manager shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee;
(iv)the Operator by the Indenture Trustee, by any Noteholder or by any Hedge Counterparty shall be sufficient for every purpose hereunder if in writing and sent by facsimile or email, in each case with a copy to follow via first-class mail, postage prepaid to the Operator addressed to: Diversified Production LLC, at 1600 Corporate Drive, Birmingham, Alabama 35242, facsimile: (205) 408-0870, email: legalnotice@dgoc.com, with copies (which shall not constitute notice) to (i) Benjamin M. Sullivan, 414 Summers Street, Charleston, West Virginia 25301, email: bsullivan@dgoc.com, and (ii) Kirkland & Ellis LLP, Attention: John Kaercher, P.C., at 401 Congress Avenue, Austin, TX 78701, email: john.kaercher@kirkland.com, or, in each case, at any other address previously furnished in writing to the Indenture Trustee by the Operator. The Operator shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee.
Article XXVIIIThe Issuer’s obligation to deliver or provide any demand, delivery, notice, communication or instruction to any Person shall be satisfied if such demand, delivery,

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notice, communication or instruction is posted to the Indenture Trustee’s investor reporting website or such other website or distribution service or provider as the Issuer shall designate by written notice to the other parties; provided, however, that any demand, delivery, notice, communication or instruction to the Indenture Trustee shall be provided at its Corporate Trust Office in accordance with Section 12.4(i) hereof.
Article XXIXThe Indenture Trustee shall promptly transmit (which may be via electronic mail) any material notice received by it from the Noteholders to the Issuer, the Manager and the Hedge Counterparties.
Section 29.1Notices to Noteholders and Hedge Counterparties; Waiver.
(a)Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if posted to the Indenture Trustee’s investor reporting website, by electronic transmission or in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Holder’s address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.
(b)Where this Indenture provides for notice to Hedge Counterparties of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if posted to the Indenture Trustee’s investor reporting website, by electronic transmission or in writing and mailed, first-class, postage prepaid to each Hedge Counterparty affected by such event, at such Hedge Counterparty’s address as it appears on the Hedge Counterparty Rights Agreement to which such Hedge Counterparty is a party, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Hedge Counterparties is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Hedge Counterparty shall affect the sufficiency of such notice with respect to other Hedge Counterparties, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.
(c)Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.
(d)In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.
Section 29.2Alternate Payment and Notice Provisions. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments to be made and notices to be given in accordance with such agreements.

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Section 29.3Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
Section 29.4Successors and Assigns. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents.
Section 29.5Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 29.6Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, each Hedge Counterparty and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture. Each Hedge Counterparty shall be a third-party beneficiary to this Indenture or the other Basic Documents (other than the Note Purchase Agreement), but only to the extent this it has any rights expressly specified herein.
Section 29.7Legal Holidays. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due.
Section 29.8GOVERNING LAW; CONSENT TO JURISDICTION. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT ANY MATTERS THAT RELATE TO REAL PROPERTY SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE SUCH PROPERTY IS LOCATED. EACH PARTY TO THIS INDENTURE SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS INDENTURE, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF. EACH PARTY (a) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (b) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (c) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON- APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES SHALL BE MAILED BY

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REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 29.9Counterparts. This Indenture may be executed in any number of counterparts (including electronic PDF), each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Each of the parties hereto agrees that the transactions consisting of this Indenture and the other Basic Documents (other than the Notes) may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Indenture or any other Basic Document (other than the Notes) using an electronic signature, it is signing, adopting, and accepting this Indenture or such other Basic Document (other than the Notes) and that signing this Indenture or such other Basic Document (other than the Notes) using an electronic signature is the legal equivalent of having placed its handwritten signature on this Indenture or such other Basic Document (other than the Notes) on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Indenture and the other Basic Documents in a usable format.
Section 29.10Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel to the effect that such recording is necessary either for the protection of the Noteholders, the Hedge Counterparties, or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.
Section 29.11No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Issuer, or join in any institution against the Issuer of, any involuntary bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar Law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents.
Section 29.12Inspection. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer’s normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall, and shall cause its representatives to, hold in confidence all such information except to the extent disclosure may be required by Law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder.
Section 29.13Waiver of Jury Trial. EACH OF THE ISSUER, EACH NOTEHOLDER AND THE INDENTURE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR

76




RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 29.14Rating Agency Notice. In addition to the information and reports specifically required to be provided to each Rating Agency pursuant to the terms of this Indenture, the Issuer shall, or shall cause the Manager to, upon written request, provide to each Rating Agency all information or reports delivered to the Indenture Trustee hereunder and such additional information as each Rating Agency may from time to time reasonably request. Any Act of the Noteholders or other documents provided or permitted by this Indenture, to be made upon, given or furnished to, or filed with each Rating Agency shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided if in writing to the applicable Rating Agency Contact).
Section 29.15Rule 17g-5 Information.
(a)The Issuer shall comply with its obligations under Rule 17g-5 promulgated under the Exchange Act (“Rule 17g-5”), if any, by its or its agent’s posting on the website required to be maintained under Rule 17g-5 (the “17g-5 Website”), no later than the time such information is provided to a Rating Agency, all information that the Issuer or other parties on its behalf, including the Indenture Trustee and the Manager, provide to the Rating Agency for the purposes of determining the initial credit rating of the Notes or undertaking credit rating surveillance of the Notes (the “17g-5 Information”); provided, that following the Closing Date, no party other than the Issuer, the Indenture Trustee or the Manager may provide information to a Rating Agency on the Issuer’s behalf without the prior written consent of the Issuer.
(b)To the extent that the Issuer is required to comply with Rule 17g-5, if any of the Issuer, the Indenture Trustee or the Manager is required to provide any information to, or communicate with, a Rating Agency in writing in accordance with its obligations under this Indenture or any other Basic Document, the Issuer, or the Manager, as applicable (or their respective representatives or advisers), shall promptly post, or cause to be posted, such information or communication to the 17g-5 Website. The Indenture Trustee will provide any information given to the Rating Agency to the Issuer and the Manager simultaneously with giving such information to the Rating Agency.
(c)To the extent that the Issuer is required to comply with Rule 17g-5 and to the extent any of the Issuer, the Indenture Trustee or the Manager are engaged in oral communications with the Rating Agency, for the purposes of determining an initial credit rating of the Notes or undertaking credit rating surveillance of the Notes, the party communicating with the Rating Agency shall cause such oral communication to either be (x) recorded and an audio file containing the recording to be promptly posted to the 17g-5 Website or (y) summarized in writing and the summary to be promptly posted to the 17g-5 Website (or with respect to the Indenture Trustee, in the case of either (x) or (y), delivered to the Issuer and the Manager for posting on the 17g-5 Website).
(d)To the extent that the Issuer is required to comply with Rule 17g-5, all information to be made available to a Rating Agency hereunder shall be made available on the 17g-5 Website. In the event that any information is delivered or posted in error, the Issuer may remove it, or cause it to be removed, from the 17g-5 Website, and shall so remove promptly when instructed to do so by the Person that delivered such information. None of the Indenture Trustee, the Manager or the Issuer shall have obtained or shall be deemed to have obtained actual knowledge of any information solely due to receipt and posting to the 17g-5 Website. Access will be provided to any NRSRO upon receipt by the Issuer of an NRSRO certification from such NRSRO (which may be submitted electronically via the 17g-5 Website).

77




(e)Notwithstanding the requirements herein, the Indenture Trustee shall have no obligation to engage in or respond to any oral communications, for the purposes of determining an initial credit rating of the Notes or undertaking credit rating surveillance of the Notes, with a Rating Agency or any of its respective officers, directors or employees.
(f)The Indenture Trustee shall not be responsible for determining compliance with 17g-5, maintaining the 17g-5 Website, posting any 17g-5 Information to the 17g-5 Website or assuring that the 17g-5 Website complies with the requirements of this Indenture, Rule 17g-5, or any other Law or regulation. In no event shall the Indenture Trustee be deemed to make any representation in respect of the content of the 17g-5 Website or compliance of the 17g-5 Website with this Indenture, Rule 17g-5, or any other Law or regulation.
(g)The Indenture Trustee shall not be responsible or liable for the dissemination of any identification numbers or passwords for the 17g-5 Website, including by the Issuer, the Rating Agency, any NRSRO, any of their agents or any other party. The Indenture Trustee shall not be liable for the use of any information posted on the 17g-5 Website, whether by the Issuer, the Rating Agency, any NRSRO or any other third party that may gain access to the 17g-5 Website or the information posted thereon.
(h)Notwithstanding anything herein to the contrary, the maintenance by a third-party service provider of the 17g-5 Website shall be deemed as compliance by or on behalf of the Issuer with Rule 17g-5 or any other Law or regulation related thereto.

[Remainder page intentionally left blank]

78




IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized, all as of the day and year first above written.

DP MUSTANG HOLDCO LLC


By: /s/ Benjamin M. Sullivan    
Name: Benjamin M. Sullivan
Title: Senior Executive Vice President, Chief
Legal and Risk Officer, and Corporate Secretary









[Signature Page to Indenture]


UMB BANK, N.A.,
not in its individual capacity but solely as Indenture Trustee


By: /s/ Michele Voon    
Name: Michele Voon
Title: Senior Vice President

    UMB BANK, N.A.,
as Securities Intermediary


By: /s/ Michele Voon    
Name: Michele Voon
Title: Senior Vice President








[Signature Page to Indenture]


SCHEDULE A
Schedule of Assets
[**Omitted**]


Sch. A




SCHEDULE B
Scheduled Principal Distribution Amounts
[**Omitted**]


Sch. B




SCHEDULE 3.3
Schedule of Legal Proceedings and Orders
[**Omitted**]

Sch. 3.3




SCHEDULE 3.4(b)
Schedule of Compliance with Laws and Governmental Authorizations
[**Omitted**]
  
Sch. 3.4(b)




SCHEDULE 3.9
Schedule of Employee Benefit Plans
[**Omitted**]

  
Sch. 3.9



Exhibit A
FORM OF NOTE
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUING ENTITY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]1
[THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. FOR INFORMATION REGARDING THE ISSUE PRICE, THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY OF THIS NOTE, PLEASE CONTACT THE CHIEF FINANCIAL OFFICER BY CALLING +1 (205) 408-0909.]2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND WILL NOT BE LISTED ON ANY EXCHANGE. THIS NOTE SHALL NOT BE TRANSFERRED OR ASSIGNED, AND NO INTEREST IN THIS NOTE SHALL BE TRANSFERRED OR ASSIGNED, UNLESS THE NOTEHOLDER AND THE TRANSFEREE OR ASSIGNEE, AS APPLICABLE, COMPLY WITH THE TERMS AND CONDITIONS OF SECTION 2.4 OF THE INDENTURE. NO TRANSFER OF THIS NOTE SHALL BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR IS EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS. EXCEPT IN A TRANSFER TO DIVERSIFIED PRODUCTION LLC (“DIVERSIFIED”) OR BY DIVERSIFIED TO AN AFFILIATE THEREOF, IN THE EVENT THAT A TRANSFER IS TO BE MADE IN RELIANCE UPON AN EXEMPTION FROM THE SECURITIES ACT AND STATE SECURITIES LAWS, IN ORDER TO ASSURE COMPLIANCE WITH THE SECURITIES ACT AND SUCH LAWS, THE NOTEHOLDER DESIRING TO EFFECT SUCH TRANSFER AND SUCH NOTEHOLDER’S PROSPECTIVE TRANSFEREE SHALL EACH CERTIFY TO THE ISSUER, THE INDENTURE TRUSTEE AND DIVERSIFIED IN WRITING THE FACTS SURROUNDING THE TRANSFER IN SUBSTANTIALLY THE FORMS SET FORTH IN EXHIBIT B TO THE INDENTURE (THE “TRANSFEROR CERTIFICATE”) AND EXHIBIT C TO THE INDENTURE (THE “INVESTMENT LETTER”). EACH NOTEHOLDER DESIRING TO EFFECT SUCH A TRANSFER SHALL, BY ITS ACCEPTANCE OF SUCH NOTE, HAVE AGREED TO INDEMNIFY THE ISSUER, THE INDENTURE TRUSTEE
1 To be included for Global Notes.
2 [To be included for Notes with original issue discount.]
Ex. A-1

AND DIVERSIFIED (IN ANY CAPACITY) AGAINST ANY LIABILITY THAT MAY RESULT IF THE TRANSFER IS NOT SO EXEMPT OR IS NOT MADE IN ACCORDANCE WITH FEDERAL AND STATE SECURITIES LAWS.
[NO TRANSFER OR EXCHANGE OF THE CLASS B NOTES SHALL BE PERMITTED EXCEPT TO THE EXTENT SUCH CLASS B NOTE HAS BEEN TRANSFERRED TO AND IS OWNED BY A BENEFICIAL OWNER THAT IS A “UNITED STATES PERSON” WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE AND WILL DELIVER AN IRS FORM W-9 TO THE ISSUER OR ITS AGENT IN CONNECTION WITH SUCH TRANSFER OR EXCHANGE. ANY TRANSFER TO A PURCHASER OR ANY EXCHANGE IN VIOLATION OF THIS PARAGRAPH WILL BE VOID AB INITIO.]3
[THE HOLDER OF THIS NOTE AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY OTHER PERSON’S ACCOUNT FOR WHICH IT HAS PURCHASED THIS NOTE THAT (A)(1) EITHER (I) THE BENEFICIAL OWNER OF SUCH NOTE IS NOT AND WILL NOT BECOME FOR U.S. FEDERAL INCOME TAX PURPOSES A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR TRUST (EACH SUCH ENTITY A “FLOW-THROUGH ENTITY”) OR (II) IF SUCH BENEFICIAL OWNER IS OR BECOMES A FLOW-THROUGH ENTITY, THEN EITHER (X) NONE OF THE DIRECT OR INDIRECT BENEFICIAL OWNERS OF ANY INTEREST IN SUCH FLOW-THROUGH ENTITY HAS OR EVER WILL HAVE MORE THAN 50% OF THE VALUE OF ITS INTEREST IN SUCH FLOW-THROUGH ENTITY ATTRIBUTABLE TO THE AGGREGATE INTEREST OF SUCH FLOW-THROUGH ENTITY IN THE COMBINED VALUE OF THE NOTE, ANY OTHER INTEREST IN THE ISSUER OR ANY INTEREST CREATED UNDER THE INDENTURE DATED AS OF SEPTEMBER 19, 2024, BY AND BETWEEN THE ISSUER UMB BANK, N.A, AS INDENTURE TRUSTEE AND AS SECURITIES INTERMEDIARY OR (Y) IT IS NOT AND WILL NOT BE A PRINCIPAL PURPOSE OF THE ARRANGEMENT INVOLVING THE INVESTMENT OF SUCH FLOW-THROUGH ENTITY IN THIS NOTE TO PERMIT THE ISSUER TO SATISFY THE 100 PARTNER LIMITATION OF TREASURY REGULATIONS SECTION 1.7704-1(H)(1)(II) NECESSARY FOR THE ISSUER NOT TO BE CLASSIFIED AS A PUBLICLY TRADED PARTNERSHIP UNDER THE CODE, OR (2) IT WILL DELIVER A WRITTEN OPINION OF NATIONALLY RECOGNIZED U.S. TAX COUNSEL THAT SUCH TRANSFER WILL NOT CAUSE THE ISSUER TO BE TREATED AS A PUBLICLY TRADED PARTNERSHIP TAXABLE AS A CORPORATION FOR U.S. FEDERAL INCOME TAX PURPOSES, (B) SUCH BENEFICIAL OWNER WILL NOT SELL, ASSIGN, TRANSFER, PLEDGE OR OTHERWISE CONVEY ANY INTEREST IN AN AMOUNT LESS THAN 100% OF THE MINIMUM DENOMINATION OF THE NOTE OR PARTICIPATING INTEREST IN THIS NOTE, OR PURCHASE OR ENTER INTO ANY FINANCIAL INSTRUMENT OR CONTRACT THE VALUE OF WHICH IS DETERMINED BY REFERENCE IN WHOLE OR IN PART TO THIS NOTE AND (C) SUCH BENEFICIAL OWNER IS NOT ACQUIRING AND WILL NOT SELL, TRANSFER, ASSIGN, PARTICIPATE, PLEDGE OR OTHERWISE DISPOSE OF OR CAUSE TO BE MARKETED THIS NOTE (OR INTEREST THEREIN), ON OR THROUGH AN “ESTABLISHED SECURITIES MARKET” WITHIN THE MEANING OF SECTION
3 To be included for Class B Notes.
Ex. A-2

7704(B) OF THE CODE AND TREASURY REGULATIONS SECTION 1.7704-1(B), INCLUDING, WITHOUT LIMITATION, AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS.]4
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.


4 NTD: To be included for Class B Notes.
Ex. A-3

REGISTERED    $____________
No.: ___    CUSIP/PPN: [ ò ]
Class: [A/B] [(Definitive Note/Global Note)]

DP MUSTANG HOLDCO LLC

[____]% CLASS [A/B] NOTES
DP Mustang Holdco LLC, a Delaware limited liability company (herein referred to as the “Issuer”), for value received, hereby promises to pay to [PURCHASER], or its registered assigns, the principal sum of $________ payable on each Payment Date from the Available Funds on deposit in the Collection Account pursuant to Section 8.6 of the Indenture, dated as of September 19, 2024 (the “Indenture”), between the Issuer and UMB Bank, N.A., as Indenture Trustee (the “Indenture Trustee”) and as securities intermediary; provided, however, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Payment Date in September 2044 (the “Final Scheduled Payment Date”) and the Redemption Date, if any, pursuant to Section 10.1 of the Indenture. Capitalized terms used but not defined herein are defined in Appendix A of the Indenture, which also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date). Interest on this Note will accrue for each Payment Date from and including the most recent Payment Date on which interest has been paid (in the case of the Initial Payment Date, from the Escrow Funding Date) to but excluding such current Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. [Any and all accrued interest on the Outstanding Principal Balance of this Class B Note that is not paid in full on any Payment Date shall be added to the Class B Outstanding Principal Balance (any such amounts, the “Designated Unpaid Interest Amount”), and shall thereafter be considered principal for all purposes and shall accrue interest at the applicable Interest Rate for this Class B Note.]5
If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) at the Interest Rate, plus an additional rate of 2.00% per annum default rate to the Interest Rate, in any lawful manner (“Default Interest”). Such Default Interest will be due and payable on the immediately
5 NTD: To be included for Class B Notes.
Ex. A-4

succeeding Payment Date[; provided that no Default Interest shall be payable with respect to the Class B Notes until such time as the Class B Notes constitute the Controlling Class.]6
The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

6 NTD: To be included for Class B Notes.
Ex. A-5

IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Responsible Officer, as of the date set forth below.
Date: ________________    DP MUSTANG HOLDCO LLC
By:    
Name:
Title:
INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-mentioned Indenture.
Date: _________________    UMB BANK, N.A., not in its individual capacity but solely as Indenture Trustee
By:        
Name:
Title:

Ex. A-6

[REVERSE OF NOTE]
This Note is the duly authorized issue of Notes of the Issuer, designated as its [____]% Class [A/B] Notes (herein called the “Notes”), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are and will be secured by the collateral pledged as security therefor as provided in the Indenture and subject to the subordination provisions set forth therein.
Principal of the Notes will be payable on each Payment Date and, if the Notes have not been paid in full prior to the Final Scheduled Payment Date, on the Final Scheduled Payment Date, in an amount described on the face hereof. “Payment Date” means the 28th day of each month or, if such day is not a Business Day, the immediately following Business Day. The Initial Payment Date will be October 28, 2024. There will be no Class A Scheduled Principal Distribution Amount, Class B Scheduled Principal Distribution Amount or payment of Note Interest with respect to the October 2024 Payment Date. The first payment of Class A Scheduled Principal Distribution Amount, Class B Scheduled Principal Distribution Amount and Note Interest will occur on the November 2024 Payment Date.
As described above, the entire unpaid principal amount of this Note shall be due and payable on the Final Scheduled Payment Date. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing and either (i) the Indenture Trustee (at the direction of the Majority Noteholders) or the Majority Noteholders have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 of the Indenture or (ii) such Event of Default arises as a result of an event set forth in Section 5.1(a)(iv) or (v) of the Indenture. All principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by wire transfer in immediately available funds to the account designated by the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register as of the close of business on each Record Date. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person in whose name this Note is registered as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee’s principal Corporate Trust Office.
Ex. A-7

The Issuer shall pay interest on overdue installments of interest at the Note Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth therein and on the face hereof, the transfer of this may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Note Registrar duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements may include membership or participation in the Securities Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.
Each Noteholder, by acceptance of a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.
Each Noteholder, by acceptance of a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder will not at any time institute against Diversified or the Issuer, or join in any institution against Diversified or the Issuer of, any involuntary bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Basic Documents.
Each Noteholder, by acceptance of a Note, represents and agrees that if it is acquiring such Note, or any interest or participation therein, as a fiduciary or agent for one or more investor accounts, it has sole investment discretion with respect to each such account and that it has full power to make the acknowledgments, representations and agreements contained herein on behalf of each such account.
Each Noteholder, by acceptance of a Note, represents and agrees that it is purchasing such Notes for its own account, or for one or more investor accounts for which it is
Ex. A-8

acting as fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirements of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Notes, or any interest or participation therein pursuant to the provisions of this Note or the Indenture.
Each Noteholder, by acceptance of a Note, acknowledges that transfers of such Notes or any interest or participation therein shall otherwise be subject in all respects to the restrictions applicable thereto contained in this Note and the Indenture.
Each Noteholder, by acceptance of a Note or a beneficial interest therein, acknowledges that interest on the Notes will be treated as United States source interest, and, as such, United States withholding tax may apply. If such withholding tax does apply, the Indenture Trustee or Paying Agent may withhold such payments in accordance with applicable law. Each such Holder that claims exemption from, or eligibility for a reduced rate of, withholding tax further agrees, upon request, to provide any certifications that may be required under applicable law, regulations or procedures to evidence such status and understands that if it ceases to satisfy the foregoing requirements or provide requested documentation, payments to it under the Notes may be subject to United States withholding tax (without any corresponding gross-up). Without limiting the foregoing, if any payment made under this Note or the Indenture would be subject to U.S. federal withholding tax, including any withholding tax imposed by FATCA, if the recipient of such payment were to fail to comply with applicable law (including the requirements of Code Sections 1471(b) or 1472(b), as applicable), such recipient shall deliver to the Issuer, with a copy to the Indenture Trustee (or if the recipient fails to so deliver, the Issuer shall deliver to the Indenture Trustee any such withholding information, to the extent the Issuer shall have previously received such information), at the time or times prescribed by the Code and at such time or times reasonably requested by the Issuer or the Indenture Trustee, such documentation prescribed by the Code (including as prescribed by Code Section 1471(b)(3)(C)(i)) and such additional documentation reasonably requested by the Issuer or the Indenture Trustee to comply with their respective obligations under FATCA, to determine that such recipient has complied with such recipient’s obligations, including under FATCA, or to determine the amount to deduct and withhold from such payment. For these purposes, “FATCA” means Section 1471 through 1474 of the Code and any regulations or official interpretations thereof (including any revenue ruling, revenue procedure, notice or similar guidance issued by the U.S. Internal Revenue Service thereunder as a precondition to relief or exemption from taxes under such Sections, regulations and interpretations), any agreements entered into pursuant to Code Section 1471(b)(1), any intergovernmental agreements entered into in connection with any of the foregoing and any fiscal or regulatory legislation, rules or generally accepted practices adopted pursuant to any such intergovernmental agreements, and any amendments made to any of the foregoing after the date of the Indenture.
Each Noteholder, by acceptance of a Note covenants and agrees that any resale, pledge or other transfer of any of the Notes contrary to the restrictions set forth above and
Ex. A-9

elsewhere in this Note and the Indenture will be deemed void ab initio by the Issuer and Indenture Trustee.
Each Noteholder, by acceptance of a Note, acknowledges that the Indenture Trustee, the Note Registrar, the Issuer and others will rely on the truth and accuracy of the foregoing acknowledgments, representations, warranties and covenants and agrees that if any of the foregoing are no longer accurate, it shall promptly notify the Issuer.
The Issuer has entered into the Indenture and this Note is issued with the intention that, for U.S. federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness secured by the Collateral. Each Noteholder, by its acceptance of a Note, agrees to treat Notes (other than Notes held by any equity holder of the Issuer (including any entity whose separate existence from the Issuer or the equity holder of the Issuer is disregarded for U.S. federal income tax purposes), any other persons who are members of an “expanded group” with the Issuer within the meaning of the Treasury Regulations under Section 385 of the Code, but only so long as such Notes are held by such person, or as otherwise required by a change in applicable law or a final determination pursuant to Section 1313 of the Code) for all purposes including U.S. federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer.
Each Noteholder, by acceptance of a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder (or, if such Noteholder is treated as a disregarded entity for U.S. federal income tax purposes, Noteholder’s regarded tax owner) shall timely furnish to the Indenture Trustee on behalf of the Issuer, (1) any applicable IRS Form W-9, W-8BEN, W-8BEN-E, W-8ECI, W-8EXP or W-8IMY (with any applicable attachments) and (2) any documentation that is required under FATCA to enable the Issuer, the Indenture Trustee and any other agent of the Issuer to determine their duties and liabilities with respect to any taxes they may be required to withhold in respect of such Note or the Noteholder of such Note or beneficial interest therein, in each case, prior to the first Payment Date after such Noteholder’s acquisition of Notes and at such time or times required by law or that the Indenture Trustee on behalf of the Issuer or their respective agents may reasonably request, and shall update or replace such IRS form or documentation in accordance with its terms or its subsequent amendments. Each Noteholder (or its regarded tax owner, as applicable) will provide the applicable replacement IRS Form W-8 or documentation every three (3) years (or sooner if there is a transfer to a new Noteholder or if required by applicable law). In each case above, the applicable IRS form or documentation shall be properly completed and signed under penalty of perjury. The Indenture Trustee has the right to withhold any amounts (properly withholdable under law and without any corresponding gross-up) payable to a Noteholder that fails to comply with the requirements of the preceding sentence.
Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this
Ex. A-10

Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice or knowledge to the contrary.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Majority Noteholders. The Indenture also contains provisions permitting the Majority Noteholders, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder.
The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of the Indenture Trustee, in its individual capacity, any owner of a beneficial interest in the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim
Ex. A-11

therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.

Ex. A-12

ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:

_________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:

_________________________________________________
        (name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ______________________________________________________________, attorney, transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.
Dated:_____________________    _____________________________________
Signature Guaranteed:

_____________________________________*










*    NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements may include membership or participation in
Ex. A-13

STAMP or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP.


Ex. A-14

Exhibit B
FORM OF TRANSFEROR CERTIFICATE
[DATE]


UMB Bank, N.A.
100 William Street, Suite 1850
New York, NY 10038

Diversified Production LLC
1600 Corporate Drive
Birmingham, Alabama 35242

DP Mustang Holdco LLC
1600 Corporate Drive
Birmingham, Alabama 35242
Re:    DP Mustang Holdco LLC [____]% Class [A/B] Notes
Ladies and Gentlemen:

In connection with our disposition of the above-referenced Notes (the “Notes”) we certify that (a) we understand that the Notes have not been registered under the Securities Act of 1933, as amended (the “Act”), and are being transferred by us in a transaction that is exempt from the registration requirements of the Act and (b) we have not offered or sold any Notes to, or solicited offers to buy any Notes from any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other action which would result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:    _______________________________
Authorized Officer


    Ex. B-1

Exhibit C
FORM OF INVESTMENT LETTER
UMB Bank, N.A.
100 William Street, Suite 1850
New York, NY 10038

Diversified Production LLC
1600 Corporate Drive
Birmingham, Alabama 35242

DP Mustang Holdco LLC
1600 Corporate Drive
Birmingham, Alabama 35242
Ladies and Gentlemen:

In connection with our proposed purchase of [____]% Class [A/B] Notes (the “Notes”) of DP Mustang Holdco LLC (the “Issuer”), we confirm that:
1.    We understand that the Notes have not been registered under the Securities Act of 1933, as amended (the “1933 Act”), and may not be sold except as permitted in the following sentence. We understand and agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, (x) that such Notes are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act and (y) that such Notes may be resold, pledged or transferred only (i) to Diversified Production LLC (“Diversified Production”), (ii) to a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (a “QIB”) acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs unless the holder is a bank acting in its fiduciary capacity) that executes a certificate substantially in the form hereof, or (iii) in a sale, pledge or other transfer made in a transaction otherwise exempt from the registration requirements of the 1933 Act, in which case the Indenture Trustee shall require that both the prospective transferor and the prospective transferee certify to Indenture Trustee and Diversified Production in writing the facts surrounding such transfer, which certification shall be in form and substance reasonably satisfactory to the Indenture Trustee and Diversified Production. We will notify any purchaser of the Notes from us of the above resale restrictions, if then applicable. We further understand that in connection with any transfer of the Notes by us that the Indenture Trustee and Diversified Production may request, and if so requested we will furnish, such certificates and other information as they may reasonably require to confirm that any such transfer complies with the foregoing restrictions.
Ex. C-1

2. We are a QIB acting for our own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs unless we are a bank acting in its fiduciary capacity). We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment for an indefinite period of time. We are acquiring the Notes or investment and not with a view to, or for offer and sale in connection with, a public distribution.
3.    [Either (i) we are not acquiring or holding the Class A Notes with the assets of any (A) “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that is subject to Title I of ERISA, (B) “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, (C) entity or account whose underlying assets are deemed to include “plan assets” (within the meaning of the Department of Labor regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (D) plan, entity or account that is subject to any U.S. federal, state, non-U.S. or local law that is substantially similar to Title I of ERISA or Section 4975 of the Code (“Similar Law”) (each, a “Plan”) or (ii) our acquisition or holding of the Class A Notes will not give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation of Similar Law. We hereby acknowledge that no transfer of any Class A Note shall be permitted to be made to any transferee unless either (i) such transferee is not acquiring or holding the Note with the assets of any Plan or (ii) the acquisition or holding of such Note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation of Similar Law.]7
[We are not acquiring or holding the Class B Notes with the assets of any (A) “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that is subject to Title I of ERISA, (B) “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code or (C) entity or account whose underlying assets are deemed to include “plan assets” (within the meaning of the Department of Labor regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) (each, a “Plan”). Further if we are acquiring or holding the Class B Notes with the assets of any plan, entity or account that is subject to any U.S. federal, state, non-U.S. or local law that is substantially similar to Title I of ERISA or Section 4975 of the Code (“Similar Law”), our acquisition or holding of the Class B Notes will not give rise to a violation of Similar Law and will not cause the assets of the Issuer to be subject to Similar Law. We hereby acknowledge that no transfer of any Class B Note shall be permitted to be made to any transferee unless (i) such transferee is not acquiring or holding the Note with the assets of any Plan or (ii) the acquisition or holding of such Note will not give rise to a violation of Similar Law and will not cause the assets of the Issuer to be subject to Similar Law.]8
7 Include for Class A Notes.
8 Include for Class B Notes.

Ex. C-2



Article XXX4.    We further represent and warrant as follows:
Article XXXI(a)     The purchaser (or, if the purchaser is treated as a disregarded entity for U.S. federal income tax purposes, such purchaser’s regarded tax owner) is and will remain a “United States person” within the meaning of Section 7701(a)(30) of the Code, and will deliver an IRS Form W-9 to the Issuer or its agent. The purchaser is not acquiring, will not acquire on behalf of, the Class B Notes or any interest therein, and will not transfer the Class B Notes or any interest therein to, a person who is not a “United States person” within the meaning of Section 7701(a)(30) of the Code, and such person will deliver an IRS Form W-9 to the Issuer or its agent.
Article XXXII(b)     On its own behalf and on behalf of any beneficial owner for which it is purchasing the Class B Notes (A) either (1) for so long as the purchaser holds such Class B Notes (or a beneficial interest therein), it is not, and will not acquire such Class B Notes or interest therein on behalf of any person that is classified for U.S. federal income tax purposes as a partnership, subchapter S corporation or grantor trust (each such entity, a “Flow-Through Entity”), or (2) if such beneficial owner is or becomes a Flow-Through Entity, then either (i) none of the direct or indirect beneficial owners of any interest in the Flow-Through Entity has or ever will have more than 50% of the value of its interest in such Flow-Through Entity attributable to the aggregate interest of such Flow-Through Entity in the combined value of the Class B Notes and any other interest in the Issuer or any interest created under this Indenture or (ii) it is not and will not be a principal purpose of the arrangement involving the investment of such Flow-Through Entity in the Class B Notes to permit the Issuer to satisfy the 100 partner limitation of Treasury Regulations Section 1.7704-1(h)(1)(ii), or (B) it will deliver a written opinion of nationally recognized U.S. tax counsel that such transfer will not cause the Issuer to be treated as a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.
Article XXXIII(c)     The purchaser will not sell, transfer, assign, participate, pledge or otherwise dispose of or cause to be marketed any Class B Notes (or interests therein), (A) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treasury Regulations Section 1.7704-1(b), including without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations or (B) in an amount less than 100% of the minimum denomination of the Class B Notes or purchase or enter into any financial instrument or contract the value of which is determined by reference in whole or in part to any Class B Note.
Article XXXIV(d)     The purchaser will not transfer its Class B Notes or interests therein to a subsequent transferee unless such subsequent transferee delivers a letter of representation to the Indenture Trustee and the Issuer substantially in the form of Exhibit C to the Indenture, in which letter such subsequent transferee makes the representations as are contained in paragraphs (a) through (b) herein.

Ex. C-3



(e)     The purchaser understands and agrees that the Class B Notes that are Definitive Notes shall not be exchangeable for beneficial interests in a Global Note representing the Class B Notes except to the extent such Definitive Notes have been transferred to and are owned by a beneficial owner that is “United States person” within the meaning of Section 7701(a)(30) of the Code and will deliver an IRS Form W-9 to the Issuer and the Indenture Trustee in connection with such exchange for a beneficial interest in the Global Note.
5.    We understand that the Issuer, the Indenture Trustee, Diversified Production and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements, and we agree that if any of the acknowledgments, representations and warranties deemed to have been made by us by our purchase of the Notes, for our own account or for one or more accounts as to each of which we exercise sole investment discretion, are no longer accurate, we shall promptly notify Diversified Production.
6.    You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
All capitalized terms used herein that are not defined herein have the meanings assigned to such terms in that certain indenture, dated September 19, 2024, by and between the Issuer and UMB Bank, N.A., as Indenture Trustee.
Very truly yours,
[NAME OF PURCHASER]
By:    ________________________________
Name:
Title:
Date: ___________________________



Ex. C-4




Exhibit D
FORM OF STATEMENT TO NOTEHOLDERS
[**Omitted**]




Ex. D-1

APPENDIX A
PART I - DEFINITIONS
All terms used in this Appendix shall have the defined meanings set forth in this Part I when used in the Basic Documents, unless otherwise defined therein.
“17g-5 Information” has the meaning specified in Section 12.19(a) of the Indenture.
“17g-5 Website” has the meaning specified in Section 12.19(a) of the Indenture.
“ABS I Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of November 13, 2019 between Diversified ABS LLC and UMB Bank, N.A.
“ABS II Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of April 9, 2020 between Diversified ABS Phase II LLC and UMB Bank, N.A.
“ABS IV Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of February 23, 2022, between Diversified ABS Phase IV LLC and UMB Bank, N.A.
“ABS VIII Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of May 30, 2024, among Diversified ABS VIII LLC, Diversified ABS III Upstream LLC, Diversified ABS V Upstream LLC, and UMB Bank, N.A.
“Act of the Noteholders” has the meaning specified in Section 12.3(a) of the Indenture.
“Additional Assets” means additional assets (that are upstream assets similar to the Wellbore Interests and are only located in the States where the initial Wellbore Interests are located) purchased and acquired by the Issuer from any Person (including, for the avoidance of doubt, Diversified or any Affiliate thereof) for a mutually-agreeable purchase price substantially equivalent to the fair market value of such assets pursuant to an executed asset purchase agreement with representations, warranties and indemnification obligations of such Person substantially the same as those in the Transfer Agreement; provided that the terms of such asset purchase agreement are on the whole not materially less favorable than those (a) that would be reasonably expected to be available from third parties on an arm’s-length basis or (b) to the extent such Person is an Affiliate of the Issuer, contained in the Transfer Agreement, in each case as determined in good faith by the Issuer.
“Administration Fees” has the meaning specified in the Management Services Agreement as of the Closing Date, with such changes as are consented to by the Majority Noteholders that would not reasonably be expected to be materially adverse to the Hedge Counterparties.
“Administrative Expenses” means, for any Payment Date, the expenses of the Issuer consisting of fees (excluding any fees otherwise paid pursuant to Section 8.6 of the Indenture) and out-of-pocket expenses and indemnification amounts payable or reimbursable to the Indenture Trustee, the Manager, the Back-Up Manager and, to the extent that the Notes are rated by a Rating Agency, any such Rating Agency, and any third-party service provider hired by or
App. A-1

on behalf of the Issuer (including, without limitation, amounts payable to any Back-Up Manager and insurance premiums related to the Collateral), but not including any fees payable or expenses reimbursable to any third party in relation to the operation of the Wellbore Interests.
“AFE Cover Amounts” has the meaning specified in the Management Services Agreement.
“AFE Operations” has the meaning specified in the Management Services Agreement.
“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Anti-Corruption Laws” means any Law or regulation in a U.S. or any non-U.S. jurisdiction regarding bribery or any other corrupt activity, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
“Anti-Money Laundering Laws” means any Law or regulation in a U.S. or any non-U.S. jurisdiction regarding money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes, including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act) and the USA PATRIOT Act.
“Anticipated Repayment Date” means the Payment Date occurring in September 2029.
“Applicable Premium” means with respect to a Note at any time, as determined by the Issuer, the excess of:
(a)the present value at such time of (i) 100% of the principal amount of the applicable Note, plus (ii) all required interest payments due on the applicable Note through the Payment Date occurring in March 2028 (excluding accrued but unpaid interest to, but not including, the Redemption Date), at the Interest Rate, computed using a discount rate equal to the Treasury Rate as of such time plus 50 basis points discounted to the redemption date on a semi-annual basis (assuming a 360 day year consisting of twelve 30 day months), over
(b)the then Outstanding Principal Balance of such Note being redeemed.
“Asset Disposition Proceeds” means, in the event that the Issuer shall sell, transfer or otherwise dispose of any Assets in a Permitted Disposition or purchased by the Manager from the Issuer pursuant to the Management Services Agreement, any proceeds remaining after (i) depositing into the Collection Account a portion of such proceeds equal to the amount, if any, required to be paid by the Issuer pursuant to the termination, in whole or in part, of any Hedge Agreement and (ii) giving effect to such sale, the repayment of the Notes and any required hedge termination payments; provided, however, that, such remaining proceeds will only constitute
App. A-2

Asset Disposition Proceeds if, on a pro forma basis, after giving effect to the payments contemplated in clause (ii) above, the DSCR would be equal to or greater than 1.55 to 1.00, the Production Tracking Rate shall not be less than 80%, the LTV shall be equal to or less than 75% and the IO DSCR would be equal to or greater than 2.00 to 1.00.
“Asset Disposition Proceeds Account” means the account designated as such, established and maintained pursuant to Section 8.2(b) of the Indenture.
“Asset Purchase Period” has the meaning specified in Section 8.4(c) of the Indenture.
“Asset Vesting Documents” means, in respect of the Wellbore Interests and related Additional Assets, the Transfer Agreement and the Assignment of Interests.
“Assets” means the Wellbore Interests and any Additional Assets, collectively.
“Assignment of Interests” means the Assignment of Interests, dated as of the date hereof, between the Seller and Diversified Holdings.
“Available Funds” means, with respect to any Payment Date, the sum of the following amounts, without duplication, with respect to the Assets in respect of the Collection Period preceding such Payment Date: (a) all Collections received and deposited into and available for withdrawal from the Collection Account prior to the applicable Payment Determination Date relating to production in the calendar month that is two months or more prior to the Collection Period and adjustments relating to prior Collection Periods, (b) amounts on deposit in the Liquidity Reserve Account after giving effect to all other deposits and withdrawals thereto or therefrom on the Payment Date relating to such Collection Period in excess of the Liquidity Reserve Account Target Amount, (c) amounts transferred from the P&A Reserve Account to the Collection Account on such Payment Date pursuant to Section 8.2(e) of the Indenture, (d) Investment Earnings for the related Payment Date, (e) all amounts received by the Indenture Trustee pursuant to Article V of the Indenture, (f) the net amount, if any, paid to the Issuer under the Hedge Agreements (for the avoidance of doubt, any Posted Collateral in any Hedge Collateral Account shall not be part of and expressly excluded from being part of Available Funds), and (g) the amount of any Equity Contribution Cure paid with respect to such Collection Period.
“Back-Up Management Agreement” means the Back-Up Management Agreement, dated as of the Closing Date, among the Issuer, the Manager, the Indenture Trustee and the Back-Up Manager.
“Back-Up Management Fee” means the fee payable to the Back-Up Manager for services rendered during each Collection Period, determined pursuant to Section 4.1 of the Back-Up Management Agreement.
“Back-Up Manager” means AlixPartners, LLP, in its capacity as back-up manager under the Back-Up Management Agreement, and any successor thereunder.
App. A-3

“Basic Documents” means the Indenture, the Notes, each Joint Operating Agreement, the Transfer Agreement, the Assignment of Interests, the Management Services Agreement, the Back-Up Management Agreement, the Note Purchase Agreement, the Pledge Agreement, the Hedge Agreements, the Issuer Operating Agreement, the Holdings Operating Agreement, the Intercreditor Acknowledgment, the Settlement Agreement, each Mortgage, each Escrow Agreement, the Corporate Services Agreement and other fee letters, documents and certificates delivered in connection with any of the foregoing.
“Basis Hedge Percentage” has the meaning specified in Section 4.28 of the Indenture.
“Basis Hedge Period” has the meaning specified in Section 4.28 of the Indenture.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Blocked Person” means (a) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons published by OFAC, (b) a Person, entity, organization, country or regime that is blocked or a target of sanctions that have been imposed under U.S. Economic Sanctions Laws, or (c) a Person that is an agent, department or instrumentality of, or is otherwise beneficially owned by, controlled by or acting on behalf of, directly or indirectly, any Person, entity, organization, country or regime described in clause (a) or (b).
“Book-Entry Notes” means a note registered in the name of the Depository or its nominee, ownership of which is reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant in accordance with the rules of such Depository); provided, that after the occurrence of a condition whereupon Definitive Notes are to be issued to Noteholders, such Book-Entry Notes shall no longer be “Book-Entry Notes”.
“Burden” means any and all royalties (including lessors’ royalties and nonparticipating royalties), overriding royalties, reversionary interests, net profits interests, production payments and other burdens upon, measured by or payable out of production.
“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions or trust companies in the State of New York or the state in which the Corporate Trust Office of the Indenture Trustee is located and are required or authorized by Law, regulation or executive order to be closed.
App. A-4

“Capital Lease” means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.
“Change of Control” means the occurrence of any of the following:
(i)the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Diversified Energy Company Plc and its direct and indirect subsidiaries taken as a whole, to any Person (including any “person” as that term is used in Section 13(d)(3) of the Exchange Act) other than a Qualifying Owner or a Qualified Buyer;
(ii)the adoption of a plan relating to the liquidation or dissolution of Diversified Energy Company Plc;
(iii)the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that (A) any Person (including any “person” (as defined above)), excluding the Qualifying Owners and Qualified Buyers, becomes the beneficial owner (as that term is used in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Voting Stock of Diversified Energy Company Plc, measured by voting power rather than number of shares, units or the like and (B) two (2) or more of the members of the Management Team as of immediately prior to the consummation of such transaction resign or are removed from their respective position;
(iv)the occurrence of any event or series of events that results in Manager ceasing to be Controlled by Diversified Energy Company Plc;
(v)the failure of Diversified Energy Company Plc to own (directly or indirectly) at least 20% of the economic interests in Diversified Holdings; or
(vi)the failure of Diversified Holdings to own 100% of the equity interests of the Issuer.
Notwithstanding the preceding, a conversion of Diversified Energy Company Plc or any of its direct or indirect wholly-owned subsidiaries from a limited partnership, corporation, limited liability company or other form of entity to a limited liability company, corporation, limited partnership or other form of entity (including by way of merger, consolidation, amalgamation or liquidation) or an exchange of all of the outstanding capital stock in one form of entity for capital stock in another form of entity or the transfer or redomestication of Diversified Energy Company Plc to or in another jurisdiction shall not constitute a Change of Control, so long as following such conversion, exchange, transfer or redomestication the “persons” (as that term is used in Section 13(d)(3) of the Exchange Act) who beneficially owned
App. A-5

the capital stock of Diversified Energy Company Plc immediately prior to such transactions, together with Qualifying Owners, beneficially own in the aggregate more than 50% of the Voting Stock of such entity, or beneficially own sufficient capital stock in such entity to elect a majority of its directors, managers, trustees or other persons serving in a similar capacity for such entity or its general partner, as applicable, and, in either case no “person” (other than a Qualifying Owner) beneficially owns more than 50% of the Voting Stock of such entity or its general partner, as applicable. References to Diversified Energy Company Plc in the foregoing clauses (i) - (iv) shall also refer to the surviving entity after giving effect to such conversion, exchange, transfer or redomestication.
For the avoidance of doubt, the Equity Transaction shall not (x) constitute a Change of Control, (y) require the consent or approval of the Noteholders, the Hedge Counterparties, the Indenture Trustee or any independent director, or (z) require the satisfaction of the Rating Agency Condition.
“Change of Control Applicable Premium” means with respect to a Note at any time, as determined by the Issuer, the excess of:
(a)the present value at such time of (i) 100% of the principal amount of the Note, plus (ii) all required interest payments due on the Note through the Payment Date occurring in March 2028 (excluding accrued but unpaid interest to, but not including, the Redemption Date), at the Interest Rate, computed using a discount rate equal to the Treasury Rate as of such time, plus 100 basis points discounted to the redemption date on a semi-annual basis (assuming a 360 day year consisting of twelve 30 day months), over
(b)the then Outstanding Principal Balance of such Note being redeemed.
“Change of Control Redemption Price” means, with respect to any redemption of Notes pursuant to Section 10.1(b) of the Indenture, (i) prior to the Payment Date occurring in March 2028 an amount equal to 100% of the principal amount thereof, plus the Change of Control Applicable Premium, plus accrued and unpaid interest, if any, to, but not including, the Change of Control Redemption Date, and (ii) on or after the Payment Date occurring in March 2028 an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the Redemption Date.
“Class A Excess Allocation Percentage” means the greatest of the following percentages, as applicable:
(a)(i) If the DSCR as of the applicable Payment Date is less than 1.45 to 1.00, then 100%, (ii) if the DSCR as of such Payment Date is greater than or equal to 1.45 to 1.00 and less than 1.55 to 1.00, then 50%, or (iii) if the DSCR as of such Payment Date is greater than or equal to 1.55 to 1.00, then 25%; or
(b) if the Production Tracking Rate is less than 80%, then 100%, otherwise 25%;
(c) if the LTV is greater than 75%, then 100%, otherwise 25%; or
App. A-6

(d) if past the Anticipated Repayment Date, then 100%, otherwise, 25%.
“Class A Excess Amortization Amount” means, with respect to any Payment Date, with respect to the Class A Notes, the Class A Excess Allocation Percentage multiplied by the amount of Available Funds for such Payment Date remaining after giving effect to the distributions pursuant to the clauses (A) through (G) of the Priority of Payments on such Payment Date; provided, that the Class A Excess Amortization Amount as of any Payment Date shall not exceed the Class A Outstanding Principal Balance as of such Payment Date (calculated after giving effect to the payments pursuant to the clauses (A) through (G) of the Priority of Payments on such Payment Date).
“Class A Interest Rate” means 6.555% plus any increase to such rate pursuant to Section 2.8(f) of the Indenture.
“Class A Notes” means, individually and collectively, the 6.555% Class A Notes of the Issuer, substantially in the form of Exhibit A to the Indenture.
“Class A Notes Outstanding Principal Balance” means, as of any date of determination, the Outstanding Principal Balance of all Class A Notes issued pursuant to the Indenture, as the context requires.
“Class A Outstanding Principal Balance” means, as of any date of determination, the outstanding principal amount of the Class A Notes on the Closing Date, less the sum of all amounts distributed to the Class A Noteholders on or prior to such date in respect of principal, including with respect to any redemption of Class A Notes.
“Class A Principal Distribution Amount” means, as of any Payment Date, the Class A Scheduled Principal Distribution Amount plus amounts previously due and unpaid; provided, that the Class A Principal Distribution Amount as of any Payment Date shall not exceed the Class A Outstanding Principal Balance as of such Payment Date.
“Class A Scheduled Principal Distribution Amount” means, as of any date of determination, the amount indicated on Schedule B with respect to such date.
“Class B Excess Allocation Percentage” means (1) prior to the repayment of the Class A Notes, 14% of the amount of Available Funds for such Payment Date remaining after giving effect to the distributions pursuant to the clauses (A) through (K) of the Priority of Payments on such Payment Date and (2) following the repayment of the Class A Notes, the greatest of the following percentages, as applicable, only insofar as the Class A Notes are no longer outstanding:
(a)(i) If the DSCR as of the applicable Payment Date is less than 1.45 to 1.00, then 100%, (ii) if the DSCR as of such Payment Date is greater than or equal to 1.45 to 1.00 and less than 1.55 to 1.00, then 50%, or (iii) if the DSCR as of such Payment Date is greater than or equal to 1.55 to 1.00, then 25%; or
App. A-7

(b) if the Production Tracking Rate is less than 80%, then 100%, otherwise 25%;
(c) if the LTV is greater than 75%, then 100%, otherwise 25%; or
(d) if past the Anticipated Repayment Date, then 100%, otherwise, 25%.
“Class B Excess Amortization Amount” means, with respect to any Payment Date, with respect to the Class B Notes, the Class B Excess Allocation Percentage multiplied by the amount of Available Funds for such Payment Date remaining after giving effect to the distributions pursuant to the clauses (A) through (K) of the Priority of Payments on such Payment Date; provided, that the Class B Excess Amortization Amount as of any Payment Date shall not exceed the Class B Outstanding Principal Balance as of such Payment Date (calculated after giving effect to the payments pursuant to the clauses (A) through (K) of the Priority of Payments on such Payment Date).
“Class B Interest Rate” means 11.235% plus any increase to such rate pursuant to Section 2.8(f) of the Indenture.
“Class B Notes” means, individually and collectively, the 11.235% Class B Notes of the Issuer, substantially in the form of Exhibit A to the Indenture.
“Class B Outstanding Principal Balance” means, as of any date of determination, (i) the outstanding principal amount of the Class B Notes on the Closing Date, plus (ii) the aggregate Designated Unpaid Interest Amount, less (iii) the sum of all amounts distributed to the Class B Noteholders on or prior to such date in respect of principal, including with respect to any redemption of Class B Notes.
“Class B Principal Distribution Amount” means, as of any Payment Date, the Class B Scheduled Principal Distribution Amount plus amounts previously due and unpaid; provided, that the Class B Principal Distribution Amount as of any Payment Date shall not exceed the Class B Outstanding Principal Balance as of such Payment Date.
“Class B Scheduled Principal Distribution Amount” means, as of any date of determination, the amount indicated on Schedule B with respect to such date.
“Closing Date” or “Closing” means September 19, 2024.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” has the meaning specified in the Granting Clause of the Indenture.
“Collection Account” means the account designated as such, established and maintained pursuant to Section 8.2(a) of the Indenture.
“Collection Period” means, with respect to any Payment Date, the period from and including the first day of the calendar month immediately preceding the calendar month in which such Payment Date occurs (or with respect to the Initial Payment Date, from but excluding the
App. A-8

Cutoff Date) to and including the last day of the calendar month immediately preceding the calendar month in which such Payment Date occurs. Any amount stated as of the last day of a Collection Period shall give effect to the following applications as determined as of the close of business on such last day: (1) all applications of Collections and (2) all distributions to be made on the related Payment Date.
“Collections” means all amounts paid to the Issuer, the Manager (solely in its capacity as such) or the Back-Up Manager from whatever source (excluding any amounts transferred by a Hedge Counterparty for deposit into any Hedge Collateral Account) on or with respect to the Assets and all amounts paid to Operator from whatever source with respect to the Assets (subject in all respects to the expense and reimbursement provisions of the Joint Operating Agreement); provided, for the avoidance of doubt, Collections deposited in the Collection Account shall not be net of any Seller Taxes (as defined under the Transfer Agreement).
“Commission” means the U.S. Securities and Exchange Commission.
“Consents” means any approval, consent, ratification, waiver or other authorization from any Person that is required to be obtained in connection with the Contemplated Transaction or the execution or delivery of the Basic Documents.
“Contemplated Transactions” means (i) all of the transactions contemplated by the Basic Documents, including: (a) the formation of Diversified Holdings; (b) the transfer of the Issuer to Diversified Holdings; (c) the entering into the Basic Documents by the Diversified Parties and the performance by the Diversified Parties of their respective covenants and obligations under the Basic Documents; and (d) the Issuer’s ownership, and exercise of control over the Assets from and after Closing; and (ii) the Manager’s management of the Issuer contemplated by the Management Services Agreement.
“Contract” means any agreements and contracts (including joint operating agreements) to which the Issuer is a party.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “Controlled” and “Controlling” shall have meanings correlative to the foregoing.
“Controlled Entity” means (a) any of the Issuer’s and Diversified Holdings’ respective Controlled Affiliates and (b) Diversified and its Controlled Affiliates.
“Controlling Class” means as of any date of determination, the most senior outstanding Class of Notes (i.e., the Class with the lowest alphabetical designation; i.e., the Class A Notes, while Class A Notes are outstanding, followed by the Class B Notes, when no Class A Notes are outstanding).
“Corporate Services Agreement” means the Corporate Services Agreement, dated as of the date hereof, between the Issuer and Citadel SPV LLC.
App. A-9

“Corporate Trust Office” means the principal office of the Indenture Trustee at which at any particular time the Indenture shall be administered, which office at the date of execution of the Indenture is located at UMB Bank, N.A., 100 William Street, Suite 1850, New York, New York 10038, Attn: ABS Structured Finance – DABS IX, e-mail: michele.voon@umb.com, (ii) for purposes of transfers and exchanges of Notes pursuant to the Indenture, UMB Bank, N.A., 928 Grand Blvd., 9th Floor, Kansas City, MO 64106, Attn: Corporate Trust Dept, Bond Operations or (iii) at such other address or electronic mail address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee at the address or electronic mail address designated by such successor Indenture Trustee by written notice to the Noteholders and the Issuer.
“Credit Risk Retention Rules” means risk retention regulations in 17 C.F.R. Part 246 as such regulation may be amended from time to time and subject to such clarification and interpretation as have been provided by the Commission in an adopting release or by the staff of the Commission, or as may be provided in writing by the Commission or its staff from time to time.
“Cutoff Date” means the “Effective Time” as defined in the Transfer Agreement.
“DABS” means Diversified ABS LLC, a Pennsylvania limited liability company.
“DABS II” means Diversified ABS Phase II LLC, a Pennsylvania limited liability company.
“DABS IV” means Diversified ABS Phase IV LLC, a Delaware limited liability company.
“DABS VIII” means Diversified ABS VIII LLC, a Delaware limited liability company.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Default Interest” has the meaning specified in Section 2.8(e) of the Indenture.
“Definitive Notes” means Notes issued in definitive form that are not Global Notes.
“Depository” means initially, the Depository Trust Company, the nominee of which is Cede & Co., and any permitted successor depository.
“Depository Agreement” means, to the extent in existence, any agreement as between the Issuer and the Depository, governing the rights and responsibilities of each party.
“Depository Participant” means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depository effects book-entry transfers and pledges of securities deposited with the Depository.
App. A-10

“Designated Unpaid Interest Amount” has the meaning specified in Section 2.8(a) of the Indenture.
“Direct Expenses” has the meaning specified in the Management Services Agreement.
“Diversified” means Diversified Production LLC, a Pennsylvania limited liability company.
“Diversified Companies” means each of Diversified Energy Company Plc and the Diversified Parties.
“Diversified Corp” means Diversified Gas & Oil Corporation, a Delaware corporation.
“Diversified Holdings” means Diversified ABS IX Holdings LLC, a Delaware limited liability company.
“Diversified Marketing” means Diversified Energy Marketing LLC, an Alabama limited liability company.
“Diversified Parties” means each of Diversified, Diversified Corp, Diversified Holdings and the Issuer.
“DSCR” means, as of any Quarterly Determination Date, beginning with the Payment Date occurring in January 2025, an amount equal to (a) the Securitized Net Cash Flow over the three (3) immediately preceding Collection Periods less the aggregate Senior Transaction Fees, divided by (b) the sum of (i) the aggregate interest accrued on the Controlling Class over such three (3) immediately preceding Payment Dates and any unpaid interest for such Controlling Class at the beginning of the Payment Date three (3) months prior to such Quarterly Determination Date, (ii) the aggregate Principal Distribution Amount for the Controlling Class over such three (3) immediately preceding Payment Dates, and (iii) without duplication, any unpaid Principal Distribution Amounts for the Controlling Class at the beginning of the Payment Date three (3) months prior to such Quarterly Determination Date.
“Eligible Account” means a segregated account with an Eligible Institution.
“Eligible Institution” means:
(a)the corporate trust department of the Indenture Trustee; or
(b)a depository institution or trust company organized under the Laws of the United States of America or any one of the states thereof, or the District of Columbia (or any domestic branch of a foreign bank), which at all times (i) has either (A) a long-term unsecured debt rating of at least BBB or better by Fitch or, to the extent that Fitch does not rate the Notes, the equivalent or better by an NRSRO, or such other rating that is acceptable to the Majority Noteholders or (B) a certificate of deposit rating of at least F-1+ or better by Fitch or, to the extent that Fitch does not rate the Notes, the equivalent or better by an NRSRO, or such other
App. A-11

rating that is acceptable to the Majority Noteholders and (ii) whose deposits are insured by the FDIC.
“Encumbrance” means any charge, equitable interest, privilege, Lien, mortgage, deed of trust, production payment, collateral assignment, security interest, or other arrangement substantially equivalent to any of the foregoing.
“Environmental Law” means any Law, ordinance, rule or regulation of any Governmental Body relating to pollution or the protection of the environment, natural resources, or human health and safety (as it relates to exposure to Hazardous Materials).
“Environmental Liabilities” means any cost, damage, expense, liability, obligation, or other responsibility arising from or under either an Environmental Law or third party claims relating to the environment, and which relates to the ownership or operation of the Assets.
“Equity Contribution Cure” means on any date prior to the Final Scheduled Payment Date for the applicable Notes, a contribution or other payment to the Issuer made by depositing cash (other than Collections) into the Collection Account by any equity holder of the Issuer, provided such amount shall not be more than ten percent (10%) in the aggregate of the initial principal amount of the Notes (as of the respective date of issuance), made no more than five (5) times (in aggregate) while the Notes are outstanding, and may not be made with respect to two consecutive Payment Dates, with such changes to the percent or frequency as are consented to by the Majority Noteholders.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder from time to time in effect.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Issuer for purposes of Section 412 of the Code or Title IV of ERISA.
“ERISA Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made by the Issuer or any ERISA Affiliate or with respect to which the Issuer or any ERISA Affiliate may have any liability.
“Escrow Agent” means UMB Bank, N.A., not in its individual capacity but solely as escrow agent under the Escrow Agreement.
“Escrow Agreement” means each escrow agreement, dated as of September 18, 2024 by and among the Issuer, Diversified Corp, the Escrow Agent and certain Noteholders referenced therein.
“Escrow Funding Date” means September 18, 2024.
“Event of Default” has the meaning specified in Section 5.1(a) of the Indenture.
App. A-12

“Excess Management Fee” means an amount per calendar month equal to (i) 3.0% multiplied by (ii) the Collections for such calendar month less (iii) $30,000, prorated for any partial calendar month.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Executive Officer” means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, any Executive Vice President, Senior Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of such corporation; with respect to any limited liability company, any of the officers listed previously with respect to a corporation or any managing member or sole member of the limited liability company; with respect to any partnership, any general partner thereof; and with respect to any other entity, a similar situated Person.
“Existing Indebtedness” means the indebtedness of the Issuer outstanding under that certain Bridge Loan and Security Agreement, dated as of June 6, 2024 (the “Loan Agreement”), by and among the Issuer, as borrower, the Seller, as guarantor, each of the financial institutions from time to time party thereto as lenders, UMB Bank, N.A., as administrative agent and account bank, and Barclays Bank PLC, as facility agent.
“FATCA” means Sections 1471 through 1474 of the Code.
“FATCA Withholding Tax” means any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code and any regulations or any intergovernmental agreements thereunder or official interpretations thereof.
“FDIC” means the Federal Deposit Insurance Corporation.
“Final Scheduled Payment Date” means the Payment Date occurring in the month of September 2044.
“Financial Asset” has the meaning given such term in Article 8 of the UCC. As used herein, the Financial Asset “related to” a security entitlement is the Financial Asset in which the entitlement holder (as defined in the New York UCC) holding such security entitlement has the rights and property interest specified in the New York UCC.
“Fitch” means Fitch Ratings, Inc., or any successor to the rating agency business thereof.
"Flow-Through Entity” has the meaning specified in Section 2.4(f) of the Indenture.
“GAAP” means Generally Accepted Accounting Principles.
“Global Notes” means Notes issued in global form to a Depository.
“Governmental Authorization” means any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law.
App. A-13

“Governmental Body” means any (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
“Governmental Official” means any governmental official or employee, employee of any government-owned or government-controlled entity, political party, any official of a political party, candidate for political office, official of any public international organization or anyone else acting in an official capacity.
“Governmental Rule” means with respect to any Person, any Law, rule, regulation, ordinance, order, code, treaty, judgment, decree, directive, guideline, policy or similar form of decision of any Governmental Body binding on such Person.
“Grant” means mortgage, pledge, bargain, warrant, alienate, remise, release, convey, assign, transfer, create, grant a Lien upon and a security interest in, grant a right of set-off against, deposit, set over and confirm pursuant to the Indenture. A Grant of any item of Collateral or of any other property shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such item of Collateral and all other monies payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person:
(a)to purchase such indebtedness or obligation or any property constituting security therefor;
(a)to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;
(b)to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or
App. A-14

(c)otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.
“Hazardous Materials” means any and all pollutants, toxic or hazardous wastes or other substances that might pose a hazard to health and safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or penalized by any applicable Law, including asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized substances.
“Hedge Agreement” means any master agreement and related schedules, annexes and confirmations entered into between the Issuer and a Hedge Counterparty with respect to any swap, forward, option, swaption, cap, future or derivative transaction or similar agreement (whether entered into as a new transaction or by novation of a transaction or agreement existing as of the Closing Date or thereafter), in each case whether cash or physical settlement, that is reasonably expected to hedge or mitigate the existing or anticipated commercial risk of the Issuer to one or more commodities including, without limitation, those transactions between the Issuer and each Hedge Counterparty.
“Hedge Collateral Accounts” has the meaning specified in Section 8.2(d) of the Indenture.
“Hedge Counterparty” or “Hedge Counterparties” means Canadian Imperial Bank of Commerce and each subsequent counterparty to a Hedge Agreement which satisfies the Hedge Counterparty Rating Requirements at the time that it enters into the Hedge Agreement with the Issuer.
“Hedge Counterparty Rating Requirements” has the meaning specified in the relevant Hedge Agreement.
“Hedge Counterparty Rights Agreement” means any Hedge Counterparty Rights Letter Agreement, dated as of the Closing Date, among the Issuer, the Indenture Trustee and any of the Hedge Counterparties.
“Holder” or “Noteholder” means the Person in whose name a Note is registered on the Note Register.
“Holdings Operating Agreement” means the Amended and Restated Operating Agreement of Diversified Holdings, dated as of the date hereof, as the same may be amended and supplemented from time to time.
App. A-15

“Hot Back-Up Management Duties” shall have the meaning set forth in the Back-Up Management Agreement.
“Hydrocarbons” means oil, gas, minerals, and other gaseous and liquid hydrocarbons or any combination of the foregoing.
“IFRS” means International Financial Reporting Standards.
“Indebtedness” means, with respect to any Person, at any time, without duplication,
(a)its liabilities for borrowed money;
(b)its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);
(c)(i) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases and (ii) all liabilities which would appear on its balance sheet in accordance with GAAP in respect of Synthetic Leases assuming such Synthetic Leases were accounted for as Capital Leases;
(d)all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);
(e)all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money);
(f)all its liabilities (including delivery and payment obligations) under any Hedge Agreement of such Person; and
(g)any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.
“Indenture” means the Indenture, dated as of the Closing Date, between the Issuer and the Indenture Trustee, as the same may be amended and supplemented from time to time.
“Indenture Trustee” means UMB Bank, N.A., a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture, or any successor Indenture Trustee under the Indenture.
App. A-16

“Independent” means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor on the Notes, Diversified and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any Material indirect financial interest in the Issuer, any such other obligor, Diversified or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, Diversified or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.
“Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than five percent (5%) of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.
“Intercreditor Acknowledgment” means that certain Acknowledgment Agreement, dated as of the Closing Date, by and among the ABS I Trustee, the ABS II Trustee, the ABS IV Trustee, the ABS VIII Trustee, the Indenture Trustee, and KeyBank National Association, and acknowledged and agreed to by Diversified, Diversified Marketing, DABS, DABS II, DABS IV, DABS VIII, DP Yellowjacket Holdco, LLC and the Issuer.
“Interest Accrual Period” means, with respect to any Payment Date for the Notes, the period from and including the immediately preceding Payment Date (or, in the case of the Initial Payment Date, from and including the Escrow Funding Date) up to, but excluding, the current Payment Date.
“Interest Rate” means the Class A Interest Rate and/or the Class B Interest Rate, as applicable.
“Interim Successor Manager” means, upon the resignation or termination of the Manager pursuant to the terms of the Management Services Agreement and prior to the appointment of any successor to the Manager, the Back-Up Manager.
“Initial Payment Date” has the meaning specified in the definition of Payment Date in this Appendix A Part I of the Indenture.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“Investment Earnings” means, with respect to any Payment Date, the investment earnings (net of losses and investment expenses) on amounts on deposit in the Issuer Accounts to be deposited into the Collection Account on such Payment Date pursuant to Section 8.2(f) of the Indenture.
“Investment Letter” has the meaning specified in Section 2.4(c) of the Indenture.
App. A-17

“Investments” means all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, Indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise.
“IO DSCR” means, as of any Quarterly Determination Date, beginning with the Payment Date occurring in January 2025, an amount equal to (a) the Securitized Net Cash Flow for each of the three (3) immediately preceding Collection Periods, divided by (b) the aggregate Note Interest with respect to the Controlling Class over such three (3) immediately preceding Payment Dates.
“IRS” means the United States Internal Revenue Service.
“Issuer” means DP Mustang Holdco LLC, a Delaware limited liability company.
“Issuer Account Property” means the Issuer Accounts, all amounts and investments held from time to time in any Issuer Account (whether in the form of deposit accounts, Physical Property, book-entry securities, uncertificated securities or otherwise), and all proceeds of the foregoing.
“Issuer Accounts” shall have the meaning specified in Section 8.2(f) of the Indenture.
“Issuer Hedge Termination Receipt” shall have the meaning specified in Section 4.28(c) of the Indenture.
“Issuer Operating Agreement” means the Amended and Restated Operating Agreement of Issuer, dated as of the date hereof, as the same may be amended and supplemented from time to time.
“Issuer Order” or “Issuer Request” means a written order or request signed in the name of the Issuer by any one of its authorized officers and delivered to the Indenture Trustee.
“Joint Operating Agreement” means, that certain Operating Agreement dated as of June 6, 2024, by and between the Operator and the Issuer, as amended by Amendment to Operating Agreement, dated as of the Closing Date, by and between the Operator and the Issuer, and as further amended from time to time.
“Knowledge” means, with respect to any Diversified Company, the actual knowledge (following reasonable inquiry of direct reports) of any Executive Officer of such entity.
“Law” means any applicable United States or foreign, federal, state, regional, or local statute, law, code, rule, treaty, convention, order, decree, injunction, directive, determination or other requirement and, where applicable, any legally binding interpretation thereof by a Governmental Body having jurisdiction with respect thereto or charged with the administration or interpretation thereof (including, without limitation, any Governmental Rule).
“Leases” means the leases described on Exhibit B to the Transfer Agreement.
App. A-18

“Lien” means a security interest, lien, charge, pledge, equity or encumbrance of any kind.
“Liquidity Reserve Account” means the account designated as such, established and maintained pursuant to Section 8.2(c) of the Indenture.
“Liquidity Reserve Account Initial Deposit” means cash or Permitted Investments having a value equal to $2,855,987.
“Liquidity Reserve Account Required Balance” means an amount equal to 50% of the Liquidity Reserve Account Target Amount.
“Liquidity Reserve Account Target Amount” means, with respect to (a) first Payment Date, the Liquidity Reserve Account Initial Deposit, (b) any Payment Date after the first Payment Date and prior to which the Principal Coverage Condition has been achieved, the product of (i) six (6) and (ii) the sum of (y) the Note Interest on the Class A Notes and (z) Senior Transaction Fees for such Payment Date (this amount shall not be less than 50% of the Liquidity Reserve Account Initial Deposit) or (c) any Payment Date on or after which the Principal Coverage Condition has been achieved, $0.
“LTV” means, as of any applicable date of determination, an amount equal to (a) the excess of the Outstanding Principal Balance of the Controlling Class as of such date of determination over the amount then on deposit in the Collection Account divided by (b) the sum of the PV-10 as of such date of determination. The LTV shall be determined on an annual basis; provided that, if the PV-10 shall have been re-calculated as a result of an updated reserve report being obtained prior to any otherwise scheduled annually updated reserve report (as described in the definition of “PV-10”), then the LTV shall be re-calculated giving effect to such re-calculation of the PV-10 and on the basis of the then-current amounts specified in the preceding clause (a).
“Majority Noteholders” means, (i) as of the date of determination on which any Notes are Outstanding, Noteholders (other than any Diversified Company and each of their Affiliates) representing greater than fifty percent (50%) of the aggregate Outstanding Principal Balance of the Controlling Class and (ii) as of any date of determination on which no Notes are Outstanding, and any Hedge Agreement with any Hedge Counterparties remains outstanding or any payments thereunder, including any termination value, remains unpaid, the Hedge Counterparties until such time as all of the Hedge Agreements with Hedge Counterparties have terminated and all payments thereunder, including termination value, have been paid in full.
“Management Services Agreement” means the Management Services Agreement, dated as of the Closing Date, by and among the Manager, Diversified Corp and the Issuer, as amended from time to time.
“Management Team” means, at any point in time, those certain individuals serving as officers of Diversified Energy Company Plc as Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and General Counsel.
“Manager” means Diversified, in its capacity as manager under the Management Services Agreement, and any successor thereunder.
App. A-19

“Material” with respect to any Person means material in relation to the business, operations, affairs, financial condition, assets or properties of such Person.
“Material Adverse Effect” means a material adverse effect on (i) the business, operations, affairs, assets, properties, prospects, financial condition or results of operation of any Diversified Party, (ii) the validity, priority or enforceability of the Liens on the Collateral, taken as a whole, (iii) the ability of any Diversified Party, the Manager or the Operator to perform any Material obligation under any Basic Document to which it is a party, (iv) the ability of the Indenture Trustee to enforce any Diversified Party, the Manager or the Operator obligations under the Basic Documents to which such person is a party in any Material respect, or (v) the validity or enforceability against any Diversified Party, the Manager or the Operator of any Basic Document to which such person is a party.
“Material Manager Default” has the meaning specified in the Management Services Agreement, as of the Closing Date, with such changes as are consented to by the Majority Noteholders and that would not reasonably be expected to be materially adverse to the Hedge Counterparties.
“Moody’s” means Moody Investors Service, Inc., or any successor to the rating agency business thereof.
“Mortgage” means any mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Indenture Trustee, for the benefit of the Secured Parties, on real property of the Issuer, including any amendment, restatement, modification or supplement thereto.
“Multiemployer Plan” means any ERISA Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).
“NAIC” means the National Association of Insurance Commissioners.
“Natural Gas Hedge Percentage” has the meaning specified in Section 4.28 of the Indenture.
“Natural Gas Hedge Period” has the meaning specified in Section 4.28 of the Indenture.
“Net Revenue Interest” means, for any Well, the holder’s share of the Hydrocarbons produced, saved and marketed therefrom (after satisfaction of all Burdens).
“Non-U.S. Plan” means any plan, fund or other similar program that (a) is established or maintained outside the United States of America by Diversified or the Issuer primarily for the benefit of employees of Diversified or the Issuer residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and (b) is not subject to ERISA or the Code.
App. A-20

“Note Interest” means, with respect to any Payment Date and any Class of Notes, an amount equal to the sum of (i) interest accrued during the Interest Accrual Period at the Interest Rate with respect to such Class of Notes on the applicable Outstanding Principal Balance thereof plus (ii) without duplication, any accrued and unpaid Note Interest in respect of such Class of Notes from prior Payment Dates (but not including, for the avoidance of doubt, any Designated Unpaid Interest Amount), together with, to the extent permitted by Law, interest thereon at such Interest Rate during the Interest Accrual Period, calculated on the basis of a 360-day year consisting of twelve 30-day months.
“Note Purchase Agreement” means the Note Purchase Agreement, dated the Closing Date, among the Diversified Parties and the Purchasers (as may be further modified, amended or supplemented).
“Note Register” and “Note Registrar” have the respective meanings specified in Section 2.5(a) of the Indenture.
“Noteholder” means, with respect to a Definitive Note, the Person in whose name a Note is registered in the Note Register and, with respect to a Book-Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on the books of the Depository, or on the books of a Person maintaining an account with such Depository (directly as a Depository Participant or as an indirect participant, in each case in accordance with the rules of such Depository).
“Noteholder FATCA Information” means, with respect to any Noteholder (or, if such Noteholder is treated as a disregarded entity for U.S. federal income tax purposes, such Noteholder’s regarded tax owner), information sufficient to eliminate the imposition of, or determine the amount of, U.S. withholding tax under FATCA.
“Noteholder Tax Identification Information” means, with respect to any Noteholder (or, if such Noteholder is treated as a disregarded entity for U.S. federal income tax purposes, such Noteholder’s regarded tax owner), properly completed and signed tax certifications (generally, in the case of U.S. federal income Tax, IRS Form W-9 (or applicable successor form) in the case of a person that is a “United States person” within the meaning of Section 7701(a)(30) of the Code or the appropriate IRS Form W-8 (or applicable successor form) in the case of a person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code).
“Notes” means the Class A Notes and the Class B Notes.
“NRSRO” means any nationally recognized statistical rating agency recognized as such by the Commission and acceptable to the SVO.
“Obligations” means all of the obligations of the Issuer with respect to the Notes and any other Basic Document, including any Hedge Agreement, whether owed to Indenture Trustee, a Holder, or any other Person, as set forth under any Basic Document (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising), including, without limitation, the obligation to pay principal, interest (including, for the avoidance of doubt, any default interest required under the Indenture),
App. A-21

any Redemption Price, Change of Control Redemption Price and all actual, reasonable and documented costs, charges and expenses, attorney’s fees and disbursements, and indemnitees.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“OFAC Sanctions Program” means any economic or trade sanction that OFAC is responsible for administering and enforcing. A list of OFAC Sanctions Programs may be found at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.
“Officer’s Certificate” means in the case of the Issuer, a certificate signed by a Responsible Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 12.1 of the Indenture, and delivered to the Indenture Trustee (unless otherwise specified, any reference in the Indenture to an Officer’s Certificate shall be to an Officer’s Certificate of a Responsible Officer of the Issuer), and in the case of the Manager or the Back-Up Manager, a certificate signed by a Responsible Officer of the Manager or the Backup Manager, as applicable.
“Oil and Gas Portfolio” means, as of any date of determination, all Assets then held by the Issuer.
“Operating Expenses” means the amounts chargeable to the Joint Account (as defined in the Joint Operating Agreement) with respect to Issuer’s interest. Operating Expenses excludes any amounts otherwise paid by Issuer under the Basic Documents and any internal general and administrative expenses of Issuer.
“Operator” means Diversified, in its capacity as operator under any Joint Operating Agreement, and any successor thereunder.
“Opinion of Counsel” means one or more written opinions of counsel who may, except as otherwise expressly provided in the Indenture, be an employee of or counsel to the Issuer (if satisfactory to the addressees of such opinion) and who shall be satisfactory to the addressees of such opinion, and which opinion or opinions if addressed to the Indenture Trustee, shall comply with any applicable requirements of Section 12.1 or any other applicable provision of the Indenture and, if applicable, shall be in form and substance satisfactory to the Indenture Trustee.
“Order” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.
“Organizational Documents” of any entity means (a) in the case of a corporation, the articles or certificate of incorporation (or the equivalent of such items under state Law) and the bylaws of such corporation, (b) in the case of a limited liability company, the certificate or articles of existence or formation and the operating agreement of such limited liability company, (c) in the case of a limited partnership, the certificate of formation and limited partnership agreement of such limited partnership and the Organizational Documents of the general partner
App. A-22

of such limited partnership, and (d) any equivalent documents to the foregoing under the state Law where such entity was organized or formed.
“Other Agreement Default” means Diversified Party or any Affiliate of a Diversified Party shall fail to pay when due any principal or interest on any Indebtedness (other than the Indebtedness under the Basic Documents); if such failure to pay, breach or default entitles the holder to cause such Indebtedness having an individual principal amount in excess of $5,000,000 or having an aggregate principal amount in excess of $10,000,000 to become or be declared due prior to its stated maturity.
“Outstanding” means, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture except:
(i)Notes theretofore cancelled by the Note Registrar or delivered to the Note Registrar for cancellation;
(ii)Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given or waived pursuant to the Indenture or provision for such notice or waiver has been made which is satisfactory to the Indenture Trustee); and
(iii)Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a protected purchaser; provided, that in determining whether the Holders of the requisite Outstanding Amount have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Notes owned by the Issuer, any other obligor upon the Notes, Diversified or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee has actual knowledge are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, Diversified or any Affiliate of any of the foregoing Persons.
“Outstanding Amount” means the aggregate principal amount of all Notes outstanding at the date of determination.
“Outstanding Principal Balance” means, as of any date of determination, the Outstanding Amount of the Notes on the Closing Date, less the sum of all amounts distributed to the
App. A-23

Noteholders on or prior to such date in respect of principal, including with respect to any redemption of Notes.
“P&A Expense Amount” means, for any fiscal year, the actual aggregate net amount of plugging and abandonment expenses attributable to the Wellbore Interests and any Additional Assets, which amount shall be determined by the Manager in accordance with the Management Standards (as defined in the Management Services Agreement).
“P&A Reserve Account” has the meaning specified in Section 8.2(f) of the Indenture.
“P&A Reserve Amount” means, with respect to any Payment Date after which a P&A Reserve Trigger occurs, an amount equal to (x) if the P&A Reserve Trigger is under subclause (a) of the definition of “P&A Reserve Trigger”, two (2) times the excess, if any, of (a) the P&A Expense Amount for the fiscal year preceding the applicable occurrence of the P&A Reserve Trigger over (b) the P&A Reserve Trigger Amount and (y) if the P&A Reserve Trigger is under subclause (b) of the definition of “P&A Reserve Trigger”, an amount equal to the P&A Expense Amount for the fiscal year preceding the applicable occurrence of the P&A Reserve Trigger.
“P&A Reserve Trigger” means (a) the determination as of the Payment Determination Date in March of any fiscal year that the P&A Expense Amount for the Issuer’s prior fiscal year exceeded the P&A Reserve Trigger Amount.
“P&A Reserve Trigger Amount” means (i) for fiscal years 2024 through 2027, an amount equal to $1,000,000, (ii) for fiscal years 2028 through 2036, an amount equal to $1,500,000, and (iii) for fiscal years 2037 through 2044 an amount equal to $2,000,000.
“Paying Agent” means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 of the Indenture and is authorized by the Issuer to make payments to and distributions from the Collection Account including payments of principal of or interest on the Notes on behalf of the Issuer.
“Payment Date” means, with respect to each Collection Period, the 28th day of the following month or, if such day is not a Business Day, the immediately following Business Day. The Initial Payment Date will be October 28, 2024. There will be no Class A Scheduled Principal Distribution Amount, Class B Scheduled Principal Distribution Amount or payment of Note Interest with respect to the October 2024 Payment Date. The first payment of Class A Scheduled Principal Distribution Amount, Class B Scheduled Principal Distribution Amount and Note Interest will occur on the November 2024 Payment Date.
“Payment Date Compliance Certificate” means the certificate delivered pursuant to Section 7.1(e) of the Indenture.
“Payment Date Report” means a certificate of the Manager delivered pursuant to Section 8.6 of the Indenture.
App. A-24

“Payment Determination Date” means, with respect to any Payment Date, two (2) Business Days immediately preceding such Payment Date.
“Permitted Dispositions” means the sale, or exchange for Additional Assets, of Assets by the Issuer at a price or value equal to fair market value at the time of such sale or exchange, subject to the following limitations:
(a)the aggregate amount of Assets sold or exchanged does not exceed 15% of the Assets on the basis of value as of the Closing Date;
(b)the aggregate amount of Assets sold to any Affiliate of Diversified does not exceed 5% of the value of the Assets;
(c)the selection procedures used in selecting such Assets would not reasonably be expected to be materially adverse to the Noteholders or the Hedge Counterparties;
(d)the DSCR shall not be less than 1.55 to 1.00, the Production Tracking Rate shall not be less than 80%, the IO DSCR shall not be less than 2.00 to 1.00 and the LTV shall not be greater than 75% on a pro forma basis after giving effect to such sale or exchange and the application of the proceeds therefrom to the purchase of Additional Assets, the repayment of the Notes or any required hedge termination payment, if any;
(e)the Rating Agency Condition shall have been satisfied;
(f)no sale, or exchange for Additional Assets, of Assets may occur during the continuance of any Default, Event of Default, or Rapid Amortization Event;
(g)the proceeds of any disposition of Collateral shall be sufficient (together with other funds available for such purpose) to pay any breakage or termination amounts (including any interest thereon) owing to any Hedge Counterparty as a result of any termination of hedges:
(h)the consideration for the disposed Collateral shall be in the form of cash, cash equivalents or Additional Assets; and
(i)delivery to the Indenture Trustee of an Officer’s Certificate certifying the above conditions.
(j)“Permitted Indebtedness” shall have the meaning specified in Section 4.21 of the Indenture.
“Permitted Investments” means (i) direct obligations of the United States of America or any agency thereof, or shares of money market funds that invest solely in such obligations, (ii) obligations fully guaranteed by the United States of America and certificates of deposit issued by, or bankers’ acceptances of, or time deposits, demand deposits or overnight deposits with, any bank, trust company or national banking association incorporated or doing business under the Laws of the United States of America or one of the states thereof having combined capital and surplus and retained earnings of at least $250,000,000, (iii) commercial paper of companies,
App. A-25

banks, trust companies or national banking associations incorporated or doing business under the Laws of the United States of America or one of the states thereof and in each case having a rating assigned to such commercial paper by S&P or Moody’s (or, if neither such organization shall rate such commercial paper at any time, by any nationally recognized statistical rating organization in the United States of America) equal to the highest rating assigned by such organizations and (iv) money market funds which (a) invest primarily in obligations of the United States of America or any agency thereof, corporate bonds, certificates of deposit, commercial paper rated AAAmmf or better by Fitch and P-1 or better by Moody’s, repurchase agreements, time deposits and (b) have a rating assigned to such fund by Moody’s, Fitch or S&P equal to “Aaa-mf”, “AAAmmf”, or “AAm”, respectively, or better. In no event shall any investment be eligible as a “Permitted Investment” unless the final maturity or date of return of such investment is thirty-one (31) days or less from the date of purchase thereof.
“Permitted Liens” shall, with respect to the Wellbore Interests, have the meaning assigned to the term “Permitted Encumbrance” in the Transfer Agreement, as of the Closing Date, with such changes as are consented to by the Majority Noteholders and the Hedge Counterparties.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.
“Physical Property” means instruments within the meaning of Section 9-102(a)(47) of the UCC and certificated securities within the meaning of Section 8-102 of the UCC.
“Plan” means any (a) “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (b) “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code; (c) entity or account whose underlying assets are deemed to include “plan assets” (within the meaning of the Department of Labor regulation located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (d) plan, entity or account that is subject to any U.S. federal, state, non-U.S. or local Law that is substantially similar to Title I of ERISA or Section 4975 of the Code.
“Pledge Agreement” means the Pledge Agreement, dated as of the Closing Date, among Diversified Holdings, the Issuer, Diversified and the Indenture Trustee, for the benefit of the Secured Parties, as amended from time to time.
“Posted Collateral” means all Eligible Collateral (as defined by the Hedge Agreement) and the proceeds thereof, including all interest accruing on any such sums, that has been received by the Issuer from a Hedge Counterparty under a Hedge Agreement and has been deposited into an applicable Hedge Collateral Account.
“Predecessor Note” means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.6 of the
App. A-26

Indenture in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
“Principal Coverage Condition” means the first Payment Date upon which the sum of (a) Available Funds available subsequent to distributions on such Payment Date pursuant to Section 8.6(i)(C) of the Indenture and (b) the amounts available in the Liquidity Reserve Account, is greater than the aggregate Outstanding Principal Balance of the Class A Notes.
“Principal Distribution Amount” means, as of any Payment Date, the Class A Principal Distribution Amount and the Class B Principal Distribution Amount.
“Proceeding” means any suit in equity, action at Law or other judicial or administrative proceeding.
“Proceeds Retention Condition” shall have the meaning specified in Section 8.4(c) of the Indenture.
“Production Tracking Rate” means, with respect to any Semi-Annual Determination Date beginning with the Payment Date occurring in July 2025, the quotient of (a) the aggregate production volume with respect to the Assets actually realized over the six (6) calendar months immediately preceding such date of determination over (b) the aggregate production volume with respect to the Assets projected in the most recent Reserve Report for the six (6) corresponding calendar months.
“Purchaser” or “Purchasers” means the purchasers listed on Schedule B to the Note Purchase Agreement.
“PV-10” means the value calculated in the most recent Reserve Report delivered pursuant to Section 8.5 of the Indenture consisting of the discounted present value (using ten percent (10.0%) discount rate) of the sum of (i) the projected net cash flows from the Oil and Gas Portfolio categorized as proved, developed and producing, using commodity strip prices and (ii) the positive or negative aggregate mark-to-market value determined as of such date of determination of all Hedge Agreements, calculated in the aggregate for all Hydrocarbons hedged, calculated on an annual basis (or, to the extent the Manager in its discretion obtains an updated Reserve Report prior to any otherwise scheduled annually updated Reserve Report, calculated on a more frequent basis to reflect the projected proceeds described in such updated Reserve Report).
“Qualified Buyer” shall mean any U.S. domiciled private equity fund or controlled holding company, similar investment fund, sovereign wealth fund, publicly listed company, upstream or energy company, and/or similar entities or investors (or any consortium or combination of any or all of the foregoing) that in the aggregate for all such persons, has either (x) assets under management equal to or in excess of $1,000,000,000; (y) a market capitalization equal to or in excess of $1,000,000,000 or (z) an enterprise value equal to or in excess of $1,500,000,000.
App. A-27

“Qualifying Owner” means any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) that directly or indirectly holds or acquires 100% of the total voting power of the Voting Stock of Diversified Energy Company Plc, and of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) holds more than 50% of the total voting power of the Voting Stock thereof.
“Quarterly Determination Date” means the Payment Determination Dates in the months of January, April, July and October.
“Rapid Amortization Event” means the occurrence of (i) any Event of Default under the Indenture, (ii) a Warm Trigger Event, (iii) any Material Manager Default under the Management Services Agreement, (iv) any Other Agreement Default, or (v) the failure to repay the Notes by their Anticipated Repayment Date.
“Rating Agency” means (i) Fitch and (ii) if Fitch does not issue a senior unsecured longterm debt rating, corporate credit rating or issuer rating for the applicable Person or fails to make such rating publicly available, a “nationally recognized statistical rating organization” registered under the Exchange Act, that is consented to by the Majority Noteholders.
“Rating Agency Condition” means, with respect to any action, that each Rating Agency then rating a class of Notes shall have received ten (10) Business Days’ (or such shorter period as shall be acceptable to each Rating Agency) prior written notice and shall not have notified the Issuer that such action will result in a downgrade or withdrawal of the then current rating on any class of Notes.
“Rating Agency Contact” means globalcrosssectorsf@fitchratings.com.
“Record Date” means, with respect to a Payment Date or Redemption Date, the last day of the immediately preceding calendar month.
“Redemption” means the redemption of the Notes by the Issuer in accordance with Section 10.1 of the Indenture.
“Redemption Date” means a Business Day, (i) in the case of a redemption of the Notes pursuant to Section 10.1(a) of the Indenture, any day specified by the Issuer in the applicable notice of redemption, and (ii) in the case of a redemption of the Notes pursuant to Section 10.1(b) of the Indenture, any Payment Date within 90 days of the triggering Change of Control, as specified by the Issuer pursuant to Section 10.1(b) of the Indenture.
“Redemption Price” means, (i) with respect to any redemption of any Class of Notes pursuant to Section 10.1(a) of the Indenture (other than in connection with a Change of Control), (a) prior to March 2028 Payment Date, an amount equal to 100% of the principal amount thereof, plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but not including, the Redemption Date, and (b) on or after March 2028 Payment Date, an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any to, but not including, the
App. A-28

Redemption Date and (ii) with respect to a Change of Control, the Change of Control Redemption Price.
“Related Fund” means, with respect to any Holder of any Note, any fund or entity that (a) invests in Securities or bank loans, and (b) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.
“Reserve Report” means initially the Transfer Agreement Reserve Report and upon delivery of the updated reserve report required with respect to the Oil & Gas Portfolio pursuant to Section 8.5 of the Indenture, a reserve report in form and substance substantially similar to the Transfer Agreement Reserve Report (as adjusted for new information) and otherwise reasonably acceptable to the Majority Noteholders, setting forth as of the date of the report the oil and gas reserves of the Issuer, together with a projection of the rate of production and future net income, Taxes, Operating Expenses and capital expenditures with respect to the Wellbore Interests and any Additional Assets as of that date based on good faith and reasonable economic assumptions provided by the Manager, containing customary assumptions, qualifications and exclusions; provided, that upon the reasonable request of the Majority Noteholders, the Majority Noteholders may, at their sole expense, independently audit the economic assumptions provided by the Manager.
“Responsible Officer” means, (x) with respect to the Indenture Trustee, any officer within the Corporate Trust Office of the Indenture Trustee, including any vice president, assistant vice president, assistant secretary, senior associate, associate, trust officer or any other officer, employee or other person of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject, in each case, who shall have direct responsibility for the administration of the Indenture, (y) with respect to the Issuer any officer, including any president, vice president, secretary or any other officer performing functions similar to those performed by such officers, and (z) with respect to Diversified Corp or Diversified, any officer, including any president, vice president, secretary or any other officer performing functions similar to those performed by such officers.
“Rule 144A” means Rule 144A promulgated under the Securities Act.
“Rule 17g-5” has the meaning specified in Section 12.19(a) of the Indenture.
“Schedule of Assets” means Exhibit A and Exhibit B to the Transfer Agreement specifying the Assets being transferred, as such Schedule may be amended from time to time.
“Scheduled Principal Distribution Amount” means, as of any date of determination, the amount indicated on Schedule B to the Indenture with respect to such date.
“Secured Parties” means, collectively, each Noteholder, the Indenture Trustee, each Hedge Counterparty and the Back-Up Manager, and “Secured Party” means any of them individually.
App. A-29

“Securities” or “Security” shall have the meaning specified in section 2(a)(1) of the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended.
“Securities Intermediary” shall have the meaning specified in Section 8.2(g) of the Indenture.
“Securitized Net Cash Flow” means, with respect to any Collection Period, the sum of the aggregate proceeds of the Assets deposited in the Collection Account with respect to such Collection Period, the aggregate amount of Equity Contribution Cures, if any, deposited in the Collection Account with respect to such Collection Period, and the net proceeds of the Hedge Agreements received by the Issuer with respect to such Collection Period in excess of amounts payable pursuant to clauses (i)(A) and (B) of Section 8.6 of the Indenture with respect to such Collection Period.
“Seller” means DP Mustang Equity Holdco LLC, a Delaware limited liability company.
“Semi-Annual Determination Date” means the Payment Determination Dates in the months of January and July.
“Senior Financial Officer” means, with respect to Diversified, the chief financial officer, principal accounting officer, treasurer or comptroller (or any other officer holding a title or role similar to any of the foregoing) of Diversified.
“Senior Transaction Fees” means any fees or expenses payable pursuant to clauses (i)(A) and (B) of Section 8.6 of the Indenture.
“Settlement Agreement” means the Settlement Agent Services Agreement, dated as of September 16, 2024 between the Issuer and UMB Bank, N.A., as settlement agent.
“Similar Law” means any U.S. federal, state, non-U.S. or local Law that is substantially similar to Title I of ERISA or Section 4975 of the Code.
“Standard & Poor’s” or “S&P” means S&P Global Ratings, a division of S&P Global Inc., or any successor to the rating agency business thereof.
“State” means any one of the 50 States of the United States of America or the District of Columbia.
“State Sanctions List” means a list that is adopted by any state Governmental Body within the United States of America pertaining to Persons that engage in investment or other commercial activities in Iran or any other country that is a target of economic sanctions imposed under U.S. Economic Sanctions Laws.
“Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns
App. A-30

sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a fifty percent (50%) interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries).
“SVO” means the Securities Valuation Office of the NAIC.
“Synthetic Lease” means, at any time, any lease (including leases that may be terminated by the lessee at any time) of any property (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such Person is the lessor.
“Tax” or “Taxes” means any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, assessments, and other governmental charges imposed by any Governmental Body, including income, profits, franchise, withholding, employment, social security (or similar), disability, occupation, ad valorem, property, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated, unemployment, severance, compensation, utility, stamp, occupation, premium, windfall profits, transfer, gains, production and excise taxes, and customs duties, together with any interest, penalties, fines or additions thereto.
“Threatened” means a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made (orally or in writing) to a Diversified Company or any officers, directors, or employees of a Diversified Company that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.
“Transfer Agreement” means the Membership Interest Purchase Agreement, dated as of the date hereof, by and among Diversified, Diversified Corp, the Issuer, the Seller, and Diversified Holdings.
“Transfer Agreement Reserve Report” means the “Reserve Report” as defined in the Transfer Agreement.
"Transfer-Restricted Notes” has the meaning specified in Section 2.4(f) of the Indenture.
“Transferor Certificate” has the meaning specified in Section 2.4(c) of the Indenture.
“Treasury Rate” means, in respect of any date of redemption of Notes pursuant to Section 10.1 of the Indenture, the yield to maturity as of the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 that has become publicly available at least two Business
App. A-31

Days prior to the applicable Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to March 28, 2028; provided, however, that if the period from the Redemption Date to March 28, 2028, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. The Issuer will (1) calculate the Treasury Rate no later than the second (and no earlier than the fourth) Business Day preceding the applicable Redemption Date and (2) prior to such Redemption Date file with the Indenture Trustee an Officers’ Certificate setting forth the Applicable Premium and the Treasury Rate and showing the calculation of each in reasonable detail.
“Treasury Regulations” means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.
“UCC” means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time.
“U.S. Economic Sanctions Laws” means those Laws, executive orders, enabling legislation or regulations administered and enforced by the United States pursuant to which economic sanctions have been imposed on any Person, entity, organization, country or regime, including the Trading with the Enemy Act, the International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan Accountability and Divestment Act and any other OFAC Sanctions Program.
“USA PATRIOT Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.
“Voting Stock” of any specified Person as of any date means the capital stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
“Warm Back-Up Management Duties” shall have the meaning set forth in the Back-Up Management Agreement.
“Warm Trigger Event” will be continuing as of any Payment Date for so long as (i) the DSCR as of such Payment Date is less than 1.45 to 1.00, (ii) the Production Tracking Rate as of such Payment Date is less than 80% or (iii) the LTV as of such Payment Date is greater than 85%.
“Wellbore Interests” has the meaning specified in the Transfer Agreement.
“Wells” has the meaning specified in the Transfer Agreement.
App. A-32

“Working Interest” means, for any Well, that share of costs and expenses associated with the exploration, maintenance, development, and operation of such Well that the holder of the interest is required to bear and pay.

App. A-33

PART II - RULES OF CONSTRUCTION
(A)Accounting Terms. As used in this Appendix or the Basic Documents, accounting terms which are not defined, and accounting terms partly defined, herein or therein shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Appendix or the Basic Documents are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Appendix or the Basic Documents will control.
(B)“Hereof,” etc.: The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Appendix or any Basic Document will refer to this Appendix or such Basic Document as a whole and not to any particular provision of this Appendix or such Basic Document; and Section, Schedule and Exhibit references contained in this Appendix or any Basic Document are references to Sections, Schedules and Exhibits in or to this Appendix or such Basic Document unless otherwise specified. The word “or” is not exclusive.
(C)Use of “related” as used in this Appendix and the Basic Documents, with respect to any Payment Date, the “related Payment Determination Date,” the “related Collection Period,” and the “related Record Date” will mean the Payment Determination Date, the Collection Period, and the Record Date, respectively, immediately preceding such Payment Date.
(D)Amendments. Any agreement or instrument defined or referred to in the Basic Documents or in any instrument or certificate delivered in connection herewith shall mean such agreement or instrument as from time to time amended, modified or supplemented and includes references to all attachments thereto and instruments incorporated therein.
(E)Number and Gender. Each defined term used in this Appendix or the Basic Documents has a comparable meaning when used in its plural or singular form. Each gender-specific term used in this Appendix or the Basic Documents has a comparable meaning whether used in a masculine, feminine or gender-neutral form.
(F)Including. Whenever the term “including” (whether or not that term is followed by the phrase “but not limited to” or “without limitation” or words of similar effect) is used in this Appendix or the Basic Documents in connection with a listing of items within a particular classification, that listing will be interpreted to be illustrative only and will not be interpreted as a limitation on, or exclusive listing of, the items within that classification.
(G)UCC References. Terms used herein that are defined in the New York Uniform Commercial Code, as amended, and not otherwise defined herein shall have the meanings set forth in the New York Uniform Commercial Code, as amended, unless the context requires otherwise. Any reference herein to a “beneficial interest” in a security also shall mean, unless the context requires otherwise, a security entitlement with respect to such security, and any reference herein to a “beneficial owner” or “beneficial holder” of a security also shall mean, unless the context requires otherwise, the holder of a security entitlement with respect to such security. Any reference herein to money or other property that is to be deposited in or is on
App. A-34

deposit in a securities account shall also mean that such money or other property is to be credited to, or is credited to, such securities account.

App. A-35
Exhibit 4.12
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
Diversified Energy Company PLC (the “Company,” “we,” “us” and “our”) has the following series of securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Ordinary shares, nominal (par) value £0.20 per shareDECNew York Stock Exchange
Ordinary shares, nominal (par) value £0.20 per shareDECLondon Stock Exchange
The following description of the terms of our securities registered pursuant to Section 12(b) of the Exchange Act is not complete and is qualified in its entirety by reference to our Articles of Association, which is an exhibit our Annual Report on Form 20-F to which this Exhibit 4.25 is a part.
Ordinary Shares
The following summarizes the rights to which holders of our ordinary shares are entitled pursuant to our Articles of Association:
•each holder of our ordinary shares is entitled to one vote per ordinary share on all matters to be voted on by shareholders generally;
•the holders of the ordinary shares shall be entitled to receive notice of, attend, speak and vote at our general meetings; and
•holders of our ordinary shares are entitled to receive such dividends as are recommended by our board of directors and declared by our shareholders.
Registered Shares
We are required by the Companies Act 2006 to keep a register of our shareholders. Under UK law, the ordinary shares are deemed to be issued when a person acquires the unconditional right to be included in the Company's register of members in respect of the shares. The share register is therefore prima facie evidence of the identity of our shareholders and the shares that they hold. The share register generally provides limited, or no, information regarding the ultimate beneficial owners of our ordinary shares. Our share register is maintained by our registrar, Computershare Investor Services PLC.
Preemptive Rights
UK law generally provides shareholders with preemptive rights when new shares are issued for cash; however, it is possible for a company’s articles of association, or shareholders in general meeting, to exclude preemptive rights. Such an exclusion of preemptive rights may be for a maximum period of up to five years from the date of adoption of the articles of association, if the exclusion is contained in the articles of association, or from the date of the shareholder resolution, if the exclusion is by shareholder resolution. In either case, this exclusion would need to be renewed by the company’s shareholders upon its expiration (i.e., at least every five years).
On May 10, 2024, our shareholders approved the exclusion of preemptive rights, for an aggregate nominal value of up to £1,902,736, representing not more than 20% of the issued share capital as at April 9, 2024, subject to certain conditions, with such authority expiring at the conclusion of our next annual general meeting or, if earlier, June 30, 2025. Such exclusion will need to be renewed upon expiration (i.e., on the conclusion of our next annual general meeting or, if earlier, June 30, 2025) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period).
Articles of Association
Shares and Rights Attaching to Them
Objects
The objects of our Company are unrestricted.
Rights Attached to Shares
Subject to the Companies Act 2006 and to the rights conferred on the holders of any other shares, any share may be issued with or have attached to it such rights and restrictions as the Company may by ordinary resolution decide or, if no such resolution is in effect or so far as the resolution does not make specific provision, as the board of directors may decide.
Voting Rights
Subject to the provisions of the Companies Act 2006 and any restrictions imposed in the Articles of Association and any rights or restrictions attached to any class of shares of our share capital, on a resolution, on a show of hands:
•every shareholder present in person shall have one vote;
•each proxy present who has been duly appointed by one or more shareholders entitled to vote on the resolution has one vote unless the proxy has been appointed by more than one shareholder entitled to vote on the resolution in which case: (i) where the proxy has been instructed by one or more of such shareholders to vote for the resolution and by one or more of such shareholders to vote against the resolution the proxy has one vote for and one vote against the resolution; or (ii) where the proxy has been instructed by, or exercises his discretion given by, one or more of those shareholders to vote for the resolution and has been instructed by, or exercises his discretion given by, one or more other of those shareholders to vote against it, a proxy has one vote for and one vote against the resolution; and
•each person authorized by a corporation to exercise voting powers on behalf of the corporation is entitled to exercise the same voting powers as the corporation would be entitled to unless a corporation authorizes more than one person, in which case: (i) if more than one person authorized by the same corporation purport to exercise the power to vote on a show of hands in respect of the same shares in the Company and exercise the power in the same way as each other, the power is treated as exercised in that way; or (ii) if more than one person authorized by the same corporation purports to exercise the power to vote on a show of hands in respect of the same shares in the Company, and they do not exercise the power in the same way as each other, the power is treated as not exercised.
Subject to the provisions of the Companies Act 2006 and any restrictions imposed by the Articles of Association and any rights or restrictions attached to any class of shares of our share capital, on a vote on a resolution on a poll, every shareholder present shall have one vote for every ordinary share in our share capital held by him or his appointee, or and if entitled to more than one vote need not, if he votes, use all his votes or cast all his votes in the same way.
Restrictions on Voting
Subject to the board of directors’ ability to decide otherwise, no shareholder shall be entitled to be present or to be counted in the quorum or vote, either in person or by proxy, at any general meeting or at any separate class meeting of the holders of a class of shares or on a poll or to exercise other

Exhibit 4.12
rights conferred by the shareholders in relation to the meeting or poll, unless all calls or other monies due and payable in respect of the shareholder’s shares have been paid up.
Dividends
The Company may, by ordinary resolution, declare a dividend to be paid to the shareholders, according to their respective rights and interests in the profits, and may fix the time for payment of such dividend, but no dividend shall exceed the amount recommended by the board of directors.
The board of directors may pay such interim dividends as appear to the board of directors to be justified by the financial position of the Company and may also pay any dividend payable at a fixed rate at intervals settled by the board of directors whenever the financial position of the Company, in the opinion of the board of directors, justifies its payment. If the board of directors acts in good faith, none of the directors shall incur any liability to the holders of shares conferring preferred rights for any loss such holders may suffer in consequence of the payment of an interim dividend on any shares having nonpreferred or deferred rights.
Change of Control
There is no specific provision in the Articles of Association that would have the effect of delaying, deferring or preventing a change of control.
Distributions on Winding Up
If the Company is in liquidation, the liquidator may, with the authority of a special resolution of the Company and any other authority required by the Companies Act 2006:
•divide among the shareholders in specie the whole or any part of the assets of the Company and, for that purpose, value any assets and determine how the division shall be earned out as between the shareholders or different classes of shareholders; or
•vest the whole or any part of the assets in trustees upon such trusts for the benefit of shareholders as the liquidator, with the like sanction, shall think fit but no shareholder shall be compelled to accept any assets upon which there is any liability.
Variation of Rights
Whenever the share capital of the Company is divided into different classes of shares, all or any of the rights for the time being attached to any class of shares in issue may from time to time (whether or not the Company is being wound up) be varied in such manner as those rights may provide or (if no such provision is made) either with the consent in writing of the holders of three-fourths in nominal value of the issued shares of that class or with the authority of a special resolution passed at a separate general meeting of the holders of those shares. The Companies Act 2006 provides a right to object to the variation of the share capital by the shareholders who did not vote in favor of the variation. Should an aggregate of 15% of the shareholders of the issued shares in question apply to the court to have the variation cancelled, the variation shall have no effect unless and until it is confirmed by the court.
Unless otherwise expressly provided by the rights attached to any class of shares those rights shall not be deemed to be varied by the creation or issue of further shares ranking pari passu with them or by the purchase or redemption by the Company of any of its own shares.
Alteration to Share Capital
We may, by ordinary resolution of shareholders, consolidate and divide all or any of our share capital into shares of larger nominal value than our existing shares, or sub-divide our shares or any of them into shares of a smaller nominal value. We may, by special resolution of shareholders, confirmed by the court, reduce our share capital or any capital redemption reserve or any share premium account in any manner authorized by the Companies Act 2006. We may redeem or purchase all or any of our shares as permitted under UK law.
Preemption Rights
In certain circumstances, our shareholders may have statutory preemption rights under the Companies Act 2006 in respect of the allotment of new shares.
Transfer of Shares
Subject to the restrictions in the Articles of Association, a shareholder may transfer all or any of his shares in any manner which is permitted by the Companies Act 2006 and is from time to time approved by the board of directors.
Sell Out
The Companies Act 2006 also gives our minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer for all of our shares. The holder of shares to which the offer relates, and who has not otherwise accepted the offer, may require the offeror to acquire his shares if, prior to the expiry of the acceptance period for such offer, (i) the offeror has acquired or unconditionally agreed to acquire not less than 90% in value of the voting shares, and (ii) not less than 90% of the voting rights carried by those shares. The offeror may impose a time limit on the rights of minority shareholders to be bought out that is not less than three months after the end of the acceptance period. If a shareholder exercises his rights to be bought out, the offeror is required to acquire those shares on the terms of this offer or on such other terms as may be agreed.
Distributions and Dividends
Under the Companies Act 2006, before a company can lawfully make a distribution or dividend, it must ensure that it has sufficient distributable reserves (on a non-consolidated basis). The basic rule is that a company’s profits available for the purpose of making a distribution are its accumulated, realized profits, so far as not previously utilized by distribution or capitalization, less its accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital duly made. The requirement to have sufficient distributable reserves before a distribution or dividend can be paid applies to us and to each of our subsidiaries that has been incorporated under UK law.
It is not sufficient that we, as a public company, have made a distributable profit for the purpose of making a distribution. An additional capital maintenance requirement is imposed on us to ensure that the net worth of the company is at least equal to the amount of its capital. A public company can only make a distribution:
•if, at the time that the distribution is made, the amount of its net assets (that is, the total excess of assets over liabilities) is not less than the total of its called-up share capital and undistributable reserves; and
•if, and to the extent that, the distribution itself, at the time that it is made, does not reduce the amount of the net assets to less than that total.
City Code on Takeovers and Mergers
As a public company incorporated in the United Kingdom with our registered office in the United Kingdom and whose shares are admitted to the premium segment of the Official List of the United Kingdom Financial Conduct Authority and to trading on the Main Market of the LSE, we are subject to the UK City Code on Takeovers and Mergers (the “City Code”), which is issued and administered by the UK Panel on Takeovers and Mergers (the “Panel”). The City Code provides a framework within which takeovers of companies subject to it are conducted. In particular, the City Code contains certain rules in respect of mandatory offers. Under Rule 9 of the City Code, if a person:

Exhibit 4.12
•acquires an interest in our shares which, when taken together with shares in which he or persons acting in concert with him are interested, carries 30% or more of the voting rights of our shares; or
•who, together with persons acting in concert with him, is interested in shares that in the aggregate carry not less than 30% and not more than 50% of the voting rights of our shares, and such persons, or any person acting in concert with him, acquires additional interests in shares that increase the percentage of shares carrying voting rights in which that person is interested,
the acquirer and depending on the circumstances, its concert parties, would be required (except with the consent of the Panel) to make a cash offer for our outstanding shares at a price not less than the highest price paid for any interests in the shares by the acquirer or its concert parties during the previous 12 months.

