Diversified Energy Share Discussion Threads

[kaos3] 25/7/2021 12:49

wold be good to plot DEC graph correlation of hedged production to the POG - how it fluctuates

[kaos3] 25/7/2021 12:42

the lower margin producer - the more hedging needed

if one can produce at 90 % margin - even if POG falls 90 % to 10% - one can endure such production for years

if one is lower margin producer at fe 50 % one can lock "profitable operations" and can endure extreme low prices for a period of the hedge -

old wells are lower margin compared to the "fresh ones"

DEC

[bountyhunter] 25/7/2021 12:40

It's clear that DEC gains from higher gas prices, it's just a question of degree, hedging a high proportion of production provides a high level of certainty of cash flows which is essential for this company.

[kaos3] 25/7/2021 12:32

take for example:

Co which hedges 100 % all the time

vs

Co which does not hedge at all.

due to the fees 1st one looses. So just hedging per se does not solve anything.

But it lowers volatility and makes economics predictable and profits at a specific time are dependand on productivity and not mostly on POG fluctuations. it is never absolute either or . Of course if one produces gas - in the end POG matters. Hedging smooths the result over the time


fine tuning % of the hedged production can help increase margins - which DEC does imho to a degree

[bountyhunter] 25/7/2021 12:21

Common sense dictates that higher gas prices are better for a gas producer than lower prices - even with ~90% hedged for the remaining 5 mths of 2021 and ~65% for 2022, and of course any new hedges will lock in the higher prices.

[fardels bear] 25/7/2021 11:41

I tried to dictate that very point to my phone last night but after three attempts and its completely useless versions of what I actually said I gave up..

[kaos3] 25/7/2021 09:29

agree - confirms my general point that I was trying to make

[melody9999] 25/7/2021 09:14

Kaos3 617 -
when POG goes up - they suffer
when POG goes down - they gain

I don't think DEC suffer if POG goes up. I get what you mean in the sense they could have made more money if they had not hedged; however if you assume DEC will continue to hedge and the POG goes up ..... it just means they will able to hedge next years production at a higher rate.

[skyship] 25/7/2021 08:34

true...end of

[senn1] 25/7/2021 08:33

What a fthing yawn conversation

[skyship] 25/7/2021 08:32

Good post Cassini. We climate change deniers are actually climate change realists who point out the facts rather than the hysteria.

The big problem is that governments are now too fearful of upsetting pressure groups so make inane decisions to stress our economies when whatever Europe does won't affect things one way or another. The big polluters are Africa, S. America, India & China.

We should concentrate on the pollution aspect and hope to bring other continents into line.

But on emissions, that's for the birds. The climate will do what the climate does and nothing we humans can do will affect it one iota. So many examples when you delve into it.

The Romans planted vineyards in the UK 2000 years ago, then in the 17c for 20yrs the Thames froze every winter etcetcetc...

[brucie5] 25/7/2021 08:32

Cassini, Boris is certainly not 'my man', though he may parade whatever qualities he thinks may get him elected.
The 'hard science', however, is is really unequivocal: I'm really amazed that you can suppose it isn't. And the rising of the sea levels is highly monitored, among other things, by NASA. You seem to believe that climate change is a conspiracy to sell electric cars, is that right? Yet the effects of fossil fuels on the climate was researched by oil majors in the 70s, and their own scientists'findings were declined by the companies themselves because they called their business models into question.
Again, I'm really startled that this late stage there are intelligent people like yourself who choose to ignore the increasingly dire evidence from heat domes and wildfires, to flash floods, to the melting of the Greenland glaciers and the melting of the Siberian permafrost, which will of course release huge amounts of methane in a further feedback loop.
That said, I'm happy to focus on this share on this board, and hope we can treat each other with respect. Too many boards do not.
Kind regards,
B5.

[cassini] 24/7/2021 23:58

Brucie5,

I was waiting for you to call me a 'climate change denier' or something with a medieval 'heretic' tinge to it but you disappoint ;0)

I was going to return your 'reins of power' wish but I think Boris, who is a conservative in name only as far as I can tell, is doing what you want so your man is in charge!

As far as climate goes though, here's a thought: try and look at the actuals once in a while, as opposed to the projected, because, as we all know, what people project often isn't what actually happens. I know you probably think 'it's the science, stupid' but be aware of 'soft' science versus 'hard' science.

If you see a photo of a thin polar bear floating on an iceberg, have a poke around to find out the context: that famous image actually was a Getty Images stock image of a penguin but it was photoshopped to a scraggy polar bear to tug heartstrings.

If you see David Attenborough showing video of elephant seals throwing themselves off cliffs due to alleged climate change crowding, take a look on the web and see it's behaviour recorded back as far as 1974 when polar bears are on the prowl.

When you see Michael Mann's famous 'hockeystick' temperature chart, be aware his actual tree ring data showed an inconvenient decided downturn in temperature during the 20th century. That didn't look good so he grafted the instrumental temperature record onto his tree-ring temperature data at a date that suited him to get rid of it.

A bit of scepticism is a useful thing when one realises that agendas are furthered by propaganda, and the continual repetition thereoF.

