Montauk Renewables (MNTK) 9 Aug 232023 Q2 Earnings call transcript

Good afternoon, everyone, and thank you for participating in today's conference call. I would like to turn the call over to Mr. John Ciroli as he provides some important cautious -- important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings material or made on this call. John, please go ahead.

Thank you, and good afternoon, everyone. earnings and to operating Renewables quarter the Montauk financial XXXX results to conference review call second Welcome and developments. Chief Ciroli, John Legal Secretary and I'm at Officer Montauk.

Officer, Montauk's today Asdalan, Van and Officer, second and Sean operating me our Financial business McClain, discuss XXXX Joining Chief and are Chief Executive quarter to to Kevin results. discuss developments President financial

At disclosure statement. forward-looking attention to this our time, we would like to direct your

and number from uncertainties to forward-looking During could this statements constitute factors of are in call, assumptions, such involve such, differ or and make company's risks certain the detailed risk by and Montauk a that performance cause statements. actual those comments as or SEC These Renewables' forward-looking uncertainties implied we results expressed materially filings.

non-GAAP adjusted indicative believe EBITDA include by the accordance consistent These in non-GAAP We Our excluding performance financial we analyzing believe a that may financial EBITDA not core accounting with assist because reporting we remarks are and accepted are prepared investors in operating not across basis generally measures performance. of items measures our principles. our also present metrics on measures. periods today do

Additional details to financial most our also on XX-Q Form reconciliations this can which measures, regarding filed financial afternoon, GAAP quarter in in our comparable are slide available press non-GAAP be found and our release and including measures presentation website, directly second the earnings these XXXX issued ir.montaukrenewables.com. and

many to as open call question will remarks, questions. ask as our After to we possible. please questions the one that We prepared to accommodate you keep

the call over And Sean. with to turn that, I'll

Environmental the XXXX Fuel XXXX On our thank and final Standard for rules Thank June for day, you Renewable you, everyone, announced Good XX, years. the XXXX, Agency joining call. Protection through the for John.

XXXX, for the finalization did rules RIN years an XXX, biofuel rules at RINs and appreciable volumes impact noting the program, and cellulosic price. the program, DX the XXXX of on While eRIN final delayed for Though not X,XXX finalize the million XXXX the respectively. did X,XXX eRIN set it the final had index

index approximately XX price through RIN from than The was June from average the June XX through XX. higher June June DX index price X average XX%

monetized and prioritizing the as in and As of all price. unsold from significant committed We RINs XXXX notable final parties DX XXXX quarter obligated third generation. we a RINs after number generated rules, majority benefiting RIN announced XX, rise the of planned, index of the our expected monetized RIN June and

the commitments price sale RIN beyond We July these have of XXXX into forward of quarter fourth not yet were the index average average The at commitments priced or entered realized XXXX DX generation. above RIN price. XXXX July

also existing final rule included changes to reform, RINs RFS as the are RNG all program generated. biogas significant industry to to the regulatory how modify The referred requiring

after come with to on XXXX. to participating Existing facilities prior XXXX, biogas that X, have New XXXX, the to January X, beginning XXXX, regulatory reform provisions will meet or RFS July reforms. register will facilities registered until have into RFS participating biogas X, July regulatory July compliance X, that

XXXX. On as has the not X, X, regulatory does biogas participants a limitation existing from clarified biogas comply For must preclude January under EPA that with facility. a facility at the The October single The this be non-RFS provisions. submitted all must registration use XXXX, updates finalized by that same RFS EPA one registrants, RFS reform proposed. uses

business. development we expected series announced have that, last are of to the the growth projects of a the few aggregate, the materially quarters, contribute Over to in

announced of XXXX, quarter second site. our Apex facility third at we the the During

of during We day XXXX. the second expect increase production plant per this X,XXX to approximately daily commissioning MMBtus half by at

announced we facility. planned South with Granite RNG Blue quarter of expansion Carolina first into XXXX, the During our our

a MMBtus this production XXXX. by daily day commissioning increase expect plant XXX approximately to in We at

