Q2 2024 Montauk Renewables Inc Earnings Call

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

John Ciroli: Thank you, and good afternoon, everyone. Welcome to Montauk Renewables' earnings conference call to review the second quarter 2024 financial and operating results and developments. I'm John Ciroli, Chief Legal Officer and Secretary at Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments, and Kevin Van Asland, Chief Financial Officer, to discuss our second quarter 2024 financial and operating results. At this time, I would like to direct your attention to our forward-looking disclosures.

Speaker Change: Joining me today are Shawn Mcclain, <unk>, President and Chief Executive Officer to discuss business development, and Kevin Vann Azlon, Chief Financial Officer to discuss our second quarter 2024 financial and operating results at this time I would like to direct your attention to our forward looking disclosure statement.

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

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

Our remarks today May also include non-GAAP financial measures, we present, EBITDA and adjusted EBITDA metrics, because we believe the measures to 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 is not non-GAAP.

Measures are not prepared in accordance with generally accepted accounting principles.

Additional details regarding these non-GAAP financial measures, including reconciliations to the.

The most directly comparable GAAP financial measures can be found in our slide presentation and in our second quarter 'twenty 'twenty four earnings press release and Form 10-Q issued and filed this afternoon, which are available on our website at IR bought Montauk renewables dotcom.

Speaker Change: Our remarks, we'll 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 will turn the call over to Sean.

John Ciroli: These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. 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 second quarter 2024 earnings press release in Form 10-Q issued and filed this afternoon, which are available on our website at ir.montaukrenewables.com. After our remarks, 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 will turn the call over to Sean.

Sean McClain: Thank you, John. Good day, everyone, and thank you for joining us on our call. I'll begin with updates regarding our ongoing development project. As previously announced, we commissioned our digestion capacity increase at our PECO facility during the first quarter of 2024. Through the second quarter of 2024, our PECO facility will produce approximately 39% more MMBTU over 2023 as a result of this capacity expansion. While LCFS credit pricing remains at low levels pending the ongoing rulemaking by the California Air Resource Board, we believe our facility is well positioned to benefit should future credit prices rise.

Sean McClain: Thank you John.

Sean McClain: Hi, everyone and thank you for joining our call.

Sean McClain: Begin with updates regarding our ongoing development projects.

Sean McClain: As previously announced we commissioned our digestion capacity increase at our Pico facility during the first quarter of 2024.

Speaker Change: Through the second quarter of 2020 for our Peco facility has produced approximately 39% more than the Btu over 2023 as a result of this capacity expansion.

Speaker Change: Well L CFS credit pricing remains at low levels pending the ongoing rulemaking or the California Air Resource Board. We believe our facility is well positioned to benefit should future credit prices rise.

Sean McClain: Also, as previously discussed, we continue to expect the dairy host to deliver the third and final tranche of increased feedstock during 2025. In the second quarter of 2024, we commissioned our first reactor for our Swine Waste-to-Energy Development Project in North Carolina. We expect to operate this and additional reactors in 2025 once the electric utility interconnection is complete. In the interim, this first reactor will be operated to provide for various data collection and testing activities, test and refine feedstock conveyance, product gas composition, and material composition related to the micronutrient organic fertilizer solid fractionation.

Speaker Change: Also as previously discussed we continue to expect the dairy house to deliver the third and final tranche of increased feedstock during 2025.

Speaker Change: During the second quarter of 2024, we commissioned our first reactor for our swine waste to energy development project in North Carolina.

Speaker Change: We expect to operate this and additional reactors in 2045 once the electric utility interconnection is complete and.

Speaker Change: In the interim it's first reactor will be operated to provide for various data collection and testing activities test and refine feedstock advance product gas composition and material composition related to the micro nutrient organic fertilizer solid fractionation.

Sean McClain: Also, during the second quarter of 2024, we continued the process related to both the outbound electric utility interconnection and related power purchase agreements. These processes are interrelated, and we expect to successfully complete any interconnection construction activities to support our project timeline. During the second quarter of 2024, we installed the majority of the required feedstock collection process equipment on two of the farms with which we have feedstock agreements. We continue to thoughtfully bring additional farms under agreement, targeting approximately 200,000 hog spaces to support our REC agreement with Duke.

Speaker Change: Also during the second quarter of 2024, we continue the process related to both the outbound electric utility interconnection and related power purchase agreements.

Speaker Change: These processes are interrelated and we expect to successfully complete any interconnection construction activities to support our project timeline.

Speaker Change: During the second quarter of 2024, we've installed the majority of the required feedstock collection process equipment are two of the farms with which we have feedstock agreements.

Speaker Change: We continue to thoughtfully bring additional farms under agreement targeting approximately up to 200000 hogs spaces to support our record agreement with Duke.

Sean McClain: In August 2024, we received approval from the North Carolina Utilities Commission of our amendment to the new renewable energy facility designation of our project received late in 2023 that provides for the generation of RECs. This approval is a critical path item in the timing of the utility infrastructure design and other balance of play components of our TARKEY North Carolina facility.

Speaker Change: In August 2024, we received approval from the North Carolina Utilities Commission of our amendment to the new renewable energy facility designation of our project received late in 2023 that provides for the generation of Rex.

Speaker Change: This approval is a critical path item and the timing of the utility infrastructure design and other balance of plant componentry of our Turkey, North Carolina facility.

Sean McClain: Development continues with our second APEX R&G facility, our Blue Granite R&G project, our Bowerman R&G project, and our European Energy CO2 project. We continue to manage through the required utility interconnection upgrades for the Blue Granite RNG project and do not anticipate meaningful additional capital expenditures for the remainder of 2024. As previously discussed, a catalyst for the second APEX R&G facility includes a gas rights contractual requirement triggered by increasing landfill waste intake and, in turn, gas feedstock availability that has periodically exceeded the processing capacity of our current facility. Upon commissioning of the second APEX R&G facility, we expect there to be a period of excess processing capacity that is subject to the rate at which gas feedstock availability increases from landfill activity.

Speaker Change: Development continues with our second apex R&D facility, our Blue granite R&D project, our Bauer meant R&D project and our European Energy C O two projects.

Speaker Change: We continue to manage through the required utility interconnection upgrades for the Blue granted R&D project and do not anticipate meaningful additional capital expenditures for the remainder of 2024.

Speaker Change: As previously discussed a catalyst for the second apex R&D facility include the gas rights contractual requirement trigger by increasing landfill waste and take and in turn gas feedstock availability. It has periodically exceeded the processing capacity of our current facility.

Speaker Change: Upon commissioning of the second apex R&D facility, we expect there to be a period of excess processing capacity. It is subject to the rate at which the gas feedstock availability increases from landfill activities.

Sean McClain: Our profitability is highly dependent on the market price of environmental attributes, including the market price for RINs. As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and our operating profits. We made a strategic decision to not transfer all available D3 RINs generated and available for transfer during the second quarter of 2024. As a result, we had approximately R$4.7 million in inventory from 2024 second quarter R&G production.

Speaker Change: Our profitability is highly dependent on the market price of environmental attributes, including the market price for rents.

Speaker Change: As we self market a significant portion of our rents a decision not to commit to transfer available returns during a period will impact our revenue and our operating profit.

Speaker Change: We made a strategic decision to not transfer all available <unk> rens generated and available for transfer during the second quarter of 2024.

Speaker Change: As a result, we had approximately $4 7 million in inventory from 2024 second quarter R&D production.

Sean McClain: We have since entered into commitments and have fully transferred all of these RINs during the third quarter of 2024 at an average realized price of $3.32, measurably higher than the average D3 index price for the second quarter of 2024 of $3.20. We have also since entered into commitments to transfer approximately 44.1% of our third quarter R&G production at an average realized RIN price of approximately $3.33. As part of its normal monetization activities, the company routinely queries the market for updates to potential offtake structures, where we self-monetize the majority of our attributes under EPA-registered pathway-sharing agreements.

Speaker Change: We have since entered into commitments and have fully transferred all of these rents during the third quarter of 40 to 44 at an average realized price of $3 32 sets measurably higher than the average D. Three index price for the second quarter of 2024 or $3 20.

Speaker Change: We have also entered into commitments to transfer approximately 44, 1% of our third quarter R&D production with an average realized price of approximately $3 33.

Speaker Change: As part of our normal monetization activities the company routinely queries the market for updates to potential offtake structures, where.

Speaker Change: Where are we self monetize the majority of our attributes under EPA registered halfway sharing agreements.

