Business Overview January 14, 2010 |
Forward Looking Statements |
This document may contain forward-looking statements including words such as "may," "can," "could," "should," "predict," "aim" "potential," "continue," "opportunity," "intend," "goal," "estimate," "expect," "expectations," "project," "projections," "plans," "anticipates," "believe," "think," "confident" "scheduled" or similar expressions, as well as information about management's view of Vertex Energy's future expectations, plans and prospects, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors which may cause the results of Vertex Energy, its divisions and concepts to be materially different than those expressed or implied in such statements. These risk factors and others are included from time to time in documents Vertex Energy files with the Securities and Exchange Commission, including but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other unknown or unpredictable factors also could have material adverse effects on Vertex Energy's future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex Energy cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex Energy undertakes no obligation to update these statements after the date of this release, except as required by law, and also takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex Energy. |
Introduction |
o Founded in 2001 by Benjamin P. Cowart
» Mr. Cowart has 24 years of experience in the petroleum recovery industry
» Management team with deep experience and relationships in residual hydrocarbon business
» People from Texpar, Siemens/FCC, Shell Oil, Chevron Sellers Oil, Phillips, Browning Ferris Industries
» Strong track records sourcing, fuel blending, logistics, fleet management, operations, petroleum process engineering, trading, brokering, project development, finance, public company management
» Company "hired up" to build management infrastructure for a >$500mm revenues public company
o Vertex is an approximately $39m (2009) revenue company in the distressed hydrocarbon recovery business
» Three distinct business units
» | Black Oil Aggregates waste petroleum products for third party re-refiners, fuel oil blenders and Thermal Chemical Extraction Process (TCEP) |
» | Refining & Marketing: Produces transportation fuels from distressed hydrocarbon and off-spec chemical streams |
» | TCEP: Captures additional margin by re-refining recovered petroleum products into marine and industrial fuel applications as well as a refinery feedstock |
Company Overview |
Vertex Energy (OTCBB: VTNR) is a leader in the aggregation, recycling and processing of distressed hydrocarbon streams thereby reducing America's reliance on foreign oil
Black Oil Division
Aggregating used oil and managing the logistics of feedstock delivery for clients
• | Outsourced feedstock management provider |
• | Core competency of competitively sourcing used oil nationwide |
Refining & Marketing Division
Processing distressed hyrdrocarbon streams at a third party facility to make valuable fuel and chemical products
• | Produce on-road gasoline blends sold to large fuel blending firms |
• | Extract chemicals from distressed streams and sell them to chemical companies |
• | Produce products sold to trading firms to use in making ship fuel and industrial fuel-oil |
Thermal-Chemical Extraction Process (TCEP)
Utilizing a proprietary licensed thermal-chemical extraction process technology to convert used oil into a marine or industrial fuel application and refinery feedstock
• | Uniquely combines our aggregated Black Oil with a processing technology to create additional value |
• | Finished TCEP product is sold into a large global market |
Mission |
Vertex strives to become the nation's leading producer of transportation fuels derived from a variety of recovered hydrocarbon streams.
In so doing, Vertex will:
• | Reduce our nation's dependence on foreign oil by making a market for otherwise discarded hydrocarbon |
• | Improve the environment by increasing the cleanliness and quantity of recovered hydrocarbons; and |
• | Improve the business practices, image and growth prospects of our industry. |
Management Team |
Benjamin P. Cowart - Chief Executive Officer, Chairman of the Board, Founder:
24+ years petroleum recovery industry, pioneering the reclamation industry by developing recycling options for
many hydrocarbon residual materials once managed as hazardous wastes.
