Diversified Energy Share Discussion Threads

[grum9] 24/5/2021 09:30

I think you will find that Primary bid will only credit shares to dealing accounts and not ISAs/SIPPPs and therefore will incur full 30% tax on divis.

[lab305] 24/5/2021 02:38

CASSINI Thank you. You have the answer . With the Oaktree money unusable and the revolving credit now depleted . They have stated on many occasions their debt ratio should be no more than 2.5. Here is a line from 2019 results ... we continue to operate comfortably within our previously guided leverage ratio of 2-2.5x Adjusted EBITDA/Net Debt.
It is unfortunate that this particular placing has had such an impact on the share price in comparison with those preceding but perhaps they will quickly recover .

[cassini] 24/5/2021 00:52

Looking at the report from DEC on coming acquisitions (and bearing in mind I can't read company reports or balance sheets for toffee) they have earmarked $291m for acquisitions coming up.

The revolving credit facility they have is $425m but $233m of that is drawn already.

Clearly $425m minus $233m leaves up to $192m of available credit with which to fund acquisitions.

This is exceeded by the $291m they have stated they have earmarked for their coming spending splurge on acquisitions so no way can it all come from their revolving credit facility.

Now it's true that they are only proposing to draw $66m from their revolving credit facility when in theory they could draw up to $192m, but whether it's a good idea to max out your credit facility/leave nothing for unforeseen circumstances is above my pay grade.

However you look at it though, the credit facility apparently cannot alone finance this acquisition programme so an equity raise does look necessary, even if it comes at an equivalent 9% (i.e. the dividend) interest cost.

The report does however perhaps shed some light on their reluctance to take more than $66m from the credit facility - they appear to be trying to keep the debt/EBITDA ratio to within a certain operational range. Considering the fate of some highly indebted oil companies during 2020 this may be just prudence.

I don't know why they are targeting a debt/EBITDA 'leverage' ratio of about 2.2/2.3 in particular but it may be an underlying company operating principle to mitigate risk.

There's more detail on page 8 of the report which is linked to in the header as well as my previous post.

[melody9999] 23/5/2021 22:16

AJBell - charges stamp duty

[fardels bear] 23/5/2021 20:58

You be sceptical. We don't need a fanboy thread.

[lab305] 23/5/2021 20:43

Gary , indeed I added the Oaktree and the revolving debt facility only recently reconfirmed. Make no mistake I have been a loyal and large investor here almost since listing and have posted many times championing the company but have grown a little sceptical of late even though it is against my interests.
Thanks Cassini that might be an answer .

[gary1966] 23/5/2021 20:20

lab305,

What finance do they have in place to cover the deal eight times over? If you are referring to the Oaktree tie up then they would still have had to find half the money. However the deals are not big enough for the Oaktree money. It is on record that this money is for deals over $250m.

[cassini] 23/5/2021 20:15

This document details the strategy here (and ongoing) vis a vis acquisitions:



Excerpt:

Expects to fund the aggregate acquisitions and transaction fees with:

•~$225 MM(a)equity issuance (gross)
•~$66 MM draw on existing credit facility
•Consistent with stated strategy to maintain target capital structure and preferred leverage range while driving per-share value accretion
•Just 1.9xNet Debt/Adj. EBITDA preserves significant liquidity and debt capacity for additional acquisition opportunities

So it's all to do with preserving a preferred leverage range and debt capacity...

If anyone can figure out what the motivations behind these goals are and put it in plain English I'd very much like to hear it...

Obviously if they took on more debt to fund these acquisitions that may well take them out of their target debt/earnings ratio, but why exactly is preserving that range important to them? Does the interest rate paid on loans increase with an increasing debt/earnings ratio?

[fardels bear] 23/5/2021 19:50

From what source did you glean that they can borrow money at 5 or 6% interest per annum?

[lab305] 23/5/2021 18:36

Yes and if I see 126p again I will. Perhaps an answer to my points may be more helpful.

[fardels bear] 23/5/2021 18:32

If you don't like it there is always a door marked exit.