Sean McClain: Those agreements, upon expiration, are subject to changes in sharing percentages and other conditions that are negotiated during renewal. However, we have not yet experienced a significant increase in pathway attribute sharing arrangements. We may look to place more of our RNG volumes under fixed price contracts should contractual sharing percentages continue to increase. We are aware that the EPA expects to target March 2025 to propose renewable fuel standard obligations for 2026. The 2025 compliance year already has its renewable volume obligations set at $1.3 billion D3.

Speaker Change: Those agreements upon exploration are subject to changes in sharing percentages and other conditions that are negotiated during renewal.

Speaker Change: But we have not yet experienced a significant increase the pathway attributes sharing arrangements. We may look to place more of our R&D volumes under fixed price contracts should contractual sharing percentages continue to increase.

Speaker Change: We are aware that the EPA expects to target March 2025, the proposed renewable fuel standard obligations for 2026.

Speaker Change: The 2025 compliance you're already has its renewable volume obligations set at $1 3 billion <unk> three rents.

Sean McClain: Prior to the EPA setting volume obligations for the 2023 through 2025 compliance years, the EPA set RBO obligations annually. Given our history and industry experience, we believe that we are positioned to navigate any uncertainty with respect to RVO rulemaking. And with that, I will turn the call over to Kevin.

Speaker Change: Prior to the EPA setting volume obligations for the 2023 through 2025 compliance years, the EPA set RVO obligations annually give.

Speaker Change: Given our history and industry experience, we believe that we are positioned to navigate any uncertainty with RVO rulemaking.

Speaker Change: And with that I will turn the call over to Kevin.

Kevin Van Asland: Thank you, Sean. I will be discussing our second quarter 2024 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. As Sean just noted, subsequent to quarter end, we sold the 4.7 million RINs which were generated but unsold as of June 30th, 2020. The actual realized price for those RINs was $3.32, which compared to our D3 average realized price for the second quarter of 2024 of $3.12. The average index price of D3 RINs in the third quarter of 2024 is approximately $3.31.

Kevin Asdalan: Thank you Sean I'll be discussing our second quarter 2024 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.

Sean McClain: Sean just noted subsequent to quarter end, we have sold $4 7 million Rins, which are generated by unsold as of June 32020 for.

Speaker Change: The actual realized price for those rents was $3 32, which compares to our D. Three average realized price for the second quarter of 2024 of $3 12.

Speaker Change: The average index price of <unk> ramp in the third quarter of 2024 is approximately $3 31.

Speaker Change: We have approximately 55, 9% with the Rins, we expect to generate from third quarter 2024, R&D production available for commitment.

Kevin Van Asland: We have approximately 55.9% of the RINs we expect to generate from third-quarter 2024 R&G production available for commitment. Total revenues in the second quarter of 2024 were $43.3 million, a decrease of $10 million or 18.6% compared to $53.3 million in the second quarter of 2023. The decrease is primarily related to a strategic decision in the second quarter of 2024 to not self-market a significant amount of RINs from 2024 R&G production due to the volatility in the second quarter of 2024 D3 RIN index. The decrease is partially offset by an increase in realized RIN pricing of approximately 44.4% during the second quarter of 2024 compared to the second quarter of 2023. Total general and administrative expenses were $8.7 million Last compared to the second quarter of 2023.

Speaker Change: Total revenues in the second quarter of 2024 were $43 3 million, a decrease of $10 million or 18, 6% compared to $53 3 million in the second quarter of 2023.

Speaker Change: The decrease is primarily related to a strategic decision in the second quarter of 2024 to not self market a significant amount of brands from 'twenty to 'twenty four R&D production due to the volatility in the second quarter of 2024 D. Three rent index price.

Speaker Change: The decrease is partially offset by an increase in realized RIN pricing of approximately 44, 4% during the second quarter of 2024 compared to the second quarter of 2023.

Speaker Change: Total general and administrative expenses were $8 7 million for the second quarter of 2024 flat compared to the second quarter of 2023.

Kevin Van Asland: Our professional fees decreased approximately $0.3 million, or 26.9%, in the second quarter of 2024 compared to the second quarter of 2023. Employee-related costs, including stock-based compensation, were $5.4 million in the second quarter of 2024, an increase of $0.2 million, or 3.5%, compared to $5.2 million in the second quarter of 2023. The increase is primarily related to forfeited stock awards in the second quarter of 2022. Turning to our segment operating metrics, I'll begin by reviewing our Renewable Natural Gas segment.

Speaker Change: Our professional fees decreased approximately <unk> 3 million or 26, 9% in the second quarter of 2024 compared to the second quarter of 2023.

Speaker Change: <unk> related costs, including stock based compensation were $5 4 million in the second quarter of 2024, an increase of <unk> 2 million or three 5% compared to $5 2 million in the second quarter of 2023.

Speaker Change: The increase was primarily related to the forfeited stock awards in the second quarter of 2023.

Speaker Change: Turning to our segment operating metrics I'll begin by reviewing our renewable natural gas segment.

Kevin Van Asland: We produced 1.4 million MMBTU of R&G during the second quarter of 2024, flat compared to 1.4 million during the second quarter of 2023. Our Texas facilities, McCarty, Atascocita, and Galveston, collectively produced 47,000 fewer MMBTU in the second quarter of 2024 compared to the second quarter of 2023, as a result of severe weather causing widespread multi-day power outages across the Houston, Our PECA facility produced 13,000 MMETU more in the second quarter of 2024 as compared to the second quarter of 2023 due to the commissioning of our digestion expansion project.

Speaker Change: We produced $1 4 million Btu of R&D during the second quarter of 2024 flat compared to $1 4 million during the second quarter of 2023.

Speaker Change: Our Texas facilities Mccarty attached to see that in Galveston collectively produced 47000 fewer <unk> in the second quarter of 2024 compared to the second quarter of 2023.

Speaker Change: Severe weather, causing widespread multi day power outages across the Houston, Texas region.

Speaker Change: Our Pekin facility produced 13000 Btu more in the second quarter of 2024 as compared to the second quarter of 2023.

Speaker Change: The commissioning of our digestion expansion project.

Kevin Van Asland: Revenues from the renewable natural gas segment during the second quarter of 2024 were $38.8 million, a decrease of $9.8 million or 20.1% compared to $48.6 million during the second quarter of 2023. Average commodity pricing for natural gas for the second quarter of 2024 was 10% lower than the prior year period.

Speaker Change: Revenues from the renewable natural gas segment during the second quarter of 2024, or $38 8 million, a decrease of $9 8 million or 21% compared to $48 6 million during the second quarter of 2023.

Speaker Change: Average commodity pricing for natural gas for the second quarter of 2024 was 10% lower than the prior year period.

Kevin Van Asland: During the second quarter of 2024, we self-marketed 10 million RINs, representing a 7.4 million decrease or 42.7% compared to 17.4 million RINs self-marketed during the second quarter of 2023. Average pricing realized on RIN sales during the second quarter of 2024 was $3.12 as compared to $2.16 during the second quarter of 2023, an increase of 44.4%. This compares to the average D3 RIN index price for the second quarter of 2024 of $3.20, which is approximately 47.9% higher than the average D3 RIN index price for the second quarter of 2023 of $2.16.

Speaker Change: The second quarter of 2024, we self marketed 10 million rins, representing a $7 4 million decrease or 42, 7% compared to $17 $4 million range South marketed during the second quarter of 2023.

Speaker Change: Average average pricing realized when RIN sales during the second quarter of 2024 was $3 12 as compared to $2 16. During the second quarter of 2023, an increase of 44, 4%. This compares to the average D. Three rent index price for the second quarter of 2024 of $3 20 being approximately 47.

Speaker Change: 9% higher than the average deep III rent index price for the second quarter of 2023 or $2 16.

Kevin Van Asland: On June 30th, 2024, we had approximately 0.4 million M&B available for in-generation, and we had approximately 4.7 million Rends generated and unsold. We had approximately 0.4 million M&B available for in-generation, and we had approximately 3.0 million Rends generated and unsold on June 30th, 2023. Our operating and maintenance expenses for our R&G facilities during the second quarter of 2024 were $13.9 million, an increase of $2.2 million, or 18.9%, compared to $11.7 million during the first quarter of 2023.

Speaker Change: At June 32024, we had approximately 0.4 million Btu is available for RIN generation and had approximately $4 7 million rins generated an unsold.

