DEC is being probed

... and the truth is out there!

Photo by Caroline LM on Unsplash

Today heralds good and bad news for DEC.

Good that US Trading begins. On a day where Oil & Gas is affected by Houthi rebels attacking Shipping travelling to/from the Suez.

Bad that there are negligible volumes on day 1 (as of -2 hours from end of live trading)

Bad too, that a House Democrats Probe has begun. Awwww shucks. Inconvenient timing? Co-incidence? I think not.

What do the data say?

Data from this link on the EPA web site show the US emits over 185 million tonnes of CO2 equivalent worth of methane in 2022.

Its own data show that Appalachian basin gas producers are responsible for 0.4m tonnes of C02e. There is no “Central Region” but the maps appears to correspond to the Arkla Basin 0.9m tonnes and Ouchita basin at 0.05m tonnes. Total 1.35m tonnes. So assuming DEC is responsible for 100% of the methane in these regions (hint: it isn’t) then GAS PRODUCERS in these areas are responsible for 0.7% of US methane emissions. SCANDALOUS! DEC’s own numbers from its sustainability report corroborate the EPA numbers. At 0.69m tonnes of methane a year it claims to be responsible for about half of emissions in those 2 areas. Two years ago it was responsible for three quarters of emissions. It has audited every one of its wells for methane emissions in 2023.

Here’s how it improved in 2022.

DEC has a target reduction of 50% methane intensity by 2030 (50% of 2020 emissions) - it has already reached halfway to its target last year (in 2022). 0.4 MT Co2e per MMcfe more to go. And the 1.2 includes the Tanos acquisition without which 1.2 would be 1.1…. so in fact it would be more than halfway. Also when it acquires assets it then improves them.

(NB Why the higher CO2? This was through the acquisitions adding additional compression and gathering equipment. Also contributing was additional gas lift compression to revitalise non-producing (idle) wells as part of its Smart Asset Management (SAM))

Their 2022 report makes interesting reading because further emission drops have already happened!

“some of our SAM reduction programmes have not yet been fully recognised and as a result cannot yet be taken into account. For example, in 2022, we eliminated pneumatic devices on 55 well pads, including on 40 such pads in the Central Region. Since we installed alternative compressed air devices at various times throughout the year, we are only able to report a portion of the associated reductions (~9,000 MT CO2e) in 2022 given this conversion timing. In 2023, we will benefit from a full year of accounting for these reductions which we currently estimate at 40,000 MT CO2e.”

More to come too - according to DEC 2022 ESG report page 23:

“we plan to eliminate natural gas pneumatics at 50 additional well pads in 2023, but we will only report a portion of those associated reductions in our 2023 year-end reports because the installations will not all occur on 1 January 2023.

“At the same time, our percentage of annual renewable energy usage increased from 7% in 2021 to 13% in 2022. In 2023, we are performing assessments to increase energy efficiency across the organisation.”

Well, what does the Clean Air Task Force Report specifically say?

The news article claims: “According to a report commissioned by the Clean Air Task Force based on Environmental Protection Agency estimates, it was the fourth-largest methane emitter among oil and gas producers in 2022”

What report??? Their website is www.CATF.US. Search for DEC - nothing. Diversified? Nothing. Search for keyword Methane. Surely….. Well - no 2022 report referring to EPA estimates. But there is a report from 2022 relating to the IEA not the EPA. But nothing to do with Diversified. A lot to do with the 99.3% that isn’t DEC. So good to see they’ve got their Ducks in a row. I searched the EPA as per the links above. No clear case to answer there either. Hopefully the Democrats can prepare a more cohesive case than the journalists did today.

Bring it on. DEC have committed to transparency - it has impressive ESG scores/wins from MSCI, GMP and is award winning with ESG Investing.

The coverage might even prove to be a positive - because what are they going to prove exactly? That DEC does a much better job than most other O&G firms? That DEC can workover and extend one of the US’s greatest assets? That DEC is an export success story supplying allies with desperately needed fuel in the face of Russian aggression. The whole rationale to launch this probe could blow up spectacularly in the Democrats faces - and actually prove a positive for DEC in the US. And even if it’s not will the Democrats continue this enquiry once election race gets going in a few months? Only if they smell blood. Seems to me they’ll be smelling their own emissions, and feeling embarrassed by them.

Can DEC afford to decommission the wells?

In DEC-tecting fact or fiction we have already asked and answered the question about whether DEC is properly treating its AMO correctly.

Conclusion

Clearly this political enquiry will waste some time. But it’s my view that DEC are well placed to address these concerns and if anything it’s able to demonstrate how it’s clearly part of the solution - not part of the problem.

This is not advice.

Oak