Go back in after Common Shares count 20-21million AND fundamentals (margins) are positive.
Corn could head up up and up ( planting delays due to frozen ground, Ukraine among new roads ahead)...
Ethanol prices will fluctuate with spring, new plants coming online, Imports...
So fundamentals are not a given, and the dilution is the path taken by PEIX.
Hopefully full dilution will be done in time for fundamentals to have a wide window of 'normal profits'
Until then, ongs are 'birds on a fence'
For above, do a like for like listing:
) What is your assumed BASIS with transportation cost being so high?
) If they are buying ethanol at spot vlaue to resell in Idaho, is Chicago SPOT in 1Q as cheap as 4Q? Could their Basis be $2
Now envision a new scenario
Do the same MATH
If they pre-sold 1Q anticipated production volume and April as well( soft crush) at the then prevailing market rates in Feb before the earnings CC. This is to ensure that they have a runway to do Madera restart ( pre-sell, get the cash in the coffers and then announce; doing it the rverse way is too, too risky : announce, go get cash and then sell).
This tack enable them to get the cash upfront, give the Cash to the debt holders and make a splash statement at 4Q earnings.
Just for guess work, assume that they did this by Feb15...
So all this SPOT math is interesting but not applicable.
( just like when one is analyzing GPRE results).
And after Feb 21, Wham, BASIS blew up East, Gulf, West coast.
Trains going to and coming from EAST pad to/from Chicago are froooozzzzennn.
In this scenario(pre-sell, soft crush), PEIX would have gotten hit with
1) Transportation Cost ( which cannot be locked)
2) With Decreased LOC( reduced debt line) ,
3) corn cost increase for 2Q will require Balance sheet to be expanded.back again
All along, the warrants are waiting to take the loot (50% Dilution)!
a) You finally recognize Brazil is the taker of fuel ( not China)
b) this is the first leg of two steps dance.
Honey sweet RINs will attract incoming bees...
Brazil cane harvest creates gushers of fuel.
So the drawdown on inventory now will be refilled with a combination of US high run rate
and some imports(called swaps)..
Wacth to not be the bagholder when the competition heats up."
I hope everyone realizes: transporation permium out West is a horse ridden by PEIX... but once the premium is erased,with a stable cost ( albeit higher at $5 corn), PEIX will still be a little cash positive ( but a lot less).
This stable state will push the warrants holder to cash in ther chips.
Thus, the 'dilution' events.
It is better than being BK, but not as good as if the CASH on hand was used to re-structure the debt properly. This bad course was set in 1Q13 with Notes A and B....and the warrants.
Go back in after Stock Issued reach 20-21Million Shares and fundamentals are solid. Otherwise, birds sitting on a fence!
I posted my inventory comments on GPRE board. where it is a sane board. I thought you would know by now where to find it.
West PAD up 100K
Midwest down 400K but still hight at 6.5MILLION barrels ( backflush if other pads stay low)
Industry Over produced by 165K barrels
Export (estimated) strong took down total Industry inventory down by 700K
Transporation Premium is regardless of inventory -- it is logistics.
Once rail cars are freed up, then the artificial SPOT price will go down.
AND anyone buyin high, using INdex cost, to deliver at high SPOT prices
( like Idaho volume) will get a hick-up...
Focus on April!!! Look ahead, not back!.
"U.S. surprises with 5 million barrel from crude oil reserve sale". Headline.
Now how would this impact ethanol price premium from Frozenomics?
Cost is high due to compensate for the train turnaround costs... delays...
and the heavy demand from the Balkans... COmbined... not just one factor.
Now add some crude fom Reserve, using Pipeline... and poof, the system gets some relief.
Railcars are freed up for a few days or a week or 2.
Do no count your eggs before they hatch!
1. this is called a throw away quarter; first they had the repair work to do and second the minor fire ( insured) caused the whole plant to shut down, while prices had come down... so they cleaned up house
2. they shitfted all remaining deliveries to 1Q14... since revenue is only recognized at shipment, this is good for 1Q
3. restarted the units in January... production is at MAX and so is Addtional STORAGE for for additional production targeted for sell in the spring. Time is money! In the past, the winter months had time but not storage to keep the fert on the shelf until spring.
Last and more important, Prices came back in 1Q and keep inching up! So 4Q bathtub was averted( a small coup, but kudos to management).
While 1Q production is humming, Even IF the bulk spring shipment shifts into April, the 4Q13 load shifted into 1Q will form the base for CASH generation in 1Q.
Traders usually have problem with revenue shifts, volume production, mixed with outtages and contract prices SHITFING all at once!!!
Look ahead , not back!
Pricing action suggests also Inventory data, as of Sunday night, will show a back-flush of liquid, in the mid-west.
When corn is plentifull and plants are running, with demand in high driving Centers( east and sout-east) took a hit due to frozen days and train movement is difficult for weeks, inventory build-up is expected.
But more over, not all of this is pent-up demand. Some of that demand is perishable. Let me explain: say you did not got to work for 4-5days in 2-3 of these snow storms and the family did not go out shopping / eat for 2-3 week-ends. You may work longer each time you go to work, but not go twice just to make-up. You may go shop once and buy more but not go shop twice as often. Driving will go up but not double when Frozenomics is in a thaw state.