Speaker Change: We had approximately <unk> 4 million maybe to use available for RIN generation and had approximately three points year of $1 million Rens generated an unsold at June 32023.

Speaker Change: Our operating and maintenance expenses for our R&D facilities during the second quarter of 2024.

Speaker Change: $18 9 million, an increase of $2 2 million or 18, 9% compared to $11 7 million during the first quarter of 2023.

Kevin Van Asland: Our R&G facilities reported increased total segment utility expenses of approximately $0.3 million during the second quarter of 2024 as compared to the second quarter of 2023. Our McCarty facility operating and maintenance expenses increased approximately $0.5 million, primarily related to the timing of gas compression system maintenance expenses. Our Rumpke facility operating and maintenance expenses increased approximately $0.5 million, primarily related to gas processing equipment maintenance, media change out, and disposal costs. Our APEX facility operating and maintenance expenses increased approximately $0.5 million, primarily again related to the timing of preventative maintenance related to gas processing. Our coastal facility operating maintenance expenses increased by approximately $0.3 million, related primarily to wellfield operational enhancements.

Speaker Change: Our R&D facilities reported increased total segment utility expenses of approximately <unk> $3 million during the second quarter of 2024 as compared to the second quarter of 2023.

Speaker Change: Our mccarty operate our mccarty facility operating and maintenance expenses increased approximately <unk> 5 million primarily related to the timing of gas compression system maintenance expenses, our rocky facility operating and maintenance expenses increased approximately <unk> 5 million primarily related to gas processing equipment maintenance media.

Speaker Change: <unk> out and disposal costs.

Speaker Change: Our apex facility operating and maintenance expenses increased approximately <unk> 5 million, primarily again related to the timing of preventative maintenance related to gas processing equipment.

Speaker Change: Our coastal facility operating maintenance expenses increased approximately <unk> 3 million related primarily to well field operational enhancements.

Kevin Van Asland: We produced approximately 45,000 megawatt-hours of renewable electricity during the second quarter of 2024, a decrease of approximately 4,000 megawatt-hours, or 8.2%, compared to 49,000 megawatt-hours during the second quarter of 2023. Our security facility produced approximately 3,000 megawatt hours less in the second quarter of 2024 compared to the second quarter of 2023 as a result of us ceasing operations in connection with the first quarter of 2024 sale of the gas rights at this location back to the landfill.

Speaker Change: We produced approximately 45000 megawatt hours in renewable electricity during the second quarter of 2024, a decrease of approximately 4000 megawatt hours or eight 2% compared to 49000 megawatt hours during the second quarter of 2023.

Speaker Change: Our security facility produced approximately 3000 megawatt hours less in the second quarter of 2024 compared to the second quarter of 2023 as a result of a ceasing operations in connection with the first quarter of 2020 for sale of the gas rights that dislocation and back to the landfill host.

Kevin Van Asland: Revenues from renewable electricity facilities during the second quarter of 2024 were $4.5 million, a decrease of $0.1 million or 3.2% compared to $4.6 million during the second quarter of 2023. The decrease is primarily driven by a decrease in our security facility production.

Speaker Change: Revenues from renewable electricity facilities during the second quarter of 2024 were $4 5 million a decrease of <unk> 1 million or three 2% compared to $4 6 million during the second quarter of 2023.

Speaker Change: The decrease was primarily driven by the decrease in our security facility production volumes.

Kevin Van Asland: Our renewable electricity generation operating and maintenance expenses during the second quarter of 2024 were $4.7 million, an increase of $1.3 million or 37.3% compared to $3.4 million during the second quarter of 2023. Our empowerment facility operating and maintenance expenses increased approximately $0.9 million, which was primarily driven by the timing of annual original equipment manufacturer preventative maintenance expenses, which are non-linear period over period. Our Tulsa facility operating and maintenance expenses increased approximately $0.4 million, which was driven by well-fueled collection and handling.

Speaker Change: Our renewable electricity generation operating and maintenance expenses during the second quarter of 2024 were $4 7 million, an increase of $1 3 million or <unk> 37, 3% compared to $3 4 million during the second quarter of 2023.

Speaker Change: Our apartment facility operating and maintenance expenses increased approximately <unk> 9 million, which was primarily driven by the timing of annual original equipment manufacturer preventative maintenance expenses, which are non linear period over period.

Speaker Change: Our Tulsa facility operating and maintenance expenses increased approximately <unk> 4 million, which was driven by well feel collection enhancements.

Kevin Van Asland: During the second quarter of 2024, we recorded impairments of 0.2 million, a decrease of 0.1 million or 37.6% compared to 0.3 million in the second quarter of 2023. The specifically identified impairment losses in the second quarter of 2024 primarily relate to various R&G equipment that was deemed obsolete or no longer suitable for the current operation. The second quarter of 2023 impairment relates to specifically identified machinery and feedstock processing equipment that is no longer in operational use.

Speaker Change: During the second quarter of 2024, we recorded impairments of <unk> 2 million, a decrease of <unk> 1 million or <unk> 37, 6% compared to <unk> 3 million in the second quarter of 2023.

Speaker Change: Specifically identified impairment losses in the second quarter of 2024, primarily relate to various R&D equipment that was deemed obsolete or no longer suitable for current operations.

Speaker Change: Second quarter of 2023 impairment relates to specifically identify machinery and feedstock processing equipment that were no longer an operational use.

Kevin Van Asland: Operating income for the second quarter of 2024 was $0.9 million, a decrease of $12.7 million, or 93.6%, compared to $13.6 million for the second quarter of 2023. Our operating income was impacted by our strategic decision to not sell 4.7 million RINs generated but unsold during the second quarter when the average D3 RIN index price was approximately $3.27. R&G operating income for the second quarter of 2024 was $11.7 million, a decrease of $11.3 million, or 49.1%, compared to $23 million for the second quarter of 2023.

Speaker Change: Operating income for the second quarter of 2024 was <unk> 9 million a decrease of $12 7 million or <unk> 93, 6% compared to $13 6 million for the second quarter of 2023.

Speaker Change: Our operating income was impacted by our strategic decision to not sell $4 7 million rins generated but unsold during the second quarter. When the average <unk> index price was approximately $3 20.

Speaker Change: R&D operating income for the second quarter of 2024 was $11 7 million a decrease of $11 3 million or 49, 1% compared to $23 million for the second quarter of 2023.

Kevin Van Asland: Renewable electricity generation operating losses for the second quarter of 2024 were $2 million, an increase of $1.4 million compared to $0.6 million for the second quarter of 2023. Turning to the balance sheet, at June 30th, 2024, $60 million was outstanding under our term loan. As of June 30th, 2024, we had capacity available for borrowing under our revolving credit facility, remaining at $117.5 million. During the second quarter of 2024, we generated $14.5 million of cash from operating activities, an increase of 138.4% compared to $6.1 million for the second quarter of 2023.

Speaker Change: Renewable electricity generation operating loss for the second quarter of 2024 with $2 million, an increase of $1 4 million compared to <unk> 6 million for the second quarter of 2023.

Speaker Change: Turning to the balance sheet at June 32020 for $60 million outstanding under our term loan as of June 32024, we had capacity available for borrowing under our revolving credit facility remaining at $117 5 million.

Speaker Change: During the second quarter of 2024, we generated $14 $5 million of cash from operating activities, an increase of 138, 4% compared to $6 1 million for the second quarter of 2023.

Kevin Van Asland: Based on our estimate of the present value of our PICO earn-out obligation, we recorded an increase of $0.4 million to the liability at June 30th, 2024. This increase was recorded through our R&G Segment Royalty Account. For the six months of 2024, we incurred approximately $40,000,000,000 in capital expenditures, of which $19 million related to our Montauk Ag Renewables development in North Carolina, $6.9 million to the second Apex facility, $6.7 million to our Bowerman R&G project, $1.8 million to the Blue Granite R&G project, and $1.3 million for our Pico Digestion Capacity Increase.

Speaker Change: Based on our estimate of the present value of our <unk> earn out obligation. We recorded an increase of <unk> 4 million for the liability at June 32024.

Speaker Change: This increase was recorded through our R&D segment royalty expense.

Speaker Change: For the six months of 2024, we incurred approximately $40 8 million in capital expenditures.

Speaker Change: Of which $19 million related to our Montauk agro knowable as development in North Carolina, $6 9 million for the second apex facility.

