Appalachian-focused US firm Diversified Gas & Oil (DGO) has announced its intention to float on the London Stock Exchange's junior market in December.
DGO is seeking to raise around $60m (£48m) with its Aim placing, which it says offers investors exposure to "a sound, profitable dividend-paying play on the US energy market".
Around half of the company will be floated in December, valuing the group at $130m after the IPO. At present, DGO is privately held in an equal split between its two founders, who will jointly own about 47 per cent of the company after the float.
The group operates a number of conventional gas and oil producing wells across Ohio, Pennsylvania and West Virginia within the Appalachian Basin, one of the largest onshore fields in the US and an area regarded as "low risk" for oil and gas activities.
DGO's daily production is in excess of 4,400 barrels of oil equivalent (boe) from an estimated 24.1m boe of proven developed reserves. It also has a further 3.8m boe of proven undeveloped reserves and says that due its low-cost operations, it could turn a profit even if oil prices were to dip to around $10 per barrel.
Over the last two years the company has expanded rapidly, acquiring multiple low risk gas and oil-producing assets from larger US companies, financed largely through borrowings.
In the six months to 30 June, gas and oil production was 428,522 boe, up from 129,277 in the first half of 2015, while revenue more than doubled to $7.6m.
Chief executive and founder Rusty Hutson said:
DGO is at an exciting stage of development. We have demonstrated our ability to acquire sound gas and oil producing assets and to further increase the productivity of those assets. There is a strong pipeline of similar assets available to us, and with the support of the Aim market we intend to capitalise on these opportunities to create additional value and to secure long-term positive cash flows for the benefit of DGO's shareholders.
We believe that the timing and appetite for our investment story is strong. We are not reliant on speculative resource exploration or development but offer investors exposure to a sound, profitable dividend-paying play on the US energy market.
The group, which is not listed on any other stock markets, has around $13.4m of unsecured bonds that mature in June 2020. Bondholders will be offered the opportunity to convert their bonds into ordinary shares or to receive a cash offer for repayment of the bond, or a combination of both.
Telefonica – which previously said it could float O2 by the year’s end depending on market conditions – has now indicated it will not push ahead with the IPO until 2017, when it will only pursue if market conditions are right.