[lab305] 23/5/2021 18:08

When we have finished the endless stamp duty / withholding tax debate can we maybe refocus on Friday's news and the merits or otherwise of that placing.
We all know that they have finance in place that I calculate would cover the deal eight times over. Why therefore did they choose not to use cash borrowed at around 5% or 6% but instead issue more shares that they will pay nearly 10% on ? Not only that but they have diluted existing holdings and trashed the share price to boot. To me this is an awful deal for existing shareholders . The idea of them keeping their powder dry for some future deal does not seem a reasonable excuse.
After them sitting on their hands for a year when prices were at rock bottom now as they have risen management are finally getting busy. The Chevron EQT deal done last year right in their area of Appalachia was perfect for DGO and the cost synergies would have been considerable. Buyer of choice ? Not.

[poleaxe] 23/5/2021 17:15

I do now, i did not fill it in correctly last Oct. and did not bother reading the broker messages on my account, so got screwed for 30%, hands up, my fault.

[gary1966] 23/5/2021 14:52

No, no stamp duty.

Do you have a valid W-8BEN in place?

[poleaxe] 23/5/2021 14:23

GARY1966 - and you paid no stamp duty ? I will try again on Monday and see what happens.

[gary1966] 23/5/2021 13:51

poleaxe,

Not sure why you would be having problems as on Friday I was getting quoted for £70K worth on a straight fixed price, or whatever they call it, order. I didn't like the price they were quoting and so I ended up placing a limit order where the only problem I encountered was that they restricted the order size to £25K and so I had to fill the order in three trades. Order was filled at the bid rather than offer price as they use DMA and so I was more than happy. Each order filled reasonably quickly.

By all means quote my experience if you contact them tomorrow.

Gary

[poleaxe] 23/5/2021 12:32

GARY 1966 - out of interest regarding broker IG i have been trying to buy DGOC / DEC shares with them for the last six or seven weeks and every time it was try latter or use an exchange deal, what ever that is, eventually they informed me that at the moment they do not deal in DEC shares.

[bullsvbears] 23/5/2021 12:32

voci:-
Can you say which broker you are using, please?


A 15% difference in tax treatment is hardly satisfactory, even more so with a high yielding share. Don't forget that in some personal circumstances one could also be called upon to pay another slug to HMRI....

[fardels bear] 22/5/2021 22:10

Until the next time.

[cassini] 22/5/2021 21:59

Just to clarify what was actually said:

wllmherk21 May '21 - 22:43 - 105 of 125

If I hold these in an ISA do I pay a withholding tax on the dividends as that would substantially reduce the yield?

wllm :)
Fardels Bear21 May '21 - 23:17 - 106 of 125

No you don’t, as long as your broker is switched on and you have submitted a signed w8ben form.


At any rate, I think we have pretty much agreed what the withholding tax situation is now.

[fardels bear] 22/5/2021 18:54

I'm sure I didn't say that. You pay 15% in an ISA, nothing in a Sipp and 15% in a normal trading account according to Hargreaves Lansdown with a valid w8ben. I can't speak for what happens with any other broker.

[voci] 22/5/2021 17:47

My understanding of the withholding tax rule is if you do not have an W-8BEN form 30% of the dividend is withheld, if you do have a W-8BEN then 15% is withheld. I hold DEC and have an W-8BEN and receive 85% of the dividend.

Then of course there is the prevailing $ to £ exchange rate which will have an effect. The weaker the £ the better from a $ dividend perspective.

I see this current weakness as a good time to open or increase a position.

[coxsmn] 22/5/2021 14:41

The immediate impact of the acquisitionAccretive acquisitionThe Indigo acquisition will be accretive to Diversified, effective March 1, 2021 (expected closing in late May 2021):The transaction adds ~50 MMboe (~305 Bcfe) of PDP reserves to DGOC's yar-end 2020 PDP reserves of 607 MMboe, representing an 8.2% expansion. The PV-10 of these newly acquired reserves is ~$175 million as of March 1, 2021, a 9.2% increase from that as of December 31, 2020.The acquisition adds ~16,000 boe/d (or 95 MMcfe/d) to DGOC's 102,000 boe/d (612 MMcfe/d) existing production in the Appalachian Basin, a 15.7% growth;The deal adds approximately $40 million of adjusted EBITDA, hedged and before anticipated synergies. Relative to the runtime 1Q2021 hedged, adjusted EBITDA of ~$78 million, it represents a 12.8% increase.

[gary1966] 22/5/2021 13:32

spawny100,

All I can suggest is raising a formal complaint and taking it to the ombudsman. This will invoke some sort of response from Iweb which should test their resolve or you get your answer from the ombudsman. Either way you win.

I can honestly say however that I have never come across a share where stamp duty and withholding tax has been so inconsistent.

ATB