Diversified Gas & Oil PLC (LON:DGOC) has announced its latest US acquisition, with a $183mln deal for Core Appalachia Holding Co LLC.
It adds around 5,000 wells - located in Kentucky, West Virginia and Virginia - to the group’s portfolio and brings an additional 11,200 barrels oil equivalent per day (comprising 90% gas) to DGOC’s daily production volumes.
Once complete, the acquisition takes group production to 71,000 boepd and it will have total reserves measuring 493mln barrels oil equivalent.
"Our strategic acquisition of Core will allow us to unlock significant value from our enlarged base of assets in Kentucky and West Virginia that would otherwise not be achievable on a stand-alone basis,” said Rusty Hutson, DGOC chief executive.
“Core's assets are highly contiguous to the assets we acquired from EQT earlier this year and materially expand our midstream footprint in Southern Appalachia.
“We expect to deliver both immediate and near-term synergies by combining these assets, resulting in higher revenues and lower operating expenses which will support our exceptional EBITDA margins across the portfolio and drive dividend payouts higher.”
The company described the acquired asset as being “highly complementary” to those picked up from EQT back in July.
Adding midstream operations
The transaction brings midstream assets including pipelines and compression infrastructure. DGOC highlighted that the midstream assets provide an additional revenue stream, about $14mln per year based on the first half of this year.
“We have strategically diversified our business beyond upstream, and now own a significant network of gathering assets in Kentucky and West Virginia providing added control over the flow of our production and an additional revenue stream as we transport gas for other operators," Hutson said.
He added: “the expansion of our midstream assets enhances the underlying economics of our sizeable proved-developed-producing reserves by allowing us to realize the processing uplift from our natural gas liquids while simultaneously reducing our transportation costs.
“Additionally, the midstream assets allow us the optionality to move our production to different sales points, maximizing realized pricing.”