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This article seems to sum up the concerns:

https://www.ehn.org/abandoned-oil-and-gas-wells-2659296731.html

Its written with an assumption that DEC is not making money though which seems to undermine the whole argument of the article. They imply hedging is a negative thing for example, this year and probably into next hedging has provided stable and predictable income for DEC vs their peer group. They missed out on the spike, but also missed out on the low prices that have been in place most of this year.

The article also massively undermines the lawsuit which is claiming DEC should put aside $100,000 per well, whilst the article indicates older wells can be capped off for as little as $5,000 and only a few of the latest fracturing wells will exceed the higher figure. Its seems the vast majority of the wells are older conventional wells which are much lower cost to cap than the law suit is alleging.

Acquiring NXT LVL in Feb 2022 seems to have been a shrewd move.

The law suit is in WV, can it be only a coincidence that this February, 12 months after acquiring NXT LVL, that the governor of WV was ribbon cutting at NXT LVL's new HQ in.... yep, WV.

https://marcellusdrilling.com/2023/02/diversifieds-next-lvl-energy-moves-headquarters-from-pa-to-wv/

Back in 2018 at the time of the EQT deal DEC signed a deal with the WV regulators to cap 730 wells over 15 years

https://marcellusdrilling.com/2018/12/diversified-deal-in-wv-to-plug-730-abandoned-wells-over-15-years/

I am guessing that the plaintiffs in the lawsuit are West Virginia Surface Owners’ Rights Organization (WVSORO) who were unhappy about the latter deal at the time.

Just to add to it...

From Q3 results:

- On track to retire ~200 Diversified wells in 2023

- 136 of 169 external wells retired YTD in conjunction with state orphan well programs

From 2022 Final Results:

• Responsibly and efficiently retired 200 wells, up 47% from Appalachian well retirements in the previous year ... (For comparative purposes, amounts exclude 14 wells retired (and related retirement costs) within the Company's Central Region operating area).

◦ Next LVL Energy has been awarded well retirement contracts on over 150 wells in 2023 for state orphan well programmes and third-party operators ... (The 169 in the Q3 figures above presumably).

Two ways of looking at this. Firstly retiring 200 wells from an estate of 90,000 is a bit of a drop in the ocean. Secondly they are obviously pretty efficient at it to be winning contract work to close down 3rd party wells.

What I don't get is the 6% drop off the back of 7 trades, the largest one of which is reported as a buy on here.

The fund raise at GROC was always going to happen, and will always be below market price. I don't understand the shock there either, its not even a particularly big number in the context of a greenfield mine build.

Gavster,

I've spent the morning reading the claims and counter claims. I am no expert, but it seems a few things stand out:

1. Part of the basis of the plaintiffs is that Diversified is not a profitable entity and cannot possibly afford the liability involved in capping off its old Wells.

2. The two transactions between EQT and Diversified were fraudulent and should be reversed 5 and 3 years later respectively.

3. The plaintiffs claim Diversified is only profitable on paper using sharp accounting practice.

4. The rate of decline of Diversified's well estate is faster than being reported meaning liabilities will arise sooner.

The environmental and pollution claims have been dropped. It's simply all about capping Wells off now to allow land owners free and normal use of their land.

Point 1 and Point 3 - liabilities regarding costs and profitability, well they seem to be selling gas at a healthy margin above operating costs and look set to continue to do so. There is no doubt the company is generating a large operating profit which undermines this claim. It's nowhere near EQT level but seems a very hard point to prove in court. The costs of capping Wells off should be now established in their records and easy to prove what the facts are.

Point 2 - I can't see how this could realistically be done as so much time has passed. The estate will have changed in the time period, and both companies have had subsequent acquisitions and disposals. It's also very likely a number of the Wells involved will have been retired and capped off.

Point 3 is really about their unconventional business model. Saying the rest of the industry doesn't do it this way doesn't make it wrong. As long as they are complying With legislation, which even the plaintiffs admit they are, then forcing the business to change operations approach seems a hard decision to take.

Point 4. The larger oil and gas companies will focus on their most profitable assets and dispose of the more marginal ones. If Diversified buys those more marginal assets at low capital outlay then it can afford to operate them differently. This seems fairly obvious, but without deep facts is hard to quantify.

Some of the points seem to quickly fall under examination, but the basic point of diversified acquiring wells and then minimising or ignoring the cost liabilities of closing them off being the core of the case. EQT sell diversified wells, reduce their liabilities in doing so. Diversified take the wells, milk them for all the production they can and kick the retirement and capping processes and the liabilities that come with it a long way down the road as the allegation is they can't afford it. To refute it Diversified will have to prove they have a capping and retirement process that they can afford in progress. Each quarter they are reporting retiring (capping?) wells as part of their trading updates, can't be without reason.

I've been going over the various press coverage for DEC. Investors comic was rating DEC as a buy at over 90p earlier in the year, but Fool won't seem to recommend at any price.

Consolidation of 20:1 will have the price in the 1400 - 1500 range, and the US listing expected 11th December will therefore be under $20 a share unless the price shifts beforehand.

So I've been thinking about the low price and what is driving it. The candidate reasons are below, please comment as appropriate :

1. Green fund policies for UK funds don't like dirty gas and oil wells, particularly involving fracturing.

2. The dividend is just too good to be true and will be cut some time

3. The company has a very high debt pile and is unlikely to be able to draw more to fund acquisitions

4. Management team changes and mixed messages create confusion, eg new CFO, US listing hokey cokey, share issues and buy backs. Whatever next?

