We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Diversified Gas & Oil Plc | LSE:DGOC | London | Ordinary Share | GB00BYX7JT74 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 120.80 | 120.20 | 120.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMDGOC
RNS Number : 2974Q
Diversified Gas & Oil PLC
11 September 2017
11 September 2017
Diversified Gas & Oil PLC
("DGO", the "Company" or the "Group")
Interim Results for the six-month period ended 30 June 2017
Diversified Gas & Oil PLC (AIM: DGOC), the US based gas and oil producer, is pleased to announce the publication of its interim results for the six-month period ended 30 June 2017.
Highlights:
-- Successful float on AIM in February 2017 raising $50m
-- First post-IPO acquisition in April of a package of 1,300 producing wells which added approximately 743 barrels of oil equivalent per day ("boepd") to the DGO portfolio.
-- $84.2m reverse takeover and readmission to AIM through the acquisition of additional assets from Titan Energy LLC ("Titan Energy") in June 2017, increasing production by 6,800 boepd, an increase of 161% over legacy production. The acquisition was financed through an oversubscribed $35m secondary share placing and with a $64m draw on our $110m debt facility
-- Increased Proved Developed Producing reserves to approximately 59.4mmboe
-- Operating costs reduced 6.4% to $7.73 per barrel of oil equivalent ("boe") in 1H17 vs $8.26 per boe in our readmission document for the last three months of 2016
-- Adjusted EBITDA (a) increase of 209% to $4.1m (2016: $1.3m); Pro forma for the Titan acquisition, Adjusted EBITDA increased nearly 900% to $12.9m
-- Adjusted EBITDA (a) per share increase of 33% to $0.04 (2016: $0.03) -- Proforma Adjusted EBITDA (c) increase of 878% to $12.9m (2016: $1.3m)
-- Reduced net debt by 17.3% with a leverage ratio of Net debt / Pro forma adjusted EBITDA of just 1.4x, a significant improvement over the 16.2x as at 30 June 2016
-- Paid a dividend to shareholders of $0.0199 per ordinary share or $2.9m on 31 July 2017 -- Declared a dividend of $0.0199 per ordinary share to be paid on 20 December 2017
-- Strong balance sheet with $4.6m cash, $24.9m in our AIM offering equity placing receivable and $64m debt with $46m undrawn on the $110m credit facility (d)
-- Enhanced liquidity position totaling $75.4m including $29.5m cash and near cash equivalent ($4.6m cash plus the $24.9m in our AIM offering equity placing receivable) and $46m undrawn on our $110m credit facility
These objectives have been delivered with the assistance of a strengthened management team as the Company continues to progress its acquisitive growth strategy.
Financial Summary:
Hot Features
Premium
Change
Explanation H1 2017 H1 2016 $'000 %
------------- ---------- ---------- -------- ---------
$'000 $'000
Financial highlights continuing
operations results:
----------------------------------
Revenue 11,541 7,653 3,888 50.8%
Adjusted EBITDA a 4,065 1,314 2,751 209.4%
18.0
Adjusted EBITDA margin b 35.2% 17.2% points 104.7%
Adjusted EBITDA per share
- Diluted ($) 0.04 0.03 0.01 33.3%
Refer to the Outlook Section
of this document for pro
forma results
Statutory results for continuing
operations:
----------------------------------
Operating profit 9,738 23,936 (14,198) (59.3)%
Profit before tax 3,940 36,491 (32,551) (89.2)%
Diluted earnings per share
($) 0.04 0.91 (0.87) (95.6)%
a) Adjusted EBITDA is derived from the reported Operating
Profit adjusted for depreciation and depletion,
non-cash gains on bargain purchase and on disposal
of property and equipment, losses on derivative
financial instruments and non-recurring costs associated
with acquisitions and certain other administrative
expenses
b) Adjusted EBITDA margin is calculated as Adjusted
EBITDA divided by total revenue.
c) The calculation of proforma Adjusted EBITDA is based
on the Adjusted EBITDA for DGO together with the
actual operating results for the assets acquired
from Titan Energy for the period from 1 January
2017 to 30 June 2017 as reported to DGO by Titan
Energy and as were included in the transaction's
closing statement. These figures are for illustrative
purposes only and have not been reported upon by
the Company's auditors.
d) DGO drew $64m on the $110m credit facility to close
the Titan asset acquisition on 30 June 2017. Of
the $46m undrawn, $11m is reserved to close on the
Titan assets held in public partnership structures.
The remaining $35m availability can be used within
the first twelve months of the facility's life to
finance additional acquisitions, of which $25m,
would require an additional underwriting process
by the lender.
Commenting on the results, CEO Rusty Hutson said:
"The DGO team has been incredibly active and highly focused in 1H17, delivering on a number of important corporate and strategic objectives for the benefit of our shareholders. Following our successful listing on AIM at the beginning of the year, we continue to concentrate on delivering the stated objectives included within our IPO admission document. Importantly, we returned nearly $3m through our inaugural dividend paid in July, which is strong evidence of our successful business model and a major differentiating factor of our investment proposition. DGO is now one of only two AIM companies amongst the 90 constituent companies in the Oil & Gas Production sector that pays a dividend to its shareholders.
In April, we closed on the acquisition of nearly 1,300 additional oil and natural gas wells, and after quickly and successfully integrating these assets into our continuing operations, we maintained the momentum by closing on a much larger, transformational acquisition of nearly 8,240 producing natural gas and oil wells. Collectively, these 1H17 acquisitions more than doubled our high-quality, long-life and low-decline asset base, while significantly enhancing DGO's production base and operating cash flows. DGO enters 2H17 owning a portfolio capable of producing a net 11,000 boepd of highly predictable and profitable volumes of gas and oil, which places DGO amongst the largest producers on AIM, and underpins our stable business model. The integration of the Titan assets is progressing well and 2H17 will see a material step-change in revenue and Adjusted EBITDA as we reap the full benefit of that acquisition, the cost of which has largely been taken in the first half of the year."
Strategic Report
Delivering on our strategic objectives
These 1H17 results reflect DGO's solid performance, delivering on our stated objectives and builds upon our already strong platform for additional growth. When we came to market in February 2017, we communicated a clear strategic vision for DGO: leverage our established position in the Appalachian Basin to capitalise on unique market conditions and acquire complementary producing assets on attractive valuation metrics to in turn grow production and cash flow, which DOG will use to fund a bi-annual dividend to shareholders. We are proud to say that we have already delivered on these objectives and have rapidly transformed the business to become what we believe to be a unique investment proposition on AIM: a low-risk, cash flow positive, dividend paying Exploration and Production Company ("E&P").
Results summary
DGO's first financial results since becoming a listed company reflect solid growth in numerous key financial metrics. Revenues are up more than 50% to $11.5m (2016: $7.7m) while adjusted EBITDA was up more than 200% to $4.1m (2016: $1.3m). Similarly, Adjusted EBITDA margin is significantly improved at 35.2% (2016: 17.2%), up 18 points over the corresponding period in 2016.
Whilst these half-year results demonstrate the Company's steady progress through to 30 June, they do not reflect the significantly enhanced financial and operational capabilities that we expect to report in 2H17, following the completion of our transformational acquisition of certain Titan Energy Appalachian Basin assets. The acquisition closed on the final day of the period and as such no contribution is reflected in our reported results although the costs associated with that transaction are included. To illustrate the significance of this acquisition, we have included below within the Outlook discussion a pro-forma table which that illustrates what DGO's financial results would have been had the Titan Energy acquisition occurred at the start of the period.
