Operations Update

RNS Number : 9778A

Diversified Gas & Oil PLC

27 January 2020

 

27 January 2020

DIVERSIFIED GAS & OIL PLC

("DGO" or the "Company")

Operations Update

Diversified Gas & Oil plc (AIM: DGOC), the U.S. based owner and operator of natural gas, natural gas liquids, and oil wells and midstream assets, is pleased to announce the following operations and trading update affirming that the Company is trading in line with current market forecasts. DGO will announce its 2019 full-year results on Monday, 09 March 2020.

Production Update:

DGO's total net production (in thousand barrels of oil equivalent, or MBoepd) for the periods presented is as follows:

						Change
Quarterly Production, Net		3Q19		4Q19		#		%
Consolidated		91.1		96.3		5.2		5.7%
Legacy Assets(a)		69.2		70.8		1.6		2.3%
						Change
Exit Rate Production, Net		Sep-19		Dec-19		#		%
Consolidated		94.4		94.8		0.4		0.4%
Legacy Assets(a)		70.6		70.2		(0.4)		(0.6)%

DGO's Smarter Well Management programme continues to maintain strong production from its Legacy Assets, which exceeded 70 MBoepd in December 2019 and for the fourth quarter of 2019. This performance marks the sixth consecutive quarter^(c) that the Company's continued optimisation of these assets has largely offset what would otherwise have been natural declines in well production.

DGO's Consolidated net production for the three months ended 31 December 2019 includes a full quarter of production from the EdgeMarc assets the Company acquired in mid-September 2019.

Hedging Update:

DGO begins 2020 with approximately 85% of its natural gas production hedged at an average price of nearly $2.70, demonstrating its continued commitment to protect cash flows, the dividend and its ability to reduce debt. Because natural gas represents approximately 90% of Diversified's production mix, these hedges protect the largest source of the Company's cash flow. Accordingly, DGO continues to maintain a robust and responsible hedging program. The table below summarises the Company's hedging portfolio for the periods presented. Further details are available on the Company's website at https://ir.dgoc.com/presentations.

	GAS			NGL			OIL
	Wtd. Avg. Hedge Price(d)	% of Production Hedged(e)		Wtd. Avg. Hedge Price(d)	% of Production Hedged(e)		Wtd. Avg. Hedge Price(d)	% of Production Hedged(e)
4Q19	$      2.65	90%		$    36.76	65%		$    50.79	63%
FY20	2.69	85%		31.64	57%		56.38	61%
FY21	2.67	51%		33.98	2%		52.65	46%

As DGO actively monitors both the macro-economic and industry landscape for factors influencing the commodity price environment, it remains focused on opportunistically increasing its hedge protection in 2021 and subsequent years to increase the percent of production hedged. The Company remains focused on maintaining appropriate cash flow protection in these future years. Importantly, using its long-life, low-decline and highly predictable production profile, DGO utilises longer-tenor hedging structures that benefit from the contango in the natural gas price curve to provide for higher hedged prices.

Footnotes:

(a) "Legacy Assets" include those owned prior to the Company's most recent 2019 acquisition of unconventional assets from HG Energy & EdgeMarc Energy.

(b) Exit Rate production represents the average for the month presented

(c) Legacy Asset production of ~70 Mboepd reflects ~60 Mboepd immediately following the acquisition of assets from EQT in July 2018 that increased an incremental ~10 Mboepd in October 2018 following the acquisition of Core Appalachia.

(d) Weighted average price reflects the weighted average of the swap price, put price and floor price for collar contracts.

(e) % of current production is calculated based on September 2019 average production and assumes annual corporate decline rate of 6%.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Diversified Gas & Oil PLC Rusty Hutson Jr., Chief Executive Officer Brad Gray, Chief Operating Officer & Finance Director Eric Williams, Chief Financial Officer Teresa Odom, Vice President, Investor Relations www.dgoc.com [e-mail]	+ 1 [phone]
Cenkos Securities plc (Nominated Adviser) Russell Cook Katy Birkin Ben Jeynes	[phone]
Mirabaud Securities Limited (Joint Broker) Peter Krens Edward Haig-Thomas	[phone]
Stifel Nicolaus Europe Limited (Joint Broker) Callum Stewart Jason Grossman Nicholas Rhodes Ashton Clanfield	[phone]
Buchanan (Financial Public Relations) Ben Romney Chris Judd Kelsey Traynor James Husband [e-mail]	[phone]

 

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