Exhibit 4.13
EXECUTION VERSION

____________________________________________________________________
BASE INDENTURE
by and among
DIVERSIFIED ABS X LLC,
as Issuer,
DIVERSIFIED ABS LLC,

DIVERSIFIED ABS PHASE II LLC,

and,

DIVERSIFIED ABS PHASE X LLC,

as Guarantors,

and
UMB BANK, N.A.,
as Indenture Trustee and Securities Intermediary

Dated as of February 27, 2025
____________________________________________________________________________



TABLE OF CONTENTS
Page

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ii




iii




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SCHEDULE A    –    Schedule of Assets
SCHEDULE 3.3    –    Schedule of Legal Proceedings and Orders
SCHEDULE 3.4(b)    –     Schedule of Compliance with Laws and Governmental                     Authorizations
SCHEDULE 3.7    –    Schedule of Employee Benefit Plans
EXHIBIT A-1    –    Form of Rule 144A Global Note
EXHIBIT A-2    –    Form of Regulation S Global Note
EXHIBIT A-3    –    Form of Definitive Variable Funding Note
EXHIBIT A-4    –    Form of Definitive Term Note
EXHIBIT B-1    –    Form of Transferor Certificate for Transfers of Beneficial Interests in Regulation S Global Note for Beneficial Interests in Rule 144A Global Note
EXHIBIT B-2    –    Form of Transferor Certificate for Transfers of Beneficial Interests in Rule 144A Global Note for Beneficial Interests in Regulation S Global Note
EXHIBIT B-3    –    Form of Transferee Certificate for Transfers of Definitive Notes to Qualified Institutional Buyers
EXHIBIT B-4    –    Form of Transferee Certificate for Transfers of Definitive Notes to Institutional Accredited Investors
EXHIBIT B-5    –    Form of Transferor Certificate for Transfers of Definitive Notes to Qualified Institutional Buyers
EXHIBIT B-6    –    Form of Transferor Certificate for Transfers of Definitive Notes to Institutional Accredited Investors
EXHIBIT B-7    –    Form of Transferee Certificate for Transfers of Tax Restricted Notes
EXHIBIT C    –    Form of Certificate of Registration
EXHIBIT D    –    Form of Statement to Noteholders


v




THIS INDENTURE dated as of February 27, 2025 (as it may be amended and supplemented from time to time, this “Indenture”) is among Diversified ABS X LLC, a Delaware limited liability company (the “Issuer”), Diversified ABS LLC, a Pennsylvania limited liability company (“DABS I”), Diversified ABS Phase II LLC, a Pennsylvania limited liability company (“DABS II”), Diversified ABS Phase X LLC, a Pennsylvania limited liability company (“DABS Phase X” and, together with DABS I and DABS II (the “Initial Guarantors”), and, any other subsidiary of the Issuer or the Initial Guarantors that becomes a party hereto after the date hereof (an “Additional Guarantor” and, together with the Initial Guarantors, the “Guarantors” and each a “Guarantor”), and UMB Bank, N.A., a national banking association, as indenture trustee and not in its individual capacity (the “Indenture Trustee”) and as Securities Intermediary (as defined herein).
WHEREAS, the parties hereto have duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time by the Issuer of one or more Series of Notes, issuable as provided in this Indenture and the applicable Series Supplement;
WHEREAS, it is hereby agreed between the Issuer Parties and the Indenture Trustee, on behalf of itself, the Noteholders and the Hedge Counterparties, that in the performance of any of the agreements of the Issuer herein contained, any obligation the Issuer may thereby incur for the payment of money shall be payable in such order of preference and priority as provided herein;
WHEREAS, each Series will be constituted by this Indenture and a Series Supplement; and
WHEREAS, the Notes of any Series issued pursuant to this Indenture will be divided into classes and types of notes (i.e., Variable Funding Note or Term Note) as provided in this Indenture and the applicable Series Supplement;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each party hereto agrees as follows for the benefit of the other parties hereto and for the equal and ratable benefit of the Secured Parties:
GRANTING CLAUSE
The Issuer and the Guarantors (collectively, the “Issuer Parties” and each, an “Issuer Party”) hereby Grant to the Indenture Trustee on the Initial Closing Date, and on, with respect to any Additional Assets, each date in which an Additional Transfer Agreement identifying such Additional Asset is entered into after the Initial Closing Date, as Indenture Trustee for the benefit of the Secured Parties, all of the Issuer Parties’ right, title and interest, whether now or hereafter acquired, and wherever located, in and to, as applicable (a) the Initial Assets, any Additional Assets identified in any Additional Transfer Agreement entered into after the Initial Closing Date, and in each case, all monies received thereon and in respect thereof after the applicable Cutoff Date; (b) the Issuer Accounts and Hedge Collateral Accounts (but, as to the Hedge Collateral Accounts, only for the benefit of the Secured Parties who are Hedge Counterparties) and all funds on deposit in, and “financial assets” (as such term is defined in the UCC as from time to time in effect), instruments, money, and other property credited to or on deposit in the



Issuer Accounts and Hedge Collateral Accounts, from time to time, including the Liquidity Reserve Account Initial Deposit, and in all investments and proceeds thereof (including all income thereon); (c) the Management Services Agreement; (d) the Hedge Agreements; (e) the Joint Operating Agreement; (f) the Back-Up Management Agreement; (g) the Transfer Agreement and any Additional Transfer Agreement; (h) the Pledge Agreement; (i) each other Basic Document to which it is a party; (j) all accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, and other minerals; (k) all proceeds of any and all of the foregoing insofar as relating to the Assets and all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing insofar as relating to the Assets and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing insofar as relating to the Assets, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments, general intangibles and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing; (l) all limited liability company interests in the Issuer Parties, including, without limitation: (i) all transferable interests, as such term is defined in the Pennsylvania Uniform Limited Liability Company Act of 2016, and limited liability company interests as defined under the Delaware Limited Liability Company Act; (ii) all governance rights, including, without limitation, all rights to vote, consent to action, and otherwise participate in the management of the business and affairs of each Issuer Party; and (iii) all informational rights, including, without limitation, all rights to receive notices, company records, Tax records and all other information related to each Issuer Party, and (m) all proceeds of any and all of the foregoing (collectively, the “Collateral”).
The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes and payments owed or owing to the Hedge Counterparties under the applicable Hedge Agreements (including any termination payments and any other amounts owed thereunder), equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the Notes and each Hedge Counterparty, acknowledges such Grant, and accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture.
Article I

DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1Definitions.

2




Certain capitalized terms used in this Indenture shall have the respective meanings assigned to them in Part I of Appendix A attached hereto. All references herein to “the Indenture” or “this Indenture” are to this Indenture as it may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the exhibits hereto and the capitalized terms used herein which are defined in such Appendix A. All references herein to Articles, Sections, subsections and exhibits are to Articles, Sections, subsections and exhibits contained in or attached to this Indenture unless otherwise specified. All terms defined in this Indenture shall have the defined meanings when used in any certificate, notice, Note or other document made or delivered pursuant hereto unless otherwise defined therein. The rules of construction set forth in Part II of such Appendix A shall be applicable to this Indenture.
Article II

THE NOTES
Section 2.1Notes.
(a)Variable Funding Notes.
(i)All Variable Funding Notes shall be issued and delivered in fully registered, certificated form (the “Definitive Variable Funding Notes”) or, at the request of a Holder or transferee, in uncertificated, fully registered form evidenced by an entry in the Note Register (the “Uncertificated Notes”) if provided for in its Series Supplement. Any Definitive Variable Funding Notes shall be substantially in the form attached as Exhibit A-3 (or in the form attached to the related Series Supplement); provided, that any of the Variable Funding Notes may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with rules or regulations pursuant thereto, or with the rules of any securities market in which the Variable Funding Notes may be admitted to trading. The Variable Funding Notes shall be revolving Notes. Additional borrowings may be made under any Variable Funding Notes pursuant to the applicable Variable Funding Note Purchase Agreement, and the principal of the Variable Funding Notes may be repaid and reborrowed pursuant to the terms of the applicable Variable Funding Note Purchase Agreement. The Variable Funding Notes shall be issued in minimum denominations specified in the related Series Supplement for any Series of Variable Funding Notes. With respect to any Uncertificated Note, the Indenture Trustee shall provide to the applicable Holder, upon request of such Holder after registration of the Uncertificated Note in the Note Register by the Note Registrar, a Certificate of Registration substantially in the form of Exhibit C.
(ii)The Definitive Variable Funding Notes shall be executed by manual signature by an authorized officer of the Issuer. Definitive Variable Funding Notes bearing the manual signatures of individuals who were at any time the authorized officers of the Issuer shall be entitled to all benefits under this Indenture, subject to the following sentence, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Definitive Variable Funding Notes or did not hold such offices at the date of such Definitive Variable Funding Notes. The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate and deliver (or register in the case of

3




Uncertificated Notes) any Variable Funding Notes executed by the Issuer for issuance pursuant to this Indenture and the applicable Series Supplement. No Definitive Variable Funding Notes shall be entitled to any benefit under this Indenture, or be valid or obligatory for any purpose, however, unless there appears on such Definitive Variable Funding Notes a certificate of authentication substantially in the form provided for in Exhibit A-3 (or in the form attached to the related Series Supplement) executed by the Indenture Trustee by manual signature, and such certificate of authentication upon any Definitive Variable Funding Note shall be conclusive evidence, and the only evidence, that such Variable Funding Note has been duly authenticated and delivered hereunder. All Variable Funding Notes shall be dated the date of their authentication (or registration, in the case of Uncertificated Notes).
(iii)Except as otherwise expressly provided herein or in any Series Supplement: (A) Uncertificated Notes registered in the name of a Person shall be considered “held” by such Person for all purposes of this Indenture and its applicable Series Supplement; and (B) with respect to any Uncertificated Note, (a) references herein to authentication and delivery shall be deemed to refer to creation of an entry for such Uncertificated Note in the Note Register and registration of such Uncertificated Note in the name of its owner, (b) references herein to the cancellation of a Uncertificated Note shall be deemed to refer to the deregistration of such Uncertificated Note and (c) references herein to the date of authentication of a Uncertificated Note shall be deemed to refer to the date of registration of such Uncertificated Note in the Note Register in the name of its owner.
(iv)For the avoidance of doubt, no Certificate of Registration shall be required to be surrendered (x) in connection with a transfer of the related Uncertificated Note or (y) in connection with the final payment of the related Uncertificated Note.
(v)The Note Register shall be conclusive evidence of the ownership of an Uncertificated Note.
(vi)Each Definitive Variable Funding Note may be exchanged in its entirety for an Uncertificated Note and, upon the exchange thereof, such Definitive Variable Funding Note shall be cancelled and de-registered by the Note Registrar. Each of the Uncertificated Notes may be exchanged in its entirety for a Definitive Variable Funding Note and, upon the exchange thereof, such Uncertificated Note shall be de-registered by the Note Registrar. In connection with such exchanges, the applicable Holder shall request such exchange in writing to the Issuer, the Note Registrar and the Indenture Trustee and provide the Note Registrar with such documents as it may require to effect such exchange and the Issuer shall deliver an Issuer Order to the Note Registrar requesting the Note Registrar to de-register any such Uncertificated Note being exchanged for a Definitive Variable Funding Note.
(vii)[Reserved].
(viii)Subject to satisfaction of the conditions precedent set forth in the applicable Variable Funding Note Purchase Agreement and the limitations in this subclause (viii), the Issuer may increase the Outstanding Principal Balance in the manner provided in such Variable Funding Note Purchase Agreement. Upon each such increase, the Indenture Trustee shall, or shall cause the Note Registrar to,

4




indicate such increase in the Note Register. The aggregate Outstanding Principal Balance of all Variable Funding Notes shall be subject to the VFN Notes Maximum Principal Amount.
(b)Term Notes.
(i)The Term Notes shall be substantially in the form attached as Exhibit A-1 (or in the form attached to the related Series Supplement) and Exhibit A-2 (or in the form attached to the related Series Supplement), as applicable; provided, that any of the Term Notes may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with rules or regulations pursuant thereto, or with the rules of any securities market in which the Term Notes may be admitted to trading. Unless otherwise specified in the Series Supplement for a Series of Term Notes, the Term Notes shall be issuable in book-entry form and in accordance with Section 2.3(a), Ownership Interests in the Book-Entry Notes shall initially be held and transferred through the book-entry facilities of the Depository; provided, that Term Notes purchased by Institutional Accredited Investors that are not Qualified Institutional Buyers will be delivered in fully registered, certificated form substantially in the form attached as Exhibit A-4 (or in the form attached to the related Series Supplement) (the “Definitive Term Notes”). The Term Notes shall be issued in minimum denominations specified in the related Series Supplement.
(ii)The Definitive Term Notes shall be executed by manual signature by an authorized officer of the Issuer. Definitive Term Notes bearing the manual signatures of individuals who were at any time authorized officers of the Issuer shall be entitled to all benefits under this Indenture, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Definitive Term Notes or did not hold such offices at the date of such Definitive Term Notes. The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate and deliver any Definitive Notes executed by the Issuer for issuance pursuant to this Indenture. No Definitive Term Note shall be entitled to any benefit under this Indenture, or be valid or obligatory for any purpose, however, unless there appears on such Definitive Term Note a certificate of authentication substantially in the form provided for in Exhibit A-4 (or in the form attached to the related Series Supplement) executed by the Indenture Trustee by the manual signature of one of its Responsible Officers, and such certificate of authentication upon any Definitive Term Note shall be conclusive evidence, and the only evidence, that such Definitive Term Note has been duly authenticated and delivered hereunder. All Definitive Term Notes shall be dated the date of their authentication.
(c)The terms of the Notes set forth in the applicable Exhibit A are part of the terms of this Indenture. Subject to Section 2.14, the aggregate principal amount of the Notes which may be authenticated and delivered under this Indenture shall be unlimited. Without limiting the generality of the foregoing, the Issuer Order shall specify whether the Notes shall be issuable as Definitive Notes or as Book-Entry Notes.
Section 2.2[Reserved].
Section 2.3Form of Notes.

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(a)Each Class and Series of Term Notes initially issued as Book-Entry Notes shall initially be issued as one or more Notes registered in the name of the Depository or its nominee and, except as provided in Section 2.3(c), transfer of such Notes may not be registered by the Note Registrar unless such transfer is to a successor Depository that agrees to hold such Notes for the respective Note Owners with Ownership Interests therein. Such Note Owners shall hold and, subject to Sections 2.4(e) through 2.4(j), transfer their respective Ownership Interests in and to such Notes through the book-entry facilities of the Depository and, except as provided in Section 2.3(c), shall not be entitled to Definitive Notes in respect of such Ownership Interests. Unless otherwise specified in the related Series Supplement, Term Notes of each Class and Series of Notes initially sold in reliance on Rule 144A shall be represented by the Rule 144A Global Note for such Class and Series, which shall be deposited with the DTC Custodian and registered in the name of Cede & Co. as nominee of the Depository. Term Notes of each Class and Series of Notes (other than Tax Restricted Notes) initially sold in offshore transactions in reliance on Regulation S shall be represented by the Regulation S Global Note for such Class and Series, which shall be deposited with the DTC Custodian and registered in the name of Cede & Co. as nominee of the Depository. All transfers by Note Owners of their respective Ownership Interests in the Book-Entry Notes shall be made in accordance with the procedures established by the Depository Participant or brokerage firm representing each such Note Owner. Each Depository Participant shall only transfer the Ownership Interests in the Book-Entry Notes of Note Owners it represents or of brokerage firms for which it acts as agent in accordance with the Depository’s normal procedures.
(b)The Issuer, the Indenture Trustee and the Note Registrar shall for all purposes, including the making of payments due on the Book-Entry Notes, deal with the Depository as the authorized representative of the Note Owners with respect to such Notes for the purposes of exercising the rights of Noteholders hereunder. The rights of Note Owners with respect to the Book-Entry Notes shall be limited to those established by law and agreements between such Note Owners and the Depository Participants and indirect participating brokerage firms representing such Note Owners. Multiple requests and directions from, and votes of, the Depository as holder of the Book-Entry Notes with respect to any particular matter shall not be deemed inconsistent if they are made with respect to different Note Owners. The Issuer may establish a reasonable record date in connection with solicitations of consents from or voting by Noteholders and shall give notice to the Depository of such record date.
(c)Subject to the restrictions on transfer under this Indenture and the Notes, in addition to clause (h) below, Term Notes initially issued in the form of Book-Entry Notes will thereafter be issued as Definitive Notes to applicable Note Owners or their nominees, rather than to the Depository or its nominee, in connection with the transfer (in accordance with the applicable DTC procedures) by a Note Owner of an interest in a Book-Entry Note to an Institutional Accredited Investor that is not a Qualified Institutional Buyer.
(d)The Indenture Trustee, the Note Registrar, the Paying Agent, the Back-Up Manager and the Diversified Companies shall have no responsibility or liability for any actions taken or not taken by the Depository.
(e)For purposes of any provision of this Indenture requiring or permitting actions with the consent of, or at the direction of, Noteholders evidencing a specified percentage of the Outstanding Principal Balance of Outstanding Notes, such direction or consent may be given by Noteholders (acting through the Depository and the Depository Participants) owning interests in or security entitlements to Notes evidencing the requisite percentage of principal amount of Notes. The Depository will be deemed to represent those Noteholders only if it has received instructions to that effect from Noteholders and/or the Depository’s participants owning or representing, the required percentage of the beneficial interest of the Notes and has delivered the instructions to the Indenture Trustee.

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(f)The Issuer in issuing Notes may use “CUSIP” numbers (if then generally in use) or “Private Placement Numbers”, and, if so, the Indenture Trustee shall use “CUSIP” numbers or “Private Placement Numbers” in notices of redemption as a convenience to Noteholders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Indenture Trustee and each Noteholder in writing of any change in the “CUSIP” numbers or “Private Placement Numbers”.
(g)Transfers of Global Notes only to Depository Nominees. Notwithstanding any other provisions of this Section 2.3 or of Section 2.4, and subject to the provisions of clause (h) below, unless the terms of a Global Note expressly permits such Global Note to be exchanged in whole or in part for individual Notes, a Global Note may be transferred, in whole but not in part and in the manner provided in Section 2.4, only to a nominee of the Depository for such Global Note, or to the Depository, or a successor Depository for such Global Note selected or approved by the Issuer, or to a nominee of such successor Depository.
(h)Limited Right to Receive Definitive Notes. Except under the limited circumstances described below, Noteholders of beneficial interests in Global Notes will not be entitled to receive Definitive Notes. With respect to issued Notes:
(i)If at any time the Depository for a Global Note notifies the Issuer that it is unwilling or unable to continue to act as Depository for such Global Note, the Issuer will appoint a successor Depository with respect to such Global Note. If a successor Depository for such Global Note is not appointed by the Issuer within ninety (90) days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer will execute, and the Indenture Trustee or its agent will, in accordance with Section 2.4 and with the Issuer Order delivered to the Indenture Trustee or its agent under Section 2.4 requesting the authentication and delivery of individual Notes of such Series or Class in exchange for such Global Note, will authenticate and deliver, individual Notes of such Class of like tenor and terms in an aggregate initial Note balance equal to the initial Note balance of the Global Note in exchange for such Global Note.
(ii)The Issuer may at any time and in its sole discretion determine that the Notes of any Class or portion thereof issued or issuable in the form of one or more Global Notes will no longer be represented by such Global Note or Notes. In such event the Issuer will execute, and the Indenture Trustee or its agent in accordance with Section 2.4 and with an Officer’s Certificate delivered to the Indenture Trustee or its agent for the authentication and delivery of individual Notes in exchange in whole or in part for such Global Note, will authenticate and deliver individual Notes of like tenor and terms in definitive form in an aggregate initial Note balance equal to the initial Note balance of such Global Note or Notes representing such portion thereof in exchange for such Global Note or Notes.
(iii)If specified by the Issuer pursuant to Sections 2.1 and 2.4 with respect to Notes issued or issuable in the form of a Global Note, the Depository for such Global Note may surrender such Global Note in exchange in whole or in part for individual Notes of like tenor and terms in definitive form on such terms as are acceptable to the Issuer and such Depository. Thereupon the Issuer will execute, and the Indenture Trustee or its agent will, in accordance with Section 2.1 and with the Issuer Order delivered to the Indenture Trustee or its agent under Section 2.1, authenticate and deliver, without service charge, (A) to each Person specified by such Depository a new Note or Notes of like tenor and terms and of any authorized denomination as requested by

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such Person in an aggregate initial Note balance equal to the initial Note balance of the portion of the Global Note or Notes specified by the Depository and in exchange for such Person’s beneficial interest in the Global Note; and (B) to such Depository a new Global Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the initial Note balance of the surrendered Global Note and the aggregate initial Note balance of Notes delivered to the Noteholders thereof.
(iv)If any Event of Default has occurred with respect to such Global Notes, and Noteholders evidencing more than 50% of the Global Notes (measured by voting interests) advise the Indenture Trustee and the Depository that a Global Note is no longer in the best interest of the Noteholders, the applicable Holder of Global Notes may, at the direction of the applicable beneficial owners, exchange the beneficial interests in such Notes for Definitive Notes in accordance with the exchange provisions herein.
(v)In any exchange provided for in any of the preceding four paragraphs, the Issuer will execute and the Indenture Trustee or its agent will, in accordance with Section 2.1 and with the Issuer Order delivered to the Indenture Trustee or its agent under Section 2.1, authenticate and deliver Definitive Notes in definitive registered form in authorized denominations. Upon the exchange of the entire initial Note balance of a Global Note for Definitive Notes, such Global Note will be canceled by the Indenture Trustee or its agent. Except as provided in the preceding paragraphs, Notes issued in exchange for a Global Note pursuant to this Section will be registered in such names and in such authorized denominations as the Depository for such Global Note, pursuant to instructions from its direct or indirect participants or otherwise, will instruct the Indenture Trustee or the Note Registrar. The Indenture Trustee or the Note Registrar will deliver such Notes to the Persons in whose names such Notes are so registered.
Section 2.3A     Notices to Depository.

    Whenever any notice or other communication is required to be given to Noteholders with respect to which Book-Entry Notes have been issued, unless and until Definitive Notes will have been issued to the related Noteholders, the Indenture Trustee will give all such notices and communications to the applicable Depository, and shall have no obligation to report directly to such Noteholders.
Section 2.4Transfer Restrictions on Notes.
(a)No transfer of any Note or any interest therein (including, without limitation, by pledge or hypothecation) shall be made except in compliance with the restrictions on transfer set forth in this Section 2.4 (including the applicable legend to be set forth on the face of each Note as provided in the Exhibits to this Indenture). Any resale, pledge or other transfer of any of the Notes contrary to the restrictions set forth above and elsewhere in this Indenture shall be deemed void ab initio by the Issuer and Indenture Trustee.
(b)Notwithstanding anything to the contrary contained herein, each Note and this Indenture may be amended or supplemented to modify the restrictions on and procedures for resale and other transfers of the Notes to reflect any change in applicable Law or regulation (or the interpretation thereof). Each Noteholder shall, by its acceptance of such Note, have agreed to any such amendment or supplement.
(c)As of the date of this Indenture, the Notes have not been registered under the Securities Act and will not be listed on any exchange. No Note shall be transferred or

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assigned, and no interest in any Note shall be transferred or assigned, unless the Noteholder and the transferee or assignee, as applicable, comply with the terms and conditions of this Section 2.4. No transfer of a Note shall be made unless such transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities Laws or is exempt from the registration requirements under the Securities Act and such state securities Laws. Except in a transfer to Diversified or by Diversified to an Affiliate thereof, in the event that a transfer is to be made in reliance upon an exemption from the Securities Act and state securities Laws, in order to assure compliance with the Securities Act and such Laws, the Noteholder desiring to effect such transfer and such Noteholder’s prospective transferee shall each certify to the Issuer, the Indenture Trustee and Diversified in writing the facts surrounding the transfer in substantially the forms set forth in applicable transferor certificate in the forms attached hereto as the applicable Exhibits B (the “Transferor Certificate”) and the applicable transferee certificate in the forms attached to this Indenture. Each Noteholder desiring to effect such a transfer shall, by its acceptance of such Note, have agreed to indemnify the Issuer, the Indenture Trustee and Diversified (in any capacity) against any liability that may result if the transfer is not so exempt or is not made in accordance with federal and state securities Laws.
(d)Subject to the other terms and provisions hereof, any Noteholder may at any time grant to any participant participations in all or part of the payments due to it, and its rights under this Indenture and the Note Purchase Agreement, in a minimum amount that is not less than the minimum denominations set forth in the related Series Supplement. No participant shall be entitled to receive any amount in excess of the amount the participating Noteholder would be entitled to receive hereunder or any of the other Basic Documents. In connection with any such transfer to a participant, such Noteholder, at its sole discretion but subject to the provisions of the Note Purchase Agreement, shall be entitled to distribute to any participant any information furnished to such Noteholder pursuant to the Note Purchase Agreement or the Indenture so long as the participant holds a participation or similar interest in the obligation due to such Noteholder in respect of the Noteholder’s respective Note. Each Noteholder, by acceptance of a Note, acknowledges and agrees that any such participation will not alter or affect in any way whatsoever such Noteholder’s direct obligations hereunder or under the Note Purchase Agreement and that, other than as set forth in this Section 2.4(d), none of the Issuer, the Indenture Trustee, the Manager or any other Person shall have any obligation to have any communication or relationship whatsoever with any participant of such Noteholder in order to enforce the obligations of such Noteholder hereunder and under the Note Purchase Agreement. Each Noteholder shall provide prior written notice to the Issuer and Diversified in writing of the identity and interest of each participant upon any such participation. Such Noteholder shall provide the Issuer and Diversified with respect to each participant appropriately executed copies of the forms required by this Section 2.4 and Section 2.12 with respect to itself and the related participant, treating the participant as though it were a Noteholder, and including any amendments and resubmissions, (A) prior to or promptly after any such participation and (B) upon the occurrence of any event which would require the amendment or resubmission of any such form previously provided hereunder. Any participation shall be subject to the Noteholder’s compliance with, and causing the participant to comply with, the restrictions on transfer of Notes set forth herein as though a participant were a Noteholder, and the purchaser acknowledgements set forth herein, as though such participant were a Noteholder. Notwithstanding anything herein to the contrary, neither the Indenture Trustee nor the Note Registrar shall have any duty to monitor, record or register any participation in a Note or any transfer of such participation, and regardless of whether the Indenture Trustee or Note Registrar has knowledge of such a participation, the Indenture Trustee and the Note Registrar shall be entitled to deal solely with the Noteholders for all purposes under this Indenture.
(e)If a transfer of any Note that constitutes a Definitive Note is to be made without registration under the Securities Act (other than in connection with the initial issuance of a Series of the Notes or a transfer of a Book-Entry Note to a successor Depository as

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contemplated by Section 2.3(c)), then such transfer shall not be registered by the Note Registrar unless the Note Registrar receives (and, upon receipt, may conclusively rely upon) either: (i) a certification from the Noteholder desiring to effect such transfer substantially in the form attached as Exhibit B-5, in the case of a transfer to a Qualified Institutional Buyer, or Exhibit B-6, in the case of a transfer to an Institutional Accredited Investor, and a certification from the prospective transferee substantially in the form attached hereto as Exhibit B-3, in the case of a transfer to a Qualified Institutional Buyer, or Exhibit B-4, in the case of a transfer to an Institutional Accredited Investor, or (ii) an Opinion of Counsel to the effect that such transfer may be made without registration under the Securities Act (which Opinion of Counsel shall not be an expense of the Issuer, the Indenture Trustee or the Note Registrar in their respective capacities as such), together with the written certification(s) as to the facts surrounding such transfer from the Noteholder desiring to effect such transfer and/or such Noteholder’s prospective transferee on which such Opinion of Counsel is based.
(f)If a transfer of any interest in a Rule 144A Global Note is to be made without registration under the Securities Act to a Person who will take delivery of such interest in the form of an interest in a Regulation S Global Note, then the Note Owner desiring to effect such transfer shall be required to deliver to the Note Registrar (i) a certification substantially in the form attached as Exhibit B-2 and (ii) such written orders and instructions as are required under the Applicable Procedures to direct the Indenture Trustee to approve the debit withdrawal of the account of a Depository Participant by a denomination of interests in such Rule 144A Global Note, and credit the account of a Depository Participant by a denomination of interests in such Regulation S Global Note, that is equal to the denomination of beneficial interests in the Class of Notes to be transferred. Upon delivery to the Note Registrar of such certification and such orders and instructions, the Indenture Trustee, subject to and in accordance with the Applicable Procedures, shall reduce the denomination of the Rule 144A Global Note in respect of the applicable Class of Notes and increase the denomination of the Regulation S Global Note for such Class by the denomination of the beneficial interest in such Class specified in such orders and instructions. If a transfer of any interest in a Rule 144A Global Note is to be made without registration under the Securities Act to a Person who will take delivery of such interest in the form of an interest in such Rule 144A Global Note, then the Note Owner desiring to effect such transfer shall be deemed to have represented and warranted that the certifications set forth in Exhibit B-1 are, with respect to such transfer, true and correct.
(g)Any interest in a Rule 144A Global Note with respect to any Class of Book-Entry Notes may be transferred by any Note Owner holding such interest to any Institutional Accredited Investor (other than a Qualified Institutional Buyer) that takes delivery in the form of a Definitive Note of the same Class as such Rule 144A Global Note upon delivery to the Note Registrar of (i)(A) a certification from such Note Owner’s prospective transferee substantially in the form of Exhibit B-4, or (B) an Opinion of Counsel to the effect that such transfer may be made without registration under the Securities Act (which Opinion of Counsel shall not be an expense of the Issuer, the Indenture Trustee or the Note Registrar in their respective capacities as such), together with the written certification(s) as to the facts surrounding such transfer from the Noteholder desiring to effect such transfer and/or such Noteholder’s prospective transferee on which such Opinion of Counsel is based, and (ii) such written orders and instructions as are required under the Applicable Procedures to direct the Indenture Trustee to approve the debit withdrawal of the account of a Depository Participant by the denomination of the transferred interests in such Rule 144A Global Note. Upon delivery to the Note Registrar of such certification or Opinion of Counsel and such orders and instructions, the Indenture Trustee, subject to and in accordance with the Applicable Procedures, shall reduce the denomination of such Rule 144A Global Note by the denomination of the transferred interests in such Rule 144A Global Note specified in such orders and instructions, and shall cause a Definitive Note of the same Class as such Rule 144A Global Note, and in a denomination equal to the reduction in the denomination of such Rule 144A Global Note, to be

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executed, authenticated and delivered in accordance with this Indenture to the applicable transferee.
(h)Except as provided in the next sentence, on and prior to the Release Date, a beneficial interest in a Regulation S Global Note for any Class of Book-Entry Notes may be transferred only to a Person who takes delivery in the form of a beneficial interest in such Regulation S Global Note. On and prior to the Release Date, a Note Owner holding an interest in a Regulation S Global Note desiring to effect a transfer to a Person who takes delivery of such interest in the form of a beneficial interest in the Rule 144A Global Note for such Class of Notes shall be required to deliver to the Note Registrar (i) a certification substantially in the form attached as Exhibit B-1 and (ii)  such written orders and instructions as are required under the Applicable Procedures to direct the Indenture Trustee to approve the debit withdrawal of the account of a Depository Participant by a denomination of interests in such Regulation S Global Note, and credit the account of a Depository Participant by a denomination of interests in such Rule 144A Global Note, that is equal to the denomination of beneficial interests in the Class of Notes to be transferred. Upon delivery to the Note Registrar of such certification and such orders and instructions, the Indenture Trustee, subject to and in accordance with the Applicable Procedures, shall reduce the denomination of the Regulation S Global Note in respect of the applicable Class of Notes and increase the denomination of the Rule 144A Global Note for such Class by the denomination of the beneficial interest in such Class specified in such orders and instructions. On or prior to the Release Date, beneficial interests in the Regulation S Global Note for each Class of Book-Entry Notes may be held only through Euroclear or Clearstream.
(i)None of the Issuer, the Indenture Trustee or the Note Registrar shall be obligated to register or qualify any Class of Notes under the Securities Act or any other securities law or to take any action not otherwise required under this Indenture to permit the transfer of any Note or interest therein without registration or qualification. Any Noteholder or Note Owner desiring to effect a transfer, sale, pledge or other disposition of any Note or interest therein shall, and does hereby agree to, indemnify Holdings, the Issuer, the Indenture Trustee, the Manager, the Back-Up Manager, and the Note Registrar against any liability that may result if such transfer, sale, pledge or other disposition is not exempt from the registration and/or qualification requirements of the Securities Act and any applicable state securities laws or is not made in accordance with such federal and state laws.
(j)No transfer of any Note or any interest therein shall be made to any Plan or to any Person who is directly or indirectly acquiring such Note on behalf of, as fiduciary of, as trustee of, or with the assets of, a Plan, except in each such case, in accordance with the following provisions of this Section 2.4(j). Any attempted or purported transfer of a Note or any interest therein in violation of this Section 2.4(j) will be null and void and vest no rights in any purported transferee.
Each purchaser and transferee (and its fiduciary, if applicable) of a Note (other than an ERISA Restricted Note) or any interest therein is deemed to represent and warrant that either: (i) it is not acquiring and will not hold such Note (or interest therein) with the assets of a Plan or (ii) the acquisition and holding of such Note (or interest therein) will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or result in a violation of any Similar Law.
Each purchaser and transferee (and its fiduciary, if applicable) of an ERISA Restricted Note or any interest therein is deemed to represent and warrant that it is not acquiring and will not hold such Note (or interest therein) with the assets of a Plan.

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The Note Registrar shall not register the transfer of a Note that constitutes a Definitive Note or the transfer of an interest in a Book-Entry Note that following such purported transfer will constitute a Definitive Note unless the Note Registrar has received from the prospective transferee a certification as to the foregoing, as applicable. It is hereby acknowledged that either of the forms of certification attached as Exhibit B-3 and Exhibit B-4 is acceptable for purposes of the preceding sentence.
The Note Registrar shall not register the transfer of a Note that constitutes an Uncertificated Note issued under the related Variable Funding Note Purchase Agreement unless the Note Registrar has received from the prospective transferee a certification as to the foregoing, as applicable. In the case of a transfer of an Uncertificated Note issued under the Variable Funding Note Purchase Agreement, it is hereby acknowledged that the form of certification specified in the related Series Supplement is acceptable for purposes of the preceding sentence.
The Note Owner desiring to effect a transfer of an interest in a Book-Entry Note (other than a transfer of an interest in a Book-Entry Note that following such purported transfer will constitute a Definitive Note, which transfer shall be subject to the forms of certification attached as Exhibit B-3 and Exhibit B-4 as provided for above) shall obtain from its prospective transferee a certification that (a) such prospective transferee is not a Plan and is not directly or indirectly acquiring, holding and subsequently disposing of such Note or any interest in such Note on behalf of, as fiduciary of, as trustee of, or with assets of, a Plan or (b) the transfer is exempt from registration requirements under the Securities Act.
It is hereby acknowledged that either of the forms of certification attached as Exhibit B-1 and Exhibit B-2 is acceptable for purposes of the preceding sentence.
(k)[Reserved].
(l)If a Person is acquiring a Note as a fiduciary or agent for one or more accounts, such Person shall be required to deliver to the Note Registrar a certification to the effect that, and such other evidence as may be reasonably required by the Note Registrar or the Issuer to confirm that, it has (i) sole investment discretion with respect to each such account and (ii) full power to make the applicable foregoing acknowledgments, representations, warranties, certifications and/or agreements with respect to each such account as set forth in subsections (e) through (j), as appropriate, of this Section 2.4.
(m) With respect to Tax Restricted Notes, each purchaser (and any transferees, successors and assigns thereof) represents and agrees on its own behalf and on behalf of any beneficial owner for which it is purchasing such Tax Restricted Notes (including, for the avoidance of doubt and to the extent applicable, its sole regarded Tax owner) that as of the date of acquisition of such Tax Restricted Notes, it is and will remain a “United States person” within the meaning of Section 7701(a)(30) of the Code and will deliver a properly completed and duly signed IRS Form W-9 (or applicable successor form) in respect of the owner, for U.S. federal income Tax purposes, of such Tax Restricted Notes, dated as of the date of the acquisition of such Tax Restricted Notes, to the Manager (or its agent) and the Indenture Trustee. Such purchaser (and its respective transferees) further agrees that no transfer, sale or other disposition of the Tax Restricted Notes (or any interest therein) will be effective, and no such transfer, sale or other disposition will be recognized, unless the applicable transferee party (or, if, for U.S. federal income Tax purposes, such transferee party is a disregarded entity, its sole regarded Tax

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owner) is a "United States person" within the meaning of Section 7701(a)(30) of the Code that delivers a properly completed and duly signed IRS Form W-9 (or applicable successor form) in respect of the owner, for U.S. federal income Tax purposes, of such Tax Restricted Notes, dated as of the date of such transfer, sale or other disposition, to the Manager (or its agent) and the Indenture Trustee. Any transfer in violation of this clause (m) shall be null and void ab initio.

(n)With respect to Tax Restricted Notes, each purchaser (and any transferees, successors and assigns thereof):
(i)represents and agrees on its own behalf and on behalf of any beneficial owner for which it is purchasing such Tax Restricted Notes (including, for the avoidance of doubt and to the extent applicable, its sole regarded Tax owner) that (1) as of the date of acquisition of such Tax Restricted Notes, (I) the purchaser or beneficial owner of such Tax Restricted Notes is not and, so long as such person is a beneficial owner of such Tax Restricted Notes, will not become a partnership, Subchapter S corporation or grantor trust, in each case, for U.S. federal (and applicable state and local) income Tax purposes (each such entity a “flow-through entity”) or (II) if such purchaser or beneficial owner is or becomes a flow-through entity, then (x) none of the direct or indirect beneficial owners of any interest in such flow-through entity has or ever will have more than 50% of the value of its interest in such flow-through entity attributable to the beneficial interest of such flow-through entity in the combined value of the Tax Restricted Notes, any other interest (direct or indirect) in the Issuer or any interest created under this Indenture or (y) it is not and will not be a principal purpose of the arrangement involving the beneficial interest of such flow-through entity in any Tax Restricted Notes to permit any entity to satisfy the 100-partner limitation of Treasury Regulations Section 1.7704-1(h)(1)(ii) necessary for such entity not to be classified as a publicly traded partnership for U.S. federal income Tax purposes;
(ii)will deliver to the Indenture Trustee, Issuer and the Manager on its own behalf and on behalf of any beneficial owner for which it is purchasing such Tax Restricted Notes (including, for the avoidance of doubt and to the extent applicable, its sole regarded Tax owner) a letter of representation in the form of the applicable Exhibit B hereto representing to the Issuer, Manager and the Indenture Trustee that either (I) for so long as it holds such Tax Restricted Notes (or a beneficial interest therein), it is not, and will not acquire such Tax Restricted Notes or interest therein on behalf of a beneficial owner (including, for the avoidance of doubt and to the extent applicable, its sole regarded Tax owner) that is classified for U.S. federal income Tax purposes as a flow-through entity, or (II) if such purchaser or beneficial owner (or regarded owner, as applicable) is or becomes a flow-through entity, then (x) none of the direct or indirect beneficial owners of any interest in such flow-through entity has or ever will have more than 50% of the value of its interest in such flow-through entity attributable to the beneficial interest of such flow-through entity in the combined value of the Tax Restricted Notes, any other interest (direct or indirect) in the Issuer or any interest created under this Indenture and (y) it is not and will not be a principal purpose of the arrangement involving the beneficial interest of such flow-through entity in any Tax Restricted Note to permit any entity to satisfy the 100 partner limitation of Treasury Regulations Section 1.7704-1(h)(1)(ii) necessary for such entity not to be classified as a publicly traded partnership for U.S. federal income Tax purposes;

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(iii)will deliver a letter of representation on its own behalf and on behalf of any beneficial owner for which it is purchasing such Tax Restricted Notes (including, for the avoidance of doubt and to the extent applicable, its sole regarded Tax owner) to the Indenture Trustee, Manager and the Issuer representing in the form of the applicable Exhibit B hereto to the Issuer, Manager and the Indenture Trustee that it will not sell, transfer, assign, participate, pledge or otherwise dispose of or cause to be marketed any Tax Restricted Notes (or any interest therein), (1) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code and Treasury Regulations Section 1.7704-1(b), including without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations, or (2) in an amount that would result in any Noteholder holding Tax Restricted Notes in an aggregate amount less than 100% of the minimum denomination of the Tax Restricted Notes or purchase or enter into any financial instrument or contract that the value of which is determined by reference in whole or in part to any Tax Restricted Note;
(iv)Tax Restricted Notes shall not be sold or transferred to any Person unless (i) the Note Registrar and the Manager have received on the date of such sale or transfer a qualifying Debt Opinion with respect to such Notes or (ii) the restrictions described in Section 2.4(m) shall have been complied with; and
(v)Each transferor of a Tax Restricted Note or an interest therein shall be deemed to have agreed to deliver to the transferee, with a copy to the Indenture Trustee, prior to the transfer of such Tax Restricted Note or an interest therein, a properly completed certificate, in a form reasonably acceptable to the transferee and the Issuer, stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person within the meaning of Section 1445(b)(2) and Section 1446(f)(2) of the Code (such certificate, a “Non-Foreign Status Certificate”). Each transferor of a Tax Restricted Note or an interest therein will be deemed to understand that the failure to provide a Non-Foreign Status Certificate to the transferee may result in withholding on the amount realized on its disposition of the Tax Restricted Note.
(vi)Each Person acquiring a Tax Restricted Note shall comply with the limitations, representations and covenants set forth in Section 2.4(m) and 2.4(n). Any transfer in violation of this clause (n) shall be null and void ab initio and the purported transferor will continue to be treated as the owner of the Tax Restricted Note.
Section 2.5Registration; Registration of Transfer and Exchange.
(a)The Issuer shall cause a note registrar (the “Note Registrar”) to keep a register (the “Note Register”) in which the Note Registrar shall provide for the registration of Notes and the registration of transfers of Notes. All Notes shall be maintained in “registered form” under Treasury Regulations Section 5f.103-1(c), proposed Treasury Regulations Section 1.163-5 and any applicable temporary, final or other successor regulations. The name and address of each Holder of the Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be recorded in such Note Register, together with the principal amount (and stated interest) of the Notes owing to the Holder of the Notes. Prior to due presentment for registration of transfer, the person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Note Registrar shall not be affected by any notice or knowledge to the contrary. No transfer shall be effective unless recorded in the Note Register. The Indenture Trustee initially shall be the Note

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Registrar for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. Any attempted or purported transfer of a Note in violation of this Section 2.5(a) will be null and void and vest no rights in any purported transferee.
(b)If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee and the Noteholders prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes; provided that, upon the reasonable request of any Noteholder, the Note Registrar and the Indenture Trustee shall provide a copy of such certificate to such Noteholder.
(c)Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 4.2, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes in any authorized denominations, of a like aggregate principal amount.
(d)At the option of any Noteholder, its Notes may be exchanged for other Notes of authorized denominations of the same Class and Series evidencing a like aggregate principal balance, upon surrender (or de-registration) of the Notes to be exchanged (or deregistered) at the offices of the Note Registrar maintained for such purpose. Whenever any Notes are so surrendered for exchange (or de-registration), the Notes which the Noteholder making the exchange (or request for de-registration) is entitled to receive shall be executed, authenticated and delivered (or registered in the case of Uncertificated Notes) in accordance with Section 2.1(a) or (b), as applicable.
(e)All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.
(f)Every Note (other than Uncertificated Notes) presented or surrendered for transfer or exchange shall (if so required by the Note Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer in a form satisfactory to, the Note Registrar duly executed by the Noteholder thereof or his attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP.
(g)No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or the Note Registrar may require payment by such Holder of a sum sufficient to cover any Tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.6 not involving any transfer.
(h)The preceding provisions of this Section 2.5 notwithstanding, the Issuer shall not be required to make and the Note Registrar need not register transfers or exchanges of

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Notes selected for redemption or of any Note for a period of fifteen (15) days preceding the due date for any payment with respect to the Note.
(i)Any purported transfer of a Note not in accordance with this Section 2.5 shall be null and void and shall not be given effect for any purpose whatsoever.
(j)Transfers of Ownership Interests in Global Notes. Transfers of beneficial interests in a Global Note representing Book-Entry Notes may be made only in accordance with the rules and regulations of the Depository and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following:
(i)General Rules Regarding Transfers of Global Notes. Subject to clauses (i) and (ii) of this Section 2.5(j), transfers of a Global Note representing Book-Entry Notes shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depository or to a successor of the Depository or such successor’s nominee.
(ii)Global Note to Definitive Note. Subject to Section 2.3(i), an owner of a beneficial interest in a Global Note deposited with or on behalf of a Depository may at any time transfer such interest for a Definitive Note, upon provision to the Indenture Trustee, the Issuer and the Note Registrar of a Transferor Certificate.
(k)Transfers of Variable Funding Notes shall be subject to such additional terms and conditions as may be set forth in the applicable Variable Funding Note Purchase Agreement.
(l)Notwithstanding anything herein to the contrary, the Indenture Trustee shall not be responsible for ascertaining whether any transfer complies with, or for otherwise monitoring or determining compliance with, the requirements or terms of the Securities Act, applicable state securities laws, ERISA, the Code or any other applicable Law.
Section 2.6Mutilated, Destroyed, Lost or Stolen Notes.
(a)If (i) any mutilated Note is surrendered to the Indenture Trustee or Note Registrar, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a protected purchaser, the Issuer shall execute, and upon its request the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven (7) days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a protected purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a protected purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of

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any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.
(b)Upon the issuance of any replacement Note under this Section 2.6, the Issuer shall pay to the Indenture Trustee any reasonable expenses in connection therewith, and the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any Tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee) connected therewith.
(c)Every replacement Note issued pursuant to this Section 2.6 in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
(d)The provisions of this Section 2.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.7Persons Deemed Owner. Prior to due presentment for registration of transfer of any Note, the Issuer, the Guarantors, the Indenture Trustee, the Note Registrar and any agent of the Issuer, the Guarantors, the Indenture Trustee or the Note Registrar may, as of the day of determination, treat the Person in whose name any Note is registered as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Guarantors, the Indenture Trustee, the Note Registrar or any agent of the Issuer, the Guarantors, the Indenture Trustee, the Note Registrar shall be affected by notice or knowledge to the contrary.
Section 2.8Payment of Principal and Interest; Defaulted Interest and VFN Undrawn Commitment Fees.
(a)The Notes shall accrue interest during the related Interest Accrual Period at the Interest Rate, and such interest shall be payable on each Payment Date in accordance with the priorities set forth in Section 8.6. Further, on each Payment Date while any Variable Funding Notes are Outstanding, any VFN Undrawn Commitment Fees on such Variable Funding Notes and any other fees, expenses and other amounts due to the holders of the Variable Funding Notes under any Variable Funding Note Purchase Agreement, shall be paid in accordance with the priorities set forth in Section 8.6. At any time at which the Class B Notes are not the Controlling Class, to the extent provided in the applicable Series Supplement, any and all accrued interest on the Outstanding Principal Balance of any Series of Class B Notes that is not paid on any Payment Date (any such amounts, the “Designated Unpaid Interest Amount”) shall be deferred and paid on a subsequent Payment Date to the extent of Available Funds. Unless otherwise specified in the related Series Supplement for a Series, Note Interest for each Payment Date shall accrue during each Interest Accrual Period at the applicable Interest Rate with respect to each Series and Class of Notes (x) with respect to Variable Funding Notes, on the daily average Outstanding Principal Balance of such Variable Funding Notes during such Interest Accrual Period and (y) with respect to any Class of Term Notes, on the Outstanding Principal Balance of such Term Notes as of the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date). Unless otherwise provided in the applicable Series Supplement, no interest (including Default Interest) will accrue on any outstanding Designated Unpaid Interest Amount.

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(b)Any installment of interest or principal payable on a Note that is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name such Note is registered on the Record Date by wire transfer in immediately available funds to the account designated by such person or nominee and except for the final installment of principal payable with respect to such Note on a Payment Date or on the applicable Final Scheduled Payment Date (and except for the Redemption Price or Change of Control Redemption Price, as applicable, for any Note called for redemption pursuant to Section 10.1) which shall be payable as provided below.
(c)On each Payment Date, any applicable Principal Distribution Amount, any Excess Amortization Amount or VFN Deficiency Amount will be payable to the Holders of each Class and Series of Notes entitled thereto, in each case, to the extent of Available Funds for such Payment Date and in accordance with the Priority of Payments or the Special Priority of Payments, as applicable. Any Principal Distribution Amount for any Series of Term Notes will be set forth in the related Series Supplement. Unless otherwise specified in this Indenture or in the related Series Supplement for a Series, Variable Funding Notes will not be subject to any Principal Distribution Amount.
(d)Prior to the occurrence of an Event of Default and a declaration in accordance with Section 5.2 that the Notes have become immediately due and payable, the Outstanding Principal Balance of the Notes of a Series (including any VFN Deficiency Amount that is due and payable) shall be payable in full on the applicable Final Scheduled Payment Date and, to the extent of funds available therefor, in installments on the Payment Dates (if any) preceding the Final Scheduled Payment Date, in the amounts and in accordance with the Priority of Payments set forth in Section 8.6(i).
(e)Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, and either (i) the Indenture Trustee (at the direction of the Majority Noteholders) or the Majority Noteholders have declared the Notes to be immediately due and payable in the manner provided in Section 5.2 or (ii) such Event of Default arises as a result of an event set forth in Section 5.1(a)(iv) or (v). In such case, principal shall be paid in accordance with the priorities set forth in Section 8.6(ii). The Indenture Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed or transmitted by email prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.2.
(f)[Reserved].
(g)If, as of the Notification Date, (x) either Emissions Linked Performance Target for the Observation Period has not been satisfied or (y) the External Verifier has not confirmed satisfaction of each such Emissions Linked Performance Target, then the Interest Rate applicable to each Class of Notes shall be increased once by 25 basis points for each such Emissions Linked Performance Target that has not been satisfied or confirmed by the External Verifier (the “Subsequent Rate of Interest”). The Subsequent Rate of Interest will apply from and including the Interest Rate Step Up Trigger Date up to, and including, the maturity date of the Notes. The Indenture Trustee may conclusively rely on the Officer’s Certificate delivered by the Issuer with respect to the Satisfaction Notification and shall have no duty to monitor or confirm the Issuer’s satisfaction of either Emissions Linked Performance Target.

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Notwithstanding any other provision herein or in any related Series Supplement, other than with respect to the Class A Notes, unless otherwise specified in the related Series Supplement for a Series, any payment of Note Interest which is not available to be paid in accordance with the Priority of Payments or the Special Priority of Payments, as applicable, on any Payment Date, including Designated Unpaid Interest Amounts, shall not be considered “due and payable” for purposes of the Indenture, and the failure to pay such Note Interest shall not be an Event of Default (other than with respect to the Class A Notes). To the extent specified in the related Series Supplement for a Series, any such unpaid Note Interest on any Class of Notes shall be added to the Outstanding Principal Balance of such Notes and shall be payable on the first Payment Date on which funds are available to be used for such purpose in accordance with the Priority of Payments or the Special Priority of Payments, as applicable. Regardless of whether any Class of Notes is the Controlling Class, to the extent that funds are not available on any Payment Date to pay previously accrued Note Interest that was deferred at a time when such Class was not the Controlling Class, such previously accrued Note Interest shall not be considered “due and payable” on such Payment Date, and the failure to pay such previously accrued Note Interest on such Payment Date shall not be an Event of Default.
Section 2.9Cancellation. All Notes surrendered for payment, registration of transfer, exchange or redemption shall be delivered to the Indenture Trustee and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 2.9, except as expressly permitted by this Indenture. All cancelled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be returned to it; provided, that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee. The Indenture Trustee shall provide notice to each Rating Agency of all cancelled Notes.
Section 2.10Release of Collateral. Subject to Section 12.1 and the terms of the Basic Documents, and other than any distribution to the Issuer pursuant to Section 8.6(i)(T), Section 8.6(ii)(H) or Section 8.7(d), the Indenture Trustee shall release property from the lien of this Indenture only in accordance with the terms of this Indenture and upon receipt of (i) an Issuer Request accompanied by an Officer’s Certificate of the Issuer stating that such release is permitted by the terms of this Indenture and that the conditions precedent to such release have been satisfied and (ii) in the event the Issuer requests a release of all or substantially all of the Collateral, a written consent to such release from each Hedge Counterparty and each Holder. With respect to clause (ii) in the foregoing sentence, any release of Collateral shall require 10 Business Days advance written notice from the Issuer to each Holder and each Hedge Counterparty.
Section 2.11Definitive Notes. Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes as Noteholders.
Section 2.12Tax Treatment.
(a)The Issuer has entered into this Indenture, and the Notes will be issued, with the intention that, for all purposes, including purposes of U.S. federal, state and local income, single business and franchise Tax and any other Tax imposed on, or measured by,

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income, the Notes shall be treated as indebtedness secured by the Collateral. The Issuer, by entering into this Indenture, each Noteholder, by its acceptance of a Note, and each holder of a beneficial interest in the Note, by purchasing or otherwise acquiring an interest in a Note, agree to treat this Indenture and the Notes (other than Notes held by any equity holder of the Issuer (including any entity whose separate existence from the Issuer or the equity holder of the Issuer is disregarded for U.S. federal income Tax purposes), any other persons who are members of an “expanded group” with the Issuer within the meaning of the Treasury Regulations under Section 385 of the Code, to the extent that a treatment other than as indebtedness may be required by law or regulation as a result of the relationship between the Issuer and such Person, but only so long as such Notes are held by such person, or as otherwise required by a change in law or a final determination pursuant to Section 1313 of the Code) for all purposes, including purposes of U.S. federal, state and local income, single business and franchise Tax and any other Tax imposed on, or measured by, income, as indebtedness of the Issuer, and not as an equity interest in the Issuer.
(b)Each Noteholder, by its acceptance of a Note (or an interest therein), agrees to provide and shall provide to the Indenture Trustee, the Note Registrar and/or the Issuer (or other Person responsible for withholding of Taxes) with the Noteholder FATCA Information and Noteholder Tax Identification Information, and shall update or replace such Noteholder FATCA Information and Noteholder Tax Identification Information as necessary at any time required by law or promptly upon request.
(c)Each Noteholder, by its acceptance of a Note (or an interest therein), understands, acknowledges and agrees that the Indenture Trustee and the Issuer (or other Person responsible for withholding of Taxes) have the right to deduct and withhold on payments with respect to a Note and such amounts deducted or withheld shall be treated as paid to such Noteholder (without any corresponding gross-up) where the Noteholder or another applicable party fails to comply with the requirements set forth in Section 2.12(b) or otherwise establish a complete exemption from withholding, or the Indenture Trustee or the Issuer (or other Person responsible for withholding of Taxes) is otherwise required to so withhold under applicable law.
Section 2.13CUSIP and Private Placement Numbers. The Issuer shall obtain “CUSIP” numbers or “Private Placement Numbers” with respect to each Class and Series of Notes. The Indenture Trustee shall use “CUSIP” numbers or “Private Placement Numbers” in notices of redemption as a convenience to Noteholders; provided, that any such notice may state that no representation is made as to the correctness of such “CUSIP” numbers or “Private Placement Numbers” either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Indenture Trustee in writing of any change in the “CUSIP” numbers or “Private Placement Numbers.”
Section 2.14Notes Issuable in Series. The Notes of the Issuer may be issued in one or more Series subject to satisfaction of the applicable conditions set forth in Section 2.15. Any Series of Variable Funding Notes may be uncertificated if provided for in its Series Supplement. Prior to the issuance of Notes of any Series, its Series Supplement shall establish:
(a)the title of the Notes of such Series (which shall distinguish the Notes of such Series from Notes of other Series) and whether such Notes will be Variable Funding Notes or Term Notes;
(b)any limit upon the aggregate principal balance of the Notes of such Series that may be authenticated and delivered (other than with respect to Uncertificated Notes, which shall be registered) under this Indenture (except for Notes authenticated and delivered (or with

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respect to Uncertificated Notes, registered) upon registration of transfer of, in exchange for, or in lieu of, other Notes of such Series pursuant to Section 2.5 or 2.6);
(c)the rate or rates at which the Notes of such Series shall bear interest, if any, or the method by which such rate shall be determined, the date or dates from which such interest shall accrue, the Payment Dates on which such interest shall be payable and the record date or dates for the determination of Holders to whom interest is payable (in each case to the extent such items are not specified herein or if specified herein, to the extent such items are modified by such Series Supplement);
(d)whether the Notes of such Series are Uncertificated Notes, Book-Entry Notes or Definitive Notes; and
(e)any other terms of such Series (which terms shall not be inconsistent with the provisions of this Indenture except to the extent that such Series Supplement also constitutes an amendment of this Indenture pursuant to Article IX).
The Notes of a Series may have more than one settlement or issue date. The Notes of each Series will be assigned to one or more Classes and shall satisfy the requirements of Section 2.15 as of the date of issuance. Notes of any Series bearing the same alphabetical designation but a different numerical designation shall be paid in the relative payment priority specified in the related Series Supplement, but the relative payment priority of such Notes collectively with other Notes bearing the same alphabetical designation in a different Series shall be determined in accordance with the Applicable Payment Priority.
Section 2.15Additional Notes.
(a)The Issuer may, at any time and from time to time, after the Initial Closing Date issue additional Notes of a new Series (“Additional Notes”) in the manner set forth in Section 2.14 pursuant to a Series Supplement, in one or more Classes that may rank (i) (other than with respect to Class A-1 Notes, but subject to and not in conflict with the payment priority for Hedge Agreements on the Initial Closing Date) senior to, (ii) (including with respect to the Class A-1 Notes, but subject to and not in conflict with the payment priority for Hedge Agreements on the Initial Closing Date) pari passu with, or (iii) (including with respect to the Class A-1 Notes, but subject to and not in conflict with the payment priority for Hedge Agreements on the Initial Closing Date) subordinate to, any Series of Notes that will remain Outstanding after the issuance of such Additional Notes; provided, that (x) if any Notes (other than such Additional Notes) will remain Outstanding after the issuance of such Additional Notes (such existing Notes, the “Continuing Notes”), then the following conditions shall have been satisfied with respect to such issuance, or (y) if no Continuing Notes will remain outstanding after giving effect to such issuance, but any Hedge Counterparties will have outstanding Hedge Agreements, then the conditions set forth in clauses (d) through (f), (h), (i), (l) and (m) shall have been satisfied with respect to such issuance:
(a)the relative payment priority of such Additional Notes of a particular Class to the Continuing Notes, if any, of the Class of Notes bearing the same alphabetical Class designation (regardless of Series or date of issuance) shall be determined in accordance with the Applicable Payment Priority, although such Class of Notes may have other characteristics different than the Continuing Notes;

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(b)each applicable Rating Agency then rating any Series of Continuing Notes that will remain outstanding after giving effect to such issuance shall have confirmed that immediately after such issuance its rating of such Notes will be no lower than its initial rating of such Notes;
(c)if the Additional Notes will be rated by any Rating Agency then rating any Continuing Notes of the same Class, the rating assigned by such Rating Agency to such Additional Notes shall be no lower than the then-current rating assigned by such Rating Agency to such Class of Continuing Notes;
(d)immediately prior to and following such issuance, no Material Event has occurred and is continuing, other than a Material Event cured by any related addition of Assets in connection with such issuance of Additional Notes;
(e)such issuance shall not, in the reasonable opinion of the Manager, be reasonably expected to have a Material Adverse Effect,
(f)after giving effect to the issuance of such Additional Notes and any concurrent acquisition of Additional Assets, the following conditions are satisfied as evidenced by calculation and reasonable supporting information set forth in an Officer’s Certificate delivered to the Indenture Trustee in connection with such issuance: (A) the Pro Forma Senior DSCR will be greater than 2.00 to 1.00; (B) the Pro Forma Aggregate DSCR will be greater than 1.50 to 1.00; (C) the Pro Forma Senior LTV will not be greater than 65%, and (D) the Pro Forma Aggregate LTV will not be greater than 75%; provided that, for purposes of clarity, such pro forma calculations shall be made without giving effect to any “holiday” or testing exclusions applicable under this Indenture;
(g)if such Additional Notes are Term Notes, such Additional Notes may not have a Final Scheduled Payment Date earlier than the Final Scheduled Payment Date of any Outstanding Series of Notes or an Anticipated Repayment Date earlier than the Anticipated Repayment Date of any Outstanding Series of Notes;
(h)any Series Supplement entered into for the purpose of issuing Variable Funding Notes as Additional Notes shall require the consent of the Majority Hedge Counterparties (such consent not to be unreasonably withheld, conditioned or delayed);
(i)the Issuer shall have entered into such additional Hedge Agreements as are necessary to comply with the hedging requirements set forth in this Indenture and any related Series Supplement;
(j)the Issuer and the Indenture Trustee receive an Opinion of Counsel (which opinion may contain similar assumptions and qualifications as are contained in the Opinion of Counsel with respect to the Tax treatment of the Notes delivered on the Initial Closing Date) to the effect that the issuance of such Additional Notes (including, for the avoidance of doubt, to the extent entered into in connection therewith, any Series Supplement or amendment to a Basic Document) (A) will not cause the Issuer or any of its subsidiaries to be treated as a corporation, association, publicly traded partnership, taxable mortgage pool, or other entity, in each case, taxable as a corporation for U.S. federal income Tax purposes, (B) will not cause any Notes of any Outstanding Series (other than those that are, at any time, held by any Section 385 Related Party) that were characterized as indebtedness for U.S. federal income Tax purposes, as of the applicable Closing Date, to be characterized as other than indebtedness for U.S. federal income Tax purposes, and (C) either (1) should not cause any Notes of any Outstanding Series to undergo a “significant modification” within the meaning of Treasury Regulations Section 1.1001-3 or (2) will not cause any Notes of any Outstanding Series to undergo a “significant

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modification” within the meaning of Treasury Regulations Section 1.1001-3 that would result in any adverse U.S. federal income tax consequence to any Holder thereof (assuming such Holder is a “United States person” (within the meaning of Section 7701(a)(30) of the Code) and is not exempt from U.S. federal income taxation (including under Section 501 of the Code));
(k)any other conditions relating to the issuance of Additional Notes set forth in any Series Supplement for any Outstanding Series of Notes are satisfied;
(l)no breakage or termination amounts are then due and unpaid in connection with any Hedge Agreement (including amounts arising from prior reductions in the notional amount under the related Hedge Agreements in order to maintain compliance with this Indenture); and
(m)the Indenture Trustee receives an Officer’s Certificate of the Issuer stating that (1) all conditions precedent to the issuance of the Additional Notes under the Indenture have been satisfied or waived and (2) the representations and warranties of the Diversified Parties under the Basic Documents are true and correct in all material respects as of the date of such issuance.
Section 2.16Certification by Note Owners.
(a)Each Note Owner is hereby deemed, by virtue of its acquisition of an Ownership Interest in the Book-Entry Notes, to agree to comply with the transfer requirements set forth in Section 2.4(j).
(b)To the extent that under the terms of this Indenture, it is necessary to determine whether any Person is a Note Owner, the Indenture Trustee may conclusively rely on a certificate of such Person, in such form as shall be reasonably acceptable to the Indenture Trustee, that specifies the Class, Series and aggregate principal balance of the Book-Entry Note beneficially owned by such Person.
Article III

REPRESENTATIONS AND WARRANTIES
The Issuer represents and warrants as of the Initial Closing Date and as of the date of issuance of any Additional Notes as follows:
Section 3.1Organization and Good Standing.
(a)The Issuer (i) is duly organized, validly existing, and in good standing under the Laws of the State of Delaware and (ii) has full power and authority under its Organizational Documents to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use.
(b)(X) As of the Initial Closing Date, DABS Phase X (i) is duly organized, validly existing, and in good standing under the Laws of the Commonwealth of Pennsylvania, (ii) is duly qualified in Kentucky, Ohio, Virginia, and West Virginia, and (iii) has full power and authority under its Organizational Documents to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use, and (Y) as of the date of issuance of any Additional Notes, DABS Phase X (i) is duly organized, validly existing, and in good standing under the Laws of the Commonwealth of Pennsylvania, (ii) is duly qualified in Kentucky, Ohio, Virginia, West Virginia and Tennessee, and (iii) has full power and

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authority under its Organizational Documents to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use.
(c)DABS I (i) is duly organized, validly existing, and in good standing under the Laws of the Commonwealth of Pennsylvania, (ii) is duly qualified in Kentucky, Ohio, Virginia and West Virginia, and (iii) has full power and authority under its Organizational Documents to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use.
(d)DABS II (i) is duly organized, validly existing, and in good standing under the Laws of the Commonwealth of Pennsylvania, (ii) is duly qualified in Kentucky, Ohio, Virginia and West Virginia, and (iii) has full power and authority under its Organizational Documents to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use.
Section 3.2Authority; No Conflict.
(a)The execution, delivery, and performance of this Indenture and the Basic Documents and the performance of the Contemplated Transactions have been duly and validly authorized in accordance with the Organizational Documents of each of the Issuer Parties, as applicable.
(b)This Indenture has been duly executed and delivered by the Issuer Parties and all instruments executed and delivered by any of the Issuer Parties at or in connection with the Closing have been duly executed and delivered by such Issuer Parties.
(c)This Indenture constitutes the legally valid and binding obligation of the Issuer Parties, enforceable against the Issuer Parties in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and or other similar Laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at Law).
(d)Neither the execution and delivery of this Indenture or the instruments executed in connection herewith by the Issuer Parties nor the consummation or performance of any of the Contemplated Transactions or Basic Documents by the Issuer Parties shall, directly or indirectly (with or without notice or lapse of time or both):
(i)contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Issuer Parties, as applicable, or (B) any resolution adopted by the board of directors, board of managers, stockholders, members, or partners of the Issuer Parties, as applicable;
(ii)in any material respect, contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to notification of or to challenge any of the Contemplated Transactions or Basic Documents, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any Contract or agreement or any Law or Order to which any of the Issuer Parties, or any of the Assets, may be subject;
(iii)in any material respect, contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that relates to the Assets; or

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(iv)result in the imposition or creation of any Encumbrance or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of any Lease, Contract, note, bond, mortgage, indenture, license, or other material agreement with respect to any of the Assets, other than any Encumbrance or Lien arising in favor of the Indenture Trustee pursuant to the Basic Documents.
Section 3.3Legal Proceedings; Orders. Except as set forth on Schedule 3.3 hereto, (a) there is no pending Proceeding against any of the Issuer Parties or any of its Affiliates (i) that relates to or may affect any of the Assets that could reasonably be expected to have a Material Adverse Effect; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise materially interfering with, any of the Contemplated Transactions or Basic Documents, and (b) to the Issuer Parties’ Knowledge, (x) no Proceeding of the type referenced above has been Threatened, (y) there is no Order adversely affecting the use or ownership of the Assets to which any of the Issuer Parties, or any of the Assets, is subject, and (z) there is no Order or Proceeding restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the Contemplated Transactions or Basic Documents or which could reasonably be expected to result in a material diminution of the benefits contemplated by this Indenture or the Contemplated Transactions or Basic Documents.
Section 3.4Compliance with Laws and Governmental Authorizations.
(a)The Assets have been owned in all material respects in accordance with all Laws of all Governmental Bodies having or asserting jurisdiction relating to the ownership and operation thereof, including the production of Hydrocarbons attributable thereto.
(b)Except as set forth on Schedule 3.4(b) hereto, to the Knowledge of the Diversified Companies, all necessary Governmental Authorizations with regard to the ownership of any of the Issuer Parties’ interest in the Assets have been obtained and no violations exist or have been recorded in respect of such Governmental Authorizations.
(c)None of the Issuer Parties nor any of their Affiliates have received any written notice of any violation of any Laws in any material respect or of any Governmental Authorization in connection with the ownership of the Assets that has not been corrected or settled, and there are no Proceedings pending or, to the Issuer Parties’ Knowledge, threatened that might result in any material modification, revocation, termination or suspension of any Governmental Authorization or which would require any material corrective or remedial action by any of the Issuer Parties or any of its Affiliates.
Section 3.5Title to Property; Leases. Each Issuer Party has good and sufficient title to its properties that individually or in the aggregate are material, including all such properties purported to have been acquired by each Issuer Party, in each case free and clear of Liens other than Permitted Liens.
Section 3.6Vesting of Title to the Assets. Title to the Assets is vested in the Guarantors, and each Guarantor will have valid legal and beneficial title thereto, in each case subject to no prior Lien, mortgage, security interest, pledge, adverse claim, charge or other encumbrance, other than the Permitted Liens. Prior to the transfers contemplated by the Asset Vesting Documents, each Guarantor had valid legal and beneficial title to the applicable Assets and had not assigned to any Person any of its right, title or interest in any such Assets, other than in connection with any Liens that are being released on or before the applicable Closing Date or any Permitted Liens.

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Section 3.7Compliance with Leases. The Issuer Parties are in compliance in all material respects with each Lease to the extent relating to an Asset, including all express and implied covenants thereunder. No material written demands or notices of default or non-compliance or dispute (including those received electronically) with respect to a Lease to the extent relating to an Asset have been issued to or received by the Issuer Parties that remain uncured or outstanding.
Section 3.8Material Indebtedness. None of the Issuer Parties has any material Indebtedness other than Permitted Indebtedness and the Existing Indebtedness which Existing Indebtedness are being repaid in full on the Initial Closing Date.
Section 3.9Employee Benefit Plans. Except as set forth on Schedule 3.9 hereto, neither any of the Issuer Parties nor, to the extent it would reasonably be expected to have a Material Adverse Effect, any ERISA Affiliate maintains or has ever maintained any Plans (including any Non-U.S. Plan) or has ever had any direct obligation to make any contribution to a Multiemployer Plan.
Section 3.10Use of Proceeds; Margin Regulations. On the Initial Closing Date, the Issuer will apply the proceeds of the sale of the Notes hereunder (a) to redeem the Existing Indebtedness, (b) to acquire the Initial Assets by acquiring 100% of the transferable interests and limited liability company interests of the Guarantors, as applicable, (c) to fund the Liquidity Reserve Account in an amount equal to the Liquidity Reserve Account Initial Deposit, (d) to pay transaction costs associated with the issuance of the Notes and the acquisition of the Initial Assets, and (e) other general corporate purposes (including dividend payments to Diversified Holdings for further distribution to Diversified). After the Initial Closing Date, subject to the conditions set forth in this Indenture, the Issuer may also apply the proceeds of the sale of any Additional Notes hereunder to fund the redemption of any Notes then Outstanding or for any other permissible purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve any of the Issuer Parties in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
Section 3.11Existing Indebtedness; Future Liens.
(a)None of the Issuer Parties has, and has never had, any outstanding Indebtedness other than Permitted Indebtedness and, in the case of the Guarantors, the Existing Indebtedness being redeemed in full on the applicable Closing Date. There are no outstanding Liens on any property of any of the Issuer Parties other than Permitted Liens.
(b)Except for Permitted Liens, none of the Issuer Parties has, at any time, agreed or consented to cause or permit any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Indebtedness or to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Indebtedness, except, in the case of the Guarantors, the Liens securing the Existing Indebtedness being discharged on the applicable Closing Date.
(c)Other than the Basic Documents and the indentures with respect to the Existing Indebtedness which are being discharged on the applicable Closing Date, none of the Issuer Parties is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of any of the Issuer Parties, any agreement relating thereto or any other

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agreement (including its charter or any other Organizational Document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of any of the Issuer Parties.
Section 3.12Foreign Assets Control Regulations, Etc.
(a)Neither any of the Issuer Parties nor any Controlled Entity (i) is a Blocked Person, (ii) has been notified that its name appears (or may in the future appear) on a State Sanctions List or (iii) to any Issuer Party’s Knowledge, is a target of sanctions that have been imposed by the United Nations or the European Union.
(b)None of the Issuer Parties or any Controlled Entity (i) is in violation, has been found in violation of, or has been charged or convicted under, any applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws or (ii) to any Issuer Party’s Knowledge, is under investigation by any Governmental Body for possible violation of any applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws.
(c)No part of the proceeds from the sale of the Notes hereunder:
(i)constitutes or will constitute funds obtained on behalf of any Blocked Person or will otherwise be used by any Issuer Party or any Controlled Entity, directly or knowingly indirectly, (A) in connection with any investment in, or any transactions or dealings with, any Blocked Person in violation of U.S. Economic Sanctions Laws, (B) for any purpose that would cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws, or (C) otherwise in violation of any U.S. Economic Sanctions Laws;
(ii)will be used, directly or knowingly indirectly, in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or
(iii)will be used, directly or knowingly indirectly, for the purpose of making any improper payments, including bribes, to any Governmental Official or commercial counterparty in order to obtain, retain or direct business or obtain any improper advantage, in each case which would be in violation of, or cause any Purchaser to be in violation of, any applicable Anti-Corruption Laws.
(d)Each of the Issuer Parties and its Affiliates have established procedures and controls which they reasonably believe are adequate (and otherwise comply with applicable Law) to ensure that each of the Issuer Parties and each Controlled Entity is and will continue to be in compliance with all applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws and Anti-Corruption Laws.
Section 3.13Status under Certain Statutes. None of the Issuer Parties is subject to regulation under the Investment Company Act, the Public Utility Holding Company Act of 2005, the ICC Termination Act of 1995, or the Federal Power Act. As to the Issuer and each of the Guarantors, (i) neither the Issuer nor each of the Guarantors is (A) a “commodity pool” as defined in Section 1a(10) of the Commodity and Exchange Act or any rule or regulation relating thereto or any interpretation thereof by the Commodity Futures Trading Commission or (B) a “financial end user,” as defined in either 17 CFR §23.151 or 12 CFR §349.2, and (ii) each of the Issuer and the Guarantors is an “eligible contract participant” as such term is defined in the Commodity and Exchange Act, and will, in the future, maintain such status as to all Hedge Agreements outstanding with any one or more of the Hedge Counterparties until all Obligations

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thereunder have been fully performed. None of the Issuer, the Guarantors or the transaction contemplated under the Basic Documents constitutes a “covered fund” for purposes of Section 619 of The Dodd-Frank Wallstreet Reform and Consumer Protection Act, otherwise known as the “Volcker Rule.”
Section 3.14Single Purpose Entity. Each Issuer Party (i) has been formed and organized for limited purposes, including entering into the Basic Documents to which it is a party, and performing its obligations thereunder (including entering into certain agreements in connection therewith), and (ii) does not have any other assets other than those related to its activities in accordance with clause (i) above.
Section 3.15Solvency. Each Issuer Party is solvent, has capital not unreasonably small in relation to its business or any contemplated or undertaken transaction and has assets having a value both at fair valuation and at present fair saleable value greater than the amount required to pay its debts as they become due and greater than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. None of the Issuer Parties intends to incur, or believes that it will incur, debts beyond its ability to pay such debts as they become due. None of the Issuer Parties believes that it will be rendered insolvent by the execution and delivery of, and performance of its obligations under, this Indenture, the Notes and the other Basic Documents to which it is a party. None of the Issuer Parties intends to hinder, delay or defraud its creditors by or through the execution and delivery of, or performance of its obligations under, this Indenture, the Notes or the other Basic Documents to which it is a party.
Section 3.16Security Interest. The Indenture, together with the Pledge Agreement and the Mortgages, creates in favor of the Indenture Trustee, as security for the payment of principal of and interest on, and any other amounts owed or owing in respect of, the Notes and the Hedge Agreements (including any termination payments and any other amounts owed or owing thereunder) and for the performance of the provisions of this Indenture, a security interest in or mortgage or deed of trust on all of the right, title, and interest, whether now owned or hereafter acquired, of each Issuer Party (and, in the case of the Collateral subject to the Pledge Agreement, Holdings) in, to, and under the Collateral. Upon the filing of the applicable UCC-1 financing statements and the Mortgages, all action has been taken as is necessary to perfect such security interest or mortgage or deed of trust, and such security interest, mortgage or deed of trust is of first priority subject in each case to Permitted Liens.
Article IV

COVENANTS
Section 4.1Payment of Principal and Interest. The Issuer will duly and punctually pay the principal of and interest, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to and in accordance with Section 8.6, the Indenture Trustee shall distribute all amounts on deposit in the Collection Account and allocated for distribution to the Noteholders on a Payment Date pursuant to Article VIII hereof for the benefit of the Notes, to the Noteholders. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture.
Section 4.2Maintenance of Office or Agency. The Issuer will maintain in the United States, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. Such office or agency will initially be at Corporate Trust Office of the

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Indenture Trustee, and the Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes. The Indenture Trustee will give prompt written notice to the Issuer, the Back-Up Manager and each Rating Agency of any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands; provided, that the Indenture Trustee shall not be deemed an agent of the Issuer for service of process.
Section 4.3Money for Payments to Be Held on behalf of the Noteholders and Hedge Counterparties. All payments of amounts due and payable with respect to any Notes and Hedge Agreements that are to be made from amounts withdrawn from the Collection Account pursuant to Section 8.6 shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account for payments of Notes and Hedge Agreements shall be paid over to the Issuer except as provided in Section 8.6.
Section 4.4Compliance With Law. Each of the Issuer Parties will comply with all Laws and regulations to which it is subject (including ERISA, Environmental Laws, and the USA PATRIOT Act) and will obtain and maintain in effect all licenses, certificates, permits, franchises and other Governmental Authorizations necessary to the ownership of its properties or to the conduct of its businesses, in each case to the extent necessary to ensure compliance in all material respects with such Laws, ordinances or governmental rules or regulations and requirements to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations.
Section 4.5Insurance. From and after the Initial Closing Date, each of the Issuer Parties will maintain (or cause to be maintained), with financially sound and reputable insurers, insurance with respect to its properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated, and, within thirty (30) days after the Initial Closing Date, each of the Issuer Parties shall cause the Indenture Trustee to be named as a loss payee or an additional insured. For the avoidance of doubt, any proceeds received by any of the Issuer Parties or the Manager for the benefit of any of the Issuer Parties with respect to any claim under such insurance policy shall be deemed to be Collections with respect to the Collection Period in which such proceeds are received and promptly, but in any event within two (2) Business Days, deposited into the Collections Account.
Section 4.6No Change in Fiscal Year. Without the consent of the Majority Noteholders, each of the Issuer Parties shall not (i) permit its fiscal year to end on a day other than December 31, (ii) change its method of determining fiscal quarters or make or permit any change in accounting policies or reporting practices, except as required by or in accordance with IFRS, or, to the extent Diversified Corp or its direct or indirect parent prepares its financial statements in accordance with GAAP, in accordance with GAAP, or (iii) change its federal employer identification number, except, in each case, for any such changes that are not materially adverse to the Holders or the Hedge Counterparties.
Section 4.7Payment of Taxes and Claims. Each of the Issuer Parties will file all U.S. federal and state and any other material Tax returns required to be filed in any jurisdiction and to pay and discharge all Taxes shown to be due and payable on such returns and all other Taxes imposed on them or any of their properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all

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claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Issuer or any of its Subsidiaries; provided, that the applicable Issuer Party need not pay any such Tax if the amount, applicability or validity thereof is contested by such Issuer Party on a timely basis in good faith and by appropriate proceedings by the Issuer Party, and such Issuer Party has established adequate reserves therefor in accordance with GAAP on the books of such Issuer Party.
Section 4.8Existence. Subject to Section 4.17, each of the Issuer Parties will at all times preserve and keep (i) its limited liability company existence in full force and effect and (ii) all foreign qualifications of the Issuer Party and all rights and franchises of the Issuer Party.
Section 4.9Books and Records. Each of the Issuer Parties will maintain or cause to be maintained proper books of record and account in conformity with IFRS, or, to the extent Diversified Corp or its direct or indirect parent prepares its financial statements in accordance with GAAP, in accordance with GAAP, and all applicable requirements of any Governmental Body having legal or regulatory jurisdiction over the Issuer Party. Each of the Issuer Parties will keep or cause to be kept books, records and accounts that, in reasonable detail, accurately reflect all transactions and dispositions of assets. The Issuer or one of its Affiliates has devised a system of internal accounting controls sufficient to provide reasonable assurances that each of the Issuer Parties’ books, records, and accounts accurately reflect all transactions and dispositions of assets, and such a system shall be maintained.
Section 4.10Performance of Material Agreements. From and after the Initial Closing Date, each of the Issuer Parties will at all times in all material respects (i) observe and perform all obligations, covenants and agreements to be performed by it under, and comply with all conditions under, each material agreement including each Lease to which it is or becomes a party in accordance with the terms thereof and (ii) subject to the terms of this Indenture, diligently exercise, enforce, defend and protect its rights under, and take any action required to collect any and all sums due to it under, each material agreement including each Lease to which it is or becomes a party. None of the Issuer Parties shall take any action or permit any action to be taken by others which would release any Person from any of such Person’s covenants or obligations under the Basic Documents or under any instrument or agreement included as part of the Collateral or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except (i) such amendment, hypothecation, subordination, termination or discharge in the ordinary course of business or that does not have a material detriment to the value of the Collateral or (ii) as expressly provided in this Indenture, the other Basic Documents or such other instrument or agreement or as ordered by a bankruptcy or other court.
Section 4.11Maintenance of Lien. From and after the Initial Closing Date and for so long as the Notes and Hedge Agreements are outstanding, each of the Issuer Parties will, at its expense, timely take or cause to be taken all action required to maintain and preserve the perfection and first priority of the Lien on the Collateral granted under this Indenture, the Pledge Agreement and the Mortgages (subject to Permitted Liens).
Section 4.12Further Assurances. From time to time the Issuer Parties will perform or cause to be performed any other act as required by Law and will execute or cause to be executed any and all further instruments that may be required by Law or reasonably necessary (or reasonably requested by the Indenture Trustee) in order to create, perfect and protect the Lien of the Indenture Trustee on or in the Collateral. The Issuer Parties will promptly do, execute, acknowledge and deliver, or cause to be promptly done, executed, acknowledged and delivered, all such further acts, deeds, conveyances, mortgages, assignments, transfers and assurances as the Indenture Trustee or any Noteholder may reasonably require for the creation, perfection and priority of the Liens being herein provided for (subject to Permitted Liens). The Issuer Parties

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will pay or cause to be paid all filing, registration and recording Taxes and fees incident to such filing, registration and recording, and all expenses incident to the preparation, execution and acknowledgment of this Indenture, and of any instrument of further assurance, and all federal or state stamp Taxes and other Taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Indenture, the other Basic Documents and such instruments of further assurance. Each Issuer Party hereby authorizes, but does not obligate, the Indenture Trustee to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Issuer. Each Issuer Party acknowledges and agrees, on behalf of itself, that any such financing statement may describe the Collateral as “all assets”, “all personal property” or “all assets and all personal property of Debtor, whether now owned or existing or hereafter acquired or arising, wherever located, together with all products and proceeds thereof, substitutions and replacements therefor, and additions and accessions thereto” of the applicable Person or words of similar effect as may be required by the Indenture Trustee.
Section 4.13Use of Proceeds. The Issuer shall apply the proceeds of the sale of the Notes solely as provided in Section 3.10.
Section 4.14Separateness.
(a)The Issuer Parties will pay their debts and liabilities (including, as applicable, shared personnel, overhead expenses and any compensation due to its Independent manager or member) from their assets as the same shall become due and payable, except for expenses paid on its behalf pursuant to arm’s length contractual arrangements providing for operating, maintenance or administrative services.
(b)Each Issuer Party will observe all limited liability company or organizational formalities, maintain books, records, financial statements and bank accounts separate from those of its Affiliates, except as permitted by this Indenture and the other Basic Documents. None of the Issuer’s or any of its Subsidiaries’ assets will be listed as assets on the financial statement of any other entity except as required by IFRS, or, to the extent Diversified Corp or its direct or indirect parent prepares its financial statements in accordance with GAAP, as required by GAAP; provided, however, that appropriate notation shall be made on any consolidated statements to indicate its separateness from any Affiliates and to indicate that its assets and credit are not available to satisfy the debt and other obligations of such Affiliate or any other Person except as otherwise contemplated by the Basic Documents.
(c)Each Issuer Party will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate). The Issuer will conduct and operate its business and in its own name.
(d)Other than as contemplated in the Joint Operating Agreement and the other Basic Documents, each Issuer Party will hold all of its assets in its own name and will not commingle its funds and other assets with those of any Affiliate.
(e)The Issuer Parties will not conduct the business of or act on behalf of any other Person (except as required by the Basic Documents).
(f)Each Issuer Party (i) will at all times have at least one (1) duly elected Independent manager or member and (ii) so long as the Notes and Hedge Agreements remain outstanding, shall not remove or replace any Independent manager or member without cause and only after providing the Indenture Trustee, each Noteholder and each Hedge Counterparty with no less than three (3) days’ prior written notice of (A) any proposed removal of such Independent manager or member, and (B) the identity of the proposed replacement, together with a

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certification that such replacement satisfies the requirements for an Independent manager or member in the organizational documents for the applicable Issuer Party and this Indenture. No Issuer Party will institute proceedings to be adjudicated bankrupt or insolvent, consent to the institution of bankruptcy or insolvency proceedings against it, or file, or consent to, a petition seeking reorganization or relief under any applicable federal or state Law relating to bankruptcy or insolvency, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Issuer Party or any substantial part of its property, or make an assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take limited liability company action in furtherance of any such action without the affirmative vote of at least one (1) duly elected Independent manager or member; provided, however, irrespective of such affirmative vote, the occurrence of any of the foregoing is subject to Section 5.1(a)(iv), Section 5.1(a)(v), and any other terms herein or any of the Basic Documents.
(g)Each Issuer Party will be, and at all times will hold itself out to the public and all other Persons as, a legal entity separate and distinct from any other Person (including any Affiliate), correct any known misunderstanding regarding its status as a separate entity, conduct business solely in its own name, and not identify itself as a division of any of its Affiliates or any of its Affiliates as a division of any Issuer Party (except for U.S. federal and applicable state and local income Tax purposes in the case of an Issuer Party that is treated as a “disregarded entity” for such purposes). Each Issuer Party will conduct and operate its business and in its own name.
(h)Each Issuer Party will not permit its name to be used by any Affiliate of the Issuer in the conduct of such Affiliate’s business, and will not use the name of any Affiliate in the conduct of the Issuer’s business.
(i)Each Issuer Party will file its own Tax returns, if any, as may be required under applicable Law, to the extent (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for Tax purposes of another taxpayer, and pay any Taxes required to be paid under applicable Law.
(j)Each Issuer Party will maintain its assets, including the Collateral, in such a manner that it would not be costly or difficult to identify, segregate or ascertain its assets from those of any other Person.
(k)Subject to Section 4.15, each Issuer Party will maintain an arm’s length relationship with its Affiliates, and not enter into any transaction with any Affiliate unless such transaction is (i) on such terms and conditions (including terms relating to amounts paid thereunder) as would be generally available if such business transaction were with an entity that was not an Affiliate in comparable transactions, and (ii) pursuant to enforceable agreements.
(l)Each Issuer Party will not hold out its credit or assets as being available to satisfy the obligations of others nor guarantee the obligation of any Person.
(m)Each Issuer Party will maintain adequate capital in light of its contemplated business purpose, transactions, and liabilities (provided, that no member of the Issuer shall have any obligation to make any contribution of capital to the Issuer).
(n)Each Issuer Party will not grant a security interest in its assets to secure the obligations of any other Person.
(o)Each Issuer Party will not, directly or indirectly, engage in any business or activity other than the actions that are both (i) required or permitted to be performed under

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Section 3.1 of its limited liability company agreement and (ii) permitted by the terms of the Basic Documents.
(p)Each Issuer Party will not incur any indebtedness, liability, obligation, or expense, or own any assets, other than in each case those that are both (i) necessary to achieve the purposes set forth in Section 3.1 of its limited liability company agreement and (ii) permitted by the Basic Documents;
(q)Each Issuer Party will not make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities of, any Person, other than as permitted by the Basic Documents;
(r)Each Issuer Party will maintain complete records of all transactions (including all transactions with any Affiliate);
(s)Each Issuer Party will comply with all requirements of applicable Law regarding its operations and shall comply with the provisions of this Indenture and its Organizational Documents; and
(t)Other than the Guarantors, the Issuer will not form, acquire, or hold any Subsidiary. Neither Guarantor will form, acquire or hold any Subsidiary, except in connection with an acquisition of Additional Assets.
Section 4.15Transactions with Affiliates. The Issuer Parties will not enter into directly or indirectly any transaction or group of related transactions (including the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate, except as contemplated by the Basic Documents and except in the ordinary course and pursuant to the reasonable requirements of the Issuer’s business and upon fair and reasonable terms no less favorable to the applicable Issuer Party than would be obtainable in a comparable arm’s length transaction with a Person not an Affiliate.
Section 4.16Merger, Consolidation, Etc. Other than the transactions contemplated on the Initial Closing Date, none of the Issuer Parties will consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions.
Section 4.17Lines of Business. None of the Issuer Parties will at any time engage in any business other than those related to the ownership of the Assets and the transactions contemplated by this Indenture and the other Basic Documents to which it is a party and other activities reasonably incidental thereto; provided, however, that none of the Issuer Parties shall engage in any business or activity or enter into any contractual arrangement (other than any business or activity in which the Issuer is engaged on the Initial Closing Date) that would (i) subject the Holders or any Hedge Counterparty to regulation or oversight by any Governmental Body (other than the Governmental Bodies which regulate companies engaged in the oil and gas industry, insurance companies and, following foreclosure, regulations applicable to assets held as a result of such foreclosure) or cause the Holders or any Hedge Counterparty to breach any Law or regulation or guideline of any Governmental Body or require Holders or any Hedge Counterparty to obtain a consent, waiver or clarification by any Governmental Body or (ii) cause any of the representations and warranties of any of the Issuer Parties contained in any of the Basic Documents to be inaccurate as of the date made or deemed made.
Section 4.18Economic Sanctions, Etc. None of the Issuer Parties nor any Controlled Entity will (a) become (including by virtue of being owned or controlled by a Blocked Person), own or control a Blocked Person or (b) directly or indirectly have any

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investment in or engage in any dealing or transaction (including any investment, dealing or transaction involving the proceeds of the Notes) with any Person if such investment, dealing or transaction (i) would cause any Noteholder, any Hedge Counterparty or any affiliate of such Holder or any Hedge Counterparty to be in violation of, or subject to sanctions under, any applicable U.S. Economic Sanctions Laws, Anti-Corruption Laws or Anti-Money Laundering Laws, or (ii) is prohibited by or subject to sanctions under any U.S. Economic Sanctions Laws.
Section 4.19Liens. None of the Issuer Parties will, directly or indirectly, create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any of its property or assets (including the Collateral), whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or otherwise convey any right to receive income or profits, except for Permitted Liens.
Section 4.20Sale of Assets, Etc. None of the Issuer Parties will sell, transfer, convey, assign, exchange or dispose of any of its properties or assets in any single transaction or series of related transactions of any individual asset, or group of related assets, other than Permitted Dispositions; provided, however, that in the event any Permitted Disposition could reasonably be expected to have a Material Adverse Effect on any Hedge Counterparty or any Noteholder or the Noteholders, the Issuer shall obtain the prior written consent of each such Hedge Counterparty and Noteholder to such Permitted Disposition.
Section 4.21Permitted Indebtedness. None of the Issuer Parties will create, guarantee, assume or suffer to exist, or in any manner be or become liable in respect of, any Indebtedness of any kind or character, other than the following (such Indebtedness being referred to as “Permitted Indebtedness”):
(a)Indebtedness owing under this Indenture, the Notes or any other Basic Document, including the Hedge Agreements;
(b)Operating Expenses;
(c)obligations incurred in the ordinary course of its business specified in Section 4.17 in an aggregate amount not to exceed $1,000,000 in the aggregate for all Issuer Parties at any one time; and
(d)other Indebtedness with the prior written consent of the Majority Noteholders; provided, however, any such Indebtedness is subordinate to the Hedge Counterparties and Holders, in all respects.
Section 4.22Amendment to Organizational Documents. None of the Issuer Parties will, or will permit any Person to, amend, modify or otherwise change (i) any material provision of the Organizational Documents of any Issuer Party, as applicable, except to the extent such amendment, modification or change would not be materially adverse to the Secured Parties as stated in an Officer’s Certificate of the Issuer or (ii) its jurisdiction of organization, its location of principal place of business or its name, in each case, without the prior written consent of the Majority Noteholders and the Majority Hedge Counterparties (such consent not to be unreasonably withheld, conditioned or delayed) and unless all actions have been taken to maintain the perfection and first-priority of the security interest in the Collateral in favor of the Indenture Trustee; provided, however, that each Issuer Party may amend, modify or otherwise change any provision of the Issuer Party’s Organizational Documents to: (i) cure any ambiguity, (ii) correct or supplement any provision in a manner consistent with the intent of the Issuer Party’s Organizational Documents and the other Basic Documents or (iii) otherwise amend, modify or change any immaterial provision of the Issuer Party’s Organizational Documents, in each case, without obtaining the consent of the Noteholders or the Hedge Counterparties, but

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with delivery of an Officer’s Certificate to the Indenture Trustee stating that such amendment is so permitted under one or more of the foregoing clauses (i)-(iii) of this proviso. Notwithstanding the foregoing, no amendment, modification, or change to any Organizational Document shall be made if such amendment, modification, or change would result in the liens granted under this Indenture or any other Basic Document becoming unperfected or otherwise adversely affect the priority or enforceability of such liens.
Section 4.23No Loans. Each of the Issuer Parties will not, directly or indirectly, make any loan or advance to any Person, other than Permitted Investments.
Section 4.24Permitted Investments; Subsidiaries. Each of the Issuer Parties will not make any Investments other than (a) any Investment in Permitted Investments of monies in any Issuer Account and (b) obligations of account debtors to the Issuer arising in the ordinary course of business, and (c) Investments received as consideration from any Permitted Disposition. Without limiting the generality of the foregoing, each of the Issuer Parties will not create any Subsidiaries (other than the Issuer’s ownership of the Guarantors) or enter into any partnership or joint venture.
Section 4.25Employees; ERISA. Each of the Issuer Parties will not maintain any employees or maintain any Plan or incur or suffer to exist any direct obligation to make any contribution to a Multiemployer Plan.
Section 4.26Tax Treatment. None of the Issuer Parties, nor any party otherwise having the authority to act on behalf of an Issuer Party, is authorized to, or will, make the election described in U.S. Treasury Regulations Section 301.7701-3(a) to treat any Issuer Party as an association taxable as a corporation for U.S. federal income Tax purposes, or a similar election under any U.S. state or local Law, or take any other action that would reasonably be expected to cause any Issuer Party to be treated as an association taxable as a corporation for U.S. federal income Tax purposes. The Issuer will treat the Notes (other than Notes held by any equity holder of the Issuer (including any entity whose separate existence from the Issuer or the equity holder of the Issuer is disregarded for U.S. federal income Tax purposes), any other persons who are members of an “expanded group” with the Issuer within the meaning of the Treasury Regulations under Section 385 of the Code, but only so long as such Notes are held by such person, or as otherwise required by a change in law or a final determination pursuant to Section 1313 of the Code) and this Indenture as indebtedness, and not as an equity interest in the Issuer, for all purposes (including U.S. federal, state and local income Tax purposes). For all U.S. federal and applicable state and local income Tax purposes, the Issuer has always been and shall continue to be classified as an entity disregarded from its regarded Tax owner and shall not be treated as a partnership (for the avoidance of doubt, treating the Class B Notes as debt for this purpose), a publicly traded partnership treated as a corporation, a Taxable mortgage pool (in whole or in part) Taxable as a corporation or as an association Taxable as a corporation.
Section 4.27Replacement of Manager, Back-Up Manager and Operator. In the event that the Manager shall be terminated due to a Material Manager Default or Event of Default have occurred or is continuing, the Majority Noteholders will have the right but not the obligation to appoint, a replacement manager as soon as reasonably practicable, but in any event within thirty (30) days following such delivery of notice of termination and notify the Issuer of such appointment. In the event that the Manager shall resign, the Issuer shall appoint a replacement manager with the consent of the Majority Noteholder (such consent not to be unreasonably withheld, conditioned, or delayed) as soon as reasonably practicable, but in any event within thirty (30) days following such delivery of notice of any such resignation and notify the Noteholders of such appointment; provided that if the Issuer shall not have appointed a replacement manager by the end of such thirty (30) day period other than as a result of the failure of the Majority Noteholders to have reasonably consented, the Majority Noteholders may have

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the right to appoint the replacement manager with the consent of the Issuer (such consent not to be unreasonably withheld, conditioned, or delayed). In the event that the Back-Up Manager shall resign, be terminated or otherwise removed, the Issuer shall appoint a replacement back-up manager with the consent of the Majority Noteholder (such consent not to be unreasonably withheld, conditioned, or delayed) as soon as reasonably practicable, but in any event within thirty (30) days following such delivery of notice of any such resignation, termination or removal and notify the Noteholders of such appointment; provided that if the Issuer shall not have appointed a replacement back-up manager by the end of such thirty (30) day period other than as a result of the failure of the Majority Noteholders to have reasonably consented, the Majority Noteholders may have the right to appoint the replacement back-up manager with the consent of the Issuer (such consent not to be unreasonably withheld, conditioned, or delayed).
Section 4.28Hedge Agreements.
(a)Natural Gas Hedging. The Issuer shall enter into on or prior to the Initial Closing Date, and thereafter maintain until the earlier of (i) the eight and a half year anniversary of the Initial Closing Date and (ii) the redemption of the Notes in accordance with Article X, swaps, collars or other non-speculative Hedge Agreements (the “Natural Gas Hedge Period”); provided that such hedging arrangements shall be adjusted on each annual anniversary of the Initial Closing Date to maintain such hedging period on an eight and a half year rolling basis; provided further that, after the fourth anniversary of the Initial Closing Date, such hedging period shall be reduced to a five-year rolling basis at any time the Aggregate LTV is less than 45%, with an aggregate notional volume of (and fixing the price exposure relative to the NYMEX spot price with respect to) at least 80% (provided that the Issuer shall endeavor to maintain a floor of at least 85%) but, at all times, including after the Natural Gas Hedge Period, no more than 95% of the projected natural gas output from the Issuer’s (together with its Subsidiary’s) Assets for each month classified as “proved, developed and producing” and as described in the Reserve Report (the “Natural Gas Hedge Percentage”), including by way of (1) an initial hedging strategy consisting of one or more swap transactions and/or swaptions which establish a minimum price level, (2) a hedging strategy consisting of long put transactions or other options transactions which establish a minimum price level and (3) mitigating basis risk of the applicable natural gas output from the Issuer’s (together with its Subsidiaries’) Assets described in the Reserve Report on a twenty four (24) month rolling basis; provided, however, that, in all cases such hedging arrangements shall be based on a Reserve Report updated on at least a semi-annual basis; provided, however, that, in each case, the Issuer shall not enter into or maintain any Hedge Agreements for purposes of speculation or investment; provided, however, nothing shall prevent Issuer from novating hedges to maintain compliance with the terms set forth herein even in cases where such novated hedges may differ from prevailing market prices, provided further, (i) for the avoidance of doubt, the foregoing shall not prohibit Issuer from selling call options or swaptions and (ii) the Issuer’s compliance with the 95% limit in the Natural Gas Hedge Percentage shall be determined without giving effect to any offsetting or similar Hedge Agreements that would otherwise result in a position that is opposite and equivalent to all or a portion of an existing Hedge Agreement (including any transaction thereunder). Neither the Issuer, nor any party otherwise having authority to act on behalf of the Issuer, is authorized to, or will, enter into an amendment to any Hedge Agreement without obtaining the prior written consent of each Rating Agency; provided that Rating Agency consent shall not be required (other than in accordance with the Hedge Agreements and other Basic Documents) and nothing in this sentence shall restrict the Issuer (i) from entering into Hedge Agreements during and after the Natural Gas Hedge Period (excluding the entry into any offsetting Hedge Agreements described in the proviso of the immediately preceding sentence) or terminating Hedge Agreements, in part or in whole, in order to maintain compliance with the terms set forth herein; or (ii) from optimizing, novating, transferring, rolling or terminating Hedge Agreements, provided further that the Natural Gas Hedge Percentage and the requirement to maintain the basis hedges under clause (3) is satisfied at all time until the earlier of (i) the

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Natural Gas Hedge Period ending date or (ii) the redemption of the Notes in accordance with Article X.
(b)Natural Gas Liquids Hedging. The Issuer shall enter into on or prior to the Initial Closing Date, and thereafter maintain until the earlier of (i) the five-year anniversary of the Initial Closing Date or (ii) the redemption of the Notes in accordance with Article X, swaps, collars or other non-speculative Hedge Agreements (the “NGL Hedge Period”); provided that such hedging arrangements shall be adjusted on each annual anniversary of the Initial Closing Date to maintain such hedging period on a five-year rolling basis; provided further that, after the fourth anniversary of the Initial Closing Date, such hedging period shall be reduced to a three-year rolling basis at any time the Aggregate LTV is less than 45%, Hedge Agreements with an aggregate notional volume of (and fixing the price exposure with respect to) at least 80% (provided that the Issuer shall endeavor to maintain a floor of at least 85%) but, at all times, including after the NGL Hedge Period, no more than 95% of the projected natural gas liquids output from the Issuer’s (together with its Subsidiaries’) Assets for each month, classified as “proved, developed and producing” and as described in the Reserve Report (the “NGL Hedge Percentage”), based on a Reserve Report updated on at least a semi-annual basis; provided, however, that, in each case, the Issuer shall not enter into or maintain any Hedge Agreements for purposes of speculation or investment; provided further, (i) for the avoidance of doubt, the foregoing shall not prohibit Issuer from selling call options or swaptions and (ii) the Issuer’s compliance with the 95% limit in the NGL Hedge Percentage shall be determined without giving effect to any offsetting or similar Hedge Agreements that would otherwise result in a position that is opposite and equivalent to all or a portion of an existing Hedge Agreement (including any transaction thereunder). Neither the Issuer, nor any party otherwise having authority to act on behalf of the Issuer, is authorized to, or will, enter into an amendment to any Hedge Agreement without obtaining the prior written consent of each Rating Agency; provided that nothing in this sentence shall restrict the Issuer (i) from entering into Hedge Agreements during and after the NGL Hedge Period (excluding the entry into any offsetting Hedge Agreements described in the proviso of the immediately preceding sentence) or terminating Hedge Agreements, in part or in whole, in order to maintain compliance with the terms set forth; or (ii) from optimizing, novating, transferring, rolling or terminating Hedge Agreements, provided further that the NGL Hedge Percentage and the requirement to maintain the basis hedges under clause (2) is satisfied at all time until the earlier of (i) the NGL Hedge Period ending date or (ii) the redemption of the Notes in accordance with Article X.
(c)Oil Hedging. The Issuer shall enter into on or prior to the Initial Closing Date, and thereafter maintain until the earlier of (i) the five-year anniversary of the Initial Closing Date or (ii) the redemption of the Notes in accordance with Article X, swaps, collars or other non-speculative Hedge Agreements (the “Oil Hedge Period”); provided that such hedging arrangements shall be adjusted on each annual anniversary of the Initial Closing Date to maintain such hedging period on a five-year rolling basis; provided further that, after the fourth Anniversary of the Initial Closing Date, such hedging period shall be reduced to a three-year rolling basis at any time the Aggregate LTV is less than 45%, Hedge Agreements with an aggregate notional volume of (and fixing the price exposure with respect to) at least 80% (provided that the Issuer shall endeavor to maintain a floor of at least 85%) but, at all times, including after the Oil Hedge Period, no more than 95% of the projected oil output from the Issuer Parties’ Assets for each month classified as “proved, developed and producing” and as described in the Reserve Report (the “Oil Hedge Percentage”), including by way of an initial hedging strategy consisting of one or more NYMEX-WTI swap transactions and/or swaptions which establish a minimum price level and mitigating basis risk of the applicable oil output from the Issuer’s (together with its Subsidiaries’) Assets described in the Reserve Report on a twenty four (24) month rolling basis, based on a Reserve Report updated on at least a semi-annual basis; provided, however, that, in each case, the Issuer shall not enter into or maintain any Hedge Agreements for purposes of speculation or investment; provided, however, nothing shall prevent

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Issuer from novating hedges to maintain compliance with the terms set forth herein even in cases where such novated hedges may differ from prevailing market prices, provided further, (i) for the avoidance of doubt, the foregoing shall not prohibit Issuer from selling call options or swaptions and (ii) the Issuer’s compliance with the 95% limit in the Oil Hedge Percentage shall be determined without giving effect to any offsetting or similar Hedge Agreements that would otherwise result in a position that is opposite and equivalent to all or a portion of an existing Hedge Agreement (including any transaction thereunder). Neither the Issuer, nor any party otherwise having authority to act on behalf of the Issuer, is authorized to, or will, enter into an amendment to any Hedge Agreement without obtaining the prior written consent of each Rating Agency; provided that nothing in this sentence shall restrict the Issuer (i) from entering into Hedge Agreements during and after the Oil Hedge Period (excluding the entry into any offsetting Hedge Agreements described in the proviso of the immediately preceding sentence) or terminating Hedge Agreements, in part or in whole, in order to maintain compliance with the terms set forth herein; or (ii) from optimizing, novating, transferring, rolling or terminating Hedge Agreements; provided that the Oil Hedge Percentage and the requirement to maintain the basis hedges is satisfied at all time until the earlier of (i) the Oil Hedge Period ending date or (ii) the redemption of the Notes in accordance with Article X.

(d)Hedge Terminations. The Issuer Parties shall not terminate, unwind or materially reduce the notional amount of any Hedge Agreement other than (i) in the Issuer’s discretion in connection with an “Event of Default” (where the relevant Hedge Counterparty is the “Defaulting Party”) or “Termination Event” (where the Issuer is a party permitted to terminate pursuant to the terms of the relevant Hedge Agreement) under a Hedge Agreement, as applicable or (ii) as a result of a good faith determination by the Issuer Party or Manager that such Hedge Counterparty or Hedge Agreement should be replaced, terminated or reduced, but not primarily to generate a profit, recognize a gain or mitigate losses, provided, for the avoidance of doubt, that the Issuer remains subject to its obligations to maintain compliance with the hedging requirements set forth in Section 4.28(a), Section 4.28(b) and Section 4.28(c) and any supplemental indenture, in connection with any early termination or unwind of any Hedge Agreement. Any amounts received by the Issuer in connection with any termination of a Hedge Agreement (an “Issuer Hedge Termination Receipt”) shall be either (A) promptly, and in any event within five (5) Business Days, applied to the acquisition of a replacement Hedge Agreement or (B) to the extent not applied pursuant to clause (A), transferred to the Collection Account at the direction of the Issuer for treatment as Available Funds and applied in accordance with the Priority of Payments; provided that, to the extent an amount up to such Issuer Hedge Termination Receipt would otherwise be distributed to the Issuer pursuant to clause (T) of the Priority of Payments (after application of clauses (A) through (S) inclusive of the Priority of Payments), then such amount (up to such Issuer Hedge Termination Receipt) (such amount, the “Excess Hedge Amount”) shall be applied in accordance with Section 8.6(iv). For the avoidance of doubt, any determination of the amounts owing pursuant to the foregoing proviso (and paid pursuant to Section 8.6(iv)) shall be determined after giving effect to amounts owing pursuant to clauses (A) through (S) (inclusive) of the Priority of Payments on the applicable Payment Date.
(e)Except for the Issuer’s requirement to maintain compliance with the 95% limit as it relates to the Natural Gas Hedge Percentage, the NGL Hedge Percentage and the Oil Hedge Percentage (collectively, the “Maximum Hedge Requirement”), failure of the Issuer Parties to comply with any other provision of this Section 4.28 shall not be an Event of Default. Any such failures (other than the Issuer’s failure to maintain compliance with the Maximum Hedge Requirement, which shall constitute an Event of Default in accordance with the terms of this Indenture) shall constitute a Rapid Amortization Event, in each case, if not remedied within 10 Business Days after knowledge by the Issuer Parties or notice from the Secured Parties of such event.

