Diversified Energy Co

Index to the Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies

Description of the Company

Diversified Energy Company, a Delaware corporation (“Diversified,” “DEC,” “we,” “us,” “our,” or collectively with its wholly owned

subsidiaries, the “Company”) is an independent energy company engaged in the production, transportation and marketing of natural

gas, oil and NGLs. The Company’s assets are locatedin the United States within the following geographical operating areas:

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

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

•Other, which includes Florida and Wyoming.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with U.S. generally accepted

accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to

such rules and regulations, certain disclosures have been condensed or omitted. These unaudited condensed consolidated financial

statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended

December 31, 2025, as included in the Company’s annual report on Form 10-K. The accompanying unaudited condensed consolidated

financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of

our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly

owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been

eliminated.

Reclassification

Certain reclassifications have been made to prior period financial statements and related disclosures to conform to current period

presentation. These reclassifications have no impact on previously reported total assets, total liabilities, net income or total operating

cash flows.

Segment Reporting

In accordance with ASC 280, Segment Reporting, the Company establishes operating segments based on the components of the

business that are regularly reviewed by the chief executive officer, who serves as the chief operating decision maker (“CODM”), for

purposes of allocating resources and assessing performance. The CODM evaluates the Company’s operations in a consolidated

manner. Accordingly, the Company hasone reportable segment.

The CODM uses consolidated income (loss) before income taxes for purposes of allocating resources and assessing operating

performance. The CODM is also regularly provided information on lease operating expense, transportation expense, production taxes,

and general and administrative expense, which represent significant segment expenses. Other segment items primarily consist of

depreciation, depletion and amortization, interest expense, and income tax expense (benefit). These amounts are derived from, and can

be found within, the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss).

Segment profit or loss reconciles to consolidated income (loss) before income taxes with no reconciling items.

There have been no material changes in the Company’s reportable segment, the CODM, or the measures used to assess segment

performance since December 31, 2025. There were no material changes in segment assets from those reported in the Company’s

annual report on Form 10-K for the year ended December 31, 2025.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less. The Company

maintains cash balances at financial institutions, which at times may exceed federally insured limits. The Company has not

experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash

equivalents.

Restricted Cash

Restricted cash represents cash whose withdrawal or use is limited by contractual or regulatory requirements and is not available for

general corporate purposes. Restricted cash is presented as either a current or noncurrent asset based on the expected timing of the

related obligations.

Restricted cash primarily consists of:

•Amounts held as collateral for surety bonds or required by state agencies for well abandonment obligations; and

•Cash reserves required for interest payments and fees related to the Company’s asset-backed securitization arrangements,

which are administered by an independent indenture trustee.

The Company’s accounting policy and the nature of its restricted cash arrangements are consistent with those described in its annual

report on Form 10-K for the year ended December 31, 2025, and there were no material changes during the interim period.

Recently Adopted Accounting Standards

In the current year, the Company adopted the following accounting standards:

The adoption of these standards did not have a significant impact on the amounts reported in the Condensed Consolidated Financial

Statements.

Note 2 - Acquisitions & Divestitures

2026 Acquisitions

During thethree months ended March 31, 2026, the Company collectively acquired certain midstream and plugging assets for total

consideration of$17 million, inclusive of customary purchase price adjustments, and transaction costs. Additionally, in February

2026, the Company paid a deposit of$25 million for the acquisition of certain producing properties from Sheridan Holding Company

III, LLC (“Sheridan”). This acquisition was completed in April 2026 and is discussed in Note 14.

2026 Divestitures

During the three months ended March 31, 2026, the Company divested certain non-core undeveloped acreage for consideration of

$101 million. The consideration received exceeded the carrying amount of the net assets divested resulting in a gain on natural gas and

oil properties and equipment of$101 million. Additionally, the disposal of various property, plant and equipment in the normal course

of business resulted in cash proceeds of$1 million and a loss on natural gas and oil properties and equipment of$3 million.

2025 Acquisitions

Canvas Energy Inc. (“Canvas”) Asset Acquisition

On November 24, 2025, the Company acquired Canvas. The Company determined that substantially all of the fair value of the gross

assets acquired was concentrated in a single asset group; therefore, the transaction was accounted for as an asset acquisition. The

Company paid purchase consideration of$533 million, inclusive of customary purchase price adjustments. The purchase consideration

consisted of the issuance of 3,718,209 shares of common stock and$399 million in cash, inclusive oftransaction costs of$13 million.

