Conditional Acquisition and Proposed Fundraising

RNS Number : 5455M

Diversified Gas & Oil PLC

11 May 2020

 

THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE INFORMATION CONTAINED HEREIN ARE RESTRICTED, FOR INFORMATION PURPOSES ONLY AND ARE NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, AND DO NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE, DISTRIBUTION, OFFER OR SALE WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR").

11 May 2020

Diversified Gas & Oil PLC

("DGO" or the "Company")

Conditional Purchase and Sale Agreement and

Proposed Fundraising

Diversified Gas & Oil PLC (AIM: DGOC), the U.S. based owner and operator of natural gas, natural gas liquids, and oil wells as well as midstream assets, is pleased to announce that it has signed a conditional Purchase and Sale Agreement ("PSA") to acquire certain upstream and midstream assets from a US-listed oil and gas company (the "US-Listed Vendor") (the "Potential Asset Acquisition"). This announcement follows a similar announcement on 8 April 2020 in relation to the conditional Purchase and Sale Agreement with Carbon Energy Corporation (the "Potential Carbon Acquisition" and, together with the Potential Asset Acquisition, the "Potential Acquisitions").

The Company today announces its intention to carry out a placing of new ordinary shares in the capital of the Company (the "Placing"). The Placing is being conducted through an accelerated bookbuild process (the "Bookbuild") outside the United States, which will launch immediately following the release of this announcement (including the appendices, the "Announcement"). Concurrently with the Placing, the Company is proposing to offer and sell new ordinary shares to certain institutional investors in the United States pursuant to direct subscription agreements (the "Subscriptions", and together with the Placing, the "Proposed Fundraising"). The Proposed Fundraising will result, in aggregate, in the issue of up to 64,280,500 new ordinary shares representing up to 10.0% of the Company's existing issued share capital, to raise approximately US$87.0 million (before expenses and based on the prevailing market price of the Company's shares on 11 May 2020). The net proceeds will be used to part-fund the Potential Acquisitions in the event that either or both complete, whilst maintaining a Transaction Adjusted Net Debt/Transaction Adjusted EBITDA of approximately 2.3x. 

Highlights of Potential Acquisitions

· Initial gross aggregate consideration for the Potential Acquisitions expected to be US$235 million (subject to customary closing adjustments) (Carbon: US$110 million, US-Listed Vendor: US$125 million), with potential aggregate contingent consideration of US$35 million to be paid over a period of up to three years based on certain pricing targets should commodity prices rise. If completed, each acquisition will have a deemed effective date of 1 January 2020;

· The assets to be acquired pursuant to the Potential Acquisitions include approximately 7,000 net wells, with combined 2019 adjusted net production of approximately 18 Mboepd (99% natural gas), representing approximately 20% of 2019 group net production;

· Approximately 4,900 miles of gas gathering assets included within the Potential Acquisitions as well as two active natural gas storage fields. Midstream assets offer the potential for cost and operational synergies to the Company, including over 200 interconnects with existing DGO midstream and direct interstate access, as well as the ability to generate third-party storage revenues;

· Robust hedge portfolio covering the Potential Carbon Acquisition, with approximately two thirds of production for the next 27 months having an average NYMEX downside protection of approximately $2.60/MMBtu (based on adjusted 2019 produced volumes declined at an assumed 6% per year);

· If completed, the Potential Acquisitions are expected to add PDP Reserves of approximately 122 MMboe with an estimated pre-tax PV10 of approximately US$374 million, with the combined initial acquisition price reflecting an approximate 37% discount to PDP PV10;

· Adjusted EBITDA for the next twelve months from 1 June 2020 for the Potential Acquisitions is estimated to be US$61-65 million, resulting in a consideration to NTM EBITDA ratio for the assets of approximately 3.3 - 3.6x after adjusting for management's estimated closing adjustments of approximately US$18 million;

· The Potential Assets are estimated to have attractive Total Cash Costs of US$5.99/boe, including immediately realisable synergies but not accounting for the longer term synergies that the Company expects to realise through its Smarter Well Management Programme and operational optimisation. The addition of these assets into the DGO portfolio is expected to drive a 5 - 10% reduction in unit-level base LOE and a 10 - 15% reduction in unit-level G&A for the Company;

· The Potential Acquisitions are expected to be immediately accretive to the Company's earnings and dividends per share, based on the Company's 2019 numbers, management's estimates for the assets, and an assumed 10% placing at market;

· The Potential Acquisitions are both conditional and remain subject to, among other things, further diligence and there can be no certainty that either will complete;

· The Company's intention is to part fund the Potential Acquisitions through the Proposed Fundraising, with the balance of the consideration funded from a new US$160 - 165 million long-term amortising senior secured term loan. At present, it is anticipated that the term loan will have a 10-year maturity and ~6.50% coupon, and be secured on certain of the upstream gas and oil assets from the Potential Acquisitions;

· The Company will announce further information on the Potential Acquisitions and the potential securitised term loan in due course following completion of customary diligence.

Proposed Fundraising Highlights

· The Company today announces its intention to carry out the Placing of new ordinary shares, available to eligible institutional investors outside the United States in "offshore transactions" as defined in, and in accordance with, Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Stifel Nicolaus Europe Limited, Mirabaud Securities Limited and Credit Suisse Securities (Europe) Limited (together, the "Joint Global Coordinators") are acting as joint global coordinators and joint bookrunners in connection with the Placing. Cenkos Securities plc is acting as Nominated Adviser to the Company;

· The Joint Global Coordinators   are conducting the Placing through the Bookbuild which they will launch immediately following the release of this Announcement and that they will make available to eligible institutional investors;

· The Company expects to close the Bookbuild no later than 8.00 a.m. on 12 May 2020, but the Joint Global Coordinators and the Company reserve the right to close the Bookbuild earlier or later, without further notice;

· Concurrently with the Placing (and conditional upon the placing agreement executed in connection with the Placing not having been terminated), the Company is proposing to offer and sell new ordinary shares in the United States to certain institutional investors pursuant to direct subscription agreements through the Subscriptions in which the new ordinary shares are being offered and sold pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act;

· The Proposed Fundraising is expected to raise approximately US$87.0 million in aggregate (before expenses and based on the prevailing market price of the Company's shares on 11 May 2020). The number of shares the Company will issue pursuant to the Proposed Fundraising will not exceed 10.0% of the existing issued share capital of the Company;

· The Company has consulted with a number of existing shareholders and other investors ahead of the release of this announcement, including regarding the rationale for the Placing;

· As detailed above, and subject to closing the Potential Acquisitions, the Company will use the net proceeds from the Proposed Fundraising to part fund the Potential Acquisitions. The Placing and the Subscriptions are not conditional on the completion of the Potential Acquisitions. Should the Company not close the Proposed Acquisitions, the Company will determine the most appropriate use of the net proceeds, including potentially paying down amounts drawn on its revolving credit facility and/or investing in other acquisition opportunities aligned with its stated strategy;

· Shares issued pursuant to the Proposed Fundraising will be eligible for the Q4 2019 and Q1 2020 dividends, each of 3.50 cents per share, as well as all future dividends. The ex-dividend dates of the Q4 2019 and Q1 2020 dividends are 28 May 2020 and 3 September 2020 respectively, and are expected to be paid on 26 June 2020 and 25 September 2020 respectively.

Transfer to the Main Market

As announced on 4 May 2020, the Company is in the final stages of its previously announced transfer from AIM to listing on the Premium Listing Segment of the Official List of the Financial Conduct Authority (the "Official List") and to trading on the London Stock Exchange's Main Market for listed securities (the "Main Market"). The Company expects to publish a prospectus on 13 May 2020 in connection with the transfer. Key information from the prospectus is contained in Appendix 2 to this Announcement.

Settlement of the Proposed Fundraising, together with the admission of the Company's ordinary share capital, as enlarged by the Proposed Fundraising, to the Premium Listing Segment of the Official List and the London Stock Exchange's Main Market ("Admission") is anticipated to occur on or around 18 May 2020. 

As a consequence of its Admission, Diversified Gas & Oil PLC is expected to enter the FTSE All-Share in the September 2020 review.

Commenting on the Potential Acquisitions and Proposed Fundraising, CEO, Rusty Hutson said:

"DGO's continued success is built on its ability to capitalise on opportunities to acquire and enhance complementary producing assets and to leverage our operational excellence and cost discipline to extract maximum value.  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.  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. Our unique business model, underpinned by low-cost and low-risk cash flow from US natural gas, enables the Company to deliver shareholder returns at a time when many other industry players are unable to do so.  We look forward to providing an update on this process in due course as we seek value creation opportunities through prudent growth and funding."

Diversified Gas & Oil PLC Rusty Hutson Jr., Chief Executive Officer Brad Gray, Chief Operating Officer Eric Williams, Chief Financial Officer Teresa Odom, Vice President, Investor Relations www.dgoc.com	+ 1 [phone]
Cenkos Securities plc (Nominated Adviser) Russell Cook Katy Birkin	[phone]
Stifel Nicolaus Europe Limited (Joint Global Coordinator, Joint Bookrunner, Joint Broker) Callum Stewart Jason Grossman Simon Mensley Ashton Clanfield	[phone]
Mirabaud Securities Limited (Joint Global Coordinator, Joint Bookrunner, Joint Broker) Peter Krens Edward Haig-Thomas	[phone]
Credit Suisse (Joint Global Coordinator, Joint Bookrunner) Blake London Ben Lawrence Ryan Pickard Omri Lumbroso	[phone]
Buchanan (Financial Public Relations) Ben Romney Chris Judd Kelsey Traynor James Husband [e-mail]	[phone]

Background to, and reasons for, the Potential Acquisitions and the Proposed Fundraising

DGO is an established, independent owner and operator of producing natural gas and oil wells concentrated in the Appalachian Basin in the United States, with operations located throughout the neighbouring states of Tennessee, Kentucky, Virginia, West Virginia, Ohio, and Pennsylvania, where it is one of the largest independent conventional producers. The Company has grown rapidly over the last few years, capitalising on opportunities to acquire and enhance producing assets in its region of focus, and leveraging the operating efficiencies that come with economies of scale.

The Company has a proven track record of capitalising on opportunities to acquire complementary producing conventional and non-conventional gas and oil assets in the Appalachian Basin from industry players who are seeking to re-focus resources, with target assets characterised by predictable production rates, long lives, and low decline rates. The Company maximises and extends production through the deployment of rigorous field management, deploying new extraction technology, and/or refreshing decayed infrastructure on poorly maintained wells. Through operational efficiencies, including utilising the Company's growing midstream infrastructure, the Company maximises value by enhancing production, targeting premium pricing points, and streamlining costs.

The Company believes that it is extremely well positioned despite the current macroeconomic conditions, with an existing pre-tax PV10 of its PDP assets of US$1.9 billion, including PDP Reserves of 563 MMboe of a largely predictable, long life, low decline nature. The Company has a demonstrated record of sustaining well production and driving cost efficiencies into its assets through its Smarter Well Management programme, with production from its legacy assets (those owned prior to 31 December 2018) achieving more than 18 months of near flat production.

The Company has a proactive approach to hedging, using a combination of structures to provide cost efficient downside protection whilst maintaining an element of upside potential. At present, the Company has outstanding hedges for approximately 90% of its 2020 and 2021 estimated natural gas production, at average prices of US$2.73/MMBtu and US$2.59/MMBtu respectively, as well as approximately half of natural gas production between 2022 and 2024 at US$2.46/MMBtu or above. Whilst significantly less material to its portfolio, the Company also has 72% and 80% of its 2020 and 2021 oil production hedged at average prices of US$59.56/bbl and US$52.65/bbl, and 62% of its 2020 natural gas liquids production hedged at average prices of US$32.71/boe.

Given the strength of the Company's asset base and hedging, it is well positioned to take advantage of the opportunity it sees in the sector. With a number of industry participants refocusing capital away from what they consider to be non-core assets, DGO continues to find opportunities to acquire assets at an attractive valuation, remove cost, and drive operational efficiencies into its asset base, ultimately supporting the Company's long term cash flow generation, dividend, and the return for its shareholders.

The Potential Asset Acquisition

The Company today announces that it has executed a conditional PSA with a US-listed oil and gas company, to acquire certain gas and oil wells as well as related midstream infrastructure. The initial consideration, should the acquisition proceed, is expected to be US$125 million (subject to customary closing adjustments). It is currently envisaged that any final agreement would include maximum contingent consideration of  US$20 million to be paid over a period of up to three years, which would be payable based on certain pricing targets designed to ensure that both parties mutually benefit from a rising commodity price environment. The transaction is subject to ongoing due diligence, which the Company will complete to its satisfaction prior to confirming the final terms (including purchase price), and there can be no certainty that the transaction will proceed. Should the transaction proceed, it is expected to have a deemed effective date of 1 January 2020 and the final consideration payable by the Company would, therefore, be reduced by the value of any interim cash flows from this date. 

The conditional PSA includes approximately 900 net operated wells, including 67 horizontal producing wells in Pennsylvania, with the majority of the balance being conventional vertical producing net wells in West Virginia, and associated midstream infrastructure. The Potential Asset Acquisition includes a further 13 drilled and completed wells that are not yet connected to the gathering infrastructure, which have been excluded from the valuation. The working interest of the wells included within the transaction is 97%, with a 92% net revenue interest.

The assets had 2019 adjusted net production of approximately 9 Mboepd, of which 100% was natural gas with a residual gas BTU of approximately 1,030, and estimated PDP Reserves of approximately 48 MMboe. Based on the Company's preliminary assessment, the assets have a PDP pre-tax PV10 of US$185 million.

On average, the assets included within the Potential Asset Acquisition are estimated to have an initial 8-10% annual production decline. This rate is driven by the horizontal wells that are long life, but on average are only 5-10 years old and are therefore at the steeper end of their decline curve. These assets provide attractively high rates of current production, although offer the same long-life production potential and long-term low decline as the Group's broader portfolio, with terminal decline rates expected to trend towards a more typical 4% within 10 years.

Key operating metrics for the assets (as integrated, including expected immediately realisable synergies only) include a -US$0.53/MMBtu gas pricing differential, a base lease operating expense of US$2.15/boe, and gathering and transportation expense of US$0.23/boe. The assets have existing asset retirement agreements in place with the relevant state authorities, allowing for assets to be brought back onto production or to be plugged. The Company anticipates satisfying a portion of this requirement through bringing wells back onto production and believes that any additional plugging activities will be immaterial to the Company. The Company will ultimately look to fold any asset retirement agreements into its existing agreements with the relevant state authorities. 

The assets included in the Potential Asset Acquisition sit in and around the Company's existing operating footprint. As such, if acquired, they can be easily managed by DGO's operating teams and are ideally suited for the Company's Smarter Well Management programme, offering an increased asset base and production with no incremental G&A expense and the ability to drive further cost savings from the assets. The assets include approximately 8,500 net acres held by production and prospective for future Marcellus and Utica development, which were excluded from the transaction price and represent further upside potential.

The Company estimates, based on forecast production, current pricing, and immediate cost synergies, that Adjusted EBITDA attributable to the acquired assets for next twelve months from 1 June 2020 will be in the approximate range of US$32 to 34 million, excluding longer term synergies that the Company expects to be able to realise. 

As detailed above, there can be no certainty that the Potential Asset Acquisition will complete, and the terms and assets included within the transaction are subject to change as the Company progresses due diligence on the assets. The Company will provide a further update on the Potential Asset Acquisition in due course as the process progresses.

The Potential Carbon Acquisition

On 8 April 2020, the Company announced the execution of a conditional PSA with Carbon Energy Corporation to acquire certain upstream and midstream assets. The initial consideration, should the acquisition proceed, is expected to be US$110 million (subject to customary closing adjustments). It is currently envisaged that any final agreement would include maximum contingent consideration of US$15 million to be paid over a period of up to three years, which would be payable based on certain pricing targets designed to ensure that both parties mutually benefit from a rising commodity price environment. The transaction is subject to ongoing due diligence, which the Company will complete to its satisfaction prior to confirming the final terms (including purchase price), and there can be no certainty that the transaction will proceed. Should the transaction proceed, it is expected to have a deemed effective date of 1 January 2020 and the final consideration payable by the Company would, therefore, be reduced by the value of any interim cash flows from this date. 

The conditional PSA includes approximately 6,100 net conventional wells in Tennessee, Kentucky and West Virginia, approximately 4,700 miles of intrastate gathering pipeline primarily in West Virginia, and two active natural gas storage fields with approximately 3.5 Bcf of capacity. The pipelines included within the acquisition currently transport volumes of approximately 90,000 MMBtu/d, of which approximately 80% relates to volumes produced by DGO. The transportation of third-party gas on these pipelines, together with the two natural gas storage fields and large commercial/industrial/local distribution company connections, are expected to generate third-party revenues of approximately US$12 million per year. The potential acquisition also includes a robust hedge portfolio covering approximately two thirds of production for the next 27 months with an average NYMEX downside protection of approximately $2.60/MMBtu (based on adjusted 2019 produced volumes declined at an assumed 6% per year). The working interest of the wells included within the transaction is 92%, with an 82% net revenue interest.

In 2019, the assets had adjusted net production of approximately 9.1 Mboepd, of which 97% was natural gas with a residual gas BTU of approximately 1,110, and estimated PDP reserves of approximately 74 MMboe. The assets have an estimated 4% production decline rate and have an average well age of approximately 30 years. Based on the Company's preliminary assessment, the assets have a PDP pre-tax PV10 of US$189 million, with the initial consideration expected to represent a 42% discount to this value.

Key operating metrics for the assets (as integrated, including expected immediately realisable synergies only) include a -US$0.33/MMBtu gas pricing differential, a base lease operating expense of US$1.83/boe, and gathering and transportation expense of US$1.47/boe. The assets have existing asset retirement agreements in place with the relevant state authorities, allowing for assets to be brought back onto production or to be plugged. The Company anticipates satisfying a portion of this requirement through bringing wells back onto production and believes that any additional plugging activities will be immaterial to the Company. The Company will ultimately look to fold any asset retirement agreements into its existing agreements with the relevant state authorities. 

The assets included within the Potential Carbon Acquisition are located within the Company's existing footprint and present opportunities to extract a number of cost and operational synergies. The Company expects to retain just 80% of the target's existing workforce, and the application of the Company's Smarter Well Management optimisation efforts across the target's portfolio of upstream assets presents further opportunities to reduce costs and enhance margins. A minimal amount of firm transportation is expected to be acquired or maintained. Furthermore, the Potential Carbon acquisition includes some 1.4 million acres of held by production acreage that were excluded from the valuation but which are prospective for future development. The midstream assets are expected to provide notable benefits to the Company, with over 200 common interconnects/intersects to existing Company systems providing a number of margin-enhancing opportunities, including a higher level of production flow control and insulation from third-party cost increases. The Cranberry Pipeline that is included within this transaction has direct connections to interstate pipelines, which can potentially increase production flow optionality and price arbitrage opportunities. Furthermore, the midstream assets have a number of immediate opportunities for unit cost reductions through pipeline and compressor optimisation. 

The Company estimates, based on forecast production, current pricing, and immediate cost synergies, that Adjusted EBITDA attributable to the acquired assets for the next twelve months from 1 June 2020 will be in the approximate range of US$29 to 31 million. The Company therefore estimates that, should the acquisition proceed, the initial consideration would represent a transaction ratio of approximately 3.2 - 3.4x NTM EBITDA, after adjusting for management's estimated closing adjustments of approximately US$11 million, but before further longer term synergies that the Company expects to be able to realise. 

As detailed above, there can be no certainty that the Potential Carbon Acquisition will complete, and the terms and assets included within the transaction are subject to change as the Company progresses due diligence on the assets. The Company will provide a further update on the Potential Carbon Acquisition in due course as the process progresses.

Debt Facilities

The Company anticipates that the Potential Acquisitions will be part funded through a US$160-165 million amortising secured term loan that the Company expects to be drawn ahead of completion of the Potential Acquisitions. At present, it is anticipated that the term loan will have a 10-year maturity and ~6.50% coupon, secured on certain of the upstream gas and oil assets from the Potential Acquisitions. Given the structure of the facility, hedging requirements for the facility are expected to be in the range of 65% to 70% of 10-year production. The terms of this secured term loan are preliminary and subject to change. 

The Company is progressing discussions with the potential lender, which is an AA- rated global investment and reinsurance institution, and will provide an update in due course. The Company's believes the expected use of this term loan to part fund the Potential Acquisitions best aligns with the amortising, long life nature of the target assets and allows it to secure fixed rate financing at competitive rates to its existing revolving credit facility. Unlike the revolving facility, the use of longer-term, fixed rate financing carries no risk of market price volatility and semi-annual redetermination.

Proposed Fundraising

The Company has sufficient headroom under its existing debt facilities to fund the initial consideration for the Potential Acquisitions, although it believes that it is both prudent and in line with its shareholders' preferences to maintain its leverage below the 2.5x level on a Net Debt to Adjusted EBITDA ratio. 

As such, the Company announces that today it proposes to issue new ordinary shares by way of the Placing to eligible institutional investors outside the United States in offshore transactions as defined in, and pursuant to, Regulation S of the Securities Act, and concurrently to offer and sell new ordinary shares to certain institutional investors pursuant to the Subscriptions in which the new ordinary shares are being offered and sold in the United States pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, to raise gross proceeds of approximately US$87.0 million in aggregate. The net proceeds of the Proposed Fundraising will be used to partially fund the Potential Acquisitions in the event that either or both of such Potential Acquisitions complete. The Placing and the Subscriptions are not conditional on closing the Potential Acquisitions. As there can be no certainty that the Potential Acquisitions will proceed, should neither of the Potential Acquisitions complete, the Company will determine the most appropriate use of the net proceeds, including potentially paying down amounts drawn on its revolving credit facility or investing in other acquisition opportunities aligned with its stated strategy.

Pursuant to the Placing, an accelerated bookbuilding process will be launched immediately following the release of this Announcement and will be made available to eligible institutional investors. The Bookbuild is expected to close no later than 8.00 a.m. on 12 May 2020, but the Joint Global Coordinators and the Company reserve the right to close the Bookbuild earlier or later, without further notice.

The number of ordinary shares to be issued by the Company pursuant to the Proposed Fundraising will not exceed 10.0% of the existing issued share capital of the Company.

Stifel Nicolaus Europe Limited, Mirabaud Securities Limited, and Credit Suisse Securities ( Europe) Limited are acting as joint global coordinators and joint bookrunners in connection with the Placing. Cenkos Securities plc is acting as Nominated Adviser to the Company.  An affiliate of Credit Suisse Securities (Europe) Limited is a party to a credit facility of the Company and, in the event that the Company determines to use the net proceeds of the Proposed Fundraising to pay down its debt, it may receive a portion of net proceeds in connection with such pay down.

This Announcement should be read in its entirety. Investors' attention is drawn to the detailed terms and conditions of the Placing described in Appendix 1 (which forms part of this Announcement), and the additional disclosure included in Appendix 2, including all registration, settlement, and tax information. As to tax, it is noted that the Company believes it is a US Real Property Holding Corporation under the US Internal Revenue Code of 1986, as further outlined in the section entitled "Material US Federal Income Tax Considerations" and the risk factor entitled "Shareholders may be subject to US withholding or income tax depending on their country of residence and their ownership percentages" in Appendix 2.  By participating in the Placing, investors will be deemed to have read and understood this Announcement (including the Appendices) in its entirety, to be participating in the Placing and making an offer to acquire, and acquiring, ordinary shares of the Company under the Placing on the terms and subject to the conditions of the Placing set out in Appendix 1 to this Announcement, and to be providing the representations, warranties, undertakings and acknowledgements contained in Appendix 1 to this Announcement.

IMPORTANT NOTICES

THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT HEREIN (TOGETHER, THIS "ANNOUNCEMENT") IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM ANY PART OF AN OFFER TO SELL OR ISSUE, OR A SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY SECURITIES IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA (COLLECTIVELY, THE "UNITED STATES"), AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN OR ANY JURISDICATION IN WHICH OR TO ANY OTHER PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ANY FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE SECURITIES LAWS OF SUCH JURISDICTIONS.

This Announcement is not for public release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, South Africa, Japan or any other jurisdiction in which such release, publication or distribution would be unlawful. No public offering of the securities referred to herein is being made in any such jurisdiction or elsewhere.

This Announcement is not an offer of securities for sale in the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States and may not be offered, sold or transferred, directly or indirectly, in or into the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Placing Shares are being offered and sold by the Company outside the United States in offshore transactions as defined in, and pursuant to, Regulation S under the Securities Act ("Regulation S"). No public offering of the Placing Shares (as defined below) is being made in the United States.

No action has been taken by the Company, Credit Suisse Securities (Europe) Limited ("Credit Suisse"), Mirabaud Securities Limited ("Mirabaud") or Stifel Nicolaus Europe Limited ("Stifel" and, together with Credit Suisse and Mirabaud, the "Joint Global Coordinators") or any of their respective affiliates, or any of their respective directors, officers , partners, employees , advisers or agents (collectively, "Representatives") that would permit an offer of the new ordinary shares of the Company to be issued pursuant to the Placing (the " Placing Shares ") in any jurisdiction where action for that purpose is required. Persons receiving this Announcement are required to inform themselves about and to observe any restrictions contained in this Announcement. The distribution of this Announcement and the Placing and/or the offer or sale of the Placing Shares in certain jurisdictions may be restricted by law. Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this Announcement should seek appropriate advice before taking any action. Persons distributing any part of this Announcement must satisfy themselves that it is lawful to do so.

Members of the public are not eligible to take part in the Placing. This Announcement is directed at and is only being distributed to persons: (a) in member states of the European Economic Area that are "qualified investors" within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the "Prospectus Regulation") ("Qualified Investors"); (b) in the United Kingdom, who (i) have professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or fall within Article 49(2)(a) to (d) of the Order and (ii) are Qualified Investors; and (c) to whom they may otherwise lawfully be communicated (each such person in (a), (b), and (c), a "Relevant Person"). No other person should act or rely on this Announcement and persons distributing this Announcement must satisfy themselves that it is lawful to do so. By accepting the terms of this Announcement, you represent and agree that you are a Relevant Person. This Announcement must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this Announcement or the Placing relates is available only to Relevant Persons and will be engaged in only with Relevant Persons.

No offering document, admission document or prospectus will be available in any jurisdiction in connection with the Placing and no such prospectus is required (in accordance with the Prospectus Regulation ) to be published.

This Announcement does not constitute, or purport to include the information required of, a disclosure document under Chapter 6D of the Australian Corporations Act 2001 (Cth) ("Corporations Act") and will not be lodged with the Australian Securities and Investments Commission. No offer of shares is or will be made in Australia pursuant to this Announcement, except to a person who is a "sophisticated investor" within the meaning of section 708(8) of the Corporations Act or a "professional investor" within the meaning of section 708(11) of the Corporations Act. If any shares are issued, they may not be offered for sale (or transferred, assigned or otherwise alienated) to investors in Australia for at least 12 months after their issue, except in circumstances where disclosure to investors is not required under Part 6D.2 of the Corporations Act.

Certain statements this Announcement are forward-looking statements with respect to the Company's expectations, intentions and projections regarding its future performance, strategic initiatives, anticipated events or trends and other matters that are not historical facts and which are, by their nature, inherently predictive, speculative and involve risks and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. All statements that address expectations or projections about the future, including statements about operating performance, strategic initiatives, objectives, market position, industry trends, general economic conditions, expected expenditures, expected cost savings and financial results, are forward-looking statements. Any statements contained in this Announcement that are not statements of historical fact are, or may be deemed to be, forward-looking statements. These forward-looking statements, which may use words such as "expects", "anticipates", "plans", "intends", "projects", "indicates" ( or the negative thereof ) and similar expressions , are not guarantees of future performance and are subject to known and unknown risks and uncertainties . There are a number of factors including, but not limited to, commercial, operational, economic and financial factors, that could cause actual results, financial condition, performance or achievements to differ materially from those expressed or implied by these forward-looking statements . Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as changes in taxation or fiscal policy, future market conditions, currency fluctuations, price fluctuations in crude oil and natural gas, drilling and production results, reserves estimates, environmental and physical risks, the behaviour of other market participants, the actions of governments or governmental regulators, or other risks factors, such as changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation, recession and consumer confidence, on a global, regional or national basis. Given these risks and uncertainties , readers are cautioned not to place undue reliance on forward-looking statements . Forward-looking statements speak only as of the date of this Announcement. Each of the Company, the Joint Global Coordinators and Cenkos Securities plc ("Cenkos") expressly disclaims any obligation or undertaking to update or revise publicly any forward-looking statements, whether as a result of a new information, future events or otherwise unless required to do so by applicable law or regulation.

In particular, no statement in this Announcement is intended to be a profit forecast or profit estimate and no statement of a financial metric (including estimates of adjusted EBITDA, profit before tax, free cash flow or net debt) should be interpreted to mean that any financial metric for the current or future financial years would necessarily match or exceed the historical published position of the Company and its subsidiaries. Certain statements in this Announcement may contain estimates. The estimates set out in this Announcement have been prepared based on numerous assumptions and forecasts, some of which are outside of the Company's influence and/or control, and is therefore inherently uncertain and there can be no guarantee or assurance that it will be correct. The estimates have not been audited, reviewed, verified or subject to any procedures by the Company's auditors. Undue reliance should not be placed on them and there can be no guarantee or assurance that they will be correct.

Credit Suisse is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the PRA and the Financial Conduct Authority (the "FCA") in the United Kingdom. Cenkos , Mirabaud and Stifel are each authorised and regulated in the United Kingdom by the FCA. Each of the Joint Global Coordinators and Cenkos is acting exclusively for the Company and for no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this Announcement) as a client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for giving advice in relation to the Placing or any other matters referred to in this Announcement.

This Announcement is being issued by and is the sole responsibility of the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by or on behalf of any of the Joint Global Coordinators or Cenkos (apart from the responsibilities or liabilities that may be imposed by the Financial Services and Markets Act 2000, as amended ("FSMA") or the regulatory regime established thereunder) or by their respective affiliates or any of their respective Representatives for the contents of this Announcement or any other written or oral information made available to or publicly available to any interested party or their respective advisers or any other statement made or purported to be made by or on behalf of any of the Joint Global Coordinators or Cenkos or any of their respective affiliates or any of their respective Representatives in connection with the Company, the Placing Shares or the Placing and any responsibility and liability whether arising in tort, contract or otherwise therefor is expressly disclaimed. No representation or warranty, express or implied, is made by any of the Joint Global Coordinators or Cenkos or any of their respective affiliates or any of their respective Representatives as to the accuracy, fairness, verification, completeness or sufficiency of the information or opinions contained in this Announcement or any other written or oral information made available to or publicly available to any interested party or their respective advisers, and any liability therefor is expressly disclaimed.

This Announcement does not constitute a recommendation concerning any investor's options with respect to the Placing. Recipients of this Announcement should conduct their own investigation, evaluation and analysis of the business, data and other information described in this Announcement. This Announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Placing Shares. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this Announcement are not to be construed as legal, business, financial or tax advice. Each investor or prospective investor should consult with his or her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, business, financial or tax advice.

Any indication in this Announcement of the price at which the Company's shares have been bought or sold in the past cannot be relied upon as a guide to future performance. Persons needing advice should consult an independent financial adviser. No statement in this Announcement should be interpreted to mean that earnings, earnings per share or income, cash flow from operations or free cash flow of the Company for the current or future financial periods would necessarily match or exceed the historical published earnings, earnings per share or income, cash flow from operations or free cash flow of the Company.  

It is currently expected that trading in the Company's ordinary shares on AIM will be cancelled on 18 May 2020 and that the Company's ordinary shares, including the Placing Shares, if issued, will be admitted to the Official List and to trading on the London Stock Exchange's main market for listed securities on the same day. The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the main market for listed securities of the London Stock Exchange.

Appendix 1 to this Announcement sets out the terms and conditions of the Placing. By participating in the Placing, each Placee will be deemed to have read and understood this Announcement (including the appendices) in its entirety, to be participating in the Placing and making an offer to acquire and acquiring Placing Shares on the terms and subject to the conditions set out in Appendix 1 to this Announcement and to be providing the representations, warranties, undertakings and acknowledgements contained in Appendix 1 to this Announcement.

Save for the Competent Person's Report, neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this Announcement.

This Announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws and regulations of any jurisdictions outside the United Kingdom.

All Reserves and Resources definitions and estimates shown in this report are based on the 2018 SPE/AAPG/WPC/SPEE Petroleum Resource Management System.

