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Syntroleum CEO Discusses Q2 2011 Results - Earnings Call Transcript

In summary, we’ve averaged $1.30 per gallon gross margin and with the project operating expense of $0.55 per gallon; dynamic fuels would have achieved a cash margin of $0.75 per gallon or $56 million a year at design capacity. There remains considerable revenue upside.

Our diesel price doing commissioning and start-up averaged $5.55 per gallon. During the same period the average full value of renewable diesel, which is calculated the sum of ULSD diesel price plus RIN plus a dollar subsidy was $6.01 per gallon. As we continue to improve plant reliability, we would expect to close the differential between our current sales price and full value of renewable diesel.

During the 10 months of operation, our non-diesel price component of production averaged $1.68 a gallon versus a petroleum equivalent of $2.03. This discount again was primarily due to commissioning volatilities.

Finally, we expect to receive 1.5 advanced bio-fuel or D5 RINs per gallon for our renewable naphtha. Advanced bio-fuel RINs has averaged $0.61 per RIN for the first six months of this year and currently trade at $0.84 per gallon. We have applied the EPA for advanced bio-fuel naphtha RINs and expect approval in the fourth quarter. If we had received full market value for our products and naphtha RINs during the prior 10 months, our average revenue per gallon would have been $5.48 versus $4.98 or an improvement of $0.50.

The fundamentals of the renewable diesel market remain strong. Renewable Fuel Standard or RFS was created by Congress in 2007 to stimulate the adoption of renewable fuels in the United States. In 2010, EPA adopted the second generation of RFS know as RFS2, which was implemented in July 2010. Since its introduction, RFS2 remains the primary tool to create bio-fuels demand in the U.S.

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