Ignore the `.xml` extension. The extension must be `.ppj` or `.pyroproject`.

Auto Loot.ppj.xml

<PapyrusProject
  xmlns="PapyrusProject.xsd"
  Game="FO4"
  Flags="Institute_Papyrus_Flags.flg"
  Output="@modpath\scripts"
  Optimize="true" Release="true" Final="true" Anonymize="true" Package="true" Zip="true">
  <Variables>
    <Variable Name="modname" Value="Auto Loot"/>
    <Variable Name="namespace" Value="AutoLoot"/>
    <Variable Name="modpath" Value="F:\repos\mods\fallout4\@modname"/>
  </Variables>
  <Imports>
    <Import>@modpath\scripts\Source\User</Import>
    <Import>E:\SteamLibrary\Fallout 4\Data\Scripts\Source\Base</Import>
  </Imports>
  <Scripts>
    <Script>@namespace\dubhAutoLootDummyScript.psc</Script>
    <Script>@namespace\dubhAutoLootEffectBodiesScript.psc</Script>
    <Script>@namespace\dubhAutoLootEffectComponentsScript.psc</Script>
    <Script>@namespace\dubhAutoLootEffectContainersScript.psc</Script>
    <Script>@namespace\dubhAutoLootEffectScript.psc</Script>
    <Script>@namespace\dubhAutoLootEffectTieredScript.psc</Script>
    <Script>@namespace\dubhAutoLootQuestScript.psc</Script>
    <Script>@namespace\dubhAutoLootNoDisintegrateScript.psc</Script>
  </Scripts>
  <Folders>
    <Folder NoRecurse="true">@namespace\Fragments\Terminals</Folder>
  </Folders>
  <Packages Output="@modpath">
    <Package Name="@modname - Main" RootDir="@modpath">
      <Include NoRecurse="false">**/*.pex</Include>
    </Package>
  </Packages>
  <ZipFiles Output="@modpath">
    <ZipFile Name="@modname" RootDir="@modpath" Compression="deflate">
      <Include>@modpath\Auto Loot.esp</Include>
      <Include>@modpath\Auto Loot - Main.ba2</Include>
    </ZipFile>
  </ZipFiles>
</PapyrusProject>