Clean Energy Fuels Corp. Q1 2023 Earnings Call
Yeah.
Good afternoon, ladies and gentlemen, and welcome to the clean energy fuels first quarter 2023 earnings conference call.
At this time all lines are in a listen only mode.
During the presentation, we will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Tuesday May nine 2023, I would now like to turn the conference over to Robert <unk>, Chief Financial Officer of clean energy.
Please go ahead.
Operator.
Earlier this afternoon clean energy released financial results for the first quarter ended March 31 2023.
If you did not receive the release it is available on the Investor Relations section of the company's website at Www Dot clean energy fuels Dot com.
For the call is also being webcast there will be a replay available on the website for 30 days.
Before we begin we'd like to remind you that some of the information contained in the news release and on this conference call contains forward looking statements that involve risks uncertainties and assumptions that are difficult to predict.
Words or expressions, reflecting optimism satisfaction with current prospects as well as words, such as believe intend expect plan should anticipate and similar variations identify forward looking statements, but their absence does not mean that the statement is not forward looking.
Such forward looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements.
Factors that could cause or contribute to such differences are described in detail in the risk factors section of clean Energy's Form 10-Q filed today.
These forward looking statements speak only as of the date of this release the company undertakes no obligation to publicly update any forward looking statements or supply new information regarding the circumstances. After the date of this release.
The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results.
GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information reasons why management uses non-GAAP information a definition of non-GAAP EPS and adjusted EBITDA and a.
A reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on form 8-K today.
With that I will turn the call over to our President and Chief Executive Officer, Andrew Little Fair.
Thank you Bob Good afternoon, everyone and thank you for joining us well for the first quarter. The good news is that our underlying growth and fundamentals were strong.
Bad News is our first quarter results were impacted by an anomaly and hopefully a one time occurrence, which was our historic spike in natural gas prices in California, resulting in a $10 million compression in our profits.
Consequence of events, including unusually cold weather in California, the lack of natural gas storage capacity by the gas utilities and the El Paso pipeline the supplies, 20% of the natural gas to California being out of commission all contributed to cause the price of natural gas to spike as high as $50 an M Btu here.
In California in January .
The move from $7 nine a M. Btu in November to January was a 600% increase.
Translating into an increase in our cost at the pump from approximately a dollar a diesel equivalent to $7 50.
We did everything we could to mitigate this unpriced unprecedented chain of events that impacted the cost of our commodity, but California continues to be our biggest market by far with the largest transit agencies in the state dozens of refuse truck fleets airport vehicles, and a growing number of heavy do.
<unk> trucks, all fueling at our network of 150 stations across the state.
He passed along some of the increase in fuel costs to these customers, but we felt we can only do so much.
Good news is that they understood in large part because every household and business in California is also seeing their gas bills at least triple if not quadruple during January .
The other important point of this historic increases at the price began to moderate in February although there were still some balancing effects that we're feeling.
Ill El Paso pipeline is back online and gas utilities that final plans for additional storage and as of March the price of natural gas.
So Cal City gate was back closer to $7 and a N V to you.
Something else that has been impacting our bottom line and that we discussed on last quarter's call as the price of the environmental credits I know these are followed closely by many on this call and as you know.
There has been a nice turnaround in the California, low carbon fuel credit price recently about a 35% increase but for the majority of Q1 prices were on the low end and had an impact on our adjusted EBITDA when compared to a year ago by.
By March credit prices were in line with our plan if not exceeding it.
In the first quarter, we sold over 53 million gallons of renewable natural gas, which was 34% more than we sold in the same quarter of last year.
We won several large transit contracts converted existing customers from traditional <unk>.
More profitable RG and opened additional R&D stations, where Amazon heavy duty trucks are the anchor customer.
Our revenue for the quarter was $132 million.
$48 million more than Q1 2022, but this was heavily impacted on the plus side by the commodity price in California that I just spoke about.
By the time, we got to March we saw our overall business begin to write itself attractive plan.
That we had at the beginning of the year.
Our balance sheet remains in very good shape with $220 million in cash and investments. In addition to a $132 million cash off balance sheet at our R&D supply joint ventures.
As I spoke about last quarter, our first R&D supply project del Rio dairy in Texas is now online.
We now have three dairies in commissioning and two others in final construction by summer time, we should have six projects producing LNG.
Many of you have read about the tragic fire south for Gary in Texas, where we had plans to build an R&D digestion.
We have funded some design engineering and early equipment purchases for that project. We have not started onsite construction and we are now working with the dairy owner as he plans to rebuild the barn and repopulate. The herd we will keep you updated on its progress.
We've added expertise in construction project management and origination do R&D team that are keeping our projects moving along at a good pace.
Not only clean energy and our customers. So we remain bullish on this ultra clean fuel Washington knows the benefits of R&D as well and I Hope you saw the announcement that a bill was introduced last month in the U S House of Representatives provide a dollar per gallon tax credit for vehicles that use R&D.
