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Edited Transcript of DOIL earnings conference call or presentation 9-Mar-20 9:00am GMT

Full Year 2019 Diversified Gas & Oil PLC Earnings Presentation

London Apr 1, 2020 (Thomson StreetEvents) -- Edited Transcript of Diversified Gas & Oil PLC earnings conference call or presentation Monday, March 9, 2020 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Bradley Grafton Gray

Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director

* Eric M. Williams

Diversified Gas & Oil PLC - CFO

* Robert Russell Hutson

Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director

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Conference Call Participants

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* Carlos Gomes

Edison Investment Research Limited - Oil and Gas Analyst & Associate Analyst

* Malcolm Graham-Wood

Hydrocarbon Capital - Founding Partner

* Timothy Alan Hurst-Brown

Mirabaud Securities Limited, Research Division - Energy Analyst

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Presentation

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [1]

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Good morning, guys and ladies. I appreciate you all coming out this morning. My good luck is I'm announcing great earnings and a great story on one of the worst market days that you could probably do it. But as I was telling some folks here in the room, I'd rather be doing this and telling a good story than telling a bad one.

So we'll start off and do an overview of the 2019 earnings. I'll give a kind of a high-level overview of some of the accomplishments as I've seen them throughout 2019. I'll turn it over to Brad Gray, our Chief Operating Officer, and he'll go through some operating slides and talk about the Smarter Well Management and some of the things we're doing in the field. And then Eric will come up and talk about the numbers in a little bit more detail, and then I'll finish it up with an outlook on the year 2020.

So great year for us. I mean I'd like to try to punch holes in it, but at the end of the day, we were very, very pleased with the year that we've had. The full year production numbers, 84.8 BOE (sic) [MBOE] per day on average for the full year, which is up substantially from 2018. The main thing of that is, is our legacy production, which we talk about a lot, which is the underpinning of our production on our cash flows, which is all of our assets that we acquired prior to the HD transaction in April of last year. Again, for the sixth straight quarter, I believe, it's flat production with no decline. And Brad will get into a lot of that as he talks about Smarter Well Management, but that is a substantial accomplishment for our operations.

Adjusted EBITDA for the year was $273 million in '19, 53% EBITDA margin on a hedged basis. As we sat and talked about the numbers, one of the things we were sitting around the table and looking at, and we talked about our margins being at 53% on a hedge basis, but what's really, really compelling for me is that if you even take the hedges out, we're still in the 40% range on an EBITDA margin, with today's current commodity price environment, which is very, very substantial. We just declared our fourth -- or our final dividend for the year, $0.035 this morning. For the full year, our dividend was $0.139 per share, up 24% versus last year. Hedge, we've got 90% of our production in 2020 hedged, with a floor of around $2.70 per MMBtu. And then we have over 60% of our gas hedged in 2021 at around the same price. So already have a substantial amount of production hedged, cash flows locked in over the next 2 years.

Free cash flow yield at the end of the year was about 25%. As of this morning, it's in the 40s. So we're in the 40% of free cash flow yield right now. Our dividend was -- at year-end was -- what was the percentage? 10% for the full year of '18 -- or '19. Right now, based on the full year run rate, we're almost 17%. Low operating costs, Brad will get into a lot of this for the fourth quarter. So as we went through the year, we'll talk about the numbers as to what the operating metrics were for the full year on average. But for the fourth quarter of '19, all of our cash operating costs, including G&A, was at $1.18 per Mcf equivalency, which is extremely low and a huge drop since the IPO.

We completed one of its -- the first of its kind, securitizations in 2019. It was a $200 million liquidity event for us in that we're able to take part of our RBL, securitize it for 10 years, essentially a 10-year note, amortizing note at 5%. So a big liquidity event and get a higher advance rate against those reserves than we would under our RBL. We acquired about $430 million last year of producing in midstream assets. We also strengthened our governance, our Board diversity in preparation for the proposed move to the premium list, which we anticipate occurring very, very quickly here. So all in all, very, very good year for the production, for the earnings, for our return on equity thresholds that we set for the company. Now we're just waiting for the stock price to catch up with that.

Business model has stayed the same, we talk about this pretty much every time. The reason we do this is because there is a lot of questions from time to time. What is the true -- the model of what you guys are trying to accomplish, and we want this to stay in front of people so that they understand what we're trying to accomplish. But we're acquiring assets that have a specific profile, long-life, low-decline production. We're hedging it. We're locking in those cash flows. We're buying assets at very compelling valuations. We never overpay for anything and we never pay for the undeveloped. It's a pretty straightforward strategy. And once we own them, we optimize and produce, and that's where our Smarter Well Management program comes into place, which Brad will talk about. But at the end of the day, it's all about disciplined growth, focused execution and creating value, which is, at the end of the day, is shown in our return on equity.

This is a new slide you guys haven't seen before, but essentially from 2001 until 2020, it's pretty substantial in what we've been able to accomplish. Obviously, it started with the float back in 2017, the $50 million IPO, the acquisitions that we've done since 2017, about $1.4 billion, I believe, of acquisitions. We've raised over $750 million of equity over that period of time. We've kept our balance sheet strong through that whole period in terms of using equity as our friend, keeping our leverage ratios in check, which is -- again, puts us in a very good position where we sit today versus our peers in Appalachia and, really, across the country and gives us the ability to take advantage of this low commodity price environment in a big way over the next 12 to 24 months. But the big one is moving up to the premium segment of the London Stock Exchange, which has been on our radar now for several months, and that's coming to a conclusion very rapidly. But a lot of activity over the last 3 years.

This slide right here, I'm not going to take credit for it. We've seen it now twice, Goldman Sachs and Evercore both have used this slide to some degree. This is the industry in a nutshell since 2000, and this starts in 2000 and shows over -- up until 2009, the industry was operating in a way that conventional wells, all the drilling was conventional up to that point. Companies were able to maintain cash flows, even though they were drilling. And so cash flows were positive, they were not outspending their CapEx or outspending their free cash flow with their CapEx. And there was actually return on equity in the industry. Therefore, institutional money was flowing into the industry over those period of time, 2000 to 2009. Then the shale boom hit in about 2010, and it really started to kick up. And you can see negative cash flows for every year over -- between 2009, 2010 until now, all negative cash flows. And as a result of that, no return on equity and the institutional money that was coming into the industry prior to that is now gone.

