Diversified Energy Share Discussion Threads

[bluemango] 12/10/2022 09:14

Good posts above.

Agree that concentrating the equity and making the prospect of sustainable dividend growth easier, is preferable to a one-off special dividend.

[charggg] 12/10/2022 09:07

Energy aspects is calling for peak shale oil in 2024. Which would mean less associated gas as well. Would be good to hear how DEC sees it and is it sensible to mix a bit if drilling as well alongside the existing producing wells.

[asp5] 12/10/2022 07:58

I have to say I am highly supportive of the managements share buyback approach. Reasoning as follows:


1) A 108M GBP buyback if paid as a dividend would equate to a payout of 12,7p per share. Applying a 15% and 30% WHT depending if shares held in an ISA or not would equate to 10,8p and 8,9p respectively. A 10% share buy back should increase the shareprice (assuming a 130p start point) by 13p (20% & 46% more repectively than the dividend approach). Importantly no tax is liable until shares are sold and likely to be 0% if you leverage available tax reliefs (ISA, SIPP, Personal Allowance etc.).

2) A maximum of 85M shares are to be purchased, with a max 108M reserved for this exercise. This equates to DEC being able to buy at an average of 127p. The effective NAV of 254p (using current low GBP/USD exchnage rates) is based on PDP PV10 pro forma of announced acquisitions. This equates to a 50% discount on assets DEC understands well. Effectively buying 1 pound for 50p.

3) However this valuation standard only accounts for proved developed producing assets discounted using a 10% rate. Given interest rates are expected to peak around 4%-5% and DEC already sees significant potential for infill drilling, bringing wells back to production etc, then DEC are from a value persepctive actually buying much more than 1 pound for 50p.

4) On a standalone basis this buyback frees up 15M USD or 13,5M GBP per annum. DEC have announced a plan to be net zero by 2040 and the published ARO stretches out for 50+ years. In short they take a long term view. So this buyback repays itself after 8 years and after 20 years is worth 300M USD. A one-off dividend payment does not have this effect.

5) Finally given the expected volatility of markets given the need to discount increasingly bad news on the economic front (especially over Q4 22 and Q1 23) - what better than having an effective floor to the share price of 127p below which a wave of buying kicks in. Importantly the size of the buying (10% of shares) is bigger than the position of any of the existing institutional investors.

To summarise, in my view this is a fantastic piece of business from a highly competent managament team who if I remember correctly have not sold any material volume of shares over the years. To me at least it does not look like they are trying to "goose the numbers" for their own short term gain.

[lomand01] 12/10/2022 06:47

1knocker. Share buy backs have been one option of a strategy of the company announced and repeated regulary since the IPO for the most effective use of their free cash. Special dividends are not well understood by investors and there is little evidence of them leading to sustainable higher share price multiples. Buying back and retiring shares shrinks the equity base and all other things been equal leads to sustainable increased dividends. This is far more likely to lead to sticky new investor interest

[woodhawk] 12/10/2022 00:31

I agree with you 1knocker. Although I have been a holder for under a year my effective unit cost after a little trading is now 104p. It is now my third largest holding.

[1knocker] 11/10/2022 23:46

I do not like share buy backs (save in the case of investment trusts using them as premium/dscount control). A company should not speculate on the price of its own shares. Its not where the skills of people paid to run a trading business lie, and it encourages share price manipulation. The value of a company's equity should be left to the market. If a company has capital in excess of its trading requirements, it should straightforwardly return it to the shareholders, by way of a special dividend or a return of capital. It was a great mistake when this hitherto illegal practicce was made legal.

As to the share price and dividend, I have many times expressed the view that the size of the dividend may actually discourage investors, fearing that it must be too good to be true.I was suspicious at first, ad my initial purchase was small. It does not help that the current accounting conventions result in highly uninformative, even misleading to the uninitiated, accounts.I have now been a holder for about five years, and this is now my largest holding. I can only say that if it is too good to be true, it does not have to last much longer before I have recouped my capital outlay (have traded in and out a bit, bringing my capital commitment to under 100p per share). I am surprised that the share price as not gradually risen to reduce the % divi, but all the better for anyone looking to reinvest dividends.