On the date of the acquisition, the Company settled the outstanding balance of$81 million on Canvas’s credit facility.

Refer to Notes 7 and 10 for additional information regarding stockholders’ equity and debt.

The fair value of the consideration transferred and the allocation to the assets acquired and liabilities assumed based on their relative

fair values as of November 24, 2025 were as follows(in thousands):

(a)The fair value of the common stock issued was based on the closing price of the Company’s common stock on November 24, 2025

of$14.51. The fair value of our common stock is a Level 1 input as our stock price is a quoted price in an active market.

Maverick Natural Resources, LLC (“Maverick”) Business Combination

On March 14, 2025, the Company acquired Maverick. The Company determined the transaction did not have a significant

concentration of assets and that it acquired an identifiable set of inputs, processes, and outputs. As a result, the Company concluded

the transaction was a business combination. The Company paid purchase consideration of approximately$666 million, inclusive of

customary purchase price adjustments. The purchase consideration consisted of the issuance of 21,194,213 shares of common stock

and$211 million in cash. As part of the acquisition, the Company paid off on the acquisition date the$202 million balance

outstanding on Maverick’s credit facility and assumed$518 million of ABS Maverick Notes outstanding. Transaction costs associated

with the acquisition were$21 million and are included within G&A expense in the Consolidated Statements of Comprehensive

Income (Loss).

Refer to Notes 7 and 10 for additional information regarding stockholders’ equity and debt.

The fair value of the consideration transferred and the fair value amounts of the assets acquired and liabilities assumed as of March 14,

2025 were as follows(in thousands):

(a)The fair value of the common stock issued was based on the closing price of the Company’s common stock on March 14, 2025 of

$11.95. The fair value of our common stock is a Level 1 input as our stock price is a quoted price in an active market.

The fair value of the natural gas and oil properties was based on estimated future production volumes, adjusted for risk characteristics

associated with the classification of the acquired reserves, and related future net cash flows discounted using a weighted average cost

of capital. The Company utilized NYMEX strip pricing adjusted for inflation. Management utilized the assistance of a third-party

valuation expert to estimate the fair value of the natural gas and oil properties acquired. The Company considers the discount rate,

commodity pricing, production and operating expense to be the assumptions most sensitive to the fair value of the acquired natural gas

and oil properties and represent Level 3 inputs, other than NYMEX strip pricing which represents a Level 1 input.

Summit Natural Resources, LLC (“Summit”) Asset Acquisition

On February 27, 2025, the Company acquired certain upstream assets and related infrastructure within Virginia, West Virginia, and

Alabama of the Appalachian Region from Summit. Given the concentration of assets, this transaction was considered an asset

acquisition rather than a business combination. The Company paid consideration of$42 million, inclusive of transaction costs of$0.4

million and customary purchase price adjustments, substantially all of which was accounted for as natural gas and oil properties. The

transaction was funded through proceeds from the ABS X Notes collateralized, in part, by the acquired assets. Refer to Note 10 for

additional information regarding debt.

Other Acquisitions

During thethree months ended March 31, 2025, the Company acquired certain midstream and upstream assets that are contiguous to

its existing Central Region assets. The Company paid total consideration of$16 million, inclusive of non-cash consideration of$4

million, customary purchase price adjustments, and transaction costs. Given the concentration of assets, these transactions were

considered asset acquisitions rather than business combinations.

2025 Divestitures

During thethree months ended March 31, 2025, the Company divested certain non-core undeveloped acreage across its operating

footprint for consideration of$2 million. The consideration received exceeded the carrying amount of the net assets divested resulting

in a gain onnatural gas and oil properties and equipment of$2 million.

Note 3 - Income Tax

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income,

plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes

for thethree months ended March 31, 2026 and 2025 differs from the amount that would be provided by applying the statutory U.S.

federal income tax rate of 21%to pre-tax income primarily due to the impact of federal tax credits (principally the marginal well tax

credit), state income taxes, permanent differences, and discrete items recognized in the interim period.

The effective tax rates for thethree months ended March 31, 2026 and 2025 were 48.7% and(25.4)%, respectively. For thethree

months ended March 31, 2026, we reported a taxbenefit of$153 million, a change of$218 million, compared to a taxexpense of$65

million in 2025. The effective tax rate for March 31, 2026 was primarily impacted by the recognition of the federal marginal well tax

credit available to qualified producers and due to management’s estimate of the annual effective tax rate expected for the full financial

year. The federal government provides these credits to encourage companies to continue producing lower-volume wells during periods

of low prices to maintain 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. The differences between the statutory U.S. federal

income tax rate and the effective tax rates are summarized as follows:

(a)Federal tax credits consist primarily of the marginal well tax credit. Because the credit is a dollar amount determined

independently of pre-tax results, its impact, expressed as a percentage of pre-tax income (loss), can be positive or negative and

can vary significantly between periods depending on the sign and magnitude of the Company's forecasted annual pre-tax book

income (loss) used in the estimated annual effective tax rate.

