Diversified Energy Share Discussion Threads

[lab305] 20/1/2022 08:35

We are now in the grip of inflation not seen since the 1980s if not earlier. Interest rates for savers remain at or close to all time lows. If people do not move their money to stocks such as this ( and there are not many ) they will see the value of their savings destroyed. The pace of these events is staggering . Energy is probably the leader in this upward movement . I was thinking of selling some of my large holding here between 1.15p and 1.20p but I realise that the euphoria of making a few thousand profit will instantly be replaced by worry on where to invest the money. I will now just hold.

[asp5] 19/1/2022 20:40

Lab/ Aleman - quite right 9 years - thanks for the feedback.

However the risk logic still applies. For me still a deep value share.

[aleman] 19/1/2022 19:50

The difference is reinvesting. 9 years for taking cash out to spend/do nothing. 6 years for reinvesting dividends in DEC. Something in between for reinvesting into a lower yield share, bond or savings account. All assumes no capital growth, which would increase the eventual gain/reduce the 100% return time.

[lab305] 19/1/2022 19:00

asp5 although I would like you to be right I cannot agree with your maths. The sipp is tax free and so earns 17 cents per year or around 12.5p . It would therefore take just under nine years to get your money back.

[asp5] 19/1/2022 08:38

For every $100 invested in DEC in a sipp based on current divi levels you will recover this initial invest in under 6 years. Selling the shares at this point would be pure profit.

Risks:
1) Unexpected decommission costs: Plugging contracts run for 10-15 years and define a low minimum that DEC need to deliver in order to be compliant. Low risk.
2) Gas demand will not be negatively impacted in this time period by net zero initiatives (in fact strong likelihood it would be positively impacted). So revenue should develop steadily over this time period.
3) Proposed methane tax (if passed) can comfortably be met from current revenue. However work underway should significantly reduce this exposure. Again a low risk.
4) Low replacement rate of 9% can be covered out of existing revenue as per business model.
5) Dividend levels may increase at a slower rate if debt rather than capital raises are used to fund purchases, however risk of dividend cut is extremely low over this period.

In short I am struggling to see the downside risk if you take a 6 year buy and hold strategy. Rather there is plenty of upside potential in terms of increased dividends and a steadily increasing share price.

Am I missing something here ?

[1knocker] 17/1/2022 14:40

All those who held their nerve and topped up when the hot air was rising from Glasgow and Bloomberg were having a fit of the vapours can give themselves a pat on the back.It was great to be able to top up while keeping my average share price under 100. I am looking forward to the dividend. The December dividend on my increased holding was my biggest ever, and March will be better still.

It is also gratifying that on the DEC business model no one needs to be cold for us to see these returns. I can't bring myself to enthuse over gas prices a large proportion even of my fellow countrymen, never mind the world's poor, cannot afford. If the green looneys have at last seen the light about gas and nuclear, perhaps there is some common sense in the world after all.

[asp5] 17/1/2022 08:53

EU classifying gas (and nuclear) as green as part of energy transition.

hxxps://www.france24.com/en/europe/20220101-eu-plans-to-class-nuclear-power-and-natural-gas-as-green-energy-sources.

Given the tensions with Russia - increased US LNG exports seems inevitable .....

[asp5] 13/1/2022 07:40

macroeconomics factors have turned in favour of energy companies - article focuses on oil but also briefly mentions gas - shell have announced increasing profits in their gas division.



Also below highlights world is structurally short of gas as China gobbles up the marginal supply of LNG, and Europe turns its back on coal. US is ramping up liquefaction capacity and has overtaken Qatar to become the top global exporter. We may well be facing a gas squeeze through the 2020s apparently .....



I think Rusty mentioned in one of the investor calls that DEC makes a lot of money when gas is over $3. Given hedges only cover 75% and 55% of production for 22 & 23, DEC has plenty of opportunity to layer in hedges at higher prices. I cannot believe DEC remains at these levels for too long ......

[bountyhunter] 12/1/2022 21:23

US natural gas is up 14% today!

That should help the price here at the open.

[aleman] 12/1/2022 10:41

January 2023 contract


free stock charts from uk.advfn.com


January 2025 contract


free stock charts from uk.advfn.com

[asp5] 12/1/2022 08:07

Interesting that the ABS & term loans are almost double the cost of the RCF.

Dec have consumed $370M of the $1B facility with Oaktree. By my calcs with the increase in the RCF they can execute a similar volume of deals ($350M net) as per 2021 without recourse to an equity raise.

I see First Berlin & Cenkos estimate FCF for 2022 between $375M - $400M. With a secure divi and ability to execute non-dilutive deal flow, I expect a healthy share price appreciation from here.

[gary1966] 12/1/2022 07:46

IR of DEC got back to me, which I am very impressed with, to point me in the direction of Note 20 of the 2021 half year report on pages 46-48. Clearly I didn't scroll down far enough when looking for myself.



So basically the RCF is variable at rates between 2-3% above LIBOR depending on how much of the facility they utilise.

[asp5] 11/1/2022 14:28

Hi Gary

On p99 of the Capital Market day slides from Nov, DEC stated the Q3 21 debt level that is amortizing as $480M. On the same slide they reconfirmed the 4.70% weighted average interest rate.

In Dec an RNS stated the new RCF was $825M - I am assuming this is in addition to the amortizing debt and would expect the rate on this to be set semi annually as per the redetermination

[gary1966] 11/1/2022 14:00

asp,

Thank you. I did look at that this morning and clearly missed it. $400m is on a fixed rate of 5.125% average. I wonder if the rest is on a variable rate.

[asp5] 11/1/2022 13:46

Gary

on p74 of the 2020 annual report the weighted average interest rate on borrowings was stated as 4.70% on total borrowings of $746M

[gary1966] 11/1/2022 11:37

5% $200m amortising secured loan note
5.25% $200m amortising secured loan note

I think these are the only loan notes and the rest is done on the RCF. Anyone have any idea what the interest rate is on the RCF?

TIA

Gary

[lab305] 11/1/2022 10:02

Mirabaud and Stifel are the house brokers. Cenkos the nominated advisor.

[fardels bear] 11/1/2022 08:32

Is people hunt not the housebroker? It's their job to like DEC

[lab305] 10/1/2022 18:20

Yep all the brokers love DEC....if we could just get some shareholders to do the same.

[voci] 10/1/2022 16:05

Peel Hunt like DEC. This from the interactive investor:

The biggest yield on Peel Hunt's list is the 12% offered by Diversified Energy Co
DEC
0.37%

following an 18% fall for shares from their 2021 high. The US-based oil and gas operator has a dividend strategy based on paying 40% of operating free cash flow.

Peel Hunt said: “Diversified Energy is a stand-out in the sector, due to its very high and sustainable dividend. This is underpinned by a low-risk free cash flow profile, owing to a low-decline production base, a comprehensive hedging portfolio, and very limited capex.”


hxxps://www.ii.co.uk/secure/my-news-feed/analysis-commentary/27-dividend-stocks-income-seekers-2022-ii522496