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Re-action to what? Are we saying that the small change to Adage's existing short position kicked this off? There's been a lot of posts today but I'm not aware of anybody setting out any (new) reasons for today's fall.

I agree that an RNS will probably be required (we might get one tonight after the US markets close) but I can't see what in particular triggered today's large fall (apart from perhaps the price falling through the psychological 75p barrier prolonging the fall further). I've had a quick look at today's trades. Apart from some action at the close, which is to be expected given the size of today's fall, there doesn't appear to be any large (notified) trades to have triggered the fall. Perhaps a large shareholder has offloaded in the market and will noticy the market in due course. Just have to wait and see.

GG, That's not how Chapter 11 works. If a company can afford to continue to pay its creditors (as you suggest), it doesn't need to go into Chapter 11 (and won't be permitted to into Chapter 11). More often than not the creditors take a haircut and/or exchange debt for equity (in which event Rusty would be diluted out along with all the rest of us).

Sure, Chapter 11 can sometimes give companies breathing space to enable them to raise funds from selling assets etc, but at the end of the day it doesn't devalue the company more or less i.e. if Rusty is intent on taking DEC private, Chapter 11 is unlikely to assist him. If DEC has problems, as you like to assert (why you would continue to hold DEC if you think that's the case is beyond me), any offer Rusty would make would reflect that; he doesn't need Chapter 11, the additional costs or the potential future financing ramifications arising therefrom.

"What exactly is 'expenditure actually incurred', if it's not a LOSS".

It's a payment! A loss, on the otherhand, is the net difference between what you expended and what you received e.g. the difference between your trading income and trading expenditure amounts to a profit or a loss.

Hedges are a gamble on the future price of a commodity but producers don't normally close them out unless there is an exceptional opportunity (more often than not the potential benefit from closing ou the hedge does not materially outweigh the compensation required by the hedge counter party).

The term "loss" suggests a misstep by DEC in the normal course of its business; it was not. Exceptional events (the war in Ukraine) gave rise to an exceptional opportunity. The event could not have been foreseen (certainly in the West) 4-5 years previously.

Whether there is ultimately a profit or loss will only be determined in subsequent years; by judging the amount received (the additional income arising from re-setting the original hedges for FY23-FY27) compared to the amount foregone (the compensation payments made in 2H22). All other things being equal, there should be a profit on the transaction, regardless of what happens to the future spot or hedge prices.

Would somebody please explain how Chapter 11 works to GG and why a shareholder with only 2.5% of the stock, such as Rusty, wouldn't be in any better position (than any other shareholder) to buy the company on the cheap!

Maxandmonty, I suggest you read Note 15 on pages 155-156 of the FY22 accounts. The hedge modifications are not a "loss", as GG suggests, but expenditure actually incurred. As explained in Note 15, the hedge modifications primarily comprised of swap enhancements and the extinguishment of standalone call options (DEC spent a lot more in FY22 than it normally does because the unusually high spot price gave DEC an opportunity to exit pre-existing hedges and re-hedge at a higher price).

You could say that the hedge modification payments are, in effect, compensation paid to DEC's hedge counter parties to exit the contracts. One can also assume that the amount paid wasn't "full value" i.e. the difference between the original hedge price and the prevailing hedge price. If it was "full value" then there would be no incentive for DEC to change its existing hedges. Likewise the hedge counter party would be willing to accept a lesser amount because there's still a risk that the future spot price may be lower than the original agreed hedge price, in which event they'd be out of the money. Obviously we we're talking about hedges 6-12 months+ down the road, rather than (say) next week.

"So I'm sure you can explain why they had to carry out a 'hedge modification' for FY 2022, at a cost of over 100 million dollars?"

GG, you really are being a dimwhit. Look at my previous post to Ace regarding the weighted average hedge price changes for FY23-FY27 between FY22 and FY23. DEC paid to get out of some historic hedges in and around $2.50 so that it could reset its hedges at a higher price. That was costly but worthwhile (it cost them c$100m but should generate an additional c$200m+ or revenues between FY23 and FY27). If you look at 1H23, DEC has actually generated income from hedge utilisations. It's the same principle but working in reverse; some of DEC's counter parties are paying DEC to get out of some of their future hedge commitments because they're now concerned that the future spot price may be signficantly below the new hedge prices they agreed with DEC. Although it means that the prospective additional $200m+ revenue DEC may generate will be less, DEC is crystallising a receipt now instead.

