Q4 2021 Montauk Renewables Inc Earnings Call
Good afternoon, everyone, and thank you for participating in today's conference call. I would like to turn the call over to Mr. John Cerulli as he provides some important cautions regarding forward-looking statements contained in the earnings material or made on this call. John , please go ahead.
Good afternoon, everyone and thank you for participating in today's conference call I would like to turn the call over to Mr. Johnson Raleigh bathroom important cautious cautions regarding forward looking statements contained in the earnings material or made on this call. John . Please go ahead.
John Cerulli: Thank you, and good afternoon, everyone. Welcome to Montauk.
Thank you and good afternoon, everyone welcome.
Two Montagues renewables earnings conference call to review fiscal 'twenty, 'twenty, one financial and operating results and development on Johnson Rolli, Vice President General Counsel and Secretary at Montauk. Joining me today are Shawn Mcclain montage, Chief Executive Officer, and President to discuss the business developments.
John Cerulli: Renewables Earnings Conference Call to Review Fiscal 2021 Financial and Operating Results and Developments. I'm John Cerulli, Vice President, General Counsel, and Secretary at Montauk. Joining me today are Sean McClain, Montauk's Chief Executive Officer and President, to discuss business developments, and Kevin Van Asselen, Chief Financial Officer, to discuss our 2021 financial and operating results.
And Kevin Vann, Azlan, Chief Financial Officer to discuss our 2021 financial and operating results. During this call certain statements. We make will be forward looking and based on management's beliefs and assumptions and information currently available to management at this time, including without.
John Cerulli: During this call, certain statements we make will be forward-looking and based on management's beliefs and assumptions and information currently available to management at this time, including, without limitation, statements relating to the company's future results of operations and financial condition, as well as our expectations and plans for the company.
Patient statements relating to the company's future results of operations and financial condition as well as our expectations and plans for the company.
John Cerulli: such as with our Montauk Ag Renewables Project in North Carolina, the PECO Improvement Project and PECO CI Score, and market volatility and fluctuations in commodity prices and the market prices of environmental attributes.
Such as with our Montauk AG renewables project in North Carolina.
Pico improvement project, and Pico Ci score and market volatility and fluctuations in commodity prices and the market prices of environmental attributes.
John Cerulli: These statements are subject to known and unknown risk and uncertainty.
These statements are subject to known and unknown risks and uncertainties, many of which maybe beyond our control, including those set forth in our safe Harbor provision for forward looking statements can be found in our 2021 earnings press release in our Form 10-K for the fiscal year ended December <unk>.
John Cerulli: many of which may be beyond our control, including those set forth in our Safe Harbor provision for forward-looking statements that can be found in our 2021 earnings press release.
John Cerulli: in our Form 10-K for the fiscal year ended December 31st, 2021, and in our other reports on file with the SEC, and that provide further detail about the risks related to our business.
31, 2021 and in our other reports on file with the SEC and that provides further detail about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated and except as required by law, we undertake no.
John Cerulli: Additionally, please note that the company's actual results may differ materially from those anticipated.
John Cerulli: and accept as required by law, we undertake no obligation to update any forward-looking statement.
No obligation to update any forward looking statements.
John Cerulli: Our remarks today may also include non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.
Our remarks today May also include non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.
John Cerulli: Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our slide presentation and in our Fiscal 2021 Earnings Press Release and Form 10-K issued and filed this afternoon. These are available on our website at ir.montagrenewables.com. After our
Actual details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide presentation and in our fiscal 2021 earnings press release and Form 10-K issued and filed this afternoon. These are available on our web.
Site at IR Dot Montauk renewables Dot com.
After our prepared remarks.
Speaker Change: We will open the call to questions. We ask that you please keep to one question to accommodate as many questions as possible. And with that, I turn the call over to Sean. Thank you, John .
We will open the call to questions. We ask that you. Please keep to one question to accommodate as many questions as possible and with that I turn the call over to Sean.
Thank you John .
Hello, everyone and thanks for joining our call.
Sean McClain: I want to start this call with a summary of the major events for Montauk during 2021. In January 2021, the company completed the initial public offering of its common stock on the NASDAQ capital market and its related reorganization transactions, including the secondary listing of its common stock on the Johannesburg Stock Exchange.
I want to start this call with a summary of the major events for them on talk during 2021.
In January 2021, the company completed the initial public offering of its common stock on the NASDAQ capital market and its related reorganization transactions, including the secondary listing of its common stock on the Johannesburg stock exchange.
Sean McClain: In May of 2021, we completed the Montauk Ag Renewables Asset Acquisition in North Carolina to purchase developing technology to recover residual natural resources from waste streams of modern agriculture and to refine and recycle such waste products through proprietary and other processes in order to produce high-quality renewable natural gas, bio-oil, and biochar. In August of 2021,
In may of 2021 we completed the Montauk gag renewables asset acquisition in North Carolina to purchase developing technology to recover residual natural resources from waste streams of modern agriculture and to refine and recycles such waste products through proprietary another processes in order to produce high quality renewable natural.
Gas bio oil and bio char.
In August of 2021 .
