Oil Sands ETFs: Alternative Energy Investments
June 18th 2012 at 10:02am by Tom Lydon
In response to the world’s demand for energy, the oil and gas industry has begun expanding into oil sands reserves. Exchange traded fund providers have taken notice of the new oil boom and now offer a couple of fund products that provide exposure to this nascent industry.
The energy industry is moving toward hydraulic fracturing, or “fracking,” and shale gas production. North America is home to the largest oil sand reserves in the world, with Canada accounting for an estimated 170 billion barrels, or 70% of global deposits.
“The Canadian oil sands represent the majority of proven oil reserves outside of OPEC nations; the sands are the top supplier of crude oil to the U.S. and are rapidly expanding production capacity over the next decade. Companies invested in the development of Canada’s oil sands stand to be key beneficiaries of these trends,” Derek Gates, CFA, founder of Sustainable Wealth Management, said in the press release.
Investors interested in gaining exposure to the growing sub-sector may take a look at the following ETFs:
The Guggenheim Canadian Energy Income Fund (NYSEArca: ENY) tries to reflect the performance of the Sustainable Canadian Energy Income Index, which invests in oil and gas producers in the royalty trusts and oil sands resources categories. The Index includes 200 TSX listed oil and gas sector securities and about 25 oil sands resource producers, so this is not a pure oil sands play. The fund has a 0.65% expense ratio
ENY only holds 32 components sampled from the Index. Top holdings include Imperial Oil 7.83%, Suncor Energy 7.5%, Canadian Oil Sands 7.0%, Cenovus Energy 6.4% and Southern Pacific Resource 6.2%.
The Market Vectors Unconventional Oil & Gas ETF (NYSEArca: FRAK) tries to reflect the Market Vectors Unconventional Oil & Gas Index, which follows companies extract coalbed methane, coal seam gas, shale oil, shale gas, tight natural gas, tight oil and tight sands. The ETF has an expense ratio of 0.54%. [Van Eck Readies Alternative Oil and Gas ETF]
FRAK has a 71.2% allocation in the U.S., 28.5% in Canada and 0.3% in Australia. The fund has 44 holdings and the top include Occidental Pete 8.2%, Canadian Natural Resources 7.4%, EOG Resources 7.1%, Devon Energy 6.2% and Williams Cos Inc 5.6%.
The recently launched Sustainable North American Oil Sands ETF (NYSEArca: SNDS) tries to reflect the performance of the Sustainable North American Oil Sands Index, which is comprised of Canadian- or U.S.-listed companies that explore, produce, refine, market, store, transport or provide services related to oil sands. The fund is the first to focus solely in relation to oil sands. SNDS has an expense ratio of 0.50%. [The First North American Oil Sands ETF]
SNDS has 32 holdings, which are evenly distributed. Top hodlings include BP Amoco PLC 3.4%, Enbridge 3.4%, Imperial Oil 3.3%, Husky Energy 3.3% and Nexen 3.2%.
For more information on the oil industry, visit our oil & gas exploration category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.