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ETFs to Benefit From the Historic Exxon-Pioneer Oil Merger
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The largest U.S. oil producer, Exxon Mobil Corp. (XOM - Free Report) has agreed to acquire Pioneer Natural Resources (PXD - Free Report) , a Texas-based hydrocarbon explorer and producer, in an all-stock deal valued at $59.5 billion or $253 per share.
The deal, if completed, marks Exxon’s biggest acquisition since its merger with Mobil Corp. in 1999. It would also be the world’s biggest this year, surpassing pharmaceutical giant Pfizer Inc.’s (PFE - Free Report) $43 billion acquisition of cancer-drug maker Seagen Inc. announced in March (see: all the Energy ETFs here).
The takeover could potentially deliver a win-win scenario, enhancing Exxon Mobil's production capabilities while providing Pioneer with the backing of a well-established industry giant. Investors seeking to tap the opportunity arising from the projected deal could bet on ETFs like iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) , Strive U.S. Energy ETF (DRLL - Free Report) , Energy Select Sector SPDR (XLE - Free Report) , iShares U.S. Energy ETF (IYE - Free Report) and Fidelity MSCI Energy Index ETF (FENY - Free Report) .
Deal in Focus
Per the terms of the deal, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing. The implied total enterprise value of the transaction, including net debt, is approximately $64.5 billion.
The boards of directors of both companies have unanimously approved the transaction, which is subject to customary regulatory reviews and approvals. It is also subject to approval by Pioneer shareholders. The transaction is expected to be closed in the first half of 2024.
Pioneer is the third-largest oil producer in the Permian basin after Chevron Corp (CVX) and ConocoPhillips (COP). Thus, the transaction will bolster ExxonMobil’s position as the dominant producer in the region, with the output expected to double to about 1.3 million barrels a day and exceed many OPEC nations. Exxon’s Permian production volume is also expected to increase to about 2 million barrels of oil equivalent per day in 2027 (read: Oil Soars On Israel-Hamas Conflict: Sector ETFs to Gain/Lose).
Additionally, Exxon said it is committed to reducing greenhouse gas emissions and announced that it would accelerate Pioneer’s plan to achieve net zero emissions within 15 years. Further, the deal would extend Exxon’s inventory of top-tier drilling locations in the basin by decades, providing low-cost, low-risk crude well beyond 2050 to feed its giant refinery network on the Gulf Coast.
The transaction is poised to usher in a new era of industry-shifting takeovers. The deal underscores a broader industry trend where oil majors are turning to acquisitions rather than drilling new acreage to mitigate risks and secure more established oil-producing lands.
ETFs in Focus
Let’s delve into each ETF below:
iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report)
iShares U.S. Oil & Gas Exploration & Production ETF provides exposure to U.S. companies engaged in the exploration, production and distribution of oil and gas. It tracks the Dow Jones U.S. Select Oil Exploration & Production Index and holds 46 stocks in its basket, with Pioneer Natural taking the fourth spot at 7.5% share.
iShares U.S. Oil & Gas Exploration & Production ETF has AUM of $928.9 million and trades in an average daily volume of 180,000 shares. The fund charges 40 bps in fees per year and has a Zacks ETF Rank #3 (Hold).
Energy Select Sector SPDR is the largest and the most popular ETF in the energy space, with AUM of $38.6 billion and an average daily volume of 19.5 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 23 securities in its basket, with Exxon Mobil occupying the top spot with 22.5% share and Pioneer Natural accounts for 4% share (read: Oil to Touch $100 Soon? Sector ETFs to Benefit/Lose).
Energy Select Sector SPDR charges 10 bps in annual fees and has a Zacks ETF Rank #3.
Strive U.S. Energy ETF seeks broad market exposure to the U.S. energy sector and follows the Solactive United States Energy Regulated Capped Index. It holds 62 stocks in its basket, with Exxon Mobil taking the top position at 20.9% while Pioneer Natural accounts for 3% of assets.
Strive U.S. Energy ETF has gathered $360.2 million in its asset base. It charges 41 bps in fees per year from investors and trades in an average daily volume of 37,000 shares.
iShares U.S. Energy ETF tracks the Russell 1000 Energy RIC 22.5/45 Capped Gross Index (USD), giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 40 stocks in its basket, with Exxon Mobil occupying the top position at 22.1% share while Pioneer Natural accounts for 3.1% share (read: Oil Jumps on Middle East Conflict, Leveraged ETFs to Profit).
iShares U.S. Energy ETF charges 40 bps in fees per year from its investors. It has AUM of $1.3 billion and an average daily volume of about 484,000 shares. The product has a Zacks ETF Rank #3.
Fidelity MSCI Energy Index ETF fund follows the MSCI USA IMI Energy Index, holding 120 stocks in its basket. XOM takes the top spot at 23.3% and PXD makes up for a 2.6% share. Fidelity MSCI Energy Index ETF charges 8 bps in annual fees and trades in a good volume of around 555,000 shares. It has accumulated $1.6 billion in its asset base and has a Zacks ETF Rank #3 with a High risk outlook.
