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Harry Johnson

Harry Johnson
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  • 2 Takeout Candidates: Continental Resources And EOG Resources [View article]
    I can't imagine Harold Ham selling out at this point. He has realized the dream of every congenital oilman that ever lived; to wit: the discovery of a huge oil deposit, an inventory of PUD drill sites as far as the eye can see, relatively stable oil prices (unprecedented in the history of the industry), and the availability of all of the capital needed at a reasonable cost. What could be more fun than that ? Certainly not sitting on a pile of cash as high as Mount Everest and trying to keep every financial charlatan in the world including the federal government from stealing it.
    Nov 22, 2013. 08:43 PM | 11 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
  • Chesapeake Energy, Rolling Stone Magazine, Shale Gas Scams And Bubbles [View article]
    To paraphrase an old axiom, A Rolling Stone gathers no facts.
    Mar 6, 2012. 02:39 PM | 9 Likes Like |Link to Comment
  • Why Is It So Hard To Apply Common Sense In The Fracking Debate? [View article]
    TxPete has it exactly right. Thoughtful analysis based on scientific fact is a rarity inside the Beltway. We don't take all of the cars off the road because some people violate the law and drive drunk. If some oil and gas operators violate state regulations that were set up years ago to protect fresh water we can't punish the entire industry. Believe it or not, back in the 1920's some operators pulled the surface casing (the primary string that protects fresh water) after the state inspector left in order to use it in the next well. And we still have fresh water a century later. The point is, we need some sense of proportion. As the bible says "Where no oxen are, the crib is clean, but much increase is by the strength of the ox."
    Dec 14, 2011. 01:10 PM | 9 Likes Like |Link to Comment
  • No Bakken, But Everything Else - Chesapeake Energy Is Set Up To Succeed [View article]
    Many things positive, but assets were sold to pay down debt, yet debt contimues to climb, illustrating the hard fact that CHK is a very inefficient operator and cannot succeed until management gets costs under control.
    Jan 22, 2013. 10:33 AM | 8 Likes Like |Link to Comment
  • Chesapeake Energy Is A Great Retirement Fund Stock [View article]
    I consider myself a knowledgeable oil and gas person (a subjective view I admit). Only those knowledgeable oil and gas people who have gone through one or two boom and bust cycles in the business can truly fathom how quickly undeveloped leases can become worthless and how quickly high dollar drilling rigs begin to sell by the pound should slackening demand cause a hiccup in crude prices.... and the impossibility of servicing mammoth debt loads if financiers tire of roll-overs.

    Icahn bought and T Boone bailed. Don't think they can both be right.
    Aug 21, 2012. 10:43 AM | 8 Likes Like |Link to Comment
  • My Take On SandRidge [View article]
    The big speculators in crude oil futures love Cushing, comfortable in the knowledge that they have no risk of having to take delivery since it is inpracticable if not impossible to make physical delivery there. If you have deep pockets and nerves of steel, you simply go long and wait out the shorts as the contract expires. The longs have the edge because they can sit on their contracts until they expire, claiming they wanted to take delivery. They never have to wait that long because the shorts must purchase an offsetting long contract before their short contract expires. If a short sets on the contract until it expires and then can't deliver the physical crude, it will prove to be a costly mistake (fines, possible suspension from trading and maybe even a lawsuit from a long who "wanted to take delivery"). For at least the past 20 years, I have ranted to anyone who would listen (and many who wouldn't listen) about the absurdity of setting the index for the 20,000,000 barrels of crude that the U.S. uses every day based upon a single land locked delivery point.

    Last week, President Obama took to the Rose Garden with the Chairman of The Commodity Futures Trading Commission(CFTC) and the Chairman of The SEC to prod Congress to pass legislation that would curb speculation in crude oil futures. Interesting, given the fact that The President appoints the Commissioners of the CTFC, which was created by Congress in 1974 with the mandate to regulate commodity futures markets. So typical of the Washington establishment - an urgent cry for new legislation, the primary objective of which is to divert attention from the fact that legislation is already on the books that is adequate had it been accompanied by proper oversite and enforcement. Part of the problem might be the President's appointment to Chairman of the CFTC of the guy who ran Goldman Sach's commodity desk for a couple of decades.. But, much as I loath Obama, I have to say that he is not much different than those who have held the office or occupied Congress during my lifetime when it comes to energy policy, or more accurately, the lack thereof.
    Apr 23, 2012. 01:51 PM | 8 Likes Like |Link to Comment
  • Bakken Update: Continental Resources' Well Results Are Getting Better [View article]
    My guess is that more proppant in the Brigham wells gives them the edge over Continental. Some formations tend to seal off over time in the absence of proppant.

    Well productivity and the decline rate thereof are two of the most important factors to consider in the valuation of an oil and gas property. Michael covers that in spades. The following is offered for those (if any) interested in learning a little more about choke settings.

    Debate on Choke setting started the second week after invention of the choke. Finding the right setting is strictly trial and error. It becomes more so for high gas oil ratio wells. In theory, the best setting will produce whatever is coming into the wellbore from the formation at the lowest possible expenditure of reservoir pressure, thus keeping the relative permeability to oil, gas, and water in the formation as constant as possible.

