XOM - Does Exxon's $4.9 Billion Denbury Buyout Make It a Bull Market Buy?
2023-07-13 13:58:43 ET
Oil giant ExxonMobil (NYSE: XOM) has finally found its acquisition. After months of rumors that it was seeking a deal to buy an independent U.S. oil producer, it announced on July 13 it would purchase Denbury (NYSE: DEN) for $4.9 billion. Both companies' stocks are down about 2% as of this writing, bucking the trend for most independent and integrated oil and gas stocks, which are generally up today.
But taking a step back and looking at the bigger picture, what does this deal mean for ExxonMobil? Increased M&A activity is generally a positive sign that management sees good prospects ahead. Does this big buy indicate investors should be looking at ExxonMobil as an emerging bull-market winner? Let's take a closer look.
According to the terms released, ExxonMobil is acquiring 100% of Denbury for $4.9 billion in an all-stock transaction. Denbury investors will get 0.84 shares of Exxon stock for every share they own of Denbury. In return, ExxonMobil will get Denbury's existing oil and gas production of just under 48,000 barrels per day on average, which is produced with the aid of some 4 million tons of CO2 it injects into wells each year. This "enhanced oil recovery" process results in 10% to 20% increased oil recovery, as well as sequestration of the CO2.
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Does Exxon's $4.9 Billion Denbury Buyout Make It a Bull Market Buy?