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Section 4.29Amendments to Basic Documents.    So long as any of the Hedge Agreements are outstanding, notwithstanding anything else herein or in any Basic Document, the Issuer Parties shall not without the prior written consent of the Majority Hedge Counterparties amend, supplement, waive or modify any of the Basic Documents in any material adverse respect. Notwithstanding the foregoing, an issuance of Additional Notes which complies with the provisions of Sections 2.14 and 2.15, including the entry into any supplemental indenture or Series Supplement, and any amendment, supplement, waiver or modification of any Series Supplement or supplemental indenture which complies with the provisions of Sections 2.14 and 2.15 as applied to such amendment, supplement, waiver or modification shall not require the consent of any Hedge Counterparties.
Article V

REMEDIES
Section 5.1Events of Default.
(a)“Event of Default,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and, subject to Sections 5.1(a)(iv) and 5.1(a)(v), whether it shall be voluntary or involuntary or be effected by operation of Law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(i)the failure to pay the Notes in full by the applicable Final Scheduled Payment Date;
(ii)default in the payment of interest on the Controlling Class of Notes when the same becomes due and payable that continues unremedied for two (2) Business Days;
(iii)default in the observance or performance of any covenant or agreement of any Diversified Party made in any Basic Document to which it is a party (other than a covenant or agreement, a default in the observance or performance of which is specifically dealt with elsewhere in this Section 5.1(a)), or any representation or warranty of any Diversified Party made in any Basic Document to which it is a party or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of thirty (30) days (subject to Section 5.1(c) below) after the earlier of (i) Knowledge of a Diversified Company of such default or incorrect representation or warranty or (ii) receipt by the Issuer and a Responsible Officer of the Indenture Trustee from a Noteholder or a Hedge Counterparty, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a notice of Default hereunder, delivered by registered or certified mail;
(iv)the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer, Diversified Holdings or the Guarantors or any substantial part of the Collateral in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, Diversified Holdings or the

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Guarantors or for any substantial part of the Collateral, or ordering the winding-up or liquidation of any such parties’ affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days;
(v)the commencement by any of the Issuer, Diversified Holdings or the Guarantors of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar Law now or hereafter in effect, or the consent by any of the Issuer, Diversified Holdings or the Guarantors to the entry of an order for relief in an involuntary case under any such Law, or the consent by the Issuer, Diversified Holdings or the Guarantors to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, Diversified Holdings or the Guarantors or for any substantial part of the Collateral, or the making by the Issuer, Diversified Holdings or the Guarantors of any general assignment for the benefit of creditors, or the failure by the Issuer, Diversified Holdings or the Guarantors generally to pay its debts as such debts become due, or the taking of any action by the Issuer, Diversified Holdings or the Guarantors in furtherance of any of the foregoing;
(vi)the failure of the Issuer or the Guarantors to cause the Indenture Trustee, for the benefit of the Secured Parties, to have a valid first-priority perfected security interest in any portion of the Collateral (subject to Permitted Liens) by no later than the time under which filings are required under Section 2(g) of the Management Services Agreement as in effect on the Initial Closing Date; provided, that it will not be an Event of Default under this clause(a)(vi) if the value of all of the Collateral for which the Indenture Trustee does not have a valid first-priority perfected security interest in any portion of the Collateral (subject to Permitted Liens) is equal to or less than 1% of the aggregate principal amount of Outstanding Notes;
(vii)other than as contemplated by Section 5.1(a)(vi), the failure of the Indenture Trustee, for the benefit of the Secured Parties, to have a valid first-priority perfected security interest in any portion of the Collateral (subject to Permitted Liens) that is not cured within ten (10) days of the earlier of (i) Knowledge of a Diversified Company of such failure or (ii) receipt by the Issuer from the Indenture Trustee a written notice specifying such failure and requiring it to be remedied and stating that such notice is a notice of Default hereunder, delivered by registered or certified mail; provided, that it will not be an Event of Default under this clause(a)(vii) if the value of all of the Collateral for which the Indenture Trustee does not have a valid first-priority perfected security interest (subject to Permitted Liens) is equal to or less than 1% of the aggregate principal amount of Outstanding Notes;
(viii)the Issuer or any of its subsidiaries shall become a corporation, association, publicly traded partnership, taxable mortgage pool, or any other entity, in each case, taxable as a corporation for U.S. federal income Tax purposes;
(ix)the filing of non-appealable decrees or orders for relief by a court having jurisdiction in the premises in respect of the Issuer, Diversified Holdings or Guarantors in excess of $500,000 in aggregate and not discharged, satisfied or stayed within thirty (30) days;
(x)the adoption in final form of a statute, rule or regulation by a competent legislative or governmental rule-making body that becomes effective

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following the Closing Date of any Outstanding Series of Notes, or the entry of a final, non-appealable judgment of a court of competent jurisdiction that is rendered following the Closing Date of any Outstanding Series of Notes, which has a Material Adverse Effect on (a) the validity or enforceability of any of the Basic Documents, or (b) the ability of the Issuer to make payments on the Notes or its obligations under any of the Hedge Agreements;
(xi)an ERISA or Tax lien is created that secures the payment of money shall be rendered against the Issuer or any of the Guarantors in excess of $500,000;
(xii)any of the Issuer, the Diversified Holdings, the Guarantors or the Collateral is required to be registered as an “investment company” under the Investment Company Act;
(xiii)any transactions under any Hedge Agreements remain outstanding as of the date that all principal and interest upon the Notes are paid in full, excluding only any Hedge Agreements for which the Hedge Counterparty thereunder has agreed in writing to accept cash collateral or other security immediately prior to the date of such payment in full;
(xiv)the failure of the Notes to be redeemed upon the occurrence of a Change of Control as required by Section 10.1(b); or
(xv)any of the Manager, the Operator, the Indenture Trustee or the Back-Up Manager shall be terminated, removed or resign, and a replacement manager, operator, indenture trustee or back-up manager satisfactory to the Majority Noteholders shall not have been engaged within sixty (60) days following any such resignation or termination; provided, however, that, with respect to the Indenture Trustee, only the termination or removal of the Indenture Trustee without a replacement indenture trustee being engaged within sixty (60) days following any such termination or removal shall constitute an Event of Default hereunder and no resignation or recusal by the Indenture Trustee itself shall constitute an Event of Default.
(b)The Issuer shall deliver to (1) a Responsible Officer of the Indenture Trustee, (2) each Noteholder, (3) each Hedge Counterparty and (4) the Back-Up Manager, and (5) each Rating Agency, within five (5) Business Days after the occurrence thereof, written notice in the form of an Officer’s Certificate of any event that with the giving of notice and the lapse of time could become an Event of Default under clause (a)(iii) above, its status and what action the Issuer is taking or proposes to take with respect thereto.
(c)Notwithstanding the foregoing, a breach of any covenant or agreement or representation or warranty of the Issuer referred to under clause (a)(iii) above shall not constitute an Event of Default after such thirty (30) day period (and the notice described under clause (b) above need not be delivered) if (x) the Issuer has commenced in a diligent manner a cure of such breach and (y) such remedial action could not reasonably have been expected to fully cure such breach within such thirty (30) days, but could reasonably be expected to be implemented and fully cure such breach within an additional thirty (30) days (but in no event shall the total cure period exceed a total of ninety (90) days). Upon the occurrence of any such event, each of the Issuer and the Indenture Trustee, as applicable, shall not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Indenture and the Issuer or the Indenture Trustee, as applicable, shall provide the Indenture Trustee (if such delay or failure is a result of a delay or failure by the Issuer), the Noteholders, the Hedge

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Counterparties and the Back-Up Manager prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations.
Section 5.2Acceleration of Maturity; Rescission and Annulment. If an Event of Default should occur and be continuing, then and in every such case the Indenture Trustee at the written direction of the Majority Noteholders (subject to the Indenture Trustee’s indemnification rights set forth herein) or the Majority Noteholders may declare all the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to a Responsible Officer of the Indenture Trustee if given by Noteholders) (a copy of which shall be provided by the Issuer to each Hedge Counterparty, the Back-Up Manager and each Rating Agency), and upon any such declaration the unpaid principal amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable; provided, that upon the occurrence of an Event of Default specified in Section 5.1(a)(iv) or (v) all the Notes shall be automatically deemed to be immediately due and payable and upon such event the unpaid principal of such Notes, together with accrued and unpaid interest thereon through the date of such Event of Default specified in Section 5.1(a)(iv) or (v), shall become immediately due and payable, in each case, without notice, declaration or demand by the Indenture Trustee or the Noteholders, all of which are hereby waived by the Issuer.
At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as provided hereinafter in this Article V, the Majority Noteholders, by written notice to the Issuer and a Responsible Officer of the Indenture Trustee (with a copy to each Hedge Counterparty, the Back-Up Manager and each Rating Agency), may rescind and annul such declaration and its consequences if:
(i)the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:
(A)all payments of principal of and interest on all Notes and all other amounts that would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and
(B)all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; and
(ii)all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right or any exercise of remedies consequent thereto nor shall such rescission in and of itself serve as a waiver of any of the Events of Default.
Section 5.3Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.
(a)The Issuer covenants that if (i) an Event of Default specified in Section 5.1(a)(i) has occurred and is continuing or (ii) an Event of Default specified in Section 5.1(a)(ii) has occurred and is continuing, the Issuer will, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the benefit of the Secured Parties, as applicable, (1) the

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whole amount then due and payable on such Notes for principal and interest, with interest on the overdue principal and, to the extent payment at such rate of interest shall be legally enforceable, on overdue installments of interest at the rate borne by the Notes, (2) any amounts due and payable by the Issuer under the Hedge Agreements, including any termination amounts and any other amounts owed thereunder, and, in addition thereto, and (3) such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel, and all other amounts due and owing to the Indenture Trustee pursuant to Section 6.7.
(b)In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Notes and Hedge Agreements and collect in the manner provided by Law out of the property of the Issuer or other obligor upon such Notes and Hedge Agreements, wherever situated, the monies adjudged or decreed to be payable.
(c)If an Event of Default occurs and is continuing, the Indenture Trustee may, as more particularly provided in Section 5.4, proceed to protect and enforce its rights and the rights of the Noteholders and the Hedge Counterparties, by such appropriate Proceedings as the Indenture Trustee may deem necessary to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by Law.
(d)In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Collateral, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar Law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, or liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise:
(i)to file and prove a claim or claims (A) for the whole amount of principal and interest owing and unpaid in respect of the Notes and (B) any amounts owed and unpaid with respect to any of the Hedge Agreements and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of gross negligence or willful misconduct of the Indenture Trustee), the Noteholders and of the Hedge Counterparties allowed in such Proceedings;
(ii)unless prohibited by applicable Law and regulations, to vote as directed in writing by the Holders of Notes and the Hedge Counterparties in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings;

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(iii)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders, the Hedge Counterparties and the Indenture Trustee on their behalf; and
(iv)to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee, the Holders of Notes and the Hedge Counterparties allowed in any Proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders and Hedge Counterparties to make payments to the Indenture Trustee and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders or the Hedge Counterparties, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of gross negligence or willful misconduct of such party.
(e)Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder or any Hedge Counterparty any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or the Hedge Agreements or the rights of any Hedge Counterparty thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder or any Hedge Counterparty in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.
(f)All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Secured Parties.
(g)In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Notes and the Hedge Counterparties, and it shall not be necessary to make any Noteholder or any Hedge Counterparty a party to any such Proceedings.
Section 5.4Remedies; Priorities.
(a)If an Event of Default shall have occurred and be continuing, the Indenture Trustee may, or at the written direction of the Majority Noteholders (subject to the terms hereof) shall, do one or more of the following (subject to Section 5.5):
(i)institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes and the Hedge Agreements (including any termination payments and any other amounts owed thereunder) or under this Indenture with respect thereto, whether by declaration or

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otherwise, enforce any judgment obtained and collect from the Issuer and any other obligor upon such Notes monies adjudged due;
(ii)institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;
(iii)exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee, the Holders of the Notes and the Hedge Counterparties, including, for the avoidance of doubt, the exercise of any remedies available under the Basic Documents; and
(iv)sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by Law; provided, however, that the Indenture Trustee may not sell or otherwise liquidate the Collateral following an Event of Default, other than an Event of Default described in Section 5.1(a)(i) or (ii), unless (A) the Majority Noteholders consent thereto, (B) the proceeds of such sale or liquidation distributable to the Secured Parties are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest and all amounts then due under the Hedge Agreements or that would be due and payable to the Hedge Counterparties if the Hedge Agreements were terminated on the date of such sale (including any termination payments and any other amounts due thereunder or that would be due and payable to the Hedge Counterparties if the Hedge Agreements were terminated on the date of such sale) or (C) the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared immediately due and payable, and the Indenture Trustee obtains the consent of one hundred percent (100%) of the Outstanding Notes; provided, that a sale under clause (A) or (C) will not be permitted unless the proceeds of such sale or liquidation distributable to the Secured Parties are sufficient to discharge in full all amounts then due under the Hedge Agreements or that would be due and payable if the Hedge Agreements were terminated on the date such sale (including any termination payments and any other amounts owed thereunder or that would be due and payable if the Hedge Agreements were terminated on the date of such sale). In determining such sufficiency or insufficiency with respect to clauses (A), (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.
(b)If the Indenture Trustee collects any money or property pursuant to this Article V, it shall promptly after receipt thereof deposit such money or property to the Collection Account as Collections to be applied pursuant to Article VIII hereof.
If the Indenture Trustee collects any money or property pursuant to this Article V, the Indenture Trustee may fix a record date and payment date for any payment to Noteholders and any Hedge Counterparty pursuant to this Section 5.4. At least fifteen (15) days before such record date, the Issuer shall mail, by overnight mail, to each Noteholder (or transmit electronically, to the extent Notes are held in book-entry form) and each Hedge Counterparty and

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the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid.
The Indenture Trustee shall incur no liability as a result of any sale (whether public or private) of the Collateral or any part thereof pursuant to this Section 5.4 that is conducted in a commercially reasonably manner. Each of the Issuer and the Noteholders hereby waives any claim against the Indenture Trustee arising by reason of the fact that the price at which the Collateral may have been sold at such sale (whether public or private) was less than the price that might have been obtained otherwise, even if the Indenture Trustee accepts the first offer received and does not offer the Collateral to more than one offeree, so long as such sale is conducted in a commercially reasonable manner. Each of the Issuer and the Noteholders hereby agree that in respect of any sale of the Collateral pursuant to the terms hereof, the Indenture Trustee is authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable Law, or in order to obtain any required approval of the sale or of the purchaser by any governmental authority or official, and the Issuer and the Noteholders further agree that such compliance shall not, in and of its self, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Indenture Trustee be liable or accountable to the Issuer or any Noteholders for any discount allowed by reason of the fact that the Collateral or any part thereof is sold in compliance with any such limitation or restriction.
Section 5.5Optional Preservation of the Assets. If the Notes have been declared to be immediately due and payable under Section 5.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of the Collateral. In the event that the Indenture Trustee elects to maintain possession of the Collateral, the Indenture Trustee shall provide written notice of such election to each such Rating Agency. It is the desire of the parties hereto, the Secured Parties that there be at all times sufficient funds for the payment of principal of and interest on the Notes and payment of any amounts due under the Hedge Agreements (including any termination payments and any other amounts owed thereunder), and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral, the Indenture Trustee may, but need not, obtain (at the expense of the Issuer) and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.
Section 5.6Limitation of Suits. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(i)such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default;
(ii)the Majority Noteholders have consented to or made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;
(iii)such Holder or Holders have offered to the Indenture Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;

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(iv)the Indenture Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and
(v)no direction inconsistent with such written request has been given to the Indenture Trustee during such sixty (60) day period by the Majority Noteholders.
It is understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or any Hedge Counterparties (provided, however, that the Indenture Trustee shall not have an affirmative obligation to determine whether any such direction affects, disturbs or prejudices the rights of any other Holders of Notes or any Hedge Counterparties), or to obtain or to seek to obtain priority or preference over any other Holders or any Hedge Counterparties, or to enforce any right under this Indenture, except in the manner herein provided.
Section 5.7Unconditional Rights of Hedge Counterparties and Noteholders to Receive Principal, Interest, and Payments of Other Obligations. Notwithstanding any other provisions in this Indenture, (a) the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date), (b) each Hedge Counterparty shall have the right, which is absolute and unconditional, to receive payment of any obligations of the Issuer under the Hedge Agreements (including the termination amounts and any other amounts owed thereunder) on or after the respective due dates thereof expressed in the applicable Hedge Agreement or in this Indenture, and (c) each Noteholder and each Hedge Counterparty shall have the right to institute suit for the enforcement of any such payment or return Posted Collateral, and such right shall not be impaired without the consent of such Holder or the Hedge Counterparties.
Section 5.8Restoration of Rights and Remedies. If the Indenture Trustee, any Noteholder or any Hedge Counterparty has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee, to such Noteholder or to such Hedge Counterparty, then and in every such case the Issuer, the Indenture Trustee, the Noteholders and the Hedge Counterparties shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee, the Noteholders and the Hedge Counterparties shall continue as though no such Proceeding had been instituted.
Section 5.9Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee, to the Noteholders or to the Hedge Counterparties is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by Law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at Law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Section 5.10Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee, any Holder of any Note or any Hedge Counterparty to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by Law to the Indenture Trustee, to the Noteholders

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or to the Hedge Counterparties may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee, by the Noteholders or by the Hedge Counterparties, as the case may be.
Section 5.11Control by Noteholders. The Majority Noteholders shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided, that:
(i)such direction shall not be in conflict with any rule of Law or with this Indenture;
(ii)such rights shall be subject to the express terms of Section 5.4(a)(iv);
(iii)if the conditions set forth in Section 5.5 have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to such Section, then any written direction to the Indenture Trustee by Holders of Notes representing less than one hundred percent (100%) of the Outstanding Principal Balance of the Notes to sell or liquidate the Collateral shall be of no force and effect;
(iv)the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction; and
(v)the Majority Noteholders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such direction.
Notwithstanding the rights of Noteholders set forth in this Section 5.11, subject to Section 6.1, the Indenture Trustee need not take any action that it determines might involve it in liability or might adversely affect the rights of any Noteholders not consenting to such action or the rights of any Hedge Counterparties.
Section 5.12Waiver of Past Defaults. Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.2, the Majority Noteholders may waive any past Default or Event of Default and its consequences except a Default or Event of Default (a) in payment of principal of or interest on any of the Notes, (b) arising under any Hedge Agreement, (c) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note, or (d) occurring as a result of an event specified in Section 5.1(a)(iv) or (v). In the case of any such waiver, the Issuer, the Indenture Trustee, the Holders of the Notes and the Hedge Counterparties shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.
Upon any such waiver, such Default or Event of Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. The Indenture Trustee shall promptly give written notice of any such waiver to each Rating Agency.

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Section 5.13Undertaking for Costs. All parties to this Indenture agree, and each Holder of a Note by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and reasonable expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding Notes evidencing in the aggregate more than 10% of the Outstanding Principal Balance or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date).
Section 5.14Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension Law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such Law had been enacted.
Section 5.15Action on Notes or Hedge Agreements. The Indenture Trustee’s right to seek and recover judgment on the Notes or the Hedge Agreements or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee, the Noteholders or the Hedge Counterparties shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer or any of its Subsidiaries. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.4(b).
Section 5.16Performance and Enforcement of Certain Obligations.
(a)The Issuer shall take all such lawful action as the Indenture Trustee, at the direction of the Majority Noteholders, shall request to compel or secure the performance and observance by the Manager of its obligations to the Issuer under or in connection with the Management Services Agreement, by any of the Diversified Parties of its obligations under or in connection with the Asset Vesting Documents, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Management Services Agreement or by any of the Issuer Parties under the Asset Vesting Documents to the extent and in the manner directed by the Indenture Trustee, at the direction of the Majority Noteholders, including the transmission of notices of default under the Management Services Agreement on the part of the Manager thereunder, claims for indemnification by the Issuer against any of the Diversified Parties under the Asset Vesting Documents, and the institution of legal or administrative actions or proceedings to compel or secure performance by the Manager of its obligations under the Management Services Agreement, and by any of the Diversified Parties of its obligations under the Asset Vesting Documents.
(b)If an Event of Default has occurred and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of the Majority Noteholders, shall, (subject to the terms hereof) exercise all rights, remedies, powers, privileges

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and claims of the Issuer against the Manager under or in connection with the Management Services Agreement, or against any of the Diversified Parties under or in connection with the Asset Vesting Documents, including the right or power to take any action to compel or secure performance or observance by the Manager, of its obligations to the Issuer under the Management Services Agreement or by any of the Diversified Parties, of its obligations to the Issuer under the Asset Vesting Documents, and to give any consent, request, notice, direction, approval, extension or waiver under the Management Services Agreement, the Asset Vesting Documents, and any right of any of the Issuer Parties to take such action shall be suspended.
Article VI

THE INDENTURE TRUSTEE
Section 6.1Duties of Indenture Trustee.
(a)If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
(b)Except as directed in writing by the Majority Noteholders or any other percentage of Noteholders required hereby, the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the other Basic Documents to which it is a party (and no implied covenants or obligations shall be read into this Indenture or such other Basic Documents against the Indenture Trustee). In the absence of gross negligence or willful misconduct on its part, the Indenture Trustee may conclusively rely upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture, as to the truth of the statements and the correctness of the opinions expressed therein; however, in the case of certificates or opinions specifically required by any provision of this Indenture to be furnished to it, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein).
(c)The Indenture Trustee may not be relieved from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that:
(i)this paragraph does not limit the effect of paragraph (b) of this Section 6.1;
(ii)the Indenture Trustee shall not be liable for any error of judgment made in good faith by the Indenture Trustee unless it is proved that the Indenture Trustee was grossly negligent in ascertaining the pertinent facts; and
(iii)the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.11.
(d)Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to this Section 6.1 and Section 6.2.
(e)The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

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(f)Money held on behalf of the Noteholders by the Indenture Trustee need not be segregated from other funds except to the extent required by Law or the terms of this Indenture or the Management Services Agreement.
(g)No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Indenture shall in any event require the Indenture Trustee to perform, or be responsible for the performance of, any of the obligations of the Manager or the Back-Up Manager under this Indenture or the Basic Documents.
(h)The Indenture Trustee shall have no duty (i) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any re-recording, refiling or redepositing of any thereof or otherwise to monitor the perfection, continuation of perfection or the sufficiency or validity of any security interest related to the Collateral, (ii) to see to any insurance or (iii) subject to the other provisions of this Indenture and the Basic Documents, to see to the payment or discharge of any Tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Collateral.
(i)The Indenture Trustee shall not be charged with knowledge of any Default, Event of Default, Material Manager Default or breach of representation or warranty unless either (1) a Responsible Officer of the Indenture Trustee shall have actual knowledge of such Default, Event of Default, Material Manager Default or breach of representation or warranty or (2) written notice of such Default, Event of Default, Material Manager Default or breach of representation or warranty shall have been given to a Responsible Officer of the Indenture Trustee in accordance with the provisions of this Indenture. For the avoidance of doubt, receipt by the Indenture Trustee of a Payment Date Report shall not constitute actual knowledge of any breach of representation or warranty.
Section 6.2Rights of Indenture Trustee.
(a)The Indenture Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person.
(b)Before the Indenture Trustee acts or refrains from acting, it may require an Officer’s Certificate of the Issuer or an Opinion of Counsel. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officer’s Certificate or Opinion of Counsel.
(c)The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed absent gross negligence or willful misconduct.
(d)The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, that the Indenture Trustee’s conduct does not constitute gross negligence or willful misconduct.

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(e)The Indenture Trustee may consult with counsel, accountants and other experts of its own selection (which may include counsel to the Issuer, the Noteholders and/or the Hedge Counterparties), and the advice or opinion of such counsel, accountants and other experts with respect to legal or other matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel, accountants and other experts.
(f)The Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto or to honor the request or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the reasonable costs, expenses, disbursements, advances and liabilities which might be incurred by it, its agents and its counsel in compliance with such request or direction.
(g)The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document (including electronic communications), unless requested in writing to do so by the Holders of Notes representing the Majority Noteholders; provided, that if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require indemnity satisfactory to the Indenture Trustee in its reasonable discretion against such cost, expense or liability as a condition to taking any such action. In no event shall the Indenture Trustee have any responsibility to monitor Diversified’s compliance with or be charged with knowledge of the Credit Risk Retention Rules, nor shall it be liable to any Noteholder or any party whatsoever for violation of such rules or requirements or such similar provisions now or hereafter in effect.
(h)The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture or any other Basic Document to which it is a party shall not be construed as a duty or obligation, and the Indenture Trustee shall not be answerable under this Indenture or any other Basic Document to which it is a party for anything other than its gross negligence or willful misconduct in the performance of such act.
(i)The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, and each agent, custodian and other Person engaged by the Indenture Trustee to act hereunder. In connection with its actions under any other Basic Document to which it is a party, the Indenture Trustee shall also be afforded all of the rights, privileges, protections, immunities and benefits given to it herein, including, without limitation, its right to be indemnified, as if set forth in full therein, mutatis mutandis.
(j)In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, any act or provision of any present or future law or regulation or governmental authority, strikes, work stoppages, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, epidemics, pandemics, quarantines, and interruptions, loss or malfunctions of utilities, communications or computer (hardware or software) systems and services, or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility;

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it being understood that the Indenture Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.
(k)In no event shall the Indenture Trustee be liable (i) for special, consequential, indirect or punitive damages (including lost profits), (ii) for the acts or omissions of its nominees, correspondents, clearing agencies or securities depositories and (iii) for the acts or omissions of brokers or dealers even if the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(l)In no event shall the Indenture Trustee be liable for the failure to perform its duties hereunder if such failure is a direct or proximate result of another party’s failure to perform its obligations hereunder.
(m)As to any fact or matter the manner of ascertainment of which is not specifically described herein, the Indenture Trustee shall be entitled to receive and may for all purposes hereof conclusively rely on a certificate, signed by an officer of any duly authorized Person, as to such fact or matter, and such certificate shall constitute full protection to the Indenture Trustee for any action taken or omitted to be taken by it in good faith reliance thereon.
(n)Any Opinion of Counsel requested by the Indenture Trustee shall be an expense of the party requesting the Indenture Trustee to act or refrain from acting or otherwise shall be an expense of the Issuer.
(o)The Indenture Trustee or its Affiliates are permitted to receive additional compensation that could be deemed to be in the Indenture Trustee’s economic self-interest for (i) serving as investment adviser, administrator, shareholder servicing agent, custodian or sub-custodian, (ii) using Affiliates to effect transactions in certain investments (if directed) and (iii) effecting transactions in certain investments (if directed). Such compensation shall not be considered an amount that is reimbursable or payable to the Indenture Trustee as part of the compensation hereunder.
(p)Neither the Indenture Trustee nor the Issuer shall be responsible for the acts or omissions of the other, it being understood that this Indenture shall not be construed to render them partners, joint venturers or agents (unless expressly set forth herein) of one another.
(q)The Indenture Trustee shall not have any obligation or liability to take any action or to refrain from taking any action hereunder that requires written direction in the absence of such written direction as provided hereunder.
(r)The Indenture Trustee shall not be required to give any bond or surety with respect to the execution of the trust created hereby or the powers granted hereunder.
(s)The Indenture Trustee may, from time to time, request that the Issuer deliver a certificate (upon which the Indenture Trustee may conclusively rely) setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture or any other Basic Document together with a specimen signature of such authorized officers; provided, however, that from time to time, the Issuer may, by delivering to the Indenture Trustee a revised certificate, change the information previously provided by it pursuant to this Section 6.2(s), but the Indenture Trustee shall be entitled to conclusively rely on the then current certificate until receipt of a superseding certificate.
(t)Except for notices, reports and other documents expressly required to be furnished to the Holders or the Hedge Counterparties by the Indenture Trustee hereunder, the

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Indenture Trustee shall not have any duty or responsibility to provide any Holder with any information concerning the transaction contemplated hereby, the Issuer, the servicer or any other parties to any other Basic Document which may come into the possession of the Indenture Trustee or any of its officers, directors, employees, representatives or attorneys in fact.
(u)The Indenture Trustee and the Note Registrar shall have no responsibility or obligation to any Person with respect to the accuracy of the books or records, or the acts or omissions, of the Depository or its nominee or of any Depository Participant, with respect to any Ownership Interest in the Notes or with respect to the delivery to any Person (other than the Depository) of any notice (including any notice of prepayment) or the payment of any amount, under or with respect to the Notes. All notices and communications to be given to the Holders and all payments to be made to the Holders hereunder shall be given or made only to or upon the order of the Holders (which shall be the Depository or its nominee in the case of a Book-Entry Note). The rights of Note Owners in any Book-Entry Note shall be exercised only through the Depository subject to the customary procedures of the Depository. The Indenture Trustee may rely and shall be fully protected in relying upon information furnished by the Depository.
(v)The Indenture Trustee and the Note Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any Note or any transfer of any interest in any Book-Entry Note, other than to require delivery of the certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance on their face to the express requirements of this Indenture. In connection with any transfer of any Note, the Indenture Trustee and the Note Registrar shall be under no duty to inquire into the validity, legality and due authorization of such transfer.
(w)The Indenture Trustee shall not have any obligation to monitor the compliance by the Issuer of its obligations under or with respect to any Hedge Agreement.
(x)In no event shall the Indenture Trustee be under any obligation (i) to monitor, determine or verify the unavailability or cessation of any applicable floating rate benchmark, or whether or when there has occurred, or to give notice to any other transaction party of the occurrence of, any benchmark transition event or benchmark replacement date, (ii) to select, determine or designate any alternative reference rate or benchmark replacement, or other successor or replacement benchmark index, or whether any conditions to the designation of such a rate have been satisfied, or (iii) to select, determine or designate any benchmark replacement adjustment, or other modifier to any replacement or successor index, or (iv) to determine whether or what benchmark replacement conforming changes are necessary or advisable, if any, in connection with any of the foregoing. The Indenture Trustee shall not be liable for (i) any determination, decision or election made by any Person in connection with any floating rate benchmark applicable to any Notes, or (ii) any inability, failure or delay on its part to perform any of its duties set forth in this Indenture as a result of the unavailability of the of any floating rate benchmark applicable to any Notes or the absence of a designated successor or replacement benchmark index, including as a result of any inability, delay, error or inaccuracy on the part of any Person in providing any direction, instruction, notice or information required or contemplated by the terms of this Indenture and reasonably required for the performance of such duties. No benchmark replacement conforming changes that materially and adversely affect the duties, immunities or protections of the Indenture Trustee shall be effective without the prior written consent of the Indenture Trustee.
(y)If at any time the Indenture Trustee is served with any arbitral, judicial or administrative order, judgment, award, decree, writ or other form of arbitral, judicial or administrative process which in any way affects this Indenture, the Notes, the Collateral or any

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part thereof or funds held by it (including, but not limited to, orders of attachment or garnishment or other forms of levies or injunctions), it shall be authorized to comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate; and if the Indenture Trustee complies with any such arbitral, judicial or administrative order, judgment, award, decree, writ or other form of arbitral, judicial or administrative process, the Indenture Trustee shall not be liable to any of the parties hereto or to any other person or entity even though such order, judgment, award, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect
Section 6.3Individual Rights of Indenture Trustee. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 6.4Indenture Trustee’s Disclaimer. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee’s certificate of authentication.
Section 6.5Notice of Material Manager Defaults or Events of Default. Unless provided by Issuer (or the Manager on its behalf) on an earlier date, if a Material Manager Default, Warm Trigger Event, Rapid Amortization Event, Default or Event of Default occurs and is continuing and if it is known to the Indenture Trustee pursuant to Section 6.1(i), the Indenture Trustee shall mail or email to each Noteholder, the Back-Up Manager, each Hedge Counterparty and each Rating Agency notice of the Material Manager Default, Warm Trigger Event, Rapid Amortization Event, Default or Event of Default within five (5) days after receipt of such knowledge.
Section 6.6Reports by Indenture Trustee. The Indenture Trustee shall make available within a reasonable period of time after the end of each calendar year to each Noteholder and each Hedge Counterparty such information furnished to the Indenture Trustee as may be required to enable such Holder or such Hedge Counterparty to prepare its U.S. federal and state income Tax returns. On or before each Payment Date, the Indenture Trustee will post a copy of the statement or statements provided to the Indenture Trustee pursuant Section 8.8 hereof with respect to the applicable Payment Date on its internet website promptly following its receipt thereof, for the benefit of the Noteholders, the Back-Up Manager, the Hedge Counterparties, Holders and the Rating Agencies, and upon written request provide a copy thereof to the Hedge Counterparties and the Rating Agencies. The Indenture Trustee shall post copies of the items provided to the Indenture Trustee pursuant to Section 7.1 hereof and each Reserve Report provided pursuant to Section 8.5 hereof on its internet website promptly following its receipt thereof (provided that within five (5) Business Days of posting, the Indenture Trustee will provide e-mail notice of such posting), for the benefit of the Noteholders, the Back-Up Manager, the Hedge Counterparties and Rating Agencies, and upon written request provide a copy thereof to each Noteholder, the Back-Up Manager, each Hedge Counterparty and the Rating Agencies. The Indenture Trustee’s internet website shall initially be located at www.debtx.com. The Indenture Trustee may change the way the statements and information are posted or distributed in order to make such distribution more convenient and/or accessible for the Noteholders, the Back-Up Manager, the Hedge Counterparties and the Rating Agencies, and the Indenture Trustee shall provide on the website timely and adequate notification to all parties regarding any such change. As currently configured, the Indenture Trustee’s website will automatically issue an email notification to any Noteholder, Hedge Counterparty, Rating Agency or Back-Up Manager

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who has registered its email address with the Indenture Trustee of any posting of information to such website. Promptly after the Initial Closing Date and each Closing of an issuance of Additional Notes, the Indenture Trustee will send by email a registration link for such website to each (i) Noteholder with an email address in a Variable Funding Note Purchase Agreement or with an email address listed on the applicable schedule to a Note Purchase Agreement, as applicable, at such email address and (ii) Hedge Counterparty, Back-Up Manager and/or Rating Agency to the email address as provided by to the Indenture Trustee for such party (or with respect to a Hedge Counterparty, such email address as set forth in the applicable Hedge Counterparty Rights Agreement). Each Noteholder, Hedge Counterparty, Back-Up Manager and Rating Agency shall be responsible for its own registration for such website and the Indenture Trustee shall not have any obligation to monitor any Noteholder’s, any Hedge Counterparty’s, the Back-Up Manager’s, or any Rating Agency’s registration status. The Indenture Trustee shall not have any liability in connection with its website failing to automatically deliver the email notifications referenced in this Section 6.6 absent gross negligence or willful misconduct on its part.
Section 6.7Compensation and Indemnity. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services as agreed between the Issuer and the Indenture Trustee in writing from time to time. The Indenture Trustee’s compensation shall not be limited by any Law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable and documented out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable and documented compensation and expenses, disbursements and advances of the Indenture Trustee’s agents, counsel, accountants and experts; provided, that, reimbursement for expenses and disbursements of any legal counsel to the Indenture Trustee may be subject to any limitations separately agreed upon in writing before the date hereof between the Issuer and the Indenture Trustee. The Issuer shall indemnify the Indenture Trustee for, and hold it and its officers, directors, employees, representatives and agents harmless against any and all loss, liability, claim, damage or expense, including reasonable and documented legal and consulting fees and expenses and including, without limitation, any legal fees, costs and expenses incurred in connection with any enforcement (including any action, claim or suit brought by the Indenture Trustee of any indemnification or other obligation of the Issuer or the Manager), incurred by it in connection with the administration of this Indenture and the performance of its duties hereunder, including with respect to any Environmental Liabilities, compliance with Environmental Laws and the generation, use, presence or release of Hydrocarbons or Hazardous Materials. The Indenture Trustee shall, to the extent practicable and not prohibited by a court order or other operation of law, notify the Issuer and the Manager promptly of any claim of which the Indenture Trustee has received written notice for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the Manager shall not relieve the Issuer or the Manager of its obligations hereunder. The Issuer may defend any such claim, and the Indenture Trustee may have separate counsel in connection with the defense of any such claim and the Issuer shall pay the fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee’s own gross negligence or willful misconduct.
The Issuer’s payment obligations to the Indenture Trustee pursuant to this Section shall survive the resignation or removal of the Indenture Trustee and the discharge of this Indenture. When the Indenture Trustee incurs fees or expenses after the occurrence of a Default specified in Section 5.1(a)(iv) or 5.1(a)(v) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar Law.

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Section 6.8Replacement of Indenture Trustee.
(a)No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee shall become effective until the acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.8. The Indenture Trustee may resign at any time with thirty (30) days’ prior written notice by so notifying the Issuer (with a copy to each Noteholder, each Hedge Counterparty and each Rating Agency). The Majority Noteholders may remove the Indenture Trustee with thirty (30) days’ prior written notice by so notifying the Indenture Trustee, Diversified and the Hedge Counterparties and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i)the Indenture Trustee fails to comply with Section 6.11;
(ii)the Indenture Trustee is adjudged bankrupt or insolvent;
(iii)a receiver or other public officer takes charge of the Indenture Trustee or its property; or
(iv)the Indenture Trustee otherwise becomes incapable of acting.
(b)If no Default or Event of Default has occurred and is continuing, and the Indenture Trustee resigns or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall appoint a replacement indenture trustee with the consent of the Majority Noteholders and of the Majority Hedge Counterparties (in either case, such consent not to be unreasonably withheld, conditioned, or delayed) as soon as reasonably practicable, but in any event within thirty (30) days following such event; provided that any of Citibank, N.A., Deutsche Bank Trust Company, BNY Mellon, U.S. Bank National Association, Wilmington Trust, National Association, or any of their Affiliates shall not require the consent of the Majority Noteholders or Majority Hedge Counterparties; provided further that if the Issuer shall not have appointed a replacement indenture trustee by the end of such thirty (30) day period other than as a result of the failure of the Majority Noteholders or the Majority Hedge Counterparties to have reasonably consented, the Majority Noteholders shall have the right to appoint the replacement with the consent of the Issuer and of the Majority Hedge Counterparties (in either case, such consent not to be unreasonably withheld, conditioned, or delayed), and the Issuer shall notify Diversified, the Back-Up Manager and each Rating Agency of such appointment. If a Default or Event of Default has occurred and is continuing, any replacement of the Indenture Trustee hereunder shall be done by the Majority Noteholders.
(c)A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee, the Issuer, each Noteholder, the Back-Up Manager and each Hedge Counterparty. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The successor Indenture Trustee shall mail a notice of its succession to Noteholders and the Hedge Counterparties. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.
(d)If a successor Indenture Trustee does not take office within thirty (30) days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Majority Noteholders may, at the expense of the Issuer, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.

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(e)If the Indenture Trustee fails to comply with Section 6.11, any Noteholder or any Hedge Counterparty may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.
(f)Notwithstanding the replacement of the Indenture Trustee pursuant to this Section 6.8, the Issuer’s obligations under Section 6.7 shall continue for the benefit of the retiring Indenture Trustee.
Section 6.9Successor Indenture Trustee by Merger. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; provided, that such corporation or banking association shall be otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall provide Diversified, Holders, each Hedge Counterparty and each Rating Agency with prior written notice of any such transaction (with a copy of such notice to the Back-Up Manager).
Section 6.10Appointment of Co-Indenture Trustee or Separate Indenture Trustee.
(a)Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Collateral may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Issuer, and to vest in such Person or Persons, in such capacity and for the benefit of the Secured Parties, such title to the Collateral, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.8 hereof.
(b)Every separate trustee and co-trustee shall, to the extent permitted by Law, be appointed and act subject to the following provisions and conditions:
(i)all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any Law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii)no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and
(iii)the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

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(c)Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee.
(d)Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by Law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by Law, without the appointment of a new or successor trustee.
Section 6.11Eligibility; Disqualification. The Indenture Trustee shall have a combined capital and surplus of at least $500,000,000 as set forth in its most recent published annual report of condition, and the issuer rating of the Indenture Trustee shall be rated at least A- (or equivalent) by Fitch and one other NRSRO, to the extent that Fitch rates the Notes, and otherwise, two NRSROs.
Section 6.12Representations and Warranties of the Indenture Trustee. The Indenture Trustee hereby makes the following representations and warranties on which the Issuer, Noteholders and the Hedge Counterparties shall rely:
(a)the Indenture Trustee is a national banking association duly organized and validly existing under the Laws of the jurisdiction of its formation;
(b)the Indenture Trustee has full power, authority and legal right to execute, deliver, and perform this Indenture and shall have taken all necessary action to authorize the execution, delivery and performance by it of this Indenture;
(c)the execution, delivery and performance by the Indenture Trustee of this Indenture (i) shall not violate any provision of any Law or regulation governing the banking and trust powers of the Indenture Trustee or any order, writ, judgment or decree of any court, arbitrator, or governmental authority applicable to the Indenture Trustee or any of its assets, (ii) shall not violate any provision of the corporate charter or bylaws of the Indenture Trustee and (iii) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Collateral pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have a materially adverse effect on the Indenture Trustee’s performance or ability to perform its duties under this Indenture or on the transactions contemplated in this Indenture;
(d)no consent, license, approval or authorization of, or filing or registration with, any governmental authority, bureau or agency is required to be obtained that has not been obtained by the Indenture Trustee in connection with the execution, delivery or performance by the Indenture Trustee of the Basic Documents; and

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(e)this Indenture has been duly executed and delivered by the Indenture Trustee and constitutes the legal, valid and binding agreement of the Indenture Trustee, enforceable in accordance with its terms.
Article VII

INFORMATION REGARDING THE ISSUER
Section 7.1Financial and Business Information.
(a)Annual Statements — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, within one hundred and twenty (120) days after the end of each fiscal year of the Issuer, commencing with the fiscal year ended December 31, 2025, duplicate copies of the audited consolidated financial statements of Diversified Corp and its consolidated subsidiaries by an independent public accountant, which such independent public accountant shall be PricewaterhouseCoopers or another independent public accountant reasonably acceptable to the Majority Noteholders; provided, that upon receipt of such audited consolidated financial statements, the Indenture Trustee shall promptly make them available to Noteholders, the Hedge Counterparties, the Back-Up Manager and the Rating Agencies on the Indenture Trustee’s internet website.
(b)Quarterly Statements — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, within sixty (60) days after the end of each quarterly fiscal period in each fiscal year of the Issuer, commencing with the fiscal quarter of the Issuer ended March 31, 2025, duplicate copies of the following reports; provided, that upon receipt of such reports, the Indenture Trustee shall promptly make them available to Noteholders, the Hedge Counterparties, the Back-Up Manager and the Rating Agencies on the Indenture Trustee’s internet website:
(i)an unaudited consolidated balance sheet of Diversified Corp and its consolidated subsidiaries as at the end of such quarter, and
(ii)unaudited consolidated statements of income, changes in shareholders’ equity and cash flows of Diversified Corp and its consolidated subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, in each case setting forth, starting with the fiscal quarter ended March 31, 2025, in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with IFRS, or, to the extent Diversified Corp or its direct or indirect parent prepares its financial statements in accordance with GAAP, in accordance with GAAP, applicable to quarterly financial statements generally, and certified by a Senior Financial Officer of Diversified Corp as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments.
(c)Notice of Material Events — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, each Noteholder, the Back-Up Manager and each Hedge Counterparty promptly, and in any event within three (3) Business Days after a Responsible Officer of an Issuer Party, the Manager or Diversified becomes aware of the existence of (i) any Rapid Amortization Event, (ii) Material Manager Default, (iii) Default, (iv) Event of Default, (v) any default under any Basic Document, (vi) any event that can be reasonably expected to cause a Material Adverse Effect, (vii) information that any Person has given any notice or taken any action with respect to a claimed default hereunder or (viii) Warm

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Trigger Event, an Officer’s Certificate (with a copy to each Rating Agency) specifying the nature and period of existence and what action the Issuer is taking or proposes to take with respect thereto. The Issuer shall, at the Issuer’s expense (in accordance with Section 8.6), promptly provide the Indenture Trustee, each Noteholder, each Hedge Counterparty, the Manager, Back-Up Manager and the Rating Agencies with such additional information as any such party may reasonably request from time to time in connection with the matters so reported, and the actions so taken or contemplated to be taken.
(d)Notices from Governmental Body — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, each Noteholder, and each Hedge Counterparty promptly, and in any event within ten (10) days of receipt thereof, copies of any material notice to any Issuer Party from any Governmental Body (with a copy to each Rating Agency and the Back-Up Manager) relating to any order, ruling, statute or other Law or regulation.
(e)Notices under Material Agreement — The Issuer shall deliver, or cause the Manager to deliver, to the Indenture Trustee, each Noteholder, and each Hedge Counterparty promptly, and in any event within fifteen (15) days after delivery or receipt by any Issuer Party, copies of all notices of termination, Default or Event of Default, suspension of performance or any force majeure event given or received pursuant to or in respect of any material agreement to which it is a party or any other material notices or documents given or received pursuant to or in respect of any material agreement to which it is a party (with a copy to each Rating Agency).
(f)Payment Date Compliance Certificates — On or before the third (3rd) Business Day prior to each Payment Date, the Issuer shall deliver to the Indenture Trustee, each Noteholder, each Hedge Counterparty, and each Rating Agency, an Officer’s Certificate to the effect that, except as provided in a notice delivered pursuant to Section 7.1(c), no potential Rapid Amortization Event or Rapid Amortization Event, no potential Material Manager Default or Material Manager Default, no potential Warm Trigger Event or Warm Trigger Event, no Default or Event of Default has occurred and is continuing (each, a “Payment Date Compliance Certificate”).
(g)Ratings — Beginning with the year ended December 31, 2025, the Issuer shall annually obtain a ratings letter from at least one Rating Agency in accordance with Section 9.17 of the Note Purchase Agreement; provided, that upon receipt of such ratings letter from the Issuer, the Indenture Trustee shall promptly make such ratings letter available to Noteholders, the Hedge Counterparties, and the Rating Agencies on the Indenture Trustee’s internet website.
(h)Reserve Reports — Promptly after completion, the Issuer shall cause each annual audited, semi-annual unaudited, and disposition related Reserve Report to be delivered to the Indenture Trustee, and the Indenture Trustee shall promptly make such Reserve Report available to the Noteholders and Hedge Counterparties on the Indenture Trustee’s internet website.
(i)Sustainability Reports — Promptly after completion, the Issuer shall cause each sustainability report of Diversified used in connection with the verification of the Emissions Linked Performance Targets to be delivered to the Indenture Trustee, and the Indenture Trustee shall promptly make such sustainability report available to the Noteholders on the Indenture Trustee’s internet website.
Section 7.2Visitation.
(a)If no Default or Event of Default then exists, each Issuer Party shall permit the representatives of each Noteholder that is an Institutional Investor to visit and inspect the

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offices or properties of the Issuer Party, to examine all its books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with the Issuer Party’s officers, employees and independent certified public accountants, at such time as may be reasonably requested in writing; provided, however, that in no event shall the Issuer Party be required to permit the representatives of a Noteholder to visit more than one (1) time in any twelve-month period. Any visits contemplated by this Section 7.2(a) shall be at the sole expense of the requesting party.
(b)If a Default or Event of Default exists, each Issuer Party shall permit the representatives of each holder of a Note that is an Institutional Investor, at the expense of the Issuer Party, upon reasonable prior notice, to visit and inspect the offices or properties of the Issuer Party, to examine all its books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with the Issuer Party’s officers, employees and independent certified public accountants, all at such times as may be reasonably requested and as often as may be requested. Any visits contemplated by this Section 7.2(b) shall be at the sole expense of the Issuer and not limited in number.

Article VIII

ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.1Deposit of Collections. The Issuer, the Guarantors and the Manager on their behalf, shall direct that all payments with respect to the Assets and all payments received under the Hedge Agreements (whether directly from any Hedge Counterparty or from Diversified Marketing) be made to the Collection Account in accordance with the Basic Documents; provided that amounts posted by a Hedge Counterparty as Posted Collateral to the Issuer under an applicable Hedge Agreement shall be deposited into the applicable Hedge Collateral Account and not be deposited in the Collection Account and shall not constitute Available Funds. The Issuer, and in the event any Collections are received by any Affiliate of the Issuer (other than the Operator, solely in its capacity as such), if applicable, shall remit or cause such Affiliate to remit to the Collection Account within two (2) Business Days of receipt and identification thereof (including receipt of proper instructions regarding where to allocate such payment) all Collections received with respect to the Assets. The Operator, solely in its capacity as such, shall remit to the Collection Account within sixty (60) days of receipt and initial identification thereof (including receipt of proper instructions regarding where to allocate such payment) all Collections received with respect to the Assets (subject in any case to the expense and reimbursement provisions of the Joint Operating Agreement); provided, that, to the extent that the Operator definitively identifies Collections attributable to the Issuer pursuant to the Joint Operating Agreement subsequent to the application of funds from such Collection pursuant to the expense and reimbursement provisions thereof, the Operator shall remit such funds to the Collection Account within two (2) Business Days of definitive identification thereof (including receipt of proper instructions regarding where to allocate such payment). Notwithstanding anything contained herein to the contrary, the Indenture Trustee shall be authorized to accept instructions from the Manager (which shall be in writing) on behalf of the Issuer on a daily basis regarding withdrawals or order transfers of funds from the Collection Account, to the extent such funds have been mistakenly deposited into the Collection Account (including without limitation funds representing amounts due and payable on wells not part of the Assets). In the case of any withdrawal or transfer pursuant to the foregoing sentence, the Manager, on behalf of the Issuer, shall provide the Noteholders, the Hedge Counterparties and the Indenture Trustee with notice of such withdrawal or transfer, together with reasonable supporting details regarding such

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withdrawal or transfer and the mistaken deposit related thereto, on such date of withdrawal to be delivered by the Manager, on behalf of the Issuer (or in such earlier written notice as may be required by the Indenture Trustee from the Manager, on behalf of the Issuer, from time to time). Notwithstanding anything therein to the contrary, the Indenture Trustee shall be entitled to make withdrawals or order transfers of funds from the Collection Account, in the amount of all reasonable out-of-pocket costs and expenses incurred by the Indenture Trustee in connection with any misdirected funds described in the second foregoing sentence.
Section 8.2Establishment of Accounts.
(a)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Collection Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties. The Issuer, for the benefit of the Secured Parties, shall deposit, or cause its Affiliate to deposit, any and all funds received pursuant to any Hedge Agreement into the Collection Account, subject only to the terms of the Joint Operating Agreement; provided, however, any such amounts received as “Posted Collateral” pursuant to the terms of a Hedge Agreement as in effect on the date hereof or subsequently put into effect shall be deposited into the Hedge Collateral Account, and the Hedge Collateral Account(s) shall not be deemed to be Collection Accounts.
(b)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Asset Disposition Proceeds Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.
(c)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Liquidity Reserve Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.
(d)The Issuer, for the benefit of the Secured Parties who are Hedge Counterparties, may from to time to time by written direction to the Indenture Trustee cause to be established and maintained with the Securities Intermediary one or more accounts or sub-accounts on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “Hedge Collateral Accounts”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Hedge Counterparty for whose benefit the Hedge Collateral Account has been established. Amounts posted as Posted Collateral to the Issuer under an applicable Hedge Agreement shall be deposited in such accounts and held therein in accordance with the terms of the applicable Hedge Agreement, including those related to the interest rate applicable to and accrual of interest at such rate on such Posted Collateral. The Manager shall have the power to instruct the Indenture Trustee in writing to establish the Hedge Collateral Accounts and to make withdrawals and returns from the Hedge Collateral Accounts for the purpose of permitting the Issuer to carry out its respective duties under the applicable Hedge Agreement and the Indenture Trustee shall be entitled to rely upon any such written instructions as conclusive evidence of such duties under the relevant Hedge Agreement. Notwithstanding anything contained herein to the contrary, the parties hereby acknowledge and agree that each Hedge Counterparty’s right to the return of any excess Posted Collateral posted under the Hedge Agreement by any such Hedge Counterparty, as determined in accordance with the terms of the relevant Hedge Agreement, and held in the Hedge Collateral Account, shall be senior in all respects to any rights or interests (i) of the Indenture Trustee or (ii) any other

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Secured Party who is not the Hedge Counterparty who posted any such collateral in such Hedge Collateral Account in accordance with the provisions of the applicable Hedge Agreement.
(e)The Issuer, for the benefit of the Secured Parties, shall cause to be established and maintained with the Securities Intermediary a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee an Eligible Account (the “P&A Reserve Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties. To the extent a P&A Reserve Trigger has occurred with respect to the Issuer's most recently completed fiscal year, Available Funds shall be deposited into the P&A Reserve Account in an amount equal to the P&A Reserve Amount in accordance with Section 8.6. On each Payment Date, all amounts then on deposit in the P&A Reserve Account shall be deposited into the Collection Account, where they will be considered part of Available Funds and distributed on such Payment Date pursuant to Section 8.6.
(f)Funds on deposit in each of (i) the Collection Account, (ii) the Asset Disposition Proceeds Account, (iii) the Liquidity Reserve Account and (iv) the P&A Reserve Account (together, the “Issuer Accounts”) shall be invested by the Indenture Trustee in Permitted Investments as directed in writing by the Manager. In the absence of written direction from the Manager, such funds shall remain uninvested. All such Permitted Investments shall be held by the Indenture Trustee for the benefit of the Secured Parties; provided, that on each Payment Determination Date all interest and other Investment Earnings on funds on deposit in the Issuer Accounts shall be deposited into the Collection Account and shall be deemed to constitute a portion of Available Funds for the related Payment Date. Other than as permitted by the Majority Noteholders (with prompt notice to the Hedge Counterparties), funds on deposit in the Issuer Accounts shall be invested in Permitted Investments that will mature (A) not later than the Business Day immediately preceding the next Payment Date or (B) on or before 10:00 a.m. on such next Payment Date if such investment is held in the corporate trust department of the institution with which the Issuer Accounts are then maintained and is invested either (i) in a time deposit of the Indenture Trustee with a credit rating in one of the generic rating categories that signifies investment grade of at least one of the Rating Agencies (such account being maintained within the corporate trust department of the Indenture Trustee), or (ii) in the Indenture Trustee’s common trust fund so long as such fund has a credit rating in one of the generic rating categories that signifies investment grade of at least one of the Rating Agencies; provided, further, that Permitted Investments shall be available for redemption and use by the Indenture Trustee on the relevant Payment Date. In no event shall the Indenture Trustee be held liable for investment losses in Permitted Investments pursuant to this Section 8.2(f), except to the extent it is acting separately in its capacity as obligor thereunder.
(g)The Indenture Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Issuer Accounts and, subject to the limitations in Section 8.2(d), Hedge Collateral Accounts and in all proceeds thereof (including all income thereon) and all such funds, investments, proceeds and income shall be part of the Collateral. The Issuer Accounts shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Secured Parties. If, at any time, any of the Issuer Accounts and/or Hedge Collateral Accounts cease to be an Eligible Account, the Indenture Trustee shall within ten (10) Business Days (or such longer period, not to exceed thirty (30) calendar days with the prior written consent the Majority Noteholders or, as applicable, the Hedge Counterparties) establish a new Issuer Account and/or Hedge Collateral Accounts, as applicable, as an Eligible Account and shall transfer any cash and/or any investments to such new Issuer Account and/or Hedge Collateral Accounts, as applicable. The Indenture Trustee, Paying Agent or the other Person holding the Issuer Accounts and Hedge Collateral Accounts as provided in this Section 8.2(g) shall be the “Securities Intermediary.” On the date hereof, the Securities Intermediary is the Indenture Trustee. If the Securities Intermediary shall be a Person other than the Indenture Trustee, the

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Manager shall obtain the express written agreement of such Person to the obligations of the Securities Intermediary set forth in this Section 8.2.
(i)The Securities Intermediary agrees, by its acceptance hereof, that:
(A)The Issuer Accounts and Hedge Collateral Accounts are “securities accounts” within the meaning of Section 8-501 of the New York UCC and are accounts to which Financial Assets will be credited.
(B)All securities or other property underlying any Financial Assets credited to the Issuer Accounts and Hedge Collateral Accounts shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any Financial Asset credited to any of the Issuer Accounts or Hedge Collateral Accounts be registered in the name of the Issuer or the Manager, payable to the order of the Issuer or the Manager or specially indorsed to the Manager or Diversified except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank.
(C)All property delivered to the Securities Intermediary pursuant to this Indenture will be promptly credited to the appropriate Issuer Account or Hedge Collateral Accounts, as applicable.
(D)Each item of property (whether investment property, Financial Asset, security, instrument or cash) credited to an Issuer Account or Hedge Collateral Accounts, as applicable, shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the New York UCC.
(E)If at any time the Securities Intermediary shall receive any order from the Indenture Trustee directing transfer or redemption of any Financial Asset relating to the Issuer Accounts, or Hedge Collateral Accounts, as applicable, the Securities Intermediary shall comply with such entitlement order without further consent by the Issuer, the Manager or any other Person.
(F)The Issuer Accounts and Hedge Collateral Accounts shall be governed by the Laws of the State of New York, regardless of any provision in any other agreement. For purposes of the UCC, New York shall be deemed to be the Securities Intermediary’s jurisdiction and the Issuer Accounts and Hedge Collateral Accounts (as well as the securities entitlements (as defined in Section 8-102(a)(17) of the UCC) related thereto) shall be governed by the Laws of the State of New York.
(G)The Securities Intermediary has not entered into, and until the termination of this Indenture will not enter into, any agreement with any other Person relating to the Issuer Accounts or Hedge Collateral Accounts and/or any Financial Assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the New York UCC) of such other person and the Securities Intermediary has not entered into, and until the termination of this Indenture will not enter into, any agreement with the Issuer, the Manager or the Indenture Trustee purporting to limit or condition the obligation of

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the Securities Intermediary to comply with entitlement orders as set forth in Section 8.2(g)(i)(E) hereof.
(H)Except for the claims and interest of the Indenture Trustee and of the Issuer in the Issuer Accounts and Hedge Collateral Accounts, the Securities Intermediary knows of no claim to, or interest in, the Issuer Accounts or Hedge Collateral Accounts or in any Financial Asset credited thereto. If any other person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Issuer Accounts, Hedge Collateral Accounts or in any Financial Asset carried therein, the Securities Intermediary will promptly notify the Indenture Trustee, the Manager, each Hedge Counterparty, the Issuer and each Rating Agency.
(I)The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Issuer Accounts and Hedge Collateral Accounts and/or any Issuer Account Property simultaneously to each of the Manager and the Indenture Trustee.
(J)The Securities Intermediary (A) shall be a corporation or national bank that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity hereunder, (B) shall not be an Affiliate of the Issuer, (C) shall have a combined capital and surplus of at least $500,000,000, (D) shall be subject to supervision or examination by United States federal or state authority and (E) shall have a rating of at least “Baa1” or better by Moody’s, “A-” or better by S&P, and “A-” or better by Fitch (if such entity is rated by Fitch).
(K)The Securities Intermediary shall treat the Indenture Trustee as entitled to exercise the rights that comprise each financial asset credited to any Issuer Account and any Hedge Collateral Account.
(L)The Securities Intermediary shall not change the name or the account number of any Issuer Account or Hedge Collateral Account without the prior written consent of the Indenture Trustee (acting at the written direction of the Majority Noteholders as to any Issuer Account or relevant Hedge Counterparties, as to any Hedge Collateral Account).
(M)The Securities Intermediary shall not be a party to any agreement that is inconsistent with this Indenture, or that limits or conditions any of its obligations under this Indenture. The Securities Intermediary shall not take any action inconsistent with the provisions of this Indenture applicable to it.
(N)Each item of property credited to each Issuer Account and Hedge Collateral Account shall not be subject to, and the Securities Intermediary hereby waives, any security interest, lien, claim, encumbrance, or right of setoff in favor of the Securities Intermediary or anyone claiming through the Securities Intermediary (other than the Indenture Trustee as to any Issuer Account or Hedge Counterparty as to any Hedge Collateral Account in the name of any such Hedge Counterparty as provided for under a Hedge Agreement).

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(O)For purposes of Article 8 of the UCC, the jurisdiction of the Securities Intermediary with respect to the Collateral shall be the State of New York.
(P)It is the intent of the Indenture Trustee and the Issuer that each Issuer Account and Hedge Collateral Account shall be a securities account on behalf of the Indenture Trustee for the benefit of the Secured Parties (as limited by the express provisions of Section 8.2(d)) and not an account of the Issuer.
(ii)The Manager shall have the power to instruct the Paying Agent on behalf of the Indenture Trustee in writing to make withdrawals and payments from the Issuer Accounts and Hedge Collateral Accounts for the purpose of permitting the Manager to carry out its respective duties under the Management Services Agreement or hereunder or permitting the Indenture Trustee to carry out its duties under the Indenture or permitting the Issuer to carry out its obligations under the Hedge Agreements; provided, that the Indenture Trustee shall have no responsibility for monitoring the Manager’s duties and shall rely exclusively on such written direction to determine if a withdrawal or payment should be made.
Section 8.3Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.
Section 8.4Asset Disposition Proceeds; Additional Assets.
(a)In the event that the Issuer or the Guarantors shall sell, transfer or otherwise dispose of any Assets in a Permitted Disposition or purchased by the Manager from the Issuer the Guarantors pursuant to Section 2(c)(iii) of the Management Services Agreement, then the Issuer shall instruct the Paying Agent, on behalf of the Indenture Trustee, in writing to deposit the Asset Disposition Proceeds into the Asset Disposition Proceeds Account. In the event that the Proceeds Retention Condition is not satisfied, then the Issuer shall instruct the Paying Agent, on behalf of the Indenture Trustee, in writing (A) to redeem Notes with such proceeds up to the total amount of Asset Disposition Proceeds required to satisfy the Proceeds Retention Condition after giving effect to such redemption and (B) following such redemption of the Notes, to deposit any remaining net proceeds from such disposition into the Asset Disposition Proceeds Account. For the avoidance of doubt, any amounts deposited in the Asset Disposition Proceeds Account pursuant to the immediately preceding clause (B) shall constitute Asset Disposition Proceeds.
(b)During the Asset Purchase Period, the Issuer shall be permitted to acquire Additional Assets (to the extent such purchase satisfies the requirements under clause (c) of the definition of Permitted Dispositions). In the event of such a purchase of Additional Assets, the Issuer shall provide written direction to the Indenture Trustee to make payment of the purchase price to such Person no later than five (5) Business Days prior to such acquisition; provided, that the Issuer certifies to the Indenture Trustee that (i) no Warm Trigger Event, Material Manager

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Default, Rapid Amortization Event exists, no Default or Event of Default has occurred and is continuing, (ii) no selection procedures materially adverse to the Noteholders or any of the Hedge Counterparties were used in selecting such Additional Assets for purchase, (iii) the Proceeds Retention Condition shall be satisfied (each on a pro forma basis after giving effect to such contemplated purchase of Additional Assets, the repayment of the Notes or any required hedge termination payment, if any, with any remaining amounts), and (iv) the Rating Agency Condition shall have been satisfied with respect thereto.
(c)In the event that any Asset Disposition Proceeds on deposit in the Asset Disposition Proceeds Account are not applied to the purchase of Additional Assets by the Payment Determination Date of the Collection Period following 180 days subsequent to the end of the Collection Period in which such Asset Disposition Proceeds were deposited into the Asset Disposition Proceeds Account (the “Asset Purchase Period”), the Issuer, or Manager on its behalf, shall direct the Indenture Trustee to deposit such remaining amounts into the Collection Account; provided, however, that the Issuer, or Manager on its behalf, may, in its sole discretion, direct the Paying Agent on behalf of the Indenture Trustee to deposit such remaining amounts into the Collection Account prior to the end of the Asset Purchase Period. For the avoidance of doubt, during the Asset Purchase Period, to the extent any Asset Disposition Proceeds on deposit in the Asset Disposition Proceeds Account are not applied to the purchase of Additional Assets, the Issuer, or the Manager on its behalf, at any time during the Asset Purchase Period may, but at the end of the Asset Purchase Period shall direct any funds to redeem Notes such that after such redemption, the Pro Forma Aggregate DSCR shall not be less than 1.45 to 1.00, the Pro Forma Senior DSCR shall not be less than 1.55 to 1.00, the Pro Forma Aggregate IO DSCR shall not be less than 2.00 to 1.00, the Pro Forma Senior IO DSCR shall not be less than 2.25 to 1.00, the Pro Forma Aggregate LTV shall not be greater than 75% and the Pro Forma Senior LTV shall not be greater than 65% after giving effect to such sale or exchange and the application of the proceeds therefrom to the purchase of Additional Assets, the repayment of the Notes or any required hedge termination payment, if any (such conditions, the “Proceeds Retention Condition”); but in no event shall the aggregate principal amount of Notes so redeemed be less than the product of (i) 125% and (ii) 55% of the amount of Asset Disposition Proceeds not used to purchase Additional Assets, and any remaining amounts shall be deposited into the Collection Account and be deemed Available Funds for the next Payment Date.
(d)In addition to the above, from time to time, the Issuer or the Guarantors may, without the consent of any Person, acquire Additional Assets as additional Collateral for the Notes or in connection with the issuance of Additional Notes, and upon the consummation of such addition, any Additional Asset so added shall constitute Collateral for all purposes; provided, that in connection with each such acquisition, the following conditions are satisfied:
(i)such acquisition shall not, in the reasonable opinion of the Manager, be reasonably expected to have a Material Adverse Effect;
(ii)the aggregate PV-10 of such Additional Assets is positive;
(iii)each applicable Rating Agency shall have confirmed that such addition will not result in a downgrade or withdrawal of its then current rating of the Notes;
(iv)immediately prior to and following such addition, no Material Event (except to the extent the addition of such Additional Assets would cure any of the foregoing) shall have occurred and be continuing;
(v)if the PV-10 of the Additional Assets added through such addition, individually or together with the PV-10 of the Additional Assets added through

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any related addition, exceeds 5% of the PV-10 of the Assets at the beginning of the relevant Annual Period (as reflected in the Reserve Report obtained in connection with the issuance of the most recent Series of Notes, or if not applicable, as reflected in the most recently delivered Reserve Report), then the Issuer shall have agreed to deliver (or cause the Manager to deliver) an updated Reserve Report within forty-five (45) days after such addition;
(vi)(A) such Additional Asset shall be transferred to the Issuer by a Seller pursuant to an asset purchase agreement substantially in the form of the Transfer Agreement with such revisions as are appropriate to reflect the structure of the applicable transfer, subject to the requirements and deliverables specified thereunder and (B) in addition to the obligation under clause (A) above, if an addition of Additional Assets shall occur concurrently with an Additional Note issuance, then the Issuer shall deliver (or cause the Manager to deliver) to the Secured Parties prior to the addition of Additional Assets reasonable supporting documentation for the PV-10 value ascribed to such Additional Assets with such documentation affirming the Issuer’s compliance with the LTV conditions for an Additional Notes issuance;
(vii)The Indenture Trustee, the Noteholders and the Hedge Counterparties shall have received Opinions of Counsel with respect to the Additional Assets, as reasonably requested, which opinions are consistent with (or are delivered as supplements to) the legal opinions delivered on Initial Closing Date as to the original Assets and address any features specific to the applicable Additional Assets as needed, including a true sale or true contribution legal opinion from Kirkland & Ellis LLP (or another nationally recognized law firm acceptable to the Indenture Trustee in its sole discretion) with respect to such Additional Assets, in substantially the same form delivered as of the Initial Closing Date with respect to the Initial Assets, or, if not in such form, in form reasonably satisfactory to the Issuer, the Indenture Trustee, the Majority Noteholders and the Hedge Counterparties;
(viii)In the reasonable opinion of the Manager, no selection procedures materially adverse to the Noteholders and the Hedge Counterparties were used in selecting such Additional Assets for addition;
(ix)the Issuer shall have reimbursed the Indenture Trustee for all third-party out-of-pocket costs and expenses incurred by the Indenture Trustee in relation to such Additional Assets;
(x)immediately following such addition of Additional Assets, the Issuer shall have adjusted its Hedge Agreements to the extent necessary to comply with applicable hedging requirements set forth in this Indenture and any related Series Supplement;
(xi)such Additional Assets shall satisfy the Eligibility Criteria, and, the Collateral, taken as a whole, giving pro forma effect to the applicable Additional Assets, shall meet the Concentration Limits at the time of such addition;
(xii)the Manager shall have delivered an Officer’s Certificate to the Indenture Trustee certifying compliance with the requirements for addition (other than with respect to clause (v), which may be satisfied within the time period specified therein);

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(xiii)a recordable release in a form reasonably acceptable to the Issuer of any trust, mortgages, financing statements, fixture filings and security agreements, in each case, securing indebtedness for borrowed money made by such Additional Seller or its Affiliates affecting the Additional Assets (including corresponding authorizations to file UCC-3 termination statement releases in all applicable jurisdictions);
(xiv)delivery of applicable lien releases and counterpart deeds of trust, precautionary deeds of trust, and UCC-1s or UCC-3s, as applicable, necessary to perfect liens over such Additional Assets;
(xv)with respect to any transaction involving a PV-10 value in excess of $50,000,000, delivery by the Issuer or the Manager of a title summary or report from a third party legal or land broker company or other title information demonstrating title coverage with respect to not less than 80% of such Additional Assets;
(xvi)with respect to any fiscal year in which the aggregate PV-10 value of all Additional Assets added during such fiscal year, other than Assets transferred pursuant to a transaction for which the conveyance was given pursuant to clause (xv) above, exceeds $50,000,000, delivery by the Issuer or the Manager of a title summary or report from a third party legal or land broker company or other title information demonstrating title coverage with respect to not less than 75% of such aggregate Additional Assets promptly following such fiscal year;

(xvii)to the extent the acquisition of Additional Assets occurs in connection with the issuance of Additional Notes, delivery to the Issuer and the Indenture Trustee an Opinion of Counsel to the effect that such acquisition of Additional Assets either (A) should not cause any of the Notes of any Outstanding Series to undergo a “significant modification” within the meaning of Treasury Regulations Section 1.1001-3 or (B) will not cause any of the Notes of any Outstanding Series to undergo a “significant modification” within the meaning of Treasury Regulations Section 1.1001-3 that would result in any adverse U.S. federal income tax consequence to any Holder thereof (assuming such Holder is a “United States person” (within the meaning of Section 7701(a)(30) of the Code) and is not exempt from U.S. federal income taxation (including under Section 501 of the Code)); and

(xviii)such Additional Assets are free and clear of any encumbrance other than the lien of the Basic Documents and Permitted Liens.

(e)In no event shall the Indenture Trustee be responsible for the determinations in this Section 8.4(d), and the Indenture Trustee shall rely exclusively on the foregoing Officer’s Certificate of the Manager in making withdrawals and distributions pursuant to this Section 8.4(d). The Back-Up Manager shall be promptly notified in writing (which may be by email) of the sale, assignment, transfer or other disposition of any material portion of the Collateral, or the addition of any Additional Assets.
Section 8.5Asset Valuation.
(a)Reserve Reports. The Issuer will be required to deliver, or to cause the Manager to deliver, to the Indenture Trustee, the Back-Up Manager, each Hedge Counterparty and each Rating Agency (i) an updated Reserve Report within ninety (90) days of the

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commencement of each calendar year (which report shall be audited or prepared by an independent petroleum engineer) and (ii) an updated Reserve Report within sixty (60) days after June 30 of each year (which report shall be internally prepared by the Issuer); provided, that the Issuer must deliver an updated Reserve Report within forty-five (45) days of any Permitted Disposition or combination of related Permitted Dispositions of an aggregate amount of Assets exceeding 5% of the PV-10 of the Assets as of the beginning of the relevant Annual Period (it being understood that (i) such updated Reserve Report may be the same report as the most recently delivered Reserve Report, rolled forward by or under the supervision of the Chief Operating Officer (or similarly titled position) of the Manager and (ii) to the extent a Reserve Report with respect to a Permitted Disposition or combination of related Permitted Dispositions has been so delivered to the Indenture Trustee, the Back-Up Manager and each Rating Agency, the foregoing shall not require the delivery of an additional Reserve Report upon additional related Permitted Dispositions unless and until the aggregate amount of such additional related Permitted Dispositions exceeds 5% of the PV-10 of the Assets as of the beginning of the relevant Annual Period) (and, following any fiscal year for which the P&A Expense Amount exceeds the P&A Reserve Trigger Amount, such updated Reserve Report shall include a separate schedule identifying the estimated net capital expenditures associated with plugging and abandonment liabilities with respect to the Assets), and, to the extent the Issuer, or the Manager on the Issuer’s behalf, in its discretion obtains an updated Reserve Report prior to any otherwise scheduled semi-annually updated Reserve Report, the Issuer, or the Manager on the Issuer’s behalf, will be required to deliver each such updated Reserve Report to such persons promptly upon its receipt thereof. The Reserve Report shall be prepared by or under the supervision of the Chief Operating Officer (or similarly titled position) of the Manager, who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report (and, with respect to the first Reserve Report delivered by the Issuer under this Indenture, the Transfer Agreement Reserve Report). With the delivery of each Reserve Report, the Issuer shall provide to the Indenture Trustee, the Back-Up Manager, each Hedge Counterparty and each Rating Agency a certificate from a Responsible Officer of the Manager certifying that in all material respects the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct, the Issuer owns good and defensible title to the Assets evaluated in such Reserve Report, such Assets are free of all Liens except for Permitted Liens and that, to the extent there has been a change in the Net Revenue Interest or Working Interest, that change is identified in an exhibit to the certificate. With the delivery of each Reserve Report, the Issuer shall provide to the Indenture Trustee, the Back-Up Manager, each Hedge Counterparty and each Rating Agency a report that shows any change, set forth to the eighth decimal place, in the Net Revenue Interest relating to the prior year or Working Interest relating to the prior year with respect to any Well from the Net Revenue Interest or Working Interest provided in the previous Reserve Report, and except to the extent already included in a report under this Section 8.5. The Indenture Trustee shall promptly make any such Reserve Reports, certificates and other reports delivered pursuant to this Section 8.5 available to the Noteholders and the Hedge Counterparties by posting any such Reserve Reports, certificates or other reports delivered pursuant to this Section 8.5 to its internet website referenced in Section 6.6 hereof subject to the terms thereof.
Section 8.6Distributions.
(i)Except as otherwise provided in clause (ii) below, on each Payment Date, the Issuer, or the Manager on the Issuer’s behalf, shall instruct the Indenture Trustee in writing (based solely on the information contained in the Payment Date Report delivered on the related Payment Determination Date pursuant to this Section 8.6) to apply all Available Funds and all amounts in the Collection Account for payments of the following amounts in the following order of priority; provided, that, with respect to the Final Scheduled Payment Date for a Series of Notes, amounts may be applied from amounts deposited from the

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Liquidity Reserve Account into the Collection Account (the “Priority of Payments”):
(A)(1) to the Indenture Trustee, the Indenture Trustee’s (x) fees and any accrued and unpaid fees of the Indenture Trustee with respect to prior Payment Dates, plus (y) any Administrative Expenses, owed to the Indenture Trustee; provided, that, in no event shall the cumulative aggregate amount paid to the Indenture Trustee pursuant to this clause (A)(1) exceed $150,000 in any calendar year (provided, that any amounts in excess of $150,000 which are unpaid pursuant to the cap herein or pursuant to the Indenture shall remain due and owing to the Indenture Trustee and payable in the following year and each subsequent year thereafter until repaid in full); provided, however, that upon the occurrence of and during the continuation of an Event of Default, no such cap shall apply, (2) to the Back-Up Manager, the Back-Up Management Fee and any accrued and unpaid Back-Up Management Fees or indemnity amounts with respect to prior Payment Dates, plus any Administrative Expenses payable to the Back-Up Manager; provided, that, in no event shall the cumulative aggregate amount of payments paid pursuant to this clause (A)(2) exceed the Back-Up Manager Senior Capped Amount in any calendar year during which the Back-Up Manager does not perform any Warm Back-Up Management Duties or Hot Back-Up Management Duties (provided, that any amounts in excess of the Back-Up Manager Senior Capped Amount which are unpaid pursuant to the cap herein shall remain due and owing to the Back-Up Manager and payable in the following year and each subsequent year thereafter until repaid in full), (ii) the Back-Up Manager Senior Capped Amount in any calendar year during which the Back-Up Manager performs Warm Back-Up Management Duties (but not Hot Back-Up Management Duties) (provided, that any amounts in excess of the Back-Up Manager Senior Capped Amount which are unpaid pursuant to the cap herein shall remain due and owing to the Back-Up Manager and payable in the following year and each subsequent year thereafter until repaid in full), and (iii) the Back-Up Manager Senior Capped Amount in any calendar year during which the Back-Up Manager performs Hot Back-Up Management Duties (provided, that any amounts in excess of the Back-Up Manager Senior Capped Amount which are unpaid pursuant to the cap herein shall remain due and owing to the Back-Up Manager and payable in the following year and each subsequent year thereafter until repaid in full); provided, however, that in the event of a liquidation following an Event of Default, no such cap shall apply; further provided, however, during a period that the Back-Up Manager is required to provide Warm Back-Up Management Duties or Hot Back-Up Management Duties, the Majority Noteholders may approve a further increase of the amounts set forth in clauses (ii) and (iii) above solely in order to take account of any additional increased fees and expenses associated with the provision of such services, and (3) to the Class Representative of the Controlling Class, if any, the Administrative Expenses payable to such Class Representative; provided that, in no event shall the cumulative aggregate amount of Administrative Expenses paid to the Class Representative of the Controlling Class exceed $15,000 in any calendar year;
(B)first, to pay the Successor Manager Transition Expenses, if any, and then , to the Manager, the Administration Fee and any accrued

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and unpaid Administration Fees with respect to prior Payment Dates; provided, that, in no event shall the cumulative aggregate amount of Administration Fees paid pursuant to this clause (B) exceed $360,000 in any calendar year; provided that to the extent the Manager is terminated pursuant to the Indenture, such cap shall be increased to an amount, in the Issuer’s good faith judgment, that is commensurate with similar arrangements for management services by third party providers, to be approved by the Majority Noteholders and the Majority Hedge Counterparties (in each case, such approval not to be unreasonably withheld, conditioned or delayed);
(C)pro rata and pari passu, (1) to the Hedge Counterparties, pro rata, any net payments due and payable by the Issuer under the related Hedge Agreements, in each case, other than termination amounts, and (2) to the Class A Noteholders of each Series, pro rata, based on the Note Interest due on the Class A Notes (other than Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), and Note Interest as a result of a step-up to the ARD Interest Rate), the Note Interest due on the Class A Notes for such Payment Date (other than Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), and Note Interest as a result of a step-up to the ARD Interest Rate) (including any amounts expected to accrue on any anticipated draws on the Variable Funding Notes prior to the end of the related Interest Accrual Period, as reasonably determined by the Manager) and, in the case of Variable Funding Notes, any accrued and unpaid commitment fees, letter of credit fees and any other fees, expenses and other amounts (other than Variable Funding Notes Other Amounts) due on or prior to such Payment Date under the related Variable Funding Note Purchase Agreement, in each case in accordance with the Applicable Payment Priority;
(D)to the Liquidity Reserve Account, the amount necessary to cause the balance in the Liquidity Reserve Account to equal the Liquidity Reserve Account Target Amount;
(E)to the Hedge Counterparties, pro rata, termination payments arising from reductions in the notional amount under the related Hedge Agreements in order to maintain compliance with the Indenture;
(F)pro rata and pari passu, (1) to the Holders of Term Notes that are Class A Notes, of each Series, pro rata, based on the applicable Class A Outstanding Principal Balance, as payment of principal on the Class A Notes, the applicable Class A-1 Principal Distribution Amount and the applicable Class A-2 Principal Distribution Amount with respect to such Payment Date, in accordance with the Applicable Payment Priority and (2) to the Hedge Counterparties, pro rata, any termination payments owed as a result of an event of default under Sections 5(a)(i) (Failure to Pay) or 5(a)(vii) (Bankruptcy), in each case where the Issuer is the Defaulting Party (as defined therein) of the related Hedge Agreement;
(G)following the Anticipated Repayment Date, if the Class A-1 Excess Allocation Percentage and Class A-2 Excess Allocation Percentage are not 100%, sequentially, (1) to the Class A-1 Noteholders of each Series, pro rata, based on the applicable Class A-1 Outstanding

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Principal Balance, and (2) if the Class A-1 Notes have been paid in full, to the Class A-2 Noteholders of each Series, pro rata, based on the applicable Class A-2 Outstanding Principal Balance, the Class A Excess Amortization Amount (if any) with respect to such Payment Date;
(H)(1) first, if no Class A Excess Amortization Amount is payable pursuant to clause (G) (i.e., on or prior to the Anticipated Repayment Date or the Class A-1 Excess Allocation Percentage is 100%), to the Class A-1 Noteholders of each Series, pro rata, based on the applicable Class A-1 Outstanding Principal Balance, the Class A-1 Excess Amortization Amount (if any) with respect to such Payment Date, in accordance with the Applicable Payment Priority and (2) second, to the Class A Noteholders of any Variable Funding Notes, of each Series, sequentially, (I) the applicable VFN Deficiency Amount (if any) and then (II) any L/C Reimbursements, Swingline Loans or Loan Advances due and payable on such Payment Date in accordance with the relevant Variable Funding Note Purchase Agreement and Series Supplement;
(I)(1) first, pro rata and pari passu, if no Class A Excess Amortization Amount is payable pursuant to clause (G) (i.e., on or prior to the Anticipated Repayment Date or the Class A-2 Excess Allocation Percentage is 100%) and the Class A-1 Notes have been paid in full, to the Class A-2 Noteholders of each Series, pro rata, based on the applicable Class A-2 Outstanding Principal Balance, the Class A-2 Excess Amortization Amount (if any) with respect to such Payment Date, in accordance with the Applicable Payment Priority, (2) second, to the Class A-1 Noteholders and the Class A-2 Noteholders of each Series, in the case of Redemption of the Class A Notes, pro rata, based on the applicable Class A-1 Outstanding Principal Balance and the applicable Class A-2 Outstanding Principal Balance, the applicable Redemption Price, in accordance with the Applicable Payment Priority and then (3) third, to the Class A Noteholders of any Variable Funding Notes, amounts due and payable under the related Variable Funding Note Purchase Agreement and Series Supplement during any Post-Renewal Date Amortization Period;
(J)to the Class B Noteholders of each Series, pro rata, based on the Note Interest due on the Class B Notes (other than Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), interest accrued on Designated Unpaid Interest Amounts, and Note Interest as a result of a step-up to the ARD Interest Rate), the Note Interest on the Class B Notes for such Payment Date (other than Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), interest accrued on Designated Unpaid Interest Amounts, and Note Interest as a result of a step-up to the ARD Interest Rate), in accordance with the Applicable Payment Priority;
(K)(1) first, to the Class B Noteholders of each Series, pro rata, based on the applicable Class B Outstanding Principal Balance, as payment of principal on the Class B Notes, the Class B Principal Distribution Amount with respect to such Payment Date, in accordance with the Applicable Payment Priority, (2) second, pro rata and pari passu (I) to the extent of Available Funds on such Payment Date, any applicable Designated Unpaid Interest Amount, in accordance with the Applicable Payment Priority, and (II) to the Hedge Counterparties, pro rata, any

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termination amounts due and payable by the Issuer under the related Hedge Agreements but not paid in accordance with clause (F) above;
(L)during the continuance of a Rapid Amortization Event, to the Class B Noteholders of each Series, all remaining amounts until the Outstanding Principal Balance of the Class B Notes shall have been reduced to zero, in accordance with the Applicable Payment Priority;
(M)pro rata and pari passu (1) if the Class A Notes have been paid in full, to the Class B Noteholders of each Series, pro rata, based on the applicable Class B Outstanding Principal Balance, the Class B Excess Amortization Amount (if any), in accordance with the Applicable Payment Priority and (2) to the Class B Noteholders of each Series, pro rata, based on the applicable Class B Outstanding Principal Balance, in the case of a Redemption of Class B Notes, pro rata, the remaining applicable Redemption Price, in accordance with the Applicable Payment Priority;
(N)if a P&A Reserve Trigger has occurred with respect to the Issuer’s prior fiscal year, to the P&A Reserve Account, the amount necessary to cause the balance in the P&A Reserve Account to equal the P&A Reserve Amount;
(O)(1) first, pro rata and pari passu (I) to the Class A Noteholders of each Series, Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), Note Interest as a result of a step-up to the ARD Interest Rate, on the Class A Notes for such Payment Date, in accordance with the Applicable Payment Priority and (II) to the Hedge Counterparties, pro rata, any remaining amounts owed to the Hedge Counterparties under the Basic Documents, (2) second, to the extent applicable, to the Class B Noteholders of each Series, Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), Note Interest as a result of a step-up to the ARD Interest Rate, and interest accrued on Designated Unpaid Interest Amounts, on the Class B Notes for such Payment Date, in accordance with the Applicable Payment Priority (3) third, to the Class A Noteholders of each Series, any remaining amounts owed to the Class A Noteholders under the Basic Documents (including Variable Funding Notes Other Amounts), in accordance with the Applicable Payment Priority and (4) fourth, to the Class B Noteholders of each Series, pro rata, based on the applicable Class B Outstanding Principal Balance, the Class B Additional Excess Amortization Amount (if any), in accordance with the Applicable Payment Priority;
(P)to the Class B Noteholders, any remaining amounts owed to the Class B Noteholders under the Basic Documents, in accordance with the Applicable Payment Priority;
(Q)to the Indenture Trustee and the Back-Up Manager, any amounts owed but not paid in accordance with clause (A) above;
(R)pro rata and pari passu, to the Manager, any unpaid AFE Cover Amounts and any amounts owed but not paid in accordance with clause (B) above;

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(S)to the Operator, any indemnity amount due and payable under the Asset Vesting Documents; and
(T)to the Issuer, all remaining amounts, free and clear of the lien of the Indenture, and any remaining Available Funds, free and clear of the lien of the Indenture; provided, that, during the continuance of any event or condition that, with notice, the lapse of time, or both, would constitute a Rapid Amortization Event, a Warm Trigger Event, an Event of Default or a Material Manager Default (as defined in the Management Services Agreement), any remaining amounts shall remain on deposit in the Collection Account, the Liquidity Reserve Account or the P&A Reserve Account, as applicable, for application as Available Funds.
(ii)On each Payment Date (a) as of which the Notes have been accelerated as a result of an Event of Default, (b) on which a Redemption is scheduled to occur or (c) that is on or after the Final Scheduled Payment Date, in each case as specified solely in the Payment Date Report, Available Funds and all amounts in the Collection Account, the Liquidity Reserve Account, the Asset Disposition Proceeds Account and the P&A Reserve Account shall be distributed by the Indenture Trustee in the following order and priority of payments (the “Special Priority of Payments”):
(A)all payments required and in the order required by clauses (A) and (B) of the Priority of Payments, in each case without giving effect to the provisos stated therein, along with the fees and expenses incurred by the Secured Parties in connection with their enforcement of remedies under this Indenture;
(B)first, (1) pro rata and pari passu, to (x) the Class A Noteholders of each Series, the Note Interest on the Class A Notes for such Payment Date (other than Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), and Note Interest as a result of a step-up to the ARD Interest Rate) and, in the case of Variable Funding Notes that are Class A Notes, any accrued and unpaid commitment fees, letter of credit fees and any other fees, expenses and other amounts (except for Variable Funding Notes Other Amounts and repayments of outstanding principal amounts) due on or prior to such Payment Date under the related Variable Funding Note Purchase Agreement, in each case in accordance with the Applicable Payment Priority and (y) each Hedge Counterparty, pro rata, any net payments under the Hedge Agreement (other than any termination amounts) and then, (2) pro rata and pari passu, to (x) the Class A Noteholders of each Series, pro rata, the applicable Class A Outstanding Principal Balance until the applicable Class A Outstanding Principal Balance has been paid in full (including repayments of outstanding principal amounts of the Variable Funding Notes), or in the case of a Redemption of the Class A Notes, the applicable Redemption Price for the Class A Notes, in accordance with the Applicable Payment Priority and (y) to each Hedge Counterparty, pro rata, any amounts due and payable under the Hedge Agreements that have not been paid pursuant to clause (B)(1)(y) above;
(C)first, (1) pro rata and pari passu, to the Class B Noteholders of each Series, (I) the Note Interest on the Class B Notes for such Payment Date (other than Default Interest, Note Interest as a result of

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an increase in the Interest Rate pursuant to Section 2.8(g), interest accrued on Designated Unpaid Interest Amounts, and Note Interest as a result of a step-up to the ARD Interest Rate), and then (II) any Designated Unpaid Interest Amounts, and then, (2) pro rata and pari passu, to the Class B Noteholders of each Series, the applicable Class B Outstanding Principal Balance until the Class B Outstanding Principal Balance has been paid in full, or in the case of a Redemption of Class B Notes, the applicable Redemption Price for the Class B Notes, in each case, in accordance with the Applicable Payment Priority;
(D)first, (1) to the Class A Noteholders of each Series, Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), and Note Interest as a result of a step-up to the ARD Interest Rate on the Class A Notes for such Payment Date, and then, (2) to the extent applicable, to the Class B Noteholders of each Series, Default Interest, Note Interest as a result of an increase in the Interest Rate pursuant to Section 2.8(g), Note Interest as a result of a step-up to the ARD Interest Rate, and interest accrued on Designated Unpaid Interest Amounts, on the Class B Notes for such Payment Date, in each case, in accordance with the Applicable Payment Priority;
(E)pro rata and pari passu, (1) to the Class A Noteholders of each Series, any remaining amounts owed to the Class A Noteholders under the Basic Documents (including Variable Funding Notes Other Amounts), other than enforcement fees and expenses contemplated in clause (A) of the Special Priority of Payments, in accordance with the Applicable Payment Priority and (2) to the Hedge Counterparties, pro rata, any remaining amounts owed to the Hedge Counterparties under the Basic Documents;
(F)to the Class B Noteholders of each Series, any remaining amounts owed under the Basic Documents, other than enforcement fees and expenses contemplated in clause (A) of the Special Priority of Payments, in accordance with the Applicable Payment Priority;
(G)pro rata and pari passu, to the Indenture Trustee, the Back-Up Manager and the Manager, any amounts owed but not paid in accordance with clause (A) above; and
(H)to the Issuer, all remaining amounts, free and clear of the lien of the Indenture.
(iii)On or prior to the close of business on each Payment Determination Date, the Manager shall calculate all amounts required to be withdrawn from the Issuer Accounts (as applicable) and distributed in accordance with the priority of payments under Section 8.6(i) and Section 8.6(ii) and shall provide such calculation to the Indenture Trustee as set forth in the Payment Date Report.
(iv)Notwithstanding the foregoing, if a Diversified Party other than the Issuer pays any amounts to the Issuer (i) with respect to any matters arising out of or relating to a breach of contract or indemnification obligation under any Basic Document or (ii) under the Asset Vesting Documents, those amounts less, with respect to subclause (i), the sum of (A) any amounts paid or payable by the Issuer

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to any third parties as of the time of receipt with respect to the applicable breach or indemnification obligation and (B) any amounts reinvested or reasonably expected to be reinvested by the Issuer (including to cure or remedy any breach or liability) to the extent permitted by the Basic Documents, shall be paid to the Noteholders in a redemption of the Notes in accordance with clause (I) of the Priority of Payments so long as the Class A Notes are Outstanding, and then in accordance with clause (M) of the Priority of Payments with respect to the Class B Notes when the Class A Notes are no longer Outstanding, in each case, without premium or penalty. In addition, any Excess Hedge Amounts shall be paid to the Noteholders in a redemption of the Notes in accordance with clause (I) of the Priority of Payments so long as the Class A Notes are Outstanding, and then in accordance with clause (M) of the Priority of Payments with respect to the Class B Notes when the Class A Notes are no longer Outstanding, in each case, without premium or penalty. No such amounts shall be payable to the Variable Funding Notes unless such Notes are in an Amortization Period.
Section 8.7Liquidity Reserve Account.
(a)On the Initial Closing Date, the Issuer shall cause an amount not less than the Liquidity Reserve Account Initial Deposit to be deposited by the Indenture Trustee into the Liquidity Reserve Account. If Variable Funding Notes have been issued, the Issuer may fund the Liquidity Reserve Account using availability under letters of credit issued under such Variable Funding Notes for such purpose, provided that such letter of credit is an Acceptable LC.
(b)If the amount on deposit in the Liquidity Reserve Account on any Payment Date (after giving effect to all deposits thereto or withdrawals therefrom on such Payment Date) is greater than the Liquidity Reserve Account Target Amount for such Payment Date, the Manager shall instruct the Indenture Trustee to withdraw such amount from the Liquidity Reserve Account and apply it as Available Funds for such Payment Date as set forth in the Payment Date Report.
(c)Without duplication, in the event that the Available Funds for a Payment Date are not sufficient to make the full amount of the payments and deposits required pursuant to Sections 8.6(i)(A) through (C) on such Payment Date, the Manager shall instruct the Paying Agent on behalf of the Indenture Trustee to withdraw from the Liquidity Reserve Account on such Payment Date an amount equal to such shortfall, to the extent of funds available therein, and pay or deposit such amount according to the priorities set forth in Sections 8.6(i)(A) through (C). In addition, if Section 8.6(ii) applies, all amounts shall be withdrawn from the Liquidity Reserve Account and applied as provided in Section 8.6(ii), as set forth in the Payment Date Report.
(d)Following the payment in full of the aggregate Outstanding Principal Balance of the Class A Notes and termination or expiration of all Hedge Agreements and payment in full of all obligations due and payable in connection therewith (including any termination amounts due thereunder) and all other amounts owing or to be distributed hereunder to the Class A Noteholders and the Hedge Counterparties, any amount remaining on deposit in the Liquidity Reserve Account shall be distributed to the Issuer free and clear of the lien of this Indenture upon written direction to the Indenture Trustee by the Manager.
Section 8.8Statements to Noteholders. On or prior to the close of business on each Payment Determination Date, the Issuer shall cause the Manager to provide to the Indenture Trustee for the Indenture Trustee to (x) post on its internet website pursuant to Section 6.6 of the Indenture or (y) provide to each Hedge Counterparty who does not then have access to such

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website pursuant to Section 6.6 hereof, a statement substantially in the form of Exhibit D hereto, setting forth at least the following information as to the Notes, to the extent applicable:
(a)the amount of Collections and Asset Disposition Proceeds, if any, received in the Collection Account with respect to the related Collection Period;
(b)confirmation of compliance with the terms of the Indenture and the other Basic Documents;
(c)other reports received or prepared by the Manager in respect of the Assets and the Hedge Agreements, along with a summary of all Hedge Agreements in place, including volumes and percentage of production that is hedged, along with a calculation of the hedge ratio;
(d)the amount of Administrative Expenses, Direct Expenses and indemnity payments paid to each party or withheld by the Operator pursuant to the Joint Operating Agreement or the Manager pursuant to the Management Services Agreement during the most recent Collection Period;
(e)the amount of any fees and expenses paid to the Indenture Trustee, the Manager or the Back-Up Manager with respect to the related Collection Period;
(f)if any, the amount of (i) any payment (including breakage or termination payments) paid to a Hedge Counterparty with respect to the related Collection Period, (ii) all deposits into and transfers out of each Hedge Collateral Account from or to each Hedge Counterparty during the Collection Period, and (iii) the balance of Posted Collateral in each Hedge Collateral Account on such Payment Determination Date, including, for the avoidance of doubt, the name of each Hedge Counterparty entitled to the balance identified by the Manager in clause (ii) above; provided, however, if a segregated Hedge Collateral Account is maintained for a Hedge Counterparty, the information set out in clauses (ii) and (iii) need only be provided to each such Hedge Counterparty, individually, the Indenture Trustee and the Securities Intermediary and will not be required to be posted on the Indenture Trustee’s website;
(g)the amount deposited in or withdrawn from the Liquidity Reserve Account on such Payment Determination Date, the amount on deposit in the Liquidity Reserve Account after giving effect to such deposit or withdrawal and the Liquidity Reserve Account Target Amount for such Payment Date;
(h)the amount deposited in or withdrawn from the P&A Reserve Account on such Payment Determination Date, the amount on deposit in the P&A Reserve Account after giving effect to such deposit or withdrawal and the P&A Reserve Account Target Amount for such Payment Date;
(i)the Outstanding Principal Amount, the Class A-1 Principal Distribution Amount, the Class A-2 Principal Distribution Amount, the Class A-1 Excess Amortization Amount (if any), the Class A-2 Excess Amortization Amount (if any), the Class B Principal Distribution Amount, and the Class B Excess Amortization Amount (if any) with respect to such Payment Determination Date;
(j)the Note Interest (including any increase as a result of a failure to achieve the GHG Emissions Targets and Methane Emissions Targets) with respect to such Payment Date;
(k)as of the Target Date, confirmation as to whether any increase to Note Interest will apply together with, if applicable, a copy of the notice to Trustee of satisfaction of the GHG Emissions Targets and the Methane Emissions Targets;

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(l)the Class A-1 Excess Allocation Percentage, Class A-2 Excess Allocation Percentage and Class B Excess Allocation Percentage, with respect to such Payment Date;
(m)the amount of the Aggregate DSCR, the Senior DSCR, the Aggregate IO DSCR, the Senior IO DSCR, the Aggregate LTV, the Senior LTV, the Production Tracking Rate and the Securitized Net Cash Flow, in each case with respect to the related Collection Period;
(n)the amounts on deposit in each Issuer Account as of the related Payment Determination Date;
(o)amounts due and owing and paid to the Noteholders under the Note Purchase Agreement, any Variable Funding Note Purchase Agreement and other Basic Documents;
(p)identification of any Assets repurchased by the Operator by Well number with respect to such Asset (as specified in the Schedule of Assets), to the extent applicable;
(q)a listing of all Permitted Indebtedness outstanding as of such date;
(r)the amount of any AFE Cover Amounts utilized to participate in AFE Operations during the related Collection Period;
(s)a listing of any Additional Assets acquired by the Issuer or the Guarantors;
(t)any reports regarding greenhouse gas or other carbon emissions associated with any Issuer Party’s operations or the products, to the extent publicly disclosed by the Issuer or any of its Affiliates;
(u)the amount of Asset Disposition Proceeds deposited in the Asset Disposition Proceeds Account;
(v)on an annual basis, on the Payment Determination Date occurring in March such report shall include the aggregate P&A Expense Amount for the preceding year and the excess, if any, of the P&A Expense Amount in excess of the P&A Reserve Trigger Amount;
(w)on an annual basis such report shall include any change, set forth to the fourth decimal place, in the Net Revenue Interest or Working Interest with respect to any Well from the Net Revenue Interest or Working Interest reflected in the most recent Reserve Report, except to the extent already expressly identified in a report under this Section 8.8;
(x)reasonably detailed information regarding any Title Failure (as defined in the applicable Asset Vesting Documents) of which the Issuer has Knowledge and all documentation with respect to any actions, claims or Proceedings under the applicable Asset Vesting Documents;
(y)any material Environmental Liability of which Issuer, Operator, Manager or any Affiliate thereof obtained Knowledge since the most recent report delivered under this Section 8.8;
(z)the filing or commencement of, or the threat in writing of, any action, suit, investigation, arbitration or proceeding by or before any arbitrator or Governmental Body against Issuer, or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed), that, in either case, if adversely determined, could reasonably be expected to result in liability in excess of $250,000;

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(aa)a reasonably detailed description of any Permitted Dispositions; and
(ab)on the first Payment Determination Date where either the GHG Emissions Targets or the Methane Emissions Targets has been met, a statement to that effect, together with copies of the confirmation from the External Verifier.
Deliveries pursuant to this Section 8.8 or any other Section of this Indenture may be delivered by electronic mail.
Section 8.9[Reserved].
Section 8.10[Reserved].
Section 8.11Original Documents. The Indenture Trustee agrees to hold any assignments of mortgage or deeds of trust that are part of the Collateral received by it. The Indenture Trustee shall keep such documents in its possession separate and apart from all other property that it is holding in its possession and from its own general assets. The Indenture Trustee shall keep records showing that it is holding such documents pursuant to this Indenture. Such documents shall be released by the Indenture Trustee to or at the direction of the Issuer upon the satisfaction and discharge of this Indenture.
Article IX

SUPPLEMENTAL INDENTURES
Section 9.1Supplemental Indentures with Consent of Noteholders and Hedge Counterparties.
(a)The Issuer Parties and the Indenture Trustee, when authorized by an Issuer Order, may, with the consent of the Majority Noteholders by Act of the Noteholders delivered to the Issuer and the Indenture Trustee, and with notice to each Hedge Counterparty (and the consent of any Hedge Counterparty if the rights of such Hedge Counterparty would be adversely affected in any material respect), and, to the extent the Notes are rated by any Rating Agency, written confirmation from such Rating Agency that no immediate withdrawal or reduction with respect to its then-current rating of any class of rated Notes will occur as a result, by Act of the Noteholders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture, any Series Supplement or any Notes, or of modifying in any manner the rights of the Holders of the Notes under this Indenture, any Series Supplement or any Notes; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note or any Hedge Counterparty under each Hedge Agreement affected thereby:
(i)change the applicable Final Scheduled Payment Date of any Series of Notes or the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the Interest Rate thereon or the Applicable Premium or Change of Control Applicable Premium or Redemption Price or Change of Control Redemption Price, as applicable, with respect thereto (other than any adjustment to any amortization schedule in any Series Supplement in connection with a partial prepayment of the related Series and Class of Notes), change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or interest on the Notes or any payments or priority of payments to any Hedge

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Counterparty under any Hedge Agreement, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes or under the Hedge Agreements on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date);
(ii)reduce the percentage of the Outstanding Principal Balance of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;
(iii)modify or alter the provisions of the proviso to the definition of the term “Outstanding”;
(iv)modify or alter the definitions of the terms “Asset Disposition Proceeds,” “Available Funds,” “Class A Excess Amortization Amount,” “Class A-1 Excess Allocation Percentage,” “Class A-1 Excess Amortization Amount,” “Class A-1 Principal Distribution Amount,” “Class A-1 Scheduled Principal Distribution Amount,” “Class A-2 Excess Allocation Percentage,” “Class A-2 Excess Amortization Amount,” “Class A-2 Principal Distribution Amount,” “Class A-2 Scheduled Principal Distribution Amount,” “Class B Excess Allocation Percentage,” “Class B Excess Amortization Amount,” “Class B Principal Distribution Amount,” “Class B Scheduled Principal Distribution Amount,” “Equity Contribution Cure,” “GHG Emissions Performance Target,” “Hedge Agreement,” “Hedge Counterparty,” “Hedge Counterparty Rating Requirement,” “IO DSCR,” “Liquidity Reserve Account Target Amount,” “Majority Hedge Counterparties,” “Majority Noteholders,” “Methane Emissions Performance Target,” “P&A Reserve Amount,” “Permitted Dispositions,” “Permitted Liens,” “Production Tracking Rate,” “Rapid Amortization Event,” “Redemption Price,” “Reserve Report,” “Securitized Net Cash Flow,” “Senior DSCR,” “Senior LTV,” “Warm Trigger Event” or “VFN Notes Maximum Principal Amount”;
(v)reduce the percentage of the Outstanding Principal Balance of the Notes required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Collateral pursuant to Section 5.4;
(vi)modify any provision of this Section 9.1 except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Basic Documents (excluding the Hedge Agreements) cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby, or if any Hedge Agreements are to be effected thereby, without the consent of the applicable Hedge Counterparties;
(vii)modify Section 8.6 or modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the optional or mandatory redemption of the Notes contained herein;

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(viii)permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note or the Hedge Counterparty to any Hedge Agreement of the security provided by the lien of this Indenture; or
(ix)except as provided in Section 5.4(a)(iv), liquidate the Assets when the proceeds of such sale would be insufficient to fully pay the Notes and the obligations of Issuer under the Hedge Agreements.
(b)The Indenture Trustee shall rely exclusively on an Officer’s Certificate of the Issuer and an Opinion of Counsel to determine whether any such action would require the consent of the Majority Noteholders, the consent of all of the Noteholders or the consent of any Hedge Counterparty. The Indenture Trustee shall not be liable for reliance on such Officer’s Certificate or Opinion of Counsel.
(c)Notwithstanding anything to the contrary in this Indenture, a Series Supplement or supplemental indenture entered into for the sole purpose of issuing Additional Notes the issuance of which complies with the provisions of Sections 2.14 and 2.15 or the amendment, supplement, modification or waiver of any Series Supplement or supplemental indenture which complies with the provisions of Sections 2.14 and 2.15 as applied to such amendment, supplement, modification or waiver shall not require the consent of any Noteholders or Hedge Counterparties.
(d)Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.1, the Indenture Trustee shall transmit to the Holders of the Notes, the Hedge Counterparties, and each Rating Agency a notice (to be provided by the Issuer) setting forth in general terms the substance of such supplemental indenture and a copy of such supplemental indenture. Any failure of the Indenture Trustee to transmit such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
Section 9.2Execution of Supplemental Indentures. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification thereby of the trusts created by this Indenture, the Indenture Trustee shall be provided with and, subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an Officer’s Certificate of the Issuer and an Opinion of Counsel stating that the execution of such supplemental indenture (i) is authorized or permitted by this Indenture and that all conditions precedent under this Indenture for the execution of the supplemental indenture have been complied with, (ii) will not cause the Issuer or any of its subsidiaries to be treated as a corporation, association, publicly traded partnership, taxable mortgage pool, or other entity, in each case, taxable as a corporation for U.S. federal income Tax purposes, and (iii) will not cause any Notes of any Outstanding Series (other than those that are, at any time, held by any Section 385 Related Party) that were characterized as indebtedness for U.S. federal income Tax purposes, as of the applicable Closing Date, to be characterized as other than indebtedness for U.S. federal income Tax purposes; provided, that the Opinion of Counsel described in clause (ii) and clause (iii) will be subject to the same conditions, exclusions and limitations as any Opinion of Counsel with respect to such matters given upon the issuance of the Notes on the Initial Closing Date. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise. The Indenture Trustee shall notify each Rating Agency of the execution of any Supplemental Indentures. The Issuer shall notify the Back-Up Manager of any amendment to the Basic Documents that (x) modifies the duties of the Manager

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or Operator and (y) adversely affects or increases the duties of the Back-Up Manager. No amendment to a Basic Document that adversely affects or increases the duties of the Back-Up Manager will be effective without the consent of the Back-Up Manager.
Section 9.3Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer, the Hedge Counterparties, and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 9.4Reference in Notes to Supplemental Indentures. If the Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.
Article X

REDEMPTION OF NOTES
Section 10.1Redemption.
(a)Subject to Section 10.1(b) and any other requirements under the applicable Series Supplement, each Series of the Outstanding Notes is subject to redemption in whole, but not in part, at the direction of the Issuer on the Redemption Date. If the Outstanding Notes, or some portion thereof, are to be redeemed pursuant to this Section 10.1(a), the Issuer shall furnish a revocable notice of such election to the Indenture Trustee (with a copy to the Back-Up Manager) not later than the close of business fourteen (14) days prior to the applicable Redemption Date, and the Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date with the Paying Agent in the Collection Account the Redemption Price of the applicable Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.2 to each Holder of the Notes, unless the Issuer shall have notified the Indenture Trustee in writing of the revocation of such election prior to the Redemption Date.
(b)Upon the occurrence of a Change of Control, the Outstanding Notes are subject to redemption in whole, but not in part, on the Redemption Date at the applicable Change of Control Redemption Price. If the Outstanding Notes, or some portion thereof, are to be redeemed pursuant to this Section 10.1(b), the Issuer shall furnish a revocable notice of such election to the Indenture Trustee not later than the close of business on the ninetieth (90th) day subsequent to the date on which the Change of Control occurs and the Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date with the Paying Agent in the Collection Account the Change of Control Redemption Price of the Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.2 to each Holder of the Notes, unless the Issuer shall have notified the Indenture Trustee in writing of the revocation of such election prior to the Redemption Date.
Section 10.2Form of Redemption Notice. Following receipt by the Indenture Trustee of the Issuer’s notice of redemption in accordance with Section 10.1, such notice of

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redemption shall be posted to the Indenture Trustee’s website for distributing information to the Noteholders or given by the Indenture Trustee by first-class mail, postage prepaid, or mailed or transmitted by email, as applicable, to each Holder of Notes affected thereby and each Hedge Counterparty, as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder’s address appearing in the Note Register and to each Hedge Counterparty at the address appearing in its Hedge Counterparty Rights Agreement or to each Holder’s and/or Hedge Counterparty’s email address on file with the Indenture Trustee, in each case, not later than ten (10) days prior to the applicable Redemption Date. The Indenture Trustee shall provide a copy of such notice to each Rating Agency and the Back-Up Manager.
All notices of redemption shall state:
(a)the Redemption Date;
(b)the Redemption Price or Change of Control Redemption Price, as applicable; and
(c)the place where such Notes are to be surrendered for payment of the Redemption Price or Change of Control Redemption Price, as applicable (which shall be the office or agency of the Issuer to be maintained as provided in Section 4.2).
Notice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note.
Notwithstanding the foregoing, the foregoing satisfaction and discharge of the Indenture only applies to the Notes and the Noteholders subject to the terms in this Article X. The Indenture shall not terminate and cease to be of further effect with respect to any of the Hedge Counterparties or any of the Hedge Agreements until and unless all of the Hedge Agreements have terminated and all payments thereunder, including the termination value, have been paid in full.
Section 10.3Notes Payable on Redemption Date. The Notes or portions thereof to be redeemed shall, following notice of redemption as required by Section 10.2, on the Redemption Date become due and payable at the Redemption Price or Change of Control Redemption Price, as applicable, and (unless the Issuer shall default in the payment of the Redemption Price or Change of Control Redemption Price, as applicable) no interest shall accrue on the Redemption Price or Change of Control Redemption Price, as applicable, for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price or Change of Control Redemption Price, as applicable. On or before such Redemption Date, Issuer shall cause the aggregate Redemption Price to be deposited to the Collection Account, and such amount shall be paid in accordance with Section 8.6(ii).
Article XI

