Q2 2024 Vertex Energy Inc Earnings Call
Good morning. I would like to welcome everyone to Vertex Energy's second quarter 2024 conference call. I will now turn the call over to Chris Delange, IR Coordinator.
Operator: Order the 2024 conference call.
Operator: I will now turn the call over to Crystal Lange, IR Cardinator. As remind you that management's commentary on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.
Operator: 2024 conference call. I will now turn the call over to Chris Delange, IR Coordinator. Thank you, Operator.
Chris Delange: Thank you, Operator. Good morning, everyone, and welcome to Vertex Energy's second quarter 2024 conference call.
Chris Delange: Good morning, everyone, and welcome to Vertex Energy's second quarter 2024 conference call. On the call today are Chairman and CEO Ben Cowart, Chief Financial Officer Chris Carlson, Interim Chief Operating Officer and Chief Commercial Officer Doug Haugh, and Chief Strategy Officer Alvaro Ruiz.
Speaker Change: On the call today are Chairman and CEO , Ben Cowart, Chief Financial Officer, Chris Carlson, Interim Chief Operating Officer and Chief Commercial Officer, Doug Haugh, and Chief Strategy Officer, Alvaro Ruiz.
Chris Delange: I want to remind you that management's commentary on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the risk factors that could cause actual results to differ, please refer to the risk factors section of Vertex Energy's latest annual and quarterly filings with the SEC.
Speaker Change: I want to remind you that management's commentary on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control.
unknown: Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. Thank you, Chris.
Chris Delange: Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.
Operator: For a discussion of some of the risk factors that could cause actual results to differ, please refer to the risk factors section of Vertex Energy's latest annual and quarterly filings with the SEC.
Speaker Change: For a discussion of some of the risk factors that could cause actual results to differ, please refer to the risk factors section of Vertex Energy's latest annual and quarterly filings with the SEC.
Operator: Additionally, please note that you can find reconciliation of the historical non-GAAP financial measures discussed during our call in the press release issued today.
Speaker Change: 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.
Operator: Today's call will begin with remarks from Ben Cowart, followed by an operational review from Doug Haugh, a financial review from Chris Carlson, and closing remarks by Ben Cowart.
Chris Delange: Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. Today's call will begin with remarks from Ben Cowart, followed by an operational review from Doug Haugh, a financial review from Chris Carlson, and closing remarks from Ben Cowart. With that, I'll turn the call over to Ben. Thank you, Chris.
Speaker Change: Today's call will begin with remarks from Ben Cowart, followed by an operational review from Doug Haugh, financial review from Chris Carlson, and closing remarks by Ben Cowart. With that, I'll turn the call over to Ben.
Benjamin Cowart: With that, I'll turn the call over to Ben.
Benjamin Cowart: Thank you, Chris. Good morning to those who are joining us.
Christopher Carlson: Thank you, Chris.
Benjamin Cowart: Good morning to those joining us. On the call of the day, the team and I plan to update you on the financial and operating results for the second quarter 2024, as well as update you on the progress around the hydrocracker conversion from renewable feedstock to conventional and outline some strategic steps that we've taken to help Vertex navigate the current near-term landscape. The second quarter saw a difficult macroeconomic environment where cracks spreads fell by 28% compared to the first quarter. Despite doing a lot of good things operationally, the lower pricing environment negatively impacted our financial performance.
Benjamin Cowart: On the call today, the team and I plan to update you on the financial and operating results for the second quarter of 2024, as well as update you on the progress around the hydrocracker conversion from renewable feedstock to conventional, and outline some strategic steps that we've taken to help Vertex navigate the current near-term landscape. The second quarter saw a difficult macroeconomic environment where crack spreads fell by 28% compared to the first quarter.
Ben Cowart: Thank you, Chris. Good morning to those joining us.
Speaker Change: On the call today, the team and I plan to update you on the financial and operating results for the second quarter 2024, as well as update you on the progress around the hydrocracker conversion from renewable feedstock to conventional.
Ben Cowart: and outline some strategic steps that we've taken to help Vertex navigate the current near-term landscape.
Ben Cowart: the second quarter saw a difficult macro economic environment where crack spreads felled by twenty-eight percent compared to the first quarter
Benjamin Cowart: And despite doing a lot of good things operationally, the lower pricing environment negatively impacted our financial performance. However, we maintained our commitment to safe and reliable operations. We saw absolute operating expenses decrease by 6% quarter over quarter and 12% year over year, which shows our continued commitment to reducing costs, expanding margins in areas that we can control, and operating efficiently. Additionally, we continue to manage capital expenditures, and we're once again below our guidance.
Speaker Change: And despite doing a lot of good things operationally, the lower pricing environment negatively impacted our financial performance.
