Diversified Energy Share Discussion Threads

[scrwal] 01/6/2022 12:46

Pro_S2009

ii are now charging stamp duty in an ISA so I assume that means any sort of account so the helpful info in the header needs updating, thank you.

[woodhawk] 01/6/2022 12:16

lab305,

You chose when to invest in DEC and only you can choose when to exit - it's the easiest option to blame the company rather than your own decision (or lack thereof).

[lab305] 01/6/2022 11:59

360p ? Well without hedging or considerably less that may well have been attainable. Back in the real world if we ever get back to 132p where we were four years ago that would be a miracle. They got so much right in the early days buying unloved assets cheaply and turning them around . Better management, cost synergies, no hedging and real increasing profits. Yes we know we get 10% but that's just insignificant compared to what could have been. I will continue to hold and hope for a takeover as the present asset value is nowhere near represented by the share price.

[holts] 01/6/2022 11:53

Still it helps DEC .

[holts] 01/6/2022 11:53

Yes the lack of strategic thinking , in fact it’s not even that it’s simple common sense thinking about energy is staggering ,bending to the eco loons has exercised my patience for years as no one in their right mind would believe you can switch over in the timescales they have scheduled , the loons are in charge of the asylum and the alternatives seem worse as they attempt to outdo each other to ‘prove’ their green credentials .

[mrnumpty] 01/6/2022 10:10

Interesting article on page 19 of the main section of today’s Telegraph , which is the first page of the Business section . Under the heading “ Kremlin freezes out Shell as Europe tumbles towards power crisis “ , it states “‘Europe lurched closer to an energy crisis yesterday after the Kremlin cut off gas supplies to major buyers including Shell . Russia’s state-owned gas supplier , Gazprom , said supplies to Shell in Germany as well as to Orsted in Denmark will be cut off today after they refused to bow to Putin’s demands to pay in roubles . Gazprom cut supplies to the Netherlands yesterday after doing the same to Poland , Bulgaria and Finland this month , weaponising its gas ….. Gas is used to generate more than a third of Britain’s electricity , and the market is already set to be tight this winter due to the planned closure of some UK power plants and ongoing problems with nuclear reactors in France . Corrosion problems mean up to half of the state-owned EDF’s fleet could be put if action . This could result in France importing more electricity from Britain …. “ .

[sf5] 31/5/2022 19:35

mrnumpty - SPAG is an agribusiness ETF I started to look at. I suspect it's not dissimilar to the grand-daddy DBA which being a US ETF won't be available to UK investors unless classed as professional (and even then will have a penal tax implications). Obviously investing in food producers isn't the same as investing in soft commodities themselves. Some investors are into potash/fertiliser plays.

Sorry for the off-topic!

[lord gnome] 31/5/2022 17:51

I think that this shows exactly why the share price doesn't make progress - even the analysts don't really understand the impact of the securitisation, for one and the effect of hedging for another. Added to that DEC has always been a moving target with many moving parts and continuing deals and expansion. Little wonder that people have trouble getting to grips with its real worth.
I think 360 is way over the top but as current hedging levels drop out of the equation to be replaced by new hedges set at higher levels, I can see the share price responding and anything up to 200 should be achievable on a 12 month view. All IMHO.

[scrwal] 31/5/2022 17:37

I have registered for free as well.

Looking at some of the figures like revenue and net income Cenkos are at complete odds with the figures by Simply's analysts since Cenkos show negative EPS and post tax income whilst Simply has positive figures. To me it appears that Simply do not understand the accounting impact of hedging as this will create the big negative income figures not positive ones.

Simply come up with a 360p figure but when they compare the Price to Book Ratio based on the current price of 124p they state that compared to the GB Oil/Gas industry average DEC is already overvalued. Yes I know it is basically a US entity but this just highlights the discrepancies in various brokers etc and the values they come up with.

The 360p is far too high and 120p is a bit low but around 180p with the current hedging levels is probably right - don't ask for details as it is just a level I have settled on with no supporting figures.

[asp5] 31/5/2022 15:18

simply wall streets current fundamental analysis puts fair value of DEC shares at 3,60 GBP with current share price of 1,24 representing a 65% undervaluation.

I was able to register for free. They provide data sources, inputs and the calculations used to determine their intrinsic value (click view data under the fair value graph)

My intrinsic valuation is roughly mid-way between the recent analyst price targets and above.

hxxps://simplywall.st/stocks/gb/energy/lse-dec/diversified-energy-shares?blueprint=2024479&utm_campaign=integrated-pitch&utm_medium=finance_user&utm_source=yahoo#executive-summary

[asp5] 31/5/2022 09:49

Even though china plans to expand green energy production like crazy - its peak gas consumption is expected around 2035 (see link). Even by 2050 gas consumption will be above 2035 consumption. Installed gas fired capacity is expected to reach 150GE by 2025 a 9,6% annual growth rate. Note these are plans - even in china plans slip and delays occur.

Add this to the news that Europe e.g. Germany are building new LNG terminals that have a typical payback period over a couple of decades and the US is building out its LNG export capacity - I see gas continuing to play a vital part in countries energy mix for the foreseeable future.

