HOUSTON–(BUSINESS WIRE)–Vertex Energy, Inc. (NASDAQ:VTNR) (“Vertex” or the “Company”), a leading specialty refiner and marketer of high-quality refined products and renewable fuels, today announced its operational and financial results for the first quarter of 2024. The Company also announced that it plans to optimize its hyrdrocracking capacity between conventional production and renewables production moving forward.
The Company will host a conference call to discuss first quarter 2024 results today, at 9:00 A.M. Eastern Time. Details regarding the conference call are included at the end of this release.
Highlights for the first quarter of 2024 and through the date of this press release include:
- Continued safe operation of the Company’s Mobile, Alabama refinery (the “Mobile Refinery”) with first quarter 2024 conventional throughput of 64,065 barrels per day (bpd), above the high end of prior guidance;
- Reduced net loss attributable to the Company to ($17.7) million, or ($0.19) per fully-diluted share compared to the fourth quarter 2023;
- Increased Adjusted EBITDA to $18.6 million driven by 28% improvement in crack spreads compared to the fourth quarter of 2023;
- Decreased direct operating expense by 11% and capital expenditures by 29% compared to previous guidance midpoints;
- Achieved renewable diesel (“RD”) throughput of 4,090 bpd, in line with previous guidance; and
- Reported total cash and cash equivalents of $65.7 million, including restricted cash of $3.6 million.
Highlights for the strategic redirection of the Company’s renewable business:
- Announced a production pause and pivot regarding the Company’s renewable business;
- Optimizing the Mobile Refinery hydrocracker capacity from renewable diesel to conventional fuels;
- Expect to deplete Company inventories of renewable feedstocks prior to the conversion;
- Conversion will be timed with a planned catalyst change and maintenance turnaround that was already scheduled for 2024, after which hydrocracker production is expected to contribute additional upgraded conventional product volumes in Q4 2024; and
- Opportunity to optimize hydrocracker production in conventional service while maintaining the proven renewable diesel production flexibility when market conditions warrant.
Note: Schedules reconciling the Company’s generally accepted accounting principles in the United States (“GAAP”) and non-GAAP financial results, including Adjusted EBITDA and certain key performance indicators, are included later in this release (see also “Non-GAAP Financial Measures and Key Performance Indicators”, below).
Mr. Benjamin P. Cowart, Vertex’s Chief Executive Officer, stated, “We had a strong operational and financial quarter, as we maintained our commitment to operating safely and reliably. We saw an improved crack spread environment, which drove our Adjusted EBITDA higher by over $50 million compared to the fourth quarter of 2023. Additionally, we saw conventional throughput above our guidance and managed direct operating costs and capital expenditures below our guidance.
“Over the past few years, we have made material advancements and strategic decisions to grow Vertex. For the past two years we have operated safely and efficiently while investing capital into upgrading the Mobile Refinery. We built in flexibility with our capital spend to allow us to redeploy our renewable equipment back into conventional production if our strategy required adjustment. Due to the significant macroeconomic headwinds over the past 12 months, many of which we believe will continue to occur over the next 18 months and potentially beyond, we have decided to strategically pause our renewable diesel business and pivot to producing conventional fuels from the hydrocracker unit. We plan to reconfigure the hydrocracker in conjunction with a planned turnaround on the unit.”
Mr. Cowart continued, “I am appreciative of the team for their work in proving the hydrocracker in renewables service, obtaining multiple pathway approvals, and successfully incorporating a wide variety of renewable feedstocks. In the future, based on economics and macro conditions, we expect to optimize our hydrocracker capacity between conventional and renewables service. We believe this flexibility to produce based on market demand materially enhances our unit’s long-term value potential. Our engineering and operations teams have worked diligently to preserve our optionality for the unit and to not degrade our ability to produce conventional products. We now have a more robust hydrocracking unit in either service mode. Relative to what’s currently available for renewables, we believe that this shift will allow us to optimize available returns through higher yield capabilities and higher margin opportunities for conventional products. When modeling the unit in conventional service against first quarter 2024 historical data, we estimate the unit could have significantly improved our results providing an additional fuel gross margin contribution of roughly $40 million on conventional fuels.”
