Diversified Energy Share Discussion Threads

[cassini] 23/10/2023 10:08

I did sell up, but for the record, whilst the fall to ~90p seems to have been caused by the dilution of the placement, the fall from there to ~70p seems to be interest rate related.

As has been noted, a lot of other shares are getting a muntering too.

What surprised me was the viciousness of the drop with DEC recently.

It's almost as if the market views it as a heavily indebted junior explorer that will be unable to service its debt in the near future. As we know, the way the company is set up, all the debt should be fixed rate and readily serviceable from existing production and hedged contracts.

However, if Mr Market views things that way then I'm out for the time being as rates are trying very hard to push upwards and the US 10 Year is at 5.01% this morning.

I'm looking to reenter at a suitable point, but I'm not sure what that looks like just yet.

[asp5] 23/10/2023 10:03

Have to agree the motley fool article is very poor. Given DEC is primarily a gas producer referencing the weakening oil market & rising demand for oil in winter yet not mentioning the gas market once is not great analysis. To then refer to "extreme equity dilution" without mentioning that every deal that DEC has executed has been accretive for existing shareholders is not great.

What I did find interesting was an article over the weekend in the telegraph (sorry its behind a paywall)



Basically the man running the UK's gas network says the country will need fossil fuels (primarily gas) to prevent blackouts for decades to come. Intermittancy of renewables is a big issue. In 2022, the wind didn’t blow enough or at all for 262 days, without gas the UK would have had blackouts.

He also mentions that if gas boilers are replaced by heat pumps (which create additional electricity demand) then you go from technology (the boiler) that is 90% efficient to redirecting gas to power stations (for backup energy) which are only 50% efficient, it means you will need more gas to have the same heating effect.

I think it was Keynes who noted "Markets can stay irrational longer than you can stay solvent" and it was the great physicist Richard Feynman who said "“For a successful technology (e.g. renewables), reality must take precedence over public relations, for Nature cannot be fooled". I think both quotes are apt at this moment in time.

For value and long term investors, I believe this is a great opportunity to purchase shares. I continue to add to my holdings, but am in the fortunate position of being able to hold for several years while collecting a fantastic dividend. I expect my patience will be well rewarded. Good luck & DYOR.

[johnhemming] 23/10/2023 09:20

The article writes about a management target of 2.5 times EBITDAX, AFAIK the covenants currently are at 3.25 x EBITDAX and I am not aware of any reason why management compensation is linked to the 2.5 figure (last figure was I think 2.4). Does anyone know of anything that says that management compensation is linked to the 2.5 figure?

[lab305] 23/10/2023 09:15

The whole market is nowhere near 50% down in 14 months. Much more relevent would be comparison with other US natural gas companies. They have done relatively well over the same period. Cassini who has been here for years said he had sold out the other day and you will know quite a few long standing posters have disappeared. Standing aloof suggesting that all companies are in the same boat just won't wash. Isn't the much vaunted hedging supposed to smooth out any shocks here??? Surely with gas prices below 3 and 90% of production sold at 3.5 this is our time to shine??
Try to answer without resorting to personal attacks !

[johnhemming] 23/10/2023 09:04

Lord Gnome is right, there is a general problem in the market. Hence if you have the option of sitting tight and getting dividends that is better than not having the option of dividends.

[lord gnome] 23/10/2023 08:47

lab305 - the whole market is screwed, not DEC. Sounds to me as though its you who is cracking under the strain.

[lab305] 23/10/2023 08:40

Substitute "Right company right time " for "Too little too late ". The company is 100% to blame for this desperate position that we find ourselves in. There is hardly anyone who has sold their shares in the last 14 months that is not better off than they would have been just a week later. A glut of private investors are now cracking under the strain adding to the selling pressure. Broker recommendations mean nothing as sensibility has gone out the window.
Yet what are the company doing to combat this ? One RNS basically saying that they don't know why this is happening and a sporadic and anaemic share buyback program that could hardly have been deployed in a worse manner. They need to act and fast but they don't. Unbelievable.

[oneillshaun] 23/10/2023 07:40

Not a great article to be honest

[pro_s2009] 22/10/2023 04:36

AIM market fast approaching Covid crash lows.........when is the trend going to break and upwards its goes ?


free stock charts from uk.advfn.com

[1knocker] 21/10/2023 11:20

That sounds good to me.
SPQR - Small Profits, Quick Returns!

Trading in and out without being too greedy has produced just about all the favourable results I have had this year, though I have not attempted it with DEC yet.

The limit order is a wonderful device. Set and forget.

[cassini] 20/10/2023 23:59

1knocker,

Indeed I knocked 2p off my average buy price by selling on the way down, buying back in lower after it bounced then selling out again. I didn't ace it but I'll take the £400 improvement in my position that netted me over simply holding on.

Having sold out again I suppose I hope to repeat that performance as my average buy price is still up there at 98p.

It helped my decision to sell out the second time that ex-div is not for a couple of months. I was surprised at the size of DEC's rally then dump at the time of the last ex-div date.

