Q4 2022 Vertex Energy Inc Earnings Call
Yeah.
Good day, and welcome to the vertex energy fourth quarter and full year 2022 earnings conference call.
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I would now like to turn the call conservative genre, Gesine aisle and Investor Relations. Please go ahead.
Thank you good morning.
And welcome to vertex Energy's fourth quarter and full year 2022 results conference call, leading the call today are chairman and CEO , Ben Cowart, Chief Financial Officer, Chris Carlson, and Chief operating Officer James Rain.
Also attending the call our Chief strategy Officer, Alberto Ruiz <unk>.
<unk>, President Bart Rice, and vice President of Black oil operations John Strickland.
I want to remind you that management's commentary and responses to questions on today's conference call May include forward looking statements, which by their nature are uncertain and outside of the company's control.
Although these forward looking statements are based on management's current expectations and beliefs actual results may differ materially.
For a discussion of some of the risk factors that could cause actual results to differ please refer to the risk factors section of vertex Energy's latest annual and quarterly filings with the SEC. Additionally.
Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today.
Today's call will begin with remarks from Ben Cowart, followed by an operational review from James Rain and financial review from Chris Carlson Ethicon.
At the conclusion of our prepared remarks, we'll open the line for questions with that I'll turn the call over to Ben.
Thank you John and good morning to those joining us on the call today.
This morning, we issued a press release detailing our financial and operating results for the fourth quarter of 2022.
We are pleased to report the continued safe and reliable operations with the improved financial and operating results, which exceeded our prior expectations.
We feel these results reflect the true earnings potential over a conventional fuels business at the mobile refinery facility, which contributed the majority of our fourth quarter adjusted EBITDA of $75 $2 million.
Reported results benefited significantly or continued strength in conventional fuels refining margins.
Increased market exposure following the expiration of our prior hedge positions beginning on September 30th.
Attractive refining yields of high margin distillate products. Following the turnaround work performed in the third quarter.
Operationally, we reported strong throughput volumes of approximately 78000 barrels per day for the quarter.
Five 4% ahead of our midpoint of our prior guidance issued in November .
Our product yield profile and premium pricing for diesel and jet fuels drove a strong capture rate of 61%.
Which exceeded our prior outlook of 52%.
And generated very attractive refining profitability on a per barrel basis.
In addition, we made notable progress on several strategic initiatives aimed at streamlining our business.
First we continue to expand our team by adding experienced talent throughout our key areas of the business.
Secondly.
We recently completed the sale of our Heartland.
<unk> business enhancing our ability further to prioritize the optimization of our current refining business.
And third we have continued advancement of our construction of our Rd conversion project for one schedule mechanical completion by end of March.
With carefully planned startup early second quarter of this year.
I am proud of our employees and contractors, who work together further results achieved for 2022.
The transition from our legacy operations.
So the advantage position, we find ourselves in today.
Not be possible without the team's relentless pursuit of our goals, while keeping safe and reliable operations as our highest priority.
With that I'd like to hand, the call over to Jane drain our Chief operating officer.
Who will provide a detailed update on our operations during the quarter, including a more detailed update on the status of our renewable diesel conversion project in mobile.
Thanks.
Thank you Ben Good morning, everyone I will begin with a brief report on our health safety and environmental performance.
During the fourth quarter of 2022, our mobile operations had zero Osha recordable.
Zero, environmental recordable and zero process safety events.
Our legacy operations saw two Osha recordable.
Both monitoring nature with zero Environmental report.
Moving on to operational performance, beginning with our legacy business.
Our Columbus refinery maintain safe and reliable operations during the fourth quarter and through the close of the recently announced divestiture.
This is to the credit of our former Heartland employees and clearly demonstrates the quality of the team running those operations.
We are proud of their contribution and grateful for the opportunity to work with them over the last eight years.
In Louisiana, our Marrero operations also saw continued progress in improving plant reliability and performance in the fourth quarter achieved.
Achieving strong run rates and 106% capacity utilization at the refinery.
Mobile performed well despite challenging weather conditions and increased side activity around the Rd conversion.
