Q3 2023 Vertex Energy Inc Earnings Call

Speaker 1: Thank you for holding and welcome everyone to the Vertex Energy Inc. third quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. If you'd like to ask a question during this time simply press star followed by the number one on your telephone keypad.

Thank you for holding and welcome everyone to the vertex Energy, Inc. Third quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the <unk>.

One on your telephone keypad, if you'd like to withdraw your question again press the star one.

Speaker 1: like to withdraw your question, again press the star 1. Thank you. I will now turn the call over to John Ragazzino. Investor Relations. Mr. Ragazzino please go ahead.

I'll now turn the call over to John Rego, Gino Investor Relations. Mr. <unk>. Please go ahead.

Okay.

Speaker 2: Thank you. Good morning and welcome to Vertex Energy's third quarter 2023 results conference call. On the call today are Chairman and CEO Ben Cowart, Chief Financial Officer Chris Carlson, Chief Operating Officer James Raim, Chief Strategy Officer Alvaro Ruiz, and Chief Commercial Officer

Thank you good morning, and welcome to vertex Energy's third quarter 2023 results conference call.

On the call today are chairman and CEO, Ben Cowart, Chief Financial Officer, Chris Carlson, Chief Operating Officer, James Ragan, Chief Strategy Officer, Albro Ruiz, Chief Commercial Officer, Doug Hock.

Speaker 2: 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.

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.

Speaker 2: Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.

Although these forward looking statements are based on management's current expectations and beliefs actual results may differ materially.

Speaker 2: For discussion of some of the risk factors that could cause actual results to differ, please refer to the risk factor section of Vertex Energy's latest annual and quarterly filings with the SEC.

<unk> 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.

Speaker 2: Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call today in the press release issued this morning.

Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call today and the press release issued this morning.

Speaker 2: Today's call will begin with remarks from Ben Kauer, followed by an operational review from James Raine.

Call will begin with remarks from Ben Cowart, followed by an operational review from James Rain.

Speaker 3: financial review from Chris Carlson, and a review of our commercial strategy by Doug Hawk. At the conclusion of these 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. We are pleased to welcome

Financial review from Chris Carlson.

In a review of our commercial strategy by Doug Haugh at the conclusion of these 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. We're pleased to report a favorable third quarter for 2023 during the quarter, if commodity prices increase relative to the prior quarter.

Speaker 3: During the quarter, commodity prices increased relative to the prior

Speaker 3: Our operations team was able to capitalize on this margin.

Our operations team was able to capitalize on this margin opportunity by running sustained elevated throughput volumes and driving improved yield stores high valued finished products, resulting in adjusted EBITDA of $51 5 million for the quarter. Our renewable diesel facility has demonstrated best in class.

Speaker 3: by running sustained elevated throughput volumes and driving improved yields towards high-valued finished products, resulting in adjusted EBITDA 51.5 million...

Speaker 3: Our renewable diesel facility has demonstrated best in class yield rates at around 98% while supporting continued operational flexibility.

Yield rates at around 98%, while supporting continued operational flexibility, allowing us to adjust as needed to qualify a variety of alternatives organic feedstock blends. We believe the renewable diesel facility is a proven capital efficient energy transition assets that offer.

Speaker 3: Allowing us to adjust as needed to qualify a variety of alternative organic feedstock.

Speaker 3: We believe the renewable diesel facility has proven capital efficient energy trans-

Speaker 3: that offer significant value in the face of increasing regulatory shifts towards low-carbon energy solutions. Most notably, electric motor Saudi or the

Significant value in the face of increasing regulatory shifts towards a low carbon energy solutions, most notably in California.

Speaker 3: As these emerging markets transition over the next year, we will continue to focus on our key priorities.

As these emerging markets transition over the next year, we will continue to focus on our key priorities number one completion of phase two of our renewable diesel projects, including the expansion of hydrogen production capabilities and number two continuing to improve on our balance sheet.

Speaker 3: Number one, completion of phase two of our renewable diesel project, including the expansion of hydrogen production capabilities. And number two, continuing to improve on our balance.

Speaker 3: As it relates to the balance sheet and as previously announced, we have formally engaged Bank of America to act as our financial advisor to enhance our renewable fuels and sustainable products growth strategy and evaluate potential strategic transactions which could rapidly accelerate our balance sheet improvement effort.

As it relates to the balance sheet and as previously announced we are formally engaged bank of America to act as our financial advisor to enhance our renewable fuels and sustainable products growth strategy and evaluate potential strategic transactions, which could rapidly accelerate our balance sheet improvement efforts.

Speaker 3: We are pleased with the support they have provided us for.

We are pleased with the support they have provided thus far and.

Speaker 3: And we look forward to providing potential updates as they develop.

And we look forward to providing potential updates as they develop.

Speaker 3: As the team will share with you today, our results for third quarter related to safety operations and financial performance demonstrate the team's ability to effectively manage the business in response to ever changing market conditions. While maintaining focus on the ability to generate long-term value for a shareholder.

Jim will share with you today, our results for the third quarter related to safety operations and financial performance demonstrate the team's ability to effectively manage the business in response to ever changing market conditions, while maintaining focus on the ability to generate long term value.

Speaker 3: With that, I would now like to hand the call over to James Raim or Chief Operating Officer. Who will provide an update on our...

Our shareholders.

With that I would now like to hand, the call over to James <unk>, Our Chief operating officer, who will provide an update on our operations during the quarter.

Speaker 3: Thank you, Ben. Good morning, everyone. I'll start as always with a report on our health, safety, and environmental performance.

Thank you Ben Good morning, everyone I'll start as always with a report on our health safety and environmental performance.

Speaker 4: The third quarter, 2023, was another clean quarter with zero-oacher recordables and zero incidents of environmental non-compliance recorded across the NCARC.

Third quarter 2023 was another clean quarter with zero, Osha recordable and zero incidents of environmental noncompliance reported across the entire company.

Speaker 4: Additionally, Mobile saw zero process safety at events and continues to set all time site records in the EHS performance.

Additionally, mobile solve zero process safety events and continue to set all time records in E. H M <unk> performance.

Speaker 4: This has been achieved with the focus of the organization during extremely busy.

This has been achieved with the focus of the organization during an extremely busy time.

Speaker 4: I'm very proud of our employees at every location for prioritizing the safety of the people working within our sites, as well as our surrounding neighbors within the communities where we live and work.

I'm very proud of our employees at ever locations for prioritizing the safety of the people working within our sites as well as our surrounding neighbors within the communities, where we live and work.

Speaker 4: I must say thank you to this group of dedicated employees.

Just say thank you to this group of dedicated employees legacy and mobile for their continued focus on our core values of caring for one another.

Speaker 4: Legacy and mobile for their continued focus on our core values of curing for one

Speaker 4: Our operations team at Mobile site demonstrated strong operational performance of the conventional facility during the

Our operations team and mobile sites demonstrated strong operational performance of the conventional facility during the quarter.

Speaker 4: average throughput volumes of 80,171 barrels per day for a capacity utilization of 107%.

With average throughput volumes of 80171 barrels per day for capacity utilization of 107% ahead of our previous guidance.

Speaker 4: Strength and throughput volumes reflect a continued optimization of the companies through to all procurement strategy to mitigate against potential supplies.

Strengthened throughput volumes reflect the continued optimization of the company's crude oil procurement strategy to mitigate against potential supply risk.

Speaker 4: Great job by both operations, as well as our Marine Logistics Group, for skillfully navigating these challenges.

Great job by both operations, while as our Marine logistics group for skillfully navigating these challenges.

Speaker 4: Total Opex Piberal for the quarter was in line with our previous guidance at $3.70 per barrel and reflect the combination of higher throughput volumes as well as cost efficiencies gained from FMUD operations quarter over quarter.

Total opex per barrel for the quarter was in line with our previous guidance at $3 70 per barrel and reflect the combination of higher throughput volumes as well as cost efficiencies gained from smooth operations quarter over quarter.

Speaker 4: Our conventional fuels gross margin per barrel during the quarter was $17.56.

Our conventional fuels gross margin per barrel during the quarter was $17.56.

Speaker 4: Our finished products, such as gasoline, diesel, and jet fuel accounted for 67% of our total product yield during the 3rd quarter of 2020.

Our finished products such as gasoline diesel and jet fuel accounted for 67% of our total product yield during the third quarter of 2023.

Speaker 4: This was ahead of our prior guidance and reflecting the continued focus on facility-wide yield optimization as we previously described.

This was ahead of our prior guidance and reflecting the continued focus on facility wide yield optimization as we previously described.

Speaker 4: This focus on enhanced yield of high value finish fuels covers a wide variety of activities from feedstock selection to optimization at the individual unit level. And in turn, maximizing by

This focus on enhanced yields of high valued finished fuels covers a wide variety of activities from feedstock selection the optimization at the individual unit level and in turn maximizing values.

Speaker 4: This has been a concentrated effort, relying on every function of the refinery to find the means to create the greatest value within the...

This has been a concentrated effort relying on every function of the refinery to find the means to create the greatest value within the asset.

Speaker 4: This same approach is being applied at our Marrero facility, focusing on operational excellence in yields to create the greatest value offered by the market. I'm very proud of you.

This same approach is being applied at our marrero facility, focusing on operational excellence and yields to create the greatest value offered by the market.

I'm very proud of the whole organization.

Speaker 4: Now, turning to our Renewable Feebles Business, vertex Renewable Diesel Point Operative Smoothies.

Now turning to our renewable fuels business vertex renewable diesel plant operated smoothly.

Speaker 4: generating total renewable fuels gross margin for bill of $4.78 for the quarter.

Generating total renewable fuels gross margin per barrel of $4 78 for the quarter.

Speaker 4: Our renewable fruit that volumes averaged 5,397 barrels per day for a capacity utilization of 67.5%.

Our renewable throughput volumes averaged 5397 barrels per day for a capacity utilization of 67, 5%.

