Diversified Gas & Oil Share Discussion Threads

[spectoacc] 20/2/2018 07:43

All good - basically saving c.5% on debt servicing.

[lab305] 20/2/2018 07:31

Another good announcement this morning with the company reducing its interest rate on debt.
This refinancing will significantly reduce the Company's interest expense as the Facility will have an initial interest rate of LIBOR plus 2.50 percent versus the Existing Facility's interest rate of LIBOR plus 8.25 percent. The interest rate on the Facility will be subject to a grid that fluctuates based upon utilisation from a pricing of LIBOR plus 2.25 percent to 3.25 percent. In addition to the refinancing of the Existing Facility, DGO intends to utilise the Facility for general corporate purposes including the option to finance all or a portion of any future acquisition opportunities

Yet still we see many small investors selling. Why?

[divmad] 11/2/2018 12:34

Either that, or he is another impatient AIM trader.

[divmad] 11/2/2018 12:33

I wonder if Bogdan was front running a placing purchase? Stranger things have happened, but the timing was perfect.

[spectoacc] 07/2/2018 07:17

Ta. The refinancing point is a good one - why pay that previous silly coupon when they can raise cash easily/should have excellent cashflow.

[lord gnome] 06/2/2018 17:18

Today's IC online carried a tip update on DGOC following the latest deal. No doubt this will copy through to the print edition on Friday.

IC View

DGO is unique among London’s resources stocks. It carries little to no exploration risk, can apparently raise money at the drop of the hat, and has a pipeline of deals ahead of it. After these purchases are finalised, the next potential catalyst for the shares is the refinancing of the company’s debt, which Mr Hutson thinks can halve some of the already-manageable interest payments. Ahead of then, we base a repeat of our original call (58p, 16 Feb 2017) on three factors. One, annualised cash profits are set to increase to at least $70m; two, higher earnings should allow the dividend yield to grow to at least 6.5 per cent; three, new reserves are being acquired for just over half their audited value. Buy.

Last IC View: Buy, 73p, 12 Sep 2017

[alter ego] 02/2/2018 08:27

clickable link without advfn's unhelpful corruption of the http bit

[lab305] 02/2/2018 07:41

hxxp://www.diversifiedgasandoil.com/wp-content/uploads/2018/02/2018-01-DGO-Presentation-Web-revised-.pdf

[lab305] 01/2/2018 19:02

Lord Gnome don't worry too much as the total net debt of 60m dollars won't put much of a dent in your analysis. Put simply they have tripled the profit and reserves of the company and just over doubled the shares in issue. Pretty reasonable really as there will be good savings to be made with economy of scale. Since September they have reduced debt by 4m dollars despite acquiring another company costing 3m. Why the share price is only 84p or thereabouts is a mystery to me, but then Clln was bankrupt on 10 July last and yet it came as a shock to many a couple of weeks ago . Sometimes realisation of something good or bad takes time to sink in !
[...]

[lord gnome] 01/2/2018 17:23

SpectoAcc - Doh! I had my rose tinted's on. I'll rejig the numbers.

[lab305] 01/2/2018 16:20

DGO is seen as a major consolidator in Appalachian Basin
To put the two acquisitions announced today by Diversified Gas and Oil PLC (LON:DGOC) into context, it is worth remembering where the AIM-listed group was a year ago.

Then, having just listed on the junior market, the company was producing about 2,500 barrels equivalent of gas per day net.

Once today’s US$180mln deals to acquire Alliance Petroleum and another batch of wells completes, that figure will rise to 28,000 barrels equivalent.


On a net basis, that’s a more than a ten-fold increase, but Rusty Hutson, Diversified’s chief executive, sees little reason why the pace of acquisitions should ease.

Finance is not likely to be a problem.

Originally, DGO planned to pay the US$180mln through a combination of debt and equity.

But such was the demand for shares from both existing and new shareholders that DGO was able to cover the whole cost through an equity placing.

