SLB, the world's biggest oil field services contractor, expanded its push into data centres last week after agreeing to buy German cooling-equipment maker Kelvion for $3.4bn. The deal marks the latest example of how oil services firms are making steady inroads into the fast-growing data centre business underpinning the artificial intelligence (AI) boom, leveraging their manufacturing and engineering expertise built up through developing large-scale energy projects over decades.
The acquisition of Kelvion, which provides thermal management and heat exchange technologies, will more than double SLB's revenue potential per gigawatt of delivered capacity. Kelvion is seen by analysts as a natural fit for SLB as the latter seeks a bigger role in the data centre space and looks to expand its technology offerings. The acquisition will allow SLB to "add more revenue breadth but also get into more of the thermal management, which they can package into their modular-type of product", US-based Melius Research analyst James West says. SLB is focusing on the infrastructure needs of data centres, while close rival Baker Hughes has so far targeted the power generation side of the market.
Oil and gas will continue to be the key driver of growth for SLB and its rivals, but they are increasingly positioning themselves as industrial and energy technology companies. Data centres are a natural extension of their talent base. "You have to consider that they are one of the biggest employers of engineers on the planet," West says. "A lot of the data centre infrastructure is engineering and construction-type jobs — it's something they already do."
The deal was announced at a time when data centres are facing growing opposition from local communities in the US, spurred by concerns over noise pollution, rising utility bills and high water consumption. This resistance is only set to intensify ahead of November's midterm elections, leading some lawmakers to withdraw their support and back a regulatory crackdown, including pauses in project approvals. As a long-time champion of data centres, US president Donald Trump recently warned that local communities risk ending up "backwards and poor" if their protests cause projects to be cancelled.
Diversification strategy
But public pushback is unlikely to dissuade the oil field services sector from looking to diversify beyond its core oil and gas business and tap the growth potential of data centres. With forecasts showing electricity demand is set to soar in the coming years due to the AI boom, more deals may lie ahead. In July, SLB teamed up with smaller rival Liberty Energy on data centre infrastructure and power projects. SLB is also serving as the modular design partner for US chip manufacturer Nvidia's AI factories, and has been selected by technology giant Meta to support a major data centre development in Canada.
SLB is acquiring Kelvion from funds managed by majority owner Apollo and minority holder Triton. The transaction is expected to close in the first half of 2027 and includes about $700mn in debt. Following the acquisition, SLB is targeting revenue of $4.5bn-$5bn from its combined data centre solutions business in 2028. The deal will not affect spending allocated to SLB's core oil services business or digital operations. And investments in its data centre unit will be funded by cash flows generated by the business as well.
While the investment case for the oil services sector has been buoyed by this year's rally in oil prices and prospects for the re-opening of Venezuela to international oil companies, the data centre business offers another revenue opportunity. "It's accretive to earnings, it creates cash flow, it's low capital intensity," says West at Melius. "There's just a lot of very positive momentum right now."