Speaker 4: strategically reduced to balance supply economics and support feedstock pathways developed.

Strategically reduced to balance supply economics, and support feedstock pathways development.

Speaker 4: Our total production of renewable diesel for the third quarter average 5,297 barrels per day, demonstrating a renewable product yield of 97.8.

Our total production of renewable diesel for the third quarter averaged 5297 barrels per day, demonstrating our renewable product yield of 97, 8%.

Speaker 4: As Chris will highlight in a moment, a crude oil throughput for the fourth quarter are expected to be down to approximately 70,000 barrels per day due to two facts.

As Chris will highlight in a moment, our crude oil throughput for the fourth quarter are expected to be down to approximately 70000 barrels per day due to two factors early in the fourth quarter mobile performed a total plant outage, allowing the local power provider to proactively replace the main electrical transformer that services the site.

Speaker 4: Early in the fourth quarter, MoVill performed a total plan outage, allowing the local power provider to proactively replace the main electrical transformer that services the site.

Speaker 4: This replacement was planned and executed successfully under our control to prevent an unplanned electrical outage.

This replacement was planned and executed successfully under our control to prevent an unplanned electrical outage at the site.

Speaker 4: The plan has returned near four rates and the completion of this

The plant has returned near full rates since the completion of this outage.

Speaker 4: Additionally during the fourth quarter there will be a crude unit furnace decode that is planned and scheduled This scheduled pit stop will be executed within the next month outside of peak holiday period

Additionally, during the fourth quarter, there will be a crude unit furnace D code that is planned and scheduled this scheduled pitstop will be executed within the next month outside of the peak holiday periods.

Speaker 3: I will now turn a chief financial officer, Chris Carlson, for a review of the company's financial results. Thank you, James, and what good is those joining us on the call today? Thank you.

I'll now turn a chief financial Officer, Chris Carlson for a review of the company's financial results.

Thank you James and welcome to those joining us on the call today for.

For the three months ended September 32023, vertex reported net income attributable to common shareholders of $19 8 million or <unk> 17 per fully diluted share.

Speaker 3: Our texture reported net income attributable to common shareholders of 19.8 million. For 17-

Speaker 5: versus net income attributable to common shareholders of 22.2 million or 15 cents per fully diluted share in the third quarter.

Versus net income attributable to common shareholders of $22 2 million or <unk> 15 per fully diluted share in the third quarter of 2022.

Speaker 5: Included in this quarter's net income is an inventory valuation adjustment charge of 9.5

Included in this quarter's net income is an inventory valuation adjustment charge of $9 4 million.

Speaker 5: We reported a just to the Vada 51.5 million in the third quarter 2023 versus 1.6

We reported adjusted EBITDA of $51 5 million in the third quarter of 2023 versus $1 6 million in the prior year period.

Speaker 5: Total capital expenditures for the third quarter 2023 were $21 million. In line with our prior guidance,

Total capital expenditures for the third quarter 2023 or $21 million in line with our prior guidance issued on August eight.

Speaker 5: Turning to the balance sheet, as of September 30th, 2023, the company had total cash and equivalents, including restricted cash of 79.3 million, versus 52.1 million at the end of the prior...

Turning to the balance sheet as of September 32023, the company had total cash and equivalents, including restricted cash of $79 3 million versus $52 1 million at the end of the prior quarter.

Speaker 5: Burtex had total met that outstanding of 163 million at the end of the third quarter of 2023. In

Vertex had total net debt outstanding of $163 million at the end of the third quarter of 2023, including various lease obligations.

Speaker 5: applying a net debt to the trailing 12 month adjusted EBITDA ratio of 1.3 times as of September 30th.

Implying a net debt to trailing 12 month adjusted EBITDA ratio of one three times as of September 32023.

Speaker 5: Regarding our ongoing balance sheet optimization strategy, we are proactively conducting cost-benefit analysis around our existing term loan and potential rate-bouncing pathways in pursuit of more efficient...

Regarding our ongoing balance sheet optimization strategy, we are proactively conducting cost benefit analysis around our existing term loan and potential refinancing pathways in pursuit of more efficient sources of capital.

Speaker 5: We continue to be opportunistic about cleaning up the remaining 15.2 million of no-self-standing. Following our recent cashless equity exchange.

We continue to be opportunistic about cleaning up the remaining $15 2 million of convertible notes outstanding following our recent cashless equity exchange transactions completed back in June.

Speaker 5: Improve pricing for conventional fuels during much of the third quarter benefited conventional fuels gross margin. Most notably, this uplift and conventional pricing for the third quarter provided a notable tailwind to financial results. And it was compounded by improved run rates and yields in our conventional fuels business as James Bell.

Improved pricing for conventional fuels during much of the third quarter benefited conventional fuels gross margin most notably this uplift in conventional pricing for the third quarter provided a notable tailwind to financial results and it was compounded by improved run rates and yields and our conventional.

Fuels business as James outlined earlier.

Speaker 5: During the third quarter, we identified the rally in gasoline prices as a substantial opportunity to limit market price exposure ahead of a seasonally weak period for gas...

During the third quarter, we identified the rally in gasoline prices added substantial opportunity to limit market price exposure ahead of a seasonally weak period for gasoline cracks.

Speaker 5: As a result, we had gasoline cracks covering approximately 27% of gasoline production for the fourth quarter of 2020.

As a result, we hedged gasoline cracks covering approximately 27% of <unk>.

Gasoline production for the fourth quarter of 2023.

Looking to the fourth quarter of 2023.

Speaker 5: We anticipate total conventional throughput volumes that mobile to be between 68,000 and 71,000 barrels per day. We're reflecting.

Anticipate total conventional throughput volumes at mobile to be between 68, and 71000 barrels per day, reflecting planned downtime as James noted.

Speaker 5: Expected yield of conventional fuel products such as gasoline, diesel, and jet fuel is expected to be between 64% and 68%.

Expected yield that conventional fuel products, such as gasoline diesel and jet fuel is expected to be between 64% and 68% with the balance in intermediate and other products such as biggio.

Speaker 5: with the balance in intermediate and other products such as BGO. Turning to our next speaker,

Turning to our renewable diesel operations, we have.

Speaker 5: We anticipate total renewable throughput volumes of 4,000 to 6,000 barrels per day. Reflecting 50% to 75% of

Tessa paid total renewable throughput volumes of 4000 to 6000 barrels per day.

Reflecting 50% to 75% of our total phase one operational capacity.

Speaker 5: Our yield on renewable volumes is expected to be 97 to 90.

Our yield on renewable volumes is expected to be 97% to 98%.

Speaker 5: OpEx per barrel on a consolidated basis is expected to be $3.95 to $4.20 for the fourth quarter. And we anticipate total capital expenditures for the quarter to be between $15 million and $20 million.

Opex per barrel on a consolidated basis is expected to be $3 95 to four.

$4 20 for the fourth quarter, and we anticipate total capital expenditures for the quarter to be between $15 million and $20 million.

Speaker 5: I'd now like to turn the call to Chief Commercial Officer Doug Hogg, who will provide updates on the commercial, business, and R&D.

I'd now like to turn the call to Chief Commercial Officer, Doug Haugh, who will provide updates on the commercial.

<unk> and <unk>.

Thanks, Chris.

Speaker 3: As James mentioned, one of our critical objectives for the quarter was to expand our feedstock blending to include runs of tallow, DCO, and canola at volumes sufficient to support the data collection required for our LCFS pathway approach.

James mentioned, one of our critical objectives for the quarter was to expand our feedstock lending to include runs of tallow desio in canola at volumes sufficient to support the data collection required for our CFS pathway approvals we.

Speaker 6: We successfully completed runs to support our soy, DCO, and canola pathways in the third quarter, and we're finishing up the tallow runs this month.

We successfully completed runs to support our soy desio in canola pathways in the third quarter and we're finishing up the tower runs this month.

Speaker 6: We have also successfully completed our LCFS temporary filings and are pleased to report that we will receive LCFS credits at the default carbon intensity values for all of our RD production in the third and fourth quarter of this year.

We have also successfully completed our CFS temporary filings and are pleased to report that we will receive LC ff's credits at the default carbon intensity values for all of our R&D production in the third and fourth quarter of this year.

Speaker 6: The next step is to complete our filings for each of the four feedstocks on which we now have proprietary run rate data and detailed carbon intensity analysis. Soy, DCO, Canola, and Tau.

First step is to complete our filings for each of the four feedstocks on which we now have proprietary run rate data and detailed carbon intensity analysis, soy desio canola and tallow.

Speaker 6: This will allow us to receive the increased credit value available with our lower carbon intensity production as compared to the default temporary value.

This will allow us to receive the increased credit value available with our lower carbon intensity production as compared to the default temporary values.

Speaker 6: We expect to complete that next step in the LCFS process during the fourth quarter as

We expect to complete that next step in the <unk> process during the fourth quarter as scheduled.

Speaker 6: If James noted earlier, RD margins during the third quarter were modest, but there are a positive growth profit of $2.4 million for the quarter.

As James noted earlier Rd margins during the third quarter were modest but drove a positive gross profit of $2 4 million for the quarter. This margin environment not only supported us in running at rate sufficient to complete our feedstock qualification process, but also improve our finished product logistics and delivery capabilities to the west coast.

Speaker 6: This margin environment not only supported us in running at rates sufficient to complete our feedstock qualification process, but also to prove our finished product logistics and delivery capabilities to the West Coast.

Speaker 6: Vessel loading and delivery of our product to California markets has now been completed for all of our renewable diesel production to date.

Vessel loading and delivery of our product, California markets has now been completed for all of our renewable diesel production to date successfully validating these critical logistics and delivery capabilities multiple times since commercial production began.

Speaker 6: We are successfully validating these critical logistics and delivery capabilities multiple times since commercial production.

Speaker 6: These shipments allow us to benefit from the value of LCFS credits for all of our production during the third and fourth quarter, and will contribute to the fourth quarter financial performance of our renewables.

