DGOC.L Regulatory News (DGOC)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG, JAPAN, SOUTH AFRICA, NEW ZEALAND OR SINGAPORE OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN ADMISSION DOCUMENT AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY ORDINARY SHARES IN THE CAPITAL OF THE COMPANY, NOR SHALL IT (OR ANY PART OF IT), OR THE FACT OF ITS DISTRIBUTION, FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH OR ACT AS ANY INDUCEMENT TO ENTER INTO, ANY CONTRACT OR COMMITMENT WHATSOEVER.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO.596/2014 ("MAR"). IN ADDITION, MARKET SOUNDINGS (AS DEFINED IN MAR) WERE TAKEN IN RESPECT OF CERTAIN OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH INSIDE INFORMATION, AS PERMITTED BY MAR. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

29 June 2018

Diversified Gas & Oil PLC

Placing of 195,330,000 new Ordinary Shares at 97 pence per Ordinary Shareto raise approximately $250 million

Acquisition of EQT entities holding certain gas and oil assets for $575 million

Admission of Enlarged Share Capital to trading on AIM

Diversified Gas & Oil PLC (AIM: DGOC), a US based gas and oil producer, is pleased to confirm that it has finalised the agreement to acquire entities holding certain gas and oil assets of EQT Corporation, which was announced on 14 June 2018. The Acquisition, which is subject to approval by Shareholders, has been funded through an extension to its existing Loan Facility and a Placing to raise $250 million.

The Company has today published an Admission Document with details of the EQT Acquisition and Fundraising, and expects that trading in the Company's Shares on AIM will resume at 8.00am today.

The Company confirms that it has received undertakings from Shareholders in respect of approximately 73.9 percent of its voting share capital to vote in favour of the Resolution to approve the Acquisition and to grant to the Board the relevant authorities in respect of the Placing.

Highlights:

· $575m acquisition of producing assets to materially expand the Group's operational footprint in Appalachian Basin, US

· Successful completion of Placing to raise $250m at 97p per Ordinary Share

· Transaction more than doubles production to circa 60 kboepd and increases PDP Reserves to 393 mmboe

· The pro forma uplift in 2017 EBITDA is estimated to be approximately 289%*

· The Acquisition will be immediately accretive to cash and earnings

At the Placing Price, on Admission DGO's market capitalisation is expected to be approximately $648.7 million (approximately £491.6 million).

Commenting on the Acquisition and Placing, CEO, Rusty Hutson said:

"Since our Admission to AIM in February of last year, we have grown the Company rapidly through a series of transformative acquisitions to become the largest producer on AIM. This transaction is yet another game-changer for us as we double our production once again to become one of the largest producers listed in the London market. We are delighted with the faith the market has put in our management team to deliver its growth strategy and thank the new and existing shareholders who participated in our over-subscribed placing. We look forward to completing the acquisition of these assets, integrating and optimising them within our existing portfolio, and leveraging our vastly increased financial profile to deliver reliable and sustainable returns to our shareholders through our proven dividend model."

* Based on pro forma estimate of 2017 EBITDA, including full year contributions from the Alliance Petroleum Corporation and CNX asset acquisitions.

Placing Statistics

Note: Figures are calculated based on a USD:GBP exchange rate of £1 = $1.3195 as at 27 June 2018

Overview

Diversified Gas & Oil PLC (AIM: DGOC), a US based gas and oil producer, has today announced that it has finalised the agreement to acquire entities holding certain gas and oil assets of EQT Corporation, which was announced on 14 June 2018. The Acquisition, which is subject to approval by Shareholders, has been funded through an extension to its existing Loan Facility and a Placing to raise $250 million. The Company has today published an Admission Document with details of the EQT Acquisition and Fundraising, and expects that trading in the Company's Shares on AIM will resume at 8.00am today.

The consideration for the EQT Acquisition is $575 million (approximately £435.8 million) (subject to adjustment in accordance with the terms of the EQT Acquisition Agreement). A deposit of $57.5 million has been paid and the balance of $517.5 million is to be satisfied in cash at Completion conditional on, inter alia, Shareholder approval.

Further details of the EQT Acquisition Agreement are set out in the section headed "Principal Terms of the EQT Acquisition" below and are set out in full in the Admission Document that has today been published and posted to Shareholders.

The EQT Acquisition will be funded by a combination of the Amended KeyBank Facility and the placing of 195,330,000 new Ordinary Shares to raise net proceeds of $238.8 million.

The Company has arranged a five year, senior secured credit facility of up to $1 billion from KeyBank National Association and a syndicate of lenders. It is intended that up to $600 million will be available to be drawn down at Completion to fund the EQT Acquisition, to pay related costs and to refinance indebtedness under the Existing KeyBank Facility.

In addition, the Company has conditionally raised $250.0 million (approximately £189.5 million) by the proposed issue of 195,330,000 new Ordinary Shares pursuant to the Placing at 97p per Placing Share. The Placing Price represents a premium of approximately 3.0 per cent. to the Company's closing mid-market price of 94.2p on 13 June 2018 being the date prior to which the Existing Ordinary Shares were suspended from trading on AIM pending publication of an admission document. At the Placing Price, on Admission DGO's market capitalisation is expected to be approximately $648.7 million (approximately £491.6 million).

Application will be made for the Placing Shares to be admitted to trading on AIM, subject to the passing of the Resolutions. It is expected that Admission will take place, and dealings in the Enlarged Share Capital (including the Placing Shares) will commence on AIM, on 17 July 2018.

As a consequence of the Acquisition and Placing, the interim dividend of 1.725 cents in respect of the first quarter to 31 March 2018 announced by the Company on 29 May 2018, will be paid on 24 September 2018 to those Shareholders on the register on 13 July 2018. Holders of Placing Shares will be fully entitled to all dividends declared following Admission.

In view of the size of the EQT Assets relative to the Company, the EQT Acquisition constitutes a reverse takeover of DGO under Rule 14 of the AIM Rules for Companies and accordingly the Existing Ordinary Shares were suspended from trading on AIM on 14 June 2018 pending publication of the Admission Document. Trading in the Existing Ordinary Shares is expected to be restored from 8.00am today.

The issue of the Placing Shares is conditional, inter alia, on the passing of the Resolutions at the General Meeting. Under the AIM Rules, the EQT Acquisition requires the prior approval of a majority of Shareholders voting on an ordinary resolution to be put to Shareholders at a general meeting, notice of which is set out at the end of this document.

Further information about the EQT Acquisition, the Fundraising and the Company's current trading and prospects is set out in the Admission Document. The Admission Document, together with further additional information about the Company and its assets, financial information and constitutional documents can be found on the Company's website at: www.dgoc.com.

Background to, and reasons for, the EQT Acquisition

The EQT Acquisition will increase proved developed producing reserves by approximately 230 mmboe to 393 mmboe and the Company will be producing from licences held by production over a total area of approximately 6.5 million acres, an increase of some 63 per cent.

