Good morning, welcome to the Vertex Energy Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on your touchtone phone. To withdraw from the question queue, please press Star then two. Please note, this event is being recorded. I would now like to turn the conference over to John Ragozzino, Investor Relations. Please go ahead. Thank you. Good morning, and welcome to Vertex Energy's second quarter 2023 results conference call. On the call today are Chairman and CEO, Ben Cowart, Chief Financial Officer, Chris Carlson, Chief Operating Officer, James Rhame, Chief Strategy Officer, Alvaro Ruiz, and Chief Commercial Officer, Doug Haugh. I want to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For discussion of some of the risk factors that could cause actual results to differ, please refer to the Risk Factors section of Vertex Energy's latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed on our call in the press release issued today. Today's call will begin with remarks from Ben Cowart, followed by an operational review from James Rhame, a financial review from Chris Carlson, followed by a review of our commercial strategy by Doug Haugh. At the conclusion of these prepared remarks, we will open the line for questions. With that, I will turn the call over to Ben. Thank you, John, and good morning to those joining us on the call today. During the second quarter of 2023, market shifts in refining margins, combined with startup expenses associated with our renewable diesel facility, impacted profitability at the Mobile facility. While several factors associated with the startup and optimization of our RD facility affected financial results for the quarter, the primary limiting factor on expected financial performance is attributed to the volatility of market conditions for refined fuels and products. Without compromising safety or quality, our goal is to maximize profitability in these ever-changing market conditions. To that end, Vertex has been laying the groundwork for strategic pathways that we believe can help us accomplish our performance goals as an energy transition company. This broader strategy, centered on creating a vertically integrated, renewable fuels-focused company, is built on three key principles, which our team will elaborate on in greater detail throughout the call. First, our commercial strategy. Advancements in our feed, origination, and product marketing strategy are crucial to capturing opportunities along the full value chain. These are core competencies that Vertex has developed over more than several decades, and we have recently made significant progress here as Chief Commercial Officer Doug Haugh will address on the call today. Second, continued operational excellence in the form of reliability and attention to safety. The reliable, smooth operations of our facilities provides the consistency and visibility required to execute on our strategic vision and continue to scale the business going forward. Our operational team continues to perform exceptionally well, which Chief Operating Officer James Rhame will cover shortly. Third, capital efficiency. Our focus on the efficient use of capital through continued balance sheet improvement and enhanced risk management strategies remain a key priority for the business as we continue to grow, which our Chief Financial Officer, Chris Carlson, will discuss. Going forward, we will continue to develop and leverage expertise as we build on our accomplishments to date and execute a much larger vision for the future of Vertex, with a commitment to providing our stakeholders with an increasingly clear view of the path ahead. With that, I'd now like to hand the call over to James Rhame, our Chief Operating Officer, who will provide an update on our operations during the quarter. Thank you, Ben. Good morning, everyone. I'll begin with a brief report on our health, safety, and environmental performance. The second quarter of 2023 was a clean quarter, with 0 OSHA recordables and 0 incidents of environmental noncompliance recorded across the entire company. Additionally, Mobile saw 0 process safety events. I want to commend our team for their continued commitment to excellence in protecting our people, as well as the environment during an extremely busy period. Marrero had a successful turnaround during the second quarter, in which we executed a full rebuild of the evaporator during the outage. Since taking the outage, Marrero has exceeded the budgeted capacity utilization. Our conventional fuels operation team at the Mobile facility successfully navigated several challenges during the quarter, including equipment failure and supply disruptions, mitigating further potential impacts to our day-to-day conventional business. Second quarter conventional throughput volumes at the Mobile Refinery averaged 76,330 barrels per day, or 102% of stated operating capacity. This strength in conventional throughput is attributed to our team's ability to procure feedstock despite pipeline outages. Direct OpEx per barrel for the second quarter was slightly above our initial expectations at $4.23 per barrel. This was largely driven by incremental costs associated with the repair of the RD unit feedstock pumps, as well as the additional effort associated with reengineering the startup sequence of the renewable diesel unit. Our finished products, such as gasoline, diesel, and jet fuel, accounted for 61% of our total product yield during the second quarter of 2023. With the completion of the renewable diesel conversion project now behind us, we believe that this yield profile is an accurate representation of the expected yield profile going forward. On a combined basis, our fuels gross margin per barrel during the quarter was $7.34 per barrel. On a conventional fuels-only basis, our fuel gross margin per barrel was $8.03, reflecting a capture rate of 34%. The erosion in our reported fuels gross margin per barrel during the quarter was driven by a combination of several factors. First, first quarter compared to second quarter refining margins were compressed due to an approximately 25% drop in the crack spread. Second, a reduction in crude prices of approximately $8 per barrel during the quarter impacted our inventory position. Third, the base refinery encountered yield impacts due to RD unit's operational downtime and startup. Regarding the RD unit conversion, there was $20 million in costs associated with the RD unit startup, most all of which were one-time costs. These costs included margin downgrade, fixed costs associated with the pumping systems, and feedstock devaluation that occurred prior to successfully getting the feedstock intermediated. Vertex renewable diesel conversion set the industry pace for safety, cost, and schedule. The unit achieved on-spec status just 14 months after the site acquisition, and within 15 months after the acquisition closed, it was at full operating rates. Since commencing