These shipments allow us to benefit from the value of El CFS credits for all of our production during the third and fourth quarter and will contribute to the fourth quarter financial performance of our renewables business.

Speaker 6: The collaboration with Edamitsu, our Optic partner, who maintains the terminal and marketing assets across several West Coast ports has been incredibly positive and productive throughout this process. The collaboration with Edamitsu, our Optic partner, who maintains the terminal and marketing assets across several West Coast ports has been incredibly positive and productive throughout this process.

The collaboration with other mid Xu our offtake partner, who maintains the terminal and marketing assets across several west coast ports has been incredibly positive and productive throughout this process, we really appreciate their support.

Another primary focus for our trading and supply teams. This quarter was the continued development of our renewable feedstock procurement strategy via the expansion of our roster of reliable suppliers. We have continued to add occurred suppliers to our supply chain for soy desio, canola and tallow and have started the sample testing and qualification processes needed to begin.

Bringing in yuko supply for multiple suppliers.

Speaker 6: testing and regulatory qualification required for these seeds includes the exchange of detailed information on origins and the application for proprietary process is used in the collection and process.

The testing and regulatory qualification required for these feeds includes the exchange of detailed information on origins and the application of proprietary processes used in the collection and processing.

Speaker 6: These important considerations assure the consistent quality of feedstock supplies and reflect the significant investment of time and money by our suppliers.

These important considerations assure the consistent quality of feedstock supplies and reflects the significant investment of time and money by our suppliers. So we appreciate and value of their efforts as we bring forward. This part of our R&D strategy by many months.

Speaker 6: So we appreciate and value their efforts as we bring forward this part of our RG strategy by many.

Speaker 6: We also continue to build our trading and supply capabilities this quarter with the opening of our new trade floor and mobile. That will support the expansion of our trading, supply, logistics and market.

We also continued to build our trading and supply capabilities. This quarter with the opening of our new trade floor in mobile that will support the expansion of our trading supply logistics and marketing teams.

Speaker 6: Trade floor will support both our conventional and renewable refining assets.

Our trade flows to support both our conventional and renewable refining assets working to maximize profitability by identifying the most attractive opportunities for feedstock supply and finished product sales.

Speaker 6: Working to maximize profitability by identifying the most attractive opportunities for feedstock supply and finished product sales.

Speaker 6: Along with this build out of trading capability, we've successfully entered the Marine Fills business with the launch of Vertex Marine Fills Services, a marketing business and mobile...

Along with the build out of trading capability, we've successfully entered the marine fuels business with the launch of vertex Greenfield services.

Marketing business in mobile Bay and surrounding markets.

Speaker 6: This team of marine-fueling experts now offers marine fuels via terminal truck and bars.

This team of Marine fueling experts now offers marine fuels via terminal truck and barge supply.

Speaker 6: establishing these commercial teams with trading, supply, marketing, logistics, and sales capabilities.

Establishing the commercial teams with trading supply marketing logistics and sales capabilities.

Speaker 6: provides the foundation for us to expand the available margins on our production volumes through the continued development of a truly integrated strategy.

<unk> provides the foundation for us to expand the available margins on our production volumes through the continued development of a truly integrated strategy.

Speaker 6: As James mentioned, our refinery Morero also performed well this quarter and that was supported by a strong performance in both our proprietary collection businesses and our third-party aggregation businesses.

As James mentioned, our refinery and <unk> also performed well this quarter and that was supported by a strong performance in both our proprietary collection businesses and our third party aggregation business. The buildout of our commercial trading in marine fuel services capabilities to support our mobile production now also supporting the integration of our Marrero production into our finished products marketing.

Speaker 6: The build out of our commercial trading and marine fuel services capabilities to support our mobile production, now also supporting the integration of our Marrao production into our finished product smart.

Speaker 6: We have established the fuel blending and transportation infrastructure needed to optimize portions of our Marrao production directly in our marine fields marketing activities Improves our netbacks in competitive position in those

This quarter, we have established the fuel blending the transportation infrastructure needed to optimize portions of our marrero production directly in our marine fuels marketing activities, which improves our net backs and competitive position in those markets in summary during the third quarter. We continued completion of the key commercial milestones needed to advance our renewable supply chain strategy.

Speaker 6: In summary, during the third quarter, we continued completion of the key commercial milestones, needed to advance our renewable supply chain strategy, while also expanding our capabilities to blend, distribute and market our conventional products.

We're also expanding our capabilities to blend distribute and market our conventional products.

Speaker 6: My thanks to the team for all the extra work it takes to build new capabilities while safely and properly running the current business. Now back to Ben for a few minutes.

My thanks to the team for all the extra work it takes to build new capabilities, while safely and profitably running the current business now.

Now back to Ben for a few closing remarks.

Thank you Doug.

Speaker 3: Through after third quarter of 2023, we have worked as a team to bring continuous improvement to each of our fight locations, commercial operations, and internal business processes.

Throughout the third quarter of 2023, we have worked as a team to bring continuous improvement to each of our site locations commercial operations and internal business processes.

We know the value of strategic positioning and we have been proactively executing key objectives aimed at scalability and reliability. So we can best position ourselves ahead of the market.

Speaker 3: And we have been proactively executing key objectives aimed at scalability and reliability so we can best position ourselves ahead of the market.

Speaker 3: We see the renewable demand out for California generating strong economic potential.

We see the renewable demand outlook for California, generating strong economic potential over the coming years.

Speaker 3: The work we continue to do around optimizing our assets, developing feedstock blends.

We continue to do around optimizing our assets developing feedstock blends deepening our supply chain logistics growing our marketing and trading capabilities or how we plan to deliver on our vision of building an energy transition company.

Speaker 3: growing, our marketing and trading capabilities, or how we plan to deliver on our vision of building an energy transition.

Speaker 3: We're excited about the renewable opportunities we see ahead. And we're committed to our long-term strategy of driving sustainable growth and creating value for our state.

We're excited about the renewable opportunities. We see ahead and we are committed to our long term strategy of driving sustainable growth and creating value for our stakeholders as we conclude our third quarter 2023 update.

Speaker 3: As we conclude our third quarter 2023 up.

Speaker 3: I want to thank our team members across the entire business for their relentless

I want to thank our team members across the entire business for their relentless contributions. Additionally.

Speaker 3: Additionally, I'd like to thank you all for joining us on the call today and for the continued support of Vertex Energy. With that, I'll now turn the call.

Additionally, I'd like to thank you all for joining us on the call today and for the continued support of vertex energy.

With that I'll now turn the call over to our operator for questions.

Speaker 1: At this time, if you'd like to ask a question, please press star one on your telephone keypad.

At this time, if you'd like to ask a question. Please press star one on your telephone keypad. Your first question comes from the line of Donovan Schafer with Northland Capital markets. Your line is open.

Speaker 1: The first question comes from a line of Donovan Schaeffer with Northland Capital Markets.

Speaker 7: Hey guys, I wanna start off by asking about the, you know, higher production yield, you were able to get this quarter, I'm sorry, high value, you know, refined products, the gasoline diesel jet fuel, you know, good mix at 67% this quarter, you're dieting 64 to 68%. Next quarter, before the operation update, you guys had said 61%.

Hey, guys.

I wanted to start off by asking about.

Higher production yield you were able to get this quarter.

Im sorry high value.

<unk> products gasoline diesel jet fuel.

Good.

Mix at 67% this quarter.

<unk>, 64% to 68% next quarter.

Before the operational update you guys had said 61%.

Speaker 7: and it sounds like you're saying this sort of these operation improvement.

And it sounds like Youre, saying thats sort of these operational improvement.

Initiatives behind that.

Speaker 7: behind that. Based on Doug's comments, it seems like there may also be something to do with, I don't know if it is.

Just on Doug's comments it seems like there may also be something to do with.

I don't know if its.

Speaker 7: If there's something with the marine fuels business combined with Marrero and the Infrastructure of somehow that's getting mixed in with things in some way. I want to know that if you could help me understand the dynamics driving that and if we expect that to continue Going forward at that kind of mid-60 mid-to-high 60% or if

Is there something with the marine fuels business combined with Marrero and the infrastructure, if somehow thats getting extended with things in some way.

Wanted to know if you.

You could help me understand the dynamics driving that and if we expect that to continue going forward.

That kind of mid <unk> mid to high 60% or if they need more typical for it to be closer to 60% or potentially a touch below that in the high fifty's.

Speaker 7: it'd be more typical for it to be closer to 60% or potentially a touch below that in the high 50s.

Hey, Donovan this is James Thanks for the question.

Speaker 4: What we've really spent time on, from the factory floor all the way through our technical organization, is really focusing on what the yields are, and using the yields and the value delivered by the market.

What we've really spent time on with from the factory floor all the way through our technical organization is really focusing on what the yields are.

And using the yields.

And the value delivered by the market to make sure that we're buying the crudes are the highest value to us and so there is nothing about marrero in there there is nothing about Ngos as straight at the fence line and it's really been a.

Speaker 8: make sure that we're buying the crudes or the highest value to us. There's nothing about Marrero in there, there's nothing about Engive, it's straight at the fence line. It's really been a constant trade of effort from trading and supply through our supply team, through operations and technical. We believe these are sustainable in the range that we describe, this quarter and in future quarters.

A concentrated effort from trading and supply through our supply team through operations and technical and we believe these are sustainable and the range that we.

We described this quarter and in future quarters.

So it's more about.

Speaker 7: the sourcing and kind of lining things up right more so than like changes of particular hardware or some other Catalyst type thing or something like that driving that yield piece of it

The sourcing.

Lining things up more so than like changes, a particular hardware or some other catalyst type thing or something like that driving that yield piece of it.

Yes, we have made some very small donovan, we have made some very small capital investments.

Speaker 8: We have made some very small, Donovan, we have made some very small capital investments, low-hanging fruit, those things that would enable us to improve the yields. However, it's not been a huge investment at all. It's really been the focus of the organization operating well, and the advantage you have from operating smoothly throughout the quarter allows you to really dial in the optimization. And that's really how that's been achieved.