Note 4 - Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to common shareholders by the

weighted average number of shares of common stock outstanding during the period, excluding shares held in treasury (if any) and the

Employee Benefit Trust (“EBT”). Diluted EPS reflects the potential dilution that could occur if share-based compensation awards

were exercised or converted into shares, except when their effect would be anti-dilutive. Refer to Note 7 for additional information

regarding the EBT.

The following table presents the reconciliation of the numerators and denominators used in the calculation of basic and diluted EPS for

the periods presented:

(a)Share-based compensation awards excluded from the diluted EPS calculation because their effect would have been anti-dilutive.

Note 5 - Natural Gas & Oil Properties

The following table summarizes the Company's natural gas and oil properties for the period presented:

(a)During thethree months ended March 31, 2026, the Company’s additions were primarily due to development and recurring

capital expenditures.

Note 6 - Derivatives

The Company 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 Company’s cash flows related to interest payments on variable rate debt

obligations can be impacted by fluctuations in interest rate markets, depending on its debt structure. To manage these risks, the

Company enters into derivative contracts primarily with major financial institutions and energy trading counterparties. As of March

31, 2026, these instruments included swaps, collars, basis swaps, and stand-alone put and call options. The Company does not intend

to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative

instruments for hedge accounting treatment. Below is a description of these instruments:

The Company may elect to enter into offsetting transactions for the above instruments for the purpose of cancelling or terminating

certain positions.

The following table summarizes the Company's calculated fair value of derivatives for the date presented:

(a)Includes future cash settlements for deferred premiums.

Netting of derivative assets and liabilities is applied at each reporting date when a legal right of offset exists under a master netting

arrangement. The Company elected to present these derivative assets and liabilities on a net basis when these conditions are satisfied.

The following table outlines the Company’s net derivatives for the date presented:

The Company 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 Company’s recognized assets and liabilities for the date presented:

The Company recorded the following gains (losses) on derivatives in the Consolidated Statement of Operations for the specified

periods:

(a)Represents the cash settlement of derivatives that were settled during the period.

(b)Represents the change in fair value of derivatives, net of the carrying value of derivatives that were settled during the period.

All derivatives are classified as Level 2 instruments under ASC 820, as their valuation relies on observable market inputs other than

quoted prices. For further details related to fair value measurements, refer to Note 11.

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 Company 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 Company manages distinct, long-dated derivative contract

portfolios for its ABS financings and Term Loans. Additionally, the Company maintains a separate derivative contract portfolio for

assets secured by the Credit Facility. These derivative contract portfolios associated with the Company’s ABS financings, Term

Loans, and Credit Facility are presented in the Company’s Statement of Financial Position.

2025 Modifications and Extinguishments

In February 2025, the Company adjusted portions of its commodity derivative portfolio across its legal entities for approximately

$150 million in connection with the completion of the ABS X financing arrangement. The Company made further adjustments to its

commodity derivative portfolio for approximately$21 million for the retirement of the ABS I and Term Loan I financing

arrangements.

Note 7 - Stockholders' Equity

The Company is authorized to issue up to 350,000,000 shares of common stock, par value$0.01 per share. As of March 31, 2026 and

December 31, 2025, the Company had 72,323,471 and 76,979,625 shares of common stock issued and outstanding.

The Company is authorized to issue 30,000,000 shares of preferred stock, par value$0.01 per share. No preferred shares have been

issued or are outstanding.

Issuance of Common Stock

In March 2025, the Company announced the completion of its previously announced acquisition of Maverick. The transaction was

funded in part through the issuance of 21,194,213 new shares of common stock directly to the unitholders of Maverick. The total value

of the stock consideration was$253 million, excluding transaction costs of$0.4 million, based on the Company’s stock price on the

NYSE on the closing date of the Maverick transaction.

In February 2025, the Company issued 8,500,000 new shares of common stock at$14.50 per share to raise gross proceeds of$123

million, excluding transaction costs of$6 million. The Company used the net proceeds to repay a portion of the debt incurred in

connection with the Maverick acquisition.

