Vertex Energy Provides Operational Update for First Quarter 2024

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Vertex Energy, Inc. (NASDAQ:VTNR) provided an operational update for the first quarter of 2024, exceeding throughput guidance, improving crack spreads, reducing operating expenses and capital expenditures. The company's focus on margin efficiency and cost reduction resulted in a solid performance.

Positive

• Vertex Energy exceeded its conventional throughput guidance with 64,000 bpd, higher than the forecasted 60,000 to 63,000 bpd.
• The company reported improved crack spreads of 28% on finished refined products compared to the fourth quarter of 2023.
• Vertex reduced direct operating expenses by 11% and capital expenditures by 29% compared to previous guidance midpoints.
• Renewable throughput and utilization were in line with guidance, showcasing operational stability.
• The company's President and CEO, Benjamin P. Cowart, emphasized the focus on margin efficiency and cost reduction to increase cash flow.
• Key commodity price averages for the first quarter of 2024 were favorable for Vertex Energy's operations.

Negative

• None.

Financial Analyst

Vertex Energy's reported conventional throughput of 64,000 barrels per day (bpd), surpassing its projection, suggests a significant operational leverage especially in light of the 11% reduction in operating expenses and 29% cut in capital expenditures. These figures indicate an optimization of resources which could enhance the company's gross margins. Notably, average first-quarter crack spreads rising by 28% quarter-over-quarter could imply stronger refining margins benefiting the bottom line. The lower yield of finished products, likely impacted by turnarounds and weather conditions, while a concern, may have been offset by the operational efficiencies.

From a financial perspective, the improvement in spreads could translate to an uptick in cash flow, bolstering the company’s financial health and potentially enhancing shareholder value. Investors should monitor the company's ability to maintain these reduced costs over the ensuing quarters, as it would reflect on the sustainability of the operational improvements and its potential impact on the stock’s valuation.

Energy Sector Analyst

The uptick in conventional throughput volumes at the Mobile Refinery is impressive and when coupled with the reported improvements in crack spreads, suggests that Vertex Energy could be capitalizing on favorable market conditions. This performance is indicative of a robust operational strategy, aligning capacity utilization with market demands. Investors should note the importance of crack spreads as a key indicator in the refining sector since these spreads are a proxy for margin and profitability.

On the renewable side, the throughput volume for renewable diesel aligns with previous guidance, which highlights stability in this segment. As the energy market continues to shift towards sustainability, Vertex's performance in renewable fuels will become increasingly relevant to its valuation. The efficiency in renewable fuel production demonstrates Vertex's commitment to this growing segment, which may become a significant driver for future growth.

Environmental, Social and Governance (ESG) Analyst

Vertex Energy's focus on reducing direct operating expenses while maintaining throughput volumes speaks to a broader commitment to operational efficiency, potentially leading to reduced environmental impact per unit of production. This is a positive note from an ESG perspective, as cost reductions in this manner often correlate with resource efficiency and environmental stewardship. Additionally, the stability in renewable diesel production underscores Vertex's role in the alternative energy landscape, which aligns with investor interest in companies contributing to a lower carbon economy.

Looking at the long term, the shift towards renewables and the management of operational costs are in line with the principles of sustainable business practices. Companies that successfully integrate ESG considerations into their business models may attract ESG-focused investors and can benefit from potentially lower risk premiums, impacting the cost of capital and thus valuation.

HOUSTON--(BUSINESS WIRE)-- 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 first quarter of 2024.

Highlights include:

• Anticipated conventional throughput of 64,000 barrels per day (bpd) exceeding guidance of 60,000 to 63,000 bpd due to stronger capacity utilization compared to forecast;
• Strong renewable throughput and utilization in line with midpoint of guidance;
• Projected improved average first quarter crack spreads on finished refined products of 28% compared to fourth quarter 2023; and
• Forecasted reductions in direct operating expense by 11% and capital expenditures by 29% compared to previous guidance midpoints.

Benjamin P. Cowart, President and CEO of Vertex, stated, “We delivered or exceeded our guidance in the first quarter of 2024, coupled with improved crack spreads, lower operating expense and lower capital spending, providing Vertex with a solid foundation to begin the year. We continue to focus on margin efficiency while we look to opportunistically ramp up our production rates and better align our capacity utilization with evolving market conditions. Our priorities remain clear, increase cash flow by improving margins and reducing our costs. We are pleased with our operational performance, the improving crack spreads and our ability to reduce operating expense in the first quarter of 2024.”

