Carl Icahn warned of "danger ahead" for investors in a dramatic video he released in late September. After reviewing his energy holdings, one has to wonder if he was speaking to himself.
"I've been in that area for years on and off and we always did great -- except now obviously with the price of oil," Icahn said in a podcast on Thursday with oil tycoon T. Boone Pickens. "We're stuck in a couple of them. I think it will work out eventually. I still think it's going to be tough for a while."
Despite a hopeful outlook, the normally brash Icahn was visibly agitated when discussing the energy sector, and for good reason: Icahn has an 8.8% stake in Freeport McMoran (FCX), a 10.98% stake in Chesapeake Energy (CHK) and a 12.65% stake in Cheniere Energy (LNG), according to data pulled by Thomson Reuters. Year-to-date performance for the companies has been dismal. Freeport McMoran is down 69%, Chesapeake Energy is down 78% and Cheniere Energy is down 44%.
"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, speaking more broadly of the tendency of financiers to be lauded and then just as quickly pilloried.
The decline in Icahn's holdings is symptomatic of the broader issues affecting the energy sector as sustained low energy prices have weakened balance sheets and exposed liquidity issues. In addition to the companies being hurt by low prices, their interconnectedness also makes them susceptible to each other's pain.
As an example, in September Natural Gas Pipeline Co., which is jointly owned by Kinder Morgan (KMI) and Brookfield Infrastructure Partners (BIP), announced an agreement with a subsidiary of Cheniere Energy to provide 385,000 dekatherms a day of gas into the Gulf Coast mainline system. At the time, NGPL planned to invest $212 million into the project.
"Once again, we have the pleasure of working with Kinder Morgan and NGPL to secure transportation capacity that will provide additional certainty of gas supply for the Corpus Christi Liquefaction Project, which is now under construction," Corey Grindal of Cheniere said in September. "It's important that we secure access to pipeline capacity to ensure reliability and deliverability of natural gas to our liquefaction facility."
Fast-forward to today and the terms of the agreement announced in September face challenges. Last week, Kinder Morgan increased its stake in NGPL to 50% from 20%. The move prompted Moody's to lower its outlook on Kinder Morgan to negative from stable due to NGPL's liquidity issues. The outlook change prompted Kinder Morgan to issue a press release on Friday in which it said it would review its financing plans for 2016.
There has so far been no mention about whether the NGPL-Cheniere deal is at risk in light of recent news from Kinder Morgan, but it is an example of the interconnectedness in the industry. Furthermore, it suggests Icahn's holdings could face more hits for reasons outside of the low energy costs.
Still, Icahn is trying to stay hopeful even while others are fleeing.
"I think it's going to be up but I can't put a time on it," Icahn said, responding to Pickens' belief that oil could go to $70 in the next six months. "I hope you're right. Believe me, I hope you're right."