Diversified Energy Share Discussion Threads

[farrugia] 27/4/2022 10:36

this is a producer paying out hefty dividends!! the hedging policy if anything stabilizes the revenue stream long term plus the company is now managing to lock in higher prices for its 2023/2024 production! The stock price should be at least double what it is today!!! The real problem here is that this company is not listed in the USA.

[lab305] 27/4/2022 09:19

The best news about Diversified is not from Diversified....GBPUSD:CUR
GBP-USD X-RATE
1.2566USD

[asp5] 26/4/2022 21:30

Scrawl, again I am not sure I agree with your conclusions.

In May 2020 DEC raised equity representing 10% of the issued share capital at the time resulting in ~700M shares outstanding. A 1,50 price target in Oct 2020 assumed a dividend pay-out of 40% of FCF and valued DEC at ~1050M GBP.

Again in May 2021 DEC raised equity representing 20% of the issued share capital at the time. DEC today has ~850M shares outstanding. The current 1,50 price target assumes a reduced dividend pay-out of only 30% of FCF and values DEC at ~1275M GBP.

This represents a 21% increase in the valuation of the company in spite of a reduced dividend assumption and is not in my view a sign of reduced enthusiasm. It would be higher on an apples to apples comparison.

Turning to the dividend assumption, given that DEC has explicitly stated that the dividend will not be cut, the current dividend will cost DEC ~144M USD (850 x 0,17). Given the $419M EDITDA estimate - this puts FCF at ~328M USD meaning the dividend represents ~44% of FCF. So this 30% assumption clearly does not hold water.

In addition to the journalism issue you raise, the share price has in my view been hit by the dilution based growth model which has now been changed to a securitization based growth model. This should get reflected in a higher share price in the not too distant future especially as DEC execute on the things they have said they will do.

[scrwal] 26/4/2022 17:21

asp5

First Berlin had a target price of 150p on the 7 Oct 2020 with estimated adj EBITDA(unhedged) for 2020 $303.18M and 2021 $304.26.
In the latest report 1 Apr 2022 the target price is still 150p with adj EBITDA(unhedged) for 2022 $419.27M and 2023 $407.11M.
This indicates that they are less enthusiastic about the company's performance otherwise their target price should be a lot higher now compared to 2020.

Even their calculation of their target price includes the assumption that the dividend FCF payout ratio falls to 30% - it is currently 45%. Using 40% the target drops to c141p and at 45% it is c139p. Their figures produce 145p.

DEC needs to buy assets to offset long term production declines of 8.5% ( First Berlin use this)

The share performance has been hit by bad journalism etc in the last 6 months but the current strategy in itself does not create significant organic growth as all funds generated are effectively allocated. It is only by significant purchases with no share dilution that such growth could be achieved which is what the company is able to do with its credit facilities but any rewards are tempered by hedging.

[asp5] 26/4/2022 16:46

A reminder of CEO quote from Feb 9th, 2022:

"As I survey our prospects, our outlook is as dynamic as I've seen. We enter 2022 with great momentum bolstered by an improving commodity pricing environment that is catalysing rapid industry consolidation and asset sales at compelling multiples of cash flow. With another successful low-cost, fully-amortizing securitization completed last week, we have greater liquidity to pursue additional value accretive growth..."

As DEC continues to deliver on their commitments across multiple fronts, I am convinced the brakes holding back the share price over the last couple of years (i.e. dilution risks, ESG risks, ARO costs etc.)should lift....

[lab305] 26/4/2022 16:42

sunbed44 perhaps we could hedge in advance !

[sunbed44] 26/4/2022 16:24

One dollar 26.2 can we please pay the next dividend now

[fardels bear] 26/4/2022 16:20

Ariston, I dub thee.

[lab305] 26/4/2022 14:47

scrwal they were never an exploration company but nevertheless they rose from 65p in 2017 to 132p in March 2019. Sadly this performance did not continue and we only stand at a miserable 116 now, more than three years later. Yes I know the dividends are good but it does not excuse the dire performance of the share price.
In less than two years we had more than 100% gain. Compare that 50% per year with the 10% per year we now get.

[asp5] 26/4/2022 13:34

scrawl - not sure I fully agree with your assessment. Agree this is a secure income play as hedges ensure debt and dividends are paid. However as DEC acquires assets then these assets should all things being equal be reflected in the share price i.e. EDITDA will continue to increase resulting in steady share price appreciation. Not fintech level growth but highly respectable growth.

Just looking historically share price doubled from 60p at IPO to over 1,20p - very roughly 20% pa growth. Share price has been hit by negative sentiment on ESG topics, costs of ARO, dilution etc. which DEC have addressed.

