Regulatory Story
Go to market news section View chart   Print
RNS
Diversified Gas & Oil PLC   -  DGOC   

Interim Results

Released 07:01 08-Aug-2019

RNS Number : 3683I
Diversified Gas & Oil PLC
08 August 2019
 

8 August 2019

DIVERSIFIED GAS & OIL PLC

("Diversified", "DGO" or the "Company")

 

Interim Results

 

Diversified Gas & Oil PLC (AIM: DGOC), the US based owner and operator of natural gas, natural gas liquids and oil wells as well as midstream assets, announces its Interim Results for the six months ended 30 June 2019.

 

Highlights

 

Operational Highlights

 

•       1H19 net production averaged 76 MBoepd including ~2 months of production from the HG Energy  assets, up ~292% compared to 1H18 (19 MBoepd) and up ~22% compared to 2H18 (62 MBoepd)

•       June 2019 exit rate net production exceeded 90.2 MBoepd including 69.7 MBoepd from wells owned prior to the HG Energy II Appalachia, LLC ("HG-Energy") transaction, further documenting the effectiveness of the Company's "Smarter Well Management" programme

•       The Company's Smarter Well Management ("SWM") Programme continued to offset natural production declines with ~430 previously non-producing wells placed back into production since 1 January 2019

•       Completed the $400 million acquisition of certain gas producing assets from HG Energy adding c.20Mboepd (18 April 2019)

•       Long-term asset retirement agreements signed with Pennsylvania and Kentucky that combined with the existing agreements with the states of Ohio and West Virginia cover 98% of the Company's owned and operated wells

 

Financial Highlights

 

•       1H19 adjusted EBITDA*, hedged, of $131 million (1H18: $22.8 million), including ~2 months of contribution from the HG Energy acquisition; month-ended June 2019 adjusted EBITDA*, hedged of $24 million

•       Declared 2Q19 interim dividend of $0.035 per share (2Q18: $0.028 per share)

•       Since 1 January 2019, paid $52 million in credit facility principal payments, with net debt of ~$613 million at 30 June 2019 and net debt-to-adjusted EBITDA*, hedged at 2.0x

•       Cash margins in 1H19 and June 2019 remain consistent with 1Q19 at approximately 54%, hedged, despite a period of lower natural gas and natural gas liquids prices

•       Lease operating expense ("LOE") of $5.44/BOE for 1H19 was ~35% lower compared to 1H18 ($8.42/BOE); base LOE was ~46% lower compared to the same period

•       General and Administrative expense of $1.35/BOE in 1H19 was ~11% lower compared to 1H18 ($1.51/BOE)

•       Borrowing base increased to $950 million from a syndicate of fourteen banks following the acquisition of assets from HG Energy providing strong liquidity of ~$335 million including cash and availability under the Company's revolving credit facility

 

Governance Highlights

 

•       Appointment of David Johnson as Non-Executive Chairman and David Turner, Jr. as an independent Non-Executive Director and Chairman of the Audit Committee reflecting the Company's commitment to further strengthen its governance structure

 

Rusty Hutson, Jr., CEO of Diversified, commented:

 

"This was yet another highly active period for Diversified in which we delivered on a number of key corporate and operational milestones that progressed our long-term growth objectives. The acquisition of the HG Energy assets in April delivered another step-change in production volumes and cash flow generation, which took us into the top tier of London quoted independent producers.

 

"The Company's strategy to build scale within the Appalachia continues to prove successful, with positive trends on cost metrics demonstrating the economies of scale and efficiencies afforded by our business model.  Our Smarter Well Management programme continues to yield positive results and our ability to hold production steady is a testament to our operating capabilities. Since 1 January 2019 approximately 430 previously non-producing wells were placed back into production. Similarly, our safe and systematic retirement programme also enjoyed excellent progress and completed approximately 55 well pluggings for less than $25,000 on average, in line with our budget and previously shared estimates for these projects.

 

"We continue to implement initiatives to ensure we have an appropriate framework in place to support our future growth ambitions, including strengthening our governance structure and policies.

 

"In summary, our first half 2019 results reflect another period of strategic progress as the Company remains exceptionally well positioned to generate consistent and sustainable value for our shareholders."

 

* Adjusted EBITDA, presented hedged and unaudited, represents earnings before interest, taxes, depletion, depreciation and amortisation and adjustments for non-recurring items such as gain on the sale of assets, acquisition related expenses and integration costs, mark-to-market adjustments related to the Company's hedge portfolio, non-cash equity compensation charges and items of a similar nature.

 

 

Diversified Gas & Oil PLC

Rusty Hutson Jr., Chief Executive Officer

Brad Gray, Chief Operating Officer & Finance Director

Eric Williams, Chief Financial Officer

www.dgoc.com

ir@dgoc.com

+ 1 (205) 408 0909

Cenkos Securities plc

(Nominated Adviser)

Russell Cook

Katy Birkin

Ben Jeynes

+44 (0)20 7397 8900

Mirabaud Securities Limited

(Joint Broker)

Peter Krens

Edward Haig-Thomas

+44 (0)20 3167 7221

Stifel Nicolaus Europe Limited

(Joint Broker)

Callum Stewart

Nicholas Rhodes

Ashton Clanfield

+44 (0)20 7710 7600

Buchanan

(Financial Public Relations)

Ben Romney

Chris Judd

James Husband

dgo@buchanan.uk.com

+44 (0)20 7466 5000

 

 

 

DIVERSIFIED GAS & OIL PLC

Strategic Review

 

Continued Operational Excellence

 

I am pleased to be providing the first report in my capacity as Chairman since assuming the role during this period ended 30 June. Consistent with Diversified Gas & Oil's performance since its admission to AIM in February 2017, the first half of 2019 has been another eventful and progressive six-month period during which we have delivered a number of key strategic and operational milestones, all of which support our long-term growth objectives. Our results are in line with market expectations and position us to maintain our commitment to leverage and utilise the exceptionally strong cash flow of the business to return cash to shareholders through dividends and share buybacks, whilst in parallel maintaining a healthy financial footing by reducing debt. Importantly, we achieved all of this despite the wider macro backdrop of commodity volatility in our market, which only serves to emphasise the strength and resilience of our business model and effective hedging policy.

 

Corporate milestones

 

In March 2019, we identified the opportunity to acquire a complementary package of unconventional assets from HG Energy for a total cash consideration of approximately $400 million funded through a combination of debt and equity, with $225 million raised via a placing with new and existing investors.  This material and accretive acquisition added c.20Mboepd to our production and elevated us further into the top tier of independent producers quoted in London. Whilst the assets are unconventional and generate their production from considerably fewer wells than our previous acquisitions, the profile of the wells is consistent with the wider portfolio in terms of being mostly post hyperbolic decline wells that are synergistically compatible with the existing producing wells.

 

Following the acquisition of the HG Energy assets, we were pleased to announce our expanded and fully underwritten borrowing base of $950 million under its $1.5 billion revolving credit facility (the "Facility"), led by KeyBank National Association. We also negotiated a reduction to each tier of our Facility's pricing grid resulting in a lowering of the spread by 10%.  We retain current liquidity of ~$335 million while ensuring we maintain comfortable leverage of ~2.0x, below our stated net debt-to-EBITDA ratio of less than 2.5x to evaluate potential complementary and accretive acquisition opportunities.

 

Early in the period we finalised long-term agreements with oil and gas regulatory entities for Kentucky and Pennsylvania setting out our asset retirement obligations in these respective states.  These long-term agreements sit alongside those already in place with the states of Ohio and West Virginia, with 98% of the portfolio now covered by multi-year agreements.  The agreements set out our undertakings to return certain wells to production under our Smarter Well Management Programme ("SWM") programme while safely and systematically retiring those wells that have reached the end of their productive life. Execution of the agreements followed lengthy discussions during which we were able to demonstrate our proven ability to successfully return to production wells acquired from previous operators and catalyse a positive socioeconomic impact in terms of job creation and contribution to the local economies in which we operate. Critically, the agreements provide long term visibility for all stakeholders, including the states and our shareholders, on the clear asset retirement parameters within which we can budget for and execute these obligations. These agreements complement our efforts in late 2018 to evaluate the remaining life of our well portfolio and the costs expected to retire these wells, supported by independent expert consultants.

 

 

Strong Cashflow

 

Our business model is defined by our ability to generate exceptionally strong free cash flow, even in an environment of lower commodity pricing. This period was no exception, and the addition of improved margin wells from the HG Energy acquisition will significantly increase cash flow, as demonstrated by the adjusted EBITDA of $24 million generated in the month of June 2019 despite lower natural gas and natural gas liquids prices.  As we continue to grow in scale, we are able to better demonstrate the fundamentals of our business model and equity proposition; namely to drive cash flow generation and shareholder returns.

 

The combination of significant free cash flow generated from long-life, low-decline assets, and low capex intensity required to maintain that cash flow, results in our ability to distribute free cash flow for the benefit of shareholders. Our stated dividend policy is to target 40% of free cash flow to be returned to shareholders in reliable quarterly dividends, with another 40% used to pay down debt and maintain low leverage.