"For a couple of years, it was able to hide this shortfall in its' production by buying gas at spot or market price. As long as the daily price swings weren't too exaggerated, some days DEC would make money by buying at market price to cover what it had promised to recipients of that gas in the form of futures contracts. It probably could have gone on doing this for some time, but 2022 saw some massive and sustained increases in market price for gas. this resulted in an alleged loss of over 100 million dollars last year. This is the immediate and most visible sign of a company that plays fast and loose with it's reserve, daily output, well maintenance and retirement claims, as well as cash burn and a few other question marks. Alternative view of this board - everything is fine. Very brief, sorry, it's dinner time."

GG, for the upteenth time, where is your evidence that DEC has been making massive, significant buys on the open market? I won't say that DEC never buys but there are no massive cash outflows to support you claim. As I've said before, I would expect the auditors to review the gas physically delivered to Henry Hub as part of their audit review.

However, like every conspiracy theorist, you expect the company to respond to your claims without providing a shread of evidence to support them. You are living in Cloud Cuckoo Land. Please show us a shread of evidence in the financials to prove your claims.

Ace, more disinformation.

The IFRS cash flow does not show the real cash generated from operations. It's a mish mash. The figures I've given are the real cash generated from operations. We could argue about the hedge utilisations but I've given my reasons for excluding them because of the exceptional payments in 2H22 that are unlikely to be repeated. Working capital movements just skew the analysis. The net difference may be small but beacuse of the large swings that can occur from one period to the next it suits your argument to include them. My rationale for excluding the working capital adjustments is that they relate to the utilisation of operational cash flow, not the generation of said cash flow (only in the IFRS multiverse could the payment of debtors and creditors ever be construed as the generation of operational cash flow), and can be affected by the timing of receipts/payments, deliveries etc. E.g. DEC could easily have increased the cash generated from operations at the end of 1H23 by simply delaying creditor payments until after the period end (it's called window dressing and is totally arbitrary).

At 30 June 2022, total borrowings stood at $1,381m. At 30 June 2023, total borrowings stood at $1,555m. That's a 13% (not 31%) increase. During the intervening 12 months, DEC has spent $475m on asset acquisitions and raised $38m from asset realisations and $156m from equity issuance. That's a net outlay of $281m compared to a net increase in debt of $174m.

You say that I've missed "the $37.5M raised by selling assets and the $156.8M equity raise" but you, equally, have missed the $213m spent on asset acquisitions in 2H22. It's easily done. I'm sorry that DEC couldn't get the equity raise away until 1H23 to make life easier for you. By concentrating on one period you've completely missed the Big Picture.

Hedging is not a perfect science; nobody ever said it was. Hindsight is such a wonderful thing; if one could only travel through time so that one could know what new assets one might buy and precisely what production one might have to sell whilst at the same time picking the most opportune time to hedge or not as the case might be. I'm sorry that DEC isn't perfect like you. DEC unravelled future hedges as best it could in 2022 (but probably not all because the potential marginal benefit didn't make the hedge utilisation cost worthwhile) to take account of events that it could not have foreseen (the war in Ukraine) when it started its hedging jouney 5+ years ago and to maximise its medium-term revenues. DEC could not wait until now to hedge the majoirty of its production (DEC does not gamble); if the Nymex NG strip price for 2024 now stood at $2.36 (rather than $3.36) we wouldn't even be having this conversation (indeed without the war in Ukraine it may well have been sub-$2.50).

Ace, GIGO as usual I see. Repeating falsehoods don't make them true.

I'll take you up on just three of your key points (I'll leave it to somebody else to poke holes in the rest of your assertions).

Firstly, stripping out working capital adjustments and hedge utilisations, cash flows generated from operations is actually rising - it was $409m in FY22 (FY21: $300m; FY20: $266m) - even when you compare the H1 results - it was $274m in 1H23 (1H22: $149m; 1H21: $141m). The justification for stripping out working capital adjustments, as I've said before, is that they aren't cash flows generated from operations but utilisations of said cash flows and vary from period to period, depending on when shipments are made and the timing of payments/receipts. The justification for stripping out hedge utilisations is that there were abnormally large payments made in 2H22 of circa $100m+ (which are unlikely to be repeated on a regular basis) to take advantage of the unusually high spot price to reset DEC's future hedge prices. This was a discretionary use of funds to take advantage of a one-off opportunity to improve revenues in subsequent periods. Even allowing for the hedge utilisations, revenues in FY22 compared to FY21 would have been flat.

