Diversified Gas & Oil - Strong balance sheet allows for dividend increase
Diversified Gas & Oil (DGO) has announced its H120 production, which averaged 95.1kboed. DGO's Smarter Well Management programme continues to offset the natural declines in its legacy assets, delivering average production of 69.4kboed during the period. The financial results were not vastly affected by COVID-19 since DGO’s strong hedging programme protects cash flows. Historically low commodity prices led to a decline in unhedged revenues; however, derivative contract settlements stood at $84m, leading to an adjusted EBITDA increase of 11% in H120 vs H119 and free cash flow (FCF) of $119m. Given FCF headroom, the board increased the quarterly dividend to 3.75c. We update our valuation to 139.8p/share (+11%) to reflect the H120 results, updated commodity price estimates and revised operating metrics. DGO will shortly be admitted to the FTSE 250 and the FTSE All-Share indices, effective 21 September, which will increase the company’s market exposure and investor access.Diversified Gas & Oil is an Appalachian Basin focused natural gas and crude oil operations company.
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