Energy Prospectus

Vertex Energy, Inc. (VTNR, $7.81, Buy; Target $17.00) -
VTNR: Did Not See this Coming. Renewable Diesel Adds at Least $15 to the Valuation. - Michael E. Hoffman -
We reiterate our Buy rating and raise the target price to $17 on Vertex Energy (VTNR, Buy, $7.81). Legacy VTNR could produce $25mm of EBITDA from the production and sale of Group II base oil and VGO into the low sulfur marine fuel markets. Legacy EBITDA for distillates from the Shell Mobile Chemical LP Refinery is about $25mm. At 10K BPD renewable diesel could add another $250mm of which about 70% are subsidies and tax credits. VTNR is paying $75mm for the operations, assumes no unusual environmental liabilities and will spend $85mm over 10-12 months to upgrade the hydrocracker to produce Renewable Diesel fuel. The energy value for diesel fuel is about $2; the subsidies are about $5 per gallon. We value legacy VNTR at $2 and the addition of the Shell refinery with 14K BPD of renewable diesel another $15 with an assumption for some walk down of subsidies.

>70% are subsidies and tax credits What a joke! Can't beat them, join them

What the hell is renewable diesel?

Vertex recycles used motor oil. Go to their website for more details.

VTNR is up another 16% today. I'm glad for the management that worked so hard to get the company this far.

Should have at least another 50% upside.