Diversified Energy Share Discussion Threads

[retirementplan] 02/9/2023 03:25

lomand01: great video (see below) & really clear explanations. Thanks.

Emeth value Diversified energy - copy and paste this into YouTube.

[lomand01] 02/9/2023 01:53

Fixed coupon with the capital repaid over the life of the loan (like a mortgage)rather than most other corporate loans where a bullet repayment is paid at term, (usually requiring the loan to be refinanced often at higher rate). Assuming no additional debt taken on DEC will own the assets 100% & be debt free in approx 7 years. This is attractive to banks along with DECs hedging strategy) allowing DEC to borrow at attractive rates). Lots more moving parts with DEC which is run (very professionally in my view) which creates attractive cash flow and equity. Watch "Emeth value Diversified energy" on YouTube for the best objective explanation of their strategy.

[scrwal] 01/9/2023 20:36

asp5

Why do you think there is good progress on the ARO?
The KPI on page 4 of the interims shows that DEC only retired 100 wells this half year compared to 117 H2 2022 and 97 H1 2022. The LVL figures are numbers relating to 3rd party wells retired by DEC.
The last ARO supplement has a 10 year target of 4500 ie 450 pa so DEC is currently way off the pace. The following 10 years has a target of 14500 ie 1450 pa.

The current spin used by the company is that the LVL work offsets its own ARO costs but this slows down their own targeted numbers and in order to catch up all LVL operations need to be solely retiring DEC wells resulting in no revenue coming in now and for the future.

[t 34] 01/9/2023 18:44

Fixed amortized.????????????????????????????? Explain.

[fred177] 01/9/2023 18:04

Sort term voting machine long term weighing machine markets are never right either way imo happy to take the dividend and wait

[lomand01] 01/9/2023 17:26

Fixed amortized.

[holts] 01/9/2023 17:20

Is much of their debt fixed or floating ?

[fordtin] 01/9/2023 17:13

US market opens and ~5% is wiped off the market cap despite rising oil & gas prices.
Does this indicate that US short-sellers understand this business better than UK investors, or are they just gambling on UK investors’ naivety?

Given their ability to batter the share price of foreign equities, is a US listing really worth pursuing?

[1knocker] 01/9/2023 16:50

Well, an 88 close was not what I was expecting.

If this goes on I shall have to exercise a lot of restraint not to reinvest the dividend, though I am already marginally over my 5% limit, as well as being overweight O and G.

[lab305] 01/9/2023 16:29

Well today was a damp squib. I think they avoided any concrete answers after the presentation. The buybacks question was first forgotten and then avoided with misleading answers such as the closed period stopping them. Rubbish.

[drk1] 01/9/2023 16:00

You'd be barking mad to judge DEC on one day's trading - ask me in approx. 2 years time when my 4 year plan materialses. ;-)

"Diversified Energy headlined their webcast presentation with the banner ‘Right Company Right Time’ a moniker it has justified by time and time again in the six plus years that it has been here in London.

Today’s figures were excellent, belying the industry cost inflation, lower gas prices and fewer potential acquisitions as DEC came in with a first class set of interims. Record production of 142 Mboepd which was 144 Mboepd at the quarter end and lower unit costs, by 10%, led to revenue that thrashed the whisper and EBITDA a top of the range $283m.

This strong operational performance was born in the Smarter Asset Management team where core efficiencies delivered 1H23 Adjusted EBITDA Margin of 52% beating this time last year by 4 basis points and the company describe as being ‘robust’. Indeed some gas wells were shut in to come back to at higher prices.

And as I mentioned earlier, this performance was achieved on the back of lower gas prices but still achieved Net Income of $631 million, which includes $761 million (pre-tax) of non-cash hedge valuation gain, yet again proving that hedging has proved further added value, this time 15% higher than the strip.

Finally the company also announced the interim dividend with today’s figures, at 4.375 cents per share for 2Q 2023 that is an increase of 3% over this time last year and for a company I have yielding C.15% for this year and 17% for next.

