Diversified Energy Company · NYSE:DEC
Diversified Energy — Diversified Gas & Oil — FY2017 Earnings Presentation
30 slides from Diversified Energy's earnings presentation, Apr 30, 2018
Slide 1: 2017 Full Year Results
Rusty Hutson Chief Executive Officer Brad Gray Chief Operating Officer 2 0 1 7 F u l l Ye a r R e s u l t s Eric Williams A year of transformation Chief Financial Officer 30 April 2018
Slide 2: Disclaimer
DISCLAIMER The information contained in this document has been prepared by Diversified Gas & Oil PLC (the “Company”). This document is being made available for information purposes only and does not constitute an offer or invitation for the sale or purchase of securities or any of the assets describ
Slide 3: YE17 Highlights
DIVERSIFIED GAS & OIL YE17 Highlights • Accretive acquisitions DGOC Focus Area • EnerVest ($2MM) • Titan ($84MM) • NGO ($3MM) • Balance sheet strengthened by equity proceeds and low leverage • 2H17 LOE down 27% vs 2016 average(e) • Strong EBITDA margins of 40% • 2016 final dividend – 1.99 cents p/sh
Slide 4: Business Model: Acquire, Produce, Drill
BUSINESS MODEL: ACQUIRE, PRODUCE, DRILL Acquire and manage producing natural gas and oil properties to generate cash flows, providing stability and growth for our stakeholders Inorganic Ongoing Organic Result Maximise Execute Create Target PDP Production; Low Risk, Shareholder Acquisitions Minimize
Slide 5: Delivering Stated IPO Objectives
DELIVERING STATED IPO OBJECTIVES • $286MM of acquisitions • 8x increase in net daily • 5x increase in 1P reserves completed in first 13 months production from 3,000 in (PDP only; No PUDs) (b) post-IPO at per-share 2016 to 28,000 BOEPD in accretive values of 2-4x 1Q18 (a) operating cash flow • 4x inc
Slide 6: Transforming Diversified
TRANSFORMING DIVERSIFIED Growing Production & Reserves Expanding HBP Acreage Base Adding Management Talent PDP Reserves 4.5 Position Name Exit Rate Net Daily Production 4.0 4.0 CFO Eric Williams 30.0 28.1 210 Average Net Daily Prod (MBOEPD) 3.5 VP Finance Bryan Berry 25.0 173 180 PDP Reserves (MMBoe
Slide 7: Transforming Capital Structure w/ Syndicated Credit Facility
TRANSFORMING CAPITAL STRUCTURE W/ SYNDICATED CREDIT FACILITY • Large borrowing base available to fund additional, significant acquisitions without the need for Borrowing Costs Significantly Reduced additional equity dilution, while maintaining $40MM $112MM commitment to maintain leverage ratios < 3x
Slide 8: Recent Acquisitions Make DGO Largest Producer on AIM
January January 2018 2018 Investor Investor Presentation Presentation RECENT ACQUISITIONS MAKE DGO LARGEST PRODUCER ON AIM ✓ Closed APC & CNX Acquisitions in March 2018; Integration underway Pennsylvania ✓ ~175% production increase and enhanced dividend Ohio ✓ Tight geographic focus enhances economi
Slide 9: Financial and Operations Review
Financial and Operations review
Slide 10: Year-over-Year Key Metrics
YEAR-OVER-YEAR KEY METRICS 2016 2017 Change (%) Dividend Payout (a) US cents per shr 1.99 5.44 173% PDP Reserves MMBOE 28 55 96% PV-10 Reserves $US MM $125 $259 107% Average net daily production (b) MBOEPD 3.0 10.4 248% Total revenue (Unhedged) $US MM $17.1 $41.8 144% Average realized prices (Unhedg