Matthew Lieb - Chief Operating Officer:
15+ years business leadership, operations, consulting expertise, 3 startups and public company experience
Chris Stratton - Chief Financial Officer:
18+ years energy and commodity industries, extensive risk management and public company experience
Chris Carlson - Vice President of Finance:
10+ years financial management, energy, commodity, treasury and risk management
John Strickland - Manager of Supply & Trading:
25+ years management and marketing of fuels and petroleum blending operations
Greg Wallace - Manager of Refining & Marketing:
20+ years processing, trading and marketing of petroleum and chemicals
David Braykovich - Vice President of Business Development:
15+ years environmental services, acquisitions and operational oversight and public company experience
Vertex's Role in the Used Oil Value Chain |
Historical Milestones |
Black Oil Division |
Black Oil |
o Value Drivers
» | Feedstock pricing and quality control |
» | Balancing supply versus spot demand |
» | Knowledge of rail and barge market logistics and costs |
» | Relationships with collectors |
» | Scale of operations relative to our customers and suppliers |
» | Proprietary operating system for the management of logistics, transportation and inventory |
o Asset intensive portions of the business are outsourced
» Terminal operations, barges, rail, trucks
o Growth opportunities and risks
» Vertically integrate by acquiring collectors in targeted markets
» Exclusive supply agreements for other planned re-refineries in the U.S.
Oil Natural Gas Spread |
Refining and Marketing |
Refining & Marketing |
o Value Drivers
» | Sourcing feedstock at attractive prices |
» | Quantity and quality of feedstock |
» | Chemical processing knowledge/experience to make customized "recipes" |
» | Utilize contract manufacturing model to create higher value end products |
» | Maintaining relationships in diversified markets for finished products |
TCEP |
TCEP |
o Value Drivers
» Processing expertise
» Proprietary technology
» Margin generated between price of input and price of output sold (crack spread)
» Opportunity to replicate technology on both domestic and international scale
» Optionality for combining logistical value of aggregating black oil with processing capabilities of TCEP
2009 Results |
Ql is excluded due to World Waste merger.
Management believes excluding these results provides potential investors
with a more accurate reflection of the company's operating history.
Unaudited Results
Q2 | Q3 | Q4 | Q2-Q4 | |||||||||||||
Total Revenue | 5,265,491 | 12,035,430 | 13,869,357 | 31,170,277 | ||||||||||||
Total Cost of Revenue | 5,202,855 | 10,342,955 | 12,777,373 | 28,323,184 | ||||||||||||
Gross Profit | 62,636 | 1,692,474 | 1,091,983 | 2,847,093 | ||||||||||||
Gross Profit % | 1 | % | 14 | % | 8 | % | 9 | % | ||||||||
S G & A | 777,326 | 982,916 | 1,006,981 | 2,767,223 | ||||||||||||
Income from Operations | (714,691 | ) | 709,558 | 85,002 | 79,870 | |||||||||||
The limited financial information and projections provided above is unaudited and have not been audited or reviewed by the Company's independent auditing firm. Such projections are provided for informational purposes only and such information may be materially different (e.g., revenues, net income, cost of revenues, operating expenses, interest expense, EBITDA and/or other results of operations may be reflected more favorably in the projections provided above) from the Company's audited financial information for the year ended December 31, 2009 as filed in the Company's Form 10-K Annual Report. As such, investors are cautioned not to put undue influence on such information, which likely will not represent the Company's final audited financial statements for the year ended December 31, 2009, which the Company will file in connection with its Form 10-K filing.
