Intrepid Potash, Inc

Welcome to the Intrepid Potash, Inc. Q2 2021 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Matt Preston, Vice President of Finance. Please go ahead.

Thanks, Charisse, and good morning, everyone. Thanks for joining us to discuss Intrepid's second quarter 2021 results. With me on the call today is Intrepid's co-founder, executive chairman, and CEO, Bob Gernobis. Also available to answer questions during the Q&A session following our prepared remarks will be our President, Brian Stone, and our Vice President of Sales and Marketing, Zachary Adams. Please be advised that our remarks today, including answers to your questions, include forward-looking statements as defined by U.S. securities laws. These forward-looking statements are subject to the risks and uncertainties that could cause actual results to be materially different from those currently anticipated. These statements are based on the information available to us today, and we assume no obligation to update them. These risks and uncertainties are described in our periodic reports filed with the Securities and Exchange Commission, which are incorporated here by reference. During today's call, we refer to certain non-GAAP financial and operational measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in yesterday's press release. Our SEC filings and press releases are available on our website at IntrepidPodash.com. I'll now turn the call over to Bob.

Thank you, Matt, and good morning, everyone. Our second quarter was highlighted by another strong performance in our fertilizer segments as strong demand and increasing prices resulted in strong bottom line results. We recorded second quarter adjusted net income of $7.4 million and adjusted EBITDA of $16.9 million, significant improvements over both the prior year and the first quarter of 2021. As expected, Cash flow from operations was impressive, with $32.3 million in cash flow in our second quarter alone and $51.4 million for the first six months of 2021, already exceeding our cash flow from operations for the full year 2020. In addition to strong results, we received notice of full forgiveness on our Paycheck Protection Program loan from the SBA and paid down the remaining $15 million on our senior notes. Our balance sheet is clean and strong and will allow us to execute on the significant opportunities in front of us in the oil field market. Second quarter results also benefited from $6 million received for the sale of another small 320-acre tract of land located adjacent to our 60,000-acre Intrepid South Ranch and the associated saltwater disposal permits with it. generating a satisfactory gain considering we purchased the assets about two years ago for $3 million. We ended the quarter with $55 million in cash on hand and approximately $30 million outstanding on our revolving credit facility and expect to pay that down in the third quarter. Earnings for our nutrient business improved dramatically in the quarter as we continued to layer in sales at increasing price levels. Potash pricing has continued to improve in both the U.S. and global markets since our third quarter price announcement, and we are currently layering in spot agricultural sales at $250 per ton above the 2020 summer fill price levels. We expect to continue to layer in spot sales during Q3 at increased pricing levels, leading to another quarter of higher average net realized sales prices in the quarter. Solid agricultural economics across the global cornucopia of crops from coffee, sugar, cotton, palm oil, soybeans, corn, wheat, and other ag commodities help boost and further strengthen the global farming economy, which in turn provides a foundation for firm potash pricing. Good application rates across our markets left most distributors low on inventory at the end of the spring season and buyers have been eager to restock depleted inventory levels. We expect good demand will continue through the second half as increased farm income levels combined with the potential for an on-time harvest remain supportive of fertilizer application. Our oilfield solutions business improved compared to the second quarter of 2020, although margins were slightly reduced as we intentionally high graded and deferred to later scheduled water sales on our south ranch in anticipation of higher margin sales in the second half of the year from fracts that are closer to our wells and based on a sliding scale pricing tied to West Texas Intermediate. Water sales are already picking up in the third quarter with approximately $1.5 million in sales in July alone, and we have a great outlook for the rest of the year. Oil pricing remains supportive, particularly for the northern Delaware Basin, and our south water rights are fully committed in the second half of the year, and the runway into early 2020 looks very promising. Other revenue sources, which include a produced water royalty, caliche, brine sales, and surface use agreements, improved significantly in the second quarter compared to the prior year, highlighting the improved oil field activity near our operations. We continue the pivot to ESG-friendly full cycle water management systems, investing in additional recycling equipment during the second quarter, and we look forward to expanding on the full cycle water management products and services we offer in the Delaware. We expect to mobilize our first 70,000 per day barrel recycle unit in the next few weeks with the potential to steadily increase volumes to over 200,000 barrels per day over the next few quarters as we bring additional recycle units online. And now I'll turn the call over to Matt for a view of our financial results and outlook.