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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