Green Plains Partners LP

Good morning and welcome to the Green Plains, Inc. and Green Plains Partners first quarter 2003 earnings conference call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in a listen-only mode. I would now like to turn the call over to your host, Bill Boggs, Vice President, Investors Relations. Mr. Boggs, please go ahead.

Thank you and good morning, everyone. Welcome to Green Plains, Inc. and Green Plains Partners first quarter 2023 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer, Jim Stark, Chief Financial Officer, and Leslie Vandermuelen, EPP of Product Marketing and Innovation. There is a slide presentation available, and you can find it on the investor page under the events and presentations link on both corporate websites. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of factors discussed in today's press releases, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Todd Becker.

Thanks, Bill, and good morning, everyone, and thanks for joining our call today. Concurrently, with our earnings announcement this morning, we announced an offer to acquire all of the publicly held common units of Green Plains Partners. We believe the proposed transaction will simplify our corporate structure and governance, generate near-term earnings and cash flow accretion, reduce SG&A expense related to the partnership, improve the credit quality of the combined enterprise, and align strategic interests between Green Plains Inc. shareholders and the partnership unit holders by regaining full ownership and control of Green Plains Total Platform, including our terminals. All this will allow us to be more flexible with our long-term asset and company strategy. This is as much commentary as we can provide on this potential transaction at this time. So let's get the first quarter results out of the way. As indicated, ethanol margins were very weak in the first quarter and began to recover too late for us to take advantage if we look backwards. But since we are looking forward, things have changed significantly from the lows we saw in January as market fundamentals look very interesting for the remainder of the year for all of our products, and we'll get to that later. This was further validated with yesterday's EIA data. Our overall consolidated crush margin was negative 7 cents for the quarter, leading to a negative EBITDA of 27.7 million. Corn basis has continued to be high, particularly in the West. We experienced a basis that was approximately 25 cents a bushel over the prior year and 40 cents over the prior five-year average. Ultimately, margins needed to adjust to this, and they have started to in the Western Corn Belt for the rest of the year based on the current forward curves and markets. Veg oil pricing was weaker than the highs we experienced in 2022, which was also a factor during Q1, even though we had most of our corn oil pre-sold for the quarter. I'll give you some insight on current events later as it gets starting to get interesting for low carbon intense oils again, which is where we sit with our product. We also saw weak driving demand in the quarter and coupled with continued excess ethanol production, which resulted in a challenging margin environment. For the last 15 years, we made sure we owned our natural gas for our winter production, and that was the right thing to do historically, but with the unusually warm winter we saw, natural gas pricing decreased below our costs, causing a drag on the spot crush margin. Because of this, we were limited in our ability to benefit from the reduction in spot pricing. Having our natural gas purchased early impacted our crush margins negatively as well. We will assess the best coverage strategy in the future for winter, but we believe this ownership is and always was the prudent approach. Recently, we have experienced significant improvement in overall ethanol margins as U.S. production has trended lower, while gas and driving demand moved above pre-COVID levels in some of the reporting weeks. Now we have to see if that holds. We believe since 2019, our inputs have driven to lower margins overall as an industry, other than a few quarters as the world balance sheet for corn tightened between COVID and the Ukraine situation as well and weather. This may turn in our favor in 2023 and 2024. We are seeing strong early indications that this year's corn acreage will be expanded and get planted in a very timely fashion as we have a near perfect spring shaping up. We all know the ethanol margin can move quickly and on paper it is well off the lows experienced in Q1. Going forward, we will choose our spots to lock in available ethanol crush margins to our hedging strategy as there are opportunities along different parts of the curve to lock in a positive base margin even before corn oil and protein contribution. Yes, this can happen in ethanol as well, but it's been a while since we have been able to say this about the forward curve. Well, this is really a great setup. Our main focus continues to be on executing on the transformation to add incremental recurring margins and cash flow opportunities from our biorefinery platform through expanded protein and ingredients, low carbon, renewable corn oil, clean sugar, and decarbonization to insulate us from the volatility that