Revisiting a Fracking ETF as Oil Prices Rebound

After the oil bust, energy prices have rebounded, supporting the hydraulic fracturing, or fracking, industry and sector-related exchange traded fund.

The VanEck Vectors Unconventional Oil & Gas ETF (NYSEArca: FRAK), which tracks North American fracking and oil sands, has been outperforming the broader energy sector. Over the past three months, FRAK surged 35.4% while the Energy Select Sector SPDR (NYSEArca: XLE) gained 16.3%.

Related: Oil ETFs Bounce After Goldman Points to Supply Deficit

FRAK is also trading above both its 50- and 200-day simple moving averages, and its short-term trend line recently crossed above its long-term trend.

Nevertheless, while some companies have outperformed the broader equities market, there are still some weak areas. For instance, Pioneer Natural Resources (NYSE: PXD) has strengthened as the firm’s stronger balance sheet afforded it more opportunity to develop attractive projects, reports Spencer Jakab for the Wall Street Journal.

Related: 32 Best ETFs to Track Crude Oil

FRAK includes a 6.2% tilt toward PXD.

Fueling the growth of some fracking firms, the sudden plunge in prices have caused may to tighten their belts and become more efficient producers.

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For instance, in the first quarter of 2015, Pioneer’s production cost per barrel of oil equivalent was $12.56, and a year later, it was down to $9.17. The company added to reserves at a cost of $10.18 per barrel, which is much cheaper than before.

Instead of meticulously picking through the various unconventional oil and gas producers, investors can turn to a broad diversified ETF play that takes on this nascent market segment.

Related: Moves Afoot for Energy ETFs – Exxon Mobil, Chevron

FRAK holds 45 unconventional oil producers and includes about 81.4% U.S. frackers and 18.5% Canadian oil sands companies. Among the ETF’s top holding, Eog Resources (NYSE: EOG) makes up 7.4% of the underlying portfolio, along with Occidentail Petroleum (NYSE: OXY) 7.2%, Anadarko Petroleum (NYSE: APC) 7.0%, PXD 6.2% and Devon Energy (NYSE: DVN) 6.1%.

For more news and strategy on the Oil ETF market, visit our Oil category.

VanEck Vectors Unconventional Oil & Gas ETF