OPAL Fuels Inc.

Good morning and welcome to the Opal Fuels second quarter 2024 earnings call and webcast. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. As a reminder, this event is being recorded. I would now like to turn the call over to Todd Firestone, Vice President of Investor Relations, to begin. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Opal Fuels second quarter 2024 earnings conference call. With me today are co-CEOs Adam Kimura and John Zamora, and Scott Contino, Opal's interim chief financial officer. Opal Fuels released financial and operating results for the second quarter of 2024 yesterday afternoon. And those results are available on the investor relations section of our website at opalfuels.com. The presentation and access to the webcast for this call are also available on our website. After completion of today's call, a replay will be available for 90 days. Before we begin, I'd like to remind you that our remarks, including answers to your questions, contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance and actual results. could differ materially from what is contained in such statements. Several factors that could cause or contribute to such differences are described on slides two and three of our presentation. These forward-looking statements reflect our views as of the date of this call, and Opal Fuels does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion on certain non-GAAP measures, a definition of non-GAAP measures, Use and a reconciliation of these measures to the nearest gap measure is included in the appendix of the release and presentation. Adam will begin today's call by providing an overview of the court's results and recent highlights and an update on our strategic and operational priorities. John will then give a commercial and business development update, after which Scott will review financial results. We'll then open the call for questions. And now, I'll turn the call over to Adam Kamara, co-CEO of Opal Fuels.

Good morning, everyone, and thank you for participating in Opal Fuel's second quarter 2024 earnings call. Our second quarter results were solid and in line with our expectations. A number of factors are driving our growth outlook for the remainder of the year, including a strong RIN market, which we've taken advantage of by selling forward the majority of our expected RIN sales at favorable pricing, accelerating production growth from our operating facilities, our SAFIRE and PULQ RNG projects remaining on schedule, and finally growth in our fuel station services segment. Adjusted EBITDA for the quarter was approximately 19 million, sequentially higher versus the first quarter as we've continued to see improvements across our business segments driven by higher RNG production, increasing throughput of RNG in our dispensing network, and improved margins in fuel station services. We expect continued sequential growth over the balance of the year and are maintaining our 2024 adjusted EBITDA guidance of 90 to 100 million. One contributing factor to this sequential growth, which we are happy to announce, is that our Prince William project has received EPA certification, and we expect to begin selling RINs from this project in the third quarter. We remain on track to bring our next two landfill RNG projects, Sapphire and Polk County, online as expected in the third and fourth quarters, respectively. We're executing on our growth objectives and are excited that construction has begun on our 16th R&G project at the Burlington County, New Jersey landfill. This project is the second with our joint venture partner, South Jersey Industries, and represents 0.46 million MMBTUs of annual design capacity. Combined with the Cottonwood project announced last quarter, we have now placed 1.1 million MMBTU of new RNG production annual design capacity into construction this year and are maintaining our guidance of placing at least 2 million MMBTU of new RNG production into construction for 2024. Our fuel station service segment continues to perform and grow in line with our expectations supporting our upstream RNG projects with dispensing in the highest value transportation fuel offtake market. We are maintaining fuel station services adjusted EBITDA guidance of 75 to 90% growth in 2024 compared to 2023. I also wanted to mention a change to our full year RNG production outlook, which is now expected to range between 4.0 and 4.4 million MMBTU versus previous guidance of 4.4 to 4.8 million MMVTU, primarily driven by the ramp-up of our most recent facilities, which we expect to be short-term in nature. Finally, we continue to believe there's a great opportunity for our industry to expand bipartisan support, including renewable electricity produced from biogas. It is important to remember what we do. We capture harmful methane emissions from decaying organic waste in place, and convert them into productive and low-carbon energy products that utilize existing pipeline and electricity grids. We believe OPWL is well-positioned to continue to be a leader in the development, operation, and distribution of these low-carbon intensity fuels utilizing proven technologies and a proven track record. With that, I'll turn it over to John.

