ExxonMobil acquisition bodes well for Bakken economy, says industry leader

One of North Dakota’s leading mineral resources experts points to ExxonMobil’s acquisition of Denbury Incorporated as a reason to be optimistic about the future of the state’s energy industry.

Exxon Mobil, with the world’s largest market capitalization of approximately $350 billion, announced on July 13th it is buying Denbury, a developer of carbon capture, storage solutions, and enhanced oil recovery. The company says its largest producing property is the Cedar Creek Anticline in Montana and North Dakota, which accounted for 23% of company production in 2021.

The acquisition is an all-stock transaction valued at $4.9 billion. It gives the American multinational oil and gas corporation the most prominent direct descendant of John D. Rockefeller's Standard Oil, the largest owned and operated Carbon Dioxide (CO2) pipeline network in the U.S. The company’s pipelines span 1,300 miles, including nearly 925 miles of CO2 pipelines in Louisiana, Texas, and Mississippi, as well as ten strategically located onshore sequestration sites used to store carbon in places such as underground geological formations.

Lynn Helms, Director of the North Dakota Department of Mineral Resources, in a recent interview on KTGO Radio (AM 1090 / FM 92.7), “I think that really speaks to what state officials have been saying about the importance of carbon capture and utilization to the state of North Dakota. When you have a company, like ExxonMobil, put $5 billion into projects that will capture CO2 and use it for enhanced oil recovery all the way from the Gulf of Mexico to Glendive, MT, it really speaks to what the future looks like for mitigating carbon and dealing with this carbon constrained world we live in."

Oil extraction vents are unusable, and gas must be burned on the spot. This intentional flaring releases methane and CO2 into the atmosphere. Today’s oil companies are getting intense pressure from banks and regulators to have a carbon mitigation strategy.

ExxonMobil believes the acquisition will give immediate options to the company as it transports and stores C02 and has the potential to reduce emissions by more than 100 million metric tons per year. In addition to Denbury’s carbon capture and storage assets, the acquisition includes its oil and natural gas operations, which boast an estimated 200 million barrels of oil reserves and 47,000 barrels per day of oil production. The deal is subject to customary regulatory reviews and approvals and approval by Denbury shareholders. The transaction is expected to close in the 4th quarter of 2023.

Environmental awareness has been a massive topic among fossil fuel producers. A recent study conducted by Inmarsat, a global satellite communications company, found that 35% of oil and gas companies are currently utilizing environmental, social, and governance-focused (ESG) data to engage investors proactively on the subject of sustainability. The report adds that the overall energy sector is currently getting only about half of venture capital investment that businesses services, health and life sciences, and information technology companies receive.

Energy companies believe it’s a discussion they must address and an opportunity they must consider. “Whether you agree or not with carbon dioxide causing global warming,” Helms says, “these companies are committed with huge amounts of capital, and Denbury has demonstrated they can produce carbon negative crude oil in North Dakota. ExxonMobil sees that and this is where they want to be. We project slow growth in our North Dakota crude oil production. We think today we’re at 1.2 million barrels a day and see that growing to 1.4 million over the next 15 years or so, and this CO2 utilization has the potential to extend that for 2 decades; for an entire generation. So our grandchildren’s grandchildren will be benefiting from investments like what ExxonMobil decided to make.”

Helms also commented on the state’s current rig count, which has dropped from 45 in April to 36 in mid-July. “That is a really puzzling number. It is largely a workforce issue. We had (former Lt. Governor) Brent Sanford in Kildeer for recent meetings to talk about the Bakken Grow initiative to bring Ukrainians and potentially other immigrants into the oil patch and acclimate them to North Dakota to be here as long-term workers. So now they’re looking for sponsors. They apparently have the jobs and the housing lined up but they need individual sponsors for those Ukrainian immigrants.”

Helms says the future may require a new way of thinking about what constitutes a healthy rig count in the state.

“I think we have to start thinking about the fact that these rigs are drilling 15,000-foot laterals and actually creating more than 2 wells or more per month per rig. Back pre-covid, the average was 2 new wells per drilling rig, but they were 10,000-foot laterals. They’ve actually made a 50% increase in efficiency, so we’re going to have to factor that in and start thinking maybe 55-60 rigs is not the norm, maybe it’s 45 to 50 rigs in order to really grow our production.”