Ben Cowart – Chairman and Chief Executive Officer Chris Carlson – Chief Financial Officer John Strickland – Chief Operating Officer

Eric Stine – Craig-Hallum Gerry Sweeney – ROTH Capital Partners Brian Butler – Stifel

Greetings and welcome to the Vertex Energy 2018 Second Quarter Financial Results Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. As a reminder this conference is being recorded. I will now turn the conference over to your host, Ben Cowart. Thank you. You may begin.

Thank you, operator. Good morning. And welcome to Vertex Energy’s 2018 second quarter six months financial results conference call. Joining me today on the call is Mr. Chris Carlson, our Chief Financial Officer; Mr. John Strickland, our Chief Operating Officer and Marlon Nurse, our Investor Relations Consultant at Porter, LeVay & Rose. The company expects to make forward-looking statements during today's call. Statements including words such as believe, anticipate, expect and statements in the future tense are forward-looking statements. These statements involve known and unknown risk and uncertainties and are based on management's current views and assumptions regarding future events and operating performance. A number of factors could cause the company's actual future results to differ materially from its current expectations. Before we review our financial results, I’d like to discuss some key points about our business operations. We remain optimistic and encouraged by our performance as our capital investments are yielding returns. The quarter, our revenues grew 27% to $47 million. Gross profits grew 86% to approximately $10 million. And we reported net profit of $0.03 per share. Overall we expect our positive financial year-to-date to continue to perform and carryover into the second half of this year. The industry has transitioned into for all model as a result of an improved commodity market and higher prices of finished products. Despite this shift, our contribution margin has remained strong and has improved year-over-year. Our spreads at both Marrero and Heartland, refining operations has been solid and were slightly better than our initial expectations. As we discussed on our last call, we expected our performance to be strong in the second quarter, which is evident in our financial results. In addition, we anticipate our second half of 2018 to be a continuation of good performance. We have completed the major turnaround for Hartland, in general our refining volumes for the quarter were strong and the spreads were ahead of target. Our refining production across both facilities was much improved over last year. We have witnessed higher production volumes and better sales for both Hartland and Marrero. We continue to see a strong demand for both base oil and marine fuels. Our gross profit has increased substantially as it’s tracking ahead of last year and is in line with our expectations thus far for this year. Our UMO collection volume continues to show strong double digit growth, tracking ahead of projections both in volume and contribution margins despite the shift in pay for all by the industry. Our collective volumes rose 17% in the second quarter over the same period in 2017 and increased 22% for the 12 months ending June 30, 2018. We’re on target to collect 30 million gallons by the end of 2018 concurrently we continue to leverage our current collection platform and made an acquisition in the Texas region during the quarter. The spreads for our Refining and Marketing business were good, but volumes were down as a result of major supplier of feedstock being down due to an extended turnaround. And again this is for our Refining and Marketing business. Our trading volumes in our Vertex recovered business were all for the quarter due to market conditions, our Group III volumes continue to be very strong, but have been impacted by delays in current base oil approvals. We have nothing definitive to announce on our ongoing private capital efforts, however, we hope to provide an update soon. I’ll now turn the call over to Chris Carlson, our CFO.