And so you've seen a complete digression of the industry over that period of time. The good news is, and what I'm able to say today, is this is where we've been since day 1. We've been in this -- when I started the company in 2001, it was always predicated and set up on a cash flow model. It started out just as a cash flow for me and my family, but as we started to grow the company, it never, never wavered from the cash flow model. And I've always said this, if you don't have cash flow, you really don't have a business. And that's where we've gotten in the industry over the last several years is -- and we've created a -- as an industry, we've created the problem for ourselves.

This is the new E&P model. This is where institutional money wants the E&P companies to go to, and this is where we're already at. And so we're already ahead up on everybody else in terms of being able to get to this model because we never strayed from it in the first place. But this is a very interesting story and every institutional fund that we talked to in the U.S. and really less so over here because I don't think they understand the true -- for the most part, they don't understand the true impact of what's occurred in the U.S. market in the last 10 years. But this is where all the institutional money is going to require companies to go to, and that's why there's going to be a lot of failures of companies over the next 12 to 24 months.

The value proposition, this kind of highlights where we're at in terms of our assets, our cost structure, our return metrics and how we compare to traditional E&P models and mineral companies, which are big in the U.S. now. You can see from a margin perspective, much higher. I'm not sure what the yellows are, Eric, they're just showing a little bit marginal or lower? Okay. Mineral companies have that margin. Obviously, they have free cash flow. PDP declines and operational control, that's the biggest difference between us and mineral companies. Mineral companies don't have operational control, we do. But most people will tell you in the U.S. that we remind a lot of these institutional funds of these mineral companies that we have operational control, which is a big, big plus.

But you can see, all these things that we're checking off here, free cash flow yields of greater than 20%. Of course, we're in the 40% range now. Dividend yields are greater than 10%. And this is not -- a lot of people say, well, your dividend yield, something's wrong. Now the dividend has been the same. The payout ratio of what we pay out of free cash flow has never wavered, never changed. It's just, obviously, the share price and then total shareholder return. So this is what we focus on and you can see, versus the traditional E&P models, going back to that shale boom slide, you can see what's transpired there.

Capital allocation, we're focused on our shareholders. We've said this from day 1 when we IPO-ed the company, I said we're going to pay dividends. People said, no, you won't be able to sustain it. I said, well, we're going to prove that we can. And you can see here 2017, 2018, 2019 since IPO, we have returned $358 million of -- which includes $142 million of dividends, which includes the one that we just declared; $163 million of debt principal repayments; $53 million of share repurchases. Until the end of the year, we've actually purchased another $13 million, $15 million since the beginning of the year; and then cash interest, income taxes, CapEx. This is the reason why we're able to do all of this, is because our CapEx is so low. And so this model has worked very, very efficiently over the last 3 years and will continue to do so. As you can see, with the hedge program and everything that we have in place over the next 2 years, we don't see any reduction in dividends or in cash flows.

This is a very -- this goes back to the comments about cash flows, but my guys put this slide together, and this is on Slide 10 for those on the video -- on the audio. Cash -- total cash cost of $1.19 per Mcf equivalency, which includes G&A and cash OpEx; then you add in our CapEx, which is very nominal at $0.09; and then cash interest today of $0.14. Fully loaded, which includes everything, is $1.42 per Mcf equivalency. For the next 2 years, we're going to be in the middle between these 2 boxes right here. And as you can see, as a result of that, that our operating cash margins will be in the 50% range, our fully loaded cash margins will be in the 40% range and then our free cash flow yield, with today's price -- share price is actually in the 40% range. So you can see that over the next 2 years, where we're going to fall within this quadrant. But even at $1.50 natural gas price net, we still have a 21% cash margin and a 3% free cash flow yield. We were at Credit Suisse conference last week, walking the hallways and listening to companies talk about if they had a 1% to 2% free cash flow yield, they thought they were in heaven. So you can see just kind of how the industry -- how we compare to the industry and the way things are right now in the U.S.

I'll turn it over to Brad now to walk through some of the operations.

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [2]

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Thank you, Rusty. We had a very productive year operationally. As Rusty said, we've been busy the last 3 years. But in 2019, we really had the opportunity to continue to improve our business model. Our team, we've got a great team spirit. That's really the best part of my job is working with our team. We've got a talented group of professionals, building the relationships and to see them each day go in to the field with creativity, with a sense of urgency to produce the results that we have and really prove out the business model that Rusty set out several years ago.

So let's get into Smarter Well Management, which we talk about a lot. What is Smarter Well Management? It really is just fundamental business practices, the blocking and tackling every day, focusing on the best business practices to produce and optimize the assets that we've acquired. And we take that into the field with a relentless focus on execution every day. So what did that produce? As Rusty mentioned, 6 quarters of basically flat, zero decline at around 70,000 barrels per day of BOE equivalents per day. When you calculate the additional revenue that, that flat decline has produced $20 million to $25 million of additional revenue. And so this is the optimization of the assets that we've seen.

And how do we do that? Well, we do it by taking wells that are producing at certain levels and improve that production. We do that by taking wells that were not in production, returning them to production. And then we even focus on the pipeline systems that we have and improve the integrity of the pipelines, which allows more gas to flow to a sales point, which produces revenue, which allows for the cash flow. So this is a tremendous testimony to our teams, the professionals that we have and the business model that we're getting to prove out each day.

Smarter Well Management, from a specific standpoint, so what's -- we wanted to highlight what we did with HG Energy. You guys know that we bought 107 Marcellus wells. So Smarter Well Management does not only apply to the conventional assets that we've acquired. It also can apply to our unconventional assets. And with the HG Energy wells that we acquired, we were able to hit several components here.

I'll highlight a few of them. Improved water management. Clearly, in the Marcellus wells, the water production is a focus and we were able to just go out and do competitive bid processes, get better vendor pricing. We were able to work with companies that were drilling in the area and no longer send water to disposal, but we send it to the drillers and we're able to significantly reduce our cost there.