John? Thank you, Adam, and good morning, everyone. Opal Fuels continues to execute on building and operating reliable R&G production facilities and fueling stations. Operationally, second quarter production results were in line with our expectations. R&G production was 0.9 million MMBTUs for the three months ended June 30th, 2024, a more than 50% increase year over year. As Adam mentioned, we're making progress on our strategic growth goals by putting projects into construction like Burlington this quarter and Cottonwood last quarter, and we're also executing by moving construction projects into operation. We currently have nine operating RNG projects and seven RNG projects in construction. Construction of our new projects is proceeding well, and they continue to be on schedule. We expect to bring online three large landfill RNG projects during 2024. We've already brought online the Prince William RNG project. And the Sapphire project is mechanically complete and in commissioning, on track for a third quarter completion date. And Polk County continues to be on track for a fourth quarter completion date. We expect to exit the year with 11 RNG facilities online, representing an annual design capacity of 8.8 million MMBTU. compared to 2.3 million MMBTU at year-end 2021, more than tripling over the past three years. Atlantic, our first SJI joint venture RNG project, which we put into construction in the third quarter of 2023, is progressing, and we continue to expect it to begin commercial operation in the third quarter 2025. Atlantic is expecting to contribute 0.3 million MMBTU of annual design capacity net to OPAL. Construction at our 100% owned Cottonwood Landfill RNG project is also progressing well and represents 0.7 million MMBTU of design capacity net to OPAL. We expect the project to begin commercial operations consistent with recent project timelines. Finally, we are happy to have announced the start of construction at the Burlington RNG project. As mentioned, this project is the second RNG conversion project with our joint venture partner, South Jersey Industries, and represents 0.46 million MMBTU of annual design capacity for our 50% ownership, and helps us progress towards our goal of putting 2.0 million of MMBTU of design capacity into construction this year. Industry tailwinds continue to support OPWL's mission. We are seeing demand strengthen across end markets. With that, I'll turn it over to Scott to discuss the quarter's financial performance. Scott?

Thank you, John, and good morning to all the participants on today's call. Last night, we filed our earnings press release, which detailed our quarterly results for the quarter ending June 30, 2024. Our 10Q will be filed tomorrow. Looking at second quarter results, RNG production increased to 0.9 million MMBTUs from 0.6 million MMBTUs in the second quarter of 2023. The increase is largely due to both the Emerald and Prince William RNG projects contribution to production volumes. Revenue in the second quarter was $71 million as compared to $55 million in the second quarter of 2023. The main driver for the increase in revenues was the timing and pricing of environmental credit sales, including both RNG fuel and fuel station services where we dispense all of the RNG for our projects including our joint venture projects, as well as other third-party R&G supplies. OPWL's share of revenues from equity method investments for the quarter was $11.2 million as compared to $2.1 million in Q2 2023, which is not included in revenue as reported on the income statement. Net income for the second quarter was approximately $1.9 million as compared to $114.1 million in the second quarter of 2023. The difference was primarily driven by the gain last year from the deconsolidation of our Emerald and Sapphire projects. Excluding this one-time gain, our adjusted net loss for the second quarter 2023 was $7.8 million. Adjusted EBITDA was $18.9 million in the second quarter as mentioned, compared to $5.1 million in the second quarter of 2023, partially driven by the timing of environmental credit sales. A reconciliation to GAAP results is provided in our earnings release from yesterday and in our investor presentation updated this morning on our website. The fuel station services segment revenues were $39.3 million for the quarter as compared to $30.0 million in the second quarter of 2023. The increase in revenues was primarily the result of increased RNG marketing fees, concurrent RIN and LCFS sales, and improved margins. Renewable power revenues were $12.2 million for the quarter compared to $14.5 million in the second quarter of 2023. This decrease was primarily due to the Emerald and Prince William RNG facilities, which are using gas that was previously utilized in renewable power facilities. In the second quarter, capital expenditures were approximately $28.5 million which includes approximately $5.6 million relating to equity method investments and approximately $7.7 million associated with downstream stations. Our senior secured credit facility provides up to $450 million of term loans over an 18-month draw period and $50 million of revolving credit. As of June 30, 2024, approximately $211.6 million was drawn down on the facility, and we have utilized approximately $13.7 million of our revolver availability to issue letters of credit. As of June 30, 2024, liquidity was approximately $302 million, consisting of $275 million of availability under the credit facility and $27 million of cash, cash equivalents, and short-term investments. We believe our liquidity and anticipated cash flows from operations are sufficient to meet our existing funding needs. We are maintaining our 2024 guidance except for RNG production, which is expected to be 4.0 to 4.4 million MMBTUs compared to our previous range of 4.4 to 4.8 million MMBTUs. primarily driven by the ramp-up of our most recent RNG facilities. I'll now turn it back to John for concluding remarks.

