UNITED STATES SECURITIES AND EXCHANGE COMMISSION Table of Contents Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39919 MONTAUK RENEWABLES, INC. (Exact name of registrant as specified in its charter) Delaware 85-3189583 (St ...

Montauk Renewables, Inc. (NASDAQ:MNTK) Q4 2021 Earnings Conference Call March 16, 2022 5:00 PM ET Company Participants John Ciroli - VP, General Counsel & Secretary Sean McClain - President, CEO & Director Kevin Van Asdalan - CFO & Treasurer Conference Call Participants Matthew Blair - Tudor, Pickering, Holt Craig Irwin - ROTH Capital Partners Craig Shere - Tuohy Brothers Investment Research Operator Good afternoon, everyone, and thank you for participating in today's conference call. I would like to turn t ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021; or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-39919 MONTAUK RENEWABLES, INC. (Exact name of registrant as specified in its charter) Delaware 85-3189583 (State or o ...

Financial Data and Key Metrics Changes - Total revenues in Q3 2021 were $39.7 million, an increase of $11.5 million or 40.7% compared to $28.3 million in Q3 2020 [12] - Operating profit in Q3 2021 was $6.7 million, an increase of $1.9 million or 39.2% compared to $4.8 million in Q3 2020 [21] - Adjusted EBITDA for Q3 2021 was $12.8 million, an increase of $2.7 million or 27.2% over adjusted EBITDA of $10.1 million for Q3 2020 [25] Business Line Data and Key Metrics Changes - Renewable Natural Gas (RNG) segment produced 1.5 million MMBtu in Q3 2021, a decrease of 0.1 million MMBtu or 0.7% compared to Q3 2020 [15] - Revenues from the RNG segment in Q3 2021 were $35.0 million, an increase of $11.0 million or 45.9% compared to $24.0 million in Q3 2020 [17] - Renewable electricity production decreased to approximately 43,000 megawatt hours in Q3 2021, a decrease of 6,000 megawatt hours or 12.2% from 49,000 megawatt hours in Q3 2020 [19] Market Data and Key Metrics Changes - Increased natural gas index prices of approximately 79.8% contributed to increases in gas commodity revenues compared to the prior year [12] - Average pricing realized on RIN sales during Q3 2021 was $1.65, an increase of 7.1% compared to $1.54 in Q3 2020 [17] Company Strategy and Development Direction - The company completed the Montauk Ag Renewables asset acquisition to produce renewable natural gas, bio oil, and bio char from agricultural waste [6][9] - The company is focusing on expanding production capabilities and optimizing existing facilities, particularly the Pico facility [10][27] - Management is optimistic about future growth opportunities, particularly in the RNG and renewable electricity sectors, and is exploring new project developments [49][56] Management's Comments on Operating Environment and Future Outlook - Management expects RNG production volumes in Q4 2021 to range between 1.4 million and 1.7 million MMBtu, with corresponding revenues between $38 million and $46 million [27] - The company anticipates improvements in the CI score for the Pico project due to operational enhancements [36] - Management highlighted a dynamic market with numerous opportunities for growth and project development [49][50] Other Important Information - Total general and administrative expenses were $7.5 million for Q3 2021, an increase of $3.4 million or 82% compared to Q3 2020 [14] - The company recorded a reduction to the liability of $0.7 million associated with the Pico facility earn-out obligation [22] Q&A Session Summary Question: Can you elaborate on the sequential improvement from the second quarter and provide some color as to the extent to which below-market hedges are rolling off into the fourth quarter and first quarter '22? - Management indicated that forward commitments for below-market hedges will be rolling off, with expectations for more reasonable RIN price commitments recognized in Q4 2021 [31] Question: Will all that be done by the first quarter '22? - Management confirmed that there are currently no 2022 vintage RINs committed, and the underperformance of RINs recognized throughout the year will clear by the end of Q4 [33] Question: Are the Pico dairy RNG digester improvements seen ultimately improving the CI score? - Management stated that the changes could improve the CI score, with potential for a more negative score due to operational enhancements [36] Question: What drove the sequential drop of 4,000 megawatt hours from the second quarter in REG? - Management explained that the decrease was due to routine preventative maintenance on production engines at the Bowerman facility [38] Question: Can you lay out some approximate guideposts for a clear growth rate that is both responsible and achievable for Montauk over the next number of years? - Management emphasized a focus on projects that add accretive value while prioritizing environmental stewardship and maintaining flexibility in operations [54][56]

