Diversified Energy Share Discussion Threads

[bluemango] 10/12/2022 13:11

"History would argue that we have years of higher oil and gas prices ahead of us”

[lab305] 09/12/2022 22:54

Well greygorge I bought another 74k shares the other day between 116.72 and 117.6 Average price after stamp duty 117.8p . If all the expert opinion on here is correct then we should be back to 130p in no time. I have made probably as much trading this share since ipo as the dividends have paid over 5 years. I still hold many more and truly it is a good income stock. It frustrates me when the share price can never seem to make much progress and the support that I believe the buyback scheme would have given has disappeared.
Seriously I find myself hoping perversely that the gas price will drop and give them a chance to buy more assets at reasonable prices. . My worry is that the prices acquisitions will now command will be too expensive for them as the money is not pouring in due to hedging.

[1knocker] 09/12/2022 21:37

A few pence up on the share price and the tone of the board is euphoric, a couple of pence down and the whole business model on which the company operates is called into question!

Some folks should look up the DEC dividend history since IPO, and count their blessings.

Have any of the naysayers worked out the percentage fall in the share price from its recent high, and compared that with the movement in the prices of other O and G companies?

Or calculated the total return on DEC this calendar year and compared that result with the results of the rest of their holdings over the same period?

If DEC is anywhere near the bottom of their portfolio holdings performance league, they have done one hell of a lot better than I have, and I should be grateful for a list of their holdings (with weightings) so that I can put my finical house in order for next year!

[lomand01] 09/12/2022 21:24

Greygeorge. Unlikely in the case of Dec. No trading Volume, liquidity and market cap far too small. Not a member of a major index such as XOI.

[greygeorge] 09/12/2022 20:32

johnhemming - '...There are clearly automated trading systems that buy and sell oil and gas stocks when the commodity price moves regardless of hedging...'

Would you like to explain to this simple soul how exactly these automated trading systems work - I mean, what formula do they use exactly when deciding what purchases and sells to execute at any particular time ?

[johnhemming] 09/12/2022 17:09

The market does not really understand that much. It is not just DEC that the market does not understand, but many other stocks. There are clearly automated trading systems that buy and sell oil and gas stocks when the commodity price moves regardless of hedging.

I don't regret not selling some of my holding when the price was higher in order to buy back in today simply because the stock is so undervalued anyway. I will just have to settle for the dividend.

[greygeorge] 09/12/2022 16:27

lab305, didn't you sell 85,000 DEC shares in Novemeber ? This, from your post back then : '...Not childish just not wearing those rose tinted glasses. Luckily I had the foresight to sell all 85k shares in my sipp last Friday @ 130-131 anticipating the update would not be well received...' So, did you buy back in at these low levels ? with your foresight, and depth of knowledge of hedging and oil and gas production in general, I'm surprised you didn't sell all 600,000 shares - or however many you claim to have - on the expectation that DEC would once again disappoint your lofty expectations of them.

[greygeorge] 09/12/2022 16:14

Poor old lab. You are totally clueless. Sad.

[asp5] 09/12/2022 15:34

Lab

DEC total shareholder returns since IPO in 2017 till now (31/10/22) was 267%. Even though the recent current share price is disappointing, DEC is still up ~13% over last 12M. If the share price stays at these levels, the current 12% yield if reinvested would still result in a ~75% compounded return over the period.

While EQT (take your pick of US shale producers) is up ~85% over the last 12M, it only yields ~1,5%, and over the last 5 years its share price gains are flat to down.

So its important to undesratnd what you are investing in. DEC are setup for shareholder returns over the long term with hedging of price risk implemented to ensure debt and dividends can be taken out and repaid/paid.

The hedges are not taken as optional insurance cover, they are taken out in order to obtain the financing required to purchase wells & grow the business. It is at the heart of the business model. This is a direct quote from the 2017 final results

"To manage its cash flows in a volatile commodity price environment, DGO uses a combination of physical and financial derivative instruments. As required by its Senior Secured Credit Facility, DGO executed a combination of fixed price physical contracts, price swap financial contracts and two-way collar financial contracts equal to approximately 75% of the Company's forecasted production volumes ..."

This startegy has been in play since IPO. The issue is that in the early years DEC were making money on these hedges as gas prices dropped, the opposite is happening now.

DEC represents tremendous value at current levels, at some stage the current pricing disconnect will resolve. In the meantime I will use the opportunity to keep re-investing and making sure that I maintain my undesrtanding of what I am buying.

On that last point, I would advise anyone who has not heard of Peter Lynch (one of the great fund managers) to take a look at (at least the first 25 mins).

