Exxon Mobil Corp has agreed to purchase Denbury Inc in a deal worth $4.9 billion. This acquisition will give Exxon access to Denbury’s substantial carbon dioxide (CO2) sequestration operation, further strengthening Exxon’s position in the emerging market of reducing greenhouse gas emissions.
The move aligns with Exxon’s plan to develop its energy transition business and generate revenue from carbon reduction services. By acquiring Denbury, Exxon will gain access to its existing CO2 pipeline network and sequestration sites, allowing for the quick provision of carbon removal services to customers such as Linde AG and CF Industries. This is a valuable asset for Exxon as its own offshore storage sites are still years away from being operational.
Carbon sequestration, which involves capturing and storing CO2, has become a preferred strategy for US oil and gas companies to mitigate emissions while continuing to expand their production. The US government’s tax credits and incentives for burying CO2 underground have spurred the growth of businesses in this field.
Denbury, based in Plano, Texas, owns the largest CO2 pipeline network in the US, spanning nearly 925 miles from Texas to Alabama. Its pipeline infrastructure is strategically located in the heartland of the Gulf Coast’s petrochemical industry.
Exxon has been investing in low carbon solutions, including carbon storage, hydrogen, and biofuels, through its Low Carbon Solutions business. The company aims to generate significant revenue from these ventures and potentially outperform its traditional oil and gas operations within the next decade.
The acquisition of Denbury is considered a small but logical step for Exxon to strengthen its carbon management technology capabilities. The deal represents a 1.9% premium to Denbury’s Tuesday closing price and is expected to close in the fourth quarter.
Denbury’s stock has soared since emerging from bankruptcy last year, nearly quintupling in value. The company’s shares were trading at $87.71 in early trading on Thursday.
Exxon CEO Darren Woods expressed the company’s commitment to profitably growing its low carbon solutions business through the Denbury deal. This acquisition highlights Exxon’s determination to be a leader in the energy transition and capitalize on the growing market for carbon reduction services.
The transaction is subject to regulatory approvals and is being closely watched by industry observers. With this strategic move, Exxon is positioning itself as a major player in the carbon sequestration market and solidifying its transition to cleaner energy sources.
[Reporting by Sabrina Valle and Arathy Somasekhar in Houston, Arunima Kumar in Bengaluru; Editing by Savio D’Souza, Shilpi Majumdar, and Conor Humphries]