Energy Business

Pacific Ethanol Outlook and Update Bring More Hope and Ambition

Pacific Ethanol, Inc. (NASDAQ: PEIX) came within about 1% of hitting a new 52-week high on Tuesday. The operational update was provided in its 10-K commentary. Pacific Ethanol produced 149.7 million gallons of ethanol with sales of $908.4 million in 2013, versus $816.04 million in revenue and 140.6 million gallons in 2012.

The ethanol producer’s strategic goals for 2014 include restarting its Madera, California production facility, as well as further improving operating efficiencies at the Pacific Ethanol Plants. Pacific Ethanol also said it plans to continue diversifying its revenue and feedstock, and in continuing to increase the value of its produced ethanol by further reducing its carbon intensity. The end game is to support sustained profitable growth.

Shares of pacific Ethanol closed up 14.9% at $17.90 versus a 52-week range of $2.33 to $18.20. Its trading volume of 3.9 million shares was nearly triple its average daily volume of 1.4 million shares.

Several other issues stood out that will help the shareholder base feel good about ethanol’s prospects. The company’s filing included the following and many more outlook comments:

  • “Ethanol prices in the Western United States have typically been $0.20 per gallon higher than in the Midwest due to the freight costs of delivering ethanol from Midwest production facilities. From October 2013 through March 2014, however, ethanol prices in the Western United States have averaged $0.40 per gallon higher than ethanol prices in the Midwest due to rail logistics challenges.”
  • “We began producing and selling corn oil at our Magic Valley and Stockton facilities in June 2013 and October 2013, respectively, allowing us to diversify our revenue and providing immediate incremental gross profit. We are currently producing corn oil in meaningful amounts at both facilities and we are evaluating whether and when to implement corn oil production technology at the remaining two Pacific Ethanol Plants.”
  • “The regulatory environment continues to support the long-term demand for renewable fuels. California’s Low-Carbon Fuel Standard requires refiners to reduce the carbon intensity of their fuels by 10% between 2011 and 2020, which we believe is an aggressive requirement that will necessitate a significant amount of low-carbon fuel to displace gasoline in the California fuel supply. We continue to reduce energy use at the Pacific Ethanol Plants to lower the carbon intensity of our ethanol.”
  • “We also continue to diversify our feedstock by using a blend of corn, sorghum and beet sugar, which reduces feedstock costs and reduces the carbon output of ethanol we produce. The United States Department of Agriculture anticipates a record 2013-2014 corn crop, but we are uncertain how the new crop will affect our ethanol production and intend to operate the Pacific Ethanol Plants with flexibility in anticipation of the new crop.”