TIDMDGOC
RNS Number : 3366A
Diversified Gas & Oil PLC
11 September 2018
11 September 2018
DIVERSIFIED GAS & OIL PLC
("DGO" or the "Company")
Interim Results
Diversified Gas & Oil PLC (AIM: DGOC), the US based gas and
oil producer with a focus on the Appalachian Basin, is pleased to
announce its interim results for the six-month period ended 30 June
2018.
Period Highlights:
-- Revenue of $58.0m (2017: $10.9m*)
-- Adjusted EBITDA of $22.87m
-- Materially increased production through acquisition
-- Average daily production of 19.3 kboed
-- Exit rate of approximately 27 kboed at period end (June average)
-- Current net production of approximately 60 kboed (July average)
-- Strong adjusted EBITDA margins of 40%
-- Continued success of value accretive acquisitions:
-- Alliance Petroleum for $80.7m completed in early March
-- Conventional assets from CNX Resources for $89.3m completed in early April
-- $575m of gas, oil and midstream assets from EQT Corporation completed post period (July)
-- Commencement of quarterly dividend payment
-- Q1'18 dividend of 1.725 cents per share announced previously
to be paid on 24 September 2018 to shareholders on the register at
13 July 2018
-- Q2 '18 dividend declared of 2.8 cents per share to be paid on 19 December 2018
-- Significantly strengthened balance sheet & liquidity
-- $439m of new gross equity raised (inclusive of July 2018 equity raise)
-- Enlarged credit facility of $1bn with a $600m committed borrowing base
-- Maintains 1.7x leverage ratio on prospective basis
-- Strong liquidity position of $187m
-- Successful integration process of acquired assets delivering operating synergies:
-- Lower unit costs (H1'17 vs H1'18)
-- Enhanced operating margins (H1'17 vs H1'18)
* figures have been restated to reflect the revisions for
operator revenue, cost of sales and administrative expenses.
Operator revenue of $641k has been reclassified as reductions in
operator expenses included in cost of sales for the six months to
30 June 2017. This represents operator expenses recharged to and
recovered from holders of working interests.
Commenting on the Results, CEO Rusty Hutson said:
"We would define the first half of 2018 as a period of
transformative growth resulting in a material step-change for our
operational and financial profile. We continued to deliver on our
growth strategy and capitalised on compelling, per-share accretive
acquisition opportunities in the Appalachian Basin to grow our
production by more than 90% since year end, and we accomplished
this growth without risking the balance sheet. Instead, our
financial strength has been improved with the addition of our low
cost credit facility and a leverage profile of less than two times
adjusted EBITDA. The real impact of these game-changing
acquisitions will be achieved in the second half of the year and
beyond, as we realise the benefits of scale in the form of
materially increased cash flow, lower costs and enhanced EBITDA
margins, all of which underpin the reliable and peer-leading
quarterly dividend. Our near-term focus will remain on extracting
maximum value from our enlarged portfolio by leveraging operating
synergies to drive both top line growth and further cost reductions
that collectively elevate our already compelling margins. Our
operating environment is increasingly positive, and we continue to
screen a robust pipeline of growth opportunities from our position
as the consolidator of choice in the Appalachian Basin."
Results presentation and audiocast
An analyst presentation will be held at 10:30am BST on 11
September 2018 at the offices of Buchanan (107 Cheapside, London,
EC2V 6DN).
The presentation will be made available on the Company website,
www.dgoc.com.
An audiocast of the presentation can be accessed shortly after
the live presentation concludes through the following link:
http://webcasting.buchanan.uk.com/broadcast/5b800ba90f6d547ed12e613c
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 and
Finance Director
Eric Williams, Chief Financial Officer
www.dgoc.com +1 (205) 408 0909
Smith & Williamson Corporate Finance Limited
(Nominated Adviser)
Russell Cook
Katy Birkin
Ben Jeynes +44 (0)20 71314000
Mirabaud Securities Limited
(Joint Broker)
Peter Krens
Edward Haig-Thomas +44 (0)20 3167 7221
Stifel Nicolaus Europe Limited
(Joint Broker)
Callum Stewart
Nicholas Rhodes
Ashton Clanfield +44 (0)20 7710 7600
Buchanan
(Financial Public Relations)
Ben Romney
Chris Judd
Henry Wilson
dgo@buchanan.uk.com +44 20 7466 5000
Introduction
The first half of 2018 saw DGO accelerate the speed of its
growth through a series of transformative events. Although the Half
Year Results tell the story of dramatic growth in the period, they
do not reflect the scale of DGO's current operational footprint and
financial profile, following the completion of two major
acquisitions in the second quarter, and yet another game-changing
transaction that made DGO one of the largest producers by volume,
listed in London.
The focus for the business throughout the period has been on
positioning the Company to grow production, cashflow and EBITDA
margins, all with a view to generating long-term value for its
shareholders through capital appreciation and a competitive
dividend yield. As highlighted by these results, DGO has been
successful in every measure and is well placed to demonstrate a
step-change in all key metrics as it benefits from its recently
expanded operational footprint and associated operating
efficiencies.
The Board is pleased to announce a dividend for the second
quarter of 2.8 cents per share, payable on 19 December 2018 to
those shareholders on the Company's register on 30 November 2018.
This represents an increase of 62 per cent over the 2018 Q1
dividend of 1.725 cents. Together these dividends are an increase
of 128 per cent over the first half of 2017.
Accelerating our strategy
Throughout the period, the Company continued to effectively
implement its growth strategy by leveraging its highly visible
growth profile within both the Appalachian Basin and the Capital
Markets to capitalise on the acquisition opportunities created by
often larger, drilling-oriented companies wishing to divest of
non-core assets, particularly within its focus region of
Appalachia.
DGO has cemented its position as the leading consolidator for
mature, cash-flowing assets in the region to become the largest
producer from conventional assets in the Appalachian Basin. The
Company has successfully leveraged its established dividend-paying
investment case and track record for closing value-creating
acquisitions to access the capital required to continue targeting
sizeable transactions through a combination of new equity and
debt.
In January, DGO announced the nearly simultaneous and highly
complementary acquisitions of Alliance Petroleum for $80.7m and
certain producing assets from CNX for $89.3m, which it funded
through a placing raising gross proceeds of $189m. These
transactions took net production to over 26 kboepd on a historical
pro forma basis, an increase of 170% from year-end 2017.
Even more transformative still was the $575m acquisition of
assets from EQT Corporation announced just prior to the period-end,
which again more than doubled the already elevated production
levels and increased DGO's PDP Reserves to 393 mmboe. The Company
funded this transaction, which was immediately accretive to cash
and earnings, through a placing which raised $250m, and with
low-cost funding from its existing credit facility, which was
doubled to $1 billion with a $600m borrowing base. After the
completion of the EQT acquisition in July, DGO's current net
production of approximately 60 kboepd has made it the largest
producer on AIM by some margin and one of the largest independent
producers in terms of volumes quoted in London. Demonstrating the
value creating nature of the transaction, DGO's declared dividend
for the second quarter of 2018 is 62% higher than its previous
first quarter dividend, and is compelling evidence of its
commitment to its dividend policy to provide robust income for
shareholders.
The EQT acquisition also included more than 6,400 miles of
gathering pipe, incorporating some 59 compression stations. This
acquisition enhanced the economics of the Company's production in
the region and will form a basis from which to develop the
Company's mid-stream operations.
Leveraging an expanded operational footprint
The opportunity to acquire complementary and operationally
compatible assets in the Appalachian Basin from Alliance and CNX
was compelling. Building on DGO's enhanced experience of completing
the acquisition of Titan the previous year, our team quickly set
about integrating and optimising these newly acquired assets.
The focus throughout the integration process has been to further
realise the financial and operating benefits of enlarged scale -
elements central to DGO's investment strategy. The integration of
these assets, acquired in March 2018, was facilitated by the
high-quality teams that came with the respective acquisitions,
particularly the Alliance team that included a number of talented
corporate support personnel including accounting, treasury and land
personnel. By taking on a combination of experienced senior
management and highly skilled field workers with in-depth knowledge
of the assets, DGO has been able to identify and prioritise the
areas of integration that maximise synergies and optimise
production.
In addition to maintaining and increasing production from
existing wells through workover initiatives, the operations team
has successfully returned wells into production, many of which came
within the Alliance and CNX packages. Returning these previously
unproductive wells to production has the dual benefit of partially
offsetting overall natural decline rates, whilst also removing the
wells from decommissioning. Over the last 18 months, DGO has
brought over 500 wells back into production across its expanded
acreage, resulting in prolonged production and deferred Plugging
& Abandonment ("P&A") liabilities.
Decommissioning
The topic of decommissioning has always been a key consideration
for DGO given the mature asset focus of the business. The issue has
increased in relevance as the Company has expanded its acreage and
therefore the scale of future liabilities. The State regulatory
bodies typically establish the requirements around P&A
liabilities, and DGO maintains constructive dialogue with those
relevant authorities to ensure compliance and to agree on mutually
beneficial long-term plugging programmes over the life of DGO's
diverse portfolio.
