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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the Green Plains Inc., and Green Plains Partners Third Quarter 2022 Conference Call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in a listen-only mode. I will now turn the call over to your host, Phil Boggs, Executive Vice President, Investor Relations. Mr. Boggs, please go ahead.
Thank you, and good morning, everyone. Welcome to Green Plains Inc., and Green Plains Partners Third Quarter Earnings Call. Participants on today's call are Todd Becker, President and Chief Executive Officer, Jim Stark, Chief Financial Officer, Patrich Simpkins, Chief Transformation Officer and Leslie van der Meulen, EVP of Product Marketing and Innovation. There is a slide presentation available, and you can find it on the Investor page under the Events and Presentations link on both corporate websites.
During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press releases and the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.
Now I'd like to turn the call over to Todd Becker.
Thanks, Phil, and good morning, everyone. During the third quarter, we experienced a challenging margin environment, resulting in a negative $0.09 a gallon margin, some of which were onetime events and the rest largely driven by the record corn basis we experienced across to the Midwest, Southern Indiana and Tennessee, with impacts from the drought lowering corn yields, which tightened ending grain stocks as a result of three lower-than-average crops in a row in the north, the south and again, the Northern Hemisphere. We saw higher corn basis ahead of this year as harvest, but we kept our plants running through that. The world is not running out of corn. It's just tighter than normal, and it was a quarter where the industry needed to adjust.
Our average corn basis was more than $1 over futures with some plants in excess of $1.50, which was higher than last year and nearly $1 higher than the five-year average. The third quarter margins were lower because of this tightness and farm ownership is in tight hands. The first impact other than corn basis is that because of these fundamental - because of the fundamental situation in corn, we decided to pull all of our seasonal maintenance shutdowns forward, completing these 10 of our 11 plants, which impacted our operating utilization rates and also increased our repairs and maintenance costs for the quarter. The shutdown impacted our margins by about $0.04 a gallon.
In addition, as a result of the higher corn basis and the inverted ethanol market, we recorded an $11.2 million LCM or lower cost or market inventory adjustments, which has also impacted our margins by about $0.05 a gallon, but to be clear, this is a noncash adjustment. Excluding these two items, our consolidated gross margin would have been near breakeven.
Overall, our EBITDA for the quarter was $35.6 million negative. But right now, for the fourth quarter, margins are positive for ethanol and have expanded in recent days, even before corn oil contribution, which I know a lot of you focus on that fact. Even with harvest corn basis levels and with the fundamentals across liquid fuels, Q4 is significantly better than Q3, but corn basis volatility still needs to be watched closely. Although our physical corn coverage grows every day and is approaching 70% for the remaining of the quarter.
The [Gen-1] volatility quarter-to-quarter has been unprecedented, and we remain exposed to that for a portion of our business as we continue to transform. Our third quarter financial and operating results remain strongly influenced by the company we are transforming from rather than the company we are transforming to. Operationally, we are seeing strong Q4 run rates and record high renewable corn oil yields. With our seasonal maintenance program completed in Q3, we anticipate that the fourth quarter should be the highest quarter of the year for throughput and corn oil yields.
Our MSC technology construction projects with Fluid Quip for 2022 are wrapping up, and we are preparing - actually have started up the dryer in Central City and are getting ready to start to load [off] system up as well. The MSC build at Mount Vernon, Indiana began commissioning in October and our Obion, Tennessee plant should begin commissioning in the next few weeks.
One very interesting point is during commissioning, the plants begin to benefit from higher renewable corn oil rates well before we bring the dryer online, and the load off structures are completed, the ability to extract oil individually is the basis of a new offering from Fluid Quip called DCO Tech, which we believe we'll discuss later in the call. This increase during start-ups contributed to a strong renewable corn oil yield in the third quarter, and we should continue to expand that in the fourth quarter as commissioning continues on additional locations.
Pricing for this product remains very firm as there's only a finite amount of low carbon-intense feedstocks and this sets us up well for 2023. As our company has been undergoing a transformation, we made a decision to dedicate a senior member of our team to those efforts full time. Patrich Simpkins has been at the company for over 10 years, serving in a number of senior roles, most recently as CFO, and we are pleased he chose to take on the new challenge of Chief Transformation Officer. This was a natural time to dedicate resources for the next several years to all of these important strategic efforts.
Jim Stark, who many of you know from his time in Investor Relations, has a dynamic background in finance and he'll take over as CFO. We also welcome Grant Kadavy as EVP of Commercial, who comes with a deep commercial experience in agricultural process and global trade and Jamie Herbert as CHRO, who joins the organization to further enhance our team and brings a long history of success. These additions bring added depth and leadership to our organization at this pivotal time in our history and proves our ability to attract talent needed who cannot only execute our plan but also believe in our transformation.
We broke ground on our CST facility in Shenandoah to produce low carbon intense dextrose, where we are deploying Fluid Quips clean sugar technology. Our developing BioCampus in Southwest Iowa has long been a showcase plant for us with our first MSC facility, [AquaLab] and now our first commercial scale dextrose facility under construction, and we'll talk more about that later as well.
Our company continues to transform, and we are firmly committed to completing that transformation. We'll begin with a vision to explore ultra-high-protein technology years ago has morphed into a pivot of our entire company to focus on customer-centric ingredients, innovative ag tech and decarbonization. We are executing on that transformation plan and remain on track, and we remain on track, to deliver on these initiatives and guidance laid out for 2024 and 2025.
