Mar 29, 2018
Executives
Todd Waltz - EVP and CFO Eric McAfee - Founder, Chairman, and CEO
Analysts
Carter Driscoll - B. Riley FBR Ed Woo - Ascendiant Capital
Operator
Welcome to Aemetis Fourth Quarter 2017 Earnings Review Conference Call. At this time all participants are in a listen-only mode.
A brief questions-and-answer session will follow formal presentation. As a reminder this conference is being It is now my pleasure to introduce your host, Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis.
Mr. Waltz you may begin
Todd Waltz
Thank you, Matt. Welcome to the Aemetis Fourth Quarter 2017 earnings review conference call.
We suggest visiting our website at aemetis.com to review today’s earnings press release, updated corporate presentation, filings with the Security and Exchange Commission, recent press releases, and previous earnings conference calls. This presentation is available for review or download on the aemetis.com homepage.
Before we begin our discussion today, I’d like to read the following disclaimer statement. During today’s call, we’ll be making forward-looking statements including, without limitation, statements with respect to our future stock price, plans, opportunities, and expectations with respect to financing activities.
These statements must be considered in conjunction with the disclosure and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risk and uncertainty and that future events may differ materially from the statements made.
For additional information, please refer to the Company’s Security and Exchange Commission filings, which are posted on our website and are available from the Company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results based on GAAP.
A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the quarter ended on December 31, 2017, which is available on our website. Adjusted EBITDA is defined as net income or loss plus to the extent deductible in calculating such net loss, interest expense, loss on extinguishment, income tax expense, intangible and other amortization expense, depreciation expense, and share-based compensation expense.
Now, I’d like to review the financial results for the fourth quarter of 2017. Revenues were $38.9 million for the first quarter of 2017 compared to $37.4 million for the fourth quarter of 2016.
The increase in revenue was attributable to increase in ethanol production volume from 14.6 million gallons during the three months ended December 31, 2016 to 16.3 million gallons during the three months ended December 31, 2017. Gross profit for the three months ended December 31, 2017 was $302,000 compared to $3.9 million during the same period of 2016.
Gross profit decline was attributed to softening prices of ethanol from $1.96 per gallon during the three months ended December 31, 2016 to $1.65 per gallon during the three months ended December 31, 2017 in a market where the cost of corn remained flat. Selling, general and administrative expenses were $3.5 million during the fourth quarter of 2017 compared to $2.9 million during the fourth quarter of 2016.
Operating loss was $3.4 million for the fourth quarter of 2017 compared to operating income of $900,000 during the fourth quarter of 2016. Net loss was $9 million for the fourth quarter of 2017 compared to a net loss of $1.4 million for the fourth quarter of 2016.
Cash at the end of the fourth quarter of 2017 was $400,000 compared to $1.5 million at the end of the fourth quarter of 2016. Now I’ll review the financial results for the 12 months ended December 30, 2017.
Revenues increased to $150 million for the 12 months ended December 31, 2017 compared to $143 million for the same period in 2016. The increase in revenue was primarily attributable to increase in the production of ethanol and wet distillers grains.
Gross profit for the 12 months ended December 31, 2017 was $3.4 million compared to the $11.6 million during the same period in 2016. Gross profit decline was attributable to an increase in the cost of corn coupled with softening in the places -- in the place of wet distiller grain for the year ended December 31, 2017, compared to 2016.
Selling, general, and administrative expenses were $30.2 million during the 12 months ended December 31, 2017 compared to $12 million during the same period in 2016. The increase in selling, general, and administrative expense was primarily attributable to $800,000 increase in salary and stock compensation and a $500,000 increase marketing, commission and professional fees compared to the same period in the prior year.
Operating loss was $12.2 million for the 12 months ended December 31, 2017 compared to operating loss of $800,000 million for the same period in 2016. Net loss attributable to Aemetis was $30.3 million for the 12 months ended December 31, 2017 compared to a net loss of $15.6 million during the same period in 2016.
