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John Campbell, John’s Substack 21 hrs ago
I would appreciate your views on the dysfunctional buy back programme with Peel Hunt. The whole buy back programme imo has been a PR disaster that failed to support the SP decline. Why oh why a measly 3750 shares bought back daily by PH. Where is the logic in that ? Any ideas and no explanation from DEC ?
The Oak Bloke, 20 hrs ago
Hi John,
I'll answer the question numerically and verbally. The verbal reason for the limited buy backs is Oaktree. The $368m acquisition takes the borrowing to a point where paying down debt to remain within 2.5X covenant is important. Moreover the acquisition is more earnings accretive than buy backs. Also buying the 48.75% holding made a great deal of strategic sense (Gulf pricing) and zero marginal overheads. It would have been daft for a competitor to control 48.75% of their assets - and Oaktree had to offer DEC first refusal.
Numerically it makes sense too. They've bought something at 3.1X EBITDA and sold something at 5.7X EBITDA. On the $200m element there is a 2.6X EBITDA difference which equates to $77m of accretive per annum earnings. If they'd instead spent $200m on buy backs then that would equate to 16.66m shares (assuming $12/share average). The dividends "saved" on those would be $18m dollars a year (16.66m shares x $1.08). So the acquisition is $59m a year better.
I hope that makes sense both from a strategic but also from a mathematical perspective.
Oak Bloke
I am a fan of Oakbloke - but whist highly informative and supportive - he does not overtly consider the headwinds here. The answer he seems to offer as to why DEC are not doing more BBs than they are is that they can't afford (as GG said - much as I hate to give him any credit) - because of the Oaktree acquisition? However, he doesn't even attempt to answer the core point that John Campbell makes (and with which I wholly concur) that the current BB and the recent antecedence thereof has been a PR disaster. Investors are here to make money (hopefully) - and unless you bought very recently that has not happened - ergo, most DEC investors here are seriously underwater. What DEC management has done to date, irrespective of it's accretive logic, has manifestly failed to bolster the plunging SP and convince the market (although it might be said to have now plateaued). Consequently, it is undeniable that it is the strategy of DEC has caused the SP collapse and thereby allowed the shorts to get a firm grip. Many investors are now seriously pi55ed off - and quite rightly so! However, contrary to Oakbloke's last post the shorts are currently showing no sign whatsoever of going away. Regrettably, this reality totally contradicts his last Oakbloke post - which was also materially incorrect in what is the oldest open short (a basic error which does not help his credibility). Furthermore, the alleged accretive advantage of the Oaktree acquisition vs BBs fails to mention that the former is a decaying financial advantage, whereas the latter is a growing financial advantage if the SP rises as we are assured it will. Just saying.
Maybe his answer should have been a bit shorterin order to clearer...
Due to the oaktree purchase they do NOT have any spare cash for more buy backs.
At which point any discussion of further buy backs is moot imho.
GLA DYOR
You might have a point there squeaky. However, it would not answer the question of why the great RNS fanfare BB announcement (again) if the realty was there was no money to BB in a meaningful way? Just makes them look stupid - as well as devious and somewhat economical with the truth!
As we’ve already suggested, acquisitions are more important to Rusty than BBs.
The EGM is for another acquisition - hence spending the money that is no longer available for BBs.
Will leave reading the documents until I get to a laptop but guess they think it’s more accretive than BBs (especially now divi is less than 10%).
Might be right for business but not necessarily for short term SP support. We’ll see!
It’s only the Oaks opinion , not proven fact. The company have notified of a share buyback programme, why not just believe them .
Davidspellacy we know that DEC are doing buy backs they are just not putting sufficient effort into it.
It looks like they are only paying lip service to it.
Note the amount per buybacks not the amount of times they buyback.
40k a day buy backs are not terrible , 200 odd days of buy backs is 8m on a 450m mcap company. The weighted average volume isn't high, personally I think the current buy back program is supportive at price, yes we all would like more, but there are many ways of increasing value for holders including new assets and debt reduction so the balance right now seems correct
Jim800
Buy backs (at the present price) are far more accretive AND are instantly accretive and involve no risk.
Rusty needs to accept this but his empire building mentality is getting in the way!
They must have a strategy in place, which we cant see/ understand, as they are the ‘experts’ ,there’s no point in a lot of moans about it, just let it play out.
Davidspellacy: I'm sure many folks said such things about various listed companies which have since gone bust. Good ole Rusty is clrarly on a mission to buy every well on planet Earth - irrespective of the cost to us shareholders!
Buying assets at a low EBITDA multiple, and selling them on at a higher multiple is not bad business.
Someone here was complaining about decline 23 to 24 YoY, the acquisitions and disposals (subject to the EGM) boost attributable production whilst reducing overall debt. Again, not bad business.
I do wonder if the problem here is not the strategy, but the speed giving the impression of slight if hand. It looks to me like they are being nimble not duplicitous.
Hi PP, I wish the market saw it that way too - but clearly not. Better PR might help - there seems to be an awful lot of folks that good ole Rusty has yet to convince! Playing with a straight bat might also help - a growing reputation for saying one thing but doing another is not a good look to showcase to potential investors IMO.
SD - but surely not as accretive as when divi was 30%!
Or perhaps they’d known for ages they were going to chop the divi and told everyone e cent shareholders?
"Or perhaps they’d known for ages they were going to chop the divi and told everyone e cent shareholders?"
I suspect this was planned for a time (would be factored in when starting to talking to Oaktree) and leaked out so explains the relentless drop in the SP and now stable once the news is out.
What is really bad is Rusty put out a couple of RNS's stating nothing changed while he was very likely planning the dividend cut to pay for the Oaktree deal.
Terry: 'What is really bad is Rusty put out a couple of RNS's stating nothing changed while he was very likely planning the dividend cut to pay for the Oaktree deal.' As I have said previously - you just can't keep saying one thing and then doing another and expect folks to believe what you might say thereafter - it just kills your credibility. Would you buy a used car of good ole Rusty - I sure as hell wouldn't!!
'off' good ole Rusty!!
“From” good ole Rusty! :-)
That is an option Jim - I prefer the vernacular!!
I see DEC are clawing their way up the UK's most shorted shares league - now in fourth position!! I think Oakbloke must have been on the sherbets when he wrote that last piece about shorts 'melting away'? Seems good ole Rusty is currently convincing nobody that he's the favourite in this particular rodeo!! LoL
https://shorttracker.co.uk/