Presentation on theme: "2014 ENERGY CONFERENCE VGO, Marine Fuel, and Cutterstocks derived from ReRefining October 2014."— Presentation transcript:
2014 ENERGY CONFERENCE VGO, Marine Fuel, and Cutterstocks derived from ReRefining October 2014
R ECOVERING T OMORROW ’ S E NERGY DISCLAIMER 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 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 presentation 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 presentation, except as required by law, and also undertakes no obligation to update or correct information prepared by third parties that are not paid for by Vertex Energy. Industry Information Information regarding market and industry statistics contained in this presentation is based on information available to us that we believe is accurate. It is generally based on publications that are not produced for investment or economic analysis. 2
R ECOVERING T OMORROW ’ S E NERGY COMPANY SNAPSHOT Key Term: 3 A leading recycler of used motor oil and refiner of off- specification petroleum and chemical co-products Core expertise in street-level feedstock collection, refining, and sales Developed and patented a used motor oil re-refining process technology (“TCEP”) Vertically integrated business model providing value-added services and capturing higher margins Flexible, scalable, and efficient platform ‒ Internal feedstock collection and refining capabilities ‒ Leverage 3rd party collectors and refineries Uniquely positioned to leverage our core expertise and proprietary technology to develop regional markets across the U.S., replicating our success in Houston into other geographies Feedstock – Raw material used in a refining process to produce a higher value finished product ‒ Used motor oil from Jiffy Lube® ‒ Co-product from industrial chemical manufacturing plant ‒ Unwanted petroleum co-products from an oil refinery R ECOVERING T OMORROW ’ S E NERGY
COMPANY SNAPSHOT – WHAT WE DO 4 Vertex sources feedstocks and processes them into higher value products ‒ Vertically integrated across the value chain collecting a variety of feedstocks from the same customer Vertex also acts as a broker of used oil to strategically control more used oil supply USED MOTOR OIL C OLLECTION & A GGREGATION P ROCESSING & H ANDLING Broker: M ANAGE LOGISTICS /S ALES USED ANTI - FREEZE P RODUCT S ALES V ERTICALLY I NTEGRATED M ODEL USED OIL FILTERS CHEMICAL & PETROLEUM CO - PRODUCTS U SED M OTOR O IL M ARINE F UEL P RODUCT V ALUE $ $$$$ V IRGIN ANTI - FREEZE V ERTEX V ALUE -A DDED P ROCESSING : (R EFINING, TCEP, M ATERIALS R ECOVERY, VGO O THER F EEDSTOCK P ROCESSING ) L EVERAGE P ROPRIETARY AND OFF - THE - SHELF TECHNOLOGY V ERTEX V ALUE -A DDED P ROCESSING : (R EFINING, TCEP, M ATERIALS R ECOVERY, VGO O THER F EEDSTOCK P ROCESSING ) L EVERAGE P ROPRIETARY AND OFF - THE - SHELF TECHNOLOGY R AW M ETAL H IGHER V ALUE F EED - S TOCK S OLD AS - IS TO BURNERS AND REFINERIES D ISTILLATES, G ASOLINE, & B LEND S TOCK R ECOVERING T OMORROW ’ S E NERGY Base Oil & Lubes
R ECOVERING T OMORROW ’ S E NERGY THE REGIONAL MODEL 5 R ECOVERING T OMORROW ’ S E NERGY There are significant costs associated with moving feedstock over long distances to and from a centrally located processing facility The Vertex / Omega combination establishes 2 regional hubs in highly strategic locations, which will optimize transportation costs ̶ West Coast - California / Nevada ̶ Gulf Region - New Orleans and Houston ̶ Vertex can leverage its national aggregation footprint to supply Omega with Cheaper UMO Vertex intends to capture additional margin by using its systems and expertise to build street collections as well as offer anti-freeze / filter processing services at the Omega sites ̶ Collected gallons are typically cheaper than third party gallons ̶ Generate incremental profit from the same generator ̶ Creates stickier customer relationships V ERTEX A GGREGATION / R EFINING F OOTPRINT Vertex TCEP – 32M gal Marrero – 60M+ gal Bango – 23M+ gal Myrtle Grove -H OUSTON, T EXAS -C OLUMBUS, O HIO -M OBILE, A LABAMA -F ALLON, N EVADA CURRENT AGGREGATION SITES Heartland – 18 M gal Heartland
R ECOVERING T OMORROW ’ S E NERGY USED MOTOR OIL RECYCLING INDUSTRY The U.S. used motor oil recycling industry is approximately $2.4 - $2.8 billion Of the 1.3 billion gallons of used oil generated annually, less than 35% is re-refined while the rest is burned or improperly disposed Cheap natural gas creating need for more re-refinement and processors like Vertex ‒ Used oil collectors historically sold to local industrial burners ‒ Industrial burners are switching to cheap natural gas, and collectors without infrastructure are now selling to re-refineries ‒ Market price for burning linked to cheap natural gas while price for re-refined oil is more closely linked to higher priced diesel ‒ As more of the 700 million gallons of burned oil is re-refined, the market size will increase considerably assuming the spread between diesel and natural gas holds M ARKETS F OR U SED O IL : B URNERS ( PAPER MILL, ASPHALT KILN ) R E - REFINERIES (B ASE S TOCK ) V ACUUM G AS O IL (VGO) E XPORT ( UTILITY BLENDS ) H IGH V ALUE F UEL (T HERMAL C HEMICAL E XTRACTION P ROCESS - TCEP) 1.3 B ILLION G ALLONS OF U SED O IL * * Midpoint of estimated ranges; gallons in millions 6 Re-Refined Recycled R ECOVERING T OMORROW ’ S E NERGY
