Diversified Energy Share Discussion Threads

[sunbed44] 12/10/2021 20:48

Restructured PF a bit over recent times to be and listed in order of my favs:-8 DEC3 JSE7 JOG2 PTAL1 SAVE9 SEPL6 TXP5 WEN4 ZPHRWish me luck!

[gary1966] 12/10/2021 20:41

Farrugia,

Just so that you know the longer term gas price is nowhere near the spot price. Last mention of this by Rusty was $3.25 for 2024. Still wishing the range of $2.50-3.50 that is expected. Rusty has said also that they make a lot of money at $3.

[sunbed44] 12/10/2021 20:40

Yeah but gas price could double againTensions rising in Middle EastRussia playing political games like a fiddleWells depletingChina buying gas / LNG at any pricePush for carbon neutral 2050Renewable growth slowing$200bn capex shortfall for explorationIncreased chance of natural disasters due to global warmingPlenty of reasons to be invested in hydrocarbons and hang around to watch this all play outThis sector will prove to be easy money over the next 5 to 10 years

[wanobi] 12/10/2021 20:38

I think those are Malcy's words!?
Cheers
Wan :-)

[spawny100] 12/10/2021 20:34

But Proactive says it's a 'must buy under any circumstances' which is a very strong statement indeed.

[spawny100] 12/10/2021 20:32

Bit of a gloating article in Bloomberg after the success of their hit piece?

[farrugia] 12/10/2021 20:12

gas price is up 115.91% in a year. If they hedge future years at these prices (i.e. lock prices) it is going to make a hell of a difference in their bottomline. Plus they can get new gas wells into production and boost production further. I bought all i could today.

[sunbed44] 12/10/2021 19:33

Not sure if Sylvia Kerrigan was appointed to the BOD today to increase the % of females or for her previous experience of de-listing 2 companies from the LSE

[gary1966] 12/10/2021 19:05

DEC May use this as a negotiating tool for future deals.

In 50 years their cash flow will dwarf $500m.

Not only Oaktree that has done extensive due diligence, we have just had a placing and I am sure the major backers did theirs. Let’s also not forget the syndicate of banks who have just renewed and increased the RCF. A lot of people have had a nose in their books and business.

[brucie5] 12/10/2021 18:52

@scrwal

Good post.

[johnhemming] 12/10/2021 18:39

@scrwal

DEC may have attracted attention because it is now bigger. However, in the end the business comes down to getting gas for people to use without allowing too much to escape. The current dividend yield is more of a factor of the share price than anything else.

I don't agree with the argument that the company does as little as possible on these issues.

[ceaserxzy] 12/10/2021 18:30

The question is if all these factors reported in Bloomberg article are taken into account in the business model of the company. Also if Howard Marks of Oaktree has considered these factors in their investment thesis when partnering with dec. I am inclined to think the answers are Yes and I also find the company response credible. Short term, the ESG issue agitated by the Bloomberg article will be a drag on the share price but it may also prove an investment opportunity.

[scrwal] 12/10/2021 18:30

I think DEC has triggered this "problem" as a result of its rapid expansion and consolidation of wells.

Bloomberg have probably had this article in their pipeline for some time but were faced with a plethora of well operators. DEC comes along and becomes a major player so now there is a big fish to be hooked which is what they have tried to do.

The company has managed to make some very favourable deals with some states as to how wells are capped per year. The company has stated that they have exceeded the numbers required but lets be realistic here and recognise that the actual number that need capping is significantly higher and that DEC has been able to kick the time frame further down the road.

Yes there are reserves for well retirement of $500M but these are book numbers only and not backed by cash which is what part of the article was trying to get at by saying that any given company may not be able to meet its plugging liabilities.
This is also linked to their comment about dividend payments which we accept as being ok because they are 40-50% of free cash flow but this ignores the fact that there appears to be no cash retention for well retirements - it's only shown as a book figure.

DEC needs to show it has the financial resources to show that it could accelerate its capping volumes, it probably can't unless it stopped the dividend. Again it is something that has been kicked down the line.

The article is misleading about the methane leaks but it does raise valid questions about maintenance and capping expenses and where the cash will come from.

It is a wake up call for Rusty and co about their policies and appearing to do as little as possible for their state agreements and how the stated ESG policies etc may not be as good as they seem on paper.
It's also a wake up for us investors who didn't really know what the local populace seem to think about a lot of the wells and the company.

I'm hoping it's all a short term blip and that Rusty will be able to ease any concerns on the finance side.

[11_percent] 12/10/2021 18:14

Six months from now no one will remember this.

[gary1966] 12/10/2021 17:56

Oh well trading statement and third qtr divi announcement by end of the month.

