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CORRECTING and REPLACING Vertex Energy Announces Fourth Quarter and Full Year 2023 Financial Results

HOUSTON , February 29 /Businesswire/ - Two in-text references to fourth-quarter 2023 net loss per fully-diluted share to be corrected.

  • First bullet point under “FOURTH QUARTER 2023 HIGHLIGHTS” should read: Reported net loss attributable to the Company of ($63.9) million, or ($0.68) per fully-diluted share (instead of “Reported net loss attributable to the Company of ($63.9) million, or ($0.84) per fully-diluted share”).
  • First sentence of the first paragraph under “FOURTH QUARTER 2023 HIGHLIGHTS” should read: Vertex reported fourth quarter 2023 net loss attributable to the Company of ($63.9) million, or ($0.68) per fully-diluted share, versus net income attributable to the Company of $44.4 million, or $0.56 per fully-diluted share for the fourth quarter of 2022 (instead of “Vertex reported fourth quarter 2023 net loss attributable to the Company of ($63.9) million, or ($0.84) per fully-diluted share, versus net income attributable to the Company of $44.4 million, or $0.07 per fully-diluted share for the fourth quarter of 2022”).

The updated release reads:

Vertex Energy Announces Fourth Quarter and Full Year 2023 Financial and Results

Vertex Energy, Inc. (NASDAQ: VTNR) (“Vertex” or the “Company”), a leading specialty refiner and marketer of high-quality refined products, today announced its financial results for the fourth quarter ended December 31, 2023.

The Company will host a conference call to discuss fourth quarter 2023 results today, at 8:30 A.M. Eastern Time. Details regarding the conference call are included at the end of this release.

FOURTH QUARTER 2023 HIGHLIGHTS

  • Reported net loss attributable to the Company of ($63.9) million, or ($0.68) per fully-diluted share.
  • Reported Adjusted EBITDA of ($35.1) million (see “Non-GAAP Financial Measures and Key Performance Indicators”, below).
  • Continued safe operation of the Company’s Mobile, Alabama refinery (the “Mobile Refinery”) with fourth quarter 2023 conventional throughput of 67,083 barrels per day (bpd), in line with prior guidance.
  • Renewable diesel (“RD”) throughput of 3,926 bpd, reflecting Phase One capacity utilization of 49.1%.
  • Total cash and cash equivalents of $80.6 million, including restricted cash of $3.6 million and $50 million in additional term loan proceeds received during the quarter ended December 31, 2023.

FULL-YEAR 2023 HIGHLIGHTS

  • Reported net loss attributable to the Company of ($71.5) million for the full year 2023, versus net loss attributable to the Company of ($4.8) million in 2022.
  • Reported Adjusted EBITDA of $17.1 million for the full-year versus Adjusted EBITDA of $161.0 million for the full year 2022 (see “Non-GAAP Financial Measures and Key Performance Indicators”, below).
  • Conventional throughput volumes of 73,734 barrels per day (bpd) for 2023 (98.3% utilization).
  • Completion of Phase I of Renewable Diesel conversion project with the launch of Renewables business and Marine Fuels and Logistics business in Mobile, Alabama.

Vertex reported fourth quarter 2023 net loss attributable to the Company of ($63.9) million, or ($0.68) per fully-diluted share, versus net income attributable to the Company of $44.4 million, or $0.56 per fully-diluted share for the fourth quarter of 2022. Adjusted EBITDA (see “Non-GAAP Financial Measures and Key Performance Indicators”, below) was ($35.1) million for the fourth quarter 2023, compared to Adjusted EBITDA of $75.2 million in the prior-year period.

For the full-year 2023, the Company reported a net loss attributable to the Company of ($71.5) million versus ($4.8) million for the full-year 2022, largely attributable to losses in the Renewables segment due to elevated costs for Refined, Bleached and Deodorized (“RBD”) soybean oil feedstock, and increased corporate segment expenses for overhead to support business expansion. The Company also reported Adjusted EBITDA of $17.1 million, versus $161.0 million for the full years 2023 and 2022, respectively. Full-year financial results for 2023 include several non-cash items such as inventory valuation adjustments of $6 million, changes in the value of derivative liabilities which amounted to $8 million and a one-time pre-tax gain on the sale of assets of $70.9 million related to the sale of the Heartland facility.

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).

MANAGEMENT COMMENTARY

Mr. Benjamin P. Cowart, Vertex’s Chief Executive Officer, stated, “In 2023, we focused on establishing new lines of business, expanding our capabilities, and positioning ourselves for growth into new markets. We believe the launch of Vertex Renewables and optimization of feedstocks have positioned the Company for margin opportunities under the new credit regime post-2024. Additionally, the inauguration of our Marine Fuels and Logistics business alongside our Supply and Trading division has enabled us to leverage strategic integration opportunities, enhancing netbacks and capturing additional value for our finished products.” Mr. Cowart continued, “As we move into 2024, our priorities are to increase our cash position, reduce our operating costs, and improve margins.”

