Diversified Energy Share Discussion Threads

[asp5] 24/2/2022 11:24

Hi Gary

I agree re prudently run company. However I believe that Rusty and board have now fully pivoted from an equity raise to an ABS based approach to raising liquidity for purchases.

I believe acquisitions opportunities are at the heart of this .... news flow over coming months should confirm this (or not as the case may be).

[gary1966] 24/2/2022 10:44

asp5,

I would argue that this is exactly what a prudently run company would do. They are replacing variable with fixed rate debt. Hedging at prices that ensure that that debt gets paid off in quite a short time frame whilst also ensuring that the dividend is sustainable for many years to come.

Appreciate that Rusty has said that there are a lot of opportunities out there but I am not at all convinced that that is what is driving this rush towards securitised loan notes.

[asp5] 24/2/2022 10:17

Another securitization deal closed meaning liquidity for acquisition has increased from $316M to over $400M with RBL reduced to $500M. I estimate only ~$75M consumed. What is interesting is that further such deals are planned for this year.

Clearly you don't do this unless you have promising deals in the pipeline - so this is very encouraging.

Given there is $630M available on the oak tree deal it means $800M of acquisitions can be made with more possible pending future ABS transactions.

[aleman] 24/2/2022 08:27

Gas prices have jumped and Treasury rates dropped. That does not mean investment grade corporates have dropped though. Some riskier/junk rates might well rise.



Feb 2023


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[1knocker] 23/2/2022 16:42

That looks pretty encouraging, especially on the well retirement cost side.
I must admit though that it had not occurred to me that production taxes were based on the commodity rather than the received price. Heged prices should grow closer to spot as time goes by if we have already seen the big price rise and prices consolidate around present levels.

The valuation at 150 seems fairly conservative. DEC certainly seems to me to be a buy at the current SP, and those of us who bought during last years panic can feel very pleased that we held our nerve. Roll on the divi next month.

[scrwal] 23/2/2022 13:43

This is the link for the latest First Berlin Report

It's generally upbeat but did point out that production taxes are linked to the unhedged commodity prices which has caused the EBDITDA margin to narrow to 50% in 2021 (2020- 54.3%)

[1knocker] 23/2/2022 11:53

Bought a few more for the SIPP this morning, just under 113. The gas price looks set to stay high, and with Russian supplies uncertain purchasers will be concerned that supply is likely to remain tight and to be subject to sudden restrictions. I don't see the Ukrainian business being resolved any time soon and f Russia cuts supply at a moment of high demand, purchases at spot will be potentially eye watereringly expensive. All those considerations will be good for the price of forward sales. Purchasers are likely to be keen to hedge their purchase prices for a high proportion of their needs rather than risk having to buy on the market during a price spike, and willing to pay a decent price to do so.

Moreover, the green lobby seem increasingly wiling to see gas as a 'greenish' transition fuel and governments under inflation pressure from energy prices (which work through the whole supply chain) the political climate should be reasonably benign for gas.

Fingers crossed, DEC seems to me to be a very good bet at the current price. I hope so, as it is now my largest single holding.

[1knocker] 22/2/2022 13:56

asp, that seems logical. The Russians have no reason to love the Germans, and the Germans know it, so my guess is that they will be first on the list for retaliation against any sanctions and turning off the gas tap is the easiest way of doing that, as well as the one which produces the fastest and most painful results.

The question remains though, how practical it is for them to replace their Russian gas supplies with gas shipped in by sea? In the near term they may not have much choice, and they have the money to pay what it takes to get hold of the stuff, but medium to longer term the choice would seem to be between their (very dirty) indigenous coal and nuclear.
I would put my money on nuclear.

DEC looks an increasingly good bet for some years, however this plays out.

[asp5] 21/2/2022 10:02

Given the unfortunate events in Ukraine, European countries will surely now look to reduce dependency on Russian gas on an accelerated timeline and increase LNG capacity. Given the limited sources of supply, this can only be a positive for US LNG exporters and beneficial for DEC over the medium & long term.

[lab305] 16/2/2022 08:31

I am very wary of Blackrock anyway. In times when DEC makes no headway or indeed falls they are responsible for multiple RNSs . They just play with the stock .

[gary1966] 16/2/2022 08:11

It does indeed lab305. Need to clean the specs before reading first thing in the morning.:-) Thanks for pointing out my error.

