Market Vectors launches unconventional oil & gas ETF

Feb 15th, 2012 | By | Category: Commodities

Market Vectors ETFs, part of Van Eck Global, has announced the launch of the Market Vectors Unconventional Oil & Gas ETF (NYSE: FRAK), a fund which seeks to tap the vast potential of the fast-growing unconventional energy sub-sector

Market Vectors launches unconventional oil & gas ETF

Van Eck has announced the launch of the Market Vectors Unconventional Oil & Gas ETF (NYSE: FRAK), a fund which seeks to tap the vast potential of the fast-growing unconventional energy sub-sector.

Market Vectors Unconventional Oil & Gas ETF is the first US-listed ETF designed to provide investors with pure-play exposure to the unconventional segment of the energy sector. Unconventional oil and gas operations can include efforts in coal bed methane, coal seam gas, shale oil, shale gas, tight natural gas, tight oil and tight sands.

The fund comes to the market as rising global consumption and the quest for energy independence is driving many nations to seek additional supply sources for oil and natural gas.

Many analysts believe that unconventional technologies – such as hydraulic fracturing (fracking), lateral or deep sea drilling, high pressure gas injection, and advanced 3D imaging – have the potential to transform the global energy landscape by dramatically increasing supply and altering import needs.

During the past several years, new extraction techniques applied to traditional resources have led to significant, “game changing” increases in North America’s natural gas supply capacity. More recently, these same techniques have been utilised by oil companies striving to produce similar results.

Companies located outside North America, in countries such as China, Australia and Argentina, have also begun exploring the potential of unconventional energy. Technological advancements and cost efficiencies have attracted interest from major global energy companies that are eager to participate, as evidenced by rapidly increasing M&A activity.

“We’re pleased to add FRAK to our family of hard assets ETFs,” said Allison Lovett, Vice President of Marketing at Van Eck Global. “As momentum continues to build in this innovative sub-sector of the energy world, companies in this space are poised to lead the way in the discovery and extraction of energy from new and existing sources.”

FRAK seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of Market Vectors Unconventional Oil & Gas Index (ticker: MVFRAKTR), a rules-based index intended to track the overall performance of companies involved in the exploration, development, extraction, production, and/or refining of unconventional oil and natural gas.

The index includes companies that derive the majority of their revenues from unconventional oil and gas (or have properties with the potential to do so), have a market cap in excess of $150 million, a three-month average daily trading volume of at least $1 million, and minimum trading volume of 250,000 shares each month over the preceding six months. As of January 31, 2012, the index had 43 constituents.

Investors should note that investing in unconventional oil and gas companies is not without risks, including the inherent volatility of energy prices, exploration and production spending, operating hazards, limited production history, a still evolving regulatory environment, and more.

As at the time of writing, the fund’s top five holdings are Occidental Petroleum, Canadian Natural Resources, Eog Resources, Devon Energy and Hess Corp. Though the fund’s investable universe is global, approximately 70% of the holdings are US-listed companies, while approximately 30% are Canadian.

FRAK is Van Eck’s 45th Market Vectors ETF and has a net expense ratio of 0.54%. It is traded on the NYSE Arca.

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