Diversified Gas & Oil plc, Appalachia’s largest conventional producer, has seen a significant boost in volumes after it acquired a package of unconventional shale wells from HG Energy II Appalachia LLC in the first quarter.
Production for the Alabama-based producer averaged 69,000 boe/d through the first three months of the year and was roughly in line with the company’s 2018 exit rate of 70,000 boe/d. Diversified said, however, that it continues to integrate the 100-plus shale wells it acquired from HG Energy in Pennsylvania and West Virginia into its program.
The assets produced more than 20,000 boe/d in April and boosted the company’s overall production to more than 90,000 boe/d.
Since Diversified went public two years ago on the London Stock Exchange’s AIM market for small growing companies, it has completed eight acquisitions throughout the Appalachian Basin, spending about $1 billion in the process. The company has amassed roughly 60,000 wells spread across millions of acres in Kentucky, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia. About 99% of its portfolio consists of conventional assets targeting shallower formations throughout the basin.
The company exited 2017 producing 10,400 boe/d and by mid-year 2018, before a transformative acquisition of EQT Corp.’s Huron assets that made it a leading producer in the region, Diversified was producing 19,300 boe/d.
The company has different reporting standards as it’s traded on the London Stock Exchange and delivers results from its gassy assets on a boe basis in an appeal to overseas investors more accustomed to it.
Diversified attributed its growth not just to acquisitions, but also its “Smart Well Management” program that’s geared toward managing the aggressive decline curves on its older wells and the legacy liabilities that come with them.
CEO Rusty Hutson said Diversified also sees “plenty of opportunities within our portfolio to organically grow production through various field and well-level initiatives.
Compression projects are underway to aid production on the HG assets. Enhanced compression added on two producing pads recently acquired in Pennsylvania, on which 21 wells sit, increased net production from 6,200 boe/d to 8,400 boe/d, Diversified said.
The package from HG isn’t likely to be Diversified’s last foray into Appalachia’s shale fields, as management has previously indicated that it would increasingly target older unconventional wells as they become less desirable to certain operators. Those wells, management has said, would fit nicely into the company’s strategy of operating existing assets bases to generate steady cash flow instead of spending heavily on drilling and completion operations.