Good morning, ladies and gentlemen, and welcome to the Vertex Energy Second Quarter 2021 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Noel Ryan. Sir, the floor is yours.

Thank you, Matthew, and good morning, and welcome to Vertex Energy's Second Quarter 2021 Results Conference Call. Leading the call today are our Chairman and CEO, Ben Cowart; CFO, Chris Carlson; and COO, John Strickland. We issued a press release before the market opened this morning detailing our second quarter results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the risk factors that could cause actual results to differ, please refer to the Risk Factors section of Vertex Energy's latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. Today's call will begin with remarks from Ben Cowart, followed by a financial review from Chris Carlson. At the conclusion of these prepared remarks, we'll open the line for questions. And with that, pleased to turn the call over to Ben.

Thank you, Noel. Good morning to those joining us today. While Chris will discuss our second quarter results in greater detail shortly, for the purpose of today's call, I want to begin with the progress update on our pending acquisitions of the Mobile refinery, including key milestones prior to the close of the transaction during the fourth quarter of 2021. As we first announced in May of this year, Vertex has entered into a definitive agreement to acquire the Mobile, Alabama refinery from Shell for $75 million. Upon completion of this acquisition of Mobile refinery, we'll become a flagship refining asset, a strong platform upon which to build an energy transition business of scale. Our initial vision for this asset involves 2 transformational capital projects. The first project involves the modification of Mobile refinery's hydrocracking unit to produce renewable diesel on a standalone basis. Upon completion of the project by year-end 2022, the refinery will commence production of approximately 10,000 barrels per day of renewable diesel, increasing to 14,000 barrels a day by mid-year 2023, while continuing to supply conventional fuels to the regional market at current rates. The second project that is still in development involves a renewable feedstock pre-treatment unit at the Myrtle Grove facility in Belle Chasse, Louisiana. The pre-treatment project, which is expected to be completed by year-end 2023, is expected to provide increased feedstock, processing, optionality, positioning us to achieve a lower landed cost of feedstock that can be supplied to the Mobile refinery over the long term. In recent months, we have conducted numerous discussions with global commercial banks and other Tier 1 and Tier 2 lenders to support our near-term financing requirements. During these discussions, several of which have now reached advanced stages, we've stayed focused on several key financing objectives. First, we want to maintain simple capital structure with significant optionality to support future organic and inorganic growth. We are currently evaluating term loans, ADL and green bond markets as potential options available to us. Second, we will continue to negotiate the lowest cost of capital available while seeking out a long-term lending relationship with an established institution. Finally, we will seek to negotiate covenant-light agreements consistent with what is generally accepted within the industry. At this juncture, we expect to fund the Mobile refinery through a combination of debt financing and liquidity available to us. We expect to reach completion from financing all before September 30, 2021, which once finalized, will allow us to proceed with our plans. Turning now to a separate discussion around our recent announced divestiture of our UMO collection and recycling assets. In June, Safety-Kleen submitted an unsolicited offer to acquire our UMO collection and recycling assets for $140 million. We have known the Safety-Kleen team for years and have a lot of respect for how they do business. After careful consideration, our Board of Directors concluded that the sale of these assets to Safety-Kleen was the optimum outcome for all shareholders, given our focus on pursuing higher growth, higher-margin energy transition businesses. Safety-Kleen recognized the value of our black oil recycling assets resulting in a compelling all-cash offer. Importantly, this transaction will serve to accelerate a full recapitalization of our balance sheet. After retiring costly term debt and other financial obligations, we expect to bring approximately $90 million of cash into our business at the closing of this transaction. The transaction with Safety-Kleen is expected to close during the third quarter 2021, continue to fund regulatory clearance, various customary closing conditions and the approval of our shareholders. By year-end 2021, Vertex will become a pure-play refiner of renewable and conventional feedstocks. Our streamlined asset portfolio, simplified capital structure and strategic focus on energy transition opportunities represents a wholesale transformation of our investment thesis, one that positions us to create measurable value for our shareholders as we enter this next important phase of growth. We are structuring Vertex to become an energy transition company of scale, one focused on driving profitable growth through high-return organic and inorganic investments. In conclusion, I want to congratulate our team on their outstanding performance during the second quarter. We executed our own plan, meeting Street consensus EBITDA by a significant margin, simplified our capital structure with the full conversion while remaining preferreds into common equity, negotiated a major asset divestiture with Safety-Kleen and continue to move forward on our acquisition of the Shell Mobile refinery. It's been an exciting period for our people, one that reflects the team's ability to simultaneously manage a complex series of independent decision points. I'm proud of what the team has accomplished and look forward to building on this progress as we move into the remainder of the year. With that, I'll hand the call over to Chris for a review of our recent financial performance.