The Company's balance sheet and liquidity position have been transformed following the recent acquisitions together with the new $110m debt facility ($64m drawn at 30 June) and two share placings which raised gross proceeds of $85m. As at 30 June DGO had cash, and near cash equivalents, of $29.4m (2016: $0.02m) while total net assets stood at $87.1m (2016: $9.2m).
Consistent with the Board's stated policy, DGO paid a maiden dividend of 1.55 pence per ordinary share (1.99 cents) on 31 July, and the Board is pleased to announce that the Company will pay an interim dividend of 1.99 cents per ordinary share on 20 December 2017.
The Appalachian Basin opportunity
The prevailing market conditions in our regional focus on the Appalachian Basin, both before and increasingly more so following our IPO, have created a compelling buyer's market for well-capitalised, credible, local operators wishing to expand their portfolio of mature, producing assets. The Appalachian Basin, the oldest producing basin in the US with an abundance of existing infrastructure, has seen a rapid expansion of unconventional activity as large players focus their operations on the prolific Utica and Marcellus shale reservoirs located throughout the basin. This industry shift towards unconventional assets, the rights to which are held by production ("HBP"), means the mature, often conventional producing assets which routinely retain the rights to the unconventional assets, have become non-core to the larger industry players. As such, these parties are keen to offload these assets to buyers who can maintain the production while allowing them to retaining the rights to the unconventional reservoirs. With the maintenance of production and rights to the undeveloped, unconventional reservoirs being the main priority for the seller, this market dynamic creates particularly attractive valuation metrics for the appropriate buyers as price consideration is not always the seller's principal factor in completing transactions.
Having operated in the Appalachian Basin since 2001, DGO has developed a strong network and regional reputation as a proven and credible operator, providing it with a first-mover advantage in a small band of appropriate companies competing to capitalise on these unique buying opportunities. Furthermore, our proven ability to raise capital through the equity and debt markets puts us in an even smaller peer group capable of executing the material transactions of larger packages being offloaded.
Reducing operating costs
The conventional producing assets that represent the focus of DGO's operations are characterised as low-cost and long-life, capable of producing steady volumes of natural gas and oil for decades with minimal pressure decline and requiring limited operational management. The assets DGO seeks to acquire have often been managed inefficiently by larger operators, and present a unique opportunity for DGO to utilise its operational skillset and complementary regional footprint to reduce operating costs and improve the asset's profitability. DGO has a proven track record for driving down its unit operating costs as the Company expands its scale in the region, which enhances its resilience and profitability in a low-cost commodity environment. Accordingly, DGO's operating expenses in 1H17 were 6.4% lower at $7.73 per boe compared with $8.26 per boe reported in our readmission document for the last three months of 2016. We estimate that these costs will fall further as we begin to realize the benefit from various operational synergies and increased production from the Titan assets acquired on the last day of the 1H17 reporting period.
Growing through acquisition
Our successful share placing to raise gross proceeds of $50m and admission to AIM in February 2017 enabled us to significantly strengthen our balance sheet and liquidity and positioned us to transact on the opportunities stated above. We were pleased to complete our first post-IPO transaction only weeks after coming to market, as we acquired a package of 1,300 producing wells for $1.75m. The acquisition added production of 3,800 mcfd and 110bopd. We completed field operation integration for these wells in May, and more fully completed the integration of accounting operations in June.
In March 2017, DGO identified the opportunity to acquire certain Appalachian Basin gas and oil assets from Titan Energy that were consistent with our acquisition criteria and that had the potential to significantly enhance the Company's scale and profile in the region. DGO successfully raised an additional $35m through a further share placing and negotiated a new $110m senior secured credit facility to fund the $84.2mTitan Energy asset acquisition. The Company closed on $72.8m of the related assets on 30 June 2017 and continues to anticipate closing on the remaining $11.4m of assets by 30 September 2017 that are held within public partnership structures and that require regulatory approval within the US to close.
Inclusive of all Titan Energy assets, the Company's gross oil and gas production increases to approximately 18,300 boepd (11,000 BEOPD net) with total gross gas production increasing more than 260% to approximately 104,200 mcfpd and gross oil production increasing by 69% to approximately 931 bopd. These production levels position DGO as one of the largest producers on AIM. At these production levels, and even with the existing cost structure that Management is actively working to lower, the acquired wells are immediately accretive to Adjusted EBITDA. Importantly, the acquisition also increased PDP reserves to approximately 59.4mmboe.
Management continues to screen a pipeline of complementary and value accretive opportunities in the Appalachian Basin and DGO is well funded to execute on additional transactions should they be compelling and in the best interest of the Company and its shareholders.
Integration process
On the day of closing the Titan acquisition, we added 104 field operation employees from Titan Energy to our team. Led by newly appointed Senior Vice President of Operations, Bob Cayton, we restructured our field operations management team to reflect our scale and geographical size. Our legacy employees combined with these new additions to our team are unified in their focus to ensure a smooth and effective integration of the new assets into our operations processes. As part of this process, the now larger team is working to enhance production and strive to generate cost savings. The addition of many talented, experienced employees from Titan Energy was an important rationale in our strategy to acquire these assets, and we are very pleased to report that we are already seeing tangible benefits from their expertise.
As a part of the acquisition, we entered into a six-month transitional services agreement ("TSA") for accounting and other administrative services from Titan Energy. The TSA is operating as we anticipated and has proven to be an effective strategy to integrate the operations. In addition to the TSA, we engaged an energy consulting firm based in Houston, Texas to work with our teams on further integration strategies including accounting and technology needs. Our engagement with the consulting firm is producing favourable results and is helping prepare us for a post-TSA operating model.
Organic opportunity
Whilst DGO's growth strategy this year has focused on successfully achieving scale through acquisition, the Company's portfolio provides significant organic growth opportunities. As we complete the full integration of the newly acquired assets, our field management team will focus on maximising production by enhancing operational techniques. Our extensive leasehold, which now covers approximately 1.6m surface acres, has been sparsely drilled to date and therefore provides material running room for infill drilling to increase the production throughout the portfolio. Development wells are both low-risk and low-cost, ranging from $250k - $350k per well drill and placed on production. Management intends to initiate a development programme when drilling economics become more favourable and offer the Company higher rates of return than are currently provided through the compelling acquisition opportunities available at present valuations from which we have recently benefitted.
Enhancing the DGO team
An important aspect of successfully executing our strategy is ensuring we have leadership and management teams with the kills and experience necessary to oversee our rapid expansion. As such, we have placed a significant focus on adding depth to our team in the past six months through the hire of several highly quality professionals. With the acquisition of the Titan Energy assets, we added Bob Cayton as our Senior Vice President of Operations and John "Jack" Crook as our Senior Vice President of Environmental, Health & Safety. Both Bob and Jack each have over 30 years of experience operating in the Appalachian Basin and we have entrusted them with the responsibility of managing our entire Appalachian operations. We also extended our capital markets, accounting and financial reporting capabilities with the addition of Eric Williams as our new Chief Financial Officer. Eric's experience includes working with numerous SEC companies in the US, and was most recently the head of the investor relations function for a Permian based SEC oil and gas company. Eric will lead our investor relations, financial reporting and accounting operations. We were also pleased to enhance our middle management teams in both field operations and administrative functions.
