Diversified Energy Share Discussion Threads

[smidge21] 26/6/2022 19:24

In my experience rebalancing gets the blame for much more than is warranted. Also that DEC is widely held by those funds that do rebalance is moot .

[asp5] 26/6/2022 14:17

One factor linked to my previous posts that has not been explicitly called out is that the recent price drop occured around mid June onwards. The end of June is of course quarter end as well as half year end.

Given the significant moves in the broader markets and the non-normal trade activity in DEC over the last couple of weeks makes me inclined to believe DEC has been particularly impacted by portfolio rebalancing from funds ahead of H2 end.

Will be interesting to see if the pattern changes after end of month. In the meantime, not long to wait so I can re-invest dividends at ~12%

[pro_s2009] 26/6/2022 08:39

Bottom of the charts in the header added the intraday FTSE:AIM chart and also FTSE:100 for easy reference to how the AIM and 100 indexes are doing.

As always, if you want to skip the header and go straight to the posts..........just click on "Skip Header" at the top on the right hand side.

[mattybuoy] 25/6/2022 23:13

17,000 miles of gathering pipelines. That's quite a lot really. How much would it cost to build that I wonder?

[bluemango] 25/6/2022 13:33

I agree. I3E does have more potential for faster capital appreciation for the reasons you give.

I guess I was just suggesting both had had overdone falls for similar sector reasons and DEC had/has not yet recovered the lost ground - but should.

[pro_s2009] 25/6/2022 01:52

bluemango, dont think you can compare with I3E at the moment. Whilst both I3E and DEC offer very good dividend yield - I3E are ramping up production with new drilling in Canada. But not only that, I3E are around 9 weeks away from spudding their Serenity appraisal drill in the North Sea, which by itself if successful could double their share price alone ignoring the dividend and current undervaluation.

So I3E ahead will become a hot stock with lots of interest and headlines due to Serenity.

[my retirement fund] 24/6/2022 22:38

What's going on here then, running yield must be approaching 9% ? have a missed some bad news ?

[bluemango] 24/6/2022 15:16

DEC out of step with peers such as I3E and now due an upwards move to catch up.

[asp5] 24/6/2022 14:57

I would also add - I have not seen any new analyst reports out, which helps re-enforce that it is likely not a news related issue that we have missed.

Also if the analysts are providing a target price of 170p - 180p why would I want to sell at 110p if I do not have to?

Anyway my valuation is North of what the analysts have targeted so will not be going anywhere for now ......

[asp5] 24/6/2022 14:50

Hi scrawl - you raise a valid question. Is there some news out there that may materially impact DEC's revenues/cashflows or some future risks out there that we have not identified.

I have not seen anything recently and this board seems to have good contributors who are not shy in flagging up issues. The only topics I can think of is the recent fire at the LNG facility impacting capacity and the democrats proposed tax on suppliers. I do not see how such a law will be passed given the current state of US politics and capacity constraints do not impact DEC as 90+% of production is hedged. So cannot see how these events would trigger a 10+% change in price levels. There is always the chance of some insider info I suppose and we only find out about the bad news later ......

For me the most likely reason is that positions are being rejigged by funds - especially given the trades and volume involved on specific days recently. If a fund has a lot of client withdrawls it needs to liquidate its positions to meet those withdrawls. This will happen in bear markets and has no reflection on the actual share itself - I suspect given the general market situation something like this is taking place.

For me I am relaxed about this situation as it gives me the opportunity to re-invest div at a lower rate (assuming the value case holds - clearly if this changes so do my actions). I think buffet said something along the lines "market takes from the impatient and gives to the patient". With DEC time is on our side as the value case gets better over time - just my opinion.

There are those who want to perfectly time entry & exits and buy the troughs and sell the peaks - very stressfull, very active and not my cup of tea. Happy to buy and accumulate (as long as value proposition holds) and only sell when price > value. May not be for another year, 2 or more - fine for me as mentioned before we are being paid handsomely to wait.

