Diversified Energy Share Discussion Threads

[fordtin] 24/10/2023 12:57

Lab305 - best of luck wherever you decide to invest next. I find it slightly comforting that there were sufficient buyers to absorb a 550k trade.

[cassini] 24/10/2023 12:27

550k shares is a monster position in one share, although I suppose it depends on the size of the rest of your portfolio!

I'm trying to get some kind of handle on where we go from here and the chart is all I've got.

It would be encouraging to close above 72.5p as that's the top of the DEC price channel from Oct 9th.

Although it has pulled back from 5.02% to 4.88%, the US 10 Year Treasury yield is also still within its rising channel, assuming it has something to do with the share price here.

Conclusion: not out of the woods yet.

[lab305] 24/10/2023 12:07

Sold out this morning 550k shares at 72p. No buybacks again yesterday was the last straw. I have lost faith in management both because of very poor communication and failure on just about everything Rusty said at the results presentation. My main regret was not selling at the placing . That really did make a mockery of the word accretive!

[scrwal] 24/10/2023 12:05

Any US quoted company doing a buyback having given the criteria for the buyback would now be going at full speed buying back the maximum they could in the position DEC finds its share price at. The revenue is hedged so they know the level of cash coming in and should have a good idea of the FCF and the share price is well below 100p being the average price per share of the £97.4M to be used. It's a complete no brainer based on their own parameters and even if they believe there may be further price weakness so what as you can't be certain and if they don't buy now then if the price does recover then logically they cannot spend any more on buybacks. It's a mess entirely of their own making at this point in time.

The market will be confused about the mess and may well be expecting another snap placing based on what happened when the previous buy back was scaled back and we all know how the market reacts to DECs snap placings.

[johnhemming] 24/10/2023 06:04

An increase from 1% to 12% exposure to interest rates still means the vast majority of debt is fixed interest. TANOS II should get paid off reasonably quickly and would have been bought with higher interest rates in place so the financial planning would not be an issue. Hence I don't think that is an issue.

I do think they are being careful and only doing buybacks when the stock is taking a downward turn.

[bluemango] 24/10/2023 03:43

Even if that was the perceived issue, the market should now be pricing in a combination of gradual easing of interest rates (having hopefully peaked), plus a possible rising again of energy prices.

[cassini] 23/10/2023 23:35

Fixed the above link from mondex's post:



Also, over on LSE, a poster (Trekmadone) is saying that before the latest TANOS acquisition, 99% of DEC's debt was fixed interest. After the acquisition, only 88% of it is, so DEC has acquired some not insignificant exposure to variable interest rates. I don't have any more info on the details.

If it was a problem I doubt they'd be doing any buybacks at all, but maybe they're being careful just out of caution?

[cassini] 23/10/2023 15:22

The US 10 Year Treasury has been knocked back to 4.88% from 5.02% this morning which may not be unrelated to our little bounce here.

Have to see if yields continue to drop...

[mondex] 23/10/2023 13:51

I strongly urge you to read the Oakbloke's piece on DEC below:

hxxps://theoakbloke.substack.com/p/dec-the-halls?utm_source=profile&utm_medium=reader2

He explains clearly how the common perception of their accounts is wrong because of IFRS9 accounting requirements: "IFRS 9 forces me to bring forward possible future losses BUT IT DOESN’T LET ME BRING FORWARD FUTURE PROFITS" also these "forward losses" have not yet occurred & are mostly protected through hedging.

"If you estimate that in the next 8 years DEC is estimated to make something like $4billion adjusted EBITDA profit. The fact “the numbers” say there’s a -$600m loss (for the next 8 years), really mean there’s a future net $3.4bn profit.

IFRS 9 is contrary to the MATCHING PRINCIPLE in Accounting that I should match my costs and revenues in the same time period. But there we go. I don’t set the rules I just try to explain them.

As an accountant it took me quite a while to get my head around DEC. For non-accountants until someone comes along with a simple model to explain it (and assuming they want to believe me) then they’ve got no chance."

[asp5] 23/10/2023 12:59

Mondex, my view is that its both a market sentiment thing as well as a company issue that is impacting DEC at present.

The CFO leaving abruptly in my view points to the fact that Rusty was clearly not happy at all with key aspects of performance which resulted in the decision to cancel the US listing.

It will be interesting to see how Brad tries to turn things around.

[mondex] 23/10/2023 09:33

Well said Cassini. It seems to me a choice of whether it's a problem with the company & how it is being run or a more general problem of the economy & the market's response to it. If you believe the former you should probably get out; the latter, hold on. The dividends pay you to do so.

[fordtin] 23/10/2023 09:28

Regarding the company’s apathetic attitude to buybacks, perhaps their 2019/2020 share buyback program has left them a bit shy of using up too much of their powder too early.

By the time COVID trashed the World’s stock markets, they’d been buying back millions of shares per day, (sometimes reporting twice per day) and had already used up most of the $68m buyback allocation.

A few days before DEC dropped below 60p, they completed their buyback scheme with a final purchase of 5,622,905 shares at an average of 85.311p/shr.

The 2019/2020 buyback scheme purchased 51,620,015 shares for $68.2m. An average of ~£1.06 per share.
During the dark days of March 2020, that must have seemed like a huge mistake.

However, In May 2020 they issued 64,280,500 @ £1.08 to make what was declared as an immediately accretive acquisition. Thus making the net result of the 2019/2020 buyback a minor success by giving a significant saving from not paying dividends on 51.6m shares for several months, plus re-issuing the shares at a small premium to the buyback average.

The question is, are DEC being too cautious and missing out on what appears to be a golden opportunity, or are macro conditions going to drag all equities even lower, either allowing DEC to buyback shares even cheaper, or perhaps make a once in a life-time acquisition which is even more attractive than buying their own shares?

The recent Director trades have signalled there are no current negotiations for acquisitions, but that doesn’t mean they haven’t got their eye on a few cash-strapped companies.

[cassini] 23/10/2023 09:08

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 09:03

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 08:20

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 08:15

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 08:04

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 07:47

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 07:40

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 06:40

Not a great article to be honest

[pro_s2009] 22/10/2023 03:36

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 10:20

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 22:59

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.