Rentech: Homegrown Synthetic Fuel On the Near Horizon 24 comments
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Is there anything more pressing on the minds of American’s right now than the high cost of energy? What if I told you that there was a company that has successfully produced usable synthetic fuel right here in the United States, would anyone be interested? In a press release today, a small company named Rentech (RTK) has produced what it has termed “ultra clean” synthetic fuels at its Colorado facility. This has the potential to be an enormous breakthrough as a large portion of this fuel has been made from liquefied coal—which the United States has in great abundance. The technological implications are awesome and this is exactly the kind of innovation that high energy prices can spur.
Rentech has scored a breakthrough for the U.S. energy crisis; its synthetic fuel is clean, homegrown, and in production now. The excerpt below is taken directly from a recent Business Wire release from RTK and describes for the layman the company’s process for cleanly converting coal to synthetic fuels:
“The Rentech Process is a patented and proprietary technology that converts synthesis gas from carbon-bearing resources into hydrocarbons that can be processed and upgraded into ultra clean synthetic jet and diesel fuels. Entsch’s Colorado facility provides a platform for the production of these products from a wide variety of resources, including waste materials, into fuels that could have a potentially carbon neutral or even carbon negative footprint. These fuels are also cleaner burning and more efficient than petroleum-derived fuels. The PDU is currently producing synthetic fuels from natural gas, and once gasification is added, it will also be capable of producing fuels from biomass and other fossil resources.”
When this technology will be ready for consumers is not something I feel confident in speculating about, but RTK is on the bleeding edge of this in-demand technology. As you can see below, the company’s valuation makes it at least worthy of a speculative buy. The potential for this fuel technology is huge and the company is also making a fairly steady stream of revenue through its nitrogen fertilizer production. Estimates have RTK’s production facility in Illinois producing over 300,000 tons of fertilizer each year which generates revenue of nearly $200 million.
Ockham Research reiterates its Strong Buy on RTK from our report dated June 30, 2008, and we have had a Buy on them since we initiated coverage in May. Over the course of its history, the stock has traded between 6.1 and 18.63 times sales revenue. Currently, that measure is just above 2 times because of the upswing in fertilizer revenue. The potential contracts that the synthetic fuels innovation could bring in would be huge, which is presumptive but must be considered. The stock—after the 13% appreciation—today is still a small operation with just a $400 million market cap. There are concerns of course: RTK has yet to have positive annual per share earnings and its recent return-on-equity (ROE) has been abysmal. This stock has a speculative element to be sure, but because it appears to be a leader in the emerging field of synthetic fuels production, it is worthy of consideration for patient, value-oriented investors.
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This article has 24 comments:
> jack
1) Heat comes from natural gas, which is subject to considerable price variation. If RTK would use solar PV and electic arc or something to produce heat, it would be more attractive.
2) Coal is used for electricity generation. The Fischer-Tropsch CTL process is about 70% efficient. One barrel of oil requires about 192kg of coal to to be produced usin CTL. This means we need a daily 4.4 billion kg increase to current coal output in order to meet 23 million bbl/day completely from coal. This is a very large increase in daily coal output, and challenging to meet.
Of course, a combined GTL, CTL, Wind, Solar, Biogas, Algae fuel will better address the petroleum crisis, and we probably will not rely solely on CTL.
But! CTL is expensive b/c 1) we need coal for power plants, 2) mining operations would need to be significantly increased to meet a new demand, 3) mining is polluting
But RTK is probably a good buy at this price...looking down the road.
nice article.
Other bigger companies, such as ExxonMobil, Shell, Sasol, and Conoco-Phillips have hundreds more patents in the F-T space. There is nothing new in Rentech's announcement of synthetic fuel in a pilot scale plant in the USA. Its been done before. Trouble is, given high natural gas prices, the process is uneconomical using this feedstock. SYNM is another smaller company in the synfuels space with high hopes.
The main problem in getting a commercial synfuels business going in the USA is opposition from environmentalists. Obtaining plant approvals will depend on the extent that the CO2 produced in the process can be "sequestrated".
