Renewable diesel ("RD") production achieved
full targeted production capacity of 8,000 bpd during the quarter,
as planned
Conventional throughput volumes for the
second quarter of 2023 of approximately 76,000 bpd to exceed
previously forecasted 68,000-72,000 bpd range, reflecting active
mitigation of expected supply disruption impact during
quarter
Expected second quarter capture rate of
30%-35% below previously forecasted range of 50%-54%, negatively
impacted by significant price volatility in fuels and refined
product markets
Vertex Energy, Inc. (NASDAQ: VTNR) ("Vertex" or “the Company"),
a leading specialty refiner and marketer of high-quality refined
products, today provided an update to its financial and operational
outlook for the second quarter of 2023.
Renewable Diesel Maximum Production Target Achieved
Production of renewable diesel achieved the Phase I installed
capacity target of 8,000 bpd during the second quarter, as
anticipated. The validation of maximum throughput capacity provides
important data related to the Company's strategic approach for
long-term optimization of the project. Currently, the Company
continues to optimize production levels based on factors including
commercial obligations and prevailing economic conditions, and does
not anticipate providing near-term throughput targets at this
time.
Second Quarter Conventional Throughput Volumes Expected to
Exceed Prior Projections
Reported throughput volumes at the Company’s Mobile, Alabama
Refinery (the “Mobile Refinery”) for the second quarter of 2023 are
expected to be approximately 76,000 barrels per day (bpd),
exceeding management’s prior expectations of 68,000 bpd to 72,000
bpd. Throughput volumes for the second quarter of 2023 reflect the
ongoing consistency and reliability of operations at the Mobile
Facility and effective supply chain management of crude oil
feedstock supplies.
The prior forecast included an anticipated disruption to
feedstock supply by certain vendors. Vertex’s feedstock procurement
team successfully minimized the impact of the supply disruption
event by actively sourcing alternative short-term supplies and
effective inventory management.
Operating expenses per barrel for the second quarter of 2023 are
estimated to total between $4.15 to $4.25 per barrel, or 7.6% over
prior expectations at the mid-point. The increase reflects
additional overhead expenses primarily driven by previously
reported renewable diesel feedstock pumping system repair and
restart. Capex is expected to be $30-$35 million, in-line with
prior expectations.
Second Quarter Capture Rate Negatively Impacted by Unhedged
Market Exposure, and Commodity Price Volatility
Capture rate on Gulf Coast 2-1-1 crack spread is forecasted to
be 30%-35%, below management’s previously forecasted 50%-54%. The
reduction in capture rate reflects increased price volatility in
fuel markets and broader commodity market pricing pressure.
- Significant Downturn in Benchmark 2-1-1 Crack Spread –
The Gulf Coast 2-1-1 crack spread for the second quarter 2023
averaged $23.61 per barrel, reflecting a 25.3% decline from the
reported first quarter 2023 average of $31.59 per barrel.
- Market Pricing Erosion on Products Outside of 2-1-1
Crack Spread – During the quarter, the Company also
experienced unexpected erosion in market prices for products,
particularly Jet A and VGO, which fall outside of the benchmark
Gulf Coast 2-1-1 crack spread.
Updated 2Q 2023 Guidance Summary
Operating Guidance
(as of 5/9/23)
(as of 7/25/23)
Operating Data:
Mobile Refinery Throughput Volume
(Mbpd)1
68-72
76
Capacity Utilization
94%
101%
Direct Operating Expense ($/bbl)
$3.80 - $4.00
$4.15 - $4.25
Capture Rate (%)2
50% - 54%
30% - 35%
Capex ($/MM)
$30 - $35
$30 - $35
Commodity Price Data:3
1Q23
2Q23
LLS Crude Oil ($/bbl)
$78.83
$75.64
GC 2-1-1 Crack Spread ($/bbl)
$31.59
$23.61
1. Preliminary actual throughput
volume results (Mbpd = Thousand barrels per day)
2. Capture rate relates to benchmark Gulf
Coast 2-1-1 Crack Spread
3. Commodity prices reflect average prices
for the quarter
Benjamin P. Cowart, President and CEO of Vertex, stated, “We are
pleased to report yet another milestone for our RD project: the
validation of targeted throughput capacity for the renewable diesel
plant at 8,000 barrels per day. We believe this is significant to
our growth potential as it further demonstrates our team's ability
to execute end-to-end project deliverables safely and reliably. On
the conventional side, our crude refining operations delivered
throughput volumes above 100% of stated operational capacity,
despite anticipated supply disruptions during the quarter.” Mr.
Cowart continued, "While the recent shifts in market conditions and
forces outside of our control have negatively impacted our
second-quarter profitability on conventional fuels, we continue to
advance our feedstock and renewable fuels strategies with continued
focus on longer-term value creation."
ABOUT VERTEX ENERGY
Houston-based Vertex Energy, Inc. (NASDAQ: VTNR), is an energy
transition company focused on the production and distribution of
conventional and alternative fuels. Vertex owns a refinery in
Mobile (AL) with an operable refining capacity of 75,000 barrels
per day and more than 3.2 million barrels of product storage,
positioning it as a leading supplier of fuels in the region. Vertex
is also one of the largest processors of used motor oil in the
U.S., with operations located in Houston and Port Arthur (TX),
Marrero (LA), and Columbus (OH). Vertex also owns a facility,
Myrtle Grove, located on a 41-acre industrial complex along the
Gulf Coast in Belle Chasse, LA, with existing hydroprocessing and
plant infrastructure assets, that include nine million gallons of
storage. The Company has built a reputation as a key supplier of
base oils to the lubricant manufacturing industry throughout North
America.
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 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, changes in commodity and credits values, and 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 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, increased interest rates,
recessions and increased inflation; 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; 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,
increases 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 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, 2022, and the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2023, 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.
PRELIMINARY FINANCIAL AND OPERATIONAL DATA
The financial and operational data for the three months ended
June 30, 2023, contained in this release are preliminary in nature.
The Company’s management has prepared the preliminary financial and
operational data contained in this release based on the most
current information available to management. The Company’s normal
closing and financial reporting processes with respect to its
financial and operational data for the three months ended June 30,
2023, have not been fully completed. This preliminary financial and
operational data has been prepared by, and is the responsibility
of, the Company’s management. Neither the Company’s independent
accountants, nor any other independent accounting firm, is
expressing an opinion or any other form of assurance with respect
thereto. As a result, the Company’s actual financial and
operational results for the three months ended June 30, 2023, could
be different from the preliminary financial and operational data
contained herein, and any differences could be material. The
Company has prepared these estimates on a basis materially
consistent with its historical financial results and in good faith
based upon its internal reporting as of and for the three months
ended June 30, 2023. This release is not intended to be a
comprehensive statement of financial results for this period. The
results of operations for an interim period may not give a true
indication of the results to be expected for a full year or any
future period.
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version on businesswire.com: https://www.businesswire.com/news/home/20230725385341/en/
INVESTOR John Ragozzino Jr., CFA (ICR) IR@vertexenergy.com
Vertex Energy (NASDAQ:VTNR)
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