Jim Chanos says he's bearish on one sector: hydraulic fracturing.
"We remain bearish on the business model of the North American exploration and production companies,"
the short seller said Tuesday during a panel at the Evidence-Based Investment Conference in New York City.
"Whether at $100 oil and $4 natural gas, or half of those prices, the US frackers generate no free cash flow," Chanos told Business Insider after the panel, which I moderated. "Higher production, lower production — it doesn’t matter."
Hydraulic fracturing is the process of extracting oil or natural gas from shale by injecting water and chemicals into the rock and breaking it apart. The technology drove an oil-production boom, but many of the explorers depending on this have struggled as global oil prices have slumped.
On his bearish outlook for the stocks, Chanos said he agreed with his fellow hedge fund manager David Einhorn of Greenlight Capital.
Einhorn presented the sector as a short opportunity last year at the Sohn Investment Conference. He called them "motherfrackers" and specifically zeroed in on one company, Pioneer.
"We object to oil fracking because the investment can contaminate returns," he said at the conference.
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