In closing, we are pleased with this quarter's results. We remain committed to furthering OPWL's vertically integrated mission together with our partners to build and operate best-in-class biomethane capture and conversion projects that deliver industry-leading reliable, and cost-effective low-carbon intensity energy products that displace fossil fuels and mitigate climate change. And with that, I'll turn the call over to the operator for Q&A. Thank you all for your interest in Opal Fuels.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please lend yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Matthew Blair with TPH. Your line is open.

Thank you, and good morning. I guess just in regards to the guide, so you maintain the full-year EBITDA guidance, but the R&G fuel production numbers coming down. Could you talk about the moving parts there and what's the offset? Why is unit profitability, I guess, coming in higher than you expected? Thanks.

Yeah. Hey, good morning. This is Adam Kimora here and I appreciate the question. So on a high level, the math, when we gave our initial guidance of 4.4 to 4.8 million MMB2s of production, And using a $3 RIN, we had our adjusted EBITDA guidance of 90 to 100 million. And you can see in that production spread between 4.4 and 4.8, about 400,000 leads to about a $10 million adjusted EBITDA between the low end and the high end. We also had guided folks that every $0.25 in a RIN price move would be about $12 million of adjusted EBITDA when we were giving out the sensitivity in our initial guidance. So if you think about our new production range being $400,000 lighter than what the original guidance was and the RIN price being stronger than our original guidance, and our forward sales position where we've sold forward the vast majority of our RIN production for this year, you can see that the RIN price that we'll achieve for the year will basically offset where that production shortfall came from. We had guided folks that a 25-cent RIN price move was a $12 million move in the adjusted EBITDA.

Okay, sounds good. And then, Adam, are you seeing any incremental opportunities for selling RNG into non-transportation markets? I know in the past, Opal has thought that the utility market just doesn't offer enough value. You don't get paid for the full RIN. But what about any sort of other markets, you know, shipping or chemicals? Are there any other opportunities to monetize RNG?

Yeah, thanks again for that question. There certainly are increasing opportunities, and we are seeing new end markets continue to develop and quite frankly strengthen from a demand perspective for RNG. And marine fuel is one that I think is or we think is particularly interesting as we're seeing a lot of ships being delivered that can run off of renewable methanol. And certainly, you know, there are some export markets over to Europe that we think, you know, will develop as well. I know there are some regulatory matters that are still being figured out in terms of tracking RNG to export over to Europe. And, you know, at this point, we think that there are great applications for RNG. in marine fuel, and we think that there's going to be continued interest there. And the voluntary markets here in the U.S., I know some folks are contracting out to sell their RNG at fixed price contracts. There are some California utilities that are really interested in purchasing it and some others as well. I would say that the discount to the transportation fuel market still seems too great for us. So we have not yet engaged in those other end markets, but we think that they're going to continue to develop. Pricing likely will continue to rise there to effectively try and procure or entice folks away from the transportation fuel market. So we continue to see all sorts of interest in RNG, and I know folks are a little bit longer out talking about renewable hydrogen or SAF, But at this point, we still feel like the discount is too great versus transportation fuel and are continuing to pursue the transportation fuel offtake market. But those markets are developing, and we are keeping a close eye on them and do think they will be part of our portfolio mix, just not yet. Sounds good. Thanks, Adam.

Thank you. Our next question comes from Paul Chang with Scotiabank. Your line is now open.

Thank you. Good morning, guys. Adam and Jonathan, two questions. First, maybe it's a little bit from a vision or strategic standpoint. As you grow your RNG upstream production, does the The business strategy is that to grow your service station business that in tandem or keep track so that you keep relatively a balanced portfolio between upstream and downstream or that you say, okay, I mean, I have sufficient scale in the downstream, in the service station, and then the industry also have enough and we really don't need to grow that. And so we will see more tilt towards into the upstream over time. So what's the business strategy from that standpoint? That's the first question. The second question is, I have to apologize, it's a little bit of the detail. On the second quarter, your LCFS sales price of $100 is actually up sequentially, but if we're looking at the industry, actual benchmark for LCFS price is down. So how's the mechanic work in here? Thank you.

