The highlight of Diversified Energy Co. PLC's May 2 annual meeting was not a shareholder proxy vote on emissions and climate change issues but an emissions reduction strategy for its unusual natural gas business model.

Diversified buys older wells from exploration and production companies such as EQT Corp. and ConocoPhillips, makes quick repairs in the field then milks the dwindling production stream for decades. Older, horizontally drilled shale gas wells are suited to this model because they peak in the first three years of life but keep producing smaller quantities of gas for decades.

The company reported lowering its Scope 1 methane intensity by 20% in 2022 compared to 2021 and by 25% compared to 2020. On the other hand, Diversified's net greenhouse gas emissions increased over the same period because it kept buying more wells.

"We recognize that our absolute [greenhouse gas] emissions will increase with each acquisition, though our operating plans for these assets include direct actions aimed at reducing both absolute emissions and emissions intensities," Diversified said in its sustainability report for 2022.

Emissions control

After it has had time to put new assets under its maintenance and production practices, net emissions fall, Diversified said. Without including the impact of acquisitions in the Midcontinent in 2022, Diversified lowered its Scope 1 emissions 4% when compared to 2021, with methane emissions seeing a 25% cut, according to the report.

The key to reducing emissions from its fleet of old wells is Diversified's "stewardship" model, COO Brad Gray said in an interview. Diversified has deployed 600 handheld methane detectors to its teams in the field. Well tenders and other technicians visit a well once a month or more and can call for repairs to fix any leaks they find.

"We found that 80% of the wells that we went to in the first detection survey had zero unintended emissions," Gray said. "For another 10%, we were able to make a very simple repair or adjustment to the equipment, so that at the time of the initial survey, 90% of the wells that we did surveys on had zero unintended emissions."

Gray said the estimated emissions data used by many exploration and production sellers were often high compared to what Diversified's teams found when surveying a new field with detectors.

"Number one is building on our stewardship mindset," Gray said. "We took a very proactive approach to determining what our operations need to meet the current and potential regulatory requirements. We had the direct measurements from our asset. We had to get away from the theoretical factor."

"We know our goal is to be carbon neutral by 2040," Gray said. "What we're really focusing on are methane reductions until 2030. And then we'll start focusing more on CO₂ in that second decade." Diversified's goals call for a 30% reduction in methane emissions by 2026 and a 50% reduction by 2030, all compared to a 2020 baseline.

Airborne methane monitors

The company's business model was criticized in 2022 as being unrealistic, but in the past year, Diversified received an award from the UN-sponsored Oil and Gas Methane Partnership in recognition of its methane detection and reduction efforts.

In addition to 600 detectors in the field, Diversified relies on airborne methane detection to scan 11,000 miles of pipeline in Appalachia. And it is converting pneumatic controllers on its systems from gas to compressed air.

With 255.6 Bcf of gas production in 2022, Diversified has grown from a small Appalachian producer into one of the top 20 natural gas producers in the US, according to S&P Global Market Intelligence data. In 2022, Diversified reported losses of $625.4 million, or 74 cents/share, almost double the red ink reported in 2021.

The company, listed on the London Stock Exchange, is looking to relist on a U.S. market. It will take steps in that direction this year, Gray said.

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