Diversified Energy Share Discussion Threads

[sunbed44] 05/10/2021 23:11

This model is perfect and if people dont like it why don't they just do one! Look at the UK gas companies who have gone bump as they got their models wrong with forward buying / hedging.I think most people who moan about DEC on here dimply do not understand the strategy. Yes hindsight is great but this is a low risk high yield company and will remain to be so for years to come. If people dont like this or understand it, simply sell up and stick your cash in to something thats higher risk!

[1knocker] 05/10/2021 23:01

lab, if you do't like the DEC's trading model (which the company has always made crystal clear, and was the same in 2017 when you say that you first invested as it is now, and s not going to change) why do you remain invested?

It seems very sound to me; much better than risking disaster in the event of price falls in order to enjoy a jackpot when they spike.An assured forward income also makes investment cheaper and safer. To my mind its the difference between running a business and gambling. If you don't see it that way though, there are plenty of alternative producers which roll the dice and pray for high prices, crossing their fingers that they survive price slumps - not al do survive.

[podgyted] 05/10/2021 22:36

DEC is not on AIM. Main market listing.

[lord gnome] 05/10/2021 22:16

Thanks Aleman. For some reason I thought it was a stock market listing requirement to publish this information on the company web site. Obviously I was wrong.

[aleman] 05/10/2021 19:47

Page 97 of the annual report:

SUBSTANTIAL SHAREHOLDERS
As at 1 March 2021, the following shareholders hold greater than 3% of the Group’s issued shares with voting rights:

Shareholders (a) Number of Shares % of Issued Share Capital

Standard Life Aberdeen plc 57,149,191 8.08%
M&G Investment Management Ltd 54,273,792 7.67%
AXA Investment Managers 50,155,212 7.09%
Pelham Capital Ltd. 40,086,732 5.67%
BlackRock Inc. 38,053,062 5.38%
JO Hambro Capital Management Ltd 29,841,759 4.22%
Schroder Investment Management 27,090,381 3.83%
GLG Partners LP 22,387,700 3.16%

a. The Group derives the information from TR1 notifications, its third-party performed annual shareholder analysis to support its Foreign Private Issuer status
as a US Corporation listed on the London Stock Exchange, and from periodic third-party share register reports it receives.

[lord gnome] 05/10/2021 19:33

We have a 5% shareholder from down under. Pendal Group. A new name to me - Investment Managers, Fund Managers. I've been trying to find out who our major shareholders are but without success. If they are listed on the web site, I can't find them. Does anyone have a link that they could paste? Sorry to be lazy.

[lab305] 05/10/2021 19:17

NATURAL GAS
6.313 +0.547 +9.4%.

[sunbed44] 05/10/2021 19:08

Is that not a puddle

[last of the mohicans] 05/10/2021 17:48

Lab305,

Well conditions are right, are they going to take advantage of them is the question?

They own all the mid-stream assets so they don't have to worry about access to pipelines etc. They can prioritise there own stuff.

As for the nat gas price its headed for double digits this winter, its just a question of how long it stays there.

Of course the high gas price will bring about a lot more drilling activity across the USA & Cananda, which will increase production and start to drag prices lower again.

LOTM

[fardels bear] 05/10/2021 17:41

I thought it had more to do with steak and kidney.

[last of the mohicans] 05/10/2021 17:34

@Fardels Bear

Do you actually know what a PUD is ?

Its a Proven Un-Developed Location !!!

LOTM

[fardels bear] 05/10/2021 17:27

OK well infill drilling but none of that wildcat ting nonsense.

[lab305] 05/10/2021 17:20

What no fracking either ?
Shale gas is natural gas stored deep underground in fine-grained sedimentary rocks. It can be extracted using a process known as hydraulic fracturing – or "fracking" – which involves drilling long horizontal wells in shale rocks more than a kilometre below the surface.
DEC has bought up a number of shale wells over the last two years.

[fardels bear] 05/10/2021 16:52

Drilling? Fracking? This company doesn't do that.It buys mature assets and exploits them more effectively than they were being exploited by the people that owned them before. It's a low risk strategyCompanies that do it the other way are 10 a penny and lots of them have gone bust recently.It's physically impossible for them to only hedge when the price is low and not when the prices is high

[lab305] 05/10/2021 16:51

LOTM I have been heavily invested here since 2017 and I believe you to be completely right. Initially the company showed a profit and this grew as they rapidly expanded. More recently however we now show ever growing losses on paper due to hedging. These paper losses look to eclipse any excess profit we ever had due to this strategy and sadly that trend looks set to continue . Rapid expansion is now unlikely as acquisitions will be prohibitively expensive and we are not growing profit at a matching rate. The only way open for expansion is organically . They have drilled wells before very successfully so they can do it again. Ironically the ultra cautious approach of the management has left them in a poor position , unable to capitalise on the boom. To those who dispute this Rusty has said more than once low prices are our friend.

