Vertex Energy (VTNR) 8 Aug 24 2024 Q2 Earnings call transcript

In Vertex Energy's Second Quarter 2024 Conference Call, management provided insights into the financial and operational results, strategic shifts, and measures taken to address near-term challenges. Amidst a volatile market landscape, Vertex Energy's executives discussed the company's efforts to maintain operational efficiency, manage costs, and strategically pivot towards conventional fuel production.

Financial Performance and Operational Highlights

The second quarter of 2024 saw a challenging macroeconomic environment with crack spreads falling by 28% compared to the previous quarter. Despite the operational excellence showcased, the lower pricing environment negatively impacted the financial performance. Vertex Energy reported a net loss of $53.8 million for the second quarter, marking a decrease from the $81.4 million net loss in the same period last year. The company's total adjusted EBITDA decreased to a loss of $22.4 million, driven primarily by the lower pricing environment.

Operationally, Vertex Energy's safety track record remains commendable, with no process safety events reported in the second quarter. The Mobile site had an average throughput volume of approximately 68,000 barrels per day, and the total operating expenses decreased by 6% quarter-over-quarter and 12% year-over-year. These figures underscore the company's commitment to operating efficiently and reducing costs.

Strategic Shifts and Future Outlook

Vertex Energy's strategic decisions in recent years have been instrumental in its growth trajectory. The company's investment in upgrading the Mobile refinery and the strategic pivot from renewable diesel to conventional fuel production highlight this focus. In the second quarter of 2024, Vertex Energy ceased deep production in its renewable diesel plant and is currently in the process of converting its hydrocracker back to conventional service. This strategic move is expected to capture available margins in a more established market, with an on-stream target of the fourth quarter of 2024.

In response to the near-term liquidity constraints, Vertex Energy has taken measures to secure additional financing. The company secured $15 million and $20 million in loans in June and July, respectively, and modified certain terms and conditions of its current loan agreement. Furthermore, Seth Bullock was appointed as the Chief Restructuring Officer to assist in managing the company through the challenging macroeconomic environment and providing expertise in liquidity management and performance improvement.

Operational and Financial Outlook

Looking ahead, Vertex Energy anticipates a planned turnaround schedule in conjunction with the hydrocracker conversion, which will result in reduced overall throughput for the third quarter of 2024. The company expects total conventional throughput volumes at Mobile to be between 55,000 and 60,000 barrels per day, with an anticipated yield of conventional products consisting of between 64% to 68% high-value finished products. The projected per barrel range for the third quarter is between $5.52 and $6.02.

Despite the challenges, Vertex Energy remains optimistic about its future and is pursuing strategic opportunities and financing pathways to support liquidity needs. The company's proactive measures to restructure the business, reduce costs, and improve margins demonstrate its resilience and adaptability in navigating the volatile market conditions.

Conclusion

Vertex Energy's Second Quarter 2024 Conference Call provided a comprehensive update on the company's financial and operational performance, strategic shifts, and measures taken to address near-term challenges. Amidst a challenging macroeconomic environment, the company's commitment to operational excellence, cost reductions, and strategic pivots underscore its resilience and adaptability. Vertex Energy's focus on increasing cash position, reducing operating costs, and improving margins positions it well for the future, despite the persistent market volatility in crude and product pricing.