Acquisition of producing Gas and Oil Wells in Ohio and Pennsylvania
Complementary acquisition adds scale in existing operating geography and will increase 2017 daily production to approximately 5,400 BOEPD
Diversified Gas & Oil PLC (AIM: DGOC), a US based gas and oil producer, is pleased to announce that it has reached a definitive agreement to acquire a package of producing gas and oil wells in the states of Ohio and Pennsylvania.
DGO is acquiring the wells from a large US based oil and gas production company for a total cash consideration of $1.75 million, funded from the Company's existing cash resources. The purchase price represents less than a 2 times multiple of forward operating cash flows and is consistent with the Company's acquisition criteria for acquiring mature assets. The wells are located in DGO's existing areas of operations and currently produce gross gas production of 3,800 Mcfd and gross oil production of 110 bopd. The acquired assets will be operated on a similar basis to the Company's existing wells in that region. The wells generated net revenues of approximately $3.0 million in the year to 31 December 2016 and are expected to contribute operating cash flow for the Company of approximately $1.0 million per annum.
The anticipated PV 10 of the proven developed producing reserves for these assets is approximately $10.0 million. The acquisition is expected to close by March 31, 2017 and is subject to customary closing conditions.
Following completion of the acquisition, DGO will have total daily production of approximately 30,000 Mcfd and 585 bopd, representing a 14% increase in current gas production and a 23% increase in current oil production. The newly acquired wells are complementary to DGO's existing portfolio and are similar in nature in terms of being mature, long-life and low-cost. The acquisition is accretive to operating cash flow.
Rusty Hutson, Jr., Chief Executive Officer of DGO, said:
"This acquisition is in line with our growth strategy that we set out at the time of our admission to AIM in early February. DGO aims to grow production, and shareholder value, through the addition of complementary low-cost producing assets. We have a proven track record for acquiring assets of this kind at attractive valuations and are positioned to execute on these transactions as a result of our regional reputation, quality operator status and access to capital. Post completion of this transaction, our near-term focus will be on enhancing the profitability of these newly acquired assets by leveraging our existing operational resources and practices. We continue to assess similar opportunities and look forward to obtaining further scale as we implement our business strategy of acquiring low-cost and predictable revenues. The further execution of our strategy enables us to offer increasing dividends to our shareholders while re-investing our capital back into the business to fund growth."
This announcement is inside information for the purposes of Article 7 of EU Regulation 596/2014.