Slide 11: Reserves
RESERVES 100% Proved Developed Producing Reserves Large Portfolio Eliminates Concentration Wells PV10 $619MM +217% Top 100 180 $700 12% (a) 78% 101-500 2017 Reserve Replacement 11% All Others 160 18.5x FY2017 Production $600 w/ 1Q18 Reserve Additions 140 Largest wells 84.8x FY2017 Production include
Slide 12: Production
PRODUCTION Net Production Highlights w/ Titan and PF for APC & CNX Acquisitions @ 1/1/18 w/ Titan Acquisition 3000 Legacy DGO 30 28.1 2500 Net Production Net Daily Production 25 +125% +860% +125% 2000 2016FY 20 2016 FY vs 2017 2016 FY vs 1Q18PF(a) BOEPD 1,066 MBOE 2017FY 2,400 1500 15 Low Maintenanc
Slide 13: Revenue & Expense Highlights
REVENUE & EXPENSE HIGHLIGHTS Revenue ($MM) Strong Margins Revenue Realized Price per McF (Unhedged) LOE Gathering and Transportation Production Taxes G&A Revenue (Hedged) 45 3 $25 FY16: FY17: 40 1Q18: +147% 2.5 19% Margin 40% Margin 40% Margin 35 $20 2016FY 2017FY 30 2 $17 $42 19% 25 $15 43% US$ 39%
Slide 14: Earnings Highlights
EARNINGS HIGHLIGHTS Adj EBITDA / Share (b) Adj EBITDA (b) 0.16 +50% w/ Titan and PF for APC & CNX Acquisitions @ 1/1/18 2016FY 2017FY w/ Titan Acquisition 0.14 $0.10 $0.15 0.12 Legacy DGO 20 43% 0.45 0.1 +308% 41% 40% 0.08 2016FY 2017FY 39% 18 0.4 0.06 $0.07 $4.3 $17.5 $0.06 $0.06 0.04 35% 16 0.35 0
Slide 15: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Gas and Oil Properties, net Cash and Liquidity $500 $150.0 $450 $467 Cash Credit Availability $400 $350 $100.0 $MM $MM $300 $250 $112 $200 $190 $50.0 $150 $39 $100 $50 $77 $0.2 $15.2 $13.6 $- $- YE16 YE17 1Q18E YE16 YE17 1Q18E Leverage; Borrowings Total Equity 10.0x $72 $75
Slide 16: Strong Balance Sheet Positions DGO for Growth
STRONG BALANCE SHEET POSITIONS DGO FOR GROWTH Capitalization ($MM) Highlights 31 Dec 31 Mar Committed to maintaining low leverage 2017 2018PF Positioned to complete acquisitions generating ~$100MM EBITDA Cash $15 $16 paying 4x cash flow without equity dilution Credit Facility $71 $88 Liquidity signi
Slide 17: Hedged to Protect Cash Flow & Dividend
HEDGED TO PROTECT CASH FLOW & DIVIDEND Natural Gas Financial Hedges Hedge Mix(a) 25,000 $4.00 $2.88 $2.88 $2.88 $2.83 $2.83 $2.83 $2.83 $2.81 $2.91 20,000 $3.00 15,000 $2.00 10,000 5,000 $1.00 55% 45% - $0.00 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 FY20 FY21 Physical Contracts Financial Hedges NYMEX Hedg
Slide 18: Robust Long-Term Growth Outlook
ROBUST LONG-TERM GROWTH OUTLOOK 2014 2017 Mar-2018 Ohio Pennsylvania West Virginia Strong Start to 2018 “Balance Sheets leverage in place to deliver transformational growth” Dec-2018 • Conventional production consolidation • Emerging opportunities to consolidate continues and is intensifying mature,
Slide 19: Dividend Schedule
DIVIDEND SCHEDULE • Mature, low-decline and well-hedged producing assets generate stable cash flow • Recently announced decision to shift to quarterly payouts vs. semi-annual • Commitment to pre-share accretive growth opportunities progressing payouts Payout Payout Annualised Period Declare Ex-Div P