The cost of plugging activities varies according to the depth of
a well. Over 98% of DGO's well portfolio will be at the lower end
of the range at around $25k per well. The Company continually
reviews ways in which plugging costs can be reduced further and is
likely to expand its internal P&A capabilities to minimise the
role of third party vendors whose work inherently carries its own
profit margins, an action that is expected to further reduce the
average plugging costs.
In line with DGO's approach to risk mitigation and visibility on
key financial metrics, DGO is actively pursuing agreements with
state authorities in the states in which it operates. In this
regard, the Company can budget accordingly for the long-term costs
and logistical efforts associated with plugging wells, with costs
representing a fraction of the annual earnings generated by the
portfolio. Of the more than 50,000 wells in the current portfolio,
we expect to plug fewer than 2,000 wells over the next 15 years,
with the vast majority producing for many decades based on the low
natural decline profile of the wells comprising our portfolio.
A transformational acquisition
The completion of the acquisition of assets from EQT Corporation
in July represented a material step change in DGO's operating
footprint and financial profile. This transaction gives DGO
unparalleled scale in the conventional gas space in the Appalachian
Basin, an enhanced exposure to liquids, and an expansive wholly
owned midstream infrastructure.
The upstream assets are consistent with the wider portfolio
profile in terms of long well-life (average 50 years) and low
decline rates of around 4% to 7% per annum. The midstream assets
provide DGO with its initial ownership of gathering systems that
span a significant portion of its Kentucky acreage position and
eliminate a meaningful portion of third party gathering expenses.
Importantly, they also provide DGO with significant takeaway
capacity to multiple end markets and processing capacity to support
both existing and future potential development across the
portfolio. For example, the ability to move a significant portion
of its Kentucky natural gas production to a local liquids
processing plant allows the Company to realize the economics of its
natural gas liquids, providing an estimated net 56% uplift in the
realized price it receives for this production. It is this type of
value-creating element of the acquisition that is driving DGO's
adjusted EBITDA margins from approximately 40% to approximately
60%. As with previous acquisitions, DGO has assumed related
operating personnel to expedite integration of these assets to
realize these higher margins.
The EQT acquisition represented a continuation of DGO's track
record to source, progress and complete value accretive
acquisitions. The Company's purchase price for the assets
represents an attractive valuation multiple of just 3.5x annual
operating cash flow, which is consistent with DGO's recent track
record for acquisitions and is particularly impressive for an
acquisition of this size and including midstream assets. As DGO
successfully integrates the assets, the Company expects to
demonstrate a further reduction in its operating costs, which will
further enhance its EBITDA margins.
Outlook
DGO continues to progress from one position of strength to
another, and is already unrecognisable from the company that
floated on AIM just over 18 months ago. The Company has achieved a
significant level of growth, surpassing market forecasts through a
series of high quality, earnings accretive acquisitions.
The window for further M&A opportunities in the Appalachian
Basin remains open, and the Company continues to review value
accretive acquisitions in line with its proven growth strategy.
With its growing list of successfully completed, sizeable
acquisitions in the region, DGO has access to an increasingly
robust pipeline of growth opportunities to consider. The Board
remains steadfast in its focus to only consider new opportunities
that complement and enhance the existing business and often passes
on growth opportunities not suited to the Company's current asset
portfolio. Importantly, DGO benefits from a strong balance sheet,
liquidity and the demonstrated ability to move quickly on large
packages of exceptional assets should it identify compelling
opportunities.
The long-term outlook for natural gas prices in the region
remains stable with investments being made in expanded take-away
capacity coming online in the region providing a catalyst for
higher realized prices as basin basis differential begins to
decline. Consistent with its commitment to always protect its cash
flow and the underlying dividend funded by its stable production
base, DGO will continue to implement its hedging strategy, whilst
also retaining upside exposure on a portion of its production to
realise pricing increases.
Presently, DGO is intensely focused on the complete and
efficient integration of assets acquired from EQT, and expects the
addition of these assets and the achieved operating synergies to
enhance revenue, cashflow and EBITDA margins whilst reducing
operating costs.
Overall, DGO has created long-term value for shareholders by
stewarding its capital to enlarge a strong platform of stable,
cashflow producing assets, and is well positioned to deliver a
materially stronger second half as it realises the benefits of the
transformative acquisitions completed in the first seven months of
2018.
Financial Review
(Amounts other than per unit are
reported in thousands) Six months to
30 June 2018 30 June 2017 $ Change % Change
----------------- ----------------- ----------- ------------
Net production
Natural gas (MMcf) 19,982 3,168 16,814 530.7%
Oil (MBbls) 116 53 63 120.5%
NGL (MBbls) 53 - 53 100%
Total (MBOE) 3,499 581 2,918 502.2%
Average daily production (BOE/d) 19,331 3,210 16,121 502.2%
% gas (BOE basis) 95% 91%
Average realised sales price
(excluding impact of cash settled
derivatives)
Natural gas (Mcf) $ 2.40 $ 2.46 $ (0.06) (2.4)%
Oil (Bbl) 64.59 45.59 19.00 41.7%
Total (BOE) $ 16.20 $ 17.55 $ (1.35) (7.7)%
Average realised sales price
(including impact of cash settled
derivatives)
Natural gas (Mcf) $ 2.44 $ 2.49 $ (0.05) (2.0)%
Oil (Bbl) 53.83 46.33 7.50 16.2%
Total (BOE) $ 16.07 $ 17.80 $ (1.73) (9.7)%
Natural gas and oil revenue
(in thousands)
Natural gas $ 48,027 $ 7,795 $ 40,232 516.1%
Oil 7,492 2,399 5,093 212.3%
NGL 1,154 - 1,154 100%
------------- --------
Total natural gas, oil and NGL
revenue 56,673 10,194 46,479 455.9%
Other revenue 1,360 706 654 92.6%
Total revenue $ 58,033 $ 10,900 $ 47,133 432.4%
========= ========= ====== ========
Gains (losses) on derivative settlements
Natural gas $ 825 $ 108 $ 698 646.3%
Oil (1,248) 39 (1,287) (3,300.0)%
Net gains on derivative settlements $ (423) $ 147 $ (589) (400.7)%
========= ========= ====== ========
Per BOE metrics
Realised price (including impact
of cash settled derivatives) $ 16.08 17.80 $ (1.73) (9.7)%
Other revenue 0.39 1.22 (0.83) (68.0)%
Lease operating expenses (a) 7.01 8.13 (1.12) (13.8)%
Recurring administrative expenses 1.51 2.64 (1.13) (42.8)%
Production taxes 0.20 1.25 (1.05) (84.0)%
Gathering, processing and
transportation 1.21 - 1.21 100%
------------- --------
Operating margin $ 6.53 7.00 $ (0.47) (6.7)%
% Operating margin 39.7% 36.8%
Production, Revenue and Hedging
Total revenue in 1H18 of $58.0m increased 432.4% from $10.9m
reported for 1H17 primarily due to a 502.2% increase in barrel of
oil equivalent sales partially offset by a 7.7% decrease in the
average realised sales price. DGO ended 1H18 with net MBOE sales of
approximately 3,499 vs. the prior year sales of approximately 581.
The increase in production was driven by the increase in producing
wells from our acquisitions of assets from Titan Energy, EnerVest
Energy, Alliance Petroleum Company, and CNX Resources LLC in 2H17
and 1H18. See Note 9 tor additional information regarding DGO's
acquisitions.
The following table is intended to reconcile the change in oil
and natural gas revenue for 1H18 by reflecting the effect of
changes in volume and in the underlying prices.
(Reported in thousands) Natural gas Oil
------------- --------
Revenue for the six months to 30 June 2017 $ 7,795 2,399
Volume increase 41,362 2,890
Price (decrease)/increase (1,130) 2,203
Net increase 40,232 5,093
Revenue for the six months to 30 June 2018 $ 48,027 $7,492
======== =====
To manage its cash flows in a volatile commodity price
environment, DGO uses a combination of physical and financial
derivative instruments. As required by its Senior Secured Credit
Facility, DGO executed a combination of fixed price physical
contracts, price swap financial contracts and two-way collar
financial contracts to hedge between 75% and 90% of the Company's
forecasted production volumes for a 36-month rolling period. Refer
to Note 13 for additional information regarding DGO's hedge
portfolio.
Expenses
(Amounts other Six months to
than
per unit are
reported
in thousands) Total Change BOE Change
30 June Per 30 June Per
2018 BOE 2017 BOE $ % $ %
------- ------ ------- ----- -------- ------- ------- -------
Lease operating
expenses
((a) $24,520 $ 7.01 $ 4,722 $8.13 $19,798 419% $ (1.12) (14)%
Production taxes 700 0.20 725 1.25 (25) (3)% (1.05) (84)%
Gathering,
processing
and
transportation 4,225 1.21 - - 4,225 100% 1.21 100%
------- ------ ------- ----- ------- ---
Total cost of
sales $29,445 $ 8.41 $5,447 $9.38 $23,998 441% $ (0.97) (10)%
Depreciation and
depletion 8,354 2.39 2,242 3.86 6,112 273% (1.47) (38)%
Administrative
expenses
(b) 7,494 2.14 3,304 5.69 4,190 127% (3.55) (62)%
Total expenses $45,293 $12.94 $10,993 18.93 $34,300 312% (5.98) (32)%
------ ----- ------ ----- ------ --- ---------- ---
a) Lease operating expenses are daily costs incurred to extract oil
and natural gas and maintain our producing properties. Such costs
b) include maintenance, repairs, insurance, employee and benefits and
automobile expenses.
