Q1 2024 Vertex Energy Inc Earnings Call

May 9, 2024

Operator: Hello everyone, and welcome to Vertex Energy Incorporated's 1st Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. If you'd like to ask a question later in the Q&A session, please press star and number one on your telephone keypad. Thank you. I'd like to turn the call over to Chris Galange, Investor Relations Coordinator. You may now begin the call.

Hello, everyone and welcome to protect energy incorporated first 2024 earnings Conference call. Please note that this call is being recorded.

You'd like to ask you a question theater into any session. Please fresh sorry number one on your telephone keypad.

Thank you I'd like to turn the call over to Chris Lynch Investor Relations going to nature, you may not begin to coverage.

Christopher Carlson: Thank you, operator. Good morning, everyone, and welcome to Vertex Energy's first quarter 2024 conference. On the call today are Chairman and CEO Ben Cowart, Chief Financial Officer Chris Carlson, Chief Operating Officer James Rhame, Chief Strategy Officer Alvaro Ruiz, and Chief Commercial Officer Doug Huff. 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.

Christopher Carlson: Thank you all.

Christopher Carlson: Welcome to <unk> first quarter 40, 44 conference call on the call today are terrible.

Christopher Carlson: <unk> Chief Financial Officer, Chris Carlson.

Christopher Carlson: Operating officer.

Christopher Carlson: Jamie strategy Officer.

Christopher Carlson: And cheap commercial officer.

Christopher Carlson: I want to remind you that managers commentary and responses to questions on today's conference call.

Christopher Carlson: Looking statements, which by their nature are uncertain.

Christopher Carlson: Companies control.

Christopher Carlson: Savings are based on management.

Christopher Carlson: Actual results may differ Missouri.

Christopher Carlson: For a discussion with some of the risk factors that could cause the actual results window for please.

Christopher Carlson: As opposed to the risk factor selection.

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Christopher Carlson: D C.

Speaker Change: Definitely please.

Christopher Carlson: And finally reconciliation for the historical willing to give up financial measures.

Christopher Carlson: The press release issued.

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Christopher Carlson: Today.

Christopher Carlson: That was followed by an operational review from James Ray.

Christopher Carlson: Naturally getting from Chris Carlson.

Christopher Carlson: Emotional strategy.

Christopher Carlson: At the conclusion of Venus prepared and emerged we will open the lines of questions with that I'll turn the call over to that.

Christopher Carlson: Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the risk factors that could cause actual results to differ, please refer to the risk factors section of Vertex Energy's latest annual report.

Christopher Carlson: and Jordan McFarland with the FGC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. Today's call will begin with a statement from Ben Cowart, followed by an operational review from James Rhame, a financial review from Chris Carlson, and a review of our commercial strategy by Doug Haugh. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Ben.

James Gary Rhame: Thank you and good morning.

Speaker Change: Tell them to call today.

Benjamin P. Cowart: Thank you, Chris, and good morning to those joining us on the call today. We had better than expected operational results as we maintained our commitment to operating safely and reliably. From a financial perspective, the first quarter saw significant improvements supported by improved crack spreads. We generated almost $20 million in adjusted EBITDA, an increase of over $50 million quarter-over-quarter.

Christopher Carlson: We had better than expected operation results as we maintained our commitment to operating safely and reliably.

Speaker Change: From a financial perspective, the first quarter saw significant improvements supported by improved cracks branch.

Speaker Change: It almost 20 million and adjusted EBITDA.

Speaker Change: Greece of over 50 million quarter over quarter.

Benjamin P. Cowart: Additionally, we saw conventional throughput above our guidance and managed direct operating costs and capital expenditures below our guidance. Over the past few years, we have made material advancements and strategic decisions to grow Vertex. For the past two years, we have operated very safely and reliably while investing capital in upgrading the mobile refinery. We built in flexibility in our capital spend to allow us to redeploy our renewable equipment back into conventional production.

Speaker Change: Additionally, we saw a conventional three but above our guidance and managed to write the operating costs and capital expenditures below her again.

Speaker Change: Over the past few years, we've made material advancements in strategic decisions to grow vertex for.

Speaker Change: For the past few years, we have operated very safely and reliably while invest in capital into upgrading the mobile refinery.

Speaker Change: We built in flexibility and our capital span to allow us to redeploy our renewable equipment back into conventional production.

Speaker Change: Strategy required adjustment.

Benjamin P. Cowart: If our strategy required to just, These are the significant macro headwinds for renewables over the past 12 months, many of which we believe will continue to occur over the next 18 months and beyond. We have decided to strategically pause our renewable diesel business and pivot to producing conventional fuels from the hydrocracker unit.

Speaker Change: Significant macro headwinds for renewables over the past 12 months, many of which we believe will continue to occur over the next 18 months and beyond we have decided to strategically pauls a renewable digital business in Tibet to producing convention appeals from the hazard Gregory unit.

Benjamin P. Cowart: We plan to reconfigure the hydrocracker in conjunction with a planned turnaround on the unit. When modeling the unit in conventional service against first quarter 2024 historical data, we estimate the unit could have significantly improved our results, providing an additional fuel gross margin contribution of roughly $40 million on conventional fuels. On the call today, my team and I plan to update you on the financial and operating results for the first quarter of 2024 and go into our plans around the Renewable Business Paws and PIP. I want to start by thanking my team.

Speaker Change: We plan to reconfigure the hydrocracker in conjunction with a plan turn around on the unit.

Speaker Change: When modeling to urinate in conventional service against first quarter of 2024 historical data, we estimate again it could have significantly improved our results providing an additional fuel gross margin contribution of roughly 40, Megan unconventional fuels.

Speaker Change: I'm Gonna call today, the team in that plan to update you on the financial and operating results for the first quarter of 2024 and go into our plans around.

Speaker Change: Normal business Paul's and pivot.

Speaker Change: I Wanna start by thank you my team.

Benjamin P. Cowart: All the employees listening on the call today for the good work they have accomplished thus far in 2024. As James will note shortly, our safety track record is commendable, and we have more work ahead of us to convert to all conventional feedstock, which we want to do safely because our people are our most valuable asset. With that, I'll now hand the call over to James. Thank you, Ben. Good morning, everyone.

Speaker Change: The employees listening in on the call today for the good work.

Speaker Change: Accomplished thus far in 2024.

Speaker Change: His jangled out shortly our site to track record is commendable and we have more work ahead of us to convert.

Speaker Change: All conventional feedstock, which we wanted to do safely because our people are our most valuable asset.

Speaker Change: Now hand to call over to James.

James Gary Rhame: We continue to believe that our people and their safety are of the utmost importance, which is why I like to start talking about our health, safety, and environmental performance. We're proud to say that the first quarter of 2024 was another clean quarter with zero OSHA recordable injuries. In fact, we've now operated for two years at the Mobile site without a reportable injury. However, we did have one minor environmental noncompliance at the Mobile site associated with the planned small unit turnaround executed during the first quarter. Additionally, Mobile saw zero process safety events, continuing its streak of outstanding HSE performance at the site.

James Gary Rhame: Thank you been good morning, everyone. We continue to believe that our people and their safety or.

James Gary Rhame: <unk>, which is one I'd like to start talking about her.

James Gary Rhame: Environmental performance.

James Gary Rhame: We're proud to say that in the first quarter of 2024 was another thing quarter.

James Gary Rhame: Oh sure it's recordable injuries.

James Gary Rhame: In fact with now operated for two years at the mobile site.

James Gary Rhame: We did have one minor environmental noncompliance at the mobile site associated.

James Gary Rhame: Small units turnaround executed during the first quarter.

James Gary Rhame: Additionally, <unk> zero process safety events.

James Gary Rhame: Streak of outstanding HSE performance at the site.

James Gary Rhame: I want to commend our employees at every location for continually prioritizing the safety-first mentality of our entire organization. The effort and care for each other seen across the entire business is a testament to the dedication of both employees and contract partners working within our facilities. Our legacy operations overall had a good quarter, with Morero performing better than budget on volume in March. This is an accomplishment of continuous improvement in operating performance by the Morero team.

Speaker Change: I wanted to command our employees at every location for continual prioritizing the safety first mentality.

Speaker Change: Entire organization.

Speaker Change: Yep and care for each other seeing across the entire business is a testament to the dedication.

Speaker Change: <unk> and contract partners.

Speaker Change: Within our facility.

Speaker Change: Our legacy operations overall, good quarter with no railroad performing better than budget on volume in March.

Speaker Change: This is an accomplishment of continuous improvement in operating performance by the morality.

James Gary Rhame: Our team at the Mobile site demonstrated strong operational performance of the conventional facility during the quarter with average throughput volumes of 64,065 barrels per day for capacity utilization of 85%, which was above the high end of our guidance at 63,000 barrels per day. The higher volumes compared to guidance are primarily due to stronger capacity utilization and getting a crew unit back from cleaning ahead of schedule. Total opex per barrel for the first quarter was also below the low end of our prior guidance at $4.10 per barrel and reflects the increasing cost efficiency gained from smooth operations which more than offset the inflationary impact of lower throughput volumes on a cost per barrel basis. Our conventional fuels gross margin per barrel during the quarter rose significantly to $12.63 compared to $4.79 in the fourth quarter.

Speaker Change: Our T mobile sign demonstrated strong operational performance of the conventional facility during the quarter.

Speaker Change: With average throughput volumes of 64065 barrels per day for capacity utilization of 85%, which was about the high end of our guidance at 63000 barrels per day.

Speaker Change: Higher volumes compared to guidance are primarily due to stronger capacity utilization and getting a cruise minutes back from cleaning ahead of schedule.

Speaker Change: Total opex per barrel for the first quarter was also below the low end of our prior guidance at $4.10 per barrel and reflects the increasing cost efficiency gain from smoothed operations with some more than offset the inflationary impact of lower throughput volumes and of course the whole basis.

Speaker Change: Our conventional fuels gross margin per barrel during the quarter rose significantly.

Speaker Change: Dollars and 63 cents compared to $4.79 in the fourth quarter.