If it had wanted, it might even have been able to raise enough for another buy as well.

Hutson says investors like DGO because, in a sector littered with over-optimism and disappointment, it has stuck to the plan outlined when it listed.

DGO’s production will rise by 173% to approximately 28,133 barrels per day equivalent on completion of the deals while total reserves will rise by 217% to 173.2mln barrels equivalent.

After five deals in twelve months, it is now the largest oil and gas producer on AIM and the largest conventional producer in the Appalachian Basin.

Underlying earnings [EBITDA] will be an annualised US$70-75mln.

DGO now also has a reputation as the go-to buyer in the region and that is also helping its development.

Hutson said it was not the highest bidder for one of the assets just acquired, but its reputation and the speed of execution in previous deals convinced the vendor.

Cookie cutter model
'Cookie cutter' might be a glib description, but Hutson says it’s accurate.

DGO knows the area. Operators know it and its model of building scale to lower costs is working.

“These two [acquisitions] will be substantial for us,” he told Proactive.

“We will really start to see the effect on operational efficiencies and the scalability of the business model.”

Once the latest acquisitions have bedded in, Hutson expects per barrel equivalent lifting costs to drop below US$7.

More deals are likely, especially as DGO is seen as the main consolidator of assets in the region.

“Investors like the story,” says Hutson.

“It’s a way to get to get exposure to the E&P sector in a safe and predictable manner.

“The pipeline is significant so there will be more acquisitions. We will execute the model and continue.”

Shares rose 11% to 84p.

[spectoacc] 01/2/2018 15:32

@LG - accounted for debt?

Interesting that people were willing to pony up approx the current market cap at approx the current s/p. And more interesting that doubling mkt cap brings 173% increase in production. Glad they've not resorted to any high-coupon debt issuance this time.

Very happy to hold.

[lord gnome] 01/2/2018 15:24

For those struggling with the maths, I make that approx. £2.20 per share.

[lord gnome] 01/2/2018 15:23

From today's IC on line:

'Diversified Gas & Oil (DGOC) likes a deal. After the market closed last night, the acquisitive Appalachian Basin-focused producer announced it had raised $180m – a sum just above its total market capitalisation – at 80p a share, to fund two purchases: Alliance Petroleum and Appalachian Gas, for $95m (£66.9m) $85m respectively. The group estimates that after the all-cash deals go through, its share of production will increase by 173 per cent to around 28,000 barrels of oil equivalent per day. Reserves should more than double to 173.2 million barrels. Buy.'

Interesting that DGOC will now have a market cap of around £220 millions. With reserves as quoted at 173 million barrels, that values each barrel at a miserly £1.27p. That is ludicrously low and based on my old yardstick of $5 per barrel of oil in the ground, the company should be worth around £617 millions with the £ at around 1.40 to the greenback.

[lord gnome] 01/2/2018 08:29

What a pleasant surprise. We now know why the end of year trading update was somewhat light on details - and late. Nice response from the market this morning. I think we can safely assume that the recent market weakness was down to the fundraising. Could be a lot more to come once we have firm figures and a nice dividend. A lot happier than I was a couple of days ago.

[spectoacc] 01/2/2018 07:01

Wow!! Fabulous. I'd have expected a placing of that magnitude at more like 60p than 80p.

Is this the next BP.?

(Tongue massively in cheek but....) :)

" "We have achieved significant growth since our Admission to AIM and the objectives that we set ourselves at Admission. Upon completion of these Acquisitions, DGO will be the largest producer on AIM, with a strong and stable business underpinned by low-cost production from a low-risk, long-life reserve base in a favourable operating environment.
"We are also one of a handful of UK listed independent E&Ps to pay a regular dividend, and the increased cash flow and EBITDA provided by these acquisitions will enhance our ability to return more cash to shareholders."