Low hanging fruit those things that would enable us to improve yields. However, it has not been a huge investment at all it's really been the focus of the organization and operating well and the advantage you have from operating smoothly throughout the quarter allows you to really dial in the optimization and Thats really how that's been it.

Keith.

Speaker 7: Okay, thank you. And then for my next question, I want to talk about, you guys shared a direct, op-ex figure for the renewable diesel side of the business. You know, it's, it's, yeah. You, you. You know, your different from that man or your policy, it's just, you're in infrastructure delivery.

Okay. Thank you and then for my next question I wanted to talk about.

You guys shared direct opex figure for the renewable diesel side of the business.

Yes.

It's.

Speaker 7: meaningfully higher than what you get on the fossil fuel side. I think it was somewhere in the $20 per barrel, you know, fossil fuel side. It's, you know, two to $4 as a barrel. Can you just talk to kind of what costs are incorporated in that, is that still cover maybe some of the, I know, last quarter you had like,

Meaningfully higher than what you get on the fossil fuel side I think it was somewhere in the $20 per barrel fossil fuel side.

Two to $4 a barrel.

Can you just talk through kind of what costs are incorporated in that.

Does that still cover maybe some of the I know last quarter you had like.

Speaker 7: 20 million and one-off charges for fixing some of the pump equipment and stuff That get included in some of that and how should we expect it to to trend going forward?

$20 million and one off charges for fixing some of the pump equipment and stuff does that get included in some of that and how should we expect it to trend going forward.

Okay.

Speaker 5: Hey, Donovan, this is Chris. Good question. So, I mean, basically what we did at the outset is we took a 3rd of the site costs and applied it to the renewable diesel. Um, division.

Hey, Jonathan This is Chris good question. So I mean, basically what we did at the outset is we took a third.

Site costs and applied it to the renewable diesel.

Division.

Speaker 5: So what you're seeing is a third of the cost on approximately 5,000 barrels of production.

So what youre seeing is a third of the cost on approximately 5000 barrels of production. So as you can imagine as we scale up production.

Speaker 5: So, you know, as you can imagine, as we scale up production.

Speaker 5: that number is going to start coming down. The best way to look at it with the on-offix per barrel for the site.

That number is going to start coming down.

The best way to look at it would be on an opex per barrel for the site.

Speaker 5: And as you heard, we guided for Q4 to be 395 to 425.

And as you heard we guided for Q4 to be $3 95 to $4 20 per barrel.

Speaker 7: Okay, okay, great. Well, thank you guys. I'll leave it there and take the rest of my questions off. I'll fly. Thanks, thanks, Don.

Okay, Okay great.

Well, thank you guys.

I'll leave it there and take the rest of my questions offline.

Thank you thanks Don.

Eric Stine with Craig Hallum. Your line is open.

Speaker 9: Hey, everyone, maybe just sticking with the direct topics first. I mean, that's elevated sequentially. Is that just reflecting a number of the projects that you cited? I believe one that you've already undertaken here in October and the one to come later in the fourth quarter.

Hey, everyone maybe.

Maybe just sticking with the direct Opex first I mean, thats elevated sequentially is that just reflecting a number of the projects that you cited I believe one that you've already undertaken here in October and the ones that come later in the fourth quarter.

Speaker 5: There may be a little bit of an increase there, but I mean, it's not much. Overall, when you look at the total size.

No Andy there.

May be a little bit of an increase there, but I mean, it's not much overall when you look at the total site.

Speaker 8: Yeah. And what you have there is pretty consistent with what we've had now that RD's up and running and we've got those cost behind us. And it's really just an allocation across those business lines.

Yes.

What you have there is pretty consistent with what we've had now that R&D is up and running and we've got those costs behind us and it's really just an allocation across those business lines.

Speaker 9: Got it, so this is kind of a, I mean, this is probably a decent run rate to think about going forward.

Got it so this is kind of.

This is probably a decent run rate to think about going forward.

Speaker 9: Yes, only consolidated basis. Yes. Yep. OK, good. Maybe just sticking with the conventional refinery here, you mentioned, I think, 27% hedging on the gasoline side. Gasoline, obviously, very strong in 3Q. I mean, should we think about that that you hedge that close to the peak or what kind of price did you lock those hedges in for Q4?

On a consolidated basis, so on a consolidated basis, yes.

Okay. Good.

Maybe just sticking with the conventional refinery here.

You mentioned.

Think 27%.

Hedging on the gasoline side gasoline, obviously very strong in in three Q I mean should we think about that that you hedge that.

Close to the peak or or what kind of price did you lock those hedges in for Q4.

Speaker 5: Yeah, the Doug here, I wouldn't say it was the peak, but I'd say we were, you know.

Yes.

Doug here.

Wouldn't say it was the peak, but I'd say we were.

Speaker 10: well-timed on that overall, as we came through the strong third quarter and, you know, we're hedged at that, for that 27%, it cracks, you know, substantially above the realized cracks today, right? Yeah. Through the end of these.

We were well timed on that overall.

As we came through the strong third quarter.

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We're hedged the debt for that 27% of cracks substantially above.

The realized cracks today right through to the entity.

So it's gonna be that'll be helpful. Yes.

Yes, no absolutely okay.

Speaker 9: Well maybe, you know, I guess on the renewable diesel side, and I know you're kind of going down the strategic path and it's still, you know, it's still somewhat early, but you know, I'm just curious if you could talk about...

Well maybe.

I guess on the renewable diesel side, and I know youre kind of going down the strategic path and it's still it's still somewhat early but I'm. Just curious if you could talk about.

Speaker 9: In your mind, as you sit here today, what your ideal partner looks like? Clearly, you're looking to do something that would include helping the balance sheet. But curious, do you think it's someone who is simply a financial partner or is it someone that could be involved on the operational side, whether it's...

In your mind as you sit here today, what your ideal partner looks like clearly you are looking to do something that would include.

To help in the balance sheet, but curious do you think it's someone who is simply a fee.

Financial partner or is it someone that could be involved it could be involved in the operational side, whether its feedstock supplier.

Speaker 9: feedstock supplier, you know any number of other parties. Just curious kind of your early thoughts on that.

Any number of other parties, just curious kind of your early thoughts on that.

Speaker 10: Yeah, I would say, you know, I don't know, I'd say that there's any.

Yes, I would say.

I would say that there is any.

Speaker 10: one specific criteria that makes it a perfect match, but we are exploring both of those groups of potential partners, one being financials that bring unique set of strengths and capabilities that can help us that are more purely balance sheet oriented. And then there is another group of potential partners on the strategic side that could bring, not only financial capacity, but

One specific criteria that makes it a perfect match, but we are exploring both of those.

Groups of potential partners, one being financials that bring a unique set of strengths and capabilities that can help us.

Or more purely balance sheet oriented and then there is another group of potential partners on the strategic side that could bring.

Not only financial capacity, but.

Speaker 10: tremendous support around feedstocks and or finished product marketing Or both in some cases. So you know, we're With what the Bank of America team has provided and brought forward so far we're gonna run a very robust process and You know, I think we'll see substantial participation from both of those categories of potential partners and that's been our indication thus far so

Tremendous support around feedstocks, and our finished product marketing.

Or both and in some cases so.

We're pleased with what the bank of America team has provided an and brought forward. Thus far we're going to run a very robust process.

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I think we'll see substantial participation from both of those categories of potential partners and Thats been our indication thus far so.

Speaker 10: exciting development overall, but we're very open and thoughtful about the advantages that either type of partner can offer.

It's an exciting development overall, but we're we're very open and.

Thoughtful about the advantages that either type of partner could provide us.

Speaker 9: Yep, and then, you know, I don't know if you've disclosed it or not, but I mean, do you have a, in your mind, do you all have a target for timing, you know, whether it's first half of 24 or something more specific?

Yes, and then I don't know if you've disclosed it or not but I mean do you have a.

Your mind do you all have a target for timing, whether it's first half of 'twenty four or something more specific.

Speaker 10: I'd say that's a reasonable estimate. You know, we're a...

No I'd say, that's a reasonable estimate.

Sure.

Sure.

Speaker 10: We're in the early stages of the process now, lots of trading of NDAs and the like, typical for a process of this type. And we certainly expect that by first half of 24, we've kind of...

And we're in the early stages of the process now lots of trading of NDA and the like typical for a process of this type.

Certainly.

Expect that.

By first half of 'twenty four.

Kind of gained.

Gained a clear understanding of the path forward.

Okay. Thanks, everyone.

Thank you.

Manav Gupta with UBS Your line is open.

Speaker 11: Guys, first of all, thank you for breaking up the RD versus conventional EBITDA. A number of your peers who have been doing it much longer than you still refuse to break it. So, it helps with the disclosure. So, thank you for that.

Guys first of all thank you for breaking up the R&D versus conventionally Victor a.

A number of your peers have been doing a much longer menu still refused to breakage. So it helps the disclosure so thank you for that.

Speaker 11: My first question here is a material improvement in conventional refining from mobile. You are not providing the capture and I'm sure there's a very good reason you stopped doing it so I'm not going to press you on that. But help us understand some of the factors that helped you deliver a much stronger EBITDA on the conventional side of the mobile refinery versus the second quarter.

My first question here is a material improvement in can maintain refining from mobile.

You are not providing the capture and I'm sure. There's a very good reason you stopped doing here, so I'm not going to press you on that but help us understand some of the factors that help you deliver a much stronger.

EBIT down the convert.

<unk> cited the mobley refinery versus the second quarter.

Speaker 8: Yeah, no, thanks. Not good question. Really, if you look at the second quarter to third quarter, we saw a significant improvement in the overall market.

Yes, no. Thanks good.

Good question.

Really if you look at the second quarter to third quarter, we saw a significant improvement in the overall market and.

Speaker 8: And with that, because we were running reliably and really focusing on those higher value products, we were able to capture what the market gave us versus the second quarter.