We look at just the flow of gas to the pipeline. Is it flowing efficiently? In this instance, it was not. There was additional fluid in the line. Our teams work together, take the fluid out of the line, lower the pressure, increase the gas flow. We added wellhead automation, so that we didn't have to have well tenders go every day to well pads to check on the status. We added automation to reduce the well tender visits. We modified compression cycles, which reduced downtime. When a compressor goes down, the gas doesn't flow. We eliminated that. And then just simple things of reconstructing some flow lines to improve our safety metrics. But also when it gets cold in Pennsylvania, sometimes the lines can freeze, and so we eliminate that pipe freezing. So that's a -- those are tangible examples of how we generated values through Smarter Well Management.

I also mentioned about bringing wells back into production. We had a great year in 2019, 750 wells. We were able to bring several systems that have been out of production for, in many cases, several years and we were able to bring those back in line, working with our teams, working creatively, excuse me. So 750 wells there. And that also translates into higher reserves. And we'll see that in the slide coming up here as well.

One other item we had an opportunity to do, we're always looking for continual improvement. And so just very simply, looking at our organizational chart, looking where our assets are, looking at the expertise that we have with our staff and where do we need to have those employees focused. And so we did create a Northern division, Southern division. We actually realigned our Southern division a little bit with the acquisitions that we did on the pipelines. We have better expertise with our management team in our Southern division and so they're now focused on our West Virginia operation. But we're always looking for improvement. And we had an opportunity to do that this past year.

We had a huge technology investment in project this past year. With all the acquisitions that we've done, we had many, many systems. We had 3 different ERP platforms. We had different processes, and tell you what, at the beginning of the year, we started out what we call Project Delta. Clearly, Project Delta is change. That was a big change for us. And so what we did was we brought a cross-functional team together to look at all of our business, look at all of our processes. And the end result was we had a very successful ERP conversion. And it's easy to say that, but this was a 12-month process that had numerous departments, numerous employees. And I think we spent between $10 million and $12 million on this project.

But what that project has done is it is going to be substantially important for us to be -- to help us continue to grow and help the sustainability of our business model. We focused on our ERP system, which is production, revenue, accounting and land; measurement systems, a field data capture system; we have a huge data warehouse. And so what that data warehouse is going to do, it's going to allow for us to have continued improvement through better reporting and analytic tools. This was a major project for us. We are now set out with a fully integrated system, where we can add assets in very efficiently and also have better results, better information, which will end up providing value for our shareholders.

I want to highlight a few acquisitions that we did this past year. So we did 2 acquisitions related to the unconventional wells. We had HG Energy and we had EdgeMarc Energy. So how did we integrate those? Well, we added no G&A. So we've got -- Rusty mentioned earlier and Eric will show you some numbers on our scale, we had low-cost production. I think we hired, between the 2 acquisitions, 5 people from a field standpoint, and we -- and our teams were able to seamlessly integrate those transactions. That added about 25% production to our overall production for the company. And these 2 transactions that we're able to seamlessly integrate with no additional G&A. We also -- we've talked a lot our midstream assets and I'll have some more information on this as well.

In the month of September, we were able to integrate or acquire assets from Dominion Energy as well as Equitrans. We have about 60% of the volume that were on those gathering systems was our gas. And so it gives us great control, gives us the ability to control the flow, operational flexibility. But importantly, especially for this Dominion acquisition, it allowed us to flow gas to much better pricing markets, and I'll show you an example of that coming up. So what's the result of these? Increased production, lower cost, and we have an expanded midstream operation as well.

Here is a perfect example of the vertical integration of the midstream assets that we were able to integrate. And this was the ability to move gas to a higher-priced market. We closed on the Dominion acquisition in mid-September, and by December 1, we were able to reroute about 15 million a day of gas production from the Dominion market to East Tennessee market and pick up a plus $0.55 basis differential. And so that added $200,000 or $300,000, $285,000 worth of additional revenue. And these are opportunities that we're looking to do every day.

One other one, from a midstream perspective, we're looking at is expense efficiencies with compression. How can we eliminate compression, which also has an ESG component to it, but of a real expense-saving opportunity as well. In April, we'll actually be converting some electric compression to gas compression, which will save us close to $1 million a year. But these are the opportunities we have every day. From a PDP perspective, the acquisitions that we've drawn over the last several years, we've drawn our reserves 20x.

As Eric likes to say, the reserves in the ground are future cash flows. And so -- and -- but from our standpoint, we don't have to spend any capital to get those reserves. They're -- it's already built into our metrics, built into our business model. Smarter Wealth Management, an example of that is we did have performance revisions in our reserves. As we increase production, as we bring wells back online, it shows up in the reserves, which is -- it was very helpful to our value.

From a plugging perspective, we had a great year there. As you guys know, we've gone out and done proactive agreements with these 4 state -- the 4 primary states we operate in. We were able to improve our agreement with Kentucky, take that from a 5-year to a 10-year. We had a 15-year -- we have a 15-year agreement with Pennsylvania. And our teams did a wonderful job -- we're actually exceeding the compliance requirements. We plugged 105 wells, and we're -- we've got a great process. We've got great resources, dedicated team members that are focused on this. So we're building some good scale from a cost perspective. We had a good year. It came in a little bit below our AFE numbers. We continue to work on that every day, and we're also working to try to find some innovative solutions with the state, changed regulations, which will lower our cost.

And then lastly, from a plugging standpoint, it's less than 1% of our overall EBITDA from an annual basis. It's an important part of our business, but it's not a huge financial commitment for us on a year-over-year basis. ESG is definitely a topic that everyone in the room is familiar with. It's one that the market is. We will be issuing our inaugural sustainability report. It will be posted on our website here relatively soon. And we're really proud of what we've produced. Our sustainability report is going to highlight that our business model is an environmentally sound, stewardship-focused, sustainability-focused business model based upon the nature of what we do. We created a new sustainability and safety committee this year. And that will -- that committee is going to be chaired by Sandy Stash, one of our new Board members. And we're really excited about our report here. I think the -- I think it's really going to showcase us and set us apart from some of our peers.

