Financial Results Overview

For the six months ended 30 June 2020, we recorded net income of $18 million and Adjusted EBITDA[1] of $146 million. These results reflect average production of 95 MBoepd, including one month's contribution from the Acquisitions, which continues to benefit from our Smarter Well Management programme and continues to maintain our Legacy production at nearly 70 MBoepd. Historically low commodity prices drove a 23% decline in commodity revenue, which was offset by a 1,025% increase in our net cash settlements from commodity derivative contracts, demonstrating the strength of our robust hedging programme.

We also reported a gross profit of $30 million and a net operating loss of $31 million, reflective of the low commodity prices and non-cash $110 million charge to adjust our long-dated derivative contract portfolio to their estimated current market value. Our proactive hedging programme and low-cost operating structure sustained an operating Cash Margin¹ above 50%, since the second half of 2018. As we look out across the natural gas futures price curve, we're encouraged to see supply rebalancing and thus providing a foundation for higher prices. To reduce the volatility of our cash flows and to support our long-life, low-cost financing strategy, we utilise long-tenor hedging to provide price protection on a portion of our production for up to 10 years.

Of course, while we benefit from rising prices on the unhedged volumes we produce and sell, higher prices can generate non-cash mark-to-market valuation adjustments on existing derivative contracts, particularly those that are long-dated with significant time-related option value. As we see the futures natural gas price curve, signaling higher prices, certain of our long-term derivatives sit in a liability position.

While at 30 June 2020, our commodity derivative contract portfolio reflects a net $40 million liability, when we compare the futures price curve to our actual hedged prices, the cash settlement value of the portfolio is a positive $31 million, which will positively impact our cash flow. This analysis demonstrates that the contracts' option value over such a long horizon drives the estimated net liability balance. As time passes and the option time value declines, absent changes to the future price curve, this liability will decline with no impact to cash flow.

During the first half of 2020, we received approximately $84 million from our derivative contract settlements, and they are poised to continue positively contributing to our cash flow, with a $62 million net current asset value. Net income also includes the benefit of significant federal tax credits we earn from producing gas in a low price environment that sustains hundreds of jobs and pays millions of dollars of production taxes into the local economies in which we operate. These tax benefits of approximately $70 million in 2020, not only offset much of the current-period non-cash unsettled derivative contracts valuation adjustment, but more importantly may offset significant federal cash taxes for several years based on current earnings levels.

Corporate Milestones

Reflective of a differentiated business model, we successfully secured both debt and common equity financing during a time when these markets have been firmly closed to most U.S. producers. We used this access to further strengthen our balance sheet, positioning us for continued success in the current environment.

We began the year welcoming Credit Suisse, Goldman Sachs and Morgan Stanley to the lending syndicate, increasing our Credit Facility lending group to 17 banks, and further enhancing the suite of available hedging counterparties to protect our cash flow. We rounded out the half-year in the midst of a turbulent market environment with this group of banks collectively reaffirming our borrowing base at $425 million, whilst many other producers saw their facilities reduced as the result of lower commodity prices. Our lenders' reaffirmation is a testament to the quality of our low-decline, long-life reserves and their confidence in our team's ability to continue the successful progression of our strategy.

Beyond our bank syndicate, in April 2020, we announced the ABS II Note, principally anchored by ESG-focused investors like Nuveen, the investment manager of TIAA. The ABS II Note is fully-amortising over 8.5 years and has a 5.25% fixed -rate coupon demonstrating our commitment to prudently use our Free Cash Flow¹ to repay debt ratably over time supported by our robust hedging portfolio and long-life, low-decline assets.

In May, we funded a portion of the Acquisitions with the Term Loan I, underwritten and funded by Munich Re Reserve Risk Financing, Inc. "(MRRF"), a wholly-owned subsidiary of Munich Re. While its 6.5% fixed coupon is slightly higher than the ABS II Note, and reflects a widening in credit spreads during the pandemic, the rate supports an accretive addition of assets to our asset portfolio and benefits from its own 10-year hedge portfolio to protect the financed assets' underlying cash flows. MRRF's financing of the secured term loan marked the second time in seven months that it invested in our business model, increasing their investment in Diversified to $360 million including its investment in our inaugural $200 million fully-amortising note ("ABS I Note") in November 2019.

To complement the Term Loan I and complete our funding of the Acquisitions, we completed a successful equity raise of approximately $85 million from a broadening base of institutional investors.

