Diversified Energy Share Discussion Threads

[redtom1] 15/10/2021 15:42

PJK,
Perhaps you need to look a bit harder as evidence has been provided.
I suspect you don't want to find the evidence as that suits your agenda.

[professor john koestler] 15/10/2021 15:27

I don't see evidence on the ability to finance the plugging of all their wells.

What if federal law outlaws gas in two decades?

Take PA. They have posted a bond of what? $7M? Covers a very small fraction of the wells they own in that state. So Bloomberg are right in what they say.

[yupawiese2010] 15/10/2021 15:22

US natural gas prices could DOUBLE this winter, says Platts Flag of United States Money bag

While Henry Hub futures have surged to highest since 2009, production has not ramped up

Prices will need to hit $12-$14/mmbtu to incentivise curtailing LNG exports or deliveries to Mexico

[johnhemming] 15/10/2021 15:21

My main criticism of the Bloomberg article is that they report a comment suggesting that DEC cannot fund the plugging when it is obvious that DEC can. They also get confused as to the nature of how to fund the plugging.

Where you say:
"Regardless of what some of you argue, DEC and its shareholders can make massive profits from these wells whilst still only covering the liability for a fraction of those it owns if future figures don't work out. It is effectively state subsidized through lack of previous tight regulation."

That is basically numerically wrong and the figures have been provided. The "if future figures don't work out" is the unlikely situation where gas prices go under USD1. There is no subsidy.

Any business can go bust if it cannot sell its product.

[johnhemming] 15/10/2021 14:51

>Bingo!
I think it is reasonable for the company to buy a collection of wells in which some of the individual wells won't raise the revenue to fund retirement as long as the package as a whole is self funding.

Hence this particular test is the key one. On a non discounted cash flow basis at the current gas price about £1 of investment gets about £8 of revenues over 75 years. However, the gas price may come down.

[professor john koestler] 15/10/2021 14:39

"However, it is important when testing the retirement finances to see that they are funded from the revenue stream from the items being retired and it is not concealed through continuing activity."

Bingo!

[hashertu] 15/10/2021 13:52

Bloomberg article.

Given that the problems they, rightly, identify have been around, in this same state, for many years, why publish now?

This is what the company wrote in the interims back in August.

“In our 2020 Sustainability Report, we stated that we had initiated a comprehensive process to enhance our understanding of our baseline emissions data through improved data collection and monitoring with an end goal to establish an accurate baseline against which to measure future initiatives and to determine the initiatives in which our emissions reduction efforts should be immediately focused. We expect the completion of our data measurement efforts to occur in the fall of 2021. Concurrent with this project, we are also identifying projects and vendors that will provide emission reducing solutions that will allow us to make meaningful progress towards our goal. We have also expanded our methane leak detection resources and updated our leak detection equipment to allow for more efficient detection and remediation practices. As part of expanding our leak detection efforts we have begun the use of aerial leak detection systems, which allow us to monitor and evaluate our assets for potential leaks more effectively, resulting in swift remediation when and where necessary. While these devices serve to aid in the detection of carbon emissions, they do not replace the daily efforts of our well tenders' inspection of wells, related equipment and midstream assets during their routine and frequent well site and midstream visits. During 2021, each well tender visited an average of ~10 well sites per day, resulting in ~100,000 total well site visits per month across our operating footprint.”

That’s a lot of well site visits and data gathering is due to complete shortly.

I guess they saw a window of opportunity after which there would be less chance of springing new information on their readership.

The journalists are not stupid. They must recognise that there is a much higher probability well leaks and well plugging, to a higher standard, will happen if ownership is aggregated in a large company.
However, a large company makes for a great target. Especially if there is a bogey man, Rusty Hutson, who can be portrayed as getting rich on the back of state subsidies and worse still, potentially take a slice of Biden’s billion dollar infrastructure program. Rusty is become the Sheriff of Nottingham.

Only time will tell if this company is performing financial charades, but I for one am prepared to believe that they are not and that stewardship of this historical problem is better served in DEC than spread widely among the disparate group.

If Bloomberg really want to make a difference they should persuade the US to limit their per capita CO2 emissions to European levels.

hxxps://worldpopulationreview.com/country-rankings/carbon-footprint-by-country

[johnhemming] 15/10/2021 12:38

They still concentrate on the meaningless accruals forgetting that people pay for things with cash.

