Published - October 11, 2022 @ 12:07 PM (EET)

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Shares of Denbury (NYSE:DEN) soared to an all-time intraday high, climbing as much as 12% on Monday after Bloomberg reported Exxon Mobil (NYSE:XOM) was considering a takeover of the oil-recovery specialist.

According to people familiar with the matter, Exxon has expressed preliminary interest in the oil and gas producer, which has the largest carbon dioxide pipeline network in the US.

Though the deal would make a potentially sizable transaction and comprise the biggest carbon management investment since the August passage of the Inflation Reduction Act, Exxon Mobil declined to respond, while Denbury could not immediately be reached for comment. 

"We'll decline from commenting on market rumor and speculation," said a spokesperson for Exxon.

WHY IT MATTERS

Denbury, which emerged from bankruptcy in 2020 and its stock performing strongly since then, has more than 2,092 kilometers of pipelines in the Gulf Coast and Rocky Mountains dedicated to transporting carbon dioxide. 

The company specializes in using carbon dioxide to extract oil from old wells and has the most aggressive net zero target of any large US oil company, aiming to be "carbon negative" by 2030.

In August, Bloomberg reported that Denbury had worked with an advisor to evaluate strategic options but that the discussions may not lead to a transaction.  Following the report, trading was temporarily halted.

NOW WHAT

With carbon capture as a priority, Exxon pledged to spend $15 billion on lower-carbon investments through 2027. Buying Denbury would thus give the oil giant the needed infrastructure as it pursues that goal.

Elsewhere,  Exxon revealed preliminary results ahead of its third-quarter earnings release scheduled for 28 October, indicating a solid quarter.  

The oil giant forecasts its earnings at around $11 billion, well ahead of the $6.8 billion it earned in the year-ago quarter.

PRICE TARGET:  Based on 11 Analyst ratings covered by TipRanks, the consensus among analysts is a Moderate Buy for Exonn's stock (8 Buys, 3 Holds). The average price target of $109.68 implies an upside potential of 10.97%.

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Denbury shares are up 30.3% year-to-date.

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