Diversified Gas & Oil

LN: DGOC

£673m market cap

102p last close

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

Investment summary

Diversified Gas & Oil (DGO) is a natural gas and oil producer with all its production in the US onshore. The company possesses long-life, low operational cost, mature producing assets and is the largest conventional gas producer in Appalachia and the largest AIM-listed producer. Following HG Energy acquisition in March 2019 and EdgeMarc Energy in August 2019, 1P PDP reserves currently stand at c 579mmboe. Our base case valuation stands at 166.3p/share and is under revision to incorporate EdgeMarc Energy and natural gas gathering systems acquisitions. In October, DGO extended its P&A agreement with the state of Kentucky and proposed a private placement securitisation transaction. Any proceeds from the offering will reduce borrowings on its existing revolving credit facility.

Y/E Dec
Revenue (US$m)
EBITDA (US$m)
PBT (US$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2017A 41.8 17.5 (1.5) (3.1) N/A 22.4
2018A 289.8 146.2 71.0 2.7 47.7 5.7
2019E 515.4 299.9 174.8 19.6 6.6 2.8
2020E 509.2 296.0 165.1 17.4 7.4 3.1
Industry outlook

DGO’s ability to maximise shareholder returns will be driven by its proficiency in managing lease operating expense and the deferment of abandonment costs through extended well life as production declines. Regional gas pricing has seen support from additions to Appalachian pipeline capacity, LNG demand and gas exports to Mexico.

Last updated on 21/11/2019
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (US$m) 508.9
Forecast gearing ratio (%) 51
Price performance
%
1m
3m
12m
Actual (7.3) 4.3 (7.7)
Relative* (8.1) 2.8 (11.0)
52-week high/low 134.0p/97.0p
*% 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