[bluemango] 09/12/2022 14:26

That link again (capitalise the 'TT' when posting a link and it doesn't change them to xx)

[lomand01] 09/12/2022 14:13

Another investor who has invested for the wrong reasons. The strategy and policy of DEC has been made clear repeatedly since the IPO. There are plenty of leveraged E&P companies for those who are bullish on O&G. Since then IPO the total return of DEC to investors has significantly outperformed the market and I doubt you will find even a handful of pension fund managers who have performed as well. The objective of DEC has been to
reward investors via a combination of attractive consistent dividend income as well replacing and growing reserves. Those who don't like it should sell and move on. Those who remain may wish to watch this again to remind themselves why they are invested. hxxps://youtu.be/-NfRXZ-OZ3o

[lab305] 09/12/2022 13:41

Copied from poster on lse thread.

The share price reflects the market's view of the prospects for DEC and the ability of management to make returns for shareholders. Those abilities include maximising the price achieved for its products. In the quarter ended 30 Sept. DEC achieved an average gas price of $3.79 MBTU thanks to hedging policies. On the 31 Jul, 31 Aug & 30 Sept Henry Hub reported spot prices of $8.33, $8.93, $6.40. It is the failure of management to make hay whilst the sun shines that is holding back the share price.
Hedging should be a tool to inflate not deflate profits. If the cost of hedging is viewed as an insurance premium then that premium should be demonstrably proportionate.
AceOfClubs

[lab305] 09/12/2022 12:58

Terrible share price performance. If they hadn't flip flopped on the share buyback scheme we wouldn't be back below 120p. The dividend is good but we have lost nearly three years worth in as many months.

[bluemango] 07/12/2022 10:35

Note the penultimate sentence:

"We could retest the lows of October: Strategist
Jeff Schulze, director and investment strategist at ClearBridge, joins BNN Bloomberg for his view on the S&P 500 amid volatility. Schulze says markets will continue to experience bear rallies and warns that earnings compressions have just begun. He warns investors that more downside could lie ahead. Schulze adds that investors should look at sectors such as staples, health care, energy and utilities. He remains wary of growth names"

[laurence llewelyn binliner] 07/12/2022 10:04

#Carcosa, almost begs the question, in whose best interests is it to future sales that Nordstream1/2 are taken out of operation..? No one has been held accountable..., yet..

[laurence llewelyn binliner] 07/12/2022 07:43

The raised floor prices for 22/23/24 from new hedges will generate income in excess of the costs to close out the old positions so we are in a better position for revenues going forward, or they would not have closed them out..

That should also convert into rising dividends, or buybacks pending the share price and FX.. :o)

[gary1966] 07/12/2022 07:20

Then do we need to worry then as they have just spent $110m of actual cash buying out hedging contracts?

[1knocker] 06/12/2022 18:14

Hedging is a very sophisticated business. Contracts can be bought and sold many times, or even repurchased, between signature and the delivery of gas. They also vary enormously, from an obligation to purchase at a stated price to a right (but not an obligation) to purchase. Purchasers don't know in advance how much thy will sell on, not least because of the vagaries of the weather and business users own fortunes. They would sooner sell more gas though than invoke supply interruption clauses in their own supply contracts to commercial users. So the price of gas at the margin (effectively the spot price) is pretty volatile, but not much is actually bought and sol at that price. Anyone forced to buy at spot when it is high, or to sell at spot when it is low, has been caught with his trousers down.

For a classic example, think back to when the oil price briefly went negative, It made for exciting headlines, but very little was actually sold on terms that the punchers would be paid by the suppliers to take iff their hands . No one was paying us to fill up our cars, or the heating oil tank!

The time you need to worry about DEC's hedging is when they declare a cracking cash flow (rather than accounting convention) loss on hedging. It will get harder though as tax rates rise, because some of the tax hydrocarbon companies pay is assessed on volume at market rates rather than price paid. I don't know why. It seems bonkers to me.

[lomand01] 06/12/2022 17:03

Agreed although ever since the IPO the management has been clear that apart from acquisitions it would use free cash to either repay debt, increae div's or buy back stock. All enhance shareholder value.

[owenski] 06/12/2022 14:59

The business model is to acquire and run financial assets, the background to the board is from the banking sector, medium term hedging is key to this and not obtaining current market spot prices, hedging provides known cash flow so that the model can operate - which includes attractive returns to shareholders.

This isn't a standard O&G producer, they run the model as a financial asset instrument.

For me, this is an income stock, so long as I see the hedging in place - irrespective of current fluctuating spot prices - then I know the model and my paycheck are secure, spot pricing is not as relevant.

[lomand01] 06/12/2022 13:36

Share repurchases done around 1.28 when sterling was weaker but despite sterlings recovery current share price again makes this an attractive option for the company. Don't be surprised to see a resumption in share repurchases.

[bluemango] 06/12/2022 12:37

#3716 Agreed. Can't imagine this weakness is any more than just temporary and management plus yield here are pretty reliable.

[lomand01] 06/12/2022 11:33

Looks like it is most likely due to sell off of gas futures in the USA the last couple of days?