Diversified Energy Share Discussion Threads

[scrwal] 30/5/2022 12:34

The $70M could be used on one of their acquisitions they don't really tell us about like the well plugging companies or midstream + processing facilities.

Looking at the recent acquisitions they should try and pick up smaller blocks of assets like the last one as these seem to have much greater value than a big buy.
The Cenkos report has this

Consideration .$PDP Reserves .$boepd
Latest $50M 2.8 14,188
Tapstone $218M 6.2 18,167
Blackbeard .$180M 2.3 11,250

Apologies for the formatting - can't do it as a table since all the spacing I use gets removed.

[woodhawk] 30/5/2022 11:12

FWIW:

DEC included in the list of stocks to thrive in a recession

[asp5] 30/5/2022 10:39

16 banks in DEC's lending group have done detailed analysis and financial due diligence to agree to lend DEC hundreds of millions out till 2030 in spite of current market turbulence. This should provide everyone with a huge degree of comfort & assurance.

DEC will be free of current debt by 2030 and have confirmed that they will not cut the dividend going forward. Assuming no increase in dividend between now & 2030 (very conservative based on history) - DEC will pay out at least ~1,22 GBP i.e. the current share price.

The market is effectively valuing the company at close to zero by 2030. Demand for gas will not be gone by 2030 based on even optimistic projections - it may well increase in fact due to transition timing etc.

In my view DEC has significant potential to re-rate, with analyst target prices an initial first step with a lot more upside to come in my view. DYOR.

[asp5] 30/5/2022 09:17

Slide 21 from the DEC May presentation had borrowing at 98M not the 80M I used. But still ~70M for general corporate purposes is still significant

[asp5] 30/5/2022 08:54

The $500M of liquidity (a 40+% increase on the previous $350M) would allow acquisitions of $1B (with oaktree involvement). I wonder if some bigger deals are being lined up .......

I am also trying to get my head around the numbers quoted.

Dec stated in the Feb ABS release they had ~80M borrowing add in $50M from recent acquisition, we have ~130M of borrowing. Assuming the 200M cash in hand mainly comes from the new ABS - this makes a total of $330M used for liquidity + clearing RBL.

As $423M was raised (net of fees) then according to my calcs ~90M is being set aside for "general corporate purposes". That is significant and may also indicate something cooking here as well.

Would be great if someone could independently check if the logic above holds and ballpark numbers are correct .....

[simplemilltownboy] 30/5/2022 08:41

Great news, 500 million ready for the next acquisition if done with oak tree that's a billion of firepower. Fixed amortising for all debt and higher swaps Is fantastic. GLA bring on the next acquisition

[woodhawk] 30/5/2022 07:44

Yes, all good stuff. Let the re-rating continue!

[sunbed44] 30/5/2022 07:23

Great news on the financing RNS

[sunbed44] 29/5/2022 07:42

The article seems very accurate to me but can KSA really increase production as analysts say in the report. I thought they were struggling to hit their OPEC quotas over recent months.Western leaders, including Mr Biden and UK Prime Minister Boris Johnson, have pleaded for help from Saudi Arabia and other producers, which analysts say have the capacity to boost output without major new investments.

[sunbed44] 29/5/2022 07:29

Why can't the US stop soaring oil and gas prices? https://www.bbc.co.uk/news/business-61446317

[mrnumpty] 28/5/2022 15:05

Knocker . Three months ago , I wrote to “ my “ Tory MP , outlining in some detail that Britain hadn’t had an energy strategy for many years , with the attitude being that “ something will turn up “ . I realised that “ my “ MP couldn’t provide a detailed answer , but his “ reply “ completely avoided the entire issue . So much of Britain’s energy crisis is due to massive failings by the politicians ( eg if Europe had spent a decent amount on defence , and if the USA hadn’t arbitrarily enacted a rout from Afghanistan last year , whilst simultaneously encouraging Ukraine to join the EU/NATO , probably Putin wouldn’t have risked war ) . Having failed the people of this country for so long by having no energy policy , except the insane “ net zero “ , and wasting their time by partying , Westminster throws the North Sea oil industry under the metaphorical bus . Anyway , the gradual severing of gas links with Russia is good for DEC , and , in spite of the vindictive tax hike yesterday by our socialist ( ! ) government , the share prices of BP and Shell did not suffer yesterday . Sorry about being off the subject , but the MPs don’t listen to us and , as more people in this country can barely eat or heat , Johnson continues to fantasise that we will be forced into spending £ 30,000 - £ 40,000 per household for a heat pump and a battery car . Fortunately DEC’s operations aren’t in Britain .

