Diversified Energy Share Discussion Threads

[aleman] 25/8/2022 12:42

We get reports of average forward sales prices but they are a mix of deals done recently and deals done years ago. The current price of a typical contract sold now compared to one sold a couple of years ago must have about doubled. Add in less than 10% sold at near spot prices and the current average sales price of new contracts done today must have slightly more than doubled over two years.

Dec 2025 contract


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[mattybuoy] 25/8/2022 12:22

DEC is a tiddler by US standards. The debts and hedging could easily be absorbed by a bigger fish, should they choose to bite.

[bluemango] 25/8/2022 11:58

Somebody's keen.

[scrwal] 24/8/2022 12:36

The very heavy short term hedging could put off a buyer although it is integral to DECs strategy.

[mattybuoy] 24/8/2022 09:22

Spangle,

Just a general thought, no one in mind specifically. It's just too cheap and the sector is flush with cash.

[asp5] 24/8/2022 08:56

Thx for clarifying Fred177

[bluemango] 24/8/2022 08:46

GLG Partners from 5.50% to under 5%.

Re the comments on takeover, though great for the valuation, an acquirer might have other ideas about how to use the income stream and it would be a shame to rock the boat with the great yielding, reliable dividends here.

Current management are doing great, imo.

[fred177] 24/8/2022 08:32

asp5 Todays RNS shows a reduction in voting rights to below 5%

[spangle93] 24/8/2022 08:01

Mattybuoy - I can see where you're going, based on the trading, though that might also be explained by today's holding RNS.

Who do you see as a potential company that might wish to take over DEC?

[asp5] 24/8/2022 07:59

With impeccable timing based on my last post a RNS is out re holdings. Cannot read it clearly from my mobile has someone acquired a 5% stake - would explain recent high volumes and a vote of confidence in the direction of travel of the share price - do let me know if I have Mia read the release.

[mrnumpty] 24/8/2022 07:51

The Telegraph states , in an article today titled “ Oil and gas investors reap record payments “ ( page 18 ) that “ the pound risks falling to its lowest versus the dollar in more than two years if a gas supply crisis this winter pushes the U.K. into recession “ . As DEC and its dividends are priced in dollars , that’s a bonus for us .

[mattybuoy] 23/8/2022 20:03

I do wonder about a takeover. Where else can you buy 136,000 bpd (plus 17,000 miles of pipeline) for $1.5bn? Absolutely nowhere.

The midstream component alone is probably worth way more than the market cap.

[asp5] 23/8/2022 19:46

Last 4 days trading volume averaging ~7,5M shares which is roughly x3 more than normal. This pattern is in place for the last 2 or 3 weeks however no RNS announcements till now ......

[2paperman] 22/8/2022 17:00

Thanks for reply, have done the paperwork.

[woodhawk] 22/8/2022 16:15

About 3.5p - but you MAY have to deduct either 15% or 30% if not in a SIPP, or W8-BEN'd.

[2paperman] 22/8/2022 16:14

How much is next div in pence anyone?

[scrwal] 22/8/2022 15:43

asp5 Thanks for the kind reply.

I have previously posted that the ARO plan is what defines DECs strategy. I think we have a different interpretation of subsidy in this instance but I agree that the surplus capacity earnt should be kept as cash to build the Pre Fund account even at this early stage.

I presume post 3413 may have been a sarcastic comment but I have filtered the poster some time ago so can't really tell.

[asp5] 22/8/2022 14:39

Hi Scrwal

Before responding to the substance of your previous post can I just say it is a pleasure to respond given the thoughtful and polite way you raise questions. I am happy to have views challenged, change my position because my facts are wrong or change if my logic does not hold water etc. In short I feel the board should be about us - the small guys discussing our thoughts challenging each other (constructively) so we all are able to make successfull returns - including getting out of shares that we should not be in !!!

So adressing the point you raised, I assumed the 50% subsidy going into some fund based on slide 13 of Dec's ARO presentation where after the debt has been amortized a pre-fund ARO account is scheduled to be setup. Their model even assumes interest earned on that account is 3%. Now I am making an assumption on the 50% i.e. how much would be deposited into this fund etc. but I always like to do an exercise for myself where I could make a plausible argument for something in this case why DEC could re-book a significantly lower ARO cost VS what EQT booked based on their different business model. I am definitely guessing and just making some broad brush assumptions that would allow DEC to book as they have based on reasonable logic.

btw I fully agree with your take on the "reasonable" phrase used by the auditors. I think insufficient time has elapsed to build the evidence and hence full confidence that this works as modelled. I believe the balance of risk is in our favour and this will become clear especially over the next few years (Rusty has the bulk of his wealth in DEC so has skin in the game). Naturally this is a risk return topic. As soon as these doubts are eliminated then I expect another re-rating of the share - but clearly a negative impact if this does not materialize. The joys of investing & deciding when you want to jump in.

