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whats the % that is always unhegded and continuioulsy being agreed? i thought theres around a 20% float which is unhedged and managed at the time, some coming off from a year or two and new being dealt. therefore surely if and when the price drops we then continue to gain and that is the point.
we are expecting a recession later this year, big drops as demand slows and inventories fill. the dynamic is slightly different for US gas as its now feeding a demand that isnt going to drop into europe too hence the price rises continue. unless russian comes far more back on line these prices will continue and as US supplies uk we supply europe too, everything against russia. price drop maybe but then 2023 onwards huge rises.
its now my biggest holding
Ace, sorry but I can not agree with you. DEC's hedging policy (irrespective of fall or rises in spot) is the reason that it can borrow from a consortia of banks and consistently pay a very high dividend.
It is so easy to say 'I wish they hadn't hedged so much as we could sell at spot'.
But DEC's whole business model is to secure income well into the future.
Management is very wise and this is why we benefit from this cash cow which is providing a very stable dividend and share price in an increasingly volatile time. And it will continue to do so for years for the same reasons.
Disagree. Sure there are short term problems which are feeding into future hedge prices and supply does seem to be tight but the fundamental problem does not appear to be a lack of oil and gas (excluding Russia) but that alternative oil and gas supplies aren't where they are currently needed. However, there is every reason to believe that these logistic problems can be solved in the medium term.
DEC has a long term strategy and should not ditch that strategy for short term considerations. I'm sure that DEC's free float will increase in the near future, as hedges increase, but the vast majority of production will continue to be hedged against the probabilty that current prices will drop. Everybody expects the current hike in consumer energy prices to start easing next year (rightly or wrongly) and that can only occur if the current benchmark prices start to drop and that can only come about by fixing the current logistical problems and/or a volte face on Russian gas and oil supplies e.g. Europe plans to reduce its reliance on Russian gas and oil, not necessarily totally exclude it. From a Russian perspective, politically it makes sense to try and normalise relations with Europe again to avoid them becoming totally reliant on China in the short/medum term.
Patience and fortitude are required. It's far too early to say that current prices are here to stay.
The counter-parties to the DEC hedges are laughing all the way to the Bank: I am crying into my tea and toast.
Management desperately needs to wise up that the world is a different place to what it was in 2021.
AceofClubs
US benchmark natural gas jumps above $9 per mBtu for the first time since in nearly 14 years. Strong local demand, massive LNG pull into Europe, and muted shale response combine into explosive ****tail.
https://twitter.com/javierblas/status/1529458237518512129?s=21&t=j4I_iEcmcozNNzc0APmU6w
Worth a listen
https://podcasts.apple.com/gb/podcast/palisades-gold-radio/id1439485214?i=1000563538278
Natural gas smashed through $9 today
Yes natural gas going up!!
Thanks for posting, very interesting reading.
Also found the historic info on the oil/gold price relationship of great interest as I'm also invested in gold miners.
Goehring & Rozencwajg latest quarterly newsletter. Always worth a read.
https://4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/Content%20Offers/2022.Q1%20Commentary/2022.Q1%20GR%20Market%20Commentary.pdf
"Asian and European natural gas prices stand at $35 per mmbtu, versus $8.20 per mmbtu here in the United States. Given the underlying fundamentals that have now developed in US gas markets, we believe prices are about to surge and converge with international prices within the next six months."
"The world has enjoyed a decade of cheap, abundant energy and nowhere has that been truer than in US natural gas. We consume nearly as much energy via natural gas as we do via crude oil, although it is usually an afterthought. The rest of the world is in the midst of an acute gas shortage that has grabbed everyone’s attention. We believe the same is about to happen in the US -- much faster than anyone realizes."