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- Vertex to acquire 100% of Mobile Chemical LP Refinery
- Transforms Vertex into a leading independent refiner of renewable and conventional products
- Multiphase Renewable Diesel Project to Drive Superior “Clean Refining” Economies
- Expect $ 3 billion in annual revenue and over $ 400 million in gross profit by the end of 2023
- The trade conference call will take place on Thursday, May 27, 2021 at 8:30 a.m.ET
Vertex Energy, Inc. (NASDAQ: VTNR) (“Vertex” or the “Company”), a leading refiner and distributor of high quality refined products, today announced that it has entered into a definitive agreement to acquire the refinery. Mobile (“Mobile”) located in Mobile, Alabama, of Equilon Enterprises LLC d / b / a Shell Oil Products US, Shell Oil Company and Shell Chemical LP (“Shell”), subsidiaries of Royal Dutch Shell plc, for $ 75 million of dollars. The transaction is expected to close in the fourth quarter of 2021, subject to regulatory clearance and various closing conditions.
- Transformational acquisition of flagship refining asset and marine terminal. Vertex will become the sole owner and operator of the Mobile refinery upon closure. The refinery, which has a long history of safe and reliable operations and consistent financial performance, will become Vertex’s flagship refining asset upon closing of the transaction, positioning the company to become a pure producer of renewable and conventional products.
- Very attractive, pro-forma transaction economy for a renewable diesel fuel project. Following the successful completion of a planned $ 85 million conversion of the Mobile Refinery’s hydrocracking unit by the end of 2022, Vertex predicts that the refinery will have the potential to generate at least 3 billion dollars in annual sales and 400 million dollars in gross profit per year as of 2023., given the current refining economy.
- Way of recapitalization of the balance sheet. This transaction significantly improves Vertex’s liquidity profile and reduces its weighted average cost of capital over the medium term.
- Also supports the energy transition towards low-carbon alternatives. The addition of renewable fuel production associated with the refinery will accelerate Vertex’s strategic focus on “clean” refining. By the end of 2022, the Mobile refinery is expected to produce approximately 10,000 barrels per day (b / d) of renewable diesel fuel and renewable by-products. By mid-2023, based on current projections, Vertex plans to increase renewable diesel production to 14,000 bpd. Upon completion of the planned renewable diesel project, Vertex will become one of the leading independent producers of renewable fuels in the Southeastern United States.
“The acquisition of the Mobile Refinery will be the largest and most significant transaction ever for Vertex, a transaction that positions us to become a leading regional supplier of renewable and conventional products,” said Benjamin P. Cowart, President and CEO of Vertex. “We will acquire an exceptional refining and scale logistics asset with a significant raw material option, as well as a slate of high value distillate weighted products. As part of this transaction, Vertex will own more than 3 million barrels of crude oil storage and products, as well as other valuable logistics assets. Our vision for this site is that of diversification. We will seek to lead the Southeast region in the commercialization of fuels and new generation products that are not currently produced by the refinery today. Our entry into these new markets should generate significant long-term value for our shareholders, while adding new jobs and economic stimulus to the regional market. “
“Upon completion of the renewable diesel fuel project by the end of 2022, we predict that the Mobile refinery will have the potential to generate at least $ 3 billion in revenue and $ 400 million in gross profit in 2023, given the current economics of the project, ”Cowart continued. “Not only will this project fundamentally transform the profitability profile of the Mobile Refinery, but it also positions Vertex to pursue its goal of developing high purity refined products and alternative feedstocks that support the global transition to low emission energy alternatives. of carbon.”
