I can't reply to private messages. I only have the basic membership Sorry.
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Roth Capital initiates coverage with $16.00 price target
Roth Capital Initiates Pacific Ethanol At Buy
What I found really interesting about this deal is the existing warrant situation. There are a bucketload of Aventine warrants, all of which expire in March 2015. My understanding is that they are also automatically convertable on a change of ownership, with unexercised warrants expiring.
So, if the deal doesn't close until after March, the warrants expire worthless and the few outstanding Aventine shares will be worth a bucketload. As I understand it, the original exercise price was also quite high on those warrants (but who knows what may have transpired in the 2+ years that they've been exempt from reporting).
Of course with not being able to see any filings since 2012, who knows how many stock options are hanging around out there as well.
http://www.sec.gov/Archives/edgar/data/1285043/000110465912065657/a12-22099_1ex10d4.htm
The most important statement in that filing would appear to be the following . . .
The current and noncurrent components of our deferred tax balances are generally based on the balance sheet classification of the asset or liability creating the temporary difference. If the deferred tax asset or liability is not based on a component of a balance of our balance sheet, such as our state net operating loss (“NOL”) carryforwards, the classification is presented based on the expected reversal date of the temporary difference. Our valuation allowance has been classified as current and noncurrent based on the percentages of current and noncurrent deferred tax assets to total deferred tax assets.
A debtor is not required to include gain on the discharge of debt in income if the debt discharge occurs in bankruptcy. However, IRC Section 108 requires that the debtor’s NOL, capital and credit carryovers first be reduced and then tax basis in assets be reduced. The Company expects to recognize approximately $52 million of cancellation of debt income resulting from the Plan related to the Company’s bankruptcy reorganization that will reduce available current year tax losses, capital loss carryforwards, and the tax basis in other assets. After consideration of this reduction, the Company expects to have no NOL carryforwards available to offset future federal taxable income.
However, there may well be NOL's that have accumulated since the restructuring . . .
Well if that's dead stock, someone paid $6.00 more for it today than it was worth yesterday. I have the last trade on my trading platform for AVRW @ $15.00, up from a close of $9.00 yesterday.
No wonder the market has no clue how to react to this :/
Stock, I think I mis-read the corn aspect. here is the link to corn purchasing on their website:
Corn purchasing
However, it appears that would be corn purchasing for their own plants. Still, this would appear to be a very strategic move for PEIX. Nebraska is not only the location where Kinergy has been purchasing ethanol, it's also the most likely location for purchasing corn destined for the California market. It would seem the ideal opportunity to reduce their costs, especially if the Nebraska plant has the storage capacity to stockpile shipments.
One thing's for sure, my spread sheet is about to become a little bigger. Now I need to track dealings in Illinois (I already started tracking Nebraska) at the beginning of Q4).
I don't see how to evaluate the deal without knowing more. Here's the Bloomgberg page for Aventine (shares are currently up 67%).
Aventine Renewable Energy Holdings Inc
Ok thanks. I was hoping to gain a little insight into their books.
The deal says PEIX will issue 17.5M shares. When I look up AVRW I see 167,000 outstanding shares and a market cap of $1.5M so there must be something more going on here. The deal must include the issuing of shares to the debt holders to retire the debt.
"Upon completion, existing Pacific Ethanol shareholders will own approximately 58% of the issued and outstanding shares of common stock of the combined entity"
That remaining 42% must include both the existing AVRW common shareholders and the holders of preferred shares or convertable debt (the debt holders). It that's the case, it would seem an excellent deal.
Stockrosen, where did you dig up financials on Aventine? This is the last info I can find.
http://www.bloomberg.com/article/2014-09-18/abmyJeYngCEg.html
This is quite interesting. PEIX gains 145M gallons of production in Nebraska. That's pretty strategic, considering that's where Kinergy buys their ethanol to market in the West. In addition, they acquire 160M gallons of production in Illinois.
As well, they gain a corn handling business that purchases directly from farmers.
Yes, they also completed a rebuild of one of their facilities. I did look at them back when Valero bought one of their plants. Going to take the market a while to digest this.
Yes, they also completed a rebuild of one of their facilities. I did look at them back when Valero bought one of their plants. Going to take the market a while to digest this.
Well I sure didn't see that one coming.
I suspect that will start to change significantly in the coming weeks. The image below captures the recent difference between the CBOT near futures price and the California terminal price for ethanol (note that it does not capture the actual cash price for any ethanol producers). BTW today isn't included because it looks like PFL will not publish their daily report today.
