We would love to hear your thoughts about our site and services, please take our survey here.
"So how many years of reserves do others get? And how do they get to this figure?"
Key to the business model in the long run is being able to acquire additional wells, at least partly through debt, as a minimum to offset the decline and ideally to actually increase production. Of late they've chosen to reduce debt and accept some decline but I doubt that strategy will continue indefinitely. If it does the company will just fizzle out and die off.
The youtube video that followed on from this was https://www.youtube.com/watch?v=_5hYsdVbW2E
Very interesting interview with African Billionaire Aliko Dangote
He explains that at the current rate of population growth Nigeria will be the 3rd most populous country in the world by 2050, behind only China and India.
What a growth market and what better energy company than Seplat to invest in?
The liability for capping @ circa $20K/well is covered in DEC's forecasts and if capping is their only liability I have few concerns. However if they also need to remove infrastructure and make good the land it seems this would incur significantly higher costs, much higher than accounted for.
I would have thought that obligations in this regard would be clear cut? Surely agreed in the original driller's contract and presumably also agreed with DEC at the point the wells were sold?
DEC's 14 bank lending syndicate are obviously aware of the ongoing McEvoy v. Diversified Energy Co. case but it does not appear to have affected DEC's credit worthiness.
"BIRMINGHAM, AL / ACCESSWIRE / September 26, 2023 / Diversified Energy Company PLC (LSE:DEC) (“Diversified” or “the Company”) is pleased to announce its completion of the semi-annual borrowing base redetermination for the Company’s revolving credit facility, structured as a Sustainability-Linked Loan. The borrowing base under the facility was increased to $425 million from $375 million with 100% approval from Diversified’s 14-bank lending syndicate, resulting in current liquidity of approximately $120 million."
Yes the divi is almost 25%
IMO the congress investigation is almost wholly without merit, we had a similar thing with Bloomberg in 2021
Not difficult to track the SP. If you google DEC share price the resulting long term chart I see is corrected for consolidation.
I recommend reading Oak Bloke's articles on DEC https://theoakbloke.substack.com/archive?sort=top and do other DD before you make up your own mind. I'm still adding.
Eviking
I think you're mistaken. Life's a GAS!
https://www.youtube.com/watch?v=lkIS9f91xxE
Fair point and sound advice.
But most large SP drops are not without good reason, seriously unfavourable trading conditions, profit warning, divi cut, warning of potential administration etc. None apply here.
One wonders how low the SP can go just on poor sentiment and misunderstanding of the accounts and business model?
Anyone who's ever played poker will know the expression "all in".
With the SP and dividend % where they are currently sitting that's what I often feel tempted to do with my investment in DEC.
As a lowly student of Benjamin Graham I cannot help feeling this is too good an opportunity to miss.
Currently this is about 25% of my portfolio, increased from about 15% previously due to topping up as the SP has fallen over the past few months. While I'm not really going to go "all in" I am seriously contemplating buying more.
I'm in agreement on all the points you made and see no reason why the SP should not eventually return to the previous trading range of £20 to £24 (£1 to £1.20 in old money).
This is on the basis that hedged gas price remains >$3, allowing the current divi to be maintained or even increased long term. The skeptics or naysayers will eventually have to accept that the business model (still) works and the SP will slowly recover.
I think £18 or 90p in old money is a realistic target to end 2024 too.
I agree the NAV figure looks to be on the low side at 50% of the new build cost when it still has a 35 year life expectancy. They do still have to spend a fair bit to clean up their emission as I recall but the deadline for that was extended due to the effects of Covid. I've not heard any news on that of late. Needless to say £50m Mcap for a 500mw plant (coal + solar) with 35 year life expectancy is comical! Surely nobody but the Indian state is going to build new power stations @ £820K/MWH when you can buy shares in OPG for £100K/MWH
With El Nino and falling prices you'd think with DEC's hedging policy and NG futures from Dec 24 onwards at >$3 gas investors would consider DEC as a relatively safe haven and be buying, pushing up the SP. Perhaps with the US listing they will?
Now does seem a very odd time to short this company. I know it's easy to say with the benefit of hindsight but the time to short was when gas prices and DEC SP were both at their peak around 16 months ago.
With US listing imminent, significant confidence in their business model evident from the support of the many US banks that make up their panel of lenders and >80% institutional share ownership it's clear that the shorters are betting against a great number of competent and knowledgeable people. I wouldn't choose to.
So a new power station costs £350m
Book value £171m
OPG Mcap £54m
India's power demand will increase year on year. With such high capex to build new power stations and I would guess interest rates for this kind of debt at about 10% I really cannot see a rush by other providers to bring new power projects online, given the miniscule or negative profits after accounting for capex/debt repayments. Maybe the Indian govt will intervene to build more state operated power stations or maybe they'll allow higher tariffs to encourage the development of more privately run projects.
Either way OPG is in a great place with minimal debt and a long life asset. PLF will surely need to increase year on year to help meet demand. India's domestic coal production is increasing so coal price will come down. Surely this share should be in the 20's by now.