☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 85-3189583 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | ||
680 Andersen Drive, 5th Floor Pittsburgh , Pennsylvania | |||
15220 | |||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | MNTK | The Nasdaq Capital Market |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☒ |
TABLE OF CONTENTS
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6 | ||||||
ITEM 1. | ||||||
6 | ||||||
ITEM 2. | ||||||
ITEM 3. | ||||||
ITEM 4. | ||||||
ITEM 1. | ||||||
ITEM 1A. | ||||||
ITEM 2. | ||||||
ITEM 3. | ||||||
ITEM 4. | ||||||
ITEM 5. | ||||||
ITEM 6. | ||||||
Glossary of Key Terms
This Quarterly Report on Form
• | “ADG” refers to anaerobic digested gas. |
• | “CARB” refers to the California Air Resource Board. |
• | “CNG” refers to compressed natural gas. |
• | “CI” refers to carbon intensity. |
• | “D3” refers to cellulosic biofuel with a 60% GHG reduction requirement. |
• | “EPA” refers to the U.S. Environmental Protection Agency. |
• | “Environmental Attributes” refer to federal, state and local government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy. |
• | “FERC” refers to the U.S. Federal Energy Regulatory Commission. |
• | “GHG” refers to greenhouse gases. |
• | “JSE” refers to the Johannesburg Stock Exchange. |
• | “LCFS” refers to Low Carbon Fuel Standard. |
• | “LFG” refers to landfill gas. |
“MMBtu” refers to Metric Million British Thermal Unit.
• | “PPAs” refers to power purchase agreements. |
• | “RECs” refers to Renewable Energy Credits. |
• | “Renewable Electricity” refers to electricity generated from renewable sources. |
• | “RFS” refers to the EPA’s Renewable Fuel Standard. |
• | “RINs” refers to Renewable Identification Numbers. |
• | “RNG” refers to renewable natural gas. |
• | “RVOs” refers to renewable volume obligations. |
3
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of U.S. federal securities laws that involve substantial risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “assume,” “believe,” “can have,” “contemplate,” “continue,” “strive,” “aim,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “might,” “objective,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “would,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. For example, all statements we make relating to future results of operations, financial condition, expectations and plans of the Company, including expected benefits of the Pico feedstock amendment and the Montauk Ag project in North Carolina, the anticipated completion of the engine repairs and resumption of operations at the Security facility,Raeger capital improvement project, the resolution of gas collection issues at the McCarty facility, our estimated and projected costs, expenditures, and growth rates, our plans and objectives for future operations, growth, or initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to:
our ability to develop and operate new renewable energy projects, including with livestock farms, and related challenges associated with new projects, such as identifying suitable locations and potential delays in acquisition financing, construction, and development;
reduction or elimination of government economic incentives to the renewable energy market;
the inability to complete strategic development opportunities;
deterioration in general economic conditions outside our control including the impacts of supply chain disruptions, inflationary cost increases, and other macroeconomic factors;
continued inflation could raise our operating costs or increase the construction costs of our existing or new projects;
rising interest rates could increase the borrowing costs of future indebtedness;
the potential failure to retain and attract qualified personnel of the Company or a possible increased reliance on third-party contractors as a result;
the impact of the ongoing COVID-19 pandemic on our business, financial condition and results of operations;
the length of development and optimization cycles for new projects, including the design and construction processes for our renewable energy projects;
dependence on third parties for the manufacture of products and services;services and our landfill operations;
the quantity, quality and consistency of our feedstock volumes from both landfill and livestock farm operations;
reliance on interconnections to distribution and transmission products for our Renewable Natural Gas and Renewable Electricity Generation segments;
our projects not producing expected levels of output;
the anticipated benefits of the Raeger capital improvement project, Pico feedstock amendment and the Montauk Ag project in North Carolina andCarolina;
potential benefits associated with the anticipated completion of engine repairs and resumption of operations at the Security facility;combustion-based oxygen removal condensate neutralization technology;
resolution of gas collection issues at the McCarty facility;
concentration of revenues from a small number of customers and projects;
our outstanding indebtedness and restrictions under our credit facility;
our ability to extend our fuel supply agreements prior to expiration;
our ability to meet milestone requirements under our PPAs;
4
existing regulations and changes to regulations and policies that effect our operations;
expected benefits from the extension of the Production Tax Credit under the Inflation Reduction Act of 2022;
decline in public acceptance and support of renewable energy development and projects;
our expectations regarding Environmental Attribute volume requirements and prices and commodity prices;
our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act (“JOBS Act”);
our expectations regarding future capital expenditures, including for the maintenance of facilities;
our expectations regarding the use of net operating losses before expiration;
our expectations regarding more attractive CI scores by regulatory agencies for our livestock farm projects;
market volatility and fluctuations in commodity prices and the market prices of Environmental Attributes and the impact of any related hedging activity;
regulatory changes in federal, state and international environmental attribute programs;
profitability of our planned livestock farm projects;
sustained demand for renewable energy;
security threats, including cyber-security attacks;
potential liabilities from contamination and environmental conditions;
potential exposure to costs and liabilities due to extensive environmental, health and safety laws;
impacts of climate change, changing weather patterns and conditions, and natural disasters;
failure of our information technology and data security systems;
increased competition in our markets;
continuing to keep up with technology innovations;
concentrated stock ownership by a few stockholders and related control over the outcome of all matters subject to a stockholder vote; and
• | other risks and uncertainties detailed in the section titled “Risk Factors” in our latest Annual Report on Form 10-K. |
We make many of our forward-looking statements based on our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in our other Securities and Exchange Commission (“SEC”) filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties. See the “Risk Factors” section in our latest Annual Report on Form
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.
5
ITEM 1. | FINANCIAL STATEMENTS |
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Montauk Renewables, Inc | ||||
Unaudited | ||||
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8 | ||||
9 | ||||
10 | ||||
11 |
As of March 31, 2022 | As of December 31, 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 59,794 | $ | 53,266 | ||||
Accounts and other receivables | 5,578 | 9,338 | ||||||
Related party receivable | 8,940 | 8,940 | ||||||
Prepaid expenses and other current assets | 3,655 | 2,846 | ||||||
Assets held for sale | — | 777 | ||||||
Total current assets | $ | 77,967 | $ | 75,167 | ||||
Restricted cash - non-current | $ | 328 | $ | 328 | ||||
Property, plant and equipment, net | 178,263 | 180,893 | ||||||
Goodwill and intangible assets, net | 13,898 | 14,113 | ||||||
Deferred tax assets | 10,806 | 10,570 | ||||||
Non-current portion of derivative asset | 368 | — | ||||||
Operating lease right-of-use | 231 | 305 | ||||||
Other assets | 5,121 | 5,104 | ||||||
Total assets | $ | 286,982 | $ | 286,480 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 5,118 | $ | 4,973 | ||||
Accrued liabilities | 9,351 | 10,823 | ||||||
Current portion of lease liability | 225 | 296 | ||||||
Current portion of derivative liability | 3,621 | 650 | ||||||
Current portion of long-term debt | 7,828 | 7,815 | ||||||
Total current liabilities | $ | 26,143 | $ | 24,557 | ||||
Long-term debt, less current portion | $ | 69,427 | $ | 71,392 | ||||