All right, great, Paul. I'll take the first question, and then John will talk about our offtake contract in the LCFS market. So I believe the first question was, how are we viewing the downstream distribution and marketing business and fuel station business in conjunction with our upstream? And I will say we are extremely excited on both the upstream development of those R&G assets and the downstream fuel station business The fuel station business for Opal is attractive in its own right. We're achieving good returns on capital on fuel stations we own with fuel purchase agreements, long-term tenure in nature fuel purchase agreements for those stations. And we have a very profitable business to build and service those stations. So even if RNG was not part of the picture, we like the growth outlook for our fuel station service business. will continue to grow that business, even if we are taking our RNG and finding other offtake markets. It just so happens that there is that terrific strategic tie-in with our upstream business. And so we're seeing great opportunities to deploy capital, both in new RNG projects and the downstream fuel station business. And quite frankly, if you went back 10 years, There was a lot of growth experienced by Opel Fuels building fuel stations and servicing those fuel stations just for the commodity price differential of CNG versus diesel fuel. With that 15-liter engine, we see a lot of opportunities even with just the economics of CNG versus diesel. you know, we think that's going to be an attractive place for us to continue to invest and grow that business and see a lot of conversion potential, you know, for the fuel station service business.

Adam, do you have a CapEx or that number of station growth kind of matrix you can share per year over the next several years?

Yeah, I think what we do, well, we don't give guidance out past 2024. But we do provide detail in our CAPEX for how much is being invested in the fuel stations versus the RNG projects. Again, the vast majority of the CAPEX that we spend is on new biogas capture and conversion projects. I think it's somewhere in the 80 plus percent range that likely will continue. But we do give it at least on a historic basis in our filings.

And the average price of RNG projects obviously is commensurately larger than the average price of the fueling station projects as well. Paul, turning to your LCFS question, we get LCFS credits principally from two sources. One is our Sonoma Dairy Project in Arizona. And there we have a offtake contract that has a floor price of $100 for the credit. So we enjoy $100 sale price there as long as the price is below that. And that's currently the situation.

Yeah, just to follow up there, that contract goes out for multiple years. So that hundred dollar floor is in place for another four and a half years.

Yeah. So and then the other place we get our LCFS credits is from our downstream dispensing, where we get a portion of the credits as a marketing fee for low CI projects that we dispense into California. And and there typically we're recognizing those credits at market prices. And those market prices have been in the $45 to $50 range most of this year.

Yeah, and I think in the second quarter we did not sell at those prices, so we've been holding those credits in inventory. But they're recognized at that price.

I see. Perfect. Thank you. Really appreciate it.

Sure.

Thank you. Our next question comes from Ryan Fink with B Reilly. Your line is open.

Hey, good morning, guys. Thanks for taking my questions. Maybe just a follow-up on CapEx. A couple months ago, we spoke about the maintenance CapEx for your operating assets. Can you just remind us what maintenance CapEx is for the current RNG portfolio or, you know, on a dollars per MMBTU basis? to help give folks a sense of what your discretionary cash flow looks like.

This is Scott Cantino. Thank you, Ryan, for the question. With respect to maintenance capex, for our renewable power portfolio, there is a reasonable amount of maintenance capex a year that we We add back to adjusted EBITDA. It's, you know, in the $10 million a year range, something like that, maybe a little less in that ballpark. For our RNG projects, there's a lot less major maintenance capex. That's all capitalized. And I don't have a dollars per MMBTU number to give you, but it's not a large number. In fact, since most of our projects are very new, it's not a significant number right now.

Yeah, this is Adam. Just a quick follow-up there because we've been chatting internally where I think it might be helpful for investors to understand the discretionary free cash flow generation of this business. We've told people historically that we'll have 90% to 95% free cash flow conversion from our EBITDA. And I think it's lost on folks. And we're going to start really illustrating that. As Scott was just mentioning, one of the beautiful things about our business is after we build these facilities, unlike a traditional energy company, we don't have to drill or spend capital to produce our fuel. If you remember what we do, we drop PVC pipes into landfills and they have perforations, and we connect them all together, and we apply a little bit of suction to gather all that gas to our facilities. And the facilities themselves, if you look across the portfolio where it sits today, it's in the single-digit millions of maintenance capex, and these are 20-, 25-year assets, and some of our gas rights even go out longer. So when you really think about us and the valuation of Opal Fuels, our discretionary free cash flow after we build these facilities is really pretty phenomenal. And that discretionary free cash flow can be used to invest in new projects. And that's what we're doing today because we still see really attractive opportunities to grow the business. And in the future, you've got other things you could be doing with that discretionary free cash flow. You could make acquisitions. You could pay a really healthy dividend. There's all sorts of things that we think can be a powerful shareholder value driving tool. And I think we're going to get back into that and start illustrating to folks, not only is this really you know, are we growing extraordinarily quickly from an adjusted EBITDA perspective? But that adjusted EBITDA, you know, translates into discretionary free cash flow to enhance shareholder value. So I'm thankful for the question. And, you know, we're going to start, I think, you know, showing better descriptors of growth capex versus maintenance capex and discretionary free cash flow. So in total, As Scott was mentioning, our maintenance capex across renewable power and the RNG facilities is in the low, between 10 and 20 million, I think, if we aggregated it all up and you look forward. And it's really attractive from that discretionary free cash flow perspective.

