Vertex Energy, Inc. (NASDAQ:VTNR) ("Vertex"), a leading specialty refiner and marketer of high-quality refined products and renewable fuels, 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.
