Exxon Mobil Company (NYSE: XOM) has introduced that it has entered right into a definitive settlement to amass Denbury Inc. (NYSE: DEN), which it describes as an skilled developer of carbon seize, utilization, and storage (CCS) options and enhanced oil restoration.
In a press release posted on its web site, Exxon famous that the acquisition is an all-stock transaction valued at $4.9 billion, or $89.45 per share based mostly on ExxonMobil’s closing worth on July 12. Below the phrases of the settlement, Denbury shareholders will obtain 0.84 shares of ExxonMobil for every Denbury share, Exxon highlighted within the assertion.
The boards of administrators of each corporations have unanimously accredited the transaction, which is topic to customary regulatory critiques and approvals, Exxon stated within the assertion, including that it’s also topic to approval by Denbury shareholders. The deal is anticipated to shut within the 4th quarter of this yr.
Exxon famous within the assertion that the transaction synergies are anticipated to drive robust development and returns for the corporate. The corporate stated within the assertion that its acquisition of Denbury offers it with the most important owned and operated CO2 pipeline community within the U.S. at 1,300 miles, “in addition to 10 strategically positioned onshore sequestration websites”.
A price-efficient transportation and storage system accelerates CCS deployment for ExxonMobil and third-party clients over the following decade and underpins a number of low carbon worth chains together with CCS, hydrogen, ammonia, biofuels, and direct air seize, Exxon famous within the assertion.
Exxon highlighted that the acquisition additionally consists of Gulf Coast and Rocky Mountain oil and pure fuel operations. The corporate outlined within the assertion that these operations include proved reserves totaling over 200 million barrels of oil equal, “with 47,000 oil-equivalent barrels per day of present manufacturing, offering speedy working money stream and near-term optionality for CO2 offtake and execution of the CCS enterprise”.
“Buying Denbury displays our willpower to profitably develop our Low Carbon Options enterprise by serving a spread of hard-to-decarbonize industries with a complete carbon seize and sequestration providing,” Darren Woods, the Chairman and CEO of Exxon, stated in an organization assertion.
“The breadth of Denbury’s community, when added to ExxonMobil’s a long time of expertise and capabilities in CCS, offers us the alternative to play a fair better function in a considerate power transition, as we proceed to ship on our dedication to offer the world with the important power and merchandise it wants,” he added.
Chris Kendall, Denbury’s President and Chief Government Officer, stated, “this transaction is a compelling alternative for Denbury to affix an admired international power chief with a low-carbon focus, a strong stability sheet and a number one shareholder return program”.
“Over the previous couple of years, Denbury has made vital progress executing our strategic plan, strengthening our enhanced oil restoration operations, and capitalizing on our unequalled infrastructure to speed up the expansion of our CO2 transportation and storage enterprise. To construct even additional on this optimistic momentum, the Denbury Board of Administrators and administration workforce undertook a radical overview course of and regarded a variety of options to maximise long-term worth,” he added.
“By way of this course of, it grew to become clear that the transaction with ExxonMobil is in the most effective pursuits of our firm, our shareholders, and all Denbury stakeholders. Importantly, given the numerous capital and years of labor required to totally develop our CO2 enterprise, ExxonMobil is the perfect companion with intensive assets and capabilities,” he continued.
“The all-equity consideration will enable Denbury shareholders to take part within the upside of ExxonMobil’s inventory whereas benefitting from its robust capital return technique. We look ahead to bringing collectively our extremely complementary cultures and groups to understand the long-term worth and advantages of this mixture,” Kendall went on to notice.
Dan Ammann, the President of ExxonMobil Low Carbon Options, stated, “Denbury’s advantaged CO2 infrastructure offers vital alternatives to increase and speed up ExxonMobil’s low-carbon management throughout our Gulf Coast worth chains”.
“As soon as totally developed and optimized, this mixture of belongings and capabilities has the potential to profitably scale back emissions by greater than 100 million metric tons per yr in one of many highest-emitting areas of the U.S.,” he added.
When requested for touch upon Exxon’s newest purchase, Enverus Intelligence Analysis (EIR) Director Andrew Dittmar advised Rigzone that “ExxonMobil has introduced what appears to be like to be the primary vital public M&A deal the place CCS belongings make up the majority of worth”.
“The tremendous main, which is making substantial investments in storing carbon, is buying Denbury Assets (DEN) for about $90/share in an all-equity deal that values the unbiased at $4.9 billion and appears to be a successful acquisition for XOM,” he stated.
“DEN brings some upstream belongings to the desk together with about 47,000 barrels of oil equal per day of present manufacturing and the Cedar Creek Anticline EOR improvement quickly to on-line with peak manufacturing of 10,000 barrels per day. These are low-decline belongings that flatter XOM’s present concentrate on short-cycle, high-decline shale wells within the Permian if a really small incremental add for an organization with practically 4 million barrels of oil equal per day of world manufacturing,” he added.
Dittmar advised Rigzone that EIR views the upstream belongings as carrying a worth of about $1.7 billion.
“XOM would have been exceedingly unlikely to purchase these belongings in isolation although, and the true driver of the deal is entry to DEN’s CCS infrastructure that features 1,300 miles of CO2 pipelines with the CCS enterprise value about $2.8 billion, within the view of Enverus,” he stated.
“The vast majority of that pipeline, 935 miles, is positioned within the Gulf Coast area Louisiana, Texas and Mississippi. That’s the most promising area for CCS improvement given a mixture of emissions sources, infrastructure and storage potential and a key focus space for XOM,” he added.
“As well as, shopping for DEN additionally provides 10 onshore sequestration websites. XOM is having access to the websites and the pipeline by way of this deal doubtless for lower than the price of buying the websites and constructing the pipeline individually. It additionally helps speed up the timeline for XOM to realize its CCS objectives as constructing the pipeline can be a multi-year mission,” he continued.
“Whereas XOM including CCS belongings to its rising portfolio isn’t a surprise, consideration within the deal barely is with XOM utilizing all inventory versus dipping into its huge money hoard, which stood at greater than $30 billion on the finish of 1Q23,” he went on to state.
Dittmar famous that this mirrors rival Chevron utilizing all fairness in its $7.6 billion buy of PDCE Vitality in Might of this yr.
“In each instances, using inventory might have been a choice of the vendor because it permits some retention of upside and avoids a pressured tax invoice from shares being cashed out,” he stated.
“Premiums in each offers had been very modest, notably for DEN with only a two p.c premium on the prior-day inventory worth. DEN can also be promoting beneath the $95/share worth the inventory reached in April 2023,” he added.
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