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Diversified Gas & Oil PLC

Diversified Gas & Oil to kick-off share buyback programme

The US-focused oil and gas group said the programme will allow it to buy a maximum of about 54.3mln shares

oil well
DGOC's production is running at 90,000 barrels per day

Diversified Gas & Oil PLC (LON:DGOC) shares rose on Tuesday boosted by news the firm is to carry out a share buyback programme over the next 12 months. 

The US-focused oil and gas group said the programme will allow it to buy a maximum of about 54.3mln shares while also maintaining its current dividend policy. 

READ: DGOC higher as it closes US$400mln asset acquisition

It was only in March, DGO raised US$225mln through a share placing at 117p to fund the acquisition of 107 gas producing wells in Pennsylvania and West Virginia.

That acquisition took production at the AIM-listed group to the equivalent of 90,000 barrels per day.

In a note to clients, analysts at Mirabaud Research said: “The move is essentially a call on the relative merits of buying back stock versus using excess cash after dividends (~US$140m in FY19e) for further acquisitions. At the current price DGOC clearly believes it makes more sense to do the former.

“Furthermore, by buying back stock, DGOC is effectively reducing the dilutive impact of the recent HG acquisition using its enlarged cash flow base. Assuming the full campaign is executed, our annual DPS estimate would rise to 17.4c./shr – up from 16c/shr – implying an enhanced dividend yield of 11%.”

In a separate announcement on Tuesday, DGO also said that Robert Post has stepped down as its chairman and will be replaced by David Johnson, who is currently the firm’s senior independent non-executive director.

In afternoon trading, shares in DGOC were 2.9% higher at 125.50p

 -- Adds analyst comment, share price --

Quick facts: Diversified Gas & Oil PLC

Price: 110 GBX

Market: AIM
Market Cap: £725.75 m
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