Outlook
The second half of 2017 promises to represent a step-change in DGO's financial and operational profile as we reap the benefits from the transactions that we closed out in the first half of the year. Our growth trajectory has been rapid as we have grown the Company's gross production by nearly 240% over the past year. Near term, Management will remain highly focused on the successful integration of the acquired Titan Energy assets with a particular emphasis on the work required to ensure we maximise production whilst lowering our operating expenses.
After assuming control on 30 June 2017 of the Titan Energy assets, we have been working diligently to deliver improved operating results through initiatives to enhance asset performance while simultaneously reducing costs. The Company is pleased to report that in just the first month following the integration of Titan Energy's assets, operating margins have meaningfully improved and we believe we will continue to drive additional improvement.
For example, immediately upon closing, we lowered operating costs with a more than 22% reduction in the number of Titan Energy employees servicing the assets. To accomplish this reduction without a detrimental effect on operations, we leveraged our existing employees in the region resulting in more efficient allocation of responsibilities in the region to lower non-productive time. Additionally, we took steps to reduce chart expenses by implementing a better process for taking readings, and we reduced workover expense by utilizing a recently acquired service rig. Recognizing that costs are only half of the equation to improve margins, we also took steps to improve asset performance. For example, with de minimis investments, we returned wells to production that were previously left shut-in and non-producing. Additionally, we've enhanced production by properly sizing compressors to the wells they support.
The following table illustrates DGO's pro forma results assuming that the Titan Energy acquisition occurred at the beginning of the period on 1 January 2017. The pro forma results reflect Titan Energy's actual operating results for the acquired assets, and therefore reflect none of the synergies DGO expected upon the integration of the assets. Further, the pro forma results include substantially no contribution from our EnerVest Energy Acquisition.
As Reported Unadjusted
Unaudited Unaudited Unaudited Pro forma Unaudited
vs H1 2016
DGO Titan Pro Forma Change Consolidated
Energy
H1 2017 H1 2017 H1 2017 H1 2016 $'000 % July 2017
----------- ------------ ----------- ---------- ---------- ----------- --------------
$'000 $'000 $'000 $'000 $'000
See Note 9
for
details
regarding
the Titan
Energy
acquisition
-------------
Revenue 11,541 24,548 36,089 7,653 28,436 371.6% 5,186
Gross Profit 3,090 7,681 10,771 919 9,852 1,072.0% 1,567
Adjusted
EBITDA 4,065 8,787 12,852 1,314 11,538 878.1% 2,087
Adjusted
EBITDA 18.4
margin 35.2% 35.8% 35.6% 17.2% points 107.0% 40.2%
Adjusted
EBITDA
per share -
Diluted 0.04 0.10 0.14 0.03 0.11 366.7% n/a
Interim
dividend
per share 0.0199 - 0.0199 100%
Adjusted net
debt 35,177 42,539 (7,362) (17.3)%
Net Debt
(Cash
+ Equity
Receivable
- Debt) /
Pro
forma
Annualized
Adjusted
EBITDA 1.4x 16.2x (14.8 )x (91.4)%
The sector backdrop continues to be challenging and we are in a highly fortunate position to be operating in a safe jurisdiction, benefit from a strong balance sheet and have an effective business model that provides significant downside protection against the variables of commodity prices. Our low-cost operations ensure we are profitable in the current environment, and able to withstand a further decrease in commodity prices. We also take a prudent approach to the way the business is run in terms of cash management and hedging out our production to ensure visibility on predictable earnings. Ironically, we are uniquely positioned to benefit from the challenging sector backdrop as it creates very compelling acquisition opportunities as distressed companies seek to rationalise their portfolio.
Over the longer-term, we continue to work on our existing portfolio to seek in-fill opportunities and maximise the efficiency, production and longevity of our assets, activities that are a key aspect of company reputation and expertise. Further, we continue to seek attractive acquisition opportunities arising out of current market conditions that have already resulted in a number of strategic purchases for DGO in the past 18 months. As our acquisitive momentum has increased over the years, we seek to continue to deliver valuable additions to our portfolio in the Appalachian Basin and other suitable mature, hydrocarbon basins in the US.
Conclusion
In summary, the first six months of 2017 has been truly transformational for the Company. We have delivered on the strategic, corporate and operational objectives that we defined at the time of obtaining our admission to AIM in February 2017. We enter the second half of the year in a strong position. I wish to extend my gratitude to our shareholders who have demonstrated confidence in our defined strategy, management team and our focus on additional growth. I would also like to thank my colleagues for their hard work and commitment, without which we would not have been able to deliver such impressive growth. We are wholly focused on delivering value for all our stakeholders as we leverage the strong platform that we have created.
Rusty Hutson Jr
Chief Executive Officer
Financial Review
Revenue
Total revenues from natural gas and oil sales in 1H17 were $10.2m, a 48.9% increase over $6.8m for 1H16.The increase in this revenue was primarily attributable to a 45.6% increase in barrel of oil equivalent sales. DGO ended the first six months of 2017 with net boe sales of approximately 581,000 vs. the prior year sales of approximately 399,000. The increase in boe sales was driven by the successful acquisitions of the assets from Seneca Resources and Eclipse Resources.
Operating profit
DGO's operating profit in 1H17 was $9.7m compared to $23.9m in 1H16. The decrease of $14.2m reflects the decrease in non-recurring bargain purchase gains of $13.8m between the two periods. The Company recorded gains on bargain purchases of $24.2m in 1H16 as a result of the acquisitions of Seneca Resources and Eclipse Resources while recording gains on bargain purchases of $10.4m in 1H17 resulting from the Titan Energy and EnerVest Energy acquisitions.
The operating expenses incurred of $3.17m were significantly higher than the $0.89m for same period last year, due to the various costs of acquisition and corporate transactions in the period, but also reflecting the investment made in staff and systems to support the Company's growth.
Finance costs
DGO's finance costs include interest expense on borrowings, non-cash amortization of deferred financing costs and gains/losses on the early retirement of debt. In 1H17 and using the proceeds from our successful AIM IPO, DGO repaid its publicly traded bonds and the then other outstanding debt. Accordingly, DGO incurred a non-recurring loss on the early extinguishment of debt, which primarily included a $3.8m charge for the accelerated amortization of the remaining deferred financing costs and $0.6m in premiums paid to redeem convertible bonds prior to DGO's admission to AIM.
Hedging
To manage its cash flows in a volatile commodity price environment, DGO uses a combination of physical and financial derivative instruments. As required by its Senior Secured Credit Facility, DGO executed a combination of fixed price physical contracts, price swap financial contracts and two-way collar financial contracts equal to approximately 75% of the Company's forecasted production volumes for a 36-month rolling period. Please refer to note 13 to our interim financial statements for additional information regarding DGO's hedge portfolio.
EPS and Adjusted EBITDA
DGO reported 1H17 statutory earnings per diluted ordinary share of $0.04 compared to $0.91 per diluted ordinary share in 1H16. However, when adjusted for certain non-cash items such as gains on bargain purchases and similar items, DGO reported Adjusted EBITDA per diluted ordinary share of $0.04 per diluted ordinary share, a 33% increase over the prior year's $0.03 Adjusted EBITDA per diluted ordinary share.
