I don't hold DEE (at present) but I've looked at them several...

I don't hold DEE (at present) but I've looked at them several times. They have taken out behind the woodshed for a whupping. I think that is primarily due to a liquidity crunch than for any other reason. That was kind of foreshadowed when they reported Q1 results and stock has declined more than its peers (say PIPE & CR) and now they haven't been able to get their Borrowing Base redetermination agreed upon on schedule (bankers extended time till June 15). Why? Always a tricky thing ... mgmt suggested it was in for a 15% haircut based on reduction in price deck but with increased reserves from new pad there would be "no material change". Hmm.... They have effectively drawn $93M out of $105M facility. There's very little wiggle room.

At 18.5cps the MC is $35M plus Net Debt of ~$200M (yep this one is indeed over leveraged) its EV is less than $250M. Consider what that buys you ... but also as an equity holder where you are in the queue.

Now the part that interests me is that if you consider ONLY the 1P PDP Reserves NPV10 (so capital already spent and cash being produced) that is calculated to be ~$1.10 from the Dec 31 Reserves Report.

Priced for foreclosure as if the BB will be (significantly) less than $90M. Feels like I'm buying $1.10 worth of 1P PDP for just 18.5 cents. We'll see ... this knife might be sharper than CE1

Now for us CE1 shareholders DEE also holds another fascinating storyline (location wise they are a long way from us in the very rich condensate area of Alberta Montney). The contrast is drawn to our analogue of Saguaro ... remember they spent circa ~$600M to get where they are. DEE has also invested circa $748M total ($605M in D&C) to get to this point.




Fair difference in production (DEE at ~9,000 and Saguaro at ~16,500 ... but remember all BOEs are not equal and DEE has a far far higher CGR and so much higher condensate production). Both own 100Mmcfpd gas plants.

So whats the bottom line .... just when you think you are on top of it (as DEE must have felt in 2016 when cumulative capital proceeds exceeded cumulative capital investments) it can all still slip away due to commodity pricing (even with hedging).

This is why, being a producer, is a big challenge. DEE has lost 90% of its equity value (topped at about $1.75 in Feb'17). Even when you do things approximately right (and they are given the netback pricing they receive for the gas/NGLs/Cond) its still tough going.

Will 2.2 hold?