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Current and Future Themes: Unconventional Resources (Fracking)

What is unconventional energy?

SHAWN REYNOLDS: Unconventional resources is really accessing hydrocarbons via hydraulic fracturing and horizontal drilling. That's a theme that we've been investing in for quite some time.  If you go back four, five, or six years, it was all about natural gas. That has evolved into accessing the resources, mostly focused around oil. We have been moving around the country into different geographic regions. Originally it all started in the Barnett Shale around Fort Worth, and then up into Appalachia in Pennsylvania, and then the Haynesville in Louisiana. Overall, gas plays. And then the first oil play was up in Montana’s Bakken formation.

Where are opportunities now?

REYNOLDS: Now, we see a lot of opportunity in West Texas, which is known as the Permian Basin. The Permian Basin is divided into two different parts: the eastern basin, which is the Midland, and the western basin, which is Delaware. We really see value in both of those areas. The Midland Basin is a little bit more advanced than the Delaware basin but we have exposure to both of those regions.

Drilling into Midland

REYNOLDS: The other really interesting thing about the Midland Basin is that it is like a layer of cake, and there are many different zones -- we call them pay zones -- that are our prospective.  The market right now is giving some of these companies value for one, maybe two, of these different pay zones.  What we see is that there's actually probably more like four, five, or maybe as many as six or seven that you should actually start giving value for into the stock price.  We don't see it today, but we see that evolving over the next several years.

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Sean Reynolds is the Portfolio Manager of Van Eck Global’s actively managed mutual fund Van Eck Global Hard Assets Fund and is not involved in the portfolio management of Van Eck’s passively managed Market Vectors ETFs.

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Please note that Van Eck Securities Corporation offers additional investment products that invest in the asset class(es) included in this video [Market Vectors Unconventional Oil & Gas ETF]. Important disclosure for Unconventional Oil & Gas ETF Investors:  Investments in the unconventional oil and gas sector are exposed to certain risks which include, among others, volatility of energy prices, exploration and production spending, operating hazards, limited production history, royalty interests, liens and other burdens, third party pipeline availability and capacity, and an evolving regulatory environment. Additionally, the Fund is subject to changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations and other risks inherent to international investing. Investors should be willing to accept a high degree of volatility and the potential of significant loss. The Fund may loan its securities, which may subject it to additional credit and counterparty risk. See the Fund’s prospectus and summary prospectus for more complete information regarding investment risks.

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