USED MOTOR OIL RECYCLING VALUE CHAIN GENERATORS COLLECTORS AGGREGATORS PROCESSORS Third parties generate used oil through core business Jiffy Lube®, car dealerships, etc. Collect used oil from generators Typically local or regional Highly fragmented Purchase used oil from collectors Sell and deliver it as feedstock for processors Process used oil into a higher value product Technology upgrades feedstock into higher value end products End product is used as an industrial fuel, ship fuel, base oil, or refinery feedstock END USERS V ERTICAL I NTEGRATION E NABLES V ERTEX T O C ONTROL M ORE O F T HE V ALUE C HAIN & C APTURE H IGHER M ARGINS 7 R ECOVERING T OMORROW ’ S E NERGY
UPCOMING MARINE REGULATIONS 8 R ECOVERING T OMORROW ’ S E NERGY The maritime shipping industry is the leading contributor of sulfur emissions in the transportation sector New U.S. / EU marine regulations beginning Jan. 1, 2015, and globally in 2020 may greatly increase the demand for low sulfur fuels such as VGO and TCEP N EW R EGULATIONS Sulfur Dioxide (SO 2 ) has been associated with numerous respiratory illnesses & cardio vascular diseases SO 2 and NOx emissions are the primary causes of acid rain, which can cause significant harm to ecosystems and man made structures Commercial marine vessels are, by far, the largest source of Sulfur Dioxide in the mobile sector New Sulfur Emission Control Area (SECA) levels go into effect in North America and northern Europe on January 1, 2015, which require ships operating within 200 nautical miles of shore to lower sulfur emissions from 10,000 ppm (1%) to 1,000 ppm (0.1%) Many industry sources believe shippers will elect to switch to low sulfur gas oil as opposed to burning LNG or installing scrubbers due to high investment costs, long payback periods, and lack of available infrastructure The net impact of these regulations could result in increased demand of more than 3.5 billion gallons of low-sulfur fuel beginning in 2015 Emission regulations will continue to tighten when the global sulfur limit decreases from 3.5% to 0.5% in 2020 E NVIRONMENTAL AND H EALTH C ONSEQUENCES Vertex Energy now produces approximately 45 – 50 million gallons VGO which meet the 0.1% sulfur spec (1) Source: US EPA
R ECOVERING T OMORROW ’ S E NERGY Significantly lower capital expenditures ‒ Estimated cost to build a TCEP plant with capacity of 25 - 50 million gallons is $10 - $15 million, whereas a similarly sized base oil plant with vacuum distillation towers and a hydrotreater can cost in excess of $50 million. Higher yield and lower operating costs (less energy requirements) Potential to develop the technology and produce higher-quality end-products, including base oil Key advantage to deploying our regional model strategy PROPRIETARY TCEP TECHNOLOGY Thermal Chemical Extraction Process (TCEP) Patented process that extracts impurities from used motor oil using thermal and chemical dynamics Produces a low viscosity end product which is currently used as a fuel oil cutterstock Produced ~32 million gallons of finished product during the Last Twelve Months TCEP Advantages Over Traditional Re-Refineries 9 R ECOVERING T OMORROW ’ S E NERGY
PROPRIETARY TCEP TECHNOLOGY TCEP cutterstock 10 R ECOVERING T OMORROW ’ S E NERGY
Meets 2015 ECA Sulfur Maximum of 0.1%. Excellent fuel system protection and lubrication. High flash point for safe fuel handling. Excellent boiler and engine protection. Consistent and reliable supply. Large volume producer. VGO/MARINE FUEL Marrero (LA) refinery Advanced refining technology. Produced ~50 million gallons of finished product during the last twelve months. ECA 2015 low sulfur compliant, for applications requiring low sulfur blending or limits. Where higher product performance is required. Vertex ECA V-1000 Premium Fuel Oil 11 R ECOVERING T OMORROW ’ S E NERGY
VGO/MARINE FUEL 12 R ECOVERING T OMORROW ’ S E NERGY Vertex ECA V-1000 Premium Fuel Oil Advanced Refining Technology Vertex ECA V-1000 Premium Fuel Oil is premium low sulfur marine fuel oil, designed and manufactured to meet new 2015 Emissions Control Area (ECA) requirements. Vertex ECA V-1000 Premium Fuel Oil is manufactured at one of our state-of-the-art refineries, utilizing advanced distillation and fractionation technologies for a cleaner burning fuel and blender stock. Vertex ECA V-1000 Premium Fuel Oil not only assists marine operators in meeting the new ECA 0.1% maximum sulfur limit, it can also provide extended equipment life and reduced down time and maintenance costs. Vertex ECA V-1000 Premium Fuel Oil not only meets the new 0.1% maximum sulfur limit outlined in ECA, it also provides excellent fuel system protection, Ignition quality, compatibility and deposit and sludge control.
