Intrepid Potash, Inc

Thank you for standing by. This is the conference operator. Welcome to the Interpret Potash, Inc. Second Quarter 2023 Results Conference Call. As a reminder, all participants are in a 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 Evan Mapes, Investor Relations. Please go ahead.

Thank you, Kayla. Good morning, everyone. Thanks for joining us to discuss and review Intrepid's second quarter 2023 results. With me today is Intrepid's co-founder, executive chairman and CEO, Bob Dornavis, and CFO, Matt Preston. Also available to answer questions during the Q&A session following our prepared remarks is our VP 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 materially different from those currently anticipated and are based upon 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 referred to certain non-GAAP financial and operational measures. Reconciliations of these 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 IntrepidPottage.com. I'll now pass the call to Bob.

Thank you, Evan, and good morning, everyone. We appreciate your interest in Intrepid in attendance for our second quarter 2023 earnings call. Positive company and industry fundamentals drove another solid quarter of results, with our second quarter adjusted EBITDA totaling just under $16 million, bringing our first half figure to approximately $32 million. Strong sales were again a key highlight for Intrepid, and in the second quarter, our POTUS sales volumes were approximately 40% higher than the second quarter of last year. And for the first half of 2023, Our potash sales of 167,000 tons already represents about three quarters of the total volume we sold in 2022. Behind this improvement was increased potash demand from agricultural markets, with feed also remaining a very important market for us, comprising just under 20% of our potash sales in the first half of this year. Combination of our geographic and logistical advantages, along with sales into premium markets, continues to support robust netbacks, and in the second quarter, our average net realized sales price per ton for potash was approximately $480, or roughly 25% higher than average NOLA pricing in Q2. While we recently saw the announcement of a summer fill program resetting prices, we think the trend of strong netbacks for us will continue, which Matt will touch on in more detail in the call. As we look back As we look into the back half of 2023 and into 2024, the key theme of agricultural markets is that it continues to enjoy a positive backdrop in a market very much still intact with higher income levels. New crop futures for corn and soybeans trade meaningfully higher than levels seen over the last decade, with futures for both markets seeing strength into 2025. Other key international commodities tell a similar story. Sugar and cocoa both currently trade at decade highs, while palm oil futures are roughly 30% higher than the recent 10-year average. Overall, farmers around the world will likely enjoy a third consecutive year of very good profitability. Moreover, hot and dry weather in the United States, unabated war in Eastern Europe, collapsing grain deals, i.e. the Russian wheat deal, and now port disruptions all continue to contribute to supply risk and help drive home the importance of having reliable access to commodities such as potash. We do want to acknowledge that it's certainly not uncommon for agricultural markets to normalize after several years of close to record profitability. On this note, the market has been looking for parallel trends with a common comparison being to the 2012 drought and the period thereafter. To offer some context, As the drop peaked in the late summer of 2012, key crop futures traded at historic highs in aggregate U.S. farm incomes, what was then record levels the following year in 2013. However, annual profitability slowly declined, and by 2016, U.S. farm incomes had decreased to about half the levels from 2013. As for potash during 2013 to 2016, demand in the U.S. actually still showed very solid growth. Over this period, U.S. potash demand experienced a cumulative annual growth rate of approximately 4 percent, while global potash demand grew at 3 percent CAGR. Well, this is just one historical example, and recognizing that there are certainly different market forces at play, this can help inform a potential scenario for when we do eventually see a period of more normal farm profitability. That said, we again emphasize that we remain optimistic on the outlook and agree with third-party forecasts that projects study potash demand growth for the U.S. and the rest of the world in the coming years. I'll now end my prepared remarks with some commentary around our potash growth projects. As a reminder, these projects are designed to revitalize our potash operations by maximizing our brine availability and brine residence time underground, which will positively impact our business in two primary ways. First, higher and more consistent production will increase revenue and cash flow from simply selling more product tons and byproducts. Second, higher potash production will significantly improve our unit economics. We firmly believe that our three potash assets are top-tier operations And when each facility experiences maximum brine availability, sufficient residence time, and normal evaporation, production at each facility can be significantly higher and more consistent than where we stand today. For reference, within the last decade or so, peak annual potash production at HB was approximately 175,000 tons. Moab was approximately 120,000 tons and Wendover was approximately 105,000 tons, for a total of approximately 400,000 tons, or almost 50% higher than our 2023 guidance of 260,000 tons. This helps frame why we've been investing higher levels of capital, our excitement for the business outlook, and why we have created these achievable goals. As for recent highlights, we successfully completed phase one of the HB injection pipeline at our HB facility in Carlsbad, as well as Well 45, Cavern 4, and Well 46, various potash projects in MOA. At HB for phase one, the installation of a new 21-mile injection pipeline, we have proven injection rates at up to 2,000 gallons per minute, which has almost tripled the average injection of approximately 700 gallons per minute over the previous five years. For the remainder of 2023, we'll continue to focus on phase two, which is the installation of a pigging system to help reduce scaling and ensure consistent flow rates. Until the completion of phase two, we anticipate operating at average injection rates of approximately 1,100 gallons per minute, which is still roughly 55 percent higher than rates prior to starting the project. Also at HB, we recently received the green light on permitting our HB Eddy shaft project to target an already measured high-grade brine pool. We expect to start putting brine from this project into our ponds in early fourth quarter this year. At Moab, the Well 45 project, or Cavern 4, is a newly designed single-well cavern system with three interlocking laterals that targets completely new ore in potash bed 9. and was commissioned successfully in July. Cavern 4 is designed to have a long operational life, and brine measurements so far have shown a solid availability of high-grade ore. Well 46 is an additional horizontal drilling project designed to target high-grade brine in a pool in the original mine workings in Potash Bed 5 and was also recently commissioned. Well 46 serves three key purposes. First, contribute to our 2023 potash production when harvest begins in the third quarter. Second, create a medium to longer term reliable wellbore access to drill additional laterals to target unmined ore or access other stranded brine bowls. And third, serve as a backup for other injection extraction wells. At Moab, after successfully commissioning wells 45 and 6, we kept the rig and crew onsite to drill one more horizontal lateral. For this last effort, we used an existing vertical well as an access point and then horizontally drilled a lateral or whip stock from the vertical well with this new lateral designed to provide better access and brine circulations to one of our other horizontal caverns. Similar to oil and gas well work rubbers, our horizontal caverns at Moab occasionally need revitalization, reworking, from time to time to help ensure we maximize our production and resources. Overall, I'm very encouraged by the strong project execution we've demonstrated so far this year. We remain confident that the capital we're spending will position our revitalized potash assets for higher and more consistent production, and in turn, help ensure that we fully capitalize on the magnitude of the opportunity in developing our long-life potash reserves for many decades to come, as well as a strong attempt to reduce the cyclicality that can be a result of lesser brine availability. I'll now turn the call over to Matt. Please go ahead.