[lab305] 01/2/2018 06:59

I cannot understand why so many small investors have sold recently especially after the favourable update. I have continued to buy swimming against the tide so they have done me a favour in one way. There are less than six million shares in the public domain and the host of five and ten thousand sells in total making a very small percentage of the company has had a completely disproportionate effect on the share price. Perhaps sense will now return and the shares will reach £1 quickly.
Personally I believe that this stock is very undervalued and should be worth about double where it is especially in the light of these latest acquisitions. The management is keen , focused and has a winning formula. It does exactly what it says on the tin and if that wasn't enough pays about 4% in dividend. All the arguments put forward by the newspaper tipping the share at 70p are even stronger now than they were six months ago.
To add to that here is a headline from today........BP Predicts Natural Gas Will Be World’s Main Fossil Fuel By 2040.
hxxps://oilprice.com/Latest-Energy-News/World-News/BP-Predicts-Natural-Gas-Will-Be-Worlds-Main-Fossil-Fuel-By-2040.html

[jq1984] 31/1/2018 19:50

Perhaps this is why DGOC were so quiet regarding an update. It seems an awful lot was going on in the background. Shame for those that sold on the back of the update.

[martinthebrave] 31/1/2018 19:37

Acquisition of Alliance Petroleum Corporation & over subscribed Placing at 80p (4p above close). US$95.0m. Production will increase by 173 per cent. Sounds good!

[fozzie] 31/1/2018 18:33

Placing of 166,400,000 new Ordinary Shares of 1 pence each at 80 pence per Ordinary Share

Diversified Gas & Oil PLC (AIM: DGOC), a US based gas and oil producer, is pleased to announce that it has signed a conditional sale and purchase agreement to acquire the entire share capital of Alliance Petroleum Corporation ("Alliance Petroleum"). The Board also announces that the Company has agreed in principle to acquire certain producing gas and oil assets from a major NYSE listed energy company ("the Appalachian Vendor"). The wells of both Alliance Petroleum and the Appalachian Vendor are close to the Company's existing operations in the Appalachian Basin in the eastern United States, principally in Pennsylvania and West Virginia, with some wells in Ohio.

The Alliance Petroleum Acquisition is to be acquired for a total cash consideration of US$95.0 million (GBP66.9 million) and the cash consideration for the Appalachian Gas Acquisition is US$85.0 million (GBP59.9 million).

On Completion of the Acquisitions, the Company anticipates that its total net working interest production will increase by 173 per cent. to approximately 28,133 boed, and its net working interest PDP reserves will grow by 217 per cent to 173.2 MMboe, resulting in an annualised EBITDA of US$70-75 million.

The Company is also pleased to announce an oversubscribed conditional placing of 166,400,000 new Ordinary Shares of 1 pence each (the "Placing Shares") at a price of 80 pence per share (the "Placing Price"), raising net proceeds of US$180 million (the "Placing"), to fund the Acquisitions. Mirabaud Securities LLP and Stifel Nicolaus Europe Limited were Joint Bookrunners for the Placing.

[gersemi] 31/1/2018 18:32

Interesting update

[russman] 29/1/2018 14:55

Bit short on figures.But seems pretty boring.

[lab305] 29/1/2018 13:55

Yep panic over. Lord Gnome slightly unfair comment as there is some detail in there on debt and the cash position. More importantly trading as that is what it is supposed to be about is meeting market expectations and the general tone is optomistic. Note the word "challenging" is absent...always a good sign.

[jq1984] 29/1/2018 08:19

Some people must be shorting the stock. No need to panic over this update. It's interesting that they have decided to pay a dividend in May rather than June. No numbers to crunch in this update, A sound update none the less.

[martinthebrave] 29/1/2018 07:57

Lord Gnome. True, the update doesn't give the detailed numbers we would have liked but nor does it allude to any problems. It states that it "looks set to meet expectations", talks about "prospects for 2018 looking very encouraging" and that they are "evaluating complimentary acquisition opportunities with confidence that it will announce further additions in 2018". Not too shabby as Updates go!!