Interesting to note that the bipartisan Bill is being co sponsored by a Republican remember from a rural District Congressman Brian just Patrick and a Democrat from an urban Southern California District.
Women Linda Sanchez.
Our members understand both the environmental benefits of R&D, which reduces air pollution, and carbon emissions and that investment of tens of millions of dollars per new R&D digester benefits their agricultural communities.
I believe a companion Bill will soon be introduced in the Senate by another bipartisan coalition.
70% of all on road fuel use of natural gas vehicles in 2022 in the U S was R&D, which is a great Testament to its acceptance and the ease to transition it to existing fueling infrastructure and fleets.
Thank you tax credit will be a big boost to the adoption of R&D if it passes.
We're also very excited about the rollout of the new comes 15 liter natural gas engines. It seems like a week doesn't go by that we don't hear some good.
Some of the country's largest fleets like Walmart Warner nights with taking delivery of these preproduction 15 liter engines I've spoken multiple times on these calls about the importance of this 15 liter engine to the heavy duty truck market because it delivers the power torque and economics.
The industry needs. It is incredibly gratifying to see the early response a.
A few weeks ago I was with the CEO of the largest trucking company in Canada, and a customer of ours very well and he is inks anxiously waiting the delivery of two tests 15 liter engines in a few months.
I've gone on a little long and my goal is to keep my remarks shorter, giving us more time to get to your questions, but I do want to end by highlighting why I was in Canada, which was for a significant announcement with the largest natural gas company in Canada and one of the most successful energy companies in North America over the last couple of decades terminally.
Mike Rose <unk>, founder and CEO , and I announced that the two companies are partnering to build a network of natural gas stations across Western Canada, primarily targeting the heavy duty truck market.
We've identified locations for the first four with one already operating Edmonton and have plans to eventually add 15, or so stations that will be co owned by the two companies clean energy will build and operate the stations.
We are very bullish about this new partnership with <unk> as well as our overall business as I detailed at the top of my remarks, we experienced some headwinds at the beginning of the year, but the momentum has already shifted back R&D continues to be a breakthrough fueling solution, allowing fleets to decarbonize quickly and affordably no other company.
He is better positioned for the R&D future with our expanding low carbon supply and our growing fueling infrastructure.
Thank you for your time today, and now I'll hand, the call over to Bob.
Thank you Andrew and good afternoon to everyone.
Let me start with giving a little color a little more color around the $10 million drag on earnings in the first quarter from the high California natural gas prices.
The quick math.
And that is that we have about 2 million gallons per month with exposure to natural gas price movement in the California market.
And we saw an incremental price increase.
Around $6 50, a gallon that's an increase in our cost.
We were able to increase our retail prices by $2 a gallon.
Taking our our price at the pump to $7.99 a gallon versus diesel at the time was $5 99.
So that left us about $4 50, a gallon that we absorbed plus.
Plus we experience some elevated gas utilities at our California, LNG plant for about another $1 million impact.
So disappointing when when we really were having a nice quarter, but that is passed and frankly without that anomaly the quarter. It was really more in line with what we were expecting.
Recent trends in the natural gas prices relative to oil remains healthy, meaning we have a strong economics at at our retail pricing Lcs L. CFS credit pricing has increased in the mid eighties from the low sixties, which is where it was out on our last call.
And even more recently, there's been a nice rise in RIN pricing.
So the current economic landscape is good for us and we think that we can recover much of the $10 million anomaly by the end of this year.
Moving on and looking at volumes, we saw increases in volume across all of our core sectors with the largest gains.
Coming from transit and trucking when compared to a year ago. The transit sector has seen more recovery. This year and we've also had some nice customer gains and.
And then our volumes with Amazon continued to increase which is helping to drive the trucking sector growth. Both of these sectors. The transit and trucking contributed to the growth in fuel gallons, which was up 18% year over year.
And then transit also contributed to service gallon growth, which was 7% compared to the first quarter of 2022.
We reported a GAAP operating loss of $35 $4 million for the first quarter of 2023.
On revenues of $132 million compared to a GAAP operating loss of $20 million.
An $83 million in revenue a year ago first quarter.
On the downside for the first quarter results of 2023 compared to the same period in 2022.
We have the $10 million drag from the California gas Spike in 2023.
Our increased volume with Amazon resulted in incremental Amazon warrant charges of $10 million in 2023, and our RIN and <unk> revenues combined were down $4 $5 million from a year ago.
Due to the lower credit prices.
On the upside.
In 2023, we have $4 3 million of incremental alternative fuel tax credit revenue compared to a year ago as the alternative fuel tax credit was not in effect in the first quarter of 2022.
Our adjusted EBITDA was negative $4 million for the first quarter of 2023, which includes the $10 million negative impact from the California gas prices.
We've also in our table in our press release, we disclosed the EBITDA components of our R&D supply Jv's. Since we are operating one project and we will be operating more this year.
Having said that our adjusted EBITDA of negative $4 million breaks down as a negative $2 9 million coming from the distribution business.
And negative.
