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Vertex Energy to pause renewable production

Vertex Energy to pause renewable production
Vertex Refining Alabama LLC's Mobile site is strategically located on the US Gulf Coast. The facility distributes its finished product across the southeastern United States through a high-capacity truck rack, together with deep and shallow water distribution points capable of supplying waterborne vessels. The Olefins Feeds Hydrocracker has been converted to produce renewable diesel (photo courtesy Vertex Energy).

In the United States (US), Vertex Energy, Inc, a specialty refiner and marketer of high-quality refined products and renewable fuels, has announced plans to optimize its hyrdrocracking capacity between conventional production and renewables production moving forward.

During the second quarter of 2024, Vertex is pausing renewable fuels production and redirecting the hydrocracking unit to conventional fuels and products. The announcement was made as part of its operational and financial results for the first quarter of 2024.

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 percent of total production in the first quarter of 2024, and in line with management’s original expectations, reflecting a continued successful yield optimization initiative at the Mobile conventional refining facility.

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 percent.

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 US$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, said Benjamin P. Cowart, CEO of Vertex Energy.

Renewable business pause and pivot

The Company also announced that it plans to optimize its hyrdrocracking capacity between conventional production and renewables production moving forward.

The Company had a previously planned catalyst and maintenance turnaround scheduled for 2024.

It will use that planned turnaround to load conventional catalysts and bring the unit out of turnaround into conventional service.

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, Benjamin P. Cowart said.

In addition, the total cost of about US$10 million was previously budgeted as part of the planned catalyst and maintenance turnaround and does not represent a material change to the forecasted capital spend.

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 renewable services. 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 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, said Benjamin P. Cowart.

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.

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 US$40 million on conventional fuels. 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, ended Benjamin P. Cowart.

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