Member Info for pickedpeck

Did you read it? They literally said $5m for costs in the article.

SD235,

What you are describing is the four year oil and gas cycle that has played out over the last three decades.

Price rises, drillers drill, production goes up, drillers cash in, price falls from over production, over financed drillers go bust, supplies tighten, prices rise.

In that development property also has peaks and troughs, drilling company values rise and fall, midstream companies have peaks of income and so on. The rig count is a tracked indicator of where in the cycle we are.

DEC has flattened the effects of the cycle by hedging production forward for multiple years, only buying PDP assets, doing no drilling other than work overs, and using innovative finance methods to make the costs of debt predictable. Where the cycle does affect them is perception of future hedge prices, the value of their land bank, and the price realised for unhedged production.

Right now we are on the rising part of the cycle. The price is going up, but it will be 12-18months before prices peak and turn again. Rumour has it that it may not be possible to drill enough to overwhelm demand, but that is said every time the price is rising.

Trek,

You set yourself the 1500 target before a lot of things changed, I am not sure why you are still using it now.

Obvious short squeeze in progress, they are undoubtedly charging for the exits now. Trump Whitehouse coming up and LNG export ban very likely lifted, gas price surging as a result. Democrat House enquiry practically dead. Before those things I agree that I think the company was worth 1500, now?

As I told invisible George some time back I am holding until at least March to see where we are then, and what the trend is before setting any targets. But if LNG ends up back in the $5-7 range this could even go back into or above it's 2021-22 trading bracket.

SD235 - DEC have a land bank of 8.6m acres which can be sold for drilling. In an environment where drill baby drill kicks in then the land bank shifts in value from $1100 an acre which they have been getting to $2000 + an acre.

If they can monetise the 8.6m acres at that rate then the NAV dwarves the mkt cap.

The gas price is being affected by two primary drivers:

Firstly the very probable lift of the Biden administration LNG export ban. Biden played the ban as if he was doing something for the environment, but in reality was just trying to make US energy prices lower for political reasons. Europe and Asia need to import gas to replace Russian supplies, the market in Europe is 4x the price of US gas.

Secondly the risk that the current shale gas plays have already reached and passed peak production, not matter how much you drill them. I posted this at the weekend, but worth a read if you haven't already https://blog.gorozen.com/blog/us-natural-gas-production-is-plummeting

Historically gas prices have run on a four year cycle of peaks and troughs. You can trace it back 20+ years and see the pattern. We are now coming up towards three years since the last peak.

The drill baby drill philosophy could also have a dramatic effect on the value of the DEC undeveloped land bank. What if the acreage goes from being worth $1100 an acre being sold fairly slowly to $2000+ an acre and in demand? As supplies tighten more acreage will be needed for drilling, being sat on quite a lot of it may be a valuable place to be.

Look at this futures list. The rate of change would suggest within a fortnight this will all be green, six months ago it was all red.

https://www.baha.com/quickbar/nymex-futures/henry-hub?ts=1732139308459

Adage reducing to below 0.5% on the 19th is a big move too. They have been short longest and are most likely to be in profit still.

5.96% with positions above 0.5% but quite a few now likely hovering below that so still maybe 8% stock is short.

Apart from Qube who seem to be on a completely different page to everyone else, it seems everyone is heading for the exit ASAP. Shorts closing 2.5% raised the price 300p... Wouldn't like to be the last ones holding out.

It explains yesterday's more moderate rise, but gotta sting today. You're getting sacked in the morning chants all round?

From a post in the comments on Oak Blokes latest blog on DEC, the link below analyses the current position of the US natural gas supply and market dynamics. Worth a read in my view if you are invested here, not specific to DEC.

https://blog.gorozen.com/blog/us-natural-gas-production-is-plummeting

Shorts have to be exiting, they would be idiots to hold on to their positions now. The steady upward trend smacks of persistent low level buying, trying to sneak out the back door without raising the big transaction alarm

Grezz,

There is no chance with open cast mining unless the mine has been filled and capped with concrete, with vents installed. I'm not sure how common that is in the US.

What I will say is that as well as lot of opencast mines there are a large number of deep mines throughout Appalachia too, these are less visible once the lift wheels have been removed but are probably similarly numerous.

https://www.arcgis.com/apps/mapviewer/index.html?layers=03b7a02fb9c2496791822964cfaa7670

Just a few points on the coal mine methane capture :

1. Methane is the main component of natural gas. It basically represents additional natural gas production.

2. The methane can be fed into Dec's pipeline network for use the same way as other production.

3. Others are doing it, but Appalachia is full of coal mines which don't, and full of DEC pipelines nearby. 17,700 miles of midstream pipelines.