Fourth quarter throughput volumes at the mobile refinery averaged 77964 barrels per day or 104% stated operating capacity.
Exceeding our initial guidance of 74000 barrels per day and slightly ahead of our updated guidance of 77000 barrels per day issued in January .
We continue to process accrued dot consisting of WTS.
And local light sweet crudes.
Total production of finished high value light products such as gasoline.
So in jet fuel represented approximately 74% of total fourth quarter production versus 69% in the third quarter of 2022.
Reflecting improved performance following the previously disclosed catalyst change and our distillate and reforming unit.
Our fuels only gross profit per barrel during the quarter was $20 50.
Driving our capture rate of 66% of the benchmark Gulf Coast 211 crack spreads.
<unk> ahead of our guidance of 50% to 54%.
The strength in our reported.
Fuels only gross profit per barrel and resulting capture rate versus the benchmark is a direct function of the strength. We continue to see in refining margins for diesel and jet fuel, which contributed to the strong per barrel profitability reported.
On a rent adjusted basis, which we believe provides an additional layer of clarity around the per barrel refining economics for a conventional fuels business gross profit per barrel was $16 54.
Now turning to our renewable diesel conversion project I am pleased to report that the development and construction activities are advancing as planned keeping the project on schedule for targeted mechanical completion by the end of the first quarter.
With anticipated initial production to follow early in the second quarter of this year.
Our budgeted total project Capex has been adjusted slightly from the 90 to 100 million range that was reported $210 billion to $115 billion.
The upward cost revision reflects three primary drivers.
Extremely tight local labor market.
Incremental rental equipment and scaffolding cost necessary to ensure adherence to all site safety protocols.
Along with some additional supply chain related costs, which we chose to pay in order to keep the project on schedule.
Despite inflationary pressures and supply chain complexity, we remain laser focused on a safe reliable and timely execution of the project.
Progress towards the goals. We are proud to report continues without compromise do the cohesive efforts of all employees and contractors involved in the project.
Notable milestones include the safe shutdown of the hydrocracker.
Completed this plan on January six.
With over 55% of the outage related work completed.
Our crews have logged in excess of 290000 work hours, thus far with zero reportable incidents to date.
Our performance of which I'm very pleased to share.
While we have an understandable bias and are proud of our team's performance the significant support our legacy mobile teams have accomplished throughout 2022 cannot be overstated.
Continued prioritization of our strict safety standards and relentless focus on achieving our goals by each individual team member is something I'd like to take time to perfectly acknowledge and command.
With that I'd like to hand, the call over to Chris Carlson, Chief Financial Officer, who will review our financial results for the quarter as well as provide an outlook for the first quarter of this year.
Thank you James and welcome to those joining us on our call today.
For the three months ended December 31, 2022 vertex reported net income of $44 4 million or <unk> 56 per share on a fully diluted basis.
The net loss of $5 3 million or <unk> <unk> per share on a fully diluted basis in the fourth quarter 2021.
We reported adjusted EBITDA of $75 2 million in the fourth quarter 2022 versus $9 5 million in the prior year period.
On a standalone basis than mobile refinery generated $78 6 million of adjusted EBITDA during the quarter versus a $500000 loss in adjusted EBITDA during the third quarter of 2022.
Our legacy operations in the Black oil and recovery segment contributed $3 9 million adjusted EBITDA.
Overall fourth quarter results benefited from a continuation of consistent operational reliability, and resulting throughput volume.
Continued strength in refined product margins, reflecting the robust conventional fuels market fundamentals, we continue to see.
The fourth quarter financial results include a loss related to continued backwardation in the crude and product markets and the amount of $9 6 million.
A returned to contango during the quarter helped offset a substantial portion of this charge relative to what we have seen in the prior two quarters.
We're backwardation charges came in at $17 9 million and $23 2 million respectively.
As of December 31, 2022, the company had total liquidity, including restricted cash of $146 2 million versus $122 4 million at the end of the prior quarter.
Vertex had total net debt outstanding of $214 1 million at the end of the fourth quarter of 2022.
