Diversified Energy Share Discussion Threads

[professor john koestler] 18/10/2021 11:12

adg

I don't particularly like your attitude.

"Thank you to the three dweebs - Zachary R. Mider, Rachel Adams-Heard and that wannabee professor Amy Townsend-Small"

Why are they dweebs? They are raising an issue about methane leaks which, as sensible humans, we should be thankful for. It is our planet as much as it is theirs. They are generally young and so one could argue have more of a vested interest in the future climate. Some of you here, come across as an ageing generation who feel threatened by change and challenges to the norms we have become accustomed to accepting.

A dweeb is more likely to be the one who tries to undermine current social attitudes towards climate change which is overwhelmingly supported by general consensus from the scientific community.

Your background, according to you, is to do with the gas industry, not climate change. The professor, or associate professor, seemingly knows her stuff about methane. Respect where respect is due.

If this industry is truly damaging our planet to the extent we need to move on very quickly and close this all down, then so be it. Having a high-yielding stock in your pension is of zero importance to humanity. Perhaps you should have put more aside for a rainy day so high-yield isn't particularly that important to you.

[redtom1] 18/10/2021 10:56

Trying to make some sense of the forecast cashflow in the recent Cenkos Paper.
It appears that they are forecasting FCF of $455m for 2022. Of this the 2 major items are $136m paid out in dividends and $191m used to pay down some of the debt.
These FCF numbers are extremely encouraging and they do make the share price look very undercooked.
One of the 'criticisms' thrown at DEC is that 'the dividend is too high'. This appears untrue and is very affordable. The yield appears too high because the share price is too low not because the divi is too high.
Whilst Cenkos have a 176p price target, I suspect that this is a little of the bullish side. But I would expect a recovery to 130p+. I expect the Capital Markets Day to address all of the recent concerns and to show a very bullish future assuming NG stays high. Talking of NG, there are a few pages on the 'Bullish outlook for Natural Gas' in the Cenkos report.

[adg] 18/10/2021 10:49

I had been watching DEC for about a month, after having it brought to my attention as an income stock. Was umming and erring and that hatchet job from Bloomberg Green and its totally flawed and obvious agenda driven nonsense of an article gave me the perfect opportunity to buy £2.5k PA income for the square root of SFA...
Thank you to the three dweebs - Zachary R. Mider, Rachel Adams-Heard and that wannabee professor Amy Townsend-Small (professors are nationally or internationally known and associate professors may be an authority in their field, but have not earned the notoriety of a full professor)

[holts] 18/10/2021 10:46

Snap , very civil of Bloomberg so far .

[1knocker] 18/10/2021 10:31

Yes, Bloomberg did me a favour too. I managed to top up at 95.6. Total holding increased, average purchase price down, overall holding and top up tranche well in the blue. I am a happy camper. Anyone who sold and repurchased lower will be a VERY happy camper. I hope none here were spooked into selling at the bottom.

[dovey21] 18/10/2021 09:59

My holding is 25% larger now following the Bloomberg nonsense. Oddly I feel quite grateful. I was expecting it to recover hence topping up but it's gaining quicker than I thought. A good investment with great income and returns.

[johnhemming] 18/10/2021 09:40

@Gary1966 - I think Cenkos are a tame broker. Hence one would expect a briefing from DEC.

@Aleman - they have a decision chart for retiring wells. There is no reason why this decision chart should be ignored.

[aleman] 18/10/2021 09:38

So net debt to fall from $1.1bn to $850m next year after a fat dividend. They could take the initiative and redirect maybe up to $50m to retire up to 2000 extra wells. They operate 60,000+. If gas prices are up and some could restart, are there 2000 that are no longer recoverable a the moment? (More visibility would help when they have assessed recent acquisitions better.) Anyway, those numbers look to give plenty of flexibility. Surely the company could take the initiative and spend more on well retirement and leakage reduction, claiming to be trying to clean up their part of the problem when most of the other 3m+ wells are sat there decaying because they are not in DEC's hands.

