Diversified Gas & Oil

LN: DGOC

£672.9m market cap

103p 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 the acquisitions of HG Energy in March 2019 and EdgeMarc Energy in August 2019, 1P PDP reserves currently stand at c 579mmboe. Our base case valuation of 166.3p/share is under revision to incorporate the EdgeMarc Energy and natural gas gathering systems acquisitions. In November, DGO announced the successful completion of its securitised financing arrangement. The company issued $200m in notes secured by c 22% working interest of certain upstream assets’ cash flows. DGO also announced its Q319 results delivering a 10% q-o-q increase in production to c 91kboed and hedge-adjusted EBITDA of $64m.

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 23.5
2018A 289.8 146.2 71.0 2.7 50.1 6.0
2019E 516.8 262.6 144.1 16.2 8.3 3.2
2020E 519.9 256.7 127.1 14.1 9.6 3.6
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 17/01/2020
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (US$m) 625.2
Forecast gearing ratio (%) 65
Price performance
%
1m
3m
12m
Actual 0.5 (5.9) (12.7)
Relative* (1.4) (12.3) (23.0)
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