The growing strength of our commercial operation continues to win new customers from our ultra-high protein product suite, customer acceptance and interest continues to accelerate, and we are generating orders and interest around the world across multiple species. We executed a 25% increase in our 2023 volumes already in our pet food vertical for the upcoming product marketing year. Many customers have indicated they have been waiting for volume, scale, redundancy, and we are finally in a position to deliver on that as we exit 2022.
Having over 330,000 tons of annual capacity for these innovative products now available to the market each year for Green Plains when novel proteins were historically in much smaller quantities, has really been a game changer in our discussions. While there are a few one-offs here and there that can make a product somewhat similar, no one else can supply the quantities customers are beginning to look at in this novel protein space like we can, which is a critical differentiating factor. Commercial demand is growing in bigger quantities now that we are able to provide a product with unmatched scale and redundancy.
With our expanding scale, we are executing sales to customers in aqua, pet, swine, poultry and dairy globally, some of which are leaders in each of their respective industries. Developing a customer-centric market for these new products take time, but we are achieving baseload volumes of the 50% ultra-high protein product today across multiple species and from customers around the world. I will talk about the importance of this as we develop our 60% protein market later in the call.
During the third quarter, we settled the remaining $34.3 million of 2022 convertible notes through a combination of common stock and cash, leaving us without any near-term maturities in our capital structure. We ended the quarter with over $500 million in cash on the balance sheet and remain in a strong position to deliver on the strategy we have laid out for you.
Green Plains Partners continues to deliver consistent results and will benefit from the strong throughput utilization rates our platform is capable of operating. For the fifth consecutive quarter, Green Plains partners increased their distribution, raising it to $0.455 per unit.
Once again, I'd like to welcome Jim to the call and hand it over to him to provide you an update on our overall financial results.
Thank you, Todd. Good morning, everyone. Glad to be back at Green Plains, and I'm excited for the opportunity to lead the finance organization. Green Plains consolidated revenues for the third quarter were $955 million, which is $208 million higher than the same period a year ago, which was driven by the higher run rates. Plant utilization rates improved year-over-year to a 90.9% run rate for the quarter, and that compares favorably to the 75% run rate reported in the same period last year.
As Todd mentioned earlier, we anticipate utilization rates improving during the fourth quarter due to having already completed our seasonal maintenance turnarounds and believe Q4 will be our strongest production quarter of 2022. For the quarter, we reported a net loss attributable to Green Plains of $73.5 million or $1.27 per diluted share. That compares to a loss of $59.6 million for the same period in 2021. EBITDA for the quarter was a negative $35.6 million compared to a negative $16.6 million for the same period last year. As we indicated in our earnings release this morning, the third quarter faced a challenging ethanol margin environment driven by higher corn basis and a weak driving demand, limiting the opportunity to generate positive margins. We also incurred lower cost or market adjustment of $11.2 million on inventories that contributed to the negative ethanol margin. For the period, we realized a negative $0.09 per gallon consolidated crush, which was lower than the prior year due to the factors described above.
Our Ag & Energy segment came in higher versus 2021, recording a $2.7 million increase in EBITDA or 71%. I would note that Ag & Energy segment has continued a strong performance for 2022, running 60% better than the nine-month period last year.
For the third quarter, our SG&A costs for all segments was $29.1 million compared to $26 million for Q3 of 2021. The increase of $3.1 million is driven by increased personnel costs from higher headcount and higher professional fees in support of our transformation as we noted on our Q2 call this year. Interest expense was $9.6 million for the quarter, which includes the impact of debt amortization and capitalized interest was roughly in line with the $9.5 million reported in the prior year third quarter of 2021.
Our income tax benefit for the quarter was $1.9 million compared to a tax expense of $7,000 for the same period of 2021. The benefit is due to a reduction of the valuation allowance against deferred tax assets. At the end of the quarter, Green Plains had net loss carryforwards available to the company of $144.7 million, which may be carried forward indefinitely.
On Slide 9 of the earnings deck, we provide a summary of the company's balance sheet. As shown, we ended the quarter with $534.6 million of cash, net of working capital financing compared to $698 million at the end of 2021. Our liquidity position at the end of the quarter included $512.4 million in cash, cash equivalents, restricted cash and marketable securities along with approximately $155 million available under our working capital revolver.
For the third quarter, turning our attention to capital expenditures, we have allocated $55 million of capital to profit sustaining and growth projects, including $44 million on our MSC protein initiatives, about $7 million to other growth initiatives and approximately $4 million towards maintenance, safety and compliance capital. We anticipate CapEx for this year will be in the range of $250 million to $280 million based on our current construction schedules, which does include some capital for the clean sugar build in Shenandoah.
Turning to the partnership. We continued to realize consistent performance, earnings and cash flow, realizing net income of $10.2 million and an adjusted EBITDA of $13 million for the quarter, which is slightly lower than the $13.5 million reported for the same period a year ago, with volumes now trending upward because of higher run rates at the parent, we expect volumes well above MVC levels. As a result, the partnership continues to support higher returns to unitholders, increasing the quarterly distribution of $0.455 per unit while maintaining a 1.05x coverage ratio for the quarter.
For the partnership, distributable cash flow was $11.3 million for the quarter, in line with $11.5 million for the same period of last year. Over the last 12 months, the partnership reduced adjusted EBITDA of $50.7 million, distributable cash flow of $44.9 million and declared distributions of $42.4 million, resulting in a 1.06x coverage ratio, excluding any adjustment for the required principal payments amortized in the past year.
Now I'd like to turn the call back over to Todd.
Thanks, Jim. So, we typically spend some time going through protein oil, sugar and carbon. But this quarter, I actually want to start with carbon. This Inflation Reduction Act is a real game changer to our industry and our company. And while we may have some transitory quarter-by-quarter volatility from our Gen-1 business, we are increasingly optimistic about the tailwinds from the recently enacted bill and continue to believe we are uniquely situated as a company to capitalize on the decarbonization incentives included in this bill. The potential impact to our transformation is immense and is still underappreciated by the market.
