It seems that, in the acquisition of the Oaktree assets, DEC is spending ~54% ($386m) of DEC's market capitalization to increase DEC's production (or production per share) by 15%. That is, per unit of production increase per share, the deal costs DEC 3.6 times as much as buying back its own shares.
The SPV divestiture was not the Conoco assets. It was a package of wells in Appalachia.
They basically took this package of wells that had $35m of cash flows ($230m PV10), used that to finance out $162m via two different ABS notes. Then sold 80% of the remaining equity left in the assets.
Class A notes had an 8.24% interest rate, class B notes had a 12.72% interest rate. So in total, about $14.3m of interest. So the sold the equity tranche which had ~$20m of cash flows after interest for about ~2x.
They basically were able to create a sale at 5.7x by securitizing the asset and getting another party to assume the equity. Really smart IMO
I see the buyout of Oaktree as hugely bearish. If they saw the right risk premium being paid here they would not have sold. As a close follower of Oaktree and holder of its other high yielding assets / investments this to me looks like they folded their hand and see better prospects elsewhere for their capital. This + withdraw by Rusty on the tender offer looks like quite a number of losses for poor ‘ol Rusty. I am a long term holder here sitting on around 50% loss. Think I might fold too.
All trust now gone with Hutson and this grossly incompetent management team . Sadly the shorters were correct all along. PI’s put our trust , money and future in the hands of this fraud. Many Pi’s have lost thousands and thousands and the dividend is utterly pitiful for long term holders. They should be locked up for the lies and deceit
Last week finally exited my #DEC position in full at a significant loss. I always enter a trade with the willingness to suffer pain as long as the fundamentals are clear. The simple truth is this business is now in the “too hard to understand” bucket. Based on 40 years investment exp this is a terrible sign and a reason to not invest or depart. Their financial engineering shenanigans are have been found lacking and all signs point to no imminent turnaround. Too many better opportunities. Money deployed to $PR, $FANG and $AM gradually over last few months as I shifted fully out of #DEC.
It's no secret that DEC has to replenish depleting assets in order to maintain its revenues; however DEC has managed to grow its revenue with a substantial dividend in place. I'm not a fan of debt laden companies; however the use and structure of ABS significantly mitigates the risk.
A 2/3 dividend cut is excessive by any measure. A 10% yield is not difficult to find among US energy royalties and trusts which leaves little incentive for share price growth. Nor does a reference to 3 years of stability provide investors with the expectation that growth will fund dividend increases. Finally, considering the size of the cut, a 3%-10% range on buybacks is not exactly thrilling.
And the revoked tender? A massive waste of money and a true black eye for DEC. I've long felt that DEC's public relations firm (FT Consulting) needs to be replaced. I add the lawyers to the list.
Not sure how many people will be ‘rejoicing’ depending on when they bought shares. Capital value down over 55% and dividend now slashed by roughly 60%. By anybody’s view that’s truly awful performance and the critics have been proved partially right in saying the dividend wouldn’t be maintained.
The real concern is the price of gas which has tanked and with reduced demand due to warmer weather the prospect doesn’t look great. The upside of that I suppose is that they will get more well closing business as other suppliers start to go out of business.
Hutson is a crook and utterly untrustworthy. Don’t believe a single word this crook: fraudster says. He has destroyed wealth and health with his fraudulent mismanagement.
Another insult from this grossly incompetent greedy BOD. Freebie shares for achieving fuck all . An utter conspiracy to screw shareholders and line their own pockets . Milk the LSE shareholders then shaft them with a crashed share price and dividend. List in the US to ultimately milk those poor bastards with promises of a so called new strategy to strengthen the balance sheet and grow the business . House Brokers with their snouts in the trough continue to talk the new strategy up with ludicrous SP target that will never be achieved. The shorts vultures circle with increasing positions knowing this crooked BOD are incapable of delivering anything apart from lies and will change tactics at the drop of a hat.
Must admit I have been confused by the last few days. All resource companies need to replace depleting assets but is this a case of DEC constantly having to eat just to stand still? What you think Oak?
Current natural gas prices are not sustainable. Hedging is still available at attractive prices starting out in 2025.
DEC is subject to the vagaries of natural gas prices and reserve replacement costs.
The time to replace reserves is when prices are low. I think without the acquisition DEC would have cut the dividend but not near the amount they chose to cut.
Natural gas prices will likely rebound by next winter and as long as DEC can hedge and increase the capacity to plug wells I think this is not a bad entry point. Currently I am underwater.
It seems that, in the acquisition of the Oaktree assets, DEC is spending ~54% ($386m) of DEC's market capitalization to increase DEC's production (or production per share) by 15%. That is, per unit of production increase per share, the deal costs DEC 3.6 times as much as buying back its own shares.
