Dive Brief:
- Fuel refiner and marketer Vertex Energy has filed for Chapter 11 bankruptcy through the U.S. Bankruptcy Court for the Southern District of Texas, the company announced.
- For now, Vertex plans to operate normally as it explores its restructuring strategy, which includes a potential sale of the company, according to the announcement. As of earlier this month, Vertex had 53 parties that were “potentially interested” in acquiring its assets, court documents show.
- Despite revenues of over $3 billion in 2023, Vertex couldn’t keep earnings in the black. Its bankruptcy is mainly the result of its struggles to capitalize on the renewable fuels market, which it began prioritizing in 2021, Seth Bullock, the company’s chief restructuring officer, wrote in a late September court filing.
Dive Insight:
Major oil companies such as BP, Shell, Chevron and Sunoco have dedicated areas of their businesses to renewable fuels in recent years to reduce their carbon footprints. In 2021, Vertex became “eager to capitalize on the national rise in demand for ‘greener’ fuels,” and, like its competitors, also turned to renewable fuel. It began building a hydrogen facility at its refinery in Mobile, Alabama, to expand renewable diesel production in 2022.
Vertex made this shift for several reasons, including belief among its leaders that this type of fuel could successfully sell at retail stations across the U.S., Bullock wrote.
“Renewable diesel was not only a sizable growth opportunity, but also an industry shift that the Company was especially well-positioned to seize,” Bullock noted.
However, Vertex began experiencing problems such as construction delays and cost overruns “almost immediately.” Vertex was also facing financial obligations from the U.S. Environmental Protection Agency’s Renewable Fuel Standard Program, which requires refiners to use a certain volume in a certain period of time.
“The Mobile refinery was only ever able to produce around half of the originally projected [capacity] of renewable diesel,” Bullock wrote.
Vertex owes about $72 million in fees alone to the RFS program, court filings show, and its total debt is currently at $422.2 million. Vertex has received $80 million in debtor-in-possession financing to assist in continuing operations as it explores a sale or other alternative.
Houston-based Vertex employs approximately 480 people across its operations in Texas, Alabama, Oklahoma, Louisiana, Mississippi and Arkansas. Its business segments include conventional and renewable fuel refining, as well as used motor oil operations.
Last spring, former Parkland USA President Doug Haugh left the convenience retailer to become Vertex’s chief commercial officer. Haugh stepped down from his role earlier this month for undisclosed reasons and will remain a senior corporate advisor through the rest of the year.
