Renewable Diesel and Biodiesel

Jim Lane In Washington, the U.S. Environmental Protection Agency announced final volume requirements under the Renewable Fuel Standard program today for the years 2014, 2015 and 2016, and final volume requirements for biomass-based diesel for 2014 to 2017. This rule finalizes higher volumes of renewable fuel than the levels EPA proposed in June, boosting renewable production and providing support for robust, achievable growth of the biofuels industry. “The biofuel industry is an incredible American success story, and the RFS program has been an important driver of that successcutting carbon pollution, reducing our dependence on foreign oil, and sparking...

by Debra Fiakas CFA Who doesn’t like a bargain?  FutureFuel Corporation (FF:  NYSE) is trading near $13.15 per share, below nine times net earnings.  Yet, the enticing earnings multiple might be only part of the story. The stock has gapped down in price twice in the last six months, trailing off after each leg down.  The stock now appears oversold. Based in Missouri, FutureFuel produces biodiesel and biobased speciality chemical products.  In the twelve months ending June 2014, the company reported $396.9 million in sales, providing $53.5 million in net income or $1.52 per share. ...

Valero Energy (VLO:  NYSE) recently disclosed ongoing discussions to expand its renewable diesel production to a second plant that would be built and managed by its Diamond Green Diesel joint venture with Darling Ingredients (DAR:  NYSE).  The proposed plant that would be located in Port Arthur, Texas and turn out 400 million gallons of renewable diesel and 40 million gallons of naptha per year.  As a food by-products processor Darling has easy access to low-cost used cooking oils and animals fats that serves as the feed stock for Diamond Green’s renewable diesel production.  Valero management has cited increasing global demand for low- to no-carbon...

Renewable Diesel Takes Smaller Cut Jim Lane “EPA continues to assert authority under the general waiver provision to reduce biofuel volumes based on available infrastructure,” says BIO. “This is a point that will have to be litigated. It goes against Congressional intent.” In Washington, the EPA released its proposed standards for 2014, 2015, and 2016 and volumes for renewable fuels. The volumes, as widely expected, include substantial reductions from the statutory standards in the original 2007 Energy Independence & Security Act. The EPA also released a 2017 proposed standard for biomass-based diesel. Yet, while attracting significant...

Tom Konrad CFA FutureFuel Corp. (NYSE:FF) manufactures chemicals, biofuels (mostly biodiesel), and other biobased products.  About 60% of revenues have historically come from the Chemicals unit, with the balance of 40% coming from the Biodiesel unit. Both units saw sharp declines in revenues over the last two quarters for reasons that seem likely to be temporary (at least in part.)  The stock has sold off sharply as a result, falling from the $18-$21 range this spring to its $12 recent price Biodiesel The entire biodiesel industry has been suffering from the expiration of the biodiesel blender's tax...

In August, I argued that Biodiesel stocks could be in trouble from more efficient ways to turn the oils and fats they use as feedstock into fuel, and concluded the article by saying that the likely winners are suppliers of oils and fats, not the processors.  James Kingsdale, of Energy Investment Strategies has been thinking along the same lines.  Last week he wrote an excellent overview of the major biofuels industries, including some stock picks.   One of those stock picks was the diamond in the rough I wish I had known about when I wrote Biodiesel's Nightmare: Renewable Diesel...

By Jim Lane Over the years we’ve all seen a lot of curveballs in the advanced bioeconomy. You see companies like Valero, which lobby the United States Congress with unbridled intensity to get rid of the Renewable Fuel Standard, on the verge of becoming the single-biggest producer of RINs in the United States (with news that they might take capacity at Diamond Green Diesel up to 540 million gallons). You see companies like Solazyme which love the Renewable Fuel Standard and drive up to nearly a billion-dollar post-IPO valuation based on delivering fuels at volume, then announcing that there are even...

by Debra Fiakas CFA Earlier this month biodiesel producer Renewable Energy Group, Inc. (REGI:  Nasdaq) reported a tidy profit of $22.3 million on record $1.0 billion in total sales.  Reported net income was $43.5 million, including accounting treatments for corporate recapitalization undertaken in the year.  Results from 2012 were noteworthy on a couple of counts.  It was the first time in the company’s ten-year history (including years of operation among predecessor firms) that sales exceeded $1.0 billion.  REGI produced 188 million gallons of biodiesel from a variety of feedstock, including non-edible corn oil, used...

by Debra Fiakas CFA This week Darling Ingredients (DAR:  NYSE) reported earnings of $100,000 on net sales of $874.7 million in the first quarter ending March 2015.  Darling is a recycler of sorts, collecting by-products of the food production industry and recycling the left-overs and waste into proteins, fats and leathers.  Nothing goes to waste.  Every last chicken feather, hide, gallon of used cooking grease and cake crumb gets up-cycled to a usable material for feed, food, fuel or clothing.  Its customers include pet food producers, personal care manufacturers and textile users, among others. Darling used...

by Debra Fiakas CFA Biodiesel and biochemical producer FutureFuel Corporation (FF:  NYSE) will report fourth quarter 2015 financial results after the market close today.  No conference call will be held due to low attendance on recent calls.  The single published estimate for FutureFuel is for $0.28 in earnings per share on $122.5 million in total sales.  Despite an increase in this estimate in the last week, the number still represents a significant decrease in earnings compared to the prior-year period.  The Company has missed the consensus estimate in both of the last two quarters and we do not...

Jim Lane Biofene production starts up in Paraiso, Brazil – sales expected to commence in Q1 2013 – Total, Temasek, Biolding inject fresh capital. What’s next for biofuels’ “Comeback Kid”? By now, most of the “smart set” that found itself excited about Amyris (AMRS), and about advanced synthetic biofuels during the IPO fever, have moved on. They read Dan Grushkin’s “The Rise And Fall Of The Company That Was Going To Have Us All Using Biofuels” in Fast Company, wrote off Amyris and possibly the entire sector, and presumably migrated their enthusiasm to low-cost natural gas, battery...

Jim Lane Filling up with Biodiesel in 2007.  Photo source: Tom Konrad Darling of the mid-2000s, still beloved by its many fans biodiesel is increasingly a key to delivering advanced biofuels volumes now and even more so between now and 2022. Presentations by NBB CEO Joe Jobe and REG CEO Daniel Oh at ABLC 2013 explained the how and why. In the excitement over cellulosic biofuels and drop-ins, it is easy to forget that the backbone of advanced biofuels in the US and around he...

Jim Lane The biggest US biodiesel, renewable diesel producer Renewable Energy Group (REGI), or "REG" buys the biggest US facility in asset deal. The fully-operational 100-million gallon nameplate capacity biorefinery will be renamed REG Grays Harbor. The facility includes 18 million gallons of storage capacity and a terminal that can accommodate feedstock intake and fuel delivery on deep-water PANAMAX class vessels as well as possessing significant rail and truck transport capability. REG will pay Imperium $15M in cash and issue 1.5 million shares of REG common stock in exchange for substantially all of Imperium’s assets. In addition to...