And with that because we were running reliably and really focusing on those higher value products, we're able to capture what the market gave us versus the second quarter and so it was a clean quarter from reliability from yields. In fact. This is this is very very good results with yield profile that we saw but it was.

Speaker 8: So as a clean quarter from reliability, from yields, in fact, this is very, very good results with the yield profile that we saw. But it was really the market gave it to us and we were there available to capture it. And with that, we had significant rate increase across the, as you can see from the rates. And that was all reliability driven. That's continued to be our focus on operational excellence.

Really the market gave it to us and we were there available to capture it and with that we had significant rate increase across the as you can see from the rates and that was all reliability driven that's continued to be our focus on operational excellence.

Speaker 11: Perfect guys. I'm going to press your little bit on the path to profitability for renewables. I think you mentioned FFS will help absolutely. I mean, I'm just saying, you know, one of your peers had similar issues struggled a little in the past on profitability, but they had a clear path to profitability. And if you look at Dino now They are actually profitable on the RDSides. So help us understand your path to profitability as it radiates to the renewables diesel business.

I'm going to press you.

You're a little bit on the path to profitability for renewables I think you mentioned L. CFS.

Absolutely.

I'm, just saying one of your peers have similar issue was struggling in the past on profitability, but they had a clear path to profitability and if you look at BMO now they are actually profitable number R&D side. So help us understand your path to profitability as it relates to the renewable diesel business.

Speaker 10: Yeah, thanks a lot. Good question. Doug here, yeah.

Yes. Thanks good question.

Doug here yet.

Speaker 10: We're very pleased with our progress thus far. We're in no way concerned about the start of cost and the additional expenses to get the unit up and running. What we're pleased with is the reliability of the unit. The yields are fantastic. And our ability to flex our supply chain has been.

We're very pleased with our progress thus far we're we're in no way concerned about.

The startup costs and the additional expenses to get the unit up and running what we're pleased with is the reliability of the unit the yields are fantastic.

And our ability to flex our supply chain has been.

Speaker 10: much greater than we anticipated. So one of the problems with the, you know, the run rate losses coming into the, you know, start a period was we had built up almost 500,000 barrels of.

Much greater than we anticipated so one of the one of the problems with the.

The run rate losses coming into the startup period was we had buildup almost 500000 barrels of inventory.

Speaker 10: Because we just, you know, we weren't experienced in these fly chains. We weren't.

Because we just we didnt, we werent, we werent experienced in the supply chains, we werent we.

Speaker 10: We didn't know how reliable they would be. The last thing we wanted to do was build a big, brand new unit and not have the feeds to run it. We kind of over-inventoried the business, if you would, but we felt that was prudent coming in. We've had to run off those high-cost feedstocks to get back to normalized.

We didn't know how reliable they would be the last thing. We wanted to do is build a price big brand new unit and not have the peds to run it so.

We kind of over inventory the business, if you would but we felt that was prudent coming in.

We've had the run off those high cost feedstocks.

To get back to normalized inventory levels, which were were at now.

Speaker 10: inventory levels, which we're at now. And we've been able to really...

And we've been able to really.

Speaker 10: gain an appreciation for the reliability of our supply base in that sector. You know, we've continued to expand the number of suppliers and continue to qualify new feeds. We found that feedstocks have been...

Gain an appreciation for the reliability of our supply base in that sector.

Continued to expand the number of suppliers and continue to qualify new feeds.

We found that feedstocks have been.

Speaker 10: Plentiful and available, which we, you know, we weren't certain of when we started up because we weren't out in the market buying every day So we're quite pleased with where we're at and yeah, you're right. I mean the past profitability from here is to continue to drive down carbon intensive

Plentiful and available.

We werent certain of when we started up because we went out in the market buying every day.

So we're quite pleased with where we're at and yes, you are right I mean, the past profitability from here is to continue to drive down carbon intensity continue to maximize the CFS contribution now that we're in the system.

Speaker 10: Can you to maximize the LCFS contribution now that we're in the system?

Speaker 10: to continue to optimize our logistics, you know, that we.

We continue to optimize our logistics that we.

Speaker 10: you know, that were brand new assets for us, you know, there in the second quarter, third quarter. So, you know, there's a lot of opportunity ahead, but we're very confident in the business, very pleased with how it's run. The team's done excellent work at the plant.

That were brand new assets for us there in the second quarter third quarter. So there is a lot of a lot of opportunity ahead, but we're very confident in the business very pleased with how it's Ron.

The team has done excellent work at the plant.

Speaker 10: terms of really running the unit well and being able to accommodate.

In terms of really running the unit, well and being able to accommodate.

Speaker 10: Tremendous flexibility on our feedstocks. So that's, you know, you don't, you plan for those, but you don't know how it's exactly gonna work until you do it. And we're very, very pleased with that.

Tremendous flexibility on our feedstocks right. So that's you don't you plan for those but you don't know how to exactly going to work until you do it.

Very very pleased without us turned out.

Speaker 11: No, congrats guys. Based on what you said, I'm optimistic that you'll start reporting a positive EBITDA from your RD business somewhere in 2024. So I'll leave it there. Thank you.

Congrats guys based on what you said I'm optimistic that we'll start reporting a positive EBITDA from your R&D business. Some of it in 2024, so I leave with that thank you.

Noah Kaye with Oppenheimer. Your line is open.

Speaker 12: Good morning, thanks for taking the questions. Nice quarter. I wanted to first ask about...

Good morning, Thanks for taking the questions nice quarter.

Wanted to first ask about.

Speaker 12: the process around hedging as a stance today. You're kind of dipping a toe in here, opportunistically it seems, hedging a portion of the gasoline production, and it's less than 10% of the output. How should we think about your approach to hedging now?

The process around hedging.

Good day.

You are kind of dipping a toe in here opportunistically it seems hedging a portion of the gasoline production.

Less than 10% of the output.

How should we think about your approach to hedging now.

Speaker 12: Will it continue to be opportunistic? Will you look to make it a bit more programmatic?

Will it continue to be opportunistic will you look to make it a bit more programmatic.

Speaker 12: Help us understand how you're thinking on the output has evolved.

Help us understand how youre thinking on the output has evolved.

Okay.

Speaker 10: Yeah, great question. I think the, you know, I do think we will continue to evolve our risk management strategy to be a bit more programmatic. The team's done, you know, made tremendous progress this year as we put the trading and supply teams in place.

Great question I think.

I do think we will continue to evolve our risk management strategy to be a bit more programmatic.

The team has done made tremendous progress this year as we put the trading and supply teams in place.

Speaker 10: Advanced our risk management policies and practices and governance internally. And has, you know, now a much more structured process to look at the markets forward, particularly in the front quarters. You know, we're not yet at the point where we're looking to go put on a full.

Advanced our risk management policies and practices and governance internally.

And has now a much more structured process to look at the markets forward, particularly in the front quarters.

We're not yet at the point, where we are.

Looking to go put on a full annual strip and hedge out our production at that level.

Speaker 10: edge out our production at that level. But we certainly are in a position to proactively take advantage.

But we certainly are in a position to proactively take advantage of.

Speaker 10: attractive cracks in the front quarter ahead of us. So we'll continue to do that.

Attractive cracks in the front quarter ahead of us. So we'll continue to do that we continue to evaluate this splits as we speak those are in a.

Speaker 10: and you evaluate this as we speak, those are enough.

Speaker 10: pretty favorable position at the moment, but also at very, very low inventory, you know, as an industry. So there's a balance there that, you know, has kept us from striking as head just yet, but again, just like we do with gasoline.

Pretty favorable position at the moment.

But also at very very low inventories as an industry. So there's there's a balance there that.

Has kept us from strike those hedges, yet, but again just like we did with gasoline.

Speaker 10: You know, we'll be opportunistic for the front quarter and continue to improve our, our capabilities and governance around that process as we go forward. And I do think you'll see us start to use that, you know, more programmatically and here's forward. Okay, great.

We'll be opportunistic for the front quarter.

And continue to improve our our capabilities and governance around that process as we go forward and.

I do think Youll see us start to use that more programmatically in years forward.

Okay, great. Thanks, that's helpful and then.

Speaker 12: You mentioned that inventories, I think it was specifically on the RD side, are a bit more in balance now. It looked like inventory actually picked up sequentially. I'm just wondering how you're thinking about working capital here in 4Q. Is working capital going to be a positive source of cash generation if you plan to work down inventories as you're running at a lower throughput rate?

You mentioned that inventories.

I think specifically on the R&D side are a bit more in balance now it looked like inventory actually ticked up sequentially and so I'm just wondering how youre thinking about working capital here in for Q as working capital is going to be positive source of cash generation do you plan to work down inventories.

As you are running at a lower throughput rate.

Speaker 5: Yeah, good question. No, this is Chris. Yeah, we saw a slight uptick in inventory values. The actual volume did go down quarter over quarter. So I know that's a little tricky when you're looking at the balance sheet. But as we head into Q4, I do anticipate us reducing inventories. So we should see a working capital benefit.

Yes. Good question Noah This is Chris.

Yes, we saw a slight uptick in inventory values. The actual volume did go down quarter over quarter. So I know thats, a little tricky when you're looking at the balance sheet, but as we head into Q4, I do anticipate us reducing inventories. So we should see a working capital benefit.

From that side.

Speaker 12: Great. Last question. Just what does the CAPEX associated with phase two of the RG project and?

Great last question, just what is the capex associated with phase two.

Of the Rd project ends.

Speaker 12: Over what timeframe do you anticipate that outlay materialized?

Over what timeframe do you anticipate that outlay materializes.

Speaker 5: Yeah, what we're looking at right now is about $35 to $40 million, and that will be largely during 2024 that that outlay will happen.

Yes, what we're looking at right now is about $35 million to $40 million and that will be largely during 2024.

That outlay will happen.

