Member Info for AceofClubs

For all the "feel good" publicity that Rusty Hutson and Patrick Morrisey would like to generate, this deal is no solution to the ARO issue either for DEC or West Virginia. The devil is in the detail: DEC is only taking on a contribution liability of $70M over a 20 year time span and to plug 1,500 wells over that same 20 years (75 per annum) - scratching the surface. After 20 years (will Rusty & Patrick be around then?) the plan rises to 250 wells annually. No solution - problem buried - for now.

AceofClubs

P.S. If Rusty & Patrick can turn $70M trickle fed over 20 years into $650M, and fund the plugging of 75 wells a year, they are both in the wrong jobs. They would make fantastic investment managers!

https://governor.wv.gov/article/west-virginia-and-diversified-energy-launch-first-its-kind-well-plugging-fund

There have certainly been events within DEC that Rusty would rather have no publicity.

https://www.londonstockexchange.com/news-article/DEC/comment-on-share-price-and-production-update/16153734

Please note the passage: "given the current equity market dynamics, the Company is no longer pursuing its previously communicated desire to list shares in the US." The shift in mood has been very swift and complete.

Gas and oil production is a dirty business: is DEC just a dustbin for other companies unwanted liabilities (accretive naturally)?

I don't know but the suspicions grow. Rusty used to boast of how many gas/oil wells DEC "operated", 76,000 is the last number I can recall, but that was a few deals ago. The number never appears in news releases now.

The recent Class Action Lawsuit https://topclassactions.com/lawsuit-settlements/closed-settlements/6-5m-diversified-energy-eqt-well-plug-class-action-settlement/ was filed and settled in the jurisdiction of West Virginia. Not even Texas would tolerate the environmental degradation wrought by the Oil/Gas/Coal industries in West Virginia. DEC got off very, very, lightly, 15,000 non-producing abandoned wells alleged, only 2,600 required to be plugged and 10 years to do so! DEC, meanwhile, meanders on, plugging its abandoned wells at the rate of 200 a year.

I have never believed the message Rusty could always buy assets at an undervalued price or that other operators practiced Dumb Asset Management. Maybe, just maybe, he is not as smart as he would like investors to believe. If you want to back gas/oil producers, plenty more fish in that sea.

AceofClubs

Where is the benefit to DEC shareholders from all of Rusty's frenzied M&A activity?

Cash from Operations per weighted average share: 2022 - $9.19, 2023 - $8.69, 2024 - $7.20.

MarketScreener is showing 3 year to date total return of -35%.

Any improvement totally dependent upon the price of NG in the markets DEC can access. Rusty is not some great deal maker and Carlyle will look after Carlyle, nobody else.

AceofClubs

The benefits of being listed on the LSE reflect the benefits of being based in the UK as a business; not a lot over the past 20 years. The economic investment decisions are increasingly made abroad and the UK is an unattractive place to invest. A thin layer of talent atop an uneducated and demotivated workforce. Expensive land, construction costs, energy supplies and logistical services. A constantly thickening layer of expensive bureaucracy. A diminishing domestic industrial/technological infrastructure. The benefits of the English language have masked an awful lot of other weaknesses. Trump, not the sharpest tool in the box, can see the dangers of outsourcing your economy.

Forget short sellers, they only succeed against lame ducks or the grossly overvalued.

AceofClubs

Black Boulder - 55 posts, all on VCP, and all tagged "Strong Buy" - at all, and any price.

Falcon (or should it be Black Pebble?) - 3 posts, all on VCP, and all tagged "Strong Buy" - at all, and any price.

AceofClubs

Black Boulder - 54 posts, all on VCP, and all tagged "Strong Buy" - at all, and any price.

The reasons why the 2028 Bond Holders would not want to accept the swap -

1.) The 2028 Bonds are redeemable in 2028 at 100c not the 25c they currently trade - a potential 200% gain.

2.) The 2028 Bonds currently pay 15% annually, in cash, if traded at 25c.

3.) The proposed 2031 Bonds pay nothing in cash until 2031.

4.) If this progresses at what price will the 2031 Bonds trade at in an open marketplace? Can any real value be reasonably ascribed to them?

5.) "During refinancing of the 2026 Notes the company stripped out all of the protective covenants from the 2028 Notes." So what value can be ascribed to the "protective covenants" on the 2031 Notes?

6.) A €4.5M reduction in cash outflow is not going to save this sinking business. This "refinancing" merely potentially delays the inevitable. There has to be doubt that VCP could stagger on to 2028, it could not afford to redeem the Bonds for cash.

7.) VCP equity is worthless and has been for some years; doubling its value still makes it worthless.

8.) Koch Industries sits waiting to secure the assets at liquidation prices.

9.) Geoff Wilding got his cash out of VCP years ago - is he bothered?

AceofClubs

"Happy to discuss if any facts are incorrect re the above." Difficult to know what constitutes a fact in the DEC bubble asp1!

