Diversified Energy Share Discussion Threads

[simplemilltownboy] 14/3/2022 17:14

Very surprised as well. Given strong forward prices, higher hedges, appreciating dollar and the fact that US gas is a relatively safe bet in this market. I will just wait for the next divi.GLA

[aleman] 14/3/2022 16:25

I don't know why DEC is falling when mid-term gas prices continue to nudge upwards. I suppose it will take a trading update for the shares to catch up with the price that they are tending to hedge forward at.

Mar 24


free stock charts from uk.advfn.com

[1knocker] 13/3/2022 19:14

more encouraging mood music in the Russia v the rest of the world contest may do DEC no harm at all if gas prices fall back a bit. DEC production is well sold forward, and a reduction in prices will improve the tax position, as DEC pays tax on market price of production not price at which it is sold.

[1knocker] 13/3/2022 15:10

If they can keep the show o the road successfully for 75 yeas scrawl, that will see me out, and some. And quite a lot actually.

[scrwal] 13/3/2022 14:46

Obviously production levels in the later years will be substantially lower but it is all shown graphically in the Asset Retirement Supplement produced last August.

[cassini] 13/3/2022 13:57

Some of the wells are projected to produce that long...

[lord gnome] 13/3/2022 12:44

75 years? Err.....

[scrwal] 12/3/2022 19:15

DEC are working on a long term 75 year plan and have set up their targets accordingly. The 75 years can only be extended if there are significant acquisitions but given the shift towards greener energy sources such additions may become less attractive leaving the company the option of replacing the reducing output in smaller buys.

The maligned hedging is an intrinsic part of the Asset Retirement Obligation model in order to ensure the repayment of debt , dividends and the future cost of retiring the entire well portfolio. As such the hedging will border on the conservative side especially when prices rise but conversely will work in the company's favour when prices fall.

Ultimately this isn't a gas exploration company which can produce big capital growth but a steady producer which provides a decent yield and is treated as such by the market.

Recent price weakness has been due to quick equity raises at a discount, the fear of further raises which is now mitigated by adequate lending now available, and misguided editorial scaremongering. The price may rise to maybe 130p but that seems to be its ceiling currently.

[sunbed44] 12/3/2022 19:01

RULE OF 72 - A QUICK TIPFor those who invest for dividend yield and compound interest you may be interested in a quick and very accurate tip I have. Its called the RULE of 72.If you divide 72 by the dividend interest rate, the answer is the number of years it takes for your initial investment to double if you automatically reinvest your dividends in to shares.So if you invest £1000 in a share paying a 4% dividend the £1000 will become £2000 in 18 years - 72/4=18 years.A 2% yield would double in 36 years and a 8% yield would double in only 9 years.Just goes to show how important the yields are when looking for dividend returns being automatically reinvested.Add in a bit of capital growth along the way to a strong dividend paying stock and you can very soon make a lot of money.

[2wild] 11/3/2022 11:50

They do not borrow at low interest rates quite the opposite in fact at over 4%.

[lab305] 11/3/2022 07:32

Antero 26.46 USD +9.85 (59.30%)past 6 months
Diversified 112.39 GBX -0.81 (-0.72%)past 6 months
Antero no dividend. DEC 5% in six months.
I am not a great fan of their hedging policy to put it lightly and believe their ultra cautious approach has cost shareholders dear. There is, and has been for about a year now , a complete disconnect between the commodity price and the share price.
The biggest problem is probably that new acquisitions will be much more expensive and if DEC wish to expand they will have to take on more debt rather than fund from greatly increased profit. I had a lot of these but have reduced by a third because of this and the share's vulnerability to shocks .

[bbluesky] 10/3/2022 21:10

If you forget the hedging strategies (excellent for yield), there are underlying assets, that will be more valuable if the gas price goes up (and probably will), so rather attractive as a take over candidate?

[mondex] 10/3/2022 18:36

S&P Global
Commodities Insights


Collars supplant swaps as US gas producers pay down debt, reach for upside Debt reduction has led to more flexibility in hedging positions

Shift in hedging strategy reveals bullish market expectations


High natural gas prices over the past six months have given many producers the opportunity to use free cash flow to pay down debt, making room for a shift in hedging strategies to ones that provide more exposure to the upside. Some producers have eschewed swaps for collars, while others have decided to hedge less or not at all, executives said in the most recent round of earnings calls.

Now The move toward collars, which pairs a price ceiling with a price floor, suggests bullish sentiment in the market, as well as an expectation of possible volatility. The shift marks a contrast from the previous market preference for swaps, which are often pricier and provide more downside risk protection.
"If natural gas producers think there is a limited probability for upside price potential, they will typically go with swaps," Ogan Kose, managing director of global trading, investment and optimization at consultancy Accenture, said in an email to S&P Global Commodity Insights.

"In 'bear' markets where the downside risk is elevated, swaps take a preference as swaps provide maximum credit capacity per unit hedged – but at the cost of taking most upside off," Kose said.

Collars versus swaps
Producers that opted to lock in more collars for 2022 expected gas production included Range Resources, EQT and Coterra Energy.

"Having cut debt in half by the end of this year, our ability to be more opportunistic is enhanced," Range CFO Mark Scucchi said in a Feb. 23 earnings call.

Range has put in less swaps for 2022 production, Scucchi said, instead adding in collars "because we felt like the fundamentals and the data indicated that the skew was to the upside, and there was more upside on the table than the strip was indicating."