James Gary Rhame: Our finished products, such as gasoline, diesel, and jet fuel, accounted for 64% of our total product yield during the first quarter of 2024, in line with our previous guide. In the first quarter, we had a planned small turnaround of one of the reformers during a pit stop of the number one crew unit in March. Following these successful maintenance events in March, the mobile facility is poised to operate at full rates during the second bird quarter, coinciding with an expected rise in demand during the driving season.

Speaker Change: Finished products such as gasoline and diesel.

Speaker Change: <unk> accounted for 64%.

Speaker Change: Total product during the first quarter of 2024.

Speaker Change: In line with our previous guidance.

Speaker Change: And the first quarter, we had a plan small turnaround of one of the reform and a good start with a number one crude email in March.

Speaker Change: The successful maintenance advanced in March.

Speaker Change: Facility is poised to operate at full rates during the second and third quarters.

Speaker Change: Added with an expected rise in demand over the driving season.

James Gary Rhame: Now turning to our renewable fuels. Vertex Renewable Diesel Plant, Operator Smooth, generating total renewable fuels gross market barrel at $10.29 for the quarter. Our renewables throughput volumes average 4,090 barrels per day for a capacity utilization of 51%, in line with our recently updated guide.

Speaker Change: Now I'm turning into a renewable fuels business.

Speaker Change: Text <unk> diesel plant operating smoothly generating total renewable fuels gross margin per barrel at $10.29 for the quarter.

Speaker Change: Are you able to sleep with volumes averaged 4090 barrels per day.

Speaker Change: <unk> a 51%.

Speaker Change: With a recently updated guidance.

James Gary Rhame: During the second quarter of 2024, in line with our pause and pivot strategy, we are pausing renewable fuels production and redirecting the hydrocracking unit to conventional fuels and products. Additionally, we had a previously planned catalyst and maintenance turnaround scheduled again later this year for our viewables business. We will now use the planned turnaround to load a conventional catalyst and transition the unit back to conventional fuel service. This Hotter Crocker unit is one of the most valuable physical assets, and we have retained the full optionality of this unit through engineering efforts in conjunction with the additional capital investments made.

Speaker Change: During the second quarter of 2024.

Speaker Change: With her paws into that strategy.

Speaker Change: Pausing renewable fuels production and redirecting the hydrocracking unit conventional fuels and products.

Speaker Change: We had a previously planned catalyst of maintenance turnaround scheduled for being later this year for our available business. We will mail you the plan turnaround slowly conventional capitalist.

Speaker Change: <unk> unit back to conventional fuels service.

Speaker Change: <unk> is one of the most valuable physical assets.

Speaker Change: Before Optionality of this unit three engineering efforts.

Speaker Change: <unk> with the additional capital investments.

James Gary Rhame: There will be a transition period as we can reconfigure the unit and prepare it to run conventional feedstock. We're targeting startup conditional service prior to the end of the year. Following the unit startup, we expect to utilize it to further refine our existing DGO stream to an upgraded conventional product. We are optimistic that the timing of the unit coming on stream will benefit from seasonal market shifts, where gasoline prices dip during the winter while diesel sees a premium due to increased heating over demand.

Speaker Change: There will be a transition period as we can reconfigure units and prepare to unconventional.

Speaker Change: We are targeting startup an additional service prior to the end of the year.

Speaker Change: We expect to utilize it further refine our existing D. G O stream too I'm upgrading conventional products.

Speaker Change: We are optimistic that the timing of the unit coming on stream.

Speaker Change: Some seasonal market shifts where typically.

Speaker Change: Absolutely and prices.

Speaker Change: The winter.

Speaker Change: Diesel sees a premium due to increased bleeding or demand.

James Gary Rhame: We'll continue to watch Curtis closely as we work through this bus. I will now turn the call over to Chief Financial Officer Chris Carlson for a review of the company's financial results and additional details regarding our financial and operating outlook for the second quarter of 2024.

Speaker Change: We'll continue to watch curves closely.

Speaker Change: This process.

Speaker Change: Now turn the call over Chief Financial Officer, Chris calls.

Chris: To review the company's financial results.

Chris: <unk> details regarding our financial and operating outlet for the second quarter 2024.

Christopher Carlson: Thank you, James, and welcome to those joining us on the call today.

Chris: Thank you James.

Chris: Welcome to those joining us on the call today.

Christopher Carlson: Our focus continues to be on managing our...

Chris: Focus continues to be managing our balance sheet and liquidity.

Christopher Carlson: As Ben and James have outlined, our strategic decision to pause and pivot RD production is aimed at significantly enhancing this effort over the near term. By stopping losses associated with renewable diesel production and adding available margin through upgrading VGO to a higher-margin conventional product.

Chris: James.

Chris: Our strategic decision for Paul Tibbets Rd production.

Chris: Significantly in hand in this effort over the near term.

Chris: By stopping losses associated with renewable digital production and adding available margin.

Chris: Upgrading D G O two at higher margin conventional products.

Christopher Carlson: We anticipate, based on near and mid-term macro pricing, that we will be able to materially generate additional cash flow, allowing us greater financial flexibility and improving our balance sheet. Turning now to our financial results, we are very pleased to see improvement across the board, driven by stronger practices.

Chris: Based on an ear and midterm macaroni pricing that we will be able to materially generate additional cash flow, allowing us greater financial flexibility and improving our balance sheet.

Christopher Carlson: Vertex reported a net loss attributable to the company of $17.7 million for the first quarter of 2020. This compares to a net loss of $63.9 million in the fourth quarter of 2023. We saw a $53 million improvement in our total adjusted EBITDA from a loss of $35.1 million in the fourth quarter to $18.6 million for the first quarter of 2024. During the quarter, we incurred a $15 million impact on cash flows, mostly as a result of the CapEx of $15 million spent during the quarter. We saw a decrease in cash from operating activities, offset by an increase in financing.

Speaker Change: Turning now to our financial results.

Speaker Change: We are very pleased to see improvement across the board driven by a stronger crack spreads.

Speaker Change: Vertex reported a net loss attributable to the company 17.7 million for the first quarter of 2024.

Speaker Change: <unk> joined net loss of $63.9 million.

Speaker Change: Quarter of 2023.

Speaker Change: 553 million dollar improvements.

Speaker Change: Total adjusted EBITDA from a loss of $35.1 million in the fourth.

Speaker Change: Four 218.6 million for the first quarter of 2024.

Chris: During the quarter, we named her.

Chris: 15 million dollar impact in cash flows mostly as a result of the cab.

Chris: During the call.

Chris: <unk>.

Chris: We saw a decrease in cash from operating activities offset by an increase in financing activities.

Christopher Carlson: Total capital expenditures for the first quarter of 2024 were $15 million, 29% below our prior estimate.

Chris: Total capital expenditures for the first quarter in 2024 $15 million, 29% below our prior guidance issued on February 28th.

Christopher Carlson: Fire Guns were issued on February 28th.

Christopher Carlson: reflecting a deliberate preservation of capital achieved via a deferral of certain discretionary capital expenditures. This primarily includes a realignment of planned capital expenditures for the Renewable System. Turning to the balance sheet, as of March 31st, 2024, the company had total cash and equivalents, including restricted cash of $65.7 million, and total net debt outstanding of $218.5 million, at the end of the first quarter of 2024, including lease obligations of $68.1 million.

Chris: <unk> and deliberate preservation of capital achieved.

Chris: Borough of certain discretionary capital expenditures. This primarily includes a realignment plan <unk> for the renewables business.

Chris: Turning to the balance sheet.

Chris: March 31st 2024, the company had total cash and equivalents, including restricted cash.

Chris: 55.7 million.

Chris: Total net outstanding of $218.5 million at the end of the first quarter between 2004.

Chris: <unk> lease obligations of $68.1 million.

Christopher Carlson: We continuously monitor the current market...

Chris: We continuously monitoring current market conditions and obsess.

Christopher Carlson: We will review market conditions and assess our expected cash generation and liquidity needs using the current forward crack spreads available. Weakening crack spreads indicate a continued need for proactively managing our liquidity position. As I stated, we believe that our strategic redirection for renewables will help our financial position. Given current market conditions, we are pursuing strategic financing opportunities to improve our balance sheet. Looking to the second quarter of 2024, we anticipate total conventional throughput volumes at Mobile to be between 68,000 and 72,000 barrels per day. Our expected yield of conventional products is expected to consist of between 64% to 68% high-value finished products.

Chris: Are expected cash generation and liquidity needs evening, the current forward crack spreads available.

Chris: Weakening crack spreads indicate a continued need for proactively managing our liquidity position.

Chris: As I stated, we believe that our strategic redirection for renewables will help our financial position.

Chris: As in current market conditions.

Chris: Strategic financing opportunities to improve our balance sheet.

Chris: Looking to the second quarter of 2024, we anticipate total conventional throughput volumes have mobile.

Chris: 68070, 2000 barrels per day.

Chris: Are expected yield a conventional products is expected to consist of between 64% to six.

Chris: Eight per cent.

Chris: Finished products expensive gasoline.

Chris: Gasoline and diesel and jet fuel with the balance in the media and other products such as V. G O.

Christopher Carlson: with a balance in intermediate and other products, such as VGO. On the renewable side of the business, we are running our remaining inventories of renewable pieces, which we believe will improve our working capital and margins for the second quarter, once the renewable feedstock has diminished.

Chris: They were normal style new business, we are running our remaining inventories of renewable feedstocks, which we believe will improve our working capital and margins for the second quarter.

Chris: Once the renewable feedstock has diminished.

Christopher Carlson: We will use a previously planned catalyst and maintenance turnaround scheduled for 2024 to load conventional catalyst and bring the unit out of turnaround into conventional service. The total cost of about $10 million was previously budgeted as part of the planned catalyst and maintenance turnaround and does not represent a material change to our forecasted capital spend. Anticipated OPEX per barrel, encompassing both conventional and renewable spindles, on a fully consolidated basis, is projected to range between $4.11 and $4.46 for the quarter.