Thanks, Ben, and welcome to those joining us on the call today. For the 3 months ended June 30, 2021, the company reported a net loss of $16 million versus a net loss of $8.9 million in the second quarter of 2020. Vertex Energy generated income from operations of $1.6 million in the second quarter of 2021 versus a loss from operations of $8.6 million in the prior year period. The company reported adjusted EBITDA of $4 million in the second quarter of 2021, including $1.2 million of transaction costs for the 2 transactions that are underway, when compared to a loss of $5.3 million of adjusted EBITDA in the prior year period. Vertex generated free cash flow of $1.1 million in the second quarter of 2021, the second consecutive quarter of free cash flow improvement. During the second quarter of 2021, a combination of improved refined product margins, sales volume growth and the strong operational reliability contributed to a year-over-year improvement in operating income and adjusted EBITDA when compared to the prior year period. As of June 30, 2021, the company had total cash and availability on a funding facility of 15 and $3.2 million, respectively. Total cash and availability at the end of the second quarter included $11 million of total cash limited to use by the 2 SPVs. Vertex has total long-term debt outstanding of $6.9 million as of June 30, 2021. Effective on June 24, 2021, as to the Series B1 preferred stock and June 25, 2021, as to the Series B preferred stock, the automatic conversion provisions of the Series B stock and B1 preferred stock were triggered and the outstanding shares of the company's Series B preferred stock and Series B1 preferred stock automatically converted into common stock of the company. As of June 30, 2021, all issued and outstanding series B and B1 preferred stock had been converted to common equity line. As of June 30, 2021, there were 59.9 million common shares issued and outstanding. With that, I will turn the call over to the operator as we take questions from those joining us on the call today.

[Operator Instructions] Your first question is coming from Amit Dayal.

It looks like all those strategic transactions are still on track. And then in terms of your expectations for additional CapEx, et cetera, for the Mobile refinery, I mean, is there any change to that? Are you still sticking with the, I think, the roughly $85 million number initially that you need for the hydrocracking unit? Is there anything else that might come up that changes some of the expectations on that front?

No. Amit, I think the conversion is the real focus. There is maintenance capital that will be part of the business, obviously, going forward, and that's not going to change. The work is in the fairway, things are going extremely well related to the conversion. And I would say we're in the zip code of what we anticipated, so things are progressing as good as we could expect on the technology for the plant.

Understood. So yes, if this -- if the UMO assets, the recycling assets that we have right now, that transaction with Clean Harbors closes before September 30th. There's a gap of roughly a quarter before the next transaction closes. I'm just trying to see how we should be modeling for this interim period between these 2 transactions closing. Any thoughts on that?

Yes. The Clean Harbors transaction is progressing on schedule, probably towards the back end of the quarter. And I would say, if a couple of things clip off here on the Shale transaction, we hope to be in the front of the fourth quarter. So I'm not sure how much of a gap is our expectation. We're trying to bring them both in the same time frame if we can to reduce that. But there certainly needs to be a conversation in the that that something that we don't control, separates those 2 transactions from what we think is going to happen. So we can talk about that offline, for sure.

