Montauk energy(US:MNTK)2021-11-16 02:18Financial 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]