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US: Diversified Gas & Oil announces placing to raise USD225 million and acquisition of US producing gas assets

28 Mar 2019

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AIM-listed Diversified Gas & Oil, a US based owner and operator of natural gas, natural gas liquids and oil wells as well as midstream assets, has signed a conditional sale and purchase agreement to acquire certain producing gas assets from HG Energy II Appalachia for a total cash consideration of approx. $400 million.

The assets being acquired from HG Energy include 107 unconventional, producing gas wells with a combined net daily production of over 20,000 boe. The wells are close to the Company's existing operations in the Appalachian Basin in the eastern United States, in Pennsylvania and West Virginia.

The Acquisition (and related costs) will be funded by a combination of a drawdown from the Company's Existing KeyBank Facility and the net proceeds of the Placing. Mirabaud Securities and Stifel Nicolaus Europe are acting as joint bookrunners for the Placing. Cenkos Securities is acting as Nominated Adviser to the Company in connection with the Placing.

The Placing is being conducted through an accelerated bookbuilding process which will be launched immediately following this Announcement and will be made available to eligible institutional investors. The Placing Price will be determined by the Joint Bookrunners following the Bookbuild. The Bookbuild is expected to close no later than 8.00 a.m. on 28 March 2019, but the Joint Bookrunners and the Company reserve the right to close the Bookbuild earlier or later, without further notice.

Further details of the Acquisition and the Placing will be announced shortly and will be set out in a circular to Shareholders which is expected to be published shortly. The Placing is not conditional upon completion of the Acquisition. 

Acquisition Highlights

  • On Completion, pro forma net production will rise to over 90,000 boepd(1) 
  • The Acquisition will increase PDP Reserves to 566 mmboe
  • The Acquisition will be immediately accretive to per share cashflow and earnings.


(1)        DGO production represents average Q4 2018 production and net production is stated after working interest and royalty adjustments
(2)        Figures in this announcement are based on a USD:GBP exchange rate of £1 =  $1.32, as at  27 March 2019

Commenting on the Acquisition and the Placing, CEO, Rusty Hutson said:

'This is yet another transformative transaction consistent with our ambitious and proven growth strategy.  These are high quality assets that are synergistically compatible with our existing portfolio in terms of profile and geography.  This package comprises significantly higher volumes per well than our previous acquisitions and achieve higher realised gas prices, resulting in a positive impact for the overall economics of the enlarged portfolio as we continue to reduce operating costs and drive higher margins.  With an estimated net average production of over 90,000 boepd post completion, the Company will be established in the top-tier of London listed producers, supported by an extremely strong cash flow profile and a healthy balance sheet.  We look forward to completing this transaction so we can turn our focus towards integration, an area of expertise that DGO continues to enhance with each acquisition that we complete.  The Company's exciting growth journey continues apace and we thank our shareholders for their support and look forward to repaying their faith with long-term value creation.'

Original article link

Source: Diversified Oil & Gas

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