One last thing on the political front, I believe most US states will do everything they can to support DEC to ensure their model works. If they can get a viable private sector solution that takes care of the ARO problem for legacy wells that would be a huge win otherwise they will have to bear the costs themselves. I do not see any other company of a similar size to DEC in this space better positioned to be the trusted custodian player ensuring wells are decommissioned appropriately.

[aleman] 22/8/2022 14:31

Dutch LNG import capacity to double, with first new imports starting from September:





EU storage of 75% is at the 10-year average after being around 10% below the 10-year average at the March 2022 low of 25%. (The pre-winter build usually peaks around 90% at the end of November.)



EU gas storage will reach 75% today, totalling 834 TWh and exceeding the level of October 1st 2021. However, while Europe has historically relied on Russian gas flows of 5.5 TWh/d during the heating season, current Russian exports of about 1 TWh/d means a deficit of 4.5 TWh/d must be replaced – equivalent to ca. 25% of daily Winter consumption. Increased draw on gas storage and higher LNG imports will largely mitigate the shortfall. In the first half of this year European imports of LNG were up by 55%, and if this trend continues then LNG could replace 30% of the missing Russian gas.

[greygeorge] 22/8/2022 14:26

Wow ! I can;t wait to read the books that are going to be published by the experts here. So many brains, so many words.

[woodhawk] 22/8/2022 14:01

Looks like some profit taking has kicked in here after a seriously strong run up from 110p. A pretty rough day on the market today too - most of my shares getting hammered.

[scrwal] 22/8/2022 13:48

asp5 Thanks for the comments which I generally agree with apart from

"As a very rough & dirty calc (I know not accurate) we can take 200M/3 = 66M. Then apply a 30% discount as DEC ARO costs are lower than peers - 66 x 30% = 46M. Then lets say 50% of costs are subsidized by selling excess capaity - we get to 23M - which is approx what DEC are booking. So I see a reduced booking of ARO costs as reasonable based on their model"

I don't see why you are including the 50% subsidy as this is not a cost of plugging and it doesn't appear that DEC are doing so as their $25k per well previously was done when there was no capacity. There is no evidence yet to support the offset and for it to happen the accounting treatment implies that a cash fund must be set up to hold all the excess selling capacity BUT the gross cost of the ARO has to be shown - you can't offset it even though it does net out to the $23M ie $46M ARO and $23M cash.
When capping commences the cash is used and the ARO reduced by the same amount but there is still $23M to be found from future funding.
This is just me attempting to disprove your rough calc with mine with the problem being we don't know enough.

As regards the auditors finding assumptions to reasonable that doesn't necessarily mean a lot. Being an auditor previously one of things you hated was being presented with a load of management assumptions on something especially if you are at odds with them. The crucial word is "reasonable" which is quite vague as it doesn't mean accurate or correct more like we can't dispute on current events what has been presented. The auditor is hoping that the future does validate the assumptions or there are events that couldn't be foreseen - not oops there was a problem which maybe should have been spotted by either party or management had been economical with what was presented.

[asp5] 22/8/2022 11:44

European benchmark gas prices have risen as much as 16pc this morning ahead of a planned shutdown of the Nord Stream pipeline from Russia at the end of this month.

This may be pay walled but the news should be around. I strongly believe that US gas prices will normalise with european prices over time - which would mean the macro picture for higher prices is looking good for DEC.

[asp5] 22/8/2022 09:27

Whichever method DEC uses to reduce the decline rate and extract every last molecule of gas then it is attempting operationally to maximise extraction and lengthen the life of the well.

By doing this it logically pushes the pluggin date further out which will reduce the NPV of this cost. By gaining this extra time DEC are also able to generate additional revenue (from selling excess pluggin capacity) which can be for example be put into an account gaining interest to cover costs when Dec's wells are ready to be plugged.

This extra time also allows for processes, tools, materials used etc. to be developed & refined that ultimately reduces this pluggin cost. So by the time they come to plug their well this is highly optimzed.

The above is all part of the business model and makes logical sense and DEC are showing it works in action. If there is data that does not support this I would be interested however I have not seen any yet.