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    US DGO to snap up gas wells from bankrupted firm


Diversified Gas and Oil says it is acquiring the high-quality, zero-cost capital wells at a fraction of their value.

by: Joseph Murphy

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US DGO to snap up gas wells from bankrupted firm

Diversified Gas & Oil (DGO) is set to acquire the upstream gas assets of bankrupted fellow US firm EdgeMarc Energy for $50mn.

DGO first announced the deal on July 25, and on August 29, it reported that the transaction had secured approval from the US bankruptcy court. EdgeMarc filed for chapter 11 bankruptcy in May.

The assets include 12 unconventional wells producing gas from the Utica shale in the Monroe and Washington counties of Ohio, as well as rights to other undeveloped land in the Utica region. Output currently stands at 46mn ft3/day or 7,700 boe/day, while proved-developed-producing reserves are assessed at 13.5mn boe, according to DGE. Lease operating expenses are estimated at $1.56/boe, and the wells brought in $30.5mn in Ebitda last year.

DGE said the assets were near its existing operations in the Appalachian basin, creating a benefit from economies of scale. They also comprise 10 undeveloped drilling sites that DGO could sell or decide to develop.

“The wells are consistent with our acquisition strategy in terms of adding high-quality, long-life assets to the portfolio,” CEO Rusty Hutson said in a statement. “We are acquiring these wells at a fraction of the cost incurred to develop them and yet given their long-life nature, we will reap the margin-enhancing benefit from them for years to come.”

According to Hutson, the assets’ zero-cost capital outlay made the deal even more attractive.