Oil giant ExxonMobil Corp. announced July 13 it agreed to acquire Denbury Inc., a developer of carbon capture, utilization and storage solutions and enhanced oil recovery, for $4.9 billion in stock.
Under the terms of the agreement, Denbury shareholders will receive 0.84 shares of ExxonMobil for each Denbury share. The stock was valued at $89.45 per share based on ExxonMobil’s closing price on July 12.
The transaction is expected to close in the fourth quarter of 2023 if it clears regulators and Denbury stockholders.
ExxonMobil’s purchase of Denbury has been rumored about since October and it is a logical, straightforward way for the oil giant to build on its strength in carbon management technology, Raymond James analyst Pavel Molchanov told Reuters. “[But the deal is] very small for Exxon, relative to its size,” he said.
ExxonMobil didn’t reveal advisors in its press release, but Plano-based Denbury said in a SEC filing it used J.P. Morgan Securities and TPH&Co. as financial advisors and providers of a fairness opinion to the board, with PJT Partners also providing a fairness opinion to the board. Vinson & Elkins confirmed its role as outside legal counsel to the company.
The V&E team was led by partners Steve Gill and Doug McWilliams and senior associate Alex Robertson with assistance from associates Luke Strieber, Tushar Parashar, Chase Browndorf, Jack Peterson and Griff Kimball.
Also advising were partners David Peck and Lina Dimachkieh, counsel Peter Rogers and associate Keleigh Carver (tax); partner David D’Alessandro, counsel Missy Spohn and associates Matt Green and Kenneth Strain (executive compensation/benefits); partners Kara Kuritz and Hill Wellford and associate Alex Rant (antitrust); partner Rick Sofield (CFIUS); and partner John Grand and counsel Elena Sauber (corporate).
Others were partner Danielle Patterson (energy transactions/projects); partners Guy Gribov and Alex Cross and associate Avi Shchigel (finance); partner Sean Becker and counsel Alex Bluebond (employment/labor); partner Matthew Dobbins and associate Kelly Rondinelli (environmental); partners Robert Kimball and Katherine Frank (corporate); and counsel Rajesh Patel and associate Warner Scott (technology transactions/IP).
Davis Polk said it counseled ExxonMobil led by partners Louis Goldberg, Oliver Smith and Shanu Bajaj and associate Alex S. Burger in New York.
ExxonMobil’s general counsel is Craig Morford. Jim Matthews is the general counsel at Denbury. Before joining Denbury in 2012, Matthews was a partner at Vinson & Elkins for 11 years, and for three of those years managed the firm’s Tokyo office.
Acquiring Denbury reflects ExxonMobil’s determination to profitably expand its low-carbon solutions business by serving hard-to-decarbonize industries with a carbon capture and sequestration offering, CEO Darren Woods said in the press release.
“The breadth of Denbury’s network, when added to ExxonMobil’s decades of experience and capabilities in CCS, gives us the opportunity to play an even greater role in a thoughtful energy transition, as we continue to deliver on our commitment to provide the world with the vital energy and products it needs,” he continued.
Chris Kendall, Denbury’s president and CEO, said Denbury’s board and management team undertook a thorough review process and considered a number of alternatives to maximize long-term value.
“Through this process, it became clear that the transaction with ExxonMobil is in the best interests of our company, our shareholders and all Denbury stakeholders,” he said. “Importantly, given the significant capital and years of work required to fully develop our CO2 business, ExxonMobil is the ideal partner with extensive resources and capabilities.”
ExxonMobil said transaction synergies are expected to drive strong growth and returns, providing it with the largest owned and operated carbon dioxide pipeline network in the U.S. at 1,300 miles. It includes nearly 925 miles of CO2 pipelines in Louisiana, Texas and Mississippi, within one of the largest U.S. markets for CO2 emissions, as well as 10 strategically located onshore sequestration sites.
A cost-efficient transportation and storage system accelerates CCS deployment for ExxonMobil and third-party customers over the next decade and underpins multiple low carbon value chains including CCS, hydrogen, ammonia, biofuels and direct air capture, ExxonMobil continued.
Once fully developed and optimized, the combination of assets and capabilities has the potential to profitably reduce emissions by more than 100 million metric tons per year in one of the highest-emitting regions of the U.S., ExxonMobil Low Carbon Solutions president Dan Ammann said.
The acquisition includes Gulf Coast and Rocky Mountain oil and natural gas operations, including proved reserves totaling more than 200 million barrels of oil equivalent with 47,000 oil-equivalent barrels per day of current production, providing immediate operating cash flow and near-term optionality for CO2 offtake and execution of the CCS business, ExxonMobil said.