For further details related to acquisitions, refer to Note 2.

Treasury Stock

The Company’s holdings in its own equity instruments are classified as treasury stock. The consideration paid, along with any directly

attributable incremental costs, is deducted from the Company’s stockholders’ equity until the shares are either cancelled or reissued.

No gain or loss is recognized in the Consolidated Statements of Comprehensive Income (Loss) upon the purchase, sale, issuance, or

cancellation of treasury stock.

Employee Benefit Trust (“EBT”)

In March 2022, the Company established the EBT to benefit its employees. The Company 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 Company’s 2017 and 2025 Equity

Incentive Plans and the Employee Stock Purchase Plan (the “ESPP”). Shares held in the EBT are treated in the same manner as

treasury stock and are thus included in the Condensed Consolidated Financial Statements as treasury stock. No shares were acquired

by the EBT during thethree months ended March 31, 2026 and 2025. As of March 31, 2026, the EBT held a total of 1,671,493 shares.

For further details related to share-based compensation, refer to Note 8.

Stock Repurchase Program

During thethree months ended March 31, 2026, the Company repurchased 5,033,364 shares of common stock at an average price of

$14.20 per share, amounting to a total of$71 million and representing 7% of common stock issued and outstanding as of March 31,

2026. During thethree months ended March 31, 2025, the Company repurchased 169,194 shares of common stock at an average price

of$13.61 per share, amounting to a total of$2 million and representing 0.2% of common stock issued and outstanding as of March 31,

The Company has recorded the repurchase of these shares of common stock as a reduction in common stock and additional paid in

capital. All repurchased shares of common stock were cancelled upon repurchase. As of March 31, 2026 and December 31, 2025, the

par value of the cancelled shares was retired from common stock in the Condensed Consolidated Balance Sheets.

Dividends

Dividends are declared at the discretion of the Board of Directors and are subject to applicable law and contractual restrictions.

Dividends are paid to holders of record as of the record date. Dividends are waived on shares held in the EBT.

The Company’s ability to pay dividends is subject to certain restrictions under its Credit Facility and other debt agreements, which

may limit dividend payments based on leverage ratios and other financial covenants. Refer to Note 10 for additional information.

Note 8 - Compensation Plans

Equity Incentive Plans

The 2017 Equity Incentive Plan (the “2017 Plan”), as amended through April 9, 2025, authorized issuances up to 10% of the

Company’s outstanding common stock and had 3,947,882 shares subject to outstanding awards as of November 21, 2025. On that

date, the Company adopted the 2025 Equity Incentive Plan (the “2025 Plan”), which authorized and reserved 6,892,551 shares of

common stock, consisting of 2,944,669 newly authorized shares plus shares underlying outstanding awards under the 2017 Plan that

may become available upon forfeiture, cancellation, expiration, cash settlement, or withholding for taxes or exercise prices. Upon

adoption of the 2025 Plan, no further awards may be granted under the 2017 Plan, and only shares underlying awards outstanding as

of November 21, 2025 may be issued thereunder. As of March 31, 2026,1,463,725 shares remained available for grant under the 2025

Plan, under which all future equity awards will be made.

RSU Awards

The following table summarizes RSU equity award activity for the respective period presented:

During thethree months ended March 31, 2026, the aggregate intrinsic value at date of vesting was$3 million. As of March 31, 2026,

the Company had$32 million of unrecognized share-based comp ensation expense related to RSUs that will be recognized over a

weighted average period of 1.8 years.

RSUs can vest either on a cliff basis or ratably, depending on the service conditions. The fair value of the Company’s RSUs is

calculated using the closing price of our common stock on the NYSE 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 period presented:

During thethree months ended March 31, 2026, the aggregate intrinsic value at date of vesting was$2 million. As of March 31, 2026,

the Company had$13 million of unrecognized share-based compensation expense related to PSUs that will be recognized over a

weighted average period of 1.8 years.

PSUs are subject to cliff vesting based on specific performance criteria over athree-year period. Depending on the achievement of

these performance targets, the number of units that will vest can vary from 0% to 250% of the initial award.

The fair value of the Company’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:

(a)Volatility utilizes the historical volatility for the Company’s share price.

Share-Based Compensation Expense

The following table presents the share-based compensation expense for the respective periods presented:

Note 9 - Asset Retirement Obligations

The Company records a liability for the present value of the estimated future decommissioning costs associated with its natural gas

and oil properties. Additionally, the Company records a liability for the future decommissioning costs of its production facilities and

pipelines when required by contract, statute, or legal obligation. For thethree months ended March 31, 2026, no state contractual

agreements or statutes related to production facilities and pipelines are expected to impose material obligations on the Company.

