The Board also announces that the Company has agreed in principle to acquire certain producing gas and oil assets from a major NYSE listed energy company ("the Appalachian Vendor"). The wells of both Alliance Petroleum and the Appalachian Vendor are close to the Company's existing operations in the Appalachian Basin in the eastern United States, principally in Pennsylvania and West Virginia, with some wells in Ohio.

The Alliance Petroleum Acquisition is to be acquired for a total cash consideration of US$95.0 million (£66.9 million) and the cash consideration for the Appalachian Gas Acquisition is US$85.0 million (£59.9 million).

On Completion of the Acquisitions, the Company anticipates that its total net working interest production will increase by 173 per cent. to approximately 28,133 boed, and its net working interest PDP reserves will grow by 217 per cent to 173.2 MMboe, resulting in an annualised EBITDA of US$70-75 million.

The Company is also pleased to announce an oversubscribed conditional placing of 166,400,000 new Ordinary Shares of 1 pence each (the "Placing Shares") at a price of 80 pence per share (the "Placing Price"), raising net proceeds of US$180 million (the "Placing"), to fund the Acquisitions. Mirabaud Securities LLP and Stifel Nicolaus Europe Limited were Joint Bookrunners for the Placing.

Highlights

The Acquisitions – Alliance Petroleum

·      On 31 January 2017 the Company entered into a conditional purchase and sale agreement to acquire the entire share capital of Alliance Petroleum, a subsidiary of Lake Fork Resources Acquisition Corporation (the "Alliance Petroleum Acquisition")

·      Total consideration of US$95 million (£66.9 million), comprising cash consideration of US$70 million and the assumption of US$25 million of outstanding debt, to be repaid immediately on completion of the acquisition

·      Acquiring approximately 13,000 producing, operated wells in the Appalachian Basin, principally in Pennsylvania and West Virginia and also in Ohio, in close proximity to the Company's existing operations in the eastern United States

·      PDP reserves of 49.3 MMboe and net daily production of 53 Mcfe (8.8 kboe) per day with production 99 per cent gas

The Acquisitions – the Appalachian Gas Acquisition

·      The Company has reached an agreement in principle to acquire certain producing gas and oil assets from the Appalachian Vendor, a subsidiary of a major NYSE listed energy company (the "Appalachian Gas Acquisition")

·      Total cash consideration of US$85 million (£59.9 million)

·      Acquiring approximately 11,000 producing operated wells in the Appalachian Basin, principally in Pennsylvania and West Virginia in close proximity to the Company's existing operations

·      PDP reserves of 69.3 MMboe and net daily production of 54 Mcfe (9.0 kboe) per day with production 99 per cent gas

The Placing

·      The Company has conditionally raised net proceeds of US$180 million in an oversubscribed placing, through the issue of 166,400,000 new Ordinary Shares of 1 pence each at a price of 80 pence per share

·      Net proceeds of the Placing will be used to fund the consideration for the Acquisitions

·      The Placing Price represents a 1.27 per cent premium to the mid-market closing price of 79 pence on the 30 January 2018, being the latest practicable date prior to release of this announcement

DGO CEO Rusty Hutson said: "These transformative transactions come almost exactly one year after we joined AIM.  At that time we stated that acquisitions would be a core part of our growth strategy as we capitalise on the unique opportunity presented in our region of focus.

"We have achieved significant growth since our Admission to AIM and the objectives that we set ourselves at Admission. Upon completion of these Acquisitions, DGO will be the largest producer on AIM, with a strong and stable business underpinned by low-cost production from a low-risk, long-life reserve base in a favourable operating environment.

"We are also one of a handful of UK listed independent E&Ps to pay a regular dividend, and the increased cash flow and EBITDA provided by these acquisitions will enhance our ability to return more cash to shareholders. 

“Our attention now turns to completing these transactions, leveraging our experience of integrating new assets into our portfolio, and achieving operating efficiencies and cost savings from an already low-cost base.

“We are delighted with the strong support shown during the Placing by both new and existing shareholders, and look forward to repaying their faith in the business and management team."