Diversified Gas & Oil PLC (DGOC) is pleased to announce the following operations and trading update confirming 2020 results are in line with market expectations. DGO also announces that it will release its 2020 full-year results and host an investor call on 8 March 2021, as more fully detailed below.
- Record full-year average daily production of ~100 Mboepd, up 18% vs. 2019
- Full-year average daily production from Legacy Assets of ~69 Mboepd, consistent with 2019 as Smarter Asset Management continues to offset natural declines within the portfolio
- Full-year cash operating expense of $5.58/Boe ($0.93/Mcfe), 15% lower vs 2019
- Full-year total cash expenses, including G&A, of $6.93/Boe ($1.15/Mcfe), 10% lower vs. 2019
- 4Q20 accretive bolt-on acquisition of five gross unconventional wells in Ohio for $8.4 million or ~2.6x cash flow
- Robust hedge portfolio provides cash flow and dividend stability with ~90% of 2021 natural gas hedged at a weighted average floor price of $2.66/MMBtu
- Improved pricing outlook provides a constructive backdrop as the Company consistently layers in additional hedge protection in future years
Commenting on these accomplishments, CEO Rusty Hutson, Jr. said:
"2020 proved to be another dynamic year for Diversified as we completed our transition from AIM to the premium segment of the Main Market, invested in enhanced Governance and efficiency-driving technology, and completed a series of accretive acquisitions funded using a balanced mix of equity and low-cost, fully amortising and hedge-protected financings. Additionally, the unprecedented events of 2020 have underscored the inherent resilience of our business model. We've built our business to operate in any natural gas price environment, and the strength of that model was evident throughout the significant volatility of 2020. Not only did our business model perform well, but the resolve of our employees was outstanding.
"With our successes last year, we are positioned to enter 2021 with momentum including our most recent fourth-quarter complementary bolt-on acquisition of unconventional assets. With a strong balance sheet, efficient cost structure, improved commodity price outlook, strong hedge protection and a robust outlook of potential accretive growth, we are poised for another exceptional year. Our opportunities to acquire high-quality assets that enhance or meaningfully enlarge our portfolio continue to increase with prolonged lower commodity prices and a sector increasingly motivated to consolidate. As we've demonstrated with each previous transaction, additional scale can further improve efficiencies and support the high cash operating margins that add stability to our dividend."
DGO's total net production in Mboepd (or thousand barrels of oil equivalent per day) for the annual periods presented.
DGO achieved record consolidated net production of 100 Mboepd (599 MMcfepd, or million cubic feet equivalent per day) for the twelve months ended 31 December 2020, representing an 18% year-over-year increase. In a year defined by uncertainty and volatility largely tied to the global pandemic, DGO demonstrated the durability of its business model designed to thrive in any commodity price environment. The Company's success was underpinned by its consistent and diligent Smarter Asset Management programme and the successful acquisition and integration of accretive upstream and midstream acquisitions.
DGO exited 2020 with December average production of 103 Mboepd (617 MMcfepd), including 68 Mboepd (406 MMcfepd) from its stable foundation of Legacy assets. Adjusting for identifiable and temporary production downtime, the Company's adjusted exit rate approximated 105 Mboepd (628 MMcfepd), including 69 Mboepd from its Legacy assets, which represents an 8% increase to the December 2019 consolidated exit rate of 95 Mboepd (569 MMcfepd). Downtime during the fourth quarter related to non-controllable events including maintenance at third-party midstream and processing facilities.
Looking forward to 2021 and mindful of the Presidential Executive Order to ban drilling on federal lands, the Company highlights that less than 1% of its total acreage consists of federal property. The Company further noted that its model of acquiring and operating existing production would be unaffected by the current order which has no bearing on existing gas and oil properties. More broadly, a changing regulatory environment with no development on federal lands may curtail the pace of additional development thereby contributing to higher commodity prices as demand remains unchanged.
Recent Bolt-on Acquisition
The Company has closed the bolt-on acquisition of five gross unconventional Utica Shale horizontal wells (the "Assets") for total cash consideration of $8.4 million, prior to normal and customary purchase price adjustments (the "Acquisition"). The Assets are in Monroe County, Ohio and are in close proximity to the Company's existing assets. This complementary Acquisition, fully funded with existing liquidity on the credit facility, reflects the Company's continued commitment to pricing discipline, representing a purchase price multiple of approximately 2.6x next twelve months' projected cash flow.
The synergistic Acquisition demonstrates the availability of quality asset as operators continue to focus their operations around assets they define as core. The Acquisition also represents the continuation of DGO's long-standing strategy of making accretive acquisitions of varying sizes that expand the Company's regional scale and complement operating efficiencies including lower unit operating costs that bolster strong cash (Adjusted EBITDA) margins. The Assets have an average well age of two years and daily net production at closing of approximately 6 MMcfe per day (1.0 Mboepd). The Acquisition adds approximately 14 Bcfe of PDP reserves with a PV10 of $9.7 million on recent NYMEX strip(b), with the purchase price representing an approximate PV15 value.