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Overall the trading update looks positive. I do, however, notice the following:
Q3 2021 92M adjusted EBITDA with a 128 Mboepd average production. The exit rate is 133 Mboepd, so it could increase by about 4%. Let's say adjusted EBITDA could be normalized to 96M adjusted EBITDA, making it annually 384M. In the presentations, they mentioned a pro forma adjusted EBITDA of 420 after the first 3 acquisitions. Even taking into account the exit rate, it seems like EBITDA is about 7% less than what would've been implied. An exit rate of 133 is 5 less than the 138 production that was mentioned in the presentation on the 5th of july. All in all, this seems like a QoQ decrease of 4-5%, not the 2% that would be in line with a 9% yearly decline rate.
What are your thoughts on this?
Alright thanks. I am much more optimistic than their base case. assuming their leverage ratio of 2,3 and their available liquidity, I think it is safe to assume they can at least maintain a 15% p.a. growth rate, taking that into account should be mandatory to value this company. My fair value is about 3 times theirs with growth rate taking into account. I will publish my calculations on my new YouTube Channel on wednesday. My YT channel is The Dutch Investor, if you are interested to find out then. Take care and thanks again for your reply!
Hi Ragnar, Where do you get the sense that it will be a 16c dividend payment in 2020? On the premise that they will acquire new assets this year?
I can't seem to edit, but I meant the FTSE index, not the FTSE 100 index. They need to grow a little bit more for that :)
I have to say, I have been surprised by the drop in Q1 this year. I invested heavily in this company since it is pretty clear they are the only company in the vicinity to be able to power through the current low gas prices. I think many investing firms also know this, so it came as a surprise that the price dropped so low. I just compared the january 2nd 2020 significant shareholder list (3%+) with the updated 28th february 2020 one, and I concluded the following:
- Blackrock, Investec, Barclays and GLG are no longer in the 3%+ list, insinuating that they got rid of a large amount of their position (if not all)
- Sand Grove Capital and HSBC Bank have been increasing their position immensely in these 2 months (both holding 60+ million shares now)
- Standard Life Aberdeen had a 1500% increase as of january 2020 and was holding 44 million shares (not sure if the data I used is correct). In the past 2 months, they sold 16 million shares. I find this mesmerizing; such a large firm buying highs and selling lows (again, if the data I used is correct).
Assuming the above, I believe that most of the previous shareholders sold their shares in the beginning of 2020 due to ESG-investing and other moral reasons.
A question for all of you while I am at it. Where can I find a list of the history of the significant shareholders? I have gone through the RNS list and I can't seem to find it. I am also unable to locate it on the AIM market info list.
Thank you for letting me know!
PS: Do you agree with my reasoning as of why the gasprice has dropped?
I just discovered this forum, thank you for all that share their thoughts and opinions. I have been following DGOC for about half a year now and I am completely sold on the company and its management. I have been increasing my position constantly, starting at 104 pence, adding to it at 108, while finally making my biggest purchases around the 90 pence range. I am currently down 22% because of that (average price of ~93 pence). I wrote 2 reports on the matter and this weekend I wrote an update for them to summarize why DGOC deserves your attention right now. Below you will find my reasons. Please let me know what you think of it!
Fundamentals:
1. Has a positive free cash flow (yield of less than 4);
2. has a good p/e ratio of below 3 (changes a lot due to volatility);
3. has an amazing dividend yield of 12-15% (changes a lot due to volatility);
4. all these valuations are expected to increase due to company policies and production;
5. hedged >90% of production for the next 18 months, so resilient to the current drop in commodity prices;
6. ROIC of 25% - for comparison, shell has an ROIC of 8% and is considered to trade at an attractive price right now;
7. Production growth of 1700%+ since IPO;
8. CAGR of ~200% since IPO;
9. Breakeven price of gas production at 1,48 USD, while competitors in the area tend to break even in the 2,70 USD – 3,20 USD range.
Management
1. Solid operational cash flow policy; 40% to dividend, 40% to pay off loans; even though the balance sheet looks bad, this policy makes it a financially healthy company;
2. strong cash policy; the price of cash (no interest) causes them to rather lend when necessary than to have it on their bank account doing nothing.
Upcoming events (possible catalysts):
1. Natural gas is currently trading at historically low levels. A price increase this year will cause a surge in the stock price;
2. When the natural gas prices drop further, buying opportunities become more likely. A good buying opportunity could cause a price increase;
3. DGOC is looking to get to the main market of London in early Q2 2020. This will cause an increase in stock demand, since they will be included in the FTSE 100 index (e.g. index fund managers will be forced to buy this stock, regardless of what price it is trading at). Possible announcement on march 9th, 2020.