Cutting its long-term debt by almost 50%, Vertex Energy, Inc. (NASDAQ: VTNR) exchanged nearly $80 million in convertible notes due in 2027 for newly issued VTNR stock resulting in a significantly lower interest payment for VTNR. While the resulting dilution caused the stock to drop by as much as 15%, it saved the company millions in interest payments that would have been paid until the notes’ maturity. With the company adding a new revenue stream after receiving EPA’s approval to generate D4 RINs for renewable fuel produced in its refining facility, the future appears to be bright for VTNR stock.
VTNR Fundamentals
Improving Balance Sheet
With a private exchange of approximately $80 million of 6.25% convertible notes due in 2027 for 17 million newly issued shares of VTNR stock, VTNR took a significant step toward strengthening its balance sheet with only $15.2 million of the convertible notes remaining standing. While VTNR may have diluted its shares to get rid of the notes before its maturity date, the exchange successfully saves VTNR millions of dollars since the $80 million convertible notes made up almost 50% of its long-term debt and had an extremely high interest rate of 6.25%.
New Revenue Stream
Furthermore, VTNR has received approval from the EPA for the generation of D4 RINs credits for each gallon of renewable fuel produced at its refining facility. RIN credits are environmental credits that could be traded in the open market and are the currency for the Renewable Fuel Standard (RFS). That could be another new source of revenue for VTNR, especially since D4 RINS are currently trading at around $1.6 and VTNR is currently producing approximately 5,500 barrels per day (bpd) with plans to increase production to 8,000 bpd by the end of Q2 2023.
It is also worth mentioning that VTNR’s revenue in Q1 2023 of $691 million is 56% more than its current market cap of $453 million and its price-to-sales ratio is currently 0.13, which is exactly half the oil and gas refining sector’s average. That means that VTNR stock may be undervalued at the moment.
Short Data
While short interest has decreased for VTNR stock by almost 14% since March 2023, VTNR stock is still seeing a high short interest rate despite the positive Q1 earnings, and the rapidly improving financials for the renewable fuel leader.
VTNR stock is highly shorted with a short interest of 24.9% and 20% of its float on loan. At the same time, utilization remains high at 73%, which may cause VTNR to skyrocket if it reports positive Q2 earnings due to the increased production capacity and the RIN credits approval.
VTNR Financials
In its Q1 2023 report, VTNR’s assets increased 17% QoQ from $689 million to $806 million, and its cash and cash equivalents decreased 39% QoQ from $141 million to $86 million. VTNR’s total liabilities increased by 11% QoQ from $523 million to $585 million.
Revenue also increased 830% YoY from $74 million to $691 million. Operating costs increased almost 260% from $12 million to $43 million which contributed to the operating income increase from $0.038 million in operating loss to $25 million in operating income. As a result, VTNR reported a net income of $53.8 million – representing a YoY increase from a $0.809 million net loss last year.
Technical Analysis
VTNR stock’s trend is bearish with the stock trading in a downward channel. Looking at the indicators, the stock is trading below the 200, 50, and 21 MAs which are bearish indications. Meanwhile, the RSI is neutral at 40 and the MACD is approaching a bullish crossover. It is also worth noting that the stock has a gap near $6.74 which may be filled in the future.
As for the fundamentals, VTNR stock just witnessed two catalysts in the EPA’s approval for it to generate RIN credits for each gallon of renewable fuel produced and the exchange of approximately $80 million of 6.25% convertible notes. VTNR’s Q2 earnings will be a huge future catalyst for VTNR, especially with the expected increase in production to 8,000 bpd. The current PPS could be a good entry point, especially since VTNR stock is trading near its 52-week low.
VTNR Forecast
VTNR’s financials are looking to be in a great spot after exchanging $80 million of its convertible notes that were due in 2027. Furthermore, the EPA approval for VTNR to generate RIN credits for fuel produced at its refining facility could be another revenue stream if VTNR decided to sell the credits in the open market. With VTNR stock trading near its 52-week low, it is certainly worth keeping an eye on.
VTNR Fundamentals
Improving Balance Sheet
With a private exchange of approximately $80 million of 6.25% convertible notes due in 2027 for 17 million newly issued shares of VTNR stock, VTNR took a significant step toward strengthening its balance sheet with only $15.2 million of the convertible notes remaining standing. While VTNR may have diluted its shares to get rid of the notes before its maturity date, the exchange successfully saves VTNR millions of dollars since the $80 million convertible notes made up almost 50% of its long-term debt and had an extremely high interest rate of 6.25%.
New Revenue Stream
Furthermore, VTNR has received approval from the EPA for the generation of D4 RINs credits for each gallon of renewable fuel produced at its refining facility. RIN credits are environmental credits that could be traded in the open market and are the currency for the Renewable Fuel Standard (RFS). That could be another new source of revenue for VTNR, especially since D4 RINS are currently trading at around $1.6 and VTNR is currently producing approximately 5,500 barrels per day (bpd) with plans to increase production to 8,000 bpd by the end of Q2 2023.
It is also worth mentioning that VTNR’s revenue in Q1 2023 of $691 million is 56% more than its current market cap of $453 million and its price-to-sales ratio is currently 0.13, which is exactly half the oil and gas refining sector’s average. That means that VTNR stock may be undervalued at the moment.
Short Data
While short interest has decreased for VTNR stock by almost 14% since March 2023, VTNR stock is still seeing a high short interest rate despite the positive Q1 earnings, and the rapidly improving financials for the renewable fuel leader.
VTNR stock is highly shorted with a short interest of 24.9% and 20% of its float on loan. At the same time, utilization remains high at 73%, which may cause VTNR to skyrocket if it reports positive Q2 earnings due to the increased production capacity and the RIN credits approval.
VTNR Financials
In its Q1 2023 report, VTNR’s assets increased 17% QoQ from $689 million to $806 million, and its cash and cash equivalents decreased 39% QoQ from $141 million to $86 million. VTNR’s total liabilities increased by 11% QoQ from $523 million to $585 million.
Revenue also increased 830% YoY from $74 million to $691 million. Operating costs increased almost 260% from $12 million to $43 million which contributed to the operating income increase from $0.038 million in operating loss to $25 million in operating income. As a result, VTNR reported a net income of $53.8 million – representing a YoY increase from a $0.809 million net loss last year.
Technical Analysis
VTNR stock’s trend is bearish with the stock trading in a downward channel. Looking at the indicators, the stock is trading below the 200, 50, and 21 MAs which are bearish indications. Meanwhile, the RSI is neutral at 40 and the MACD is approaching a bullish crossover. It is also worth noting that the stock has a gap near $6.74 which may be filled in the future.
As for the fundamentals, VTNR stock just witnessed two catalysts in the EPA’s approval for it to generate RIN credits for each gallon of renewable fuel produced and the exchange of approximately $80 million of 6.25% convertible notes. VTNR’s Q2 earnings will be a huge future catalyst for VTNR, especially with the expected increase in production to 8,000 bpd. The current PPS could be a good entry point, especially since VTNR stock is trading near its 52-week low.
VTNR Forecast
VTNR’s financials are looking to be in a great spot after exchanging $80 million of its convertible notes that were due in 2027. Furthermore, the EPA approval for VTNR to generate RIN credits for fuel produced at its refining facility could be another revenue stream if VTNR decided to sell the credits in the open market. With VTNR stock trading near its 52-week low, it is certainly worth keeping an eye on.