While it doesn't kick in till 2025, the new technology-neutral clean fuel production credit or 45Z, will be a significant game changer to fuel ethanol production as we head into the possibility of alcohol-to-jet later in the decade. The new credit provides an incentive of $0.02 per gallon for each point of CI reduction below 50. The program uses the Argonne GREET model, and many of our plants are not far from that number today. When we start with sequestration to get below 50, we can then look to further reduce our CI at each of our biorefineries, adding things like combined heat and power to biodigesters, to even wind and solar options. And when looking at this opportunity in carbon initiatives from our Midwest plants positioned on the Summit Carbon pipeline to our eastern plants that we are identifying partnerships and other opportunities to sequester and decarbonize, combined with additional carbon initiatives outlined, we are very excited and anticipate significant annual contributions once all of our initiatives are completed just in time to leverage the clean fuel production credit.
Our renewable corn oil business continued to reach new highs in terms of yield as additional MSC facilities come online. The third quarter was another record for us, and we believe the fourth quarter will be higher yet again. The uplift, specifically in yields and corn oil values, is included in our MSC margins, but the base corn of our Gen-1 platform produces just under 300 million pounds, which add $0.70 or $0.80 a pound gross price could generate approximately $150 million to $180 million of consistent earnings above base ethanol.
We expect to produce 400 million pounds per year in total as we approach 2025. This is a valuable product stream for us, and the one is in high demand with the growth of the renewable diesel industry. There is continued interest by counterparties to monetize our DCO stream in various ways, but we have the ability to be patient due to the strong market, which seems to grow tighter every day and prices seems to get firmer.
The extension of the $1 per gallon biodiesel and renewable diesel blender tax credit is also beneficial to our renewable corn oil values. And we consistently see corn oil trade at a premium to soybean oil because of its lower CI as high as $0.10 per pound or more premium at times. We believe this differential will only expand when the clean fuel production credit kicks in as new state and national LCFS programs come online and renewable diesel producers are further encouraged to source low carbon intensity waste oils as a feedstock.
You can see from the term structure, the market is very tight and seems to roll up in tighten as we move through every exploration month, notwithstanding a random macro move lower, which is quickly supported and bought. Our long-term view is low carbon oil stays firm through the end of the decade as the onset of new renewable diesel production has not been felt yet.
Now let's talk protein. On the protein and the ingredient front, construction of our MSE platform continues to progress with over half of our platform nearly up and running. It has been a herculean effort to deliver five major builds by the end of 2022 with unprecedented supply chain tightness and a challenging labor market almost impossible to navigate. We will have 560 million gallons online with equivalent protein capacity of over 330,000 tons in 2023.
As mentioned earlier, Central City is complete, Mt. Vernon is complete, waiting for a permit to start the dryer and Obion will begin commissioning in the next several weeks, and the load-out will finish in early January and as soon as we turn on the site, we will start making oil and oil share is excellent. Our JV turnkey plant is under construction in North Dakota, which will be the largest MSC ultra-high protein production facility in the world, and we expect to create break ground on our Madison location in early 2023.
As indicated, since the inception of the program, permitting in Minnesota for our Fairmont and Otter Tail plants is a gating item that could come as early as nine months and as late as 18 months from now. With that said, we can be patient at a large plant from a capital efficiency standpoint, but at a smaller plant, we will move to install Fluid Quips new DCO technology as permitting is not an issue, and the economic return on capital is significant.
We are going after low carbon renewable corn oil that's superior at Otter Tail first with DCO Tech as we wait for permitting. That being said, we are on track to deliver on our overall MSC projections. With the ability to run the larger plants at higher Gen-1 rates combined with higher MSC yields, we will still get roughly the same overall MSC footprint, but with a slightly different mix of plants.
Our base protein projections continue to be on track to $150 million to $210 million of incremental value to our Gen-1 ethanol platform and can go higher from there as we build out our 60 pro market and other innovative products we are working on. We also continue to assess what capital to invest in our York and Atkinson, Nebraska facilities as they are the smallest in the fleet, and our current run rates across the platform can make up for any shortfalls there.
We are maximizing our return on capital while leaving our guidance intact. DCO Tech is a game changer and Fluid Quip use our data and learnings to offer this technology to the industry, which can help monetize our investment there as well as they are preparing a turnkey DCO technology solution. We continue to believe the value of Fluid Quip portfolio is significant and significantly undervalued as a component of our overall company's valuation. Construction of a first-of-its-kind deployment of Fluid Quips innovative clean sugar technology at our Shenandoah, Iowa biorefinery is underway.
Adding this technology is the next step in the transformation of our dry mills. This installation is already generating interest from multiple potential partners and customers who share our vision to build a low-carbon footprint BioCampus, to produce lower carbon ingredients. We remain confident in the rollout of CST after we prove to the market we can make this product at scale and in spec.
Our first facility has been designed to produce greater than 200 million pounds with upside to 500 million pounds with additional capital deployment. Dextrose has been in high demand recently and current pricing could result in even stronger future contributions. This plant will be able to make refined and unrefined 43, 63 and 95 dextrose products for use in food, chemicals, synthetic biology and industrial production processes. To give you an example, if we had capacity online today, the equivalent margin based on today's dextrose pricing would be approaching $1 per gallon or in bushel terms, almost $3 a bushel. We will have years of additional investment opportunities in this space beyond 2024 and believe we have strong IP leadership position. We believe clean sugar will be a significant and growing part of our growth story over the next three to five years as well.