Non-current portion of lease liability | 25 | 27 | ||||||
Non-current portion of derivativeliability | — | 189 | ||||||
Asset retirement obligation | 5,379 | 5,301 | ||||||
Other liabilities | 2,587 | 2,721 | ||||||
Total liabilities | $ | 103,561 | $ | 104,187 | ||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $0.01 par value, authorized 690,000,000 shares; 143,603,681 and 143,584,827 shares issued at March 31, 2022and December 31, 2021, respectively ; 141,057,772and 141,015,213 shares outstanding at March 31, 2022and December 31, 2021, respectively | $ | 1,410 | $ | 1,410 | ||||
Treasury stock, at cost, 959,344 and 950,214 shares at March 31, 2022 and December 31, 2021, respectively | (10,904 | ) | (10,813 | ) | ||||
Additional paid-in capital | 198,558 | 196,224 | ||||||
Retained deficit | (5,643 | ) | (4,528 | ) | ||||
Total stockholders’ equity | $ | 183,421 | $ | 182,293 | ||||
Total liabilities and stockholders’ equity | $ | 286,982 | $ | 286,480 | ||||
As of September 30, 2022 | As of December 31, 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 95,619 | $ | 53,266 | ||||
Accounts and other receivables | 12,264 | 9,338 | ||||||
Related party receivable | 8,940 | 8,940 | ||||||
Current portion of derivative instrument | 718 | — | ||||||
Prepaid expenses and other current assets | 4,110 | 2,846 | ||||||
Assets held for sale | — | 777 | ||||||
Total current assets | $ | 121,651 | $ | 75,167 | ||||
Restricted cash—non-current | $ | 407 | $ | 328 | ||||
Property, plant and equipment, net | 173,968 | 180,893 | ||||||
Goodwill and intangible assets, net | 15,897 | 14,113 | ||||||
Deferred tax assets | 4,568 | 10,570 | ||||||
Non-current portion of derivative instrument | 1,244 | — | ||||||
Operating lease right-of-use | 124 | 305 | ||||||
Finance lease right-of-use | 113 | — | ||||||
Other assets | 5,971 | 5,104 | ||||||
Total assets | $ | 323,943 | $ | 286,480 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,369 | $ | 4,973 | ||||
Accrued liabilities | 17,243 | 10,823 | ||||||
Income tax payable | 288 | — | ||||||
Current portion of derivative instrument | 1,440 | 650 | ||||||
Current portion of operating lease liability | 84 | 296 | ||||||
Current portion of finance lease liability | 69 | — | ||||||
Current portion of long-term debt | 7,854 | 7,815 | ||||||
Total current liabilities | $ | 30,347 | $ | 24,557 | ||||
Long-term debt, less current portion | $ | 65,485 | $ | 71,392 | ||||
Non-current portion of derivative instrument | — | 189 | ||||||
Non-current portion of operating lease liability | 21 | 27 | ||||||
Non-current portion of finance lease liability | 42 | — | ||||||
Asset retirement obligation | 5,397 | 5,301 | ||||||
Other liabilities | 3,843 | 2,721 | ||||||
Total liabilities | $ | 105,135 | $ | 104,187 | ||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $0.01 par value, authorized 690,000,000 shares; 143,603,681 and 143,584,827 shares issued at September 30, 2022 and December 31, 2021, respectively; 141,290,748 and 141,015,213 shares outstanding at September 30, 2022 and December 31, 2021, respectively | $ | 1,410 | $ | 1,410 | ||||
Treasury stock, at cost, 959,344 and 950,214 shares September 30, 2022 and December 31, 2021, respectively | (10,904 | ) | (10,813 | ) | ||||
Additional paid-in capital | 203,606 | 196,224 | ||||||
Retained earnings (deficit) | 24,696 | (4,528 | ) | |||||
Total stockholders’ equity | $ | 218,808 | $ | 182,293 | ||||
Total liabilities and stockholders’ equity | $ | 323,943 | $ | 286,480 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Total operating revenues | $ | 32,169 | $ | 31,447 | ||||
Operating expenses: | ||||||||
Operating and maintenance expenses | $ | 13,201 | $ | 10,612 | ||||
General and administrative expenses | 8,495 | 20,452 | ||||||
Royalties, transportation, gathering and production fuel | 7,206 | 6,218 | ||||||
Depreciation, depletion and amortization | 5,153 | 5,737 | ||||||
Gain on insurance proceeds | (313 | ) | (82 | ) | ||||
Impairment loss | 51 | 626 | ||||||
Transaction costs | 27 | 88 | ||||||
Total operating expenses | $ | 33,820 | $ | 43,651 | ||||
Operating loss | $ | (1,651 | ) | $ | (12,204 | ) | ||
Other (income) expenses: | ||||||||
Interest expense | $ | 32 | $ | 646 | ||||
Net gain on sale of assets | (293 | ) | 0 | |||||
Other (income) expense | (17 | ) | 33 | |||||
Total other (income) expenses | $ | (278 | ) | $ | 679 | |||
Loss before income taxes | $ | (1,373 | ) | $ | (12,883 | ) | ||
Income tax (benefit) expense | (258 | ) | 1,382 | |||||
Net loss | $ | (1,115 | ) | $ | (14,265 | ) | ||
Loss per share: | ||||||||
Basic | $ | (0.01 | ) | $ | (0.10 | ) | ||
Diluted | $ | (0.01 | ) | $ | (0.10 | ) | ||
Weighted-average common shares outstanding: | ||||||||
Basic | 141,045,477 | 141,015,213 | ||||||
Diluted | 141,045,477 | 141,015,213 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Total operating revenues | $ | 55,860 | $ | 39,749 | $ | 155,916 | $ | 102,872 | ||||||||
Operating expenses: | ||||||||||||||||
Operating and maintenance expenses | $ | 14,134 | $ | 13,123 | $ | 42,205 | $ | 36,954 | ||||||||
General and administrative expenses | 8,466 | 7,520 | 25,715 | 35,280 | ||||||||||||
Royalties, transportation, gathering and production fuel | 12,188 | 6,636 | 34,484 | 18,840 | ||||||||||||
Depreciation, depletion and amortization | 5,167 | 5,666 | 15,453 | 17,062 | ||||||||||||
Gain on insurance proceeds | — | (157 | ) | (313 | ) | (238 | ) | |||||||||
Impairment loss | 2,273 | — | 2,393 | 626 | ||||||||||||
Transaction costs | — | 232 | 32 | 357 | ||||||||||||
Total operating expenses | $ | 42,228 | $ | 33,020 | $ | 119,969 | $ | 108,881 | ||||||||
Operating income (loss) | $ | 13,632 | $ | 6,729 | $ | 35,947 | $ | (6,009 | ) | |||||||
Other expenses (income): | ||||||||||||||||
Interest expense | $ | 36 | $ | 697 | $ | 339 | $ | 2,064 | ||||||||
Other (income) expense | (131 | ) | 617 | (463 | ) | 662 | ||||||||||
Total other (income) expense | $ | (95 | ) | $ | 1,314 | $ | (124 | ) | $ | 2,726 | ||||||
Income (loss) before income taxes | $ | 13,727 | 5,415 | $ | 36,071 | $ | (8,735 | ) | ||||||||
Income tax expense (benefit) | 2,540 | (3,481 | ) | 6,847 | 1,286 | |||||||||||
Net income (loss) | $ | 11,187 | $ | 8,896 | $ | 29,224 | $ | (10,021 | ) | |||||||
Earnings (loss) per share: | ||||||||||||||||
Basic | $ | 0.08 | $ | 0.06 | $ | 0.21 | $ | (0.07 | ) | |||||||
Diluted | $ | 0.08 | $ | 0.06 | $ | 0.20 | $ | (0.07 | ) | |||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 141,290,748 | 141,015,213 | 141,156,126 | 141,015,213 | ||||||||||||
Diluted | 142,722,396 | 141,048,006 | 142,627,711 | 141,015,213 |
Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Member’s Equity | Total Equity | |||||||||||||||||||||||||||
Balance at December 31, 2020 | — | $ | — | — | $ | — | $ | 159,622 | $ | — | $ | — | $ | 159,622 | ||||||||||||||||||
Effect of reorganization transactions | 138,312,713 | 1,383 | — | — | (159,622 | ) | 158,239 | — | ||||||||||||||||||||||||
IPO common stock | 2,702,500 | 27 | — | — | — | 15,566 | — | 15,593 | ||||||||||||||||||||||||
Treasury stock | — | 950,214 | (10,813 | ) | — | — | (10,813 | ) | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (14,265 | ) | (14,265 | ) | ||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | 14,598 | — | 14,598 | ||||||||||||||||||||||||
Balance at March 31, 2021 | 141,015,213 | $ | 1,410 | 950,214 | $ | (10,813 | ) | $ | 0— | $ | 188,403 | $ | (14,265 | ) | $ | 164,735 | ||||||||||||||||
Balance at December 31, 2021 | 141,015,213 | $ | 1,410 | 950,214 | $ | (10,813 | ) | $ | — | $ | 196,224 | $ | (4,528 | ) | $ | 182,293 | ||||||||||||||||
Vesting of stock awards | 42,559 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Treasury stock | — | — | 9,130 | (91 | ) | — | — | — | (91 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (1,115 | ) | (1,115 | ) | ||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | 2,334 | — | 2,334 | ||||||||||||||||||||||||
Balance at March 31, 2022 | 141,057,772 | $ | 1,410 | 959,344 | $ | (10,904 | ) | $ | 0— | $ | 198,558 | $ | (5,643 | ) | $ | 183,421 | ||||||||||||||||
Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Total Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at June 30, 2022 | 141,290,748 | $ | 1,410 | 959,344 | $ | (10,904 | ) | $ | 200,855 | $ | 13,509 | $ | 204,870 | |||||||||||||||
Net income | — | — | — | — | — | 11,187 | 11,187 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,751 | — | 2,751 | |||||||||||||||||||||
Balance at September 30, 2022 | 141,290,748 | $ | 1,410 | 959,344 | $ | (10,904 | ) | $ | 203,606 | $ | 24,696 | $ | 218,808 | |||||||||||||||
Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Total Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at June 30, 2021 | 141,015,213 | $ | 1,410 | 950,214 | $ | (10,813 | ) | $ | 190,944 | $ | (18,917 | ) | $ | 162,624 | ||||||||||||||
