Malcy’s Blog, Diversified Gas & Oil & Genel Energy

The latest blog up-date By Malcolm Graham-Wood


Diversified Gas & Oil

Interims from DGO this morning which confirmed the positive tone from the recent update. 1H net production of 76 MBoepd included around 2 months of HG Energy and was up ~292% compared with 1H18 and ~22% compared with 2H18. What is more, the June 2019 exit rate net production exceeded 90.2 MBoepd including 69.7 MBoepd from pre-HG days which gives significant credence to the effectiveness claims of the “Smarter Well Management” (SWM).

This programme continued to offset natural production declines with ~430 previously non-producing wells placed back into production since 1 January 2019 which is some vindication of the operation.

Any worries about the long-term asset situation with remaining states were finalised with agreements signed with Pennsylvania and Kentucky which when combined with existing agreements with Ohio and West Virginia cover 98% of the company’s owned and operated wells.

This gave 1H adjusted EBITDA of $131m including the HG contribution of $24m and led to a 2Q dividend of $0.035 per share($0.028). At the end of June net debt was a comfortable ~$613m with net debt to EBITDA of 2X.

As I pointed out in my recent note cash margins are an impressive 54% despite lower HydroCarbon prices mainly in gas and liquids in the period. Another plus is the lease operating expense of $5.44/boe for 1H was down ~35% compared to last interims and base LOE was 46% down in the same period. It gets better, G&A expense was $1.35/bone in the period, 11% lower than 1H 2018, these guys certainly run a tight ship.

With a borrowing base of $950m following the HG acquisition providing strong liquidity of ~$335m including cash and availability under the company’s revolving credit facility opportunities ‘to support future growth ambitions, ‘ these are more likely than not.

There is little doubt that DGO has again delivered the goods with a very good set of results and the most recent acquisition fitting in well. As the company builds, and there is no reason to think that it can’t continue to do so, the model actually gets better with the cost metrics moving south and profits growing. All is well at DGO and these figures will satisfy investors that there is plenty of upside in the stock.


Genel Energy


Genel has announced the resumption of its share buy-back programme of up to $10m as previously announced. With previous purchases of just under $3m, the company have scope for plenty more at the moment.

With the normal comment that the current share price ‘significantly undervalues the company’s assets’ with which I concur, the use of the strong balance sheet to make the repurchase does indeed represent a value accretive use of its cash resources. Following a very good set of results this week this is a good way of investing the very strong cash flow.



By Malcolm Graham-Wood

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