$1 1 million coming from our R&D supply business.
And you can calculate these figures utilizing the press release and our 10-Q.
But we intend to update our company presentation on this adjusted EBITDAX to show you that the two different.
Contributors to the adjusted EBITDA.
We're going to update our company presentation that will put onto our website soon.
Yeah.
And with that operator.
Please open the call for questions.
Thank you, ladies and gentlemen, we will now conduct a question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.
Here are three Tony from acknowledging your request.
We would like to withdraw your request. Please press the star followed by the tail.
Can a speaker phone please lift the handset before pressing any keys. Your first question comes from Eric Stine with Craig Hallum.
Please go ahead.
Andrew Hi, Bob Hey here Eric.
So.
Thanks for the details on the R&D pipeline, maybe if.
If you could go beyond that a little bit I know in the past you've talked about.
Kind of the next level, which is the number of <unk>.
And the number of plants that you've got in <unk>.
Jennerian phase and I'd also love to hear just kind of the size of the pipeline as it stands now maybe versus six months ago 12 months ago right right. So.
Slice Eric Thanks.
These things differently. So when you kind of when you sort of boil. It all down we have nine under construction now one of those is south Fork and I can go in a little more detail on that in a minute, but you have 900 construction year for under engineering.
Hearing in these projects is.
Pretty detailed right so youre.
Youre spending some money at that point and Youre getting up to about 30% drawing so they are well underway and yes, mou's everything and then we have two kind of on the early stages of development. So they are about to enter engineering. So those are the projects, let's just call them active where youre really moving forward than the pipeline.
It kind of ebbs and flows.
Eric There are 18 to 20 active in the pipeline or.
Sure.
We're dealing with the farmers and pass through paper back and forth and.
So now just to be clear that number could probably swell I mean, our guys are in touch with more than that but that's the number that I asked for this morning is we're kind of looking at those that we really are starting to get a rule a nice line of sight on.
There are more but.
But time will tell over here over the next few months of kind of which ones then move move into the real active pursuit, but the pipeline's robust.
And our guys have really done I think a nice job on that.
Not only on the pipe and for development, but also on the R&D supply side.
It's very active for us as well.
Got it and just curious.
I guess first of all I mean, I think in the past you've talked about an ultimate goal I mean, obviously you could expand beyond this with BP and total at some point, but I think targeting like 105 million gallons is that still a number we should think of them still noise I'm glad you bring that up because it's still.
Because we've kind of talked about it we did acknowledge on the last call.
Some of these projects were taken a little bit longer and so theres a little slippage if you will to the to the right, but the main goal is still in place.
What we laid out at about a little over a year ago of the 100, 500 100 million gallons of our own equity account with our partners on the supply side Thats still.
Still on track for that now we've always been very clear that some of that will be greenfield that will develop some of it could be an M&A and so we will still work on that but we still like that number.
Frankly I'd.
I would like to see that go up but our partners are still hooked with us on that.
And then at the same time that's in development.
26.
We have to then.
Bring a lot more third party.
Low ci gas and landfill gas.
Equation as well so we're very busy on that front, but we really haven't changed.
<unk>.
Size of what we're trying to achieve or the money that we're going to need to spend with our partners on it.
Okay. Thanks for that and then I guess, maybe last one for me just.
Last quarter with the Amazon stations, you would not.
Through anything that you were doing it was more permitting delays.
Those sorts of things curious where that stands.
As that loosened up a little bit and when you might get back to what you would view more of a normal rollout.
It has it has we've worked really hard we have a very large team.
On the site acquisition entitlement permitting.
Side of the equation and then of course construction right and we've worked hand in glove with our friends at Amazon as well.
Our construction party and all of that team.
Starting late last year to see what we could do to streamline the process and working together utilizing all of the levers that we have.
Im happy to note that.
We have seven stations that are under construction right now and that will come on.
In the next five months and I reviewed that with Amazon the other day.
<unk>.
The entire.
Maybe less one of the original stations that we signed on the Amazon.
We've disclosed will should be completed by the end of the year. So there's a lot more to be done there. It has sped up some.
We get a little break with the weather right I mean, we've made tremendous progress in a couple of the stations out here in California here in the last six weeks after the rain stopped and Thats also the case in other parts of the country. So I'm feeling good we have cameras on all those locations and we have meeting a standing meeting with the big team every Friday morning at 830 and.
A lot of activity as we're bringing those projects along so feeling much better about that and those like magic Eric you open one of those stations and.
Literally within a few days, even before we were in final commissioning and ready to get the occupancy permit from the city of those 158 trucks in there.
And so it's it's a beautiful thing when you see it and so we're very excited about.
Alright, Thanks, Andrew.
Okay. Thank you.
Okay.
Your next question comes from Rob Brown with Lake Street capital markets.
Please go ahead.
Hi, Good afternoon, Hey, Rob Hey.
Rob.
Just following on with Amazon how many stations are now open and do you have a sense of how much the truckload youre feeling at the moment.