[redtom1] 18/10/2021 08:58

A snippet from the research note regarding 2021 and 2022:
Through a combination of the Tapstone acquisition and the recent increase in commodity prices we estimate 2021E revenues at cUS$1.0bn (previously US$843.1m), based on an average daily net production of 119.2Mboepd (previously 118.2Mboepd). We estimated Adjusted EBITDA in 2021E at US$329m (previously US$344.7m), with the increase in Adjusted EBITDA as a result of the Tapstone acquisition more than offset by an increase in the loss on settled derivative instruments. Unhedged, our Adjusted EBITDA increases to US$641.2m (previously US$490.3m). Including the effective purchase price of US$174m for the Tapstone assets, we model DEC ending 2021E with US$1.1bn of net debt (previously US$787.6m). In 2022E we assume DEC will generate US$1.4bn in revenue (previously US$866.1m) based on average daily net production of 137Mboepd (previously 127Mboepd). We estimate Adjusted EBITDA in 2021E at US$544.2m (previously US$378.2m), with an Adjusted EBITDA ratio of 54.7% (previously 49.7%). We model DEC ending 2022E with US$849.3m of net debt (previously US$614.9m). We increase our price target in-line with our Core NAV at 176p, a 64% premium to the current share price and reiterate our BUY recommendation.

[gary1966] 18/10/2021 08:37

Do DEC have input into that Cenkos note? If not it is a great riposte to the Bloomberg Green article.

[bountyhunter] 18/10/2021 08:15

Moving up again, as expected.

[johnhemming] 18/10/2021 08:01

Also from Cenkos:

Asset integrity is a keen focus for DEC. Equipment such as valves, pumps and connectors can be a source of emissions, but are controlled through a continuous programme of leak detection and repair and by upgrading and modifying equipment where necessary. DEC carry out leak detection and repair tests on applicable production pads and compressor stations in order to detect methane leaks. In addition, DEC utilises monitoring equipment as well as audio-visual olfactory (AVO) inspections to search for any detectable emissions of natural gas. In 2020, DEC completed a successful pilot utilising remote methane leak detection equipment to locate previously unidentified or undetectable to AVO inspection methane emissions. As part of this pilot programme, DEC acquired nine remote methane leak detection devices (RMLD), which are utilised on a daily basis. Though not required by regulations, the use of these devices further exemplifies DEC’s commitment to address climate change risks and demonstrates the Company’s commitment to safe and environmentally friendly operations in the communities in which it operates. The result of DEC’s emissions strategy saw a reduction in its methane emissions in 2020 by more than 60% to 4.2MT CO2e per MMcfe (2019: 9.8MT CO2e per MMcfe). Further, as part of the Bloomberg Green article published earlier this week on DEC, it was found that of three West Virginia wells observed and reported, emissions averaged 60g of methane per hour, which according to a 2020 study of lower production wells in Appalachia is likely indicative of a high state of asset integrity due to regular maintenance activity. That study published in the Journal of Air & Waste Management Association reported that of the 48 wells observed, those noted as having “good maintenance” or where maintenance status was not noted had an average emissions rate of 50g of methane per hour – broadly in line with the observed Diversified wells. Conversely, wells noted as displaying a poor state of maintenance achieved an average emissions rate of 183g of methane per hour, c.3x the rate assigned to Diversified wells in the Bloomberg report.

Diversified has a well-established, highly successful and well-funded program to systematically retire wells that have reached the end of their economic lives. The Company has demonstrated this commitment by annually retiring more wells than required under its long-term agreements (2020: 92 vs a target of 80). DEC continues to maintain open and active dialogue with the regulatory bodies to collaborate on best practices for retirement and closure activities. Leveraging DEC’s well retirement expertise, in 2020, a legislative bill was successfully passed into law to create the Abandoned Well Plugging Fund, the first of its kind in dealing with orphaned wells across the state of West Virginia. DEC also works with landowners to plant trees on the restored well sites, or to donate equivalent funds to organisations actively involved in similar tree planting initiatives as a means of creating carbon offsets.

In 2021, DEC purchased its first plugging rig and established an in-house asset retirement team in West Virginia. Bringing these vertically integrated operations in-house has allowed DEC to better manage its environmental impact and the retirement methods used

[pro_s2009] 18/10/2021 07:26

Cenkos note on DEC out today.

[markydeedrop] 17/10/2021 16:00

Ver positive article in the Daily Mail and I support everything that was said.