Includes non-recurring costs related to acquisitions of $2.1m in
1H18 and $1.8m in 1H17.
As a result of DGO's significant, value-focused growth, unit
operating expenses decreased 32% or $5.98 per BOE. These reductions
include:
-- Lower per BOE lease operating expenses, which declined 14% or
$1.12 per BOE through a mixture of disciplined cost reductions and
through achieving an enlarged scale in the region whereby fixed
operating costs were spread across a larger base of producing
assets.
-- Lower per BOE production taxes, which declines 84% or $1.05 per BOE.
-- Lower per BOE depreciation and depletion, which declined 38%
or $1.47 per BOE due to the acquisition of reserves at attractive
valuations resulting in a lower unit depletion charge for each unit
produced.
-- Lower per BOE administrative expenses, which decreased 62% or
$3.55 per BOE due to the significant growth in our production
base.
Partially offsetting these significant per BOE declines were
increases in non-controllable costs related to gathering and
transportation costs to deliver our production to market.
Refer to Note 9 for additional information regarding DGO's
acquisitions.
Finance costs
(Reported in thousands) Six months to
30 June 2018 30 June 2017 $ Change % Change
--------------- --------------- ----------- -----------
Interest $ 3,415 $ 437 $ 2,978 681.5%
Finance charge 5 130 (125) (96.2)%
Bond financing costs 613 174 439 252.3%
Loan standby fee 204 4 200 5,000.0%
Loan management fee 38 - 38 100%
--------------- --------------- ----------
Total finance costs $ 4,275 $ 745 $ 3,530 473.8%
=== ========== === ========== ====== =======
Loss (gain) on early retirement
of debt $ 8,359 $ 4,468 $ 3,891 (87.1)%
=== ========== === ========== ====== =======
DGO's finance costs include interest expense on borrowings and
non-cash amortization of deferred financing costs. In March 2018,
the Company closed a new $500 million five-year senior secured
revolving credit facility with an initial base borrowing base of
$140 million increasing to $200 million with the closing of the CNX
acquisition. The facility has an initial interest rate of 2.50%
plus LIBOR and is subject to a grid that fluctuates based upon
utilisation with a pricing of 2.25% - 3.25% plus LIBOR.
In 1H18 and using the proceeds from the March 2018 credit
facility, DGO repaid its previous outstanding debt. Accordingly,
DGO incurred a non-recurring loss on the early extinguishment of
debt of $8.36 million. In 1H17 using the proceeds from our
successful AIM IPO, DGO repaid its publicly traded bonds and other
outstanding debt. Accordingly, DGO incurred a non-recurring loss on
the early extinguishment of debt, which primarily included a $3.8m
charge for the accelerated amortization of the remaining deferred
financing costs and $0.6m in premiums paid to redeem convertible
bonds prior to DGO's admission to AIM.
For more information on DGO's acquisitions, secondary offering
and borrowings, refer to Notes 9, 8 and 16, respectively
Income before taxation, EPS and Adjusted EBITDA
DGO reported income before taxation of $21.4m in 1H18 compared
to $29.4m in 1H17, a decrease of 27%, and reported statutory
earnings for 1H18 per diluted ordinary share of $0.09 compared to
$0.24 per diluted ordinary share in 1H17. However, when adjusted
for certain non-cash items such as gains on bargain purchases and
similar items, DGO reported adjusted EBITDA per diluted ordinary
share of $0.09 per diluted ordinary share, a 125.0% increase over
the prior year's $0.04 adjusted EBITDA per diluted ordinary share.
DGO's adjusted EBITDA for 1H18 was $22.9m, a 462.2% increase over
$4.1m in 1H17. Refer to Note 6 for additional information regarding
DGO's adjusted EBITDA.
Conclusion
We have already enjoyed an eventful and successful 2018, and we
look forward to continued progress as we focus our attention
towards 2019. I would like to thank the growing Diversified family
for its commitment to safe and efficient operations, the Board for
its diligent oversight and guidance, and our shareholders and
stakeholders who entrust to us the capital to fuel our growth. I
will look forward to reporting back to you with our full-year
results.
Rusty Hutson Jr.
Chief Executive Officer
AUDITORS' REVIEW REPORT
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the interim financial report for the 6
months ended 30 June 2018 which comprises the Condensed Interim
Consolidated Statement of Profit or Loss and Other Comprehensive
Income, the Condensed Interim Consolidated Statement of Financial
Position, the Condensed Interim Consolidated Statement of Changes
in Equity, the Condensed Interim Consolidated Statement of Cash
Flow and the related explanatory notes. We have read the other
information contained in the interim financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company, in accordance with
our instructions. Our review has been undertaken so that we might
state to the company those matters we are required to state to them
in a review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company, for our work, for this report, or
for the opinions we have reached.
Directors' Responsibilities
The interim financial report is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the interim financial report in accordance with the AIM
Rules of the London Stock Exchange.
As disclosed in note 3, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the interim financial
report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity, issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial report for the 6 months ended 30 June 2018
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the AIM Rules of the London Stock Exchange.
Crowe U.K. LLP
Statutory Auditor
DIVERSIFIED GAS & OIL PLC
Interim Consolidated Statements of Profit or Loss and Other
Comprehensive Income
(Amounts in thousands, except per-share amounts)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months Year ended
to to
Note 30 June 2018 30 June 2017 31 December
2017
----- -------------- -------------- ---------------
Revenue 4 $ 58,033 $ 10,900 $ 41,777
Cost of sales 5 (29,445) (5,447) (20,908)
Depreciation and depletion 5 (8,354) (2,242) (7,536)
------------- ------------- ------------
Gross profit $ 20,234 $ 3,211 $ 13,333
Administrative expenses 5 (7,494) (3,304) (8,919)
(Loss) gain on disposal of property
and equipment (137) 4 95
Loss on derivative financial instruments 13 (18,447) (540) (441)
Gain on sale of oil and gas properties 4,200 - -
Gain on bargain purchase 9 37,823 35,841 37,093
------------------------------------------- ------------- ------------- ------------
Operating profit $ 36,179 $ 35,212 $ 41,161
Finance costs 16 (4,275) (745) (5,225)
(Loss) on early retirement of debt 16 (8,359) (4,468) (4,468)
Accretion of decommissioning provision 15 (2,158) (585) (1,764)
------------- ------------- ------------
Income before taxation $ 21,387 $ 29,414 $ 29,704
Taxation on income 2,159 (6,780) (2,250)
------------- ------------- ------------
Income after taxation available to
ordinary shareholders $ 23,546 $ 22,634 $ 27,454
Other comprehensive income - gain
on foreign currency conversion 6 202 355
------------- ------------- ------------
Total comprehensive income for the
year $ 23,552 $ 22,836 $ 27,809
========= ========= ========
Earnings per ordinary share - basic
& diluted 7 $ 0.09 $ 0.24 $ 0.23
========= ========= ========
Weighted average ordinary shares
outstanding - basic 7 265,509 94,971 120,136
============= ============= ============
Weighted average ordinary shares
outstanding - diluted 7 266,483 94,971 120,269
============= ============= ============
The notes are an integral part of these consolidated financial
statements.
DIVERSIFIED GAS & OIL PLC
Interim Consolidated Statements of Financial Position
(Amounts in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
31 December
Note 30 June 2018 30 June 2017 2017
----- -------------- -------------- ---------------
ASSETS
Non-current assets
Oil and gas properties, net 11 $ 483,530 $ 202,010 $ 215,325
Property and equipment, net 12 10,090 5,668 6,947
Other non-current assets 57,769 1,011 1,036
Restricted cash 2,672 117 744
Indemnification receivable 9 2,133 $ - $ -
-------------- ---------- ---------
Total non-current assets $ 556,194 $ 208,806 $ 224,052
Current assets
Trade receivables 34,967 5,085 13,917
Other current assets 2,530 417 513
Equity placing receivable - 24,864 -
Cash and cash equivalents 9,537 4,574 15,168
-------------- -------------- -------------
Total current assets $ 47,034 $ 34,940 $ 29,598
Total Assets $ 603,228 $ 243,746 $ 253,650
========== ========== =========
EQUITY AND LIABILITIES
Shareholders' equity
Share capital 14 $ 4,299 $ 1,940 $ 1,940
Share premium 254,327 76,015 76,026
Merger reserve (478) (478) (478)
Share based payment reserve - - 59
Retained earnings 43,497 28,607 30,691
Total Equity $301,645 $106,084 $108,238
------- ------- -------
Non-current liabilities
Decommissioning liability 15 $ 72,390 $ 31,630 $ 35,448
Capital lease 1,465 440 836
Borrowings 16 139,688 61,316 70,619
Deferred tax liability 35,092 21,926 17,399
Other non-current liabilities 10 9,780 5,038 5,764
Uncertain tax position 9 2,133 - -
-------- -------- --------
Total non-current liabilities $260,548 $120,350 $130,066
Current liabilities
Trade and other payables $ 6,323 $ 3,032 $ 2,132
Borrowings 16 107 305 373
Capital lease 579 250 324
Dividends payable - 2,887 -
Other current liabilities 10 34,026 10,838 12,517
--------
Total current liabilities $ 41,035 $ 17,312 $ 15,346
Total Liabilities $301,583 $137,662 $145,412
------- ------- -------
Total Equity and Liabilities $603,228 $243,746 $253,650
======= ======= =======
The notes are an integral part of these consolidated financial
statements.