initial production of RD on May 27th and achieving our targeted phase one production rate during the initial test runs, we have observed stable performance and reliability of the facility along the throughput curve. As we continue to operate, we are focused on optimizing the unit through the pursuit of pathway approval for alternate feedstocks to improve LCFS credits by improving the carbon intensity, which allows us to unlock the full value of the asset, which Doug Haugh will elaborate upon following a financial update from Chief Financial Officer, Chris Carlson, to whom I will now hand the call over. Thank you, James. Welcome to those joining us on the call today. For the three months ended June 30th, 2023, Vertex reported a net loss attributable to common shareholders of $81.4 million, or $1.03 per share, versus a net loss attributable to common shareholders of $67 million, or $0.99 per share in the second quarter of 2022. Included in this quarter's net loss on a GAAP basis is a one-time non-cash interest expense in the amount of $63 million, which reflects the recent convertible note exchange transaction we executed in June. We reported an adjusted EBITDA loss of $34.2 million in the second quarter of 2023 versus EBITDA income of $71.3 million in the prior year period. The adjusted EBITDA loss for the quarter reflects a combination of weakness in refined product margins, as well as the impact of incremental costs associated with the repair and startup of our RD facility during the quarter. Total capital expenditures for the second quarter 2023 were $30.5 million, in line with our prior guidance issued on May 9th. Turning to the balance sheet. As of June 30th, 2023, the company had total cash and equivalents, including restricted cash, of $52.1 million versus $95.1 million at the end of the prior quarter. Vertex had total net debt outstanding of $275.3 million at the end of the second quarter of 2023, including lease obligations of $162.1 million, implying a net debt to trailing twelve-month adjusted EBITDA ratio of 3.6 times as of June 30th, 2023. While shifts in market pricing had a negative impact on the profitability of the conventional refining business during the quarter, prices have materially improved from the lows experienced earlier in Q2. The Gulf Coast 2-1-1 crack spread has materially improved from the lows of approximately $18 per barrel in Q2 to over $35 per barrel as of the end of July. Additionally, market pricing for refined products outside of the benchmark, such as Jet A, has also recovered substantially, improving 40% from the lows witnessed in Q2 2023. As a result, our current liquidity situation remains adequate to satisfy our near-term obligations and capital plan for the remainder of 2023. We remain focused on upgrading the overall capital efficiency of our balance sheet. During the second quarter, we successfully executed on a cashless equity conversion for approximately $79.9 million of our 6.25% convertible notes for an aggregate of 17.2 million shares of common stock. This is expected to drive approximately $5 million in annual cash interest expense savings and remove the longer term need to meet the obligation of principal and cash upon maturity. Refinancing of the remaining $15.2 million of convertible notes, as well as the $150 million in term loan debt outstanding, remains a top priority of our financial strategy. Keeping in mind the prepayment prohibition clause on our term loan, which expires on October 1st of this year, we maintain an opportunistic view on refinancing this debt with more efficient, less expensive sources of capital, consistent with our strategic focus on our balance sheet and maintaining longer term capital efficiency. Looking to the third quarter of 2023, with the successful conversion of our hydrocracker to renewable diesel production now complete, and considering the lower complexity of the Mobile facility, less than 50% of our expected future product yield profile now falls within the current benchmark product composition. We therefore believe it is far less useful as a tool for forecasting expected profitability of our conventional refining operations and will no longer provide specific guidance on expected capture rates. For the third quarter of 2023, we anticipate total conventional throughput volumes at Mobile to be between 74,000 and 77,000 barrels per day. Our expected yield of conventional products is expected to be comprised of between 59%-63% finished products, such as gasoline, diesel, and jet fuel, with the balance in intermediate and other products such as VGO. OpEx is expected to be $3.60-$3.80 per barrel for the quarter, and we anticipate total capital expenditures for the third quarter to be between $20 million-$25 million. I'd now like to turn the call to Chief Commercial Officer, Doug Haugh. Thank you, Chris. Good morning. Now that we've achieved commercial production sales of RD and proven the unit to run at designated rates with yields at or better than target, we have quickly shifted our focus to accelerating the deployment schedule of our multi-feedstock supply and production strategy. We are accelerating this due primarily to two factors. One, the new plan has demonstrated operational stability over a wider range of throughput rates than we'd originally anticipated at acceptable conversion rates, providing valuable insight into the optimization of the facility. Two, the economics of producing RD from RBD soybean oil are currently unattractive under prevailing market conditions. While the RD units and our supply systems are multi-feedstock capable, we had initially anticipated a longer break-in period to stabilize and streamline operations while utilizing RBD during this initial period. With diligent work from our supply, engineering, and operations teams, we were able to introduce distillers corn oil, or DCO, into our feedstock blend last week and have advanced a combination of eight different feedstock blends through our feedstock approval process in the last six weeks. These include technical tallow, DCO, canola, and crude degummed soy, processed through a nearby pretreatment unit under a tolling arrangement. The reason I mentioned eight, and not just the four different feedstock types, is because we must run each supplier and origination point through our feedstock approval process before it becomes approved for use in blends run through the RD unit. This process is robust and includes quality assurance and quality control steps at each critical step along the supply chain. I specifically want to thank the engineering and laboratory staff at the Mobile site and the supply and trading team in Mobile for advancing our feedstock schedule by months with the hard work and diligence required to do it safely while maintaining the quality we need to protect our catalyst life longer term. With approvals in place, we've obtained attractively priced commercial supplies