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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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IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video's posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.


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.


Important disclosure for Van Eck Global Hard Assets Investors:  You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with concentrating its investments in hard assets and the hard assets sector, including real estate, precious metals and natural resources, and can be significantly affected by events relating to these industries, including international political and economic developments, inflation, and other factors. The Fund’s portfolio securities may experience substantial price fluctuations as a result of these factors, and may move independently of the trends of industrialized companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in debt securities, derivatives, commodity-linked instruments, illiquid securities, asset-backed securities and CMOs. The Fund is also subject to inflation risk, short-sales risk, market risk, non-diversification risk, leverage risk, credit risk and counterparty risk. Please see the prospectus for information on these and other risk considerations.


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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ETF Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.


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