Diversified Gas & Oil - Cash flow protected in a low-price environment
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.Diversified Gas & Oil is an Appalachian Basin focused natural gas and crude oil operations company.
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