(Sharecast News) - Diversified Gas & Oil has signed a deal with Oaktree Capital Management for Oaktree to provide up to $1bn (£775m) for acquisitions amid stressed energy markets.
Oaktree has agreed to provide the funding over three years for mutually agreed purchases worth more than $250m each of "proved developed producing" assets. DGO and Oaktree will fund equal portions of the transactions and DGO will be the sole operator.
The FTSE 250 operator of natural gas and oil assets said Oaktree would provide 5% upfront of its funded working interest at the time of an acquisition. DGO will receive 52.5% working interest for a 50% investment and Oaktree will get 47.5% working interest for its 50% stake.
When Oaktree achieves 10% internal rate of return it will transfer 15% of its working interest to DGO and DGO's ownership will increase to 59.625%. DGO will have the right of first offer to buy Oaktrees's interest when it decides to divest.
DGO said the deal would help it complete larger acquisitions and give greater certainty to sellers about DGO's ability to fund and close deals.
DGO Chief Executive Rusty Hutson said: "We continuously evaluate various PDP asset packages and anticipate more coming to market over the near term as the prolonged lower commodity price environment and capital market conditions create an environment poised for consolidation. This agreement uniquely positions DGO and Oaktree to capture long-term value for our respective shareholders, including opportunities of a greater size than we otherwise might have approached on a stand-alone basis.
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