in is XXXX, California least, to Bowerman of facility. landfill at not This planned June of Frank the the process of gas project in project announced R. but Irvine, Landfill. Generation of Renewable capacity anticipated we our growing existing our Electric to last excess in development the RNG a And and biogas volumes large

currently per the and With date landfill the million time to projected investment available between expect of forecasted production that from are range feedstock facility a currently the at of host with new the targeted approximately assuming commissioning. capacity RNG capital the $XX in X,XXX XXXX, we to million volumes biogas of $XX nameplate be MMBtus day,

an I like our on Next, project Pico would provide cluster update to Idaho. dairy in

significant of have of two period increases The minus certified supplied to Pico XXXX. the any comments, a XXXX, storage has will period, March corresponding XXX.XX. amount to the CARB remaining the the ending over the delivered from comment Related the and second Tier management dairy. XX, gas first of of LCFS feedstock enabled As application credits. to feedstock report our be generate We made from have and feedstock and contractual It and the the both us the which to our in certified without quarter feedstock X process volumes and processing digestion increases we released feedstock amendment, result public the dairy improvements a value facility payments. water efficiencies for in CI three-year our to used increased

capital of design third design in quarter construction the As disclosed, began XXXX of expansion to completed our related digestion the of we incurring project. the and the digestion the capacity expenditures previously increase of we completed

the expansion of will expect We continue digestion quarter third project XXXX. to during complete be functionally the

in the also delivering feedstock tranche to final We and dairy expect the begin volumes third increased of XXXX.

technology development waste to to through the commissioned, swine Creek, of engineer up the to Carolina the at year improvements to which under XX,XXX the swine per purchase record Duke into from energy Duke agreement energy annually with reactor of swine RECs terms Once continue waste our with Turkey Carolina, facility our conversion of optimization Turkey Carolina In signed Energy, agreement. that our North fully and of to a will certificate the at Duke deployment renewable patented RECs North we the North to meet expect renewable to feedstock July work waste As sell location. initiative renewable XXXX, energy we Creek, to in the we location.

reminder, of quarter coincide the the Natural Gas a Creek, Carolina the first development interconnection Piedmont XXXX, at with is a Turkey with for executed location. we Turkey in to location. North receipt agreement the Carolina As agreement structured timeline Creek, North This

facilities. create Energy, Denmark-based reserves highlight which July intent of American North use letter a with announcement would dioxide. our beneficial of XXXX, potential production terms Texas opportunity into a LOI, the Lastly, from in use otherwise facilities recent development waste a years of our delivery with XXXX. the execution, to for biogenic E-methanol. to final term agreement sufficient of Energy, expected I COX a the their first In large-scale volumes contract carbon XX we like entered to COX Under for we is European to subsidiary of up Upon of European the regarding delivery the expect last to to

and The atmosphere, to of terms new capital that fixed-price choosing biogenic the a Energy. is commitments the entering stream COX LOI for the European put is of prevent volumes on based most to our technology be COX use critical create The delivery commodity to allow for amounts to expected optimal beneficial planned from revenue for it suited delivery Montauk.

call the I to that, turn Kevin. over with And will

decrease million, of earnings $XX.X results. refer second discussing Thank is be quarter I the of that $XX.X million website decrease our $XX.X or of to XXXX our quarter XXXX slides a to The RIN XXXX. million to you, for supplemental in related and decrease posted primarily to release quarter financial and a second operating average XX.X% were realized second Please XXXX have revenues gas through pricing compared indices second Sean. additional quarter the of in the of the information. press XXXX. been second during compared Total commodity of our pricing will the quarter of and in

the decreased quarter contributed quarter pricing indices as XXXX $X.XX in of XXXX second quarter quarter second second compared to Gas compared to the commodity to of the total the of to of in RIN Realized XXXX, also second which during the during decrease $X.XX XXXX. revenues. decreased XX.X%

elimination Additionally, contributing expiration was the and gas of agreements. decrease our sharing commodity the of hedge to the the counterparty

quarter commodity impacts of in hedge gas We the commodity our corporate gains of second gas million program reported of our $X.X recognized program. to related within hedge segment. XXXX a the We

