Diversified Energy Share Discussion Threads

[laurence llewelyn binliner] 31/1/2023 07:11

Protecting our cash flow and, in turn, our dividend and debt payments have always been core to our strategy. We opportunistically capture higher natural gas prices as we add additional hedge protection. We begin 2023 again on solid footing, with 85% of our natural gas production hedged at an average floor price of USD3.63/Mcf, with downside protection 27% better or $0.78 higher per Mcf compared to the values reported as of year-end 2021..

[lab305] 31/1/2023 07:08

All looks excellent to me and will buy more at the open if it doesn't jump !

[pro_s2009] 31/1/2023 07:02

Trading update :



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[bluemango] 30/1/2023 23:23

#3942 Agree. I only use the filter in extremis, but have been minded to in this case, for some time.

Can't decide whether the constant negativity is a deliberate attempt at manipulation or just a character flaw, but it's tiresome and boring.

[1knocker] 30/1/2023 23:11

greygeorge, if you hold DEC shares, you will presumably sell them pdq, before disaster overtakes you and DEC. If (as seems more likely) you hold none and have no intention of buying any because you see disaster looming, you have nothing to worry about.

Either way, why post here? Surely your time would be better spent analysing shares in which you see som merit, rater than a share you regard as a moneypit for investors? We are all big boys, and will make our own investment decisions about DEC, without your assistance, profound (or not) though your insights may be. Please do not feel obliged to mind our backs.

PS If you had troubled to read my post of a few days ago, you would have seen an analysis of how lower gas prices could well be beneficial to DEC in the longer term - in outline that is because DEC is a low cost producer and thus profitable at lower prices, lower pricer discourage the construction of new wells flooding the market, and lower prices enable DEC to acquire existing wells at low prices from less efficient producers. DEC was paying a dividend at very little less than the present rate long before last year's gas price spike.

But please don't buy DEC shares on the strength of anything any of us say.We do not wish to have your financial ruin on our consciences!

[lomand01] 30/1/2023 22:00

Suarez is correct with his analysis. For comprehensive and unbiased analysis of DEC watch the Emeth discussion on YT. DEC has a unique business strategy which differs from traditional E&P and will always be confusing to many. ARO concerns and decline rates will always be a concern for investors and if you are not convinced then don't buy the stock. For those who are, this is a company generating 33% free cash flow, with limited and disciplined approach to leverage and ideally placed to acquire and manage replacement assets and very attractive pricing. If they can't then the return of my cash via increased dividends and stock buy backs is fine by me. This is in effect a public company with a private equity strategy.

[clive7878] 30/1/2023 21:33

Need gas prices to shoot up to avoid £1 a share.

[spangle93] 30/1/2023 21:32

KS - yes, you put it much better than I did


Asp - when I wrote that earlier post, I hadn't read the latest "hatchet job" from the link in post 3914. That's a credible reason for a DEC-specific fall over the days since its publication

[asp5] 30/1/2023 21:21

Hi spangle - I think you are correct in suggesting that the decline is not solely related to US gas prices. It seems more DEC specific.

My hunch is that we have a fund selling down its position (as per a previous post). I suspect certain funds may be required to downsize the fossil fuel exposure in their portfolios as a matter of ESG policy/targets. Often these are set at the start of each new year hence the reason for my guess.

I did notice Abdrn reduced their position below the 5% level recently and trade volume is high .....

[asp5] 30/1/2023 21:07

GG according to the logic you describe, DEC would only ever have 12,5 years of reserves. King Suaez explains it well. DEC was formed over 20+ years ago and has consistently followed the same business model.

It has also been able to consistently secure financing over this period. As recently as a few months ago a consortium of banks were willing to lend hundreds of millions over a 10 year period. You cannot even get a buy to let mortgage at a decent rate from a bank without providing 30%-40% equity. Banks would not lend on the basis you describe. Would suggest to study DECs AR supplement to get a better understanding.

btw I fundamentally disagree with the statement that "there is no such thing any more as LTBH ....". Happy to have a discussion on this in 7 years time.

Good luck to all

[king suarez] 30/1/2023 20:58

A decline of 8% per year doesn't mean 100, 92, 84... 12, 4, zero in 12.5 years exactly.

You start at 100 and multiply by 0.92 each year. It's a decline <<curve>>; not a straight linear extrapolation. After 12.5 years you're still at around 35% of year 1 production - and that assumes NO capital expenditure on replacement production..

At an 8% decline rate, after 8 years you are just over half starting production rate and now declining by just 4% of year one production each year, for example.

With enough drilling and/or acquisitions from cash flow you can likely offset a modest decline rate indefinitely?

[greygeorge] 30/1/2023 20:10

spangle93, thanks for that. So, a production rate decline of 8% per year, over the entire portfolio, means that they have 12.5 years of reserves, assuming EVERY factor breaks in their favour ? Unless of course the 'decline from peak in the production' refers to peaks reached before DEC aquisition of those assets, So things don't look very rosy AT ALL long term then ?

