With West Texas Intermediate crude oil at $38 per barrel in the United States, stock prices across the energy sector have collapsed, meaning those investors who see a bottom in oil have an opportunity to buy at generational lows. But the one group of potential investors that could be the biggest beneficiaries of the abundant bargains in the oil space—Big Oil companies themselves—have been notably silent thus far.

Acreage and smaller competing firms are dirt-cheap right now, but Big Oil hasn’t pounced … yet. Oil companies have been biding their time, waiting for the right moment to go on a spending spree. But there are signals now that oil majors may finally be ready to start buying. The biggest indicator in recent weeks was the massive bond sale conducted by Exxon Mobil Corporation (NYSE: XOM).

For Exxon, or any other oil majors considering deploying cash in anticipation of a rebound in oil prices, now would be the time to strike.

Exxon Mobil bides its time

Judging by Exxon Mobil’s recent activity in the credit markets, it seems the biggest of Big Oil majors could be gearing up for a major acquisition. On Feb. 29, Exxon Mobil announced a huge $12 billion bond sale—the largest bond sale on record in the oil industry. The bond issue was broken up into several tranches, including two-year notes yielding 1.24 percent; $2.5 billion in 30-year bonds yielding 4.1 percent; and another $2.5 billion in 10-year notes that yield 3.0 percent.

The bond issue makes a great deal of strategic and financial sense for the company. First, debt is very cheap right now—particularly for companies in sound financial shape, such as Exxon Mobil. With interest rates still sitting near historic lows, companies can take advantage of very low yields. Despite a decline in profits, Exxon Mobil still holds the ‘AAA’ credit rating from Standard & Poor’s. This is why Exxon Mobil was able to sell 10-year notes at just 130 basis points more than comparable U.S. Treasuries.

Second, using these funds to buy acreage or rival firms outright would likely be very accretive to Exxon Mobil’s future earnings potential. Assuming oil recovers at some point in the not-too-distant future, Exxon Mobil could generate significant returns by buying when prices are this low. Over the past several years, the company has proven to be an excellent allocator of capital, by doing just that. For example, Exxon Mobil produced a 7.9 percent return on average capital employed last year, far higher than many of its peers, and it has averaged above 15 percent from 2011-2015.

If there were ever a time for Exxon Mobil to make a big move in M&A activity, this would be it.

Who might be on Exxon’s shopping list?

If Exxon Mobil were to go the M&A route, it is likely the company would seek to expand its presence in the premier oil fields in the United States. These include the Permian Basin, Eagle Ford shale, and Bakken shale, where Exxon Mobil has moderate (but not overwhelming) positions. Exxon Mobil could do this by acquiring smaller firms with entrenched positions in these attractive regions. Some of the smaller producers that could be accretive bolt-on acquisition targets could be Pioneer Natural Resources (NYSE: PXD) or EOG Resources (NYSE: EOG). That is because Pioneer and EOG are two of the biggest producers in the Permian and Eagle Ford fields. Pioneer has a total resource potential of more than 11 billion barrels of oil equivalents. Meanwhile, EOG is the largest crude oil producer in the Eagle Ford region, after growing its oil production at a 40 percent compound annual rate from 2010-2014.

These companies are large enough to move the needle in terms of Exxon Mobil’s own production, and they are small enough to be acquired with relative ease. Pioneer and EOG currently hold enterprise values of $23 billion and $44 billion, respectively. These firms have similar models and acreage as Exxon, and would serve as solid complements to Exxon’s existing operations.

The reason why Exxon Mobil, and most of its deep-pocketed peers, have not yet made substantial deals, could be that Big Oil is simply waiting for a wave of bankruptcies to ripple through the exploration and production space. Rather than pay current prices to acquire a rival firm, Exxon Mobil could alternatively go the acreage acquisition route. The thinking could be that Exxon Mobil would rather wait for some of the more highly indebted firms to declare bankruptcy, see asset prices plunge further, and then scoop up their assets for pennies on the dollar. In any case, investors should expect Exxon Mobil to make a move at some point over the next few months.

Companies to watch

Chevron (NYSE: CVX): Along with Exxon Mobil, Chevron is arguably the most likely buyer in the oil industry. Like Exxon Mobil, Chevron has deep pockets—even though it is undeniably challenged by low oil prices, it is still profitable, and it held more than $11 billion in cash and equivalents at the end of last quarter, meaning it has enough financial strength to make a meaningful acquisition. One complication is that Chevron is slightly more limited than Exxon Mobil, in terms of the scope of its financial flexibility. Chevron holds a AA- credit rating, which is the second-highest among the integrated majors after Exxon.

Royal Dutch Shell (NYSE: RDS.B): Shell is probably the least likely Big Oil major to engage in M&A activity, because it already has announced a major acquisition. Last year, Shell struck a deal to buy BG Group PLC for $70 billion, which was Shell’s largest deal ever. The move was a clear attempt to become the premier leader in liquefied natural gas, or LNG, which many industry observers believe to be the fuel of the future. LNG is easily transported to emerging markets such as China, where energy demand is soaring. Analysts are bullish on Shell as a result: the average analyst recommendation is ‘overweight’ with a median price target of $52.88, representing 11 percent upside potential from its March 4 closing price.

Bob Ciura is an independent equity analyst. Since 2012, his work has focused on fundamental investment analysis of publicly-traded companies in the energy, technology, and consumer goods industries. Bob has a Bachelor's degree in Finance and an MBA in Finance.