R ECOVERING T OMORROW ’ S E NERGY VGO/MARINE FUEL 13 R ECOVERING T OMORROW ’ S E NERGY Vertex ECA V-1000 Premium Fuel Oil Quality and Consistency
R ECOVERING T OMORROW ’ S E NERGY VGO/MARINE FUEL 14 R ECOVERING T OMORROW ’ S E NERGY Vertex ECA V-1000 Premium Fuel Oil Complete Analytical Certification The quality of Vertex ECA V-1000 Premium Fuel Oil has been verified by external laboratories and shown to meet or exceed the strict limits required to ensure proper protection and performance of modern marine equipment. ECA V-1000 Premium Fuel Oil not only provides the performance and protection demanded by modern marine engines, it is manufactured from renewable feed sources providing a low emissions fuel that protects the environment through renewal, and reduces our dependence on foreign crude sources. Vertex ECA V-1000 Premium Fuel Oil typical data has been reviewed by MAN Diesel & Turbo SE, and verified suitable for use when run in conjunction with low BN cylinder oil (as required with all low sulfur ECA fuels).
R ECOVERING T OMORROW ’ S E NERGY VGO/MARINE FUEL 15 R ECOVERING T OMORROW ’ S E NERGY Vertex ECA V-1000 Premium Fuel Oil Complete Analytical Certification
R ECOVERING T OMORROW ’ S E NERGY State of the Art Refinery Capacity ~18 million Gallons / Yr Producing Premium API Group II Base Oil Premium Low volatility Stocks Specifically designed to formulating modern Diesel and Passenger Car Motor Oils Fully Tested and Approved by API and Major OEM’s PREMIUM API GROUP II BASE OIL Vertex, Nevada Refinery State of the Art Refinery Capacity ~23 million Gallons / Yr Producing Premium API Group II Base Oils Premium Low volatility Stocks Specifically designed to formulating modern Diesel and Passenger Car Motor Oils Fully Tested and Approved by API and Major OEM’s Vertex, Ohio Refinery 16 R ECOVERING T OMORROW ’ S E NERGY
BASE OIL – TYPICAL PRODUCTION 17 R ECOVERING T OMORROW ’ S E NERGY VERTEX Base Oils are Premium quality paraffinic base stocks manufactured using state of the art re-refining technology, incorporating vacuum distillation with high pressure hydrotreatment to produce extremely consistent high quality, light colored, paraffinic base oils. VERTEX Base Oils not only provide the same high quality performance you have come to expect from virgin oil manufacturers, they also help protect the environment and reduce America’s dependence on foreign crude. VERTEX Base Oils display excellent Noack volatility, oxidation and cold temperatures characteristics required to formulate modern passenger car and heavy duty diesel engine oils.
R ECOVERING T OMORROW ’ S E NERGY FINISHED OIL BLENDING CAPABILITIES Vertex, Bakersfield, CA Blend Facility Fully Integrated Finished Oil Blending Facility PCMO (ILSAC GF-5), HDDO (CJ-4/SN), ATF (Dexron IIIH and Full Synthetic MV), UTF & Premium Hydraulic Oils (5000 hours +) Currently available State of the Art Testing facility for 100% Finished Product Verification and Certification Testing Current Capacity ~ 12+ million Gallons / Yr Producing fully licensed Finished Lubricants Room for Multiple Additive Chemistries and product line expansion Unique Additives approved in Vertex base oils designed for premium performance and significantly lower formulation costing Products Eligible for the California $0.12 Tax Credit 18 R ECOVERING T OMORROW ’ S E NERGY
Questions? 19 R ECOVERING T OMORROW ’ S E NERGY