In estimating the present value of future decommissioning costs for its natural gas and oil properties, the Company considers several

factors, including the number and state jurisdictions of wells, current decommissioning costs by state and well type, and the

Company’s retirement plan, which is based on state requirements and the Company’s capacity to retire wells over their productive

lives. The Company’s 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 and the retirement schedule. These factors are

inherently uncertain.

The Company 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 components of the change in our asset retirement obligations are detailed below for the period presented:

Note 10 - Borrowings

The Company’s borrowings consist of the following amounts (in thousands) as of the date presented:

(a)Represents the variable interest rate.

(b)Includes$22 million in notes payable issued by a third party financial institution in November 2024, collateralized bytwo natural

gas processing plants and various natural gas compressors and related support equipment in the Central Region, as of March 31,

Credit Facility

The Company maintains a Credit Facility with a lending syndicate, the borrowing base for which is redetermined semi-annually or in

certain other situations as described therein. The Company’s wholly owned subsidiary, DP RBL Co LLC, serves as the borrower

under the 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.

As of March 31, 2026, the Company’s Credit Facility had a borrowing base of$825 million anda maturity of March 2029. The Credit

Facilityhas an interest rate of SOFR plus an additional spread ranging from 2.75% to 3.75% based on utilization. Interest payments on

the Credit Facility are paid on a quarterly basis. Available borrowings under the Credit Facility were $475 million as of March 31,

2026, which excludes $36 million in letters of credit issued to certain vendors.

ABS IV Notes

In February 2022, the Company formed Diversified ABS IV LLC (“ABS IV”), a limited-purpose, bankruptcy-remote, wholly-owned

subsidiary, to issue asset-backed securities with a total principal amount of$160 million at par (the “ABS IV Notes”). The ABS IV

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 alegal 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.

ABS VI Notes

In October 2022, the Company formed Diversified ABS VI LLC (“ABS VI”), a limited-purpose, bankruptcy-remote, wholly-owned

subsidiary, to issue, jointly with Oaktree Capital Management, L.P. (“Oaktree”), asset-backed securities with a total principal amount

of$460 million. The Company’s share amounted to$236 million 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 Company recorded its proportionate share of the ABS VI Notes in its

Condensed Consolidated Balance Sheets. In June 2024, as part of the Oaktree acquisition, the Company assumed Oaktree’s

proportionate debt of$133 million associated with the ABS VI Notes.

The ABS VI 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.

ABS VIII Notes

In May 2024, the Company 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 were issued with a total principal amount of$400 million, while the Class A-2 Notes were

issued with a total principal amount of$210 million. 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 Company’s outstanding debt. Consequently, ABS III and ABS

V were dissolved. The ABS VIII Notes are secured by the collateral that previously secured the ABS III and ABS V notes, which

includes certain upstream producing and midstream assets in the Appalachian Region owned by the Company, 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%, while the Class A-2 Notes carry an annual interest rate of 7.670%. These

notes have a legal final maturity date of May 2044, with an amortizing maturity date of March 2033. Both interest and principal

payments on the ABS VIII Notes are made on a monthly basis.

ABS IX Notes

In June 2024, the Company 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 million, which included$66 million in net proceeds,$3 million in restricted cash

interest reserve, and$2 million 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 Company 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$77 million. The Class A Notes were issued with a total principal

amount of$71 million, while the Class B Notes were issued with a total principal amount of$6 million. The proceeds from these

issuances were used to repay the outstanding principal of the ABS Facility Warehouse Notes, effectively retiring it from the

Company’s outstanding debt and resulting in a loss on the early retirement of debt amounting to$2 million. 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.

ABS X Notes

In February 2025, the Company formed Diversified ABS Phase X LLC, a limited-purpose, bankruptcy-remote, wholly-owned

subsidiary (“ABS X”), to issue Class A-1, Class A-2, and Class B asset-backed securities (the “Class A-1 Notes,” “Class A-2 Notes,”

“Class B Notes,” and collectively the “ABS X Notes”) with a total principal amount of$530 million. The Class A-1 Notes, were

issued with a total principal amount of$200 million. The Class A-2 Notes were issued with a total principal amount of$240 million.