As this becomes evident then I expect share price appreciation to continue. When exactly this happens - who knows, however I feel these levels do provide an excellent value buying opportunity.

The analysts covering dec have price targets in the range of 1,50 - 1,70 based on conservative estimates which I believe will be exceeded (see my previous post). Achieving analysts targets would represent a 30% - 45% appreciation in share price from where we are now.

[scrwal] 26/4/2022 13:07

Farrugia

DEC is not an exploration company but one that acquires more mature gas producing assets.

It has a long term plan driven by its ARO which involves high hedging levels to ensure all debt is fully serviced over the loan periods as well as paying the dividends.
The hedging means that the company misses out on hard cash when prices spike and so there is little upward price movement.
You have to treat it as an income play.

Given the necessary hedging policy there is very little scope to reap rewards from current high prices. Furthermore you only need to look at the last post from Aleman to see what the 2024 and 2026 futures were at the start of 2022 to get an idea of the hedging prices DEC were getting. This means that even a c50% fall in current prices would still result in the market price being higher than the company average hedged prices. It is this that the market is factoring in when deriving the low share price compared to other producers. Of course that would all change if the gas price dropped to $2 but is that likely to happen - who knows.

[sunbed44] 26/4/2022 11:37

Pound continues to go down which means dividend continues to become more attractive

[woodhawk] 26/4/2022 11:28

Dunno, but if you think it's cheap, fill your boots! Great quarterly divi!

[farrugia] 26/4/2022 11:18

how is this still trading at those pitiful levels i ask

[aleman] 26/4/2022 10:21

Futures for May 2022, 2024 and 2026.


free stock charts from uk.advfn.com


free stock charts from uk.advfn.com


free stock charts from uk.advfn.com

[asp5] 26/4/2022 08:45

First Berlin has estimated an adjusted EBITDA of $419M for 2022. Given this deal adds ~$35M to a 2021 actual adjusted EBITDA of $343 giving ~$378M. It will only take another similar small deal to hit the First Berlin estimate.

DEC will definitely outperform their adjusted EDITDA estimate for 2022 in my view.

[asp5] 26/4/2022 07:54

Rusty has been consistent that the current environment is good for DEC to acquire assets at good valuations. From memory I believe all deals (at least post IPO) have been accretive. Adding 10% EBITDA for $50M is just great and only helps to validate his comments.

I also think the good progress being made on ESG - especially engagement of an independent third party to assess its true position will help considerably going forward and remove a lot of the negative sentiment. There will need to be a player who acts as the responsible owner of mature wells - DEC is shaping up nicely to be the market leader in this space in the US.

A nice dividend and plenty of room for share price appreciation going forward (based on analysts reports) for the patient. I expect deal volume to be on a par with last year so plenty more to come and all without dilution ....

[lab305] 26/4/2022 07:53

Little reaction on the chat rooms this morning so may have caught people unawares. Looks an excellent deal so will buy more at the open if it doesn't jump too far.

[gary1966] 26/4/2022 07:28

Yep didn’t expect that and so pleasant surprise this morning. Only a small deal but probably their best to date and in an environment where everyone thinks that deals can’t be done at historically good prices due to the surge in gas prices. 10% accretive to 2021 hedged EBITDA for $50m and cost synergies and increased production to add to that. This really is a good deal but more importantly proves deals can still be done. They would have already generated $50m cash flow this year and illustrates how big DEC could become from internally generated resources.

[neilyb675] 26/4/2022 07:18

Commenting on the transaction, CEO Rusty Hutson, Jr. said:

" With a compelling purchase multiple of 1.4 times net cash flow, this acquisition represents another accretive, fully cash and debt-financed acquisition that further demonstrates our status as a capable consolidator of low-decline producing assets within the Central Region. Our enlarged regional footprint complements our portfolio of high-quality assets and provides additional scale from which we can derive operational synergies as we optimise asset performance and the associated costs. We are pleased to once again partner with Oaktree to acquire assets with material upside potential available through Smarter Asset Management. Having emerged as a significant operator in the Central Region with a proven track record of execution in Appalachia and a strong balance sheet, we are well positioned to capitalise on additional opportunities."

[sunbed44] 22/4/2022 17:59

Wow just noticed the pound dropped 1.5 percent against dollar todays to be 1.283 atm - this dividend yield is getting bigger on all fronts SP is lowerDividend payments going up current 4.25c pa and risingExchange rates in our favourBoom boom boom

[seangwhite] 22/4/2022 16:17

2023 prices look good for DEC

[imnotspartacus] 18/4/2022 19:17

I love it!

[podgyted] 18/4/2022 16:51

US natural gas close to 9% up - approaching $8.

[11_percent] 14/4/2022 13:39

Good to see an intra day reversal......looks like that 13.4p was the low.