Diversified Gas & Oil Share Discussion Threads

[shanklin] 05/3/2019 10:26

Scottishfield, Sadly not being reflected in the share price

[scottishfield] 05/3/2019 09:37

Tks Shanklin, & with a price tgt of £1.53, and a 'strong buy' rating.

[shanklin] 05/3/2019 09:34

FYI, DGOC's results have belatedly been loaded on to Stockopedia. Their stock rating has increased from 47-->89, with QVM now 56, 85 & 76 having previously been 37, 16 & 98. All numbers out of 100.

[poleaxe] 04/3/2019 17:49

mad f - don't you pay the 15% tax then ?

[sogoesit] 04/3/2019 15:20

Yep, added too as seems a shame not to collect 5%+ over the next few months.
Good luck for some upside!

[croasdalelfc] 04/3/2019 13:48

Bought 11000 for my 2 kids Junior ISA - safe as houses

[mad foetus] 04/3/2019 12:37

Starting to find some strength now

[sogoesit] 04/3/2019 11:19

Quite a few increased holdings notified today.
Institutional buying always a good lead indicator.

[bountyhunter] 04/3/2019 11:17

I agree, by the way next XD is this Thursday

[mad foetus] 04/3/2019 11:08

Pretty much 10p divi pa here. Crazy cheap

[kenmitch] 03/3/2019 18:34

Very helpful post (830) Sogoesit. Thanks.

[lab305] 03/3/2019 16:48

Crikey 12 posts in a couple of days ! Things must be looking up. Since normal investment criteria and a wealth of good news have been ignored by the market perhaps the increase in traffic on here will be a better indicator of brighter prospects .

[bountyhunter] 03/3/2019 15:07

Thanks carcosa.

[mad foetus] 03/3/2019 15:01

I see this was the top holding in the RMMC fund at their last factsheet. They are pretty good imo, so a real vote of confidence.

[carcosa] 03/3/2019 14:57

% gas (BOE basis)

88% as of 31 December 2018

91% as of 31 December 2017

[bountyhunter] 03/3/2019 13:25

What are the percentages of production for gas & oil if anyone knows off the top of their head please?

[sogoesit] 03/3/2019 12:00

Here's my FY 2019 Projection (aka "guesstimate" or "even shot in the dark"!):
Average Production Rate: 70,000 boepd
Annual Production: 25.550m boe
REVENUE: $508.332m
Operating Profit: $237.352m
Less Admin: $ 40.524m
Less Interest: $ 25.025m
Less Tax: $ 41.346m
NET PROFIT: $130.457m
EPS: 24.04 usc (at Forex of 1.32 = 21.14gbp)

Assumptions (aka as "where it gets tricky"!)
a) No major (acquisition) Capex >> Rusty doesn't spend the debt headroom, or raise equity for acquisitions! Haha, unlikely imv.
b) Revenue based on 86% Natural Gas priced at $2.80/Mcf and 14% NGLs priced at $28.35/bbl.
c) There are some oil sales guesstimated at $37.241m revenue at $60/bbl in proportion to last year's statements.
d) OPEX in proportion to last year's. DGOC say they will bear down on Opex so a sensitivity of reducing Opex by 15% results in Net Profit of $151.440m and EPS of 27.91usc compared to above figures.
e) Admin, same as last year; no savings.
f) Interest based on $455.00m Debt, no debt repayment during year, IR of LIBOR+2.75% = 5.50%.
g) Tax Rate 24%.
h) ARO of $15.00m written to Opex (P&L Account). [Last year $7.101m].

NB: Plenty of room to write down debt, pay (increased) dividends etc. etc.

DYOR but let me know errors, omissions, ideas or if you want I can run sensitivities or adjust as easily done.
Time for a few more G&Ts!!
AIMV

[shanklin] 03/3/2019 11:53

Blimey, despite all these burdens and no free cash flow...

...DGOC has paid a dividend and reduced its debt by $70m in the last four months.

[sogoesit] 03/3/2019 11:19

It seems the old saw about abandonment liability has raised its head again as a burden on the share price
This may just be a perception issue, if us price takers really are in synch with the market (?), where the market sees more political/regulatory risk, than the company accounts for. But this should not, in my view, be due to a lack of transparency and accounting conformity on DGO's part.

Here are some facts about abandonment and decommissioning:
- Slide/sheet 16 of the DGOC 2018 FY Presentation lays out the agreements to date on wells amounting to 105 per year (pending Pennsylvania State agreement but includes about 30 for them in 2019 reducing to 20 pa thereafter). [105 wells is an obligation of $2.6m.]

