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Harry Johnson

Harry Johnson
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  • Chesapeake Continues To Correct Its Ways [View article]
    It is crazy talk, but what a novel idea for corporate America. Now if we could just develop the same program for Congress............
    Jan 8 07:55 PM | 4 Likes Like |Link to Comment
  • Bakken Update: EOG Wells Model EURs Over 2 Million Barrels Of Oil [View article]
    Great stuff Mike. I think relatively short laterals with as much propant and water as can be handled in a reasonable time frame, followed by tight chokes is going to produce better ultimate results. Opening up the choke to get an impressive IP will reduce relative permeability to oil and probably steepen the decline curve. Being one, I think it is easy for an engineer to be enticed by longer and longer laterals. Although the technology is awesome, there may be a point at which it makes more sense to increase well density. Laterals eight to ten thousand feet long and 30 plus frac stages could tax pumping equipment, not to mention human endurance. Just a gut feeling, but frac control might become problematic if the EOG formula is applied to 10,000 foot laterals.

    Disclaimer: My comments aren't based on hard science, but are more just thinking out loud.
    Jan 7 07:46 PM | 4 Likes Like |Link to Comment
  • Can An Activist Shareholder Prop Up SandRidge Energy's Stock Price? [View article]
    "A more probable path to unlocking the "hidden" value in the stock lies, in my opinion, through operations (as opposed to the M&A market), regardless of who controls the Board."

    Couldn't agree more. Moreover, the history of financial types who would be oilmen isn't very exciting (and neither is TPG-Axon's BOD slate). Ultimate success in plays like the Mississippi requires micro-management of field operations; not macro management at the Board level.
    Jan 7 11:49 AM | 3 Likes Like |Link to Comment
  • Linn Energy Is A Buy Below $40 [View article]
    I'm a little rusty on this, but isn't limited partner income from an MLP excluded from Self Employment tax; whereas, LLC income is not ? If so, this contributes further to the problem of comparing the "yield " from an LLC investment with that from an MLP. Such comparisons are already complicated by the fact that the percentage of income offset by cost depletion may vary materially between an LLC and an MLP (and between MLPs for that matter).
    Jan 4 04:25 PM | Likes Like |Link to Comment
  • Why $100 Brent Will Not Last Through 2013 [View article]
    Saw a comment in Mauldine's "Yield Shark" that the price of crude would have to drop to less than $30/barrel to approximate the fall in natural gas prices. While not likely to happen tomorrow, at some point (maybe when the total capacity of all LNG tankers has grown to equal the total capacity of all crude oil tankers), economic equilibrium should set in. That is, assuming speculation in the paper crude market is ever affected by reality.
    Dec 31 01:38 PM | 2 Likes Like |Link to Comment
  • SandRidge Energy (SD) is striking back against TPG-Axon’s push to replace the company’s board and amend its bylaws, urging shareholders to reject the proposal and describing the hedge fund as an “opportunistic investor with short-term interests” whose slate of nominees is not familiar with SD’s operations or the oil and gas sector. TPG says it's just looking out for the shareholders[View news story]
    Not sure it would be a step in the right direction to accept the recommendations of a former Goldman Sachs Partner (TPG-Axon CEO) given Goldman's sterling record of looking out for their clients during the past decade or two. Guess the plan is to come in and cook SD's books like Goldman did for Greece and palm the Company off to some trusting buyer like the EU.
    Dec 28 09:27 PM | 1 Like Like |Link to Comment
  • Midstream Assets Sales Reason To Buy Chesapeake [View article]
    I subscribe to Mark's analysis if permitted one small exception: It isn't that shale wells are necessarily unprofitable, it is just that an operator has to exercise a modicum of cost control. Cost control isn't in CHK's policies and procedures manual. And taking nothing away from the new Chairman, I believe he is too far removed from the nitty gritty of melding hard headed field people into cost conscious managers than for it to ever happen.
    Dec 28 03:03 PM | 3 Likes Like |Link to Comment
  • Linn Energy For 7.9% Yield And 22% Upside [View article]
    An unconfirmed rumor around the oil patch is that Linn will pay as much for proved reserves as their present value at a 6% discount factor. That is pretty rich, but there have been hidden values in Linn's acquisitions. Moreover, Linn's philosophy appears to be distributions first, as contrasted with most oil companies philosophy of putting all cash flow and as much as you can borrow on the drill bit and forget about dividends. Always good to remember, though, that MLP distributions are partly yield and partly a return of capital. If the spread between annual distributions and taxable income before IDC exhibits an ever widening margin, it could be a caution flag that the asset base is declining faster than other factors might indicate.
    Dec 17 03:39 PM | 2 Likes Like |Link to Comment
  • Chesapeake Energy: Converting To Oil Production At A Breathtaking Rate [View article]
    I just hope the downward trend in oil prices doesn't become breathtaking. Anybody have a take on the IEA's substitution of Brent for WTI ?
    Dec 15 03:38 AM | Likes Like |Link to Comment
  • Continental Resources Recent Asset Sales Suggest The Company Is Not Undervalued [View article]
    Way, way back in time, when all of the trade was in physical barrels and the posted price for WTI was about two-bits less than $3/bbl, independents were selling out for around $10,000/barrel of daily production. We never figured out why back then, and too many of my brain cells have retired to undertake such a daunting task now. There is, of course, a relationship between daily production and proved reserves. For example, assume for the moment that $100,000 buys 30 years of production that starts at one barrel per day and ends at zero 30 years out. Cumulative production after 30 years would be about 5,000 barrels, or $20/barrel.