While on longer-term opportunities, we see alcohol-to-jet sustainable aviation fuel as a major opportunity. With carbon sequestration in place, our lower CI ethanol will be an ideal and plentiful molecule for conversion to sustainable aviation fuel at commercial scale. We believe our platform and partnerships position us to have a key impact in this space before the end of the decade.
When you put it all together, our 2024 projections, excluding the Gen-1 business and ancillary businesses are on track to achieve our previous EBITDA baseline guidance with continued upside opportunities from our MSC protein initiatives, base corn oil values and clean sugar, which will just be getting started and can grow from there. And then carbon beginning in earnest in 2025 after the completion of the Summit pipeline and other carbon reduction opportunities, which could add materially to these totals.
On top of that, any material shift to a 60% protein product or greater or other protein ingredients and innovations that are taking place would also add to these totals. Our initiatives and growth pillars are aligned with the macro factors of protein growth, the expanding bioeconomy, low carbon transportation fuels and decarbonization and low carbon ingredients, and we are executing to create value on behalf of our shareholders, our owners, our employees, our business partners and our customers and our communities every day.
With that said, thanks for joining our call today, and we can now start the Q&A.
[Operator Instructions.] One moment will be compiled a Q&A roster. Our first question comes from Adam Samuelson with Goldman Sachs.
So, Todd, I guess the first question is thinking about high pro and commercialization. You went through the plant kind of rollout and the facilities that are coming on stream by the end of the year. And I guess I wanted to just clarify in thinking about the contribution from incremental high pro in 2023 as you now have, I think, 330,000 tons of ultra-high protein and as we just think about the incremental profit that, that would generate as you sell those. And along those lines, kind of you talk about the commercialization of the 60% value high pro and kind of where you're seeing customer interest and pricing indications and when that could be a contributor to the top and bottom line.
Yes. Thanks. So, we expect in 2023 that with the capacity we have online and coming - the capacity we have online at the end of the year, and assets under construction, we will see our first real contribution from this program during the year. So, when you talk about 560 million gallons converted, today, what we're seeing, basis current values on 50 pro is somewhere between kind of a $0.12 and $0.17 a gallon margin available today and oil share is a strong part of that. So, we think there's upside to those opportunities as well, but we're continuing to develop markets around that.
So, we sold pet food for 2020, the pet food vertical for 2023. We're starting to see interest in aquaculture for 2023, significant interest in poultry and swine as well for 2023. So, the margins kind of range, depending on what the customer wants from a protein perspective, whether it's 48, 50, 52 or 54. So, as we kind of go into the year and we're thinking about 2023, the starting point, this 560 million gallons converted, with margins ranging from $0.12 to $0.17 a gallon, depending on what we sell and potentially upside from there.
Our next question comes from Jordan Levy with Truist Securities.
Good morning, all, and welcome back to the call, Jim. Okay. I just wanted to start off and ask on your comfort level when it comes to liquidity. When thinking about the next eight quarters or so, we know the focus is getting all the MSC online, still got a good amount of cash, but these swings in the ethanol market can come up and sometimes eat into some of that. So I'm curious how you feel about the capital runway going into 2023? And maybe any updated thoughts on 2023 CapEx and how that's shaping up?
I'll talk first on - a little bit on the market. So yes, I mean, basically, when we look at the third quarter, between the LCM, which is noncash and obviously, depreciation as well. We really - while we did see some reduction in free cash flow, it wasn't significant enough for us to worry about anything. As we come into the fourth quarter, ethanol margins have turned positive again and have increased over the last week or so. So, from that standpoint, the fourth quarter looks pretty solid from the ability to begin to generate free cash flow again notwithstanding the fact that we're going to continue to execute on our build program by ending the year with the liquidity we have and again, starting to see some opportunities to generate free cash flow and bringing on things like ultra-high protein next year as well as these higher prices in corn oil pricing. And I think what is critical is, obviously, this was a unique third quarter with the record high corn basis, and we were literally dead on right in the middle of the hotspot. We were paying $160 over for corn, almost $160 over for corn, in Southern Minnesota to $100 over corn in Nebraska and down in Tennessee, the end of the crop year was very tight as well. So, we've seen some relief on that, and we've also seen margins expand back to allow the industry to have a margin. And then on top of that, our run rates continue to get better and better, and we will get execution through that as well.
Then when you look at all of that and you look at the setup, I think, from the standpoint of liquid fuels, you have a tight or almost unprecedented diesel situation, the heating oil situation. You've got tightness in gasoline as well, which you're seeing in the term structure. And I think we're starting to see some of that fall over into ethanol as well where people are realizing it's a molecule that needs to be used, and we're starting to see some increased offtakes from that perspective. So, I think we're in a really good position when you start to look at the forward curve, you're not going to see much relative to 2023 yet in the ethanol margin. Our view is that where we're positioned right now and what we think are the fundamentals, I think we're in a pretty good position to continue to execute the program without any issues on our balance sheet. It's cleaned up pretty well as we have no near-term maturities. And even more important, if China can start to kick back in on gas demand in 2023. I don't think the world is prepared for that either. So, I think we're sitting in a pretty good position to continue to execute on the program. And as we said, we wanted to get through the clean sugar number one, continue to build out all of these other assets. We're seeing some delays in Minnesota, but we're making it up on our DCO MAX program, our DCO Tech program, where we can go after about $0.07 or $0.08 a gallon contribution just from that while we're waiting to get permitting. So, I think overall, we're in a very good position liquidity-wise.