[aleman] 24/6/2022 14:27

Some futures contract prices:

July 2022


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July 2024


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July 2026


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July 2028


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[scrwal] 24/6/2022 13:05

asp5 I agree with your comments but would add why is there the "not normal volume" - is it portfolio rejigging and if so why at this price , or is it someone has identified something not yet picked up yet ( unlikely but possible). If holders get sucked in by the sentiment of the buyers then there will be volatility but the price should recover.

Once again we hit the mid 120s only to drop back to the c110p level - maybe we should trade the share rather than hold it for the longer term. Of course if everybody did that the price would be up and down like a yoyo.

[asp5] 24/6/2022 12:15

Also worth noting there were 4 trades of 244,718 shares plus another 4 trades of 250K shres. This is not normal volume - so some portfolio moves afoot.

[asp5] 24/6/2022 12:07

For those getting a little nervous with recent price drops be aware that in March 2020 the share price dropped to 60p but was back around 110p a couple of months later.

Given the current state of the broader market I do expect price volatility to persist as buyers may be outnumbered by people forced to sell due to being leveraged and/or changing their risk appetite.

Fortunately, I am not in the above position and am looking forward to taking advantage of the opportunity being presented by the market. But in the meantime I am happy to be paid a 12,5% return while waiting for the share price to hit my valuation targets.

Importantly DEC's value propostion has not changed - in fact it has got much better after the recent ABS & acquisition announcements and should get even better once the spare liquidiy has been put to use.

[holts] 24/6/2022 11:19

Presumably Black rock are still selling .

[janhar] 23/6/2022 15:53

Also added at 110

[redtom1] 23/6/2022 15:18

I added too. Couldn't resist at sub 110p

[lomand] 23/6/2022 15:04

asp5. Agreed. And with $400MM+ of liquidity plenty of opportunity to replace depleting assets for another decade. This stock is more like a REIT than a traditional energy company . Fortunately the market just does not get it...

[asp5] 23/6/2022 13:56

Just to underline the current value proposition with DEC. If dividends of 3.43p per quarter are maintained for next 8 years (DEC have committed not to reduce the div) then you will recover the full share price in dividends in that time if you buy now.

Given that DEC has recently announced ABS deals that last till 2030 and these are hedged for this time period - this is as close to locked in as you can get over such a tenor. Only issue could by FX swings.

So for those who are lucky and have funds to invest good luck - unfortunately I have to wait a week before I can join you. Markets have a habit of creating great buying opportunities during bear markets as buffett says - but you need to know where to invest!!

[redtom1] 23/6/2022 11:59

Carcosa,

The company merely agreed to look into what is required for a US listing by mid year.

I spoke to the company about this in April and this was their response "Regarding our public comments on a U.S. listing, we said that we continue to explore this option but haven’t announced definitive timing. We anticipate figuring out by mid-year what we need to do to get the process rolling."

[bluemango] 23/6/2022 11:53

Added to my existing holding.

[carcosa] 23/6/2022 11:51

Amongst my notes I have "US ADR expected mid 2022".
Not heard anything happening in that regard; unless I have missed it...

[asp5] 23/6/2022 10:29

redtom - I do not see it as any fundamental issue with DEC. Given:

Price to sales < 1
Div yield > 12%
FCF yield > 25%

Means the company is able to generating cashflow to grow organically and can be bought at a value level. It is able to comfotably pay a dividend that provides a real return vs inflation. It has demand visibility for its product stretching out 20+ years - from a value perspective it looks great.

However as mentioned above markets have taken a beating - so you will get funds/investors selling to potentially cover losses/ margin elsewhere in their portfolio.

There is $500M of liquidity that has yet to be put to work - so I expect announcements soon that should positively impact the share price. If you have spare cash these are great levels to top up - I am waiting for the dividend to be paid on the 30th to do just that.

[lloydypool] 23/6/2022 10:16

Dragged down with a bear market is the short answer.