SATISFACTION AND DISCHARGE
Section 11.1Satisfaction and Discharge of Indenture . This Indenture shall cease to be of further effect with respect to the Notes or Series of Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen

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Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon plus all other amounts due under the Basic Documents, (iv) Sections 4.1, 4.2, 4.3, 4.4, 4.8, 4.11, 4.12, 4.14 and 4.18, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee under Section 11.2) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when:
(A)either:
(1)all Notes or the Notes of the applicable Series theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.6 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 4.3) have been delivered to the Indenture Trustee for cancellation; or
(2)all Notes not theretofore delivered to the Indenture Trustee for cancellation:
(I)have become due and payable, or
(II)are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer,
and the Issuer, in the case of (I) or (II) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Indenture Trustee for cancellation when due to the applicable Final Scheduled Payment Date or Redemption Date (if Notes shall have been called for redemption pursuant to Section 10.1), as the case may be;
(B)the Issuer has paid or caused to be paid all other sums payable by the Issuer hereunder; and
(C)the Issuer has delivered to the Indenture Trustee an Officer’s Certificate, an Opinion of Counsel and, each meeting the applicable requirements of Section 12.1(a) and, subject to Section 12.2,

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each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the foregoing, the foregoing satisfaction and discharge of the Indenture only applies to the Notes and the Noteholders subject to the terms in this Section 11. The Indenture shall not terminate and cease to be of further effect with respect to any of the Hedge Counterparties or any of the Hedge Agreements until and unless all of the Hedge Agreements have terminated and all payments thereunder, including the termination value, have been paid in full and all Posted Collateral returned to each Hedge Counterparty as required by the applicable Hedge Agreement. At any time that the Notes are no longer outstanding, the Hedge Counterparties shall be entitled to exercise any rights and remedies set forth herein or in the other Basic Documents (other than the Note Purchase Agreement) otherwise afforded to the Noteholders or Majority Noteholders, including any rights granted to the foregoing as a Secured Party under any of the other Basic Documents (other than the Note Purchase Agreement).
Section 11.2Application of Trust Money. All monies deposited with the Indenture Trustee pursuant to Section 11.1 hereof shall be held on behalf of the Noteholders and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, (i) to the Holders of the particular Notes for the payment or redemption of which such monies have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest plus all other amounts due under the Basic Documents and (ii) to the Hedge Counterparties, of all sums, if any, due or to become due to the applicable Hedge Counterparty under and in accordance with the Hedge Agreements (including any termination value due or becoming due thereunder); but such monies need not be segregated from other funds except to the extent required herein or in the Management Services Agreement or required by Law.
Section 11.3Repayment of Monies Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all monies then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 4.3 and thereupon such Paying Agent shall be released from all further liability with respect to such monies.
Article XII

MISCELLANEOUS
Section 12.1Compliance Certificates and Opinions, etc.
(a)Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

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(i)a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;
(ii)a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(iii)a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv)a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.
Section 12.2Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
(a)Any certificate or opinion of an authorized officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer’s certificate or opinion is based are erroneous. Any such certificate of an authorized officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Manager or the Issuer, stating that the information with respect to such factual matters is in the possession of the Manager or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
(b)Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
(c)Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.
Section 12.3Acts of Noteholders.
(a)Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in

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and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act of the Noteholders” signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 12.3.
(b)The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.
(c)The ownership of Notes shall be proved by the Note Register.
(d)Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.
Section 12.4Notices, etc., to Indenture Trustee and Issuer. Any request, demand, authorization, direction, notice, consent, waiver or act of Noteholders or Hedge Counterparties or other documents provided or permitted by this Indenture shall be in writing and if such request, demand, authorization, direction, notice, consent, waiver or act of Noteholders or the Hedge Counterparties is to be made upon, given or furnished to or filed with:
(i)the Indenture Trustee by any Noteholder, by the Issuer or by any Hedge Counterparty shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (which may be made via e-mail transmission, pdf or overnight delivery) to or with a Responsible Officer of the Indenture Trustee at its Corporate Trust Office, or
(ii)the Issuer by the Indenture Trustee, by any Noteholder or by any Hedge Counterparty shall be sufficient for every purpose hereunder if in writing and sent by facsimile or email, in each case with a copy to follow via first-class mail, postage prepaid to the Issuer addressed to: Diversified ABS X LLC, at 1600 Corporate Drive, Birmingham, Alabama 35242, facsimile: (205) 408-0870, email: legalnotice@dgoc.com, with copies (which shall not constitute notice) to (i) Benjamin M. Sullivan, 414 Summers Street, Charleston, West Virginia 25301, email: bsullivan@dgoc.com, and (ii) Kirkland & Ellis LLP, Attention: John Kaercher, P.C., at 401 Congress Avenue, Austin, TX 78701, email: john.kaercher@kirkland.com, or, in each case, at any other address previously furnished in writing to the Indenture Trustee by the Issuer or the Manager. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee.
(iii)the Manager by the Indenture Trustee, by any Noteholder or by any Hedge Counterparty shall be sufficient for every purpose hereunder if in writing and sent by facsimile or email, in each case with a copy to follow via first-class mail, postage prepaid to the Issuer addressed to: Diversified Production LLC, at 1600 Corporate Drive, Birmingham, Alabama 35242, facsimile: (205) 408-0870, email: legalnotice@dgoc.com, with copies (which shall not constitute notice) to (i) Benjamin M. Sullivan, 414 Summers Street, Charleston, West

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Virginia 25301, email: bsullivan@dgoc.com, and (ii) Kirkland & Ellis LLP, Attention: John Kaercher, P.C., at 401 Congress Avenue, Austin, TX 78701, email: john.kaercher@kirkland.com, or, in each case, at any other address previously furnished in writing to the Indenture Trustee by the Manager. The Manager shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee.
(iv)the Operator by the Indenture Trustee, by any Noteholder or by any Hedge Counterparty shall be sufficient for every purpose hereunder if in writing and sent by facsimile or email, in each case with a copy to follow via first-class mail, postage prepaid to the Issuer addressed to: Diversified Production LLC, at 1600 Corporate Drive, Birmingham, Alabama 35242, facsimile: (205) 408-0870, email: legalnotice@dgoc.com, with copies (which shall not constitute notice) to (i) Benjamin M. Sullivan, 414 Summers Street, Charleston, West Virginia 25301, email: bsullivan@dgoc.com, and (ii) Kirkland & Ellis LLP, Attention: John Kaercher, P.C., at 401 Congress Avenue, Austin, TX 78701, email: john.kaercher@kirkland.com, or, in each case, at any other address previously furnished in writing to the Indenture Trustee by the Operator. The Operator shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee.
The Issuer’s obligation to deliver or provide any demand, delivery, notice, communication or instruction to any Person shall be satisfied if such demand, delivery, notice, communication or instruction is posted to the Indenture Trustee’s investor reporting website or such other website or distribution service or provider as the Issuer shall designate by written notice to the other parties; provided, however, that any demand, delivery, notice, communication or instruction to the Indenture Trustee shall be provided at its Corporate Trust Office in accordance with Section 12.4(i) hereof.
The Indenture Trustee shall promptly transmit (which may be via electronic mail) any material notice received by it from the Noteholders to the Issuer, the Manager, the Back-Up Manager and the Hedge Counterparties.
Section 12.5Notices to Noteholders and Hedge Counterparties; Waiver.
(a)Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if posted to the Indenture Trustee’s investor reporting website, by electronic transmission or in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Holder’s address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.
(b)Where this Indenture provides for notice to Hedge Counterparties of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if posted to the Indenture Trustee’s investor reporting website, by electronic transmission or in writing and mailed, first-class, postage prepaid to each Hedge Counterparty affected by such event, at such Hedge Counterparty’s address as it appears on the Hedge Counterparty Rights Agreement to which such Hedge Counterparty is a party, not later than the latest date, and not

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earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Hedge Counterparties is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Hedge Counterparty shall affect the sufficiency of such notice with respect to other Hedge Counterparties, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.
(c)Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.
(d)In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.
Section 12.6Alternate Payment and Notice Provisions. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments to be made and notices to be given in accordance with such agreements.
Section 12.7Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
Section 12.8Successors and Assigns. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents.
Section 12.9Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.10Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, each Hedge Counterparty and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture. Each Hedge Counterparty and the Back-Up Manager shall be a third-party beneficiary to this Indenture or the other Basic Documents (other than the Note Purchase Agreement), but only to the extent this it has any rights expressly specified herein.
Section 12.11Legal Holidays. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after such nominal date.
Section 12.12GOVERNING LAW; CONSENT TO JURISDICTION. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE

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STATE OF NEW YORK, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT ANY MATTERS THAT RELATE TO REAL PROPERTY SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE SUCH PROPERTY IS LOCATED. EACH PARTY TO THIS INDENTURE SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS INDENTURE, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF. EACH PARTY (a) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (b) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (c) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 12.13Counterparts; Electronic Signature. This Indenture and any Series Supplement may be executed in any number of counterparts (including electronic PDF), each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Each of the parties hereto agrees that the transactions consisting of this Indenture and the other Basic Documents (other than the Notes) may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Indenture or any other Basic Document (other than the Notes) using an electronic signature, it is signing, adopting, and accepting this Indenture or such other Basic Document (other than the Notes) and that signing this Indenture or such other Basic Document (other than the Notes) using an electronic signature is the legal equivalent of having placed its handwritten signature on this Indenture or such other Basic Document (other than the Notes) on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Indenture and the other Basic Documents in a usable format.
Section 12.14Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel to the effect that such recording is necessary either for the protection of the Noteholders, the Hedge Counterparties, or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

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Section 12.15No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note, and each Note Owner, by accepting an Ownership Interest in a Book-Entry Note, hereby covenant and agree that they will not at any time institute against any Issuer Party, Diversified Holdings, or join in any institution against any Issuer Party or Diversified Holdings of, any involuntary bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar Law in connection with any obligations relating to the Notes, this Indenture, any Series Supplement or any of the other Basic Documents.
Section 12.16Inspection. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer’s normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall, and shall cause its representatives to, hold in confidence all such information except to the extent disclosure may be required by Law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder.
Section 12.17Waiver of Jury Trial. EACH OF THE ISSUER PARTIES, EACH NOTEHOLDER AND THE INDENTURE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, ANY SERIES SUPPLEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 12.18Rating Agency Notice. In addition to the information and reports specifically required to be provided to each Rating Agency pursuant to the terms of this Indenture, the Issuer shall, or shall cause the Manager to, upon written request, provide to each Rating Agency all information or reports delivered to the Indenture Trustee hereunder and such additional information as each Rating Agency may from time to time reasonably request. Any Act of the Noteholders or other documents provided or permitted by this Indenture, to be made upon, given or furnished to, or filed with each Rating Agency shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided if in writing to the applicable Rating Agency Contact).
Section 12.19Rule 17g-5 Information.
(a)The Issuer shall comply with its obligations under Rule 17g-5 promulgated under the Exchange Act (“Rule 17g-5”), if any, by its or its agent’s posting on the website required to be maintained under Rule 17g-5 (the “17g-5 Website”), no later than the time such information is provided to a Rating Agency, all information that the Issuer or other parties on its behalf, including the Indenture Trustee and the Manager, provide to the Rating Agency for the purposes of determining the initial credit rating of the Notes or undertaking credit rating surveillance of the Notes (the “17g-5 Information”); provided, that following the Initial Closing Date, no party other than the Issuer, the Indenture Trustee or the Manager may provide information to a Rating Agency on the Issuer’s behalf without the prior written consent of the Issuer.
(b)To the extent that the Issuer is required to comply with Rule 17g-5, if any of the Issuer, the Indenture Trustee or the Manager is required to provide any information to, or communicate with, a Rating Agency in writing in accordance with its obligations under this

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Indenture or any other Basic Document, the Issuer, or the Manager, as applicable (or their respective representatives or advisers), shall promptly post, or cause to be posted, such information or communication to the 17g-5 Website. The Indenture Trustee will provide any information given to the Rating Agency to the Issuer and the Manager simultaneously with giving such information to the Rating Agency.
(c)To the extent that the Issuer is required to comply with Rule 17g-5 and to the extent any of the Issuer, the Indenture Trustee or the Manager are engaged in oral communications with the Rating Agency, for the purposes of determining an initial credit rating of the Notes or undertaking credit rating surveillance of the Notes, the party communicating with the Rating Agency shall cause such oral communication to either be (x) recorded and an audio file containing the recording to be promptly posted to the 17g-5 Website or (y) summarized in writing and the summary to be promptly posted to the 17g-5 Website (or with respect to the Indenture Trustee, in the case of either (x) or (y), delivered to the Issuer and the Manager for posting on the 17g-5 Website).
(d)To the extent that the Issuer is required to comply with Rule 17g-5, all information to be made available to a Rating Agency hereunder shall be made available on the 17g-5 Website. In the event that any information is delivered or posted in error, the Issuer may remove it, or cause it to be removed, from the 17g-5 Website, and shall so remove promptly when instructed to do so by the Person that delivered such information. None of the Indenture Trustee, the Manager or the Issuer shall have obtained or shall be deemed to have obtained actual knowledge of any information solely due to receipt and posting to the 17g-5 Website. Access will be provided to any NRSRO upon receipt by the Issuer of an NRSRO certification from such NRSRO (which may be submitted electronically via the 17g-5 Website).
(e)Notwithstanding the requirements herein, the Indenture Trustee shall have no obligation to engage in or respond to any oral communications, for the purposes of determining an initial credit rating of the Notes or undertaking credit rating surveillance of the Notes, with a Rating Agency or any of its respective officers, directors or employees.
(f)The Indenture Trustee shall not be responsible for determining compliance with 17g-5, maintaining the 17g-5 Website, posting any 17g-5 Information to the 17g-5 Website or assuring that the 17g-5 Website complies with the requirements of this Indenture, Rule 17g-5, or any other Law or regulation. In no event shall the Indenture Trustee be deemed to make any representation in respect of the content of the 17g-5 Website or compliance of the 17g-5 Website with this Indenture, Rule 17g-5, or any other Law or regulation.
(g)The Indenture Trustee shall not be responsible or liable for the dissemination of any identification numbers or passwords for the 17g-5 Website, including by the Issuer, the Rating Agency, any NRSRO, any of their agents or any other party. The Indenture Trustee shall not be liable for the use of any information posted on the 17g-5 Website, whether by the Issuer, the Rating Agency, any NRSRO or any other third party that may gain access to the 17g-5 Website or the information posted thereon.
(h)Notwithstanding anything herein to the contrary, the maintenance by a third-party service provider of the 17g-5 Website shall be deemed as compliance by or on behalf of the Issuer with Rule 17g-5 or any other Law or regulation related thereto.
Section 12.20Extinguishment of Obligations. Notwithstanding any other provision of this Indenture or any Series Supplement, the obligations of each Issuer Party under the Notes, this Indenture and each Series Supplement are limited recourse obligations of such Issuer Party payable solely from the Collateral. No recourse shall be had against any officer, director, employee, shareholder, authorized person or incorporator of the Issuer Parties or any of their

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respective Affiliates, other than the Issuer Parties, or their respective successors or assigns for any amounts payable under the Notes, this Indenture or any Series Supplement, except as provided under the Pledge Agreement or Article XIII of this Indenture.
Article XIII GUARANTEES
Section 13.1Guarantees.
(a)Each Guarantor, jointly and severally, hereby unconditionally and irrevocably guarantees the Notes, Hedge Agreements and the Obligations hereunder and thereunder, and guarantees to each Holder of a Note authenticated and delivered by the Indenture Trustee, each Hedge Counterparty and to the Indenture Trustee on behalf of such Holder and such Hedge Counterparty, that:
(i)the principal of and premium, if any and interest on the Notes shall be paid in full when due, whether at the Final Scheduled Payment Date, by acceleration or otherwise (including, without limitation, the amount that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Issuer to the Holders or the Indenture Trustee hereunder or thereunder shall be paid in full or performed, all in accordance with the terms hereof and thereof;
(ii)in case of any extension of time of payment or renewal of any Notes or of any such other Obligations, the same shall be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at the Final Scheduled Payment Date, by acceleration or otherwise; and
(iii)the full amount of all obligations of Issuer under the Hedge Agreements shall be paid in full when due, whether on a particular payment date, by acceleration or otherwise (including, without limitation, the amount that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), together with interest on each overdue amount as provided for under any Hedge Agreement, and all other obligations of the Issuer to the applicable Hedge Counterparty thereunder shall be paid in full or performed, all in accordance with the terms thereof.
(b)The obligations of each Guarantor are direct, independent and primary obligations of each Guarantor and are irrevocable, absolute, unconditional, and continuing obligations and are not conditioned in any way upon the institution of suit or the taking of any other action, the pursuit of any remedies or any attempt to enforce performance of or compliance with the Obligations by the Issuer and each Guarantor, and their respective successors, transferees or assigns, and shall constitute a guaranty of payment and performance and not of collection, binding upon the Guarantors and their successors and assigns and irrevocable without regard to the validity, legality or enforceability of this Indenture or any other Basic Document, or the lack of power or authority of the Issuer or any Guarantor to enter into this Indenture or any other Basic Document, or any substitution, release or exchange of any other guaranty or any other security for any of the Obligations or any other circumstance whatsoever (other than payment) that might otherwise constitute a legal or equitable discharge of a surety or guarantor, and shall not be subject to any right of set off, recoupment or counterclaim and are in no way conditioned or contingent upon any attempt to collect from the Issuer, any Guarantor or any other entity or to perfect or enforce any security or upon any other condition or contingency or upon any other action, occurrence, or circumstance whatsoever.

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(c)Without limiting the generality of the foregoing, no Guarantor shall have any right to terminate this guaranty, or to be released, relieved or discharged from its obligations hereunder except as provided in Section 11.1 hereof, and such obligations shall not be affected, diminished, modified or impaired for any reason whatsoever, including, without limitation, (i) the change, modification or amendment of any obligation, duty, guarantee, warranty, responsibility, covenant or agreement set forth in this Indenture, the granting of any extension of time for payment to the Issuer or any other surety, or any extension or renewal of the Issuer’s obligations under this Indenture, (ii) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of any of the Issuer’s or any Guarantor’s assets, the receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization of or similar proceedings affecting the Issuer or any Guarantor or any of the assets of the Issuer or any Guarantor, (iii) any furnishing or acceptance of additional security or any exchange, surrender, substitution or release of any security, (iv) any waiver, consent or other action or inaction or any exercise or non-exercise of any right, remedy or power with respect to the Obligations or this Indenture, (v) any merger or consolidation of the Issuer or any Guarantor into or with any other person or entity, the Issuer’s loss of its separate corporate identity or its ceasing to be an affiliate of the Guarantors, or (vi) the failure to give notice to any Guarantor of the occurrence of a default under the terms and provisions of this Indenture.
(d)Each Guarantor irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any right it may have now, or in the future, under law or in equity, to: (i) the notice of any waiver or extension granted to the Issuer; (ii) all notices which may be required by applicable statute, rule of law or otherwise to preserve any of the rights of the Noteholders or the Hedge Counterparties against the Issuer, each Guarantor or any other person; (iii) require either that an action be brought against the Issuer or any other person or entity as a condition to proceeding against any Guarantor, or to require that action be first taken against any security given by the Issuer or any Guarantor; (iv) notice of (a) any Noteholder’s or the Hedge Counterparty’s acceptance and reliance on this guaranty, (b) default or demand in the case of default, provided such notice or demand has been given to or made upon the Issuer or any Guarantor, and (c) any extensions or consents granted to the Issuer, any Guarantor or any other surety; (v) promptness, diligence, presentment, demand of payment or enforcement and any other notice with respect to any of the Obligations and this guaranty; (vi) require any election of remedies; (vii) require the marshalling of assets or the resort to any other security; (viii) except as otherwise expressly provided herein, claim any other defense, contingency, circumstance or matter which might constitute a legal or equitable discharge of a surety or guarantor; (ix) any defense based on or arising out of the voluntary or involuntary bankruptcy, insolvency, liquidation, dissolution, receivership, or other similar proceeding affecting the Issuer; or (x) any defense related to the addition, substitution or partial or entire release of any guarantor, maker or other party (including the Issuer and each Guarantor) primarily or secondarily liable or responsible for the performance and observance of any of the terms set forth in this Indenture and the other Basic Documents or by any extension, waiver, amendment or action whatsoever which may release a guarantor (other than performance).
(e)If any Noteholder, Hedge Counterparty or the Indenture Trustee is required by any court or otherwise to return to the Issuer or any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Issuer or any Guarantor, any amount paid by any of them to the Indenture Trustee or such Noteholder or Hedge Counterparty, the Guaranty of the Guarantors, to the extent theretofore discharged, shall be reinstated in full force and effect. This paragraph (c) shall remain effective notwithstanding any contrary action which may be taken by the Indenture Trustee or any Noteholder or Hedge Counterparty in reliance upon such amount required to be returned. This paragraph (c) shall survive the termination of this Indenture.

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(f)Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Holders, Hedge Counterparties and the Indenture Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article V hereof for the purposes of the Guaranty of such Guarantor, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any acceleration of such Obligations as provided in Article V hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of the Guaranty of such Guarantor.
Section 13.2Severability. In case any provision of any Guaranty of a Guarantor shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 13.3Limitation of Liability.
(a)No Fraudulent Conveyance. Each Guarantor, and, by its acceptance hereof, each Holder confirms that it is the intention of all such parties that the Guaranty of such Guarantor shall not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law or the provisions of its local law relating to fraudulent transfer or conveyance. To effectuate the foregoing intention, the Indenture Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantors under its Guaranty shall be limited to the maximum amount that will not, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guaranty, result in the obligations of such Guarantor under its Guaranty constituting a fraudulent transfer or conveyance.
(b)No Personal Liability. No member, manager, employee, officer, or organizer, as such, past, present or future of each Guarantor shall have any liability under this Guaranty by reason of his/her or its status as such member, manager, employee, officer, or organizer.
Section 13.4Release of Guaranty. A Guaranty by a Guarantor will be automatically and unconditionally released upon the discharge of this Indenture in accordance with Section 11.1 and satisfaction in full of the obligations of the Issuer hereunder.
Section 13.5Benefits Acknowledged. Each Guarantor acknowledges that it will receive direct and indirect benefits from the transactions contemplated by the Basic Documents and that its guarantee and waivers pursuant to its Guarantee are knowingly made in contemplation of such benefits.


[Remainder page intentionally left blank]

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IN WITNESS WHEREOF, the Issuer Parties, the Indenture Trustee and the Securities Intermediary have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized, all as of the day and year first above written.

DIVERSIFIED ABS X LLC

By: /s/ Benjamin M. Sullivan    
Name: Benjamin M. Sullivan
Title: Senior Executive Vice President, Chief Legal
and Risk Officer, and Corporate Secretary


DIVERSIFIED ABS LLC

    By: /s/ Benjamin M. Sullivan    
Name: Benjamin M. Sullivan
Title: Senior Executive Vice President, Chief Legal
and Risk Officer, and Corporate Secretary


DIVERSIFIED ABS PHASE II LLC

    By: /s/ Benjamin M. Sullivan    
Name: Benjamin M. Sullivan
Title: Senior Executive Vice President, Chief Legal
and Risk Officer, and Corporate Secretary

DIVERSIFIED ABS PHASE X LLC

    By: /s/ Benjamin M. Sullivan    
Name: Benjamin M. Sullivan
Title: Senior Executive Vice President, Chief Legal
and Risk Officer, and Corporate Secretary





[Signature Page to Indenture]


UMB BANK, N.A.,
not in its individual capacity but solely as Indenture Trustee


By: /s/ Michele Voon    
Name: Michele Voon
Title: Senior Vice President


UMB BANK, N.A.,
as Securities Intermediary


By: /s/ Michele Voon    
Name: Michele Voon
Title: Senior Vice President








[Signature Page to Indenture]


SCHEDULE A
Schedule of Assets
[**Omitted**]

Sch. A




SCHEDULE 3.3
Schedule of Legal Proceedings and Orders
[**Omitted**]

Sch. 3.3




SCHEDULE 3.4(b)
Schedule of Compliance with Laws and Governmental Authorizations
[**Omitted**]
  
Sch. 3.4(b)




SCHEDULE 3.9
Schedule of Employee Benefit Plans
[**Omitted**]
  
Sch. 3.7



Exhibits A-1 - C (Notes and Transfer Certificates)
[To be attached]







Ex. C-1


EXHIBIT D
FORM OF STATEMENT TO NOTEHOLDERS
[**Omitted**]




Ex. D-1

APPENDIX A
PART I - DEFINITIONS
All terms used in this Appendix shall have the defined meanings set forth in this Part I when used in the Basic Documents, unless otherwise defined therein.
“17g-5 Information” has the meaning specified in Section 12.19(a) of the Indenture.
“17g-5 Website” has the meaning specified in Section 12.19(a) of the Indenture.
“ABS I Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of November 13, 2019 between Diversified ABS LLC and UMB Bank, N.A.
“ABS II Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of April 9, 2020 between Diversified ABS Phase II LLC and UMB Bank, N.A.
“ABS IV Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of February 23, 2022, between Diversified ABS Phase IV LLC and UMB Bank, N.A.
“ABS VIII Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of May 30, 2024, among Diversified ABS VIII LLC, Diversified ABS III Upstream LLC, Diversified ABS V Upstream LLC, and UMB Bank, N.A.
“ABS IX Trustee” means UMB Bank, N.A. as indenture trustee under the indenture dated as of September 19, 2024 between DP Mustang Holdco LLC and UMB Bank, N.A.
“Acceptable LC” means, a letter of credit in a form acceptable to the Rating Agencies, and as specified in the related Series Supplement with respect to such Variable Funding Notes; provided that such Acceptable LC provider shall be rated at least “BBB” or better by Fitch or equivalent from another rating agency.
“Act of the Noteholders” has the meaning specified in Section 12.3(a) of the Indenture.
“Additional Assets” means additional assets (that are upstream assets and which satisfy the Eligibility Criteria) purchased and acquired by the Issuer (or any Subsidiary thereof, including by way of acquisition of the equity interests of the owner of such assets) after the Initial Closing Date from any Person (including, for the avoidance of doubt, Diversified or any Affiliate thereof) for a mutually-agreeable purchase price substantially equivalent to the fair market value of such assets pursuant to an executed asset purchase agreement with representations, warranties and indemnification obligations of such Person substantially the same as those in the Transfer Agreement; provided that the terms of such asset purchase agreement are on the whole not materially less favorable than those (a) that would be reasonably expected to be available from third parties on an arm’s-length basis or (b) to the extent such Person is an Affiliate of the Issuer, contained in the Transfer Agreement, in each case as determined in good faith by the Issuer.


“Additional Notes” has the meaning specified in Section 2.15 of the Indenture.
“Additional Seller” means any direct or indirect subsidiary of Diversified Energy Company Plc that subsequently joins the Transfer Agreement or is party to an Additional Transfer Agreement with respect to and for the purpose of transferring Additional Assets to the Issuer pursuant to such Asset Vesting Document.
“Additional Transfer Agreement” means an agreement pursuant to which Additional Assets are transferred to the Issuer Parties pursuant to Section 8.4 of the Indenture, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time.
“Administration Fees” has the meaning specified in the Management Services Agreement as of the Initial Closing Date, with such changes as are consented to by the Majority Noteholders and that would not reasonably be expected to be materially adverse to the Hedge Counterparties.
“Administrative Expenses” means, for any Payment Date, the expenses of the Issuer consisting of fees (excluding any fees otherwise paid pursuant to Section 8.6 of the Indenture) and out-of-pocket expenses and indemnification amounts payable or reimbursable to the Indenture Trustee, the Manager, the Back-Up Manager, the Class Representative and, to the extent that the Notes are rated by a Rating Agency, any such Rating Agency, and any third-party service provider hired by or on behalf of the Issuer (including, without limitation, amounts payable to any Back-Up Manager and insurance premiums related to the Collateral), but not including any fees payable or expenses reimbursable to any third party in relation to the operation of the Assets.
“AFE Cover Amounts” has the meaning specified in the Management Services Agreement.
“AFE Operations” has the meaning specified in the Management Services Agreement.
“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Aggregate DSCR” means, as of any Quarterly Determination Date, beginning with the Payment Date occurring in April 2025, equals (a) the Securitized Net Cash Flow over the three (3) immediately preceding Collection Periods less the aggregate Senior Transaction Fees, divided by (b) the sum of (i) the aggregate interest accrued on the Notes (in alphabetical order) of each Class and Series over such three (3) immediately preceding Payment Dates and any unpaid interest for such Notes (in alphabetical order) at the beginning of the Payment Date three (3) months prior to such Quarterly Determination Date, (ii) the aggregate Principal Distribution Amount for Notes (in alphabetical order) of each Class and Series over such three (3)


immediately preceding Payment Dates, and (iii) any unpaid Principal Distribution Amounts for Notes (in alphabetical order) at the beginning of the Payment Date three (3) months prior to such Quarterly Determination Date; provided, that, any calculation of the Aggregate DSCR following the issuance of Additional Notes and the related Additional Assets may, but shall not be required to be calculated until the first Quarterly Determination Date that is at least 3 months after such issuance of Additional Notes and the related Additional Assets; provided further, that, more than 6 months shall not have elapsed since the prior calculation.
“Aggregate LTV” means, as of any applicable date of determination, beginning with the Payment Date occurring July 2025, equal to (a) the excess of the Outstanding Principal Balance of the Notes (in alphabetical order) of each Class and Series as of such date of determination over the amount then on deposit in the Collection Account divided by (b) the sum of the PV-10 as of such date of determination less any Excess Concentration Amounts. The Aggregate LTV shall be determined on an annual basis; provided that, if the PV-10 shall have been re-calculated as a result of an updated reserve report being obtained prior to any otherwise scheduled annually updated reserve report (as described in the definition of “PV-10”), then the Aggregate LTV shall be re-calculated giving effect to such re-calculation of the PV-10 and on the basis of the then-current amounts specified in the preceding clause (a).
“Amortization Period” means, as specified in the relevant Series Supplement.
“Annual Determination Date” means (i) initially, the Payment Determination Date in the month of March 2026 and (ii) thereafter, the Payment Determination Date in the month of March of each calendar year.
“Annual Period” means (i) initially, the period from (and including) the Initial Closing Date to (but excluding) the first Annual Determination Date and (ii) thereafter, each successive period from and including any Annual Determination Date to (but excluding) the immediately succeeding Annual Determination Date; provided, that with respect to any Annual Period that is less than twelve (12) calendar months, any numerical limitations associated with such Annual Period shall be prorated.
“Anti-Corruption Laws” means any Law or regulation in a U.S. or any non-U.S. jurisdiction regarding bribery or any other corrupt activity, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
“Anti-Money Laundering Laws” means any Law or regulation in a U.S. or any non-U.S. jurisdiction regarding money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes, including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act) and the USA PATRIOT Act.
“Anticipated Repayment Date” means, with respect to any Class or Series of Notes, as specified in the related Series Supplement.
“Appalachian Region” means Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia.


“Applicable Payment Priority” means,
(a)each Class of Notes will be pari passu in right of payment of interest with other Notes of that Class, regardless of Series;
(b)other than during the continuance of an Event of Default or after the Anticipated Repayment Date for any outstanding Series of Class A Notes, (x) Class A-1 Notes will be pari passu with other Class A-1 Notes and senior to other Class A Notes, in each case, in right of payment of amounts other than interest, including Principal Distribution Amounts and Excess Amortization Amounts and (y) subject to clause (x), Notes of a Class from a Series with an earlier issuance date will be senior in right of payment of amounts other than interest to Notes of that Class from a Series with a later issuance date;
(c)during the continuance of an Event of Default or after the Anticipated Repayment Date for any outstanding Class of Notes, each such Class will be pari passu in right of payment of amounts with other Notes of that Class, regardless of Series; and
(d)in connection with a Redemption in whole of the Notes, the Notes of a Series from an earlier issuance date will be senior in right of payment to the full Redemption Price to Notes from a Series with a later issuance date, and such Redemption Price shall be applied solely to the applicable Series subject to the Redemption.
“Applicable Premium” means, as specified in the related Series Supplement.
“Applicable Procedures” means, with respect to any transfer or transaction involving a Regulation S Global Note or beneficial interest therein, the rules and procedures of the Depository, Euroclear and Clearstream, as the case may be, for such Global Note, in each case to the extent applicable to such transaction and as in effect from time to time.
“Asset Disposition Proceeds” means, in the event that the Issuer shall sell, transfer or otherwise dispose of any Assets in a Permitted Disposition or purchased by the Manager from the Issuer pursuant to the Management Services Agreement, any proceeds remaining after (i) depositing into the Collection Account a portion of such proceeds equal to the amount, if any, required to be paid by the Issuer pursuant to the termination, in whole or in part, of any Hedge Agreement and (ii) giving effect to such sale, the repayment of the Notes and any required hedge termination payments; provided, however, that, such remaining proceeds will only constitute Asset Disposition Proceeds if, after giving effect to the payments contemplated in clause (ii) above, the Pro Forma Aggregate DSCR would be equal to or greater than 1.45 to 1.00, the Pro Forma Senior DSCR would be equal to or greater than 1.55 to 1.00, the Pro Forma Aggregate LTV shall be equal to or less than 75%, the Pro Forma Senior LTV shall be equal to or less than 65%, the Pro Forma Aggregate IO DSCR would be equal to or greater than 2.00 to 1.00 and the Pro Forma Senior IO DSCR would be equal to or greater than 2.25 to 1.00.
“Asset Disposition Proceeds Account” means the account designated as such, established and maintained pursuant to Section 8.2(b) of the Indenture.


“Asset Purchase Period” has the meaning specified in Section 8.4(c) of the Indenture.
“Asset Vesting Documents” means, in respect of (i) the Initial Assets, the Transfer Agreement and (ii) any Additional Assets, the related Additional Transfer Agreement.
“Assets” means the Initial Assets and any Additional Assets, collectively.
“Assignment of Interests” means (i) the Assignment of Interests, dated as of the Initial Closing Date, among Diversified ABS Holdings, LLC, Diversified ABS Phase II Holdings LLC, and Diversified, as assignors and the Issuer, as assignee and (ii) each additional assignment of interests entered into by the Issuer or the Guarantors in connection with an acquisition of Additional Assets.
“Available Funds” means, with respect to any Payment Date, the sum of the following amounts, without duplication, with respect to the Assets in respect of the Collection Period preceding such Payment Date: (a) all Collections received and deposited into and available for withdrawal from the Collection Account prior to the applicable Payment Determination Date relating to production in the calendar month that is two months or more prior to the Collection Period and adjustments relating to prior Collection Periods, (b) amounts on deposit in the Liquidity Reserve Account after giving effect to all other deposits and withdrawals thereto or therefrom on the Payment Date relating to such Collection Period in excess of the Liquidity Reserve Account Target Amount, (c) amounts transferred from the P&A Reserve Account to the Collection Account on such Payment Date pursuant to Section 8.2(e) of the Indenture, (d) Investment Earnings for the related Payment Date, (e) all amounts received by the Indenture Trustee pursuant to Article V of the Indenture, (f) the net amount, if any, paid to the Issuer under the Hedge Agreements (for the avoidance of doubt, any Posted Collateral in any Hedge Collateral Account shall not be part of and expressly excluded from being part of Available Funds), and (g) the amount of any Equity Contribution Cure paid with respect to such Collection Period.
“Back-Up Management Agreement” means the Back-Up Management Agreement, dated as of the Initial Closing Date, among the Issuer, the Manager, the Indenture Trustee and the Back-Up Manager, as the same may be amended, supplemented or otherwise modified from time to time.
“Back-Up Management Fee” means the fee payable to the Back-Up Manager for services rendered during each Collection Period, determined pursuant to Section 4.1 of the Back-Up Management Agreement.
“Back-Up Manager” means AlixPartners, LLP, in its capacity as back-up manager under the Back-Up Management Agreement, and any successor thereunder.
“Back-Up Manager Senior Capped Amount” means:
(a)$150,000 for any calendar year in which the Back-Up Manager does not perform any Warm Back-Up Management Duties or any Hot Back-Up Management Duties;


(b)$550,000 for any calendar year in which the Back-Up Manager does not perform any Hot Back-Up Manager Duties but does perform Warm Back-Up Management Duties; or
(c)initially $1,000,000 with respect to the Series 2025-1 Notes, which may be increased by the Issuer up to an aggregate amount of 0.375% of the aggregate initial principal amount of Notes issued pursuant to this Indenture and the related Series Supplements, for any calendar year in which the Back-Up Manager performs Hot Back-Up Manager Duties.
“Basic Documents” means the Indenture, each Joint Operating Agreement, the Transfer Agreement, any Additional Transfer Agreement, the DABS I Operating Agreement, the DABS II Operating Agreement, the DABS Phase X Operating Agreement, the Notes, the Management Services Agreement, the Back-Up Management Agreement, each Note Purchase Agreement, each Variable Funding Note Purchase Agreement, the Pledge Agreement, each Hedge Agreement, the Issuer Operating Agreement, the Holdings Operating Agreement, each Novation Agreement, the Intercreditor Acknowledgment, each Settlement Agreement, each Mortgage, each Escrow Agreement, each Assignment of Interests, each Corporate Services Agreement and other fee letters, agreements, documents and certificates delivered in connection with any of the foregoing.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Blocked Person” means (a) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons published by OFAC, (b) a Person, entity, organization, country or regime that is blocked or a target of sanctions that have been imposed under U.S. Economic Sanctions Laws, or (c) a Person that is an agent, department or instrumentality of, or is otherwise beneficially owned by, controlled by or acting on behalf of, directly or indirectly, any Person, entity, organization, country or regime described in clause (a) or (b).
“Book-Entry Notes” means a note registered in the name of the Depository or its nominee, ownership of which is reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant in accordance with the rules of such Depository); provided, that after the occurrence of a condition whereupon Definitive Notes are to be issued to Noteholders, such Book-Entry Notes shall no longer be “Book-Entry Notes.”
“Burden” means any and all royalties (including lessors’ royalties and nonparticipating royalties), overriding royalties, reversionary interests, net profits interests, production payments and other burdens upon, measured by or payable out of production.


“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions or trust companies in the State of New York or the state in which the Corporate Trust Office of the Indenture Trustee is located and are required or authorized by Law, regulation or executive order to be closed.
“Capital Lease” means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.
“Certificate of Registration” means the Certificate of Registration substantially in the form of Exhibit C to the Indenture.
“Change of Control” means the occurrence of any of the following:
(i)the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Diversified Energy Company Plc and its direct and indirect subsidiaries taken as a whole, to any Person (including any “person” as that term is used in Section 13(d)(3) of the Exchange Act) other than a Qualifying Owner or a Qualified Buyer;
(ii)the adoption of a plan relating to the liquidation or dissolution of Diversified Energy Company Plc, the Manager or the Operator;
(iii)the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that (A) any Person (including any “person” (as defined above)), excluding the Qualifying Owners and Qualified Buyers, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of Diversified Energy Company Plc, measured by voting power rather than number of shares, units or the like, and measured on a pro forma basis after giving effect to such transaction and (B) two (2) or more of the members of the Management Team as of immediately prior to the consummation of such transaction resign or are removed from their respective position; or
(iv)the occurrence of any event or series of events that results in Operator ceasing to be Controlled by Diversified Energy Company Plc.
Notwithstanding the preceding, a conversion of Diversified Energy Company Plc or any of its direct or indirect wholly-owned subsidiaries from a limited partnership, corporation, limited liability company or other form of entity to a limited liability company, corporation, limited partnership or other form of entity (including by way of merger, consolidation, amalgamation or liquidation) or an exchange of all of the outstanding capital stock in one form of entity for capital stock in another form of entity or the transfer or redomestication of Diversified Energy Company Plc to or in another jurisdiction shall not constitute a Change of


Control, so long as following such conversion, exchange, transfer or redomestication the “persons” (as that term is used in Section 13(d)(3) of the Exchange Act) who beneficially owned the capital stock of Diversified Energy Company Plc immediately prior to such transactions, together with Qualifying Owners, beneficially own in the aggregate more than 50% of the Voting Stock of such entity, or beneficially own sufficient capital stock in such entity to elect a majority of its directors, managers, trustees or other persons serving in a similar capacity for such entity or its general partner, as applicable, and, in either case no “person” (other than a Qualifying Owner) beneficially owns more than 50% of the Voting Stock of such entity or its general partner, as applicable. References to Diversified Energy Company Plc in the foregoing clauses (i) - (iv) shall also refer to the surviving entity after giving effect to such conversion, exchange, transfer or redomestication.
“Change of Control Applicable Premium” has the meaning specified in the applicable Series Supplement.
“Change of Control Redemption Price” has the meaning specified in the applicable Series Supplement.
“Class” means, collectively, all of the Notes bearing the same alphabetical designation and having the same payment terms (i.e., Variable Funding Notes or Term Notes). The respective Classes of Notes are designated under Series Supplements.
“Class A Excess Amortization Amount” has the meaning specified in the related Series Supplement.
“Class A Maximum Rated Amount” means, as of any date of determination, the maximum Outstanding Principal Balance of Class A Notes that are permitted to have a rating of not less than “BBB” by the Rating Agency, as most recently determined by the administrative agent under the related Variable Funding Note Purchase Agreement, in accordance with the related Variable Funding Note Purchase Agreement.  
“Class A Noteholder” means any Holder of a Class A Note.
“Class A Notes” means the Notes of any Series designated as “Class A Notes” in the related Series Supplement.
“Class A Outstanding Principal Balance” has the meaning specified in the related Series Supplement.
“Class A-1 Excess Allocation Percentage” means, as of any date of determination, the highest Class A-1 Excess Allocation Percentage then in effect for any outstanding Series of Class A-1 Notes.
“Class A-1 Excess Amortization Amount” has the meaning specified in the related Series Supplement.
“Class A-1 Noteholder” means any Holder of a Class A-1 Note.


“Class A-1 Notes” means the Notes of any Series designated as “Class A-1 Notes” in the related Series Supplement.
“Class A-1 Outstanding Principal Balance” has the meaning specified in the related Series Supplement.
“Class A-1 Principal Distribution Amount” has the meaning specified in the related Series Supplement.
“Class A-1 Scheduled Principal Distribution Amount” has the meaning specified in the related Series Supplement.
“Class A-2 Excess Allocation Percentage” means, as of any date of determination, the highest Class A-2 Excess Allocation Percentage then in effect for any outstanding Series of Class A-2 Notes.
“Class A-2 Excess Amortization Amount” has the meaning specified in the related Series Supplement.
“Class A-2 Noteholder” means any Holder of a Class A-2 Note.
“Class A-2 Notes” means the Notes of any Series designated as “Class A-2 Notes” in the related Series Supplement.
“Class A-2 Outstanding Principal Balance” has the meaning specified in the related Series Supplement.
“Class A-2 Principal Distribution Amount” has the meaning specified in the related Series Supplement.
“Class A-2 Scheduled Principal Distribution Amount” has the meaning specified in the related Series Supplement.
“Class B Excess Allocation Percentage” means, as of any date of determination, the highest Class B Excess Allocation Percentage then in effect for any outstanding Series of Class B Notes.
“Class B Excess Amortization Amount” has the meaning specified in the related Series Supplement.
“Class B Noteholder” means any Holder of a Class B Note.
“Class B Notes” means the Notes of any Series designated as “Class B Notes” in the related Series Supplement.
“Class B Outstanding Principal Balance” has the meaning specified in the related Series Supplement.


“Class B Principal Distribution Amount” has the meaning specified in the related Series Supplement.
“Class B Scheduled Principal Distribution Amount” has the meaning specified in the related Series Supplement.
“Class Representative” means with respect to any Class or Series of Notes, issued pursuant to Rule 144A, as specified in the related Series Supplement.
“Clearstream” means Clearstream Banking S.A.
“Closing Date” or “Closing” means (i) the Initial Closing Date and (ii) the date of issuance of any Additional Notes, as applicable.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder.
“Collateral” has the meaning specified in the Granting Clause of the Indenture.
“Collection Account” means the account designated as such, established and maintained pursuant to Section 8.2(a) of the Indenture.
“Collection Period” means, with respect to any Payment Date, the period from and including the first day of the calendar month immediately preceding the calendar month in which such Payment Date occurs (or with respect to the initial Payment Date, from but excluding the applicable Cutoff Date) to and including the last day of the calendar month immediately preceding the calendar month in which such Payment Date occurs. Any amount stated as of the last day of a Collection Period shall give effect to the following applications as determined as of the close of business on such last day: (1) all applications of Collections and (2) all distributions to be made on the related Payment Date.
“Collections” means all amounts paid to the Issuer, the Guarantors, the Manager (solely in its capacity as such) or the Back-Up Manager from whatever source (excluding any amounts transferred by a Hedge Counterparty for deposit into any Hedge Collateral Account) on or with respect to the Assets and all amounts paid to Operator from whatever source with respect to the Assets (subject in all respects to the expense and reimbursement provisions of the Joint Operating Agreement); provided, for the avoidance of doubt, Collections deposited in the Collection Account shall not be net of any Seller Taxes (as defined under the related Asset Vesting Document).
“Commission” means the U.S. Securities and Exchange Commission.
“Concentration Limits” means (a) no single Well and Assets related to that Well comprise more than 5% of the pro forma consolidated PV-10 of the Assets, and (b) the five (5) Wells and Assets related to those Wells that individually comprise the largest portion of the pro forma consolidated PV-10 of the Assets collectively comprise no more than 15% of the PV-10 of the Assets.


“Consents” means any approval, consent, ratification, waiver or other authorization from any Person that is required to be obtained in connection with the Contemplated Transaction or the execution or delivery of the Basic Documents.
“Contemplated Transactions” means (i) all of the transactions contemplated by the Basic Documents, including: (a) the formation of the Issuer and Diversified Holdings; (b) the transfer of DABS I, DABS II and DABS Phase X to the Issuer; (c) the entering into the Basic Documents by the Diversified Parties and the performance by the Diversified Parties of their respective covenants and obligations under the Basic Documents; and (d) the Issuer’s and each Guarantor’s acquisition, ownership, and exercise of control over the Assets from and after the Initial Closing Date; and (ii) the Manager’s management of the Issuer and the Guarantors contemplated by the Management Services Agreement.
“Continuing Notes” has the meaning specified in Section 2.15 of the Indenture.
“Contract” has the meaning specified (i) with respect to the Initial Assets, in the definition of “Wellbore Interests” under the Transfer Agreement and (ii) with respect to any Additional Assets, in the applicable definition under the applicable Additional Transfer Agreement.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “Controlled” and “Controlling” shall have meanings correlative to the foregoing.
“Controlled Entity” means (a) any of the Issuer’s, Diversified Holdings’ and the Guarantors’ respective Controlled Affiliates and (b) Diversified and its Controlled Affiliates.
“Controlling Class” means, as of any date of determination, the senior-most Outstanding Class of Notes (i.e., the Class with the lowest alphabetical designation), without regard to allocation to a particular Series or tranche (i.e., the Class A Notes, while the Class A Notes are Outstanding, followed by the Class B Notes, while the Class B Notes are Outstanding and no Class A Notes are Outstanding, etc.).
“Corporate Services Agreement” means (i) the Corporate Services Agreement, dated as of the Initial Closing Date, between the Issuer and Citadel SPV LLC and (ii) each subsequent agreement providing for independent director services that may be entered into in connection with the addition of a Guarantor, or any replacement independent director services agreement of the foregoing, in each case, as amended, amended and restated, supplemented or otherwise modified from time to time.
“Corporate Trust Office” means the (i) principal office of the Indenture Trustee at which at any particular time the Indenture shall be administered, which office at the date of execution of the Indenture is located at UMB Bank, N.A., 100 William Street, Suite 1850, New York, New York 10038, Attn: ABS Structured Finance – Diversified ABS X LLC, e-mail: michele.voon@umb.com, (ii) for purposes of transfers and exchanges of Notes pursuant to the


Indenture, UMB Bank, N.A., 928 Grand Blvd., 9th Floor, Kansas City, MO 64106, Attn: Corporate Trust Dept, Bond Operations or (iii) at such other address or electronic mail address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee at the address or electronic mail address designated by such successor Indenture Trustee by written notice to the Noteholders and the Issuer.
“Credit Risk Retention Rules” means risk retention regulations in 17 C.F.R. Part 246 as such regulation may be amended from time to time and subject to such clarification and interpretation as have been provided by the Commission in an adopting release or by the staff of the Commission, or as may be provided in writing by the Commission or its staff from time to time.
“Cutoff Date” means the “Effective Time” as defined in the applicable Asset Vesting Document.
“DABS I” means Diversified ABS LLC, a Pennsylvania limited liability company.
“DABS I Operating Agreement” means the Amended and Restated Operating Agreement of DABS I, dated as of the Initial Closing Date, as further amended, amended and restated, supplemented or otherwise modified from time to time.
“DABS II” means Diversified ABS Phase II LLC, a Pennsylvania limited liability company.
“DABS II Operating Agreement” means the Amended and Restated Operating Agreement of DABS II, dated as of the Initial Closing Date, as further amended, amended and restated, supplemented or otherwise modified from time to time.
“DABS III Upstream” means Diversified ABS III Upstream LLC, a Pennsylvania limited liability company.
“DABS IV” means Diversified ABS Phase IV LLC, a Delaware limited liability company.
“DABS V Upstream” means Diversified ABS V Upstream LLC, a Pennsylvania limited liability company.
“DABS VIII” means Diversified ABS VIII LLC, a Delaware limited liability company.
“DABS IX” means DP Mustang Holdco LLC, a Delaware limited liability company.
“DABS Phase X Operating Agreement” means the Amended and Restated Operating Agreement of DABS Phase X, dated as of the Initial Closing Date, as further amended, amended and restated, supplemented or otherwise modified from time to time.


“DABS Phase X” means Diversified ABS Phase X LLC, a Pennsylvania limited liability company.
“Day Count Convention” means, with respect to Notes of any Class and Series, as specified in the related Series Supplement.
“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.
“Default Interest” with respect to any Series or Class of Notes, if applicable, shall be as specified in the related Series Supplement.
“Definitive Notes” means, collectively, the Definitive Term Notes and the Definitive Variable Funding Notes, in each case, substantially in the form of Exhibit A-3 and Exhibit A-4 to the Indenture, or, in each case in the form attached to the related Series Supplement.
“Definitive Term Notes” has the meaning specified in Section 2.1(b)(i) of the Indenture.
“Definitive Variable Funding Notes” has the meaning specified in Section 2.1(a)(i) of the Indenture.
“Depository” means initially, the Depository Trust Company (“DTC”), the nominee of which is Cede & Co., and any permitted successor depository.
“Depository Agreement” means, to the extent in existence, any agreement as between the Issuer and the Depository, governing the rights and responsibilities of each party.
“Depository Participant” means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depository effects book-entry transfers and pledges of securities deposited with the Depository.
“Designated Unpaid Interest Amount” has the meaning specified in Section 2.8 of the Indenture.
“Direct Expenses” has the meaning specified in the Management Services Agreement.
“Diversified” means Diversified Production LLC, a Pennsylvania limited liability company.
“Diversified Companies” means each of Diversified Energy Company Plc and the Diversified Parties.
“Diversified Corp” means Diversified Gas & Oil Corporation, a Delaware corporation.
“Diversified Holdings” means Diversified ABS X Holdings LLC, a Delaware limited liability company.


“Diversified Marketing” means Diversified Energy Marketing LLC, an Alabama limited liability company.
“Diversified Parties” means each of Diversified, Diversified Corp, Diversified Holdings, the Guarantors and the Issuer.
“DTC Custodian” means the Indenture Trustee, in its capacity as custodian of any Series or Class of Global Notes for DTC.
“Effective Time” has the meaning specified in the Transfer Agreement or the related Additional Transfer Agreement.
“Eligibility Criteria” means, subject to any exceptions in the Concentration Limits, Assets which are located in the Appalachian Region of the United States, and Assets not located in the Appalachian Region of the United States which comprise no more than 15% of the pro forma consolidated PV-10 of the Assets in the aggregate.
“Eligible Account” means a segregated account with an Eligible Institution.
“Eligible Institution” means:
(a)the corporate trust department of the Indenture Trustee; or
(b)a depository institution or trust company organized under the Laws of the United States of America or any one of the states thereof, or the District of Columbia (or any domestic branch of a foreign bank), which at all times (i) has either (A) a long-term unsecured debt rating of at least BBB or better by Fitch or, to the extent that Fitch does not rate the Notes, the equivalent or better by an NRSRO, or such other rating that is acceptable to the Majority Noteholders or (B) a certificate of deposit rating of at least F-1+ or better by Fitch or, to the extent that Fitch does not rate the Notes, the equivalent or better by an NRSRO, or such other rating that is acceptable to the Majority Noteholders and (ii) whose deposits are insured by the FDIC.
“Emissions Linked Performance Targets” means the GHG Emissions Performance Target or the Methane Emissions Performance Target.
“Encumbrance” means any charge, equitable interest, privilege, Lien, mortgage, deed of trust, production payment, collateral assignment, security interest, or other arrangement substantially equivalent to any of the foregoing.
“Environmental Law” has the meaning specified in the applicable Asset Vesting Document.
“Environmental Liabilities” has the meaning specified in the applicable Asset Vesting Document.


“Equity Contribution Cure” means on any date, a contribution or other payment to the Issuer made by depositing cash (other than Collections) into the Collection Account or a contribution of Additional Assets for the purpose of being an Equity Cure Contribution by any equity holder of the Issuer, provided such amount and contribution of Additional Assets (based on PV-10 value) shall not be more than ten percent (10%) in the aggregate of the initial principal amount of all the Notes (as of the respective date of issuance) issued pursuant to the Indenture (and each related Series Supplement) as of such date, and made no more frequently than twice (in aggregate) per calendar year, with such changes to the percent or frequency as are consented to by the Majority Noteholders.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Issuer for purposes of Section 412 of the Code or Title IV of ERISA.
“ERISA Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made by the Issuer or any ERISA Affiliate or with respect to which the Issuer or any ERISA Affiliate may have any liability.
“ERISA Restricted Notes” means the Notes of any Series designated as “ERISA Restricted Notes” in the related Series Supplement.
“Escrow Agent” if applicable, as specified in the related Series Supplement.
“Escrow Agreement” if applicable, as specified in the related Series Supplement.
“Escrow Funding Date” if applicable, as specified in the related Series Supplement.
“Escrow Interest” if applicable, as specified in the related Series Supplement.
“Euroclear” means the Euroclear System.
“Event of Default” has the meaning specified in Section 5.1(a) of the Indenture.
“Excess Amortization Amount” means, with respect to any Series or Class of Notes, as set forth in the applicable Series Supplement; provided that the Excess Amortization Amount with respect to any Series or Class of Notes as of any Payment Date shall not exceed the Outstanding Principal Balance of such Notes as of such Payment Date (calculated after giving effect to all prior payments on such Payment Date pursuant to the Priority of Payments).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.


“Excess Concentration Amounts” means, as of any date of determination, the sum, without duplication, of the PV-10 of the Oil and Gas Portfolio that exceeds one or more Concentration Limits.
“Executive Officer” means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, any Executive Vice President, Senior Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of such corporation; with respect to any limited liability company, any of the officers listed previously with respect to a corporation or any managing member or sole member of the limited liability company; with respect to any partnership, any general partner thereof; and with respect to any other entity, a similar situated Person.
“Existing Indebtedness” means, (x) as of the Initial Closing Date, collectively, the (i) $200,000,000 aggregate principal amount of Diversified ABS LLC’s 5.00% Notes due January 2037, (ii) $200,000,000 aggregate principal amount of Diversified ABS Phase II LLC’s 5.25% Notes due July 2037, and (iii) $160,000,000 term loan pursuant to the certain Credit Agreement, dated as of May 26, 2020, among DP Bluegrass LLC, as borrower, DABS Phase X, and Munich Re Energy Transition Finance Inc. f/k/a Munich Re Reserve Risk Financing, Inc., as lender, and (y) as of any other applicable Closing Date, indebtedness of any Additional Guarantors existing prior to such applicable Closing Date.
“External Verifier” means an independent third party engaged by Diversified Corp or any of its affiliates who in the ordinary course of business evaluates metrics such as the Emissions Linked Performance Targets and provides limited assurances with respect thereto.
“FATCA” means Sections 1471 through 1474 of the Code.
“FATCA Withholding Tax” means any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code and any regulations or any intergovernmental agreements thereunder or official interpretations thereof.
“FDIC” means the Federal Deposit Insurance Corporation.
“Final Scheduled Payment Date” with respect to any Class or Series of Notes, has the meaning specified in the related Series Supplement.
“Financial Asset” has the meaning given such term in Article 8 of the UCC. As used herein, the Financial Asset “related to” a security entitlement is the Financial Asset in which the entitlement holder (as defined in the New York UCC) holding such security entitlement has the rights and property interest specified in the New York UCC.
“Fitch” means Fitch Ratings, Inc., or any successor to the rating agency business thereof.
“GAAP” means Generally Accepted Accounting Principles.


“GHG Emissions Performance Target” means attaining Diversified Energy Company Plc’s target set forth in the Sustainability Framework to achieve a reduction in Diversified Energy Company Plc’s Scope 1 and Scope 2 GHG emissions intensity to 2.73 MT CO2e/MMcfe for the Observation Period as certified by the External Verifier, such measurement and certification to be made in accordance with measurement and verification practices and procedures commonly in effect in the industry as of the Initial Closing Date.
“Global Notes” means, collectively, the Rule 144A Global Notes and the Regulation S Global Notes.
“Governmental Authorization” means any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law.
“Governmental Body” means any (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
“Governmental Official” means any governmental official or employee, employee of any government-owned or government-controlled entity, political party, any official of a political party, candidate for political office, official of any public international organization or anyone else acting in an official capacity.
“Governmental Rule” means with respect to any Person, any Law, rule, regulation, ordinance, order, code, treaty, judgment, decree, directive, guideline, policy or similar form of decision of any Governmental Body binding on such Person.
“Grant” means mortgage, pledge, bargain, warrant, alienate, remise, release, convey, assign, transfer, create, grant a Lien upon and a security interest in, grant a right of set-off against, deposit, set over and confirm pursuant to the Indenture. A Grant of any item of Collateral or of any other property shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such item of Collateral and all other monies payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.
“Guarantors” means each Initial Guarantor and each Additional Guarantor, individually or collectively.


“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person:
(a)to purchase such indebtedness or obligation or any property constituting security therefor;
(b)to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;
(c)to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or
(d)otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.
“Hazardous Materials” has the meaning specified in the applicable Asset Vesting Document.
“Hedge Agreement” means any master agreement and related schedules, annexes and confirmations entered into between the Issuer and a Hedge Counterparty with respect to any swap, forward, option, swaption, cap, future or derivative transaction or similar agreement (whether entered into as a new transaction or by novation of a transaction or agreement existing as of the applicable Closing Date or thereafter), in each case whether cash or physical settlement, that is reasonably expected to hedge or mitigate the existing or anticipated commercial risk of the Issuer to one or more commodities including, without limitation, those transactions between the Issuer and each Hedge Counterparty, in each case, as amended, amended and restated, supplemented or otherwise modified from time to time.
“Hedge Collateral Accounts” has the meaning specified in Section 8.2(d) of the Indenture.
“Hedge Counterparty” means each of Canadian Imperial Bank of Commerce, Citizens Bank, National Association, J. Aron & Company LLC, and each subsequent counterparty to a Hedge Agreement which satisfies the Hedge Counterparty Rating Requirements at the time that it enters into the Hedge Agreement with the Issuer.


“Hedge Counterparty Rating Requirements” has the meaning specified in the relevant Hedge Agreement.
“Hedge Counterparty Rights Agreement” means any Hedge Counterparty Rights Letter Agreement, dated as of the applicable Closing Date, among the Issuer, the Indenture Trustee and any of the Hedge Counterparties, as may be amended, supplemented or otherwise modified from time to time.
“Holder” or “Noteholder” means the Person in whose name a Note is registered on the Note Register.
“Holdings Operating Agreement” means the Amended and Restated Operating Agreement of Diversified Holdings, dated as of the Initial Closing Date, as further amended, amended and restated, supplemented or otherwise modified from time to time.
“Hot Back-Up Management Duties” shall have the meaning set forth in the Back-Up Management Agreement.
“Hydrocarbons” means oil, gas, minerals, and other gaseous and liquid hydrocarbons or any combination of the foregoing.
“IFRS” means International Financial Reporting Standards.
“Indebtedness” means, with respect to any Person, at any time, without duplication,
(a)its liabilities for borrowed money;
(b)its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);
(c)(i) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases and (ii) all liabilities which would appear on its balance sheet in accordance with GAAP in respect of Synthetic Leases assuming such Synthetic Leases were accounted for as Capital Leases;
(d)all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);
(e)all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money);
(f)all its liabilities (including delivery and payment obligations) under any Hedge Agreement of such Person; and


(g)any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.
“Indenture” means the Indenture, dated as of the Initial Closing Date, among the Issuer, the Guarantors, the Indenture Trustee and the Securities Intermediary, as the same may be amended and supplemented from time to time.
“Indenture Trustee” means UMB Bank, N.A., a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture, or any successor Indenture Trustee under the Indenture.
“Independent” means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor on the Notes, Diversified and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any Material indirect financial interest in the Issuer, any such other obligor, Diversified or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, Diversified or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.
“Initial Assets” means the “Wellbore Interests” as defined in the Transfer Agreement.
“Initial Seller” means each of the “Sellers” as specified in the Transfer Agreement.
“Initial Closing Date” means February 27, 2025.
“Institutional Accredited Investor” means an “accredited investor” within the meaning of paragraph (1), (2), (3) or (7) of Rule 501(a) of Regulation D of the Securities Act or an entity owned entirely by other entities that fall within such paragraphs.
“Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than five percent (5%) of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.
“Intercreditor Acknowledgment” means that certain Acknowledgment Agreement, dated as of the Initial Closing Date, by and among the ABS I Trustee, ABS II Trustee, ABS IV Trustee, the ABS VIII Trustee, the ABS IX Trustee, the Indenture Trustee, and KeyBank National Association, and acknowledged and agreed to by DP RBL Co LLC, Diversified, Diversified Marketing, DABS I, DABS II, DABS IV, DABS VIII, DABS III Upstream, DABS


V Upstream, DABS IX, the Issuer, and DP Yellowjacket Holdco, LLC, as amended, amended and restated, supplemented or otherwise modified from time to time.
“Interest Accrual Period” means, with respect to any Payment Date, unless otherwise specified in the related Series Supplement for the Notes, the period from and including the immediately preceding Payment Date (or, in the case of the applicable initial Payment Date for a Series of Notes, from and including the related Closing Date or Escrow Funding Date, if applicable for the related Series) up to, but excluding, the current Payment Date.
“Interim Successor Manager” means, upon the resignation or termination of the Manager pursuant to the terms of the Management Services Agreement and prior to the appointment of any successor to the Manager, the Back-Up Manager.
“IO DSCR” means, as of any Quarterly Determination Date, beginning with the Payment Date occurring in April 2025, an amount equal to (a) the Securitized Net Cash Flow for each of the three (3) immediately preceding Collection Periods, divided by (b) the aggregate Note Interest with respect to the Controlling Class over such three (3) immediately preceding Payment Dates; provided, that, the IO DSCR may, but shall not be required to, be calculated until the first Quarterly Determination Date that is at least 3 months after the issuance of Additional Notes and the related Additional Assets; provided further, that, more than 6 months shall not have elapsed since the prior calculation.
“Interest Rate” means, with respect to any Series and Class of Notes, the per annum fixed or floating rate at which such Notes accrue interest, as specified in the related Series Supplement.
“Interest Rate Step Up Trigger Date” means the Payment Date in the month of May 2030.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“Investment Earnings” means, with respect to any Payment Date, the investment earnings (net of losses and investment expenses) on amounts on deposit in the Issuer Accounts to be deposited into the Collection Account on such Payment Date pursuant to Section 8.2(f) of the Indenture.
“Investments” means all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, Indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise.
“Issuer” means Diversified ABS X LLC, a Delaware limited liability company.
“Issuer Account Property” means the Issuer Accounts, all amounts and investments held from time to time in any Issuer Account (whether in the form of deposit accounts, Physical Property, book-entry securities, uncertificated securities or otherwise), and all proceeds of the foregoing.
“Issuer Accounts” shall have the meaning specified in Section 8.2(f) of the Indenture.


“Issuer Hedge Termination Receipt” shall have the meaning specified in Section 4.28(d) of the Indenture.
“Issuer Operating Agreement” means the Amended and Restated Operating Agreement of Diversified ABS X LLC, dated as of the Initial Closing Date, as further amended, amended and restated, supplemented or otherwise modified from time to time.
“Issuer Order” or “Issuer Request” means a written order or request signed in the name of the Issuer by any one of its authorized officers and delivered to the Indenture Trustee.
“Issuer Parties” and “Issuer Party” have the meanings specified in the preamble to the Indenture.
“Joint Operating Agreement” means, as applicable, (i) the Joint Operating Agreement, dated as of November 13, 2019, by and between Diversified and DABS I, as amended by (a) the Amendment to Operating Agreement, dated as of April 9, 2020, by and among Diversified, DABS I and DABS II, (b) the Second Amendment to Operating Agreement, dated as of February 4, 2022, by and among Diversified, DABS I, DABS II and DABS III Upstream, (c) the letter agreement, dated as of February 4, 2022, between Diversified and DABS III Upstream, (d) the Third Amendment to Operating Agreement, dated as of May 27, 2022, by and among, Diversified, DABS I, DABS II, DABS III Upstream and DABS V Upstream, (e) the letter agreement, dated as of May 27, 2022, between Diversified and DABS V Upstream, (f) the Fourth Amendment to Operating Agreement, dated as of May 30, 2024, by and among, Diversified, DABS I, DABS II, DABS III Upstream and DABS V Upstream, (g) the Fifth Amendment to Operating Agreement, dated as of the Initial Closing Date, by and among, Diversified, DABS I, DABS II, DABS III Upstream and DABS V Upstream, and (h) the letter agreement, dated as of the Initial Closing Date, by and among Diversified, DABS I and DABS II, and (ii) the Joint Operating Agreement, dated as of the Initial Closing Date, by and between Diversified and DABS Phase X, in each case, as further amended, amended and restated, supplemented or otherwise modified from time to time.
“Knowledge” means, with respect to any Diversified Company, the actual knowledge (following reasonable inquiry of direct reports) of any Executive Officer of such entity.
“L/C Reimbursements” means, with respect to any Series of Variable Funding Notes, as specified in the related Series Supplement.
“Law” means any applicable United States or foreign, federal, state, regional, or local statute, law, code, rule, treaty, convention, order, decree, injunction, directive, determination or other requirement and, where applicable, any legally binding interpretation thereof by a Governmental Body having jurisdiction with respect thereto or charged with the administration or interpretation thereof (including, without limitation, any Governmental Rule).
“Leases” has the meaning specified (i) with respect to the Initial Assets, in the definition of “Wellbore Interests” under the Transfer Agreement and (ii) with respect to any Additional Assets, in the applicable definition under the applicable Additional Transfer Agreement.


“Lien” means a security interest, lien, charge, pledge, equity or encumbrance of any kind.
“Liquidity Reserve Account” means the account designated as such, established and maintained pursuant to Section 8.2(c) of the Indenture.
“Liquidity Reserve Account Initial Deposit” means cash or Permitted Investments having a value equal to $19,110,056.
“Liquidity Reserve Account Required Balance” means an amount equal to 50% of the Liquidity Reserve Account Target Amount.
“Liquidity Reserve Account Target Amount” means, with respect to (a) first Payment Date, the Liquidity Reserve Account Initial Deposit, (b) any Payment Date after the first Payment Date and prior to which the Principal Coverage Condition has been achieved, the product of (i) six (6) and (ii) the sum of (y) the Note Interest on all outstanding Class A Notes and (z) Senior Transaction Fees for such Payment Date (this amount shall not be less than 50% of the Liquidity Reserve Account Initial Deposit) or (c) any Payment Date on or after which the Principal Coverage Condition has been achieved, $0.
“Loan Advances” means, with respect to any Series of Variable Funding Notes, as specified in the related Series Supplement.
“Majority Hedge Counterparties” means, as of the date of determination, (a) if there are less than three unaffiliated Hedge Counterparties on such date, all Hedge Counterparties, and (b) if there are three or more unaffiliated Hedge Counterparties on such date, Hedge Counterparties representing greater than sixty-six and two-thirds (66 2/3%) of the aggregate net mark-to-market exposure to the Issuer (with respect to each Hedge Agreement as determined by the relevant Hedge Counterparty acting in a commercially reasonable manner) of all outstanding Hedge Agreements at such time (calculated in the aggregate for each Hedge Counterparty but, for the avoidance of doubt, excluding from the aggregate any Hedge Counterparty to which the Issuer has net mark-to-market exposure). If no Hedge Counterparty has any positive net mark-to-market exposure to the Issuer, then a majority of the Hedge Counterparties in number shall, acting together, constitute the Majority Hedge Counterparties.
“Majority Noteholders” means, (i) as of the date of determination on which any Notes are Outstanding, means Noteholders (other than any Diversified Company and each of their Affiliates) representing greater than fifty percent (50%) of the aggregate Outstanding Principal Balance of the Controlling Class and (ii) as of any date of determination on which no Notes are Outstanding, and any Hedge Agreement with any Hedge Counterparties remains outstanding or any payments thereunder, including any termination value, remains unpaid, the Majority Hedge Counterparties until such time as all of the Hedge Agreements related to this Indenture have terminated and all payments thereunder, including termination value, have been paid in full.
“Management Services Agreement” means the Management Services Agreement, dated as of the Initial Closing Date, by and among the Manager, Diversified Corp and the Issuer, as amended, amended and restated, supplemented or otherwise modified from time to time.


“Management Team” means, at any point in time, those certain individuals serving as officers of Diversified Energy Company Plc as Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Legal and Risk Officer.
“Manager” means Diversified, in its capacity as manager under the Management Services Agreement, and any successor thereunder.
“Material” with respect to any Person means material in relation to the business, operations, affairs, financial condition, assets or properties of such Person.
“Material Event” means a Default, Event of Default, Rapid Amortization Event or Material Manager Default.
“Material Adverse Effect” means any event, occurrence, fact, condition or change that has a material adverse effect on (i) the business, operations, affairs, assets, properties, prospects, financial condition or results of operation of any Diversified Party, (ii) the validity, priority or enforceability of the Liens on the Collateral, taken as a whole, (iii) the ability of any Diversified Party, the Manager or the Operator to perform any Material obligation under any Basic Document to which it is a party, (iv) the ability of the Indenture Trustee to enforce any Diversified Party, the Manager or the Operator obligations under the Basic Documents to which such person is a party in any Material respect, or (v) the validity or enforceability against any Diversified Party, the Manager or the Operator of any Basic Document to which such person is a party.
“Material Manager Default” has the meaning specified in the Management Services Agreement, as of the Initial Closing Date, with such changes as are consented to by the Majority Noteholders and that would not reasonably be expected to be materially adverse to the Hedge Counterparties.
“Maximum Hedge Requirement” shall have the meaning specified in Section 4.28(e) of the Indenture.
“Methane Emissions Performance Target” means attaining Diversified Energy Company Plc’s target set forth in the Sustainability Framework to achieve a reduction in Diversified Energy Company Plc’s Scope 1 methane emissions intensity to 0.75 MT CO2e/MMcfe for the Observation Period as certified by the External Verifier, such measurement and certification to be made in accordance with measurement and verification practices and procedures commonly in effect in the industry as of the Initial Closing Date.
“Moody’s” means Moody’s Investors Service, Inc., or any successor to the rating agency business thereof.
“Mortgage” means any mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Indenture Trustee, for the benefit of the Secured Parties, on real property of the Issuer or the Guarantors, including any amendment, restatement, modification or supplement thereto.


“MT CO2e/MMcfe” means metric tons of carbon dioxide equivalent per million cubic feet of natural gas equivalent.
“Multiemployer Plan” means any ERISA Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).
“NAIC” means the National Association of Insurance Commissioners.
“Natural Gas Hedge Percentage” has the meaning specified in Section 4.29(a) of the Indenture.
“Natural Gas Hedge Period” has the meaning specified in Section 4.29(a) of the Indenture.
“Net Revenue Interest” means, for any Well, the holder’s share of the Hydrocarbons produced, saved and marketed therefrom (after satisfaction of all Burdens).
“NGL Hedge Percentage” has the meaning specified in Section 4.29(b) of the Indenture.
“NGL Hedge Period” has the meaning specified in Section 4.29(b) of the Indenture.
“Non-U.S. Plan” means any plan, fund or other similar program that (a) is established or maintained outside the United States of America by Diversified or the Issuer primarily for the benefit of employees of Diversified or the Issuer residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and (b) is not subject to ERISA or the Code.
“Note Interest” means, with respect to any Payment Date and to the Notes of a Class and Series, an amount equal to the sum of (i) with respect to the Class A Notes and Class B Notes, (x) the interest accrued thereon during the Interest Accrual Period at the applicable Interest Rate (which Interest Rate may be fixed or floating and shall be set forth in the related Series Supplement for such Series and Class of Notes) on the applicable Outstanding Principal Balance thereof plus (y) without duplication, any accrued and unpaid Note Interest thereon from prior Payment Dates, together with, to the extent permitted by law, this Indenture and the applicable Series Supplement, interest thereon at such Interest Rate during the Interest Accrual Period, calculated on the basis of the applicable Day Count Convention, and (ii) without duplication, solely with respect to the Class B Notes, to the extent applicable, any Designated Unpaid Interest Amounts. Note Interest on any Variable Funding Notes will be calculated on the daily average Outstanding Principal Balance thereof and will include any accrued and unpaid commitment fees and any other fees, expenses and other amounts due to the holders of such Variable Funding Notes under any Variable Funding Note Purchase Agreement.
“Note Owner” means, with respect to any Book-Entry Note, the Person who is the beneficial owner of such Note as reflected on the books of the Depository, a Depository


Participant or an indirect participating brokerage firm for which a Depository Participant acts as agent.
“Note Purchase Agreement” means a purchase agreement, dated as of the related Closing Date, related to the sale of all or a portion of a Series or Class of Notes, among the Diversified Parties party thereto and the purchasers thereof, as may be amended, supplemented or otherwise modified from time to time.
“Note Register” and “Note Registrar” have the respective meanings specified in Section 2.5(a) of the Indenture.
“Noteholder” means, with respect to a Definitive Note, the Person in whose name a Note is registered in the Note Register and, with respect to a Book-Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on the books of the Depository, or on the books of a Person maintaining an account with such Depository (directly as a Depository Participant or as an indirect participant, in each case in accordance with the rules of such Depository).
“Noteholder FATCA Information” means, with respect to any Noteholder, information sufficient to eliminate the imposition of, or determine the amount of, FATCA Withholding Tax.
“Noteholder Tax Identification Information” means, with respect to any Noteholder, properly completed and signed Tax certifications (generally, in the case of U.S. federal income Tax, IRS Form W-9 (or applicable successor form) in the case of a person that is a U.S. Person or the appropriate IRS Form W-8 (or applicable successor form)) as well as other relevant information if the Noteholder desires to claim the portfolio interest exemption in the case of a person that is not a U.S. Person.
“Notes” means the Term Notes and the Variable Funding Notes issued by the Issuer pursuant to the Indenture and the Series Supplements.
“Notification Date” means the date thirty (30) days prior to the Interest Rate Step Up Trigger Date.
“Novation Agreements” means each agreement by and among an Issuer Party, a transferor and a Hedge Counterparty pursuant to which hedging transactions are novated to the Issuer and become subject to the related Hedge Agreement between the Issuer Party and such Hedge Counterparty.
“NRSRO” means any nationally recognized statistical rating agency recognized as such by the Commission and acceptable to the SVO.
“Obligations” means all of the obligations of the Issuer and the Guarantors with respect to the Notes and any other Basic Document, including any Hedge Agreement, whether owed to Indenture Trustee, a Holder, or any other Person, as set forth under any Basic Document (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising), including, without limitation, the obligation


to pay principal, interest (including, for the avoidance of doubt, any default interest required under the Indenture), any Redemption Price, Change of Control Redemption Price and all actual, reasonable and documented costs, charges and expenses, attorney’s fees and disbursements, and indemnitees.
“Observation Period” means the year ended December 31, 2029.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“OFAC Sanctions Program” means any economic or trade sanction that OFAC is responsible for administering and enforcing. A list of OFAC Sanctions Programs may be found at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.
“Officer’s Certificate” means in the case of the Issuer, a certificate signed by a Responsible Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 12.1 of the Indenture, and delivered to the Indenture Trustee (unless otherwise specified, any reference in the Indenture to an Officer’s Certificate shall be to an Officer’s Certificate of a Responsible Officer of the Issuer), and in the case of the Manager or the Back-Up Manager, a certificate signed by a Responsible Officer of the Manager or the Backup Manager, as applicable.
“Oil and Gas Portfolio” means, as of any date of determination, collectively, all Assets then held by the Issuer and the Guarantors.
“Oil Hedge Percentage” has the meaning specified in Section 4.28 of the Indenture.
“Oil Hedge Period” has the meaning specified in Section 4.28 of the Indenture.
“Operating Expenses” means the amounts chargeable to the Joint Account (as defined in the applicable Joint Operating Agreement) with respect to Issuer’s interest. Operating Expenses excludes any amounts otherwise paid by Issuer under the Basic Documents and any internal general and administrative expenses of Issuer.
“Operator” means Diversified, in its capacity as operator under any Joint Operating Agreement, and any successor thereunder.
“Opinion of Counsel” means one or more written opinions of counsel who may, except as otherwise expressly provided in the Indenture, be an employee of or counsel to the Issuer (if satisfactory to the addressees of such opinion) and who shall be satisfactory to the addressees of such opinion, and which opinion or opinions if addressed to the Indenture Trustee, shall comply with any applicable requirements of Section 12.1 or any other applicable provision of the Indenture and, if applicable, shall be in form and substance satisfactory to the Indenture Trustee.
“Order” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.


“Organizational Documents” of any entity means (a) in the case of a corporation, the articles or certificate of incorporation (or the equivalent of such items under state Law) and the bylaws of such corporation, (b) in the case of a limited liability company, the certificate or articles of existence or formation and the operating agreement of such limited liability company, (c) in the case of a limited partnership, the certificate of formation and limited partnership agreement of such limited partnership and the Organizational Documents of the general partner of such limited partnership, and (d) any equivalent documents to the foregoing under the state Law where such entity was organized or formed.
“Other Agreement Default” means Diversified Party or any Affiliate of a Diversified Party shall fail to pay when due any principal or interest on any Indebtedness (other than the Indebtedness under the Basic Documents); if such failure to pay, breach or default entitles the holder to cause such Indebtedness having an individual principal amount in excess of $5,000,000 or having an aggregate principal amount in excess of $10,000,000 to become or be declared due prior to its stated maturity.
“Outstanding” means, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture except:
(i)Notes theretofore cancelled by the Note Registrar or delivered to the Note Registrar for cancellation;
(ii)Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given or waived pursuant to the Indenture or provision for such notice or waiver has been made which is satisfactory to the Indenture Trustee); and
(iii)Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a protected purchaser; provided, that in determining whether the Holders of the requisite Outstanding Principal Balance have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Notes owned by the Issuer, any other obligor upon the Notes, Diversified or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee has actual knowledge are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, Diversified or any Affiliate of any of the foregoing Persons.


“Outstanding Principal Balance” means, as of any date of determination, with respect to any Class and/or Series of Notes, the aggregate unpaid principal balance of all Outstanding Notes of such Class and/or Series.
“Ownership Interest” means, with respect to any Note, any ownership or security interest in such Note of the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee.
“P&A Expense Amount” means, for any fiscal year, the actual aggregate net amount of plugging and abandonment expenses attributable to the Initial Assets and any Additional Assets, which amount shall be determined by the Manager in accordance with the Management Standards (as defined in the Management Services Agreement).
“P&A Reserve Account” means one or more accounts or sub-accounts established on behalf of the Indenture Trustee and maintained by the Securities Intermediary in the name of the Issuer, in trust for the benefit of the Secured Parties.
“P&A Reserve Amount” means, with respect to any Payment Date after which a P&A Reserve Trigger occurs, an amount equal to (x) if the P&A Reserve Trigger is under subclause (a) of the definition of “P&A Reserve Trigger”, two (2) times the excess, if any, of (a) the P&A Expense Amount for the fiscal year preceding the applicable occurrence of the P&A Reserve Trigger over (b) the P&A Reserve Trigger Amount and (y) if the P&A Reserve Trigger is under subclause (b) of the definition of “P&A Reserve Trigger”, an amount equal to the P&A Expense Amount for the fiscal year preceding the applicable occurrence of the P&A Reserve Trigger.
“P&A Reserve Trigger” means the determination as of the Payment Determination Date in March of any fiscal year that the P&A Expense Amount for the Issuer’s prior fiscal year exceeded the P&A Reserve Trigger Amount.
“P&A Reserve Trigger Amount” means (i) for fiscal years 2025 through 2028, an amount equal to $1.0 million, (ii) for fiscal years 2029 through 2037, an amount equal to $1.5 million, and (iii) for fiscal years 2038 through 2045, an amount equal to $2.0 million.
“Paying Agent” means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 of the Indenture and is authorized by the Issuer to make payments to and distributions from the Collection Account including payments of principal of or interest on the Notes on behalf of the Issuer.
“Payment Date” means, with respect to each Collection Period, the 28th day of the following month or, if such day is not a Business Day, the immediately following Business Day. The initial Payment Date with respect to any Series of Notes shall be as set forth in the applicable Series Supplement.
“Payment Date Compliance Certificate” means the certificate delivered pursuant to Section 7.1(e) of the Indenture.


“Payment Date Report” means a certificate of the Manager delivered pursuant to Section 8.6 of the Indenture.
“Payment Determination Date” means, with respect to any Payment Date, two (2) Business Days immediately preceding such Payment Date.
“Permitted Dispositions” means the sale, or exchange for Additional Assets, of Assets by the Issuer or the Guarantors, as applicable, at a price or value equal to fair market value at the time of such sale or exchange, subject to the following limitations:
(a)the aggregate amount of Assets sold or exchanged does not exceed 15% of the cumulative initial principal balance of all Notes issued by the Issuer pursuant to the Indenture (and each related Series Supplement) on or prior to the date of such disposition;
(b)the aggregate amount of Assets sold to any Affiliate of the Diversified Parties does not exceed 5% of the cumulative initial principal balance of all Notes issued by the Issuer pursuant to the Indenture (and each related Series Supplement) on or prior to the date of such disposition;
(c)in the reasonable opinion of the Manager, the selection procedures used in selecting such Assets would not reasonably be expected to be materially adverse to the Noteholders or the Hedge Counterparties;
(d)the Pro Forma Aggregate DSCR shall not be less than 1.45 to 1.00, the Pro Forma Senior DSCR shall not be less than 1.55 to 1.00, the Pro Forma Aggregate IO DSCR shall not be less than 2.00 to 1.00, the Pro Forma Senior IO DSCR shall not be less than 2.25 to 1.00, the Pro Forma Aggregate LTV shall not be greater than 75% and the Pro Forma Senior LTV shall not be greater than 65% after giving effect to such sale or exchange and the application of the proceeds therefrom to the purchase of Additional Assets, the repayment of the Notes or any required hedge termination payment, if any;
(e)the Rating Agency Condition shall have been satisfied;
(f)no sale, or exchange for Additional Assets, of Assets may occur during the continuance of any Default, Event of Default, or Rapid Amortization Event;
(g)the proceeds of any disposition of Collateral shall be sufficient (together with other funds available for such purpose) to pay any breakage or termination amounts (including any interest thereon) owing to any Hedge Counterparty as a result of any termination of hedges;
(h)the consideration for the disposed Collateral shall be in the form of cash, cash equivalents or Additional Assets;
(i)the Concentration Limits are satisfied after giving effect to such disposition, or if, such Concentration Limit was not satisfied immediately prior to such disposition, the level of compliance with such limit is maintained or improved after giving effect to such disposition;


(j)if the PV-10 of the Assets disposed of through such disposition, individually or together with the PV-10 of the Assets disposed of through any related disposition, exceed 5% of the PV-10 of the Assets at the beginning of the relevant Annual Period (as reflected in the most recently delivered Reserve Report), then the Issuer shall have agreed to deliver (or cause the Manager to deliver) an updated Reserve Report within forty-five (45) days after such disposition; and
(k)delivery to the Indenture Trustee of an Officer’s Certificate certifying the above conditions.
(l)“Permitted Indebtedness” shall have the meaning specified in Section 4.21 of the Indenture.
“Permitted Investments” means (i) direct obligations of the United States of America or any agency thereof, or shares of money market funds that invest solely in such obligations, (ii) obligations fully guaranteed by the United States of America and certificates of deposit issued by, or bankers’ acceptances of, or time deposits, demand deposits or overnight deposits with, any bank, trust company or national banking association incorporated or doing business under the Laws of the United States of America or one of the states thereof having combined capital and surplus and retained earnings of at least $250,000,000, (iii) commercial paper of companies, banks, trust companies or national banking associations incorporated or doing business under the Laws of the United States of America or one of the states thereof and in each case having a rating assigned to such commercial paper by S&P or Moody’s (or, if neither such organization shall rate such commercial paper at any time, by any nationally recognized statistical rating organization in the United States of America) equal to the highest rating assigned by such organizations, and (iv) money market funds which (a) invest primarily in obligations of the United States of America or any agency thereof, corporate bonds, certificates of deposit, commercial paper rated AAAmmf or better by Fitch and P-1 or better by Moody’s, repurchase agreements, time deposits and (b) have a rating assigned to such fund by Moody’s, Fitch or S&P equal to “Aaa-mf”, “AAAmmf”, or “AAm”, respectively, or better. In no event shall any investment be eligible as a “Permitted Investment” unless the final maturity or date of return of such investment is thirty-one (31) days or less from the date of purchase thereof.
“Permitted Liens” shall, with respect to the Assets, have the meaning assigned to the term “Permitted Encumbrance” or similar term in the applicable Asset Vesting Document as of the related Closing Date, with such changes as are consented to by the Majority Noteholders and the Majority Hedge Counterparties.
“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.
“Physical Property” means instruments within the meaning of Section 9-102(a)(47) of the UCC and certificated securities within the meaning of Section 8-102 of the UCC.


“Placement Agents” means, with respect to any Series of Notes, as specified in the related Series Supplement.
“Plan” means (a) an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code that is subject to Section 4975 of the Code; (c) any plan subject to Similar Law or (d) any entity or account deemed to hold plan assets of the foregoing.
“Pledge Agreement” means the Pledge Agreement, dated as of the Initial Closing Date, among Diversified Holdings, the Issuer, the Guarantors, Diversified and the Indenture Trustee, for the benefit of the Secured Parties, as amended, amended and restated, supplemented or otherwise modified from time to time.
“Post-Renewal Date Amortization Period” means, with respect to any Variable Funding Notes, as designated in the relevant Series Supplement.
“Posted Collateral” means all Eligible Collateral (as defined by the Hedge Agreement) and the proceeds thereof, including all interest accruing on any such sums, that has been received by the Issuer from a Hedge Counterparty under a Hedge Agreement and has been deposited into an applicable Hedge Collateral Account.
“Predecessor Note” means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.6 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
“Principal Coverage Condition” means the first Payment Date upon which the sum of (a) Available Funds available subsequent to distributions on such Payment Date pursuant to Section 8.6(i)(C) of the Indenture and (b) the amounts available in the Liquidity Reserve Account, is greater than the aggregate Outstanding Principal Balance of the Class A Notes.
“Principal Distribution Amount” means, with respect to any Class and Series of Term Notes, as specified in the related Series Supplement.
“Proceeding” means any suit in equity, action at Law or other judicial or administrative proceeding.
“Proceeds Retention Condition” shall have the meaning specified in Section 8.4(c) of the Indenture.
“Production Tracking Rate” means, with respect to any Semi-Annual Determination Date beginning with the Payment Date occurring in July 2025, the quotient of (a) the aggregate production volume with respect to the Assets actually realized over the six (6) calendar months immediately preceding such date of determination over (b) the aggregate production volume with respect to the Assets projected in the most recent Reserve Report for the six (6) corresponding


calendar months; provided, that, any calculation of the Production Tracking Rate following the issuance of Additional Notes or the related Additional Assets may, but shall not be required to, be calculated until the first Semi-Annual Determination Date that is at least 6 months after such issuance of Additional Notes and the related Additional Assets; provided further, that, more than 12 months shall not have elapsed since the prior calculation.
“Pro Forma Aggregate DSCR” means the projected Aggregate DSCR calculation as of the Payment Determination Date occurring at least three (3) full calendar months following the date of the issuance of the relevant Additional Notes or Permitted Disposition.
“Pro Forma Aggregate IO DSCR” means the projected Aggregate IO DSCR calculation as of the Payment Determination Date occurring at least three (3) full calendar months following the date of the issuance of the relevant Additional Notes or Permitted Disposition.
“Pro Forma Aggregate LTV” means the projected Aggregate LTV calculation as of the Payment Determination Date occurring at least three (3) full calendar months following the date of the issuance of the relevant Additional Notes or Permitted Disposition; provided that if the Aggregate LTV would not be redetermined on such Payment Determination Date, the Pro Forma Aggregate LTV shall be the projected Aggregate LTV calculation as if such Payment Determination Date was a determination date for the Aggregate LTV.
“Pro Forma Senior DSCR” means the projected Senior DSCR calculation as of the Payment Determination Date occurring at least three (3) full calendar months following the date of the relevant issuance of Additional Notes or Permitted Disposition.
“Pro Forma Senior IO DSCR” means the projected Senior IO DSCR calculation as of the Payment Determination Date occurring at least three (3) full calendar months following the date of the relevant issuance of Additional Notes or Permitted Disposition.
“Pro Forma Senior LTV” means the projected Senior LTV calculation as of the Payment Determination Date occurring at least three (3) full calendar months following the date of the relevant issuance of Additional Notes or Permitted Disposition; provided that if the Senior LTV would not be redetermined on such Payment Determination Date, the Pro Forma Senior LTV shall be the projected Senior LTV calculation as if such Payment Determination Date was a determination date for the Senior LTV.
“PV-10” means the value calculated in the most recent Reserve Report delivered pursuant to Section 8.5 of the Indenture consisting of the discounted present value (using ten percent (10.0%) discount rate) of the sum of (i) the projected net cash flows from the Oil and Gas Portfolio categorized as proved, developed and producing, using commodity strip prices and (ii) the positive or negative aggregate mark-to-market value determined as of such date of determination of all Hedge Agreements, calculated in the aggregate for all Hydrocarbons hedged, calculated on an annual basis (or, to the extent the Manager in its discretion obtains an updated Reserve Report prior to any otherwise scheduled annually updated Reserve Report, calculated on a more frequent basis to reflect the projected proceeds described in such updated Reserve Report).


“Qualified Buyer” shall mean any U.S. domiciled private equity fund or controlled holding company, similar investment fund, sovereign wealth fund, publicly listed company, upstream or energy company, and/or similar entities or investors (or any consortium or combination of any or all of the foregoing) that in the aggregate for all such persons, has either (x) assets under management equal to or in excess of $1,000,000,000; (y) a market capitalization equal to or in excess of $1,000,000,000 or (z) an enterprise value equal to or in excess of $1,500,000,000.
“Qualified Institutional Buyer” means a “qualified institutional buyer” within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.
“Qualifying Debt Opinion” means an opinion, based on customary representations, covenants and undertakings by the Issuer and its Affiliates, from nationally-recognized Tax counsel to the effect that the Notes, or a Series or Class of Notes, will be properly characterized as debt for U.S. federal income Tax purposes, subject to customary assumptions and qualifications.
“Qualifying Owner” means any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) that directly or indirectly holds or acquires 100% of the total voting power of the Voting Stock of Diversified Energy Company Plc, and of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) holds more than 50% of the total voting power of the Voting Stock thereof.
“Quarterly Determination Date” means the Payment Determination Dates in the months of January, April, July and October.
“Rapid Amortization Event” means the occurrence and continuation of (i) any Event of Default under the Indenture, (ii) a Warm Trigger Event, (iii) any Material Manager Default under the Management Services Agreement, (iv) any Other Agreement Default, (v) the failure to repay the Notes by their applicable Anticipated Repayment Date, or (vi) failure to comply with Section 4.28 of this Indenture as determined by Section 4.28(e) of this Indenture.
“Rating Agency” means, with respect to any action or event in regards to a Series of Notes, the rating agency or agencies specified as such in the Series Supplement for such Series.
“Rating Agency Condition” means, with respect to any transaction or matter in regards to Notes of any Class and Series, a condition that is satisfied:
(i)    if “Rating Agency Condition” (or an analogous term) is defined in the Series Supplement for such Series, when such condition as defined therein has been satisfied; and
(ii)    if “Rating Agency Condition” (or an analogous term) is not defined in the Series Supplement for such Series, when each Rating Agency then rating such Notes shall have received ten (10) Business Days’ (or such shorter period as shall be acceptable


to such Rating Agency) prior written notice of such transaction or matter, and shall not have notified the Issuer that such transaction or matter will result in a downgrade or withdrawal of the then-current rating of such Rating Agency of such Notes.
“Rating Agency Contact” means, with respect to any other Rating Agency and Series of Notes, the contact details specified for such Rating Agency in the related Series Supplement.
“Record Date” means, with respect to a Payment Date or Redemption Date, the last day of the immediately preceding calendar month.
“Redemption” means the redemption of the Notes by the Issuer in accordance with Section 10.1 of the Indenture.
“Redemption Date” means a Business Day, (i) in the case of a redemption of the Notes pursuant to Section 10.1(a) of the Indenture, any day specified by the Issuer in the applicable notice of redemption, (ii) in the case of a redemption of the Notes pursuant to Section 10.1(b) of the Indenture, any day within 90 days of the triggering Change of Control, as specified by the Issuer pursuant to Section 10.1(b) of the Indenture or (iii) in each case as may be specified in the related Series Supplement.
“Redemption Price” means, in connection with a redemption of Notes of any Class and Series pursuant to Section 10.1 of the Indenture, the price specified in the related Series Supplement for Notes of such Class. For the avoidance of doubt, no Redemption Price shall be paid in connection with principal amounts redeemed solely as a result of the Issuer’s receipt and application of amounts pursuant to Section 8.6(iv) of the Indenture (including any Excess Hedge Amounts).
“Regulation S” means Regulation S promulgated under the Securities Act and any successor provision thereto.
“Regulation S Global Note” means, with respect to any Series and Class of Term Notes, a single global Note, in definitive, fully registered form without interest coupons, representing such Term Notes offered and sold outside the United States in reliance on Regulation S, which Note bears a Regulation S Legend.
“Regulation S Legend” means, with respect to any Series and Class of Term Notes, a legend generally to the effect that such Term Notes may not be offered, sold, pledged or otherwise transferred in the United States or to a U.S. Person prior to the date that is 40 days following the later of the commencement of the initial offering of such Term Notes and the Closing Date for such Term Notes, except pursuant to an exemption from the registration requirements of the Securities Act.
“Related Fund” means, with respect to any Holder of any Note, any fund or entity that (a) invests in Securities or bank loans, and (b) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.


“Release Date” means, with respect to any Series and Class of Term Notes, the date that is 40 days following the later of (i) the Closing Date for such Term Notes and (ii) the commencement of the initial offering of such Term Notes in reliance on Regulation S.
“Reserve Report” means (i) initially the Transfer Agreement Reserve Report and (ii) upon delivery of the updated reserve report required with respect to the Initial Assets and any Additional Assets pursuant to Section 8.5 of the Indenture, a reserve report in form and substance substantially similar to the Transfer Agreement Reserve Report (as adjusted for new information) and otherwise reasonably acceptable to the Majority Noteholders, setting forth as of the date of the report the oil and gas reserves of the Issuer and the Guarantors, together with a projection of the rate of production and future net income, Taxes, Operating Expenses and capital expenditures with respect to the Initial Assets and any Additional Assets as of that date based on good faith and reasonable economic assumptions provided by the Manager, containing customary assumptions, qualifications and exclusions; provided, that upon the reasonable request of the Majority Noteholders, the Majority Noteholders may, at their sole expense, independently audit the economic assumptions provided by the Manager.
“Responsible Officer” means, (x) with respect to the Indenture Trustee, any officer within the Corporate Trust Office of the Indenture Trustee, including any vice president, assistant vice president, assistant secretary, senior associate, associate, trust officer or any other officer, employee or other person of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject, in each case, who shall have direct responsibility for the administration of the Indenture, (y) with respect to the Issuer any officer, including any president, vice president, secretary or any other officer performing functions similar to those performed by such officers, and (z) with respect to Diversified Corp or Diversified, any officer, including any president, vice president, secretary or any other officer performing functions similar to those performed by such officers.
“Rule 144A” means Rule 144A promulgated under the Securities Act.
“Rule 144A Global Note” means, with respect to any Series and Class of Term Notes, a single global Note, in definitive, fully registered form without interest coupons, representing such Term Notes, which Note does not bear a Regulation S Legend.
“Rule 17g-5” has the meaning specified in Section 12.19(a) of the Indenture.
“Satisfaction Notification” means an Officer’s Certificate delivered at least 30 days prior to the applicable Interest Rate Step Up Trigger Date (the “Notification Date”) that in respect of the applicable Observation Period: (i) one or both Emissions Linked Performance Targets have been satisfied and (ii) the satisfaction of each Emissions Linked Performance Target has been confirmed by the External Verifier, such measurement and certification to be made in accordance with measurement and verification practices and procedures commonly in effect in the industry as of the Initial Closing Date.


“Schedule of Assets” means the schedules and exhibits to the related Asset Vesting Documents specifying the Assets being transferred, as such schedules and exhibits may be amended from time to time including by a related Series Supplement in connection with an issuance of Additional Notes.
“Section 385 Related Party” means the Issuer (or any entity treated as the Issuer for U.S. federal income Tax purposes), a member of an “expanded group” that includes the Issuer (or any entity treated as the Issuer for U.S. federal income Tax purposes) or with respect to which the Issuer is a “controlled partnership” or that would include the Issuer if the Issuer were a corporation or a “controlled partnership” with respect to such an expanded group, in each case within the meaning of Treasury Regulations under Section 385 of the Code.
“Secured Parties” means, collectively, each Noteholder, the Indenture Trustee, each Hedge Counterparty and the Back-Up Manager, and “Secured Party” means any of them individually.
“Securities” or “Security” shall have the meaning specified in section 2(a)(1) of the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended.
“Securities Intermediary” shall have the meaning specified in Section 8.2(g) of the Indenture.
“Securitized Net Cash Flow” means, with respect to any Collection Period, the sum of the aggregate proceeds of the Assets deposited in the Collection Account with respect to such Collection Period, the aggregate amount of Equity Contribution Cures, if any, deposited in the Collection Account with respect to such Collection Period, and the net proceeds of the Hedge Agreements received by the Issuer with respect to such Collection Period in excess of amounts payable pursuant to clauses (ii)(A) and (B) of Section 8.6 of the Indenture with respect to such Collection Period.
“Sellers” means, collectively, the Initial Sellers and each Additional Seller.
“Semi-Annual Determination Date” means the Payment Determination Dates in the months of January and July.
“Senior DSCR” means, as of any Quarterly Determination Date, beginning with the Payment Date occurring in April 2025, an amount equal to (a) the Securitized Net Cash Flow over the three (3) immediately preceding Collection Periods less the aggregate Senior Transaction Fees, divided by (b) the sum of (i) the aggregate interest accrued on the most senior Class of Notes then outstanding (in alphabetical order) over such three (3) immediately preceding Payment Dates and any unpaid interest for such most senior Class of Notes (in alphabetical order) at the beginning of the Payment Date three (3) months prior to such Quarterly Determination Date, (ii) the aggregate Principal Distribution Amount for the most senior Class of Notes (in alphabetical order) over such three (3) immediately preceding Payment


Dates, and (iii) without duplication, any unpaid Principal Distribution Amounts for such most senior Class of Notes (in alphabetical order) at the beginning of the Payment Date three (3) months prior to such Quarterly Determination Date; provided, that, any calculation of the Senior DSCR following the issuance of Additional Notes and the related Additional Assets may, but shall not be required to, be calculated until the first Quarterly Determination Date that is at least 3 months after such issuance of Additional Notes and the related Additional Assets; provided further, that, more than 6 months shall not have elapsed since the prior calculation.
“Senior Financial Officer” means, with respect to Diversified, the chief financial officer, principal accounting officer, treasurer or comptroller (or any other officer holding a title or role similar to any of the foregoing) of Diversified.
“Senior IO DSCR” means, as of any Quarterly Determination Date, beginning with the Payment Date occurring in April 2025, an amount equal to (a) the Securitized Net Cash Flow for each of the three (3) immediately preceding Collection Periods, divided by (b) the aggregate Note Interest with respect to the most senior Class of Notes over such three (3) immediately preceding Payment Dates; provided, that, any calculation of the Senior IO DSCR following the issuance of Additional Notes and the related Additional Assets may, but shall not be required to, be calculated until the first Quarterly Determination Date that is at least 3 months after such issuance of Additional Notes and the related Additional Assets; provided further, that, more than 6 months shall not have elapsed since the prior calculation.
“Senior LTV” means, as of any applicable date of determination, beginning with the Payment Date occurring in July 2025, an amount equal to (a) the excess of the Outstanding Principal Balance of the most senior Class of Notes then outstanding (in alphabetical order) as of such date of determination over the amount then on deposit in the Collection Account divided by (b) the sum of the PV-10 as of such date of determination less any Excess Concentration Amounts. The Senior LTV shall be determined on an annual basis; provided that, if the PV-10 shall have been re-calculated as a result of an updated reserve report being obtained prior to any otherwise scheduled annually updated reserve report (as described in the definition of “PV-10”), then the Senior LTV shall be re-calculated giving effect to such re-calculation of the PV-10 and on the basis of the then-current amounts specified in the preceding clause (a).
“Senior Transaction Fees” means any fees or expenses payable pursuant to clauses (i)(A) and (B) of Section 8.6 of the Indenture.
“Series” means a series of Notes issued pursuant to the Indenture and the related Series Supplement.
“Series Supplement” means a supplement to the Indenture pursuant to which a Series of Notes is issued.
“Settlement Agreement” means (i) the Settlement Agent Services Agreement, dated as of the Initial Closing Date, between the Issuer and UMB Bank, N.A., as settlement agent and (ii) each such additional agreement providing for DTC settlement services that may be entered into in connection with an issuance of Additional Notes.


“Similar Law” means any U.S. federal, state, non-U.S. or local Law that is substantially similar to Title I of ERISA or Section 4975 of the Code.
“Standard & Poor’s” or “S&P” means S&P Global Ratings, a division of S&P Global Inc., or any successor to the rating agency business thereof.
“State” means any one of the 50 States of the United States of America or the District of Columbia.
“State Sanctions List” means a list that is adopted by any state Governmental Body within the United States of America pertaining to Persons that engage in investment or other commercial activities in Iran or any other country that is a target of economic sanctions imposed under U.S. Economic Sanctions Laws.
“Subsequent Rate of Interest” has the meaning specified in Section 2.8(f) of the Indenture.
“Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a fifty percent (50%) interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Issuer, including the Guarantors, as applicable.
“Successor Manager Transition Expenses” means all costs and expenses incurred by a successor Manager or Interim Successor Manager in connection with the termination, removal and/or replacement of the Manager under the Management Services Agreement.
“Sustainability Framework” means the Sustainability Framework adopted by Diversified Energy Company Plc in May 2022.
“SVO” means the Securities Valuation Office of the NAIC.
“Swingline Loans” means, with respect to any Series of Variable Funding Notes, as specified in the related Series Supplement.
“Synthetic Lease” means, at any time, any lease (including leases that may be terminated by the lessee at any time) of any property (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income Tax purposes, other than any such lease under which such Person is the lessor.


“Target Date” means December 31, 2029.
“Tax” or “Taxes” means any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, assessments, and other governmental charges imposed by any Governmental Body, including income, profits, franchise, withholding, employment, social security (or similar), disability, occupation, ad valorem, property, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated, unemployment, severance, compensation, utility, stamp, occupation, premium, windfall profits, transfer, gains, production and excise taxes, and customs duties, together with any interest, penalties, fines or additions thereto.
“Tax Restricted Notes” means (i) Notes for which the Issuer does not receive a Qualifying Debt Opinion (a) at the time the Series or Class of such Notes is issued, or (b) to the extent the Notes are held by a Section 385 Related Party at any time, when such Notes are transferred by such Section 385 Related Party to another person and (ii) any Notes designated as such in an applicable Series Supplement (it being understood that such Series or Class that does not receive a Qualifying Debt Opinion at the time such Series or Class of Notes is issued will be designated as “Tax Restricted Notes” in the Series Supplement for such Series or Class).
“Term Notes” means Notes of a Series designated at the time of issuance thereof as “Term Notes” and pursuant to which the principal balance thereof permanently decreases with any principal payment on such Notes.
“Threatened” means a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made (orally or in writing) to a Diversified Company or any officers, directors, or employees of a Diversified Company that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.
“Transfer Agreement” means the Membership Interest Purchase Agreement, dated of the Initial Closing Date, by and among Diversified, Diversified Corp, Diversified ABS Holdings LLC, Diversified ABS Phase II Holdings LLC, DP Bluegrass LLC, DABS I, DABS II, DABS Phase X and the Issuer, as amended, amended and restated, supplemented or otherwise modified from time to time.
“Transfer Agreement Reserve Report” means the “Reserve Report” as defined in the Transfer Agreement.
“Transferor Certificate” has the meaning specified in Section 2.4(c) of the Indenture.
“Treasury Regulations” means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.


“UCC” means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time.
“Uncertificated Notes” has the meaning specified in Section 2.1(a)(i) of the Indenture.
“U.S. Economic Sanctions Laws” means those Laws, executive orders, enabling legislation or regulations administered and enforced by the United States pursuant to which economic sanctions have been imposed on any Person, entity, organization, country or regime, including the Trading with the Enemy Act, the International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan Accountability and Divestment Act and any other OFAC Sanctions Program.
“USA PATRIOT Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.
“U.S. Person” has the meaning given to the term “United States person” in Section 7701(a)(30) of the Code.
“Variable Funding Note Purchase Agreement” means, with respect to any Series of Variable Funding Notes, a purchase agreement, dated as of the related Closing Date, among the among the Diversified Parties party thereto and the purchasers thereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“Variable Funding Notes” means Class A Notes of a Series designated at the time of issuance thereof as “Variable Funding Notes” and pursuant to which the principal balance thereof may increase and decrease from time to time pursuant to the related Variable Funding Note Purchase Agreement.
“Variable Funding Notes Other Amounts” means amounts owing thereunder designated as “Other Amounts” in the applicable Series Supplement.
“VFN Notes Maximum Principal Amount” means, as of any date, the lesser of (a) the Class A Maximum Rated Amount minus the Outstanding Principal Balance of all Class A Notes (other than such VFN Notes), in each case, as of the most recent applicable determination date(s) (or, prior to the first such applicable determination date(s), the applicable Closing Date of such Series of Variable Funding Notes); provided, that, in no event shall the amount calculated pursuant to clause (a)  hereof be less than then outstanding letter of credit obligations; provided, further, that, any upward adjustment to the amount determined pursuant to clause (a) hereof shall be subject to the satisfaction of the Rating Agency Condition and (b) $100,000,000, as such amount may be reduced pursuant to the related Variable Funding Note Purchase Agreement and the Indenture or terminated pursuant to the terms of the related Variable Funding Note Purchase Agreement. 


“VFN Undrawn Commitment Fee” means, with respect to any Series of Variable Funding Notes, as specified in the related Series Supplement.
“VFN Deficiency Amount” means 100% of the amount by which the Outstanding Principal Balance under any Variable Funding Notes on any Payment Date exceeds the availability in effect thereunder.
“Voting Stock” of any specified Person as of any date means the capital stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
“Warm Back-Up Management Duties” shall have the meaning set forth in the Back-Up Management Agreement.
“Warm Trigger Event” will be continuing as of any Payment Date for so long as (i) the Senior DSCR as of such Payment Date is less than 1.45 to 1.00, (ii) the Production Tracking Rate as of such Payment Date is less than eighty percent (80%) or (iii) the Senior LTV as of such Payment Date is greater than eighty-five percent (85%).
“Wellbore Interests” has the meaning specified (i) with respect to the Initial Assets, in the Transfer Agreement and (ii) with respect to any Additional Assets, in the applicable definition under the applicable Additional Transfer Agreement.
“Wells” has the meaning specified (i) with respect to the Initial Assets, in the definition of “Wellbore Interests” under the Transfer Agreement and (ii) with respect to any Additional Assets, in the applicable definition under the applicable Additional Transfer Agreement.
“Working Interest” means, for any Well, that share of costs and expenses associated with the exploration, maintenance, development, and operation of such Well that the holder of the interest is required to bear and pay.