- Note 10 of the FY Accounts details that a net $140.19m was added to the Asset Retirement Obligation (ARO) (including $(7.101m) directly to a line in the Income Statement for FY2018). A net $104.442m was added to the ARO in FY2018. This makes an investor perception focus on wells alone a bit meaningless imv given the decommissioning amounts on other (mainly production) assets!

- Note 2, Acquisitions details how the Net Acquisitions and the "Gain on Bargain Purchase" have all accounted for their own ARO's IN CASH written to the P&L Account.

This is how the ARO is arrived at (Note 10):
"The Company records a liability for future cost of asset retirement production facilities and pipelines. The asset retirement obligation liability represents the present value of asset retirement costs relating to oil and gas properties, which the Company expects to incur over the long producing life of its wells, presently estimated through to 2093 when the Company expects its producing oil and gas properties to reach the end of their economic lives.

These liabilities represent Management's best estimates of the future obligation. Management's assumptions are based on the current economic environment, and represent what they believe is a reasonable basis upon which to estimate the future liability. Management reviews these estimates regularly and adjust for any identified material changes to the assumptions. However, actual asset retirement costs will ultimately depend upon future market prices at the time the asset retirement services are performed. Furthermore, the timing of asset retirement will vary depending on when the fields ceases to produce economically, which makes the determination dependent upon future oil and gas prices, which are inherently uncertain.

The discount rate and the cost inflation rate used in the calculation of the asset retirement obligation was 8.0% as at each of the periods presented. The table below summarises the activity for the Company's asset retirement obligation."

A Statement in Note 1 says:
"The ultimate asset retirement obligation costs are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing and amount of expenditure can also change, for example, in response to changes in reserves or changes in laws and regulations or their interpretation. As a result, significant estimates and assumptions are made in determining the provision for asset retirement obligations. See Note 10 for more information."

The significant issues here are timing (to 2093 and DCF discount factor) and the fact these ammounts have been, and their future adjustments will be, accounted for in the P&L account as demonstrated by the $7.101m in FY 2018.

[nimbo1] 02/3/2019 22:36

I think the situation isn’t dissimilar to some other high income vehicles I’ve owned over the years. Take the solar panel it’s like bsif - to begin with market was sceptical. Now they are proven to work and reliable pay out 5 - 6 percent they trade on a premium. Dgoc may have to earn markets trust over time - but at least one is paid very well to wait. Point is once reliability is proven the yield will come down and price go up but can take a bit of time,

[kenmitch] 02/3/2019 20:33

I guess a key reason for incredibly disappointing share price is the very large number of wells to be plugged/decommissioned.

Around 30 wells to be plugged this year and cost for each well around $24’000.And then 20 or so a year thereafter and also dispose of 50 a year.

So it could be the anticipated costs of doing this are currently hitting share price performance.

But big dividend increases strongly suggest DGOC are confident these costs are manageable and once market realises that and/or on next good news/acquisition update, the share really should recover strongly.

I’m very happy to wait for that and collect the big and growing quarterly dividends while waiting.

Another reason for low share price could well be DGOC being under the radar....for now... for many investors. And it seems few really understand this Company.

fwiw Ithink the share is a real bargain at current price.

[riverman77] 02/3/2019 19:01

One source of comfort is the incredibly strong shareholders list - held by Miton, Jo Hambro, TB Amati (top holding in their superbly performing smaller companies fund), Man Glg income fund (another very good performer), plus a few other decent funds. That has to be a good sign.

[sogoesit] 02/3/2019 18:31

No, I don't think so.
None of us on this board appear to have sussed what drives the price... not natural gas prices, not the oil price, not cable, not abandonment liabilities....not you name it!

alotto probably came close to it, post 805, to do with the balance sheet, imv.
Personally, as posted, I think it's do with Free Cash Flow (negative in my view) and continuing revenue items. Also, cash on the balance sheet at 31 December was $1.372m although there is debt headroom.
>> Risky, that's why we're being paid 9%... at least until these acquisitions bed-down. Which may not happen soon if Rusty splurges the debt headroom on another acquisition.

My current valuation, on examination of the 2018 Income Statement, based on 8x Underlying EPS is 120p, coincidentally! So, I have self-explained to my current satisfaction why it is what it is for now... but the coincidence is not proof.
I havent worked out the forward valuation based on the 70,000 boepd exit production rate as the gas/liquids ratio is changing... but the figures are there for me to stick in a spreadsheet... which I may do after a few G&Ts (FeverTree of course)... then again I may leave it until once the haze has cleared.
AIMV

[melody9999] 02/3/2019 08:32

Would strengthening £ explain price weakness this week?