Benjamin Cowart: We maintained our commitment to safe and reliable operations. We saw absolute operating expenses decreased by 6% quarter over quarter and 12% year over year, which shows our continued commitment to reducing costs, expanding margins and areas that we can control, and operating efficiently. Additionally, we continue to manage capital expenditures, and we're once again below our guidance.
Speaker Change: We maintained our commitment to safe and reliable operations. We saw absolute operating expenses decrease by 6% quarter-over-quarter and 12% year-over-year, which shows our continued commitment to reducing costs, expanding margins in areas that we can control.
Speaker Change: and Operating Efficiently.
Speaker Change: Additionally, we continue to manage capital expenditures and we're once again below our guidance.
Benjamin Cowart: Over the past few years, we've made material advancements and strategic decisions to grow Vertex. For the past two years, we have operated safely and efficiently while investing capital into upgrading the mobile refinery. We built in flexibility where our capital spend allows us to redeploy our renewable equipment back into conventional production if our strategy or the adjustment. On the first quarter conference call, we discussed the strategic decision to pause our renewable diesel business and pivot to produce conventional fuels from the hydrocracker unit. We were in the process reconfiguring the unit back to conventional feedstocking, conjunction with the plan third quarter maintenance turnaround.
Benjamin Cowart: Over the past few years, we've made material advancements and strategic decisions to grow Vertex. For the past two years, we have operated safely and efficiently while investing capital into upgrading the mobile refinery. We built in flexibility with our capital spend to allow us to redeploy our renewable equipment back into conventional production if our strategy required adjustments. On the first quarter conference call, we discussed the strategic decision to pause our renewable diesel business and pivot to producing conventional fuels from the Hydro Cracker unit.
Speaker Change: Over the past few years, we've made material advancements and strategic decisions to grow Vertex. For the past two years, we have operated safely and efficiently while investing capital into upgrading the mobile refinery.
unknown: We built in flexibility with our capital spend to allow us to redeploy our renewable equipment back into conventional production if our strategy required adjustments to producing conventional fuels from the Hydro Cracker unit. As we look to ensure that any near-term liquidity constraints during our transitional period are addressed, we continue to work with our lenders. It was brought in to assist Vertex in managing through a difficult macro environment and providing additional expertise in liquidity management and performance improvement.
Speaker Change: we built in flexibility with our capital spend allow us to redeploy our renewable equipment back into conventional production if our strategy higher adjustment
Speaker Change: On the first quarter conference call, we discussed the strategic decision to pause our renewable diesel business and pivot to producing conventional fuels from the Hydro Cracker Unit.
Benjamin Cowart: We're in the process of reconfiguring the unit back to conventional feedstock in conjunction with the planned third quarter maintenance turnaround. As we look to ensure that any near-term liquidity constraints during our transitional period are addressed, we continue to work with our lenders. In June and July, we secured an additional $15 and $20 million in loans, as well as modified certain terms and conditions of our current loan agreement.
Speaker Change: we are in the process reconfiguring the unit back to conventional feed stocking conjunction with the planned third quarter maintenance turnaround
Benjamin Cowart: As we look to ensure that any near term liquidity constraints during our transitional period or address, we continue to work with our lenders. and June and July. We secured an additional 15 and 20 million in loans, as well as modified certain terms and conditions of our current loan agreement. We also named Seth Bullitt as our Chief Restructuring Officer. Seth has significant experience in the industry and understands Vertex's operational and financial capability very well. He was brought in to assist Vertex and managing through a difficult macro environment and providing additional expertise in liquidity, management, and performance improvement.
Speaker Change: As we look to ensure that any near-term liquidity constraints during our transitional period are addressed, we continue to work with our lenders.
Speaker Change: In June and July , we secured an additional $15 and $20 million in loans.
Speaker Change: as well as modified certain terms and conditions of our current loan agreement. We also named Seth Bullock as our chief restructuring officer. Seth has significant experience in the industry and understands Vertex's operational and financial capability very well.
Benjamin Cowart: We also named Seth Bullock as our chief restructuring officer. Seth has significant experience in the industry and understands Vertex's operational and financial capability very well. It was brought in to assist Vertex in managing through a difficult macro environment and providing additional expertise in liquidity management and performance improvement. I want to thank all of our employees for the good work they have accomplished thus far in 2024. As Doug will note shortly, our safety track record is commendable, and we have more work ahead of us to convert our hydrocracker to 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 Doug.
unknown: It was brought in to assist Vertex in managing through a difficult macro environment and providing additional expertise in liquidity management and performance improvement.
Benjamin Cowart: I want to thank all of our employees for the good work they have accomplished us for in 2024.