Yes. Jordan, just to answer some of your question on kind of the 2023 look. If you go back and look at what I said earlier in the call, we kind of brought the top end of our CapEx range down for this year to $280 million at the max. So, when we think and look at the projects that we have outlined for next year, we're probably going to be somewhere in the range of $250 million to $275 million on the spend. And that is certainly, as Todd indicated, including those DCO Tech build-outs that we want to do, which I know we haven't disclosed in the market yet what those costs are, but those are at a lower cost and building a full MSC out there today. So, we're very mindful about the cadence of capital, we feel pretty good about the liquidity position where we are today and how we see the guide.
I think I would add on to it, we're bringing up over 200,000-plus tons of high pro here now as we speak, which have not been in our run rate for the last nine months. So that lift plus the additional oil lift should also, as Tod has pointed out on Adam's question, should add at the bottom line when we get into the first part of next year.
It's great color. Just a quick follow-up to that, given you're bringing the MSC systems online and Central City is starting up. I'm just curious how the startup has been going. I know Todd, you mentioned it starts - the corn oil yields start picking up before the protein comes on. But just curious what that time line for start-up has been trending and if that's changing at all?
No. I mean, our view has always been taking about a quarter to get it fully up and running and ramped up. Sometimes we go a little faster as we learn more. One thing is everybody is well trained to run the systems now because they're trained at other facilities. But what we really wanted to do is start to - when we start commissioning, we literally start making oil on Day 1 and oil share today at $0.80 a pound, you want to make as much as you can because that's helping pay for the investment. In fact, oil alone can almost start to pay for the investment to just be a longer return, but we don't - that's not why we built these.
So, the great thing is we get the benefit of that during start up, which early on when we started up Shenandoah, the oil market was very different back then. So, we're pressing hard for oil yield, and then we bring on our protein drivers after that. As we said, Central City literally started up the protein dryer this week, and we started making product, and we're starting to send it to our silos and the products coming in on spec. And now we just continue to ramp higher. So, ramp rates happen very fast once the dryer comes online.
Again, in Mount Vernon, we're waiting - it's around a November 15, 20 permit time that the state will allow us to turn the dryer on. And so, we have to wait for that. And sometimes those are a gating item. But in the meantime, again, we're running the system and for any of you that have seen the system, we just - we can continue to run and really extract and segregate that oil fast, and that's going to help our fourth quarter as well. So, we're really starting to get into the - as I said, I can't do much about a record corn basis in the third quarter and how this thing played out. What I can do is point to when I can see inflection in 2023 as we grow our customer base in protein, as we continue to bring on more systems and even more importantly than that, we know that what we possess in a low-carbon feedstock waste oil is very, very valuable. And we believe we still have significant opportunities to monetize that stream even above what we're seeing today in the market.
We continue to get approached constantly on partnering for the stream in one way, shape or form or another. But in the meantime, what's been great is that we are trading at a premium to soybean oil. More renewable diesel demand continues to come on every day and the pull from this industry is significant. So, the plants have to run. We're going to run them hard. We're running them harder every day, and we're very comfortable with how we can start up MSC systems now, much more than in the beginning when it was a bigger learning curve.
Our next question comes from Kristen Owen with Oppenheimer & Co., Inc.
So, you talked about shipping in the fourth quarter to a variety of protein markets, I think swine, poultry among them. How advanced are the discussions with these partners? And can you speak to just generally the cycle times that you're seeing in terms of customer conversations, given the macro backdrop that we're working in.
Yes. It was hard to get engagement when you would show up and you have Shenandoah running, and you're making 45,000 tons of protein or 50,000 tons of protein. It was hard to get engaged with them to believe you that you can ship a full vessel, full hold of a vessel, somewhere into the world or ship unit trains of this product. And when you want to get - now we have seen other people start up somewhat similar smaller systems, but - and we're dealing with that as well in the market, and there's a little bit of confusion on product. But we're getting through that now when somebody shows up and says, can you ship us this much quantity? And now we can say, yes. And that's the difference.
So, now you can get real attention paid to you to get included in real rations across a full system. And we have built a sales team that is highly focused on that customer engagement. So, we can now talk to an aquaculture producer in South America or Southeast Asia or shrimp producer or a salmon producer somewhere in the world. And we can now talk to them about significant volumes available, consistent volumes available, and volumes available with redundancy because you're just not going to get the attention of a customer unless you have three or four or five of these plants running because they are very nervous, you can't execute, much like what we saw with our pet food vertical.
So, as you know, pet food was one of our first verticals. And everybody has been trying to get this business from us. And that has been something that we obviously have to deal with. But when the customer that we've developed our relationship with and customers that we have developed the relations with show up and say, we want it, and we want to make sure you redundancy, we can get - we can still get the business, and we still get it at a premium to the market. So, that's one thing that I think is to our advantage. And we haven't even been able to necessarily take advantage of that yet because we haven't had the volume. So, again, now that we have the volume if somebody comes in and says, I need 100 cars a month of this product or I need 200 cars a month of this product or I need 10,000 tons in a hold of this product, we can say yes now and that's a different engagement.
So, we have a full team of salespeople, nutritionists, and customer support and product development that is working with customers, not just domestically, but internationally on inclusion and how to use this product best. And again, it's not always the same when it comes out of any system. Our system is very unique and our ability to give consistency is very unique at any protein level that they're looking for or even from the standpoint of yeast as well.
That's super helpful. The related question that I have for you is related to the 2024 EBITDA guidance, which you said you were on track for. I'm wondering if you can give us your updated thoughts just given that you're pricing protein off of that soybean meal base, how you're thinking about protein pricing maybe in that 2024, 2025 time frame across the J-curve, just given the expectation of how much more soybean meal is expected to come online?