Including lease obligations of $100 1 billion, implying a net debt to trailing 12 months adjusted EBITDA ratio of one three times as of December 31 2022.
We continue to remain fully exposed to current robust refining margin with no fixed price hedge contracts currently in place.
Subsequent to quarter end, we successfully closed on the planned divestiture of our Heartland view amongst facility for total gross proceeds of $90 million.
We are extremely pleased with the results of this sale as we originally purchased this asset for $8 3 million in stock back in 2014.
The net proceeds of $85 million are largely being used to finance the significant working capital requirements associated with our planned R&D production with volumes of soybean oil feedstock currently being purchased and preparation of our April production startup.
A portion of the proceeds are also being directed towards the repayment of our $165 million term loan, which carries a 15 two 5% interest rate.
We were able to make a prepayment of $11 million of the term loan saving over $1 $5 million in future interest expense on the loans through year end 2023.
Looking to the first quarter of 2023, we anticipate total throughput volumes at mobile to be between 69, and 72000 barrels per day reflective.
Reflective of the shutdown and the hydro cracker to accommodate completion of the R&D conversion project by the end of the quarter.
Opex per barrel is expected to be 385 to $4 per barrel for the quarter.
And our capture rate on the benchmark Gulf Coast 211, crack spread is forecast to be approximately 50% to 54%.
We anticipate total capital expenditures for the first quarter to be between 30 million to $35 million.
I would now like to turn the call back to <unk> to provide some final comments before we open it up for Q&A.
Thank you Chris.
The fourth quarter of 2022 sets a bar for financial and operating performance, which I'm extremely proud of.
We continue to be encouraged by the fundamental outlook for refining margins on both the conventional and renewable fuel side of the business.
As we approach the startup of our renewable fuels production in April .
We look forward to establishing vertex as an important player in the rapidly developing.
Developing renewable fuels market.
We remain extremely enthusiastic about the outlook for potential profitability in this business now and each player in this market faces widely differing circumstances that ultimately determine their individual performance.
Therefore, we anticipate updating the market with a detailed look at our expectations for this business as we build confidence in our ability to accurately forecast and deliver on these expectations and.
We will continue to take a very measured thoughtful and prudent approach to each decision we face as the R&D business ramps.
On the conventional side of our business the macro environment continues to be extremely robust.
Product margins for lighter distillate products, including diesel and jet fuel continue to maintain historically elevated levels.
Fueled by the tight refining capacity and domestic inventory levels well below historic averages.
As a result, we expect to continue to see strong financial performance on that side of the business.
I'd like to thank all of you for joining us on this call. This morning, and I look forward to being able to deliver another positive update on our next quarter performance with that we will open the line for questions operator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on Touchtone phone.
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Today's first question comes from Manav Gupta with UBS. Please go ahead.
Okay.
Guys Congrats on a great quarter Mike.
My first question is you.
I'm glad you asked it on April one.
You are showing a material improvement in capture in the last couple of quarters throughput has gone up.
Help us on this time some of the changes you have brought about weekend, allowing you to learn from this experience and improve the performance of this asset and the follow up on this one is help US also understand once the project goes into the picture.
Does it change the throughput at all does it change the clean product if you could walk us through some of those that amicus.
Good morning, <unk>. This is James I'll answer that so what what occurred and allowed us to increase the capture rate in the fourth quarter were really three things during the third quarter as you remember we changed our reformer catalyst, which was at end of life and was affecting yields.
And while we did change both the reformer and the.
Distillate Hydro treater, we increased the capacity of catalyst that we were able to put in there, which we were able to capture that improvement in yields between the age catalyst and the improvements we made inside the reactor space. Those are the two main things. The other one that I would also say as we have.
<unk> bought the site and this site was one that had many.
Very good projects that we could go execute there were relatively simple debt focused on distillate maximum distillate strategy and that's what we've been doing.
Everywhere from crude selection to how we're running the unit and making sure that yields are matter and we're paying attention to those and so that answered that question and in the end. You also saw the amount of crude throughput that we had and we were able to make sure that we didn't lose yields during the crude throughput also.
