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Many an old economy company has tried to rebrand itself as a modern tech upstart, with mixed success. But for Denbury the plan seems to be working.
The oil and gas driller announced on Thursday that it would sell itself to Exxon for $4.9bn. Both buyer and seller painted Denbury as an emerging star in carbon capture technology. Its core energy production business was presented as a mere afterthought.
Exxon’s chief executive recently explained that in his optimal world, carbon emissions could efficiently be taken from the air. That would mean no need for a costly revamp of energy and power infrastructure. Fossil fuel production for Exxon and others could go on mostly unimpeded. Exxon has been investing in its own carbon capture efforts. The Denbury deal confirms its interest in the controversial technology.
Three years ago, Denbury filed for bankruptcy. It emerged from the court process in 2020 by shedding billions of dollars in bond debt. The rally in energy prices lifted its shares from around $20 each to over $80. Exxon, worth $400bn, will pay for Denbury all in stock at almost no premium.
Denbury produces 47,000 in barrels of oil equivalent per day. That cash flow is being ploughed into both drilling and carbon capture technology, including CO₂ sequestration facilities, transport pipelines and storage concentrated along the Gulf of Mexico coast. That infrastructure fits well with Exxon’s needs, especially Denbury’s Green Pipeline, say Jefferies.
Rumoured to have bid for Denbury before last October, Exxon clearly drove a hard bargain. Carbon transported and stored could reach 60mn metric tonnes annually by the end of the decade, resulting in annual ebitda of $800mn
Exxon seeks the idea of “blue oil”, using captured carbon for “enhanced oil recovery”. It can be injected into the ground and then used to extract more oil. Denbury says nearly a third of its production can be described as blue. That is the kind of cutting edge label that attracted Exxon’s bid.