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any 'manufacturer' (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that such Placing Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Global Coordinators will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

Dealing Codes:

Ticker: DGOC.L

ISIN for the Ordinary Shares: GB00BYX7JT74

SEDOL for the Ordinary Shares: BYX7JT7

Company's legal entity identifier: 213800YR9TFRVHPGOS67

APPENDIX 1 - TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR INVITED PLACEES ONLY REGARDING THE PLACING

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT HEREIN (TOGETHER, THIS "ANNOUNCEMENT") ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA (THE "EEA"), PERSONS WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(E) OF REGULATION (EU) 2017/1129 (THE "PROSPECTUS REGULATION") ("QUALIFIED INVESTORS"); (B) IN THE UNITED KINGDOM, PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS WHO FALL WITHIN THE DEFINITION OF "INVESTMENT PROFESSIONALS" IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE "ORDER"), OR ARE HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS OR PARTNERSHIPS OR TRUSTEES OF HIGH VALUE TRUSTS AS DESCRIBED IN ARTICLE 49(2)(A) TO (D) OF THE ORDER AND (II) ARE QUALIFIED INVESTORS; AND (c) OTHERWISE, PERSONS TO WHOM IT MAY OTHERWISE BE LAWFUL TO COMMUNICATE IT TO (EACH, A "RELEVANT PERSON"). NO OTHER PERSON SHOULD ACT OR RELY ON THIS ANNOUNCEMENT. BY ACCEPTING THE TERMS OF THIS ANNOUNCEMENT YOU REPRESENT AND AGREE THAT YOU ARE A RELEVANT PERSON. THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. EACH PLACEE (AS DEFINED BELOW) SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS OF A SUBSCRIPTION FOR THE PLACING SHARES (AS DEFINED BELOW).

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA (COLLECTIVELY, THE "UNITED STATES"), AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN OR ANY JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL OR REQUIRE A PROSPECTUS OR SIMILAR DOCUMENT TO BE FILED. THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN DO NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN OR IN ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Regulation from the requirement to produce a prospectus. This Announcement is being distributed and communicated to persons in the UK only in circumstances to which section 21(1) of the Financial Services and Markets Act 2000, as amended ("FSMA") does not apply.

The Placing Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States. Accordingly, the Placing Shares may not be offered, sold or transferred, directly or indirectly, in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in accordance with any applicable securities laws of any state or other jurisdiction of the United States. The Placing Shares are being offered and sold by the Company outside the United States in offshore transactions as defined in, and pursuant to, Regulation S under the Securities Act ("Regulation S"). There will be no public offering of the Placing Shares in the United States.

The Placing has not been approved and will not be approved or disapproved by the United States Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States, nor have any of the authorities in Australia, Canada, South Africa, Japan or any other jurisdiction in which a registration statement or prospectus would be required to be filed in connection with the Placing Shares passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is unlawful.

Persons who are invited to and who choose to participate in the placing (the "Placing") of the Placing Shares by making an oral or written offer to acquire Placing Shares, including any individuals, funds or others on whose behalf a commitment to acquire Placing Shares is given ("Placees"), will be deemed to have read and understood this Announcement (including the appendices) in its entirety to be making (and shall only be permitted to participate in the Placing on the basis that they have made) such offer on the terms and conditions, and to be providing the representations, warranties, indemnities, acknowledgements, undertakings and agreements, contained in this Appendix 1. In particular, each such Placee represents, warrants, acknowledges and agrees that:

1.  it is a Relevant Person and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;

2.  it is acquiring the Placing Shares for its own account or is acquiring the Placing Shares for an account with respect to which it exercises sole investment discretion and has the authority to make and does make the representations, warranties, indemnities, acknowledgments, undertakings and agreements contained in this Announcement;

3.  it understands (or if acting for the account of another person, such person has confirmed that such person understands) the resale and transfer restrictions set out in this Announcement (including this Appendix 1);

4.  if it is in a member state of the EEA and it is a financial intermediary, as that term is used in Article 5(1) of the Prospectus Regulation, that any Placing Shares subscribed for by it in the Placing will not be subscribed for on a non-discretionary basis on behalf of, nor will they be subscribed for with a view to their offer or resale to, persons in a member state of the EEA other than Qualified Investors, or in circumstances in which the prior consent of the Joint Global Coordinators has been given to each such proposed offer or resale;

5.  it and the person(s), if any, for whose account or benefit it is acquiring the Placing Shares are outside the United States and will be outside the United States at the time the Placing Shares are acquired by it and acquiring the Placing Shares in an "offshore transaction" within the meaning of Regulation S; and

6.  the Company, Credit Suisse Securities (Europe) Limited ("Credit Suisse"), Mirabaud Securities Limited ("Mirabaud") and Stifel Nicolaus Europe Limited ("Stifel" and, together with Credit Suisse and Mirabaud, the "Joint Global Coordinators") will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements.

None of the Company, the Joint Global Coordinators or any of their respective affiliates or any of their respective Representatives (as defined below) makes any representation to any Placee regarding an investment in the Placing Shares.

Details of the Placing Agreement and of the Placing Shares

The Joint Global Coordinators and the Company have today entered into a placing agreement (the "Placing Agreement") under which, subject to the terms and conditions set out therein, each of the Joint Global Coordinators has agreed, severally and not jointly or jointly and severally, as agent for and on behalf of the Company, to use its reasonable endeavours to procure Placees for new ordinary shares of one penny each in the capital of the Company (the "Placing Shares") representing up to 10.0% of the Company's existing issued share capital, with the number of Placing Shares and price to be determined following completion of the bookbuilding process in respect of the Placing (the "Placing Price"), and to the extent any Placee defaults in paying the Placing Price in respect of any Placing Shares allocated to it, each of the Joint Global Coordinators has agreed, severally and not jointly or jointly and severally, to subscribe for such Placing Shares at the Placing Price.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of one penny each in the capital of the Company (the "Ordinary Shares"), including the right to receive all dividends and other distributions declared, made or paid in respect of the Ordinary Shares after the date of issue of the Placing Shares including the interim dividends previously announced by the Company in respect of Q4 2019 and in respect of Q1 2020. The ex-dividend dates of the Q4 2019 and Q1 2020 dividends are 28 May 2020 and 3 September 2020, respectively, and are expected to be paid on 26 June 2020 and 25 September 2020, respectively.

Applications for listing and admission to trading

The Ordinary Shares are currently admitted to trading on AIM, a market of the London Stock Exchange plc (the "London Stock Exchange"). It is currently expected that trading in the Ordinary Shares on AIM will be cancelled on or around 18 May 2020 (the "Admission Date") and will be admitted to the premium listing segment of the Official List of the Financial Conduct Authority (the "FCA") (the "Official List") and to trading on the main market for listed securities of the London Stock Exchange on the same day. If there is any change to the timetable outlined, the Company will make a further announcement.

Applications will be made to the FCA for admission of the Placing Shares to the premium listing segment of the Official List and to the London Stock Exchange for admission of the Placing Shares to trading on its main market for listed securities (together, "Admission"). It is expected that Admission will become effective at 8.00 a.m. on the Admission Date and that dealings in the Placing Shares will commence at that time (or such later date as may be agreed between the Company and the Joint Global Coordinators).

Bookbuild

The Joint Global Coordinators will today commence an accelerated bookbuilding process to determine demand for participation in the Placing by Placees (the "Bookbuild"). This Appendix 1 gives details of the terms and conditions of, and the mechanics of participation in, the Placing. No commissions will be paid to Placees or by Placees in respect of any Placing Shares. Members of the public are not entitled to participate.

The Joint Global Coordinators and the Company shall be entitled to effect the Placing by such alternative method to the Bookbuild as they may, in their absolute discretion, determine.

Participation in, and principal terms of, the Placing

1.  Each of the Joint Global Coordinators is acting as a joint global coordinator, joint bookrunner and agent for the Company in connection with the Placing.

2.  Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by the Joint Global Coordinators. The Joint Global Coordinators and their respective agents and affiliates are entitled to enter bids in the Bookbuild as principal.

3.  The Bookbuild will establish a single price per Placing Share payable to the Joint Global Coordinators, as agents for and on behalf of the Company, by all Placees whose bids are successful. The Placing Price and the final number of Placing Shares will be determined by the Company (in consultation with the Joint Global Coordinators) following completion of the Bookbuild. The Placing Price and the final number of Placing Shares to be issued will be announced on a Regulatory Information Service ("RIS") following the completion of the Bookbuild.

4.  To bid in the Bookbuild, prospective Placees should communicate their bid by telephone or in writing to their usual sales contact at any of the Joint Global Coordinators. Each bid should state the number of Placing Shares which the prospective Placee wishes to acquire at either the Placing Price which is ultimately established by the Company and the Joint Global Coordinators or at prices up to a price limit specified in its bid. Bids may be scaled down by the Joint Global Coordinators on the basis referred to in paragraph 8 below.

5.  A bid in the Bookbuild will be made on the terms and subject to the conditions in this Appendix 1 and will be legally binding on the Placee on behalf of which it is made and, except with the Joint Global Coordinators' consent, will not be capable of variation or revocation after the time at which it is submitted. Each Placee will have an immediate, separate, irrevocable and binding obligation, owed to the Joint Global Coordinators, as agents for and on behalf of the Company, to pay it in cleared funds immediately on the settlement date, in accordance with the registration and settlement requirements set out below, an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to subscribe for and the Company has agreed to allot.

6.  The Bookbuild is expected to close no later than 8.00 a.m. (London time) on 12 May 2020 but may be closed earlier or later at the discretion of the Joint Global Coordinators and the Company. The Joint Global Coordinators may, in agreement with the Company, accept bids that are received after the Bookbuild has closed.

7.  Each prospective Placee's allocation will be agreed between the Joint Global Coordinators and the Company and will be confirmed orally or in writing by any of the Joint Global Coordinators (as agent for and on behalf of the Company) following the close of the Bookbuild and a trade confirmation will be despatched thereafter. This oral confirmation to such Placee will constitute an irrevocable legally binding commitment upon that person (who will at that point become a Placee) in favour of the Joint Global Coordinators and the Company to acquire the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix 1 and in accordance with the Company's articles of association and each Placee will be deemed to have read and understood this Announcement (including the appendices) in its entirety. The terms of this Appendix 1 will be deemed incorporated by reference in the trade confirmation. All obligations under the Bookbuild and Placing will be subject to fulfilment or, where applicable, waiver of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate under the Placing Agreement". By participating in the Bookbuild, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee after confirmation (oral or otherwise) by any of the Joint Global Coordinators.

8.  The Joint Global Coordinators may choose to accept bids, either in whole or in part, on the basis of allocations determined in agreement with the Company and may scale down any bids for this purpose on such basis as they may determine. The Joint Global Coordinators may also, notwithstanding paragraphs 4 and 5 above, and subject to the prior consent of the Company, (i) allocate Placing Shares after the time of any initial allocation to any person submitting a bid after that time; and (ii) allocate Placing Shares after the Bookbuild has closed to any person submitting a bid after that time. The Company reserves the right (upon consultation with the Joint Global Coordinators) to reduce or seek to increase the amount to be raised pursuant to the Placing, in its absolute discretion.

9.  Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and settlement".

10.  Except as required by law or regulation, no press release or other announcement will be made by the Joint Global Coordinators or the Company using the name of any Placee (or its agent), in its capacity as Placee (or agent), other than with such Placee's prior written consent.

11.  To the fullest extent permissible by law, none of the Joint Global Coordinators, the Company or any of their respective affiliates or any of their respective directors, officers, partners, employees, advisers or agents (collectively, "Representatives") shall have any responsibility or liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, none of the Joint Global Coordinators, the Company or any of their respective affiliates or any of their respective Representatives shall have any liability (including to the fullest extent permissible by law, any fiduciary duties) in respect of the conduct of the Bookbuild or of such alternative method of effecting the Placing as the Joint Global Coordinators and the Company may agree.

Conditions of the Placing

The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms. The obligations of the Joint Global Coordinators under the Placing Agreement are conditional on, amongst other things: (a) Admission, the cancellation of trading of the Ordinary Shares on AIM and the admission of the Ordinary Shares to listing on the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities taking place by no later than 8.00 a.m. on 18 May 2020; (b) the Company's representations and warranties contained in the Placing Agreement being true and accurate and not misleading on and as at the date of the Placing Agreement and at all times up to Admission; (c) the Company complying with its obligations and undertakings under the Placing Agreement   so far as the same fall to be performed or satisfied on or prior to Admission ; (d) there not having occurred, since the date of the Placing Agreement at any time prior to Admission, any material adverse change; or (e) no matter having arisen which might reasonably give be expected to give rise to an indemnity claim under the Placing Agreement .

The Joint Global Coordinators have discretion to waive compliance with certain of the conditions and/or agree an extension in time for their satisfaction.

If: (a) any of the conditions contained in the Placing Agreement, including those described above, are not fulfilled (or, where permitted, waived or extended in writing by the Joint Global Coordinators) or have become incapable of fulfilment on or before the date or time specified for the fulfilment thereof (or such later time and/or date as the Company and the Joint Global Coordinators may agree); or (b) the Placing Agreement is terminated in the circumstances specified below, the Placing will not proceed and the Placees' rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.

Neither the Joint Global Coordinators nor any of their respective affiliates nor any of their respective Representatives shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision they may make as to whether or not to waive or to extend the time and/or the date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally, and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Joint Global Coordinators.

Lock-up

The Company has agreed with the Joint Global Coordinators that, subject to customary expectations, it will not, and will procure that none of its subsidiaries will, between the date of the Placing Agreement and 45 days after the date of the Placing Agreement, without the prior written consent of the Joint Global Coordinators, (a) issue, allot, offer, pledge, sell, contract to sell, pledge, grant any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or other shares in the capital of the Company or any securities convertible into or exchangeable for Ordinary Shares or other shares in the capital of the Company or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Ordinary Shares or other shares in the capital of the Company, whether any such transaction described in (a) or (b) above is to be settled by delivery of Ordinary Shares or other shares in the capital of the Company or such other securities, in cash or otherwise.

Right to terminate under the Placing Agreement

Each of the Joint Global Coordinators, for itself in its capacity as joint global co-ordinator and joint bookrunner, is entitled, in its absolute discretion acting in good faith and after consultation (to the extent reasonably practicable) with the Company and the other Joint Global Coordinators, at any time before Admission, to terminate the Placing Agreement by giving notice to the Company if, amongst other things, (a) any of the conditions to the Placing Agreement have not been satisfied or (where permitted) waived, (b) any of the Company's representations and warranties are not or cease to be true and accurate or have become misleading; (c) there has been a breach by the Company of any of its obligations or undertakings contained in the Placing Agreement ; (d) since the date of the Placing Agreement, there has been a material adverse change; or (e) there has occurred a market disruption event as specified in the Placing Agreement.

Upon such notice being given, such parties to the Placing Agreement shall be released and discharged (except for any liability arising before or in relation to such termination) from their respective obligations under or pursuant to the Placing Agreement, subject to certain exceptions. Each of the other Joint Global Coordinators may, in its absolute discretion, elect by giving notice to the Company to allow the Placing to proceed.

By participating in the Placing, Placees agree that the exercise by any of the Joint Global Coordinators of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of each of the Joint Global Coordinators, that the Joint Global Coordinators do not need to make any reference to, consult with, or seek consent from, Placees and that none of the Company or the Joint Global Coordinators or any of their respective affiliates or any of their respective Representatives shall have any liability to Placees whatsoever in connection with any exercise or failure to exercise any right of termination or other discretion.

No prospectus

No offering document, admission document or prospectus has been or will be submitted to be approved by the FCA or submitted to the London Stock Exchange in relation to the Placing and no such prospectus is required (in accordance with the Prospectus Regulation) to be published. Placees' commitments will be made solely on the basis of their own assessment of the Company, the Placing Shares and the Placing based on information contained in this Announcement (including the appendices) released by the Company today and any information publicly announced to a RIS by or on behalf of the Company on or prior to the date of this Announcement and subject to the further terms set forth in the trade confirmation to be provided to individual prospective Placees.

Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement (including the appendices) and all other publicly available information previously and simultaneously published by the Company by notification to a RIS is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Company or the Joint Global Coordinators or any other person and none of the Company or the Joint Global Coordinators or any of their respective affiliates or any of their respective Representatives will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placee may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude or limit the liability of any person for fraudulent misrepresentation by that person.

Registration and settlement

Settlement of transactions in the Placing Shares following Admission will take place within the CREST system, subject to certain exceptions. The Joint Global Coordinators and the Company reserve the right to require settlement for and delivery of the Placing Shares (or a portion thereof) to Placees in certificated form if delivery or settlement is not possible or practicable within the CREST system or would not be consistent with the regulatory requirements in the Placee's jurisdiction.

Following the close of the Bookbuild, each Placee allocated Placing Shares in the Placing will be sent a trade confirmation stating the number of Placing Shares to be allocated to it at the Placing Price and settlement instructions. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the standing CREST or certificated settlement instructions that it has in place with the relevant Joint Global Coordinator.

The Company will deliver the Placing Shares to a CREST account operated by the Joint Global Coordinators (or any one of them) as the Company's agent and the relevant Joint Global Coordinator will enter its delivery (DEL) instruction into the CREST system. The input to CREST by a Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee against payment.

It is expected that settlement will be on 18 May 2020 on a T+4 basis and on a delivery versus payment basis in accordance with the instructions set out in the trade confirmation. Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by the Joint Global Coordinators.

Each Placee is deemed to agree that, if it does not comply with these obligations, the Joint Global Coordinators (as agents for and on behalf of the Company) may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for the Company's account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax or other similar taxes (together with any interest or penalties) imposed in any jurisdiction which may arise upon the sale of such Placing Shares on such Placee's behalf. By communicating a bid for Placing Shares, each Placee confirms on each of the Joint Global Coordinators all such authorities and powers necessary to carry out any such transaction and agrees to ratify and confirm all actions which the Joint Global Coordinators lawfully takes on such Placee's behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. If there are any other circumstances in which any stamp duty or stamp duty reserve tax (and/or any interest, fines or penalties relating thereto) is payable in respect of the allocation, allotment, issue or delivery of the Placing Shares (or for the avoidance of doubt if any stamp duty or stamp duty reserve tax is payable in connection with any subsequent transfer of or agreement to transfer Placing Shares), none of the Joint Global Coordinators or the Company shall be responsible for the payment thereof. Placees shall not be entitled to receive any fee or commission in connection with the Placing.

Representations and warranties and further terms

By submitting a bid and/or participating in the Placing each prospective Placee (and any person acting on such Placee's behalf) irrevocably acknowledges, confirms, undertakes, represents, warrants and agrees (as the case may be) with each Joint Global Coordinator and the Company, in each case as a fundamental term of its application for Placing Shares), the following:

1.  it has read and understood this Announcement, including this Appendix, in its entirety and that its participation in the Bookbuild and the Placing and its subscription for and purchase of Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, indemnities, acknowledgements, agreements and undertakings and other information contained herein and undertakes not to redistribute or duplicate this Announcement and it has not relied on, and will not rely on, any other information given or any representations, warranties or statements made at any time by any person in connection with Admission, the Bookbuild, the Placing, the Company, the Placing Shares or otherwise;

2.  that no offering document, offering memorandum, admission document or prospectus has been or will be prepared in connection with the Placing or is required under the Prospectus Regulation and it has not received and will not receive a prospectus, offering memorandum, admission document or other offering document in connection with the Bookbuild, the Placing or the Placing Shares;

3.  (i) it has made its own assessment of the Company, the Placing Shares and the terms of the Placing based on this Announcement (including the appendices) and any information publicly announced to a Regulatory Information Service by or on behalf of the Company prior to the date of this Announcement (the "Publicly Available Information"); (ii) the Ordinary Shares are currently admitted to trading on AIM and the Company is therefore required to publish certain business and financial information in accordance with the rules and practices of the London Stock Exchange (the "Exchange Information"), which includes a description of the nature of the Company's business, most recent balance sheet and profit and loss account, and similar statements for preceding years, and it has reviewed such Exchange Information as it has deemed necessary or that it is able to obtain or access the Exchange Information without undue difficulty; and (iii) it has had access to such financial and other information (including the business, financial condition, prospects, creditworthiness, status and affairs of the Company, the Placing and the Placing Shares, as well as the opportunity to ask questions) concerning the Company, the Placing and the Placing Shares as it has deemed necessary in connection with its own investment decision to acquire any of the Placing Shares and has satisfied itself that the information is still current and relied on that investigation for the purposes of its decision to participate in the Placing;

4.  that the content of this Announcement is exclusively the responsibility of the Company and that neither the Joint Global Coordinators nor any of their respective affiliates nor any of their respective Representatives nor any person acting on their behalf has or shall have any responsibility or liability for any information, representation or statement contained in this Announcement or any information previously or subsequently published by or on behalf of the Company, including, without limitation, any Exchange Information, and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this Announcement or any information previously published by or on behalf of the Company or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing itself to acquire the Placing Shares is contained in this Announcement and any Publicly Available Information including (without limitation) the Exchange Information, such information being all that it deems necessary and/or appropriate to make an investment decision in respect of the Placing Shares, and that it has neither received nor relied on any other information given or investigations, representations, warranties or statements made by the Joint Global Coordinators or the Company or any of their respective affiliates or any of their respective Representatives or any person acting on their behalf and neither the Joint Global Coordinators nor the Company nor any of their respective affiliates, nor any of their respective Representatives nor any person acting on their behalf will be liable for any Placee's decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement. Each Placee further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing;

5.  (i) neither the Joint Global Coordinators nor any of their respective affiliates nor any of their respective Representatives nor any person acting on their behalf have made any representations to it, express or implied, with respect to the Company, the Bookbuild, the Placing and the Placing Shares or the accuracy, completeness or adequacy of the Publicly Available Information or the Exchange Information, and each of them expressly disclaims any liability in respect thereof; and (ii) it will not hold the Joint Global Coordinators or any of their respective affiliates or any of their respective Representatives or any person acting on their behalf responsible for any misstatements in or omissions from the Publicly Available Information or the Exchange Information. Nothing in this paragraph or otherwise in this Announcement excludes the liability of any person for fraudulent misrepresentation made by that person;

6.  none of the Joint Global Coordinators or the Company or any of their respective affiliates or any of their respective Representatives or any person acting on behalf of any of them has provided, and none of them will provide, to it any material regarding the Placing Shares or the Company or any other person other than this Announcement, nor has it requested that any of the Joint Global Coordinators, the Company, any of their respective affiliates, any of their respective Representatives or any person acting on behalf of any of them to provide it with any such material;

7.  it is not within the United States, will not be within the United States at the time that any buy order for Placing Shares is originated by it and is acquiring the Placing Shares in an "offshore transaction" within the meaning of and pursuant to Regulation S and not as a result of any form of "directed selling efforts" as defined in Regulation S;

8.  it understands, and each account it represents has been advised that, (i) the Placing Shares have not been and will not be registered under the Securities Act or with any regulatory authority of any other state or other jurisdiction of the United States; (ii) the Placing Shares are being offered and sold only in "offshore transactions" within the meaning of and pursuant to Regulation S under the Securities Act; and (iii) the Placing Shares may only be reoffered or resold in transactions exempt from, or not subject to, the registration requirements of the Securities Act;

9.  it will not distribute, forward, transfer or otherwise transmit this Announcement or any other materials concerning the Placing (including any electronic copies thereof), in or into the United States;

10.  it is not, and at the time the Placing Shares are acquired, neither it nor the beneficial owner of the Placing Shares will be, a resident of Australia (unless paragraph 11 below applies), Canada, Japan or South Africa and further acknowledges that the Placing Shares have not been and will not be registered under the securities legislation of Australia, Canada, Japan or South Africa and, subject to certain exceptions, may not be offered, sold, transferred, delivered or distributed, directly or indirectly, in or into those jurisdictions;

11.  if it is receiving the offer to acquire the Placing Shares in Australia, it is (i) a "sophisticated investor" within the meaning of section 708(8) of the Australian Corporations Act 2001 (Cth) (the "Corporations Act") or a "professional investor" within the meaning of section 708(11) of the Corporations Act and the issue of the Placing Shares to it under the Placing does not require a prospectus or other form of disclosure document under the Corporations Act, and no Placing Shares may be offered for sale (or transferred, assigned or otherwise alienated) to investors in Australia for at least 12 months after their issue, except in circumstances where disclosure to investors is not required under Part 6D.2 of the Corporations Act;

12.  if it received any "inside information" as defined in the EU Market Abuse Regulation (EU) 596/2014 ("MAR") concerning the Company or its shares or other securities or related financial instruments in advance of the Placing, it has not (i) dealt in the securities of the Company; (ii) encouraged or required another person to deal in the securities of the Company; or (iii) disclosed such information to any person except as permitted by MAR, prior to the information being made publicly available;

13.  it has complied with its obligations under the Criminal Justice Act 1993, MAR and any delegating acts, implementing acts, technical standards and guidelines thereunder, and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000 (as amended), the Terrorism Act 2006, and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended) (the "Regulations") and the Money Laundering Sourcebook of the FCA and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations. If within a reasonable time after a request for verification of identity, the Joint Global Coordinators have not received such satisfactory evidence, the Joint Global Coordinators may, at their absolute discretion, terminate the Placee's Placing participation in which event all funds delivered by the Placee to the Joint Global Coordinators will be returned without interest to the account of the drawee bank or CREST account from which they were originally debited;

14.  it is a Relevant Person and undertakes that it will subscribe for, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;

15.  it understands that any investment or investment activity to which this Announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons, and further understands that this Announcement must not be acted on or relied on by persons who are not Relevant Persons;

16.  if it is a financial intermediary, as that term is used in Article 5(1) of the Prospectus Regulation, that the Placing Shares subscribed for by it in the Placing will not be subscribed for on a non-discretionary basis on behalf of, nor will they be subscribed for with a view to their offer or resale to, persons in a member state of the EEA other than Qualified Investors or persons in the UK other than Relevant Persons, or in circumstances in which the prior consent of the Joint Global Coordinators has been given to the proposed offer or resale;

17.  that it has not offered or sold and will not offer or sell any Placing Shares to persons in the United Kingdom, except to Relevant Persons or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of the FSMA;

18.  that any offer of Placing Shares may only be directed at persons in member states of the EEA who are Qualified Investors and represents, warrants and undertakes that it has not offered or sold and will not offer or sell any Placing Shares to persons in the EEA prior to Admission except to Qualified Investors or otherwise in circumstances which have not resulted in and which will not result in an offer to the public in any member state of the EEA within the meaning of the Prospectus Regulation;

19.  it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person;

20.  it has complied and will comply with all applicable laws (including all relevant provisions of FSMA) with respect to anything done by it in relation to the Placing Shares;

21.  if in the United Kingdom, it is a Qualified Investor (i) having professional experience in matters relating to investments and who falls within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "Order") or (ii) who falls within Article 49(2)(a) to (d) of the Order;

22.  if it is in a member state of the EEA, it is a Qualified Investor;

23.  no action has been or will be taken by either the Company or the Joint Global Coordinators or any person acting on behalf of the Company or the Joint Global Coordinators that would, or is intended to, permit a public offer of the Placing Shares in any country or jurisdiction where any such action for that purpose is required;

24.  neither it, nor the person specified by it for registration as holder of Placing Shares is, or is acting as nominee or agent for, and the Placing Shares will not be allotted to, a person who is or may be liable to stamp duty reserve tax under any of sections 67, 70, 93 and 96 of the Finance Act 1986 (depository receipts and clearance services) and the Placing Shares are not being acquired in connection with arrangements to issue depository receipts or to issue or transfer Placing Shares into a clearance system;

25.  (i) it is acting as principal in respect of the Placing and has the power and authority to carry on the activities in which it is engaged, to subscribe for Placing Shares and to execute and deliver all documents necessary for such subscription; and/or (ii) if it is acting for any other person (A) it is duly authorised to do so and has full power to make the acknowledgments, representations, undertakings and agreements and give the indemnities herein on behalf of each such person; and (B) it is and will remain liable to the Company and/or the Joint Global Coordinators for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person). Each Placee agrees that the provisions of this paragraph shall survive the resale of the Placing Shares by or on behalf of any person for whom it is acting;

26.  if it is a pension fund or investment company, its acquisition of Placing Shares is in full compliance with applicable laws and regulations;

27.  (i) it and any person acting on its behalf is entitled to subscribe for the Placing Shares under the laws of all relevant jurisdictions which apply to it; (ii) it has paid any issue, transfer or other taxes due in connection with its participation in any territory; (iii) it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereunder and complied with all necessary formalities and that it has not taken any action or omitted to take any action which will or may result in the Joint Global Coordinators or the Company or any of their respective affiliates or any of their respective Representatives acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Placing; and (iv) the subscription of the Placing Shares by it or any person acting on its behalf will be in compliance with applicable laws and regulations in the jurisdiction of its residence, the residence of the Company, or otherwise;

28.  it (and any person acting on its behalf) has the funds available to pay for, and has all necessary capacity and has obtained all necessary consents and authorities to enable it to commit to its participation in the Placing and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in this Announcement) and will honour such obligations;

29.  it (and any person acting on its behalf) will make payment for the Placing Shares allocated to it in accordance with the terms and conditions of this Announcement (including the appendices), on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other persons or sold as the Joint Global Coordinators may in their absolute discretion determine and without liability to such Placee, and it will remain liable for any amount by which the net proceeds of such sale falls short of the product of the Placing Price and the number of Placing Shares allocated to it and may be required to bear any stamp duty or stamp duty reserve tax or other similar taxes (together with any interest or penalties due pursuant to the terms set out or referred to in this Announcement) which may arise upon the sale of such Placee's Placing Shares on its behalf;

30.  its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares which it will be entitled, and required, to acquire, and that the Joint Global Coordinators or the Company may call upon it to acquire a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;

31.  the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. Neither the Joint Global Coordinators nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax or other similar taxes resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to indemnify and hold harmless the Company, each of the Joint Global Coordinators, their respective affiliates and any of their respective Representatives in respect of the same on an after-tax basis on the basis that the Placing Shares will be allotted to the CREST stock account of the Joint Global Coordinators (or any one of them) who will hold them as nominee on behalf of such Placee until settlement in accordance with its standing settlement instructions;

32.  the Placing does not constitute a recommendation or financial product advice and the Joint Global Coordinators have not had regard to its particular objectives, financial situation and needs;

33.  none of the Joint Global Coordinators, any of their respective affiliates, any of their respective Representatives or any person acting on behalf of any of them, is making any recommendations to it or, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of any of the Joint Global Coordinators and that the Joint Global Coordinators do not have any duties or responsibilities to it for providing the protections afforded to their respective clients or customers or for providing advice in relation to the Placing or in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement or for the exercise or performance of any of their rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

34.  that in making any decision to acquire the Placing Shares (i) it has such knowledge, sophistication and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for or purchasing the Placing Shares, (ii) it is experienced in investing in securities of this nature in this sector and is aware that it may be required to bear, and is able to bear, the economic risk of participating in, and is able to sustain a complete loss in connection with, the Placing, (iii) it has relied on its own examination, due diligence and analysis of the Company and its affiliates taken as a whole, including the markets in which the Company and its affiliates operate, and the terms of the Placing, including the merits and risks involved and not upon any view expressed or information provided by or on behalf of any of the Joint Global Coordinators, (iv) it has had sufficient time and access to information to consider and conduct its own investigation with respect to the offer and purchase of the Placing Shares, including the legal, regulatory, tax, business, currency and other economic and financial considerations relevant to such investment and has so conducted its own investigation to the extent it deems necessary for the purposes of its investigation, and (v) it will not look to the Company, the Joint Global Coordinators, any of their respective affiliates, any of their respective Representatives or any person acting on their behalf for all or part of any such loss or losses it or they may suffer;

35.  in connection with the Placing, any of the Joint Global Coordinators and any of its or their respective affiliates acting as an investor for its own account may take up a portion of the Placing Shares and in that capacity may acquire, retain, purchase or sell for its own account such Placing Shares in the Company and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Placing. Accordingly, references in this Announcement to shares being issued, offered or placed should be read as including any issue, offering or placement of such shares in the Company to the Joint Global Coordinators or their respective affiliates acting in such capacity. In addition the Joint Global Coordinators may enter into financing arrangements and swaps with investors in connection with which the Joint Global Coordinators may from time to time acquire, hold or dispose of such securities of the Company, including the Placing Shares. None of the Joint Global Coordinators intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so;

36.  its commitment to acquire the Placing Shares on the terms set out herein and in the trade confirmation will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Placing and Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's or the Joint Global Coordinators' conduct of the Placing;

37.  the terms and conditions and any agreements entered into by it pursuant to these terms and conditions and any non-contractual obligations arising out of or in connection with such agreements shall be governed by and construed in accordance with the laws of England and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such agreements and such non-contractual obligations, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company or the Joint Global Coordinators in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;

38.  it will indemnify on an after-tax basis and hold each of the Company and the Joint Global Coordinators and their respective affiliates and their respective Representatives harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of, directly or indirectly, or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Appendix 1 and further agrees that the provisions of this Appendix 1 shall survive after completion of the Placing;

39.  neither the Company nor the Joint Global Coordinators owes any fiduciary or other duties to any Placee in respect of any acknowledgements, confirmations, undertakings, representations, warranties or indemnities in the Placing Agreement; and

40.  the Company, the Joint Global Coordinators and their respective affiliates and others will rely upon the truth and accuracy of the representations, warranties, acknowledgements, indemnities, undertakings and agreements set forth herein and which are given to each of the Joint Global Coordinators and the Company (for their own benefit and, where relevant, the benefit of their respective affiliates and any person acting on their behalf) and are irrevocable and it irrevocably authorises the Company and the Joint Global Coordinators to produce this Announcement, pursuant to, in connection with, or as may be required by any applicable law or regulation, administrative or legal proceeding or official inquiry with respect to the matters set forth herein. It agrees that if any of the acknowledgements, representations, warranties, undertakings and agreements made in connection with its subscribing and/or acquiring of Placing Shares is no longer accurate, it shall promptly notify the Company and the Joint Global Coordinators.