We have for not currently XXXX. entered programs into any commodity gas hedge

approximately million the of $X.X of our second previous in revenues recognized under agreements. also sharing quarter XXXX We counterparty

and for the second a Total the was $X.X expenses result quarter of our general million, and compensation and administrative grants to rental XXXX. flat as of stock for stock-based $X.X acquisition million awards over stock quarter were of stock expense compared lower Increased XXXX option executives the XXXX as which expense quarter second XXXX Montauk to of of to The five forfeiture and second fees. offset period the years. of the XXXX invest by three were restricted the awards renewables in to professional ratably a option amendments Ag

Turning X.X metrics, in of our to MMBtus a We second of less decrease our Natural million I'll during segment begin by $X.X of million MMBtu XXXX. than compared operating Gas RNG quarter Renewable the XXXX, X.X produced segment. of the million reviewing to second produced quarter

compared in Our of quarter which equipment repaired. approximately of impacted equipment failure of a The as quarter million second the quarter less failed been process Rumpke in second to XXXX, MMBtu result X.X XXXX the XXXX of temporarily second facility production. produced process which has the

second the of of produced Our compared X.X quarter quarter second due to less in XXXX feedstock MMBtu XXXX Pico approximately to the processing challenges. facility million

of million of facility than the a X.X modifications. produced compared Galveston in less as the MMBtus XXXX more second process Our to XXXX result equipment of quarter second quarter

segment pricing second XXXX XXXX. quarter the or quarter $X.XX XXXX the of natural gas XX.X% the to second a $XX.X in lower Average MMBtu, million Gas of Renewable of from in $XX.X of second second of was decrease the for million $XX per the million, than quarter Revenues compared commodity Natural for XX.X% XXXX. quarter were

the XXXX, XX.X self-monetized a X quarter or to million XX.X of we quarter representing increase million RIN During million in XXXX. RINs, second RINs second the compared XX.X% of

RIN XXXX. XXXX second This RIN a $X.XX, DX to the the the lower price of on approximately as DX in of second realized quarter index second to average of was the XXXX compares index $X.XX XX.X% $X.XX of XX.X%. price than RIN of compared quarter Average the being in average quarter pricing second of for XXXX, decrease quarter the during sales

for X.X available million MMBtus approximately X for At generated MMBtus RIN had and generated and XX, June generation generation million approximately X.X X.X June available XXXX, had At approximately we RINs had approximately RINs had XX, and RIN million XXXX, and unsold. million we unsold.

Our including market highly on price environmental the for market the price dependent RINs. is attributes, of profitability

increase at XXXX. As had inventory, XX, a million an approximately of June in XXX.X% June RINs XX, to we XXXX, X result, compared

entered July commitments transfer we generated RINs unsold. into these noted, previously to of Sean during As all XXXX but

were transfers index of at 'XX Our July XXXX price average $X.XX. or of in July priced DX excess price average RIN realized RIN for these the

Our for an to second operating and The our the million XXXX $XX.X Atascocita $XX the maintenance timing preventative this second increase quarter XXXX facilities. primary contributing compared at during of Apex X.X% XXXX $X.X expenses facilities the was to or our facilities. well-filled the in second expenses of million, Coastal quarter to our XXXX. and increase of in of maintenance of the million quarter second quarter Also enhancements driver in related were Atascocita of the and of were at operational RNG increase

XXXX. hours XXXX, XX,XXX of of megawatt quarter in second of megawatt X,XXX megawatt during renewable hours XX,XXX approximately to second produced approximately the electricity in compared increase quarter the hours an We

more compared due to Our security completed second produced the XXXX quarter of the in XXXX quarter second second maintenance facility hours megawatt XXXX. the engine X,XXX quarter approximately to of in of

were $X.X renewable to XXXX or primarily of electricity in in second million, renewable second increase is the from increase the by million XXXX. our X.X% million production $X.X increase quarter volumes. electricity quarter facilities $X.X of The compared of in driven an the Revenues

the second maintenance were in to and which XXXX. maintenance the in scheduled quarter facility, was quarter a of $X.X million XXXX quarter XXXX. XXXX second The the operating generation related $X.X second million, is compared $X.X of to $X.X our electricity renewable to decrease preventative Our million in of Bowerman at or million decrease higher second XX% quarter of approximately of expenses the compared primarily

