Member Info for TheTrotsky

You may as well ask why long investors average down. It's the same principle in reverse.

Of course there may be other reasons, macroeconomic or otherwise, why Marshall Wace might increase it's short position.

Terminal decline? They lost the British Gas contract back in 2019 and had to re-set. They sold their Romanian subsidiary to fund re-investment in the UK which has culminated in the recent acquisition of the Appreciate Group (Love2shop).

Initially growth in UK income from replacement sources was stymied by falling income from the British Gas contract but UK income and profits are now ahead of where they were previously and steadily growing apace. Group income and profits are not yet back to the levels they were prior to selling the Romanian subsidiary but are trending upwards YoY and Love2shop should help take them to the next level.

I think Paypoint is too quickly written off because people compare today's results to pre-2019 and don't spend the time to look into the background.

Perhaps some should point out to them the AIM listing requirements that they are obliged to follow.

Not wishing to split hairs, but the dividend reference related to the dividend paid in January. They've given no guidance on the dividend due to be paid in July albeit, based on this RNS, there's no grounds to consider that the dividend will be cut; there may even be scope to increase the quarterly dividend to (say) 0.75p at some point in the next couple of quarters.

IMHO you've always got to take a balanced view of directors buys and sells; I don't think it's reasonable to expect directors to hold the majority of their wealth in one company's shares, any more so than any other investor. As long as they hold a reasonably susbtantial holding in the company (either value or percentage-wise) then I don't think it's wholly unreasonable for them to sell any additional share awards, either to diversify their investments.

In fairness to Gray, the COO (Eric Williams is the CFO but doesn't appear to sit on the BoD), he may have sold 250k shares but still retains c2.92m shares (c3% of the issued share capital); so he's still got a fair amount of skin in the game both value and percentage-wise. What's quite interesting is that if you refer to page 108 of the last accounts, he and Rusty are actually required to hold the equivalent of, at least, 200% of their respective salaries in shares. I also note that the sale on 22-May followed the vesting of 774k shares under the 2020 LTIP award on 20-Mar (Rusty received 1.7m shares at the same time); so he sold about a third of the new shares he received in March.

Is that what the coffee cups are for? ;-)

Mea culpa

CC, I'm not trashing your research; it's appreciated I assure you (I wouldn't know where to start to find even half the stuff you've turned up). But you, like most of us, have a vested interest in CASP succeeding and therefore you, and all of us, are prone to misinterpret and/or overstate the relevance of these various snippets of information gleaned from a variety of not necessarily correlated sources (it's how we're wired).

It's been too long now. We need an RNS to put these snippets into context.

agricore, thanks for your explanation but you really are missing the point.

you shouldn't need to be an accountant to understand a set of accounts! nor should you need to revert to the notes to the accounts to try and "weed out" any unrealised profits/losses so as to determine the "realised" profit/loss and, even then, it's not that simple. some of those unrealised profits/losses should possibly be taken into account because ifrs makes no real distinction between events that may occur and events that are never likely to occur (the balance of probabilities).

to put it simply, whether it was originally intended or not, ifrs has simply become an accountants' junket (and i say that as an accountant myself). the accountant's mission should not be to try and make everybody else an accountant! it should be to produce a set of accounts which is as plain and simple as possible so that they can't be misinterpreted. i appreciate that it's not always that simple and perhaps some additional disclosure could be made by, for example, including an additional "**** hits the fan" statement which reconciles the reported profit/loss to the potential profit/loss if it all goes "tits up". you'll appreciate that these are all technical accountancy terms ;-)

as regards, dec i'm not really sure what benefit shareholders derive from the inclusion of the potential, future, unrealised, non-cash profits/losses on its financial derivatives instruments (aka hedges) in its p&l and balance sheet, where a simple note to the accounts would better suffice. it's actually a distraction from the far more impactful capping provision, which will affect both cash and realised profits.

it's not dec's fault but ifrs seems to have ended up prioritising "trivialities" (putting form before substance). hedging is a core part of dec's business strategy and it's understood that, as a result, potenial profits will be foregone; it's not going to materially change dec's business strategy.

With respect CC your research has already been found wanting e.g. the debentures. I'm not saying that you're wrong but the snippets of information you've found don't provide a full picture and are open to (unintentional) misinterpretation. There's no substitute for an RNS and even those aren't always a guarantee.

Carver is a sly, old dog. In the last RNS he said "The next dividend announcement therefore is expected to be made with the publication of the 2022 audited accounts in May 2023 ...". The key word to note is "expected". That gives him plenty of wiggle room, unfortunately. Also, the FY21 results were announced on 27 June last year, so it was always a bit optimistic to expect the FY22 results to be published before the end of May. That said, Carver and CASP have given a commitment on dividends (until such time as they advise the market otherwise) and the dividend announcement does not have to wait for publication of the FY22 results. A dividend RNS ought to be forthcoming one way or the other.

