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Terry, thank you for your kind words. I sometimes think we have lost the art of disagreeing agreeably.

I do have a positive outlook on the fundamentals of dec, however that does not mean this will autmatically translate to a postive impact on the share price. Due to periods of market sentiment (e.g. sustainability investing metrics & thinking) you could have a period of weakening share price but still have positive business fundamentals.

To make a market you need a buyer and seller so always contrasting views. Your approach of trading your position is also totally valid. I do not like this approach because I am not very good at it. I tend to have reasonable returns if I buy into something at the right price and hold over the longer term till the value is realized in the price - however this approach required being comfortable with short/medium term price volatility.

I agree with your take that as equity is issued there is an element of risk that after lock up period you may get periods of selling. However I think this is mitigtaed (as per my post) by the current situation where there is an attractive roadmap ahead where a reasonable assessment can be made as to where we will be from a business perspective in 18-24 months time. Which means there should be a ready market of buyers.

The news that stabilization activity was not needed certainly hints to me at least this could be the case. Anyways long live differing views, everyone is grown up enough to make their own investment decisions and good luck with your returns whatever you decide !!

The canvas deal adds proved PV-10 assets of ~$1,4B, EBITDA of ~$155M and FCF of ~$123M to DEC and consumes ~$400M of the $2B agreement with Carlyle. Post acqusition DEC will have Proved PV-10 assets of ~$7,2B, EBITDA of ~$1B, and FCF of ~$543M.

Given DEC averages around 3 to 4 deals per annum over the last 8 years and given there is room with Carlyle to close 4 more Canvas type deals, it is perfectly feasible that we could be in a position at the end of 2026/ H1 20027 where DEC has proved PV-10 assets of ~12,8B , EBITDA of ~$1,6B, and FCF of ~$1B (based on pro-rata of canvas deal).

I can certianly see a positive case for institutional investors to have a healthy appetite for DEC shares given what is currently in place and DEC's track record on execution. If anything like this transpires, the current mkt cap of $1,1B could easily re-rate significantly.

Given the powerfull positive cash generative position that DEC is in, the proven assets it has and the price hedging that ensures consistent margin line of sight I do not see in DEC having any fundamental problems financially. The share price may get impacted by liquidity topics , but DEC fundamantels look solid from my perspective. As usual DYOR:

Hi Terry , you are quite right there was a book build. I focused on the secondary offering aspect (and hence no impact re fundamentals of DEC) but clearly the underwriters collected investor demand bids within some agreed (with EIG) price band to determine the final issue price.

The highly negative market response is presumably driven by the fact that EIG are selling at a loss and the impact on confidence . However as per my response to ACE is that correct from an accounting perspective?

Ace

Completely valid and I am with you totally confusing to navigate. The RNS at acquisition announcememnt.

"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" I take to mean that what has been fixed is receipt of 21,2M shares at close of the transaction, with the value at signing of the agreement being $345M.

When the deal was actually closed in March the mark to market of those shares are another value. From an accounting perspective what is booked ? I am assuming the value at deal close , which would then mean they now sell at a profit. However I am not an accountant and your take could be completely valid.

Sorry cut and paste problems with my post.

should be "It looks to me like these former Maverick unit holders (EIG affiliates) are looking to sell" ........ " ..... so it looks like EIG affiliates and the buyers seem to have mutually agreed a price."

Under the Maverick acqusition at completion on 14th March 2025, Maverick unit holders recieved 21M shares with EIG retaining a 20% share of equity. Lockup period was 6 months which brings us to September 17th 2025.

After acquisition 81M shares were in issuance. However 20% of 81M is only ~16M shares. Which means ~5M shares were allocated to non EIG unit holders. It looks to me like these former Maverick unit holders are looking to sell and EIG and their affiliates are looking to buy. (A positive sign??)

Now on March 14th, DEC closed at $11,50, so for former Maverick unit holders selling at $13,75 represents a ~20% gain over 6 months or an annual return of 40%. These shares should not be confused with the earlier 8,5M shares issues @$14,50.

Now clearly selling these shares in the market directly would have lowered the market price, so it looks like EIG and the sellers seem to have mutually agreed a price.

I do not see an issue with a unit holder looking to lock-in a 40% annual gain especially as I understand it Maverick unit holders were looking to sell for several years before being purchased by DEC.

Going forward given the Carlyle deal, the need to issue large amounts of shares reduces significantly. This looks like a market overreaction to me. However I can understand folks taking a blame it on Rusty, end of the world is nigh view, however just wanted to post an alternative take.