During the last nine months, we successfully completed three financings, the ABS I Note, ABS II Note and Term Loan I, that refinanced at more compelling rates than Credit Facility borrowings, thus reducing our reliance on the bank syndicate and eliminating redetermination risk. As a result, approximately 72% of our debt now sits within fully-amortising structures over an eight to ten year period, which provides visibility to our declining leverage and eliminates the refinancing risk associated with bullet maturities. We have proactively positioned ourselves with a strong balance sheet and supportive group of lenders to pursue growth opportunities.

Turning to the Acquisitions, for $112 million (net of customary purchase price adjustments to the effective date) we acquired from EQT approximately 900 net operated conventional and unconventional wells along with the related infrastructure. Due to the geographic concentration of these wells within our own existing operational footprint, we have been able to leverage our talented Legacy field personnel to manage the assets, successfully folding these wells into our portfolio. The EQT assets also included 13 wells classified as proved, developed non-producing, or PDNP, which offer additional upside to the transaction since we allocated no value to these wells in our valuation. We are currently evaluating these wells to determine the time and costs required to turn them to production. Notably, this purchase marks the second package of wells we purchased from EQT (the first being the $575 million largely conventional package of wells in mid-2018) demonstrating the value of our established, in-basin relationships as EQT and others pursue strategic initiatives such as asset sales to reduce debt, focusing their operations around core areas, or both.

The Acquisitions also included approximately 6,100 conventional wells and 4,700 miles of midstream assets from Carbon for cash consideration of $98 million (net of customary purchase price adjustments to the effective date). Strategically, the addition of these midstream assets expands our midstream system to nearly 17,000 miles and enhances our ability to (1) control the flow of our own production, (2) access premium priced markets, and (3) generate third-party revenue by transporting others' production on the system. We recognised immediate synergies from the acquisition of these geographically proximate assets by retaining approximately 80% of the existing Carbon workforce, reducing associated payroll expense by approximately 25%.

The Acquisitions in total add approximately 6,900 conventional and some 70 unconventional producing wells to our Appalachian portfolio. The conventional wells further establish our presence throughout the basin, uniquely allowing us to rapidly scale our operations. Adding the unconventional wells to the portfolio with their higher per-well production rates allows us to leverage the fixed costs of an already assembled workforce and further reduce unit-level operating costs.

Having closed on the Acquisitions, we now turn our attention to the successful integration of these assets into our Smarter Well Management Programme with its proven ability to enhance well productivity while reducing unit-level expenses. Inclusive of these newly acquired assets, we exited the mid-year with net daily production of 109 MBoepd.

Cash Flow & Liquidity

Our focus on acquiring assets from which we can generate healthy Free Cash Flow¹, even in an environment of lower commodity pricing, remains central to our business model. Our discipline in properly valuing acquired assets, protecting the associated cash flows with an opportunistically placed hedge portfolio and proactively working to enhance the assets' productivity and reduce expenses, ensures their accretion to earnings and dividends. This period was no exception as we maintained a strong Cash Margin¹ of 55% through the six months ended 30 June 2020, exited the half-year with a Free Cash Flow Yield¹ of 32% and increased our 2Q20 dividend by 7% over the 1Q20 dividend.

Our long-life, low-decline assets require minimal ongoing capital expenditures, thus generating significant Free Cash Flow¹. Since our 2017 IPO, we've consistently distributed approximately 40% of this Free Cash Flow¹ to our shareholders through our stable dividend with a similar amount allocated to debt repayments. Over the same time period, our dividends paid and declared are approximately $218 million and total $166 million paid through June 2020. With a consolidated Trailing Twelve Month ("TTM") Net Debt-to-Adjusted EBITDA¹ at 30 June 2020 of 2.19x and approximately $220 million in liquidity, inclusive of cash and availability on our Credit Facility, we are well-positioned to respond to opportunities that create long-term shareholder value.

During this period of economic uncertainty stemming from the COVID-19 pandemic, companies across all sectors have cut, suspended or eliminated their dividends, and volatile commodity prices have increased the strain on companies within our sector. Our sustained dividend differentiates us from our peers, and in the first six months of this year we have paid more than $47 million in dividends. Further, differentiating our model and following another operating period of consistent and strong cash flows, our Board is pleased to declare an interim dividend of 3.75 cents per share in respect of the three-month period ended 30 June 2020, which as previously mentioned is 7% higher than the immediately preceding period per share dividend.

