If you’re looking to invest in oil and gas companies, a sector ETF can be an inexpensive way to get that exposure. The three most popular exchange-traded funds (ETFs)), which track the oil and gas drilling sector are the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the iShares Dow Jones US Oil & Gas Exploration & Production Index Fund (IEO) and the Invesco Dynamic Energy Exploration & Production . Wallet (PXE). Here we take a closer look at these ETFs.
The SPDR S&P Oil & Gas Exploration & Production ETF
XOP was created on June 19, 2006 and has a spend rate of 0.35%.The ETF’s 10, 5, and 1-year returns were -10.82%, -12.14%, and -36.58%, respectively, as of January 15, 2021. The ETF has a net asset of 2. $78 billion. Its benchmark is the S&P Oil & Gas Exploration & Production Select Industry Index. The main fund holdings and their percentage of total assets are:
- Devon Energy Corporation – 4.37%
- Diamondback Energy Inc. – 4.30%
- Marathon Oil Corporation – 4.28%
- EOG Resources Inc. – 4.04%
- Western Petroleum Corporation – 4.04%
The iShares Dow Jones US Oil & Gas Exploration & Production Index Fund
IEO was founded on May 1, 2006 and has a management expense ratio by 0.42%.Over the past 10 years, five years and one year, respectively, the ETF has posted returns of -4.21%, -5.71% and -32.75% as of December 31, 2020. The benchmark of IEO is the Dow Jones US Select Oil Exploration & Production Index. IEO is smaller than XOP, with assets of $204 million. The top holdings and their sizes in proportion to the fund are as follows:
- Conoco Phillips – 14.74%
- EOG Resources Inc. – 10.47%
- Phillips – 9.34%
- Marathon Petroleum Corporation – 8.54%
- Pioneering natural resource – 5.55%
Invesco Dynamic Energy’s exploration and production portfolio
The smallest of the three most commonly traded ETFs in the oil and gas drilling sector is PXE, with assets of just $20.5 million as of January 15, 2021. It was founded on October 26, 2005 and has a net spend rate of 0.63%. The ETF has posted returns of -5.47%, -11.37% and -36.77% over the past 10, 5 and 1 year periods.
This ETF is more volatile than a general index like the S&P 500, which is tracked by ETFs like SPY. The benchmark for PXE is the Dynamic Energy Exploration & Production Intellidex Index. Its main holdings are:
- Pioneer Natural Resources Co. – 7.54%
- Devon Energy Corp. – 5.95%
- Denbury Inc. – 5.81%
- EOG Resources Inc. – 4.69%
- Phillips 66 – 4.49%
The oil and gas industry has been strained over the past few years, with relatively low oil prices and increasing supply. Expectations of future growth of these ETFs must therefore be tempered by an appreciation of the impact of the fluctuation in the price of oil and resistance level of the merchandise.