Mr. Cowart concluded, “Our strategic priorities remain focused on increasing our cash position, reducing our operating costs, and improving margins. We believe that this decision, to allow for more optionality in the hydrocracking unit, is not only prudent but a necessary step toward accomplishing these for the remainder of 2024 and into 2025.”
MOBILE REFINERY OPERATIONS
Total conventional throughput at the Mobile Refinery was 64,065 bpd in the first quarter of 2024. Total production of finished high-value, light products, such as gasoline, diesel, and jet fuel, represented approximately 64% of total production in the first quarter of 2024, vs. 66% in the fourth quarter of 2023, and in line with management’s original expectations, reflecting a continued successful yield optimization initiative at the Mobile conventional refining facility.
The Mobile Refinery’s conventional operations generated a gross profit of $37.5 million and $73.6 million of fuel gross margin (a key performance indicator (KPI) discussed below) or $12.63 per barrel during the first quarter of 2024, versus generating a gross profit of $7.3 million, and fuel gross margin of $29.6 million, or $4.79 per barrel in the fourth quarter of 2023.
Total renewable throughput at the Mobile Renewable Diesel facility was 4,090 bpd in the first quarter of 2024. Total production of renewable diesel was 4,003 bpd reflecting a product yield of 98%.
The Mobile Renewable Diesel facility operations generated a gross loss of $(10.5) million and $3.8 million of fuel gross margin (a KPI discussed below) or $10.29 per barrel during the first quarter of 2024.
Renewable Business Pause and Pivot
During the second quarter of 2024, Vertex is pausing renewable fuels production and redirecting the hydrocracking unit to conventional fuels and products. The Company had a previously planned catalyst and maintenance turnaround scheduled for 2024. It will use that planned turnaround to load conventional catalyst and bring the unit out of turnaround in conventional service. In addition, the total cost of about $10 million was previously budgeted as part of the planned catalyst and maintenance turnaround and does not represent a material change to our forecasted capital spend. During the second quarter, Vertex is running the remaining Company inventories of renewable feedstock, which is expected to allow the Company to improve its working capital and margins in the second quarter from the renewable business.
First Quarter 2024 Mobile Refinery Results Summary ($/millions unless otherwise noted)
|
Conventional Fuels Refinery |
4Q23 |
TTM |
1Q24 |
|
Total Throughput (bpd) |
67,083 |
71,922 |
64,065 |
|
Total Throughput (MMbbl) |
6.17 |
26.32 |
5.83 |
|
Conventional Facility Capacity Utilization1 |
89.4% |
95.9% |
85.4% |
|
Direct Opex Per Barrel ($/bbl) |
$2.46 |
$2.74 |
$2.75 |
|
Fuel Gross Margin ($/MM) |
$29.6 |
$288.5 |
$73.6 |
|
Fuel Gross Margin Per Barrel ($/bbl) |
$4.79 |
$10.96 |
$12.63 |
|
Production Yield |
|||
|
Gasoline (bpd) |
17,826 |
17,388 |
14,678 |
|
% Production |
25.9% |
24.0% |
22.9% |
|
ULSD (bpd) |
14,510 |
15,014 |
13,441 |
|
% Production |
21.1% |
21.6% |
21.0% |
|
Jet (bpd) |
12,937 |
