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Robert Wagner

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  • Renewable Energy Group Outperforms Expectations [View article]
    The EPA ruling doesn't look to be having a major impact on the stocks. It just prolongs the uncertainty. I would imagine the tax credit will carry a greater impact. This ruling does however give the Republicans plenty of ammo to use in its battle against the EPA.
    Nov 22, 2014. 08:38 AM | Likes Like |Link to Comment
  • Higher Soybean Prices Are Helping Renewable Energy Group's Margins [View article]
    Investors in REGI should watch for the outcome of the BTC vote in the Lame Duck and the final EPA RVO, both of which should have decisions rather soon.
    Nov 8, 2014. 06:45 AM | Likes Like |Link to Comment
  • Higher Soybean Prices Are Helping Renewable Energy Group's Margins [View article]
    Q4 should be extremely impact-full on REGI.
    1) The EPA should release the RVO soon. Right now the production is in line with the expected 1.2 x 1.2 billion gallons. Any increase over the current 1.2 billion gallons will effectively create a shortage in 2015. I expect the EPA to boost the RVO somewhere between the current 1.2 billion and last year's production of 1.8 billion gallons. The problem is the EPA has waited so long there is no time to make up the difference, so if they boost it too much they will create a blend wall type situation and open themselves up to extreme criticism. I doubt they EPA wants that with the new Congress.
    2) The Tax credit is likely to pass, and from everything I've read it should happen in the lame duck session. The new congress will want to start fresh, so they will do everything possible to clean the slate before the new congress take over.
    3) If the Geismar plant gets running well, each gallon produced will allow REGI to keep the full $1 BTC if it gets reinstated. By blending biodiesel into the renewable diesel REGI can multiply the number of gallons they will be able to keep the full $1. Last time it passed REGI kept about $0.35/gal.
    4) Based upon current production, REGI should be upward of $100 million if the BTC passes. That should give a substantial boost to the PPS.
    5) Even if the BTC doesn't pass REGI should do well. A) the smaller competition will likely go bankrupt and B) RIN prices will adjust upward for the loss of the tax credit. Right now the markets are pricing RINs and Fuel as if the tax credit will pass. Once certainty is known, the markets will adjust accordingly.

    I continue to be long REGI and recently added a small amount to round my shares to multiples of 100 so I can write options going forward.
    Nov 7, 2014. 08:03 AM | 2 Likes Like |Link to Comment
  • Renewable Energy Group Outperforms Expectations [View article]
    Here are some details on the odds of the BTC passing in the Lame Duck:

    Under this scenario, the Senate Republican leadership would prefer to pass an omnibus spending bill or a yearlong stopgap funding measure that would keep the federal government operating until the end of the fiscal year on Sept. 30.

    It could also have implications for a package extending a variety of expired tax provisions. Some House Republicans would like to delay action on the so-called tax extenders package to 2015 in the hope that a Congress under unified GOP control could make some of the fixes permanent.

    This, however, would have to be done immediately at the start of the new session if the fixes were to apply to 2014. Tax returns must be filed by mid-April.

    House Republicans are seeking to extend some expired provisions, like the credit for business research, indefinitely.

    Another Source:

    The other strong push to do tax extenders in lame duck is that Republicans — with a good election result and control of both houses – don’t want to start the first day in a new Congress eating leftovers (“new food, new food” as we would say growing up). There is understandably a push to clear the decks in lame duck and start with a clean slate for an ambitious agenda
    Nov 7, 2014. 01:23 AM | 2 Likes Like |Link to Comment
  • Renewable Energy Group Outperforms Expectations [View article]
    I wouldn't bet against the BTC passing, as mentioned it typically has bipartisan support, and a 100% track record of getting reinstated. Right now as mentioned in the conference call the markets are discounting the reinstatement of the tax credit. If it doesn't get reinstated the smaller companies will likely go bankrupt, and RIN prices will likely adjust upward to reflect the absence of the tax credit going forward. One other major issue on the horizon not mentioned is the EPA's RVO. Anything above the current 1.2 billion gallons should be a big positive because current production is on track to reach 1.2 billion plus the additional 20% allowed for carry over. Any boost would effectively create a shortage of RINs going into 2015. Lastly, the last time the BTC get reinstated REGI kept about $0.35/gallon, with the Geismar fuel being produced REGI is blending it with their biodiesel making REGI the blender. I believe that will allow them to keep the full $1.00 of the tax credit for each gallon of blended fuel they sell. I know SYNM used to keep 100% of the tax credit when they were producing fuel. REGI by blending it with their own biodiesel will be able to stretch the benefits to a greater number of gallons.
    Nov 7, 2014. 01:07 AM | 4 Likes Like |Link to Comment
  • Renewable Energy Group Beat Expectations... As Expected [View article]
    REGI should easily beat current estimates for Q3. Margins have been positive all quarter and estimates are for a loss. More importantly, the news out today is that REGI is blending the Geismar ULSD with their biodiesel. I have a call into IR to verify that that will qualify them as the "blender" allowing them to keep 100% of the "blenders'" tax credit. If that is the case REGI will have a huge incentive to expand and build new plants like Gesimar. That would add $0.50/gal + to the margins. I would also listen to the conference call to see if they address this issue.
    Oct 31, 2014. 11:25 AM | 1 Like Like |Link to Comment
  • Higher Soybean Prices Are Helping Renewable Energy Group's Margins [View article]
    Yes, I see 4 major catalysts on the horizon for REGI.
    1) The EPA's final decision of the 2014 RFS2 Biodiesel RVO. I expect it to be boosted above the current 1.2 billion gallon target. That should boost D4 RIN prices.
    2) I expect the tax extenders to get voted on and passed after the election. Watch for the time period to extend beyond an annual renewal.
    3) Watch for the Dynamic Fuels plant to restart soon.
    4) I expect the strong $US and bumper crop to keep feed stocks low and maybe send them lower.

