Diversified Gas & Oil PLC deal could prove significant for shareholders

21 February 2018

This week, Diversified Gas & Oil (DGOC LN) announced a new banking facility which will give the company an annual saving of US$11.5 million in interest alone.

The five-year senior secured a revolving credit facility, with interest at LIBOR +2.5% compared with previous LIBOR +8.25%; to be provided by KeyBank National Association.

With an initial borrowing limit of US$140 million, this increased to a limit of US$200 million following the closing of two acquisition agreements.  DGOC have acquired Alliance Petroleum Corporation, along with select Appalachian-based assets of CNX Gas Company Limited.

In January, DGOC acquired Alliance Petroleum Corporation for US$95 million and CNX Gas Company Limited for US$85 million, which will enable the company to increase production by a staggering 173%. This may result in an annualised EBITDA of US$70-75 million.

The DGOC plans to use the debt to fund future acquisitions. Based on DGOC drawing US$130 million with the new banking facility and buying assets at 4.0x EBITDA, we feel dividends could increase. A potential of US$30 million could be added to the annual EBITDA without further equity dilution.


If you’d like more information on Diversified Gas & Oil PLC, contact the Shard Capital Stockbroking team.