Speaker Change: $6 7 million to our Bauer I mean, R&D project $1 8 million to the Blue granite R&D project and $1 3 million for our PTO digestion capacity increase.

Kevin Van Asland: As of June 30, 2024, we had cash and cash equivalents of approximately $42.3 million and accounts and other receivables of approximately $22.0 million. Accounts receivable primarily relate to second quarter RIN sales, comprising the majority of this balance, of which the majority was collected after June 30th, 2024. Adjusted EBITDA for the second quarter of 2024 was $7 million, a decrease of $12.2 million compared to $19.2 million for the second quarter of 2023.

Speaker Change: As of June 32024, we had approximately we had cash and cash equivalent of approximately $42 3 million and accounts and other receivables of approximately 22.0 million.

Speaker Change: Receivable, primarily relate to second quarter RIN sales comprising the majority of this balance of which the majority was collected after June 30 of 2024.

Speaker Change: Adjusted EBITDA for the second quarter of 2024 was $7 million, a decrease of $12 2 million compared to $19 2 million for the second quarter of 2023.

Kevin Van Asland: EBITDA for the second quarter of 2024 was $6.7 million, a decrease of $12.2 million, or 64.3%, compared to EBITDA of $18.9 million for the second quarter of 2023. The net loss for the second quarter of 2024 was $0.7 million compared to a net income of $1 million for the second quarter of 2023. Our income tax expense decreased approximately $11.6 million for the second quarter of 2024 as compared to the second quarter of 2023.

Speaker Change: EBITDA for the second quarter of 2024 was $6 7 million a decrease of $12 2 million or 64, 3% compared to EBITDA of $18 9 million for the second quarter of 2023.

Speaker Change: Net loss in the second quarter of 2024 was <unk> 7 million compared to a net income of $1 million in the second quarter of 2023.

Speaker Change: Our income tax expense decreased approximately 11, 6% decreased approximately $11 6 million.

Speaker Change: For the second quarter of 2024 as compared to the second quarter of 2023.

Kevin Van Asland: The decrease is primarily related to interim tax provision calculations using our estimated annual effective tax rate against a pre-tax loss for the second quarter of 2024 as compared to the 2023 estimated annual effective tax rate applied against pre-tax income for the second quarter of 2023. And I'll turn the call back over to Sean.

Speaker Change: The decrease is primarily related to interim tax provision calculations using our estimated annual effective tax rate against a pre tax loss for the second quarter of 2024 as compared to the 2023 estimated annual effective tax rate applied against pre tax income for the second quarter of 2023.

Speaker Change: And now I'll turn the call back over to Sean.

Sean McClain: Thank you Kevin.

Sean McClain: Thank you very much. For 2024, we continue to expect our R&G production volumes to range between 5.8 and 6.1 million MMETU, with corresponding R&G revenues to range between $195 and $215 million. This range, though unchanged, accounts for impacts resulting from the hurricane that impacted the Houston, Texas, region with widespread utility outages in July 2024. We expect our 2024 renewable electricity production volumes to range between 190 and 200,000 megawatt hours, with corresponding renewable electricity revenues to range between 18 and 19 million, also unchanged from our previous earnings call. And with that, we will pause for any questions.

Sean McClain: In closing.

Sean McClain: And though we don't provide guidance as to our internal expectations on the market price of environmental attributes, including the market price of <unk> rents. We are reaffirming our full year 2024 outlook provided in May 2024.

Sean McClain: For 2024, we continue to expect our RMG production volumes to range between five eight and $6 1 million Btu.

Speaker Change: With a corresponding R&D revenues to range between 195 and $215 million.

Speaker Change: This range, though unchanged accounts.

Speaker Change: Accounts for impacts, resulting from the hurricane which impacted the Houston, Texas region with widespread utility outages in July 2024.

Speaker Change: We expect our 2020 for renewable electricity production volumes to range between 190, and 200000 megawatt hours with corresponding renewable electricity revenues to range between 18 and $19 million also unchanged from our previous earnings call.

Speaker Change: And with that we will pause for any questions.

Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question and rejoin the queue for a follow up.

Operator: Please limit yourself to one question and rejoin the queue for a follow-up. Our first question will be from Matthew Blair of TPH. Matthew, your line is open. Thank you and good afternoon.

Speaker Change: Our first question will be coming from Matthew Blair of T. P. H Matthew Your line is open.

Sean McClain: Thank you and good afternoon. You kept your full year production guidance for R&G the same despite some of the challenges in the second quarter with the power outages in Texas. Could you talk about how you were able to do that and what are the bright spots in terms of areas that might be producing a little bit more than you expected? And then could I also ask, for the third quarter, you mentioned that you had already monetized $4.7 million in rent and inventory?

Matthew Blair: Thank you and good afternoon.

Matthew Blair: You kept your full year production guidance for R&D the same.

Speaker Change: Despite some of the challenges in the second quarter with the.

Speaker Change: With the power outages in Texas could you talk about.

Speaker Change: How are you able to do that and what are the bright spots.

Speaker Change: In terms of areas that might be producing a little bit more than you expected.

Speaker Change: And then can I also ask for the third quarter, you mentioned that you're already monetize the $4 7 million.

Speaker Change: Some inventory.

Sean McClain: But do you expect to monetize all of the RINs that you produce in the third quarter? Or is there a chance that you might hold back some of the Q3 production from sale as well? Thank you.

Speaker Change: But.

Speaker Change: Do you expect to monetize all of the Rins that you produce in the third quarter or is there a chance that you might hold back some of the Q3 production from sale as well. Thank you.

Sean McClain: Thanks, Matthew. Yeah, we are anticipating this question in regards to our holding guidance, though we've had two consecutive quarters with weather impacts predominantly impacting our Houston region, which generates give or take about 50%. So what we do, you know, we set our budgetary expectations with where we think the year is going to go in regards to production impacts. We expect, you know, well-field investment to drive production increases. Though we have had those two quarters of weather impacts, you know, we go through various sensitivities and historical lookbacks in regards to what landfill hosts tell us at the beginning of a year what their landfill expansion plans are going to be.

Speaker Change: Thanks, Matthew Yeah. We are anticipating this question in regards to our holding guidance, though we've had two consecutive quarters with weather impacts predominantly impacting our Houston region, which generate give or take about 50%.

Speaker Change: So what we do we set our budgetary expectations with where we think the year is going to go in regards to production impacts, we expect well field investment to drive production increases, though we have had those two quarters of weather impacts.

Speaker Change: We will go through various sensitivities and historical look backs in regards to at the beginning of the year what landfill hosts tell us they are there they are.

Speaker Change: Landfill expansion plans are going to be and then we tried to go through various.

Sean McClain: And then we try to go through various sort of discounting, if you will, or delay impacts for what that expansion may look like at various sites. And then, in regards to why we believe the second half of the year is still going to develop in appreciable volumes holding that guidance, we'll take a look at our budgeted expected capital expenditures into our wellfield as compared to what we've actually incurred. We still have enough runway left in the rest of this year that we believe we'll get some meaningful uplift from the capital that we anticipate investing into our well-field at certain of our sites, as well as some of the ongoing and known optimization enhancements that we're doing either through well-field collection or within our plans that will not necessarily be solely related to our landfill host expense expansion activities, in regards to the guidance ranges.

Speaker Change: Sort of discounting if you will or delay impacts for what that expansion may look like at various sites.

Speaker Change: And then in regards to why we believe the second half of the year is still going to develop in.

Speaker Change: Appreciable volumes holding that guidance is it will take a look at our budgeted expected budgeted expected capital expenditures into our well field as compared to what we've actually incurred we still have enough runway left in the rest of this year and we believe we will get some meaningful uplift from the capital.

Speaker Change: We anticipate investing into our wealth at certain of our sites as well as some of the ongoing.

Speaker Change: Known optimization enhancements that we're doing either through well feel collection or within our plants that will not necessarily be solely related when our landfill host expense expansion activities in regards to the guidance ranges, while we know that our Houston region has been impacted by weather events previous two.

Sean McClain: So yeah, while we know that our Houston region has been impacted by weather events in the previous two quarters, we believe that our existing guidance from an R&G production standpoint takes into account those impacts in the second and third quarters.

Speaker Change: Quarters, we believe that our existing guidance from an R&D production standpoint, it takes into account those impacts in the second and third quarter.

