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Diversified Gas & Oil — Core Appalachia offers multiple synergies

Diversified Gas & Oil — Core Appalachia offers multiple synergies

Diversified Gas & Oil’s (DGO) acquisition of Core Appalachia (Core) offers multiple synergies. These include a material increase in natural gas liquid (NGL) yield from acquired rich gas streams, optimisation of well tender routings, rationalisation of compressor stations, utilisation of existing administrative capabilities to eliminate duplicate functions, and leveraging DGO’s expansive midstream operations. The deal values Core at $183m, which is broadly in line with the valuation of the EQT transaction on a price to NPV10, price to flowing barrel and price to trailing cash flow metric. On addition of the Core assets, assumption of incremental debt and issue of 35m new shares at 115p/share, our valuation rises from 138.1p/share to 145.9p/share (+6%).

Analyst avatar placeholder

Written by

Diversified Gas & Oil

Core Appalachia offers multiple synergies

Corporate transaction

Oil & gas

22 October 2018

Price

115p

Market cap

£622m

US$/£0.75

Net debt ($m) at 30 June 2018

130

Shares in issue

541.8m

Free float

99%

Code

DGOC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.8)

(3.0)

50.9

Rel (local)

(1.2)

6.0

61.0

52-week high/low

128.5p

76.0p

Business description

Diversified Gas & Oil is a conventional natural gas and oil producer with a main focus in the US onshore. The company possesses long-life, low operational cost, mature producing assets with slow decline profiles in the Appalachian region, in the states of Pennsylvania, West Virginia and Ohio.

Next event

2018 full-year results

H119

Analysts

Sanjeev Bahl

+44 (0)20 3077 5742

Carlos Gomes

+44 (0)20 3077 5722

Diversified Gas & Oil is a research client of Edison Investment Research Limited

Diversified Gas & Oil’s (DGO) acquisition of Core Appalachia (Core) offers multiple synergies. These include a material increase in natural gas liquid (NGL) yield from acquired rich gas streams, optimisation of well tender routings, rationalisation of compressor stations, utilisation of existing administrative capabilities to eliminate duplicate functions, and leveraging DGO’s expansive midstream operations. The deal values Core at $183m, which is broadly in line with the valuation of the EQT transaction on a price to NPV10, price to flowing barrel and price to trailing cash flow metric. On addition of the Core assets, assumption of incremental debt and issue of 35m new shares at 115p/share, our valuation rises from 138.1p/share to 145.9p/share (+6%).

Year end

Revenue (US$m)

EBITDA
(US$m)

PBT*
(US$m)

Net cash/
(debt) (US$m)

Dividend yield** (%)

Capex
(US$m)

12/16

17.1

26.5

32.5

(37.1)

0.0

(9.2)

12/17

41.8

23.2

4.7

(55.8)

2.7

(93.1)

12/18e

230.8

120.5

52.2

(480.9)

5.2

(912.5)

12/19e

447.8

254.1

142.0

(353.4)

8.6

(23.2)

Note: *PBT normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Dividend yield based on expected cash payment during year.

Value accretive bolt-on transaction

Our updated valuation includes the positive impact of the acquisition of Core at a c 28% discount to management-estimated NPV10, as well as the impact of potential corporate and operational synergies, which management estimates at c $5–10m per year. The deal highlights further potential for value-accretive, bolt-on asset deals within DGO’s core areas of operation. Our valuation is based solely on existing assets within the DGO portfolio, with potential for upside in the event of improved gas realisations or further asset M&A.

Midstream, operational and corporate synergies

We discuss synergies in greater detail within this note, but key components include: the ability to leverage midstream infrastructure in order to maximise liquid yield and price realisations; a reduction in ‘C-suite’ and overheads; optimisation of well tender routings; and rationalisation of redundant infrastructure.

