Green Plains Partners LP

Good morning and welcome to the Green Plains Inc. and Green Plains Partners second quarter 2023 earnings conference call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in listen-only mode. I will now turn the call over to your host, Phil Boggs, Executive Vice President, Investor Relations. Mr. Boggs, please go ahead.

Thank you and good morning everyone. Welcome to Green Plains Inc. and Green Plains Partners second 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, EVP Product Marketing and Innovation. There is a slide presentation available and you can find it on the investor page under the events and presentations 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 could materially differ because of factors discussed in today's press releases, in the comments made during this conference call, and in the risk factor 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, Phil, and good morning, everyone, and thanks for joining our call today. So during the quarter, we were challenged by several events that held us back a quarter from showing you the results of the transformation as we experienced several significant events that negatively impacted what would have been a good quarter. The first was our Wood River incident, which took one of our largest locations down for most of the quarter. This impact to the company was over $18 million in total, and we expect some recovery from insurance in the last half of the year, so some of this will be coming back. In addition, during Q2, our platform was in need of significant upgrades to prepare for 2024 and beyond, and while we had some planned downtime, we also experienced a high level of unplanned downtime in Gen 1, which also had an impact on Gen 2 production volumes and sales and hedges that we had in place already to lock the quarter in. The challenge is that our other plants came later in the quarter and really was a June event in the highest margin environment, which we were unable to take advantage of. With that said, we had put Q2 hedges on to lock in over 20 cents a gallon in results, and unfortunate timing of these events took most of that away. On the last call, we indicated 12 to 17 cent a gallon opportunity on paper, and we were tracking accordingly and better through the end of May, but did not get Wood River released back to us and up and running until a week later than expected, in addition to unplanned outages. With this downtime behind us, we are now operating at near full rate for both ethanol and ultra-high protein operations, and even more important, Wood River is making new production records as the team has done a great job getting the plant back to service, but more importantly, the state of the team there is good after the tragedy they experienced. Because of these events, our operations team diligently completed extended spring shutdowns and many of our locations, resulting in an 81.5% utilization rate for the quarter. Our operations leadership team implemented process control improvements to improve reliability and increase ultra-high protein production. All in, this downtime positions our assets to operate reliably during the third and fourth quarter, with solid margins on paper today. And at least half of our locations are now capable of foregoing their typical fall shutdowns enabling additional production during these higher margin periods we are seeing in corn oil, protein, and solid ethanol fundamentals. Now onto the quarter, which Jim will cover more in depth later. Our consolidated crush margin was one cent per gallon, but again, we are prepared for a solid last half. Between Wood River, negative absorption, repairs, and lost opportunity for both protein and ethanol, there was a 15 to 20 cent impact on the overall consolidated crush minimum. Our financial position remains very strong with significant liquidity. And with the last half opportunity and margins, we don't see a significant change to this strength as we return to free cash flow generation during the last half, which will help pay for the large part of the capital needed for our build out for the rest of the year. In addition, we entered into a sale contract to divest our 55 million gallon Atkinson, Nebraska facility as it does not meet our parameters to justify making investments for our technology improvements. For where we are going with Green Plains, this asset did not fit our long-term vision, and once it closes, we believe this transaction will be accretive. We expect to close in the next few weeks and bring the capital back on the balance sheet, further increasing our financial strength as we optimize our asset base. We expect to replace these volumes with either an expansion at one of our larger locations where our technologies are running, which is very accretive, or look for an acquisition opportunity where we can immediately add technologies, therefore not expanding fuel supplies in the market. I will take you through a detailed recap of our transformation progress later in the call and walk you through how we are thinking about the last half of the year. But for now, I want to reiterate that the fundamentals across each area of our strategy are strong and improving. Core ethanol demand remains to look – continues to look solid and is tracking higher than the prior year. With 94 million acres of corn versus 84 million acres of soybeans, the price spreads remain in favor for both protein and corn oil. and timely rains this summer have improved the USDA estimates for crop conditions in the West, finally giving an opportunity again to source our inputs a little bit easier than in the past several years. In fact, we have seen continued pressure on the Western corn basis just recently, especially new crop in 2024. Our ultra-high protein production is once again achieving rates of 800 to 1,000 tons per day. After the extensive downtime taken in the second quarter, we are seeing production rates as designed and have hit over 1,000 tons per day on multiple days. We are planning to dedicate one of our sites to 60% protein production later this quarter and begin to build supply chain for delivering 60Pro to the market during the fourth quarter. I will get more into this exciting development later as well. One really interesting data point is our investments were made on a 3 to 3.5 pounds per bushel yield of protein and we have now achieved as high as five pounds with the MSC technology from FluEquip. And in fact, since Wood River has returned to full rate, they have averaged well over four pounds, which over time increases our capability to produce higher volumes and have better capital efficiencies. No other technology in the world can achieve these rates. The future of our platform is within sight, and with our clean sugar facility on track to start up in early 2024, we are fast approaching being able to demonstrate the true potential of our full vision at one of our refineries. And now I'll hand the call over to Jim to provide an update on the overall financial results.