That completes our financial review of the fourth quarter 2017. Now, I’d like to introduce the Founder, Chairman, and Chief Executive Officer of Aemetis, Eric McAfee, for a business update.
Eric?
Eric McAfee
Thank you, Todd. For those of you who may be new to our company, let me take a moment to provide some brief background information.
Aemetis was founded in 2006 and we own and operate production facilities with more than 110 million gallons per year of renewable fuel capacity in the U.S. and India.
Included in our production portfolio is a 60 million gallon per year capacity ethanol distillers grain and corn oil plant located in Keyes, California near Modesto. We also built, own, and operate a 50 million gallon per year capacity distilled biodiesel and refined glycerin biorefinery on the East Coast of India near the port city of Kakinada.
In 2017, we set in place the foundational milestones for significant cost savings driven by plan EB-5 funding, that is expected to generate decrease interest costs and advanced biofuels projects that are expected to generate significant revenue growth and positive cash flow from operations. During 2017 and continuing this year, I made about a dozen trips to Asia, the Middle East in Europe to present the Aemetis to EB-5 brokers and investors.
We have completed the fundraising for a $35 million EB-5 subordinated refinancing of current debt at only a 3% interest rate. And now let’s sign about a dozen brokers and finders for additional $50 million of EB-5 low interest refinancing.
After more than a year of short-term extensions with the U.S. federal budget was being negotiated.
Last week, the EB-5 program was extended until September 2018 of the current rate of $500,000 of investment per family, which is very positive for our offering. To begin, let’s review our biodiesel business India.
The Aemetis 50 million gallon capacity distilled biodiesel and refined glycerin on the East Coast of India has no term debt and generated about $13 million of revenues operating and only about 10% of capacity during 2017. During the period of uncertainty created well the national Goods and Services Tax systems known as GST was being adopted and then revised in India.
The May 2017, three-year biodiesel supply agreement with BP Singapore required the construction of advanced pre-treatment unit to process high free fatty acid feedstock supplied by BP to the India biodiesel plan. The completion of commissioning of the pre-treatment unit will enable the India plan to process imported products with high free fatty acid content as well as convert BP feedstock into biodiesel for export primarily to the EU and U.S.
As a result of these plant upgrades and the favorable domestic market in India, we believe the India subsidiary is entering a rapid revenue and earnings growth phase for our distilled biodiesel and refined glycerin businesses. Through continued capacity expansions and plant debottlenecking, maintaining a price of crude oil above $50 a barrel will continue to be a leading factor in the profitability of India operations.
The India subsidiary is expected to increase revenues from about $1 million per month in 2017 to more than $6 million per month while generating healthy positive cash flow due to favorable feedstock price and low interest costs as a result of the repayment of the State Bank of India term debt in 2016. The refined glycerin business has been and is expected to be a significant contributor to this revenue and operating cash flow expansion.
The addition of an advanced pre-treatment process for low-carbon low-cost renewable waste feedstock is expected to provide feedstock alternatives, increased profit margins and a sustainable technology advantage for our India subsidiary. Shipments in India to domestic biodiesel and glycerin customers have increased in Q1 2018 and are expected to continue to expand.
Shipments to BP are expected to begin in Q2 2018 and to be a consistent contributor to revenues and positive cash flow. We expect to ramp up operations to about 5,000 metric tons per month of biodiesel shipments to BP for export.
In addition to more than 7,500 metric tons per month, our biodiesel and glycerin is supplied to domestic India customers. Now let’s review our ethanol business.
The Modesto ethanol plant in California has been consistently operating above nameplate capacity with a current annual run rate of more than 61 million gallons per year. Our focus on operational efficiency and cost reductions of the plant has reduced expenses for chemicals and enzymes significantly in the past year by changing vendors and adopting new products.
