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What is interesting is the trading volumes over the last couple of weeks. From the 6th March total volume of DEC shares traded on the NYSE was ~6,7M while it was just ~2,5M shares on the LSE for the same time period (excluding today). Thats 2,5x the volume traded in the US compared to the UK.

Quite some change in investor profile compared to 1 year ago.

Terry, as per DEC RNS share in issues ~81M x 13.28 NYSE share price

I think most of the online web sites do not reflect the current shares in issue hence the discrepencies.

Terry, what is also interesting is that they will buy UK shares and cancel them. So there is definitely a push to reduce the impact from UK investors. Share limit & value limit implies purchases averaging ~11 GBP per share.

JC, Terry, Jim firstly its refreshing to see a civilized discussion of different views on the board without resorting to insult. Long may it continue & I would encourage others to join in as well. I have a different take to the recent posts, so thought I would give my 2 cents worth.

From memory the maverick deal was different to all the other previous deals DEC have executed, namely DEC bought a company and integrated it and did not just purchase a set of assets (wells) so I am willing to cut DEC a little slack given its their first time for such a transaction. Hopefully lessons have been learnt.

The price DEC paid for Maverick was $1,275B and I think its fair to say this was a good price and certainly not excessive. The current share price puts DEC market cap at ~1,1B, so less then the purchase price of Maverick and essentially assigning zero value to DEC pre-maverick. The market is in my view pricing DEC incorrectly. This will not last long & the share price will correct upwards in due course.

After Maverick, EIG (a specialist energy investor,) & its affiliates own ~30% of DEC with ~70% of ownership now in US based investor hands. This change in ownership profile from the historic profile suggests to me that growth (ie more acquisitions) will be better rewarded going forward than it has in the last couple of years.

Let me explain my rational. The UK funds that were invested in DEC were more income plays rather than growth plays. They were also captured by ESG, meaning there was constant pressure to reduce exposure to fossil fuel investments rather than a focus on pure investment returns. So whenever DEC went to grow its fossil fuel business over the last few years, it went against the strategy of its shareholders. In my view it is this that has driven the recent period of share price under performance and why Rusty put so much emphasis on getting a US listing. US investors are not captured by ESG and are much more focused on investment returns and growth.

In short. I would like to see DEC to accelerate its acquisition strategy, especially as we are in a period of consolidation in the US E&G industry and opportunities will abound as Rusty alluded to in his year end call. This period will not last forever, so DEC should look to take advantage. DEC management will be extra motivated to drive the share price higher in order to enable this. I see the announcements today support this approach.

As usually these are just my thoughts. I am not looking to convince anyone of anything. Always DYOR & good luck with your investments.

Terry, thank you for your kind words. I try to just focus on the data and provide my interpretation and thoughts. I am not looking to convince anyone of anything but I do like to hear alternative views to help me validate my thoughts or change them. It does not always work but I try.

Now the reason why I think a 28+ gbp share price is achievable is as follows. The current pv-10 of pdp assets is ~$5B (3,3 Dec and 1,7 from maverick).

This does not take account of the 9,5M net acres Dec holds of which 65% (6,2M) is undeveloped. If we use the latest sales prices of $1300 per acre that translates to a value of ~$8B.

If we apply a haircut of 50% (please select your own margin of conservatism) you get to $4B.

I will not bother putting a valuation on the pipeline assets or the next level unit etc. So we have an estimated real world NAV for Dec of around $9B.

Current mkt cap of Dec is ~$1B. So the share price can increase quite a lot before you get to valuation issues. A tripling of the current share price is not unreasonable - but would require a change in investor sentiment- this can happen in markets very quickly.

As usual dyor

Just had a quick look at the annual report. PV-10 of PDP assets at end 2024 $3,3B, Maverick adds another $1,7B so a toal of $5B of pv-10 PDP assets. Value of land and other assets are not included in this number so significant upside to this is possible.

Current DEC market cap ~$1B. How long will the valuation & price disconnect last ?

Certainly a punchy results call. It is clear more acquisitions will be made, shares are undervalued so re-purchases will be pursued, Drilling JV will result in additional production as wells move into production (assume this help cover volume lost through decline), targeting supply of net zero energy to data centers in Appalachia, alot of synergies to come ..... all very bullish & seems to be reflected in the price reaction today. Worth listening to the recording.

JC, Jim, Terry - I very much share the frustration re the share price. I regularly review if I should sell my DEC position or not based on the value outlook. Each time I analyse it, I come to the same conclusion that the shares are significantly undervalued at current prices.