Speaker Change: I want to thank all of our employees for the good work they have accomplished thus far in 2024. As Doug will note shortly, our safety track record is commendable and we have more work ahead of us to convert our hydrocracker to conventional feedstock, which we want to do safely.
Benjamin Cowart: As Doug will note shortly, our safety track record is commendable, and we have more work ahead of us to convert our hydrocracker to conventional feedstock, which we want to do safely because our people are the most valuable asset.
Benjamin Cowart: But that's on that hand to call over to Doug.
Speaker Change: because our people are our most valuable asset. With that, I now hand the call over to Doug.
Douglas Haugh: Thank you, Ben.
Douglas Haugh: Good morning, everyone. Unfortunately, the mobile site had its first OSHA recordable injury in over two years during the second quarter of 2024. While this contractor incident was minor, it highlighted to all of us that there are always improvements to make and that our commitment to safety must always remain top of mind. Mobile saw zero process safety events for the quarter. Continuing his streak of over two years without standing HS&E performance at the site. 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, the testament to the dedication of both employees and contract partners working within our facilities.
Douglas Haugh: Unfortunately, the mobile site had its first OSHA recordable injury in over two years during the second quarter of 2024. While this contractor incident was minor, it highlighted to all of us that there are always improvements to make and that our commitment to safety must always remain top of mind, and Mobile saw zero process safety events for the quarter, continuing its streak of over two years with outstanding HSNE performance at the site.
Doug Haugh: Thank you, Ben. Good morning, everyone.
Doug Haugh: Unfortunately, the mobile site had its first OSHA recordable injury in over two years during the second quarter of 2024.
Speaker Change: While this contractor incident was minor, it highlighted to all of us that there are always improvements to make and that our commitment to safety must always remain top of mind, and Mobile saw zero process safety events for the quarter, continuing its streak of over two years with outstanding HSNE performance at the site.
Douglas Haugh: I want to commend our employees at every location for continually prioritizing the safety-first mentality of our entire organization, and the effort and care for each other seen across the entire business. It's 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 in line with expectations. Our team at the Mobile site demonstrated strong operational performance of the conventional facility during the quarter with average throughput volumes of approximately 68,000 barrels per day for capacity utilization at 90%.
unknown: I want to commend our employees at every location for continually prioritizing the safety-first mentality of our entire organization.
unknown: It's 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 in line with expectations. Turning to our Renewable Fuels business, Vertex's Renewable Diesel plant operated well, and we finished running down our inventory of feedstock. This focus on the conventional business seeks to capture available margins in a more established market with an on-stream target of the fourth quarter of 2024.
Speaker Change: 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.
Douglas Haugh: Our legacy operations overall had a good quarter, with our arrow performing in line with expectations. Our team at the mobile site demonstrated strong operational performance of the conventional facility during the quarter with average throughput volumes of approximately 68,000 barrels per day for capacity utilization and 90%. The higher capacity utilization rate was possible due to the team getting the crewed unit back from its planned decog ahead of schedule. Total off-ex for the second quarter was down 6% compared to the first quarter and down 12% year over year. This reflects our continuous emphasis on operational excellence, including cost savings and efficiencies that will help us lower our overall cost.
Doug Haugh: our legacy operations overall had a good quarter with maro performing in line with expectations
Speaker Change: Our team at the Mobile site demonstrated strong operational performance of the conventional facility during the quarter with average throughput volumes of approximately 68,000 barrels per day for capacity utilization of 90%.
Douglas Haugh: A higher capacity utilization rate was possible due to the team getting the crew unit back from its planned decode ahead of schedule. However, total OPEX for the second quarter was down 6% compared to the first quarter and down 12% year-over-year. This reflects our continuous emphasis on operational excellence, including cost savings and efficiencies that will help us lower our overall cost. Given the deteriorating crack spreads, we saw our conventional fuels gross margin per barrel during the quarter decrease materially to $5.67, compared to the $12.63 we saw in the first quarter.
unknown: A higher capacity utilization rate was possible due to the team getting the crew unit back from its planned decoat ahead of schedule.
Speaker Change: Total OPEX for the second quarter was down 6% compared to the first quarter and down 12% year over year. This reflects our continuous emphasis on operational excellence, including cost savings and efficiencies that will help us lower our overall costs.
Douglas Haugh: Given the deteriorating cracks roads, we saw our conventional fields grow smart and per barrel during the quarter decrease materially to $5.67. Compared to the $12.63 we saw in the first quarter. Our finished products such as gasoline, diesel, and jet fuel accounted for 64.4% of our total product yield during the second quarter of 2024, slightly higher than in the first quarter.
unknown: Given the deteriorating crack spreads, we saw our conventional fuels gross margin per barrel during the quarter decrease materially to $5.67.
