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Numerous traditional companies have attempted to reposition themselves as modern tech startups, but only a few have succeeded. Denbury, however, appears to be among the successful ones.
The oil and gas driller recently announced its sale to Exxon for a whopping $4.9 billion. Both the buyer and seller highlighted Denbury’s exceptional carbon capture technology, with little emphasis on its core energy production business.
In an ideal scenario, Exxon’s CEO envisions a world where carbon emissions can be efficiently removed from the air, eliminating the need for costly infrastructure updates. This aligns perfectly with Exxon’s current carbon capture investments, further confirmed by their acquisition of Denbury.
Just three years prior, Denbury had filed for bankruptcy, but after shedding billions of dollars in bond debt, it emerged from the court process in 2020. The surge in energy prices propelled its shares from $20 to over $80. In a nearly no premium, all-stock deal, Exxon, valued at $400 billion, will purchase Denbury.
Denbury currently produces 47,000 barrels of oil equivalent per day. The revenue generated from this is being reinvested in drilling and carbon capture technology, including facilities for CO₂ sequestration, transportation pipelines, and storage centers along the Gulf of Mexico coast. This infrastructure aligns perfectly with Exxon’s requirements, particularly Denbury’s Green Pipeline.
Exxon’s hard negotiation tactics were evident in their previous attempts to acquire Denbury. The transport and storage of carbon could potentially reach 60 million metric tonnes per year by the end of the decade, leading to an annual EBITDA of $800 million.
Exxon is enthusiastic about the concept of “blue oil,” which involves using captured carbon for enhanced oil recovery. By injecting it into the ground, more oil can be extracted. Denbury claims that almost a third of its production can be classified as blue, making it an appealing target for Exxon’s bid.
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