ExxonMobil (XOM) Signs Deal to Acquire Denbury for $4.9B

Exxon Mobil Corporation XOM has entered into an agreement to acquire Denbury Inc. DEN for $4.9 billion.

The move is part of ExxonMobil’s plan to enhance its transition to clean energy with a well-established carbon dioxide sequestration operation. The acquisition will provide XOM access to the biggest pipeline network in the United States.

Denbury exited bankruptcy in September 2020. The company’s main business is oil production. The majority of DEN’s revenues are generated from enhanced oil recovery or injecting carbon dioxide into wells to extract more oil.

Denbury is an expert in carbon management. The acquisition gives ExxonMobil ready-made carbon dioxide transportation, allowing XOM to make carbon capture a profitable business.

Oil and gas companies are actively involved in carbon capture and storage (CCS) projects as these companies offer a transition pathway for the rapid and effective reduction of carbon dioxide emissions beyond what can be achieved by alternative methods like electrification and renewable fuels.

CCS involves the capturing of carbon dioxide either from the source of pollution or from the atmosphere. In some cases, the captured carbon dioxide is carried across states through pipelines and stored at facilities to be used for other things. Thus, the use of CCS in reducing industrial emissions offers an excellent opportunity.

The acquisition also involves Denbury’s Gulf Coast and Rocky Mountain hydrocarbon operations. The operations comprise proved reserves of more than 200 million barrels of oil equivalent, with current production of 47,000 oil equivalent barrels per day.

As part of its low-carbon plan, ExxonMobil mainly focuses on carbon capture and storage, hydrogen, and biofuels. Unlike its European peers, the company avoided any shift into renewable energy. XOM pledged to spend $7 billion on its low-carbon business through 2027.

Price Performance

Shares of ExxonMobil have underperformed the industry in the past year. The stock has gained 23.6% compared with the industry’s 24% growth.

Zacks Rank & Stocks to Consider

ExxonMobil currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Cheniere Energy Partners, L.P. CQP and Oceaneering International, Inc. OII, currently sporting a Zacks Rank of 1 (Strong Buy) each.

Cheniere Partners has a stable business model, backed by long-term take-or-pay contracts with investment-grade off-takers. CQP recorded first-quarter 2023 earnings per unit of $1.43, beating the Zacks Consensus Estimate of 70 cents.

Cheniere Partners has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for CQP’s 2023 and 2024 earnings per share is pegged at $2.93 and $3.49, respectively.

One of the leading suppliers of integrated technology solutions, Oceaneering boasts an impressive portfolio of diversified products and services. OII has a Zacks Style Score of A for Momentum and B for Growth.

Oceaneering has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for OII’s 2023 and 2024 earnings per share is pegged at $1.12 and $1.29, respectively.

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

Oceaneering International, Inc. (OII): Free Stock Analysis Report

Cheniere Energy Partners, LP (CQP): Free Stock Analysis Report

Denbury Inc. (DEN): Free Stock Analysis Report

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