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I cannot think of a single instance (there may be some) where a company buying its own equity has "stimulated" the market price of its shares. AVIVA appears to be the latest example of buybacks associated with an apparently depressed share price. PayPal has devoted most of its considerable free cash flow into share repurchases for years, to no appreciable effect.
In mu opinion there are three things that will affect DEC's share price:
1.) The price of NG
2.) The price of NG
3.) Any of the above.
AceOfClubs
Differing views on a share make a market; buyers and sellers both think they are doing the right thing. I never wanted to be an AVIVA shareholder but found myself with a pile of their equity when they bought Friends Life in 2014. I added a few more over the years, "buying the dips" as they say, but it has been a poor investment. The biggest setback was the dividend cuts in 2019 & 2020. AVIVA is now focused on the UK, an economy I have no appetite for.
AVIVA has been a drag on my investment performance for too long - my procrastination has been costly, but I shall sell at 450p - which may leave me here a while longer yet.
AceOfClubs
Loiusiana & Texas are definetly where the future price action on US NG is. Appalachia & Ohio are largely isolated from this and are their own markets.
Centrica and Delfin Midstream Inc. today announced the signature of a long-term Sale and Purchase Agreement for 1.0 million tonnes per annum (MTPA) of Liquefied Natural Gas (“LNG”) for 15-years on a Free on Board (“FOB”) basis at the Delfin Deepwater Port, located 40 nautical miles off the coast of Louisiana. This agreement will see Centrica take delivery of around 14 LNG cargoes per year and could provide enough energy to heat 5% of UK homes for 15 years.
The deal, with a market value of $8bn, marks an additional move by Centrica to build further resilience in the UK’s energy security. It follows a three-year supply agreement with Equinor that will heat 4.5m UK homes through to 2024 and the reopening of the Rough gas storage facility in October 2022. Rough now provides half of the UK’s total gas storage capacity with the potential to store over 50 billion cubic feet (bcf) of gas, enough to heat almost 10% of UK homes throughout winter.
As a foundation customer of the Delfin LNG project, Centrica’s offtake underpins investment in the next wave of incremental LNG supply from the US. It will complement a diversified and flexible LNG portfolio.
https://delfinmidstream.com/news/centrica-signs-major-lng-supply-agreement/
AceOfClubs
"Aviva normally one of the robust at delivering performance. dyor"
Doing my own research tells me AVIVA share price has dropped 40% in the past 5 years - not robust performance in my book. It's too cheap to sell but I see 450p as full value.
AceOfClubs
CEO of TotalEnergies Patrick Pouyanne, speaking 8 July:
"Americans base all their policies on the domestic price of gas or oil, they have resources, and if they feel that exports are driving their prices up, they block us."
Pouyanné also said he expected a "sustainably high" oil barrel price due to the global shift towards cleaner sources of energy and the decrease in oil investments.
https://www.reuters.com/business/energy/totalenergies-boss-2024-us-election-could-cause-energy-shock-2023-07-08/
AceOfClubs
He clearly sees greener pastures elsewhere. If the CFO is giving up on CMC why should anybody else invest?
https://www.londonstockexchange.com/news-article/CMCX/directorate-change/16031140
Difficult one to value, is Peter Crudas any longer up to it?
AceOfClubs
Anybody paying attention to analyst targets is likely to be rather disappointed; Phoenix last achieved the analyst average consensus in November 2020, (784p) sigh!
Current average is 700p - highest 830p, lowest 627p.
Difficult to value this one with such long-term liabilities and investments. Actuarial calcalations are invariably useless and the actuaries long retired or dead before they are tested by reality.
Dividend yield is attractive but is a result of a declining share price rather than a rising payout. Cash flow per share and net asset value in steep decline.
I hold plenty of these accumulated over the years but never expected to be underwater. The half year results may give us a steer.
AceOfClubs
"Norway's parliament in 2020 introduced temporary tax incentives to encourage petroleum investment at a time of low activity, triggering a rush of applications from energy companies."
https://www.marketscreener.com/quote/commodity/WTI-2355639/news/Norway-approves-more-than-18-bln-in-oil-gas-investments-44211297/
Meanwhile, Tweedledum and Tweedledee compete with each other to stifle investment in very necessary UK resources.
AceOfClubs
Sage words:
"When you analyze Argentina, don't think as a trader and look to the local market as a thermometer of where are things heading. Common sense and critical thinking left Argentina decades ago and have never returned. Look at the country's problems and you will see that YPF of Banco Galicia stock prices are rallying because they were depressed for a long long time, and the market loves the idea of this current government leaving office in 6 months time. But the problems will remain and to solve them Argentines need more than good intentions."
Banco Galacia: Forecast 2023 P/E 18.8 - Yield 0.75%
Barclays Bank: Forecast 2023 P/E 4.5 - Yield 6.1%
Where would you rather be?
AceOfClubs
Wether DEC can benefit depends on them being able to get their production to the Louisiana and Texas coast. Appalacia is a long way from the Gulf of Mexico and there has been environmental based opposition to a lot of proposed new pipeline development. Some of the infrastructure is already operating at 100% capacity. DEC have moved into Texas and Louisiana, chasing better prices.
https://seekingalpha.com/news/3982532-lng-project-approvals-set-to-push-us-to-process-record-volumes
AceOfClubs
DEC is using ABS (Asset Backed Securitisation) and RBL (Reserve Backed Lending) to finance its business. The RBL is like an overdraft facility and subject to semi-annual review. Wether the ABS tranches are non-recourse I do not know; but DEC wouldn't have much of a business if it lost its seuritised assets!