Valuation: Base case increases to 145.9p/share

We recently initiated on DGO with a base case valuation of 138.1p/share; this rises to 145.9p/share on inclusion of the Core asset transaction, making the deal 6% accretive to our NPV10-based valuation. Our valuation is based on an EIA gas price forecast of $3.10/mcf in 2018 and $3.23/mcf in 2019, with a long-term gas price of $3.10/mcf (2022). Assuming management maintains a $0.28/share quarterly dividend for the underlying asset base, we forecast a FY19 dividend yield of 8.6% at the current share price.

Value-accretive, bolt-on transaction

Acquisition headline metrics

DGO’s acquisition of Core for a total consideration of $183m comprised $130m in cash payment and the issuance of 35m new shares at an issue price of 115p/share (shareholders are subject to an eight-month lock-in, followed by an orderly market agreement for a further six months thereafter). The cash component of the consideration is to be funded through the assumption of the $93m balance on Core’s revolving credit facility from a consortium led by KeyBank and an incremental draw of $40m under DGO’s existing KeyBank debt facility.

The acquisition is priced at 72% of DGO’s estimated NPV10 for Core’s asset base. On production and reserve metrics, the deal is broadly in line with the price paid for EQT, as shown in Exhibit 1 below. For further details of DGO’s historical transactions, including EQT, please see our recent initiation note.

Exhibit 1: EV/production and EV/1P indexes for the latest acquisitions

Source: Bloomberg, Edison Investment Research. Note: peer group includes Antero Resources, Cabot Oil & Gas, Chesapeake, Devon Energy, EQT, Range Resources, Southwestern Energy and XTO.

Management estimates the impact of synergies to be $5m to $10m per annum (excluding G&A synergies) – we take a look at potential midstream, operational and corporate synergies below.

Material midstream component

The acquired asset base comes with a significant midstream component, including 4,100 miles of pipe, 47,000HP compression and c 140,000Dth/d (Dekatherms per day) of inlet throughput, in addition to a 1.3m undeveloped acreage position. DGO’s mid-stream assets are increased by c 65% through the transaction. We include production and reserves for the Core producing asset base in our updated model, and also include a $14m revenue stream that management expects to accrete from third-party tariffs. Gathering and transportation costs for operating midstream infrastructure are included in our asset models.

Midstream consolidation provides the opportunity to utilise EQT’s NGL processing/marketing arrangements to extract NGL from Core’s rich gas, which is currently unprocessed, and positions DGO to capture additional third-party gathering revenues. Management seeks to continue to enhance the value of the company’s midstream portfolio by: increasing operated throughput, thereby reducing unit transport costs; attracting third-party volumes; and acquiring nearby operators – optimising transport routes and product yields.

Operational synergies

In addition to the midstream synergies described above, DGO is to benefit from the streamlining of field level positions and optimisation of well tender routes. An opportunity also exists to rationalise well compression stations and potentially to redeploy redundant equipment. The decline rate of the acquired Core asset base is similar to that of DGO’s underlying asset base at c 4% pa, and takes current production to c 70kboed with increased exposure to NGL and liquids pricing. Core gas provides accesses to both the Dominion South and TCO markets, with benchmark pricing at a relatively low differential to Henry Hub (c $0.30/mmBtu).

The NPV10 of plugging and abandonment (P&A) liabilities under the transaction is estimated by DGO at c $7m for the acquired well stock of 5,000 producing wells. P&A costs are estimated at a weighted average of $25k per well location.

Corporate synergies

DGO expects to eliminate ‘C-suite’ and upper-management positions in Core’s organisation structure, but maintain the bulk of Core’s operational team in order to mitigate integration risks. Other ‘head office’ synergies include the rationalisation of existing accounting and back-office infrastructure, office space and the benefit of increased purchasing power with key vendors.

Updated valuation breakdown by asset

The NAV table below provides a breakdown of our valuation by asset, using data available in the company’s last published prospectus and CPR, as well as state public sources.