As you can see, there was an extended period of time where shipping ethanol to the West Coast was very lucrative. That has now changed. Assuming ethanol takes a week or more to be transported by rail, I suspect that sales to the West Coast markets have ceased being lucrative. Ethanol inventory gains that showed up last week were likely loaded and shipped beginning the week prior.
There are definitely advantages to keeping an ongoing price log with a market as volatile as ethanol. That's just a peek at what I've been logging. The image below shows the column headers I've set up for Q1 2015. All in all it takes me about 10 minutes a day to collect and enter the data. It's taken me a few quarters to figure out what has value and what doesn't, but I think I've pretty much got it nailed now (although I might add the daily Brazil price as well).
No idea, I don't track the margin for REX or GPRE. But then again, when was the last time you figured ANY stock price was actually grounded in reality?
I have the quarter to date @ $0.906 and last week's average came in at $0.600
This week's average could well be below $0.50 but it's still early. Yesterday's New York Harbour price for ethanol was over 30 cents higher than the California price. Sustained price pressure in the east like that won't take long to show up in the California price.
If you want the daily number, all you need to do is plug the numbers into the formula. I use the Cal terminal ethanol price provided by PFL (I average the bid/ask) and the cash corn price from barchart.
The PFL daily report usually comes out around an hour after the market close, but I expect there to be some missed daily reports around the holidays, just as there was around Thanksgiving.
I believe we saw institutional rebalancing. Normally occurs on the last day of the quarter, but with the holidays, a lot of fund managers will be off after today until the new year.
On my trading platform.
If you don't get level 1 quotes, you can click on "tools" on the IHub navigation bar, then select data tools > trades
That feed is delayed 15 minutes.
Wow. 898,241 closing trade.
Could the op ex manipulation be any more blatant? eom.
VWAP trades from the day, reported after the close. It's a common occurrence. The 4 digit decimal point is a dead giveaway every time.
http://www.investopedia.com/articles/trading/11/trading-with-vwap-mvwap.asp
Ethanol futures went up. Meanwhile, the California price for ethanol dropped substantially (12 cents). That's probably what the market reacted to.
Catkin, if you want real time spot prices, you have to subscribe to a service and they cost big bucks.
A far more accurate source than DTN is the PFL Biofuels Report. It provides the bid/ask for California on a daily basis.
As for crush margins, unless the variables that are being used to generate the number are provided, they're all rather meaningless. It matters what State it's based on, as well as whether it includes WDGS or DDGS and/or corn oil.
Lots of people like to quote the Neely number. It's great if you want the profit margin for a hypothetical ethanol plant in Iowa, that meets the profile that forms the basis for the Neely model. That includes a similar debt structure. As for it's application to a plant in California that buys and sells at entirely different prices and produces WDGS and corn oil as co-products, it's not such a great indicator.
That's why I look to the PEIX hypothetical formula for guidance. It's provided by PEIX, for PEIX operations.
One thing for sure, oil is going to be a wild ride for a while to come. Stories (loaded with rhetoric as well as facts) like this point to some of the volatility that can be expected beyond what OPEC does or doesn't do.
Oil Investors at Brink of Losing Trillions of Dollars in Assets. Gore: It's That Road Runner Moment
At some point the market will realize that not all energy stocks (including ethanol producers) are not oil.
A global view is what the World Agricultural Supply and Demand Estimates Report (WASDE) provides.
http://www.usda.gov/oce/commodity/wasde/
Page 12 of the Excel file provides a complete breakdown of the US corn situation. Pages 22-23 provide a breakdown of the world corn situation. The PDF file provides an overview discussion.
Here's the short form from the CME
That's up to each producer to provide. Whether they make it available is up to them. The basis for PEIX comes from PEIX. It's included in their 10-Q's as well as in some of their presentations.
The increaased usage is evidenced in the EIA reports. The 4 week average of total supplied gasoline is up 3.9% year over year from last year.
"Over the last four weeks, motor gasoline product supplied averaged 9.1 million barrels per day, up by 3.9% from the same period last year."
http://ir.eia.gov/wpsr/wpsrsummary.pdf
First, it's not my formula, it's PEIX's formula. Basis is the cost of shipping the corn by rail. It's assumed to be $1.28/bushel, but that does vary.
I'm wondering if this isn't a repeat set-up of the scenario we saw from September to November? No one wants to buy now because they all predict lower ethanol, so they drain their internal supplies, hoping to replenish at lower prices. Problem is, everyone then starts buying at once, at the same time that export demand surges again.
BTW I saw an earlier post questioning whether Brazil will again become a factor.
