INVENTORY FINANCING AGREEMENT

6 Months Ended

Jun. 30, 2023

INVENTORY

The following table describes the Company's inventory balances by category (in thousands):


	As of June 30, 2023		As of December 31, 2022
Crude oil	$	64,552	$	59,131
Refined products	149,838		74,311
Re-refined products	1,282		2,031
Total hydrocarbon inventories	$	215,672	$	135,473

INVENTORY FINANCING AGREEMENT

On May 26, 2023, pursuant to an Inventory Sales Agreement entered into between Vertex Renewables Alabama LLC, an affiliate indirectly wholly-owned by Vertex Energy, Inc. (“Vertex Renewables”) and Macquarie, Macquarie purchased from Vertex Renewables all renewable biomass feedstocks and renewable fuels meeting agreed specifications and held in inventory and located at the Mobile Refinery and in certain third party storage terminals on such date, which purchase was based on agreed upon market values (the “Mobile Refinery Inventory”), which Mobile Refinery Inventory then became subject to the terms of the RD Supply and Offtake Agreement.

The following table summarizes our outstanding obligations under our inventory financing agreements (in thousands):


	June 30, 2023		December 31, 2022
Obligations under inventory financing agreement	$	162,846	$	119,189
Unamortized financing cost	(750)		(1,250)
Obligations under inventory financing agreement, net	$	162,096	$	117,939

The valuation of our obligations at the end of each reporting period requires that we make estimates of the prices and differentials for our then monthly forward purchase obligations.

Supply and Offtake Agreement

On April 1, 2022 (the “Commencement Date”), Vertex Refining entered into a Supply and Offtake Agreement (the “Supply and Offtake Agreement”) with Macquarie, pertaining to crude oil supply and offtake of finished products located at the Mobile Refinery acquired on April 1, 2022.

Under the Supply and Offtake Agreement, Macquarie purchases the majority of the crude oil utilized at the Mobile Refinery and holds legal title prior to its sale to Vertex Refining for consumption within the Mobile Refinery processing units. Also pursuant to the Supply and Offtake Agreement, Macquarie purchases from Vertex Refining substantially all of the Mobile Refinery’s output of certain refined products and owns such refined products while they are located within certain specified locations at the Mobile Refinery. Macquarie takes title to the refined products stored in our storage tanks until they are sold. We record the inventory owned by Macquarie on our behalf as inventory with a corresponding accrued liability on our balance sheet because we maintain the risk of loss until the refined products are sold to third parties and we have an obligation to repurchase it.

Pursuant to the Supply and Offtake Agreement and subject to the terms and conditions therein, Macquarie may during the term of the Supply and Offtake Agreement procure crude oil and refined products from certain third parties which may be sold to Vertex Refining or third parties (including customers of Vertex Refining) pursuant to the Supply and Offtake Agreement.

The Supply and Offtake Agreement expires March 31, 2024, subject to the performance of customary covenants, and certain events of default and termination events provided therein, for a facility of that size and type. Additionally, either party may terminate the agreement at any time, for any reason, with no less than 180 days prior notice to the other.

Amendment No. 1 to Supply and Offtake Agreement

In connection with the entry into the RD Supply and Offtake Agreement, see below, Macquarie, Vertex Refining and the Company, entered into Amendment Agreement No. 1 to the Supply and Offtake Agreement (“Amendment 1”). Pursuant to Amendment 1, the Supply and Offtake Agreement was amended to include certain additional documents relating to the RD Supply and Offtake Agreement as transaction documents, and to update such Supply and Offtake Agreement in connection therewith, to amend the unwind procedures associated with the Supply and Offtake Agreement, and to update or revise certain other covenants set forth in the Supply and Offtake Agreement relating to cross defaults, finance agreements, minimum liquidity, and guarantor requirements, to be conformed with changes made to analogous provisions in, or to otherwise account for, the RD Supply and Offtake Agreement terms. Amendment 1 also made conforming amendments to certain other agreements relating to the Supply and Offtake Agreement.

Renewables RD Supply and Offtake Agreement

On May 26, 2023 (the “Commencement Date”), Vertex Renewables entered into a Supply and Offtake Agreement (the “RD Supply and Offtake Agreement”) with Macquarie, pertaining to the supply and financing of renewable biomass feedstocks used for the production of renewable fuels, the offtake and financing of renewable diesel, and the provision of certain financing accommodations with respect to certain agreed environmental attributes associated with the operation of such renewable diesel unit (including Renewable Identification Numbers (RINs), tax credits, and low carbon fuel credits) at the Mobile Refinery acquired on April 1, 2022.

The RD Supply and Offtake Agreement has a 24 month term following the Effective Date, which was May 26, 2023, subject to the performance of customary covenants, and may be terminated earlier following the occurrence of certain events of default and termination events provided therein that are customary for a facility of this size and type and subject to applicable cure periods in certain events. Additionally, either party may terminate the agreement at any time, for any reason, with not less than

180 days prior notice to the other. In the event Vertex Renewables is the terminating party, Vertex Refining must also at the same time, terminate that certain Supply and Offtake Agreement entered into with Macquarie dated April 1, 2022.

Pursuant to the Supply and Offtake Agreement, we pay or receive certain fees from Macquarie based on changes in market prices over time. The following table summarizes the inventory intermediation fees, interest expenses and financing costs (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Intermediation fee	$	4,161	$	23,180	$	6,225	$	23,180
Inventory financing fees (include over/under)	$	(29)	$	1,235	$	2,266	$	1,235
Interest expense and financing costs, net	$	2,583	$	1,730	$	5,103	$	1,730