Yeah, I appreciate all that color, Adam and Scott. For my second question, I guess just wondering if you have an update on the ITC and any thoughts on timing there or potential risks you might see if we have a change in administration in November.

Yeah, another good question. This is Adam here. I think we're in a pretty good spot in terms of getting a final rule that we think likely will include our RNG projects for that saleable ITC credit. As for timing, I feel like what we've been hearing is that Treasury does not want to just issue another piecemeal correction or on specifically Section 48 for RNG projects. They may be trying to issue one set of total final guidance on 48. And I think there may be some other issues that they're trying to work through and finalize. So I feel like our specific Section 48 final rule may be you know, just waiting as they finalize whatever else they're doing in Section 48. You know, I know folks have been saying, you know, late summer, we're in late summer, third quarter. So we're still anticipating that we'll see that, you know, hopefully soon. And so, you know, there's no change to how we're thinking about it in terms of total dollars that you know, we think we'll be able to sell here as cash proceeds. And, you know, we've told folks not included in our adjusted EBITDA, you know, something close to that 40 million range. And we've been, you know, in discussions with folks to, you know, even potentially, you know, close some of those sales as Treasury is still, you know, coming out with that final guidance. Just an addendum to that previous question that we talked about in terms of discretionary free cash flow, those kinds of levels may be available for us in the next several years, because I think everybody understands that it's everything that you place into construction this year that qualifies. And we've got a host of projects that we think we're going to pre-qualify here before the end of the year. So if you want to think about our discretionary free cash flow over the next several years, that would be something else that's available to us. And, you know, we're still working through the accounting treatment of where it will show up on the income statement because they are saleable credits. And, you know, so still optimistic that we're going to get that positive final resolution. Disappointed it's taking this long, but it's not slowing us down in terms of setting up projects to prequalify it. and setting up our monetization for those credits when they ultimately get generated. All right. Appreciate that, Adam. I'll throw it back. Oh, sorry. Yeah. Thanks, Scott. Just reminded me. I missed the change of administration, or I should say now potential change of administration, or at least change of party. There's been a lot of Republican support for what we do, and I think there was a letter that was sent to the House speaker signed by 18 or 20 Republicans talking about some of the benefits that are in the IRA and some of the tax credits that go along with it. I don't think that the Section 48 is at particular risk And there is a lot of Republican support for specifically this tax credit within the IRA. So we don't think that there's a lot of risk that necessarily this piece of the IRA will fall under that kind of scrutiny.

Got it. Thanks for that additional detail.

Thank you. Our next question comes from Adam Buvez with Goldman Sachs. Your line is now open.

Hi, good morning. Can you update us on just how you're thinking about your capacity to build fuel stations if demand for the 15-liter natural gas engine takes off? How many fuel stations could you build in a given year?

So our current build is in that 40 range, 40 to 50 range, and that's sort of how we're set up today. I would say it would, in terms of scaling up that business, it would not be difficult for us. We don't have many constraints to how we would continue to add a scaling capacity there. It would be to continue to add to our staff, quite frankly, both on the construction side and the service side. You know, Opal Fuels is in a little bit, you know, we like to think of ourselves as being unique in a lot of ways. One of the ways that we're unique is our ability to attract talent. You know, a lot of folks out there want to be part of the Opal Fuels team, really like what we're doing. And we think we'll be in a good spot to continue to add service techs and construction teams to scale up that business and really don't see any constraints from that perspective if Cummins and others are right in the industry for what the uptake will be for that 15-liter engine.

And then as we think about the Burlington and Cottonwood projects, what's the marked market on how you're thinking about project timing today?