Sasol has been producing synthetic fuels in South Africa from coal and natural gas for over 50 years. They have developed the process extensively. They also have a commercial scale plant in Qatar that produces ultra pure diesel from natural gas. Shell has bee operating a gas to liquid fuels plant in Indonesia for several years.
Rotsa Ruck!
> jack
Yes, and Mobil contributed (to the ExxonMobil merger) the methanol-to-gasoline process that some other would-be synfuel producers want to license.
> jack
the MTG[methanol to gasoline] process together with RTK process is planne to be used in mine mouth production facity in 2011 timeframe. see DKRW Energy + ACI coal. both websies/references supply more detail.
pardon the typos, broken finger.
Who are you kidding?
Asd an investor I would look for what the Congress over the next 4 years will do in the subsidy area, who will get the most. Invest there.
Also, some unconventional methodologies are eco unfriendly. Shale gas uses a tremendous amount of water. In the Barnett a few years ago, ranchers were making more money selling water to gas producers than raising cattle or crops. Also, coal is still dirty no matter its process and sequestration needs big bucks for infrastructure.
We should all get a kick out of the enviro jihadists in Congress the next 4 years fighting over their pet project "clean fuel" ideas. Seeing fratracide amongst the tree huggers will be entertaining.
But the sad fact is before it's over the American People will be beat down like a rented mule until some sensible energy plan is acheived.
A fine example of this is when Speaker Pelosi was asked by George Stepanopolous of ABC news why she doesn't permit a vote in the House up or down on expanded off shore drilling. Her reply, "We must save the planet". She said it with all the wild eyed zealousness of a religous fanatic. No, I'm not exaggerating, see the interview for yourself.
Fun times for the Dems when they get into fights over how much to subsidize coal vs. solar etc.
It'll be a symphony of cognitive dissonance. Mixing metaphors, it's going to be entertaining, between gasps of fright, to witness the battles for the tiller of our ship of state when the new executive and legislature are commissioned.
1.- as opposed to Sasol, it is an American initiative. America needs to become energy independent because depending on people like Putin, Saddam Hussein and the House of Saud is a very risky proposition for a superpower, witness the need to go to war for oil in Iraq and possibly in Iran. This is a legacy of Churchill's ambition to switch the Royal Navy from coal to petrol. Back in WWI, Churchill did say that petrol was a legitimate war objective. In today's PC world politicians are no longer allowed to say it but reality has not changed one iota. The American presence in the Middle East is to keep the Straight of Hormuz open and the oil fields pumping.
2.- Renteck is not only about coal to liquid (CTL), it is about just about anything to liquid. If I'm not mistaken in Natchez it will be petroleum coke to liquid with CO2 being sold to Danbury Resources for re-injection into the oil fields. The important immediate issue here is certification of the jet fuel by the Air Force and the activation of the PDU is an important milestone in this process.
No doubt, Rentech is still a development stage company so it is highly speculative but the fertilizer plant was a stroke of luck or genius because it solves the cash burn issue that development stage companies typically face. I think Rentech needs to be looked at not in comparison to past failures but in terms of current opportunities. As Churchill said, "Some people see problems at every opportunity. Others see opportunity in every problem."
Long RTK (but not much)
"Rentech utilizes its patented and proprietary iron-based catalyst in its Fischer-Tropsch reactors. The Rentech catalyst was chosen to be used over cobalt catalyst for two very specific reasons.
* The qualities of iron catalyst make it the most flexible catalyst, able to convert synthesis gas made from the widest range of hydrocarbon feedstocks with excellent economic efficiency.
* Specific to Coal-to-Liquids, iron catalyst can tolerate low levels of sulfur contamination and ammonia compounds that may get into the synthesis gas and still maintain economic levels of conversion. Cobalt catalysts have little or no resistance to poisons that may be contained in the synthesis gas produced from coal and once contaminated must be replaced."
End snippet.