 

In April 2019, the Board approved the implementation of a share buyback programme which it deemed to be a value accretive use of our remaining free cash flow given the perceived value proposition resulting from our share price at the time.  Since June 2019, we have repurchased $32 million of shares.  The Board will keep the form and quantum of the programme under review while allowing us to maintain the current dividend policy.

 

Dividend

 

In June 2019, we announced a dividend payment for 1Q19 of 3.42 cents per share, totalling almost double the amount paid out in the corresponding period in 2018, demonstrating the step change in free cash flow and benefit to shareholders of recent acquisitive growth.  I am also pleased to declare our 2019 dividend of 3.5 cents per share (2Q18: 2.8 cents per share), which will be paid on 18 December 2019 to those shareholders on the register as at 29 November 2019. Since our Admission to AIM, we have returned almost $100 million to shareholders in dividends declared and paid, $59 million of which has been returned since the start of this year, and paid $117 million towards reducing debt, of which $52 million was paid year to date.

 

I am pleased to announce that we are making available the ability for our shareholders to receive our dividend paid in sterling. This will commence with the Q1 dividend of which is due to be paid 27 September 2019. An announcement will be made shortly and election forms will be sent to shareholders in the coming days.

 

Commodity Volatility

 

The period was characterised by continued volatility in natural gas prices.  Our hedging policy largely mitigated our exposure to the volatility with $7.4 million of commodity hedge cash settlements and highlighted the strategic rationale for having this policy in place.  In line with our stated policy to use a mixture of physical and financial contracts to protect cash flow, and specifically those associated with the acquisition of HG Energy Assets, we successfully executed financial NYMEX gas hedges for the period of May 2019 through April 2020.  At the period end, our net hedge portfolio was valued at $60.6 million, of which $47.1 million was current.  Our philosophy with regards to hedging is that we are willing to forgo potential upside, protect the downside and provide visibility and security on cash flow.

 

Operating efficiencies

 

Another fundamental aspect of the business model is our ability to achieve operating efficiencies by leveraging economies of scale and maintaining a strict focus on cost discipline and operational excellence. Each material acquisition completed by us has resulted in a positive impact on costs.  The completion of the HG Energy acquisition allowed us to reduce Base LOE, Total LOE and per unit G&A expenses, all key cost metrics for our business, by ~14%, ~6% and ~15% respectively compared with 4Q18. This reduction of costs enabled us to maintain a robust cash margin of 54% through the first half of the year, despite the lower natural gas and natural gas liquids prices that prevailed throughout the period.

 

One of the key operating highlights in the first half of the year was our ability to maintain flat organic production through the effective SWM programme. By optimising existing wells and bringing ~430 previously non-producing wells back into production since the start of 2019, we were able to offset the natural decline of the portfolio, representing a considerable achievement and testament to the quality of our field managers.

 

Another area of focus in terms of operational efficiency and cost control is our asset retirement obligations. In the first half of the year, we successfully plugged 55 wells, representing over 62% of our 2019 required plugging obligations per the long-term agreements with the four primary states in which almost all of our wells are located. These wells have been plugged at an average cost of $25 thousand per well, in line with our estimates.  As we progress with our asset retirement programme, we benefit from the knowledge and data obtained in terms of cost and process which in turn help support our long term asset retirement obligation estimates.  Since the beginning of 2018 through to 30 June 2019, we have plugged 90 wells at an average cost of $23 thousand per well, approximately 5% below our estimates.

 

Governance

 

To reflect the growth and maturing of the business, the Board continues to enhance its governance structures and policies.  In this regard, I was pleased to assume the role of Non-Executive Chairman during the period, replacing Robert Post who assumed the role of Non-Executive Director.  We also strengthened the Board with the appointment of another Independent Non-Executive Director, David J Turner, Jr, who brings a wealth of experience and skill to our Board.  These changes reflect a wholesale strengthening of our internal policies, structures and protocols and we will continue to focus on improved governance structures in the second half of the year, including a strong focus on ensuring ESG best-practices.

 

Positive Outlook

 

At the half year stage, we are performing in line with market expectations. The near-term priorities for the remainder of the year will be the continued success of the SWM programme and value extraction from the HG Energy acquisition earlier this year.  We will also continue to be opportunistic and agile in our approach to business development and remain well capitalised to move swiftly on opportunities that we deem to be value accretive and complementary.  As an example, on 25 July 2019, we announced that we entered a Conditional Asset Purchase Agreement to acquire for $50 million certain oil and natural gas development, production and exploration assets located in Ohio from EdgeMarc Energy Holdings LLC ("EdgeMarc") and certain of its subsidiaries.  Because EdgeMarc is undergoing liquidation under Chapter 11 of the US Bankruptcy code, we presently are unable to offer certainty that we will complete the transaction. However, if we are successful in acquiring these assets, consistent with our other acquisitions, we believe the assets will create long-term value for our shareholders. We expect to make a further announcement on or before 29 August 2019.

 

 

In summary, it has been another period of focused execution of our strategy and remarkable growth for the business. We continue to build a bigger, better and stronger business that is capable of delivering continued long-term, sustainable value for our shareholders.

 

 

 

Financial Review

 

 

Six months to

 

 

 

 

 

 

30 June 2019

 

30 June 2018

 

 $ Change

 

% Change

Net production

 

 

 

 

 

 

 

 

Natural gas (MMcf)

 

73,196

 

 

19,982

 

 

53,214

 

 

266.3

%

NGL (MBbls)

 

1,313

 

 

53

 

 

1,260

 

 

2,377.4

%

Oil (MBbls)

 

189

 

 

116

 

 

73

 

 

62.9

%

Total (MBOE)

 

13,701

 

 

3,499

 

 

10,202

 

 

291.5

%

Average daily production (BOE/d)

 

75,696

 

 

19,333

 

 

56,363

 

 

291.5

%

% gas (BOE basis)

 

89

%

 

95

%

 

 

 

 

Average realised sales price

 

 

 

 

 

 

 

 

(excluding impact of cash settled derivatives)

 

 

 

 

 

 

 

 

Natural gas (Mcf)

 

$

2.66

 

 

$

2.40

 

 

$

0.26

 

 

10.8

%

NGL (Bbl)

 

14.04

 

 

21.77

 

 

(7.73

)

 

(35.5

)%

Oil (Bbl)

 

53.16

 

 

64.59

 

 

(11.43

)

 

(17.7

)%

Total (BOE)

 

$

16.30

 

 

$

16.20

 

 

$

0.10

 

 

0.6

%

Average realised sales price

 

 

 

 

 

 

 

 

(including impact of cash settled derivatives)

 

 

 

 

 

 

 

 

Natural gas (Mcf)

 

$

2.64

 

 

$

2.44

 

 

$

0.20

 

 

8.2

%

NGL (Bbl)

 

21.08

 

 

21.77

 

 

(0.69

)

 

(3.2

)%

Oil (Bbl)

 

52.96

 

 

53.83

 

 

(0.87

)

 

(1.6

)%

Total (BOE)

 

$

16.84

 

 

$

16.08

 

 

$

0.76

 

 

4.73

%

Natural gas, NGL and oil revenue

 

 

 

 

 

 

 

 

(Financial amounts reported in thousands except per unit and per share amounts)

 

 

 

 

 

 

 

 

Natural gas

 

$

194,810

 

 

$

48,027

 

 

$

146,783

 

 

305.6

%

NGL

 

18,439

 

 

1,154

 

 

$

17,285

 

 

1497.8

%

Oil

 

10,048

 

 

7,492

 

 

$

2,556

 

 

34.1

%

Total natural gas, NGL and oil revenue

 

$

223,297

 

 

$

56,673

 

 

$

166,624

 

 

294.0

%

Other revenue

 

1,396

 

 

1,360

 

 

36

 

 

2.6

%

Midstream revenue

 

12,765

 

 

-

 

 

12,765

 

 

100.0

%

    Total revenue

 

$

237,458

 

 

$

58,033

 

 

$

179,425

 

 

309.2

%

Gains (losses) on derivative settlements

 

 

 

 

 

 

 

 

Natural gas

 

(1,780

)

 

825

 

 

$

(2,605

)

 

(315.8

)%

NGL

 

9,241

 

 

-

 

 

$

9,241

 

 

100.0

%

Oil

 

(39

)

 

(1248

)

 

$

1,209

 

 

96.9

%

Net gains (losses) on derivative settlements

 

$

7,422

 

 

$

(423

)

 

$

7,845

 

 

1,854.6

%

Per BOE metrics

 

 

 

 

 

 

 

 

Realised price (including impact of cash settled derivatives)

 

$

16.84

 

 

$

16.08

 

 

$

0.76

 

 

4.7

%

Other revenue

 

1.03

 

 

0.39

 

 

0.64

 

 

164.1

%

Base lease operating expense

 

3.78

 

 

7.01

 

 

(3.23

)

 

(46.1

)%

Gathering and compression, owned

 

1.50

 

 

-

 

 

1.50

 

 

100.0

%

Recurring administrative expenses

 

1.35

 

 

1.51

 

 

(0.16

)

 

(10.6

)%

Production taxes

 

0.53

 

 

0.20

 

 

0.33

 

 

165.0

%

Gathering and transportation, third party

 

1.13

 

 

1.21

 

 

(0.08

)

 

(6.6

)%

Operating margin

 

$

9.58

 

 

$

6.54

 

 

$

3.04

 

 

46.5

%

% Operating margin

 

53.6

%

 

39.7

%

 

 

 

 

 

 

Production, Revenue and Hedging

 

Total revenue in 1H19 of $237.5 million increased 309.2% from the $58.0 million reported for 1H18 primarily due to 291.5% higher production and an increase in midstream revenue, both of which were positively impacted by our acquisitive growth strategy.  DGO ended 1H19 with net MBOE sales of approximately 13,701 vs. the prior year sales of approximately 3,499. The increase in production was driven by the full integration of the previously acquired EQT and Core assets in 2H18 and the HG Energy assets in 1H19.  See Note 3 for additional information regarding DGO's acquisitions.