The SPV divestiture was not the Conoco assets. It was a package of wells in Appalachia.
They basically took this package of wells that had $35m of cash flows ($230m PV10), used that to finance out $162m via two different ABS notes. Then sold 80% of the remaining equity left in the assets.
Class A notes had an 8.24% interest rate, class B notes had a 12.72% interest rate. So in total, about $14.3m of interest. So the sold the equity tranche which had ~$20m of cash flows after interest for about ~2x.
They basically were able to create a sale at 5.7x by securitizing the asset and getting another party to assume the equity. Really smart IMO
https://www.sustainablefitch.com/corporate-finance/sustainable-fitch-spo-provided-for-decs-kpi-linked-asset-backed-transaction-23-01-2024
I see the buyout of Oaktree as hugely bearish. If they saw the right risk premium being paid here they would not have sold. As a close follower of Oaktree and holder of its other high yielding assets / investments this to me looks like they folded their hand and see better prospects elsewhere for their capital. This + withdraw by Rusty on the tender offer looks like quite a number of losses for poor ‘ol Rusty. I am a long term holder here sitting on around 50% loss. Think I might fold too.
All trust now gone with Hutson and this grossly incompetent management team . Sadly the shorters were correct all along. PI’s put our trust , money and future in the hands of this fraud. Many Pi’s have lost thousands and thousands and the dividend is utterly pitiful for long term holders. They should be locked up for the lies and deceit
Last week finally exited my #DEC position in full at a significant loss. I always enter a trade with the willingness to suffer pain as long as the fundamentals are clear. The simple truth is this business is now in the “too hard to understand” bucket. Based on 40 years investment exp this is a terrible sign and a reason to not invest or depart. Their financial engineering shenanigans are have been found lacking and all signs point to no imminent turnaround. Too many better opportunities. Money deployed to $PR, $FANG and $AM gradually over last few months as I shifted fully out of #DEC.
It's no secret that DEC has to replenish depleting assets in order to maintain its revenues; however DEC has managed to grow its revenue with a substantial dividend in place. I'm not a fan of debt laden companies; however the use and structure of ABS significantly mitigates the risk.
A 2/3 dividend cut is excessive by any measure. A 10% yield is not difficult to find among US energy royalties and trusts which leaves little incentive for share price growth. Nor does a reference to 3 years of stability provide investors with the expectation that growth will fund dividend increases. Finally, considering the size of the cut, a 3%-10% range on buybacks is not exactly thrilling.
And the revoked tender? A massive waste of money and a true black eye for DEC. I've long felt that DEC's public relations firm (FT Consulting) needs to be replaced. I add the lawyers to the list.
And the tender offer pulled too.
Mr Market not impressed.
Not sure how many people will be ‘rejoicing’ depending on when they bought shares. Capital value down over 55% and dividend now slashed by roughly 60%. By anybody’s view that’s truly awful performance and the critics have been proved partially right in saying the dividend wouldn’t be maintained.
The real concern is the price of gas which has tanked and with reduced demand due to warmer weather the prospect doesn’t look great. The upside of that I suppose is that they will get more well closing business as other suppliers start to go out of business.
Hutson is a crook and utterly untrustworthy. Don’t believe a single word this crook: fraudster says. He has destroyed wealth and health with his fraudulent mismanagement.
Another insult from this grossly incompetent greedy BOD. Freebie shares for achieving fuck all . An utter conspiracy to screw shareholders and line their own pockets . Milk the LSE shareholders then shaft them with a crashed share price and dividend. List in the US to ultimately milk those poor bastards with promises of a so called new strategy to strengthen the balance sheet and grow the business . House Brokers with their snouts in the trough continue to talk the new strategy up with ludicrous SP target that will never be achieved. The shorts vultures circle with increasing positions knowing this crooked BOD are incapable of delivering anything apart from lies and will change tactics at the drop of a hat.
Must admit I have been confused by the last few days. All resource companies need to replace depleting assets but is this a case of DEC constantly having to eat just to stand still? What you think Oak?
Please write a blog on i3 Energy
Like I foretold, dividend needed to be cut drastically.
Beware of any investment blog author who uses terms like "FUD"
Current natural gas prices are not sustainable. Hedging is still available at attractive prices starting out in 2025.
DEC is subject to the vagaries of natural gas prices and reserve replacement costs.
The time to replace reserves is when prices are low. I think without the acquisition DEC would have cut the dividend but not near the amount they chose to cut.
Natural gas prices will likely rebound by next winter and as long as DEC can hedge and increase the capacity to plug wells I think this is not a bad entry point. Currently I am underwater.