What’s going on?
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.
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.
—
Originally Posted July 13, 2023 – Pipe Dream Come True
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Finimize and is being posted with its permission. The views expressed in this material are solely those of the author and/or Finimize and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.