ExxonMobil considers acquiring Denbury to invest in carbon capture

ExxonMobil is considering acquiring Denbury Inc., an oil and gas producer with the largest carbon dioxide pipeline network in the United States.

People familiar with the matter said ExxonMobil has expressed initial interest in the company, which is located in Plano, Texas. As the matter has not been disclosed and a final decision has not been made, ExxonMobil may choose not to promote the potential transaction.

Denbury has more than 1300 miles (2092 kilometers) of pipelines along the Gulf Coast and in the Rocky Mountains dedicated to transporting carbon dioxide. Carbon capture is the cornerstone of ExxonMobil's climate strategy, which aims to eliminate operational emissions by 2050. The acquisition of Denbury will provide the oil giant with critical and hard to replicate infrastructure to achieve this goal.

If the acquisition is successful, it will also be the largest carbon management investment since the adoption of the Inflation Reduction Act in August, which provides a lot of tax incentives for burying carbon dioxide. The bill increases the carbon capture tax credit by 70% to $85 per ton. Executives including Darren Woods, CEO of ExxonMobil, praised the bill for providing financial support for carbon capture. Morgan Stanley said carbon capture may be very profitable in the future.

Among all large oil companies in the United States, Denbury's net zero goal is the most radical, with the goal of achieving "carbon negative" (Scope 3, including customer emissions) by 2030.

Bloomberg News reported in August that the company was discussing the sale with a consultant. Denbury Company broke away from bankruptcy protection in 2020 and has been extracting more crude oil from old oilfields with carbon dioxide for more than 20 years. This process is called improving oil recovery.

During the shale revolution, EOR was unpopular because of its high cost and low output, but recently it has become popular again because of its green potential, especially its ability to store more carbon underground than the carbon emitted by the oil it produces.

Earlier this year, ExxonMobil promised to invest $15 billion in low-carbon investment by 2027, and carbon capture is a priority project. Denbury's Rocky Mountain assets are connected to ExxonMobil's Shute Creek gas facility near LaBarge, Wyoming, which captures more carbon than any other asset in the United States.