Diversified Energy Share Discussion Threads

[gary1966] 31/5/2023 06:52

I will repost this as judging by recent posts I believe you have all forgotten this.

Gary196626 Apr '23 - 07:44 - 4703 of 4882 Edit
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Aleman,

Hedging drops away quite quickly after 12 months, really?

Take a look at page 38 of the March presentation, link below.



2023 85% hedged $3.83
2024 80% hedged $3.32
2025 70% hedged $3.23

Remember Rusty said DEC make a lot of money at $3. ABS all covered by hedging to be repaid in the next 7 years.

Someone also mentioned on here that the longer term contracts ie 2026 onwards were still strong, well above $3, so there really is no excuse for this kind of price weakness here. Some of the speculation on here for the reason for the weakness really isn’t backed up by reality. They have already hedged quite a bit for 2026 and beyond as part of the ABS conditions. If anything the current situation is a positive for DEC as I am sure some cheap production is going to become available whilst they are making lots of money.

[skinny] 31/5/2023 06:10

Brent daily YTD.

[podgyted] 30/5/2023 22:54

Hedging is an issue here IMO.

DEC has to hedge to cover its loan liabilities/ it's its business model - but given the current market I suspect the hedges they can currently put in place for 2024/2025/2026 are not attractive.

[scrwal] 30/5/2023 20:40

Aleman
Correct if using such a basis. I think there is a discount used because of the high hedging done which negates any ability to benefit from any shorter term price spikes generating decent cash surpluses but this is a result of the need to provide cash flow certainty which is strictly followed by the company.

I do not regard DEC as a long term hold as I have previously stated I would sell in the 120s which seems to be the range where the price starts to meander before dropping back for various reasons - the exception was the short foray into the 140s before a quickish retreat. Given my last holding had a 101p average but my current average is 88.25p the high 110s would be an acceptable selling point if pushed.

[aleman] 30/5/2023 20:01

scrwal
30 May '23 - 17:56 - 4876 of 4877

The market has always appeared to ignore the hedging even when it goes in the company's favour.


If a company is valued on about 10 years of projected cashflow, then only about 20-25% of said casflows here are hedged? So the the shares should only be slightly less volatile than other gas companies - especially when some of them are hedged to varying degrees, too. Then throw in that low gas prices bring forward capping costs on low producing wells and vice versa - which will add to volatility. It's quite possible that DEC should be every bit as volatile as other gas companies. Maybe the market is not ignoring anything.

[1knocker] 30/5/2023 18:55

Following my last (rather downbeat) post, out of curiosity I looked over my historic DEC purchases and sales. I see that on 4 March 2020 I bought at 78.7, and my next transaction after that was another purchase on 20 May 2020 at 101.6.

That is a pretty striking example of how volatile these shares can be.

A reminder also that when they seem to be on a roll one should perhaps think of selling some, with a view to getting back in not much later at a lower price! In fact though, in all the years I have held DEC have only made two such 'round trips', and without making very much on either. That is because (for me at any rate) this is a difficult share to call, and as it perennially seems undervalued it is difficult to bring oneself to sell, and equally difficult to hold out for a great re entry price if the price shows any sign of rising, and with another big dividend never far away . On the whole probably best just to accumulate on the dips, and enjoy the income. Less stressful, anyhow.

A rather cursory look at the charts also suggests to me that there is no clear profitable pattern to selling ahead of the ex div date and repurchasing soon after. I think the better way to play that one would be to place a 75 day limit order to repurchase at some price which gives an acceptable profit, rather than stay glued to the screen trying to judge the optimum moment. Certainly if one was looking to 'round rip' DEC on a regular basis, that looks to me to be the way to do it.

[scrwal] 30/5/2023 17:56

I have increased my holding but it is only half of what it was when I sold out.

The share price has followed the expected kicking after the snap placing and compounded by the macro environment.
The market has always appeared to ignore the hedging even when it goes in the company's favour.

[cassini] 30/5/2023 16:08

I wonder if DEC is lumped in with the 'OIL' sector and just gets muntered along with everything else if Brent/WTI falls, or the market doesn't quite get the hedging strategy when gas prices fall.

I know that sounds implausible but it would explain a lot.

Aside from the lightning placement(s) which obviously did/do damage the share price, this puts DEC squarely in the 'mispriced stock' category.

That is to say, this is an opportunity - if anyone has any money left ;0)

[lomand] 30/5/2023 15:48

Looks to me that the buy backs may have started today from action in past one hour. Even if this is not the case,the risks for sellers at these levels is significantly higher than a week ago.