of crude degummed soy, technical tallow, canola, and DCO for this quarter. These feeds will be included in our feedstock blends for the remainder of this quarter, and optimizing a feedstock diet consisting of significant percentage of these lower cost feeds is a key priority for our RD team. In parallel with these current optimization efforts, our feedstock development team is sourcing supplies of other lower CI and lower cost alternatives in the UCO and fats, oils, and greases market while they build a longer term supply of agricultural oils produced from cover crops. This combination of near term optimization and longer term feedstock development builds on the 20-plus year history of Vertex of developing, sourcing, and scaling alternative feedstocks. To enable and support these feedstock optimization and development efforts, we have 500,000 barrels of tankage and logistics capacity in Mobile that provides dedicated storage for each family of feedstocks as required by the EPA. This infrastructure also provides us the necessary blend tank capacity needed to optimize the blends prior to final injection in our pipeline to the refinery day tanks that feed the RD unit. Our feedstock supply system provides us with the capacity, flexibility, and capability needed to optimize our mix of many alternative feedstocks, using a combination of truck, rail, and barge logistics, with the dedicated storage and blending tanks that a multi-feedstock supply strategy requires. In addition to the feedstock supply system, we have added storage capacity to our deepwater products terminal, utilized to load vessels with RD for supply to the West Coast of North America. With these additions, we now have 450,000 barrels of RD storage piped directly from our RD unit to our Blakely Island terminal, where it's manifolded together and piped directly to our deepwater dock. This system performed well, loading our first shipment last month, with rapid loading rates that minimize dockside time for the vessel and eliminate unnecessary demurrage or delay for deepwater vessels. We added the additional storage to ensure that we can more easily maximize volumes loaded to each vessel, which in turn minimizes our freight cost per gallon. In closing, I would just like to thank our supply, engineering, and operations teams for allowing us to safely advance the schedule of this work and for obtaining excellent operational and safety results during a hectic startup and commissioning period. This team's demonstrating that we can build upon a solid operation with an advanced feedstock supply system that allows us to optimize available margins. While advancing those plans are a key priority for all of us at Vertex, the ability to do so starts with safe and reliable operations, and we're grateful for the team for delivering those conditions. Thank you for your time and attention today. We look forward to taking questions following some final remarks from Ben. Thank you, Doug. Over the past year, our focus has been on executing the biggest development project in the 22-year history of Vertex. We knew we owed it to the market to deliver on our target of successfully transitioning the Mobile Refinery and completing the renewable diesel conversion project. As Doug and the team have laid out, we have the assets, we have the operational capability, and with our expanded team's expertise, we're well positioned to execute a strategy that has been taking shape since the close of the acquisition of the Mobile Refinery. We are currently drafting our five-year plan and are looking forward to publishing this in 2024, following finalization and board approval. For now, as I stated in the beginning of the call, we will build on our achievements to date and pursue areas of greatest opportunity, which we believe are in feedstocks, logistics, product marketing, balance sheet improvement, and risk management. The progress we've made to date is exciting. We know we have a lot of work to do in terms of translating this to shareholder value. As always, we're grateful for the shareholder support that allows us to continue executing our vision as a vertically integrated energy transition company. Thank you for joining us on this call today. We look forward to providing you more information and updates in the near future. With that, we will open the line for questions. Operator? We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. The 1st question is from Noah Kaye with Oppenheimer. Please go ahead. Good morning. Thanks for taking the questions. Morning, Noah. Nice job on the reliability, and, you know, just the throughput at Mobile and hearing that the new normal is very encouraging. Understand the logic around not providing a capture rate going forward, given the product slate. Can you give us some directional guidance, you know, and I think, Chris, you were alluding to this in your prepared remarks on where you think margins can go as we look out here in the third quarter and the back half? I mean, clearly, they should go up, right, based off of where, you know, the benchmark is and some of those other prices. Can you help us put a little bit finer point on it? Because, you know, I think we just want to get our bearings here from the sell side. Yeah, good question, Noah. Thank you. Yeah, I would say definitely, as I noted, we're seeing improved margins in the third quarter, especially over what we saw in the second quarter. You know, as far as, you know, the percentages of yield and what we're gonna see out of the refinery, you know, that's kind of what we're gonna present going forward, you know, from a, from a yield perspective. Okay. I, I, let me try to follow up online. Maybe we can try to get a little more clarity on RD production. Clearly, you're doing a lot of work around sourcing the alternative feedstock, kind of having run into the reality of RBD economics here. Just given everything you said, when should we expect the company to start profitably generating renewable diesel production and sale? Well, I think, you know, we're, we're gonna optimize the mix that, that we outlined today, you know, for this quarter. I think the, you know, there's the margin environment similar to, you know, along with crack spreads, has improved this quarter versus last quarter, just on any feedstock mix, right. I think, we should all be encouraged by that. You know, it sort of looks like we commissioned a unit and produced at the, at the bottom. At least we hope for the near term, that's the case. And the, you know, margin environment this quarter looks, looks positive. Sorry, I just want to get a little bit of a clearer answer to that. I mean, you've got peers guiding to renewable diesel production, for the back half of the year, at least in sort of, you know, volumes. I understand, you know, they have different feedstock blends, but maybe you can help us better understand at least the steps that you need to take to