Did that answer the first question then I'll go to the next one.
That did answer the first question.
Alright art, so what's going to change.
Number one in the first quarter, so youll see slightly down on crude performance and Thats, primarily because I don't have a hydro cracker up to absorb hydrogen. So therefore I've got to limit my fuel system. That's there, but once the hydrocracker comes up the capture rate will change and actually.
What you do see is we're back to what the capture rate was from our initial purchase.
Because of the benefits we saw in the fourth quarter, but what will occur is now no longer have biggio go into a hydrocracker, making eight roughly 8000 barrels a day eight to 9000 barrels of diesel all b cell and biggio out on the open market as a result, all of that affects capture rate.
But I will run the same amount of crude once I get the Rd unit up I'm, sorry, I should have added that into EBITDA or crude rate will be consistent with what it was prior to.
Prior to taking the.
Osh down before the conversion.
So perfect. So the lease yield which is selling at a massive premium <unk> was up is that right.
That's correct it goes from.
Let me give you some rough numbers 10000 barrel a day as to about 20000 barrels a day.
So lets take in my very quick follow up.
We recently saw another Louisiana project is an excellent valuation from a European media almost $6 a gallon.
Is this something you could be open buoy for European or U S. Median of proteins, you that kind of valuation would you be open to that kind of a deal or do you want to do this on the other one I was going to go after that.
Good morning, and thanks for being on the call. This is Ben.
We we've taken no.
There is two projects now that have set.
A value on R&D production.
And.
For us we have.
We have planned.
Down this path on our own.
If necessary, but we've also legally barricaded our renewable business on site.
In the event that.
Our whole value is exceeded by someone of interest at least for a portion of.
That business, we will.
We will be prepared to look at those opportunities, but we're very excited don't 100% of this business today based on the performance of the rest of the company.
And our ability to continue.
Continue down this path.
Perfect. Thanks, Congrats on a great quarter guys.
Thank you.
Thank you and our next question comes from Donovan Schafer with Northland capital.
Okay.
Hey, guys. Thanks for taking the questions.
Second the first analyst comment just that.
<unk> broadly seem quite positive.
I think the only.
Yeah I mean.
The only thing.
If there isn't a sort of incremental negative thing if you could call. It that is the higher capex, but you provided some explanation.
The crowd rates with what we're seeing generally tight labor market.
Of course, it makes sense.
Making saying youre, making it a priority to sound schedules of course.
Supply chain stuff that could mean.
<unk>.
Higher higher sort of expediting costs.
The question is like if we can dig down just a tiny bit more on that.
Sometimes.
You say for instance, tight labor market.
Can you.
You can pay up more and that means you get your hands on people, but you are in a very.
Kind of rural area, you've talked about employees.
Plus of your refinery being third generation.
<unk>.
Yeah.
And so sometimes there's a difference between having to pay up for something versus just not even being able to get it period or stay with expediting or something so I'm trying to I'm trying to.
Really honing in on kind of is there anything in the nature of those what's behind the cost overruns that could give you any.
That would incrementally caused some potential of a further delay.
I know you are still on track like as of now like as of today of course, we're on track, but stay Youre waiting on you know 10 large components and you've had to expedite three of them. Because you found out there is the delay is that the type of thing where well was therefore, you could potentially learn about delays in the other southern.
And then you might have to expedite those but.
Sometimes maybe you can't so is there anything in the the attributes of the aspects of whats underneath side that would give a basis for a little bit of caution or a little bit of reservation around there just.
Really digging into that.
Yes, yes, no. Thank you for the question.
We have.
Every single piece of hardware on site today to finish the project and if I was in the so that's first on hardware. So the supply chain, even though we did pay to maintain schedule every one of those components. We were our team on site, we've really focused on making sure every little valve.
And I would say to level. These aren't little these are big high pressure valves were on the ground as we took feed out as I have previously told you by.
By the time feet out we'd have most of it on the ground and I think we had all but a handful of components and every one of those have arrived so thats one of the supply chain and on the people side.
