When using West north California shipment ( 1.74 for example), Then use Chicago SPOT price ( say $$1.51) , not CME. Then you will notice the thin delta in current ship prices.
CME is what it is : a look into the future - may or may not be cash in the producer's pocket.
I got Jan at $1.30, Feb $1.40, March $1.45ish for ethanol (Midwest avg).
Add about 20c for west
Kelly I agree with the West coast WDG price cover somewhat the increase cost of corn basis.
However, in past charts, ethanol price needed to be 20 to 40c above CME just to cover 'west coast cost spread(may be higher salary, smaller plants...').
Thie 2nd quarter will have more corn oil extraction. Good.
buit apart from this.margins will much lower... I even heard one exec use the term 'negative', another said plantsrunning at breakeven. So bad 1Q news out first, before 2Q Averages kick in.
Kelly good table,
Except that Corn Cost basis for PEIX is say $1.10 to $1.25 per bushel...
Play with a range... and one can see that 1Q was VERY VERY difficult...
with CME ethanol as low as the $1.30ish per gallon ( 1.45 -$1.50 out west ?)
Again play with the range to see how 1Q was
Yes, 2Q is in the $1.65 -1.75 Range for ethanol out west
and Corn CME is $3.80ish plus $1.10 to - $1.20 Basis.
The Corn basis outwest of $11.1 to $1.20 PERCENTAGE WISE
is a killer when compared to Corn at $5.00ot $6.00.
When Corn is up so is DDG. So the DGG revenue covers better the cost of Basis.
I do not know.... I see closer to 10c or below.
Again, just math
After the merger, AVRW stockholders will finally have a market to sell shares into.
They will not 100% of the shares. At least some of it will go out to market as covered shorts.
Due to dollar value to real, ethanol price in Brazil ($1.60ish) can now challenge some of US based sales.First impact local sales when RINs value are considered,,, and later on challenge some export sales.
New ball game when dollar further appreciates.
Watching EIA stats for evidence: Inventory build last week seem to suggest some regional distribution is waiting for Imports?
This time of the year, warm weather permits splash-and-dash(mixing) rather than refinery blending. Could be South/Florida. And or Spot premium value in the west+rins can pull some imports from Brazil.
Dicey for prices with inventory being high.
Time to look back at 1Q and peek ahead.
Where are we?
o Industry in Good cash position (but spending ahead to acquire midwest capacity( for PEIX)
o Industry Inventory HIGH...
o As of this week, REX gave an update: plants are running near breakeven and for some at a small lost
o Spot prices no longer at a premium
o Gasoline prices low but ethanol high stock inventory sells at discount to RBOB.
o 1Q might be a wash in earnings 5-10c per gallon.
o 2Q corn still around upper 3.70/ bushel, ethanol margins in the teens per gallon
Stock price adjustment not done since Aventine owners might sell a few shares after merger.
Look to Summer for next bump.
Along the following lines:
1. revenue higher than Street estimates. Why? Spot ethanol prices in Nov and Dec higher than CME(per REX CC today). So Gevo should also benefit.
2. ISO had a 75,000 gallon month in Dec ( per Gruber...)
3. They cut expenses ( Gruber taking shares...) and restructure R&D ( end of reserach)
New News along these lines
o PRAJ MOU - lower cost for expanding Laverne ISO infrastructure.
o Switch to ISO from ethanol, may be 1 train per quarter?
o working on more Licenses
o Outlook for 100K/month ISO runrate!!!!
You miss the call to sell at $24?
I just explained how I saw the cash going out rather than stay in the company!
Look at the final balance sheet, ALL of the cash generated went out the door.
! ALL of cash LEFT ( after capex) on the books are from issued common shares.
Funny, debt restructured was lowered by HALF A PERCENT... my guess from 13.5% to 13% AND kept longer!!! SO when I see any debt at 13% Interest, it is 2X Debt at 6%, and 3X debt at 4%.
My new sentiment is based on Aventine risk in a market where extra cheap corn will keep everyone running and Industry Inventory is already high. Unlike last year, everyone can step up production in peak summer season. So running down this inventory might close the door on Aventine stepping up production at a profit. By the way, Cash flow from flow or DRAW from Aventine will hit PEIX kitty. So what looks like sufficient now for PEIX might become thin ice for a larger company.This is iffy until summer
Yeap, I made that call since they were using ALL the cash generated to buyback 'debt' and issuing diluted shares in the process!!! Had they held the cash back for 6 months, they could have walked to a bank for a commercial loan or come to market with Low interest bonds. But only then did I realize 100% of their cash flow was limited to 'plant owners', and not to the shareholders !
Holding at $23 still?
Water under the bridge
o 2015 is a new year. Aventine is the new load to bear!
o PEIX common shares and not cash from "plant owners" at play
4Q is last of EXCELLENT operating quarters. Pluses and Minuses
+ Volume production with plant running above 100% and yield of 2.8 gallons per bushel
- Basis at $1.35 higher than 3Q due to high train traffic during harvest time. Why was old-corn not in store for 4Q?
- WDG price was low
What is ahead for 1Q15?
