Shares of Vertex Energy Inc. (VTNR) - Get Report more than doubled after the specialty refiner agreed to purchase a Mobile, Ala., refinery from Royal Dutch Shell (RDS.A) - Get Report (RDS.B) - Get Report for $75 million.
Shares of Vertex Energy, Houston, at last check were trading at $4.05, against Wednesday's close at $1.78. They have traded on Thursday at as much as a 52-week high $4.80.
Terms call for Vertex Energy to acquire Mobile Chemical LP Refinery and associated logistics assets.
Vertex says the refinery has the potential to generate at least $3 billion of annual sales and $400 million of gross profit each year beginning in 2023, “given current refining economics.”
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The acquisition "positions us to become a leading regional supplier of both renewable and conventional products," Vertex Chief Executive Benjamin P. Cowart said in a statement.
The Mobile refinery has the capacity to process 91,000 barrels a day.
About 70% of the refinery's current annual production is distillate, gasoline and jet fuel, with the rest vacuum gas oil (used in producing gasoline and other products) and liquefied petroleum gas. The facility distributes its finished product throughout the southeastern U.S.
As part of the deal Vertex also will acquire about 3.2 million barrels of product storage, inventory, logistics and distribution with more than 860 acres of developed and undeveloped land.
"Upon closing, we expect to hedge a significant portion of the first-year production, reducing our near-term exposure to movements in refined product margins, as we focus on completing the planned asset conversion, which remains the most significant near-term economic driver resulting from this transaction," Cowart said.
Vertex expects to initiate an $85 million capital project to modify the Mobile refinery's hydrocracking unit to produce renewable diesel fuel.