Kevin Van Asland: I can take the piece regarding the timing of RIN monetization. How I would like to answer it is the decision as to whether or not we'll monetize is a function of our prioritization to have those attributes to be placed directly into the hands of the obligated parties, rather than tying it to ebbs and flows and pricing, although it is a consideration as we look at what is readily available in the marketplace, news from the EPA, recent pricing trends, but the leading driver is the purchasing cadence of the obligated parties.

Speaker Change: I can take the piece regarding the timing brand monetization.

Speaker Change: How I would like to answer it is the decision as to whether or not we'll monetize is a function of our prioritization to have those attributes to be placed directly into the hands of the obligated parties.

Speaker Change: Rather than tying it to ebbs and flows and pricing. Although it is a consideration as we look at what is readily available in the marketplace news from the EPA.

Operator: Good afternoon, everyone, and thank you for participating in today's conference call.

John Ciroli: I would like to turn the call over to Mr. John Ciroli as he provides some important cautions regarding forward-looking statements in non-gap financial measures contained in the earnings material or made on this call. John, please go ahead. Thank you. Good afternoon, everyone.

Speaker Change: Recent pricing trends, but the leading driver.

Speaker Change: Is the purchasing cadence of the obligated parties.

Kevin Van Asland: The way in which we manage our cash flows and our available cash and our borrowing facilities affords us the opportunity to take those attributes and place them where they belong, which is in the hands of the obligated parties, not to intermediaries that may hold those in the hopes that they're able to extract a margin as they ultimately place those into the hands of the obligated parties. That will drive any decisions that we have as to what we hold coming in and out of any particular quarter and the volumes at which we would delay, and then there is one more.

Kevin Van Asland: The way in which we manage our cash flows and our available cash and our borrowing facilities affords us the opportunity to take those attributes and place them, where they belong which is in the hands of the obligated parties not to intermediaries that may hold those in the hopes that they are able to extract a margin.

John Ciroli: Welcome to Montauk Renewables' earnings conference call to review the second quarter of 2024 financial and operating results and development. I'm John Ciroli, chief legal officer and secretary at Montauk.

John Ciroli: Joining me today are Sean McClain, Montauk's president and chief executive officer to discuss business developments and Kevin Van Asdalan, chief financial officer to discuss our second quarter 2024 financial and operating results. This time, I would like to direct your attention to our forward-looking disclosure statement. During this call, certain comments we make constitute forward-looking statements and as such involve a number of assumptions, risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed in or implied by such forward-looking statements.

Speaker Change: As they ultimately place those into the hands of the obligated parties.

Kevin Van Asland: That will drive any decisions that we have as to what we hold coming in and out of any particular quarter.

Speaker Change: <unk>.

Speaker Change: The volumes at which we would we would delay.

Sean McClain: And then one other note, Matthew, is that obviously, we've had conversations, and we take into consideration the feedback that we're getting. And knowing that our 10Q was just hit by Edgar right before the call, we have included a new table that is trying to help people like you to see the variability or volatility in regards to RINs that we may or may not have generated but are unsold at any given course.

Matthew Blair: And then one other note Matthew is that obviously, we've had conversations and we take into consideration the feedback that we're getting.

Speaker Change: And knowing that our 10-Q was just.

Sean McClain: Edgar right before the call. We have included a new table that is trying to help people like you to see the variability or volatility in regards to rent that we may or may not have and have generated but unsold at any given quarter.

John Ciroli: These risk factors and uncertainties are detailed in Montauk Renewables' SEC filings. Our remarks today may also include non-gap financial measures. 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. These non-gap financial measures are not prepared in accordance with generally accepted accounting principles.

Speaker Change: Okay.

Operator: And our next question will come from Saumya Jain of UBS. Your line is open....

Speaker Change: Yes.

Sam <unk>: And our next question will come from Sam <unk>.

Sam: Of UBS your line is now.

Sean McClain: Hey, how are you guys looking at any potential changes in LCFS or rent prices or, you know, club? Just given the upcoming elections, how are you factoring in those potential opportunities for growth?

Saumya Jain: Hey, how are you guys looking at construction in Georgia.

John Ciroli: Additional details regarding these non-gap financial measures, including reconciliation through the most directly comparable gap financial measures can be found in our slide presentation and in our second quarter, 2024 earnings press release, informed TENQ issued in file this afternoon, which are available on our website at ir.montauk Renewables.com. After our remarks, we will open the call to questions. We ask that you please keep the one question to accommodate as many questions as possible.

Sean McClain: Correct.

Speaker Change: Just given that last one.

Speaker Change: Potentially we would ensure outlets.

Sean McClain: Um, I would, I guess I would 1st respond that we generally don't provide guidance in regards to our internal expectations for the price of environmental attributes. We are all very aware that carbon is going through various rulemaking processes. I believe there's a, the next meeting for Carb is in November. I want to say where we expect some voting on rulemaking to impact. I believe 2025 and the overall programs, emission reduction targets, we're bullish that those rules, that that rulemaking will be beneficial and have an appreciable increase in LCFS pricing.

Speaker Change: I would I guess I would first respond that we generally don't provide guidance in regards to our internal expectations for the price of environmental attributes. We are all very aware that carb is going through various rulemaking I believe.

Sean McClain: The next meeting for Carb is in November I want to say, where we expect some voting on rulemaking.

John Ciroli: And with that, I will turn the call over to Sean. Thank you, Joan.

Sean McClain: Good day, everyone, and thank you for joining our call. I'll begin with updates regarding our ongoing development projects. As previously announced, we commissioned our digestion capacity increase in our pico facility during the first quarter of 2024. Through the second quarter of 2024, our pico facility has produced approximately 39% more MMBTU over 2023 as a result of this capacity expansion. While LCFS credit pricing remains at low levels, pending the ongoing rulemaking by the California Air Resource Board, we believe our facility is well positioned to benefit should future credit prices rise.

Speaker Change: <unk> impact I believe 2025, and the overall programs emission reduction targets.

Sean McClain: We're bullish that does rule at that rulemaking will be beneficial and have a appreciable increase in <unk> pricing.

Sean McClain: But as with other regulatory outcomes, the devil's in the details, and we believe that when LCFS credit pricing increases, certain of our sites, notably PICO, will be primed to benefit from an eventual uplift in LCFS credit pricing.

Speaker Change: But as with other regulatory.

Sean McClain: Outcomes the Devil's in the details and we believe that when that Lcs, that's credit pricing increases certain of our sites, notably Pico that will be primed to benefit from an eventual uplift in our CFS credit pricing.

Sean McClain: Yeah.

Sean McClain: Also as previously discussed, we continue to expect the dairy hose to deliver the third and final tranche of increased speed stock during 2025. During the second quarter of 2024, we commissioned our first reactor for our swine waste to energy development project in North Carolina. We expect to operate this in additional reactors in 2025 once the electric utility interconnection is complete. In the interim, this first reactor will be operated to provide for various data collection and testing activities.

Operator: And our next question will be coming from Paul Cheng, of Scotiabank. Your line is open. Hi.

Sean McClain: And our next question will be coming from Paul Cheng of.

Speaker Change: Scotiabank Your line is open.

Kevin Van Asland: Hi. Good afternoon. Hey, Sean, can you tell us what the second quarter weather impact on production was and also that in your full-year guidance or in PI's third quarter, have you built in any expectation for the hurricane season? Thank you.

Operator: Alright.

Kevin Van Asland: Good afternoon, Sean can you tell us.

Speaker Change: What is the second quarter.

Speaker Change: The impact on production and also that in your full year guidance in Pi.

Kevin Van Asland: Quarter.

Kevin Van Asland: Have you built in any expectation for the hurricane season. Thank you.

Kevin Van Asland: Thanks, Paul. I know that you asked Sean, but I'll answer that very quickly.

Speaker Change: Yes, Thanks, Paul I know that you asked Sean but I'll answer that very quickly we estimate that the approximate impact across the Houston facilities in the second quarter was around 47000.

Sean McClain: Test and refine feed stock conveyance, product gas composition, and material composition related to the micronutrient organic fertilizers solid Also during the second quarter of 2024, we continue the process related to both the outbound electric utility interconnection and related power purchase agreements. These processes are interrelated and we expect to successfully complete any interconnection construction activities to support our project timeline. During the second quarter of 2024, we have installed the majority of the required feedstock collection process equipment on two of the farms with which we have feedstock agreements.

Speaker Change: The direct impact in the second quarter.

