Diversified Gas & Oil

LN: DGOC

Market Cap£786.6m

Last Close -111.2

Diversified Gas & Oil is a conventional natural gas and oil producer with a main focus on the US onshore. The company possesses long-life, low operational cost, mature producing assets with slow decline profiles in the Appalachian region.

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Investment summary

Diversified Gas & Oil (DGO) is a natural gas and oil producer with all its production in the US onshore. It possesses long-life, low operational cost, mature producing assets and is the largest conventional gas producer in Appalachia. Despite the current challenging environment, DGO has essentially remained unaffected by COVID-19, and has completed two acquisitions, and a record H120 exit rate of 109kboed. The company has maintained stable production, low operating costs and robust hedging, thus mitigating the impact of low commodity prices and underpinning steady cash flows and profitability, and it recently increased its quarterly dividend by c 7% on the back of H120 results. A deal with Oaktree Capital Management has increased DGO’s access to capital and to jointly identify and fund growth opportunities. DGO was admitted to the FTSE 250 and the FTSE All-Share indices, effective from 21 September, increasing its market exposure and investor access. Our updated valuation stands at 139.8p/share.

Y/E Dec
Revenue (US$m)
EBITDA (US$m)
PBT (US$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2018A 289.8 146.2 71.0 2.7 53.4 6.4
2019A 462.3 273.3 126.1 14.6 9.9 3.3
2020E 400.0 298.4 147.3 15.2 9.5 3.7
2021E 651.1 299.6 143.2 14.8 9.7 4.3
Industry outlook

DGO’s ability to maximise shareholder returns will be driven by its proficiency in maximising production, increasing cost efficiencies and extending the economic life of the assets.

Last updated on 19/11/2020
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Share price graph
Balance sheet
Forecast net debt (US$m) 677.8
Forecast gearing ratio (%) 67
Price performance
%
1m
3m
12m
Actual 5.9 1.7 7.4
Relative* (2.4) (4.6) 20.2
52-week high/low 115.0p/59.6p
*% relative to local index
Key management
David Johnson Chairman
Rusty Hutson CEO
Eric Williams CFO
Bradley Gray Finance Director & US COO
Teresa Odom VP of Investor Relations