Notrex, I may be a bit frustrated with PIs not grasping the principle but at the end of the day it's not the PIs who are really moving this share price. If you'd followed some of my recent posts with Ace you'll have seen reference to the derivative financial instruments (aka hedges) in current creditors; it was not at all obvious that these were non-cash liabilities and Ace is a seasoned campaigner who knows his way around accounts. You shouldn't have to dive into the notes to the accounts to try and determine what may, or may be, payable. I'm definitely not a fan of IFRS and am constantly left to wonder what it's tring to achieve.

I have to say that it would be tempting to buy more at this price but I'm trying to maintain my investment rigour. I already have a sizeable holding (for me) both as a percentage of funds invested and income generated and, as such, if there is a fundamental problem with DEC (I don't believe there is but the constant price falls are nevertheless unnerving) then I can survive the hit. Too often recently I've read about people losing six figure sums and either bemoaning their luck or saying that they are, essentially, now on their uppers as a result. Investment rigour doesn't mean that you will always avoid losses (I probably should be a lot more ruthless about setting my stop losses - I tend to invest and hold more often than is good for me) but at least I never lose more than I can afford.

Pikeman, The fact that reserves might fall and prices rise may mean that new alternatives are able to enter the market. Here in the UK 50 years might prove conservative if the government continues to have an incoherent energy policy and does not make significant investment into the current electricity transmission system. We currently face the prospect of green energy sources not being able to connect or being paid not to supply because our current transmission system is not fit for purpose and have the additional farce of the government not only trying to encourage the construction of even more wind farms but alos trying to encourage users to switch from gas to electricity despite our inability to self-supply. That said, I don't think 50 years is wholly unrealistic or conservative.

I believe that I'm right in saying that TEP's profit per customer falls as gas and electricity prices fall and/or usage declines (because its margin on the gas and electricity supplied by nPower remains constant) and, as such, the TEP share price is probably suffering from a quadruple whammy: (1) It's been a relatively mild winter so TEP hasn't been able to take as much advantage of higher pricing as it might, (2) It's now entered the lower usage cycle of the summer/autumn months, (3) Global electricty and gas prices have been falling (but may start to increase again as we enter the autumn/winter period), and (4) The recent reduction in the Ofgem price cap (and the expected further, but smaller, reduction to come in September).

TEP's business model is fairly simple and is underwritten by its supply contract with nPower but it does mean that its profits per customer tend to fluctuate with market prices and that those "lost" profits can only be replaced by adding additional customers and services (it's has to run faster just to stand still). Assuming that TEP's ability to add customers and services remains fairly constant (growing at a reasonably predictable rate albeit that it can, occassionally, have exceptionally good periods and vice versa) and the fairly benign supplier environment (no new collapses look imminent), it's likely that TEP's profits over forthcoming reporting periods will fall short of what brokers might have been predicting only 12 months ago and it's ability to again increase its dividend beyond the end of FY23 looks less likely. You also have perhaps to question whether TEP can actually maintain its FY24 dividend at 80p; historically it hasn't tended, if at all, to backtrack its dividend, so I'd hazard that it will maintain its dividend, even if it isn't full covered for the foreseeable future - it wouldn't be the first time. TEP has always been thus. It expands, it consolidates and then it goes again but it may take another 8-10 years for its share price to re-scale the heights seen last November (it's previous share price peak was in November 2013 and it took until June 2022 to surpass that and it's now trading below that November 2013 peak once again).

That may be pessimistic but TEP is currently neither a growth nor an income stock. It either needs to add new additional services to accelerate profit growth or its share price needs to fall further to make it more attractive to income chasers. I'd hazard that its forward yield might need to rise to, at least, 6% to make it attractive to income chasers which, at 80p, would mean a share price of c1,350p (or below). The fact that its dividend might not be covered might necessitate an even higher yield premium in the medium term.

I'm not a current holder but have held a couple of times in the past and done quite well (albeit that I sold out too soon).

GLA

How many times does it need to be said? DEC's not making hedging losses! They are non-cash adjustments that reflect the "lost opprotunity" of chooisng to hedge rather than sell at the spot rate. DEC's accounting for its hedges is driven by IFRS; one of the aims of whch is to make accounts easier to understand, didn't you know! When you have to pick the accounts apart and separate the realisable assets/liabilities from the undrealisable you have to wonder what the hell is going on. It's a complete farce.

I should add that I don't think DEC's equity would be (or shouldn't be) judged on its IFRS figures.