And then lastly, connected with sustainability. We have 4 operational goals that every day we focus on. They're simple messages, but they're very powerful and they support our business model. Not only do they support our business model, they support the desires and programs that we have from an ESG standpoint. We're, number one, focused on safety. We're clearly focused on production. Every unit counts is what we tell our employees every day. Efficiency, every dollar accounts as we've seen in our ability to lower our cost. And then we want our employees to enjoy working at Diversified. We want them to have fun. We want them to celebrate success with each other. And then each one of those daily operational goals does flow into our ESG efforts, and our sustainability report will highlight that.

So with that, we'll to turn it over to Eric.

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [3]

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Good morning. Thanks, Brad. Yes, I used to work for a Permian-based company, and I get up at the beginning of the financial overview and talk about, well, now I get to talk about how I'm going to pay for all that development. So I have a very different story today. I get to talk about how do we continue to return value to shareholders through those dividends and share buybacks and delevering opportunities. And it all goes back to what Rusty talked about at the very beginning, which is a very clean strategy that's always been focused on tangible shareholder value creation through disciplined execution of a rollout model and the commitment to operational excellence as opposed to development.

And so when you put the numbers together, you'd expect to see revenue up year-over-year because we did significant acquisitions in 2018 that we now have a full year of contribution from, as well as some contribution in 2019 from our newest assets. But what might be lost in over $500 million of revenue is that we had a significant increase, 200% increase in our midstream revenue. So last year, we had about $7 million. This year, we took that up to just over $22 million. And if you annualize what we did last year, that's over $25 million heading into 2020. And what's important about that is that, that's not exposed to, of course, the commodity cycle. So effectively, that revenue is hedged because we'll collect that from third parties. And when we talk about our operating cost structure, you'll also see how that plays into that as well and even our CapEx budget.

Brad and Rusty both talked about our commitment to operational excellence and how that plays out to our total cost. And when you add up all the cost across the organization, not only at the field level but also midstream and G&A, we took that down 10% on a unit basis, which drives us very strong margins. As Rusty said, 53% on a hedged basis. In 2019, that's 48% on an unhedged basis. And even where commodity prices sit today, that's north of 40%. So very, very robust, which just gives us line of sight to continued distributions in a very challenged environment. Obviously, if you've got a significant increase in revenue, you should see that translate to EBITDA, and you do, 87% increase there as well.

But importantly, and we know we issued equity throughout that cycle. Rusty talked about equal contribution of equity and debt. So we did 3 equity raises in 2018, but just 1 this year. But we've always said, if we're going to put shares in the market, then there needs to be a per share accretion to the shareholder with respect to the ultimate distributions. And you see that play through with a 24% year-over-year improvement in our dividends paid.

So moving forward, we talked about production being up. So I won't go into that in any significant detail, but I'm going to spend most of my time on the left-hand side of the screen talking about the fourth quarter. Because ultimately, whether we exit this year with the contribution of all the acquisitions, including EdgeMarc versus where we exited last year with the most recent -- or the then most current acquisition of Core. And what you see is that revenue is up 11% period-over-period. When you add up the natural gas revenues, the NGLs, the oil and then look at the hedge contribution. And if you'll recall, last year, gas prices spiked to nearly $5 in the fourth quarter.

So you actually had hedges giving back 11.3% of that revenue. But this year, with gas prices moving much, much lower, you see hedges doing what they're intended to do, which is providing that stability to cash flows, while we have very, very stable and predictable production. So that stable revenue translates into stable dividends. And so it's very important that if we're going to have predictable production, that we take steps to make sure that we have the same predictability to cash flows.

So moving to 24, we talked about a little bit of how we do that, and it's through opportunistic hedging. So we entered 2020 extremely well hedged and well positioned. As Rusty said, we're nearly 90% hedged this year at $2.70 and 66% hedged next year at nearly that same level. And if you go back to the slide, you'll recall that, that generates free cash flow yields of somewhere between 35% and 45%, which again, gives you a nice insulation to weather commodity price volatility and maintain those strong dividend payouts, as you see on the right-hand side of the screen, dividend payouts over -- up over 2.5x in just 2 years.

But it's not just about hedging. Ultimately, you have to run a really good business. And Brad talked about the things that we do every day to take costs out of the systems and to maintain production. And again, I'll focus on the left-hand side of Slide 25, where we talk about our expenses. But you see that in the fourth quarter, if you looked at where we were on a unit basis to where we were on a unit basis in the fourth quarter 2019, down 17% on an all-in basis. So Brad mentioned, we added HG and EdgeMarc, as well as the midstream systems with no incremental G&A. And you see that unit costs last year of $1.32 per BOE dropping down to just $0.82 per BOE in 2019. And then if you look at the bottom of the stack, what we call base LOE, that's the LOE that we have the most control over. That's our employees, that's our vehicles and that's all the well maintenance expense that goes into Smarter Well Management, and you see that dropping from $3.97 per BOE down to $2.67.

Now you see a widening of a couple of the pieces. You see gathering and transportation, which is third-party transportation costs. And you see a widening of our gathering and compression, which is our own midstream. But a couple things to highlight. One, that's a result of acquiring more unconventional assets that are producing into third-party systems. But importantly, that's 100% variable. So as that production begins to come off and simultaneously, 100% of that expense goes away as well. But the midstream, while you've seen a widening of that, I think it's impressive to see that notionally, they're the same amount. But that purple wedge, which is the owned midstream at $1.54 per BOE, provides us significant benefits. One, it provides us the $25 million of third-party revenue that I mentioned earlier. But it also provides us the ability to improve our realized pricing, which goes to protecting those margins because we're able to flow that gas to better markets. Or if there's disruptions in the midstream system throughout the basin, then we have the opportunity to just redirect those flows to maintain production that would otherwise need to be shut in. So it significantly offers us benefits beyond just matching the cost of third-party gathering and transportation.

