LONDON (Alliance News) - Diversified Gas & Oil PLC on Tuesday said it has entered a five-year agreement with the Kentucky Department for Natural Resources to analyse and plug its non-producing wells.
Diversified Gas & Oil owns and operates a number of natural gas and oil producing assets in the US.
Having acquired Core Appalachia Holding Co LLC in October, Diversified Gas & Oil now owns and operates 60,000 gas and oil wells in the Appalachian region. Some 7,500 of these wells are in Kentucky.
Under the agreement, Diversified Gas & Oil is to assess its wells in Kentucky by the end of June, including primary analysis of its non-producing wells.
Diversified Gas & Oil must then plug 25 non-producing wells by the end of 2019 and at least 20 per annum between 2020 and 2023.
Between 2020 and 2023, Diversified Gas & Oil has also agreed to plug or return to production at least another 50 wells per annum, 30 of which can be previously non-productive wells that Diversified Gas & Oil puts back into production.
If Diversified Gas & Oil returns more than the minimum number of wells to production then it can carry forward that activity into future periods.
As part of the agreement, Diversified Gas & Oil must post a USD1.5 million bond which will be released once the company fulfils the terms of the deal.
"This is another positive agreement that underlines our commitment to responsibly managing the wells within the states in which we operate," said Diversified Gas & Oil Chief Executive Rusty Hutson.
"The agreement provides clear visibility for both the Commonwealth of Kentucky and the company on asset retirement activities across our operated wells in the Commonwealth, and we sincerely thank the regulators for their pragmatic approach during these discussions."
"We continue to move towards our objective of having the wells in our main states of operation covered by long-term agreements with the state regulators," Hutson added.
Diversified Gas & Oil has already signed "multi-year agreements" for plugging its non-producing wells in Ohio and West Virginia. These agreements cover around 60% of the firm's operated wells. It is also in the final stages of an agreement with Pennsylvania.
"[Diversified Gas & Oil] budgets annually for the number of wells it expects to plug and continues to improve cost and operational efficiencies as the company builds a growing body of asset retirement work. Similar to the efficiencies and cost synergies it realizes within its upstream operations, [Diversified Gas & Oil] expects further value realisations overtime within its plugging programmes," the company added.
Shares were 2.1% higher on Tuesday morning at a price of 119.44 pence each.