impairments for XXXX Other Our quarter the maintenance an $X.X of in and XXXX, Turkey identified million the We in expenses costs impairments calculated $X.X and events, XXXX. million second Ag of that recorded as were million no quarter quarter of million Montauk non-capitalizable related second Creek discrete second The we flows. $X.X loss renewables. RNG facility of approximately were other and increased equipment cash impairment future $X.X specifically of an than in not these any for to the to did operational longer a record operating in machinery use. increase compared of result

million of XXXX million income a a the of operating $XX quarter or XXXX. quarter XXXX of was decrease second $XX.X of decrease the for $XX.X Operating generation operating second $X.X RNG or the million $X.X quarter $XX.X of million second million, quarter the XXXX of $X.X loss second second was to quarter XX.X% in or for to decrease Renewable million quarter compared in XX.X% compared the of of $XX.X income in million, XXXX. $XX.X compared to of XX.X% second electricity a XXXX. in million, was the million

sheet. balance to Turning the

XX, was under outstanding loan. our As $XX million June of XXXX, term

million. was Our credit revolving available for capacity approximately facility $XXX.X borrowing under the

activities XXXX. $XX.X to operating of from the of the activities, XXXX, During or second in of of second a provided cash quarter cash operating of generated million by $XX.X compared $X.X decrease quarter XX.X% million million we

quarter capital were In Carolina $X.X increase, the second RNG and in $X.X capacity Granite Blue million, respectively. which million million, XXXX, approximately Pico were facility South Ag to facility the of Montauk of the adjustment million $X project Carolina, Apex expenditures RNG the $X second Renewables million, our and North development our ongoing $XX.X related

note June security by amending we've equivalents and promissory second cash had and and of loan and entirety amended approximately On note secured million. Montauk the June and into restating and third $XX.X between agreement agreement XX, and the cash amended. its Limited, XXXX, XX, Montauk XXXX, restated As in Holdings loan promissory of as we entered

aggregate loan loan XXX,XXX interest balance $X.X current of common XXX,XXX shares XX, from the of increases to date to the extends are $XX total Montauk a the June The its the XXXX, of XX, MNK of The of terms similar substantially million Limited. the December in owned amendment to Montauk XXXX, amount from the of of from and otherwise MNK our security agreement. the principal loan maturity million amendment MNK increases Holdings and shares by to stock

into As MNK Holdings initial entered party and public with we in agreement into and set in offering. our connection entered previously the obligations disclosed, with forth accordance implementation in Limited, Montauk us, agreement loan the by transaction other our XXXX among

million, XXXX. or for the XX.X% XXXX $XX.X $XX.X or a of decrease $XX.X second second pricing. to XXXX. indices pricing and decrease million, the of for million the quarter gas of million XXXX related of decrease was decrease quarter EBITDA second over decreased was the the million quarter revenues Net was $XX.X income second to commodity for Adjusted quarter compared of of EBITDA of realized second reduction XX.X% XXXX for XXXX. average a due or quarter a XX.X% This of second RIN million $XX.X $X.X the $XX.X quarter to of to a primarily for million of compared in

I'll over back now Sean. turn the call to

XXXX outlook. we would provide you, full year Thank closing, Kevin. In updated like an to

our pricing volatility While expectations. provide we impact does environmental revenue index don't of our on pricing, attribute future guidance expectations and

to We corresponding revenues have million. million million X.X X.X RNG $XXX continue and and to between increased between expect the and range $XXX RNG million MMBtus to production volumes

volumes hours We $XX electricity megawatt corresponding XXX,XXX expect million. renewable to electricity $XX range hours million with megawatt production and renewable and revenues between between XXX,XXX

And with that, any pause we questions. for will

Instructions] first Our Gupta with will [Operator from question come Manav UBS.

is open. line Your

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in time value this more sense, My it Energy. with and you a period it So you benefits the of congratulations Can makes something question about Duke why strategic on very how over agreement? talk of bit is a adds that. little announced here interesting agreement

