Diversified Gas & Oil Share Discussion Threads

[spangle93] 17/8/2020 09:42

Rainy morning so I've been going through a Natural resources report by Goehring & Rozencwajg that was posted on an ADVFN thread.



excerpt from the long report....

In our 3Q2019 letter, we established the relationship between total recoverable reserves and peak production. We showed how a shale gas field’s peak production has occurred once half of its total recoverable reserves have been produced. This relationship is very well established in conventional basins, but we showed how it held true with the Barnett and Fayetteville as well. According to this our analysis, the Haynesville has likely produced more than half its total reserves and as a result has likely peaked. The Marcellus is not far behind. The Utica is the only basin that shows signs of potential growth.

Production of associated gas from the shale oil fields will be challenged as well. In the short term, associated gas is almost guaranteed to decline as drilling in the Permian has fallen by 70% in only three months. My note - it's completions that's the critical metric, not drilling In total, we believe that shale production will decline by 1.5 bdf/d per year over the next five years after having averaged an incredible 4 bcf/d of growth each year over the past decade.

We have long argued that gas fundamentals have been weak because of surging supply. Demand has actually been very robust and we believe will continue to be going forward. The key issue is supply which is finally in the process of rolling over and entering a period of sustained declines.

We believe we have now entered into a new sustained bull market that will see natural gas move back towards its energy equivalency with oil. Remember, if oil returns to $75 per barrel, even an oil-to-gas ratio of 10 yields a $7.50 mcf gas price, over four times higher than today

[pro_s2009] 16/8/2020 11:28

DGOC Interim Results Webinar video :



....

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[simplemilltownboy] 16/8/2020 09:25

Yep I thought that lol

[fardels bear] 15/8/2020 19:50

Oh dear. That's the kiss of death.

[simplemilltownboy] 15/8/2020 12:07

DGO tipped in IC this week.

[pro_s2009] 15/8/2020 00:05

US rig count also down again.

Less shale oil means less shale gas, as shale oil production continues to fall the big surplus of gas will start to reduce significantly and so the gas price is starting to respond to that scenario ahead.

The next couple of years will be massive for DGOC imo.

[lab305] 14/8/2020 23:38

Natural gas prices hit $2.367 by 2:26 pm EDT, an increase of 8.48% or $0.185, even as the EIA’s weekly storage report a day earlier showed a small increase of 58 Bcf in working gas in storage. The market had anticipated a larger build.

Also bullish for natural gas on Friday were forecasts for hot weather and reports of increased LNG exports.

Front-month natural gas futures on Friday hit their highest since the end of last year on this data as air conditioning usage is expected to increase as people try to cope with the heat wave. This will increase the demand for natural gas.

[yellowstoneadvisory] 14/8/2020 16:53

DGOC management presented at the Yellowstone advisory webinar on 12 August. See a recording here

[burtond1] 14/8/2020 14:51

With Brent Crude ticking up, is it time to find a bargain in the sector?We caught up with independent oil analyst Malcolm Graham-Wood to talk more about the latest developments in the oil environment but more so to look through a number of opportunities that may exist in the market with Brent Crude ticking up to $45 as fuel demand picks up...https://twitter.com/tmsreach/status/1294268981231181825?s=21

[fardels bear] 14/8/2020 09:39

Nigh. Bloody phone

[fardels bear] 14/8/2020 09:39

He ain't blue, so it certainly wasn't him. You gotta be blue to downvote. I don't recommend it though. It is high on impossible to cancel.

[shanklin] 14/8/2020 08:01

Yellowstone Advisory replied to a question I asked re hedging

Hedging is in place on forecast production as follows

2020 c80%
2021 c70%
2022 c45%
2023 c45%
2023 c45%

Lets hope gas prices strengthen

[dunderheed] 12/8/2020 22:56

Cheers Pro.

[pro_s2009] 12/8/2020 22:35

Link to the 10th August Interim's presentation.



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[dunderheed] 12/8/2020 20:29

Ah f - yeh!!
LOL. I wondered who the f was ticking everything down - weird - just weird!

[kenmitch] 12/8/2020 19:52

johnrxx99?

[dunderheed] 12/8/2020 18:47

I cannae - who then?!

[kenmitch] 12/8/2020 17:44

I think we can guess who the idiot is who is giving a thumbs down to every sensible post here!

[shanklin] 12/8/2020 17:11

Listened to the last 40 minutes of today's presentation having arrived late and then had fun using zoom for the first time.

Still have one question. Obviously I am aware that DGOC has hedged enough of the forward production to be able to meet all its debt (and other cost) obligations so that lenders feel extremely comfortable with providing funding to DGOC.