You know, it's interesting because the pulp project, which is coming online in Q4, we expect that to be early Q4 and that project will hit around a 15 or 16 month timeframe. So I would say that's kind of at the faster end of our projects. We're certainly focused more on the time period leading up to getting projects into construction to ensure that those construction timeframes remain tight. For a project, an average project, we would think an 18 to 20 month period would be a reasonable timeframe for us. Recollect that when we put a project into construction, we have a basic project design, we have the gas rights executed, and a path to pipeline and electric interconnection supply. So those are some of our key critical path items for putting a project into construction. Some people define construction differently. The actual time of getting out and starting to work, turning over the ground and putting in foundations and whatnot may occur somewhat later in the process. Certainly, during that period, we'll complete the pipelines, we'll complete the rest of the permitting and other construction. Sometimes, in the past, some of those other items have taken a little while longer to complete, and so it pushed us out. For example, on the SAFIRE project, which is in commissioning right now, at the front end, the landfill was working on some issues. Dave Kuntz, associated with PFAS and other things that that we have delayed our permitting by a couple months. And so set that timeframe longer but Dave Kuntz, You know, we're seeing Dave Kuntz, Projects in the future auto reach that same 18 to 20 month timeframe that I alluded to before.

All right, then the last one for me, you know, in the beginning of the year, I think you got it towards an increase of RNG pending monetization in 2024 of $15 million. Can you just update us on how you're thinking about the difference between the timing of RNG monetization and actual production and the balance of the year?

Yeah, this is Adam here. Once we started talking about our adjusted EBITDA, not having that RNG pending monetization component, we still think it's helpful for folks to see what is being sold in a given quarter and pricing and that sort of thing to get a sense of how the operations are performing. We don't see any major changes. to how we were thinking about it, but we just don't think it's as impactful anymore to talk about as a guidance metric. And likely as we move into 25 and beyond, likely not be talking about that as much and talking more about what our production outlook and adjusted EBITDA outlook is and that sort of thing.

I think I can illuminate another part of your question, and that is that we look at our production across the year and we will sell when the market, when we feel that the market is a good place, those credits on a forward basis so that, as Adam said earlier in his comments, we've sold, as he put it, a vast majority of our credits for the year. Typically, we'll look at credit at the projects that are in operation and try to sell as much of those as we can during the course of the given year. As projects come online and complete their commissioning, we'll start to sell those as well. And credits are generally saleable within the current year or the current vintage year. And with regard to 2025, in the merchant rim market, there's not really a deep market there yet. That'll develop towards the end of the year. So, Adam, I don't know if you wanted to add to that.

Yeah, no, I think maybe I missed that nuance in the question. You know, we are anticipating selling all of our RINs that we generate in 2024 in the calendar year of 2024. Got it.

Very helpful. Appreciate the color.

Thank you. As a reminder, to ask a question, please press star plus. 11 on your telephone. Again, that is star 11 to ask a question. Our next question comes from Alex Canyon with Marathon Capital. Your line is open.

Hi, good morning. Thanks for taking my question. Maybe the first thing I was curious about is just as you look to, you know, in the face of the updated production guidance for this year, Do you expect that really by year-end that all of the operating and commissioning assets are going to be roughly at full expected run rate, or will there still be a little bit more to go as you move into early 2025?

Yeah, this is Adam here. So just wanted to provide a little bit more color on the production outlook in some of the newer facilities that have been commissioned. And you can see some of that variability in the ramp of those new facilities from time to time. And specifically this year at Prince William, we had done a significant amount of wellfield drilling and expansion at that landfill before the facility came online. And we were not able to tie in all those wellfield improvements and expansions into the broader collection system before we began operating the facility. And the root cause of that was really flare capacity that the municipality had in terms of us collecting the additional gas and flowing that additional gas. And when we tied in the wellfield expansion and drilling into the base collection system, there was a little bit of a slower tie-in and seeing the gas flow from those additional wells. So we're in the process of remediating them and re-drilling some of them. And we believe it's short-term in nature, and for us, we think short-term means several months. So, you know, we've been a little bit conservative for when we'll see, you know, the gas production from that well field expansion. And, you know, we are, I'd say, cautiously optimistic that, you know, we'll start to see all those improvements in the gas flowing from the expansions that we had done. you know, as we move through the balance of the year and certainly provide, obviously, our 2025 guidance, you know, sort of later on when we issue our final year results. But, you know, that's how we think about, you know, sort of short-term in nature. And the plant is performing excellent in terms of its processing of its inlet gas. You know, so that's the one issue that popped in terms of our production. And we're also continuing to optimize the equipment at our Emerald facility to be appropriately scaled to the size of the project. And you all may recall that it's one of the largest RNG projects in the country. And, you know, certain scalability that we're still optimizing when you're looking at the compressor size that we used there or deoxyskid that we used there. And again, those are relatively short-term in nature as we continue to optimize that equipment. And really, that's really on the margin there. So I feel like both of those facilities will show good growth as we move into 25.

