Exxon’s Carbon-Capture Deal is Pale Shade of Green

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(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%.

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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)