PART II - RULES OF CONSTRUCTION
(A)Accounting Terms. As used in this Appendix or the Basic Documents, accounting terms which are not defined, and accounting terms partly defined, herein or therein shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Appendix or the Basic Documents are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Appendix or the Basic Documents will control.
(B)“Hereof,” etc.: The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Appendix or any Basic Document will refer to this Appendix or such Basic Document as a whole and not to any particular provision of this Appendix or such Basic Document; and Section, Schedule and Exhibit references contained in this Appendix or any Basic Document are references to Sections, Schedules and Exhibits in or to this Appendix or such Basic Document unless otherwise specified. The word “or” is not exclusive.
(C)Use of “related” as used in this Appendix and the Basic Documents, with respect to any Payment Date, the “related Payment Determination Date,” the “related Collection Period,” and the “related Record Date” will mean the Payment Determination Date, the Collection Period, and the Record Date, respectively, immediately preceding such Payment Date.
(D)Amendments. Any agreement or instrument defined or referred to in the Basic Documents or in any instrument or certificate delivered in connection herewith shall mean such agreement or instrument as from time to time amended, modified or supplemented and includes references to all attachments thereto and instruments incorporated therein.
(E)Number and Gender. Each defined term used in this Appendix or the Basic Documents has a comparable meaning when used in its plural or singular form. Each gender-specific term used in this Appendix or the Basic Documents has a comparable meaning whether used in a masculine, feminine or gender-neutral form.
(F)Including. Whenever the term “including” (whether or not that term is followed by the phrase “but not limited to” or “without limitation” or words of similar effect) is used in this Appendix or the Basic Documents in connection with a listing of items within a particular classification, that listing will be interpreted to be illustrative only and will not be interpreted as a limitation on, or exclusive listing of, the items within that classification.
(G)UCC References. Terms used herein that are defined in the New York Uniform Commercial Code, as amended, and not otherwise defined herein shall have the meanings set forth in the New York Uniform Commercial Code, as amended, unless the context requires otherwise. Any reference herein to a “beneficial interest” in a security also shall mean, unless the context requires otherwise, a security entitlement with respect to such security, and any reference herein to a “beneficial owner” or “beneficial holder” of a security also shall mean, unless the context requires otherwise, the holder of a security entitlement with respect to such security. Any reference herein to money or other property that is to be deposited in or is on


deposit in a securities account shall also mean that such money or other property is to be credited to, or is credited to, such securities account.

Exhibit 4.14
Execution Version
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of March 14, 2025 by and between Diversified Energy Company plc, a public limited company incorporated in England and Wales (the “Company”), the Holders set forth on the signature pages hereto, and, solely for purposes of Section 2.8 herein, Diversified Gas & Oil Corporation, a Delaware corporation and direct wholly owned subsidiary of the Company (“DGOC”).
WHEREAS, this Agreement is made in connection with the closing of the transactions contemplated by that certain Merger Agreement, dated as of January 24, 2025 (the “Merger Agreement”), by and among the Company, Maverick Natural Resources, LLC, a Delaware limited liability company, Remington Merger Sub, LLC, a Delaware limited liability company and indirect wholly owned subsidiary of the Company, solely for purposes of Section 7.3 thereof, DGOC, and, solely for purposes of Section 2.7, Section 2.8, Section 2.10, Article VIII and Article IX thereof, EIG Management Company, LLC, a Delaware limited liability company (“EIG”), solely in its capacity as representative of the Company Unitholders, Company Restricted Unitholders and Company TVU Holders (in each case, as defined in the Merger Agreement);
WHEREAS, under the Merger Agreement, the Holders will receive ordinary shares, par value of £0.20 per share, of the Company (the “Ordinary Shares”);
WHEREAS, the Company has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Company Unitholders (as defined in the Merger Agreement) who received in the aggregate more than 1% of the outstanding Ordinary Shares at Closing (as defined in the Merger Agreement) (after giving effect to the allotment and issuance of the Stock Consideration (as defined in the Merger Agreement)); and
WHEREAS, it is a condition to the obligations of the parties under the Merger Agreement that this Agreement be executed and delivered.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the parties hereby agree as follows:
Article I
DEFINITIONS
Section 1.1Definitions. The terms set forth below are used herein as so defined:
“Affiliate” means, with respect to a specified Person, any other Person, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person; provided, that, notwithstanding the foregoing, the Holders and their Affiliates, including any Person that is a portfolio company of EIG, a portfolio company of any investment fund managed by EIG or a portfolio company of any investment fund managed by an Affiliate of EIG (other than the Company), shall not be considered Affiliates of the Company. For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning specified therefor in the introductory paragraph of this Agreement.
“Automatic Shelf Registration Statement” means an “automatic shelf registration statement” as defined in Rule 405 promulgated under the Securities Act.
“Beneficially Own” has the meaning ascribed to it in Section 13(d) of the Exchange Act.
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“Business Day” means any day (other than a Saturday or Sunday) on which banking institutions in the State of Texas and London, England are generally open for business.
“Closing Date” has the meaning specified therefor in the Merger Agreement.
“Closing Ordinary Shares” means the fully paid-up Ordinary Shares issued and allotted to the Holders on the Closing Date pursuant to the Merger Agreement and not any other Ordinary Shares held by any Holder.
“Commission” means the United States’ Securities and Exchange Commission.
“Company” has the meaning specified therefor in the introductory paragraph of this Agreement.
“Depositary Receipt” means a depositary receipt representing one whole Ordinary Share.
“DGOC” has the meaning specified therefor in the introductory paragraph of this Agreement.
“DTC” means the Depository Trust Company.
“DTRs” means the Disclosure Guidance and Transparency Rules set out in the FCA’s Disclosure Guidance and Transparency Rules sourcebook.
“Effective Date” has the meaning specified therefor in Section 2.1(a) of this Agreement.
“Effectiveness Period” means the period beginning on the Effective Date for the Registration Statement and ending at the time all Registrable Securities covered by such Registration Statement have ceased to be Registrable Securities.
“EIG” has the meaning specified therefor in the introductory paragraph of this Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
“Existing Holders” has the meaning specified therefor in Section 2.2(b) of this Agreement.
“Existing Registration Rights Agreement” means that certain registration rights agreement, dated as of August 15, 2024, by and between the Company and Crescent Pass Energy Holdings, LLC.
“FCA” means the United Kingdom’s Financial Services Authority acting in its capacity as relevant competent authority in the United Kingdom under Part VI of the FSMA.
“FINRA” means the Financial Industry Regulatory Authority.
“FSMA” means the United Kingdom’s Financial Services and Markets Act 2000, as amended.
“Holder” means the record holder of any Registrable Securities as set forth on the signature page hereto.
“Included Registrable Securities” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Laws” shall have the meaning set forth in the Merger Agreement.
“Legend Removal Documents” has the meaning specified therefor in Section 2.12 of this Agreement.
“Listing Rules” means the listing rules of the FCA made for the purposes of section 73A of the FSMA as set out in the FCA’s Listing Rules sourcebook, as amended from time to time.
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“Losses” has the meaning specified therefor in Section 2.9(a) of this Agreement.
“Managing Underwriter” means, with respect to any Underwritten Offering, the left lead book running manager of such Underwritten Offering.
“Market Abuse Regulation” means Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse, including as the same forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018, as amended, and as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019 (SI 2019/310).
“Merger Agreement” has the meaning specified therefor in the Recitals of this Agreement.
“Ordinary Shares” has the meaning specified therefor in the Recitals of this Agreement.
“Other Holders” has the meaning specified therefor in Section 2.2(b) of this Agreement.
“Permitted Transfer” has the meaning specified therefor in Section 2.6(b)(i) of this Agreement.
“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity.
“Piggyback Notice” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Piggyback Opt-Out Notice” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Piggyback Registration” has the meaning specified therefor in Section 2.2(a) of this Agreement.
“Registrable Securities” means, subject to Section 1.2 of this Agreement, the Closing Ordinary Shares.
“Registration” means any registration pursuant to this Agreement, including pursuant to the Shelf Registration Statement.
“Registration Statement” has the meaning specified therefor in Section 2.1 of this Agreement.
“Resale Opt-Out Notice” has the meaning specified therefor in Section 2.1(b) of this Agreement.
“Restricted Period” has the meaning specified therefor in Section 2.6(b)(ii) of this Agreement.
“Rule 144” has the meaning specified therefor in Section 1.2 of this Agreement.
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
“Selling Expenses” means all underwriting fees, discounts and selling commissions or similar fees or arrangements allocable to the sale of the Registrable Securities, transfer taxes and fees and disbursements of counsel to the Selling Holders except for the reasonable fees and disbursements of counsel for the Selling Holders required to be paid by DGOC pursuant to Section 2.8 of this Agreement.
“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a Registration.
“Selling Holder Election Notice” has the meaning specified therefor in Section 2.3(a) of this Agreement.
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“Shelf Registration Statement” means a registration statement under the Securities Act to permit the public resale of the Registrable Securities from time to time as permitted by Rule 415 of the Securities Act (or any similar provision then in force under the Securities Act).
“Transfer” has the meaning specified therefor in Section 2.6(b)(iii) of this Agreement.
“Underwritten Block Trade” has the meaning specified therefor in Section 2.3(b) of this Agreement.
“Underwritten Block Trade Minimum Commitment” has the meaning specified therefor in Section 2.3(b) of this Agreement.

“Underwritten Offering” means an offering (including an offering pursuant to a Shelf Registration Statement) in which Ordinary Shares are issued and allotted to investors and/or to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.
“Underwritten Offering Filing” means a registration statement or a preliminary prospectus supplement (or prospectus supplement if no preliminary prospectus supplement is used) to an effective registration statement, in each case relating to an Underwritten Offering.
“Underwritten Offering Minimum Commitment” has the meaning specified therefor in Section 2.3(a) of this Agreement.
“WKSI” means a well-known seasoned issuer (as defined in the rules and regulations of the Commission).
Section 1.2Registrable Securities. Any Registrable Security will cease to be a Registrable Security at the earliest of the following: (a) when a registration statement covering such Registrable Security has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security is held by the Company or one of its subsidiaries; (c) when such Registrable Security has been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such Registrable Security; (d) the date on which such Registrable Security has been sold pursuant to any section of Rule 144 under the Securities Act (or any similar provision then in force under the Securities Act, “Rule 144”) or any other exemption from the registration requirements of the Securities Act as a result of which the legend on any certificate, book-entry notation or Depositary Receipt representing such Registrable Security restricting transfer of such Registrable Security has been removed; or (e) when the Holder of such Registrable Security owns less than an aggregate of 1% of the then outstanding Ordinary Shares and such Holder may dispose of all Registrable Securities then owned by such Person, free of restrictions, without regard to Rule 144(b) (or any successor rule) under the Securities Act (i.e., such Person is not an affiliate of the Company, and has not been an affiliate of the Company for the previous three months, and has satisfied the one-year holding period under Rule 144).
Article II
REGISTRATION RIGHTS
Section 2.1Shelf Registration.
(a)Shelf Registration. The Company shall (i) prepare and file a Shelf Registration Statement under the Securities Act covering all Registrable Securities outstanding at the time of such filing (or submission) (a “Registration Statement”) within 90 calendar days from the date of this Agreement, and (ii) use its reasonable best efforts to cause such Shelf Registration Statement to become effective as promptly as is reasonably practicable but no later than (A) 30 days from its initial filing (or submission) if the Commission notifies the Company there will not be a “review” of such Registration Statement or (B) 180 days following the Closing Date (such date, the “Effective Date”); provided, that, the Effective Date may be extended as necessary in the opinion of counsel to clear any comments received from the Commission. The Registration Statement filed with the Commission pursuant to this Section 2.1 shall be on Form F-3 or Form S-3, as applicable, and, if the Company is a WKSI as of the filing date thereof, shall be an Automatic Shelf Registration Statement, or, if Form F-3 or Form S-3, as applicable, are not then
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available to the Company, on Form F-1 or Form S-1, as applicable, or such other form of registration statement as is then available to effect a registration for resale of the Registrable Securities, covering the Registrable Securities, and shall contain a prospectus in such form as to permit any Selling Holder covered by such Registration Statement to sell such Registrable Securities pursuant to Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) at any time beginning on the Effective Date for such Registration Statement. During the Effectiveness Period, the Company will use its reasonable best efforts to cause such Shelf Registration Statement on Form F-3 or Form S-3, as applicable, filed pursuant to this Section 2.1(a) to be continuously effective under the Securities Act, and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, that another registration statement is available, for the resale of the Registrable Securities until all Registrable Securities have ceased to be Registrable Securities. A Registration Statement when declared effective, or for purposes of an Automatic Shelf Registration Statement when filed with the Commission (including the documents incorporated therein by reference), will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Registration Statement, in the light of the circumstances under which a statement is made). As soon as practicable following the date that a Shelf Registration Statement becomes effective, but in any event within two Business Days of such date, the Company shall provide the Holders with written notice of the effectiveness of such Registration Statement.
(b)Resale Registration Opt-Out. At least three Business Days before the initial filing of a Shelf Registration Statement required by Section 2.1(a), the Company shall provide advance written notice (which notice may be provided prior to the date of this Agreement) to each Holder that it plans to file a Shelf Registration Statement. Any Holder may deliver advance written notice (a “Resale Opt-Out Notice”) to the Company requesting that such Holder not be included in a Shelf Registration Statement prior to its initial filing. Following receipt of a Resale Opt-Out Notice from a Holder, the Company shall not be required to include the Registrable Securities of such Holder in such Shelf Registration Statement.
(c)Delay Rights. Notwithstanding anything to the contrary contained herein, the Company may delay the filing of a Shelf Registration Statement required by Section 2.1(a) and may, upon written notice to any Selling Holder whose Registrable Securities are included in a Shelf Registration Statement filed pursuant to Section 2.1(a), suspend such Selling Holder’s use of any prospectus which is a part of the Shelf Registration Statement, including pursuant to an Underwritten Offering, (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to the Shelf Registration Statement) if (i) the Company determines that the offer or sale of Registrable Securities would reasonably be expected to have an adverse effect on any proposal or plan by the Company or any of its subsidiaries to engage in any acquisition of assets or stock (other than in the ordinary course of business) or any merger, consolidation, tender offer, recapitalization, reorganization, financing or other transaction involving the Company or (ii) upon advice of counsel, the sale of Registrable Securities pursuant to the Registration Statement would require disclosure of material non-public information / inside information not otherwise required to be disclosed under Law, and either (x) the Company has a bona fide business purpose for preserving the confidentiality of such information or transaction, (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate such transaction, or (z) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post effective basis, as applicable; provided, however, that the Company may only suspend Selling Holders from selling Registrable Securities pursuant to such Registration Statement twice in any twelve-month period and in no event for a period that exceeds an aggregate of 60 days in any 365-day period. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice to the Selling Holders whose Registrable Securities are included in the Shelf Registration Statement, but in any event within one Business Day of such disclosure or termination, and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions necessary or appropriate to permit registered sales of Registrable Securities as contemplated in this Agreement.
Section 2.2Piggyback Registration Participation. (a) If at any time the Company proposes to file an Underwritten Offering Filing for the sale of Ordinary Shares in an Underwritten Offering for its own account and/or another Person, other than (i) a Registration Statement contemplated by Section 2.1, (ii) a registration relating solely to employee benefit plans, (iii) a registration relating solely to a Rule 145 transaction, (iv) a registration relating to a transaction, the registration of which is filed on Form F-4 or Form S-4, as applicable, or (v) a registration statement on any registration form which does not permit secondary sales, then the Company shall give not less than three Business Days advance notice, or at least two Business Days in connection with any overnight or bought Underwritten Offering (including, but not limited to, notification by e-mail; such notice, a “Piggyback Notice”), of such proposed Underwritten Offering to each Holder, and such notice shall offer such Holder the opportunity to participate in any Underwritten Offering and to include in such Underwritten Offering such number of Registrable Securities (the “Included Registrable Securities”) as each such Holder may request in writing (a “Piggyback
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Registration”); provided, however, that (A) the Company shall not be required to include the Registrable Securities of the Holders in such Registration if the Holders do not offer in the aggregate a minimum of $15.0 million of Registrable Securities, and (B) if the Company has been advised by the Managing Underwriter that the inclusion of Registrable Securities for sale for the benefit of the Holders will have material and adverse effect on the offering price, timing or probability of success of the distribution of the Ordinary Shares in the Underwritten Offering, then the amount of Registrable Securities to be offered for the accounts of Holders shall be determined based on the provisions of Section 2.2(b) or in such other manner as such Selling Holders may agree. Each Piggyback Notice shall be provided to Holders on a Business Day pursuant to Section 3.1 hereof and confirmation of receipt of such notice shall be requested in the notice. The Holder will have two Business Days (or one Business Day in connection with any overnight or bought Underwritten Offering) after notice has been delivered to request in writing the inclusion of Registrable Securities in the Underwritten Offering. If no request for inclusion from a Holder is received within the specified time, such Holder shall have no further right to participate in such Piggyback Registration. If the Company is not required to offer the opportunity for a Piggyback Registration in respect of a proposed Underwritten Offering initiated by the Company as a result of the circumstance described in the immediately preceding sentence, the Company shall have no obligation to provide a Piggyback Notice to the Holder and the Holder shall have no right to include any Registrable Securities in such Underwritten Offering (and any related registration, if applicable). If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Company shall determine for any reason not to undertake or to delay such Underwritten Offering, the Company may, at its election, give written notice of such determination to the Selling Holders and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering. Any Selling Holder shall have the right to withdraw such Selling Holder’s request for inclusion of such Selling Holder’s Registrable Securities in such Underwritten Offering by giving written notice to the Company of such withdrawal at least one Business Day prior to such offering (or, if later, no later than one Business Day after receiving any notice (other than a Piggyback Notice) of reduction of offering size pursuant to the first sentence of Section 2.2(b)). Any Holder may deliver written notice (a “Piggyback Opt-Out Notice”) to the Company requesting that such Holder not receive notice from the Company of any proposed Underwritten Offering; provided, however, that such Holder may later revoke any such Piggyback Opt-Out Notice in writing. Following receipt of a Piggyback Opt-Out Notice from a Holder (unless subsequently revoked), the Company shall not be required to deliver any notice to such Holder pursuant to this Section 2.2(a) and such Holder shall no longer be entitled to participate in Underwritten Offerings by the Company pursuant to this Section 2.2(a), unless such Piggyback Opt-Out Notice is revoked by such Holder. Each Holder who receives a Piggyback Notice shall keep the receipt of such Piggyback Notice and any information it receives regarding the related Underwritten Offering confidential and will not disclose such information to any third party.
(a)Priority of Piggyback Registration. If the Managing Underwriter or Underwriters of any proposed Underwritten Offering of Ordinary Shares involving Included Registrable Securities advises the Company that the total amount of Ordinary Shares which the Selling Holders and any other Persons intend to include in such offering exceeds the number which can be sold in such offering without being likely to have a material and adverse effect on the offering price, timing or probability of success of the distribution of the Ordinary Shares offered or the market for the Ordinary Shares, then the Piggyback Notice provided by the Company pursuant to Section 2.2(a) shall include notification of such determination or, if such determination is made after the Piggyback Notice has been given, then the Company shall furnish notice in writing (including by e-mail) to the Holders (or to those who have timely elected to participate in such Underwritten Offering), and the Ordinary Shares to be included in such Underwritten Offering shall include the number of Ordinary Shares that such Managing Underwriter or Underwriters advises the Company can be sold without having such material and adverse effect, with such number to be allocated (i) if such Piggyback Registration was initiated by the Company, (A) first, to the Company, (B) second, pro rata among the Selling Holders and any holders granted registration rights under the Existing Registration Statement (the “Existing Holders”) who have requested participation in the Piggyback Registration (based, for each such Selling Holder or Existing Holder, on the percentage derived by dividing (1) the number of Ordinary Shares proposed to be sold by such Selling Holder or Existing Holder in such offering; by (2) the aggregate number of Ordinary Shares proposed to be sold by all Selling Holders and all Existing Holders in the Piggyback Registration), and (C) third, to any other holder of Ordinary Shares with registration rights and (ii) if such Piggyback Registration was not initiated by the Company, (A) first, solely to the extent such Registration was initiated pursuant to the Existing Registration Rights Agreement, to the Existing Holders initiating such Registration, (B) second, pro rata among the Selling Holders and any other Persons who have been, including the Existing Holders, or after the date hereof are granted registration rights on parity with the registration rights granted under this Agreement (the “Other Holders”) who have requested participation in the Piggyback Registration (based, for each such Selling Holder or Other Holder, on the percentage derived by dividing (1) the number of Ordinary Shares proposed to be sold by such Selling Holder or Other Holder in such offering; by (2) the aggregate number of Ordinary Shares proposed to be sold by all Selling Holders and all Other Holders in the Piggyback Registration other than the Existing Holders initiating such Registration in the event the immediately preceding clause (A)
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applies), (C) third, to any other holder of Ordinary Shares with registration rights on a pro rata basis, and (D) fourth, to the Company. For the avoidance of doubt, the priority set forth in this Section 2.2(b) shall not apply and shall have no effect in the event that a Holder exercises its rights pursuant to Section 2.3, which shall be governed exclusively by the provisions of Section 2.3.
Section 2.3Secondary Underwritten Offering.
(a)Underwritten Offering. In the event that a Selling Holder or a group of Selling Holders elects to dispose of Registrable Securities under the Shelf Registration Statement pursuant to an Underwritten Offering for its own account and reasonably expects gross proceeds of at least $20.0 million (such amount, the “Underwritten Offering Minimum Commitment”), such Selling Holder shall give notice of such election in writing (including, but not limited to, notification by e-mail; such notice, the “Selling Holder Election Notice”) to the Company not less than 5 Business Days before the date such Selling Holder intends for such Underwritten Offering to commence marketing (whether on a confidential basis or on a public basis).
(b)Underwritten Block Trade. In the event that a Selling Holder or a group of Selling Holders elects to dispose of Registrable Securities under the Shelf Registration Statement pursuant to an Underwritten Offering not involving a “roadshow,” an offer commonly known as a “block trade” (each, an “Underwritten Block Trade”) for its own account and reasonably expects gross proceeds of at least $15.0 million (such amount, the “Underwritten Block Trade Minimum Commitment”), such Selling Holder shall give a Selling Holder Election Notice to the Company not less than three Business Days before the date such Selling Holder intends for such Underwritten Block Trade to commence.
(c)Notice to the Company. The Selling Holder Election Notice shall specify the number of Registrable Securities that the Selling Holder intends to offer in such Underwritten Offering or Underwritten Block Trade, as applicable, and the expected commencement date thereof. The Company shall, at the request of such Selling Holder, enter into an underwriting agreement in a customary form (that is mutually agreeable to all parties thereto) with the Managing Underwriter or Underwriters selected by the Holders, which shall include, among other provisions, indemnities to the effect and to the extent provided in Section 2.9, and shall take all such other reasonable actions as are requested by the Managing Underwriter in order to expedite or facilitate the disposition of the Registrable Securities. For the avoidance of doubt, the Holders’ rights to elect to participate in an Underwritten Offering or Underwritten Block Trade pursuant to Section 2.3(a) and 2.3(b), respectively, shall not be limited in any way by the rights of other holders of Ordinary Shares with registration rights to make similar elections to participate in underwritten offerings of Ordinary Shares, except as expressly provided in this Agreement.
(d)Notice to Holders. Subject to applicable Laws (including the requirements under the Market Abuse Regulations), not later than (i) in the case of an Underwritten Offering, two Business Days, and (ii) in the case of an Underwritten Block Trade, one Business Day, after receipt by the Company of the Selling Holder Election Notice, unless the Company determines in accordance with Section 2.1(e) to delay such Underwritten Offering or Underwritten Block Trade (in which event the Company shall promptly notify the initiating Selling Holder in writing of such determination), then the Company shall provide written notice (including, but not limited to, notification by e-mail) to the other Holders of Registrable Securities of the Selling Holder’s intention to conduct an Underwritten Offering or Underwritten Block Trade, as applicable, and such notice shall offer such other Holders the opportunity to participate in such Underwritten Offering or Underwritten Block Trade, as applicable, and to include in such Underwritten Offering or Underwritten Block Trade, as applicable, such number of Registrable Securities as each such Holder may request in writing. Each such other Holder will have (i) in the case of an Underwritten Offering, three Business Days, or (ii) in the case of an Underwritten Block Trade, one Business Day, after notice has been delivered to request in writing submitted to the Company the inclusion of Registrable Securities in the Underwritten Offering or Underwritten Block Trade, as applicable. If no request for inclusion from a Holder is received by the Company within the specified time, such Holder shall have no further right to participate in such Underwritten Offering or Underwritten Block Trade. If, at any time after giving written notice of its intention to undertake an Underwritten Offering or Underwritten Block Trade and prior to the closing of such Underwritten Offering or Underwritten Block Trade, the Selling Holder giving the notice shall determine for any reason not to undertake or to delay such Underwritten Offering or Underwritten Block Trade, such Selling Holder may, at its election, give written notice of such determination to the Company and, if the failure of such Selling Holder to participate would cause the aggregate amount of Registrable Securities participating in the Underwritten Offering or Underwritten Block Trade to fall below the Underwritten Offering Minimum Commitment or Underwritten Block Trade Minimum Commitment, as applicable, the Company shall notify the other Holders and, (x) in the case of a determination not to undertake such Underwritten Offering or Underwritten Block Trade, shall be relieved of its obligation to include Registrable Securities of any other Holder, and (y) in the case of a determination to delay such Underwritten Offering or Underwritten Block Trade, shall be permitted to delay offering any Registrable Securities of any other Holder for the same period as the delay in the Underwritten Offering or Underwritten Block Trade. Any other Holder shall have the right to withdraw such Holder’s request for inclusion of
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such Holder’s Registrable Securities in such Underwritten Offering or Underwritten Block Trade by giving written notice to the Company of such withdrawal up to and including the time of pricing of such offering. If the Managing Underwriter or Underwriters of any proposed Underwritten Offering or Underwritten Block Trade of Registrable Securities under a Shelf Registration Statement advises the Company that the total amount of Registrable Securities which the Selling Holders and any other Persons intend to include in such offering exceeds the number which can be sold in such offering without being likely to have a material and adverse effect on the offering price, timing or probability of success of the distribution of the Registrable Securities offered or the market for the Registrable Securities, then the Registrable Securities to be included in such Underwritten Offering or Underwritten Block Trade shall include the number of Registrable Securities that such Managing Underwriter or Underwriters advises the Company can be sold without having such material and adverse effect, with such number to be allocated (i) first, to the Selling Holders who requested such Underwritten Offering or Underwritten Block Trade and any other Holders of Registrable Securities who have elected to participate in such Underwritten Offering or Underwritten Block Trade (based, for each such Selling Holder or other Holder, on the percentage derived by dividing (1) the number of Ordinary Shares proposed to be sold by such Selling Holder or other Holder in such offering; by (2) the aggregate number of Ordinary Shares proposed to be sold by such Selling Holders and such other Holders), (ii) second, to the Other Holders who have requested participation in the Underwritten Offering or Underwritten Block Trade, (iii) third, to any other holder of Ordinary Shares with registration rights on a pro rata basis, and (iv) fourth, to the Company.
(e)The Company shall not be required to conduct more than (i) five Underwritten Offerings (excluding Underwritten Block Trades as separately provided for in clause (ii) below) in the aggregate pursuant to this Section 2.3 (and not more than three of such Underwritten Offerings in any 365-day period; provided, that if on any day on or after the 18 month anniversary of the Closing Date, the Selling Holders Beneficially Own in the aggregate less than 10% of the outstanding Ordinary Shares as of such date, then, despite any later increase in the Ordinary Shares Beneficially Owned by the Selling Holders, not more than one of such Underwritten Offerings in any 365-day period) and (ii) five Underwritten Block Trades in the aggregate pursuant to this Section 2.3 (and not more than two of such Underwritten Block Trades in any 365-day period), provided, that the number of Underwritten Block Trades permitted pursuant to this clause (ii) may be increased in total or in any 365-day period with the number of unused Underwritten Offerings provided for in clause (i), in each case pursuant to Selling Holder Election Notices.
Section 2.4Sale Procedures.
(a)General Procedures. In connection with any Underwritten Offering (i) under Section 2.2 of this Agreement, the Company shall be entitled to select the Managing Underwriter or Underwriters, and (ii) under Section 2.3 of this Agreement, the Selling Holders shall be entitled to select the Managing Underwriter or Underwriters (provided, however, that the designated Managing Underwriter or Underwriters shall be reasonably acceptable to the Company). In connection with an Underwritten Offering contemplated by this Agreement in which a Selling Holder participates, each Selling Holder and the Company shall be obligated to enter into an underwriting agreement (in a form that is mutually agreeable to all parties thereto) with the Managing Underwriter or Underwriters which contains such representations, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of equity securities or an offering that is a “bought deal”. No Selling Holder may participate in such Underwritten Offering unless such Selling Holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities, “lock-up” arrangements and other documents reasonably required under the terms of such underwriting agreement. Each Selling Holder may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters also be made to and for such Selling Holder’s benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to its obligations. No Selling Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Selling Holder’s ownership of the securities being registered on its behalf and its intended method of distribution and any other representation required by law. If any Selling Holder disapproves of the terms of an Underwritten Offering, such Selling Holder may elect to withdraw therefrom by notice to the Company and the Managing Underwriter at least one Business Day prior to such Underwritten Offering. No such withdrawal or abandonment shall affect the Company’s obligation to pay expenses in accordance with Section 2.8.
(b)In connection with its obligations under this Article II, the Company will, subject at all times to compliance with all applicable laws and regulations (including, without limitation, the Listing Rules, the DTRs and the Market Abuse Regulation), as expeditiously as possible:
(i)prepare and file with the Commission such amendments and supplements to the Shelf Registration Statement and the prospectus used in connection therewith as may be necessary
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to keep a Shelf Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by a Shelf Registration Statement;
(ii)if a prospectus supplement will be used in connection with the marketing of an Underwritten Offering from a Shelf Registration Statement and the Managing Underwriter at any time shall notify the Company in writing that, in the sole judgment of such Managing Underwriter, the inclusion of detailed information to be used in such prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, the Company shall use its commercially reasonable efforts to include such information in the prospectus supplement;
(iii)furnish to each Selling Holder (A) as far in advance as reasonably practicable before filing a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing such Shelf Registration Statement or such other registration statement and the prospectus included therein or any supplement or amendment thereto, and (B) such number of copies of such Shelf Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Shelf Registration Statement or other registration statement;
(iv)if applicable, use its reasonable best efforts to register or qualify the Registrable Securities covered by a Shelf Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an Underwritten Offering, the Managing Underwriter, shall reasonably request, provided, that the Company will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject;
(v)promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (A) the filing of a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus included therein or any amendment or supplement thereto (other than any amendment or supplement resulting from the filing of a document incorporated by reference therein), and, with respect to such Shelf Registration Statement or any other registration statement or any post-effective amendment thereto, in each case other than an Automatic Shelf Registration Statement, when the same has become effective; and (B) the receipt of any written comments from the Commission with respect to any filing referred to in clause (A) and, subject to clause (vii) below, any written request by the Commission for amendments or supplements to such Shelf Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement thereto;
(vi)promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (A) the happening of any event as a result of which the prospectus or prospectus supplement contained in a Shelf Registration Statement or any other registration statement contemplated by this Agreement or any supplemental amendment thereto, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (B) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (C) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Company agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an
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untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;
(vii)upon request and subject to appropriate confidentiality obligations, furnish to each Selling Holder copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Registrable Securities;
(viii)in the case of an Underwritten Offering, furnish upon request a “comfort” letter, dated the pricing date of such Underwritten Offering and a letter of like kind dated the date of the closing under the underwriting agreement, in each case, signed by the independent public accountants who have certified the Company’s financial statements included or incorporated by reference into the applicable registration statement, and the “comfort” letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus included therein and any supplement thereto) and as are customarily covered in accountants’ letters delivered to the underwriters in underwritten offerings of securities;
(ix)in the case of an Underwritten Offering, use reasonable best efforts to furnish upon request a letter, dated the pricing date of such Underwritten Offering and a letter of like kind dated the date of the closing under the underwriting agreement, in each case, signed by the reserve engineers who have prepared reserve reports of estimated net proved oil and natural gas reserves with respect to certain oil and gas properties of the Company included or incorporated by reference into the applicable registration statement, and the letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus included therein and any supplement thereto) and as are customarily covered in reserve engineers’ letters delivered to the underwriters in underwritten offerings of securities;
(x)in the case of an Underwritten Offering, use reasonable best efforts to furnish upon request an opinion of U.S. counsel to the Company, dated the date of the closing under the underwriting agreement, in form and substance satisfactory to the underwriters of such Underwritten Offering;
(xi)otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;
(xii)make available to the appropriate representatives of the underwriters access to such information and the Company personnel as is reasonable and customary to enable such parties and their representatives to establish a due diligence defense under the Securities Act; provided, that the Company shall not disclose any non-public information to any such representatives unless and until such representatives have entered into a confidentiality agreement with the Company and/or as otherwise required by applicable law (including, without limitation, the Market Abuse Regulation);
(xiii)use its reasonable best efforts to cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which the Ordinary Shares are then listed or quoted;
(xiv)use its reasonable best efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders to consummate the disposition of such Registrable Securities;
(xv)provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the Effective Date of such registration statement;
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(xvi)enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders, or the underwriters, if any, in order to expedite or facilitate the disposition of such Registrable Securities (including, in the case of an Underwritten Offering of $50 million or greater of Registrable Securities, making appropriate officers of the Company available to participate in any “road show” presentations before analysts, and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Securities)); provided, however, that the officers of the Company shall not be required to dedicate an unreasonably burdensome amount of time in connection with activities for any Underwritten Offering; and
(xvii)if requested by any Selling Holder in connection with any transaction involving any Registrable Securities (including any sale or other transfer of such Registrable Securities without registration under the Securities Act, pledges pursuant to margin loans, hedging or other transactions or arrangements (including, without limitation, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined)), provide such Selling Holder with customary and reasonable assistance to facilitate such transaction, including, without limitation (A) such action as the Selling Holder may reasonably request from time to time to enable the Selling Holder to sell Registrable Securities without registration under the Securities Act and (B) entering into an “issuer’s agreement” in connection with any margin loan with respect to such Registrable Securities in customary form.
(c)Each Selling Holder will at all times be required to comply with its obligations under the Market Abuse Regulation in respect of the Registrable Securities and, upon receipt of notice from the Company of the happening of any event of the kind described in Section 2.4(b)(vi), shall forthwith discontinue disposition of the Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.4(b)(vi) or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by the Company, such Selling Holder will, or will request the Managing Underwriter or underwriters, if any, to deliver to the Company (at the Company’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus and any prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.
Section 2.5Cooperation by Holders. The Company shall have no obligation to include Registrable Securities of a Holder in the Shelf Registration Statement or in an Underwritten Offering under Article II of this Agreement if such Selling Holder has failed to timely furnish such information which, in the opinion of counsel to the Company, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.
Section 2.6Lock-Up.
(a)Each Holder hereby irrevocably agrees that, subject to the exceptions set forth in this Section 2.6, without the prior written consent of the Company, the Holder will not, during the applicable Restricted Period, Transfer any Closing Ordinary Shares and/or Depositary Receipts representing such Closing Ordinary Shares other than in Permitted Transfers.
(b)As used in this Section 2.6 with respect to each Holder:
(i)“Permitted Transfer” means any Transfer (A) to an Affiliate of the Holder or, upon prior written notice and subject to the execution of a joinder agreement as set forth in the proviso below, an entity in which one or more Affiliates of the Holder, directly, or indirectly through one or more Affiliates of the Holder, owns equity interests with sufficient voting control in such entity, or otherwise has legally enforceable rights, such that one or more Affiliates of the Holder retain sole dispositive power and exclusive voting control with respect to the Closing Ordinary Shares held by such entity; (B) to the Company or any of its subsidiaries or the Company’s Employee Benefit Trust, including pursuant to a share buyback, tender offer, or any other lawful purchase of Ordinary Shares by the Company or any of its subsidiaries or the Company’s Employee Benefit Trust; (C) pursuant to a liquidation, merger, consolidation, share exchange, reorganization, tender offer or other similar transaction involving the Company or any of its subsidiaries that has been approved, authorized or recommended by the board of directors of the Company; (D) of Ordinary Shares purchased by such Holder on the open market; and (E) (1) for estate planning purposes to any trust, partnership, limited liability company or other vehicle for the benefit of such Holder; (2) by will or intestate succession upon the death of a Holder or a division or distribution of a trust described in clause (1) above; (3) pursuant to a qualified
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domestic order, court order or in connection with a divorce settlement; (4) as a bona fide gift or charitable distribution, or for bona fide estate planning purposes; (5) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust (for purposes of this Section 2.6, “immediate family” shall mean any relationship by blood, current or former marriage, domestic partnership or adoption, not more remote than first cousin); (6) to a partnership, limited liability company or other entity of which the undersigned and the immediate family of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (7) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (1) through (6) above; and (8) if such Holder is a corporation, partnership (whether general, limited or otherwise), limited liability company, trust or other business entity, (x) to another corporation, partnership, limited liability company, trust or other business entity that controlled or managed by the Holder (including, but not limited to, any distribution to its members), or (y) to partners, limited liability company members, or stockholders of the Holder, including, for the avoidance of doubt, where the Holder is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership; provided, however, that in the case of any transfer or distribution pursuant to clauses (A) through (E) above, such transfer shall not involve a disposition for value and each donee, devisee, transferee or distributee must sign and deliver a lock-up agreement to the Company substantially in the form of this Section 2.6 for a period not to exceed the Restricted Period; provided, further, that in order for the Transfer to be effective and binding, any transferee who receives Closing Ordinary Shares or Depositary Receipts representing such Closing Ordinary Shares pursuant to a Permitted Transfer in accordance with clauses (A) through (E) above at any time while this Agreement remains in effect must first execute a joinder to this Agreement and agree to be bound by the terms of this Agreement as if they were an original party (in the capacity of the Holder) hereto.
(ii)“Restricted Period” means (a) with respect to 33% of the Closing Ordinary Shares or Depositary Receipts representing such Closing Ordinary Shares issued to the Holder, the period commencing on Closing Date and ending on the date that is six months after the Closing Date, (b) with respect to an additional 33% of the Closing Ordinary Shares or Depositary Receipts representing such Closing Ordinary Shares issued to the Holder, the period commencing on the Closing Date and ending on the date that is nine months after the Closing Date, and (c) with respect to the remaining 34% of the Closing Ordinary Shares or Depositary Receipts representing such Closing Ordinary Shares issued to the Holder, the period commencing on the Closing Date and ending on the date that is one year after the Closing Date.
(iii)“Transfer” means, with respect to Ordinary Shares or Depositary Receipts, directly or indirectly, by operation of Law, contract or otherwise, (A) the sale, transfer, assignment, pledge, hypothecation, mortgage, license, gift, creation of a security interest in or lien on, placement in trust (voting or otherwise), encumbrance or other disposition to any Person of such Ordinary Shares or Depositary Receipts, in whole or in part, including as a result of foreclosure on a security interest, (B) any hedging, swap, forward contract or other transaction that is designed to or which reasonably could be expected to lead to or result in a transfer or other disposition of Beneficial Ownership (as defined in Rule 13d-3 promulgated under the Exchange Act) of, or pecuniary interest in, or the economic consequences of having Beneficial Ownership of, such Ordinary Shares or Depositary Receipts, including any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to such Ordinary Shares or Depositary Receipts, (C) any short sale of, or trade in, such Ordinary Shares or Depositary Receipts, or entry into any transaction with respect to derivative securities representing the right to vote or economic benefits of, such Ordinary Shares or Depositary Receipts, or (D) any entry into any contract, option or other arrangement or understanding with respect to the matters described in the foregoing clauses (A) to (C); provided, however, that the following shall not be considered a “Transfer”: (1) entering into a voting or support agreement (with or without granting a proxy) in support of any merger, consolidation or other business combination of the Company that has been approved, and is then recommended, by the Company’s board of directors, whether effectuated through one transaction or series of related transactions (including a tender offer followed by a merger); or (2) the grant of a proxy to officers or directors of the Company at the request of the Company’s board of director in connection with actions to be taken at a general or special meeting of shareholders.
(c)Any attempted Transfer in violation of this Section 2.6 shall, to the fullest extent permitted by applicable Law, be null and void ab initio, and the Company shall not, and shall instruct its transfer agent and other parties not to, record or recognize any such purported transaction on the books of the Company. In
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furtherance of the foregoing, each Holder agrees that the Company and any duly appointed transfer agent for the registration or transfer of the Closing Ordinary Shares are hereby authorized to decline to make any Transfer of Closing Ordinary Shares or Depositary Receipts representing such Closing Ordinary Shares if such Transfer would constitute a violation or breach of this Section 2.6.
Section 2.7In-Kind Distributions. If any Holder seeks to effectuate an in-kind distribution of all or part of their Registrable Securities to their respective direct or indirect equityholders, the Company will, subject to any applicable lock-ups, including pursuant to Section 2.6, use commercially reasonable efforts to cooperate with and assist such Holder, such equityholders and the Company’s transfer agent to facilitate such in-kind distribution; provided, that the Holder and its equityholders, as applicable, shall (A) deliver such documents and undertakings reasonably requested by the Company, its counsel or its transfer agent in connection with such request, including an indemnity letter to the Company indemnifying the Company to the same extent the Company is required or requested to indemnify the Company’s transfer agent in connection with such in-kind distribution, if applicable, and (B) if applicable, agree not to sell such shares unless an effective registration statement is on file with the Commission or there is an applicable exemption from registration for such sale under the Securities Act or the rules promulgated thereunder. Any delivery of Ordinary Shares without restrictive legends pursuant to this Section 2.7 shall be made in accordance with Section 2.12. Notwithstanding the provisions of Section 2.8, each of the Holder and its equityholders shall be responsible for its own fees and expenses incident to the delivery of Ordinary Shares pursuant to this Section 2.7.
Section 2.8Expenses. The Company will pay all reasonable expenses incident to the Company’s performance under or compliance with this Agreement to effect the registration of Registrable Securities in a Shelf Registration Statement pursuant to Section 2.1, a Piggyback Registration pursuant to Section 2.2 or an Underwritten Offering or Underwritten Block Trade pursuant to Section 2.3 and the disposition of such securities, including, without limitation: (a) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the Commission or FINRA, (b) all fees and expenses in connection with compliance with any securities or “blue sky” laws, (c) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with DTC or other depositary and of printing prospectuses), (d) all fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and cold comfort letters required by or incident to such performance), (e) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed, (f) all applicable rating agency fees with respect to the Registrable Securities, (g) all fees and disbursements of legal counsel for the Company, (h) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties) and (i) all expenses of the Company and its officers and employees related to the “road-show” for any Underwritten Offering, including all travel, meals and lodging. Each Selling Holder shall pay its pro rata share of all Selling Expenses incurred by it in connection with any sale of its Registrable Securities hereunder (including all underwriting fees, discounts and selling commissions, transfer taxes allocable to the sale of the Registrable Securities and all fees and disbursements of counsel for the Selling Holders), provided that DGOC will pay all reasonable fees and disbursements of one legal counsel for Selling Holders selected by the Holders (which may be the same counsel as selected for the Company), together with any necessary local counsel as may be required by the Selling Holders, in an amount not to exceed $200,000 in any 12-month period.
Section 2.9Indemnification.
(a)By the Company. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, to the extent permitted by applicable law and without limitation as to time, the Company will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, members, partners, employees, agents, representatives and managers, and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, members, partners, employees, agents, representatives and managers, against any losses, claims, actions, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses), including any of the foregoing incurred in settlement of any litigation commenced or threatened by any party other than a Selling Holder (collectively, “Losses”), joint or several, to which such Selling Holder or controlling Person or directors, officers, employees, agents, representatives or managers may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in light of the circumstances under which such statement is made) contained in the Shelf Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus or final prospectus contained therein, or any free writing prospectus related thereto, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder, its directors and officers, and each such
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controlling Person and each such director, officer, employee, agent, representatives or manager for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings; provided, however, that the Company will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder or such controlling Person in writing specifically for use in the Shelf Registration Statement or such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or any such director, officer, employee, agent, representatives, manager or controlling Person, and shall survive the transfer of such securities by such Selling Holder.
(b)By Each Selling Holder. Each Selling Holder agrees severally and not jointly to indemnify and hold harmless the Company, its directors, officers, employees, representatives and agents and each Person, if any, who controls the Company within the meaning of the Securities Act or of the Exchange Act to the same extent as the foregoing indemnity from the Company to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in the Shelf Registration Statement or prospectus supplement relating to the Registrable Securities, or any amendment or supplement thereto; provided, however, that the liability of each Selling Holder shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification.
(c)Notice. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under this Section 2.9(c) except to the extent that the indemnifying party is materially prejudiced by such failure. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.9 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying party has failed to assume the defense and employ counsel reasonably satisfactory to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party or representation by both parties by the same counsel is otherwise inappropriate under the applicable standards of professional conduct, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, the indemnifying party shall not settle any indemnified claim without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, includes a complete release from liability of, and does not contain any admission of wrongdoing by, the indemnified party.
(d)Contribution. If the indemnification provided for in this Section 2.9 is held by a court or government agency of competent jurisdiction to be unavailable to the Company or any Selling Holder or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of such Selling Holder on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses attributable to such Selling Holder in accordance with Section 2.8) received by such Selling Holder from the sale of Registrable Securities giving rise to such indemnification less the amount of any damages that such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The relative fault of the Company on the one hand and each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. The amount paid by an
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indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss which is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.
(e)Other Indemnification. The provisions of this Section 2.9 shall be in addition to any other rights to indemnification or contribution which an indemnified party may have pursuant to law, equity, contract or otherwise. To the extent that any of the Holders is, or would be expected to be, deemed to be an underwriter of Registrable Securities pursuant to any Commission comments or policies or any court of law or otherwise, the Company agrees that (i) the indemnification and contribution provisions contained in this Section 2.9 shall be applicable to the benefit of such Holder in its role as deemed underwriter in addition to its capacity as a Holder (so long as the amount for which any other Holder is or becomes responsible does not exceed the amount for which such Holder would be responsible if the Holder were not deemed to be an underwriter of Registrable Securities) and (ii) such Holder and its representatives shall be entitled to conduct the due diligence which would normally be conducted in connection with an offering of securities registered under the Securities Act, including receipt of customary opinions and comfort letters.
Section 2.10Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company shall use reasonable best efforts to:
(a)Make and keep adequate current public information regarding the Company available, as those terms are understood and defined in Rule 144;
(b)File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
(c)So long as a Holder, together with its Affiliates, owns any Registrable Securities, (i) unless otherwise available at no charge by access electronically to the Commission’s EDGAR filing system (or any successor system), furnish to such Holder forthwith upon request a copy of the most recent annual or interim report of the Company, and such other public reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration, and (ii) to the extent accurate, furnish to such Holder upon reasonable request a written statement of the Company that it has complied with the reporting requirements of Rule 144.
Section 2.11Transfer or Assignment of Registration Rights. Without the prior written consent of the Company, the rights to cause the Company to register Registrable Securities granted to the Holders by the Company under this Article II may not be transferred or assigned by the Holders except to one or more transferee(s) or assignee(s) of such Registrable Securities pursuant to a Permitted Transfer in accordance with Section 2.6. The Company shall be given written notice prior to any said transfer or assignment, stating the name and address of each such transferee and identifying the securities with respect to which such registration rights are being transferred or assigned, and each such transferee shall assume in writing responsibility for its obligations of such Holder under this Agreement.
Section 2.12Company Obligations Regarding Legend Removal. The restrictive legend on any Depositary Receipts representing Ordinary Shares covered by this Agreement shall be removed only if (a) the Ordinary Shares represented by such Depositary Receipts are sold, distributed or otherwise transferred pursuant to an effective registration statement under the Securities Act in accordance with the plan of distribution described therein, (b) the Ordinary Shares represented by such Depositary Receipts may be sold by the applicable Holder free of restrictions without regard to Rule 144(b) (i.e., such Holder is not an Affiliate of the Company, and has not been an Affiliate of the Company for the previous three months, and has satisfied the one-year holding period under Rule 144), or (c) the Ordinary Shares represented by such Depositary Receipts are being sold, assigned or otherwise transferred pursuant to Rule 144 or another available exemption from registration under the Securities Act; provided, that with respect to clause (b) or (c) above, the applicable Holder has provided all documentation and evidence (which documentation (i) other than in connection with sales pursuant to Rule 144, may include an opinion of counsel and (ii) may include a representation letter from the Holder that, with respect to determinations of Affiliate status for purposes of Rule 144, shall be determinative, absent manifest error) as may reasonably be required by the Company or its transfer agent to confirm that the legend may be removed under applicable securities laws, including an indemnity letter to the Company indemnifying the Company to the same extent the Company is required or requested to indemnify the Company’s transfer agent in connection with such legend removal, if applicable, (the “Legend Removal Documents”). The Company will use its reasonable best efforts to assist such Holder in the facilitation of such transfers, including the delivery of instruction letters and legal opinions to the transfer agent. The
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Company shall cooperate with the applicable Holder covered by this Agreement to cause its transfer agent to remove the legend on such Depositary Receipts pursuant to this Section 2.12 and exchange such Depositary Receipts for Ordinary Shares as soon as reasonably practicable after delivery of notice from such Holder that the conditions to removal are satisfied (together with any Legend Removal Documents). The Company shall bear all direct costs and expenses associated with the removal of a legend pursuant to this Section 2.12, provided, that the applicable Holder shall be responsible for all fees and expenses (including of counsel for such Holder) incurred by such Holder. For the avoidance of doubt, each Holder acknowledges that no legend will be removed from Depositary Receipts hereunder unless such Depositary Receipts are being exchanged for Ordinary Shares without restrictions on transfer pursuant to this Section 2.12.
Section 2.13Aggregation of Registrable Securities. All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. In addition, all other Ordinary Shares held by a Person and for which such Person has similar registration rights pursuant to an agreement between such Person and the Company shall be aggregated together for the purpose of determining such Person’s rights under this Agreement solely as such shares relate to minimum quantity requirements contemplated herein; provided, that for the avoidance of doubt, such Ordinary Shares shall not otherwise be deemed Registrable Securities for any other purpose under this Agreement.
Section 2.14No Conflicts of Rights. The Company represents and warrants that it is not subject to any registration rights that are superior to, inconsistent with or that in any way violate or subordinate the rights granted to the Holders hereby. The Company shall not, prior to the termination of this Agreement, grant any registration rights that conflict with, would prevent the Company from performing, or are superior to or inconsistent with, the rights granted to the Holders hereby.
Section 2.15Limitation on Subsequent Registration Rights. From and after the date hereof, the Company shall not, without the prior written consent of the Holders, enter into any agreement with any current or future holder of any equity securities of the Company that would allow such current or future holder to require the Company to include equity securities in any registration statement filed by the Company on a basis other than pari passu with, or expressly subordinated to the piggyback rights granted to the Holders pursuant to Section 2.2 or Section 2.3; provided, that in no event shall the Company enter into any agreement from and after the date hereof that would permit another holder of securities of the Company to participate on a superior or pari passu basis (in terms of priority of cut-back based on advice of underwriters) with a Holder requesting registration or takedown in an Underwritten Offering or an Underwritten Block Trade pursuant to Section 2.3.
Article III
MISCELLANEOUS
Section 3.1Communications. All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, facsimile, e-mail, air courier guaranteeing overnight delivery or personal delivery to the following addresses:
(a)If to any Holder, to the address or email address under such Holder’s name on the signature pages hereto.
(b)If to the Company:
Diversified Production LLC
414 Summers Street, 2nd Floor
Charleston, WV 25301
Attn: Ben Sullivan
Email: bsullivan@dgoc.com
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
811 Main Street, Suite 3000
Houston, Texas 77002
Attention: Hillary H. Holmes
Facsimile: (346) 718-6902
E-mail: HHolmes@gibsondunn.com
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or, if to a transferee of a Holder, to the transferee at the address provided pursuant to Section 2.11 above. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the facsimile copy or e-mail, if sent via facsimile or e-mail; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.
Section 3.2Accredited Investor Status. Each of the undersigned receiving Closing Ordinary Shares on the Closing Date pursuant to the Merger Agreement hereby represents and warrants to the Company on the date hereof is an “accredited investor,” as such term is defined in Regulation D of the Securities Act, and is acquiring the Closing Ordinary Shares for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act, any applicable state blue sky Laws or any other applicable securities Laws.
Section 3.3Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.
Section 3.4Assignment of Rights. All or any portion of the rights and obligations of the Holders under this Agreement may be transferred or assigned by the Holders so long as in conformity with Section 2.6 and Section 2.11 hereof.
Section 3.5Recapitalization (Exchanges, etc. Affecting the Registrable Securities). The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued and allotted in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, recapitalizations and the like occurring after the date of this Agreement.
Section 3.6Specific Performance. Damages in the event of breach of this Agreement by a party hereto would be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives (a) any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief or that a remedy at law would be adequate and (b) any requirement under any law to post securities as a prerequisite to obtaining equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have.
Section 3.7Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.
Section 3.8Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
Section 3.9Governing Law, Submission to Jurisdiction. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement or the transactions contemplated hereby shall be brought and determined by courts of the State of Texas located in Houston, Texas and the federal courts of the United States of America located in Houston, Texas, and each of the parties hereto irrevocably submits to the exclusive jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement.
Section 3.10Waiver of Jury Trial. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVE, AND AGREE TO CAUSE THEIR AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
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OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 3.11Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.
Section 3.12Entire Agreement. This Agreement and the Merger Agreement are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein or therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein with respect to the rights granted by the Company set forth herein or therein. This Agreement and the Merger Agreement supersede all prior agreements and understandings between the parties with respect to such subject matter.
Section 3.13Term; Amendment. This Agreement shall automatically terminate and be of no further force and effect on the date on which there are no Registrable Securities. This Agreement may be amended only by means of a written amendment signed by the Company and the Holders of a majority of the then outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder.
Section 3.14No Presumption. In the event any claim is made by a party relating to any conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.
Section 3.15Obligations Limited to Parties to Agreement. Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Holders, their respective permitted assignees and the Company shall have any obligation hereunder and that, notwithstanding that one or more of the Company and the Holders may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, shareholder or Affiliate of any of the Company, the Holders or their respective permitted assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, shareholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise by incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, shareholder or Affiliate of any of the Company, the Holders or any of their respective assignees, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, shareholder or Affiliate of any of the foregoing, as such, for any obligations of the Company, the Holders or their respective permitted assignees under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any assignee of a Holder hereunder.
Section 3.16Interpretation. Article and Section references in this Agreement are references to the corresponding Article and Section to this Agreement, unless otherwise specified. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” If any period of days referred to in this Agreement shall end on a day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the first succeeding Business Day.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
DIVERSIFIED ENERGY COMPANY PLC
By:/s/ Benjamin M. Sullivan
Name:Benjamin M. Sullivan
Title:Senior Executive Vice President & Chief Legal and Risk Officer


DIVERSIFIED GAS & OIL CORPORATION
By:/s/ Benjamin M. Sullivan
Name:Benjamin M. Sullivan
Title:Senior Executive Vice President, Chief Legal and Risk Officer and Corporate Secretary
[Signature Page to Registration Rights Agreement]


By: EIG MANAGEMENT COMPANY, LLC, as designee for each Holder set forth below
By:/s/ Jean Powers
Name:Jean Powers
Title:Managing Director
By:/s/ Billy Rogers
Name:Billy Rogers
Title:Senior Vice President


Holders:
EIG REDWOOD CO-INVESTMENT, L.P.
EIG ENERGY FUND XV-A, L.P.
EIG ENERGY FUND XVI, L.P.
EIG ENERGY FUND XVI-E, L.P.
EIG ENERGY FUND XV, L.P.
EIG HOLDINGS CARRY SPLITTER (REDWOOD), L.P.
EIG ENERGY FUND XVI HOLDINGS SPLITTER (FOURPOINT), L.P. EIG ENERGY XV BLOCKER AGENT (REDWOOD), INC.
EIG ENERGY FUND XV BLOCKER SERIES C (FOUR POINT) LLC
Notices:
c/o EIG Management Company, LLC
333 Clay Street, Suite 3500
Houston, Texas 77002
Attention:    Jeannie Powers
        Billy Rogers
Email:        jeannie.powers@eigpartners.com
        billy.rogers@eigpartners.com
        notices@eigpartners.com





[Signature Page to Registration Rights Agreement]





FSIC INVESTMENTS, INC.
By:/s/ Stephen S. Sypherd
Name:Stephen S. Sypherd
Title:Authorized Signer


Notices:
Franklin Square Holdings, L.P.
201 Rouse Boulevard Philadelphia, PA 19112
Attention: Investment Management
Tel: (215) 495-1150
Facsimile: (214) 339-1931
Email: FSEPInvestments@fsinvestments.com; investmentops@fsinvestments.com
        





























[Signature Page to Registration Rights Agreement]








FSIC II INVESTMENTS, INC.
By:/s/ Stephen S. Sypherd
Name:Stephen S. Sypherd
Title:Authorized Signer


Notices:
Franklin Square Holdings, L.P.
201 Rouse Boulevard Philadelphia, PA 19112
Attention: Investment Management
Tel: (215) 495-1150
Facsimile: (214) 339-1931
Email: FSEPInvestments@fsinvestments.com; investmentops@fsinvestments.com



























[Signature Page to Registration Rights Agreement]











FSEP INVESTMENTS, INC.
By:/s/ Scott Giardina
Name:Scott Giardina
Title:Authorized Signer


Notices:
FSEP Investments Inc.
Investment Operations, 3rd Floor
201 Rouse Boulevard
Philadelphia, PA 19112
Telephone: (215) 372-1183
Email: investmentops@fsinvestments.com
[Signature Page to Registration Rights Agreement]
Exhibit 4.15
Execution Version
DATED MARCH 14, 2025
______________________
RELATIONSHIP AGREEMENT
between
DIVERSIFIED ENERGY COMPANY PLC
and
EIG MANAGEMENT COMPANY, LLC




CONTENTS
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THIS AGREEMENT is dated March 14, 2025
BETWEEN:
(1)Diversified Energy Company PLC, a public company incorporated in England and Wales under number 09156132 whose registered office is at 4th Floor Phoenix House, 1 Station Hill, Reading, Berkshire, United Kingdom, RG1 1NB (“Parent”); and
(2)EIG Management Company, LLC, a Delaware limited liability company (“EIG”).
Each of Parent and EIG being a “Party” and together, the “Parties”.
WHEREAS:
(A)(i) Parent, (ii) Remington Merger Sub, LLC, a Delaware limited liability company and indirect wholly owned subsidiary of Parent (“Merger Sub”), (iii) Maverick Natural Resources, LLC, a Delaware limited liability company (the “Company”), (iv) solely for purposes of Section 7.3 therein, Diversified Gas & Oil Corporation, a Delaware corporation, and (v) solely for purposes of certain specified provisions, EIG, solely in its capacity as representative of the existing holders of membership interests of the Company, are parties to that certain Merger Agreement dated as of January 24, 2025, providing for the merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the “Merger”).
(B)In connection with the Merger, certain controlled Affiliates (as defined below) of EIG will subscribe for Ordinary Shares (as defined below).
(C)The Parties are entering into this Agreement for the purposes of Parent providing to EIG, and each Party complying with, the respective undertakings set out herein.
THIS AGREEMENT WITNESSES as follows:
1Interpretation
1.1The definitions and rules of interpretation in this clause 1 apply in this Agreement.



Affiliate:with respect to any person, any other person that directly or indirectly through one or more intermediaries controls or is controlled by the person in question; provided that, with respect to a shareholder or any of its Affiliates, (x) “Affiliate” does not include any portfolio company of a shareholder or any of its Affiliates and (y) for purposes of this Agreement, Parent and its subsidiaries shall not be deemed to be an Affiliate of any shareholder of Parent or such shareholder’s Affiliates. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise.
Applicable Law:applicable statutes, laws, common laws, treaties, acts, constitutions, regulations, rules, codes, by-laws, injunctions, judgments, binding decrees, ordinances, rulings, awards, writs, orders or other binding requirement of any governmental authority.
Articles:the articles of association of Parent, as amended from time to time.
Board:the board of directors of Parent from time to time.
Business Day:any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York, United States or London, England.
Companies Act:the UK Companies Act 2006, as amended from time to time.
Confidential Information:any information of a secret or confidential nature received by a Party (or its Affiliates) from the other Party (or its Affiliates) in connection with this Agreement.
Corporate Governance Code:the UK Corporate Governance Code issued in January 2024 by the UK Financial Reporting Council, as amended from time to time.
Director:a director of Parent from time to time.
Disclosure Guidance and Transparency Rules:the Disclosure Guidance and Transparency Rules made by the FCA and forming part of the FCA Handbook, as amended from time to time.
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FCA:
the United Kingdom’s Financial Services Authority acting in its capacity as relevant competent authority the United Kingdom under Part VI of the Financial Services and Markets Act 2000.
FSMA:the Financial Services and Markets Act 2000, including any regulations or other legislation made pursuant thereto or in substitution therefor.
Group:Parent and its subsidiaries and subsidiary undertakings from time to time.
Independent Directors:a non-executive Director appointed in accordance with the Articles who is independent for the purposes of the Corporate Governance Code.
Listing Rules:the Listing Rules made by the FCA under Part VI of FSMA and forming part of the FCA’s Handbook of rules and guidance as amended from time to time.
Market Abuse Regulationthe UK version of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse, as it forms part of UK domestic law pursuant to the European Union (Withdrawal) Act 2018, as amended from time to time.
Nominated Director:
has the meaning given to that term in clause 3.1.
Nomination Committee:the nomination committee of the Board as constituted from time to time.
NYSE:the New York Stock Exchange.
Ordinary Shares:the ordinary shares, par value of £0.20 per share, of Parent.
Outstanding Ordinary Shares:at any given time, the aggregate number of Ordinary Shares issued by Parent at such time (which, for the avoidance of doubt, does not include treasury shares).
SEC:the U.S. Securities and Exchange Commission.
Termination Date:
has the meaning given in clause 2.
VAT:value added tax.
1.2Clause and paragraph headings shall not affect the interpretation of this Agreement.
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1.3References to clauses are to the clauses of this Agreement.
1.4A reference to this Agreement or to any other agreement or document referred to in this Agreement is a reference to this Agreement or such other agreement or document as varied or novated in accordance with its terms from time to time.
1.5Unless the context otherwise requires, words in the singular shall include the plural and, in the plural, shall include the singular.
1.6Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders.
1.7A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality).
1.8A reference to any Party shall include that Party’s successors.
1.9A reference to a company shall include any company, corporation or other body corporate, wherever and however incorporated or established.
1.10A reference to writing or written includes email.
1.11Any words following the terms including, include, in particular, for example or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms.
1.12A reference to a statute, statutory provision, code, regulation or rule is a reference to it as amended, extended, consolidated, replaced or re-enacted from time to time.
1.13A reference to a legislative or regulatory provision, rule or code shall include all subordinate legislation, regulations, rules and codes made from time to time under that provision, rule or code.
1.14Any obligation on a Party not to do something includes an obligation not to allow that thing to be done.
2Commencement and duration
2.1This Agreement shall come into force on the date hereof and shall continue in full force and effect until the date that this Agreement is terminated in accordance with clause 8 (the “Termination Date”).
3Nominated director appointment rights
3.1Parent agrees that for so long as EIG (including, for purposes of this clause 3, all of EIG’s controlled Affiliates) holds, in the aggregate:
(a)no fewer than twenty percent (20%) of the Outstanding Ordinary Shares, EIG shall be entitled to nominate for appointment two non-executive directors to the Board;
(b)fewer than twenty percent (20%) but no fewer than ten percent (10%) of the Outstanding Ordinary Shares, EIG shall be entitled to nominate for appointment
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one non-executive director to the Board (such persons referenced in clause 3.1(a) and 3.1(b) being “Nominated Directors”); and
(c)no fewer than ten percent (10%) of the Outstanding Ordinary Shares, the number of directors on the Board shall not exceed eight (8) without the prior written consent of EIG.
3.2The Parties agree that EIG’s right to nominate for appointment the Nominated Directors pursuant to section 3.1(a) and 3.1(b) shall cease immediately on the Business Day on which EIG ceases to hold at least twenty percent (20%) and ten percent (10%) of the Outstanding Ordinary Shares, respectively, and EIG shall not be entitled to nominate for appointment a Nominated Director if it holds, in aggregate, fewer than ten percent (10%) of the Outstanding Ordinary Shares.
3.3Any appointment, removal, or reappointment of a Nominated Director by EIG shall be made by written notice to Parent, provided that the first Nominated Directors shall be nominated within five Business Days following the first annual general meeting of Parent following the date of this Agreement. Prior to the appointment of a Nominated Director pursuant to this clause 3, EIG shall consult in advance and take into account the reasonable representations of the Nomination Committee and the Board regarding the identity, qualifications and suitability of the person proposed to be appointed. No Nominated Director shall be appointed or continue in office as a Director if the Nomination Committee (acting reasonably) determines that such appointment or continuation in office would have an adverse effect on the reputation or good standing of Parent.
3.4For so long as required pursuant to clause 3.1 and subject to clauses 3.3, 3.5 and 3.6 and to the requirements of the Articles, Parent shall, within ten Business Days after the date of written notice from EIG in accordance with clause 3.1, procure that the person so nominated is appointed, removed, or reappointed (as the case may be) as a Director on the Board.
3.5Parent’s obligation to formally appoint a Nominated Director in accordance with clause 3.3 shall be subject to and conditional on that person:
(a)not being an employee of Parent or its subsidiaries;
(b)not being disqualified under the Companies Act or any other Applicable Law from being appointed as a Director;
(c)not being prohibited under the Listing Rules or the Corporate Governance Code, in each case as applicable to the Parent; and
(d)entering into a letter of appointment with Parent, and agreeing to adhere to rules of conduct, in each case consistent with those of other non-executive directors of Parent.
3.6If a Nominated Director ceases to serve for any reason, EIG shall, subject to EIG being entitled to nominate such individual for appointment as a director of the Board pursuant to clause 3.1, be entitled to nominate such person’s successor for appointment in accordance with this Agreement and the Board shall promptly fill the vacancy with such successor Nominated Director in accordance with this Agreement.
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3.7If EIG is no longer entitled to nominate a Nominated Director(s) pursuant to clauses 3.1 and 3.2, then upon receipt of a request from Parent to EIG or the applicable Nominated Director, such Nominated Director(s) shall (and EIG shall, to the extent legally able to do so, cause such Nominated Director(s) to) tender his resignation as a Director to be effective forthwith and such Nominated Director(s) shall not be entitled to seek compensation for loss of office and shall be deemed to have waived all claims that the relevant Nominated Director may have against Parent in connection thereto. For the avoidance of doubt, this shall not prejudice any Nominated Director’s right to indemnification from Parent in respect of his period of office, whether under the Articles or a separate deed of indemnity with Parent, nor any Nominated Director’s rights and/or claims as a shareholder of Parent. If the relevant Nominated Director refuses to resign, the Parties shall use their best endeavors to ensure that the relevant Nominated Director is removed at a general meeting of the shareholders under section 168 of the Companies Act as soon as practicable.
3.8Without prejudice to the Articles, Parent shall be entitled by notice in writing to EIG to immediately terminate the appointment of any Nominated Director where:
(a)he is prohibited by law from being a director;
(b)he is removed from office by the shareholders of Parent at a general meeting pursuant to section 168 of the Companies Act or is not re-elected as a director by the shareholders of Parent at an annual general meeting;
(c)the Nominated Director commits a material breach of his obligations under his letter of appointment with Parent; or
(d)EIG is obliged under clause 3.7 to cause the resignation of the relevant Nominee and such Nominee has not so resigned with immediate effect.
3.9EIG agrees that, if the appointment of a particular Nominated Director is terminated by Parent for any reason set out in clause 3.8 above, then EIG will procure the resignation of such individual as soon as reasonably practicable and EIG will not (save with the prior approval of the Nomination Committee) be entitled to nominate such individual for re-appointment as a Nominated Director.
3.10Each Nominated Director shall receive the same compensation for his service as a non-executive director to Parent, and shall be entitled to the same rights to indemnification and exculpation from Parent, in each case, as the other directors on the Board that are not Nominated Directors. Each Nominated Director shall be reimbursed by Parent for all reasonable travel and other out-of-pocket expenses that such Nominated Director incurs in attending or participating in meetings of the Board or otherwise fulfilling such Nominated Director’s duties as a director, at the same rate and in the same manner as the other directors on the Board that are not Nominated Directors.
3.11EIG shall indemnify Parent on demand in full against any liabilities incurred by Parent and arising as a direct result of any claims by a Nominated Director arising from loss of office, together with any costs reasonably incurred by Parent in connection with the convening, holding and/or administration of any general meeting to consider any resolution to remove such Nominated Director.
3.12EIG shall notify Parent promptly upon ceasing to hold (i) twenty percent (20%) or more, and (ii) ten percent (10%) or more, of the Outstanding Ordinary Shares and shall provide such information as may reasonably be required by Parent from time to time (and in any
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case prior to the appointment or re-appointment of any Nominated Director) to evidence that EIG continues to hold (i) ten percent (10%) or more or (ii) twenty percent (20%) or more, respectively, of the Outstanding Ordinary Shares, as the case may be.
4Undertakings
4.1EIG undertakes to Parent that it shall, and shall procure that its Affiliates and Nominated Directors (subject to such directors complying with their legal and fiduciary duties) shall:
(a)not take any action that would have the effect of preventing Parent or any other member of the Group from complying with Applicable Law, including any obligations under the Listing Rules, Disclosure Guidance and Transparency Rules, the Market Abuse Regulation, the requirements of the London Stock Exchange, the FSMA or the Financial Services Act, 2012;
(b)not propose or procure the proposal of any shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules;
(c)not take any action that would have the effect of preventing Parent, any other member of the Group or the Board from managing their affairs in accordance with the principles of good governance set out in the Corporate Governance Code;
(d)not exercise any voting or other rights and powers as a shareholder of Parent to procure or propose, or vote in favor of, any resolution which would be inconsistent with, undermine or breach any provisions of this Agreement, the Listing Rules, the Disclosure Guidance and Transparency Rules or the Market Abuse Regulation; and
(e)not take any steps or actions which would result in the cancellation of, or prevent Parent from maintaining, or render Parent unsuitable for, listing on the NYSE and/or the equity shares (commercial companies) category of the Official List and to trading on the main market for listed securities of the London Stock Exchange, unless recommended by the Board, or result in the Parent being subject to regulatory censure or other adverse regulatory action.
5Procedure on conflict
5.1If, in the opinion of a majority of the Independent Directors present at a meeting of the Board, a matter, transaction, arrangement or agreement gives rise to a conflict of interest (direct or indirect) between:
(a)any member of the Group, on the one hand; and
(b)any Nominated Director, EIG or any of their Affiliates, on the other hand,
5.2(each, a “Conflict”), the Nominated Director shall:
(i)remove himself from any Board or committee meeting (or the relevant part thereof) during which any matter, transaction, arrangement or agreement to which the Conflict relates is discussed;
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(ii)not receive any Board or committee papers relating to the Conflict, unless a majority of the Independent Directors otherwise determines; and
(iii)not vote in relation to that matter, transaction, arrangement or agreement.
6Information
6.1For so long as EIG is entitled to nominate for appointment a Nominated Director pursuant to this Agreement, and subject to compliance by Parent with its legal and regulatory obligations, Parent shall provide to EIG (or procure that EIG is provided with) such financial and other information as may be reasonably requested by EIG for the purpose of:
(a)completing any tax return or other filing which may be required by Applicable Law;
(b)any audit or regulatory reason; or
(c)meeting its financial reporting requirements.
6.2Nothing in this clause 6 shall oblige Parent to take any action which in its reasonable opinion would be to the material detriment of the Group or any of the Group’s shareholders (other than EIG and/or its Affiliates).
6.3Each Nominated Director shall, to the extent permitted by Applicable Law and subject to that Nominated Director complying with his duties as a Director, be entitled to disclose any information received under or in connection with this Agreement or the Articles to EIG, provided that EIG and its Affiliates keep all such information received as Confidential Information. A Nominated Director may not disclose such information for the purposes of any competing business interests.
6.4EIG agrees, and agrees to procure that its Affiliates agree, to treat as Confidential Information all information provided to them under clauses 6.1 and 6.2.
6.5EIG acknowledges that (a) inside information and/or material non-public information may only be disclosed by any person (including a Nominated Director) in limited circumstances permitted by Applicable Law, and (b) notwithstanding the foregoing, any information disclosed to it by a Nominated Director, Parent or any other member of the Group may be inside information and/or material non-public information, and that EIG and its Affiliates are subject to Applicable Laws relating to market abuse and inside information in respect of their dealings in Parent’s securities while in possession of any such information.
6.6Parent and the Group accept no responsibility for or liability in respect of the information disclosed to EIG or any of its Affiliates pursuant to this clause 6.
7Confidentiality
7.1Each Party shall use all reasonable endeavors to ensure that Confidential Information of the other Party shall be treated as confidential by it and its officers, employees and agents and shall not be disclosed to any third party.
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7.2No Party shall make nor, in the case of Parent, permit any other member of the Group to make and, in the case of EIG, permit any of its Affiliates to make, any announcement concerning the subject matter of this Agreement.
7.3Nothing in this clause 7 prevents disclosure by any Party of Confidential Information of the other Party:
(a)with the written approval of the other Party;
(b)to the extent required by Applicable Law or by the FCA, the SEC, the UK Listing Authority, London Stock Exchange, the NYSE or any other competent regulatory body;
(c)to the extent that the information is in or comes into the public domain other than as a result of a breach of this Agreement;
(d)to the extent that the information is received from a person possessing it otherwise than as a result of any breach by any person of a duty of confidentiality to the other Party;
(e)for the purpose of pursuing or defending any proceedings arising out of this Agreement, any letter of appointment or the Articles;
(f)unless prohibited by Applicable Law, to that Party’s Affiliates and its and their professional advisers, auditors or bankers, provided that prior to any disclosure to any such person, the relevant Party shall procure that such person is made aware of the terms of this clause 7 and the relevant Party shall procure that such person adheres to these terms as if it were bound by the provisions of this clause 7; or
(g)to relevant tax or VAT authorities, any regulatory authority, and any other governmental or public authorities, but only to the extent that such persons require the information for the proper discharge of their functions.
8Standstill
8.1For a period of one (1) year following the date hereof, EIG shall not, and shall procure that none of its Affiliates shall, either alone or with other persons, directly or indirectly, whether alone or acting in concert with others, without Parent’s prior written consent:
(a)acquire, offer to acquire, procure, induce or encourage any other person to acquire any further direct or indirect interest in any Ordinary Shares or other securities of Parent or any member of its Group (“Parent Securities”) or enter into any agreement, arrangement or understanding (whether legally binding or not) or do or omit to do any act as a result of which it or any person may acquire any further direct or indirect interest in any Parent Securities;
(b)make, announce, procure or induce any other person to make or announce any firm offer, possible offer, invitation or solicitation for all or any interest in Parent Securities, or enter into any agreement, arrangement or understanding (whether legally binding or not), or do or omit to do any act as a result of which any person may become obliged to make or announce a firm offer, possible offer, invitation or solicitation for such an interest;
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(c)submit any proposal which because of its terms would be required to be made public by Parent, or announce any proposal for any purchase, offer, tender, merger, consolidation, share exchange, restructuring, recapitalization or similar transaction which in any case involves Parent Securities or any material undertakings, assets or business of Parent;
(d)take any step which might give rise to any obligation under the City Code on Takeovers and Mergers (the “Takeover Code”), as amended from time to time, or otherwise to make any sort of offer or tender for all or any part of the share capital of Parent;
(e)make or in any way participate, directly or indirectly, in any solicitation of proxies or votes or any attempt to influence votes from or by any holder of voting shares or other Parent Securities in connection with any vote of holders of Parent Securities or requisition or join in requisitioning or attempt to induce any other person to requisition any general meeting of Parent, other than in a manner that is recommended by the Board;
(f)enter into any agreement or arrangement (whether or not legally binding) with any person relating to or connected with any of the foregoing; or
(g)procure to be done any of the above.
9Termination
9.1This Agreement will terminate automatically upon the earlier of (i) the date on which EIG ceases to hold at least ten percent (10%) of the Outstanding Ordinary Shares (including, for purposes of this clause 9.1, any Outstanding Ordinary Shares held by EIG’s controlled Affiliates or persons acting in concert with EIG, as determined in accordance with the Takeover Code), or (ii) the date on which this Agreement is terminated by the mutual written consent of Parent and EIG.
9.2Termination of this Agreement shall not affect any rights, remedies, obligations or liabilities of the Parties that have accrued up to the date of termination, including the right to claim damages in respect of any breach of the Agreement which existed at or before the date of termination.
9.3If this Agreement is terminated pursuant to the provisions of this clause 9, such termination shall be without prejudice to the provisions of clauses 3.11, 7, 21 and 22, which clauses shall continue in full force and effect.
10Status of this Agreement
10.1If there is any inconsistency between any of the provisions of this Agreement and the Articles, the provisions of the Articles shall prevail.
10.2For the avoidance of doubt, the obligations of each of the Parties under this Agreement shall be subject to all applicable legal and regulatory requirements and no Party shall be required to breach any such law, regulation, rule or code.
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11Assignment
This Agreement is personal to the Parties and no Party shall assign, transfer, mortgage, charge, subcontract, declare a trust over or deal in any other manner with any of its rights and obligations under this Agreement; provided, that EIG may assign or transfer its respective rights, interests or obligations under this Agreement to an Affiliate of EIG, but, in each such case, no such assignment shall relieve EIG of any of its obligations hereunder.
12Entire agreement
This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to their subject matter.
13Counterparts
13.1This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all the counterparts shall together constitute the one Agreement.
13.2Transmission of an executed counterpart of this Agreement (but for the avoidance of doubt not just a signature page) by e-mail (in PDF, JPEG or other agreed format) shall take effect as delivery of an executed counterpart of this Agreement. If either method of delivery is adopted, without prejudice to the validity of the Agreement thus made, each Party shall provide the other Parties with the original of such counterpart as soon as reasonably possible thereafter.
13.3No counterpart shall be effective until each Party has executed and delivered at least one counterpart.
14Variation and waiver
14.1No variation of this Agreement shall be effective unless it is made in writing and signed and delivered by the Parties (or their authorized representatives).
14.2A waiver of any right or remedy under this Agreement or by law is only effective if it is given in writing and shall not be deemed a waiver of any subsequent right or remedy.
14.3A failure or delay by a Party to exercise any right or remedy provided under this Agreement or by law shall not constitute a waiver of that or any other right or remedy, nor shall it prevent or restrict any further exercise of that or any other right or remedy.
14.4No single or partial exercise of such right or remedy provided under this Agreement or by law shall prevent or restrict any further exercise of that or any other right or remedy.
14.5The rights and remedies provided in this Agreement are cumulative and do not exclude any rights or remedies provided by law except as otherwise expressly provided.
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15No partnership or agency
15.1Nothing in this Agreement is intended to, or shall be deemed to, establish any partnership between the Parties or constitute any Party the agent of another Party.
15.2Each Party confirms it is acting on its own behalf and not for the benefit of any other person.
16Notices and consents
16.1All notices and other communications that are required or may be given pursuant to this Agreement must be given in writing, in English, and shall be deemed to have been given (a) when delivered personally, by courier, to the addressee, (b) when received by the addressee if sent by registered or certified mail, postage prepaid, or (c) on the date sent by email (upon affirmative or automated reply by email by the intended recipient that such email was received) if sent during normal business hours of the recipient or on the next Business Day if sent after normal business hours of the recipient. Such notices and other communications must be sent to the following addresses or email addresses:
(a)Parent
Address:    Diversified Energy Company PLC
1600 Corporate Drive
Birmingham, Alabama 35242, USA

For the attention of:    Ben Sullivan
Email Address:    bsullivan@dgoc.com
(b)EIG
Address:    EIG Management Company, LLC
600 New Hampshire Avenue NW, Suite 1200
Washington, DC 20037

For the attention of:    General Counsel
    Jeannie Powers
Billy Rogers

Email Address:    notices@eigpartners.com
    jeannie.powers@eigpartners.com
billy.rogers@eigpartners.com

16.2Either Party may change its address or email address for notice purposes by written notice to the other Party in the manner set forth above.
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17Severance
17.1If any provision or part-provision of this Agreement is or becomes invalid, illegal or unenforceable, it shall be deemed deleted, but that shall not affect the validity and enforceability of the rest of this Agreement.
17.2If any provision or part-provision of this Agreement is deemed deleted under clause 17.1, the Parties shall negotiate in good faith to agree a replacement provision that, to the greatest extent possible, achieves the intended commercial result of the original provision. Any such amendment will be made in accordance with clause 14.
18Rights of third-parties
The parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.
19Inadequacy of damages
Without prejudice to any other rights or remedies that the Parties may have, the Parties acknowledge and agree that damages alone would not be an adequate remedy for any breach of the terms of this Agreement. Accordingly, the Parties shall be entitled to the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the terms of this Agreement.
20Rights and remedies
Except as expressly provided in this Agreement, the rights and remedies provided under this Agreement are in addition to, and not exclusive of, any rights or remedies provided by law.
21Governing law
This Agreement and the rights and obligations of the parties including all non-contractual obligations arising under or in connection with this Agreement shall be governed by and construed in accordance with the laws of England and Wales.
22Jurisdiction
The Parties irrevocably submit to the exclusive jurisdiction of the courts of England and Wales in respect of any claim, dispute or difference arising out of or in connection with this Agreement and/or any non-contractual obligation arising in connection with this Agreement.
23Further assurances
(a)At any time after the date of this Agreement, each Party shall, and shall use all reasonable endeavors to procure that any necessary third party shall, at the cost of that Party, execute such documents and do such acts and things as the other Party
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may reasonably require for the purpose of giving full effect to all the provisions of this Agreement.
(b)At any time after the date of this Agreement, if Parent undertakes a change in its jurisdiction of incorporation by way of a redomiciliation, migration or similar transaction, the Parties shall amend this Agreement to provide the Parties with rights vis-à-vis such entity following such transaction that are substantially identical to those set forth in this Agreement to the fullest extent permitted by the Applicable Law of such new jurisdiction.
This Agreement has been entered into and delivered on the date stated at the beginning of it.

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first written above.
DIVERSIFIED ENERGY COMPANY PLC
By:
/s/ Benjamin M. Sullivan
Name: Benjamin M. Sullivan
Title: Senior Executive Vice President & Chief Legal and Risk Officer

[Signature Page to Relationship Agreement]

EIG MANAGEMENT COMPANY, LLC
By:/s/ Jean Powers
Name: Jean Powers
Title:Managing Director
By:/s/ Billy Rogers
Name:Billy Rogers
Title:Senior Vice President

[Signature Page to Relationship Agreement]
Exhibit 4.16            
Execution Version


SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

dated as of March 14, 2025

among

DP RBL CO LLC,
as Borrower

KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent

and

the Lenders party hereto
__________________________________________
KEYBANC CAPITAL MARKETS INC.,
as Coordinating Lead Arranger and Sole Bookrunner
BARCLAYS BANK PLC, CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH, CITIBANK, N.A., CITIZENS BANK, N.A., DNB MARKETS, INC., KEYBANC CAPITAL MARKETS INC., MIZUHO BANK, LTD., MUFG BANK, LTD., TRUIST SECURITIES, INC., AND U.S. BANK NATIONAL ASSOCIATION,
as Joint Lead Arrangers
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH, CITIZENS BANK, N.A., MIZUHO BANK, LIMITED, AND TRUIST BANK,
as Co-Syndication Agents

DNB BANK ASA, NEW YORK BRANCH, AND U.S. BANK NATIONAL ASSOCIATION,
as Co-Documentation Agents

CANADIAN IMPERIAL BANK OF COMMERCE,
as Lead Sustainability Structuring Agent

DNB BANK ASA, NEW YORK BRANCH,
as Co-Sustainability Structuring Agent






TABLE OF CONTENTS
Page
Section 1.01    Terms Defined Above    1
Section 1.02    Certain Defined Terms    1
Section 1.03    Types of Loans and Borrowings    43
Section 1.04    Terms Generally; Rules of Construction    43
Section 1.05    Accounting Terms and Determinations; GAAP    44
Section 1.06    Times of Day    44
Section 1.07    Timing of Payment or Performance    45
Section 1.08    Divisions    45
Section 1.09    Rates    45
Section 1.10    Letter of Credit Amounts    45
ARTICLE II
THE CREDITS
Section 2.01    Commitments    46
Section 2.02    Loans and Borrowings    46
Section 2.03    Requests for Borrowings    47
Section 2.04    Interest Elections    48
Section 2.05    Funding of Borrowings    49
Section 2.06    Termination and Reduction of Aggregate Maximum Credit Amounts    50
Section 2.07    Borrowing Base    50
Section 2.08    Borrowing Base Adjustment Provisions.    52
Section 2.09    Letters of Credit    53
Section 2.10    Defaulting Lenders    58
Section 2.11    Swing Line Loans    59
Section 2.12    Loans and Borrowings Under Existing Credit Agreement    61
Section 2.13    Sustainability Adjustments    62
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01    Repayment of Loans    64
Section 3.02    Interest    64
Section 3.03    Inability to Determine Rates    65
Section 3.04    Prepayments    67
Section 3.05    Fees    69
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
Section 4.01    Payments Generally; Pro Rata Treatment; Sharing of Set-offs    70
Section 4.02    Presumption of Payment by the Borrower    71
Section 4.03    Certain Deductions by the Administrative Agent    71
Section 4.04    Disposition of Proceeds    71
ARTICLE V
INCREASED COSTS; ILLEGALITY AND TAXES
Section 5.01    Increased Costs, Illegality, etc.    72
Section 5.02    Breakage Compensation    74


Section 5.03    Taxes    74
Section 5.04    Designation of Different Lending Office    77
Section 5.05    Replacement of Lenders    78
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01    Closing Date    78
Section 6.02    Each Credit Event    82
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01    Organization; Powers    83
Section 7.02    Authority; Enforceability    83
Section 7.03    Approvals; No Conflicts    83
Section 7.04    Financial Condition; No Material Adverse Change    83
Section 7.05    Litigation    84
Section 7.06    Environmental Matters    84
Section 7.07    Compliance with the Laws; No Defaults    85
Section 7.08    Investment Company Act    85
Section 7.09    Taxes    85
Section 7.10    ERISA    86
Section 7.11    Disclosure; No Material Misstatements    86
Section 7.12    Insurance    86
Section 7.13    Restriction on Liens    87
Section 7.14    Group Members    87
Section 7.15    Location of Business and Offices    87
Section 7.16    Properties; Title, Etc    87
Section 7.17    Maintenance of Properties    88
Section 7.18    Gas Imbalances    88
Section 7.19    Marketing of Production    88
Section 7.20    Security Documents    88
Section 7.21    Swap Agreements    89
Section 7.22    Use of Loans and Letters of Credit    89
Section 7.23    Solvency    89
Section 7.24    Anti-Corruption Laws; Sanctions; OFAC; Outbound Investment Rules    89
Section 7.25    Senior Debt Status    90
Section 7.26    EEA Financial Institution    90
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01    Financial Statements; Other Information    90
Section 8.02    Notices of Material Events    95
Section 8.03    Existence; Conduct of Business    95
Section 8.04    Payment of Obligations    96
Section 8.05    Operation and Maintenance of Properties    96
Section 8.06    Insurance    96
Section 8.07    Books and Records; Inspection Rights    96
Section 8.08    Compliance with Laws    97
Section 8.09    Environmental Matters    97


Section 8.10    Further Assurances    98
Section 8.11    Reserve Reports    99
Section 8.12    Title Information    100
Section 8.13    Additional Collateral; Additional Guarantors    100
Section 8.14    ERISA Compliance    102
Section 8.15    Swap Agreements    102
Section 8.16    Marketing Activities    103
Section 8.17    Account Control Agreements; Location of Proceeds of Loans    103
Section 8.18    Unrestricted Subsidiaries    103
Section 8.19    Commodity Exchange Act Keepwell Provisions    104
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01    Financial Covenants    105
Section 9.02    Indebtedness    105
Section 9.03    Liens    106
Section 9.04    Restricted Payments; Redemptions and Restrictions on Amendments of Permitted Unsecured Debt    106
Section 9.05    Investments, Loans and Advances    108
Section 9.06    Nature of Business; No International Operations    108
Section 9.07    Proceeds of Loans    109
Section 9.08    ERISA Compliance    109
Section 9.09    Sale or Discount of Receivables    110
Section 9.10    Mergers, Etc.    110
Section 9.11    Sale of Properties and Termination of Hedging Transactions    110
Section 9.12    Sales and Leasebacks    111
Section 9.13    Environmental Matters    112
Section 9.14    Transactions with Affiliates    112
Section 9.15    Subsidiaries    112
Section 9.16    Negative Pledge Agreements; Dividend Restrictions    112
Section 9.17    Swap Agreements    112
Section 9.18    Amendments to Organizational Documents; Joint Operating Agreement and Management Services Agreement and Other Agreements Listed on Schedule 9.14    115
Section 9.19    Changes in Fiscal Periods    115
Section 9.20    Outbound Investment Rules    115
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01    Events of Default    115
Section 10.02    Remedies    117
ARTICLE XI
THE ADMINISTRATIVE AGENTS
Section 11.01    Appointment; Powers    118
Section 11.02    Duties and Obligations of Administrative Agent    118
Section 11.03    Action by Administrative Agent    119
Section 11.04    Reliance by Administrative Agent    119
Section 11.05    Subagents    120
Section 11.06    Resignation of Administrative Agent    120


Section 11.07    Administrative Agent as a Lender    120
Section 11.08    No Reliance    120
Section 11.09    Administrative Agent May File Proofs of Claim    121
Section 11.10    Authority of Administrative Agent to Release Collateral and Liens    121
Section 11.11    Duties of the Arrangers    122
Section 11.12    Erroneous Payments    122
Section 11.13    Credit Bidding    124
Section 11.14    Certain ERISA Matters.    124
ARTICLE XII
MISCELLANEOUS
Section 12.01    Notices    125
Section 12.02    Waivers; Amendments    126
Section 12.03    Expenses, Indemnity; Damage Waiver    128
Section 12.04    Successors and Assigns    130
Section 12.05    Survival; Revival; Reinstatement    134
Section 12.06    Counterparts; Integration; Effectiveness    134
Section 12.07    Severability    135
Section 12.08    Right of Setoff    135
Section 12.09    GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER OF JURY TRIAL    135
Section 12.10    Headings    136
Section 12.11    Confidentiality    136
Section 12.12    Interest Rate Limitation    137
Section 12.13    Collateral Matters; Swap Agreements    138
Section 12.14    No Third Party Beneficiaries    138
Section 12.15    EXCULPATION PROVISIONS    139
Section 12.16    Patriot Act Notice    139
Section 12.17    Flood Insurance Provisions    139
Section 12.18    Releases    139
Section 12.19    Acknowledgement and Consent to Bail-In of EEA Financial Institutions    140
Section 12.20    Acknowledgement Regarding Any Supported QFCs    140

Annexes, Exhibits, Schedules and Appendices
Annex IList of Maximum Credit Amounts
Exhibit AForm of Note
Exhibit BForm of Borrowing Request
Exhibit CForm of Interest Election Request
Exhibit DForm of Compliance Certificate
Exhibit EForm of Solvency Certificate
Exhibit FSecurity Instruments
Exhibit GForm of Assignment and Assumption
Exhibit H-1Form of U.S. Tax Compliance Certificate (Non-U.S. Lenders; non-partnerships)
Exhibit H-2Form of U.S. Tax Compliance Certificate (Foreign Participants; non-partnerships)
Exhibit H-3Form of U.S. Tax Compliance Certificate (Foreign Participants; partnerships)
Exhibit H-4Form of U.S. Tax Compliance Certificate (Non-U.S. Lenders; partnerships)


Exhibit I
Exhibit J
Form of Reserve Report Certificate
Form of Sustainability Certificate
Schedule 101(a)
Schedule 7.12
Schedule 7.14
Existing Letters of Credit
Insurance
Group Members
Schedule 7.18Gas Imbalances
Schedule 7.19Marketing Contracts
Schedule 7.21Swap Agreements
Schedule 8.09(b)
Schedule 8.15
Environmental Matters
Required Swap Agreements
Schedule 9.02Existing Indebtedness
Schedule 9.03Existing Liens
Schedule 9.05
Schedule 9.14

Appendix A
Appendix B
Appendix C
Investments
Affiliate Agreements

GHG Emissions Intensity Performance Targets
Plugged Wells Performance Targets
TRIR Performance Targets



THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of March 14, 2025, is among DP RBL CO LLC, a Delaware limited liability company (the “Borrower”), each Lender that is a party hereto, KEYBANK NATIONAL ASSOCIATION, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity pursuant to the terms hereof, the “Administrative Agent”), KEYBANC CAPITAL MARKETS, as Coordinating Lead Arranger and Sole Book Runner, and KEYBANK NATIONAL ASSOCIATION, as Issuing Bank.
R E C I T A L S
A.    The Borrower, the Administrative Agent, the lenders and other agents party thereto (the “Existing Lenders”) entered into that certain Amended and Restated Revolving Credit Agreement dated as of August 2, 2022 (as amended to the date hereof, the “Existing Credit Agreement”), pursuant to which the Existing Lenders provided certain loans to and extensions of credit to the Borrower.
B.    Subject to the terms and conditions set forth herein, the parties hereto desire to amend and restate the Existing Credit Agreement in its entirety in the form of this Agreement and evidence pursuant to its terms that, among other things, the principal obligations of the Borrower that remain outstanding under the Existing Credit Agreement shall continue under this Agreement.
C.    The Borrower has requested that the Lenders provide certain loans and extensions of credit from time to time on behalf of the Borrower.
D.    The Lenders have agreed to make such loans and extensions of credit subject to the terms and conditions of this Agreement.
E.    After giving effect to the amendment and restatement of the Existing Credit Agreement pursuant to the terms hereof, the commitments of each Existing Lender under the Existing Credit Agreement will be replaced with the Commitments hereunder which will be as set forth on Annex I attached hereto.
F.    In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:
Article I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01Terms Defined Above. As used in this Agreement, each term defined above has the meaning indicated above.
Section 1.02Certain Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“ABR” means, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
“ABS BB Transaction” means a transaction whereby the Oil and Gas Properties or the Equity Interests of an entity owning Oil and Gas Properties, in each instance, owned by the Borrower or a


Subsidiary of the Borrower are transferred to Diversified or a Subsidiary of Diversified (other than the Borrower and its Subsidiaries) and such Oil and Gas Properties are securitized in a financing with third parties.
“ABS Party” has the meaning assigned to such term in Section 9.11(g)(iv).
“ABS Transaction” means a transaction whereby the Oil and Gas Properties or the Equity Interests of an entity owning Oil and Gas Properties, in each instance, owned by a Subsidiary of Diversified (other than the Borrower or a Subsidiary of the Borrower) and such Oil and Gas Properties are securitized in a financing with third parties.
“Accounting Changes” has the meaning assigned to such term in Section 1.05.
“Acquisition” means, collectively, (a) the merger transaction between MNR and Merger Sub upon and pursuant to the terms and conditions of the Merger Agreement whereby MNR shall become a wholly-owned Subsidiary of Diversified, and (b) the subsequent and substantially contemporaneous transactions whereby MAH (together with its Subsidiaries and their Oil and Gas Properties comprising Borrowing Base Properties), shall become a wholly-owned Subsidiary of the Borrower.
“Acquisition Documents” means, collectively, (a) the Merger Agreement, (b) the Maverick Assignment, and (c) all other material agreements, assignments, conveyances, and instruments of any kind delivered in connection therewith to consummate the Acquisition.
“Acquisition Properties” means the Oil and Gas Properties and other properties acquired by the Loan Parties pursuant to the Acquisition Documents.
“Adjusted Daily Simple SOFR” means with respect to a Daily Simple SOFR Loan, the greater of (a) the sum of (i) Daily Simple SOFR and (ii) the applicable SOFR Index Adjustment and (b) the Floor.
“Adjusted RP Testing Period” means the period of time commencing on the Closing Date through and including June 30, 2025; provided that the Borrower may terminate the Adjusted RP Testing Period by delivering written notice thereof to the Administrative Agent at least three (3) Business Days before the date of any such proposed termination.
“Adjusted Term SOFR” means for any Available Tenor and Interest Period with respect to a SOFR Loan, the greater of (a) sum of (i) Term SOFR for such Interest Period and (ii) the applicable SOFR Index Adjustment and (b) the Floor.
“Administrative Agent” has the meaning assigned to such term in the preamble hereto.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
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“Affiliate Operator” means Diversified Production, Diversified Midstream LLC, Maverick Permian LLC, Unbridled Resources, LLC, Breitburn Operating LP, and any other Affiliate of either that conducts the exploration, development, production, operation, or other management services or plugs any Oil and Gas Property of the Group Members or that markets the production therefrom.
“Agents” means, collectively, the Administrative Agent, the Co-Syndication Agents and the Co-Documentation Agents; and “Agent” shall mean either the Administrative Agent, a Co-Syndication Agent or a Co-Documentation Agent, as the context requires.
“Aggregate Maximum Credit Amounts” means, at any time, an amount equal to the sum of the Maximum Credit Amounts in effect at such time.
“Agreement” means this Second Amended and Restated Revolving Credit Agreement, including the Schedules and Exhibits hereto, as the same may be amended, modified, supplemented, restated, replaced or otherwise modified from time to time.
“Alternate Base Rate” means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate in effect on such day plus 0.50%, (b) the Prime Rate, (c) Adjusted Term SOFR for a one month tenor in effect on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.00% and (d) 0.00%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or Adjusted Term SOFR shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or Adjusted Term SOFR, respectively.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption.
“Applicable Margin” means, for any day, the applicable rate per annum set forth below as determined based upon the Borrowing Base Utilization Percentage then in effect:
Borrowing Base Utilization Percentage
<25%
>25% and <50%
>50% and <75%
>75% and <90%
>90%
SOFR Loans2.75%3.00%3.25%3.50%3.75%
ABR Loans1.75%2.00%2.25%2.50%2.75%
Commitment Fee Rate0.50%0.50%0.50%0.50%0.50%
Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change in the Borrowing Base Utilization Percentage and ending on the date immediately preceding the effective date of the next such change; provided that, if at any time when the Applicable Margin is determined based on Borrowing Base Utilization Percentage the Borrower fails to deliver a Reserve Report pursuant to Section 8.11(a), then beginning on the date that is 30 calendar days from the date of such failure and until such Reserve Report is delivered, the “Applicable Margin” shall mean the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level. It is hereby understood and agreed that the Applicable Margin for SOFR Loans and the Applicable Margin for ABR Loans shall each be adjusted from time to time based upon the Sustainability Rate Adjustment (to be calculated and applied as set forth in Section 2.13).
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Notwithstanding the preceding provisions of this definition, during the Adjusted RP Testing Period, each applicable rate per annum set forth above with respect to SOFR Loans and ABR Loans shall be increased by 0.50% per annum.
“Applicable Percentage” means, with respect to any Lender at any time, the percentage of the Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount as such percentage is set forth on Annex I; provided further that when a Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the Aggregate Maximum Credit Amounts (disregarding any Defaulting Lender’s Maximum Credit Amount) represented by such Lender’s Maximum Credit Amount. As of the Closing Date, each Lender’s Applicable Percentage is set forth on Annex I.
“Approved Counterparty” means (a) any Secured Swap Provider or (b) any other Person that has (or the credit support provider of such Person has) a long term senior unsecured debt or corporate credit rating of BBB or Baa2 by S&P or Moody’s (or their equivalent) or higher at the time of entry into the applicable Swap Agreements.
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc., (b) Ryder Scott Company Petroleum Consultants, L.P., (c) DeGolyer and MacNaughton, (d) Cawley, Gillespie & Associates, Inc., (e) Wright & Company, (f) W.D. Von Gonten & Co., and (g) any other independent petroleum engineer reasonably acceptable to the Administrative Agent.
“Arrangers” means each of the Lenders listed on the cover page as joint lead arrangers and joint bookrunners in such capacity hereunder.
“Assignee” has the meaning assigned to such term in Section 12.04(b)(i).
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 12.04(b)), and accepted by the Administrative Agent, substantially in the form of Exhibit G or any other form approved by the Administrative Agent.
“Availability” means, on any date of determination, the difference between the aggregate Commitments on such date and the aggregate Revolving Credit Exposures on such date.
“Available Diversified Free Cash Flow” means, as of any time of calculation thereof, the amount equal to:
(a)Diversified Cash Flow as of the last day of the most recently ended Test Period, minus
(b)Diversified Corporate Expenses for the most recently ended Test Period; minus
(c)the aggregate amount of Restricted Payments made pursuant to Section 9.04(a)(v) and Section 9.04(a)(vi) that have occurred during the period commencing with the first day of the most recently ended Test Period, through and including the time of calculation.
    4

“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, (a) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an Interest Period pursuant to this Agreement, or (b) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 3.03(b)(iv).
“Availability Period” means the period from and including the Closing Date to but excluding the Termination Date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, with respect to (a) any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their Affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bankruptcy Code” means The Bankruptcy Reform Act of 1978 as codified as 11 U.S.C. Section 101 et seq., as amended from time to time and any successor statute.
“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, or from the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator with respect to a Person that directly or indirectly controls such Person under the Dutch Financial Supervision Act 2007 (as amended from time to time and including any successor legislation); provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Benchmark” means, initially, with respect to (a) any Daily Simple SOFR Loan, Daily Simple SOFR, and (b) any Term SOFR Loan, Term SOFR; provided that if a Benchmark Transition Event has occurred with respect to the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.03.
    5

“Benchmark Replacement” means, with respect to any Benchmark Transition Event for the then-current Benchmark, the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent as the replacement for such Benchmark giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for such Benchmark for syndicated credit facilities denominated in U.S. Dollars at such time and (b) the related Benchmark Replacement Adjustment, if any; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of any then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Available Tenor, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero), if any, that has been selected by the Administrative Agent giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. Dollar denominated syndicated credit facilities.
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark:
(a)     in the case of clause (a) or clause (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b)     in the case of clause (c) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or clause (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to the then-current Benchmark, the occurrence of one or more of the following events with respect to such Benchmark:
(a)     a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such
    6

administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b)     a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c)     a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, with respect to any Benchmark, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means, with respect to any then-current Benchmark, the period (if any) (a) beginning at the time that a Benchmark Replacement Date with respect to such Benchmark pursuant to clauses (a) or (b) of that definition has occurred if, at such time, no Benchmark Replacement has replaced such Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.03(a) and (b) ending at the time that a Benchmark Replacement has replaced such Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.03(b).
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 CFR § 1010.230.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
    7

“Board” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.
“Borrower” has the meaning assigned to such term in the preamble hereto.
“Borrowing” means (a) Loans of the same Type, made, converted or continued on the same date and, in the case of Term SOFR Loans, as to which a single Interest Period is in effect or (b) a Swing Line Loan.
“Borrowing Base” means, at any time, an amount equal to the amount determined in accordance with Section 2.07, as the same may be adjusted from time to time pursuant to the Borrowing Base Adjustment Provisions. The Borrowing Base on the Closing Date shall be the amount set forth in Section 2.07(a).
“Borrowing Base Adjustment Provisions” means Section 2.08(a), Section 2.08(b), Section 2.08(c), Section 2.08(d), and any other provision hereunder which adjusts (as opposed to redetermines) the amount of the Borrowing Base.
“Borrowing Base Deficiency” occurs if, at any time, the total Revolving Credit Exposures exceeds the Borrowing Base then in effect; provided, that, for purposes of determining the existence and amount of any Borrowing Base Deficiency, obligations under any Letter of Credit will not be deemed to be outstanding to the extent such obligations are Cash Collateralized.
“Borrowing Base Properties” means the Oil and Gas Properties constituting Proved Reserves that (a) are included in the most recently delivered Reserve Report delivered pursuant to Section 8.11 and (b) are given Borrowing Base credit. For the avoidance of doubt, no Unrestricted Subsidiary may own Borrowing Base Properties.
“Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed as a percentage, the numerator of which is the sum of the Revolving Credit Exposures of the Lenders on such day, and the denominator of which is the Borrowing Base in effect on such day.
“Borrowing Base Value” means, with respect to any Borrowing Base Properties or any Swap Agreement, the value attributed to such asset in connection with the most recent determination of the Borrowing Base as reasonably determined by the Administrative Agent in its sole discretion acting in good faith and consistent with its customary oil and gas lending criteria as it exists at the particular time.
“Borrowing Request” means a request by the Borrower substantially in the form of Exhibit B for a Borrowing in accordance with Section 2.03.
“Business Day” means (a) any day other than Saturday, Sunday or any other day on which commercial banks in Cleveland, Ohio or New York, New York are authorized or required by law to close and (b) with respect to any matters relating to SOFR Loans, a SOFR Business Day.
“Capital Lease Obligations” means, with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
    8

