Diversified Energy Share Discussion Threads

[apollocreed1] 07/10/2021 13:52

The RNS States that the above deal was financed by a combination of debt and cash. Does it not mean that all these acquisitions will result in the company having to return to the market to raise more equity, thereby diluting the share price?

[scrwal] 07/10/2021 13:36

The deal shows the effect of the gas prices:

Previous 3 purchases - Net Price $342M , Production 38 MBoepd , PDP Res 145 MMBoe
Tapstone - Net $174M , Production 12 , PDP Res 35.

The level of PDP Reserves seems on the low side for the $s paid but that is what the market is like now.

At least everything was unhedged so DEC can lock in at the higher prices on completion.

[1knocker] 07/10/2021 11:46

Lord G you seem to be wrestling with the age old auction dilemma -is the man the lot is knocked down to thereby proven to be a mug because he has paid more than the seller and all of the other prospective buyers believed it was worth? The announcement explains that there are synergies here. An asset can be worth more to its purchaser than to its seller. Lets hope it is in this case. DEC has done alright so far with its acquisitions, so I have faith in its judgment.

[sogoesit] 07/10/2021 09:33

Today's acquisition RNS, note:
"Hedging
The Company is acquiring the Assets unhedged and, upon closing, will opportunistically protect the Acquisition's cash flows, capitalising on the improved forward commodities price curves."

Likely upside potential to share price arising if Natgas has a "winter of content" above and beyond the delta NAV, which is usually neutral (to slightly positive depending on debt/equity structure).

Capital gains expecters should like this ;-)
But I think the 100 to 120 channel still stands. We will see.

The market DOES like this... it gets a constant (low volatility) 10% risked yield... a "quasi-bond" no less ;-)
And, as sunbed implies, at the price you start your future yield-on-investment grows.
What's not to like?

[sunbed44] 07/10/2021 09:26

Not sure why the market does not seem to like this. Ive been building a stake since the 90s and recently took some profit out of TXP on mini spike and added at in mid teens. Have a sizeable holding now for the divi which I expect to grow. Still looks cheap to me at 120p.

[11_percent] 07/10/2021 09:20

Presentation

[grum9] 07/10/2021 09:18

See today's Presentation on DEC Website

[gary1966] 07/10/2021 09:07

It could be JH but that isn't factoring in the following that the company has a proven, good track record on achieving.

Consistent with the Company's growth strategy, Diversified intends to retain Tapstone personnel who will assist with Diversified's Smarter Asset Management programme to optimise asset performance, reduce costs and add value through realisation of operational synergies within the Central Region.

[lord gnome] 07/10/2021 09:07

Hence my question about pricing assumptions.

[johnhemming] 07/10/2021 08:55

I would not say it is a historically distressed multiple. If gas prices were usd 2 rather than usd 6 it could be an ebitda of zero.

[lord gnome] 07/10/2021 08:29

I have a lot of faith in DEC management and their ability to do excellent deals. I do however wonder why the seller is getting out at what would appear to be a distressed multiple. This leads me to question the gas price assumptions built into the figures quoted and whether they are forecast or historic. I don't doubt that there is some window dressing going on but I dare say that it is still a very good deal. Onwards and upwards.

[johnhemming] 07/10/2021 08:03

I have not tried to do the figures, but I assume that the price per reserve P2 or whatever is higher than previously and the low EV/EBITDA is because the price of gas and consequent EBITDA is higher.

It remains, however, that they have said that acquisition is possible without a placement although I would not be surprised if Oaktree put their interest into DEC at a higher price at some stage.

Again I have not done the figures, but that sort of deal could put DEC into that USD2bn territory

Heres a link to future gas contracts for anyone who is interested

[gary1966] 07/10/2021 07:48

Gary19661 Oct '21 - 16:36 - 1040 of 1097

For the last few days the share price has been strong after the US markets have opened. Yet another strong UT to continue the trend of late. Almost as though something is going on.

I guess we know what that something was now and stateside were aware.

[gary1966] 07/10/2021 07:40

Cheapest deal in current times when gas prices at their highest, not bad. Production won’t be hedged until December and who knows where the price will be then with the volatility we are seeing presently, but at least it is closer to the onset of winter.