The Class B Notes were issued with a total principal amount of$90 million. The proceeds from these issuances were used to repay the

outstanding principal of the ABS I Notes, ABS II Notes, and Term Loan I, effectively retiring those notes from the Company’s

outstanding debt. The ABS X Notes are secured by certain upstream producing assets in the Appalachian Region owned by the

Company, including those that previously collateralized the ABS I Notes, ABS II Notes, and Term Loan I. Excess proceeds from the

issuance of the Notes were used to fund the Summit acquisition and for general corporate purposes. Refer to Note 2 for additional

information regarding acquisitions.

The Class A-1 Notes carry an annual interest rate of 5.945%. The Class A-2 Notes carry an annual interest rate of 6.751%. The Class

B Notes carry an annual interest rate of 10.398%. These notes have a legal final maturity date of February 2045. Both interest and

principal payments on the ABS X Notes are made on a monthly basis.

ABS Maverick Notes

In February 2025, the Company formed Maverick ABS Holdings LLC, a limited-purpose, bankruptcy-remote, wholly-owned

subsidiary (“ABS Maverick”), to hold the Class A-1, Class A-2, and Class B asset-backed securities (the “Class A-1 Notes,” “Class

A-2 Notes,” “Class B Notes,” and collectively the “ABS Maverick Notes”) assumed as part of the Maverick acquisition. These Notes

had a total principal amount of$640 million upon issuance. The Class A-1 Notes were issued with a total principal amount of

$285 million. The Class A-2 Notes were issued with a total principal amount of$260 million. The Class B Notes were issued with a

total principal amount of$95 million. Upon acquisition, the ABS Maverick Notes carried a 1.6% market premium and are secured by

certain upstream producing assets in the Western Anadarko Basin acquired in the Maverick acquisition. Refer to Note 2 for additional

information regarding acquisitions.

The Class A-1 Notes carry an annual interest rate of 8.121%. The Class A-2 Notes carry an annual interest rate of 8.946%. The Class

B Notes carry an annual interest rate of 12.436%. These notes have a legal final maturity date of December 2038. Both interest and

principal payments on the ABS Maverick Notes are made on a monthly basis.

ABS XI Notes

In November 2025, the Company formed DP Keeneland Mile LLC, a limited-purpose, bankruptcy-remote, wholly-owned subsidiary

(“ABS XI”), to issue Class A-1, Class A-2, and Class B asset-backed securities (the “Class A-1 Notes,” “Class A-2 Notes,” “Class B

Notes,” and collectively the “ABS XI Notes”) with a total principal amount of$400 million. The Class A-1 Notes were issued with a

total principal amount of$247 million. The Class A-2 Notes were issued with a total principal amount of$91 million. The Class B

Notes were issued with a total principal amount of$62 million. The proceeds from this issuance were used to fund, in part, the Canvas

acquisition and are secured by certain upstream producing assets acquired.

The Class A-1 Notes carry an annual interest rate of 5.757%. The Class A-2 Notes carry an annual interest rate of 6.547%. The Class

B Notes carry an annual interest rate of 10.129%. These notes have a legal final maturity date of November 2045. Both interest and

principal payments on the ABS XI Notes are made on a monthly basis.

Nordic Bonds

In April 2025, the Company issued the Nordic Bonds, consisting of$300 million of new senior secured notes in the Nordic bond

market at a 2% discount, resulting in net proceeds of$294 million. The proceeds were used to repay existing indebtedness and for

general corporate purposes. The Nordic Bonds mature in April 2029 and bear interest at a fixed rate of 9.75% per annum, payable

semi-annually in arrears. The Bonds are secured by (i) all of the Company’s U.S. bank accounts, (ii) the equity interests in Diversified

Gas and Oil Company (“DGOC”) as well as DGOC’s equity interests in its direct operating subsidiaries and (iii) interests in certain

intercompany loans.

The Nordic Bonds were listed for trading on the Oslo Stock Exchange in October 2025.

In February 2026, the Company completed a$200 million tap-on offering, increasing the aggregate principal amount of the

outstanding Nordic Bonds to$500 million. The additional Bonds were issued at a 3.5% discount, resulting in net proceeds of$193

million before transaction costs and other fees. The proceeds were used for general corporate purposes.

Early Retirement of Debt

In February 2025, the Company used proceeds from the ABS X Notes to repay the outstanding principal of the ABS I & II notes and

Term Loan I (each as previously defined in the Company’sannual report on Form 10-K for the year ended December 31, 2025),

thereby retiring the ABS I & II notes and Term Loan I from the Company’s outstanding debt and resulting in a loss on the early

retirement of debt of$27 million. Concurrently, Diversified ABS Holdings LLC, Diversified ABS Phase II Holdings LLC, and DP

Bluegrass Holdings LLC were dissolved. The ABS X Notes are secured by the collateral previously securing the ABS I & II notes,

along with a portion of the collateral previously securing Term Loan I.