So [after we talk about expenses], we'll talk about the capital allocation. And obviously, in a year where commodity prices are difficult, every dollar that we deploy in this arena will matter, so we'll take a hard look at it. But we're starting from a great point. One, Brad mentioned, 100% of our reserves are PDP. So we don't need to deploy any additional capital to harvest the reserves that we have on the books today. If you look at the recurring wedge or a pie that we show, just 8% of our overall CapEx budget goes into our upstream assets. So that's less than $2 million a year, which is primarily the vehicles that we put our men and women in to tend to our assets.

The larger piece is the midstream asset. But as we said, that makes up about $50 million last year. It will be about $20 million this year, but that's less than the third-party revenues alone. So the third-party revenues that we get off the system more than subsidize the cost for maintaining that system, and then we have the opportunity to flow our gas on that system for just the OpEx associated with it. But when you put it together, just 6% of EBITDA is reinvested into recurring CapEx. The nonrecurring piece was extremely important to us this year. Brad talked about that, the $15 million investment. It was primarily ERP, taking 3 legacy systems down into one, enhancing our field data capture, so that management and our operations teams have access to real -- data real time, which will only further enhance our ability to continue to optimize and maintain these wells very, very smartly. But a different CapEx profile, then of course, anyone else in the industry can talk about.

But through it all, we've always said we have an unwavering commitment to the balance sheet. We've never been willing to risk the balance sheet for the sake of growth, and we've always looked to be very disciplined in how we deploy. I mentioned, in 2018, we tapped the equity markets 3x to do just over $900 million of acquisitions. But in 2019, we tapped -- we came back to market just one time and did nearly $500 million of acquisitions. And so we used the balance sheet to grow in a very shareholder accretive way. But we do that by maintaining our net debt-to-EBITDA target of less than 2.5x, 2 to 2.5x. And so while you see that we're at 2.3x, slightly higher than we were this time last year, when we talk about the cash generation of the business and our ability to have that glide path to naturally delevering, you see a path -- a very visible path, particularly giving our hedged cash flows to not only maintain our dividend, but to also maintain a declining leverage profile.

If you looked at just the fourth quarter alone, we delevered at $13 million a month on average. And that's inclusive of $5 million of share buybacks. So if you were to take the share buybacks out, you're looking at anywhere from $15 million to $20 million a month of natural delevering. And when you put that into context around our maturity schedule, you'll recall that this year, we also diversified our debt profile. So previously, we had been 100% RBL debt.

But this year, we issued the inaugural -- first time ever, actually, within the industry as an operated company, a securitization of our cash flows. And so that securitization offered 10-year paper at 5% interest, which was a -- certainly, nearly half of what you would pay for high yield, very, very competitive with even RBL. But that 10-year paper has an amortization schedule. And so you'll see about $20 million of principal each year is paid, which equates to about 1 month's worth of our natural delevering capabilities anyway. So a very, very comfortable number, but ultimately, demonstrates our commitment to continuously be paying down in this environment to maintain that balance sheet stream.

When you look at the banks that we work with, I think it's important to remember, we've increased the syndicate from 14 banks previously, this last redetermination that we completed in January. We added Morgan Stanley, Goldman Sachs, Credit Suisse to the team, which goes to -- no one bank has a disproportionate hold. So while there's going to be certainly some volatility in the banking sector and companies that are looking to reduce exposure, we're in the position where no one bank has an outsized hold, so we're in a very, very good position. Not to mention that we're probably one of the best, if not the best, credit-worthy names that's in that portfolio.

If you look at our neighbors in Appalachia, unfortunately, there is a lot of pain that they're going to be sorting through. So we sit in a very good spot. And then of course, we have access to other pockets of capital as well. It's well-known that they announced that Munich Re was the investor in our ABS. And we certainly have line of sight to do more of that with names that are very, very similar to that. In this environment, you're seeing pockets of capital that are looking to bypass the traditional private equity vehicles to get to an issuer and coming directly to us. So we'll be taking a hard look at how we continue to capitalize the business to maintain what we think is an optimal capital structure.

So with that, I will give it back to Rusty to talk about the 2020 outlook and just recap.

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [4]

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All right. One thing I will say, it'll sound a little strange, I'm sure, but with the temperature in the markets, the commodity price environment that we're seeing today, I have a very, very positive outlook on our business for this year. In fact, I'm excited about it. Obviously, we don't have the financial stress that a lot of our peers do in the U.S., especially in Appalachia. But the opportunity set that we're seeing, I call it a generational opportunity, in the 19 years that I've been doing this, the assets that are going to be on the market or already are, are extremely, extremely compelling.

And for companies like ours, I mean, we get the calls directly from these guys now to be involved in pretty much anything that's going on. We're working with every investment bank from Evercore, who runs a lot of 363 sales, especially on the distressed side, to Credit Suisse, to Jefferies, all of the guys that are working these deals, working transactions, working different types of capital structures. We're working with them all. And the reason we're working with them all is because we are one of the few people out there that have the financial capabilities, the business model that everybody is looking for to really grow and to be successful in this kind of environment.

So our outlook for 2020 has -- is not much different than it has been for the last 3 years, it's just more opportunistic. We're going to focus on margin-enhancing growth and efficiencies. There's no doubt that we will have significant opportunities to acquire assets this year, and I mean greater than we've seen for the first 3 years. So that opportunity will exist. We will continue to focus on our core business and drive efficiencies in our operations. As Brad said, there is no shortfall of opportunities as it relates to being able to continue to reduce cost and become efficient in the operations, even more so than we are today. So we'll focus on that. But at the end of the day, it's all about the margin and making sure that we're protecting cash flows and increasing cash flows through the operations of the business.

We're going to continue to look at hedging. Through this whole price cycle environment, we've been adding hedges, being opportunistic, looking at different structures and different ways to go a little longer, bringing more value to the front end. People say, well, you're going to lose maybe a $2.75 gas price or a $3 gas price. We may, but we're going to protect it and we're going to have a $2.60 or $2.70 for a long time. And when you have a fixed cost structure like we do and not escalating with a lot of CapEx, we're okay with that. So we'll look at that.

