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Harry Johnson

Harry Johnson
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  • Chesapeake Energy - Enough Is Enough [View article]
    Although not a fan of McClendon, here is what he might have done:

    1) Set up NG fueling stations from coast to coast and the infrastructure to supply them.

    2) Started the wheels in motion to export LNG.

    This assumes he could have sold the billions of $ of junk bonds it would take to do this. Possible, when one considers that he sold billions of $ of junk bonds throughout the years that CHK was pretty much insolvent.

    The elephant in the room certainly is natural gas. Clean energy, worldwide summits on climate change, blah, blah, blah. So natural gas is a fossil fuel. So what ? It is far better than coal, fuel oil and gasoline. For the U. S. to wait for relief from clean and/or renewable energy is comparable to a terminal ill patient who rejects a current treatment that won't cure him, but will give him quality of life for 20 years or more because he wants to be cured completely.
    Dec 1, 2015. 10:31 AM | 2 Likes Like |Link to Comment
  • CEO Lawler says 54% of Chesapeake's projects unprofitable when he started [View news story]
    While taking nothing away from Lawler - no doubt he wasn't following McClendon's every move back then - but it started becoming obvious in about 2004 to anyone reading the footnotes and crunching the numbers that the economics of CHK's ventures were becoming marginal (to say the least). Price Per Share v Net Reserve Value Per Share went from even to a stock price of more than twice NRV year over year. Unit production cost began to spiral upwards. And while most of Wall Street gushed over CHK's increase in total production, average daily production per well dropped 38 % YOY. Reserve replacement costs doubled YOY and actual replacement cost were 45 % higher than projected PUD development costs from the previous year. These are just a few of the red flags that signaled the inevitable 10 + years ago.
    Nov 27, 2015. 01:02 PM | 10 Likes Like |Link to Comment
  • Continental Resources' Highly Suspicious Refusal To Impair Assets Makes It A Peer Set Outlier [View article]
    The only thing highly suspicious to me is how in the world Full Cost accounting ever came to be accepted as a legitimate accounting theory. Full Cost capitalizes E & P expenses, good will, and in some cases the CEO's art and wine collection. Comparing a company using Full Cost with a company using Successful Efforts is difficult if not impossible. I put up a web site 8 or 10 years ago that demonstrated a half-dozen litmus tests that could be used to circumvent the obfuscation of full cost accounting. I used Chesapeake's financials to show the fallacies of Full Cost, but the treatise was not well received. In fact, the only measurable education that resulted from the site was self inflicted (i.e.; don't step in front of a speeding express train).

    Nov 18, 2015. 08:33 PM | Likes Like |Link to Comment
  • Chesapeake bonds sink on new debt leeway in amended revolver [View news story]
    Following the signal from central banks everywhere, if you can't pay your debts when due, simply borrow some more money. Banks, hedge funds and fellow travelers have no need for due diligence. Why worry; its others peoples money.
    Oct 1, 2015. 01:22 PM | 1 Like Like |Link to Comment
  • Does Saudi Arabia Hate Sandridge Energy? [View article]
    HoustonK1W1 nailed it. Pennies per barrel finding and operating costs aren't in the equation. The Saudi move is a head fake ay best. The only thing I like about $80 oil is that it sobered Putin up pretty quick.
    Oct 19, 2014. 08:26 PM | Likes Like |Link to Comment
  • The Fall On The COO Leaving Has Created A Buying Opportunity For Continental Resources [View article]
    I never quite figured how Bott's background and experience suited him for Continental in the first place. The thought occurs that if you set it up where folks can pick up 3 or 4 million bucks by leaving, then it may not take a whole lot to motivate them to do so.
    Sep 21, 2014. 11:33 PM | 4 Likes Like |Link to Comment
  • Chesapeake Energy's Spin-Off Of Seventy Seven Energy: A Strong Buy? [View article]
    I think for the reasons cited, there will be a prolonged dumping of the shares of Seventy Seven. The institutions, as well as Mr. Icahn will be sellers. I suspect that the last thing he wants in his portfolio is a capital and labor intensive oilfield service company that will be losing 85% of its customer base. I guess the key questions are: (1) How will one know when the sell off is concluded and (2) What will it take to lure investors into buying the stock ?

