Diversified Gas & Oil PLC – Trading Statement

Diversified Gas & Oil PLC – Trading Statement

Diversified Gas & Oil plc (AIM: DGOC), the US based owner and operator of natural gas, natural gas liquids and oil wells as well as midstream assets, is pleased to announce the following trading and operating update for the half-year period ended 30 June 2019.


Operational highlights

  • 1H19 production averaged 76 MBoepd (net) including ~2 months of production from the HG Energy II(“HG”) assets (transaction closed 18 April 2019), up ~295% compared to 1H18 (19 MBoepd) and up ~22% compared to 2H18 (62 MBoepd)
  • June exit rate production exceeded 90.2 MBoepd (net) including 69.7 MBoepd (net) excluding production from the wells acquired in the HG transaction
  • The Company’s Smarter Well Management (“SWM”) Programme continued to offset natural production declines with ~430 previously non-producing wells placed back into production since 1 January 2019
  • Re-established wells and further SWM optimisations contributed to production (excluding from wells acquired in the HG acquisition) at month end June 2019 of 69.7 MBoepd, consistent with 2018 year-end exit rate production
  • The HG assets have been successfully integrated into the portfolio and are producing 20.5 MBoepd, in line with expectations
  • All seller-financed compression projects associated with the HG acquisition are complete and online

Financial highlights

  • 1H19 adjusted EBITDA*, hedged, of $131 million, including ~2 months of contribution from the HG acquisition; month-ended June 2019 adjusted EBITDA* of $24 million
  • Cash margins in 1H19 and June 2019 remain consistent with 1Q19 at approximately 54%, hedged, despite a period of lower natural gas and natural gas liquids prices
  • Since 1 January 2019 paid $52 million in debt principal payments, with net debt of ~$613 million at 30 June 2019 and net debt-to-adjusted EBITDA* at 2.0x
  • Distributions for the benefit of shareholders totaling $54 million to 30 June 2019 including $36 million of dividends and $19 million of share repurchases; year-to-date distributions increase to $68 million inclusive of an additional $11 million of share repurchases 
  • Maintained strong liquidity of ~$335 million including cash and availability under the Company’s revolving credit facility
  • Through 30 June 2019 recurring capex, which excludes one-time investments associated with the Company’s data modernization project and asset integration, approximated $12 million, in line with budget
  • Average 1H19 net realised price was $17.87 per BOE ($2.98 per Mcfe), including $0.54 per BOE ($0.09 per Mcfe) of net hedging gains through 30 June 2019; at 30 June 2019, DGO’s net hedge portfolio was valued at $60.6 million of which $47.1 million is current
  • Lease operating expense of $5.39/BOE in June 2019 was ~6% lower compared to 4Q18 ($5.75/BOE); base LOE is ~14% lower compared to the same period
  • General and Administrative expense of $1.12/BOE in June 2019 was ~15% lower compared to 4Q18 ($1.32/BOE)

Rusty Hutson, Jr., CEO of Diversified, commented:

“As we entered 2019, we set the expectation that our SWM Programme would continue to offset natural declines within our portfolio and hold production flat excluding acquisitions. I’m pleased to report that production from the wells we owned prior to those purchased from HG averaged 70 Mboepd, marking a full year that we’ve successfully delivered on our objective and highlighting the effectiveness of our efficient field operations. Strong production and a robust hedge portfolio underpin our healthy cash flows that position us to weather periods of commodity price volatility. Our portfolio retains an ample opportunity set for continued organic production optimisation which we will continue to exploit.

“Wise stewardship of capital remains a top priority as do our efforts to reduce our unit-level operating and G&A expenses. Our emphasis on controlling costs and commitment to maintaining an effective hedge portfolio are reflected in strong cash margins near 55% despite a period of lower natural gas and natural gas liquids prices. We now enter the second half of 2019 with approximately $335 million of liquidity, well positioned to respond to market dynamics and opportunities to create long-term shareholder value.”

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