I really don't understand why DEC don't start dealing with this rubbish properly. Surely they should be able to simply challenge some of the stuff coming from paid analysts? They must understand that their accounts are complex so god knows why they don't start briefing people using simple words and pictures to clearly show how they are put together. Not everyone is an accountant!
They seriously need to up their PR game (unless of course there really is an issue somewhere...)
I settled on the proforma approach because the financials, with mixed hedging data, is too challenging to tease out the essentials. I have not attempted to incorporate adjustments for the land and SPV deals even though favorable to the net. DEC's financials are full of disclosure but in no way are they user friendly! I am hoping that the transaction statement due at month end and 4Q financials will provide more clarity.
While Alex has probably built a model of some kind, I can say that his interest rate expense number is pure nonsense by a factor of almost double.
In any event, in going back to the Nov 15 presentation pages 30-31 for hedging prices with which to make adjustment (adj table is under the proforma) to future revenues using the 2023 3Q as baseline, I find that the 2025 NG hedge pricing at 3.05 is far below the current forward NG average of 3.67 for 2025. Ditto for 2026: 2.97 vs 3.89 average. The net effect is that the 12.4% drop in hedge pricing for 2025 appears to have a very significant negative impact on DEC's net.
As to DEC's public relations, I agree with Ian. Every release has the name FT Consulting on it. DEC needs to dump these people and hire a firm with proven public relations crisis handling experience to start digging out of this debacle. I would think that Rusty, who is now sitting on some major personal losses on his 2.6M shares, would fire those who have allowed PR crisis to proceed unabated.
If the company has $1,740,556,000 of assets and approximately 70,000 wells then it would seem that if a well plug cost (on average) more than $24,865 then it won't have the funds to cover the decommissioning liabilities if it went bust tomorrow.
Thanks for the great articles and analysis OB. I've been especially interested in reading about DEC given everything that's been going on. I've read quite a few of your articles in the last few days and have seen it's your top idea for 2024 unsurprisingly ;) I'm not sure if I've missed it but what do you believe is fair value for DEC currently given the current softness in energy stocks ? Also I noticed that EPS estimates on stockopedia have just been reduced quite markedly - do you think that's in relation to the recent sale but also the higher interest costs indicated by the Investec analyst?
I really don't understand why DEC don't start dealing with this rubbish properly. Surely they should be able to simply challenge some of the stuff coming from paid analysts? They must understand that their accounts are complex so god knows why they don't start briefing people using simple words and pictures to clearly show how they are put together. Not everyone is an accountant!
They seriously need to up their PR game (unless of course there really is an issue somewhere...)
After reading the Alex Smith comments on DEC, I wanted to see if he might have something. I began working on a Google Sheet (shared and open to comments: https://docs.google.com/spreadsheets/d/12hKqxzFgqgn-7d-7WjQvwjVycIlhLn9o5JV9prTCxyA/edit?usp=sharing) to better understand DEC's finances. There are many omissions, as detailed in the notes, but I think it covers the essentials.
I settled on the proforma approach because the financials, with mixed hedging data, is too challenging to tease out the essentials. I have not attempted to incorporate adjustments for the land and SPV deals even though favorable to the net. DEC's financials are full of disclosure but in no way are they user friendly! I am hoping that the transaction statement due at month end and 4Q financials will provide more clarity.
While Alex has probably built a model of some kind, I can say that his interest rate expense number is pure nonsense by a factor of almost double.
In any event, in going back to the Nov 15 presentation pages 30-31 for hedging prices with which to make adjustment (adj table is under the proforma) to future revenues using the 2023 3Q as baseline, I find that the 2025 NG hedge pricing at 3.05 is far below the current forward NG average of 3.67 for 2025. Ditto for 2026: 2.97 vs 3.89 average. The net effect is that the 12.4% drop in hedge pricing for 2025 appears to have a very significant negative impact on DEC's net.
As to DEC's public relations, I agree with Ian. Every release has the name FT Consulting on it. DEC needs to dump these people and hire a firm with proven public relations crisis handling experience to start digging out of this debacle. I would think that Rusty, who is now sitting on some major personal losses on his 2.6M shares, would fire those who have allowed PR crisis to proceed unabated.
Interesting article
https://blog.gorozen.com/blog/natural-gas-market?_hsmi=290658219&_hsenc=p2ANqtz-89UtXNvx5j_v8LqlWvM8zGustUgbVPhzJnpC_LFHfD2LnHXEMODBCRgebxGDDlxQAQEKZ_H4RFLQyFzQusda4u0M_O4Q
Thanks for your reassuring article.
If the company has $1,740,556,000 of assets and approximately 70,000 wells then it would seem that if a well plug cost (on average) more than $24,865 then it won't have the funds to cover the decommissioning liabilities if it went bust tomorrow.
Thanks for the great articles and analysis OB. I've been especially interested in reading about DEC given everything that's been going on. I've read quite a few of your articles in the last few days and have seen it's your top idea for 2024 unsurprisingly ;) I'm not sure if I've missed it but what do you believe is fair value for DEC currently given the current softness in energy stocks ? Also I noticed that EPS estimates on stockopedia have just been reduced quite markedly - do you think that's in relation to the recent sale but also the higher interest costs indicated by the Investec analyst?