get alternative pathways approved and whether or not you see a pathway here to actually materially increase production using RBD. Yeah, I think that, yeah, we're gonna-- I mean, the main focus, though, is this quarter is getting those pathway approvals, right? We gotta, you have to actually run each of those feeds and, you know, quantities enough to get the approvals for LCFS. That's the focus right now. The, you know, our run rates are gonna be based on the available margin, right? And, you know, what we found with the units, which James can speak to maybe more clearly than I can, but the, you know, the operating range of stable production with good conversion rates, is wider than we anticipated, which is good. We're not, we're not forced to run the unit at higher production rates if there's no margin available. That's, you know, that's, that's what we're exploring. That's, that's why we're not providing guidance on throughput on the RD unit yet, similar-. Mm-hmm to what we've done with conventional. You know, I expect that, you know, we hope to be able to do that in four quarters, but right now, having, you know, weeks of production time under our belt, we're, we're not gonna make that commitment just yet. Okay. That, that's helpful. Thanks. I guess if I can sneak one last one in. Just, you know, how should we be thinking about, you know, managing the balance sheet and, and the cash generation profile for the back half? You, you know, I assume there'll be some focus on, you know, decreasing inventories. You do have some CapEx here, in the guide for Q3. Maybe you can speak to balance sheet management, cash generation, and, and potential additional capital sources, if you need to, you know, expand your liquidity. Yeah. Again, good question, Noah. I think as everybody knows, the last 12 months, we've put tools in place for day-to-day working capital. One being an intermediation agreement on the conventional side, and then also in the recent quarter, another intermediation agreement for the RD side of the business. In addition, we, you know, retired the majority of the $155 million convertible bond that was out there. You know, as you heard last quarter, we're, we're ahead on CapEx for phase two. As we kind of look forward in the next two-three quarters, our CapEx spend is expected to go down, you know, all of which, you know, really put us in a great position to look out and to refinance the overall business heading into fourth quarter and first quarter. Okay, great. Thanks very much for taking the questions. The next question is from Eric Stine of Craig-Hallum. Please go ahead. Good morning, everyone. Morning, Eric. Morning. Morning. Hey, just sticking with the renewable diesel, just to be clear, the eight feedstocks that you mentioned, are those approved or is that still in process? Then, you know, I know this doesn't necessarily matter until you get LCFS approval for those pathways, but can you just give an idea of maybe a, you know, I don't know if it's a blended CI score or how the CI, you know, carbon intensity would compare to, to soybean oil? Yeah, we can't, we can't give you direction on the CI sort of averages at this time. I mean, the, the CI scores on the feedstock categories themselves are, are, you know, that's all public information in terms of the, the standard CI score that you can ascribe to those. We, we certainly hope that our particular LCF pathways, once approved, will improve on those public benchmarks. We have no reason to believe they, they wouldn't. If you wanna sort of, you know, have a basis for calculation, I'd, I'd look to those, you know, the CARB numbers or the GREET numbers, however you look at the qualifying those. Argonne's got a, a spread on those as well. Yeah, the, the approval process I spoke to is, is from our internal engineering team, right? So that's... We first have to know, okay, you know, we've, we've obtained feed, we know we can run it, it goes through our quality control process. It's one thing to know that, you know, a particular type of feed, which we've engineered for, is, is workable. We have to actually get commercial quantities of the feedstock and make sure that it meets those specs, right? Because the, you know, the, the big fear is contaminating your, you know, poisoning your catalyst, right? We've got to keep those, those safeguards in place and then make sure that we run through that rigorous approval process on each of these blend, you know, each of these origins and each of these types. That's the, that's the, that's the treadmill the team's on right now to, to keep up at that pace. We've got many additional blends that we've got to get through in the next couple of quarters to make sure we can fully optimize, you know, the margin environment that gets presented to us. Because we don't know, you know, at any given time, which of those feedstocks is gonna be advantaged in that, you know, in the forward part of their curves in terms of their cost. Our, our goal operationally is to make sure that we are prepared both with the infrastructure, the pipeline configuration that we've got between the infrastructure and the RD unit, and that all the engineering and, and lab work's been done to qualify all of those blends. If, you know, a particular feedstock presents a really good buying opportunity in the market, we can act very, very promptly, get that into our blend, and know that we can do that safely and reliably. That's, that's really the work that's going on right now with the feedstocks. Got it. Understood. I mean, obviously, I've got access to the various CI scores. I guess I was more getting at, you know, as more comes in and as you see availability, what that mix might be, but I guess that's more of a, you know, to be determined going forward. I guess I'll leave it at that. You know, maybe last one for me. You know, obviously, the production, a lot of it is falling outside the 2-1-1, and so no capture rate going forward. I guess understandable, but any thoughts on maybe, you know, changing the way that you talk about this, you know, not the 2-1-1 anymore, maybe it's a different crack spread, or anything along those lines. Because I'm just envisioning when you do your quarterly update, you know, what are those metrics that you're going to give? Does that truly give transparency into what the quarter, you know, is looking like, you know, whether it's a week or two after quarter end? Yeah, what we're trying to give you is really more of what our yield structure is as we kinda go within ranges. This way, you know, they're commercially available or, you know, available in the market versus, you know, current plus forward strips. Doing that should allow you, you know, enough, we hope, enough insight to be able to look for what the, what the guidance will be. We're giving you crude rate, capital, yield, and what did I miss? That's it. That's it. Yeah, I think it's, it's probably good to