We were granted a patent of over 24 specific aspects of our continuous feed closed loop reactor technology acquired in the acquisition.
Sean McClain: of over 24 specific aspects of our continuous feed closed-loop reactor technology acquired in the acquisition.
October of 2021, we closed on a five and a half million dollar transaction to acquire approximately 146 acres and an existing approximately 500000 square foot structure in North Carolina, which we plan to use as we pursue our development projects associated with the Montauk egg renewables acquisition.
Sean McClain: We closed on a $5.5 million transaction to acquire approximately 146 acres and an existing approximately 500,000 square foot structure in North Carolina, which we plan to use as we pursue our development project associated with the Montauk Ag Renewables Acquisition.
Sean McClain: We have also executed master service agreements that provide access to waste feedstock for Montauk AG to process.
We have also executed master service agreements that provide access to waste feedstock for months Hawk age you to process.
Sean McClain: The feedstock will be swine waste sourced from our farming partner location.
The feedstock will be swine waste source from our farming partner locations.
Sean McClain: We do not currently expect significant production to commence at Montauk Ag Renewables North Carolina project during 2022 based on the current development.
We do not currently expect significant production to commence at Montauk, Agra Doable as North Carolina project during 2022 based on the current development timeline.
Sean McClain: I also want to provide an update on our first dairy cluster project, the PECO facility in Jerome, Idaho. As part of our overall capacity expansion at the PECO facility, we undertook significant efforts to improve the performance of its existing digestion process.
I also want to provide an update on our first dairy cluster project, the Pico facility and Jerome Idaho as part of our overall capacity expansion at the peak of facility, we undertook significant efforts to improve the performance of its existing digestion process, we temporarily idled RMG production at this facility in order to clean out settled.
Sean McClain: We temporarily idled R&G production at this facility in order to clean out settled solids in the digester, replace the cover of the digester, and replace the lid of the digester.
Solids in the digester replace to cover the digester and to make various other efficiency improvements we've completed the improvements and Orangey production has resumed at Pico.
Sean McClain: and to make various other efficiency improvements. We've completed the improvements and R&G production has resumed at Pico.
Sean McClain: At this stage of the capacity expansion has impacted the timeline for modeling PICO's initial CI score pathway model and subsequent auditing approval by CARB. We did not receive a temporary CI pathway in 2021 and were not able to generate LCFS credit revenue on 2021 production. We are and we will be storing 2022 production from PICO while CARB completes its CI score pathway.
At this stage of the capacity expansion has impacted the timeline for modeling peak was initial Ci score pathway model and subsequent auditing approval by Carb, we did not receive a temporary C. I pathway in 2021, and we're not able to generate L. CFS credit revenue on 2021 production.
We are and we will be storing 2022 production from Pico, while carb completes its ci score pathway. So we expect to receive the results of this approval during the second half of 2022, we do not currently expect to receive L. CFS credit revenue on Pico is 2022 production until 2023.
Sean McClain: Though we expect to receive the results of this approval during the second half of 2022, we do not currently expect to receive LCFS credit revenue on PCOS 2022 production until 2023.
Sean McClain: And with that, I will turn the call over to Kevin Ben-Ezzelin, our Chief Financial Officer.
Yeah.
And with that I will turn the call over to Kevin Van <unk>, Our Chief Financial Officer.
Thank you Sean I'll be discussing our 2021 financial and operating results. Please refer to our earnings press release and the supplemental slides that have been posted to our website for additional information.
Kevin Ben-Ezzelin: Thank you, Sean. I will be discussing our 2021 financial and operating results. Please refer to our earnings press release and the supplemental slides that have been posted to our website for additional information.
Kevin Ben-Ezzelin: Total revenues in 2021 were $148.1 million, an increase of $47.7 million, or 47.5% compared to $100.4 million in 2020.
Total revenues in 2021 were $148 1 million, an increase of $47 7 million or 47, 5% compared to $100 4 million in 2020.
Kevin Ben-Ezzelin: The primary driver for this increase related to an increase of 45.5% in realized RIN pricing during 2021 of $1.91 compared to $1.31 in 2021.
The primary driver for this increase related to an increase of 45, 5% and realized RIN pricing during 2021 of $1 91 compared to $1 31 in 2020 <unk>.
Kevin Ben-Ezzelin: Additionally, an increase in natural gas index pricing of approximately 46 percent in 2021 of $3.84 compared to $2.63 in 2020 and higher revenues under our counterparty sharing arrangements of approximately $8 million in 2021 compared to 2020.
Additionally, an increase in natural gas index pricing of approximately 46% in 2021 of $3 84.
Compared to $2 63 in 2020 and higher revenues under our counterparty sharing arrangements of approximately $8 million in 2021 compared to 2020.
Kevin Ben-Ezzelin: primarily related to increased RIN pricing, also contributed to higher revenue.
Primarily related to increased RIN pricing.
So contributed to higher revenues.
Kevin Ben-Ezzelin: As it relates to 2022 RINs, we have not forward sold a significant portion of expected generation and our current 2022 RIN commitments are at an average D3 RIN price of approximately $3.40 with commitments through June 2022.
