Diversified Gas & Oil to buy assets from Titan Energy

AIM-listed Diversified Gas & Oil has entered into a conditional sale and purchase agreement to buy certain gas and oil assets of Titan Energy in the Appalachian Basin, principally the states of Ohio, Pennsylvania, southern New York and northeast Tennessee, for a cash consideration of $84.2m.

The company said this would be a "transformational acquisition" that would increase its gross oil and gas production to around 18,300 barrels of oil equivalent per day and its proved developed producing reserves by around 36.7 mmboe to 60.5 mmboe. It added that the new wells would be immediately accretive to earnings.

It said the cash consideration would be funded through a new term debt facility and a proposed placing of new ordinary shares raising at least $20m.

The deal constitutes a reverse takeover under AIM rules and as a result, trading in the company's ordinary shares has been suspended.

Chief executive officer Rusty Hutson said: "This transformational deal for DGO will materially increase the scale of our portfolio within the Appalachian Basin, taking up further acreage in the states of Ohio and Pennsylvania and entering southern New York and northeast Tennessee. The proposed transaction highlights the strength of our business model in that we are able to acquire complementary assets in a proven, stable and low-risk environment at compelling valuation metrics.

"We believe that this deal will deliver significant benefits to our shareholders in the form of increased cash flow, proven developed reserves and acreage for future development opportunities whilst also supporting our dividend policy and enabling us to consider additional opportunities that we see within our region of focus."