Well now remember I always give this little warning that I get in trouble, but but I do know this that we.
There's a couple of pieces to that right. So we early on going back I guess, what 18 months ago.
As they began to take trucks.
We opened up our nation nationwide network of stations and as of last week in my meeting with.
Folks who executives Amazon I reported that we've actually fueled heavy duty trucks, Amazon trucks and mediums at 101 of our different stations.
And and.
And that's a daily occurrence and.
As of.
Last week it appears to us because it changes from time to time.
Youre approaching 500 trucks that are fueling on a daily basis.
Okay, Great now adds those stations that I, just discussed with Eric come online, you'll see that number I hope go up.
<unk>.
I know that through the public.
Information that Amazon is disclosed I think they are admitted to 2000 2500 trucks that they've disclosed.
And so our number of shale should continue to go up as these stations.
Come on line.
Okay.
Okay. Thank you and then on the on the 15 liter rollout.
They are testing right now how does that ramp rollout, how how do you sort of see that flowing into the fleet over over the next two or three years.
It was it was really pleasing to see.
I would like to say that Cummins has really gotten into this in a big way and.
You may see it Rob, but gosh in the last.
Six weeks almost every week there is another announcement coming out about different parts of the business and last week at the Act Expo in span on.
Huge presence by Cummins.
My salesman reported that he thought there as many as 20 Cummins individuals there now they had a couple of other fuels, but about fully half of that.
It was natural gas.
A portion of a lot of customer interest there in fact.
Rob one of the only of the ride and drive big fuel cells and electric vehicles and all the showbiz.
The advanced technology innovation, they're the only vehicle that made it there under its own power to be.
The ride and drive the heavy duty was.
Cummins natural gas product that was driven in.
It was actually being operated at the time by Walmart.
Those vehicles the way I understand it and you might get better information can come in but as I understand it there was about <unk>.
40 of some of the nation's largest fleets that are in line now.
Got it.
Sequence to take delivery of those vehicles those are new engines that are being placed into.
Existing diesel.
Oems right into trucks ticks. So they have to has to go to the shop from the fleet you put in the new engine and some of those are on the road now some of them some of those fleets that I mentioned in my remarks.
I haven't seen anything official from Cummins, but the early reports are.
The Lady that drove the truck for Walmart.
A very good report that she imported there to the people at <unk> expert. So I have my fingers crossed that the customer experience is going to be good the torque and horsepower is good I saw as I think today Cummins made another announcement on their up fitting program on their new design back a cap.
And I really like this because youre beginning to see sort of the OEM nature that Cummins can bring now with their up fitting.
The capability to bring the fuel system and everything together.
Together as a factory product they've been prove that they have 170 gallon option that I think 130 gallon options that really looks like so if I can.
400 pounds lighter that tank packages for it but thank you Bob as 400 pounds lighter. So so it seems like things are going well and I am hoping.
I can never I always get out there a little bit ahead of myself, but you know that.
Story is later this year the the kind of order book will open at some point and Im hoping that we begin to see those orders taken for that engine.
Okay, great. Thank you I'll turn it over.
Okay.
Your next question.
It comes from Manav Gupta with UBS.
Please go ahead.
Hey, guys actually quickly wanted to touch a little bit on the third party volumes. Some of you on upstream projects are the need.
We're competitive in the upscale projects that also slightly delayed.
But in your guidance you had indicated that youre still seeing very strong contractual volumes from third parties for both landfill and Daddy R&D.
Can you talk a little bit about your marquee volume contracts as they lead to R&D and the volumes actually distribute through your own outlets.
Sure Bob you might have those handy here, but we.
The third party I'll start.
Good to hear your voice.
The third parties very important piece to our to our story until we begin to well it always will be right I think the account as we have 63 different R&D supplier. So we've worked with almost everybody in the business landfill and dairy are dairies increasing dramatically. This.
This year that we're bringing in from third party.
I think it's going from roughly in California for 20 million gallons of our of load of dairy R&D last year to something closer to $60 million for 2023, So big nice increase.
We had what about a 20% increase in third party supply for 2023, that's that's right now on budget. So we'll end up with about 234, I think million gallons.
For the year end.
It's going well went up yes, Andrew I agree and I think I mean, it ebbs and flows as as we have always seen it but it's.
Got it.
It's not really being impacted by by us.
That projects are delayed kind of thing, but because all of.
Our third party supply is pretty much operating units and so anything that we come across there might be.
From an operational matter, where yield is a little different but.
Because we are kind of spread out with a number of the.
Suppliers than all of that is.
Dissipated.
And we're planning on our.
234 million gallons from third party for this year, yes. So I think we're on track on that so no. It's a good question are we seeing a slowdown it no I think we'll be able to meet our demand with our which is in large part due to our third party supply.
Congrats on that.
Quick follow up and then I'll turn it over.
You mentioned in your opening comments you are seeing some improvement in the CFS faces.
<unk> meetings at head back up.