I do believe this will correct over time and I do believe we will see a 28GBP share price again. The year end announcement looks good with expectation of ~420M USD of FCF in 2025. That is a huge increase from 2024 if achieved. Given that 65% of the net acres are undeveloped, I do believe the JVM could provide significant upside to DEC valuations. Remember all undeveloped land is currently valued at zero on the balance sheet.

Good luck & DYOR

JC01 – I certainly do not wish to be glib or to patronise. I am a long term holder of DEC who is still nursing losses so very much feel the pain. The DEC value proposition from my perspective is the same (if not better) as when I initially invested, however the share price is in my view disconnected to the underlying value.

DEC will continue to acquire assets, in fact the company has built a platform to do just that. I do not believe Hutson has blown anything in the US as demonstrated by the recent financing round which was 6 times oversubscribed.

Just as a final comment Rusty has the bulk of his wealth tied up in DEC. His shareholding is larger than anyone else’s on this board. Why would he then execute strategies that drastically reduce his wealth. He is building long term value with DEC. The share price is certainly frustrating, but I expect the gap between value & share price to close over time.

• Not much has been made about the technology and operations platform that DEC has built up over the years that allows DEC to integrate assets & people smoothly and enable synergies to be extracted quickly. Given the volume of deals DEC has done, the DEC platform is proven and gives it a competitive advantage as consolidation plays out in the industry.

• Dec’s technology & acquisitions also put it in a unique position of having accurate & UpToDate geologic data that can be used by the JVM to evaluate best drilling locations, reducing drilling costs etc. and increasing chances of success.

• Finally a greater proportion of DEC shares are traded in the US and the recent placing will only increase this further. Given that equity valuations are higher in the US than the UK, this should help support share price performance now uncertainty with the Maverick deal has been removed.

Clearly there is a disconnect with the DEC value proposition and the current share price. I expect this value disconnect to drive a re-rating over time as I see the recent share price performance not reflective of DEC's underlying value. Good luck to all investors & DYOR.

The initial market reaction to the Maverick deal was positive but turned pear shape quite naturally when extra equity was raised. Clearly financing got pulled and DEC mgmt. had to react. A deal which was initially accretive is now neutral but likely to still be accretive once DEC has had a chance to optimize the portfolio. Now that the deal has been completed, it should draw a line under the uncertainty. For new investors in DEC there is a lot to like:

• A current yield of ~10% with a current fed rate of 4,33% and with rate cuts expected

• A market cap of ~740M GBP and a FCF of ~350M USD / ~270M GBP (pre optimization) means DEC could buy the business with 2,75 years of FCF which is a low valuation. From a value perspective the market cap could triple from here and it would still be good value.

• Debt is amortizing and being restructured in a smart way. I saw some posts bemoaning that the new consolidated facility (ABS X) was at a higher interest rate than the previous facilities. However the posts fail to reflect that this rate increase is offset by the opportunity to reset hedges associated with the gas assets of the old debt to higher price levels. Using example numbers if your interest bill goes up 1% but your hedge prices goes up 20-25% and it nets significant additional revenue gains why would management not do it? It makes complete business sense.

• Significant risks have also been addressed over the last couple of years. DEC has transformed itself into an ESG leader in the E&P field. In addition it has built up a sizeable inhouse capability to address future ARO so costs can be offset, kept low and factored into the business model including future asset purchases with far greater certainty.

• The Maverick deal also tackles an unaddressed risk topic, namely acquisition risk. Currently to replace production declines, DEC has to purchase wells. However with Maverick, DEC now has a JVM in place with a drilling company that it can leverage. So if market prices for assets are too high it can use the JVM to perform in-fill drilling to replace declines. This creates useful optionality in the business model. I expect to hear more from DEC on this in the future as integration progresses.

• The maverick deal takes net acres to ~9,5M. Assuming zero value from producing wells & all the other DEC revenue streams, the current 740M GBP market cap translates to valuing each acre of land at 78GBP. The most recent land sales are averaging $1100 per acre. Quite some margin of conservatism.

• DEC have shown they can add grow additional revenue sources such as plugging for 3rd party wells and more recently coal mined methane. There is the opportunity to make further land sales and further down the line carbon capture could transform ARO liabilities into assets.

part 3 to follow

Given the upcoming results release, I thought I would try to articulate the bull case for DEC, starting with the current macro environment.

There have been interesting market developments for DEC holders over Q1 2025. European gas storage levels are currently at 48.8%, well below where they should be for this time of year. EU Gas Storage Regulation sets a binding target of 90% filling of storage facilities by 1 November each year. So plenty of buying will be needed over the coming months (especially from the US in my view).

