Diversified Gas & Oil PLC Completion of EQT Acquisition (9070N)
26 May 2020 - 4:01PM
UK Regulatory
TIDMDGOC
RNS Number : 9070N
Diversified Gas & Oil PLC
26 May 2020
26 May 2020
DIVERSIFIED GAS & OIL PLC
("DGO" or the "Company")
Completion of EQT Acquisition
Diversified Gas & Oil PLC (LSE: DGOC), the U.S. based owner
and operator of natural gas, natural gas liquids, and oil wells as
well as midstream assets, confirms that further to the
announcements made by the Company on 11 May 2020 and 12 May 2020,
it has completed the purchase of certain upstream and related
infrastructure assets from EQT Corporation ("EQT") (the
"Acquisition"). DGO is also pleased to announce that it has secured
a commitment from Munich Re Reserves Risk Financing, Inc. ("MRRF")
for the term loan financing for the Acquisition. The Company
continues to advance towards completing its diligence and closing
the previously announced conditional Purchase and Sale Agreement
with Carbon Energy Corporation announced on 8 April 2020.
Acquisition Highlights:
-- PDP reserves of 48 MMBoe (288 Bcfe) with pretax PV10 of $185 million on recent NYMEX strip
-- Estimated next twelve months ("NTM") Adjusted EBITDA of $32-$34 million
-- Net consideration represents a 3.3x-3.5x cash multiple
-- 9,000 Boepd (54,000 Mcfe) of adjusted 2019 net production (100% gas)
-- Average 97% working interest / 92% net revenue interest
-- 900 net operated wells and related gathering infrastructure
o 67 horizontal producing wells in Pennsylvania
o Remainder are conventional vertical producing wells in West
Virginia
-- Additional upside opportunity from 13 presently non-producing
horizontal Marcellus wells which DGO will pursue returning to
production, and to which the Company allocated no value in the
purchase price, estimated reserves, PV10 value or NTM Adjusted
EBITDA
For the Acquisition and at closing, DGO paid net consideration
of approximately $112 million ($125 million, gross) after customary
purchase price adjustments with a 1 January 2020 effective date.
Depending on future natural gas prices and measured on a quarterly
basis over the next three years, EQT may earn additional contingent
consideration of up to $20 million in aggregate if actual NYMEX
natural gas prices exceed certain established thresholds. Based on
forward NYMEX natural gas prices at the time of closing, total
estimated contingent consideration is less than $1 million.
To fund the net $112 million due at closing, DGO utilised the
$82 million of net proceeds from its recent fundraise and a
short-term draw on its revolving credit facility. DGO received
final approval from MRRF, a wholly-owned subsidiary of Munich Re,
for a $160 million senior secured term loan (the "Term Loan") that
it will utilise as the long-term, amortising financing instrument
for this Acquisition and, subject to successfully completing the
final stages of diligence, its acquisition of assets from Carbon
Energy Corporation. The Term Loan will fully amortise over ten
years with a 6.5% fixed coupon and will include 10-year hedge
protection on the production underlying the loan. DGO expects to
close the Term Loan during May 2020.
Rusty Hutson, Jr., CEO of the Company commented:
"This transaction further solidifies the strong relationship we
share with EQT that dates back to 2018 when we completed a $575
million purchase of similar Appalachian assets. Our teams work
exceptionally well together, and we look forward to future
opportunities to partner again. Today's acquisition builds on the
significant momentum we've generated this year and continues to
validate the large opportunity set of accretive gas and oil
producing assets available in this market. As in the past, we now
turn our attention to seamlessly integrating the assets into our
existing portfolio, eager to capitalise on the embedded upside from
the 13 non-producing wells by restoring them to production and
further leveraging the scale and geographic density of our
operation to reduce costs while also improving production from the
other wells."
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 (205) 408 0909
Buchanan
(Financial Public Relations)
Ben Romney
Chris Judd
Kelsey Traynor
James Husband
dgo@buchanan.uk.com +44 (0)20 7466 5000
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END
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