Shale oil still offers potential opportunities in many supporting companies.
Exploration and production companies grew rapidly after the onset of the “shale revolution” that boosted
U.S. oil output. High-quality independent companies now are focused on increasing efficiency and reducing
costs. Select shale producers have shown that they can be competitive on price with major oil exporting
countries and grow profitably at these levels. They have continued to grow because of their efficiencies,
productivity gains and strong balance sheets. North American shale companies have become the global
swing producer in response to changes in supply and demand.
Source: U.S. Energy Information Administration
Investable Theme in Action: Ivy Energy Fund
David Ginther, CPA, and Michael Wolverton, CFA, portfolio managers of Ivy Energy Fund, focus now on companies
that are low-cost operators with strong balance sheets, the ability to grow profitably and strong return on capital.
A closer look at the Ivy Energy Fund
Consider these examples of stocks that we believe may benefit from development of North American shale.
Parsley Energy, Inc. (PE)
- Independent oil and natural gas exploration
and production company focused on the
- Conservative financial strategy
- Focus on Permian Basin, which Fund’s
managers believe has further growth potential
- Proven operational efficiency
Parsley Energy is a Permian-focused
independent oil and natural gas company that
was founded in 2008. It boasts a premier drilling
acreage position, strong well results and a
conservative financial strategy. The company
operates hundreds of vertical and horizontal
wells, but has transitioned from vertical drilling to
horizontal drilling as it seeks to capture the full
potential of its Permian resources.
EOG Resources Inc. (EOG)
- Explores, develops, produces and markets
natural gas and crude oil primarily in the U.S.,
Canada, Trinidad, the U.K. and China.
- Early-mover advantage, particularly
in acquiring Eagle Ford acreage
- Increasing efficiency, helping lower marginal costs
- Technology leader and
EOG Resources is one of the largest
independent (non-integrated) crude oil and
natural gas companies in the U.S. It has net
proved reserves totaling about 2.5 billion barrels
of oil equivalent in the U.S., Canada, Trinidad,
the U.K. and China. About 97% of those reserves
are located in the U.S. It has areas of operation
in major shale basins in the U.S., including Eagle
Ford, Williston Basin and Marcellus shale.
Pioneer Natural Resources Co. (PXD)
- U.S. petroleum and natural gas/liquids
exploration and production company.
- Strong balance sheet
- Efficiency in production process and cost
- Significant producer in Permian Basin, a
preferred area for the Fund
Pioneer Natural Resources is an independent
exploration and production company based
in Texas. It is among the largest producers
from wells in Permian Basin and Eagle Ford
shale areas. Pioneer also is a large natural gas
producer in Texas and Colorado.
Past performance is not a guarantee of future results. The opinions expressed are those of the Fund’s portfolio manager and are not meant as investment advice or to predict or project the future performance of
any investment product. The opinions are current through September 2018, are subject to change based on market conditions or other factors, and no forecasts can be guaranteed. The holdings discussed are for
illustrative purposes only and are not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy.
Investment return and principal value will fluctuate, and it is possible to lose money by investing.
PE:3.76%, EOG: 4.16%, PXD: 3.57% of net assets as of 09/30/2018.
Risk factors:The value of the Fund’s shares will change and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. Investing in the energy sector
can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments, and the cost assumed
by energy companies in complying with environmental safety regulations. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/ dealers.