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Edison Investment Research Limited
 London, UK, 15 June 2020 Edison issues outlook on Diversified Gas & Oil (DGOC) On 18 May 2020, Diversified Gas & Oil (DGO) started trading on the Main Market of the London Stock Exchange (LSE), just over three years after its IPO on AIM. The company continues to offset Legacy assets' natural declines and keep operating costs low resulting in strong cash flow generation. Even though COVID-19 has affected global energy demand and the current commodity price environment, DGO has hedged c 80% of its natural gas production for FY20 and FY21 protecting its cash flows and shareholder returns. DGO recently announced two more opportunistic acquisitions in line with the company strategy. We update our valuation to reflect the impact of our new short- and long-term pricing assumptions and scenarios. Our mid-case valuation stands at 125.4p/share.  Our updated mid-case valuation currently stands at 125.4p/share. Changes to our valuation include updated short-term commodity prices based on the EIA's 9 June 2020 forecasts. We have also revised our long-term (2022 onwards) commodity price assumptions and we now present three different scenarios. In this note we also provide a peer analysis and compare DGO's multiples to other US onshore producers. We forecast an FY20 dividend yield of 10.4% at the current share price.Â
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