The production figures in the table below show barrel of oil equivalent per day (boepd) for the Enlarged Group on a pro-forma basis:

* DGO production numbers are stated on a pro forma basis including production from the Alliance Petroleum Acquisition and CNX Acquisition in March 2018

** Net production is stated after working interest and royalty adjustments as at 31 December 2017

The following information has been extracted from the Unaudited Pro Forma Financial Information set out in Part IV of the Admission Document and illustrates the impact of the EQT Acquisition on the Enlarged Group:

Further details of the EQT Assets are set out below.

Principal Terms of the EQT Acquisition

On 28 June 2018, the Company entered into the EQT Acquisition Agreement, with an effective date of 1 April 2018, pursuant to which DGO Corp, a wholly owned subsidiary of the Company, conditionally agreed to acquire all of the issued and outstanding membership interests of two new entities, Diversified Southern Production and Diversified Southern Midstream, which will own the EQT Assets. The consideration payable by DGO Corp is $575 million, of which $57.5 million (the "Deposit") has been paid as an on-risk deposit and the balance of $517.5 million is to be satisfied entirely in cash at Completion (subject to adjustment post Completion in accordance with the terms of the EQT Acquisition Agreement taking into account, inter alia, cash generated since the effective date of 1 April 2018).

The EQT Acquisition Agreement includes the requirement for DGO Corp or one of its affiliates to hire all of the EQT Employees (as defined below). For a period of one year immediately following Completion, DGO Corp must offer (or cause one of its affiliates to offer) the EQT Employees compensation (including base salary or wage rate, variable compensation opportunity and long term incentive opportunity) with a value no less than that provided to such employees immediately prior to Completion and other employee benefits no less favourable in the aggregate than those provided to DGO Corp's similarly situated employees. Post Completion, the Directors expect that DGO Corp will employ approximately a further 250 employees of EQT, comprising operational employees located in the gas fields and administrative employees located in various corporate and support offices (the "EQT Employees").

DGO Corp is not acquiring the rights to the deeper unconventional horizons in the acquired acreage.

The EQT Acquisition Agreement is capable of termination by DGO Corp prior to Completion if Completion has not occurred by 31 July 2018 (unless Completion has failed to occur as of such date as a result of a breach by DGO Corp of its representations or warranties or the failure to perform its covenants and agreements under the EQT Acquisition Agreement).

If Completion does not occur by 31 July 2018 due to a breach by DGO Corp of its obligation to close the EQT Acquisition Agreement, then the Sellers shall be entitled to elect to terminate the EQT Acquisition Agreement and retain the Deposit. If Completion does not occur by 31 July 2018 due to a breach by the Sellers of their obligation to close the EQT Acquisition Agreement, then DGO Corp shall be entitled to elect either to (i) seek specific performance or (ii) terminate the EQT Acquisition Agreement, have the Deposit returned by the Sellers.

As the EQT Acquisition constitutes a reverse takeover under the AIM Rules, Shareholder approval is required.

Information on the EQT Assets

The EQT Assets comprise approximately 11,250 producing gas wells located in the states of Kentucky, West Virginia and Virginia, close to the Group's existing operations in the Appalachian Basin in the northeastern United States, principally in the states of Ohio, Pennsylvania, West Virginia and northeast Tennessee.

The EQT Assets also include a wholly-owned midstream gathering and compression system with approximately 6,400 miles of pipeline and 59 compressor stations located in Kentucky, Virginia, and West Virginia. This system is used to gather all of the EQT Assets' current production, reducing the gathering expense as compared to using a third party midstream operator. In addition to the EQT Assets' volumes, third party volumes are also gathered through the system through long-term gathering and compression arrangements, enhancing system economics.

The size of the pipeline varies from 2-inch to as large as 30-inch. The purpose of the system is to primarily gather the gas from the wells comprising the EQT Assets in the Pikeville Area along with some third party gas from other operators and deliver the volumes to an NGL processing plant in Langley, Kentucky. Currently, the EQT Assets allow delivery of approximately 100 mmcf/d to Langley to be processed for NGLs. The Langley processing plant allows NGLs to be separated from the high btu gas produced by the EQT Assets which is then sold at a premium as compared to unprocessed gas. The gathering system is also located in several of the other key areas in order to gather and compress the gas from the wells of the EQT Assets that do not require processing at Langley and deliver those volumes to the interconnections for marketing.1 The table below sets out detail on the wells by state comprising the EQT Assets and the relative total proved reserve figures:

Source: EQT Assets Competent Person's Report set out in the Admission Document

Across all wells the average working interest is approximately 95 per cent., while the overall average net revenue interest is approximately 88 per cent. The average royalty rate is approximately 7.4 per cent. There are approximately 3,500 properties that include the royalty interest.

The EQT Assets consist of approximately 230 mmboe of proved developed producing reserves with a pre-tax PV10 of $804 million and a post-tax NPV10 of $661 million as reported on by Wright & Co in the EQT Assets Competent Person's Report in Part V of this document. The reserves are characterised by an average well life of approximately 50 years and a predictable production profile which declined approximately 5 per cent. per annum between 2011 and 2017. In addition, the EQT Assets include a significant NGL and liquids component representing approximately 24 per cent. of total proved developed producing reserves and accounting for approximately 23 per cent. of 2017 production. The gas produced from the EQT Assets has an average calorific value of approximately 1,170 btu, which allows the EQT Assets to achieve a higher realised gas price as compared to similar assets with a lower gas btu content.

As with DGO's existing asset base, numerous wells comprising the EQT Assets are completed in multiple formations and production is commingled in the wellbore. Most of these properties may have additional productive formations up-hole from the existing producing formations, which may allow for future completion opportunities. Drilling and recompletion opportunities are considered to be relatively low risk, due to the geology and the extensive mapping of the formations.

Detailed information on the EQT Assets is set out in the EQT Assets Competent Person's Report contained in the Admission Document.

Details of the Fundraising and Use of Proceeds

The EQT Acquisition will be funded by a combination of draw down under the Amended KeyBank Facility and the net proceeds of the Placing.

Existing bank facilities

As at the date of this announcement, and excluding the funds available for draw down under the Amended KeyBank Facility Agreement, the Group currently has in place a $500 million, five-year senior secured revolving credit facility (the "Existing KeyBank Facility") with a syndicate of seven US banks, led by KeyBank National Association ("KeyBank"). The syndicate comprises KeyBank, Huntington National Bank, Citizens Bank, N.A., Branch Banking and Trust Company, Iberia Bank, CIT Bank, N.A. and First Tennessee Bank, N.A.

The Existing KeyBank Facility was subject to an initial borrowing limit of $140 million in conjunction with the closing of the Alliance Petroleum Acquisition, increasing to $200 million following closing of the CNX Acquisition.

The Existing KeyBank Facility has an initial interest rate of LIBOR plus 2.50 per cent. The interest rate on the Existing KeyBank Facility is subject to a pricing grid that fluctuates based upon utilisation from a pricing of LIBOR plus 2.25 per cent. to 3.25 per cent.

