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Diversified Gas & Oil PLC acquires operations in Louisiana as first deal in new

In the ‘central’ area – parts of Louisiana, Texas, Oklahoma and Arkansas – the company plans to replicate the acquisitive growth model that proved successful in Appalachia

() has acquired a package of assets in Louisiana, marking its first deal in a newly identified ‘central’ regional focus area (RFA).

The company is paying US$135mln for upstream assets and related facilities from Indigo Minerals LLC. The package, referred to as Cotton Valley, includes some 16,000 barrels oil equivalent per day (boepd) of production across 780 net operated wells.

It is host to around 50mln barrels of proved-developed-producing (PDP) reserves. And the company highlighted that the operations benefit from Gulf Coast pricing, which the company noted means higher realisations.

Significantly, the company believes that in the new RFA it can replicate its proven business model, which in the Appalachian region was driven by acquisitions.

READ: DGOC cheers resilience of 2020 performance

The Central RFA includes areas in Louisiana, Texas, Oklahoma and Arkansas. It is similar footprint to Diversified’s existing Appalachia region and the assets available in the region also share similar asset characteristics to Appalachia, it added.

DGOC said it sees a significant opportunity to grow scale through complementary bolt-on and/or larger deals.

Chief executive Rusty Hutson, in a statement, told investors that the expansion provides significant runway for DGOC to replicate its success in Appalachia – allowing the opportunity to consolidate projects to reduce unit expenses, improve margins and optimise production.

He highlighted that DGOC is positioned as a “buyer of choice” in current market conditions.

“This first strategic acquisition outside of Appalachia also reflects our continued commitment to a consistent asset profile and valuation while affording us expanded value-accretive roll-up opportunities in this new region that will enable us to quickly build scale and drive efficiencies,” he said.

“Our financial and operational strengths continue to uniquely position Diversified to capitalise on current market conditions as the PDP buyer of choice.”

The company also on Friday provided an update to its production business in Appalachia.

Daily production averaged 102,000 barrels of oil equivalent during the first quarter, with 73% coming from conventional fields. The run-rate, once adjusted to exclude temporary winter-weather related downtime was marked at 105,000 boepd, which the company said is a 3% improvement over the preceding quarter.

It noted earnings (adjusted EBITDA) of US$78mln. The company said it had unit cash expenses of US$7.86 per boe.

DGOC is to pay a 4 cent per share dividend for the quarter, payable in September.

“Despite the challenging environment, our team continued to deliver strong financial performance through the quarter with continued strong cash margins,” Hutson said.

“As detailed in our recently released second sustainability report, we also made significant progress enhancing our sustainability practices as we seek to optimise the stewardship of our assets in line with the global energy transition.”

Read More: Diversified Gas & Oil PLC acquires operations in Louisiana as first deal in new

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