Yeap, interest rates are to stay low for a long time. The window for PEIX to write bonds and to restructure its debt ( from Buying Aventine) will stay open wider and longer. The RATES to be paid by PEIX will look SWEEEET to the banks vs alternatives.
See article on Vietnam buying DDG to ffed the Hogs to be bought by China!
The other isde of the coin, export is taking ethanol fuel away in volume.
Corn oil used for buifuel mix
Industry running on all cylinders
Ok, ok, ok.... day after MARKET reaction... all stocks move one way to finance the bets going wild. Need for cash cause all stokcs to be put on the block to raise cash. But what next for PEIX?
PEIX next BIG driver is the WINDOW TO RESTRUICTURE the debt that it holds in order to LOWER its cost, raise earnings and P/E.
How does BREXIT HELP or HURT PEIX specifically?
o with interest rates NOW staying lower for longer, PEIX refinancing package LOOKS BETTER
o It happens just when Demand is high ( summer), Industry has production under control
o Export has the potential to INCREASE, thus keep price higher. Why will export increase? Sugarcane is suffering from dry weather in Brazil, keeping US export prospect up.
o EU took down Ethanol barrier against US producers.
From 1Q conference call on May 12:
" Following the restart of isobutanol production in March, Gevo has produced approximately 50 thousand gallons of isobutanol. In addition, Gevo’s iDGsTM, or the distiller grains produced as part of the isobutanol process, are being blended with the distiller grains coming from the ethanol side of the plant, and being sold on par with traditional ethanol distiller grains."
Plant operations in 1Q was at a lost, so was the industry.
2Q slightly better
But company is burning cash at a rate of $2.5M+
No cash to expand,
Not enough Licensing business to grow.
Converting Debt to equity dilute shares
Only way to keep R&D going is to issue new shares, diluting further.
Need a stronger partner to adopt cost of ISO.
Sentiment: Strong Sell
The nominal price per gallon heavily depends on the cost of the debt assumed with the cash value.
The higher the interest rate being assumed, higher cost per gallon paid.
For PEIX, no one will buy PEIX with this high a debt load at high rate.
You are looking back AGAIN... when prices of ethanol were LOWER than gasoline.
Check prices today and look forward!
Back in January, with inventpry ramping up, and oil going down, I called 1Q - going down ! Surprise, I was right/ 2Q is tight but will break even with DDG saving the day, corn is holding dow crush margin to be FLAT!
Volume production is good. But export is done way ahead of daily prices... so low 1Q margins will impact 2Q profits.
Industry will get by. but no run away gains!
Corn price trends?
If you were a farmer, had a probable dry period ahead (LaNina), would you sell your inventory cheap?
Whoever does not have the cash to secure corn supply now is risking a crunch later:
corn up, oil steady to down...
Good thing DDGS is also softening the blow... but is it enough if corn explodes? For expensive DDGS, there is natural grazing, just in the middle of crunch.
Yeap 10cents. was it 14c before when LCFS was 124? Just to keep track here.
It is a true event for Alaska and for Gevo.. but financially it is all in the cost, revenues...
Does it say it is a 'steady volume'?
Or just a test of an expensive fuel for FUTURE use?
This is a LONG TERM developmen with a lot of CASH needed to get to production level volume.
Sorry, if I interreted the news story of the Technology as old news.
Just to record key data, Jul corn $4.28ish, ethanol 1.69ish, Oil $51.03
Productionfrom 960Kbod to 1,06MILLION bpd = 46kbpd! Industry running on akk Cylinders!
And Inventory down: 20.2m from 20.8 down .5m...
BUT local refiner demand DOWbN to 904kbpd from 922kbpd... down 18K bpd.
With Demand Down (18k), Production UP(46K), and say PAD Inventory down say 500K over 7 days = (70K per day)...
EITHER plants INVENTORY not included in PAD Data ( bad, bad, bad restart if this is the case... next week Inventory will be up 500k).IIn this case, next week data will show a big bump in invenotry.
OR Export took it ALL ( in whicj case these export volumes were committed at very low 1Q prices).
Both scenarios above : Goof for corn, not good for margins.
Watch this space above with all plants running at 1M barrels per day!
Ten Day Check ( 5-28 to 6/8) Crush lost 5 cents approx, while DDG picked up from 125 to 140. BUT, corn Kept going up to $4.30 ish.... This is frm the $3.60 4 weeks ago.
There goes 2Q targets... positive from 1Q loss, but not breaking out. And Summer corn ( La Nina) will keep this trend flat.... Corn will not get out of the bin with farmers expecting to cash in IF....
Feb,Mar,April ... period 1Q16 FORECAST too high !
Top line equal to DEC,JAN, FEB top line --- not likely. DDG was a bummer as well as ethanol.
Bottom line of $1.01 per share implies $7M earnings... on a 50+ million gallons, this is 13-14cents net bottom per gallon. Check the rest of industry for Jan-March results - lost all over the place ....
So with 1Q such a big miss... all of 2016 is way at risk... specially if they spend cash to plan for a new plant to be built.
Sell here at $59
Last check,..LCFS did not hold 124 level ( which is the level I recall at CC time)...
LCFS lost about 15 point ( 124 to 109). Still good, but headed down.
This could be as a result of the production level locally.
Ethanol prices adjusted upward with CORN... but not enough to keep pace.
Corn is not letting go! SPECIALLY FOR west coast basis, this is hardknock on margin.
At least, some shorts were taken out. But this is not yet firm footing, if your corn buy/usage is day-to-day or week-to-week. PEIX and AMRS has a thougher June ahead... GPRE and REX better positioned with corn in stock or cheaper price.
(sell here to buy later - if No LaNina)