MOBILE REFINERY OPERATIONS

Conventional Fuels Refining

Total conventional throughput at the Mobile Refinery was 67,083 bpd in the fourth quarter of 2023. Total production of finished high-value, light products, such as gasoline, diesel, and jet fuel, represented approximately 66% of total production in the fourth quarter of 2023, vs. 64% in the third quarter of 2023, and in line with management’s original expectations, reflecting a continued successful yield optimization initiative at the Mobile conventional refining facility.

The Mobile Refinery’s conventional operations generated a gross profit of $7.3 million and $29.6 million of fuel gross margin (a Key performance indicator (KPI) discussed below) or $4.79 per barrel during the fourth quarter of 2023, versus generating a gross profit of $89.9 million, and fuel gross margin of $147.0 million, or $20.50 per barrel in the fourth quarter of 2022.

Total conventional throughput at the Mobile Refinery was 73,734 bpd for the full year 2023, reflecting capacity utilization of 98%. Total production of finished high-value, light products, such as gasoline, diesel, and jet fuel, represented approximately 63% of total production in 2023, vs. 70% in the nine-month operating period in 2022.

The Mobile Refinery’s conventional operations generated a gross profit of $165.5 million and $318.6 million of fuel gross margin (a KPI discussed below) or $11.84 per barrel during the full year 2023, versus generating a gross profit of $140.9 million, and fuel gross margin of $398.4 million, or $19.93 per barrel in the nine-month operating period in 2022.

Renewable Diesel Facility

Total renewable throughput at the Mobile Renewable Diesel facility was 3,926 bpd in the fourth quarter of 2023. Total production of renewable diesel was 3,786 bpd reflecting a product yield of 96.4%.

The Mobile Renewable Diesel facility operations generated a gross loss of $(17.6) million and $4.4 million of fuel gross margin (a KPI discussed below) or $12.11 per barrel during the fourth quarter of 2023.

Feedstock Supply Strategy Advanced. During the fourth quarter, Vertex continued to advance its alternative feedstock supply strategy. The Company had recently completed the required temporary filings for low carbon fuel standard (“LCFS”) credits at the default carbon intensity (“CI”) score. As previously communicated, the Company expected that the initial default level LCFS credits would be applied to all volumes of renewable diesel produced during the third and fourth quarter of 2023 and to contribute to financial results in the fourth quarter. As anticipated, during the fourth quarter of 2023, Vertex received an initial LCFS payment calculated using the temporary default CI score, resulting in a net payment of $9.6 million.

During the fourth quarter, the Company successfully completed runs to support filing for proprietary carbon intensity scores of LCFS pathways for Tallow. In addition to the testing completed for Soy, distiller’s corn oil (“DCO”) and Canola completed during the third quarter of 2023, the Company has now successfully completed the filings for each of these four feedstocks allowing Vertex to receive the increased credit value available with their lower carbon intensity production as compared to the default temporary values for all future renewable diesel production values.

Fourth Quarter and Full Year 2023 Mobile Refinery Results Summary ($/millions unless otherwise noted)

Conventional Fuels Refinery

1Q23

2Q23

3Q23

4Q23

FY2023

 

 

 

 

 

 

Total Throughput (bpd)

71,328

76,330

80,171

67,083

73,734

Total Throughput (MMbbl)

6.42

6.95

7.38

6.17

26.91

Conventional Facility Capacity Utilization1

95.1%

101.8%

106.9%

89.4%

98.3%

 

 

 

 

 

 

Direct Opex Per Barrel ($/bbl)

$3.84

$3.35

$2.40

$2.46

$3.00

Fuel Gross Margin ($/MM)

$103.8

$55.7

$129.5

$29.6

$318.6

Fuel Gross Margin Per Barrel ($/bbl)

$16.17

$8.03

$17.56

$4.79

$11.84

 

 

 

 

 

 

Production Yield

 

 

 

 

 

Gasoline (bpd)

15,723

17,812

19,211

17,826

17,653

% Production

22.7%

23.2%

24.0%

25.9%

23.9%

ULSD (bpd)

14,720

15,618

16,479

14,510

15,334

% Production

21.2%

20.3%

20.6%

21.1%

20.8%

Jet (bpd)