DIVERSIFIED GAS & OIL PLC
Interim Consolidated Statements of Changes in Equity
(Amounts in thousands)
Share
Based
Share Share Merger Payment Retained Total
Note Capital Premium Reserve Reserve Earnings Equity
----- ------------ ------------ ------------ -------------- ------------ --------------
Balance at 1
January 2018 $ 1,940 $ 76,026 $ (478) $ 59 $ 30,691 $ 108,238
Income after
taxation - - - - 23,546 23,546
Gain on foreign
currency
conversion - - - - 6 6
----------- -----------
Total
comprehensive
income - - - - 23,552 23,552
------------ ------------ ----------- --------- --- ----------- -----------
Issuance of
share capital,
secondary
offering 14 2,359 178,301 - - 180,660
Equity
compensation - - - (59) (59)
Dividends
authorized and
declared 8 - - - - (10,746) (10,746)
--------- --- ----------- -----------
Transactions
with
shareholders 2,359 178,301 - (59) (10,746) 169,855
------------ ------------ ----------- --------- ----------- -----------
Balance at 30
June 2018 $ 4,299 $ 254,327 $ (478) $ - $ 43,497 $ 301,645
=== ======= === ======= === ====== === ==== === ======= =======
(Restated)
Share
(Restated) (Restated) (Restated) Based (Restated) (Restated)
Share Share Merger Payment Retained Total
Capital Premium Reserve Reserve Earnings Equity
------------ ------------ ------------ -------------- ------------ --------------
Balance at 1
January 2017 $ 669 $ 313 $ (478) $ - $ 8,658 $ 9,162
Income after
taxation - - - - 22,634 22,634
Gain on foreign
currency
conversion - - - - 202 202
Total
comprehensive
income - - - - 22,836 22,836
------------ ------------ ----------- --------- --- ----------- -----------
Issuance of
share capital,
initial
offering 768 43,550 - - - 44,318
Issuance of
share capital,
secondary
offering 503 32,152 - - - 32,655
Dividends
authorized and
declared - - - - (2,887) (2,887)
Transactions
with
shareholders 1,271 75,702 - - (2,887) 74,086
------------ ------------ ----------- --------- --- ----------- -----------
Balance at 30
June 2017 $ 1,940 $ 76,015 $ (478) $ - $ 28,607 $ 106,084
=== ======= === ======= === ====== === ==== === ======= =======
(Restated)
Share
(Restated) (Restated) (Restated) Based (Restated) (Restated)
Share Share Merger Payment Retained Total
Capital Premium Reserve Reserve Earnings Equity
------------ ------------ ------------ ------------ ------------ --------------
Balance at 1
January 2017 $ 669 $ 313 $ (478) $ - $ 8,658 $ 9,162
Income after
taxation - - - - 27,454 27,454
Gain on foreign
currency
conversion - - - - 355 355
Total
comprehensive
income - - - - 27,809 27,809
------------ ------------ ----------- ------------ ----------- -----------
Issuance of
share capital,
initial
offering 768 43,550 - - - 44,318
Issuance of
share capital,
secondary
offering 503 32,163 - - - 32,666
Equity
compensation - - - 59 - 59
Dividends
authorized and
declared 8 - - - - (5,776) (5,776)
------------ ------------ ----------- ------------ -----------
Transactions
with
shareholders 1,271 75,713 - 59 (5,776) 71,267
------------ ------------ ----------- ------------ ----------- -----------
Balance at 31
December 2017 $ 1,940 $ 76,026 $ (478) $ 59 $ 30,691 $ 108,238
=== ======= === ======= === ====== ==== ====== ======= =======
The notes are an integral part of these consolidated financial
statements.
DIVERSIFIED GAS & OIL PLC
Interim Consolidated Statements of Cash Flow
(Amounts in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months
to to Year ended
31 December
Note 30 June 2018 30 June 2017 2017
----- -------------- -------------- ---------------
Cash flows from operating activities
Income after taxation $ 23,546 $ 22,634 $ 27,454
Cash flow from operations reconciliation:
Depreciation and depletion 8,354 2,242 7,536
Accretion of decommissioning
provision 15 2,158 585 1,764
Deferred income taxes (2,159) 6,780 2,251
Provision for working interest
owners receivable - - 632
Loss on derivative financial
instruments 13 18,447 687 1,965
Gain on oil and gas properties (4,200) (396) (396)
Gain on bargain purchase 9 (37,823) (35,841) (37,093)
Deferred financing expense 195 4,045 4,510
Loss on debt cancellation 8,164 - -
Loss (gain) on disposal of property
and equipment 12 137 (4) 95
Non-cash equity compensation - - 59
Working capital adjustments:
Change in trade receivables (9,269) (2,002) (11,465)
Change in other current assets (1,743) 138 798
Change in other assets 9 767 (15) (38)
Change in trade and other payables 4,191 (1,595) (2,495)
Change in other liabilities (2,817) 9,733 11,345
-------------
Net cash provided by operating
activities $ 7,948 $ 6,991 $ 6,922
--------- --------- --------
Cash flows from investing activities
Acquisition costs 9 $ (72,105) $ - $ -
Acquisition deposit 9 (57,500) - -
Expenditures on oil and gas properties (90,393) (73,585) (88,267)
Expenditures on property and equipment
from acquisitions - - (2,500)
Expenditures on property and equipment (1,927) (2,652) (1,953)
Plugging and abandonment (128) - (78)
Increase in restricted cash (1,928) - (627)
Proceeds on disposal of oil and
gas properties 4,219 - 334
-------------
Net cash used in investing activities $ (219,762) $ (76,237) $ (93,091)
--------- --------- --------
Cash flows from financing activities
Proceeds from borrowings $145,600 $64,000 $ 75,000
Repayment of borrowings (104,016) (40,521) (42,514)
Financing expense (6,140) (2,994) (3,298)
Proceeds from equity issuance,
net 180,601 52,864 76,984
Proceeds from capital lease 884 319 1,246
Repayment of capital lease - (72) (529)
Dividends to shareholders 8 (10,746) - (5,776)
-------
Net cash provided by financing
activities $206,183 $73,596 $101,113
------- ------ -------
Net (decrease) increase in cash
and cash equivalents (5,631) 4,350 14,944
Cash and cash equivalents - beginning
of the period 15,168 224 224
-------- ------- --------
Cash and cash equivalents - end
of the period $ 9,537 $ 4,574 $ 15,168
======= ====== =======
The notes are an integral part of these consolidated financial
statements.
DIVERSIFIED GAS & OIL PLC
Notes to the Interim Consolidated Financial Statements
(Amounts in thousands, except per share and per unit data)
Note 1 - General Information
Diversified Gas & Oil PLC ("DGO" or the "Company") is a
natural gas and crude oil producer that is focused on acquiring and
operating mature producing wells with long lives and slow decline
profiles. The Company's assets are exclusively located within the
Appalachian Basin of the United States. The Company is
headquartered in Birmingham, Alabama, USA with field offices
located in the states of Pennsylvania, Ohio, West Virginia and
Tennessee. DGO was incorporated on 31 July 2014 in England and
Wales as a private limited company under company number 09156132.
DGO's registered office is located at 27/28 Eastcastle Street,
London W1W 8DH, United Kingdom. In February 2017, the Company's
ordinary shares were admitted to trading on AIM under the ticker
"DGOC."
Note 2 - Basis of Consolidation
The interim consolidated financial statements reflect the
following corporate structure of DGO:
-- Diversified Gas & Oil PLC ("PLC"), and its wholly owned subsidiary,
-- Alliance Petroleum Corporation
-- Diversified Gas & Oil Corporation ("DGOC") as well as
its, direct and indirect, wholly owned subsidiaries,
-- Diversified Resources, Inc.;
-- M & R Investments, LLC;
-- M & R Investments Ohio, LLC;
-- Marshall Gas and Oil Corporation;
-- R&K Oil and Gas, Inc.;
-- Fund 1 DR, LLC;
-- Diversified Oil & Gas, LLC;
-- Diversified Appalachian Group, LLC;
-- Diversified Energy, LLC;
-- Diversified Partnership Holdings, LLC
-- Diversified Partnership Holdings II, LLC
-- Atlas Energy Tennessee, LLC
Atlas Pipeline Tennessee, LLC
Note 3 - Basis of Preparation
Basis of Preparation and Measurement
The interim consolidated financial statements are unaudited and
do not represent statutory accounts within the meaning of section
434 of the Companies Act 2006. The financial information for the
six month period ended 30 June 2018 is based on the statutory
accounts for the year ended 31 December 2017. Those accounts, upon
which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies and did not contain
statements under section 498(2) or (3) of the Companies Act.
The interim consolidated financial information has been prepared
on the basis of the accounting policies set out in the Company's
2017 statutory accounts in accordance with International Accounting
Standard (IAS) 34 Interim Financial Reporting. The interim
consolidated financial statements do not include all of the
information required for a full annual financial report and should
be read in conjunction with the Company's financial statements for
the year ended 31 December 2017, which were prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU).
