Member Info for Rrb1981

Looks like the market has decided that DEC's AROs are still a problem that needs to be addressed, even after ole Trusty Rusty made the Maverick acquisition. It would seem that Rusty has lost his charm in terms of being able to convince Wall Street that running with 2.5x debt to EBITDA leverage and carrying AROs that are more than the market cap isn't really prudent. The game will continue as long as the debt holders are satisfied. Of course, Trusty Rusty need only take an axe to the dividend again to gain more cash to continue playing the game. Perhaps one day he will realize that he's the patsy at the table and all of the table scraps he is buying are assets that the big boys are thrilled to be getting rid of, let alone paid nicely to dispose of them!

Trek

And yet, DEC continues to languish, and you continue to bury your head in the sand.

Quick Math:

In early 2018, Diversified Energy acquired Alliance Petroleum, which produced around 52,000 mcf/d from 13,000 wells. (source: https://www.proactiveinvestors.com/companies/news/191428/diversified-gas-oil-expects-to-complete-cnx-deal-in-march-191428.html)

If we assume a mere 6% decline rate on this mature production, it has been right at 7 years..meaning production has declined to around 2.65 mcf/day (starting at 4 then declining to 3.8 in year 1, 3.6 in year 3, 3.4 in year 3, 3.2 in year 4, 3 in year 5, 2.8 in year 6 and 2.6 in year 7.

So, DEC has 13,000 wells producing around 2.6 mcf/day. If we assume they are netting $2/mcf, those wells generate $5.20/day/well. That's around $1,900 per year. Cost to plug and abandon those wells is around $20,000 each. ...(pulls out calculator), oh, that's around 10.5 years of cash flow to pay for the P&A.

Similar with the CNX Mountaineer acquisition of 11,000 wells producing around 54,000 mcf/d. These are producing an average (in 2018) of around 5 mcf/day/well. They are now at around 3.2 mcf/day/well. They could dedicate all of the remaining production to the ARO and still not cover it. The market gets it and is why DEC's equity is so poorly received by Wall Street.

This is the tip of the iceberg. They currently have tens of thousands of wells that are essentially being operated to avoid having to plug them. Wells that are generating virtually nothing. Wells that are being operated for a day per month to keep them active.

You can verify this by simply taking the total Appalachian production and dividing it by the number of wells they operate in Appalachia. Once you realize the average is sub 10 mcf/day and then you account for the fact that they have a number of high volume shale wells (such as those acquired from HG Energy in 2019, a mere 107 wells producing 126,000 mcf/day or over 1,000 mcf/day of production per well, then you realize in order for the average to be so low, they have to have an enormous number of "marginal" producers (e.g. wells making 1 mcf/day).

These facts may be inconvenient, but they are why DEC's stock is languishing.

Oh Terry, you do know you don't have to make it back the way you lost it.

Or did you get sucked into the cult of Rusty?

Fundamentals?

Do you think the market is able to evaluate all of the other E&P companies based on fundamentals, but then suddenly forgets how to value Diversified? Laughable. You are indoctrinated and will be until the end.

"DEC makes a lot of money. Sound to be a hell of lot more. Easily covers ARO commitments. No rush for wells to be closed if they still produce gas/oil."

Ah, the market does not agree with you. I think you are simply yelling into your echo chamber thoughts that reassure you. If they made so much money, why reduce the dividend by 2/3? Are you insinuating that the collective market can value companies like ExxonMobil, Chevron, BP and literally hundreds of other E&P companies, but when they get to Diversified, somehow, they forget how to value production, reserves, AROs etc?

It is refreshing to see Terry coming to grips with reality. As they say, it is easier to fool someone than to convince them they've been fooled.

Terry is slowly realizing that DEC hasn't managed to escape the ARO overhang. Rusty is now trying to buy more productive wells away from Appalachia, but the 80,000 well overhang persists. Market sees right through Rusty.

TerryM1

I am thrilled to see you are finally seeing the light. It does my heart good to know that you have finally understood the scam of DEC. Just think, without intervention, you could have turned into a mumbling Oak Bloke, explaining why every move Rusty makes is brilliant, how the market got it all wrong (and how he got it all right), all the while the dividend was cut by 2/3, the equity price made a similar move.

I keep asking, does anyone really think DEC had $3.50 to pay the dividend now? Would Rusty really issue equity at current prices knowing it was capable of paying that dividend?

"Once the Maverick deal is swallowed Hutson needs to stop deal making , leverage all the DEC assets to create True Shareholder Value and Corporate targets to get this SP back over $20 within the next 12 months. This needs to be his #1 priority and return value to his shareholders ."

Oh this is laughable. Don't you realize that serial acquisitions are necessary to keep the scheme working?

Rusty will continue to buy anyone's castoff assets so long as they provide immediate cash flow. No matter what the ARO is, he doesn't care. Many assets in the US are being operated simply to avoid having to properly plug & abandon the wells. Rusty is more than happy to acquire these at a low price, providing an immediate infusion of cash flow to help prop up the company and keep the dividends flowing. But of course, eventually those 80,000+ wells will need to be plugged. Plugging a mere 200 per year means that the wall of end of life wells keeps growing. The market has seen through him.

Poor Terry,

You know the old saying, it is easier to fool someone that to convince them that they have been fooled.

I fear that you simply cannot process that you have been fooled, no matter how many times we tell you.

PT Barnum once quipped" there's a sucker born every minute". It would seem that the E&P industry now realizes that Rusty is the sucker. All the bankers have to do is tell him he'll have 50% cash margins and more wells than he can count and he's ready to sign on the dotted line.

Oh Terry - The sound of desperation in your message seeps trough. At least you have learned that Oakbloke is nothing but a pumper. There is hope for you yet.

Terry - I have not posted a single lie on this board. Not one.

I have simply challenged the cult. I have noted repeatedly that the market has not forgotten about the AROs. Rusty continues to try to kick the can down the road. The market is far smarter than many give it credit for.

Terry,

So you finally saw the light and realized DEC was a sham. I had faith that you would eventually come around.

AROs are still the big issue for DEC. The market hasn't forgotten.

Terry - You mean you don't believe Oakbloke that always has an answer for everything and always projects a positive outlook for DEC?

I'm back after an extended hiatus. Thought I would pop in and see if the DEC fan club is still in full force. Looks like nothing has changed. Bemused investors still drinking the Kool Aid.

When will you figure out that Rusty isn't respected in the E&P community. He's the patsy at the card table that everyone loves to see walk up. If you have old production that you are operating simply to avoid having to pay to properly abandon it, fear not, Rusty will happily overpay to take them off your hands.

Funny how, despite so much "value creation", the entity seems to just keep adding debt, adding shares and of course reducing the dividend. Kind of makes you question whether Rusty really knows what he is doing, doesn't it.

You claim he was a bad CFO? He literally developed the amortizing ABS's for DEC. Name me another E&P company that had a CFO savvy enough to come up with a creative financing like that? You can't name a single thing that Williams did that put DEC into a bad position.

Eric Williams left because he didn’t wish to be a part of an unethical scam. Once the market figured out Rusty’s scheme, the game was up.

40 BCF over 3 years.

40 BCF = 40 million mcf

13.3 million mcf per year

DEC produces 855,000 mcf/day

This is roughly 16 days worth of production or a bit over 4% of their annual production.

Rusty should know by now that fluff press releases won’t fool the market.

Don’t look now but DEC moving back down. Gas prices also dropping.