Chanos: Exxon and Other Big Oil Names are “Value Traps”
Famed short-seller Jim Chanos raised a red flag in a speech at the Value Investing Congress in New York Monday about integrated oil companies, saying that their costs to find and produce oil have gone up considerably in the past decade.
Chanos singled out ExxonMobil (XOM ).
“It’s still not generating enough cash to cover all its cash needs. There’s a reason this stock has lagged despite its being the bluest of blue chips.”
Chanos is bearish on the entire sector. “The cost structure has grown dramatically.”
In 2000 average exploration costs for the big names were $5 per barrel, but had risen to $22 last year. Production costs have risen from $5 per barrel to $15.
“The cost of finding a marginal barrel for the big behemoths is up and rising — a very very negative trend,” Chanos said. He warned that deals by large integrated companies with countries like Russia are not necessarily a good thing.
Chanos singled out ExxonMobil (XOM ).
“It’s still not generating enough cash to cover all its cash needs. There’s a reason this stock has lagged despite its being the bluest of blue chips.”
Chanos is bearish on the entire sector. “The cost structure has grown dramatically.”
In 2000 average exploration costs for the big names were $5 per barrel, but had risen to $22 last year. Production costs have risen from $5 per barrel to $15.
“The cost of finding a marginal barrel for the big behemoths is up and rising — a very very negative trend,” Chanos said. He warned that deals by large integrated companies with countries like Russia are not necessarily a good thing.
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