“Cash Collateralize” means, to pledge and deposit with or deliver to the Administrative Agent (in a manner reasonably satisfactory to the Administrative Agent and Issuing Bank, which shall require such deposit to made into a controlled account), for the benefit of any Issuing Bank, the Lenders or any Secured Parties and other Persons as the context requires, as collateral for LC Exposure or obligations of the Lenders to fund participations in respect of LC Exposure, cash or deposit account balances or, if the Administrative Agent and any applicable Issuing Bank shall agree, in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and any such Issuing Bank. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such Cash Collateral and other credit support.
“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition or (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government.
“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements.
“Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of any Group Member.
“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group, of Equity Interests representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Parent, (b) the Parent shall cease to own, directly or indirectly, all of the Equity Interests of Diversified Production, (c) Diversified Production shall pledge any portion of the Equity Interests of the Borrower or cease to own 100% of the Equity Interests in the Borrower (other than a pledge in favor of the Administrative Agent), or (d) a Specified Change of Control shall have occurred.
“Change in Law” means the occurrence after the date of this Agreement of any of the following (a) the adoption of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 5.01(c), by any lending office of such Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any request, rule, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules,
    9

guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.
“Closing Date” means the date on which the conditions specified in Section 6.01 are satisfied (or waived in accordance with Section 12.02).
“Closing Date Distribution” means a Restricted Payment made by the Borrower on the Closing Date to Parent and/or Diversified Production in an amount necessary to effect payments required under the Merger Agreement or otherwise complete the Acquisition, including payment of the purchase price under the Merger Agreement and payment in full of the Secured Obligations (as such term is defined in the Yellowjacket Credit Agreement) and the Obligations (as defined in the Maverick Credit Agreement), excluding, in each case, expense reimbursement and indemnification obligations that by the terms of the Yellowjacket Credit Agreement or Maverick Credit Agreement, as applicable, expressly survive termination (and for which no claim has been made).
“CME” means CME Group Benchmark Administration Ltd.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.
“Commitment” means, with respect to each Lender, the commitment of such Lender to make or continue Loans and to acquire participations in Letters of Credit and Swing Line Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06, (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b) or (c) otherwise modified pursuant to the terms of this Agreement. The amount representing each Lender’s Commitment shall at any time be the lesser of (i) such Lender’s Maximum Credit Amount and (ii) such Lender’s Applicable Percentage of the then effective Borrowing Base.
“Commitment Fee Rate” has the meaning assigned to such term in the definition of “Applicable Margin”.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time, and any successor statute.
“Compliance Certificate” means the Compliance Certificate, signed by a Financial Officer, substantially in the form of Exhibit D.
“Conforming Changes” means, with respect to either the use or administration of Daily Simple SOFR or Term SOFR, or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “SOFR Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 5.02 and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative
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Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Continue,” “Continuation” and “Continued” each refers to a continuation of a SOFR Loan for an additional Interest Period as provided in Section 2.04.
“Consolidated Net Income” means with respect to the Borrower and the Consolidated Restricted Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any Consolidated Restricted Subsidiary has an interest (other than a Consolidated Restricted Subsidiary), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Restricted Subsidiary, as the case may be, from such other Person’s net income; (b) the net income (but not loss) during such period of any Consolidated Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Restricted Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Restricted Subsidiary or is otherwise restricted or prohibited; (c) the income (or loss) of any Person accrued prior to the date it becomes a Consolidated Restricted Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Consolidated Restricted Subsidiaries; (d) any extraordinary gains or losses or expenses during such period; (e) non-cash gains or losses under FASB ASC Topic 815 resulting from the net change in mark to market portfolio of commodity price risk management activities during that period and (f) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns.
“Consolidated Restricted Subsidiaries” means each Restricted Subsidiary of the Borrower (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of the Borrower in accordance with GAAP.
“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now existing or hereafter created or acquired) the financial statements of which are or shall be (or should have been) consolidated with the financial statements of the Borrower in accordance with GAAP.
“Consolidated Total Assets” means, as of any date of determination, the amount that would, in conformity with GAAP, be set forth opposite the caption “total assets” (or any like caption) on a consolidated balance sheet of the Borrower and the Consolidated Restricted Subsidiaries.
“Control” means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Control Agreement” means a deposit account control agreement or securities account control agreement (or similar agreement), as applicable, in form and substance reasonably satisfactory to the
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Administrative Agent, executed by the applicable Loan Party, the Administrative Agent and the relevant financial institution party thereto, which agreement shall provide a first priority perfected Lien in favor of the Administrative Agent for the benefit of the Secured Parties in the applicable Loan Party’s Deposit Account and/or Securities Account.
“Controlled Account” means a Deposit Account or Securities Account that is subject to a Control Agreement.
“Convert,” “Conversion” and “Converted” each refers to a conversion pursuant to Section 2.04 otherwise of one Type of Loan into another Type of Loan.
“Coordinating Lead Arranger” means KeyBanc Capital Markets Inc.
“Corporate CapEx” means, for any Test Period, the actual cash capital expenditures made by Diversified Corporate Expenses Entities during such Test Period.
“Corporate Debt Issue Costs” means, for any Test Period, the actual cash issuance fees and expenses incurred by Diversified Corporate Expenses Entities in issuing Indebtedness for borrowed money, including registration fees, legal fees, printing costs, and underwriting costs.
“Corporate G&A Expenses” means, for any Test Period, the actual cash general and administrative expenses made by Diversified Corporate Expenses Entities during such Test Period.
“Corporate Midstream Expenses” means, for any Test Period, the actual cash expenses for midstream services made by Diversified Corporate Expenses Entities during such Test Period, including transportation, processing, and treating services.
“Corporate Taxes” means, for any Test Period, the actual cash Taxes made by Diversified Corporate Expenses Entities during such Test Period.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
“Co-Documentation Agent” means each of the Co-Documentation Agents identified on the cover page of this Agreement.
“Co-Sustainability Structuring Agent” means DNB Bank ASA, New York Branch, in its capacity as co-sustainability agent.
“Co-Syndication Agent” means each of the Co-Syndication Agents identified on the cover page of this Agreement.
“Covered Entity” means any of the following:
(a)    a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(b)    a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
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(c)     a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning assigned to such term in Section 12.20(a).
“Current Assets” means, as of any date of determination, without duplication, the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Borrower and the Consolidated Restricted Subsidiaries at such date, plus the unused Commitments, but excluding all non-cash assets under FASB ASC Topics 815 and 410.
“Current Liabilities” means, as of any date of determination, without duplication, the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Borrower and the Consolidated Restricted Subsidiaries on such date, but excluding (a) all non-cash obligations under FASB ASC Topics 815 and 410 and (b) the current portion of the Loans under this Agreement.
“Current Ratio” means, with respect to the Borrower and the Consolidated Restricted Subsidiaries for any date of determination, the ratio of (a) Current Assets as of the last day of the most recently ended Fiscal Quarter (which may be such date of determination) to (b) Current Liabilities on such day.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum (rounded in accordance with the Administrative Agent’s customary practice) equal to SOFR for the day (such day, the “SOFR Determination Day”) that is five (5) SOFR Business Days (or such other period as determined by the Administrative Agent based on then prevailing market conventions) prior to (a) if such SOFR Rate Day is a SOFR Business Day, such SOFR Rate Day or (b) if such SOFR Rate Day is not a SOFR Business Day, the SOFR Business Day immediately preceding such SOFR Rate Day, in each case, as and when SOFR for such SOFR Rate Day is published by the Daily Simple SOFR Administrator on the SOFR Administrator’s Website. If by 5:00 p.m. on the second (2nd) SOFR Business Day immediately following any SOFR Determination Day, SOFR in respect of such SOFR Determination Day has not been published on the SOFR Administrator’s Website and a Benchmark Replacement Date with respect to Daily Simple SOFR has not occurred, then SOFR for such SOFR Determination Day will be SOFR as published in respect of the first preceding SOFR Business Day for which such SOFR was published on the SOFR Administrator’s Website; provided, that any SOFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple SOFR for no more than three (3) consecutive SOFR Rate Days. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.
“Daily Simple SOFR Borrowing” means a Borrowing comprised of Daily Simple SOFR Loans.
“Daily Simple SOFR Loan” means each Loan bearing interest at a rate based upon Daily Simple SOFR.
“December 31 Reserve Report” has the meaning assigned to such term in Section 8.11(a).
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
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“Defaulting Lender” means any Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swing Line Loans or (iii) pay over to the Administrative Agent, the Swing Line Lender, any Issuing Bank or any other Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular Default, if any) has not been satisfied, (b) has notified the Borrower, the Administrative Agent, the Swing Line Lender or any Issuing Bank in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by the Administrative Agent, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swing Line Loans under this Agreement; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s receipt of such certification in form and substance satisfactory to it, or (d) has become the subject of a Bankruptcy Event or Bail-In Action.
“Deficiency Date” has the meaning assigned to such term in Section 3.04(c)(ii).
“Deposit Account” has the meaning assigned to such term in the UCC.
“Disposition” means, with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer, casualty, condemnation or other disposition thereof. The terms “Dispose” and “Disposed of” shall have correlative meanings.
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Indebtedness or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is one year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans, LC Exposure or other Secured Obligations outstanding and all of the Commitments are terminated.
“Diversified” means Diversified Gas and Oil Corporation, a Delaware corporation.
“Diversified Cash Flow” means, for any Test Period, an amount equal to (a) Free Cash Flow for such Test Period, plus (b) SPV Cash Flow for such Test Period.
“Diversified Corporate Expenses” means, for any Test Period, an amount equal to the positive remainder, if any, of (a) the sum (without duplication) of (i) Corporate CapEx, (ii) Corporate G&A Expenses, (iii) Corporate Debt Issue Costs, (iv) Corporate Midstream Expenses, (v) Corporate Taxes, (vi) the amount of the decrease (if any) in the working capital of Diversified Corporate Expenses Entities during such Test Period, and (vii) any other general operating expenses incurred by Diversified Corporate
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Expenses Entities in the ordinary course of business, minus (b) the amount of the increase (if any) in the working capital of Diversified Corporate Expenses Entities during such Test Period; provided that, for the avoidance of doubt, (i) amounts constituting Diversified Distributions shall never constitute Diversified Corporate Expenses and (ii) working capital shall be calculated eliminating all cash impacts associated with the Maverick ABS Accounts.
“Diversified Corporate Expense Distribution Amount” means, for any Test Period, an amount equal to the positive remainder, if any, of (a) the Diversified Corporate Expenses for such Test Period, minus (b) the SPV Cash Flow for such Test Period.
“Diversified Corporate Expenses Entities” collectively refers to Diversified and Diversified Production.
“Diversified Distributions” means, for any Test Period, (a) cash Restricted Payments made by Diversified to the Parent for the purpose of (i) purchasing shares of the Parent’s common Equity Interests on the open market and (ii) paying dividends with respect to common Equity Interests in the Parent and (b) cash payments made by Diversified in respect of the Seller Indebtedness, provided that cash payments made by Diversified pursuant this clause (b) contemporaneously with the receipt by the Parent (and its contribution to Diversified) of net cash proceeds of a new issuance of Equity Interests by the Parent shall not constitute Diversified Distributions.
“Diversified Production” means Diversified Production LLC, a Pennsylvania limited liability company.
“dollars” or “$” refers to lawful money of the United States of America.
“Domestic Subsidiary Group Member” means any Restricted Subsidiary (a) that is organized under the laws of the United States of America or any state thereof or the District of Columbia and (b) that is not a Foreign Group Member.
“EBITDAX” means, for any period, the sum of Consolidated Net Income for such period plus the following expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest, (ii) income and franchise taxes, (iii) depreciation, depletion, amortization and other noncash charges, and (iv) actual cash transaction costs and expenses incurred in connection with permitted acquisitions, permitted incurrences of Indebtedness, issuances of Equity Interests, permitted Investments or dispositions (whether or not successful) not to exceed 5% of EBITDAX for any period of four consecutive Fiscal Quarters, minus all noncash income (including cancellation of indebtedness income) added to Consolidated Net Income (excluding any such non cash item to the extent it represents the reversal of an accrual or reserve for potential cash item in any prior period); provided that any realized cumulative cash gains or losses resulting from the settlement of commodity price risk contracts not included in Consolidated Net Income shall, to the extent not included, be added to EBITDAX in the case of such gains and subtracted from EBITDAX in the case of such losses (provided that in all events any such realized cumulative cash gains or losses shall be applied in equal monthly installments across the term which would have been in effect had such applicable commodity price risk contract not been settled); provided further that for the purposes of calculating EBITDAX for any period of four consecutive Fiscal Quarters (each, a “Reference Period”), (a) if during such Reference Period (or, in the case of pro forma calculations, during the period from the last day of such Reference Period to and including the date as of which such calculation is made) the Borrower or any Consolidated Restricted Subsidiary shall have made a Material Disposition or Material Acquisition, EBITDAX (including
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Consolidated Net Income) for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Disposition or Material Acquisition by the Borrower or its Consolidated Restricted Subsidiaries occurred on the first day of such Reference Period (with the Reference Period for the purposes of pro forma calculations being the most recent period of four consecutive Fiscal Quarters for which the relevant financial information is available and made on an annualized basis) including the addition of any losses and subtraction of any gains resulting from settlements of commodity price risk associated with an ABS BB Transaction that (x) settle between the effective date and closing date of such ABS BB Transaction and (y) are unwound to maintain compliance with Section 9.17, subject to the conditions in Section 3.04(c) being met and (b) if any calculations in the foregoing clause (a) are made on a pro forma basis, such pro forma adjustments are factually supportable and subject to supporting documentation and otherwise acceptable to the Administrative Agent. As used in this definition, “Material Acquisition” means any acquisition by the Borrower or its Consolidated Restricted Subsidiaries of property or series of related acquisitions of property that involves consideration in excess of $10,000,000, and “Material Disposition” means any Disposition or series of related Dispositions that yields gross proceeds to the Borrower or any Consolidated Restricted Subsidiary in excess of $10,000,000. For avoidance of doubt, amounts added back or subtracted from Consolidated Net Income pursuant to this definition shall be without duplication of gains or losses excluded from Consolidated Net Income. Notwithstanding anything herein to the contrary, for the purpose of determining EBITDAX (except as it relates to calculations of EBITDAX affecting Diversified Cash Flow calculations for the Fiscal Quarter ending December 31, 2024) for any four Fiscal Quarters ending on December 31, 2024, EBITDAX for such four Fiscal Quarters shall be deemed to equal EBITDAX for the three Fiscal Quarters then ending multiplied by 4 and divided by 3.
“EEA Financial Institution” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Engineering Reports” has the meaning assigned to such term in Section 2.07(c)(i).
“Environmental Laws” means all Governmental Requirements relating to the environment, the preservation or reclamation of natural resources, the regulation or management of any harmful or deleterious substances, or to health and safety as it relates to environmental protection or exposure to harmful or deleterious substances.
“Environmental Permit” means any permit, registration, license, notice, approval, consent, exemption, variance, or other authorization required under or issued pursuant to applicable Environmental Laws.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person,
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and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute, together with the rules and regulations promulgated thereunder.
“ERISA Affiliate” means any entity (whether or not incorporated) which together with the Borrower or a Subsidiary would be treated as a single employer under Section 4001(b)(1) of ERISA or Section 414(b) or (c) of the Code or, for purposes of provisions relating to Section 412 of the Code and Section 302 of ERISA, Section 414 (m) or (o) of the Code.
“ERISA Event” means (a) a Reportable Event, (b) the withdrawal of the Borrower, any other Group Member or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the Borrower, any other Group Member or any ERISA Affiliate from a Multiemployer Plan; (d) the filing (or the receipt by any Group Member or any ERISA Affiliate) of a notice of intent to terminate a Plan under Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (e) the institution of proceedings to terminate a Plan by the PBGC, (f) the receipt by any Group Member or any ERISA Affiliate of a notice of withdrawal liability pursuant to Section 4202 of ERISA, (g) any other event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or the incurrence by any Group Member or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, including but not limited to the imposition of any Lien in favor of the PBGC, (h) on and after the effectiveness of the Pension Act, a determination that a Plan is, or would reasonably be expected to be, in “at risk” status (as defined in 303(i)(4) of ERISA or 430(i)(4) of the Code) or (i) the failure of any Group Member or any ERISA Affiliate to make by its due date, after expiration of any applicable grace period, a required installment under Section 430(j) of the Code with respect to any Plan or any failure by any Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, whether or not waived, or the failure by the Borrower, any other Group Member or any of their respective ERISA Affiliates to make any required contribution to a Multiemployer Plan.
“Erroneous Payment” has the meaning assigned to it in Section 11.12(a).
“Erroneous Payment Deficiency Assignment” has the meaning assigned to it in Section 11.12(d).
“Erroneous Payment Impacted Loan” has the meaning assigned to it in Section 11.12(d).
“Erroneous Payment Return Deficiency” has the meaning assigned to it in Section 11.12(d).
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Event of Default” has the meaning assigned to such term in Section 10.01.
“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public
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liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements, in each case, which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair (i) the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any other Group Member or (ii) the value of such Property subject thereto; (e) Liens arising by virtue of any statutory or common law provision or customary deposit account terms relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by Borrower or any other Group Member to provide collateral to the depository institution; (f) zoning and land use requirements, easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of the Borrower or any other Group Member for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair (i) the use of such Property for the purposes of which such Property is held by the Borrower or any other Group Member or (ii) the value of such Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature, in each case, incurred in the ordinary course of business; (h) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; (i) Liens, titles and interests of lessors of personal Property leased by such lessors to the Borrower or any other Group Member, restrictions and prohibitions on encumbrances and transferability with respect to such Property and the Borrower’s or such Group Member’s interests therein imposed by such leases, and Liens and encumbrances encumbering such lessors’ titles and interests in such Property and to which the Borrower’s or such Group Member’s leasehold interests may be subject or subordinate, in each case, whether or not evidenced by UCC financing statement filings or other documents of record; provided that such Liens do not secure Indebtedness of the Borrower or any other Group Member and do not encumber Property of the Borrower or any other Group Member other than the Property that is the subject of such leases; and (j) Liens, titles and interests of licensors of software and other intangible personal Property licensed by such licensors to the Borrower or any other Group Member, restrictions and
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prohibitions on encumbrances and transferability with respect to such Property and the Borrower’s or such Group Member’s interests therein imposed by such licenses, and Liens and encumbrances encumbering such licensors’ titles and interests in such Property and to which the Borrower’s or such Group Member’s license interests may be subject or subordinate, in each case, whether or not evidenced by UCC financing statement filings or other documents of record; provided that such Liens do not secure Indebtedness of the Borrower or any other Group Member and do not encumber Property of the Borrower or any other Group Member other than the Property that is the subject of such licenses; provided, further that Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the Liens granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of any Excepted Liens.
“Excess Cash” means, at any time, the aggregate amount of cash and Cash Equivalents (other than Excluded Cash) of the Borrower and its Restricted Subsidiaries in excess of $60,000,000.
“Exchange Act” means the Securities Exchange Act of 1934.
“Excluded Accounts” means (a) each account in which all or substantially all of the deposits consist of amounts utilized to fund payroll, employee benefit or tax obligations of the Borrower and its Subsidiaries, (b) fiduciary accounts, (c) to the extent necessary or desirable to comply with the terms of a binding purchase agreement, escrow accounts holding amounts on deposit in connection with a binding purchase agreement to the extent that and for so long as such amounts are refundable to the buyer, (d) “zero balance” accounts, (e) each Maverick ABS Account, and (f) other accounts so long as the aggregate average daily maximum balance in any such other account over a 30-day period does not at any time exceed $2,500,000; provided that the aggregate daily maximum balance for all such bank accounts excluded pursuant to this clause (f) on any day shall not exceed $5,000,000.
“Excluded Cash” means, at any time, (a) any cash or Cash Equivalents held in Excluded Accounts, (b) to the extent the payment of such amounts are not prohibited by this Agreement, other amounts in respect of which the Borrower or any Restricted Subsidiary has issued checks or has initiated wires or ACH transfers to Persons that are not Affiliates of the Borrower or any Restricted Subsidiary but that have not yet been subtracted from the balance in the relevant account of the Borrower or any Restricted Subsidiary, (c) any cash of the Borrower and its Restricted Subsidiaries constituting pledges and/or deposits securing any binding and enforceable purchase and sale agreement with any Persons who are not Affiliates of the Borrower or any Restricted Subsidiary, in each case to the extent permitted by this Agreement, (d) cash or Cash Equivalents of to be used by the Borrower or any Restricted Subsidiary within ten (10) Business Days to pay (i) the purchase price for any acquisition of any assets or property by the Borrower or any Restricted Subsidiary pursuant to an executed and binding agreement between the Borrower or any Restricted Subsidiary and a third party seller that is not an Affiliate of the Borrower or any Restricted Subsidiary, and (ii) obligations of the Borrower or any Restricted Subsidiary then due and owing or to make dividends, Investments or other acquisitions not prohibited by this Agreement, (e) cash deposited with an Issuing Bank to cash collateralize Letters of Credit in accordance with Section 2.09(j) and (f) any cash or Cash Equivalents subject to a Lien pursuant to clause (g) of the definition of “Excepted Liens”.
“Excluded Swap Obligation” means, with respect to any Guarantor, (a) any Swap Obligation if, and to the extent that, and only for so long as, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, as applicable, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or
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order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure to constitute an “eligible contract participant,” as defined in the Commodity Exchange Act and the regulations thereunder, at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap Obligation.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Lending Party or required to be withheld or deducted from a payment to a Lending Party: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Lending Party being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 5.05) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.03, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Lending Party’s failure to comply with Section 5.03(g) or Section 5.03(h) and (d) any U.S. federal withholding Taxes imposed under FATCA.
“Existing Credit Agreement” has the meaning assigned to such term in the Recitals hereto.
“Existing Lenders” has the meaning assigned to such term in the Recitals hereto.
“Existing Letters of Credit” means the letters of credit described on Schedule 1.01(a) hereto and issued and outstanding under the Existing Credit Agreement prior to the Closing Date.
“Existing Liens” has the meaning assigned to such term in Section 12.21.
“Existing Loan Documents” means the “Loan Documents” (as such term is defined in the Existing Credit Agreement) as in effect prior to the Closing Date.
“Existing Loans” has the meaning assigned to such term in Section 2.01(b).
“Fair Market Value” means, with respect to any asset or group of assets on any date of determination, the value of the consideration obtainable in a Disposition of such asset or assets at such date of determination assuming a Disposition by a willing seller to a willing purchaser dealing at arm’s length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code and any law, regulation, rule, promulgation or official agreement implementing any intergovernmental agreement, treaty or convention among Governmental Authorities with respect to the foregoing.
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“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“Federal Funds Effective Rate” means, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it; provided that if the Federal Funds Effective Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Financial Officer” means, for any Person, the chief executive officer, chief financial officer, chief operating officer, principal accounting officer or treasurer of such Person. Unless otherwise specified, all references herein to a Financial Officer means a Financial Officer of the Borrower, Diversified or of the Parent, as applicable.
“Financial Performance Covenants” means the covenants of the Borrower set forth in Section 9.01.
“Fiscal Quarter” means each fiscal quarter for accounting and tax purposes, ending on the last day of each March, June, September and December.
“Fiscal Year” means each fiscal year for accounting and tax purposes, ending on December 31 of each year.
“Flood Insurance Regulations” means (a) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (b) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statue thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as the same may be amended or recodified from time to time, (d) the Flood Insurance Reform Act of 2004 and (e) the Biggert Waters Flood Reform Act of 2012, and any regulations promulgated thereunder.
“Floor” means a rate of interest equal to 0.00% per annum.
“Foreign Group Member” means, any Group Member that is a Subsidiary of the Borrower which (a) is not organized under the laws of the United States of America or any state thereof or the District of Columbia or (b) is a FSHCO.
“Free Cash Flow” means, as of any time of calculation thereof, EBITDAX for the most recently ended Test Period minus the sum, without duplication, of the amounts for such four Fiscal Quarter period of:
(a)    capital expenditures paid in cash (other than to the extent such capital expenditures were themselves (or were incurred in connection with) an acquisition),
(b)    consolidated interest expense paid in cash,
(c)    taxes paid in cash, and
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(d)    exploration expenses paid in cash.
“FSHCO” means any Subsidiary substantially all of the assets of which consist of Equity Interests in or Indebtedness of one or more Subsidiaries that are “controlled foreign corporations” within the meaning of Section 957 of the Code.
“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.05.
“GHG Emissions Intensity” means in any Fiscal Year, the consolidated Scope 1 Emissions and Scope 2 Emissions as metric tonnes carbon dioxide equivalent (“MtCO2e”) of Diversified per million cubic feet of natural gas equivalent (“MMcfe”) expressed as MtCO2e/MMcfe as reported in Diversified’s annual Sustainability Report for such Fiscal Year and which is verified by the Sustainability Assurance Provider on a limited assurance basis.
“GHG Emissions Intensity Applicable Rate Adjustment Amount” means, with respect to any Fiscal Year, (a) if the GHG Emissions Intensity Reported Amount for such Fiscal Year is equal to or less than Level 1 of the GHG Emissions Intensity Performance Targets for such Fiscal Year, then minus two (2) basis points, (b) if the GHG Emissions Intensity Reported Actual Amount for such Fiscal Year is greater than Level 1 of the GHG Emissions Intensity Performance Targets but less than or equal to Level 3 of the GHG Emissions Intensity Performance Targets for such Fiscal Year, then no change and (c) if the GHG Emissions Intensity Reported Amount for such Fiscal Year is greater than Level 3 of the GHG Emissions Intensity Performance Targets for such Fiscal Year, then plus two (2) basis points.
“GHG Emissions Intensity Performance Targets” means the targets set forth on Appendix A to achieve a reduction in Diversified’s GHG Emissions Intensity for a Fiscal Year.
“GHG Emissions Intensity Reported Amount” means, with respect to any Fiscal Year, Diversified’s reported values of GHG Emissions Intensity for such Fiscal Year as verified by the Sustainability Assurance Provider on a limited assurance basis.
“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Governmental Requirement” means any law (including common law), statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, whether now or hereinafter in effect, including energy regulations and occupational, safety and health standards or controls, of any Governmental Authority.
“Group Members” means the collective reference to the Borrower and its Restricted Subsidiaries.
“Guarantee and Collateral Agreement” means the Amended and Restated Guaranty and Collateral Agreement dated as of the date hereof and executed by the Borrower and the Guarantors, as the same may be amended, amended and restated, modified or supplemented from time to time.
“Guarantors” means:
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(a)BlueStone Natural Resources II LLC,
(b)DP Bluegrass LLC,
(c)DP Legacy Central LLC,
(d)DP Tapstone Energy Holdings, LLC,
(e)DP Legacy Tapstone LLC,
(f)Diversified Energy Marketing, LLC,
(g)DP Yellowjacket HoldCo LLC,
(h)DM Yellowjacket HoldCo LLC,
(i)Maverick Asset Holdings LLC,
(j)Maverick Permian LLC,
(k)Maverick Permian Agent Corp.,
(l)Unbridled Resources, LLC,
(m)Wheeler Midstream, LLC,
(n)MidPoint MidStream, LLC,
(o)Unbridled Agent Corp,
(p)Breitburn Operating LP,
(q)Maverick Operating GP, LLC,
(r)Breitburn Transpetco LP LLC,
(s)Transpetco Pipeline Company, LP,
(t)Breitburn Transpetco GP LLC,
(u)Breitburn Oklahoma LLC,
(v)Phoenix Production Company,
(w)GTG Pipeline LLC, and
(x)each other Domestic Subsidiary Group Member that is a Material Subsidiary that guarantees the Secured Obligations pursuant to Section 8.13(b) or any other Group Member that guarantees the Secured Obligations at the election of the Borrower.
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“Hazardous Material” means any chemical, compound, material, product, byproduct, substance or waste that is defined, regulated or otherwise classified as a “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar meaning under any applicable Environmental Law, and for the avoidance of doubt includes Hydrocarbons, radioactive materials, explosives, asbestos or asbestos containing materials, polychlorinated biphenyls, radon, and infectious or medical wastes.
“Highest Lawful Rate” means, as to any Lender, at the particular time in question, the maximum non-usurious rate of interest which, under applicable law, such Lender is then permitted to contract for, charge or collect from the Borrower on the Loans or the other obligations of the Borrower hereunder, and as to any other Person, at the particular time in question, the maximum non-usurious rate of interest which, under applicable law, such Person is then permitted to contract for, charge or collect with respect to the obligation in question. If the maximum rate of interest which, under applicable law, the Lenders are permitted to contract for, charge or collect from the Borrower on the Loans or the other obligations of the Borrower hereunder shall change after the date hereof, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, as of the effective time of such change without notice to the Borrower or any other Person.
“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. Unless otherwise indicated herein, each reference to the term “Hydrocarbon Interests” shall mean Hydrocarbon Interests of the Borrower or any other Group Member, as the context requires.
“Hydrocarbons” means all oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all constituents, elements or compounds thereof and all products refined or separated therefrom and all other minerals which may be produced and saved from or attributable to the Oil and Gas Properties of any Person, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests or other properties constituting Oil and Gas Properties.
“IFRS” means the accounting standards issued by the International Financial Reporting Standards Foundation and the International Accounting Standards Board and adopted by the European Union in effect from time to time and subject to the conditions set forth in Section 1.05.
“Indebtedness” means, for any Person, the sum of the following (without duplication):
(a)     all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments;
(b)     all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bank guarantees, surety or other bonds and similar instruments;
(c)     all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services (including insurance premium payables), in each case that are greater than one hundred twenty (120) days past the date of invoice, other than those which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
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(d)     all Capital Lease Obligations;
(e)     all Indebtedness (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Indebtedness is assumed by such Person;
(f)     all Indebtedness (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person agrees to purchase or otherwise assures a creditor against loss of the Indebtedness (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Indebtedness and the maximum stated amount of such guarantee or assurance against loss;
(g)     all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase Indebtedness or Property of others;
(h)     all obligations of such Person under take/ship or pay contracts if any goods or services are not actually received or utilized by such Person;
(i)     any Indebtedness of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability;
(j)     Disqualified Capital Stock (for purposes hereof, the amount of any Disqualified Capital Stock shall be its liquidation value and, without duplication, the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase in respect of Disqualified Capital Stock);
(k)     net Swap Obligations of such Person (for purposes hereof, the amount of any net Swap Obligations on any date shall be deemed to be the Swap Termination Value thereof as of such date); and
(l)     the undischarged balance of any volumetric or production payment created by such Person or for the creation of which such Person directly or indirectly received payment.
The Indebtedness of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a) above, Other Taxes.
“Indemnitee” has the meaning assigned to such term in Section 12.03(b).
“Information” has the meaning assigned to such term in Section 12.11.
“Interest Election Request” means a request by the Borrower substantially in the form of Exhibit C to convert or continue a Borrowing in accordance with Section 2.04.
“Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swing Line Loan) or any Daily Simple SOFR Loan, the last day of each March, June, September and December, (b) with respect to any Term SOFR Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Term SOFR Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three
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months’ duration after the first day of such Interest Period, and (c) with respect to any Swing Line Loan, the day that such Loan is required to be repaid .
“Interest Period” means, with respect to each Term SOFR Borrowing, a period of one, three or six months as selected by the Borrower (other than any tenor removed pursuant to Section 3.03(b)(iv)); provided, however, that (a) the initial Interest Period for any Borrowing of a Term SOFR Loan shall commence on the date of such Borrowing (the date of a Borrowing resulting from a Conversion or Continuation shall be the date of such Conversion or Continuation) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the first day after the last day of the next preceding Interest Period; (b) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (c) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (d) no Interest Period for any Term SOFR Loan may be selected that would end after the Maturity Date; and (e) if, upon the expiration of any Interest Period, the Borrower has failed to (or may not) elect a new Interest Period to be applicable to the respective Borrowing of Term SOFR Loans as provided above, the Borrower shall be deemed to have elected to Convert such Borrowing to Daily Simple SOFR Loans effective as of the expiration date of such current Interest Period.
“Interim Redetermination” has the meaning assigned to such term in Section 2.07(b).
“Interim Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to an Interim Redetermination becomes effective as provided in Section 2.07(d).
“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or capital contribution to, assumption of Indebtedness of, purchase or other acquisition of any other Indebtedness of, or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory, goods, supplies or services sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person constituting a business unit or Oil and Gas Properties; or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.
“Issuing Bank” means KeyBank National Association, Truist Bank and each Lender approved by the Administrative Agent that is reasonably requested by the Borrower that agrees to act as an issuer of Letters of Credit hereunder, in each case, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.09(i). Any Issuing Bank may, in its sole discretion, arrange for one or more Letters of Credit to be issued by its Affiliates, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
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References herein and in the other Loan Documents to an Issuing Bank shall be deemed to refer to such Issuing Bank in respect of the applicable Letter of Credit or to all Issuing Banks, as the context requires.
“Joint Operating Agreement” means that Joint Operating Agreement dated as of August 2, 2022 among Diversified Production and the Borrower.
“JPMorgan LC” means that certain Letter of Credit issued by KeyBank National Association, as Issuing Bank, in favor of JPMorgan Chase Bank, N.A. in the face amount of $$22,401,750.00, which has been issued to “back-stop” letters of credit previously issued by JPMorgan Chase Bank, N.A. under the Maverick Credit Agreement.
“June 30 Reserve Report” has the meaning assigned to such term in Section 8.11(a).
“LC Availability Requirements” has the meaning assigned to such term in Section 2.09(a).
“LC Commitment” means, at any time, an amount equal to (a) $40,000,000 plus (b) the undrawn face amount of the JPMorgan LC at such time; provided that the LC Commitment shall in no event exceed $60,000,000.  For the avoidance of doubt, the LC Commitment is part of, and not in addition to, the aggregate Commitments.
“LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means, at any time, (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.
“Lead Sustainability Structuring Agent” means Canadian Imperial Bank of Commence, in its capacity as the lead sustainability structuring agent.
“Lender Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a Subsidiary.
“Lenders” means the Persons listed on Annex I and any Person that shall have become a party hereto pursuant to an Assignment and Assumption or otherwise that is in the Register, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption or otherwise and is no longer in the Register. Unless the context otherwise requires, the term “Lenders” includes the Swing Line Lender and the Issuing Banks.
“Lending Parties” means the Administrative Agent, the Swing Line Lender, the Issuing Banks and the Lenders.
“Letter of Credit” means any letter of credit issued pursuant to this Agreement.
“Letter of Credit Agreements” means all letter of credit applications and other agreements (including any amendments, modifications or supplements thereto) submitted by the Borrower, or entered into by the Borrower, with an Issuing Bank relating to any Letter of Credit.
“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or
    27

contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties. The term “Lien” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations, including if they burden Property to the extent they secure an obligation owed to a Person other than the owner of the Property. For the purposes of this Agreement, the Borrower and the other Group Members shall be deemed to be the owner of any Property which they have acquired or hold subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.
“Liquidity” means, on any date, the sum of unrestricted cash (not to exceed $30,000,000) and Availability on such date.
“Loan Documents” means this Agreement, the Security Instruments, any Notes, any fee letter, any Letter of Credit Agreements and the Letters of Credit.
“Loan Party” means the Borrower and each Guarantor.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“Lookback Day” has the meaning assigned to such term in the definition of “Term SOFR”.
“MAH” means Maverick Asset Holdings LLC, a Delaware limited liability company.
“Majority Lenders” means (a) at any time while no Loans or LC Exposure are outstanding, Lenders having greater than fifty percent (50%) of the Aggregate Maximum Credit Amounts and (b) at any time while any Loans or LC Exposure are outstanding, Lenders holding greater than fifty percent (50%) of the outstanding aggregate principal amount of the Loans and participation interests in Letters of Credit and Swing Line Loans at such time (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)).
“Management Services Agreement” means that certain Management Services Agreement dated as of August 2, 2022 among Diversified and the Borrower.
“Material Adverse Effect” means a material adverse change in, or material adverse effect on (a) the business, operations, Property or financial condition of the Borrower and the other Group Members taken as a whole, (b) the ability of the Loan Parties to perform any of their obligations under the Loan Documents, (c) the validity or enforceability of any Loan Document or (d) the rights and remedies of, or benefits available to, the Administrative Agent, any other Agent, any Issuing Bank or any Lender under any Loan Document.
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), of any one or more Group Member in an aggregate principal amount exceeding the greater of (a) $10,000,000 and (b) 5.0% of the then effective Borrowing Base. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of any Group Member in respect of any Swap Agreement at any time shall be the Swap Termination Value.
“Material Subsidiary” means, at any date of determination, each Restricted Subsidiary of the Borrower (a) whose Total Assets (when combined with the assets of such Restricted Subsidiary’s
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Subsidiaries) at the last day of the most recent Fiscal Quarter of the Borrower for which financial statements were required to be delivered pursuant to Section 8.01 were equal to or greater than five percent (5.0%) of the Consolidated Total Assets of the Borrower and the Restricted Subsidiaries at such date or (b) whose revenues (when combined with the revenues of such Restricted Subsidiary’s Subsidiaries) at the last day of the most recent Fiscal Quarter of the Borrower for which financial statements were required to be delivered pursuant to Section 8.01 were equal to or greater than five percent (5.0%) of the consolidated revenues of the Borrower and the Restricted Subsidiaries at the last day of the most recent Fiscal Quarter of the Borrower for which financial statements were required to be delivered pursuant to Section 8.01, in each case determined in accordance with GAAP; provided that if, at any time and from time to time after the Closing Date, Restricted Subsidiaries that are not Material Subsidiaries have, in the aggregate, (i) Total Assets (when combined with the assets of such Restricted Subsidiary’s Subsidiaries) as of the last day of such Fiscal Quarter that equal, or exceed, seven and a half percent (7.5%) of the Consolidated Total Assets of the Borrower and the Restricted Subsidiaries as of such date or (ii) revenues (when combined with the revenues of such Restricted Subsidiary’s Subsidiaries) during such period that equal or exceed seven and a half percent (7.5%) of the consolidated revenues of the Borrower and the Restricted Subsidiaries for such period, in each case, determined in accordance with GAAP, then the term “Material Subsidiary” shall include each such Restricted Subsidiary (starting with the Restricted Subsidiary that accounts for the most revenues or Consolidated Total Assets and then in descending order) necessary to account for at least 92.5% of the consolidated gross revenues and 92.5% of the Consolidated Total Assets, each as described in the previous sentence, so that the remaining non-Material Subsidiaries no longer satisfy such condition; provided further that, notwithstanding the foregoing, each Restricted Subsidiary that owns Oil and Gas Properties for which Borrowing Base credit is given, or is to be given in an upcoming redetermination, shall be a Material Subsidiary.
“Material Transaction” means if any Loan Party (i) acquires or disposes of any Equity Interests in any other Person (other than any Loan Party) such that such Person becomes a Loan Party or (ii) acquires or disposes of the property or assets of another Person (other than any Loan Party), in each case with a gross purchase price of at least $10,000,000 (in one or a series of related transactions).
“Maturity Date” means March 14, 2029.
“Maverick ABS” means the securitization of Oil and Gas Properties evidenced by that certain Indenture dated as of October 26, 2023 by and among MNR ABS Issuer I, LLC, a Delaware limited liability company, as Issuer, MNR ABS Agent Corp, as AgentCorp, and UMB Bank, N.A., as Indenture Trustee, Note Registrar, Paying Agent, and Securities Intermediary.
“Maverick ABS Account” means each Deposit Account of Unbridled Resources, LLC that is subject to a Lien to secure obligations arising under the Maverick ABS, provided that the funds credited to such Deposit Account consist solely and exclusively of proceeds of production from the interests in Oil and Gas Properties related to the Maverick ABS.
“Maverick Assignment” means that certain Assignment of Membership Interests entered into as of the Closing Date, by and between Maverick Services, LLC, a Delaware limited liability company, as the Assignor, and the Borrower, as the Assignee, whereby the Borrower acquires one hundred percent (100%) of the Equity Interests in MAH and indirectly one hundred percent (100%) of the Equity Interests in the Subsidiaries of MAH.
“Maverick Credit Agreement” means that certain Credit Agreement, dated as of April 1, 2022, among Maverick Natural Resources II, LLC, MAH, as borrower, the lenders party thereto, and JPMorgan
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Chase Bank, N.A., as Administrative Agent, Collateral Agent and Letter of Credit Issuer, as amended, supplemented or otherwise modified prior to the Closing Date.
“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amounts pursuant to Section 2.06, (b) modified from time to time pursuant to any assignment permitted by Section 12.04(b) or (c) or otherwise modified pursuant to the terms of this Agreement. As of the Closing Date, the aggregate Maximum Credit Amounts of the Lenders are $1,500,000,000.
“Merger Agreement” means that certain Merger Agreement dated as of January 24, 2025, by and among MNR, Diversified, Merger Sub, and, solely for purposes specified therein, EIG Management Company, LLC.
“Merger Sub” means Remington Merger Sub, LLC, a Delaware limited liability company.
“Minimum Required Volume” has the meaning assigned to such term in Section 8.15.
“MNR” means Maverick Natural Resources, LLC, a Delaware limited liability company.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.
“Mortgage” means each of the mortgages or deeds of trust executed by any one or more Loan Parties for the benefit of the Secured Parties as security for the Secured Obligations, together with any supplements, modifications or amendments thereto and assumptions or assignments of the obligations thereunder by any Loan Party. “Mortgages” shall mean all of such Mortgages collectively.
“Mortgaged Property” means any Property owned by any Loan Party which is subject to the Liens existing and to exist under the terms of the Security Instruments.
“Multiemployer Plan” means a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA.
“Net Proceeds” means the aggregate cash proceeds received by any Group Member in respect of any Disposition of Property (including any cash subsequently received upon the sale or other Disposition or collection of any non-cash consideration received in any sale), any Unwind of Swap Agreements, any incurrence of Indebtedness, or Casualty Event, net of, unless the Loans have been declared or become due and payable as a result of an Event of Default described in Section 10.01(h) or Section 10.01(i) (or after the occurrence and during the continuation of an Event of Default described in Section 10.01(h) or Section 10.01(i)), (a) the direct costs relating to such sale of Property, incurrence of Indebtedness or any Casualty Event (including legal, accounting and investment banking fees, and sales commissions paid to unaffiliated third parties), (b) Taxes paid or payable as a result thereof (after taking into account any tax credits or deductions utilized or reasonably expected to be utilized and any tax sharing arrangements), and (c) Indebtedness (other than the Secured Obligations) which is secured by a Lien upon any of the assets being sold that is senior to any Lien created by the Loan Documents with respect to such assets and which must be repaid as a result of such sale.
“New Borrowing Base Notice” has the meaning assigned to such term in Section 2.07(d).
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“New Debt” has the meaning assigned to such term in the definition of Permitted Refinancing Indebtedness.
“Non-U.S. Lender” means a Lender, with respect to the Borrower, that is not a U.S. Person.
“Notes” means the promissory notes, if any, of the Borrower described in Section 2.02(d) and being substantially in the form of Exhibit A, together with all amendments, modifications, replacements, extensions and rearrangements thereof.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing.
“Organizational Documents” means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to such corporation’s jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
“Other Connection Taxes” means, with respect to any Lending Party, Taxes imposed as a result of a present or former connection between such Lending Party and the jurisdiction imposing such Tax (other than connections arising from such Lending Party having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under,
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engaged in any other transaction pursuant to, or enforced, any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.05).
“Outbound Investment Rules” means the regulations administered and enforced, together with any related public guidance issued, by the United States Treasury Department under U.S. Executive Order 14105 of August 9, 2023, or any similar law or regulation; as of the date of this Agreement, and as codified at 31 C.F.R. § 850.101 et seq.
“Parent” means Diversified Energy Company PLC, a company incorporated under the laws of England and Wales.
“Parent Pledge Agreement” means that certain pledge agreement dated as of the date hereof executed by Diversified Production pursuant to which it pledged 100% of the Equity Interest of the Borrower to the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations.
“Participant” has the meaning assigned to such term in Section 12.04(c).
“Participant Register” has the meaning assigned to such term in Section 12.04(c).
“Patriot Act” has the meaning assigned to such term in Section 12.16.
“Payment in Full” means (a) the Commitments have expired or been terminated, (b) the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been indefeasibly paid in full (other than contingent indemnification obligations), (c) all Letters of Credit shall have expired or terminated (or are Cash Collateralized or otherwise secured to the satisfaction of the Issuing Bank) and all LC Disbursements shall have been reimbursed and (d) all amounts due under Secured Swap Agreements shall have been indefeasibly paid in full in cash and all such Secured Swap Agreements shall have expired or been terminated by the parties thereto (or such Secured Swap Agreements are Cash Collateralized or otherwise secured to the satisfaction of the Secured Swap Provider) (it is understood that the Administrative Agent shall be (i) permitted to rely on a certificate of a Responsible Officer of the Borrower to establish the foregoing in clause (d) and (ii) entitled to deem that the foregoing clause (d) has occurred with respect to any Secured Swap Provider if it does not respond to a written request from the Administrative Agent or the Borrower to confirm that the foregoing clause (d) has occurred within two (2) Business Days of such request).
“Payment Notice” has the meaning assigned to it in Section 11.12(b).
“Payment Recipient” has the meaning assigned to it in Section 11.12(a).
“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.
“PDP Reserves” means oil and gas mineral reserves that, in accordance with Petroleum Industry Standards, are classified as both “Proved Reserves” and “Developed Producing Reserves”.
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“Pension Act” means the Pension Protection Act of 2006, as it presently exists or as it may be amended from time to time, or any successor thereto.
“Permitted L/C Party” means (a) the Borrower, (b) any Restricted Subsidiary of the Borrower, and (c) Diversified and its wholly owned Subsidiaries (other than any such Subsidiary that has been or becomes a party to an ABS Transaction other than Diversified Production and Diversified Midstream LLC; for the avoidance of doubt, Diversified Production and Diversified Midstream LLC are each a Permitted L/C Party).
“Permitted Refinancing Indebtedness” means Indebtedness (for purposes of this definition, “New Debt”) incurred in exchange for, or proceeds of which are used to refinance, all of any other Indebtedness (the “Refinanced Indebtedness”); provided that:
(a)    such New Debt is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the Refinanced Indebtedness (or, if the Refinanced Indebtedness is exchanged or acquired for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange or refinancing,
(b)    such New Debt has a stated maturity no earlier than the stated maturity of the Refinanced Indebtedness and an average life no shorter than the average life of the Refinanced Indebtedness and does not restrict the prepayment or repayment of the Secured Obligations,
(c)     such New Debt contains covenants, events of default, guarantees and other terms which (other than “market” interest rate, fees, funding discounts and redemption or prepayment premiums as determined at the time of issuance or incurrence of any such Indebtedness), are not more restrictive on the Borrower and each Group Member than the terms of this Agreement (as in effect at the time of such issuance or incurrence),
(d)    no Subsidiary of the Borrower (other than a Guarantor or a Person who becomes a Guarantor in connection therewith) is an obligor under such New Debt, and
(e)    if such Refinanced Indebtedness is subordinated in right of payment to the Secured Obligations, such New Debt (and any guarantees thereof) is subordinated in right of payment to the Secured Obligations (or, if applicable, the Guarantee and Collateral Agreement) to at least the same extent as the Refinanced Indebtedness and subordinated on terms satisfactory to the Administrative Agent.
“Permitted Unsecured Debt” means unsecured senior, senior subordinated or subordinated Indebtedness issued or incurred by the Borrower and any guarantees thereof by the Guarantors (including any Persons becoming Guarantors simultaneously with the incurrence of such Indebtedness):
(a)    that does not restrict the prepayment or repayment of the Secured Obligations,
(b)    that has terms which do not provide for the maturity of such Indebtedness to be or any scheduled repayment, mandatory redemption or sinking fund obligation to occur prior to ninety-one (91) days (or one (1) year, if provided by any holder of the Borrower’s Equity Interests) after the Maturity Date (other than customary offers to purchase upon a change of control and customary acceleration rights after an event of default),
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(c)    where the covenants, events of default, guarantees and other terms which (other than “market” interest rate, fees, funding discounts and redemption or prepayment premiums as determined at the time of issuance or incurrence of any such Indebtedness), are not more restrictive on the Borrower and each Group Member than the terms of this Agreement (as in effect at the time of such issuance or incurrence),
(d)    where, if such Indebtedness is subordinated Indebtedness in right of payment, the terms of such Indebtedness provide for customary subordination of such Indebtedness to the Secured Obligations, and
(e)    where no Subsidiary of the Borrower (other than a Guarantor or a Person who becomes a Guarantor in connection therewith) is an obligor under such Indebtedness.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Petroleum Industry Standards” means the Definitions for Oil and Gas Reserves promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question.
“Plan” means any “employee pension benefit plan”, as defined in Section 3(2) of ERISA, other than a Multiemployer Plan, that is subject to Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA and which (a) is currently or hereafter sponsored, maintained or contributed to by a Group Member or an ERISA Affiliate or (b) was at any time during the six calendar years immediately preceding the date hereof, sponsored, maintained or contributed to by a Group Member or an ERISA Affiliate or to which a Group Member or an ERISA Affiliate has any liability.
“Plugged Wells” means in any Fiscal Year, the total number of affidavits received by a state or regulator evidencing the plugging and filling of a well as required by each state law; and which is verified by the Sustainability Assurance Provider on a limited assurance basis.
“Plugged Wells Applicable Rate Adjustment Amount” means, with respect to any Fiscal Year, (a) if the Plugged Wells Reported Amount for such Fiscal Year is equal to or greater than Level 1 of the Plugged Wells Performance Targets for such Fiscal Year, then minus one and one-half (1.5) basis points, (b) if the Plugged Wells Reported Amount for such Fiscal Year is less than Level 1 of the Plugged Wells Performance Targets but greater than or equal to Level 3 of the Plugged Wells Performance Targets for such Fiscal Year, then no change and (c) if the Plugged Wells Reported Amount for such Fiscal year is less than Level 3 of the Plugged Wells Performance Targets for such Fiscal Year, then plus one and one-half (1.5) basis points.
“Plugged Wells Performance Targets” means the targets set forth on Appendix B to achieve permanent retirement in Diversified’s wells.
“Plugged Wells Reported Amount” means, with respect to any Fiscal Year, Diversified’s reported number of Plugged Wells for such Fiscal Year as verified by the Sustainability Assurance Provider on a limited assurance basis.
“Prime Rate” means the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being
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effective. Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative Agent may deem appropriate; it being understood that many of the Administrative Agent’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various commercial or other loans at rates of interest having no relationship to such rate.
“Prohibited Transaction” has the meaning assigned to such term in Section 406 of ERISA and Section 4975(c) of the Code.
“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including cash, securities, accounts and contract rights.
“Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(c)(i).
“Proposed Borrowing Base Notice” has the meaning assigned to such term in Section 2.07(c)(ii).
“Proved Reserves” means oil and gas mineral reserves that, in accordance with Petroleum Industry Standards, are classified as both “Proved Reserves” and one of the following: (a) “Developed Producing Reserves”, (b) “Developed Non-Producing Reserves” or (c) “Undeveloped Reserves”.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning assigned to such term in Section 12.20.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation, (a) each Loan Party that has total assets exceeding $10,000,000 at the time the relevant guarantee of obligations under, or grant of a security interest to secure, such Swap Obligation or (b) such other Person that constitutes an “eligible contract participant” under the Commodity Exchange Act, or any regulation promulgated thereunder, and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“RBL Maverick Account” means any Deposit Account of Borrower or any Loan Party acquired pursuant to the Acquisition that is held by a financial institution that is not a Lender so long as such account is subject to a Control Agreement in form and substance satisfactory to the Administrative Agent.
“Redemption” means with respect to any Indebtedness, the repurchase, redemption, prepayment, repayment, defeasance or any other acquisition or retirement for value (or the segregation of funds with respect to any of the foregoing) of such Indebtedness. “Redeem” has the correlative meaning thereto.
“Redetermination Date” means, with respect to any Scheduled Redetermination or any Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes effective pursuant to Section 2.07(d).
“Reference Period” has the meaning assigned to such term in the definition of “EBITDAX”.
“Refinanced Indebtedness” has the meaning assigned to such term in the definition of “Permitted Refinancing Indebtedness”.
“Register” has the meaning assigned to such term in Section 12.04(b)(iv).
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“Regulation D” means Regulation D of the Board, as the same may be amended, supplemented or replaced from time to time.
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents, partners and advisors (including attorneys, accountants and experts) of such Person and such Person’s Affiliates.
“Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.
“Released Entities” has the meaning assigned to such term in Section 12.21.
“Relevant Governmental Body” means the Federal Reserve Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Plan, other than those events as to which the 30-day notice has been waived in regulations issued by the PBGC.
“Required Lenders” means (a) at any time while no Loans or LC Exposure are outstanding, Lenders having at least sixty-six and two thirds percent (66-2/3%) of the Aggregate Maximum Credit Amounts and (b) at any time while any Loans or LC Exposure are outstanding, Lenders holding at least sixty-six and two thirds percent (66-2/3%) of the outstanding aggregate principal amount of the Loans and participation interests in Letters of Credit and Swing Line Loans at such time (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)).
“Reserve Report” means each report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of the dates set forth in Section 8.11(a) (or such other date in the event of an Interim Redetermination) the oil and gas reserves attributable to the Borrowing Base Properties of the Borrower and the Guarantors, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the economic and pricing assumptions consistent with the Administrative Agent’s lending requirements at the time.
“Reserve Report Certificate” has the meaning assigned to such term in Section 8.11(c).
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means, as to any Person, the chief executive officer, the chief operating officer, the president, any Financial Officer or general counsel of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower, Diversified or of the Parent, as applicable.
“Restricted Payment” means any dividend or other distribution or return of capital (whether in cash, securities or other Property) with respect to any Equity Interests in any Person, or any payment (whether in cash, securities or other Property), including any sinking fund or similar deposit, on account
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of the purchase, redemption, retirement, acquisition, cancellation or termination of (a) any such Equity Interests or (b) any option, warrant or other right to acquire any such Equity Interests.
“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an Unrestricted Subsidiary.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans, its LC Exposure and Swing Line Exposure at such time.
“S&P” means S&P Global Ratings, a division of S&P Global, and any successor thereto that is a nationally recognized rating agency.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (as of the Closing Date, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, the Crimea, Zaporizhzhia and Kherson Regions of Ukraine, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the U.S. government (including by OFAC or the U.S. Department of State), the United Nations Security Council, the European Union, any European Union member state, the United Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by OFAC or the U.S. Department of State, the U.S. government (including by OFAC or the U.S. Department of State), the United Nations Security Council, the European Union, any European Union member state, the United Kingdom or other relevant sanctions authority.
“Scheduled Redetermination” has the meaning assigned to such term in Section 2.07(b).
“Scheduled Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section 2.07(d).
“Scope 1 Emissions” means, the absolute direct greenhouse emissions or equivalent CO2 emissions occurring from activities under which Diversified has operational control, which are calculated in accordance with the Intergovernmental Panel on Climate Change (AR5) reporting guidance, which permits best engineering estimates for certain emissions metrics and which may vary from the prescriptive measures applied under US EPA reporting standards; and for greater certainty will not include carbon offsets.
“Scope 2 Emissions” means, the absolute indirect greenhouse gas emissions or equivalent CO2 emissions occurring from the generation of purchased and imported electricity consumed by Diversified in the operation of their business, which are determined in accordance with the Intergovernmental Panel on Climate Change (AR5) reporting guidance, which permits best engineering estimates for certain emissions metrics and which may vary from the prescriptive measures applied under US EPA reporting standards; and for greater certainty will not include carbon offsets.
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“SEC” means the Securities and Exchange Commission or any successor Governmental Authority.
“Secured Affiliate Cash Management Obligations” means all obligations of Diversified and its wholly owned Subsidiaries (other than any such Subsidiary that has been or becomes a party to an ABS Transaction other than Diversified Production and Diversified Midstream LLC; for the avoidance of doubt, any Cash Management Agreement between Diversified Production or Diversified Midstream LLC and a Secured Cash Management Lender is a Secured Affiliate Cash Management Agreement) arising from time to time under any Cash Management Agreement with a Secured Cash Management Bank; provided that if such Secured Cash Management Bank ceases to be a Lender or an Affiliate of a Lender hereunder, such obligations owed to such Secured Cash Management Bank shall no longer be Secured Affiliate Cash Management Obligations.
“Secured Cash Management Bank” means any Lender or any Affiliate of a Lender that is a counterparty to a Cash Management Agreement with the Borrower or any other Group Member.
“Secured Cash Management Obligations” means (a) all obligations of the Borrower or any other Group Member arising from time to time under any Cash Management Agreement with a Secured Cash Management Bank; provided that if such Secured Cash Management Bank ceases to be a Lender or an Affiliate of a Lender hereunder, such obligations owed to such Secured Cash Management Bank shall no longer be Secured Cash Management Obligations and (b) all Secured Affiliate Cash Management Obligations.
“Secured Obligations” means any and all amounts owing or to be owing by any Loan Party (a) to the Administrative Agent, any Issuing Bank, any Lender or any other Person under any Loan Document or (b) to any Secured Swap Provider under a Secured Swap Agreement or Secured Cash Management Bank under Secured Cash Management Obligations, and for clauses (a) and (b), all renewals, extensions and/or rearrangements of any of the foregoing, in each case, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising (including interest accruing after the maturity of the Loans and LC Disbursements and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding); provided that solely with respect to any Group Member that is not an “eligible contract participant” under the Commodity Exchange Act, Excluded Swap Obligations of such Group Member shall in any event be excluded from “Secured Obligations” owing by such Group Member.
“Secured Parties” means, collectively, the Administrative Agent, each Issuing Bank, the Lenders, each Secured Cash Management Bank, each Secured Swap Provider, and any other Person owed Secured Obligations. “Secured Party” means any of the foregoing individually.
“Secured Swap Agreement” means a Swap Agreement between (a) any Loan Party and (b) a Secured Swap Provider.
“Secured Swap Provider” means, with respect to any Swap Agreement, (a) a Lender or an Affiliate of a Lender who is the counterparty to any such Swap Agreement with a Loan Party and (b) any Person who was a Lender or an Affiliate of a Lender at the time when such Person entered into any such Swap Agreement with a Loan Party; provided that any such Secured Swap Provider that ceases to be a Lender or an Affiliate of a Lender shall continue to be a “Secured Swap Provider” for purposes of this
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Agreement to the extent that such Secured Swap Provider entered into a Secured Swap Agreement with the Borrower or any of its Subsidiaries at the time such Secured Swap Provider was a Lender (or Affiliate of a Lender) hereunder and such Secured Swap Agreement remains in effect and there are remaining obligations under such Secured Swap Agreement (but excluding any transactions, confirms, or trades entered into after such Person ceases to be a Lender or an Affiliate of a Lender). For the avoidance of doubt, for purposes of this definition and the definition of “Secured Swap Agreement” the term “Lender” includes each Person that was a “Lender” under the Existing Credit Agreement at the relevant time.
“Securities Account” has the meaning assigned to such term in the UCC.
“Security Instruments” means (a) the Guarantee and Collateral Agreement, (b) the Mortgages, (c) any Control Agreement, (d) the Parent Pledge Agreement, (e) the other agreements, instruments or certificates described or referred to in Exhibit F and (f) any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower, the other Loan Parties or any other Person, in each case in connection with, or as security for the payment or performance of the Secured Obligations, as such agreements may be amended, modified, supplemented or restated from time to time, but, for the avoidance of doubt, excluding any Swap Agreements.
“Seller Credit Agreement” means that certain Credit Agreement, dated as of June 6, 2024 by and among Diversified, as borrower, the Guarantors party thereto, the Lenders party thereto, and Oaktree Fund Administration, LLC, as Administrative Agent.
“Seller Facility” means, collectively, (a) the Seller Credit Agreement and (b) all “Loan Documents” (as defined therein).
“Seller Indebtedness” means the Indebtedness evidenced by the Seller Facility.
“Significant Sustainability Event” means a material event impacting environmental, social or governance performance of Diversified or its operations, as determined by the Lead Sustainability Structuring Agent and Majority Lenders, each acting reasonably.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the Term SOFR Administrator.
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Borrowing” means a Term SOFR Borrowing and/or a Daily Simple SOFR Borrowing, as the context may require.
“SOFR Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“SOFR Determination Day” has the assigned to such term in the definition of “Daily Simple SOFR”.
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“SOFR Index Adjustment” means for any calculation with respect to a Daily Simple SOFR Loan or a Term SOFR Loan, a percentage per annum as set forth below for the applicable Type of such Loan and (if applicable) Interest Period therefor:
Daily Simple SOFR Loans0.10%

Term SOFR Interest PeriodPercentage
One month0.10%
Three months0.15%
Six months0.25%

“SOFR Loan” means each Loan bearing interest at a rate based upon (a) Adjusted Term SOFR (other than pursuant to clause (c) of the definition of “Alternate Base Rate”) or (b) Adjusted Daily Simple SOFR.
“SOFR Rate Day” has the meaning assigned to such term the definition of “Daily Simple SOFR”.
“Solvency Certificate” means a solvency certificate signed by a Financial Officer in substantially the form of Exhibit E hereto.
“Specified Change of Control” means a “Change of Control” (or any other defined term having a similar purpose or meaning) as defined in any Permitted Unsecured Debt.
“Specified Indebtedness” has the meaning assigned to such term in Section 9.04(b).
“Specified Merger Agreement Representations” means such of the representations and warranties made by or with respect to MNR and/or MAH in the Merger Agreement that are material to the interests of the Lenders, but only to the extent that the Borrower has (and/or its applicable Affiliates have) the right to terminate its (and/or such Affiliate’s) obligations under the Merger Agreement or to decline to consummate the Acquisition (pursuant to the terms thereof) as a result of a breach of one or more of such representations and warranties in the Merger Agreement.
“Specified Representations” means the representations and warranties set forth in Section 7.01, Section 7.02, Section 7.03, Section 7.08, Section 7.20, Section 7.22, Section 7.23, Section 7.24, and Section 7.26.
“SPV Cash Flow” means, for any Test Period, an amount equal to cash distributions actually received by Diversified Production during such Test Period on account of its Equity Interests in (a) Subsidiaries that are parties to ABS Transactions and (b) DP Lion Equity Holdco LLC.
“Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a direct or indirect Subsidiary or Subsidiaries of the Borrower.
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“Supported QFC” has the meaning assigned to such term in Section 12.20.
“Sustainability Assurance Provider” means ISOS Group or any other independent third party engaged by Diversified or any of its Subsidiaries who in the ordinary course of business evaluates metrics such as the Sustainability Linked Performance Targets and provides limited assurances with respect thereto; provided that such replacement Sustainability Assurance Provider shall be reasonably acceptable to the Lead Sustainability Structuring Agent.
“Sustainability Certificate” means a certificate substantially in the form of Exhibit J executed by a Responsible Officer of the Borrower and attaching (a) a true and correct copy of the Sustainability Report (unless such Sustainability Report is publicly available on the Internet) for the most recently ended Fiscal Year and setting forth the Sustainability Rate Adjustment for the period covered thereby and computations in reasonable detail in respect thereof, (b) a review report of the Sustainability Assurance Provider confirming (i) that the Sustainability Assurance Provider is not aware of any material modifications that should be made to such computations in order for them to be presented in all material respects in conformity with the applicable reporting criteria, including any occurrence set forth in Section 2.13(g) that may have impacted any of the Sustainability Linked Performance Targets and (ii) the calculation of the Sustainability Rate Adjustment.
“Sustainability Certificate Inaccuracy” has the meaning assigned to such term in Section 2.13(d).
“Sustainability Linked Performance Targets” means the GHG Emissions Intensity Performance Targets, the Plugged Wells Performances Targets and the TRIR Performance Targets.
“Sustainability Pricing Adjustment Date” has the meaning assigned to such term in Section 2.13(a).
“Sustainability Rate Adjustment” means, with respect to any Sustainability Certificate for any Fiscal Year, an amount (whether positive, negative or zero), expressed in basis points, equal to the sum of (a) the GHG Emissions Intensity Applicable Rate Adjustment Amount, plus (b) the Plugged Wells Applicable Rate Adjustment Amount plus (c) the TRIR Applicable Rate Adjustment Amount, in each case for such Fiscal Year; provided that no Sustainability Rate Adjustment shall apply at any time an Event of Default has occurred and is continuing.
“Sustainability Report” means the annual non-financial disclosure report prepared by Diversified in accordance with the GRI Standard for Sustainability Reporting or other internationally recognized sustainability reporting standard reasonably acceptable to the Lead Sustainability Structuring Agent which includes disclosure of the Sustainability Linked Performance Targets, publicly reported by Diversified and published on an Internet or intranet website.
“Swap Adjustment” has the meaning assigned to such term in Section 9.17(a)(i).
“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement (including collar transactions), whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of any Group Member shall be a Swap Agreement.
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“Swap Obligation” means, with respect to any person, any obligation to pay or perform under any Swap Agreement.
“Swap Percentage” has the meaning assigned to such term in Section 9.17(a)(ii)(B).
“Swap Termination Value” means, in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, (a) for any date on or after the date such Swap Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and any unpaid amounts and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as determined by the counterparties to such Swap Agreements.
“Swing Line Commitment” means, at any time, forty million dollars ($40,000,000). The Swing Line Commitment is part of and not in addition to the Aggregate Maximum Credit Amounts.
“Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing Line Loans outstanding at such time. The Swing Line Exposure of any Lender at any time shall be the sum of (a) its Applicable Percentage of the total Swing Line Exposure at such time, other than with respect to any Swing Line Loans made by such Lender in its capacity as a Swing Line Lender, and (b) the aggregate principal amount of all Swing Line Loans made by such Lender as a Swing Line Lender outstanding at such time (less the amount of participations funded by the other Lenders in such Swing Line Loans).
“Swing Line Lender” means KeyBank National Association in its capacity as a lender of Swing Line Loans hereunder.
“Swing Line Loan” means a Loan made pursuant to Section 2.11.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Date” means the earlier of the Maturity Date and the date of termination of the Commitments in accordance with the terms of this Agreement.
“Term SOFR” means for any calculation with respect to a Term SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Lookback Day”) that is two SOFR Business Days prior to the first day of such Interest Period (and rounded in accordance with the Administrative Agent’s customary practice), as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. on any Lookback Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding SOFR Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding SOFR Business Day is not more than three SOFR Business Days prior to such Lookback Day, and for any calculation with respect to a ABR Loan, the Term SOFR Reference Rate for a tenor of one month on the day that is two SOFR Business Days prior to the date the Alternate Base Rate is determined, subject to the proviso provided above.
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“Term SOFR Administrator” means CME (or a successor administrator of the Term SOFR Reference Rate, as selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Borrowing” means a Borrowing comprised of Term SOFR Loans.
“Term SOFR Loan” means each Loan bearing interest at a rate based upon Adjusted Term SOFR (other than pursuant to clause (c) of the definition of Alternate Base Rate).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Test Period” means, for any determination under this Agreement, (a) the nine-month period ending December 31, 2024, and (b) for each Fiscal Quarter ending thereafter, each period of four consecutive Fiscal Quarters of the Borrower then last ended and for which financial statements have been delivered (or are required to be delivered) to the Administrative Agent pursuant to Sections 8.01(a) or (b).
“Total Assets” means, as of any date of determination with respect to any Person, the amount that would, in accordance with GAAP, be set forth opposite the caption “total assets” (or any like caption) on a balance sheet of such Person at such date.
“Total Net Debt” means, at any time, (a) all Indebtedness of the Borrower and the Consolidated Restricted Subsidiaries on a consolidated basis described in clauses (a), (c), (d), (j) and (l) of the definition of Indebtedness, excluding the undrawn portion and/or contingent obligations arising under, or in respect of letters of credit, bank guarantees and surety or other bonds and similar instruments; provided that net Swap Obligations to the extent such obligations are due and payable and not paid on such date shall constitute Total Net Debt minus (b) the aggregate amount (not to exceed $30,000,000 at any time) of unrestricted cash and Cash Equivalents on the balance sheet of the Borrower and its Restricted Subsidiaries as of such date.
“Transactions” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement, each other Loan Document to which it is a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, the Borrower’s grant of the security interests and provision of collateral under the Security Instruments and Borrower’s grant of Liens on Mortgaged Properties (if applicable) and other Properties pursuant to the Security Instruments, (b) each Loan Party, the execution, delivery and performance by such Loan Party of each Loan Document to which it is a party, the guaranteeing of the Secured Obligations and the other obligations under the Guarantee and Collateral Agreement by such Loan Party, (c) each Loan Party, such Loan Party’s grant of the security interests and provision of collateral under the Security Instruments, and the grant of Liens by such Loan Party on Mortgaged Properties (if applicable) and other Properties pursuant to the Security Instruments, and (d) the consummation of the Acquisition and the other transactions described in Section 6.01.
“Transferee” means any Assignee or Participant.
“TRIR” means in any Fiscal Year, the arithmetic average of the 2 Fiscal Years preceding and current period total recordable injury rate computed as the Total Number of Recordable Cases (as defined by the Occupational Safety and Health Administration) times 200,000 and then divided by total hours worked by all employees during the Fiscal Year covered and which is verified by the Sustainability Assurance Provider on a limited assurance basis.
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“TRIR Applicable Rate Adjustment Amount” means, with respect to any Fiscal Year, (a) if the TRIR Reported Amount for such Fiscal Year is equal to or less than Level 1 of the TRIR Performance Targets for such Fiscal Year, then minus one and one-half (1.5) basis points, (b) if the TRIR Reported Amount for such Fiscal Year is greater than Level 1 of the TRIR Performance Targets but less than or equal to Level 3 of the TRIR Performance Targets for such Fiscal Year, then minus seventy-five hundredths (.75) basis points, (c) if the TRIR Reported Amount for such Fiscal Year is greater than Level 2 of the TRIR Performance Targets for such Fiscal Year but less than or equal to Level 4 of the TRIR Performance Targets for such Fiscal Year, then no change and (d) if the TRIR Reported Amount for such Fiscal Year is greater than Level 4 of the TRIR Performance Targets for such Fiscal Year, then plus one and one-half (1.5) basis points.
“TRIR Performance Targets” means the targets set forth on Appendix C to achieve a reduction in work-related injuries.
“TRIR Reported Amount” means, with respect to any Fiscal Year, Diversified’s reported TRIR reports for such Fiscal Year as verified by the Sustainability Assurance Provider on a limited assurance basis.
“Type” means any type of Loan determined with respect to the interest option applicable thereto, which in each case shall be an ABR Loan, a Daily Simple SOFR Loan or a Term SOFR Loan.
“UCC” means the Uniform Commercial Code of the State of New York or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Mortgaged Property.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unrestricted Subsidiary” means any Subsidiary of the Borrower which the Borrower has designated in writing to the Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 8.18 and satisfies the requirements to be an Unrestricted Subsidiary as set forth in Section 8.18.
“Unwind” means, with respect to any Swap Agreement, the early termination, unwind, cancelation or other Disposition of any such Swap Agreement. “Unwound” shall have a meaning correlative to the foregoing.
“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code and, for purposes of Section 7.24(e) and Section 9.20, this term means any United States citizen, lawful permanent resident, entity organized under the laws of the United States or any jurisdiction within the United States, including any foreign branch of any such entity, or any Person in the United States.
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“U.S. Tax Compliance Certificate” has the meaning assigned such term in Section 5.03(g)(ii)(B)(3).
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
“Yellowjacket” means DP Yellowjacket Holdco LLC, a Delaware limited liability company.
“Yellowjacket Assignment” has the meaning assigned to such term in Section 6.01(v).
“Yellowjacket Credit Agreement” means that certain Credit Agreement dated as of August 15, 2024 by and among Yellowjacket, as borrower, KeyBank National Association, as administrative agent, the lenders party thereto, and the other parties thereto, as amended, supplemented or otherwise modified prior to the Closing Date.
Section 1.03Types of Loans and Borrowings. For purposes of this Agreement, Loans and Borrowings, respectively, may be classified and referred to by Type (e.g., a “Daily Simple SOFR Loan” or a “Daily Simple SOFR Borrowing”).
Section 1.04Terms Generally; Rules of Construction. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented, restated or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” and the word “through” means “to and including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. The use of the phrase “subject to” as used in connection with Excepted Liens or otherwise and the permitted existence of any Excepted Liens or any other Liens shall not be interpreted to expressly or impliedly subordinate any Liens granted in favor of the Administrative Agent and the other Secured Parties as there is no intention to subordinate the Liens granted in favor of the Administrative Agent and the other Secured Parties. No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.
Section 1.05Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the financial statements delivered pursuant to Section 7.04(a), except for Accounting Changes (as defined below) with which the Borrower’s independent certified public accountants concur and which are disclosed to the Administrative Agent on the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the Borrower and the Majority Lenders shall otherwise agree in writing, no
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such change shall modify or affect the manner in which compliance with the covenants set forth in Section 9.01 is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods; and provided, further, for purposes of such covenant compliance by the Borrower and its Subsidiaries, operating and capital leases shall be treated in a manner consistent with their treatment under GAAP as in effect prior to the issuance by the Financial Accounting Standards Board on February 25, 2016 of Accounting Standards Update No. 2016-02. In the event that any “Accounting Change” shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Majority Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.
Section 1.06Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
Section 1.07Timing of Payment or Performance. When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day.
Section 1.08Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
Section 1.09Rates. The interest rate on Loans denominated in Dollars may be determined by reference to a benchmark rate that is, or may in the future become, the subject of regulatory reform or cessation. The Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Alternate Base Rate, Daily Simple SOFR, Adjusted Daily Simple SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR or Term SOFR, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Alternate Base Rate, Daily Simple SOFR, Adjusted Daily Simple SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR or Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Administrative Agent and its affiliates or other related entities may engage in transactions that affect the calculation of the Alternate Base Rate, Daily Simple SOFR, Adjusted Daily Simple SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR or Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain the Alternate Base Rate, Daily Simple SOFR, Adjusted Daily Simple SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR or Term SOFR or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided
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by any such information source or service. The Administrative Agent will, in keeping with industry practice, continue using its current rounding practices in connection with the Alternate Base Rate, Daily Simple SOFR, Adjusted Daily Simple SOFR, the Term SOFR Reference Rate, Adjusted Term SOFR or Term SOFR. In connection with the use or administration of Daily Simple SOFR and Term SOFR, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Daily Simple SOFR and Term SOFR.
Section 1.10Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the amount of such Letter of Credit available to be drawn at such time; provided that with respect to any Letter of Credit that, by its terms, provides for one or more automatic increases in the available amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum amount is available to be drawn at such time.
Article II
THE CREDITS
Section 2.01Commitments.
(a)Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrower from time to time on any Business Day during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (ii) the total Revolving Credit Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Loans.
(b)Subject to the terms of this Agreement, each Lender that was an Existing Lender holding “Loans” (under and as defined in the Existing Credit Agreement, such loans, the “Existing Loans”) immediately prior to the Closing Date, severally agrees, on the terms and conditions of this Agreement, to continue, assign, and/or reallocate a portion of its Existing Loans to other Lenders hereunder and/or accept the reallocation from other Existing Lenders a portion of such other Existing Lenders’ Existing Loans, in each case such that, after giving effect to all such continuations, assignments, and reallocations, a portion of the Existing Loans held by each Lender shall be in an amount equal to such Lender’s Applicable Percentage of the aggregate Commitments as of the Closing Date, and such portion of Existing Loans so continued, assigned, and reallocated by the Lenders under this Section 2.01(b) shall automatically be deemed to constitute Loans under this Agreement for all purposes.
Section 2.02Loans and Borrowings.
(a)Borrowings; Several Obligations. Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.
(b)Types of Loans. Subject to the terms of this Agreement, each Borrowing shall be comprised entirely of ABR Loans or SOFR Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any SOFR Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan and any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.
(c)Minimum Amounts; Limitation on Number of Borrowings. At the commencement of each Interest Period for any Term SOFR Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $500,000. At the time that
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each ABR Borrowing or Daily Simple SOFR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $500,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.09(e). Each Swing Line Loan shall be in an amount that is an integral multiple of $500,000 and not less than $500,000. More than one Borrowing may be incurred by the Borrower on any day; provided, however, that (i) if there are two or more Borrowings on a single day by the Borrower that consist of Term SOFR Loans, each such Borrowing shall have a different initial Interest Period, and (ii) at no time shall there be more than five (5) Borrowings of Term SOFR Loans outstanding hereunder. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
(d)Notes. If a Lender shall make a written request to the Administrative Agent and the Borrower to have its Loans evidenced by a Note, then, for each such Lender, the Borrower shall execute and deliver a single Note of the Borrower dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the Closing Date or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, payable to such Lender (and, for avoidance of doubt, its registered assigns) in a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly completed. Upon request from a Lender, in the event that any such Lender’s Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise), the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to such Lender (and, for avoidance of doubt, its registered assigns) in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or decrease, and otherwise duly completed. The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, may be recorded by such Lender on its books for its Note, and, prior to any transfer, may be recorded by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender; provided that the failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note.
Section 2.03Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Term SOFR Borrowing, not later than 11:00 a.m. three (3) Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing or Daily Simple SOFR Borrowing, on the date of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e). Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or electronic communication to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower (or other communication in writing acceptable to the Administrative Agent). Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i)the aggregate amount of the requested Borrowing;
(ii)the date of such Borrowing, which shall be a Business Day;
(iii)whether such Borrowing is to be an ABR Borrowing, a Daily Simple SOFR Borrowing or a Term SOFR Borrowing;
(iv)in the case of a Term SOFR Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and
(v)the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05.
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Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent may act prior to receipt of written confirmation without liability upon the basis of such telephonic notice believed by the Administrative Agent in good faith to be from an Responsible Officer of the Borrower entitled to give telephonic notices under this Agreement on behalf of the Borrower. In each such case, the Administrative Agent’s record of the terms of such telephonic notice shall be conclusive absent manifest error. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be a Daily Simple SOFR Borrowing. If no election is specified as to whether a SOFR Borrowing is to be a Term SOFR Loan or Daily Simple SOFR Loan, then the requested Borrowing shall be a Daily Simple SOFR Loan. If no Interest Period is specified with respect to any requested Term SOFR Loan, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
Each Borrowing Request shall constitute a representation that the amount of the requested Borrowing shall not cause the total Revolving Credit Exposures to exceed the total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base) on the date of such Borrowing.
Section 2.04Interest Elections.
(a)Conversion and Continuance. Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request unless otherwise precluded by the terms hereof and, if a Term SOFR Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Term SOFR Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.04. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section 2.04 shall not apply to Swing Line Loans which may not be converted or continued.
(b)Interest Election Requests. To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or electronic communication to the Administrative Agent of a written Interest Election Request signed by the Borrower.
(c)Information in Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i)the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.04(c)(iii) and Section 2.04(c)(iv) shall be specified for each resulting Borrowing);
(ii)the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii)whether the resulting Borrowing is to be an ABR Borrowing, a Daily Simple SOFR Borrowing or a Term SOFR Borrowing; and
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(iv)if the resulting Borrowing is a Term SOFR Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Term SOFR Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
(d)Notice to Lenders by the Administrative Agent. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.
(e)Effect of Failure to Deliver Timely Interest Election Request and Events of Default and Borrowing Base Deficiencies on Interest Election. If the Borrower fails to deliver a timely Interest Election Request with respect to a Term SOFR Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to a Term SOFR Borrowing with a one month Interest Period. Notwithstanding any contrary provision hereof, if (i) a Borrowing Base Deficiency has occurred and is continuing, no outstanding Borrowing may be converted to or continued as a Term SOFR Borrowing with an Interest Period longer than one month (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Term SOFR Borrowing shall be deemed to request an Interest Period of one month) and (ii) an Event of Default has occurred and is continuing, no outstanding Borrowing may be converted to or continued as a Term SOFR Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Term SOFR Borrowing shall be ineffective) and, unless repaid, each Term SOFR Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
Section 2.05Funding of Borrowings.
(a)Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swing Line Loans shall be made as provided in Section 2.11. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank. Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.
(b)Presumption of Funding by the Lenders. Unless the Administrative Agent shall have received notice from a Lender prior to 10:00 a.m. on the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.
Section 2.06Termination and Reduction of Aggregate Maximum Credit Amounts.
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(a)Scheduled Termination of Commitments. Unless previously terminated, the Commitments shall terminate on the Maturity Date. If at any time the Aggregate Maximum Credit Amounts are terminated or reduced to zero, then the Commitments shall terminate on the effective date of such termination or reduction.
(b)Optional Termination and Reduction of Aggregate Credit Amounts.
(i)The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amounts; provided that (A) each reduction of the Aggregate Maximum Credit Amounts shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (B) the Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(b), the total Revolving Credit Exposures would exceed the total Commitments.
(ii)The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three (3) Business Days prior to the effective date of such termination or reduction (or such shorter time as the Administrative Agent may agree) in writing, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that a notice of termination of the Aggregate Maximum Credit Amounts delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit or debt facilities or the consummation of a Material Acquisition or Material Disposition or an issuance of Equity Interests, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Aggregate Maximum Credit Amounts shall be permanent and may not be reinstated. Each reduction of the Aggregate Maximum Credit Amounts shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.
Section 2.07Borrowing Base.
(a)Borrowing Base. For the period from and including the Closing Date to but excluding the next Redetermination Date, the Borrowing Base shall be $900,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time to time pursuant to the Borrowing Base Adjustment Provisions.
(b)Scheduled and Interim Redeterminations. The Borrowing Base shall be redetermined semi-annually in accordance with this Section 2.07 (each such redetermination, a “Scheduled Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank(s) and the Lenders on May 1st and November 1st of each year (or as soon as possible thereafter as contemplated by Section 2.07(d)(i)) commencing May 1, 2025. The (i) Borrower may, by notifying the Administrative Agent thereof, (A) one time between each Scheduled Redetermination, or (B) upon the acquisition or disposition of Oil and Gas Properties that have a Fair Market Value (in the instance of an acquisition) or a Borrowing Base value (in the instance of a divestiture) equal to or greater than 5% of the then effective Borrowing Base, elect to cause the Borrowing Base to be redetermined in accordance with this Section 2.07 and (ii) Administrative Agent, at the direction of the Required Lenders shall, by notifying the Borrower thereof, one-time between each Scheduled Redetermination elect to cause the Borrowing Base to be redetermined (each such redetermination, an “Interim Redetermination”) in accordance with this Section 2.07.
(c)Scheduled and Interim Redetermination Procedure.
(i)Each Scheduled Redetermination and each Interim Redetermination shall be effectuated as follows: upon receipt by the Administrative Agent of (A) the Reserve Report for such redetermination and the related Reserve Report Certificate (unless waived by the Administrative Agent in the case of an Interim Redetermination) and (B) such other reports, data and supplemental information, including the information provided pursuant to Section 8.11(c), as may, from time to time, be reasonably
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requested by the Administrative Agent or a Lender (the Reserve Report, such Reserve Report Certificate and such other reports, data and supplemental information being the “Engineering Reports”), the Administrative Agent in its sole discretion shall evaluate the information contained in the Engineering Reports and shall propose a new Borrowing Base (the “Proposed Borrowing Base”) in good faith based upon such information and such other information (including the status of title information with respect to the Oil and Gas Properties as described in the Engineering Reports and the existence of any other Indebtedness) as the Administrative Agent deems appropriate in its sole discretion and consistent with its oil and gas lending criteria as it exists at the particular time. In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amounts.
(ii)The Administrative Agent shall thereafter notify the Borrower and the Lenders of the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):
(A)in the case of a Scheduled Redetermination (1) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and Section 8.11(c) in a timely and complete manner, then before or on March 15th or September 15th, as the case may be, of such year following the date of delivery or (2) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and Section 8.11(c) in a timely and complete manner, then promptly after the Administrative Agent has received complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine the Proposed Borrowing Base in accordance with Section 2.07(c)(i); and
(B)in the case of an Interim Redetermination, promptly, and in any event, in the case of a Borrower requested Interim Redetermination within fifteen (15) days after the Administrative Agent has received the required Engineering Reports (or such later date to which the Borrower and the Administrative Agent agree).
(iii)Subject to Section 2.10(b) and Section 12.02(b)(ii) with respect to any Defaulting Lender, any Proposed Borrowing Base that would (A) increase the Borrowing Base then in effect must be approved by all Lenders as provided in this Section 2.07(c)(iii) and (B) decrease or maintain the Borrowing Base then in effect must be approved by the Required Lenders as provided in this Section 2.07(c)(iii). Upon receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days (or such shorter period as the Administrative Agent may permit) to agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base. If, at the end of such 15-day period (or such shorter period as the Administrative Agent may permit), all of the Lenders, in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or the Required Lenders, in the case of a Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, have approved, as aforesaid, then the Proposed Borrowing Base shall become the new Borrowing Base, effective on the date specified in Section 2.07(d). If, however, at the end of such 15-day period (or such shorter period as the Administrative Agent may permit), all of the Lenders or the Required Lenders, as applicable, have not approved the Proposed Borrowing Base, as aforesaid, then the Administrative Agent shall poll the Lenders to ascertain the highest Borrowing Base then acceptable to a number of Lenders sufficient to constitute the Required Lenders and, so long as such amount does not increase the Borrowing Base then in effect, such amount shall become the new Borrowing Base, effective on the date specified in Section 2.07(d) (provided that, if the Administrative Agent shall have polled the Lenders and ascertained that the highest Borrowing Base then acceptable to all of the Lenders increases the Borrowing Base then in effect, such amount shall become the new Borrowing Base, effective on the date specified in Section 2.07(d)).
(d)Effectiveness of a Redetermined Borrowing Base. After a redetermined Borrowing Base is approved by all of the Lenders or the Required Lenders (subject to Section 2.10(b) and Section 12.02(b)(ii) with respect to any Defaulting Lender), as applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders of the amount of the redetermined Borrowing Base (such notice, the “New Borrowing Base Notice”) and such amount shall become the new Borrowing Base effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank(s) and the Lenders:
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(i)in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and Section 8.11(c) in a timely and complete manner, then on May 1st or November 1st of each year, as applicable, following such notice or as soon as possible thereafter, pursuant to the procedures set forth in Section 2.07(c)(iii), or (B) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and Section 8.11(c) in a timely and complete manner, then on the Business Day next succeeding delivery of such New Borrowing Base Notice; and
(ii)in the case of an Interim Redetermination, on the Business Day next succeeding delivery of such New Borrowing Base Notice.
Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base pursuant to the Borrowing Base Adjustment Provisions, whichever occurs first. Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall become effective until the New Borrowing Base Notice related thereto is received by the Borrower.
Section 2.08Borrowing Base Adjustment Provisions.
(a)Reduction of Borrowing Base Upon Asset Dispositions and Termination of Swap Positions. If the Borrower or one of the other Group Members Disposes of Oil and Gas Properties constituting Proved Reserves (but excluding (1) any Disposition to a Loan Party or from a non-Loan Party to a non-Loan Party or (2) any Dispositions in connection with an ABS BB Transaction, in each case, subject to prior written notice) or any Equity Interests in any Person owning Oil and Gas Properties constituting Proved Reserves (but excluding (1) any Disposition to a Loan Party or from a non-Loan Party to a non-Loan Party or (2) any Dispositions in connection with an ABS BB Transaction, in each case, subject to prior written notice), or Unwinds Swap Agreements and (i) the Borrowing Base Value attributable to such Disposed of Oil and Gas Property (or the Oil and Gas Properties owned by any Group Member whose Equity Interests were sold) (after giving effect to any acquisitions of, and adding the Borrowing Base Value of, Oil and Gas Properties by the Loan Parties with respect to which the Borrower has delivered to the Lenders a Reserve Report or other engineering information acceptable to the Administrative Agent demonstrating the Borrowing Base Value of such acquired Oil and Gas Properties at least thirty (30) days (or such shorter period approved by the Administrative Agent in its sole discretion) prior to such acquisition and which such value has been reasonably determined by the Administrative Agent) plus (ii) the Borrowing Base Value attributable to such Unwound Swap Agreements, since the later of (x) the last Redetermination Date and (y) the last adjustment of the Borrowing Base pursuant to this Section 2.08(a) is in excess of five percent (5%) of the Borrowing Base as then in effect (as reasonably determined by the Administrative Agent), individually or in the aggregate, then the Borrowing Base will be automatically reduced by an amount equal to the Borrowing Base Value attributable to such Oil and Gas Properties (or such Oil and Gas Properties owned by any Group Member whose Equity Interests were sold) or such Unwound Swap Agreement in the current Borrowing Base; provided that the Administrative Agent shall promptly inform the Borrower of the amount of the adjusted Borrowing Base. For the purposes of this Section 2.08(a), a Disposition of Oil and Gas Properties shall be deemed to include the designation of a Restricted Subsidiary owning Oil and Gas Properties constituting Proved Reserves as an Unrestricted Subsidiary and the Disposition of Oil and Gas Properties, or Equity Interests in any Person owning Oil and Gas Properties constituting Proved Reserves, to an Unrestricted Subsidiary.
(b)Reduction of Borrowing Base Related to Title. Pursuant to Section 8.12(c), if the Administrative Agent or Required Lenders have adjusted the Borrowing Base, so that, after giving effect to such reduction, the Borrower will satisfy the requirements of Section 8.12(c), the Administrative Agent shall promptly notify the Borrower in writing and, upon receipt of such notice, the new Borrowing Base will simultaneously become effective.
(c)Reduction of Borrowing Base Upon Incurrence of Permitted Unsecured Debt. Upon the issuance or incurrence of any Permitted Unsecured Debt or Permitted Refinancing Indebtedness
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in an aggregate principal amount in excess of the Refinanced Indebtedness, the Borrowing Base then in effect shall be automatically reduced by an amount equal to the product of 0.25 multiplied by the stated principal amount of such Permitted Unsecured Debt or, with respect to such Permitted Refinancing Indebtedness, the extent the aggregate principal amount of such Indebtedness exceeds the Refinanced Indebtedness, as applicable, without regard to any original issue discount, and the Borrowing Base as so reduced shall become the new Borrowing Base on the Business Day of such issuance or incurrence.
(d)Reduction of Borrowing Base in Connection with an ABS BB Transaction. Upon the closing of an ABS BB Transaction, the Borrowing Base will be automatically reduced by an amount equal to the Borrowing Base Value attributable to the Borrowing Base Properties (or such Borrowing Base Properties owned by any Group Member whose Equity Interests were sold) transferred in connection with such ABS BB Transaction in the current Borrowing Base.
Section 2.09Letters of Credit.
(a)General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of dollar denominated Letters of Credit for its own account or for the account of any other Loan Party, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time to time during the period from the Closing Date until the day which is five (5) Business Days prior to the Maturity Date; provided that, in addition to the conditions set forth in Section 6.02, the Borrower may not request the issuance, amendment, or extension of Letters of Credit hereunder if (i) the LC Exposure would exceed the LC Commitment or (ii) the total Revolving Credit Exposures would exceed the aggregate Commitments of the Lenders (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base) (collectively, the “LC Availability Requirements”). In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the terms and conditions of this Agreement shall control. Notwithstanding anything to the contrary in the foregoing, the Existing Letters of Credit shall be deemed to have been issued hereunder as “Letters of Credit”.
(b)Notice of Issuance, Amendment, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank to the Issuing Bank and the Administrative Agent (not less than three (3) Business Days in advance of the requested date of issuance, amendment, or extension) a notice:
(i)requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be amended or extended;
(ii)specifying the date of issuance, amendment, or extension (which shall be a Business Day);
(iii)specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.09(c));
(iv)specifying the amount of such Letter of Credit;
(v)specifying the Permitted L/C Party for whom such Letter of Credit is to be issued; and
(vi)specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, or extend such Letter of Credit.
Each notice shall constitute a representation that, after giving effect to the requested issuance, amendment, or extension, as applicable, the LC Availability Requirements will be satisfied on the date of such issuance, amendment, or extension.
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If requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit.
(c)Expiration Date. Each Letter of Credit shall expire (or be subject to termination by notice from the Issuing Bank to the beneficiary thereof) at or prior to the close of business on the earlier of (A) the date that is one year after the date of the issuance of such Letter of Credit (or, in the case of any extension of a Letter of Credit, one year after such extension), and (B) the date that is five (5) Business Days prior to the Maturity Date.
(d)Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, such Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.09(e), or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.09(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e)Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m. on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon on the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, unless the Borrower has notified the relevant Issuing Bank and Administrative Agent that it will, and does, reimburse such LC Disbursement by the required date and time, the Borrower shall, subject to the satisfaction of the conditions to Borrowing set forth in Section 6.02, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing. If the Borrower fails to make such payment in respect of any LC Disbursement when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.09(e), the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this Section 2.09(e) to reimburse the applicable Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this Section 2.09(e) to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f)Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.09(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter
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of Credit Agreement or any other Loan Document, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.09(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise due care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised all requisite care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(g)Disbursement Procedures. An Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. An Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by electronic communication) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the applicable Issuing Bank and the Lenders with respect to any such LC Disbursement.
(h)Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, until the Borrower shall have reimbursed such Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing under Section 2.09(e)), the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans. Interest accrued pursuant to this Section 2.09(h) shall be for the account of such Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.09(e) to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment.
(i)Replacement of the Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 3.05(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall also be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not
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be required to issue additional Letters of Credit. Subject to the appointment and acceptance of a successor Issuing Bank, any Issuing Bank may resign as an Issuing Bank at any time upon thirty (30) days prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, such Issuing Bank shall be replaced in accordance with this Section 2.09(i) above.
(j)Cash Collateralization. If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Majority Lenders demanding the deposit of Cash Collateral pursuant to this Section 2.09(j), (ii) the LC Exposure exceeds the LC Commitment at any time as a result of a reduction in the Borrowing Base, (iii) the Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c) or (iv) the Borrower is required to Cash Collateralize a Defaulting Lender’s LC Exposure pursuant to Section 2.10, then the Borrower shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 103% of (A) in the case of an Event of Default, the LC Exposure (net of any Cash Collateral already held at the applicable time by the Administrative Agent with respect to such LC Exposure) and (B) in the case of the LC Exposure exceeding the LC Commitment, the amount of such excess, and (C) in the case of a payment required by Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such Cash Collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower or any other Group Member described in Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank(s) and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to this Section 2.09(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, the Issuing Bank(s), the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held as collateral securing the payment and performance of the Borrower’s and the Guarantor’s obligations under this Agreement and the other Loan Documents. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the applicable Issuing Bank(s) for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this Agreement or the other Loan Documents. If the Borrower is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived.
(k)Letters of Credit Issued for Permitted L/C Parties. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, is for the account of, or the applicant therefor is, a Permitted L/C Party other than the Borrower, the Borrower shall be obligated to reimburse the applicable Issuing Bank hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account, or upon the application, of Permitted L/C Parties other than the Borrower inures to the benefit of the Borrower, and
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that the Borrower’s business derives substantial benefits from the businesses of such Permitted L/C Parties.
(l)Additional Issuance Conditions. An Issuing Bank shall not be under any obligation to issue any Letter of Credit if:
(i)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or request that such Issuing Bank refrain from, or any Law applicable to such Issuing Bank shall prohibit the issuance of letters of credit generally or such Letter of Credit in particular, any such order, judgment or decree, or Law shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital or liquidity requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense that was not applicable on the Closing Date and that such Issuing Bank in good faith deems material to it;
(ii)the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank applicable to letters of credit generally; or
(iii)the proceeds of such Letter of Credit would be made available to any Person (x) to fund any activity or business of or with any Sanctioned Person or in any country, region or territory that, at the time of such funding, is the subject of any Sanctions or (y) in any manner that would result in a violation of any Sanctions by any party to this Agreement.
(m)In addition, an Issuing Bank shall be under no obligation to issue any amendment to any Letter of Credit if such Issuing Lender would have no obligation at such time to issue the Letter of Credit in its amended form under the terms hereof.
Section 2.10Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a)Commitment Fees. Commitment fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 3.05(a).
(b)Waivers and Amendments. The Maximum Credit Amount and the principal amount of the Loans and participation interests in Letters of Credit and Swing Line Loans of the Defaulting Lenders (if any) shall not be included in determining whether the Majority Lenders or Required Lenders, as applicable, have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 12.02); provided that, without prejudice to the terms of Section 12.02, this clause (b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender adversely affected thereby.
(c)if any Swing Line Exposure or LC Exposure exists at the time such Lender becomes a Defaulting Lender then:
(i)all or any part of the Swing Line Exposure and LC Exposure of such Defaulting Lender (other than the portion of such Swing Line Exposure referred to in clause (b) of the definition of such term) shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentage but only to the extent the sum of all non-Defaulting Lenders’ Revolving Credit Exposure plus such Defaulting Lender’s LC Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments;
(ii)if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one Business Day following notice by the Administrative Agent (A) first prepay such Swing Line Exposure and (B) second Cash Collateralize for the benefit of the
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Issuing Bank only the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.09(j) for so long as such LC Exposure is outstanding;
(iii)if the Borrower Cash Collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is Cash Collateralized;
(iv)if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentage; and
(v)if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor Cash Collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Bank or any other Lender hereunder, all fees payable under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until and to the extent that such LC Exposure is reallocated and/or Cash Collateralized.
(d)So long as such Lender is a Defaulting Lender, the Swing Line Lender shall not be required to fund any Swing Line Loans and the Issuing Bank shall not be required to issue, extend, or increase any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting Lender’s then outstanding LC Exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or Cash Collateral will be provided by the Borrower in accordance with Section 2.10(c), and participating interests in any newly made Swing Line Loans and any newly issued, extended, or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.10(c)(i) (and such Defaulting Lender shall not participate therein).
(e)New Swing Line Loans and Letters of Credit. If (i) a Bankruptcy Event or a Bail-In Action with respect to a Lender Parent of any Lender shall occur following the date hereof and for so long as such event shall continue or (ii) the Swing Line Lender or any Issuing Bank has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Swing Line Lender shall not be required to fund any Swing Line Loan and the Issuing Bank shall not be required to issue, extend, or increase any Letter of Credit, unless the Swing Line Lender or Issuing Bank, as the case may be, shall have entered into arrangements with the Borrower or such Lender, satisfactory to the Swing Line Lender or Issuing Bank, as applicable, to defease any risk to it in respect of such Lender hereunder.
(f)Defaulting Lender Cure. In the event that the Administrative Agent, the Borrower, the Swing Line Lender and the Issuing Bank each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swing Line Exposure and LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.
Section 2.11Swing Line Loans.
(a)Subject to the terms and conditions set forth herein, from time to time during the Availability Period, the Swing Line Lender agrees to make Swing Line Loans to the Borrower in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swing Line Loans exceeding the Swing Line Commitment or (ii) the sum of the Revolving Credit Exposures exceeding the total Commitments; provided that a Swing Line Lender shall not be required to make a Swing Line Loan to refinance an outstanding Swing Line Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swing Line Loans.
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(b)To request a Swing Line Loan, the Borrower shall submit a written notice to the Administrative Agent by telecopy or electronic mail not later than 11:00 a.m., on the day of a proposed Swing Line Loan. Each such notice shall be in a form approved by the Administrative Agent, shall be irrevocable and shall specify (i) the requested date (which shall be a Business Day) and (ii) amount of the requested Swing Line Loan. The Administrative Agent will promptly advise the Swing Line Lender of any such notice received from the Borrower. The Swing Line Lender shall make the requested Swing Line Loan available to the Borrower by means of a credit to an account of the Borrower with the Administrative Agent designated for such purpose by 3:00 p.m., on the requested date of such Swing Line Loan.
(c)The Swing Line Lender may by written notice given to the Administrative Agent require the Lenders to acquire participations in all or a portion of its Swing Line Loans outstanding. Such notice shall specify the aggregate amount of Swing Line Loans in which Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender’s Applicable Percentage of such Swing Line Loans. Each Lender hereby absolutely and unconditionally agrees, promptly upon receipt of such notice from the Administrative Agent (and in any event, if such notice is received by 12:00 noon on a Business Day no later than 5:00 p.m. on such Business Day and if received after 12:00 noon on a Business Day shall mean no later than 10:00 a.m. on the immediately succeeding Business Day), to pay to the Administrative Agent, for the account of such Swing Line Lenders, such Lender’s Applicable Percentage of such Swing Line Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swing Line Loans pursuant to this Section 2.11(c) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this Section 2.11(c) by wire transfer of immediately available funds, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swing Line Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swing Line Loan acquired pursuant to this Section 2.11(c), and thereafter payments in respect of such Swing Line Loan shall be made to the Administrative Agent and not to the Swing Line Lender. Any amounts received by the Swing Line Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swing Line Loan after receipt by the Swing Line Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this Section 2.11(c) and to the Swing Line Lenders, as its interests may appear; provided that any such payment so remitted shall be repaid to the Swing Line Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swing Line Loan pursuant to this Section 2.11(c) shall not relieve the Borrower of any default in the payment thereof.
(d)The Swing Line Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the Swing Line Lender and the successor Swing Line Lender. The Administrative Agent shall notify the Lenders of any such replacement of the Swing Line Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid interest accrued for the account of the replaced Swing Line Lender pursuant to Section 3.02(d). From and after the effective date of any such replacement, (i) the successor Swing Line Lender shall have all the rights and obligations of the replaced Swing Line Lender under this Agreement with respect to Swing Line Loans made thereafter and (ii) references herein to the term “Swing Line Lender” shall be deemed to refer to such successor or to any previous Swing Line Lender. After the replacement of the Swing Line Lender hereunder, the replaced Swing Line Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swing Line Lender under this Agreement with respect to Swing Line Loans made by it prior to its replacement, but shall not be required to make additional Swing Line Loans.
(e)Subject to the appointment and acceptance of a successor Swing Line Lender, the Swing Line Lender may resign as a Swing Line Lender at any time upon thirty days’ prior written notice
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to the Administrative Agent, the Borrower and the Lenders, in which case, the Swing Line Lender shall be replaced in accordance with Section 2.11(d) above.
Section 2.12Loans and Borrowings Under Existing Credit Agreement. On the Closing Date:
(a)it is the intention of the Borrower, the Administrative Agent and the Lenders, and such parties hereby agree, from and after the Closing Date, this Agreement supersedes and replaces the Existing Credit Agreement in its entirety, and that (i) such amendment and restatement shall operate to renew, amend, and modify the rights and obligations of the parties under the Existing Credit Agreement as provided herein, but shall not act as a novation thereof, and (ii) the “Liens” (as defined in the Existing Loan Documents) securing the “Secured Obligations” (as defined in the Existing Credit Agreement) and the rights, duties, liabilities, and obligations of each Loan Party under the Existing Loan Documents to which it is a party shall not be extinguished but shall be carried forward and shall secure such obligations as renewed, amended, restated, and modified hereby. The parties hereto each hereby consent to the amendments to, and amendment and restatement of, the Existing Credit Agreement in the form of this Agreement;
(b)the Existing Credit Agreement was amended and restated in its entirety in the form of this Agreement. The parties hereto acknowledge and agree that (i) this Agreement and the other Loan Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation, payment or reborrowing, or termination of the “Secured Obligations” (as such term is defined in the Existing Credit Agreement) and (ii) such “Secured Obligations” are in all respects continuing (as amended and restated hereby) as part of the Secured Obligations under this Agreement with only the terms thereof being modified as provided herein. Each reference to the “Credit Agreement” in any Existing Loan Document shall be deemed to be a reference to this Agreement as amended in the form hereof;
(c)each “ABR Loan”, “Daily Simple SOFR Loan”, or “Term SOFR Loan” outstanding under the Existing Credit Agreement (as such terms are defined therein) shall be deemed to be continued as an ABR Loan, Daily Simple SOFR Loan or Term SOFR Loan, as applicable, under this Agreement and not as a novation;
(d)any letters of credit outstanding under the Existing Credit Agreement shall be deemed issued under this Agreement; and
(e)the Existing Credit Agreement and the commitments thereunder shall be superseded by this Agreement.
It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or evidence repayment of any such obligations and liabilities and that this Agreement amend and restate in its entirety the Existing Credit Agreement and re-evidence the obligations of the Borrower outstanding thereunder as obligations of the Borrower hereunder. Except to the extent not amended and restated as of the Closing Date, the Existing Loan Documents executed in connection with the Existing Credit Agreement and in effect prior to the Closing Date shall continue in full force and effect, are hereby ratified, reaffirmed and confirmed in all respects, and shall, for the avoidance of doubt, constitute “Loan Documents” under this Agreement. The terms of the Loan Documents that correspond to the Existing Loan Documents that have been amended and restated as of the Closing Date shall govern for any period occurring on or after the Closing Date, and the terms of such Existing Loan Documents prior to their amendment and restatement shall govern for any period beginning before the Closing Date and ending on the day immediately preceding the Closing Date. In furtherance of the foregoing, (i) each reference in any Loan Document to the “Credit Agreement”, any other Loan Document that is being amended and restated as of the Closing Date, “thereunder”, “thereof” or words of like import, is hereby amended, mutatis mutandis, as applicable in the context, to be a reference to, and shall thereafter mean, this Agreement or such other amended and restated Loan Document, as applicable in the context (as each may be amended, modified or supplemented and in effect
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from time to time) and (ii) the definition of any term defined in any Loan Document by reference to the terms defined in the “Credit Agreement” or any other Loan Document that is being amended and restated as of the Closing Date is hereby amended to be defined by reference to the defined term in this Agreement or such other amended and restated Loan Document, as applicable (as each may be amended, modified or supplemented and in effect from time to time).
Section 2.13Sustainability Adjustments.
(a)Following the date on which the Borrower provides a Sustainability Certificate in respect of the most recently ended Fiscal Year, commencing with the Fiscal Year ending December 31, 2024, the Applicable Margin for SOFR Loans in basis points and the Applicable Margin for ABR Loans in basis points otherwise then applicable in accordance with the pricing grid set forth in the definition of Applicable Margin in Section 1.1 each shall be increased or decreased (or neither increased nor decreased), as applicable, pursuant to the Sustainability Rate Adjustment as set forth in such Sustainability Certificate. For purposes of the foregoing, (A) the Sustainability Rate Adjustment shall be determined as of the fifth (5th) Business Day following receipt by the Administrative Agent of a Sustainability Certificate delivered pursuant to Section 8.01(u) based upon the Sustainability Linked Performance Targets set forth in such Sustainability Certificate and the calculations of the Applicable Margin for SOFR Rate Loans in basis points and the Applicable Margin for ABR Loans in basis points, as applicable, therein (such day, the “Sustainability Pricing Adjustment Date”) and (B) each change in the Applicable Margin for SOFR Loans in basis points and the Applicable Margin for ABR Loans in basis points resulting from a Sustainability Certificate shall be effective during the period commencing on and including the applicable Sustainability Pricing Adjustment Date and ending on the date immediately preceding the next such Sustainability Pricing Adjustment Date (or, in the case of non-delivery of a Sustainability Certificate, the last day such Sustainability Certificate could have been delivered pursuant to the terms of Section 8.01(u)).
(b)For the avoidance of doubt, only one Sustainability Certificate may be delivered in respect of any Fiscal Year. It is further understood and agreed that the Applicable Margin for SOFR Loans in basis points and the Applicable Margin for ABR Loans in basis points will never be reduced or increased by more than 5 basis points, during any Fiscal Year. For the avoidance of doubt, any adjustment to the Applicable Margin for SOFR Loans in basis points and the Applicable Margin for ABR Loans in basis points by reason of meeting one or several Sustainability Linked Performance Targets in any year shall not be cumulative year-over-year. Each applicable adjustment shall only apply until the date on which the next adjustment is due to take place.
(c)It is hereby understood and agreed that if no such Sustainability Certificate is delivered by the Borrower within the period set forth in to Section 8.01(u), the Sustainability Rate Adjustment will be plus 5 basis points commencing on the last day such Sustainability Certificate could have been delivered pursuant to the terms of Section 8.01(u) and continuing until the Borrower delivers a Sustainability Certificate to the Administrative Agent; provided further that, during such period, if the Borrower determines in good faith that it is not possible to calculate any Sustainability Linked Performance Target for any Fiscal Year for whatever reason, the Lead Sustainability Structuring Agent (acting on the request of the Majority Lenders) and the Borrower will negotiate in good faith to agree on the selection of an alternative measure that is customarily applied by Persons carrying out similar businesses or being subject to similar incentives and, if after 20 Business Days, the Borrower and the Lead Sustainability Structuring Agent (acting on the behalf of the Majority Lenders) are unable to agree on the selection of such alternative measure, the Applicable Margin shall apply without any increase or decrease to such Sustainability Linked Performance Target (and if such increase or decrease was already applied at that point in time, it will then be discontinued as of the end of such 20 Business Day period).
(d)If (i)(A) the Borrower or the Lead Sustainability Structuring Agent becomes aware of any material inaccuracy in the Sustainability Rate Adjustment or the Sustainability Linked Performance Targets as reported in a Sustainability Certificate (any such material inaccuracy, a “Sustainability Certificate Inaccuracy”) and, in the case of the Lead Sustainability Structuring Agent, such Lead Sustainability Structuring Agent delivers, not later than ten (10) Business Days after obtaining knowledge thereof, a written notice to the Administrative Agent describing such Sustainability Certificate
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Inaccuracy in reasonable detail (which description shall be shared with each Lender and the Borrower), or (B) the Borrower and the Lead Sustainability Structuring Agent agree that there was a Sustainability Certificate Inaccuracy at the time of delivery of a Sustainability Certificate, (ii) a proper calculation of the Sustainability Rate Adjustment or the Sustainability Linked Performance Targets would have resulted in an increase in the Applicable Margin for SOFR Loans in basis points and/or the Applicable Margin for ABR Loans in basis points for any period, the Borrower shall be obligated to pay to the Administrative Agent for the account of the applicable Lenders or the applicable Issuing Banks, as the case may be, promptly on demand by the Administrative Agent, but in any event within ten (10) Business Days after the Borrower has received written notice of, or has agreed in writing that there was, a Sustainability Certificate Inaccuracy, an amount equal to the excess of (1) the amount of interest that should have been paid for such period over (2) the amount of interest actually paid for such period and (iii) a proper calculation of the Sustainability Rate Adjustment or the Sustainability Linked Performance Targets would have resulted in a decrease in the Applicable Margin for SOFR Loans in basis points and/or the Applicable Margin for ABR Loans in basis points for any period, the Borrower shall receive a credit against subsequent interest payable in an amount equal to the excess of (1) the amount of interest actually paid for such period over (2) the amount of interest that should have been paid for such period.
(e)Notwithstanding anything set out in this Agreement to the contrary, none of: (i) the failure of the Borrower to publish or deliver a Sustainability Report or to deliver a Sustainability Certificate, respectively, or any Sustainability Certificate Inaccuracy in any of the foregoing, or (ii) or the failure of the Borrower to meet or satisfy any Sustainability Linked Performance Target set out in the “Sustainability Rate Adjustment” definition, shall be, or deemed to be, a Default or an Event of Default.
(f)Each party hereto hereby agrees that the Administrative Agent, the Lead Sustainability Structuring Agent and the Co-Sustainability Structuring Agent shall not have any responsibility for (or liability in respect of) reviewing, auditing or otherwise evaluating any calculation by the Borrower of any Sustainability Rate Adjustment (or any of the data or computations that are part of or related to any such calculation) set forth in any Sustainability Certificate (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry).
(g)Notwithstanding anything to the contrary contained herein, if (i) a Significant Sustainability Event, a restatement of Scope 1 Emissions and Scope 2 Emissions factors, or any other extraordinary event beyond the Borrower’s control occurs (each, a “Triggering Event”) then (A) the Borrower or Lead Sustainability Structuring Agent shall provide prompt written notice to the other party and (B) the Borrower and the Lead Sustainability Structuring Agent (acting on a Majority Lenders consent) will update the applicable Sustainability Linked Performance Targets no later than 1 year following the occurrence of any such Triggering Event. If the Borrower and the Lead Sustainability Structuring Agent are unable to agree on the updated Sustainability Linked Performance Targets, the Applicable Margin shall apply without any increase or decrease due to the Sustainability Rate Adjustment for the impacted Sustainability Linked Performance Targets or (ii) a Material Transaction occurs and the GHG Emissions Intensity of the Borrower in connection with such Material Transaction would reasonably be expected to increase or decrease by 5% or more at the consummation of such Material Transaction then (A) the Borrower or Lead Sustainability Structuring Agent shall provide prompt written notice to the other party, (B) the Borrower may elect to exclude the impact of such Material Transaction on the Sustainability Linked Performance Targets for a period not exceeding 1 year, and (C) the Borrower and the Lead Sustainability Structuring Agent (acting on a Majority Lenders consent) will update the applicable Sustainability Linked Performance Targets no later than 1 year following the occurrence of any such Material Transaction. If the Borrower and the Lead Sustainability Structuring Agent (acting on the request of the Majority Lenders) are unable to agree on the updated Sustainability Linked Performance Targets, the Applicable Margin shall apply without any increase or decrease due to the Sustainability Rate Adjustment for the impacted Sustainability Linked Performance Targets.

