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CUI Global introduces VIRTU & other hydrocarbon news +2

10:50 03-Apr-19


CUI Global will be showcasing its new Visually Integrated Remote Telemetry Unit (VIRTU) to customers in the coming weeks.  This is the fruit of the collaboration with Mitsubishi Electric Europe that began in November.  VIRTU pairs Orbital's sensing systems with Mitsubishi's platform to provide ease of use and secure remote management.

Evidence of the shift to natural gas continues to abound, with major new LNG projects underway from Shell and Chevron in eastern Canada.  Furthermore, Shell has just inked a new SPA (sale and purchase agreement) where I find the most important aspect to be:

The SPA is the first-ever long-term contract with LNG produced out of the United States to be indexed to Brent and comes with full destination flexibility.
That means that even natural gas from the states is starting to be priced on a more global basis.  This coincides with a further revelation from Aramco that its primary fields are declining faster than most apparently thought, but fairly in-line with what we've been hearing from Schlumberger about global production.  The only thing I find shocking is that investors believed the dated and biased projections the were previously given.  At maximum production, the field would be depleted in 34 years, which is right in the neighborhood of the lifespan I've been forecasting for the hydrocarbon economy.

The overall long-term picture very good for both companies and Golar as well, assuming it can capitalize on the demand.  It is further evidence of a world where smart technological management of increasingly difficult hydrocarbon (with an increasing emphasis on natural and renewable gas) development and production will reign supreme.  In my mind, all that remains is to see how quickly or slowly the equity markets price this in.  We can already see the effect in a Brent/WTI spread that has fallen below $7.  This is an environment that calls for Schlumberger's core proficiencies and its financing capabilities can only help further.  Energy Recovery probably still has time for VorTeq and M-Teq to leap forward, quite possibly after ERII gets worse.  Don't be surprised if Orbital winds up in some further transaction with Mitsubishi towards the end of this year, once the Brexit path is settled, now that Theresa May's deal is finally dead.  Taken together these stocks represent a very nice range of risks for proportionate returns.