XOP ETF Review: Is SPDR Oil & Gas ETF Worth Buying?

SPDR S&P Oil & Gas Exploration & Production ETF provides equal-weighted exposure to U.S. E&P companies, offering higher beta to oil and gas prices than the top-heavy XLE and capturing the full spectrum of upstream producers from large-cap to small-cap.

Last updated: 2026-02-02 · Data: Yahoo Finance, fund prospectuses, SEC filings

What Is XOP?

SPDR S&P Oil & Gas Exploration tracks the S&P Oil & Gas Exploration & Production Select Industry Index, holding roughly 80 U.S. oil and gas exploration companies weighted by modified market cap. State Street runs this ETF, which has operated since 2006 and gives equal-weight exposure to America's energy producers rather than concentration in mega-caps.

Expense ratio: 0.35% | AUM: $1.77 billion | Inception: June 2006

Current Snapshot

Why It Matters for Real Asset Investors

XOP represents the infrastructure backbone of American energy independence—the companies that find, drill, and produce the oil and gas flowing through our tollbooth pipeline networks. While pipeline MLPs collect fees regardless of commodity prices, XOP holds the producers whose cash flows move directly with energy prices, making it both more volatile and more leveraged to the commodity supercycle.

This ETF shines during periods of supply-demand imbalance when energy scarcity drives pricing power. Unlike the mega-cap energy names that dominate broad market indices, XOP's equal-weight structure gives meaningful exposure to mid-cap independents that can double production or get acquired during boom cycles. These smaller players often carry higher debt loads and more volatile operations, but that creates asymmetric upside when oil prices surge above $80-90 per barrel.

The grid risk thesis connects here through baseload power generation—many of these producers supply natural gas to power plants that backstop intermittent renewables. As electricity demand grows from AI data centers and electric vehicle charging, reliable baseload capacity becomes more valuable, potentially supporting long-term gas demand even amid the energy transition.

Top Holdings

XOP's equal-weight approach means no single holding exceeds 3.1%, but the top names reveal the portfolio's focus:

Venture Global (VG) — 3.1%: LNG export terminal operator capitalizing on global gas demand

Exxon Mobil (XOM) — 2.8%: Integrated oil giant with Permian Basin growth projects

Chevron (CVX) — 2.8%: Another major with strong free cash flow generation

Gulfport Energy (GPOR) — 2.8%: Natural gas-focused producer in Appalachian Basin

Occidental Petroleum (OXY) — 2.7%: Permian operator with carbon capture investments

Coterra Energy (CTRA) — 2.7%: Gas-weighted producer with Marcellus and Permian assets

ConocoPhillips (COP) — 2.7%: Low-cost producer with disciplined capital allocation

Texas Pacific Land (TPL) — 2.7%: Permian royalty company with mineral rights ownership

Devon Energy (DVN) — 2.6%: Permian-focused with variable dividend policy

Magnolia Oil & Gas (MGY) — 2.6%: Pure-play Permian producer

How It Fits the Portfolio

XOP works best as a 3-7% tactical allocation when energy fundamentals support higher commodity prices—think inventory drawdowns, geopolitical supply disruptions, or sustained economic growth pushing demand above spare capacity. The equal-weight structure means you're not just buying Exxon and Chevron; you're getting exposure to acquisition targets and smaller players with operational leverage.

Pair XOP with pipeline MLPs like Enterprise Products Partners or Kinder Morgan for a complete energy infrastructure play. While the MLPs provide steady toll collection, XOP captures the volatile but potentially explosive upside when energy markets tighten. Watch for regime changes where energy moves from oversupplied to constrained—that's when this ETF can deliver outsized returns.

Regime Signals

XOP outperforms during commodity up-cycles, typically triggered by supply disruptions, inventory drawdowns below five-year averages, or sustained economic growth pushing oil demand above 102-103 million barrels per day. The ETF also benefits from dollar weakness, which makes U.S. energy exports more competitive globally and supports higher commodity prices in dollar terms.

Rising interest rates initially hurt these leveraged producers, but if rate increases reflect genuine economic growth rather than inflation fears, the demand boost can overcome financing headwinds. Conversely, XOP struggles during recession fears, oversupply periods, or aggressive Federal Reserve tightening cycles that threaten demand destruction.

Related Research

• Alabama Power Grid Risk Assessment
• NextEra Energy (NEE) Tollbooth Analysis
• XLE: Energy Select Sector SPDR
• VDE: Vanguard Energy ETF
• USO: United States Oil Fund

Frequently Asked Questions

How does XOP differ from XLE?

XOP uses equal-weighting across its E&P holdings, giving small-cap producers the same portfolio impact as large-caps. XLE is market-cap weighted, dominated by ExxonMobil and Chevron. This makes XOP significantly more volatile and more responsive to oil and gas price changes. XOP is the higher-beta choice for investors who want amplified energy commodity exposure, while XLE provides more stable, large-cap energy equity returns.

What is the expense ratio of XOP?

XOP charges a 0.35% expense ratio — higher than XLE's 0.09% but reasonable for an equal-weighted sector ETF that requires more frequent rebalancing. The equal-weight methodology generates higher turnover and trading costs, which contribute to the higher fee. For the amplified commodity beta XOP provides, the additional cost is generally acceptable for tactical allocations.

Is XOP a good investment when oil prices rise?

XOP is one of the most effective vehicles for capturing oil price upside through equities. Its equal-weighted E&P composition means small and mid-cap producers — which have the highest operating leverage to oil prices — drive returns alongside larger companies. During the 2021-2022 oil rally, XOP dramatically outperformed XLE. However, this leverage works both ways, and XOP can decline 40-60% during oil price crashes.

What types of companies does XOP hold?

XOP holds pure-play exploration and production companies — the firms that actually drill for and produce oil and natural gas. Holdings include companies like Devon Energy, Diamondback Energy, Coterra Energy, and Marathon Oil. Unlike XLE, which includes refiners and integrated majors, XOP focuses on upstream producers whose revenues are most directly tied to commodity prices.

For our complete allocation framework across real assets, infrastructure, and income strategies, see The Blackout Fortune Playbook.

Last updated: February 1, 2026 | Data: Yahoo Finance, State Street Global Advisors