 

The following table is intended to reconcile the change in natural gas, NGL and oil revenue (excluding the impact of cash settled hedges) for 1H19 by reflecting the effect of changes in volume and in the underlying prices.

 

 

 

Natural gas

 

NGL

 

Oil

 

Total

Revenue for the six months ended 30 June 2018

 

$

48,027

 

 

$

1,154

 

 

$

7,492

 

 

$

56,673

 

Volume increase

 

127,901

 

 

27,430

 

 

4,716

 

 

160,047

 

Price increase (decrease)

 

18,882

 

 

(10,145

)

 

(2,160

)

 

6,577

 

Net increase

 

146,783

 

 

17,285

 

 

2,556

 

 

166,624

 

Revenue for the six months ended 30 June 2019

 

$

194,810

 

 

$

18,439

 

 

$

10,048

 

 

$

223,297

 

 

To manage its cash flows in a volatile commodity price environment, DGO uses a combination of physical and financial derivative instruments.  See the table below for our hedging impact on revenue and average realised prices:

 

 

For the six months ended 30 June 2019

 

 

Natural Gas

 

NGL

 

Oil

 

 

Revenue

 

Realised Price

 

Revenue

 

Realised Price

 

Revenue

 

Realised Price

Excluding hedge impact

 

$

194,810

 

 

$

2.66

 

 

$

18,439

 

 

$

14.04

 

 

$

10,048

 

 

$

53.16

 

Hedge impact

 

(1,780

)

 

(0.02

)

 

9,241

 

 

7.04

 

 

(39

)

 

(0.21

)

Including hedge impact

 

$

193,030

 

 

$

2.64

 

 

$

27,680

 

 

$

21.08

 

 

$

10,009

 

 

$

52.96

 

 

Refer to Note 15 for additional information regarding DGO's hedge portfolio.

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to

 

Total Change

 

BOE Change

 

 

30 June 2019

 

Per BOE

 

30 June 2018

 

Per BOE

 

$

 

%

 

$

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base lease operating expense (a)

 

$

51,777

 

 

$

3.78

 

 

$

24,520

 

 

$

7.01

 

 

$

27,257

 

 

111

%

 

$

(3.23

)

 

(46

)%

Production taxes

 

7,277

 

 

0.53

 

 

700

 

 

0.20

 

 

6,577

 

 

940

%

 

0.33

 

 

165

%

G & C (b)

 

20,552

 

 

1.50

 

 

-

 

 

 

 

20,552

 

 

100

%

 

1.50

 

 

100

%

G & T (c)

 

15,523

 

 

1.13

 

 

4,225

 

 

1.21

 

 

11,298

 

 

267

%

 

(0.08

)

 

(7

)%

Total operating expense

 

$

95,129

 

 

$

6.94

 

 

$

29,445

 

 

$

8.41

 

 

$

65,684

 

 

223

%

 

$

(1.47

)

 

(17

)%

G & A (d)

 

21,682

 

 

1.59

 

 

7,494

 

 

2.14

 

 

14,188

 

 

189

%

 

(0.56

)

 

(26

)%

Total cash operating expense

 

$

116,811

 

 

$

8.53

 

 

$

36,939

 

 

$

10.56

 

 

$

79,872

 

 

216

%

 

$

(2.03

)

 

(19

)%

Depreciation and depletion (non-cash)

 

45,342

 

 

3.31

 

 

8,354

 

 

2.39

 

 

36,988

 

 

443

%

 

0.92

 

 

38

%

Total expenses

 

$

162,153

 

 

$

11.84

 

 

$

45,293

 

 

$

12.94

 

 

$

116,860

 

 

258

%

 

$

(1.10

)

 

(9

)%

 

a)

 

Lease operating expenses are daily costs incurred to extract oil and natural gas and maintain our producing properties. Such costs generally include maintenance, repairs, insurance, employee and benefits and automobile expenses.

b)

 

G & C expenses are daily costs incurred to operate the Company's owned midstream assets.

c)

 

G &T expenses are daily costs incurred to gather, process and transport the Company's natural gas, natural gas liquids and oil.

d)

 

G & A expenses are daily costs incurred for general and administrative activities.

 

As a result of DGO's significant, value-focused growth, unit operating expenses decreased 9% or $1.10 per BOE. These reductions are a result of:

•       Lower per BOE lease operating expenses, which declined 46% or $3.23 per BOE through a mixture of disciplined cost reductions and economies of scale whereby fixed operating costs were spread across a larger base of producing assets.

•       Lower per BOE gathering, processing and transportation expenses, which declined 7% or $0.08 per BOE.

•       Lower per BOE administrative expenses, which decreased 26% or $0.56 per BOE due to the significant growth in our production base.

 

Partially offsetting these significant per BOE declines were increases to production taxes and depreciation and depletion caused by the increase in production associated with the EQT, Core and HG Energy acquisitions.

 

Refer to Note 3 for additional information regarding DGO's acquisitions.

.

Finance costs, loss on early retirement of debt

 

 

Six months to

 

 

 

 

30 June 2019

 

30 June 2018

 

 

 $ Change

 

% Change

Interest

 

$

15,676

 

 

$

3,415

 

 

 

$

12,261

 

 

359.0

%

Finance charge

 

1,930

 

 

5

 

 

 

1,925

 

 

38,500.0

%

Bond financing costs

 

2

 

 

613

 

 

 

(611

)

 

(99.7

)%

Loan standby fee

 

-

 

 

204

 

 

 

(204

)

 

(100.0

)%

Loan management fee

 

-

 

 

38

 

 

 

(38

)

 

(100.0

)%

Total finance costs

 

$

17,608

 

 

$

4,275

 

 

 

$

13,333

 

 

311.9

%

 

 

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

$

-

 

 

$

8,359

 

 

 

$

(8,359

)

 

(100.0

)%

 

DGO's finance costs include interest expense on borrowings and non-cash amortisation of deferred financing costs. Interest expense on borrowings of $15.7 million in 2019 increased $12.3 million compared to $3.4 million in 2018 primarily due to the increase in borrowings used to fund the Company's previously mentioned acquisitions.

 

In March 2018, the Company closed a new $500 million five year credit facility, initially subject to a borrowing limit of $140 million that stepped up within the same month to $200 million following the closing of the acquisition of certain assets of CNX. The new credit facility resulted in a non-recurring loss on early extinguishment of debt of $8.4 million, which included a $2.6 million charge for the accelerated amortisation of the remaining deferred financing costs and $5.8 million relating to an early payment fee.

 

In July 2018 and in conjunction with the acquisition of certain assets of EQT, the Company closed on an enlarged $1 billion, five-year secured revolving credit facility with an initial borrowing base of $600 million, which replaced the existing $500 million facility.

 

In December 2018 and following the October 2018 acquisition of Core, the Company closed on a further-enlarged $1.5 billion, five-year senior secured credit facility with an initial borrowing base of $725 million, and which replaced the $1 billion facility and fully extinguished Core's facility assumed as part of that acquisition. The facility maintains the July 2023 maturity date of the prior facility, and had an interest rate of 2.75% plus one-month LIBOR and is subject to a grid that fluctuates from 2.25% to 3.25% plus LIBOR based on utilisation.

 

In April 2019, the Company increased its borrowing base on the $1.5 billion, five-year senior secured credit facility from $725 million to $950 million. The April 2019 acquisition of certain producing assets of HG Energy, discussed in Note 3, was funded partially by a $152 million draw on the upsized credit facility. The facility has an initial interest rate of 2.50% plus the one-month LIBOR and is subject to a pricing grid that fluctuates from 2.00% to 3.00% plus LIBOR based on utilisation.

 

For more information on DGO's acquisitions and borrowings refer to Notes 3 and 13, respectively.