We're going to strengthen our balance sheet for financial flexibility. We talked about doing the securitization. Don't be surprised if we don't do another round of that in the near -- very near term at a similar type structure, with additional institutional investors. Munich Re, who did the first ABS, they're looking -- they want to work with us on additional transactions. So we'll look to use their balance sheet on further type structures and deals as we move forward there. So we have a lot of opportunities out there. As we talked about the acquisitions, people hunting us down, we've got private capital pools constantly coming to us, wanting to work with us on acquisitions. And so don't be surprised if you don't hear about some of those in the near term also.

The investments, very compelling. I mean we've talked about this, guys, I mean, cash flow yields, EBITDA margins, dividend structures, the sustainability of the dividend over the next 2 years without any kind of concerns whatsoever. The leverage in the balance sheet being extremely strong. This company is a very, very, very investable company. We're going to be on the road a lot this year. We're going to spend a lot of time in London, but we're going to spend a lot of time outside of London. We're going to spend a lot of time in Europe. We're going to go to Israel. We're going to -- all over the U.S. We're going to market this company because I feel like after we -- especially after the main market move, that we are in a very good position to get a lot of -- get a lot of leverage. And people seeing that, hey, there is a company in the E&P sector that you can invest in, get return on equity and feel very comfortable that they're running the business in a conservative way, that the balance sheet is never going to be at risk and be a good long-term investment for growth and for income.

And with that, I'll open it up and see if there's any questions that you guys may have.

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Questions and Answers

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [1]

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Yes, sir?

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Carlos Gomes, Edison Investment Research Limited - Oil and Gas Analyst & Associate Analyst [2]

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Carlos Gomes from Edison. I have a question for Brad. For how long do you think the Smarter Well Program can extend DG oil legacy in the next couple of years? Do you think it's a 1, 2 year? Or do you think you will be to have it for a longer period? And also, the reserves number that you have, it's a management estimate, right?

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [3]

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On the reserve question, it's a company-produced reserve that's audited by our third-party reserve engineers. So that's a process that we go through every year to achieve that audit or obtain that audit. As it relates to Smarter Well Management, as Rusty somewhat alluded to, we have opportunities every day. I tell Rusty, our project pipeline is endless. And then once we complete 1 project, 5 years later, we can go back and do it again.

As it relates to maintaining or continuing that legacy production like we have over the last 6 quarters. That's a great question. It's something we work on every day. I don't have a crystal ball there. My level of confidence as we go forward into 2020, is high. I know the projects that we're working on now, and I would not be surprised if we were able to continue that at least through this year.

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Unidentified Analyst, [4]

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[Thomas Streater] from [Streets Investment Research]. I think the midstream part of your business is very useful. So do you have a sort of target in terms of the size you want to have in midstream as part of your overall business?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [5]

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Yes. So the midstream business, we're not in the midstream business, per se. What we are in the business of is to acquire these pipelines, where we have a high percentage of our production going into, where we can control our own destiny, keep it out of the hands of people who may want to try to put higher cost on them, but also give us options as to where we're moving our gas to, to be able to seek higher gas price markets.

So I would say that we will continue -- I would say that we'll do a couple more of those type of transactions this year. I think there are some pipelines out there that are very, very opportunistic for us in terms of being able to give us that control over pricing. But as far as trying to go out and find midstream businesses, that's not what we're in the business of doing. It all comes down to, does it help us to control our own destiny, and does it get us better price markets.

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Unidentified Analyst, [6]

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Right. But do you have a target of how much of your own gas you want to be sending through your own pipelines?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [7]

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Well, most of the pipelines that we're buying are typically 60% or more. So that would be the gauge for us, is if we can get these pipelines and move a pretty high percentage of our gas, 50% to 60%, that would be really, really optimal for us.

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Unidentified Analyst, [8]

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Okay. And one final question, it's great here in London. I really appreciate it. But why not list in New York?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [9]

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Well, up until this point, there -- we've just been too small for the New York. We're starting to get there, of course, with the share price where it's at today. But what I would say is, is that there will become a point, and it could be this year, where we will look at a dual listing in the U.S., where we'll continue to keep our main market here in London but a dual listing in the U.S. where we can access pools of funds there also.

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [10]

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It's probably -- to that point, I think it's probably worth reminding, the step-up to the main market and the premium list, I think is the first step in that direction. As we've started to have meetings with investors in the United States who are following us, we've become far more investable on that platform. But then with the right event and the right catalysts, there's definitely expressed appetite for that dual listing.

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Malcolm Graham-Wood, Hydrocarbon Capital - Founding Partner [11]

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It's Malcolm Graham-Wood from Hydrocarbon Capital. I've got sort of 2 or 3 questions, really, if I may. And the first one actually is interesting regarding the last question. Because I'd like -- I think I'd like to ask what you think your peer group is and what you think it might be. Because to me, that's changing a little bit, changing in terms of defensibility, it's changing because of the midstream. And to be frank, it's one of the things that I've had an interest in, is that over the last year or 2, quite a lot of E&P companies are starting to pay dividends. Not all of them, I would say, are entitled to do such a thing. And that's for 2 reasons. And one is, I've never heard it approved of the issue with raised equity money and then pay it out in dividends and market buybacks. And the second thing is that you shouldn't raise equity for drilling wells. The second thing doesn't apply to you because you don't spend any money on the acquisitions you make. So that's the first question, if I may.

And the second question really is, this business is changing -- to a certain extent, similar to the first question. But this business is changing so much. I'm perhaps have been looking at it for some time. And the more I get a chance to write about it and to compare it with others, the more you're out on your own in terms of the model that you talked about. Is that something, would you think, is going to be able to take you to another level?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [12]

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Well, I'll start with that second question in terms of where we're going. We are so different, [Malcy,] than everybody else. It is hard to find a peer group. I mean if you look in Appalachia, for example, everybody for the most part is shale, which is a completely different model than ours. And frankly, most of those are in big trouble right now. I've said for a while that the shale, especially the natural gas shale plays, it doesn't even work without subsidies. It's kind of like solar and wind, it doesn't work without government subsidies because of the cost. I think shale is that way. I think you can't outgrow -- you're putting all this production line, you can't keep up after a while. You're outspending cash flows, it just doesn't work very well. And then what they did, that I believe where they really screwed up, was they sold me all their cash flowing assets. If they were to keep that cash flow pinning underneath their structure, they would have been able to probably drill and still be able to have cash flow. But beyond that, I think the shale model is broken.