add that we're, we're benchmarking off a LLS crude. Right. -posting. Yeah. I think you need that. Yeah. LLS posting. Yeah. CBOB, Gulf Coast, VGO Gulf Coast, and, jet, ULSD. That covers it. Okay, I'll take the rest offline. That's, that's most of everything we have. Yeah. I mean. Anything else coming out... It should be actually better- It should be better- Better than of what we were trying to do with 2-1-1, especially with the hydrocracker out of service. That's right. Moved to RD service. Sorry. Okay. Okay. Thank you. The next question is from Amit Dayal of H.C. Wainwright. Please go ahead. Thank you. Good morning, guys. Just on the, the repairs and the, you know, the cost associated with that was, how much of this was anticipated and how much actually went into the repairs, you know, for that $20 million that incurred in Q2? What I described was what I put to start-up cost, which was of course, delayed further from, you know, what our original plan was when we damaged the pump. None of the cost. About a third of it was just straight repair costs and what the team had to do to get the pumping system to work. With that, we also brought in expensive start-up material and downgraded, and that was about another third of it. That start-up material was what was required, especially as we restarted. That was our plan. However, we did not plan for the way that the team had to adjust to be able to start up safely and make sure we get through the initial commissioning phase. Then the inventory evaluation devaluation occurred because we knew we had to get way out in front of this unit to make sure we had feed in case we did start up. During that time, we did get a devaluation of the of the bean oil. Understood. Thank you. then- Okay. You know, just I, I, I may have missed some of the commentary around, you know, the feedstock and the RD production. Just to clarify, are we still producing at 8,000 barrels per day, given sort of, you know, our feedstock, you know, process that's going on in terms of finding, you know, the most optimized pathways, et cetera? To be clear, you know, we're gonna, we're gonna vary the production rate based on a couple of factors, biggest of which is margin of opportunity. If there's, if there's very, very attractive margins, we will, we will max rates within safe limits, of course. Then, you know, we're finding the optimum rate on each blend and each mix that we feed to the unit, which is gonna, you know, it's gonna take some trial and error. We need to ramp the unit up and down to do that, you know, against each, each blend that we wanna optimize with. That's why we're, you know, and I appreciate the earlier question as well, but that's why we're not providing the same throughput guidance yet on the RD unit that we have for the conventional. You know, we hope to do that in the future. You know, we hope everybody understands that's, you know, we're past commissioning. We've run at design rates. We know the unit can do it. Now it's what's the operating envelope that's available to us to optimize with. When will we be able to maybe provide this guidance, fourth quarter or early 2024? Yeah, I mean, we, I think there's certainly some opportunity for fourth quarter, but I would feel much more comfortable with, you know, next year. I think heading in, we've fully got the system run in, we've got the optimization blend done, we know what our conversion rates are at each of those, each of those blends, and then we can give much firmer guidance. We'll have a, you know, little bit more forward look on the feeds at that point, because we'll know what our recipes are gonna be with more certainty going forward. We'll actually be, you know, buying those feeds on a, on a forward basis, much more consistently. That'll give us our, you know, our run rate forecast a lot more stable than what we have right now. All right. Thank you for that. Just last one, regards inventory. It looks like you sold some inventory into the quarter. I'm just trying to sort of, you know, bridge the logic of trying to sell more inventory during, you know, tighter market conditions. Just any color on how we are managing that side of the business? What maybe drove, and maybe I didn't understand this correctly, but if we did sell more inventory into the quarter, just trying to understand the logic behind that? I guess just to be clear, if you're looking at last quarter to this quarter, you know, in the last quarter call, we did discuss inventories building around RD, especially around the feedstocks that we brought in. You know, we did have some other inventory builds at the end of last quarter at our Marrero facility, of which the majority of that has started to sell during Q3. That's the shift that, you know, we're seeing in inventory at the moment. Again, a lot of that is driven by the, the RD startup. Okay, understood. That's all I have, guys. Thank you so much. Thanks. The next question is from Manav Gupta of UBS. Please go ahead. Hey, guys. I wanted to understand the Q2 capture a little better. Was the fact that you have a slightly higher diesel yield and a high jet fuel yield, and those products were discounting to gasoline also a drag on your capture in the Q2? Yes. Yes. Particularly jet. Jet, jet was a big difference between Q1 and Q2. Okay, it was Jet. That's what I thought it was Jet. Jet has recovered and so has diesel. Again, I don't want the guidance, but if it was basically Jet and diesel trading at a big discount to gasoline, those two have reversed, right? Yeah, I wouldn't say it's just a discount to gasoline, more as a discount to their traditional position... Yeah versus gasoline that had been in the prior quarter. You know, you saw a realignment in the second quarter of distillates versus gasoline, not entirely anticipated with driving season hitting and gasoline going through its seasonal adjustment. Certainly, that, that impacts how the 2-1-1 translates into a capture rate for us in a big way. You know, I, I think that's why we're trying to move, move your view to, you know, from a capture rate at a gross level against 2-1-1 to more of an understanding of the actual yields, particularly given how much jet we make, which, you know, is, is a substantial portion of our production. Okay. That's all I needed. Thank you so much. Thank you, Manav. The next question is from Brian Butler of Stifel. Please go ahead. Good morning. Thanks for taking my questions. Hi, Brian. Hi, Brian. Just on the conventional again. At the current prices, is conventional profitable? Is it past break even? Yes. Yes. Yes. If we were to run at current prices for a quarter, you would be, the conventional would be profitable. I just want to be clear on this because. Yes. I guess. Yes. What's your- Yes. Yeah, so the expectation is on a long-term basis, you're able to manage this at some level of profitability? I don't know. Correct. Absolutely. Brian, I mean, one of, one of the things