    If pressed, I would probably throw in with Devon Shire on their conclusion that CLR is fully priced. Some would argue that the difference in Devon Shires' number and market price is going concern value. That is a legitimate consideration, but it should checked against what can be called "Market Sentiment Indicator (MSI)." MSI is the SEC value of proved reserves minus Enterprise Value (Enterprise Value being Market Cap plus Debt). Of course, by the time the value of proved reserves becomes available, a company like CLR has moved much further down the road, but it is still useful to keep an eye on MSI. For example, when CHK's stock price was at $40/share, the Company' Enterprise Value was almost $20/share more than the value of their proved reserves. Or, to say it another way, 50% of CHK's stock price represented going concern value.

    I haven't calculated any of this for CLR and I don't know what the right number is for going concern value for any company, but the market can easily push the price of a popular stock past its going concern value into the realm of irrational exuberance.
    Dec 6 08:29 PM | Likes Like |Link to Comment
  • SandRidge Energy: Should Tom Ward Go? [View article]
    The jury is not yet in on the Mississippi Lime.
    Nov 13 07:55 PM | 2 Likes Like |Link to Comment
  • Disgruntled investment firm TPG-Axon and its affiliates boost their stakes in SandRidge Energy (SD) to 6.2% of outstanding shares, according to a new SEC filing, after owning ~4.5% last week when TPG-Axon criticized the performance of SD stock and accused management of "poor strategic planning and reckless spending." [View news story]
    .....AXON must know something or their analysts are just plain stupid.

    Could be both.
    Nov 13 07:49 PM | Likes Like |Link to Comment
  • Buy Chesapeake: A Turnaround Energy Stock [View article]
    Falling demand per IEA. Probably a short term trend. But here I go again on a tiresome tale from yesteryear. Late 1950's American households began to become two car families. Humble Oil (now Exxon) market analysis projected significant growth in gasoline demand as a result, so we jacked up our E & P budget accordingly. Demand actually dropped and we had to retrench. Post drop analysis showed there was less driving in two car families because it was no longer necessary to take hubby to work and pick him up that evening. (For what it is worth, I have as much confidence in market analyses as I do in the daily explanation of why the DOW went up or down.)
    Nov 8 10:38 AM | 1 Like Like |Link to Comment
  • Buy Chesapeake: A Turnaround Energy Stock [View article]
    Lot of potential for domestic energy and domestic energy companies, but keep your eye on a couple of worrisome trends:

    (1) Unprecedented (at least in recent history) increase in worldwide oil production and capacity.

    (2) Saudi drumbeat that oil prices are too high to permit worldwide economic recovery. (Perhaps a counterpunch to their Shia enemies in Iraq and Iran ?)

    (3) Falling demand for oil, which may be exacerbated by continuing trend of deflation in other commodity prices.

    (4) Loss of $40/barrel premium for Middle East turmoil should the region quiet down (not much of a possibility, it would seem).
    Nov 6 11:46 AM | 2 Likes Like |Link to Comment
  • Chesapeake (CHK -8.5%) hits lows of the day after admitting its target to reduce debt to $9.5B or less by year's end may be pushed into 2013 (conference call). Argus oil analyst Phil Weiss says CHK has promised a lot but has yet to deliver much: "They still say they are going to lower debt and they still need to complete asset sales. They just admitted they are having trouble." [View news story]
    Just goes to show that "Full Cost Accounting" and a CEO's Letter To Stockholders can't hide the truth forever.
    Nov 3 08:22 AM | 2 Likes Like |Link to Comment
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