Chris: Previously planned catalyst and maintenance turnaround scheduled for 2024.

Chris: Conventional catalyst in bringing out a turnaround.

Chris: Turnaround.

Chris: Conventional service.

Chris: The total cost of about 10 million was previously budgeted as part of the plan catalyst and maintenance turnaround.

Chris: It does not represent a material change to our forecast in capitals.

Chris: Anticipated opex per barrel encompassing both conventional and renewable spin nurses on a fully consolidated basis.

Chris: Projected to range between $4.11.

Chris: 446 for the quarter.

Christopher Carlson: We anticipate total capital expenditures for the second quarter to be between $20 million and $25 million, which includes a portion of the $10 million conversion cost. I'd now like to turn the call over to Chief Commercial Officer Doug Haugh.

Chris: We anticipate total capital expenditures for the second quarter to be between $20 million to $25 million, which includes a portion of the 10 million conversion costs.

Speaker Change: I'd now like to turn the call to achieve commercial officer and a diet coke.

Chris: Thanks, Chris.

Douglas S. Haugh: as Ben and James shared earlier, we are planning to pause renewable energy production. Optimizing our Hydrocracking Asset to Be Utilized in Upgrading Conventional Products. Our team has done an incredible job in terms of running and managing the unit in its renewable service. I'm exceptionally proud of the work they achieved in building a supply base and securing approvals for lower carbon intensity pathways. The work done in developing these feedstock pathways not only deepens the proven capabilities of the asset in renewable service, but it also paves the way for potential future benefits. Should market conditions support a decision to resume renewable energy production?

Speaker Change: That's been a James shared earlier.

Speaker Change: We're planning to pause renewables production.

Speaker Change: Optimizing our hydrocracking asset to visualize in upgrading conventional products.

Speaker Change: Our team has done an incredible job in terms of running and managing the unit in renewable surface.

Speaker Change: I'm exceptionally proud of the work they achieved in building a supply base and securing approvals for lower carbon intensity pathways.

Speaker Change: The work done on developing these feedstock pathways not only deepens the proven capabilities of the asset in renewable service.

Speaker Change: But it also paves the way for potential future benefit.

Speaker Change: Should market conditions support the decision to resume renewables production.

Douglas S. Haugh: Our commercial team has now shifted its focus to supporting this strategic pivot, fulfilling our Current Renewable Commercial Obligations, winding down feedstock positions, and supporting our operational team on the ground. We continue to work closely with customers and suppliers, all of whom have been great partners through this process. We're appreciative of their collaboration and support of this effort.

Speaker Change: Our commercial team has now shifted its focus to supporting the strategic vivid.

Speaker Change: Fulfilling our current renewable commercial obligations.

Speaker Change: [noise] down feedstock physicians and supporting operational team on the ground.

Speaker Change: We continue to work closely with customers and suppliers all of them have been great partners through this process.

Speaker Change: Their collaboration support of this effort.

Douglas S. Haugh: The company continued to advance targeted net back improvement opportunities on conventional and renewable products to bolster profitability, notably completing all pathway approvals for renewable feedstocks and securing a direct offtake of jet fuel produced at the mobile refinery. After tendering and negotiating a new offtake agreement for this jet this spring, we commenced supply for our new customer on April 1st. The transition has been well managed by the operational and commercial team, and this is an important milestone for Vertex, as it is the first of the finished product contracts to roll off our initial off-take agreements inherent in the purchase of the refinery.

Speaker Change: The company continued to advance targeted netback and prudent opportunity in unconventional and renewable products to bolster profitability.

Speaker Change: Bleeding all pathway approvals for renewal feedstocks and securing a direct uptake of jet fuel produced at the mobile refinery.

Speaker Change: After tendering in negotiating a new I'll take agreement for this jet. This spring we commenced apply for a new customer on April 1st.

Speaker Change: Transition has been well managed by the operational in commercial teams.

Speaker Change: And this was an important milestone for vertex as it is the first of the finished product contracts to roll off.

Speaker Change: Sure I'll take agreements inherit upon the purchase of the refinery.

Douglas S. Haugh: We expect our margin uplift on these barrels under our new contract to represent a $10 million improvement over the previous agreement. We have additional agreements approaching expiry over the next year and will be following a similar process with those volumes as we did with the jet volumes and expect to deliver increased value for the company as compared with the existing contract. With that, I'll turn it over to Ben for some closing remarks.

Speaker Change: We expect our margin uplift on these barrels under our new contract to represent a 10 million dollar improvement over the previous agreement.

Speaker Change: We have additional agreements approaching expiry over the next year and will be following a similar process with those volumes as we did with the jet volumes.

Speaker Change: To deliver increased value for the company as compared with the existing contracts.

Speaker Change: With that I'll turn it over to ban for some closing remarks.

Ban: Thank you.

Benjamin P. Cowart: Our team is doing a great job of keeping our operations safe, minimizing risk, and delivering incremental results towards our stated goal. As we navigate the second quarter of 2024, our focus is on managing cash flow during this transitional period. We believe this is the best decision at this time for this asset, as it is not only expected to curtail and stop losses associated with renewable production, but it is also expected to provide additional margin opportunities following successful conversion.

Ban: Our team is doing a great job of keeping our operation safe minimizing risk and delivering incremental results towards our stated goals as we navigate the second quarter of 2024, our focus is on managing cash flow during this transitional period.

Ban: This is the best decision at this time.

Ban: That is it is not only expected to curtail and stop losses associated with renewable production. It is also expected to provide additional margin opportunities following successful conversion.

Benjamin P. Cowart: Given the persisting market volatility and crude pricing, which is impacted by a variety of global factors, we will continue to pursue strategic opportunities and financing pathways that support liquidity needs over the near term. We've done a lot of work proactively restructuring the business to reduce cost and capital and set up systems to manage and monitor cash flow effectively, and we will continue these efforts on an ongoing basis. We've been adamant that our strategic priorities are to increase our cash position, reduce our operating costs, and improve our margin.

Ban: Given the persisting market volatility include pricing, which is impacted by a variety of global factors. We will continue to pursue strategic opportunities in financing pathways that support liquidity needs over the near Denver.

Ban: We've done a lot of work proactively restructuring the business to reduce cost capital and set up systems to manage and monitor cash flow effectively and we will continue these efforts an ongoing basis.

Ban: We have been adamant that our strategic priorities are to increase our cash position reduce our operating costs and improve margins. While we are optimistic about the future of renewables over the long term we fail. This decision to optimize the renewable digital heidrich trader to conventional services not only prudent but.

Benjamin P. Cowart: While we're optimistic about the future of renewables over the long term, we feel this decision to optimize the renewable diesel hydrotreater to conventional service is not only prudent but a necessary step in accomplishing these goals for the remainder of 2024 and into 2025. Thank you. I'll now turn the call over to the operator for questions.

Ban: Necessary step in accomplishing these goals for the remainder of 2024 and in the 20 to 25.

Speaker Change: Thank you I will now turn the call over to the operator for questions.

Operator: We are now opening the floor to questions and answers. If you'd like to ask a question, please press star and number one on your telephone keypad. Our first question comes from Noah Kaye from Oppenheimer. Your line is now open.

Speaker Change: We are now open question and answer session, if you'd like to ask a question. Please press start.

Ban: A number one on your telephone keypad.

Speaker Change: Question comes from Miller.

Ban: Hum.

Speaker Change: New line is now okay.

Noah Duke Kaye: Thanks for taking the questions. Maybe you could just sort of walk us through what's entailed in, you know, doing the conversion of the Hydro Cracker back. I mean, it was in good shape, you know, prior to the RD conversion. Just is there anything that we should be particularly aware of around, you know, the actual mechanics here? Anything that, you know, suggests any kind of risk to kind of getting back to generating what I think you called a materially higher gross profit.

Miller: Thanks for taking my questions, maybe just sort of walk us through what entailed and you know doing the conversion of the hydrocracker back I mean, it was it was it was in good shape.

Miller: Prior prior to the R. D conversion just is there anything that we should be particularly aware of around.

Ban: The actual mechanics here anything that.

Ban: The kind of risks to kind of getting back to generating what do you think should call that would've been materially higher gross profit.

James Gary Rhame: Yeah, thank you, Noah. This is James.

Ban: Yeah.

Ban: This is James thanks for the questions.

James Gary Rhame: Pivot we've got two is Doug described in his opening remarks, we've got to work with our feet suppliers and get all of those out we've been working that and clear that inventory.

James Gary Rhame: Thanks for the question. The pivot, you know, we've got to, as Doug described in his opening remarks, work with our feed suppliers and get all of those out. We've been working on that, and clearing that inventory. And then there are probably two keys.

James Gary Rhame: And then there are probably two keys one of course is getting the different catalysts, Dan and that's got to work and we've got a plan on yet and then finish the permitting.

James Gary Rhame: One, of course, is getting the different catalyst in. And that's got to work, and we've got to plan for it and then finish the permitting. And then with that, we will go through a full management of change, which we're required to do, and make sure we do the engineering and do the construction. We think it's a low-risk activity. We had a small team, but now that we've announced it, we'll be able to get more collaboration and turn the unit back, and we think it'll be a better unit than it was before.

James Gary Rhame: And with that we will go through a full management of change which were required to do and make sure. We do the engineering and do construction. We think it's a low risk activity. We have had a small team, but now that we've announced who've been able to get to be able to get more collaboration and convert the unit back and we think it will be a better unit than it was before.

James Gary Rhame: And just, thank you, and just in terms of the timing, any chance you can put a finer point on the timeline, and, you know, I would expect that this will start to really show up more in 3Q results, but, you know, if you could speak to the timetables you're currently planning.

Speaker Change: And just take your interest in terms of the timing any change you can put a finer point on the timeline and you know I would.

Speaker Change: I would expect that this will start to really show up more than three Q results, but you know if you could speak to to the timetables are currently planning on.

