Diversified Gas & Oil Share Discussion Threads

[lord gnome] 29/1/2018 07:15

And our current production level is? This update is notable for what it doesn't say - basically anything. I could have written that myself.

[spectoacc] 29/1/2018 07:14

"The Board is pleased to report that trading for the year ended 31 December 2017 remains in line with market expectations and that prospects for 2018 look very encouraging. Consistent with its stated growth strategy, having now become an established consolidator of mature, low-decline producing assets within the Appalachian Basin, the Board is actively evaluating complimentary acquisition opportunities with confidence that it will announce further additions in 2018. The Company continues to achieve additional operational efficiencies across its enlarged portfolio."

[bogdan branislov] 28/1/2018 01:22

lab305 - profit forecasts for DGOC were based upon a gas price of 3.5 dollars. The ramp of of shale oil production will result in a lot more shale gas also, the gas market in the US could easily become over supplied even though the oil price is the main driver for US shale expansion - it is hard to see past these points i think. Also, the loan facility was very expensive for DGOC, not a problem if all in their favour, but I suspect it is not and after all the complexities of the listing and the reverse takeover, which were fine in theory, does make investors hungry for updates because we needed to see how it all settles out, there was a lot of moving parts. To then hold back and say we don't update this way in the US is nonsense. DGOC definitely do not have a high regard for their shareholders, if they do not want to talk to shareholders something is wrong. I may be proven wrong, I accept that, but there is enough here to make me uncomfortable, the clincher in terms of selling is the repeated failure to update at specified times. there are too many investors now edgy, but wanting to give a little more time, if the info when it comes is bad, the fall will be heavy, I only sold about £160k and look what happened, if a few million is chasing the door then the price will tank.

[lab305] 27/1/2018 09:05

Bogdan I don't fully agree with your synopsis. If they have always quoted in barrels then you bought them when that was the case.Gas prices have been increasing worldwide and in the US (3.175 today) and it is a fuel the use of which is on the increase .(see long article above). Whilst gas is their primary product oil production is not negligible as you imply and both the oil price and production have been growing.
I would be interested to know the quantity of shares that you sold but as we know there is a very tight market here and £100k worth of stock will push the price quite heavily either way.
Finally I will agree on your point on communication. On the good side the company replies quickly to enquiries but then fails to adhere to their guidance. This is I think what really spooked you and also worries me as the CFO doesn't appear to know what day it is. If they don't update us by the end of next week then I will attempt to contact someone on the board for some answers.

[bogdan branislov] 26/1/2018 12:31

Since yesterday my concerns have grown almost by the hour. I think that the fact that DGOC quotes in barrels equivalent misleads, probably unintentionally, as to how little oil they produce - the gas price is lower than their profit forecasts assumed. Gas, as I understand it, is a more regional market, harder to ship around the world, the shale ramp up on the back of the oil price could sink the US gas price this year. The interest rate on their post takeover bank loan is high single figures, ok if all goes well, but the gas price is an issue and could get worse. Given all that has gone on, the flotation, the reverse takeover, while they are no doubt very busy, following such a year, not updating shareholders is a problem, they are either delaying bad news or taking shareholder for granted, neither is good. Sorry about the price drop today, but I had to set my limit at 76p to have any chance of getting clear with a 6 fig exit, most went through higher, I could not indicate here in advance, obviously. yesterday's post probably suggests I was talking up the price then in prep to exit, not so, that is how I saw it yesterday. You could argue my valuation concerns, it is not clear cut, but if communicating with us is not priority, which it clearly is not then we are wasting our time I think. Bogdan.

[bushranger] 26/1/2018 11:27

My concern is I emsiled DGOC two weeks ago & FCO replied stating update would be specificaly end of last week or early this week just gone. So he was either lying in writing & or they have missed that deadline and he is not owning that failure. A red flag for me.

[costax1654x] 25/1/2018 19:41

I think after FFI with Massive directors buys this one is one to watch as well!

[kenmitch] 25/1/2018 17:20

I decided to email to find out. Got a very prompt reply.

"I appreciate your continued support of the Company, and apologies if our timing on a trading update feels delayed. As a US operator, it’s quite uncommon to issue any news release this early in the year-end reporting process as we closed our 2017 books, but I believe you should see a trading update very soon.

Thank you for your patience, and please stay tuned for that release.

"I believe you should see a trading update very soon," suggests just that. I'm not convinced by the "unusual to issue news releases this early in the year," bit as plenty of US Companies are currently reporting. Points made by bogdan branislov seem more plausible.

So fwiw I'm not that bothered by further trading update delay... which oddly they don't see as delay ... following that reply today. And it's good that they/the CFO reply so promptly too.