Net income | — | — | — | — | — | 8,896 | 8,896 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,574 | — | 2,574 | |||||||||||||||||||||
Balance at September 30, 2021 | 141,015,213 | $ | 1,410 | 950,214 | $ | (10,813 | ) | $ | 193,518 | $ | (10,021 | ) | $ | 174,094 | ||||||||||||||
Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Total Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at December 31, 2021 | 141,015,213 | $ | 1,410 | 950,214 | $ | (10,813 | ) | $ | 196,224 | $ | (4,528 | ) | $ | 182,293 | ||||||||||||||
Vesting of stock awards | 275,535 | — | — | — | — | — | ||||||||||||||||||||||
Treasury stock | — | — | 9,130 | (91 | ) | — | — | (91 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 29,224 | 29,224 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 7,382 | — | 7,382 | |||||||||||||||||||||
Balance at September 30, 2022 | 141,290,748 | $ | 1,410 | 959,344 | $ | (10,904 | ) | $ | 203,606 | $ | 24,696 | $ | 218,808 | |||||||||||||||
Common Stock | Treasury Stock | Members’ Equity | Additional Paid-in Capital | Retained Earnings (Deficit) | Total Equity | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balance at December 31, 2020 | — | $ | — | — | $ | — | $ | 159,622 | $ | — | $ | — | $ | 159,622 | ||||||||||||||||||
Effect of reorganization transactions | 138,312,713 | 1,383 | — | — | (159,622 | ) | 158,239 | — | — | |||||||||||||||||||||||
IPO common stock | 2,702,500 | 27 | — | — | — | 15,566 | — | 15,593 | ||||||||||||||||||||||||
Treasury stock | — | — | 950,214 | $ | (10,813 | ) | — | — | — | (10,813 | ) | |||||||||||||||||||||
Net loss | — | — | — | — | — | — | (10,021 | ) | (10,021 | ) | ||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | 19,713 | — | 19,713 | ||||||||||||||||||||||||
Balance at September 30, 2021 | 141,015,213 | $ | 1,410 | 950,214 | $ | (10,813 | ) | — | 193,518 | $ | (10,021 | ) | $ | 174,094 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,115 | ) | $ | (14,265 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation, depletion and amortization | 5,153 | 5,737 | ||||||
(Benefit) provision for deferred income taxes | (236 | ) | 1,066 | |||||
Stock-based compensation | 2,334 | 14,598 | ||||||
Derivative mark-to-market | 2,415 | (418 | ) | |||||
Gain on property insurance proceeds | (313 | ) | (82 | ) | ||||
Accretion of asset retirement obligations | 98 | 138 | ||||||
Net gain on sale of assets | (293 | ) | — | |||||
Amortization of debt issuance costs | 108 | 137 | ||||||
Impairment loss | 51 | 626 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and other receivables and other current assets | 2,949 | 2,634 | ||||||
Accounts payable and other accrued expenses | (1,554 | ) | (2,402 | ) | ||||
Net cash provided by operating activities | $ | 9,597 | $ | 7,769 | ||||
Cash flows from investing activities: | ||||||||
Capital expenditures | $ | (2,378 | ) | $ | (1,335 | ) | ||
Proceeds from insurance recovery | 313 | 82 | ||||||
Proceeds from sale of assets | 1,088 | — | ||||||
Net cash used in investing activities | $ | (977 | ) | $ | (1,253 | ) | ||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt | $ | (2,000 | ) | $ | (2,500 | ) | ||
Proceeds from initial public offering | — | 15,593 | ||||||
Treasury stock purchase | (91 | ) | (10,813 | ) | ||||
Related party receivable | — | (7,140 | ) | |||||
Net cash used in financing activities | $ | (2,091 | ) | $ | (4,860 | ) | ||
Net increase in cash and cash equivalents and restricted cash | $ | 6,529 | $ | 1,656 | ||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 53,612 | $ | 21,559 | ||||
Cash and cash equivalents and restricted cash at end of period | $ | 60,141 | $ | 23,215 | ||||
Reconciliation of cash, cash equivalents, and restricted cash at end of period: | ||||||||
Cash and cash equivalents | $ | 59,794 | $ | 22,643 | ||||
Restricted cash and cash equivalents - current | 19 | — | ||||||
Restricted cash and cash equivalents - non-current | 328 | 572 | ||||||
$ | 60,141 | $ | 23,215 | |||||
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 29,224 | $ | (10,021 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation, depletion and amortization | 15,453 | 17,062 | ||||||
Provision for deferred income taxes | 6,002 | 1,124 | ||||||
Stock-based compensation | 7,382 | 19,713 | ||||||
Derivative mark-to-market | (1,359 | ) | (1,011 | ) | ||||
Gain on property insurance proceeds | (313 | ) | (238 | ) | ||||
Earn out increase (decrease) | 1,122 | (694 | ) | |||||
Net (gain) loss on sale of assets | (250 | ) | 822 | |||||
Accretion of asset retirement obligations | 174 | 304 | ||||||
Amortization of debt issuance costs | 314 | 395 | ||||||
Impairment loss | 2,393 | 626 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and other receivables and other current assets | (5,252 | ) | (7,272 | ) | ||||
Accounts payable and other accrued expenses | 4,919 | 488 | ||||||
Net cash provided by operating activities | $ | 59,809 | $ | 21,298 | ||||
Cash flows from investing activities | ||||||||
Capital expenditures | $ | (12,750 | ) | $ | (7,702 | ) | ||
Asset acquisition | — | (4,142 | ) | |||||
Cash collateral deposits | 79 | 118 | ||||||
Proceeds from sale of assets | 1,088 | 74 | ||||||
Proceeds from insurance recovery | 313 | 238 | ||||||
Net cash used in investing activities | $ | (11,270 | ) | $ | (11,414 | ) | ||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt | $ | (6,000 | ) | $ | (7,500 | ) | ||
Proceeds from initial public offering | — | 15,593 | ||||||
Treasury stock purchase | (91 | ) | (10,813 | ) | ||||
Loan to Montauk Holdings Limited | — | (7,140 | ) | |||||
Finance lease payments | (15 | ) | — | |||||
Net cash used in financing activities | $ | (6,106 | ) | $ | (9,860 | ) | ||
Net increase (decrease) in cash and cash equivalents and restricted cash | $ | 42,433 | $ | 24 | ||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 53,612 | $ | 21,559 | ||||
Cash and cash equivalents and restricted cash at end of period | $ | 96,045 | $ | 21,583 | ||||
Reconciliation of cash, cash equivalents, and restricted cash at end of period: | ||||||||
Cash and cash equivalents | $ | 95,619 | $ | 20,892 | ||||
Restricted cash and cash equivalents - current | 19 | 118 | ||||||
Restricted cash and cash equivalents - non-current | 407 | 573 | ||||||
$ | 96,045 | $ | 21,583 | |||||
Three Months Ended March 31, 2022 | ||||||||||||
Goods transferred at a point in time | Goods transferred over time | Total | ||||||||||
Major Goods/Service Line: | ||||||||||||
Natural Gas Commodity | $ | 405 | $ | 9,488 | $ | 9,893 | ||||||
Natural Gas Environmental Attributes | 22,710 | — | 22,710 | |||||||||
Electric Commodity | — | 2,385 | 2,385 | |||||||||
Electric Environmental Attributes | 1,649 | — | 1,649 | |||||||||
$ | 24,764 | $ | 11,873 | $ | 36,637 | |||||||
Operating Segment: | ||||||||||||
RNG | $ | 23,115 | $ | 9,488 | $ | 32,603 | ||||||
REG | 1,649 | 2,385 | 4,034 | |||||||||
$ | 24,764 | $ | 11,873 | $ | 36,637 | |||||||
Three months ended September 30, 2022 | ||||||||||||
Goods transferred at a point in time | Goods transferred over time | Total | ||||||||||
Major goods/Service line: | ||||||||||||
Natural gas commodity | $ | 197 | $ | 15,770 | $ | 15,967 | ||||||
Natural gas environmental attributes | 38,264 | — | 38,264 | |||||||||
Electric commodity | — | 2,736 | 2,736 | |||||||||
Electric environmental attributes | 1,727 | — | 1,727 | |||||||||
$ | 40,188 | $ | 18,506 | $ | 58,694 | |||||||
Operating segment: | ||||||||||||
RNG | $ | 38,461 | $ | 15,770 | $ | 54,231 | ||||||
REG | 1,727 | 2,736 | 4,463 | |||||||||
$ | 40,188 | $ | 18,506 | $ | 58,694 | |||||||
Three months ended September 30, 2021 | ||||||||||||
Goods transferred at a point in time | Goods transferred over time | Total | ||||||||||
Major goods/Service line: | ||||||||||||
Natural gas commodity | $ | 2,983 | $ | 8,570 | $ | 11,553 | ||||||
Natural gas environmental attributes | 24,223 | — | 24,223 | |||||||||
Electric commodity | — | 2,305 | 2,305 | |||||||||
Electric environmental attributes | 1,668 | — | 1,668 | |||||||||
$ | 28,874 | $ | 10,875 | $ | 39,749 | |||||||
Operating Segment: | ||||||||||||
RNG | $ | 27,206 | $ | 8,570 | $ | 35,776 | ||||||
REG | 1,668 | 2,305 | 3,973 | |||||||||
$ | 28,874 | $ | 10,875 | $ | 39,749 | |||||||
Nine months ended September 30, 2022 | ||||||||||||
Goods transferred at a point in time | Goods transferred over time | Total | ||||||||||
Major goods/Service line: | ||||||||||||
Natural gas commodity | $ | 1,852 | $ | 39,896 | $ | 41,748 | ||||||
Natural gas environmental attributes | 109,620 | — | 109,620 | |||||||||
Electric commodity | — | 7,768 | 7,768 | |||||||||
Electric environmental attributes | 5,092 | — | 5,092 | |||||||||
$ | 116,564 | $ | 47,664 | $ | 164,228 | |||||||
Operating Segment: | ||||||||||||