[johnhemming] 11/10/2022 20:07

At current exchange rates PV10 of USD 2.82 is GBP 2.56. I am not quite sure which of the recent transactions are included in this, however.

[woodhawk] 11/10/2022 19:40

Jeffries also cover DEC, last target I saw was 170p as at April.

Is 10% yield ridiculously high? Or is the share price ridiculously low? I know what my money is on. In the meantime, intend to enjoy and exploit the mighty, quarterly divi as long as it lasts.

[charggg] 11/10/2022 19:18

Emeth value seems to be a fund that likes the story at Dec. Should have more brokers covering apart from just peel hunt especially a £1.1bn market cap company. 10% yield is ridiculously high - that too at fully hedged gas prices.

[woodhawk] 11/10/2022 18:37

Yes, Charggg, you might find some other illuminating info there too.

[ilot] 11/10/2022 16:52

look at p12 of the August presentation

[charggg] 11/10/2022 16:17

Where did the company mention 234p? Where is the number coming from?

[woodhawk] 11/10/2022 11:09

As at 8-8-2022 the company believed the NAV to be circa 234p - therefore a very substantial discount at the current share price.

[redsonning] 11/10/2022 10:50

You're asking me to believe that to save paying out about 15p (div), I would go out and borrow 130p so as to buy back the share that gives me the dividend liability. Makes no sense on it's own. Only can ever make sense when the net assets per share are a reasonable amount greater that the share price. Understanding exactly what that is for DEC is not that obvious. Anyone have any decent feel for the NAV per share here?

[johnhemming] 10/10/2022 13:25

The cost of the finance for buying back the shares is lower than the dividend paid on the shares.

[mrnumpty] 09/10/2022 22:32

On the LSE chat site for DEC , a poster called Seav provided a be link at 18.08 pm today ( Sunday 9th October ) for a You Tube interview about DEC . The interview is lengthy and needs some concentration but is ultimately positive about the Company . However , I haven’t heard before of the interviewer or the interviewé before , so I can’t vouch for their bona fides .

[aleman] 07/10/2022 10:41

Gas prices in Europe have been tumbling. EU reserves are about full now (89.6%) and the cold weather has not hit yet. Until the cold arrives that drives winter levels of demand, usually later November, I'd guess at 6-8 weeks of further downward drift in gas prices.





If only there was a high-yielding gas company around that had fixed its medium term prices so this did not matter too much.

[mrnumpty] 07/10/2022 10:25

We all are aware that , unlike crude oil , which can be relatively easily shipped between continents and the price of which therefore is fairly uniform across the world , it is an entirely different matter with natural gas . Where gas pipes do not exist to transport gas from one country to another , the process of freezing the gas down to one six-hundredths if its volume , and then returning it to ambient temperature on reaching the destination port is very expensive . Furthermore , the facilities to do so , such as the specialised ships , and especially the facilities for freezing the gas at the exporting nation are highly constrained . This limitation also applies to the LNG terminals in Europe , so it’s very interesting to Google “ LNG terminals in Europe “ , which claims that there are currently 29 large LNG terminals ( there are also some smaller ones ) in Europe , with a further 33 under construction or in the planning stage . There is also a lengthy article on the subject by King and Spalding , but it dates back to 2018 . Anyway , if there is an increase in infrastructure for transporting natural gas from the USA ( where gas prices are low ) to Europe ( where gas prices were much higher even before this crisis ) , then it must , albeit in the medium term , be good for DEC , as an increasing ability to export US gas to Europe would surely raise the Henry Hub rate .

[shawzie] 04/10/2022 10:29

Is this the future for old oil and gas wells?

“CEMVITA - Successful Field Test Demonstrates Gold Hydrogen™ Production in Situ.
To accelerate the clean energy transition, Cemvita taps existing oil and gas infrastructure to produce clean hydrogen at $1/kg using subsurface microbes”

[bluemango] 03/10/2022 21:45

Wrong thread?

[clive7878] 03/10/2022 21:09

Said today that they expect interest rates to be 3.5% in Nov, 4.5% in Dec, and 5.5% next March, and that a 2 year fixed mortgage deal is now already being quoted at 5.5%.
These rates could hurt some people.

[simplemilltownboy] 03/10/2022 07:38

Nice to see the share buy backs have started.