Exxon Mobil Corporation (NYSE: XOM) has announced that it has entered into a definitive agreement to acquire Denbury Inc. (NYSE: DEN), which it describes as an experienced developer of carbon capture, utilization and storage (CCS) and enhanced solutions. oil recovery.
In a statement posted on its site, Exxon said the acquisition is an all-stock transaction valued at $4.9 billion, or $89.45 per share based on ExxonMobil’s July 12 closing price. Under the terms of the deal, Denbury shareholders will receive 0.84 shares. of ExxonMobil for each share of Denbury, Exxon highlighted in the statement.
The boards of directors of both companies have unanimously approved the transaction, which is subject to customary regulatory reviews and approvals, Exxon said in the statement, adding that it is also subject to approval by Denbury shareholders. The deal is expected to close in the fourth quarter of this year.
Exxon said in the statement that the synergies of the transaction are expected to drive strong growth and returns for the company. The company said in the statement that its acquisition of Denbury gives it the largest and most operated CO2 pipeline network in the US at 1,300 miles, “at more than 10 strategically located sequestration sites on land.”
A cost-effective transportation and storage system accelerates CCS deployment for ExxonMobil and third-party customers over the next decade and supports multiple low-carbon value chains, including CCS, hydrogen, ammonia, biofuels and direct air capture, he noted. Exxon in the statement.
Exxon emphasized that the acquisition also includes Gulf Coast and Rocky Mountain oil and natural gas operations. The company highlighted in the statement that these operations consist of proven reserves totaling more than 200 million barrels of oil equivalent, “with 47,000 barrels of oil equivalent per day of current production, providing immediate operating cash flow and a short-term optionality for CO2 capture and execution of the CCS business”.
“The acquisition of Denbury reflects our determination to profitably grow our low carbon solutions business serving a range of hard-to-decarbonize industries with a comprehensive carbon capture and sequestration offering,” he said Darren Woods, president and CEO of Exxon, in a company statement. .
“The breadth of Denbury’s network, when added to ExxonMobil’s decades of experience and capabilities in CCS, gives us the opportunity to play an even greater role in a thoughtful energy transition, while continuing to meet the our commitment to provide the world with the energy and products it needs”, he added.
Chris Kendall, Chairman and CEO of Denbury, said: “This transaction is an attractive opportunity for Denbury to join an admired global energy leader with a low-carbon focus, strong balance sheet and program of return to leading shareholders”.
“Over the past few years, Denbury has made significant progress executing on our strategic plan, strengthening our enhanced oil recovery operations and leveraging our unmatched infrastructure to accelerate the growth of our CO2 transportation and storage business. To further leverage plus this positive momentum, Denbury’s Board of Directors and management team undertook a comprehensive review process and considered various alternatives to maximize long-term value,” he added.
“Through this process, it became clear that the transaction with ExxonMobil is in the best interests of our company, our shareholders and all Denbury stakeholders. Importantly, given the significant capital and years of work needed to fully develop our CO2 business, ExxonMobil is the ideal partner with extensive resources and capabilities,” he continued.
“The full equity consideration will allow Denbury shareholders to participate in the growth of ExxonMobil’s stock while benefiting from its strong capital return strategy. We look forward to bringing together our highly complementary cultures and teams to realize the value and the long-term benefits of this combination,” Kendall said.
Dan Ammann, president of ExxonMobil Low Carbon Solutions, said, “Denbury’s advanced CO2 infrastructure provides significant opportunities to expand and accelerate ExxonMobil’s low carbon leadership across our Gulf Coast value chains” .
“Once fully developed and optimized, this combination of assets and capabilities has the potential to cost-effectively reduce emissions by more than 100 million metric tons per year in one of the highest-emitting regions in the US,” he said. add.
Analyst view
When asked for comment on Exxon’s latest purchase, Enverus Intelligence Research (EIR) Director Andrew Dittmar told Rigzone that “ExxonMobil has announced what appears to be the first major public merger deal and acquisitions where CCS assets represent most of the value.”
“The super major, which is making substantial investments in carbon storage, is acquiring Denbury Resources (DEN) for about $90/share in an all-equity deal that values the independent at $4.9 billion and appears to be a winning acquisition for XOM”. he said
“DEN brings some assets to the table that include about 47,000 barrels of oil equivalent per day of current production and the Cedar Creek EOR Anticline development will soon come online with peak production of 10,000 barrels per day. of low-decline assets that complement XOM’s current focus on short-cycle, high-decline shale wells in the Permian if there is a very small incremental sum for a company with nearly four million barrels of oil equivalent per day of global production,” he added. .
Dittmar told Rigzone that EIR considers the upstream assets to be worth about $1.7 billion.
“However, it would have been highly unlikely that XOM would have bought these assets in isolation, and the real driver of the deal is access to DEN’s CCS infrastructure which includes 1,300 miles of CO2 pipelines with the CCS business to worth about $2.8 billion, according to Enverus,” he said.
“The majority of this 935-mile pipeline is located in the Gulf Coast region of Louisiana, Texas, and Mississippi. This is the most promising region for CCS development given a combination of emissions sources, infrastructure and storage potential and a key focus area for XOM,” he added.
“In addition, the purchase of DEN also adds 10 onshore sequestration sites. XOM has access to the sites and the pipeline through this deal for probably less than the cost of acquiring the sites and building the pipeline separately. It also helps accelerate the timeline for XOM to achieve its CCS goals, as construction of the pipeline would be a multi-year project,” he continued.
“While XOM has added CCS assets to its growing portfolio not surprisingly, the consideration of the deal is slightly for XOM to use all the shares rather than dip into its large cash hoard, which it was over $30 billion at the end of 1Q23,” he said. he went on to declare.
Dittmar noted that this reflects rival Chevron using all the capital in its $7.6 billion purchase of PDCE Energy in May of this year.
“In both cases, the use of stock may have been a preference of the seller as it allows for some upside retention and avoids a hefty tax bill on the stock being retired,” he said.
“Premiums in both offers were very modest, especially for DEN at only a two percent premium over the previous day’s stock price. DEN is also selling below the $95 per share that the stock reached on April 2023,” he added.
To contact the author, please send an email andreas.exarcheas@rigzone.com
