It’s amazing just how much energy North America is producing these days. The widespread adoption of hydraulic fracturing and horizontal drilling have opened up a sea of oil and natural gas that has completely changed the global energy landscape.

And yet, despite the torrid production gains, there is still plenty of oil and natural gas to be unlocked in North America. For investors, that means betting on the energy sector and unconventional drilling for years to come. (For more, see: Why Schlumberger Is A Name You Should Know.)

Rising Production

While fracking has been around since the 1940s, it wasn’t until the late 2000s when the drilling technique was coupled with horizontal drilling for the first time. And energy exploration & production (E&P) firms haven’t looked back since. As of the end of 2012, there have been over 2.5 million hydraulic fracturing jobs performed on oil and gas wells worldwide. However, North America remains the fracking and unconventional drilling epicenter. (For more, see: Fracking Can't Happen Without These Companies.)

As the exploitation of shale fields like the Bakken, Marcellus and Eagle Ford has progressed, production of both natural gas and crude oil continues to exceed previous records. According to energy reporting service Platt’s, natural gas production rose by 0.5 billion cubic feet per day (Bcf/d) to reach an average of 68.5 billion Bcf/d in July. That’s the highest monthly average on record and builds upon June’s record production numbers. (For more, see: A Guide To Oil And Gas Plays In North America: Williston, Bakken and Three Forks.)

Not to be outdone, crude oil production in the U.S. has also surged. In fact, that production has hit its highest level in nearly 27 years. According to the Energy Information Administration (EIA), crude oil production in the U.S. averaged roughly 8.5 million barrels per day in July. That’s the highest amount since April 1987. (For more, see: How Does Crude Oil Affect Gas Prices?)

Canada and Re-fracking, Too

And as impressive as these numbers are they don’t take into account rising unconventional energy production in Canada. Canada has benefited from fracking and advanced drilling as well. Nor do the numbers highlight the potential continued production growth. There’s still plenty of untapped acreage in North America’s various shale fields. The EIA estimates that crude oil production in the U.S. should hit 9.3 million bpd. (For more, see: Oil And Gas Industry Primer.)

Also contributing to that growth is the new trend of re-fracking. Firms like EnCana Corp. (ECA) and Marathon Oil Corp. (MRO) have begun re-fracking older wells drilled in the Bakken and Haynesville shales using current technology. That’s allowed them to extract more oil and gas from these wells. As re-fracking takes off, the energy boom could enter another growth phase. (For more, see: How Fracking Affects Natural Gas Prices.)

Betting Big On Unconventional Energy

Given just how massive fracking and energy production has become, investors with longer term timelines should seriously considering adding oil and gas stocks to their portfolios. Two great places to start are the Market Vectors Unconventional Oil & Gas ETF (FRAK) and the First Trust ISE-Revere Natural Gas ETF (FCG). (For more, see: ETFs For Playing The Surge In Unconventional Energy.)

The First Trust fund tracks firms who receive a substantial portion of their income from natural gas production. Top holdings for FCG include fracking leaders like Devon Energy Crop. (DVN) and QEP Resources Inc. (QEP). So far, FCG has managed to register good – although volatile – performance and has returned 8.48% annually over the last five years. FRAK covers the wide world of unconventional energy including shale oil and other sources like coalbed methane. That broader mandate has helped the fund return nearly 15% this year as production continues to surge.

Playing Re-fracking

For those looking to play the growing use of re-fracking, the trio of EXCO Resources Inc. (XCO), Denbury Resources (DNR) and CARBO Ceramics Inc. (CRR) could be top choices. Unlike larger E&P firms, smaller EXCO could have the most to gain from using re-fracking, as it will make a the biggest dent in production volumes. Already XCO has begun testing wells drilled back in 2010 and has identified more than 400 additional wells to be re-fracked. Denbury already is the leader in using enhanced oil recovery (EoR) techniques to extract more oil per well from its older holdings. (For more, see: Pipeline Plans Are A Big Win For The Oil Sands.)

Meanwhile, in order to re-frack a well, E&P firms need to use a higher-tech blend of proppant and chemicals in order to open older wells. CARBO remains the biggest supplier of ceramic and specialized proppants to fracking firms. For investors looking to bet on all the “fancy” equipment to make hydraulic fracking work, the iShares Dow Jones US Oil Equipment Index (IEZ) is still one of the best plays for the oil services industry. (For more, see: Guide To Measuring Oil And Gas Companies.)

The Bottom Line

For investors, the unconventional drilling boom is the gift that keeps on giving. Despite the recent record productions gains, more could be in store for the energy industry as new techniques continue to unearth more oil and natural gas.

Related Articles
  1. Stock Analysis

    Fracking Can't Happen Without These Companies

    With all the attention paid to fracking, what is are the good investment opportunities? Are the companies that extract oil and natural gas a good bet?
  2. Stock Analysis

    How Fracking Affects Natural Gas Prices

    Whatever you think of fracking, it has done one thing: kept the price of natural gas from increasing any more than it has.
  3. Investing

    How Shale Fracking May Hurt Your Investment

    With news that shale drilling has caused earthquakes, you may want to rethink your investments.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Asia 50

    Read more about BlackRock's iShares Asia 50 Fund, an ETF that follows the four "Asian Tiger'' nations plus China.
  5. Investing

    Build a Retirement Portfolio for a Different World

    When it comes to retirement rules of thumb, the financial industry is experiencing new guidelines and the new rules for navigating retirement.
  6. Mutual Funds & ETFs

    ETF Analysis: WisdomTree International LargeCp Div

    Learn more about the WisdomTree International LargeCap Dividend fund, an income-based international equities ETF that focuses heavily on the United Kingdom.
  7. Mutual Funds & ETFs

    ETF Analysis: United States Gasoline Fund

    Learn about the United States Gasoline Fund, the characteristics of the exchange-traded fund, and the suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: United States 12 Month Oil

    Find out more information about the United States 12 Month Oil ETF, and explore detailed analysis of the characteristics, suitability and recommendations of it.
  9. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Nasdaq Biotechnology

    Find out information about the ProShares Ultra Nasdaq Biotechnology exchange-traded fund, and learn detailed analysis of its characteristics and suitability.
  10. Mutual Funds & ETFs

    ETF Analysis: Direxion Daily S&P Biotech Bull 3X

    Learn more about the Direxion Daily S&P Biotech Bull 3x exchange-traded fund, a new triple-leveraged ETF tracking biotechnology equities.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. P5+1

    The P5+1 is a group of world powers who have been negotiating ...
  5. Control Of Well Insurance

    Insurance that provides coverage to companies operating a well ...
  6. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!