Please also note that the agreement to allot and issue Placing Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct from the Company for the Placing Shares in question. Such agreement is subject to the representations, warranties and further terms above and assumes and is based on the warranty and representation from each Placee that the Placing Shares are not being subscribed for in connection with arrangements to issue depositary receipts or to issue or transfer the Placing Shares into a clearance service. If there are any such arrangements, or the settlement relates to any other dealing in the Placing Shares, stamp duty or stamp duty reserve tax or other similar taxes may be payable, for which none of the Company or the Joint Global Coordinators will be responsible and each Placee shall indemnify on an after-tax basis and hold harmless the Company and the Joint Global Coordinators and their respective affiliates and their respective Representatives for any stamp duty or stamp duty reserve tax paid by them in respect of any such arrangements or dealings. If this is the case, each Placee should seek its own advice and notify the Joint Global Coordinators accordingly.

None of the Company or the Joint Global Coordinators is liable to bear any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable in or outside the United Kingdom by any Placee or any other person on a Placee's acquisition of any Placing Shares or the agreement by a Placee to acquire any Placing Shares. Each Placee agrees to indemnify on an after-tax basis and hold harmless the Company, the Joint Global Coordinators, their respective affiliates and their respective Representatives from any and all such stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including interest, fines or penalties relating thereto). Each Placee should seek its own advice as to whether any of the above tax liabilities arise and notify the Joint Global Coordinators accordingly.

In this Announcement, "after-tax basis" means in relation to any payment made to the Company or the Joint Global Coordinators or their respective affiliates or their respective Representatives pursuant to this Announcement where the payment (or any part thereof) is chargeable to any tax, a basis such that the amount so payable shall be increased so as to ensure that after taking into account any tax chargeable (or which would be chargeable but for the availability of any relief unrelated to the loss, damage, cost, charge, expense or liability against which the indemnity is given on such amount (including on the increased amount) there shall remain a sum equal to the amount that would otherwise have been so payable.

Each Placee, and any person acting on behalf of each Placee, acknowledges and agrees that the Joint Global Coordinators and/or any of their respective affiliates may, at their absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares. Each Placee acknowledges and is aware that each of the Joint Global Coordinators is receiving a fee in connection with its role in respect of the Placing as detailed in the Placing Agreement. An affiliate of Credit Suisse is a party to a credit facility of the Company and, in the event that the Company determines to use the net proceeds of the Proposed Fundraising to pay down its debt, it may receive a portion of net proceeds in connection with such pay down.

When a Placee or person acting on behalf of the Placee is dealing with any of the Joint Global Coordinators, any money held in an account with the relevant Joint Global Coordinator on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from the relevant Joint Global Coordinator's money in accordance with the client money rules and will be used by the relevant Joint Global Coordinator in the course of its own business; and the Placee will rank only as a general creditor of such Joint Global Coordinator.

All times and dates in this Announcement may be subject to amendment by the Joint Global Coordinators and the Company (in their absolute discretion).The Joint Global Coordinators shall notify the Placees and any person acting on behalf of the Placees of any changes.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

The rights and remedies of the Joint Global Coordinators and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one will not prevent the exercise of others.

APPENDIX 2 - KEY PROSPECTUS INFORMATION

RISK FACTORS

Any investment in the Ordinary Shares is subject to a number of risks. The risk factors associated with any investment in the Ordinary Shares, the Group's business and the industry in which it operates, together with all other information contained in this Announcement including, in particular, the risk factors described below should be carefully considered.

The risk factors described below are not an exhaustive list or explanation of all risks which investors may face when making an investment in the Ordinary Shares. The risk factors detailed below and additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, results of operations, financial condition or prospects and, if any such risk should occur, the price of the Ordinary Shares may decline. The suitability of investment in the Ordinary Shares should be considered in the light of the information in this Announcement and personal circumstances of the investor.

Risks relating to the Group's business and industry

Volatility and future decreases in gas, natural gas liquids and oil prices could materially and adversely affect the Group's business, results of operations, financial condition or prospects.

The Group's business, operating results, financial condition and prospects depend substantially upon prevailing gas, natural gas liquids and oil prices, which may be adversely impacted by unfavourable global, regional and national macroeconomic conditions, including instability related to trade tensions between the US and China. Gas, natural gas liquids and oil are commodities for which prices are determined based on world and localised demand, supply and other factors, all of which are beyond the Group's control. In March 2020, the market experienced a significant decline in oil prices in response to oil demand concerns due to the economic impact of the spread of the COVID-19 virus and anticipated increases in supply following the OPEC Russia oil price confrontation and travel restrictions globally. COVID-19 is expected to result in a reduction of demand for all energy sources until the virus' impact is largely mitigated. See risk factor below entitled "The recent COVID-19 outbreak could have an adverse effect on the Group's business."

Historically, prices for gas, natural gas liquids and oil have fluctuated widely for many reasons, including:

· global and regional supply and demand, and expectations regarding future supply and demand, for gas and oil products;

· global and regional economic conditions;

· evolution of stocks of oil and related products;

· increased production due to new extraction developments and improved extraction and production methods;

· geopolitical uncertainty;

· threats or acts of terrorism, war or threat of war, which may affect supply, transportation or demand;

· weather conditions, natural disasters and environmental incidents;

· access to pipelines, storage platforms, shipping vessels and other means of transporting and storing and refining gas and oil, including without limitation, changes in availability of, and access to, pipeline ullage;

· prices and availability of alternative fuels;

· prices and availability of new technologies;

· increasing competition from alternative energy sources;

· the ability of OPEC, and other oil producing nations, to set and maintain specified levels of production and prices;

· political, economic and military developments in gas and oil producing regions generally;

· governmental regulations and actions, including the imposition of export restrictions and taxes and environmental requirements and restrictions as well as anti-hydrocarbon production policies;

· trading activities by market participants and others either seeking to secure access to gas, natural gas liquids and oil or to hedge against commercial risks, or as part of an investment portfolio; and

· market uncertainty, including fluctuations in currency exchange rates, and speculative activities by those who buy and sell gas, natural gas liquids and oil on the world markets.

It is impossible to accurately predict future gas, natural gas liquids and oil price movements. Historically, gas prices have been highly volatile and subject to large fluctuations in response to relatively minor changes in the demand for gas. The spike in US natural gas prices to nearly $5.00 per MMBtu in December 2018 and subsequent fall back to approximately $2.14 per MMBtu in August 2019 highlights the volatile nature of commodity prices.

The economics of producing from some wells and assets may also result in a reduction in the volumes of the Group's reserves which can be produced commercially, resulting in decreases to the Group's reported reserves. Additionally, further reductions in commodity prices may result in a reduction in the volumes of the Group's reserves. The Group might also elect not to continue production from certain wells at lower prices, or the Group's licence partners may not want to continue production regardless of the Group's position. 

Each of these factors could result in a material decrease in the value of the Group's reserves, which could lead to a reduction in the Group's gas, natural gas liquids and oil development activities and acquisition of additional reserves. In addition, certain development projects or potential future acquisitions could become unprofitable as a result of a decline in price and could result in the Group having to postpone or cancel a planned project or potential acquisition, or if it is not possible to cancel, carry out the project or acquisition with negative economic impacts. Further, a reduction in gas, natural gas liquids or oil prices may lead the Group's producing fields to be shut down and to be entered into the decommissioning phase earlier than estimated.

The Group's revenues, cash flows, operating results, profitability, dividends, future rate of growth and the carrying value of the Group's gas and oil properties depend heavily on the prices the Group receives for gas, natural gas liquids and oil sales. Commodity prices also affect the Group's cash flows available for capital investments and other items, including the amount and value of the Group's gas and oil reserves. In addition, the Group may face gas and oil property impairments if prices fall significantly. In light of the continuing increase in supply coming from the Utica and Marcellus shale plays of the Appalachian Basin, no assurance can be given that commodity prices will remain at levels which enable the Group to do business profitably or at levels that make it economically viable to produce from certain wells and any material decline in such prices could result in a reduction of the Group's net production volumes and revenue and a decrease in the valuation of the Group's appraisal, development and production properties.

The Group may experience delays in production, marketing and transportation.

Various production, marketing and transportation conditions may cause delays in gas, natural gas liquids and oil production and adversely affect the Group's business. For example the Group's gas transportation systems connect to other pipelines or facilities which are owned and operated by third parties. These pipelines and other midstream facilities and others upon which the Group relies may become unavailable because of testing, turnarounds, line repair, reduced operating pressure, lack of operating capacity, regulatory requirements, curtailments of receipt or deliveries due to insufficient capacity or because of damage. In periods where natural gas liquid prices are high, the Group benefits greatly from its ability to process natural gas liquids. The Group's largest processor of natural gas liquids is a MarkWest plant located in Langley, Kentucky. If the Group were to lose the ability to process natural gas liquids at MarkWest's plant during a period of high pricing, the Group's revenues would be negatively impacted. As a short term measure, the Group could divert the natural gas through other pipeline routes; however, certain pipeline operators would eventually decline to transport the gas due to it containing liquid content at a level that exceeded tariff specifications for those pipelines. The lack of availability of capacity on third-party systems and facilities could reduce the price offered for the Group's production or result in the shut-in of producing wells. Any significant changes affecting these infrastructure systems and facilities, as well as any delays in constructing new infrastructure systems and facilities, could delay the Group's production, which could negatively impact the Group's business, results of operations, financial condition or prospects.

There are risks inherent in the Group's acquisitions of gas and oil assets.

Acquisitions are an essential part of the Group's strategy for protecting and growing cash flow, particularly in relation to the risk that some of the Group's wells may have a higher than anticipated production decline rate. The Group has undertaken a number of acquisitions of gas and oil assets (and of companies holding such assets), including, but not limited to, the Alliance Petroleum Acquisition, the CNX Assets Acquisition, the EQT Assets Acquisition, the HG Energy Assets Acquisition, and the EdgeMarc Energy Acquisition. The Group's ability to complete future acquisitions will depend on it being able to identify suitable acquisition candidates and negotiate favourable terms for their acquisition, in each case, before any attractive candidates are purchased by other parties such as private equity firms, some of whom have substantially greater financial and other resources than the Group. The Group may face competition for attractive acquisition targets that may also increase the price of the target business. As a result, there is no assurance that the Group will always be able to source and execute acquisitions in the future at attractive valuations. 

Furthermore, in pursuit of more acquisitions, the Group may make acquisitions outside the Appalachian Basin, a region in which the Group has developed its operational experience. Accordingly, an acquisition in a new area in which the Group lacks experience may present unanticipated risks and challenges that were not accounted for. Ordinarily, the Group's due diligence efforts are focused on higher valued and material properties or assets. Even an in depth review of all properties and records may not reveal all existing or potential problems, nor will such review always permit a buyer to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. Generally, physical inspections are not performed on every well or facility, and structural or environmental problems are not necessarily observable even when an inspection is undertaken.

There can be no assurance that the Group's prior acquisitions or any other potential acquisition by the Group will perform operationally as anticipated or be profitable. The Group could fail to appropriately value any acquired business and the value of any business, company or property that the Group acquires or invests in may actually be less than the amount paid for it or its estimated production capacity. The Group may be required to assume pre closing liabilities with respect to an acquisition, including known and unknown title, contractual, and environmental and decommissioning liabilities, and may acquire interests in properties on an "as is" basis without recourse to the seller of such interest or the seller may have limited resources to provide post-sale indemnities.

In addition, successful acquisitions of gas and oil assets require an assessment of a number of factors, including estimates of recoverable reserves, the time of recovering reserves, exploration potential, future gas, natural gas liquids and oil prices and operating costs. Such assessments are inexact, and the Group cannot guarantee that it makes these assessments with a high degree of accuracy. In connection with assessments, the Group performs a review of the acquired assets. However, such a review will not reveal all existing or potential problems. Furthermore, review may not permit the Group to become sufficiently familiar with the assets to fully assess their deficiencies and capabilities.

Integrating operations, technology, systems, management, back office personnel and pre or post completion costs for future acquisitions may prove more difficult or expensive than anticipated, thereby rendering the value of any company or assets acquired less than the amount paid. The Group may also take on unexpected liabilities or have to undertake unanticipated capital expenditures in connection with a new acquisition. The integration of acquired businesses or assets requires significant time and effort on the part of the Group's management. Following such integration efforts, prior acquisitions may still not achieve the level of financial or operational performance that was anticipated when they were acquired. In addition, the integration of new acquisitions can be difficult and disrupt the Group's own business because the Group's operational and business culture may differ from the cultures of the acquired businesses, unpopular cost cutting measures may be required, internal controls may be more difficult to maintain and control over cash flows and expenditures may be difficult to establish. If the Group encounters any of the foregoing issues in relation to one of its acquisitions this could have a material adverse effect on the Group's business, results of operations, financial condition or prospects.

Climate change legislation or protests against fossil fuel extraction may have a material adverse effect on the industry.

Continued public concern regarding climate change, the extent to which it is caused by human activity and potential mitigation through regulation could have a material impact on the Group's business. International agreements, national and regional legislation, and regulatory measures to limit greenhouse gas ("GHG") emissions are currently in place or in various stages of discussion or implementation. Given that certain of the Group's operations are associated with emissions of GHGs, these and other GHG emissions-related laws, policies and regulations may result in substantial capital, compliance, operating and maintenance costs. The level of expenditure required to comply with these laws and regulations is uncertain and is expected to vary depending on the laws enacted by particular countries.

The emission reduction targets and other provisions of legislative or regulatory initiatives and policies enacted in the future by the United States or states in which the Group operates, could adversely impact the Group's business by imposing increased costs in the form of higher taxes or rises in the prices of emission allowances, limiting the Group's ability to develop new gas and oil reserves, transport hydrocarbons through pipelines or other methods to market, decreasing the value of the Group's assets, or reducing the demand for hydrocarbons and refined petroleum products. In addition, the Group may be subject to activism from groups campaigning against fossil fuel extraction, which could affect the Group's reputation, disrupt its campaigns or programs, require the Group to incur significant, unplanned expense to respond or react to intentionally disruptive campaigns, result in limitations or restrictions on certain sources of funding (including investment from current or other potential investors as well as funding from commercial banks), create blockades to interfere with operations or otherwise negatively impact the Group's business, results of operations, financial condition or prospects.

The Group faces production risks and hazards that may affect its ability to produce gas, natural gas liquids and oil at expected levels, quality and costs and that may result in additional liabilities to the Group.

The Group's gas and oil production operations are subject to numerous risks common to its industry, including, but not limited to, premature decline of reservoirs, incorrect production estimates, invasion of water into producing formations, geological uncertainties such as unusual or unexpected rock formations and abnormal geological pressures, low permeability of reservoirs, contamination of gas and oil, blowouts, oil and other chemical spills, explosions, fires, equipment damage or failure, natural disasters, uncontrollable flows of oil, gas or well fluids, adverse weather conditions, shortages of skilled labour, delays in obtaining regulatory approvals or consents, pollution and other environmental risks.

If any of the above events occur, environmental damage, including biodiversity loss or habitat destruction, injury to persons or property and other species and organisms, loss of life, failure to produce gas, natural gas liquids and oil in commercial quantities or an inability to fully produce discovered reserves could result. These events could also cause substantial damage to the Group's property and its reputation and put at risk some or all its interests in licences, which enable the Group to produce, and could result in incurrence of fines or penalties, criminal sanctions potentially being enforced against the Group and its management, as well as other governmental and third party claims. Consequent production delays and declines from normal field operating conditions and other adverse actions taken by third parties may result in revenue and cash flow levels being adversely affected.

Moreover, should any of these risks materialize, the Group could incur legal defence costs, remedial costs and substantial losses, including those due to injury or loss of life, human health risks, severe damage to or destruction of property, natural resources and equipment, environmental damage, unplanned production outages, clean up responsibilities, regulatory investigations and penalties, increased public interest in the Group's operational performance and suspension of operations.

The Group is obligated to comply with operational, health and safety and environmental regulations and cannot guarantee that it will be able to comply with these regulations.

The Group operates in an industry that has certain hazardous risks and consequently is subject to comprehensive laws and regulations, especially with regard to the protection of health, safety and the environment. For example, the Group is subject to laws and regulations related to occupational safety and health, hydraulic fracturing activities, air emissions, water quality, the protection of endangered animal species and the safety of gas transmission and gathering pipelines. Although the Directors believe that the Group has adequate procedures in place to mitigate operational risks and keep these under review, there can be no assurances that these procedures will be adequate to address every potential health, safety and environmental hazard and a failure to adequately mitigate risks may result in loss of life, injury, or adverse impacts on health of employees, contractors and third-parties or the environment. Any failure by the Group or one of its sub-contractors, whether inadvertent or otherwise, to comply with applicable legal or regulatory requirements may give rise to civil, administrative and/or criminal liabilities, civil fines and penalties, delays or restrictions in acquiring or disposing of assets and/or delays in securing or maintaining the required permits, licences and approvals. A lack of regulatory compliance may even lead to denial or termination of licences the Group requires for operating its sites or could result in other operational restrictions or obligations. The Group's health, safety and environmental policy is to observe local, state, and national, legal and regulatory requirements and to apply generally accepted industry best practices where legislation does not exist.

The terms of licences, permits, regulatory orders, or permissions may include more stringent operational, environmental and/or health and safety requirements. The Group's operations have the potential to impact soil, air and water quality, biodiversity and ecosystems. Obtaining development or production licences and permits may become more difficult or may be delayed due to governmental, regional or local environmental consultation, scientific studies, approvals or other considerations or requirements. Furthermore, third-parties such as environmental organizations may judicially contest licences and permits already granted by relevant authorities and operations may be subject to other administrative or judicial challenges.

The Group incurs, and expects to continue to incur, capital and operating costs in an effort to comply with increasingly complex operational, health and safety and environmental laws and regulations. New laws and regulations, new national executive orders, the imposition of more stringent requirements in licences, increasingly strict enforcement of, or new interpretations of, existing laws, regulations and licences, or the discovery of previously unknown contamination or hazards may require further high cost expenditures to, for example:

· modify operations, including an increase in plugging and abandonment operations;

· install or upgrade pollution or emissions control equipment;

· perform site clean ups, including the remediation and reclamation of gas and oil sites;

· curtail or cease certain operations;

· provide financial securities, bonds, and/or take out insurance; or

· pay fees or fines or make other payments for pollution, discharges to the environment or other breaches of environmental or health and safety requirements or consent agreements with regulatory agencies.

The Group cannot predict with any certainty the full impact of any new laws, regulations, or legal initiatives on its operations or on the cost or availability of insurance to cover the risks associated with such operations. The costs of such measures and liabilities related to potential operational, health, safety or environmental damage caused by the Group may increase, which could materially and adversely affect the Group's business, results of operations, financial condition or prospects. In addition, it is not possible to predict what future operational, health, safety or environmental regulations will be enacted or how current or future operational, health, safety or environmental regulations will be applied or enforced. The Group may have to incur significant expenditure for the installation and operation of systems and equipment for monitoring and remedial measures in the event that operational, health, safety and environmental regulations become more stringent or governmental authorities elect to enforce them more vigorously, or costly operational, health, safety and environmental reform is implemented by competent regulators. Any such expenditure may have a material adverse effect on the Group's business, results of operations, financial condition or prospects. No assurance can be given that compliance with operational, health, safety and environmental laws or regulations in the regions where the Group operates will not result in a curtailment of production or a material increase in the cost of production or development activities.

The Group carries out business in a highly competitive industry.

The gas and oil industry is highly competitive. The key areas in respect of which the Group faces competition include:

· engagement of third party service providers whose capacity to provide key services may be limited;

· acquisition of other companies that may already own licences or existing producing assets;

· acquisition of assets offered for sale by other companies;

· access to capital (debt and equity) for financing and operational purposes;

· purchasing, leasing, hiring, chartering or other procuring of equipment that may be scarce; and

· employment of qualified and experienced skilled management and gas and oil professionals and field operations personnel.

Competition in the Group's markets is intense and depends, among other things, on the number of competitors in the market, their financial resources, their degree of geological, geophysical, engineering and management expertise and capabilities, their degree of vertical integration, and pricing policies, their ability to develop properties on time and on budget, their ability to select, acquire and develop reserves and their ability to foster and maintain relationships with the relevant authorities.

The Group's competitors also include those entities with greater technical, physical and financial resources. Finally, companies and certain private equity firms not previously investing in gas and oil may choose to acquire reserves to establish a firm supply or simply as an investment. Any such companies will also increase market competition which may directly affect the Group.

The effects of operating in a competitive industry may include:

· higher than anticipated prices for the acquisition of licences or assets;

· the hiring by competitors of key management or other personnel; and

· restrictions on the availability of equipment or services.

If the Group is unsuccessful in competing against other companies, its business, results of operations, financial condition or prospects could be materially adversely affected.

The levels of the Group's gas and oil reserves and resources, their quality and production volumes may be lower than estimated or expected.

Unless stated otherwise, the reserves and resources set forth in this Announcement represent estimates only and are based on data taken from the Competent Person's Report, available on the Company's website at www.dgoc.com . The resources data contained in this Announcement has been certified by the Competent Person unless stated otherwise. The standards utilised to prepare the reserves and resources information that has been extracted in the Competent Person's Report, are different from the standards of reporting adopted in other jurisdictions. Investors, therefore, should not assume that the data found in the reserves and resources information set forth in the Competent Person's Report is directly comparable to similar information that has been prepared in accordance with the reserve and resource reporting standards of other jurisdictions.

In general, estimates of economically recoverable gas, natural gas liquids and oil reserves and resources are based on a number of factors and assumptions made as of the date on which the reserves and resources estimates were determined, such as geological, geophysical and engineering estimates (which have inherent uncertainties), historical production from the properties or analogous reserves, the assumed effects of regulation by governmental agencies and estimates of future commodity prices, operating costs, gathering and transportation costs and production related taxes, all of which may vary considerably from actual results.

Underground accumulations of hydrocarbons cannot be measured in an exact manner and estimates thereof are a subjective process aimed at understanding the statistical probabilities of recovery. Estimates of the quantity of economically recoverable gas and oil reserves and resources, rates of production and the timing of development expenditures depend upon several variables and assumptions, including the following:

· production history compared with production from other comparable producing areas;

· quality and quantity of available data;

· interpretation of the available geological and geophysical data;

· effects of regulations adopted by governmental agencies;

· future percentages of sales;

· future gas, natural gas liquids and oil prices;

· capital investments;

· effectiveness of the applied technologies and equipment;

· effectiveness of the Group's field operations employees to extract the reserves;

· natural events or the negative impacts of natural disasters;

· future operating costs, tax on the extraction of commercial minerals, development costs and workover and remedial costs; and

· the judgment of the persons preparing the estimate.

As all reserve estimates are subjective, each of the following items may differ materially from those assumed in estimating reserves:

· the quantities and qualities that are ultimately recovered;

· the timing of the recovery of gas and oil reserves;

· the production and operating costs incurred;

· the amount and timing of development expenditures;

· future hydrocarbon sales prices; and

· decommissioning costs and changes to regulatory requirements for decommissioning.

Many of the factors in respect of which assumptions are made when estimating reserves and resources are beyond the Group's control and therefore these estimates may prove to be incorrect over time. Evaluations of reserves necessarily involve multiple uncertainties. The accuracy of any reserves or resources evaluation depends on the quality of available information and gas, natural gas liquids and oil engineering and geological interpretation. Furthermore, less historical data is available for unconventional wells because they have only become technologically viable in the past decade. In comparison, some conventional wells in the Group's portfolio have been productive for a much longer time. As a result, there is a risk that estimates of the Group's shale reserves are not as reliable as estimates of the conventional well reserves that have a longer historical profile to draw on. Interpretation, testing and production after the date of the estimates may require substantial upward or downward revisions in the Group's reserves and resources data. Moreover, different reserve engineers may make different estimates of reserves, resources and cash flows based on the same available data. Actual production, revenues and expenditures with respect to reserves and resources will vary from estimates and the variances may be material.

If the assumptions upon which the estimates of the Group's gas and oil reserves have been based prove to be incorrect or if the actual reserves or recoverable resources available to the Group (or the operator of an asset in which the Group has an interest) are otherwise less than the current estimates or of lesser quality than expected, the Group may be unable to recover and produce the estimated levels or quality of gas, natural gas liquids or oil set out in this Announcement and this may materially and adversely affect the Group's business, results of operations, financial condition or prospects.

The Group may not have good title to all its assets and licences.

Although the Directors believe that the Group takes due care and conducts due diligence on new acquisitions in a manner that is consistent with industry practice, there can be no assurance that the Group has good title to all its assets and the rights to develop and produce gas and oil from its assets. Such reviews are inherently incomplete and it is generally not feasible to review in depth every individual well or field involved in each acquisition. There can be no assurance that any due diligence carried out by the Group or by third parties on its behalf in connection with any assets that the Group acquires will reveal all of the risks associated with those assets, and the assets may be subject to title defects that were not apparent at the time of acquisition. The Group may acquire interests in properties on an "as is" basis without recourse to the seller of such interest or the seller may have limited resources to provide post-sale indemnities. In addition, changes in law or change in the interpretation of law or political events may arise to defeat or impair the claim of the Group to certain properties which it currently owns or may acquire which could result in a material adverse effect on the Group's business, results of operations, financial condition or prospects.

The Group may face unanticipated increased or incremental costs in connection with decommissioning obligations such as plugging.

In the future, the Group may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which it uses for the processing of gas and oil reserves. With regards to plugging, the Group is a party to agreements with regulators in the states of Ohio, West Virginia, Kentucky and Pennsylvania, its four largest wellbore states, setting forth plugging and abandonment schedules spanning a period ranging from 10 years to 15 years. These agreements may be subject to different interpretations, amendments or untimely termination, leading to an increase in the Group's plugging costs. Such decommissioning costs will be incurred by the Group at the end of the operating life of some of the Group's properties. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques, the shortage of plugging vendors, difficult terrain or weather conditions or experience at other production sites. The expected timing and amount of expenditure can also change, for example, in response to changes in reserves, wells losing commercial viability sooner than forecasted or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the provisions established which would affect future financial results. The use of other funds to satisfy such decommissioning costs may impair the Group's ability to focus capital investment in other areas of its business, which could materially and adversely affect the Group's business, results of operations, financial condition or prospects.

The recent COVID-19 outbreak could have an adverse effect on the Group's business.

Concerns are rapidly growing about the global outbreak of COVID-19. The virus has spread rapidly across the globe, including in the continents of Europe and North America. The pandemic is having an unprecedented impact on the global economy as the respective levels of government react to this public health crisis, which has created significant uncertainties. As the pandemic continues to grow, consumer fears about becoming ill with the virus and recommendations and/or mandates from authorities to avoid large gatherings of people or self-quarantine may continue to increase, which has already affected, and may continue to affect aggregate energy consumption and economic activity generally. The extent of the impact of the pandemic on the Group's business, results of operations, financial condition or prospects will depend largely on future developments, including the duration of the spread of the outbreak, the impact on capital and financial markets and the related impact on consumer behavior, all of which are highly uncertain and cannot be predicted. This situation is changing rapidly, and additional impacts may arise that the Group is not aware of currently.

The Group relies on third party infrastructure such as TC Energy (formerly TransCanada), Enbridge, CNX, Dominion Energy Transmission and MarkWest that it does not control and/or, in each case, is subject to tariff charges that it does not control.

The majority of the Group's production passes through third party owned and controlled infrastructure. If these third party pipelines or liquids processing facilities experience any event that causes an interruption in operations or a shut down such as mechanical problems, an explosion, adverse weather conditions, a terrorist attack or labour dispute, the Group's ability to produce or transport natural gas could be severely affected. For example, the Group has an agreement with MarkWest Energy Partners, L.P., ("MarkWest") where approximately 90 per cent. of the natural gas liquids sold by the Group are processed at MarkWest's facility in Kentucky. Any material decrease in the Group's ability to process or transport its natural gas through third party infrastructure such as MarkWest's could have a material adverse effect on the Group's business, results of operations, financial condition or prospects.

The Group's use of third party infrastructure may be subject to tariff charges. Although the Directors seek to manage Group's flow via its midstream infrastructure, it may not always be able to avoid higher tariffs or basis blowouts due to the lack of interconnections. In such instances, the tariff charges can be substantial and the cost is not subject to the Group's direct control, although the Group may have certain contractual or governmental protections and rights. Generally, the operator of the gathering or transmission pipelines sets these tariffs and expenses on a cost sharing basis according to the Group's proportionate hydrocarbon through put of that facility. A provisional tariff rate is applied during the relevant year and then finalized the following year based on the actual final costs and final through put volumes. Such tariffs are dependent on continued production from assets owned by third parties and, may be priced at such a level as to lead to production from the Group's assets ceasing to be economic and thus have a material adverse effect on its business, results of operations, financial condition or prospects.

Furthermore, the Group's use of third party infrastructure exposes the Group to the possibility that such infrastructure will cease to be operational or be decommissioned and therefore require the Group to source alternative export routes and/or prevent economic production from the Group's assets. This could also have a material adverse effect on the Group's business, results of operations, financial condition or prospects.

Failure by the Group, its contractors or its primary offtakers to obtain access to necessary equipment and transportation systems could materially and adversely affect the Group's business, results of operations, financial condition or prospects.

The Group relies on its gas and oil field suppliers and contractors to provide materials and services that facilitate its production activities, including plugging and abandonment contractors. Any competitive pressures on the oil field suppliers and contractors could result in a material increase of costs for the materials and services required to conduct the Group's business. For example, the Group is dependent on the availability of plugging vendors to help it satisfy abandonment schedules that it has agreed to with the states of Ohio, West Virginia, Kentucky and Pennsylvania.  Such personnel and services can be scarce and may not be readily available at the times and places required. Future increases could have a material adverse effect on the Group's asset retirement liability, operating income, cash flows and borrowing capacity and may require a reduction in the carrying value of the Group's properties, its planned level of spending for development and the level of the Group's reserves. Prices for the materials and services the Group depends on to conduct its business may not be sustained at levels that enable the Group to operate profitably.

The Group and its offtakers rely, and any future offtakers will rely, upon the availability of pipeline and storage capacity systems, including such infrastructure systems that are owned and operated by third parties. As a result, the Group may be unable to access the infrastructure and systems which it currently uses or plans to use, or source alternatives or otherwise be subject to interruptions or delays in the availability of infrastructure and systems necessary for the delivery of its gas, natural gas liquids and oil to commercial markets. In addition, such infrastructure may be close to its design life and decisions may be taken to decommission such infrastructure or perform life extension work to maintain continued operations. Any of these events could result in disruptions to the Group's projects thereby impacting its ability to deliver gas, natural gas liquids and oil to commercial markets and/or may increasing the Group's costs associated with the production of gas, natural gas liquids and oil reliant upon such infrastructure/systems. Further, the Group's offtakers could become subject to increased tariffs imposed by government regulators or the third party operators or owners of the transportation systems available for the transport of the Group's gas, natural gas liquids and oil, which could result in decreased offtaker demand and downward pricing pressure.

If the Group is unable to access infrastructure systems facilitating the delivery of its gas, natural gas liquids and oil to commercial markets due to its contractors or primary offtakes being unable to access the necessary equipment or transportation systems,  the Group's operations will be adversely affected. If the Group is unable to source the most efficient and expedient infrastructure systems for its assets then delivery of its gas, natural gas liquids and oil to the commercial markets may be negatively impacted, as may its costs associated with the production of gas, natural gas liquids and oil reliant upon such infrastructure/systems.

A proportion of the Group's equipment has substantial prior use and significant expenditure may be required to maintain operability and operations integrity.

