Cooperman Contrarian Gas Strategy

Natural gas prices are fluctuating around 10-year lows. America has such a big surplus in natural gas that some producers, notably Chesapeake Energy, have reduced production.  So Omega Advisors’ substantial position in natural gas looks like a contrarian bet.

But the story is complicated. Long-time manager and Omega founder Leon Cooperman bought Atlas Energy Inc., the largest producer of natural gas from the Marcellus Shale, years ago. This came as a merger arbitrage play—Chevron acquired Atlas Energy in 2010. Presumably Omega did alright on that.

Separately, Atlas raised money through master limited partnerships, which have a tax advantage. Omega funds and Cooperman’s family trusts now own two such partnerships, 9% of one and 7.5% of the other. Some Atlas partnership shares are owned by institutional investors advised by Omega.

These must be investments with long time horizons. There is no sign of recovery in the natural gas market—futures traded lower today.

 

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