One school of thought regarding the FTSE is that it's been rangebound for 20 years so aside from growth stocks, trading divi shares is a way to beat this sclerosis.

As you say though, DEC hasn't really demonstrated a reliable trading range so that makes trading it high risk. We'll see how it goes, it's an experiment on my part really.

[1knocker] 20/10/2023 20:37

cassini, I think there is a lot to be said for trading in and out of holdings in this market, even those intended to be LTHs. Get the cost down. Its a bit of a gamble though until some sort of a range is apparent.

I do hope 74 will not prove to be the top of an establishing range, but have to agree that even 80, never mind 100, feels rather distant at present.

[cassini] 20/10/2023 15:40

I confess I'm back out of this one (near last Friday's close at ~74.05p) as the bounce had stalled at that point and the macro situation looked fugly (and still does).

I'm thinking that, at the moment, a bit of trading of DEC instead of just holding might be a better strategy, so I'm looking for a reentry point, but today doesn't feel like it.

Trading's not my forte so I'm going to need some luck as well...as are we all I think.

[1knocker] 20/10/2023 14:46

Lab, if the brokers disclosed their instructions from their client (DEC) to a third party (you) that was a grave breach of client confidentiality. even if the information is i the public domain, better practise would have been to refer you to the company's announcements.

one might have hoped that the brokers would know that their clients' affairs should not be disclosed to the world and his wife, even if High Street bank chairwomen can't see anything wrong in disclosing the level of a customer's bank balance in a BBC interview!

[alotto] 20/10/2023 14:00

I know this may sound irrelevant but, who holds the cash for the BB?
Does DEC pay Stifel £70m one-off, for the broker to purchase shares under DEC instructions or does DEC pay the broker only when an instruction is given to place a deal?
Or does DEC cover the cost incurred by the broker at a later date, once the purchase is completed?
Or simply the broker does not see any of the cash and DEC pays directly (don't know how and who) when the deal is placed?
Reason for asking: is the cash readily available for the BB or does DEC have to scramble and source the cash from daily/periodical operating cash flow when and where available?

[lab305] 20/10/2023 12:42

Thank you Aleman.

[aleman] 20/10/2023 12:09

lab305 - Sorry, it looks like you are right. I've not seen this before and I think it feels a bit odd: a mixture of DEC buying themselves and an occasional arms length Stifle buying operation (probably when they want purchases to continue into closed periods). Your criticism of the company's buy-back timing could therefore be valid some, most or even all of the time. It would be interesting to have a bit of light shed upon this. At least a few purchases have arrived recently. I hope they prove well-timed with hindsight.

Stifel Nicolaus Europe Limited will purchase Shares under the Programme on behalf of the Company. The Company will provide instructions to buy back Shares as and when its management believes that, at the time of instruction, these repurchases will enhance earnings per Share and would be in the best interests of shareholders generally. From time to time, the Company may also provide one or more time-limited, irrevocable, non-discretionary instructions to Stifel to make trading decisions and repurchase Shares within those instructions independently of the Company. Any purchases of shares made during closed periods pursuant to the Programme shall be made independently of and uninfluenced by the Company.

[johnhemming] 20/10/2023 11:34

I think the underlying problem is that the share price is following yields in general probably through the OEIC process. Hence as yields more generally go up, the yield on DEC even though already high goes up further.

In the end long term holders (and I bought some in 2020 in the 60s) can sit and take the dividend.

@sst I am not aware that any of the DEC covenants relate in any way to the share price.

[stevensupertrader] 20/10/2023 10:59

A weak share price leads to lot of financial problems esp when companies have high debts as now 10 yrs Bond is at 16 years high and with Biden asking Congress to approve more military funding to Ukraine and Israel , Smart investors know what is coming around the corner .

[lab305] 20/10/2023 09:50

renewed1 yes that sounds about right . They have inflated them all the way from £1.44 to 72p! When should they buyback then ? 60p ? 50p ? When will people understand that a weak share price is very detrimental to the company and shilly-shallying around is costing us all dear.

[riskvsreward] 20/10/2023 09:11

If long term future is assured and invest in long term, then don't see buyback slowly is a problem. It keeps money in hand for safety and in the meantime as long as money is there, what is the problem if one can buy more back with the same money at a later date?

[renewed1] 20/10/2023 09:04

The last thing we need is the company buying back shares at a price they themselves have inflated.

[johnhemming] 20/10/2023 08:55

As far as I can tell the company buys back shares when there is some selling pressure.

[lab305] 19/10/2023 17:05

Aleman if you check the Rns you will see that Stifel are under instructions directly from Dec and not using their own discretion. This is totally opposite to what you are claiming.
There are limits on volumes but buybacks so far have never come anywhere near them. A fabricated excuse that holds no validity. If you ask the company they will also state that there are limits But when pressed that the limits have nowhere near been reached they have no argument. This is simply not good enough and the longer this flimflan continues the further the share price will fall.