Thank you, Ben. I’ll now new review our financial results for the 2018 second quarter and the first six months ended on June 30, 2018. All of our financial statements, unless otherwise noted, are prepared in accordance with generally accepted accounting principles. For second quarter, consolidated revenue was $47 million, which was a 27% higher than the $36.9 million reported for the second quarter ended June 30, 2017. For the first six months, the consolidate revenue was $88.2 million, 23.2% higher than the $71.7 million for the first six months in 2017. Our total overall volume for the business was down 7% for the second quarter, over the second quarter 2017 and decreased 5% for the first six months over the same period in 2017. For the second quarter our gross profit was $10.1 million, an increase of 86% from a gross profit of $5.4 million during the same period in 2017. For the six months our gross profit was $16.4 million, compared to $9.5 million for the first six months ended June 30, 2017. For second quarter gross profit margin was approximately 22%, compared to 14.6% for the same period a year ago. For the six months, gross profit margin was roughly 19% versus 13.2% for the six months ended June 30, 2017. Our consolidated per barrel margin increased 102% in the quarter, compared to the same period a year ago. And rose 83% for the six months 2018. The growth was attributed to improvements in our production, continued focus on finished product value enhancement and management of our costs and spread related to improved market conditions. In our Black Oil division, which includes our Marrero and Heartland business units, revenue was $38.5 million for the quarter, as compared to $27.4 million in the same period a year ago, an increase of approximately 40%. Volume increased 2% for the second quarter over second quarter of 2017, while our overall production volume in the Heartland and Marrero was up 5% year-to-date over the same period a year ago. Gross profit for the division was $8.7 million during the quarter, which was a 98% improvement over a $4.4 million in the second quarter of 2017. The Refining and Marketing division produced revenue of 44.4 million, as compared to $5.2 million for the same period a year ago, a decrease of 15% because of the extended turnaround of the major supplier volume for the quarter was down 40% over the second quarter of 2017. Gross profit decrease 26% to $358,000 for the quarter, compared to $482,000 a year ago. Per barrel margin increased 30% for second quarter 2018 over the same period a year ago. For the second quarter 2019 Vertex Recovery division, which includes our Group III base oil import business generated revenue of $4 million, compared to revenue of $4.3 million a year ago. Volume was down 36% for the quarter over second quarter 2017. For the second quarter gross profit was $1 million, compared to $548,000 a year ago, which was an increase of 86% Selling, general and administrative expenses were $5.4 million in the second quarter 2018, which is in line with the $5.4 million reported for the same period a year ago. For the six months ended June 30, 2018 SG&A was $11 million, slightly higher than the $10.6 million reported for the same period in 2017. For the second quarter depreciation, amortization expenses were $1.7 million, compared to $1.7 million a year ago. As of June 30, 2018 our term debt was approx $15.4 million, compared to $14 million for the same period a year ago. The increases demonstrated in our capital investment that have yielded improving returns. Our working capital was approximately $6.5 million, compared to working capital of $4.7 million at the end of June 30, 2017. Our reported net income for the second quarter, which includes the accretive cost of our preferred stocks was $1.4 million or a profit of $0.03 per share, compared to a net loss of $2.7 million or loss of $0.08 per share in the same period a year ago. Without the accretion of the preferred stock, our net income was $2.5 million or a profit of $0.07 per share, compared to a net loss of $1.9 million or a loss of $0.06 per share for second quarter 2017. For the first six months of 2018, our reported net loss including the cost of the preferred stocks was $2 million or loss of $0.06 per share. This compared to a net loss of $6.7 million or a loss of $0.21 per share for the same period a year ago. Without the accretion of the preferred stock net income was $322,000 or a profit of $0.01 per share, compared to a loss of $5.1 million or $0.16 per share. Our EPS was calculated using an average of 37 million diluted shares outstanding in second quarter of 2018. We expect a positive momentum to carry into the second half of 2018, therefore we want to provide the following guidance for full year 2018. Revenues should be between $170 million and $180 million. EBITDA should be between $10 million and $12 million. And net income profit should be between $1 million and $2 million dollars. Before we take questions, I want to let the listeners know that if you have any follow-up questions or comments, please feel free to contact Porter, LeVay & Rose Investor Relations Representative, Marlon Nurse, at (212) 564-4700. I also want to mention that a digital replay will be available by telephone approximately two hours after the call's completion until July 31, 2018. Details on how to access the replay can be found in our recent press releases and on the Investor Relations section of our website at www.vertexenergy.com. Operator, we are now ready to take a limited number of questions pertaining to the matters discussed on this call and in our 10-Q. Remember, we are unable to discuss any information or business plans which are not publicly available. Thank you.

Great, thank you. [Operator Instructions] One moment please while we pole for questions. Our first question is from Eric Stine of Craig-Hallum. Please go ahead.

Obviously your position to do well either way but just longer term when you think about the pay-for-oil versus charge for oil, I mean how do you think that plays out, i.e. there's a little bit of differing opinions in the industry whether pay-for-oil is a short term dynamic or is it something that lasts a little bit longer or normalizes and it kind of goes back to modest charge for oil?

Hey Eric, good question. Let me just explain a little bit about pay-for-oil. It’s definitely moved by the markets related products in crude oil, but it also is as tad very much to two things, the re-refining capacity in the U.S. and the utility fuel market that is, I guess, represented by offshore utility companies that are stranded non-natural gas utility markets. So if you can get natural gas the cost of that seems to be pretty low. If you can't, then you have to use a heavy Black Oil that will power of the utility markets. So we deal with that utility component probably more than most in the industry. And so we think that that has a major, or has had a major influence on used oil values. And as we approach the new 2020 fuel oil regulations for ships, the ships are the major consumer of six oil, this heavy resids. And when this sulfur change goes into effect in 2020, all of those heavy resids on board to ships will have to go to other markets. And we believe the utility market will see a oversupply of these heavy molecules. And we definitely believe that that residual fuel price will come down. And so if that happens, it will re-set the value of used motor oil based on the utility demand and the indexing that prices used motor oil. So at that point we think that the market could move back to much lower levels and back to a charge market if oil prices generally kind of stay where they are today. So that's…

Got it. Yes so that’s what I was looking for. That is great color there. But I mean while collection volumes you made great progress there. And I know you're on target for 30 million gallons and that really helps you even if it is a pay-for-oil market. I mean ultimately where do you see those going long-term? And maybe just a little color on the acquisition you made.