 

Income before taxation, EPS and Adjusted EBITDA

 

DGO reported income before taxation of $84.0 million in 1H19 compared to $21.4 million in 1H18, an increase of 293%, and reported statutory earnings for 1H19 per diluted ordinary share of $0.10 compared to $0.09 per diluted ordinary share in 1H18. However, when adjusted for certain non-cash items such as gains on bargain purchases and similar items, DGO reported adjusted EBITDA per diluted ordinary share of $0.22, a 152% increase over the prior year's $0.09. DGO's adjusted EBITDA for 1H19 was $131.3 million, a 474% increase over $22.87 million in 1H18. Refer to Note 6 for additional information regarding DGO's adjusted EBITDA.

 

Conclusion

 

We have already enjoyed an eventful and successful 2019, and we look forward to continued progress as we focus our attention towards the second half of 2019. I would like to thank the growing Diversified family for its commitment to safe and efficient operations, the Board for its diligent oversight and guidance, and our shareholders and stakeholders who entrust to us the capital to fuel our growth. I look forward to reporting back to you with our full-year results.

 

David Johnson

Chairman

 

Independent Auditor's Report

 

INDEPENDENT REVIEW REPORT

 

Introduction

We have been engaged by the company to review the condensed financial statements in the interim financial report for the 6 months ended 30 June 2019 which comprise the Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Condensed Statement of Financial Position, the Consolidated Condensed Statement of Changes in Equity, the Consolidated Condensed Statement of Cash Flow and the related explanatory notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company, in accordance with our instructions. Our review has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the opinions we have reached.

 

Directors' Responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the AIM Rules of the London Stock Exchange.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our Responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed financial statements in the interim financial report for the 6 months ended 30 June 2019 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

 

 

/s/Crowe U.K. LLP

 

 

Crowe U.K. LLP

Statutory Auditor

 

 

 

 

Consolidated Condensed Statements of Profit or Loss and Other Comprehensive Income

(Amounts in thousands, except per-share amounts)

 

  

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

Six months to

 

Six months to

 

Year ended

 

 

Note

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

 

 

Revenue

 

4

 

$

237,458

 

 

$

58,033

 

 

$

289,769

 

 

 

 

 

 

 

 

 

 

Operating expense

 

5

 

(95,129

)

 

(29,445

)

 

(107,793

)

Depreciation and depletion

 

5,9

 

(45,342

)

 

(8,354

)

 

(41,988

)

Gross profit

 

 

 

$

96,987

 

 

$

20,234

 

 

$

139,988

 

 

 

 

 

 

 

 

 

 

Administrative expenses

 

5

 

$

(21,682

)

 

$

(7,494

)

 

$

(40,524

)

Gain (loss) on oil and gas programme and equipment

 

 

 

(336

)

 

4,063

 

 

4,079

 

Gain (loss) on derivative financial instruments

 

15

 

32,794

 

 

(18,447

)

 

17,981

 

Gain on bargain purchase

 

 

 

-

 

 

37,823

 

 

173,473

 

Operating profit

 

 

 

$

107,763

 

 

$

36,179

 

 

$

294,997

 

 

 

 

 

 

 

 

 

 

Finance costs

 

 

 

$

(17,608

)

 

$

(4,275

)

 

$

(17,743

)

Loss on early retirement of debt

 

 

 

-

 

 

(8,359

)

 

(8,358

)

Accretion of asset retirement obligation

 

12

 

(6,108

)

 

(2,158

)

 

(7,101

)

Income before taxation

 

 

 

$

84,047

 

 

$

21,387

 

 

$

261,795

 

 

 

 

 

 

 

 

 

 

Taxation on income

 

 

 

(21,881

)

 

2,159

 

 

(60,676

)

 

 

 

 

 

 

 

 

 

Income after taxation available to ordinary shareholders

 

 

 

$

62,166

 

 

$

23,546

 

 

$

201,119

 

 

 

 

 

 

 

 

 

 

Other comprehensive income - gain on foreign currency conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

$

62,166

 

 

$

23,552

 

 

$

201,120

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share - basic & diluted

 

7

 

$

0.10

 

 

$

0.09

 

 

$

0.52

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - basic

 

7

 

603,807

 

 

265,509

 

 

386,559

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - diluted

 

7

 

604,996

 

 

266,483

 

 

387,925

 

 

 

The notes are an integral part of these consolidated financial statements.

Consolidated Condensed Statements of Financial Position

(Amounts in thousands)

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

Six months to

 

Six months to

 

Year ended

 

 

Note

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

 

 

Revenue

 

4

 

$

237,458

 

 

$

58,033

 

 

$

289,769

 

 

 

 

 

 

 

 

 

 

Operating expense

 

5

 

(95,129

)

 

(29,445

)

 

(107,793

)

Depreciation and depletion

 

5,9

 

(45,342

)

 

(8,354

)

 

(41,988

)

Gross profit

 

 

 

$

96,987

 

 

$

20,234

 

 

$

139,988

 

 

 

 

 

 

 

 

 

 

Administrative expenses

 

5

 

$

(21,682

)

 

$

(7,494

)

 

$

(40,524

)

Gain (loss) on oil and gas programme and equipment

 

 

 

(336

)

 

4,063

 

 

4,079

 

Gain (loss) on derivative financial instruments

 

15

 

32,794

 

 

(18,447

)

 

17,981

 

Gain on bargain purchase

 

 

 

-

 

 

37,823

 

 

173,473

 

Operating profit

 

 

 

$

107,763

 

 

$

36,179

 

 

$

294,997

 

 

 

 

 

 

 

 

 

 

Finance costs

 

 

 

$

(17,608

)

 

$

(4,275

)

 

$

(17,743

)

Loss on early retirement of debt

 

 

 

-

 

 

(8,359

)

 

(8,358

)

Accretion of asset retirement obligation

 

12

 

(6,108

)

 

(2,158

)

 

(7,101

)

Income before taxation

 

 

 

$

84,047

 

 

$

21,387

 

 

$

261,795

 

 

 

 

 

 

 

 

 

 

Taxation on income

 

 

 

(21,881

)

 

2,159

 

 

(60,676

)

 

 

 

 

 

 

 

 

 

Income after taxation available to ordinary shareholders

 

 

 

$

62,166

 

 

$

23,546

 

 

$

201,119

 

 

 

 

 

 

 

 

 

 

Other comprehensive income - gain on foreign currency conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

$

62,166

 

 

$

23,552

 

 

$

201,120

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share - basic & diluted

 

7

 

$

0.10

 

 

$

0.09

 

 

$

0.52

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - basic

 

7

 

603,807

 

 

265,509

 

 

386,559

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - diluted

 

7

 

604,996

 

 

266,483

 

 

387,925

 

 

 

The notes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

Note

 

30 June 2019

 

June 30, 2018

 

31 December 2018

ASSETS

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

Oil and gas properties, net

 

9

 

$

1,449,962

 

 

$

483,530

 

 

$

1,092,951

 

Property and equipment, net

 

10

 

332,536

 

 

10,090

 

 

327,749

 

Other non-current assets

 

14

 

14,000

 

 

57,769

 

 

22,543

 

Indemnification receivable

 

 

 

2,133

 

 

2,133

 

 

2,133

 

Total non-current assets

 

 

 

$

1,798,631

 

 

$

553,522

 

 

$

1,445,376

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Trade receivables

 

 

 

$

75,145

 

 

$

34,967

 

 

$

78,451

 

Other current assets

 

14

 

57,481

 

 

2,530

 

 

30,043

 

Cash and cash equivalents

 

 

 

-

 

 

9,537

 

 

1,372

 

Restricted cash

 

 

 

1,681

 

 

2,672

 

 

1,730

 

Total current assets

 

 

 

$

134,307

 

 

$

49,706

 

 

$

111,596

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

 

$

1,932,938

 

 

$

603,228

 

 

$

1,556,972

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

Share capital

 

11

 

$

9,318

 

 

$

4,299

 

 

$

7,346

 

Share premium

 

11

 

760,543

 

 

254,327

 

 

540,655

 

Merger reserve

 

 

 

(478

)

 

(478

)

 

(478

)

Share based payment reserve

 

 

 

1,250

 

 

-

 

 

842

 

Retained earnings

 

 

 

207,125

 

 

43,497

 

 

200,498

 

Total Equity

 

 

 

$

977,758

 

 

$

301,645

 

 

$

748,863

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

Asset retirement obligation

 

12

 

$

145,167

 

 

$

72,390

 

 

$

140,190

 

Capital lease

 

 

 

1,816

 

 

1,465

 

 

2,694

 

Borrowings

 

13

 

610,231

 

 

139,688

 

 

482,528

 

Deferred tax liability

 

 

 

114,091

 

 

35,092

 

 

95,033

 

Other non-current liabilities

 

14

 

22,892

 

 

20,925

 

 

21,219

 

Uncertain tax position

 

 

 

2,133

 

 

2,133

 

 

2,133

 

Total non-current liabilities

 

 

 

$

896,330

 

 

$

271,693

 

 

$

743,797

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Trade and other payables

 

 

 

$

7,568

 

 

$

6,323

 

 

$

9,383

 

Borrowings

 

13

 

122

 

 

107

 

 

286

 

Capital lease

 

 

 

796

 

 

579

 

 

842

 

Other current liabilities

 

14

 

50,364

 

 

22,881

 

 

53,801

 

Total current liabilities

 

 

 

$

58,850

 

 

$

29,890

 

 

$

64,312

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 

$

955,180

 

 

$

301,583

 

 

$

808,109

 

 

 

 

 

 

 

 

 

 

Total Equity and Liabilities

 

 

 

$

1,932,938

 

 

$

603,228

 

 

$

1,556,972

 

 

The notes are an integral part of these consolidated financial statements.

