Last month, California Resources Corp (NYSE:CRC) completed its all-stock merger with Aera Energy, in a deal valued at $2.1 billion.

Datacenters, many of which have deep pockets, could be an opportunity to commercialize carbon capture and storage (CCS), according to Bank of America Securities.

Bank of America Securities analyst Kalei Akamine upgraded the rating for California Resources from Neutral to Buy, while raising the price target from $57 to $65.

"California's power grid isn't growing fast enough," the firm stated in the note. Deep-pocketed datacenters may not be willing to wait four years to connect; This backdrop may be the opportunity CCS needs to commercialize, it added.

California Resources may offer "unique exposure to this theme" in case the company goes ahead with its CalCapture project, Akamine stated.

The California Resources Thesis: While natural gas with carbon capture is not considered green enough, this perception may be changing "as the market comes to grips with power demand implications that the data center buildout portends," Akamine said in the upgrade note.

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As power demand grows, it is "unreasonable to assume" that the complete generation in California can be replaced by renewables "on a timeline that matches demand, while also balancing the needs of the grid," the analyst wrote.

"The pragmatic approach to addressing this need sees natural gas with carbon capture as a transition fuel," Akamine added.

CRC Price Action: Shares of California Resources had risen by 4.36% to $51.65 at the time of publication on Wednesday.

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