Diversified Energy Share Discussion Threads

[greygeorge] 08/8/2022 22:48

fred177, I think it's an ok company. It's the posters here who are clueless.

[greygeorge] 08/8/2022 22:44

podgyted, I don't think you fully understand what you're posting.

[fred177] 08/8/2022 22:43

Greygeorge you've convinced me to get out, im in profit so thats ok with me

[greygeorge] 08/8/2022 22:39

fred177, please, NEVER buy or sell based on what you read on a message board.

[fred177] 08/8/2022 22:35

I am out of my depth but in profit with a good yield. will sell up as I don't understand the hedging greygeorge and 1knocker seem very clued up

[greygeorge] 08/8/2022 22:34

Lord Gnome, would you please explain this statement to me.

'...The positions will unwind over time and money will be paid to the counter-parties as gas is sold at higher prices. DEC has however, had to make margin calls in real cash, reflecting just how much the hedging positions are ‘losing’...'

[podgyted] 08/8/2022 22:33

Strangely enough 1K LG does actually know what he's talking about.

Greygeorge

"podgyted, you too are confusing commodity production with commodity futures trading.

the only 'loss' incurred by DEC is the theoretical loss between what it ACTUALLY sold it's production at, as oppsed to what it COULD have got if it sold it into the post market each day the commodity was produced.

The 'financial instruments' you mention are of no concern in the real world to DEC, but to the parties, the 'commodity traders' who have already agreed to buy and sell the commodity between themselves and for eventual delivery to the end user."

FFS

If you actually read my post that was precisely what I was saying.

[greygeorge] 08/8/2022 22:16

1knocker, maybe lord gnome is right, and the rest of us are all wrong....Nah, just kidding, lol.

[1knocker] 08/8/2022 22:10

greygeorge, LG is the living embodiment of the axiom that 'it ain't what a man don't know as makes him a fool. its what he does know that ain't so'.

[greygeorge] 08/8/2022 21:50

lord gnome - Ok, whatever you say (-:

[lord gnome] 08/8/2022 21:48

Greygeorge - it is quite clear from your last post that you haven’t the faintest idea what hedging is or how it works, or how DEC uses it as part of it’s financial strategy. You are completely clueless and shouldn’t be let loose on the stock market. Your juvenile attempt at explanation merely shows what a fool you are.

[1knocker] 08/8/2022 20:54

Greygeorge, be grateful for such people!! You see the same names on many boards, always totally ignorant of the company and its sector. They might as well pick their investments with a pin, though I guess they probably follow tips, without sufficient knowledge to assess the merits of the tip. If someone tells them in print that it will double, or better still replicate the success of Amazon, in they pile. At the first sign of a small drop, they sell. In the case of a big drop they hold or double down, determined to get their money back. They are very useful. When the rest of us make a mistake, or an unforeseeable disaster occurs, they are there to buy our shares so that we can salvage something from the wreck and move on.

Better still, in the case of DEC. which is prone to scare stories once or twice a year, they are generally spooked, sell up. and give us an opportunity to top up at bargain prices!!

[greygeorge] 08/8/2022 20:51

Ummmm, smidge21, I think you'll find YOU DID !!!

'...Believing them to have a high likelihood of producing oil...If I want to invest in am oil trader I'll go elsewhere...'

[smidge21] 08/8/2022 20:47

Of course it is a producer, who said otherwise?

[smidge21] 08/8/2022 20:47

Let's not forget that DEC's business model is simple: to manage end of life fe assets much more efficiently than the previous owner assumes and uses hedging to minimise market risk

[greygeorge] 08/8/2022 20:46

smidge21, to all intents and purposes, DEC is a GAS producer. But don't let the facts spoil your opinions.

[smidge21] 08/8/2022 20:39

I have lost track of this spat.
DEC buys (discarded) assets on the cheap. Believing them to have a high likelihood of producing oil, they sell production forward; their risk is that the wells fail to produce so they under sell. They profit mostly from the spread between cost of asset and the price price sold forward. The idea that they could have finessed a higher sale price is to ask them to play the market - they will win some and may lose more. Id rather they stuck at what they are doing locking in the production vs sale spread. If I want to invest in am oil trader I'll go elsewhere

[greygeorge] 08/8/2022 20:03

podgyted, you too are confusing commodity production with commodity futures trading.

the only 'loss' incurred by DEC is the theoretical loss between what it ACTUALLY sold it's production at, as oppsed to what it COULD have got if it sold it into the post market each day the commodity was produced.

The 'financial instruments' you mention are of no concern in the real world to DEC, but to the parties, the 'commodity traders' who have already agreed to buy and sell the commodity between themselves and for eventual delivery to the end user.

[greygeorge] 08/8/2022 19:50

lord gnome, let me try and put this into words you might be able to understand.

Let's say instead of DEC producing gas, the company is 'lord gnome', who produces hot air. You know you can supply with me with a whole load of hot air for delivery in September. you have worked out your costs, and know you can sell me 5000 units of your hot air at £10 per unit, with a nice little profit for yourself. I agree to buy those 5000 units for £50000, thinking I can sell those units as they get delivered to me at £15 per unit. If I'm right, I'll make for myself a nice little profit. Alternatively, once I've signed a contract with you, I find another trader prepared to pay me £20 per unit so i sell my contract onto him. He gets physical delivery of your hot air, which I have no real use for. Alternatively, I hold on until September since I have nowhere to physically store your hot air, nor do I have any use for your hot air, so I sell it on at market price that month. sadly, your hot air in September turns out to be part of a glut of hot air, and I have to sell at £5 per unit, resulting in a loss TO ME. But WHATEVER happens to the market price in that month, you (DEC) will get £50000 AS AGREED.

[fred177] 08/8/2022 19:50

I am a complete novice at this, but, I am assuming that DEC gets the gas away at the market price circa $8 dollars, they then have to pay of the insurance policy/hedge who gain the difference, lucky them ?

[podgyted] 08/8/2022 19:46

DEC uses hedging to produce a 90% fixed income stream (10% variable unhedged) to be certain it can meet loan interest, dividends etc.

There are two figures in the accounts which need to be broken-down to see this in action.

Revenue $933.5m

(Loss) on derivative financial instruments $(1,673.8m)

DEC usefully provide a split of the derivative loss:-

Settled $469m
Unsettled $1,205m

Therefore the 'actual revenue' (based on what DEC was trying to achieve) is $934m - $469m = $465m.

The settled part ($469m) is actual cash/cost.

The unsettled part is how much the forward unsettled hedges are underwater (at 30/6/22) and are not actual cash/costs as long as DEC keeps producing.

[greygeorge] 08/8/2022 19:39

lord gnome, you do understand that DEC is a gas PRODUCER, NOT a futures trader, don't you ?