Another thing that is also not widely reported is the technology breakthroughs that could make gas even cleaner than it is now. Most of the focus in the media is on new green tech - will try and post some links later which indicate promising developments may be just around the corner wrt zero emissions with natural gas.

hxxps://www.argusmedia.com/en/news/2228275-chinas-gas-consumption-seen-peaking-by-2035

[aleman] 31/5/2022 08:52

Short contracts have eased a whisker off the highs of last week but medium and longer contracts are still rising.

June 2022


free stock charts from uk.advfn.com


June 2024


free stock charts from uk.advfn.com


June 2026


free stock charts from uk.advfn.com

[mrnumpty] 30/5/2022 22:14

1knocker and everyone . Thanks for your forbearance after my rant a couple of days ago here . If you are concerned about food price inflation ( as I very much am - if Russia succeeds in seizing the coast of Ukraine , including Odesa , it will truly be able to weaponise food , causing many weaker regimes to collapse ) , there are two funds of which I am aware : Barings Global Agriculture ( in which I have an investment ) ; much less successful recently has been the Sarasin Agriculture fund . Another fund , invested in energy , which has been having phenomenal success ( + 116.3 % in a year - that is not a typo ) is Riverstone Energy Ltd ( I’ve had a holding there for a couple of months ) . I hope that this is of some interest to others here , but do your own research .

[asp5] 30/5/2022 21:04

Hi Scrawl - I think you are right that a superficial glance at DEC based on typical financial ratios (P.E. etc.) may indeed put some investors off. I think that's why mgmt are keen to get a listing in the US as I get the feeling investors there may well be more receptive to the DEC story.

As far as Cenkos - I have not had a chance to look but I assume they would net any excess cash against debt e.g. from the RBL as mgmt have always said they would put excess cash to work against outstanding debt. In my example, I assumed no new acquisitions - which would mean no new debt in the RBL to offset against - so excess cash would accumulate (or if contracts allow accelerated repayment of debt in the different ABS structures).

[1knocker] 30/5/2022 20:54

Yes mmumpty. And wait for the food prices to hit home. I noticed today that butter had gone from £1.75 to £2 since I sat bought any a few days ago. What then? Free [school] meats for the whole population?

[sunbed44] 30/5/2022 20:08

Forcing companies out of the North Sea due to taxation and not being a trusted government AND extending the life of coal fired power stations AND re-opening strategic gas storage. Where oh where is our power security strategyUK in talks to reopen giant gas storage facility for winter https://www.bbc.co.uk/news/business-61633993

[scrwal] 30/5/2022 17:33

asp5

Although Cenkos show FCF of $327M in 2022 and $301M in 2023 their cashflow statement shows no change in the cash level of $12.6M so they don't appear to agree with your $122m increase pa.
Could this be why the price is lower then hoped for because of brokers pessimistic views.

Re my earlier post I was only saying that investors can be put off immediately if a company's debt is higher than it's market value even if the value is understated.

[asp5] 30/5/2022 16:46

I forgot to add. Using the estimated FCF from Cenkos in 2022 of $327M subtract dividend (~$145M) and replacement of 7% decline (~$60M - based on recent acquisition + margin) so 327 - (145+60) = $122M of net cash accumulation pa.

Over 9 years a further ~$1B(9x 122) of cash will be generated on the balance sheet.

So actually it is a conservative tripling of share price just based on pricing at asset value - which equates to a 33% pa return for the next 9 years at minimal risk with plenty of upside on this as DEC are not going to stop acquiring assets for the foreseeable future.

Happy to have someone point out & discuss any material flaws in the logic. In the meantime I keep adding to my position.

[rogerramjett] 30/5/2022 15:45

When debt is service by production revenues yet secured against assets it is surely not a problem. Using leverage for high returns.

I'm sure a broker target valued DEC at about 50% higher than current share price To put that in perspective it's actually the difference between its current value and secured or amortised debt. But is this debt equal to or less than the actual asset value. I would assume that its actually not at 100%. This only valuing the assets more greatly. Perhaps MCap here is based upon earnings ratios. In actual fact I don't think you can ever be too assumption on how a market values a company. DEC to me does seem like it could be valued more highly.

[scrwal] 30/5/2022 14:29

asp5 True but a lot of formulae/criteria etc that people tend to use would cause a red flag when debt exceeds market value making DEC a no go if using such parameters. Shows you need to dig deeper especially when hedging gets involved and creates paper reporting losses which completely distort the ongoing normal operating results.

[asp5] 30/5/2022 14:02

By my calculations DEC has ~1,4B of amortizing debt (secured by assets) at a blended rate of ~5,3%. Debt will reduce by ~150M pa between now and 2030.

Just to underline the valuation gap - DEC market cap is only ~1,06B.

[aleman] 30/5/2022 13:41

A small acquisition of a share of one of these companies trialling geothermal energy from oil and gas wells would go down well. Or maybe they have the skillbase to announce their own trials?