We are working on plant upgrade projects over the next year, we do expect will increase revenues, reduce costs and reduce the carbon intensity of our ethanol from the current 68 CI score to below 60 CI under the Low Carbon Fuel Standard in California. This carbon intensity score reduction is expected to generate more than $10 million per year of additional operating cash flow through a reduction in natural gas usage and an increase in the value of our lower carbon ethanol under the Low Carbon Fuel Standard.
In 2017, we achieved milestones in our plant to alleviate the air pollution and health crisis in the California Central Valley by building 160 million gallons of cellulosic ethanol production in four plants. The first phase of the California cellulosic ethanol project is a 12 million gallon per year plant located at the former Riverbank plant near Modesto.
We have achieved several major milestones during 2017 that are foundational for this business, including signing of 55 year lease on the Riverbank site, signing a 20 year feedstock agreement with 10 years of fixed pricing for waste orchid wood from the local area, obtaining the key environmental permits for the plant and satisfying the key requirements for a $125 million USDA loan guarantee to fund the construction of the 12 million gallon per year Riverbank project. We are currently responding to questions from The Office of Management and Budget prior to the issuance of a loan rating which is the amount of funds that will set aside in the USDA program related to the Aemetis loan guarantee.
During 2017 we made a significant investment to build and operate a cellulosic ethanol demonstration plant in Richmond, Washington at the InEnTec Technology Center for 120 days to generate yield data and operational up-time for the USDA loan guarantee. The cost to good of this demo plant were shown some expense in 2017 and increase our loss for the year, but we believe we’ll payoff in 20 years of low interest financing expected revenues of approximately $50 million from the 12 million gallon of cellulosic ethanol and positive cash flow for the plant starting in mid 2019.
The acquisition of Edeniq continues to go slowly with litigation discovery being delayed by Edeniq newer. This week, Aemetis filed a motion to compel against the Edeniq to obtain a significant number of documents that may not have yet been delivered during the past year of litigation.
We are confident in the ability of our case. We look forward to further progress by Edeniq in the adoption of corn kernel fiber technology.
We continue to be strongly supportive of the Company’s technology and look forward to favorable enforcement of the signed acquisition agreement under which we believe Aemetis is fully performed to-date. In summary, Aemetis is working on the refinancing of $50 million of senior debt with low cost represent interest rate EB-5, growing revenues and profitability at a 50 million gallon per year India biodiesel and glycerin plant to ramp up to near full capacity.
Lowering cost and increasing revenues at the 60 million gallon per year California ethanol plat through significant reductions in carbon intensity to generate about $10 million per year of increase profit margin and cash flow. And building 12 million gallons per year of Cellulosic ethanol capacity in Central California, combined these initiatives are expected to generate meaningful annual operating cash flow in less than 18 months.
We anticipate that we will have approximately $48 million of senior secured debt outstanding after funding the $50 million of EB-5 which were putting Aemetis in a much stronger cash flow position and we position us to refinance remaining high interest rate debt would low cost bank or bond funding. Now, let’s take a few questions from our call participants.
Matt.
Operator
Thank you. At this time, we will conduction a question-and-answer session [Operator Instructions] Our first question is from Carter Driscoll from B.
Riley FBR. Please go ahead.
Carter Driscoll
Good afternoon Todd, Eric. First question, you seem pretty confident that the Kakinada plant is on the path towards meaningful improvement in terms of capacity utilization.
You talk about and you gave some numbers in terms of where you think the EB is supplying domestically versus for EB taking in from VP for export. Can you about maybe the timing of the ramp and maybe the composition of those two components by say year-end?
And then, what if you do to achieve kind of near full utilization any potential expansion opportunities and how you would if so potentially finance them?
Eric McAfee
The India production plant is already ramping up because the domestic market changed fundamentally in February of 2018 with the 33% reduction in the Good and Services Tax of biodiesel. And so, we have already ramped up domestic production of both glycerin and biodiesel that will show up in first quarter and increasingly in the second quarter.
And I believe by the time we hit the third quarter, we will be at that 7,500 tons per months target that we described in the summary. The ramp up of our BP business which we expect our first shipments to be in production in Q2 and frankly there's a process of getting it actually on the boat they can have a two to four week window in it.
