Seeking Alpha

Jim Chanos sees dark side of natural gas boom

  • The downside of the U.S. natural gas boom is that, at historically low prices of ~$3.75/MMBtu, "some of the levered players are struggling to cover their debt service and their obligations to drill more holes under their leases," Jim Chanos tells CNBC.
  • The boom in nat gas supplies, and the subsequent low prices, is "bad news for global coal as more and more countries switch over to natural gas," he adds.
  • Chanos is short two different groups of the major oil companies: the big publicly traded majors like Exxon (XOM) - "their problem is finding costs" in reserves like deepwater drilling and the Arctic - and the nationalized companies such as Petrobras (PBR), Ecopetrol (EC) and PetroChina (PTR), which he says really are "political venues."
  • ETFs: FCG, GASL, GASX.
Comments (9)
  • So is he predicting consolidation, bankruptcies, etc...? Thus far the rest of the world has struggled with geological differences that allowed the US to have a revolution as it has... from what I have ready anyway. Has there been any real breakthrough similar to the US elsewhere?
    14 Oct 2013, 03:26 PM Reply Like
  • wigit5,

     

    One of the biggest differences between the US & ROW that has fueled US production via the unconventional shale plays is that citizens in the US own mineral rights and receive direct monetary benefit. That is not the situation in most other places so there is less incentive to make it work.
    14 Oct 2013, 03:43 PM Reply Like
  • One of the largest commodity hedge funds out there Clive Capital out of London went insolvent bout a month ago . Big publicly traded majors or political venues if you're too leveraged you're too leveraged.
    14 Oct 2013, 03:27 PM Reply Like
  • Historically, selling Standard Oilor Exxon short has been a terrible idea. So who knows more about the challenges XOM has? Mr. Chanos? Or XOM management? My money is on management.
    14 Oct 2013, 05:11 PM Reply Like
  • Exxon will convert the natural gas to LNG to sell it in better markets in one way or another. They also have a huge advantage in making long term contracts with utilities at prices out in the future that others cannot make. They have the resources to assure the utilities that they can deliver the gas in the future at a more competitive price. This is where size does help Exxon.
    14 Oct 2013, 05:37 PM Reply Like
  • Americans should demand an Energy Policy from the bozos in Washington. One that includes our own petroleum and gas and even coal making our country more solid, solvent, and secure.
    6 or 7 brand new refineries (with light sweet capacity), some export terminals, and the Keystone Pipeline seems like a good place to start...
    14 Oct 2013, 06:05 PM Reply Like
  • Our energy policy should be simple...provide short term (three years starting 2015-2018) tax breaks for car companies to produce vehicles that run on natural gas. That would give time for a little build of out infrastructure.

     

    The day of that announcement, oil would drop $20.

     

    All we need is a little kick start from the government.
    15 Oct 2013, 11:07 AM Reply Like
  • Or we could just stop favoring one form of energy over the other... stop the subsidies, support all forms of energy equally (responsibly as is reasonable).
    15 Oct 2013, 11:12 AM Reply Like
  • This country was blessed with an abundance of natural gas! We should be using it! A nat gas energy policy would be a huge catalyst for our economy and our national security.

     

    Anyone I talk to about this..agrees 100%. Common sense
    15 Oct 2013, 11:57 AM Reply Like
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