Kevin Van Asland: We estimate that the approximate impact across the Houston facilities in the second quarter was around 47,000, the direct impact in the second quarter. And in the third quarter, I would say that we're probably seeing a similar expectation of struggles on production out of Houston. I want to say that, generally, in the second quarter, those power outages lasted approximately five to eight days. And then I believe that that sort of approximation of widespread power outages from the hurricane in July was, again, about five or eight days or so, depending upon the region of Houston. Yeah, because I mean...

Speaker Change: In the third quarter I would say that we're probably seeing a similar.

Kevin Van Asland: Spectation of struggle was on production out of Houston I wanted to say that generally in the second quarter. There was power outages were approximately five to eight days and then I believe that that sort of approximation of widespread power outages from the hurricane in July was again about five or eight days or so depending.

Kevin Van Asland: Upon the region of Houston.

Kevin Van Asland: Yeah, because the National Weather Center is predicting this is going to be one of the, perhaps, the most heavy hurricane seasons, so I'm just curious whether you guys built in some additional downtime in your forecast, and also, when you're talking about your current full year, what is the biggest risk for you not to hit that target?

Speaker Change: Yes, because I mean that.

Sean McClain: We continue to thoughtfully bring additional farms under agreement targeting approximately up to 200,000 hog spaces to support our record agreement with Duke. In August 2024, we received approval from the North Carolina Utilities Commission of our amendment to the new renewable energy facility designation of our project received late in 2023 that provides for the generation of wrecks. This approval is a critical path item in the timing of the utility infrastructure design and other bounce-of-plane componentry of our Turkey North Carolina facility.

Kevin Van Asland: National Weather Centre is predicting this is going to be.

Speaker Change: One of the area.

Kevin Van Asland: Perhaps the most happy Hurricane season. So I was just curious whether you guys built in some additional downtime in your forecast.

Speaker Change: And also with that when you're talking about.

Speaker Change: Our current full year. So what is the biggest risk for you not to hit that pocket.

Kevin Van Asland: The process by which we would incorporate future weather impacts is at least initially rooted in our historical outages, our unplanned outages associated with utility outages, or the direct impact from weather events, indirect or direct. That budgetary process has a natural component that you're taking the total capacity that is available for production, and you are taking into consideration the sort of the average that you're seeing or the trend, rather, that you're seeing in those weather phenomena.

Speaker Change: The process by which we would incorporate future weather impacts is at least initially rooted in our historical.

Sean McClain: Development continues with our second APEX RNG facility, our Blue Granite RNG project, our Mauerman RNG project, and our European Energy CO2 projects. We continue to manage through the required utility interconnection upgrades for the Blue Granite RNG project and do not anticipate meaningful additional capital expenditures for the remainder of 2024. As previously discussed, a catalyst for the second APEX RNG facility includes a gas rights contractual requirement trigger by increasing landfill waste intake and in turn gas feedstock availability that has periodically exceeded the processing capacity of our current facility.

Kevin Van Asland: Outages are unplanned outages associated with utility outages or direct impact from weather events indirect or direct.

Kevin Van Asland: That budgetary process has a natural component that youre, taking the total capacity that is available for production and you are taking into consideration the.

Kevin Van Asland: Sort of the average that youre seeing or the trend rather that youre seeing in those weather phenomenon now although there may be speculations that suggests that this will be the most active hurricane season. There has been an increasing trend that you see in those weather phenomenon and so the <unk>.

Kevin Van Asland: Now although there may be speculations that suggest that this will be the most active hurricane season, there has been an increasing trend that you see in those weather phenomenon and so the projections that we put in place, albeit the optimistic side where you are placing investments as Kevin mentioned into the well field, the timing of landfill operations that you'll see the positive lift that in this case has allowed for us to maintain with confidence our four-year guidance, you do see that trend that will increase the impact of the weather events that we put into our projections for 2024.

Sean McClain: Upon commissioning of the second APEX RNG facility, we expect it to be a period of excess processing capacity that is subject to the rate at which the gas feedstock availability increases from landfill activities. Our profitability is highly dependent on the market price of environmental attributes, including the market price for Rinse. As we self-market a significant portion of our Rinse, a decision not to commit to transfer available Rinse during a period will impact our revenue and our operating profit.

Kevin Van Asland: <unk> that we put in place, albeit the the optimistic side, where you are placing investments, it's Kevin mentioned into the well field. The timing of landfill operations that you will see the positive lift to that in this case is allowed for us to maintain with confidence our full year guidance.

Kevin Van Asland: You do see that trend that will increase the impact of the weather events that we put into our projections for 2024.

Sean McClain: We made a strategic decision to not transfer all available D3 Rinse generated and available for transfer during the second quarter of 2024. As a result, we had approximately 4.7 million Rinse in inventory from 2024 second quarter RNG production. We have since entered into commitments and have fully transferred all of these Rinse during the third quarter of 2024 at an average realized price of $3.32. Measureably higher than the average D3 index price for the second quarter of 2024 of $3.20.

Operator: And our next question will be coming from William Blair of TPH. Your line is open, William.

Kevin Van Asland: And our next question will be coming from William Blair of Tpa <unk>. Your line is open William.

Kevin Van Asland: Hey, it's Matthew again. Thanks for taking the follow-up. Just looking through the queue, it looks like your 2024 CapEx range is down to $84 to $106 million from the $149 to $167 previously. But looking at the table of projects, the start dates for your four major growth projects are all the same, all unchanged. So could you talk about what's changing on the CapEx side? Are you pushing anything out? Or why is this year's CapEx number coming down? Thanks. Yeah, Matthew.

Operator: It's Matthew again, thanks for taking the follow up.

Kevin Van Asland: Just looking through the Q it looks like your 2020 for Capex range is down to <unk> $84 million to $106 million from the $1 49 to 167 previously, but but looking at the table of projects.

Speaker Change: The start dates for your four major growth projects are all all the same all unchanged. So could you talk about what's what.

Sean McClain: We have also since entered into commitments to transfer approximately 44.1% of our third quarter RNG production with an average realized Rinse price of approximately $3.33. As part of our normal monetization activities, the company routinely queries the market for updates to potential off-take strikes. Where we self-monetized the majority of our attributes under EPA registered halfway sharing agreements. Those agreements upon expiration are subject to changes in sharing percentages and other conditions that are negotiated during renewal.

Speaker Change: Changing on the Capex side are you pushing anything out or why is this year's capex number coming down yes.

Kevin Van Asland: Yeah, Matthew, that's specifically in regards to the Bowerman RNG project and primarily related to one significant component associated with that. It's solely a, we expected a large outlay for one component to come in the third or fourth quarter of 2024. We have now anticipated that outlay to be pushed into 2025. It's a timing issue from this year into next year, which we do not anticipate to impact the overall commissioning of our Bowerman RNG project. So, it's solely a function of the vendor's expected timing with that particular project.

Speaker Change: Yes, Matthew that specifically in regards to the Bauer and R&D project and primarily related to one significant component associated.

Kevin Van Asland: <unk> with that it's solely.

Kevin Van Asland: We expected a large outlay for one component to come in the third or fourth quarter of 2024, we have now anticipated that outlay to be pushed into 2025.

Kevin Van Asland: The timing issue with out of a period this year into next year, which we do not anticipate to impact the overall commissioning of our R&D projects. So it is solely a function of sort of vendor expected timing at that.

Sean McClain: But we have not yet experienced a significant increase to pathway attribute sharing arrangements, we may look to place more of our RNG volumes under fixed price contracts should contractual sharing percentages continue to increase. We are aware that the EPA expects to target March 2025 to propose renewable fuel standard obligations for 2026. The 2025 compliance year already has its renewable volume obligations set at 1.3 billion D3 rents. Prior to the EPA setting volume obligations for the 2023 through 2025 compliance years, the EPA set RVO obligations annually. Given our history and industry experience, we believe that we are positioned to navigate any uncertainty with RVO rulemaking.

Kevin Van Asland: With that particular project.

Operator: As a reminder, if you would like to ask a question, please press star 11 on your telephone. Again, as a reminder, for any additional questions, please press star 1 1. I would now like to hand the call back to Sean for his closing remarks.

Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone.

Speaker Change: Again as a reminder for any additional questions. Please press star one one.

Operator: I would now like to hand, the call back to Sean for closing remarks.

Sean McClain: Thank you and.

Sean McClain: Thank you all for taking the time to join us on the conference call today. We look forward to speaking with you when we present our third quarter 2024 results.

Sean McClain: And thank you all for taking the time to join US on our conference call. Today, we look forward to speaking with you when we present, our third quarter 2024 results.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.