Yes. I mean that's been a question that we've been discussing with a lot of our customers, shareholders, etc. When you go back and you take a history lesson, we brought on in two years, in the ethanol industry, 40 million tons of protein to the world. And while it might have been chunky for a year or two, it was absorbed very fast. In our view is when we look at what's coming online in soybean meal in the next kind of three to five years, somewhere around 15 million to 20 million tons based on the current announced projects. It's our view, and it's just our view, that this will get absorbed into the world very quickly and that this whole glut might last for a quarter or two. But people are building soy crush plants near the river to export because they believe the export market will continue to grow.
Argentina continues to be a bit of an issue in the world and it's not really a reliable supplier. And we see protein demand growing at 10 million to 15 million tons per year in terms of demand globally, and that has happened really on average, for the last 10, 15 years, it's been 9 million tons a year, and we've seen some years as high as 12 million to 15 million tons. So, if each year, demand for protein grows somewhere between 10 million and 12 million tons, and we're going to bring on 15 million to 20 million tons of total protein over the next three to five years in soy crushing, our view is that it will get absorbed. And our view is that the market will quickly adjust to that notwithstanding maybe a year of a chunky market.
In the meantime, we offer a very different opportunity for our customer. And while the market wants to price this off of soybean meal, we are not a soybean meal replacement, we are an ingredient that provides other added benefits to them. We can continue to go through those benefits with you, but while today, some in the market want to price it off of the replacement of soybean meal in certain applications in other applications, we are a new ingredient that's getting added into their platform.
And I'll just have Leslie, maybe give just two or three of the key components of why this product is very different than soybean meal.
Yes. So, I think - The other aspects to take into account is that as a product - as it comes out of our buyer refinery, we have a distinct management it comes to the position on carbon, which is very high on the list of our customers. So, we're getting a lot of traction there where people are looking for not only an advanced nutritional products like our product as it comes out, but also additional benefits.
Really to address the other question you had on the J-curve. If you really look at it, as you proceed to get into the higher protein products, the 58%, 60%, you're disconnecting the product from the soybean meal base and you're getting into a complete vision category where you're looking at corn gluten meals, fish meals, other concentrates. And all of that can come from our same system. So, there's no additional requirements from an investment perspective. And last but not least, the fact that our products are fermented, So, it comes in a pre-digested state for a lot of these animals is of extreme importance relatively - relative to solvent extracted products like soybean meal.
Our next question comes from Ken Zaslow with BMO.
Could I just ask two questions. One is, can you walk us through how you think about 2023 expectations on a consolidated EBITDA? You went through a lot of pieces. I just - my mind isn't that smart to be able to build all together. You just kind of worked that out for us, just kind of thinking about 2023 consolidated EBITDA. How do I think about that?
Yes. I mean at the last conference we did, we basically said, MSC is in that $90 million to $120 million range opportunity for 2023. Corn oil was about $165 million opportunity. Ag and energy, typically in that $30 million range and the corporate overhead in that $60 million range, getting to a range of what we outlined at the last conference of $225 million to $255 million at the last place we presented this range. There are definitely some moving pieces, some higher prices in corn oil that are potentially an opportunity. If we can maintain this $0.80 a pound pricing through 2023, that will be an opportunity on the upside, and we have to watch pricing obviously on the downside. Same to watch kind of MSC, whether it's 90 to 120 or 80 to 130 , there's ranges in there, but all within that same midrange $2.25 to $2.55. You could say low of 200 plus and a high of 260 plus somewhere in that range. And I think that there's opportunities to even potentially go higher than that. But we're going to kind of leave our - and that doesn't include any ethanol at all.
And I think while you can look at Q3 and say, ethanol will never be good again, that's not the case. I mean, ethanol is in positive margins before corn oil this quarter already. We're starting to see the curve recover a little bit in 2023 as the market is very clear that it was undervalued as a molecule and nobody is paying attention to it, and we've seen those curves start to move. So, we don't - while from these numbers, we take the view that we're going to give you - we'll let you decide where ethanol is going to come in, our view is still in the forward curve that ethanol will be not necessarily negative all the time and potentially positive over the average. So, - and that's where we're at today relative to 2023, leaving our 2024 and 2025 guidance intact.
And then how much of a premium pricing you're getting on high pro relative to your - how much of a premium are you getting on your high pro, and is it consistent across your portfolio?
Yes. So, with every customer and every application, it prices a little bit different. So, when we look at more of the commodity side and what we have to compete against we could run our plants, our MSC plants harder and make a lower protein. So, it's not always necessarily the exact price premium or discount you would get. It's how much margin you're going to make. And So, when we guided you early on when we initially did this investment thesis, we said the uplift is $0.12 to $0.15 a gallon going to $0.15 to $0.20 a gallon over time on our base product. And we believe the 60 pro product is significantly higher than that as we move into those markets over three to five years. We didn't know how long it would take us to produce 60 pro. We now know we can do it in - I'm sorry, in Wood River, and now we feel very confident we could do it in Shenandoah on demand. So, we reached that point now as well.
So, when we look at it, we'll price every market different depending on the protein that they want. So, if it's just a commodity protein, we'll run a plant harder instead of making three pounds a bushel, we'll make four pounds a bushel where we'll get higher volumes out of it and will go against a little bit lower protein to be competitive at the 48 or 49 pro market. If somebody wants a 53 to 54 pro market, we can run a little bit slower. And again, it still comes down to that margin of kind of basically what we've outlined. The base margin was 12% to 15%. The opportunity for upside is 15% to 20%, and we're still now - even today where we've seen soybean meal when it collapsed a little bit against replacement corn, but now it's expanded back out, those are margins today that are now possible.