we've experienced. While the first quarter was tough, we are well underway. With approximately 10% of our plant utilization capacity offline during the first quarter because of margins, our overall production utilization came in at about 87%. Improvements in the margin gave us the opportunity to bring back all of our facilities back online, but it was just in time for us to enter maintenance and turnaround season, So we anticipate only slightly higher run rates nearby and strong run rates for the third and fourth quarter, where the actual highest margins are. Second quarter will be impacted from having Wood River offline for a period of time, as we had an explosion of a whole stillage tank when the plant was not operating because of routine maintenance. With current engineering and construction estimates to complete repairs, we are targeting to bring that facility back in line by the end of the quarter, at which time we will return to full rates across our platform. Anything longer than that will be covered by business interruption insurance, so we don't believe this will ultimately have a material effect on 2023. But we hope to be up and running before that kicks in, as demand for ultra-high protein from Wood River continues to be very strong. As we exited the first quarter and early in the second quarter, our transformation strategy began to hit an important inflection. With improved ethanol margins, we brought our ethanol production capacity fully back online. and all five of our MSC systems were lined out and producing high-quality, high-protein products to benefit our animal nutrition customers and business. For 21 days at the end of March, at the end of the quarter, and into the first half of April, we averaged over 900 tons per day of ultra-high-protein production, with some days achieving over 1,000 tons of production. Some of these days exceeded our initial investment expected volumes, and we still have more to go as we've just begun to truly optimize our process. We have achieved yields that exceeded four pounds per bushel pushing close to five. We believe the MSC technology is the best and only system to ever see these type of yield numbers and the most consistent in producing high quality suite of animal nutrition products. Continuing to optimize these systems to maximize production provides opportunities to further enhance the potential of our assets. Our platform was performing as designed and at rate and demonstrates the annual run rate exceeding 330,000 tons per year for these five locations only, and is achievable in more. After the events that occurred in Wood River location in mid-April, the protein location has been offline, and when we started back up, we believe we will once again be running at 900 tons per day, plus or minus, day in and day out. Our anticipated MSC volumes for the second quarter are in the 60,000 to 70,000 ton range, and as a result of this downtime, moving to 80,000 to 90,000 tons per quarter going forward. Later in the call, I will review our pricing and financial metrics associated with protein production. As you can see in the volume table in the press release, we added a line for ultra-high protein, and when we get to full production, we will give you more breakout of financial outcomes as well. I will also review some of the things we are seeing for the last half of the year sales channels and higher proteins as well. But even more exciting than this is our clean sugar facility in Shenandoah is making great progress, and we have recently gone vertical in which we have posted pictures online, and you can see the walls of the securification tanks are being installed. It's very exciting to see this progress, and we hope to share our vision with what this project can do for the future and our company, and I'll go later in the call, I will go deeper on this topic. I won't spend a lot of time on the regulatory front, except to say things are trending our way as well. Between RVO staying steady on ethanol and potential upside for renewable diesel, higher blends like E15 taking hold as we enter into our fifth straight summer of year-round sales, along with the Midwest E15 waiver, which, by the way, becomes permanent next year, which is very exciting. Renewable diesel supported by state-level programs to help our low-carbon renewable corn oil production achieve higher values, all the way to the IRA, which we have spent a lot of time on our past calls, and you can see it could be quite an interesting market for us to take advantage of. I will cover decarbonization briefly. later in the call, but I'm happy to announce June 15th at 10 a.m. Central Time for our teach-in that we have been promising on the IRA and the impact to the future of our company. Our decarbonized alcohol will be a valuable feedstock to produce alcohol to jet and sustainable aviation fuel at scale, but that is the end game. In the meantime, there are many positives to unpack for our shareholders, and we are excited to educate all of you on this. Our balance sheet on liquidity remains strong, ending the quarter with $408 million in cash. Jim will provide a summary of our financial results and an update to our capital allocation for the balance of 2023. And now I'll hand the call over to Jim to provide an update on the overall financial results.