1 cubic meter of ethanol (Dec futures contract, settles the last day of the month) sold today on the Brazil market for $1,209 BR
$1,209 BR = $448.49 US
1 cubic meter = 264 gallons
$448.49/264 = $1.69/gal
January futures worked out to be $1.74 US/gal
Today's spot price was $1.99 (Anhydrous, quoted San Paulo)
That's before the cost of shipping.
Brazilian ethanol (quoted in Real/cubic meter)
http://www.datagro.com.br/english
Keep in mind that number is a gross number on goods bought and sold. It doesn't include plant operating costs. If you pay attention to the formula, you can look back on past quarters, plug in the numbers for those quarters, and see how the current margin for Q4 stacks up. Of course you'll also have to make some allowances for debt no longer carried, large chunks no longer being carved off for 3rd party ownership, etc.
There are variables that make the overall profitability for Q4 difficult to predict. At this point I still have Kinergy turning a slight profit for the quarter, but the last 2 weeks have kicked the stuffing out of what was until then by all appearances some very good numbers. I also see PEIX in the black overall. Compared to the PEIX of a year ago, I think they're very well positioned. However, the continuing pressure on corn prices isn't helping. This isn't going to be a record earnings quarter by any stretch of the imagination. At this point, I suspect it'll be a modest one. But no longer is it a company being crushed under a mountain of debt. It's a company positioned to ride out the ups and downs of the industry. From that perspective, if the market wants to continue to sell it down, that's just fine by me. I'll be waiting, and as it turns out, will have some significant funds to buy in a few more weeks.
lol he makes "Neeley Biofuels posted a net gain of 41 cents per gallon" sound like a bad thing. A year ago everyone would of been dancing in the isles to see that number.
I'm not trying to paint a rosy smile on a difficult situation, but Rick has been lamenting the blues for weeks now. You could probably cut and paste that and spare Eyore the trouble of writing anything for tomorrow.
Yes the weeks ahead are going to suck. Yes we'll probably see oil hit $40 before there's any bounce. Until then, neither the shale nor the oil sands producers will have the brains to pull back. Until producers pull back on producing, nothing is going to stop the downward motion. More to the point though, this is as much or more about politics and a war of submission as about supply and demand. It's not like the powers to be suddenly woke up one day and the world had changed overnight from supply meeting demand to supply exceeding demand. Russia is getting crushed. So too, Middle Eastern countries are getting set up for another Spring of Discontent when those in power find their bank accounts a little short and they can't buy internal peace from the masses.
Meanwhile, we're all just puppets on a string. The more hand-wringing they can produce, the better for them. Sell! Sell! Sell! They were miles ahead in setting the stage and shorting the plays, long before they raised the curtain on the latest act. So too, they'll have bought up everything they want before the next act in the Spring finds us waking up one day and being told that overnight we went from drowning in oil to not having enough for an oil change on your car.
PEIX margin was $0.739 today
PEIX quarter to date: $0.929
Ethanol: $2.10/$2.12
Corn: $4.085 + basis
Formula: Ethanol – (CBOT Corn + basis) x (1-Co product return)/2.74
eom.
One factor to keep in mind is that ethanol use is not federally mandated at 10%. If it were then the current kerfuffle over the RFS would be meaningless. Producers would be required to maintain a 10% blend at all times. Instead, they have to blend the mandated amount, whatever that turns out to be.
Another thing to keep in mind is that ethanol is not the only oxygenate that can be used. So, if the 2014 RFS is set at 13B gallons, once they reach that amount they are free to source other oxygenates if they are cheaper. One of those is MTBE. While it's use is banned by most US states, it is still in use around the world. Whether it can be supplied cheaper than ethanol is another factor for the export market.
Clearly Big Oil continues to be driven by current profit rather than potential future liabilities associated with it's continued use.
Methyl tert-butyl ether
Gasoline Octane Improvers/Oxygenates
First of all, PEIX does not sell DDGS (Dry Distillers Grains). PEIX sells WDGS (Wet Distillers Grains). That's an important distinction. The price for WDGS is less than for DDGS but the expense of drying the grains is not incurred. It's a major plank in the PEIX model. It's also important to note that PEIX does not sell their DDGS into the midwestern market, nor do they export. They sell to the immediate market near their plant locations.
PEIX provides guidance in their 10Q's on the expected revenue from the sales of WDGS and corn oil. It generally amounts to 30% of the delivered cost of corn. That's why the PEIX margin calculation discounts the price of delivered corn. If you take the time to review the latest PEIX presentation, you will find that formula.
Catkin, I will never try to persuade someone whether to buy or sell. For starters, I don't know where anyone bought in, their investment/trading strategy (including whether they sell options against their holdings or otherwise utilize a hedging strategy), or their tax situation. All of those are serious considerations.