Slide 20: Conclusion
DIVERSIFIED GAS & OIL Conclusion
Slide 21: A Unique Investment Opportunity
A UNIQUE INVESTMENT OPPORTUNITY • Track record of • Capitalising on consistent growth unique regional and returns, reducing acquisition window to costs through build platform for increasing scale long-term growth Proven Model Disciplined (Founded 2001) (Focused Strategy) Dividend Financially Paying
Slide 22: Appendix
DIVERSIFIED GAS & OIL APPENDIX
Slide 23: Natural Gas Hedge Detail
NATURAL GAS HEDGE DETAIL Financial Contracts Natural Gas (MMBtu, $/MMBtu) 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 NYMEX NG Swaps 1,770,000 1,770,000 1,680,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,707,000 2,970,000 Swap Price $2.88 $2.88 $2.88 $2
Slide 24: Oil Hedges
OIL HEDGES Price Protection of ~$47/Bbl for ~36 months Hedge Contract Structure Crude Oil Hedges 700 $50.78 $47.84 $47.84 $46.50 $47.23 $47.20 $47.20 $46.66 $44.53 $50.00 600 22% 500 $40.00 BBL per Day 400 $30.00 300 $20.00 78% 200 $10.00 100 - $0.00 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 FY20 FY21 Swap
Slide 25: Non-IFRS & Other Reconciliations
NON-IFRS & OTHER RECONCILIATIONS YE16 1Q17 2Q17 1H17 3Q17 4Q17 2H17 YE17 Hedged Revenue Reconciliation Natural gas $ 10,671 $ 4,045 $ 3,635 $ 7,680 $ 10,474 $ 12,309 $ 22,783 $ 30,463 Oil 4,207 1,221 1,267 2,488 2,696 2,863 5,559 8,047 NGL - - 26 26 392 625 1,017 1,043 Total natural gas, oil and NGL
Slide 26: Non-IFRS & Other Reconciliations
NON-IFRS & OTHER RECONCILIATIONS YE16 1Q17 2Q17 1H17 3Q17 4Q17 2H17 YE17 LOE Reconciliation Controllable LOE $ 10,470 $ 2,286 $ 2,205 $ 4,491 $ 5,109 $ 5,991 $ 11,100 $ 15,591 Production taxes 833 437 519 956 1,030 1,406 2,436 3,392 Gathering and transportation - - - - 1,133 792 1,925 1,925 Total LO
Slide 27: Non-IFRS & Other Reconciliations
NON-IFRS & OTHER RECONCILIATIONS YE16 1Q17 2Q17 1H17 3Q17 4Q17 2H17 YE17 Adjusted EBITDA Reconciliation Operating profit $ 22,450 $ 1,205 $ 8,533 $ 9,738 $ 3,346 $ 3,110 $ 6,456 $ 16,194 Adjustments Depreciation and depletion 4,039 1,066 1,160 2,226 2,423 2,364 4,787 7,013 Gain on bargain purchase (
Slide 28: Robust, Expanding Distribution Network
ROBUST, EXPANDING DISTRIBUTION NETWORK Conventional Production Benefits Recent Pipeline Approvals: Low pressure gathering and transmission systems that Atlantic Sunrise: ~200 miles of pipe; 1.7 Bcf/day do not take Marcellus and Utica production Rover: ~500 miles of pipe; 3.25 Bcf/day Separation Unit
Slide 29: Company History Marked by Growth
COMPANY HISTORY MARKED BY GROWTH Gross Boe/ 41,000 day ~103% Gross ‘18 Production CAGR from 2012 to Mar2018 Gross Boe/ Jan: 18,000 day Raised $180 net equity proceeds to fully fund two, transformative ‘17 acquisitions in March Feb: Mar: Gross Floated on AIM raising $50m – Boe/ Acquired Alliance Petr
Slide 30: Contact
Company Diversified PO BOX 381087 BIRMINGHAM, ALABAMA 35238-1087 (USA) ERIC W ILLIAMS, CFO EWILLIAMS@DGASOIL.COM +1-205-379-8321 Brokers Mirabaud MIRABAUD SECURITIES LIMITED 10 BRESSENDEN PLACE LONDON SW1E 5DH PETER KRENS PETER.KRENS@MIRABAUD.CO.UK +44 (0)20 3167 7221 Brokers Stifel STIFEL NICOLAUS