[bogdan branislov] 25/1/2018 16:00

I have been asking them the same questions. I think that the update will arrive soon and I expect that all will be OK. The reverse takeover is bound to have put DGOC under extreme operational and administrative pressure. One of the issues with DGOC prior to the acquisition was that they struggled to reach an operational 'critical mass' where the size of their production was able to cover the essential elements of their overhead costs. My main concern was that post the recent acquisition, DGOC did not expand its overhead in line with production, overhead had to become a much smaller proportion of the cost relative to production, otherwise there was no point in the expansion. DGOC no doubt see things the same way, but this objective of curtailing any overhead expansion will inevitably place their existing resource under considerable pressure during the current bedding in phase post acquisition. They will have had an extremely lively few months. Having said that, we do need to hear from them soon. Bogdan

[bushranger] 24/1/2018 23:57

I am disappointed the update has not yet been released, especially as it was the FCO who stated it would be end of last week or early this week. Thursday is starting to push the boundries of the definition of early. If it is a great update all will be forgiven of course.

[kenmitch] 24/1/2018 21:37

Based on post 144 it should be this week though he did perhaps give wriggle room to end of January. It’ll be worth emailing again if no update tomorrow as they should now know the exact date. And if they don’t, then agree that would be worrying, as they won’t have kept to their word and the obvious question ..... why not?

[lab305] 24/1/2018 11:20

kenmitch I am fully aware of the earlier posts in which the CFO has reportedly indicated a trading update was to be released at the end of last week or the beginning of this. To quote Chamberlain I have to tell you now that no such undertaking has been received.

[kenmitch] 22/1/2018 20:27

They have confirmed there will be a trading statement within next few days. See earlier posts here.

[lab305] 22/1/2018 09:44

Another raft of sellers today as no news is bad news . They want to get their act together and keep investors more informed. Their website financial calendar finished on 7 July last year. Not good enough.

[lab305] 21/1/2018 09:16

Liubov Georges
The World’s Most Innovative Gas Field
By Liubov Georges - Jan 20, 2018, 6:00 PM CST
Natural Gas
Appalachian gas production has surged over eighty five percent (from 13,837 bcf/d to 26, 027 bcf/d) since 2014. The region has one the most productive and economic gas acreage in the country, and today it produces more gas than all other shale plays in the United States combined. Now, with the slate of pipeline projects coming on-line in 2018 Marcellus and Utica molecules can finally reach end consumers in larger markets creating a more adequate price equilibrium throughout the United States regions. During cold winter months this will translate into thousands of dollars saved on energy bills for consumers in Midwest and Atlantic Seaboard. Appalachian gas today is well positioned to change long established regional dynamics of gas pricing and flow while transforming the United States energy economy for years to come. It is worthwhile to have another look into why Appalachia matters today more than ever to the United States energy economy.

If there was one defining characteristic of Appalachian gas production, it would be technological innovation and constantly evolving costs. In 2015, an unexpected diversion occurred between rig count and total gas output from the region. As number of operating rigs continued to decline, production per well continued to increase and last month it reached the record high level of 26,027 mcf/day. It defined skeptics who argued that Marcellus and Utica shale operators had exhausted the best rock in the region and output was bound for downward trajectory. Contrary to that argument, a new Marcellus gas well today yields almost twice as much gas as the same well with similar latitude/ longitude in Haynesville field, East Texas (the second largest producing gas region in the United States). See table 1.



Source: EIA

The main driving factor behind such a steep and sustainable increase in output is a constantly evolving technology that is being tested and applied in the region. In fact, some of the recent drilling techniques of Appalachian producers have never been seen anywhere in the world. Arrival of super laterals ( as long as 20,000 feet long), multiple well drilling ( typical pad currently expected to contain dozen wells), proppant with the latest crush resistance and high conductivity allowed Appalachian rig operators yield an average sixty percent more gas per well compared to 2014 levels. Move towards “walking”; rigs that could literally get up and walk from one part of the pad to another substantially reduced the drilling time. It currently takes just few days as opposed to months to complete a well all the while achieving fifty percent increase in efficiency of a drilling operation. The latest example of this comes to us courtesy of NorthEast operator Eclipse Resources that drilled a well in Utica shale just under 17 days from the spud to the total completion with the lateral exceeding 19,000 feet. Technological innovations allowed Appalachian producers to lower their operating costs and hence reduce their breakeven margins. Since 2011 an average drilling cost in South West Pennsylvania have gone down seventy one percent (from $1,200,000 to $300,000) yet an average lateral length increased by a whopping 9,500 feet! According to EQT Corporation, expected IRR for 12 well pad with 12,000 feet lateral exceeds hundred percent, while 5 well pad with 5,500 feet lateral barely breaks seventy percent mark (assuming 3$/ mmbtu gas price). In a currently depressed price environment, this has come as a remarkable achievement for Appalachian producers. Marcellus and Utica gas have been consistently trading with a discount to Henry Hub and one can only imagine the tremendous pressure these guys were under to remain competitive.