As it relates to 2022 runs we have not forward. So when a significant portion of expected generation in our current 20 twenty-two RIN commitments are at an average D. Three RIN price of approximately $3 40.
With commitments through June 2022.
Kevin Ben-Ezzelin: Total general and administrative expenses were $42.6 million for 2021, an increase of $26.0 million, or 156.4%, compared to $16.6 million for 2020.
Total general and administrative expenses were $42 6 million for 2021, an increase of 26.0 million or 156, 4% compared to $16 6 million for 2020.
Kevin Ben-Ezzelin: Of the total expense in 2021, $22.4 million is related to stock-based compensation costs primarily associated with the IPO and reorganization trend.
Of the total expense in 2021 'twenty $2 4 million is related to stock based compensation costs, primarily associated with the IPO and reorganization transaction.
Kevin Ben-Ezzelin: excluding the impacts of the IPO related to thought-based compensation expense, general and administrative expenses increased approximately 3.3 million.
Excluding the impacts of the IPO related stock based compensation expense general and administrative expenses increased approximately $3 3 million.
Kevin Ben-Ezzelin: Corporate insurance premiums for 2021 increased approximately 2.9 million or 110.3% compared to 2020 due to increased premiums associated with the IPO.
Corporate insurance premiums for 2021 increased approximately $2 9 million or 110, 3% compared to 2020 due to increased premiums associated with the IPO.
Kevin Ben-Ezzelin: Professional fees increased approximately $1.4 million, or 46.8% during 2021, primarily resulting from our successful completion of the IPO.
<unk> fees increased approximately $1 4 million or 46, 8% during 2021, primarily resulting from our successful completion of the IPO.
Kevin Ben-Ezzelin: Turning to our segment operating metrics, I'll begin by reviewing our renewable natural gas.
Turning to our segment operating metrics I'll begin by reviewing our renewable and natural gas segment.
Kevin Ben-Ezzelin: we produced 5.7 million MMBTU of RNG during 2021, essentially unchanged as compared to the number of MMBTUs produced in 2020.
We produced $5 7 million and then Btu of R&D during 2021 essentially unchanged as compared to the number of M. N V to use produced in 2020.
Kevin Ben-Ezzelin: Of the 2021 volumes, 0.1 million MMBtu of R&D was produced from development sites commissioned during 2020.
Of the 2021 volumes 0.1 million M of Btu of R&D was produced from development sites Commission during 2020.
Kevin Ben-Ezzelin: of the 0.2 million 2021 increase as compared to 2020 MMBTUs of RNG produced at our other locations, this reduction relates primarily to our McCarty
Of the 0.2 million 2021 increase as compared to 2020 M. N V to use of R&D and <unk>.
At our other locations this reduction relates primarily to our mccarty facility.
Kevin Ben-Ezzelin: of the collection system at the Bacardi facility was hampered in 2021 by increased volumes of water negatively impacting biogas collection.
The performance of the collection system at the Bacardi facility was hampered in 2021 by increased volumes of water negatively impacting biogas collection.
Kevin Ben-Ezzelin: As water levels vary or increase, the ability to draw feedstock may be reduced. We also experienced process equipment failures at the McCarty facility in 2021 that impacted our collection.
As water levels, Barry or increase the ability to draw feedstock may be reduced we also experienced process equipment failures at the mccarty facility in 2020 , one that impacted our collection system.
Revenues from the renewable natural gas segment in 2021 were $131 8 million, an increase of $48 6 million or 58, 3% compared to $83 2 million in 2020.
Kevin Ben-Ezzelin: Revenues from the renewable natural gas segment in 2021 were $131.8 million.
Kevin Ben-Ezzelin: an increase of 48.6 million or 58.3% compared to 83.2 million in 2020.
Kevin Ben-Ezzelin: Average commodity pricing for natural gas for 2021 was 46.0% higher than the prior year. During 2021, we self-marketed 42.6 million RINs, representing a 3.3 million or 8.3% increase compared to 39.3 million in 2020.
Average commodity pricing for natural gas for 2021 was 46 point.
Zero percent higher than the prior year during 2021 we self market at $42 6 million Rins, representing a $3 3 million or eight 3% increase compared to $39 3 million in 2020.
Kevin Ben-Ezzelin: The increase was primarily related to an off-take agreement change in 2021, providing more R&G volumes available to self-market.
The increase was primarily related to an off take agreement change in 2021 providing more R&D volumes available to south market.
Kevin Ben-Ezzelin: average pricing realized on rent sales during 2021 was $1.91 as compared to $1.31 in 2020, an increase of 45.5%.
Average pricing realized when RIN sales during 2021 what the dollar 91 as compared to $1 31 in 'twenty 'twenty, an increase of 45, 5%. This.
Kevin Ben-Ezzelin: This compares to the average D3 RIN index price for 2021 of $3.02 being approximately 102.7% higher than the average D3 RIN index price in 2020.
This compares to the average D. Three rent index price for 2021 $3 two stents being approximately 102, 7% higher than the average D. Three rent index price in 2020.
