ExxonMobil to buy Denbury for $4.9b to expand low-carbon business

NEW YORK — ExxonMobil will acquire Denbury Inc., a specialist in enhanced oil recovery and carbon sequestration, for $4.9 billion as it builds out its low-carbon business, the oil giant announced Thursday.

The all-stock acquisition provides ExxonMobil with Denbury's carbon dioxide pipeline network in industrial-rich regions of the southern states of Texas, Louisiana and Mississippi, where oil companies plan major carbon sequestration projects in response to climate change.

The deal is expected to close in the fourth quarter.

"Acquiring Denbury reflects our determination to profitably grow our Low Carbon Solutions business by serving a range of hard-to-de-carbonise industries with a comprehensive carbon capture and sequestration offering," said ExxonMobil Chief Executive Darren Woods.

Oil companies have championed carbon sequestration as a major response to climate change. The process involves trapping carbon dioxide released in industrial production and shipping it through pipelines to sites where it is buried underground, removing the heat-trapping gases from the atmosphere.

Denbury also produces oil and natural gas through the process of enhanced oil recovery, which injects carbon dioxide gas into partially-produced petroleum reserves in order to coax out additional hydrocarbons.

In the first quarter of 2023, Denbury produced about 48,000 barrels of oil equivalent per day, a pittance next to ExxonMobil's 3.8 million barrels per day.

Denbury's oil and gas production is "not a strategic asset for us", Woods said in an interview CNBC. 

"The value of the deal... is really the assets and the experience of storing carbon dioxide, taking advantage of that pipeline and infrastructure system in this very industrial corridor... to store that carbon dioxide."

Shares of Denbury fell 0.3 per cent to $87.53 in early trading, while ExxonMobil dropped one per cent to $105.44.