Appalachia producer EQT has also shifted its hedging to include more collars after a program of "nearly all swaps," which CFO David Khani described as having been a "defensive hedging strategy" in a Feb. 10 call.

The newly formed Coterra Energy -- formerly Cabot Oil & Gas and Cimarex -- has oriented its gas hedging program toward "wide collars," CFO Scott Schroeder said in the Feb. 24 call. But he emphasized that the company sees a "tremendous return profile" that doesn't "need a lot of hedging to underpin it."

Less hedging overall
Both oil and gas producers have reduced the volume hedged for 2022, compared to 2021, according to Nathan Hasbrook, an energy analyst with S&P Global.

Producers that sustained large losses because of rigid hedge positions may be wary of history repeating itself, especially amid bullish outlooks for pricing, Hasbrook said.

Some gas producers have walked away from hedging future production entirely, citing optimistic expectations for commodity prices that they feel are not being accurately reflected in forward curves.

Executives at Antero Resources said that the Appalachia producer has not put into place any new gas hedges since spring 2020, with around 50% of its 2022 production hedged and no essentially no hedges in place for 2023.

"We have the balance sheet now and a lot of opportunities to really pay down debt more quickly if we're just willing to stay on the front of the curve," Antero CEO Paul Rady said Feb. 17.

Other producers, like Southwestern Energy, told analysts that smaller hedging positions might be in the cards if the bubbly pricing environment continues.

"Going forward, assuming the current constructive commodity price outlook and as we progress our debt reduction, we would anticipate that our future hedging levels will moderate within the company's established framework," Southwestern CFO Carl Fredrick Giesler said

[fardels bear] 10/3/2022 12:46

That would appear to be the situation they are in, for the next fortnight.

[cassini] 10/3/2022 12:41

I believe SQZ do not have many producing assets. If only one goes off line, they may not be able to meet their contractual hedge deliveries, then as has been said, they're on the hook for the full spot price then.

[fardels bear] 10/3/2022 11:35

I see, thanks. I think I do anyway

[gary1966] 10/3/2022 11:18

FB,

DEC have said that there are no cash implications of having the hedges, it is just the opportunity cost of not achieving higher prices. The opportunity cost ensures that the dividend and debt is paid/repaid and they borrow at lower interest rates.

With regards to Serica maybe the author is suggesting that they may not produce sufficient gas to meet the requirements of their hedges, in which case they will have to buy any shortfall in the market, which will cost them many multiples of the price at which they have hedged and will be real cash out of the company.

[fardels bear] 10/3/2022 10:59

post on LSE:A perfect stormAmongst the figures in the 20th Jan RNS Corporate update was the large £115.4m call on cash by counter-parties to the gas hedging.The last Serica corporate presentation shows UK NBP gas prices averaged 200p/therm in Oct and Nov and 270p/therm in Dec. Prices last winter now appear low compares to the current spike.This week saw both UK NBP April futures spiking on Friday to 500p/therm, as well as the futures contracts for the summer and next winter rising dramatically in the expectation that it will be necessary to rapidly fill gas storage sites before next winter.Serica has hedged 900,000 therm/d for the remainder of this year at prices between 41p and 47p and this week futures contracts have risen to 430p for summer 22 and 350p for the autumn.The security that Serica is lodging with hedging counter-parties for its contracts for the remainder of the year will now be extending to several hundreds of £ millions. At the same time the loss of Rhum production for at least two weeks is cutting production to 10,000boe/d whilst reducing revenues by two thirds.Serica has hedges for 25% of gas sales, and the step up in 22 hedging reflects the retention of 100% of BKR revenues. With the loss of Rhum production, it looks likely that all of the currently reduced free cashflow is being lodged on a daily basis with counter-parties.If not now, then at some point in the near future, unless full production is resumed, Serica might have a liquidity problem. It would benefit the market if Serica could clarify whether the combination of higher margin calls and lower production is not going to cause a liquidity problem.

[fardels bear] 10/3/2022 10:58

Here is a post on hedged production as it relates to Serica. They currently have 20% of their production hedged, I believe at 54p a therm. I am interested why this bloke (and others) think there is such a problem and yet nobody on here thinks that 90% of DEC production being hedged is a problem. I'm not saying it is, could be or may be a problem, just interested in the reasons for it not being. Is it due to the huge difference between SQZ hedged price and the spot price being ten times higher, whereas for DEC it's only 30% higher?

[fardels bear] 10/3/2022 10:49

I am already retired thanks.

[fardels bear] 10/3/2022 10:47

I am not complaining about it.

[push n run] 10/3/2022 10:41

Nobody was complaining about the hedging strategy in 2020.

[asp5] 10/3/2022 10:01

I would also add that it helps to secure the funds required to plug wells at the end of their life. As all the debt will be repaid by 2030 and many wells are able to produce for a further 50+ years (according to capital day slides). This means DEC can switch from 2030 from making debt repayments to having the headroom to set aside an equivalent volume of money in a fund which can be drawn down when required to cover future plugging costs.

By also building up the capability of the internal plugging team over the coming years, DEC should be able to execute at low cost as well.

They seem to be setting themselves up to have the finance and capability to responsibly decommission their wells.

[gary1966] 10/3/2022 09:07

It will have no cash effect other than potential lost revenue over the life of the hedges. Gas from the Appalachia sells at a discount to spot prices and so that would never be achievable. I don't want to contribute to this can of worms being opened again as this was discussed and done to death some time ago. Focus on the fact that at over $3 DEC makes a lot of money. Dividend and debt repayment are secured as a result.