Bullish Option Flow In $GEVO Stock After Largest Supply Agreement for Renewable Fuels

  • Post category:Options Trading
  • Reading time:9 mins read
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Bullish option flow was detected in GEVO stock on December 7, 2021, after the company announced its largest supply agreement to date for its renewable fuel.

Bullish Option Flow In GEVO Stock

Gevo Option Flow

Make sure to review this lesson on option flow so that you understand the image above.

Gevo Inks Largest Supply Agreement To-Date for Renewable Fuels

Kolmar and Gevo have entered into a financeable fuel supply agreement for 45 million gallons per year (on a neat basis) of renewable, energy-dense liquid hydrocarbons that are expected to be produced from Gevo’s second Net-Zero production facility, Net-Zero 2. Kolmar is a wholly owned subsidiary of Kolmar Group AG that is a privately held service provider, manufacturer, and marketer of renewable fuels headquartered in Zug, Switzerland.

The agreement with Kolmar demonstrates that Gevo is continuing to diversify its partner base geographically as it grows its presence on the global stage. The fuel supply agreement provides for Gevo to supply Kolmar with renewable hydrocarbons, including sustainable aviation fuel (“SAF”) and isooctane that is a key component of renewable premium gasoline.

Gevo expects to supply 45MGPY of renewable fuels to Kolmar from its Net-Zero 2 plant that is currently being developed in the Mid-West of the United States. Deliveries to Kolmar would represent the entire plant output based on Net-Zero 2’s current design. Under the fuel supply agreement, Net-Zero 2 is expected to generate approximately US$300 million per year of gross revenue, including revenue from environmental benefits. With protein and corn oil co-product sales, Net-Zero 2 is estimated to generate gross revenues of approximately US$350 million per year. Over the eight years of the agreement, Net-Zero 2 all-in, gross revenue is estimated to be up to approximately US$2.8 billion, inclusive of renewable fuels and related products for the food chain.

According to Raf Aviner, President of Kolmar Americas, Inc.: “In addition to our traditional businesses, Kolmar is dedicated to commercial development and optimization of leading-edge low carbon products and technologies. We are excited to align Kolmar’s global supply reach, logistics, and regulatory capabilities with GEVO’s Net-Zero 2 production of cutting-edge low carbon aviation and gasoline fuels to get these advanced, sustainable products to the varied global markets that need and want them the most.”

“With this agreement, Kolmar is investing in the future, and this kind of foresight makes for another excellent partner and should make clear to our investors that we have traction in the market,” said Dr. Patrick R. Gruber, Gevo’s Chief Executive Officer. “We have great potential in our business system to reinvent what is possible. Our system translates well because we actively address food security with the high-value nutritional products that our process generates simultaneously as we produce our advanced renewable fuels. Both products come from the same acre of farmland and add to our environmental benefit.”

Gevo and Sweetwater Energy Sign MoU to Supply Lignocellulosic Feedstocks to Produce Cellulosic Alcohols and Sustainable Aviation Fuel

On November 16, 2021, Gevo, Inc. (NASDAQ: GEVO) signed a memorandum of understanding (MoU) with Sweetwater Energy, Inc., regarding the use of sustainably sourced agricultural residues and woody biomass as a feedstock for producing cellulosic alcohols and energy-dense renewable liquid hydrocarbons.

As outlined in the MoU, Sweetwater plans to build, own and operate a facility adjacent to Gevo’s existing plant in Luverne, Minnesota to produce high-value, plant-based products from cellulose and lignin while supplying Gevo with up to 30,000 tons of biomass-derived cellulosic sugars annually, with opportunities for expansion. The new Sweetwater facility would utilize its proprietary Sunburst technology for deconstructing lignocellulosic biomass. Sweetwater’s anticipated plant-based product portfolio, derived from cellulose and lignin, is targeted for applications in packaging, resins, and other applications to increase performance and sustainability, while displacing petroleum-based products. Gevo plans to use the offtake of the low-cost, cellulosic sugars co-produced by Sweetwater for the anticipated production of cellulosic alcohols and renewable hydrocarbons.

“We’re very excited to work with Gevo,” says Arunas Chesonis, Chairman and CEO of Sweetwater Energy. “This partnership fits perfectly with our goal for the company—replacing petroleum products with renewable solutions at a price point so low that making the right decision for the planet is also the right decision for our customers. This is the beginning of a collaboration that will pay very real dividends for present and future generations.”

Gevo was the first company to demonstrate conversion of cellulosic sugars to make sustainable aviation fuel meeting the ASTM D7566 specification allowing it to be used for commercial flights. The company expects it can be commercialized effectively when cost-effective sources of these sugars meet sustainability goals. In addition, cellulosic D3 RINs are high value and create an opportunity for Gevo to leverage its Luverne plant with anticipated better returns to make higher value products that are in demand in the marketplace.

The potential partnership with Sweetwater to supply cellulosic sugars provides an exciting model for Gevo. Because this offtake model could be replicated globally in multiple locations to fill a gap in the marketplace, it could further expand the reach of Gevo’s systems approach to sustainability, while allowing the company to stay focused on its technology for the production of alcohols and hydrocarbon fuels. Developing new partnerships for the conversion of cellulosic biomass is expected to continue to be a part of Gevo’s strategic plan.

Since Sweetwater’s Sunburst technology is designed with the flexibility to pretreat many types of biomass and has been proven in operation at commercial scale at the Sweetwoods Project in Imavere, Estonia, Sweetwater plans to increase the types of feedstock used in the Luverne plant to include qualified wood products and agricultural residues. Construction of the Sweetwater facility adjacent to the Luverne facility is anticipated to begin in Q3 2022.

“Combining forces with Sweetwater is a great way to leverage the best technology and resources from both parties to expand our addressable feedstocks to produce cellulosic alcohols and energy dense hydrocarbon fuels and plant-based products,” says Dr. Paul Bloom, Chief Carbon and Innovation Officer of Gevo. “Working together we anticipate delivering products to the market faster while decreasing risk throughout the value chain and lowering overall product carbon intensities through a systems approach to decarbonization. This is an important step to expand the portfolio of carbohydrates we intend to process to include cellulosic sugars that represent a huge amount of feedstock globally.”

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GEVO Stock Technical Analysis

Gevo Stock Chart

GEVO is part of the Oil, Gas & Consumable Fuels industry. There are 403 other stocks in this industry. GEVO outperforms 88% of them. When comparing the yearly performance of all stocks, we notice that GEVO is one of the better performing stocks in the market, outperforming 97% of all stocks. We also observe that the gains produced by GEVO over the past year are nicely spread over this period. However, this overall performance is mostly based on the strong move around 10 months ago. There is a support zone ranging from 4.78 to 4.78. This zone is formed by a combination of multiple trend lines in multiple time frames. There is a resistance zone ranging from 7.39 to 7.41. This zone is formed by a combination of multiple trend lines in multiple time frames. The technical rating of GEVO is bad and it also does not present a quality setup at the moment. Price movement has been a little bit too volatile to find a nice entry and exit point. It is probably a good idea to wait for a consolidation first. Click here to sign up for email alerts on when GEVO stock is a good entry.

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