Diversified Energy Share Discussion Threads

[woodhawk] 11/11/2022 14:46

I've already done very well here since I switched out of APF (or ECOR as it's now called). I didn't like their cavalier attitude to divis - unlike the approach here. At least double the yield and some superb capital gains after a modicum of trading too. Onwards and upwards!

[laurence llewelyn binliner] 11/11/2022 14:23

#Woodhawk, seems we are both holding here too ..

Higher prices from forward hedge positions will kick in from Q3-2022, prices are not easy to unpick, but from what I read from the H1 presentation, our late 2022 and FY2023 natural gas consolidated basic hedges are +30%, 2024 hedges are the same .. :o)

[woodhawk] 11/11/2022 11:46

I made a note of this quote from a couple of months back:

"the second half of 2022 and into 2023 when the increase in our hedged floor price…will be more impactful”.

Looking forward to Monday's update.

[riskvsreward] 11/11/2022 11:30

Good news leaked before the update on Monday?

[laurence llewelyn binliner] 11/11/2022 09:55

#Blue Mango, +1, if patterns repeat, no guarantees but they often do, we should be in for an upside breakout timed very neatly with results and the next dividend update next week.. :o)

[bluemango] 11/11/2022 09:48

Chart in header is showing a classic pennant formation (started around July), with possible breakout perfectly timed to coincide with trading update due on Monday.

Current yield is 11.3% if held in a SIPP with no WHT; otherwise 9.6%.

[lab305] 08/11/2022 14:42

Cenkos buy note out today. £1.66 price target.

[bluemango] 07/11/2022 19:25

I do like a nice pennant chart formation ...

[ntv] 07/11/2022 17:44

Results due 14th

[tom111] 04/11/2022 09:40

Slowly on the rise with results due next week

[scrwal] 01/11/2022 12:19

Maybe they got cold feet or need the funds for another deal.

[lab305] 01/11/2022 07:51

No shares bought by DEC yesterday when prices were at a month low ?

[renewed1] 31/10/2022 17:44

Thanks Mondex that makes it a lot clearer.

[1knocker] 31/10/2022 14:19

Very good to see DEC working on both sides of the equation - cost of money and gas sales. The right time to do it too, with the wind behind gas prices.

[lab305] 31/10/2022 11:41

NATURAL GAS
6.308 +10.98%

[bluemango] 31/10/2022 11:20

#3624 It looks like a restructuring of their debt, asset-backed (as explained in #3626) and giving them enough in the coffers to take advantage of any resource sales coming up.

[mondex] 31/10/2022 09:11

Novel asset-backed bonds lure shale sector away from bank loans (World Oil)

As big banks pull back on lending to oil and gas drillers, some U.S. energy companies are relying on a novel kind of bond to get the financing they need.

The bonds are backed by the companies’ oil and gas reserves, meaning producers are essentially pledging income from their wells in exchange for up-front cash. The debt known as “proved developing producing” securitizations can allow shale drillers to pay less to borrow, in exchange for giving up some of their possible gains if energy prices rise.


Companies this year have sold, or are in the middle of selling, $4 billion of PDP securitizations. That’s up from just $1.4 billion total over the previous three years, according to data from Fitch Ratings. The first such bond was sold in 2019.

Energy companies are broadly cutting back on borrowing now because they are awash in cash. New loans to oil and gas firms fell more than 30% from 2018 to 2021 and are on track to fall again this year, according to data compiled by Bloomberg. Banks have also been under pressure from regulators and investors to cut back on lending to an industry that is notorious for overspending during booms that get followed by busts.

But many energy companies still need financing. Colorado-based Jonah Energy sold a $750 million PDP securitization this month, backed by the rights to proceeds from about 2,400 oil and gas wells -- virtually all the wells it owns. The driller will pay a yield of about 8% for its PDP securitization with an average life of three years.

In contrast, UK-based oil and gas driller EnQuest Plc this month sold unsecured five-year bonds at a yield of 12%.