Key assumptions for the Core asset base include a unit LOE of $3.5/boe, and midstream opex of $5.70/boe. Midstream opex is higher on a unit basis than that of the acquired EQT asset base, but this is expected to fall over time as assets are consolidated. Differentials are in line with management guidance at $0.3/mmBtu, oil differential at $6.2/bbl and NGLs priced at 30% of WTI.

Exhibit 2: Edison detailed NAV breakdown for DGO

 

 

 

 

Recoverable reserves

Net risked value

Risked value

Asset

Country

Diluted WI

CoS

Net post royalty

NPV10/boe

 

 

%

%

mmboe

$/boe

US$m

p/share

Net (debt)/cash end-2017

(55.8)

(7.7)

SG&A – NPV of 3 years

(38.0)

(5.3)

2018 funds raised net proceeds

420.0

58.3

Cash out for 2018 acquisitions

(902.0)

(125.2)

Hedging impact

(57.4)

(8.0)

Third-party volume discounted revenues

209.2

29.0

Production

 

 

 

 

 

 

 

Kentucky

US

90%

100%

200

5.6

849.3

117.8

Ohio

US

82%

100%

17

5.1

87.5

12.1

Pennsylvania

US

82%

100%

115

2.1

240.7

33.4

Tennessee

US

82%

100%

5

1.8

8.8

1.2

Virginia

US

81%

100%

10

5.4

31.9

4.4

West Virginia

US

84%

100%

144

5.5

257.3

35.7

Core NAV

 

 

 

491

1,051.5

145.9

Source: Edison Investment Research. Note: number of shares: 541.8m, FX: US$/£0.75 (due to the recent volatility in exchange rates and for the sake of consistency, we assume the FX based on the average of the last six months before the end of each quarter).

Exhibit 3 below breaks down our valuation by asset class, showing where our base case core NAV is relative to the current share price.

Exhibit 3: NAV/share waterfall

Source: Edison Investment Research

Key sensitivities: Gas price and LOE

Key drivers of DGO’s valuation are assumed gas price and LOE. The table below provides a base case valuation sensitivity to these key drivers. Our base assumes a long-term (2022) gas price of $3.10/mcf and LOE of $4.52/boe (LOE excludes gathering and transport, SG&A and production taxes), both inflated by 2.5% thereafter.

Exhibit 4: Valuation sensitivity to LOE and gas price assumption

LOE $/boe

 

3.39

3.84

4.52

5.20

5.42

HH $/mcf LT

-25%

118.6

109.3

95.3

81.3

71.9

-15%

139.3

130.0

116.0

102.1

92.8

3.10

169.1

159.8

145.9

132.0

122.7

+15%

199.6

190.3

176.3

162.4

153.1

+25%

219.6

210.3

196.4

182.5

173.2

Source: Edison Investment Research

Exhibit 5: Financial summary

 US$m

2016

2017

2018e

2019e

2020e

Year-end December

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

17.1

41.8

230.8

447.8

428.6

Cost of sales

(15.3)

(27.9)

(131.2)

(232.2)

(222.2)

Gross profit

1.7

13.9

99.6

215.5

206.4

General & admin

(2.8)

(8.9)

(13.5)

(25.0)

(24.0)

EBITDA

 

 

26.5

23.2

120.5

254.1

243.3

Depreciation

(4.0)

(7.0)

(34.9)

(63.9)

(61.4)

Operating Profit (before amort. and except.)