A part of the Group's business strategy is to optimise or refurbish producing assets where possible to maximise the efficiency of its operations while avoiding significant expenses associated with purchasing new equipment. The Group's producing assets and midstream infrastructure require ongoing maintenance to ensure continued operational integrity. For example, some older wells may struggle to produce suitable line pressure and will require the addition of compression to push the gas. Despite the Group's planned operating and capital expenditures, there can be no guarantee that the Group's assets or the assets used by the Group will continue to operate without fault and not suffer material damage in this period through, for example, wear and tear, severe weather conditions, natural disasters or industrial accidents. If the Group's assets or the assets used by the Group do not operate at or above expected efficiencies, the Group may be required to invest substantial expenditure beyond the amounts budgeted. Any material damage to these assets or significant capital expenditure on these assets for improvement or maintenance may have a material adverse effect on the Group's business, results of operations, financial condition or prospects.  In addition, as with planned operating and capital expenditure, there is no guarantee that the amounts expended will ensure continued operation without fault or address the effects of wear and tear, severe weather conditions, natural disasters or industrial accidents. The Group cannot guarantee that such optimization or refurbishment will be commercially feasible to undertake in the future and it cannot provide assurance that it will not face unexpected costs during the optimization or refurbishment process.

The Group's operations are dependent on its compliance with obligations under licences, contracts and field development plans.

The Group's operations must be carried out in accordance with the terms of licences, operating agreements, annual work programs and budgets together with any conditions incumbent on the Group at the time the relevant asset was acquired such as ongoing royalty and other rental payments. Relevant legislation provides that fines may be imposed and a licence may be suspended or terminated if a licence holder, or party to a related agreement, fails to comply with its obligations under such licence or agreement, or fails to make timely payments of levies and taxes for the licensed activity, provide the required geological information or meet other reporting requirements. It may from time to time be difficult to ascertain whether the Group has complied with obligations under licences as the extent of such obligations may be unclear or ambiguous and regulatory authorities in jurisdictions in which the Group does business, or in which it may do business in the future, may not be forthcoming with confirmatory statements that work obligations have been fulfilled, which can lead to further operational uncertainty.

In addition, the Group and its commercial partners, as applicable, have obligations to operate assets in accordance with specific requirements under certain licences and related agreements, field development agreements, laws and regulations. If the Group or its partners were to fail to satisfy such obligations with respect to a specific field, the licence or related agreements for that field may be suspended, revoked or terminated. Although the Group is now acquiring shale assets, the Group's primary source of natural gas and crude oil remains conventional wells. In some instances, these conventional wells are located on the same property as unconventional wells that produce shale oil. In these cases, the rights to access the shale layers of the property will typically be conditioned on the ongoing productivity of conventional wells on the property. Furthermore, the shale rights may be owned by a third party, and the Group will typically have a joint operating agreement with the third party. This joint agreement will typically stipulate that in consideration for the Group being permitted to operate the conventional wells, the Group is required to maintain production so that the third party retains the shale licenses. If the Group fails to maintain production in the conventional wells, under the joint agreement, the Group will be liable to the third party for a percentage of the reserve value of the shale oil. Among others, the Group has such joint agreements with CNX and EQT. The relevant authorities are typically authorized to, and do from time to time, inspect to verify compliance by the Group or its commercial partners, as applicable, with relevant laws and the licences or the agreements pursuant to which the Group conducts its business. There can be no assurance that the views of the relevant government agencies regarding the development of the fields that the Group operates or the compliance with the terms of the licences pursuant to which the Group conducts such operations will coincide with the Groups views, which might lead to disagreements that may not be resolved.

The suspension, revocation, withdrawal or termination of any of the licences or related agreements pursuant to which the Group may conduct business, as well as any delays in the continuous development of or production at the Group's fields caused by the issues detailed above could materially and adversely affect the business, results of operations, financial condition or prospects. In addition, failure to comply with the obligations under the licences or agreements pursuant to which the Group conducts business, whether inadvertent or otherwise, may lead to fines, penalties, restrictions, withdrawal of licences and termination of related agreements.

The Group may not be able to keep pace with technological developments in its industry or be able to implement them effectively.

The gas and oil industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies, such as emissions controls and processing technologies. As others use or develop new technologies, the Group may be placed at a competitive disadvantage or may be forced by competitive pressures to implement those new technologies at substantial costs. In addition, other gas and oil companies may have greater financial, technical and personnel resources that allow them to enjoy technological advantages, which may in the future allow them to implement new technologies before the Group can. The Group may not be able to respond to these competitive pressures or implement new technologies on a timely basis or at an acceptable cost or even at all given the personnel resources that are available to it. In addition to implementing new accounting and royalty management software, the Group is also implementing technology that aims to improve field data capture for its approximately 60,000 wells so as to grant efficient access to information for decision-making. These efforts to upgrade the Group's enterprise technology represent a significant undertaking and may have unforeseen adverse consequences. If one or more of the technologies used now or in the future were to become obsolete, the Group's business, results of operations, financial condition or prospects could be materially adversely affected if competitors gain a material competitive advantage.

The Group depends on its board of directors, key members of management, independent experts, technical and operational service providers and on the Group's ability to retain and hire such persons to effectively manage its growing business.

The Group's future operating results depend in significant part upon the continued contribution of its board of directors, key senior management and technical, financial and operations personnel. Management of the Group's growth will require, among other things, stringent control of financial systems and operations, the continued development of its management control, the ability to attract and retain sufficient numbers of qualified management and other personnel, the continued training of such personnel and the presence of adequate supervision.

In addition, the personal connections and relationships of the Group's board of directors and key management are important to the conduct of its business. If the Group were to unexpectedly lose a member of its key management or fail to maintain one of the strategic relationships of its key management team, the Group's business, results of operations, financial condition or prospects could be materially adversely affected. In particular, the Group is highly dependent on its Chief Executive Officer, Rusty Hutson, Jr. Acquisitions are key part of the Group's strategy and Mr. Hutson has been instrumental in sourcing them and securing their financing. Furthermore, as the Group's founder, Mr. Hutson is strongly associated with the Group's success and if he were to cease being the Chief Executive Officer, perception of the Group's future prospects may be diminished. 

Attracting and retaining additional skilled personnel will be fundamental to the continued growth and operation of the Group's business. The Group requires skilled personnel in the areas of development, operations, engineering, business development, gas, natural gas liquids and oil marketing, finance and accounting relating to the Group's projects. Personnel costs, including salaries, are increasing as industry wide demand for suitably qualified personnel increases. The Group may not successfully attract new personnel and retain existing personnel required to continue to expand its business and to successfully execute and implement its business strategy.

Completion of the potential acquisition of assets from third parties, including from Carbon and the US-Listed Vendor, is uncertain and subject to a significant number of conditions which may not be satisfied or waived and may result in the acquisition being delayed or not being completed at all

In pursuance of its acquisition strategy, the Company continues to explore potential acquisition targets from third parties. Diversified Gas & Oil Corporation, a subsidiary of the Company, executed a conditional purchase and sale agreement dated 7 April 2020 (the "CarbonPSA") with Carbon Energy Corporation ("Carbon") in connection with the possible acquisition of certain upstream and midstream assets of Carbon in the Appalachian Basin, including approximately 6,100 net conventional wells located in Appalachia (Tennessee, Kentucky, West Virginia), as well as various non-operated wells, midstream pipeline systems and facilities (including intrastate gathering pipeline of approximately 4,700 miles in West Virginia and two active natural gas storage fields) (the "Carbon Assets") from Carbon. The acquisition of the Carbon Assets is at a preliminary stage and is subject to a significant number of conditions. The satisfaction of certain of these conditions are within the sole control of the Group such as completion of due diligence (including all title, environmental, contractual, credit, litigation, and regulatory diligence) to the Company's satisfaction and the Company's right to not complete the acquisition if there is a material change in the conditions, assets, or operational matters of the Carbon Assets prior to completion of the acquisition. In addition, the acquisition is also conditional upon satisfaction of various other conditions, including receipt of all necessary shareholder consents, approvals, authorisations and permits (including any authorisations required from the Federal Energy Regulatory Commission and various State Public Service Commissions).

In addition, the Company executed a conditional purchase and sale agreement dated 11 May 2020 (the "US-Listed Vendor PSA") in connection with the possible acquisition of certain assets in the Appalachian Basin, including approximately 900 net operated wells, including 67 horizontal producing wells in Pennsylvania, with the majority of the balance being conventional vertical producing net wells in West Virginia, and associated midstream infrastructure as well as a further 13 drilled and completed wells that are not yet connected to the gathering infrastructure   (the "US-Listed Vendor Assets") from the US-Listed Vendor. The acquisition of the US-Listed Vendor Assets is at a preliminary stage and is subject to a significant number of conditions. The satisfaction of certain of these conditions are within the sole control of the Group such as completion of due diligence (including all title, environmental, contractual, credit, litigation, and regulatory diligence) to the Company's satisfaction and the Company's right to not complete the acquisition if there is a material change in the conditions, assets, or operational matters of the US-Listed Vendor Assets prior to completion of the acquisition. In addition, the acquisition is also conditional upon satisfaction of various other conditions, including receipt of all necessary shareholder consents, approvals, authorisations and permits.

Under the terms of the Carbon PSA and the US-Listed Vendor PSA, although the Company has a right to exclusivity pursuant to which Carbon and the US-Listed Vendor respectively have agreed to not enter into any negotiations or discussions with any third party in connection with the disposal of the Carbon Assets for a period ending on 30 June 2020 and the US-Listed Vendor Assets for a period ending on 28 May 2020, the Company cannot predict definitively how long it will take to fully complete its due diligence and satisfy all the conditions under each of the Carbon PSA and the US-Listed Vendor PSA. In addition, satisfying the conditions could also cost more than the Company currently expects and there may be further additional and unforeseen expenses incurred in connection with the acquisitions, which may make the acquisitions financially unviable or unattractive.

There can be no guarantee that the conditions will be satisfied (or waived, if applicable) in the necessary time frame and whether the Company will acquire the Carbon Assets, the US-Listed Vendor Assets or any other potential third party assets on satisfactory terms, or at all. Any delay in completing the acquisition of the Carbon Assets, the US-Listed Vendor Assets or any other assets from third parties may adversely affect the synergies and other benefits that the Group expects to achieve if the acquisition and integration of these assets into the Group is completed within the expected timeframe. In addition, the Group's management would have spent significant time in connection with these acquisitions, which could otherwise have been spent in connection with the other activities of the Group. 

The Group does not insure against certain risks and its insurance coverage may not be adequate for covering losses arising from potential operational hazards and unforeseen interruptions.

The Group insures its operations in accordance with industry practice and plans to continue to insure the risks it considers appropriate for the Group's needs and circumstances. However, the Group may elect not to have insurance for certain risks, due to the high premium costs associated with insuring those risks or for various other reasons, including an assessment in some cases that the risks are remote.

No assurance can be given that the Group will be able to obtain insurance coverage at reasonable rates (or at all), or that any coverage it or the relevant operator obtains, and any proceeds of insurance, will be adequate and available to cover any claims arising. The Group may become subject to liability for pollution, blow-outs or other hazards against which it has not insured or cannot insure, including those in respect of past activities for which it was not responsible. Any indemnities the Group may receive from such parties may be difficult to enforce if such sub-contractors, operators or joint venture partners lack adequate resources.

Operational insurance policies are usually placed in one year contracts and the insurance market can withdraw cover for certain risks due to events occurring in other parts of the industry, thus greatly increasing the costs of risk transfer. For example, in September 2018, a gas pipeline operated by another midstream company exploded in Beaver Country, Pennsylvania, a state in which the Group has operations. The explosion resulted in the destruction of residential property and motor vehicles as well as the evacuation of nearby households. Catastrophic events such as these may cause the insurance costs for the Group's midstream operations to rise, despite the Group not being involved in the catastrophic event. In the event that insurance coverage is not available or the Group's insurance is insufficient to fully cover any losses, including losses incurred due to lost revenues resulting from third party operations or processing plants, claims and/or liabilities incurred, or indemnities are difficult to enforce, the Group's business and operations, financial results or financial position may be disrupted and adversely affected.

The payment by the Group's insurers of any insurance claims may result in increases in the premiums payable by the Group for its insurance cover and adversely affect the Group's financial performance. In the future, some or all of the Group's insurance coverage may become unavailable or prohibitively expensive.

The Group's operations are subject to the risk of litigation.

From time to time, the Group may be subject, directly or indirectly, to litigation arising out of its operations and the regulatory environments in its areas of operations. Historically, categories of litigation that the Group has faced included actions by royalty owners over payment disputes, personal injury claims and property related claims, including claims over property damage, trespass or nuisance. Although the Group currently faces no material litigation, damages claimed under such litigation in the future may be material or may be indeterminate, and the outcome of such litigation may materially impact the Group's business, results of operations, financial condition or prospects. While the Group assesses the merits of each lawsuit and defends itself accordingly, it may be required to incur significant expenses or devote significant resources to defending itself against such litigation. In addition, the adverse publicity surrounding such claims may have a material adverse effect on the Group's business.

The Group's internal systems and website may be subject to intentional and unintentional disruption, and its confidential information may be misappropriated, stolen or misused, which could adversely impact the Group's reputation and future sales.

The Group may face attempted cyber attacks. Such cyber attacks are designed to penetrate the Group's network security or the security of its internal systems, misappropriate proprietary information and/or cause interruptions to its services and expect to continue to face similar threats in the future. While the Group has successfully prevented attacks faced to date from being successful, it cannot guarantee that it will be able to do so in the future. Such future attacks could include hackers obtaining access to the Group's systems, the introduction of malicious computer code or denial of service attacks. If an actual or perceived breach of the Group's network security occurs, it could adversely affect its business or reputation, and may expose the Group to the loss of information, litigation and possible liability. An actual security breach could also impair the Group's ability to operate its business and provide products and services to its customers. Additionally, malicious attacks, including cyber attacks, may damage the Group's assets, prevent production at its producing assets and otherwise significantly affect corporate activities. For example, the Group utilises electronic monitoring of meters and flow rate devices to monitor pressure build-up in its production wells. If there were a cyber-attack that penetrated the Group's monitoring systems such that they provided false readings, this could result in an unknown pressure build-up, creating a dangerous situation which could end up in an explosion. Such an outcome would have a material adverse impact on the Group's business, results of operations, financial condition or prospects.

In addition, confidential or financial payment information that the Group maintains may be subject to misappropriation, theft and deliberate or unintentional misuse by current or former employees, third party contractors or other parties who have had access to such information. Any such misappropriation and/or misuse of the Group's information could result in the Group, among other things, being in breach of certain data protection requirements and related legislation as well as incurring liability to third parties. The Group expects that it will need to continue closely monitoring the accessibility and use of confidential information in its business, educate its employees and third party contractors about the risks and consequences of any misuse of confidential information and, to the extent necessary, pursue legal or other remedies to enforce the Group's policies and deter future misuse. If the Group's confidential information is misappropriated, stolen or misused as a result of a disruption to its website or internal systems this could have a material adverse effect on its business, results of operations, financial condition or prospects.

The Group is subject to certain tax risks

There can be no certainty that the current taxation regime in the UK or overseas jurisdictions within which the Group currently operates or may operate in the future will remain in force or that the current levels of corporation taxation will remain unchanged. For example, in the US certain localities maintain a severance or impact tax on the removal of oil and natural gas from the ground. Such tax rates may be increased or new severance or impact taxes implemented. In addition to marginal well tax credits available under US federal tax law, the Group has also been able to offset its tax burden against net operating losses generated by its historic drilling activity and the acquisition of certain fixed assets such as EQT's midstream assets. There can be no assurance that there will be no amendment to the existing taxation laws applicable to the Group, which may have a material adverse effect on the Group's financial position. Any change in the Group's tax status or in taxation legislation in the UK or the US could affect the Group's ability to provide returns to Shareholders. Statements in this Announcement concerning the taxation of investors in shares are based on current law and practice, which is subject to change. The taxation of an investment in the Group depends on the individual circumstances of investors.

The nature and amount of tax which members of the Group expect to pay and the reliefs expected to be available to any member of the Group are each dependent upon several assumptions, any one of which may change and which would, if so changed, affect the nature and amount of tax payable and reliefs available. In particular, the nature and amount of tax payable is dependent on the availability of relief under tax treaties and is subject to changes to the tax laws or practice in any of the jurisdictions affecting the Group. Any limitation in the availability of relief under these treaties, any change in the terms of any such treaty or any changes in tax law, interpretation or practice could increase the amount of tax payable by the Group.

The Group is subject to income taxes in the US and UK, and its domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. The Group's effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses arising from stock option compensation, the valuation of deferred tax assets and liabilities and changes in federal, state or international tax laws and accounting principles. Increases in the Group's effective tax rate could materially affect the Group's net financial results. Although the Directors believe that the Group's income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material adverse effect on the Group's business, results of operations, financial condition or prospects.

Finally, due to the Group's parent company being a UK based entity with operations and assets in the US, any changes in US federal tax law or tax rulings unfavourable to the Group structure related to non US owned parent companies could negatively impact the Group's effective tax rate and cash flows, which could cause the Group's business, results of operations, financial condition or prospects to be materially adversely affected. Investors who are in any doubt as to their tax position or who are subject to tax in jurisdictions other than the UK are strongly advised to consult their professional advisers.

 Risks relating to the Ordinary Shares

The Group's share price may be volatile and purchasers of the Ordinary Shares could incur substantial losses.

The public market for the Ordinary Shares has been characterized by significant price and volume fluctuations. There can be no assurance that the market price of the Ordinary Shares will not decline below its current or historic price ranges. The market price may bear no relationship to the prospects, stage of development, existence of gas and oil reserves, revenues, earnings, assets or potential of the Group and may not be indicative of its future business performance. The trading price of the Ordinary Shares could be subject to wide fluctuations. Fluctuations in the price of gas, natural gas liquids and oil and related international political events can be expected to affect the price of the Ordinary Shares. In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price for many companies, sometimes unrelated to the operating performance of these companies. These market fluctuations, as well as general economic, political and market conditions, may have a material adverse effect on the market price of the Ordinary Shares.

Some of the factors that could negatively affect the Group's share price or result in fluctuations in the price or trading volume of the Ordinary Shares include:

· the price of gas, natural gas liquids and oil;

· conditions generally affecting the oil and gas industry;

· actual or anticipated quarterly variations in the Group's operating results;

· changes in expectations as to the Group's future financial performance or changes in financial estimates or past financial or accounting practices or reports, if any;

· announcements relating to the Group's business or the business of its competitors;

· operational incidents;

· the global macroeconomic environment;

· "Brexit";

· fund redemptions;

· irrational investor behaviour;

· the operating and stock performance of other comparable companies.

Many of these factors are beyond the Group's control and it is not possible to predict their potential effects on the price of the Ordinary Shares. Finally, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on the Ordinary Shares.

The concentration of the Group's share capital ownership among its largest shareholders could conflict with the interests of other shareholders.

The Group's Significant Shareholders collectively own approximately 73 per cent. of its issued and outstanding Ordinary Shares as of the Last Practicable Date. Consequently, these Shareholders have significant influence over all matters that require approval by the Shareholders, including the re-election of directors and approval of significant corporate transactions. This concentration of ownership will limit the Shareholders' ability to influence corporate matters, and as a result actions may be taken that Shareholders may not view as beneficial.

Shareholders may be subject to US withholding or income tax depending on their country of residence and their ownership percentages.

Pursuant to Section 7874 of the US Internal Revenue Code (the "Code"), the Company believes it is and will continue be treated as a US corporation for all purposes under the Code. Accordingly, and because the rules governing "passive foreign investment companies" apply only to non-US corporations for US federal income tax purposes, the Company is not a "passive foreign investment company".

As a US corporation, dividends paid by the Company to non-US Shareholders are generally subject to US withholding taxes applied on the gross amount of such dividends. The statutory rate of withholding under the Code is 30 per cent. to non-US Shareholders, which may be reduced by an applicable treaty (however, as described in detail in the "Material US Federal Income Tax Considerations", in certain situations will not be less than 15 per cent). Furthermore, Sections 1471 through 1474 of the Code (commonly referred to as "FATCA") generally impose a withholding tax of no more than 30 per cent. on the gross amount of dividends paid to non-US financial institutions and certain other non-US entities on Ordinary Shares in a United States corporation, unless certain conditions are met.

Due to the nature of its assets and operations, the Company believes it is a US Real Property Holding Corporation ("USRPHC") under the Code and Ordinary Shares constitute a US real property interest ("USRPI").  Non-US Shareholders in their capacity as sellers or transferors are subject to US federal income tax in respect of a gain on their Ordinary Shares and are required to file a US tax return. Furthermore, the amount realised from any disposition is subject to a withholding tax of 15 per cent. required to be collected from disposition proceeds, unless the Ordinary Shares qualify as "regularly traded on an established securities market". Non-US Shareholders may, by filing a US tax return, be able to claim a refund for any withholding tax deducted in excess of the tax liability on gain. Furthermore, non-US Shareholders will be required to pay, by filing a US tax return, any tax liability on gain that is not satisfied by withholding. A non-US Shareholder that has owned 5 per cent. or less of the Ordinary Shares during the relevant period under these rules, taking into account applicable constructive ownership rules, may treat its ownership of the Ordinary Shares as not constituting a USRPI and thereby avoid net income tax payment and tax return filing obligations if the Ordinary Shares are treated as "regularly traded on an established securities market."  The Company makes no representations as to whether the Ordinary Shares have been and will be treated as "regularly traded on an established securities market."

For further details, see "Material US Federal Income Tax Considerations."

There is no guarantee that the Company will continue to pay dividends in the future.

The dividend policy of the Company is dependent upon its financial condition, cash requirements, future prospects, compliance with the financial covenants in the Amended KeyBank Facility Agreement, profits available for distribution and other factors deemed to be relevant at the time and on the continued health of the markets in which it operates. Although the Board's target is to return not less than 40 per cent. of free cash flow to Shareholders by way of a dividend and the Board's dividend policy reflects the Company's current and future expectation of future cash flow generation potential, there can be no guarantee that the Company will continue to pay dividends in the future.

The issuance of additional Ordinary Shares in the Company in connection with future acquisitions or other growth opportunities, any share incentive or share option plan or otherwise may dilute all other shareholdings.

The Group may seek to raise financing to fund future acquisitions and other growth opportunities. The Company may, for these and other purposes, issue additional equity or convertible equity securities. As a result, existing holders of Ordinary Shares may suffer dilution in their percentage ownership or the market price of the Ordinary Shares may be adversely affected.

The Company has issued options under its equity incentive plans to employees and Executive Directors for a total of 23,220,000 new Ordinary Shares of the Company which are currently outstanding, and has also entered into restricted stock unit agreements with certain employees, of which 1,816,209 restricted stock units are currently outstanding. In addition, on 30 January 2017 and 15 June 2017, the Company issued Warrants to certain of its existing professional advisers over 3,543,769 Ordinary Shares, which are currently outstanding. The Company may, in the future, issue further options and/or warrants to subscribe for new Ordinary Shares to certain advisers, employees, Directors, senior management and/or consultants of the Group. The exercise of any such options and warrants would result in a dilution of the shareholdings of other investors. Additionally, although the Company has no current plans for an offering of Ordinary Shares, it is possible, that the Company may decide to offer additional Ordinary Shares in the future. Subject to any applicable pre-emption rights, any future issues of Ordinary Shares by the Company may have a dilutive effect on the holdings of Shareholders and could have a material adverse effect on the market price of Ordinary Shares as a whole.

Overseas shareholders may be subject to exchange rate risk.

The Ordinary Shares are denominated in pounds sterling while dividends to be paid in respect of the Ordinary Shares are declared in US dollars and payable in US dollars or pounds sterling. An investment in Ordinary Shares by an investor whose principal currency is not pounds sterling exposes the investor to foreign currency exchange rate risk. Any depreciation of pounds sterling in relation to such foreign currency will reduce the value of the investment in the Ordinary Shares or any dividends in foreign currency terms.

There is no guarantee that an active trading market for the Ordinary Shares will develop or that the Main Market will provide an increased liquidity in the Ordinary Shares

As previously announced on 17 April 2020, the Company intends to seek admission of its Ordinary Shares to be listed on the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. The liquidity of the Ordinary Shares on the Main Market will be influenced by a large number of factors, some specific to the Group and its operations and others outside its control and unrelated to the Group's operating performance, such as the operating and share price performance of other companies that investors may consider comparable to the Company, speculation about the Company in the press or the investment community, strategic actions by competitors, changes in market conditions and regulatory changes in any number of countries. There can be no guarantee that, following Admission, an active trading market for the Ordinary Shares will develop or, if developed, that it will be maintained or that Admission will result in an increase in the liquidity of the Ordinary Shares. If an active trading market is not maintained, the trading price of the Ordinary Shares could be adversely affected. The market price for the Ordinary Shares may fall, perhaps substantially. As a result of fluctuations in the market price of the Ordinary Shares, investors may not be able to sell their Ordinary Shares.

Shareholders in the United States and other jurisdictions may not be able to participate in future equity offerings.

The Articles provide for pre-emption rights to be granted to shareholders in the Company in certain circumstances, unless such rights are dis-applied by a shareholder resolution. However, securities laws of certain jurisdictions may restrict the Group's ability to allow participation by shareholders in future offerings. In particular, shareholders in the United States may not be entitled to exercise these rights, unless either the Ordinary Shares and any other securities that are offered and sold are registered under the US Securities Act, or the Ordinary Shares and such other securities are offered pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The Company cannot assure prospective investors that any exemption from such overseas securities law requirements would be available to enable US or other Shareholders to exercise their pre-emption rights or, if available, that the Company will utilise any such exemption.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Non-IFRS financial measures

The Group presents certain key operating metrics that are not defined under IFRS (alternative performance measures) in this Announcement. These non-IFRS measures are used by the Group to monitor the underlying performance of the Group's performance from period to period and to facilitate comparison with its peers. Since not all companies calculate these or other non-IFRS metrics in the same way, the manner in which the Group has chosen to calculate the non-IFRS metrics presented herein may not be compatible with similarly defined terms used by other companies. Therefore, the non-IFRS metrics should not be considered in isolation of, or viewed as substitutes for, the financial information prepared in accordance with IFRS. Certain of the key operating metrics set forth below are based on information derived from the Group's regularly maintained records and accounting and operating systems.

EBITDA (hedged) and EBITDA (unhedged)

EBITDA is defined by the Group as earnings before interest, tax, depreciation and amortisation.

Adjusted EBITDA (hedged) and Adjusted EBITDA (unhedged) are defined by the Company as earnings before interest, taxes, depletion, depreciation and amortisation and adjustments for non-recurring items such as gain on the sale of assets, acquisition related expenses and integration costs, mark-to-market adjustments related to the Group's hedge portfolio, non-cash equity compensation charges and items of a similar nature. The Directors believe that Adjusted EBITDA (hedged) and Adjusted EBITDA (unhedged) are useful measures as they enable a more effective way to evaluate operating performance and compare the results of operations from period-to-period and against its peers without regard to the Group's financing methods or capital structure. The Group excludes the items listed in the table below from operating profit in arriving at Adjusted EBITDA (hedged) and Adjusted EBITDA (unhedged) because these amounts can vary substantially from company to company within the industry, depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.

The table below shows the calculation of Adjusted EBITDA (hedged) and Adjusted EBITDA (unhedged) for each of the periods presented:

	Fiscal Year ended 31 December
(Amounts in thousands $)	2019	2018	2017
Operating profit.................................	180,507	294,997	41,161
Amortisation, depreciation and depletion.......................................................	98,139	41,988	7,536
Gain on bargain purchase...................	(1,540)	(173,473)	(37,093)
Gain on oil and gas programme and equipment.................	-	(4,079)	(95)
(Gain) loss on derivative financial instruments.....................................	(20,270)	(33,636)	1,965
Non-recurring costs associated with acquisitions........................................	9,210	19,637	3,349
Other non-recurring costs	7,542	-	-
Provision for working interest owners receivable	730	-	632
Non-cash equity issuance included in administrative expense...................... Gain on foreign currency hedge..........	3,065 (4,117)	783 -	59 -
Adjusted EBITDA (hedged).................	273,266	146,217	17,514
Cash portion of settled hedges	(53,584)	15,655	(1,524)
Adjusted EBITDA (unhedged).............	219,682	161,872	15,990

Operating Margin

Operating Margin is defined as total realised price less total cash costs and Percentage Operating Margin is defined as the Operating Margin as a percentage of total realised price.

The table below shows the calculation of Operating Margin and Percentage Operating Margin for each of the periods presented.

	Fiscal Year ended 31 December
(Amounts in $ per boe)	2019	2018	2017
Realised price (including impact of cash-settled derivatives)	15.76	17.69	17.12
Other revenue...................................	0.77	0.64	0.93
Base lease operating expense............	(3.31)	(4.73)	(7.02)
Gathering and compression, owned...	(1.42)	(1.00)	-
Recurring administrative expenses.....	(1.17)	(1.34)	(2.03)
Production taxes................................	(0.53)	(0.80)	(0.56)
Gathering and transportation, 3rd party.......................................................	(1.28)	(0.68)	(1.14)
Operating margin ...............................	8.82	9.78	7.30
Percentage Operating margin............	53.4%	53.4%	40.4%

Free Cash Flow (adjusted)

Free Cash Flow (adjusted) is defined by the Group as Adjusted EBITDA (hedged) further adjusted for capital expenditures, plugging costs and cash paid for interest. The Directors view Free Cash Flow (adjusted) as a key liquidity measure, as this measure represents the amount of discretionary cash available to service debt principal, pay dividends and to possibly buyback stock shares.

The table below shows the calculation of Free Cash Flow (adjusted) for each of the periods presented.

   Fiscal Year ended 31 December

(Amounts in thousands $)	2019	2018		2017
Adjusted EBITDA (hedged) ............................................	273,266	146,217		17,514
Capital expenditures and plugging costs........................................	(32,313)	(18,515	)	(2,935)
Finance expense (interest).............................................................	(32,715)	(15,433	)	(3,298)
Asset retirement (plugging)	(2,541)	(1,171)		(78)
Free Cash Flow (adjusted) ...........................................................	205,697	111,098		11,203

Leverage (hedged) and Leverage (unhedged)

Leverage is calculated by dividing Adjusted EBITDA (hedged) and Adjusted EBITDA (unhedged) (as defined above) of the Group for the last 12 months by Net Debt at the period end. The Directors view leverage as a key measure of the Group's ability to pay off its debt as well as it being used in the covenant calculations for the Group's external borrowings.

The table below shows the calculation of Leverage (hedged) and Leverage (unhedged) for each of the periods presented:

	Fiscal Year ended 31 December
(Amounts in thousands $)	2019	2018	2017
Adjusted EBITDA (hedged).................	273,266	146,217	17,514
Net Debt............................................	643,258	496,535	58,657
Leverage (hedged).............................	42.8%	29.4%	29.9%
Adjusted EBITDA (unhedged).............	219,682	161,872	15,990
Net Debt............................................	643,258	496,535	58,657
Leverage (unhedged).........................	34.2%	32.6%	27.3%

Net Debt

Net Debt is defined as the sum of Group's borrowings, excluding leases, less cash and cash equivalents. The table below shows the calculation of Net Debt for each of the periods presented.

	Fiscal Year ended 31 December
(Amounts in thousands $)	2019	2018	2017
Total borrowings................................	644,919	497,907	73,825
Less:
Cash and cash equivalents..................	(1,661)	(1,372)	(15,168)
Net Debt............................................	643,258	496,535	58,657

Revenue (hedged)

Revenue (hedged) is defined as revenue adjusted for impact of any gains/losses on derivative settlements. The table below shows the calculation of Revenue (unhedged) for each of the periods presented:

	Fiscal Year ended 31 December
(Amounts in thousands $)	2019	2018	2017
Revenue............................................	462,256	289,769	41,777
Less:
Net gain/(loss) on derivative settlements.......................................................	49,467	(15,655)	1,524
Revenue (hedged).............................	511,723	274,114	43,301

Market, industry and other statistical data

This Announcement relies on and refers to information regarding the Group's business and the markets in which the markets in which the Group operates and competes. The market data and certain economic and industry data and forecasts used in this Announcement were obtained from governmental and other publicly available information, independent industry publications and reports prepared by industry consultants, including Energy Information Administration and FactSet.

Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that there can be no assurance as to the accuracy and completeness of such information. The Group believes that these industry publications, surveys and forecasts are reliable, but they have not been independently verified from third party sources.

All such data sourced from third parties contained in this Announcement have been accurately reproduced and, so far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. No material changes have occurred since the date of the Competent Person's Report available on the Company's website at www.dgoc.com, the omission of which would make the Competent Person's Report misleading.

The Group cannot assure you that any of the assumptions underlying any statements regarding the gas and oil industry are accurate or correctly reflect the Group's position in the industry. Market data and statistics are inherently predictive and speculative and are not necessarily reflective of actual market conditions. Such statistics are based on market research, which itself is based on sampling and subjective judgments by both the researchers and the respondents, including judgments about what types of products and transactions should be included in the relevant market. In addition, the value of comparisons of statistics for different markets is limited by many factors, including that (i) the markets are defined differently, (ii) the underlying information was gathered by different methods and (iii) different assumptions were applied in compiling the data. Accordingly, the market statistics included in this Announcement should be viewed with caution and no representation or warranty is given by any person as to their accuracy.

