Diversified Energy Share Discussion Threads

[bountyhunter] 02/5/2024 06:34

HH up last night.

[stevensupertrader] 01/5/2024 21:59

Sp will drop further tomorrow . DEC afraid of vertigo

[bountyhunter] 01/5/2024 20:34

Added the Henry Hub intraday chart at the end of the header, worth keeping an eye on.

[sbb1x] 01/5/2024 08:04

Saw a 1086 print, is that what they are aiming for today ?

[oneillshaun] 30/4/2024 15:53

Disappointing end

[kaos3] 30/4/2024 10:21

Superb. Thnx

[asp5] 30/4/2024 09:47

DEC achieved $543M adjusted EBITDA in 2023. Since then it has sold assets representing ~$35m EBITDA (02 Jan RNS) and made an acquisition of ~$126m EBITDA (19 Mar RNS). So on a pro forma basis DEC is currently running at ~$634m EBITDA level $543m+$126m-$35m).

The FCF generated in 2023 was ~$219m. With the increase in EBITDA and the nature of the acquisition (no additional op costs etc.), FCF should increase to around $320m.
The average decline rate for DEC is 10%, however 30% of declines can be addressed by workovers (slide 14, 23 FY results presentation) leaving a net 7% of EBITDA needing to be replaced by acquisition. This translates to ~44M EBITDA (7% of ~$634M).

If we assume an average x3 multiple of EBITDA to acquire, this would require ~$132M. Assuming 50% is funded via debt, then ~$66M from FCF is required. If we breakdown FCF, ~$55m (for dividends), ~$200M (debt reduction), ~$66M (cash to replace production decline). Total ~320m which consumes the FCF.

In order to acquire further assets, let us say another ~$126m EBITDA as per Jan transaction, it would require funds of ~$380m net (assuming a x3 multiple).

To complete such a deal, Dec could sell another set of assets representing ~$35m EBITDA for ~$200M (on same terms as the transaction in Jan) leaving the remaining $180m funded via debt. This would result in ~$725m EBITDA (634 – 35 +126). This could be repeated to grow EBITDA in an accretive manner without the need for equity raises. If they sell a little more the funds raised could also be used to fund the share buybacks.

Furthermore as DEC have announced they will reduce debt by an average $200m pa for the next 3 years (slide 45, Apr 7 corporate presentation), this translates to a net asset value (NAV) per share increase of ~$4,21 pa (200m/47,5m shares issued) or ~$12,63 increase over 3 years. I would expect this to be reflected in the share price going forward.

Rusty & the board has clearly made a strategic decision to drive capital growth. The business model looks sustainable to me and given the ESG improvements DEC have made and continue to make, I see this risk as largely mitigated. It is interesting that there has not been a peep out of the House of Representatives committee since DEC submitted their response letter in Dec 23.

While I am still sitting on unrealized capital losses (excluding dividends), I am very positive on the future of DEC. As usual dyor.

[bulltradept] 30/4/2024 08:33

Tails above starting to form, will have to see where this lands cop today.

[leoneobull] 30/4/2024 07:16

Market down, most stocks down, DEC up. This is starting to become a momentum play imov.

[action] 30/4/2024 05:47

Natural gas up. Price 2.03 .

[leoneobull] 30/4/2024 03:33

A Value Proposition Par ExcellencePerhaps the most compelling aspect of the Oaktree deal is the purchase price -set at a strikingly advantageous 3.1x EBITDA. This figure is not just a number; it's a stark indicator of the value DEC is capable of unlocking through diligent portfolio management. To put this into perspective, DEC's recent asset divestment in January 2024 was concluded at 5.7x EBITDA. The contrast between these figures highlights the exceptional value DEC has managed to extract from the Oaktree acquisition, showcasing its adeptness at identifying and capitalising on strategic investment opportunities.Financial Prudence and Strategic GrowthThe financial implications of the Oaktree deal are equally noteworthy. Supported by savings on dividends, DEC has managed to bolster its EBITDA by approximately one-third -without diluting shareholder value through the issuance of additional equity. This maneuverer not only demonstrates DEC's financial prudence but also its strategic approach to growth and value creation.Unlocking Discretionary Cash FlowsThe acquisition's impact extends into DEC's future, with updated financial models post-Oaktree acquisition revealing a promising outlook for discretionary cash flows. From 2024 to 2028, DEC is expected to generate an average of ~US$65m in free cash flow annually, after accounting for ABS repayments and dividends. This influx of cash positions DEC uniquely to pursue growth opportunities, additional buy backs, and accelerated deleveraging, underscoring the company's commitment to driving long-term shareholder value.

[leoneobull] 29/4/2024 18:34

Apologies for the typos, I have somebody sitting on me

[leoneobull] 29/4/2024 18:33

The benefits for UK investors of the NYSE listing were made very clear by Rusty about 1 month ago if anybodies missed it.

[bountyhunter] 29/4/2024 18:33

US natural gas up should help.

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[bountyhunter] 29/4/2024 17:47

£11.60 close in London catching up with the Friday close in NY, with NY still rising post the LSE close this evening, £11.84 equivalent currently.

[this_is_me] 29/4/2024 17:22

Solidly above £11 now and looking very good for further rises.

[croasdalelfc] 29/4/2024 15:42

3 month closing high - maybe hits 1250 before a retrace based on chart technicals - overbought etc

[laurence llewelyn binliner] 29/4/2024 08:03

The sharp move down from 2000 to 850 was unjustified, so now we have a dual listing, have addressed the Gov panels concerns on emissions, building out Next LVL plugging, cut the dividend by 2/3, initiated a buyback, added Tanos1/2 acquisitions, and are positioned to reduce debt much faster now, I would expect a re-rate back to somewhere closer to where we were..? sitting on paper losses is becoming irritating.. :o)

[tsmith2] 29/4/2024 07:09

could we'll see a pretty sharp move up to £14-15..

[bountyhunter] 27/4/2024 09:04

£11.61 equivalent close in NY.

[action] 27/4/2024 08:28

Usa summer driving season on its way. Hope gasoline goes up.

[leoneobull] 27/4/2024 03:50

Q1: First off, Matt, Diversified Energy Company published 2023 results a few weeks ago. What was your view on the results?A1: I think the results highlighted a very strong year for the company. A number of the key metrics, production, EBITDA, operating costs, were pre-released in January.They did announce revenue at $1,046 million, which was substantially above consensus of $937 million. Another key number that was announced a couple of weeks back was the free cash flow of $219 million and again, that was above consensus and above our estimates.I thought another impressive part of the results statement was around the continued progress on the ESG. So specifically, they announced that in 2023, the group had met its target of reducing scope one methane intensity reduction by 50%. That's actually seven years ahead of the target of 2030, that was set a few years back.So, I think it really just highlights the progress the group's made against its ESG targets.

[leoneobull] 27/4/2024 03:49

Q4: How has your view on the balance sheet items changed?A4: That's another big piece. So, Diversified Energy Company, the gearing level there, we find drops pretty materially so for example, our year end 2026 gearing level drops by about 1.0 times and another interesting finding is given that making this pretty substantive acquisition, you're looking at $386 million guided on completion, we actually find that our year end 2024 net debt number actually goes down slightly despite making that payment.So reasons for that are the EBITDA that you can get straight away from that acquisition this year, the reduction in dividend payments, and also, a slight reduction in interest.In subsequent years, our net debt estimate for the group falls fairly materially so in year-end '25, year-end '26, we see quite a material reduction in net debt for the company as a result of these announcements made on the 19th of March.

[bountyhunter] 26/4/2024 15:56

Looking good so far, £11.39 equivalent in NY.