Business Operations - Montauk Renewables operates 15 projects across multiple states, focusing on converting biogas into Renewable Natural Gas (RNG) and Renewable Electricity [120]. - The company completed the Montauk Ag Renewables Acquisition for a total of $3,797 in cash and $12,500 in restricted stock awards, enhancing its technology for renewable natural gas production [123]. - The company expects to increase production at the Pico facility from approximately 150 MMBtu/day after completing significant improvements, with full operations anticipated in Q1 2022 [128]. - The company has amended its Pico feedstock agreement to increase feedstock supply over a one to three-year period, with an initial cash payment of $1,000 [126]. Market Demand and Regulatory Environment - Montauk Renewables is experiencing rising demand for RNG due to public support for renewable energy and regulatory initiatives, which are expected to drive long-term growth [130]. - The company is subject to regulatory changes that could impact the profitability of its projects, particularly regarding RIN pricing and CI score assessments [132]. - The company expects to submit a CI pathway model for approval in Q4 2021, which could significantly impact its ability to generate LCFS credit revenues in 2022 [129]. Financial Performance - Total operating revenues for Q3 2021 were $39,749 million, an increase of $11,499 million (40.7%) compared to Q3 2020 [152]. - Renewable Natural Gas (RNG) revenues in Q3 2021 were $35,002 million, an increase of $11,008 million (45.9%) compared to $23,994 million in Q3 2020 [154]. - Renewable Electricity Generation total revenues decreased by 9.0% to $3,872,000 from $4,256,000 year-over-year [149]. - Total revenues for the first nine months of 2021 were $102,872, an increase of $28,309 (38.0%) compared to $74,563 in the first nine months of 2020 [176]. - Renewable Natural Gas segment revenues increased to $90,707, up $29,908 (49.2%) from $60,799 in the same period of 2020, driven by a 43.4% increase in average realized RIN pricing [179]. Production and Operating Metrics - RNG production volumes for the current year (CY) were 1,510 MMBtu, a slight decrease of 0.7% from 1,520 MMBtu in the previous year [149]. - The company produced 1,510 MMBtus of RNG in Q3 2021, a decrease of 10 MMBtus (0.7%) from Q3 2020 [153]. - Renewable Electricity production volumes were approximately 137 MWh, a decrease of 15 MWh (9.9%) from 152 MWh in the first nine months of 2020 [181]. Expenses and Profitability - Operating expenses for Renewable Natural Gas increased by 8.7% to $14,916,000 compared to $13,717,000 in the same quarter last year [149]. - Operating profit for Q3 2021 was $6,729 million, an increase of $1,895 million (39.2%) compared to Q3 2020 [172]. - General and administrative expenses for Q3 2021 were $7,520 million, an increase of $3,389 million (82.0%) compared to Q3 2020 [159]. - Operating loss in the first nine months of 2021 was $6,010, a decrease of $11,625 (207.0%) compared to an operating profit of $5,615 in the first nine months of 2020 [198]. Cash Flow and Capital Expenditures - Net cash flows provided by operating activities for the first nine months of 2021 were $21,298, a 5.9% decrease from $22,636 in the first nine months of 2020 [209]. - Capital expenditures for the first nine months of 2021 were $7,702, significantly lower than $14,911 in the first nine months of 2020 [210]. - The company expects 2021 capital expenditures to range between $8,000 and $9,000, with additional spending anticipated for optimization projects and development capital expenditures [208]. Tax and Impairment - The effective tax rate for Q3 2021 was (64.3%), significantly lower than the 149.8% effective tax rate for Q3 2020 [170]. - The company recorded an impairment loss of $626 in the first nine months of 2021, an increase of $348 (125.2%) compared to $278 in the same period of 2020 [193]. Other Financial Information - The company continues to implement remediation initiatives for a previously identified material weakness in internal control over financial reporting [212]. - The company is classified as an emerging growth company, allowing it to delay the adoption of new accounting standards [232]. - There were no material changes to significant contractual obligations during the third quarter of 2021 compared to previous reports [231].

