Montauk Renewables, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call. I would like to turn the call over to Mr. John Cerulli as we provide 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.

Thank you, and good afternoon, everyone. Welcome to Montauk Renewables Earnings Conference Call to review the first quarter 2023 financial and operating results and developments. I'm John Cerulli, Chief Legal Officer and Secretary at Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer to discuss business development, and Kevin Van Aslin, Chief Financial Officer, to discuss our first quarter 2023 financial and operating results. At 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, such as, 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 Renewable's 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. 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 first quarter 2023 earnings press release and Form 10Q issued and filed this afternoon. Those are available also on our website at ir.montaukrenovals.com. After our prepared remarks, we will open the call to questions. And with that, I turn the call over to Sean.

Thank you, John. Good day, everyone, and thank you for joining our call. As we previously announced during our fiscal 2022 earnings conference call in March, and as Kevin will explain in more detail, we made a strategic decision not to commit to transfer any available RINs on 2023 RNG production until the second quarter of 2023. The EPA's release of the RVO in December 2022 included RVO obligations for three years, 2023 through 2025, and included volumes of eRINs to be generated from renewable electricity and used in transportation fuel. With the final RVO due to be released in June 2023, we believe this rulemaking introduced higher than expected volatility in the price of D3 RINs during the first quarter of 2023. As a result, we purposefully delayed the timing of all D3 RIN transfers from 2023 RNG production until the second quarter of 2023. We have begun to see the benefits of this strategy with the 4 million RINs related to 2023 RNG production committed in the second quarter of 2023 at an average realized price of $2.04. In March 2023, we announced our entrance into South Carolina with the development of a new landfill gas to RNG facility. The planned project is expected to contribute approximately 900 MMBTUs per day of production capacity upon commissioning. We expect to incur capital expenditures beginning in the second quarter of 2023 and expect the project to be complete and become commercially operational in 2025. Next, I would like to provide an update on our PECO dairy cluster project in Idaho. During the first quarter of 2023, CARB finalized the engineering review of the PECO facility's provisional CI application and released it for public comment. Public comment period ended March 14, 2023, and we did not receive any significant comments. CARB certified our Tier 2 application and the certified CI value will be used to report and generate LCFS credits starting in the fourth quarter of 2022. We plan to release the remaining gas from storage in the second quarter of 2023. As part of our overall capacity expansion at the PECO facility, We undertook significant efforts to improve the performance of its existing digestion process. Related to our PECO feedstock amendment, which increased the amount of feedstock supplied to the facility for processing over a three-year period, the dairy delivered the two increases in feedstock, and we have made three payments to the dairy as required in the PECO feedstock amendment. The approved efficiencies of our existing digestion process and the water management improvements have enabled us to process the increased feedstock volumes which we received from the dairy. We completed the design of the digestion capacity increase in the third quarter of 2022 and began incurring capital expenditures related to the completed design of our digestion expansion construction of the project. We expect the digestion expansion project to be functionally completed during the third quarter of 2023. We expect the dairy to begin delivering the third and final tranche of increased feedstock in 2024. As to our 2021 Montauk Ag Renewables acquisition, we continue to work with our engineer of record through the optimization of improvements to the patented reactor technology. In the first quarter of 2023, we completed the relocation of the reactor in Magnolia, North Carolina to the Turkey Creek, North Carolina location to centralize processing at one location. We continue to progress on our improvements and continue to expect to begin revenue-producing activities in 2024. In parallel, we continue to engage with regulatory agencies in North Carolina related to the resulting power generation derived from swine waste to confirm its eligibility for renewable energy credits under North Carolina's Renewable Energy Portfolio Standards in anticipation of commercial production. Our Turkey Creek, North Carolina facility has been accepted into the Piedmont Natural Gas Renewable Gas Pilot Program, which is a step towards obtaining the new renewable energy facility, NREF designation, under the North Carolina Utilities Commission. Due to our consolidation of operations at the Turkey Creek North Carolina location, and based on our current expectations related to commercial operations, we have paused our registration process to obtain NREF status for the Turkey Creek, North Carolina location. Concurrently, we have executed a receipt interconnection agreement with Piedmont Natural Gas for the Turkey Creek, North Carolina location. This agreement is structured to coincide with the development timeline at that location Also, in the first quarter of 2023, we signed a lease agreement with Piedmont Natural Gas to provide access to the Turkey Creek, North Carolina property during construction of the interconnection. We are also in varying stages of discussions with potential power purchasers. Finally, we are currently in late-stage negotiation to develop, own, and operate an R&G facility alongside our existing renewable electric generation facility in Irvine, California. We intend to beneficially process the available feedstock, which we currently estimate to be approximately 2485 MMBTUs in excess of what the REG facility can process. While we believe we are in the late stages of negotiation and expect to finalize the development opportunity, no assurances can be given that this opportunity will meet our expectations. And with that, I will turn the call over to Ken.