Secondly, as as the end of 1H23, only about 17% of DEC's total borrowings were floating rate i.e. about 83% of DEC's total borrowings are fixed rate! So, to imply that the interest cash burden on DEC's debt is rising uncontrollably is both unfair and untrue. Yes, debt and interest have risen but only because DEC has acquired new production assets, which in turn will result in increased production revenues in later periods. Until DEC eventually goes into run off, it will always be looking to acquire new production volumes to replace its own depleting reserves (you pump oil/gas it will inevitably deplete; it's fact of life). With regard to whether they are paying off debt with free cash flow or the RCF, I'd suggest you actually look at the figures. They expended $262m on asset acquisitions in 1H23 and increased their RCF by $209m. I rest my case.

Finally, you say that DEC's hedge prices in 2024 are below 2023. When they exited FY21 their weighted average hedge price for FY23-FY27 were $2.85, $2.66, $2.55, $2.53 and $2.50 respectively. When they exited FY22 their weighted average hedge price for FY23- FY27 were $3.65, $3.15, $3.09, $3.15 and $3.04 respectively; those abnormal hedge utilisations in action. Even at constant hedged volumes (hedged volumes tend to progressively increase as the year of production approaches) that's an additional $227m of revenues over the 5 years in question (circa $100m+ after allowing for the hedge utilisation costs). The hedged price in FY24 is less than FY23 but it's still higher than today's Henry Hub spot price of $2.87! The fall in the hedge price is due to factors outside DEC's control e.g. the Texas LNG refinery coming back on line following the fire.

Saga, I think quite a few of RGL's premium offices are "out of town" developments. That said, "out of town" in the Regions doesn't always mean less commuting (in smaller towns and cities if often means more commuting because the populace live in or around the town centres, rather than out on the outskirts).

0715, I said we should ignore offices within the M25 because the likes of Meta have recently handed back the keys on their new, unused Central London office (they paid a surrender fee of c£150m). Also, it would appear that Canary Wharf is losing tenants and is now looking at re-purposing some/all of the development. As I understand, there is also a lot of new offices coming on line, or due to come on line in the next few years, in Central London which will probably means that there could be a lot of surplus office space in Central London for many years to come (a lot of the new offices were planned and broke ground before Covid; timing is everything), which in turn is also likely to have a knock-on effect on rental rates in Central London (I wouldn't be too surprised to see landlords now having to offer rental discounts and/or reverse premiums to get new tenants to sign on the dotted line to fill up these new premium offices; perhaps even paying sweetners to retain their anchor tenants). I note LandSec's bullishness but even new, premium office space in Central London would appear to be no guarantor of secure, long-term future revenues (it's my understaning that the Meta offices would have ticked all of the premium office criteria).

I would however suggest that some of the larger renters in the Central London market - banks, financial institutions, corporate headquarters, technology companies etc. - aren't as prevalent in the regions or are tasked for a different purpose e.g. banks in the regions tend to be represented by call centres rather than corporate or investment banking sites. Bottom line, I don't think that there is currently a general read across from Central London to the Regions (which may bode well or ill) and at present I don't believe that surplus office space and WFH are as big an issue in the Regions as it is, or will become, in Central London.

0715, in your haste you seem to be mixing apples and pears. Your first paragraph makes no sense; I'm not disputing that the London market is trending downwards. If you're referring to a regional report then the extensive survey that RGL has done of its own tenants should, perhaps, be given more weighting (as regards RGL's future prospects) than simply a general straw poll of landlord sentiment (who may not have done a similar exercise).

Lies, damn lies and statistics in action again I see.

The Cushman Wakefield data you provide firstly says that office take-up across the Big Five and Central London was 2.5 million sq ft in Q2, down 7% versus Q1. It then helpfully gives a split of the Q2 square footage between the Big Five and Central London but fails to provide the percentage falls in the relative markets between Q2 and Q1. Are we to assume that the fall in the Big Five is smaller, the same or greater than Central London? We know that Central London is suffering badly, so it is a pertinent piece of information (perhaps a review of the Q1 report might provide a similar split of the square footage to enable us to compute figures for the Big Five and Central London seperately)