I think we've seen what the market is has performed and what everyone else is seeing in the market. We could have made some different choices there.
<unk> not got the quality of people, we had in and not paid but we have had very very good quality work and performance by our contractors on site and hats off to them. They brought the 18th force and they have done very well and with that.
We are now in the process of staffing the project as we're coming down from our peak. So if I was ramping up I would be worried but that's not where we are on the project at this stage, we are ramping down from peak.
Manpower requirements okay.
Okay. That's great. Okay, that's very helpful.
Then as a follow up question just.
For the $9 $6 million.
Loss on the hedge roll or backward position.
I wanted to make sure im understanding that clearly so my impression is that this is a bit different from the initial hedges you guys had in place sort of in prior quarters, where this is really more about the implicit commodity price exposure that it's almost sort of a working capital exposure you buy.
The crude one day, but those exact barrels of crude that you're buying you want to kind of lock in that margin when they go in the feeder that go into the process and then there is some amount of lag or delay before they come out the other side.
So is the is the $9 6 million.
That an explicit hedging that's tied to that specific exposure and or alternatively is it even hedging or is it more sort of an implied hedge is just that if you're not hedging you just have that exposure and so you're you're highlighting the impact of that exposure as commodity prices move in the interim between when you get.
Crude and refined product out.
Yeah, Hey, this is Chris.
I mean, you kind of laid it out well in your explanation, but yes.
A combination of the impact of the inventory that we have on hand, and the changing in the commodity market.
Which are in a backwardation.
Position today.
We're seeing it go back and forth a little bit, but it's still backward dated at the moment.
Okay, and so in the release and the <unk>.
Adjusted EBITDA Rec.
Reconciliation.
Cause the gain loss on hedge roll parentheses backwardation. So would you say has role you're using that just more broadly.
Kind of.
There is not actually like hedge contracts in place it's more of the impact of that exposure is that right.
Now to clarify that there are hedge contracts okay Andrew.
Intermediation agreement on our inventory.
End of.
It's kind of effectively a mix of both in a way where theres, a certain amount of netting and figuring it out.
It is it's a combination of both I see I see okay. Great. Thank you I'll take the rest offline congratulations guys.
Thank you Donna.
Thank you and our next question comes from Amit Dayal H C. Wainwright. Please go ahead.
Thank you good morning, guys, great results and I appreciate you taking my questions.
<unk>.
Operating expenses of 285 to $4 is this sort of the range for the near term and how will this change with R&D coming online soon.
Yes. So this is James Thanks, I'll answer that question.
Our costs are competitive if we go in comparison on a per barrel basis.
Continuing to look at that we'll always look at what our costs are.
As of one refiner site.
And without some of the conversion.
We have what we believe this cost its competitive if we go back through the history of the site.
With our D. What will occur on that per barrel basis, we may split the pie up as the R&D once its up takes its share of the cost of the site, but the size of the pie will not change it will be the same amount with both the Rd operating now as a separate business.
And we will bifurcate it in that manner.
Does that answer your question.
And just to make sure is clear we already carry the burden of running the hydrocracker in much cost as we bring R&D. One we don't anticipate our operating cost to change very much it will be kind of bifurcated as we discussed earlier.
Yes. Thank you it's clear.
Thank you I appreciate that.
Okay.
Just with respect to the Rd. Another question I have is.
Deploying the pretreatment unit in this initial ramp or is that coming later and if it is coming later.
What's the timeline for that.
On Capex et cetera that you expect to incur related to that.
Yes. Thank you. This is James again, I'll answer that we've been looking real hard at pre treatment and how does it fit and what is the best path forward for that.
However in this process of our investigation, we have found a commercial arrangement with a pre treatment facility.
At a cost below our capital hurdle rate and even though it's not settled yet we believe it is.
<unk> settled at commercial arrangement that would tell us we would not have to.
It would be economically best first not to invest in a pre treatment facility as of today.
Okay is this local to you guys or are you getting this from another state or something.
Yes, and there is actually two of these facilities are relatively local to our mobile refinery.