 

The consolidated financial statements were approved by the Board of Directors on 8 August, 2019 and were signed on its behalf by:

 

 

 

 

 

David Johnson                                                                                    

Chairman

Consolidated Condensed Statements of Changes in Equity

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Based

 

 

 

 

 

 

 

 

Share

 

Share

 

Merger

 

Payment

 

Retained

 

Total

 

 

Note

 

Capital

 

Premium

 

Reserve

 

Reserve

 

Earnings

 

Equity

Balance at 1 January 2019

 

 

 

$

7,346

 

 

$

540,655

 

 

$

(478

)

 

$

842

 

 

$

200,498

 

 

$

748,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income after taxation

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

62,166

 

 

62,166

 

Gain on foreign currency conversion

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Total comprehensive income

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

62,166

 

 

62,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of share capital

 

11

 

1,972

 

 

219,888

 

 

-

 

 

-

 

 

-

 

 

221,860

 

Equity compensation

 

 

 

-

 

 

-

 

 

-

 

 

408

 

 

-

 

 

408

 

Repurchase of shares

 

11

 

-

 

 

-

 

 

-

 

 

-

 

 

(19,181

)

 

(19,181

)

Dividends authorized and declared

 

8

 

-

 

 

-

 

 

-

 

 

-

 

 

(36,358

)

 

(36,358

)

Transactions with shareholders

 

 

 

1,972

 

 

219,888

 

 

-

 

 

408

 

 

(55,539

)

 

166,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2019

 

 

 

$

9,318

 

 

$

760,543

 

 

$

(478

)

 

$

1,250

 

 

$

207,125

 

 

$

977,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Based

 

 

 

 

 

 

 

 

Share

 

Share

 

Merger

 

Payment

 

Retained

 

Total

 

 

 

 

Capital

 

Premium

 

Reserve

 

Reserve

 

Earnings

 

Equity

Balance at 1 January 2018

 

 

 

$

1,940

 

 

$

76,026

 

 

$

(478

)

 

$

59

 

 

$

30,691

 

 

$

108,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income after taxation

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

23,546

 

 

23,546

 

Gain on foreign currency conversion

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

6

 

 

6

 

Total comprehensive income

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

23,552

 

 

23,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of share capital

 

 

 

2,359

 

 

178,301

 

 

-

 

 

-

 

 

-

 

 

180,660

 

Equity compensation

 

 

 

 

 

 

 

 

 

(59

)

 

-

 

 

(59

)

Repurchase of shares

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Dividends authorized and declared

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(10,746

)

 

(10,746

)

Transactions with shareholders

 

 

 

2,359

 

 

178,301

 

 

-

 

 

(59

)

 

(10,746

)

 

169,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2018

 

 

 

$

4,299

 

 

$

254,327

 

 

$

(478

)

 

$

-

 

 

$

43,497

 

 

$

301,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Based

 

 

 

 

 

 

 

 

Share

 

Share

 

Merger

 

Payment

 

Retained

 

Total

 

 

 

 

Capital

 

Premium

 

Reserve

 

Reserve

 

Earnings

 

Equity

Balance at 1 January 2018

 

 

 

$

1,940

 

 

$

76,026

 

 

$

(478

)

 

$

59

 

 

$

30,691

 

 

$

108,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income after taxation

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

201,119

 

 

201,119

 

Gain on foreign currency conversion

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

1

 

 

1

 

Total comprehensive income

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

201,120

 

 

201,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of share capital

 

 

 

5,406

 

 

464,629

 

 

-

 

 

-

 

 

-

 

 

470,035

 

Equity compensation

 

 

 

-

 

 

-

 

 

-

 

 

783

 

 

-

 

 

783

 

Repurchase of shares

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Dividends authorized and declared

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(31,313

)

 

(31,313

)

Transactions with shareholders

 

 

 

5,406

 

 

464,629

 

 

-

 

 

783

 

 

(31,313

)

 

439,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2018

 

 

 

$

7,346

 

 

$

540,655

 

 

$

(478

)

 

$

842

 

 

$

200,498

 

 

$

748,863

 

 

 

The notes are an integral part of these consolidated financial statements.

 

 

Consolidated Condensed Statements of Cash Flow

(Amounts in thousands)

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

Six months to

 

Six months to

 

Year ended

 

 

Note

 

30 June 2019

 

30 June 2018

 

31 December 2018

Cash flows from operating activities

 

 

 

 

 

 

 

 

Income after taxation

 

 

 

$

62,166

 

 

$

23,546

 

 

$

201,119

 

Cash flow from operations reconciliation:

 

 

 

 

 

 

 

 

     Depreciation and depletion

 

 

 

45,342

 

 

8,354

 

 

41,988

 

     Accretion of asset retirement obligation

 

12

 

6,108

 

 

2,158

 

 

7,101

 

     Income tax charge (credit)

 

 

 

21,881

 

 

(2,159

)

 

60,676

 

     (Gain)/loss on derivative financial instruments

 

15

 

(21,252

)

 

18,447

 

 

(32,768

)

     Gain on oil and gas program and equipment

 

 

 

-

 

 

(4,200

)

 

(4,079

)

     Gain on bargain purchase

 

3

 

-

 

 

(37,823

)

 

(173,473

)

Finance costs

 

13

 

17,608

 

 

195

 

 

17,743

 

     Loss on early retirement of debt

 

 

 

-

 

 

8,164

 

 

8,358

 

     Non-cash equity compensation

 

11

 

408

 

 

137

 

 

783

 

Working capital adjustments:

 

 

 

 

 

 

 

 

     Change in trade receivables

 

 

 

3,384

 

 

(9,269

)

 

(41,225

)

     Change in other current assets

 

 

 

2,138

 

 

(1,743

)

 

(6,286

)

     Change in other assets

 

 

 

220

 

 

767

 

 

(1,732

)

     Change in trade and other payables

 

 

 

(1,849

)

 

4,191

 

 

1,134

 

     Change in other current and non-current liabilities

 

 

 

(4,376

)

 

(2,817

)

 

8,396

 

Net cash provided by operating activities

 

 

 

$

131,778

 

 

$

7,948

 

 

$

87,735

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisitions

 

3

 

$

(388,064

)

 

$

(162,498

)

 

$

(750,256

)

Acquisition deposit

 

 

 

-

 

 

(57,500

)

 

-

 

Expenditures on oil and gas properties and equipment

 

 

 

(19,178

)

 

(1,927

)

 

(18,515

)

Asset retirement (plugging)

 

 

 

(1,237

)

 

(128

)

 

(1,171

)

Decrease (increase) in restricted cash

 

 

 

49

 

 

(1,928

)

 

(986

)

Proceeds on disposals of oil and gas properties

 

 

 

-

 

 

4,219

 

 

4,079

 

Net cash used in investing activities

 

 

 

$

(408,430

)

 

$

(219,762

)

 

$

(766,849

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayment of borrowings

 

13

 

$

(189,993

)

 

$

(104,016

)

 

$

(280,890

)

Proceeds from borrowings

 

13

 

317,267

 

 

145,600

 

 

581,221

 

Financing expense

 

 

 

(16,024

)

 

(6,140

)

 

(15,433

)

Cost incurred to secure financing

 

 

 

(1,581

)

 

-

 

 

(17,176

)

Proceeds from equity issuance, net

 

 

 

221,860

 

 

180,601

 

 

425,601

 

Proceeds from capital lease

 

 

 

-

 

 

884

 

 

4,401

 

Repayment of capital lease

 

 

 

(710

)

 

-

 

 

(1,093

)

Dividends to shareholders

 

8

 

(36,358

)

 

(10,746

)

 

(31,313

)

Repurchase of shares

 

 

 

(19,181

)

 

-

 

 

-

 

Net cash provided by financing activities

 

 

 

$

275,280

 

 

$

206,183

 

 

$

665,318

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

 

(1,372

)

 

(5,631

)

 

(13,796

)

Cash and cash equivalents - beginning of the period

 

 

 

1,372

 

 

15,168

 

 

15,168

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents - end of the period

 

 

 

$

-

 

 

$

9,537

 

 

$

1,372

 

 

 

 

The notes are an integral part of these consolidated financial statements.

