Green Plains Partners LP

Plains Inc. Second Quarter 2024 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 and Finance. Mr. Boggs, please go ahead.

Thank you, and good morning, everyone. Welcome to Green Plains Inc. Second Quarter 2024 Earnings Call. Participants on today's call are Todd Becker, President and Chief Executive Officer, Jim Stark, Chief Financial Officer, and several other members of Green Plains Senior Leadership Team. There is a slide presentation available and you can find it on the investor page under the events and presentations link on our website. 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 release, 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 statements. 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. Margins began to turn higher later in the second quarter, driven by a change in the fundamentals. and U.S. ethanol is once again the lowest priced molecule on the planet. We ended the quarter on track for potentially record exports for 2024, and the world has returned to the U.S. to buy low-carbon fuels, led by expanded use in Canada and many other countries. Even sitting at over 23 million barrels of stocks for most of the quarter, we saw a nice margin expansion as we entered into the third quarter. Favorable natural gas and corn prices also helped as fuel prices remained elevated, and continue to stay that way with strong driving demand. As everybody knows, air travel is mostly a challenge. Fundamentals remain strong for the balance of the year as we expect Brazil to be short export products in the fourth quarter, so we have the potential to have this market somewhat to ourselves as we remain competitively priced in the world. As a result, we delivered positive second quarter EBITDA, significantly higher than last year's second quarter and higher than the prior quarter, however, still not to our satisfaction. as our operating costs on a per gallon basis were somewhat elevated since we had six scheduled maintenance turnarounds during the quarter. This sets us up for strong run rates for the balance of the year. Our utilization remained consistent in the 93% range, inclusive of completing our spring maintenance, as mentioned, which tells you we are really seeing the results of investments made when we were experiencing lower run rates. We also continue to work through some of the equipment refreshes at Mount Vernon and Obeyan we mentioned last quarter, and believe we will begin to see the positive impact of that in the second half of the year. which should take our run rates even higher, as both of those plants remain somewhat hampered while we await conveyor replacements for both of them, and for Obion specifically, a new thermal oxidizer that should help both ethanol and ultra-high protein production. When this is complete, it will unlock an additional 40 million gallons of capacity, and that can put us up in the high 90s run rates as a percentage. Our renewable corn oil yields had a quarterly platform record at 1.02 pounds per bushel across all of our sites, We challenged our operations team to improve that number after lower Q1, and they certainly delivered. Looking forward, margins for Q3 all in, ranging in the high 20s to high 30s per gallon. On paper, the fourth quarter is starting to pick up steam as late as well. We have had some of the third quarter production as margins were peaking in July above current levels, and those hedges are at or above current levels to ensure that we can deliver a strong third quarter. If you look at the simple crush, we reached three standard deviations from the mean. It was just something we could not turn down. But we still have plenty of upside on unhedged gallons. But so far, that absolutely was the right decision. We don't make random decisions from our trading and risk team. And we do consult our board, which we all have been very cautious and thoughtful about these decisions. We review at every board meeting and on subsequent calls with the board. We discuss current fundamentals and hedging strategies. But we do continue to have a favorable outlook for the balance of the year as the market is backwardated, so spot margins remain the best. The fourth quarter is at the long-term mean, and we have very limited hedging out forward, so we want to take advantage of the strong left half that we are expecting. The corn crop appears to be in excellent shape, which the USDA continues to reaffirm with abundant anticipated ending stocks. The crop that will be harvested this year puts Green Plains in a much better spot in both the east and western Corn Belt than the recent years. Our turnkey JV with Errolson started up in the second quarter, and we welcome the opportunity to provide additional high-protein production to our growing list of customers. This is the largest project we have built to date, and while we continue to de-bottleneck, we have started shipping product to customers. Commissioning our CST or clean sugar project in Shenandoah has been ongoing. The startup of serial number one is now without its fits and starts, but our Green Plains engineering and operations team, along with Flu Equip engineering teams, have worked nonstop to sort out some manufactured equipment challenges while de-bottlenecking to best optimize this exciting new facility. Most of the issues so far are from construction and equipment and not from the technology. Customers have been very patient with us as we work through this startup, and interest for our products remain very, very strong. Finally, in our carbon capture strategy, we are pleased that our Advantage Nebraska approach is on track as we have the compression equipment needed for our three Nebraska plants ordered. We are very happy with the short lead times and expect construction of our compression sites to begin later this year. The Trailblazer project remains on pace. We're starting up in the second half of 2025. We can talk economics later in the call, but feel strongly the value of decarbonized ethanol assets are not correctly reflected in our current enterprise value. We continue to closely monitor the progress of our Iowa and Minnesota assets on Summit as well as they continue to work through permitting. We're also looking at our Indiana asset as we feel there's plenty of opportunity in the eastern Corn Belt to sequester carbon in geologic formations in and near Indiana. Again, more later on the overall carbon strategy and economics. One final update on the strategic review. As we indicated in the morning's release, the special committee of the board assisting the full board in evaluating alternatives have engaged Bank of America and Vincent & Elkins, LLP, as financial and legal advisors. As we continue to execute on our strategic review and transformation strategy, we have announced the sale of the Birmingham Unit Train Terminal as only one part of that. We will apply these proceeds to help retire the remaining balance of high-priced partnership debt, strengthening the overall financial position of the company. This will allow us to complete the streamlining and efficiency gains we anticipated after the acquisition of Green Plains Partners in early January. Again, this sale is only one piece of the broader initiative. And now I'll hand over the call to Jim to provide an update on the overall financial results. I'll come back on the call to provide an updated policy outlook and discuss our progress on our initiatives in more detail.