Jim Chanos is skeptical on shale, betting against Continental Resources

Key Points
  • "People have been looking at the industry with rose colored glasses. This is a problem with the North American shale business," Chanos said at the Delivering Alpha Conference in New York on Tuesday.
  • "Unlike other businesses your assets literally get burned up," he added.
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Short seller Jim Chanos is skeptical North American energy shale company Continental Resources will be able to pay off its debts in the coming years.

"We are short CLR," Chanos said at the Delivering Alpha Conference in New York on Tuesday.

"People have been looking at the industry with rose colored glasses. This is a problem with the North American shale business... If we don't get a big pickup in the company's fortunes in the back half of the year. It's going to struggle."

Short selling is a practice in which traders can bet against a company by selling shares they don't own and buying them back at a lower price.

The hedge fund manager also focused on Continental's problematic business model.

"Unlike other businesses your assets literally get burned up," he said. "Most of the dollars that come out of the ground have to go right back to pay your creditors."

Shares of Continental fell from its intraday high as Chanos gave his negative thesis and was up about 1 percent at 3:27 EDT.

Chanos is founder and managing partner of Kynikos Associates, one of the largest short selling investment firms in the world. Chanos is lauded for his prescient negative calls on Enron and Tyco.

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