Kevin Ben-Ezzelin: Operating and maintenance expenses for our R&G facilities in 2021 were $38.1 million, an increase of $4.6 million, or 13.6%, as compared to $33.6 million in 2020.
Operating and maintenance expenses for our R&D facilities in 2021 were $38 1 million, an increase of $4 6 million or 13, 6% as compared to $33.6 million in 2020 Approx.
Kevin Ben-Ezzelin: Approximately $4.7 million of this increase relates to development sites commissioned during 2020. Exclusive of the effects of these development sites, operating and maintenance expenses for 2021 were $33.5 million, a decrease of $0.1 million or 0.3% compared to 2020.
Approximately $4 7 million of this increase relates to development sites commissioned during 2020 exclusive of the effects of these development sites operating and maintenance expenses for 2021 were $33 5 million, a decrease of <unk> 1 million or 340.3% compared to 2020.
Kevin Ben-Ezzelin: In the first quarter of 2021, our Houston, Texas facilities were favorably impacted by lower utility rates as a result of the weather events.
In the first quarter of 2021, our Houston, Texas facilities were favorably impacted by lower utility rates as a result of the weather event certain of our utility contracts have provisions that when we're not using utilities that providers are able to contribute that capacity back into the market and we receive credit against our future belts.
Kevin Ben-Ezzelin: Certain of our utility contracts have provisions that when we are not using utilities, the providers are able to contribute that capacity back into the market, and we receive credit against our future.
Kevin Ben-Ezzelin: The 2021 weather event, which temporarily impacted our Texas facilities utility consumption, resulted in our orange utilities being approximately 0.5 million lower in 2021 as compared to
The 2021 weather event, which temporarily impacted our Texas facilities utility consumption resulted in our orange utilities being approximately 0.5 million lower in 2021 as compared to 2020.
Kevin Ben-Ezzelin: We produced approximately 183,000 megawatt hours in renewable electricity during 2021, a decrease of 3,000 megawatt hours from the 186,000 megawatt hours.
We produced approximately 183000 megawatt hours in renewable electricity during 2021, a decrease of 3000 megawatt hours from the 186000 megawatt hours.
Kevin Ben-Ezzelin: produced in 2020. In 2021, our Bowerman facility produced 152 megawatt-hours, an increase of 8 megawatt-hours, or 5.3 percent, over the 144 megawatt-hours produced in 2020.
Reduced in 'twenty, and 'twenty and 2021 hour Baumann facility produced 152 megawatt hours, an increase of eight megawatt hours or five 3% over the 144 megawatt hours produced in 2020.
Kevin Ben-Ezzelin: The increased production in 2021 was primarily driven by the California wildfires that forced the facility to temporarily shut down in October 2020, negatively impacting our 2020 production at Ballast.
The increased production in 2020 , one was primarily driven by the California wildfires that forced the facility to temporarily shut down in October 'twenty 'twenty negatively impacting our 2020 production at all.
Kevin Ben-Ezzelin: Offsetting this increase was our security facility that had zero production in 2021 compared to eight megawatt hours in 2020 due to ongoing projects to restore the engines at our security facility.
Offsetting this increase was our security facility that had zero production in 2021 compared to eight megawatt hours in 2020 due to ongoing projects to restore the engines at our security facility.
Kevin Ben-Ezzelin: Operating and maintenance expenses for our renewable electricity facilities in 2021 were $10.4 million, an increase of $0.6 million, or 6.3 percent, compared to $9.8 million in 2020. We reported the results of PECO within the renewable electricity generation segment until October 2020, and PECO contributed $1.4 million to the
Operating and maintenance expenses for our renewable electricity facilities in 2021 were $10 4 million, an increase of <unk> 6 million or six 3% compared to $9 8 million in 2020 , we reported the results of Pico within the renewable electricity generation segment until October 2020, and Pico contributed $1 4 million.
And its way.
Two the 'twenty 'twenty period.
Kevin Ben-Ezzelin: Exclusive of PECO, renewable electricity facility operating and maintenance expenses increased by 2 million or 19.2 percent in 2021 compared to 2020.
Exclusive of Pico renewable electricity facility operating and maintenance expenses increased by 2 million or 19, 2% in 2021 compared to 2020 the.
Kevin Ben-Ezzelin: The increase is primarily a result of the timing of scheduled engine preventative maintenance intervals at our Bowerman facility, which was approximately 2.8 million higher in 2021 over 2020.
The increase was primarily a result of the timing of scheduled engine preventative maintenance intervals at our Baumann facility, which was approximately 2.8 million higher in 2020 one over 'twenty 'twenty.
Kevin Ben-Ezzelin: Operating profit in 2021 was $3.3 million, a decrease of $0.2 million or 6.9 percent compared to an operating profit of $3.6 million in 2020.
Operating profit in 2020 , one with $3 3 million a decrease of <unk> 2 million or six 9% compared to an operating profit of $3 6 million in 2020.
Kevin Ben-Ezzelin: R&G operating profit for 2021 was 50.4 million, an increase of 28.1 million or 126.5% compared to 22.2 million in 2020.