Financial Performance - Total operating revenues increased to $31674 thousand for the three months ended June 30, 2021, compared to $27908 thousand in 2020[5] - Net loss was $4652 thousand for the three months ended June 30, 2021, compared to a net loss of $1583 thousand in 2020[5] - Renewable Natural Gas (RNG) total revenues increased by $4203 thousand, or 180%, to $27581 thousand[9] - Renewable Electricity Generation (REG) total revenues decreased by $437 thousand, or 96%, to $4093 thousand[9] Operational Results - CY RNG production volumes decreased by 126 MMBtu, or 82%[9] - Total RINs available for sale decreased by 1623, or 141%[9] - RINs sold decreased by 3250, or 271%[9] - Average realized RIN price increased by $041, or 299%[9] Business Development - Extended Fixed-Price RNG agreement for 45 years, beginning July 1, 2021, covering 900K MMBtu annually[13] - Montauk plans to prioritize its collection of animal and agricultural waste from farms surrounding historically underserved, at-risk communities in North Carolina[16]

Financial Data and Key Metrics Changes - Total revenues for Q2 2021 were $31.7 million, an increase of $3.8 million or 13.5% compared to $27.9 million in Q2 2020, primarily driven by higher revenues recognized under counterparty sharing agreements [15] - Total general and administrative expenses were $7.3 million for Q2 2021, an increase of $3.6 million or 95% compared to $3.8 million in Q2 2020, with $2.2 million related to stock-based compensation costs [17] - Adjusted EBITDA for Q2 2021 was $5.2 million, a decrease of $3.7 million or 41.5% from $8.8 million in Q2 2020, primarily due to a $3.1 million increase in net loss [34] Business Line Data and Key Metrics Changes - Renewable natural gas (RNG) production was approximately 1.4 million MMBtu in Q2 2021, a decrease of 0.1 million MMBtu or 8.2% from 1.5 million MMBtu in Q2 2020 [19] - Revenues from the RNG segment in Q2 2021 were $27.6 million, an increase of $3.7 million or 15.6% compared to $23.9 million in Q2 2020 [21] - Revenues from renewable electricity in Q2 2021 were $4.1 million, a decrease of $0.4 million or 9.6% compared to $4.5 million in Q2 2020 [27] Market Data and Key Metrics Changes - Average pricing realized on RIN sales during Q2 2021 was $1.78, compared to $1.37 in Q2 2020, an increase of 29.9% [23] - The average D3 RIN index price for Q2 2021 was $3.06, more than double the average D3 RIN index price in Q2 2020 [23] Company Strategy and Development Direction - The company is focusing on optimizing and growing within its existing portfolio, including the Pico feedstock amendments to increase capacity and efficiency at its dairy digester cluster project [8] - The recent acquisition of business assets in North Carolina aims to address challenges in swine farming while deploying near-zero emissions technology [12] - The strategy to monetize RNG production abroad is expected to stabilize domestic attribute pricing for renewable natural gas production [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth strategy, supported by federal, state, and international incentive programs for renewable natural gas [7] - The company acknowledged the challenges faced due to equipment failures but emphasized that corrective actions have been taken to minimize recurrence [39] - Management did not provide specific forward-looking guidance on production volumes but indicated that the expectation is to recapture lost production due to non-recurring equipment failures [44] Other Important Information - The company generated $11.2 million of cash from operating activities in the first six months of 2021, a 28.8% increase from $8.7 million in the same period of 2020 [32] - As of June 30, 2021, $25.0 million was outstanding under the term loan and $36.7 million under the revolving credit facility, with $37.5 million available for borrowing [31] Q&A Session Summary Question: Clarification on production performance at McCarty - Management clarified that the equipment failures at McCarty were separate incidents, and corrective actions have been taken to prevent recurrence [39][40] Question: Expectations for normalized production rates - Management indicated that while they cannot provide specific production statistics, they expect to recapture lost production due to previous equipment failures [44] Question: Concerns about over-investment in capacity - Management stated that they have not over-invested in facilities and that there are opportunities to optimize production closer to capacity [56][57] Question: Pricing and hedging commitments - Management confirmed that approximately 50% of production for 2021 has been hedged, and they will benefit from spot prices in the latter half of the year [61][64] Question: Need for more detailed production guidance - Management acknowledged the need for transparency but emphasized that they provide historical run rates and explanations for deviations [116]

