Diversified Energy Share Discussion Threads

[renewed1] 11/3/2023 08:38

Nice to see the company replies and responds to the points raised instead of typical cut and paste job from so many companies...whether we agree with the response or not!!

[lab305] 10/3/2023 20:35

johnhemming. I too hold for the long term , nearly six years now. For a company that prides itself in safety the volatility is unbelievable. Now when the hedging should be giving us backing we are on the floor. It is disingenuous to suggest that people are selling on the commodity price. The story has been out there long enough. The share price responsibility lays squarely at the door of the actions of Dec.

[karakaya00] 10/3/2023 18:06

This is the reply I got from DEC when asked why they do share buybacks and then start raising funds.

"Thanks very much for your email and apologies for the delayed response.



With regards to the share repurchases conducted in 2H22, there was at the time of the share purchases a unique opportunity presented in the form of near-parity between the US Dollar and Pound Sterling. The Company took advantage of the temporary disruption in foreign exchange and ceased purchases when the USD/GBP cross returned to normal levels.



As it pertains to DEC’s recent share price performance and the equity fundraise, I would first take a moment to remind that year-to-date performance for Natural Gas has seen the active contract price decrease by >30% and gas-weighted North American producers have seen a drop in equity value of approximately 10% across the board. Certainly we feel that Diversified’s robust hedge position for 2023 (above the current natural gas strip) should provide some insulation when compared to peers with less price protection, but at the least this strategy will support cash flows in an uncertain commodity price market. Broadly, Diversified’s year-to-date share price performance has replicated that of market peers and significantly outperformed the commodity.



Speaking to the recent acquisition and fundraise, it’s important to recall that the Company acquired approximately $800 million in Central Region assets since the May 2021 fundraising (Diversified’s last until February of this year) – which was largely made possible through strategic financing and utilization of the Balance Sheet. Given the full subscription of the February 2023 fundraise and the relatively low discount of 5% to the 8 February mid-market price, it is reasonable to say that there was significant institutional and even retail demand for the shares that supported the placing.



We appreciate you reaching out and your ongoing investment and support of the business model. I hope that the above has spoken to your enquiry, but please do let me know if I may assist in this or other matters.



Best,

Wren Smith

Investor Relations

Diversified Energy Company PLC"

[johnhemming] 10/3/2023 15:44

@lab305 If you know how the stock works then gas prices don't matter, but a lot of people trading the stocks are following commodity prices. This happened during Covid which is when I took my average price down from £1.20 to a much lower point.

Of course the company continued to pay the dividend all throughout the lockdowns.

There are from time to time opportunities in stock picking.

In the end I hold the stock for the long term. If the acquisition pays for itself over three years then the additional cash after that is something I would like a share in.

[gisjob2] 10/3/2023 15:02

I'm a small shareholder here and DEC are becoming very interesting to me for a large top up at these sorts of levels, especially with the Dividend as large as it is, however I have read and seen questions regarding how the company quantifies it's well P&A liabilities, and in particular how it quantifies it's gas leakage from wells once they're acquired them from previous owners as discuss in the video here at 33 mins



I'm sure this has probably been discussed at length before on the board but can anyone offer their constructive thoughts regarding articles such as this.

[johnhemming] 10/3/2023 14:33

Natural Gas is on its way down again at the moment.

[gisjob2] 10/3/2023 14:26

Any chance of the low 90's ?, I would consider a top up around there.

[johnhemming] 10/3/2023 13:11

@lab305 I would not expect them to start a buy back this soon. I would not be surprised if there were not some covenant on the financing.

[scrwal] 10/3/2023 12:36

I don't see how they can continue the share buy back at this point in time since they have just done a share raise.
The price will recover but this is what happens to DEC when they do a snap placing and will do in the future. Continuing to do this will always unsettle the market and when other factors are in play, even if not sector specific, the price will get hit.

[1knocker] 10/3/2023 12:27

My post was tongue in cheek.I knew it was too good to be true johnhemming. The taxman always has a monopoly on the trump cards!!

It is a further demonstration though of how useless GAPP accounts are for a business like this. The bottom line does not even give a realistic guide to tax liabilities.

[lab305] 10/3/2023 11:09

How long before they act ? They have the mandate in place for a share buyback scheme of which they have only used a fraction. They were buying for a short time (28 days) at around £1.28. We are now 30% below that. The pound has risen around 10% so the shares are still considerably cheaper. The argument that they have stopped because of the pound dollar rate just won't wash. On top of that they can borrow at 6% when they are paying out at almost 15%. Having completely undermined the confidence of many investors with a lowly priced placing they need to get off their hands and support the stock. Good deals are not enough and we need more support.

[johnhemming] 10/3/2023 10:32

@1knocker it is the value of future production I am talking about not the value of the hedges. I expect them to declare a non-cash profit from the value of the hedges going up. Luckily this is generally not taxable. (nor are the losses allowed against tax).