James Gary Rhame: Yeah, so our plan is to get the conversion complete in Q3 and show up fully for Q4. That's the current plan. But as I said, there are two pieces I don't have control of. One is getting the permitting and getting the catalyst, but we have a line on both, and we'll be pursuing both aggressively.

Speaker Change: Yeah. So our plan is to get the conversion complete in Q3 and show up fully for Q4, that's the current plan, but as I said, there's two pieces I don't have control of one is getting a permitting and getting the capitalist but we have a line on both and will be pursuing both aggressive.

Douglas S. Haugh: Okay, I appreciate that. And then just on the hedging, you know, you did undertake some additional sort of hedges here. And can we talk a little bit about hedging going forward? You know, beyond what you did in 1Q, are you going to do additional swaps, or have you already done swaps for the second quarter?

Speaker Change: Okay.

Speaker Change: Right that and then just on you know the hedging you know you did undertake some additional sort of hedges here.

Speaker Change: And.

Speaker Change: Can we talk a little bit about hedging going forward.

Speaker Change: Beyond and what you did and one Q are you are you gonna do additional swaps or have you already done swaps for the second quarter.

Douglas S. Haugh: Yeah, thanks, Doug. Here, there's no, we put no additional positions on since those hedges rolled, you know, strategically, we would look to repeat if possible. What we will do is take our approach from last year. So if we see a late summer run on gasoline cracks into the winter, then we would we would look to capture some of that and head it off. And, you know, we have no idea whether we'll get that opportunity or not.

Speaker Change: Yeah. Thanks.

Speaker Change: Doug here, there's no we've put no additional positions on since those edges rolls.

Speaker Change:

Doug: Strategically we would look to repeat if possible.

Speaker Change: What we are approached from last year. So if we if we see a late summer Ron.

Speaker Change: Gasoline cracks into the winter then we would we would look too.

Speaker Change: Sure some of that and headed off we.

Speaker Change: We have no idea, where they will get that opportunity or not but.

Douglas S. Haugh: You know, strategically just so you know what we're looking at, that's how we look at it, and then, similar to what we did in this winter, if we see diesel cracks persist at levels that are attractive, you know, above what we expect, then we'll do the same with diesel. So that's, you know, our strategy would mirror what we did with gasoline in the late summer and then what we did with diesel for next year. That'd be the same outlook.

Speaker Change: Strategically just so you know what we're looking at that's how we look at that and then.

Speaker Change: To what we did and and this winter.

Speaker Change: We see.

Speaker Change: Diesel cracks persist at levels that are attractive.

Speaker Change: About what we expect.

Speaker Change: Will do the same with diesel so that's.

Speaker Change: Our strategy would mirror, what we did with gasoline in this in late summer and then what we did with diesel in winter.

Speaker Change: For next year that'd be the same outlook.

Noah Duke Kaye: Okay, thanks. Maybe one more, you know, maybe talk a little bit about... the process, or where the process sits in and around the strategic alternatives now that the company is, you know, making the decision to pause R&D operations for the current environment, how you're thinking about the pathway for the business going forward, and some of the other options that you mentioned in your prepared remarks.

Speaker Change: Okay.

Speaker Change: Maybe one more you know maybe talk a little bit about.

Speaker Change: The the the process or where the process it's in around two.

Speaker Change: Alternatively now that the company is.

Speaker Change: Making the decision to pause Rd operations, you know for the current environment.

Speaker Change: You're thinking about.

Speaker Change: The pathway for the business going forward and and some of the other options that you you mentioned in your prepared remarks.

Benjamin P. Cowart: Hey, good morning, Noah. This is Ben.

Speaker Change: Good morning, this is Ben.

Ben: Thanks for your question obviously.

Benjamin P. Cowart: Thanks for the question, obviously. You know, we are. Still very much in our process with B of A. We've got good outcomes that we're working through. So nothing to report at the moment, but it's coming along.

Ben: Yeah, we are.

Ben: Still very much in our process with me advice, we've got good outcomes that that we're working through so nothing to report at the moment.

Ben: It's it's.

Benjamin P. Cowart: It's clear to that process and those that are still there what we're doing on the pause and pivot. So we will continue forward with that. Hopefully, we'll bring good information back to the market once we conclude the process.

Ben: Clear to that process and and those that are still there.

Ben: What we're doing on the policy temperature. So we will continue forward with with that and.

Ben: Hopefully will bring good good good.

Ben: Good information back to the market and once we conclude the process.

Noah Duke Kaye: Well, I appreciate all the color. Thanks for taking the questions.

Speaker Change: Well I appreciate all the color thanks for taking questions.

Ben: <unk>.

Operator: The next question comes from Sameer Joshi from Wainwright. Your line is now open. Yeah, good morning.

Speaker Change: Next question comes from.

Joshua: Joshua from your.

Joshua: Of your line is now okay.

Sameer S. Joshi: I think we agree it's a prudent decision to pause and transition, but just a quick question on the actual operations of the RD. Is every incremental barrel that you are producing at a positive gross contribution margin right now? And if not, then does it make sense to completely pause production instead of having some level of production at this facility?

Sameer S. Joshi: Yeah, good morning. Thanks for taking my question.

Joshua: Yeah. Good morning, Thanks for taking my questions I think we agree.

Joshua: <unk> of the <unk>.

Joshua: As in transition.

Speaker Change: But just a quick question on.

Ben: The actual operation of the <unk>.

Ben: It was February incremental battle that you are producing at the Glasgow gross margin contribution margin right now.

Ben: Then does it make sense to completely.

Ben: <unk> instead of.

Ben: Having some level of products and I've this facility.

Douglas S. Haugh: Yeah, I think Doug here, I think I follow you that, you know, if there's a negative contribution margin, why run it all? I think that's effectively the conclusion we came to. So we're running off our existing inventory of feedstocks now and then preparing the unit for the conversion, as James described, from Cal's perspective. You know, that's.

Ben: Yeah.

Ben: Doug here I think I'd, probably that if there's negative contribution margin while I run at all.

Ben:

Doug: I think that's effectively the conclusion, we came to.

Doug: So we were running off our existing inventory feedstocks now.

Ben:

Ben: And then preparing to units.

Ben: The conversion is James described.

Ben: Perspective so.

Ben: That's.

Douglas S. Haugh: We didn't see any reason to persist in those losses. The forward curve on feedstocks is flat, so there's no implied benefit coming in terms of feedstock costs. RINs have collapsed materially from where they were last year, which was already down substantially from the previous year. LCFS has been, you know, bouncing a little bit, but it's, you know, substantially below levels where it commands production. So when you look at those, you know, there just doesn't look like there's a combination of any of those for us that... would provide positive margins for the next several quarters.

Ben: Didn't see any reason to.

Ben: Persist in those losses.

Ben:

Ben: The forward curve on feedstocks is as flat so there's no there's no implied.

Ben: Benefit coming in terms of feedstock costs.

Ben: <unk>.

Ben: Collapsed materially from from where they were last year.

Ben: With us already down substantially from the previous year.

Ben: L C F S has been.

Ben: You know.

Ben: Dancing, a little bit, but it's substantially below levels, where it where it commands.

Ben: <unk> production.

Ben: So when you look at those.

Ben: It doesn't look like there's a combination of any of those to us that.

Ben: Provide positive margins for the next several quarters.

Ben: Understood.

Sameer S. Joshi: And just a quick follow-up on Noah's previous question as to what it entails; just wanted to understand... Are there any foreseen or foreseeable issues, hurdles, in this transition process, like from an engineering point of view or from a construction point of view, and what kind of safeguards have you put in place or are you putting in place?

Speaker Change: And just a quick follow up on Noah's previous.

Speaker Change: Question, that's too <unk> just wanted to understand.

Speaker Change: Are there any for seeing <unk> issues curtains in this transition process like Osama engineering point of view or from construction point of view and what kind of safeguards that we put in place or are you putting in place.

Speaker Change: Yeah.

James Gary Rhame: Thank you. This is James again.

Speaker Change: Hello. Thank you. This is James again, no no hurdles from an engineering.

James Gary Rhame: Is going to make sure. His safeguards that you described we will go to management of change NFPA process hazard analysis of.

James Gary Rhame: The unit to make sure that the changes made with Rd had been taken into account and this service and.

James Gary Rhame: And make sure that we have a lot of conversions back and making sure. All those are in good shape and the changes we made associated with R&D would be accounted for.

James Gary Rhame: Do the conversion back.

James Gary Rhame: No, no hurdles from an engineering point of view. We're just going to make sure, as the safeguards that you describe, we go through full management of change and a process hazard analysis of the unit to make sure that the changes made with RD have been taken into account in this service, and we make sure that we have a lot of conversions back and make sure all those are in good shape, and the changes we made associated with R&D would be accounted for as we do the conversion back. And we'll have those, and we'll have a full engineering analysis and make sure that we've done it safely and through a pre-startup safety check.

James Gary Rhame: And we will have those and we will have a.

James Gary Rhame: Full engineering analysis and make sure that we have done it safely in and through a pre startup safety review.

Sameer S. Joshi: Thanks for that. And the last one. On capital preservation or cost savings, since the integration in 2022, your SG&A has been pretty steady, around $40 million on a gap basis. Do you foresee or are you planning any further resource optimization or lowering of these costs from a cash preservation point of view?

Speaker Change: Thanks for that and the last one of <unk>.

Speaker Change: On capital preservation or cost savings.

Speaker Change: Since the integration 2022 U S. G N D has been pretty steady around $40 million on a gap basis.

Speaker Change: Do you foresee or are you planning any further.

Speaker Change: Resource optimization or or the lowering of these costs.

Speaker Change: From Ah.

Speaker Change: We can cash point of view.

Christopher Carlson: Yeah, this is Chris. Good question. So I mean, we do currently have a company-wide focus on cost reductions, along with SG&A expense. One thing you'll note in Q1, we did see a 5% reduction in SG&A year-over-year. So, while I'll say this is probably directionally where we will be, we are continuing to be very focused on reducing SG&A and costs in the business.

Speaker Change: Yeah. This is Chris good question. So I mean, we do currently have a company wide focus on cost reductions.