Company Operations - Montauk Renewables operates 15 projects across multiple states, focusing on converting biogas into Renewable Natural Gas (RNG) and Renewable Electricity [108]. - The company expects increased production from existing projects as landfills take in more waste, although delays in new projects could impact production timelines [117]. - Key drivers for long-term growth in RNG include the potential for sustained growth in biogas conversion from waste sources and the company's established relationships with landfill owners [175]. Financial Performance - Total revenues for Q2 2021 were $31,674, an increase of $3,766 (13.5%) compared to $27,908 in Q2 2020, primarily driven by higher revenues under counterparty sharing agreements [129]. - Renewable Natural Gas (RNG) total revenues increased to $27,581, up $4,203 (18.0%) from $23,378 in Q2 2020, despite a decrease in RNG production volumes to 1,416 MMBtu, down 126 MMBtu (8.2%) from 1,542 MMBtu [126][131]. - Total operating revenues for the first six months of 2021 were $63,121, an increase of $16,809 (36.3%) compared to $46,312 in the first six months of 2020 [153]. - Renewable Natural Gas revenues in the first six months of 2021 were $55,704, an increase of $18,900 (51.4%) compared to $36,804 in the first six months of 2020 [155]. Production and Pricing - The company reported a 29.1% increase in RNG production volumes in Q1 2021 compared to Q1 2020, attributed to the commissioning of a new engine [117]. - Average realized price for RINs increased to $1.78, a rise of $0.41 (29.9%) compared to $1.37 in Q2 2020, while the average D3 RIN index price was $3.06, more than double the previous year's average [131]. - Average realized RIN pricing during the first six months of 2021 was $1.77, a 66.6% increase compared to $1.06 in the first six months of 2020 [153]. Operating Expenses - Operating expenses for Q2 2021 totaled $32,211, an increase of $7,865 (32.3%) compared to $24,346 in Q2 2020, with general and administrative expenses rising by $3,576 (95.0%) to $7,341 [128][136]. - Operating and maintenance expenses for RNG facilities increased to $10,159, up $3,056 (43.0%) compared to $7,103 in Q2 2020, primarily due to costs associated with development sites commissioned in 2020 [137]. - Total operating expenses for the first six months of 2021 were $75,860, an increase of $30,328 (66.6%) compared to $45,532 in the first six months of 2020 [152]. Net Loss and Adjusted EBITDA - Net loss for Q2 2021 was $4,652, compared to a net loss of $1,583 in Q2 2020, representing an increase in loss of $3,069 (193.9%) year-over-year [128]. - Adjusted EBITDA for the six months ended June 30, 2021 was $(637,000), a significant decrease from $12,062,000 in the same period of 2020 [181]. - Operating loss in Q2 2021 was $537, a decrease of $4,099 (115.0%) compared to an operating profit of $3,562 in Q2 2020 [148]. Cash Flow and Capital Expenditures - The company generated $11,245,000 in net cash flows from operating activities for the first six months of 2021, representing a 34.3% increase from $8,370,000 in the first six months of 2020 [190]. - Capital expenditures for the first six months of 2021 were $4,469,000, down from $10,454,000 in the same period of 2020 [191]. - The company expects 2021 capital expenditures to range between $8,500,000 and $9,500,000, including $5,000,000 for optimization projects [189]. Debt and Financial Obligations - The company had total debt of $61,698,000 as of June 30, 2021, a decrease from $66,697,000 at December 31, 2020 [183]. - The company is required to maintain a Fixed Charge Coverage Ratio of not less than 1.2 to 1.0 under its Amended Credit Agreement [189]. - As of the first six months of 2021, the company had approximately $5,765 million of off-balance sheet arrangements in outstanding letters of credit, which reduced the borrowing capacity of its revolving credit facility [210]. Impairment and Tax Rate - The company recorded an impairment loss of $626,000 during the six months ended June 30, 2021 related to a landfill facility decommissioning [181]. - The effective tax rate for Q2 2021 was (267%), lower than the 160% rate for Q2 2020, primarily due to disallowance of officers' compensation [147]. - The effective tax rate for the first six months of 2021 was (34%), significantly lower than the 282% rate for the same period in 2020 [172]. Market and Regulatory Environment - Revenues are influenced by market pricing and regulatory developments, with a focus on managing production volumes and operating expenses [116]. - Environmental Attributes, including RINs and LCFS credits, significantly contribute to revenues, with realized average RIN prices in the first half of 2021 at approximately $1.77, below the D3 RIN index of $2.80 [120]. - The dairy farm project is anticipated to generate LCFS credits at a multiple of those from landfill projects, with more information expected in 2022 [119]. Miscellaneous - The company is classified as an emerging growth company under the JOBS Act, allowing it to delay the adoption of new accounting standards [212]. - There have been no material changes in market risk disclosures since the 2020 Annual Report [214].