Today this price reduction achieved by Appalachian gas producers can finally pass on to consumers all around the United States. Several interstate pipeline projects, such as Leach XPress, Rover, Atlantic Sunrise (1.7 bcf/d) and Atlantic Coast ( 1.5 bcf/d) pipeline will create critically needed connectivity between prolific, but constrained, Marcellus and Utica production areas and the larger markets. Atlantic Seaboard gas market has long suffered from bottlenecks during cold winter months on Transco pipeline route. For example during the polar vortex in winter 2014 gas prices in Maryland, Virginia and North Carolina spiked to almost 100$/ per mmbtu, while in Pennsylvania they remained 1/10 of that price level. Additional Appalachian gas volumes along the Transco corridor will help alleviate these problems and result in tremendous savings on energy bills for consumers in these states. It is estimated that net energy savings from Atlantic Coast pipeline for the states of Virginia and North Carolina to be $ 377 million annually.


Appalachian gas has a significant immediate economic impact and a potentially huge long term benefit of supply security in the United States. In 2015, Transo pipeline has reversed gas flows for the first time in 50 years. Traditionally gas molecules were flowing in one direction from the South to large demand centers in the North East and Mid- West. Today Marcellus and Utica gas is increasingly serving the growing LNG, power and industrial demand load in the Gulf Coast. Texas and Louisiana gas consumption is expected to grow by 10 bcf/day in the next 5 years and will represent thirty percent of the total US gas demand by 2022. In the Mid-West, Marcellus molecules are increasingly displacing Rockies gas as a dominant supplier of Illinois market with a large demand center in Chicago. The Rover pipeline (3.25 bcf/ day), which comes on-line this year, will bring more price competition, benefit end user consumers, and change long established dynamics in the region. Constitution pipeline (650 mmcf/d), a proposed project that is currently held in a legislative limbo by regulators, could have brought Appalachian gas to overpriced New England and Massachusetts markets as well. However, the pipeline is not expected to be approved anytime soon. Massachusetts, for example, although located next to the nation’s largest gas producing region, absurdly relies on LNG imports and hence is vulnerable to price spikes during winter months.



Source: EIA

Spurred by favorable economics and build-up in pipeline capacity, Appalachia currently supplies forty-two percent of the United States gas demand with further expected growth in 2018. This region has become a testing ground for technological innovation in hydraulic fracturing which gave regional producers a competitive edge in an ultra-low price environment. Yet, Appalachia today is also a testing ground for regulatory framework around rapidly evolving hydraulic fracturing process. Some regulators have come under sharp criticism for their inability to keep up with experimental and potentially hazardous drilling techniques. With the advent of multiple well drilling and laterals as long as 20,000 feet, the public should rightfully be concerned about potential fugitive methane and induced seismicity in their backyards. There is nothing new about the debate between balancing economic development and environmental protection. Today, however, the community of “impacted̶1; stakeholders has changed with strong interests in further development of Appalachian basin. Communities and businesses are forging ties to work together for transparent, evolving and commercially predictable regulatory framework that benefits everyone. Appalachian gas production is here to stay and will dominate national conversation about energy, policy and environment for years to come.

[terry topper] 18/1/2018 23:08

The oil price is pretty irrelevant for this stock - only 6% of the production is oil.
The rest is gas - they get about a 10% discount to Henry Hub gas prices so will be doing OK but gas prices are far less volatile.

[crazycoops] 18/1/2018 13:12

I believe CFO comms confirmed end of this week or early next. Await with interest!

[martinthebrave] 18/1/2018 12:26

Close to ATH. Paying 88p. Trading update tomorrow (Based upon 2017). Very hopeful!

[lord gnome] 16/1/2018 10:36

I don't have level 2 so I can't see what each MM is quoting. Mt bet however is that there are only three, perhaps four MMs and that they are each quoting the same i.e. it's a 4v4 situation hence the wide spread.

[lab305] 16/1/2018 09:44

5p spread now. 83-88p . Are these market makers having a laugh ?

[spectoacc] 11/1/2018 15:29

Agreed, barring production issues. DGOC should be raking it in atm.

[bandit99] 11/1/2018 15:08

at ~$69/bbl it would be hard to see a negative update.....

[kenmitch] 10/1/2018 10:08

Thanks bushranger. That’s a prompt, excellent and reassuring reply. Hope the trading update is positive and gives the share price another lift. Based on their confidence last time there’s a good chance it will be so tempted to top up ahead of it.

[lord gnome] 10/1/2018 09:26

The oil price drifting upwards nicely should provide a very positive backdrop to the next update. All that extra, free cashflow should do wonder for our dividend expectations.

[bushranger] 09/1/2018 22:57

Well, that was a super fast response from the CFO no less. Big tick in the box from me. Below is his response.

"We are in the processes of closing our books for 2017, and expect to issue a trading update either late next week or early the following, so please stay tuned for that. I wouldn’t characterize our timing as a ‘failure to provide as planned,’ since for a company like ours – an ops update anytime in January would relate to the ‘end of the year. Perhaps the wording could have been more clear."

A fair explaination in my book.