Pennsylvania Asset Retirement Agreement
8 March 2019
DIVERSIFIED GAS & OIL PLC
("DGO" or the "Company")
DGO completes 15-year agreement with
the Commonwealth of Pennsylvania, Department of Environmental Protection
Diversified Gas & Oil PLC (AIM: DGOC), the U.S. based owner and operator of natural gas, natural gas liquids, and oil producing assets, is pleased to announce that it has entered into a 15-year, definitive and extendable agreement with the Commonwealth of Pennsylvania's ("Pennsylvania") Department of Environmental Protection (the "Department") setting out the Company's asset retirement obligations in Pennsylvania (the "Agreement"). DGO operates approximately 23,000 wells within Pennsylvania.
This Agreement follows on from the Company's long-term agreements previously signed with the states of Ohio, West Virginia and Kentucky that detail DGO's undertakings to return wells to production under its Smarter Well Management programme while systematically, safely and permanently plugging those wells that have reached the end of their productive life. DGO has demonstrated its ability to successfully return to production wells acquired from previous operators, which both creates long-term value for shareholders and sustains jobs and economic stimulus around these wells. Importantly, the completion of this Agreement clarifies DGO's asset retirement obligations across the four states within which it operates virtually all its wells.
Key terms of the Agreement include:
· For years 1 to 15, DGO will plug a minimum of 20 wells per annum and will either return to production using its Smarter Well Management programme or will plug an additional 30 wells, representing a total of 50 wells per annum.
· If in any year, DGO plugs or returns more wells to production than required, DGO may request to carry that additional activity forward as a credit for future annual requirements.
· By 28 February 2021, DGO will complete an assessment of its wells within Pennsylvania for which no production had been reported for calendar year 2017 ("Non-Productive Wells"), and provide a report to the Department listing those wells that DGO intends to return to production and those that it intends to plug.
· By 28 February 2024, DGO will complete a further assessment of all its other operated wells in Pennsylvania, adding if applicable any Non-Productive Wells to the list of those that it will either return to production or plug ("Additional Non-Productive Wells").
· By 28 February 2024, DGO may request to extend the term of this Agreement by five years, providing for a remaining term of 15 years, and continue to return to production or plug wells at the rate required to address any remaining of the approximately 1,400 Non-Productive Wells listed at the inception of the Agreement and, if applicable, any Additional Non-Productive Wells.
· Within 30 days following the date of the Agreement, DGO will post a $7 million bond to the benefit of Pennsylvania's Department of Environmental Protection, which the state will release following DGO's fulfillment of the Agreement's terms.
Commenting on the Agreement, Chief Executive, Rusty Hutson said: "This long-term Agreement is significant for DGO and clarifies our asset retirement obligations within Pennsylvania where we operate approximately 40% of our wells. We have invested the time necessary to negotiate an Agreement that meets the needs of Pennsylvania, the communities in which we employ its citizens and our Shareholders. This Agreement is underpinned by our unwavering commitment to vigilantly manage a best-in-class asset retirement programme.
We are pleased that this process is complete and that we have accomplished our strategy to formalize agreements with each of the principal States in which we operate including Ohio, Kentucky, West Virginia and Pennsylvania. We now have formal, multi-year agreements covering virtually all of the wells we operate, which provides us with clear asset retirement parameters within which we can budget comfortably from the stable operating cash flows we generate from approximately 70,000 barrels of daily oil equivalency production."
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
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Diversified Gas & Oil PLC Rusty Hutson Jr., Chief Executive Officer Brad Gray, Chief Operating Officer & Finance Director Eric Williams, Chief Financial Officer
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+ 1 (205) 408 0909
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Cenkos Securities plc (Nominated Adviser) Russell Cook Katy Birkin Ben Jeynes
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+44 (0)20 7397 8900 |
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Mirabaud Securities Limited (Joint Broker) Peter Krens Edward Haig-Thomas
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+44 (0)20 3167 7221 |
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Stifel Nicolaus Europe Limited (Joint Broker) Callum Stewart Nicholas Rhodes Ashton Clanfield
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+44 (0)20 7710 7600 |
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Buchanan (Financial Public Relations) Ben Romney Chris Judd Henry Wilson |
+44 20 7466 5000 |
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