Dividend
The Board has announced an interim dividend of 1.99 cents per ordinary share to be paid on 20 December 2017 to those shareholders in the register on 17 November 2017, and follows the dividend of 1.99 cents per ordinary share paid to shareholders on 31 July 2017.
Enquiries:
Diversified Gas & Oil PLC Rusty Hutson Jr., Chief Executive Officer Brad Gray, Finance Director / Chief Operating Officer Eric Williams, Chief Financial Officer / Investor Relations +001 205 408 www.diversifiedgasandoil.com 0909 Smith & Williamson Corporate Finance Limited (Nominated Adviser & Joint Broker) Russell Cook, Katy +44 (0)20 7131 Birkin 4000 Mirabaud Securities Limited (Lead Broker) Peter Krens, Edward +44 (0)20 3167 Haig-Thomas 7221 Buchanan (Financial Public Relations) Ben Romney, Chris Judd, Henry Wilson +44 (0)20 7466 dgo@buchanan.uk.com 5000
IMPORTANT NOTE REGARDING THE BASIS OF PRESENTATION --
The Company is pleased to present its interim consolidated financial statements. As discussed below in note 3, "Basis of Presentation," please be aware that unless otherwise stated, the all information included within the financial statements, including the notes to the financial statements, is presented in US Dollars, which is the currency of the primary economic environment in which the Company operates, and all values, including those in sentences, are rounded to the nearest thousand dollars except per unit amounts and where otherwise indicated.
Interim Consolidated Statements of Comprehensive Income
(Amounts in thousands, except per-share amounts)
Unaudited Unaudited Audited
Six months Six months Year ended
to to
Note 30 June 30 June 31 December
2017 2016 2016
----- ------------ ------------ ---------------
Revenue 4 $ 11,541 $ 7,653 $ 18,279
Cost of sales 5 (6,225) (6,227) (12,767)
Depreciation and depletion 5 (2,226) (507) (4,039)
----------- ----------- ------------
Gross profit $ 3,090 $ 919 $ 1,473
Administrative expenses 5 (3,167) (887) (2,540)
Gain on disposal of property
and equipment 4 - 34
Loss on derivative financial
instruments (540) (308) (810)
Gain on bargain purchase 9 10,351 24,212 24,293
----------- ----------- ------------
Operating profit $ 9,738 $ 23,936 $ 22,450
Finance costs (745) (1,371) (3,291)
Accretion of decommissioning
provision (585) (223) (797)
(Loss)/Gain on early retirement
of debt (4,468) 14,149 14,149
----------- ----------- ------------
Income before taxation $ 3,940 $ 36,491 $ 32,511
Taxation on income (262) - (14,829)
----------- ------------ ------------
Income after taxation available
to ordinary shareholders $ 3,678 $ 36,491 $ 17,682
Other comprehensive income
- gain on foreign currency
conversion 202 603 901
----------- ----------- ------------
Total comprehensive income
for the year $ 3,880 $ 37,094 $ 18,583
======= ======= ========
Earnings per ordinary share
- basic & diluted 7 $ 0.04 $ 0.91 $ 0.42
======= ======= ========
Weighted average ordinary shares
outstanding - Basic & Diluted 7 94,971 40,100 42,011
=========== =========== ============
Interim Consolidated Statements of Financial Position
(Amounts in thousands)
Unaudited Unaudited Audited
30 June 30 June 31 December
Note 2017 2016 2016
----- --------- ----------- ---------------
ASSETS
Non-current assets
Oil and gas properties,
net 11 $176,536 $ 79,864 $ 76,793
Property and equipment,
net 12 5,668 2,798 3,348
Other non-current assets 1,011 817 998
Restricted cash 117 117 117
-------- ---------- ------------
Total non-current assets $183,332 $ 83,596 $ 81,256
Current assets
Trade receivables 5,085 2,519 3,084
Other current assets 417 118 1,311
Equity placing receivable 24,864 - -
Cash and cash equivalents 4,574 20 224
-------- ---------- ------------
Total current assets $ 34,940 $ 2,657 $ 4,619
Total Assets $218,272 $ 86,253 $ 85,875
======= ====== ========
EQUITY AND LIABILITIES
Shareholders' equity
Share capital 14 $ 1,940 $ 630 $ 669
Share premium 76,015 - 313
Merger reserve (478) (478) (478)
Dividends declared (2,887) - -
Retained earnings 12,538 27,587 8,658
Total Equity $ 87,128 $ 27,739 $ 9,162
------- ------ --------
Non-current liabilities
Decommissioning liability 15 $ 31,630 $ 14,798 $ 12,265
Capital lease 440 115 274
Borrowings 16 61,316 9,592 10,113
Deferred tax liability 15,408 - 15,148
Other non-current liabilities 10 5,038 457 414
-------- ---------- ------------
Total non-current liabilities $113,832 $ 24,962 $ 38,214
------- ------ --------
Current liabilities
Trade and other payables $ 3,032 $ 3,537 $ 4,627
Borrowings 16 305 29,194 27,181
Capital lease 250 113 169
Dividends payable 2,887 - -
Other current liabilities 10 10,838 708 6,522
-------- ---------- ------------
Total current-liabilities $ 17,312 $ 33,552 $ 38,499
------- ------ --------
Total Liabilities $131,144 $ 58,514 $ 76,713
------- ------ --------
Total Liabilities and
Equity $218,272 $ 86,253 $ 85,875
======= ====== ========
Interim Consolidated Statements of Changes in Equity
(Amounts in thousands)
Share Share Merger Retained Total
Note Capital Premium Reserve Dividends Earnings Equity
----- --------- ------- --------- ----------- -------- ----------
Balance as of 1
January
2017 $ 669 $ 313 $ (478) $ - $ 8,658 $ 9,162
Income after
taxation - - - - 3,678 3,678
Gain on foreign
currency
conversion - - - - 202 202
------- -------
Total
comprehensive
income - - - - 3,880 3,880
--------- ------- -------- ---------- ------- -------
Issuance of share
capital,
initial offering 14 768 43,550 - - - 44,318
Issuance of share
capital,
secondary
offering 9 503 32,152 - - - 32,655
Dividends
authorized
and declared 8 - - - (2,887) - (2,887)
Transactions
with
shareholders 1,271 75,702 - (2,887) - 74,086
--------- ------- -------- ---------- ------- -------
Balance as of 30
June
2017 $ 1,940 $76,015 $ (478) $ (2,887) $12,538 $87,128
===== ====== ==== ====== ====== ======
Share Share Merger Retained Total
Capital Premium Reserve Dividends Earnings Equity
--------- ------- --------- ----------- -------- ----------
Balance as of 1
January
2016 $ 630 $ - $ (478) $ - $(8,969) $(8,817)
Income after
taxation - - - - 36,491 36,491
Gain on foreign
currency
conversion - - - - 603 603
Total
comprehensive
income - - - - 37,094 37,094
--------- ------- -------- ---------- ------- -------
Stockholder
distributions
pre-group
reconstruction - - - - (538) (538)
Transactions
with
shareholders - - - - (538) (538)
--------- ------- -------- ---------- ------- -------
Balance as of 30
June
2016 $ 630 $ - $ (478) $ - $27,587 $27,739
===== ====== ==== ====== ====== ======
Share Share Merger Retained Total
Capital Premium Reserve Dividends Earnings Equity
--------- ------- --------- ----------- -------- ----------
Balance as of 1
January
2016 $ 630 $ - $ (478) $ - $(8,969) $(8,817)
Income after
taxation - - - - 17,682 17,682
Gain on foreign
currency
conversion - - - - 901 901
Total
comprehensive
income - - - - 18,583 18,583
--------- ------- -------- ---------- ------- -------
Stockholder
distributions
pre-group
reconstruction - - - - (956) (956)
Issuance of share
capital 39 313 - - - 352
Transactions
with
shareholders 39 313 - - (956) (604)
--------- ------- -------- ---------- ------- -------
Balance as of 31
December
2016 $ 669 $ 313 $ (478) $ - $ 8,658 $ 9,162
===== ====== ==== ====== ====== ======
Interim Consolidated Statements of Cash Flow
(Amounts in thousands)
Unaudited Unaudited Audited
Six months Six months
to to Year ended
31 December
Note 30 June 2017 30 June 2016 2016
----- -------------- -------------- ---------------
Cash flows from operating
activities