[last of the mohicans] 05/10/2021 16:31

@redtom1,

Good Question, I don't know if they would buy an actual drilling rig themselves (or hire one) and use there own employees to do the drilling etc.

They already have there own people do work-overs & P&A work etc, so they have a lot of the basic skill set required. The same could be said when it comes to doing the fraccing, although its highly likely that they would out source this to begin with at least. Doing the drilling themselves will likely knock 20% of that part (drilling share) of the $8M estimate.

The opportunity is there for them to make hay while the sun shines, so it will be interesting to see what they say or do in this regard.

I think the next quarterly will be first source to reveal the current level of hedging going forward.

LOTM

[redtom1] 05/10/2021 16:17

LOTM,

Fair point regarding the undrilled PUD locations. I had missed that, sorry. Not sure whether they would doing it themselves though?

I guess they may update us to the extent of their latest hedging at the Capital Markets day in Nov. Until then we just don't know.
RT1

[last of the mohicans] 05/10/2021 16:12

@redtom1,

I'm well aware of the fact they don't normally do drilling & indeed sold of 4 unstimulated Utica shale wellbores last year that came with one of its lease purchases.

However if you read there reports they mention having undrilled PUD locations within the portfolio leases. The best time to capture the value of such assets is to have them producing when gas prices are high, especially when these types of wells have steep decline curves in the first 2 years 80%+

Get them into production now & they will pay for themselves inside 5 months after that it will provide them with good free cash flow until prices moderate again.

I suspect your right in guessing that they've increased there hedge position since the last investor update. Personally I think they would be much better off waiting until at least the middle of December before doing any more hedging & see what the market looks like then.

LOTM

[last of the mohicans] 05/10/2021 15:56

@Gary1966,

Sorry I haven't really read this BB before, I've just watched the company with interest over the past couple of years & what its been doing.

I understand a lot of what they were doing with the hedges etc & the need for them in there business model when your on the downside of the wave & concerned about where the trough will actually fall.

The problem comes when your in the trough itself & are about to enter the upside wave with there strategy. So much is locked into a tight band that you virtually miss out completely on the massive gains that could be realised but aren't.

Yes there new purchases have turned out to be well timed & if you look at the prices they paid for them they were starting to rise at that time.

Which makes one wonder how they saw the value in the assets at that time but didn't cut back on their level of hedging to potentially gain from the upside to rising gas prices that was occurring.

LOTM

[redtom1] 05/10/2021 15:37

LOTM,

I'm not sure if you quite get the business model that DEC uses.
It should not reduce its hedging because its whole business model is to reduce risk and is aimed at paying back the loans, paying running costs, paying the large dividend and having sufficient cash left over to replace the decaying assets.
It does not initiate drilling programs so forget that one.
These M to M accounting losses are purely an accounting anomaly as those don't adopt the matching principle. They are one side of the entry with the other side being recognised later. They are non-cash are totally irrelevant if you understand the full accounting principles.
It is easy in hindsight to say that DEC would make more money had it hedged nothing given the current NG price but that's purely hypothetical and the company would probably have gone out of business with the lows in 2020.
DEC derisks itself by its hedging model and this should continue. I suspect that DEC has been increasing its hedge book recently.

[ceaserxzy] 05/10/2021 15:27

The argument that dec should be valued less when the ng price is going up due to their hedge is barmy. If the ng price stays high, their ng long term asset surely will be worth a lot more, not less. The so-called hedge loss is only an accounting paper loss, which should be better termed as earning less than it could have earned for the current year if it had not hedged. But it doesn't extrapolate to future and if one values the company on DCF, then it doesn't matter really if it has hedged or not. The cash flow is only shifted by one year,

[gary1966] 05/10/2021 15:26

Once again a good UT yesterday and price firming up again after 14:30.

[cassini] 05/10/2021 15:24

At my average buy price, inside my SIPP, this bad boy is yielding 11.0%.

They could have wrung more out of this gas spike without all the hedging it is true, but I can't find it in myself to get too upset about the present situation.

I only wish I'd bought more when they dipped to 99p now though...

[gary1966] 05/10/2021 15:24

LOTM,

If you look back through my posts when hedges were being discussed that I have said that the hedges have an opportunity cost that at the moment is costing them and that it is reducing the amount of cash they could have been building up during the good times. However nobody was on here criticising or congratulating the company 12-14 months ago when the gas price was $1.60 and our hedges were at levels that were substantially higher and ensured an already substantial dividend could be increased. It is what it is and if the company was run the way that you would like it to be then I would not be invested here at any level, as it is because of the way it is run I am very overweight here. With the benefit of hindsight the deals done this year have been perfectly timed and will be very accretive. They would not have been able to be done if we didn't have long term hedges.

You will also see from my earlier posts that I too would be happy for the amount of hedging to be reduced so that they cover the existing dividend and loan repayments and the rest is a free ride.