Updated 1Q 2024 Management Guidance

Conventional Fuels	1Q 2024
Operational:	As of 2/28/24		As of 4/18/24
Mobile Refinery Conventional Throughput Volume (Mbpd)	60 - 63		~64
Capacity Utilization	80 - 84%		84 - 86%
Production Yield Profile:
Percentage Finished Products1	64 - 68%		62 - 65%
Intermediate & Other Products2	36 - 32%		38 - 35%
Renewable Fuels	1Q 2024
Operational:	As of 2/28/24		As of 4/18/24
Mobile Refinery Renewable Throughput Volume (Mbpd)	3 – 5		~4
Capacity Utilization	38 - 63%		50 - 52%
Production Yield	96 - 98%		97 - 99%
Yield Loss	4 - 2%		3 - 1%
Consolidated	1Q 2024
Operational:	As of 2/28/24		As of 4/18/24
Mobile Refinery Total Throughput Volume (Mbpd)	63 - 68		~68
Capacity Utilization	76 - 82%		81 - 83%
Financial Guidance:
Direct Operating Expense ($/bbl)	$4.59 – $4.95		$4.15 – 4.35
Capital Expenditures ($/MM)	$20 - $25		$15 - $17
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)

First quarter conventional throughput volumes above the high end of prior forecasts with lower operating expenses and capital expenditures

Reported throughput volumes at the Company’s Mobile, Alabama Refinery (the “Mobile Refinery”) for the first quarter of 2024 are expected to be approximately 64,000 bpd, above the high end of management’s previous guidance. The increase reflects better utilization in light of improving market conditions during the quarter.

The expected yield of finished conventional fuel products such as gasoline, diesel, and jet fuel is expected to be between 62% and 65%, at the low end of the previously forecasted range of 64% to 68%. This reflects planned turnaround activity, as well as weather related supply events, that were experienced in the first quarter of 2024.

Operating expenses per barrel for the first quarter of 2024 are expected to total between $4.15 to $4.35 per barrel, a 10.9% improvement vs. prior expectations at the mid-point. Capex is expected to be $15 - $17 million, 28.9% below expectations at the midpoint.

Key commodity price averages in local markets served by Vertex for the first quarter of 2024 include Conventional Blendstock for Oxygenate Blending or CBOB gasoline at $93.52 per barrel, ultra-low sulfur diesel at $110.08 per barrel, jet fuel at $109.85 per barrel, and Louisiana Light, Sweet Crude oil at $79.70 per barrel.

Renewable diesel volume expected to be in line with prior outlook

Vertex’s reported renewable diesel production for the first quarter 2024 is expected to be about 4,000 bpd, at the midpoint of the forecasted range of 3,000 to 5,000 bpd. The yield on renewable throughput volumes is expected to be between 97% and 99%, at the high end of the previously anticipated range of 96% to 98%.

ABOUT VERTEX ENERGY

Vertex Energy is a leading energy transition company that specializes in producing both renewable and conventional fuels. The Company’s innovative solutions are designed to enhance the performance of its 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 expected results of operations for the first quarter of 2024, 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; the timing of capital projects at the Mobile Refinery and the outcome of such projects; the future production of the Mobile Refinery, including but not limited to, renewable diesel production; 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 January 31, 2024, when filed, 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 March 31, 2024, 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 March 31, 2024, 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, has expressed 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 March 31, 2024, 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 March 31, 2024. 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240418788872/en/

INVESTOR CONTACT

IR@vertexenergy.com

Source: Vertex Energy, Inc.

FAQ

What is Vertex Energy's (VTNR) reported conventional throughput volume for the first quarter of 2024?

Vertex Energy reported a conventional throughput volume of approximately 64,000 barrels per day (bpd) for the first quarter of 2024, exceeding previous guidance.

How did Vertex Energy's crack spreads on finished refined products compare to the fourth quarter of 2023?

Vertex Energy reported improved crack spreads of 28% on finished refined products for the first quarter of 2024 compared to the fourth quarter of 2023.

What reductions were made in Vertex Energy's direct operating expenses and capital expenditures for the first quarter of 2024?

Vertex Energy reduced direct operating expenses by 11% and capital expenditures by 29% for the first quarter of 2024 compared to previous guidance midpoints.

Was Vertex Energy's renewable throughput volume in line with guidance for the first quarter of 2024?

Yes, Vertex Energy's reported renewable throughput volume and utilization were in line with guidance for the first quarter of 2024.

What did Vertex Energy's President and CEO emphasize regarding the company's performance in the first quarter of 2024?

Vertex Energy's President and CEO, Benjamin P. Cowart, emphasized the focus on margin efficiency, cost reduction, and increasing cash flow in the first quarter of 2024.

What were the key commodity price averages for the markets served by Vertex Energy in the first quarter of 2024?

Key commodity price averages for Vertex Energy in the first quarter of 2024 included CBOB gasoline at $93.52 per barrel, ultra-low sulfur diesel at $110.08 per barrel, jet fuel at $109.85 per barrel, and Louisiana Light, Sweet Crude oil at $79.70 per barrel.