In March 2025, the Company used proceeds from the upsized borrowing base on the amended and restated credit agreement governing

the Credit Facility to repay the outstanding principal on Term Loan II (as previously defined in the Company’sannual report on Form

10-K for the year ended December 31, 2025), thereby retiring Term Loan II from the Company’s outstanding debt and resulting in a

loss on the early retirement of debt of$0.2 million.

Debt Covenants

Credit Facility

The Credit Facility contains certain customary representations and warranties and affirmative and negative covenants, including

covenants relating to: 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, making certain debt payments and amendments, restrictive agreements, investments, restricted payments and hedging. The

restricted payment provision governs the Company’s ability to make discretionary payments such as dividends, share repurchases, or

other discretionary payments. DP RBL Co LLC must comply with the following restricted payments test in order to make

discretionary payments (i) leverage is less than 1.5 x and borrowing base availability is >20%, or (ii) leverage is between 1.5 x and

2.0 x, free cash flow must be positive, and borrowing base availability must be >20%; and (iii) when leverage exceeds 2.0 x, restricted

payments are prohibited.

Additional covenants require DP RBL Co LLC to maintain a ratio of total debt to EBITDAX of not more than 3.25 to 1.00 and a ratio

of current assets (with certain adjustments) to current liabilities of not less than 1.00 to 1.00 as of the last day of each fiscal quarter.

As of March 31, 2026, the Company wasin compliance with all covenants for its Credit Facility.

ABS IV, VI, VIII, IX, X, XI, and Maverick Notes (Collectively, the “ABS Notes”) and the Nordic Bonds

The ABS Notes and Nordic Bonds 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 Nordic Bond,

(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 Nordic Bond 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 (ABS

IV only).

The ABS Notes and Nordic Bonds are also subject to customary accelerated amortization events as outlined in the agreements

governing such indebtedness. 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 Nordic Bond on the applicable scheduled maturity date.

The ABS Notes and Nordic Bonds 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.

Additionally, the Nordic Bonds contain the following financial covenants (i) the leverage ratio shall not exceed 3.5 x, (ii) the asset

coverage ratio shall not be less than 1.20 to 1.00, (iii) book equity shall not be less than$500 million, and (iv) liquidity shall not be

less than 25% of the outstanding bonds.

As of March 31, 2026, the Company wasin compliance with all covenants related to the ABS Notes and Nordic Bonds.

Future Maturities

The table below represents the Company’s future maturities of its total borrowings as of March 31, 2026, excluding deferred financing

costs, premiums, and discounts:

Interest Expense

The table details the Company’s interest expense for each of the periods presented:

Fair Value

The table below represents the fair value of the Company’s debt structures for the date presented:

(a)Carrying value approximates fair value.

(b)Fair values are measured using a market approach, based upon market rates, which are Level 2 inputs.

Note 11 - Fair Value

The fair value of an asset or liability is defined as the price that would be received for an asset or paid to transfer a liability in the

principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the

measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use

of unobservable inputs. To determine fair value, the Company applies a hierarchy that consists of three input levels. The first and

second levels are regarded as observable, while the third is categorized as unobservable. These input levels may be utilized in the

measurement of fair value as outlined below:

(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.

There were no transfers between fair value levels for thethree months ended March 31, 2026.

Recurring Fair Value Measurements

Derivatives

The Company measures the fair value of its derivatives in accordance with ASC 820, Fair Value Measurement, utilizing valuation

models that incorporate observable market inputs whenever available. These inputs typically include contractual terms, current market

prices, forward price curves for natural gas, liquids, and oil, relevant interest rate yield curves (such as U.S. Treasury and SOFR), and

volatility factors.

Derivatives are classified within the fair value hierarchy based on the observability of the inputs used in the valuation. The Company’s

fixed price swaps are classified as Level 2 and are valued using third-party discounted cash flow models, which rely on NYMEX

futures for natural gas and oil derivatives and OPIS forward curves for NGL derivatives. Interest rate derivatives, also classified as

Level 2, are valued using discounted cash flow models that incorporate contracted notional amounts, market-quoted SOFR yield

curves, and credit-adjusted risk-free rates.