Unless otherwise stated, the interim consolidated financial
statements are presented in US Dollars, which is the currency of
the primary economic environment in which DGO operates, and all
values are rounded to the nearest thousand dollars except per unit
amounts and where otherwise indicated. Transactions in foreign
currencies are translated into US Dollars at the rate of exchange
on the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the exchange
ruling at the balance sheet date. The resulting gain or loss is
reflected in the Interim Consolidated Statements of Profit or Loss
and Other Comprehensive Income within Other comprehensive income -
gain on foreign currency conversion.
Certain prior period amounts within the Revenue and Expense
accounts have been reclassified to conform with current
presentation as follows:
-- Operator revenue of $641 has been reclassified as reductions
in operator expenses included in Cost of sales for the six months
to 30 June 2017. This represents operator expenses recharged to and
recovered from holders of working interests.
-- Salaries and benefits of $137 have been reclassified from
Cost of sales to Administrative expenses for the six months to 30
June 2017. This represents salaries and benefits for certain
corporate employees that were recorded in cost of sales.
During the period ended 30 June 2018, DGO finalized the fair
value measurement related to the previously reported EnerVest and
Titan acquisitions discussed in Note 9. As a result, DGO
retrospectively adjusted previously reported provisional amounts
related to the EnerVest and Titan Energy acquisitions in accordance
with IFRS - 3. The following tables summarize the impact of these
adjustments for the year ended 31 December 2017 and the period
ended as at 30 June 2017:
(Amounts reported in thousands)
Year ended 31
December 2017 Year ended 31 December
(Reported) Revisions 2017 (Restated)
--------------- --------- ------------------------
Balance sheet accounts
impacted
Oil and gas properties,
net 190,358 24,967 215,325
Deferred tax liability 11,011 6,388 17,399
Retained earnings 12,112 18,579 30,691
Income statement accounts
impacted
Depreciation and depletion (7,013) (523) (7,536)
Gain on bargain purchase 11,603 25,490 37,093
Income tax benefit (expense) 4,138 (6,388) (2,250)
For the year ended 31 December 2017 the cumulative impact of
these adjustments resulted in an $18,579 increase to the
Consolidated Statements of Changes in Equity through retained
earnings and did not impact net cash provided by operating
activities on the Consolidated Statements of Cash Flow.
(Amounts reported in thousands)
Unaudited Six
Months to 30 June Unaudited Six Months
2017 (Reported) Revisions to 30 June 2017 (Restated)
-------------------- --------- -----------------------------
Balance sheet accounts
impacted
Oil and gas properties,
net 176,536 25,474 202,010
Deferred tax liability 15,408 6,518 21,926
Retained earnings 9,651 18,956 28,607
Income statements impacted
Depreciation and depletion (2,226) (16) (2,242)
Gain on bargain purchase 10,351 25,490 35,841
Income tax benefit (expense) (262) (6,518) (6,780)
For the unaudited six months to 30 June 2017 the cumulative
impact of these adjustments resulted in a $18,956 increase to the
Statements of Changes in Equity through an increase to retained
earnings and did not impact the net cash provided by operating
activities on the Consolidated Statements of Cash Flow.
The interim consolidated financial statements have been prepared
under the historical cost convention, except for acquisitions and
derivative financial instruments that have been measured at fair
value through profit and loss.
The interim consolidated financial statements have been prepared
on the going concern basis, which contemplates the continuity of
normal business activity and the realization of assets and the
settlement of liabilities in the normal course of business. The
Directors have reviewed DGO's overall position and outlook and are
of the opinion that DGO is sufficiently well funded to be able to
operate as a going concern for at least the next twelve months from
the date of approval of these interim consolidated financial
statements.
New Standards and Interpretations
IFRS 9 Financial Instruments
In July 2014, the IASB issued IFRS 9 Financial Instruments that
replaces IAS 39 Financial Instruments: Recognition and Measurement
and all previous versions of IFRS 9. IFRS 9 incorporates the three
aspects of the accounting for financial instruments: classification
and measurement; impairment; and hedge accounting. Except for hedge
accounting, the standard should be applied using the retrospective
application. The Company adopted this standard on 1 January 2018.
The adoption of this standard did not have a material impact on the
Company's financial statements.
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with
Customers. The standard requires an entity to recognize revenue in
a manner that depicts the transfer of goods or services to
customers at an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. The new standard will supersede all current revenue
recognition requirements under IFRS when it becomes effective. The
standard can be applied using either the full retrospective
approach or a modified retrospective approach at the date of
adoptions. The Company adopted this standard on 1 January 2018
using the modified retrospective method. The adoption of this
standard did not have a material impact on the Company's financial
statements.
Not Yet Adopted
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases. The standard
establishes the principles for the recognition, measurement,
presentation and disclosure of leases for both the lessee and
lessor. The standard requires the present value of future minimum
lease payments for all lease transactions (with terms in excess of
12 months) to be recognized on the balance sheet as lease assets
and lease liabilities, and to depreciate lease assets separately
from interest on lease liabilities in the income statement. IFRS 16
replaces the previous lease standard, IAS 17 Leases, and related
interpretations. This standard will be effective on 1 January 2019.
Early adoption is permitted only if the Company also applies IFRS
15 Revenue from Contracts with Customers. The standard can be
applied using either the full retrospective approach or a modified
retrospective approach at the date of adoption. To date, the
Company has not yet concluded on the impact of this standard.
Note 4 - Revenue
DGO extracts and sells natural gas, natural gas liquids and
crude oil to various customers in addition to operating a majority
of these oil and natural gas wells for customers and other working
interest owners. The following table reconciles the Company's
revenue for the periods presented:
(Amounts reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months
to to Year ended
31 December
30 June 2018 30 June 2017 2017
-------------- -------------- ---------------
Natural gas $ 48,027 $ 7,795 $ 30,463
Oil 7,492 2,399 8,047
NGL 1,154 - 1,043
-------------- --------------
Total natural gas, oil and NGL 56,673 10,194 39,553
Operator 776 21 936
Oil and gas program 195 403 705
Water disposal 344 282 565
Other 45 - 18
-------------- -------------- -------------
Total revenue $ 58,033 $ 10,900 $ 41,777
========== ========== =========
A significant portion of DGO's trade receivables represent
receivables related to either sales of oil and natural gas or
operational services. Oil and natural gas trade receivables are
generally uncollateralised.
Certain prior period amounts of Operator revenue have been
reclassified to conform with current presentation. See Note 3 for
additional information regarding reclassifications.
Note 5 - Expenses by Nature
The following table provides a detail of the Company's
expenses:
(Amounts reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months
to to Year ended
31 December
Explanation 30 June 2018 30 June 2017 2017
------------- -------------- -------------- ---------------
Employees and benefits $ 8,209 $ 2,217 $ 8,539
Automobile 1,475 526 1,441
Insurance 2,095 117 491
Production taxes 700 725 1,345
Gathering, processing and transportation 4,225 - 2,712
Well operating expenses, net 12,741 1,862 6,380
-------------- -------------- -------------
Total cost of sales a $ 29,445 $ 5,447 $ 20,908
Depreciation 1,091 516 1,469
Depletion 7,263 1,726 6,067
-------------- -------------- -------------
Total depreciation and depletion $ 8,354 $ 2,242 $ 7,536
Employees and benefits 3,921 1,102 2,655
Other administrative 213 136 1,525
Professional fees 302 165 360
Auditors' remuneration
Fees payable to the Company's
auditor for the audit of the
group and Company's annual accounts 73 11 55
Fees payable to the Company's
auditor and its associates for
other services:
Audit of the accounts of subsidiaries 238 75 125
Corporate finance services 116 4 73
--------------
Total auditors' remuneration 427 $ 90 253
Rent 430 42 86
-------------- -------------- -------------
Recurring administrative expenses $ 5,293 $ 1,535 $ 4,879
Non-recurring costs associated
with acquisitions & contribution
of assets 2,059 1,769 3,349
Provision for working interest
owners receivable - - 632
Non-cash equity compensation b 142 - 59
Non-recurring administrative
expenses $ 2,201 $ 1,769 $ 4,040
Total administrative expenses a $ 7,494 $ 3,304 $ 8,919
Total expenses a $ 45,293 $ 10,993 $ 37,363
========== ========== =========
a) The increase in expenses is primarily related to the oil and gas properties
acquired during 2018. See Note 9 for more information about the Company's
acquisitions.
b) Non-cash equity issuance reflects the expense recognition related to
the issuance of restricted stock units to certain key managers.
Certain prior period amounts have been reclassified to conform
with current presentation. See Note 3 for additional information
regarding reclassifications.
Note 6 - Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure, which is of
particular interest to the industry and Directors, as it is
essentially the cash generated from operations that DGO has free
for interest payments and capital investment. Adjusted EBITDA
should not be considered as an alternative to operating profit
(loss), comprehensive income, cash flow from operating activities
or any other financial performance or liquidity measure presented
in accordance with IFRS. Adjusted EBITDA is a non-IFRS financial
measure that is defined as operating profit plus or minus items
detailed below in the table below.
