Diversified Gas & Oil: beyond Appalachia?

Those early 2018 numbers, treated as if the acquisitions of APC and CNX were completed on 1 January, suggest general and administrative (G&A) and unit lease costs continue to narrow, and that the adjusted cash profit margin has held firm at 40 per cent. That margin, in keeping with DGO’s preference for swaps and collars on future production, is accounted for on a hedged basis. Had output not been hedged in the first three months of this year, it would be slightly higher, and adjusted cash profit would have hit $15.8m (£11.5m), rather than $15.5m.

This isn’t to imply that investors are missing out on higher energy prices; indeed, most of what comes out of DGO’s 30,000 wells is natural gas, which hasn’t seen the same price spike as crude. Moreover, it demonstrates that scale and acquisitions, rather than commodity prices, are the route to earnings growth. On that note, consensus forecasts are for pre-tax profit of $24.8m and adjusted EPS of 7.6¢ in 2018.