WTI $89.36 -$1.96, Brent $90.78 -$1.91, Diff -$1.42 +5c, NG $4.25 +2c, UKNG 178.77p -16.23p
Oil came off a bit more and yesterday it was down to the US/Iran talks I mentioned yesterday along with the EIA report which was slightly mixed, they expect more oil from the USA later this year. No one ever thinks that Opec might just second guess them though…
But, the API inventory stats showed further big draws across the board and lets see what the EIA stats are like shortly.
Diversified Energy Company
Diversified Energy has announced the following operations and trading update confirming 2021 results are in line with market expectations. Diversified also announces that the Company will release its 2021 full-year results and host an investor call on 22 March 2022.
Recent Operating Highlights
• Expanded Diversified’s production-focused platform with entry into Central Region through four completed acquisitions totalling $516 million now contributing approximately one-third of Diversified’s current exit rate production with access to favourably priced end markets
• Recorded full year production of 119 Mboepd (711 MMcfepd), up 19% vs 2020, with a December 2021 exit rate of 139 Mboepd (833 MMcfepd), up 35% vs December 2020
• Realised 50% Cash Margin(a) on the enlarged business in 2021 with full-year Adjusted G&A(b), down 11% to $1.21/Boe ($0.20/Mcfe) vs 2020
• Realized higher prices in the Central Region that preserve Cash Margins(a) even as Total Cash Expenses(c) increase 13% to $7.97/Boe ($1.33/Mcfe) vs 2020 largely driven by higher production taxes and transportation expense in the Central Region
• Hedged to provide stability to cash flows with ~90% of 2022 and ~70% of 2023 natural gas production hedged(d) at $3.17/Mcf(e)(f) ($2.96/MMBtu) and $3.07/Mcf ($2.86/MMBtu), respectively
• Opportunistically hedged into a rising price environment adding incremental 2022 NYMEX hedges at an average floor of $4.00/Mcf, representing a 33%% premium to the Company’s previous reported 2022 NYMEX average floor of $3.03//Mcf as of 3Q21.
• Closed leverage-neutral $365 million BBB-rated 4.875% securitisation of Appalachia assets (the “Securitisation”), ~163 bps lower than the Company’s previous amortising term loan and 38 bps lower than the Company’s previous securitisation
• Secured year-end liquidity of $316 million(g) (pro-forma for the recent Securitisation) while maintaining the ~2.2x net debt / adjusted EBITDA leverage ratio reported in the Company’s 28 October 2021 Trading Statement
Recent Environmental, Social and Governance (“ESG”) Highlights
• Closed the Company’s first sustainability-linked financing on 04 February 2022 (discussed above)
• Asset-Retirement Progress:
◦ Acquired an established asset retirement company in Appalachia that strengthens the Company’s ability to meet its retirement targets creating the ability to market excess service capacity to third parties for a fee
◦ Exceeded well retirement targets by 70% and plugged 136 wells during 2021 at an average cost of ~$22,500(i) per well
• Emission Reduction Initiatives:
◦ Appointed a third party to independently verify the Company’s 2021 greenhouse gas emissions data and actively working to progress their review
◦ Advanced the deployment of handheld emission detection equipment and developed a data platform to aggregate well-level emissions data to facilitate strategic analysis and drive emissions reduction
◦ Scheduled aerial surveys of Appalachian midstream assets beginning in February 2022 that will focus asset optimisation efforts
Rusty Hutson, Jr., CEO of the Company commented:
“I am pleased to report that our full-year 2021 results are in line with market expectations as the Diversified team delivered another transformative year. This group led our expansion into a new operating region, which today represents one-third of our consolidated production. Our enlarged team, including the talented individuals who join Diversified having previously operated our acquired Central assets for their sellers’, is actively applying our proven Smarter Asset Management techniques and working to leverage our enlarged scale.
“Importantly, we continue to create value for all stakeholders. We progressed our ESG commitments, targeting ambitious emission reductions with the independent verification of our emissions data under way. This important work complements our success retiring 70% more wells than our initial goal at exceptional costs. Concurrently, we maintained our progress repaying our fully-amortizing debt while continuing to delivering tangible shareholder returns, raising our quarterly dividend for the tenth time since our IPO in 2017 to an annualised 17 cents, paying approximately $130 million in dividends to our shareholders in 2021.
“As I survey our prospects, our outlook is as dynamic as I’ve seen. We enter 2022 with great momentum bolstered by an improving commodity pricing environment that is catalysing rapid industry consolidation and asset sales at compelling multiples of cash flow. With another successful low-cost, fully-amortising securitisation completed last week, we have greater liquidity to pursue additional value accretive growth while responsibly stewarding the operating assets that underpin our stable cash flows, debt reductions, ESG commitments and dividends.”
Announcing that the 2021 numbers will be in line with market expectations is good especially in a company with so many moving parts, indeed the word I take from the CEO’s comments is delivery, across the board. The company’s model has been adhered to meticulously and excellent results have followed four substantial acquisitions in the Central Region stamped at a cost of $516m with production up 20% vs 2020 and in December up 35%, nice work at $90.
It gets better, cash margins are up to 50% with G&A down 11% to $1.21 boe v 2020 illustrating the grip this company always seems to demonstrate on costs. Hedges provide stability, all of this enabling the company to distribute to shareholders, the last quarterly was the 10th raise since IPO.
Importantly in the realm of ESG, the company has made significant steps, more than expected in the Asset-Replacement Programme where they have plugged more wells, more efficiently than demanding targets. All of this has helped the financing terms for the sustainability-linked financing announced on Monday.
There is little that I can add to the comments I made then, this update backs up the operating process and on that basis the boxes are well and truly ticked. Expect more of the same, no wonder Rusty Hutson, Jr. says that ‘our outlook is as dynamic as I’ve seen’ and to me investors, particularly those who like the shield of a regular increasing dividend should find this investment irresistible.
In the Prem last night the Magpies beat the Toffees 3-1 Burnley drew 1-1 with the Red Devils and the Hammers beat the Hornets 1-0. The win was soured after the cat-beater Kurt Zouma was actually played after all his feline abuse and today the retribution has started with the RSPCA taking the cats to a safe house away. More punishment is expected with everything except flogging on the pitch considered as a punishment…
Tonight the Bees go to the Emptihad, the Canaries entertain the Eagles, the Saints are at White Hart Lane and Villa host Leeds.