As regards DEC's capping costs, it would currently plan to do it all in-house, thus stripping out the profit element that the likes of Baker Hughes & Haliburton would add to the cost. Also, I believe that because of the scale DEC is acheiving in the regions where it operates, it can better plan and manage its capping, thus reducing its mobilisation and demobilisation costs. Most of those economies are likely to come to the fore further down the road when DEC starts capping (potentially) thousands of wells a year rather than the current few hundred. However, whether $20,000 per well is a reasonable estimate remains to be seen and I'm not sure that DEC has done enough to prove its doubters wrong (yet).

Ace, I'm not sure whether they have reached a debt/equity ceiling. Based on IFRS, the group's equity is toast because of the requirement to book these notional, unrealised hedging losses. According to their plan, if they didn't buy any more assets, they'd expect it to take 50 years to run down existing reserves and cap all wells. In the meantime. according to plan, existing debt would be paid down off over the next 10 years from operational cash flow and they'd expect to pay an annual dividend of at least 17¢ with the potential to pay additional dividends/capital returns equivalent to c50¢ per annum.

I don't believe that DEC's business model is predicated on simply buying additional assets; I believe that it's predicated on achieving the necessary economies of scale both in production and capping. I believe that they've already achieved such scale in the Appalachian Region but I'm not sure about the Central Region.

DEC always had a finite lifespan as an oil and gas producer and I don't think that has changed or will materially change even if it buys further assets. You've also got to factor in how much longer gas will play a part in energy production; extending the lifespan of DEC's current oil and gas production beyond the lifespan of energy production from gas serves no purpose. 50 years would not appear to be a wholly unreasonable target.

Ace, DEC is making large acquisitions. Of course it's not going to be able to acquire these assets from current operational cash flow alone. Compare them to a landlord buying one porperty or a portfolio of properties; you might be able to buy one property each year from operational cash flow but not whole portfolios. Economies of scale are the key to DEC's operation; they're not going to but the odd well here or there.

As regards the capping liability I think you need to re-think. The capping liability, unlike some of the other liabilities we've previously discussed, is a real, future, potential liability and, according to one recent report, may be so large that DEC is already technically insolvent. I'm not suggesting that the report is right but I don't think DEC has done enough to disprove its main tenets.

As regards whether or not this is a short attack, all I can say is that the autotrades are doing all the talking and the price no longer seems to respond to ordinary buys. There was a c£70k buy at 13:13 at c83.46p (not a small chunk of change). How did the market respond? Half a dozen small autotrades (a couple of £100 each) just continued to take it lower! We might be talking about several hundred £millions being spent over the last few months but that would be chicken feed to some of the larger hedge funds. This just doesn't seem like a "normal" market.

DEC is not alone in seeing share price movments which seem to defy normal, accepted logic. There sems to be a lot more going on, undisclosed, behind the scenes.

You only look to share buy backs when you have surplus capital, paid down outstanding debt (finacing buy backs from debt is never a good idea; I learnt that from bitter experience on Topps over a decade ago) and have no better use for the money in the business. DEC has been investing its surplus operational cash flow in expanding its assets in the Central Region (with a view to increasing its economies of scale within that region) and, at this juncture, has better uses for its cash IMHO than to make symobolic share buy backs. Also, there's been plenty of anecdotal evidence of late that suggests share buy backs in a bear market are fairly ineffective at raising and sustaining share prices.

If we are looking at reasons for the recent share price fall then, personally, I think DEC's hedging is a complete a red herring. In my view, in the absence of any significant notifiable sales, the share price fall has all the hallmarks of a short attack and I can think of two potential reasons: (1) DEC has been funding its recent Central Region acquisitions using a mix of cash flow, debt and equity, and, whilst DEC's remains acquisitive in the Central Region, there is a risk of yet further equity raises and (2) continuing, persistant concerns about DEC's capping provision.

Reducing or stopping the dividend might be an alternative solution to raising fresh equity for new acquisitions but, in my view, that doesn't fit with DEC's modus operandi and could have a wholly cataclysmic affect on the share price (most of DEC's investors are here for the income and I believe Rusty appreciates that; DEC is an income stock, not a growth stock).

As regards the capping provision, DEC receives regular annual bashings on the matter and probably needs to do more to prove its "proof of concept".

Production isn't actually falling (at present); it's a bit more complicated than that. Clearly reserves are falling, subject to any investment to increase potential recoverable reserves, and I believe I'm right in saying that output of indiviual wells do start to fall as reserves are depleted but opportunities to acquire new wells do mean that depleted reserves are currently being replaced plus there also appear to be some opportunities to generate additional income from solar energy, particularly in the Central Region, that are currently being explored that aren't yet factored into the share price.

And there was me thinking a pumping unit was a small group of people who continuously write positive posts about a share to try and get the share proce to rise ;-)

Have a good bank holiday all!

At least my portfolio won't be a sea of red (again) on Monday! For me at least, this has generally been a week to forget and cry into a few beers afterwards.