Exxon’s $4.9 billion deal with Denbury boosts energy transition plans

  • Denbury has a large CO2 sequestration process
  • It boasts the largest carbon dioxide pipeline network in the United States
  • All transactions are on shares, a premium of 1.9% from Tuesday’s close

HOUSTON (Reuters) – Exxon Mobil Corporation (XOM.N) on Thursday agreed to buy Denbury Inc (DEN.N) for $4.9 billion, acquiring a company with significant carbon dioxide (CO2) sequestration that could accelerate its growth. energy transition work.

The agreement builds Exxon’s plan to develop an emerging market that makes money from reducing its greenhouse and other gases.

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 breaks and incentives to bury carbon dioxide underground have unleashed a wave of new businesses to help fund the effort.

The network of pipelines and carbon dioxide sequestration sites located in Denbury will give Exxon a way to rapidly provide carbon removal services to carbon reduction customers Linde AG and CF Industries. Their offshore storage sites are years away.

“It’s a very logical and straightforward way for Exxon to build on its existing business strength in carbon management technology,” said Raymond James analyst Pavel Molchanov, adding that the deal is “very small for Exxon, relative to its size.”

Plano, Texas has the largest carbon dioxide pipeline network in the United States including nearly 925 miles of pipelines that stretch from Texas to Alabama, along the heart of the Gulf Coast petrochemical industry.

Exxon founded Low Carbon Solutions, a business two years ago, with the goal of generating hundreds of billions of dollars in revenue from reducing its emissions and those of others. The company, which includes carbon and hydrogen storage and biofuels, could outperform traditional oil and gas operations as soon as a decade from now.

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Last year, Exxon struck its first commercial carbon storage deal with ammonia leader CF Industries. In January, Exxon said it plans to begin operations at its large-scale hydrogen plant in Texas in 2027 or 2028. Hydrogen is a potential clean fuel for utilities.

Exxon CEO Darren Woods said in a statement that the Denbury deal “reflects our determination to profitably grow our low-carbon solutions business.”

The all-share deal represents a 1.9% premium to Denbury’s closing Tuesday of 0.84 Exxon shares for every Denbury share. The deal is expected to close in the fourth quarter.

Denbury emerged from bankruptcy in September 2020 and its stock has jumped nearly fivefold since then. Its shares rose five cents to $87.71 in early trading Thursday.

Additional reporting by Sabrina Valli and Arathi Somasekhar in Houston and Arunima Kumar in Bengaluru; Editing by Savio D’Souza, Shelby Majumdar, and Connor Humphreys

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