Options, including call options, put options, and collars, are classified as Level 2 and valued using the Black-Scholes option pricing

model. This model incorporates contract terms such as maturity, market parameters including NYMEX and OPIS futures, interest

rates, volatility, and counterparty credit risk. Volatility and other significant inputs are obtained from independent third-party pricing

sources and are subject to monthly verification.

Basis swaps are classified as Level 2 and are valued using third-party models based on forward commodity price curves.

Changes in key inputs, such as volatility, may result in changes to the fair value measurement of the Company’s derivatives.

Assets and liabilities measured at fair value on a recurring basisfor the date presented:

Nonrecurring Fair Value Measurements

Impairment of Proved Natural Gas & Oil Properties

When impairment occurs, the Company estimates the fair value of the impaired proved natural gas and oil properties through a

discounted cash flow method, which incorporates Level 3 inputs that are not directly observable.

Business combinations

The Company assesses the value of acquired proved properties using an income-based approach as of the acquisition date. This

method is classified as a Level 3 fair value estimate due to its reliance on key assumptions, such as anticipated production volumes,

future commodity pricing, operating costs, weighted average cost of capital (the discount rate) and risk adjustments tailored to the

reserve classification.

Financial Instruments Not Measured at Fair Value

The carrying values of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued liabilities, and

other current liabilities approximate fair value due to the highly liquid or short-term nature. The Company’s Credit Facility (see Note

10. has a recorded value that approximates fair market value, as it bears interest at a floating rate that approximates a current market

rate.

Note 12 - Commitments & Contingencies

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 undiscounted commitments, compiled using best estimates based on our sales strategy, as of

March 31, 2026.

Litigation and Regulatory Proceedings

The Company is involved in various pending legal issues that have arisen in the ordinary course of business. The Company accrues for

litigation, claims, and proceedings when a liability is both probable and the amount can be reasonably estimated. As of March 31,

2026, the Company didnot 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

Company’s financial position, results of operations, or cash flows.

The Company has no other contingent liabilities that would have a material impact on the Company’s financial position, results of

operations, or cash flows.

Environmental Matters

The Company’s operations are subject to environmental laws and regulations in all the jurisdictions where it operates, and the

Company was in material compliance as of March 31, 2026. However, the Company 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 Company can offer no assurance regarding the significance or cost of compliance associated with any new environmental

legislation or regulation once implemented.

Note 13 - Supplemental Cash Flow Information

The following table summarizes supplemental cash flow information as follows:

Cash paid for amounts included in the measurement of operating lease liabilities represents total lease payments made during the

period. For finance leases, cash paid for amounts included in the measurement of lease liabilities represents the principal portion of

lease payments. Interest paid on finance leases is included in cash paid for interest.

Note 14 - Subsequent Events

Acquisitions

In May 2026, the Company entered into an agreement to acquire the securities of certain affiliates of Camino Natural Resources, LLC

(“Camino”) owning certain producing properties and undeveloped acreage for an estimated gross purchase price of$1.2 billion before

customary purchase price adjustments. Simultaneously, the Company entered into an agreement with Carlyle Global Credit

Investment Management, LLC (“Carlyle”) in which Carlyle agreed to fund 60% of the purchase price for the producing properties in

exchange for a 60% ownership interest in a newly formed special purpose vehicle (“SPV”), with the Company retaining a 40%

ownership interest in the SPV. At closing, the producing assets are expected to be contributed to an indirect subsidiary of the SPV,

which will be controlled by Carlyle. The acquisition of the producing assets will be funded by an ABS collateralized by the acquired

assets, the funds contributed by Carlyle and borrowings under the Company’s Credit Facility. The acquisition of the undeveloped

acreage will be funded by borrowings under the Company’s Credit Facility and the Company will retain 100% of the ownership in the

undeveloped acreage. The transaction is expected to close in the third quarter of 2026, subject to customary closing conditions.

In April 2026, the Company completed the previously announced transaction to acquire certain oil and natural gas wells, leasehold

interests and related assets from Sheridan for a gross purchase price of$248 million before customary purchase price adjustments.

Dividends

In May 2026, the Company’s Board of Directors declared a cash dividend on the Company’s common stock in the amount of$0.29

per share. The dividend is payable on September 30, 2026 to stockholders on record as of the close of business on August 28, 2026.

Borrowings

In April 2026, the Company completed the semi-annual borrowing base redetermination of the revolving Credit Facility. The

borrowing base under the facility was increased from$825 million to$900 million as a result of the increase in collateral from certain

assets acquired in the Sheridan acquisition.