Chanos: ‘Lots of Agency Risk in the Energy Business’, American E&P Business ‘Not Economic at $45 Oil’

In this clip, Chanos discusses his rationale for being short oil stocks, specifically, Royal Dutch Shell and Chevron. Moreover, he believes you can be long oil, but short oil stocks. The default risk is exceptionally high, thanks to the mountain of debt on balance sheets.

Buying energy stocks with crude at $45 is not economical. It’s important to note that he’s taking a closer look at multiple e&p names here, as potential shorts–due to the recent rally.

Naturally, I agree with his assessment. Any novice can view the wall of maturities set to assault Wall Street in 2017 and surmise that liquidity will soon become an issue with many of these companies. Although crude has rallied off the lows and has resulted in feverish rallies in the space, the balance sheet for many of these companies aren’t built for $45 crude, or even $60 crude. They need oil to head back to $100.