Diversified Energy Share Discussion Threads

[simplemilltownboy] 09/11/2021 13:27

Spot on, just bought another lump of these. Hopefully the share price will settle down a bit after the re ent turbulence. GLA

[bountyhunter] 09/11/2021 13:08

Don't forget xd 4c 25/11

[bountyhunter] 09/11/2021 11:35

Good point, there may be a stampede by larger companies to offload gas wells at low prices.

[sogoesit] 09/11/2021 10:41

Methane:
From a negotiating point of view I think both political risk-wise, and DEC's response, put Rusty Hutson in an advantageous position when purchasing assets.
After all, when it comes to belly-to-the-bar time and he says to his seller of the next 1000 wells "So, these wells you're selling us, they're all certificated leak free?" will the purchase price be higher, or lower, than a month ago all other things equal?
(NB. On the UKCS there are examples of sellers paying purchasers to take-away abandonment liability).

However, on the London listing and ESG risk, given the Cenkos NAV discrepancy, my view is that London is not the right place to be listed on a valuation/risk perception basis.

[papabull] 09/11/2021 08:47

For those that need it: the full report, see here: hxxps://www.research-tree.com/companies/uk/diversified-energy-company-plc/research/

[johnhemming] 09/11/2021 08:06

To me the key takeaway on Methane is that DEC were highlighting the issue and acting before the most recent fuss.

[simplemilltownboy] 09/11/2021 07:55

Good to see in the Cenkos note that DEC has been working with the US dept of energy on methane reduction. The other take away for me was that Cenkos believe DEC will expand debt rather than another placing for any accretive purchase. I'm sure this will be discussed at the CMD. Looking at adding again, personally I'm confident that the ESG issues can be handled responsibly and effectively with Rusty at the helm. DYOR

[spangle93] 09/11/2021 07:38

Cenkos note issued this morning is bullish

"We set our price target following the increase in the Company’s interim dividend to 161p per share, a c57% premium to the current share price and reiterate our BUY recommendation.

[bountyhunter] 09/11/2021 07:35

9 November 2021

Diversified Expands Emissions Detection Capability

Diversified Energy (LSE: DEC) announced today that it will deploy an additional 500 methane emissions detection devices to its Appalachian upstream field operations team as part of the company's ongoing commitment to environmental stewardship. This investment follows the results of a pilot project that deployed 100 devices across Appalachia and proved to be effective in identifying small emissions for trained well tenders to eliminate at little-to-no incremental cost.

As a result, Diversified will use 600 hand-held methane emissions detection devices in its Appalachia operating area, demonstrating the Company's operational focus on environmental stewardship. Portable methane emission detection devices empower the Company's highly skilled personnel to identify and remediate emissions otherwise undetectable using traditional techniques like AVO or Audio, Visual and Olfactory.

Diversified's investment in monitoring, effectively managing, and reducing its emissions is part of the Company's existing Smarter Asset Management ("SAM") programmes and broader environmental, social and governance ("ESG") initiatives that will be discussed at its upcoming 17 November Capital Markets Day. Importantly, the Company designed its SAM programmes with an emphasis on sustainability and operational excellence, which enables unique and necessary investments into the region's legacy assets.

Reflecting its ongoing commitment to these initiatives, the Company continues to evaluate complementary emission reduction investments as it integrates its recently acquired Central Region assets and continues to optimise its Appalachian assets.

In accordance with its longstanding zero-tolerance policy regarding unintended methane emissions, Diversified is committed to repairing all emissions and to documenting and publicly disclosing the results of its emissions detection and repair activities. By enhancing its measurement processes and capabilities, the Company is designing its emissions reduction programmes to exceed existing state and federal regulatory requirements governing methane emissions including the U.S. Environmental Protection Agency's most recent proposed methane emissions guidelines.

Rusty Hutson, Jr., CEO of the Company, commented:

"We are actively accelerating investments in emerging environmental technology that will greatly expand our field operations team's ability to detect and repair methane emissions in Appalachia and across our broader asset base. Respecting environmental stewardship in making business decisions is a core value for our employees. Diversified remains committed to the continuous improvement of our environmental performance and to outpacing the expectations of our stakeholders. We look forward to discussing this programme and others at our upcoming Capital Markets Day event in Houston on 17 November 2021."

[lab305] 09/11/2021 06:02

Ptolemy I think that you miss the point. It is precisely these old low production very low decline wells where DEC get their bread and butter. Some of these wells can go on producing for 60 years with decline rates of around 1%. They still have many years in them yet.

[cassini] 08/11/2021 21:26

DEC is nearly all gas.

[r9505571] 08/11/2021 21:14

46720 Mboe?

[sunbed44] 08/11/2021 19:55

How much oil do we sell per annum

[r9505571] 08/11/2021 19:00

Oil price up and this is getting walked down!

[hashertu] 08/11/2021 18:29

Ptolemy. 18,000 wells at 15MCF/day is potentially 200 million dollars revenue per year, is it not? I do not know the costs associated with these wells nor actual production but they might be worth keeping.

[johnhemming] 08/11/2021 16:18

That was about a USD30 lunch. Not a massively expensive lunch, but still lunch. It would now be a USD75 lunch, starting to be quite an expensive lunch.

