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 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.

Thank you, and good afternoon, everyone. Welcome to Montauk Renewables Earnings Conference Call. to review the second 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 developments, and Kevin Van Asselen, Chief Financial Officer, to discuss our second quarter 2023 financial and operating results. At this time, I would like to direct your attention to our forward-looking disclosure statements. 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 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 gap financial measures can be found in our slide presentation and in our second quarter 2023 earnings press release and form 10Q issued and filed this afternoon, which are also available on our website, ir.montaukrenewables.com. After our prepared 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 turn the call over to Sean.

Thank you, John. Good day, everyone, and thank you for joining our call. On June 21, 2023, the Environmental Protection Agency announced final rules for the Renewable Fuel Standard for the 2023 through 2025 years. While the final rules did not finalize the eRIN program, it did set final volumes for cellulosic biofuel at 838, 1090, and 1,376 million RINs for the years 2023, 2024, and 2025, respectively. Though noting the delayed eRIN program, the finalization of the rules had an appreciable impact on the D3 RIN index price. The average D3 RIN index price from June 22nd through June 30th was approximately 31% higher than the index price average from June 1st through June 21st. As planned, we monetized a significant number of RINs after the announced final rules, prioritizing obligated parties and benefiting from the notable rise in D3 RIN index price. We monetized all RINs generated and unsold as of June 30th, 2023, and committed the majority of our expected 2023 third quarter RIN generation. We have not yet entered into forward sale commitments beyond the fourth quarter of 2023 RIN generation. The average realized price of these July 2023 commitments were priced at or above the July 2023 average D3 RIN index price. The final rule also included significant changes to the existing RFS program, referred to as biogas regulatory reform, requiring the R&G industry to modify how all RINs are generated. New RFS participating facilities that register on or after July 1, 2024, will have to meet the biogas regulatory reform provisions beginning July 1, 2024. Existing RFS participating facilities that registered prior to July 1, 2024, will have until January 1, 2025 to come into compliance with biogas regulatory reforms. For existing registrants, registration updates must be submitted by October 1, 2024. On January 1, 2025, all RFS participants must comply with biogas regulatory reform provisions. The EPA finalized a limitation that biogas from one facility has a single use under the RFS as proposed. The EPA clarified that this does not preclude non-RFS uses at the same facility. Over the last few quarters, we have announced a series of development projects that, in the aggregate, are expected to materially contribute to the growth of the business. During the third quarter of 2022, we announced our second facility at the APEX site. We expect this plan to increase daily production by approximately 2,100 MMVTUs per day at commissioning during the second half of 2024. During the first quarter of 2023, we announced our expansion into South Carolina with our planned Blue Granite RNG facility. We expect this plan to increase daily production by approximately 900 MMVTUs a day at commissioning in 2025. And last but not least, In June 2023, we announced our planned development of a landfill gas to RNG project in Irvine, California at the Frank R. Bowerman Landfill. This project is anticipated to process the large and growing volumes of biogas in excess of the existing capacity of our renewable electric generation facility. With a targeted date in 2026, we currently expect the capital investment of the new RNG facility to range between 85 million and 95 million with a production nameplate capacity of approximately 3,600 MMBTUs per day, assuming currently forecasted biogas feedstock volumes that are projected to be available from the host landfill at the time of commissioning. Next, I would like to provide an update on our PECO dairy cluster project in Idaho. As a result of the public comment period ending March 14, 2023, without any significant comments, CARB certified our Tier 2 application and certified CI value of minus 260.56 that will be used to report and generate LCFS credits. We released the remaining gas from storage in the second quarter of 2023. Related to our PECO feedstock amendments, which increases the amount of feedstock supplied to the facility for processing over a three-year period, the dairy has delivered the first two increases in feedstock, and we have made the corresponding contractual payments. The efficiencies and improvements to both our feedstock digestion and water management have enabled us to process the increased feedstock volumes from the dairy. As we previously disclosed, 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 continue to expect the digestion expansion project will be functionally complete during the third quarter of 2023. We also expect the dairy to begin delivering the third and final tranche of increased feedstock volumes in 2024. As to our swine waste to renewable energy development initiative in North Carolina, we continue to work with our engineer of record through the optimization and deployment of improvements to the patented reactor technology at our Turkey Creek, North Carolina location. In July 2023, we signed a renewable energy certificates agreement with Duke Energy, under which Duke will purchase the swine waste wrecks from the conversion of swine waste feedstock into renewable energy at the Turkey Creek, North Carolina location. Once fully commissioned, we expect the facility to sell up to 47,000 RECs per year to Duke annually to meet the terms of that agreement. As a reminder, in the first quarter of 2023, we 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 the Turkey Creek, North Carolina location. Lastly, I would like to highlight a recent announcement regarding our potential development opportunity to create a beneficial use of otherwise waste biogenic carbon dioxide. In July 2023, we entered into a letter of intent with a North American subsidiary of Denmark-based European Energy, which reserves the use of the CO2 for our Texas facilities. Under the terms of the LOI, we expect to contract CO2 volumes from facilities to European energy sufficient for their large-scale production of e-methanol. Upon final agreement execution, the delivery term is expected to last up to 15 years with first delivery in 2026. The LOI terms allow for our capital commitments to be based on choosing technology that is most suited for the optimal delivery of the CO2 volumes to European energy. The planned delivery is expected to prevent critical amounts of biogenic CO2 from entering the atmosphere, put it to beneficial use, and create a new fixed-price commodity revenue stream for MOTOC. And with that, I will turn the call over to Ken.