Income after taxation $ 3,678 $ 36,491 $ 17,682
Cash flow from operations
reconciliation:
Depreciation and depletion 2,226 507 4,039
Finance costs 4,045 1,371 3,291
Accretion of decommissioning
provision 15 585 223 797
Loss on derivative
financial instruments 13 687 699 957
Gain on oil and gas
program (396) (84) (84)
Deferred income taxes 260 - 14,829
Gain on bargain purchase 9 (10,351) (24,212) (24,293)
Gain on disposal of
property and equipment (4) - (34)
Gain on debt cancellation - (14,149) (14,149)
Non-cash equity grant - - 340
Working capital adjustments:
Change in trade receivables (2,002) (1,145) (907)
Change in other current
assets 138 (71) (269)
Change in other assets (13) - (652)
Change in trade and
other payables (1,595) 543 2,662
Change in other liabilities 9,733 129 920
Net cash provided by
operating activities $ 6,991 $ 302 $ 5,129
--------- --------- --------
Cash flows from investing
activities
Expenditures on oil
and gas properties $ (73,585) $ (8,642) $ (7,838)
Expenditures on property
and equipment (2,652) (155) (1,462)
Increase in restricted
cash - (2) (2)
Proceeds on disposal
of oil and gas properties - 93 93
Net cash used in investing
activities $ (76,237) $ (8,706) $ (9,209)
--------- --------- --------
Cash flows from financing
activities
Proceeds from borrowings 16 $ 64,000 $ 13,200 $ 14,915
Repayment of borrowings (40,521) (3,138) (6,794)
Financing expense (2,994) (1,244) (3,222)
Proceeds from equity
issuance, net 52,864 - -
Proceeds from capital
lease 319 133 435
Repayment of capital
lease (72) (79) (164)
Dividends to shareholders
pre-group reconstruction - (538) (956)
Net cash provided by
financing activities $ 73,596 $ 8,334 $ 4,214
--------- --------- --------
Net increase(decrease)
in cash and cash equivalents 4,350 (70) 134
Cash and cash equivalents
- beginning of the period 224 90 90
------------- ------------- ------------
Cash and cash equivalents
- end of the period $ 4,574 $ 20 $ 224
========= ========= ========
Note 1 - General Information
Diversified Gas & Oil PLC ("DGO" or the "Company") is a natural gas and crude oil producer that is focused on acquiring and operating mature producing wells with long lives and slow decline profiles. Presently, our assets are exclusively located within the Appalachian Basin. The Company is headquartered in Birmingham, Alabama, USA with field offices located in Pennsylvania, Ohio, West Virginia and Tennessee. DGO was incorporated on 31 July 2014 in England and Wales as a private limited company under company number 09156132. DGO's registered office is located at 27/28 Eastcastle Street, London W1W 8DH, United Kingdom.
Note 2 - Business Consolidation
The interim consolidated financial statements reflect the following corporate structure of DGO:
-- Diversified Gas & Oil PLC ("PLC"), and its wholly owned subsidiary,
Diversified Gas & Oil Corporation ("DGOC'), as well as its wholly owned subsidiaries,
-- Diversified Resources, Inc. -- M & R Investments, LLC; -- M & R Investments Ohio, LLC; -- Marshall Gas and Oil Corporation; -- R&K Oil and Gas, Inc.; -- Fund 1 DR, LLC -- Diversified Oil & Gas, LLC; -- Diversified Appalachian Group, LLC -- Diversified Energy, LLC (see note 9)
Note 3 - Basis of Preparation
The interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The financial information for the period ended 30 June 2017 is based on the statutory accounts for the year ended 31 December 2016. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The interim consolidated financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2016 statutory accounts in accordance with IAS 34 Interim Financial Reporting.
Unless otherwise stated, the financial statements are presented in US Dollars, which is the currency of the primary economic environment in which DGO operates, and all values are rounded to the nearest thousand dollars except per unit amounts and where otherwise indicated. Certain prior period amounts have been reclassified to conform with current presentation. Transactions in foreign currencies are translated into US Dollars at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange ruling at the balance sheet date. The resulting gain or loss is reflected in the income statement within Other comprehensive income - gain on foreign currency conversion.
The financial statements have been prepared under the historical cost convention, except for acquisitions and derivative financial instruments that have been measured at fair value through profit and loss.
The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realization of assets and the settlement of liabilities in the normal course of business. The Directors have reviewed DGO's overall position and outlook and are of the opinion that DGO is sufficiently well funded to be able to operate as a going concern for at least the next twelve months from the date of approval of these financial statements. The Directors believe that the use of the going concern basis is appropriate. Accordingly, the Directors have prepared the financial statements on a going concern basis.
Note 4 - Revenue
DGO extracts and sells natural gas and crude oil to various customers. DGO also operates oil and natural gas wells for customers and other working interest owners. The following table reconciles the Company's revenues for the periods presented:
Unaudited Unaudited Audited
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
------------ ------------ ----------------
Natural gas revenue $ 7,795 $ 4,996 $ 10,671
Oil revenue 2,399 1,849 4,207
------------ ------------ --------------
Total natural gas and oil
revenues 10,194 6,845 14,878
Operator revenue 662 468 1,209
Oil and gas program revenue 403 84 1,573
Water disposal revenue 282 256 619
Total revenue $ 11,541 $ 7,653 $ 18,279
======== ======== ==========
Note 5 - Expenses by Nature
The following table provides a detail of the Company's expenses:
Unaudited Unaudited Audited
Six months Six months
to to Year ended
30 June 30 June 31 December
Explanation 2017 2016 2016
------------- ------------ ------------ ----------------
Automobile $ 526 $ 306 $ 797
Employees and benefits 2,354 2,135 4,117
Insurance 117 53 162
Well operating expenses
& taxes 3,228 3,733 7,691
------------ ----------- --------------
Total cost of sales $ 6,225 $ 6,227 $ 12,767
Depreciation 516 (567) 756
Depletion 1,710 1,074 3,283
------------ ----------- --------------
Total depreciation and
depletion $ 2,226 $ 507 $ 4,039
Employees and benefits a 965 95 373
Other administrative 136 150 301
Professional fees 165 63 272
Auditors' remuneration
Audit of parent 11 15 34
Audit of group 75 112 247
------------ ----------- --------------
Total Auditors' remuneration $ 86 $ 127 $ 281
Other fees payable to
auditors 4 24 42
Rent 42 44 93
------------ ----------- --------------
Recurring administrative
expenses $ 1,398 $ 503 $ 1,362
Non-recurring costs associated
with acquisitions & contribution
of assets 1,769 384 838
Non-cash equity issuance b - - 340
------------
Non-recurring administrative
expenses $ 1,769 $ 384 $ 1,178
Total administrative expenses $ 3,167 $ 887 $ 2,540
Total expenses $ 11,618 $ 7,621 $ 19,346
======== ======= ==========
a) Prior to admission to AIM, compensation expense for
the owners was recorded as an owner distribution. Thus,
the expense reported in the prior year is lower by
the amount of such distributions. Further, the Company
hired additional personnel, including a Finance Director
and Chief Operating Officer in October 2016, which
increased this expense to support a larger, more dynamic
organization.