 

 

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Amounts in thousands, except per share and per unit data)

Note 1 - General Information

 

Diversified Gas & Oil PLC ("DGO" or the "Company") is a natural gas, natural gas liquids and crude oil producer and midstream operator that is focused on acquiring and operating mature producing wells with long lives and slow decline profiles. The Company's assets are exclusively located within the Appalachian Basin of the United States. The Company is headquartered in Birmingham, Alabama, USA with field offices located in the states of Pennsylvania, Ohio, West Virginia, Kentucky, Virginia and Tennessee. DGO was incorporated on 31 July 2014 in England and Wales as a private limited company under company number 09156132. DGO's registered office is located at 27/28 Eastcastle Street, London W1W 8DH, United Kingdom. In February 2017, the Company's ordinary shares were admitted to trading on AIM under the ticker "DGOC."

Note 2 - Accounting Policies

 

Basis of Preparation and Measurement

 

The interim condensed consolidated financial statements are unaudited and do not represent statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended ended 31 December 2018 is based on the statutory accounts for the year ended 31 December 2018. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act.

 

The interim consolidated financial information has been prepared on the basis of the accounting policies set out in the Company's 2018 statutory accounts in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. The interim consolidated financial statements do not include all of the information required for a full annual financial report and should be read in conjunction with the Company's financial statements for the year ended 31 December 2018, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU).

 

Unless otherwise stated, the interim consolidated financial statements are presented in US Dollars, which is the currency of the primary economic environment in which DGO operates, and all values are rounded to the nearest thousand dollars except per unit amounts and where otherwise indicated. Transactions in foreign currencies are translated into US Dollars at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange ruling at the balance sheet date. The resulting gain or loss is reflected in the Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income within Other comprehensive income - gain on foreign currency conversion.

 

To conform with current presentation, $2,983 has been reclassified from other long term assets to property and equipment for the year ended 31 December 2018. To conform with current presentation $11,145 has been reclassified from other current liabilities to other non-current liabilities.

 

 

 

 

Basis of Consolidation

 

The consolidated financial statements reflect the following corporate structure of DGO:

 

•       Diversified Gas & Oil PLC ("PLC"), and its wholly owned subsidiary,

•       Diversified Gas & Oil Corporation ("DGOC'') as well as its, direct and indirect, wholly owned subsidiaries,

•       Diversified Resources, Inc.;

•       M & R Investments, LLC;

•       M & R Investments Ohio, LLC;

•       Marshall Gas and Oil Corporation;

•       R&K Oil and Gas, Inc.;

•       Fund 1 DR, LLC;

•       Diversified Oil & Gas, LLC;

•       Alliance Petroleum Co, LLC

•       Diversified Appalachian Group, LLC;

•       Diversified Energy, LLC;

•       Diversified Partnership Holdings, LLC

•       Diversified Partnership Holdings II, LLC

•       Atlas Energy Tennessee, LLC

•       Atlas Pipeline Tennessee, LLC

•       Diversified Southern Production, LLC;

•       Diversified Southern Midstream, LLC;

•       Diversified Energy Marketing, LLC;

•       Core Appalachia Holding Co, LLC;

•       Core Appalachia Compression, LLC

•       Core Appalachia Midstream, LLC

•       Core Appalachia Operating, LLC

•       Core Appalachia Production, LLC

 

                               

New Standards and Interpretations

 

Adopted

 

IFRS 16 Leases

 

In January 2016, the IASB issued IFRS 16 Leases. The standard establishes the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and lessor. The standard requires all lease transactions (with terms in excess of 12 months) to be recognized on the balance sheet as lease assets and lease liabilities, and to depreciate lease assets separately from interest on lease liabilities in the income statement.  IFRS 16 replaces the previous lease standard, IAS 17 Leases, and related interpretations. This standard was effective on 1 January 2019. Early adoption is permitted only if the Company also applies IFRS 15 Revenue from Contracts with Customers. The standard can be applied using either the full retrospective approach or a modified retrospective approach at the date of adoption.

 

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.

 

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining Whether an Arrangement Contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

The Company does not consider IFRS 16 to have a material impact on its consolidated financial statements.

 

Significant Accounting Policies

 

The preparation of the interim condensed consolidated financial information requires Management to exercise judgment in applying DGO's accounting policies.

Note 3 - Acquisitions

 

The assets acquired in all acquisitions include the necessary permits, rights to production, royalties, assignments, contracts and agreements that support the production from wells and operations of pipelines. The Company accounts for business acquisitions under IFRS 3. Where practical to do so the contribution arising from acquisitions up to the reporting date is disclosed.

 

2019 Acquisitions

 

Acquisition of HG Energy Appalachia II, LLC

 

In April 2019, DGO acquired 107 non-conventional wells in the states of Pennsylvania and West Virginia from HG Energy. The Company paid purchase consideration of $388,064, excluding customary purchase price adjustments. The Company funded the cash consideration for the purchase with the proceeds from its equity placing of stock in April 2019, discussed in Note 11, and a draw from the credit facility discussed in Note 13. The Company is currently evaluating the purchase price accounting. 

Note 4 - Revenue

 

DGO extracts and sells natural gas, natural gas liquids and crude oil to various customers in addition to operating a majority of these oil and natural gas wells for customers and other working interest owners. In addition, DGO provides gathering and transportation services to third parties. All revenue was generated in the United States of America. The following table reconciles the Company's revenue for the periods presented:

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

Six months to

 

Six months to

 

Year ended

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

Natural gas

 

$

194,810

 

 

$

48,027

 

 

$

219,189

 

NGL

 

18,439

 

 

1,154

 

 

41,854

 

Oil

 

10,048

 

 

7,492

 

 

19,117

 

     Total natural gas, NGL and oil

 

$

223,297

 

 

$

56,673

 

 

$

280,160

 

Midstream revenue

 

12,765

 

 

-

 

 

7,315

 

Other

 

1,396

 

 

1,360

 

 

2,294

 

     Total revenue

 

$

237,458

 

 

$

58,033

 

 

$

289,769

 

 

A significant portion of DGO's trade receivables represent receivables related to either sales of natural gas, NGL and oil or operational services, all of which are generally uncollateralised, and collected within 30-to-60 days depending on the commodity, location and well-type.

Note 5 - Expenses by Nature

 

The following table provides a detail of the Company's expenses:

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

Six months to

 

Six months to

 

Year ended

 

 

Explanation

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

 

 

Employees and benefits (operations)

 

 

 

$

34,124

 

 

$

8,209

 

 

$

35,061

 

Well operating expenses, net

 

 

 

28,636

 

 

12,741

 

 

31,080

 

Automobile

 

 

 

4,871

 

 

1,475

 

 

5,569

 

Insurance

 

 

 

4,698

 

 

2,095

 

 

4,698

 

Production taxes (severance, property and other)

 

 

 

7,277

 

 

700

 

 

10,221

 

Gathering, compression and transportation

 

 

 

15,523

 

 

4,225

 

 

21,164

 

     Total operating expense

 

 

 

$

95,129

 

 

$

29,445

 

 

$

107,793

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

$

11,290

 

 

1,091

 

 

$

10,272

 

Depletion

 

 

 

34,052

 

 

7,263

 

 

31,716

 

      Total depreciation and depletion

 

 

 

$

45,342

 

 

$

8,354

 

 

$

41,988

 

 

 

 

 

 

 

 

 

 

Employees and benefits (administrative)

 

 

 

$

8,952

 

 

$

3,921

 

 

$

12,653

 

Other administrative

 

 

 

3,554

 

 

213

 

 

1,834

 

Professional fees

 

 

 

5,261

 

 

302

 

 

5,070

 

Auditors' remuneration

 

 

 

 

 

 

 

 

Fees payable to the Company's auditor for the audit of the group and Company's annual accounts

 

 

 

70

 

 

73

 

 

95

 

Fees payable to the Company's auditor and its associates for other services:

 

 

 

 

 

 

 

 

Audit of the accounts of subsidiaries

 

 

 

42

 

 

238

 

 

310

 

Corporate finance services

 

 

 

591

 

 

116

 

 

142

 

Total auditors' remuneration

 

 

 

$

703

 

 

$

427

 

 

$

547

 

Rent

 

 

 

-

 

 

430

 

 

-

 

     Recurring administrative expenses

 

 

 

$

18,470

 

 

$

5,293

 

 

$

20,104

 

Non-recurring costs associated with acquisitions

 

 

 

2,803

 

 

2,059

 

 

19,637

 

Non-cash equity compensation

 

(a)

 

409

 

 

142

 

 

783

 

     Non-recurring administrative expenses

 

 

 

$

3,212

 

 

$

2,201

 

 

$

20,420

 

Total administrative expenses

 

 

 

$

21,682

 

 

$

7,494

 

 

$

40,524

 

 

 

 

 

 

 

 

 

 

Total expenses

 

 

 

$

162,153

 

 

$

45,293

 

 

$

190,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a)

 

Non-cash equity issuances in 2019 and 2018 reflect the expense recognition related to stock compensation provided to certain key managers.

