Amid the tumbling energy company share prices caused by the oil price crash, Diversified Gas & Oil (DGOC) falling 7 per cent comes across as a win. The US-based gas producer’s portfolio is gas-heavy, and the major sell-off came on the same day as its 2019 results.
Chief executive Rusty Hutson said it would be a buying time for DGOC. “This is a generational opportunity. In the 19 years I’ve been in the business, I have not seen the level of distress [we have now],” he said.
DGOC ended 2019 with liquidity of around $230m (£174m), so this is not just talk from Mr Hutson. The group’s strategy in recent years has been to buy up assets in the Appalachian basin in the US from struggling producers. This has taken production from 41m barrels of oil equivalent per day (boepd) at the end of 2018 to 85m boepd last year.
DGO has around 90 per cent of its 2020 production hedged at a floor of $2.70 per million British thermal units (btu), 17 per cent above the average natural gas sales price in 2019. Gas provided 83 per cent of the company’s revenue in 2019.
While the statutory figures were down on 2018 because of $174m (£133m) of gains from bargain purchases that year, underlying performance indicators were positive for DGOC. Adjusted cash profits (hedged) were up 87 per cent to $273m, and the hedged cash operating margin was flat on the prior year due to lower prices overall. Shareholders will get a total dividend of 13.92ȼ a share, almost a quarter above 2018.
Consensus forecasts compiled by Bloomberg see cash profits staying flat in 2020.
| DIVERSIFIED GAS & OIL (DGOC) | ||||
| ORD PRICE: | 66p | MARKET VALUE: | £424m | |
| TOUCH: | 65.6-66.2p | 12-MONTH HIGH: | 135p | LOW: 55p |
| DIVIDEND YIELD: | 16.1% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 146ȼ | NET DEBT: | 68%* | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2015 | 18.5 | -0.4 | n/a | nil |
| 2016 | 17.1 | 32.5 | 42.0 | 2.00 |
| 2017 | 41.8 | 29.7 | 23.0 | 5.40 |
| 2018 | 290 | 262 | 52.0 | 11.23 |
| 2019 | 462 | 131 | 15.0 | 13.92 |
| % change | +60 | -50 | -71 | +24 |
| Ex-div: | 5 Mar and 4 June** | |||
| Payment: | 27 Mar and 26 June** | |||
| £1=$1.31 *Includes $1.8m in lease liabilities **Applies to dividend payments for the third and fourth quarters | ||||