The deal may have transacted in March, but the pricing was agreed in January, and announced by DEC on January 27. I quote:

"TRANSACTION DETAILS"

"The gross Acquisition value of $1,275 million (inclusive of debt assumption) represents an approximate 3.3 times LTM EBITDA (g) multiple. Consideration is expected to be satisfied through the assumption of approximately $700 million of Maverick debt outstanding associated with its RBL, an ABS amortizing note and other outstanding credit, the issuance of approximately 21.2 million new U.S. dollar-denominated Diversified Ordinary Shares to the unitholders of Maverick valued at approximately $345 million at signing, and approximately $207 million in cash, with the mix of Ordinary Shares and cash subject to adjustment based on the outstanding amount of Maverick's RBL at Completion."

Now, I base 21.2m Ordinary Shares valued at $345m at signing as signifying a value of $16.27 assigned to each share by both seller and buyer. If the seller is now selling at $13.75; that constitutes a ~15% hit on the value of the equity portion of the sale proceeds, $51.75M. Not a good look, unless they were very pleased with the nominal gross proceeds and not content to hold DEC equity a day longer than contractually obliged.

Is that clear? No? Then join the rest of this happy band in our DEC befuddlement!

AceofClubs

I suspect that the owners of Maverick Natural Resources obtained such a high price from Diversified in March that they are more than content to take a 15% hit on the equity part of the proceeds. They see the cash as preferable to holding the paper equity.

AceofClubs

Is the resignation of Ms Stash and the publication of the latest "financial statements" linked or just coincidental? I don't pretend to know the answer, but I am not a great beliver in coincidences. Possibly the adjustment of a $34M loss for the six months into a profit of $418M EBITDA was a $452M adjustment too far?

Rest assured, all this adjustment effort helps investors "to evaluate our financial performance". Last, but not least, it "is used by us as a performance measure in determining executive compensation".

AceofClubs

P.S. Where are the FCF per share figures?

You may have overlooked the Preferred Shares (effectively debt):- "The preferred equity attracts a dividend of 8.35% if cash settled, or 8.85% if Paid In Kind by way of issue of additional preferred shares (such PIK occurring quarterly). Starting in year three, the dividend moves from a fixed rate to a spread over

three-month LIBOR (or SONIA, if it is not possible to ascertain LIBOR). The spread starts at 8.35% and 8.85% (for cash and PIK settlement respectively) and increases by 1% in each subsequent year up to year nine, after which it remains flat."

Nominal value of preferred shares was £282.5M at 29 March 2025 - continually rising because of the "interest" being paid via PIK (extra shares) rather than cash. I read the PIK option runs to 2031 but every year the snowball of debt grows larger and the interest rate rises.

A house of cards - AceofClubs

Market disappointed (with reason to be) with overall profitability given the opportunities of the past six months: "a period of heightened market volatility" as Nicolas Breteau, Group CEO, highlighted.

The report shows Parameta Solutions not to be an under appreciated asset which can only be truly valued with a US listing. It really is a very small business even by LSE standards. 5% revenue growth is barely above inflation and it reads that the management had to restrain on price rises to achieve that: "Performance reflects decision to moderate 2025 price increases to support sustainable growth". US listing? cannot see the numbers enthusing anybody in the US.

Neptune Networks Ltd - last filed accounts for 31 December 2023 disclosed annual losses of £1.16M and accumulated losses of £15M - all from a company only established in 2015! The "Going Concern" note assures creditors that the company relies upon capital injections from its shareholders to meet its liabilities as they fall due. The Bank shareholders must have been delighted to offload 70% of this money pit on to TP ICAP.

TP ICAP management grossly overpaid for Liquidnet, I do hope Neptune Networks is not another big mistake.

AceofClubs

If you don't agree to swap your 2026 Notes for our irresistable 2029 Notes and less than 10% of you hold out, this is how you will be treated.

"The 90% Amendments, include among other things, (i) reducing the interest rate applicable to the 2026 Notes to cash interest of 1.00% per annum and (ii) extending the maturity date of the 2026 Notes to August 24, 2031. Should the 90% Amendments be adopted, the Existing Indenture and the 2026 Notes will be amended to this effect, and the updates will govern all participating and non-participating holders of the 2026 Notes."

It's not what you signed up for when we relieved you of your ready cash for our 2026 Promissory Notes; but then more fool you.

AceofClubs

(Alliance News) - The co-founder of Wise PLC on Monday criticised the payment firm's "inappropriate and unfair" governance changes within plans to move its primary stock market listing from the UK to the US. Taavet Hinrikus wrote a letter to shareholders through his investment vehicle Skaala Investments OU, which owns 5.1% of the shares in Wise.

The letter criticised the company's proposals to move its primary listing to a stock exchange in the US and also to extend the voting rights of so-called Class B shareholders by another decade. A dual-class shareholding structure means the Class B shareholders have more than 90% of the voting rights. Such structures have faced criticism that they give minority stakeholders an oversized voting power over a company's proposals.

Skaala Investments wrote in the letter that the proposal "deprives owners of a fair choice and requires them to accept an unnecessary compromise, forcing an 'all-or-nothing' vote rather than allowing shareholders to approve a dual-listing but vote down a resolution granting Class B shares extended voting powers". "This prejudices Class A shareholders by diluting their voting power, benefiting those few with significant Class B shareholdings – primarily the [chief executive], Kristo Kaarmann." The investment group said it was "entirely inappropriate and unfair to wrap these distinct issues together".

