Vertex Energy’s black oil segment, which includes its rerefineries business, posted steep decreases in operating income and revenue for the quarter ending June 30. The COVID-19 pandemic had a major impact on collection of used motor oil that reduced feedstock availability, the company noted.
In a filing with the United States Securities and Exchange Commission, the company said that its black oil segment lost $6.5 million during the second quarter, compared to income of $126,000 during the same period of 2019.
Total revenue for the black oil segment dropped 70% to $11.5 million. The segment’s revenue is comprised primarily of product sales from Vertex’s rerefineries and feedstock sales – used motor oil – which are purchased from generators of used motor oil such as oil change shops and garages, as well as a network of local and regional suppliers. The company said the black oil division’s volumes of product sold decreased in the second quarter by 33%, compared to the year-earlier period.
Vertex said in its SEC filing that shelter in place orders in the locations where it collects used motor oil “directly impacted the generation of used oil, which caused a dramatic reduction in volumes of feedstock availability for use in our refineries.”
Vertex operates a rerefinery in Columbus, Ohio, that can produce 1,500 barrels per day of API Group II base stocks and a Marrero, Louisiana, rerefinery that produces finished vacuum gas oil.
“As expected, our second quarter performance was impacted by a combination of low [used motor oil] availability, extended downtime at our largest refinery and a year-over-year decline in refined product margins, all of which were attributable to the historic disruption caused by the COVID-19 pandemic,” Vertex President and CEO Benjamin Cowart said in the company’s earnings news release.
Cowart noted that business conditions improved during July, as shelter-in-place orders were lifted. “Since the start of the third quarter, both our Marrero and Heartland [Columbus] refineries have operated near peak utilization, as UMO [used motor oil] feedstock availability has returned to near-historical levels,” he said. “In July, total UMO collections increased by nearly 40% versus June levels.
During the second quarter, used motor oil prices were driven to elevated levels, given a lack of feedstock availability, continued Cowart. “Elevated UMO pricing resulted in less favorable product spreads, which impacted our profitability during the second quarter. As economic activity further accelerates, and UMO supplies become more readily available, we expect to see a decline in feedstock prices and improved realized margins during the second half of 2020.”
Vertex’s recovery division includes the business operations of Vertex Recovery Management as well as its Group III base oil business. Vertex is exclusive U.S. marketer for Netherlands based Penthol C.V. of Group III base oil from Abu Dhabi National Oil Co.’s plant in the United Arab Emirates.
The division’s revenue increased 43 percent to $3.5 million, as a result of an increase in volumes during the second quarter, compared to the year-earlier period. However, the recovery segment posted a $1.6 million loss from operations in the second quarter, down from a smaller $661,321 operations loss a year earlier.
Vertex as a whole posted a $8.9 million net loss in the second quarter, falling further from a $202,329 net loss a year earlier. The company attributed the loss to the decrease in volumes sold throughout its business lines. Second-quarter revenue was down 51 percent at $21.4 million.