 

 

 

Note 6 - Adjusted EBITDA

 

Adjusted EBITDA is a non-IFRS financial measure, that is defined as operating profit plus or minus items detailed in the table below, which is of particular interest to the industry and Management, as it is essentially the cash generated from operations that DGO has free for interest payments and capital investment. Adjusted EBITDA should not be considered as an alternative to operating profit (loss), comprehensive income, cash flow from operating activities or any other financial performance or liquidity measure presented in accordance with IFRS.

 

The Company believes Adjusted EBITDA is a useful measure because it enables a more effective way to evaluate operating performance and compare the results of operations from period-to-period and against its peers without regard to DGO's financing methods or capital structure. The Company excludes the items listed in the table below from operating profit in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.

 

The following table reconciles operating profit to Adjusted EBITDA:

 

 

Unaudited

 

Unaudited

 

Audited

 

 

Six months to

 

Six months to

 

Year ended

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

Operating profit

 

$

107,763

 

 

$

36,179

 

 

$

294,997

 

 

 

 

 

 

 

 

Depreciation and depletion

 

45,342

 

 

8,354

 

 

41,988

 

Gain on bargain purchase

 

-

 

 

(37,823

)

 

(173,473

)

Loss (gain) on oil and gas programme and equipment

 

336

 

 

(4,063

)

 

(4,079

)

Loss (gain) on derivative financial instruments

 

(21,252

)

 

18,024

 

 

(33,636

)

Non-recurring costs associated with acquisitions

 

2,802

 

 

2,059

 

 

19,637

 

Non-cash equity issuance included in administrative expense

 

408

 

 

142

 

 

738

 

Gain on foreign currency hedge

 

(4,120

)

 

-

 

 

-

 

   Total adjustments

 

23,516

 

 

(13,307

)

 

(148,825

)

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

131,279

 

 

$

22,872

 

 

$

146,172

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - basic

 

603,807

 

 

265,509

 

 

386,559

 

Weighted average ordinary shares outstanding - diluted

 

604,996

 

 

266,483

 

 

387,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA per share - basic and diluted

 

$

0.22

 

 

$

0.09

 

 

$

0.38

 

 

 

 

 

Note 7 - Earnings Per Share

 

The calculation of basic income/(loss) per ordinary share is based on the income/(loss) after taxation available to ordinary shareholders and on the weighted average number of ordinary shares outstanding during the period. The calculation of diluted income/(loss) per ordinary share is based on the income/(loss) after taxation available to ordinary shareholders and the weighted average number of ordinary shares outstanding plus the weighted average number of shares that would be issued if dilutive options and warrants were converted into ordinary shares on the first day of the reporting period. Basic and diluted income/(loss) per ordinary share is calculated as follows:

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

Six months to

 

Six months to

 

Year ended

 

 

Calculation

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

 

 

Income after taxation available to ordinary shareholders

 

A

 

$

62,166

 

 

$

23,546

 

 

$

201,119

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - basic

 

B

 

603,807

 

 

265,509

 

386,559

 

Weighted average ordinary shares outstanding - diluted

 

C

 

604,996

 

 

266,483

 

 

387,925

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share - basic

 

 = A/B

 

$

0.10

 

 

$

0.09

 

 

$

0.52

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share - diluted

 

 = A/C

 

$

0.10

 

 

$

0.09

 

 

$

0.52

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA per ordinary share - basic & diluted

 

Note 6

 

$

0.22

 

 

$

0.09

 

 

$

0.38

 

 

 

Note 8 - Dividends

 

The following table summarizes the Company's dividends paid and declared:

 

 

 

Dividend per Ordinary Share

 

 

 

 

 

 

 

 

Date Declared

 

USD

 

GBP

 

Record Date

 

Pay Date

 

Shares Outstanding

 

Gross Dividends Paid $'000

Dividend declared 30 April 2018

 

0.0345

 

0.0251

 

11 May 2018

 

25 May 2018

 

311,476

 

 

$

10,746

 

Dividends paid during the period ended 30 June 2018

 

 

 

 

 

 

 

 

 

 

 

10,746

 

Dividend declared 29 June 2018

 

0.0173

 

 

0.013

 

13 July 2018

 

24 September 2018

 

311,476

 

 

5,373

 

Dividend declared 11 September 2018

 

0.0280

 

 

0.022

 

30 November 2018

 

19 December 2018

 

542,633

 

 

15,194

 

Dividends paid during the year ended 31 December 2018

 

 

 

 

 

 

 

 

 

 

 

31,313

 

Dividend declared 14 December 2018

 

0.0330

 

 

0.0434

 

 

8 March 2019

 

29 March 2019

 

542,654

 

 

17,908

 

Dividend declared 28 February 2019

 

0.0340

 

 

0.0432

 

 

12 April 2019

 

28 June 2019

 

542,654

 

 

18,450

 

Dividends paid during the period ended 30 June 2019

 

 

 

 

 

 

 

 

 

 

 

$

36,358

 

 

On 13 June 2019 the Company announced a dividend of $0.0342 per share. The dividend will be paid on 27 September 2019 to shareholders on the register on 6 September 2019. On 8 August 2019 the Company announced a dividend of $0.035 per share that will be paid in December 2019.

 

 

 

Note 9 - Oil and Gas Properties

 

The following table summarises the Company's oil and gas properties for each of the periods presented:

 

 

Costs

 

 

Depletion and Impairment

 

 

 

Period

 

Beginning Balance

 

Additions (a)

 

Disposals

 

Ending Balance

 

 

Beginning Balance

 

Period Charges

 

 

Ending Balance

 

 

Net Book Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the six months to 30 June 2019

 

$

1,148,235

 

 

391,063

 

 

-

 

 

$

1,539,298

 

 

 

$

(55,284

)

 

(34,052

)

 

-

 

 

$

(89,336

)

 

 

$

1,449,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the six months to 30 June 2018

 

$

239,814

 

 

275,716

 

 

(19

)

 

$

515,511

 

 

 

$

(24,489

)

 

(7,492

)

 

-

 

 

$

(31,981

)

 

 

$

483,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the year ended December 31 2018

 

$

239,814

 

 

908,514

 

 

(93

)

 

$

1,148,235

 

 

 

$

(24,489

)

 

(30,795

)

 

-

 

 

$

(55,284

)

 

 

$

1,092,951

 

 

a)

 

See Note 3 for more information about the Company's acquisitions.

Note 10 - Property and Equipment

 

The following table summarises the Company's property and equipment for each of the periods presented:

 

 

Plant, Property & Equipment

 

 

Accumulated Depreciation and Disposals

 

 

 

Period

 

Beginning Balance

 

Additions

 

Disposals

 

Ending Balance

 

 

Beginning Balance

 

Period Charges

 

Disposals

 

Ending Balance

 

 

Net Book Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the six months to 30 June 2019

 

$

340,393

 

 

16,077

 

 

 

 

$

356,470

 

 

 

$

(12,644

)

 

(11,290

)

 

-

 

 

$

(23,934

)

 

 

$

332,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the six months to 30 June 2018

 

$

9,676

 

 

8,608

 

 

(465

)

 

$

17,819

 

 

 

$

(2,729

)

 

(5,000

)

 

-

 

 

$

(7,729

)

 

 

$

10,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the year ended 31 December 2018

 

$

9,676

 

 

330,859

 

 

(142

)

 

$

340,393

 

 

 

$

(2,729

)

 

(11,193

)

 

1,278

 

 

$

(12,644

)

 

 

$

327,749

 

 

 

Certain prior period amounts of property and equipment have been reclassified to conform with current presentation. See Note 2 for additional information.

 

 

Note 11 - Share Capital

 

In April 2019 DGO placed 151,515 new ordinary shares at $1.52 per share (£1.17) to raise gross proceeds of $230,676 (approximately £177,278). DGO used the proceeds to fund the HG Energy acquisition discussed in Note 3.

 

The following table summarises the Company's share capital for the periods presented:

 

 

Number of shares

 

Total Share Capital $'000

 

Total Share Premium $'000

Balance at 1 January 2019

 

542,654

 

 

$

7,346

 

 

$

540,655

 

Issuance of share capital

 

151,515

 

 

1,972

 

 

219,888

 

Repurchase of shares

 

(13,732

)

(a)

-

 

 

-

 

Balance at 30 June 2019

 

680,437

 

 

$

9,318

 

 

$

760,543

 

 

(a) In April 2019 the Company announced the terms of a share buyback programme. For the period ended 30 June 2019, the Company repurchased 13,732 shares at an average price of $1.40, totaling $19,181. The Company has accounted for the repurchase of these shares a direct reduction to retained earnings. All repurchased shares will be canceled.

 

Note 12 - Asset Retirement Obligation

 

The Company records a liability for future cost of decommissioning production facilities and pipelines. The decommissioning liability represents the present value of decommissioning costs relating to oil and gas properties, which the Company expects to incur over the long producing life of its wells, presently estimated through to 2093 when the Company expects its producing oil and gas properties to reach the end of their economic lives.