Douglas Haugh: Our finished products, such as gasoline, diesel, and jet fuel, accounted for 64.4% of our total product yield during the second quarter of 2024, slightly higher than in the first quarter. In the second quarter, we had strong throughput volumes, but in the third quarter, we have a planned turnaround scheduled in conjunction with the HydroCracker conversion that is currently in progress. This will reduce our overall throughput for Q3, but we do expect to return to our typical run rates for quarter four. Now turning to our renewable fuels business, Vertex's renewable diesel plant operated well. We finished running down our inventory of feedstock. Our renewable throughput volumes average 3,092 barrels per day.
unknown: Compared to the $12.63 we saw in the first quarter, our finished products, such as gasoline, diesel, and jet fuel, accounted for 64.4% of our total product yield during the second quarter of 2024, slightly higher than in the first quarter.
Douglas Haugh: In the second quarter, we had strong throughput volumes, but in the third quarter, we have a planned turnaround scheduled in conjunction with the hydrocracker conversion that is currently in progress. This will reduce our overall throughput for Q3 when we do expect to return to our typical run rates for quarter four.
unknown: In the second quarter we had strong throughput volumes, but in the third quarter we have a planned turnaround scheduled in conjunction with the HydroCracker conversion that is currently in progress. This will reduce our overall throughput for Q3, but we do expect to return to our typical run rates for quarter four.
Douglas Haugh: Now turning to our renewable fuels business, where Texas renewable diesel plant operated well, we finished running down our inventory of feedstock. Our renewable throughput volumes average $3,092 per day. And as of the end of June, we had C-star V production and are on schedule for the conversion of our hydrocracker back to conventional service. as well. His focus on the conventional business seeks to capture available margins in a more established market with an on-screen target of the fourth quarter of 2024. Our commercial team is supporting our strategic pivot and continues to work closely with customers and suppliers, all of whom have been great partners through this process.
unknown: Now turning to our Renewable Fuels business, Vertex's renewable diesel plant operated well. We finished running down our inventory of feedstock. Our renewable throughput volumes averaged 3,092 barrels per day. And as of the end of June , we had ceased RD production and are on schedule for the conversion of our hydrocracker back to conventional service.
Douglas Haugh: And as of the end of June, we have ceased our deproduction and are on schedule for the conversion of our hydrocracker back to conventional service. This focus on the conventional business seeks to capture available margins in a more established market with an on-stream target of the fourth quarter of 2024. Our commercial team is supporting our strategic pivot and continues to work closely with customers and suppliers, all of whom have been great partners through this process.
Speaker Change: this focusused on the commissional business seeks to capture available margins in a moreestablished market but an ansering target of the fourth quarter two thousand and twenty-four
unknown: Our commercial team is supporting our strategic pivot and continues to work closely with customers and suppliers, all of whom have been great partners through this process.
Douglas Haugh: We're appreciative of their collaboration and support of this effort.
Douglas Haugh: We're appreciative of their collaboration and support of this effort. As I mentioned on our last call, we tendered a new offtake agreement for Jet this spring and commenced supply of our new customer on April 1st. This transition has been well-managed by the operations and commercial teams, and this is an important milestone for Vertex. This is the first of our finished product contracts to roll off our initial offtake agreements inherited upon the purchase of the refinery.
Douglas Haugh: As I mentioned on our last call, we tender the new off-take agreement for Jet the Spring and commence supply of our new customer on April 1st. This transition has been well-managed by the operations and commercial teams, and this is an important milestone for Vertex. It is the first of our finished product contracts to roll off our initial off-take agreements inherited upon the purchase of their refinery. Like to remind you, we have additional agreements approaching extra years and next year, and we'll be following a similar process with those volumes as we did with the Jet volumes and expect to deliver increased value to Vertex versus our existing contracts.
unknown: We're appreciative of their collaboration and support of this effort.
unknown: As I mentioned on our last call, we tendered a new offtake agreement for JET this spring and commenced supply of our new customer on April 1st.
unknown: This transition has been well-managed by the operations and commercial teams, and this is an important milestone for Vertex. This is the first of our finished product contracts to roll off our initial offtake agreements inherited upon the purchase of the refinery.
unknown: This transition has been well managed by the operations and commercial teams, and this is an important milestone for Vertex. This is the first of our finished product contracts to roll off our initial offtake agreements inherited upon the purchase of the refinery.
Douglas Haugh: I'd like to remind you we have additional agreements approaching expiry over the next year, and we'll be following a similar process with those volumes as we did with the jet volumes and expect to deliver increased value to Vertex versus our existing contract. I'll now turn the call over to Chris for a review of the company's financial results and additional detail regarding our financial and operating outlook for the third quarter of 2024.
unknown: I'd like to remind you we have additional agreements approaching expiry over the next year, and we'll be following a similar process with those volumes as we did with the JET volumes, and expect to deliver increased value to Vertex versus our existing contracts.
