Alabama-based Diversified Gas & Oil has acquired Core Appalachia from TCFII Core in a cash-cum-stock deal worth around $183m.
Core Appalachia is a producer and processor of natural gas in the Devonian region with operations spread over 1.3 million net acres in Kentucky, Virginia and West Virginia. Diversified Gas & Oil has acquired it with a cash payment of $130m and issuance of 35,000,000 of its new ordinary shares.
The transaction follows Diversified Gas & Oil’s acquisition of EQT’s southern Appalachian producing gas and oil and midstream assets for $575m in July 2018.
Diversified Gas & Oil said that the assets added from Core Appalachia are highly complementary to the upstream and midstream assets acquired from EQT. The company believes that the combined assets will enable it to unlock considerable incremental value by consolidation to a single operator.
Core Appalachia operates close to 5,000 wells, which put together give it a daily production of around 11,200 boe/d, of which almost 90% is gas. Diversified Gas & Oil said that its total net working interest production following the acquisition increases by 19% to nearly 71,000 boed.
The Alabama firm’s net working interest PDP reserves will move up by 25% to 493mmboe owing to the acquisition.
On the other hand, Core Appalachia’s midstream assets include around 6,598km of pipe and about 47,000 horsepower of compression. The addition of these will increase the total midstream assets of Diversified Gas & Oil to more than 16,898km or so of pipe covering a major portion of Kentucky and West Virginia.
Diversified Gas & Oil CEO Rusty Hutson said: “Our strategic acquisition of Core will allow us to unlock significant value from our enlarged base of assets in Kentucky and West Virginia that would otherwise not be achievable on a stand-alone basis.
“Core’s assets are highly contiguous to the assets we acquired from EQT earlier this year and materially expand our midstream footprint in Southern Appalachia.
“We expect to deliver both immediate and near-term synergies by combining these assets, resulting in higher revenues and lower operating expenses which will support our exceptional EBITDA margins across the portfolio and drive dividend payouts higher.”