 

The discount rate and the cost inflation rate used in the calculation of the decommissioning liability was 8.0%  and 2.2%, respectively, as at each of the periods presented. The table below summarises the activity for the Company's decommissioning liability:

 

 

Six months to

 

Six months to

 

Year ended

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

Balance at 1 January

 

$

142,725

 

 

$

35,448

 

 

$

35,448

 

Additions (a)

 

221

 

 

34,784

 

 

96,508

 

Accretion

 

6,108

 

 

2,158

 

 

7,101

 

Disposals

 

(1,237

)

 

-

 

 

(1,161

)

Revisions to estimate

 

-

 

 

-

 

 

4,829

 

Balance

 

$

147,817

 

 

$

72,390

 

 

$

142,725

 

Less: Current decommissioning provision

 

2,650

 

 

-

 

 

2,535

 

Long-term decommissioning liability

 

$

145,167

 

 

$

72,390

 

 

$

140,190

 

 

a)

 

See Note 3 for more information about the Company's acquisitions.

 

 

 

Note 13 - Borrowings

 

DGO's borrowings consist of the following amounts for the periods presented:

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

Individuals and institutional investor bonds, interest rate of 8.50%, maturing June 2020, unsecured

 

$

123

 

 

89

 

 

$

86

 

Financial institution, interest rate of 2.00% plus LIBOR (2019) and  2.25% plus LIBOR (2018), secured by oil and gas properties

 

615,200

 

 

145,600

 

 

495,284

 

Miscellaneous, primarily for real estate, vehicles and equipment

 

9,859

 

(a)

301

 

 

2,537

 

     Total borrowings

 

$

625,182

 

 

$

145,990

 

 

$

497,907

 

 

 

 

 

 

 

 

Less: Current portion of long-term debt

 

(122

)

 

(107

)

 

(286

)

Less: Deferred financing costs

 

(14,829

)

 

(6,195

)

 

(15,093

)

     Total non-current borrowings, net

 

$

610,231

 

 

$

139,688

 

 

$

482,527

 

 

(a) In June 2019 the Company entered into a fleet financing agreement for $7.7 million with an implied interest of 2%

 

In April 2019, the Company increased its borrowing base on the $1,500,000, five-year senior secured credit facility from $725,000 to $950,000. The April 2019 acquisition of certain producing assets of HG Energy, discussed in Note 3, were funded partially by a $152,000 draw on the upsized credit facility. The facility has an initial interest rate of 2.50% plus the one-month LIBOR and is subject to a pricing grid that fluctuates from 2.00% to 3.00% plus LIBOR based on utilisation.

 

The following table provides a reconciliation of DGO's future maturities of its total borrowings for each of the periods presented:

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

Not later than one year

 

$

122

 

 

$

107

 

 

$

286

 

Later than one year and not later than five years

 

625,060

 

 

145,883

 

 

497,621

 

     Total borrowings

 

$

625,182

 

 

$

145,990

 

 

$

497,907

 

 

Note 14 - Other Assets & Liabilities

 

The following table includes a detail of other liabilities as at the periods presented:

 

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

Other non-current assets

 

 

 

 

 

 

   Derivative financial instruments

 

$

13,423

 

 

$

-

 

 

$

21,745

 

   Other non-current assets

 

577

 

 

57,769

 

 

798

 

Total other non-current assets

 

$

14,000

 

 

$

57,769

 

 

$

22,543

 

 

 

 

 

 

 

 

Other current assets

 

 

 

 

 

 

   Prepaid expenses

 

$

3,240

 

 

$

2,158

 

 

$

2,996

 

   Derivative financial instruments

 

47,148

 

 

-

 

 

17,573

 

   Other receivables

 

1,930

 

 

372

 

 

4,171

 

   Inventory

 

5,163

 

 

-

 

 

5,303

 

Total other current assets

 

$

57,481

 

 

$

2,530

 

 

$

30,043

 

 

 

 

 

 

 

 

Other non-current liabilities

 

 

 

 

 

 

   Derivative financial instruments

 

$

-

 

 

$

5,971

 

 

$

-

 

   Revenue to be distributed

 

21,198

 

 

11,145

 

 

20,159

 

   Other

 

1,694

 

 

3,809

 

 

1,060

 

Total other non-current liabilities

 

$

22,892

 

 

$

20,925

 

 

$

21,219

 

 

 

 

 

 

 

 

Other current liabilities

 

 

 

 

 

 

   Accrued expenses

 

$

22,198

 

 

$

4,339

 

 

$

21,852

 

   Taxes payable

 

12,865

 

 

509

 

 

13,854

 

   Net revenue clearing

 

10,729

 

 

3,642

 

 

9,299

 

   Asset retirement obligation - current

 

2,650

 

 

-

 

 

2,535

 

   Derivative financial instruments

 

-

 

 

12,921

 

 

-

 

   Other

 

1,922

 

 

1,470

 

 

6,261

 

Total other current liabilities

 

$

50,364

 

 

$

22,881

 

 

$

53,801

 

 

 

 

Note 15 - Derivatives

 

The following table summarizes the Company's calculated fair value of derivative financial instruments:

Assets/(Liabilities)

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

Natural gas

 

 

 

 

 

 

Swaps

 

$

25,301

 

 

$

(1,020

)

 

$

4,053

 

Collars

 

11,526

 

 

(2,288

)

 

131

 

Basis swaps

 

(2,073

)

 

(872

)

 

(1,720

)

   Put options

 

3,486

 

 

-

 

 

7,292

 

Total natural gas financial derivative contracts

 

$

38,240

 

 

$

(4,180

)

 

$

9,756

 

 

 

 

 

 

 

 

Natural gas liquids

 

 

 

 

 

 

   Swaps

 

21,793

 

 

(9,371

)

 

26,208

 

   Total natural gas financial derivative contracts

 

$

21,793

 

 

$

(9,371

)

 

$

26,208

 

 

 

 

 

 

 

 

Oil

 

 

 

 

 

 

Swaps

 

$

41

 

 

$

(992

)

 

$

676

 

Collars

 

497

 

 

(4,349

)

 

2,929

 

Total oil financial derivative contracts

 

$

538

 

 

$

(5,341

)

 

$

3,605

 

 

 

 

 

 

 

 

Total financial derivative contracts

 

$

60,571

 

 

$

(18,892

)

 

$

39,569

 

 

The Company reports derivative financial instrument assets and liabilities net in its balance sheet. The following table reconciles the Company's derivative financial instrument gross assets and gross liabilities for the periods presented:

Derivative Financial

 

Statement of

 

 

 

 

 

 

Instruments

 

Financial Position line item

 

30 June 2019

 

30 June 2018

 

31 December 2018

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

$

34,274

 

 

$

13,791

 

 

$

49,854

 

Current assets

 

 

 

59,249

 

 

1,646

 

 

29,068

 

     Total assets

 

 

 

$

93,523

 

 

$

15,437

 

 

$

78,922

 

 

 

 

 

 

 

 

 

 

Non-current liability

 

 

 

$

(20,851

)

 

$

(19,762

)

 

(28,109

)

Current liabilities

 

 

 

(12,101

)

 

(14,567

)

 

(11,495

)

     Total liabilities

 

 

 

$

(32,952

)

 

$

(34,329

)

 

(39,604

)

 

 

 

 

 

 

 

 

 

Net assets - non-current

 

Other non-current assets/(liabilities)

 

$

13,423

 

 

$

(5,971

)

 

21,746

 

Net assets - current

 

Other current assets/(liabilities)

 

47,148

 

 

(12,921

)

 

17,573

 

     Net assets/(liabilities)

 

 

 

$

60,571

 

 

$

(18,892

)

 

$

39,319

 

 

The Company recorded the following gain (loss) on derivative financial instruments in the Consolidated Statements of Profit or Loss and Other Comprehensive Income for the periods presented:

 

 

Unaudited

 

Unaudited

 

Audited

 

 

Six months to

 

Six Months to

 

Year ended

 

 

30 June 2019

 

30 June 2018

 

31 December 2018

Net gain (loss) on settlements

 

$

7,422

 

 

$

(423

)

 

$

(15,655

)

Gain on foreign currency hedge

 

4,120

 

 

-

 

 

-

 

Total gain (loss) on settled derivative instruments

 

$

11,542

 

 

$

(423

)

 

$

(15,655

)

Net gain (loss) on fair value adjustments on unsettled financial instruments

 

 

 

(18,024

)

 

 

   Total gain (loss) on derivative financial instruments

 

$

32,794

 

 

$

(18,447

)

 

$

17,981

 

 

All derivatives are defined as Level 2 instruments as they are valued using inputs and outputs other than quoted prices that are observable for the assets and liabilities.

Note 16 - Subsequent Events

 

The Company determined the need to disclose the following material transactions that occurred subsequent to 30 June 2019, which have been described within each relevant footnote as follows:

Description

 

Footnote

 

 

 

Dividends

 

Note 8

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
IR GUGDIRUGBGCI
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Interim Results - RNS