That’s a view shared by Stewart Glickman, group head of energy equity research at S&P Capital IQ. “The lower 48 E&P shale plays have such high rates of return that oil prices can fall considerably and they would still be profitable,” he says. Yet investors are starting to think of this industry selectively. Todd Rosenbluth, director of ETF research at S&P Capital IQ, thinks that investors are seeking the perceived safety of major oil firms. That helps explain why the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), with a 14 percent stake in ConocoPhilips, has slipped only 10 percent year-to-date, compared with a 20 percent drop for rival SPDR S&P Oil & Gas Exploration & Production ETF (XOP). (Those two funds carry expense ratios of 0.45 and 0.35 percent, respectively).

Other E&P ETFs to consider include the PowerShares Dynamic Energy Exploration & Production ETF (PXE), which focuses on both E&P firms and energy refiners (and carries a 0.64 expense ratio), and the Market Vectors Unconventional Oil & Gas ETF  (FRAK), which solely invests in companies involved in U.S. shale regions (and has a 0.54 expense ratio).

The pullback in oil prices has been quite swift, but economic factors should eventually move the market back into equilibrium. That makes this a good time to re-visit the badly tarnished energy ETFs.
 

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