Elsewhere in this Announcement, statements regarding the gas and oil industry are not based on published statistical data or information obtained from independent third parties, but are based solely on the Group's experience, its internal studies and estimates, and its own investigation of market conditions. The Group cannot assure you that any of these studies or estimates are accurate, and none of the Group's internal surveys or information have been verified by any independent sources. While the Group is not aware of any misstatements regarding its estimates presented herein, the Group's estimates involve risks, assumptions and uncertainties and are subject to change based on various factors.

Forward-looking statements

This Announcement includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Group's control and all of which are based on management's current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "targets", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Announcement and include statements regarding the intentions, beliefs or current expectations of management or the Company concerning, among other things, the results of operations, financial condition, prospects, growth, strategies and dividend policy of the Company and the industry in which it operates. In particular, the statements included in the sections entitled "Risk Factors" and "Business" of this Announcement regarding the Company's strategy, targets and expectations in respect of the Group's expected revenue, profit, growth, accounting tax rates, and capital expenditure upon the operating results of the Group as well as other expressions of the Group's targets and expectations and other future events or prospects are forward-looking statements.

No incorporation of website information

Save for the Competent Person's Report, information contained on the Company's website or the contents of any website accessible from hyperlinks on the Company's website are not incorporated into and do not form part of this Announcement.

BUSINESS

Overview

The Company is an independent owner and operator of producing natural gas and oil wells concentrated in the Appalachian Basin, the oldest hydrocarbon producing region within the United States. The Group's operations are located throughout the neighbouring states of Tennessee, Kentucky, Virginia, West Virginia, Ohio, and Pennsylvania, where the Company is one of the largest independent operators of conventional assets and also an operator of unconventional assets and midstream pipeline infrastructure. Diversified Gas & Oil plc was incorporated in 2014. The Diversified Gas & Oil predecessor business was founded in 2001 by the CEO Rusty Hutson, Jr. with an initial focus on gas and oil production in West Virginia. In recent years, Diversified Gas & Oil plc has grown rapidly by capitalising on opportunities to acquire and enhance producing assets, and leveraging the operating efficiencies that come with economies of scale. Since 2017, the Company has carried out 11 asset and business acquisitions for a combined purchase consideration of approximately $1.5 billion.

The Company's strategy is to acquire and manage gas and oil properties and certain associated midstream assets to generate cash flows and provide cash distributions to its shareholders. The Company seeks to acquire high-quality producing conventional and unconventional gas and oil assets with synergistic opportunities, from industry players who are seeking to re-focus resources elsewhere, typically to US onshore shale reservoirs, or who are experiencing financial difficulties and wish to sell non-core assets. The Company seeks to acquire long-life producing assets at accretive valuations, typically allocating value only to the PDP portion of 1P reserves and allocating no value to the PUD portion of 1P reserves or to probable or possible resources. The Company further seeks to operate and enhance those acquired assets, and then distribute natural gas, natural gas liquids and oil to achieve optimal pricing. The Group's target assets are characterized by highly visible production rates, long-life (in excess of 50 remaining production years), and low decline rates.

The Group seeks to improve the performance of its acquired assets which have often not received an optimal level of focus and investment from their former owners. The Company enhances its production through the deployment of rigorous field management programs and accelerating or extending production by deploying new extraction technology and/or refreshing decayed infrastructure on poorly maintained wells. Through operational efficiencies, the Company demonstrates its ability to maximise value by enhancing production while lowering costs and improving well productivity. The Group's gas, natural gas liquids and oil production is distributed in a way that manages price by leveraging the Group's midstream pipeline infrastructure to take advantage of pricing differentials.

The Company adheres to best-in-class operating standards, with a strong focus on health, safety and the environment to ensure the safety of its employees, local communities and the environment in which the Company operates. The Company aims to maintain its committed approach to long term sustainability which, alongside its strict fiscal discipline and stewardship, maximises returns to its shareholders.

Assets and Operations

Evaluation of DGO Assets Utilizing Specified Economics Northern + Southern Divisions	Total Proved Developed Northern Division	Total Proved Developed Southern Division	Total Proved Developed
Net Reserves to the Evaluated Interests
Oil, Mbbl............................................	3,387	1,404	4,791
Gas, MMcf.........................................	1,309,953	1,632,645	2,942,598
NGL, Mbbl.........................................	493	67,716	68,209
Oil Equivalent, MBOE1 (6 Mcf = 1 BOE)................................	222,205	341,227	563,432
Number of Wells................................	42,445	17,373	59,818

Note:

1) For purposes of the CPR, quantities of natural gas are converted into equivalent quantities of oil at the ratio of 6,000 standard cubic feet of gas equal 1 barrel of oil equivalent (BOE). For additional information see the 'General Information' section of the Competent Person's Report available on the Company's website at www.dgoc.com.

  The estimates of reserves were determined by methods set forth by the PRMS.

Source: Competent Person's Report.

The Group's asset base is comprised of approximately 60,000 conventional and unconventional natural gas and oil producing wells. The Group's shallow-depth vertical and long-lateral horizontal wells produce from low permeability reservoirs sitting above and within the prolific Marcellus and Utica shale plays of the Appalachian Basin. These mature wells benefit from simple and low-cost maintenance operations and require low ongoing capital expenditures. The wells exhibit long-term low decline rates of approximately three to seven per cent., with little water content, resulting in an average well life of over 50 remaining years. In addition to the upstream assets, the Group's portfolio contains approximately 12,000 miles of natural gas gathering pipelines and a network of compression stations and processing facilities.

The Group's experienced management team has a proven track record of consistently delivering strong revenue growth, profitability and cash flow generation. As a result of the Group's competitive strengths, the Directors believe that the Group is well-positioned for continued strong growth and financial returns. For FY2017, FY2018 and FY2019, the Group's revenue was $41.8 million, $289.8 million and $462.3 million respectively, representing a CAGR of 233 per cent. For FY2017, FY2018 and FY2019, the Group's Adjusted EBITDA (hedged) was $17.5 million, $146.2 million and $273.3 million respectively, representing a CAGR of 295 per cent. For FY2017, FY2018 and FY2019, the Group's Adjusted EBITDA (unhedged) was $16.0 million, $161.9 million and $219.7 million respectively, representing a CAGR of 271 per cent.

 Strengths

The Group benefits from the following key competitive strengths:

Low risk and low cost portfolio of assets

The Group benefits from a highly diversified portfolio of low risk and low cost assets. These assets include approximately 60,000 conventional and unconventional gas and oil producing wells located across the geologically and politically low-risk US states of Tennessee, Kentucky, Virginia, West Virginia, Ohio, and Pennsylvania. As a result, Group performance is not materially impacted by the performance of any individual well. In addition to these upstream assets, the Group's portfolio contains approximately 12,000  miles of natural gas gathering pipelines and a network of compression and processing facilities which are complementary to the Company's assets and enhance margins by reducing third-party tariffs and allowing the Company to optimise pricing through route selection. The Group does not depend on exploration or significant development activity to increase resources or drive production. As a result, the Group is not as exposed to the higher risks that accompany exploration or development nor the greater capital expenditure that is typical of such activity.

The Group's wells are mature and benefit from simple and low-cost maintenance operations and require low ongoing capital expenditures meaning the Group's production base is highly cash generative. The Group's capital expenditure in 2020 is expected to be approximately $28 million,  substantially in line with the prior year. As a result of the Group's wells maturity and significant remaining asset life, the Group is positioned to effectively manage the nature, timing, and amount of capital expenditure invested in its assets. This provides the Group control and flexibility over future investment programs, which is a key advantage in light of historic volatility in commodity prices.

Long life and low decline production

The Group benefits from stable, long life and low decline production providing a high-quality, highly visible and reliable source of revenue and cash generation and allowing for sustainable returns to shareholders. The Company's wells have been producing for an average of 25 years. This means they are typically past their high decline phase, an earlier period in a well's life where production declines at a steep rate leading to significant production volatility, and into their period of exponential decline, a later period in a well's life where decline rates are low and steady leading to more stable production. Notwithstanding their maturity, due to their long-term low decline rates and limited water content, the Group's wells have an average remaining producing life of over 50 years. In 2019, the Group's portfolio delivered strong production performance, with actual production arresting forecasted declines due to the Group's robust Smarter Well Management programme of enhancing production from producing wells and returning other non-producing wells to a productive state. In 2019, the Group returned approximately 750 non-producing wells to production. This performance is underpinned by Smarter Well Management, the Group's proactive approach to extending well life, involving wellhead compression management, fluid load deduction, and pumpjack optimization, among other techniques. The Group has adopted a conservative hedging policy which further protects and provides visibility over cash flows, dividends and leverage. The Group's commodity risk hedging program covers both gas and oil price exposures and seeks to protect a significant portion of the Group's underlying post-tax production revenues. The Group adjusts the proportion of hedged revenues and choice of hedging instruments based on a number of factors, including levels of leverage and committed capital expenditures, but does not seek to trade speculatively.

High margin assets benefiting from significant scale

The Group benefits from high quality assets and significant scale that gives rise to high profit margins and consistent cash flows. The concentration of the Group's assets in the Appalachian Basin allows it to run highly efficient operations, with employees able to service a large number of assets reducing operating expenditures. It also allows the Group to leverage the extensive expertise of its engineers and the experience accumulated by the Group's employees from operating in this region for many years driving innovation and best practice. The asset acquisitions made by the Group complement the larger portfolio by delivering operating efficiencies to drive down operating costs and enhance the Group's profit margins. For example, the impact of the acquisitions made in 2018 is illustrated by the Group's lease operating expenses (defined as daily costs incurred to extract oil and natural gas and maintain the producing properties) which fell from $7.02/boe in 2017 to $4.83/boe in 2018.

The Group's significant operational scale is enhanced by its 12,000 miles of midstream infrastructure. The margin-enhancing benefits of owning and operating these midstream assets arise from increased control of the Group's production flow, where it can identify both optimum routes and improved pricing points; increased operational efficiencies through ongoing optimization efforts; and increased third-party revenue streams.

Highly experienced management and operational team

The Group's senior management team is comprised of highly experienced individuals with a combined ten decades of experience in the gas and oil sector, including in the Appalachian Basin where the Group's operations are concentrated. In particular, the Group benefits from the experience of its Chief Executive Officer, Rusty Hutson, Jr., who is highly experienced in sourcing acquisitions and securing their financing. The management team is complemented by an operational team with unmatched experience in the Appalachian Basin with an average of over 25 years of operational experience. These experienced employees have a relentless focus on execution and an in-depth understanding of, and extensive experience working with, the Group's assets. For example, the Group's operations team developed the Smarter Well Management program, which enhances the Group's production by slowing production declines and returning shut-in wells to production. The Group's management team remains focused on efficient and effective management of production and operations whilst carefully controlling the Group's general and administrative expenses.

Track record of successful consolidation and integration of acquired assets

Following the development of the US onshore oil & gas industry through the 'shale revolution', there has been a significant supply of conventional and unconventional assets that have become available as a result of a number of US onshore energy companies selling acreage not seen as core to their operations and of asset owners experiencing cash flow difficulties. Simultaneously, this increase in supply of assets has been met by limited demand due to a lack of appropriate buyers. The Group is well positioned to exploit these continued consolidation opportunities. The Group's management has a strong track record of successful acquisitions of assets and businesses and has demonstrated its ability to source, fund and execute acquisitions in a manner that creates value for the Group. The Group has demonstrated its ability to source opportunities and access to capital as one of the few buyers of scale in the Appalachian Basin, completing eleven acquisitions since 2017 with a combined purchase consideration of approximately $1.5 billion while maintaining Leverage (unhedged) of less than 2.5 times Adjusted EBITDA (unhedged).

Strong organic growth upside potential due to the Group's vast land bank

The Group's current strategic focus remains on the maximisation of its existing portfolio of operational wells. However, the Group has a vast land bank of 7.8 million acres which present organic growth opportunities through infill drilling. In a higher commodity price environment, the Group would consider the drilling opportunities provided by its land bank if economically attractive to do so. Within the Group's portfolio of existing exploration and appraisal opportunities, the Group has a number of attractive near-term drilling opportunities. As the wells are onshore and shallow, development wells are low cost and quick to drill. In the near term, the Group's exploration is likely to be mainly focused on near-field opportunities that leverage its existing assets and operating capabilities and require relatively short development periods. The Group has a historic track record of successfully drilling and operating new wells. As a privately held company, the Group drilled 150 wells across its then-existing portfolio and all were productive.

Strategy

The Group has the following key business strategies:

Target Proved Developed Producing (PDP) asset acquisitions while focusing on returns and accretive dividends

The Group seeks to capitalise on opportunities to acquire producing conventional and unconventional gas and oil assets. To achieve this strategy, the Group intends to continue employing its disciplined approach to evaluating acquisition opportunities. The Company seeks to acquire long-life producing assets at accretive valuations, typically allocating value only to the PDP portion of 1P reserves and allocating no value to the PUD portion of 1P reserves or to probable or possible resources. The Company further seeks to operate and enhance those acquired assets, and then distribute natural gas, natural gas liquids and oil to achieve optimal pricing. This approach ensures that the Group pursues opportunities that support its cash flow and dividend policy. The Group intends to continue pursuing this strategy as it is well-positioned to benefit from ongoing trends in the US industry where incumbent industry players are seeking to divest assets due to financial distress or a shift in strategy. The Group has a track record as an established consolidator in the Appalachian Basin and is one of the few operators with access to sufficient capital to make acquisitions at scale. The Group is willing to explore acquisition opportunities outside the Appalachian Basin on an opportunistic basis if they become available and present a compelling and scalable proposition.

Maximise value by seeking operational efficiencies

The Group aims to maximise value for its shareholders by realising operational efficiencies. To achieve the strategy, the Group seeks to leverage its scale and cost efficiencies, reducing operating costs and improving margins, including by extending the life of its assets through Smarter Well Management. Smarter Well Management uses a precautionary approach that employs a number of techniques to extend well life and limit the rate of asset depletion. The Group seeks to proactively manage its operating costs and the Directors believe that there is further room to optimise the operating cost base of the business given its scale and that it can achieve savings by focusing on simplification of processes, procedures and standards. The Group's midstream assets also help to support cost reduction by providing operational control over the flow of the Group's production, thus allowing the Group to optimise pricing through selection of delivery points. Further, the Group intends to achieve operational efficiencies through proactive regulatory engagement, including with regard to asset retirement. The Group plans to safely and systematically retire wells supported by long-term agreements with the states of Pennsylvania, Ohio, Kentucky and West Virginia, its four largest wellbore states, setting forth plugging and abandonment schedules and thus providing visibility on asset retirement costs for the majority of its wells.

Optimise operations for cash flow growth

The Group intends to continue optimising its operations in a manner that prioritises cash generation. The Group's principal focus is on operating assets, not drilling new production wells, allowing it to optimise PDP revenues and cost streams. In 2019, the Group generated $205,697 in Free Cash Flow (adjusted), an increase of $94,599 or 85.1 per cent from 2018. The Group intends to maintain its disciplined approach to acquisitions and, whilst it will pursue opportunistic, synergistic, growth, will focus on those assets that provide long-term cash flow generation that supports the Company's cash generation and dividend policy.

Maximise shareholder returns

The Group intends to continue its strategy of delivering value to shareholders through a combination of paying dividends, buybacks and repaying debt. The Group also seeks to prudently invest part of the earnings the Group retains by prudently reinvesting into other accretive and strategically compatible growth opportunities. The Group will seek to continue to operate in a disciplined manner that maximizes investment returns and sustains the Group's dividend policy of returning not less than 40 per cent. of free cash flow to shareholders. From time-to-time, the Group also evaluates share buyback opportunities and is willing to engage in such returns of value to the Group's shareholders. The Group aims to enhance its liquidity through deleveraging, which will create additional debt capacity upon which the Group can draw for general corporate purposes or acquisitions while also reducing cash interest expense.

Overview of assets and principal activities

The Group's current activities comprise the operation of approximately 60,000 conventional and stable/mature unconventional natural gas and oil wells  in the Appalachian Basin in the north-eastern United States.  The Group also operates over 12,000 miles of midstream pipelines and compression assets principally located in the states of Kentucky and West Virginia. 

The Group has grown significantly since its initial formation in 2001, primarily through the acquisition of producing assets. The Group has an experienced team of professionals managing its operational assets and personnel.  The Company has an experienced management team with proven ability to drive operational efficiency, creating opportunities for additional value for shareholders even during extended periods where commodity prices remain below historical trends.

As at the date of this Announcement, the Group has total proved reserves of gas of approximately 2,942,598 mmcf (all producing), oil reserves of approximately 4,791 mbbl (all producing), and natural gas liquids of approximately 68,209 mbbl (all producing). For the three months ended 31 March 2020, the Group's total net daily production was 94,011 boepd. The Group has approximately 8 million acres under lease which are principally held by production ("HBP"). HBP means that the lease does not expire as long as the land is still producing. The overall average working interest for DGO's existing assets is approximately 89.3 per cent., the overall average net revenue interest is approximately 78.1 per cent. and the average royalty rate is approximately 12.6 per cent. (calculations presented on the basis of simple average interests).

The Group's assets provide:

· highly visible and consistent production profile;

· an average remaining producing life of over 50 years;

· proven low decline rates, with the majority of production declining on average at 5 per cent.;

· low operational costs; and

· low operational risks and production concentration.

Appalachian

The Group operates within the Appalachian Basin, an area of the north-eastern United States that underlies ten states including Tennessee, Kentucky, Virginia, West Virginia, Ohio and Pennsylvania.

The Appalachian Basin covers an area of some 185,500 square miles. Whilst the area has come to prominence in recent years following the discovery of significant shale gas reserves in 2009, known as the Utica and Marcellus Shales, it has been a major producer of oil and gas from conventional vertical well development since the late 19th century, making it the oldest producing basin within the United States.

The depositions for the Appalachian Basin are the erosional sediments from the once Acadian Mountains into the lower basin. The basin was limited to the west by the Cincinnati Arch. As the mountains eroded over time, the sediment was deposited in the basin with alternating layers of carbonates, limestones, sandstone, siltstone, and shale intervals.

The oil and gas industry started in the basin in 1859 with the discovery of oil in the Edwin Drake well located in north-western Pennsylvania. Oil in this well was produced from the Upper Devonian sandstone at a depth of approximately 70 feet. This discovery well opened a trend of oil and gas fields producing from the Upper Devonian, Mississippian, and Pennsylvanian sandstones across many parts of the states of Kentucky, New York, Ohio, Pennsylvania and West Virginia.

Detailed information on the Group's assets is set out in the Competent Person's Report available on the Company's website at www.dgoc.com.

Reserves

Since 2009, the primary target in the Appalachian Basin for the development of natural gas, natural gas liquids and oil for most companies operating in the area has been the horizontal drilling of the Marcellus and the Utica shale formations. These horizontal wells have long laterals that allow more contact with the reservoirs.

The Group's focus continues to be producing natural gas, natural gas liquids and crude oil from established conventional and mature unconventional wells. Most of the properties owned and/or operated by the Group are vertical wells. These vertical wells are typically shallow at depths ranging from 2,200 feet to 6,000 feet. The Group operates a smaller set of unconventional vertical and horizontal wells at depths ranging from 6,000 to 10,000 feet. A number of the Group's wells are completed in multiple formations and production is sourced from numerous zones in the wellbore. Most of these properties may have additional productive formations up-hole from the existing producing formations, which may allow for future completion opportunities. These assets have been reported upon by Wright & Co in the Competent Person's Report . The Directors believe that drilling and recompletion opportunities are relatively low risk, due to the geology and the extensive mapping of the formations. Drilling is relatively straight forward, quick to execute and low cost with the cost of drilling and completing new conventional wells in the range of $118,000 to $1.3 million depending primarily on depth.

The production profiles of the wells across these formations demonstrate very similar characteristics. Most of these formations produce gas and/or oil on a hyperbolic curve with an initial rapid decline followed by gradual decline of production over a very long period of time. This rate of decline enables the Company to predict and plan with a high level of confidence the future production profile of its producing assets.

A majority of the wells are expected to have an average remaining producing life of over 50 years, with some lasting in excess of 80 years. The conventional wells and the mature unconventional wells produce very little, if any, water.

The aggregate valuation of the total proved existing reserves of the Group is $1.86 billion (pretax PV10) and $1.38 billion (post-tax NPV10) as reported on by Wright & Co in the Competent Person's Report. The valuation set out in the Competent Person's Report is based only on proved reserves of the Group only.

Acquisitions and consolidation

The Company's strategy is to acquire and to manage gas and oil properties and certain associated midstream assets to generate cash flows and provide cash distributions to its shareholders. The Company has capitalised upon opportunities to acquire conventional, mature, low risk oil and gas producing assets. The acquisition of assets from Titan Energy, LLC in June 2017 introduced unconventional assets into the Company's portfolio, following which the Company embraced a broader acquisition strategy that included unconventional assets while remaining focused on the Appalachian Basin, though the Company may explore acquisitions outside the Appalachian Basin on an opportunistic basis. The Company believes that it is well positioned to acquire further conventional and stable and mature unconventional assets and intends to continue its growth strategy through the acquisition of proven producing assets.

Advances in shale production caused a significant shift in emphasis of many US investors and US domestic exploration and production companies in the US, resulting in conventional, mature gas and oil assets becoming available at reasonable prices to credible and proven operators who can maintain production from the conventional reservoirs and in doing so, retain the HBP rights to the shale licences on behalf of the seller. Concurrent to this increase in assets available for sale, there is a lack of demand due to a number of traditional onshore energy companies experiencing financial difficulties and thus being unable to purchase the assets that are becoming available. The Directors believe that value accretive opportunities lie in field optimisation and the application of optimised production techniques used across the existing portfolio. The Group has a proven track record in reducing the operating costs of acquired assets through the implementation of operating and financial efficiencies. The Group also has a proven track record in enhancing and in many cases increasing production from the acquired conventional wells. These factors combined with the Group's low cost corporate structure gives the Group a competitive advantage over its peers.

After purchasing existing conventional wells, the Group accelerates or extends production by refreshing decayed infrastructure on what are typically poorly maintained wells due to the wells not having been core assets for the prior owner. Conventional wells that are in production for over five years (mature wells) can have an average annual decline rate in the range of 3-7 per cent. The Group accelerates or extends production by repairing lines, recompleting wells, reconnecting wells, swabbing wells and adding or optimising compression. The Group has an established and proactive approach to the long-term sustainability of its wells through its deployment of experience, knowledge & resources throughout its entire portfolio, executed through its Smarter Well Management Programme and it's 'Safe & Systematic Asset Retirement Programme', which leverages the Group's portfolio's scale, diverse institutional knowledge from a growing body of professionals with unique experience and geographical proximity to extract maximum value. This program, tailored for each asset, focuses on optimising production from active wells and, where economically possible through a variety of means, returning inactive wells to production. The Company is committed to industry leading operating procedures and holds the safety and sustainability of the local communities and environment in which it works in the highest regards.

The Group continues to identify attractive acquisition and investment opportunities to purchase additional producing assets in or around the Group's existing footprint, although future acquisitions could fall outside of the states in which it currently operates. Each target acquisition is evaluated against a strict criteria and the Group's disciplined approach to evaluating opportunities ensures that it only pursues those acquisitions that possess a consistent asset profile, compelling upside and drive positive debt-adjusted cash flow per share that supports the Company's dividend policy. Sustained low oil and natural gas prices continue to result in companies divesting non-core and distressed assets, and the Group continues to explore these opportunities. Any additional assets purchased are expected to complement the Group's existing portfolio and provide an increase in revenue and net cash flow.

The Group maintains a pipeline of acquisition targets. This pipeline is developed through the relationships that members of the Company's management have maintained with industry personnel as well as investment banking advisors. As a part of its evaluation and diligence processes, the Group considers numerous financial and strategic factors to determine the consideration to be paid for the target. Of utmost priority, the Group will not provide value for undeveloped assets and will only consider assets with a reasonably low decline rate and prospective cash flows. Some of the other significant factors included in the evaluation process include the valuation of future reserves, geographic location, proximity to existing operations, market pricing for sales of produced units, experience of existing or available human resources, quality of the assets, historical environmental performance of the seller, financing resources required to fund the acquisition, regulatory environments for the assets and current or potential legal considerations. In considering these and other factors, the Group regularly works with its investment bankers, legal and accounting advisors, environmental consultants and third-party reserve engineers to assist in the evaluation and diligence processes prior to any acquisition. Once the evaluation process is completed, the Group's executive management team reviews its process and valuation perspective with the Board. The Board approves all material transactions prior to its consummation.

As part of its stated acquisition target evaluation process described above, the Company continues to explore potential acquisition targets from third parties. On 7 April 2020, Diversified Gas & Oil Corporation, a subsidiary of the Company, executed a conditional purchase and sale agreement with Carbon in connection with the possible acquisition of certain upstream and midstream assets of Carbon in the Appalachian Basin, including approximately 6,100 net conventional wells located in Appalachia (Tennessee, Kentucky, West Virginia), as well as various non-operated wells, midstream pipeline systems and facilities (including intrastate gathering pipeline of approximately 4,700 miles in West Virginia and two active natural gas storage fields with 3.5 Bcf of working capacity). The net production of the Carbon Assets for the year ended 31 December 2019, was approximately 9.1 Mboepd boe and if completed, the acquisition would potentially add PDP reserves of approximately 74 MMboe with an estimated pre-tax PV10 of approximately $189 million.

If the acquisition were to complete, the Company currently estimates that the consideration payable would comprise: (i) approximately $110 million, payable in cash at closing; and (ii) a further payment of up to $15 million, subject to the achievement of certain conditions with respect to future gas prices, payable over a period of up to three years after closing. If completed, the initial consideration payable for the Carbon Assets would be at an approximate 42 per cent. discount to PDP PV10 of the Group for the year ending 31 December 2019 and the Company estimates that this would be 3.2 to 3.4 times the Adjusted EBITDA attributable to the Carbon Assets for the 12 month ended 31 May 2021, following management's estimated closing adjustments of approximately US$11 million. However, the final consideration payable may be less than currently estimated and will be determined following completion of due diligence by the Company and satisfaction of the other conditions under the Carbon PSA. If completed, the Carbon PSA will have a deemed effective date of 1 January 2020. The Company estimates that the Adjusted EBITDA attributable to the Carbon Assets for the 12 month ended 31 May 2021 will be approximately $29 million to $31 million.

In addition, on 11 May 2020, the Company executed a conditional purchase and sale agreement with a US-Listed Vendor in connection with the possible acquisition of certain assets in the Appalachian Basin, including approximately 900 net operated wells, including 67 horizontal producing wells in Pennsylvania, with the majority of the balance being conventional vertical producing net wells in West Virginia, and associated midstream infrastructure as well as a further 13 drilled and completed wells that are not yet connected to the gathering infrastructure . The net production of the US-Listed Vendor Assets for the year ended 31 December 2019, was approximately 9 Mboepd and if completed, the acquisition would potentially add PDP reserves of approximately 48 MMboe with an estimated pre-tax PV10 of approximately $185 million.

If the acquisition were to complete, the Company currently estimates that the consideration payable would comprise: (i) approximately $125 million, payable in cash at closing; and (ii) a further payment of up to $20 million, subject to the achievement of certain conditions with respect to future gas prices, payable over a period of up to three years after closing. However, the final consideration payable may be less than currently estimated and will be determined post completion of due diligence by the Company and satisfaction of the other conditions under the US-Listed Vendor PSA. If completed, the US-Listed Vendor PSA will have a deemed effective date of 1 January 2020. The Company estimates that the Adjusted EBITDA attributable to the US-Listed Vendor Assets for the 12 month ended 31 May 2021will be approximately $32 million to $34 million , excluding longer term synergies that the Company expects to be able to realise following the acquisition of the US Listed Vendor  Assets .

The potential acquisition of each of the Carbon Assets and the US-Listed Vendor Assets is at a preliminary stage and is subject to a significant number of conditions. The satisfaction of certain of these conditions are within the sole control of the Group such as completion of due diligence (including all title, environmental, contractual, credit, litigation, and regulatory diligence) to the Company's satisfaction and the Company's right to not complete the respective acquisitions if there is a material change in the conditions, assets, or operational matters of the Carbon Assets or the US-Listed Vendor Assets prior to completion of the respective acquisitions. In addition, the acquisitions are also conditional upon satisfaction of various other conditions, including receipt of all necessary shareholder consents, approvals, authorisations and permits (including any authorisations required from the Federal Energy Regulatory Commission and various State Public Service Commissions).

Carbon and the US-Listed Vendor have provided customary commercial representations and warranties on the Carbon Assets and the US-Listed Vendor Assets respectively, which are also conditional upon satisfaction of the conditions under the Carbon PSA and the US-Listed Vendor PSA respectively and completion of the acquisitions.

Under the terms of the Carbon PSA and the US-Listed Vendor PSA respectively, the Company has a right to exclusivity pursuant to which Carbon and the US-Listed Vendor respectively have agreed to not enter into any negotiations or discussions with any third party in connection with the disposal of the Carbon Assets and the US-Listed Vendor Assets for a period ending on 30 June 2020 and 28 May 2020 respectively to enable the Company to complete its due diligence and for the satisfaction of all the conditions under the Carbon PSA and the US-Listed Vendor PSA respectively.

The acquisitions of the Carbon Assets and the US-Listed Vendor Assets are expected to be partially financed by the net proceeds of the Placing, with the balance being financed by a new securitised term loan of up to $165 million, the terms of which are expected to be comparable to the Keybank Facility and the Amended Keybank Facility. These acquisitions are not expected to have a material impact on the Company's ratio of Net Debt to Adjusted EBITDA.

Operations

Infrastructure  

The Group conducts operations in the states of Pennsylvania, West Virginia, Ohio, Kentucky, Virginia and Tennessee. Approximately 790 field employees operate the natural gas and oil wells as well as the Group's midstream assets, consisting of pipelines and compressor stations. An important aspect to the success of the Group's acquisition strategy is the hiring of the employees that are experienced with the acquired assets, and generally have worked with the assets for many years. By maintaining the experienced employees, the Group is able to mitigate integration risk that is inherent with acquisitions. 

The Group has numerous field offices located throughout its six states of operation.  These field offices allow the Group to deploy employees in distinct geographic locations in order to efficiently operate its assets.  The Group field employees access the producing gas and oil well and midstream assets via transportation in company owned or leased vehicles, including pick-up trucks, service trucks and ATVs. 

Natural gas produced from the Group's wells is delivered to sales points via gathering pipelines. These gathering pipelines may either be owned by the Group or by a third-party transporting the natural gas to a delivery point where the Group takes ownership of the natural gas. The Group monitors and measures this transportation of gas to ensure accuracy of sales at the point of ownership transfer. The Group's field employees maintain frequent communication with gathering and pipeline companies to ensure the consistent delivery of natural gas produced from the Group's wells.  Natural gas is produced from numerous types of gas wells. The mechanical disposition of natural gas wells include pump jack equipment, artificial lift equipment and open flow wells. The type of equipment located on a well is generally determined based on the production profile of the producing formations. As the production profile of a well changes, the Group's employees determine if different equipment is needed and/or economical for the efficient production of future reserves.

NGLs maintained in the natural gas molecules are generally produced by third-party processing companies that perform fractionation processes to extract the NGLs.  Fractionation processes generally involve lowering the temperature of the natural gas molecule to a below zero-degree temperature, which causes the NGLs to separate and "drop out" of the natural gas molecule.  The NGLs produced by the third-party processor are generally sold into local petrochemical markets are transported by truck or rail car to larger petrochemical markets. The Group's largest processor of NGLs is the MarkWest owned plant located in Langley, Kentucky.  MarkWest is a subsidiary of Marathon Petroleum Corporation.

Crude oil produced from the Group's wells is stored at the well pad in a bulk storage tank. Crude oil is accumulated in these bulk tanks until the point that a Company employee calls for a collection by the local collection company.  The local collection company unloads the crude oil (and water) from the bulk storage tank and delivers the crude oil to a refinery or to a local storage hub. 

The Group monitors the production of natural gas and crude oil via an extensive network of well head meters, electronic measurement, telecommunication networks, mobile devices and software applications.  The Group invests in technology in support of its Smarter Well Management programme with a focus on driving safe operations, production improvement opportunities and cost savings. The Group also monitors the flow of natural gas on its midstream assets through compressor meters, electronic measurement, telecommunication networks and software applications. The Group services the measurement and monitoring devices and technology with a combination of its own employees and third party contractors.

