Due to the state of backwardation in the oil market, Vertex was forced to pay Shell Oil above-market prices for the additional crude oil inventory. Immediately prior to the closing of the acquisition, Vertex learned that pursuant to the terms of the purchase agreement, it would be required to purchase substantially more inventory from Shell Oil, totaling $164 million. Vertex had anticipated purchasing approximately $100 million of crude oil and refined fuel inventory. The losses, which began as of the Apacquisition date, totaled $23 million during the second quarter of fiscal year 2022 (c) prior to the acquisition of the Mobile refinery, defendants had entered into an inventory purchase agreement with Shell Oil as part of the Mobile acquisition agreement. The strict terms of the arrangement, including requiring Vertex to purchase hedges to protect Macquarie's position in holding the crude and refined inventory, combined with the fact that the oil market was in a state of backwardation in early 2022, resulted in Vertex incurring significant fees and inventory losses. These hedges severely limited Vertex's ability to capitalize on the record-high crack spreads that existed at the time of the acquisition and resulted in over $90 million in losses in the second quarter of fiscal year 2022 (b) prior to the acquisition of the Mobile refinery, defendants had entered into an inventory intermediation agreement with the investment bank Macquarie Group, whereby Macquarie purchased (from third parties), owned, and sold (to Vertex) all crude oil inventory to be used at the Mobile refinery and also purchased (from Vertex), owned, and sold (to third parties) all refined fuel inventory produced at the Mobile refinery. ABOUT THE ACTION: The class action against Vertex includes allegations that the Company made materially false and/or misleading statements and/or failed to disclose that: (a) prior to the acquisition of the oil refinery in Mobile, Alabama, defendants had entered into inventory and crack spread hedging derivatives that significantly capped the profit margins on 50% of the Mobile refinery's expected output over the period Apto September 30, 2022, affecting over 6.5 million barrels of refined fuel output.
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