The Group has in place total borrowings, as at the date of this document, of approximately $92 million.

Amended KeyBank Facility Agreement

The Company has arranged a five year, senior secured credit facility of up to $1 billion from KeyBank and a syndicate of lenders. It is intended that up to $600 million will be available to be drawn down at Completion to fund the EQT Acquisition, to pay related closing costs and to refinance indebtedness under the Existing KeyBank Facility.

The Amended KeyBank Facility Agreement stipulates that the loan proceeds are to be utilised for the EQT Acquisition, refinancing of the Existing KeyBank Facility, capital expenditures programme, working capital and transaction costs. The Amended KeyBank Facility Agreement has an interest rate of LIBOR plus a margin based on a pricing grid of 2.25 per cent. to 3.25 per cent. based upon utilisation.

The Amended KeyBank Facility Agreement is subject to, inter alia, the following conditions precedent:

(i) the Company having received cash proceeds of a minimum of $180 million through the Placing;

(ii) satisfactory completion of acquisition, financial, legal, collateral and commercial due diligence; and

(iii) evidence that the Company has minimum availability under the borrowing base of not less than 15 per cent. as of the closing date of the Amended KeyBank Facility.

The Amended KeyBank Facility Agreement contains standard representations and warranties, affirmative and negative covenants and events of defaults, including financial reporting requirements (e.g. annual audited financial statements, quarterly unaudited financial statements, compliance certificates, financial plans, reserve reports and information regarding oil and gas properties) and performance covenants (e.g. total leverage ratio and current ratio) all of which shall be comparable to those contained in the Existing KeyBank Facility).

Placing

The Company has conditionally raised $250.0 million (approximately £189.5 million), before expenses ($238.8 million (£181.0 million) net of the Placing expenses) through the Placing being undertaken by Mirabaud and Stifel of 195,330,000 Placing Shares at 97 pence per Placing Share from certain existing and new institutional investors.

The issue of the Placing Shares is conditional, inter alia, on the passing of the Resolutions at the General Meeting.

The Placing Price represents a premium of approximately 3.0 per cent. to the Company's closing mid-market price of 94.2p on 13 June 2018 being the date prior to which the Existing Ordinary Shares were suspended from trading on AIM pending publication of this document. At the Placing Price, DGO is valued at approximately $648.7 million (approximately £491.6 million). The Placing Shares will represent approximately 38.5 per cent. of the Enlarged Share Capital on Admission.

Directors Martin Thomas and David Johnson have agreed to subscribe for 25,000 and 50,000 Placing Shares, respectively. Immediately following Admission, the Board and their immediate families are expected to hold in aggregate 44,485,481 Ordinary Shares amounting to approximately 8.78 per cent. of the Enlarged Share Capital on Admission.

On 28 June 2018, the Company, the Directors, Mirabaud, Stifel and Smith & Williamson entered into the Placing Agreement pursuant to which each of Mirabaud and Stifel agreed, subject to certain conditions, to use its reasonable endeavours to procure subscribers for the Placing Shares pursuant to the Placing. Each of Mirabaud and Stifel is accepting settlement risk on the Placees procured by each of them.

The Placing of the Placing Shares is conditional, inter alia, upon:

(i) the passing of the Resolutions to be proposed at the General Meeting;

(ii) compliance by the Company in all material respects with its obligations under the Placing Agreement;

(iii) the EQT Acquisition Agreement having been duly executed by the parties; and

(iv) Admission having occurred by not later than 8.00 a.m. on 17 July 2018.

Under the Placing Agreement, which may be terminated by Mirabaud, Stifel and Smith & Williamson in certain circumstances (including force majeure) prior to Admission, the Company and the Directors have given certain warranties and indemnities to Mirabaud, Stifel and Smith & Williamson concerning, inter alia, the accuracy of the information contained in this document.

Dealings in the Existing Ordinary Shares are expected to recommence on publication of this document.

As a consequence of the EQT Acquisition constituting a reverse takeover, the Company is required to apply for readmission to AIM as the Enlarged Group. Therefore, application will be made for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Enlarged Share Capital including the Placing Shares will commence on AIM on 17 July 2018. The Placing Shares will rank, on issue, pari passu, in all respects with the Existing Ordinary Shares including the right to receive all dividends and distributions paid or made in respect of the Ordinary Shares after Admission. The Placing Shares will be issued free from all liens, charges and encumbrances.

In the case of Placees requesting their Placing Shares in uncertificated form, it is expected that the appropriate CREST accounts will be credited with the Placing Shares comprising their Placing participation with effect from 17 July 2018.

For those Placees who have requested their Placing Shares in certificated form it is expected that certificates in respect of such shares will be despatched by post not later than 1 August 2018. Pending despatch of definitive share certificates or crediting of CREST accounts, the Company's registrars will certify any instrument of transfer against the register.

Use of proceeds

The net proceeds of the Placing together with the draw down under the Amended KeyBank Facility Agreement, totalling $606.3 million (approximately £459.5 million), will be used to fund the Consideration for the EQT Acquisition, costs of the EQT Acquisition and Admission and working capital requirements of the Group, as follows:

Information on the Group

DGO's assets

DGO's current activities comprise the development and operation of over 40,000 primarily conventional natural gas and oil assets in the Appalachian Basin in the northeastern United States.

The Group has an experienced operating team managing all of the wells and has grown significantly since its formation in 2001, primarily through the acquisition of producing assets with some drilling of existing leases. The Company has an experienced management team with proven ability to drive operational efficiency, creating opportunities for additional value for Shareholders even in a low commodity price cycle

As at the date of this document, DGO has total proved reserves of gas of approximately 934,770 mmcf (all producing), oil reserves of approximately 3,796 mbbl (all producing) and NGL reserves of approximately 3,217 mbbl (all producing). Current daily net gas production is running at approximately 26,986 boepd, NGL production at approximately 287 boepd and oil production at approximately 797 bopd, making the Group the largest gas and oil producer on AIM. The Group has approximately 4 million acres under lease which are all held by production ("HBP"). HBP means that the lease does not expire as long as the land is still producing. The overall average working interest for DGO's existing assets is approximately 87 per cent., the overall average net revenue interest is approximately 76 per cent. and the average royalty rate is approximately 11 per cent.

The Group's assets provide:

- predictable and consistent production profile;

- a typical life span of over 50 years;

- proven low decline rates;

- low operational costs; and

- low operational risks and production concentration

Appalachian Basin

The Appalachian Basin covers an area of some 185,500 square miles. Whilst the area has come to prominence in recent years following the discovery of significant shale gas reserves since 2009, known as the Utica and Marcellus Shales, it has been a major producer of oil and gas from conventional vertical well development since the late 19th century, making it the oldest producing basin within the United States.

The depositions for the Appalachian Basin are the erosional sediments from the once Acadian Mountains into the lower basin. The basin was limited to the west by the Cincinnati Arch. As the mountains eroded over time, the sediment was deposited in the basin with alternating layers of carbonates, limestones, sandstone, siltstone, and shale intervals.

