Vertex Energy Announces Second Quarter 2024 Results

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 second quarter of 2024. The Company also updated its progress in the optimization of its hydrocracking capacity between conventional production and renewables production.

The Company will host a conference call to discuss second 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 second quarter of 2024 and through the date of this press release include:

• Secured new $15 million and $20 million loans, as previously disclosed, enhancing the Company’s liquidity;
• Modified certain terms and conditions of the current term loan agreement and appointed Seth Bullock as Chief Restructuring Officer;
• Continued safe operation of the Company’s Mobile, Alabama refinery (the “Mobile Refinery”) with second quarter 2024 conventional throughput of 67,758 barrels per day (bpd);
• Reported net loss attributable to the Company of ($53.8) million, or ($0.58) per fully-diluted share;
• Recorded Adjusted EBITDA of ($22.4) million driven by a 28% decrease in crack spreads compared to the first quarter of 2024;
• Decreased selling, general and administrative expense by 6% compared to the first quarter of 2024 and by 12% compared to the second quarter of 2023; and
• Completed running all renewable feedstock and began optimizing the Mobile Refinery hydrocracker capacity from renewable diesel to conventional fuels with expected contribution in Q4 2024.

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 continued to demonstrate operational reliability for conventional refining and overall continued strong performance in safety. We saw a difficult crack spread environment driven by a weakening in gasoline and diesel demand in the second quarter that drove our Adjusted EBITDA lower. Consistent with the previously announced pause and pivot strategy, Vertex successfully processed the remaining inventories of renewable feedstock and safely decommissioned the hydrotreater out of renewable service. The Company also continued to manage expenses, seeing moderate reductions in capital and fixed costs across the business.”

“Given continued near-term EBITDA and liquidity constraints, the Company continues its pursuit of strategic pathways, considering alternatives and exploring financing pathways to maximize value. This includes working with our lenders to secure additional $15 and $20 million loans in June and July, as well as naming Seth Bullock as our Chief Restructuring Officer. Seth has significant experience in the industry and understands Vertex’s operational and financial capabilities very well. Seth is being brought in to assist Vertex in managing through a difficult macro-economic environment and providing additional expertise in liquidity management and performance improvement. We believe that continued support from our lenders is key to executing our strategic priorities which are focused on managing our liquidity position, reducing our operating costs, and improving margins.”

Mr. Cowart concluded, “We are focused on navigating through the recent lower crack spreads and continue to believe that the decision and execution to convert the hydrocracking unit to conventional fuels will help us toward accomplishing our strategic priorities for the second half of 2024 and into 2025.”

MOBILE REFINERY OPERATIONS

Total conventional throughput at the Mobile Refinery was 67,758 bpd in the second 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 second quarter of 2024, flat with the first quarter of 2024, and in line with management’s original expectations, reflecting a continued solid yield at the Mobile conventional refining facility.

The Mobile Refinery’s conventional operations generated a gross profit of $6.4 million and $35.0 million of fuel gross margin (a key performance indicator (KPI) discussed below) or $5.67 per barrel during the second quarter of 2024, versus generating a gross profit of $37.5 million, and fuel gross margin of $73.6 million, or $12.63 per barrel in the first quarter of 2024. The decline in profit and margin was driven by a 28% decrease in crack spreads compared to the first quarter of 2024.

Total renewable throughput at the Mobile Renewable Diesel facility was 3,092 bpd in the second quarter of 2024. Total production of renewable diesel was 3,082 bpd reflecting a product yield of 99.7%.

The Mobile Renewable Diesel facility operations generated a gross loss of $(11.8) million and $4.5 million of fuel gross margin (a KPI discussed below) or $16.08 per barrel during the second quarter of 2024.

Renewable Business Pause and Pivot

As previously announced, 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.

The Company has ceased renewable production and is on-schedule for the conversion of its Hydrocracker back to conventional service. This focus on the conventional business seeks to capture available margins in a more established market with an on-stream target of the fourth quarter of 2024.

Second Quarter 2024 Mobile Refinery Results Summary ($/millions unless otherwise noted)