Now you see they have increased the profits from the rising costs of fertilizer and have sold point of use patents already with others in-work.
I haven't yet looked into the other producers but am today. I have some RTK and will pick up some more Monday as it is down.
Mark
mark
Ticker: RTK
On Friday, November 21, 2008 we recommended going long Rentech (Ticker: RTK) at .50 cents. Over the weekend President Elect Obama reaffirmed his support for alternative energy that includes Rentech’s technology of converting biomass, natural gas, and coal into liquid fuels ranging from jet fuel to diesel gasoline.
Since our recommendation Rentech’s stock has jumped 20 percent to .60 and we continue to see significant upside from these current levels.
______________________...
For an Aggressive short-term trade we like Rentech at this current level. Rentech will release 2008 financial statements in the middle of December and rumor has it these numbers will be very positive.
As of Friday, November 21, 2008 Rentech’s stock price has been down significantly along with everyone else:
15 days down –43%
45 days down –62%
65 days down –79%
Keep in mind the last time Rentech hit .46 cents a share was October 27, 2008 and the stock proceeded to rally .43 cents to .87 cents. An 89 percent rally in 7 days. Since March of this year a 40 to 80 percent fluctuation in price has been common and we look for this type of volatility to continue. Rentech could easily exceed a $1.20 per share before year-end based on a number of reasons.
Rentech’s management is currently in a pickle. The stock has dropped significantly and the officers of the company need results ASAP if they want to be able to justify their year-end bonuses. In addition, all stock options are underwater including those belonging to the board of directors. As we have seen in the past, Rentech actively manages their stock price by issuing press reports before they release their latest financial numbers. Only to be followed with additional press releases over the next week or two, all in an attempt to move the stock price. One news release could easily move Rentech’s stock price .50-.60 cents like it has done so many times in the past. Two or more press releases could be very significant.
Press releases for Rentech's alternative energy segment could focus on:
* Technology licensing partnerships = Revenue increase
* Revenue and cost sharing relationships = Revenue increase and cost decrease
* New business strategies and directions = Shareholder assurance
* New product sales revenue generated by their Product Demonstration Unit -PDU- leading the way to future business opportunities as companies discover value in Rentech’s numerous gas to liquid products = Revenue increase and shareholder assurance
* Continued process improvements at their Product Demonstration Unit -PDU- facility in Commerce City, CO = Shareholder assurance
Rentech recently reaffirmed EBITDA guidance for their fertilizer plant and there’s a good chance Rentech will post a net income, something they haven’t done in years. Moving from a net loss to a net income would be a significant event and I think the street HAS NOT priced this into the stock. Last quarter Rentech completed their Product Demonstration Unit -PDU- that converts natural gas into various petroleum based products like jet fuel and diesel gasoline. The completion of the PDU means a reduction in expenses. Combine reduced expenses with record fertilizer sales revenue, coming from greater demand for corn that is used in the production of ethanol based fuel, could translate to a positive earnings per share. Management needs a homerun if they want to justify year-end bonuses; there’s an incentive for them to be aggressive. Shareholders are less likely to be pissed off when they hear about seven figure total compensation packages when the stock is trading at $3.15 versus .50 cents a share. Again, management has a strong incentive to move this stock and all stock options are currently underwater.
Press releases for Rentech's fertilizer segment could focus on:
* Record fertilizer sales revenue growth for fiscal year 2008
* Very favorable EBITDA guidance for 2009
* Favorable asset valuation discussion of their fertilizer plant
Rentech’s fertilizer plant, Rentech Energy Midwest Corporation -REMC- located in Dubuque Ill, is an extremely valuable asset that generates a tremendous amount of cash. The value of this plant alone creates a support at current levels helping to reduce downside risk. Rentech currently has 166 million shares outstanding and their fertilizer plant alone is valued between 120-210 million. A quick back of the envelope calculation, 122/166 and 210/166, suggests a stock price between .73 to $1.27.