Yes the acquisition was smaller the tuck-in with our branch operations in Fort Worth, Texas. So it was another small company that was collect in that market that we were able to acquire and roll their routes and equipment drivers into our business. So not material but it does reflect the type of work that we are doing to expand our self collections. We believe our growth – we're in our third year of sustainable growth, most of which has been organic. And we think we’ll continue that forward. Again even in a pay-for-oil market our contribution margins are much better than our cost of third-party supply. So one thing for Vertex as we steal the pin on a large amount of third-party oil that we purchased again off with the six oil index. So it allows us to reach out and grow that collection business at a pretty aggressive level because our cost for third party supply is much more than what it cost us to collect with our trucks.

Alright $30 million is, I mean there's a lot of upside I mean that will take time. But that's by no means kind of the top end. You've got a lot more room to go there.

Yes maybe another 30 million gallons of refined [indiscernible].

Okay, fair enough, yes. And then last one for me just maybe an update on TCEP in the testing I know you've been doing some testing, been working to get the cost down there, all with an eye towards IMO-2020, but just maybe where you stand right now on that?

Yes nothing further to update on TCEP we really finished all our work, all the R&D and the work we did last year and finished up in the first quarter. So the plant we actually tested and produced a barge load of product. So we're really waiting on this 2020 market to get here. We also are prepared if things change sooner that we can dial that refining capacity back into the market. So we have really focused on our refining capacity with the two existing refineries, Marrero and Heartland. And as we discussed last year that was a major goal. So we increased that capacity by 17% last year. And at the end of the second quarter, as Chris indicated, we've added another 5% over last year's production rate. So we've got a lot of leverage out of the existing refineries. And we think that's more important to keep this refining capacity tight until we see these 2020 opportunities open up.

Okay, thanks a lot.

Thank you.

Our next question is from Gerry Sweeney from ROTH Capital Partners. Please go ahead.

Hey good morning guys. And congratulations on the nice quarter.

Thank you Gerry.

I think you did touch a little bit of on this, but from a capacity standpoint are Marrero and Heartland running at full capacity in the quarter? It sounded like you also added capacity. Just want to double check that point.

Yes, our Marrero plant – this is John Strickland, is that going to have the capacity we budgeted for and whether new CapEx projects we did into our early second quarter Heartland – turnaround has allowed us to raise our capacity at that facility. And everything looks good going forward there.

Is there opportunity to continue to add some CapEx to expand capacity at either facility that are outside major CapEx maybe a smaller amount that you can keep expanding?

Yes they are, there's an opportunity there that we’re working on today.

Got it okay. And then Ben maybe you could talk about maybe just the acquisition field a little bit. Obviously the collections business is highly fragmented, you have a localized footprint I think down the Louisiana Texas area, maybe, I think Alabama even. What's that look like? Is there opportunity to how many little tuck-ins could you do especially now that you're starting to turn a little bit of a profit? And then the follow-up to that would actually be is that a key focus for capital investment? And if not where would it be?

Yes I think it ranks at the top of our priority list for use of capital. As you indicated we really needed to work the investments that we made in the refineries and get them really producing, which I think you can see the leverage that we've created at the refinery level. We've worked really hard to grow the collection business. And 22% on a trailing twelve basis is pretty good considering the amount of capital that we actually deployed into that space. So we've added very little debt to the company in the last year. And we’ve continued to grow our collection business. So we will as investable capital becomes more available to us, we will continue to step into that that collection vertical and try to build synergy around our footprint as you see both in the Gulf and up in the Midwest. And so we’re doing that but we hope we will be able to do more of that. We do think the targets and opportunities are there. And we've just been limited a little bit on our available capital and the priorities of how we chose investor capital at this point. So collections will be front and center as we go forward.

Got you. And then I know you mentioned Myrtle Grove in the prepared remarks, but any more details on how things are progressing on that front or if anything has changed?

No it's a very positive on all three of our projects. So our Myrtle Grove project for high purity base oil is certainly moving forward. There's a lot of activity in that general area as far as development goes. And so we're very encouraged by the prospects of what we see with the Myrtle Grove asset. We’re well on our way. As John indicated we made some big investments in our Heartland facility to dough our throughput capacity up further. So they're just now getting into some of that new capacity. And we still have more to do there. So we believe that we will get some private capital around both of those opportunities. And we've got plans around our 2020 marine fuel business that we're working on also. So there's still lot of opportunity in the assets that we already own.