Shell has announced it expects a 60% rise in global LNG demand by 2040 as Asia leads growth. While BP has reset its strategy. Apparently the energy giant had gone "too far, too fast" in the transition away from fossil fuels, and that its faith in green energy was "misplaced" according to its CEO. It also does not help when total returns since 2019 for eco focused BP have been ~30% compared to ~120% for fossil fuel focused Exxon Mobil.

In addition we are entering a period where US LNG export capacity is on track to more than double from 11.4 Bcf/d in 2023 to 24.4 Bcf/d in 2028. In 2025 two major US LNG expansions are activating. Cheniere’s Corpus Christi Stage 3 expansion produced its first cargo in February, adding 1.3 bcf/d of capacity. The second phase of Plaquemines LNG is expected to come online later this year.

These are all positive short, medium & long term indicators of gas demand for DEC. Especially the LNG expansion as the excess supply in the US which has kept gas prices at decades lows for the last couple of years will unwind and prices should adjust to reflect this (as we are starting to see).

DEC’s business model just to re-iterate is not to drill, but to make accretive acquisitions of producing wells, operate them at low cost, and to mitigate the risks associated with doing this. Rusty did this when founding the business (taking on mortgage debt) right through to IPO where the strategy was communicated and up to the latest Maverick acquisition. The only question regarding acquisitions has been the exact mix of cash, debt & equity. Investors not comfortable with this strategy really should consider re-investing in another company that aligns to their investment appetite as I do not see DEC changing their approach.

Part 2 follows

Given DEC is the largest well owner in Appalachia, it does look it is well positioned to materially grow its ~$10M EDITDA of CMM (coal mined methane) going forward. Below are some data points from CNX that outline the opportunity:

-Methane emitted from coal mines accounts for approximately 10% of all U.S. emissions, with about 80% of those concentrated in the Appalachian region.

-In 2023, less than 0.1% of the 30,771 abandoned mines registered methane capture projects.

-Estimated methane emissions from abandoned mines will increase 8-fold by the end of the century.

Furthermore it looks like Trump will pressure the EU and allies to purchase more US gas (in order to avoid higher tariffs) and will allow US LNG export to expand further than the doubling of capacity already planned for go-live from 2025 through to 2027.

It is also seems demand for domestic gas is set to increase as the US aims to maintain its leadership position in AI. The compute coming online for AI appears to be increasing by a factor of 10 every six months according to Musk. Also add in the need to meet the demand for the growing number of electric cars.

All of the above should be highly positive for DEC in the short & medium term. Also given the above, I would say that the value of the 8,6M acres of land DEC has will only increase rather decrease over time, again this should positively impact valuations.

Finally, when Shell is threating to move its listing to the US from the UK due to low valuations, it only underlines my belief that a basic re-rating of DEC shares is underway as more US investors come onboard thanks to its US listing.

Promising signs for the year ahead. Links to sources below. Good luck all & DYOR.

https://www.positiveenergyhub.com/congressional-members-witness-a-new-dawn-of-clean-energy-in-appalachia

https://sustainability.cnx.com/introduction/how-we-produce-natural-gas/

https://www.theguardian.com/business/2024/dec/20/donald-trump-tells-eu-buy-more-us-oil-gas-tariffs

https://newatlas.com/technology/elon-musk-ai/

https://www.thisismoney.co.uk/money/markets/article-14242071/Shell-shock-warning-plot-listing-New-York-fuel-oil-gas-exodus.html

From my understanding the data cut off date for the rebalance is close of business today. The confirmation that DEC will re-enter the FTSE 250 will come tomorrow (after markets close). The effective date of the change will be Dec 23rd.

While a number of trackers may have already purchased, there may well be some that wait until the confirmation is issued and will purchase up until Dec 23rd.

Given trackers (russell 2000 & ftse 250) are typically bought by investors who invest on a regular basis (monthly, quarterly etc.), then this creates underlying buying demand on an ongoing basis as we move forward.

https://www.lseg.com/content/dam/ftse-russell/en_us/documents/policy-documents/ftse-faq-document-uk-2024.pdf

Confirmation that DEC is on the indicative list to re-enter the FTSE 250. The final review will be based on data at the close on Tuesday 3rd December 2024.

https://www.lseg.com/en/media-centre/press-releases/ftse-russell/2024/ftse-uk-index-series-indicative-review-december-2024

Simply wall street show the ownership of DEC shares as follows:

75% Institutions/Funds

9% Private companies (basically crescent & maverick as part of recent acquisitions)

12% Private Individuals

3,4% Insiders

The 25 biggest holders (which they list) own 68% of shares issued. Meanwhile yahoo indicate 186 institutions have positions in DEC and also show institutions owning a similar amount of 73%.

