Vertex Investor Presentation - MicroCapClub · Company Overview ¾Vertex Energy, Inc. is an environmental services company focused on recycling petroleum-based waste streams....

Business OverviewBusiness OverviewOTCBB: VTNR

May 2012

recovering tomorrow’s energy

Disclaimer

This document may contain forward-looking statements including words such as “may” “can ”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 orVertex 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 Energyshould 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.

recovering tomorrow’s energy 2

Company Overview

Vertex Energy, Inc. is an environmental services company focused on recycling petroleum-based waste streams.

Vertex is a leader in aggregation, logistics, re-refining, and sales.Vertex is a leader in aggregation, logistics, re refining, and sales.

» Aggregation: Purchase used oil, transmix, and off-specification commercial chemical

products from an established network of local and regional collectors and generators

› 48 million gallons of feedstock aggregated in 2011

» Logistics: Manage the transportation, storage and delivery of aggregated feedstock and

re-refined products

» Re-refining: Manage the re-refining of feedstock into higher-value feedstocks or end

products

C h l f f d l› Proprietary TCEP technology for re-refining used oil

› Third party technology for re-refining transmix and chemical byproducts

» Sales: Sell used oil and re-refined products to re-refineries and fuel blenders


Compelling Business Model

Used Oil Pipeline Transmix & Chemical Byproduct

Feedstock

Black Oil Division• Aggregator and logistics manager of used oil feedstock

Re-refining & Marketing• Aggregator and logistics manager of transmix and byproduct feedstocksused oil feedstock

• Used oil sold to third-party re-refineries or transferred to Vertex Refining & Marketing Division

transmix and byproduct feedstocks

• Manage 3rd party re-refining process

• Manage proprietary Thermal Chemical Extraction Process (TCEP)

• Sell re-refined products

Re-refineries Fuel BlendersRe-refineries


Vertex’s Role in the Petroleum Recycling Value Chain

Black Oil Refining & Marketing

Vertex Future G l

Generators Collectors Aggregators

Division

Processors End Users

DivisionGoal

Generate used oil through

Collect used oil from generators

Purchase used oil from

Process used oil

Technology

End product is used as an

core business

Jiffy Lube, car dealerships, etc.

Typically local or regional

Highly fragmented

collectors

Sell and deliver it as feedstock for processors

Vertex is

Technology upgrades input into higher value end products

industrial fuel, ship fuel, base oil, or refinery feedstock

Vertex is significant player in this space.


Strong Financial Performance

Sales Gross ProfitSales Gross Profit

$109.7

$100

$125$8.1

$6

$8

$10

$38.7

$58.1

$20.3

$34.8

$25

$50

$75

$2.7

$4.2

$2.3$2.9

$2

$4

$6

EBITDANet Income

$02009 2010 2011 Q1 2011 Q1 2012

$02009 2010 2011 Q1 2011 Q1 2012

*$6.0 $6 $5

$3

$4

$5

$6

$1 5

$4.3

$1.8 $2

$3

$4

$

20092010 2011 Q1 2011 Q1 2012

($0.6)

$1.2 $1.2 $1.7

($1)

$0

$1

$2

($0.2)

$1.5 $1.3

($1)

$0

$1

$2

2009 2010 2011 Q1 2011 Q1 2012


•$ in Millions•*Includes $1.8mm Tax Adjustment

($1) ($1)

Investment Highlights

i d $2 3 billi k iStrong Position In Growing Petroleum Recycling Industry

• Estimated $2.3 billion market opportunity• Demand driven by economics of re-refining and environmental concerns• Well positioned to capitalize on growth trends through scale, technology, and key strategic

relationships

• World-wide, perpetual, royalty-free license to the patent pending TCEP process• TCEP upgrades used oil into higher-value feedstock and diesel replacement fuel• TCEP refinery capital expenditures are significantly less than conventional re-refineries