Okay understood.
One last one from me congrats on the sale and you have more business just wondering what is remaining of that business.
And what do you expect to do with anything that is remaining for the <unk> side of things.
Yeah. So thank you Amit.
Coming into the call and just the coverage work and what you guys have done over the years. So we.
We're very pleased with the sale of Heartland.
We're very excited about our legacy business that remains this is three times bigger.
Maybe a little more than that than what we were doing at heartland.
And Barry bidding to what we're focused on in the Gulf region. So we.
We will we will continue to combine our mobile operations with all the work that we're doing.
Our <unk> collections and refining and so when we see some real synergies and upside as we move that business forward. So it's just a refining of our focus.
To the Gulf and.
Really focused.
<unk> focus on low carbon products.
And the molecules that come from our legacy business.
Are becoming more and more valuable so.
We're going to really dial that business in.
Understood. Thank you so much that's all.
Thank you. Thank you.
And our next question comes from Michael Hoffman of Stifel. Please go ahead.
Hey, Tim vertex thanks for taking the call.
Echo everybody's comments, it's nice to see this plant and its strides for you.
Kevin some of them.
Pumps initially.
Yeah.
You have a working capital arrangement.
Sorry go ahead.
I just wanted to thank you you've been here a long time.
I can fight with us.
Looking forward to sharing this moment with yet.
All the work you've done.
15 years been so.
[laughter].
Of that demand.
Go ahead with your question I apologize.
Not at all.
You have a working capital arrangement with Macquarie that hasnt kicked in yet.
It has to happen next for that.
To kick in and then when it does some of that 75.
The 85 million net proceeds you've got 74, you use you are using for working capital kind of Peel that back and that goes to.
Paying down more debt and get some more of that 15% money off your balance sheet.
Yes, Hey, Michael its Chris.
So yes, we're I mean, we're in the.
Probably at the 50 yard line of working through the the next agreement with our lender.
The soybean oil product.
Should be a lot simpler than the first one.
And as far as.
Cash once we get into that deal, yes, we will have a little bit more.
Cash that will come back to us.
And the uses of that are going to be to continue to finish out the R&D project.
Which is almost done.
And then as noted we will focus on a healthier balance sheet and we will look at opportunities, where we can to reduce debt.
Okay.
And then at 15% you are really in the cost of equity territory, so it'd be nice to see that come down.
Q on Q sequentially from <unk> to <unk>, there is a $34 million reduction in inventory.
Can you talk us through what was going on there and what should we see as the trend for Q1 <unk> versus <unk>.
Yes.
The inventory is the value the cost.
The commodities.
Brent diesel et cetera came down what $10 $15 a barrel so that that obviously reduced.
Financing requirement.
Quarter over quarter.
Okay. So it wasn't.
A draw down on it as well physically actual volume drawdown this sort of the total.
Volume is consistent just the underlying mark to market has changed.
Yes, its just the dollars involved thats right, Okay, and youll see that weighed as commodities go up and down.
Okay and then.
You alluded to the press release, you put a boiler point and about hedging not currently hedging today, but future could but Mike.
I presume you would protein hedging differently than you did last year.
For the second or third quarter could you talk a little bit about if you did it how are you.
You would think about it.
What's sort of the.
The approach you would take if you chose to hedge.
Yes, I'll take that question Michael.
Keep in mind.
There are certain things like Chris mentioned on intermediation that is just.
Normal housekeeping with inventory, that's that's really not what.
<unk> was reflected in our second and third quarter hedge decision. We were we were hedging the crack spreads. So when you look at that 211 crack spread we were locking that in.
For the purpose of.
Protecting the limited cash we had and make it making a safe passage to our R&D project and delivering long term on what our goals and objectives were.
Obviously, hindsight's always 2020, and we clearly see.
That for what it is as we look forward, we have the capacity in the company and the credit capacity.
To hedge as necessary and we have a team.
Yes.
Deep bench today that looks at the markets and looks at.
<unk>.
What our exposures are and we will make those decisions as we go we believe as we indicated that the market is very strong for our business in the foreseeable future and we're going to maintain the exposure.