b) Non-cash equity issuance is a non-recurring expense
related to the initial issuance of stock to a Company
senior manager in 2016.
Note 6 - Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure, which is of particular interest to the industry and Directors, as it is essentially the cash generated from operations that DGO has free for interest payments and capital investment. Adjusted EBITDA should not be considered as an alternative to operating profit (loss), comprehensive income, cash flow from operating activities or any other financial performance or liquidity measure presented in accordance with IFRS. Adjusted EBITDA is a non-IFRS financial measure that is defined as operating profit plus or minus items detailed below in the table below.
The Company believes Adjusted EBITDA is a useful measure because it enables a more effective way to evaluate operating performance and compare the results of operations from period-to-period and against our peers without regard to our financing methods or capital structure. The Company excludes the items listed in the table below from operating profit in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.
The following table reconciles the Company's operating profit to Adjusted EBITDA:
Unaudited Unaudited Audited
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
------------ ------------ ---------------
Operating profit $ 9,738 $ 23,936 $ 22,450
Depreciation and depletion 2,226 507 4,039
Gain on bargain purchase (10,351) (24,212) (24,293)
Gain on disposal of property
and equipment (4) - (34)
Loss on derivative financial
instruments 687 699 957
Non-recurring costs associated
with acquisitions & contribution
of assets 1,769 384 838
Non-cash equity issuance included
in Administrative expense - - 340
-----------
Total Adjustments (5,673) (22,622) (18,153)
Adjusted EBITDA $ 4,065 $ 1,314 $ 4,297
=== ====== ======= ========
Weighted average ordinary shares
outstanding - Basic and Diluted 94,971 40,100 42,011
Adjusted EBITDA per share -
Basic and Diluted $ 0.04 $ 0.03 $ 0.10
=== ====== ======= ========
Note 7 - Earnings per Share
The calculation of basic income/(loss) per ordinary share is based on the income/(loss) after taxation available to ordinary shareholders and on the weighted average number of ordinary shares outstanding during the period. The calculation of diluted income/(loss) per ordinary share is based on the income/(loss) after taxation available to ordinary shareholders and the weighted average number of ordinary shares outstanding plus the weighted average number of shares that would be issued if dilutive options and warrants were converted into shares on the last day of the reporting period. Basic and diluted income/(loss) per ordinary share is calculated as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
to to
Calculation 30 June 30 June 31 December
2017 2016 2016
------------- ------------ ------------ ---------------
Income after taxation available
to ordinary shareholders A $ 3,678 $ 36,491 $ 17,682
Weighted average ordinary
shares outstanding - Basic
& Diluted B 94,971 40,100 42,011
Earnings per ordinary share = A
- basic & diluted / B $ 0.04 $ 0.91 $ 0.42
======== ======== =========
See
Adjusted EBITDA per ordinary Note
share - basic & diluted 6 $ 0.04 $ 0.03 $ 0.10
======== ======== =========
Note 8 - Dividends
On 15 June 2017, the Company declared its first dividend subsequent to completing its initial public offering on the AIM in February 2017. Subsequent to 30 June 2017, the Company declared an additional dividend to be paid on 20 December 2017.
The following table summarizes the Company's dividends paid and declared:
Dividend per
Ordinary Share
Record Shares Gross Dividends
Date Declared USD GBP Date Pay Date Outstanding Paid
-------------- ------- ----------- ----------- ----------- ------------ -------------------
15 June 07 July 31 July
2017 $0.0199 GBP 0.0155 2017 2017 145,076 $ 2,887
11 September 17 November 20 December
2017 0.0199 Pending 2017 2017 Pending Pending
Note 9 - Acquisitions
The assets acquired in all acquisitions include the necessary permits, rights to production, royalties, contracts and agreements that support the production from the wells. The acquisitions have been accounted for as a business acquisition under IFRS 3. The acquisitions gave rise to bargain purchases due to the prevailing market conditions in the Appalachian Basin, the context of global oil and gas prices, the financial condition of the sellers, and a change in the operational focus of the sellers compelling these sellers to divest of their conventional oil and gas assets.
EnerVest Acquisition
In April 2017, DGO acquired approximately 1,300 conventional natural gas and oil wells in Ohio and equipment from EnerVest. The purchase consideration totalling $1,750 was paid in cash. Management considered the fair value of the reserves held in the assets acquired to be $5,629, which was the 30% cumulative cash flow discount reserve valuation derived from a third-party engineer at the time of purchase. The provisional estimated fair values of the assets and liabilities assumed were as follows:
Oil and gas properties $5,629
Oil and gas properties (Decommissioning provision,
asset portion) 2,406
Decommissioning liability (2,406)
Gain on bargain purchase (3,879)
Purchase price $1,750
=====
Titan Energy Acquisition
On 30 June 2017, DGO acquired approximately 8,380 producing conventional natural gas and oil wells in the states of Pennsylvania, Ohio, and Tennessee (including approximately 1,140 non-operated wells) and equipment from Titan Energy. The total purchase consideration including assets expected to close by 30 September 2017 was $84,200. The cash consideration for the purchase was funded by a new $110,000 Senior Secured Loan Facility, of which $64,000 was drawn upon closing on 30 June 2017, and an equity placing of DGO's stock. DGO placed 39,300 new ordinary shares at $0.89 per share with certain existing and new institutional investors to raise $35,020. The equity placing occurred in two tranches of 11,400 shares which raised $10,158 and 27,900 shares were placed with the second tranche, which raised $24,862.
Of the total $84,200 purchase consideration, DGO funded $72,800 in cash on 30 June 2017 for approximately 8,240 of the total wells. The remaining $11,400 of the purchase price is allocated to Titan Energy assets that are held within public partnership structures and include a number of horizontal wells. The Company continues to anticipate closing on the remaining assets by 30 September 2017 pending regulatory approval within the United States.