you see us doing now that we've moved the hydrocracker into renewable diesel service and is dedicated to renewables, is how do we continue to try to get yield improvements inside of the refinery? We've already captured a few of those. We've got more coming, and we expect within the next couple of years to replace that income generation, not only within the fence line, but really one of the reasons that Doug's here is to help us make sure we get the best net back all the way with our products that we are now, selling, you know, outside of our, our Shell facility. That's what you see Doug and his team doing, is really making sure that we're capturing good net backs on every one of our molecules as we try to improve the yields across the refinery inside the fence line. Yeah. That's right, Jim. Things twofold, right? It's, it's what we can do inside the fence line on yields, and it's what we can achieve commercially, in the market for all the production of the refinery, which, you know, there's, there's ongoing optimization opportunities and margin capture opportunities there. You know, I think the. Also the, you know, it's not just the second quarter market conditions, but, you know, the unit going through commissioning, you know, we had to run conventional different as well. Right. The two aren't disconnected. Correct For quarter. You know, that's why the yield guidance going forward, we believe, is accurate on the current facility, and yes, it's profitable at today's crack, certainly. Let me- Okay. Let me just- Hello? Yeah. We think about the, the third quarter, you know, that we're in and, and what we're looking at as far as forward curves. The fact we've added roughly 10,000 pounds a day production on the conventional side really, you know, positions us well, you know, as we look ahead. That's, that's kind of added value that, that we originally really didn't anticipate, really pleased about. Yeah, the teams continue to optimize every place they can. A lot of good, on a go-forward basis. Okay. Then on the renewable diesel, if my understanding is correct, that the changing of the feedstocks, you, you're not running at 8,000 barrels per day, and at some point, I'm guessing you get there, but is that a fourth quarter, or is that a first quarter 2024 event? Well, yeah. To be clear, again, for the earlier question, we are not running at 8,000 barrels a day, and we're not currently providing guidance on throughput for the third or fourth quarter at this time. To be clear, the unit is fully capable of operating at that level. That's, that's what we've proven out with the commissioning process. And we're, you know, very, very pleased with the conversion rates and the throughput capacity of the unit, you know, performing above design targets. You know, we're pleased with that. But, you know, this is necessary work we need to do to position the unit for long-term success. Also the, you know, the market conditions don't tell you to, to run hard. We're gonna, we're gonna optimize against the available margin, and find the, you know, the optimum operating envelope that the unit provides us to do that. All right. So on, on this uncertainty kind of around the feedstock on the renewable diesel, does this limit your ability to get a CI score for the LCFS? Does that now get pushed from an expectation that you were gonna get a score in the fourth quarter now to sometime in 2024? No, no. That's, that's, in fact, that is the work that we're doing now. You know, if anything, we've accelerated versus, you know, delayed in that regard. You know, the pathway approval requires us to run some commercial quantities of each of the feeds that we seek pathway approval on. Then to move from the default score to a, an approved pathway, you know, we've got to submit all of those details on each run through the CARB processes required to achieve those, those pathway approvals. Now, look, we don't control the schedule of that. They can get backlogged as some of the other regulatory agencies have been of late. For what we can control, we are, we are marching forward at all pace. All right. You've already received authorizations to sell the RINs and your other tax credits. Is that correct? RINs are. Yeah, we've been, our AD approval, we secured that. The RINs have already traded and been produced and filed, so. Okay. Then, as we wait on the solving the feedstock on renewable diesel, is the hydrogen expansion project slowed, or is that still expected to continue to move forward? Yeah, it's still expected to move forward. Mid-year, next year, is when we plan on bringing it in. We're doing the capital work around it, where we tie into it, as is Matheson's doing all the foundation work right now. All right. Thank you very much for taking my questions. Thank you. The next question is from Donovan Schafer of Northland. Please go ahead. Hey, guys. Thanks for taking the questions. The first question, I know, I did miss some of the prepared remarks, kind of juggling calls, apologies if you've already covered any of this. You know, you've moved away from from providing a capture rate, talked about jet fuel as kind of a big part of that. Your, your other, the, like, quote, unquote, you know, other categories, including, you know, intermediates, like VGO, LPG and other items. That's also a significant piece, you know, I think 37% of the yield this quarter. I guess I'm curious if in this quarter, if you can give us a sense of kind of the magnitude of the significance of the impact that had on the capture rate. You know, was it, was it really pretty much all on the jet side, and that kind of held steady or didn't make a big difference? Or was it sort of mostly jet, but, but there was, you know, 60/40, like, you know, mostly jet, but there was still a big impact from changes in those, that other category? Then, and then sort of going forward, you know, I think I, I appreciate the logic of moving away from the capture rate. It probably makes a lot of sense. We might need some help figuring out how to kind of follow, you know, something like VGO in particular, as a product that gets traded between refineries and whatnot. There's not a great kind of public pri-- We don't really get public prices that get reported. I'm wondering if you can help us think through, you know, what we would track or what we might look at to, to estimate where that other category is going. That's, you know, like, more than 30% of the yield. Go ahead, James. All right, let's, let's, let's first start with your, your first question. What was the impact? Roughly, I'll answer the yield component of it. It was roughly a $1 a barrel impact just on yields, and crude devaluation was another $1 a barrel during this quarter. Top of it, we saw the jet drop by about $30 relative to crude across the quarter, quarter one to quarter two. It was still healthy. However, it was a significant drop, and those all affected the capture