Diversified Gas & Oil

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June 15, 2017

Update on proposed acquisition

15 June 2017

Diversified Gas & Oil PLC
(“DGO” or the “Company”)

Update on proposed acquisition of certain gas and oil assets of Titan Energy, LLC
Share placing to raise $35.0m (the “Placing”)
Restoration of trading on AIM

Diversified Gas & Oil PLC (AIM: DGOC), a US based gas and oil producer, is pleased to confirm that it has finalised the agreement to acquire certain gas and oil assets of Titan Energy, LLC (“Titan Assets”) which was announced on 5 May 2017 (the “Acquisition”). Details of the Acquisition will be set out in a new Admission Document and Circular to Shareholders which is expected to be published by not later than 7.00am on 16 June 2017 (the “Admission Document”).

As announced previously, the Titan Assets comprise certain producing gas and oil wells, close to DGO’s existing operations in the Appalachian Basin in the eastern United States, principally in the states of Ohio, Pennsylvania, southern New York and northeast Tennessee.

Daily gas production from the Titan Assets is approximately 12,500 gross boepd (6,550 net boepd) and oil production is 380 gross bopd (266 net bopd). The Acquisition will more than triple DGO’s gross gas production to approximately 17,367 boepd, and will increase gross oil production by 69% to approximately 930 bopd. Overall gross production will increase from approximately 5,400 boe to 18,300 boe. The Titan Assets will be immediately accretive to cash and earnings.

The cash consideration for the Acquisition is $84.2 million (approximately £66.1 million) (subject to adjustment in accordance with the terms of the agreement for the Acquisition). This will be funded by a new $110 million Senior Secured Loan Facility (the “Loan Facility”) and the Placing. Mirabaud Securities LLP has placed 39.3 million new ordinary shares (the “Placing Shares”) at 70p per share with certain existing and new institutional investors to raise $35.0 million (£27.5 million). The Placing will take place in two tranches. 11.4 million firm Placing Shares have been placed to raise $10.1 million. The remaining 27.9 million conditional Placing Shares are placed conditional on approval by Shareholders.

Notice of a Shareholder meeting to seek approval for the Acquisition and authority for the conditional Placing Shares will be sent to Shareholders later today. The Shareholder meeting will be held at 11.00am on 30 June 2017.

Full details of the Loan Facility and the Placing will be set out in the Admission Document.

Following publication of the Admission Document the Company anticipates that the suspension of trading in the Company’s shares will be lifted and that trading in the Company’s existing ordinary shares will recommence at 8.00am on 16 June 2017.

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Oil guru who foresaw crash says OPEC should have cut deeper

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By ANGELINA RASCOUET AND LAURA HURST on 6/15/2017

LONDON (Bloomberg) — The oil guru who predicted the market rout in 2014 said OPEC and its allies should have gone much further when they extended their supply deal last month.

“They should have cut another million barrels a day for ninety days in order to drain the system,” said Gary Ross, global head of oil at PIRA Energy, a forecasting and analytics unit of S&P Global Platts.

For Ross, the producers missed an opportunity to deepen cuts between June and August when refinery demand is higher and so accelerate the decline in inventories. Such a move would have pushed the market into backwardation, when near-term prices are higher than those for later months, he said. That structure favors OPEC because it would discourage their shale-oil rivals from locking in prices for future production.

“If that was really their objective, then they should have cut during this window of maximum crude runs to accelerate,” he said.

OPEC, and partners led by Russia, re-upped their agreement on May 25, agreeing to maintain curbs of as much as 1.8 million barrels a day until next March. Yet benchmark crude prices have since slid toward $47 a barrel, and the International Energy Agency said Wednesday that the cuts are only slowly diminishing global stockpiles.

Ross’s view was echoed by analysts at Sanford C. Bernstein Ltd., who said OPEC needs to cut deeper for longer to restore inventories to normal levels. “OPEC needs to drain by 34 million barrels a month or 1 MMbpd for the next 10 months,” the analysts wrote in a note. “This looks challenging.”

Ross also warned that Chinese crude-demand growth is set to decrease in the second half of this year. “That poses a real problem for OPEC as they enter 2018,” he said.

Ross lowered his forecast for benchmark Brent crude to $50-$55/bbl by year-end, he said Wednesday. In early February, he expected Brent would be trading near $60-$65/bbl by now and reach as much as $70 by year-end.

Although the market is rebalancing, the surplus isn’t reducing at the rate OPEC had hoped and will still be at 150 to 200 MMbpd by year-end, Ross said. That’s partly because crude production is increasing in Libya and Nigeria — OPEC members that are exempt from curbing output because of internal turmoil.

In November, two weeks before OPEC decided to implement curbs, Ross predicted an agreement could eliminate most of the surplus stocks by the beginning of the second half of this year.

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