They are looking to make some changes over there to support hardware higher carbon prices you guys I'll just keep after them a lot more than weekend, so help us understand a little bit on what's going on with <unk>, how do we actually see just about making some changes which will help support higher carbon prices and this is John and I'll Donegal App for that thank you.
Well I would say first off there.
And.
Weekly or daily contact with different groups that them as they look at adjustments to the low carbon fuel.
Standard program.
Which kind of the way it works Manav is there'll be one more kind of community workshop at the end of this month.
End of May 1st of June then you should see some time. These things things are set in stone right now, but it looks to us pretty closely that.
June July you'll begin.
Then sometime in mid June June Youll have a.
Proposed rule out.
Adjustments to the low carbon fuel standard and.
The board will then begin to hear that some 30 days or so after so sometime in late July August .
That that will kind of move along there of course.
There'll be a lots of input on that.
I wouldn't say that the ERP is looking to make adjustments to raise the price, but I don't know that they would they would agree with that I think theyre looking to make some adjustments in the program.
To increase the compliance curve that is require more.
Obligation by by the obligated.
Appliance by the obligated parties.
Use more renewable fuel low carbon fuels in the state.
We're at about 20% and so theres a couple of choices that sitting before <unk> all of which are constructive for our business we believe.
Methane business.
Is 30%.
Increasing from 20% to 30% or 35%.
With a higher obligation threshold and I think that's why the prices moved from 60 to 85.
62 to 85 and is likely could move a little bit higher even though it doesn't take effect for another year right.
Thank you so much guys. Thank you.
Okay.
Your next question comes from to Cheyenne and any.
Japanese.
Hi, Angela Hi, Bob Thank you for taking my questions.
Yes, My first one my first one is on the terminal contract, but he can assure some you know some color on the economics of it the cadence of Orange juice stations coming on line over the next couple of years.
Yeah, just made me some more color on that.
Yeah, well, we have we have line of sight on.
Four one is actually operating.
And.
And we will get those you should get those constructed.
For the most part this year, maybe going into the first quarter of 24 on the other three.
And then.
But we've already identified probably.
10, others.
And that market and and those will come on so you know.
Like our whole model as we got it you have to go through a period to build them doesn't take that long.
What what were most excited about there is the.
Is our partner they're torn lane.
They're in this to drive.
The option of natural gas heavy duty trucks, they want national gas heavy duty trucks on the road up there in Canada and.
<unk> and and I had been up there. The view is very bullish on on that type of vehicle. They do need to 15 later so that also plays in but the timing.
Is the time it is good because you know if we had all the stations right now we wouldn't probably have a vehicle. So we don't sell so we need to hurry up and get those built and then we're working the thing is with with formally they they.
They have so many operations they see all of the various geographic areas, where there's thousands of trucks going by locations each day. So.
So we will get about four in this year early part of next year and and just keep on going from there.
No. The nice thing in Canada is you have a huge vast resource in natural gas and they're very expensive diesel. So you really have economics. This thing sits on its own bottom up there and over time.
You will you know <unk>.
But and everybody's open to that and as you know <unk>. There is a federal orangey a little carbon fuel program in Canada kind of kicks in you know faces and over time, it's it's I think it's already in the D C. But so you know.
Everybody is understands that you'll begin to blend in orange G. Later, but it'll start out compressed natural gas and and the economics of a look good as compared to <unk>.
<unk> and then just a quick follow up on that in terms of plummeting.
All of that you know coming on all other any.
Are there any.
Issues around that or like is it relatively easier to get advice is what you have seen you know was Amazon.
Yeah, no I wouldn't say easy but.
We on the on the first four or or pretty well ended those and.
No you you always have it but I do believe that.
These are the areas are are kind of heavy industrial and I saw that it just I dunno that the permitting is gonna be.
You know as prevalent as it is is when we want to put something.
You know in the San Bernardino.
I understand I'm gonna sit at my final question I've done I've done it or is it just on del Rio in terms of pathway approvals.
How's that coming along and then any kind of thoughts on on the other facilities that are gonna come onto someone I can talk to about six in a flowing by summer so just <unk>.
If you could shed some color on the pathways approval for these yeah, well you know pathways take longer. So you will begin to operate these but you know these things come on production and then you'll you'll put into storage right. The pathways take can take we got to work on this the end of the industry everybody's aware of its pathways in my humble.
Can you take way too long right now right. That's the way it can be anywhere from 12 months to longer.
You.
You don't have to wait for the pathway, but you you can't operate to your full potential in your App store some gas.
Yeah. That's it's under that pathway you know is under way, but that takes a lot. Yeah. Because you have to you have to run the dairy to get yeah. You have to get you know a number of months of operation Yeah data that they collect as an established to see I of course all of that is.
In the works if you well, yes, but.
But that will take some time.
Understood. Thank you I'll sign or.
Okay.
Your next question comes from Matthew Blair with T. P H.
Please go ahead.
Hey, good afternoon, Andrew and Bob could you talk about how the economics for dairy Orangy will change in 2025, when the benefits of the R. A flow through it should it should we expect that you would receive a P. T C.
