Asset A&D

Diversified Gas & Oil Acquires Additional Appalachian Assets from EQT

By Deepak Sharma
May 14, 2020
2 minutes read

Birmingham, Alabama-based Diversified Gas & Oil Plc (DGO), whose shares trade on the AIM sub-market of the London Stock Exchange, has signed a conditional purchase and sale agreement with EQT Corp. to acquire certain upstream and midstream assets in the Appalachian Basin, for a total consideration of US$125 million plus additional contingent payments of up to US$20 million.

The assets acquired include 900 net operated wells, including 67 horizontal wells located across West Virginia and Pennsylvania, which produced approximately ~54 million standard cubic feet of gas per day (MMscf/d) in 2019. The transaction also includes associated midstream assets, including pipelines and gathering infrastructure. In addition, DGO will also acquire a further 13 drilled and completed wells that are not yet connected to the gathering infrastructure and ~8,500 net acres (held by production), both excluded from the transaction valuation.

Last month, DGO had entered into an agreement with Carbon Energy Corp., Nytis Exploration (USA) Inc. (a wholly-owned subsidiary of Carbon Energy), and certain other affiliates to acquire all of the issued and outstanding membership interests in Carbon Appalachia LLC and Nytis Exploration Company LLC, for a total consideration of US$110 million plus certain additional contingent payments of up to US$15 million. Carbon Appalachia and Nytis Exploration currently hold certain conventional upstream and midstream assets across the Appalachian and Illinois Basins.

“These potential acquisitions are entirely consistent with this growth strategy and represent a compelling opportunity to enhance the profitability of the business, and subsequently the shareholder returns,” said DGO Chief Executive Rusty Hutson. “As we have always stated, maintaining a healthy balance sheet is a key priority, and we are therefore seeking to fund these proposed acquisitions through a combination of debt and equity, consistent with the financing of our acquisitive growth to date,” Hutson added.

Following the completion of the transactions, both of which remain subject to customary closing conditions including due diligence and regulatory approvals, DGO’s net production will increase by approximately 18,000 boe/d (99% gas), representing approximately 20% of 2019 group net production. The acquisitions are expected to add proved developed producing (PDP) reserves of approximately 122 million barrels of oil equivalent (MMboe), with an estimated pretax PV-10 of approximately US$374 million.

To fund the acquisitions, DGO has also commenced a private placing to issue up to 64.3 million ordinary shares, representing approximately 10% of its existing issued share capital, to raise approximately US$87 million to part-fund the acquisitions. Stifel Nicolaus, Mirabaud Securities and Credit Suisse are acting as joint global coordinators and book-runners for the placing.

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