XOP

SPDR S&P OIL & GAS EXPLOR & PRODUCT

Year-to-Date Return: 67.1%1

Fund Description: Oil and Gas Exploration and Production Fund

Expense Ratio: 0.35%

Inception Date: June 19, 2006

Issuer: State Street

XOP tracks the performance of the S&P Oil & Gas Exploration & Production Select Industry Index, which represents the oil and gas exploration and production (E&P) segment of the S&P Total Market Index. The ETF provides exposure to companies engaged in the exploration, production, refining, and marketing of oil and gas.

However, more than two-thirds of the fund's holdings are of companies engaged in exploration and production. It follows a blended strategy, investing in both value and growth stocks across the market cap spectrum. Its top three holdings include Devon Energy Corp. (DVN), Callon Petroleum Co. (CPE), and SM Energy Co. (SM), all three of which are engaged in the exploration and production of oil and gas.5

XOP has been riding the wave of investor optimism over energy companies this year amid the rally in oil prices. Another key factor luring investors to the sector is that a number of oil and gas exploration and production companies are coming out of the pandemic with record cash flows, which the companies say they are going to return to shareholders rather than spend on growth. That marks a major shift compared to prior years when further expansion was given priority over investor returns.

The cautiousness of energy companies about investing in future expansion could also hold back the rate of increase in oil supply, which could continue to maintain the strength in prices.