Diversified Gas & Oil

LN: DGOC

£916.3m market cap

132p 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 of its production in the US onshore. The company possesses long-life, low operational cost, mature producing assets. DGO is now the largest conventional gas producer in Appalachia and the largest AIM-listed producer. DGO’s acquisition-led strategy has enabled it to amass a net acreage over 7.8m acres and a 1P PDP 474mmboe net reserve base by the end of FY18. Our base case valuation was updated to 166.3p/share following the acquisition of HG Energy announced on 28 March 2019 which is expected to add 92mmboe of PDP reserves. Management expects the transaction to be accretive with the potential to increase annual dividend to $0.16/share.

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 30.1
2018A 289.8 146.2 71.0 2.7 64.1 7.6
2019E 515.4 299.9 174.8 19.6 8.8 3.8
2020E 509.2 296.0 165.1 17.4 9.9 4.2
Last updated on 21/05/2019
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 21/05/2019
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 11.4 10.9 35.3
Relative* 13.3 8.6 45.4
52-week high/low 133.5p/92.0p
*% relative to local index
Key management
Rusty Hutson CEO
Eric Williams CFO
Bradley Gray Finance Director & US COO
Robert Post Non-Executive Chairman
Teresa Odom VP of Investor Relations