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Goodrich Petroleum (GDP): There is Still Value in Shale

Sometimes, when we look at a market that is booming and that has risen significantly in a fairly short time it is easy to feel that we have missed the boat. A look at the performance of the Market Vectors Unconventional Oil and Gas ETF (FRAK), which specializes in companies involved in shale exploration and extraction, would definitely make you feel that way about that particular market.

 

After gaining over 40% in the first 11 months of last year, FRAK has stalled and is only now moving back towards November highs. If enthusiasm is rooted in fundamentals, however, rather than just hope, the flood of speculative cash that we see can be only the beginning of the move. That is not to say that there isn’t risk. That speculative money is, by its nature, fickle, so corrections in the overall market are inevitable, but over time the potential of companies specializing in the field will be realized and enormous profit can still be made.

As readers of Oil & Energy Insider, I am sure you are well aware of the fundamental case for shale oil as a sector. Improving technology has unleashed huge supplies of a valuable commodity, just as growth in the world’s developing nations has increased demand. Still, that nagging feeling remains that all of the value has gone. For an ETF such as FRAK, that may be the case, and buying anything as it edges towards previous highs is a slightly scary prospect. It could be that it will break through and race to new…




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