Diversified Gas & Oil (DGO) has signed off on a conditional purchase and sale agreement to acquire the US-based Appalachian upstream and midstream assets from Carbon Energy.
DGO said there is no certainty it will complete the transaction and is still negotiating terms.
The deal remains subject to ongoing diligence and the confirmation of final details, including the gross purchase price which is expected to be around USD 110.00 million.
Furthermore, the transaction falls within the company’s stated valuation criteria of less than 4.0x its earnings, before interest, taxes, depreciation and amortisation based on diligence to date and will have an effective date of 1st January 2020, if completed.
If successful, the possible acquiror plans to finance the deal with available funds from its existing credit facility.
Carbon’s assets are located within DGO’s existing footprint in West Virginia, Kentucky and Tennessee and will increase the latter’s operating scale and efficiencies.
The units comprise two active natural gas storage fields that will generate third-party storage revenue and greater control optionality for the company.
In 2019, the assets had a mature, low decline daily net production of 9,900 barrels of oil equivalent from 6,500 net operated wells.
Carbon’s units have an intrastate gathering pipeline which spans around 4,700 miles across West Virginia and currently transports the majority of the vendor’s Appalachian wells.
Ruston Huston, chief executive of DGO, said: “These assets, strategically located in our existing area of operations, will allow us to leverage our talented field personnel and Smarter Well Management programme across additional assets as we relentlessly drive operating efficiencies and cost savings.
“Further expanding our midstream system will provide both greater certainty and optionality to transporting our production, and together with the storage fields, provide ways to generate additional third-party revenue.”
© Zephus Ltd