[ptolemy] 08/11/2021 15:27

Gary1966, Lab305,

Sorry for late reply. The 10,000 is an under statement based on Loughrey's work in 2020. He looked at 37,000 of DECs 70,000 wells and found "18,000 wells producing less and 15 MCF per day, which in this price environment will barely buy you lunch."

[johnhemming] 08/11/2021 07:07

Looks like the Methane Fee is still not necessarily likely to pass.

[1knocker] 07/11/2021 18:03

Thanks for the calls john. This is not an easy business to analyse, even when the goal post are not being moved moved, but if one remembers that the impact of hedges cannot be taken at face value in the numbers in the accounts (you need to bear in mind the accounting conventions which dictate how the hedging numbers are calculated) it does seem to me that we are being paid our divis out of free cash flow, and the business model is a conservative and sustainable one. All the same (and it has this in common wiht Russian gold miners!) it is operating in a field where I am relieved to see the profits promptly shipped out to my bank a/c by way of divis rather than swelling the asset value of the company and thus the share price

[johnhemming] 07/11/2021 15:45

>is to what extent is this a business that effectively pays out of capital
That is clearly not the case, but the business does need analysing from the perspective of Free Cash Flow rather than accruals.

[brucie5] 07/11/2021 15:30

Thanks John - good to see someone doing the calcs, though they're largely over my head... Certainly interested in your conclusion.

Seems to sensible to suppose that this carries a balance of risk/reward, as does every investment, but the most basic question, aside from the problem of leakage, which should of course be properly addressed, is to what extent is this a business that effectively pays out of capital. That will be the bear case to watch carefully.

I hold - currently actually my largest holding, within a balanced, income oriented folio.

[johnhemming] 06/11/2021 17:11

I think DEC would end up paying a methane fee if one were to pass into US law and I think it would be of the order of USD20-30m pa were it to be based upon the 2020 sustainability report. Obviously since then methane emissions have been reduced, but there have been acquisitions.

The hedged adjusted EBITDA for 2020 was about 300m so it would be a material nuisance, but I don't think it would affect the ability to pay back debt or in fact the ability to pay the same dividend as we are getting now.

If DEC managed to halve emissions in 2021 then in fact the methane fee calculated on 2021 figures would drop below USD10m which starts being not particularly material. However, there are uncertainties about the new acquisitions, because I don't know the facts relating to them. However, going by the pattern of the companies track record they should be able to handle this. Obviously if it does come in the earliest it could come in is 2023 so there is plenty of time to resolve this.

However, calculating these things is difficult because of the differing units although I have managed to do reasonableness tests on this which has brought me to the conclusion that the stock is still cheap. However, people should do their own research.

Hence don't rely on my figures I put them up for debate.

These are my detailed calculations (for the year 2020). I would welcome people checking them as it is complex set of calculations (mainly because of having to convert between units).

Diversified had methane leaks of 1,068,000 Metric Tonnes of CO2 equivalent which converted with the ratio of 28 is 38,142.86 tonnes of methane.

Diversified produced on average 653.8 MMcf per day equivalent to 238,637 over the year.

Each MMCf weighs 21 metric tons so the total weight of gas is 5,011,377 tonnes

If the proposal with a threshold of 0.2% comes in that figure is 10,022.75 tonnes

That means diversified would be 28,120.10 tonnes over the limit and would have had to pay at a rate of $900 per tonne 25,308,092.83

[brucie5] 06/11/2021 16:41

johnhemming6 Nov '21 - 12:05 - 1882 of 1882
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Interesting links. And what is your conclusion?

[johnhemming] 06/11/2021 12:05

This, I think, is the most recent summary of CH4 emissions across the USA


It is a report in 2021 where the latest figures re 2019. The latest figures we have for DEC are 2020.

It has about 157.6MMT CO2 eq (6305kt) for Natural Gas Systems and 50 for Petroleum, plus about 10 for abandoned wells.

Enteric Fermentation (which I presume is mainly cattle) are top at 179.

"Methane emissions from natural gas systems and petroleum systems (combined here) decreased 39.1
MMT CO2 Eq. (16.6 percent decrease from 1990 to 2019) or from 235.8 MMT CO2 Eq. in 1990 to 196.7
MMT CO2 Eq. in 2019. Natural gas systems CH4 emissions decreased by 29.3 MMT CO2 Eq. (15.7 percent)
since 1990, largely due to a decrease in emissions from distribution, transmission and storage, processing,
and exploration. The decrease in distribution is largely due to decreased emissions from pipelines and
distribution station leaks, and the decrease in transmission and storage emissions is largely due to
reduced compressor station emissions (including emissions from compressors and leaks). At the same
time, emissions from the natural gas production segment increased. Petroleum systems CH4 emissions
decreased by 9.8 MMT CO2 Eq. (or 20.1 percent) since 1990. This decrease is due primarily to decreases in
emissions from offshore platforms, tanks, and pneumatic controllers. Carbon dioxide emissions from
natural gas and petroleum systems increased by 42.8 MMT CO2 Eq. (102.4 percent) from 1990 to 2019.
This increase is due primarily to increases in the production segment, where flaring emissions from
associated gas flaring, tanks, and miscellaneous production flaring have increased over time. "

DEC say they had CH4 emissions of about 1MMT CO2 eq in 2020 and about 2MMT CO2 eq in 2019.

I think the writers of this report have a certain amount of independence

[fardels bear] 06/11/2021 08:57

What, one on every seat?