Christopher Carlson: I'll now turn the call over to Chris for review of the company financial results and additional detail regarding our financial and operating outlook for the third quarter of 2024.
unknown: I'll now turn the call over to Chris for a review of the company's financial results and additional detail regarding our financial and operating outlook for the third quarter of 2024.
Christopher Carlson: Thank you, Doug. And welcome to those joining us on the call today. Our focus continues to be on managing our balance sheet and protecting liquidity. As discussed, we entered into additional term loans for a total of $35 million to help us manage any near-term softness in the macroeconomic pricing environment and to help us through our transition from RD to conventional production. We continue to believe that by stopping losses associated with renewable diesel production and adding available margin through upgrading VGO to a higher-margin conventional product, we will be able to generate additional cash, allowing us greater financial flexibility and improving our balance sheet.
Christopher Carlson: Thank you, Doug, and welcome to those joining us on the call today. Our focus continues to be on managing our balance sheet and protecting liquidity. As been discussed, we entered into additional term loans for a total of 35 million dollars to help us manage any near-term softness in the macroeconomic pricing environment and to help us through our transition from RD to conventional production. We continue to believe that by stopping losses associated with the renewable diesel production and adding available margin through upgrading VGO to a higher margin conventional product, we will be able to generate additional cash flow, allowing us greater financial flexibility and improving our balance sheet.
unknown: Thank you, Doug, and welcome to those joining us on the call today. Our focus continues to be on managing our balance sheet and protecting liquidity.
unknown: As been discussed, we entered into additional term loans for a total of $35 million to help us manage any near-term softness in the macroeconomic pricing environment and to help us through our transition from RD to conventional production.
unknown: We continue to believe that by stopping losses associated with the renewable diesel production and adding available margin through upgrading BGO to a higher margin conventional product.
unknown: We will be able to generate additional cash flow, allowing us greater financial flexibility and improving our balance sheet.
Christopher Carlson: Turning that to our financial results. Vertex reported net loss attributed a little to the company of 53.8 million for the second quarter of 2024. This compares to a net loss of 81.4 million in the second quarter of 2023. We saw a decrease in our total adjusted evadab to a loss of 22.4 million in the second quarter driven by lower pricing. Total capital expenditure for the second quarter of 2024 were 15 million. 29 percent below our prior guidance. Reflecting a deliberate preservation of capital achieved via deferral of certain discretionary capital expenditures. This primarily includes a re-alignment of planned capital expenses for the renewables business.
Christopher Carlson: Turning now to our financial results, Vertex reported a net loss attributable to the company of $53.8 million for the second quarter of 2024. This compares to a net loss of $81.4 million in the second quarter of 2020. We saw a decrease in our total adjusted EBITDA to a loss of $22.4 million in the second quarter, driven by lower prices. Total capital expenditures for the second quarter of 2024 were $15 million, 29% below our prior guide.
unknown: Vertex reported a net loss attributable to the company of $53.8 million for the second quarter of 2024. This compares to a net loss of $81.4 million in the second quarter of 2020. Reflecting a deliberate preservation of capital achieved via a deferral of certain discretionary capital expenditure, which does not include the additional $20 million received in July.
unknown: Turning now to our financial results.
unknown: Vertex reported net loss attributable to the company of $53.8 million for the second quarter of 2024. This compares to a net loss of $81.4 million in the second quarter of 2023.
unknown: We saw a decrease in our total adjusted EBITDA to a loss of $22.4 million in the second quarter, driven by lower pricing.
unknown: Total capital expenditures for the second quarter of 2024 were $15 million.
Christopher Carlson: Reflecting a deliberate preservation of capital achieved via a deferral of certain discretionary capital expenditure. This primarily includes a realignment of planned capital expenses for the renewables business. Turning to the balance sheet, as of June 30, 2024, the company has total cash and equivalents, including restricted cash, of $18.9 million, which does not include the additional $20 million received in July. The total net debt outstanding was $303.8 million at the end of the second quarter 2024, including lease obligations of $67.5 million.
unknown: 29% below our prior guidance, reflecting a deliberate preservation of capital achieved via a deferral of certain discretionary capital expenditures. This primarily includes a realignment of planned capital expenses for the renewables business.
Christopher Carlson: Turning to the balance sheet. As of June 30, 2024, the company has total cash and equivalents, including restricted cash, of 18.9 million, which does not include the additional 20 million received in July. The total net debt outstanding was 303.8 million at the end of the third quarter of 2024. We have a plan turnaround schedule in conjunction with the continued work to convert the hydrocracker back to conventional production. This will result in a decrease in our overall throughput for the quarter, which we forecast will improve materially in the fourth quarter. For Q3, we anticipate total conventional throughput volumes at mobile to be between 55,000 and 60,000 barrels per day.
unknown: Turning to the balance sheet, as of June 30, 2024, the company had total cash and equivalents, including restricted cash, of $18.9 million, which does not include the additional $20 million received in July .
unknown: The total net debt outstanding was $303.8 million at the end of the second quarter of 2024, including lease obligations of $67.5 million.
