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Xebec Biostream MSA and energy update +4

08:39 06-Jul-21


Xebec has announced a master services agreement with a "leading U.S. RNG dairy farm developer" which constitutes an initial order of 18 units and sets a framework for further purchases.  This is exactly the growth ramp we want to see from the product's introduction.  Production is also ramping in-line with the already communicated schedule. 

XEBEF hasn't logged any pre-market trades, but the bid/ask indicates only a modest jump.  I suspect the market may not be realizing the significance here; with a base price of $1.5M per unit, this order represents at least $27M, or almost half of last year's revenue, and a quarter of what's projected for this year.  I expect sales to be production constrained for the time being, but that should help pricing.

Furthermore, the macro energy market is setting up perfectly for Xebec and Golar.  Comparing current global prices (NG1: $3.75, JKM $13.90, TTF almost €37) with those documented just 3 weeks ago shows 13% American inflation and over 20% internationally.  The ongoing OPEC+ theater should help that trend further, tightening oil supply in the short term, but potentially creating another medium-term price war.  More important to me, and other Golar investors should be the international expansion of American drillers and their new-found interest environment interest in gas-powered rigs.  If that doesn't put an explanation point on the gas ascendancy that I tipped last week, and my inflation outlook all along, I don't know what does.  Accordingly, PPL's rate increases from April are now official to the tune of $199M in annual revenue.