Exxon’s carbon-capture deal is pale shade of green
13/07/2023 17:38
(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
NEW YORK, July 13 (Reuters Breakingviews) - Exxon Mobil
XOM.N is banking on the world needing fossil fuels for years
to come, and its cautious energy transition philosophy under
boss Darren Woods can be seen clearly in the company’s latest
acquisition. The oil titan’s $4.9 billion all-stock deal for
Denbury DEN.N unveiled on Thursday provides a financially and
strategically judicious way to capture and move carbon dioxide.
The premium Exxon is paying for Denbury, which owns and
operates the largest U.S. carbon pipeline network at 1,300
miles, amounts to less than 2%, based on Wednesday’s closing
price. The $89.75 a share is also lower than where Denbury was
trading before Bloomberg reported news of a possible deal in
October. Exxon should generate value from the transaction.
Denbury is expected by analysts to earn $477 million of
operating profit in 2024, according to Refinitiv, translating
into a theoretical return on investment of about 10%.
While Denbury’s pipelines pass by Exxon’s Gulf Coast
refining facilities, enhancing its efforts to produce low-carbon
ammonia, the company also pumps carbon dioxide into ageing wells
to boost oil production. Denbury says that 28% of it is “blue
oil” that produces negative scope 3 emissions. Showcasing an
evolving mindset while helping extract more oil is just the pale
green hue that suits Exxon. (By Robert Cyran)
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(Editing by Jeffrey Goldfarb and Sharon Lam)
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