Got it. Did you every breakout or can you tell us how much of your, I guess, Marrero product is heading to the marine fuel market today versus maybe the VGO market?

I think we sold one barge to the VGO market which was probably one for the quarter, the balance had been going to the marine fuel market. So we’re pretty much in full swing with the ship fuel business.

Okay and that's been pretty consistent with previous quarters, there’s definitely…

Yes.

Yes, okay. Perfect. Thanks again, I appreciate your time.

Thank you. I appreciate it.

[Operator Instructions] Our next question comes from Brian Butler from Stifel. Please go ahead.

Good morning. Thanks for taking my questions.

Good morning.

Good morning Brian.

When you think about the strength that you had in this quarter is there any way to – give some color or maybe break out how much of that is a benefit of higher fuel and base oil prices versus kind of some of the changes and improvements that you’ve made to the assets?

Yes good question Brian. I would say it's a combination. Definitely we recognize that the market enhancement and improvement has helped. But from a production perspective what our engineers and our – the people at the plants have done has been amazing from an improvement. And the ratability of the plants and the quality of the product is being produced. So you've heard us over the last couple of quarters talk about really focused on value enhancement of our finished products. And I really believe we're there. So that's what we're seeing in this quarter in addition to being an improvement on the collection side. The more we can collect ourselves at that street level you're seeing that come through in the margins.

Okay. And when you think of the charge-for-oil, pay-for-oil kind of market, I mean you've already given a lot of color there. But it was slow to react when fuel prices went down and it seems to be faster as fuel prices come back to more shift to the pay-for-oil. Is there a structural change there that if we were to see fuel prices or crude prices come back in, that you can move quicker this time around to a charge-for-oil and kind of keep those spread that lag between the spreads catching up much shorter than in the past?

Brian I think that's – the biggest challenge is you're dealing with a industry that's not very sophisticated. So we don't have indexing for used motor oil values like we do on finished product value. So that has actually worked to the industry's favor here in the short term as oil prices have gone up, because used oil prices are not tracking as fast. But when oil prices go back down, it happens quick on the sales side and you've got thousands on top of thousands of generators that you have to go and re-price. And that's done at the pace of the industry. That's really what took us so long. Before it was with no indexing for the value, then it kind of watersheds from the top of the industry and the bigger companies as they start charging everyone else starts charging and it just kind of cascades down. So I would hope that we've learned something and we would move sooner than later. That's what it takes. And I wish I had a better answer for you other than we really need to raise the sophistication of the industry and have some way to index the value of used oil, so it can move as quick as the market does as well. So there's some work going on in that area, but we aren't there yet.

Okay. That's helpful. And then on the refining piece that third-party volume issues you have, have that been – has that been resolved in the third quarter or is there start still some residual issues with getting the feedstock?

That was on our Refining and Marketing business in Port Arthur. And our largest supplier went down for a turnaround which was routine but they had major problems and they were down probably an additional six weeks. So the plant is back on line and we are back at full production with them. So it is behind us. But our quarter was affected because of that.

So sequentially we should see some improvement on the margin there and most of the headwinds from what you saw in the second quarter?

Yes, correct.

Okay, on the gross profit, on the first quarter call you had talked about a range of kind of in that 16% to 19%. And then based on second quarter results and the guidance that you gave, it sounds like you're probably towards the high end of that on the gross profit side that 19%, maybe a little better. Is that the right way to look at this?

Yes I would agree with that.

Okay. And then last one here on capital spending, kind of the $2 million to $2.5 million in 2018 as a target, does that continue at that pace or grow when you think about going into 2019?

CapEx, does it grow?

Yes. From a CapEx side I don't think is going to grow more of that refineries. We’ve already did the CapEx project we had planned the last year-and-a-half. We'll do a little bit more CapEx in the next year, but not like we have in the last year-and-a-half.

So that pace of 2 to 2.5 is kind of sustainable?

That’s consistent, yes. That will be consistent.

Okay, great. Thank you very much for taking my questions.

Alright.

Thank you.

[Operator Instructions] And as there are no further questions, I like to turn the floor back over to management for any closing comments.

Okay. Well thank you everyone. We appreciate you dialing into this quarter's call. And if you need any further assistance, again you can reach Marlon Nurse at (212) 564-4700. Thank you for calling.

This concludes today’s teleconference. You may disconnect the lines at this time. Thank you for your participation.