- Denbury owns a large CO2 sequestration operation
- Features the largest CO2 pipeline network in the United States
- Full stock deal, up 1.9% on Tuesday’s close
HOUSTON, July 13 (Portal) – Exxon Mobil Corp (XOM.N) on Thursday agreed to buy Denbury Inc (DEN.N) for $4.9 billion, a company with an extensive carbon footprint (CO2) -Acquiring a sequestration operation that could accelerate its emergence as an energy transition company.
The deal builds on Exxon’s plan to develop an emerging market that makes money from reducing its own and others’ greenhouse gas emissions.
Carbon sequestration is the preferred strategy for US oil and gas companies to reduce emissions while continuing to expand oil and gas production. US tax credits and incentives to bury CO2 underground have spawned a flood of new companies to help fund this effort.
Denbury’s existing CO2 pipeline network and sequestration sites will enable Exxon to rapidly offer carbon removal services to CO2 reduction customers Linde AG and CF Industries. From own offshore storage locations it will still take years.
“It’s a very logical and very straightforward way for Exxon to build on its existing business strength in carbon management technology,” said Pavel Molchanov, an analyst at Raymond James, but added that the deal is “great for Exxon relative to its size very small”.
Based in Plano, Texas, Denbury has the largest CO2 pipeline network in the United States, including nearly 925 miles of pipelines stretching from Texas to Alabama along the Gulf Coast petrochemical heartland.
Exxon launched its Low Carbon Solutions business two years ago with a goal of hundreds of billions of dollars in revenue from reducing its and others’ emissions. It says the business, which includes carbon storage, hydrogen and biofuels, could surpass its traditional oil and gas operations in as little as a decade.
Last year, Exxon secured its first commercial carbon storage deal with leading ammonia producer CF Industries. In January, Exxon announced that it plans to commission its large-scale hydrogen plant in Texas in 2027 or 2028. Hydrogen is a potentially clean utility fuel.
The Denbury deal “reflects our determination to profitably grow our low-carbon solutions business,” Exxon CEO Darren Woods said in a statement.
The pure stock transaction represents a 1.9% premium to Denbury’s closing price on Tuesday at 0.84 Exxon shares for each Denbury share. The deal is expected to close in the fourth quarter.
Denbury emerged from bankruptcy in September 2020 and its share price has nearly quintupled since then. Its shares were up five cents to $87.71 in early trading Thursday.
Reporting by Sabrina Valle and Arathy Somasekhar in Houston, Arunima Kumar in Bengaluru; Adaptation by Savio D’Souza, Shilpi Majumdar and Conor Humphries
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