Yes, yes, yes. I think most of my other questions [indiscernible] you already modeled for that transition, et cetera. And I guess, my other question is, we can take them offline.

Yes. Amit, I lost you from -- I couldn't hear what you said. Could you repeat the question?

Yes. I was just saying that you've pretty much modeled for the transition for the new Mobile refining. So my other questions, we can take them offline. That's all I ask for now.

Okay. No problem.

[Operator Instructions] Your next question is coming from Eric Stine.

So I apologize I jumped on a little late here, just given the earnings season. But I was curious, as you think about the Mobile refinery, I know on the last call, you kind of mentioned the hydrotreater being a overall voice. And maybe could you just go into a little bit why that's important in terms of producing the renewable diesel? And then, I'd also love to just hear kind of the setup or how you feel about having ample hydrogen production.

Yes. Okay. So this facility is unique as we see it because the hydrotreater had a unique function inside a regular conventional refining asset that's making motor fuels, gasoline, diesel, jet fuel. The mid-grade, the back in gasoil was -- is going through this hydrocracker for the purpose of making a heavy olefin chemical feedstock. So it had a chemical focus or chemical purpose. So the design of this cracker in the operations of this cracker has had its own separate focus. So the refinery is very skilled in operating this hydrocracker. It's got all the, let's say, bells and whistles for its service today, and a lot of those attributes around the equipment and the design of the plant lend to a very good renewable diesel production unit. So there's not a lot of reinventing this process or retooling at a very severe and expensive and time-consuming basis. So we're very fortunate that the asset that we're acquiring already had a big head start related to the way the plan operates today with this cracking it. So that's -- when you think about the work involved in making renewable diesel, this is a big head start for us. So we're very thankful for that. When it comes to hydrogen, renewable diesel production is very hydrogen-intensive. So the other good point to make is when we get this hydrocracker, we also get the hydrogen production that's on-site, that is being used in that process. And it allows us to quickly come into the market with a meaningful level of production at 10,000 barrels a day. So we don't have to go and create any new hydrogen to do that. So that's another big positive. Now we will upgrade the production capacity to 14,000 barrels a day, and this will come by adding additional hydrogen generating capacity, that actually will be fueled by the co-products that come off the initial process. So we'll be able to make hydrogen using renewable propane and renewable naphtha, which are both co-products in making renewable diesel. So that's going to be a capital project that is done through a partnership on-site, where they will provide the additional capacity, and that will come to us just like it does today, in a cost -- a tolling cost from the hydro. So that's the plan, and that's how we go from 10,000 barrels a day of renewable diesel production to 14,000 barrels a day. Does that answer your question?

Yes. No, that's helpful. I mean I know that those are the hydrocracker and hydrogen are 2 areas that it's somewhat -- for others who have gone down the hard renewable diesel route, it's been a bit of a road block or caused some bump, so good to know that those are both in place. On the hydrogen side, though, you mentioned the additional investment. Is that something -- so that's above and beyond kind of the CapEx you've talked about to bring on the hydrogen for that additional renewable diesel capacity?

Yes. We have a term sheet that is being finalized with a third-party supplier of our hydrogen, where they're handling the CapEx to install the additional equipment.

Got it. Okay, and that is helpful. And then maybe could we just talk a little bit on the feedstock side? I know that at Myrtle Grove, you're upgrading the pre-processing capabilities. Is it too early or how should we think about how much you may source from Idemitsu Kosan or you would source from yourself?

Well, let me be clear, the relationship with Idemitsu has nothing to do with the feedstock. So they are our offtake partners. So they will take all of the renewable diesel production is -- that's what the Idemitsu relationship represents. So our feedstock, both what we start the refinery on, which would be a refined bean oil like a canola or a soybean oil or maybe a technical tower, that feedstock will come from your major producers that will supply directly to the refinery. Myrtle Grove will function as a pre-treatment unit that will process second-generation feedstocks that need work before you can send them to the refinery. And so that's what the investment at Myrtle Grove will represent. So we have finalized the technology work around the pre-treatment operation and the design of that plant. And so today, we're working on the OSB or the outside the battery limits as far as the 41-acre site and all the connecting infrastructure that needs to support that pre-treatment unit. And so we've -- we contracted with our EPC firm that is doing that work as we speak. So everything is underway and in a fair way related to the pre-treatment expansion at the Myrtle Grove side.