2010 EBITDA Financial Forecast |
Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 | 2010 Total | ||||||||||||||||
Revenue | $ | 17,586,237 | $ | 17,883,278 | $ | 19,644,223 | $ | 18,717,387 | $ | 73,831,124 | ||||||||||
Cost of Revenues | 15,966,494 | 16,488,177 | 18,084,782 | 17,255,040 | ||||||||||||||||
Gross Profit | 1,619,743 | 1,395,100 | 1,559,441 | 1,462,347 | 6,036,631 | |||||||||||||||
Operating Expenses | 864,100 | 885,350 | 880,350 | 900,350 | 3,530,150 | |||||||||||||||
Income from Operations | 755,643 | 509,750 | 679,091 | 561,997 | 2,506,481 | |||||||||||||||
Interest Expense | (69,865 | ) | (71,250 | ) | (71,250 | ) | (71,250 | ) | (283,615 | ) | ||||||||||
Income Before Income Taxes | 685,777 | 438,500 | 607,841 | 490,747 | 2,222,865 | |||||||||||||||
Income Taxes | - | - | - | - | - | |||||||||||||||
EBITDA | $ | 843,180 | $ | 597,287 | $ | 766,628 | $ | 649,534 | $ | 2,856,629 |
There are approximately 14,772,000 fully diluted shares outstanding
Historical and Projected 2010 Revenue |
Projections and Assumptions |
o Annual Volumes of Production by Business
» 265,000 Bbls. TCEP Production (67% of Contracted Capacity)
» 810,000 Bbls. Black Oil
» 259,000 Bbls. Refining and Marketing Production
o Net Operating Losses ("NOLs")
» Continued utilization of NOLs acquired during 2009 reverse merger with World Waste
o Forward Curves as of January 13, 2010
Potential EBITDA Impact from Growth of TCEP Production |
o | Increased TCEP production is single most significant driver for additional EBITDA growth for 2010 |
o | 2010 EBITDA Forecast is $2.856m and is based upon 265,000 (67% of contracted capacity) barrels of annual TCEP production |
» 2009 TCEP production was 216,000 barrels (annualized)
Potential 2010 EBITDA Growth From 67% to 98% of Plant Capacity |
Each incremental TCEP barrel sold between
265,000 Bbls. (67% of contracted capacity) and 390,000 Bbls. (98% of contracted capacity) increases 2010 EBITDA by approximately $ 13 per barrel
Growth Prospects Beyond 2010 |
1) Replication and rollout of TCEP facilities at various locations across the U.S. and international locations
Coastal locations provide the greatest opportunities Access to end users for ship based finished products Infrastructure to include barge, rail and truck capabilities |
Technology is designed for future rollout and can be co-located with terminaling facilities Skid Mounted Minimal Capital Expenditure Limited Footprint |
2) Acquisition of used oil collectors
Acquire collectors to secure attractively priced feedstock supply for TCEP Collectors are trading at attractive prices in the current market Management has expertise in running and growing collection operations |
TCEP Rollout |
Management is targeting additional TCEP facilities in the next 2 years
Leveraging knowledge and experience from the development of the Baytown, Texas facility • Expansion of additional capacity at Baytown TCEP facility will occur before rolling out new facilities •Management is actively evaluating additional locations for TCEP facilities and plans to Lease rather than purchase excess real estate at terminaling facilities to reduce overall capital expenditures |
Acquisition of Collectors |
Management is evaluating potential acquisitions of used collectors to secure feedstock and to garner a greater share of the margin dollars in the used oil value chain
Opportunities to acquire privately held collectors in key locations at attractive prices • Public : Private EBITDA multiple arbitrage • Leverage management teams' experience in running collection operations • Improve competitive positioning within geographic markets by securing feedstock supply for additional TCEP facilities • Utilize public company stock as currency to purchase collectors |
Summary |
o | 3 lines of business |
» Black Oil
» Refining and Marketing
» TCEP
o | Forecast of positive cash flow |
o | Growth prospects |
» TCEP volumetric increases and additional plants
» Acquisitions
Definitions |
o Refinery Feedstock- a fluid catalytic cracker typically found in a crude oil refinery and used to make gasoline No. 2 oil and other byproducts
o Burners-companies that burn Black Oil for fuel
o Blenders-companies that blend Black Oil with other feedstocks to produce a higher value crude based product that meets a customer's specification
o Marine Fuel-a blend of petroleum products that are used as fuel in the marine industry
o Crack Spread-the differential between the price of Black Oil and TCEP product extracted from the Black Oil
o TCEP-Thermal Chemical Extraction Process
o Bbls.- Barrels
o Plant Capacity - 33,000 bbls of capacity under contract for TCEP production
Contact Information |
Chris Stratton | Vertex Energy, Inc. |
281.486.4182 x 109 | 1331 Gemini |
Chriss@vertexenergy.com | Suite 250 |
www.vertexenerqy.com | Houston, TX 77058 |