In my view we have been through a period since early 2023 where weak holders have sold (e.g. institutions who wanted to limit their exposure to the fossil fuel industry). Shorters clearly took advantage of this net selling period starting in early 2024 and it culminated in DEC being pushed out of the FTSE250 which triggered a final bout of selling from trackers. Clearly these effects have created a big disconnect between value & price as I have mentioned in previous posts.

However, now that this selling demand has played out, a greater % of DEC shares are held by stronger holders who need to be motivated to sell.Demand from shorters covering positions and FTSE250 tracker funds buying back in ahead of December index change seem to be forcing the price up to encourage holders to sell as liquidity seems tight. Dec mgmt. are also doing the right thing by also drumming up demand from US investors through recent investor engagement activity.

As a final note for the bulls out there simply wall street see fair value for DEC as 57 GBP based on a discounted cashflow basis!!

https://simplywall.st/stocks/gb/energy/lse-dec/diversified-energy-shares/ownership

https://finance.yahoo.com/quote/DEC.L/holders/

Hi Jim, my point is more that changes in sentiment will cause prices to go up/down over the short term but longer term its the inherent value of the company that will eventually come through. DEC has not really changed over the last few months, only sentiment.

The change in the macro picture should attract buyers but I also believe the upcoming re-entry into the FTSE250 is having an impact as the effects that hit the share price a few months back now play out in reverse. I would also add the fact that we have a US listing which will attract a greater volume of liquiidty. The shorts have only reduced their position by ~1,5% or ~800K shares, however the volume of shares traded over the last 10 days is >10M so I am not sure their impact is as great as some think - at least not yet.

Any long term holders who did not sell on the way down from the peak are not going to sell at these levels. This must reduce the number of shares available to buy meaning market makers need to increase the price to tempt sellers and meet buyer demand.

Given the recent focus on the positive price action, I thought I would re-iterate the value view on DEC:

From the annual report, the PV-10 value of reserves at the start of 2024 was $3,2B. Over 2024 DEC has acquired $706M of PV-10 reserves for $526M. In addition DEC has 8,6M acres of land of which 5,6M acres (65%) is undeveloped. Recent land sales have averaged ~$1,100 per acre or an indicative ~$6B of land value.

Dec has two main liabilities:

1) Debt of ~$1,5B net. 85+% is in amortizing ABS structures which will all be repaid by 2033.(reason for the hedges).

2) ARO obligations of ~$1,5B. 3rd party well retirement work can offset these costs. In addition wells could be used for carbon capture and other green initiatives meaning this liability could be turned into an asset in the coming years.

The macro picture is also turning positive with a trump presidency removing the green lobby risk for the next 4 years, low gas prices correcting as LNG export demand/capacity increases significantly over the coming months/years (which in turn positively impacts asset values) and the interest rate cycle turning meaning lower financing costs for DEC going forward. Also add in increased US domestic energy demand for AI data centres etc., electric car charging and the need for energy independence for the US.

Even after the recent price rises, the current market cap of DEC is still only ~$750M. In my view there is still a significant disconnect between the value of DEC assets, and price that I would expect to close over time. As usual DYOR.

Mines in the appalachia region emit ~1.1 million tons per annum (as per 2021 report below). The last sentence in the report "The level of emissions can be cut through changes in operating practices. And those changes in practices are not very expensive to implement.” This seems a good fit from a SAM perpsective and DEC skill set.

Also from CNX it seems 97,6% of active mines and 99.9% of abandoned mines have no methane capture in place.

So it looks like DEC has the skills, the land and the pipeline assets to capture the methane, sell it for revenue and also generate revenue from carbon credits as it prevents methane from leaking into the air. Also the cost to execute is not too high and nobody seems to be doing it at scale in appalachia.

https://www.wkyufm.org/environment/2021-05-28/appalachian-coal-is-a-major-source-of-methane-a-potent-greenhouse-gas

https://unece.org/sites/default/files/2024-04/10-BOB~1.PDF

Nice write up from oak bloke who again highlights the strong value play re DEC.

On Nov 26th the indicative list of companies to enter the FTSE 250 will be published. At current levels DEC will easily re-enter. Then Nov 28th is ex-div date.

I expect shorters to continue to reduce their positions, which does suggest that DEC is a trading opportunity for them rather than having fundamental conviction that it has serious flaws (aka Enron).