[spangle93] 30/1/2023 20:05

GG - They don't state that they produce 8% of their reserves per year, they state that over their entire portfolio, the PRODUCTION decline rate is 8.5%, which is what you'd expect if you're a company focused on exploiting the long tail of a parabolic decline curve.

Production and reserves are different buckets. Reserves are economically-producible volumes, and thus depends heavily on the price of gas - wells that are uneconomic to produce (volume in the ground = no reserves) at $2/mcf may be profitable at $5/mcf (volume in the ground = reserves).

[erocnelg] 30/1/2023 18:41

Gasifying post agree 100pc

[lab305] 30/1/2023 18:22

If anyone needs a little moral support ! Watch 18minutes in.

[greygeorge] 30/1/2023 17:43

Ignoring such imponderables as the price of natural gas, hedged or spot, new revenue streams, etc, etc, ad infinitum, one difficulty I have with is the long term outlook for DEC with regards to it's proven and probable deposits. They state that they produce 8% per year, and the assumption here seems to be that the dividend will be maintained - if not raised - into the foreseeable future - and beyond. But in order to maintain profit, and dividend, the proven and probable reserves they base their figures on will be totally depleted in 12.5 years. Now, if they are going to be pumping at a rate of 8% of remaining proved and probable reserves, thereby extending the life of their wells, then the profits, and dividend, will have to reduce too. Tell me how you see it differently.

[laurence llewelyn binliner] 30/1/2023 17:30

That Eco think tank article has done the share price reduction job better than the sliding NG1 spot price today, thanks very much.. :o)

02.03.2023 for the next XD already declared and 4.375 cents..

[podgyted] 30/1/2023 17:25

Well, let's see what tomorrow brings.

[greygeorge] 30/1/2023 17:24

Lord Gnome - 'Buy at the bottom, greygeorge. No advice intended.'

That's ok Lord Gnome. None taken.

[greygeorge] 30/1/2023 17:23

asp5, there is no such thing any more as LTBH, even the most large cap and stable of FTSE100 companies in any 12-18 month period can experience swings of +/- 10% to 20% in their share price. The swings can be even more frequent and more extreme in FTSe 250, DEC is no different. Your 'reasoing' in your previous post tries to make the case that DEC is somehow different to any other company's share price trading pattern. It isn't.

[spangle93] 30/1/2023 17:19

You'd think that it the fall were solely related to US gas prices, then SOUC would have exhibited a similar fall over the last week. Instead, despite having far less production hedged than DEC, it's flat today and over the last week.


Anyway, the good news is that if the spot price falls, DEC won't be reporting huge virtual opportunity losses based on imaginary prices it couldn't have got if it hadn't hedged. Consequently without this apparent headline loss, people might actually see how underpriced it is.

[asp5] 30/1/2023 16:52

#GG - responding to post 3918

DEC is one of the lowest cost gas producers. It has no need for large capex drilling investments compared to other gas producers and has very low operational costs. As an example in 2020 Henry hub hit $1,63 the lowest spot price over the last 25 years. In general it was a very tough price environment, yet DEC was still able to make acquisitions and paid a dividend of 14,5c. It has demonstrated its buisness model works in low as well as high price environments.

The higher cost producers will struggle to get financing at these low gas prices and will look to sell non strategic assets, which provides DEC the opportunity to acquire cheap assets, which in turn drives growth for coming years.

This is also why the hedging strategy is so important to DEC and is a fundamental part of its strategy. For long term investors a low gas price is a positive.

[asp5] 30/1/2023 16:17

#GG not sure what is contradictory in my last post, but will try to clarify:

I see DEC as a long term investment. By 2030 it will be debt free based on its amortizing ABS structures. Over this time the dividend on a very conservative basis (assuming no further increases) will have repaid my initial acquisition costs. At this point the valuation of my DEC holding will be pure profit.

The recent long term LNG deals that the US has signed with the UK & EU, together with the large invest into LNG export capacity by the US as well as technology advancements/investments resulting from incentives in the inflation reduction act give me confidence that gas will be heavily consumed well past 2030. Just today BP stated that investments in fossil fuels are needed for another 30 years to combat energy shortages.



In addition DEC has multiple additional future revenue/saving streams that are not really factored into the share price in my opinion such as its well plugging business, in-fill drilling, sequestration, reduction in AR costs etc. So there is plenty of scope for share price appreciation over the longer term.

While the long term prospects look very good to me it does not mean there will not be short term falls in the share price. As mentioned in my previous posts there are a number of factors (which I will not repeat) that could negatively impact the share price over the short term.

This volatility is not really an issue for those willing to stay invested for a while (as explained above). In fact I treat a lower price as an opportunity to average down and reduce my payback period. The factors I mention in my previous post also provide DEC an opportunity to pick up cheap assets and may well be a factor as to why they have not continued with the share buyback.

For those with a shorter investment horizon the current price volatility will be an issue, but that is why understaning the company you are investing in is so important. I hope this helps to clarify.