rate. All right, that's question one. Question two was really around VGO. Yeah, now, let me say this around VGO. We're focused on the key products, which is gasoline, diesel, jet, where you can actually go get those index pricing and do your evaluation against LLS crude. As you said, Donovan, VGO is a. Large piece of our yield structure. It, it is. There's not a big index to go draw from publicly to try to figure that out. You got to. That's why we're not making it part of the guidance, because it, it has the ability to. Bring a big positive or bring a negative at the same time, depending on what those markets do. As you said, that VGO trades between refineries. The rule of thumb, James, I guess when, when, you know, it's either- 70. Yeah. 60/40, 70/30. Yeah versus CBOT price is kind of our rule of thumb. Gas, diesel. Gas, diesel. Yeah. Either 70 gas, 30 diesel, or 60 gas, 40 diesel. Everybody has their own choice on what, what they use to figure that out. I think we're probably tracking closer to a 60/30 today. Yeah, it, it, it has moved away some recently due to some cat cracker outages. Okay recently in the market. You know, that's generally has worked pretty well for us long term. We'll, we'll leave that up to you, Donovan, but that's probably the best guidance we can provide to you there. My second question is on, you know, the cost that you incur for RINs on the fossil fuel side. It looks like, unless I just sort of misrecorded things, it looks like the cost of RINs actually went up from $2.51 a barrel in Q1 to $3.66 a barrel in Q2. When I look at the EPA's kind of dashboard showing these pricing, I believe it's D6 RINs that you guys typically purchase. You maybe have the option to do D5 if you see that as, you know, advantageous for any reason. In any case, the pricing for those seems to decline from the first quarter to the second quarter. I'm curious what caused the cost for you guys to increase. Was there a change in the, in the, you know, commitment, kind of, obligations for you guys, where you had to do more RIN, you know, purchase more RINs than you would have in the past based on, you know, yield, mix? Or is there sort of a timing delay between what I would see, you know, like on the EPA's pricing dashboard versus what you experienced? Just kind of trying to understand the difference there. Yeah, I'm not sure how that. I'm actually not familiar with the EPA dashboard price, but the, you know, the locals, you know, the spot price in the RINs market has, by our experience, increased a bit during the quarter, didn't go down. Specifically, D6s. Yeah. Okay. You, you saw D6s go up on a, on a, yeah, per RIN, that actually increased. Is it, is it regional? There's regional pricing? No, but. No. Okay. It's not a, not a liquid, you know, it's, it's a liquid market, but it's not a, like, it's a, you know, traded index, right? Sure. Okay. Okay. Down or bespoke transactions, right? You got that factor. Yeah. Our run, our run rates were up, so you're incurring greater RVO obligation with those run rates. That's a factor. If you're dividing off per barrel, I understand, account for that, but, Yeah, the RIN cost was higher. Okay. Okay. Yeah, there's probably just something. I think the EPA dashboard is this sort of like a sampling or something. It's not a complete data set, so that might just be part of the issue there. Okay, that's helpful. That clarifies things a bit. Thank you, guys. I'll take the rest of my questions offline. Thank you, Donovan. Okay, thank you. Again, if you have a question, please press Star, then One. The next question is from Jason Gabelman from TD Cowen. Please go ahead. Hey, morning, guys. Good morning, Jason. Morning. I wanted to go back to the renewable diesel project and just clarify a couple of points that you've touched on, during the call so far. I understand you're not providing throughput guidance, and it sounds like you may run under 8,000 barrels a day. I guess I'm wondering if is that a function of not having the LCFS approval yet, or is it a function of just other market dynamics going on? I guess what I'm trying to understand is in a, if you were kind of in a position where the asset was fully operational and everything was lined out, would you still be running under nameplate, given market conditions? Yeah, I think it's. Yeah, thanks for your question. I think it's a combination of both. You've got, you know, obviously, you can look at the, the CBOT on soy to see the unbelievable run up during the quarter, right? You know, feedstocks have kind of skyrocketed. You know, even when you're not using soy, everything trades off of soy, right? It drags the whole complex up when you've got that kind of move. You know, and that's, that's in addition to the operational, you know, parameters that we've talked about already, but that's a, that's a big factor. I think, yeah, and you don't have the additional margin opportunity of the, of the LCFS pathways available to us right now, right? There's no. You know, normally, yes, if those were all in place for your question, we would, we would run to capture those. They're not in place, you're not going to run, you know, and not, not, not capture those yields, obviously, against the very, very high feedstock costs, so. Got it. My follow-up also on the project is, can you discuss, if you're utilizing the third-party Pretreatment Units yet? If not, when we should expect that to occur? Maybe just touch on. I know you've mentioned in the past, there are some unique logistical benefits. to the renewable diesel project. If you're able to quantify any of those that are more difficult for the market to quantify themselves, that'd be great. Thank you. Yeah, I think the, yes, we have. We are, as of now, utilizing pretreated feeds. We've put our first barges through the initial pretreatment facility. As we've mentioned, I think on earlier calls, we, we do intend to utilize multiple facilities. Commissioning on the second one is about a month behind by our partner, so we're, you know, we're looking forward to that, but that's, that's in hand and ready to roll on the, on the feedstock, you know, plan for us. You know, we'll start to benefit from the, not just the base spreads between bean oil and the other feeds that we've described, but the, you know, spreads between that and the crude feeds of those same categories. You know, those economics will continue to be available to us, you know, now in this quarter and going forward. That's certainly a big part of the plan as we described in the last few quarters. That's now in place. You know, I think that that's gonna be a big benefit as we continue to optimize the blends. Then how much of those two Pretreatment units, what is their capacity relative to the size of the 8,000 barrel a day facility that you have? You know, it's, it's, I don't want to speak for those producers. They have nameplate capacities, that they've, you know, they're