    For example, producing a well with the choke wide open can cause a rapid pressure decline in the proximity of the wellbore (even more likely in a horizontal well). This causes gas that is in solution in the oil at original reservoir conditions to escape. As a result, the avenues that exist for reservoir fluids to reach the wellbore must now be shared by oil and gas and, as would be expected, gas is much more mobile than oil. The end result is somewhat analogous to shaking up a carbonated beverage and drinking the fizz. After three or four cycles, the drink is flat and there is no more energy to displace the liquid. When this point is reached in a reservoir, it is necessary to install a pump and be patient while gravity and whatever energy is contributed by oil and water expansion pushes reservoir fluid into the wellbore.

    A rapid pressure drop at the wellbore interface is even more detrimental if a well produces water. Without getting into the technicalities, this can cause an exponential increase in water production which is really bad news.

    In the final analysis, an experienced pumper is probably in the best position to refine the choke setting. He is (or should be) checking the well daily for production and wellhead pressure, among other things. A good pumper will get a feel for what a well can do after a few weeks of tinkering; whereas, a petroleum engineer (like me) might come by once a month and be apt to open the choke and increase the gas-oil ratio, or pinch it back and allow water to accumulate in the tubing and kill the well.
    Jun 2, 2012. 03:04 PM | 7 Likes Like |Link to Comment
  • My Take On SandRidge [View article]
    Michael: Great analysis. Rumor has it that Ward and McClendon began to fall out when CHK bought the old Columbia Gas System back in Pennsylvania and West Virginia. The rift widened with Aubrey's incessant drive to be the number one champion of NG. Ward isn't one to gloat or take any pleasure in another's misfortune, but it must warm his heart a little to be proved right.

    Having drilled over 500 vertical wells in the Mississippi Lime, I worry a little bit about SDR's Lime program, but it should be long life, which tends to take care of things over time. Also, local rumor has it that there is another zone in their Kansas acreage that could sweeten the pot significantly.
    Apr 20, 2012. 09:54 PM | 7 Likes Like |Link to Comment
  • Why Chesapeake Energy Isn't A Takeover Target [View article]
    I often wonder if the advocates of wind and solar think the Tooth Fairy pays for the solar panels, windmills and costly transmission lines needed to carry electricity from solar and wind farms to places where the electricity is needed. Moreover, do they actually think that the laws of physics and thermodynamics don't apply to the conversion of solar hear, or to the effect the pressure sink created at a concentration of windmills has on wind patterns in the upper atmosphere ???
    Oct 28, 2013. 07:16 PM | 6 Likes Like |Link to Comment
  • The Numbers Are Finally Catching Up With Chesapeake Energy [View article]
    Wouldn't it be more accurate for the title to be "Investors and Analysts are finally catching up with Chesapeake's numbers ?" A careful reading of the 10K footnotes and some knowledge of the history of the industry showed where this company was headed at least a decade ago, oil and gas prices notwithstanding.
    Feb 20, 2013. 01:33 PM | 6 Likes Like |Link to Comment
  • Chesapeake Energy: A Long-Term Play On Natural Gas As An Automotive Fuel [View article]
    Corey: Your piece would be near perfect had you mentioned the 100,000,000 vehicles that could be converted to natural gas within a matter of weeks without any build out of infrastructure. I refer, of course, to the 110,000,000 homes in the U.S. that use natural gas for heating and/or cooking. A small inexpensive compressor in the garage could refill the tank while the owner slept. I have seen estimates for converting a gasoline engine to dual fuel gasoline/NG in the range of $12,000 to $15,000, but my guess is that the cost would come down to around $2,500 if manufacturers were looking at a market of millions.

    I sometimes think the best way to describe the apparent aversion to natural gas as a vehicle fuel is to modify a famous statement made by Winston Churchill: Never have so many ignored for so long such an obvious solution to the major economic and environmental problems of our time.
    Mar 13, 2012. 06:29 PM | 6 Likes Like |Link to Comment
  • Gasfrac Energy Services: Fracturing Game Changer [View article]
    Properly cemented strings of surface casing, the primary protectors of fresh water, usually outlive the oilfields in which they are situated. There are oilfields still producing that were discovered in the 1920's and 30's in which no failures of surface casing or underground contamination of fresh water has occurred.

    When a well reaches the economic limit, the production casing is cut off above the cement top and pulled from the hole. Any perforations in the production casing are cemented and a cement plug is placed beginning several feet inside the production casing stub left in the hole, and running to several feet above the stub in the open hole. A similar cement plug is set in and out of the bottom of the surface casing. The job is completed by setting a final cement plug in the top of the surface casing.

    With regard to problems 25 years from now, I believe the industry has already encountered and solved more problems in the past than it will encounter in the future (excluding regulations spawned by know-nothing politicians grandstanding for votes). The U. S. already has over 750,000 producing wells; hence, there is no reason to re-invent the wheel just so Congressmen and Presidents can appear to be relevant.
    Jan 14, 2012. 04:42 PM | 6 Likes Like |Link to Comment
  • Chesapeake Energy: Managing Its Way Into Analysts' Good Graces [View article]
    I guess the underlying disappointment for a lot of folks is the fact that a little less arrogance and a little more cost control would have put CHK's stock at $100 as the CEO promised a few years back. CHK astounded the industry early on by paying whatever it took to establish the position it wanted in various plays and other undertakings. This becomes increasingly risky as a company increases mass, particularly if debt grows with each new venture.
    Dec 30, 2011. 07:56 PM | 6 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