Diversified Energy Share Discussion Threads

[ptolemy] 14/10/2021 11:54

Posted without comment. I'm here to learn.

[redtom1] 14/10/2021 11:45

Here's a starter:

"DEC buys old rusty wells" - No, it buys well established gas producing well. STRIKE 1.
"and marks the value up because they can extract some gas out of them when others have written them down or written them off." - No, they do not mark the value up. They negotiate and pay low market rates from 3rd parties - STRIKE 2

"This creates instant profits" - No, they do not book instant profits from buying wells. They make profits of the gas they subsequently sell. - STRIKE 3
Need I go on....yawn...

[johnhemming] 14/10/2021 11:22

I quite like trees although I don't remember hugging one in recent years. I think the essential argument about funding plugging is whether there is any difficulty using the free cash flow currently being used to pay off debt once the debt has been cleared to plug wells or it needs to be done earlier. Obviously with a lot of wells to be plugged taking the average costs down from USD25K to 20K makes a difference. (which is what they have done).

The deal in Pennsylvania


Talked about plugging or restarting production at 1,400 wells over 15 years.

However,
"Diversified said it intends to plug 1,000 wells per year from 2049 on."

Diversified’s CEO, Rusty Hutson, indicated in a statement that the Pennsylvania deal, the last to be signed, removes the uncertainty over long-term liabilities that has trailed the company over the past year.

“We now have formal, multi-year agreements covering virtually all of the wells we operate, which provides us with clear asset retirement parameters within which we can budget comfortably from the stable operating cash flows we generate,” he said.

[professor john koestler] 14/10/2021 11:15

"I would suggest practically no research as opposed to limited research!"

Tell me I'm wrong then and why.

It sounds to me that even though my research has been limited it is rather a little more than what you have done. :)

[redtom1] 14/10/2021 11:13

Professor JK

"This is just my opinion based on rather limited research"

I would suggest practically no research as opposed to limited research!

[professor john koestler] 14/10/2021 10:58

So let me get this straight:

DEC buys old rusty wells and marks the value up because they can extract some gas out of them when others have written them down or written them off.

This creates instant profits and builds up NAV on the balance sheet.

It then extracts some gas and sells it and/or claims money from government when prices are low. OK.

Then with said increased NAV it sets aside provision to tap said wells.

But the company knows to tap wells it needs hard cash. Perhaps that is why the provision is high and the real rate of tapping is very low.

To increase cash flows (growth) on wells that are empty or near end of life it needs more and more wells and/or increase gas prices and so goes about on an acquisition spree. But more and more wells mean greater and greater provisions (liabilities) for tapping.

Those provisions are liabilities that are NOT MATCHED in liquid assets, no?

It sounds like some extravagant Ponzi scheme IMO.

Personally I don't see an amicable exit for all stakeholders unless the government steps in with some tapping scheme.

Someone tell me I'm wrong and say how.

This is just my opinion based on rather limited research.

IMO & DYOR

[sunbed44] 14/10/2021 10:50

8 DEC3 JSE7 JOG2 PTAL1 SAVE9 SEPL6 TXP5 WEN4 ZPHRAll blue whoop whoop

[fardels bear] 14/10/2021 10:47

No, they wouldn't. A brainwashed person would say it's the same thing

[professor john koestler] 14/10/2021 10:46

"Any human who believes that we can destroy the planet is both misguided and arrogant..


We can ruin it for ourselves but we cannot destroy it."




An intelligent person would say it is the same thing.

[farrugia] 14/10/2021 10:31

yes wild cat producers will have a huge challenge attracting new funds from investors or banks due to ESG so they can't easily increase production

[aleman] 14/10/2021 10:27

It does make on wonder if the gas price can remain so low if it was driven down by cutting corners that have generated a big problem. Banks will now stop lending to wildcat drillers and regulators will want cash putting aside for future maintenance and plugging and maybe a tax paid into a "clean up pool". It will drive loads of small operators out of business and the price of gas could end up higher than it would otherwise have been. Stranded assets could become cheaper for the remaining large players. This could be good or bad for DEC in time, depending on how legislators deal with it. DEC could be part of the solution and will probably want to play it that way.