So we are working towards the Q2 first shipment to BP, but we’re targeting that we would be shifting 5,000 tons a month by the end of Q3 to BP. So both those businesses are basically ramping up through the next Q2 and Q3 to our 7,500 and 5,000 ton numbers that we described.
Regarding expansion, we have -- we're funding the existing capital expansion in India from routine cash flow from operations in India at this time. And so, we would be in a position to be able to continue funding that expansion just by retained cash in India.
A decision will be made later on this year probably as early as the third quarter about whether we use local term debt because the plant has no term debt, has no long term debt financing. And this is essentially debt for the assets for $50 million term plan.
We will make a decision whether we use local term debt and then use the X -- the operating cash flow primarily to reduce the parent company senior secured debt, so that decision won't be taken though until probably sometime in the third quarter of this year. We however do expect we can fully finance our expansion out of change cash flow if we made the decision that the parent company debt have been largely refinanced through EB-5 funding and that moving money out of India was not as wise as just investing in capacity expansion.
Carter Driscoll
It sounds like a big part of the plants to be able to fund and pay down some of the parent debt from operating cash and therefore either capital local, term markets in India for potential expansion, thus far you depend on your ability to secure EB-5, it can be a somewhat lengthy process. I know you’ve made several trips over to, trying to secure that.
Maybe just talk about process that was extended till September, does that mean you need to secure that approximately $15 million by that time frame? Do you anticipate the authorization can go beyond September, but I'm just thinking about it, is that hard fast date?
And then I have a couple of follow-ups on the ethanol side.
Eric McAfee
Sure, EB-5 has already played a very important role in our company. We've already raised $35 million of fund raising and just have a second phase $50 million offering that we're working on right now.
The significance of September 2018 should not be understated the entire program has basically been extended for a month or two months at a time for the last year and a half. And so when we do meetings in China, Vietnam, India, Middle East, I mean, Abu Dhabi, Dubai everybody looks at is well.
I don't know if this program's going to be around in four weeks. So why should I engage lawyers go through the entire immigration, preparation and documentation process and transfer funds and all these kind of things because the whole thing could get changed materially in 30 to 60 days and that's been the reality for the last year and a half.
Now in our particular situation, our first offering had a requirement that we would escrow the funds, the $500,000 per family for approximately in 18 to 24 month period in which their immigration documentation was pending at the U.S. government, because we're now a proven project developer and have successfully completed the immigration process for almost all of our investors, we now do not have that as grow requirement.
So within approximately 2 to 4 weeks after the funds, our deposited into U.S. Bank cash flow there then release upon the immigration documentation just being filed with the federal government, not being fully approved.
And so, that is a dramatic change in the cash cycle for this around EB-5. And from that this six month window and which we can have plenty of time to move the roughly 100 investors through the process.
And not have to wait 18 to 24 months, we get the capital is reward for the previous work we did to build broker relationships and frankly have a successful Phase I offering. Is that answered your questions?
Carter Driscoll
Moving over to the demo unit that you -- it sounds like you have favorable engineering data from to go back USDA that to try to close the loop in terms of securing the loan. Can you talk about just the timing of that process start to recall correctly this seems like this indicated facility and then the timeframe to get that first leg of that first facility?
I mean it sounds like you actually have very strong plans to build out 160 million gallon. Obviously, you take several years to do so.
But that would fundamentally change composition of your ethanol business if you’re able to do so, that’s call over the next three or four years. What is your -- you’ve got the feedstock, you’ve got the space.
What is the biggest hindrance to getting the first 12 million units -- excuse me volume build at the site you have now? Is it the funding?
Is it just pure execution? It doesn't sound like you've lot of hurdles left outside of the funding and then obviously plan to construction?
Eric McAfee
The one item I would highlight would be the key permits under California Law, California Environmental Quality Act being a big one and also under federal law with no FONSI have all been completed. So that usually is the timing barrier on this project is the administrative process for those permits.