Our next question comes from Adam Samuelson with Goldman Sachs.
Sorry about before. Todd, I was hoping to maybe clarify just some of those guidance points and make sure we're not double counting. So, you talked about $0.12 to $0.17 per gallon uplift from high pro, but it's also kind of reference to distillers corn oil. So, I just want to be clear, is that $0.12 to $0.17 purely the high protein value, or is it high protein value plus corn oil on the 550 million gallons that's been converted. And I guess, I'm just trying - yes, I'm trying to just clarify --
I can answer that for you. Yes. No, we've clarified it. I mean we've never wavered from this. The corn oil number we give you is based on the pre MSC volumes that we make across our system, which is close to 300 million pounds a year. So, if you take 300 million pounds, we figured it's $0.12 to $0.15 a pound in cost to make the corn oil. So, if next year, the market is $0.80 a pound and take $0.12 to $0.15 off that, your EBITDA revenue will be 300 - approximately $300 million, maybe a little bit less than that, 290 million pounds times $0.65 to $0.67 a pound, something like that. And So, that's about $180 million, $190 million of opportunity on the high side.
On the lower side, obviously, you can just do your math if it gets to $0.50 a pound, you could do your math or $0.60 or $0.70 or $0.80 a pound. So, that is just on the non-MSC corn oil. Included in the MSC has always been a corn oil share. And what we're seeing right now is even with higher corn oil prices, obviously, we feel better now that our systems will run with a higher oil share and even potentially with the shrinking at times, and now today, it's not like that between a distiller's value and a high-protein soybean meal value, those spreads will move in and out. But since we have this baseload of oil earnings in our proteins MSC systems, and we feel confident that - and when we sell something, we're starting to see these margins. So, it's a little bit - it's in both places. If you actually just separated oil today, our oil earnings in separation outside of protein would be higher than what we're giving you, but we included an MSC because MSC is really not just a protein system. It's a separation system that separates lots of different products, including oil and including protein.
Our next question comes from Eric Stine with Craig-Hallum.
So, maybe just on carbon capture. Obviously, the tax credits, the progress that's being made there in the Midwest Express, you've got that on one hand, but do notice or see that it seems like the local or state level kind of pushback or digging in versus pipelines going through fields, counties, etc. So, obviously, optimistic about this and starting to be a contributor in I believe, 2025. But maybe just your thoughts on the push and pull here as you look at carbon capture going forward.
Yes. It's an interesting - well, I think, first of all, let's look at the economics of what's at stake here. The new IRA bill, Inflation Reduction Act, is an absolute game changer to our company, to our industry and even to the pipelines that are being built out there. It provides a - finally it provides something to invest behind. And whether it's on a pipeline or it's a direct inject or whether it's something in our Eastern plants where we can capture carbon and move it around and look at that area as well. These are game changers to our industry, not only from the fact that the economics are so significant and the opportunity is so significant, things we've never seen before, but the fact that we will make low-carbon ingredients in protein, in oil and in alcohol, especially in alcohol as we think about alcohol-to-jet later in the decade.
So, when you kind of look at what's going on with what we've committed to with six of our, or eight, of our plants on a pipeline, they continue to make great progress. They continue to continue to get higher and higher right-of-way percentages locked down in many, many states, and we continue to support that at all of our plants from our - from the standpoint of trying to get our farmers at least to commit to allowing that pipe to go through their ground, and we've been successful with that. There will always be some holdouts when you build a pipeline. And it's not just - I don't think you can just look at that and say that's immune to just to carbon because there's 40,000 miles of pipe, sitting in the state of Iowa today. And pipelines are going to build a couple of hundred miles just to get carbon out of the state.
So, this is just a bit of a chicken and egg for these guys that are building these pipelines, but ultimately for agriculture and for the U.S. farmer, there has been no bigger opportunity than to try and sequester carbon out of ethanol plants and continue to drive the potential of this industry. So, we're very excited about it. But if you look at the economics in a vacuum and you look at what we put out there for our 2024, 2025, 2026 numbers and beyond, it's even hard for us to - when we stare at it, it's hard for us to even imagine that this cap, this money, is available through this act and it's not just available because you sequester carbon. It's available because now you're going to be incented to lower your energy from fossil fuels. So, do things like combined heat and power systems, do things like fluidized bed boilers, do things like capture of anything that you can do to reduce your commitment to fossil fuel energy and do things that you can be almost your own cogen site. The money is all there to do this. This 2025 through 2027 clean fuel production credit is really an incredible opportunity for this industry to decarbonize. And when we get out of that and if alcohol-to-jet is successful, which we believe there's a high probability of success in using alcohol to produce jet fuel because it will be - the CI scores will be So, significantly lower. When you go out and you look at 2024 and 2025 and 2026 for a company like ourselves, if we put those numbers that are available under the IRA in our guidance, nobody would believe us. So, it's a great opportunity for us. We're committed to sequestering carbon. And I think there's a high chance - high probability of success that the project that we're on their pipeline will get built.
Our next question comes from Salvator Tiano with Bank of America.
Yes. One question just a little bit about how - what opportunity you have to manage your ethanol system. You mentioned that you brought forward a lot of maintenance and turnarounds. I'm just wondering, given how extreme the basis was, where are you considering actual shutdowns of facilities? And if this would happen again, let's say, if the corn harvest may not be great if this were to happen again next year, what options do you have to manage your systems to kind of avoid EBITDA losses?