R&D operating profit for 2021 was $50 4 million, an increase of $28 1 million or 126, 5% compared to $22 2 million in 2020.
Kevin Ben-Ezzelin: Renewable electricity generation operating loss for 2021 was $3.1 million, a decrease of $0.8 million or 35.5% compared to an operating loss of $2.3 million for 2020.
Renewable electricity generation operating loss for 2021 was $3 1 million a decrease of <unk> 8 million or 35, 5% compared to an operating loss of $2 3 million for 2020.
Yeah.
Kevin Ben-Ezzelin: Turning to the balance sheet, as of December 31st, 2021, 80 million was outstanding under our term loan, and we had no borrowings under our revolving credit.
Turning to the balance sheet as of December 31st 2021, 80 million was outstanding under our term loan and we had no borrowings under our revolving credit facility.
Kevin Ben-Ezzelin: The company's capacity available for borrowing under the revolving credit facility was approximately $116.1 million.
The company's capacity available for borrowing under the revolving credit facility was approximately $116 1 million.
Kevin Ben-Ezzelin: During December 2021, we refinanced our credit facility and entered into the fourth amendment to the amended creditors.
During December 2021 we refinanced our credit facility and entered into the fourth amendment to the amended credit agreement.
Kevin Ben-Ezzelin: The amended credit agreement provided for a five-year $80 million term loan and a five-year $120 million revolving credit.
The amended credit agreement provided for a five year 80 million term loan and a five year $120 million revolving credit facility.
Kevin Ben-Ezzelin: During 2021, we generated $42.9 million of cash from operating activities, a 49.5% increase from 2020 of $28.7 million.
During 2020 , one we generated $42 9 million of cash from operating activities.
49, 5% increase from 2020 of $28 7 million.
Kevin Ben-Ezzelin: For 2021, our capital expenditures were approximately 10 million, of which approximately 2.4 million.
For 2020 , one our capital expenditures were approximately $10 million of which approximately $2 4 million.
Kevin Ben-Ezzelin: related to optimization projects at our recently commissioned facilities and 1 million related to the PICO feedstock.
Related to optimization projects at our recently commissioned facilities and $1 million related to the peak of feedstock Amendment.
Kevin Ben-Ezzelin: We acquired assets for the Montauk Ag Renewables acquisition in North Carolina of $4.1 million, including acquisition costs of $0.3 million.
We acquired assets for the Montauk add renewables acquisition in North Carolina, a $4 1 million, including acquisition costs zero point $3 million.
Kevin Ben-Ezzelin: We also closed on a 5.5 million transaction to acquire approximately 146 acres and an existing approximately 500,000 square foot structure in North Carolina, which we plan to use as we pursue our development project associated with the Montauk Ag Renewables acquisition.
Also closed $25 5 million transaction to acquire approximately 146 acres and an existing approximately 500000 square foot structure in North Carolina, which we plan to use as we pursue our development project associated with the Montoc AG renewals acquisition.
We present EBITDA and adjusted EBIT of metrics, because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
Kevin Ben-Ezzelin: We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
Kevin Ben-Ezzelin: Adjusted EBITDA for 2021 was $27.9 million, an increase of $1.9 million or 7.3% over adjusted EBITDA of $26 million for 2020. EBITDA for 2021 was $25.4 million, an increase of $0.4 million or 1.5% over EBITDA of $25.1 million for 2020.
Adjusted EBITDA for 2021 was $27 9 million, an increase of $1 9 million or seven 3% over adjusted EBITDA of $26 million for 'twenty 'twenty.
EBITDA for 2021 with $25.4 million, an increase of zero point $4 million or one 5% over EBITDA of $25 1 million for 'twenty 'twenty.
Kevin Ben-Ezzelin: Net loss for 2021 decreased approximately $9.1 million or 198.4% from net income for 2020.
Net loss for 2021 decreased approximately $9 1 million or 198, 4% from net income for 2020.
Kevin Ben-Ezzelin: The decrease was partially related to income tax expense for 2021 of 4.1 million, increasing 10.2 million, or 169.4% compared to a benefit of income taxes in 2020 of 6 million. And I'll turn the call back over.
The decrease was partially related to income tax expense for 2021 of $4 1 million, increasing $10 2 million or 169, 4% compared to a benefit of income taxes in 2020 up $6 million.
Now I'll turn the call back over to Sean.
Thank you Kevin.
Kevin Ben-Ezzelin: In closing, we want to provide our full year 2022 outlook.
In closing we want to provide our full year 2022 outlook, we expect R&D production volumes to range between 5.5, and $6 8 million M. M Btu with corresponding RG revenues between $181 million and $226 million, we expect renewable electricity production.
Kevin Ben-Ezzelin: We expect R&G production volumes to range between 5.5 and 6.8 million MMBTU with corresponding R&G revenues between $181 million and $226 million. We expect renewable electricity production volumes to range between 189 and 231,000 megawatt hours with corresponding renewable electric revenues between $17 million and $20 million. And with that...
<unk> to range between 189, and 231000 megawatt hours with corresponding renewable electric revenues between 17 million and $20 million.
And with that we'll pause for any questions.
