Diversified Gas & Oil, a company that claims to succeed where other oil and gas producers fail by aggregating an enormous portfolio of Appalachian wells, has announced two more deals on the horizon.
To fund them, the Alabama-based firm is issuing shares of its stock, which is traded in London, at a time when demand for fossil fuels, commodity prices and energy company stocks are hurting.
The move is in line with the company’s self-described “contrarian business strategy” of buying up older, shallow wells. But, as with several other recent deals, the two proposed transactions also include dozens of horizontal shale wells from Downtown-based natural gas producer EQT Corp.
EQT, which has been shopping around some of its non-core assets to pay off debt, would receive $125 million in exchange for 900 wells, most of them shallow assets in West Virginia and 67 horizontal shale wells in Pennsylvania. The shale wells are between 5 and 10 years old, according to Diversified’s announcement of the potential deals.
By count, horizontal shale wells make up a minuscule proportion of Diversified’s portfolio — the company had just over 500 of them as of the end of last year, according to a reserve report released this week, out of nearly 60,000 total wells.
But shale now accounts for more than a quarter of Diversified’s oil and gas production.
The shale wells are also more expensive to decommission, a responsibility that is growing for Diversified even though much of its obligations to plug and abandon thousands of wells are pushed out decades into the future, as per agreements with the states where the company operates.
The other proposed deal that Diversified recently disclosed involves about 6,100 conventional wells in Tennessee, Kentucky and West Virginia, along with pipelines and two natural gas storage fields. The assets are currently owned by Carbon Energy Corp. and would be worth $100 million at closing.
Both the EQT and the Carbon deals have provisions for extra payments if commodity prices rise.
Production from the proposed acquisitions would amount to 20% of Diversified’s 2019 output, another significant boost to its Appalachian status.
The company cautioned that it is still doing diligence on the deals and made no guarantees that they will close.
Anya Litvak: alitvak@post-gazette.com or 412-263-1455.
First Published: May 12, 2020, 9:33 p.m.
