Member Info for PIKEMAN

Let's hope that DEC has been doing the rounds with the instos in the USA. I would imagine he has been busy presenting. Can't be worse than trying to sell a sensible, well managed, cash generating business focused on the energy source which will be at the centre of power generation for the next 30 years+ to UK investors!!! The last 12 months have shown how "thin" the UK market is for anything outside the FTSE 100. Must be more smart value investors in the USA which understand the business.

Have the feeling that the share will trade upwards in the next couple of weeks as trading starts in the USA. Those who bought in the 65p-70p range will be reluctant sellers of a -20% yield for the foreseeable.

Trek. So true but as we know every oil, gas, mining company faces the same challenge of replacing assets.The difference is that for 99% of the other resource companies they have to spend millions exploring for the stuff with no certainty of finding it. Also for most resource companies every extra barrel, tonne or oz of what they extract costs incrementally more than the last one. I can't see Rusty sitting on his hands when the ABLs are bring paid down and the share price is 30-50% higher than now. "Ahead Warp Speed one Captain"

Https://open.substack.com/pub/theoakbloke/p/dec-tecting-fact-and-fiction?utm_source=share&utm_medium=android&r=19pp7m

Possible duplication but a good informative read as usual

He is excellent. See his earlier posts on DEC

Falconer. I am in big time too similar to you. Painful this year but the US listing will definitely be the catalyst for the next stage of growth. DEC has a unique strategy and already decent scale. Apart from Toby Rice, Rusty is as good as it gets in landing deals and making them work. Plenty of capital available to DEC now it has scale. I feel 2024 will be what Rusty was hoping for in 2023.

Thanks...It's hysterical SWS. Some of the stuff the bot writes is unbelievable.... Don't know how it keeps going

Bismarck. What's the SWS article? I agree with your sentiments. As the ABLs get paid off, a lot of free cash flows to the bottom line, more than enough to compensate for decline in output. Add on strategic sales of non core assets and some low risk infill drilling and the position looks healthy. I suspect that once the US listing is up and running Rusty will be out promoting the company locally. The US investor base is massive compared with the US and far more diverse. Steady as she goes for the next 12 months should see a re-rate of thebshre price. Add a couple of small acquisitions and we are back to where we were 18months ago. Some times you have to trust the CEO knows what he is doing. Rusty knowsnthengas business but unlike others in the field he understands the use of capital. Fingers crossed

Pickedpeck. I agree. The investor sentiment in general in the UK is far worse than most realise. BBs are seen as panic measures. Do nothing and investors claim you don't care. Cut divs and it's bankruptcy ! 2023 was always going to be a bump for DEC as it it drew down on its RCF and before the ABLs start to run off rapidly in 2024. The hike in short term rates, domestic and international politics has crushed investor sentiment and investors have run for the hills. Any exposure to equities has been big blue chip names. Some times you just have to realise that it's emotion and not logic that drives markets. DEC needs to stick to its plan, drive down costs, lock in margins and pay down debt. With the US placing there will be a far larger audience and I suspect a number of savvy investors willing to take shares off the hands of despondent investors. It happens regularly and this I suspect will be no exception

The UK Market is broken. Not just for DEC but so many small/mid cap names. Rusty is right to focus on US investors. Massive compared with UK, an understanding of the US O&G market with much bigger audience of small cap, resources funds,401k plans and HNW investors. A stronger macro environment helps as well. Far less effort needed to promote the co compared with London where equity fund managers are seeing losses of AUM.