[lab305] 16/2/2022 08:07

Gary1966 does today's RNS not concern Pelham Capital ?

[gary1966] 16/2/2022 07:11

Blackrock aren’t posting all their holdings RNS’s as their previous reported holding was 5.17% on the 10/02 and now in today’s RNS the previous position on the 14th was 4.97%. Between the 10th and the 14th they shifted 0.2% and didn’t report it. Does anyone hold these firms accountable to make sure they are following the rules? Obviously not.

[cassini] 15/2/2022 15:15

Aleman,

I post as I see fit, you don't have to read it.

[aleman] 15/2/2022 14:45

Cassini - Perhaps, but I'm sure there are better background articles about methane leaks than Zero Hedge's politically loaded one about one big leak that is not yet understood?

[cassini] 15/2/2022 14:03

Aleman,

For background info on methane leaks, a source of much interest recently on this board.

[asp5] 15/2/2022 10:33

In the asset retirement supplement from June 2021 - the average weighted plugging cost per well was $25K so for 69K wells this resulted in a $1,7B exposure that articles like motley fool reference as a key risk.

The latest trading update has revised the weighted cost to $22,5K per well which should reduce the exposure by $170M. In addition there is the implication that selling unused plugging capacity could enable this average weighted cost to reduce even further over time.

In the supplement it states well retirement is now down to 4 days (from 8 day). To plug 200 wells pa (DECs stated target) would thus require ~800 team days (people costs I assume being one of the largest cost components to plugging a well).

Given they start with 6 teams and lets assume 220 working days per team they have 1320 days capacity.

Used capacity is 800/1320 = ~60% leaving ~40% available to be used to generate revenue and offset DECs own plugging costs.

DEC could then adjust this 60:40 ratio to reduce & de-risk the current $1,7B exposure yet still deliver on its own ESG targets.

I do not see the cenkos update covering this development but I see it as potentially one of the biggest highlights in the update - am I missing something?

[aleman] 15/2/2022 08:24

I'm sure significant leaks occur often enough and need dealing with but why post about a leak that is not in DEC's territory?

Edit - just to clarify, DEC does have wells in NW Louisiana but the leak in the satellite image looks to be outside its territory and maybe 30 miles from the nearest well on that edge as marked in DEC's last presentation.

Edit 2 - this story is a couple of weeks old and here is previous coverage. Zerohedge has ringed the source at the NE end of the line of methane concentration but this version shows the line to be more concentrated at the SW. If the source is at that end then its a bit further away from DEC's wells and in a wetland area of the Red River, which could possibly make it a natural leak. The NE end is higher ground and less likely to be natural. However, it is still possible that it might be a pipeline leak. I don't know if DEC are likely to have any resposibiity for a pipeline issue.

H ttps://www.newscientist.com/article/2306715-satellite-images-show-biggest-methane-leaks-come-from-russia-and-us/

Here's Louisiana's gas pipeline network. There is a couple of piplines in that location running SW to NE. That seems an unlikely direction for DEC to use, given where its wells are, but I'm not familiar with it.

[aleman] 14/2/2022 19:23

Medium term contracts continue to edge up.

Feb 24


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Feb 25


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[lab305] 14/2/2022 07:28

Cenkos this morning......
Backed by an improving commodity price environment and an increased liquidity position following the Company’s recent low-cost securitisation, we believe the environment is ripe for Diversified to pursue further value accretive growth opportunities at compelling valuations. We maintain our price target at 168p, a c44% premium. BUY.
A bit more upbeat than the Motley Fool !!

[aleman] 12/2/2022 11:52

Consensus dividend forecast is looking strong - rising to 18 cents in 2023 on a consensus of 7 broker forecasts. The fall in leverage from 2.44 in 2020 to 1.16 in 2023 also looks good. That gives firepower for further acquisitions. Of course, the gas price is a major risk to everything but it's better to have a strong forecast out there than a weak one and it's improved a bit since the update.

[lab305] 12/2/2022 10:32

Motley Fool aptly named. He wasn't buying at £1 on the 4 December and now they've risen to £1.16 he's still not buying. Moron.

[grupo guitarlumber] 12/2/2022 08:39

Strong Resistence apparently at 118p