Conventional Fuels Refinery		1Q24	2Q24	2024 YTD
	Total Throughput (bpd)	64,065	67,758	65,911
	Total Throughput (MMbbl)	5.83	6.17	12.00
	Conventional Facility Capacity Utilization1 (%)	85.4%	90.3%	87.88%
	Direct Opex Per Barrel ($/bbl)	$2.75	$2.59	$2.67
	Fuel Gross Margin ($/MM)	$73.6	$35.0	$108.60
	Fuel Gross Margin Per Barrel ($/bbl)	$12.63	$5.67	$9.06
	Production Yield
	Gasoline (bpd)	14,678	15,642	15,160
	% Production	22.9%	22.6%	22.7%
	ULSD (bpd)	13,441	14,174	13,808
	% Production	21.0%	20.4%	20.7%
	Jet (bpd)	12,595	14,848	13,722
	% Production	19.6%	21.4%	20.6%
	Total Finished Fuel Products (bpd)	40,714	44,664	42,690
	% Production	63.5%	64.4%	64.0%
	Other2 (bpd)	23,428	24,683	24,056
	% Production	36.5%	35.6%	36.0%
	Total Production (bpd)	64,142	69,347	66,746
	Total Production (MMbbl)	5.84	6.31	12.15
Renewable Fuels Refinery		1Q24	2Q24	2024 YTD
	Total Renewable Throughput (bpd)	4,090	3,092	3,591
	Total Renewable Throughput (MMbbl)	0.37	0.28	0.65
	Renewable Diesel Facility Capacity Utilization3 (%)	51.1%	38.7%	44.9%
	Direct Opex Per Barrel ($/bbl)	$25.20	$31.75	$28.03
	Renewable Fuel Gross Margin	$3.8	$4.5	$8.4
	Renewable Fuel Gross Margin Per Barrel ($/bbl)	$10.29	16.08	$12.78
	Renewable Diesel Production (bpd)	4,003	3,082	3,543
	Renewable Diesel Production (MMbbl)	0.36	0.28	0.64
	Renewable Diesel Production Yield (%)	97.9%	99.7%	98.7%
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

Second Quarter 2024 Financial Update

Vertex reported second quarter 2024 net loss attributable to the Company of ($53.8) million, or ($0.58) per fully-diluted share, versus net loss attributable to the Company of ($17.7) million, or ($0.19) per fully-diluted share for the first quarter of 2024. Adjusted EBITDA was $(22.4) million for the second quarter of 2024, compared to Adjusted EBITDA of $18.6 million in the first quarter of 2024. The reduction in quarter-over-quarter results was primarily driven by decreased crack spread pricing across all products.

Balance Sheet and Liquidity Update

As of June 30, 2024, Vertex had total debt outstanding of $303.8 million, including $15.2 million in 6.25% Senior Convertible Notes, $207.2 million outstanding on the Company’s Term Loan, finance lease obligations of $67.5 million, and $13.9 million in other obligations. The Company had total cash and cash equivalents of $18.9 million, including $0.1 million of restricted cash on the balance sheet as of June 30, 2024, for a net debt position of $284.9 million.

As previously disclosed, on July 24, 2024 the Company reached an agreement with its senior lenders to modify certain terms and conditions of the current term loan agreement and agreed to provide a term loan in the amount of $20 million. The new term loan provided an incremental $20.0 million in borrowings.

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	3Q 2024
Operational:	Low		High
Mobile Refinery Conventional Throughput Volume (Mbpd)	55.0		60.0
Capacity Utilization	73%		80%
Production Yield Profile:
Percentage Finished Products1	64%		68%
Intermediate & Other Products2	36%		32%
Financial Guidance:	Low		High
Direct Operating Expense ($/bbl)	$5.52		$6.02
Capital Expenditures ($/MM)	$15.00		$20.00
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, August 8, 2024, at 9:00 A.M. Eastern Time to review the Company’s financial results, discuss recent events. 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 refined fuels and products. Our 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 third quarter of 2024, the costs associated with, and outcome of the Company’s plans to optimize conventional fuel and renewable diesel production moving forward; 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; potential restructuring of the Company, its operations, financials, debts and assets; 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 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, including to pay amounts owed under the Company’s outstanding term loan, the Company’s ability to raise such capital in the future, and the terms of such funding, including dilution caused thereby, and steps the Company may be required to take in the future if the Company is unable to raise additional capital, including potentially seeking bankruptcy protection; 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 intermediation facilities, 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 and interest rates 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 June 30, 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. The Projections also assume the continued uptime of the Company’s facilities at historical levels and the successful funding of, timely completion of, and successful outcome of, planned capital projects. Additionally, to the extent that the assumptions inherent in the Projections are based upon future business decisions and objectives, they are subject to change. Although the Projections are presented with numerical specificity and are based on reasonable expectations developed by Vertex’s management, the assumptions and estimates underlying the Projections are subject to significant business, economic, and competitive uncertainties and contingencies, many of which will be beyond the control of Vertex. Accordingly, the Projections are only estimates and are necessarily speculative in nature. It is expected that some or all of the assumptions in the Projections will not be realized and that actual results will vary from the Projections. Such variations may be material and may increase over time.

Contacts

INVESTOR CONTACT
IR@vertexenergy.com

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