13,735 |
12,595 |
|
% Production |
18.8% |
19.8% |
19.6% |
|
Total Finished Fuel Products |
45,273 |
46,137 |
40,714 |
|
% Production |
65.9% |
63.7% |
63.5% |
|
Other2 |
23,457 |
26,300 |
23,428 |
|
% Production |
34.1% |
37.9% |
36.5% |
|
Total Production (bpd) |
68,730 |
72,437 |
64,142 |
|
Total Production (MMbbl) |
6.32 |
26.51 |
5.84 |
|
Renewable Fuels Refinery |
4Q23 |
TTM |
1Q24 |
|
Total Renewable Throughput (bpd) |
3,926 |
3,980 |
4,090 |
|
Total Renewable Throughput (MMbbl) |
0.36 |
1.46 |
0.37 |
|
Renewable Diesel Facility Capacity Utilization3 |
49.1% |
49.8% |
51.1% |
|
Direct Opex Per Barrel ($/bbl) |
$27.32 |
$25.93 |
$25.20 |
|
Renewable Fuel Gross Margin |
$4.4 |
$7.5 |
$3.8 |
|
Renewable Fuel Gross Margin Per Barrel ($/bbl) |
$12.11 |
$5.13 |
$10.29 |
|
Renewable Diesel Production (bpd) |
3,786 |
3,822 |
4,003 |
|
Renewable Diesel Production (MMbbl) |
0.35 |
1.40 |
0.36 |
|
Renewable Diesel Production Yield (%) |
96.4% |
96.0% |
97.9% |
|
1) Assumes 75,000 barrels per day of conventional operational capacity 2) Other includes naphtha, intermediates, and LNG 3) Assumes 8,000 barrels per day of renewable fuels operational capacity |
First Quarter 2024 Financial Update
Vertex reported first quarter 2024 net loss attributable to the Company of ($17.7) million, or ($0.19) per fully-diluted share, versus net loss attributable to the Company of ($63.9) million, or ($0.68) per fully-diluted share for the fourth quarter of 2023. Adjusted EBITDA was $18.6 million for the first quarter of 2024, compared to Adjusted EBITDA of ($35.1) million in the fourth quarter of 2023. The improvement in quarter-over-quarter results was primarily driven by improved crack spread pricing, in Vacuum Gas Oil (“VGO”) and gasoline finished products.
Balance Sheet and Liquidity Update
As of March 31, 2024, Vertex had total debt outstanding of $284 million, including $15.2 million in 6.25% Senior Convertible Notes, $196.0 million outstanding on the Company’s Term Loan, finance lease obligations of $68.1 million, and $5.0 million in other obligations. The Company had total cash and equivalents of $65.7 million, including $3.6 million of restricted cash on the balance sheet as of March 31, 2024, for a net debt position of $218.5 million.
As previously announced on January 2, 2024, the Company reached an agreement with its existing lending group to modify certain terms and conditions of the current term loan agreement. The amended term loan provided an incremental $50.0 million in borrowings, the full amount of which was borrowed upon closing on December 29, 2023 and therefore was reflected in Vertex’s year end 2023 cash position.
Vertex management continuously monitors current market conditions to assess expected cash generation and liquidity needs against its available cash position, using the forward crack spreads in the market. Additionally, the Company continues to evaluate strategic financial opportunities seeking further enhancements to its current liquidity position.
Management Outlook
All guidance presented below is current as of the time of this release and is subject to change. All prior financial guidance should no longer be relied upon.