Speaker 13: Thanks. Well, it looks like your balance sheet will be in much stronger shape for that out like Then last quarter. So well done. That's just a thank you. I

Thanks, well it looks like your balance sheet again.

Much stronger shape for that outlay.

Then last quarter, so well done.

Okay.

Thank you Noah.

Sameer Joshi with H C. Wainwright your line is open.

Speaker 14: Great. Thanks for taking my questions. Just following up on some of the previous questions. Is this CAPEX for Phase 2 or the beginning of a work on Phase 2 dependent on any results from the efforts from the strategic side where you are trying to monetize some of the actuality of lähesp.

Great. Thanks for taking my questions just following up on some of the previous questions.

Is this capex for phase two.

Beginning of.

Well countries too dependent on any.

Results from the efforts on the strategic side.

Trying to monetize some of the cash flows there.

Speaker 5: No, we're not waiting on the strategic side at all. That's just part of our normal process that we put in place a year ago for patients.

No we're not we're not waiting on the strategic side at all that's just part of our normal process that we put in place a year ago for phase III.

Speaker 14: Okay, so this is the irrespective of what happens on that front you will continue the development as planned.

Okay.

Irrespective of what happens on that front, you will continue the development as planned.

Correct correct.

Speaker 14: On the renewable capacity utilization,

On the renewable capacity utilization.

Speaker 14: Is the reason to a strain or constraint to less than 75% related to just feedstock availability or is it related to uncertainty on LCSS or what are the only other operational reasons? Why is it that we are not doing more than 25% in 14%?

Good evening.

Scheme are concerned looking forward the telcos want well.

Related to just feedstock available.

Or is that related to uncertainty on and CSS.

Or any other operational reasons.

Why is it that we're not being more than 75%.

In 14 months.

Speaker 10: Yeah, I think the way to look at that this Doug here just is the one the available margin. In the market, so we're going to optimize to that and ramp rates up and down. As appropriate, but the other we have.

Yes, I think.

The way to look at that this Doug here just as the one the available margin.

And the market, so we're going to optimize to that and ramp rates up and down as.

As appropriate.

But the other.

Yes.

Speaker 10: Just qualified for the LCFS defaults. Those do add certainly margin structure for us compared to where we were in the trailing quarter. Going forward, we'll realize those in the fourth quarter for both quarters actually. So that's gonna be helpful. It's definitely not related to feed stock availability. So, you know, we have had...

Just qualified for the El CFS defaults.

Those do add.

Certainly margin structure for us compared to where we were in the trailing quarter going forward, we will realize those in the fourth quarter for for both quarters actually so that's going to be helpful.

It's definitely not related to feedstock availability. So we have had.

Speaker 10: Like I stated, we've had, frankly, a lot more feedstock than we needed, so we're bringing those supply chains into equilibrium now, but are very confident because we have originated

Like I stated, we've had frankly, a lot more feedstock than we needed.

So we're bringing those supply chains in the equilibrium now.

But are very confident because we have originated.

Speaker 10: In a very tight period, we were still able to originate more than enough feed that we

And a very tight period, we are still a little originate.

More than enough feed that we took to run rates that we wanted to run.

Speaker 10: run rates that we wanted to run. You know, so that that capacity is available. And it's the market commands that we can bring it to bear and.

So that capacity is available.

And if.

The market demand that we can bring it to bear.

Speaker 10: raise rates, you know, appropriately. Correct. The unit has run extremely well also. We've been very proud of the way it's operated. And I think it's important to note that, you know, when you look at the operating cost as, you know, as allocated, it's really important to understand that we're, you know, we're fully burdening the business unit with all of the costs to run at 14 KBD, right? So we've got all the infrastructure, all the tankage, all the storage, all the transportation capacity.

<unk> raised rates appropriately correct.

Unit has run extremely well also as we have been very proud with the way its operated and I think it's important to note that when you look at the the operating cost as as allocated it's really important to understand that were.

We're fully.

Burdening that business unit with all of the cost to run it in 2014 Kvd alright. So we've got all the infrastructure all the tankage all the storage all the transportation capacity.

Speaker 10: barging and so forth that's built for full raid.

Barging and so forth. That's that's built for full rates because we didn't want to wait to build that stuff and then have the unit come up and not be able to run it right. So.

Speaker 10: didn't want to wait to build that stuff and then have the unit come up and not be able to run it, right? So, you know, the capacity is there in its full sense, not just the available of feeds, but ability to manage them, ship them, store them, convert them, load vessels to the West Coast efficiently. But that comes with a lot of cost burden when you're just starting up at these run rates. So, you know, really we've seen RINs collapse meaningfully.

The capacity is there and its full sense not just the available of seeds, but ability to manage them ship them store them convert them.

Loads vessels to the west coast efficiently.

But that comes with a lot of cost burden when you're when you're just starting out that these run rate. So.

It really we've you've seen rins collapsed meaningfully.

Speaker 10: and you haven't seen the feed stock prices capitulate to that repricing yet. We believe that is coming. It started, it started in this quarter certainly. But as we see those come in the equilibrium, we'll use that opportunity to buy in feeds profitably and ramp rates appropriately.

And you haven't seen the.

Feedstock prices capitulate to that re pricing yet we believe that it's coming it started it started in this quarter certainly.

But as we see those come into equilibrium.

Use that opportunity to buy in feeds profitably and ramp rates appropriately.

Speaker 14: Yeah, I was going to ask you about that.

Yes.

I was going to ask you about that.

Speaker 14: as well. So the $4.78 per barrel renewable gross margins.

So the $4.78 per barrel.

Renewable gross margins.

Speaker 14: Do they include any impact or benefit of REN? And also, if that is a positive number and if your OPEX is being distributed over a smaller generation or yield.

Do they include any impact of.

For the benefit of Remy.

And also if that is a positive number and if your opex is.

Being distributed order is smaller.

Generation.

Yield.

Speaker 14: Does it not make sense to increase to full capacity so that you have lower...

Does it not make sense too.

Increases.

Mike.

Full capacity, so that you have lower.

Thanks.

Speaker 14: Over all of it distributed to that unit.

Overall, often distributed to that unit.

Speaker 5: Yeah, so looking at the 478, it does include the RIN. However, it does not include the LCFS credit that Doug mentioned earlier that we expect to get.

Yes, so looking at the 478. It does include the Ren However, it does not include the Lcs best credit that Doug mentioned earlier that we expect to get.

Speaker 5: Hopefully we'll get an MQ1 and then it is retroact.

Hopefully we will get it in Q1 and then it is retroactive to Q3 and Q4.

Speaker 14: And then this last question on slide 16 under asset utilization, the last bullet says vertically integrate from feed stock to retail products. What is this related to which asset does it talk about?

Okay and then just last question on slide 16.

Under asset utilization the last bullet teams working fully integrated from feedstock to retail products what does this do.

We need to which asset dogma.

That's.

That's really integrating those.

Speaker 10: entire supply chain for renewables all the way through our our system. In the old right. So, you know, we're not,

The entire supply chain for renewables, all the way through our renewable right.

We're not.

Speaker 10: You know, we're going back to origin on our feeds as you go to lower carbon intensity feeds, that's now required by the EPA.

We're going back to origin on our feeds.

As you go to a lower carbon intensity feeds that's now required by the EPA to actually document every individual origin and Hugo as an example, you've got to know the exact restaurant it came from.

Speaker 10: actually document every individual origin.

Speaker 10: You go as an example, you got to know the exact restaurant it came from in order to fully qualify and be fully auditable on your...

In order to fully qualify in and be fully audible on your origins.

Test your carbon intensity.

Speaker 10: So, it really is a different.

Outcomes right. So it really is a different type of supply chain than what you have as an example with crude oil.

Speaker 10: type of supply chain, then what you have as an example with crude oil, running through the conventional refinery. And then I guess when you're looking at the other end, it also requires us to get access to the consumer market in California, which we're doing with our partner in the mid-2. So if we didn't have a secure partner that had...

Running through the conventional refinery.

And then I guess when Youre looking at the other end. It also requires us to get access to the consumer market in California, which we're doing with our partner Mitsui. So.

If we didn't have a <unk>.

<unk> partner that had the tanks and the rack truck racks in the finished product marketing actually in that market, particularly as other production comes online.

Speaker 10: tanks and the truck racks and the finished product marketing actually in that market, particularly as other production comes online, you know, you could run the risk of getting squeezed out of that retail market and lose access to that additional credit regime. So it's really important that we address it on both ends.

You could run the risk of getting squeezed out of that out of that retail market.

And lose access to that additional credit regime. So it's really important that we address it on both ends and that we've got a supply chain that can reach back to specific origins on the feedstock side and make sure that we can land that product and the highest netback markets and access that that end use market.

Speaker 10: and that we've got a supply chain that can reach back to specific origins on the feedstock side and make sure that we can land that product in the highest net back markets and access that end use market through both from an infrastructure and marketing standpoint.

Through both from an infrastructure and marketing standpoint.

Understood great.

Thanks for that.

Good luck.

Thank you Samir.

Speaker 13: Jason Gableman with TD Cowen. Your line is open. Hey, good morning. Thanks for taking my questions.

Jason <unk> with TD Cowen Your line is open.

Hey, good morning, Thanks for taking my questions.

Good morning, I wanted to just.

Speaker 13: Clarify a point you just made about receiving LCFS credit value. And I think I heard one cue just now in the press release. It says.

Clarify a point you just made about receiving.

CFS credit and value and I think I heard one Q just now in the press release, it says that youll receive credit for Q. So just wanted to clarify that and I was wondering if.

Speaker 13: that you'll receive credit in 4Q. So I just wanted to clarify that. And I was wondering if...

Speaker 13: the value you capture is based on LCFS credit prices at the time the volume was produced or at the time you're actually crediting yourself with the LCFS values.

<unk> value you.

Capture is based on.

Oh, So you have credit prices at the time the volume was produced.

Or at the time Youre actually.

Crediting yourself with the DFS values.

