Vertex: Renewable diesel conversion project to be complete in Q1

By Vertex Energy Inc. | September 13, 2022

Vertex Energy Inc., a leading specialty refiner and marketer of high-quality refined products, on Sept. 12 provided an update on the company's Mobile, Alabama, refinery renewable diesel conversion project, including a strategic extension of the planned construction timeline.

As previously disclosed, Vertex is currently working on completing a $90-$100 million capital project designed to modify the Mobile Refinery's existing hydrocracking unit to produce renewable diesel fuel on a standalone basis. Upon completion of the conversion project, the refinery is expected to commence production of approximately 8,000 - 10,000 barrels per day (bpd) of renewable diesel, with production volumes anticipated to subsequently ramp up to approximately 14,000 bpd. This project seeks to capitalize on the rapidly growing demand for advanced sustainable fuels, while further expanding upon Vertex's commitment to supply lower carbon fuels solutions.

After a thorough review of project execution risk by the company, mechanical completion of the Mobile Refinery's renewable diesel conversion project has been proactively extended from its initial target of year-end 2022, to the first quarter of 2023. These risk considerations are the result of recent COVID-19 induced product delays and global supply chain shortages in several previously unimpacted markets, including common pipes, valves and fittings, and certain base bulk materials. Limited visibility into a solution for these challenges, combined with the notable financial benefits associated with reduced downtime and extending current operations, have allowed the Company to respond by extending the project timeline to ensure all necessary parts and materials are ready and on-site prior to shutting the hydrocracker unit down.

Management now expects mechanical completion to occur in the first quarter of 2023, with production anticipated to begin in the second quarter of 2023, an extension of the previously communicated timeline of approximately one quarter.

Management estimates that its decision to extend the project timeline will result in a positive impact to fourth quarter 2022 gross margin of approximately $15 to $17 million, by maintaining current operations through year end 2022, assuming current refining spreads at the time of this announcement.

"I am pleased with the team's ability to remain nimble in a highly dynamic market environment," said Benjamin P. Cowart, President and CEO of Vertex, who continued, "While we are eager to begin the production of renewable diesel, we are confident in this decision to extend the timeline, while seeking to achieve an improvement in safety and reduction in project risk, compounded by the expected incremental financial benefit of maximizing participation in current market economics. We look forward to continuing to execute the project on budget, as well as advancing our commitment to supplying lower carbon fuel solutions to the market."