As reported at Mutual Fund Facts About Individual Stocks -MFFAIS- the overall number of institutional owners has recently increased 20 percent from 81 to its current level of 97. This is very positive.
Institutions adding to an already existing position include:
Goldman Sachs added 825,221 shares
Vanguard Group added 5,662,885 shares
Barclays Global Investors added 1,918,971 shares
Credit Suisse added shares
Putnam added shares
Oppenheimer added shares
Northern Trust added shares
Bank of New York Mellon added shares
Bank of America added shares
Wells Fargo added shares
There’s a large short position, I believe 8-9 million shares and it’s probably a safe assumption that these sellers are in the money since Rentech is currently near 52-week lows. If Rentech’s stock price does move quickly, press releases and an overall market rally, we could see short sellers add to the buying as they lock in profits. This 1-2 combo could move Rentech’s stock price in excess of .40 cents a share.
Because of a crisis in confidence the major indices, DJIA and S&P 500, have seen a record setting retreat in the last 30 days, especially in the last 7, and the market is due for a 1,200-point rally. This alone could move Rentech’s stock price .30 cents a share.
Company: Rentech
Ticker: RTK
Company Snapshot: Rentech is composed of two business segments each focusing on a major global issue, alternative green energy and fertilizer production. Rentech’s alternative energy segment is one of the world's leading synthetic fuels technology and development companies. Over the last twenty-five years, Rentech has developed and patented the Rentech Process, an advanced version of the well-established Fischer-Tropsch process. The Rentech Process can convert a wide array of carbon-bearing materials, including green resources such as biomass and municipal solid waste, into ultra clean fuels and chemicals ranging from jet fuel to diesel gasoline. Rentech’s objective is to help the world reduce its dependency on oil and lower emissions, including greenhouse gases. Rentech’s second business segment is their fertilizer plant Rentech Energy Midwest Corp. -REMC-, located in East Dubuque, IL. REMC is one of the country’s largest nitrogen manufacturers producing nitrogen-based fertilizer products and industrial nitrogen products.
Recommendation: Buy
Recommendation Date: Friday, November 21, 2008 at .50 cents per share
Recommendation Results:
** 11/21/2008: UP 8.00%
** 11/24/2008: UP 12.96%
** 11/25/2008: DOWN -1.72%
** 11/26/2008: UP 3.42%
*** Since Date of Recommendation: UP 24.00%
______________________...
On Friday, November 21, 2008 we recommended Rentech (Ticker: RTK) with a buy rating at .50 cents a shares. Since then a few positive and significant developments have taken place.
* November 22, 2008 Indiana and Illinois announce they are pursuing major clean coal power projects. Illinois Attorney General Lisa Madigan has announced a measure that will create 2 clean coal projects including a $2.5-billion plant near Taylorville, Illinois. That plant comes in the wake of another $2 billion coal gasification project in southern Indiana.
www.wthitv.com/dpp/new...
* November 22, 2008 Baard Energy has received its final air permits from the Ohio EPA which in turn allows them to build a coal to liquid plant in Wellsville along the Ohio River. One of the first of its kind. The permit is the third and final state environmental permit necessary for Baard Energy to proceed into final design and construction of the 53,000 barrel-per-day coal/biomass to liquids plant at the Columbiana County Port Authority site in Wellsville. Baard has yet to release who will supply their Fischer-Tropsch technology.
www.reviewonline.com/p...
* November 22, 2008 President-elect Barack Obama reaffirmed his support for alternative energy. This includes Rentech’s Fischer-Tropsch technology that converts biomass, natural gas, and coal into liquid fuels ranging from jet fuel to diesel gasoline.
news.yahoo.com/s/ap/20...;_ylt=Anucx2RdHWzyzTRu...
* November 24, 2008 The US Air Force concluded analysis of the effects of using a natural gas-based synthetic fuel with its Lockheed Martin F-22, as work to trial the technology accelerates through its trainer, transport and fighter fleets. The office of the assistant secretary of the air force for installations, environment and logistics is expected to select a private partner during December to develop a Fischer-Tropsch production facility at Malmstrom AFB, Montana.
www.flightglobal.com/a...