Also, what exactly is office take-up? In Q1 there was (apparently) approximately 287m square foot of built office real estate in the UK. So, I'd suggest that the take-up referred to in Cushman's report is new lettings (please correct me if I'm wrong) in the Big Five and Central London. The fact that new office lettings is falling is, perhaps, not really that surprising given the current economic backdrop but that does not automatically read across as implying that there has been comparable fall in NAV. Albeit that I'd not disagree with the general premis that NAVs have been falling, the real question is whether NAVs in the regions are going to continue to falling or are now going to level off, and hopefully start to rise again, now that it would appear that interest rates may, hopefully, have plateaued. Subject to the release of the latest service sector data and other pertinent inflation data, the latest industrial sector data released today would seem to make that the more likely scenario i.e. the odds of a further interest rate rise are looking less likely than they were last week (still not impossible, but less likely than they were).

0715, I can't comment on BCPT but have they actually put "boots on the ground" so to speak and actually surveyed tenants on their current intentions? Or have they just carried out a desktop review?

Forgive me if I'm wrong but when you reported on respondents on current market sentiment wasn't that from a national RICS quarterly report?

0715, I'm not saying that RGL is not without problems at the moment but the way I see it the market is correct and the office market is collapsing in on itself then RGL will have to sell all of its property (selling £150m only gives it breathing space until the LTV falls again). IMHO markets always tend to overreact, with a little help from private equity. I beleive the situation is manageable but the market has become hysteric.

Is RGL a bargain? I honestly don't know. I'm not selling but nor am I buying (I've already got enough skin in the game and don't need to incease my exposure). As I've said before, the short term share price is irrelevant. I think the markets "world view" is currently too reliant on national data (which is being skewed by events within the M25) and what's happening in the London office market. We know that there are particular problems affecting the London market (oversupply and WFH) which aren't so prevalent, if at all, in the regional markets. I can't stop the markets relying on national data nor can I provide regional data beyond what RGL has collected. You keep quoting national statistics which aren't necessarily applicable to the regional markets e.g. we know/expect London office prices are likely to continue falling significantly (which will skew the national data). I'd accept that the economic backdrop isn't good and that interest rates might stay higher for longer (that's another thing the market can't make up its mind about) but I'm yet to be convinced that there is going to be a mass exodus of tenants from the regional market or that rents, on the back of inflationary rises, will not start to trend upwards. The fact that RGL has never differntiated between its regular and irregular income does make it difficult to see the wood for the trees but we'll have to see.

Pikeman, At the time, each and every crash always "feels different". History says not but we'll have to see. On the bright side, high inlfation is eroding the value of that debt mountain ;-)

GeneralMonty, I wouldn't necessarily read too much into KMPG making people redundant at the moment. The audit market is in flux and KPMG are in the doghouse. I also suspect a lot of the redundancies will be within the M25. Auditors have been recruiting a lot of additional staff in the last few years because they've had to tighten up their audit procedures and do a lot more data collection, testing and checking; that trend is likely to continue for the forseeable future.

DGI9 is totally different. Actually try reading the accounts and trading statements over the last 6-12 months; they clearly stated that they needed to invest over £500m on new capital expenditure in the next 12+ months just to meet existing customer demand/commitments (the expenditure could not be deferred) and had little or no funds available to invest i.e. they were either going to have to borrow, sell or do a capital raise just when the markets were in tumult. Current borrowing costs and covenants were going to make borrowing difficult/impossible and the discount on the company's share price was going to make a capital raise impossible. It's now in the process of trying to syndicate a sale of a significant interest in one of its operating subsidiaries to raise the funds it needs. I looked at DGI9 3-6 months ago and decided there and then to give it a wide berth because of its need to source a large amount of funds in a relatively short time frame (the issue wasn't with its existing borrowing per se; it was the fact that it needed to invest now when the capital markets were, effectively, closed). The fact that the market has reacted the way it has today is an indication that the market, like you, hadn't bothered to read the accounts and statements either! The fact that DGI has stopped its dividend to conserve cash is something it should have done long ago.

It's a totally different situation to RGL; RGL only has modest capital expediture commitments and these can be funded from the sale of properties up to £10m if required (or the capital expenditure can be deferred). Furthermore, any further property acquisitions are discretionary.