So those being in place means that along with our 20-year feedstock agreement 55-year at least on the project et cetera. We are frankly just going through a financial closing process.
We are funded for the engineering activity we announced recently we’ve completed the pre-engineering process. So, there is -- has been a delay and the delay has been drove by frankly just the administrative process within the Office of Management and Budget at the White House.
And we have seen -- I believe the number of four projects go through that rating process successfully, $112 million loan close in December for renewable diesel plan. So the process is working, but it is been going slowly and we do expect in April to complete that process and be able to obtain a loan commitment letter from USDA.
From receiving that loan commitment letter we then move to closing and the closing process is 60-to 90-day kind of process we expect to go through. So, we’re currently looking at a Q2 closing on funding, but we’re already fully finance for the continuation of engineering and procurement has began et cetera.
So really we’ll not have much impact on project timing to have a closing in Q2. If there is a further delay beyond that and there would be pretty much a month-to-month delay on opening.
But we are projecting a Q3 2019 opening of Phase I and then we’ve built it in a size that matches the US loan guarantee program, that’s why the 12 million gallons is what it is. It fits the funding size of the program, looks for.
The additional phases we would expect would match more of what the bond market has an upside for. And so we do expect to see a ramp up in the number of gallons we do in Phase II et cetera.
Carter Driscoll
Why we have seen a greater push given the price disparity in terms of what the criteria that qualifies in terms of cellulous ethanol? I mean why there hasn't been a greater pushes within the industry to move after very challenging year for corn ethanol in terms of margins?
Help me with your long history in this side of the business, so why have you seen a greater push for this? I mean it seems to be a much larger margin opportunity than corn ethanol obviously much smaller volumes, but it just seems like push for cellulosic and other types of advanced biofuels is recently R&D perspective somewhat installed industry wide?
Eric McAfee
We are using an advanced cellulosic ethanol technology. I would call it a second generation cellulosic ethanol technology.
The first generation technology which had basically four plants though is basically a parallel of the corn ethanol business. If you take sugar out of the feedstock, feed that sugar to yeast and produce ethanol.
And so as you look at those projects, a major consideration is that approximately 45% of the feedstock is not sugar. So in any circumstance you are basically wasting about half of your feedstock even if you are really optimizing, no sure you can extract, you’re wasting about half of your feedstock.
We believe that there was a better way and that especially when you look at wood which has over 40% malignant content which will never turn into sugar feed we have opted there need to be a different process. So our second generation process which now has a demonstration unit that as we publicly stated generated over 90 gallons per dry ton of feedstock, that process is fundamentally different and that we take each of the molecules in the feedstock, separate them into a gas and then feed that entire gas a 100% feedstock for the micro that then converts into ethanol.
And so the LanzaTech technology which is based upon feeding a gas to a microbe rather than basically a liquid sugar to yeast was ability for us to effectively double the amount of feedstock available for conversion to ethanol. So for a given dry ton of feedstock, we're not throwing way half the ton immediately before even start going into the process and that has prove out to generate much higher yields.
And I think as that technology is not only demonstrated about us which has been completed, but now proves out with the economics which are extremely attractive. I think you will see a land rush, same thing that happened at the first phase of corn ethanol business from the mandates we put in price in 2005 to 2006 and ‘07.
You will see people realize that there is more than 1 billion tons of available waste feedstock and that that could be converted 90 gallons -- 90 times 1 billion is a big number. So, you are entering the second phase of ethanol but basically on very low carbon very low cost wastes feedstock and what’s delaying this is a technology commercialization gap that we believe we’re leading.
Carter Driscoll
Do you -- given your feedstock supply agreement, is that as the -- there is a sustainable advantage, are there other opportunities for competitors to come in and source similar types of feedstock? I mean it seems like the waste is this otherwise an economical it's almost grow your, only pay to tip it -- you're not pay to take any specific fee, but it’s a very well cost feedstock.
