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DGOC going up through the gears

The US-based driller is drumming up institutional support for its proposed Titan Energy deal
June 12, 2017

At the time of writing, shares in Diversified Gas & Oil (DGOC) remained suspended as the company outlines its investment case to potential creditors following its decision to acquire various assets from Titan Energy.

IC TIP: Buy at 64.5p

The Titan deal promises to expand the US-based driller's reserve base and propel production towards 11,000 barrels of oil equivalent per day (boepd), an inferred increase of 161 per cent from existing levels. The deal, once completed, will obviously change the scale of its operations, but there was actually a marked step-up in revenue and production following the acquisitions of Eclipse and Seneca in 2016. Contributions from the 3,500 conventional wells acquired with the deals saw DGOC exit 2016 with gross production of 26.5m cubic feet equivalent per day, a 120 per cent increase year on year.

Rising production translated into a near tripling in revenue, and gross profit of $1.47m (£1.13m) against a loss of $1.34m in the prior year. Net income received a boost from the settlement of mezzanine debt which resulted in a $14.1m gain on debt cancellation, but if you strip out one-off effects, cash profit came in at $4.3m, against $2.6m in 2015. The impact of the acquisitions was also noticeable in operating cash flow, which, at $5.1m, also reversed from the previous year's outflow of $0.75m.

 

DIVERSIFIED GAS & OIL (DGOC)
ORD PRICE:64.5p*MARKET VALUE:£68m
TOUCH:na*12-MONTH HIGH:68pLOW: 55p
DIVIDEND YIELD:nilPE RATIO:2
NET ASSET VALUE:8.7¢NET DEBT:$37.1m

 

 

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20135.2-2.8n/an/a
20147.4-0.2n/an/a
20156.3-0.4-1.0n/a
201618.332.542.0nil
% change+190---

Ex-div: -

Payment: -

£1=$1.27. *Shares suspended on 5 May 2017 in accordance with Aim Rule 14