The Group continues to invest in the appropriate capital infrastructure both at the well head, through the extensive network of Group owned pipeline, and at pumping and compression sites. The Group's operational structure enables it to generate significant operating free cash flow, even in the current low energy price environment, with an average lease operating cash cost in the third quarter of 2019 equivalent to $5.01/boe, falling from $5.75/boe and $8.54/boe in the fourth quarter of calendar years 2018 and 2017, respectively. Through the Company's Smarter Well Management programme, the Company's management constantly strives for cost savings and production enhancements to further mitigate rising costs during times of low commodity prices.

Distribution and Pricing

The Group sells natural gas directly into the local markets or into interstate transmission pipelines. The Group's customers are large regional utility companies and pipeline marketing companies that have operated in its markets for extensive periods. The Group's customers have been purchasing natural gas from its producing assets for numerous years. The Group's producing wells have direct connections into the pipeline systems of large regional utilities and pipeline companies such as Dominion Transmission, TC Energy (formerly TransCanada), Equitrans and Enbridge. 

The Group sells natural gas to purchasers either at fixed prices or variable index prices. Whether the Group receives a fixed or variable price, the net price received by the Group is a combination of the commodity index price (principally "Henry Hub") plus or minus a local market differential. The local market differential is also known as the "basis" differential. The basis differential is typically generated by local market supply and demand factors as well as pipeline capacity factors. Revenues are generally received 30 to 60 days following the month end after the gas enters the local transmission pipelines. The Group sells natural gas to large institutions that have established credit and are financially capable of meeting their obligations to the Company.

Oil is sold by the Group to large regional, refining companies that utilise their fleet of vehicles or at times third-party collection companies to collect the Group's produced oil. Revenue is recognised at collection when the responsibility for the product is transferred to the distributor. Revenues are generally received 30 to 60 days following the month end after the crude oil is collected by the refining company. Pricing for crude oil sales is typically determined based on the price of West Texas Intermediate crude oil ("WTI") for the day the oil is collected less a deduction for the cost of collection, which is generally less than 10 per cent. of WTI.

The Group seeks to leverage its experience and market knowledge, along with the experience and skills of commodity price advisors to manage the issues caused by volatile gas and oil prices, which can be influenced by global trends as well as local supply and demand factors. The spike in US natural gas prices to nearly $5.00 per MMBtu in November 2018 and subsequent fall back to approximately $2.40 per MMBtu in August 2019 highlights the volatile nature of commodity prices. To protect its revenue, the Group utilises hedging strategies as well as forward fixed pricing purchase contracts with natural gas purchasers, which are designed to ensure that the Group maintains a clear visibility of its cash flow while minimising any exposure to downside risk.

The Company has entered into a variety of hedging and fixed price sale contracts for oil and gas production providing a degree of downside protection on revenues between 2019 and 2021 calendar years. Additionally, in November 2019, the Group entered into hedging arrangements that allow it to secure a fixed price for approximately 18 per cent. of its natural gas production for the next 10 years.

Capital Expenditure

The Group's strategy to acquire and operate producing assets that generate cash flow margins in excess of 50 per cent. allows the Group to continually invest capital back into its operations. The Group anticipates investing approximately 8 per cent. to 10 per cent. of its Adjusted EBITDA (hedged) in predominantly maintenance capital expenditures on an annual basis.

The majority of the Group's capital expenditures are focused on its midstream operations, which includes pipelines and compression, while the remaining capital expenditures are focused on fleet, technology, upstream operations and facilities.

Marketing

The Group markets and sells its natural gas through its wholly owned subsidiary, Diversified Energy Marketing LLC ("DEM"). DEM purchases produced natural gas from the Group's production company, Diversified Production LLC ("DP").

DEM markets the Company's natural gas to qualified purchasers and works to maximize netback pricing via a periodic bidding process or through other forms of negotiations that occur on a daily, monthly, and long-term basis. This includes DEM actively managing its transportation contracts to ensure full utilisation and effective cost rationalisation. DEM markets natural gas to purchasers on numerous gathering, intrastate, and interstate pipeline systems. DEM works closely with the Group's operational teams to align sold volumes with produced volumes while also working closely with the pipeline companies to ensure that natural gas flows in a timely and accurate manner. 

Employees

As of 4 May 2020, the Group had 929 full-time employees, with 772 production and/or operations employees and 157 production support and/or administrative employees.

The following table shows the Group's employees broken down by function as at each of 31 December 2019, 2018 and 2017.

Function	2019	2018	2017
General and administration......................	128	220	260
Field operations.......................................	790	727	229
Total ........................................................	918	947	489

The following table shows the Group's employees broken down by location as at each of 31 December 2019, 2018 and 2017.

Location	2019	2018	2017
AL................................................................	27	21	7
FL ................................................................	1	1	2
IN	1	2	3
KY................................................................	222	251	111
OH...............................................................	147	192	101
PA...............................................................	243	195	87
TN...............................................................	11	14	14
VA...............................................................	18	22	1
TX................................................................	0	1	1
WV..............................................................	248	248	162
Total ............................................................	918	947	489

The Group's compensation structure is comprised of a fixed and variable performance-based component. The performance component includes an incentive plan, which provides a bonus when certain financial targets each financial year are met and is triggered once the business achieves a predetermined percentage of Adjusted EBITDA (hedged) and Adjusted EBITDA (unhedged) on a sliding scale, at which point discretionary bonuses are paid out. In addition, there are discretionary performance-related bonuses for all staff based on individual performance.

Approximately twenty-three percent of the Group's employees are represented by a collective bargaining agreement which provides for seniority, vacations, wages, schedule of hours, health & welfare benefits and retirement benefits. The employees working under this agreement are located in the states of Kentucky and West Virginia. The existing agreement terminates in December 2022. The Directors believe that the Group's relations with its employees are good.

Health, Safety and Environment

The Group is subject to various health, safety and environmental laws and regulations administered by local, national and other government entities, and similar agencies in the states in which the Group operates. The Directors believe that the Group is currently in compliance with all material governmental laws and regulations affecting its business and maintains all material permits and licences relating to its operations.

The Group is committed to protecting the health and safety of all individuals potentially affected by its activities, including its employees, contractors and the public. The Group strives to provide a safe and healthy working environment and not to compromise the health and safety of any individual.

The Group is also committed to managing the environmental impact of its business. The Group seeks to manage its operations in an environmentally sound manner, for the benefit of all stakeholders, taking the necessary precautions to protect the natural environments that surround its gas and oil assets and to prevent incidents. Such activities include, but are not limited to, water, emissions and biodiversity management.

The Group's operational processes focus on reducing risks, maintaining compliance, and seeking best practice and continuous improvement in its activities. The Group is in the process of establishing and formalising a Group-wide Operations and Environmental, Health & Safety ("EHS") Management System to minimise the environmental impacts of its operating portfolio of upstream and midstream assets and to protect the natural environment in which it operates.

A strong health, safety and environmental performance is a key aspect of the Group's overall business success. A strong health, safety and environmental performance is a key aspect of the Group's overall business success. In 2019, the Group had a Total Recordable Incident Rate ("TRIR") of 2.06. TRIR is a U.S. mathematical measure of occupational safety and health defined as the number of work-related injuries per 100 full-time workers during a one-year period. The Group's total Scope 1 and Scope 2 GHG emissions for 2019 were 2.6 million metric tons, resulting in a GHG intensity factor of 0.014 metric tons of CO2e per million cubic feet equivalent of production.

Dividend Policy

The Board's target is to return not less than 40 per cent. of free cash flow to Shareholders by way of dividend, on a quarterly basis, in line with the strength and consistency of the Group's cash flows.

For the three months ended 31 March 2019, the Company paid a dividend of 3.42 cents per Ordinary Share on 27 September, 2019. For the three months ended 30 June 2019, the Company paid a dividend of 3.50 cents per Ordinary Share on 18 December 2019. For the three months ended 30 September 2019, the Company paid a dividend of 3.50 cents per Ordinary Share in March 2020. For the three months ended 31 December 2019, the Company expects to pay a dividend of 3.50 cents per Ordinary Share in June 2020.

The Directors may further revise the Group's dividend policy from time to time in line with the actual results and financial position of the Group.

The Board's dividend policy reflects the Company's current and expected future cash flow generation potential.

OPERATING AND FINANCIAL REVIEW

Significant factors affecting the Group's results of operations

Production Volumes and Acquisitions

Acquisitions

The Group's revenues and results of operations depend significantly on the volumes of gas and oil it produces.  As one of the Group's key business strategies is to capitalise on opportunities to acquire producing conventional and unconventional gas and oil assets, the Group's production has historically increased substantially from period to period as a result of acquisitions and the Group intends to continue pursuing attractive acquisition opportunities in the future. The Group's production volumes have grown significantly during the period under review due to several acquisitions that it has carried out. For the year ended 31 December 2017, the Group made three acquisitions which resulted in the Group's well count growing by 10,230 wells. During the same period, the Group's production increased by 10,620 boepd or 2042.3 per cent. from 520 boepd to 11,140 boepd, with an average daily production of 6,575 boepd. 

For the year ended 31 December 2018, the Group made four acquisitions which resulted in the Group's well count growing by 40,250 wells. During the same period, the Group's production increased by 59,800 boepd or 536.8 per cent. from 11,140 boepd to 70,940 boepd, with an average daily production of 40,959 boepd. Primarily due to the increase in production, the Group's revenues also grew during the same period by 593.3 per cent. from $41.8 million to $289.8 million. Due to the growth in the Group's operational footprint, operating expense grew by $86.9 million or 415.8 per cent. from $20.9 million to $107.8 million and depreciation and depletion also grew by 457.2 per cent. or $34.5 million from $7.5 million to $42.0 million. However, due to the Group being able to leverage cost synergies from its acquisitions, the Group's Percentage Operating Margin grew from 40.4 per cent. to 53.4 per cent., despite the high growth in operating expenses and depreciation between the years ended 31 December 2017 and 31 December 2018. 

For the year ended 31 December 2019, the Group made three acquisitions which resulted in the Group's well count growing by another 119 wells. During the same period, the Group's production increased by 35.2 per cent. or 25,000 boepd from 70,940 boepd to 94,832 boepd, with an average daily production of 84,778 boepd. Primarily due to the increase in production, the Group's revenues increased by 59.5 per cent. or $172.5 million from $289.8 million to $462.3 million. Due to the growth in the Group's operational footprint, operating expense grew by $94.6 million or 87.8 per cent. from $107.8 million to $202.4 million and depreciation and depletion also grew by $56.2 million or 133.7 per cent. from $42.0 million to $98.1 million. The Group's Operating Margin decreased by 96 cents or 9.8 per cent. from $9.78 per BOE to $8.82 per BOE. This was due to:

· Lower per boe lease operating expenses, which declined 30 per cent. or $1.42 per boe through a mixture of disciplined cost reductions and economies of scale whereby fixed operating costs were spread across a larger base of producing assets;  

· Lower per boe production taxes, which decreased 34 per cent. or $0.27 per boe primarily due to taxes on the Group's midstream assets that are generally fixed and are spread across a larger base of producing assets;

· Lower per boe gathering, processing and transportation expenses, which declined 88 per cent. or $0.60 per boe; and

· Lower per boe administrative expenses, which decreased 32 per cent. or $0.88 per boe primarily due to the significant growth in our production base. Administrative expenses increased by $14.9 million due to costs related to the Company's acquisition efforts and the investment made in staff and systems to support the Company's growth.

The following table summarises the acquisitions made by the Group for the years ended 31 December 2017, 31 December 2018 and 31 December 2019:

Event	Acquisition Type	Date	No. of Wells Acquired(a)	Production (boepd)	Total Production (boepd)	PDP Reserves (MMboe)
Pre-IPO	N/A	N/A	N/A	520	520	24.3
EnerVest	Asset	Apr. 2017	1,300	3,800	4,320	2.4
Titan	Asset	June 2017	8,380	6,600	10,920	35
NGO	Asset	Dec. 2017	550	220	11,140	1
Alliance Petroleum	Corporate	Mar. 2018	13,000	8,800	19,940	49
CNX	Asset	Mar. 2018	11,000	9,000	28,940	69
EQT	Asset	July  2018	11,250	32,000	60,940	230
Core	Corporate	Oct.  2018	5,000	10,000	70,940	100
HG  Energy	Asset	Apr.  2019	107	20,000	90,940	92
EdgeMarc	Asset	Sept. 2019	12	5,000	94,832	13.5
Dominion & Equitrans	Asset	Sept. 2019	N/A	N/A	94,832	N/A

Note:

(a) Well counts represent the number of wells for the respective acquisitions.

Prior to the Group's admission to AIM in February 2017, the Group's total well count was 9,698 and its total production was 520 boepd ("Pre-IPO"). In April 2017, the Group acquired approximately 1,300 gas and oil wells and PDP reserves of 2.4 MMboe in Ohio from EnerVest Limited ("EnerVest") for a purchase price of $1.75 million. At the time of acquisition, EnerVest's product mix was over 95 per cent. natural gas. For the year ended 31 December 2017, EnerVest's total operating expense was $1.1 million and $2.8 million for the year ended 31 December 2018. For the year ended 31 December 2019, EnerVest's operating expense was $3.1 million. The acquisition of EnerVest increased the Group's total production to 4,320 boepd.

In June 2017, the Group acquired approximately 8,380 gas and oil wells and PDP reserves of 35 MMboe in Pennsylvania, Ohio, and Tennessee from Titan Energy LLC ("Titan") for a purchase price of $84.2 million. At the time of acquisition, Titan's product mix was over 95 per cent. natural gas. For the year ended 31 December 2017, Titan's total operating expense was $10.4 million and $25.2 million for the year ended 31 December 2018. For the year ended 31 December 2019, Titan's operating expense was $27.3 million. The acquisition of Titan increased the Group's total production to 6,600 boepd.

In December 2017, the Group acquired approximately 550 gas and oil wells and PDP reserves of 1 MMboe in Ohio from NGO Development Corporation Inc ("NGO") for a purchase price of $3.1 million. At the time of acquisition, NGO's product mix was over 95 per cent. natural gas. For the year ended 31 December 2017, NGO's total operating expense was $276,384 and $1.3 million for the year ended 31 December 2018. For the year ended 31 December 2019, NGO's operating expense was $1.3 million. The acquisition of NGO increased the Group's total production to 11,140 boepd.

In March 2018, the Group acquired a 100 per cent. ownership interest in Alliance Petroleum Corporation ("Alliance Petroleum") including approximately 13,000 gas and oil wells and PDP reserves of 49 MMboe in Pennsylvania, West Virginia and Ohio for a purchase price of $95.0 million. At the time of acquisition, Alliance Petroleum's product mix was 98.8 per cent. natural gas and 1.2 per cent. oil. For the year ended 31 December 2018, Alliance Petroleum's total operating expense was $20.2 million and $23.1 million for the year ended 31 December 2019. The acquisition of Alliance Petroleum increased the Group's total production to 19,940 boepd.

In March 2018, the Group acquired approximately 11,000 gas and oil wells and PDP reserves of 69 MMboe in Pennsylvania and West Virginia from CNX Gas Company ("CNX") for a purchase price of $85.0 million. At the time of acquisition, CNX's product mix was 99.0 per cent. natural gas and 1 per cent. oil. For the year ended 31 December 2018, CNX's total operating expense was $13.3 million and $14.9 million for the year ended 31 December 2019. The acquisition of CNX increased the Group's total production to 28,940 boepd.

In July 2018, the Group acquired approximately 11,250 conventional natural gas and oil wells, PDP reserves of 230 MMboe  and a wholly-owned midstream gathering and a compression system with approximately 6,400 miles of pipeline and 59 compressor stations in Kentucky, West Virginia and Virginia from EQT Corporation ("EQT") for a purchase price of $575.0 million. At the time of acquisition, EQT's product mix was over 76.9 per cent. natural gas, 22.6 per cent. natural gas liquids and 0.5 per cent. oil. For the year ended 31 December 2018, EQT's total operating expense was $27.6 million and $67.1 million for the year ended 31 December 2019. The acquisition of EQT increased the Group's total production to 60,940 boepd.

In October 2018, the Group acquired Core Appalachia Holding Co, LLC ("Core"), which included approximately 5,000 conventional natural gas and oil wells, PDP reserves of 100 MMboe and a wholly-owned midstream gathering and compression system with approximately 4,100 miles of pipeline and 47,000 horsepower of compression in Kentucky, West Virginia and Virginia for a purchase price of $90.6 million. At the time of acquisition, Core's product mix was over 97.1 per cent. natural gas, 1.5 per cent. natural gas liquids and 1.4 per cent. oil. For the year ended 31 December 2018, Core's total operating expense was $10.9 million and $28.3 million for the year ended 31 December 2019. The acquisition of Core increased the Group's total production to 70,940 boepd.

In April 2019, the Group acquired 107 gas wells, PDP reserves of 92 MMboe and related surface rights and gathering equipment in Pennsylvania and West Virginia from HG Energy Appalachia, LLC ("HG Energy") for a purchase price of $400.0 million. At the time of acquisition, HG Energy's product mix was 100 per cent. natural gas. For the year ended 31 December 2019, HG Energy's total operating expense was $18.9 million. The acquisition of HG Energy increased the Group's total production to 90,940 boepd.

In September 2019, the Group acquired certain gas and oil development, production and exploration assets located in Ohio from EdgeMarc Energy, that included 12 unconventional wells and PDP reserves of 13.5 MMboe for a price of $48.1 million. At the time of acquisition, EdgeMarc Energy's product mix was 100 per cent. natural gas. For the year ended 31 December 2019, EdgeMarc Energy's total operating expense was $3.9 million. The acquisition of the EdgeMarc Energy assets increased the Group's total production to 94,832 boepd.

In September 2019, the Group acquired natural gas gathering systems in Pennsylvania and West Virginia in two separate transactions, comprising approximately 1,700 miles of low-pressure wet and dry gas gathering pipelines together with compressors and measurement stations from Dominion Gathering and Processing and Equitrans. The combined purchase price of the assets was $7.7 million. For the year ended 31 December 2019, total operating expense of the assets was $1.3 million.

Managing Decline Rates

Following the acquisition of existing conventional wells, the Group enhances well production by refreshing decayed infrastructure on wells that have typically been poorly maintained by former owners for whom these were not core assets. Mature conventional wells that are in production for five years or more have an average decline rate that ranges from 3 per cent. to 7 per cent. per year. By leveraging the extensive operational experience of the Group's staff, many of whom who have had long careers in the Appalachian Basin, the Group is able to deploy a number of techniques to extend production by repairing lines, recompleting wells, reconnecting wells, swabbing wells and adding or optimising compression. The Group has an established and proactive approach to the long-term sustainability of its wells through its deployment of experience, knowledge and resources throughout its entire portfolio, executed through its Smarter Well Management and Safe & Systematic Asset Retirement programmes which harness the Group's scale and diverse institutional knowledge from a growing body of professionals with unique experience and geographical proximity to extract maximum value. These programs, tailored for each asset, focus on optimising production from active wells and, where economically possible through a variety of means, returning inactive wells to production. For example, in 2019, the Group returned approximately 750 non-producing wells to production. Through these approaches, the Group is able to achieve low-decline and steady production that creates stable unit operating costs over time.

Gas, Natural Gas Liquids and Oil Prices

In combination with production volumes, the prevailing prices of gas, natural gas liquids and oil are the key drivers of the Group's revenue. The prices of gas, natural gas liquids and oil also affect the Group's results of operations and the recoverability of its reserves. In addition to being subject to technical feasibility, the recoverability of the Group's reserves is also constrained by economic feasibility and therefore impacted by price changes in gas, natural gas liquids and oil. A decrease in gas, natural gas liquids and oil prices could lead to a reduction in the recoverability of the Group's reserves, thus reducing the expected economic life of a field. Hydrocarbon prices have historically been volatile and subject to supply and demand and, in the case of crude oil, particularly sensitive to OPEC production levels. The Group engages in the hedging of gas, natural gas liquids and oil prices in order to protect cash flows.

In the year ended 31 December 2019, the Group's total average realised price for gas, natural gas liquids and oil decreased by $4.58, or 24.4 per cent. , to $14.16/boe from $18.74/boe in the year ended 31 December 2018. In the year ended 31 December 2018, the Group's revenue increased by $248.0 million, or 593.3 per cent., in the year ended 31 December 2017. During this period, the Group's total average realised price for gas, natural gas liquids and oil increased by $2.26, or 13.7 per cent., to $18.74/boe in the year ended 31 December 2018 from $16.48/boe in the year ended 31 December 2017. Although the 13.7 per cent. increase in total average realised price was significant, the increase in revenue for this period was primarily attributable to a 523.0 per cent. increase in produced volumes sold on a BOE equivalent basis as discussed in the section above. In a year where fewer acquisitions occur, commodity price changes are expected to be one of the primary factors affecting changes in revenue between periods.

Gas Prices

In 2019, gas sales accounted for 83.1 per cent. of the Group's revenue as compared to 75.6 per cent. in 2018 and 72.9 per cent. in 2017. The Group's gas sales are priced using the Henry Hub price benchmark. The average Henry Hub quoted price decreased by $0.46, or 14.8 per cent., to $2.63 per btu in the year ended 31 December 2019 from $3.09 per btu in the year ended 31 December 2018. The average  Henry Hub  quoted price decreased by $ 0.02 , or  1 per cent., to  $3.09  per  btu  in the year ended 31 December 2018 from $3.11 per btu in the year ended 31 December 2017.

The following table sets forth information on Henry Hub benchmark gas prices for each of the years ended 31 December 2017, 31 December 2018 and 31 December 2019:

	Year ended 31 December
(in $/btu)	2017	2018	2019
Average price for the period.......................................................................	$3.11	$3.09	$2.63
Highest price for the period........................................................................	$3.93	$4.72	$3.64
Lowest price for the period........................................................................	$2.63	$2.64	$2.14

Source: US Energy Information Administration

Natural Gas Liquid Prices

In 2019, natural gas liquid sales accounted for 7.3 per cent. of the Group's revenue as compared to 14.4 per cent. in 2018 and 2.5 per cent. in 2017. The Group's natural gas liquid prices are priced using the Mont Belvieu benchmark. The weighted average Mont Belvieu quoted price decreased by $14.04, or 34.6 per cent., to $26.56 per barrel in the year ended 31 December 2019 from $40.60 per barrel in the year ended 31 December 2018. The weighted average Mont Belvieu quoted price increased by $5.30, or 15 per cent., to $40.60 per barrel in the year ended 31 December 2018 from $35.30 per barrel in the year ended 31 December 2017.

The following table sets forth information on Mont Belvieu benchmark natural gas liquid prices for the years ended 31 December, 2017, 2018 and 2019.

	Year ended 31 December
(in $/bbl)	2017	2018	2019
Average price for the period............................................................................	$35.30	$40.60	$26.56
Highest price for the period.............................................................................	$43.30	$48.70	$31.85
Lowest price for the period..............................................................................	$27.60	$31.00	$20.40

Source: FactSet

Crude Oil Prices

In 2019, crude oil sales accounted for 4.4 per cent. of the Group's revenue as compared to 6.6 per cent. in 2018 and 19.3 per cent. in 2017. The Group's crude oil prices are priced using the WTI benchmark. The average WTI quoted price decreased by $8.35, or 12.8 per cent., to $56.98 per barrel in the year ended 31 December 2019 from $65.33 per barrel in the year ended 31 December 2018. The average WTI quoted price increased by $15.11, or 30 per cent., to $65.33 per barrel in the year ended 31 December 2018 from $50.22 per barrel in the year ended 31 December 2017. 

The following table sets forth information on WTI benchmark crude oil prices for each of the years ended 31 December 2017, 31 December 2018 and 31 December 2019.

	Year ended 31 December
(in $/bbl)	2017	2018	2019
Average price for the period............................................................................	$35.30	$40.60	$26.56
Highest price for the period.............................................................................	$43.30	$48.70	$31.85
Lowest price for the period..............................................................................	$27.60	$31.00	$20.40

Source: FactSet

Pricing Differentials

Gas prices are subject to regionalised benchmarks that are commonly referred to as differentials. The Group sells gas to 20 to 30 price pools, with approximately 95 per cent. of the Group's gas being marketed and sold at prices derived from the Dominion South, TCO, and TETCO M2 price pools. These regionalised benchmarks represent downward adjustments to the Henry Hub benchmark price discussed above and vary depending on market fundamentals in their respective regions. In the normal course of business, the Group attempts to capture the best pricing available in the market, often through the utilisation of its extensive midstream pipeline infrastructure to direct the flow of gas to delivery points with the best pricing.

The table below sets forth the average price differential for natural gas by price pool for the years ended 31 December 2017, 31 December 2018 and 31 December 2019. Historical data is unavailable for TETCO M2 because prior to the HG Energy Assets Acquisition in April 2019, the Group sold an immaterial amount of gas through that price pool.

	Year ended 31 December
(in $/bbl)	2017	2018	2019
Average price for the period...........................................................................	$50.22	$65.33	$56.98
Highest price for the period............................................................................	$56.09	$72.13	$65.70
Lowest price for the period............................................................................	$43.23	$56.76	$47.20

Source: FactSet

Natural gas liquids and oil are also subject to pricing differentials; however, due to both the structure of those markets and the nature of Group's operations, the differentials do not operate in the same way they do for gas. Almost all of the Group's natural gas liquids are processed at MarkWest's plant in Langley, Kentucky. As a result, the Group effectively has a single delivery point for its natural gas liquids, and therefore a single key pricing differential, which is the difference between the US Natural Gas Liquid Composite Price and the processing fees charged by MarkWest. For the years ended 31 December 2017, 31 December 2018 and 31 December 2019, the pricing differential for natural gas liquids was approximately $12.00 per barrel on a weighted average basis and ranged between $3.50 and $5.00 per barrel for crude oil during the same period.

Hedging

The Group's proactive approach to hedging provides indirect tangible benefits for its shareholders. These benefits were evident in the year ended 31 December 2019, where hedge gains during the year added approximately $50 million in revenues. Historically, the Group has adopted a conservative hedging program, which covers a portion of gas, natural gas liquids and oil exposures and seeks to protect a significant portion of the Group's underlying production revenues, at the post-tax level, from commodity price fluctuations. Accordingly, the Group has historically entered into both commodity price swaps and certain fixed price marketing agreements to hedge a portion of its commodity price risks. The terms of these hedging transactions are designed to match as closely as practicable the underlying pricing structure of physical sales contracts, and the volume of hedges reflects production uncertainties and the fiscal  impact  of  hedging. These  derivative  instruments  have  allowed  the Group  to  reduce,  but  not  eliminate,  the variability in cash flow from operations due to fluctuations in commodity prices.

The table below outlines the attributes of the hedge structures used by the Group to protect cash flow:

Hedge Structure	Attributes
Swaps and Physicals	Fixes cash flows and provides no exposure to upside or downside
Collars	Limits downside and provides some upside exposure
Puts	Locks floor for a cost while providing full upside exposure
"Extendables" & "Double-Ups"	Provide an opportunity to pull forward value when the futures price of a commodity is higher than the spot price
Other	Bespoke structures with hedge counterparties that are tailored for the Group's portfolio

For the year ended 31 December 2019, the Group had total financial derivative contracts with a net asset value of $61.8 million, as compared to financial derivative contracts with a net asset value of $39.6 million for the year ended 31 December 2018. For the year ended 31 December 2017, the Company had total financial derivative contracts with a net liability value of ($2.9 million).

The following table summarises the Group's calculated fair value of derivative financial instruments.

	Year ended 31 December
(Amounts in thousands $)	2017	2018	2019
Natural gas
Swaps .................................................................................	28	4,053	69,242
Collars .................................................................................	311	131	3,882
Basis swaps .........................................................................	(965)	(1,720)	(2,455)
Put options .........................................................................	-	7,292	(24,783)
Total natural gas financial derivative contracts ....................	(626)	9,756	45,886
Natural gas liquids
Swaps .................................................................................	-	26,208	15,859
Total natural gas liquids financial derivative contracts .........	-	26,208	15,859
Oil
Swaps .................................................................................	(56)	676	(323)
Collars .................................................................................	(2,222)	2,929	380
Total oil financial derivative contracts .................................	(2,278)	3,605	57
Total financial derivative contracts ......................................	(2,904)	39,569	61,802

As at the date of this Announcement, the Group has two hedging programs, its Longstanding Hedging Program and its ABS Facility Hedging Program

Longstanding Hedging Program

As required by its senior secured credit facility, the Group is required to hedge at least 50 per cent. of production for the first 12 months followed by 25 per cent. of production for months 13 to 24 on a rolling quarterly basis. At the end of each quarter, compliance with this policy is tested for the following 24 months. Typically, the Group exceeds these target levels and hedges 75-80 per cent. of production for the first 12 months and 25-50 per cent. of production for the second 12 months, where the Company's hedging is more opportunistic and will depend on the favourability of pricing.

The table below presents a summary of the average downside protection and volume that the Group has secured for gas, natural liquids and oil under its Longstanding Hedging Program.

	NATURAL GAS		NGL		OIL
Period	Average Downside Protection	Average Volume (MMBtu/day)	Average Downside Protection	Average Volume (bbls/day)	Average Downside Protection	Average Volume (bbls/day)
FY20.......................	$  2.70	440,815	$  32.71	4,528	$  56.38	766
FY21.......................	$  2.66	296,738	$  33.98	113	$  52.65	585
FY22.......................	$  2.54	112,247	$  -	-	$  55.61	99
FY23.......................	$  2.52	96,274	$  -	-	$  -	-
FY24.......................	$  2.52	88,087	$  -	-	$  -	-

ABS Facility Hedging Program

In November 2019, the Group launched its ABS I facility, a securitised financing arrangement that is secured by 21.6 per cent. of the Group's reserves and requires 85 per cent. of production from those reserves to be hedged for ten years (the "ABS I Facility"). That hedge was executed at the close of the ABS structure as a price swap financial hedge. To facilitate the arrangement, the Group created a wholly-owned and fully consolidated (for accounting purposes) special purpose vehicle, Diversified ABS LLC, to issue $200 million of non-recourse asset-backed securities, collateralised by working interests, consisting of 21.6 per cent. of the Group's existing upstream proved developed producing asset portfolio. 85 per cent. of the production from Diversified ABS LLC reserve was hedged at a NYMEX price of $2.46 per MMBtu. and the Group will also maintain two rolling years of basis hedges initially swapped at -$0.43 per MMBtu.

In April 2020, the Group completed a a second securitised financing arrangement with the launch of its ABS II facility, a securitised financing arrangement that is secured by a further 29.4 per cent. of the Group's reserves and requires at least 85 per cent. of production from those reserves to be hedged for six years (the "ABS II Facility"). Similar to the November 2019 structure, the hedge was executed at the close of the ABS structure as a price swap financial hedge. The Group also created a wholly-owned and fully consolidated (for accounting purposes) special purpose vehicle, Diversified ABS Phase II LLC, to issue $200 million of non-recourse asset-backed securities, collateralised by working interests, consisting of 29.4 per cent. of the Group's existing upstream proved developed producing asset portfolio. 85 per cent. of the production from Diversified ABS Phase II LLC reserve was hedged at a NYMEX price of $2.40 per MMBtu. and the Group will also maintain two rolling years of basis hedges initially swapped at -$0.43 per MMBtu.

Finance Costs

In the year ended 31 December 2019, total finance costs increased by $18.8 million or 106.2 per cent., to $36.7 million from $17.7 million in the year ended 31 December 2018. This increase was primarily due to the increased borrowings on the Company's credit facility. In the year ended 31 December 2018, total finance costs increased by $12.5 million or 240.4 per cent., to $17.7 million from $5.2 million in the year ended 31 December 2017. During this period, the Group made four acquisitions for the total consideration of approximately $845 million. The increase in finance costs in this period was primarily due to a 368.0 per cent. increase in interest costs and a 230.4 per cent. increase in bond financing costs.

The table below summarises the Group's finance costs for the years ended 31 December 2017, 2018 and 2019:

	Year Ended 31 December
(Amounts in thousands $ )	2017	2018	2019
Interest.........................................................	$  3,298	$  15,433	$  32,662
Amortisation of deferred finance cost ...........	1,212	2,230	3,875
Other............................................................	715	80	130
Total finance costs .........................................	$  5,225	$  17,743	$  36,667
Loss on early retirement of debt ....................	$  4,468	$  8,358	$  -

In H1 2017 the Group repaid its publicly traded bonds and certain other outstanding debt with proceeds from the Group's IPO. Accordingly, it incurred a non-recurring loss on the early extinguishment of debt, which primarily included a $3.3 million charge for the accelerated amortisation of the remaining deferred financing costs. The Group's finance costs include interest expense on borrowings and non-cash amortisation of deferred financing costs. Interest expense on borrowings of $15.4 million in 2018 increased $12.1 million compared to $3.3 million in 2017 primarily due to the increase in borrowings used to fund the Group's previously mentioned acquisitions.