[w1ndjammer] 14/10/2021 10:21

3.2 million abandoned wells need plugging, so why pick on DEC

Could it be that the tree huggers opened a big short, strange they put out the
Report after the share price had a good run.

Maybe these tree huggers should be investigated…….

WJ.

[farrugia] 14/10/2021 10:21

very interesting - i think the conclusion I've reached is that low gas prices are basically unsustainable.

[farrugia] 14/10/2021 09:51

how do you know there are 3m abandoned wells aleman? And I agree that they should increase the plugging to say 1000 wells per year if it make sense to do so.

[aleman] 14/10/2021 09:44

I'm still trying to get around numbers for methane emissions since study results vary so much but one article suggested that most leaks in the gas industry pay for themselves to get fixed. Most of the leaks in that video look like they could be - and were - fixed very cheaply. The real problem is probably the 3m+ abandoned wells that nobody wants to shell out for and not the 60k+ that DEC own which will probably see significant leaks fixed once they get a better handle on what they've bought. These journalists could actually be encouraging the company to make its wells more efficient - but wasn't that the plan?

Obviously more wells are going to get plugged. If they plug 1000 more per year, it will cost maybe $15m out of EBITDA of $500m and free cashflow of $250m. (They might even get more efficent at it as they scale up.) A cost of that magnitude would be similar to the dividend increase touted for next year from the latest acquisition. So why not announce that they are abandoning any dividend rise to scale up well plugging? It would be good PR.

That still does nothing to address the 3m abandoned wells. I'm all in favour of reducing DEC's emissions but they only own 2% of total wells even though they're the biggest player.

[farrugia] 14/10/2021 09:15

it looks like the recovery if any will be slow and painful.

The higher gas prices do allow the company to hedge future prices at much higher prices. That's a fact though.

[fardels bear] 14/10/2021 09:03

Volume returning to normal levels. Which way will the price break, up or down?Yes, I know I sold but I didn't spend the money on anything else..

[fardels bear] 14/10/2021 08:51

He's got a sense of humour

[yupawiese2010] 14/10/2021 07:56

Not sure if this has been posted before, apologies if it has.

Bloomberg video on Diversified dying gas wells.

[pro_s2009] 14/10/2021 01:10

US OTC chart for DEC added into the header.

[1knocker] 13/10/2021 21:39

All rather gloomy fordtin, especially if one considers what the ecological impact would be of Africa attaining anything like a European standard of living, with the infrastructure to maintain it. There are of course double standards too. The only humans who. run with the grain of nature are hunter gathers with inefficient weapons. Somehow, I don't think even the sainted Greta T is going to persuade us to revert to that way of life.We shall have to find a less radical answer. Now if only covid had worked as well as the Black Death, we would by now be cooking with gas (both literally and metaphorically). Not convinced though that the gang about to convene in Glasgow (with the heating on I assume) have in mind an improved strain of covid in mind as the solution.

[bountyhunter] 13/10/2021 21:22

To see how far this has recovered by then, imo. It would have been nice to have sold at 110 and bought back under a quid but I was busy working and missed the journalistic hit initially, however I remain optimistic that this will recover once the dust has settled, nothing fundamentally has changed and gas prices now and going forwards remain at record levels compared with just a few months ago and look set to remain high for some time to come. I will be happy to receive the 10% yield paid quarterly in the meantime. 16c this year before the deduction of 15% withholding tax with nothing deducted in a SIPP.

Picked up a tad further in NY this evening after the London close, recovery could take a while.

[fardels bear] 13/10/2021 21:04

How do you mean?

[bountyhunter] 13/10/2021 20:51

Interesting, it might be worth taking another look in a few months time.