The oil and gas industry started in the basin in 1859 with the discovery of oil in the Edwin Drake well located in northwestern Pennsylvania. Oil in this well was produced from the Upper Devonian sandstone at a depth of approximately 70 feet. This discovery well opened a trend of oil and gas fields producing from the Upper Devonian, Mississippian, and Pennsylvanian sandstones across many parts of the states of Kentucky, New York, Ohio, Pennsylvania and West Virginia.

Acquisition and consolidation strategy

The Ordinary Shares were admitted to trading on AIM on 3 February 2017. The Company's stated strategy for growth includes:

(i) acquisition and consolidation of other gas and oil producing assets;

(ii) driving further expense leverage;

(iii) improving the productivity of existing wells; and

(iv) further in-fill drilling of its current acreage position as and when commodity prices provide for drilling returns on capital employed that meet or exceed returns available through the acquisition of producing assets.

The Company has capitalised upon opportunities to acquire conventional, mature, low risk oil and gas producing assets from (i) large and established exploration and production ("E&P") companies with an increasing focus upon shale reserves, which are seeking to reduce operating expenses and non-core assets to concentrate resources upon their shale extraction activities and (ii) financially distressed companies which have been exposed to declining returns from depressed energy prices and lack economies of scale. The Company is well positioned to acquire further conventional assets and intends to continue its growth strategy through the acquisition of proven producing assets in and around its current areas of operation.

Recent advances in shale production have caused a significant shift in emphasis of many US investors and US domestic E&P companies in the USA, resulting in conventional, mature gas and oil assets becoming available at reasonable prices to credible and proven operators who can maintain production from the conventional reservoirs and in doing so, retain the HBP rights to the shale licences on behalf of the seller. The Directors believe that value accretive opportunities lie in field optimisation and the application of optimised production techniques used across the existing portfolio. The Company has a proven track record in reducing the operating costs of acquired assets through the implementation of operating and financial efficiencies. This combined with the Company's low cost corporate structure gives DGO a competitive advantage over its peers.

After purchasing existing conventional wells, the Group accelerates or extends production by refreshing decayed infrastructure on poorly maintained wells. Typical conventional wells that are in production for over five years (mature wells) have an average 3-5 per cent. annual decline rate. The Group accelerates or extends production by repairing lines, recompleting wells, reconnecting wells, swabbing wells and adding or optimising compression.

The Board continues to identify attractive acquisition and investment opportunities to purchase additional producing assets in or around the Group's existing footprint, although future acquisitions could fall outside of the states in which it currently operates. Sustained low oil and natural gas prices continue to result in companies divesting non-core and distressed assets, and the Group continues to explore these opportunities. Any additional assets purchased are expected to complement the Group's existing portfolio and provide an increase in revenue and net cash flow.

The Company has identified further significant acquisition opportunities which the Directors anticipate could culminate in one or more corporate transactions in the current financial year.

Recent acquisition history

The Company has a track record of successfully sourcing, financing and closing acquisitions. Since the February 2017 Admission, the Company has completed five acquisitions with an aggregate consideration of approximately $269 million. These acquisitions have added significant, long-life production volume and cash flows

EnerVest acquisition

In line with its stated strategy, on 24 February 2017, DGO announced the acquisition of a package of approximately 1,300 producing gas and oil wells in the states of Ohio and Pennsylvania, from EnerVest Ltd, for a total cash consideration of $1.75 million, funded from the Company's existing cash resources. Following completion of the acquisition on 18 April 2017, DGO had total daily gas production of approximately 3,800 boepd and oil production of 585 bopd, representing a 14 per cent. increase in gas production and a 23 per cent. increase in current oil production from the position on admission to AIM.

Titan Acquisition

The Board identified the Titan Assets, and the Company entered into the Titan Acquisition Agreement in June 2017 for a consideration of $84.2 million (approximately £66.1 million) (subject to adjustment in accordance with the terms of the Titan Acquisition Agreement), satisfied in cash at completion. The Titan Acquisition constituted a reverse takeover under the AIM Rules and was approved by Shareholders on 30 June 2017.

Daily gas production from the Titan Assets at the time of the acquisition was approximately 12,500 gross boepd (6,550 net boepd) and oil production was 380 gross bopd (266 net bopd). The Titan Acquisition more than tripled DGO's gross gas production, to approximately 17,367 boepd, and increased gross oil production by 69 per cent. to approximately 930 bopd. Overall gross production increased from approximately 5,400 boepd to 18,300 boepd. The wells comprising the Titan Assets were immediately accretive to cash and earnings.

NGO Acquisition

On 1 December 2017, the Company announced the acquisition of 550 wells in central Ohio from NGO for consideration of $3.1 million met in cash from the Company's existing cash resources. Net production of the acquired wells was approximately 1,300 mcfed or 220 boepd. The NGO Acquisition was immediately accretive to operating cash flow and consistent with the Company's acquisition criteria.

Aliance Petroleum and CNX Acquisitions

On 31 January 2018, the Company announced that DGO Corp had entered into a conditional sale and purchase agreement to acquire Alliance Petroleum Corporation, a subsidiary of Lake Fork Resources Acquisition Corporation ("LFRA"), pursuant to which DGO Corp agreed to purchase all of the outstanding shares of Alliance Petroleum.

The total consideration for the Alliance Petroleum Acquisition was $95.0 million (£66.9 million) comprising the purchase price of $70.0 million (£49.3 million), plus repayment of certain debts of Alliance Petroleum Corporation in the amount of $25.0 million (approximately £17.6 million), which was satisfied in cash at completion. The purchase price for the Alliance Petroleum Acquisition was subject to adjustment in accordance with the terms of the Alliance Petroleum Acquisition Agreement. The Alliance Petroleum Acquisition was completed on 8 March 2018 with an effective date of 1 March 2018.

The assets acquired as part of the Alliance Petroleum Acquisition comprised approximately 13,000 producing gas wells located close to the Company's existing operations in the Appalachian Basin principally in Pennsylvania and West Virginia, with some wells in Ohio. At the time of the Alliance Petroleum Acquisition, Alliance Petroleum Corporation had proven reserves of approximately 49.3 mmboe with an estimated PV10 of $168 million (£118.3 million), as estimated by Wright & Co., the Company's independent reserves auditor. Net daily production was approximately 53 mcfed (8,800 boed) at the time of the Alliance Petroleum Acquisition. Based on trading in the 11 months to 30 November 2017, Alliance Petroleum generated unaudited annualised pre-tax profits of $13.5 million (£9.5 million).

In addition, on 31 January 2018, the Company announced that DGO Corp had agreed in principle the terms of a sale and purchase agreement for the conditional acquisition of certain oil and gas leaseholds, wells, working interests, licenses, related equipment and other assets. On 9 February 2018, the Company announced that it had entered into a conditional sale and purchase agreement with CNX.