RNG | $ | 111,472 | $ | 39,896 | $ | 151,368 | ||||||
REG | 5,092 | 7,768 | 12,860 | |||||||||
$ | 116,564 | $ | 47,664 | $ | 164,228 | |||||||
Nine months ended September 30, 2021 | ||||||||||||
Goods transferred at a point in time | Goods transferred over time | Total | ||||||||||
Major goods/Service line: | ||||||||||||
Natural gas commodity | $ | 13,293 | $ | 21,620 | $ | 34,913 | ||||||
Natural gas environmental attributes | 56,297 | — | 56,297 | |||||||||
Electric commodity | — | 7,150 | 7,150 | |||||||||
Electric environmental attributes | 4,512 | — | 4,512 | |||||||||
$ | 74,102 | $ | 28,770 | $ | 102,872 | |||||||
Operating Segment: | ||||||||||||
RNG | $ | 69,590 | $ | 21,620 | $ | 91,210 | ||||||
REG | 4,512 | 7,150 | 11,662 | |||||||||
$ | 74,102 | $ | 28,770 | $ | 102,872 | |||||||
Three Months Ended March 31, 2021 | ||||||||||||
Goods transferred at a point in time | Goods transferred over time | Total | ||||||||||
Major Goods/Service Line: | ||||||||||||
Natural Gas Commodity | $ | 3,976 | $ | 6,695 | $ | 10,671 | ||||||
Natural Gas Environmental Attributes | 17,452 | — | 17,452 | |||||||||
Electric Commodity | — | 2,273 | 2,273 | |||||||||
Electric Environmental Attributes | 1,051 | — | 1,051 | |||||||||
$ | 22,479 | $ | 8,968 | $ | 31,447 | |||||||
Operating Segment: | ||||||||||||
RNG | $ | 21,428 | $ | 6,695 | $ | 28,123 | ||||||
REG | 1,051 | 2,273 | 3,324 | |||||||||
$ | 22,479 | $ | 8,968 | $ | 31,447 | |||||||
March 31, 2022 | December, 31 2021 | |||||||
Accounts receivables | $ | 5,518 | $ | 9,281 | ||||
Other receivables | 35 | 26 | ||||||
Reimbursable expenses | 25 | 31 | ||||||
Accounts and other receivables | $ | 5,578 | $ | 9,338 | ||||
September 30, 2022 | December, 31 2021 | |||||||
Accounts receivables | $ | 12,204 | $ | 9,281 | ||||
Other receivables | 56 | 26 | ||||||
Reimbursable expenses | 4 | 31 | ||||||
Accounts and other receivables | $ | 12,264 | $ | 9,338 | ||||
March 31, 2022 | December, 31 2021 | |||||||
Land | $ | 595 | $ | 595 | ||||
Buildings and improvements | 28,967 | 28,693 | ||||||
Machinery and equipment | 247,667 | 246,670 | ||||||
Gas mineral rights | 34,551 | 34,551 | ||||||
Construction work in progress | 12,698 | 12,725 | ||||||
Total | 324,478 | 323,234 | ||||||
Less: Accumulated depreciation and amortization | (146,215 | ) | (142,341 | ) | ||||
Property, plant & equipment, net | $ | 178,263 | $ | 180,893 | ||||
September 30, 2022 | December 31, 2021 | |||||||
Land | $ | 595 | $ | 595 | ||||
Buildings and improvements | 29,081 | 28,693 | ||||||
Machinery and equipment | 244,990 | 246,670 | ||||||
Gas mineral rights | 34,526 | 34,551 | ||||||
Construction work in progress | 17,043 | 12,725 | ||||||
Total | 326,235 | 323,234 | ||||||
Less: Accumulated depreciation and amortization | (152,267 | ) | (142,341 | ) | ||||
Property, plant & equipment, net | $ | 173,968 | $ | 180,893 | ||||
March 31, 2022 | December 31, 2021 | |||||||
Goodwill | $ | 60 | $ | 60 | ||||
Intangible assets with indefinite lives: | ||||||||
Land use rights | 329 | 329 | ||||||
Intangible assets with finite lives: | ||||||||
Interconnection, net of accumulated amortization of $3,241 and $3,034 | $ | 12,320 | $ | 12,526 | ||||
Customer contracts, net of accumulated amortization of $17,094 and $17,085 | $ | 1,189 | $ | 1,198 | ||||
Total intangible assets with finite lives: | $ | 13,509 | $ | 13,724 | ||||
Total Goodwill and Intangible assets | $ | 13,898 | $ | 14,113 | ||||
September 30, 2022 | December 31, 2021 | |||||||
Goodwill | $ | 60 | $ | 60 | ||||
Intangible assets with indefinite lives: | ||||||||
Land use rights | 329 | 329 | ||||||
Intangible assets with finite lives: | ||||||||
Interconnections, net of accumulated amortization of $2,921 and $3,034 | $ | 11,871 | $ | 12,526 | ||||
Customer contracts, net of accumulated amortization of $16,964 and $17,085 | $ | 3,637 | $ | 1,198 | ||||
Total intangible assets with finite lives: | $ | 15,508 | $ | 13,724 | ||||
Total Goodwill and Intangible assets | $ | 15,897 | $ | 14,113 | ||||
Three Months Ended March 31, 2022 | Year Ended December 31, 2021 | |||||||
Asset retirement obligations - beginning of period | $ | 5,301 | $ | 5,689 | ||||
Accretion expense | 98 | (160 | ) | |||||
Decommissioning | (20 | ) | (228 | ) | ||||
Asset retirement obligations - end of period | $ | 5,379 | $ | 5,301 |
Nine months ended September 30, 2022 | Year ended December 31, 2021 | |||||||
Asset retirement obligations - beginning of period | $ | 5,301 | $ | 5,689 | ||||
Accretion expense | 174 | (160 | ) | |||||
Decommissioning | (78 | ) | (228 | ) | ||||
Asset retirement obligations - end of period | $ | 5,397 | $ | 5,301 | ||||
Three Months Ended | ||||||||||||
Derivative Instrument | Location | March 31, 2022 | March 31, 2021 | |||||||||
Commodity contracts: | ||||||||||||
Realized natural gas | Gas commodity sales | $ | (1,016 | ) | $ | 0 | ||||||
Unrealized natural gas | Other income | (3,451 | ) | 0 | ||||||||
Interest rate swaps | Interest expense | 1,036 | 418 | |||||||||
Net gain (loss) | $ | (3,431 | ) | $ | 418 | |||||||
Three months ended | ||||||||
Derivative Instrument | September 30, 2022 | September 30, 2021 | ||||||
Commodity contracts: | ||||||||
Realized natural gas | $ | (3,201 | ) | $ | — | |||
Unrealized natural gas | 367 | — | ||||||
Interest rate swaps | 1,149 | 287 | ||||||
Net gain (loss) | $ | (1,685 | ) | $ | 287 | |||
Nine months ended | ||||||||
Derivative Instrument | September 30, 2022 | September 30, 2021 | ||||||
Commodity contracts: | ||||||||
Realized natural gas | $ | (6,872 | ) | $ | — | |||
Unrealized natural gas | (1,440 | ) | — | |||||
Interest rate swaps | 2,799 | 1,011 | ||||||
Net gain (loss) | $ | (5,513 | ) | $ | 1,011 | |||
March 31, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Commodity derivative liability | $ | (3,451 | ) | 0 | 0 | $ | (3,451 | ) | ||||||||
Interest rate swap derivative asset | 0 | 368 | 0 | 368 | ||||||||||||
Interest rate swap derivative liability | 0 | (170 | ) | $ | 0 | $ | (170 | ) | ||||||||
Asset retirement obligations | 0 | 0 | (5,379 | ) | (5,379 | ) | ||||||||||
Earn-out liability | 0 | 0 | (2,721 | ) | (2,721 | ) | ||||||||||
$ | (3,451 | ) | $ | 198 | $ | (8,100 | ) | $ | (11,353 | ) | ||||||
September 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Commodity derivative liability | $ | (1,440 | ) | — | — | $ | (1,440 | ) | ||||||||
Interest rate swap derivative asset | — | 1,962 | — | 1,962 | ||||||||||||
Asset retirement obligations | — | — | (5,397 | ) | (5,397 | ) | ||||||||||
Earn-out liability | — | — | (3,843 | ) | (3,843 | ) | ||||||||||
$ | (1,440 | ) | $ | 1,962 | $ | (9,240 | ) | $ | (8,718 | ) | ||||||
December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Interest rate swap derivative liability | $ | 0 | $ | (839 | ) | $ | 0 | $ | (839 | ) | ||||||
Asset retirement obligations | 0 | 0 | (5,301 | ) | (5,301 | ) | ||||||||||
Earn-out liability | 0 | 0 | (2,721 | ) | (2,721 | ) | ||||||||||
$ | 0 | $ | (839 | ) | $ | (8,022 | ) | $ | (8,861 | ) | ||||||
December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Interest rate swap derivative liability | $ | — | $ | (839 | ) | $ | — | $ | (839 | ) | ||||||
Asset retirement obligations | — | — | (5,301 | ) | (5,301 | ) | ||||||||||
Earn-out liability | — | — | (2,721 | ) | (2,721 | ) | ||||||||||
$ | — | $ | (839 | ) | $ | (8,022 | ) | $ | (8,861 | ) | ||||||
March 31, 2022 | December 31, 2021 | |||||||
Accrued expenses | $ | 4,042 | $ | 3,551 | ||||
Payroll and related benefits | 1,340 | 1,239 | ||||||
Royalty | 2,458 | 4,630 | ||||||
Utility | 1,152 | 1,274 | ||||||
Other | 359 | 129 | ||||||
Accrued liabilities | $ | 9,351 | $ | 10,823 | ||||
September 30, 2022 | December 31, 2021 | |||||||
Accrued expenses | $ | 5,454 | $ | 3,551 | ||||
Payroll and related benefits | 2,498 | 1,239 | ||||||
Royalty | 6,796 | 4,630 | ||||||
Utility | 1,569 | 1,274 | ||||||
Other | 926 | 129 | ||||||
Accrued liabilities | $ | 17,243 | $ | 10,823 | ||||
March 31, 2022 | December 31, 2021 | |||||||
Term Loans | $ | 78,000 | $ | 80,000 | ||||
Less: current principal maturities | (8,000 | ) | (8,000 | ) | ||||
Less: debt issuance costs (on long-term debt) | (573 | ) | (608 | ) | ||||
Long-term Debt | $ | 69,427 | $ | 71,392 | ||||
Current Portion of Long- term Debt | 7,828 | 7,815 | ||||||
$ | 77,255 | $ | 79,207 | |||||
September 30, 2022 | December 31, 2021 | |||||||
Term loans | $ | 74,000 | $ | 80,000 | ||||
Less: current principal maturities | (8,000 | ) | (8,000 | ) | ||||
Less: debt issuance costs (on long-term debt) | (515 | ) | (608 | ) | ||||
Long-term debt | $ | 65,485 | $ | 71,392 | ||||
Current portion of long- term debt | 7,854 | 7,815 | ||||||
$ | 73,339 | $ | 79,207 | |||||
Three Months Ended | ||||||||
September 30, 2022 | September 30, 2021 | |||||||
Provision (benefit) for income taxes | $ | 2,540 | $ | (3,481 | ) | |||