Proprietary TCEP Re-refinement

Technology

Key Strategic Relationships

• Diverse network of feedstock suppliers covering 13 states• Insulated from commodity price risk through supplier and customer contracts• Aggregated 48 million gallons of feedstock in 2012

Compelling Growth Opportunities

• Expand feedstock aggregation volumes and geographic footprint• Develop or acquire technologies to upgrade TCEP finished product into base oil• Expand TCEP capacity – 30 million gallon run-rate at first TCEP processing facility

Proven financial Performance and

Management Team

• Demonstrated growth in revenue, gross profit, EBITDA and net income• Proven, highly experienced management team averaging 20 years of industry experience

recovering tomorrow’s energy7

Black Oil Division Business Model

Small-medium aggregators and street-level collectors

V t th d il d l i ti f tiVertex sources the used oil and manages logistics of aggregation

Third Party Re-Refinery

Global BlendersSold to export fuel blenders

End MarketThird Party Re-Refinery sells VGO and quality re-refined lubricants

Sold to export fuel blenders


Black Oil Division is a 3rd party

Black Oil Division

$2.00

$2.50

$3.00

lan

t p

er G

al.

Oil vs. Natural Gas SpreadBlack Oil Division is a 3 party

aggregator and logistics manager

» Feedstock to Re-refineries

$0.00

$0.50

$1.00

$1.50

9 9 0 0 1 1 2 2 3er E

ner

gy

Eq

uiv

a» International fuel blending companies

Used oil is sourced at prices that are

somewhat tied to natural gas

1/1/

200

7/1/

200

1/1/

201

7/1/

201

1/1/

201

7/1/

201

1/1/

201

7/1/

201

1/1/

201

$ p

e

Nymex Natural Gas NYMEX Crude» Traditional users of used oil as a fuel now have

the option of using natural gas

» Geographic constraints of most collectors limits g p

their options for buyers

Used oil is sold to clients at prices indexed off of crude oil (#6 Oil)

Increasing spread between natural gas and crude improves marginIncreasing spread between natural gas and crude improves margin

Business is not asset intensive

» Market knowledge, relationships and logistics know-how are key drivers


Map of Black Oil Division and Distribution


Refining & Marketing Division Business Model

Pipeline Transmix & Chemical Byproducts Used Oil Feedstock

Vertex Sources the Feedstock Used Oil Feedstock Sourced

Thi d P t P i F ilit

and Oversees Processing from Black Oil Division

TCEPThird Party Processing Facility

G li i

TCEP

fi i i lGasoline Blendstock

Vertex sells processed products

Pygas MarineCutterstock

RefiningFeedstock

Diesel Replacement


Refining & Marketing Division

» Feedstocks

› Pipeline transmix

› Byproducts from chemical plants and refineries

› Used oil

» End Products

› Gasoline Blendstock: raw gasoline product sold to large fuel blenders

› Pygas: feedstock for various chemical production processes

› Marine Cutterstock: cutterstock sold to oil trading companies used in fuel

› Diesel Replacements: Sold directly to commercial end-users

› Refining Feedstock: Higher value feedstock for re-refineries

» Opportunistically purchase distressed hydrocarbon feedstocks

› Outsourced production allows flexibility to purchase feedstock based on demand and› Outsourced production allows flexibility to purchase feedstock based on demand and

market pricing

› No need to manage production capacity

› Business is not asset intensive


› Business is not asset intensive

h l Ch i l i (“ C ”) i h l i hi

TCEP

Thermal-Chemical Extraction Process (“TCEP”) is a new technology within

our Refining & Marketing Division that was launched in July of 2009

» Process utilizes thermal and chemical dynamics to extract impurities from used oily p

» Developed to capture greater margin in the used oil value chain by upgrading used oil internally

» Current annual capacity of approximately 30 million gallons

Converts used oil feedstock into refining feedstock and diesel replacement

products that can be used in all grades of ship fuel

» End product is sold into a large marine and fuel blending market at prices indexed to crude oilEnd product is sold into a large marine and fuel blending market at prices indexed to crude oil

