Diversified Gas and Oil has signed an agreement to acquire a number of producing gas assets in the US states of Pennsylvania and West Virginia from HG Energy for $400m.

Under the conditional sale and purchase agreement, Diversified Gas and Oil will acquire 107 unconventional producing gas wells with a combined net daily production of more than 20,000boe.

The wells are located close to the company’s existing operations in the Appalachian Basin.

“This package comprises significantly higher volumes per well than our previous acquisitions and achieves higher realised gas prices.”

Diversified Gas and Oil also announced a proposed placing of shares via an accelerated bookbuild to raise at least $225m to fund the deal.

The company will also fund the acquisition using a combination of a drawdown from its existing KeyBank facility.

Diversified Gas and Oil CEO Rusty Hutson said: “This package comprises significantly higher volumes per well than our previous acquisitions and achieves higher realised gas prices, resulting in a positive impact for the overall economics of the enlarged portfolio as we continue to reduce operating costs and drive higher margins.

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“With an estimated net average production of over 90,000boed post-completion, the company will be established in the top-tier of London listed producers, supported by an extremely strong cash flow profile and a healthy balance sheet.”

Upon completion, the pro forma net production is expected to increase to more than 90,000boed and PDP reserves to 566mmboe.

Last July, Diversified Gas & Oil completed the $575m acquisition of EQT’s producing gas and oil and midstream assets in the southern Appalachian Basin in the US.