ExxonMobil Just Sealed A Pipe Dream

ExxonMobil Just Sealed A Pipe Dream
Daniel Johnston

8 months ago2 mins

Mentioned in story

What’s going on here?

ExxonMobil has just sealed its biggest deal in six years.

What does this mean?

Exxon’s got some lofty goals to bring its net emissions down to zero by 2050 – and since it’s not about to cut oil production in any meaningful way, carbon capture is going to be the bedrock of its strategy instead. Now the oil giant is putting its money where its mouth is, with a $4.9 billion all-stock deal to acquire Denbury. And this isn’t just any acquisition: it’s a strategic move that hands Exxon the biggest network of carbon dioxide pipelines in the US, a crucial piece of the carbon capture puzzle. Plus, Denbury specializes in using carbon dioxide to coax more oil from old oil fields, all while burying more carbon in the ground than the slippery stuff will emit – something seen as a must-have if the world’s going to hit its climate goals.

Exxon Denbury

Why should I care?

Zooming in: Going green for greenbacks.

Exxon isn’t just doing this for the love of Mother Earth. First off, making more bets on environmental, social, and corporate governance (ESG) strategies should help keep increasingly eco-conscious investors sweet. And there’s a financial incentive too: the US Inflation Reduction Act increased tax credits to $85 for every ton of carbon dioxide sequestered. Morgan Stanley reckons that could be highly profitable – so Exxon’s move could unlock a tidy new stream of income.

The bigger picture: Bad boy appeal.

US firms Exxon and Chevron have been sticking to their traditional oil and gas businesses, while their European energy counterparts have been busy preparing for a greener world. But it seems investors are favoring the American approach – and now UK energy giant Shell is taking note. The company’s reportedly considering selling a stake in its renewable power business, as part of a strategic shift back toward fossil fuel investments, in a bid to boost shareholder returns.

Shell renewable capacity
Source: Bloomberg
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