Friday, January 30, 2015 10:55:15 PM
I think we worked out, based on the operating costs sheet that was prepared and posted on this board sometime around a year ago, that PEIX's operating costs were around $0.50-0.55/gallon at that time. I believe natural gas has come down some since then. Valero would also probably incur lower labor costs, given the location of their plants.
The value of the ethanol would be less, but their corn costs would be less as well (a $1.28 basis works out to about $0.315/gallon net after co-products/gallon are factored in).
On the positive side, NK stated in the last CC that ethanol transportation costs from Chicago to the West Coast were $0.20/gallon. Looking at Nebraska, the distance appears to be around 25% less, so using a transportation cost of $0.15/gal would seem reasonable. If all other Kinergy costs ranged around $0.05/gallon, that would imply a net cost around $0.20/gal for Kinergy on the ethanol they import.
I have the one week delayed differential for Q4 pegged around $0.28/gallon for Q4 (that's pricing the Nebraska buy price a week earlier than the Cal sell price). That would suggest an operating profit of around 8 cents/gallon in Q4 on the ethanol they import from Nebraska for resale (assuming they receive the Cal Terminal price for that ethanol). Now if only we knew how much ethanol that was . . .
Of course they may receive better prices at some locations. As well, any ethanol shipped to a state where the distance is less is also going to reduce costs. So, Kinergy should produce positive income numbers for Q4. If we assume 50M gallons for the resale market, I don't think a net revenue in the $4M range is out of line. That of course excludes the revenue generated by handling charges for the portion they deliver on contract. Lets call that another $1M for argument's sake.
I have a Q4 margin of $0.875 for PEIX ethanol production. If $0.55 for operating costs is reasonably close, that would produce net operating income in the range of $0.32/gallon. Assuming reduced production in the same range as Q3, that would suggest somewhere around $14.4M.
Using those numbers, that would appear to produce a total operating income in the range of $19.4M for Q4.
Using the same number as Q3 (rounded to the nearest $0.1M):
Selling, general and administrative expenses of $4.4M
Interest expenses of $1.1M
Other expenses of $0.2
Warrant costs of $1M (I know, but they've bitten us in the butt every quarter)
That brings it to $12.7M
Taxes (40%) of $5.1M
Payment to non-controlling interests of $0.7M
Preferred stock dividends of $0.3M
Should leave around $6.6M for 25M+ shares. Ive attempted to use conservative numbers where possible. Of course, this doesn't include any unknown costs they may have incurred. Keep in mind as well that the estimate for Kinergy is, at best, an educated guess. In past three quarter, PEIX has also beaten the basis cost and managed a selling price slightly higher than the West Coast terminal price. NK also mentioned during the Q3 CC that the rail basis had climbed as high as $1.50 at times during the fall.
As for Q1 2015 to date:
Based on CBOT + Basis, I have the average margin to date @ $0.320
Based on the Cal corn price, it works out to $0.357
I have the one week delayed differential between Nebraska and Cal ethanol prices @ an average of $0.139 for the quarter to date.
Without factoring in a delay, the straight across comparison is $0.225
On the good news side of that information, that differential has improved dramatically the past 2 weeks.
If I get a chance, 'll publish the full Q1 2015 spreadsheet at some point this weekend. First though need to load a program on to my new 'puter.
Hey Value, on a slightly different topic, did you happen to observe what happened with COS.TO today? They released guidance for 2015. It came somewhat as a surprise that as a major oil sands producer, they expect to be profitable in 2015. In large part that's due to a substantially lower Canadian dollar.
While it may not at first appear to carry any significance for the ethanol industry, on reflection it does. While some North American producers are hard up against it, some are managing to do more than just survive in the current oil climate. I think the general assumption out there (myself included) was that lost production due to unprofitability will push oil back up sooner than later. While I'm sure that will happen, it may not be as quick as some would like to see. That, in turn, will continue to impose negative price pressure on ethanol. It's not the only factor, but it can't be ignored.
Here's a link to their earnings release
Today's chart:
52 Week chart:
I bought a few, then sold Feb $8 calls @$0.65 against my position. I guess I'll know next week whether it was a wise move.
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