Speaker 5: Hey, Jay, Chris here. Yeah, I guess to tackle the statement on the LCFS credit, we expect to receive the credit for Q3 and Q4. My expectation is the cash that, you know, when we receive the cash, will be sometime in Q4, Q1.

Hey, Jason Chris here, Yes, yes to tackle the statement on the LCM best credit, we expect to receive the credit for Q3 and Q4.

My expectation is that cash that when we received the cash will be some timing Q4 Q1.

Speaker 5: who knows when we will get it exactly as we're dealing with government agencies and timing. That's kind of where that stands.

Yes, who knows when we will get it exactly as we are dealing with government.

Government agencies and timing.

So that's kind of where that stands at the moment, yes.

Yes, just to be clear the.

Speaker 10: The filing for the credits is always the following quarter. So, you know, we'll file force course.

The filing for the credits is always the following quarter.

We will file fourth quarter.

Speaker 10: and imports in the California that was produced in third quarter. So you're always a quarter trailing.

Production.

And imports into California that was produced in third quarter, Alright, So youre always a quarter trailing.

Speaker 10: And the commercial value of those credits depends on how you're executing those transactions with your partner. So when they're actually...

And the commercial value of those credits it depends on how you are executing those transactions with your partner so when they are actually.

Speaker 10: put in the credit bank and monetize and the terms of which that's done and the price at which that's done is gonna be unique to every party that you talk to depending on their commercial arrangements with the importer of record in the game.

Put into credit bank, and monetize and the terms of which that's done and the price at which that's done is it's going to be unique to every party that you talk to depending on their commercial arrangements with with the importer of record into California, which for US is that a necessity.

Speaker 13: Got it. And then in terms of how much value you're going to generate, if we look at some of the indicator margins of your peers, they suggest the value they get is 0.007 times the LTFS credit price. Is that kind of a ballpark of what we should expect to see reflected in vertexes earnings?

Got it.

And then in terms of how much value you're going to generate if we look at some of the indicator margins of your peers that you suggest.

Value they get his 0.007 times the ALJ adverse credit credit prices that has that kind of a ballpark of what we should expect to see reflected.

Vertex is earnings.

Speaker 10: I haven't done the math that way, but I think the way we think about it is, we've got to, on the temporary pathway.

Yeah, I haven't done the math that way, but I think the way we think about it is we've got a.

On the temporary pathway.

Speaker 10: For the third and fourth quarter production, which is at a CI value of 65 and 45, depending on whether your plant based or waste based. You know that translates into a kind of a sense for gallon value for us. On the Finland product.

For the third and fourth quarter production, which is at a ci value of $65 45, depending on whether you are plant based or waste space.

That translates into kind of a cents per gallon value for us.

Alex.

Speaker 10: You know, obviously that's just the starting point. It's helpful. I think, Chris, we have an estimate of that at 8 million for the third and fourth quarter.

Obviously, that's just the starting point it's helpful. I think Chris we have an estimate of that.

Of that $8 million for the third and fourth quarter coming in yes combined.

Speaker 10: So that's round math, how that will work out. I think the way to forecast it going forward, so you speak to others in industry, I don't know where they're at on their kind of CI journey, if you would. So the value will increase as the carbon intensity goes down and you generate.

So thats round map out that will work out I think.

The way to forecast it going forward. So can you speak to others in industry I don't know where they are add on there kind of Ci journey. If you would so the value will increase as the carbon intensity goes down and you generate.

Speaker 10: additional credits under the LCFS regime. So.

Additional credits under the LCR Thats regime. So.

Speaker 10: you know, we believe that, you know, our focus right now is getting on the specific pathways.

We believe that our focus right now is getting on the specific pathway. So it's a pretty complicated process, but you move from the temporaries to what's called Provisional.

Speaker 10: Pretty complicated process but you move from the temporaries to what's called provisional. So now we'll file our provisional pathways which are based on our proprietary production right so it's the exact carbon intensity as calculated under their carbon intensity models that you use for CARB on our actual production for each actual feed.

So now we'll file our provisional pathways, which are based on our proprietary production right. So it's the exact carbon intensity.

As calculated under there.

Carbon intensity models that you used for car on our actual production for each actual feedstock.

Speaker 10: Um, but even for, and the reason I say that is even for soybean oil.

But even for <unk>.

The reason I say that is even for soybean oil.

Speaker 10: typically much better than the default value.

It's typically much better than the default value.

Speaker 10: use your actual production values and you're running an efficient facility, which we expect that we are. So it's not just the feedstock mix, it's even the carbon intensity values that you're producing at on your conventional feeds as well. So it's going to be beneficial across our feedstock mix in its entirety, not just for the DCOs and tallows, the waste products.

If you use your actual production values and you are running an efficient facility, which we expected that we are.

So it's not just the the feedstock mix, it's even the carbon intensity values that youre producing at on your conventional feeds as well so it's going to be it's going to be beneficial across our feedstock mix and its entirety.

Just for the <unk> and the waste products.

Speaker 13: Great. And then my last one of my good squeeze and other one in was just kind of, I wanted to get your sense on the market outlook for renewable diesel, especially in light of vertex conducting.

Yeah.

Great and then my last one if I can squeeze another one in was just.

I wanted to get your sense on the market outlook for our renewable diesel, especially.

And in light of vertex conducting.

Speaker 13: the process that you are in terms of monetizing or increasing kind of the value you're getting for the project. I think a lot of investors are concerned about a potential.

The process that you are.

In terms of monetizing or increasing kind of the value you're getting for the project.

I think a lot of investors are concerned about a potential oversupply next year.

Speaker 13: over supply next year of renewable diesel and pressure on rent prices. There's been some volatility in the rent prices recently. Just wanted to get a sense of your market outlook for the next 12 months and how you think that impacts at all this process that you're running. And I'll leave it there. Thanks.

Of renewable diesel and pressure on RIN prices, there's been some volatility in the Rins prices recently, just wanted to get a sense of your market outlook for the next 12 months and how you think that impacts at all this process that you're running and I'll leave it there. Thanks.

Yes, I think we are.

I mean, we.

Speaker 10: We don't materially differ from that, you know, the challenging outlook that we see. I mean, Rins are friends have come off, you know, almost 50%.

We don't materially differ from that the challenging outlook that we see I mean <unk> or <unk>.

<unk> have come off almost 50%.

Speaker 10: You know, that's obviously very favorable to our conventional business, but it's a headwind for the renewable business.

That's obviously very favorable to our conventional business, but it is a headwind for the renewable business.

Speaker 10: We do actually like the fact that we are more balanced now and have that opportunity to meet our obligation. But really, you know, the

We do actually like the fact that we are more balanced now and have that opportunity to meet our obligation.

But really.

Speaker 10: Anticipation of those margins depends on how fast the feedstocks react to the new margin environment, right? So as Rins goes, if you look historically, since 2016 all the way back to when RD really started to scale, you've got these medium periods of volatility where...

The anticipation of those margins depends on how fast the feedstocks react to the to the new margin environment right. So.

As <unk>, if you look historically since 2016, all the way back to when <unk> really started to scale.

You've got these medium periods of volatility where.

Speaker 10: you know, Rins go up, LTFS goes up, Pete sucks go up, Rins go down, LTFS goes down, Pete sucks go down, but they don't do it in perfect timing. So, you know, I think our outlook fundamentally for 24 is going to depend on, you know, how fast does the RD capacity ramp in comparison to how fast the crushed capacity on the Pete sucks ramp?

Extreme Rens go up <unk> feedstocks go up Rins go downhill CFS goes down feedstocks go down, but they don't do it and perfect timing so.

I think our outlook fundamentally for 'twenty four is going to depend on.

How fast is the Rd capacity ramp in comparison to how fast that crush capacity on the feedstocks ramps and you know we.

Speaker 10: We don't pretend to have a crystal ball on that, but we do see tremendous feeds that capacity under development. You know, in our meetings with suppliers, there's a lot of new crush and refining capacity coming online. And there's also a massive influx of imports that the US has never seen before, because you know, with these credit regimes, we're now pulling feeds from the entire planet into the US. At accelerating rates. So, you know, that's the push and pull. Obviously, as the production is ramped, you know, the...

We don't pretend to have a crystal ball on that.

But we do see tremendous feedstock capacity under development.

In our meetings with suppliers there is a lot of new crush in refining capacity coming online and there is also a massive influx of imports that the U S has never seen before because.

These credit regimes, we're now pulling feeds from the entire planet into the U S.

And that accelerating rates so.

That's the that's the push and pull obviously as the production has ramped.

Speaker 10: government programs, quote, frankly, have worked, right, because they've created the production and they've continued to scale, but they have come off as that production ramps up. We're very focused on 2025 in terms of running the process. You know, that's when...

The government programs.

Frankly have worked right because <unk>.

Created the production and they've continued to scale.

But they have come off as that production ramps up.

We're very focused on 2025 in terms of running the process.

Speaker 10: Really, our unit is at full capacity, right? So, you know, we're focused on.

That's one.

Really our unit is at full capacity right. So we're focused on.

Speaker 10: The margin environment further out where, you know, once the LCFS program is kind of, quote, reset, you know, they publish their guidance for that. It's a 75 page, you know.

The margin environment further out where.

Once the El CFS program is kind of quote reset they published their guidance for that it's 75 pages.

Okay.

Speaker 10: that acted on early next year, which basically puts the glide path in place for California to fully convert. So we're, you know, that builds a lot of confidence on our side that puts kind of a floor under the market, continues to pull those products into California for conversion, you know, from conventional to renewable and, you know, create the margin.

See that acted on early next year.

Which basically puts the glide path in place for California to fully convert.

So we're.

That builds a lot of confidence on our side that puts kind of a floor under the market.

Continues to pull those products into California for conversion.

From conventional to renewable.

And create the margin.

Environment long term for that to be so so.

Speaker 10: So, you know, that's our focus, you know, from a process standpoint is to have a.

That's our focus from a process standpoint as.