To the market I think our shareholders have.
I have kind of expressed.
They are add on that so we hear them loud and clear, but we will also be diligent to.
<unk> be looking at things that other people may not see and protect our margin as we go.
Fair enough and then where do you stand on feedstock arrangements April literally is around the corner you snap your fingers and it's going to be here. So what's what's the status of feedstock to support.
Production training facility.
Yes, so Bart Rice's here will have him, but I'll talk about operations and let him talk more about who the suppliers of the suppliers, but where we are but we are already acquiring feedstock and getting them into the third party terminals in front of us and Bart and his team have done a fantastic job securing those and I'll let her.
Speak to that.
Hi, Michael.
Right.
Even though the feedstock.
Piece of the puzzle is the most important for our success.
We look at it as one of our most confidential important.
News as well.
We have already land.
Logistics with all.
The big companies.
Each of those companies have already shipped product to us and we have it in tank and storage and mobile.
We will be taking this feedstock.
By board by rail.
<unk> truck.
We're going to focus a lot on.
Some of them.
<unk> and Greece's that need to be pre process. They have the better score and with extend more value to the company.
But our logistics is the key to our success on this feedstock.
East of the Mississippi River, we've got all of the people that have historically been taking their feedstocks rat past us.
Our competitors.
They're happy to find a home with vertex their automobile.
Perfect Mike very helpful. Mike.
Let me make a point here just for future reference as we move this business forward and again <unk> been involved with the company.
For a long time, so feed origination is a strong point for vertex and it's how we founded the company.
22 years ago. So we're very excited about our ability.
To move materials as Bart said.
Our ability to capture the right feed opportunities negotiate that at ground level and then the geographic location advantage, we have for a lot of feedstock.
We will weigh in heavy so we're very positive and.
And bullish on the <unk>.
<unk> side of the business.
Okay, and what I heard Brian Shea.
A focus on getting my words dirty oil.
Pre process, that's why you're arranging these third party preprocessing, but you will balance that with the cleaner soybean types as need.
Got it.
That is correct, we're going to we're going to start up clean just for smooth operations and then we'll start integrating.
Okay and then.
What's the base oil selling prices do in the fourth quarter.
Okay.
Yes.
Don't have that information I've got John you're welcome.
Al bump not major but it did go down yes, okay.
Okay, and then just to be clear the question was asked earlier.
Yes.
Vertex will seek to.
Maximize and maintain some open profile of maximizing shareholder value, so whatever the best ways to maximize shareholder value.
Youll do that whether it's solid keep it and run it.
Right.
Okay.
We have a whole value no different than than our renewable capacity, we're bringing on land.
We're going to look at.
The best value, we add to our shareholders as you said.
And then lastly on the latest.
Sorry go ahead no no no no in the legacy business is no different than that and we believe we got a line on how that will play out but we.
As we've handled enquiries and things that we continue to look at what's in our best interest.
And that's.
That's leading the decisions that we've made so far.
Okay.
Anticipated My last question, which is I would suspect given you've got great VGL business in Marrero, but there are other pieces of legacy that maybe arent all that relevant going forward that we could continue to see.
Cleaning up that portfolio and we may end up with just the marrero producing but.
Processing that 60 million gallons of used oil into VGL and tying that into 'twenty.
<unk> thousand barrels a day that youre kind of sell out mobile.
We will continue to look at each piece of the business.
Withheld values that we've already started to assign to each one of them and the answer is yes.
That's going to be our approach.
Okay.
Thanks for making the time for me.
Thank you Mike.
And our next question today comes from Eric Stine, Craig Hallum. Please go ahead.
Good morning, I'll, just sneak with you in here at the end.
We can go back to hey, good morning, I'm, hoping we can go back to capture rate.
And I can I can appreciate first corner, obviously with the hydro treater offline or as part of the R&D.
Expansion, but I know you don't guide, but any thoughts on what we should think about for the capture rates.
<unk> and beyond.
I think the best way to think of it we're not going to be even though our crude rate may be slightly higher.