Commodity Volatility

For the six months ended 30 June 2020, we recorded net income of $18 million and Adjusted EBITDA¹ of $146 million. Net income was largely reflective of a $110 million non-cash loss on unsettled mark-to-market derivatives partially offset by $70 million in federal well tax credits while Adjusted EBITDA¹ was primarily driven by the strength of our hedge portfolio and high-margin assets.

Commodity price volatility continued during the first half of 2020 when realised natural gas prices (unhedged) averaged $1.67/Mcf, well below that of our realised natural gas prices (hedged) of $2.34/Mcf for the period. The strength of our well-placed commodity hedges contributed to a total $84 million settled hedge gain for the period and drove an Adjusted EBITDA¹ of $146 million. Current forward commodity prices have since begun to rebound, driving natural gas prices in excess of our longer tenor portfolio hedged prices and generating a $110 million non-cash mark-to-market loss on unsettled derivatives as of 30 June 2020. The non-cash loss on derivatives adversely impacted net income of $18 million for the period. The rebound in commodity prices, however, does bode well for our future revenue as future unhedged production stands to benefit from higher market prices.

Our relentless focus on expense management has served to bolster our already lean cost structure and to meaningfully offset lower commodity prices as experienced in the first half of 2020. Our daily operational goals focus on "Efficiency-every dollar counts" and "Production-every unit counts" and empower our employees to seek out and implement cost reducing processes and activities so we can thrive in any commodity price environment and continuously return value to our shareholders.

Our focus on expense management is only half the story as we strive to fully enhance margins with a proactive and consistent hedging policy. Our prudent risk management practices result in timely layering in short and long-term hedge protection in the form of financial NYMEX swaps, collars and basis swaps. We strategically execute NYMEX hedges when the respective prices move higher, or add basis hedge protection when prices move lower, and basis differentials are often compressed. Our long-life, Free Cash Flow asset portfolio dictates a longer-term approach to hedging than most of peers in our industry. The longer-tenor hedges in our portfolio not only insulate our fully-amortising debt from commodity price volatility, they also add durability to our cash flows and support a consistently strong dividend to our shareholders.

We also seek to minimise the impact of lower commodity prices with our vertically integrated upstream and midstream systems by strategically moving gas production to alternative accessible markets. Our midstream system provides important flow assurance and allows us to nimbly shift transportation of our production to more attractively priced markets to capture value beyond the wellhead.

Operational Update

We are living in an unprecedented, challenging time with the global COVID-19 pandemic which is having a substantial impact to people and economies around the world. I would like to thank our more than 1,000 employees at DGO who have quickly adapted to these challenging times to ensure the uninterrupted production of low-cost, reliable energy for the communities in which we operate. It is a testament to the daily commitment and care of our family that we have managed through this time with unwavering perseverance and dedication to deliver operational excellence.

With a midstream system that now spans approximately 17,000 miles, we similarly expand our "Acquire-Optimise-Produce" business model to be "Acquire-Optimise-Produce-Transport' to better reflect our strict focus on cost discipline and operational efficiencies. While we fully integrate our newly acquired EQT and Carbon assets, we continue to engage in daily activities in both our upstream and midstream operations that seek to increase production, minimise costs, and maximise revenue - all of which contribute to our ongoing ability to fund dividends and reduce leverage. Some of the many examples of these activities within our midstream system include:

• Transporting gas production to premium-priced markets and re-routing Btu-rich gas from NGL processing plants during periods of low NGL prices to maximise realised prices;

• Right-sizing and eliminating redundant or leased compression equipment to help ensure flow control and optionality in addition to lowering operating expenses and increasing production; and

• Gathering and transporting third-party gas volumes to optimise assets and further supplement revenue.

ESG and Corporate Responsibility

As announced in our full-year results and evidenced by our inaugural Sustainability Report in March of this year, our Board and Management team continue to place significant focus on ESG. We believe wisely stewarding the resource already developed by our industry is central to ESG. Accordingly, we've placed particular emphasis on effectively managing later-life producing wells to fully realise their productive lives before safely and responsibly retiring those wells.

With approximately 99% of our total production coming from natural gas and NGLs, we are supporting the U.S.' drive to reduce carbon dioxide emissions. Approximately 37% of total U.S. natural gas supply comes from Appalachia, and that production continues to be a major contributor to the consistent and substantial reductions in U.S. carbon dioxide emissions as natural gas fills the market share lost by coal and oil. The positive environmental benefits of increased natural gas consumption for energy generation are evident when you consider that natural gas emits approximately 50% less carbon dioxide emissions compared to coal.