Watch for ethanol inventotry to back-up, prices to dive. Back to early January Level?
A case of back-flush?. ( a key indicator will be an Inventoy build-up in the mid-west, made accute by a few plants coming online from old, old, plants also going online to take advantage of Summer demand). As inventory goes to 18mil,19M...we will label the phase B18,B19 for Back-flush18-19... until October. Just oe measure how long it takes to stabilize this 2 months of Frozenomics impact on the ethanol network.
Do not count the chickens before they hatch!.
It is the sudden shift cathing a firm with inventory on-board a train, having paid dearly for the transport, and by the time the load arrives, wham prices are lower.
today's price action:
Prompt delivered ethanol to Calif. sunk 35.0 cents to a $2.80 to $2.85 per gallon bid/ask while prompt ethanol in Ariz. was offered at $2.95 gallon, down 27.5 cents. Argo ethanol traded early at $2.32 gallon, up 1.0 cents.
Jus keeping track of the prices... specially when the farmers are buying.
Mar 11 report
Tue Mar 11, 2014 01:41 PM CDT
OMAHA (DTN) -- Retail fertilizer prices were still on the rise the first week of March, according to fertilizer retailers surveyed by DTN. All eight of the major fertilizers had higher prices compared to a month earlier for the third straight week.
Urea was 6% higher the first week of March compared to a month ago, with an average price of $531 per ton. (DTN chart)
Leading the way higher once again are urea and DAP. Both fertilizers were 6% higher compared to a month previous. Urea has an average price of $531 per ton while DAP was at $553 per ton.
Check ethanolproducer magazine and GPRE board.
Note timely release of information!!!
1small plant out of 10 total plants.
Probably can handle the volume, but cost to buy or transporation will be a minus
Risk if one goes to sleep and wakes up with one plant down.
Reported at 4:40 on March 10
Check ethanolproducer magazine.
Dryer unit caught fire.
Fire was extenguished.
60mil gal is 6% of capacity.
Heading to ramping up demand for Spring. But Industry has the capacity to compensate.
Running other plants harder will balance out 2q production.
Transporation costs might be a negative.
Notice, increase in export is to Brazil, not China!
To Brazil or China, PEIX is not the gate to ship out...PEIX is one of tre the higher cost center among the producers).
This data confirms the Swap game is on.
First leg of the swap in inventory.: ship to Brazil when corn harvest is at its peek.
Why pay to stor the corn? Use it as fast as possible , through Brazilian inter harvest when all the mills are shut down, end of fall going into winter ( and carnival by the way).
Lay out orders to import more fuel for later month... by the way corn in Bins can last years. NO need to rush t crush.
Return leg: crank up these cane cutter machiines' shew up the fields as fast as possible (no longer human with machettees). Thenany cane cut needs to be squeezed for its juice with 2-3 days. This creates a flood of fuel. Ship to market + RINs. Save on storage.
USDA, as part of WASDE report, projects 2013/14
as high and SAME area planted as 2012/13
Year Planted Harvested
12/13 109.8 96.6m acres
13/14 109.9 98.2m acres
From a fertilizer point of interest : PLANTED acres is greaaat
After 1 hour of trade. AMTX has sold its plant!
40CENTS NO CHANGE, Volume 3,000 shares.
Sure, Engineering GENIUS!
Even NK talks of 2-3% for Cellulosic bump.
20%? Would be like gold. May be it is gold.
Specially if they paid with 5.1M warrants. It is GOLD!
I will go dig dirt instead.
Glad to hear of the father and son relationship.
Sorry to learn of the timing for "jumping in".
Having followed the stock closely, my surprise was reading the 3Q13 filings where the Warrrants were Clearly layed out. Low and Behold, not only there was Notes A and Band ALL the Shareholder votes, but here layed out was the time delayed instruments: Warrants.
But this is middle of November. The Industry is showing good promises, low corn, good prodcution volume...
Warrants strike prices at $7.50 or so and the stock is about half.
And then MORE common shares ( 91% ownership level)... And then in January ( conv debt paid - no specific on How; cash, debt)
As of Friday 03-07-2013, a new SEC fling, Signed by an AUDITING firm reviewing PEIX filings, to qualify their assessment of the firm. Friday 3/7/13 filing points to a PAST document, specifying that " proceeds will NOT flow to PEIX".
If cash does not flow to PEIX , then there is no tax.
This is probably for TAX purposes... making the exchange of like-assets and is not subject to tax.
Since this Specifications of the Instruments is being made after the facts, this could be
a disputed IRS treatment.
Wihout last Friday night filing, one would think that the warrants holders could have taken the shares and HOLD or SELL in he public market. But instead, it seems like the value of
the PEIX shares will go toward satisfying the debt of Aemetis plan t debt was long issued and used up ]. BY pumping and pre-selling the PEIX shares, the CASH is already in, the distribution of PEIX the shares is done. Dilution is done.
SEC might taket a look at this round trip too.
So IRS and SEC might have to take a look from two different aspects
Someone once told me :
" It s not Pump and Dump to look for. It is the Dump that hurts you.'
I said : How so?
He said: " when falling from a building, it feels like flying. Feels good.
It is the sudden stop that hurts. IN STOCKS, Do no look for the sudden stop,
beware of the feeling WHEN flying"