Diversified completes £67m acquisition of Alliance Petroleum

Independent US-based gas and oil producer Diversified Gas & Oil confirmed on Thursday that it has completed the acquisition of Alliance Petroleum Corporation.

The AIM-traded firm had announced on 31 January that it signed a conditional sale-and-purchase agreement to acquire the entire share capital of Alliance Petroleum from Lake Fork Resources Acquisition Corporation.

It said on Thursday that the conditions of the sale-and-purchase agreement had been met in full, with the acquisition being effective from 1 March.

The total consideration for the Alliance Petroleum acquisition was $95m (£66.9m), comprising the purchase price of $70m, as well as the repayment of certain debts of Alliance Petroleum of $25m.

Diversified said the consideration was met from its own resources, following completion of the $189m share placing on 20 February.

As it had previously announced, Diversified said the assets of Alliance Petroleum comprised gas wells close to its existing operations in the Appalachian Basin - mainly in the states of Pennsylvania and West Virginia, with some wells in Ohio.

Alliance Petroleum had proven reserves of around 49.3 MMboe, with an estimated net present value of $168m as estimated by Wright & Co.

Current net daily production was approximately 53 Mcfed (8.8 kboed).

Based on trading in the 11 months to 30 November, Alliance Petroleum generated unaudited annualised pre-tax profits of $13.5m.

Following completion of the acquisition, Diversified estimated that net daily production would increase from approximately 62 Mcfed to 115 Mcfed.

“We are pleased to have completed this acquisition in line with our previously stated timeframe,” said Diversified CEO Rusty Hutson.

“The acquisition of Alliance Petroleum adds high quality assets that complement our existing portfolio, as well as an experienced operating team who will work diligently with our existing team to ensure a seamless transition of ownership.”

Hutson said the company would now turn its attention to the integration and optimisation of the assets, leveraging its expanded footprint to drive operational efficiencies and lower operating costs.

“We also remain on track with regards to our other transformative acquisition of assets from CNX Gas Company, which will further cement our position as the largest producer on AIM when that transaction completes in the next few weeks.”