Why hasn't Carl Icahn been talking about his energy plays? Within the last few months, he's congratulated Xerox (XRX) for its decision to split in two and wished that another of his holdings, AIG (AIG), would be as amenable to his recommendations. (AIG has rejected Icahn's call for the company to split in three, but it is taking other measures to re-organize itself.)
Through all of this, Icahn also managed to make a winning bid on Pep Boys.
However, the billionaire activist investor has not been as vocal about his three big energy plays; these haven't been doing so well.
Icahn has stakes in Chesapeake Energy (CHK), where he is the second largest shareholder with a 10.98% stake, Cheniere Energy (LNG), where he is also the second largest shareholder with a 13.83% stake, and Freeport-McMoRan (FCX), where he is the largest shareholder with an 8.8% stake, all according to data provided by Thomson Reuters.
Real Money reached out to representatives for Icahn, who did not immediately respond to requests for comment.
"I've been in that area for years on and off, and we always did great -- except now obviously with the price of oil, we're stuck in a couple of them," Icahn said in a podcast with T. Boone Pickens in December. "I think it will work out eventually. I still think it's going to be tough for a while."
Chesapeake Energy is the Icahn holding which has garnered the most recent attention. It also happens to be on Real Money's "Stressed Out" index. On Monday, the stock fell more than 50% in intraday trading on reports that the company hired Kirkland & Ellis to serve as its bankruptcy attorneys. After the stock was halted multiple times in early trading, Chesapeake Energy released a statement in which it affirmed it had "no plans" to file for bankruptcy and that it has been a client of Kirkland & Ellis since 2010.
Icahn, meanwhile, has said very little about his holding in Chesapeake Energy, which has fallen 85% since he last added to his stake in March 2015. Since that time, the company has also cut its common and preferred share dividends, seen the price of many of its bonds fall to 50 cents on the dollar, and has had its credit rating slashed to CCC.
Freeport-McMoRan also has the distinction of being on Real Money's "Stressed Out" index. The natural resources company reported losses for 2015 and its call with analysts took a sobering tone as the company focused on its plans to relieve itself of its hefty debt load as it has $5.4 billion in financial obligations coming due through 2018. Its debt is rated below investment grade across the three major ratings agencies.
Again, Icahn has remained largely silent about this holding even as shares have fallen 50% since he announced his stake in the company in August. In October, Icahn posted a note on his website in which he commended Freeport's board for reducing its number of directors to 11 and for giving Icahn 2 representatives on the board. In December, he said on CNBC's 'Fast Money: Halftime Report" that he agreed with Freeport's decision to suspend its dividend. Freeport's announcement in December included many other cost-cutting provisions as well.
However, Icahn has not said anything on Freeport since the company reported earnings last month. The company's earnings call focused on its plans to try to decrease its $20.4 billion debt load by $5 to $10 billion by a mix of asset sales and other measures. Shares of the company are down 24% year to date, even accounting for some of the rallies the company saw when copper prices ticked upwards.
Finally, Cheniere Energy is another one of Icahn's energy plays that has faced trouble. The stock is down 63% since Icahn announced his stake in August. Icahn was also able to get two seats on Cheniere's board, and this was followed by the ousting of its CEO Charif Souki in December.
Of Souki's departure, Icahn congratulated the board for having the "guts" to terminate Souki and said the following in a statement on his website:
"There is no doubt that Charif Souki has proven that he is a talented entrepreneur but at this time there is also little doubt that the board wished to move the company in a direction that differed greatly from the path Mr. Souki wanted. It is also telling that Mr. Souki sold a great deal of his stock, which made it somewhat easier for him to 'swing for the fences' making it a win-win for Mr. Souki but not necessarily for the shareholders."
Shares of the company are down 41% since Souki's departure. (Of course, Cheniere isn't the only energy company which has seen steep drops.)
Cheniere faces challenges with Souki no longer at the helm. While Souki was called "entrepreneurial" and the company wished to focus more on operating its existing business, there is something to be said for having someone who can secure contracts at the helm when times are tough.
"Our concern is that Mr. Souki's sudden departure could cause other critical management team members to leave the firm," Faisal Khan of Citigroup said in a note soon after Souki's departure was announced. "Furthermore, we do not believe the current interim CEO and chairman have sufficient experience operating and managing Cheniere's large capital budget and construction timetable."
In an interview with Forbes Magazine, shortly after his departure, Souki said he would not have been happy running a "quasi-utility," which is the direction Cheniere seemed to want.
"I'm a builder, not a cost-cutter," Souki said.
In January, the company announced that its first liquefied natural gas shipment from one of its new Sabine Pass terminals would be delayed by a month or two. The timing is troubling as Cheniere -- with Souki at the helm -- led the charge in exporting liquefied natural gas. Unfortunately, the completion of Sabine Pass terminals comes at a time in when the market is glutted.
Cheniere secured its projects with offtake agreements when the outlook for liquefied natural gas was stronger. However, as the energy market weakens, even seemingly secure contracts could be questioned and Cheniere could be looking at counterparty risks.
Last week, RBN Energy noted that the crude-to-gas ratio (WTI divided by Henry Hub) stands at 16x, which is down from its average of 27x between 2009 and 2014. The low ratio could mean that U.S. natural gas is less competitive in international markets. If true, Cheniere's ability to hold existing contacts and gain new ones could be challenged.
With energy prices staying low and stocks in freefall, Icahn may have reached his third strike on energy plays.
"You hit three in a row and you're a genius until you lose three in a row and you're a bum," Icahn said in December, speaking more broadly of the tendency of financiers to be lauded and then just as quickly pilloried.