Kevin Van Asdalan: And with that, I will turn the call over to Kevin. Thank you, Sean. I will be discussing our second quarter of 2024 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. As Sean just noted, subsequent to quarter end, we have sold the 4.7 million rents which are generated but unsolved as of June 30th, 2024. The actual realized price for those rents was $3.32, which compared to our D3 average realized price for the second quarter of 2024 of $3.12. The average index price of D3 rents in the third quarter of 2024 is approximately $3.31. We have approximately 55.9%, but the rents we expect to generate from third quarter of 2024 RNG production available for commitment.

Operator: Okay.

Operator: [music].

Operator: Yeah.

Operator: Okay.

Operator: Yes.

Operator: [music].

Operator: Okay.

Operator: [music].

Kevin Van Asdalan: Total revenues in the second quarter of 2024 were $43.3 million, a decrease of $10 million or 18.6%, compared to $53.3 million in the second quarter of 2023. The decrease is primarily related to a strategic decision in the second quarter of 2024 to not self-market a significant amount of rents from 2024 RNG production due to the volatility in the second quarter of 2024 D3 rent and next price. The decrease is partially offset by an increase in realized rent pricing of approximately 44.4% during the second quarter of 2024 compared to the second quarter of 2023.

Operator: So.

Operator: Hum.

Operator: [music].

Kevin Van Asdalan: Total general and administrative expenses were $8.7 million for the second quarter of 2024, last compared to the second quarter of 2023. Our professional fees decreased approximately $0.3 million or 26.9% in the second quarter of 2024 compared to the second quarter of 2023. Employee related costs, including stock based compensation, or $5.4 million in the second quarter of 2024, an increase of $0.2 million or $3.5% compared to $5.2 million in the second quarter of 2023. The increase is primarily related to the 4-fitted stock awards in the second quarter of 2023.

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: Okay.

Operator: [music].

Kevin Van Asdalan: Turning to our segment operating metrics, I'll begin by reviewing our renewable natural gas. We produced 1.4 million MMVTU of R&G during the second quarter of 2024, FLAQ, compared to 1.4 million during the second quarter of 2023. Our Texas facilities, McCarty, Atastic Seated, and Galveston, collectively produced 47,000 fewer MMVTU in the second quarter of 2024, compared to the second quarter of 2023, as a result of severe weather causing widespread multi-day power outages across the Houston, Texas region.

Operator: Okay.

Operator: [music].

Kevin Van Asdalan: Our PICO facility produced 13,000 MMVTU more in the second quarter of 2024, as compared to the second quarter of 2023, uses a commissioning of our digestion expansion project. Revenue from the Renewable Natural Gas Segment during the second quarter of 2024 for 38.8 million. The decrease of 9.8 million or 20.1 percent compared to 48.6 million during the second quarter of 2023. Average commodity pricing for natural gas for the second quarter of 2024 was 10 percent lower than the prior year period.

Operator: No.

Operator: Dan.

Kevin Van Asdalan: During the second quarter of 2024, we self-marketed 10 million Renewables representing a 7.4 million decrease or 42.7 percent compared to 17.4 million Renewables self-marketed during the second quarter of 2023. Average pricing realized when Renewables sales during the second quarter of 2024 was $3.12 percent, as compared to $2.16 during the second quarter of 2023, and increased to 44.4 percent. As compared to the average D3 Ren Index price for the second quarter of 2024 of $3.20 being approximately 47.9 percent higher than the average D3 Ren Index price for the second quarter of 2023 of $2.16.

Kevin Van Asdalan: At June 30th, 2024, we had approximately 0.4 million MMVTUs available for Ren generation and had approximately 4.7 million Renewables generated and unsold. We had approximately 0.4 million MMVTUs available for Renewables generation and had approximately 3.0 million Renewables generated and unsold at June 30th, 2023. Our operating and maintenance expenses for our RNG facilities during the second quarter of 2024 were $13.9 million, an increase of 2.2 million or 18.9 percent compared to $11.7 million during the first quarter of 2023.

Kevin Van Asdalan: Our RNG facilities reported increased total segment utility expenses of approximately 0.3 million during the second quarter of 2024 as compared to the second quarter of 2023. Our MACarty facility operating and maintenance expenses increased approximately 0.5 million primarily related to the timing of gas compression system maintenance expenses. Our RUNCY facility operating and maintenance expenses increased approximately 0.5 million primarily related to gas processing equipment maintenance, media change out and disposal costs. Our APEX facility operating and maintenance expenses increased approximately 0.5 million primarily again related to the timing of preventative maintenance related to gas processing equipment. Our Coastal facility operating maintenance expenses increased approximately 0.3 million related primarily to well-filled operational enhancements.

Kevin Van Asdalan: We produced approximately 45,000 megawatt hours in renewable electricity during the second quarter of 2024. A decrease of approximately 4,000 megawatt hours or 8.2 percent compared to 49,000 megawatt hours during the second quarter of 2023. Our security facility produced approximately 3,000 megawatt hours less in the second quarter of 2024 compared to the second quarter of 2023 as a result of a ceasing operations and connection with the first quarter of 2024 sale of the gas rights at this location back to the landfill.

Kevin Van Asdalan: Revenue from Renewable Electricity Facilities during the second quarter of 2024, 4.5 million, a decrease of 0.1 million or 3.2 percent compared to 4.6 million during the second quarter of 2023. The decrease is primarily driven by the decrease in our security facility production volumes. Our Renewable Electricity Generation operating in maintenance expenses during the second quarter of 2024, or 4.7 million, an increase of 1.3 million or 37.3 percent compared to 3.4 million during the second quarter of 2023.

Kevin Van Asdalan: Our empowerment facility operating in maintenance expenses increased approximately 0.9 million, which is primarily driven by the timing of annual original equipment manufacturer preventative maintenance expenses, which are non-linear period over period. Our pulse of facility operating in maintenance expenses increased approximately 0.4 million, which is driven by well-filled collection enhancements. During the second quarter of 2024, we recorded impairments of 0.2 million, a decrease of 0.1 million or 37.6 percent compared to 0.3 million in the second quarter of 2023.

Kevin Van Asdalan: The specifically identified impairment losses in the second quarter of 2024, primarily relate to various R&G equipment that would seem obsolete or no longer suitable for current operations. The second quarter of 2023 impairment relates to specifically identified machinery and feedstock processing equipment that were no longer in operational use.

Kevin Van Asdalan: Operating income for the second quarter of 2024 was 0.9 million, a decrease of 12.7 million or 93.6 percent compared to 13.6 million for the second quarter of 2023. Our operating income was impacted by our strategic decision to not sell 4.7 million rents generated by unsold during the second quarter, when the average D3 rent index price was approximately $3.20. R&G operating income for the second quarter of 2024 was 11.7 million, a decrease of 11.3 million or 49.1 percent compared to 23 million for the second quarter of 2023. Renewable electricity generation operating loss for the second quarter of 2024 was 2 million, an increase of 1.4 million compared to 0.6 million for the second quarter of 2023.

Kevin Van Asdalan: Turning to the balance sheet, at June 30, 2024, 60 million was outstanding under our term month. As of June 30, 2024, we had capacity available for borrowing under our revolving credit facility remaining at 117.5 million. During the second quarter of 2024, we generated 14.5 million of cash from operating activities, an increase of 138.4 percent compared to 6.1 million for the second quarter of 2023. Based on our estimates of the present value of our PICO turnout obligation, we recorded an increase of 0.4 million to the liability at June 30, 2024.

Kevin Van Asdalan: This increase was recorded through our R&G segment royalty expense. For the six months of 2024, we incurred approximately 4.8 million in capital expenditures, of which 19 million related to our Montalk Agrenewables development in North Carolina, 6.9 million to the second Apex facility, 6.7 million to our Bowerman R&G project, 1.8 million to the Blue Granite R&G project, and 1.3 million for our PICO digestion capacity. As of June 30th, 2024, we had cash and cash equivalence of approximately 42.3 million and accounts and other receivables of approximately 22.0 million.

Kevin Van Asdalan: Accounts receivable primarily relate to second quarter ring sales comprising the majority of this balance of which the majority was collected after June 30th, 2024. Adjusted even up for the second quarter of 2024 was 7 million, a decrease of 12.2 million compared to 19.2 million for the second quarter of 2023. EBITDA for the second quarter of 2024 was 6.7 million, a decrease of 12.2 million or 64.3 percent compared to EBITDA of 18.9 million for the second quarter of 2023.