______________________...
As of Friday, November 21, 2008 for an Aggressive short-term trade we like Rentech at these current levels. Rentech will release fiscal year 2008 financial statements December 16, 2008. Rumor has it these numbers will be very positive.
Rentech’s stock price has been down significantly along with everyone else:
15 days down –43%
45 days down –62%
65 days down –79%
The last time Rentech hit .46 cents a share was October 27, 2008 and the stock proceeded to rally .43 cents to .87 cents a share. An 89 percent increase in 7 days. Since March of this year a 40 to 80 percent fluctuation in price has been common and we look for this level of volatility to continue. Rentech could easily exceed a $1.20 per share before year-end based on a number of reasons.
Rentech’s management is currently in a pickle. The stock has dropped significantly and the officers of the company need results ASAP if they want to be able to justify their year-end bonuses. In addition, all stock options are underwater including those belonging to the board of directors. As we have seen in the past, Rentech actively manages their stock price by issuing press reports before releasing their latest financial numbers. Only to be followed with additional press releases over the coming weeks in an attempt to influence the stock price. One news release could easily move Rentech’s stock price .50 to .60 cents like it has done so many times in the past. Two or more press releases could be very significant.
Press releases for Rentech's alternative energy segment could focus on:
* Technology licensing partnerships = Revenue increase
* Revenue and cost sharing relationships = Revenue increase and cost decrease
* New business strategies and directions = Shareholder assurance
* New product sales revenue generated by their Product Demonstration Unit -PDU- leading the way to future business opportunities as companies discover value in Rentech’s numerous gas to liquid products = Revenue increase and shareholder assurance
* Continued process improvements at their Product Demonstration Unit -PDU- facility in Commerce City, CO = Shareholder assurance
Rentech’s fertilizer plant, Rentech Energy Midwest Corporation -REMC- located in Dubuque IL, is an extremely valuable asset that generates a tremendous amount of cash. The value of this plant alone creates a support at current levels helping to reduce downside risk. Rentech currently has 166 million shares outstanding and their fertilizer plant alone is valued between 120-210 million. A quick back of the envelope calculation, 122/166 and 210/166, suggests a stock price between .73 to $1.27.
Rentech recently reaffirmed EBITDA guidance for their fertilizer plant and there’s a good chance Rentech will post a net income, something they haven’t done in years. Moving from a net loss to a net income would be a significant event and I think the street HAS NOT priced this into the stock. Last quarter Rentech successfully completed their Product Demonstration Unit -PDU- that converts natural gas into various petroleum based products like jet fuel and diesel gasoline. The completion of the PDU means a reduction in expenses. Combine reduced expenses with record fertilizer sales revenue, coming from greater demand for corn that is used in the production of ethanol based fuels, could translate to a positive earnings per share. Management needs a homerun if they want to justify year-end bonuses; there’s an incentive for them to be aggressive. Shareholders are less likely to be pissed off when they hear about seven figure total compensation packages when the stock is trading at $3.15 versus .50 cents a share. Again, management has a strong incentive to move this stock and all stock options are currently underwater.
Press releases for Rentech's fertilizer segment could focus on:
* Record fertilizer sales revenue growth for fiscal year 2008
* Very favorable EBITDA guidance for 2009
* Favorable asset valuation discussion of their fertilizer plant
As reported at Mutual Fund Facts About Individual Stocks -MFFAIS- the overall number of institutional owners has recently increased 20 percent from 81 to its current level of 97. This is very positive.
Institutions adding to an already existing position include:
Goldman Sachs added 825,221 shares
Vanguard Group added 5,662,885 shares
Barclays Global Investors added 1,918,971 shares
Credit Suisse added shares
Putnam added shares
Oppenheimer added shares
Northern Trust added shares
Bank of New York Mellon added shares
Bank of America added shares
Wells Fargo added shares
There’s a large short position, I believe 8-9 million shares and it’s probably a safe assumption that these sellers are in the money since Rentech is currently near 52-week lows. If Rentech’s stock price does move quickly, press releases and an overall market rally, we could see short sellers add to the buying as they lock in profits. This 1-2 combo could move Rentech’s stock price in excess of .40 cents a share.
