Renewable Energy Group, Inc. (NASDAQ:REGI) Q3 2018 Earnings Conference Call - Final Transcript
Nov 06, 2018 • 04:30 pm ET
(Operator Instructions) Craig Irwin, Roth Capital Partners.
So, first, I should say congratulations on again another very strong quarter. My first question I wanted to ask is about the non-cash hedge losses in the quarter. Can you articulate for us precisely how much they were and what your assumptions are in the fourth quarter so we can see how really strong this quarter was?
We used to give you a little bit of a sense of our risk management loss for the quarter, it was about $7.5 million. But if you really look at the ULSD movement, the spot prices, the last 10 days of the quarter, we had a significant run up in ultra-low sulfur diesel. And that was during that short time period, a pretty significant impact, which is largely protecting fourth quarter gallons. So, that headwind between the time we gave you guidance in end of the quarter was a $15 million movement, and $11 million roughly of that is related to fourth quarter specifically. That said, if you look at what energy prices have done just in the month of October or since September 30, that $7.5 million risk management loss for the quarter, so to date, has virtually reversed in October. So, that's what you can expect going forward.
And I was kind of surprised by the announcement of the, I guess, the joint venture plan, if you will call it, REG-Ferndale, and that you're in serious, serious consideration with Phillips on moving forward on this. I was kind of surprised that you'd announced this ahead of maybe a 120 or 240 for REG Geismar. Can you maybe share with us specifically what catalyzed the public disclosure around the cooperation with Phillips 66? And should we expect similar things to play out for Geismar?
Sure, Craig. As we've said today and also in our press release, we've been working with Phillips 66 for over a year on this project. And we got to the phase of the preliminary engineering where we needed to go public, both to begin the actual on-site permitting evaluation and, again, the next phase of cost-estimating in engineering. Because that activity was going to be public, we felt it was urgent that we notify our investors via a press release. So, that's really what dictated the timing, it's just the general nature of project development became public. Relative --
No, and then just relative to Geismar, obviously, we're in the last phases of -- last phase of the kind of engineering -- the detailed engineering for expanding and debottlenecking the logistics of Geismar. And then, again, we're in the preliminary stages of looking at the nominally doubling that new added capacity at Geismar. So, all of that activity is taking place simultaneously. And for a company like REG, what's nice is a lot of it's very similar. And it's not like it's three separate projects, it's work that's complementary.
So, then that hedges actually, that bridges right over to the question I