In March 2018, the Group closed a new $500 million five-year credit facility, initially subject to a borrowing limit of $140 million that stepped up within the same month to $200 million following the closing of the acquisition of certain assets of CNX. Entry into this new senior secured revolving credit resulted in a non-recurring loss on early extinguishment of debt of $8.4 million, which primarily included a $2.6 million charge for the accelerated amortisation of the remaining deferred financing costs and $5.8 million related to an early payment fee. In July 2018, and in conjunction with the EQT Asset Acquisition, the Group closed on an enlarged $1 billion, five-year secured revolving credit facility with an initial borrowing base of $600 million, which replaced the existing $500 million facility. In December 2018 and following the October 2018 acquisition of Core, the Group closed on a further-enlarged $1.5 billion, five-year senior secured credit facility with an initial borrowing base of $725 million, and which replaced the $1 billion facility and fully extinguished Core's facility assumed as part of that acquisition. The facility maintained previous pricing but was amended in April 2019 to upsize the borrowing base to $950 million related to the HG Energy Assets Acquisition and reduced the pricing grid to 2.00 per cent to 3.00 per cent based on utilisation. In November 2019, the facility was further amended in relation to the $200 million securitisation agreement reducing the borrowing base to $650 million. The facility maintains the July 2023 maturity date of the replaced facility, and has an initial interest rate of 2.75 per cent. plus the one-month LIBOR and is subject to a grid that fluctuates from 2.25 per cent. to 3.25 per cent. plus LIBOR based on utilisation.

Asset Retirement Obligation

The Group's asset portfolio consists of approximately 60,000 wells and the Group is subject to certain regulatory requirements as to how these wells must be retired, typically through a process referred to as plugging. In addition, during periods where there is a high demand for plugging contractors, the costs of plugging wells can rise. As of the date of this Announcement, the average cost to plug a well is approximately $22,000 per well.

The Group has developed a strategy to safely and systematically retire wells, supported by long-term agreements with the states of Pennsylvania, Ohio, Kentucky and West Virginia, the four states where the majority of the Group's wells are located. The agreements set forth plugging and abandonment schedules and thus provide visibility on asset retirement costs for most of the Group's wells. Under these agreements, the Group can also receive credits for bringing unproductive wells back into production and the credits can be used to reduce the number of wells the Group must plug in a certain state in a given year. The Group is well-equipped to make use of the plugging credit system due to its Smarter Well Management program that allows the Group to extend well-life and reduce decline rates. In 2019, the Group returned approximately 750 non-producing wells to production. The first full year of the Group's plugging programme was 2018 and for the year ended 31 December 2018, the Group plugged 35 wells. For the year ended 31 December 2019, the Group plugged approximately 100 wells and met each of its plugging obligations for each state. Based on its agreements with the four states, the Group's minimum plugging obligations will require the Group to plug 80 wells per year beginning from 2020. The Group has assumed a plugging rate of approximately 85 to 90 wells per year in these four states.

The Group's plugging agreements with the states of Pennsylvania and West Virginia are for 15 years. The agreements with the state of Kentucky and Ohio are for ten years respectively. The Group records a liability for the future cost of decommissioning production facilities and pipelines. The decommissioning liability represents the present value of decommissioning costs relating to gas and oil properties, which the Group expects to incur over the long producing life of its wells, presently estimated through to 2093 when the Group expects the last of its current producing gas and oil properties to reach the end of their economic lives.

The table below summarises the activity for the Group's decommissioning liability. The discount rate and the cost inflation rate used in the calculation of the decommissioning liability was 5.8 per cent. as at each of the periods presented.

	Year Ended 31 December
(Amounts in thousands $)	2017	2018	2019
Balance at 1 January....................	12,265	35,448	142,725
Additions....................................	21,497	96,508	252
Accretion....................................	1,764	7,101	12,349
Disposals.....................................	(78)	(1,161)	(2,541)
Revisions to estimate(a)...............	-	4,829	46,736
Balance at 31 December..............	35,448	142,725	199,521
Less: Current decommissioning provision.....................................	-	(2,535)	(2,650)
Long-term decommissioning liability.......................................	35,448	140,190	196,871

(a)  During the year Management revised the plugging program to more closely align with operations. As a result of this revision, cost inputs and assumptions made surrounding the life of certain wells were amended.

These liabilities represent the Directors' best estimates of the future obligation. Such assumptions are based on the current economic environment, and represent what the Directors believe is a reasonable basis upon which to estimate the future liability. The Directors review these estimates regularly and adjust for any identified material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices at the time the decommissioning services are performed. Furthermore, the timing of decommissioning will vary depending on when the fields ceases to produce economically, which makes the determination dependent upon future gas and oil prices, which are inherently uncertain. As a result of this uncertainty, the Group's future asset retirement obligations may not conform with estimations.

Income Taxes

For US Federal tax purposes, the Group is taxed as one consolidated entity, which includes its parent company,  Diversified Gas & Oil plc. In the US, the Group is subject to corporate tax on its taxable profits at the rate of 21 per cent. for US federal tax and approximately 5 per cent. for state taxes. Diversified Gas & Oil plc is also subject to corporate tax in its home jurisdiction of the United Kingdom at the rate of 19 per cent., however, Diversified Gas & Oil plc's taxation in the United Kingdom does not extend to its US operations.

For the year ended 31 December 2019, the Group had federal net operating loss carryforwards of approximately $207 million. The federal net operating loss carryforwards remaining were generated in tax year ended 31 December 2018 primarily as a result of the new 100 per cent. bonus depreciation rules signed into law with the Tax Cuts and Jobs Acts on 22 December 2017. The federal net operating loss carryforward is limited to 80 per cent. of taxable income each year and does not have an expiration date. The Group currently projects the federal net operating losses to be fully utilised in tax year 2022. Additionally, the Group has state net operating loss carryforwards of approximately $37 million, which expire in the year 2038. The Group currently projects the state net operating losses to be fully utilised in tax year 2020.

As of 31 December 2019, the Group had federal marginal well tax credit carryforwards of approximately $20.7 million which expire in years 2037 to 2039. Marginal well credit carryforwards are limited to 75 per cent. of tax due before credits. The Group currently projects the credits to be fully utilised by tax year 2024.

Current trading and prospects

The US gas market continues to be a challenging environment based on the exceptionally low gas prices, abundant supply and wider disruptions in global economic activity as a result of the COVID-19 pandemic. Nevertheless, the Group is successfully navigating the unprecedented market volatility and general economic uncertainty, thus validating its business model that was defined almost 20 years ago. For the three months ended 31 March 2020, the Group's total net daily production was  94,011 boepd, representing a decrease of less than 1.0 per cent. from the Group's 2019 exit production rate of 94,832 boepd and demonstrating the Group's success at meeting energy demand while still responsibly observing social distancing and navigating other operational challenges presented by the COVID-19 pandemic. 

The Group was built to ensure resilience in this kind of economic environment, and due to the Group's low-cost operations and approach to risk mitigation through an opportunistic hedging strategy, the Group remains well-placed to consider new opportunities that arise as a result of the market backdrop. Operating efficiencies will remain the key priority for the Group in 2020 as it seeks to protect and enhance margins across the business.

The Group continues to execute on its strategy of production growth through accretive acquisitions and driving down unit operating costs through the integration of its acquisitions and the use of Smarter Well Management to offset natural production declines. The Group's Smarter Well Management programme continues to yield positive results as the Group is succeeding in maintaining production levels on its conventional assets while seeking to minimise the declines from the Group's unconventional assets.

For the three months ended 31 March 2020, the Group's Adjusted EBITDA was approximately $78 million, largely unchanged from an Adjusted EBITDA of approximately $78 million for the three months ended 31 December 2019.

The Group's board declared an interim dividend of 3.5 cents per share for the three months ended 31 March 2020, unchanged from the dividend declared for the three months ended 31 December 2019. The sustainability of the Group's dividend continues to be supported by an expanded hedge portfolio with approximately 90 per cent. of 2020 production and approximately 90 per cent. of 2021 production hedged at $2.73/MMBtu and $2.59/MMBtu, respectively.

Total cash expenses, consisting of Total Lease Operating Expense and Recurring Administrative Expense, were $6.98/boe for the three months ended 31 March 2020, declining by 1.6 per cent. or 11 cents from $7.09/boe for the three months ended 31 December 2019.

In April 2020, the Group completed a second securitised financing arrangement with the addition of its ABS II Facility. The 8.5-year securitised financing of $200 million at a 5.25 per cent. coupon rate further aligns an incremental portion of the Group's capital structure with the underlying long-life nature of its assets. The entire net proceeds of $183.6 million from the financing were used to reduce the Group's utilisation of its revolving credit facility. The Group's borrowing base on its revolving credit facility is currently $425 million, and the Group expects to complete its semi-annual redetermination process during May 2020.

Despite the challenging market backdrop, the Group remains well-positioned to maintain its steady growth, with an robust business underpinned by a diverse and low-cost asset base, strong cash flow, healthy balance sheet, proven business model and an entrepreneurial leadership team whose primary considerations are value creation and operational excellence.

COMPETENT PERSONS REPORT

Executive Summary

At the request of the Board of Directors of Diversified Gas & Oil PLC (DGO) and Stifel Nicolaus Europe Limited (Stifel), as Sponsor for DGO, Wright & Company, Inc. (Wright) has prepared the Competent Person's Report (CPR) to present our independent estimates of the proved (1P) developed reserves and associated economics based on specified technical and economic parameters effective January 1, 2020 (Effective Date). Wright's estimates of future production and income are attributable to certain working and net revenue interests of DGO as of the Effective Date. The subject properties are located in the US and primarily in the region referred to as the Appalachian Basin. According to DGO, the properties evaluated by Wright represent 100 percent of the total 1P developed net liquid and natural gas reserves owned by them at the Effective Date.

The estimates of reserves contained in the CPR were determined by accepted industry methods as determined by the Guidelines for Application of the Petroleum Resources Management System (PRMS), in particular section 4.1.4.3, as related to reserves estimation in mature reservoirs, and updated and approved by the Society of Petroleum Engineers (SPE) in 2018, and in accordance with the SPE Petroleum Reserves Definitions. An abbreviated form of the PRMS is presented in Exhibit A.

The estimates of reserves and economics were based on annual averages of the five-year New York Mercantile Exchange (NYMEX) Futures Settlements prices as published by the Chicago Mercantile Exchange (CME) Group on December 31, 2019 for years 2020 through 2024. Settle prices for January are not included in the December 31, 2019 NYMEX Futures Settlements. Base prices used are the January closing price for oil published by CME Group December 19, 2019, and the January closing price for gas published by CME Group December 27, 2019. The 2024 product prices were escalated at five percent per annum for years 2025 through 2029, and then held constant thereafter at the 2029 prices in accordance with the instructions of DGO (Base Case).  At the request of DGO, Wright also included two (2) price sensitivity cases in the CPR by adjusting the base case with a +10 and -10 percent base price at the Effective Date.  These sensitivities are described in further detail in the PRODUCT PRICE SENSITIVITIES (+/- 10%) section in the CPR. 

After the Effective Date, but prior to the completion of the CPR, there have been significant changes in product prices due to the impacts of COVID-19 and the OPEC+ and Russia price confrontation for crude oil (Subsequent Events).  The base product prices used as of the Effective Date have been negatively impacted.  In order to reflect the impact of the subsequent decline in commodity prices for crude oil and natural gas resulting from the Subsequent Events, Wright provided a third price sensitivity case to reflect the potential impact on DGO's reserves value.  For this additional price sensitivity case, Wright utilized commodity prices based on NYMEX Futures Settlements prices as published by the CME on April 13, 2020.  This sensitivity is described in further detail in the PRODUCT PRICE SENSITIVITY (SUBSEQUENT EVENTS) section in the CPR.  Exhibit B shows the Base Case prices used in the CPR. NYMEX is a commodity futures exchange owned and operated by CME Group of Chicago and is located in lower Manhattan, New York, New York, US.

The CPR details the geological and technical descriptions of methods in estimating reserves quantities and deliverability, product prices, expenses, and other criteria utilized by Wright in the evaluation process. It should be noted that the CPR is not a complete financial statement for DGO and should not be utilized as the sole basis for any transaction concerning DGO or the evaluated properties. Wright is confident that the CPR provides a fair and reasonable representation of the aggregate reserves and associated results of the DGO assets. The evaluation is based on two ARIES® databases, which represent the Northern (Northern Division) and Southern (Southern Division) Divisions.

The following table is a summary of the results of the Northern Division and Southern Division evaluations as of the Effective Date. The corresponding cash flow summaries can be found in Exhibit C. It should be noted that there are no grand total cash flow summaries; therefore, the following table is presented as a summary of the combined results of the Northern and Southern Divisions evaluations as of the Effective Date.

Evaluation of DGO Assets Utilizing Specified Economics Northern and Southern Divisions	Total Proved Developed Northern Division	Total Proved Developed Southern Division	Total Proved Developed
Net 1P Developed Reserves to the   Evaluated Interests
Oil, Mbbl:	3,387	1,404	4,791
Gas, MMcf:	1,309,953	1,632,645	2,942,598
NGL, Mbbl:	493	67,716	68,209
Oil Equivalent, MBOE:   (6 Mcf = 1 BOE)*	222,205	341,227	563,432
Number of Wells:	42,445	17,373	59,818
Cash Flow Before Tax (BTAX), M$ (US)**
Undiscounted:	1,052,147	2,928,289	3,980,436
Discounted at 10% per Annum:	743,290	1,120,936	1,864,226
Cash Flow After Tax (ATAX), M$ (US)**
Undiscounted:	778,311	2,166,934	2,945,245
Discounted at 10% per Annum:	549,477	828,633	1,378,110
*  For purposes of this CPR, quantities of natural gas are converted into equivalent quantities of oil at the ratio of 6,000 standard cubic feet of gas equal 1 barrel of oil equivalent (BOE). For additional information see the GENERAL INFORMATION section of this CPR. **  Includes summary cases for asset retirement obligations, corporate expenses, and non-hydrocarbon revenue sources.

The complete CPR is available on the Company's website at www.dgoc.com .

ADDITIONAL INFORMATION

Director service agreements and letters of appointment

Save as disclosed below, there are no existing or proposed service agreements or letters of appointment between the Directors and any members of the Group. Certain terms of the Directors' service agreements and letters of appointment are summarised below.

Service Agreements

The principal terms of the service contracts entered into by the Company with each of the Executive Directors are as follows:

Rusty Hutson, Jr.

On 30 January 2017, Rusty Hutson, Jr. ("RH") entered into a service agreement with the Company under the terms of which he agreed to act as Chief Executive Officer of the Company on a full time basis, further amended on 28 April 2020. The remuneration payable under this agreement is determined annually by the Board, provided that it shall not be less than $675,000 gross per annum. RH is also entitled to partake in any employee benefit plans, programs, practices or arrangements of the Company in which other employees of the Company located in the United States are eligible to participate, including, without limitation, any qualified or non-qualified pension, profit sharing and savings plans, any death benefit and disability benefit plans, and any medical, dental, health and welfare insurance plans. The service agreement was for an initial fixed term of 12 months from February 2017 and continues thereafter until terminated by either party giving not less than 6 months' notice in writing. RH is entitled to be reimbursed for all expenses reasonably incurred by him in the proper performance of his duties. 

Depending on the circumstances of his severance from service as Chief Executive Officer, RH may be entitled to certain payments, including previously accrued salary plus 12 months' salary.

Bradley Gray

On 30 January 2017, Brad Gray ("BG") entered into a service agreement with the Company under the terms of which he agreed to act as Chief Operating Officer of Diversified Gas & Oil Corporation on a full time basis. The remuneration payable under this agreement is determined annually by the Board, provided that it shall not be less than $275,000 gross per annum. In connection with his appointment to the Board, BG was issued 2,210,481 Ordinary Shares, which are subject to the terms of the Restricted Stock Agreement.  BG is also entitled to partake in any employee benefit plans, programs, practices or arrangements of the Company in which other employees of the Company located in the United States are eligible to participate, including, without limitation, any qualified or non-qualified pension, profit sharing and savings plans, any death benefit and disability benefit plans, and any medical, dental, health and welfare insurance plans. The service agreement was for an initial fixed term of 12 months from  February 2017 continuing thereafter until terminated by either party giving not less than 6 months' notice in writing. BG is entitled to be reimbursed for all expenses reasonably incurred by him in the proper performance of his duties.

Depending on the circumstances of his severance from service as Chief Operating Officer, BG may be entitled to certain payments, including previously accrued salary plus 6 months' salary.

Save as disclosed above, there are no existing service contracts between any Executive Director and any member of the Group, which provide for benefits upon termination.

Letters of appointment

General terms

The principal terms of the letters of appointments for the Non-executive Directors are as follows:

Name	Title	Date of appointment to the Board
David Edward Johnson..........................................................	Chair	3 February 2017
Martin Keith Thomas............................................................	Non-executive Vice Chairman	1 January 2015
David Jackson Turner Jr.........................................................	Independent Non-executive Director	27 May 2019
Sandra (Sandy) Mary Stash...................................................	Independent Non-executive Director	21 October 2019
Melanie Little.......................................................................	Independent Non-executive Director	18 December 2019

Each of the Non-executive Directors have entered into an appointment agreement under the terms of which they each agreed to act, with effect from their respective dates of appointment, each as a Non-executive director of the Company and to devote such time as is reasonably necessary for the proper performance of their respective duties under their respective agreements, including attending or participating in all board meetings. The remuneration payable to each of the Non-executive Directors under their respective letters of appointment does not exceed £75,000 gross per annum (or such higher rate as may from time to time be agreed in writing). Each of their agreement is for an initial period of 12 months from the date of their appointment and continues thereafter unless terminated by either party to the agreement giving not less than 3 months' notice.

Termination provisions

The appointment of the Chair is terminable by either party on three months' notice, and the appointment of each of the Non-executive Directors is terminable by either party on three months' notice.

The appointment of the Chair and each Non-executive Director may also be terminated with immediate effect by the Company if he or she, among other things,: (i) commits a serious or repeated breach or non-observance of his or her obligations to the Company (which includes his or her obligations not to breach fiduciary duties); or (ii) been guilty of any fraud or dishonesty or acted in any manner which, in the opinion of the Company, brings or is likely to bring the Director or the Company into disrepute or is materially adverse to the interests of the Company; (iii) a bankruptcy order made against him or her or entered into a voluntary arrangement within the meaning of the Insolvency Act 1986 or enter into a Deed of Arrangement under the Deeds of Arrangement Act 1914 or make any composition with some or all of his creditors; (iv) become incapacitated from performing his duties hereunder for a period of 90 days (whether concurrently or in aggregate) in any 12 month period (without prejudice to any rights the Director may have under the Equality Act 2012); (v) been disqualified from acting as a director; or (vi) fails to be re-appointed or re-elected, or vacates his or her office, or otherwise stops being a director in accordance with the Articles.

Options, Awards and Employee Share Option Schemes

(a)  As at the date of this Announcement:

· the Company has not, save as set out below, issued any options or warrants to subscribe for Ordinary Shares, nor any other equity securities convertible into Ordinary Shares;  

· on 30 January 2017 and 15 June 2017, the Company issued 2,364,769 warrants to Mirabaud, which are currently outstanding.

(b)  The Directors believe that the success of the Group will depend to a significant degree on the future performance of the executive management team. The Directors also recognise the importance of employees being well motivated and identifying closely with the success of the Group.

(c)  On 30 January 2017, the Directors implemented an equity incentive plan, which was amended and restated on 11 May 2020 (as amended, the "Equity Incentive Plan"), under which the Company offers incentives to employees and Executive Directors. Awards granted under the Equity Incentive Plan shall be administered by the Board (or duly constituted committee thereof), which shall also be responsible for, among other things, construing and interpreting the Equity Incentive Plan. Subject to certain conditions, a total of up to 50,680,609 new Ordinary Shares of the Company from time to time shall be available to satisfy awards under the Equity Incentive Plan. Shares available for distribution under the Equity Incentive Plan may consist, in whole or in part, of authorised and unissued shares, treasury shares or shares reacquired by the Company in any manner. The Equity Incentive Plan provides for the potential award of two types of share option awards: incentive stock options and non-qualified stock options. The Equity Incentive Plan sets out a number of eligibility conditions which must be followed, including that incentive stock options are only to be granted to employees and each award granted under the Equity Incentive Plan must be evidenced by an award agreement. The Equity Incentive Plan also provides for other awards consisting of stock appreciation rights, restricted awards, performance share awards and performance compensation awards. Performance compensation awards may take the form of a cash bonus, a portion of which may be deferred through the grant of restricted stock units.  Award levels will be determined each year by the Remuneration Committee. An award may not be granted to an individual if such grant would cause the aggregate total market value (as measured at the respective dates of grant) of the maximum number of shares that may be acquired on realisation of the individual's Equity Incentive Plan awards in relation to the same financial year to exceed 250 per cent. of the individual's base salary at the date of grant. The vesting of awards granted to Executive Directors and other senior employees will normally be dependent upon the satisfaction of stretching performance conditions that are appropriate to the strategic objectives of the Company. If the Remuneration Committee so determines upon the grant of certain types of award, the number of shares under an award may be increased to account for dividends paid on any vesting shares in the period between grant and vesting (or such other period as the Remuneration Committee may determine). Alternatively, participants may receive a cash sum equal to the value of dividends paid on any vesting shares in the relevant period. Where appropriate, awards under the Equity Incentive Plan will be granted subject to the Company's policy relating to malus and clawback and post-vesting holding periods.  In any 10-year period, the Company may not grant awards under the Equity Incentive Plan if such grant would cause the number of shares that could be issued under the Equity Incentive Plan or any other share plan adopted by the Company or any other company under the Company's control on or after admission to the Main Market of the London Stock Exchange to exceed 10 per cent. of the Company's issued ordinary share capital at the proposed date of grant.  The Share Option Scheme is governed by the laws of the State of Alabama.

(d)  Effective 14 April 2020, the Remuneration Committee approved certain awards under the Equity Incentive Plan for each of Rusty Hutson, Jr. (Chief Executive Officer) and Brad Gray (Chief Operating Officer) (the "2020 Awards"). The 2020 Awards comprise:

(i)  an annual bonus award of up to a maximum of one hundred fifty percent (150%) for Mr. Hutson and Mr. Gray of each recipient's annual base salary. Subject to the relevant performance criteria being met, the annual bonus awards will be paid no later than 15 March 2021 in cash (up to one hundred per cent (100%) of each recipient's annual base salary). Any portion of an award that exceeds one hundred percent (100%) of the recipient's annual base salary will be granted in restricted stock units pursuant to the Equity Incentive Plan with a deferred vesting and settlement date of 28 February 2022; and

(ii)  a performance share award with a value up to a maximum of two hundred percent (200%) for Mr. Hutson and Mr. Gray of each recipient's annual base salary. The performance share awards are expected to vest no later than 15 March 2023, subject to certain performance targets being met over the three-year performance period of 1 January 2020 through 31 December 2022.  The performance targets measure three year average return on equity, three year absolute total shareholder return ("TSR") and TSR relative to FTSE 250 Index TSR.

(e)  The Company has also entered into Restricted Stock Unit Agreements with certain employees ("Recipients") pursuant to which such employees were granted the following restricted stock units (the "Units") in the Company to acquire new Ordinary Shares under the Share Option Scheme. As at the Last Practicable Date, 1,816,209 Units are currently outstanding. Each Unit represents the right to one Ordinary Share in the Company. The Recipients do not have any rights as a shareholder with respect to the shares underlying the Units, including the rights to vote or to dividends, until the Units vest and are settled by the issuance of new Ordinary Shares. In order for the Units to vest, the Recipient must remain actively employed with the Company.

(f)  As of the date of this Announcement, under the Share Option Scheme, the Company has a total of 23,220,000 options outstanding to certain directors and employees of the Group, none of which have been vested. The Company has Share Options under the Share Option Scheme over 14,650,000 new Ordinary Shares outstanding in aggregate at an exercise price of 84 pence per share to a total of 15 employees (including the Executive Directors) and over 800,000 new Ordinary Shares outstanding in aggregate at an exercise price of 96 pence per share to two employees. These Share Options will vest in three to five years' time. In addition, the Company has Share Options under the Share Option Scheme over 8,520,000 new Ordinary Shares outstanding in aggregate at an exercise price of 120 pence per share to a total of 26 employees (including Executive Directors).

(g)  The following options and awards have been granted to the Directors and Senior Managers and remain outstanding as at the Last Practicable Date.

Name	Ordinary Shares subject to the option/award	Exercise period	Exercise price per share (£)
Directors
Rusty Hutson, Jr.......................................	6,000,000	In three tranches, ending on 1 March 2023	0.84
	2,400,000	In three tranches, ending on 1 March 2024	1.20
	78,3511	In one tranche, ending on 23 April 2021	-
Brad Gray................................................	2,750,000	In three tranches, ending on 1 March 2023	0.84
	1,100,000	In three tranches, ending on 1 March 2024	1.20
	64,5241	In one tranche, ending on 26 April 2021	-
Senior Managers
Eric Michael Williams................................	1,750,000	In three tranches, ending on 1 March 2023	0.84
	700,000	In three tranches, ending on 1 March 2024	1.20
	400,0001	In five tranches, ending on 1 August 2024	-
Bryan Keith Berry.....................................	750,000	In three tranches, ending on 1 March 2023	0.84
	200,000	In three tranches, ending on 1 March 2024	1.20
Michael Walton Garrett............................	750,000	In three tranches, ending on 1 March 2023	0.84
	200,000	In three tranches, ending on 1 March 2024	1.20
	25,0001	In three tranches, ending on 1 January 2021	-
Benjamin Sullivan.....................................	250,000	In three tranches, ending on 1 July 2023	1.20
	500,0001	In four tranches, ending on 1 July 2023	-
James Rode.............................................	300,000	In three tranches, ending on 1 March 2024	1.20
	500,0001	In two tranches, ending on 1 June 2022	-

Notes :

(1)  Restricted stock units issued by the Company

Dividend Policy

The Board's target is to return not less than 40 per cent. of free cash flow to Shareholders by way of dividend, on a quarterly basis, in line with the strength and consistency of the Group's cash flows.

For the three months ended 31 March 2019, the Company paid a dividend of 3.42 cents per Ordinary Share on 27 September, 2019. For the three months ended 30 June 2019, the Company paid a dividend of 3.50 cents per Ordinary Share on 18 December 2019. For the three months ended 30 September 2019, the Company paid a dividend of 3.50 cents per Ordinary Share in March 2020. For the three months ended 31 December 2019, the Company expects to pay a dividend of 3.50 cents per Ordinary Share in June 2020.

The Directors may further revise the Group's dividend policy from time to time in line with the actual results and financial position of the Group.

The Board's dividend policy reflects the Company's current and expected future cash flow generation potential.

Material UK tax considerations

Taxation in the United Kingdom

The following statements are based on current UK tax law and current HMRC published practice currently in force in the UK. Such law and practice (including, without limitation, rates of tax) is in principle subject to change at any time. The information that follows is for guidance purposes only. All potential investors, and in particular any person who is in any doubt about their position, should contact their professional advisor immediately.

Tax treatment of UK investors

The following statements only apply to Shareholders who are resident (and in the case of individuals, domiciled or deemed domiciled) in the UK and who beneficially own Ordinary Shares as investments and not as securities to be realised in the course of a trade. It is based on the law and practice currently in force in the UK. The information is not exhaustive and does not apply to potential investors:

· who are dealers in securities, insurance companies, collective investment schemes or Shareholders who have (or are deemed to have) acquired their Ordinary Shares by virtue of an office or employment, who may be subject to special rules;

· who intend to acquire, or may acquire (either on their own or together with persons with whom they are connected or associated for tax purposes), more than 10 per cent., of any of the classes of shares in the Company; or

· who intend to acquire Ordinary Shares as part of tax avoidance arrangements; or

· who are in any doubt as to their taxation position.

Such Shareholders should consult their professional advisers without delay. Shareholders should note that tax law and interpretation can change and that, in particular, the levels, basis of and reliefs from taxation may change. Such changes may alter the benefits of investment in the Company.

Shareholders who are neither resident nor temporarily non-resident in the UK and who do not carry on a trade, profession or vocation through a branch, agency or permanent establishment in the UK with which the Ordinary Shares are connected, will not normally be liable to UK taxation on dividends paid by the Company or on capital gains arising on the sale or other disposal of Ordinary Shares. Such Shareholders should consult their own tax advisers concerning their tax liabilities.

Dividends

Withholding tax

The Company will not be required to withhold amounts on account of UK tax at source when paying dividends in respect of Ordinary Shares.

Subject to certain limitations, any US tax withheld from a dividend and paid over to the relevant taxing authority will be eligible for credit against a UK tax resident Shareholder's UK tax liability except to the extent that a refund is available under US tax law or under any applicable tax treaty to the Shareholder or a connected person. If a refund becomes available after the UK tax resident Shareholder has submitted its tax return, the UK tax resident Shareholder will be required to notify HMRC and will lose the credit to the extent of the refund.

Where a UK tax resident Shareholder is not liable to UK tax on dividends or benefits from exemption, no credit will be available for any US tax withheld and paid over to the relevant taxing authority.

Individual Shareholders

Shareholders who are resident and domiciled in the UK for taxation purposes may, depending on their circumstances, be liable to UK income tax in respect of dividends paid by the Company.

A nil rate of income tax will apply to the first £2,000 of dividend income received by an individual shareholder in a tax year from 6 April 2019 (the "Nil Rate Amount"), regardless of what tax rate would otherwise apply to that dividend income. Any dividend income received by an individual shareholder in a tax year in excess of the Nil Rate Amount will be subject to income tax at the following dividend rates for 2020/21: 7.5 per cent. for basic rate taxpayers, 32.5 per cent for higher rate taxpayers and 38.1 per cent. for additional rate taxpayers.

Dividend income that is within the dividend nil rate amount counts towards an individual's basic or higher rate limits - and will therefore affect the level of savings allowance to which they are entitled, and the rate of tax that is due on any dividend income in excess of the nil rate amount. In calculating into which tax band any dividend income over the nil rate amount falls, savings and dividend income are treated as the highest part of an individual's income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice

Corporate shareholders

A UK resident corporate Shareholder which is considered to be a "small company" for the purposes of Chapter 2 of Part 9A of the Corporation Tax Act 2009 will be liable to UK corporation tax as the Company is dual tax resident company. As such, small UK corporate shareholders receiving dividends from the Company will be liable to UK corporation tax (currently at a rate of 19 per cent).

A UK resident corporate Shareholder (which is not a "small company" for the purposes of the UK taxation of dividends legislation in Part 9A of the Corporation Tax Act 2009) will be liable to UK corporation tax (currently at a rate of 19 per cent) unless the dividend falls within one of the exempt classes set out in Part 9A. Examples of exempt classes (as defined in Chapter 3 of Part 9A of the Corporation Tax Act 2009) include dividends paid on shares that are ''ordinary shares'' (that is shares that do not carry any present or future preferential right to dividends or to the Company's assets on its winding up) and which are not "redeemable", and dividends paid to a person holding less than 10 per cent. of the issued share capital of the payer (or any class of that share capital in respect of which the distribution is made). However, the exemptions are not comprehensive and are subject to anti-avoidance rules.

Disposals of Ordinary Shares

For the purpose of UK tax on chargeable gains, the amounts paid by a Shareholder for Ordinary Shares will generally constitute the base cost of their holdings in those Ordinary Shares.

A disposal or deemed disposal of Ordinary Shares by a Shareholder who is resident in the UK for tax purposes may give rise to a chargeable gain or an allowable loss for the purposes of UK taxation of chargeable gains depending upon the Shareholder's circumstances and subject to any available exemption or relief.

UK resident individual Shareholders

For an individual Shareholder within the charge to UK capital gains tax, a disposal (or deemed disposal) of Ordinary Shares may give rise to a chargeable gain or an allowable loss for the purposes of capital gains tax. The rate of capital gains tax on disposal of shares is 10 per cent. (2020/2021) for individuals who are subject to income tax at the basic rate and 20 per cent. (2020/2021) for individuals who are subject to income tax at the higher or additional rates. An individual Shareholder is entitled to realise an annual exempt amount of gains (currently £12,300) for the year to 5 April 2021 without being liable to UK capital gains tax.

UK resident corporate Shareholders

For a corporate Shareholder within the charge to UK corporation tax, a disposal (or deemed disposal) of Ordinary Shares may give rise to a chargeable gain at the rate of corporation tax applicable to that Shareholder (currently 19 per cent) or an allowable loss for the purposes of UK corporation tax.

Stamp Duty and Stamp Duty Reserve Tax

The statements below are intended as a general guide to the current position. They do not apply to certain intermediaries who are not liable to stamp duty or stamp duty reserve tax or (except where stated otherwise) to persons connected with depositary arrangements or clearance services who may be liable at a higher rate.

No stamp duty or stamp duty reserve tax will generally be payable on the issue of Ordinary Shares.