working towards and representing. We, we don't have the commercial operating experience with them yet to know that those are where those units will run. You know, our, our, our approach from a feedstock portfolio standpoint has been that, you know, we have the capacity available from a pretreatment standpoint to treat all of our feed at these run rates, right? At the, at the phase one design run rate. That's the premise, that's the approach, that's the strategy on the port, you know, the feedstock portfolio. We can't confirm for you at this time that those PTUs will run at that, at those rates. We, we have no reason to believe they won't, but again, we're not gonna, can't commit to, you know, what they can achieve until we see them do it. You know, we have been pleased with the initial results. We're excited about continuing to work with them and, you know, very positive in their progress at this point. Got it. Then anything on the logistics side that you could comment on, have things been running there as expected, where you're seeing some benefits above what a generic renewable diesel plant would do? Yeah, I mean, I think the biggest benefit we have is, is, you know, optionality, right? We have the logistical optionality in mode, so, you know, we can take truck, rail, or barge. We have, you know, really good optimization capability between feeds in terms of segmenting each family as required by EPA before we blend. I mean, all that infrastructure is in place, and it really just gives us, you know, the optimization leverage we need to pursue those lower-cost feeds, whichever category they arise in, which, you know, is obviously not entirely predictable, and that's one might guess. You know, that's, that's the, that's the infrastructure that's in place and allows us to do that optimization. You know, in terms of modeling that or benchmarking that, you know, we'll look for public information that we can provide going forward on that, but there's, there's nothing obvious right now. I think the, you know, the simple way to think about it is, is, you know, that infrastructure allows us to buy a better basis than we would otherwise achieve, you know, versus the, versus the board. Okay. All right, thanks for the call. This concludes our question and answer session. I would now like to turn the conference over to Ben Cowart for closing remarks. Thank you, operator, thank you, everybody, for joining us on the call today. It's, it's really been a, a, a, a landmark quarter for the company. Definitely, not happy with the, the market headwinds, I guess we faced and bottomed out on some of the, the, the spreads. It's, it's really good looking ahead to see the third quarter bounce back like it's done, we're very positive about that. We see a lot of good, you know, market conditions as we look to the end of the year. I'm really pleased with the delivery of this RD facility on plan and the way the company and the team has, you know, projected that work, delivered that work. It's been, it's been, monumental and, and commendable to the efforts of our people. We're, we're very proud of, you know, of what, what has been accomplished there. You know, I wanna, I wanna talk about the systems that's been deployed. As, as Doug mentioned, you know, all of the third-party infrastructure, all the pipelines, all the connections, you know, the tankage, all the barging and the ships and all the logistic assets, all have been deployed and tested in the second quarter. That was a big undertaking. You know, our, our EHS performance, you know, the site had, you know, a historic accomplishment from a safety environmental compliance in its history. You know, that's thanks to, to the team and, and, and to the organization, you know, to stay focused on what's most important. Very proud of that. The leadership, you know, Doug coming in around our, you know, our trade teams now in place. We've got, we've got the people, you know, we're acquiring feedstocks, we're opening up new relationships every day. You know, the market is very, very excited about, you know, our facility being online. That's positive. Our working capital facilities that we've been able to establish, you know, with Macquarie across the conventional business and now in the second quarter, the RD business, that provides good working capital for the business. Then the fact we've, you know, we've pivoted. Again, in the middle of all this work, we accelerated our phase two with the, the pipeline system that, that we brought forward. We spent the capital early. That is really allowing us to move our pretreatment and all our advantage feedstocks up in front of our plan. We're ahead of plan when it comes to that, and it's a good thing. You know, we didn't see, you know, this, the soybean prices accelerating like, like we did, but we're well prepared. We're right where we're supposed to be to, to stay ahead of that curve. I think what's most, most noteworthy as I look at the business, is the fact we, we closed this transaction April of 2022, bought the refinery. We, we, we took on a monumental challenge to, to build an RD plant and build it out quickly, safely, and deliver on that, which we've done. We only had $100 million at close in cash, and we've had unbelievable amount of tailwinds from the conventional business from the time we closed. The second quarter doesn't count because we had a little takeaway. When I look at the balance sheet, you know, we're $200+ million of capital that's been deployed into the Mobile Refinery asset. Between the conversion, the remaining working capital that we have in inventory now to run the business, and then to take and reduce our debt by $150 million through the conversion, mainly of the bonds. That's a major shift on our balance sheet. We've been very focused on that. We you know, when we look at now the, the value we've created around the asset compared to what we started with, I think we'll see as, as we get close to the opportunity to recapitalize our debt, you know, and, and, and see our RD margins, you know, start to really flow into the business. You know, the, the refinery has served as a, as a major platform, and it's, and it's gotten better. Quarter by quarter, month by month, our people has developed across the business. I'm very, very excited about the business. I, I believe we've got a lot now we can, we can rest on when, you know, when we look ahead. The work is done. We've delivered on what we said we needed to do. We see this quarter as transitional. It doesn't define how the business moves forward by any means. I, I do believe that we can, we can start talking about the future plans of the company, and that's what we're looking forward to. Really appreciate everybody's time. I appreciate, you know, the support, you know, to us and to the company, we look forward to our, our call in the third quarter. Thank you. Goodbye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.