Shares of Vertex Energy dropped to a two-year low after Fitch downgraded the fuel maker’s default rating amid declines in the price difference between refined products and crude oil, known as a crack spread.
The stock fell 15%, to a low of $1.58, in early trading. Shares haven’t traded this low since May 2021.
Fitch said after the bell on Tuesday that it has downgraded Vertex and Vertex Refining Alabama’s long-term issuer default ratings to CCC+ from B-.
The downgrade reflects Vertex’s weaker liquidity buffer, which was driven by lower U.S. Gulf Coast refining crack spreads, as well as the rating agency’s expectation for a weaker contribution from Vertex’s renewable diesel business in 2024.
Fitch said the company’s free cash flow generation is highly sensitive to the refining crack spreads that declined in the fourth quarter from abnormally high levels over the last two years. Vertex’s unrestricted cash balance dropped to between $70 million and $80 million at the end of 2023 from $141 million by year-end of 2022, Fitch said.
On Wednesday morning, Northland Capital Markets downgraded Vertex’s stock rating to market perform from outperform.