Speaker Change: Along with SG&A expense.

Speaker Change: One thing you'll note in Q1, you did see a 5% reduction in SG&A year over year.

Speaker Change: So.

Speaker Change: While I will say this is probably directionally wherever you will be.

Speaker Change: Continue to be very focused on reducing SG&A and cost in the business.

Sameer S. Joshi: Got it. Thanks for that. I'll take other questions offline. Thanks and good luck.

Speaker Change: Thanks for that I'll take leather questions offline, thanks, and good luck.

Operator: The next question comes from Eric Stine on behalf of Craig Halem. Your line is now open. Good morning, everyone.

Speaker Change: Question comes from headaches Okay.

Speaker Change: Ma'am your line is that okay.

Speaker Change: Good morning, everyone.

Speaker Change: Mark.

Eric Andrew Stine: Hey, so I've been jumping around on calls. I apologize if I missed this. But did you quantify your estimate of what, you know, whether it's in Q1 or what it would have been in fiscal 23 from an EBITDA perspective, you know, without the losses from renewable energy?

Eric Andrew Stine: Okay. So I've been jumping around on calls I apologize if I missed this but did you quantify eurest an estimate of what you know whether it's in Q1 or what it would have been in physical twenty-three from an EBIT perspective.

Eric Andrew Stine:

Without the losses from renewable vehicle.

Eric Andrew Stine: You're asking without the losses of renewability, so... Yeah, without the losses, what should we do? I was just curious if you quantified what the incremental EBIT would be or what you would expect given this action you're taking.

Eric Andrew Stine: Yeah. So we take the loss you are asking without the losses of renewable diesel yeah without the losses, what <unk>. What's your that we are you know just curious if you quantified what what the incremental EBITDA would be or what you would expect.

Given this actions are taken.

Christopher Carlson: Yeah, so we did a similar exercise, Eric, but mostly around the fuel gross margin approach. And what we did was we looked at the Hydro Cracker the last time it was in service, took those yields and applied them to Q1, which provided the benefit in distillate, which would be your gas, diesel, and jet. In addition, it provided a benefit in volumes from eliminating the yield loss that we experience when it's not in service, and that gave us about a $40 million benefit on gross profit, fuel gross market.

Yeah. So.

Eric Andrew Stine: We did a similar exercise, Eric but mostly around the fuel gross margin approach.

Christopher Carlson: And what we did was we looked at the Hydrocrack or the last time. It was in service, we took those yields and applied it to Q1.

Christopher Carlson: Which provided the benefit and <unk>.

Christopher Carlson: Severe gas diesel and jet and a D.

Christopher Carlson: <unk> provided the benefit in volumes from eliminating the yield loss that we experienced when it's not in service.

Speaker Change: And that gave us about a 40 million dollar benefit.

Christopher Carlson: Gross profit fuel gross margin.

Christopher Carlson: Got it. And, I would assume then you're also taking out the elevated topics for the barrel for the renewable diesel unit given that I guess Thinking about how this looks maybe in the fourth quarter when the RD unit has been converted, direct op-eds per barrel should be dramatically lower. Yes, you're on.

Eric: Got it and and I would assume then you're also taking galaxy elevated.

Speaker Change: Oh, Thanks for burial for the renewable diesel <unk> I guess.

Speaker Change: King about how this looks may be in fourth quarter when the already has been converted.

Speaker Change: <unk> per barrel should be dramatically loss.

Christopher Carlson: Yes, your OPEX per barrel is going to be less. You're going to have fewer variable expenses such as logistics and other items. So yeah, you're going to see some benefit across the board.

Speaker Change: Yeah sure Opex per barrel is gonna be less you're gonna have less variable expenses, such as logistics and other items. So yeah, you're gonna see some benefit across the board.

Christopher Carlson: Got it.

Eric Andrew Stine: And then as we think about this, obviously, you have not brought on the full 14,000 barrels per day that you were planning. So we should think about this. You're roughly adding 8,000 barrels per day when all is said and done. Should we think, I was unclear, should we think about kind of a similar mix of finished product? went up and running. You also had some commentary about some upgrades to increase VGO output or just upgrade it. So maybe if you could just provide some details, that'd be great.

Speaker Change: And then as we think about this obviously you had not brought on the full 14000 barrels per day that you were planning. So we should think about this you're you're roughly adding eight.

Eric Andrew Stine: Thousand barrels per day, when all of a sudden done.

Eric Andrew Stine: Should we think I was unclear should we think about kind of a similar mix.

Eric Andrew Stine: Finished products.

Eric Andrew Stine: Up and running you also had some commentary about some upgrades to.

Eric Andrew Stine: Increasingly G O output or or so I'll just upgrade it. So maybe if you can just provide some details that'd be great.

Benjamin P. Cowart: Yeah, so what you'll see, if you go back on this hydrocracker, it was about a 40% to 50% conversion unit, and its shortage, its constraint was hydrogen stripping ability. Once we finally get the hydrogen unit up and an additional stripper, then we'll see a significant upgrade in the hydrocracker itself and see a larger yield of diesel and less BGO. It'll go to about 60. A 60-plus percent conversion unit versus a 40- to 50-percent conversion unit.

Speaker Change: Yeah, so what you'll see if.

Benjamin P. Cowart: If you go back on this <unk> it was about a 40% to 50% conversion unit and <unk> and it's shortages constraint was how does it and stripping ability.

Benjamin P. Cowart: Finally get the.

Benjamin P. Cowart: Get the hydrogen unit up and an additional stripper then we will see significant upgrade and hydrocracker itself and larger yield of diesel and less biggio.

Benjamin P. Cowart: <unk> <unk> <unk>.

Benjamin P. Cowart: 60, plus percent conversion unit versus.

Benjamin P. Cowart: 40% to 50 to get today.

Benjamin P. Cowart: Okay, so you see, you're looking at, you'll be in the low 70s, and Merrill Purda. I mean, I'm going to start with the first one. The first one is the the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the,

Speaker Change: Okay. So I mean, you're.

Benjamin P. Cowart: You're looking at you'll be a low.

Benjamin P. Cowart: Low seventies.

Benjamin P. Cowart: <unk> I mean.

Benjamin P. Cowart: But this is specifically the Ida cracker, not the crude throughput. We'll hold crude running at 75,000 barrels a day when it's all up and running. That does it. Okay.

Benjamin P. Cowart: This is this is specifically auto cracker not the crude throughput.

Benjamin P. Cowart:

Benjamin P. Cowart: Crude running in the.

Benjamin P. Cowart: Average 75000 barrels a day, when all up and running that doesn't change.

Benjamin P. Cowart: Okay.

Eric Andrew Stine: I got it. And then last thing, just on the strategic initiatives that have been ongoing with B of A. I mean, I would assume there's a component of the people that maybe you've been talking to that were more interested in the conventional refinery, curious, you know, what this move potentially does with the strategic alternatives or options that you discussed on the call. Does that encompass what you've already been doing, or are you taking additional steps?

Speaker Change: Got it and then last thing just on the strategic initiatives that have been ongoing with <unk>.

Eric Andrew Stine: I mean I would assume there is.

Eric Andrew Stine: A component of the people that maybe you've been talking to that we're more interested in the conventional refinery curious.

Eric Andrew Stine: What that what this move potentially does and the the strategic.

Eric Andrew Stine: Alternatives are option that you've discussed on the call does that encompass what you've already been doing or you take some additional steps.

Benjamin P. Cowart: Now, Eric, you know, the Pauls and Pivots certainly paint, you know, a much better picture of our financials as we work on these strategic alternatives. So it's, I think everybody sees the current market for renewable diesel. So there's no surprise there. I think it's well-received by, you know, any alternative party.

Speaker Change: So Eric you know the the policy <unk> certainly paint.

Benjamin P. Cowart: You know a good a much better picture on our financials as we.

Benjamin P. Cowart: Work on this strategic alternatives. So it's I think everybody sees the current market for for renewable diesel. So there's no surprise there I think it's.

Benjamin P. Cowart: Well received <unk> you know.

Benjamin P. Cowart: Any any alternative.

Benjamin P. Cowart: Just kind of looking at the business at this point in this process and... Yeah, really, you know, no dissension on this decision or anything there. So when you look at renewable opportunities, they're more long-term as this process is unfolding. And then we also have the ability to demonstrate the true profitability of the asset just under this pivot strategy, taking advantage of the Hydro Cracker and the feed stocks that we control. So we're really setting a kind of a base of cash flow that you know we're running this process by. So, it allows us time and allows us, you know, more optionality and broadens interest in the alternative process that we're running.

Benjamin P. Cowart: Party kind of looking at the business at this point in this process and.

Benjamin P. Cowart: Really you know.

Benjamin P. Cowart: <unk> no no no distinction on this decision or anything there. So when you look at renewable opera 10 days or more longterm as as this process is unfolding and and then we also have the ability to demonstrate.

Benjamin P. Cowart: The the true profitability the asset just under this pivot strategy taken advantage of hydrocracker in the feedstocks, we control. So we're really set and kind of a base of cash flow.

Benjamin P. Cowart: That that word.

Benjamin P. Cowart: We're running this process box so.

Benjamin P. Cowart: It it allows us time and allows US you know more optionality and broadens interest in in the alternative process that we're running.

Speaker Change: Okay. Thank you.

Benjamin P. Cowart: Okay.

Operator: Our next question comes from Donovan Schafer from Northland Capital Markets. Your line is now open.

Speaker Change: Our next question comes from nothing cheaper.

Donovan Due Schafer: Capital market, you remind us now okay.

Donovan Due Schafer: Hey guys, thanks for taking the questions. So the first question I want to ask is about running down the inventory levels for the RD operation. How should we think about or expect that to impact your cash position? So, on the one hand, you'll be monetizing what's in inventory, and that generates cash without the need to turn around and then buy additional feedstock and replace it. But, on the other hand, I believe there is an inventory facility linked to this that would need to be paid down as well.

Donovan Due Schafer: Alright, guys. Thanks for taking my questions.