The consideration for the CNX Acquisition was $85.0 million (approximately £59.9 million), payable in cash on completion (subject to adjustment in accordance with the terms of the CNX Acquisition Agreement). The CNX Acquisition completed on 29 March 2018.

The acquired CNX Assets comprised approximately 11,000 producing gas wells, located close to the Company's existing operations in the Appalachian Basin, principally in Pennsylvania and West Virginia as well as related equipment and other assets. At the time of the CNX Acquisition, these assets had proven reserves of approximately 69.3 mmboe with an NPV10 of $178 million (£125.4 million) as estimated by Wright & Co. Net daily production was approximately 54 mcfed (9,000 boed) at the time of the CNX Acquisition. Subsequent to the purchase of the CNX Assets, CNX agreed to retain a monthly tariff obligation applicable to the CNX Assets that requires monthly cash payments to a pipeline transmission company until calendar year 2022. Tariff payments from the effective date of the purchase through to their expiration in 2022 totalled $27 million. In exchange for CNX retaining this $27 million pipeline tariff obligation, the Company paid CNX $17 million. This one-off payment allows DGO to retain complete and uninterrupted access to the applicable pipeline system and eliminates the $27 million tariffs the Company would have paid over the remaining term. In the 12 months to 31 December 2017 the CNX Assets are estimated to have generated operating profits of approximately $14.5 million (£10.2 million).

Drilling strategy

The Board also believes that the Group's current acreage position has potential for horizontal development in the conventional formations. This opportunity has been tested in other areas of the Appalachian Basin. As the technology continues to develop, the Board will review this approach for future development of reserves. The Group has not drilled a new development well since 2014 and has no current plans to do so, instead focusing on acquisitions which offer superior return profiles in the current commodity price environment. However, as and when commodity prices provide for drilling returns on capital employed that meet or exceed returns available through the acquisition of producing assets, the Group will evaluate its drilling strategy.

The NYMEX gas price has traded in the range of $2.55 and $3.51/mcf in the last six months. Increases in average long term gas prices will present opportunities for the Company to infill drill its reserves. The Directors believe a new well can generate an internal rate of return ("IRR") of up to 20 per cent. at current price levels; as prices increase, the IRR will improve. The Board estimates that if wellhead gas prices increase to over $3.50/mcf the average IRR per new well could reach 30 per cent. at which level infill drilling could compete for capital allocation within the Company's budget.

Given the Group's recent acquisitive focus, further technical work will need to be completed to establish the value of the Group's undeveloped acreage.

Pricing strategy

The Company has the experience to manage the issues caused by volatile oil and gas prices, which can be influenced by other global trends as well as local supply and demand factors. To protect its revenue, the Group utilises hedging strategies as well as forward fixed pricing purchase contracts with natural gas purchasers. The Company has entered into a variety of hedging and fixed price sale contracts for oil and gas production providing a degree of downside protection on revenues between 2018 and 2020 (calendar years). Through financial hedges, the Group has hedged approximately 35 per cent. of its commodity price exposure for gas production and 87 per cent. of its price exposure for oil production for 2018. Through fixed price contracts, the Group has protected approximately 50 per cent. of its net market price received for gas production in 2018.

Under the terms of the Amended KeyBank Facility Agreement, the Company is required to hedge 75 per cent. of projected PDP production for the 36 months following Completion. The Board has therefore committed to this hedging strategy following Admission.

The Company continues to invest in the appropriate capital infrastructure both at the well head, through the extensive network of Company owned pipeline, and at pumping and compression sites. DGO's operational structure enables it to generate significant operating free cash flow, even in the current low energy price environment, with an average operating cost in 2017 equivalent to $6.50/boe, falling to $5.50/boe after the completion of the Alliance Petroleum Acquisition and the CNX Acquisition

Distribution

DGO sells natural gas directly into the local market. DGO's customers are large regional utility companies and pipeline marketing companies that have operated in its markets for extensive periods. DGO's customers have been purchasing natural gas from DGO's producing assets for numerous years. DGO's producing wells have direct connections into the gathering pipeline systems of these large regional utilities and pipeline companies.

A significant portion of DGO's gas production is currently sold at a fixed price to DGO's largest buyer. The price for the sale of natural gas is a blended rate of this fixed rate and the current NYMEX index price. Revenues are generally received 30 to 60 days following the gas entering the local transmission pipelines. A supply relationship with DGO's largest buyer has been in existence for multiple years. DGO also sells natural gas to other large local natural gas utility companies.

Oil is sold by DGO to local distributors who collect the oil from production sites by way of collection vehicles and then sell on to the local oil refineries. Revenue is recognised at collection when the responsibility for the product is transferred to the distributor. Pricing for crude oil sales is typically determined based on the market price of West Texas Intermediate crude oil ("WTI") for the day the oil is collected.

Reserves

Since 2009, the primary target of the Appalachian Basin for most companies operating in the area has been the horizontal drilling of the Marcellus and the Utica shale formations. These horizontal wells have long laterals that allow more contact with the reservoirs. Large hydraulic fracture treatments are needed in order to make these commercial.

DGO's core focus continues to be conventional production in the Appalachian Basin from established conventional vertical wells. Presently, most of the properties owned and/or operated by DGO are vertical wells. The wells are shallow at depths ranging from 2,200 feet to 6,000 feet. A number of the DGO wells are completed in multiple formations and production is commingled in the wellbore. Most of these properties may have additional productive formations up-hole from the existing producing formations, which may allow for future completion opportunities. These assets have been reported upon by Wright & Co in the DGO Competent Person's Report set out in Part V of this document. In the opinion of Wright & Co., drilling and recompletion opportunities are relatively low risk, due to the geology and the extensive mapping of the formations. Drilling is relatively straight forward, quick to execute and low cost with wells costing approximately $300,000 each.

The production profiles of the wells across these formations demonstrate very similar characteristics. Most of these formations produce gas and/or oil on a hyperbolic curve with an initial rapid decline followed by gradual decline of production over a very long time. This enables the Company to predict and plan with a high level of confidence the future production profile of its producing assets

A majority of the wells are expected to have production lives of at least 50 years, with some lasting in excess of 80 years. These wells produce very little, if any, water.

Total proved reserves for the Enlarged Group, following Completion, will comprise:

Net gas reserves 1,983,501 mmcf 330,584 mboe

Net NGL reserves 57,449 mbbl 57,449 mboe

Net oil reserves 5,248 mbbl 5,248 mboe

Total 393,281 mboe

The aggregate valuation of the total proved existing reserves of the Enlarged Group is $1.388 billion (pre-tax PV10) and $1.145 billion (post-tax NPV10) as reported on by Wright & Co in the DGO Competent Person's Report and EQT Assets Competent Person's Report in Part V of this document.

The valuation set out in the Competent Person's Reports is based only on proved reserves and does not take into account the further probable or possible reserves of the Enlarged Group.