So it's hard for us to find what I would consider to be true peers. I think the mineral companies, the model of the mineral companies, looks a lot like us, but they just don't have operational control. So they're at the mercy of the drillers that own the leasing rights to drill on. So I think, overall, we're so different. But really, I've never called this an E&P company. I really haven't. I've always said it's a cash flow company, cash flow modeled company that just happens to have some oil and gas assets behind it, creating the cash flow. And businesses are businesses because they have a product or they sell something and they make money. And the E&P sector has not made money for a while. And so I think that's what's really distinguished us from everybody else is the fact that we're out there actually making money and doing it very effectively. But we look at our operations, a lot of these guys that are heavy drillers aren't operators. They don't -- once the well is drilled, they don't really focus on it much. And that's really where I think we have made the biggest impression is being able to take wells that -- even shale wells. I mean wells that aren't that old and operate much more effectively than the previous owners.

So I think, overall, that because the model is so different, we have a tremendous opportunity. And I'm only going off of what I'm being -- what I'm seeing in the market. And then the calls that I'm getting and the people that I'm talking to within the investment banks is that we are in a very, very, very advantageous spot. And I think that if we can access pools of capital -- obviously, the equity markets are going to be tough, but if we can access pools of capital out there, it would not be a stretch to hit the $2 billion, $2.5 billion worth of acquisitions in a very short period of time. And that puts us in a whole different ball game of now we've got lots of different assets. We've got a lot of different cash flow streams with different types of assets. And I'm not even talking about staying in Appalachia. I'm saying, it doesn't really matter to us. There are some scalable assets all over the country that are going to be in the market.

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Malcolm Graham-Wood, Hydrocarbon Capital - Founding Partner [13]

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You said that -- that means that there's a possibility that, actually, the acquisitions that you make, I've got a feeling that there are people in this marketplace who really don't know where the other sector is going at the moment, and the investors are probably at the front of that queue. More importantly, the investments that you make, the acquisitions that you buy will be deemed to be M&A as we go through the next year or 2. And it will be the M&A -- the prices are actually paid for businesses and for acreage and so on that will determine what the price, what the market of the oil sector is?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [14]

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Yes. That, I think so. In the M&A market, at these prices, with natural gas where it's at and oil now being depressed and the distress in the market, if we can buy assets in this price environment, there's tremendous upside. And so you buy them on these valuations, you buy them on these commodity price strips, I told some of the institutional investors as we were going through the Credit Suisse Conference last week, this natural gas strip price is the lowest that we've acquired assets on since I've been doing business in 2001. Yes, we've had prices this low but never with the strip, with the curve being so flat and with no contango like we've got right now.

So if you can buy them on these prices and factor that into your pricing models, we run models all the time, moves of gas of $0.10, $0.15 have tremendous value to your company on the back end of those transactions.

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Malcolm Graham-Wood, Hydrocarbon Capital - Founding Partner [15]

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And you do the deals because you can, or because (inaudible).

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [16]

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Absolutely. And there is a lot of fear in the market right now.

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Malcolm Graham-Wood, Hydrocarbon Capital - Founding Partner [17]

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Yes. (inaudible)

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [18]

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Yes. And I -- going back to the -- the whole Saudi and Russia price war, it's -- I don't blame them. I don't blame Saudi and I don't blame Russia. Somebody needs to put an end, and I'm from the U.S. if somebody needs to put an end to the U.S. living off of Russia and Saudi, holding up the oil price. So they cut, they keep the production down so that the U.S. can just produce more. U.S. needs to stop. And they're creating the problem, let them feel the pain.

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Unidentified Analyst, [19]

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Two questions for me. The first is around the reserve. How sensitive would be the PDP volumes to this lower gas price that we have seen recently? So if we say if gas prices were $1.50 as well on the bottom end, what does that mean for the reserve volume PDP?

And my second question is around acquisitions. As you said, you have opportunities all over the place. So if we are to look at the type of acquisition we'll be making now, will that be more sort of shales, the last one? Or go back to what you used to do, which was conventional?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [20]

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Yes. Well, on the second part, on the acquisitions, we don't even have a preference. I will tell you that we're looking at both. There's still some conventional out there that is very attractive to us. We like conventional. In fact, it's funny Brad had texted me the other day and said, do we want to buy an asset that has so many wells, or do we want to buy this unconventional that has a lot fewer wells? And I said, well, it's those conventional wells that really are, as I said earlier, the underpinning low declines, they just sit there and do what they're doing over a long period of time. They give you a lot of levers to pull and you can keep that production very flat. The unconventional, you can slow it down, but it still want to have some decline rates that you can't really stop. But the unconventional, the positive one, it is a low cost. It's extremely low cost to operate. And so it really drives those metrics, those expense metrics that we see continue to come down, the Marcellus and the Utica wells have a tremendous impact on those.

On the PDP, going back to the cost or the price of gas and how it will affect the production, it won't impact at all, okay? But obviously, anytime you have price reductions like this, you're going to see some value come off of your PV10, which is what they -- the borrowing bases and stuff are redetermined on. But what we've done is we've managed that. And what I mean by that is these securitizations, we've essentially taking -- taken redetermination risks off of our RBL and essentially, put it into fully amortizing notes. And so that PV10 value was moved, but it was at a higher advance rate than what we were getting on the RBL anyway, so we were able to pay down the RBL more than that we were getting credit for there. And so we're -- and we're going to do that again. So we're taking all the redetermination risk kind of off of that as we do those structures and permanent financing.

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Unidentified Analyst, [21]

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[Chris] from Stifel, 2 questions for me. Brad, first to you, please. Slide 12 refers to a 5% underlying decline rate. What are you spending to, if anything, to hold that level at 5%?

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [22]

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I'm sorry, you said Slide 12?

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Unidentified Analyst, [23]

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Yes.

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [24]

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Okay. Well, from a recurring CapEx standpoint, I think Eric -- actually Eric, kind of capital expenditure slide and we're at what, 6% to 8% overall CapEx...