Christopher Carlson: Looking to the third quarter of 2024, we have a planned turnaround schedule in conjunction with the continued work to convert the hydrocracker back to conventional production. This will result in a decrease in our overall throughput for the quarter, which we forecast will improve materially in the fourth quarter. For Q3, we anticipate total conventional throughput volumes at Mobile to be between 55,000 and 60,000 barrels per day. Our expected yield of conventional products is expected to consist of between 64% to 68% high-value finished products, such as gasoline, diesel, and jet fuel, with the Balance and Intermediate and other products such as VGO.
Speaker Change: looking to the third quarter of two thousand and twenty-four we had a plan turnaround schedule in conjunction with the continued work to convert the hydrocracker back to conventictional production
unknown: This will result in a decrease in our overall throughput for the quarter, which we forecast will improve materially in the fourth quarter.
Speaker Change: For Q3, we anticipate total conventional throughput volumes at Mobile to be between 55,000 and 60,000 barrels per day.
Christopher Carlson: Our expected yield of conventional products is expected to consist of between 64% to 68% high value finished products, such as gasoline, diesel, and jet fuel, with the balance in intermediate and other products such as VGO. Our anticipated op-ex per barrel is also expected to rise in conjunction with the lower throughput, but we will continue to work on cost reductions on an absolute basis. For the third quarter, the projected per barrel range is between $5.52 per barrel and $6.02 for the quarter. We anticipate total capital expenditures for the third quarter to be between 15 million to 20 million as planned, which includes a portion of the 10 million conversion costs.
Speaker Change: Our expected yield of conventional products is expected to consist of between 64% to 68% high-value finished products, such as gasoline, diesel, and jet fuel, with the balance in intermediate and other products, such as VGO.
Christopher Carlson: Our anticipated op-ex per barrel is also expected to rise in conjunction with the lower throughput, but we will continue to work on cost reductions on an absolute basis. For the third quarter, the projected per barrel range is between $5.52 per barrel and $6.02 for the quarter. We anticipate total capital expenditures for the third quarter to be between $15 million and $20 million, as planned, which includes a portion of the $10 million conversion cost. With that, I will turn it over to Ben for some closing remarks.
Speaker Change: Our anticipated op ex per barrel is also expected to rise in conjunction with the lower throughput, but we will continue to work on cost reductions on an absolute basis.
unknown: For the third quarter, the projected per barrel range is between $5.52 per barrel and $6.02 for the quarter.
unknown: We anticipate total capital expenditures for the third quarter to be between $15 million to $20 million as planned, which includes a portion of the $10 million conversion cost. With that, I will turn it over to Ben for some closing remarks.
Benjamin Cowart: With that, I will turn it over to Ben for some closing remarks.
unknown: Thank you, Chris.
Benjamin Cowart: Thank you, Chris. Our team is doing a great job of keeping our operations safe, minimizing risk, and delivering incremental results towards our strategic goals. As we navigate to the third quarter of 2024, our focus is on managing cash flow during the transitional period, given the persistent market volatility and crude and product 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. Seth will provide valuable insight and guidance to help us through this process. We've done a lot of work proactively, restructuring the business to reduce cost in capital and set up systems to manage and monitor cash flow effectively.
Benjamin Cowart: Chris, our team is doing a great job of keeping our operations safe.
Speaker Change: Thank you, Chris. Our team is doing a great job of keeping our operations safe, minimizing risk, and delivering incremental results towards our strategic goals.
Speaker Change: As we navigate the third quarter of 2024, our focus is on managing cash flow during this transitional period, given the persistent market volatility and crude in product pricing, which is impacted by a variety of global factors.
Speaker Change: We will continue to pursue strategic opportunities and financing pathways that support liquidity needs over the near term.
unknown: Seth will provide valuable insight and guidance to help us through this process.
Speaker Change: We've done a lot of work proactively restructuring the business to reduce costs and capital and set up systems to manage and monitor cash flow effectively.
Benjamin Cowart: We will continue these efforts on an ongoing basis. We have been adamant that our strategic priorities are to increase our cash position, reduce our operating costs, and improve margins.
unknown: And we'll continue these efforts on an ongoing basis.
Speaker Change: 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, we can't control pricing.