How do you put that in context with some potential entrants as you've talked about it, if you continue to that get the plant up and earnings by 3Q 19, other people to get the chase that. Is just a barrier to entry?
Eric McAfee
We set up three barriers to entry, any one of which is sufficient to provide us permanent protection. Number one is that we got a feedstock agreement with the supplier that provides about 90% of the Orchid wood, waste Orchid wood in our area.
And so, there is a not second choice for this Orchid wood grinding process. And so we have loss up a relationship that can expand far past our first space.
The second thing that we did was we sign exclusive for the entire State of California with the LanzaTech microbe and reactor technology. So, a competitor would have to come in with a lesser technology, remember this is gas conversion and so they’re going to have to start all of it again, and LanzaTech has spent $250 million in 12 years developing our technology with six demonstration plants worldwide.
And we are a big believer in them and they were ranked one by the economy company I think each for the last three years by relative stages. So there is no number two to LanzaTechto be frankly the, there are immature technology that are in biotech five years to maturity convert to where LanzaTech.
The third thing we did, is that we realized the creating a clean sin gas, a clean feedstock for the micro was the key commercialization and we have seen companies using metal catalyst for example who failed as a business, because were unable to produce a clean enough gas to them not filed their catalyst, in our case our catalyst is a organism, it’s a biological micro. And so we went and got worldwide exclusive rights for aiming use of the Aemetis gasolier with the LanzaTech reactor and microbe anywhere in the world.
And so, the InEnTe gas fire has about $300 million of Department of Energy funding over more than a decade and over a $130 million led by waste management in commercialization as a private company. So, this is the technology represents over $430 million of total capital over a couple of decades.
And it has built many commercial facilities, but we locked it up because of the stability to at the low energy inputs produce a very clean gas and then we develop some technology to clean that gas up to standards that are very, very high and exceed what we need for the microbe. So, I should mention that our technology approach of kit gas cleanup is a technology someone else would have to repeat it upon and or to even use the gas fire with LanzaTech.
So, we have import many, many years to ascertain what technologies are going to win and then lock up the rights so that frankly anyone of the factors that is mentioned could fail and we still have three factors that still work for us and we effectively don't have competition. California is the Saudi Arabia of dense waste wood feedstock.
It’s already ground up, it's already collected, it's sitting in a field that the farmer wants to get it out of and it's just very unusual that you have got1.6 million tons per year of the feedstock sitting there, waiting for someone to move it and that that represents a great opportunity for our company.
Carter Driscoll
Remind us again there just enough price differential between we expect to sell the ethanol four versus corn?
Eric McAfee
There's a federal tax credit for $1 one per gallon while ignoring that in this calculation, but for investors if that continues on, add $1 tax credit everything I’d say. Current economic value in the market is roughly $4.80 a gallon, the price of crude oil has risen as we know to over $60 a barrel and as that filters through to supply demand equation on ethanol that's a little more favorable for the ethanol supplier.
I think we'll be talking $5 to $5.10 a gallon for, say, let’s get them all ethanol, plus that $1 per gallon tax credit. I should mention the big driver there is California Low Carbon Fuel Standard credits were $62 last July and then they extended the law from 2020, 2030 and yesterday was a $146.
So we can create a carbon negative fuel. We actually absorb more carbon atmosphere than what the car emits as its driving and so we generate a lot of low carbon fuel standard credits in California and as a result of that the economics on our plant are very favorable.
Carter Driscoll
Maybe a two bigger picture questions for you before get back to queue. Assuming you’ve got this up and running on time, you’ve got the funding, you’ve got the EB-5.
You can change the fundamental cap structure of the Company. Is there a longer term rationale for continuing to supply corn ethanol when you could potentially dominate the cellulosic market?
Eric McAfee
We believe we will be a major contributor to say cellulosic ethanol market and the only carbon market that really pays it for -- pays for, which is California. And so, you are correct that we will get a lot of pressure from people saying, why are you in this corn market which requires we have to bring our feedstock over 1,500 miles each way from the Midwest and suffers under volatility and in uncorrelated markets of corn and fuel.