|
Conventional Fuels |
2Q 2024 |
||
|
Operational: |
Low |
High |
|
|
Mobile Refinery Conventional Throughput Volume (Mbpd) |
68.0 |
72.0 |
|
|
Capacity Utilization |
91% |
96% |
|
|
Production Yield Profile: |
|||
|
Percentage Finished Products1 |
64% |
68% |
|
|
Intermediate & Other Products2 |
36% |
32% |
|
|
Renewable Fuels |
2Q 2024 |
||
|
Operational: |
Low |
High |
|
|
Mobile Refinery Renewable Throughput Volume (Mbpd) |
2.0 |
4.0 |
|
|
Capacity Utilization |
25% |
50% |
|
|
Production Yield |
96% |
98% |
|
|
Yield Loss |
4% |
2% |
|
|
Consolidated |
2Q 2024 |
||
|
Operational: |
Low |
High |
|
|
Mobile Refinery Total Throughput Volume (Mbpd) |
70.0 |
76.0 |
|
|
Capacity Utilization |
84% |
92% |
|
|
Financial Guidance: |
|||
|
Direct Operating Expense ($/bbl) |
$4.11 |
$4.46 |
|
|
Capital Expenditures ($/MM) |
$20.00 |
$25.00 |
|
|
1.) Finished products include gasoline, ULSD, and Jet A |
|||
|
2.) Intermediate & Other products include Vacuum Gas Oil (VGO), Liquified Petroleum Gases (LPGs), and Vacuum Tower Bottoms (VTBs) |
|||
CONFERENCE CALL AND WEBCAST DETAILS
A conference call will be held today, May 9, 2024 at 9:00 A.M. Eastern Time to review the Company’s financial results, discuss recent events and conduct a question-and-answer session. An audio webcast of the conference call and accompanying presentation materials will also be available in the “Events and Presentation” section of Vertex’s website at www.vertexenergy.com. To listen to a live broadcast, visit the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.
To participate in the live teleconference:
Domestic: (888) 350-3870
International: (646) 960-0308
Conference ID: 8960754
A replay of the teleconference will be available in the “Events and Presentation” section of Vertex’s website at www.vertexenergy.com for up to one year following the conference call.
ABOUT VERTEX ENERGY
Vertex Energy is a leading energy transition company that specializes in producing high-purity fuels and products from conventional, sustainable, and renewable feedstocks. The Company’s innovative solutions are designed to enhance the performance of our customers and partners while also prioritizing sustainability, safety, and operational excellence. With a commitment to providing superior products and services, Vertex Energy is dedicated to shaping the future of the energy industry.
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the securities laws, including the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. The important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include, without limitation, the Company’s projected Outlook for the second quarter of 2024, the costs associated with, and outcome of the Company’s plans to optimize conventional fuel and renewable diesel production moving forward,, as discussed above; statements concerning: the Company’s engagement of BofA Securities, Inc., as previously disclosed; the review and evaluation of potential joint ventures, divestitures, acquisitions, mergers, business combinations, or other strategic transactions, the outcome of such review, and the impact on any such transactions, or the review thereof, and their impact on shareholder value; the process by which the Company engages in evaluation of strategic transactions; the Company’s ability to identify potential partners; the outcome of potential future strategic transactions and the terms thereof; the future production of the Company’s Mobile Refinery; anticipated and unforeseen events which could reduce future production at the refinery or delay future capital projects, and changes in commodity and credit values; throughput volumes, production rates, yields, operating expenses and capital expenditures at the Mobile Refinery; the timing of, and outcome of, the evaluation and associated carbon intensity scoring of the Company’s feedstock blends by officials in the state of California; the ability of the Company to obtain low carbon fuel standard (LCFS) credits, and the amounts thereof; the need for additional capital in the future, including, but not limited to, in order to complete capital projects and satisfy liabilities, the Company’s ability to raise such capital in the future, and the terms of such funding, including dilution caused thereby; the timing of capital projects at the Company’s refinery located in Mobile, Alabama (the “Mobile Refinery”) and the outcome of such projects; the future production of the Mobile Refinery, including but not limited to, renewable diesel and conventional production and the breakdown between the two; estimated and actual production and costs associated with the renewable diesel capital project; estimated revenues, margins and expenses, over the course of the agreement with Idemitsu; anticipated and unforeseen events which could reduce future production at the Mobile Refinery or delay planned and future capital projects; changes in commodity and credits values; certain early termination rights associated with third party agreements and conditions precedent to such agreements; certain mandatory redemption provisions of the outstanding senior convertible notes, the conversion rights associated therewith, and dilution caused by conversions and/or the exchanges of convertible notes; the Company’s ability to comply with required covenants under outstanding senior notes and a term loan and to pay amounts due under such senior notes and term loan, including interest and other amounts due thereunder; the ability of the Company to retain and hire key personnel; the level