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ETFs to Benefit From the Historic Exxon-Pioneer Oil Merger
The largest U.S. oil producer, Exxon Mobil Corp. (XOM - Free Report) has agreed to acquire Pioneer Natural Resources (PXD - Free Report) , a Texas-based hydrocarbon explorer and producer, in an all-stock deal valued at $59.5 billion or $253 per share.
The deal, if completed, marks Exxon’s biggest acquisition since its merger with Mobil Corp. in 1999. It would also be the world’s biggest this year, surpassing pharmaceutical giant Pfizer Inc.’s (PFE - Free Report) $43 billion acquisition of cancer-drug maker Seagen Inc. announced in March (see: all the Energy ETFs here).
The takeover could potentially deliver a win-win scenario, enhancing Exxon Mobil's production capabilities while providing Pioneer with the backing of a well-established industry giant. Investors seeking to tap the opportunity arising from the projected deal could bet on ETFs like iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) , Strive U.S. Energy ETF (DRLL - Free Report) , Energy Select Sector SPDR (XLE - Free Report) , iShares U.S. Energy ETF (IYE - Free Report) and Fidelity MSCI Energy Index ETF (FENY - Free Report) .
Deal in Focus
Per the terms of the deal, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing. The implied total enterprise value of the transaction, including net debt, is approximately $64.5 billion.
The boards of directors of both companies have unanimously approved the transaction, which is subject to customary regulatory reviews and approvals. It is also subject to approval by Pioneer shareholders. The transaction is expected to be closed in the first half of 2024.
Pioneer is the third-largest oil producer in the Permian basin after Chevron Corp (CVX) and ConocoPhillips (COP). Thus, the transaction will bolster ExxonMobil’s position as the dominant producer in the region, with the output expected to double to about 1.3 million barrels a day and exceed many OPEC nations. Exxon’s Permian production volume is also expected to increase to about 2 million barrels of oil equivalent per day in 2027 (read: Oil Soars On Israel-Hamas Conflict: Sector ETFs to Gain/Lose).
Additionally, Exxon said it is committed to reducing greenhouse gas emissions and announced that it would accelerate Pioneer’s plan to achieve net zero emissions within 15 years. Further, the deal would extend Exxon’s inventory of top-tier drilling locations in the basin by decades, providing low-cost, low-risk crude well beyond 2050 to feed its giant refinery network on the Gulf Coast.
The transaction is poised to usher in a new era of industry-shifting takeovers. The deal underscores a broader industry trend where oil majors are turning to acquisitions rather than drilling new acreage to mitigate risks and secure more established oil-producing lands.
ETFs in Focus
Let’s delve into each ETF below:
iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report)
iShares U.S. Oil & Gas Exploration & Production ETF provides exposure to U.S. companies engaged in the exploration, production and distribution of oil and gas. It tracks the Dow Jones U.S. Select Oil Exploration & Production Index and holds 46 stocks in its basket, with Pioneer Natural taking the fourth spot at 7.5% share.
iShares U.S. Oil & Gas Exploration & Production ETF has AUM of $928.9 million and trades in an average daily volume of 180,000 shares. The fund charges 40 bps in fees per year and has a Zacks ETF Rank #3 (Hold).
Energy Select Sector SPDR (XLE - Free Report)
Energy Select Sector SPDR is the largest and the most popular ETF in the energy space, with AUM of $38.6 billion and an average daily volume of 19.5 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 23 securities in its basket, with Exxon Mobil occupying the top spot with 22.5% share and Pioneer Natural accounts for 4% share (read: Oil to Touch $100 Soon? Sector ETFs to Benefit/Lose).
Energy Select Sector SPDR charges 10 bps in annual fees and has a Zacks ETF Rank #3.
Strive U.S. Energy ETF (DRLL - Free Report)
Strive U.S. Energy ETF seeks broad market exposure to the U.S. energy sector and follows the Solactive United States Energy Regulated Capped Index. It holds 62 stocks in its basket, with Exxon Mobil taking the top position at 20.9% while Pioneer Natural accounts for 3% of assets.
Strive U.S. Energy ETF has gathered $360.2 million in its asset base. It charges 41 bps in fees per year from investors and trades in an average daily volume of 37,000 shares.
iShares U.S. Energy ETF (IYE - Free Report)
iShares U.S. Energy ETF tracks the Russell 1000 Energy RIC 22.5/45 Capped Gross Index (USD), giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 40 stocks in its basket, with Exxon Mobil occupying the top position at 22.1% share while Pioneer Natural accounts for 3.1% share (read: Oil Jumps on Middle East Conflict, Leveraged ETFs to Profit).
iShares U.S. Energy ETF charges 40 bps in fees per year from its investors. It has AUM of $1.3 billion and an average daily volume of about 484,000 shares. The product has a Zacks ETF Rank #3.
Fidelity MSCI Energy Index ETF (FENY - Free Report)
Fidelity MSCI Energy Index ETF fund follows the MSCI USA IMI Energy Index, holding 120 stocks in its basket. XOM takes the top spot at 23.3% and PXD makes up for a 2.6% share. Fidelity MSCI Energy Index ETF charges 8 bps in annual fees and trades in a good volume of around 555,000 shares. It has accumulated $1.6 billion in its asset base and has a Zacks ETF Rank #3 with a High risk outlook.