The Investment Opportunity

DGO represents a unique investment opportunity within the E&P sector of the US oil and gas industry. As many US oil and gas investments are primarily focused on companies targeting shale formation drilling prospects, DGO differentiates itself by offering Shareholders existing, consistent production and cash flows. Additionally, DGO's growth strategy, which is the acquisition of proven production at historically low valuations, provides an attractive investment upside with the opportunity for both increasing dividend yields and capital price appreciation.

The Directors believe that there are a numbers of factors which differentiate DGO from other companies in the market:

• Cash flow and strong EBITDA margins create opportunities with a commitment from the Board to return not less than 40 per cent. of free cash flow to Shareholders by way of a dividend.

• Larger public and private E&P companies are selling conventional and mature assets to focus their investment capital on shale development which continues to provide a robust inventory of growth opportunities for the Company.

• The larger US shale focused E&P companies are seeking buyers for their conventional and mature assets that are proven and competent operators. The competency of the buyer is an important factor for these companies because the continuation of HBP production from the conventional assets protects the future drilling opportunity for the deeper shale formations retained by the E&P vendors.

• DGO has a successful track record for safely operating acquired wells whilst also successfully integrating assets and employees into its existing operations.

• DGO has a track record of successfully sourcing, financing and closing acquisitions with the most recent acquisition closing in late March 2018. DGO has completed five progressively larger acquisitions for an aggregate consideration of approximately $269 million since admission to AIM in February 2017.

• DGO's experienced management team and its proven ability to drive operational efficiency creates opportunities for additional value.

• DGO's assets have the following attributes:

- predictable and consistent production profile;

- typical life span of over 50 years;

- proven low decline rates;

- low operational costs; and

- minimal operational risks and production concentration.

• As at the date of this document, the Group has approximately 4 million acres under lease which are all HBP. This expansive leasehold interest provides DGO the flexibility to develop new production through drilling at favourable rates of return when commodity prices provide for drilling returns on capital employed that meet or exceed returns available through the acquisition of producing assets.

Directors and Senior Management

Board

The Board comprises two executive Directors and three non-executive Directors. There are no proposed changes to the structure of the Board as a result of the EQT Acquisition.

Robert Marshall Post, (61), Non-Executive Chairman

Robert joined Diversified Gas & Oil in 2005 and became a 50 per cent. shareholder with Rusty Hutson Jr. Robert was previously Controller for Whiting Corporation for three years until he purchased TramBeam, an overhead crane company, from Whiting Corporation and owned and operated the business for 20 years. Robert sold TramBeam to a London based corporation, FKI Industries, in 2002. He has a B.S. degree in Accounting (Finance minor) from Jacksonville State University - Alabama. Given his major interest in Ordinary Shares, Robert is not considered by the Board to be independent.

Robert "Rusty" Russell Hutson Jr., (49), Chief Executive Officer

Rusty is the fourth generation of his family to be involved in the oil and gas industry but the first to hold an executive role. Rusty's Father, Grandfather and Great Grandfather all worked in various field operational roles within the industry. Prior to founding Diversified Gas & Oil in 2001, Rusty held finance and accounting roles for 13 years at Bank One (Columbus, Ohio) and Compass Bank (Birmingham, Alabama). He finished his banking career as CFO of Compass Financial Services. Rusty has a B.S. degree in Accounting from Fairmont State College - West Virginia. He is a former certified public accountant ("CPA") (Ohio).

Bradley Grafton Gray, (49), Finance Director and US Chief Operating Officer

Prior to joining the Company in October 2016, Brad held the position of Senior Vice President and Chief Financial Officer for Royal Cup, Inc., a United States based commercial coffee roaster and wholesale distributor of tea and other beverage related products. Prior to Royal Cup, Inc., from 2006 to 2014, Brad worked in the petroleum distribution industry for The McPherson Companies, Inc. and held the position of Executive Vice President and Chief Financial Officer. Additionally, from 1997 to 2006, Brad worked in various financial and operational roles with Saks Incorporated, a previously listed New York Stock Exchange retail group in the United States. Brad began his career at Arthur Andersen, has a B.S. degree in Accounting from the University of Alabama and is a licensed CPA (Alabama).

David Edward Johnson, (58), Senior Independent Non-executive Director

David has enjoyed a long and successful career in the investment sector. He has worked at a number of leading City investment houses, as both an investment analyst and more recently in equity sales and investment management. During his career David has worked for Sun Life Assurance, Henderson Crosthwaite and Investec Securities. David joined Panmure Gordon & Co in 2004 where he worked until 2013, including as Head of Sales from 2006 and then Head of Equities from 2009. David joined Chelverton Asset Management in 2014 where he had specific responsibility for the Group's private equity investments.

David is a non-executive director of AIM quoted Bilby plc, a holding company providing a platform for strategic acquisitions in the gas heating and general building services industries. David is considered by the Board to be independent.

Martin Keith Thomas, (54), Independent Non-executive Director

Martin is a corporate partner heading up the capital markets practice at Wedlake Bell LLP in London. Martin specialises in advising on IPOs and secondary offerings of equity and debt on the London capital markets, corporate finance and M&A work, including cross-border and domestic acquisitions and disposals, joint ventures and private equity transactions. Previously named one of The Lawyer's "UK Hot 100 Lawyers" and ranked by both Chambers and Partners and Legal 500, Martin advises clients operating in a variety of sectors, including oil and gas, renewable energy, natural resources and mining, climate change, financial services and early stage technology. During his legal career of 30 years, Martin has also held senior management positions including seven years as the European Managing Partner of a global law firm headquartered in the United States and was most recently a corporate partner at Watson Farley & Williams LLP in London. Martin is considered by the Board to be Independent.

Senior Management

Eric Michael Williams CPA, (40), Chief Financial Officer

Eric joined the Company in July 2017 from Callon Petroleum (NYSE: CPE) ("Callon"), an oil and gas company with annual revenues of $200 million, where he was Manager of Finance and responsible for the company's investor relations and related corporate finance activities.

During Eric's more than seven years with Callon, the company grew significantly from a market capitalisation of $40 million, to over $3.5 billion, successfully transforming itself from a deep-water, non-operational company to an onshore, pure-play Permian Basin operator. He was instrumental in enhancing and developing the financial reporting streams and establishing a formal investor relations function as Callon's communications requirements increased. Eric began his career in the Birmingham, Alabama office of PWC. Prior to his time at Callon, Eric's career included various audit, accounting and financial reporting roles with several US publicly traded companies.

Bryan Keith Berry, (48), Vice President of Finance

Bryan joined the Company from Arlington Capital Advisors and is focused on analysis of the Company's transaction opportunities, financial planning and analysis of the Company's operations. Bryan has over 20 years of experience in corporate finance, investment banking and public accounting. Prior to Arlington, Bryan was Vice President of Financial Planning and Analysis at Colonial Properties Trust, a Real Estate Investment Trust with over $4 billion in assets. During his tenure at Colonial Properties Trust, Colonial acquired, developed or disposed of over $1.5 billion in assets. Additionally, Bryan was latterly Director of Financial Planning at Saks Incorporated, a Fortune 500 retail company, having worked at Saks between 1998 and 2007. Bryan began his career in public accounting at Deloitte.