Kevin Van Asdalan: Net loss in the second quarter of 2024 was 0.7 million compared to a net income of 1 million in the second quarter of 2023. Our income tax expense decreased approximately 11.6 percent, a decrease of approximately 11.6 million for the second quarter of 2024 as compared to the second quarter of 2023. Decrease is primarily related to interim tax provision calculations using our estimated annual effective tax rate against a pre-tax loss for the second quarter of 2024. As compared to the 2023 estimated annual effective tax rate applied against pre-tax income for the second quarter of 2023.

Sean McClain: And I'll turn the call back over to Sean. Thank you, Kevin.

Sean McClain: In closing, and though we don't provide guidance as to our internal expectations on the market price of environmental attributes, including the market price of B3 RINs, we are reaffirming our full-year 2024 outlook provided in May 2024. For 2024, we continue to expect our R&G production volumes to range between 5.8 and 6.1 million MMVTU, with corresponding R&G revenues to range between 195 and 215 million. This range, though unchanged, accounts for impacts resulting from the hurricane which impacted the Houston, Texas region with widespread utility allergies in July 2024. We expect our 2024 renewable electricity production volumes to range between 190 and 200,000 megawatt hours with corresponding renewable electricity revenues to range between 18 and 19 million, also unchanged from our previous earnings call.

Operator: And with that, we will pause for any questions. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please limit yourself to one question and rejoin the queue for a follow-up.

Matthew Blair: Our first question will be coming from Matthew Blair of TPH. Matthew, your line is open. Thank you and good afternoon. You kept your full-year production guidance for R&G the same, despite some of the challenges in the second quarter with the the power outages in Texas. Could you talk about how are you able to do that and what are the bright spots in terms of areas that might be producing a little bit more than you expected?

Matthew Blair: And then can I also ask for the third quarter, you mentioned that you already monetized the 4.7 million of RINs in inventory, but do you expect to monetize all of the RINs that you produce in the third quarter or a certain chance that you might hold back some of the Q3 production from sale as well? Thank you. Thanks, Matthew. Yeah, we are anticipating this question in regards to our holding guidance, though we've had two consecutive quarters with weather impacts, predominantly impacting our Houston region, which generates, you give or take about 50%.

Matthew Blair: So what we do, we set our production impacts, we expect, you know, well-filled investment to drive production increases. Though we have had those two quarters of weather impacts, you know, we go through various sensitivities and historical lookbacks in regards to, at the beginning of a year, what landfill hosts tell us there, their landfills, pension plans are going to be, and then we try to go through various sort of discounting, if you will, or delay impacts for what that expansion may look like at various sites.

Matthew Blair: And then in regards to why we believe the second half of the year is still going to develop in appreciable volumes holding that guidance, is it will take a look at our budgeted expected, budgeted expected capital expenditures into our well-filled as compared to what we've actually incurred. We still have enough runway left in the rest of this year that we believe will get some meaningful uplift from the capital that we anticipate investing into our well-filled at certain of our sites, as well as some of the ongoing and known optimization enhancements that we're doing either through well-filled collection or within our plans that will not necessarily be solely related on our landfill host expansion activities in regards to the guidance ranges.

Matthew Blair: So while we know that our Houston region has been impacted by weather events in previous two quarters, we believe that our existing guidance from an R&G production standpoint takes into account those impacts in the second and third quarter. I can take the piece regarding the timing of rent monetization. How I would like to answer it is the decision as to whether or not we'll monetize is a function of our prioritization to have those attributes to be placed directly into the hands of the obligated parties.

Matthew Blair: Rather than tying it to ebbs and flows and pricing, although it is a consideration as we look at what is readily available in the marketplace, news from the EPA, you know, recent pricing trends, but the leading driver is the purchasing cadence of the obligated parties, the way in which we manage our cash flows and our available cash and our borrowing facilities affords us the opportunity to take those attributes and place them where they belong, which is in the hands of the obligated parties, not to intermediaries that may hold those in the hopes that they're able to extract a margin as they ultimately place those into the hands of the obligated parties. That will drive any decisions that we have as to what we hold coming in and out of any particular quarter and the volumes at which we would delay. And then one other note, Matthew, is that obviously we've had conversations and we take into consideration the feedback that we're getting and knowing that our 10Q was just hit Edgar right before the call.

Sean McClain: We have included a new table that is trying to help people like you to see the variability or volatility in regards to RIN that we may or may not have generated but unsolved at any given quarter.

Saumya Jain: And our next question will come from Saumya Jain of UBS, your line is open. Hey, how are you about looking at any potential changes in LCFS or RIN packages, your club to get them up coming up in part of the chapter and go with potential changes? I guess I would first respond that we generally don't provide guidance in regards to our internal expectations for the price of environmental attributes.

Sean McClain: We are all very aware that CARB is going through various rulemaking. I believe there's a next meeting for CARB is in November, I want to say, where we expect some voting on rulemaking to impact, I believe, 2025 and the overall programs of mission reductions targets were bullish that that rulemaking will be beneficial and have a appreciable increase in LCFS pricing. But with other regulatory and outcomes that was in the details and we believe that when that LCFS credit pricing increases, certain of our site, notably Pico, that will be primed to benefit from an eventual uplift in LCFS credit pricing.

Paul Chang: In our next question, we'll be coming from Paul Chang of Sushibank, your line is open. Hi, good afternoon. Sean, can you tell us what is the second quarter weather impact on the production and also that in your four-year guide, the Northern pie, the quarter, have you built in any expectation for the hurricane season? Thank you. Thanks, Paul. I know that you asked Sean, but I'll answer that very quickly. We estimate that the approximate impact across the Houston facilities in the second quarter was around 47,000 to direct impact in the second quarter.

Paul Chang: And in the third quarter, I would say that we're probably seeing a similar expectation of struggles on production out of Houston. I want to say that generally in the second quarter, those power outages were approximately five to eight days. And then I believe that that sort of approximation of widespread power outages from the hurricane in July was again about five or eight days or so, depending upon the region of Houston. Yeah, because I mean that the National Weather Center is predicting this is going to be Perhaps that most happy hurricane season.

Paul Chang: So I just curious that whether you guys building some additional downtime in your forecast. And also that when you're talking about your current full year. So what is the biggest risk for you not to hit that target? The process by which we would incorporate future weather impacts is at least initially rooted in our historical outages are our unplanned outages associated with utility outages or direct impact from weather events, indirect or direct.

Paul Chang: That budgetary process has a natural component that you're taking the total capacity that is available for production. And you are taking into consideration the sort of the average that you're seeing or the trend rather that you're seeing in those weather phenomenon. Now, although there may be speculations that suggest that this will be the most active hurricane season, there has been an increasing trend that you see in those weather phenomenon. And so the projections that we put in place.

Paul Chang: I'll be at the optimistic side where you are placing investments as Kevin mentioned into the well filled the timing of landfill operations that you'll see the positive lift that in this case has allowed for us to maintain with confidence or for your guidance.

Sean McClain: You do see that trend that will increase the impact of the weather events that we put into our projections for 2024.

Sean McClain: And our next question will be coming from William Blair of TPH. Your line is open William. It's Matthew again, thanks for taking the follow up. Just looking through the two looks like your 2024 capex range is down to 84 to 106 million from the 149 to 167 previously, but looking at the table of projects, the start dates for your four major growth projects are all the same all and changed. So could you talk about what's what's changing on the capex side or are you pushing anything out or what why is this year's capex number coming down.

Sean McClain: Thanks. Yeah, Matthew that's specifically in regards to the Bauerman RNG project and primarily related to one significant component associated with that. It's solely a we expected a large outlay for one component to come in the third or fourth quarter of 2024. We have now anticipated that outlay to be pushed into 2025 is the timing issue with it out of a period this year into next year, which we do not anticipate to impact the overall commissioning of our Bauerman RNG project. So it's solely a function of sort of vendor expected timing with that particular project.

Operator: As a reminder, if you would like to ask a question, please press star 1-1 on your telephone. Again, as a reminder, for any additional questions, please press star 1-1.

Sean McClain: I will now like to hand the call back to Sean for closing remarks. Thank you. And thank you all for taking the time to join us on the conference call today.

Operator: We look forward to speaking with you when we present our third quarter of 2024 results. In this concludes today's conference call, thank you for your participation.

Operator: You may now disconnect. Thank you very much. Thank you.