Diversified Gas & Oil (DGO) is to expand its midstream footprint in Southern Appalachia through acquiring independent natural gas producer Core Appalachia from TCFII Core in a $183m cash-stock deal.
The transaction involves a cash payment of $130m and issuing 35,000,000 new ordinary shares of £0.01 at a price of £1.15 ($1.51) each.
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Core Appalachia produces and processes natural gas in the Devonian region across an aggregate area of 1.3 million net acres.
The acquired assets include around 5,000 wells throughout Kentucky, West Virginia, and Virginia, with daily production of around 11,200boe/d, with nearly 90% of this being gas.
DGO also acquired midstream assets, including around 4,100 miles of pipe and around 47,000 horsepower of compression. This will take the company’s total midstream assets to more than 10,500 miles of pipe.
The deal is expected to enable the company to raise its total net production by 19% to around 71,000boed and net PDP reserves by 25% to 493Mboe.
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By GlobalDataDiversified Gas & Oil CEO Rusty Hutson said: “Our strategic acquisition of Core will allow us to unlock significant value from our enlarged base of assets in Kentucky and West Virginia that would otherwise not be achievable on a standalone basis.
“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.”
Huston added that the midstream assets will provide the optionality to move the company’s production to different sales points, maximising realised pricing.
The company said that the acquired assets are located in proximity to the oil and gas assets it purchased from EQT for $575m in July this year.