Article III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01Repayment of Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of (a) each Lender the then unpaid principal amount of each
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Loan on the Termination Date and (b) the Swing Line Lender the then unpaid principal amount of each Swing Line Loan on the earliest of (i) five (5) Business Days prior to the Maturity Date, (ii) the Termination Date and (iii) the twentieth (20th) Business Day after such Swing Line Loan is made; provided that on each date that a Borrowing is made, the Borrower shall repay all Swing Line Loans then outstanding and the proceeds of any such Borrowing shall be applied by the Administrative Agent to repay any Swing Line Loans outstanding.
Section 3.02Interest
(a)ABR Loans. The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.
(b)Daily Simple SOFR Loans. The Loans comprising each Daily Simple SOFR Borrowing shall bear interest at Adjusted Daily Simple SOFR plus the Applicable Margin in effect from time to time, but in no event to exceed the Highest Lawful Rate.
(c)Term SOFR Loans. The Loans comprising each Term SOFR Borrowing shall bear interest at Adjusted Term SOFR plus the Applicable Margin in effect from time to time, but in no event to exceed the Highest Lawful Rate.
(d)Swing Line Loans. The Swing Line Loans shall bear interest at the Adjusted Daily Simple SOFR rate plus the Applicable Margin in effect from time to time, but in no event to exceed the Highest Lawful Rate.
(e)Post-Default Rate. Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.
(f)Interest Payment Dates. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and on the Termination Date; provided that (i) interest accrued pursuant to Section 3.02(e) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan or Daily Simple SOFR Loan prior to the Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Term SOFR Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
(g)Interest Rate Computations. All computations of interest on SOFR Loans shall be made on the actual number of days elapsed over a year of 360 days. All computations of interest on ABR Loans shall be made on the actual number of days elapsed over a year of 365 or 366 days, as applicable.
(h)Information as to Interest Rates. The Administrative Agent, upon determining the interest rate for any Borrowing, shall promptly notify the Borrower and the Lenders thereof. Any changes in the Applicable Margin shall be determined by the Administrative Agent in accordance with the provisions set forth in the definition of “Applicable Margin” and the Administrative Agent will promptly provide notice of such determinations to the Borrower and the Lenders. Any such determination by the Administrative Agent shall be conclusive and binding absent manifest error.
Section 3.03Inability to Determine Rates.
(a)Temporary Inability to Determine Rates. If (i) the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that Adjusted Daily Simple SOFR or Adjusted Term SOFR cannot be determined pursuant to the definitions thereof or (ii) the Majority Lenders determine that for any reason in connection with any request for a SOFR Loan
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or a conversion thereto or a continuation thereof that Adjusted Daily Simple SOFR or Adjusted Term SOFR for any requested Interest Period with respect to a proposed SOFR Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, and the Majority Lenders have provided notice of such determination to the Administrative Agent, in each case of (i) and (ii), on or prior to the first day of any Interest Period, the Administrative Agent will promptly so notify the Borrower and each Lender. Upon notice thereof by the Administrative Agent to the Borrower, (A) any obligation of the Lenders to make or continue the applicable SOFR Loans or to convert ABR Loans to SOFR Loans shall be suspended (to the extent of the affected Interest Periods) until the Administrative Agent revokes such notice and (B) if such determination affects the calculation of the Alternate Base Rate, the Administrative Agent shall during the period of such suspension compute the Alternate Base Rate without reference to clause (c) of the definition of “Alternate Base Rate” until the Administrative Agent revokes such notice. Upon receipt of such notice, (1) the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of any applicable SOFR Loans (to the extent of the affected SOFR Loans or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans in the amount specified therein and (2) any outstanding affected SOFR Loans will be deemed to have been converted into ABR Loans at the end of the applicable Interest Period. Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 5.02. If the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that “Adjusted Term SOFR” cannot be determined pursuant to the definition thereof on any given day, the interest rate on ABR Loans shall be determined by the Administrative Agent without reference to clause (c) of the definition of “Alternate Base Rate” until the Administrative Agent revokes such determination.
(b)Permanent Inability to Determine Rate; Benchmark Replacement.
(i)Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, the Administrative Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Majority Lenders. No replacement of the then-current Benchmark with a Benchmark Replacement pursuant to this Section 3.03(b)(i) will occur prior to the applicable Benchmark Transition Start Date. Unless and until a Benchmark Replacement is effective in accordance with this Section 3.03(b)(i), all Loans shall be converted into ABR Loans in accordance with the provisions of Section 3.03(a) above.
(ii)Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(iii)Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of the implementation of any Benchmark Replacement and the effectiveness of any Conforming Changes. The Administrative Agent will notify the Borrower and the removal or reinstatement of any tenor of a Benchmark. Any determination, decision or election that may be made by the Administrative Agent or Lenders pursuant to this Section 3.03(b), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 3.03(b).
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(iv)Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if any then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the administrator of such Benchmark or the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable, non-representative, non-compliant or non-aligned tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative or incompliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(v)Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any request for the applicable SOFR Borrowing of, conversion to or continuation of SOFR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of Alternate Base Rate based upon Adjusted Term SOFR (or then-current Benchmark) will not be used in any determination of Alternate Base Rate.
Section 3.04Prepayments.
(a)Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay, without premium or penalty (except with respect to any amounts due under Section 5.02), any Borrowing in whole or in part, subject to prior notice in accordance with Section 3.04(b).
(b)Notice and Terms of Optional Prepayment. The Borrower shall notify the Administrative Agent (and in the case of a Swing Line Loan, the Swing Line Lender) by telephone (confirmed by electronic communication) of any prepayment hereunder (i) in the case of prepayment of a SOFR Borrowing, not later than 12:00 noon three (3) Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m. on the date of prepayment or (iii) in the case of prepayment of a Swing Line Loan, not later than 11:00 a.m. on the date of prepayment (or, in each case, such shorter time as the Administrative Agent may agree). Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.06(b), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06(b). Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02 and any amounts due under Section 5.02.
(c)Mandatory Prepayments.
(i)Upon Optional Termination and Reduction. If, after giving effect to any termination or reduction of the Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), there is
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a Borrowing Base Deficiency, then the Borrower shall (A) prepay the Borrowings on the date of such termination or reduction in an aggregate principal amount equal to such Borrowing Base Deficiency, and (B) if any Borrowing Base Deficiency remains after prepaying all of the Borrowings as a result of any LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such remaining Borrowing Base Deficiency to be held as Cash Collateral as provided in Section 2.09(j).
(ii)Upon Redeterminations and Title Related Borrowing Base Adjustment. If there is a Borrowing Base Deficiency as a result of (A) any redetermination of the Borrowing Base in accordance with Section 2.07 or (B) a Borrowing Base adjustment pursuant to Section 2.08(b), then upon such Redetermination Date or the occurrence of such Borrowing Base adjustment (such date, the “Deficiency Date”), the Borrower shall, within five (5) Business Days of the Deficiency Date, inform the Administrative Agent that it intends to do one or more of the following:
(A)within thirty (30) days of the Deficiency Date (1) prepay the Borrowings in an aggregate principal amount equal to such Borrowing Base Deficiency and (2) if any Borrowing Base Deficiency remains after prepaying all of the Borrowings as a result of any LC Exposure, Cash Collateralize as provided in Section 2.09(j);
(B)commencing on the 30th day after the Deficiency Date and continuing on the same day of each month for the next five months thereafter (or if any such day is not a Business Day, the immediately preceding Business Day), prepay the Borrowings in an amount equal to one-sixth (1/6th) of such Borrowing Base Deficiency so that the Borrowing Base Deficiency is reduced to zero within 180 days of the Deficiency Date;
(C)within thirty (30) days of the Deficiency Date, submit and pledge as Mortgaged Property additional Oil and Gas Properties not evaluated in the most recently delivered Reserve Report or other collateral reasonably acceptable to the Administrative Agent owned by the Borrower or any of the other Loan Parties for consideration in connection with the determination of the Borrowing Base which the Administrative Agent and the Required Lenders deem satisfactory, in their sole discretion, to eliminate such Borrowing Base Deficiency; or
(D)eliminate such Borrowing Base Deficiency by any combination of prepayment and additional security as provided in the foregoing clauses (A), (B) and (C).
provided that, notwithstanding the options set forth above, in all cases, the Borrowing Base Deficiency must be eliminated on or prior to the Termination Date. If, because of LC Exposure, a Borrowing Base Deficiency remains after prepaying all of the Loans, the Borrower shall Cash Collateralize Letters of Credit in an amount equal to such remaining Borrowing Base Deficiency as provided in Section 2.09(j); provided further, if the Borrower fails to inform the Administrative Agent that it intends to do one of the foregoing within such 5 Business Day period, the Borrower shall be deemed to have elected option (B) above.
(iii)Upon Certain Adjustments. If (A) there is a Borrowing Base Deficiency, as a result of Borrowing Base adjustment pursuant to the Borrowing Base Adjustment Provisions (other than Section 2.08(b) and (d)), then upon the receipt of proceeds as a result of the occurrence of such Borrowing Base adjustment, the Borrower shall (I) prepay the Borrowings in an aggregate principal amount equal to such Borrowing Base Deficiency and (II) if any Borrowing Base Deficiency remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such remaining Borrowing Base Deficiency to be held as Cash Collateral as provided in Section 2.09(j) or (B) there is an ABS BB Transaction, the Borrower shall prepay the Borrowings (if any) on the date such ABS BB Transaction closes in an amount equal to 100% of the Net Proceeds of the financing for the securitization of the Oil and Gas Properties the subject of such securitization and if any such Net Proceeds remain after prepayment of the Borrowings, the Borrower shall retain such Net Proceeds.
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(iv)During an Event of Default. If an Event of Default has occurred and is continuing, upon any (A) Disposition of Property, (B) Unwind of any Swap Agreement or (C) incurrence or issuance of Indebtedness, an aggregate amount equal to one hundred percent (100%) of the Net Proceeds received therefrom shall be applied to repay the Secured Obligations in accordance with the priority set forth in Section 10.02(d).
(v)Excess Cash. If the Borrower and its Restricted Subsidiaries have any Excess Cash at the end of any Fiscal Quarter of the Borrower, then no later than three (3) Business Days after the Borrower delivers the financial statements for such Fiscal Quarter pursuant to Sections 8.01(a) or (b) (provided that if the Borrower fails to deliver such financials when due it shall make such payment as if it had delivered the financials on such date) the Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal to such Excess Cash and (B) if at such time a Default, Event of Default or Borrowing Base Deficiency exists and is continuing and any Excess Cash remains after prepaying all of the Borrowings as a result of an LC Exposure, the Borrower shall pay to the Administrative Agent on behalf of the Lenders an amount of such remaining Excess Cash necessary to Cash Collateralize such LC Exposure as provided in Section 2.09(j).
(vi)Application of Prepayments to Types of Borrowings. Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first, ratably to any ABR Borrowings then outstanding, second ratably to any Daily Simple SOFR Borrowings then outstanding, and, third, ratably to any Term SOFR Borrowings then outstanding, and if more than one Term SOFR Borrowing is then outstanding, to each such Term SOFR Borrowing in order of priority beginning with the Term SOFR Borrowing with the least number of days remaining in the Interest Period applicable thereto and ending with the Term SOFR Borrowing with the most number of days remaining in the Interest Period applicable thereto.
(vii)Interest to be Paid with Prepayments. Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section 3.02.
(d)No Premium or Penalty. Prepayments permitted or required under this Section 3.04 shall be without premium or penalty, except as required under Section 5.02.
Section 3.05Fees.
(a)Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the applicable Commitment Fee Rate on the average daily amount of the unused amount of the Commitment of such Lender (determined taking into account both Loans and LC Exposure) during the period from and including the Closing Date to but excluding the Termination Date. Accrued commitment fees shall be payable in arrears on the last Business Day of March, June, September and December of each year and on the Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year) (or in such other manner as the Administrative Agent shall provide so that such computation shall not exceed the Highest Lawful Rate), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(b)Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Term SOFR Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to each applicable Issuing Bank a fronting fee, which shall accrue at the rate equal to the greater of (A) $750 and (B) 0.125% per annum (or such other rate as may be agreed to with such Issuing Bank) on the average daily amount of the LC Exposure
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attributable to such Issuing Bank (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure; provided that in no event shall such fee be less than $750.00 during any quarter unless no LC Exposure existed at any time during such quarter and (iii) to each Issuing Bank, for its own account, its standard fees with respect to the issuance, amendment, or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last Business Day of March, June, September and December of each year shall be payable on the third Business Day following such last Business Day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on demand. Any other fees payable to any Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 Business Days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(c)Agent Fees. The Borrower agrees to pay to the Administrative Agent, the Co-Sustainability Structuring Agent and the Lead Sustainability Structuring Agent, for their own respective accounts, fees payable in the amounts and at the times separately agreed upon in writing between the Borrower and the Administrative Agent, the Co-Sustainability Structuring Agent or the Lead Sustainability Structuring Agent, as applicable.
Article IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
Section 4.01Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a)Payments by the Borrower. The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon on the date when due, in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and shall not be refundable under any circumstances, absent manifest error. Any amounts received after such time on any date may, in the sole discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices specified in Section 12.01, except payments to be made directly to the applicable Issuing Bank or the Swing Line Lender as expressly provided herein and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.
(b)Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.
(c)Sharing of Payments by Lenders. If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swing Line Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC
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Disbursements and Swing Line Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swing Line Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swing Line Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements and Swing Line Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
Section 4.02Presumption of Payment by the Borrower. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the applicable Issuing Bank that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
Section 4.03Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(a), Section 2.09(d), Section 2.09(e) or Section 4.02 then the Administrative Agent may, in its sole discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.
Section 4.04Disposition of Proceeds. The Security Instruments comprised of deeds of trust and mortgages contain an assignment by the Borrower and/or the Guarantors to and in favor of the Administrative Agent for the benefit of the Secured Parties of all of the Borrower’s or each Guarantor’s interest in and to production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property. The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Secured Obligations and other obligations described therein and secured thereby. Notwithstanding the assignment contained in such Security Instruments, until the occurrence and continuation of an Event of Default, (a) the Administrative Agent and the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Administrative Agent or the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower and its Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to take such actions as may be necessary to cause such proceeds to be paid to the Borrower and/or such Restricted Subsidiaries.
Article V
INCREASED COSTS; ILLEGALITY AND TAXES
Section 5.01Increased Costs, Illegality, etc..
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(a)In the event that (x) in the case of Section 5.01(a)(i) below, the Administrative Agent or (y) in the case of Sections 5.01(a)(ii) and (iii) below, any Lender or Issuing Bank shall have determined on a reasonable basis (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto):
(i)on any date for determining the interest rate applicable to any SOFR Loan for any Interest Period that, by reason of any changes arising after the Closing Date, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in this Agreement for such SOFR Loan; or
(ii)at any time, that such Lender or Issuing Bank shall incur increased costs or reductions in the amounts received or receivable by it hereunder in an amount that such Lender or Issuing Bank deems material with respect to any SOFR Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of any (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) because of (1) any Change in Law since the Closing Date (including, but not limited to, a change in requirements for any reserve, special deposit, liquidity or similar requirements (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender or Issuing Bank) or (2) other circumstances adversely affecting the availability of Term SOFR; or
(iii)at any time, that the making or continuance of any SOFR Loan has become unlawful by compliance by such Lender in good faith with any Change in Law since the Closing Date, or would conflict with any thereof not having the force of law but with which such Lender customarily complies, or has become impracticable as a result of a contingency occurring after the Closing Date that materially adversely affects the availability of SOFR;
then, and in each such event, such Lender or Issuing Bank (or the Administrative Agent in the case of Section 5.01(a)(i) above) shall (1) on or promptly following such date or time and (2) within ten (10) Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders or Issuing Banks). Thereafter (x) in the case of Section 5.01(a)(i) above, the affected Type of SOFR Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders or Issuing Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Continuation or Conversion given by the Borrower with respect to such Type of SOFR Loans that have not yet been incurred, Converted or Continued shall be deemed rescinded by the Borrower or, in the case of a Notice of Borrowing, shall, at the option of the Borrower, be deemed converted into a Notice of Borrowing for ABR Loans to be made on the date of Borrowing contained in such Notice of Borrowing, (y) in the case of Section 5.01(a)(ii) above, the Borrower shall pay to such Lender or Issuing Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender or Issuing Bank shall determine) as shall be required to compensate such Lender or Issuing Bank for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender or Issuing Bank, showing the basis for the calculation thereof, which basis must be reasonable, submitted to the Borrower by such Lender or Issuing Bank shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of Section 5.01(a)(iii) above, the Borrower shall take one of the actions specified in Section 5.01(b) as promptly as possible and, in any event, within the time period required by law.
(b)At any time that any SOFR Loan is affected by the circumstances described in Section 5.01(a)(ii) or (iii), the Borrower may (and in the case of a SOFR Loan affected pursuant to Section 5.01(a)(iii) the Borrower shall) either (i) if the affected SOFR Loan is then being made pursuant to a Borrowing, by giving the Administrative Agent telephonic notice (confirmed promptly in writing)
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thereof on the same date that the Borrower was notified by a Lender or Issuing Bank pursuant to Section 5.01(a)(ii) or (iii), cancel said Borrowing, or, in the case of any Borrowing, convert the related Notice of Borrowing into one requesting a Borrowing of ABR Loans or require the affected Lender or Issuing Bank to make its requested Loan as an ABR Loan, or (ii) if the affected SOFR Loan is then outstanding, upon at least one Business Day’s notice to the Administrative Agent, require the affected Lender or Issuing Bank to Convert each such SOFR Loan into an ABR Loan; provided, however, that if more than one Lender or Issuing Bank is affected at any time, then all affected Lenders or Issuing Banks must be treated the same pursuant to this Section 5.01(b).
(c)If any Lender shall have determined that after the Closing Date, any Change in Law regarding capital adequacy or liquidity by any Governmental Authority, central bank or comparable agency charged by law with the interpretation or administration thereof, or compliance by such Lender or its parent corporation with any request or directive regarding capital adequacy or liquidity (whether or not having the force of law) of any such authority, central bank, or comparable agency, in each case made subsequent to the Closing Date, has or would have the effect of reducing by an amount reasonably deemed by such Lender to be material to the rate of return on such Lender’s or its parent corporation’s capital or assets as a consequence of such Lender’s commitments or obligations hereunder to a level below that which such Lender or its parent corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender’s or its parent corporation’s policies with respect to capital adequacy and liquidity), then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent corporation for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this Section 5.01(c), will give prompt written notice thereof to the Borrower, which notice shall set forth, in reasonable detail, the basis of the calculation of such additional amounts, which basis must be reasonable, although the failure to give any such notice shall not release or diminish any of the Borrower’s obligations to pay additional amounts pursuant to this Section 5.01(c) upon the subsequent receipt of such notice.
(d)Notwithstanding the foregoing, the provisions of Section 3.01(a) shall apply with respect to a Benchmark Transaction Event.
(e)Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
Section 5.02Breakage Compensation. The Borrower shall compensate each Lender upon its written request (which request shall set forth the detailed basis for requesting and the method of calculating such compensation), for all reasonable losses, costs, expenses and liabilities (including, without limitation, any loss, cost, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its SOFR Loans) which such Lender may sustain in connection with any of the following: (a) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of SOFR Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Continuation or Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 5.01(a)); (b) if any repayment, prepayment, Conversion or Continuation of any SOFR Loan occurs on a date that is not the last day of an Interest Period applicable thereto; (c) if any prepayment of any of its SOFR Loans is not made on any date specified in a notice of prepayment given by the Borrower; (d) as a result of an assignment by a Lender of any SOFR Loan other than on the last day of the Interest Period applicable thereto pursuant to a request by the Borrower pursuant to Section 5.05 or (e) as a consequence of (i) any other default by the Borrower to repay or prepay any SOFR Loans when required by the terms of this Agreement or (ii) an election made pursuant to Section 5.05. The written request of any Lender setting forth any amount or amounts
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that such Lender is entitled to receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such request within ten (10) Business Days after receipt thereof. The Borrower shall not be required to compensate a Lender pursuant to this Section 5.02 for any such amounts incurred more than 270 days prior to the date such Lender delivers the written request referenced herein to the Borrower; provided that, if the event giving rise to such losses, costs, expenses and liabilities is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
Section 5.03Taxes.
(a)Defined Terms. For purposes of this Section 5.03, Section 5.04 and Section 5.05, the term “Lender” includes any Issuing Bank and the term “applicable law” includes FATCA.
(b)Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of the Borrower or the Administrative Agent, as applicable) requires the deduction or withholding of any Tax from any such payment by the Borrower or the Administrative Agent, as applicable, then the Borrower or the Administrative Agent, as applicable, shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that, after such deduction or withholding has been made (including such deductions and withholdings of Indemnified Taxes applicable to additional sums payable under this Section 5.03), the applicable Lending Party receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(c)Payment of Other Taxes by the Loan Parties. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.
(d)Indemnification by the Loan Parties. The Loan Parties shall jointly and severally indemnify each Lending Party, within ten (10) Business Days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03) payable or paid by such Lending Party or required to be withheld or deducted from a payment to such Lending Party and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(e)Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within ten (10) Business Days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 12.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this subsection (e).
(f)Evidence of Payments. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 5.03, such Loan Party shall deliver
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to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(g)Status of Lenders.
(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 5.03(g)(ii)(A), Section 5.03(g)(ii)(B) and Section 5.03(g)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii)Without limiting the generality of the foregoing,
(A)any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B)any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1)in the case of a Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States of America is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN-E or IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E or IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2)executed copies of IRS Form W-8ECI;
(3)in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit H-1 to the effect that such Non-U.S. Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Parent within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN-E or IRS Form W-8BEN; or
(4)to the extent a Non-U.S. Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of
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Exhibit H-2 or Exhibit H-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Non-U.S. Lender is a partnership and one or more direct or indirect partners of such Non-U.S. Lender are claiming the portfolio interest exemption, such Non-U.S. Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit H-4 on behalf of each such direct and indirect partner;
(C)any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D)if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(h)Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 5.03 (including by the payment of additional amounts pursuant to this Section 5.03), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 5.03 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes with respect to such refund) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this subsection (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection (h) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(i)Survival. Each party’s obligations under this Section 5.03 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement
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of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under the Loan Documents.
Section 5.04Designation of Different Lending Office. If any Lender requests compensation under Section 5.01, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
Section 5.05Replacement of Lenders. If (a) any Lender requests compensation under Section 5.01, (b) the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, (c) any Lender is a Defaulting Lender, or (d) any Lender fails to consent to an election, consent, approval, amendment, waiver or other modification to this Agreement or any other Loan Document that requires the consent of all Lenders or all directly and adversely affected Lenders, and such election, consent, amendment, waiver or other modification is otherwise consented to by the Required Lenders (excluding the Maximum Credit Amounts of Defaulting Lenders), then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.04(b)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swing Line Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.02), from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 5.01 or payments required to be made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Article VI
CONDITIONS PRECEDENT
Section 6.01Closing Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02):
(a)Credit Agreement. The Administrative Agent shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent) of this Agreement signed on behalf of such party.
(b)Loan Documents.
(i)Execution of Security Instruments. The Administrative Agent shall have received from each party thereto counterparts (in such number as may be requested by the Administrative Agent) of the Security Instruments, including the Guarantee and Collateral Agreement, described on Exhibit F that have been executed and delivered by a Responsible Officer of each party thereto.
(ii)Filings, Registrations and Recordings. Each Security Instrument and any other document (including any Uniform Commercial Code financing statement) required by any Security
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Instrument or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Mortgaged Property described therein, prior and superior in right to any other Person shall be in proper form for filing, registration or recordation.
(iii)Mortgage Coverage. The Administrative Agent shall be reasonably satisfied that, upon recording the Mortgages of Borrowing Base Properties, in each case, in the appropriate filing offices, it shall have a first priority Lien on at least 85% of the PV-10 of the Borrowing Base Properties.
(iv)Pledged Stock; Stock Powers; Pledged Notes. The Administrative Agent shall have received (A) the certificates representing the shares of certificated Equity Interests pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate (if any) executed in blank by a duly authorized officer of the pledgor thereof and (B) each promissory note (if any) pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.
(c)Secretary’s Certificates. The Administrative Agent shall have received a certificate of a Responsible Officer of each Loan Party setting forth (i) resolutions of its board of directors or other appropriate governing body with respect to the authorization of such Loan Party to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of such Loan Party (A) who are authorized to sign the Loan Documents to which such Loan Party is a party and (B) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of such authorized officers and (iv) the applicable Organizational Documents of such Loan Party, certified by a Responsible Officer as being true and complete. The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from such Loan Party to the contrary.
(d)Corporate Status; Good Standing Certificates. The Administrative Agent shall have received certificates of the appropriate State agencies with respect to the existence, qualification and good standing of each Loan Party in each jurisdiction where any such Loan Party is organized and foreign qualification and good standing certificates, as applicable, for such Persons in each state identified by the Administrative Agent.
(e)Financial Officer’s Certificate – Representations and Warranties. The Administrative Agent shall have received a closing certificate of a Financial Officer of the Borrower in form and substance reasonably satisfactory to the Administrative Agent, dated as of the Closing Date, certifying (i) that the Specified Merger Agreement Representations are true and correct in all material respects, and (ii) that the Specified Representations are true and correct in all material respects; provided that, to the extent that any Specified Merger Agreement Representation or any Specified Representation is qualified by or subject to a “in all material respects”, “material adverse effect”, “material adverse change” or similar term or qualification, the same shall be true and correct in all respects.
(f)Responsible Officer’s Certificate. The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower in form and substance reasonably satisfactory to the Administrative Agent certifying: (i) that attached to such certificate are true, accurate and complete copies of the Acquisition Documents, (ii) that concurrently with the Transactions contemplated on the Closing Date, the Borrower is (A) consummating the Acquisition in accordance with applicable law and substantially on the terms of the Acquisition Documents without giving effect to any waiver, amendment, modification or consent that is materially adverse to the interests of the Lenders (as reasonably determined by the Coordinating Lead Arranger) and (B) acquiring substantially all of the Acquisition Properties contemplated by the Acquisition Documents, (iii) as to the final purchase price for the Acquisition after giving effect to all adjustments contemplated by the Merger Agreement, (iv) that attached to such certificate is a true, accurate and complete copy of the Yellowjacket Assignment, (v) as to the matters set forth in Section 6.01(p) and Section 6.01(u), (vi) that the Borrower has received all
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government and third party approvals required by Section 7.03 and such approvals have been obtained on satisfactory terms; (vii) no action, proceeding or litigation is pending or threatened in any court or before any Governmental Authority that involves any Loan Document or that is seeking to enjoin or prevent the consummation of the Transactions contemplated hereby; and (viii) that neither the Borrower nor any other Group Member has any outstanding Indebtedness for borrowed money or Disqualified Capital Stock other than the Secured Obligations under this Agreement.
(g)Solvency Certificate. The Administrative Agent shall have received a Solvency Certificate, duly executed by a Financial Officer and dated as of the Closing Date.
(h)Repayment of Indebtedness. The Administrative Agent shall have received documents, in form and substance satisfactory to the Administrative Agent, (i) confirming that with the making of the Loans by the Lenders on the Closing Date, all of the lien terminations, UCC-3 termination statements, and other documentation evidencing the termination of the Liens, if any, on any Loan Party’s property securing the Secured Obligations (as such term is defined in the Yellowjacket Credit Agreement) and the Obligations (as defined in the Maverick Credit Agreement) shall be delivered to the Administrative Agent and (ii) providing for the payment in full of such Secured Obligations and Obligations, excluding, in each case, expense reimbursement and indemnification obligations which by the terms of the Yellowjacket Credit Agreement or Maverick Credit Agreement, as applicable, expressly survive termination (and for which no claim has been made).
(i)Patriot Act. The Administrative Agent shall have received, at least five (5) days prior to the Closing Date, all documentation and other information requested at least two (2) Business Days prior to such date and required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.
(j)Legal Opinions. The Administrative Agent shall have received an opinion of (i) counsel for the Loan Parties, and (ii) applicable local counsel in each jurisdiction designated by the Administrative Agent, including each state in which Borrowing Base Properties are located (except to the extent covered by the opinion described in the preceding clause (i)).
(k)Fees. The Administrative Agent, the Arrangers and the Lenders shall have received all fees and other amounts due and payable on or prior to the Closing Date and, to the extent invoiced at least two (2) Business Days prior to the Closing Date, reimbursement or payment of all reasonable and documented out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder and the Borrower shall have paid all accrued and unpaid commitment fees, and all other fees that are outstanding under the Existing Credit Agreement for the account of each Existing Lender under the Existing Credit Agreement.
(l)Lien Searches. The Administrative Agent shall have received appropriate UCC searches on each Loan Party and Diversified Production reflecting no prior Liens encumbering the Properties of such Loan Party other than those being released on or prior to the Closing Date and those permitted by Section 9.03.
(m)No MAE. Since January 24, 2025, excluding results from (i) general changes in hydrocarbon prices, (ii) general changes in industry or economic conditions, and (iii) general changes in political conditions, including any engagements of hostilities, acts of war or terrorist activities or changes imposed by a governmental authority associated with additional security, there has not been any change, development or event that, individually or in the aggregate, has had or would have a Material Adverse Effect.
(n)Insurance Certificates. The Administrative Agent shall have received certificates of insurance coverage of the Loan Parties in form and substance reasonably satisfactory to the Administrative Agent evidencing that the Loan Parties are carrying insurance in accordance with Section 8.06.
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(o)Environmental. The Borrower shall have provided to the Administrative Agent copies of any material environmental due diligence documents in its possession with respect to the Acquisition Properties, including Phase I Reports, if any.
(p)Beneficial Ownership. To the extent the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, at least five (5) days prior to the Closing Date, any Lender that has requested, in a written notice to the Borrower at least ten (10) days prior to the Closing Date, a Beneficial Ownership Certification in relation to the Borrower shall have received such Beneficial Ownership Certification.
(q)Projections. The Arrangers shall have received management prepared consolidated financial projections covering the forecast period October 1, 2024 through fiscal year 2027 using final deal terms (with an effective date of the Acquisition and the Yellowjacket Assignment as of April 1, 2025).
(r)Liquidity. After giving effect to all the Transactions to occur on or prior to the Closing Date, including the making of the Loans on the Closing Date, and the payment of all fees and expenses due thereunder, the Arrangers shall have received evidence reasonably satisfactory to them that (a) the Borrowing Base Utilization Percentage shall not exceed 85% and (b) the ratio of Total Net Debt to EBITDAX for the most recent four Fiscal Quarters for which financial statements are available will not exceed 3.25 to 1.00 (calculated on a pro forma basis).
(s)Financial Statements. The Arrangers shall have received (a) with respect to the Borrower and the Parent, audited annual financial statements for the Fiscal Year ended December 31, 2023 and unaudited financial statements for the Fiscal Quarter ended September 30, 2024, (b) with respect to MNR, audited annual financial statements for the Fiscal Year ended December 31, 2023 and unaudited financial statements for the Fiscal Quarter ended September 30, 2024, (c) with respect to MAH, audited annual financial statements for the Fiscal Year ended December 31, 2023 and unaudited financial statements for the Fiscal Quarter ended September 30, 2024, and (d) an opening balance sheet of the Borrower as of the Closing Date after giving pro forma effect to the Transactions on the Closing Date.
(t)Lease Operating Statements. The Arrangers shall have received lease operating statements of (a) MAH and its subsidiaries for the twelve-month period ended September 30, 2024, (b) the “Yellowjacket Crescent Pass” assets for the twelve-month period ended March 31, 2024, and (c) the “Yellowjacket Maverick E TX” assets for the twelve-month period ended April 30, 2024.
(u)Engineering Reports. The Arrangers shall have received the Reserve Reports for the Oil and Gas Properties given value in the Borrowing Base (and not presently part of the Borrowing Base under the Existing Credit Agreement as of the date hereof), prepared by Borrower’s internal engineers and dated as of July 1, 2024.
(v)Yellowjacket Assignment. The Borrower shall have acquired one hundred percent (100%) of the Equity Interests in Yellowjacket and indirectly one hundred percent (100%) of the Equity Interests in the Subsidiaries of Yellowjacket (inclusive of all of their respective oil and gas assts and midstream assets as of January 24, 2025, the “Yellowjacket Assignment”).
(w)Swap Agreement Novations. The Arrangers shall have received evidence reasonably satisfactory to them that (i) all of the Swap Agreements secured under the Yellowjacket Credit Agreement and the loan documents related thereto as of January 24, 2025, together with any additional Swap Agreements entered into after such date, shall have been novated to the Borrower, and (ii) all of the Swap Agreements secured under the Maverick Credit Agreement and the loan documents related thereto as of January 24, 2025, together with any additional Swap Agreements entered into after such date, shall either be with a Lender (or an Affiliate of a Lender) or be novated from the counterparty thereunder to a Lender (or an Affiliate of a Lender).
(x)Seller Facility Consent. The Coordinating Lead Arranger shall have received evidence satisfactory to it that the Transactions are permitted by the terms of the Seller Credit Agreement.
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(y)Joint Operating Agreement and Management Services Agreement. The Borrower shall have entered into amendments to (i) the Joint Operating Agreement and (ii) the Management Services Agreement, each in form and substance reasonably acceptable to the Administrative Agent to give effect to the Transactions.
(z)Borrowing Request. The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03; provided that such Borrowing Request shall not contain any certifications or conditions to borrowing that are not otherwise specified in this Section 6.01.    
The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank(s) to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 5:00 p.m. on March 14, 2025 (and, in the event such conditions are not so satisfied or waived, this Agreement shall terminate at such time).
Section 6.02Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (other than the initial funding on the Closing Date), and of the Issuing Bank(s) to issue Letters of Credit or amend any Letter of Credit to increase the amount thereof, is subject to the satisfaction of the following conditions:
(a)At the time of and immediately after giving effect to such Borrowing or any such issuance or amendment of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing or result therefrom.
(b)The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects (unless already qualified by materiality, in which case such representation and warranty (to the extent so qualified) shall continue to be true and correct in all respects) on and as of the date of such Borrowing or the date of any such issuance or amendment of such Letter of Credit, as applicable, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date of such Borrowing or the date of issuance, amendment, or extension of such Letter of Credit, as applicable, such representations and warranties shall continue to be true and correct in all material respects (unless already qualified by materiality, in which case, such applicable representation and warranty shall be true and correct) as of such specified earlier date.
(c)After giving pro forma effect to the making of each Loan, including the use of proceeds thereof, the Borrower and its Restricted Subsidiaries shall not have any Excess Cash.
(d)The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03 or a request for a Letter of Credit (or any such amendment to increase the amount of a Letter of Credit) in accordance with Section 2.09(b), as applicable.
Each request for any such Borrowing or for the issuance of any Letter of Credit or for any amendment to increase the amount of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in Section 6.02(a) through Section 6.02(c).
Article VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
Section 7.01Organization; Powers. Each Group Member is (a)(i) duly organized, validly existing and (ii) in good standing under the laws of the jurisdiction of its organization, (b) has all requisite
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power and authority, and has all governmental licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and is qualified to do business in, and (c) is in good standing in, every material jurisdiction where such qualification is required, except for purposes of Section 7.01(a)(ii), 7.01(b) and 7.01(c) to the extent that a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.
Section 7.02Authority; Enforceability. The Transactions are within each Group Member’s corporate or equivalent powers and have been duly authorized by all necessary corporate or equivalent and, if required, owner action. Each Loan Document to which a Loan Party is a party has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
Section 7.03Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person, nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect other than the recording and filing of financing statements and the Security Instruments as required by this Agreement (b) will not violate (i) in any material respect, any applicable law or regulation or any order of any Governmental Authority or (ii) the Organizational Documents of any Loan Party, (c) will not violate or result in a default under any indenture, note, credit agreement or other similar instrument, in each case constituting Material Indebtedness binding upon any Group Member or its Properties or give rise to a right thereunder to require any payment to be made by any Group Member and (d) will not result in the creation or imposition of any Lien on any Property of any Group Member (other than the Liens created by the Loan Documents).
Section 7.04Financial Condition; No Material Adverse Change.
(a)The Borrower has heretofore furnished to the Lenders the Parent’s consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the Fiscal Year ending on December 31, 2023, reported on by Price Waterhouse Coopers, independent public accountants, and (ii) the Parent’s consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the nine months ended September 30, 2024 prepared internally by the Borrower. Such financial statement presents fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its Consolidated Restricted Subsidiaries as of such dates and for such periods.
(b)The most recent financial statements furnished pursuant to Section 8.01(a) and Section 8.01(b) present fairly, in all material respects, the financial condition of Borrower and its Consolidated Restricted Subsidiaries on a consolidated basis, as of the dates and for the periods set forth above in accordance with IFRS or GAAP, as applicable, subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited quarterly financial statements.
(c)Since the later of (i) the date hereof and (ii) date of the financial statements most recently delivered pursuant to Section 8.01(a), and after giving effect to the Transactions, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.
(d)Neither the Borrower nor any other Group Member has on the date of this Agreement any Indebtedness (including Disqualified Capital Stock) or any contingent liabilities, off-balance sheet liabilities or partnerships, or unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments other than in respect of the Secured Obligations or as otherwise permitted hereunder.
Section 7.05Litigation.
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(a)There are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened in writing by, against or affecting any Group Member any of their respective properties or revenues that (i) are not fully covered by insurance (except for normal deductibles) as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) involve any Loan Document or the Transactions.
Section 7.06Environmental Matters. Except for such matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a)the Group Members and any property with respect to which any Group Member has any interest or obligation are in compliance with all, and have not violated any, applicable Environmental Laws;
(b)(i) the Group Members and all relevant Persons for any property with respect to which any Group Member has any interest or obligation hold and are in compliance with all, and have not violated any, Environmental Permits required for their respective operations and each of their respective properties; (ii) all such Environmental Permits are in full force and effect; and (iii) no Group Member has received any notice or otherwise has knowledge that any such Environmental Permit may be revoked, adversely modified, or not renewed, or that any application for any Environmental Permit may be protested or denied or that the anticipated terms thereof may be adversely modified;
(c) (i) there are no actions, claims, demands, suits, investigations or proceedings under any Environmental Laws or regarding any Hazardous Materials that are pending or, to the Borrower’s knowledge, threatened, against any Group Member or regarding any property with respect to which any Group Member has any interest or obligation, or as a result of any operations of any Group Member or any other Person regarding any property with respect to which any Group Member has any interest or obligation; and (ii) there are no consent decrees or other decrees, consent orders, administrative orders or other administrative, arbitral or judicial requirements outstanding under any Environmental Laws or regarding any Hazardous Materials, directed to any Group Member or as to which any Group Member is a party, or regarding any property with respect to which any Group Member has any interest or obligation;
(d)(i) there has been no Release or, to the Borrower’s knowledge, threatened Release, of Hazardous Materials attributable to the operations of any Group Member at, on, under or from any Group Member’s current or formerly owned, leased or operated property or at any other location (including, to the Borrower’s knowledge, any location to which Hazardous Materials have been sent for re-use, recycling, treatment, storage or disposal) for which any Group Member could be liable, and (ii) Hazardous Materials are not otherwise present at any such properties or other locations, in either (i) or (ii) above, in amounts or concentrations or under conditions which constitute a violation of any applicable Environmental Law, could reasonably be expected to give rise to any liability, or, with respect to any Mortgaged Property, could reasonably be expected to impair its fair saleable value;
(e)no Group Member, nor to the Borrower’s knowledge any other Person for any property with respect to which any Group Member has any interest or obligation, has received any written notice of violation, alleged violation, non-compliance, liability or potential liability or request for information regarding Environmental Laws or Hazardous Materials, and, to the Borrower’s knowledge, there are no conditions or circumstances that would reasonably be expected to result in the receipt of any such notice or request for information;
(f)no Group Member has assumed or retained any liability under applicable Environmental Laws or regarding Hazardous Materials that could reasonably be expected to result in liability to any Group Member; and
(g)to the extent reasonably requested by the Administrative Agent, the Group Members have provided to Lenders complete and correct copies of all environmental site assessment reports, investigations, studies, analyses, and correspondence on environmental matters (including matters
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relating to any alleged non-compliance with or liability under Environmental Laws) that are in any Group Member’s possession or control and relating to their respective Properties or operations thereon.
Section 7.07Compliance with the Laws; No Defaults.
(a)Each Group Member is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business, except to the extent that any failure of the foregoing could not reasonably be expected to result in a Material Adverse Effect.
(b)No Default has occurred and is continuing.
Section 7.08Investment Company Act. No Group Member is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.
Section 7.09Taxes. Each Group Member has timely filed or caused to be filed all U.S. federal income Tax returns and other material Tax returns and reports required to have been filed (taking into account any extension of time to file) and has paid or caused to be paid all material Taxes required to have been paid by it, except Taxes that are being contested in good faith by appropriate proceedings and for which the applicable Group Member has set aside on its books adequate reserves in accordance with GAAP. To the knowledge of Borrower, no material proposed tax assessment has been asserted with respect to any Group Member.
Section 7.10ERISA. Except as could not, whether individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect:
(a)each Plan is, and has been, operated, administered and maintained in compliance with, and the Borrower and each ERISA Affiliate have complied with, ERISA, the terms of the applicable Plan and, where applicable, the Code;
(b)no act, omission or transaction has occurred which could result in imposition on the Borrower or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under Section 409 of ERISA;
(c)no liability to the PBGC (other than required premiums payments which are not past due after giving effect to any applicable grace periods) by the Borrower or any ERISA Affiliate has been or is reasonably expected by any Group Member or any ERISA Affiliate to be incurred with respect to any Plan and no ERISA Event with respect to any Plan has occurred;
(d)the actuarial present value of the benefit liabilities under each Plan which is subject to Title IV of ERISA does not (determined as of the end of the most recent plan year) exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term “actuarial present value of the benefit liabilities” shall have the meaning specified in Section 4041 of ERISA; and
(e)neither the Borrower nor any ERISA Affiliate has any actual or contingent liability to any Multiemployer Plan.
Section 7.11Disclosure; No Material Misstatements. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Group Members to the Administrative Agent or any Lender or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contain any material misstatement of fact or
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omits to state any material fact necessary to make the statements therein when taken as a whole, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Group Members represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and it further being understood that projections concerning volumes attributable to the Oil and Gas Properties and production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and the Group Members do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate. All of the information included in the Beneficial Ownership Certification most recently provided to each Lender, if applicable, is true and correct as of the date thereof.
Section 7.12Insurance. For the benefit of each Loan Parties, the Borrower has (a) all insurance policies sufficient for the compliance by the Loan Parties with all material Governmental Requirements and all material agreements and (b) insurance coverage, or self-insurance, in at least such amounts and against such risk (including public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Loan Parties. Schedule 7.12, as of the date hereof, sets forth a list of all insurance maintained by the Borrower.
Section 7.13Restriction on Liens. No Group Member is subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Administrative Agent and the Lenders on or in respect of their Properties to secure the Secured Obligations and the Loan Documents.
Section 7.14Group Members. There are no Group Members, except as set forth on Schedule 7.14 or as disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which shall be a supplement to Schedule 7.14. Each Group Member’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section 8.01(k)). No Group Member is a Foreign Group Member (other than any Foreign Group Member as of the Closing Date).
Section 7.15Location of Business and Offices. The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is DP RBL CO LLC; and the organizational identification number of the Borrower in its jurisdiction of organization is set forth on Schedule 7.14 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(k) in accordance with Section 12.01). The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(k) and Section 12.01(c)).
Section 7.16Properties; Title, Etc.
(a)Each Group Member has good and defensible title to the Oil and Gas Properties evaluated in the most recently delivered Reserve Report and good title to all its material personal Properties other than Properties sold, transferred or otherwise disposed of (i) on or prior to the Closing Date or (ii) after the Closing Date, in compliance with Section 9.11 from time to time, in each case, free and clear of all Liens except Liens permitted by Section 9.03. After giving full effect to the Excepted Liens and the dispositions referenced in the prior sentence, the Group Member specified as the owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected in the most recently delivered Reserve Report, and except as otherwise provided by statute, regulation or the standard and customary provisions of any applicable joint operating agreement, the ownership of such Properties shall not in any material respect obligate the Group Member to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in the Group Member’s net revenue interest in such Property.
(b)(i) All leases and agreements necessary for the conduct of the business of the Group Members are valid and subsisting, in full force and effect, and (ii) there exists no default or event
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or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such lease or leases, which, in the case of either (i) or (ii), could reasonably be expected to have a Material Adverse Effect.
(c)The rights and Properties presently owned, leased or licensed by the Group Members including all easements and rights of way, include all rights and Properties necessary to permit the Group Members to conduct their business in the same manner as its business is conducted on the date hereof except where the failure of the foregoing could not reasonably be expected to result in a Material Adverse Effect.
(d)Except for Properties being repaired, all of the Properties of the Group Members which are reasonably necessary for the operation of their businesses are in good working condition and are maintained in accordance with prudent business standards, except where the failure of the foregoing could not reasonably be expected to result in a Material Adverse Effect.
(e)Each Group Member owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual Property necessary to operate its business, and the use thereof by the Group Member does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Group Members either own or have valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as could not reasonably be expected to have a Material Adverse Effect.
Section 7.17Maintenance of Properties. The Oil and Gas Properties (and Properties unitized therewith) of the Group Members have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Governmental Requirements in all material respects and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties of the Group Members in all material respects. All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Group Members that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Group Members, in a manner consistent with the Group Members’ past practices (other than those the failure of which to maintain in accordance with this Section 7.17 could not reasonably be expected to have a Material Adverse Effect).
Section 7.18Gas Imbalances. Except as set forth on Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.11(c), on a net basis there are no gas imbalances, take or pay or other prepayments which would require any Group Member to deliver Hydrocarbons produced from their Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor exceeding two percent (2.0%) of the aggregate volumes of Hydrocarbons (on an Mcf equivalent basis) listed in the most recent Reserve Report.
Section 7.19Marketing of Production. Except for contracts listed and in effect on the date hereof on Schedule 7.19, and thereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report, (a) the Group Members are receiving a price for all production sold thereunder which is computed substantially in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject Property’s delivery capacity and (b) no material agreements of any Group Member exist which are not cancelable on sixty (60) days’ notice or less without penalty or detriment for the sale of production from the Group Members’ Hydrocarbons (including calls on or other rights to purchase, production, whether or not the same are currently being exercised) that (i) pertain to the sale of production at a fixed price and (ii) have a maturity or expiry date of longer than six (6) months from the date of such agreement.
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Section 7.20Security Documents. The Security Instruments are effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Mortgaged Property and proceeds thereof. The Secured Obligations are and have been at all times secured by a legal, valid and enforceability first priority perfected Liens in favor of the Administrative Agent, covering and encumbering (a) at least 85% of the PV-10 of the Borrowing Base Properties, (b) the Mortgaged Property granted pursuant to the Guarantee and Collateral Agreement, including the pledged Equity Interests and the Deposit Accounts and Securities Accounts, in each case to the extent perfection has occurred, as the case may be, by the recording of a mortgage, the filing of a UCC financing statement, or, in the case of Deposit Accounts and Securities Accounts, by obtaining of “control” or, with respect to Equity Interests represented by certificates, by possession (in each case, to the extent available in the applicable jurisdiction); provided that, except in the case of pledged Equity Interests, Liens permitted by Section 9.03 may exist.
Section 7.21Swap Agreements. Schedule 7.21, as of the Closing Date, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(d), as of the last Business Day of the period covered by such report, sets forth, a true and complete list of all Swap Agreements of the Group Members, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied, but excluding the Security Instruments) and the counterparty to each such agreement. As of the Closing Date, all Secured Swap Agreements (as defined in the Existing Credit Agreement) entered into during the term of the Existing Credit Agreement remain in place under this Agreement, or have either been terminated or novated to continue under this Agreement.
Section 7.22Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters of Credit shall be used (a) to pay fees and expenses associated with the Transactions, (b) to provide working capital for lease acquisitions, for exploration and production operations, for development (including the drilling and completion of producing wells), for acquisitions of Oil and Gas Properties permitted hereunder, and (c) for other general corporate purposes of the Borrower, its Subsidiaries and the other Permitted L/C Parties, including to fund Restricted Payments permitted by Section 9.04(a). No Group Member or other Permitted L/C Party is engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.
Section 7.23Solvency. Immediately after giving effect to the transactions contemplated hereby (including, without limitation, each Borrowing or the issuance, increase or extension of each Letter of Credit hereunder) (a) the sum of the debt (including contingent liabilities) of the Borrower and its Subsidiaries, on a consolidated basis, does not exceed the present fair saleable value of the present assets of the Borrower and its Subsidiaries, on a consolidated basis, (b) the capital of the Borrower and its Subsidiaries, on a consolidated basis, is not unreasonably small in relation to their business, (c) the Borrower and its Subsidiaries, on a consolidated basis, have not incurred and do not intend to incur, or believe that they will incur, debts including current obligations, beyond their ability to pay such debts as they become due (whether at maturity or otherwise), and (d) the Borrower and its Subsidiaries, on a consolidated basis, are “solvent” within the meaning given to that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.
Section 7.24Anti-Corruption Laws; Sanctions; OFAC; Outbound Investment Rules.
(a)The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
(b)The Borrower, its Subsidiaries, their respective directors and officers, and to the knowledge of the Borrower, its employees, agents and the other Permitted L/C Parties are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects and are not knowingly
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engaged in any activity that would reasonably be expected to result in any Group Member being designated as a Sanctioned Person.
(c)None of (i) the Borrower, any Subsidiary or any of their respective directors, officers or employees, or (ii) to the knowledge of the Borrower, any other Permitted L/C Party or any agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. The Borrower will not directly or, to its knowledge, indirectly use the proceeds from the Loans or lend, contribute or otherwise make available such proceeds to any Subsidiary, other Permitted L/C Party, joint venture partner or other Person, for the purpose of financing the activities of any Person currently subject to any applicable Sanctions, or otherwise in violation of any Anti-Corruption Law.
(d)The Borrower and each of its Subsidiaries is in compliance in all material respects with the Patriot Act.
(e)Neither the Borrower nor any of its Subsidiaries is a ‘covered foreign person’ as that term is used in the Outbound Investment Rules. Neither the Borrower nor any of its Subsidiaries currently engages, or has any present intention to engage in the future, directly or indirectly, in (i) a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, (ii) any activity or transaction that would constitute a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, if the Borrower were a U.S. Person, or (iii) any other activity that would cause the Administrative Agent or any Lender to be in violation of the Outbound Investment Rules or cause the Administrative Agent or any Lender to be legally prohibited by the Outbound Investment Rules from performing under this Agreement.
Section 7.25Senior Debt Status. The Secured Obligations constitute “Senior Indebtedness”, “Designated Senior Indebtedness” or any similar designation under and as defined in any agreement governing any senior subordinated or subordinated Indebtedness and the subordination provisions set forth in each such agreement, if any, are legally valid and enforceable against the parties thereto.
Section 7.26EEA Financial Institution. No Loan Party is an Affected Financial Institution.
Article VIII
AFFIRMATIVE COVENANTS
Until Payment in Full, the Borrower covenants and agrees with the Lenders that:
Section 8.01Financial Statements; Other Information. The Borrower will furnish to the Administrative Agent for delivery to each Lender:
(a)Annual Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than one hundred twenty (120) days after the end of each Fiscal Year of the Parent (commencing with the Fiscal Year ending December 31, 2024), (i) the Parent’s audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous Fiscal Year of the Parent, all reported on by an independent public accountant reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit, other than with respect to, or resulting from the occurrence of an upcoming maturity date of Indebtedness) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis and the other Group Members (as applicable), on a consolidated basis, in each case, in accordance with IFRS (if the Parent’s financial statements are available in accordance with GAAP, GAAP) consistently applied, (ii) the Borrower’s audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous Fiscal Year of the Borrower, where available, all reported on by an independent public accountant reasonably acceptable to the Administrative Agent (without a “going concern” or like
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qualification or exception and without any qualification or exception as to the scope of such audit, other than with respect to, or resulting from, the occurrence of an upcoming maturity date of Indebtedness) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis and the other Group Members (as applicable), on a consolidated basis, in each case, in accordance with GAAP or IFRS (if the Parent’s financial statements are available in accordance with GAAP, GAAP) consistently applied, and for the avoidance of doubt, without accompanying financial statement footnotes, and (iii) in the event the Borrower’s audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such Fiscal Year are prepared and audited in accordance with IFRS or prepared under a basis of accounting that differs from the Quarterly Financial Statements provided in accordance with Section 8.01(b), the Borrower will separately provide a reconciliation (for the avoidance of doubt, such reconciliation will be unaudited) between the two standards in a format reasonably acceptable to the Administrative Agent.
(b)Quarterly Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Parent (commencing with the Fiscal Quarter ending March 31, 2025), (i) the Parent’s unaudited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such Fiscal Quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent and its Consolidated Subsidiaries on a consolidated basis and the other Group Members (as applicable), on a consolidated basis, in each case, in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes and (ii) the Borrower’s unaudited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such Fiscal Quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis and the other Group Members (as applicable), on a consolidated basis, in each case, in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.
(c)Certificate of Financial Officer - Compliance. Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a Compliance Certificate (i) certifying as to whether a Default has occurred and is continuing and, if a Default has occurred and is continuing, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) certifying that (A) the Borrower has been in compliance with the Financial Performance Covenants at such times as required therein as of the last day of such Fiscal Quarter and (B) in connection therewith, setting forth reasonably detailed calculations demonstrating such compliance, (iii) stating whether any change in GAAP or IFRS or in the application thereof has occurred since the date of the most recently delivered financial statements referred to in Section 8.01(a) and Section 8.01(b) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate, (iv) stating whether there are any Subsidiaries which are to become Loan Parties in order to comply with Section 8.13 and, if any such Subsidiaries exist, specifying the actions proposed to be taken in connection therewith, and (v) attaching Annex C thereto containing calculations of Available Diversified Free Cash Flow, Diversified Cash Flow, Diversified Corporate Expenses, and Restricted Payments (including Diversified Distributions) for the Test Period then ended, in each case in reasonable detail and calculation satisfactory to the Administrative Agent.
(d)Certificate of Financial Officer – Swap Agreements. Concurrently with any delivery of financial statements pursuant to Section 8.01(a) and Section 8.01(b), a certificate of a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent, setting forth as of the last Business Day of such Fiscal Quarter or Fiscal Year, a true and complete list of all Swap Agreements of the Borrower and each Group Member, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value
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therefor (as of the last Business Day of such Fiscal Quarter or Fiscal Year), any new credit support agreements relating thereto not listed on Schedule 7.21, any margin required or supplied under any credit support document, and the counterparty to each such agreement.
(e)Production Report and Lease Operating Statements. Within sixty (60) days after the end of each Fiscal Quarter, a report setting forth, for each calendar month during the then current Fiscal Year to date, the volume of total production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties of the Group Members, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month.
(f)Certificate of Insurer - Insurance Coverage. Within five (5) Business Days following each material change in the insurance maintained in accordance with Section 8.06, certificates of insurance coverage with respect to the insurance required by Section 8.06, in form and substance satisfactory to the Administrative Agent, and, if reasonably requested by the Administrative Agent or any Lender, all copies of the applicable policies.
(g)SEC and Other Filings; Reports to Shareholders. Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements, financial statements, and other materials filed by any Group Member with the SEC or with any national securities exchange.
(h)Notices Under Material Instruments. Concurrently with the furnishing thereof, copies of any financial statement, report or notice (including any notice of default) furnished to or by any Person pursuant to the terms of any preferred stock designation, indenture, loan or credit or other similar agreement evidencing Material Indebtedness (other than this Agreement) that has not been previously furnished to the Lenders pursuant to any other provision of this Section 8.01.
(i)Lists of Purchasers. Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 8.11 (commencing with the Reserve Report as of December 31, 2024), a list of all Persons purchasing Hydrocarbons in excess of $1,000,000 from any Group Member (or, with respect to Oil and Gas Properties that are not operated by a Group Member, a list of the operators of such properties) during the two Fiscal Quarters ending as the date of such Reserve Report.
(j)Issuances and Incurrences of Debt. Two (2) Business Days prior written notice of the incurrence by any Group Member of any Permitted Unsecured Debt, Permitted Refinancing Indebtedness or, if in excess of $10,000,000, any other Indebtedness as well as the amount thereof, the anticipated closing date and definitive documentation for the foregoing and any other related information reasonably requested.
(k)Information Regarding Borrower and Guarantors. Prompt written notice of (and in any event within five (5) Business Days prior thereto or such other time as the Administrative Agent may agree in its sole discretion) any change (i) in a Loan Party’s corporate name or in any trade name used to identify such Person in the conduct of its business or in the ownership of its Properties, (ii) in the location of the Loan Party’s chief executive office or principal place of business, (iii) in the Loan Party’s identity or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in the Loan Party’s jurisdiction of organization, and (v) in the Loan Party’s federal taxpayer identification number.
(l)Patriot Act. Promptly upon request, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.
(m)Cash Flow and Forecasts. As soon as available, but in any event prior to March 1 and September 1 of each fiscal year, the Borrower’s cash flow and capital expenditure forecast prepared on a monthly basis for (i) with respect to the March 1 forecast, the 12 month period comprised of the then current Fiscal Year and (ii) with respect to September 1 forecast, the 12 month period from July 1 of such
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Fiscal Year through June 30 of the following Fiscal Year, each in form and detail reasonably satisfactory to the Administrative Agent.
(n)Notices Related to Oil and Gas Properties and Swap Agreements. In the event the Borrower or any Restricted Subsidiary (i) intends to consummate any sale, transfer, assignment or other disposition involving Proved Reserves with a fair market value in excess of $5,000,000 in accordance with Section 9.11, reasonable prior written notice (and in any event not less than five (5) Business Days prior notice) of such disposition, the price thereof and the anticipated date of closing and any other details thereof reasonably requested by the Administrative Agent, (ii) receives any notice of early termination of any Swap Agreement to which the Borrower or any Restricted Subsidiary is a party from any of its counterparties, or any Swap Agreement to which the Borrower or any Restricted Subsidiary is a party is Unwound and results in cash payments to the Borrower or any Restricted Subsidiary in excess of $5,000,000, or (iii) any combination of (i) and (ii) above that results in cash payments to the Borrower or any Restricted Subsidiary in excess of $5,000,000, written notice, promptly thereafter (and in any event, not more than three (3) Business Days thereafter), of such early termination notice or such Unwind.
(o)Notice of Casualty Events. Promptly, but in any event within ten (10) Business Days following the occurrence thereof, written notice of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event, in each case, of any Property of any Group Member having a Fair Market Value in excess of $10,000,000.
(p)Notices of Certain Changes. Promptly, but in any event within five (5) Business Days after the execution thereof, copies of any material amendment, modification or supplement to (i) the Seller Facility or (ii) any preferred stock designation or Organizational Document of the Borrower or any Group Member.
(q)Other Requested Information. Promptly, but in any event within five (5) Business Days following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary (including any Plan or Multiemployer Plan to which any Group Member or any of their respective ERISA Affiliates contributes or has an obligation to contribute and any reports or other information, in either case with respect thereto, required to be filed under ERISA), or compliance with the terms of this Agreement or any other Loan Document, as the Administrative Agent or any Lender may reasonably request in writing.
(r)Notices of Acquisitions of Oil and Gas Properties. Promptly, but in any event within five (5) Business Days following the occurrence thereof, written notice of the acquisition of any Oil and Gas Properties by the Group Members in one or a series of related transactions having a Fair Market Value in excess of $10,000,000 or where the consideration paid exceeds $10,000,000.
(s)Take or Pay, Ship or Pay or Other Prepayments. Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 8.11 (commencing with the Reserve Report as of December 31, 2024), written notice of the occurrence of any Group Member entering into a take or pay, ship or pay or other prepayments arrangement with respect to the Oil and Gas Properties of any Group Member.
(t)Beneficial Ownership. Promptly upon the reasonable request of the Administrative Agent or any Lender, provide the Administrative Agent or such Lender, as the case may be, any information or documentation reasonably requested by it for purposes of complying with the Beneficial Ownership Regulation.
(u)Sustainability Certificate. As soon as available and in any event by June 30th following the end of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2024), a Sustainability Certificate for the most recently-ended Fiscal Year; provided, that, for any Fiscal Year the Borrower may elect not to deliver a Sustainability Certificate, and such election shall not constitute a Default or Event of Default (but such failure to so deliver a Sustainability Certificate by June 30th shall result in the Sustainability Rate Adjustment being applied as set forth in Section 2.13(c)).
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(v)Sustainability Report. As soon as available and in any event within 150 days following the end of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2024), a Sustainability Report for the most recently-ended Fiscal Year; provided, that, for any Fiscal Year the Borrower may elect not to deliver a Sustainability Report, and such election shall not constitute a Default or Event of Default.
(w)Certificate of Financial Officer - Diversified Distributions. Concurrently with the making thereof (or, if applicable, on the Payment Date described in the proviso to Section 9.04(a)), a certificate of a Financial Officer of the Borrower (substantially in the form of Exhibit K) certifying (i) the amount of each Diversified Distribution and (ii) that after giving pro forma effect thereto (including any Borrowing incurred in connection therewith) either (x) the Borrower’s ratio of Total Net Debt as of such date to EBITDAX for the four Fiscal Quarters most recently ended for which financial statements are available is less than 1.50 to 1.00 and the Borrower’s Liquidity is greater than 25% of the then effective Borrowing Base (or 15% during the Adjusted RP Testing Period) or (y) (A) Available Diversified Free Cash Flow for the most recently ended Test Period for which financial statements are available is greater than $0.00, (B) the ratio of Total Net Debt to EBITDAX for the most recent four Fiscal Quarters for which financial statements are available does not exceed 2.0 to 1.0 and (C) the Borrower’s Liquidity is equal to or greater than 20% of the then effective Borrowing Base, so long as no Default, Event or Default or Borrowing Base Deficiency has occurred and is continuing or would occur as a result.
(x)Certificate of Financial Officer – Restricted Payments. Within five (5) Business Days after the end of each calendar month, a certificate of a Financial Officer of the Borrower (substantially in the form of Exhibit L) setting forth the various Restricted Payments (if any) made by the Borrower during such calendar month pursuant to Section 9.04(a)(v) and Section 9.04(a)(vi) and certifying that the Borrower was in compliance with Section 9.04(a)(v) and Section 9.04(a)(vi), as applicable, at such times as required therein as of the date of each such Restricted Payment, together with reasonably detailed calculations demonstrating such compliance.
Documents required to be delivered pursuant to this Section 8.01 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which such documents are posted on the Borrower’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions of any such documents.
Section 8.02Notices of Material Events. Within three (3) Business Days, the Borrower will furnish to the Administrative Agent written notice of the following:
(a)Defaults. The occurrence of any Default or Event of Default;
(b)Governmental Matters. The filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting Group Members thereof not previously disclosed in writing to the Lenders or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lenders) that, in either case, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;
(c)ERISA Events. The occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower or any Group Member in an aggregate amount exceeding $10,000,000;
(d)Material Adverse Effect and Borrowing Base Adjustment. Any other development that results in, or could reasonably be expected to result in a Material Adverse Effect or an adjustment to the Borrowing Base pursuant to the Borrowing Base Adjustment Provisions; and
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(e)Beneficial Ownership. To the extent the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall notify the Administrative Agent and each Lender that previously received a Beneficial Ownership Certification of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified therein.
Each notice delivered under this Section 8.02 shall be accompanied by a statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
Section 8.03Existence; Conduct of Business. The Borrower will, and will cause each Group Member to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises necessary to the conduct of its business and maintain, if necessary, its qualification to do business in each other material jurisdiction in which its Oil and Gas Properties is located or the ownership of its Properties requires such qualification, except to the extent that the failure to be so qualified could not reasonably be expected to cause a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 9.10.
Section 8.04Payment of Obligations. The Borrower will, and will cause each other Group Member to, pay its material obligations (other than Material Indebtedness), including material tax liabilities of the Borrower and all of the other Group Members before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings and (b) the Borrower or such other Group Member has set aside on its books adequate reserves with respect thereto in accordance with GAAP.
Section 8.05Operation and Maintenance of Properties. The Borrower, at its own expense, will, and will cause each other Group Member and Affiliate Operator to:
(a)operate its Oil and Gas Properties (i) in accordance with the customary practices of the industry and (ii) in compliance with all applicable contracts and agreements and in compliance with all applicable Governmental Requirements, in the case of clauses (i) and (ii) above, in all material respects, including applicable pro ration requirements and applicable Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons and other minerals therefrom in all material respects;
(b)keep and maintain all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, in accordance with the standard of a prudent operator;
(c)promptly pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all material delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties and will do all other things necessary, in accordance with industry standards, to keep unimpaired their rights with respect thereto and prevent any forfeiture thereof or default thereunder, in each case, in all material respects;
(d)promptly perform or make reasonable and customary efforts to cause to be performed, in accordance with customary industry standards, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties, in each case, in all material respects; and
(e)to the extent a Group Member or Affiliate Operator is not the operator of any Property, the Borrower shall use reasonable efforts to cause the operator to comply with this Section 8.05, but failure of the operator so to comply will not constitute a Default or Event of Default.
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Section 8.06Insurance. The Borrower will maintain, with financially sound and reputable insurance companies, insurance covering all Group Members, in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The loss payable clauses or provisions in the applicable insurance policy or policies insuring the Group Members or their Property shall be endorsed in favor of and made payable to the Administrative Agent as sole “loss payee” or other formulation reasonably acceptable to the Administrative Agent and such liability policies shall name the Administrative Agent and the Secured Parties as “additional insureds” and provide that the insurer will endeavor to give at least 30 days prior notice of any cancellation to the Administrative Agent.
Section 8.07Books and Records; Inspection Rights. The Borrower will, and will cause each other Group Member to, keep proper books of record and account in which full, true and correct entries in conformity with GAAP, prudent accounting practice and all Governmental Requirements shall be made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each other Group Member to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior written notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times during normal business hours and as often as reasonably requested; provided that, unless an Event of Default exists, no more than one visit per year shall be at the Borrower’s expense. Neither the Borrower nor any Subsidiary will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter (a) that constitutes non-financial trade secrets or non-financial proprietary information, (b) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by any Governmental Requirement or any binding agreement (provided that the Loan Parties shall use commercially reasonable efforts to cause its agreements to permit disclosure of information that is pertinent to the interests of the Lenders to the Administrative Agent and the Lenders subject to the confidentiality provisions herein) or (c) that is subject to attorney-client or similar privilege or constitutes attorney work product.
Section 8.08Compliance with Laws. The Borrower will, and will cause each Group Member and Affiliate Operator to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property in all material respects. The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Group Members, the Affiliate Operators and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
Section 8.09Environmental Matters.
(a)The Borrower will, and will cause each Group Member and Affiliate Operator to; (i) comply with all applicable Environmental Laws, and undertake reasonable efforts to ensure that all tenants and subtenants (if any), and all Persons with whom any Group Member or Affiliate Operator has contracted for the exploration, development, production, operation, or other management of an oil or gas well or lease, comply with all applicable Environmental Laws; and (ii) generate, use, treat, store, release, transport, dispose of, and otherwise manage all Hazardous Materials in a manner that could not reasonably be expected to result in any Liability to any Group Member or Affiliate Operator or to adversely affect any real property owned, leased or operated by any of them, and take reasonable efforts to prevent any other Person from generating, using, treating, storing, releasing, transporting, disposing of, or otherwise managing Hazardous Materials in a manner that could reasonably be expected to result in a liability to any Group Member, or with respect to any Mortgaged Property, could reasonably be expected to adversely affect its fair saleable value (for the avoidance of doubt, with respect to activities on properties neighboring such real property, such reasonable efforts shall not include any obligation to monitor such activities or properties); it being understood that this clause (a) shall be deemed not breached by a noncompliance with any of the foregoing (i) or (ii) if, upon learning of such noncompliance or any condition that results from such noncompliance, any affected Group Member promptly develops and diligently implements a response to such noncompliance and any such condition that is consistent with principles of prudent environmental management and all applicable Environmental Laws, and provided that such response and condition, in the aggregate with any other such responses and conditions, could not reasonably be expected to have a Material Adverse Effect.
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(b)The Borrower will promptly, but in no event later than five (5) days after learning of any action, investigation, demand or inquiry contemplated by this Section 8.09(b), notify the Administrative Agent and the Lenders in writing of any action, investigation, demand, or inquiry by any Person threatened in writing or commenced against the Borrower or any Group Member, or any of their property or any property with respect to which a Group Member has any interest or obligation, in connection with any applicable Environmental Laws or regarding any Hazardous Materials (excluding routine testing and corrective action), unless the Borrower reasonably determines, based on the information reasonably available to it at the time, that such action, investigation, demand or inquiry is unlikely to result in costs and liabilities in excess of $5,000,000 (it being understood that the amount will be determined in the aggregate with the costs and liabilities of all related similar actions, investigations, demands or inquiries) or could not reasonably be expected to have a Material Adverse Effect (it being understood that the Borrower shall be deemed to have given notice under this Section 8.09(b) regarding the matters set forth on Schedule 8.09(b) to this Agreement to the extent such matters are described thereon).
(c)If an Event of Default has occurred or is reasonably anticipated, or if any event or circumstance has occurred or is reasonably suspected that could reasonably be expected to result in a material diminution in the value of any of the Mortgaged Properties, the Administrative Agent may (but shall not be obligated to), at the expense of the Borrower (such expenses to be reasonable in light of the circumstances), conduct such investigation as it reasonably deems appropriate to determine the nature and extent of any noncompliance with applicable Environmental Laws, the nature and extent of the presence of any Hazardous Material and the nature and extent of any other environmental conditions that may exist at or affect any of the Mortgaged Properties, and the Loan Parties and each relevant Group Member shall reasonably cooperate with the Administrative Agent in conducting such investigation and in implementing any response to such noncompliance, Hazardous Material or other environmental condition as the Administrative Agent reasonably deems appropriate. Such investigation and response may include, without limitation, a detailed visual inspection of the Mortgaged Properties, including all storage areas, storage tanks, drains and dry wells and other structures and locations, as well as the taking of soil samples, surface water samples, and ground water samples and such other investigations or analyses as the Administrative Agent deems appropriate, and any containment, cleanup, removal, repair, restoration, remediation or other remedial work. Upon reasonable request and notice, the Administrative Agent and its officers, employees, agents and contractors shall have and are hereby granted the right to enter upon the Mortgaged Properties for the foregoing purposes.
Section 8.10Further Assurances.
(a)The Borrower at its sole expense will, and will cause each other Group Member to, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably requested by the Administrative Agent to (i) further evidence and more fully describe the collateral intended as security for the Secured Obligations, (ii) correct any omissions in this Agreement or the Security Instruments, (iii) state more fully the obligations secured therein, (iv) perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or (v) make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the reasonable discretion of the Administrative Agent to ensure that the Administrative Agent, on behalf of the Secured Parties, has a perfected security interest in all assets of the Loan Parties. In addition, at the Administrative Agent’s request, the Borrower, at its sole expense, shall provide any information requested to identify any Mortgaged Property, a customary “lease to well” reconciliation schedule, list or similar item, exhibits to Mortgages in form and substance reasonably satisfactory to the Administrative Agent (which such exhibits shall be in recordable form for the applicable jurisdiction) or any other information requested in connection with the identification of any Mortgaged Property.
(b)The Borrower hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Mortgaged Property without the signature of the Borrower or any other Loan Party where permitted by law, which financing statements may contain a description of collateral that describes such property in any manner as the Administrative Agent may reasonably determine is necessary or advisable to ensure the perfection of the security interest in the Mortgaged Property consistent with the terms of the Loan Documents,
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including describing such property as “all assets” or “all property” or words of similar effect. A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering the Mortgaged Property or any part thereof shall be sufficient as a financing statement where permitted by law.
Section 8.11Reserve Reports.
(a)On or before April 1st and October 1st of each year beginning April 1, 2025, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the Borrowing Base Properties of the Borrower and its Subsidiaries as of the immediately preceding December 31st (the “December 31 Reserve Report”) and June 30th (the “June 30 Reserve Report”), as applicable. Each (A) December 31 Reserve Report delivered on or before April 1st of each year, shall be prepared by one or more Approved Petroleum Engineers, and (B) June 30 Reserve Report delivered on or before October 1st of each year shall be prepared by one or more Approved Petroleum Engineers or internally under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate in all material respects and to have been prepared in accordance with the procedures used in the immediately preceding December 31 Reserve Report.
(b)In the event of a request for an Interim Redetermination pursuant to Section 2.07(b), the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate in all material respects and to have been prepared in accordance with the procedures used in the immediately preceding December 31 Reserve Report with an “as of” date as required by the Administrative Agent as soon as commercially reasonable, but in any event no later than thirty (30) days following the receipt of such request; provided that at any time prior to delivery of such Reserve Report the Administrative Agent may, or at the direction of the Required Lenders shall, elect to use the most recently delivered Reserve Report, which such Reserve Report may be rolled forward in a customary manner.
(c)With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent and the Lenders a Reserve Report Certificate substantially in the form of Exhibit I from a Responsible Officer certifying that in all material respects: (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct, (ii) except as set forth on an exhibit to the certificate, the Borrower or the other Loan Parties own good and defensible title to the Borrowing Base Properties evaluated in such Reserve Report and such Borrowing Base Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, (A) on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with respect to the Borrowing Base Properties evaluated in such Reserve Report which would require the Borrower or any other Group Member to deliver Hydrocarbons either generally or produced from such Borrowing Base Properties at some future time without then or thereafter receiving full payment therefor and (B) there are no take-or-pay or ship-or-pay contracts that have not been disclosed in a previous Reserve Report Certificate, (iv) none of their Borrowing Base Properties have been sold (other than Hydrocarbons sold in the ordinary course of business) since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which exhibit shall list all of its Borrowing Base Properties sold (other than Hydrocarbons sold in the ordinary course of business) and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into by a Group Member subsequent to the later of the date hereof or the most recently delivered Reserve Report which the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof and (vi) attached thereto is a schedule of the Borrowing Base Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the PV-10 of the Borrowing Base Properties that the value of such Mortgaged Properties represent and that such percentage is in compliance with Section 8.13(a) (the certificate described herein, the “Reserve Report Certificate”). For the avoidance of doubt, the requirement to provide a Reserve Report Certificate shall require the delivery of such Reserve Report Certificate at the time each Reserve Report is delivered.
Section 8.12Title Information.
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(a)On or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 8.11(a), the Borrower shall deliver title information in form and substance acceptable to the Administrative Agent covering enough of the Borrowing Base Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received reasonably satisfactory title information on Hydrocarbon Interests constituting at least 85% of the PV-10 of the Borrowing Base Properties evaluated by such Reserve Report as determined by the Administrative Agent.
(b)If the Borrower has provided title information for additional Properties under Section 8.12(a), the Borrower shall, within 60 days (or such longer period as the Administrative Agent may agree up to a maximum of thirty (30) additional days) after notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties (or such longer period as the Administrative Agent may approve in its sole discretion), either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Liens permitted by Section 9.03 having an equivalent or greater value or (iii) deliver title information in form and substance reasonably acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, reasonably satisfactory title information on Hydrocarbon Interests constituting at least 85% of the PV-10 of the Borrowing Base Properties evaluated by such Reserve Report as determined by the Administrative Agent.
(c)If the Borrower is unable to cure any title defect reasonably requested by the Administrative Agent or the Lenders to be cured within the 60-day (or such longer period as the Administrative Agent may agree up to a maximum of thirty (30) additional days) period or the Borrower does not comply with the requirements to provide acceptable title information covering 85% of the PV-10 of the Borrowing Base Properties evaluated in the most recent Reserve Report as determined by the Administrative Agent, such failure shall not be a Default, but instead the Administrative Agent and/or the Required Lenders shall each have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent or the Lenders. To the extent that the Administrative Agent or the Required Lenders are not reasonably satisfied with title to any Mortgaged Property after the 60-day (or such longer period as the Administrative Agent may agree up to a maximum of thirty (30) additional days) period has elapsed, such unacceptable Mortgaged Property shall not count towards the 85% requirement, and the Administrative Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by the Required Lenders to cause the Borrower to be in compliance with the requirement to provide acceptable title information covering 85% of the PV-10 of the Borrowing Base Properties evaluated by such Reserve Report. This new Borrowing Base shall become effective immediately after receipt of such notice.
Section 8.13Additional Collateral; Additional Guarantors.
(a)In connection with each redetermination of the Borrowing Base (including, for avoidance of doubt, any Interim Redetermination), the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.11(c)(vi)) to ascertain whether the Borrowing Base Properties which are Mortgaged Properties represent at least 85% of the PV-10 of the Borrowing Base Properties evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, Dispositions and production. In the event that the Mortgaged Properties do not represent at least 85% of such PV-10 value, then the Borrower shall, and shall cause the other Loan Parties to, grant, within thirty (30) days of delivery of the Reserve Report Certificate required under Section 8.11(c), to the Administrative Agent as security for the Secured Obligations a first-priority Lien interest (provided that Excepted Liens of the type described in clauses (a) to (d) and (f) of the definition thereof may exist, but subject to the provisos at the end of such definition) on additional Oil and Gas Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 85% of such PV-10 value. All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and with sufficient executed (and acknowledged
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where necessary or appropriate) counterparts for recording purposes. In order to comply with the foregoing, if any Subsidiary grants a Lien on its Oil and Gas Properties pursuant to this Section 8.13(a) and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.13(b). It is understood that the obligation to pledge and provide first priority perfected liens on only 85% (rather than 100%) of the PV-10 of the Borrowing Base Properties is a matter of administrative convenience only and it is the intention of the parties that the Administrative Agent benefit from an all assets pledge of the Loan Parties’ Properties; accordingly the percentage of the PV-10 of the Borrowing Base Properties pledged to the Administrative Agent for the benefit of the Secured Parties may be (but shall not be required to be) up to 100% at any time.
(i)(b) (i) The Borrower shall promptly cause each Domestic Subsidiary Group Member that is a wholly-owned Material Subsidiary and which is not acquired or created for the purpose of an ABS Transaction to guarantee and secure the Secured Obligations pursuant to the Guarantee and Collateral Agreement, including pursuant to a supplement or joinder thereto. In connection with any such guaranty and security interest grant, the Borrower shall, or shall cause (i) such Material Subsidiary to promptly execute and deliver such Guarantee and Collateral Agreement (or a supplement thereto, as applicable), (ii) the owners of the Equity Interests of such Material Subsidiary who are Group Members to pledge all of the Equity Interests of such Material Subsidiary (including delivery of original stock certificates (if any) evidencing the certificated Equity Interests of such Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof) and (iii) such Material Subsidiary or other Person, as applicable, to promptly execute and deliver such other additional closing documents, legal opinions and certificates as shall reasonably be requested by the Administrative Agent.
(i)With respect to any Subsidiary that is acquired or created for the purpose of an ABS Transaction, such Subsidiary shall guarantee and secure the Secured Obligations prior to its acquisition (either by assignment, division, divisive merger or otherwise) of any Mortgaged Property or the Equity Interest of an entity that owns Mortgaged Property by executing a supplement to the Guarantee and Collateral Agreement in the form of Annex I thereto and if such ABS Transaction does not close within five (5) Business Days (or such longer period as the Administrative Agent shall agree) after the acquisition of such Mortgaged Property or the Equity Interest of an entity that owns such Mortgaged Property by such Subsidiary, the Borrower shall cause (A) the owners of the Equity Interests of such Subsidiary who are Group Members to pledge all of the Equity Interests of such Subsidiary (including delivery of original stock certificates (if any) evidencing the certificated Equity Interests of such Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof) and (B) such Material Subsidiary to promptly execute and deliver such other additional closing documents (including Mortgages or amendments to Mortgages), legal opinions and certificates as shall reasonably be requested by the Administrative Agent.
(b)In the event that any Loan Party becomes the owner of (i) a first tier Foreign Group Member or (ii) a Domestic Subsidiary Group Member, then the parent Loan Party shall (A) pledge (x) 65% of all Equity Interests of such Foreign Group Member or (y) 100% of all the Equity Interests of such Domestic Subsidiary Group Member, in each case, that are owned by such Loan Party (including, in each case, delivery of original stock certificates, if any, evidencing such certificated Equity Interests, together with appropriate stock powers for each certificate duly executed in blank by the registered owner thereof) and (along with such Foreign Group Member or Subsidiary Group Member, as applicable) execute and deliver such other additional closing documents, legal opinions and certificates as shall reasonably be requested by the Administrative Agent.
(c)The Borrower will at all times cause the other material tangible and intangible personal and real property assets (other than any “Excluded Asset” as defined in the Security Instruments) of the Borrower and each Group Member to be subject to a Lien of the Security Instruments.
Section 8.14ERISA Compliance. The Borrower will promptly furnish and will cause each Subsidiary of the Borrower and any ERISA Affiliate to promptly furnish to the Administrative Agent (a) immediately upon becoming aware of the occurrence of any ERISA Event or of any Prohibited Transaction, which could reasonably be expected to result in liability of the Borrower or Group Member in an aggregate amount exceeding $10,000,000, in connection with any Plan or any trust created
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thereunder, a written notice of the Borrower or such other Group Member or ERISA Affiliate, as the case may be, specifying the nature thereof, what action such Person is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (b) immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan. With respect to each Plan, except for matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (A) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of Section 412 of the Code and of Section 302 of ERISA, and (B) pay, or cause to be paid, to the PBGC and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, after giving effect to any applicable grace period, all premiums required pursuant to Sections 4006 and 4007 of ERISA. Promptly following receipt thereof from the administrator or plan sponsor, but in any event within five (5) Business Days following any request therefor, the Borrower will furnish or will cause any applicable Subsidiary and any applicable ERISA Affiliate to furnish to the Administrative Agent copies of any documents described in Sections 101(k) or 101(l) of ERISA that any Group Member or any ERISA Affiliate may request with respect to any Multiemployer Plan to which any Group Member or any ERISA Affiliate contributes or has an obligation to contribute; provided, that if the Group Members or any of their ERISA Affiliates have not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Administrative Agent, the Group Members and/or their ERISA Affiliates shall promptly, but in any event within five (5) Business Days following such request, make a request for such documents or notices from such administrator or sponsor and the Borrower shall provide copies of such documents and notices to the Administrative Agent promptly, but in any event within five (5) Business Days following receipt thereof.
Section 8.15Swap Agreements. On each April 1st and October 1st (commencing October 1, 2025), the Loan Parties shall be party to Swap Agreements (including without limitation puts and floors) in respect of commodities the net notional volumes for which (when aggregated with other commodity Swap Agreements then in effect (other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements)) equal at least:
(a)(i) 65% of the reasonably anticipated Hydrocarbon production from the Group Member’s total proved developed producing reserves as forecast based upon the most recent Reserve Report delivered pursuant to Section 8.11 for each month during the 12 month period from such April 1st and October 1st, as applicable, and (ii) 35% of the reasonably anticipated Hydrocarbon production from the Group Member’s total proved developed producing reserves as forecast based upon the most recent Reserve Report delivered pursuant to Section 8.11 for each month during the 12 month period thereafter; and
(b)(i) 50% of the reasonably anticipated Hydrocarbon production from the Group Member’s total proved developed producing reserves of natural gas as forecast based upon the most recent Reserve Report delivered pursuant to Section 8.11 for each month during the 12 month period from such April 1st and October 1st, as applicable, and (ii) 25% of the reasonably anticipated Hydrocarbon production from the Group Member’s total proved developed producing reserves of natural gas as forecast based upon the most recent Reserve Report delivered pursuant to Section 8.11 for each month during the 12 month period thereafter.
The amounts set forth in Sections 8.15(a) and (b) shall be modified by the same Swap Adjustment used in Section 9.17(a)(i) at the time of determination and being the “Minimum Required Volume”. In addition, within thirty (30) days (or such longer period as may be agreed by the Administrative Agent in its sole discretion) after the Closing Date, the Loan Parties shall be party to Swap Agreements in respect of commodities at least equal to the notional amounts of Hydrocarbon production set forth on the Schedule 8.15.
Section 8.16Marketing Activities. The Borrower will not, and will not permit any of the other Group Members to, engage in marketing activities for any Hydrocarbons or enter into any contracts related thereto other than (i) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to
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be produced from their proved Oil and Gas Properties during the period of such contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from proved Oil and Gas Properties of third parties during the period of such contract associated with the Oil and Gas Properties of the Borrower and the other Group Members that the Borrower or one of the other Group Members has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business and (iii) other contracts for the purchase and/or sale of Hydrocarbons of third parties (A) which have generally offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and points and volumes) such that no “position” is taken and (B) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto.
Section 8.17Account Control Agreements; Location of Proceeds of Loans. The Borrower shall, and shall cause each of the other Loan Parties to, maintain each of their Deposit Accounts (other than Excluded Accounts and any RBL Maverick Accounts) with a Lender, and shall cause each of such Deposit Account and each of its Securities Accounts to be subject to a Control Agreement reasonably acceptable in form and substance to the Administrative Agent; provided (a) the Borrower and each other Loan Party shall comply with the foregoing requirement within sixty (60) days after the Closing Date (or such longer period as the Administrative Agent shall agree in its sole discretion), (b) no such Control Agreement shall be required for Excluded Accounts, and (c) excepting all RBL Maverick Accounts, if any Lender or Affiliate of a Lender is such a depository bank for the Borrower or any Guarantor and such Lender for any reason ceases to be a Lender party to this Agreement, the Borrower or such Guarantor (as applicable) shall be deemed to have satisfied the foregoing requirement so long as the Borrower or such Guarantor transitions its Deposit Accounts to another Lender or Affiliate of a Lender within sixty (60) days (or such longer period of time as may be acceptable to the Administrative Agent) following such cessation.
Section 8.18Unrestricted Subsidiaries
(a)The Borrower may designate any Restricted Subsidiary as an Unrestricted Subsidiary and, subject to Section 8.18(c), any Unrestricted Subsidiary as a Restricted Subsidiary upon delivery to the Administrative Agent of written notice from the Borrower; provided that immediately before and after such designation, (i) no Default or Event of Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Borrower shall be in pro forma compliance with the Financial Performance Covenants (iii) no Borrowing Base Deficiency not otherwise cured shall be existing or result therefrom and (iv) the representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty shall be true and correct) on and as of the date of such designation, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date of such designation, such representations and warranties shall continue to be true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty shall be true and correct) as of such specified earlier date.
(b)The designation of any Restricted Subsidiary as an Unrestricted Subsidiary and any Disposition of Property to an Unrestricted Subsidiary shall constitute (i) an Investment under Section 9.05 as of the date of designation or Disposition, as applicable, in an amount equal to the Fair Market Value of the Borrower’s investment therein and (ii) a Disposition as of the date of designation or Disposition, including (A) for purposes of the provisions of Section 2.08 and (B) for purposes of EBITDAX where such Disposition shall be deemed to be a Material Disposition.
(c)The Borrower may designate any Unrestricted Subsidiary as a Restricted Subsidiary once upon delivery of written notice to the Administrative Agent; provided that such designation (i) shall constitute the incurrence at the time of designation of any Indebtedness and Liens of such Subsidiary existing at such time, (ii) shall constitute a reduction in any Investment under Section 9.05 to the extent that such Investment was attributable to such Restricted Subsidiary being an Unrestricted Subsidiary at the date of designation in an amount equal to the Fair Market Value of the Borrower’s investment therein, it being understood that any incurrence of Indebtedness and Liens in connection herewith shall require compliance with Section 9.02 and Section 9.03, as applicable and (iii)
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shall require the Borrower to be in compliance with the Financial Performance Covenants immediately before such designation and in pro forma compliance immediately after such designation.
(d)Any designation of a Restricted Subsidiary of the Borrower as an Unrestricted Subsidiary, any designation of a Unrestricted Subsidiary as a Restricted Subsidiary and any Disposition to an Unrestricted Subsidiary will require the Borrower to provide the Administrative Agent a certificate signed by a Responsible Officer of the Borrower certifying that such designation complied with the preceding conditions in Section 8.18(b) or Section 8.18(c), as applicable.
Section 8.19Commodity Exchange Act Keepwell Provisions. Each Qualified ECP Guarantor hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under the Loan Documents in respect of Swap Obligations (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under any guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section 8.19 shall remain in full force and effect until the Secured Obligations have been indefeasibly paid and performed in full and the Commitments are terminated. Each Loan Party intends this Section 8.19 to constitute, and this Section 8.19 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each other Loan Party for all purposes of the Commodity Exchange Act.
Article IX
NEGATIVE COVENANTS
Until Payment in Full, the Borrower covenants and agrees with the Lenders that:
Section 9.01Financial Covenants.
(a)Ratio of Total Net Debt to EBITDAX. Beginning with the Fiscal Quarter ending December 31, 2024, the Borrower will not, as of the last day of any Fiscal Quarter, permit its ratio of Total Net Debt as of such last day to EBITDAX for the period of four Fiscal Quarters then ending on such day to exceed 3.25 to 1.00.
(b)Current Ratio. Beginning with the Fiscal Quarter ending December 31, 2024, the Borrower will not, as of the last day of any Fiscal Quarter, permit its Current Ratio as of such day to be less than 1.00 to 1.00.
Section 9.02Indebtedness. The Borrower will not, and will not permit any other Group Member to, incur, create, assume or suffer to exist any Indebtedness, except:
(a)the Loans or other Secured Obligations;
(b)Indebtedness of the Group Members existing on the date hereof set forth on Schedule 9.02 as well as any Permitted Refinancing Indebtedness in respect thereof;
(c)purchase money Indebtedness or Capital Lease Obligations not to exceed $30,000,000 in the aggregate at any one time outstanding;
(d)unsecured Indebtedness associated with worker’s compensation claims, bonds or surety obligations required by Governmental Requirements or by third parties in the ordinary course of business in connection with the operation of, or provision for the abandonment and remediation of, the Oil and Gas Properties;
(e)(i) Indebtedness among the Borrower and its Subsidiaries which are Loan Parties, (ii) Indebtedness between the Subsidiaries of the Borrower which are not Loan Parties and (iii) Indebtedness extended to the Borrower and its Subsidiaries which are Loan Parties by any Group
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Members; provided that (A) such Indebtedness is not held, assigned, transferred, negotiated or pledged to any Person other than a Loan Party and (B) any such Indebtedness owed by either the Borrower or a Guarantor shall be subordinated to the Secured Obligations on terms satisfactory to the Administrative Agent;
(f)endorsements of negotiable instruments for collection in the ordinary course of business;
(g)any guarantee of any other Indebtedness permitted to be incurred hereunder;
(h)unsecured Indebtedness in respect of Swap Agreements entered into in compliance with Section 9.17;
(i)Indebtedness of the Borrower in respect of Permitted Unsecured Debt and any Permitted Refinancing Indebtedness of such Indebtedness provided, that (i) such Indebtedness does not exceed $500,000,000 of principal in the aggregate outstanding at any time and (ii) giving pro forma effect to such Indebtedness and the repayment of any other Indebtedness with the proceeds thereof, (A) no Default, Event of Default or Borrowing Base Deficiency exists at such time, (B) the ratio of Total Net Debt to EBITDAX for the most recent four Fiscal Quarters for which financial statements are available is in compliance with Section 9.01(a) and (C) the Availability is equal to or greater than 15%; and
(j)other Indebtedness not to exceed $30,000,000 in the aggregate at any one time outstanding.
Section 9.03Liens. The Borrower will not, and will not permit any Group Member to, create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:
(a)Liens securing the payment of any Secured Obligations;
(b)Liens existing on the Closing Date and disclosed on Schedule 9.03 and Excepted Liens;
(c)Liens securing purchase money Indebtedness or Capital Leases Obligations permitted by Section 9.02(c) but only on the Property that is the subject of any such Indebtedness or lease, accessions and improvements thereto, insurance thereon, and the proceeds of the foregoing;
(d)Liens securing any Permitted Refinancing Indebtedness; provided that any such Permitted Refinancing Indebtedness is not secured by any additional or different Property not securing the Refinanced Indebtedness;
(e)Liens on Property not constituting Mortgaged Property that secure Indebtedness and that are not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate or principal or face amount of all debt secured by such Liens pursuant to this Section 9.03(e), and the Fair Market Value of the Properties subject to such Liens (determined as of the date such Liens are incurred), shall not exceed $10,000,000 in the aggregate at any time outstanding; and
(f)Liens on each Maverick ABS Account upon and pursuant to the terms of the Maverick ABS.
Section 9.04Restricted Payments; Redemptions and Restrictions on Amendments of Permitted Unsecured Debt.
(a)Restricted Payments. The Borrower will not, and will not permit any of the other Group Members to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:
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(i) the Borrower may declare and pay Restricted Payments with respect to its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital Stock);
(ii)Subsidiaries may make Restricted Payments ratably to the holders of their Equity Interests;
(iii)the Borrower may make cash Restricted Payments pursuant to and in accordance with stock option plans, other equity compensation plans or other benefit plans for management, employees or other individual service providers of the Borrower and the other Group Members which plans have been approved by the Borrower’s board of directors, to the extent such Restricted Payments are made in the ordinary course of business;
(iv)the Borrower may make cash Restricted Payments in an aggregate amount not to exceed the Diversified Corporate Expense Distribution Amount;
(v)the Borrower may pay cash Restricted Payments (including Diversified Distributions) if after giving pro forma effect thereto (including any Borrowing incurred in connection therewith) (A) Available Diversified Free Cash Flow for the most recently ended Test Period for which financial statements are available is greater than $0.00, (B) the ratio of Total Net Debt as of such date to EBITDAX for the most recent four Fiscal Quarters for which financial statements are available does not exceed 2.00 to 1.00 and (C) the Borrower’s Liquidity is equal to or greater than 20% of the then effective Borrowing Base, so long as no Default, Event or Default or Borrowing Base Deficiency has occurred and is continuing or would occur as a result;
(vi)the Borrower may make cash Restricted Payments (including Diversified Distributions) if after giving pro forma effect thereto the Borrower’s ratio of Total Net Debt as of such date to EBITDAX for the most recent four Fiscal Quarters for which financial statements are available is less than 1.50 to 1.00 and the Borrower’s Liquidity is greater than 25% (or 15% during the Adjusted RP Testing Period) of the then effective Borrowing Base; and
(vii)the Borrower may make the Closing Date Distribution in cash on the Closing Date;
provided, that with respect to Restricted Payments constituting Diversified Distributions of the type described in clause (a)(ii) of the definition thereof, the Borrower may make such Restricted Payments up to ten (10) days prior to the date upon which such Restricted Payments will be made by the Parent (the “Payment Date”) and the pro forma provisions of Section 9.04(a)(v) and Section 9.04(a)(vi), as applicable, shall be tested and certified by the Borrower as of the Payment Date.

