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Diversified Gas & Oil buys Core Appalachia for $183 million

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By Reuters

(Reuters) – Diversified Gas & Oil Plc <DGOC.L> said on Thursday it acquired privately held natural gas producer Core Appalachia for $183 million, expanding its presence in the Appalachian Basin.

The assets were acquired from TCFII Core LLC and include 5,000 producing wells in Kentucky, West Virginia and Virginia, with production of about 11,200 barrels of oil equivalent (boe) per day, of which 90 percent is gas.

London-listed Diversified Gas, which has a market value of about $730 million, said the deal would increase its overall net output by about 19 percent to about 71,000 boe a day and reserves by 25 percent to 493 million boe.

The deal, which marks Diversified Gas & Oil’s fourth acquisition in the Appalachian Basin this year, comprises a cash payment of $130 million and the issuance of 35 million new shares of 1 pence at an issue price of 1.15 pound-a-share, the company said.

Diversified Gas & Oil said the acquired wells are located close to the oil and gas producing assets it bought in July for about $575 million from EQT.

“We expect to deliver both immediate and near-term synergies by combining these assets, resulting in higher revenues and lower operating expenses which will support our exceptional EBITDA margins across the portfolio and drive dividend payouts higher,” Chief Executive Officer Rusty Hutson said.

“We have strategically diversified our business beyond upstream, and now control the vast network of gathering assets in Kentucky and West Virginia providing an additional revenue stream as we transport gas for other operators,” Hutson added.

In June, the company had announced plans to buy oil and gas producing assets in the Appalachian Basin for about $575 million in a reverse takeover.

(This story corrects to say the deal is the company’s fourth acquisition, not second, in the Appalachian Basin this year in fourth paragraph; removes reference to expanding into U.S. shale market in first paragraph.)

(Reporting by Justin George Varghese and Muvija M in Bengaluru; Editing by Bernard Orr)