Investor

5 QUESTIONS AND ANSWERS for 2018 with BENJAMIN COWART - CHAIRMAN AND CEO

  1. HOW WOULD YOU COMPARE THE BUSINESS TODAY IN 2018 VERSUS A YEAR AGO?
  2. We have made significant strides in our financial and operational performance in the last 12 months. Main drivers to that success have been:

    • Substantial improvements in our production capacity. Our production volumes have increased at our Marrero and Heartland facilities by 17% over the last twelve months. We have been very diligent in our efforts to continually improve year over year at our operating facilities.

    • Significant growth in our Collection volumes that makes us less dependent on third-party oil and reduces our exposure to #6 Oil price volatility. We collected approximately 26 million gallons of UMO in 2017, which was up from 20 million gallons in 2016. Our current annualized run-rate surpasses 30 million gallons trending and tracking ahead of projections, while our contribution margin is also ahead of our internal expectation despite the streets shifting to a Pay-For-Oil model.

    • Continue to further the development and progress on our Gulf presence in the Marine Fuel markets. We have increased the percentage of finished products being delivered into the marine diesel market (which meets ECA spec). We have also made remarkable strides as we have increased our presence in local markets for our products moving forward.

  3. WHAT DOES THE COMPANY LOOK LIKE IF PERFORMING AT MAXIMUM CAPACITY?
  4. We are continuing to improve the production capabilities at both Marrero and Heartland as well as focusing on the potential upside in expanding and growing our street collections into our facilities which will add margin to our business. We anticipate an additional 10% improvement in production during 2018 vs. 2017. The current market conditions are the strongest we have seen since taking ownership of both plants.

  5. WHAT IS THE ROLE OF TCEP and MRYTLE GROVE FACILITIES IN THE COMPANY'S FUTURE?
  6. TCEP is ready to produce a product that will meet the new IMO 2020 Marine bunker fuel regulations for sulfur content although we haven’t seen the demand for that product in the current market. We will keep on exploring in the interim other market opportunities for products produced at the TCEP facility while remaining confidant in the strategic value that it presents to the new low sulfur marine fuel market coming January 1, 2020.

    Myrtle Grove as a site has the potential to become the flagship of the company. Our key initiative for this facility is to produce high-purity base stocks for the US manufacturing markets. This is one of our key initiatives for private capital funded projects and we remain optimistic with our progress to secure funding in the coming months. The site is located on a 41-acre industrial complex along the Gulf Coast in Belle Chasse, LA, with existing hydroprocessing and plant infrastructure assets, which includes 9 million gallons of storage.

  7. WHAT IS YOUR IDEAL COLLECTED VOLUME? WHAT WOULD BE THE RATIO OF COLLECTED VOLUME TO THIRD-PARTY?
  8. One of our priorities is to keep on building our collections volume organically as well as through acquisitions. Our collections volume grew 17% first quarter 2018 over first quarter 2017, and jumped 27% for the twelve months ended March 31, 2018, as we are on pace to collect over 30 million gallons per year. Our objective for the next 2-3 years is to reach 60 million gallons of collections and eventually be over 75% self-collected into our refining capacity. The expected margin enhancement of a collected gallon vs. third party purchased gallons is between 10 to 20 cents per gallon.

  9. HOW DOES THE COMPANY MAINTAIN AN ATTRACTIVE SPREAD WHEN THE MARKET SHIFTS TO A PFO?
  10. We have historically lead in our markets with a value proposition to our UMO generators not predicated on price. Our efficiency running routes and maximizing the utilization of the collection assets have allowed us to maintain solid contribution margins in our collections both in CFO and PFO market environments. In addition, we will continue on exploring new markets for our finished products in our constant objective to maximize the value and best monetize the feed through our refineries.