Michael Walton Garrett, CPA, (36) Vice President of Accounting and Financial Controller

Michael joined the Company from Callon, an independent energy company focused on oil and gas properties in the Permian Basin, and is responsible for supporting the finance team. Michael's responsibilities include accounting operations and financial reporting and, prior to his time at Callon, Michael worked for Pfizer Corp. and Pinnacle Airlines Corp.

Selected Financial Information

The accountant's report on the Group for the three years ended 31 December 2017 is set out in the Admission Document.

The table below shows the selected key historical financial information of the Group for the three years ended 31 December 2017 extracted without material adjustment from the historical financial information on the Group contained within Part III(B) "Historical Financial Information of the Group" of the Admission Document.

Summary income statements

EQT Assets

The table below sets out summary pro-forma financial information for the EQT Assets for the year ended 31 December 2017 extracted from the EQT Assets' unaudited management accounts as adjusted by the Directors:

Unaudited pro-forma results (extracts)

Current Trading and Prospects 

Current trading - DGO 

2017 ended with daily net production for the Group of 10,400 boepd, a 250 per cent. increase from the 2016 year end with current net overall production running at approximately 28,070 boepd. The EQT Acquisition will add approximately 30,311 boepd to daily net production, an increase on current production of approximately 114 per cent.

In March 2018, DGO completed the Alliance Petroleum Acquisition and the CNX Acquisition comprising 24,000 oil and gas wells in aggregate, principally in Pennsylvania and West Virginia. On completion of the Alliance Petroleum Acquisition and CNX Acquisition, the Company's total net working interest production increased by 173 per cent. to approximately 28,133 boed and its net working interest PDP reserves grew by 217 per cent. to 173.2 mmboe.

Current trading - EQT Assets

During the year ended 31 December 2017, and as presented on a proforma adjusted basis, the EQT Assets produced an average 30,200 boepd, with 29,379 boepd being produced in December 2017.

Prospects - Enlarged Group

The Board is delivering on its stated acquisitive strategy as demonstrated with the significant acquisitions of Titan, Alliance Petroleum Corporation and CNX within the last 12 months.

Following Completion, the Company will produce approximately 60,103 boepd of daily net production, making the Company a material producer amongst its small-mid cap peer group and the largest gas and oil producer on AIM. Increased combined production, improved operational efficiencies and the corresponding earnings enhancing impact on the Enlarged Group, significantly enhances the future prospects of the Enlarged Group. The Directors continue to identify suitable acquisition targets which the Board intends to execute following Admission.

Distribution and Dividend Policy

The Board is committed to returning not less than 40 per cent. of free cash flow to Shareholders by way of dividend.

For the year ended 31 December 2017, the Company paid an interim dividend of 1.99 cents per Ordinary Share on 20 December 2017 and, following approval by Shareholders at the Annual General Meeting held on 29 May 2018, a final dividend of 3.45 cents per Ordinary Share on 31 May 2018.

On 3 April 2018, the Company announced its intention to move to a quarterly dividend, in line with the strength and consistency of the Group's cash flows. On 29 May 2018, the Company announced a dividend payment of 1.725 cents per Ordinary Share in September 2018 in respect of the first quarter to 31 March 2018. The Company has today announced that the dividend will be paid to those Shareholders on the Company's share register on 13 July 2018.

The Company's expected annual dividend timetable is as follows:

Quarter Dividend Announced Ex-dividend Date Dividend Paid

Quarter 1 Interim May September* September

Quarter 2 Interim September December December

Quarter 3 Interim December March March

Final May June June

* The 2018 Q1 interim dividend of 1.725 cents per share will be marked ex-dividend on 12 July 2018

The Directors may further revise the Group's dividend policy from time to time in line with the actual results and financial position of the Group.

The Board's dividend policy reflects the Company's current and expected future cash flow generation potential.

General Meeting

A notice convening a General Meeting of the Company, to be held at 11.00 a.m. on 16 July 2018 at the offices of Buchanan Communications Limited, 107 Cheapside, London EC2V 6DN, is set out at the end of this document. At that meeting a resolution will be proposed in order to obtain Shareholder approval for the EQT Acquisition. In addition, resolutions will be proposed at the General Meeting granting powers of allotment and disapplication of pre-emption rights in respect of, inter alia, the Placing Shares and to assist the Enlarged Group going forward.

Further details of the Resolutions are set out below:

Resolution 1 - Approval of the EQT Acquisition

Resolution 1 is an ordinary resolution to approve the EQT Acquisition. As the EQT Acquisition constitutes a reverse takeover under the AIM Rules for Companies, Shareholder approval is required under the AIM Rules for Companies.

Resolution 2 - Authority to allot shares

Resolution 2 is an ordinary resolution to authorise the Directors under Section 551 of the Act to issue and allot Ordinary Shares. The Act requires that the authority of Directors to allot shares and to make offers or agreements to allot shares in the Company or grant rights to subscribe for or convert any security into shares ("relevant securities") should be subject to the approval of Shareholders in a general meeting or to an authority set out in the Company's Articles. Accordingly, Resolution 2 will be proposed to authorise the directors to allot relevant securities in respect of the issue of (i) Placing Shares, (ii) new Ordinary Shares to satisfy awards made under the Share Option Scheme, and (iii) otherwise up to a total nominal value of £1,689,353.62 representing 168,935,362 new Ordinary Shares (being approximately one third of the Enlarged Share Capital). This authority will expire on the conclusion of the Company's next Annual General Meeting.

Resolution 3 - Disapplication of statutory pre-emption rights

Resolution 3 is a special resolution to disapply statutory pre-emption rights under Section 571 of the Act in respect of equity securities (as defined in Section 560 of the Act). The Act requires that any equity shares issued wholly for cash must be offered to existing Shareholders in proportion to their existing shareholdings unless otherwise approved by Shareholders in general meeting or excepted under the Company's Articles or law. The Placing Shares are not being offered to Shareholders in proportion to their existing holdings. A special resolution will be proposed at the General Meeting to give the Director's authority to allot equity securities for cash other than on a pro rata basis pursuant to the issue of the Placing Shares under the Placing and otherwise up to a total nominal value of £506,806.09 representing 50,680,609 new Ordinary Shares (being approximately 10 per cent. of the Enlarged Share Capital). This authority will expire on the conclusion of the next Annual General Meeting of the Company.

The issue of the Placing Shares is conditional, among other things, on Shareholders passing the appropriate Resolutions being proposed at the General Meeting. If Shareholders do not pass the appropriate Resolutions, the issue of the Placing Shares and the EQT Acquisition will not proceed.

Irrevocable Undertakings and Commitment

The Company has received irrevocable undertakings and commitments to vote in favour of the Resolutions from the Directors and certain Shareholders in respect of, in aggregate, 230,165,838 Ordinary Shares representing approximately 73.9 per cent. of the Existing Ordinary Shares.