    One thing folks sometimes miss in analyzing a company like this is the fact that EBITDA isn't applicable. The DA part is real and you can't keep the equipment in the condition needed to keep customers if you are putting the DA on debt service.
    May 26, 2014. 11:43 PM | Likes Like |Link to Comment
  • Why Investing In Chesapeake Energy Is Not A Good Idea [View article]
    Billions in asset sales; billions from JV partners, billions in revenue, year after year and yet no meaningful reduction in debt. But as long as CHK can keep rolling it into the distant future, I guess it isn't anything to worry about.
    Mar 24, 2014. 06:42 PM | 5 Likes Like |Link to Comment
  • Chesapeake files for possible spinoff of oilfield services [View news story]
    176 pages of data in the Form 10, but maybe the only question that needs to be asked is why a buyer couldn't be found. Some reasons might be that CHK is the major (maybe only) customer of the oil services division. When it becomes Seventy Seven Energy, it will have to bid for work like all the other service companies. Another might be the relatively heavy debt load. Financial statement charges for depreciation of drilling rigs, heavy trucks, frack pumps and the like is real (if not understated) and you can't maintain the equipment and service debt with the same dollar. In other words it may turn out to be EBIT and not EBITDA.
    Mar 17, 2014. 10:57 PM | Likes Like |Link to Comment
  • Will Icahn Finally Push For A Takeover Of Chesapeake? [View article]
    Does this really apply to CHK ?

    "Icahn recently endorsed his activist investment style arguing that there has never been a better time for activist investing than today: Acquisitions are highly attractive due to persistently low interest rates and, correspondingly, funding costs. Many companies also hold vast amounts of cash on their balance sheets which ultimately needs to be deployed, for instance for acquisitions. .... Thirdly, activist involvement is necessary to ensure efficient resource allocation and ensure the competitiveness of corporate America."

    None of the three fit Chesapeake. Does a leveraged buyout of a company leveraged out the wazoo make sense ? CHK doesn't have any cash to speak of, much less "vast amounts." Thirdly, "activist involvement" has already been employed in CHK's case and about the only thing that CHK might be able to do that they aren't doing would be to speed up the divestiture process.
    Feb 16, 2014. 06:04 PM | Likes Like |Link to Comment
  • Chesapeake Energy: Net Debt Gutting Shareholder Value [View article]
    I am sure Lawlor will do the job right, but the historic veracity of "CHK News" tends to color current releases with some skepticism.
    Feb 6, 2014. 10:10 AM | Likes Like |Link to Comment
  • Chesapeake Energy: Net Debt Gutting Shareholder Value [View article]
    And kept selling valuable assets to do so.
    Feb 6, 2014. 10:05 AM | Likes Like |Link to Comment
  • Short Interest On Chesapeake Energy Could Lead To A Big Short Squeeze [View article]
    All very interesting, but I have never believed the market is efficient and to imagine that all of the players can absorb this much information and act upon it in a rational manner is a stretch. Almost like fine tuning the reduction in mileage on an 18 wheeler that has low pressure in two tires on the trailing axle.
    Jan 29, 2014. 08:36 PM | 2 Likes Like |Link to Comment
  • Chesapeake Energy: Benefiting From Utica And Reducing Non-Core Assets [View article]
    Good article. Think this is first time in recent history that CHK has shown an improvement in Debt to EBITDA ratio. May be the best litmus test of turn around success. A lot more confidence in the turn around will come if CHK exits the service business (drilling, pumping and rental subs).
    Jan 22, 2014. 07:21 AM | 2 Likes Like |Link to Comment
  • Can SandRidge Find A Solution For The Variability Of The Mississippian Play? [View article]
    Excellent article. Needless to say, not much can be added. Zeits nails it succinctly when he leads off with "The difficult to control variability of well results in the Mississippian fractured carbonate play remains one of the main challenges for operators." To which could be added "since the late 1950's."

    Although it isn't an excuse to avoid science, nor a valid reason to escape tedious analyses, the Mississippi is a game of averages. Sandridge has entered that fray with the only formula that has a prayer for ultimate success. First SD has acquired a huge block of acreage. Second, SD has installed the infrastructure to handle Mississippian production at the lowest possible long term costs (e.g.: their own electrical power generation and grid, as opposed to using antiquated single phase rural power; permanent company operated salt water disposal systems, as opposed to using third party contractors to truck produced water to commercial sites; a intensely focused effort to reduce costs, which can pay dividends when drilling and development is very repetitive and takes place in a contiguous geographic area.)

    Prior to development of the techniques currently in use to study fracture systems, the quality of a Mississippi well could never be known until it had been completed and fracked. This resulted in a significant number of wells on the books that would never pay out, but keeping them around insured the recovery of at least part of the investment (and sometimes improved prices put their PI to one and above). I don't think things have changed that much, the new techniques notwithstanding.

    Jan 14, 2014. 02:03 PM | 10 Likes Like |Link to Comment