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The audit report is not qualified and is prepared on a going concern basis so the Auditors are happy that whilst the risk exists it is unlikely to crystallize especially bearing in mind the recent developments which supports that stance.
The relevant rns was headed as Initiation of Farm-Out Process for Verkhuba.
The process won't be finalised till June and as Crofton pointed out the rns states one non-binding offer has been received.
Obviously there are no guarantees of success but several companies have been interested as per the rns.
Buy backs can be good or bad. In DECs case they could be very bad if the share price meanders sideways. It doesn't matter what the underlying metrics show as the market capitalisation of the company takes a significant hit and DEC is currently in the bottom 5 of the FTSE 250. A large buyback would put it at the bottom and if there was any further price weakness then it could be looking at automatic relegation from the 250. It may be this that the shorters are looking at in the immediate short term or by the end of May with further attacks in the meantime.
TheTrotsky
DEC haven't done that in the past. On any acquisition they make they have reassessed the ARO and have capitalised that as part of the assets which they then depreciate over the asset life.
They are unwinding the ARO but have not hit the P/L with a one off set cost.
Note 5 gives more info but note 11 clearly shows the costs capitalised/released under acquisitions of Natural Oil and Gas Properties that relate to the ARO. These figures are also included in note 20.
I agree with the simplistic terms you put forward but that isn't what DEC have done in the main.
This is the 2022 Accounting Policy "ASSET RETIREMENT OBLIGATIONS
Where a liability for the retirement of a well, removal of production equipment and site restoration at the end of the
production life of a well exists, the Group recognises a liability for asset retirement. The amount recognised is the present value of estimated future net expenditures determined in accordance with our anticipated retirement plans as well as with local conditions and requirements. The unwinding of the discount on the decommissioning liability is included as accretion of the decommissioning provision. The cost of the relevant property, plant and equipment asset is increased with an amount equivalent to the liability and depreciated on a unit of production basis. The Group recognises changes in estimates prospectively, with corresponding adjustments to the liability and the associated non-current asset.
As of 31 December 2022 and 2021, the Group had no midstream asset retirement obligations."
TheTrotsky re your reply 15.03
The provision would normally be reduced by cash paid to plug the wells so that those costs incurred do not hit the profit and loss account. The part which has been capitalised as an asset is depreciated over the asset life and that is what hits the profit and loss over the asset life , you are in effect spreading the charge over a long period rather than taking an immediate hit with a "normal" provision eg bad debts , provision for a cost over-run or a provision for remedial costs ( eg builders for defective works).
The provision can also be changed as a result of lower cost expectations or any integral assumptions being revised. However this could lead to various items potentially being mis-stated as any change should primarily be reflected against the fixed asset costs but there is scope to abuse the system and release it directly to the revenue account especially if the provision is being reduced as that creates pure profit - the auditors should pick it up but stranger things have happened.
The problems with the ARO model as far as I am concerned is that the decline rate used is lower than decline rates notified by the company in other documents. The June 2022 supplement page 11 has a very clear major assumption of a 4.5% long term production decline rate. In any other document produced by the company the decline rate is usually twice this figure. The placing circular of 8 Feb 2023 page 6 has a paragraph about the assets being acquired and their decline rates with the company stating " On a pro-forma basis, the Company expects to have a company-wide average
decline rate of approximately 11% following the Proposed Acquisition, below its peer group." So which decline rate is accurate and why is he ARO model using such a low rate.
Furthermore in the circular, same page 2 paragraphs later the company states "The Company estimates
costs for P&A activities to be approximately US$40,000 – 60,000 per well" These figures have yet to be incorporated into any available model as the 2023 version has not yet been released.
Also for the first time the company in the illustration in the supplement states that no sinking fund is required as sufficient FCF will be generated - this is rubbish since in say 40 years time production will be much lower but plugging costs won't be so you have to build up a cash provision to cover those costs.
There may have been a broker downgrade today. On other advfn Investec is mentioned.
As regards the ARO the company has indicated the following 10 yearly targets for retirements - 4.500:14,500:19,000:19,000:15,000 - a total of 72,000. Currently they are retiring 200 wells annually.
The ARO provision is also a bit misleading as the bulk of it hasn't been charged against profits but is capitalised as an asset and then depreciated over the asset life.
All the previous ARO presentations have clearly indicated a need for a sinking fund - the model showed the build up of cash once al debt was paid off. To then state no sinking fund is needed because sufficient yearly cash flows exist is insanity. They only have the capacity to retire 500 wells annually and are actually retiring only 250 of their own wells. The last supplement indicates 4,500 retirements in the first 10 years and then 14,500 in the next ten years and 19,000 in the next two ten year periods,
Those production figures you are quoting are not what was said in the presentation. The question asked was in relation to time frames to get back to prior rates inferring if the pipeline opened and at no point has anything been said about significant increases in local sales. In fact the sales were referred to as being erratic .
The only comment was made regarding the physical limitations on road tanker usage with a max of c40bopd being possible if working 24 hours.
Hopefully sales increase but don't expect there to be much said about it unless there is a significant guaranteed increase.
I think the disconnect is because we are listed on AIM in the UK which tends to be discounted anyway but this is magnified by minimal Canadian visibility especially market wise. Moving to a pure/primarily Canadian listing would trigger a re-rate
moving the price much closer to the peers.
Depends how much of the fall relates to Tesla and its price cutting as this has irked customers who just bought , have a order but in particular those who were thinking of buying but are now waiting in case more price cuts occur. This would be relevant for all EV makers if price cuts continue but Tesla has been the prime mover.
Ends 2p down on a stupid UT for a single share sold.
Any Institutional selling is likely to be done because of holding criteria. We as PI's can decide to let a big share gain run even if it results in an unbalanced portfolio , an Institution does not have this luxury especially if the share price retreats as it has done which has probably affected any risk analysis that is used. This is only an AIM company,
On the Counts' ADVFN board he has posted this
"I emailed him, he said all the gold assays will be in by Q1 and more news flow on the REE project is also due.
Gold assays will also come in on a project by project basis, so one could think if they are positive that it could lead to a rerate as each project comes in and reports."
Him refers to Alex Walker.
If the results are in then I think the company has to legally declare them - to not do so may be a breach of the Companies Act and listing regulations.
Even if the results are in and are good and the company may be in negotiations regarding the way forward then that is itself should be a notifiable event.
The company can't cherry pick how it declares any results.
Any asset values for RMM will not be near predicted market values. Take NewGen and the asset their loan is secured on - any buyer would wait to see when RMM defaults and NewGen takes control. All NewGen would want is its loan and associated fees repaid - they wouldn't care about the sale price being heavily discounted so no buyer will pay even 50% of asset value and it may be far lower than that. The only hope in that scenario is to have several interested parties but even then they could decide to form a consortium and give a lowball offer.
RMM is on its knees with no leverage over potential business dealings.
The share price rises so does the company market value. This may continue but everybody is ignoring the probable large share dilution. At the end of the day the price may reach 30p based on the current issued equity but by then holders may have faced dilution destruction meaning their holding in £s is exactly the same as now.
Basing things on share price is meaningless for an investor - you need to look at the company market value now and when share dilution occurs. The market value could jump ten fold but so what if your holding is diluted by 90% as your holding value doesn't change.