Morgan Stanley analysts are bullish on ConocoPhillips, noting that the energy company has expressed a strong desire to invest in CCS as part of a low-carbon strategy.
Chart Industries, headquartered in Georgia, is emerging as a “uniquely positioned key supplier of high-tech equipment” among various decarbonization solutions, most notably carbon capture, according to Morgan Stanley. On the stock, it is overpriced.
According to Goldman Sachs, Occidental Petroleum’s expertise in enhanced oil recovery provides a “unique” opportunity to apply carbon capture technologies to generate new sources of revenue. Morgan Stanley has an equal weight position in the stock, but claims to have the “most direct exposure” to CCS across its U.S. energy coverage.
Morgan Stanley has an overweight position in Exxon Mobil, recognizing that the oil giant has committed to investing $3 billion in low-emission energy solutions through 2025, with an initial focus on CCS and hydrogen.
Baker Hughes, based in Texas, is one company that Bank of America expects to benefit from increased CCS investment. Morgan Stanley, which has an overweight position in the stock, considers the company to be one of its top picks in oil services with exposure to carbon capture.
Along with Baker Hughes, Morgan Stanley ranks oil services conglomerate Schlumberger as one of its top picks for CCS exposure. The bank is bullish on the stock, praising the company’s “capital-light approach” to preparing for the low-carbon transition.
Morgan Stanley analysts are also bullish on Chevron, citing the oil and gas company as one of the first to invest in CCS technologies. Chevron sees carbon capture and storage (CCS) as an underinvested area of the energy transition.
Morgan Stanley is overweight on Diamondback Energy, based in Texas, following the firm’s pledge to potentially co-invest in CCS. Diamondback Energy is one of the stocks most vulnerable to increased investment in carbon capture, according to the report.
Carbon capture and storage entails separating carbon dioxide from waste gases and permanently storing it underground, such as in old oil and gas fields.
In recent years, energy titans have lauded the often-overlooked technology, claiming it could play a critical role in the journey to net zero emissions by 2050.
Environmental groups and climate activists, on the other hand, argue that the climate emergency necessitates an immediate and wholesale shift away from fossil fuels.
Morgan Stanley analysts argued in a note titled “Carbon Capture: A Hidden Opportunity?” that the United States was well positioned to play a leading role in the development of the technology.
“In comparison to their European counterparts, US energy companies have lagged in the advancement of sustainability strategies… However, a shift is underway, led by the US majors,” the analysts wrote.
“US Energy has invested heavily in carbon capture and storage… In contrast to other low-carbon technologies, such as solar and wind, US Energy has a presence in CCS development.”