Diversified Energy Share Discussion Threads

[scrwal] 06/4/2022 12:42

greygeorge

The taxes issue is referred to in the First Berlin Research reports.

Also see redtom1 post 2441 which indicates the implications that DEC pays tax at market rates because of closing the hedge for 100 at $2 and selling at $3 but the net position excluding taxes doesn't change at $200 - taxes are levied on the open market sale at $3.. This is my simple take on it and could be wrong.

[11_percent] 06/4/2022 12:26

Aleman..... for one appreciate your graphs.....please continue to post.

Cheers.

[aleman] 06/4/2022 11:42

Gary1966
6 Apr '22 - 11:18 - 2488 of 2490
0 0 1
Aleman,

Given that 90% of 2022 production is hedged, is there much relevance to posting any chart for 2022?

Yes, posting short futures will be useful occasionally if moves are significant. 10% is not hedged and the very sharp rises in short prices seem to be slowly dragging the longer prices up. The profit margins in the unhedged stuff must be phenomenal if they generate plenty of profit at $3. The rise to $6.20 since $3.00 last summer must be close to pure profit. It might only be on 10% but that's still going to be a huge rise in profit. The rise in the last 24 hours alone is 30 cents. That's why I posted it. It's significantly bigger than previous rises. I said I hoped to post price charts less if things calmed down but the rise in recent weeks have been quite something.

[lab305] 06/4/2022 11:35

Gary1966 indeed I agree with all that you say . It is the very high percentage hedged that galls me.

[gary1966] 06/4/2022 11:18

Aleman,

Given that 90% of 2022 production is hedged, is there much relevance to posting any chart for 2022? I do appreciate the charts though but just thought it may save you some time as DEC aren't going to benefit much from rising prices this year. Obviously from 2023 and particularly 2024 onwards there is great relevance.

Lab305, No tirade from me as I am on record that in these times I would have preferred them to hedge sufficient to cover debt/dividends/capex then let the rest run for free and was happy for them to stop at 75% for 2022. I will stress again though that our gas sells at a discount to the spot prices you are comparing them against and always will do, also some of those 2024 hedges were probably part of the recent acquisitions, we get that price all year round so covers the weaker pricing environment during the summer months and finally hedges have to be taken out as part of the terms for financing.

[aleman] 06/4/2022 09:45

Short contracts jumped sharply yesterday.

May 22


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[greygeorge] 05/4/2022 17:26

scrwal, could you provide a source, or link to the US taxation of oil and gas at market prices rather than actual sold prices (whether hedged or spot). I know US taxes can be convoluted and complicated but I can't find any published material that backs up this assertion I've seen you make a few times lately. Thanks.

[gary1966] 05/4/2022 14:52

DEC have always said that they receive less than HH prices for their Appalachian gas.

[aleman] 05/4/2022 13:48

Note that I have no idea how closely DEC's contracted prices are likely to track these futures. Can anyone comment if they operate directly in such futures markets or contract (similarly priced?) commercial supply agreements off-market?

[simplemilltownboy] 05/4/2022 13:43

Wow that's some gradient, thanks Aleman. Hopefully we should be locking in some good forward prices. GLA

[aleman] 05/4/2022 13:39

I can't be bothered to keep posting futures charts every day over all timeframes but they are up significantly again over them all. Here's April 2026.


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[aleman] 05/4/2022 13:23

LNG export expansion is already under way in the US so DEC seem well placed. I'm not familiar with the nature of these figures, though, so please check for mistakes.


Onstream just now and 10 mtpa when full capacity reached in late 2022.



20mtpa onstream 2026



20mtpa onstream 2025



Europe imports about 8000 mcm per week or about 0.6mt, so 30mtpa. Russia provides about 1/3rd of that or 10mtpa.

[aleman] 05/4/2022 11:03

I've deleted post 2474 about a dividend in cents. It was meant for another thread. Sorry for any confusion.

[spangle93] 05/4/2022 10:21

Latest Cenkos note is now available, which includes quantitative updates following the results.

They state they have "updated our model following the final results, making the following changes".
 Updated our price assumptions to the latest commodity price forward curves:
 WTI: 2022: US$100/bbl, 2023: US$86.4/bbl, Long-Term: US$67.8/bbl.
 Henry Hub: 2022: US$5.2/MMBtu, 2023: US$4.1/MMBtu, Long Term: US$4.4/MMBtu.

 Increased our NGL differential assumption from US$14/bbl to US$17/bbl to be in-line with the actual figure reported by Diversified in Q4/21.

 Updated the corporate mmbtu factor from 1.1 to 1.07.

 Updated our commodity derivatives portfolio as per Diversified’s update as at 17 March 2022.
 2022: 90% of natural gas production hedged at a floor price of US$3.19/Mcf.
 2023: 70% of natural gas production hedged at a floor price of US$3.06/Mcf.
 2024: 50% of natural gas production hedges at a floor price of US$2.85/Mcf.

 Updated our production profiles and decline curves to incorporate the Company’s
774mmboe of PDP reserves.

 Updated our operating expenses in-line with the Company’s Q4/21 reported figures, which includes a full quarter of production from both the Tanos and Blackbeard acquisitions:
 Base LOE: US$2.74/boe.
 Midstream Expense: US$1.28/boe.
 Gathering and Transportation: US$1.86/boe.

 Included the restricted cash and the transaction costs associated with the ABS III and IV notes.

 Increased our 2022E and 2023E capex to include the costs associated with the Company’s emissions related capital commitment


The result of all this... the target price remains 168p :-)

[holts] 05/4/2022 07:51

Cassini , thank you .

[aleman] 05/4/2022 07:49

Edited - Wrong thread.

[cassini] 05/4/2022 00:20

HOLTS,

Yes, II is correct to give 2.7p in an ISA. You still get taxed at 15% if DEC is held in an ISA.

Only a SIPP will shield you from all the withholding tax (and even then, oddly enough, only with some brokers - see the header here for more info).

[holts] 04/4/2022 21:05

Help if possible please , I have an II isa , got 2.7pence with a w8 filled in , is that correct? Do you only get the full 3.24 if in a sipp ?

[lab305] 04/4/2022 19:13

sunbed44 maybe you should get a grasp on history. I invested heavily here in 2017 and 2018. There were real increasing profits then and no mention of hedging. I did plenty of due diligence and attended three shareholder meetings at Buchanan . I don't remember you there.
The share price rose strongly reaching 126 in 2018 and then 133.5 in 2019. Oh bliss !
Then hedging started. Profit went into reverse with ever growing losses year on year as hedging increased. Of course we are told that these are not real losses but you didn't have to be an accountant in the initial years to understand the P and L account.
The question is would the share price , profit and by inference dividend be considerably higher without such a severe hedging policy ? It appears heresy on here to suggest such a thing. With gas prices where they are now and over the last year someone is making a lot of money from DEC.

[sunbed44] 04/4/2022 18:08

100 percent. If anybody stuck money in here and is not happy with the hedging position, they clearly did not do their own detailed due diligence. Maybe they just read a few nice posts and pressed the buy button as far too many people do.

[redtom1] 04/4/2022 17:48

Lab305, you are totally in the wrong investment if you want a gas company with a lot less hedges. Antero would suite you better.
DEC is for investors that want very steady, reliable, consistent, non-volatile, low risk, guaranteed large dividends for years to come.
I'm with you sunbed44. I would be happier with a greater percentage of production hedged.

[sunbed44] 04/4/2022 17:43

Hindsight...