Shares of Vertex Energy, Inc. VTNR plummeted more than 58% on Wednesday after the producer and marketer of refined products announced a Restructuring Support Agreement (RSA) with lenders andfiled for bankruptcy protection.

With full support from its lenders, Vertex Energy has commenced a Chapter 11 case in the United States Bankruptcy Court for the Southern District of Texas to expedite the transactions under the RSA. The decision comes after the company failed in the renewable energy sector.

Vertex’s Restructuring Goals and Financial Support

The critical funding of $80 million from the lenders under Debtor-in-Possession financing will not only help the company maintain its business continuity but also allow it to focus on a comprehensive restructuring program under the RSA.

Per the Chief Restructuring Officer of Alvarez & Marsal, the RSA will help the company start afresh and improve its long-term value as it would only aim toward its growth and strengthening its organization.

Reasons Behind Vertex’s Chapter 11 Filing

The difficulties faced by the company in the renewable energy sector compelled it to file Chapter11 bankruptcy. Vertex Energy, holding a Zacks Rank #4 (Sell), had made major investments at the Mobile, Alabama refinery for renewable diesel production, but had to make a spin back toward fossil fuel production due to an oversupply of renewable fuels and low credit prices.

Other companies like Delek US Holdings and Chevron have adopted a similar move of shutting down their biodiesel plants due to market conditions and are exploring some alternative uses for their sites in order to recover the losses.

Key Picks

Investors interested in the energy sector might look at some better-ranked stocks like PEDEVCO Corp. PED,Royal Vopak VOPKY and VAALCO Energy (EGY). While PEDEVCO and Royal Vopak currently sport a Zacks Rank #1 (Strong Buy) each, VAALCO Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PEDEVCO Corp. is an oil and gas company engaged in the acquisition and development of energy projects in the United States and Pacific Rim countries. Over the past 30 days, the Zacks Consensus Estimate for PED's 2024 earnings has improved by 33.3%.

Royal Vopak NV is a tank terminal operator. The company is engaged in the storage and handling of oil products, liquid chemicals, gases, biofuels and vegetable oils. The Zacks Consensus Estimate for VOPKY's 2024 earnings indicates 2.5% year-over-year growth.

VAALCO Energy is an independent energy company principally engaged in acquiring, developing and producing crude oil and natural gas. The Zacks Consensus Estimate for EGY’s 2024 earnings indicates 4.8% year-over-year growth.