Yes. I mean this was such a unique - I mean, I guess unique, but more unique than we've ever seen, this inverse. You have to make a decision on any given day to run through the inverse and what's the decision we made. In every year in history, or a lot of years in history, the inverses break and they break hard and they break fast, and you don't want to be off and not running during that time. This one just lasted longer. And our plants just happen to be basically on a square one of the high basis levels in the United States. Fairmont, Minnesota, 150 over in Nebraska 100 over. And the ethanol industry did not adjust to that.
Now as we're in Q4, and we still see elevated basis levels and rising in Q4, we see that the need for our product and the need for this molecule to be made and the need for the low carbon oils to be made is driving the fact that ethanol margins are positive before contribution from corn oil at this point. So, I think it was a unique situation. Could it happen again? Yes, we need to grow corn in the United States. We need to get - we need to have a good growing season. We need South America to grow well as well. We need that to come off this year, better than the last couple of years as well. So, we've got to watch that weather closely. But the river system helped a little bit backing up some corn into the system. I think that we're only running at a million barrel pace as an industry, and that's not going to do it. If we can get through winter and not build stocks and we get in this driving season next year, and we get China to reengage in their economy and start to - instead of exporting gas use their own gasoline. I think it's setting ethanol up for 2023 to have a great opportunity on top of everything we're doing. But we're going to run through these situations for the most part. I mean we could have probably shut a plant down or two, but the cost of doing that versus the cost of bringing it back up in the rest of it, we just ran through it. And in the middle of all that, we're seeing increased ability to drive these plants harder with our operations team that we have in place than we ever have had before.
We've had 15 of the last 30 days were record run rates with our product with our suite of plants, and we're going to continue to drive that. And by bringing our maintenance forward from Q4 to Q3 and just driving hard to do 10 turnarounds in one quarter it's almost unheard of, but we did it so we could position ourselves now to run how we should be running and take advantage of harvest basis levels and really hopefully drive to get ourselves back on track here. But we're going to run these plants because we're going to run protein, we're going to run oil and we're going to run sugar. And when this is all in place, a negative $0.09 a gallon margin would have been a significant positive margin under our system today. And so, this was worst-case scenario without protein fully on board yet and without sugar coming online and with corn oil yields through protein, then we're in a pretty good place as we approach 2023 and 2024 to hit our numbers.
Okay. Perfect. And I also wanted to ask, you mentioned that with regard to the IRA benefits in a few years, if were to put numbers into your - what you would expect, nobody would believe it. But I think if we were to try to do something like that, I think the idea is that with the new deal the credit is $0.02 a gallon for each point under a CI of 50. So, based on kind of this guidance for ethanol plants, ethanol CI score is right now and what projects you believe you could do, can we actually try to put some numbers to what could happen after 2025?
Yes. I think we'll start to put that into some of our forward ideas on what is the art of the possible. But when you look at it and you look at it as a starting point, under Argonne GREET, our plants are just above 50 carbon intensity. When you sequester on a pipeline, you reduce it by 25 to 30 points. So, under 45Z, there's 45Qs and they're 45Z and a combination of all that and which one you choose is all subject to interpretation. But in our view is you choose the 45Z, you get your $0.02 a point below 50 on your reduction. Obviously, we share that with our pipeline partner. But on top of that, we can do things like combined heat and power where it's a $0.02 per point again there, and you can maybe reduce your intensity by 5 to 10 points and your capital is kind of a one to two year payback on that basis of this program because you're getting - basically, the U.S. government has put a program in place to incent you to do this.
On top of that, you could even go lower on your carbon intensity by doing other things. So, there is a shot that you get into that 0 to 15, 20 CI range to have a low carbon fuel. And that's - it's just such a game changer. And California at that point doesn't really - and California, if you ship there, great, but this green fuel production credit, that's not a California program, that's a U.S. program, and it just allows you to benefit over the whole United States to ship your product. But if you get into a low carbon market like California, Oregon or Washington, there's even upside from there.
So, we're talking in the potential of hundreds of millions of dollars of opportunity to go after. I think that's a little bit different from when we first went on the pipeline a couple of years ago, and the only program in place was the 45Q at $50 in a little with LCFS, which has come down significantly. This has really set us up to succeed as a business in carbon reduction as well as our partners that we're going to be partnering with to help sequester our carbon as well to succeed
Thank you. At this time, there are no further questions. I will now turn the call back over to Todd Becker, CEO, for closing remarks.
Yes. Thanks, everybody. Obviously, not the quarter we wanted to have, but the quarter we want to have is starting now and the company we want to have is starting in the fourth quarter. That's why bringing on the rest of our capacity, delivering on five major projects during supply chain and COVID and tightness and all the rest of it that we've been dealing with to deliver these five projects and with the biggest under construction as we speak, we believe we are executing on a strategy we laid out as we approach 2023, 2024 and 2025. And we maintain that the fact that we are developing new markets, unique opportunities, low carbon ingredients, the ability for us to strategically put ourselves as a low carbon feedstock provider to renewable diesel markets, we believe we'll be able to monetize that opportunity going forward for our shareholders. We also believe that decarbonizing this platform will have significant effects on our financial capabilities as well and producing low-carbon alcohols to be made into sustainable aviation fuels from 2025 and on, is positioning us very, very well for the last half of the decade. And on top of that, the dextrose glucose opportunity, we will know a lot more as we continue to build out this first plant. And that's just really our pathway to opportunities that I don't think any of us really thought of when we started this. So, we're in a great place. We're financially sound. We're in a great financial position as we launch into Q4 and going into 2023, we're very excited about the opportunities that are ahead of us, and we appreciate your support. Thank you.
Thank you for participating in today's conference. This now concludes the program. You may now disconnect.