Process economics are driven by feedstock vs. end product spread and

throughput

» Same spread dynamic as the Black Oil Division with greater margin capture through internal

processing and end product sales

» Opportunity to further upgrade end products to capture additional margin


pp y pg p p g

TCEP


Financials

*2009 2010 2011 1st Qtr. 2011 1st Qtr. 2012

Revenues $38,703,847 $58,140,985 $109,740,257 $20,308,903 $34,827,939 G f $2 29 552 $ 239 9 $8 0 0 0 $2 2 0 896 $2 885 06Gross Profit $2,729,552 $4,239,944 $8,074,070 $2,270,896 $2,885,064 Net income ($609,384) $1,228,426 $5,753,515 $1,196,097 $1,680,273

Gross Margin % 7.1% 7.3% 7.4% 11.2% 8.3%Gross Margin % 7.1% 7.3% 7.4% 11.2% 8.3%Net Income % ‐1.6% 2.1% 5.2% 5.9% 4.8%

EPS (Diluted) ($0.08) $0.09 $0.39 $0.09 $0.10

*2009 2010 2011 1st Qtr. 2011 1st Qtr. 2012

NOL’s of ~$36mm from reverse merger

*Company went Public in April, 2009

No debt


Gross Profit Mix

S f ll l i hi t l dd d f d t k l i ti

Percentage of VTNR Gross Profit by Division:

Successfully leveraging our history as a value-added feedstock logistics

provider to become a leading re-refiner of used petroleum products

Percentage of VTNR Gross Profit by Division:

2009 2010 20112008

68%

32%23% 25%

77%75%

100%

Black Oil Division Refining & Marketing Division

TCEP contribution ramping up dramatically


Balance Sheet Highlights

March 31, 2012 Dec. 31, 2011

($ in 000s) June 30, 2011 ##########

ASSETS

Cash & Equivalents $ 4,296 $ 675

Total Current Assets 17,390 12,674 , ,

TOTAL ASSETS $ 21,471 $ 16,734

LIABILITIES & STOCKHOLDERS' EQUITY

Total Current Liabilities $ 10,298 $ 7,320

Total Liabilities 10,374 7,396

The company has access to a revolving line of credit with Bank of AmericaTotal Stockholders' Equity 11,096 9,337

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 21,471 $ 16,734


Growth Opportunities

Expand Black Oil aggregation footprint

» New Aggregation facility in California, Los Angeles market

» Increased reach in sourcing greater amounts of feedstock» Increased reach in sourcing greater amounts of feedstock

Acquire used oil collectors

» Greater control of feedstock in key markets coupled with new TCEP facilities

» In process to acquire privately held collection company & refining assets

» Acquire other used oil collectors

Replicate and rollout additional TCEP facilities

» Locate new TCEP facility sites at marine ports to capitalize on feedstock availability

Upgrade TCEP finished product to base oil

» Capture a greater portion of the margin in the used oil value chain» Capture a greater portion of the margin in the used oil value chain


Management Team

Benjamin P. Cowart - Chief Executive Officer, Chairman of the Board, Founder:26+ years petroleum recovery industry, pioneering the reclamation industry by developing recycling options for many hydrocarbon residual materials once managed as hazardous

twastes.

Matthew Lieb - Chief Operating Officer:17+ years business leadership, operations, consulting expertise, 3 startups and public

icompany experience

Chris Carlson - Chief Financial Officer:12+ years financial management, energy, commodity, treasury and risk management

John Strickland – Manager of Supply & Trading:27+ years management and marketing of fuels and petroleum blending operations

G W ll M f R fi i & M k tiGreg Wallace – Manager of Refining & Marketing:22+ years processing, trading and marketing of petroleum and chemicals


Contact Information

Ben CowartCEO

(281) 486-4182

[email protected]

www.vertexenergy.comgy


Vertex Investor Presentation - MicroCapClub · Company Overview ¾Vertex Energy, Inc. is an environmental services company focused on recycling petroleum-based waste streams....

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