Approximately $80 per M. M. B to you in addition to the existing support from D. T <unk> Oh fitness programs.
But we'll get P. T C at whatever you know.
We hope it's $80 [laughter], but it it would be in addition man I'm into your point, it's kind of on top of.
On top of the economics that we've already would that we'd built in to justify the investment.
You know, it's additive for sure and you know the Big question is on.
How much.
But we.
Continue to hear that I could be substantial.
Yeah. It's.
It's great it's great it on the carbon intensity as a fuel and.
And it has in it is that rule has to be you know promulgated by the Treasury Secretary so that hasn't happened yet so.
But we don't like count our chickens.
Before the ash, but but we we take it could be substantial budget, yeah, and it's relevant in the marketplace.
Yeah. So there's.
<unk> it's.
It's in the narrative for sure.
Sounds good and then could you talk about what gives you confidence to keep the full your guide of $50 million to $60 million <unk> are there any parts that are coming in better than expected that would offset the the 10 million loss from high California natural gas prices in Q1.
Yeah, I mean the by.
I mean, we've we've sense now some of this has to save it locally when we set our plan and talked about our guidance.
We said, we're kind of going low on L. C F S and the low sixties and that's at right now 85, and you know.
If there's more encouraging news that could go even more so I think they all C. F S. As cooperating nicely. The the Red is cooperating nicely and then just in general kind of the underlying commodity economics at our stations before the credits.
You know, we're at like 30, plus spread between W. T I crude <unk>.
And Nymex Yep, Okay, So you're at 70, something and $2.26.
See that that just means that we're very competitive we have a low cost delivered product that's against a relatively high priced competitor in diesel and and that so that's.
That's good for us so.
Like all of that.
Moving forward and when we know we have enough of the year you have about nine months. So you know we feel like.
You can race kind of our 10 million dollar Hickey if you well.
And stay with it.
That sounds good and then last question I think you have stations in Seattle, and Tacoma, and Washington State unveiled there I'll see if this program could.
Could you could you talk about how that's going in and whether you're starting to receive like any sort of <unk> contribution from Washington, So far.
You know we do we.
We we participate in the program in Oregon, and Washington, I don't believe we collect anything yet and Chris Columbia.
But I can't give you any more specifics on that.
Okay, <unk> not material, yeah material, but we'll try to get back to you on that but I. Just don't know it's not a lot you know we have a few stations up there.
It'll it'll grow so it's gonna it'll be.
It'll be meaningful.
You know it doesn't really make the radar at the moment, but.
We we see volume up there uhm.
We'll get it or Oregon, a little last but.
Alright, higher price and they have great prices. So I mean, it's more about that it's more about the you know the the truck traffic and that sort of <unk> it's not.
Saying that.
Anything that we're doing to not be there so.
Sounds good.
I was trying to get that number Matthew I'm trying to get a number.
Okay, great. Thanks.
Okay.
Your next question comes from Paula Chang with a scotiabank.
Please go ahead.
Hey, guys definite.
Hi.
And <unk> Baptist to question one in Amazon can you talk about the past two perfect pretty T on that <unk>.
I I don't think the path Apple yet and what yes. The economy of scale that you need in order for you to relate the coughing up a lot of data.
And also that if we looking at that's a multiple have a new I suppose that you can get two total population path apples at the next say by 2025 Yep <unk>.
What is the most critical panful that the most important <unk> in your opinion for you to get to <unk>.
Okay.
Okay, Paul on your first.
On your first question on.
Amazon, Let me see if I get this right on kind of Amazon profitability.
Hello.
Okay.
So I don't know that we and we have and I know I won't say I don't know I'll say, we have not.
Discussed.
That economics on Amazon, So I'm curious I'd be curious as to what you are looking at to say.
You know when with Amazon be profitable or not.
I.
I think that.
Certainly what we certainly one of the things we see in our numbers as the Amazon warrant charge right. Okay.
That is you know that's not a.
An item that effects that kind of cash collected at the station in terms of you know when we transact on.
Price per gallon and and just what all is entailed relative to that so.
There is that aspect to it.
The cell and in the Amazon weren't charge will be here for awhile as they consume them.
Mount a spin that that was targeted for them to earn.
The war.
Yeah.
Maybe let me we face Yep <unk> the one charges.
Is your John then check with Amazon today, you don't have to tell me the exact number but can you say, whether they got path Apple.
Well I'll say this.
We are.
Investing in building stations.
And we have a model that would suggest that we need a fair return on investments.
And so.
Yeah, and it's fair like all <unk>, you know all that's kind of negotiate it but.
Understood that.
The commitment that.
Uhm.
The commitment that we have at Amazon.
Good for both.
Marty.
Okay. So we make we should be able to make money.
And they should be able to get one of the best fuels at the lowest cost around.
With the Orangey and all of that.
And then the more they you know the more they spend a <unk> based on volume that so that benefits us. So that'll program is.
Good and.
I'll say that it's beneficial yeah.