    Right now REGI is tracking ULSD, as it falls REGI falls. Lastly, estimates are for REGI to show a loss for Q3. I've been following the margins all quarter and I doubt that will happen. REGI IMHO should show a profit Q3 based upon stronger than expected margins.
    Oct 4, 2014. 07:59 AM | 1 Like Like |Link to Comment
  • Deciphering Renewable Energy Group's Margins [View article]
    "Hey Robert, does the average sales price include the value of the RIN when sold to the refiner?"

    Yes, the value of the BioDiesel includes 1.5x s D4 RIN. That is why the fuel cost more than the ULSD.

    Here is a source for the quotes:

    Right now SME sells for $3.30 and ULSD sells for $2.69.
    Sep 22, 2014. 09:45 PM | Likes Like |Link to Comment
  • Higher Soybean Prices Are Helping Renewable Energy Group's Margins [View article]
    Things are really odd now. Soybean oil is actually one of the lower cost feedstocks right now, and the flex feedstock firms don't have much of an advantage, if at all. Yellow grease still has the best margin, but soybean oil isn't far behind.

    Est Margin Calculation
    Fuel Blend Blend Blend MW SME MW FAME MW FAME MW FAME
    Fuel $ $3.32 $3.25 $3.32 $3.31 $3.36 $3.36 $3.36
    Feedstock YG Corn Oil SME SME CWG YG Corn Oil
    FS lbs/gal 7.6 7.6 7.5 7.5 8.0 8.5 8.2
    FS $/lb $0.26 $0.35 $0.33 $0.33 $0.33 $0.26 $0.35
    FS/gal $1.99 $2.62 $2.45 $2.45 $2.62 $2.23 $2.83
    Trans/lb $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.02
    Trans/gal $0.15 $0.15 $0.15 $0.15 $0.16 $0.17 $0.16
    Total FS $2.15 $2.77 $2.60 $2.60 $2.78 $2.40 $2.99

    Other VC/gal $0.18 $0.18 $0.18 $0.46 $0.46 $0.46 $0.46

    Est Gross Margin $0.99 $0.29 $0.54 $0.25 $0.12 $0.50 $(0.09)

    Estimated Fixed Costs/OPEX at Full Production
    Fixed OPEX/gal $0.37 $0.37 $0.37 $0.12 $0.12 $0.12 $0.12
    Glyserine $0.03 $0.03 $0.03 $0.03
    Tax Credit Adj