Effective tax rate | 19 | % | (64 | )% | ||||
Nine Months Ended | ||||||||
September 30, 2022 | September 30, 2021 | |||||||
Provision for income taxes | $ | 6,847 | $ | 1,286 | ||||
Effective tax rate | 19 | % | (15 | )% |
Three Months Ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
(Benefit) expense provision for income taxes | $ | (258 | ) | $ | 1,382 | |||
Effective tax rate | 18.8 | % | (10.7 | )% |
Grant Date | ||||
Risk-free interest rate | 0.5 | % | ||
Expected volatility | 32.0 | % | ||
Expected option life (in years) | 5.5 | |||
Grant-date fair value | $ | 3.44 |
Restricted Shares | Restricted Stock Units | Options | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Exercise Price | |||||||||||||||||||
End of period - December 31, 2021 | 2,569,613 | $ | 10.08 | 377,984 | $ | 10.23 | 950,214 | $ | 11.38 | |||||||||||||||
Beginning of period - January 1, 2022 | 2,569,613 | $ | 10.08 | 377,984 | $ | 10.23 | 950,214 | $ | 11.38 | |||||||||||||||
Granted | ||||||||||||||||||||||||
Vested | (23,705 | ) | 11.38 | (27,984 | ) | 11.38 | (950,214 | ) | 11.38 | |||||||||||||||
Forfeited | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Exercised | 0 | 0 | ||||||||||||||||||||||
End of period - March 31, 2022 | 2,545,908 | $ | 10.07 | 350,000 | $ | 10.13 | 0 | $ | 0 | |||||||||||||||
Restricted Shares | Restricted Stock Units | Options | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Exercise Price | |||||||||||||||||||
End of period - December 31, 2021 | 2,569,613 | $ | 10.08 | 377,984 | $ | 10.23 | 950,214 | $ | 11.38 | |||||||||||||||
Beginning of period - January 1, 2022 | 2,569,613 | $ | 10.08 | 377,984 | $ | 10.23 | 950,214 | $ | 11.38 | |||||||||||||||
Granted | 1,250,000 | 12.40 | — | — | — | — | ||||||||||||||||||
Vested | (256,681 | ) | 11.38 | (27,984 | ) | 11.38 | (950,214 | ) | 11.38 | |||||||||||||||
Forfeited | (1,250,000 | ) | 9.04 | — | — | — | — | |||||||||||||||||
End of period – September 30, 2022 | 2,312,932 | $ | 11.75 | 350,000 | $ | 10.13 | — | $ | — | |||||||||||||||
Restricted Shares | Restricted Stock Units | Options | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Exercise Price | |||||||||||||||||||
End of period - December 31, 2020 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Beginning of period - January 1, 2021 | 0 | $ | 0 | 0 | $ | 0 | 0 | $ | 0 | |||||||||||||||
Granted | 2,092,836 | 11.38 | 29,568 | 11.38 | 950,214 | 11.38 | ||||||||||||||||||
Vested | (950,214 | ) | 11.38 | 0 | — | — | 0 | |||||||||||||||||
Forfeited | — | — | (792 | ) | 11.38 | 0 | 0 | |||||||||||||||||
Exercised | — | — | — | — | — | — | ||||||||||||||||||
End of period – March 31, 2021 | 1,142,622 | $ | 11.38 | 28,776 | $ | 11.38 | 950,214 | $ | 11.38 | |||||||||||||||
Restricted Shares | Restricted Stock Units | Options | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Exercise Price | |||||||||||||||||||
End of period - December 31, 2020 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Beginning of period - January 1, 2021 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Granted | 3,519,827 | 10.43 | 29,304 | 11.38 | 950,214 | 11.38 | ||||||||||||||||||
Vested | (950,214 | ) | 11.38 | — | — | — | — | |||||||||||||||||
Forfeited | — | — | (1,056 | ) | 11.38 | — | — | |||||||||||||||||
Exercised | — | — | — | — | — | — | ||||||||||||||||||
End of period – September 30, 2021 | 2,569,613 | $ | 10.08 | 28,248 | $ | 11.38 | 950,214 | $ | 11.38 | |||||||||||||||
Three Months Ended March 31, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Total Revenue | $ | 32,665 | $ | 3,971 | $ | (4,467 | ) | $ | 32,169 | |||||||
Net Income (Loss) | 12,940 | (1,178 | ) | (12,877 | ) | (1,115 | ) | |||||||||
EBITDA | 16,620 | 214 | (13,022 | ) | 3,812 | |||||||||||
Adjusted EBITDA (1) | 16,327 | 214 | (9,493 | ) | 7,048 | |||||||||||
Total Assets | 147,981 | 56,818 | 82,183 | 286,982 | ||||||||||||
Capital Expenditure | 1,012 | 1,361 | 5 | 2,378 |
Three Months Ended September 30, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Total revenue | $ | 54,343 | $ | 4,351 | $ | (2,834 | ) | $ | 55,860 | |||||||
Net income (loss) | 26,841 | (1,689 | ) | (13,965 | ) | 11,187 | ||||||||||
EBITDA (1) | 30,572 | (326 | ) | (11,316 | ) | 18,930 | ||||||||||
Adjusted EBITDA (1) | 30,615 | 1,807 | (11,543 | ) | 20,879 | |||||||||||
Total assets | 152,113 | 53,303 | 118,527 | 323,943 | ||||||||||||
Capital expenditures | 6,225 | 1,061 | 315 | 7,601 |
Three Months Ended March 31, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Net Income (loss) | $ | 12,940 | $ | (1,178 | ) | $ | (12,877 | ) | $ | (1,115 | ) | |||||
Depreciation and amortization | 3,680 | 1,392 | 81 | 5,153 | ||||||||||||
Interest expense | — | — | 32 | 32 | ||||||||||||
Income tax benefit | — | — | (258 | ) | (258 | ) | ||||||||||
EBITDA | $ | 16,620 | $ | 214 | $ | (13,022 | ) | $ | 3,812 | |||||||
Impairment loss | — | — | 51 | 51 | ||||||||||||
Net gain on sale of assets | (293 | ) | (293 | ) | ||||||||||||
Transaction costs | — | — | 27 | 27 | ||||||||||||
Non cash hedging charges | — | — | 3,451 | 3,451 | ||||||||||||
Adjusted EBITDA | $ | 16,327 | $ | 214 | $ | (9,493 | ) | $ | 7,048 | |||||||
Three Months Ended September 30, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Net income (loss) | $ | 26,841 | $ | (1,689 | ) | $ | (13,965 | ) | $ | 11,187 | ||||||
Depreciation and amortization | 3,731 | 1,363 | 73 | 5,167 | ||||||||||||
Interest expense | — | — | 36 | 36 | ||||||||||||
Income tax expense | — | — | 2,540 | 2,540 | ||||||||||||
EBITDA | $ | 30,572 | $ | (326 | ) | $ | (11,316 | ) | $ | 18,930 | ||||||
Net loss on sale of assets | 43 | — | — | 43 | ||||||||||||
Impairment loss | — | 2,133 | 140 | 2,273 | ||||||||||||
Unrealized gains on hedging activities | — | — | (367 | ) | (367 | ) | ||||||||||
Adjusted EBITDA | $ | 30,615 | $ | 1,807 | $ | (11,543 | ) | $ | 20,879 | |||||||
Three Months Ended March 31, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Total Revenue | $ | 28,123 | $ | 3,324 | $ | — | $ | 31,447 | ||||||||
Net Income (Loss) | 10,561 | (2,241 | ) | (22,585 | ) | (14,265 | ) | |||||||||
EBITDA | 14,779 | (765 | ) | (20,514 | ) | (6,500 | ) | |||||||||
Adjusted EBITDA (1) | 14,779 | (139 | ) | (20,426 | ) | (5,786 | ) | |||||||||
Total Assets | 157,436 | 50,156 | 45,770 | 253,362 | ||||||||||||
Capital Expenditure | 1,306 | 23 | 6 | 1,335 |
Three Months Ended September 30, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Total revenue | $ | 35,002 | $ | 3,872 | $ | 875 | $ | 39,749 | ||||||||
Net income (loss) | 15,071 | (1,379 | ) | (4,796 | ) | 8,896 | ||||||||||
EBITDA (1) | 19,358 | (44 | ) | (7,536 | ) | 11,778 | ||||||||||
Adjusted EBITDA (1) | 20,180 | (24 | ) | (7,324 | ) | 12,832 | ||||||||||
Total assets | 153,108 | 53,711 | 52,926 | 259,745 | ||||||||||||
Capital expenditures | 1,864 | 1,321 | 49 | 3,234 |
Three Months Ended March 31, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Net Income (loss) | $ | 10,561 | $ | (2,241 | ) | $ | (22,585 | ) | $ | (14,265 | ) | |||||
Depreciation and amortization | 4,218 | 1,474 | 45 | 5,737 | ||||||||||||
Interest expense | — | — | 646 | 646 | ||||||||||||
Income tax expense | — | 2 | 1,380 | 1,382 | ||||||||||||
EBITDA | $ | 14,779 | $ | (765 | ) | $ | (20,514 | ) | $ | (6,500 | ) | |||||
Impairment loss | — | 626 | — | 626 | ||||||||||||
Transaction costs | — | — | 88 | 88 | ||||||||||||
Adjusted EBITDA | $ | 14,779 | $ | (139 | ) | $ | (20,426 | ) | $ | (5,786 | ) | |||||
Three Months Ended September 30, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Net income (loss) | $ | 15,071 | $ | (1,379 | ) | $ | (4,796 | ) | $ | 8,896 | ||||||
Depreciation and amortization | 4,287 | 1,335 | 44 | 5,666 | ||||||||||||
Interest expense | — | — | 697 | 697 | ||||||||||||
Income tax benefit | — | — | (3,481 | ) | (3,481 | ) | ||||||||||
EBITDA | $ | 19,358 | $ | (44 | ) | $ | (7,536 | ) | $ | 11,778 | ||||||
Net loss sale of assets | 822 | — | — | 822 | ||||||||||||
Transaction costs | — | 20 | 212 | 232 | ||||||||||||
Adjusted EBITDA | $ | 20,180 | $ | (24 | ) | $ | (7,324 | ) | $ | 12,832 |
Three Months Ended March 31, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Customer A | 24.3 | % | — | — | 24.3 | % | ||||||||||
Customer B | 16.1 | % | — | — | 16.1 | % | ||||||||||
Customer C | 11.2 | % | — | 11.2 | % | |||||||||||
Customer D | 10.6 | % | — | — | 10.6 | % | ||||||||||
Customer E | 10.3 | % | 10.3 | % |
Three Months Ended September 30, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Customer A | 43.9 | % | — | — | 43.9 | % | ||||||||||
Customer B | 12.4 | % | — | — | 12.4 | % |
Three Months Ended March 31, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Customer A | 26.2 | % | — | — | 26.2 | % | ||||||||||
Customer B | 13.1 | % | — | — | 13.1 | % | ||||||||||
