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Renewable Energy Group Q3 Earnings Forecast

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Viking Analytics


  • Background of Renewable Energy Group.
  • Forecast for Q3 and Q4 earnings, and discuss some assumptions and results.
  • Some commentary on REGI's convertible bonds.
  • Some comments on U.S. biofuel policy.


Renewable Energy Group (NASDAQ: REGI) is the largest producer of biodiesel in the U.S., having grown through a series of acquisitions. It now owns over 500 million gallons of nameplate biodiesel production capacity.

Beyond production growth, REGI has made many investments over the years to diversify its production technologies, and therefore has the ability to process multiple feedstocks at many locations. This enables REGI to select the local feedstock for which it obtains the highest production margin. Biodiesel feedstock options include soybean oil, used cooking oil, corn oil and other animal and vegetable fats. Some byproduct feedstocks like used cooking oil and distillers corn oil obtain premium carbon credit values which can greatly improve production margins in low-carbon mandated markets like California.

As a co-founder a biodiesel company in 2006, I worked in the industry for a decade. Having initially raised capital through a friends and family round, I helped grow a niche biofuel company into a multi-million dollar enterprise operating throughout the East Coast. As a result, I probably know more about the biodiesel industry than I wish I did. The most notable thing about the industry is its absolute co-dependence upon government subsidies and government policy. As a result of this co-dependence, it is often difficult for a biodiesel producer to plan for the future, raise capital, and meet investor expectations. REGI deserves a lot of credit for weathering the myriad of policy storms that have surrounded the industry.

For example, the biodiesel Blender’s Tax Credit (“BTC”) is an on-again, off-again $1/gal credit that the blender of biodiesel can receive or use to offset other tax obligations. This credit was allowed to lapse at the beginning of 2012, 2014, 2015 and 2017. In each of these years, REGI and other biodiesel producers were forced to operate with near-zero production margins, with the hope and expectation that the BTC

This article was written by

Viking Analytics profile picture
Systematic and quantitative analysis.Rob McBride has 15+ years of experience in the systematic investment space and is a former Managing Director at a $14 Billion hedge fund. Rob has deep experience with market data, software and model building in financial markets. Erik Lytikainen has 25+ years of experience as an entrepreneur, business developer and financial analyst. He founded Viking Analytics in 2015 after selling a commodity production & trading company he co-founded in 2006.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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