[lab305] 30/5/2023 15:32

People such wild speculation . There is nothing fundamentally wrong with the company except for the way it went about the raising of cash and the abrupt ceasing of the buybacks. Both caused negative sentiment amongst holders and as some sold it snowballed. The director sale was also very bad timing. Negativity breeds negativity and now the company will have to act as it is fast becoming a crisis of confidence.
Buybacks are not so popular on here but when you can borrow at 7% and you are paying out now over 17% they make glaring financial sense , never mind supporting suffering shareholders.

[huckers] 30/5/2023 15:29

A good bunch of posts on this board. If anyone wishes to read the DEC chat on the LSE board that also has some valuable and reassuring debate.

[mondex] 30/5/2023 15:27

Shawzie, it relates to the current downward demand for gas, which affects the market

[lomand] 30/5/2023 15:00

Tug of war between bulls and bears re gas prices. Lower European prices could limit exports and lead to falling domestic US NAT gas prices.in theory DEC should be best placed given its strategy. Investors are selling it down on the anticipation that divs will come under pressure in a low price environment. On the other hand at $2 gas expect almost no new drilling at a time that peak shake production has passed. Nearly all tier 1 acreage has already been drilled and at $2 gas drilling of poorer acreage not economic. Volatility aside DEC is well placed to weather the storm for next 2-3 years IMO even if it haircut divs in favour of acquiring assets.

[shawzie] 30/5/2023 14:50

Mondex - how does all that your article states affect DEC, where most of its output is hedged?

[mondex] 30/5/2023 14:44

From Oil & Gas ME:

"Natural gas prices in Europe are likely to plummet further on lackluster demand from power generation and industry.

This downward trend has led traders and industry officials to consider the possibility of day-ahead prices dipping below zero in some European markets during the summer, according to a report by Oilprice.

According to the report, several factors have contributed to this situation, including abundant inventories after a mild winter, consistent imports of liquefied natural gas (LNG), and weak demand. As a result, European benchmark natural gas prices have experienced eight consecutive weeks of losses, marking the longest losing streak in over six years.

While it is unlikely that the benchmark price will fall below zero, certain regional day-ahead prices in Europe may briefly turn negative if demand remains weak and renewable power generation remains strong.

The report quoted Peder Bjorland, the vice president for gas trading and optimization at Norway’s Equinor, saying, “individual regional gas markets in Europe could go negative when you have hours and days with renewable production is current trend sharply contrasts with last year when benchmark prices skyrocketed to as high as $322 per MWh in August.

The surge was a result of Russia reducing its pipeline supply, which caused concerns of potential gas shortages in the winter among governments and industry.

Thanks to milder winter weather, reduced consumption at the EU level, and demand destruction in the industry due to high energy costs, Europe managed to get through the 2022/2023 winter without experiencing gas shortages or rationing.

Presently, natural gas inventories in Europe are comfortably high for this time of the year.

As of May 24, gas storage sites in the EU were 66.71% full, marking the highest level in at least a decade for this period, according to Gas Infrastructure Europe, the report said."

[1knocker] 30/5/2023 14:25

This is becoming disconcerting. If the dividend was half its present level DEC would seem cheap at the current price.

Neither the fall in gas prices, nor reaction to the placing seems an adequate explanation for the present share price It looks as though holders have headed for the hills, or at least reduced, as soon as the current dividend was in the bag. But why?

I would feel a lot happier if I knew of some bad news which I could then take a view on!

[oneillshaun] 30/5/2023 14:23

Hold out a couple of days and 80p will appear

[stevensupertrader] 30/5/2023 14:11

SP faces no resistance and kept on dropping - wonder why ???? Is it time to take a bite at this juicy CHERRY 🍒 or this cherry looks good on the outside but fully rotten inside 😔 BIG DECISION

[stevensupertrader] 30/5/2023 12:30

Smelling fishy - such high juicy yield at 84p and still dropping , yet shareholders are selling - just puzzled 🤔 and wonder to buy more but then am I catching a falling knife .

[marksp2011] 30/5/2023 11:54

SHEL is down 1.8% today
DEC is down 1.7%

People are selling indexes. All the ships will sink or rise together

[podgyted] 30/5/2023 11:40

If you ignore the initial pandemic crash you have to go back 5 years to when it was last at this price. Dividend before WHT was @6% then.

Dividend before WHT now over 17%.

I am beginning to seriously wonder if there's something I'm missing here, because that's what the market is telling me.

[laurence llewelyn binliner] 30/5/2023 11:40

This trend is dragging on some now, perhaps a persistent seller / fund / II clearing OnG holdings on some ESG criteria..? Difficult to see why a holder would liquidate such a strong yielding position unless they are forced to..?

[linton5] 30/5/2023 11:37

The management say they are severely undervalued be interesting to se there next move

[tag57] 30/5/2023 11:33

Linton, I dont feel conned, just disappointed. The amount I bought at 105p was just a small part of my overall holding and that hurts a lot more, even with an average price of just below 100p