By selling a PDP securitization, Jonah managed to garner substantial savings, all the more impressive because just a few years ago the company couldn’t pay its obligations. In 2020, during the early stage of the pandemic, the company restructured its balance sheet to cut its debt, raise equity and hand over a majority of the company to some former noteholders.

The securitizations offer other advantages as well, most notably when energy prices drop. A common alternative form of financing, known as reserve-based loans, is also secured by a company’s wells. With these loans, every six months, banks estimate the value of the oil and gas wells backing the loan.

If the assets have declined in value, companies have to cut their borrowings or offer more collateral. And even in good times, when prices are rising, drillers may not see their borrowing bases rise, meaning the corporations may not be entitled to borrow more. According to a survey of borrowers and lenders in the reserve-based loan market from Haynes and Boone, a law firm, strong oil and gas prices haven’t been resulting in borrowing base increases recently.

With PDP securitizations, collateral doesn’t get re-valued.

“This is a more permanent source of capital,” said Greg Kabance, a managing director at Fitch.

Jonah is using the proceeds from its securitized deal to refinance its existing reserve-based loan, according to a statement from Tom Hart, Jonah’s president and CEO. The deal “positions us with a strong balance sheet to pursue the significant drilling opportunities that we have on our acreage and strategic opportunities that may come our way,” he said.

But there are downsides to these deals too. To protect investors in PDP securitizations, companies selling these bonds usually enter derivatives transactions that effectively give them steady income from the assets over the life of the bonds, and reduce their potential gains from energy price increases. The banks that sell these derivatives bear the risk of oil and gas prices falling and reap the benefits of prices rising. The Wall Street firms can hedge their exposure using options and other instruments.

These derivatives are one reason why big, integrated oil and gas firms like Exxon Mobil Corp. have avoided selling PDP securities: they don’t want to give up their potential gains. So far, the space has been dominated mostly by smaller, private firms, some of which have done multiple securitizations. They include Wyoming-focused gas producer PureWest Energy and Denver-based Raisa Energy, which owns and leases oil assets across North America. Diversified Energy, the owner of a vast empire of wells in Appalachia, has completed six.

In addition to pressure from regulators, banks have faced pressure from investors to cut exposure to businesses that are seen as risky from an environmental, social or governance perspective.

“Fewer banks these days are willing to lend into the upstream oil and gas industry, in part of because of ESG and other concerns,” said Michael O’Leary, a partner at law firm Hunton Andrews Kurth, who has written about PDP securitizations.

[renewed1] 31/10/2022 08:42

Too complicated for my understanding....can anyone explain in simple language what they are doing?

[lab305] 31/10/2022 08:30

NATURAL GAS
6.127 +0.443 +7.79%

[asp5] 31/10/2022 07:48

latest ABS deal is interesting. Although weighted average interest rates overall is currently a favourable 5,7% the latest deal came in at 7,5%.

The near ~50% increase in financing costs (compared to past deals) will surely have an impact in the market more broadly. For the big players why load up the balance sheet with debt by executing similar ABS structures when they can make a true sale to the likes of DEC.

From a liquidity perspective I expect the $300M to increase by ~$200M once the conoco deal is factored in. Again leaving DEC well placed to take advanatge of any distressed asset sales in the months head.

[lomand01] 28/10/2022 15:51

Gas prices off in the USA around 3% so assume that's the reason for share weakness today. Good opportunity for some share buy back activity.this is seriously cheap.

[woodhawk] 28/10/2022 12:13

mrnumty,

RE SIPP and withholding tax - HL may not deduct the tax in respect of shares held in a SIPP, but other platforms DO. I use IG Index and they definitely deduct the 15% from my SIPP holding (I have current W8-BEN). I have repeatedly questioned this, but they refuse to budge. iWEB (Halifax) are even more useless.

[aleman] 26/10/2022 12:29

Gas futures and commentary on them suggest the EU has enough gas unless it has a colder than average winter.

[owenski] 26/10/2022 12:13

“ Most major gas users on the Continent now have storage levels at more than 90% capacity “ .

For now.

Winter hasn't started yet.