8-K: Vertex Energy Amends Supply and Offtake Agreement with Macquarie, Adjusting Offtake Terms and Fees

Vertex Energy and its subsidiaries have amended their supply and offtake agreement with Macquarie, modifying offtake arrangements and fees following changes in their offtake agreements with Shell and Glencore.

Summary

• Vertex Energy, through its subsidiary Vertex Refining Alabama LLC, has entered into Amendment No. 4 to its Supply and Offtake Agreement with Macquarie Energy North America Trading Inc.
• This amendment modifies certain offtake agreements and amends fees payable to Macquarie.
• The changes accommodate a new jet fuel offtake agreement with Glencore Ltd. and the termination of a previous agreement with Shell Trading (US) Company.
• Vertex Energy and Vertex Renewables Alabama LLC have guaranteed the obligations of Vertex Refining under the amended agreement.
• The amendment includes changes to the definition of 'Intermediated Product Offtake Agreement' and the calculation of 'Relevant Averaging Period Price'.
• The Monthly Product Intermediation Fee calculation has been updated to include both customer and supplier barrel fees.
• Specific customer barrel fees for Shell Chemical L.P., Equilon Enterprises LLC, and Glencore Ltd. are defined, along with a process for agreeing on fees with other customers and suppliers.

Sentiment

Score: 7

Explanation: The document reflects a necessary adjustment to existing agreements, which is a neutral to slightly positive development. The company is adapting to changes in its offtake agreements, which is a sign of operational flexibility. However, the termination of the Shell agreement could have some negative implications.

Positives

• The amendment allows Vertex to adapt to changes in its offtake agreements, specifically the new agreement with Glencore.
• Macquarie's waiver of termination rights provides stability to the Supply and Offtake Agreement.
• The updated fee structure provides clarity on the costs associated with the agreement.
• The agreement ensures continued supply and offtake arrangements for Vertex.

Negatives

• The termination of the Shell Distillates Offtake Agreement could potentially impact Vertex's revenue streams.
• The need to renegotiate customer and supplier barrel fees could introduce uncertainty.
• The agreement contains confidential information that is not disclosed.

Risks

• Changes in market conditions could affect the profitability of the amended agreement.
• The reliance on Macquarie for product purchases and sales introduces counterparty risk.
• The need to agree on fees with new customers and suppliers could lead to delays or unfavorable terms.
• The confidential nature of some terms makes it difficult to fully assess the impact of the agreement.

Future Outlook

The amended agreement is expected to govern the ongoing supply and offtake arrangements between Vertex and Macquarie, with adjustments to fees and offtake partners.

Management Comments

• The Company has advised Macquarie that it expects to enter into an agreement with Glencore Ltd., to be effective as of April 1, 2024, for Glencore Ltd.'s offtake of jet fuel from the Refinery.
• The Company has advised Macquarie that the term agreement for offtake of ULSD and Jet A-1/Defstan between the Company and Shell Trading (US) Company dated April 1, 2022 terminated with effect as of April 1, 2024.

Industry Context

This amendment reflects the dynamic nature of the energy trading industry, where companies must adapt to changes in offtake agreements and market conditions. The shift from Shell to Glencore for jet fuel offtake is a significant change in Vertex's trading relationships.

Comparison to Industry Standards

• Supply and offtake agreements are common in the energy industry, with companies like Shell, Glencore, and Macquarie frequently involved in such arrangements.
• The use of barrel fees for intermediation is a standard practice in commodity trading.
• The need to amend agreements due to changes in offtake partners is not unusual in this sector.
• The specific fees and terms are confidential, making direct comparison to other agreements difficult.

Stakeholder Impact

• Shareholders will be impacted by the changes in offtake agreements and the associated financial implications.
• Employees will be impacted by the operational changes related to the new offtake agreement.
• Customers will be impacted by the changes in product supply and pricing.
• Suppliers will be impacted by the changes in product purchase arrangements.
• Creditors will be impacted by the changes in the company's financial obligations.

Next Steps

• Vertex will continue to operate under the amended Supply and Offtake Agreement with Macquarie.
• Vertex will implement the new jet fuel offtake agreement with Glencore.
• Vertex will work with Macquarie to agree on supplier barrel fees for new product purchases.

Key Dates

Keywords

Supply and Offtake Agreement, Macquarie, Vertex Energy, Offtake Agreement, Jet Fuel, Glencore, Shell, Intermediation Fee, Product Purchase, Refining