[johnhemming] 17/10/2021 13:19

>No one is saying they will ban gas anytime soon but they may in a decade or so.
Governments and the IPCC have multidecade forecasts from which I have quoted. There always is a form of political risk on any stock. For example if you invest in a Brewery there is a risk that governments will ban alcohol. One has to make reasonable evidenced judgments as to what governments are likely to do.

The banning of gas option is not on the US Democrat agenda or that of the IPCC. In any event the most of the world is not really doing what the IPCC suggest anyway.

[gary1966] 17/10/2021 13:14

PJK,

There isn't a sector or share that the above post couldn't apply to so where do you start when investing? The known known at the moment is that countries are moving over to gas. If you believe what the company says then they are meeting and exceeding all regulatory requirements. They are generating real cash with which they pay us a real dividend and make real debt repayments. Personally I have to keep things simple and not over analyse otherwise I would never buy a share.

[professor john koestler] 17/10/2021 12:31

No one is saying they will ban gas anytime soon but they may in a decade or so. If they don't it might start getting hindered with additional taxes, just like tobacco. Some people seem to be completely ignoring political risk here. The US has a vast changing opinion to health, energy and other issues. What makes pragmatic sense comes second to securing votes. Then you have the big energy companies, utilities, transmision and distribution networks who will have their own agendas and deeper pockets for lobbying. I think a business model over 70 years (???) for gas (without much change) is wishful thinking - even over a decade - and has greater risks than some are placing here. If this was a developing country, I'd probaby be more relaxed, but this is the US and it is changing very quickly, quicker than many would think.

By-the-way, I own this share. I'm placing questions and testing as it may help me reduce or even increase my holding. No hidden agenda other than for us all to be more informed. I've never shorted a stock in my life. I'm traditional long only.

[bountyhunter] 17/10/2021 12:06

"130,000 barrels a day, 95 per cent of which is gas. At the beginning of last week, the shares were trading at £1.29."
The need for gas has not gone away and the company looks to be addressing ESG issues going forwards - it's looking as though there will be a lot more on this on the Capital Markets Day. The price will recover imv as I've been saying and has already recovered relatively quickly from the low of 95p. Well done to those that topped up there.

[petewy] 17/10/2021 12:01

Positive write-up by Midas

[redtom1] 16/10/2021 10:12

Regarding the upcoming Capital Markets Day, we are going to hear more about their ARO position. It should be a very interesting meeting and hopefully it will answer many of AR issues/questions being banded around. Worth joining the call if you have time.

"You may have seen the White House has announced the United States will allow entry for vaccinated persons from outside the US beginning 8 November. As such, you may expect Diversified to soon release the new Capital Markets Day event date via RNS in the coming days.

The Company has devoted a significant portion of the Capital Markets Day agenda to provide more detail on its ESG initiatives, inclusive of our stewardship of assets through to retirement at end of economic life. While Diversified has previously published materials within its ARO supplement detailing the adequacy of cash flows to fund the cumulative plugging obligation (please refer to Slide 13 of the supplement) you can certainly expect the Company to provide more information on this matter and how we intend to address in the more immediate term at Capital Markets Day."

[johnhemming] 16/10/2021 03:40

It is true that there are CCS (Carbon Capture and Storage) systems that do work, but from a scientific perspective there are energy costs to this process. All fossil fuels face depletion issues as well as carbon issues. Obviously the ones with a higher proportion of hydrogen atoms (gases) have less of a carbon issue, but it is still there.

Everyone has their own views. PJK is entitled to have his views and argue his views.

I have my own views which are that we need to consider the wider impact of any company in terms of all stakeholders. One of the aspects of this is the impact on the environment.

Hence it is only right to ensure that things like carbon emissions are taken into account as is the planning for the retirement of assets.

DEC is a responsible company that has done this. The basic thesis of the Bloomberg article which is that because the company is paying high dividends (which are a high percentage because the share price is lower than it should be) it cannot fund retirement of assets (plugging wells) is basically mathematically wrong.

[lab305] 15/10/2021 23:33

Ban gas . What rubbish. The country would freeze . There is a viable alternative to coal and oil .It's gas . Much cleaner and less polluting. Now if some technology could pump CO2 into the old disused wells win win.

[bountyhunter] 15/10/2021 21:34

PJK, member since 07 SEP 2021.
Since the Bloomberg article nearly all posts criticising DEC, clearly an agenda.