Because of a crisis in confidence the major indices, DJIA and S&P 500, have seen a record setting retreat in the last 30 days, especially in the last 7, and the market is due for a 1,200-point rally. This alone could move Rentech’s stock price .30 cents a share.
Company: Rentech
Ticker: RTK
Company Snapshot: Rentech is composed of two business segments each focusing on a major global issue, alternative green energy and fertilizer production. Rentech’s alternative energy segment is one of the world's leading synthetic fuels technology and development companies. Over the last twenty-five years, Rentech has developed and patented the Rentech Process, an advanced version of the well-established Fischer-Tropsch process. The Rentech Process can convert a wide array of carbon-bearing materials, including green resources such as biomass and municipal solid waste, into ultra clean fuels and chemicals ranging from jet fuel to diesel gasoline. Rentech’s objective is to help the world reduce its dependency on oil and lower emissions, including greenhouse gases. Rentech’s second business segment is their fertilizer plant Rentech Energy Midwest Corp. -REMC-, located in East Dubuque, IL. REMC is one of the country’s largest nitrogen manufacturers producing nitrogen-based fertilizer products and industrial nitrogen products.
Recommendation: Buy
Recommendation Date: Friday, November 21, 2008 at .50 cents per share
Recommendation Results:
** 11/21/2008: UP 8.00%
** 11/24/2008: UP 12.96%
** 11/25/2008: DOWN -1.72%
** 11/26/2008: UP 3.42%
*** Since Date of Recommendation: UP 24.00%
______________________...
On Friday, November 21, 2008 we recommended Rentech (Ticker: RTK) with a buy rating at .50 cents a shares. Since then a few positive and significant developments have taken place.
* November 22, 2008 Indiana and Illinois announce they are pursuing major clean coal power projects. Illinois Attorney General Lisa Madigan has announced a measure that will create 2 clean coal projects including a $2.5-billion plant near Taylorville, Illinois. That plant comes in the wake of another $2 billion coal gasification project in southern Indiana.
www.wthitv.com/dpp/new...
* November 22, 2008 Baard Energy has received its final air permits from the Ohio EPA which in turn allows them to build a coal to liquid plant in Wellsville along the Ohio River. One of the first of its kind. The permit is the third and final state environmental permit necessary for Baard Energy to proceed into final design and construction of the 53,000 barrel-per-day coal/biomass to liquids plant at the Columbiana County Port Authority site in Wellsville. Baard has yet to release who will supply their Fischer-Tropsch technology.
www.reviewonline.com/p...
* November 22, 2008 President-elect Barack Obama reaffirmed his support for alternative energy. This includes Rentech’s Fischer-Tropsch technology that converts biomass, natural gas, and coal into liquid fuels ranging from jet fuel to diesel gasoline.
news.yahoo.com/s/ap/20...;_ylt=Anucx2RdHWzyzTRu...
* November 24, 2008 The US Air Force concluded analysis of the effects of using a natural gas-based synthetic fuel with its Lockheed Martin F-22, as work to trial the technology accelerates through its trainer, transport and fighter fleets. The office of the assistant secretary of the air force for installations, environment and logistics is expected to select a private partner during December to develop a Fischer-Tropsch production facility at Malmstrom AFB, Montana.
www.flightglobal.com/a...
______________________...
As of Friday, November 21, 2008 for an Aggressive short-term trade we like Rentech at these current levels. Rentech will release fiscal year 2008 financial statements December 16, 2008. Rumor has it these numbers will be very positive.