Donovan Due Schafer: So the first question I'm Gonna ask us for you know running down to inventory levels for the Rd operations.

Donovan Due Schafer: How how should we think about our expect that too and.

Donovan Due Schafer: Impact your cash position so you're on the one hand.

Donovan Due Schafer: You'll be monetizing, what's an inventory and that generates cash without the need to turn around and then buy additional feedstock and replace it but then on the other hand I believe there is an inventory facility.

Donovan Due Schafer: Linked to this that would need to be paid down as well. So does everything just kind of night out or does this do you end up coming out ahead or behind little or just what do you think the.

Donovan Due Schafer: So does everything just kind of net out, or does this, do you end up coming out ahead or behind a little? Or just what is the net impact on your cash after running down that inventory?

Donovan Due Schafer: Impact on your cash position will be after running down that inventory.

Christopher Carlson: Yeah, thanks for this, Chris. It's a good question. You know, basically, the way we look at it is it's going to be neutral because, as you noted, we've got a financing arrangement with the inventory. So, as we run that down and clear it, there's not a lot of margin in it today, as you noted. And then as we clear out of the financing arrangement, you know, we'll get a little bit of cash back on that, but when you offset it against the negative margin, I would view it as neutral.

Speaker Change: Yeah. Thanks to this Chris Good question basically the way we look at it as it's gonna be neutral.

Christopher Carlson: We've got a financing arrangement.

Christopher Carlson: With the inventory.

Christopher Carlson: Do you run that down and clear it there's not a lot of margin and it today as noted.

Christopher Carlson: And then as we clear out of the financing arrangement will get a little bit of cashback on that but when you offset it against the negative margin.

Christopher Carlson: It is neutral.

Donovan Due Schafer: Okay, that's helpful. Um, and then with the, um, I think Ben responded to an earlier question about the hydrocarbon unit saying, you know, it's a 40 to 50% conversion rate from the, you know, VGO, coming off the primary distillation, converting that to, you know, diesel or refined products when it goes through the hydrocracker and that that can be increased to 60%. I believe you said with additional hydrogen. So I guess the question, so the question is, does this mean the plan is to proceed with the phase two where, I forget the name of the partner you have there, but that, the additional hydrogen that was originally intended to be plumbed into everything to take the hydrocracker up to 14, you know, from 8,000 to 14,000 barrels. Is that still going to happen and then that available hydrogen ends up giving you this improvement on the hydrocracker? Is that what's going on? Yes.

Speaker Change: Okay. That's helpful.

Donovan Due Schafer: And then <unk>.

Donovan Due Schafer: With the.

Donovan Due Schafer: I think Ben responded to an earlier question about the Hydrocracking unit, saying, it's a 40% to 50% conversion rate from the you know V G O coming.

Donovan Due Schafer: Coming off the primary distillation converting that to diesel refined products when it goes through the hydrocracker in the back can be increased to 60 per cent I believe you said with additional hydrogen. So I guess the question. The question is does this mean the plan is to proceed with the phase two where.

Donovan Due Schafer: I forget the name of the the partner you have there but that the.

Donovan Due Schafer: The additional hydrogen that was originally intended to be plumbed into everything to take the hydrocracker up to 14 from 8000 to 14.

Donovan Due Schafer: 14000 barrels.

Donovan Due Schafer: Is that still going to happen and then dot available hydrogen ended up giving you. This improvement on the hydrocracker is that what's going on.

Benjamin P. Cowart: Yes, yes, that's the way to think of it. So that project will continue, and it will continue for two reasons, of course. One is that it helps the hydrocracker in its conversion, but if we ever choose to go back to renewables, we'll need that hydrogen to get full rate.

Speaker Change: Yes, yes, that's the way to think of it so that project will continue and it continues for two reasons.

Benjamin P. Cowart: Of course, one is it helps the hottest record this conversion, but if we ever choose to go back to renewables will need that hydrogen to get full rates.

Donovan Due Schafer: Okay, great. So that's helpful. And then when you were running the Hydro Cracker for conventional throughput before, you know, before you stopped to convert it over to renewable diesel, I believe you were still... At least up until the end there, you were still getting an olefin seed stock that was coming out of that. I don't actually quite know how the olefin and what share of hydrocracker fit in and if that's important and, you know, if Towner Party: How does that work?

Speaker Change: Okay, great. So that's helpful.

Donovan Due Schafer: And then when you are running the hydrocracker for conventional sure but before.

Donovan Due Schafer: Before you stops to converted over to renewable diesel.

Towner Party: I believe you are still.

Towner Party: At least up until the in there you are still getting an olefins seed.

Towner Party: Stock that was coming out of that.

Towner Party: Part of the byproducts that someone's going to shell.

Towner Party: Petrochemical plant to then make plastics or something with it.

Towner Party: Is that something does that do we go back to that she resumed selling the oldest and feed to shell how do I think about it and come into contact with the other part cause maybe that maybe that gets compensated for by the conversion rate for the diesel and so forth you know if you're going from 40 to 50 40 to 50 range up to 60% range maybe.

Donovan Due Schafer: Maybe that's making up for all of us in peace I kind of I don't actually quite know how the Olsen and what share of hydrocracker, how does that fit in and if that's important and if you can just turn it back to the way it was or would you have to find another olefin.

Donovan Due Schafer: Counterparty.

Towner Party: Does that work.

Speaker Change: Yeah, there's more commercial.

Douglas S. Haugh: Yeah, it's Doug here. I'll take that. I mean, there is, I mean, clearly we will be, you know, the BGO coming off the unit that isn't converted. The finished fuels will be of the previous grade that was sold, you know, to Shell or supplied internally when they were running this as a network for all of the feedstock. It is undetermined at this time whether we can get a value improvement for the hydrocracked VGO at this grade.

Donovan Due Schafer: Doug here I'll take that I mean, it's.

Douglas S. Haugh: There is clearly we will be.

Douglas S. Haugh: The biggio coming off the unit that isn't converted.

Douglas S. Haugh: To finish fuels will be.

Douglas S. Haugh: Of the previous grade that was sold to.

Douglas S. Haugh: Shell are supplied internally when they were running this is a network.

Douglas S. Haugh:

Douglas S. Haugh: <unk> Bulletin feedstock.

Douglas S. Haugh: Undetermined at this time, whether we can get a a value improvement for.

Douglas S. Haugh: It certainly will be as good or better than the previous quality produced, so I don't think there's any reason to expect that those markets would be available to us again, but at this point, we don't have any indication that that would be a value uplift versus the VGO market that we see.

Douglas S. Haugh: Hydrocrack <unk> and this and that at this great. It's certainly we'd certainly.

Douglas S. Haugh: Certainly will be as good or better than the previous quality produced so.

Douglas S. Haugh: There's a reason to expect that those markets would be available to us again, but at this point. We are you know we don't have any indication that that would be.

Douglas S. Haugh: Uplift versus the video market that we sell into every day today.

Donovan Due Schafer: Okay, so just so I'm clear, it's like the VGO comes off the distillate, the, you know, primary distillation... tower, you've got that VGOs, and it's going into the hydrocracker. A certain amount of that, say we'll get to 60% of that, is going to get turned into a much higher margin. The 40% that isn't converted into fuel that comes out is, is that also? Is that just the same as VGO? Like it kind of went in and came out, and there was no change to it.

Speaker Change: Okay. So just just so I'm clear, it's like the V. G. O comes off the just the the primary of installation tower.

Speaker Change: Yeah, that'd be G. As in it's going into the hydrocracker, a certain amount of that say.

Donovan Due Schafer: We'll get to 60 per cent of that is gonna get turned into much higher margin fuel the 40% that isn't converted into feel that comes out is.

Donovan Due Schafer: And that is also synonymously, or incidentally, also what was called olefin feed before? Or is there actually a change to that other, you know, 40%? And it's like a different quality product, but you have to figure out what to do with it.

Donovan Due Schafer: Is does that either is that just the same ads VGL like it kind of went in and came out and there was no change to it and that is also synonymous leader Incidentally also what was called Olaf and she'd before or is there actually a change to that other 40% and it's different.

Donovan Due Schafer: Different quality products, but you have to figure out what to do.

Douglas S. Haugh: Yeah, it's different. It's slightly better than just straight run VGO. However, we don't know whether it's determined whether we can get a premium for it. But you got it right.

Speaker Change: Yeah, it's different it's slightly better than just straight run D. G. O. However, we don't okay.

Douglas S. Haugh: Whether it is then determine if we can get a premium for but you got it right.

Douglas S. Haugh: It was before.

Donovan Due Schafer: Okay, and then if I could squeeze just one more in talking about the fourth quarter, you know, will we have, I guess first would be when the fourth quarter comes around, and we expect it to be running full out with conventional. Will we get back to the refined product or fuel kind of yield jet, diesel, gasoline that we had back in, I don't know, gosh, Q2 or Q3, like a year ago? I think it was about 75% or maybe 74%.

Speaker Change: Okay, and then if I could squeeze just one more and talking about the fourth quarter you know.

Donovan Due Schafer: Well, we have I guess first would be by the when the fourth quarter comes around and we expect it to running.

Donovan Due Schafer: Full out with conventional <unk>.

Donovan Due Schafer: We get it back to the yield the refined product or fuel kind of yield.

Donovan Due Schafer: Diesel gasoline that we had back in I don't know I guess 2223 like a year ago. I think it was I was about 75% or maybe 74% does that nudge up a bit with the higher.

Donovan Due Schafer: Does that nudge up a bit with the higher, will the additional hydrogen capacity be on by then? Basically, just what refined product or high-margin product yield should we expect kind of on a go forward basis in Q4?

Donovan Due Schafer: The additional hydrogen capacity beyond by then basically just you know what what refined product high margin product yield should we expect kind of on a go forward basis in Q4.

Benjamin P. Cowart: Yeah, go back to, you know, 22, and you know that should be your basis even though we believe we're going to do better than that because we've made some yield improvements which we're not going to back up on even with this conversion, but that's at least it gives you a starting point, okay?