DEC has continued to deliver excellent figures year after year, whatever the background whilst all the time backed by a strong balance sheet and aggressive dividend payments. A while ago I worked out with the company that they could pay the dividends for many years and still the company would not lose any value, quite some tribute to the management and the model they have established.

For the future there will be more acquisitions, the company has been waiting for deals to come to them as the market has been a bit toppy as vendors are yet to come to terms with the higher costs and expectations are maybe a bit too high, DEC don’t want to overpay, nor will they.

DEC are extraordinarily cheap, whilst they are off the bottom, at 91p they carry a substantial, 15 yield, directors have been buying stock and I can’t think of any companies better placed to take advantage of current market conditions, they are indeed resilient and consistently execute the model which has worked very well for them. ”

[marksp2011] 01/9/2023 15:50

Was there any explanation of why it looks like underlying net income was negative?

[johnhemming] 01/9/2023 15:36

A good question to which I think the answer is working capital.

[stevensupertrader] 01/9/2023 15:19

Now finally DEC come to roost and falling fast - if anyone took my advice in the morning , they are laughing all the way to their banks .

[asp5] 01/9/2023 15:13

my retirement fund - I would not say that. Actually I think DEC is well run and it should have more than sufficient cash generation to pay a good divi, perform ARO, repay debt & replace declines - however the accounts need patience & time to disect which I have not yet had the time to do and probably will not in the near term.

If you look at the notes the outstanding ABS debt went down by ~150M, which is more than the planned so I really would like to get my head around things first .... hence my request to the wise owls on this board ......

[asp5] 01/9/2023 14:59

From my point of view a few quick notes on the results.

The positives:
- Total Cash Costs per Unit down 10% to $1.66/Mcfe
- Average Realised Price of $3.56 /Mcfe (locking in a ~1.9 /Mcfe gain for 2023)
- H1 Adj EBITDA of $283M which is ~$566M FY23 vs $505M for 2022 a 12% increase
- Production at all time highs of 142Mboepd
- Good progress on both ESG & ARO
- Dividend confirmed and looks secure for 2024 & 2025 based on current hedges in place

The negatives:
- I do not understood the net debt dynamics.
- Net debt at end of 2022 was $1435M, then:
- $250M Acquisition of Tanos II, via $160M equity & $90M draw from RCF
- Planned $135M reduction in ABS debt due to amortization effects
- $40M cash recieved for sale of non strategic assets
- Net FCF of ~$130M derived from $283M (EDITDA) - $27M (Depreciation & Amort) - $41M (Interest) - $85M (H1 divis)

I would expect net debt to be around 1435 + 90 - 135 - 40 - 130 = ~$1220M, however net debt is $1509, a ~$290M delta.

What am I missing?? I would certainly appreciate any guidance / feedback whether there is a break in the logic above ....

[lab305] 01/9/2023 14:09

Investors Chronicle conclusion...
Despite a weaker year for energy prices, this remains a strong income stock. Buy.

[stevensupertrader] 01/9/2023 13:55

Nonsense . DEC doesn’t have enough cash flow to do BUYBACK, servicing its huge debt and paying a high dividend have drained its cash 💰 TEll me where to find extra cash unless DEC borrowed more and increased its debt mountain

[fred177] 01/9/2023 13:45

Any comment on the webcast talked about buy backs what low ball price are they waiting for ? Or are acquisitions a priority they say they are waiting for sellers to come to terms with higher interest rate environment i wil continue to hold

[johnhemming] 01/9/2023 11:07

The unwinding of a benefit from working capital, however, would result in a net cash outflow.

[lonrho] 01/9/2023 10:24

The unwinding of a build in working capital should result in a cash inflow not an outflow as receivables and stocks reduce. An outflow should only occur if payables reduce and in that event working capital should rise not fall.

[laurence llewelyn binliner] 01/9/2023 10:22

#Spangle93 ,indeed, as my previous post the past 4 years have consistently been 4 equal dividends then a raise, it is pretty strong at present but I would also be happy to accept more should the opportunity arise.. :o)