The transfer of, or agreement to transfer, Ordinary Shares will generally give rise to a liability to both stamp duty and/or stamp duty reserve tax ("SDRT"). Both taxes are payable at a rate of 0.5 per cent. In the case of stamp duty this would apply to the consideration provided rounded up to the nearest £5 or to the higher of the consideration provided and the market value if the shares are transferred between connected persons. In the case of SDRT this would apply to the amount or value of the consideration payable or the higher of the consideration provided and the market value if transferred between connected persons. Payment of the appropriate amount of stamp duty would cancel the parallel charge to SDRT. An exemption from stamp duty is available on an instrument transferring Ordinary Shares where the amount or value of the consideration payable is £1,000 or less, and it is certificated on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate consideration exceeds £1,000. Unless the transaction takes place within a clearance system or depositary receipt system (to which special rules apply), a charge to SDRT will also arise on an unconditional agreement to transfer Ordinary Shares as set out above. However, if within six years of the date of the agreement becoming unconditional an instrument of transfer is executed pursuant to the agreement, and stamp duty is paid on that instrument, any SDRT already paid will be refunded (generally, but not necessarily, with interest) provided that a claim for repayment is made, and any outstanding liability to SDRT will be cancelled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee. In the event that the shares are in dematerialised form and the sale of the shares is settled in CREST, stamp duty would not apply and SDRT is automatically deducted at 0.5 per cent and paid to HMRC.

The above comments are intended as a guide to the general stamp duty and stamp duty reserve tax position and may not relate to persons such as charities, market makers, brokers, dealers, intermediaries and persons connected with depositary arrangements or clearance services to whom special rules apply.

Material US Federal Income Tax Considerations

The following discussion is a summary of the material US federal income tax consequences to Non US Holders and US Holders (each, as defined below) of the purchase, ownership and disposition of the Ordinary Shares, but does not purport to be a complete analysis of all potential tax effects. The effects of other US federal tax laws, such as estate and gift tax laws, and any applicable state, local or non US tax laws are not discussed. This discussion is based on the US Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated under the Code, judicial decisions, and published rulings and administrative pronouncements of the US Internal Revenue Service, or the IRS, in each case in effect as of the date of this Announcement. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of the Ordinary Shares. The Company has not sought any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of the Ordinary Shares.

This discussion is limited to Non US Holders and US Holders that each hold the Ordinary Shares as a "capital asset" within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all US federal income tax consequences relevant to a holder's particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to holders subject to special rules, including, without limitation:

· US expatriates and former citizens or long term residents of the United States;

· persons subject to the alternative minimum tax;

· persons holding the Ordinary Shares as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

· banks, insurance companies, and other financial institutions;

· brokers, dealers or traders in securities;

· "controlled foreign corporations", "passive foreign investment companies", and corporations that accumulate earnings to avoid US federal income tax;

· partnerships or other entities or arrangements treated as partnerships for US federal income tax purposes and other pass through entities (and investors in such entities);

· tax exempt organisations or governmental organisations;

· persons deemed to sell the Ordinary Shares under the constructive sale provisions of the Code;

· persons who hold or receive the Ordinary Shares pursuant to the exercise of any employee stock option or otherwise as compensation;

· tax qualified retirement plans;

· "qualified foreign pension funds" as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds; and

· persons subject to special tax accounting rules as a result of any item of gross income with respect to the Ordinary Shares being taken into account in an applicable financial statement.

If an entity or arrangement treated as a partnership for US federal income tax purposes holds the Ordinary Shares, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding the Ordinary Shares and the partners in such partnerships should consult their tax advisors regarding the US federal income tax consequences to them.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE US FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE ORDINARY SHARES ARISING UNDER THE US FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON US TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

US Tax Status of the Company

Pursuant to Section 7874 of the Code, the Company believes it is and will continue be treated as a US corporation for all purposes under the Code. As the Company will be treated as a US corporation for all purposes under the Code, the Company will not be treated as a "passive foreign investment company", as such rules apply only to non-US corporations for US federal income tax purposes.

US Holders

For purposes of this discussion, a "US Holder" is any person that, for US federal income tax purposes, is or is treated as any of the following:

· an individual who is a citizen or resident of the United States;

· a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;

· an estate, the income of which is subject to US federal income tax regardless of its source; or

· a trust that (1) is subject to the primary supervision of a US court and the control of one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for US federal income tax purposes.

Distributions

Distributions, if any, made on the Ordinary Shares, other than certain pro rata distributions of common shares, generally will be included in a US Holder's income as ordinary dividend income to the extent of the Company's current or accumulated earnings and profits and treated as US source income for US foreign tax credit purposes. Distributions in excess of the Company's current and accumulated earnings and profits will be treated as a tax-free return of capital to the extent of a US Holder's tax basis in the Ordinary Shares and thereafter as capital gain from the sale or exchange of such Ordinary Shares. Dividends received by a corporate US Holder may be eligible for a dividends-received deduction, subject to applicable limitations. Dividends received by certain non-corporate US Holders (including individuals) are generally taxed at the lower applicable long-term capital gains rates, provided certain holding period and other requirements are satisfied.

Sales, Certain Redemptions or Other Taxable Dispositions of Ordinary Shares

Upon sales, certain redemptions or other taxable dispositions of the Ordinary Shares, a US Holder generally will recognise gain or loss equal to the difference between the amount realised and the US Holder's tax basis in the Ordinary Shares. Any gain or loss recognised on a taxable disposition of the Ordinary Shares will be capital gain or loss and treated as US source for US foreign tax credit purposes. Such capital gain or loss will be long-term capital gain or loss if a US Holder's holding period at the time of the sale, redemption or other taxable disposition of the Ordinary Shares is more than one year. Long-term capital gains recognised by certain non-corporate US Holders (including individuals) are generally subject to a reduced rate of US federal income tax. The deductibility of capital losses is subject to limitations.

If the consideration received upon the sale or other taxable disposition of the Ordinary Shares is paid in foreign currency, the amount realised will be the US Dollar value of the payment received, translated at the spot rate of exchange on the date of taxable disposition. If the Ordinary Shares are treated as traded on an established securities market for US federal income tax purposes and the relevant US Holder is either a cash basis taxpayer or an accrual basis taxpayer who has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the IRS), such holder will determine the US Dollar value of the amount realised in foreign currency by translating the amount received at the spot rate of exchange on the settlement date of the taxable disposition. An accrual basis taxpayer that does not make the special election will recognise exchange gain or loss to the extent attributable to the difference between the exchange rates on the date of disposition and the settlement date, and such exchange gain or loss generally will constitute US-source ordinary income or loss.

A US Holder's initial tax basis in the Ordinary Shares generally will equal the cost of such Ordinary Shares. If a US Holder used foreign currency to purchase the Ordinary Shares, the cost of such Ordinary Shares will be the US dollar value of the foreign currency purchase price on the date of purchase, translated at the spot rate of exchange on that date. If the Ordinary Shares are treated as traded on an established securities market for US federal income tax purposes and the relevant US Holder is either a cash basis taxpayer or an accrual basis taxpayer who has made the special election, the US Holder will determine the US dollar value of the cost of such Ordinary Shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase.

Non US Holders

For purposes of this discussion, a "Non US Holder" is any beneficial owner of the Ordinary Shares that is neither a US Holder nor an entity treated as a partnership for US federal income tax purposes.

Distributions

If the Company makes distributions of cash or property on the Ordinary Shares, such distributions will constitute dividends for US federal income tax purposes to the extent paid from the Company's current or accumulated earnings and profits, as determined under US federal income tax principles. Amounts not treated as dividends for US federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non US Holder's adjusted tax basis in its  Ordinary Shares, but not below zero. Any excess will be treated as capital gain and will be treated as described below under "-Sale or Other Taxable Disposition."

Subject to the discussion below on effectively connected income and the discussion in the subsequent paragraph regarding the Company's USRPHC status, dividends paid to a Non US Holder of the Ordinary Shares will be subject to US federal withholding tax at a rate of 30 per. cent. of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non US Holder furnishes a valid IRS Form W 8BEN or W 8BEN E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non US Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non US Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

As a result of the Company's status as a USRPHC (as described below), the Company will have additional withholding tax obligations which it will need to satisfy either by treating the entire distribution as a dividend, subject to the withholding rules above (but withhold at a minimum rate of 15 per cent or such lower rate as may be specified by an applicable income tax treaty for distributions from a USRPHC) or by treating only the amount of the distribution equal to the Company's reasonable estimate of its current and accumulated earnings and profits as a dividend, with the excess portion of the distribution possibly being subject to withholding at a rate of 15 per cent or such lower rate as may be specified by an applicable income tax treaty as if such excess were the result of a sale of shares in a USRPHC.

If dividends paid to a Non US Holder are effectively connected with the Non US Holder's conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non US Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non US Holder will be exempt from the US federal withholding tax described above. To claim the exemption, the Non US Holder must furnish to the applicable withholding agent a valid IRS Form W 8ECI, certifying that the dividends are effectively connected with the Non US Holder's conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to US federal income tax on a net income basis at the regular graduated rates. A Non US Holder that is a corporation also may be subject to a branch profits tax at a rate of 30.0 per. cent. (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non US Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Sale or Other Taxable Disposition

Subject to the discussion below on information reporting, backup withholding and foreign accounts, a Non US Holder will not be subject to US federal income tax on any gain realized upon the sale or other taxable disposition of the Ordinary Shares unless:

· the Ordinary Shares constitute a US real property interest, or USRPI, by reason of the Company's status as a US real property holding corporation, or USRPHC, for US federal income tax purposes at any applicable time within the shorter of the five year period preceding the Non US Holder's disposition of, or the Non US Holder's holding period for, the Ordinary Shares (such shorter time, "5-Year Period");

· the gain is effectively connected with the Non US Holder's conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non US Holder maintains a permanent establishment in the United States to which such gain is attributable); or

· the Non US Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met.

Due to the nature of its assets and operations, the Company believes it is a USRPHC under the Code and Ordinary Shares constitute a US real property interest.  Non-US Holders in their capacity as sellers or transferors are subject to US federal income tax in respect of a gain on their Ordinary Shares and are required to file a US tax return. Such gain should be determined in US dollars, based on the excess, if any, of US dollar value of the consideration received over the Non-US Holder's basis in the Ordinary Shares determined in US dollars under the rules applicable to US Holders. Furthermore, the amount realized from any disposition is subject to a withholding tax of 15 per cent. required to be collected from disposition proceeds, unless the Ordinary Shares qualify as "regularly traded on an established securities market." Non-US Holder may, by filing a US tax return, be able to claim a refund for any withholding tax deducted in excess of the tax liability on gain.  Furthermore , Non-US Holders will be required to pay, by filing a US tax return, any tax liability on gain that is not satisfied by withholding. A Non-US Holder that has owned 5 per cent. or less of the Ordinary Shares during the entire 5-Year Period, taking into account applicable constructive ownership rules, may treat its ownership of the Ordinary Shares as not constituting a USRPI and thereby avoid net income tax payment and tax return filing obligations if the Ordinary Shares are treated as "regularly traded on an established securities market."  The Company makes no representations as to whether the Ordinary Shares have been and will be treated as "regularly traded on an established securities market."

Gain described in the second bullet point above generally will be subject to US federal income tax on a net income basis at the regular graduated rates. A Non US Holder that is a corporation also may be subject to a branch profits tax at a rate of 30 per cent. (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

Gain described in the third bullet point above will be subject to US federal income tax at a rate of 30 per cent. (or such lower rate specified by an applicable income tax treaty), which may be offset by US source capital losses of the Non US Holder (even though the individual is not considered a resident of the United States), provided the Non US Holder has timely filed US federal income tax returns with respect to such losses.

Non US Holders should consult their tax advisors regarding tax consequences of our treatment as a USRPHC and regarding potentially applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

US Holders

Information reporting requirements generally will apply to payments of dividends on the Ordinary Shares and the proceeds of a sale of the Ordinary Shares paid to a US Holder unless the US Holder is an exempt recipient and, if requested, certifies as to that status. Backup withholding generally will apply to those payments if the US Holder fails to provide an appropriate certification with its correct taxpayer identification number or certification of exempt status. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a US Holder's US federal income tax liability, provided the required information is timely furnished to the IRS.

Non-US Holders

Generally, the amount of dividends on the Ordinary Shares paid to non-US Holders and the amount of tax, if any, withheld with respect to those payments must be reported annually to the IRS and to the non-US Holders. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in a country in which the non-US Holder resides under the provisions of an applicable income tax treaty. In general, a non-US Holder will not be subject to backup withholding with respect to payments of dividends on the Ordinary Shares, provided the applicable tax certifications have been received or the non-US Holder otherwise establishes an exemption. In addition, a non-US Holder will be subject to information reporting and, depending on the circumstances, backup withholding with respect to payments of the proceeds of the sale of the Ordinary Shares conducted within the United States or through certain US-related financial intermediaries, unless the statement described above has been received or the non-US Holder otherwise establishes an exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a non-US Holder's US federal income tax liability, if any, provided the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) on certain types of payments made to non US financial institutions and certain other non US entities. Specifically, a 30 per. cent. withholding tax may be imposed on dividends on, or gross proceeds from the sale or other disposition of, the Ordinary Shares paid to a "foreign financial institution" or a "non financial foreign entity" (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non financial foreign entity either certifies it does not have any "substantial United States owners" (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the US Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain "specified United States persons" or "United States owned foreign entities" (each as defined in the Code), annually report certain information about such accounts, and withhold 30 per cent. on certain payments to non compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on the Ordinary Shares. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of Ordinary Shares on or after January 1, 2019 (except to the extent subject to the USRPI rules), recently proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely.  Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in the Ordinary Shares.

Material contracts

Carbon Assets purchase and sale agreement

On 7 April 2020, Diversified Gas & Oil Corporation, a subsidiary of the Company, executed a conditional Carbon PSA with Carbon in connection with the possible acquisition of the Carbon Assets. If the acquisition were to complete, the Company currently estimates that the consideration payable would comprise: (i) approximately $110 million , payable in cash at closing; and (ii) a further payment of up to $15 million, subject to the achievement of certain conditions with respect to future gas prices, payable over a period of up to three years after closing. However, the final consideration payable may be less than currently estimated and will be determined following completion of due diligence by the Company and satisfaction of the other conditions under the Carbon PSA.

The potential acquisition of the Carbon Assets is subject to a significant number of conditions. The satisfaction of certain of these conditions are within the sole control of the Group such as completion of due diligence (including all title, environmental, contractual, credit, litigation, and regulatory diligence) to the Company's satisfaction and the Company's right to not complete the acquisition if there is a material change in the conditions, assets, or operational matters of the Carbon Assets prior to completion of the acquisition. In addition, the acquisition is also conditional upon satisfaction of various other conditions, including receipt of all necessary shareholder consents, approvals, authorisations and permits (including any authorisations required from the Federal Energy Regulatory Commission and various State Public Service Commissions). 

Carbon has provided customary commercial representations and warranties on the Carbon Assets, which are also conditional upon satisfaction of the conditions under the Carbon PSA and completion of the acquisition.

Under the terms of the Carbon PSA, the Company has a right to exclusivity pursuant to which Carbon has agreed to not enter into any negotiations or discussions with any third party in connection with the disposal of the Carbon Assets for a period ending on 30 June 2020 to enable the Company to complete its due diligence and for the satisfaction of all the conditions under the Carbon PSA. If completed, the Carbon PSA will have an effective date of 1 January 2020.

The Carbon PSA is governed by the laws of Texas.

US-Listed Vendor purchase and sale agreement

On 11 May 2020, the Company executed a conditional purchase and sale agreement a US-Listed Vendor in connection with the possible acquisition of the US-Listed Vendor Assets. If the acquisition were to complete, the Company currently estimates that the consideration payable would comprise: (i) approximately $125 million, payable in cash at closing; and (ii) a further payment of up to $20 million, subject to the achievement of certain conditions with respect to future gas prices, payable over a period of up to three years after closing. However, the final consideration payable may be less than currently estimated and will be determined following completion of due diligence by the Company and satisfaction of the other conditions under the US-Listed Vendor PSA.

The potential acquisition of the US-Listed Vendor Assets is subject to a significant number of conditions. The satisfaction of certain of these conditions are within the sole control of the Group such as completion of due diligence (including all title, environmental, contractual, credit, litigation, and regulatory diligence) to the Company's satisfaction and the Company's right to not complete the acquisition if there is a material change in the conditions, assets, or operational matters of the US-Listed Vendor Assets prior to completion of the acquisition. In addition, the acquisition is also conditional upon satisfaction of various other conditions, including receipt of all necessary shareholder consents, approvals, authorisations and permits. 

The US-Listed Vendor has provided customary commercial representations and warranties on the US-Listed Vendor Assets, which are also conditional upon satisfaction of the conditions under the US-Listed Vendor PSA and completion of the acquisition.

Under the terms of the US-Listed Vendor PSA, the Company has a right to exclusivity pursuant to which the US-Listed Vendor has agreed to not enter into any negotiations or discussions with any third party in connection with the disposal of the US-Listed Vendor for a period ending on 28 May 2020 to enable the Company to complete its due diligence and for the satisfaction of all the conditions under the US-Listed Vendor PSA. If completed, the US-Listed Vendor PSA will have an effective date of 1 January 2020.

The US-Listed Vendor PSA is governed by the laws of Pennsylvania.

Diversified ABS Phase II LLC Agreement

On 9 April 2020, Diversified ABS Phase II LLC ("Diversified ABS II"), a wholly owned subsidiary of the Company, issued and sold $200,000,000 aggregate principal amount of its 5.25% notes due 28 July 2037 (the "Notes") in a private placement transaction pursuant to an indenture entered into on the same date (the "Indenture") between UMB Bank, N.A., as indenture trustee (the "Indenture Trustee"), and Diversified ABS II. Diversified ABS II also issued membership interests in itself to Diversified ABS Phase II Holdings LLC pursuant to an operating agreement dated 23 March 2020.

Diversified ABS II used the proceeds from the issue and sale of the Notes:

· to finance the acquisition of an undivided 29.4 per cent. interest in certain wellbores (the "Wellbore Interests") owned by Diversified Production LLC ("Diversified Production");

· to establish a non-interest bearing trust account on behalf of the Indenture Trustee and in the name of the Indenture Trustee (the "Liquidity Reserve Account") for the benefit of the Note holders and the counterparties to Hedge Agreements (defined below);

· to pay transaction fees and expenses related to the issuance of the Notes; and

· for general limited liability company purposes.

Under the terms of the Indenture, Diversified ABS II is required to enter into and maintain until the earlier of (i) the six-year anniversary of the Closing Date or (ii) the redemption of the Notes in accordance with the Indenture, hedge agreements with an aggregate notional volume of (and fixing the price exposure with respect to) at least 85.0 per cent. but no more than 95 per cent. of the projected natural gas output from the Wellbore Interests for each month classified as "proved" on a two-year rolling basis.

Early amortization of the Notes' principal and outstanding interest payments will occur if:

· any event of default occurs under the Indenture;

· as of a payment date under the Indenture, DSCR (as defined in the Indenture) is less than 1.15 to 1.00, production is below 80 per cent. of the agreed amount or the value of the Wellbore Interests is below 85 per cent. of the value of the Notes; and

· Diversified Production materially defaults under the "Management Services Agreement", dated 9 April 2020, by and among Diversified ABS II, Diversified Production and Diversified Gas & Oil Corporation. Among others things, "Material Manager Defaults" under the Management Services Agreement include bankruptcy or dissolution of Diversified Production, the failure of Diversified Production to remit funds to Diversified ABS II within specified time periods, the acceleration of indebtedness of Diversified Production (subject to a $10 million threshold) and the rendering of a non-appealable judgment in excess of $10 million against Diversified Production.

The Indenture also contains standard representations and warranties, affirmative and negative covenants and events of defaults, including financial reporting and performance covenants, as well as covenants relating to the separation of Diversified ABS II from Diversified Production and the replacement of Diversified Production as the manager under the Management Services Agreement..

The Indenture is governed by the laws of the state of New York, and the holders of the Notes irrevocably waived their right to a jury trial and agreed to submit to the jurisdiction of the courts of New York.

Working Capital

In the opinion of the Company, taking into account the Group's existing financing arrangements, the Group has sufficient working capital for its present requirements, that is, for at least the next 12 months following the date of this Announcement.

Litigation

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the twelve months preceding the date of this Announcement, which may have or have had in the recent past significant effects on the Company's and/or Group's financial position or profitability.

DEFINITIONS

The following definitions apply throughout this Announcement unless the context requires otherwise:

"Adjusted EBITDA"	earnings before interest, taxes, depletion, depreciation and amortisation and adjustments for non-recurring items such as gain on the sale of assets, acquisition related expenses and integration costs, mark-to-market adjustments related to the Company's hedge portfolio, non-cash equity compensation charges and items of a similar nature;
"Admission"	the admission of all of the issued to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the London Stock Exchange's standards for admission and disclosure for securities (as amended from time to time);
"Alliance Petroleum"	Alliance Petroleum Corporation;
"Alliance Petroleum Acquisition"	the acquisition of the entire share capital of Alliance Petroleum in March 2018;
"Articles"	the articles of association of the Company, from time to time;
"Board"	the board of directors of the Company from time to time including a duly constituted committee thereof;
"CAGR"	compound annual growth rate;
"Carbon"	Carbon Energy Corporation and Nytis Exploration (USA) Inc.;
"Carbon Assets"	certain upstream and midstream assets of Carbon in the Appalachian Basin, including approximately 6,100 net conventional wells located in Appalachia (Tennessee, Kentucky, West Virginia) as well as various non-operated wells, midstream pipeline systems and facilities (including intrastate gathering pipeline of approximately 4,700 miles in West Virginia and two active natural gas storage fields);
"Cenkos"	Cenkos Securities Plc;
"cents"	US cents;
"CNX"	CNX Resources LLC;
"CNX Assets Acquisition"	the acquisition of the producing natural gas and oil wells from CNX Resources LLC in the  Appalachian Basin, principally in Pennsylvania and West Virginia, with some wells in Ohio in March 2018;
"Company"	Diversified Gas & Oil plc;
"Competent Person"	Wright & Company, Inc., the competent person and author of the Competent Person's Reports;
"Competent Person's Report"	the report relating to the Group's production assets produced by the Competent Person, being the Competent Person's Report, available on the Company's website at www.dgoc.com;
"Core"	Core Appalachia Holding Co, LLC;
"Core Acquisition"	the acquisition of the entire issued share capital of Core in October 2018;
"Core Acquisition Agreement"	the acquisition agreement dated 10 October 2018, pursuant to which the Company acquired Core;
"Credit Suisse"	Credit Suisse Securities (Europe) Limited;
"Directors"	the directors of the Company;
"EBITDA"	earnings before interest, tax, depreciation and amortisation;
"EdgeMarc Energy"	EdgeMarc Energy Holdings, LLC;
" EdgeMarc Energy Acquisition "	the acquisition of certain oil and natural gas development, production and exploration assets located in Ohio from EdgeMarc Energy and certain of its subsidiaries in September 2019;
"EdgeMarc Energy Acquisition Agreement"	the acquisition agreement dated September 2019, pursuant to which the Company effected EdgeMarc Energy Acquisition;
"EnerVest"	EnerVest Limited;
"EnerVest Assets"	approximately 1,300 gas and oil wells and PDP reserves of 14,597.721 MMboe in Ohio, acquired from EnerVest in April 2017;
"EnerVest Assets Acquisition"	the acquisition of the EnerVest Assets from EnerVest in April 2017;
"Enlarged Share Capital"	the existing Ordinary Shares in the Company plus the additional Ordinary Shares to be issued pursuant to the Proposed Fundraising;
"EQT"	EQT Corporation;
" EQT Assets Acquisition"	the acquisition of all of the issued and outstanding membership interests of two new entities, Diversified Southern Production LLC and Diversified Southern Midstream LLC, which owned certain producing gas, oil, natural gas liquids and midstream assets located in the states of Kentucky, West Virginia and Virginia in July 2018;
"EQT Assets Acquisition Agreement"	the acquisition agreement dated July 2018, pursuant to which the Company effected the EQT Assets Acquisition;
"Executive Directors"	Robert "Rusty" Russell Hutson Jr. and Bradley Grafton Gray;
"G&A"	general and administrative expenses;
"Group"	the Company and its subsidiary undertakings (as defined in section 1162 of the UK Companies Act);
"HG Energy"	HG Energy II Appalachia, LLC;
"HG Energy Assets Acquisition"	the acquisition of certain producing gas assets from HG Energy, comprising 107 unconventional wells and related surface rights and gathering equipment, located in the states of Pennsylvania and West Virginia in April 2019;
"HG Energy Assets Acquisition Agreement"	the acquisition agreement dated April 2019, pursuant to which the Company effected HG Energy Assets Acquisition;
"IFRS"	International Financial Reporting Standards, as adopted for use in the European Union;
"Internal Revenue Code"	the domestic portion of federal statutory tax law in the United States;
"Joint Global Coordinators"	Stifel, Mirabaud, and Credit Suisse;
"Last Practicable Date"	8 May 2020;
"Mirabaud"	Mirabaud Securities Limited;
"NGO"	NGO Development Corporation, Inc.;
"Non-executive Directors"	David Edward Johnson, Martin Keith Thomas, David Jackson Turner Jr., Sandra (Sandy) Mary Stash and Melanie Little;
"OPEC"	the Organization of the Petroleum Exporting Countries;
"Ordinary Shares"	ordinary shares of £0.01 each in the share capital of the Company;
"Placing"	placing of new ordinary shares in the capital of the Company to be conducted through an accelerated bookbuild process outside the United States, which will launch immediately following the release of this announcement;
"Potential Acquisitions"	the Potential Carbon Acquisition and Potential Acquisition;
"Potential Asset Acquisition"	the signature of a conditional purchase and sale agreement to acquire certain upstream and midstream assets from a US-Listed Vendor;
"Potential Carbon Acquisition"	the signature of a conditional purchase and sale agreement to acquire certain upstream and midstream assets from Carbon Energy Corporation and certain of its affiliates, as announced on 8 April 2020;
"Proposed Fundraising"	the Placing and Subscriptions;
"PSA"	purchase and sale agreement;
"Shareholders"	holders of Ordinary Shares;
"Significant Shareholders"	the Shareholder who owns more than 3 per cent. of the issued share capital of Company;
"Smarter Well Management"	precautionary techniques for extending well life that include wellhead compression management, fluid load deduction and pumpjack optimization;
"stamp duty"	UK stamp duty;
"Stifel"	Stifel Nicolaus Europe Limited;
"Subscriptions"	offer and sell new ordinary shares to certain institutional investors in the United States pursuant to direct subscription agreements, to be completed concurrently with the Placing (and conditional upon the completion of the Placing, but not vice versa);
"Titan Energy"	Titan Energy, LLC;
"Total Cash Costs"	operating expense, production taxes, gathering & transportation expense, gathering & compression expense and recurring general & administrative expense;
"Transaction Adjusted Net Debt"	the net debt of the Company as at 31 December 2019, adjusted for the securitisation transaction and related redetermination of the Company's reserve based lending facility announced on 14 April 2020, adjusted to reflect the mid-point of potential range for the potential secured term loan of US$162.5 million, and for the mid-point of the assumed placing size of US$72.5 million;
"Transaction Adjusted EBITDA"	the Adjusted EBITDA of the Company for the year ended 31 December 2019, adjusted for management's expectation of the EBITDA for the Potential Acquisitions for the twelve months from 1 June 2020;
"UKCompanies Act"	the UK Companies Act 2006 (as amended);
"United Kingdom" or "UK"	the UK of Great Britain and Northern Ireland;
"United States" or "US"	the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia;
"US-Listed Vendor Assets"	approximately 900 net operated wells, including 67 horizontal producing wells in Pennsylvania, with the majority of the balance being conventional vertical producing net wells in West Virginia, and associated midstream infrastructure as well as a further 13 drilled and completed wells that are not yet connected to the gathering infrastructure;
"US Securities Act"	the US Securities Act of 1933, as amended;
"Warrants"	the warrants issued by the Company to certain of its professional advisers, which are exchangeable for Ordinary Shares;
"£"	Great British Pounds Sterling; and
"$" or "US$"	United States Dollars.

GLOSSARY OF TECHNICAL TERMS

"annual decline rate"	the annualized rate at which oil and gas production volumes decline;
"average remaining producing life"	the average time period of future production capability of the Company's portfolio of wells
"barrels" or "bbl"	a unit of volume measurement used for petroleum and its products (for a typical crude oil 7.3 barrels (equal to 42 US gallons) = 1 tonne: 6.29 barrels = 1 cubic metre;
"Bcf"	billion cubic feet;
"Bcfe"	billion cubic feet of natural gas equivalent;
"BestEstimate"	the middle value in a range of estimates considered to be the most likely. If based on a statistical distribution, this can be the mean, median or mode depending on usage;
"boe"	barrels of oil equivalent. One barrel of oil is approximately the energy equivalent of 5,800 cf of natural gas;
"boepd"	barrels of oil equivalent per day;
"btu"	British thermal unit, which is the heat required to raise the temperature of a one pound mass of water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit under specific conditions;
"CO2e"	carbon dioxide equivalent;
"developmentwell"	a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive in an attempt to recover proved undeveloped reserves;
"fractionation"	the process by which ethane, propane, butane, and longer hydrocarbon chains are separated from a produced natural gas production stream;
"gross wells"	the total wells in which a working interest is owned by all parties;
"gross conventional wells"	the total conventional wells in which a working interest is owned by all parties;
"HBP"	held by production: a provision in an oil or natural gas property lease that allows the lessee to continue drilling activities on the property as long as it is producing a minimum paying amount of oil or gas, thereby extending the lessee's right to operate the property beyond the initial lease term;
"Mcf"	thousand standard cubic feet of natural gas;
"Mcfe"	thousand cubic feet of natural gas equivalent;
"Mcfed"	thousand cubic feet of natural gas equivalent per day;
"Mbbl"	thousand barrels of oil;
"Mirabaud"	Mirabaud Securities Limited;
"Mboepd"	Thousand barrels of oil equivalent per day;
"MMbbl"	millions of barrels of oil;
"MMboe"	millions of barrels of oil equivalent;
"MMbtu"	million btus;
"MMcf"	million standard cubic feet of natural gas;
"MMcfed"	million standard cubic feet of natural gas equivalent per day;
"naturalgas"	hydrocarbons that at a standard temperature of sixty degrees Fahrenheit (60ºF) and a standard pressure of one atmosphere are in a gaseous state, including wet mineral gas and dry mineral gas, casing head gas, residual gas remaining after separation treatment, processing, or extraction of liquid hydrocarbons;
"net conventional wells"	the sum of the fractional working interests owned by the Group in the gross conventional wells;
"net production"	the sum of the production volumes from the net wells;
"net wells"	the sum of the fractional working interests owned by the Group in the gross wells;
"NGL"	natural gas liquids;
"NTM"	next twelve months
"oilequivalent"	international standard for comparing the thermal energy of different fuels;
"plugging"	the plug and abandonment process of a well for retirement at the end of its productive life cycle through pumping of cement into the well to cover and isolate the zones that produce, have produced, or contain hydrocarbons;
"PV" or "presentvalue"	the present value of a future sum of money or stream of cash flows given a specific rate of return e.g. PV 18 means the present value at a discount rate of eighteen per cent. (18 per cent.);
"PV10"	the present value of a future sum of money or stream of cash flows given a discount rate 10 per cent. PV10 is a customary valuation metric used in the valuation of future cash flows for oil and gas reserves;
"proveddevelopedproducingReserves" or "PDP"	proved developed reserves that are expected to be recovered from completion intervals currently open in existing wells and able to produce to market. Reserves that can be recovered through wells with existing equipment and operating methods;
"provedreserves"	the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions;
"provedundevelopedreserves" or "PUD"	proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion;
"recompletion"	the completion for production of an existing well bore in another formation from that in which the well has been previously completed;
"recoverable"	a description of hydrocarbon reserves that identifies them as technically or economically feasible to extract;
"reserves"	those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions;
"reservoir"	a subsurface body of rock having sufficient porosity and permeability to store and transmit fluids. A reservoir is a critical component of a complete petroleum system;
"resources"	deposits of naturally occurring hydrocarbons which, if recoverable, include those volumes of hydrocarbons either yet to be found (prospective) or if found the development of which depends upon a number of factors (technical, legal and/or commercial) being resolved (contingent);
"undevelopedacreage"	lease acreage on which wells have not been participated in or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether such acreage contains proved reserves;
"workinginterest"	a cost bearing interest which gives the owner the right to drill, produce, and conduct oil and gas operations on the property, as well as a right to a share of production therefrom;
"West Texas Intermediate"	the underlying commodity of the Chicago Mercantile Exchange's oil futures contracts.

 

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