Harry Johnson

7 Comments

    • ON: Mon May 5th 21:17 PM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      Even if they contain a typo from time to time.
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    • ON: Mon May 5th 21:16 PM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      Forgot one other item: Dateline Oil & Gas Journal April 21, 2008.
      "Two LNG tankers arriving along the upper Texas Gulf Coast within five days of each other are delivering cargoes for two new LNG terminals, one in Louisiana and one in Texas. These two terminals are the first land based terminals to open in the U.S. in 25 years. Two more terminals are expected to start late this year or first quarter next year. One is Exxon Mobile's and one is Sempra Energy.

      Don't mean to rain on anybody's parade, but facts are afcts.
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    • ON: Mon May 5th 21:07 PM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      If they are making so much money, why do current liabilities and long term debt keep climbing ? Last years financials aren'told hat. Unfortunately, with full cost accounting, judging performance by the last quarter is unreliable. For example, if a company spent a billion on drilling in one quarter, resulting in $200,000,000 in earnings, but payout from the reserves developed by the billion spent on drilling will return only $800,000,000 ultimately, this only shows up much later in D D & A. In order to determine if the produced reserves are truly being replaced at a cost below or equal to the cost of those produced reserves, it is necessary to look at the year to year trend in D D & A. Chesapeake's D D & A as a pecent of total revenues has gone from 28.6% in 2005 to 35.0 % in 2007.

      I recognize that all of these numbers will only be looked at if CHK stumbles. I sincerely hope they don't, but the $1.5 billion growth in current liabilities from December 31, 2007, until March 31, 2008 (2.76 to 4.2) means that cash flow, whatever it is, is inadequate to support CHK's level of operations. If the loan window is closed, as it appears to be, this trend ca't be good news.
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    • ON: Sun May 4th 15:35 PM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      Sounds a bit like the philosophy of the big three auto makers a few years back. They just forgot that others can sometimes do the job less expensively. The fact that Qatar can land NG in this country at around $4.00 an mcf and still realize enormous profits scares me a little. Of course, that is probably a few years away.

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    • ON: Sat May 3rd 21:19 PM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      bellard:

      The numbers I quoted are theirs; not mine. I confess that 50 years in and around the oil and gas business has made me a bit skeptical, or at least cautious. Unfortunately, the price of hydrocarbons doesn’t always cover the cost to extract as you put it. Throughout several decades of the last half of the 20th Century, foreign oil had a finding cost of less than 10 Cents per barrel. It didn’t take long for 3,000,000 barrel tankers to start unloading that cheap oil on our shores, and it took even less time to destroy the domestic oil industry.

      As for simple supply and demand, take a look at the current price of crude. In a little over a year, the price of crude has gone up 140%, while worldwide demand has increased less than 2% (check it out at eia.doe.gov.) No economics course that I ever took would suggest that such a minuscule increase in demand would cause a skyrocketing price. (Once again we have perception overriding reality.)

      The same thing that happened to the domestic oil industry may be on the horizon of the domestic NG industry. There are huge under produced natural gas reserves in many places outside the U.S. Qatar’s reserves are among the highest, and Qatar will soon launch their 45th LNG carrier. Their smallest ship carries about 3 billion cubic feet; the largest about 5 bcf. Since we live and die by NYMEX futures prices, all supply is priced at the last incremental barrel or mcf of demand. The U.S. uses an average of about 60 bcf per day, so it doesn’t take much imagination to guess what will happen to prices when three or four 5 bcf carriers a week start dumping their loads here.

      But, like I said, perception drives the market, and the CEO of Chesapeake has a vastly greater audience than I. He told the local newspaper this week that the stock will double, so don’t let my sterile analysis of facts cause you to miss the ride. Just be sure to act quickly when you see signs that the tide is about to go out.
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    • ON: Sat May 3rd 10:49 AM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      The =$5 billion was for 2005.
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    • ON: Sat May 3rd 10:47 AM
      Commented on:
      Reviewing Chesapeake's Strong Quarter: Pre-Call Notes
      Does anybody do math anymore ? Al of the following came from Chesapeake's 2007 Form 10K: Total expenses were $4.84 per mcfe, up from $3.77 per mcfe in 2005. Projected cost to develop proved undeveloped reserves was $1.85 per mcfe as compared to $1.64 per mcfe in 2005, and $1.00 per mcfe in 2003. If costs remain at the 2007 level (not likely), the cost to get reserves developed in 2008 to market will be $6.69 per mcfe (4.48+1.85). Chesapeake's average price received in 2007, excluding derivatives, was $6.71 per mcfe; the average price including derivatives was $8.40 per mcfe. Long term debt at December 31, 2007 was $11 billion versus $5.5 billion in 2005. PV @ 10% of proved reserves minus market cap and long term debt at the end of 2007 was just under -$10 billion, whereas the number was just under +$5 billion. Admittedly, this is all reality: whereas, as we all know, perception drives the market.
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