PS: Sea level change has shown no significant change in its rate of increase in the last 100 years. The tide gauge data and the satellite data disagree somewhat. No one quite knows why but if there was an acceleration in sea level rise out of the natural variability the tide gauges would show it too - they don't. Tide gauges show about 2mm rise per year over the last 100 years, the recent satellite data shows ~3mm. I note that Al Gore, and Barrack Obama, both bought expensive coastal properties within a few metres height of sea level, near the beach.

[bountyhunter] 24/7/2021 22:42

You've lost me there, mind you I am back down the pub listening to live music (at last!) 😉
Half empty but a step back to some kind of normality. Happy to hold a number of gas related companies, namely this one, SQZ, KIST and IOG.

[brucie5] 24/7/2021 20:50

CASSINI24 Jul '21 - 18:28 - 604 of 607
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Humanity has always seemed to thrive better in warm periods. The Vikings used to farm cattle in Southern Greenland for 400 years from about 900AD on before the cold returned and the colony was lost.
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The so called 'medieval warming period' is well covered by the science, and sadly, does not offer reassurance for our current predicament.



"The fact that some areas of the world actually prospered during the Medieval warm period gives ammunition to the global warming skeptics' position. But there are two fundamental differences that make the Medieval warm period different from what we are experiencing now.

The present-day baseline used for comparison to the temperatures in the Medieval warm period is 1960-1990. Although it is true that in some regions the temperatures equalled or exceeded this baseline, globally the planet was still cooler on average than today. Temperatures experienced since 2000 in the northern hemisphere are already hotter than any time during the Medieval warm period.
The Medieval warm period is an asynchronous regional warming caused by natural (not human-driven) climatic variation, whereas we are facing a homogeneous and global warming caused by human activity releasing too much greenhouse gas into the atmosphere."
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Cassini, I envy you your sanguine attitude to the challenge that lies before us, though I sincerely hope you never hold the reins of power. The last time the planet was 3 degrees hotter, was during the Pliocene, 3 million years ago, and water levels were upwards of 20 meters higher. This is the real thing, we all need to wake up.

Further reading:

[kaos3] 24/7/2021 18:54

how I percieve DEC - an efficient operator - mostly non dependant on POG due to their hedging - if they keep it consistent over the long term

when POG goes up - they suffer
when POG goes down - they gain

in the long term it equals out - they make margin from their efficiency

low risk high return - low volatility stock

also taxes and P&L will equal out to its right place in the long term

now POG is going up - there is a superficial "problem" due to the hedging (loses) - which can be used to load shares - if one gets it.

but all above makes DEC a very boring and stable low risk high yield stock

the only risk I see and not understand are the future environmental regulation changes and hedging being done by others (main part of the business is outsourced and has low transparency imho)

[fardels bear] 24/7/2021 18:52

Naughty Vikings. Imagine how much fossil fuel they must have had to burn to make it warm enough to farm cattle In Greenland. And those pesky dinosaurs. Don't get me started on them.

[cassini] 24/7/2021 18:28

Just for comparison the current UAH measured rate of global temperature rise is +1.4C/century (if extrapolated).

Nearly all the climate computer models run hotter than the observations.

Humanity has always seemed to thrive better in warm periods. The Vikings used to farm cattle in Southern Greenland for 400 years from about 900AD on before the cold returned and the colony was lost.

I remember ITN did a special report years ago on Global Warming (as they still called it then) which was entitled 'Six Bad Things About Global Warming'.

They didn't add any Good Things at all about global warming, though there are plenty, but I've since become aware of GroupThink and how that works. Clearly the aim was not to give a balanced view but to din a narrative into people about what to think.

Rather like with COVID, there are plenty of factions out there that never let a good crisis go to waste...

[brucie5] 24/7/2021 17:45

Gary196624 Jul '21 - 14:12 - 601 of 602
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bipos,

Wells appear to have around a 50 year life and so your timelines are right. By the time 50 years are up I in all likelihood will be dead.
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By 2050 I am very much hoping that we will using sources other than fossil fuels for the bulk of our energy requirements. Otherwise, and unless we find a way of sequestrating what we bring up, we will be truly screwed. We're currently on course for 3 degree rise, even if countries inside the Climate Change agreement deliver on their earlier promises. My investment here is very much on balance of benefits, with gas as an important part of the energy transition, largely to displace coal, and create baseload along with nuclear, while renewables become more pervasive and reliable. I am therefore also attracted by the fact that DEC is not drilling fresh wells, but using existing ones, and then taking responsibility for capping and closing, as I understand. In the meantime, as the IC points out, the price of gas is far more likely to firm, as we take out coal, and use more renewables.

[johnhemming] 24/7/2021 15:32

@bipos

I read the Berlin point being that you cannot rely on the company getting good deals and hence should not make the assumption necessarily that the company will grow.

[gary1966] 24/7/2021 14:12

bipos,

I think your synopsis is about right. Company will just get smaller and smaller over time if no new acquisitions. Debt will be paid off over the next few years then all surplus cash flow can come out as dividends. Wells appear to have around a 50 year life and so your timelines are right. By the time 50 years are up I in all likelihood will be dead and will have received many multiples of my initial investment in dividends and so will be happy whilst I lie decaying in my grave or powdering my nose in my urn.