This deal builds confidence that the acquisition market hasn’t dried up with the higher prices, which I know was a concern of many on here.

The benefit of the higher prices is that Oaktree should hit their target of an IRR of 10% sooner, at which point DEC’s share increases to 60% for no further consideration. Also leverage enhancing and so more funds available for further acquisitions without further dilution.

[bountyhunter] 07/10/2021 07:39

Downtick this if you agree this is a great deal. I thought so.

[bountyhunter] 07/10/2021 07:17

Absolutely! Also presumably they get the unhedged revenue from Aug 1st as that is the effective date.

[dunderheed] 07/10/2021 07:13

Yes so hopefully they can get a lot hedged at these extraordinary prices to lock in the bought cash flow?

[bountyhunter] 07/10/2021 07:08

Another aquisition :-) UNHEDGED!
Effective date of 1st August.

"The Company signed a conditional Plan of Merger and Purchase and Sale Agreement with the Sellers on 6 October 2021, its fourth acquisition of producing assets within the Company's Central Region within the past five months. Net of Oaktree's co-investment, Diversified will acquire 660 operated producing wells with August 2021 production of 12 MBoepd (72 MMcfepd; over 80% natural gas and NGLs) located in Oklahoma within the broader Mid-Continent producing area. This Acquisition demonstrates Diversified's status as a capable consolidator, highlighting its ability to build regional scale at compelling valuations. As with the broader region, the Mid-Continent also benefits from a constructive regulatory environment and aligns with the Company's operating and ESG strategic initiatives. Diversified and Oaktree expect to close the acquisition in early December 2021 upon completing customary diligence"

"With an effective date of 1 August 2021, Diversified's 51.25% working interest in the Acquisition adds 35 MMBoe (208 Bcfe) of net PDP reserves, with a PV10 of $324 million with an estimated Adjusted EBITDA of $95 million(b) , and strong cash operating margins of 65%(d) reflective of high realisations and a low operating cost structure that excludes the potential benefit of immediate or future synergies."

[apollocreed1] 06/10/2021 20:26

@1knocker- Where can I find DEC's strategy outlined please?

[lord gnome] 06/10/2021 16:42

I think that's the Putin effect , Aleman. He is riding to the rescue so that we don't freeze this winter- but at what price?

[aleman] 06/10/2021 16:36

Wow. UK November contract now down 6% from +16% earlier. That's some turnaround. Henry Hub gone from +1% to -7%. It's volatile out there. What next?

[aleman] 06/10/2021 11:23

Not directly influencing DEC but a sign of the craziness going on - UK Nov gas up 16% today. There are reports of a 40% rise in media but I'm not sure what contract they refer to. It will put more pressure on other global markets and UK residents here (on ADVFN) will be concerned about such large ongoing rises which will hit us in the pocket one way or another.

[lab305] 06/10/2021 09:32

Well I managed to get out of 17.6k shares @£1.22 this morning. Next lot £1.25.

[fardels bear] 06/10/2021 07:00

Everything in life comes with a degree of risk. The hard part is to work out what is the best degree of risk. As the others say there are plenty of other gas companies who use a more traditional model and therefore you may feel more comfortable invested with them.Some of what you say is undoubtedly true, but I still say that if we're all comfortable with it and you're not then the remedy is staring you in the face.

[lab305] 06/10/2021 01:49

1knocker you are not quite correct when you state it was the same in 2017. Derivatives have played an ever increasing part of the business since later in 2018 , to the point that gas production has become secondary. I have not been completely happy with this move as you have deduced mainly because the business is no longer transparent and easily understandable but exceedingly complex . Also the stock is very volatile with the last 20% spike down in May undoubtedly caused by the placing. Therefore gradually I have reduced my holding this year by around a third up to now and still have some way to go before I feel comfortable.
"The model " that you both rave about may not prove to be perfect if the high gas prices don't just spike but become the norm. We will be locked in to very low prices for a considerable part of our production for years to come and fresh assets will not be so affordable.