Speaker Change: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touchtone telephone. Again, if you would like to ask a question, please press star then 1.
Thank you, ladies and gentlemen, if you like to ask a question. Please press Star then one when you touch tone telephone again, if he would like to ask a question. Please press Star then one.
Speaker Change: Our first question comes from Matthew Blair of Tudor Pickering Holt. Ilana, go ahead.
Our first question comes from Matthew Blair of Tudor Pickering Holt Your line is open.
Matthew Blair: Hey, good afternoon Sean and Kevin, thanks for taking my questions here.
Hey, good afternoon, John and Kevin Thanks for taking my questions here.
Matthew Blair: The first one, so your 2022 RNG production guidance, it looks like it's anywhere from down 4% to up 19% for next year, I guess this year. What are the factors that would push you to the low end of the range versus the high end of the range, and are there any major projects that we should be looking out for starting up in 2022?
Sure.
The first one.
So your your 2022 RMG production guidance.
It looks like its anywhere from down 4%.
Two up 19% for for next year I guess this year what are the factors that would push you to the low end of the range versus the high end of the range and.
Are there any major projects that we should be looking out for starting up in 2022.
I'll take that initially Shaun.
Matthew Blair: Matthew, given that feedstock is a diverse sort of living organism, we're always managing landfill.
Matthew.
Given that feedstock.
It is a diverse sort of living organism, we're always managing.
Landfill.
Matthew Blair: landfill host impacts. We are mindful, as we publicly disclosed, that our McCarty location is experiencing matters with the landfill host that is going to drive down our McCarty production volumes from their normal historical level.
Landfill host impacts.
We are mindful as we publicly disclosed that are mccarty location is experiencing matters with the landfill host that is going to drive down our mccarty production volumes from their normal historical levels.
Matthew Blair: And then in regards to the upside, we do have some development, not development, we do have projects at certain of these facilities, especially some of the newer
And then in regards to.
The upside we do have some.
Element than not development, we do have projects at certain of these facilities.
Actually some of the newer.
Matthew Blair: commissioned facilities that as they continue to go through optimization, that we
Commissioned facilities that as they continue to go through optimization.
We.
Matthew Blair: believe could drive volumes to that upper
We believe could drive volumes to that upper range.
Speaker Change: Thank you. Our next question comes from Craig Irwin of Roth Capital. Your line is open.
Thank you. Our next question comes from Craig Irwin of Roth Capital. Your line is open.
Thank you for taking my questions.
Craig Irwin: So can you update us on the PICO CARB certification? Where do we stand there? What is the process for us to actually monetize D3, sorry, LCFS credits on top of the D3?
So can you update us on the the HEICO Carb certification.
Where do we stand there.
What is the process for us to actually monetize the three sorry also your best credits on top of the decree.
Craig Irwin: And do you have an inventory there that you can maybe share with us of gas that's generated and waiting for final certification? Thank you.
And.
Do you have an inventory there that you can maybe share with us.
Gas, it's generated and waiting for her.
For final certification.
Speaker Change: Sure, Craig. We can talk a little bit about what we've done at the PECO facility in general and then what that means in terms of monetization. So with PECO, as we have announced, temporarily idling the facility in 2021, we announced an executed amendment with the dairy partner that we have in Idaho to expand the feedstock that's available for the whole cluster.
Yeah sure Craig we can talk a little bit about what we've done at the Pico facility in general and then what that means in terms of monetization.
So with Pico as we have announced temporarily idling the facility in 2020 , one we announced and executed amendments with the dairy partner that we have in Idaho to expand the feedstock that's available for the whole cluster project. When we proceeded with that expansion. We determined the first most beneficial step was to actually refurbished the existing die.
Speaker Change: When we proceeded with that expansion, we determined the first most beneficial step was to actually refurbish the existing digester to increase its capacity, as well as the efficiency for R&G production, as opposed to what it was originally optimized for, which was fiber recovery for the dairy.
Gesture to increase its capacity as well as the efficiency for RMG production as opposed to what was originally optimized for which was fiber recovery for the dairy. So it was determined that if we temporarily idled the facility cleaned out the existing digester and made a number of improvements to the digester as well as the handling of the feedstock it would.
Speaker Change: So, it was determined that if we temporarily idled the facility, cleaned out the existing digester, and made a number of improvements to the digester as well as the handling of the feedstock, it would result in an increase to the feedstock gas to the R&G facility and in turn R&G production because of the excess capacity of that R&G plant, that the value of which would be well in excess of the risk of not achieving any LCFS credit revenue on the run rate that we had for 2021.
Result in an increase to the feedstock gas to the RG facility and in turn R&D production because of the excess capacity of that RMG plants that the value of which would be well in excess of the risk of not achieving any L. CFS credit revenue on the run rate that we had for 2021 production.
Speaker Change: After all of the improvements were completed, the production volumes have more than doubled in the first quarter in 2022. The expectation is that we will monetize LCFS credit revenue for all of our 2022 production.
After all of the improvements were completed the production volumes have more than doubled in the first quarter. In 2022. The expectation is that we will monetize L. CFS credit revenue for all of our 2022 production the timing of which is a function of car, but the number of projects that it is currently processing.
