Diversified Gas & Oil Admission Announcement

Diversified Gas & Oil Admission Announcement

The Directors of Diversified Gas & Oil Plc are pleased to announce that an application has been made for the further issue of up to GBP3,600,000 of 8.5% Unsecured Bonds due 2020, with a nominal value of GBP1 each, of the Company (the “Bonds”) to be admitted to trading on the ISDX  Growth Market. The Company’s registered office is at Regis House, 45 King Williams Street, London EC4R 9AN. The expected admission date of new Bonds to be issued in connection with this Announcement is 14 March 2016.

The Company’s 8.5 per cent. Unsecured Bonds were originally admitted to the ISDX Growth Market on 24 June 2015. To date DGO has raise approximately GBP4.2m in five placings of the Bonds.

  1. Company Information

Diversified Gas & Oil Plc was incorporated on 31 July 2014 in England and Wales as a public limited company by its founders, Robert Hutson Jr. and Robert Post.

It intends to use the proceeds of the issue of the new Bonds described in this Announcement to acquire approximately 1,000 conventional oil and gas wells and has entered into a Letter of Intent with a seller in Ohio, USA. These assets are considered non-core to the seller as it has shifted its focus to the Utica and Marcellus shales. The purchase price of the acquired assets is $4.8m, which represents a significant discount to current market price. The present value (“PV”) discounted future cash flows at the $4.8m purchase price represents a 70% discount rate of future cash flows.

These assets are currently producing over 225 BOPD and 3,500 MCF of natural gas per day. The production of these assets will generate a total revenue at current market prices in excess of $6.5m with EBITDA estimated at approximately $1.5m. The operating expenses for the acquired assets would be combined with the Group’s current operations in Ohio, resulting in a substantial cost reduction for the acquired assets.

On completion of the acquisition, the DGO Group will operate over 5,000 conventional wells in the Appalachian Basin, producing approximately 450 BOPD and 13,500 MCF per pay of natural gas.

  1. Directors

The Directors have extensive senior level experience in private and public held companies, both within and outside the oil and gas sector.

The Directors of the Company, their age and positions are as follows:

Robert “Rusty” Hutson Jr., (Age 46, Chief Executive Officer)

Before founding the DGO Group in 2001, Rusty held finance and accounting roles for 13 years at Bank One (Columbus, Ohio) and Compass Bank (Birmingham, Alabama). He finished his banking career as Chief Financial Officer of Compass Financial Services. Rusty is a 50% owner of the Company and has a B.S. degree in Accounting from Fairmont State College, West Virginia. He is a former CPA (Ohio).

Robert Marshall Post, (Age 58, Chairman)

Robert joined the DGO Group in 2005. He was previously a corporate controller for Whiting Corporation for 3 years. He then purchased TramBeam, an overhead crane company, from Whiting Corporation and owned and operated this business for 20 years. Robert sold TramBeam in 2002 to a London-based corporation, FKI Industries. He has a B.S. degree in Accounting (Finance minor) from Jacksonville State University, Alabama.

Martin Keith Thomas (Age 51, Non-Executive Director)

Martin is a lawyer based in the city of London. Martin has built a strong reputation for advising companies and investment banks on flotations and other transactions on the markets of the London Stock Exchange. For the past twenty years, Martin has been one of the most active lawyers advising on public offerings of shares in London.

  1. The Issue

The Company has applied for the new Bonds to be issued in connection with this Announcement to be admitted to trading on the ISDX Growth Market.

DGO Group has received a commitment for further placings of up to 1,000,000 of new Bonds to be issued at par with this Announcement. It is expected that the admission of the first tranche of such new Bonds to the ISDX Growth Market will take place on 14 March 2016.

Once an aggregate of GBP3.6m of the new Bonds have been placed another Information Memorandum will be issued for the next GBP3.5m commitment.

The net proceeds of the issue of the new Bonds referred to in this Announcement will be used by the Company to fund the intended acquisition and other appropriate value driven investment opportunities of small gas and oil operators across West Virginia and Ohio.

  1. Information on the Bonds

The new Bonds bear interest from and including the applicable issue date at the rate of 8.5% interest per annum, payable quarterly in arrears in instalments on 31 March, 30 June, 30 September, and 31 December in each year. The new Bonds will be redeemed by the Company on the 23 June 2020.