I do know that selling from a profit position is always better than selling from a loss position. As the old saying goes, it's only a profit (loss) once you book it.
One thing for certain: PEIX is going to be volatile in the coming months. In all likelihood it should book a profit in Q4, but even in the short time frame since someone asked my take on what those profits might look like, things have changed. So too with Mr Lin's comments. They were brilliant when reflected upon against the time frame in which they were made (late September/early October). The more important question would be, how might those comments have changed if he was asked the same questions today. Which brings up the larger point: over what time frame are any observations valid? This industry is very capable of turning on a dime. Is it about to turn again? Who knows?
I do know that observations about the US gasoline market should not be transposed on the international market. For starters, US gasoline prices are not the norm. Gasoline costs more in pretty much every other industrialized country than it costs in the US. Sitting here in Canada, I'm only too aware of that fact, and I live in the major oil producing part of the country. Ethanol is still considerably cheaper than the retail price of gasoline. Like about a buck less (and that's adjusted to US dollars). And much like the US, gasoline in Canada is cheap compared to most industrialized countries.
So what? Historically the sum total of US ethanol exports are a mere drop in the bucket to the total production figures. What makes that interesting, however, is the fact that during the time of year when ethanol production typically tails off due to seasonal decreases in US consumption, it's doing something unheard of. It's running flat out. Unfortunately, the EIA doesn't see fit to keep us up to date on exports. Is the export market still there to support ongoing production? Given that we're not privileged, we won't even get to see the October export numbers until the end of December.
I do know this: something is driving the demand on corn futures, and it's not failed crops. In fact, the pattern is very similar to to last year, only last year the demand didn't hit until year end. Considering on average that 20% of the US corn crop goes to exports. According to the most recent WASDE report, there hasn't been and significant change to overall corn production or demand. If anything, there should be a glut.
The other 80% is consumed domestically. Here's a historical chart of that consumption by category:
So, who's using it? More importantly, who's driving the projected demand? Certainly some of the price pressure is being created by the cattle industry, but that doesn't (in my mind at least) offset what would historically be the seasonal production lows in the ethanol industry. Especially in a record harvest year. At best, I would expect it to remain steady. Instead, we've seen continued price pressure. The near futures price on October 1st was $3.21. Nov 1st it was $3.73. Dec 1st it was $3.75. As of Friday, it was $3.96.
I don't know the answer to the question of what's driving corn demand, but if it's ethanol, it's at least something to consider in relation to all the weight being given to gasoline prices.
So where is corn going to top out? The market seems to be defying the WASDE at present. Could it be due to rail problems?
I have to admit I got a little nervous the past day or so. The timing of the article on why Chen is so bullish on PEIX as well as the one on the Brazil situation is impeccable. Between the two of them, they confirm everything that everyone has been saying the past couple weeks on this board.
You mean train tracks? I suspect they would be high and dry as well. Railways tend to build to a level grade whenever possible, and as the plant is located on high ground, that would be the elevation they would build to.
I'm not seeing any current flood warnings for Stockton anyway. I looked because of PEIX's past history of anything that could possibly go wrong doing so.
Well on a completely different note, given the heavy rains hitting California and concerns over flooding, I thought I would look up the Stockton plant's susceptibility. I'm happy to report that the plant is located in an area that is identified to be subject to a less than 0.2% chance of being flooded in a 1 in 500 year flood event. To put it another way, despite being located on the banks of the San Joaquin river, they're on ground so high that they look down on the top of the levy that's there to protect the land lower than them.
All of which is more cheerful news compared to what happened to the production margin yesterday. For those who still haven't done their own math, it dropped to $0.806 yesterday.
Every other ethanol producer is in the same boat. Like it or not, the market is looking right over any potential Q4 earnings, straight at the current ethanol futures and not liking what it sees.
I do know that if I was going to make a buyout offer, I don't think it would be that difficult to factor in outstanding warrants. It's just math. Either way the plants have a value. If I'm prepared to pay (say) $300M for the company, warrants or no warrants I'm prepared to pay $300M.
As for the previous warrant inducements, well I suppose we all have our opinions. I personally understand the strategy whether I agree with it or not. The volatility would just be that much greater if they were still all hanging out there.
Other than that, I'm the wrong person to ask. I do know that more often than not, takeover rumors and management conspiracy rumors seem to be a constant companion for micro-caps. I've never seen them actually play out in a single stock I've held, but that's not to say it doesn't happen some times. I know they've been tagging along with PEIX ever since I first started following it.