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In a landmark development, the largest U.S. oil producer Exxon Mobil Corp. (XOM - Free Report) is in talks to acquire Pioneer Natural Resources (PXD - Free Report), a Texas-based hydrocarbon explorer and producer.

The acquisition, if successful, could be valued at approximately $60 billion, marking Exxon’s biggest acquisition since its merger with Mobil Corp. in 1999. At this size, the deal would also be the world’s biggest this year, surpassing pharmaceutical giant Pfizer Inc.’s $43 billion acquisition of cancer-drug maker Seagen Inc. announced in March.

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 into the opportunity arising from the projected deal could bet on energy 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

If it materializes, the deal will reshape the competitive landscape of the U.S. oil sector, uniting two of the biggest acreage holders in the Permian Basin of Texas and New Mexico. It will make Exxon the oil field’s biggest producer, with an output of about 1.2 million barrels a day — more than many OPEC nations.

It would also 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. Notably, Pioneer is the third-largest oil producer in the Permian basin after Chevron Corp (CVX - Free Report) and ConocoPhillips (COP - Free Report).

The deal is expected to be sealed in the coming days, but it may attract political and regulatory scrutiny, especially in a climate where the White House had earlier accused Exxon of amassing excessive profits at the consumers' expense.

The potential Exxon-Pioneer 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. For instance, Chevron recently agreed to acquire shale producer PDC Energy Inc. in a transaction valued at $7.6 billion.

ETFs in Focus

Let’s delve into each energy ETF that may benefit from this current scenario.

iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report)

This fund 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 7.21% share.

The ETF has AUM of $888.6 million, and it trades in an average daily volume of 168,000 shares. The fund charges 40 bps in fees per year, and it has a Zacks ETF Rank (Hold).

Energy Select Sector SPDR (XLE - Free Report)

This fund is the largest and the most popular ETF in the energy space, with AUM of $38.2 billion and an average daily volume of 19 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. The ETF holds 23 securities in its basket, with Exxon Mobil occupying the top spot with 23.5% share.

The ETF charges 10 bps in annual fees, and it has a Zacks ETF Rank (Hold).

Strive U.S. Energy ETF (DRLL - Free Report)

This fund 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 22%.

The ETF has gathered $357.1 million in its asset base. It charges 41 bps in fees per year from investors, and it trades in an average daily volume of 34,000 shares.

iShares U.S. Energy ETF (IYE - Free Report)

This fund tracks the Russell 1000 Energy RIC 22.5/45 Capped Gross Index, 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 two positions at 23.2% share.

The 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 454,000 shares. The fund has a Zacks ETF Rank (Hold).

Fidelity MSCI Energy Index ETF (FENY - Free Report)

This fund follows the MSCI USA IMI Energy Index, holding 120 stocks in its basket. Exxon Mobil takes the top spot at 23.3%. The ETF charges 8 bps in annual fees, and it trades in a good volume of around 528,000 shares. It has accumulated $1.6 billion in its asset base, and it has a Zacks ETF Rank (Hold) with a High risk outlook.

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