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DGOC's second half promises much

Buying assets from Titan Energy points to solid growth for the oil producer, next time around
September 12, 2017

It has been a busy six months for US-based producer Diversified Gas & Oil (DGOC) following its admission to the Alternative Investment Market in February. Since then, it has been transformed through a reverse takeover by which means it acquired assets from Titan Energy that have increased output by 161 per cent, or 6,800 barrels of oil equivalent per day (boepd). The company has also promised a maiden interim dividend.

IC TIP: Buy at 73p

After taking out exceptional items, adjusted cash profits more than trebled to $4.1m (£3.1m), while margins grew from 17.2 per cent to 35.2 per cent. However, the full benefits of the Titan acquisition have yet to be felt, as the deal was completed on the last day of the half-year. In fact, if the deal had been concluded at the start of the half-year, overall revenue would have been $36.1m.

The company is looking to acquire more assets from larger operators who are keen to retain rights for shale exploration but are less interested in maintaining existing production of conventional assets. The rationale is to reduce operating costs, given that many assets are managed inefficiently by the larger operators. Operating expenses were down 6.4 per cent to $7.73 per barrel of oil equivalent, and further synergies are expected.

DIVERSIFIED GAS & OIL (DGOC)  
ORD PRICE:73pMARKET VALUE:£106m
TOUCH:72-74p12-MONTH HIGH:79pLOW: 55p
DIVIDEND YIELD:4.1%PE RATIO:NA
NET ASSET VALUE:60¢NET DEBT*:37%
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20167.736.591.0nil
201711.53.94.01.99
% change+51-89-96-
Ex-div:16 Nov   
Payment:20 Dec   
£1=$1.321 *Includes equity placing receivable