For the avoidance of doubt, transactions with Affiliates pursuant to those agreements listed on Schedule 9.14 do not constitute Restricted Payments.
(b)Redemptions. The Borrower will not, and will not permit any other Group Member to prior to the Maturity Date, call, make or offer to make any optional or voluntary Redemption of or otherwise optionally or voluntarily Redeem (whether in whole or in part), (i) any Permitted Unsecured Debt, (ii) any other Indebtedness of the type set forth in clause (h) of the definition of Indebtedness, (iii) any Indebtedness permitted by Section 9.02(i) if at the time of such Redemption a Default, Event of Default or Borrowing Base Deficiency exists and is continuing, or (iv) any Permitted Refinancing Indebtedness in respect of the foregoing clauses (i) and (ii) (such Indebtedness in clauses (i) through (iv), collectively, the “Specified Indebtedness”); provided that the Borrower may prepay such Specified Indebtedness with the proceeds of any Permitted Refinancing Indebtedness in respect thereof or with the net cash proceeds of Equity Interests (other than Disqualified Capital Stock) of the Borrower so long as no Default, Event of Default or Borrowing Base Deficiency has occurred and is continuing or would occur as a result of such Redemption.
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(c)Amendments. The Borrower will not, and will not permit any other Group Member to amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver or other change to any Specified Indebtedness if doing so would (i) with respect to Permitted Unsecured Debt cause such Specified Indebtedness to not meet the requirements set forth in the definition of Permitted Refinancing Indebtedness or Permitted Unsecured Debt, as applicable (tested as if such Specified Indebtedness were being issued or incurred at such time) and (ii) with respect to any other Specified Indebtedness, shorten the average maturity or average life of such Specified Indebtedness.
Section 9.05Investments, Loans and Advances. The Borrower will not, and will not permit any other Group Member to, make or permit to remain outstanding any Investments in or to any Person, except that the foregoing restriction shall not apply to:
(a)Investments which are disclosed to the Lenders in Schedule 9.05;
(b)accounts receivable arising in the ordinary course of business;
(c)Investments in Cash Equivalents;
(d)Investments (i) made among the Borrower and the other Subsidiaries which are Loan Parties, (ii) made between the Subsidiaries of the Borrower which are not Loan Parties or (iii) made by any Group Member in or to the Borrower or to its Subsidiaries which are Loan Parties;
(e)subject to the limits in Section 9.06, Investments in direct ownership interests in additional Oil and Gas Properties or investments with respect to and relating to the production of oil, gas and other liquid or gaseous hydrocarbons from Oil and Gas Properties which are usual and customary in the oil and gas exploration and production business located, in each case, within the geographic boundaries of the United States of America;
(f)loans or advances to employees, officers or directors in the ordinary course of business of the Borrower or any of the other Loan Parties, in each case only as permitted by applicable law, including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed $1,000,000 in the aggregate at any time;
(g)Investments in stock, obligations or securities received in settlement of debts arising from Investments permitted under this Section 9.05 owing to the Borrower or any other Group Member as a result of a bankruptcy or other insolvency proceeding of the obligor in respect of such debts or upon the enforcement of any Lien in favor of the Borrower or any of the other Group Members; provided that the Borrower shall give the Administrative Agent prompt written notice in the event that the aggregate amount of all Investments held at any one time under this Section 9.05(g) exceeds $1,000,000;
(h)Investments pursuant to Swap Agreements otherwise permitted under this Agreement;
(i)other Investments not to exceed $15,000,000 in the aggregate at any time;
(j)loans, advances or extensions of credit to suppliers or contractors under applicable contracts or agreements in the ordinary course of business in connection with oil and gas development activities of such Borrower or such Subsidiary; and
(k)Investments in Unrestricted Subsidiaries, provided that the aggregate amount of all such Investments at any one time shall not exceed $10,000,000 (without giving effect to any appreciation in the value of such Investment after date such Investment is made).
Section 9.06Nature of Business; No International Operations. The Borrower and the other Group Members, taken as a whole, will not allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. The Group Members will not acquire or make any other expenditures (whether such expenditure is capital, operating or otherwise)
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in or related to, any Oil and Gas Properties not located within the geographical boundaries of the United States of America or in the offshore federal waters of the United States of America.
Section 9.07Proceeds of Loans. The Borrower will not permit the proceeds of the Borrowings to be used for any purpose other than those permitted by Section 7.22. No Loan Party, any other Permitted L/C Party, nor any Person acting on behalf of the Borrower has taken or will take any action which may cause any of the Loan Documents to violate Regulations T, U or X or any other regulation of the Board or to violate Section 7 of the Exchange Act or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not directly or, to the knowledge of the Borrower, indirectly use, and shall procure that its Subsidiaries, the other Permitted L/C Parties and its or their respective directors, officers, employees and agents shall not directly or, to the knowledge of such Person, indirectly use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country to the extent such activities, businesses or transaction would be prohibited by Sanctions if conducted by a corporation incorporated in the United States or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto.
Section 9.08ERISA Compliance. Except as would not, whether individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Borrower will not, and will not permit any ERISA Affiliate to, at any time:
(a)engage in any transaction in connection with which the Borrower or any ERISA Affiliate, could be subject to either a civil penalty assessed pursuant to subsections (c), (i), (l) or (m) of Section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
(b)terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability of the Borrower or any Subsidiary or any ERISA Affiliate to the PBGC;
(c)fail to make, or permit any ERISA Affiliate to fail to make, after giving effect to any applicable grace period, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is required to pay as contributions thereto;
(d)fail to satisfy, or allow any ERISA Affiliate to fail to satisfy, the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA), in any case whether or not waived, with respect to any Plan; and
(e)acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to any Group Member or ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period immediately preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA and determined as of the end of the most recent plan year) of such Plan allocable to such benefit liabilities.
Section 9.09Sale or Discount of Receivables. Except for receivables obtained by the Group Members out of the ordinary course of business or the settlement of joint interest billing accounts in the ordinary course of business or discounts granted to settle collection of accounts receivable or the sale of defaulted accounts arising in the ordinary course of business in connection with the compromise or collection thereof and not in connection with any financing transaction, the Borrower will not, and will
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not permit any other Group Member to, discount or sell (with or without recourse) any of its notes receivable or accounts receivable.
Section 9.10Mergers, Etc.. The Borrower will not, and will not permit any other Group Member to merge into or with or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property to any other Person, (whether now owned or hereafter acquired) or liquidate or dissolve (any such transaction, a “consolidation”), except that (a) any Loan Party may consolidate with or into the Borrower (provided the Borrower shall be the continuing or surviving entity), (b) any Group Member (other than the Borrower) may consolidate with any Subsidiary of the Borrower which is a Loan Party (provided such Subsidiary which is a Loan Party shall be the continuing or surviving entity) and (c) any Subsidiary which is not a Loan Party may consolidate with any other Subsidiary which is not a Loan Party, in each case, so long as no Default, Event of Default or Borrowing Base Deficiency has occurred and is continuing or would occur as a result of such consolidation and notice of such consolidation is provided to the Administrative Agent five (5) Business Days prior to such consolidation.
Section 9.11Sale of Properties and Termination of Hedging Transactions. The Borrower will not, and will not permit any Group Member to, sell, assign, farm-out, convey or otherwise transfer or Dispose of any Property except for:
(a)the sale of Hydrocarbons in the ordinary course of business;
(b)the sale or other Disposition (including any farmout or similar agreement) of Oil and Gas Properties not included in the calculation of the Borrowing Base (which, for avoidance of doubt, includes Oil and Gas Properties not constituting Proved Reserves) or 100% of the Equity Interests of any Subsidiary owning such Oil and Gas Properties;
(c)the sale or transfer of equipment (including, for the avoidance of doubt, midstream pipelines, gathering systems, processing plants and other related equipment) that (i) is no longer necessary for the business of the Borrower or such other Group Member or (ii) is replaced by equipment of at least comparable value and use;
(d)other than as permitted under Section 9.11(g) hereof, the sale or other Disposition (including Casualty Events or in connection with any condemnation proceeding) of any Borrowing Base Properties or any interest therein, 100% of the Equity Interests of any Subsidiary owning Borrowing Base Properties or the Unwind of Swap Agreements; provided that:
(i)not less than 80% of the consideration received in respect of such sale or other Disposition shall be cash (provided that Oil and Gas Properties constituting Proved Reserves received as consideration in connection with an asset swap may be deemed to be cash in an amount equal to the Fair Market Value of the Oil and Gas Properties constituting Proved Reserves received so long as the aggregate amount of such deemed cash consideration does not exceed five percent (5%) of the Borrowing Base then in effect at the time of such sale or other Disposition),
(ii)no Default or Event of Default has occurred and is continuing nor would a Default, Event of Default or Borrowing Base Deficiency (after giving effect to any prepayment of the Loans made with the proceeds of such sale or other Disposition) result therefrom, and
(iii)(other than in respect of Casualty Events) the consideration received in respect of a sale or other Disposition of any Oil and Gas Property constituting Proved Reserves, Equity Interest or interest therein shall be equal to or greater than the Fair Market Value of the Oil and Gas Property constituting Proved Reserves, Equity Interest or interest therein subject of such sale or other Disposition (as reasonably determined by a Responsible Officer of the Borrower and if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to the foregoing);
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(e)other than as permitted by Section 9.11(b), sales and other Dispositions for cash of Properties not included in the Borrowing Base having a Fair Market Value in aggregate not to exceed $15,000,000 in the aggregate;
(f)(i) transfers of Properties between the Borrower and its Subsidiaries which are Loan Parties, (ii) transfers of Properties between the Subsidiaries of the Borrower which are not Group Members and (iii) transfers of Property from Subsidiaries which are not Loan Parties to Loan Parties;
(g)Dispositions of Borrowing Base Properties or all of the Equity Interests of a Loan Party which owns Borrowing Base Properties or any ABS Party with respect to an ABS BB Transaction; provided that:
(i)the Borrower receives cash consideration for such Disposition equal to or greater than the Borrowing Base Value of such Borrowing Base Properties as determined in the most recently delivered Reserve Report;
(ii)the Borrowing Base shall automatically, without any further actions by the Lenders or the Administrative Agent, be reduced by the Borrowing Base Value of such Borrowing Base Properties upon the closing of such ABS BB Transaction in accordance with Section 2.08(d);
(iii)the Borrower shall prepay the Loans in accordance with Section 3.04(c)(iii); and
(iv)with respect to any Dispositions of Borrowing Base Properties by a Loan Party or by any of its Subsidiaries (including Subsidiaries formed by division or divisive merger) in connection with an ABS BB Transaction (an “ABS Party”), the Borrower shall have the option to transfer the Equity Interests of such ABS Party to Diversified or a Subsidiary of Diversified; provided that such ABS Party, after the relevant ABS BB Transaction, (A) is a non-Material Subsidiary and (B) does not own any Borrowing Base Properties; and
(h)any transaction permitted by Section 9.05.
Section 9.12Sales and Leasebacks. The Borrower will not, and will not permit any other Group Member to enter into any arrangement with any Person providing for the leasing by any Group Member of real or personal property that has been or is to be sold or transferred by such Group Member to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Group Member.
Section 9.13Environmental Matters. The Borrower will not, and will not permit any other Group Member or Affiliate Operator, to undertake (or allow to be undertaken at any property subject to its control) anything which will subject any such property to any obligation to conduct any investigation or remediation under any applicable Environmental Laws or regarding any Hazardous Material that could reasonably be expected to have a Material Adverse Effect, it being understood that the foregoing will not be deemed to limit (i) any obligation under applicable Environmental Law to disclose any relevant facts, conditions or circumstances to the appropriate Governmental Authority as and to the extent required by any such Environmental Law, (ii) any investigation or remediation required to be conducted under applicable Environmental Law, (iii) any investigation reasonably requested by a prospective purchaser of any property, provided that such investigation is subject to conditions and limitations (including indemnification and insurance obligations regarding the conduct of such investigation) that are reasonably protective of the Borrower and any Group Member, or (iv) any investigation or remediation required pursuant to any lease agreements with the owners of any Properties.
Section 9.14Transactions with Affiliates. Except for (a) payment of Restricted Payments permitted by Section 9.04, (b) Dispositions permitted by Section 9.11(g), (c) the Joint Operating Agreement, (d) the Management Services Agreement, and (e) the transactions and payment of funds under those agreements listed on Schedule 9.14 including those agreements with respect to similar such transactions and payments to an Affiliate or Affiliates entered into in the ordinary course of business for the payment of Hydrocarbons or services in connection with an ABS Transaction and disclosed in writing
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to the Administrative Agent (which shall promptly furnish a copy to the Lenders) which shall be a supplement to Schedule 9.14, the Borrower will not, and will not permit any other Group Member to, enter into any transaction, including any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than among the Loan Parties) unless such transactions are otherwise not prohibited under this Agreement and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate.
Section 9.15Subsidiaries. The Borrower shall not, and shall not permit any Group Member to, sell, assign or otherwise Dispose of any Equity Interests in any Group Members except in compliance with Section 9.11. The Borrower shall not, and shall not permit any other Group Member to, have any foreign Subsidiaries (other than those in existence on the Closing Date).
Section 9.16Negative Pledge Agreements; Dividend Restrictions. The Borrower will not, and will not permit any other Group Member to, create, incur, assume or suffer to exist any contract, agreement or understanding which in any way prohibits or restricts (a) the granting, conveying, creation or imposition of any Lien on any of its Property to secure the Secured Obligations or which (i) requires the consent of other Persons in connection therewith or (ii) provides that any such occurrence shall constitute a default or breach of such agreement or (b) the Borrower or any other Group Member from (i) paying dividends or making distributions to any Loan Party, (ii) paying any Indebtedness owed to any Loan Party (other than any restrictions imposed on any Loan Party making any such payment pursuant to the Loan Documents during an Event of Default), (iii) making loans or advances to, or other Investments in, any Loan Party (other than any restrictions imposed on any Loan Party making such loan or advance pursuant to the Loan Documents during an Event of Default) or (iv) prepaying or repaying Secured Obligations; provided that (A) the foregoing shall not apply to restrictions and conditions under the Loan Documents and (B) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement for purchase money Indebtedness or Capital Lease Obligations permitted by this Agreement if such restrictions or conditions apply only to the Property securing such purchase money Indebtedness or Capital Lease Obligations.
Section 9.17Swap Agreements.
(a)The Borrower will not, and will not permit any other Group Member to, enter into any Swap Agreements with any Person other than:
(i)Swap Agreements with an Approved Counterparty in respect of commodities entered into not for speculative purposes the notional volumes for which (when aggregated with other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement is entered into (A) ninety percent (90%) of the reasonably anticipated projected production (as such production is projected in the most recent Reserve Report delivered pursuant to the terms of this Agreement) from Proved Reserves from the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties for each month during the period which such Swap Agreement is in effect for each of crude oil, natural gas and natural gas liquids, calculated separately, for the period of thirty six (36) months following the date such Swap Agreement is entered into and (B) seventy five percent (75%) of the reasonably anticipated projected production (as such production is projected in the most recent Reserve Report delivered pursuant to the terms of this Agreement) from Proved Reserves from the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties for each month during the period which such Swap Agreement is in effect for each of crude oil, natural gas and natural gas liquids, calculated separately for the period of thirty seven (37) to seventy two (72) months following the date such Swap Agreement is entered into; provided that (x) the Borrower may update the projections by providing the Administrative Agent additional information reasonably satisfactory to the Administrative Agent (and shall include new reasonably anticipated Hydrocarbon production from new wells or other production improvements and any dispositions, well shut-ins and other reductions of, or decreases to, production) (this clause (x), the “Swap Adjustment”) and (y) any Swap Agreements shall not, in any case, have a tenor of greater than six (6) years (provided that a Swap Agreement that may be or is extended by the exercise of an option to extend such a Swap Agreement for an additional term of up to sixty (60) months at the end of the initial term of such Swap Agreement is permitted); provided further that the foregoing limitations shall not apply to purchased put options or floors for Hydrocarbons that are not related to corresponding calls,
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collars or swaps and with respect to which any Group Member has no payment obligation other than premiums and charges the total amount of which are fixed and known at the time such transaction is entered into;
(ii)in connection with a proposed acquisition by the Borrower or its Restricted Subsidiaries of Oil and Gas Properties pursuant to a binding and enforceable purchase and sale agreement and in addition to the Swap Agreements permitted to be entered into pursuant to Section 9.17(a)(i)(A), Swap Agreements with Approved Counterparties in respect of commodities entered into not for speculative purposes; provided that:
(A)the notional volumes for which (exclusive of puts, floors and basis differential swaps on volumes already hedged pursuant to other Swap Agreements for which the total amount of obligations thereunder are known and fixed at the time such transaction is entered into) do not exceed, as of the date such Swap Agreement is entered into (as such production is projected in a Reserve Report covering the Oil and Gas Properties to be acquired) eighty-five percent (85%) of the reasonably anticipated production from the PDP Reserves of the Oil and Gas Properties to be acquired for each month during the period which such Swap Agreement is in effect for each of crude oil, natural gas and natural gas liquids, calculated separately for the period of thirty six (36) months following the date such Swap Agreement is entered into;
(B)such Swap Agreements are entered into on or after the date on which the Borrower or any of its Restricted Subsidiaries signs such a binding and enforceable purchase and sale agreement in connection with such proposed acquisition of Oil and Gas Properties;
(C)such Swap Agreements shall not, in any case, have a tenor of greater than three (3) years;
(D)(I) the notional volumes for such Swap Agreements when aggregated with the notional volumes of the Swap Agreements entered into pursuant to Section 9.17(a)(i) above do not exceed 130% of the reasonably anticipated projected production (as such production is projected in the most recent Reserve Report delivered pursuant to the terms of this Agreement) from Proved Reserves from the Borrower’s and its Restricted Subsidiaries’ existing Oil and Gas Properties for each month during the period which such Swap Agreements are in effect for each of crude oil, natural gas and natural gas liquids, calculated separately (the actual percentage so determined, the “Swap Percentage”) and (II) the Availability is equal to or greater than the number, expressed as a percentage, of the then effective Borrowing Base, that is the difference between (x) the Swap Percentage and (y) 100%; and
(E)The Borrower shall unwind such Swap Agreements to the extent necessary to be in compliance with the limitations set forth in Section 9.17(a)(i) on the earliest of (1) the date of consummation of such proposed acquisition of Oil and Gas Properties, (2) the date that is 90 days after the execution of the purchase and sale agreement relating to such acquisition to the extent that such acquisition has not been consummated by such date, and (3) any Loan Party knows with reasonable certainty that such acquisition will not be consummated or such purchase and sale agreement is terminated; and
(iii)Swap Agreements in respect of interest rates with an Approved Counterparty, which effectively convert interest rates from floating to fixed, the notional amounts of which (when aggregated with all other Swap Agreements of the Borrower and its Subsidiaries then in effect effectively converting interest rates from floating to fixed) do not exceed 80% of the then outstanding principal amount of all the Borrower’s Indebtedness for borrowed money which bears interest at a floating rate;
(b)in no event shall any Swap Agreement contain any requirement, agreement or covenant for any Group Member to post collateral or margin to secure their obligations under such Swap Agreement or to cover market exposures (other than under the Security Instruments);
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(c)Swap Agreements shall only be entered into in the ordinary course of business (and not for speculative purposes);
(d)no Swap Agreement in respect of commodities shall be terminated, unwound, cancelled or otherwise disposed of by the Loan Party thereto except to the extent permitted by Section 9.11; and
(e)if after the end of any Fiscal Quarter, the aggregate volume of all Swap Agreements in respect of commodities for which settlement payments were calculated in such Fiscal Quarter and the preceding Fiscal Quarter (other than basis differential swaps on volumes hedged by other Swap Agreements) exceeded, or will exceed, the sum of 100% of the actual production of crude oil, natural gas and natural gas liquids, calculated separately, in such Fiscal Quarter, then the Borrower shall terminate, create off-setting positions, allocate volumes to other production the Borrower or any Subsidiary is marketing, or otherwise Unwind existing Swap Agreements (in accordance with the terms of such Swap Agreements) such that, at such time, future hedging volumes will not exceed 100% of the reasonably anticipated projected production from proved, developed producing Oil and Gas Properties for each of crude oil, natural gas and natural gas liquids, calculated separately, for the then-current and any succeeding Fiscal Quarters.
Section 9.18Amendments to Organizational Documents; Joint Operating Agreement and Management Services Agreement and Other Agreements Listed on Schedule 9.14. The Borrower shall not, and shall not permit any other Group Member to, amend, supplement or otherwise modify (or permit to be amended, supplemented or modified) its Organizational Documents, the Joint Operating Agreement, the Management Services Agreement or any other agreement listed on Schedule 9.14 in any material respect that could reasonably be expected to be materially adverse to the interests of the Administrative Agent or the Lenders without the consent of the Administrative Agent.
Section 9.19Changes in Fiscal Periods. The Borrower shall not, and shall not permit any other Group Member to have its Fiscal Year end on a date other than December 31 or change the method of determining Fiscal Quarters.
Section 9.20Outbound Investment Rules. The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) be or become a “covered foreign person”, as that term is defined in the Outbound Investment Rules, or (b) engage, directly or indirectly, in (i) a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, (ii) any activity or transaction that would constitute a “covered activity” or a “covered transaction”, as each such term is defined in the Outbound Investment Rules, if the Borrower were a U.S. Person or (iii) any other activity that would cause the Administrative Agent or any Lender to be in violation of the Outbound Investment Rules or cause the Administrative Agent or any Lender to be legally prohibited by the Outbound Investment Rules from performing under this Agreement.
Article X
EVENTS OF DEFAULT; REMEDIES
Section 10.01Events of Default. One or more of the following events shall constitute an “Event of Default”:
(a)the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof, by acceleration or otherwise;
(b)the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 10.01(a)) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) days;
(c)any representation or warranty made or deemed made by or on behalf of the Borrower or any other Group Member in or in connection with any Loan Document or any amendment or
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modification of any Loan Document or waiver under such Loan Document, or in any report, notice, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;
(d)the Borrower or any other Group Member shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(k), Section 8.02, Section 8.03 (only with respect to the Borrower’s existence), Section 8.17, Section 8.18 or in Article IX;
(e)the Borrower or any other Group Member shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a), Section 10.01(b), Section 10.01(c) or Section 10.01(d)) or any other Loan Document, and such failure shall continue unremedied for a period of 30 days after the earlier to occur of (A) notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender) or (B) a Responsible Officer of the Borrower or such other Group Member otherwise becoming aware of such default;
(f)the Borrower or any other Group Member shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable and such failure continues after the applicable grace or notice period, if any, specified in the relevant document for such Material Indebtedness;
(g)any other event or condition occurs that results in any Material Indebtedness of any Group Member becoming due prior to its scheduled maturity or that enables or permits (after giving effect to any applicable notice periods, if any, and any applicable grace periods) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause any such Material Indebtedness to become due, or to require the Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its scheduled maturity or require the Borrower or any other Group Member to make an offer in respect thereof;
(h)an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Group Member, or its or their debts, or of a substantial part of its or their assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any other Group Member or for a substantial part of its or their assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;
(i)the Borrower or any other Group Member shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 10.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any other Group Member or for a substantial part of its or their assets, (iv) file an answer admitting the material allegations of a petition filed against it or them in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) take any action for the purpose of effecting any of the foregoing; or any partner, or stockholder of the Borrower shall make any request or take any action for the purpose of calling a meeting of the partners or stockholders, as applicable, of the Borrower to consider a resolution to dissolve and wind up the Borrower’s affairs or (vii) become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(j)(i) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage and is not subject to an insolvency proceeding) or (ii) any one or more non-monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, shall be rendered against any Group Member or any combination
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thereof and the same shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be effectively stayed;
(k)the Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms against the Borrower or a Loan Party thereto or shall be repudiated by any of them, or cease to create a valid and perfected Lien of the priority required thereby on any Mortgaged Property purported to be covered thereby, except to the extent permitted by the terms of this Agreement, or the Borrower or any other Loan Party or any of their Affiliates shall so state or assert in writing;
(l)a Change in Control shall occur; or
(m)the occurrence of any “Event of Default” (as therein defined) under the Seller Credit Agreement;
Section 10.02Remedies.
(a)In the case of an Event of Default other than one described in Section 10.01(g), Section 10.01(h) or Section 10.01(i), at any time thereafter during the continuance of such Event of Default, the Administrative Agent may, and at the request of the Majority Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments and/or the LC Commitments, and thereupon the Commitments and/or the LC Commitments shall terminate immediately, and (ii) declare the Notes and the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(j)), shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(g), Section 10.01(h) or Section 10.01(i), the Commitments shall automatically terminate and the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(j)), shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.
(b)In the case of the occurrence of an Event of Default, the Administrative Agent and the Lenders will have all other rights and remedies available at law and equity.
(c)In the case of the occurrence of an Event of Default which results in the Commitments terminating then the Borrowing Base shall automatically and concurrently be reduced to $0.
(d)All proceeds realized from the liquidation or other Disposition of collateral and to any other amounts received after maturity of the Loans, whether from the Borrower, another Loan Party, by acceleration or otherwise, shall be applied:
(i)first, to payment or reimbursement of that portion of the Secured Obligations constituting fees, expenses and indemnities payable to the Administrative Agent in its capacity as such;
(ii)second, pro rata to payment or reimbursement of that portion of the Secured Obligations constituting fees, expenses and indemnities payable to the Lenders;
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(iii)third, pro rata to payment of accrued interest on the Loans and regularly scheduled payments in respect of Secured Swap Agreement (but not any close-out or termination amounts);
(iv)fourth, pro rata to payment of principal outstanding on the Loans, the Secured Obligations owing under Secured Swap Agreements (to the extent not paid pursuant to clause third), and Secured Cash Management Obligations (other than Secured Affiliate Cash Management Obligations);
(v)fifth, pro rata to Secured Affiliate Cash Management Obligations and any other Secured Obligations;
(vi)sixth, to serve as cash collateral to be held by the Administrative Agent to secure the LC Exposure; and
(vii)seventh, any excess, after all of the Secured Obligations shall have been indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental Requirement.
Article XI
THE ADMINISTRATIVE AGENTS
Section 11.01Appointment; Powers. Each Lender and Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. Each Lender (and each Person that becomes a Lender hereunder pursuant to Section 12.04) hereby authorizes and directs the Administrative Agent to enter into the Security Instruments on behalf of such Lender, in each case, as needed to effectuate the transactions permitted by this Agreement and agrees that the Administrative Agent may take such actions on its behalf as is contemplated by the terms of such applicable Security Instrument. Without limiting the provisions of Sections 11.02 and 12.03, each Lender hereby consents to the Administrative Agent and any successor serving in such capacity and agrees not to assert any claim (including as a result of any conflict of interest) against the Administrative Agent, or any such successor, arising from the role of the Administrative Agent or such successor under the Loan Documents so long as it is either acting in accordance with the terms of such documents and otherwise has not engaged in gross negligence or willful misconduct.
Section 11.02Duties and Obligations of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any Group Member that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or
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any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or as to those conditions precedent expressly required to be to the Administrative Agent’s satisfaction, (vi) the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower and the other Group Members or any other obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein. For purposes of determining compliance with the conditions specified in Article VI, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed closing date specifying its objection thereto. No Person identified as Coordinating Lead Arranger, an Arranger, a Co-Syndication Agent or a Co-Documentation Agent, in each case, in its capacity as such, shall have any responsibilities or duties, or incur any liability, under this Agreement or the other Loan Documents.
Section 11.03Action by Administrative Agent. The Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) and in all cases the Administrative Agent shall be fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it shall (a) receive written instructions from the Majority Lenders or the Lenders, as applicable, (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent shall be binding on all of the Lenders. If a Default or Event of Default has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default or Event of Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, the Loan Documents or applicable law. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02), and otherwise the Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.
Section 11.04Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon and each of the Borrower, the Lenders and the Issuing Bank(s) hereby waives the right to dispute the Administrative Agent’s record of such statement, except in the case of gross negligence or willful misconduct by the Administrative Agent. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Section 11.05Subagents. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative
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Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding Sections of this Article XI shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Section 11.06Resignation of Administrative Agent. The Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank(s) and the Borrower. Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Borrower, to appoint from among the Lenders a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank(s), appoint a qualified financial institution as successor Administrative Agent. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article XI and Section 12.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
Section 11.07Administrative Agent as a Lender. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
Section 11.08No Reliance. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any arranger of this Agreement or any amendment thereto or any other Lender and their respective Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any arranger of this Agreement or any amendment thereto or any other Lender and their respective Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. The Agents shall not be required to keep themselves informed as to the performance or observance by, the Borrower or any of the other Group Members of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of any such Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent or the Arrangers shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any Group Member (or any of their Affiliates) which may come into the possession of such Agent, the Arrangers or any of their Affiliates. In this regard, each Lender acknowledges that Baker Botts L.L.P. is acting in this transaction as special counsel to the Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each other party hereto will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein.
Section 11.09Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower or any of the other Loan Parties, the Administrative Agent (irrespective of whether the principal of any Loan or LC Disbursement shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative
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Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, LC Disbursements and all other Secured Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Bank, the Administrative Agent and the other Secured Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 12.03) allowed in such judicial proceeding; and
(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 3.05 and Section 12.03.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or other Secured Party any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or other Secured Party or to authorize the Administrative Agent to vote in respect of the claim of any Lender or other Secured Party in any such proceeding.
Section 11.10Authority of Administrative Agent to Release Collateral and Liens. The Lenders, each Issuing Bank and each other Secured Party:
(a)irrevocably authorize the Administrative Agent to comply with the provisions of Section 12.18 (without requirement of notice to or consent of any Person except as expressly required by Section 12.02(b)); and
(b)authorize the Administrative Agent to execute and deliver to the Loan Parties, any and all releases of Liens, termination statements, assignments or other documents as reasonably requested by such Loan Party in connection with any sale or other Disposition of Property to the extent such sale or other Disposition is permitted by the terms of Section 9.11 or is otherwise authorized by the terms of the Loan Documents.
Subject to Section 12.02(b)(vii), upon request by the Administrative Agent at any time, the Majority Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guarantee and Collateral Agreement pursuant to this Section 11.10 or Section 12.18.
Section 11.11Duties of the Arrangers . The Arrangers (including the Coordinating Lead Arranger) shall not have any duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than duties, responsibilities and liabilities in its capacity as Lenders hereunder.
Section 11.12Erroneous Payments.
(a)If the Administrative Agent notifies a Lender, Issuing Bank or Secured Party or any Person who has received funds on behalf of a Lender, Issuing Bank or Secured Party (any such Lender, Issuing Bank, Secured Party or other recipient, a “Payment Recipient”) that the Administrative Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately
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succeeding Section 11.12(b)) that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, Issuing Bank, Secured Party or other Payment Recipient on its behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent, and such Lender, Issuing Bank or Secured Party shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of the Administrative Agent to any Payment Recipient under this Section 11.12(a) shall be conclusive, absent manifest error.
(b)Without limiting immediately preceding Section 11.12(a), each Payment Recipient hereby further agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Administrative Agent (or any of its Affiliates) (i) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment (a “Payment Notice”), (ii) that was not preceded or accompanied by a Payment Notice, or (iii) that such Payment Recipient otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part) in each case:
(A)an error may have been made (in the case of immediately preceding Sections 11.12(b)(i) or (ii)) or an error has been made (in the case of immediately preceding Section 11.12(b)(iii)) with respect to such payment, prepayment or repayment; and
(B)such Payment Recipient shall promptly (and, in all events, within one Business Day of its knowledge of such error) notify the Administrative Agent of its receipt of such payment, prepayment or repayment, the details thereof and that it is so notifying the Administrative Agent pursuant to this Section 11.12(b).
(c)Each Lender, Issuing Bank or Secured Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Lender, Issuing Bank or Secured Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Lender, Issuing Bank or Secured Party from any source, against any amount due to the Administrative Agent under immediately preceding Section 11.12(a) or under the indemnification provisions of this Agreement.
(d)In the event an Erroneous Payment (or portion thereof) is not recovered by the Administrative Agent for any reason, after demand therefor by the Administrative Agent in accordance with immediately preceding Section 11.12(a), from any Lender or Issuing Bank that has received such Erroneous Payment (or portion thereof) (or from any Payment Recipient who received such Erroneous Payment (or portion thereof) on its respective behalf) (such unrecovered amount, an “Erroneous Payment Return Deficiency”), upon the Administrative Agent’s request to such Lender or Issuing Bank at any time, (i) such Lender or Issuing Bank shall be deemed to have assigned its Loans (but not its Commitments) with respect to which such Erroneous Payment was made (the “Erroneous Payment Impacted Loan”) in an amount equal to the Erroneous Payment Return Deficiency (such assignment of the Loans (but not Commitments) of the Erroneous Payment Impacted Loan, the “Erroneous Payment Deficiency Assignment”) at par plus any accrued and unpaid interest (with the assignment fee to be waived by the Administrative Agent in such instance), and is hereby (together with the Borrower) deemed to execute and deliver an Assignment and Assumption with respect to such Erroneous Payment Deficiency Assignment, and such Lender or Issuing Bank shall deliver any Notes evidencing such Loans
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to the Borrower or the Administrative Agent, (ii) the Administrative Agent as the assignee Lender shall be deemed to acquire the Erroneous Payment Deficiency Assignment and (iii) upon such deemed acquisition, the Administrative Agent as the assignee Lender shall become a Lender or Issuing Bank, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment and the assigning Lender or assigning Issuing Bank shall cease to be a Lender or Issuing Bank, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment, excluding, for the avoidance of doubt, its obligations under the indemnification provisions of this Agreement and its applicable Commitments which shall survive as to such assigning Lender or assigning Issuing Bank. For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the Commitments of any Lender or Issuing Bank and such Commitments shall remain available in accordance with the terms of this Agreement.
(e)The parties hereto agree that an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Secured Obligations owed by the Borrower or any other Loan Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower or any other Loan Party for the purpose of making such Erroneous Payment.
(f)To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.
(g)Each party’s obligations, agreements and waivers under this Section 11.12 shall survive the resignation or replacement of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Lender or Issuing Bank, the termination of the Commitments and/or the repayment, satisfaction or discharge of all Secured Obligations (or any portion thereof) under any Loan Document.
Section 11.13Credit Bidding. The Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Majority Lenders, to credit bid all or any portion of the Secured Obligations (including by accepting some or all of the Collateral in satisfaction of some or all of the Secured Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123, or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which a Restricted Person is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the Secured Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid by the Administrative Agent at the direction of the Majority Lenders on a ratable basis (with Secured Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the equity interests or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid, (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles, (ii) each of the Secured Parties’ ratable interests in the Secured Obligations which were credit bid shall be deemed without any further action under this Agreement to be assigned to such vehicle or vehicles for the purpose of closing such sale, (iii) the Administrative Agent shall be authorized to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or equity interests thereof, shall be governed, directly or indirectly, by, and the governing documents shall provide for, control by the vote of the Majority Lenders or their permitted assignees under the terms of this Agreement or the governing documents of the applicable acquisition vehicle or vehicles, as the case may be, irrespective of the termination of this Agreement), (iv) the Administrative Agent on behalf of such acquisition vehicle or vehicles shall be authorized to issue to each of the Secured Parties, ratably on account of the relevant
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Secured Obligations which were credit bid, interests, whether as equity, partnership, limited partnership interests, or membership interests, in any such acquisition vehicle and/or debt instruments issued by such acquisition vehicle or vehicles, all without the need for any Secured Party or acquisition vehicle to take any further action, and (v) to the extent that Secured Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Secured Obligations assigned to the acquisition vehicle exceeds the amount of Secured Obligations credit bid by the acquisition vehicle or otherwise), such Secured Obligations shall automatically be reassigned to the Secured Parties pro rata and the equity interests and/or debt instruments issued by any acquisition vehicle on account of such Secured Obligations shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action. Notwithstanding that the ratable portion of the Secured Obligations of each Secured Party are deemed assigned to the acquisition vehicle or vehicles as set forth in clause (ii) above, each Secured Party shall execute such documents and provide such information regarding the Secured Party (and/or any designee of the Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle or vehicles) as the Administrative Agent may reasonably request in connection with the formation of any acquisition vehicle, the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.
Section 11.14Certain ERISA Matters.
(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:
(i)such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit or the Commitments or this Agreement;
(ii)the prohibited transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable so as to exempt from the prohibitions of Section 406 of ERISA and Section 4975 of the Code such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement;
(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or
(iv)such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b)In addition, unless either (1) subclause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with subclause (iv) in the immediately preceding clause (a), such Lender further
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(x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that none of the Administrative Agent, any Arranger and their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).
Article XII
MISCELLANEOUS
Section 12.01Notices.
(a)Except in the case of notices and other communications expressly permitted to be given by telephone and subject to Section 12.01(b), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax or by electronic mail (with read-receipt or similar feature enabled), as follows:
(i)if to the Borrower, to it at 1600 Corporate Drive, Birmingham, AL 35242, Attention of: Bradley G. Gray (Telephone No. (205) 379-0225 and email bgray@dgoc.com) with a copy to 414 Summers Street, Charleston, WV 25301, attention of: Benjamin Sullivan (Telephone No. (304) 561-4260 and email bsullivan@dgoc.com);
(ii)if to the Administrative Agent, to it at 600 Travis Street, Suite 3100, Houston, TX 77002, Attention of: George McKean (Fax No. (216) 370-5779, Telephone No. (713) 221-6187 and email george.mckean@key.com);
(iii)if to the Issuing Bank, to KeyBank National Association, to it at 600 Travis Street, Suite 3100, Houston, TX 77002, Attention of: George McKean (Fax No. (216) 370-5779, Telephone No. (713) 221-6187 and email george.mckean@key.com);
(iv)if to the Swing Line Lender, to KeyBank National Association, to it at 600 Travis Street, Suite 3100, Houston, TX 77002, Attention of: George McKean (Fax No. (216) 370-5779, Telephone No. (713) 221-6187 and email george.mckean@key.com); and
(v)if to any other Lender or Issuing Bank, to it at its address (or fax number) set forth in its Administrative Questionnaire.
(b)Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II, Article III, Article IV and Article V unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
(c)Any party hereto may change its address or fax number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
Section 12.02Waivers; Amendments.
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(a)No failure on the part of the Administrative Agent, any Issuing Bank or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Administrative Agent, any Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 12.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time.
(b)Neither this Agreement nor any provision hereof nor any Loan Document nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into (x) by the Borrower and/or the other applicable Loan Parties and the Majority Lenders or (y) by the Borrower and/or the other applicable Loan Parties and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall be effective if it shall:
(i)increase the Maximum Credit Amount of any Lender without the written consent of such Lender,
(ii)increase the Borrowing Base without the written consent of each Lender (other than any Defaulting Lender), or decrease or maintain the Borrowing Base (other than a decrease pursuant to Sections 2.08(a) or (d)) without the consent of the Required Lenders; provided that (A) a Scheduled Redetermination and the delivery of a Reserve Report may be postponed by the Majority Lenders and (B) it is understood that any waiver (or amendment or modification that would have the effect of a waiver) of the right of the Required Lenders to adjust (through a reduction of) the Borrowing Base or the amount of such adjustment in the form of a reduction to the Borrowing Base pursuant to the Borrowing Base Adjustment Provisions (other than Sections 2.08(a) and (d)) in connection with the occurrence of a relevant event giving rise to such right shall require the consent of the Required Lenders,
(iii)reduce the principal amount of any Loan or LC Disbursement or reduce the stated rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Secured Obligations hereunder or under any other Loan Document, without the written consent of each Lender directly and adversely affected thereby (except (A) in connection with any amendment or waiver of the applicability of any post-default increase in interest rates or of any amendment to the Sustainability Rate Adjustment which does not have the effect of reducing the Applicable Margin for SOFR Loans or Applicable Margin for ABR Loans to a level not otherwise permitted herein, both of which shall be effective with the consent of Majority Lenders or (B) in connection with any amendment which would increase the Sustainability Rate Adjustment to be greater than 5 basis points which shall require the approval of all Lenders),
(iv)postpone the scheduled date of (A) payment or prepayment of the principal amount of any Loan or LC Disbursement, (B) any interest thereon, or (C) any fees payable hereunder, or any other Secured Obligations hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone the Termination Date without the written consent of each Lender directly and adversely affected thereby,
(v)change Section 4.01(b) or Section 4.01(c) or any other term or condition hereof in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender directly and adversely affected thereby,
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(vi)waive or amend Section 10.02(d) without the written consent of each directly and adversely affected Lender; provided that any waiver or amendment to Section 10.02(d) or to this proviso in this Section 12.02(b)(vi), or any amendment or modification to any Security Instrument that results in the Secured Swap Agreement secured or guaranteed by such Security Instrument no longer being secured or guaranteed thereby on an equal and ratable basis with the principal of the Loans, or any amendment or other change to the definition of the terms “Payment in Full”, “Secured Obligations”, “Secured Parties”, “Secured Swap Agreement” or “Secured Swap Provider”, which would result in an equivalent effect, shall also require the written consent of each Secured Swap Provider adversely affected thereby,
(vii)(A) release any Guarantor (other than as a result of a transaction permitted hereby), (B) release all or substantially all of the collateral (other than as provided in Section 11.10), or (C) subordinate the payment priority of the Secured Obligations or subordinate the Liens securing the Secured Obligations to any other Indebtedness, in each case, without the written consent of each directly and adversely affected Lender (other than any Defaulting Lender), or
(viii)change any of the provisions of this Section 12.02(b) or the definitions of “Majority Lenders” or “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or grant any consent hereunder or any other Loan Documents, without the written consent of each directly and adversely affected Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Swing Line Lender, any Issuing Bank or the Lead Sustainability Structuring Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Swing Line Lender, any Issuing Bank or the Lead Sustainability Structuring Agent, as the case may be. Notwithstanding the foregoing, any supplement to any Schedule shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders.
(c)Notwithstanding anything to the contrary contained in the Loan Documents, the Administrative Agent and the Borrower, may amend, modify or supplement any Loan Document without the consent of any Lender in order to (i) correct, amend, cure or resolve any ambiguity, omission, defect, typographical error, inconsistency or other manifest error therein, (ii) add a guarantor or collateral or otherwise enhance the rights and benefits of the Lenders, (iii) make administrative or operational changes not adverse to any Lender or (iv) adhere to any local Governmental Requirement or advice of local counsel.
(d)Notwithstanding anything to the contrary contained in any Loan Documents, the Commitment of any Defaulting Lender may not be increased without its consent (it being understood, for avoidance of doubt, that no Defaulting Lender shall have any right to approve or disapprove any increase, decrease or reaffirmation of the Borrowing Base) and the Administrative Agent may with the consent of the Borrower amend, modify or supplement the Loan Documents to effectuate an increase to the Borrowing Base where such Defaulting Lender does not consent to an increase to its Commitment, including not increasing the Borrowing Base by the portion thereof applicable to the Defaulting Lender.
Section 12.03Expenses, Indemnity; Damage Waiver.
(a)The Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (without duplication), including the reasonable fees, charges and disbursements of counsel and other outside consultants for the Administrative Agent (provided that counsel shall be limited to (x) one (1) counsel to such Persons, taken as a whole, one (1) local counsel in each relevant jurisdiction and one (1) regulatory counsel to all such Persons with respect to a relevant regulatory matter, taken as a whole, (y), solely in the event of a conflict of interest, one (1) additional counsel (and, if necessary, one (1) regulatory counsel and one (1) local counsel in each relevant jurisdiction or for each matter) to each group of similarly situated affected indemnified persons and (z) other counsel consented to by the Borrower (such consent not to be unreasonably withheld, delayed or conditioned)), the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental invasive and non-invasive
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assessments and audits and surveys and appraisals, in connection with the syndication of this Agreement, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all documented costs, expenses, and Other Taxes, assessments and other charges incurred by the Administrative Agent or any Lender in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein or conducting of title reviews, mortgage matches and collateral reviews, (iii) all reasonable and documented out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, or extension of any Letter of Credit or any demand for payment thereunder, (iv) all documented out-of-pocket expenses incurred by the Administrative Agent, the Swing Line Lender, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Swing Line Lender, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03, or in connection with the Loans made or Letters of Credit issued hereunder, including all such documented out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b)The Borrower shall and shall cause each Loan Party to indemnify the Administrative Agent, the Arrangers, the Swing Line Lender, the Issuing Bank and each Lender, and each Related Party of any of the foregoing persons (each such person being called an “Indemnitee”) against, and defend and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee (provided that counsel shall be limited to (x) one (1) counsel to such Indemnitees, taken as a whole, one (1) local counsel in each relevant jurisdiction and one (1) regulatory counsel to all such Indemnitees with respect to a relevant regulatory matter, taken as a whole, (y), solely in the event of a conflict of interest, one (1) additional counsel (and, if necessary, one (1) regulatory counsel and one (1) local counsel in each relevant jurisdiction or for each matter) to each group of similarly situated affected Indemnitees and (z) other counsel consented to by the Borrower (such consent not to be unreasonably withheld, delayed or conditioned)), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of, and any enforcement against the Borrower or any other Group Member of any rights under this Agreement or any other Loan Document or any Agreement or instrument contemplated hereby or thereby, (ii) the performance by the parties hereto or the parties to any other Loan Document of their respective obligations hereunder or thereunder of the consummation of the transactions contemplated hereby or by any other Loan Document, (iii) the failure of the Borrower or any other Group Member to comply with the terms of any Loan Document, including this Agreement, or with any Governmental Requirement, (iv) any inaccuracy of any representation or any breach of any warranty or covenant of the Borrower or any other Group Members set forth in any of the Loan Documents or any instruments, documents or certifications delivered in connection therewith, (v) any loan or Letter of Credit or the use of the proceeds therefrom, including (A) any refusal by an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not comply with the terms of such Letter of Credit, or (B) the payment of a drawing under any Letter of Credit notwithstanding the non-compliance, non-delivery or other improper presentation of the documents presented in connection therewith, (vi) any other aspect of the Loan Documents, (vii) the operations of the business of the Borrower or any other Group Member by such persons, (viii) any assertion that the Lenders were not entitled to receive the proceeds received pursuant to the Security Instruments, (ix) any actual or alleged presence or release of Hazardous Materials or any liability under Environmental Law related to the Borrower or any other Group Member, (x) the past ownership by the Borrower or any other Group Member of any of their Properties or past activity on any of their Properties which, though lawful and fully permissible at the time, could result in present liability or (xi) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Loan Party, and regardless of whether any Indemnitee is a party thereto, and such indemnity shall extend to each Indemnitee notwithstanding the sole or concurrent negligence of every kind or character whatsoever, whether active or passive, whether an affirmative act or an omission, including all types of negligent conduct identified in the restatement (second) of torts of one or more of the
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Indemnitees or by reason of strict liability imposed without fault on any one or more of the Indemnitees including ordinary negligence; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have directly resulted from (A) the gross negligence, willful misconduct or bad faith of such Indemnitee, (B) a material breach by such Indemnitee of its obligations under this Agreement at a time when the Borrower has not breached its obligations hereunder in any material respect or (C) a dispute solely among Indemnitees (other than a proceeding against any Indemnitee in its capacity or in fulfilling its role as an Arranger, Administrative Agent, Lender or any other similar role in connection with this Agreement) not arising out of any act or omission on the part of the Borrower or its affiliates. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower shall not, and shall cause each Group Member not to, assert and hereby waives and agrees to cause each Group Member to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them may have by statute or otherwise against any Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof whether occurring on, prior to or after the Closing Date. This Section 12.03(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
(c)To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Arrangers, the Swing Line Lender or the Issuing Bank under Section 12.03(a) or Section 12.03(b), each Lender severally agrees to pay to the Administrative Agent, the Arrangers or the Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Arrangers or the Issuing Bank in its capacity as such.
(d)To the extent permitted by applicable law, no party hereto shall, and the Borrower shall cause each Group Member not to, assert, and hereby waives, and the Borrower agrees to cause each Group Member to waive, any claim against any other party hereto and any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof whether occurring on, prior to or after the Closing Date; provided that, nothing in this Section 12.03(d) shall relieve (i) the Borrower of any obligation it may have to indemnify an Indemnitee against special, indirect, consequential or punitive damages asserted against such Indemnitee by a third party or (ii) any Lender of its obligations under Section 12.03(c).
(e)All amounts due under this Section 12.03 shall be payable not later than 10 Business Days after written demand therefor.
Section 12.04Successors and Assigns.
(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 12.04. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated herein, the Related Parties of each of the Administrative Agent, any Issuing Bank,
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the Lenders and the other Secured Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)(i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may assign to one or more assignees (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A)the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund, or, if an Event of Default has occurred and is continuing, to any Assignee, and provided further, the Borrower shall be deemed to have consented to any such Assignee if it has not objected to such Assignee within ten (10) Business Days after receiving notice of such assignment; and
(B)the Administrative Agent, the Swing Line Lender and each Issuing Bank; provided that no consent of the Administrative Agent, the Swing Line Lender or any Issuing Bank shall be required for an assignment to a Lender or an Affiliate of a Lender.
(i)Assignments shall be subject to the following additional conditions:
(A)except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (and shall be in increments of $1,000,000 in excess thereof) unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;
(B)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;
(C)the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 and the assignor shall have paid (or another Person shall have paid on its behalf) in full any amounts owing by it to the Administrative Agent and any Issuing Bank;
(D)the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and
(E)the assignee must not be a natural person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person), a Defaulting Lender, an Affiliate or a Subsidiary of the Borrower or any other Loan Party.
(ii)Subject to Section 12.04(b)(iv) and the acceptance and recording thereof, from and after the effective date specified in each Assignment and Assumption, the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).
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(iii)The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Maximum Credit Amount of, and principal amount of (and stated interest on) the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Bank(s) and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. In connection with any changes to the Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and, at its election, forward a copy of such revised Annex I to the Borrower, each Issuing Bank and each Lender.
(iv)Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Questionnaire and, as required by Section 5.03(g), applicable tax forms or certifications (taking into account whether the Assignee shall already be a Lender hereunder and shall have provided the required tax forms and certifications), the processing and recordation fee referred to in this Section 12.04(b) and any written consent to such assignment required by this Section 12.04(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 12.04(b).
(c)Any Lender may, without the consent of the Borrower, the Administrative Agent, the Swing Line Lender, the Issuing Bank, the Lead Sustainability Structuring Agent or the Co-Sustainability Structuring Agent, sell participations to one or more banks or other entities (other than the Borrower, any Affiliate of the Borrower, a Defaulting Lender, or any natural person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person)) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) such Lender shall continue to give prompt attention to and process (including, if required, through discussions with Participants) requests for waivers or amendments hereunder. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Participant may have consent rights with respect to any amendment, modification or waiver described in clauses (i), (iii), (iv), (v), (vi) and (vii) of the proviso to Section 12.02(b) that affects such Participant and for which such Lender would have consent rights. In addition such agreement must provide that the Participant be bound by the provisions of Section 12.03. The Borrower agrees that each Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 (subject to the requirements and limitations therein, including the requirements under Section 5.03(g) (it being understood that the documentation required under Section 5.03(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section 12.04; provided that such Participant (A) agrees to be subject to the provisions of Section 5.02 and Section 5.03 as if it were an assignee under subsection (b) of this Section 12.04 and (B) shall not be entitled to receive any greater payment under Section 5.02 or Section 5.03, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from an adoption of or any change in any law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender.
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Each Lender that sells a participation, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain a register on which it enters the name and address of each Participant and the principal amounts of (and stated interest on) each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations, proposed Section 1.163-5 of the United States Treasury Regulations and any applicable temporary, final or other successor regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(d)Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender, and this Section 12.04(d) shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto. The Borrower, upon receipt of written notice from the relevant Lender, agrees to issues Notes to any Lender requiring Notes to facilitate transactions described in this Section 12.04(d) in accordance with Section 2.02(d) or as the Borrower may otherwise consent (such consent not to be unreasonably withheld or delayed).
(e)Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Lender or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Borrower and the other Loan Parties to file a registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.
Section 12.05Survival; Revival; Reinstatement.
(a)All covenants, agreements, representations and warranties made by the Loan Parties herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect until Payment in Full. The provisions of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and Article XI shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.
(b)To the extent that any payments on the Secured Obligations or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Secured Obligations shall be revived and continue as if such payment or proceeds had not been received and the Administrative Agent’s and the Lenders’ Liens, security interests, rights, powers and remedies under this Agreement and each Loan Document shall continue in full force and effect. In such event, each Loan Document shall be automatically reinstated and the Borrower shall, and shall cause each other Loan Party to, take any action as may be reasonably requested by the Administrative Agent and the Lenders to effect such reinstatement.
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Section 12.06Counterparts; Integration; Effectiveness.
(a)This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by email or facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.
(b)This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(c)Except as provided in Section 6.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by electronic communication shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 12.07Severability. Any provision of this Agreement or any other Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 12.08Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any other Group Member against any of and all the obligations of the Borrower or any other Group Member owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured; provided that to the extent prohibited by applicable law as described in the definition of “Excluded Swap Obligation,” no amounts received from, or set off with respect to, any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor. The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 10.02(c) and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, Issuing Bank(s) and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Secured Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, Issuing Bank(s) and their respective Affiliates under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) that such Lender, Issuing Bank(s) or their respective Affiliates may have. Each Lender and Issuing Bank agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
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Section 12.09GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
(a)THIS AGREEMENT, THE NOTES AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b)EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS (AND THE BORROWER SHALL CAUSE EACH GROUP MEMBER TO SUBMIT) FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING (WHETHER IN TORT, LAW OR IN EQUITY) RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK SITTING IN NEW YORK COUNTY, AND ANY APPELLATE COURT FROM ANY THEREOF AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT; PROVIDED, THAT NOTHING CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT WILL PREVENT ANY PARTY FROM BRINGING ANY ACTION TO ENFORCE ANY AWARD OR JUDGMENT OR EXERCISE ANY RIGHT UNDER THE LOAN DOCUMENTS IN ANY OTHER FORUM IN WHICH JURISDICTION CAN BE ESTABLISHED. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c)EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
(d)EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT (I) SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 12.01 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO AND (II) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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Section 12.10Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
Section 12.11Confidentiality. Each of the Administrative Agent and each Lender agrees to keep confidential all non-public information provided to it by any Loan Party, the Administrative Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate thereof, (b) subject to an agreement to comply with the provisions of this Section 12.11, to any actual or prospective Transferee or any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Governmental Requirement, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender and if requested, to any Lender’s insurance or credit risk support provider, (i) in connection with the exercise of any remedy hereunder or under any other Loan Document, (j) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower, (k) if agreed by the Borrower in its sole discretion by any other Person, (l) to any other party with the consent of the Borrower, (m) that becomes available to the Administrative Agent, any Lender, any Issuing Bank or any of their respective branches or Affiliates on a nonconfidential basis from a source other than the Borrower that is not known to be subject to a confidentiality obligation to the Borrower, (n) that is independently discovered or developed by a party hereto without utilizing any Information received from the Borrower or violating the terms of this Section 12.11, or (o) to the extent required by a potential or actual insurer or reinsurer in connection with providing insurance, reinsurance or credit risk mitigation coverage under which payments are to be made or may be made by reference to this Agreement. For the avoidance of doubt, nothing herein shall prohibit any Person from communicating or disclosing Information regarding suspected violations of laws, rules, or regulations to a Governmental Authority or self-regulatory authority without notifying any other Person. “Information” means all written information received from the Borrower relating to the Borrower, any Subsidiary or their business, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis prior to disclosure by the Borrower and other than information pertaining to this Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the lending industry; provided that in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 12.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Each Lender acknowledges that information furnished to it pursuant to this Agreement or the other Loan Documents may include material non-public information concerning the Borrower and its Affiliates and their related parties or their respective securities, and confirms that it has developed compliance procedures regarding the use of material non-public information and that it will handle such material non-public information in accordance with those procedures and applicable law, including Federal and state securities laws.
All information, including requests for waivers and amendments, furnished by the Borrower or the Administrative Agent pursuant to, or in the course of administering, this Agreement or the other Loan Documents will be syndicate-level information, which may contain material non-public information about the Borrower and its Affiliates and their related parties or their respective securities. Accordingly, each Lender represents to the Borrower and the Administrative Agent that it has identified in its Administrative
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Questionnaire a credit contact who may receive information that may contain material non-public information in accordance with its compliance procedures and applicable law, including Federal and state securities laws.
Section 12.12Interest Rate Limitation. It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes and other Secured Obligations arising under the Loan Documents, it is agreed as follows: (a) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Loans or Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Secured Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (b) in the event that the maturity of the Loans or Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Secured Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.12. To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Borrower’s obligations hereunder.
Section 12.13Collateral Matters; Swap Agreements. The benefit of the Security Instruments and of the provisions of this Agreement relating to any collateral securing the Secured Obligations shall also extend to and be available to the Secured Swap Providers in respect of the Secured Swap Agreements as set forth herein. Except as set forth in Section 12.02(b)(vi), no Lender or any Affiliate of a Lender shall have any voting rights under any Loan Document as a result of the existence of obligations owed to it under any such Swap Agreements.
Section 12.14No Third Party Beneficiaries. This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans and any Issuing Bank to issue, amend, or extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person (including any other Loan Party of the Borrower, any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any Issuing Bank or any Lender for any reason whatsoever. There are no third
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party beneficiaries other than as expressly provided herein with respect to the Secured Swap Providers and Secured Cash Management Banks that are Affiliates of Lenders hereunder.
Section 12.15EXCULPATION PROVISIONS. Each of the parties hereto hereby acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between the Loan Parties and the Lending Parties is intended to be or has been created in respect of any of the transactions contemplated by this Agreement or the other Loan Documents, irrespective of whether the Lending Parties have advised or are advising the Loan Parties on other matters, and the relationship between the Lending Parties, on the one hand, and the Loan Parties, on the other hand, in connection herewith and therewith is solely that of creditor and debtor, (b) the Lending Parties, on the one hand, and the Loan Parties, on the other hand, have an arm’s length business relationship that does not directly or indirectly give rise to, nor do the Loan Parties rely on, any fiduciary duty to the Loan Parties or their affiliates on the part of the Lending Parties, (c) the Loan Parties are capable of evaluating and understanding, and the Loan Parties understand and accept, the terms, risks and conditions of the transactions contemplated by this Agreement and the other Loan Documents, (d) the Loan Parties have been advised that the Lending Parties are engaged in a broad range of transactions that may involve interests that differ from the Loan Parties’ interests and that the Lending Parties have no obligation to disclose such interests and transactions to the Loan Parties, (e) the Loan Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent the Loan Parties have deemed appropriate in the negotiation, execution and delivery of this Agreement and the other Loan Documents, (f) each Lending Party has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by it and the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Loan Parties, any of their affiliates or any other Person, (g) none of the Lending Parties has any obligation to the Loan Parties or their affiliates with respect to the transactions contemplated by this Agreement or the other Loan Documents except those obligations expressly set forth herein or therein or in any other express writing executed and delivered by such Lending Party and the Loan Parties or any such affiliate and (h) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lending Parties or among the Loan Parties and the Lending Parties. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”
Section 12.16Patriot Act Notice. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower and other Loan Parties, which information includes the name and address of the Borrower and other Loan Parties and other information that will allow such Lender to identify the Borrower and other Loan Parties in accordance with the Patriot Act and Beneficial Ownership Regulations.
Section 12.17Flood Insurance Provisions. In no event is any Building (as defined in the applicable Flood Insurance Regulation) or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance Regulation) included in the definition of “Mortgaged Property” and no Building or Manufactured (Mobile) Home is hereby encumbered by this Agreement or any other Loan Document.
Section 12.18Releases.
(a)Release Upon Payment in Full. Upon Payment in Full, the Administrative Agent, at the written request and expense of the Borrower, will promptly release, reassign and transfer the Mortgaged Property to the Loan Parties.
(b)Further Assurances. If any of the Mortgaged Property shall be sold, transferred or otherwise disposed of by any Group Member in a transaction permitted by the Loan Documents and such Mortgaged Property shall no longer constitute or be required to be Mortgaged Property under the Loan Documents, then the Administrative Agent, at the request and sole expense of the Borrower and the applicable Group Member, shall promptly execute and deliver to such Group Member all releases or other documents reasonably necessary or desirable for the release of the Liens created by the applicable
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Security Instrument on such Mortgaged Property; provided that the Borrower shall have delivered to the Administrative Agent, at least five (5) Business Days prior to the date of the proposed release (or such other time period as the Administrative Agent may agree), a written request for release identifying the relevant Group Member, together with a certification by the Borrower stating (x) that such transaction is in compliance with this Agreement and the other Loan Documents (y) the Borrower has complied with its obligations under Section 8.01(n)(i), if applicable and (z) no Mortgaged Property other than the Mortgaged Property required to be released is being released. At the request and sole expense of the Borrower, a Group Member shall be released from its obligations under the Loan Documents in the event that all the capital stock or other Equity Interests of such Group Member shall be sold, transferred or otherwise disposed of in a transaction permitted by the Loan Documents and such Equity Interests shall no longer constitute or be required to be Mortgaged Property under the Loan Documents; provided that the Borrower shall have delivered to the Administrative Agent, at least five (5) Business Days prior to the date of the proposed release (or such other time period as the Administrative Agent may agree), a written request for release identifying the relevant Group Member, together with a certification by the Borrower stating (x) that such transaction is in compliance with this Agreement and the other Loan Documents and the Borrower has complied with its obligations under Section 8.01(n)(i), if applicable, and (y) no Mortgaged Property other than the Mortgaged Property required to be released is being released.
Section 12.19Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
Section 12.20Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the
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transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
[SIGNATURES BEGIN NEXT PAGE]
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The parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
BORROWER:
DP RBL CO LLC

By:
/s/ Benjamin M. Sullivan

Name:    Benjamin M. Sullivan

Title:    Senior Executive Vice President, Chief
              Legal and Risk Officer and Corporate
              Secretary









KEYBANK NATIONAL ASSOCIATION, as Administrative Agent, Issuing Bank and a Lender


By: /s/ George E. McKean            
Name: George E. McKean
Title: Senior Vice President

KEYBANC CAPITAL MARKETS INC., as Coordinating Lead Arranger and Sole Bookrunner


By: /s/ Brian Hunnicut            
Name: Brian Hunnicutt
Title: Managing Director








CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH, as a Joint Lead Arranger, a Co-Syndication Agent and a Lender


By: /s/ Jacob W. Lewis            
Name: Jacob W. Lewis
Title: Authorized Signatory


By: /s/ Donovan C. Broussard            
Name: Donovan C. Broussard
Title: Authorized Signatory

CANADIAN IMPERIAL BANK OF COMMERCE, as Lead Sustainability Structuring Agent


By: /s/ Jacob W. Lewis            
Name: Jacob W. Lewis
Title: Authorized Signatory


By: /s/ Donovan C. Broussard            
Name: Donovan C. Broussard
Title: Authorized Signatory


















CITIBANK, N.A., as a Joint Lead Arranger and a Lender


By: /s/ Cliff Vaz                
Name: Cliff Vaz
Title: Vice President




















CITIZENS BANK, N.A., as Joint Lead Arranger, a Co-Syndication Agent and a Lender


By: /s/ Scott Donaldson            
Name: Scott Donaldson
Title: Senior Vice President







MIZUHO BANK, LTD., as a Joint Lead Arranger, Co-Syndication Agent and a Lender


By: /s/ Edward Sacks                
Name: Edward Sacks
Title: Managing Director








TRUIST BANK, as a Co-Syndication Agent and a Lender


By: /s/ Farhan Iqbal                
Name: FARHAN IQBAL
Title: Director















U.S. BANK NATIONAL ASSOCIATION, as a Joint Lead Arranger, a Co-Documentation Agent and a Lender


By: /s/ Matt Turner                
Name: Matt Turner
Title: S.V.P.



















DNB BANK ASA, NEW YORK BRANCH, as a Co-Documentation Agent and a Co-Sustainability Structuring Agent


By: /s/ Scott L. Joyce                
Name: Scott Joyce
Title: Senior Vice President


By: /s/ George Philippopoulos            
Name:    George Philippopoulos        
Title:    Senior Vice President                    


DNB MARKETS, INC., as a Joint Lead Arranger


By: /s/ Daniel Hochstadt            
Name: Daniel Hochstadt
Title: Managing Director


By: /s/ Emilio Fabbrizzi            
Name:    Emilio Fabbrizzi        
Title:    Senior Vice President    


DNB CAPITAL LLC as a Lender


By: /s/ Scott L. Joyce                
Name: Scott Joyce
Title: Senior Vice President


By: /s/ George Philippopoulos            
Name:    George Philippopoulos        
Title:    Senior Vice President    















MUFG BANK LTD. , as a Joint Lead Arranger and a Lender


By: /s/ Edward Andrew            
Name: Edward Andrew
Title: Authorized Signatory








BARCLAYS BANK PLC, as a Joint Lead Arranger and a Lender


By: /s/ Sydney G. Dennis            
Name: Sydney G. Dennis
Title: Director








FIRST HORIZON BANK, as a Lender


By: /s/ W. David McCarver IV        
Name: W. David McCarver IV
Title: Senior Vice President









SYNOVUS BANK, as a Lender


By: /s/ Hoyt Elliott                
Name: Hoyt Elliott
Title: SVP










CITY NATIONAL OF WEST VIRGINIA, as a Lender


By: /s/ Jack Cavender                
Name: Jack Cavender
Title: Executive Vice President





GOLDMAN SACHS BANK USA, as a Lender


By: /s/ Rebecca Kratz                
Name: Rebecca Kratz
Title: Authorized Signatory












MORGAN STANLEY SENIOR FUNDING, INC., as a Lender





By: /s/ Michael King    

Name:    Michael King

Title:    Vice President




MERCURIA INVESTMENTS U.S., INC., as a Lender

By: /s/ Steven Bunkin    

Name:    Steven Bunkin

Title:    Secretary    






Annex I
LIST OF MAXIMUM CREDIT AMOUNTS

[**Omitted**]


EXHIBIT A
[FORM OF] NOTE

[**Omitted**]

Exhibit A

EXHIBIT B
[FORM OF] BORROWING REQUEST

[**Omitted**]


Exhibit B - 1

EXHIBIT C
[FORM OF] INTEREST ELECTION REQUEST

[**Omitted**]




Exhibit C - 1

EXHIBIT D
[FORM OF]
COMPLIANCE CERTIFICATE

[**Omitted**]





Exhibit D - 1


Exhibit A
Financial Statements

[**Omitted**]




Exhibit D - 2

ANNEX A

[**Omitted**]




Exhibit D - 3

ANNEX B
Subsidiaries Not Loan Parties

[**Omitted**]


Exhibit D - 4

ANNEX C

[**Omitted**]



Exhibit D - 5

EXHIBIT E
[FORM OF] SOLVENCY CERTIFICATE

[**Omitted**]




Exhibit E - 1

EXHIBIT F
SECURITY INSTRUMENTS

[**Omitted**]



Exhibit F - 1

EXHIBIT G
[FORM OF] ASSIGNMENT AND ASSUMPTION

[**Omitted**]




Exhibit G - 1



Exhibit G - 2

EXHIBIT H-1
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
(NON-U.S. LENDERS; NON-PARTNERSHIPS)

[**Omitted**]




Exhibit H - 1

EXHIBIT H-2
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
(FOREIGN PARTICIPANTS; NOT PARTNERSHIPS)

[**Omitted**]



Exhibit H - 2

EXHIBIT H-3
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
(FOREIGN PARTICIPANTS; PARTNERSHIPS)

[**Omitted**]




Exhibit H - 3

EXHIBIT H-4
[FORM OF] U.S. TAX COMPLIANCE CERTIFICATE
(NON-U.S. LENDERS; PARTNERSHIPS)

[**Omitted**]




Exhibit H - 4

EXHIBIT I
[FORM OF] RESERVE REPORT CERTIFICATE

[**Omitted**]




Exhibit I - 1

Exhibit 1
Liens on Oil and Gas Properties

[**Omitted**]



Exhibit 2
Gas Imbalances, Take-or-Pay, Ship-or-Pay or Other Prepayments

[**Omitted**]



Exhibit 3
Sales of Oil and Gas Properties

[**Omitted**]



Exhibit 4
Marketing Agreements

[**Omitted**]



Exhibit 5
Oil and Gas Properties that are Mortgaged Properties

[**Omitted**]


EXHIBIT J
FORM OF SUSTAINABILITY CERTIFICATE

[**Omitted**]






Annex A
Sustainability Report and Review Report

[**Omitted**]



Annex B
Sustainability Rate Adjustment

[**Omitted**]






EXHIBIT K
[FORM OF]
DIVERSIFIED DISTRIBUTIONS CERTIFICATE

[**Omitted**]






ANNEX A
Calculations

[**Omitted**]



EXHIBIT L
[FORM OF]
RESTRICTED PAYMENTS CERTIFICATE

[**Omitted**]





ANNEX A
Restricted Payments

[**Omitted**]


ANNEX B
Calculations

[**Omitted**]


Schedule 1.01(a)
Existing Letters of Credit

[**Omitted**]


Schedule 7.12
Insurance

[**Omitted**]

























Schedule 7.14
Group Members

[**Omitted**]



Schedule 7.18
Gas Imbalances

[**Omitted**]



Schedule 7.19
Marketing Contracts

[**Omitted**]







Schedule 7.21
Swap Agreements

[**Omitted**]



Schedule 8.09(b)
Environmental Matters

[**Omitted**]



Schedule 8.15
Required Swap Agreements

[**Omitted**]




Schedule 9.02
Existing Indebtedness

[**Omitted**]




Schedule 9.03
Existing Liens

[**Omitted**]




Schedule 9.05
Investments

[**Omitted**]



Schedule 9.14
Affiliate Agreements

[**Omitted**]



APPENDIX A

GHG EMISSIONS INTENSITY PERFORMANCE TARGETS


[**Omitted**]
APPENDIX A

APPENDIX B

PLUGGED WELLS PERFORMANCE TARGETS


[**Omitted**]
APPENDIX B

APPENDIX C

TRIR PERFORMANCE TARGETS

[**Omitted**]

    APPENDIX C
Exhibit 8.1
Subsidiaries of Diversified Energy Company PLC as of December 31, 2024

Name of SubsidiaryJurisdiction
Diversified Gas & Oil CorporationUnited States
Diversified Production LLCUnited States
Diversified ABS Holdings LLCUnited States
Diversified ABS LLCUnited States
Diversified ABS Phase II Holdings LLCUnited States
Diversified ABS Phase II LLCUnited States
Diversified ABS Phase IV Holdings LLCUnited States
Diversified ABS Phase IV LLCUnited States
DP Bluegrass Holdings LLCUnited States
DP Bluegrass LLCUnited States
Chesapeake Granite Wash Trust(a)United States
BlueStone Natural Resources II, LLCUnited States
Sooner State Joint ABS Holdings LLC(b)United States
Diversified ABS Phase VI Holdings LLCUnited States
Diversified ABS Phase VI LLCUnited States
Diversified ABS VI Upstream LLCUnited States
Oaktree ABS VI Upstream LLCUnited States
DP Lion Equity Holdco LLC(c)United States
DP Lion Holdco LLC(c)United States
Diversified ABS VIII Holdings LLCUnited States
Diversified ABS VIII LLCUnited States
Diversified ABS III Upstream LLCUnited States
Diversified ABS V Upstream LLCUnited States
DP Yellowjacket Equity Holdco LLCUnited States
DP Yellowjacket Holdco LLCUnited States
DM Yellowjacket Holdco LLCUnited States
Tanos TX Holdco LLCUnited States
Diversified ABS IX Holdings LLCUnited States
Diversified Mustang Holdco LLCUnited States
DP RBL Co LLCUnited States
DP Legacy Central LLCUnited States
Diversified Energy Marketing, LLCUnited States
OCM Denali Holdings, LLCUnited States
DP Tapstone Energy Holdings, LLCUnited States
DP Legacy Tapstone LLCUnited States
Giant Land, LLC(d)United States
Link Land, LLC(d)United States
Old Faithful Land, LLC(d)United States
Riverside Land, LLC(d)United States
Splendid Land, LLC(d)United States
Diversified Midstream LLCUnited States
Cranberry Pipeline CorporationUnited States
Coalfield Pipeline CompanyUnited States
DM Bluebonnet LLCUnited States
Black Bear Midstream Holdings LLCUnited States
Black Bear Midstream LLCUnited States
Black Bear Liquids LLCUnited States
Black Bear Liquids Marketing LLCUnited States
DM Pennsylvania Holdco LLCUnited States
Diversified Energy Group LLCUnited States
Diversified Energy Company LLCUnited States
Next LVL Energy, LLCUnited States
Diversified ABS IX Holdings LLCUnited States
Diversified ABS X Holdings LLCUnited States
Diversified ABS X LLCUnited States

Exhibit 11.2
delogohoriz-rgbxblublk.jpg
SECURITIES DEALING POLICY
This policy statement is driven in part by our Company Values, which form the foundation upon which our company was started and the standards to which each Director, officer and employee of Diversified is expected to adhere. As per these Company Values, we will conduct our business and deliver value to our stakeholders based upon ethical standards and beliefs that:
•Value the dignity and worth of all individuals;
•Act with personal and business integrity;
•Commit to excellence in our performance;
•Respect environmental stewardship as we make business decisions;
•Exhibit courage of convictions, challenge the status quo and strive to create value;
•Seek opportunities for continuous learning and improvement; and
•Serve and support our teams and communities with passion and enthusiasm.

















Revised November 2024

Exhibit 11.2
ABOUT THIS SECURITIES DEALING CODE
The purpose of this Securities Dealing Code (the “Code” or the “Policy”) is to ensure that the directors of Diversified Energy Company PLC (the “Company”), and certain employees of the Company and its subsidiaries, do not abuse, and do not place themselves under suspicion of abusing Inside Information and comply with their obligations under the Market Abuse Regulation and U.S. federal and state laws regarding trading in the securities of a company while in possession of Inside Information. This Code applies to Dealing in the Company’s Securities on both the London Stock Exchange and the New York Stock Exchange.
Part A of this Code contains the Dealing clearance procedures which must be observed by the Company’s PDMRs and those employees who have been told that the clearance procedures apply to them (“Restricted Persons”). This applicability means that there will be certain times when such persons cannot Deal in Company Securities. Note that all employees of the Company are required to follow applicable securities laws (including insider trading) and failure to comply with any such applicable securities laws is a violation of this Code.
Part B sets out certain additional obligations which only apply to PDMRs.
Failure by any person who is subject to this Code to observe and comply with its requirements may result in disciplinary action. Depending on the circumstances, such non-compliance may also constitute a civil and/or criminal offense.
This Policy applies to all directors and employees of the Company and its subsidiaries. It has been designed to help ensure that you do not misuse, or place yourself under suspicion of misusing, Inside Information which you have and that you comply with your obligations under the Market Abuse Regulation. These individuals should note the following:
(i)You must not deal in any securities of the Group if you are in possession of Inside Information about the Group. You must also not recommend or encourage someone else to deal in the Group’s securities at that time – even if you will not profit from such dealing.
(ii)You must not disclose any confidential information about the Group (including any Inside Information) except where you are required to do so as part of your employment or duties. This requirement means that you should not share the Group’s confidential information with family, friends or business acquaintances.
(iii)You may, from time to time, be given access to inside information about another group of companies (for example, one of the Group’s customers or suppliers). You must not deal in the securities of that group of companies at those times.
(iv)Parts A and B of this Policy apply to the Company’s directors and to employees who are able to access restricted information about the Group (for example, employees who are involved in the preparation of the Group’s financial reports and those working on other sensitive matters). You may be informed from time to time if you are required to comply with Parts A and B of the Securities Dealing Policy, however as stated above, Parts A and B of this Policy apply regardless of whether you have been separately advised of the same.
(v)If you are in possession of Inside Information when your service to the Company terminates, you may not deal in Company Securities until that information has become public or is no longer material.
(vi)Failure to comply with this Policy may result in internal disciplinary action. It may also mean that you have committed a civil and/or criminal offense.
The prohibition against dealing on Inside Information is absolute and unconditional. The securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for adhering to high standards of conduct. There is no exception for small transactions or transactions that may seem necessary or justifiable for independent reasons, such as the need to raise money for an emergency expenditure, unless specifically permitted in accordance with this Policy.
If you have any questions about this Policy, or if you are not sure whether you can deal in securities at any particular time, please contact the Office of the Chief Legal & Risk Officer.


Exhibit 11.2

GLOSSARY
For the purposes of this Policy:
1.“Closed Period” means any of the following: (a) a period commencing on the last full day of a fiscal quarter (the “Subject Quarter”) and ending after completion of the first full trading day following the earlier of (i) publication of the Company’s preliminary results and/or trading update for the Subject Quarter in which all material information related to the Company’s financial and operational results for the Subject Quarter is published (“Preliminary Results Announcement”) if the Company’s management determines that such Preliminary Results Announcement contains all material nonpublic information regarding the completed period and through the date of such publication and (ii) publication of the earning release or public filing setting forth the final results for the Subject Quarter (“Final Results Announcement”), provided that if the period of days between the last full day of the Subject Quarter and the publication date of the Preliminary Results Announcement or Final Results Announcement (whichever is earlier) is less than 30 calendar days, then the Closed Period shall instead commence 30 calendar days before said publication date; (b) a period of time in which the Company (or an individual subject to the policy) is in possession of Inside Information that if known to the public would be reasonably expected to have an impact on decisions to buy or sell the company’s securities; and (c) any other period of time declared by the Company.
2.“Code” means this Securities Dealing Code.
3.“Company” means Diversified Energy Company PLC.
4.“Company Securities” means any publicly traded or quoted shares or debt instruments of the Company (or of any of the Company’s subsidiaries or subsidiary undertakings) or derivatives or other financial instruments linked to any of them, including phantom options.
5.“Deal” (together with corresponding terms such as “Deals” and “Dealing”) means any type of transaction in Company Securities, including purchases, sales, the exercise of options, the receipt of shares under share plans, using Company Securities as security for a loan or other obligation and entering into, amending or terminating any agreement in relation to Company Securities (e.g. a Trading Plan, as defined below), and other transactions listed on Schedule 1, attached hereto.
6.“Designated Officer” shall initially mean Benjamin M. Sullivan, the Company’s Senior Executive Vice President, Chief Legal & Risk Officer, and Corporate Secretary, and thereafter any replacement appointed by the Company’s Board of Directors. If the individual then serving as Designated Officer is seeking approval to Deal, then the Chief Financial Officer of the Company shall serve as “Designated Officer” for purposes of reviewing said individual’s request for approval.
7.“Exchange Act” means the Securities Exchange Act of 1934, as amended.
8.“FCA” means the UK Financial Conduct Authority.
9.“Group” means the Company and its subsidiaries.
10.“Inside Information” means information which relates to the Company or any Company Securities, which is nonpublic, which is likely to have a significant effect on the price of Company Securities and which an investor would be likely to use as part of the basis of his or her investment decision. Information is “nonpublic” if it is not available to the general public. In order for information to be considered “public” in the United States, it must be widely disseminated in a manner that makes it generally available to investors in a Regulation FD-compliant method, such as through a press release, a filing with the U.S. Securities and Exchange Commission or a Regulation FD- compliant conference call. The circulation of rumors, even if accurate and reported in the media, does not constitute public dissemination. Inside Information can be positive or negative and can relate to virtually any aspect of a Company’s business or to any type of security, debt, or equity. Also, information that something is likely to happen in the future—or even just that it may happen—could be deemed Inside Information. Examples of Inside Information may include (but are not limited to) information about:
(a)corporate earnings or earnings forecasts;


Exhibit 11.2

(b)possible mergers, acquisitions, tender offers, or dispositions;
(c)important business developments, such as developments regarding strategic collaborations;
(d)material management or control changes;
(e)significant financing developments including pending public sales or offerings of debt or equity securities;
(f)defaults on borrowings;
(g)bankruptcies;
(h)material cybersecurity or data security incidents; and
(i)significant litigation or regulatory actions.
11.“Investment Program” means a share acquisition scheme relating only to the Company’s shares under which: (a) shares are purchased by a Restricted Person pursuant to a regular standing order or direct debit or by regular deduction from the person’s salary or director’s fees, including the Company’s Employee Stock Purchase Program; or (b) shares are acquired by a Restricted Person by way of a standing election to re-invest dividends or other distributions received; or (c) shares are acquired as part payment of a Restricted Person’s remuneration or director’s fees.
12.“Market Abuse Regulation” means the EU Market Abuse Regulation (596/2014) as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended from time to time.
13.“Notifiable Transaction” means any transaction relating to Company Securities conducted for the account of a PDMR or PCA, whether the transaction was conducted by the PDMR or PCA or on his or her behalf by a third party and regardless of whether or not the PDMR or PCA had control over the transaction. This captures every transaction which changes a PDMR’s or PCA’s holding of Company Securities, even if the transaction does not require clearance under this Code. It also includes gifts of Company Securities, the grant of options or share awards, the exercise of options or vesting of share awards and transactions carried out by investment managers or other third parties on behalf of a PDMR, including where discretion is exercised by such investment managers or third parties and including under Trading Plans or Investment Programs.
14.“PCA” means a person closely associated with a PDMR, being:
(a)the spouse or civil partner of a PDMR; or
(b)a PDMR’s child or stepchild under the age of 18 years who is unmarried and does not have a civil partner; or
(c)a relative who has shared the same household as the PDMR for at least one year on the date of the relevant Dealing; or
(d)a legal person, corporation, limited liability company, trust, partnership or transactions by these entities, the managerial responsibilities of which are discharged by a PDMR (or by a PCA referred to in paragraphs (a), (b), or (c) of this definition), which is directly or indirectly controlled by such a person, which is set up for the benefit of such a person or which has economic interests which are substantially equivalent to those of such a person.
15.“PDMR” means a person discharging managerial responsibilities in respect of the Company, being either:
(a)a director of the Company;


Exhibit 11.2

(b)the Company’s senior executives who have regular access to Inside Information and the power to make managerial decisions affecting the future developments and business prospects of the Company, who are designated as PDMRs by the Company;
(c)officers who meet the definition of “officer” under Section 16 of the Exchange Act; and
(d)any other employee who has been told that he or she is a PDMR.
16.“Purchase” and “Sale” are defined broadly under federal securities law. “Purchase” includes not only the actual purchase of a security, but also any contract to purchase or otherwise acquire a security. “Sale” includes not only the actual sale of a security, but also any contract to sell or otherwise dispose of a security. These definitions extend to a broad range of transactions, including conventional cash-for-stock transactions, conversions, the exercise of stock options, transfers, gifts, and acquisitions and exercises of warrants or puts, calls, pledging and margin loans, or other derivative securities.
17.“Restricted Person” means:
(a)a PDMR and their PCAs; and
(b)any other person who has been told by the Company that the clearance procedures in Part A of this Code apply to him or her. Employees who are named on the Company’s insider list (whether as permanent insiders or on a project-specific insider list) are considered Restricted Persons and are required to follow the clearance procedures in this Code. When an employee is included on or removed from such a list, he or she will be notified by the Company.
18.“Securities” means any publicly traded or quoted equity shares or debt instruments, and any linked derivatives or financial instruments, including shares, bonds, notes, debentures, depositary receipts, options, warrants and bonds.
19.“Trading Plan” means a written plan entered into by a Restricted Person and an independent third party that sets out a strategy for the acquisition and/or disposal of Company Securities by the Restricted Person, and:
(a)specifies the amount of Company Securities to be dealt in and the price at which and the date on which the Company Securities are to be dealt in; or
(b)gives discretion to that independent third party to make trading decisions about the amount of Company Securities to be dealt in and the price at which and the date on which the Company Securities are to be dealt in; or
(c)includes a method for determining the amount of Company Securities to be dealt in and the price at which and the date on which the Company Securities are to be dealt in; or
(d)contract, plan or instruction to trade in the Company’s Securities entered into in accordance with Exchange Act Rule 10b5-1 (“Rule 10b5-1”).
PART A – CLEARANCE PROCEDURES FOR RESTRICTED PERSONS
1.CLEARANCE TO DEAL
1.1.Restricted Persons must not Deal for themselves or for anyone else, directly or indirectly, in Company Securities without obtaining clearance from the Company in advance in the manner described below.
1.2.Applications for clearance to Deal must be made in writing and submitted to the Designated Officer at least one business day in advance of the proposed transaction using the form set out in Schedule 2, attached hereto.
1.3.Restricted Persons must not submit an application for clearance to Deal if they are in possession of Inside Information. If a Restricted Persons becomes aware that they are or may be in possession of


Exhibit 11.2

Inside Information after they submit an application, they must inform the Designated Officer as soon as possible and they must refrain from Dealing (even if they have previously been given clearance).
1.4.A Restricted Person will receive a written response to their application. They must keep any refusal confidential and not discuss it with any other person. A refusal to Deal is final and binding. Restricted Persons will not ordinarily be given clearance to Deal in Company Securities during any period when there exists any matter which constitutes Inside Information or during a Closed Period.
1.5.If a Restricted Persons is given clearance, they must Deal as soon as possible and in any event within two business days of receiving clearance. A cleared trade (or any portion of a cleared trade) that has not been effected during the two business day period must be submitted for clearance determination again prior to execution.
1.6.Clearance to Deal may be given subject to conditions. Where this is the case, the Restricted Person must observe those conditions when Dealing.
1.7.    Restricted Persons must not enter into, amend or cancel a Trading Plan or an Investment Program, including the Company’s Employee Stock Purchase Program, under which Company Securities may be purchased or sold (i) unless clearance has been given to do so, or (ii) during any period when there exists any matter which constitutes Inside Information, or (iii) during a Closed Period. Restricted Persons must not deal in Company Securities on considerations of a short-term nature. A sale of Company Securities which were acquired less than a year previously will be considered to be a Dealing of a short-term nature.
1.8.Different clearance procedures will apply where Dealing is being carried out by the Company in relation to an employee share plan (e.g., if the Company is making an option grant or share award to a Restricted Person, or shares are receivable on vesting under a long-term incentive plan). Restricted Persons will be notified separately of any arrangements for clearance if this applies to them.
1.9.If a Restricted Persons acts as the trustee of a trust, they should speak to the Designated Officer about their obligations in respect of any Dealing in Company Securities carried out by the trustee(s) of that trust.
1.10.A Restricted Persons should seek further guidance from the Designated Officer before transacting in:
(a)units or shares in a collective investment undertaking (e.g. a UCITS or an Alternative Investment Fund) which holds, or might hold, Company Securities; or
(b)financial instruments which provide exposure to a portfolio of assets which have, or may have, an exposure to Company Securities.
1.11.Clearance should not be understood to represent legal advice by the Company that a proposed transaction complies with the law.
1.12.If a Restricted Persons is uncertain as to whether or not a particular transaction requires clearance, they must obtain guidance from the Designated Officer before carrying out that transaction.
PART B – ADDITIONAL NOTIFICATION PROVISIONS FOR PDMRS AND PCAS
2.NOTIFICATION OF TRANSACTIONS
2.1.After conducting a Notifiable Transaction, each PDMR and PCA must notify the Company and the FCA in writing of every Notifiable Transaction in Company Securities conducted for your account as follows:


Exhibit 11.2

(a)Notifications to the Company must be made using the template in Schedule 3 and sent to the Designated Officer as soon as practicable and in any event within one business day of the transaction date. You should ensure that your investment managers (whether discretionary or not) notify you of any Notifiable Transactions conducted on your behalf promptly so as to allow you to notify the Company within this time frame.
(b)Notifications to the FCA must be made within three business days of the transaction date. A copy of the notification form is available on the FCA’s website. If you would like, the Designated Officer can assist you with this notification, provided that you ask him or her to do so within one business day of the transaction date.
2.2.For clarity, the notification under this Part B only applies after a Notifiable Transaction has occurred; and the Clearance Application described under Part A should always be sought prior to Dealing or transacting.
2.3.If you are uncertain as to whether or not a particular transaction is a Notifiable Transaction, you must obtain guidance from the Designated Officer.
3.PCAS AND INVESTMENT MANAGERS
3.1.PDMRs must provide the Company with a list of your PCAs and notify the Company of any changes that need to be made to that list.
3.2.PDMRs should ask your PCAs not to Deal (whether directly or through an investment manager) in Company Securities during Closed Periods and not to deal on considerations of a short-term nature. A sale of Company Securities which were acquired less than a year previously will be considered to be a Dealing of a short- term nature.
3.3.    Your PCAs are also required to notify the Company and the FCA in writing, within Section 2.1, of every Notifiable Transaction conducted for their account. For your protection, it is suggested that you should inform your PCAs in writing of this requirement and keep a copy. If your PCAs would like, the Designated Officer can assist them with the notification to the FCA, provided that your PCA asks the Designated Officer to do so within one business day of the transaction date. A copy of the form for notifying the FCA is available on the FCA’s website.
3.4.PDMRs should ask your investment managers (whether or not discretionary) not to Deal in Company Securities on your behalf during Closed Periods.
PART C – Prohibited Transactions
4.CLOSED PERIOD
4.1.No PDMR shall Deal in any security of the Company during a Closed Period unless permitted in accordance with this Policy and applicable law, provided, that such prohibition shall not apply to:
(a)Vesting of equity based awards under the Company’s share plans or;
(b)Dealing in the Company’s Securities pursuant to a Trading Plan adopted to comply with the Rule 10b5-1 and in accordance with this Policy.
5.MARGIN ACCOUNTS SHORT-SALES AND HEDGING
5.1.Individuals are prohibited from purchasing Company Securities on margin (i.e., borrowing money to purchase the securities) or placing Company Securities in a margin account. This prohibition does not apply to cashless exercises of stock options under the Company’s equity plans, nor to situations approved in advance by the Designated Officer.


Exhibit 11.2

5.2.Individuals are prohibited from engaging in short sales of Company Securities (sales of Securities that are not then owned), including a "sale against the box" (a sale with delayed delivery).
5.3.Although we discourage speculative hedging transactions, you are permitted to engage in long-term hedging transactions that are designed to protect your investment in Company Securities (i.e., the hedge must be for at least one year and relate to stock held by the individual). If you wish to engage in any such transaction, you must obtain clearance in accordance with the procedures described in Part A, whether or not you are a Restricted Person. Because these activities raise issues under the
U.S. federal securities laws, any person intending to engage in permitted hedging transactions is strongly urged to consult independent legal counsel.
PART D – Rule 10b5-1 Trading Plans
6.The trading restrictions set forth in this Policy, other than those transactions described under “Prohibited Transactions,” do not apply to transactions under a previously established Trading Plan that complies with all applicable requirements of Rule 10b5-1 (including any applicable cooling-off periods).
7.    The Compliance Officer may impose such other conditions on the implementation and operation of the Trading Plan as the Compliance Officer deems necessary or advisable. Individuals may not adopt more than one Trading Plan at a time except under the limited circumstances permitted by Rule 10b5-1 and subject to preapproval by the Compliance Officer.
8.    An individual may only enter into or modify a Trading Plan outside of a Closed Period and, in any event, when the individual does not possess material nonpublic information. Modifications to and terminations of a Trading Plan are subject to preapproval by the Compliance Officer and modifications of a Trading Plan that change the amount, price, or timing of the purchase or sale of the securities underlying a Trading Plan will trigger a new cooling-off period.
9.    The Company reserves the right to publicly disclose, announce, or respond to inquiries from the media regarding the adoption, modification, or termination of a Trading Plan and non-Rule 10b5-1 trading arrangements, or the execution of transactions made under a Trading Plan. The Company also reserves the right from time to time to suspend, discontinue, or otherwise prohibit transactions under a Trading Plan if the Compliance Officer or the Board of Directors, in its discretion, determines that such suspension, discontinuation, or other prohibition is in the best interests of the Company.
10.Compliance of a Trading Plan with the terms of Rule 10b5-1 and the execution of transactions pursuant to the Trading Plan are the sole responsibility of the person initiating the Trading Plan, and none of the Company, the Compliance Officer, or the Company’s other employees assumes any liability for any delay in reviewing and/or refusing to approve a Trading Plan submitted for approval, nor the legality or consequences relating to a person entering into, informing the Company of, or trading under, a Trading Plan.
PART E – COMPANY TRANSACTIONS
11.From time to time, the Company may engage in transactions in its own securities. It is the Company’s policy to comply with all applicable securities and state laws (including appropriate approvals by the Board of Directors or appropriate committee as well as shareholders at a general meeting, if required) when engaging in transactions in the Company’s Securities.


Exhibit 11.2

SCHEDULE 1 - DEALINGS
The following is a non-exhaustive list of transactions which are Dealings:
1.the pledging or lending of Company Securities (although a pledge, or a similar security interest, of Company Securities in connection with the depositing of Company Securities in a custody account is not “Dealing”, unless and until such pledge or other security interest is designated to secure a specific credit facility);
2.transactions in Company Securities carried out by persons professionally arranging or executing transactions or by another person on behalf of a Restricted Person, including where discretion is exercised;
3.transactions in Company Securities made under a life insurance policy, where (i) the policyholder is a Restricted Person; (ii) the investment risk is borne by the policyholder; and (iii) the policyholder has the power or discretion to make investment decisions regarding specific instruments in that life insurance policy or to execute transactions regarding specific instruments for that life insurance policy;
4.an acquisition, disposal, short sale, subscription or exchange of Company Securities;
5.the acceptance or exercise of an option over Company Securities, including of a share option granted as part of a remuneration package, and the disposal of shares stemming from the exercise of a share option;
6.entering into or exercise of equity swaps related to Company Securities;
7.transactions in or related to derivatives over Company Securities, including cash-settled transactions and phantom options;
8.entering into a contract for difference on Company Securities;
9.the acquisition, disposal or exercise of rights in relation to Company Securities, including put and call options and warrants;
10.subscription to a share capital increase or debt instrument issuance of the Company;
11.transactions in derivatives and financial instruments linked to a debt instrument of the Company including credit default swaps;
12.conditional transactions relating to Company Securities. The completion of such transactions upon fulfilment of the conditions (provided no further action is required by the Restricted Person) does not constitute Dealing and therefore does not require clearance, but such completion would be a “Notifiable Transaction” under Part B of the Dealing Code;
13.the automatic or non-automatic conversion of a Company Security into another Company Security, including the exchange of convertible bonds to shares;
14.gifts and donations of Company Securities made or received, or an inheritance of Company Securities received;
15.transactions executed in index-related products, baskets and derivatives transacting in Company Securities;
16.transactions executed in shares or units of investment funds which transact in Company Securities;
17.transactions in Company Securities executed by a manager of an investment fund in which a Restricted Person has invested;
18.transactions in Company Securities executed by a third party under an individual portfolio or asset management mandate on behalf or for the benefit of a Restricted Person; and
19.borrowing or lending of Company Securities.


Exhibit 11.2

SCHEDULE 2 - CLEARANCE APPLICATION TEMPLATE
Diversified Energy Company PLC (the “Company”)
Application for clearance to deal
If you wish to apply for clearance to deal under the Company’s Securities Dealing Code, please complete sections 1 and 2 of the table below and submit this form to the Designated Officer. By submitting this form, you will be deemed to have confirmed and agreed that:
(i)the information included in this form is accurate and complete;
(ii)you are not in possession of inside information relating to the Company or any Company Securities;
(iii)if you are given clearance to deal and you still wish to deal, you will do so as soon as possible and in any event within two business days; and
(iv)if you become aware that you are in possession of inside information before you deal, you will inform the Designated Officer and refrain from dealing.

1.Applicant
a)Name
[Include applicant name and name of the company or trust in which the shares are registered if not in our personal name.]
b)
Contact details
[For executive directors and other employees, please include email address.]
[For non-executive directors, please include email address and telephone number.]
2.
Proposed dealing
a)
Description of the securities
[e.g. ordinary shares, a debt instrument, a derivative or a financial instrument linked to a share or debt instrument.]
b)
Number    of securities
[If actual number is not known, provide a maximum amount (e.g. “up to 100 shares” or “up to £1,000 of shares”).]
c)
Nature    of    the dealing
[Description of the transaction type (e.g. acquisition; disposal; subscription; option exercise; settling a contract for difference; entry into, or amendment or cancellation of, an investment program or trading plan).]
d)
Other details
[Please include all other relevant details which might reasonably assist the person considering your application for clearance (e.g. transfer will be for no consideration).]
[If you are applying for clearance to enter into, amend or cancel an investment program or trading plan, please provide full details of the relevant program or plan or attach a copy of its terms.]

Applicant Name (Printed)
Applicant Signature
Date
        

Exhibit 11.2
Provide to:
Diversified Energy Company Plc Attention: Benjamin M. Sullivan, Senior Executive Vice President,
Chief Legal & Risk Officer, and Corporate Secretary

Exhibit 11.2
SCHEDULE 3 - NOTIFICATION TEMPLATE FOR PDMRS AND PCAS
Diversified Energy Company PLC (the “Company”)
Transaction notification
Please send your completed form to the Designated Officer. If you require any assistance in completing this form, please contact the Designated Officer.

1.
Details of PDMR / person closely associated with them (“PCA”)
a)Name
[Include first name(s) and last name(s).]
[If the PCA is a legal person, state its full name including legal form as provided for in the register where it is incorporated, if applicable.]
b)
Position / status
[For PDMRs, state job title e.g. CEO, CFO.]
[For PCAs, state that the notification concerns a PCA and the name and position of the relevant PDMR.]
c)
Initial    notification    / amendment
[Please indicate if this is an initial notification or an amendment to a prior notification. If this is an amendment, please explain the previous error which this amendment has corrected.]
2.
Details of the transaction(s): section to be repeated for (i) each type of instrument; (ii) each type of transaction; (iii) each date; and (iv) each place where transactions have been conducted.
a)
Description    of    the financial instrument
[State the nature of the instrument e.g. a share, a debt instrument, a derivative or a financial instrument linked to a share or debt instrument.]
b)
Nature    of    the transaction
[Description of the transaction type e.g. acquisition, disposal, subscription, contract for difference, etc.]
[Please indicate whether the transaction is linked to the exercise of a share option program.]
[If the transaction was conducted pursuant to an investment program or a trading plan, please indicate that fact and provide the date on which the relevant investment program or trading plan was entered into.]

Exhibit 11.2
c)
Price(s) and volume(s)
Price(s) Volume(s)



[Where more than one transaction of the same nature (purchase, disposal, etc.) of the same financial instrument are executed on the same day and at the same place of transaction, prices and volumes of these transactions should be separately identified in the table above, using as many lines as needed. Do not aggregate or net off transactions.]
[In each case, please specify the currency and the metric for quantity.]
d)
Aggregated information Aggregated volume Price
[Please aggregate the volumes of multiple transactions when these transactions:
•relate to the same financial instrument;
•are of the same nature;
•are executed on the same day; and
•are executed at the same place of transaction.]
•[Please state the metric for quantity.] [Please provide:
•in the case of a single transaction, the price of the single transaction; and
•in the case where the volumes of multiple transactions are aggregated, the weighted average price of the aggregated transactions.]
[Please state the currency.]
e)
Date of the transaction
[Date of the particular day of execution of the notified transaction, using the date format: YYYY-MM-DD and please specify the time zone.]
f)
Place of the transaction
[Please name the trading venue where the transaction was executed. If the transaction was not executed on any trading venue, please state “outside a trading venue” in this box.]

Applicant Name (Printed)
Applicant Signature
Date


Provide to:
Diversified Energy Company Plc Attention: Benjamin M. Sullivan, Senior Executive Vice President,
Chief Legal & Risk Officer, and Corporate Secretary

Exhibit 12.1

Certification by the Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Rusty Hutson, Jr., certify that:
1.I have reviewed this Annual Report on Form 20-F of Diversified Energy Company PLC;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
March 17, 2025/s/ Rusty Hutson, Jr.
DateRusty Hutson, Jr.
Chief Executive Officer


Exhibit 12.1

Certification of the Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Bradley G. Gray, certify that:
1.I have reviewed this Annual Report on Form 20-F of Diversified Energy Company PLC;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
March 17, 2025/s/ Bradley G. Gray
DateBradley G. Gray
Chief Financial Officer

Exhibit 13.1

Certification Pursuant to 18 U. S. C. Section 1350(b), as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Rusty Hutson, Jr., the Chief Executive Officer, and Bradley G. Gray, the Chief Financial Officer of Diversified Energy Company PLC (the Company), hereby certify, that, to their knowledge:
1.The Annual Report on Form 20-F for the year ended December 31, 2024 (the Report), as filed with the Securities and Exchange Commission on March 17, 2025, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 17, 2025/s/ Rusty Hutson, Jr.
DateRusty Hutson, Jr.
Chief Executive Officer
March 17, 2025/s/ Bradley G. Gray
DateBradley G. Gray
Chief Financial Officer



Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (333-276139) and Form F-3 (333-284846) of Diversified Energy Company PLC of our report dated March 17, 2025 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 20-F.

/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 17, 2025


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Exhibit 15.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS



We hereby consent to the inclusion in or incorporation by reference into the Annual Report on Form 20-F of Diversified Energy Company PLC (the "Annual Report") and the Registration Statements on Form S-8 (333-276139) and Form F-3 (333-284846) of our report prepared for Diversified Energy Company PLC dated February 20, 2025, with respect to estimates of proved reserves and future revenue to the Diversified Energy Company PLC interest, as of December 31, 2024, in certain oil and gas properties located in the Appalachian Basin and the Louisiana-Oklahoma-Texas Area of the United States. We also consent to all references to our firm, including the reference to us under the heading "Officers and Professional Advisors", in the Annual Report.
NETHERLAND, SEWELL & ASSOCIATES, INC.
/s/ Eric J. Stevens
By:
Eric J. Stevens, P.E.
President and Chief Operating Officer
Dallas, Texas
March 17, 2025

Exhibit 15.3
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February 20, 2025

Mr. Bradley G. Gray
Diversified Energy Company PLC
1600 Corporate Drive
Birmingham, Alabama 35242
Dear Mr. Gray:
In accordance with your request, we have estimated the proved developed reserves and future revenue, as of December 31, 2024, to the Diversified Energy Company PLC (DEC) interest in certain oil and gas properties located in the Appalachian Basin and the Louisiana-Oklahoma-Texas Area of the United States. We completed our evaluation on or about the date of this letter. It is our understanding that the proved reserves estimated in this report constitute all of the proved reserves owned by DEC. The estimates in this report have been prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission (SEC) and conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas, except that future income taxes are excluded for all properties and, as requested, per-well overhead expenses are excluded for the operated properties. Definitions are presented immediately following this letter. This report has been prepared for DEC's use in filing with the SEC; in our opinion the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for such purpose.
As requested, this report is broken out by DEC operating areas organized into depletion pools, as provided by DEC. We estimate the net reserves and future net revenue to the DEC interest in these properties, as of December 31, 2024, to be:
Net Reserves
Future Net Revenue(1) (M$)
OilNGLGasOil EquivalentPresent Worth
Depletion Pool/Category(MBBL)(MBBL)(MMCF)(MBOE)Totalat 10%
Appalachia
   Proved Developed Producing4,958.868,651.11,849,459.2381,853.1428,526.5781,617.7
   Proved Developed Non-Producing(2)
0.00.00.00.00.00.0
      Total Proved Developed4,958.868,651.11,849,459.2381,853.1428,526.5781,617.7
Barnett
   Proved Developed Producing291.59,662.297,268.426,165.0113,821.371,826.5
Haynesville, Bossier, and Cotton Valley
   Proved Developed Producing3,234.913,498.5691,299.3131,949.9421,866.4392,195.6
Mid-Continent
   Proved Developed Producing10,039.011,659.7257,592.764,630.8483,452.0346,131.7
Total – All Depletion Pools
Proved Developed Producing
18,524.2103,471.42,895,619.6604,598.91,447,666.21,591,771.6
Proved Developed Non-Producing(2)
0.00.00.00.00.00.0
   Total Proved Developed
18,524.2103,471.42,895,619.6604,598.91,447,666.21,591,771.6
Totals may not add because of rounding.
(1)    Future net revenue is after deducting estimated abandonment costs.
(2)    There are no proved developed non-producing reserves at the price and cost parameters used in this report.
The oil volumes shown include crude oil and condensate. Oil and natural gas liquids (NGL) volumes are expressed in thousands of barrels (MBBL); a barrel is equivalent to 42 United States gallons. Gas volumes are expressed in millions of
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cubic feet (MMCF) at standard temperature and pressure bases. Oil equivalent volumes are expressed in thousands of barrels of oil equivalent (MBOE), determined using the ratio of 6 MCF of gas to 1 barrel of oil.
Reserves categorization conveys the relative degree of certainty; reserves subcategorization is based on development and production status. Our study indicates that as of December 31, 2024, there are no proved undeveloped reserves for these properties. No study was made to determine whether probable or possible reserves might be established for these properties. The estimates of reserves and future revenue included herein have not been adjusted for risk. This report does not include any value that could be attributed to interests in undeveloped acreage.
Gross revenue is DEC's share of the gross (100 percent) revenue from the properties prior to any deductions. Future net revenue is after deductions for DEC's share of production taxes, ad valorem taxes, capital costs, abandonment costs, and operating expenses but before consideration of any income taxes. The future net revenue has been discounted at an annual rate of 10 percent to determine its present worth, which is shown to indicate the effect of time on the value of money. Future net revenue presented in this report, whether discounted or undiscounted, should not be construed as being the fair market value of the properties.
Prices used in this report are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2024. For oil and NGL volumes, the average West Texas Intermediate spot price of $76.32 per barrel is adjusted for quality, transportation fees, and market differentials. For gas volumes, the average Henry Hub spot price of $2.130 per MMBTU is adjusted for energy content, transportation fees, and market differentials. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the properties are $74.76 per barrel of oil, $20.02 per barrel of NGL, and $1.830 per MCF of gas.
Operating costs used in this report are based on operating expense records of DEC. For the nonoperated properties, these costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels.  As requested, operating costs for the operated properties include only direct lease- and field-level costs.  Operating costs have been divided into per-well costs and per-unit-of-production costs.  For all properties, headquarters general and administrative overhead expenses of DEC are not included. This report includes additional operating expenses for the effects of all applicable firm transportation contracts. It is our understanding that DEC is supplying all committed volumes for these contracts. Operating costs are not escalated for inflation.
Capital costs used in this report were provided by DEC and are based on authorizations for expenditure and actual costs from recent activity. Capital costs are included as required for artificial lift, workovers, production equipment, and midstream facility maintenance. Based on our understanding of future development plans, a review of the records provided to us, and our knowledge of similar properties, we regard these estimated capital costs to be reasonable. Abandonment costs used in this report are DEC's estimates of the costs to abandon the wells and production facilities, net of any salvage value. Capital costs and abandonment costs are not escalated for inflation.
For the purposes of this report, we did not perform any field inspection of the properties, nor did we examine the mechanical operation or condition of the wells and facilities. We have not investigated possible environmental liability related to the properties; therefore, our estimates do not include any costs due to such possible liability.
We have made no investigation of potential volume and value imbalances resulting from overdelivery or underdelivery to the DEC interest. Therefore, our estimates of reserves and future revenue do not include adjustments for the settlement of any such imbalances; our projections are based on DEC receiving its net revenue interest share of estimated future gross production. In addition, no consideration has been given to any potential future gas curtailment activities or changes in market conditions.
The reserves shown in this report are estimates only and should not be construed as exact quantities. Proved reserves are those quantities of oil and gas which, by analysis of engineering and geoscience data, can be estimated with reasonable certainty to be economically producible; probable and possible reserves are those additional reserves which are sequentially less certain to be recovered than proved reserves. Estimates of reserves may increase or decrease as a

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result of market conditions, future operations, changes in regulations, or actual reservoir performance. In addition to the primary economic assumptions discussed herein, our estimates are based on certain assumptions including, but not limited to, that the properties will be operated in a prudent manner, that no governmental regulations or controls will be put in place that would impact the ability of the interest owner to recover the reserves, and that our projections of future production will prove consistent with actual performance. If the reserves are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing this report.
For the purposes of this report, we used technical and economic data including, but not limited to, well logs, geologic maps, well test data, production data, historical price and cost information, and property ownership interests. The reserves in this report have been estimated using deterministic methods; these estimates have been prepared in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE Standards). We used standard engineering and geoscience methods, or a combination of methods, including performance analysis, volumetric analysis, and analogy, that we considered to be appropriate and necessary to categorize and estimate reserves in accordance with SEC definitions and regulations. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geoscience data; therefore, our conclusions necessarily represent only informed professional judgment.
The data used in our estimates were obtained from DEC, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc. (NSAI) and were accepted as accurate. Supporting work data are on file in our office. We have not examined the titles to the properties or independently confirmed the actual degree or type of interest owned. The technical persons primarily responsible for preparing the estimates presented herein meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the SPE Standards. Robert C. Barg, a Licensed Professional Engineer in the State of Texas, has been practicing consulting petroleum engineering at NSAI since 1989 and has over 6 years of prior industry experience. William J. Knights, a Licensed Professional Geoscientist in the State of Texas, has been practicing consulting petroleum geoscience at NSAI since 1991 and has over 10 years of prior industry experience. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties nor are we employed on a contingent basis.
    Sincerely,
    NETHERLAND, SEWELL & ASSOCIATES, INC.
    Texas Registered Engineering Firm F-2699
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DEFINITIONS OF OIL AND GAS RESERVES
Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)
The following definitions are set forth in U.S. Securities and Exchange Commission (SEC) Regulation S-X Section 210.4-10(a). Also included is supplemental information from (1) the 2018 Petroleum Resources Management System approved by the Society of Petroleum Engineers, (2) the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas, and (3) the SEC's Compliance and Disclosure Interpretations.
(1) Acquisition of properties. Costs incurred to purchase, lease or otherwise acquire a property, including costs of lease bonuses and options to purchase or lease properties, the portion of costs applicable to minerals when land including mineral rights is purchased in fee, brokers' fees, recording fees, legal costs, and other costs incurred in acquiring properties.
(2) Analogous reservoir. Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, an "analogous reservoir" refers to a reservoir that shares the following characteristics with the reservoir of interest:
(i)    Same geological formation (but not necessarily in pressure communication with the reservoir of interest);
(ii)    Same environment of deposition;
(iii)    Similar geological structure; and
(iv)    Same drive mechanism.
Instruction to paragraph (a)(2): Reservoir properties must, in the aggregate, be no more favorable in the analog than in the reservoir of interest.
(3) Bitumen. Bitumen, sometimes referred to as natural bitumen, is petroleum in a solid or semi-solid state in natural deposits with a viscosity greater than 10,000 centipoise measured at original temperature in the deposit and atmospheric pressure, on a gas free basis. In its natural state it usually contains sulfur, metals, and other non-hydrocarbons.
(4) Condensate. Condensate is a mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at surface pressure and temperature.
(5) Deterministic estimate. The method of estimating reserves or resources is called deterministic when a single value for each parameter (from the geoscience, engineering, or economic data) in the reserves calculation is used in the reserves estimation procedure.
(6) Developed oil and gas reserves. Developed oil and gas reserves are reserves of any category that can be expected to be recovered:
(i)    Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and
(ii)    Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.
Supplemental definitions from the 2018 Petroleum Resources Management System:
Developed Producing Reserves – Expected quantities to be recovered from completion intervals that are open and producing at the effective date of the estimate. Improved recovery Reserves are considered producing only after the improved recovery project is in operation.
Developed Non-Producing Reserves – Shut-in and behind-pipe Reserves. Shut-in Reserves are expected to be recovered from (1) completion intervals that are open at the time of the estimate but which have not yet started producing, (2) wells which were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons. Behind-pipe Reserves are expected to be recovered from zones in existing wells that will require additional completion work or future re-completion before start of production with minor cost to access these reserves. In all cases, production can be initiated or restored with relatively low expenditure compared to the cost of drilling a new well.
(7) Development costs. Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas. More specifically, development costs, including depreciation and applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to:
(i)    Gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building, and relocating public roads, gas lines, and power lines, to the extent necessary in developing the proved reserves.
(ii)    Drill and equip development wells, development-type stratigraphic test wells, and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment, and the wellhead assembly.
    Definitions - Page 1 of 6
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DEFINITIONS OF OIL AND GAS RESERVES
Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)
(iii)    Acquire, construct, and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices, and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems.
(iv)    Provide improved recovery systems.
(8) Development project. A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field, or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.
(9) Development well. A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.
(10) Economically producible. The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. The value of the products that generate revenue shall be determined at the terminal point of oil and gas producing activities as defined in paragraph (a)(16) of this section.
(11) Estimated ultimate recovery (EUR). Estimated ultimate recovery is the sum of reserves remaining as of a given date and cumulative production as of that date.
(12) Exploration costs. Costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as prospecting costs) and after acquiring the property. Principal types of exploration costs, which include depreciation and applicable operating costs of support equipment and facilities and other costs of exploration activities, are:
(i)    Costs of topographical, geographical and geophysical studies, rights of access to properties to conduct those studies, and salaries and other expenses of geologists, geophysical crews, and others conducting those studies. Collectively, these are sometimes referred to as geological and geophysical or "G&G" costs.
(ii)    Costs of carrying and retaining undeveloped properties, such as delay rentals, ad valorem taxes on properties, legal costs for title defense, and the maintenance of land and lease records.
(iii)    Dry hole contributions and bottom hole contributions.
(iv)    Costs of drilling and equipping exploratory wells.
(v)    Costs of drilling exploratory-type stratigraphic test wells.
(13) Exploratory well. An exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, an extension well, a service well, or a stratigraphic test well as those items are defined in this section.
(14) Extension well. An extension well is a well drilled to extend the limits of a known reservoir.
(15) Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field which are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms "structural feature" and "stratigraphic condition" are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc.
(16) Oil and gas producing activities.
(i)    Oil and gas producing activities include:
(A)    The search for crude oil, including condensate and natural gas liquids, or natural gas ("oil and gas") in their natural states and original locations;
(B)    The acquisition of property rights or properties for the purpose of further exploration or for the purpose of removing the oil or gas from such properties;
(C)    The construction, drilling, and production activities necessary to retrieve oil and gas from their natural reservoirs, including the acquisition, construction, installation, and maintenance of field gathering and storage systems, such as:
(1)    Lifting the oil and gas to the surface; and
(2)    Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons); and
    Definitions - Page 2 of 6
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DEFINITIONS OF OIL AND GAS RESERVES
Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)
(D)    Extraction of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coalbeds, or other nonrenewable natural resources which are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction.
Instruction 1 to paragraph (a)(16)(i): The oil and gas production function shall be regarded as ending at a "terminal point", which is the outlet valve on the lease or field storage tank. If unusual physical or operational circumstances exist, it may be appropriate to regard the terminal point for the production function as:
a.    The first point at which oil, gas, or gas liquids, natural or synthetic, are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal; and
b.    In the case of natural resources that are intended to be upgraded into synthetic oil or gas, if those natural resources are delivered to a purchaser prior to upgrading, the first point at which the natural resources are delivered to a main pipeline, a common carrier, a refinery, a marine terminal, or a facility which upgrades such natural resources into synthetic oil or gas.
Instruction 2 to paragraph (a)(16)(i): For purposes of this paragraph (a)(16), the term saleable hydrocarbons means hydrocarbons that are saleable in the state in which the hydrocarbons are delivered.
(ii)    Oil and gas producing activities do not include:
(A)    Transporting, refining, or marketing oil and gas;
(B)    Processing of produced oil, gas, or natural resources that can be upgraded into synthetic oil or gas by a registrant that does not have the legal right to produce or a revenue interest in such production;
(C)    Activities relating to the production of natural resources other than oil, gas, or natural resources from which synthetic oil and gas can be extracted; or
(D)    Production of geothermal steam.
(17) Possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.
(i)    When deterministic methods are used, the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves. When probabilistic methods are used, there should be at least a 10% probability that the total quantities ultimately recovered will equal or exceed the proved plus probable plus possible reserves estimates.
(ii)    Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where data control and interpretations of available data are progressively less certain. Frequently, this will be in areas where geoscience and engineering data are unable to define clearly the area and vertical limits of commercial production from the reservoir by a defined project.
(iii)    Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves.
(iv)    The proved plus probable and proved plus probable plus possible reserves estimates must be based on reasonable alternative technical and commercial interpretations within the reservoir or subject project that are clearly documented, including comparisons to results in successful similar projects.
(v)    Possible reserves may be assigned where geoscience and engineering data identify directly adjacent portions of a reservoir within the same accumulation that may be separated from proved areas by faults with displacement less than formation thickness or other geological discontinuities and that have not been penetrated by a wellbore, and the registrant believes that such adjacent portions are in communication with the known (proved) reservoir. Possible reserves may be assigned to areas that are structurally higher or lower than the proved area if these areas are in communication with the proved reservoir.
(vi)    Pursuant to paragraph (a)(22)(iii) of this section, where direct observation has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves should be assigned in the structurally higher portions of the reservoir above the HKO only if the higher contact can be established with reasonable certainty through reliable technology. Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as probable and possible oil or gas based on reservoir fluid properties and pressure gradient interpretations.
(18) Probable reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.
(i)    When deterministic methods are used, it is as likely as not that actual remaining quantities recovered will exceed the sum of estimated proved plus probable reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates.
    Definitions - Page 3 of 6
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DEFINITIONS OF OIL AND GAS RESERVES
Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)
(ii)    Probable reserves may be assigned to areas of a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain, even if the interpreted reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be assigned to areas that are structurally higher than the proved area if these areas are in communication with the proved reservoir.
(iii)    Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.
(iv)    See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section.
(19) Probabilistic estimate. The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter (from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence.
(20) Production costs.
(i)    Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. They become part of the cost of oil and gas produced. Examples of production costs (sometimes called lifting costs) are:
(A)    Costs of labor to operate the wells and related equipment and facilities.
(B)    Repairs and maintenance.
(C)    Materials, supplies, and fuel consumed and supplies utilized in operating the wells and related equipment and facilities.
(D)    Property taxes and insurance applicable to proved properties and wells and related equipment and facilities.
(E)    Severance taxes.
(ii)    Some support equipment or facilities may serve two or more oil and gas producing activities and may also serve transportation, refining, and marketing activities. To the extent that the support equipment and facilities are used in oil and gas producing activities, their depreciation and applicable operating costs become exploration, development or production costs, as appropriate. Depreciation, depletion, and amortization of capitalized acquisition, exploration, and development costs are not production costs but also become part of the cost of oil and gas produced along with production (lifting) costs identified above.
(21) Proved area. The part of a property to which proved reserves have been specifically attributed.
(22) Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
(i)    The area of the reservoir considered as proved includes:
(A)    The area identified by drilling and limited by fluid contacts, if any, and
(B)    Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.
(ii)    In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.
(iii)    Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.
(iv)    Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:
(A)    Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and
    Definitions - Page 4 of 6
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DEFINITIONS OF OIL AND GAS RESERVES
Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)
(B)    The project has been approved for development by all necessary parties and entities, including governmental entities.
(v)    Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.
(23) Proved properties. Properties with proved reserves.
(24) Reasonable certainty. If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be achieved than not, and, as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic data are made to estimated ultimate recovery (EUR) with time, reasonably certain EUR is much more likely to increase or remain constant than to decrease.
(25) Reliable technology. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.
(26) Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.
Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).
Excerpted from the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas:
932-235-50-30 A standardized measure of discounted future net cash flows relating to an entity's interests in both of the following shall be disclosed as of the end of the year:
    a.    Proved oil and gas reserves (see paragraphs 932-235-50-3 through 50-11B)
    b.    Oil and gas subject to purchase under long-term supply, purchase, or similar agreements and contracts in which the entity participates in the operation of the properties on which the oil or gas is located or otherwise serves as the producer of those reserves (see paragraph 932-235-50-7).
The standardized measure of discounted future net cash flows relating to those two types of interests in reserves may be combined for reporting purposes.
932-235-50-31 All of the following information shall be disclosed in the aggregate and for each geographic area for which reserve quantities are disclosed in accordance with paragraphs 932-235-50-3 through 50-11B:
    a.    Future cash inflows. These shall be computed by applying prices used in estimating the entity's proved oil and gas reserves to the year-end quantities of those reserves. Future price changes shall be considered only to the extent provided by contractual arrangements in existence at year-end.
    b.    Future development and production costs. These costs shall be computed by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. If estimated development expenditures are significant, they shall be presented separately from estimated production costs.
    c.    Future income tax expenses. These expenses shall be computed by applying the appropriate year-end statutory tax rates, with consideration of future tax rates already legislated, to the future pretax net cash flows relating to the entity's proved oil and gas reserves, less the tax basis of the properties involved. The future income tax expenses shall give effect to tax deductions and tax credits and allowances relating to the entity's proved oil and gas reserves.
    d.    Future net cash flows. These amounts are the result of subtracting future development and production costs and future income tax expenses from future cash inflows.
    e.    Discount. This amount shall be derived from using a discount rate of 10 percent a year to reflect the timing of the future net cash flows relating to proved oil and gas reserves.
    f.    Standardized measure of discounted future net cash flows. This amount is the future net cash flows less the computed discount.
    Definitions - Page 5 of 6
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DEFINITIONS OF OIL AND GAS RESERVES
Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)
(27) Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.
(28) Resources. Resources are quantities of oil and gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable, and another portion may be considered to be unrecoverable. Resources include both discovered and undiscovered accumulations.
(29) Service well. A well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include gas injection, water injection, steam injection, air injection, salt-water disposal, water supply for injection, observation, or injection for in-situ combustion.
(30) Stratigraphic test well. A stratigraphic test well is a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intent of being completed for hydrocarbon production. The classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon exploration. Stratigraphic tests are classified as "exploratory type" if not drilled in a known area or "development type" if drilled in a known area.
(31) Undeveloped oil and gas reserves. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.
(i)    Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.
(ii)    Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.
From the SEC's Compliance and Disclosure Interpretations (October 26, 2009):
Although several types of projects — such as constructing offshore platforms and development in urban areas, remote locations or environmentally sensitive locations — by their nature customarily take a longer time to develop and therefore often do justify longer time periods, this determination must always take into consideration all of the facts and circumstances. No particular type of project per se justifies a longer time period, and any extension beyond five years should be the exception, and not the rule.
Factors that a company should consider in determining whether or not circumstances justify recognizing reserves even though development may extend past five years include, but are not limited to, the following:

        The company's level of ongoing significant development activities in the area to be developed (for example, drilling only the minimum number of wells necessary to maintain the lease generally would not constitute significant development activities);
        The company's historical record at completing development of comparable long-term projects;
        The amount of time in which the company has maintained the leases, or booked the reserves, without significant development activities;
        The extent to which the company has followed a previously adopted development plan (for example, if a company has changed its development plan several times without taking significant steps to implement any of those plans, recognizing proved undeveloped reserves typically would not be appropriate); and
        The extent to which delays in development are caused by external factors related to the physical operating environment (for example, restrictions on development on Federal lands, but not obtaining government permits), rather than by internal factors (for example, shifting resources to develop properties with higher priority).
(iii)    Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in paragraph (a)(2) of this section, or by other evidence using reliable technology establishing reasonable certainty.
(32) Unproved properties. Properties with no proved reserves.
    Definitions - Page 6 of 6