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is for at revenue degree are to the project able equally the bolster and developing with your the price under technology to comment The monetizing security our is Businesses, second form measured environmental and we streams that a patented newly of are commodity of some environment that contract fixed and you that strategy further piece is able up in of the you our the do pricing, to fact us to for first a it EBITDA to continue business of through be the your underpins attribute to a reactor that attributes. the offtakers diversification on product price. as suite to for end the fixed be initially, project indicated the that for allow volatility important our of floating and in the timing or the phenomenal who

you. Thank

Craig Our Brothers. Shere with next come will question Tuohy from

open. is line Your

If and to comments Hi, more a this over XX years. projects I'd of possibly the that? of as kind size into its REC around was chunkiness, swine correctly, little terms envisioned North on Carolina dig five in I the of, like does agreement. opportunity in your fit How kind recall Duke in

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is us turn that and monetization And to as anchor process when arrangement will it to gives an sight project in starts the a of EBITDA. line that so contribute

you. Thank

next our for moment One you. question. Thank

Blair from We have Matthew a question TPH. with

Your line is open.

Hey, EBITDA? the were little million? just on of the a should in $XX roughly RIN about bit think more I $X.XX, at to I XX.X the way $X.XX, results. Kevin, in guess, $X.XX, $XX strong on on Is XX math per around $X details top believe the RIN regular sold Sean monetized Is that we inventory we wanted $XX as we maybe on as So into million in million I monetization regular million run the about boost right the said that your generation million look RINs then sounded to XX into QX. dig and that of operations. congrats think of at price. RIN the look so your times And like remaining doing on inventory? the just approximately the quarter, rate there, the you minus were would be extra QX, boost a million, it RIN that moving QX parts those X QX at of

in of to the carryover we above Into were way. you or would that look account commitments price, RINs been highlighted and a make the the in and did quarter comment it at going the first to for our sold, the yeah, as can net exiting quarter, third RINs Matthew, revenues DX monetized Generally, quarter but you're of don't price. that also have And have second recognizing July well. the generated at index XXXX unsold that quarter third index forget,

convey. what second you're geographically quarter trying how the getting quarter we're to the third generally, from contribution of your math So to is aligned pricing RIN in generally to and

comes our question Thank Ryan you. next And B. Pfingst with from Riley.

open. is line Your

time talk recent mean all how on being about it developments a higher-level Kind a you as the the for and With Hey producer? the here. a the around might industry multiyear particular guys, RVO, what we've first it you RVO. benefit had that can question could of guys congrats in

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where commentary that, don't looks of absence And like, those to mechanic are for and pricing supply/demand what like determine or we focus formal this so year trying could we look beyond with particularly credit. there's a guidance what a always mindset cellulosic typically on in waiver attributes that in But beyond. the the outlook associated

Thank you. follow-up like from a Blair we have TPH. Matthew with Looks

Your line is open.

follow-up. Hey, thanks for my taking

you space. RNG the a On it relationships just this technology? swine be seem Is swine in competitive to RNG? it I else? would progress on efforts, your edge something maybe it about leader Is and certainly is what's Montauk Is talk or Could say making people? good you

Matthew. Sure,

for As we of elements natural processing more what of the fashion various piece efficient other and renewable allows of of time essentially disclosed patented allows of compact, commodity monetize all to methods Energy that in attribute of the as sort like of a we in opportunity It for swine with to digestion have traditional waste Duke spoken that is a with reliable with the of an more waste streams project. our folks demonstrate of technology do reactor folks look do and in the a and swine fraction optimal and renewable very electricity. type gas biochar, quarters, hub conversion the that the into a technology previous

largest So would that be general, our in competitive advantage.

you. Thank

with from more follow-up one Gupta have UBS. We Manav

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us are of to and us. is Thank with in Quickly delivering the newer concept This the can the where understand you. benefits this. you help of on are 'XX, company? us understand agreement this starting this the of dioxide a benefits real European what Energy for European deliveries but I take Energy. this this carbon somewhat Help some understand

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questions Thank to McClain I'd for in over you. back to the queue. remarks. showing And any Sean no turn closing I'm other the like call

to the thank on you with join call today. the third We Well, call. to thank all conference conference for look XXXX speaking on you, time you and us taking forward our quarter

concludes you. Thank call. today's conference This

now may disconnect. You