Management considered the fair value of the reserves held in the assets acquired on 30 June 2017 to be $79,272, which was the 25% cumulative cash flow discount reserve valuation derived from a third-party engineer at the time of purchase. The provisional estimated fair values of the assets and liabilities assumed were as follows:
Total purchase consideration $84,200
Less: Net purchase price adjustments (4,928)
-------
Oil and gas properties purchased at 30 June
2017 $79,272
Oil and gas properties (Decommissioning provision,
asset portion) 14,896
Decommissioning liability (14,896)
Gain on bargain purchase for properties purchased
at 30 June 2017 (6,472)
Purchase price as at 30 June 2017 $72,800
======
Note 10 - Other Liabilities
The following table reconciles the Company's other liabilities for the periods presented:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
----------- ----------- ---------------
Other non-current liabilities
Customer deposits $ 55 $ 52 $ 52
Revenue to be distributed 3,128 306 362
Derivative financial instruments
- net non-current liability 1,855 99 -
Total Other non-current liabilities $ 5,038 $ 457 $ 414
======= === ====== =========
Other current liabilities
Accrued expenses $ 896 $ - $ 1,112
Net revenue clearing 2,461 - 498
IPO related expenses 2,768 - -
Acquisition related short term
financing 3,500 - 3,500
Derivative financial instruments
- net current liability - 583 939
Other 1,213 125 473
Total Other current liabilities $ 10,838 $ 708 $ 6,522
======= === ====== =========
Note 11 - Oil and Gas Properties
As discussed in Note 9, the Company completed two acquisitions during the first half of 2017. The following table summarizes the Company's oil and gas properties for each of the periods presented:
Costs Depletion and Impairment
Net
Beginning Ending Beginning Period Ending Book
Period Balance Additions Disposals Balance Balance Charges Disposals Balance Value
------------- ----------- --------- ----------- -------- --------- ------- --------- --------- ----------
As at and
for the
6-months
ended 30
June 2017
(Unaudited) $ 94,608 101,645 (12) $196,241 $(17,815) (1,890) - $(19,705) $176,536
As at and
for the
6-months
ended 30
June 2016
(Unaudited) 56,659 37,809 (28) 94,440 (14,306) (283) 13 (14,576) 79,864
As at and
for the year
ended 31
December
2016
(Audited) 56,659 41,077 (3,128) 94,608 (14,306) (3,553) 44 (17,815) 76,793
Note 12 - Property and Equipment
The following table summarizes the Company's property and equipment for each of the periods presented:
Plant, Property & Accumulated Depreciation
Equipment and Disposals
Net
Beginning Ending Beginning Period Ending Book
Period Balance Additions Disposals Balance Balance Charges Disposals Balance Value
------------- ------------ ---------- ------------ ---------- ------------ ---------- ---------- -------- --------
As at and
for the
6-months
ended 30
June 2017
(Unaudited) $ 5,223 2,657 (5) $ 7,875 $ (1,875) (336) 4 $(2,207) $5,668
As at and
for the
6-months
ended 30
June 2016
(Unaudited) 3,506 911 (6) 4,411 (1,395) (224) 6 (1,613) 2,798
As at and
for the year
ended 31
December
2016
(Audited) 3,506 1,791 (74) 5,223 (1,395) (486) 6 (1,875) 3,348
Note 13 - Derivative Financial Instruments & Hedging Activities
The following table summarizes DGO Group's calculated fair value of derivative financial instruments:
Unaudited Unaudited Audited
30 June 30 June 31 December
(Liabilities)/Assets 2017 2016 2016
----------- ----------- ---------------
Natural gas
Swaps $ (747) $ (474) $ (99)
Collars (57) - (685)
Basis swaps (568) 53 -
Put options - (140) -
---------- ---------- ------------
Total natural gas derivative
financial instruments $ (1,372) $ (561) $ (784)
------ ------ --------
Oil
Swaps $ - $ - $ -
Collars (254) - (155)
Basis swaps - - -
Put options - (121) -
---------- ---------- ------------
Total oil derivative financial
instruments $ (254) $ (121) $ (155)
------ ------ --------
Total derivative financial
instruments $ (1,626) $ (682) $ (939)
====== ====== ========
The Company reports the derivative financial instrument assets and liabilities net in its balance sheet. The following table reconciles the Company's derivative financial instrument gross assets and gross liabilities for the periods presented:
Derivative Financial Unaudited Unaudited Audited
Balance Sheet 30 June 30 June 31 December
Instruments line item 2017 2016 2016
------------------------------ ----------------------- ----------- ----------- ---------------
Non-current assets $ 1,585 $ 380 $ -
Current assets 2,012 466 640
---------- ---------- ------------
Total assets $ 3,597 $ 846 $ 640
Non-current liability $ (3,440) $ (479) $ -
Current liabilities (1,783) (1,049) (1,579)
---------- ---------- ------------
Total liabilities $ (5,223) $ (1,528) $ (1,579)
Net (liabilities)/assets Other Non-current
- Non-current (liabilities)/assets $ (1,855) $ (99) $ -
Net assets/(liabilities) Other Current
- Current assets/(liabilities) 229 (583) (939)
Net (liabilities)/assets $ (1,626) $ (682) $ (939)
====== ====== ========
For the periods indicated, the Company recorded the following related to its derivative financial instruments in the consolidated statements of comprehensive income as gain (loss) on derivative financial instruments:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
----------- ----------- ---------------
Net gain on settlements $ 147 $ 391 $ 147
Net loss on fair value adjustments
on unsettled financial instruments (687) (699) (957)
Total loss on derivative financial
instruments $ (540) $ (308) $ (810)
====== ====== ========
Listed in the table below are the outstanding natural gas and oil derivative financial instruments as of 30 June 2017:
Derivative Short
Financial Remaining Ending Swap Floor Put Ceiling Mark-to-Market
Instrument As of 30
Type Volumes Month Price Price Price Price June 2017
------------ ----------- ------- ------ ------ ------- --------- ------------------
Natural Gas
------- ------ ------ ------- ---------
307,500
Swap MMBTUs Oct-17 $3.38 $ - $ - $ - $ 102
1,500,000
Swap MMBTUs Oct-17 2.92 - - - (181)
6,000,000
Swap MMBTUs Mar-19 2.89 - - - (266)
6,000,000
Swap MMBTUs Mar-20 2.81 - - - (191)
6,000,000
Swap MMBTUs Mar-21 2.82 - - - (211)
Two-Way 152,500
Collar MMBTUs Dec-17 - 3.25 - 3.75 31
Two-Way 1,000,000
Collar MMBTUs Dec-17 - 2.87 - 3.32 (97)
Two-Way 1,500,000
Collar MMBTUs Mar-18 - 3.00 - 3.55 (145)
Three-Way 688,500
Collar MMBTUs Dec-17 - 3.00 2.50 3.48 24
Three-Way 688,500
Collar MMBTUs Dec-17 - 3.30 2.80 3.77 130
Basis Swap: 1,230,000
Dominion SP MMBTUs Oct-17 (0.67) - - - 493
Basis Swap: 3,600,000
Dominion SP MMBTUs Dec-18 (0.60) - - - (420)
Basis Swap: 305,000
Dominion SP MMBTUs Dec-18 (0.53) - - - (13)
Basis Swap: 7,668,000
Dominion SP MMBTUs Sep-20 (0.59) - - - (567)
Basis Swap: 2,100,000
TCO MMBTUs Sep-20 (0.39) - - - (61)
Oil
------- ------ ------ ------- ---------
Two-Way
Collar 30,728 BBLs Dec-17 - $50.00 $ - $ 59.00 $ 133
Two-Way
Collar 30,600 BBLs Dec-17 - 40.00 - 49.00 (35)
Two-Way 146,000
Collar BBLs Dec-18 - 42.00 - 51.00 (204)
Two-Way 146,000
Collar BBLs Dec-19 - 44.00 - 52.00 (197)
Three-Way
Collar 22,800 BBLs Dec-17 - 47.00 37.00 59.00 49
---------------
Total Derivative
Financial
Instruments $ (1,626)
=== ==========
