This week we welcomed back the management team of Diversified Gas & Oil to present at a Yellowstone Advisory webinar. The company is listed on the premium segment of the London Stock Exchange and with a market cap of £900m is part of the FTSE250 index. For investors looking for a high and rising dividend the stock currently yields 11% and is growing this at 4%.

The company reported HY numbers on 5th August and management took the opportunity to update on their performance, recent acquisitions and the opportunities for further growth. A recording of the webinar can be found here.

Rusty Hutson Jr., Co-founder and CEO, started the presentation with the highlights from the first half: Free Cash generation reached $117million, adjusted EBITDA margin came in at 50% (after the hedging program) and average daily production reached 106Mboepd. Acquisition spend was $342m on three transactions taking the company into the Central Region in partnership with finance provider Oaktree. Rusty explained that the Central region will be key to future growth and they hope to replicate their success in the Appalachian region. Rusty also stressed progress on recent ESG initiatives and it is clear this is increasingly becoming more central to the business model.

That ESG is good for business was the first part of the operational highlights too. Progress has been made building out the environmental team, improving emissions detection and data collection and safely retiring over 80% of the annual target for well retirement at the HY point. Costs of well retirement has been reduced by a further 25%. The process of recruiting an additional female director has commenced.

The recently acquired assets in the central region provide the starting point to a large opportunity set and further consolidation of assets is planned. There are 169k vertical wells and 49k horizontal wells producing 24 Bcfepd to go after in this region. The acquired wells have been integrated into the Diversified operating model, at the heart of which is Smarter Asset Management to optimise performance. These assets provide a lot of opportunities for production enhancement, cost improvement and they are already tackling some of the low hanging fruit available. As well as better management of the assets there are opportunities to improve pricing through sales of gas at Gulf Coast locations.

Turning to total production, average daily net production grew 2% to 106 MBoepd and the…

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