Diversified Gas & Oil PLC (LON:DGOC) has told investors it maintained production levels in the first quarter and it is to pay a 3.5 cents per share dividend for the period.

In a trading update, the company said its production in the three months ended March 31, 2020, was marked at 94,000 barrels of oil equivalent per day (boepd) – 564mln cubic feet equivalent per day – helped by the group’s well management programme which offset natural declines.

Adjusted underlying earnings (EBITDA) were reported at US$78mln for the period, in line with the prior period, with sales prices supported by a hedged price of US$2.73 per mln, the group added.

READ: DGOC is ideally positioned thanks to industry leading hedge – Cenkos

The company said its total unit cash expenses in the quarter amounted to US$6.98 per oil equivalent barrel, down 22% from US$8.90 in the comparative period of 2019.

DGOC noted that its decision to maintain its dividend is in line with its commitments to shareholders. In the year to date, the company has paid US$22mln to shareholders and has completed US$16mln of share buy-backs. The company had US$190mln of current liquidity.

Later this month, DGOC is set to move its listing up from AIM to the Main Market of the London Stock Exchange.

“Navigating unprecedented market volatility and general economic uncertainty validates the business model DGO defined nearly 20 years ago. Our unwavering commitment to maintain a healthy balance sheet while protecting capital returns to shareholders through responsible and long-term hedging remains a top priority,” Rusty Hutson, DGOC chief executive said in a statement.

He added: “I’m also encouraged by the improved pricing outlook for natural gas. While oil makes up just 1% of our production, dramatically lower oil prices combined with a fundamentally changed outlook for oil has shale oil developers, particularly within the Permian Basin, moving quickly to significantly reduce spending on new shale oil wells that, as a byproduct, also produce large amounts of associated gas.

“This behavioral shift is expected to therefore reduce the supply-side of natural gas while demand remains stable despite the ongoing pandemic, benefiting from continued transition from coal to natural gas-fired electricity.”

Stockbroker Miraubaud described the first quarter trading update as “solid” despite the Covid-19 pandemic and unprecedented market volatility.

“Notably, unhedged EBITDA margins were healthy at ~41% showing the resilience of the underlying business, even at cyclical lows,” Mirabaud analyst Tim-Hurst Brown said in a note.

He added: “In a sign of management’s confidence in the outlook, the company announced a Q1 2020 dividend of 3.5c per share today, unchanged on Q4, and reiterated its commitment to being a reliable dividend payer through the cycle.

“Lastly, we note the group’s upbeat comments around the US gas macro, where the collapse in oil prices is forcing significant associated gas volumes off market, leading to a notable recovery in the gas forward curve in recent weeks.”
 

–UPDATED to add broker comments–