The key point between us is does DEC have gas in the tank for more asset acquisitions? You are very confident, I am far less so. I also question if DEC would want to make another move right now, given the macro outlook and rising interest rates. There may be some irresistable bargains arise but they look stretched enough already for my taste.
A "Weak Buy" for me but I am not adding.
AceOfClubs
"Reserve-Based Lending (RBL) is a type of financing for independent exploration and production companies. RBL is a “borrowing-base” type of loan sized on the basis of the projected Net Present Value (NPV) of cash flows generated by the underlying oil & gas assets."
Any borrowing on this type of facility sits firmly on the balance sheet - but as you say, this is what makes a market.
AceOfClubs
"Rusty is looking to build a multi billion market cap monster which will be in a dominant position as US nat gas production declines over the next decade and prices rise."
The US is a series of regional markets for NG production as there is no national distribution network and there never will be. Recently the price for NG in California was 4 times that achievable in Appalacia. The dominant operator in Appalacia, DEC's largest market, is EQT Corporation, market cap $14.3B, DEC market cap $1.05B.
With its current equity/debt structure DEC appears to me to have run out of gas (pun intended) for any further asset purchases at scale.
Running hard to stand still.
AceOfClubs
Entain to buy Polish betting operator STS Holdings for $946m in association with EMMA Capital.
Equity placing & possible public offer coming up.
Ace Of Clubs
"U.S. natural gas futures (NG1:COM) continued their slide, with the new front-month July contract closing -3.7% to $2.327/MMBtu following last week's loss of 16%, on record production and forecasts for milder weather and lower demand over the next two weeks.
Data provider Refinitiv reported average gas production in the U.S. Lower 48 states rose to 101.7B cf/day so far in May, which would top April's monthly record of 101.4b cf/day."
It takes some hard grit to be buying into US gas producers against this continuing news background. But the first part of the investment thesis is "buy low" - if you are buying into the right company.
At the moment my two other O&G investments - Shell & Crescent Point Energy, are also motoring in reverse.
It's a tricky one - must be tempting those with no current holding, cash, nerves and patience.
AceOfClubs
Hello unvrkw,
To state that the CFO has the best informed view of his company's finances may be a statement of the "bleedin' obvious" but it applies to all companies and does not constitute a conspiracy theory!
I do have no idea why the finance guy is selling but his pattern of behaviour in that respect, over an extended period, is in the public domain. Once again, these are facts that do not consitute a conspiracy theory.
Using DEC's cash to purchase 100,000 shares is, because of its low magnitude, a meaningless gesture in my opinion.
A statement from the company saying "the directors are unaware of any explanation for the recent share price weakness and reafirm the financial guidance for 2023" would probably have delivered more value for money for us shareholders.
AceOfClubs
Lots more fun tomorrow!
Bradley Grafton Gray (Chief Financial Officer) has been a heavy and consistent seller of DEC equity to the tune of 1,991,667 shares since May 2021 I calculate, his last tranche of 250,000 only a couple of weeks ago.
For all our head scratching and pontificating, if anybody knows what is really happening with the DEC finances it is (or should be); Mr Gray.
AceOfClubs
RNS: 15 May
Entain plc (LSE: ENT), the global sports betting, gaming and interactive entertainment group, announces that, after 18 years with the Group, Robert Hoskin is stepping down as Chief Governance Officer. He will leave the Board on June 30 and remain in role with the Group until 31 August 2023.
Robert has been with the Group since 2005, originally serving as Company Secretary and Group Director of Legal, Regulatory and Secretariat, before being promoted to his current role in October 2020, and joining the Board in 2021. The Group has taken the decision to restructure certain responsibilities, in particular Regulatory Affairs given the strategic importance of regulation and our focus exclusively on regulated or regulating markets.
With the never ending series of "compliance" or rather "non-compliance" issues regularly arising Robert Hoskin should have been dispensed with years ago - not up to the job. The whole of the Compliance Board Committee are culpable. The giveaway of Entain's Turkish operations to a Maltese entity had a stench to it at the time. Entain is gaining for itself an unenviable reputation and only the BetMGM connection is keeping the share price afloat.
Better management needed if this company is to fulfil its potential.
AceOfClubs
Trotsky,
Agreed on the inability to fund acquistions at scale entirely from cash flow. The point I am trying to make is that have they reached a debt/equity ceiling - so no more acquisitions? End of business model?
Capping liabilities - who knows? I do think their $20,000 per well assumption is hopelessly optimistic. Well capping - there are a lot of companies already at it on a scale and geographic coverage DEC can only dream about - Baker Hughes & Haliburton to name only two.
Strange happenings indeed with the SP.
AceOfClubs
Trotsky:
Shorting a share with a 15%+ dividend, paid quarterly, is a very expensive operation and DEC is quite tightly held; I calculate the top 10 shareholders have 38% of the equity.
The capping liabilities may be optimistically calculated but they will only become financially painful 5-10 years down the line and I don't think the market looks that far ahead - more like 18-24 months.
To get where it is today DEC has consistently had to invest (via acquisitions) considerably more than its operational cash flow. It may have reached a ceiling on both debt and equity raises. Perhaps Rusty is looking for a merger?
Whether Rusty's 50-year financial glide path to Nirvana is realistic is highly questionable. He does appear to have committed to some substantial debt repayments over the next 5+ years which should improve sentiment, if it happens.
Meanwhile, at these prices, it must be happy days for true believers, so it's not all bad news.
AceOfClubs