The Company believes Adjusted EBITDA is a useful measure because
it enables 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 DGO's financing methods or
capital structure. The Company excludes the items listed in the
table below from operating profit in arriving at Adjusted EBITDA
because these amounts can vary substantially from company to
company within our industry depending upon accounting methods and
book values of assets, capital structures and the method by which
the assets were acquired. The following table reconciles operating
profit to Adjusted EBITDA:
(Amounts other than per share are reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months
to to Year ended
31 December
30 June 2018 30 June 2017 2017
-------------- -------------- ---------------
Operating profit $ 36,179 $ 35,212 $ 41,161
Depreciation and depletion 8,354 2,242 7,536
Gain on bargain purchase (37,823) (35,841) (37,093)
(Loss) gain on disposal of property
and equipment 137 (4) (95)
Loss on derivative financial instruments 18,024 687 1,965
Non-recurring costs associated with
acquisitions & contribution of assets 2,059 1,769 3,349
Provision for working interest owners
receivable - - 632
Gain on sale oil and gas properties (4,200) - -
Non-cash equity issuance included in
administrative expense 142 - 59
-------------
Total adjustments (13,307) (31,147) (23,457)
Adjusted EBITDA $ 22,872 $ 4,065 $ 17,704
========= ========= ========
Weighted average ordinary shares outstanding
- basic 265,509 94,971 120,136
Weighted average ordinary shares outstanding
- diluted 266,483 94,971 120,269
Adjusted EBITDA per share - basic and
diluted $ 0.09 $ 0.04 $ 0.15
========= ========= ========
Note 7 - Earnings Per Share
The calculation of basic income/(loss) per ordinary share is
based on the income/(loss) after taxation available to ordinary
shareholders and on the weighted average number of ordinary shares
outstanding during the period. The calculation of diluted
income/(loss) per ordinary share is based on the income/(loss)
after taxation available to ordinary shareholders and the weighted
average number of ordinary shares outstanding plus the weighted
average number of shares that would be issued if dilutive options
and warrants were converted into ordinary shares on the last day of
the reporting period. Basic and diluted income/(loss) per ordinary
share is calculated as follows:
(Amounts other than per share are reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months Year ended
to to
Calculation 30 June 2018 30 June 2017 31 December
2017
------------- -------------- -------------- ---------------
Income after taxation available
to ordinary shareholders A $ 23,546 $ 22,634 $ 27,454
Weighted average ordinary shares
outstanding - basic B 265,509 94,971 120,136
Weighted average ordinary shares
outstanding - diluted C 266,483 94,971 120,269
Earnings per ordinary share - = A /
basic B $ 0.09 $ 0.24 $ 0.23
========== ========== =========
Earnings per ordinary share - = A /
diluted C $ 0.09 $ 0.24 $ 0.23
========== ========== =========
Adjusted EBITDA per ordinary share
- basic & diluted Note 6 $ 0.09 $ 0.04 $ 0.15
========== ========== =========
Note 8 - Dividends
The following table summarizes the Company's dividends paid and
declared:
Dividends per
Ordinary Share
Record Shares Gross Dividends
USD $ GBP Date Pay Date Outstanding Paid $'000
---------------- -------- -------- ------------ ------------- --------------- -----------------
Dividend
declared 07 July
15 June 2017 0.0199 0.0155 2017 31 July 2017 145,076 2,887
Dividend
declared
11 September 17 November 20 December
2017 0.0199 0.0149 2017 2017 145,076 2,889
---------------
Cumulative
dividends
declared as at
for
the year ended
31
December 2017 5,776
Dividend
declared 11 May
30 April 2018 0.0345 0.0251 2018 25 May 2018 311,476 10,746
Cumulative
dividends
declared as at
for
the period
ended
30 June 2018 $16,522
===============
Note 9 - Acquisitions
The assets acquired in all acquisitions include the necessary
permits, rights to production, royalties, contracts and agreements
that support the production from the wells. The Company accounts
for business acquisitions under IFRS 3. The acquisitions gave rise
to bargain purchases due to the prevailing market conditions in the
Appalachian Basin, the context of global oil and gas prices, the
financial condition of the sellers, and a change in the operational
focus of the sellers compelling these sellers to divest of their
conventional oil and gas assets.
1H 2018 Acquisitions
In February 2018, DGO placed 166,400 new ordinary shares at
$1.13 per share with certain existing and new institutional
investors to raise net proceeds of $180,000 to fund the following
acquisitions (see Note 14 for more information on share
issuances):
Acquisition of the stock of Alliance Petroleum Corporation
In March 2018, DGO acquired the entire share capital of Alliance
Petroleum Corporation, including approximately 13,000 conventional
natural gas and oil wells in the states of Pennsylvania, West
Virginia and Ohio and all other property and equipment. The Company
paid consideration of $80,743, excluding customary purchase price
adjustments. The Company funded the cash consideration for the
purchase with the $180,000 net proceeds from its equity placing of
DGO's stock in February 2018.
Management determined the fair value of the reserves held in the
assets acquired to be $129,125. The provisional estimated fair
values of the assets and liabilities assumed were as follows:
(Amounts reported in thousands)
Total cash consideration $80,743
Less cash received (8,638)
Cash consideration, net of cash received $72,105
=======
Net Assets Acquired:
Current assets $14,645
Oil and gas properties, net 129,125
Property and equipment, net 2,444
Other assets 2,133
Current liabilities (7,576)
Deferred tax liability (19,852)
Uncertain tax position (2,133)
Debt (25,000)
Other liabilities (119)
Decommissioning liability (20,153)
73,514
Gain on bargain purchase (1,409)
72,105
=======
(a) At the date of acquisition DGO determined the Alliance
Petroleum Corporation had taken uncertain tax positions, and as a
result, an indemnification agreement was executed. DGO recorded an
indemnification receivable in the amount of $2,133. In accordance
with IFRS 3, DGO assigned acquisition date fair value to the
indemnification asset using the same valuation techniques used to
determine the acquisition date fair value of the related
liability.
(b) On the date of acquisition DGO repaid the debt in full using
proceeds from the February 2018 equity placing.
Acquisition of assets from CNX Resources LLC
In March 2018, DGO acquired approximately 11,000 conventional
natural gas and oil wells principally in the states of Pennsylvania
and West Virginia and other equipment from CNX Resources LLC
("CNX"). The Company paid purchase consideration of $89,296,
excluding customary purchase price adjustments. The Company funded
the cash consideration for the purchase with the $180,000 net
proceeds from its equity placing of DGO's stock in February 2018.
Subsequent to the purchase of these assets, CNX agreed to retain a
monthly tariff obligation applicable to the Appalachian assets that
requires monthly cash payments to a pipeline transmission company
through a portion of calendar year 2022. Tariff payments from the
effective date of the purchase through their expiration in 2022
totaled $27,000. In exchange for CNX retaining this $27,000
pipeline tariff obligation, the Company paid CNX $17,000. This
one-time payment allows DGO to retain complete and uninterrupted
access to the applicable pipeline system and eliminates the $27,000
tariffs the Company would have paid over the remaining term.
Management determined the fair value of the reserves held in the
assets acquired to be $130,500. The provisional estimated fair
values of the assets and liabilities assumed were as follows:
(Amounts reported in thousands)
Oil and gas properties $130,500
Oil and gas properties (Decommissioning provision, asset portion) 14,332
Other PPE
Decommissioning liability (14,332)
Other liabilities (4,790)
Gain on bargain purchase (36,414)
--------
Purchase price $ 89,296
=======
2017 Acquisitions (Restated)
EnerVest Acquisition
In April 2017, DGO acquired approximately 1,300 conventional
natural gas and oil wells in Ohio and equipment from EnerVest. The
Company paid in cash the consideration totaling $1,750. Management
considered the fair value of the reserves held in the assets
acquired to be $8,500. The fair values of the assets and
liabilities assumed were as follows:
(Amounts reported in thousands)
Oil and gas properties $8,500
Oil and gas properties (Decommissioning provision, asset portion) 2,406
Decommissioning liability (2,406)
Gain on bargain purchase (6,750)
Purchase price $1,750
=====
Titan Energy Acquisition
In June 2017, DGO acquired approximately 8,380 producing
conventional natural gas and oil wells in the states of
Pennsylvania, Ohio, and Tennessee (including approximately 1,140
non-operated wells) and equipment from Titan Energy. The Company
paid total consideration of $84,200, excluding customary purchase
price adjustments. The cash consideration for the purchase was
funded by a new $110,000 Senior Secured Loan Facility, of which,
$64,000 was drawn at closing on 30 June 2017, and an equity placing
of DGO's stock. DGO placed 39,300 new ordinary shares at $0.89 per
share with certain existing and new institutional investors to
raise $35,020. The equity placing occurred in two tranches of
11,400 shares which raised $10,158 and 27,900 shares were placed
with the second tranche, which raised $24,862.
