Diversified Gas & Oil Share Discussion Threads

[sogoesit] 15/9/2018 17:24

IC results write-up this week:

“No pause for Diversified Gas & Oil

ALEX NEWMAN
As is now standard for Diversified Gas & Oil (DGOC) given its rate of dealmaking, half-year numbers landed obsolete-on-arrival. In the first half of 2018, production averaged 19.3kboepd (thousand barrels of oil-equivalent per day); by July, following the acquisition of three separate portfolios of conventional assets, that had tripled to 60kboepd.


A jump in the main credit facility to $1bn (£770m), and another equity raise, further obscure matters. In fact, the most useful financial metric to investors at this stage might be the second-quarter dividend, which was raised 62 per cent to 2.8¢ a share, and suggests the new wells are already generating the levels of cash management hoped for.

So can we expect Aim's largest producer to pause the deal-making, if only to allow investors to understand their company’s current financial picture? In short, no. “In a normal world, where acquisitions came to you on a normal course, I would say that may be a fair request,” chief executive Rusty Hutson told us.

Where capital has flowed into or consolidated within shale basins, there is now often a need to find spare cash or synergies via 'non-core' conventional acreage sales. For Mr Hutson, this dynamic continues to generate “a plethora of great assets in the market that have tremendous value”.

On average, analysts expect earnings per share of 6.75¢ this year, and 12.7¢ in 2019.

DIVERSIFIED GAS & OIL (DGOC)
ORD PRICE: 111p MARKET VALUE: £560m
TOUCH: 109.5-111p 12-MONTH HIGH: 130p LOW: 69p
DIVIDEND YIELD: 5.5% PE RATIO: 18
NET ASSET VALUE: 60¢ NET DEBT: 43%
Half-year to 30 Jun Turnover ($m) Pre-tax profit ($m) Earnings per share (¢) Dividend per share (¢)
2017 (restated) 10.9 29.4 24.0 2.0
2018 58.0 21.4 9.0 4.5
% change +432 -27 -63 +127
Ex-div: 29 Nov
Payment: 19 Dec
£1=$1.30. *Refers to Q2 dividend of 2.8¢; Q1 dividend went ex 12 Jul, and will be paid on 24 Sep.
Reports of rising plugging costs in Pennsylvania – which caused the shares to drop over the summer – were “completely overblown” says Mr Hutson, who hopes to resolve the matter with the state soon. Worst-case cost scenarios are manageable, and don’t dent our income-themed original buy call (58p, 16 Feb 2017), which already yields 13 per cent if you annualise the quarterly dividend. Buy.
Last IC View: Buy, 125p, 4 Jul 2018”

[sogoesit] 14/9/2018 13:30

Realisation of value dawning... always a bit of a lag on news but good to see some catch-up now.
Good luck folks.

[podgyted] 14/9/2018 11:49

Also, somewhat amazingly, in the top 10 MomentumRank stocks on Stocko

[podgyted] 14/9/2018 11:45

HSBC taken 9% stake.

[nimbo1] 14/9/2018 09:49

i agree with you - just listened to the presentation. In this environment there is no way investors will allow a 10% yield to stick around for long. The period we are currently in will be the transformational one they say so I expect amazing figures next time round.

[blueeyes13] 14/9/2018 07:24

I've now had chance to listen to the actual broadcast presentation to analysts of the results - see below. I'd recommend listening to these as they can throw up some off the cuff remarks which are enlightening (similar to BKS' recent PI World video of their results)...Rusty's comment on the EQT purchase concluded in July (ie. not in H1 figs) is really, really bullish which reading between the lines could lead one to think that the figures at year end 2018 and rolling on into 2019 will be even better than forecast.



Does anyone have any up to date analyst projections?

Stockopedia has f/c 2019 eps 17c (approx 13p) and divi 12c (9.2p)
Investors Chronicle in their buy reiteration and bullish tip of yesterday are, as is often, behind the curve at f/c 2019 eps 12.7c (9.77p) although they do state, to be fair, this is from an average of analysts.

Personally I think Sogoesit's 12p divi suggestion for 2019 is definitely acheivable and I'm looking for a 200p target share price by end 2019 which with divis on top would be a fantastic return. BLIMEY, i thinkj I've just convinced myself to increase my already large holding...the risk reward is definitely to the upside here IMV.

GLA

[lab305] 13/9/2018 23:35

You are both correct but any positive publicity is good and raises the profile. Some positive weekend press articles would help.

[alter ego] 13/9/2018 22:40

Agree your lordship. Also, since when has DGOC been an “explorer̶1;?

[lord gnome] 13/9/2018 22:30

'Diversified will start paying dividends in September'.... usual Motley Fool standard of journalism. Sad really to see how it has deteriorated over the years.

[lab305] 13/9/2018 19:54

And also Motley Fool.......




US-based gas and oil producer Diversified Gas & Oil (LSE: DGOC) is up 4% today after delighting investors with a strong set of results, including a near sixfold increase in revenues to $58m.

Nicely Diversified

The AIM-listed £585m group, which has a focus on the Appalachian Basin, is up 52% in the past year, and today’s results for the six months to 30 June suggest the momentum could continue.