Production and Revenue - Montauk Renewables operates 12 RNG and three Renewable Electricity projects across six states, making it one of the largest U.S. producers of RNG[107]. - The company reported a 29.1% increase in RNG production volumes in Q1 2021 compared to Q1 2020, primarily due to the commissioning of a new engine[114]. - Montauk Renewables anticipates increased production from existing projects as landfills continue to accept more waste, enhancing gas collection[114]. - The company expects to generate LCFS credits at a multiple from its dairy farm project compared to landfill projects, with more attractive CI expected to be awarded in 2022[116]. - Montauk Renewables' revenues are primarily driven by the production of RNG and Renewable Electricity, along with the sale of Environmental Attributes[120]. - Total revenues for Q1 2021 were $31,447, an increase of $13,044 (70.9%) compared to $18,403 in Q1 2020[123]. - Renewable Natural Gas segment revenues increased to $28,123, up $14,234 (102.5%) from $13,889 in Q1 2020[125]. - Renewable Electricity Generation revenues decreased to $3,324, down $1,137 (25.5%) from $4,461 in Q1 2020[128]. Operating Expenses - Total operating expenses for Q1 2021 were $43,651, an increase of $22,465 (106.0%) from $21,186 in Q1 2020[122]. - General and administrative expenses surged to $20,452, an increase of $17,013 (494.7%) compared to $3,439 in Q1 2020[131]. - Royalties, transportation, gathering, and production fuel expenses increased to $5,532, up $3,050 (122.9%) compared to $2,482 in Q1 2020[133]. - Renewable Electricity operating and maintenance expenses increased by $461 (18.4%) to $2,965 in Q1 2021 compared to Q1 2020[134]. - Royalties, transportation, gathering, and production fuel expenses rose by $3,277 (111.4%) to $6,218 in Q1 2021 compared to Q1 2020[135]. - Depreciation and amortization increased by $389 (7.3%) to $5,737 in Q1 2021 compared to Q1 2020[136]. - Impairment loss in Q1 2021 was $626, an increase of $348 (125.2%) compared to $278 in Q1 2020[137]. Profitability and Loss - Operating loss for Q1 2021 was $(12,204), a decline of $9,421 (338.5%) from $(2,783) in Q1 2020[122]. - Operating loss in Q1 2021 was $12,204, an increase of $9,421 (338.5%) compared to an operating loss of $2,783 in Q1 2020[141]. - Consolidated EBITDA for Q1 2021 was $(6,500), compared to $2,591 in Q1 2020[149]. Cash Flow and Capital Expenditures - For Q1 2021, the company generated $7,769 in cash from operating activities, a 565.1% increase from $1,168 in Q1 2020[160]. - The company incurred $1,355 in capital expenditures in Q1 2021, with approximately $917 related to optimization projects[161]. - The company expects 2021 capital expenditures to range between $8,500 and $9,500, including $2,000 to $4,000 for optimization projects at recently commissioned facilities[158]. - The company anticipates up to $3,000 in initial capital expenditures in 2021 related to acquisitions[158]. Debt and Financial Position - Cash and cash equivalents as of March 31, 2021, were $22,643, up from $20,992 at December 31, 2020[150]. - Debt before issuance costs decreased to $64,198 as of March 31, 2021, from $66,697 at December 31, 2020[151]. - The Amended Credit Agreement provides an $80,000 revolving credit facility with a $75,000 accordion option for additional capital access[158]. - The company aims to maintain a Total Leverage Ratio of not more than 3.0 to 1.0 as per the Amended Credit Agreement[159]. Tax and Compliance - The effective tax rate for Q1 2021 was (10.7)%, significantly lower than 217.0% in Q1 2020 due to an income tax benefit[140]. - The company continues to implement remediation initiatives in response to a previously identified material weakness in internal control over financial reporting[163]. Inventory and Production Metrics - Total RNG production volumes were 1,348 MMBtu, a decrease of 41 MMBtu (3.0%) from 1,389 MMBtu in Q1 2020[124]. - RIN inventory at the end of Q1 2021 was 622, a decrease of 490 (44.1%) from 1,112 in Q1 2020[122]. - Average realized RIN price rose to $1.91, a significant increase of $1.15 (151.3%) compared to $0.76 in Q1 2020[125]. - The average realized price for RINs in Q1 2021 was approximately $1.91, below the D3 RIN index price of approximately $2.54[117].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020; or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-39919 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securit ...