I would doubt add I mean, you know <unk>.
It's not <unk>.
We're not speaking stations, hoping that an Amazon trucks Gonna show up right.
So there there's a you know we are working hand in glove with Amazon and we have a relationship to volume commitments.
Or developing these stations and that's beneficial for both companies.
Mmk.
And on on your other question in terms of overall corporate.
You know profitability what.
What's needed there you know to really kind of get over the line of.
Let's call it in a positive net income if you will.
And.
Ultimately.
Ultimately, it's about volume and the and the adoption of heavy duty fleets of natural gas vehicles.
Yeah, I mean that drives.
It drives everything all it really does I mean, you know all the all the projects of Orangey supply.
And look we you know so we're but we're bullish on that because.
Because it's kind of the epitome of renewable energy.
That's running our transportation fleet cell.
Yeah of course for.
But the the B and part of that the big part of that paws because for awhile.
We're we're we're already kind of built out to take on.
Much more volume.
And so that that can.
That would really kind of <unk>.
Pop with us because we could already taken a lot of capacity without.
Really extending much more significance.
Significance Capex.
And that's that's really the that's.
That's the play on it and and you know the big market that.
It's just untapped literally is the classic heavy duty truck market, that's 40 billion plus gallons a year that predominantly uses the 15 liter engine.
So.
So that a.
Aw interest at the thing that that have to <unk> <unk>.
Critical mass is <unk>.
80, or 100 million gallons sales or that.
What what is that number in your opinion when you're looking at your internal model.
Well good question.
And there's a lot there's <unk>, there's a little bit, but a lot under that I mean cause as we go through a as we just talked about.
With our you know Amazon warrant charge and that sort of thing but.
It won't it won't I'll just say this it's not a tremendous lift because you can kind of.
You can start to do the math and say if you added 100 million more gallons that.
45, 50 cents a gallon on on a margin.
Without extending a whole lot of other opex.
You're putting in your dropping in another $50 million that.
You know.
Puts us on the positive side.
Mmm.
Kind of thing alright.
<unk>. Thank you.
Your next question comes from <unk> <unk> <unk> <unk>.
Please go ahead.
Good afternoon, Thanks for putting me in.
<unk>, just dig a little bit into the EBITDA around first per.
This year in terms of making up for the 10 million dollar drug and mostly January .
It sounds like pricing power on low gas prices that all things are many equal.
Forward with <unk>, you know who knows.
That that that's just.
Kind of a static situation, where you have an opportunity so.
If if if everything remain the same as it is today should we assume that making up that 10 million would be kind of ratably equal over the next three quarters of an happen versus rising overtime or <unk>. How do you how do you see that progression.
Well yeah. It rises I mean, the you know the progression.
Our progression as I said it'd be in our progression would be somewhat similar to last year, which was it rises but the reason arises because of volume is not rising because word.
Saying that.
<unk>.
<unk> you know that <unk> they'll go 80, 590 110, when I when I was on a plane that volume rabbit.
It's in his Amazon station volume ramp other stations would come on his volume ramp and it's always and I know it frustrates. Some of you that want you know we should maybe.
We're working on you know, maybe a little more clarity quarter over quarter, but you know we've we've always add those are beautiful as well, we've always had a a ramp that starts a little bit low in the first quarter and then ramps as they take trash trucks and and we finished stations and it's always the cases it'll be a case again this year.
I I hear you I'm, sorry, maybe I didn't ask clearly.
The the ramp in terms of volumes was always a part of the plan.
The January dislocation was not in the very widespread that you're enjoying between gas and diesel today is not.
And so to the degree upside versus plan for the remainder of the year can make up for January I guess, what I'm trying to ask is all assuming.
I have no idea, what the futures, but assuming all things remain equal.
Is there.
There's no special reason to think that you're going to have a stronger.
Upside versus plan in the fourth quarter, then and the second is that a fair statement.
Mmm.
Well I.
I think we already answered that wasn't the answer it would be stronger because of the volume but.
But on a relative basis.
You get there.
I mean, you're gonna see the ramp and you're gonna see kind of the well.
Well, we didn't see really any benefit.
Much of a benefit other than in kind of in March in Q1, but.
But certainly not.
Not at these kind of current prices. So all I can say is that you know that you have the same ramp, but yeah, better economics, alright, and what we planned.
Right I mean, so so therefore as the volume goes up.
Yeah.
Well the actual.
Yeah. It does as you get more volume at better economics, but those volumes to your point you know that is a plan that's fine, but what's not in the plan is kind of the <unk> and the <unk> and as well as the spread that were seen on oil the natgas I mean, those have profound effects. So if you just say.
<unk> of all else equal and Lan this new pricing.
That that's how you get there.
Fair enough.
I have to go through any <unk> any other big Oops [laughter].
But let me <unk> to to the upstream you you announced temporal breakout which was nice of.
Business lines in terms of you just to be with the.