It urged shareholders to vote against the proposals unless the issues can be separated into two separate resolutions.

As and when the "B" shareholders agree to give up their excess voting rights they will demand a huge financial premium - the bigger and more profitable the company the bigger the premium - hence the 10 year extension. To wrap this indivisibly from the move to a US listing - stinks.

AceofClubs

ALPHAVALUE ANALYSIS

The decline in the take rate was mainly driven by Wise’s ongoing commercial strategy of lowering the average price, but also reflects a growing proportion of higher-volume, lower-margin customers – consistent with recent trends.

The graph below shows the quarterly evolution of Wise’s revenue by source. (impossible to post graph) It highlights the increasing contribution from cards and other revenue and interest income over the past three years.

Cards and other revenue and interest income have been the main drivers of Wise’s revenue growth. Looking ahead, we believe Wise’s strong growth trajectory may become increasingly difficult to sustain, particularly as:

1.)The contribution from interest income is set to diminish, having benefited from the post-pandemic surge in interest rates.

2.) Cards and other revenue, while still growing strongly, are now facing increasingly tough comparables. We expect growth in this segment to gradually align with volume growth.

© Alphavalue - 2025

FYI: Alphavalue have been consistently bullish on WISE for a number of years.

AceofClubs

I see investing in WISE as a long term game and am not concerned about short-term price fluctuations.

I do worry about the significant margin drop. It is very easy to be the cheapest in the market place - you just cut your prices; but being the cheapest in the market place is not always the easiest place to earn a living. WISE has prospered not just by offering a cost cutting service but by offering superior software, increasing speed, reliability and transparency. That should command value and it can be very easy to pass on too much of that value to the customer.

It's a delicate but critical balance: one thing is certain in this business area: price reductions, once conceded, will never be clawed back. Still backing this management, but please don't lose the profitability in the rush to rule the world.

AceofClubs

Reuters:

"Blackstone (NYSE:BX) plans to spend $25B to develop data centers and power plants in Pennsylvania, according to a media report published on Tuesday. President and Chief Operating Officer Jon Gray says the alternative asset management giant has identified several sites to develop the energy-intensive data centers: Gray's comments during a panel at the Energy and Innovation Summit in Pittsburgh. Blackstone (NYSE:BX) plans to team up with an electric utility to build multiple natural gas power generation facilities that will fuel the data centers in Pennsylvania."

For balance, I should point out that EQT, the largest natural gas producer in Appalachia, has seen its share price up 350% over the past 5 years, DEC, a relative minnow, has seen its share price down 43% over the same period. Not wanting to sound at all gloomy, but I think I may just been backing the wrong horse these past 5 years: others may disagree.

AceofClubs

(MT Newswires) -- UniCredit (UCG.MI) partnered with payments platform Wise plc (WISE.L) to launch a new international payment service for retail customers in Europe. The Italian lender said Tuesday that the launch makes it the first Italian bank to offer foreign-currency payments directly via its mobile app. The partnership includes payments to and currencies of the UK, Switzerland, Hong Kong, Singapore and India, with more in development.

AceofClubs

Ambitious, able management with a good track record - hard to find in UK companies. Not cheap now, but it was cheap as recently as September 2024; one I shall hold on to.

Wise in June said: "The US is the world's largest economy and the biggest market opportunity in the world for our products today."

"Money transfer company Wise Plc has applied to be directly regulated by the U.S. Office of the Comptroller of the Currency (OCC) to create a national trust bank in the United States, according to an official document.

An OCC document dated June 16 showed Wise seeking approval to operate as a nondepository trust bank in the U.S.

If the application is approved, Wise would be able to bypass intermediary banks and settle U.S. dollar payments directly with the Federal Reserve, potentially cutting costs, speeding up transfers and giving it tighter control over its largest currency flow. It will also be a step toward deeper integration into the U.S. financial system. Trust banks can offer limited financial services."

AceofClubs

The only comparable company to DEC I currently own is Whitecap Resources, WCP:CA.

Basic stuff: Yield DEC 8.07% - WCP 7.91% - P/E DEC 4.65 - WCP 6.0

However, to get to the above, 5 year share price performance: DEC -44%, WCP +303%

My conclusion: I think most buyers in this type of company are after income yield. We know DEC yield is moribund and I do not think the business is in any shape to increase it and is having to pursue an expansionary path just to maintain it. In its current limited SP trading range DEC looks correctly valued to me. Only the uncontrollable external forces of gas/oil prices and interest rates will alter my view.

AceofClubs

"The new facility has no maintenance covenants or drawing restrictions" - "the entire facility will therefore be available to the Company upon satisfying certain funding conditions ".

Contradictory messages in the same sentence - which is it VCP? Very coy on the cost of all this - NatWest will be making sure they don't pay for any of it!

I still cannot see any value in the ordinary equity.

AceofClubs