Have a.

Speaker 10: very low cost capacity RD facility at 14 KVD that is speak duct flexible and is continued to...

Very low cost capacity R&D facility at 14 Kvd that.

As feedstock flexible and has continued to.

Speaker 10: improve its carbon intensity quarter over quarter over quarter, both in terms of the feedstock selection and our operating efficiency.

Improve its carbon intensity quarter over quarter over quarter, both in terms of the feedstock selection and our operating efficiency. So we believe that's what 'twenty four is about for us and that that provides a tremendous opportunity for our partner to get involved with us in the business as we position that facility for a long term run.

Speaker 13: We believe that's what 24 is about for us and that that provides a tremendous opportunity for a partner to get involved with us in the business as we position that facility for a long term run. You

Got it thanks, a lot for the color.

Our final question comes from the line of Brian Butler with Stifel. Your line is open.

Hey, good morning, Thank you for fitting me in.

Speaker 15: Quick up on the conventional piece, based on the midpoint kind of your outlook for the fourth quarter, at current prices, what would the gross margin on the conventional and the EBITDAB be? Assuming, again, pricing doesn't change from where we're at.

Quick on the conventional piece based on the midpoint kind of your outlook for the fourth quarter at current prices what would the gross margin on the conventional and the EBITDA would be.

Assuming again pricing doesn't change from where we're at.

Speaker 5: I'm adding a good question, Brian . I think we're all looking to the markets to kind of see where things land.

Good question, Brian I think we're all looking to the markets to kind of see where things land.

Speaker 5: You know, again, as our guidance has indicated the last two quarters, we're focused on offense per barrel and then cat-back.

You know again as our guidance as indicated in the last two quarters, we're focused on opex per barrel and then capex.

Speaker 5: And then as Ben or as James noted, the yields have dramatically improved. So, you know, I think to focus on the gas, jet and diesel yield, that'll give you your best indicator of where we're gonna land looking at the forward stress.

And then has been or as James noted the yields have dramatically improved so I think to focus on the gas jet and diesel yield that'll give you your best indicator of where we're going to land looking at the forward strip.

Speaker 15: Okay, and then I guess on the hedge piece, how much of that profit have you locked in? Can you give any color on the dollar amount?

Yeah.

Okay, and then I guess on the hedged piece how much of that profit have you locked in can you give any color on that maybe the dollar amount.

Speaker 5: You know, it's hard to say because it's going to move around. You can look to the current filing and at September 30th, I think it was right at 4 million, you know, for the gas hedges. But again, that's going to bounce around through the...

It's hard to say because it is going to move around you can you can look to the current filing and at September 30, I think it was right at $4 million.

For the gas hedges.

But again, that's going to bounce around through the quarter.

Speaker 15: All right, and then looking at the renewable diesel.

Alright, and then looking at the renewable diesel.

At.

Speaker 15: At the current LCFS or the default and the current rent price is...

At the current.

<unk> are the default and the current RIN price.

In.

Speaker 15: Is the renewable diesel profitable at full capacity or do we need to see the feedstock costs come down?

Is the renewable diesel profitable at at full capacity or do you need to do we need to see the feedstock costs come down.

Speaker 10: Yeah, we're I would say marginally profitable on, you know, the current, the current margin structure. Certainly as we now get else the best credit, that's helpful compared to where we're less quarter. So that's, you know, that's pushing us to run, you know, a little greater rate than we would have otherwise. But

Yes.

I would say marginally profitable.

The current the current margin structure.

Certainly as we now get Elsea best credits Thats helpful. February were last quarter. So that's that's pushing us to run.

Greater rate than we than we would have otherwise.

But.

Speaker 10: You know, we really see the, I mean for us the ramp to full rates, you know, we'd need to see if each of us come down in price.

We really see the I mean.

For us to.

Ramped to full rates, we'd need to see feedstocks come down in price.

Speaker 10: and you know, have additional margin opportunities for us.

And.

I have additional margin opportunities for us to.

Speaker 10: that hard. So otherwise we're going to stick to our plan on really optimizing the lower carbon intensity feeds. We have a lot of technical work that we should continue to do within the facility to make sure that again, as we run forward, certainly through 24, but as we get to 25 at full production rates.

So chase it that hard alright, so otherwise, we're going to stick to our our plan on really optimizing the lower carbon intensity seeds. We have a lot of technical work that we continue to do within the facility to make sure that again as we run forward certainly through 'twenty four but as we get to 25 at full production rates that we haven't we haven't left that work.

Speaker 10: that we haven't left that work to do.

Speaker 10: when the Mars environment is there. Right, so, you know, we just have to be disciplined now, get that work done, and make sure that we're in the long-term position to maximize run rates and margin opportunities when they're there.

To do so.

When the margin environment is there right. So we.

We just have to be disciplined now get that work done.

To make sure that we're in in the long term position to maximize run rates and margin opportunities when they are there.

So.

Speaker 10: Yes, there's some incremental margin for barrel. I got the earlier question that, well then why don't you just run it full rates? But that really puts the facility in a tough position when we're trying to optimize different feed to documents on a week over week basis. And as we're doing all the intense data collection, it takes to make sure that we're really optimizing our carbon intensity.

Yes, there is some incremental margin per barrel I got the earlier question that will then why don't you just run at full rates.

But that really puts the facility in a tough position when we're trying to.

Optimize different feedstock blends on a week over week basis, and as we're doing all the intense data collection. It takes to make sure that we're really optimizing our carbon intensity.

Speaker 10: on the facility. So we're going to maintain reasonable rates. Certainly if there was, you know,

Work.

On the facility itself. So we're going to we're going to maintain reasonable rates certainly if there was.

Speaker 10: really attractive margins, then we would ramp rates and run at full rates, but we just haven't seen feedstocks adjust to that cost level where it incentivizes us to do that.

Really attractive margins, then we would ramp rates and running at full rates.

We just haven't seen feedstocks.

Adjusted for that cost level, where it incentivizes us to do that this time.

Speaker 15: Okay, and then one last one, on the feedstock optimization, how much of an carbon intensity improvement or benefit you get from running the other feedstocks over the default? I mean, is it 50% is it 100%? How much of an increase can you see as you put in the new, you know, better lower CI score feedstocks?

Okay, and then one last one on the feedstock optimization how much.

Carbon intensity improvement or benefit you get from.

Running the other feedstocks over the default I mean is it 50% is it a 100% how much of an increase can you see as you put in the new.

Better lower Ci score feedstocks.

Speaker 10: I certainly, you know, compared to the defaults, you know, we'd expect, you know, at least 50% improvement.

Certainly compared to the default, we would expect at least 50% improvement.

Speaker 10: you know, from where your defaults are. So, you know, it's going to be, you know, we don't.

<unk>.

From where youre defaults are so it's going to be.

We don't we.

Speaker 10: We don't know exactly where the soil will land, but if you look at other golf coast processors on their, even the carbon intensity of their soil production versus the D-file of 65, I think many of them are in the, you know, low-pitched.

We don't know exactly like where the soil land, but if you look at other Gulf Coast processors.

On there even the carbon intensity of their soy production versus the default 65, I think many of them are in the low.

<unk>.

Speaker 10: So you pick up, you know, it's not 50 percent on that one. But the overall blend, when you look at much lower...

So you pick up.

About 50% on that one but the overall blend when you look at much lower.

Speaker 10: Carbon intensity values on your tallows and your DCO in particular and then obviously as we as we bring you go to bear All of those are going to going to result in dramatically lower carbon intensity for the for the pool

Carbon intensity values on your <unk> and your Desio in particular, and then obviously as we as we bring you go to bear all of those are going to kind of result in dramatically lower carbon intensity for the pool.

Okay. Thank you very much for taking the questions.

Speaker 1: I will now turn the call back over to the speakers for final comments. Hey, thank you.

I will now turn the call back over to the speakers for final comments.

Alright, Thank you operator.

Speaker 3: Thank you everybody. Before we sign off here, this has been...

Thank you everybody before we sign off here this is Ben.

Speaker 3: I want to express my gratitude to our team once again for their outstanding work this quarter.

I want to express my gratitude to our team once again for their outstanding work this quarter.

Speaker 3: in a dynamic business such as ours, ability and our agility is very crucial.

In a dynamic business, such as ours ability and our agility.

Is very crucial.

Speaker 3: And I'm confident in our team's ability as they have demonstrated over this past quarter. We're gonna head, you know, we will continue to follow the road map we've established.

And I am confident in our team's ability as they have demonstrated.

Over this past quarter moving ahead, we will continue to follow the roadmap we've established.

Speaker 3: We're pleased with the capital investments made in these markets over the past few years. I think we're setting in a very good place as far as capital efficiency.

Pleased with the capital investments made in these markets over the past few years I think we're sitting in a very good place as far as capital efficiency.

Speaker 3: We've laid the groundwork now for renewables, and we've brought together the synergies across our assets.

Which we've laid the groundwork now for our renewables and we brought together the synergies across our assets.

Speaker 3: from feedstock origination to sustainable products being made from our legacy business.

From feedstock origination to sustainable products.

Being made from our legacy business.

Speaker 3: We've enlisted the help of outside experts to model our business over the next five years.

We have enlisted the help of outside experts to model our business over the next five years.

We see good long term value creation.

Speaker 3: We will remain agile and pursue opportunities to deliver our best to our employees and our stakeholders.

We will remain agile and pursue opportunities to deliver our.

So best to our employees and our stakeholders.

We look forward to sharing more as we're able.

Speaker 3: Appreciate everybody taking the time on this call to lean into you know, vertex and what we're doing. And we look forward to our call in the fourth quarter ending. Thanks.

I appreciate everybody taking the time on this call too.

Leaning into vertex and what we're doing and we look forward to our call in the fourth quarter ended thanks.

Speaker 16: Discoly includes today's call. We thank you for your participation. You may now disconnect.

This can lead to today's call. We thank you for your participation you may now disconnect.

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Yes.

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