Vertex ECA V-1000 Premium Fuel Oil

Report
2014 ENERGY CONFERENCE
VGO, Marine Fuel, and Cutterstocks derived from ReRefining
October 2014
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.
RECOVERING TOMORROW’S ENERGY
2
COMPANY SNAPSHOT
 A leading recycler of used motor oil and refiner of offspecification 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
Key Term:
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
proprietary technology to develop regional markets across the
U.S., replicating our success in Houston into other geographies
manufacturing plant
‒
Unwanted petroleum co-products from
an oil refinery
RECOVERING TOMORROW’S ENERGY
3
COMPANY SNAPSHOT – WHAT WE DO
 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
COLLECTION &
AGGREGATION
PROCESSING
& HANDLING
ANTI-
MOTOR OIL
FREEZE
USED OIL
FILTERS
CHEMICAL &
PETROLEUM
CO-PRODUCTS
USED
MOTOR OIL
VERTEX VALUE-ADDED PROCESSING:
Broker:
(REFINING, TCEP, MATERIALS RECOVERY, VGO OTHER FEEDSTOCK PROCESSING)
LEVERAGE PROPRIETARY AND OFF-THE-SHELF TECHNOLOGY
MANAGE
LOGISTICS/SALES
VIRGIN
ANTIFREEZE
RAW
METAL
HIGHER
VALUE
FEEDSTOCK
DISTILLATES,
GASOLINE, &
BLENDSTOCK
RECOVERING TOMORROW’S ENERGY
Base
Oil &
Lubes
SOLD AS-IS TO
BURNERS AND
REFINERIES
$$$$
MARINE
FUEL
PRODUCT VALUE
PRODUCT
SALES
USED
USED
$
VERTICALLY INTEGRATED MODEL
 Vertex also acts as a broker of used oil to strategically control more used oil supply
4
THE REGIONAL MODEL

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 AGGREGATION / REFINING FOOTPRINT
Heartland – 18 M gal
Bango – 23M+ gal
Marrero – 60M+ gal
Vertex TCEP
– 32M gal
Myrtle Grove
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
Heartland
CURRENT AGGREGATION SITES
̶
Generate incremental profit from the same generator
̶
Creates stickier customer relationships
-HOUSTON, TEXAS
-MOBILE, ALABAMA
RECOVERING TOMORROW’S ENERGY
-COLUMBUS, OHIO
-FALLON, NEVADA
5
USED MOTOR OIL RECYCLING INDUSTRY
 The U.S. used motor oil recycling industry is
approximately $2.4 - $2.8 billion
MARKETS FOR USED OIL:
BURNERS
(PAPER MILL, ASPHALT KILN)
 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
RE-REFINERIES (BASE STOCK)
VACUUM GAS OIL (VGO)
 Cheap natural gas creating need for more re-refinement
and processors like Vertex
EXPORT (UTILITY BLENDS)
‒ Used oil collectors historically sold to local industrial burners
(THERMAL CHEMICAL EXTRACTION PROCESS - TCEP)
HIGH VALUE FUEL
‒ 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
1.3 BILLION GALLONS OF USED OIL*
100%
price for re-refined oil is more closely linked to higher priced
diesel
200
Improperly Disposed
700
Unrefined Recycled
Fuel
75%
50%
spread between diesel and natural gas holds
25%
0%
RECOVERING TOMORROW’S ENERGY
Re-Refined
the market size will increase considerably assuming the
225
175
Recycled
‒ As more of the 700 million gallons of burned oil is re-refined,
Re-Refined into
Lubricating Base Oils
Re-Refined into
Intermediate Products
* Midpoint of estimated ranges; gallons in millions
6
USED MOTOR OIL RECYCLING VALUE CHAIN
GENERATORS
 Third parties
generate used oil
through core
business
 Jiffy Lube®, car
dealerships, etc.
COLLECTORS
AGGREGATORS
 Collect used oil from
generators
 Purchase used oil
from collectors
 Typically local or
regional
 Sell and deliver it as
feedstock for
processors
 Highly fragmented
PROCESSORS
 Process used oil into
a higher value
product
 Technology
upgrades feedstock
into higher value end
products
END USERS
 End product is used
as an industrial fuel,
ship fuel, base oil, or
refinery feedstock
VERTICAL INTEGRATION ENABLES VERTEX TO CONTROL MORE OF THE VALUE CHAIN & CAPTURE HIGHER MARGINS
RECOVERING TOMORROW’S ENERGY
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UPCOMING MARINE REGULATIONS


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
ENVIRONMENTAL AND HEALTH CONSEQUENCES
NEW REGULATIONS




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

Sulfur Dioxide (SO2) has been associated with numerous
respiratory illnesses & cardio vascular diseases

SO2 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
Non-Road
Locomotives
Aircraft
On-Road
Comm. Marine Vessels
0
20,000
40,000
60,000
80,000
Vertex Energy now produces approximately 45 – 50 million gallons VGO which meet the 0.1% sulfur spec
RECOVERING TOMORROW’S ENERGY
(1) Source: US EPA
8
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
 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
RECOVERING TOMORROW’S ENERGY
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PROPRIETARY TCEP TECHNOLOGY
TCEP cutterstock
Report of Anaylysis by Intertek
Method
ASTM D4052
ASTM D445
ASTM D4294
ASTM D95
ASTM D93
ASTM D482
IP 501
ITM 1564
Test
Density of Liquids by Digital Density Meter, API Gravity @ 60 deg F
Kinematic / Dynamic Vicosity, Kinematic Viscosity @ 122 deg F / 50 Deg C
Sulfur Content in Petroleum Products by ED-XRF, Sample Prep (Centrifuged)
Water By Distillation
Pensky-Martens Closed Cup Flash Point (procedure B)
Ash from Petroleum Products
Determination of AL, Si, V, Ni, Fe, Na, Ca, Zn, P in Fuel Oil - ICPES
Aluminum
Silicon
Vanadium
Calcium
Zinc
Phosphorus
GCMS-Headspace (BTEX, DCPD, or VOC's)
Styrene
RECOVERING TOMORROW’S ENERGY
Result Units
29.8
API
39.53 mm2/s
0.306 Wt %
0.6
Vol %
> 158 Farenheit
0.087 Wt %
9
47
<1
25
18
142
mg/kg
mg/kg
mg/kg
mg/kg
mg/kg
mg/kg
<10
ppm Wt
10
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
 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.
RECOVERING TOMORROW’S ENERGY
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VGO/MARINE FUEL
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.
RECOVERING TOMORROW’S ENERGY
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VGO/MARINE FUEL
Vertex ECA V-1000 Premium Fuel Oil
Quality and Consistency
50
Consistent API Gravity
40
30
20
35
10
30
0
25
Consistent Viscosity Production (cSt @ 50°C)
20
15
0.4
Low Sulfur Content
10
5
0.2
0
0
RECOVERING TOMORROW’S ENERGY
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VGO/MARINE FUEL
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).
RECOVERING TOMORROW’S ENERGY
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VGO/MARINE FUEL
Vertex ECA V-1000 Premium Fuel Oil
Complete Analytical Certification
RECOVERING TOMORROW’S ENERGY
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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
 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
RECOVERING TOMORROW’S ENERGY
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BASE OIL – TYPICAL PRODUCTION
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.
RECOVERING TOMORROW’S ENERGY
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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
RECOVERING TOMORROW’S ENERGY
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Questions?
RECOVERING TOMORROW’S ENERGY
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