Got it. Thanks for clearing up that misunderstanding for me. So just, I guess, last one, just on little growth. I mean is there a way -- is it too early to quantify what the feedstock benefit would be or the pricing benefit? Because I know you'd be able to use things that are lower cost or feedstock that's lower cost versus soybean oil, which I think prices are pretty elevated right now.

Yes. No, that's a good question. And that will continue to -- the net value of pre-treatment will continue to move based on more specifically the LCFS credits that are provided by California. And so you pick up a benefit because you're processing second-generation feedstocks that are beyond your first generation feedstocks. And the model is in the $0.40, $0.45 per gallon range from an improvement in value. So it's -- today, it's significant. We anticipate LCFS to fall back from where it is today as more and more producers land product in California. So -- and then, we also are expecting more LCFS markets to open up in the future. So that's currently where it sits. I think it's -- our production capacity for the site, it's currently planned to be more than the feed that we need at Mobile. So we hope to have material business and process and the second-generation feedstocks where we believe as a company, we've got a very strong core competency around that area of the business.

Your next question is coming from Brian Butler.

I actually apologize if I repeat anything. I had some overlapping earnings calls as well. I guess just on the first question, just with an inflation, could you talk maybe about a little bit of inflation, if you've seen any pressures in the second quarter? And then just thoughts on what could that mean for the planned upgrade, the $85 million for hydrocracking and $40 million for Myrtle Grove? Is there potential upward pressure on those costs or delays that labor availability has been kind of an issue?

That's a good question because we definitely see some shortage around materials and your -- what people are typically experiencing. But based on our time lines, our suppliers of long lead equipment, et cetera, are very comfortable with where our equipment needs are going to land. We thought we were going to run it through more of an issue, but as we said today, I think we're okay. I don't have Dave Peel on the call to speak exactly to the supply chain, but I did follow up on that with him and again I discussed it and he felt like, our schedule is firm today. So we don't anticipate that being a problem related to the conversion of the project. So I think you've probably seen an increase of bean oil prices. So this comes back to the global markets for soybean oil and so that price has escalated here. I guess a lot of that's related to a growing seasons and many other factors, including biodiesel producers, press in the markets just like we are to term up supply, and that's part of it. But the future pricing for bean oil is coming back down, so we don't anticipate that being a material change as we start the plant either. So those, I think, so far, so good related to the question.

Thank you. There are no further questions in the queue.

Okay. Well, thank you, everybody. I know this was a short call. The good thing here is we're wrapping up another great operating quarter. So I really don't want to -- I know we're looking forward. I know that our goal now is very clear on where we're going with the business. But our team did a great job, once again, ahead of plans and executed across the business, our collection growth, our refining production. I think everybody has been great. We anticipate our quarter ahead to be a fairly full quarter is what our anticipation is. And to kind of continue the course that we were on in the second quarter, so all as well from our day-to-day business. Our teams are focused on running the business and continuing to execute exactly to plan. And so everything is in the fairway as we see it on our transactions. And so it's blocking and tackling from here, a lot of work simultaneously. So trying to manage all this from a multi-facet parallel standpoint. And I think this past quarter clearly demonstrates our ability to do all this and stay the course. So I just want to thank everybody from the interest in what we're doing and in the future of where we're going. I think it's very exciting, and I believe our team has a foundation deeply set to be very successful in this new frontier. So thank you for joining the call. And if you have any questions, feel free to reach back to now Noel Ryan at ir@vertexenergy.com, and we'll be glad to keep you in the loop. Thank you.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.