12,789

13,570

15,823

12,937

13,786

% Production

18.4%

17.7%

19.8%

18.8%

18.7%

Total Finished Fuel Products

43,232

47,000

51,513

45,273

46,773

% Production

62.3%

61.2%

64.4%

65.9%

63.4%

Other2

26,119

29,828

28,495

23,457

26,972

% Production

37.7%

38.8%

35.6%

34.1%

36.6%

Total Production (bpd)

69,351

76,828

80,008

68,730

73,745

Total Production (MMbbl)

6.24

6.99

7.36

6.32

26.92

 

Renewable Fuels Refinery

1Q23

2Q23

3Q23

4Q23

FY2023

 

 

 

 

 

 

Total Renewable Throughput (bpd)

-

2,490

5,397

3,926

3,943

Total Renewable Throughput (MMbbl)

-

0.23

0.50

0.36

1.08

Renewable Diesel Facility Capacity Utilization3

-

31.1%

67.5%

49.1%

49.3%

 

 

 

 

 

 

Direct Opex Per Barrel ($/bbl)

-

$31.23

$23.05

$27.32

$26.17

Renewable Fuel Gross Margin

-

($3.1)

$2.4

$4.4

$3.7

Renewable Fuel Gross Margin Per Barrel ($/bbl)

-

($13.66)

$4.78

$12.11

$3.37

Renewable Diesel Production (bpd)

-

2,208

5,276

3,786

3,762

Renewable Diesel Production (MMbbl)

-

0.20

0.49

0.35

1.03

Renewable Diesel Production Yield (%)

-

88.7%

97.8%

96.4%

95.4%

 

 

 

 

 

 

1.) Assumes 75,000 barrels per day of conventional operational capacity

2.) Other includes naphtha, intermediates, and LPG

3.) Assumes 8,000 barrels per day of renewable fuels operational capacity

Balance Sheet and Liquidity Update

As of December 31, 2023, Vertex had total debt outstanding of $286 million, including $15.2 million in 6.25% Senior Convertible Notes, $196.0 million outstanding on the Company’s Term Loan, finance lease obligations of $68.6 million, and $6.2 million in other obligations. The Company had total cash and equivalents of $80.6 million, including $3.6 million of restricted cash on the balance sheet as of December 31, 2023, for a net debt position of $205.5 million. The ratio of net debt to trailing twelve-month Adjusted EBITDA was 12.0 times as of December 31, 2023 (see also “Non-GAAP Financial Measures and Key Performance Indicators”, below).

As previously announced on January 2, 2024, the Company reached an agreement with its existing lending group to modify certain terms and conditions of the current term loan agreement. The amended term loan provided an incremental $50.0 million in borrowings, the full amount of which was borrowed upon closing on December 29, 2023 and therefore reflected in Vertex’s year end cash position of $80.6 million.

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.

As of the current year-end, the Company believes it has adequate financial flexibility to meet its needs based on the total liquidity position. Furthermore, the Company is currently going through a strategic evaluation process with BofA Securities, which started in October 2023, that may result in further enhancements to its current liquidity options.

Commodity Price Risk Management

During the fourth quarter, Vertex’s commodity price risk management team entered into hedge positions covering approximately 38% of planned diesel production and distillate production for the first quarter of 2024 as discussed below:

Asset

Contract

Contract

Price

Mid-Point

Hedged

Approximate %

Type

Details

Period

($/bbl)

Prod'n (Bbl)

Volumes (bbl)

Hedged1

Fixed Price Swap

ULSD/LLS Swap

January

$25.55

762,600

100,000

13.1%

Fixed Price Swap

ULSD/LLS Swap

February

$30.68

713,400

375,000

52.6%

Fixed Price Swap

ULSD/LLS Swap

March

$28.95

762,600

375,000

49.2%

Total

$28.39

2,238,600

850,000

38.0%

 

1.) % hedged assumes mid-point of operating guidance of 61.5 Mbbld and mid-point of distillate production yield of 40%

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

1Q 2024

Operational:

Low

High

Mobile Refinery Conventional Throughput Volume (Mbpd)

60.0

63.0

Capacity Utilization

80%

84%

Production Yield Profile:

Percentage Finished Products1

64%

68%

Intermediate & Other Products2

36%

32%

 

Renewable Fuels

1Q 2024

Operational:

Low

High

Mobile Refinery Renewable Throughput Volume (Mbpd)

3.0

5.0

Capacity Utilization

38%

63%

Production Yield

96%

98%

Yield Loss

4%

2%

 

Consolidated

1Q 2024

Operational:

Low

 

High

Mobile Refinery Total Throughput Volume (Mbpd)

63.0

 

68.0

Capacity Utilization

76%

 

82%

 

 

 

 

Financial Guidance:

 

 

 

Direct Operating Expense ($/bbl)

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