Management determined the fair value of the reserves held in the
assets acquired on 30 June 2017 to be $108,011. The fair values of
the assets and liabilities assumed were as follows:
(Amounts reported in thousands)
Oil and gas properties $108,011
Oil and gas properties (Decommissioning provision, asset portion) 16,366
Other PPE 1,752
Decommissioning liability (16,366)
Other liabilities (2,279)
Gain on bargain purchase (30,141)
Purchase price $ 77,343
=======
NGO Acquisition
In November 2017, DGO acquired approximately 550 wells in
Central Ohio from NGO Development Corporation, Inc. The Company
paid cash consideration totaling $3,114. Management determined the
fair value of the reserves held in the assets acquired to be
$3,003. The provisional estimated fair values of the assets and
liabilities assumed were as follows:
(Amounts reported in thousands)
Oil and gas properties $3,003
Oil and gas properties (Decommissioning provision, asset portion) 818
Other PPE 352
Decommissioning liability (818)
Other liabilities (39)
Gain on bargain purchase (202)
Purchase price $3,114
=====
Subsequent Events
In July 2018, DGO placed 195,330 new ordinary shares at $1.32
per share (97 pence) with certain existing and new institutional
investors to raise net proceeds of $238,800 to partially fund the
acquisition of approximately 11,250 conventional natural gas wells
and a wholly-owned midstream gathering and compression system with
approximately 6,400 miles of pipeline and 59 compressor stations in
the states of Kentucky, West Virginia and Virginia and other
equipment from EQT. The Company paid purchase consideration of
$575,000, excluding customary purchase price adjustments. The
Company funded the cash consideration for the purchase with
$238,800 from the net proceeds from its equity placing of stock in
July 2018 and an initial draw of $336,200 from the new $1,000,000
debt facility as discussed in Note 16. As at 30 June 2018 the
Company has made a $57,500 deposit related to the acquisition,
which is included in other non-current assets on the financial
position.
Also in July, DGO purchased for $20,212 additional working
interest in certain wells it already operated. These assets were
previously held in seven limited partnerships with working interest
ranges from 54% to 82% to which the Company served as the managing
general partner. The Company funded the cash consideration for the
purchase with a draw on its debt facility.
Note 10 - Other Liabilities
The following table includes a detail of other liabilities as at
the periods presented:
(Amounts reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
31 December
30 June 2018 30 June 2017 2017
-------------- -------------- ---------------
Other non-current liabilities
Customer deposits $ - $ 55 $ 52
Revenue to be distributed - 3,128 3,486
Derivative financial instruments 5,971 1,855 1,943
Other 3,809 - 283
--------------
Total other non-current liabilities $ 9,780 $ 5,038 $ 5,764
========== ========== =========
Other current liabilities
Accrued expenses 2,715 $ 896 $ 2,300
Net revenue clearing 9,344 2,461 6,472
IPO related expenses - 2,768 -
Acquisition related short term financing - 3,500 -
Derivative financial instruments 12,921 - 961
Other 9,046 1,213 2,784
--------------
Total other current liabilities $ 34,026 $ 10,838 $ 12,517
========== ========== =========
Note 11 - Oil and Gas Properties
The following table summarizes the Company's oil and gas
properties for each of the periods presented:
(Amounts reported in thousands)
Costs Depletion and Impairment
Beginning Additions Ending Beginning Period Ending Net Book
Period Balance (a) Disposals Balance Balance Charges Disposals Balance Value
---------- --------- --------- ----------- ------- --------- ------- --------- -------- ----------
As at and
for
the six
months
to 30
June 2018 239,814 275,716 (19) 515,511 (24,489) (7,492) - (31,981) $483,530
As at and
for
the six
months
to 30
June 2017 94,608 127,135 (12) 221,731 (17,815) (1,906) - (19,721) 202,010
As at and
for
the year
ended
31
December
2017 94,608 145,527 (321) 239,814 (17,815) (6,674) - (24,489) 215,325
a) See Note 9 for more information about the Company's acquisitions.
Note 12 - Property and Equipment
The following table summarizes the Company's property and
equipment for each of the periods presented:
(Amounts reported in thousands)
Accumulated Depreciation
Plant, Property & Equipment and Disposals
Beginning Additions Ending Beginning Period Ending Net Book
Period Balance (a) Disposals Balance Balance Charges Disposals Balance Value
------------ ----------- --------- ----------- ------- ----------- ------- --------- -------- ---------
As at and
for
the six
months
to 30 June
2018 $ 9,676 8,608 (465) 17,819 (2,729) (5,000) - $(7,729) $10,090
As at and
for
the six
months
to 30 June
2017
(Restated) 5,223 2,657 (5) 7,875 (1,875) (336) 4 (2,207) 5,668
As at and
for
the year
ended
31 December
2017
(Restated) 5,223 4,595 (142) 9,676 (1,875) (862) 8 (2,729) 6,947
a) Of the $8,575 in 2018 additions, $4,317 relates to equipment purchased
through acquisitions. See Note 9 for more information about the Company's
acquisitions.
Note 13 - Derivatives
The following table summarizes the Company's calculated fair
value of derivative financial instruments:
(Amounts reported in thousands)
Unaudited Unaudited Audited
(Liabilities)/Assets 30 June 2018 30 June 2017 31 December 2017
-------------- -------------- --------------------
Natural gas
Swaps $ (1,020) $ (747) $ 28
Collars (2,288) (57) 311
Basis swaps (872) (568) (965)
Put options - $ - $ -
------------- --------- ------------
Total natural gas financial
derivative contracts $ (4,180) $ (1,372) $ (626)
--------- --------- ------------
Oil
Swaps $ (992) $ - $ (56)
Collars (4,349) (254) (2,222)
Basis swaps - - -
Put options - $ - $ -
------------- --------- ------------
Total oil financial derivative
contracts $ (5,341) $ (254) $ (2,278)
--------- --------- ------------
Natural gas liquids
Swaps $ (9,371) $ - $ -
--------- --------- ------------
Total financial derivative contracts $ (18,892) $ (1,626) $ (2,904)
========= ========= ============
The Company reports derivative financial instrument assets and
liabilities net in its balance sheet. The following table
reconciles the Company's derivative financial instrument gross
assets and gross liabilities for the periods presented:
(Amounts reported in thousands)
(Restated) (Restated)
Derivative Financial Statement of Unaudited Unaudited Audited
Financial Position 30 June 2018 30 June 2017 31 December
Instruments line item 2017
------------------------------- -------------------- -------------- -------------- ---------------
Non-current assets $ 13,791 $ 1,585 $ 1,348
Current assets 1,646 2,012 955
------------- ------------- ------------
Total assets $ 15,437 $ 3,597 $ 2,303
Non-current liability $ (19,762) $ (3,440) $ (3,291)
Current liabilities (14,567) (1,783) (1,916)
------------- ------------- ------------
Total liabilities $ (34,329) $ (5,223) $ (5,207)
Other non-current
Net liabilities - non-current liabilities $ (5,971) $ (1,855) $ (1,943)
Other current
Net liabilities - current liabilities (12,921) 229 (961)
-------------
Net (liabilities)/assets $ (18,892) $ (1,626) $ (2,904)
========= ========= ========
The Company recorded the following gain (loss) on derivative
financial instruments in the Interim Consolidated Statements of
Profit or Loss and Other Comprehensive Income for the periods
presented:
(Amounts reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months Year ended
to to
30 June 2018 30 June 2017 31 December
2017
-------------- ---------------- ---------------
Net (loss) gain on settlements $ (423) $ 147 $ 1,524
Net loss on fair value adjustments on
unsettled financial instruments (18,024) (687) (1,965)
-------------
Total loss on derivative financial instruments $ (18,447) $ (540) $ (441)
========= ======== ========
The Company's natural gas and oil derivative financial
instruments outstanding at 30 June 2018 are listed below:
Short
Financial Remaining Ending Swap Floor Put Ceiling Mark-to-Market
Instrument Type Volumes Month Price Price Price Price 30 June 2018
------------------- ----------- ------- ----- ------- ------- --------- ------------------
(Amounts reported
in thousands)
Natural gas
3,450,000
Swap MMBTUs Dec-18 $2.88 $ - $ - $ - $ (242)
6,000,000
Swap MMBTUs Dec-19 2.83 - - - 137
6,207,000
Swap MMBTUs Dec-20 2.81 - - - 776
2,970,000
Swap MMBTUs Mar-21 2.91 - - - 247
9,063,000
Swap MMBTUs Mar-19 2.35 - - - (1,245)
4,250,000
Swap MMBTUs Mar-20 2.72 - - - (345)
4,250,000
Swap MMBTUs Mar-20 2.72 - - - (348)
3,660,000
Two-Way Collar MMBTUs Mar-20 - 2.55 - 2.85 (251)
3,660,000
Two-Way Collar MMBTUs Mar-20 - 2.55 - 2.79 (346)
3,650,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.74 (67)
3,650,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.74 (60)
3,660,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.79 (346)
3,660,000
Two-Way Collar MMBTUs Mar-20 - 2.55 - 2.79 (338)
3,650,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.73 (67)
1,825,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.76 (20)
