Big Data Download

Shale Brings Big Changes to Markets, Infrastructure

Big Data Download

America is moving toward energy independence, and that means a lot for the global energy market and domestic stocks.

Darren Schuringa, managing partner at Yorkville Capital Management says within four years, America will be the largest energy exporter, and by 2020, the U.S. will surpass Saudi Arabia as the world’s largest oil producer.

An unconventional resource is being extracted by unconventional methods throughout the country. It’s shale gas and it’s leading the nation to a wealth of oil, according to Schuringa.

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Shale gas is natural gas trapped in rock formation. In traditional oil reserves, you drill down and can extract a pool of oil. Shale production is more complex. Gaining access to the gas involves drilling vertically then horizontally to target the formation. Once the gas is targeted, in order to release the gas from the rock, it needs a completion technique called hydraulic fracturing. It can then be pumped up as regular oil.

North Dakota is the second largest energy-producing state, behind Texas. In 2004, North Dakota was producing 2,000 barrels of oil per month; today it produces about 25,000 barrels per month.

In the year 2007, shale gas production accounted for just six percent of overall natural gas production. In 2012, it accounted for 40 percent of total production.

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One thing that means for investors, according to Schuringa, is that the need for new pipeline infrastructure in the United States is massive. The country will need between $250 billion and $350 billion worth of infrastructure investments, he said.

Schuringa told “Big Data Download” that the industry will grow at 8 percent per year.

Schuringa runs the Yorkville High Income Infras MLP (YMLP) and the Yorkville High Income Infras MLP ETF (YMLI). They are Master Limited Partnerships which launched in mid-February. They offer investors the opportunity to get in to the energy space with an 8.5 percent yield. The advantage of an MLP is it combines the tax benefits of a limited partnership with the liquidity of a publicly traded company.

The Energy Select Sector SPDR (XLE), Vanguard Energy (VDE) and iShares S&P Global Energy (IXC) are a few traditional ETF options available to investors wanting to get in to the space.

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