However, California as I mentioned provides very significant cash compensation for reducing the amount of carbon that is input into the process of making biofuels. And so, we have a team at our plant that has already proven themselves to be able to operate, one of the highest uptime plants in the entire United States.
We take one day a year for routine plant periodic maintenance and in terms of throughput efficiency et cetera, we have achieved at the high end of the industry. What we're doing next that I cited briefly was, we're now changing how much energy we use and we're changing the carbon intensity of our product as a result to doing that.
So we're adopting what I’m considered to be standard technology from other industries that has not been adopted in this industry that will potentially have a 11 carbon intensity point reduction from our corn ethanol business generating over $10 million per year at current LC invest values, if the price look our material standard keeps going up. You can see the more than 10 million of cash flow.
And in that scenario, we would have a sustainable technology advantage of sustainable $1 million of month of additional cash flow and we believe we’re in rising price environment with crude oil and ethanol demand both domestically and internationally. And when we get there, I think we’re going to tell our shareholders fellows, we’re making $0.60 to $1, a share of cash flow running this commodity plan whether we just keep on doing it.
And yes, okay, so it’s not profitable say ethanol plan. But it is certainly a plan that we can expand gallon capacity as part of our upgrade is actually expanding is the physical gallons by about 15%.
And so I think we’ll find a good rationale for leading the traditional corn ethanol business showing how to reduce carbon inputs and therefore increased the value the output we produce.
Carter Driscoll
And then I appreciate all the detail. Maybe this is my last question, increasing rhetoric, I realized that it’s currently established wall, but it established wall for several more years.
But more rhetoric about attacking RFS from current administration's proof certainly a volatile on certain policies, regarding trade and other types of renewal initiatives. Maybe give you perspective, I know we've talked a lot in the past about how it is cemented in the current law, but it doesn’t mean it can't be played with several years out and maybe that potential impact on sediments for the biofuels industry?
Eric McAfee
The biofuels industry today has three drivers for market demand. First and the one that I have as you know given quite a number of speeches about these renewable fuel standards, which is federal law signed by President Bush in December 2007.
And in order to change that federal law, you literally have to go back to Congress, get the 28 corn state, each of which have two senators to agree to change that law. And despite probably billions of dollars of investment made over the last decade by the oil industry, they have failed to have any meaningful traction in any meaningful legislation that would move throughout the house and the senate, and get the signature of the President of United States, who has, I think we all knows largely elected by corn farmers.
And so I feel that we are on a very solid footing with the renewable fuel standard from a legislated policy perspective. From administrative perspective, we have headline risks every day between tweets and newspaper articles, you have that worried investors because they’re not paying attention to legislative process of changing law.
They’re paying attention to just the political process of talking about, how the law is being implemented. And that’s our primary risk and renewal fuel standard is the gibberish among people talking about how they wish that they didn’t have to comply with federal law.
And so, my view on the renewal fuel standard is the legislate changes will be very difficult to make proven out by 10 years of repeated attempts and that the political reality is voting against current farmers in order to increased imports of OPEC, it is the political decision. At the end of the day, every gallon do not buy fuel requires and import a gallon.
We import over 8 million barrels per day of crude oil and every gallon we don’t buy it ethanol or renewable diesel or biodiesel or biodiesel will increase the number of gallons of imported OPEC crude oil we have. And that’s a political reality.
It’s very uncomfortable for some people but that’s just the reality we have. And you cannot be elected president or anything else, if you go to Iowa with the platform that we want to import more from OPEC and take it directly out of the pockets of farmers, school teachers and bankers in Iowa.
So, second and third drivers are state policy, California Low Carbon Fuel Standards, only one of literally every state in the United States. The average blend of ethanol is over 11% of our gasoline supply because states actually in many cases have up to 20% blending goal.