Donovan Due Schafer: Yeah go back to 22.

Benjamin P. Cowart: Mhm, that's that should be your basis, even though we believe we're going to do better than that because we've made some yield improvements, which we're not going to back up on even with this conversion.

Benjamin P. Cowart: At least it gives you a starting point.

Donovan Due Schafer: Okay, and I think that's where I got the 74 from, but I don't have my model in front of me. Is that in the ballpark?

Speaker Change: Okay, and I think that's where I got the 74 from but.

Donovan Due Schafer: Model in front of me is that <unk>.

Donovan Due Schafer: Ballpark.

Benjamin P. Cowart: Yep, you're in the boat. Okay. All right. All right. Thanks, guys. I'll take the rest of my questions offline.

Speaker Change: We're in the ballpark.

Speaker Change: Okay Alright.

Speaker Change: Alright, Thanks, guys I'll take the rest of my questions are fine.

Operator: Our next question comes from Soumya Jain from UPS. Your line is now open. Hey.

Speaker Change: Alright next question comes from some you Jane.

Sameer S. Joshi: Your lines.

Sameer S. Joshi: Hey, good morning guys. You guys talked a bit about how, you know, with market conditions right now, it's part of the reason that we're pivoting from renewable to diesel. How easily would you guys even be able to pivot back? Should that change? How feasible would that be as a company to consider?

Operator: Oh.

Sameer S. Joshi: If you guys have forgot about how you know is martini questions right now.

Sameer S. Joshi: That.

Sameer S. Joshi: Okay.

Sameer S. Joshi: <unk> <unk> would you guys be able to pay it back with actual castle for what I did it for me.

Sameer S. Joshi: Okay.

Douglas S. Haugh: Yeah, it's a great question. I mean, just as the team has preserved our optionality on this unit going, you know, back to conventional, we're doing the same, taking the same engineering approach and operations approach to preserve the optionality to go back into renewables. Obviously, frankly, each time you do it, you get better at it because you, we've got experience, but also you.

Speaker Change: Yeah, that's a great question I mean.

Douglas S. Haugh: Just as the team is preserved are optionality on this unit going back to conventional we're doing the same.

Douglas S. Haugh: Taking the same engineering approach operations approach to preserve the optionality to come back into renewables obviously.

Douglas S. Haugh: Frankly, each time you do it you get better at it because you've you've got experienced that also.

Douglas S. Haugh: 10 years to closing the gaps mechanically that might've arose as you did the work so.

Douglas S. Haugh: We have a natural option if you would.

Douglas S. Haugh: Every time, we come up on a catalyst change.

Douglas S. Haugh: [inaudible] You know, we're going to evaluate the forward market conditions, look at what those yields would produce in terms of margin, and make that decision as we order catalysts and plan the turnaround. So, you know, for renewable energy sources, that's every year. In conventional service, it's roughly every two years. So, you know, one could certainly make that decision earlier if there was just, you know, disproportionate or dislocated margins available for some reason, and you had confidence in your ability to achieve those, but the normal, you know, the normal schedule would be just to evaluate this every time we have a catalyst change planned and then use that turnaround as our option point to go one direction or the other. Got it.

Douglas S. Haugh: We're going to evaluate the forward market conditions.

Douglas S. Haugh: Look at what those yields would produce in terms of margin.

Douglas S. Haugh: And make that decision.

Douglas S. Haugh: As we order catalyst and plan the turnaround so for renewables that's every year.

Douglas S. Haugh: And conventional services roughly every two years.

Douglas S. Haugh: No one could certainly make that decision earlier, if there was just you know.

Douglas S. Haugh: Disproportionate or dislocated margins available for some reason and yet confidence in your ability to to achieve those but the normal the normal schedule with you just to evaluate this every time, we have a catalyst change plans and then use that turnaround as as our option points to go one direction or the other.

Sameer S. Joshi: And then, on another, on a separate note, would you guys, or have you considered any potential, you know, joint venture partners to help with the cash flow in regards to the refinery itself?

Douglas S. Haugh: And then I guess.

Speaker Change: On another note right now that you guys are having some potential.

Speaker Change: <unk> alright.

Sameer S. Joshi: Right now.

Benjamin P. Cowart: You mean as far as other intermediators coming in to work? Yeah. Yeah, I mean, what we're really focused on right now, you know, the term debt is due within 11 months of basically today. So we're really focused on, number one, as you heard, the strategic financing opportunities, as well as a refocus on refinancing, the term dead.

Sameer S. Joshi: You mean as far as like other intermediated.

Benjamin P. Cowart: Yeah.

Benjamin P. Cowart: Got it. Thank you.

Benjamin P. Cowart: Yeah, I mean, what we're really focused on right now the turn that is due within 11 months basically today.

Benjamin P. Cowart: So we're really focused on number one is you heard the strategic financing opportunities.

Benjamin P. Cowart: As well as a you know a.

Benjamin P. Cowart: Re I guess refocus on refinancing.

Benjamin P. Cowart: The term that at the moment.

Benjamin P. Cowart: [noise] question comes from Brian Butler from Stifle your line is now.

Operator: The next question comes from Brian Butler from Stifle. Your line is now open.

Brian Joseph Butler: Good morning. Thanks for taking my question.

Brian Joseph Butler: Good morning, Thanks for taking my question.

Brian Joseph Butler: Morning. Morning.

Brian Joseph Butler: Good morning, Good morning, I just wanted to I just wanted to start on the going concern disclosure in the 10-Q can we put maybe provide a little digital color and square that kind of with what we're discussing in the call here and and what's what's behind that analysis is it just the term loan coming due in 11 months or.

Brian Joseph Butler: I just wanted to start on the going concern disclosure and the 10-Q. Can we maybe provide a little additional color and square that kind of with what we're discussing on the call here? And what's behind that analysis? Is it just the term loan coming due in 11 months? Or, you know, what is the opportunity, you know, timeline?

Brian Joseph Butler: What is the opportunity timeline between.

Brian Joseph Butler: Timeline for forward financing that term loan.

Brian Joseph Butler: <unk> for refinancing that term long.

Christopher Carlson: Yeah, great question, Brian. So, yeah, that is strictly around the term debt coming due within a 12-month window of the filing. So, you know, GAAP requires us to disclose that, you know, as noted, we're very focused on a refinancing, and we feel very good about where we're at. We've got 11 months to do that, so that process is underway.

Speaker Change: Yeah, Great question Bryan So yeah that is strictly around the term debt coming due within a 12 month window the filing.

Christopher Carlson: So you know gap requires us to disclose that.

Christopher Carlson: You know as noted we're very focused on a refinancing and.

Christopher Carlson: Feel very good about where we're at we've got 11 months to do that.

Christopher Carlson: So that process is underway today.

Brian Joseph Butler: Okay. And then on the conventional, when you think about getting the hydro cracker back to conventional production, can you maybe give at a high level how we should think about gross profit, EBITDA, and maybe sensitivity kind of to the spread as we get to a run rate in 2025 for that conventional business? I mean, how much EBITDA can that generate, and how sensitive is that to the spread?

Christopher Carlson: Okay, and then on the conventional when you think about the hidden hydrocracker back to conventional production.

Brian Joseph Butler: You may begin at a high level of how we should think about gross profit EBITDA and maybe sensitivity kind of spread as we get to a run rate in 2025, four that conventional business I mean, how much stupid document generator and how sensitive is that too to the spread.

Christopher Carlson: Yeah, I mean, the best thing to do would be, you know, as James noted, Q4 of 22, look at that yield plate, and you basically see that we will produce more gasoline, more diesel, and jet fuel, and less VGO. As far as exposure to the market and cracks, it's still the same; there's no difference.

Speaker Change: Yeah, I mean, the best thing to do would be look back at you know as James noted Q4 of 22.

Christopher Carlson: Look at that yields play.

Christopher Carlson: And you basically see that we will produce more gasoline or diesel and jet and less VGL.

Christopher Carlson: As far as exposure to the market and cracks it's still the same there's no difference.

Brian Joseph Butler: Okay, and then last one on renewable diesel. Where does, you know, the D4 RIN or the LCF as credit in feedstock costs really need to be for you guys to go back and reconsider starting renewable diesel production again?

Speaker Change: Okay, and then last one on renewable diesel.

Brian Joseph Butler: Where does you know the the D. Four ran her for the Elsia as credit and feedstock costs really need to be so you guys to go back and reconsider I'm starting back renewable diesel production.

Douglas S. Haugh: Yeah, I mean, I think if you look back historically, we'd need to see a margin environment similar to the margin environment that existed when we made this investment. So again, if you look at, you know, 22, and maybe first quarter 23, I think before Curves really collapsed. But, you know, again, I think if you looked at those values and, you know, on a kind of annual average in 2022, by and large, that would certainly incentivize us to... You know, fully evaluate, you know, converting back at the number I know how to catalyst change at an upcoming catalyst change.

Speaker Change: Yeah, I mean, I think if you look back historically.

Douglas S. Haugh: We'd need to see a margin environment similar to the margin environment that existed when we made this investment decision.

Douglas S. Haugh: She was again.

Douglas S. Haugh: Again, if you look at 22.

Douglas S. Haugh: Maybe the first quarter of 23, I think before the.

Douglas S. Haugh: The curves really collapsed but.

Douglas S. Haugh: Again, I think if you if you looked at those values and and Ah.

Douglas S. Haugh: Kind of annual average of 2022.

Douglas S. Haugh: By and large that would that would certainly incentivize us too.

Douglas S. Haugh: Fully evaluate.

Douglas S. Haugh: Converting back at the next thing I know, what a catalyst Shane.

Douglas S. Haugh: At an upcoming catalyst changes those were the courage you are looking at that.

Douglas S. Haugh: That would make that.

Douglas S. Haugh: If those were the curves we were looking at, you know, that would make that a viable candidate at that time. But if you look at the certainly the margining environment, you know, in most of 23 and certainly what it's been in 24 thus far, you know, to date, then obviously very unattractive.

