Oil Services ETFs Could Boom as Shale Drillers Expand

As crude oil prices rebound, shale hydraulic fracturing companies could increase spending on exploration and production next year, supporting further gains in energy services-related exchange traded funds.

With improved oil prices, banks are more willing to extend credit lines to leveraged hydraulic fracturing or fracking companies that are looking to boost market share for the first time in two years, reports Swetha Gopinath for Reuters.

Raymond James calculated that North America-focused oil and gas producers could raise capital investment by 30% in 2017. A number of companies, like Pioneer Natural Resources (NYSE: PXD), Diamondback Energy (NasdaqGS: FANG) and RSP Permian (NYSE: RSPP), have projected larger budgets and increased output next year.

Through the latest calculation in the value of reserves in the ground with bank creditors, 34 oil and gas producers had their available credit lines raised an average of 5%, or over $1.3 billion, with a combined credit for the companies at $30.3 billion, compared to $28.9 billion at the end of spring 2016.

“The ‘animal spirits,’ seem to be coming back to the exploration and production market, albeit slowly,” Reorg Research analyst Kyle Owusu, referring to the human emotion that drives confidence, told Reuters.