Pikeman, IMHO the UK markets have just gone to pot. There doesn't seem to be much rhyme or reason; the market is just choosing to look at any news, positive or negative, as a case of a "glass half empty". There's a lot of economic uncertainty, geopolitical problems, inflation, Trump etc. etc. Given the backdrop, the "door" has been opened and its easy money for the private equity funds to chase the market down (there's little or no resistance). Unless this is truly Armageddon, the markets will eventually turn (often when there are just no more pips for the private equity funds to squeeze i.e. when the risk/reward ratio becomes too high - everything's great when you're making £10 for every £100 you commit but when the return falls to, say, £1 for every £100 you commit then the risk starts to outweigh the potential benefits).

"The figures I posted earlier reflected that. In 2023 "working capital adjustments" constituted 36% of operating cash flow!" Working capital adjustments aren't really operational cash flow per se; they are, instead, the use of operational cash and can be affected by when deliveries are made, cash is received and/or creditors are paid. They can be scewed simply by the fact that, for example, settlement at the end of the month falls on a weekend and so slips into the following month (so there can be very large swings from one period to the next). Under the old accounting rules, working capital movements weren't included in cash generated from operations (they were "below the line", like finance costs).

The perception that hedging destroys value is, IMHO, a misconception because it can also protect value if the spot price plummets below the cost of production (this has happened before and mid-size oil/gas prodcuers have gone bankrupt because they didn't hedge). Nobody, at least in the West, was predicting that Russia was going to invade Ukraine and the impact that the resulting sanctions would have on global oil/gas prices. If DEC had been aware 4-5 years prior then it may have adjusted its hedging strategy. One swallow does not make a summer (just because DEC has missed an opportunity to make excess profits does not invalidate it's hedging strategy; it's not a business critical mistake, unlike if the spot price had plummeted below the cost of production). From DEC's perspective, it's cash flows are in line with its internal expectations and the cash foregone was cash that DEC never expected to receive (it doesn't affect its day to day business).

0715, My point is that the market doesn't concur until it does concur. The market is fickle. The market always predicts the worst case scenario i.e. that this cycle will never end, nobody wants to use offices anymore etc. etc. It was just the same when the analysts were telling us about the Goldilocks cycle (the market has a short memory). The market, with the benefit of hindsight, is rarely, if ever, correct about the overall picture.

Although RGL is currently in a pickle, it's long-term future is now dependent on when the regional office market reaches its nadir. The surveys that RGL has undertaken point to a much more robust regional office market than many commentators are willing to give credit for. RGL has not stuck its head in the sand it's gone out and surveyed hundreds of tenants to find out what's happening on the ground; it's not relying on uncorroborated, anecodotal evidence.

"All other REITS saying office sector deteriorating and looking to sell". Which REITs? There are plenty of REITs which are cautious about the office sector that own little or no office space and are basing their assessments simply on anecdotal evidence. There are also plenty of REITs that have office space in London (a totally different market). Which other REIT which owns offices solely in the regions are you referring to?

"Income down, no point saying rents are going up when income gone down by £3m". I suggest that you re-listen to Inglis's interview. Income is primarily down because RGL's irregular income has plummeted; it's lease surrender and dilapidations income. That is not necessarily a bad thing; it means that not so many existing tenants aren't terminating their leases early and, going forward, voids will be reduced (it's rare that an existing tenant can be replaced immediately and properties will often remain vacant for a period). RGL does not distinguish between its regular rental income and its other irregular income (IMHO RGL should make better disclosure going forward).

"Do you believe what he says or what is actually happening in front of your eyes?". We are a service-based economy. There will always be an element of WFH but it appears that we are now returning to more normal levels in the regions. Inglis has gone direct to the tenants and cut out all the other "noise". I think the demise of the regional office has been overdone.

There are clear problems in the London market because of oversupply and WFH but those problems are not so acute in the regional markets; regional markets do not appear to have the same oversupply issues and commuting outside the M25 and wider South East area is more a matter of choice than necessity (where housing affordability has forced people to commute long distances). WFH is far less of an issue in the regions. Employers generally are keen to get workers back into offices and the justification for WFH in the regions is less compelling.

Pikeman, There is some dispute as to whether the amount DEC has provided for plugging its wells, with or without its own crews, is reasonable given that its reported revenues from plugging third party wells in its latest accounts is signifcantly higher than the costs it has provided. Part of the discrepancy can be explained away by the "profit margin" and part from the expected economies of scale that DEC might expect to be able to benefit from when it starts plugging it own wells en masse (reductions in tooling up/down times, travel etc.). However, a 20-30% profit margin on current third party contracts would still leave a very significant difference between the current costs it is incurring and the costs that it is providing. I'm just saying that it's a point of contention.