So the state mandates are largely going to overtake the federal mandates and most journalists don’t have good access to what the state mandates are, but today as those state mandates increase trying to get cleaner air and frankly in many states rather drive a market of the corn and soybean farmers that represent 160 million acres of land in the United States, those state mandates are going to carry the water. And then lastly is foreign markets, we export to Brazil, Raízen is the world’s number two ethanol producer but they actually import from the United States.
They're one of our largest export markets for ethanol. China which has some variability in it.
India that just came up with a 10% ethanol mandate can only produce about 3% domestically. Vietnam that just came up with a 5% mandates starting in January.
All these countries are discovering that the cheapest source of sugar in the world is corn starch. And so by taking corn starch converting it into sugar to making ethanol, you end up with a cheapest ethanol in the world.
And so export markets for US ethanol will continue to be in major opportunity for the industry. Does that answer your question?
Operator
[Operator Instructions] Our next question comes from Ed Woo from Ascendiant Capital. Please go ahead.
Ed Woo
My question is more on, what’s your outlook for oil and ethanol? I know it’s pretty volatile all the time but just curious to get your thoughts on that.
Eric McAfee
My outlook for oil is that the Russian and the Saudis have been working together very closely actually over the last two years, but have recently announced that they are working on a 20-year supply constraint relationship. It essentially links OPEC with the Russians.
A part of the driver for that is the need by the Saudis to have a more competent investor base for the Saudi Aramco IPO which has been announced and worked on now and they still seem to be targeting 2018 closing of that IPO. And so in order to achieve their valuation goals, they need a higher price of crude oil.
They have also a domestic problem in Saudi Arabia which is they need about $80 crude oil to pay for their domestic spending. And so I think we are on a gradual transition toward $70 to $80 crude oil price.
One of the things that people sometimes don’t pay attention to is the demand in Asia primarily China and India has driven about 1.5 million barrels per day of increased demand in each of the last four years. So when the price of crude oil was crashed by the Saudis back in ‘94 -- I am sorry 2014, we only had about 94 million barrels per day of global consumption.
Today this year will be at over a 100 million per day. And so OPEC is pumping as much fuel as they can right now quite frankly to offset some of the countries like Venezuela who are collapsing through things that really have nothing to do with the price of crude oil.
So, I think in general, we’re looking at frackers who drills rigs now about 800 drill rigs now from over 1,600 drill rigs back in 2014. And we are not seeing a huge amount of excess production coming out of any of the wells part of the world.
Lastly, the data point is that over 80% of the crude oil fields in the world are in the decline stage and every major crude oil field in the world is declining. Over last what five years, we’ve only discovered a 110 billion gallons of oil -- barrels of oil, but we consumed over 360 billion.
So, we've actually 250 billion barrels of additional consumption above what we actually discovered over the last number of years. So, the statistics drive the fact that there is been a lack of investments in crude oil and that we are going to have a supply demand problem over the next several years as demand continues to increase in supply fails to keep up and with the coordination between OPEC and Russia, we’re just seeing ourselves return to the time which you actually have a swing producer, somebody you actually can set the price to crude oil and the name of that swing producer is quite frankly Saudi Arabia.
And so I’m very comfortable that those are going to go do a good job of it and I think we’re going to transition from the $65 West Texas price to the $70 to $80 price over the next year or so.
Operator
Thank you. This concludes the question-and-answer session.
Go ahead I’m sorry.
Eric McAfee
No, thank you, Matt, go ahead.
Operator
I was just quantitative concludes the question-and-answer session. I’ll turn it back over to the management now for any closing comments.
Eric McAfee
Terrific. Thank you everyone for joining us today.
We look forward to meeting with you and continuing our dialogue about pursuing the rapid growth opportunities at Aemetis.
Todd Waltz
Thank you for attending today’s Aemetis earnings call. Please visit the Investor section of our website where we’ll post a written version and an audio version of this earnings review and business update.
Matt?
Operator
Okay. Thank you.
This does conclude the teleconference. Thank you again for your participation.
And you may disconnect your lines at this time.