Benjamin Cowart: While we are optimistic about the future, we can't control pricing, and we'll continue to evaluate all options to help best position Vertex to navigate the current environment and try to maximize profitability for the remainder of 2024 and into 2025.
Speaker Change: And we'll continue to evaluate all options to help best position Vertex to navigate the current environment and try to maximize profitability for the remainder of 2024 and into 2025.
Benjamin Cowart: Thank you for joining us on the call today.
Speaker Change: Thank you for joining us on the call today.
Operator: We conclude the Vertex Energy second quarter 2024 conference call. Thank you for joining. You may now disconnect. Thank you.
Speaker Change: This concludes the Vertex Energy second quarter 2024 conference call.
Speaker Change: Thank you for joining. You may now disconnect.
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Speaker Change: and yeah yeah yeah yeah yeah yeah yeah
in Quarter 2024 conference call.
Crystal Lange: I will now turn the call over to Crystal Lange, IR Cardinator. As remind you that management's commentary on today's conference call may include forward-looking statements which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially.
For a discussion of some of the risk factors that could cause actual results to differ, please refer to the risk factors section of Vertex Energy's latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliation of the historical non-gap financial measures discussed during our call in the press release issued today.
Ben Cowart: Today's call will begin with remarks from Ben Cowart, followed by an operational review from Doug Haugh, financial review from Chris Carlson, in closing remarks by Ben Cowart. With that, I'll turn the call over to Ben. Thank you, Chris.
Ben Cowart: Good morning to those joining us.
Ben Cowart: On the call of the day, the team and I plan to update you on the financial and operating results for the second quarter 2024, as well as update you on the progress around the hydrocracker conversion from renewable feedstock to conventional and outline some strategic steps that we've taken to help Vertex navigate the current near-term landscape. The second quarter saw a difficult macro economic environment where cracks spreads fell by 28% compared to the first quarter.
Ben Cowart: Despite doing a lot of good things operationally, the lower pricing environment negatively impacted or financial performance. We maintained our commitment to safe and reliable operations. We saw absolute operating expenses decreased by 6% quarter over quarter and 12% year over year, which shows our continued commitment to reducing costs, expanding margins and areas that we can control, and operating efficiently. Additionally, we continue to manage capital expenditures and we're once again below our guidance.
Ben Cowart: Over the past few years, we've made material advancements and strategic decisions to grow Vertex. For the past two years, we have operated safely and efficiently while investing capital into upgrading the mobile refinery. We built in flexibility where our capital spend allows us to redeploy our renewable equipment back into conventional production if our strategy or the adjustment. On the first quarter conference call we discussed the strategic decision to pause our renewable diesel business and pivot to produce and conventional fuels from the hydrocracker unit.
Ben Cowart: We were in the process reconfiguring the unit back to conventional feedstocking conjunction with the plan third quarter maintenance turnaround. As we look to ensure that any near term liquidity constraints during our transitional period or address, we continue to work with our lenders, and June and July. We secured an additional 15 and 20 million in loans, as well as modified certain terms and conditions of our current loan agreement.
Ben Cowart: We also named Seth Bullitt as our chief restructuring officer. Seth has significant experience in the industry and understands Vertex's operational and financial capability very well. He was brought in to assist Vertex and managing through a difficult macro environment and providing additional expertise in liquidity, management and performance improvement.
I want to thank all of our employees for the good work they have accomplished us for in 2024. As Doug will note shortly, our safety track record is commendable and we have more work ahead of us to convert our hydrocracker to conventional feedstock, which we want to do safely because our people are the most valuable asset.
Ben Cowart: But that's on that hand to call over to Doug. Thank you, Ben.
Doug Haugh: Good morning, everyone.
Doug Haugh: Unfortunately, the mobile site had its first OSHA recordable injury in over two years during the second quarter of 2024.
Doug Haugh: While this contractor incident was minor, it highlighted to all of us that there are always improvements to make and that our commitment to safety must always remain top of mind and mobile saw zero process safety events for the quarter. Continuing his streak of over two years without standing HS&E performance at the site.
Doug Haugh: 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, the testament to the dedication of both employees and contract partners working within our facilities.
Doug Haugh: Our legacy operations overall had a good quarter with our arrow performing in line with expectations. Our team at the mobile site demonstrated strong operational performance of the conventional facility during the quarter with average throughput volumes of approximately 68,000 barrels per day for capacity utilization and 90%. The higher capacity utilization rate was possible due to the team getting the crewed unit back from its planned decog ahead of schedule. Total off-ex for the second quarter was down 6% compared to the first quarter and down 12% year over year.
Doug Haugh: This reflects our continuous emphasis on operational excellence including cost savings and efficiencies that will help us lower our overall cost. Given the deteriorating cracks roads, we saw our conventional fields grow smart and per barrel during the quarter decrease materially to $5.67. Compared to the $12.63 we saw in the first quarter. Our finished products such as gasoline, diesel, and jet fuel accounted for 64.4% of our total product yield during the second quarter of 2024 slightly higher than in the first quarter.