Customer C | 11.0 | % | — | — | 11.0 | % | ||||||||||
Customer D | 10.0 | % | 10.0 | % | ||||||||||||
Three Months Ended September 30, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Customer A | 19.6 | % | — | — | 19.6 | % | ||||||||||
Customer B | 15.4 | % | — | — | 15.4 | % | ||||||||||
Customer C | 11.4 | % | — | — | 11.4 | % |
Nine Months Ended September 30, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Total revenue | $ | 151,577 | $ | 12,651 | $ | (8,312 | ) | $ | 155,916 | |||||||
Net income (loss) | 75,021 | (4,284 | ) | (41,513 | ) | 29,224 | ||||||||||
EBITDA (1) | 86,109 | (126 | ) | (34,120 | ) | 51,863 | ||||||||||
Adjusted EBITDA (1) | 86,197 | 1,738 | (32,457 | ) | 55,478 | |||||||||||
Total assets | 152,113 | 53,303 | 118,527 | 323,943 | ||||||||||||
Capital expenditures | 10,039 | 2,390 | 321 | 12,750 |
Nine Months Ended September 30, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Net Income (loss) | $ | 75,021 | $ | (4,284 | ) | $ | (41,513 | ) | $ | 29,224 | ||||||
Depreciation and amortization | 11,088 | 4,158 | 207 | 15,453 | ||||||||||||
Interest expense | — | — | 339 | 339 | ||||||||||||
Income tax expense | — | — | 6,847 | 6,847 | ||||||||||||
EBITDA | $ | 86,109 | $ | (126 | ) | $ | (34,120 | ) | $ | 51,863 | ||||||
Net loss (gain) sale of assets | 61 | (311 | ) | — | (250 | ) | ||||||||||
Impairment loss | 27 | 2,175 | 191 | 2,393 | ||||||||||||
Unrealized losses on hedging activities | — | — | 1,440 | 1,440 | ||||||||||||
Transaction costs | — | — | 32 | 32 | ||||||||||||
Adjusted EBITDA | $ | 86,197 | $ | 1,738 | $ | (32,457 | ) | $ | 55,478 | |||||||
Nine Months Ended September 30, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Total revenue | $ | 90,707 | $ | 11,290 | $ | 875 | $ | 102,872 | ||||||||
Net income (loss) | 33,205 | (3,647 | ) | (39,579 | ) | (10,021 | ) | |||||||||
EBITDA (1) | 45,991 | 498 | (36,098 | ) | 10,391 | |||||||||||
Adjusted EBITDA (1) | 46,813 | 1,144 | (35,761 | ) | 12,196 | |||||||||||
Total assets | 153,108 | 53,711 | 52,926 | 259,745 | ||||||||||||
Capital expenditures | 5,883 | 1,770 | 49 | 7,702 |
Nine Months Ended September 30, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Net income (loss) | $ | 33,205 | $ | (3,647 | ) | $ | (39,579 | ) | $ | (10,021 | ) | |||||
Depreciation and amortization | 12,786 | 4,143 | 133 | 17,062 | ||||||||||||
Interest expense | — | — | 2,064 | 2,064 | ||||||||||||
Income tax expense | — | 2 | 1,284 | 1,286 | ||||||||||||
EBITDA | $ | 45,991 | $ | 498 | $ | (36,098 | ) | $ | 10,391 | |||||||
Net loss sale of assets | 822 | — | — | 822 | ||||||||||||
Impairment loss | — | 626 | — | 626 | ||||||||||||
Transaction costs | — | 20 | 337 | 357 | ||||||||||||
Adjusted EBITDA | $ | 46,813 | $ | 1,144 | $ | (35,761 | ) | $ | 12,196 | |||||||
Nine Months Ended September 30, 2022 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Customer A | 31.6 | % | — | — | 31.6 | % | ||||||||||
Customer B | 13.2 | % | — | — | 13.2 | % |
Nine Months Ended September 30, 2021 | ||||||||||||||||
RNG | REG | Corporate | Total | |||||||||||||
Customer A | 12.8 | % | — | — | 12.8 | % | ||||||||||
Customer B | 12.4 | % | — | — | 12.4 | % | ||||||||||
Customer C | 11.3 | % | — | — | 11.3 | % | ||||||||||
Customer D | 10.5 | % | — | — | 10.5 | % | ||||||||||
Customer E | — | 10.2 | % | — | 10.2 | % |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 64 | $ | 76 | ||||
Weighted average remaining lease term (in years) | 1.05 | 1.51 | ||||||
Weighted average discount rate | 5.00 | % | 5.00 | % |
Three months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 83 | $ | 76 | ||||
Weighted average remaining lease term (in years) | 1.50 | 1.83 | ||||||
Weighted average discount rate | 5.00 | % | 5.00 | % |
Nine months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 282 | $ | 227 | ||||
Weighted average remaining lease term (in years) | 1.50 | 1.83 | ||||||
Weighted average discount rate | 5.00 | % | 5.00 | % |
Year Ending | ||||
Remainder of 2022 | $ | 241 | ||
2023 | 8 | |||
2024 | 2 | |||
Interest | (1 | ) | ||
Total | $ | 250 |
Year Ending | ||||
Remainder of 2022 | $ | 83 | ||
2023 | 11 | |||
2024 | 5 | |||
2025 | 4 | |||
2026 | 4 | |||
2027 | 1 | |||
Interest | (3 | ) | ||
Total | $ | 105 |
Three months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of financing lease liabilities | $ | 12 | $ | — | ||||
Weighted average remaining lease term (in years) | 1.58 | — | ||||||
Weighted average discount rate | 5.00 | % | — |
Nine months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of finance lease liabilities | $ | 18 | — | |||||
Weighted average remaining lease term (in years) | 1.58 | — | ||||||
Weighted average discount rate | 5.00 | % | — |
Year Ending | ||||
Remainder of 2022 | $ | 18 | ||
2023 | 75 | |||
2024 | 23 | |||
Interest | (5 | ) | ||
Total | $ | 111 |
Three months ended March 31, 2022 | Three months ended March 31, 2021 | |||||||
Net loss | $ | (1,115 | ) | $ | (14,265 | ) | ||
Basic weighted-average shares outstanding | 141,045,477 | 141,015,213 | ||||||
Dilutive effect of share-based awards | 0 | 0 | ||||||
Diluted weighted-average shares outstanding | 141,045,477 | 141,015,213 | ||||||
Basic loss per share | $ | (0.01 | ) | $ | (0.10 | ) | ||
Diluted loss per share | $ | (0.01 | ) | $ | (0.10 | ) |
Three months ended September 30, 2022 | Three months ended September 30, 2021 | |||||||
Net income | $ | 11,187 | $ | 8,896 | ||||
Basic weighted-average shares outstanding | 141,290,748 | 141,015,213 | ||||||
Dilutive effect of share-based awards | 1,431,648 | 32,793 | ||||||
Diluted weighted-average shares outstanding | 142,722,396 | 141,048,006 | ||||||
Basic income per share | $ | 0.08 | $ | 0.06 | ||||
Diluted income per share | $ | 0.08 | $ | 0.06 |
Nine months ended September 30, 2022 | Nine months ended September 30, 2021 | |||||||
Net income (loss) | $ | 29,224 | $ | (10,021 | ) | |||
Basic weighted-average shares outstanding | 141,156,126 | 141,015,213 | ||||||
Dilutive effect of share-based awards | 1,471,585 | — | ||||||
Diluted weighted-average shares outstanding | 142,627,711 | 141,015,213 | ||||||
Basic income (loss) per share | $ | 0.21 | $ | (0.07 | ) | |||
Diluted income (loss) per share | $ | 0.20 | $ | (0.07 | ) |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A.–Risk Factors” of our 2021 Annual Report and elsewhere in this report.
Overview
Montauk Renewables is a renewable energy company specializing in the recovery and processing of biogas from landfills and other
Biogas is produced by microbes as they break down organic matter in the absence of oxygen (during a process called anaerobic digestion). Our two current sources of commercial scale biogas are LFG or ADG. We typically secure our biogas feedstock through long-term fuel supply agreements and property lease agreements with biogas site hosts. Once we secure long-term fuel supply rights, we design, build, own, and operate facilities that convert the biogas into RNG or use the processed biogas to produce Renewable Electricity. We sell the RNG and Renewable Electricity through a variety of term length agreements. Because we are capturing waste methane and making use of a renewable source of energy, our RNG and Renewable Electricity generate valuable Environmental Attributes which we are able to monetize under federal and state renewable initiatives.
Our current operating projects produce either RNG or Renewable Electricity by processing biogas from landfill sites or agricultural waste from livestock farms. We view agricultural waste from livestock farms as a significant opportunity for us to expand our RNG business, whileand we continue to evaluate other agricultural feedstock opportunities. We believe that our business model and technology are highly scalable given availability of biogas from agriculturally derived sources, which will allow us to continue to grow through prudent development and complimentary acquisitions.
Recent Developments
Second Apex RNG Facility
In August 2022, we announced the planned construction of a second RNG processing facility at the Apex landfill. This project is highly dependent onbeing driven by projections in biogas feedstock availability from the market pricehost landfill. We anticipate an approximate 40% increase in RNG processing capacity with the addition of Environmental Attributes, including the market pricesecond facility. This expansion is expected to increase daily production approximately 2,100 MMBtu per day and expand the infrastructure for RINs. As we self-marketthe conversion of LFG to RNG. We expect the project to be complete and become commercially operational in 2024. We do not currently anticipate this project to have a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. The industry experienced volatile D3 RIN index prices duringon 2022 development capital expenditures.
