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Linn Energy, LLC (LINE) Message Board

  • rlp2451 rlp2451 Jan 9, 2013 3:10 PM Flag

    OT: RNF

    RNF, one of my favorites, is up over 14% since the beginning of the year and more than doubled since it's IPO in November 2011. That along with an 8% yield is pure gold. I guess folks are expected a huge demand for fertilizer this spring.

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    • Up another buck today!

    • RNF owns and operates two fertilizer production facilities. One is located in Illinois, while the other is in Pasadena, Texas. The Illinois property is one of the primary producers of nitrogen fertilizer products in the Mid Corn Belt region of the United States. This is the largest market in the United States for direct application of nitrogen fertilizer products. The Pasadena property is the largest producer of synthetic granulated ammonium sulfate in North America. This property has sales in both the United States and South America.

      The reason RNF was selected revolves around its facility in Texas. It all started back in November 2, 2012, when RNF announced that it has completed the acquisition of Agrifos LLC. The initial purchase price was $158 million. Of that total $138 million was provided in cash, and the remainder of the purchase price was provided in the form of 538,793 common units of Rentech Nitrogen. This was valued at $20 million based on the 30-day volume-weighted average price of the common units prior to signing the acquisition agreement.

      RNF expects that this new asset will be accretive to cash available for distribution per unit beginning in 2013. The company also believes that the Pasadena facility will generate approximately $20 million in operating income, and approximately $25 million in EBITDA in 2013. On top of that, RNF will also initiate the first planned organic growth project at the Pasadena plant to further increase the cash flow. RNF will begin work in 2013, and the desired results will increase the ammonium sulfate capacity by 20%. That additional production should contribute to cash distributions in the second half of 2014.

      Other possible ideas being analyzed by RNF involve the installation of steam turbines to produce electrical power. Currently steam is being vented from the plant. If it could be captured is could prove to be a real cost savings for the company. The excess remaining power could then be exported and sold in the deregulated Texas market as another source of income. This type of planning shows some out of the box thinking, which is what business entities need in this current economic environment.

      During the three months ended September 30, 2012, RNF generated operating income of $29.2 million. This is a large increase compared with the $10.4 million figure that was generated in the comparable period in the prior year. This generated a net income of $28.8 for the three months ended September 30, 2012. This compares with net income of $3.3 million for the comparable period last year.

      As good as these figures sound, there are some factors that explain the increases. The surge in revenue was primarily due to increased sales volume and the timing of the shipments. For the three months ended September 30, 2011, the timing of product shipments was what made the difference. In 2011 there were fewer tons of products available for sale, and RNF secured a larger percentage of sales for delivery in the fourth quarter of 2011. In 2012 the dry weather during the second quarter of 2012 reduced sales volume. The result was that these additional products became available for delivery in the third quarter of 2012. The final outcome was that larger than expected sales figures were recorded on the third quarter's financial statements for 2012.

      A better measure might be provided by the nine-month financial figures. Revenue for the nine months ended September 30, 2012, was $169.2 million, compared with $136.9 million for the comparable period in the prior year. The nine months ending September 30, 2012, generated net income of $89.4 million. This compares with net income of $20.6 million for the comparable period last year.

      One final positive driver for this company revolves around the recent drought conditions experienced last year in the United States. The drought has reduced projected yields and increased corn pricing in the market. The impact of the drought will likely result in significant acres being planted next year. Low inventories should drive corn pricing through the year and support strong fertilizer demand.

      • 2 Replies to rlp2451
      • I don't think RNF has anything to worry about from experimental technology that might help a few local farmers.

      • The longer term problem with natural gas fertilizer plants is that they are simple to build. Logically North Dakota with the gas flaring could build one with no cost feedstock cost for many years.

        No barrier to entry except for all the Obama uncertainty in our economy causing a capital strike.

        So perhaps this company like Terra Nitrogen can continue for the next four years to make what economists label excess profits. The capital investment Obama has scared away means American farmers are still paying oil prices for fertilizer as that is where the industries marginal capacity is.

        RLP is correct about the massive need for fertilizer corn requires. Good for fertilizer companies terrible for the environment. All so that wealth or production can be destroyed for corn ethanol corruption.

    • BUT,

      New things on the way for this year (which was already posted here before).

      "Beowulf Energy LLC announced it has acquired the rights to N-Flex distributed ammonia technology — a process that converts low-cost natural gas or stranded electrical power to high-value nitrogen products. Production of anhydrous ammonia fertilizer can be produced at the point of demand.

      Ammonia production was commercialized 99 years ago and until now has focused on developing larger mega plants in gas rich nations like Trinidad, Qatar and Saudi Arabia. The U.S. has become a major ammonia importer and now faces shortages after 40 percent of U.S. production was dismantled during the past decade as U.S. natural gas prices spiked.

      N-Flex’s small-scale distributed ammonia production is positioned to succeed under the new conditions of low-cost natural gas, high-price ammonia and extreme logistics challenges for the transport of ammonia to the farmers that use over 90 percent of the supply.

      The North Dakota Industrial Commission recently approved a $1 million grant to N-Flex to deploy its nimble and highly efficient mobile units to convert North Dakota’s flared gas into ammonia fertilizer. North Dakota’s oil boom has outpaced the infrastructure needed to capture associated gas causing over 30 percent of the state’s energy-rich gas to be flared.

      Simultaneously, farmers in North Dakota and across the U.S. are facing ammonia shortages and paying record levels for imported ammonia. North Dakota Department of Mineral Resources Director Lynn Helms stated that the N-Flex technology is a win for everyone, describing it as an “incredible synergy between North Dakota’s two largest industries, agriculture and oil.”

      The N-Flex technology was developed on an exclusive basis with Ammonia Casale and Proton Ventures, and Beowulf has the exclusive rights to deploy these small scale units in North America. “Beowulf recognizes the importance of distributed ammonia production and sees N-Flex’s approach as the leading technology to convert gas to liquids to benefit both energy and agricultural markets, said Paul Prager, founder and CEO of Beowulf Energy.

      “We are thrilled to expand our vision to utilize the independence created by domestic shale oil production to bring food security back to the U.S. where we currently import over 70 percent of the fertilizer needed to feed our country,” said Neil Cohn, founder of N-Flex. Cohn will join Beowulf to continue developing the distributed ammonia business.

      Although North Dakota natural gas is referenced in this announcement, Cohn also noted the availability of low-cost natural gas nationally, which makes an N-Flex small-scale ammonia production facility appropriate for many ag retailers to contract for construction."

 
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