(Alliance News) - Diversified Gas & Oil PLC on Tuesday said it has completed another USD200 million securities financing arrangement.
Guggenheim Securities LLC acted as sole structuring advisor and placing agent for the deal, which was the second USD200 million securitised financing arrangement for the US-based natural gas and oil well owner and operator.
The notes have a BBB investment grade rating from Fitch and a 5.25% coupon, with a 6.00% yield after an original issue discount. These are 8.5-year amortising notes and have a 17-year legal final maturity.
The notes are secured by a 29% working interest in upstream assets, with the assets having 6-year extendable hedges on around 85% of production volumes. Natural gas from these assets is hedged at USD2.40 per million thermal units. Nuveen was lead advisor on the financing.
Diversified Gas & Oil identified "key benefits" from successful financing, including that it strengthens the firm's commitment to sustaining its dividend and means that around two thirds of its debt is now in long-term, fixed rate amortising notes with long-term hedges and no redetermination risk.
Once the securitisation closes, the firm's borrowing base on its revolving credit facility will be USD425 million. The company will start its semi-annual redetermination process later in April and expects this to complete in May.
Other benefits include enhanced liquidity, now around USD200 million, and a more diversified debt structure with reduced reliance on its credit facility.
Chief Executive Rusty Hutson Junior said: "This arrangement strengthens our balance sheet and provides clear long-term visibility on hedged cash flow, both of which support our unwavering commitment to return value to shareholders through our reliable quarterly dividend.
"The strength and low-risk nature of our business model and current liquidity of nearly USD200 million ensures that [Diversified Gas & Oil] is ideally positioned to maintain its dividend, a factor that we believe to be a core pillar of our investment case, while strengthening our position in the market to opportunistically pursue prudent and accretive growth during a time when we expect significant, high-quality assets to become available at compelling valuations. It is critically important to me to position DGO to capitalise on this unique ability to grow scale and cash flows for the benefit of our dividend and shareholders."
Shares in Diversified Gas & Oil were down 2.1% at 82.92 pence in London on Wednesday morning.
By Anna Farley; annafarley@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
