Thinking Small in Ethanol
February 22, 2008
By Greg Sushinsky
With oil surging above the $100 a barrel mark and headed for
who-knows-where, it’s time to look seriously again at alternative
fuels. Although there has been a recent up tick in one sector of the
green economy in solar stocks, prior to that it looked as though
ethanol stocks would be the rage. This falling in and out of fashion,
along with the adjustments of business models, costs and profit
projections, as well as the fortunes of all facets of the alternative
energy field, are likely to ebb and flow as these young industries
grow into the future.
One alternative energy company involved in this ebb and flow of
fortunes is Gulf Ethanol Corp. (OTC: GFET), which is a small entry
in the ethanol field out of Houston, Texas. They feature a particular
type of technology and product, cellulosic ethanol, are concentrated
in Texas and the Gulf Coast region and sell fuel to North American
markets. Typical of such small companies, its numbers are highly
fluid. CNN Money lists Gulf Ethanol with an $8.6 million market cap,
while other sources, including the company, peg this figure at
$26-$28 million. It registered a 1 cent-per-share loss in earnings for
the trailing twelve months. They deal in cash flows of hundreds of
thousands, not millions of dollars at this stage. The stock has
traded in a range from 0.65 to 3.01 in the last 52 weeks, so you can
see it is small, speculative and volatile—a true micro-play for
traders. It recently has traded at 0.81 per share.
So what’s the appeal? Estimates for the next twenty years range
in the several trillion dollar range as far as investment in the
alternative energy field, including of course ethanol. Ethanol is ethyl
alcohol, also known as drinking alcohol or grain alcohol, which is
usually processed by fermenting sugars and yeast. With the
cellulosic process, instead of using grains directly in the process,
abundant plant remains such as corncobs, straw and sawdust—all
cellulose-- may be used, though they must undergo a hydrolysis
process of fermentation to make them bio-available. Genetically
engineered cellulase is being developed, also. These processes
are an attempt to make cheaper, more readily available ethanol for
fuel.
The nascent ethanol industry contends that these ethanol fuel
blends will be more efficient than gasoline, and that the cellulosic
ethanol will be more efficient than even grain-based ethanol. With
the widespread availability of cellulose, it will also provide cheaper
fuel for transportation, particularly as the technologies of processing
the cellulose into ethanol improve. So this stock is a potential trade,
also maybe a harbinger of the next 25-50 years of the energy
industry, most notably the renewable energy industry.
February 22, 2008
By Greg Sushinsky
With oil surging above the $100 a barrel mark and headed for
who-knows-where, it’s time to look seriously again at alternative
fuels. Although there has been a recent up tick in one sector of the
green economy in solar stocks, prior to that it looked as though
ethanol stocks would be the rage. This falling in and out of fashion,
along with the adjustments of business models, costs and profit
projections, as well as the fortunes of all facets of the alternative
energy field, are likely to ebb and flow as these young industries
grow into the future.
One alternative energy company involved in this ebb and flow of
fortunes is Gulf Ethanol Corp. (OTC: GFET), which is a small entry
in the ethanol field out of Houston, Texas. They feature a particular
type of technology and product, cellulosic ethanol, are concentrated
in Texas and the Gulf Coast region and sell fuel to North American
markets. Typical of such small companies, its numbers are highly
fluid. CNN Money lists Gulf Ethanol with an $8.6 million market cap,
while other sources, including the company, peg this figure at
$26-$28 million. It registered a 1 cent-per-share loss in earnings for
the trailing twelve months. They deal in cash flows of hundreds of
thousands, not millions of dollars at this stage. The stock has
traded in a range from 0.65 to 3.01 in the last 52 weeks, so you can
see it is small, speculative and volatile—a true micro-play for
traders. It recently has traded at 0.81 per share.
So what’s the appeal? Estimates for the next twenty years range
in the several trillion dollar range as far as investment in the
alternative energy field, including of course ethanol. Ethanol is ethyl
alcohol, also known as drinking alcohol or grain alcohol, which is
usually processed by fermenting sugars and yeast. With the
cellulosic process, instead of using grains directly in the process,
abundant plant remains such as corncobs, straw and sawdust—all
cellulose-- may be used, though they must undergo a hydrolysis
process of fermentation to make them bio-available. Genetically
engineered cellulase is being developed, also. These processes
are an attempt to make cheaper, more readily available ethanol for
fuel.
The nascent ethanol industry contends that these ethanol fuel
blends will be more efficient than gasoline, and that the cellulosic
ethanol will be more efficient than even grain-based ethanol. With
the widespread availability of cellulose, it will also provide cheaper
fuel for transportation, particularly as the technologies of processing
the cellulose into ethanol improve. So this stock is a potential trade,
also maybe a harbinger of the next 25-50 years of the energy
industry, most notably the renewable energy industry.
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