Chevron (NYSE: CVX) announced the take over of Noble Energy (NasdaqGS: NBL), potentially kicking off mergers and acquisitions activity in the beleaguered energy sector and supporting exchange traded funds that track smaller oil companies.

Chevron has been shopping around for new assets since last year, and with crude oil prices depressed more than 30% this year, the multinational energy company has issued a $5 billion all-stock offering for the independent Houston oil and gas driller, the Associated Press reports. The total enterprise value of the deal is calculated to be $13 billion after taking into account Noble’s debt, which has ballooned since the coronavirus pandemic.

Through its acquisition of Noble Energy, Chevron now has exposure to low-cost, proven reserves, along with cash-generating offshore assets in Israel, further strengthening the company’s position in the Mediterranean. Noble will also add to Chevron’s U.S. footprint in the Permian Basin and in Colorado’s DJ Basin.

“Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow,” Chevron Chairman and CEO Michael Wirth said. “These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline.”

Looking ahead, Gianna Bern, a finance professor at the University of Notre Dame’s Mendoza College of Business, argued that other big oil players could also be looking for ways to cut costs and load up on assets, especially now that many smaller companies are floundering in face of depressed crude prices.

“This is the first wave of acquisitions,” Bern told the AP.

Over 20 North American oil producers have filed for bankruptcy this year, and dozens more are expected to follow if oil prices stay at these current levels, the Wall Street Journal reports.

Small and midsize oil-and-gas companies have underperformed in recent years and faced increasing pressure to deliver more consistent profits and cash flow. Consequently, this has raised expectations of a potential wave of mergers as stronger players to take over weaker rivals. Specifically, many believe oil majors are targeting those with acreage in the Permian where its geology makes it one of the least expensive places in the U.S. to produce oil through fracking.

ETF investors can also target smaller energy names through targeted energy sector ETF plays. For example, the Invesco S&P 500® Equal Weight Energy ETF (RYE) equally weights components so it includes a greater focus on midsized energy names. Additionally, the Invesco S&P SmallCap Energy ETF (NasdaqGM: PSCE) includes small-cap energy names taken from the broader S&P SmallCap 600 Index of small-cap companies.

For more information on the energy sector, visit our energy category.