of competition in the Company’s industry and its ability to compete; the Company’s ability to respond to changes in its industry; the loss of key personnel or failure to attract, integrate and retain additional personnel; the Company’s ability to protect intellectual property and not infringe on others’ intellectual property; the Company’s ability to scale its business; the Company’s ability to maintain supplier relationships and obtain adequate supplies of feedstocks; the Company’s ability to obtain and retain customers; the Company’s ability to produce products at competitive rates; the Company’s ability to execute its business strategy in a very competitive environment; trends in, and the market for, the price of oil and gas and alternative energy sources; the impact of inflation on margins and costs; the volatile nature of the prices for oil and gas caused by supply and demand, including volatility caused by the ongoing Ukraine/Russia conflict and/or the Israel/Hamas conflict, changes in interest rates and inflation, and potential recessions; the Company’s ability to maintain relationships with partners; the outcome of pending and potential future litigation, judgments and settlements; rules and regulations making the Company’s operations more costly or restrictive; volatility in the market price of compliance credits (primarily Renewable Identification Numbers (RINs) needed to comply with the Renewable Fuel Standard (“RFS”)) under renewable and low-carbon fuel programs and emission credits needed under other environmental emissions programs, the requirement for the Company to purchase RINs in the secondary market to the extent it does not generate sufficient RINs internally, liabilities associated therewith and the timing, funding and costs of such required purchases, if any; changes in environmental and other laws and regulations and risks associated with such laws and regulations; economic downturns both in the United States and globally, changes in inflation and interest rates, increased costs of borrowing associated therewith and potential declines in the availability of such funding; risk of increased regulation of the Company’s operations and products; disruptions in the infrastructure that the Company and its partners rely on; interruptions at the Company’s facilities; unexpected and expected changes in the Company’s anticipated capital expenditures resulting from unforeseen and expected required maintenance, repairs, or upgrades; the Company’s ability to acquire and construct new facilities; the Company’s ability to effectively manage growth; decreases in global demand for, and the price of, oil, due to inflation, recessions or other reasons, including declines in economic activity or global conflicts; expected and unexpected downtime at the Company’s facilities; the Company’s level of indebtedness, which could affect its ability to fulfill its obligations, impede the implementation of its strategy, and expose the Company’s interest rate risk; dependence on third party transportation services and pipelines; risks related to obtaining required crude oil supplies, and the costs of such supplies; counterparty credit and performance risk; unanticipated problems at, or downtime effecting, the Company’s facilities and those operated by third parties; risks relating to the Company’s hedging activities or lack of hedging activities; and risks relating to planned and future divestitures, asset sales, joint ventures and acquisitions.
Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward-looking statements included in this communication are described in the Company’s publicly filed reports, including, but not limited to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. These reports are available at www.sec.gov. The Company cautions that the foregoing list of important factors is not complete. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements referenced above. Other unknown or unpredictable factors also could have material adverse effects on Vertex’s future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex undertakes no obligation to update these statements after the date of this release, except as required by law, and takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
PROJECTIONS
The financial projections (the “Projections”) included herein were prepared by Vertex in good faith using assumptions believed to be reasonable. A significant number of assumptions about the operations of the business of Vertex were based, in part, on economic, competitive, and general business conditions prevailing at the time the Projections were developed. Any future changes in these conditions, may materially impact the ability of Vertex to achieve the financial results set forth in the Projections. The Projections are based on numerous assumptions, including realization of the operating strategy of Vertex; industry performance; no material adverse changes in applicable legislation or regulations, or the administration thereof, or generally accepted accounting principles; general business and economic conditions; competition; retention of key management and other key employees; absence of material contingent or unliquidated litigation, indemnity, or other claims; minimal changes in current pricing; static material and equipment pricing; no significant increases in interest rates or inflation; and other matters, many of which will be beyond the control of Vertex, and some or all of which may not materialize.
Contacts
INVESTOR CONTACT
IR@vertexenergy.com
