Vertex Energy to ‘pause’ renewable diesel production, ‘pivot’ back to petroleum refining
Vertex Energy announced May 9 that it is “pausing” renewable diesel production in Mobile, Alabama, in order to “pivot” back to petroleum refining in the second quarter.
The company said it had a previously planned catalyst and maintenance turnaround scheduled for 2024, and it will use that planned turnaround to load conventional catalyst and bring the unit out of turnaround in conventional service.
The news comes as the company reported its renewable diesel operations generated a gross loss of $10.5 million during the first quarter while its conventional petroleum refining in Mobile generated a gross profit of $37.5 million for the same three-month period.
In addition, the loss for the renewable diesel unit in the first quarter follows Vertex Energy missing its renewables output and yield targets in the fourth quarter of 2023 and losing $8.5 million in the third quarter last year.
The unit began operations in spring 2023, shortly after which it ran into operational problems during start up.
“We built in flexibility with our capital spend to allow us to redeploy our renewable equipment back into conventional production if our strategy required adjustment,” said Vertex Energy CEO Benjamin Cowart. “Due to the significant macroeconomic headwinds over the past 12 months, many of which we believe will continue to occur over the next 18 months and potentially beyond, we have decided to strategically pause our renewable diesel business and pivot to producing conventional fuels from the hydrocracker unit. We plan to reconfigure the hydrocracker in conjunction with a planned turnaround on the unit.”
Total renewable throughput at the Mobile renewable diesel facility was 4,090 barrels (171,780 gallons) per day in the first quarter.
Total production of renewable diesel was 4,003 barrels (168,126 gallons) per day, reflecting a product yield of 98 percent.
“I am appreciative of the team for their work in proving the hydrocracker in renewables service, obtaining multiple pathway approvals, and successfully incorporating a wide variety of renewable feedstocks,” Cowart added. “In the future, based on economics and macro conditions, we expect to optimize our hydrocracker capacity between conventional and renewables service. We believe this flexibility to produce based on market demand materially enhances our unit’s long-term value potential. Our engineering and operations teams have worked diligently to preserve our optionality for the unit and to not degrade our ability to produce conventional products. We now have a more robust hydrocracking unit in either service mode. Relative to what’s currently available for renewables, we believe that this shift will allow us to optimize available returns through higher yield capabilities and higher margin opportunities for conventional products. 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.”
Cowart said Vertex Energy’s strategic priorities remain focused on increasing its cash position, reducing operating costs, and improving margins.
“We believe that this decision, to allow for more optionality in the hydrocracking unit, is not only prudent but a necessary step toward accomplishing these for the remainder of 2024 and into 2025,” he said.
In all, Vertex Energy reported a net loss of $17.7 million in the first quarter versus a net loss of $63.9 million for the fourth quarter of 2023.
The improvement in quarter-over-quarter results was primarily driven by improved crack-spread pricing in vacuum gas oil and gasoline finished products.