[1knocker] 10/3/2023 09:41

'..they have to declare a loss when the value of the hedges goes down and cannot declare a profit when their value goes up..' That sounds like the dream scenario for minimising corporation tax. I wonder if there is some way I could build hedges into my income tax return? I must have a word with my accountant... One lives in hope !!

[bountyhunter] 08/3/2023 10:27

Back up at £1 + the divi in the bag makes this only a tad down from the 105p issue price, nothing to worry about imv. US gas already appears to have bottomed out. Ok there are hedges but the US gas price still has a strong influence on the price here.

[johnhemming] 08/3/2023 10:25

I don't know the current balance between conventional and unconventional, but the annual report 2021 has 67% conventional.

I always think it is worth challenging assumptions. The key drivers here are the long term production from the wells and the plugging costs. The company's assumptions on this will have been checked by other larger investors such as the securitised debt holders and Oaktree, but it is worth looking at these.

Hyperbolic reductions mean that revenue goes on for a lot longer than exponential. We can check the plugging costs through current plugging costs.

The business is really a cash based business and the accrual accounts are essentially meaningless. The fact that they have to declare a loss when the value of the hedges go down and cannot declare a profit when the value of future production goes up means the bottom line figure is meaningless.

However, we should check the assumptions for reasonableness. A while ago I looked at what cash might be left when the music stops (after finance costs, dividend costs and plugging costs) and came up with a figure of the order of the USD 2bn that others have come up with.

Looking at the charts DEC has bounced up and down for quite a while.

[spangle93] 08/3/2023 09:49

johnhenning, ref 371

I'm not sure how that nugget of knowledge changed your thoughts of investing in DEC in any way? ;-)

However in your link, which references the extreme case of shale well, it goes on to say
"The application of hyperbolic decline in unconventional reservoirs tends to overestimate the cumulative production. Therefore, the transition from hyperbolic to exponential decline curve at some terminal decline rate is assumed in unconventional reservoirs. For this example, terminal decline rate of 5% is assumed. That is when annual effective decline rate “De” is reached to 5% the hyperbolic decline will be a switch to exponential decline"

Most of DEC's wells are late life wells

[11_percent] 08/3/2023 09:32

11%
Don't forget that back in August last year this was 140p. Using that and fx of 1.2 you would have got $1.7bn so all that is needed is a couple of well planned share issues funding acquisitions and you will be in the $2bn ballpark.

=================

Mmmm......not sure I would go with that.

The share price is where it was back in 2018.....since then it has been down at 55p and up at 144p.....and everywhere in between.

The problem here is that the acquisitions don't add to the market cap on the long term basis......there is a low probability of getting a $2B MC and holding it.

Go for a NY listing now.....or near term when the sentiment improves.

[johnhemming] 08/3/2023 08:08

Looking at the USD market cap issue. From Stockopedia current market cap is GBP 958. I think ADVFN are not including the recent issue. That in dollars is 1,129m. That would require a share price of 175 to give the 2bn dollars figure.

The yield at 175 would be about 8%.

[johnhemming] 08/3/2023 07:16

I thought I would have a further look at the decline issues and it appears that conventional gas wells normally link to a hyperbolic decline rate rather than an exponential decline rate.

Viz:



"In hyperbolic decline as opposed to exponential decline (where the decline rate stays constant with time), the decline rate decreases as a function of the hyperbolic exponent with time."

[scrwal] 07/3/2023 20:37

11%
Don't forget that back in August last year this was 140p. Using that and fx of 1.2 you would have got $1.7bn so all that is needed is a couple of well planned share issues funding acquisitions and you will be in the $2bn ballpark.
The problem is getting there and currently management have kiboshed things with their preference for a snap placing - this scenario has played out exactly like a previous placing which hit the price even harder.
Things will improve but it won't be a rapid bounce back - everything is geared to steady cash flows etc which theoretically should minimise price downside but doesn't if the market is unsettled, something that Rusty by now should be aware of but seems to ignore.

[laurence llewelyn binliner] 07/3/2023 19:24

Looking pretty good here for our next dividend fix, typically announced 2 weeks before the payment date and the FX 2 days before that so expect the news 14th, and fix from the 12th and there is not much to shore up the GBP before the MPC vote on 23rd..

USD0.04375 could give us around GBP0.038.. :o)

[adg] 07/3/2023 18:15

Hilarious with all the experts coming out of the woodwork with doom and gloom scare stories as the share price wobbles

I mean ffs - for example one doommonger “Steven - super - trader” (being one )… what a really silly laughable stupid name to choose for yourself - says a lot really

Perhaps I should change my username to Iamatotaltitandthinkimthebesttraderintheworld or something equally as ridiculous