1,825,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.75 (23)
3,360,000
Two-Way Collar MMBTUs Mar-20 - 2.60 - 2.76 (313)
3,360,000
Two-Way Collar MMBTUs Mar-20 - 2.60 - 2.74 (343)
3,365,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.76 (40)
3,365,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.76 (40)
3,365,000
Two-Way Collar MMBTUs Mar-21 - 2.55 - 2.76 (34)
Basis Swap:
Dominion 3,005,000
SP MMBTUs Dec-18 0.58 - - - (123)
Basis Swap:
Dominion 6,180,000
SP MMBTUs Dec-19 0.58 - - - (468)
Basis Swap:
Dominion 4,197,000
SP MMBTUs Dec-20 0.59 - - - (272)
Basis Swap:
Dominion 1,770.000
SP MMBTUs Mar-20 0.48 - - - 44
320,000
Basis Swap: TCO MMBTUs Oct-18 0.35 - - - (46)
183,000
Basis Swap: TCO MMBTUs Dec-18 0.35 - - - (25)
1,160,000
Basis Swap: TCO MMBTUs Dec-19 0.39 - - - (44)
1,029,000
Basis Swap: TCO MMBTUs Dec-20 0.40 - - - 45
810,000
Basis Swap: Tetco MMBTUs Mar-21 0.46 - - - 20
Basis Swap:
Dominion 117,000
SP MMBTUs Dec-18 0.58 - - - (3)
(Amounts reported
in thousands)
Oil
Swap 33,000 BBLs Mar-21 50.78 - - - (252)
15,000
Swap MMBTUs Dec-18 54.1 - - - (247)
72,000
Swap MMBTUs Dec-19 58.55 - - - (493)
74,000
Two-Way Collar MMBTUs Dec-18 - 41.50 - 51.45 (1,413)
146,000
Two-Way Collar MMBTUs Dec-19 - 43.50 - 52.40 (2,046)
Two-Way Collar 6,000 MMBTUs Feb-19 - 40.00 - 56.05 (70)
33,000
Two-Way Collar MMBTUs Dec-20 - 42.5 - 57.40 (226)
36,000
Two-Way Collar MMBTUs Dec-20 - 45 - 64 (145)
108,000
Two-Way Collar MMBTUs Sep-20 - 45 - 64.6 (435)
Two-Way Collar 9,000 MMBTUs Mar-21 - 50 - 63.45 (14)
Natural Gas
Liquids
------------------- ----------- ------- ----- ------- ------- ---------
7,130,000
Swap MMBTUs Jul-21 0.81 - - - 41
509,000
Swap MMBTUs Jul-21 0.81 - - - (62)
1,630,000
Swap MMBTUs Jul-21 0.81 - - - (170)
917,000
Swap MMBTUs Jul-21 0.81 - - - (558)
75,514,000
Swap MMBTUs Jul-20 0.81 - - - 246
5,394,000
Swap MMBTUs Jul-20 0.81 - - - (668)
17,260,000
Swap MMBTUs Jul-20 0.81 - - - (1,891)
9,709,000
Swap MMBTUs Jul-21 0.81 - - - (6,309)
Total derivative financial
instruments $ (18,892)
=== ========
Subsequent Event
No significant natural gas, natural gas liquid or oil derivative
financial instruments have been executed subsequent to 30 June
2018.
Note 14 - Share Capital
In February 2018, DGO placed 166,400 new ordinary shares at
$1.13 per share (80 pence) to raise gross proceeds of $188,775
(approximately GBP133,120). DGO used the proceeds to fund the
Alliance Petroleum and CNX Resources acquisition discussed in Note
9. The following table summarizes the Company's share capital for
the periods presented:
(Amounts reported in thousands)
Number of Total Share Total Share
Shares Capital Premium
Balance at 1 January 2018 145,076 $ 1,940 $ 76,026
Issuance of share capital, secondary
offering 166,400 2,359 $ 178,301
Balance at 30 June 2018 311,476 $ 4,299 $ 254,327
========= ========= =========
Number of Total Share Total Share
Shares Capital Premium
--------- ------------- ---------------
Balance at 1 January 2017 44,210 $ 669 $ 313
Issuance of share capital, initial
offering 61,381 768 43,550
Issuance of share capital, secondary
offering 39,485 503 32,152
Balance at 30 June 2017 (Restated) 145,076 $ 1,940 $ 76,015
========= ========= =========
Number of Total Share Total Share
Shares Capital Premium
--------- ------------- ---------------
Balance at 1 January 2017 44,210 $ 669 $ 313
Issuance of share capital, initial
offering 61,381 768 43,550
Issuance of share capital, secondary
offering 39,485 503 32,163
--------- ------------- -------------
Balance at 31 December 2017 (Restated) 145,076 $ 1,940 $ 76,026
========= ========= =========
Subsequent Event
In July 2018, DGO placed 195,330 new ordinary shares at $1.32
per share (97 pence) with certain existing and new institutional
investors to raise net proceeds of $238,800 to partially fund the
acquisition of assets from EQT as discussed in Note 9.
Note 15 - Decommissioning Liability
The Company records a liability for future cost of
decommissioning production facilities and pipelines. The
decommissioning liability represents the present value of
decommissioning costs relating to oil and gas properties, which the
Company expects to incur over the long producing life of its wells,
presently estimated through to 2048 when the Company expects its
producing oil and gas properties to reach the end of their economic
lives.
As discussed more fully in Note 2, these liabilities represent
the Directors' best estimates of the future obligation. Directors'
assumptions are based on the current economic environment, and
represent what they 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
oil and gas prices, which are inherently uncertain.
The discount rate and the cost inflation rate used in the
calculation of the decommissioning liability were 8.0% and 3.0%,
respectively as at each of the periods presented. The table below
summarizes the activity for the Company's decommissioning
liability:
(Amounts reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
Six months Six months
to to Year ended
31 December
30 June 2018 30 June 2017 2017
-------------- -------------- ---------------
Balance at 1 January $ 35,448 $ 12,265 $ 12,265
Additions (a) 34,784 18,780 21,497
Accretion (a) 2,158 585 1,764
Disposals - - (78)
--------------
Balance at 30 June $ 72,390 $ 31,630 $ 35,448
========== ========== ========
a) See Note 9 for more information about the Company's acquisitions.
Note 16 - Borrowings
DGO's borrowings consist of the following amounts for the
periods presented:
(Amounts reported in thousands)
(Restated) (Restated)
Unaudited Unaudited Audited
31 December
30 June 2018 30 June 2017 2017
-------------- -------------- ---------------
Financial institution, with interest
rate of 2.25% plus LIBOR, maturing March
14, 2023, secured by oil and gas properties $ 145,600 $ - $ -
Financial institution, interest rate
of 8.25% plus LIBOR, secured by oil and
gas properties (a) - 64,000 73,249
Individuals and institutional investor
bonds, interest rate of 8.50%, maturing
June 2020, unsecured 89 118 81
Miscellaneous notes, primarily for equipment,
real estate and operational cash flow 301 497 495
Total borrowings $ 145,990 $ 64,615 $ 73,825
--------- --------- --------
Less current portion of long-term debt (107) (305) (373)
Less deferred financing costs (b) (6,195) (2,994) (2,833)
Total non-current borrowings, net $ 139,688 $ 61,316 $ 70,619
========= ========= ========
In March 2018, the Company closed a new $500,000 five-year
senior secured revolving credit facility, initially subject to a
borrowing limit of $140,000. Following the closing of the
acquisition of certain assets of CNX Resources LLC in March 2018,
as discussed in Note 9, the borrowing limit increased to $200,000.
The facility has an initial interest rate of 2.50% plus LIBOR and
is subject to a grid that fluctuates based upon utilisation with a
pricing of 2.25% - 3.25% plus LIBOR.
a) In June 2017 the Company closed a new $110,000 senior secured
credit facility, of which, $64,000 was drawn at closing on 30 June
2017. On 30 September 2017, an additional $11,000 was drawn to
close on the remaining purchase of oil and gas assets discussed in
Note 9.
b) Deferred financing costs outstanding at 30 June 2018 were
incurred with the financing of the senior secured term loan.
The following table provides a reconciliation of DGO's future
maturities of its total borrowings for each of the periods
presented:
(Amounts reported in thousands)
31 December
30 June 2018 30 June 2017 2017
-------------- -------------- ---------------
Not later than one year $ 107 $ 305 $ 373
Later than one year and not later than
five years 145,883 64,310 73,452
Later than five years - - -
Total borrowings $ 145,990 $ 64,615 $ 73,825
========== ========== =========
Reconciliation of borrowings arising from financing
activities:
(Amounts reported in thousands)
31 December
2017 Net Cash Flows 30 June 2018
------------- ---------------- ----------------
Total borrowings $ 73,825 $ (72,165) $ 145,990
Gain/Loss on Debt Extinguishment
As discussed above, when DGO entered into the new senior secured
revolving credit facility in March 2018 it resulted in a
non-recurring loss on the early extinguishment of debt of $8,359,
which primarily included a $2,583 charge for the accelerated
amortization of the remaining deferred financing costs and $5,776
related to an early payment fee.
Subsequent Event
In July 2018, the Company arranged an amended five year, senior
secured credit facility up to $1,000,000 with an initial
availability of $600,000 to fund the EQT acquisition as discussed
in Note 9, to pay related costs and to refinance indebtedness under
the existing credit facility.
Note 17 - Subsequent Events
The Directors determined the need to disclose the following
material transactions that occurred subsequent to 30 June 2018,
which have been described within each relevant footnote as
follows:
Description Footnote
-------------- ---------
Acquisitions Note 9
Share Capital Note 14
Borrowings Note 16
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BIGDCISBBGIG
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