The United States population grew at a rate of about 1.3% per year throughout the 20th century and is forecast to reach 417 million by 2060. Demand for affordable and sustainable energy is growing and will continue to be a significant need for the United States and for countries around the world. Understanding DGO’s role in being responsible stewards of the natural resources for which it manages and recognizing the world’s growing demand for energy, we support the further development of sustainable energy from multiple sources, including hydrocarbons, nuclear and renewables.
DGO operates within the Appalachia region of the United States, which comprises 37% of total US natural gas supply. It’s largely the Appalachian natural gas production that continues to be a major contributor to the consistent and substantial reductions in US carbon dioxide emissions, which have been declining significantly faster than any other country. With DGO’s recent expansion in the region, we are increasingly an integral part of this story given our material production of natural gas. DGO’s production is nearly 85% dry natural gas and when that is combined with clean natural gas liquids they together comprise 99% of its production stream.
Not only is natural gas the cleanest-burning hydrocarbon, it is an abundant and an economically viable, affordable, reliable and predictable source of energy which makes it the ideal partner to renewable energy sources such as wind and solar. Natural gas, particularly with recent advancements in liquification and development of a global LNG infrastructure, is more than a bridge source of energy. Rather, it is part of the long-term solution to clean US and global energy requirements.
When used to generate electricity, a significant benefit of natural gas is its (i) reliability and predictability compared to renewables and (ii) 50% lower carbon dioxide emissions and 90% lower air pollutants generation compared to coal. Further, natural gas is not only cleaner to burn than other fossil fuels, but it is excellent for the local and national economies given its low cost to produce that allows for energy costs to remain low for consumers. We believe that the industry will play a key role in further reducing carbon emissions by continuing to advance technological improvements such as carbon capture technology and the early stage tests of converting natural gas to hydrogen which may generate a zero carbon fuel for the future.
At DGO, we have a robust approach to sustainability, underpinned by our commitment to high standards of corporate behaviour, social responsibility, and environmental stewardship. Consistent with our growth strategy, one of our fundamental operational objectives and differentiating factors is our disciplined emphasis on managing later-life producing wells fully to their natural end of life potential before safely and responsibly retiring those wells. Not only does maximizing a well’s productive life reduce the need to drill new wells, this operating philosophy simultaneously increases production and cash flow while economically benefiting the communities in which we live and operate by creating and maintaining jobs, increasing tax revenues and sustaining royalty income to mineral owners.
Our Smarter Well Management programme comprises well maintenance and workover activity to improve production from already active wells as well as enhancing the safety of the original well equipment. Our approach to managing mature wells differs from those divesting of these assets due to our desire to extend the producing life of the well. Our operational focus and commitment to well productivity creates a tangible benefit for the environment while also driving real value for stakeholders.
Consistent with our reputation as a leading operator in the region, DGO is committed to act as a good steward of the environment within the states in which it operates. We have always made provisions for our well asset retirement obligations, and we continue to enhance and, in some cases, extend our multi-year arrangements with the various state environmental regulatory agencies to strengthen our commitments.
These agreements provide certainty for the states about our commitment to fulfil our obligations as an operator of gas and oil wells, whilst providing all parties with clear long-term and transparent visibility into our asset retirement activities, the related liabilities and our ability to fund retirement from free cash flow.
We believe that principles of corporate responsibility are not secondary but are a central and commercial priority. Not only do we promote such principles to ensure strong governance, safe working conditions and minimal impact to the environment, we believe that thoughtful ESG initiatives significantly reduce risk, create long-term value and represent a competitive advantage in an industry landscape that at times is only focused on additional development versus wisely maximizing the resources the industry has already developed.
As part of our commitment to sustainability, we have recently launched Target 2020, a review of our Corporate Social Responsibility (CSR) activities that will result in a formal roadmap setting out our key sustainability objectives and targets. Included within this review will be additional sustainability measures that cover emissions management, leak detection and repair, water management, waste disposal, spill prevention and conservation efforts; all with the objective of ensuring that DGO continues to strive to achieve the highest industry standards for these areas of our operations. We will devote time and attention at all levels of the company, from executive management to the well management personnel, to support this initiative in our effort to ensure that the principles of ESG are fully integrated into all aspects of our business.
We will ask stakeholders from inside and outside the company to provide input into the design and effectiveness of our material CSR activities in order to define our key priorities and create a set of values that will drive our efforts in achieving our goal of becoming a leading ESG operator in our industry.
We recognise that a prudent and comprehensive approach to environmental stewardship and sustainability can favourably influence long-term value creation. Our business model is built on the positive results of intentional and tangible environmental stewardship through our Smarter Well Management programme. Our values compel us to always drive for the best interests of the citizens and communities in which we operate. We recognise that being a responsible corporate citizen is important and we are committed to corporate excellence in managing all of our operations.
Rusty R. Hutson, Jr
CEO and Co-Founder