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Diversified Gas & Oil strong on healthy balance sheet despite market turmoil

Snapshot

  • Owns thousands of simple, mature wells
  • Recent results show production was 94,800 boepd
  • Dividend safe, financing position secure
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Quick facts: Diversified Gas & Oil PLC

Price: 106 GBX

LSE:DGOC
Market: LSE
Market Cap: £749.71 m
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What it does

London-listed Diversified Gas & Oil PLC (LON:DGOC) is an operator of gas and oil producing assets.

Its investment strategy is focused on the acquisition of mature, low-decline and low-risk wells, enhancement of operations with a focus on efficiency.  Founded in 2001, Diversified has deep roots in the Appalachian United States.

 

How is it doing?

In August, the firm said it is well-positioned to capitalise on opportunities created in the presently challenging times thanks to US$220mln of liquidity and a healthy balance sheet.

Production was 109,000 barrels oil equivalent per day (boepd) for the month of June, with the first half rate averaging 95,100 boepd.

First-half earnings (adjusted EBITDA) were US$146mln and net income was reported at US$18mln. An interim dividend was confirmed at 3.75 cents per share, up 7% on last year.

 

What the boss says: chief executive Rusty Hutson 

"Our commitment to an opportunistic yet fiscally disciplined business strategy continues to deliver tangible results for our shareholders with nearly $150 million of adjusted EBITDA during the first half of the year, supported by a robust hedge portfolio and low operating costs that underpin a 55% cash operating margin including operating and all administrative cash costs.

“While others have been forced to cut or suspend their dividends over the past several months, the strength and durability of our cash flows allow us to not just sustain but to increase our second quarter dividend by 7% to 3.75 cents per share, wholly reflective of the confidence the Board has in the near-medium-term outlook for the business.”

 

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What analysts say

"Based on a futures curve which slopes upward for the remainder of this decade and DGOC's existing hedge portfolio, we expect the natural gas prices realised by the company over the next five years (after the impact of cash-settled derivatives) to be stable in the range USD2.34/mcf to USD2.57/mcf," said analysts at First Berlin Equity Research in September.

"DGOC should thus have plenty of firepower to keep making the regular acquisitions through which it has secured over 95% of its current production since early 2017."

"The combination of a dividend yield above 10% and strong and stable cash generation reinforces our view that the share is substantially undervalued. Moreover, the current market cap. warrants DGOC's inclusion in the FTSE 250 Index."

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Diversified Gas & Oil hikes dividend 7% and is 'well placed to capitalise on...

Diversified Gas & Oil PLC’s (LON:DGOC) Rusty Hutson tells Proactive that despite the recent volatility in commodity prices – the company is well positioned to capitalise on opportunities. The company produced 109,000 barrels oil equivalent per day (boepd) for the month of June, with the...

on 10/8/20

2 min read