5. Gas prices will be suppressed by an El Nino mild winter and despite hedging margins will be squeezed.

6. It's all a bit American and un-British, we don't go in for that sort of thing.

Personally I think the management team is reacting to market disinterest with some confusion. They have stated a strategic plan and are clearly executing on it, maintaining excellent well performance, minimising ESG impacts that others ignore, and keeping the business within their own guard rails.

I guess we will see what the NYSE listing does soon enough, but I wouldn't be overly surprised to see a price of $25 a share by mid year.

Bloody comedian market makers read my post and dropped the bid through 7, ho ho ho and merry Christmas to you too!

Will check back in March I think...

I agree. I've bought quite a few of these this week intending to hold until at least the NYSE listing + 3 months. I'm hoping to get income from Nov and Feb dividends plus capital appreciation as the business is rerated in NY. I've read and reread the results, and apart from high long term debt I see no real reason for the price to be where it is, 120 - 140 being fairer value.

The sells appear to be almost all bot sales. I am guessing no TR1s as there are only a handful of holders with notifiable interests, the vast majority seem to be sub 3% stakes.

Am I right i thinking the cash offer is against the NAV , currently 247.35, with a 1.5% discount? That would make the cash settlement 243.64p against the current ask of 236p. I know 7.64p is not exactly untold riches, but does look like an instant 3.25% gain for nothing.

Am I missing something?

Sssshhh...

Its all been a bit quiet here lately. Seems like 7p is a support that is set in stone, but unfortunately we have also got a solid stone ceiling at 7.5! I doubt anything is going to move this to the next results apart from the possibility of a bid. At this price there must be the occasional sniff round, with the URL real estate and revenue it must be attractive.

Robbie,

Not sure where you live, but here in coastal N Wales while the temperatures have been mild, the wind and rain have not exactly been ideal for drone flying. I guess you need the occasional calm day and sunshine from a passing high pressure. Its been a bit grim for quite a few weeks now.

Including the special dividend this is not far off back to the recent highs. I wonder if it will go on to test 700 given the positive coverage and dividend forecasts? Pre covid since it broke that figure.

Https://www.mining.com/chinas-controls-on-graphite-exports-a-loud-wakeup-call-for-the-us-says-graphex-ceo/

Https://www.wildsofoldham.co.uk/our-history/#

Family business, hopefully they have earn outs as a lot of the customers will be based on personal relationships with a business like this.

Seems to have become a standard approach for many acquisitions on the market recently.

However as it is a UK Ltd company you can check their books at:

https://find-and-update.company-information.service.gov.uk/company/12169927

The books don't look spectacular, but at least they made a profit!

What we don't know is the price paid obviously.

OK so having asked the question that is relevant to DEC rather than personal tax allowances under the other thread, I thought I should answer some of my own question and see if anyone differs.

Firstly 2023-24 winter appears to be heading for a strong El Nino event. This in past years has occasionally had a dramatc effect on the US natural gas industry, particularly in 94-95 where it led to very low gas prices, shutdowns, layoffs and a lot of consolidation.

I think as it is part of received wisdom by the US industry that this will happen, natural gas stocks have been hit unusually hard since the summer when it first became apparent it was likely to happen this winter.

However I am going to argue that this presents a significant opportunity for DEC. In anticipation of El Nino, stock levels have been allowed to fall, and rig counts are down. What that does not account for is the fact that the US now exports a significant amount of production via the pipelines to the Gulf ports.

El Nino has another effect which is less obvious to US based analysts. It typically makes Northern Europe significantly colder. With Russian gas supply still very questionable much of Europe has become more dependent on imports from the global market, not least from the US. So whilst US consumption may be down, European consumption may well be up.

In 2015 this happened: https://www.naturalgasintel.com/el-nino-pattern-could-determine-winter-natural-gas-prices/

News on 2023 El Nino:

https://edition.cnn.com/2023/11/03/weather/us-snowfall-maps-el-nino-winter-climate/index.html

https://weather.com/storms/winter/news/2023-10-31-el-nino-winter-changes-snowfall-precip-temps

El Nino In Europer and RoW :

https://www.euronews.com/green/2023/09/03/will-europe-see-more-snow-this-winter-heres-how-el-nino-could-affect-our-weather

Anyone got a view on what effect, if any, that the forecast strong El Nino winter ahead will do to the natural gas prices in the US? In past years it has flipped the climate to cooler and wetter in the Southern US, and somewhat warmer and drier in the Northern states. It would be interesting to see of there is any correlation to El Nino winters and natural gas price shifts.

8 years between posts. Quite impressive! Still haven't got your 300p though, although it is starting to look a bit more promising again.

the mine does not produce nickel, it produces ferronickel. the ore is mostly iron, the target product is 31% ferronickel or nickel pig iron as it is otherwise known. rkef process uses a rotary kiln followed by an electric arc furnace which separates silicon **** from the ferronickel. obviously you can't separate nickel from iron magnetically.

incidentally the company was looking at nickel matte production potential as a post process option for line 2. matte can be used as an intermediate process feed for battery grade nickel.

While we are talking recommendation he dividend expections for next year were interesting.

RBC, which reiterated its 'outperform' rating on the stock, said Lancashire's valuation "remains cheap" in its view at 1.3x book against an average 2023-25 return on equity of 22% with double-digit yields.

"We make no changes to our net income forecasts while our EPS increases by 2% reflecting the announced $50.0m buyback. For 2023e, we continue to forecast a final dividend per share of $0.15 to be announced giving a full-year total DPS of $0.70. For 2024e and 2025e, we forecast total DPS of $0.90 (up from $0.75) and $1.20 (unchanged), respectively, or a yield of 10.5% and 13.9% in each year. We assume no further buybacks," concluded the analysts.