It will not be that much different than it is today in the first quarter. We provided guidance on we will continue to try to accrete. The capture rate. However that if you had asked me I would tell you would be in the range of where we are for the first quarter.
The rest of the year.
Okay.
And then maybe just longer term.
Where can that go obviously, we saw it in this corner and then capture arena.
As a huge driver.
Not necessarily by the end of 2023, but as you look longer term for this business, where do you think that can go and what are some of the steps that you might take to get there.
Yes, that's a great question, because one of the things that.
We've really unlocked at mobile is the ideas that our people have had their to improve the profitability of the site and so far every single time that we are there. They are looking at what's the next opportunity is and where can we do that cost competitively.
I would tell you that we are.
Right now I can't even predict it because I see some projects in front of us that may take us several years to go execute but they will continue to creep that.
My goal is to recover back to where we were in the fourth quarter and beyond and I see that coming from the people. They have they have been sitting there in a site that was not strategic and now being in a strategic tie site, but a lot of focus and an extremely strong market and theyre coming forward with ideas.
Daily.
Got you very helpful. I guess I will take the rest offline no need to ask six questions. Thank you.
Thank you Eric.
Great all your work but.
Thank you and our next question comes from Noah Kaye of Oppenheimer. Please go ahead.
Hey, good morning, Thanks for taking the questions.
Echo that.
And from others really nice quarter, great to see the execution here.
Yeah.
With the R&D conversion timetable on track.
You got to walk before we run in terms of standing that up but.
<unk> seen a number of other projects in the industry.
Doing a sustainable aviation fuel conversions.
And so maybe can you just talk a little bit about the technical feasibility of doing is half project at this refinery how much you've looked into that.
When you think about actually doing a project of that nature.
Yes.
Let's just put a strike we're very interested in SaaS, we're really trying to see what's the best path forward for us.
Understanding the economics, what is the impact associated with the IRA and as we analyze what's the best path forward for US what has the lowest capital with the highest return what can we use.
That can either bolt on to the Rd project or as a Standalone project and we're not prepared for that conversation that we are very early in it but.
And as you can guess from the conversation. This is something that's on my agenda and the team's agenda.
Determine the best path forward for us.
Yeah.
Very good I think we'll stay tuned for more details on that.
I want to go back to Michael's question earlier about hedging.
I thought it was a thoughtful response around how youre approaching hedging.
When do you anticipate maybe articulating kind of a spending profile our posture for the company on a go forward basis.
Is that something you might actually be able to communicate to investors either we will hedge or we will hedge X percent of our exposure. When do you think you might be able to kind.
Kind of communicate that clearly folks.
Yes.
I can give you a base.
For today is as we move forward and it's pretty straightforward.
We're going to do.
Right.
<unk> in our inventory for market exposure, so theres always going to be paper around that that's just standard operating.
Seizures and then.
We have a team in place with the ability to hedge.
With a.
Much deeper view of markets and cracks and lot of.
Outside.
Consulting that we'd look to so we are going to work hard to protect our margins.
And provide the upside exposure to to the market for our shareholders. So if we see that turn and then we have the tools to make decisions at that point in time, but as of today as long as our team.
Has the view that we have we're going to we're going to keep our exposure on the crack spreads.
And make sure that we deliver that back to the to the shareholder but we are in a position if things turn to protect that.
That margin.
Okay, great. Thanks, Spence I'll take the rest offline.
Thank you Noah. Thank you I appreciate I appreciate that.
Ladies and gentlemen. This concludes the question and answer session I would like to turn the conference back over to management for any closing remarks.
Thank you Rocco and thank you everybody for that.
The time, joining the call today, we're very proud of what our team has accomplished we look forward to our next call.
It shouldnt be too long.
We.
We'll be available if anyone has any questions you can reach out through our <unk>.
<unk> dot com, so that we can provide more more comments and answers if if theres anything else that we had covered today.
I appreciate you joining in.
Thank you Sir.
Today's conference call. We thank you all attending today's presentation.
May now disconnect your lines and have a wonderful day.
Yeah.