There are no peers. The div strategy since IPO was to pay out 40% of FCF and I don't see that changing. It's the reason for DECs existence. The ABL debt declines sharply from next year and in the event of no further acquisitions is repaid in 6 years. That should leave a lot of free cash for divs/buy backs. It's a double edged sword. DEC strategy is unique in the industry and therefore most investors just don't "get it"..I have been in since the IPO and expect to be here in 10 yrs time. Rusty has an incentive to sweat the DEC assets, pay out a good chunk in divs and reinvest a chunk in acquiring new assets. There will always be assets that traditional E&P companies can't manage effectively any more once their production starts to drop off that DEC can manage more effectively. The US listing will give DEC access to an audience which understands the strategy. ATM the UK market is totally dislocated. Lots of closed end funds with first class assets trading at 40...50%+ discounts to NAV and excellent small mid caps priced at distressed valuations. Little real interest in anything outside the FTSE 100. May take years for this gap to reverse...at least DEC is sharing it's free cash flow margins (which would make drug dealer blush) with shareholders and being proactive whilst we wait for better times..

All in all a good outcome under the circumstances. The UK market could be in the doldrums and worse for years and no matter what the efforts made by DEC it was unlikely to have any meaningful positive effect on the SP. This way they have access to a huge pool of local capital from investors that understand the us gas industry. Even modest interest from the US mutual funds is enough to make a difference. DEC will be gone from the UK I suspect within 18 months, thankful it got them going but relieved that it's over.

By it's nature I think it will always trade at a discount. I think it will be priced in it's yield probably 1000bps over 3 month cash

I expect no earnings surprise this week. Company has already provided guidance on revenues and we know it's costs. I expect the co to continue sales of non strategic assets in next few months, a declining RCF balance outstanding moving to a headroom of ~ $200MM. This will be a slow burner in terms of price recovery but a bargain on a 3-5 year view....the problem is that the pool of potential buyers is modest. O&G out of favour. Ditto small and medium cap funds and retail investors are shunning risk. But I suppose that's when the opportunity for real wealth creation happens?

It's an exponential decline rate. ..faster in earlier years and a long tail

Https://open.spotify.com/episode/3fqkWNrjO3KVZJeKxVDXIl

Fascinating insight into NG prices in future. For those who can not access - major points:

Massive disconnect between US NG prices and global.

50% increase in US LNG export cap in next 2 yrs.

Possible spike in US NAT gas prices to $8-10.

New Production geology constrained (best wells already drilled).

Price gap will have to narrow

Personal Observation.... A very attractive environment for DEC with long life low cost proven production.😁

Interesting. Looks like a crossed trade. Could be the bottom.

I figure the $500MM may be a bit optimistic but would be happy with half of that! Would eliminate most of the RCF and add +$20MM to FCF. Rather than buying more assets for cash, I wonder if DEC could acquire assets on a profit share basis. Cheaper than DEC issuing equity and avoids the debt markets. Attractive for a seller to get an annuity with no overhead costs. Just a thought 🤔

In no particular order. The RCF is mainly used to smooth out the lumpy cash flow. Pretty well every business has one, profitable or not. (I believe DEC also used a part of it for funding the last acquisition). Dividends are not like debt payments. Unless the company was in financial difficulty why would it buy back shares "to save the cost of the dividend"? There are buyers for DEC. It's just that the price they are willing to pay is less. I would assume that the vast majority of these buyers are doing so for the dividend. DEC has grown it's assets dramatically over the past 7 years and still returned most of the early investors their capital in dividends. The market was clearly wrong about amzn for much of the 90s when SP went sideways. Has the market decided DEC is doing a bad job? Much of the fall is likely due to fund redemptions in which case the fund manager sells regardless of his view. DEC may spend the next decade doing no more deals but I doubt it. The risk I see is that Rusty gives up on the fickle public markets and hitches his cart to a PE group. No more market compliance, accounting headaches, AGMs etc...bliss!

Not particularly relevant to the discussion but will share annecdote with you. I was managing private portfolio's at the time amzn went public. Share price went nowhere for years. Investors complained that every time it looked as though it was going to make money it spent it and built new warehouses, equipment instead. What was the point? I bet none of those original investors still own any shares in amzn. Some times (if the corporate strategy is correct) you just have to be patient..