I remember Rusty once joked about buying back the company over a year ago. I hope we see a tender buyback offer announced with the increase in liquidity. Thanks for all the post Oak Bloke.
Oakbloke; I think I am singular in thinking this is a bad deal, and mere financial engineering. My start point is, if you really believe in the value of your assets, why would you sell them? Selling them as they have done, says to me either, they need the cash pronto, or they don't believe they have a value beyond that committed to the original debt.
Yes, you have got rid of 80% of the ARO, but you've also lost 80% of the value/gain. That you so believed was undervalued when you originally bought it.
Your coverage of DEC is awesome. I believe DEC's Investor Relations missed a great opportunity with its press release. This is what I sent to the VP of IR:
"This is a masterpiece of financial engineering. Brilliant!
The press release on this is a huge missed opportunity to achieve some recognition and thrust in the investor community by explaining the transaction and its benefit to shareholders. There is a repeating pattern here of lost PR opportunities. DEC needs to give serious consideration to replacing FTI Consulting and/or improving oversight of its material.
Thank you for digging through the release and writing it up!
I have one comment on your calculations picture: the Assets Calculation (-90.1 in the figure) is not adding up, i think it should be -82.6 as the SPV will remain on the BS somehow (I think). My reasoning is that assets worth 90.1 are moved into the SPV, then the 20% stake worth 7.5M are added to the BS offsetting some of the asset side reduction.
I assume this also has effects on the shareholder equity part to balance assets and liab; and on gain on disposal ?
Fantastc work on DEC. Just wanted to clarify your start assumption. You state Debt as at 30/06/23 was $1,272.8m. On p40 of the nov 23 presentation it puts net debt at 30/06/23 at $1,509.8, which would make a 12% reduction in net debt equate to ~181m??
Also if liquidity is stated in Q3 Trading update as $135M and the RCF is 425M, then utilization has increased from $265M to $290M (425-135). in November This would imply net debt of around ~$1535m so a 12% reduction closer to $184M?
Hi Anup, you raise a very valid point. I've updated the article as I see your point about using the 30/09/23 numbers. But you also made me consider and I've added to the article the amount of debt reduction (as a proportion of the $200m proceeds) is irrelevant to the loss or gain on disposal. In other words when you look at the sale at net $69.7m cost and $200m income that's actually a $130.3m gain. (or £2.12/share). But I've kept the assumption that anything above the debt reduction ($181.2m) is expensed to the P&L. Even so, the profit on disposal is $111.5m not $83m (so £1.81 a share gain not £1.35 a share).
I remember Rusty once joked about buying back the company over a year ago. I hope we see a tender buyback offer announced with the increase in liquidity. Thanks for all the post Oak Bloke.
Completely agree - this article explores the value of the existing DEC buyback programme and is worth a read if you haven't already (https://theoakbloke.substack.com/p/dec-laration-on-buy-backs).
Oakbloke; I think I am singular in thinking this is a bad deal, and mere financial engineering. My start point is, if you really believe in the value of your assets, why would you sell them? Selling them as they have done, says to me either, they need the cash pronto, or they don't believe they have a value beyond that committed to the original debt.
Yes, you have got rid of 80% of the ARO, but you've also lost 80% of the value/gain. That you so believed was undervalued when you originally bought it.
This transaction doesn't speak of strength.
Your coverage of DEC is awesome. I believe DEC's Investor Relations missed a great opportunity with its press release. This is what I sent to the VP of IR:
"This is a masterpiece of financial engineering. Brilliant!
The press release on this is a huge missed opportunity to achieve some recognition and thrust in the investor community by explaining the transaction and its benefit to shareholders. There is a repeating pattern here of lost PR opportunities. DEC needs to give serious consideration to replacing FTI Consulting and/or improving oversight of its material.
Extremely disappointing!!!"
Yes, a masterpiece of financial engineering. SAM where DEC is concerned is more about Smarter Accounting Management than Smarter Asset Management
Hi Oak Bloke, Happy New Year
Thank you for digging through the release and writing it up!
I have one comment on your calculations picture: the Assets Calculation (-90.1 in the figure) is not adding up, i think it should be -82.6 as the SPV will remain on the BS somehow (I think). My reasoning is that assets worth 90.1 are moved into the SPV, then the 20% stake worth 7.5M are added to the BS offsetting some of the asset side reduction.
I assume this also has effects on the shareholder equity part to balance assets and liab; and on gain on disposal ?
Or am I wrong?
Hi Mr Schmidt, No you're right and the gain actually grows as a result. I added the SPV asset and didn't consider the impact on the gain/loss.
I've tidied up the balance sheet changes to show negatives as reductions which hopefully makes it clearer too.
Thanks for spotting this.
Ok great 👍 again thanks for doing this
(Yes changing the signs helps readability 😀)
Fantastc work on DEC. Just wanted to clarify your start assumption. You state Debt as at 30/06/23 was $1,272.8m. On p40 of the nov 23 presentation it puts net debt at 30/06/23 at $1,509.8, which would make a 12% reduction in net debt equate to ~181m??
Also if liquidity is stated in Q3 Trading update as $135M and the RCF is 425M, then utilization has increased from $265M to $290M (425-135). in November This would imply net debt of around ~$1535m so a 12% reduction closer to $184M?
Am I missing something??
Hi Anup, you raise a very valid point. I've updated the article as I see your point about using the 30/09/23 numbers. But you also made me consider and I've added to the article the amount of debt reduction (as a proportion of the $200m proceeds) is irrelevant to the loss or gain on disposal. In other words when you look at the sale at net $69.7m cost and $200m income that's actually a $130.3m gain. (or £2.12/share). But I've kept the assumption that anything above the debt reduction ($181.2m) is expensed to the P&L. Even so, the profit on disposal is $111.5m not $83m (so £1.81 a share gain not £1.35 a share).