Assume that the Orangey supply is merely initial fixed overhead on a burgeoning business. The obviously is moving towards breakeven in positive EBITDA, but but you've you've got these delays that you alluded to.
Halfway issues.
Could we reasonably expect your upstream business to be breakeven the positive by the first half of 24.
Sure Yeah yeah.
Yeah, and I mean.
Yeah, there's I mean, there's ways that you.
Yeah, there's ways that you get there which is by producing the gas and then there's economics on the gas and that's what gets you a breakeven yep.
Yes.
Alright, thank you.
By the way <unk>, operator, so I condition, Matthew Blair may be gone, but the answer was in Washington, and Q1, just a couple of million gallons and 50 per cent of his orangey.
Okay.
Thank you. Your next question comes from Chris sung with leather research.
Please go ahead.
Hey, good afternoon, Andrew and Bob hopping on for Great. Thanks for taking my question.
Hi, Chris.
I'm, sorry, I just wanted to just dig it on the previous question <unk>, you know asking in a slightly different way like how did Q1 Q2, so far compared to your internal expectations for the last quarter like with negative emergence rated with the stroke ramp in.
Natural gas prices higher volumes kind of hurts your full year EBITDA guidance. So I'm just wondering like was most of it most of the 10 million hit was it just on pricing room makes it higher than expected volume for the quarter and and how does that <unk>. The rest of you for your kind of considering that you guys are keeping it unchanged.
Yeah, the 10 million was.
It was really on the <unk> on the cost of gas. Okay. So that you take that out and then.
Then our quarter was within our plan.
You know all things considered <unk> volume in other margins and.
You know.
<unk> so.
So we were kind of we met our expectation other than.
Few dollars yeah other than that yeah $54.
California gas so.
Okay, great right. So we feel we felt like okay, well that was there, but you have a 10 million dollar hold that you've dog what does the environment look like today.
Nothing had changed I'd, probably have to say there I would say there's there's.
<unk> hard pressed to say, you're gonna make up a 10 million dollar hole.
But things have gotten in a more positive than than what we kind of laid out a couple of months ago in terms of what our <unk> our assumptions four so that's good for us I mean environments.
That's a good environment, where you know just disappointed that.
We had to absorb.
What went on which was I mean it it it frankly it was horrific the checks that I was writing for gas bills was out of it it was just.
Unbelievable and and our customers to we had a whole campaign.
To to contact our customers because we have a lot of kind of pass through.
Gas costs as part of the arrangement and.
And so we add customers that you know, we're just gonna get a bill from us that was seven times.
What they've seen in the past and you know that that is.
Right in the cases, all surrounded they're gonna be able to pay.
I mean, you know it it was devastating to a lot of industry here in California.
Restaurants, without a business I mean <unk>.
And then we've seen some of the other groups in the alternative energy their energy transition that you know I've kind of or we're fairly well you know kind of blown away big part of their quarter was also this this topic so I feel like we.
I feel like we financially.
Yet again have weathered a significant storm.
I was not that's not just a little.
Talking point and Okay would it cost US 10 million Bucks that was that's a lotta money and it was huge and you know and that's after we took prices up.
Nearly $8 a gallon compared to diesel at 599, yeah.
Yeah, no right and I I I kind of see it you know silver lining ready to <unk>.
Totally with five G sorry.
Alright, Yeah, Yeah, we we we got a silver lining you know I mean, I [laughter] speak too highly of it because we've had a fair that we've had a fair number of events.
You know that we've had the weather in the first quarter, but right now the.
Economics are are are good for us and then it looks good I mean that the 15 later the excitement route that Canada.
It looks good looking forward.
<unk> tried to squeeze one more question and I know you asked about this in the past and it's just always gets kind of check and is there any updates on the railroad marine markets with respect to commercialization or timelines to commercialization for R G and or hydrogen via Orangey.
On the marine marketing Green market well, the only update I would say is the our second shift is being cooled down it's not our ship the second patient ship is being cooled down in Brownsville.
The end of this week and will then complete a sea trial and begin to move to the port of Los Angeles. So that's nice every time those tips there'll be two in service later here in the next.
Month, or so and they used to 4 million gallons of LNG.
On a round trip so we'd like that in the third ship should be here late twenties twenty-three no real Chris No I'm a b.
<unk>, no real hydrogen or orangy going into shipping yet.
Not not as far as we we know, but we are putting LNG in a few ships and there are some other very large shipping lines that are.
<unk> talking to us and others about more shifts to be brought into the port.
Alright, no I appreciate the call and thank you for that and I'll turn it over.
Okay.
Your next question comes from Nathan <unk> <unk> <unk>.
Please go ahead.
Yeah, Hey, it's J as in gambling some talent, but all my questions have actually been answered so make sure the time <unk>.
Alright, thanks, great Jason Thank you.
Okay.
There are no further questions at this time I tried to call over to you and your mental Sir for closing remarks.
Brighter. Thank you. Thank you everyone for joining us today, and we will look forward updating you on our progress next door.
Good afternoon.
Ladies and gentlemen.
A conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
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