Pico Digestion Capacity Increase
During the first quarter ended March 31, 2022. Though the average market price of D3 RINs during the first quarter ended March 31, 2022 was approximately $3.25, the market price declined as low as $2.85 and generally decreased during the first quarter. We viewed this reduction in price as temporary and, accordingly, we determined not to transfer a significant amount of D3 RINs generated and available for transfer. As a result, for the period ended March 31, 2022, we had approximately 4,394 RINs in inventory as compared to 622 RINs in inventory for the period ended March 31, 2021.
Related to our Pico feedstock amendment, which increased the amount of feedstock supplied to the facility for processing over a one to three-year period (the “Pico Feedstock Amendment, we expectAmendment”), the dairy began delivering the first and second increases in feedstock during the third quarter of 2022 and we have made two payments to begin to deliver increased feedstock volumesthe dairy as required in the second half of 2022.Pico Feedstock Agreement. The improved efficiencies of our existing digestion process has providedand the opportunity to pursue additional process changes related to water management. The volume of water in the existing digestion process limits the amount of feedstock we can process. We expect that our water management improvements will enablehave enabled us to process the increased feedstock volumes expectedwhich we currently expect to increase by five to ten percent in connection with increased feedstock deliveries received from the dairy indairy. We completed the second halfdesign of 2022. Our improved water management has allowed us to further work with the dairy to meet their needs and interests related to enhanced water purification. Changes to water purification benefits the dairy by improving the quality of water being sent to lagoons, and has the potential of reducing our costs of operations, though has elongated the timeline of certain components of the overall capacity expansion. We expect the final phase of designing our digestion capacity project to be completed duringin the third quarter of 2022 includingand have begun incurring capital expenditures related to the water management and purification improvements.construction of the project. We currently expect the dairy to begin delivering the final increase in feedstock volumes during 2024.
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Montauk Ag Renewables
In the second quarter of 2021, through our newly formed wholly owned subsidiary, Montauk Ag Renewables, we completed the 2021 asset purchase related to developing technology to recover residual natural resources from waste streams of modern agriculture and to refine and recycle such waste products through proprietary and other processes to produce high quality renewable natural gas,
We continue to work with our engineer of record through the optimization of improvements to the now patented reactor technology, which is currently functional in Magnolia. We have not completed our improvements, however, and have not reached commercial operations at this location. The improvements to the reactor technology are intended to be deployed at the Turkey location.
While these project developments continue, we are in various stages of discussioncontinue to engage with regulatory agencies in North Carolina related to the resulting power generation derived from swine waste to ensureconfirm its eligibility for Renewable Energy Credits under North Carolina’s Renewable Energy Portfolio Standards in anticipation of commercial production. The North Carolina Utilities Commission (“NCUC”) has placed a three-year moratorium on the designation of any new New Renewable Energy Facility (“NREF”) while the NCUC monitor and assess gas quality. We requested the Turkey location to both be designated as an NREF and to be accepted into the NCUC pilot project portfolio. The NCUC designated the Turkey location as an NREF and was accepted into the pilot project portfolio. Our Magnolia, North Carolina location has an existing electricity interconnection which can be reactivated pending those discussions.reactivated. We are also in varying stages of corresponding negotiationsdiscussions with potential power purchasers.
We are at the beginning stages of developing the opportunities associated with Montauk Ag Renewables and can give no assurances that our plans related to this acquisition will meet our expectations. We continue to design and plan for the development of the facility to be used for commercial production. We do not currently expect commercial production to commence during 2022 based on the current development timeline. We also do not expect to commence significant revenue generating activities until 2024. We intend to contract with additional farms to secure feedstock sources, as we commission commercial production and increase our production capabilities, which we anticipate will secure additional feedstock for future production processes.
Key Trends
Market Trends Affecting the Renewable Fuel Market
We believe demand for RNG produced from biogas remains strong due to increasing public policy initiatives focused on reducing greenhouse gas emissions, including methane, as well as continued public and private sector interest in the development of additional renewable energy sources to offset traditional fossil fuel energy sources.
Key drivers for the long-term growth of RNG include the following factors:
• | Regulatory or policy initiatives, including the federal RFS program and state or national-level low-carbon fuel programs in states such as California and Oregon or Canada, that drive demand for RNG and its derivative Environmental Attributes (as further described below). |
Efficiency, mobility and capital cost flexibility in RNG operations enable them to compete successfully in multiple markets. Our operating model is nimble, as we commonly use modular equipment; our RNG processing equipment is more efficient than its fossil-fuel counterparts.
• | Demand for compressed natural gas (“CNG”) from natural gas-fueled vehicles. The RNG we create is pipeline quality and can be used for transportation fuel when converted to CNG. CNG is commonly used by medium-duty fleets that are close to fueling stations, such as city fleets, local delivery trucks and waste haulers. |
Regulatory requirements, market pressure and public relations challenges increase the time, cost and difficulty of permitting new fossil fuel-fired facilities.
Factors Affecting Our Future Operating Results:
Conversion of Electricity Projects to RNG Projects:
We periodically evaluate opportunities to convert existing facilities from Renewable Electricity to RNG production. These opportunities tend to be most attractive for any merchant electricity facilities given the favorable economics for the sale of RNG plus RINs relative to the sale of market rate electricity plus RECs. This strategy has been an increasingly attractive avenue for growth since 2014 when RNG from landfills became eligible for D3 RINs. However, during the conversion of a project, there is a gap in production while the electricity project is offline until it commences operation as an RNG facility, which can adversely affect us. This timing effect may adversely affect our operating results as a result of our potential conversion of Renewable Electricity projects. Upon completion of a conversion, we expect that the increase in revenue upon commencement of RNG production will more than offset the loss of revenue from Renewable Electricity production. Historically, we have taken advantage of these opportunities on a gradual basis at our merchant electricity facilities, such as Atascocita and Coastal Plains.
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Acquisition and Development Pipeline
The timing and extent of our development pipeline affects our operating results due to:
Impact of Higher Selling, General and Administrative Expenses Prior to the Commencement of a Project’s Operation: We incur significant expenses in the development of new RNG projects. Further, the receipt of RINs is delayed, and typically does not commence for a period of four to six months after the commencement of injecting RNG into a pipeline, pending final registration approval of the project by the EPA and then the subsequent completion of a third-party quality assurance plan certification. During such time, the RNG is either physically or theoretically stored and later withdrawn from storage to allow for the generation of RINs.
Shifts in Revenue Composition for Projects from New Fuel Sources: As we expand into livestock farm projects, our revenue composition from Environmental Attributes will change. We believe that livestock farms offer us a lucrative opportunity, as the value of LCFS credits for dairy farm projects, for example, are a multiple of those realized from landfill projects due to the significantly more attractive CI score of livestock farms.
Incurrence of Expenses Associated with Pursuing Prospective Projects That Do Not Come to Fruition: We incur expenses to pursue prospective projects with the goal of a site host accepting our proposal or being awarded a project in a competitive bidding process. Historically, we have evaluated opportunities which we decided not to pursue further due to the prospective project not meeting our internal investment thresholds or a lack of success in a competitive bidding process. To the extent we seek to pursue a greater number of projects or bidding for projects becomes more competitive, our expenses may increase.
Increased Construction Costs or Length Related to Material Cost Inflation or Supply Chain Disruptions: Due to the variability of our development and construction cycle of approximately 12 to 24 months, we believe that we could incur increased raw material costs for development projects related to inflation or supply chain disruptions. Although these factors have not had a material impact on our business or results of operations to date for development projects, these price increases and disruptions in construction could lead to future material, design, or transportation delays, which could increase the costs of our development.
Regulatory, Environmental and Social Trends
Regulatory, environmental and social factors are key drivers that incentivize the development of RNG and Renewable Electricity projects and influence the economics of these projects. We are subject to the possibility of legislative and regulatory changes to certain incentives, such as RINs, RECs and GHG initiatives. On December 7, 2021,In accordance with the EPA issued a proposed rule modifying the RVOs for 2020 and setting the RVOs for 2021 and 2022. In addition, the proposed rule included the addition of a supplemental volume of renewable fuel obligation in 2022 to address the United States Court of Appeals for the D.C. Circuit’s 2017 remand of the 2014-2016 standards and also laid out a proposed regulatory framework to allow biointermediates to be included in the program. The manner in which the EPA will establish RVOs beginning in 2023 and when the statutory RVO mandates are set to expire, is expected to create additional uncertainty as to RIN pricing. EPA decisions on SRE petitions also has strong potential to introduce RIN pricing volatility. On December 7, 2021, the EPA proposed a decision to deny 65 pending petitions for extensions between compliance years 2016 – 2021. In April 2022, the EPA issued final denials for 36 petitions for the 2018 compliance year with compliance flexibility in a separate action for 31 of those denials. Remaining petitions are still being considered for compliance years 2016 – 2021. On April 22, 2022, the U.S. District Court for the District of Columbia approved a consent decree entered into between the EPA and Growth Energy which requiresapproved by the U.S. District Court for the District of Columbia, the EPA to issueissued the final Renewable Fuel Standards for 2020, 2021, and 2022 byon June 3, 2022. The EPA’s proposedFinal volumes for cellulosic biofuel were set at 510, 560 and 630 million RINs for the three years 2020, 2021 and 2022, standards includerespectively. While final volumes set for all three years were lower than proposed, the EPA partially offset the lower volumes by issuing its final notice, also on June 3, 2022, to deny the remaining 69 petitions for RFS Small Refinery Exemptions. It is not certain whether the EPA will set RFS volume obligations for one year or multiple years going forward, however, per the settlement agreement with Growth Energy, the EPA must issue a proposed revision2023 RVO no later than November 16, 2022 with final volume requirements established by June 11, 2023. On November 4, the U.S. Environmental Protection Agency (EPA) filed a notice with the U.S. District Court for the District of Columbia indicating that EPA and Growth Energy have agreed to extend the 2020 standardsdeadline for signing the proposed rule for the 2023 renewable fuel standards. The deadline under a Consent Decree entered to resolve litigation between the two parties had been set as November 16, 2022. Under the stipulated extension, the date is now November 30, 2022 to sign a notice of proposed rulemaking. The notice indicates that the stipulation is based on an understanding that EPA had previously set in 2019.