Doug Haugh: In the second quarter we had strong throughput volumes but in the third quarter we have a plan turnaround scheduled in conjunction with the hydrocracker conversion that is currently in progress. This will reduce our overall throughput for Q3 when we do expect to return to our typical run rates for quarter four.
Doug Haugh: Now turning to our renewable fuels business where Texas renewable diesel plant operated well, we finished running down our inventory of feedstock. Our renewable throughput volumes average $3,092 per day. And as of the end of June we had C-star V production and are on schedule for the conversion of our hydrocracker back to conventional service, as well.
Doug Haugh: His focus on the conventional business seeks to capture available margins in a more established market with an on-screen target of the fourth quarter of 2024. Our commercial team is supporting our strategic pivot and continues 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. As I mentioned on our last call, we tender the new off-take agreement for Jet the Spring and commence supply of our new customer on April 1st.
This transition has been well-managed by the operations and commercial teams and this is an important milestone for Vertex is the first of our finished product contracts to roll off our initial off-take agreements inherited upon the purchase of their refinery. Like to remind you, we have additional agreements approaching extra years and next year, and we'll be following a similar process with those volumes as we did with the Jet volumes and expect to deliver increased value to Vertex versus our existing contracts.
Chris Carlson: I'll now turn the call over Chris for review of the company financial results and additional detail regarding our financial and operating outlook for the third quarter of 2024. Thank you Doug, and welcome to those joining us on the call today. Our focus continues to be on managing our balance sheet and protecting liquidity. As been discussed, we entered into additional term loans for a total of 35 million dollars to help us manage any near-term softness in the macroeconomic pricing environment and to help us through our transition from RD to conventional production.
Chris Carlson: We continue to believe that by stopping losses associated with the renewable diesel production and adding available margin through upgrading VGO to a higher margin conventional product, we will be able to generate additional cash flow, allowing us greater financial flexibility and improving our balance sheet.
Chris Carlson: Turning that to our financial results. Vertex reported net loss attributed a little to the company of 53.8 million for the second quarter of 2024. This compares to a net loss of 81.4 million in the second quarter of 2023. We saw a decrease in our total adjusted evadab to a loss of 22.4 million in the second quarter driven by lower pricing. Total capital expenditure for the second quarter of 2024 were 15 million. 29 percent below our prior guidance. Reflecting a deliberate preservation of capital achieved via deferral of certain discretionary capital expenditures. This primarily includes a re-alignment of planned capital expenses for the renewables business.
Chris Carlson: Turning to the balance sheet. As of June 30, 2024, the company has total cash and equivalents including restricted cash of 18.9 million, which does not include the additional 20 million received in July. The total net debt outstanding was 303.8 million at the end of the third quarter of 2024. We have a plan turnaround schedule in conjunction with the continued work to convert the hydrocracker back to conventional production. This will result in a decrease in our overall throughput for the quarter, which we forecast will improve materially in the fourth quarter.
Chris Carlson: For Q3, we anticipate total conventional throughput volumes at mobile to be between 55,000 and 60,000 barrels per day. Our expected yield of conventional products is expected to consist of between 64% to 68% high value finished products, such as gasoline, diesel and jet fuel, with the balance in intermediate and other products such as VGO. Our anticipated op-ex per barrel is also expected to rise in conjunction with the lower throughput, but we will continue to work on cost reductions on an absolute basis.
Chris Carlson: For the third quarter, the projected per barrel range is between $5.52 per barrel and $6.02 for the quarter. We anticipate total capital expenditures for the third quarter to be between 15 million to 20 million as planned, which includes a portion of the 10 million conversion costs.
Ben Cowart: With that, I will turn it over to Ben for some closing remarks.
Ben Cowart: Thank you, Chris. Our team is doing a great job of keeping our operations safe, minimizing risk, and delivering incremental results towards our strategic goals. As we navigate to third quarter of 2024, our focus is on managing cash flow during the transitional period given the persistent market volatility and crude and product 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.
Ben Cowart: Seth will provide valuable insight and guidance to help us through this process. We've done a lot of work proactively, restructuring the business to reduce cost in capital and set up systems to manage and monitor cash flow effectively. We will continue these efforts on a ongoing basis. 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, we can't control pricing and we'll continue to evaluate all options to help best position vertex to navigate the current environment and try to maximize profitability for the remainder of 2024 and into 2025.
Thank you for joining us on the call today.
Crystal Lange: We conclude the vertex energy second quarter 2024 conference call. Thank you for joining.
You may now disconnect. Thank you.
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