SLB: Aker Carbon Capture Purchase Is Prudent Step in Move Toward Carbon Capture and Storage

We see narrow-moat-rated SLB’s agreement to combine its carbon capture business with Aker Carbon Capture and own 80% of the combined entity as a prudent step toward building a sizable presence in the carbon capture and storage, or CCS, market. SLB’s acquisition makes sense in the context of past pronouncements from the company about wanting to move into the carbon capture and storage space given pressure from regulators to move toward net zero greenhouse gas emissions goals. In addition, we expect SLB’s customers to be interested in the technology to optimize oil extraction, as captured carbon can be used to derive more oil from a given well. The goal of the deal is to lower carbon capture costs (about 50%-70% of the total spending for a project) to expedite the adoption of the technology, particularly across industrial sectors.