Happy to discuss if any facts are incorrect re the above, but I am really not looking to change anyones existing (negative??) opinions of the management team, or trade personal insults.

One thing that has not really been mentioned is that DEC has built a proven multi-basin acquisition engine that can identify targets, buy accretive assets at decent prices, integrate them quickly and harvest synergies without a fuss. Given we are entering a consolidation phase in the industry , I expect over time this unique execution capability to be reflected in the share price.

Pikeman, I agree the headwinds are receding and being replaced by tailwinds.

From IPO in 2017 to Aug 2022, DEC made ~20 acquisitions using a mix of debt & equity and the share price doubled, so I am not convinced by the theory that the DEC acquisition strategy is wrong.

However, the last 2-3 years has seen DEC having to deal with ARO concerns, ESG issues, a law suit related to the EQT acquisition, UK institutional investors aggressively reducing their fossil fuel investment (due to policies not investment rational), an on/off/on US listing to counteract the negative UK investment environment , a CFO being let go (sorry resigning) because of his poor execution, a short attack that lasted over 1 year, dropping out of the FTSE 250 , US democratic senators writing public letters to the DEC board, Biden ban on new LNG export terminals, interest rates rapidly increasing from 0,25% in early 22 to a peak of 5,5% in 2023 and of course a dividend reduction as DEC reassessed their capital allocation strategy given the new US shareholder base.

I have probably missed some things out, but its really no surprise that the share price declined so significantly over this period. Given the above have all been resolved/mitigated, I cannot see any material negatives on the horizon. However I do see lots of positive tailwinds . Good luck & DYOR.

The first Berlin note came out this week. They reduced their price target from 19GBP to 15GBP but the tone was positive. What caught my attention was that 7% of Q2/25 production volume came from the JV partnership, you then factor in ~30% of the 10% decline rate i.e. 3% comes from workovers (June 25 presentation), then DEC are already able to offset a significant amount of the 10% decline rate without needing to purchase assets. The JV has plenty of wells left to drill as well.

I am keen for DEC to make further acquisitions especially leveraging the new Carlyle deal. Tech & admin integration from Maverick is due to complete by end of September so I suspect we will not have to wait too long for the next acquistion RNS.

With ARO risk well managed (as per the seeking alpha link below) and debt under control I do not see many material negatives on the horizon. However I do see lots of near term upside:

- The carlyle deal could be worth up to $1,5B to DEC

- The automatic debt reduction over the next 3 years should add ~$11 dollars per share to the share price (logically speaking)

- DEC can purchase 5M shares if there is a need to soak up any sales

- 2,85% of shares are currently being shorted and from what I can tell these positions are underwater and assume will need to be closed out at some stage

- A very postive demand picture with data center growth , the $750B of energy the EU has agreed to buy from the US etc

- While short term gas proces are low, futures indicate average 2025-29 gas price will be 68% above 2024 levels and DEC are hedging into this (as per first berlin note)

Who knows how the share price will perform going forward, but DEC has good fundamentals in place from my perspective. As usual DYOR and good luck with your investing.

I have not seen any meaningful posts assessing the value impact of the recent strategic Carlyle partnership on DEC. I believe the potential to be significant.

The partnership looks like a way to scale the securitization announced back on 2nd Jan 2024. Where assets representing $35M of EBITDA were securitized and sold for $200M i.e. at a 5,7 multiple. DEC continued to operate the wells and proceeds were used to repay outstanding debt.

If we take the 5 deals prior to Maverick (as Maverick was a whole company acquisition vs a pure PDP acquisition) the average purchase multiple was 3 (with a low of 2,3 and a max of 3,8).

$2000M of assets securitization based on a purchase multiple of 3 would represent ~650M of EBITDA purchased (approx. 2 Mavericks). If these were securitized and sold at the same 5,7 multiple then it would generate proceeds of ~$3,7B. This would result in a net gain for DEC of ~$1,7B (3,7B – 2,0B) assume $200M in Carlyle fees etc then ~$1,5B net.

Now you can plug-in your own values here based on your level of conservatism but the ability to purchase assets at a 3 multiple and then securitize them at a higher multiple with the proceeds used to repay purchase costs and book signiciant gains could be highly transformative for DEC.

The current the mkt cap of DEC is only ~$1,17B, so this deal alone could add ~$19 to the share price if above assumptions are anywhere near right. Unlike some, I am very keen for Rusty to do more acquisitions.

Not sure I will have time to respond to posts but good luck to all investors (especially the long termers) & please DYOR.

