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Xebec Carbon Capture MoU +4

Xebec has signed a memorandum of understanding for negotiation of an order in excess of $100M (CAD126M) for 51 carbon dioxide reciprocating compression packages to be completed by the end of 3Q23. This equipment will be used for Summit Carbon Solutions’ proposed carbon capture and sequestration project, which will be the largest in the world if approved.  Management says that the equipment will be made at the Denver facility.  So we can expect that to be a focus of today's presentation.  It also says it is working closely with the customer and major suppliers to manage cash flows and supply chain risks associated with the project.

The figure given would double Xebec's revenue for last year.  Perhaps that is just coincidence.  I have been doubtful about the current economic viability of carbon capture projects, and think that can only change with proper pollution pricing, as pioneered by Europe.  However, if one believes the vast preponderance of scientists, then it has to happen eventually.  I can't be sure that a Republican-controlled Congress spells good things for that in the short term, but this end project aims to support the ethanol industry.  In my opinion, that is the worst energy policy the developed world has seen in my lifetime, but it has lots of Republican support.  Furthermore, if we have to wait until after the mid-terms for approval, then the timing seems tight.  We'll see what happens.

In the meantime, I think it's worth reminding investors about the rebate rate on XEBEF and XBC, which still exceeds 20%.  My conversations with the company indicate that it is aware of the situation and potential for OMIBs to impact the stocks.  Obviously I can't be sure that will happen, but it wouldn't be uncommon following a management change and information dump.