Bad day at the office but only money. Will probably get a +ve PCR result later to cap off the day.

GLA

[brucie5] 12/10/2021 17:47

Reassuring to see it close above the £1 level, where I bought the larger part of my current holding. Nevertheless, I'm now almost 5% down overall, which is disappointing given where I was by close of last night!

No doubt DEC is vulnerable because few like to admit that gas is a necessary (transitional) climate cost, as we're currently seeing in our energy crisis. But it also remains hugely cash generative and in a geography of stable governance, hence its liability to special journalistic scrutiny - and rightly so.

But without overlooking any legitimate concerns, I think the larger case needs to be answered by its critics: depleted wells need to be properly capped and without DEC creating a market for the gas, the responsibility will to cap them will simply return to the state in which they reside. Same if DEC were to go under. It would hardly solve the problem.

I imagine that "other" RNS today concerning the appointment of Sylvia Kerrigan as NED had this in mind, to restore confidence, ensure ESG compliance, and communicate the company's policy going forward.

Assuming that they do just this, I haven't as yet sold any. Gas is only likely to become more valuable resource over next two years as the energy squeeze tightens, and without it, we go back to coal.

[bountyhunter] 12/10/2021 17:47

>>this reminds me of the time that a student had a go at Diversified over well retirement costs. I wonder if the two may be linked?

I was thinking the same, the two occurrences seem remarkably similar in many ways. As I said earlier today's Bloomberg article is a rehash of old news, easy money for the journos.

[cassini] 12/10/2021 17:46

On the plus side, Buywell hasn't shown up (yet!)...

[lord gnome] 12/10/2021 17:02

WTAbsoluteF!
Just got in from a very average day on the golf course, complete with a soaking from heavy rain. I come home to find that DEC has had a soaking as well, together with over 150 posts on advfn, mostly from people I've ever heard of (never a good sign).
Lots to take in, but Rusty's response to the Bloomberg feature looks very measured.
Without wishing to appear overly complacent, this reminds me of the time that a student had a go at Diversified over well retirement costs. I wonder if the two may be linked? Hopefully the only real effect will be to provide a good buying opportunity for anyone who needs it (I don't) and the share price will recover in its own good time.


Here's the link to the Bloomberg article again for anyone who needs it.

[johnhemming] 12/10/2021 16:59

There was some revenue when Gas prices were low. Gas prices are no longer low.

I think the biggest flaw in the article is to ignore the fact that reserves are made for retiring wells. Hence it is not so much a current cost as a payment out of a balance sheet reserve.

Hence where they see the payment of a high dividend being as a consequence of not plugging wells, the two are not really linked. The dividend percentage is high because the share price is low.

They also get confused between the average lifetime of a well and the point at which all the wells will have ceased operating.

For example quoting from the article: "We saw access roads choked by vegetation, machinery buried under vines and weeds, oil dripping onto the ground, and steel doors rusted off their hinges. "

Now I ask you. Why if a well is producing little gas would one expect any access road to be maintained. That really cannot be an issue. The fact that plants are growing is also not in itself something to worry about.

"Oil dripping" may be an issue. Steel doors rusting should not itself be.

The issue to be concerned about is methane leaks and that is what they should concentrate on.

"In a statement to Bloomberg Green, Diversified said that the wells we visited were “not representative of our entire portfolio” and that many had been neglected by previous owners and acquired only recently. "

Now an article that attacks a particular company should attack that company for what it has been doing not what other companies have been doing.

[1knocker] 12/10/2021 16:46

The important figure is the free cash flow.

[tonysss13] 12/10/2021 16:44

wrong board

[andyalan10] 12/10/2021 16:40

The full Bloomberg article is available via google news if you search for DEC.L.

The far more interesting part of the article is the later part that refers to DEC's financial engineering. They suggest many wells are classified as producing despite producing tiny amounts of gas, just to defer capping obligations, that $80m of revenue last year came from state subsidies designed to preserve employment when gas prices are low (that's about 20% of total revenue at a glance) and that DEC's entire profit since inception is accounted for by the increase in "on paper" values they ascribe to their wells after purchase due to their superior methods.

You can call journalists marxists or woke, or you can read the article and wonder why DEC haven't answered any of the financial engineering allegations, but they have responded to the methane leak elements of the story.

I increased my holding by about 50% earlier today, and am now overweight in my portfolio. Having read the whole article I am seriously considering reducing again. At today's closing price I could sell half my old holding, and would have my remaining holdings all in my SIPP, rather than spread across ISA and SIPP, I would have made a small profit on the the 2 transactions, and could say bye-bye to withholding tax.

[joedjoed] 12/10/2021 16:23

Wow. Thank you for the correction. That has made my mind up.