The deal, with Carbon Energy Corporation and its affiliates, sees DGOC pick up some 9,900 barrels oil equivalent production in 6,500 “mature, low decline conventional” wells. It noted that 97% of the production is gas.
“This proposed complementary acquisition, if completed, remains consistent with our commitment to pursue prudent growth that enhances our dividend per share to shareholders,” Rusty Hutson, DGOC chief executive said in a statement.
Along with the wells, DGOC is acquiring some 4,700 miles of intrastate gas gathering pipelines in West Virginia, transporting the majority of the Carbon Energy production as well as third-party product (generating additional revenues) and connecting to interstate pipelines (which have higher pricing).
It also picks up two active gas storage fields, which generate third-party revenues and give DGOC greater control optionality.
The brings with it hedging facilities, giving downside protection (locking a price of US$2.60 per mmbtu) for eighteen months, over around 75% of the acquired production.
“These Assets, strategically located in our existing area of operations, will allow us to leverage our talented field personnel and Smarter Well Management program across additional assets as we relentlessly drive operating efficiencies and cost savings,” Hutson said.
“Expanded scale combined with our focus on a variety of identified opportunities to further improve the assets’ free cash flow will enhance operating margins and provide additional insulation and resilience in this low commodity price environment.”
Hutson added: “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.”