OPAL Fuels (US:OPAL)2023-05-14 02:35Financial Data and Key Metrics Changes - For Q1 2023, RNG production remained at 0.6 million MMBtus, consistent with Q4 2022, but up approximately 50% compared to Q1 2022 [54] - Revenues for the quarter were $43 million, representing a 12% decrease compared to Q1 2022 [54] - Adjusted EBITDA was $8.7 million, compared to $4.1 million in the previous year, including a $10.3 million adjustment for stored gas and unsold environmental attributes [56][90] - The net loss for Q1 2023 was $7.3 million, compared to a loss of $4.5 million in Q1 2022 [91] Business Line Data and Key Metrics Changes - The Fuel Station Services segment saw a low revenue quarter compared to backlog, with a contracted backlog of approximately $65 million expected to be realized over the next 12 months [107][92] - The company is on track to commence construction on 39 fueling stations this year, with expected RNG fuel dispensing volumes growing to approximately 56 million gallons from nearly 30 million gallons in 2022 [123] Market Data and Key Metrics Changes - Current D3 RIN pricing has improved, trading at $2.15 per gallon, while LCFS prices have begun to rise, now sitting in the mid-$80 per credit [118] - The heavy-duty transportation market in the U.S. uses approximately 45 billion gallons of diesel per year, with RNG currently holding just over 1% market share, indicating significant growth potential [12] Company Strategy and Development Direction - The company aims to build and operate best-in-class RNG facilities and renewable power facilities to mitigate climate change and displace fossil fuels [62] - OPAL Fuels is focused on executing its business plan, maximizing output from operating projects, and moving advanced development projects into construction [105] - The introduction of the 15-liter Cummins engine is expected to expand the market for RNG within the heavy-duty transportation sector [103] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the demand for RNG, particularly with new fleets testing the 15-liter engine, which is anticipated to drive market expansion [103] - The company remains cautiously optimistic about the finalization of the eRIN pathway, which could provide material upside for existing projects and new developments [85] - Management noted that environmental credit pricing is expected to improve, which will positively impact financial results in 2023 and beyond [93] Other Important Information - The company has secured gas rights agreements for new landfill RNG projects, including one with WM in Illinois and another with a municipality in Florida, enhancing its development pipeline [99] - The company is experiencing some delays in permitting, particularly with the Sapphire project, but is optimistic about progress being made [42][46] Q&A Session Summary Question: Can you provide more color around the ITC embedded in your guidance for this year? - Management is still waiting for final guidance from the IRS regarding ITC and prefers not to provide additional color at this time [20] Question: What is the impact of the Sapphire project delay on 2023? - The Sapphire project is experiencing a slight delay due to PFAS regulations, but management believes it will not have a significant impact on 2023 results [42][46] Question: How is the profitability in the Fuel Station Services segment? - Profitability was slightly below expectations due to inflationary pressures and slower construction pace, but management expects margins and revenues to improve throughout the year [87][92] Question: What is the embedded D3 RIN pricing assumption in the EBITDA guidance? - Management confirmed that the D3 RIN pricing assumption embedded in the guidance is $2.25 [30] Question: What is the outlook for eRINs and their potential impact? - Management believes eRINs could provide significant upside, with potential EBITDA estimates ranging from $50 million to $80 million, depending on final rulings and market conditions [82][85]