+ Basis is now around $1/bushel (35c less than 4Q). So call it less cost of 10-12c per gallon
- But average ETHANOLwest cost price is $160-1.70 per gallon ( range so far). This 50-40C LESS than 4Q $2.15(avg). So corn basis does not make up for ethanol price drop
+ / - By-product price (WDG) higher than 4Q but less in 1Q15 than 1Q14
- extra Corn oil has not yet kicked in for 1Q15
-- SGA Plus Interest cost about $5M or 21c/gallon @45m gallon production ;
BIG hurdle to Generate Cash above COGS
- Production at 90% generate lower margins to cover fixed cost. Margin is in WDG. Low run rate genrates less cash.
- Negative earnings -- say -10c/share
What is ahead for later in 2015?
+ extra corn oil
+ Tax rate of 35-40% kicks-in
+ Cash position Good !!!
Why is Aventine above a "-" (mInus)
- Overpaid above market price per gallon, when considering Stock and Debt.
- With West coast ethanol premium at 20c ( and not 30-40c), arbitrage will be limited
- Aventine will be a flex Export engine, but not lower cost ( due to high interest debt)
- Dliuted common shares will come to market - Aventine owners cashing out.
There is Conv debt on their books to be replaced by newly issued shares. When GPRE say that they will be 'debt free', they have always said that the debt will be paid with shares.
Big plant out, ' Significant mechanical faliure'.
Impacts fuel and animal feed.
Full impact starting this week,partial hit last week..
Feb 9 (Reuters) - Cargill Inc on Monday said it was suspending shipments and deliveries at its corn wet mill in Fort Dodge, Iowa, due to a "significant mechanical failure" on Friday.
"The local team is in the process of assessing the damage to the equipment. As a result, we will be immediately suspending inbound and outbound deliveries," the company said in a note on its website.
The company purchased the mill from Tate & Lyle PLC in 2011 and the plant can consume 150,000 bushels of corn daily, churning out ethanol, dextrose and animal feed.
A company spokesman did not immediately respond to a request for comment.
Yes, this is a good number after the dip in October.
VLO Net profit margin is 46cents after 37cents operating cost which includes 4cents depreciation.
;Assuming VLO gross 87c /gallon and 47c cost ( inlc 14c depreciation ) for PEIX, then they would net 40c per gallon .
times 50m gallons = $20M; Minus $4m corporate = $16M.
$16M over 25m shares = 64cents
Multiple by a 'round factor of 4' to see that there is a margin to export to Brazil.
Brazilian ethanol prices out of plant doors.
Weekly Average Price in cash* - FUEL ETHANOL
Date Anhydrous US$/liter Hydrous US$/liter
01/23/2015 0.5618 0.5223
01/16/2015 0.5517 0.4862
01/09/2015 0.5304 0.4775
01/02/2015 0.5351 0.4771
12/26/2014 0.5360 0.4770
R&D is one step, Licensing is a second step, Building a new plant or extension to an existing plant is a 3rd step, Volume Contract is a fourth step.
Dollar investments varies depending on what the step is.
Old cash burn rate as stated in Jan 20th suggest that they used $8-8.75M out of the $14M (3Q). SO there is $6M in the kitty If there was No $ Income from any 4Q contract/special sales...
o Production rate 979K barrels per day, up 1K from last week. Cumulative rate for 4week at 977Kbpd which 9.7% year-to-year
o Refiner Demand 837K up 15Kbpd from last week. This leaves 142Kbpd or 934K Refiner demand. Now see below.
o Total Inventory at 20.4m up 200K from 20.2M last week. Since Only 200K went into Inventory, EXPORT
must have take 734,000 Barrels in one week ( 934K extra production minus 200K = 734K; Times 42= 30.8Million Gallons)
Inventory Status Comments:
Gasoline Refiner Total demand UP 6% ( economy is humming) while Ethanol Mix is 4.17%!!!
East PAD added 400K ... 2014 was a meager storage level due to drought; 2015 still below 2013 level by 400K. So given the high level of gasoline refiner needs and Winter, East Pad OK.
Midwest added 200K at 7.1M and is 600K above 2013 level. Midwest getting ready for more export?
Gulf down down 200K at 3.8M sill up from 2013 level 3.2M
West coast at 2.3M way below 2.9M level of 2013. West coast is still tight.
I just read the Jan 20th Status UPDATE. So wanted to check back here on 4Q expectations.
1. In prior statement, GEVO stated that they reached plant level EBIT in Nov, with 50K iso production.
2. Now they stated that December ended with rate of 75,000-100,000.
3. Have enough in the tank to keep shipping to existing customers but MAY SWITCH to 4 fermenters running ethanol.
4. CREATED a path fromethanol to hydrocarbons. this could lead an ethanol producer to buy
out GEVO ( get a plant and all the technology!!!)
They cut R&D headcount (as Predicted) by $3m/quarter,
but in the process also gave cash burn rate of $1.50 -$1.75M/month....
Given 4Q numbers, this might take them to June.
So a Licensing Contract is needed to shore up cash. Or a take-over offer from an ethanol producer.