And just to repeat things that we've talked about in the past, that we build projects to a size larger than the current gas resource because these Landfills that we're on are all open and growing landfills. And so over time, you'll see these projects continue to improve as we call same store sales as the gas resource continues to grow. We reach fairly quickly on each of these projects a availability and efficiency for these projects. In the kind of low to mid 90s range which when multiplied together gives you kind of a mid 80% productivity factor. And so we look at both of those factors over time, the growth in same store sales, the efficiency and availability of our product projects. And as Adam was talking about earlier, the ramp on the initial front end of the project.

Yeah, so our initial thinking, just to sort of put a button on that, is really more about 24 than 25 at those newer facilities.

Great. Thanks for that, Collar. And then maybe just to follow up, thinking about maybe on the fueling side and the Class 8 side, You know, I know that, you know, the phase three final rules were out. I think there have been some revisions. But just kind of wondering about how you think about, you know, the kind of adoption or the pace of acceleration or accelerating pace, I should say, on CNG-related vehicles as it stands relative to kind of what EPA has been kind of giving in terms of their guidance.

Oh, that is a really interesting question, and it dovetails into a couple of things. So, on the 15-liter itself, you know, really pleased with the feedback that we're hearing, really pleased that Freightliner is going to be rolling it out and make available for those that like to buy Freightliner trucks and to join PACCAR. you know, really think that it's going to be a terrific product for fleets to replace diesel and save money. And if they're working with an RNG supplier, they'll get all the sustainability benefits with it as well. And, you know, there have been a couple of things out there which, you know, I feel like, you know, I would say, you know, not accelerating adoption. How's that? And And one of them is that noise that has come out of the EPA on phase three truck regulations, which I do believe people are starting to listen to industry feedback. People in DC, I think, are starting to listen to what industry is telling them about those phase three regs. You know, it's one of the interesting things that we and folks in our sector and our industry are really focused on is really educating the democratic side of things or the more progressive climate side of things that not all molecules are bad. You know, specifically in our industry, we're collecting waste molecules that exist and you know, transportation fuel and heavy-duty trucking is a terrific application form where other technologies are struggling to meet, you know, sort of emission reductions for transportation. And, you know, so, you know, we spend a lot of time talking to Republicans about, you know, hey, this is a really great pragmatic solution and really supports a lot of you know, Republican constituencies in ag and municipalities and rural communities that we should be incentivizing and recognizing the benefits of collecting biogas emissions at their source. And specifically with Republicans talking to them about, you know, we should really be also embracing some of these electron policies, whether it be ERINs or other things that promote renewable electricity. And on the Democratic side is really explaining to them that, you you know, combustion of molecules, you know, isn't always bad depending on where it comes from and what the other options are there. So, yes, the phase three EPA regs have created some noise, have created some confusion, you know, have, you know, had, you know, some fleets say, hey, wait a minute, what do those mean for me deploying RNG? And look, that's one of the things that we're focused on and doing. And different political outcomes have different areas of focus for us to do education and advocacy-wise. And that's one where if there's a Republican administration, I think we could be off to the races on the use of R&G in heavy duty trucking and maybe have a little bit more work to do on the electric policies, whether they be ERINs or some other incentives for renewable power. And we can all talk about electricity demand and what's happening in this country and why this is a good answer. And if the Democrats happen to win the White House, I think we're off to the races on a lot of those electricity policies, whether it be ERINs or other things. And we got a little work to do to make sure that hey, this is a really good answer for heavy-duty trucking and, you know, really work on those phase three regs. So needless to say, we think whoever wins, both sides of those policies make sense, which is what we keep talking about. But it'll just direct our focus onto, you know, which ones, you know, we really have to spend more time on. Great. Thank you. Thanks, Alex.

Thank you. Our next question comes from Thomas Merrick. with Jani Montgomery-Scott. Your line is open.