“I welcome the employees of the Mobile Refinery to the Vertex family,” continued Cowart. We look forward to strengthening your cultural commitment to safety, regulatory compliance and operational excellence. I would also like to thank our financial partners, who all contributed to the completion of this transaction, allowing Vertex to embark on this next exciting phase in the history of our company. “
“As part of this transaction, we plan to enter into multi-year crude supply and product offtake agreements with several highly respected counterparties, including Shell, which has been an exceptional partner throughout the sales process,” said said Alvaro Ruiz, EVP of Enterprise Development at Vertex. “We believe these agreements will allow us to reduce our working capital requirements, while mitigating the spot market risk on product sales. At closing, we plan to hedge a significant portion of year one production, reducing our short-term exposure to movements in refined product margins, as we focus on completing the asset conversion. forecast, which remains the main short-term economic driver resulting from this transaction. “
OVERVIEW OF ASSETS
The 91,000 barrels per day Mobile Refinery is a strategically located asset capable of sourcing a flexible mix of domestic and international raw materials at low cost. The Mobile Refinery has the option of operating as a stand-alone refinery and is also capable of producing base oils and chemical raw materials. About 70% of the refinery’s current annual production is distillates, gasoline and jet fuel, with the remainder being vacuum diesel, LPG and other products. The plant distributes its finished product throughout the Southeastern United States through a large capacity truck rack, as well as deep and shallow water distribution points capable of supplying water to water vessels. As part of the transaction, Vertex will acquire approximately 3.2 million barrels of product storage, inventory, logistics and distribution assets, as well as more than 860 acres of developed and undeveloped land. Vertex plans to retain the approximately 200 employees currently employed in the company being acquired.
RENEWABLE DIESEL PROJECT
Upon completion of the transaction, Vertex plans to launch an $ 85 million capital project to modify the hydrocracking unit at the Mobile Refinery to produce renewable diesel fuel on a stand-alone basis. Upon completion of the project, which is expected to be completed by the end of 2022, the refinery will begin production of around 10,000 barrels per day of renewable diesel, increasing to 14,000 bpd by mid- 2023, while continuing to supply conventional fuels to the regional market at current rates.
Renewable diesel is a biofuel that can be produced from organic waste and vegetable oils. Renewable diesel is a sustainable and fungible replacement for petroleum-based diesel fuel. While California remains the primary market for domestically produced renewable diesel, given the economic benefits of its use under the state’s low-carbon fuel standard, other states are expected to follow suit, creating significant additional demand over the next decade. Once operational, the converted hydrocracking unit at the Mobile Refinery will be able to process a wide range of pretreated organic raw materials, including soybean and corn oil, meat tallow and used vegetable oils, between other.
Vertex expects the average gross profit per barrel on its renewable diesel production to be significantly higher than the conventional fuels production of the Mobile refinery, including the benefits of tax subsidies and emission reduction incentives. of carbon. As this project involves the conversion of an existing business process unit, Vertex expects the expected capital cost and time to market to be significantly lower than comparable new facility conversion projects.
Vertex intends to enter into a crude oil supply agreement with Shell for an initial term of five years upon closing. Under the terms of the agreement, Shell will obtain all crude oil feedstocks required by the Mobile refinery at a price negotiated against crude oil indices. In addition, Vertex plans to source renewable raw materials under a multi-year agreement with Synergy Supply and Trading, a subsidiary of Bunker Holding Group, and potentially from the planned pre-treatment facility at Myrtle Grove of the company in Belle Chasse, LA.
Vertex intends to enter into a multi-year product supply agreement with Shell, while continuing to supply Bunker Holding (“Bunker One”) under an existing 10-year agreement. Under these agreements, Shell and Bunker One will purchase 100% of the conventional fuel production from the Mobile refinery. Along with the deal, Vertex will enter into a separate long-term agreement under which Idemitsu Apollo Corporation, a wholly-owned California subsidiary of Idemitsu Kosan, will purchase 100% of the renewable diesel fuel output from the Mobile refinery. The sale of all conventional and unconventional fuels will be priced against the spot market index prices.
FINANCING OF TRANSACTIONS
Vertex expects to fund this transaction and the renewable diesel capital project with a $ 125 million credit facility and cash generated from potential asset divestments, with the balance from the sale of shares. ordinary, if necessary.
Upon closing, Vertex will acquire the existing hydrocarbon inventory of the Mobile refinery with financing provided by Bunker One. The hydrocarbon inventory will be valued at closing based on actual volumes and prevailing market prices.
Vertex hired Donovan Ventures as investment banking advisor and Vallum Advisors as financial communications advisor on the transaction.