Rentech’s stock price has been down significantly along with everyone else:
15 days down –43%
45 days down –62%
65 days down –79%
The last time Rentech hit .46 cents a share was October 27, 2008 and the stock proceeded to rally .43 cents to .87 cents a share. An 89 percent increase in 7 days. Since March of this year a 40 to 80 percent fluctuation in price has been common and we look for this level of volatility to continue. Rentech could easily exceed a $1.20 per share before year-end based on a number of reasons.
Rentech’s management is currently in a pickle. The stock has dropped significantly and the officers of the company need results ASAP if they want to be able to justify their year-end bonuses. In addition, all stock options are underwater including those belonging to the board of directors. As we have seen in the past, Rentech actively manages their stock price by issuing press reports before releasing their latest financial numbers. Only to be followed with additional press releases over the coming weeks in an attempt to influence the stock price. One news release could easily move Rentech’s stock price .50 to .60 cents like it has done so many times in the past. Two or more press releases could be very significant.
Press releases for Rentech's alternative energy segment could focus on:
* Technology licensing partnerships = Revenue increase
* Revenue and cost sharing relationships = Revenue increase and cost decrease
* New business strategies and directions = Shareholder assurance
* New product sales revenue generated by their Product Demonstration Unit -PDU- leading the way to future business opportunities as companies discover value in Rentech’s numerous gas to liquid products = Revenue increase and shareholder assurance
* Continued process improvements at their Product Demonstration Unit -PDU- facility in Commerce City, CO = Shareholder assurance
Rentech’s fertilizer plant, Rentech Energy Midwest Corporation -REMC- located in Dubuque IL, is an extremely valuable asset that generates a tremendous amount of cash. The value of this plant alone creates a support at current levels helping to reduce downside risk. Rentech currently has 166 million shares outstanding and their fertilizer plant alone is valued between 120-210 million. A quick back of the envelope calculation, 122/166 and 210/166, suggests a stock price between .73 to $1.27.
Rentech recently reaffirmed EBITDA guidance for their fertilizer plant and there’s a good chance Rentech will post a net income, something they haven’t done in years. Moving from a net loss to a net income would be a significant event and I think the street HAS NOT priced this into the stock. Last quarter Rentech successfully completed their Product Demonstration Unit -PDU- that converts natural gas into various petroleum based products like jet fuel and diesel gasoline. The completion of the PDU means a reduction in expenses. Combine reduced expenses with record fertilizer sales revenue, coming from greater demand for corn that is used in the production of ethanol based fuels, could translate to a positive earnings per share. Management needs a homerun if they want to justify year-end bonuses; there’s an incentive for them to be aggressive. Shareholders are less likely to be pissed off when they hear about seven figure total compensation packages when the stock is trading at $3.15 versus .50 cents a share. Again, management has a strong incentive to move this stock and all stock options are currently underwater.
Press releases for Rentech's fertilizer segment could focus on:
* Record fertilizer sales revenue growth for fiscal year 2008
* Very favorable EBITDA guidance for 2009
* Favorable asset valuation discussion of their fertilizer plant
As reported at Mutual Fund Facts About Individual Stocks -MFFAIS- the overall number of institutional owners has recently increased 20 percent from 81 to its current level of 97. This is very positive.
Institutions adding to an already existing position include:
Goldman Sachs added 825,221 shares
Vanguard Group added 5,662,885 shares
Barclays Global Investors added 1,918,971 shares
Credit Suisse added shares
Putnam added shares
Oppenheimer added shares
Northern Trust added shares
Bank of New York Mellon added shares
Bank of America added shares
Wells Fargo added shares
There’s a large short position, I believe 8-9 million shares and it’s probably a safe assumption that these sellers are in the money since Rentech is currently near 52-week lows. If Rentech’s stock price does move quickly, press releases and an overall market rally, we could see short sellers add to the buying as they lock in profits. This 1-2 combo could move Rentech’s stock price in excess of .40 cents a share.
Because of a crisis in confidence the major indices, DJIA and S&P 500, have seen a record setting retreat in the last 30 days, especially in the last 7, and the market is due for a 1,200-point rally. This alone could move Rentech’s stock price .30 cents a share.