Diversified Energy Share Discussion Threads

[leoneobull] 03/1/2024 06:27

Investors' Chronicle Diversified Energy narrows portfolio with saleDiversified Energy (DEC), which owns around 90,000 mature oil and gas wells in the US, has signed a $200mn (£157mn) deal to sell off a chunk of wells in the Appalachian basin. The sale is "innovative" in the words of the company, as it involves selling 80 per cent of the assets to a 'special purpose vehicle' while holding on to 20 per cent and operatorship. Peel Hunt says the arrangement will take 2024 output down 5 per cent, to 124,000 barrels of oil equivalent per day. The proceeds will go to paying down net debt. The structure of the deal does involve debt, however – the assets get moved into the SPV, with the actual sale price just $30mn, while the extra $170mn comes from a loan taken out by the new entity. Stifel analyst David Round said the pricing of the assets at around NAV pointed to the company being underpriced on the market. "The cash injection is also welcome and should improve confidence around liquidity," he added. DEC's share price has floundered this year, and last month members of a US Congress committee launched a broadside against its strategy of buying up old wells.

[leoneobull] 03/1/2024 06:22

https://www.bizjournals.com/pittsburgh/news/2022/08/17/20-people-to-know-energy-jason-mounts.htmlEsg related. Think DEC will come out OK in the investigation albeit there's more they can do still especially in Pennsylvania

[joedjoed] 02/1/2024 23:09

What am I missing. The press release says "The implied valuation of the Transaction represents a multiple of 5.7 times the expected hedged 2024 EBITDA of approximately $35 million". DEC as a whole is trading on Enterprise value/EBITDA of only 1.08 (Yahoo Finance). What stops this financial wizardry being applied to all assets? Or looked at another way, if this structure pays off 12% of net debt by packaging 35mln of EBITDA, it only needs another 8 of them to pay off all debt. That would then apply to 280mln of EBITDA. Out of 1.64bn.

[imnotspartacus] 02/1/2024 21:26

Yep nice finish

[aleman] 02/1/2024 20:57

Jumped a bit less than $1 in the last 40 mins in New York, to around £12.80 equivalent.

[bountyhunter] 02/1/2024 20:18

Up nicely in NY trading since the LSE close.

[renewed1] 02/1/2024 19:19

I hope you are right salty...the divi maintained is crucial.
Todays announcement should save the divi for the rest of the year.

[laurence llewelyn binliner] 02/1/2024 18:43

Shorts will have to cough for the next dividend after XD 29.02.2024 or close before..

Fair point on the risk of an extra cough for a special too given our new cash injection, that is also now there to consider (although an unlikely event IMO)..

Shares in issue at 29.12.2023 - 47,923,726
TT international asset management 14.12.2023 short 0.61% - (292,334 shares to cover off)

Getting more expensive by the day... :o)

[saltaire111] 02/1/2024 18:03

I can’t see a reason for the company to cut the dividend. The actual performance of the company is good, it’s only the potential risk associated with the methane leaks that’s the issue. But their last report suggested it was only a very small minority of wells that were leaking.

I don’t think they’ll cut the dividend, and that means the share price must recover some of the lost ground.

Anyone with a different view on this?

Salty.

[tonytyke2] 02/1/2024 18:01

Could it be also that the 'creative' transaction today is not something the shorters had factored into their thinking, re the way DEC raised the monies? Then along with the dividend hurdles, could one or two shorters be thinking twice now?

[kaos3] 02/1/2024 17:22

One can go short stock with all kind of paper to make profit. Ok it is not real short.

My question is - are there any options or other derivatives publicly traded on DEC?

[bountyhunter] 02/1/2024 17:07

Low volume in New York so far today..

[fordtin] 02/1/2024 16:30

1knocker - it might give short sellers a bit of a surprise if they used a part of the proceeds from the sale to fund a $1 per share special dividend!

[1knocker] 02/1/2024 16:13

I would want to be damn confident that a stock paying well over 20%pa dividend, quarterly, was going to cut that dividend before I shorted it. A pretty tight window to make a profit on the short without being hit for a big dividend liability.

I should have thought there were many more attractive shorting candidates than DEC.

[tsmith2] 02/1/2024 15:34

still slow imo

[johnhemming] 02/1/2024 15:23

The shorters had good reason to think that DEC needed to raise some working capital. As a minimum the US placing paperwork said this. Now they don't.

[bluemango] 02/1/2024 15:03

Shorters have just over 8 weeks to close, or have to cough up the next dividend amount - currently around 23% annualised.

[imnotspartacus] 02/1/2024 14:58

Same here, looking really good.

[this_is_me] 02/1/2024 14:48

Bought some more.

[1knocker] 02/1/2024 12:58

I have no idea whether the sale of assets was a good move, but
1. I like to see management which has its eyes open for selling as well as buying opportunities, and
2. I just 'lurve' to see debt repayments.

DEC seems to me to be very much a company where we place all our faith in the management. If you don't trust the management, this is certainly not a stock to hold. Fingers and toes crossed, I do.

[yaesu] 02/1/2024 11:36

ii seem to have credited the DEC divs to my trading account but they are not available for currency conversion or withdrawal. They are very irritating !

[1knocker] 02/1/2024 10:16

A welcome start to 2024 with the arrival of my dividend (HL) and a tick up in the share price as well.

[sbb1x] 02/1/2024 08:39

How much was debt reduction divided between shares in issue...

[taffevans] 02/1/2024 08:22

Sooooo undervalued GLA