    EBITDA Margin $0.62 $(0.07) $0.17 $0.16 $0.03 $0.41 $(0.18)
    Sep 16, 2014. 09:31 PM | 1 Like Like |Link to Comment
  • Renewable Energy Group: Undervalued And Ready To Break Out [View article]
    REGI is most likely going to have a strong 2nd half of the year for various reason, none of them quantitative or technical.
    1) The entire fate of this company depends on the margins they get for their biodiesel. Margins have been improving, and even high cost soybean oil now shows a positive margin.
    2) Production has been relatively lite this year, so the RINs look to be on course to barely meeting the 1.2 billion gallon EPA RVO. In reality that translates into a 20% underproduction. The underproduction of D6 RINs in 2013 has resulted in them remaining unusually high for all of 2014 ytd.
    3) The market is unlikely to have picked up on the improvements in margins, so I would expect REGI to beat estimates for Q2.
    4) Going into year end, talk will focus on the reinstatement of the blenders tax credit. The tax has a 100% track record of getting reinstated.
    5) When/if the tax gets reinstated it historically has been made retroactive, so just like 2012, what was a loss in real time becomes a nice gain post tax reinstatement.
    6) REGI has the advantage most other biodiesel firms don't, that being scale. Just like in 2012, REGI will be able to maintain high production throughout the entire year betting on the tax credit being reinstated.
    7) Investors interested in REGI should look at their earnings releases and how they adjusted 2012 for the tax reinstatement to see the impact a potential repeat will have on its 2014 earnings.
    8) Key points, investors should focus on the biodiesel margins which are now positive, biodiesel production relative to its 1.2 billion gallon mandate and prospects of the tax credit being reinstated. All look positive going into the 2nd half of 2014.
    Jul 4, 2014. 09:30 AM | 8 Likes Like |Link to Comment
  • Renewable Energy Group: A Classic 'Heads I Win Big, Tails I Still Win Something' [View article]
    Brian, IMHO the SYNM purchase is a game changer for REGI. SYNM has 2 technologies, 1) Biosynfining which hydrogenates fats into renewable drop in diesel and jet fuels and 2) Fischer Tropsch technology that allows them to pursue GTL, CTL and BTL. The BTL or biomass to liquid technology would allow them to go after cellulosic RINs. By buying SYNM and LS9 REGI went from a biodiesel firm to a diversified energy firm. SYNM usually has higher margins than REGI, and doesn't have to worry about the lower price of FAME vs ULSD. Also, there will always be a market for ULSD, the same can't be said about biodiesel.
    Apr 8, 2014. 07:40 PM | 3 Likes Like |Link to Comment
  • Renewable Energy Group: A Classic 'Heads I Win Big, Tails I Still Win Something' [View article]
    Nice article, IMHO the SYNM purchase really expands their options to GTL, CTL and BTL, and more aggressively pursue cellulose. Also, SYNM isn't a direct competitor, they produce renewable diesel, REGI produced biodiesel. Using your EBITDA margins, that essentially equals the share of the BTC that REGI collects. Once again, good article, but I wouldn't rely on book value to value these companies, other than cash, without regulatory support the assets are scrap metal.
    Apr 8, 2014. 09:06 AM | 2 Likes Like |Link to Comment
  • Renewable Energy Group, Inc.: A Textbook Dollar Bill For Fifty Cents, Maybe Less [View article]
    "The author tells everyone directly that soybean oil-based biodiesel producers are NOT profitable, "they current have negative operating margins." When a company's only source of profit, that is carrying a non-profitable segment, starts generating less profit, to the point where it can no long cover the losses of the other segment, what are you left with? A big problem. "

    The question people have to ask is why a company would ever produce at a negative margin. Don't these CEOs know basic micro-economics 101? Is this entire industry clueless? No, they know exactly what they are doing. Most of them lived through 2012. You are mistaken to think that they are making negative margins. What they are doing it accumulating future revenues counting on the tax credit being reinstated and made retroactive. That is the huge benefit REGI has with its cash. They can afford to fund operation while they are waiting on the tax credit vote, that is exactly what happened in 2012. Go look at REGI's presentations and you will see how the "adjust" EBTDA for post-tax credit passage. Yes REGI technically did show poor earnings in real time for 2012, but after the reinstatement of the tax credit earnings were outstanding. REGI will likely rally strongly with the passage of the tax credit and/or a boost to the biodiesel RVO.
    Apr 5, 2014. 09:06 AM | 3 Likes Like |Link to Comment
  • Renewable Energy Group, Inc.: A Textbook Dollar Bill For Fifty Cents, Maybe Less [View article]
    "How risky can it be?"

    Very, remove the EPA's RFS2 and those assets are worthless, regardless of what the balance sheet says.
    Mar 30, 2014. 08:52 AM | 1 Like Like |Link to Comment
  • Renewable Energy Group, Inc.: A Textbook Dollar Bill For Fifty Cents, Maybe Less [View article]
    "Syntroleum stock volume had a curious spike at the end of the day. Do you know why? "

    Don't know who or why, but SYNM is selling at a 20% discount to where it should trade. If I were an institution I would be buying shares to ensure the buyout takes place. It is basically a free 20% if they succeed.
    Mar 22, 2014. 01:24 PM | 1 Like Like |Link to Comment
More on REGI by Robert Wagner