I have been exceptionally busy at work so have not had the time to post as much as I would like but I have tried to skim read posts as best as I can.

A sentiment that I see in a number of posts is that the CEO is trigger happy to close & structure deals that negatively impact the share price. In short his ego & management approach is the cause of the share price undervaluation. Based on the data, I fundamentally disagree with this view.

At IPO in Feb 2017, DEC had ~105M shares issued at a 65p giving a mkt cap of ~68M. The share price peaked at ~140p in Aug 22, with a peak market cap of ~1,2B GBP. So a 215% share price increase over 5,5 years or ~40% pa average share price appreciation not factoring a very health dividend paid over this time.

Now during this period the CEO made 20 acquisitions (averaging 3 to 4 deals per year), using a mix of debt & equity such that by Aug 22, DEC had ~850M shares outstanding and net debt had increased significantly. The market took all these acquisitions and equity raises in their stride and the share price followed an upward trajectory with the normal ups and downs.

However from Aug 22 until Oct 24, in a ~2 year period the share price collapsed to ~800p or 40p pre-share consolidation. This 70% share price reduction has been put down to acquisitions. However DEC strategy did not change and the fundamentals of the company did not fundamentally change during this time. Rather, In my view a number of unique circumstances impacted the share price.

When I get time I will try to post my thoughts on this period, however before that I wanted to quickly post something on the recent partnership news, that even OB has not picked up on.

Only 2 weeks of contribution from Maverick, however exit rate Q1 of 1149 already above higher production band guidance which is positive.

I also note that capex guidance ($165m to $185m) is materially higher than 2024 (~$51m). Is this an indication that DEC intend to leverage the drilling JV from the maverick deal to cover declines rather than through acquisitions?

I still see DEC making acquisitions to grow, but just like when they purchased Next LvL, it may well be they are looking to find ways to address declines at lower cost.

@terry - I am just catching up on the thread having been busy the last couple of weeks. Will post later and provide a link re the options topic that you raised in a response to one of my previous posts.

GG the note is 4 years (not 2 years as you mention) at 9,75%.

It will be used to repay existing debt. It will be leverage neutral (debt to EBITDA not impacted) and will enhance cashflow.

So it could be used for example to replace the class B notes of ABS IX which carries an 11.235% interest rate or replace the Oaktree Seller’s Note of 9% or replace part of the credit facility currently being charged at 8,6% etc.

The old debt is typically secured by assets that are hedged at historically low prices. By retiring the debt you have the opportunity to put in place new hedges at higher prices. So basically you could have the situation where you might pay 1% more interest on 300M = $3M, but gain 30+% on hedge prices, increasing cashflow by a multiple of $3M. Under this scenario it is a reasonable business decision from my point of view.

I struggle to understand the weight given to this topic which represents less than 1% ($3M) of the 420M FCF for 2025 vs the lack of weight given to the undeveloped acres that represents upside of multiple billions or the $1B in upside from the amortizing debt repayments over next couple of years etc. Just my view.

Good luck & DYOR.

I am sitting on paper capital loses at the moment but keep adding to my DEC position as funds permit. It is easy to get stuck into a doom & gloom cycle, so thought I would re-state my high level view of DEC as an investment. The recent price action is disconnected to the value proposition from my perspective.

DEC pursues a low-risk E&P strategy. They don’t explore. They buy producing wells and optimize them. Debt repayment & ARO costs are factored into the purchase price of assets ensuring they do not overpay. Commodity price risk is mitigated via hedging. Strong sustainability strategies mitigates green regulatory risks. Looking at DEC’s main assets & liabilities:

Assets: PV10 of DEC Wells + Maverick Wells = $3,3B + $1,7B = ~$5B

Liabilities: Debt = ~$2,1B and ARO = ~$1,5B

Equity = Assets – Liabilities = $5B – $3,6B = $~1,4B, a ~40% discount to current ~$1B mkt cap.

As per slide 55 from 20th March presentation between 2025-2028, ~$1B of amortizing debt will be repaid. Given ~80M shares in issue, this translates to an equity increase of $14,25 per share.

In addition DEC has 9,5M acres of which 60% (5,7M) is undeveloped and valued at zero on the balance sheet. Recent land sales of ~$1300 per acre would value the undeveloped acres at $7,41B. Lets assume a 25% haircut (pick your conservative number), this translates to ~$1,85B or $23,1 per share.