Speaker Change: timing of which is a function of CARB at the number of projects that it is currently processing its evaluation and approval for and the expectation is we'll receive that notification from CARB in the second half of 2022.
Its evaluation and approval for and the expectation is we'll receive that notification from carb in the second half of 2022.
Speaker Change: So there is an opportunity, but our current expectation is we would monetize those in 2023. The earliest that it would happen would be a quarter sooner, depending on the timing the CARB comes back with that notification.
So there is an opportunity, but our current expectation is we would monetize those in 2023. The earliest that it would happen would be a quarter sooner depending on the timing the carb comes back with that notification.
Speaker Change: Okay, just just a clarification if I may. So the gas that's produced at this facility this year will generate an LCFS credit inventory that can that can be liquidated on certification, is that correct?
Okay, just just a clarification if I may so the gas that's produced at this facility this year will generate an ulcer fish.
Inventory that can that can be liquidated.
On certification is that correct.
Speaker Change: I think a better way to say it, Craig, is the gas that is going into storage is eligible to generate LCFS credits when it comes out of storage, and it will in turn then be able to monetize the LCFS credit revenue, but you're right, it is contingent on the timing in which CARB comes back and approves that certification.
I think a better way to say it Craig is the gas that is going into storage is eligible to generate L. CFS credits when it comes out of storage and it will in turn then be able to monetize the O CFS credit revenue, but you're right. It is contingent on the timing at which carb comes back.
Approves that certification.
Speaker Change: Thank you. Our next question comes from Fred Shree of Tuhoe Brothers. Your line is open.
Thank you. Our next question comes from connect story of two brothers. Your line is open.
Fred Shree: Hi, I wonder if you can give us a little update on what to anticipate this year as far as decision making and guidance that may be coming out around the SWINE RNG opportunity. Do you expect some more definitive announcements over the next quarter or two?
Hi.
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Wonder if you can give us a little update on what to anticipate this year as far as decision making.
And guidance that may be coming out around the swine earn G opportunities or.
Do you expect some more definitive announcements over the next quarter or two.
Speaker Change: Sure. With respect to North Carolina, as we disclosed previously, we've continued down the path of our initial five-year development project.
Sure with respect to North Carolina as we disclosed previously we've continued down the path of our initial five year development project. We've disclosed publicly all of the milestones that have been associated with that endeavor, specifically, we announced our our successful award of.
Speaker Change: We've disclosed publicly all of the milestones that have been associated with that endeavor, specifically.
Speaker Change: We announced our successful award of our technology patent in August of 2021.
Our technology patent in August of 'twenty, and 'twenty one our.
Speaker Change: uh... are closing on a five-and-a-half million real estate and building property in north carolina which will actually house the operations of the development project
Our closing on a five and a half million real estate and building property in North Carolina, which will actually house the operations of the development projects and the execution of some initial service agreements with the farming partners that will provide the feedstock volumes of the project itself as we continue to reach those milestones in terms of.
Speaker Change: and the execution of some initial service agreements with the farming partners that will provide the feedstock volumes of the project itself.
Speaker Change: As we continue to reach those milestones in terms of developments and the capital that we have already provided guidance on for 2022, we'll announce those publicly in due course.
<unk> and the capital that we have already provided guidance on for 2022, we'll announce those publicly in due course.
Speaker Change: Thank you. Our next question comes from David McCall of Fort Washington. Your line is open.
Thank you. Our next question comes from David Mccoll of Port Washington, Your line is open.
Afternoon, guys. Thanks for taking the question I'll follow up on the North Carolina walks, you you know I love them.
David McCall: Afternoon, guys. Thanks for taking the question. I'll follow up on the North Carolina ones. You know I love the Montauk, the egg. So you've got the patent, the property, the people, the partners. The question is really when do you think we could see production? You seem to be checking all the boxes towards making a final investment decision. You've got the Magnolia.
So you've got the patent property people. The partners. The question is is really when do you think we could see production you seem to be checking all the boxes towards making a final investment decision.
You've got the Magnolia concept, you're improving on it.
David McCall: So what's the critical path that's left for a final investment decision? Is that something?
Is what's the critical path that's left for a final investment decision is that something we could expect in 2022.
David McCall: expect in 2022, what would cause that to not happen and what would maybe cause that to
What would cause that tends to not happen what would maybe cause that to happen.
Speaker Change: I think the question on the investment decision has already been resolved with the asset acquisition that we did in 2021. The question is to how we proceed with that investment.
I think the the question on the investment decision has already been resolved with the asset acquisition that we did in 2021.
The question is to how we proceed with that investment is you know in order to maximize the value that we get out of this first cluster project of the number of farms that will be taking under consideration.
Speaker Change: is, you know, in order to maximize the value that we get out of this first cluster project.
Speaker Change: The number of farms that we'll be taking under consideration, the deployment of the newly patented technology, to what extent to optimize the value that we get from both the RIN and the LCFS credit markets.
Deployment of the newly patented technology.