Listed in the table below are the natural gas and oil derivative financial instruments executed subsequent to 30 June 2017:
Derivative Short
Financial Remaining Ending Swap Floor Put Ceiling
Instrument
Type Volumes Month Price Price Price Price
---------------- ----------- ------- ------ ------ ------- -----------
Natural Gas
------- ------ ------ ------- -----------
900,000
Swap MMBTUs Nov-18 $2.84 $ - $ - $ -
Basis Swap: 20,000
TCO MMBTUs Nov-17 (0.24) - - -
Basis Swap: 20,000
TCO MMBTUs Apr-18 (0.21) - - -
Basis Swap: 320,000
TCO MMBTUs Oct-18 (0.34) - - -
Basis Swap: 65,000
TCO MMBTUs Feb-19 (0.32) - - -
Basis Swap: 320,000
Leidy MMBTUs Oct-18 (0.71) - - -
Oil
------- ------ ------ ------- -----------
23,000
Two-Way Collar BBLs Oct-17 $ - $38.00 $ - $ 50.90
Two-Way Collar 2,800 BBLs Feb-18 - 39.00 - 53.35
Two-Way Collar 5,600 BBLs Feb-19 - 40.00 - 56.05
Note 14 - Share Capital
In February 2017, DGO placed 61,000 new ordinary shares at 65 pence per share to raise gross proceeds of $49,563 (approximately GBP39,650). DGO used the funds raised for the repurchase of bonds, repayment of existing debt facilities, costs of admission to AIM and working capital requirements of the Company. Following this initial placing, and as discussed in Note 9, in June 2017, DGO issued an additional 39,300 ordinary shares at 70 pence per share to raise additional gross proceeds of $34,938 (approximately GBP27,510) to fund part of the purchase price of an additional acquisition. The following table summarizes the Company's share capital for the periods presented:
Number of Total Share
Shares Capital
--------- ---------------
Balance as of 1 January 2017 44,210 $ 669
Issuance of share capital, primarily
initial offering 61,381 768
Issuance of share capital, primarily
secondary offering 39,485 503
--------- -------------
Balance as of 30 June 2017 145,076 $ 1,940
========= =========
Number of Total Share
Shares Capital
--------- ---------------
Balance as of 1 January 2016 41,200 $ 630
No activity during the period - -
--------- -------------
Balance as of 30 June 2016 41,200 $ 630
========= =========
Number of Total Share
Shares Capital
--------- ---------------
Balance as of 1 January 2016 41,200 $ 630
Issuance of share capital, Board Member 800 12
Issuance of share capital, Chief Operating
Officer & Finance Director 2,210 27
--------- -------------
Balance as of 31 December 2016 44,210 $ 669
========= =========
Note 15 - Decommissioning Liability
The Company records a liability for future cost of decommissioning production facilities and pipelines on a discounted basis. The decommissioning liability represents the present value of decommissioning costs relating to oil and gas properties, which are expected to be incurred up to 2047, which is when the producing oil and gas properties are expected to cease operations. These liabilities are recorded based on the Directors' internal estimates. Assumptions based on the current economic environment have been made, which the Directors believe are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required that will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This, in turn, will depend upon future oil and gas prices, which are inherently uncertain. The discount rate and the cost inflation rate used in the calculation of the decommissioning liability were 8.0% and 3%, respectively as at each of the periods presented. See Note 9 for a discussion of acquisition activity that drove the increase in the liability since 31 December 2016:
Beginning Change Ending
Period Liability Additions Accretion Disposals of Estimate Liability
------------- ----------- ----------- ----------- ------------- -------------- -------------
As at and for
the
6 months
ended 30
June 2017
(Unaudited) $ 12,265 $ 18,780 $ 585 $ - $ - $ 31,630
As at and for
the
6 months
ended 30
June 2016
(Unaudited) 8,869 5,706 223 - - 14,798
As at and for
the
year ended
31 December
2016
(Audited) 8,869 5,457 797 (4) (2,854) 12,265
Note 16 - Borrowings
As discussed in Note 14, the Company used part of the equity proceeds raised through its IPO on AIM to repay much of the debt outstanding at 31 December 2016. DGO's borrowings consist of the following amounts for the periods presented:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
----------- ----------- ---------------
Financial institution, with interest
rate of 3.25%, matured December
2016, secured by oil and gas properties $ - $ 16,118 $ 15,768
Financial institution, interest
rate of 4.00%, matured August
2016, secured by oil and gas properties - 3,225 3,165
Financial institution, interest
rate of WSJ Prime Rate plus 0.50%,
maturing July 2017, secured by
oil and gas properties - 2,000 2,000
Financing companies, interest
rates of 10%-12%, maturing September
2016 - November 2016, secured
by oil and gas properties - 6,650 4,750
Individuals and institutional
investor bonds, interest rate
of 8.50%, maturing June 2020,
unsecured 118 13,009 13,928
Financial institution, interest
rate of 8.25% plus LIBOR, maturing
July 2020, secured by oil and
gas properties (a) 64,000 - -
Miscellaneous notes, primarily
for equipment, real estate and
operational cash flow 497 1,537 1,728
Total borrowings $ 64,615 $ 42,539 $ 41,339
------ ------ --------
Less current portion of long-term
debt (305) (29,194) (27,181)
Less deferred financing costs
(b) (2,994) (3,753) (4,045)
Total non-current borrowings,
net $ 61,316 $ 9,592 $ 10,113
====== ====== ========
a. In June 2017 the Company closed a new $110,000 Senior Secured Credit Facility, of which $64,000 was drawn upon closing on 30 June 2017. Of the $46,000 undrawn, $11,000 is reserved to close on the remaining oil and gas assets discussed in Note 9. The remaining $35,000 availability can be used within the first twelve months of the facility's life to finance additional acquisitions, of which $25,000 would require an additional underwriting process by the lender.
b. Subsequent to 31 December 2016, all deferred financing costs were expensed when applicable borrowings were paid in full using IPO proceeds. The deferred financing costs outstanding at 30 June 2017 were incurred with the financing of the Senior Secured Term Loan.
The following table provides a reconciliation of DGO's future maturities of its total borrowings for each of the periods presented:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
----------- ----------- ---------------
Not later than one year $ 305 $ 29,194 $ 27,181
Later than one year and not
later than five years 64,310 13,345 14,158
Later than five years - - -
Total borrowings $ 64,615 $ 42,539 $ 41,339
======= ======= =========
Note 17 - Subsequent Events
Subsequent to 30 June 2017, the Directors determined the need to disclose within the interim financial statements the following material items:
a. Dividend Paid & Declared: See Note 8 for a discussion of dividends paid and declared subsequent to 30 June 2017.
b. Hedging Activities: See Note 13 for a detail of derivative financial instruments executed subsequent to 30 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BUGDCCSGBGRC
(END) Dow Jones Newswires
September 11, 2017 02:00 ET (06:00 GMT)
1 Year Diversified Gas & Oil Chart |
1 Month Diversified Gas & Oil Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