[farrugia] 15/10/2021 12:09

it is a recycled version of that story.

[ptolemy] 15/10/2021 12:04

Is this another Bloomberg article? Apologies if incorrect it's behind a paywall and I can only read the lead-in...

[fardels bear] 15/10/2021 09:50

Second that

[johnhemming] 15/10/2021 09:20

@Farrugia Petrotal springs to mind. (PTAL)

[lab305] 15/10/2021 08:29

In case anyone is interested , directors are unable to purchase shares at the moment as they are in the closed period just before the upcoming 3Q21 trading update. I have that from the company themselves. I have no idea when that update is due but it should be interesting as will be any purchases that follow it.
Last year 3Q21 trading update was on 29 October.

[farrugia] 15/10/2021 08:15

Guys can you suggest some solid oil producers that you think have the potential to move big/fast? I like Genel and hold quite a bit of it.

[marksp2011] 15/10/2021 06:15

Sunbed44

That all depends on what the real source of the oil/gas price increases has been doesn't it.

I have little exposure to the energy sector beyond a trading play in these and some RDSB I bought when the sky was falling in. But i am deeply unconvinced by the sector generally - great for volatility trading but as an investment (something you buy and hold and don't fret over), it is pants

[1knocker] 14/10/2021 20:13

Fingers crossed, the dividend will increase, or at least not be reduced. I rely upon the income from DEC to offset the inflation in my household energy bills, and the income from my Oil shares todo likewise with my motor fuel costs.If JKX resumes paying dividends, that would be the icing on the cake. It must be sense to align income sources with significant elements of expenditure. It is just a pity I can't find a company which collects tax, and pays out its profits in dividends. Though on reflection, perhaps not. Its balance sheet would be weak and its future contractual liabilities unaffordable. What would Bloomberg's verdict on the business model of GB Plc and USA Ltd have been, I wonder?

[mondex] 14/10/2021 16:33

The well abandonment issue is complex because it depends upon history, regulations etc. e.g. there are wells in the state of NY that were drilled in the 1800's. The technology to safely abandon such wells was not hugely efficient. Depending upon where you are in the world there are regulations stating what must be done to abandon an oil or gas well. In the US, which is where DEC operates, the regulations today are tighter than, say, 50 years ago. Also, operators are obliged to take out bonds to fund abandonments. This is good in theory. However, any commodities business are affected by the ebb & flow of prices & the current economic situation. There have been 2 serious recessions in the O&G industry in the past 6 years. Many operators went bankrupt leaving a legacy of abandoned wells & no-one to pay for them. This has gone on throughout history & represents a genuine problem.

DEC recognises this & has a plan to properly "retire" these wells as needed or required. Remember that DEC is NOT a "shale driller" whose business models may well be suspect. DEC is buying proven assets. Yes production is declining, but it is measureable, because the bought wells have production records, which plot the decline. DEC is buying assets which have reduced or no value to a Chesapeke or Cabot, but do have value to DEC & us as shareholders.

[sunbed44] 14/10/2021 15:56

Candy off babies

[sunbed44] 14/10/2021 15:56

My post from Tuesday I would expect to see 110p at some point hopefully tomorrow and definitely by the end of the week. Should then see a steady rise back to test 52 week high.

[farrugia] 14/10/2021 15:53

Natural gas spot is up 5.22%!

[johnhemming] 14/10/2021 15:45

@scrawl That is why I was pleased to see the wind down analysis. That demonstrates that the dividend stream is financed entirely by the wells being depleted.

Most extraction companies look for new projects whilst running individual projects each of which individually wind down.

[scrwal] 14/10/2021 15:42

johnh
I suppose that's the problem if shareholders are unable to see clearly if there is any concealment.
Any sensationalist story may have some misguided truths which can cause doubt about what is going on.

[johnhemming] 14/10/2021 15:34

The wind down model looks at the sustainability of the cash flows. Obviously at a point it stops.

For the business as a whole one would assume that other activities would be started up. Those also may wind down, but with a different endpoint.

However, it is important when testing the retirement finances to see that they are funded from the revenue stream from the items being retired and it is not concealed through continuing activity.