Douglas S. Haugh: Viable candidate.

Douglas S. Haugh: Candidate.

Douglas S. Haugh: At that time, if you look at the certainly in the margin environment and.

Douglas S. Haugh: And most of 23 and certainly what what it's been in 24 the day to day, then obviously very unattractive.

Douglas S. Haugh: Okay, and I guess tied to that, would you have to go through the whole certification pathway again for the D4, the BTC, and the credits, is that like another, would be a whole other group of hurdles to get over? No, no, no, we can preserve those. We have a time frame. We've got certain things we have to do to be able to preserve those administrative offices. We'll continue to preserve those. Okay, great. Thanks for taking my question.

Douglas S. Haugh: Okay.

Douglas S. Haugh: I guess tied to that we.

Douglas S. Haugh: Would you have to go through the whole certification pathway again for for.

Douglas S. Haugh: For the <unk> D for the BTC in the credits is that like another would be a whole nother group.

Douglas S. Haugh: Group of hurdles to get over.

Douglas S. Haugh: No no no where we could reserve those.

Douglas S. Haugh: We have a timeframe we've got certain things we have to do to be able to preserve those administratively, but we will continue to preservatives.

Douglas S. Haugh: In the future as long as we can.

Douglas S. Haugh: Okay, great. Thanks for taking my questions.

Douglas S. Haugh: Thanks.

Operator: Our next question comes from Jason Gabelman from TD Cowen. Your line is now open.

Speaker Change: My next question comes from changing cameraman from T D.

Jason Daniel Gabelman: Calling the line is now.

Jason Daniel Gabelman: Hey morning. Thanks for taking my questions. I missed some of the calls, so apologies. This has already been discussed, but the offtake agreement with Itametsui, that was for the renewable diesel product. Are there any commitments that you'll have to follow through on despite shutting down the renewable diesel production, or is there any cost associated with ending that contract?

Jason Daniel Gabelman: Okay. Good morning, Thanks for taking my questions I missed some of the call. So I apologize. If this has already been discussed but the offtake agreement with Chile are there that that was for the renewable diesel product.

Jason Daniel Gabelman: Are there any commitments that you'll have to follow through on despite shutting down the renewable diesel production or is there any cost associated with ending that contract.

Douglas S. Haugh: Well, I guess to clarify, Jason, and Doug here. Yeah, we don't intend to end that contract or continue to have a very good relationship with Emitsu in all respects. So, you know, we want that contract to continue. Should we resume renewable production?

Speaker Change: Well I guess to clarify dug here, yeah, we don't tend to end that contract.

Speaker Change: Continue to have it.

Speaker Change: A very good relationship with the mid two.

Douglas S. Haugh: And in all regards so we want that contract to continue.

Douglas S. Haugh: Should we resume renewable production so that's.

Douglas S. Haugh: So that's, you know, our belief is that Enemitsu values that as well, and that's our current indication. So, you know, it's more of a pause than a cessation, you know, in permanent terms, and that's a fairly long-term contract. So, you know, it currently goes beyond our next, you know, sort of window when we would evaluate this again. There are some operational obligations for both of us in that in that arrangement that we will, you know, we're working through and dealing with currently.

Douglas S. Haugh: Our belief visited amid sue values that as well.

Douglas S. Haugh: Our current indications so.

Douglas S. Haugh: It's more of a pause and then a cessation permanent terms.

Douglas S. Haugh: And that's a fairly long term contracts so.

Douglas S. Haugh: Currently goes beyond our next sort of window, when we would evaluate this again.

Douglas S. Haugh: There are some.

Douglas S. Haugh: Operational obligations.

Douglas S. Haugh: For both of us in that in that arrangement that we will.

Douglas S. Haugh: [noise] working through in dealing with currently is there <unk>.

Douglas S. Haugh: Is there, you know, residual costs in our systems on a go-forward basis coming out of this, potentially, not definitively, but certainly potentially associated with Emitsu? And then we also have, you know, storage capacity in Mobile that was secured specifically to support RD that we believe we have uses for and can trade around those assets and make use of those rents that we're paying on those tanks, but there's a tail on the tank rents too.

Douglas S. Haugh: Residual costs and our systems on a go forward basis coming out of this attack.

Douglas S. Haugh: Essentially not definitively that certainly essentially.

Douglas S. Haugh: Associated with it emits U and then we also have <unk>.

Douglas S. Haugh: Storage capacity.

Douglas S. Haugh: <unk> yeah.

Douglas S. Haugh: That was secured specifically to support our D that.

Douglas S. Haugh: We believe we have uses foreign and can trade.

Douglas S. Haugh: Around those assets and.

Douglas S. Haugh: [noise] use of those rents that we're paying on those tanks, but there's there's a tail on the tank rents too.

Jason Daniel Gabelman: Okay, but to be clear, you don't have to go out and buy renewable diesel in the open market to fulfill some sort of contractual obligation moving forward.

Speaker Change: Okay, but to be clear you don't have to go out and buy renewable diesel in the open market to fulfill some sort of contractual obligation moving forward.

Douglas S. Haugh: No, no, the Yenemitsu is a production off-take agreement, not a... Not a guaranteed production agreement, right? So it flexes with our production.

Jason Daniel Gabelman: No no the mid.

Douglas S. Haugh: There is a production optic agreement not Ah.

Douglas S. Haugh: Not a guaranteed production agreement right. So it flexes with our production.

Jason Daniel Gabelman: Okay, thanks. And then my other one was just on maybe some of the cash benefits from ending the renewable diesel service. Can you provide a working capital benefit that you expect to get from running down that feedstock? And then is there any offset from building more conventional related inventories?

Speaker Change: Okay. Thanks, and then my other one was just on maybe some of the cash benefits from ending the renewable diesel.

Jason Daniel Gabelman: Service.

Jason Daniel Gabelman: Can you provide a working capital.

Jason Daniel Gabelman: Benefits that you're trying to get from running down that feedstock that is Ernie all set from building more conventional related inventories.

Christopher Carlson: Yeah, I mean, from the RD perspective, I don't see a big benefit in working capital as we look at running this down. You know, on the conventional, as you know, we've got the financing agreement, you know, for our inventory flowing through. So there shouldn't be a big change in working capital as we move.

Speaker Change: Yeah, I mean from the Rd perspective, I don't see a big benefit in working capital as we look at running this down.

Christopher Carlson: You know wanted to convince at all as you know we've got the financing agreement far inventory blowing through.

Christopher Carlson: So there shouldn't be a big change in working capital as we transition.

Jason Daniel Gabelman: Okay, great. Thanks.

Speaker Change: Okay, that's great.

Speaker Change: Yeah, sorry.

Douglas S. Haugh: I'll just say the only difference is, you know, the refined products will go up a bit because we're making more of them, and some of those move via vessel, so you'll see builds as you, you know, build inventory to load the ship, but, you know, similar to what we do with jet fuel today. So that'd be the only material difference that you'll see on the inventory side.

Jason Daniel Gabelman: To say the only differences.

Douglas S. Haugh: The the refined products will go up.

Douglas S. Haugh: Bit because we're making more of them.

Douglas S. Haugh: And some of those movie of vessels, so you'll see bills.

Douglas S. Haugh: Build inventory load the ship.

Douglas S. Haugh: Similar to what we do with jet today so.

Douglas S. Haugh: That'd be the only material difference that you'll see in the inventory side.

Jason Daniel Gabelman: Got it. Great. Thanks for the answers.

Speaker Change: Got it great. Thanks for the answers.

Operator: As of right now, we don't have any pending questions. I'd now like to hand the microphone over to Mr. Ben Cowart, CEO. Thank you.

Jason Daniel Gabelman: As of right now, we don't have any pending crashed.

Operator: Alright.

Benjamin P. Cowart: <unk> okay.

Benjamin P. Cowart: Mr. <unk>, Alright C E L. Thank you.

Benjamin P. Cowart: Thank you, operator, and thank you everyone for joining the call today. We are very, very positive about this initiative and the pause and pivot. We really believe it's the right time and place to be able to make that move. And I just want to thank our team and our leadership team as well, the folks at the site, our legacy business, for all the good work they did over the quarter.

Benjamin P. Cowart: Yeah. Thank you operator, and thank everyone for joining the call of the day.

Benjamin P. Cowart: We are a very very positive about this initiative and pause and <unk>, we really believe it's the right time and place to be able to make that that that move in.

Benjamin P. Cowart: I just want to thank our team and our our our leadership team as well.

Benjamin P. Cowart: The site our legacy business all the good work they did over the quarter. So you know.

Benjamin P. Cowart: So we're looking forward to really putting cash flow back on the business where it should be and really, you know, gives us time to work on our renewable strategy. And there are lots of opportunities, long term, that we believe our asset is going to be of high interest. So we're going to take our time here with our conventional business and get us back to good cash flow and move the business forward.

Benjamin P. Cowart: We're looking forward to.

Benjamin P. Cowart: Putting cash flow back back on the business, where where it should be in.

Benjamin P. Cowart: Really yeah gives us time to work on a renewable strategy and there's there's.

Benjamin P. Cowart: Lots of opportunities longterm that we believe our asset is gonna be.

Benjamin P. Cowart: Of high interest so we're going to take our time here with our with our conventional business and put us back good cash flow and move the business forward, so having the flexibility around the asset and and the the ability to do this is very important and.

Benjamin P. Cowart: It's to the credit of our people to be able to put us in this position. It's it really gives us a a big step forward. So thank your body and really appreciate it again, making the call and we look forward to some some future communications as as we go forward.

Benjamin P. Cowart: So having the flexibility around the asset and the ability to do this is very important and to the credit of our people to be able to put us in this position. It really gives us a big step forward. So thank you everybody and really appreciate again making the call, and we look forward to some future communications as we go forward.

Operator: Thank you so much for attending today's conference call. Have a wonderful day. You may now disconnect.

Speaker Change: Thank you so much for attempting to <unk> have a wonderful day <unk>.

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Q1 2024 Vertex Energy Inc Earnings Call

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