 

22.5

16.2

85.7

190.1

181.9

Intangible amortisation

-

-

-

-

-

Exceptionals

-

-

-

-

-

Other

-

-

-

-

-

EBIT

22.5

16.2

85.7

190.1

181.9

Net interest

10.1

(11.5)

(33.4)

(48.1)

(43.0)

Profit Before Tax (norm)

 

 

32.5

4.7

52.2

142.0

139.0

Profit Before Tax (FRS 3)

 

 

32.5

4.7

52.2

142.0

139.0

Tax

(14.8)

4.1

(13.1)*

(35.5)

(34.7)

Profit After Tax (norm)

32.5

9.2

39.2

106.5

104.2

Profit After Tax (FRS 3)

32.5

8.9

39.2

106.5

104.2

Average Number of Shares Outstanding (m)

42.0

120.1

442.6

541.8

541.8

EPS - normalised (c)

 

 

44.2

7.7

8.9

19.7

19.2

EPS - normalised fully diluted (c)

 

 

34.3

5.8

6.7

14.8

14.4

EPS - (IFRS) (c)

 

 

42.1

7.4

8.9

19.7

19.2

Dividend per share (c)

-

4.0

8.0

13.2

13.2

Gross margin (%)

10.2

33.2

43.2

48.1

48.2

EBITDA margin (%)

155.0

55.5

52.2

56.7

56.8

Operating margin (before GW and except.) (%)

131.4

38.8

37.1

42.5

42.4

BALANCE SHEET

Non current assets

 

 

81.1

198.3

1,196.9

1,156.2

1,117.2

Intangible assets

76.8

190.4

1,188.9

1,148.2

1,109.2

Tangible assets

3.3

6.9

6.9

6.9

6.9

Investments

1.0

1.0

1.0

1.0

1.0

Current assets

 

 

4.7

30.3

65.2

65.2

65.2

Stocks

-

-

0.0

0.0

0.0

Debtors

3.1

13.9

13.9

13.9

13.9

Cash

0.2

15.2

50.0

50.0

50.0

Other/ restricted cash

1.4

1.3

1.3

1.3

1.3

Current liabilities

 

 

(38.5)

(15.3)

(15.3)

(15.3)

(15.3)

Creditors

(11.3)

(15.0)

(15.0)

(15.0)

(15.0)

Short term borrowings

(27.2)

(0.4)

(0.4)

(0.4)

(0.4)

Long term liabilities

 

 

(38.2)

(123.1)

(733.2)

(657.4)

(585.8)

Long term borrowings

(10.1)

(70.6)

(530.6)

(403.0)

(278.6)

Other long term liabilities (inc. decomm.)

(28.1)

(52.5)

(202.6)

(254.4)

(307.2)

Net assets

 

 

9.2

90.2

513.6

548.6

581.3

CASH FLOW

Operating cash flow

 

 

5.1

6.9

102.6

222.2

218.4

Capex inc acquisitions

(9.2)

(93.1)

(912.5)

(23.2)

(22.4)

Other

0.1

-

-

-

-

Equity issued

-

77.0

420.0

-

-

Dividends

(1.0)

(5.8)

(35.3)

(71.5)

(71.5)

Net cash flow

(4.9)

(15.0)

(425.1)

127.5

124.4

Opening net debt/(cash)

 

 

42.8

37.1

55.8

480.9

353.4

HP finance leases initiated

-

-

-

-

-

Other

10.7

(3.8)

-

-

-

Closing net debt/(cash)

 

 

37.1

55.8

480.9

353.4

229.0

Source: Diversified Gas and Oil accounts, Edison Investment Research. Note: *company indication – net operating losses to shelter

cash tax through to 2020. Effective P&L tax rate estimated at 25%.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Diversified Gas & Oil and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Diversified Gas & Oil and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). 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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

President Energy — Argentina – material growth continues

President Energy is an oil and gas company with a diverse portfolio of operated onshore assets that is focused on growing production in Argentina in the near term. Management is targeting end-2019 production rates of around 5,000boepd from existing assets (from current rates of 2,700boepd), supported by ongoing drilling together with an active operational programme planned for H219. Further growth is expected through acquisitions in Argentina, with the addition of the Puesto Prado and Las Bases concessions adding critical mass in the Rio Negro Province, due by the end of the year. High-potential exploration opportunities are due to be drilled in Argentina and Paraguay in 2019, with farm-out processes underway in both countries.

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