4. Methane emissions were/ are about to be punished, capturing and selling the gas and claiming environmental credits may be. A temporary thing as it seems likely the Trump administration will reduce or remove the penalties.

5. Nonetheless, the gas is essentially free additional production, and there may be a lot of it available right where DEC operate

The EPA has a page on it with some extra links:

https://www.epa.gov/cmop/benefits-capturing-and-using-coal-mine-methane

Thanks Jim and Terry, no idea what I had done to upset the other chap let alone end up in the loony bin with George.

Asp,

Fact checking George is an endless task. He knows there are facts, he just doesn't bother using the existing ones and prefers to make up his own.

The real question I have never been able to understand is why? I suspect either a disgruntled ex employee or Rusty Hutson ran over his dog. No one could be short and interested this long.

Ocelot, unless you know exactly what people inside the company know how can you be so certain? My point is he may already know that Clogau grades for the ore they have recovered are not economic. You and many others are assuming the happy path.

If I was in his position I would have waited to do any raised until after the imminent appraisal of grades if they are positive. The raise at that point would require a lot less dilution assuming the grades have a positive effect on the share price. Are we talking days, weeks, or months to that point? He has instead chosen to further erode shareholder value by raising now, pre assay results announcement, for what reason?

The way miners normally develop is to raise in line with increasing enterprise value so that share holders are not damaged at each raise. Here there is no obvious uplift in EV going on at each raise, and going off on wild goose chases is only further reducing EV and confidence.

Ocelot... Just playing devil's advocate here, but what exactly would GF do if he thought Clogau wasn't going to play out? Wouldn't he be reaching out to find alternative projects? Wouldn't he wait to raise money using equity at higher values once progress at Clogau was clear rather than massively dilute everyone now?

I hope you're right and he is doing this assuming the company will have more money than it knows what to do with, but the alternative is currently also equally possible.

With Australia, Sweden, and now Tanzania that is three attempts at new projects in the last six months alone. If they were Glencore it would be understandable!

This is a company that just did an RNS of a ladder and a hose being installed, they will be doing an RNS that they saved some money on the Tanzania flights using SkyScanner next!

that's a little tiny straw you are clutching at there george. over $100m undrawn on the credit facility and borrowing less than one year free cash flow. i thought you had given up here after so conclusively proving you didn't know your **** from your elbow?

Tazed, its a down market day and at least they are showing blue. It takes a day or two for these results to be digested, no one was waiting to buy or sell based on what would be said at 7am this morning, the paltry number of transactions so far today shows that.

Every indicator in the results is positive, and the land bank becoming valuable is a left field potential game changer. As that gets digested properly then we may see more buy in.

The results as always are a little complex to read but there are some pearls in there.

"average production for the period represents an approximate 14% increase in volumes compared to the adjusted 4Q23 average"

"Diversified's delivered 3Q24 per unit revenues of $3.23/Mcfe ($19.38/Boe) that substantially benefited from the Company's disciplined hedging strategy, with settled natural gas hedge floors of $3.34/MMBtu exceeding the average NYMEX settlements by 55% during the quarter" - So hedging is working better than well, producing very string cash flow results.

"Divestitures of undeveloped leasehold acreage continued to supplement Diversified's organic cash generation, with ~$9 million of cash proceeds during the quarter and year-to-date cash proceeds of ~$23 million." - Selling off the undeveloped land, despite some saying its worthless, seems to be generating quite a bit of cash.

"Expansion into adjacent market of Coal Mine Methane ("CMM") capture and environmental credit sales generating $8 to $10 million of EBITDA in 2024" - Wait what??? Will this grow more? Appalachia is dotted with coal mines emitting methane, this could gain some legs.

These books show a balance the cash approach, deliver an income whilst growing the business and paying down debt.

I am sure the AI autogenerators will pick up the Swings to loss "net loss of $1m", and ignore the fact the business works on cash generation.

I know I sold last week and have no dog in the fight now, but this is just further evidence that I did the right thing getting some of my cash back out.

Tanzania is a historically productive country, but is also amazingly corrupt and renowned for being difficult to do business in. Petra diamonds was not long ago nearly put under by the Tanzanian government 'deciding' to seize a package of diamonds from the Williamson mine, for no reason other than corrupt greed.

GF should be happy there, back scratching deals all round.