Putting this all together: current share price ($~12,6) + 40% NAV discount (~$5) + Debt repayment (~$14,25) + undeveloped land valuation (~23,1) = $55+ per share

From a value perspective, I can easily see DEC share price above 30 GBP based on the above logic. Clearly sentiment (which is highly negative at the moment) needs to change but that can happen very quickly in markets. Everything else is in place. DEC even provides a nice 9+% return while waiting. However patience is required,. Something that seems to be in short supply these days.

Just following up on my previous post ........

While DEC manages its wells to minimize decline rates, DEC also needs to manage its debt portfolio as movements in interest rates, gas prices & investor appetite can create issues as well as opportunities to maximize FCF.

DEC’s hedges are separate from the loans in so far as they are accounted for on DEC financials separately. However the loan and the hedges are linked contractually in the loan agreement. While DEC can change the hedges, DEC must do so in accordance to the terms in the loan agreement. If those terms are restrictive/costly, then terminating the loan & replacing with an alternative is a valid approach / only way to go.

Given all DEC ABS structures are investment grade, they are rated by Fitch who perform regular reviews and adjust their ratings accordingly. The link below is an example of a rating watch negative for ABS II (meaning it would be downgraded a notch if DEC did not do something). The main reason is the hedge book, which has prices significantly below strip prices.

If you look at Dec’s 2023 FY financials (link below) on p205, you can see the average swap rate for 2028 is $2,79 while average HH prices for 2028 are currently $3,57. So by closing the current hedge position and taking out a new one, DEC could realize a ~30% price gain. If this is repeated across multiple years, it could also mean that the value of assets have increased sufficiently so that only a subset of the current assets would be needed to secure a new loan. The remaining assets could then be used for liquidity purposes. If investor demand was high then they could negotiate a higher LTV (loan to value) on better covenant terms and on an asset based that has increased in value. This what it appears DEC have done.

The downside is that they may need to pay a higher interest rate due to current interest rates (lets say 2% extra) on let say $200M. That would equate to ~$4M extra per annum. If the 30% increase in price say caused a $30M increase in revenue for 2028 (as an example, have not had the time to plugin the actual numbers) and other years, then you would have a gain of $26M over a 5 year tenor that would be over $100M in additional FCF. So well worth doing. Of course there are transaction costs with the above, such as terminating loans, closing out hedges etc.

As usual just my thoughts. Good luck all & DYOR.

hTTps://www.fitchratings.com/research/structured-finance/fitch-places-diversified-abs-phase-ii-llc-notes-on-rating-watch-negative-01-11-2024

hTTps://ir.div.energy/financial-information/sec-filings/content/0001628280-24-011847/dec-20231231.htm

Hi Terry you can close out hedges at a cost whenever you like. They are independent from the loan. The entity lending money as part of the terms of the loan will insist on a certain level of hedging to ensure they get repaid. So DEC would use funds to repay the loans and exit current hedges before entering into new hedges. If you see on p52 of the recent corporate presentation DEC lists quite transparently their current hedges.

They have cost less collars and swaps in place. They are cost less because the cost / income from buying a put and selling a call offset. Am travelling at the moment so will try and post more on this over the weekend.

Terry, ABS= Asset Backed Securities while “senior secured notes” are a type of debt where lenders have a priority claim on a company’s assets. For DEC this means its wells and specifically the cash flow associated with those wells. To lock in cash flows, there will need to be hedges in place for the term of the loan. If those loans are repaid and replaced with new loans then the old hedges are closed and new ones opened up that align with terms of the new loan.

Terry, this makes sense as the abs and notes rely on assigning wells as collateral. When this is done , DEC take out hedges so that interest can be paid and loans repaid. So let’s say DEC pay 2% more on interest but can reset the old hedges on the old loans to a higher level say a 40% uptick you have the scenario where the loan rate is higher, but cash flows are higher and liquidity ratios stay flat. Looks logical to me.

We have had a working week of buy backs (5 business days). Shares purchased ~108K at a cost of ~1,1M.

From the recent RNS, DEC are allowed to purchase ~4,75M shares up to a value of $52M. So at the current pace it would take ~1 year , assuming the share price stays at current levels. This fits with the April 2026 AGM date communicated in the RNS for the next update on buy backs.

I would personally prefer DEC to front load purchases given the current share price.

JC I agree. Expect it’s only a matter of time before DEC switches its main listing to the US. I still think the uk listing will remain.

Also a new presentation was released by Dec yesterday. There was one interesting slide which shows debt repayment for 2025 & 2026 as 300+M per year. So DEC are accelerating repayments vs previous years. This is another boost to share price as at least mathematically it should get reflected.