To what extent you optimize the value that we get from both the rent and the L. CFS credit markets to ensure that we are servicing the farming community in the way that this project was originally designed and intended all of these things are staged processes that need to happen in order of.
Speaker Change: to ensure that we are servicing the farming community in the way that this project was originally designed and intended. All of these things are staged processes that need to happen in order of.
Prioritization, making sure that we are securing the obligations as well as the rights to the farmers at the same time that we are securing the orders for the critical pieces of equipment that we're optimizing the engineering with the lessons that we continue to learn and develop through our commercially.
Speaker Change: making sure that we are securing the obligations as well as the rights to the farmers at the same time, that we are securing the orders for the critical pieces of equipment, that we're optimizing the engineering with the lessons that we continue to learn and develop through our commercially operatable technology that's already in existence in North Carolina. One of the reactors of which we're looking at building up to 20 of those.
Offer ratable technology, that's already in existence in North Carolina, one of the reactors of which we're looking at building up to 20 of those in this cluster project in the the real estate.
Speaker Change: in this cluster project in the real estate.
Speaker Change: purchase that we had in North Carolina in October .
Purchase that we had in North Carolina in October and so as we continue to develop that as we continued to secure more and more of these feedstock agreements as we continue to progress with major equipment orders as we continue to provide guidance on anything associated with.
Speaker Change: And so, as we continue to develop that, as we continue to secure more and more of these feedstock agreements, as we continue to progress with major equipment orders, as we continue to provide guidance.
Speaker Change: on anything associated with additional capital developments for the year, and as we have a line of sight as to when those deliveries and the further build-out of that project results in us having an expectation for that quarter of when we're going to commence production. Those are all items that we'll communicate publicly in future disclosures.
Additional capital developments for the year.
And as we have a line of sight as to when those deliveries and the further build out of that project results in us having a an expectation for that quarter of wind works going to commence production. Those are all items that will communicate publicly in future disclosures.
Speaker Change: Thank you. Our next question comes from Matthew Blair of Tudor Pickering Hall, Yolanda.
Thank you. Our next question comes from Matthew Blair of Tudor Pickering Holt Your line is open.
Matthew Blair: Hi, thanks. If I could just circle back to this PICO LCFS opportunity, you mentioned you doubled capacity. I previously had capacity at 330 K MMBTU per year, so doubling it would be 660.
Hi, Thanks, if I could just circle back to this tico L. CFS opportunity you mentioned you double capacity.
Do you have capacity at 330, K M Btu per year, so doubling it would be 660, I'm showing dairy PFS credits around $60 per M. N V. Q and then if I take off of.
Matthew Blair: I'm showing dairy LCFS credits around $60 per MMBTU, and then if I take off a 20% royalty on that, basically putting all this together, I'm getting to about $32 million of potential annual revenue.
Like a 20% royalty on that basically putting all this together and getting to about 32 million of potential annual revenue from from Pico, Oh, PFS, which presumably would also translate to the EBITDA. So is that the right way to think about is do those numbers sound.
Matthew Blair: from PICO, LCFS, which presumably would also just translate to.
Matthew Blair: to EBITDA, so is that the right way to think about it? Do those numbers sound approximately correct?
Correct.
Matthew Blair: you know, I guess we think of your underlying earnings power as being this 220, 222 midpoint guidance for 22 plus, you know, this Pico LCFS opportunity.
You know I guess, we think of your underlying earnings powers beams to 'twenty to 'twenty two midpoint guidance for 'twenty two plus you know this pico L CFS opportunity.
Yeah.
Speaker Change: No, that's a good question. The guidance that we've provided has been exclusive to the capacity expansion in terms of our production expectations.
No. That's a good question the guidance that we've provided has been exclusive to the capacity expansion in terms of our production expectations. So are directionally correct in the sense that we would be doubling those production numbers in 2022 are in regard.
Speaker Change: So, directionally correct in the sense that we would be doubling those production numbers in 2022. In regards to the value that you expect to achieve for the revenue monetization itself, one has to have a specific view that the company does not provide guidance on in terms of the expectations of those attribute prices at the time that they're monetized.
<unk> to the value that you expect to achieve for the revenue monetization itself. One has to have a specific view that the company does not provide guidance on in terms of the expectations of those attribute prices at the time that they're monetize them. They are not monetized in advance.
Speaker Change: They are not monetized in advance of their generation and we expect to monetize those attributes more likely than not in 2023 based on the 2022 production and the release from storage.
Their generation and we expect to monetize those attributes are more likely than not in 'twenty 'twenty three based on the 2022 production and the release from storage.
Thank you.
Speaker Change: I'm showing no further questions at this time. I'd like to turn the call back over to Sean McLean for any closing remarks.
I'm showing no further questions at this time I'd like to turn the call back over to Shawn Mcclain for any closing remarks.
Sean McLean: Thank you. And thank you all for taking the time to join us on the conference call today. We look forward to speaking with you on our 2022 first quarter conference call.
Thank you and thank you all for taking the time to join US on the conference call. Today, We look forward to speaking with you on our 2022 first quarter conference call.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may all disconnect have a great day.
Speaker Change: Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may all disconnect. Have a good day.
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