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [25]

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Yes, so the upstream assets, those 60,000 wells, it's less than $2 million of CapEx to maintain, which is, as I said, mostly vehicles. So all the cost of Smarter Well Management is captured in LOE, just operating expense.

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [26]

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[Chris], one thing I'll tell you. This right here, this is a natural decline. This is what -- if you engineer it on wells, that's what they will engineer at, 5%. But we've held it flat. So we've had 0% in those same wells. And what this is showing you is by us since -- I don't know what the date -- what the actual date is that, June '18?

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [27]

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'18.

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [28]

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June of '18 until now, by us holding that production flat versus a normal 5% decline rate, it's added $24 million of revenue to our bottom -- to our income statement.

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [29]

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And the vast majority of that spend, to your question, is in that 771 BOE cost. The capital that we're spending from an upstream standpoint, there might be a little bit of capital here and there. It's mainly fleet related. The majority of our true capital is in our midstream operation.

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [30]

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Maybe to give a context to a swabbing job, what the type of individual activities we call.

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [31]

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Yes. So a workover in our business, especially on the conventional side, could be anywhere from $1,500 to $5,000. And so we're typically not capitalizing that.

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [32]

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It just runs through our direct operating expense.

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Unidentified Analyst, [33]

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Great. And Rusty, a question for you, picking up on your point on the ABS securitization you've done. If you had an infinite amount of capital available, how much of your production would you like backed by ABS and, therefore, implicitly by the hedging? If you had all that capital available, would it be 1/3 of your production? Half? Or 70%? What do you think the optimal level is, bearing in mind that the more hedging you've got, the more leverage you -- in theory, as a business you should be able to withstand?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [34]

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Well, the way we look at securitization and the way we look at our RBL is our RBL is never a permanent financing. So it should always be -- there should be a room, availability on it to go out and to acquire an asset with the liquidity on your RBL and then taking an ABS or other structure, whatever it ends up being and permanently financing that off and keeping the liquidity on your RBL to continue to fully loaded so that you can go out and look to acquire assets. So...

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Unidentified Analyst, [35]

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So the RBL is kind of an overdraft, it becomes kind of an overdraft facility...

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [36]

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It's really just the liquidity in the business. Yes.

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [37]

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Yes. I think, obviously, long-duration assets, ideally have long-duration financing. But if you look at where the financing market has been and the E&P sector, high yield, which is the typical go-to double-digit coupon, and that's just not of interest to us. So we had to, frankly, go create a better long-term financing vehicle to match with these assets. We also didn't like that high-yield is a bullet payment. That becomes a freight train coming at you, perhaps at the most inopportune time. So if we had stable cash flows that are throwing off every month, we'd like to have that amortizing structure that's a glide path back down to the end of that financing structure. There's always the availability to roll it forward that's built into the instrument. So I think if you think about just typical being around 35% to 50% drawn on RBL because we do delever so naturally, it gives you the ability to put it on the balance sheet, avoid interest expense but then draw it back on demand. Whereas with an ABS, it's amortized that's gone until you do a refinancing. So it's less liquid from the standpoint of being able to fund future growth. So there is that symbiotic nature between the 2. But ultimately, we're very, very much focused on a coupon. And so we mean ABS is the right vehicle for assets like ours.

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [38]

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Yes. And one of the things I would point to, our industry has used the high yield for so many years. And that high yield, kind of like with the other institutional money had dried up. It actually became available, like you saw a couple of companies who had those bullet maturities coming up on them pretty quickly, EQT, Range Resources, a couple of others. They all did those in the first quarter, and all of those high yields are trading at $0.70 on the dollar or less already within 2 months. Not a good way to, for your institutional holders to feel comfortable with your company. So we've taken all that off the table. We don't like high yield, we won't use it. It's not really a good tool for us. The ABS, fixed rate notes with longevity and long-term hedging, those are the way for us.

Anybody else? Yes.

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Timothy Alan Hurst-Brown, Mirabaud Securities Limited, Research Division - Energy Analyst [39]

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Tim Hurst-Brown from Mirabaud. Just a quick question on operating costs. So in Q4, operating costs and G&A were $1.18 an Mcf. Just wondering how you see that trending over the course of this year? Any potential it's going to go lower?

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [40]

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Well, we'll at least stay at $1.18. I don't know. I'm hopeful that we'll be able to bring it down further, with Brad's -- with the -- but that $1.18 is pretty darn low. And so you're starting to get down now to where you've got to really tweak on the expenses to get it lower than that. And not to say that we won't be able to do it. We're going to find some things. I mean you talked about the compression, switching from -- I never thought today would come when electricity would be higher than natural gas, but that's where we're at in the world. And so we'll take advantage of moving a lot of our compression to natural gas and see if we can lower cost pretty substantially there.

And there's a lot of those kind of things out there. We're going to look at rightsizing some more in the organization and cutting some -- where we've had multiple people acquired in some acquisitions. We've done that in the south already. We've lowered our number of people down there, and we're going to look to do some of that in the north. So there's still things out there. But I'm not going to come right out and say that we're going to be able to go lower than $1.18, but I'd like to.

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Bradley Grafton Gray, Diversified Gas & Oil PLC - Executive VP, Finance Director, COO & Director [41]

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But we did stabilize and really implement some transformational changes in our workforce. And in the third and fourth quarter, mainly in the fourth quarter. And I believe that's going to -- that trend is going to continue as we go into 2020.

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Eric M. Williams, Diversified Gas & Oil PLC - CFO [42]

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And then just the -- I'd remind, the investments we made in data capture and the ability to have actionable data that these guys can use to determine where is the best use of their time, I think will ultimately go to that as well. It may not be necessarily you're driving absolute cost out of the system, but anything we can do to continue to optimize those wells will further improve the unit cost. So there's -- we have a lot of tools, I'd say, in our chest to work with.

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [43]

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Anyone else?

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Unidentified Analyst, [44]

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(inaudible)

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [45]

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Wonderful.

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Unidentified Analyst, [46]

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(inaudible)

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Robert Russell Hutson, Diversified Gas & Oil PLC - Co-Founder, CEO, President & Director [47]

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Very. We'll take it. Well today, that's for sure. Okay. Thank you all for coming.