Jani Montgomery- Thanks, gentlemen. Thanks for taking the time for a few questions. Just want to touch base on Cummins 15L, ask a question in a slightly different way. I know you've talked about it extensively so far. Just want to think through potential fleet owners as they look at supply and demand at CNG. Are they contemplating kind of a front loading of infrastructure needed for whatever scale of fleet they're looking to operate? Or do they look at it and think the supply of stations is adequate for their needs? And then just to follow up.

Yeah, another good question. So, you know, we're still in early days of deploying either CNG or RNG as transportation fuel for heavy-duty trucking. And I would remind folks that 85% to 90% of what we build is really dedicated fueling distribution centers and now looking at potentially rolling out lanes for folks between those distribution centers and that sort of thing. It takes us also about 12 to 14 months to build a fuel station, which is about the same amount of time for their trucks to get delivered. So we see those fleets making those decisions at the same time. you know, on fueling infrastructure as they're ordering trucks. And they typically go hand-in-hand where, you know, okay, they're happy with the truck, they know what they're speccing, they're ordering them, and then they're engaged in their fueling strategy. You know, one interesting thing for Opal Fuels is the beautiful nature of our vertical integration and how, you know, certainly RNG has captured the attention of a lot of these fleets because they're also looking for ways to reduce their scope one and scope two emissions. And I would remind folks when fleets use RNG versus diesel, the greenhouse gas accounting protocol is zero scope one emissions and also zero scope two because that's derived from your electricity usage. So this is a really powerful product for them. And so they're engaging with us at the same time that they're thinking about that truck order and really working with us to make sure that the fuel station is aligned and they can get their fuel as those trucks are being delivered.

That is super helpful. And then my follow up is really on EPA rules or potential EPA rules as they look to potentially update their landfill emission standards from 2016. I'm curious just how you think about that opportunity. What are the puts and takes from the stakeholders? I know it's early days, the rule hasn't even been proposed yet, but any color you could provide to us would be helpful just as we contemplate the future of landfill gas and what the EPA is requiring.

Yeah, so I think the EPA is really focused on methane emissions wherever they come from. And quite frankly, Quite frankly, rightfully so. You know, 80% more damaging than CO2, and really the most impactful thing we can do to halt climate change. So they are looking at methane emissions from a variety of places, and they already came out with, you know, a lot of regulations on pipeline companies and E&P companies on how they're going to do methane monitoring and that sort of thing. And, you know, I think they're moving on to other sources of methane as well. And I think EPA recognizes and folks in DC recognize that it's really important to continue to promote public policies that incentivize, you know, the capture of biogas to make sure that it incentivizes the right behavior. And, you know, what technologies or how they're thinking about methane monitoring and measurement I think a lot of that is being worked through, and we don't have a specific opinion on how to do methane monitoring or that sort of thing, but what I do know is that focus on methane emissions or methane emissions from organic waste is likely going to come into focus, and we think we're in a terrific place to help folks capture it and turn it into a beneficial use. So, you know, we think it's going to be, you know, it's going to be a helpful talent for public policy and what we're doing. And, you know, we're happy to partner with folks to make sure we're capturing as many biogenic methane emissions that we can and turning them into their productive use.

Our landfill partners are super focused on collecting methane. and they recognize that this is a real opportunity. I think that the value of the RNG projects has really helped them to increase their focus as well. The more methane they're able to collect, obviously, that turns into higher royalties as well as for those who have ownership interest in projects, higher equity distributions as well. It's a great focus in addition to the RNG projects that the policymakers, as they start to focus on methane emissions, particularly at landfills, you'll see that, you know, the eRIN policy and others really help to promote that capture and conversion and particularly at smaller landfills that may not have the scale to do a larger RNG project. So we'll be looking very closely at how we work with our great landfill partners to promote that policy and increase that collection.

Yeah, and really what it does is, you know, that focus on methane emissions, it's just going to create greater alignment. between us and our feedstock hosts, where everybody is going to be aligned to make sure we're doing everything that we can to maximize the gas collection and its productive use.

Great. Thanks, gentlemen. Appreciate the feedback. Thank you.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Adam Kimora for closing remarks.

Yeah, I appreciate everybody's interest in Opal Fuels. We are really excited about what we're doing here and our growth outlook, and I hope everybody has a wonderful rest of their day.

This concludes today's conference call.