It has materially increased production through acquisitions, including Alliance Petroleum for $80.7m in March, $89.3m of conventional assets from CNX Resources in April, and $575m of gas, oil and midstream assets from EQT Corporation (the largest acquisition by an oil and gas company in the history of AIM).

Right balance
Average daily production was 19.3 kilo barrel of oil equivalent (kboed) over the period, hitting 60 kboed in post-period July. It also revealed strong adjusted EBITDA margins of 40% and “significantly strengthened balance sheet and liquidity”, with $439m of new gross equity raised. It now has an enlarged credit facility of $1bn, with a $600m committed borrowing base. Overall, it has a strong liquidity position of $187m.

CEO Rusty Hutson hailed “a period of transformative growth” with acquisitions boosting production by more than 90% without risking the balance sheet. He said the real impact of the group’s “game-changing acquisitions” are still to come, in materially increased cash flow, lower costs and enhanced EBITDA margins.

Diversified will start paying dividends in September and City analysts forecast a yield of 7.4% for 2018, and 8.3% for 2019, alongside whopping earnings per share (EPS) growth of 28% this year, and 86% in 2019. A lot can go wrong with AIM-listed energy explorers but this looks an intriguing option.

[lab305] 13/9/2018 08:48

IC small update.
the reaction to half year results from Diversified Gas & Oil (DGOC), Aim’s largest hydrocarbon producer (by volume), has been more positive. Though obscured by the timing of the EQT Corporation acquisition, production has stepped up materially – from a first half average of 19.3kboepd (thousand barrels of oil-equivalent per day) to 27kboepd by June and 60kboepd now. And for those who have bought into DGO’s income case, the 62 per cent hike in the second quarter dividend – from 1.73¢ to 2.8¢ per share – is another source of reassurance. Under review.

[blueeyes13] 12/9/2018 15:09

Following my post yesterday, I'm now back to my full holding I previously held before selling down half. 15% of my SIPP pf and looking forward to the high and growing divis plus some decent capital growth the next few years fingers crossed. A 10p divi next year will give me over 10% on my average buy price, happy for that to compound over the years. That's the plan anyway! :-) GLA

[melody9999] 11/9/2018 14:05

Shorter interview ith Rusty

[...]

[nimbo1] 11/9/2018 12:04

hxxps://d1io3yog0oux5.cloudfront.net/_b0f0f59acd067608461f430a393da220/dgoc/db/460/3380/file/DGOC+-+IR+-+Earnings+Presentation+-+2018H1+Earnings+vFINAL.pdf

here is presentation from today - quite compelling for a slot in anyones income portfolio imo

[nimbo1] 11/9/2018 09:07

I keep buying more, want to get to 100,000 shares...10% yield should pay for a few bills : )

[sogoesit] 11/9/2018 08:59

Yes, lab & blueeyes, it was the well plugging "issue" that done it!

Partly the problem of the company. Non-US-centric shareholders not given enough explanation/education on US practices, and costs, imo.

Have been accumulating too. It's a "dollar income play" for me so my main concerns are (gas) price and production decline.

Good luck.

[blueeyes13] 11/9/2018 08:45

I agree. I sold down half my large holding in 2 tranches, one near peak and rest on the rns mentioning decommissioning which spooked me a little. Just bought 50% of what I sold back this morning and fantastic yield ahead. I also now have a large holding in Serica so have very large exposure to gas price but relaxed with large holdings in both. Onwards and upwards for DGOC, H2 2018 and onwards should be very rewarding for shareholders all being well.

[lab305] 11/9/2018 08:36

Sogoesit I agree. Bought more this morning. It is very frustrating as the share price is so low but on the other hand a good opportunity. The almost zero interest on this board illustrates the problem. There are few private investors left and they don't seem to have any backbone.A bit of profit and they are gone !

[sogoesit] 11/9/2018 07:51

The 2.8c dividend may be only part of a ramp up so the annual forecast dividend could be over 10p given the exit production rates of 60k boepd and the “enhanced margins”.
I will have to do some figures but the share price near term looks good value at over 200p forecast TP.
Or am I too optimistic?

EDIT: on tripling EBITDA on back of tripling production at 40% payout 12p pa is within reach within 12months. Awarding it a 5% yield gives a TP of 240p.

[lab305] 11/9/2018 07:26

As expected looks very good to me. Profits and dividend accelerating . Four times the new dividend equates to about 8.6 pence per year and the profit from the new EQT acquisition hasn't kicked in yet. Wake up investors.

[lord gnome] 10/9/2018 17:07

lab305 - it was the scare over the cost of plugging abandoned wells. I think some people saw it as a skeleton in the cupboard. The share price will recover.

[lab305] 10/9/2018 16:50

Rising price despite many small sells. Imminent results must be good. I cannot understand why so many have sold. The share is very under priced.

[melody9999] 06/9/2018 11:18

hxxps://www.directorstalk.net/appalachian-basin-driving-u-s-natural-gas-production-growth/

[sogoesit] 01/9/2018 11:56

Haha, yes Lord Gnome... the foxes decided to attack the food waste bin at about 4:30am, scattering rubbish over the pavement.
Luckily no-one was around to get frightened-off by the sight of me in a state of undress!!
The trend is our friend again, indeed.