[scrwal] 27/5/2022 12:59

FWIW the Cenkos report 21 May actually has a neat table of the Central Region acquisitions showing the consideration , PDP reseves and boepd for each one. It shows how dirt cheap the latest $50M acquisition was.

This is what Cenkos stated
"M&A Valuations Remain Subdued – As we have discussed in our previous report, M&A transaction values continue to be subdued despite the rapid rise in North American commodity prices. Diversified’s East Texas acquisition is further confirmation of this"

[1knocker] 27/5/2022 12:35

How long before this shower pretending to be government decide that Corbyn was right all along and nationalise the lot so as to let the people enjoy the profits? And they can then sign up Greta as a consultant (at a very high fee, obviously)to advise where all the new investment, which they will borrow to fund, should go. They know so much better than those who have devoted their working lives to the energy industry. What could possibly go wrong?

[lomand] 27/5/2022 09:37

Correct. Originally the focus was on traditional wells although Rusty has stated that they would look at non-trad asset as well. Either way the incentive for a seller to retain or sell an asset is different with gas at $8 as opposed to $2... they can follow the production curve decline far longer with higher prices before a well becomes uneconomic.

[aleman] 27/5/2022 09:17

No. The tax is on continental shelf operations - the tax jargon for the North Sea. I don't think it even covers potential deepwater projects off the NW of the UK that are probably now viable with oil at these prices.

[owenski] 27/5/2022 09:11

It's US domiciled for tax not UK, so good luck on UK's new Robin Hood socialist tax policies.

[woodhawk] 27/5/2022 08:58

No. I think it's only on UK derived earnings anyway.

[spangle93] 27/5/2022 08:15

DEC historically hasn't bought from bigger companies

Can't quickly find the stat for the current portfolio, but a year ago about 75% of production came from conventional wells, rather than shale gas

[poleaxe] 27/5/2022 08:13

Will this company be subject to the windfall tax, it being UK registered ?

[simplemilltownboy] 27/5/2022 07:49

Agreed on the economies of scale, there will be producers who want to off load wells for reinvestment into new wells. Whilst shale is approaching peak production it's not there yet. I believe there are sellers and Rusty and co are running their slide rule. The team has a lot on its plate with the integration of all the central zone assets as stated before this is one for the patient. There is loads of latent value in this share IMO. GLA

[lomand] 27/5/2022 07:17

The additional variable is whether there will be much more new drilling. It looks like we are at or close to peak production from shale. Desite the surge in prices we are not seeing significant new drilling which is usually the incentive to sell off older assets as their production starts to decline. Fortunately DEC already has economies of scale which make them one of only a small number of serious potential purchasers. The last acquisition was relatively small. With DEC having a serious war chest we will see in the next few weeks/months how quickly it can be deployed. With the proposed US listing there will likely be a fund raise so the ability to deploy any funds raised will be a big consideration.

[sunbed44] 27/5/2022 06:41

Yes purchasing assets may have gone up but this does not concern me. The bigger companies wont be changing their divestment strategies and any higher purchases made would be generating higher revenues - so in summary its all relative.

[lomand] 27/5/2022 03:09

Anyone have an idea on how this move in gas prices will affect the ability to buy new assets. Obviously the cost will rise but will it mean that there will be a tendency for existing owners to retain assets as they will now be more profitable for longer. If replacing assets is not possible then we are looking at DEC running down its existing portfolio and distributing the cash. This changes the DEC business model completely but brings forward plugging liabilities etc.At $8-9 previously marginally profitable gas fields are very viable for any operator...