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Diversified Gas & Oil to buy U.S. wells for $1.75m

Staff Writer |
Diversified Gas & Oil is to buy a package of producing wells in Ohio and Pennsylvania in the U.S. for $1.75m, which is expected to increase its daily production.

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The acquisition of the 1,300 oil and gas wells, which will close by the end of March, is expected to increase the company's production to about 5,400 barrels of oil equivalent per day and expand its production acreage by about 75,2500 acres.

The $1.75m purchase price, which will be funded from existing cash resources, represents less than a two times multiple of forward operating cash flows and is consistent with the DGO's acquisition criteria for mature assets.

The wells, which are located in DGO's existing areas of operations, currently produce 3,800 cubic feet of natural gas, which add 14% to the company's current gross gas production, and 110 barrels of oil per day, which will add 23% to its gross oil production.

They generated net revenues of about $3m in the year to 31 December 2016 and are expected to contribute operating cash flow of about $1m per year.

The anticipated PV 10 of the proven developed producing reserves for the assets is around $10m.

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