Vertex Energy Announces First Commercial Sales of Renewable Diesel

June 27, 2023

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(Vertex Energy/Business Wire) Vertex Energy, Inc. (NASDAQ: VTNR) ("Vertex" or “the Company"), a leading specialty refiner and marketer of high-quality refined products, today announced that the Company has completed its first series of commercial sales transactions of renewable diesel ("RD") from its recently completed Renewable Diesel production facility at its refinery located in Mobile, Alabama (the “Mobile Refinery”). The initial sales totaled approximately 110,000 barrels of RD to Idemitsu Apollo Renewable Corporation ("Idemitsu"), a wholly-owned California-based subsidiary of Idemitsu Kosan, per the previously disclosed product supply agreement announced in February 2022.

The Company also announced expected increases in RD production volumes remain on schedule as planned, at a current rate of approximately 7,700 barrels per day (bpd). The Company maintains plans to continue increasing RD production levels towards its previously stated target of approximately 8,000 bpd, by the end of 2Q23.

"We are pleased to report the initial sales of Renewable Diesel out of our Mobile Refinery. Our team has demonstrated dedication and excellence in getting us to this point, and this series of transactions is a testament to their ability to execute end-to-end on putting an entirely new, low-carbon product stream, into the market," stated James Rhame, Chief Operations Officer of Vertex, who continued, "Operationally, the renewable diesel plant continues to run well, and our team continues to safely and reliably deliver on incremental production targets as planned. We are proud of our team, and we are honored to have Idemitsu as an offtake partner in this process, as we work together toward a sustainable future."

ABOUT VERTEX ENERGY

Vertex Energy is a leading energy transition company that specializes in producing both renewable and conventional fuels. 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. READ MORE

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Excerpt from Biomass Magazine: Vertex Energy Inc. on July 25 announced the renewable diesel unit at its refinery in Mobile, Alabama, achieved the company’s phase 1 installed capacity target of 8,000 barrels per day during the second quarter.

“We are pleased to report yet another milestone for our RD project: the validation of targeted throughput capacity for the renewable diesel plant at 8,000 barrels per day,” said Benjamin Cowart, president and CEO of Vertex. “We believe this is significant to our growth potential as it further demonstrates our team's ability to execute end-to-end project deliverables safely and reliably.

Vertex in mid-2021 announced an agreement to acquire the Mobile refinery and convert a portion of it to renewable diesel production. The newly completed renewable diesel unit began operations this spring. In late June, Vertex announced it had completed the first series of commercial sales transactions of renewable diesel.

With the Q2 update released on July 25, Vertex confirmed that the renewable diesel unit achieved its installed capacity target during the three-month period. According to the company, the validation of maximum throughput capacity provides important data released to its strategic approach for long-term optimization of the project. Vertex said it is continuing to optimize renewable diesel production levels based on factors such as commercial obligations and prevailing economic conditions and does not anticipate providing near-term throughput targets at this time. READ MORE

Excerpt from Biodiesel Magazine: According to Vertex, the yield on renewable throughput volumes was approximately 96% during the fourth quarter, slightly below the previously anticipated range of 97% to 98%. Capacity utilization for the period was 48% to 50%, down from the previous forecast of 50% to 75%.

Vertex also reported that its feedstock optimization strategy is progressing as expected. The company said it expected to receive California Low Carbon Fuel Standard credits in the fourth quarter of 2023 for its renewable diesel production volumes produced in both the third and fourth quarters of last year. The initial LCFS credits reflect a temporary carbon intensity (CI) score and amounted to $9.5 million for the period. Upon receiving a provisional CI score, expected sometime in the first half of 2024, Vertex said it expects the per-barrel LCFS credits to improve materially over temporary CI values. READ MORE

Excerpt from Vertex: 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. READ MORE

Excerpt from Vertex Energy/Business Wire/Yahoo! Finance: Vertex Energy, Inc. (NASDAQ: VTNR) ("Vertex" or the "Company"), a leading specialty refiner and marketer of high-quality refined products, today announced it entered into a Restructuring Support Agreement (the "RSA") with overwhelming support of 100% of the Company’s term loan lenders (the "Consenting Term Loan Lenders"). To facilitate the transactions contemplated under the RSA, including exploration of a sale transaction, the Company commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas.

Benjamin P. Cowart, President and CEO of Vertex, stated, "As we enter this next phase of our restructuring process through a formal proceeding, we are appreciative of the continued support from our lenders. Their confidence in our business, as demonstrated by this ongoing collaboration, reinforces the critical role Vertex plays in the specialty refinery space. We want to thank our employees for continuing to be fully engaged as we go through this process and prioritizing safety and customer satisfaction above all else. Together with our lenders, we feel confident this decision provides the best pathway toward future success."

Chief Restructuring Officer, Seth Bullock of Alvarez & Marsal, added: "We have gained significant momentum with the partnership of Vertex’s lenders over the last several months and believe the restructuring support agreement and related milestones will allow the Company to initiate a fresh start and improve long-term value as it singularly concentrates on strengthening its foundation for continued growth and stability."

The Company has filed customary first day motions and plans to operate its business in the ordinary course as it explores a holistic restructuring strategy pursuant to the terms of the RSA. To fund this process and continue operating in the ordinary course, the Consenting Term Loan Lenders have agreed to provide the Company with an additional $80 million Debtor-In-Possession financing facility subject to certain terms and the satisfaction of certain conditions precedent. The Company has also filed a Chapter 11 plan and bidding procedures, and anticipates confirming their Chapter 11 plan by the end of the year.

Kirkland & Ellis is serving as restructuring counsel, Bracewell LLP is serving as restructuring co-counsel, Perella Weinberg Partners is serving as the investment banker, and Alvarez & Marsal is serving as the Chief Restructuring Officer and financial advisor to the Company.

ABOUT VERTEX ENERGY

Vertex is a leading energy transition company that specializes in producing high-quality refined products. 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 is dedicated to shaping the future of the energy industry. READ MORE

Excerpt from Biomass Magazine: Vertex Energy Inc. on Oct. 9 confirmed that its refinery in Mobile, Alabama, is again producing fossil-based fuels. The company, however, confirmed that it has preserved renewable fuels production capabilities at the plant. Renewable diesel production could resume in the future, should market conditions warrant the change, according to Vertex.

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While Vertex was converting the facility back to fossil fuel production, the company on Sept. 24 filed for Chapter 11 bankruptcy in the U.S. bankruptcy Court for the Southern District of Texas. At that time, Vertex said it is exploring the possible sale of the Mobile refinery. READ MORE