Does anybody know what proportion of forecast production in future years is not subject to these hedges, and on which therefore DGOC could make additional profits should prices pick up?

Any info welcome.

TIA.

[shanklin] 11/8/2020 09:09

This is pretty helpful in the grand scheme of things...

"We reported a tax benefit of $77.7 million for 1H20, an increase of $99.6 million, compared to expense of $21.9 million for 1H19. The resulting effective tax rates for 1H20 and 1H19 were 131.2% and 26.0%, respectively. The effective tax rate is primarily impacted by recognition of the federal well tax credit available to qualified producers in 2020 due to the low commodity pricing environment."

So as well as hedging to ensure they can cope with their debt in a low price environent, there was significant support in terms of this tax credit.

Wonder if this is an ongoing potential benefit as and when the gas price is particularly low.

[simplemilltownboy] 11/8/2020 08:46

Great interview from rusty, thanks pro. Interesting comment about the charm offensive to US institutions in September and the comment about the 7 percent increase in divi was only part quarter, so hopefully more to come. GLA. Think I might have another little top up.

[dunderheed] 11/8/2020 07:41

Oh dear, lol!
John I wouldn't invest in o&g companies if I were you!
Read the posts from yesterday regarding this loss!!

[johnrxx99] 11/8/2020 07:17

All in all, not an inspiring result - loss going up. The proof of the pudding is money, not a load of words.

[pro_s2009] 10/8/2020 22:45

Diversified Gas & Oil

Interims from DGO this morning, preceded by the announcement that the dividend for the quarter was to be 3.75c (3.5c) a 7% increase making the payment for the first half of 7.25c and giving DGO a yield of 12%…

The results were predictably good, production was 95.1 MBoepd up 26% (1H 2019 75.3 MBoepd) but the exit rate was 109.0 MBoepd including 18.7 MBoepd from the EQT and Carbon Energy acquisitions completed in May.

In the first half legacy assets were maintained at ˜70 MBoepd for the 8th consecutive quarter, a tremendous achievement. 1H adjusted EBITDA of $146m (+11% on 1H ’19 3% on 2H 19) gave net income of $18m leading to a net operating loss of $(31) million (1H19: -129% vs $108 million; 2H19: -142% vs $73 million) ‘includes a $110 million non-cash charge to mark derivative contracts to fair value’.

Cash operating expenses fell again to $7.05/boe, down 15% on 1H 2019 of $8.30 and $7.24 in 2H 2019. During the quarter DGO transitioned to the Premium Segment of the Main Market of the London Stock Exchange from AIM and also completed upstream and midstream asset acquisitions from EQT ($125 million) and Carbon ($110 million) in May financed through a successful $86 million (gross) share placing and $160 million (gross) amortising 10-year term loan underwritten by Munich Re Reserves Risk Financing, Inc.

On the conference call the DGO management were sprightly and so they deserved to be, they reminded the audience of the four key tenets which drive the company led by the 55% adjusted EBITDA cash margin. This is made possible by a robust, nay aggressive hedging programme ‘to protect downside’, all enabled by low cash Opex and G&A costs of $7.05/boe, and an average 2020 hedge floor of $2.69/MMBtu.

The free cash flow yield of 32% comes back to that 8 quarter stable, hedged production I mentioned earlier, which as the CEO pointed out means that this cash generation means that the shares must be too cheap, something one can only agree with.

All this means that shareholders are protected by a 12% yield, again validated by a combination of risk strategies that has been achieved despite the incredibly challenging environment. They added that the company has a disciplined attitude to growth and a prudent capital allocation all the time.

Rusty Hutson Jr, CEO of DGO said;

“As we enter the second half of 2020 with approximately $220 million of total liquidity, a healthy balance sheet and with a focused and efficient operation, we are well-positioned to capitalise on the opportunities these challenging times create, all with our unrelenting focus on creating long-term value for shareholders.”

DGO has rallied from the 60p level when markets really didn’t understand the concept or the model, at 101p given the fcf yield and dividend yield which more than supports this share price for a number of reasons.

The company ticks many boxes, operationally it is superb in legacy assets as well as the interesting unconventional ones it speaks highly of making record production. Other boxes ticked are the midstream assets that give it huge flexibility, optionality and revenue generation.

The acquisition team are clearly smart, they are already showing enhancing economics at EQT and Carbon with a number of opportunities going forward in conventional and unconventional prospects. For investors who havent yet looked at the DGO model with its associated yields it is high time they did so, the company has strong management and great visibility in these times that is quite something.