Our business model is built on the concept of sustainability - we acquire neglected or non-core assets and then focus on optimising their productivity or usefulness until the end of their natural lives. This model works for both our upstream and midstream assets where we consistently engage in smarter "asset" management activities that not only reduce unit operating costs, create efficiencies and increase margins but also eliminate potential associated emissions that may be present. We recently enhanced our emission detection efforts with the implementation of multiple hand-held leak detection devices capable of detecting flows as small as one part per million of methane in the air. While these devices serve to aid in the detection of carbon emissions, they do not replace the daily efforts our well tenders apply in inspections of the wells, related equipment or midstream assets during their routine well site visits.

We also serve as good stewards of the environment in our cooperative agreements for the retirement of wells within our operating states. In March 2020, we extended our original five-year definitive asset retirement agreement with the state of Ohio by an additional five years, now covering asset retirement activities through the period ending 31 December 2029. This action brings all our retirement agreements, alongside those in Kentucky, West Virginia and Pennsylvania, to a minimum of 10 years - establishing ourselves as a long-term partner with our primary states of operation and providing us with operational and financial stability and visibility in regard to the plugging programme.

In the year to date, we have retired 52 wells at an average cost of $24,779 per well as compared to our expected average cost to retire of $25,054 per well, in line with our cost estimates and reflective of our diligence to plug wells safely and efficiently. These retirements represent approximately 60% of our current year retirement obligation as per the agreements. Since inception of our retirement agreements with the states in 2018, we have now retired 192 wells at an average cost of $23,463 per well.

During this ongoing COVID-19 pandemic, we remain fully committed to the health and safety of our employees and the citizens of the communities in which we operate. We are pleased to report that though this unprecedented time has been economically challenging for many individuals and companies, DGO has not experienced similar difficulty and instead has incurred no personnel layoffs nor reduced the salaries or benefits paid to any of our employees. In fact, as part of our continued growth through acquisitions, we welcomed 124 employees to the Diversified family who came from the Carbon acquisition and we extended the same excellent health and wellness benefits to these newest team members. Additionally, as part of our expanding employee resources, our new team members are also eligible to participate in our recently adopted company-wide educational assistance programme which encourages continuing education in job-related areas or that may lead to promotional opportunities within our company.

As an acquisitive company, we've experienced tremendous change and growth since our IPO on AIM in February 2017, spending during this time nearly $1.7 billion to acquire accretive, cash generative assets that have allowed us to build both scale and operating synergies. The AIM was a tremendous springboard for us in our pursuit to establish and build our position on the London market through the successful execution of a clearly defined growth strategy. As a result of that growth and after just three years, we announced last year our intention to obtain admission to the Premium Segment of the London Stock Exchange, and we saw that goal come to fruition in May with our move up to the Main Market. We believe the move to the Main Market, among many benefits, provides a better suited and enlarged funding platform to continue the execution of our growth plan that is driven by both a disciplined fiscal policy and rewarding dividend policy.

Our step up to the Main Market came under the vision and leadership of a governance structure that was also transforming. Last year, we increased the composition, independence and diversity of our Board with the addition of three new independent non-executive Directors. We named an independent Board Chairman and Lead Director, and also appointed independent non-executive Directors to chair the Audit & Risk, Remuneration, and newly created Sustainability & Safety committees of the Board. We further appointed new independent legal advisors, accounting auditors and reserve auditors. A move to the Main Market inherently brings with it a commitment to strong governance, reporting and operating standards, and we believe these Board and advisory changes will support that commitment as we progress our strategy.

Outlook

Despite the current market backdrop, we are well-positioned to step into the second half of 2020 and continue to do what we do best - engage in operational activities that minimise cost and maximise production; create value through opportunistic hedging practices and value-adding financing arrangements; and, strive to maintain a clear line of sight to cash flows that provide strong shareholder returns and drive debt reductions. As near-term priorities, we will continue to integrate the EQT and Carbon assets and identify value-deriving smarter "asset" management activities for both the existing and newly acquired upstream and midstream assets.

This lingering period of low commodity prices has not been helpful for our natural gas and oil industry peers who have traditionally focused on expensive growth through the drill bit and now find themselves over-leveraged and with near-term maturities that must be satisfied. Recognising the need to lower costs and generate positive cash flow, those companies are now being forced to reevaluate their portfolios and determine what assets they can trim to best re-fortify their balance sheets. As these companies work to realign their forward growth and financial strategies, we believe it will provide ample opportunity for continued complementary and accretive growth for us, and we continue to look for such opportunities.