How long can Diversified Gas and Oil (DGOC) keep this up? The Appalachian basin-focused acquirer of shale assets has built a sizeable portfolio in recent years by buying up assets other producers are struggling with. These assets will either stop being cheap or salvageable at some point, but for now the spree is bearing fruit.
In the first half, DGO's production hit 75,696 barrels of oil equivalent per day (boepd), a 292 per cent increase on last year, and its adjusted cash profit jumped 475 per cent to $131m (£108m). At the same time, DGO saw average realised gas prices climb to $2.66 per 1,000 cubic feet (mcf) from $2.40, although prices fell steadily through the half.
In the half, DGO completed the $400m purchase of assets from HG Energy and in July put in a $50m stalking horse bid for assets owned by EdgeMarc Energy, an Ohio-based company currently in liquidation. The HG additions were paid for through a debt and equity combination, but cash flow and loans are likely to cover future buys, as the share price has come down 21 per cent since a May high of 134p. This decline was triggered by a series of anonymous analysis pieces that sceptically wrote up the company’s gains-on-bargain-purchase-supported profits.
Consensus broker forecasts collated by Bloomberg give adjusted EPS and enterprise/cash profits (Ebitda) of 20.5¢ and $303m respectively, with EPS the same in 2020 and Ebitda climbing to $313m.
| DIVERSIFIED GAS AND OIL (DGOC) | ||||
| ORD PRICE: | 106p | MARKET VALUE: | £ 707m | |
| TOUCH: | 105.5p-106p | 12-MONTH HIGH: | 135p | 99p |
| DIVIDEND YIELD: | 10.6% | PE RATIO: | 2 | |
| NET ASSET VALUE: | 147¢ | NET DEBT: | 63% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢)* |
| 2018 | 58 | 21.4 | 9.0 | 4.53 |
| 2019 | 237 | 84.0 | 10.0 | 6.92 |
| % change | +309 | +293 | +11 | +34 |
| Ex-div: | 05 Sep & 29 Nov* | |||
| Payment: | 27 Sep &18 Dec* | |||
| £1=$1.21, *Reflects dividend payments for the first and second quarters | ||||
