Intrepid Potash, Inc

Thank you for standing by. This is the conference operator. Welcome to the Intrepid Podash, Inc. second quarter 2022 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 this conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Evan Mapes, Investor Relations. Please go ahead.

Thank you, Angela. Good morning, everyone. And thank you for joining us to discuss Intrepid's second quarter 2022 results. With me on the call today is Intrepid's co-founder, executive chairman and CEO, Bob Dronavis, and Intrepid CFO, Matt Preston. Also available to answer questions during the Q&A session will be 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 risks and uncertainties that could cause actual results to be materially different from those currently anticipated. These statements are based on information available to us today, and we assume no obligation to update them. These risks and uncertainties are described in periodic reports filed with the SEC, 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 will be to the most directly comparable GAAP measures are included in yesterday's press release. Our SEC filings and press releases are also available on our website at intrepidpottage.com. And I will now turn the call over to Bob.

Kevin, thank you very much. Good morning to everyone joining the call. We really appreciate the attendance and interest in Intrepid. I'll begin my remarks with recent company highlights, then move to broader macro and market commentary, and end with the financial results before passing the call on to Matt. The first half of 2022 has no doubt been exceptional for Intrepid, as the company's $92 million in adjusted EBITDA is the best first half performance in a decade. With a debt-free balance sheet $85 million of cash as of July 31st and a positive outlook, we're in a great position to pursue internal growth projects and opportunistically return capital to shareholders. We have $35 million in a share repurchase program approved by our board. And given the oversold market conditions that exist in the stock market, we firmly believe that buying back shares is one of the best ways we can deploy capital. Now on to the macro. So far this year, fertilizers have gone from a relatively quiet space within the global commodity market to continually making headlines. The unabated impact on fertilizers and grains from both sanctions on Belarusian potash and the Ukraine conflict has been the biggest agricultural story in 2022. While the food crisis in Sri Lanka has shown the vital role that fertilizers play in affordable food production, They've also made the headlines. At Intrepid, we take great pride in being the only United States-based potash producer and one of the two commercial Langmanite producers in the world through our TRIO product. Focusing on our domestic market, the United States farmer economics continue to be quite strong. Based on USDA operating costs and yield projections, farmer cash margins are projected to be historically high this year and next, supported by very strong and high crop prices. As expected, anytime fertilizer prices are at elevated levels, we expect a choppier sales order book, specifically for P and K outside the spring season, as farmers manage working capital by delaying application decisions whenever possible. and buyers do their best to move to just-in-time purchasing. The positive difference in today's market, if you're comparing to potash prices from year-fast, is that both the underlying economics remain very supportive, while the supply disruptions that are causing unmet fertilizer demand to have no near-term fix, despite the marginal announced production increases by a few small producers. As a relatively smaller potash producer with a distinct geographic advantage that serves a diverse set of markets in addition to agricultural, feed, industrial, organic, and turf markets, we expect a good, solid second half of the year. Moving on to financial highlights, our second quarter consolidated adjusted EBITDA totaled $41.59, bringing our first half 22 adjusted EBITDA to $91.6 million. Overall, we're on track to put in the best year in a decade. And to put in perspective just how strong our financial performance has been, the $91.6 million in the first half of 22 alone would have been the best full-year EBITDA since 2014. In the second quarter, our average net realized sales price for potash was $738 per ton and for TRIO was $493 per ton. These were year-over-year increases of roughly 130% and 82% respectively. In second quarter, our gross margin in the potash segment came in at roughly $25 million, a $15 million improvement versus the prior year, while our TRIO gross margin totaled $13 million, a roughly $10 million improvement over the second quarter of 2021. In step with strong EBITDA performance, we delivered $83 million in cash flow from operations through the first half of the year, which is allowing us to invest in our core mining assets to help drive more reliable and higher production, which in turn reduces costs. We've touched on growth projects at our Utah and New Mexico assets in recent earnings calls, but today we're also excited to talk about a sand opportunity we're developing at our Intrepid South ranch. As a reminder, this property comprises roughly 59,000 acres, strategically located in the heart of the Permian oil field activity in the northern Delaware Basin. As we stand today, the Permian has just under 50% of all U.S. land rigs operating today, as well as more than 1,200 drilled but uncompleted wells, commonly known as ducts. As for the initial scope of the project, We estimate that the total capital investment will be approximately $16 million, split equally between dollars already spent in 2022 and those that will be spent in the fourth quarter of 2022 and early 2023. We've already purchased the major long lead time pieces of equipment, which are now manufactured and ready for delivery. We are further making progress on what should be a relatively simple permitting and regulatory process. Our goal is to begin operations and sales in the first quarter of 2023 with initial production potential of over 600,000 tons annually. In our first focus area on the ranch, which we defined by the drilling of 43 core holes, which comprise less than 5% of the total ranch, we estimate for just this preliminary area least 10 years of commercial reserves and given the scale of our property as well as additional core holes we conservatively estimate that the underlying resource potential at intrepid south could be significantly higher than 10 years which could support decades of sand production moreover we think that our our south ranch location which is literally surrounded by new mexico oil field activity will give Intrepid a key competitive advantage, with permanent sand sourcing and supply having recently been key headwinds for the E&P companies. One of our primary corporate goals has been to continue to unlock value at Intrepid South and increase the revenue cash flow contribution from our oilfield segment solution. And we think the well-defined sand resource presents a tremendous opportunity to help achieve these goals. In summary, Intrepid has delivered exceptionally strong results in the first two quarters of the year as we head into the fall application season. We still see a long runway for robust, strong, firm fertilizer prices given the global supply issues that may persist for the next few years. I'll now turn the call over to Matt for a more detailed review of our financial results and a bit more color on the outlook for the business.