Management Incentive Arrangements

The Board believes that the Company's success is highly dependent on the quality and loyalty of the current and future directors and employees. To assist in the recruitment, retention and motivation of high quality directors and employees as necessary, the Company must have an effective remuneration strategy. The Board considers that an important part of this remuneration strategy is the ability to award equity incentives and, in particular, share options.

Share Options may be granted under the Share Option Scheme implemented by the Board on the February 2017 Admission. The Board intends that a maximum of 10 per cent. of the issued share capital of the Company (as enlarged) from time to time will be capable of being placed under option under the Share Option Scheme subject to Shareholders passing the appropriate Resolution being proposed at the General Meeting. A total of up to 50,680,609 new Ordinary Shares (in aggregate) shall be available to satisfy awards under the Share Option Scheme on Admission

As at the date of this document, the Company has awarded rights to acquire an aggregate of 795,002 new Ordinary Shares to a total of nine employees under the Share Option Scheme.

Following consultation with major Shareholders in April and May 2018, and in light of the feedback then received, the Remuneration Committee recommended that Share Options over a further 15,525,000 new Ordinary Shares in aggregate be granted at an exercise price of 84 pence per Ordinary Share (the then mid-market price) to a total of 18 executive Directors and employees. It was intended that the award of these further Share Options would have been made and announced on 3 May 2018 following publication of the Company's annual report for the year ended 31 December 2017, but the grant had to be delayed until publication of this document because negotiations relating to the EQT Acquisition had commenced and constituted inside information.

Admission to AIM

Application will be made to the London Stock Exchange for the Enlarged Share Capital including the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Enlarged Share Capital will commence on AIM on 17 July 2018. No application has or will be made for the Enlarged Share Capital to be admitted to trading or to be listed on any other stock exchange.

Recommendation and Irrevocable Undertakings

The Directors consider that the Fundraising and the EQT Acquisition are in the best interests of the Company and Shareholders as a whole. Accordingly, the Directors recommend that you vote in favour of the Resolutions at the General Meeting as they have irrevocably committed to do so in respect of their own beneficial holdings amounting, in aggregate, to 44,410,481 Existing Ordinary Shares, representing 14.26 per cent. of the Existing Ordinary Shares.

In addition, the Company has received irrevocable undertakings and commitments to vote in favour of the Resolutions from the Directors and certain Shareholders amounting to, in aggregate, 230,165,838 Existing Ordinary Shares, representing approximately 73.9 per cent. of the Existing Ordinary Shares.

DEFINITIONS

GLOSSARY

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, Placees should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; Placing Shares offer no guaranteed income and no capital protection; and an investment in Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to Placing Shares

Important Notice

Smith & Williamson Corporate Finance Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and is a member of the London Stock Exchange, is acting exclusively for the Company and no one else in connection with the proposed Admission and Placing. Smith & Williamson Corporate Finance Limited will not regard any other person as its customer or be responsible to any other person for providing the protections afforded to customers of Smith & Williamson Corporate Finance Limited nor for providing advice in relation to the transactions and arrangements detailed in this announcement for which the Company and the Directors are solely responsible. The responsibilities of Smith & Williamson Corporate Finance Limited as the Company's nominated adviser for the purposes of the AIM Rules are owed solely to the London Stock Exchange and are not owed to the Company, any Shareholder or any Director or to any other person in respect of his decision to acquire Ordinary Shares in reliance on any part of this announcement. Smith & Williamson Corporate Finance Limited has not authorised the contents of any part of this announcement and is not making any representation or warranty, express or implied, as to the contents of this announcement and accordingly, without limiting the statutory rights of any recipient of this document, no liability whatsoever is accepted by it for the accuracy of any information or opinions contained in this announcement or for the omission of any material information for which it is not responsible.

Mirabaud Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and is a member of the London Stock Exchange, is acting exclusively for the Company and no one else in connection with the proposed Admission and Placing. Mirabaud Securities Limited will not regard any other person as its customer or be responsible to any other person for providing the protections afforded to customers of Mirabaud Securities Limited nor for providing advice in relation to the transactions and arrangements detailed in this announcement for which the Company and the Directors are solely responsible. The responsibilities of Mirabaud Securities Limited as the Company's joint broker are not owed to the Company, any Shareholder or any Director or to any other person in respect of his decision to acquire Ordinary Shares in reliance on any part of this announcement. Mirabaud Securities Limited is not making any representation or warranty, express or implied, as to the contents of this announcement and accordingly, without limiting the statutory rights of any recipient of this announcement, no liability is accepted by it for the accuracy of any information or opinions contained in this announcement or for the omission of any material information for which it is not responsible.

Stifel Nicolaus Europe Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and is a member of the London Stock Exchange, is acting exclusively for the Company and no one else in connection with the proposed Admission and Placing. Stifel Nicolaus Europe Limited will not regard any other person as its customer or be responsible to any other person for providing the protections afforded to customers of Stifel Nicolaus Europe Limited nor for providing advice in relation to the transactions and arrangements detailed in this announcement for which the Company and the Directors are solely responsible. The responsibilities of Stifel Nicolaus Europe Limited as the Company's joint broker are not owed to the Company, any Shareholder or any Director or to any other person in respect of his decision to acquire Ordinary Shares in reliance on any part of this announcement. Stifel Nicolaus Europe Limited is not making any representation or warranty, express or implied, as to the contents of this announcement and accordingly, without limiting the statutory rights of any recipient of this announcement, no liability is accepted by it for the accuracy of any information or opinions contained in this announcement or for the omission of any material information for which it is not responsible.

This announcement is for information purposes only and does not constitute an admission document and does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any ordinary shares in the capital of the company, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever.

This announcement is not for publication or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, the Republic of South Africa, Japan or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession this announcement, or other information referred to herein, comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The securities referred to herein may not be offered or sold, directly or indirectly, in the United States unless registered under the US Securities Act of 1933, as amended (the "US Securities Act") or offered in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act. The offer and sale of securities referred to herein has not been and will not be registered under the US Securities Act or under the applicable securities laws of Australia, Canada, the Republic of South Africa or Japan. There will be no public offer of the Ordinary Shares in the United States, Australia, Canada, the Republic of South Africa or Japan. Subject to certain exceptions, the Ordinary Shares referred to herein may not be offered or sold in Australia, Canada, the Republic of South Africa or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, the Republic of South Africa or Japan.

No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information in this announcement is subject to change. Investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. This announcement does not constitute a recommendation concerning the Placing. The value of shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the Placing for the person concerned.

Forward Looking Statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These statements relate to, among other things, analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to the Company's future prospects, developments and business strategies. These forward-looking statements can be identified by their use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will" or the negative of those variations, or comparable expressions, including references to assumptions. The forward-looking statements in this announcement, including statements concerning projections of the Company's future results and operations are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements.

These forward-looking statements speak only as of the date of this announcement. The Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.