Changes to the LCFS program require annual verification of the CI score assigned to a project. Annual verification could significantly affect the profitability of a project, particularly in the case of a livestock farm project.
Factors Affecting Revenue
Our total operating revenues include renewable energy and related sales of Environmental Attributes. Renewable energy sales primarily consist of the sale of biogas, including LFG and ADG, which is either sold or converted to Renewable Electricity. Environmental Attributes are generated and monetized from the renewable energy.
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We report revenues from two operating segments: Renewable Natural Gas and Renewable Electricity Generation. Corporate relates to additional discrete financial information for the corporate function; primarily used as a shared service center for maintaining functions described below and not otherwise allocated to a segment. As such, the corporate entity is not determined to be an operating segment but is discretely disclosed for purposes of reconciliation to the Company’s consolidated financial statements.
• | Renewable Natural Gas Revenues: We record revenues from the production and sale of RNG and the generation and sale of the EnvironmentalAttributes derived from RNG, such as RINs and LCFS credits. Our RNG revenues from Environmental Attributes are recorded net of a portion of Environmental Attributes shared with off-take counterparties as consideration for such counterparties using the RNG as a transportation fuel. We monetize a portion of our RNG production under fixed-price and counterparty sharing agreements, which provide floor prices in excess of commodity indices and sharing percentages of the monetization of Environmental Attributes. Under these sharing arrangements, we receive a portion of the profits derived from counterparty monetization of the Environmental Attributes in excess of the floor prices. We have entered into fixed-price agreements to replace the counterparty sharing arrangements which expired during 2022. |
• | Renewable Electricity Generation Revenues: We record revenues from the production and sale of Renewable Electricity and the generation andsale of the Environmental Attributes, such as RECs, derived from Renewable Electricity. All of our Renewable Electricity production is monetized under fixed-price PPAs from our existing operating projects. |
• | Corporate Revenues: Corporate reports realized and unrealized gains or losses under our gas hedge programs. Based on current rates, we expect our gas commodity hedge program to continue to be priced below actual index prices through the end of this fiscal year at which time the hedge program will expire. Corporate also relates to additionaldiscrete financial information for the corporate function; primarily used as a shared service center for maintaining functions such as executive, accounting, treasury, legal, human resources, tax, environmental, engineering and other operations functions not otherwise allocated to a segment. |
Our revenues are priced based on published index prices which can be influenced by factors outside our control, such as market impacts on commodity pricing and regulatory developments. With our royalty payments structured as a percentage of revenue, royalty payments fluctuate with changes in revenues. Due to these factors, we place a primary focus on managing production volumes and operating and maintenance expenses as these factors are more controllable by us.
RNG Production
Our RNG production levels are subject to fluctuations based on numerous factors, including:
Disruptions to Production
A 2021 cold weather event impacted our Atascocita, Galveston, McCarty, and Coastal Plains facilities located in Texas. Production at these facilities was temporarily idled due to the loss of power from February 14 through February 20, 2021 and force majeure events were declared by certain of our counter-partiescounterparties or by us for the period February 12 through February 22, 2021 related to these weather events. Operations at these facilities have subsequently resumed.
The landfill host at our McCarty facility recently changed its wellfield collection system which has contributed to elevated nitrogen in the feedstock received by our facility. Additionally, the landfill host modified the wellfield bifurcation approach which has impacted the quantity of feedstock received at the facility. We are working with the landfill host but have currently experienced lower volumes of feedstock available to be processed at the McCarty facility. We currently expect lower than historical volumes through the end of 2022.
Our Pico facility has resumed operations and ramp up activities related to the existing digester cleanout activities have been substantially completed. Production volume performance continues to meet our expectations during the post cleanout period. Our improvement project has impacted the timeline related to modeling the CI Score pathway model. Our 2022We have begun releasing production will be stored untilfrom storage while CARB completes its CI Score Pathway. We dowill not currently expect to receive LCFS credit revenue on 2022 production until 2023.2023, but do expect 2022 production to generate 2023 LCFS credit revenue.
• | Quality of Biogas: We are reliant upon the quality and availability of biogas from our site partners. The quality of the waste at our landfill projectsites is subject to change based on the volume and type of waste accepted. Variations in the quality of the biogas could affect our RNG production levels. At three of our projects, we operate the wellfield collection system, which allows greater control over the quality and consistency of the collected biogas. At two of our projects, we have operating and management agreements by which we earn revenue for managing the wellfield collection systems. Additionally, our dairy farm project benefits from the consistency of feedstock and controlled environment of collection of waste to improve biogas quality. |
• | RNG Production from Our Growth Projects: We anticipate increased production at certain of our existing projects as open landfills continue totake in additional waste and the amount of gas available for collection increases. Delays in commencement of production or extended commissioning issues at a new project or a conversion project would delay any realization of production from that project. |
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Pricing
Our Renewable Natural Gas and Renewable Electricity Generation segments’ revenues are primarily driven by the prices under our
The pricing of Environmental Attributes, which accounts for a substantial portion of our revenues, is subject to volatility based on a variety of factors, including regulatory and administrative actions and commodity pricing.
Our Pico project is expected to be awarded a more attractive CI by CARB, thereby generating LCFS credits at a multiple of those generated by our landfill projects.
The sale of RINs, which is subject to market price fluctuations, accounts for a substantial portion of our revenues. We manage against the risk of these fluctuations through forward sales of RINs, although currently we only sell RINs in the calendar year they are generated. A decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. As of September 30, 2022, we had approximately 2,357 RINs in inventory as compared to 308 RINs in inventory for the period ended September 30, 2021. Our current RIN commitments scheduled for transfer are at an average D3 RIN price of approximately $3.41$3.52 with commitments substantively through JuneDecember 2022. We have not currently committed a significantan insignificant portion of our expected 2022 fourth quarter RIN generation forgeneration. We believe a portion of the second halfreduction and volatility in RIN price during the third and fourth quarter of 2022 could be temporary and related to uncertainty due to the upcoming release by the EPA of the 2023 RVO in November 2022. We expect to transfer the majority of RINs generated after the release of the RVO in the fourth quarter. Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments.
Factors Affecting Operating Expenses
Our operating expenses include royalties, transportation, gathering and production fuel expenses, project operating and maintenance expenses, general and administrative expenses, depreciation and amortization, net loss (gain) on sale of assets, impairment loss and transaction costs. Our operating expenses can be subject to inflationary cost increases that are largely out of our control. During 2022, increased commodity index prices have mitigated these increases but these inflationary increases could have an impact on our operating income in the future.
• | Project Operating and Maintenance Expenses: Operating and maintenance expenses primarily consist of expenses related to the collection and processing of biogas, including biogas collection system operating and maintenance expenses, biogas processing, operating and maintenance expenses, and related labor and overhead expenses. At the project level, this includes all labor and benefit costs, ongoing corrective and proactive maintenance, project level utility charges, rent, health and safety, employee communication, and other general project level expenses. |
• | Royalties, Transportation, Gathering and Production Fuel Expenses: Royalties represent payments made to our facility hosts, typically structuredas a percentage of revenue. Transportation and gathering expenses include capacity and metering expenses representing the costs of delivering our RNG and Renewable Electricity production to our customers. These expenses include payments to pipeline operators and other agencies that allow for the transmission of our gas and electricity commodities to end users. Production fuel expenses generally represent alternative royalty payments based on quantity usage of biogas feedstock. |
• | General and Administrative Expenses: General and administrative expenses primarily consist of corporate expenses and unallocated support functions for our operating facilities, including personnel costs for executive, finance, accounting, investor relations, legal, human resources, operations, engineering, environmental registration and reporting, health and safety, IT and other administrative personnel and professional fees and general corporate expenses. We expect increased general and administrative expenses associated with our ongoing development of Montauk Ag Renewables in 2022. We also expect increased general and administrative expenses associated with our board of directors approving the payment of cash fees to non-employee directors beginning in 2022. The Company accounts for share-based compensation related to grants made through its equity and incentive compensation plan under FASB ASC 718.We expect the amendment to the RS Awards to increase general and administrative expenses approximately $1,227 quarterly through the end of 2022. For more information, see Note 16 to our unaudited condensed consolidated financial statements related to share-based compensation. |
• | Depreciation and Amortization: Expenses related to the recognition of the useful lives of our intangible and fixed assets. We spend significantcapital to build and own our facilities. In addition to development capital, we annually reinvest to maintain these facilities. |
• | Impairment Loss: Expenses related to reductions in the carrying value(s) of fixed and/or intangible assets based on periodic evaluations wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. |
• | Transaction Costs: Transaction costs primarily consist of expenses incurred for due diligence and other activities related to potential acquisitionsand other strategic transactions. |
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Key Operating Metrics
Total operating revenues reflect both sales of renewable energy and sales of related Environmental Attributes. As a result, our revenues are primarily affected by unit production of RNG and Renewable Electricity, production of Environmental Attributes, and the prices at which we monetize such production. Set forth below is an overview of these key metrics:
• | Production volumes: We review performance by site based on unit of production calculations for RNG and Renewable Electricity, measured interms of MMBtu and MWh, respectively. While unit of production measurements can be influenced by schedule facility maintenance schedules, the metric is used to measure the efficiency of operations and the impact of optimization improvement initiatives. We monetize a majority of our RNG commodity production under variable-price agreements, based on indices. A portion of our Renewable Natural Gas segment commodity production is monetized under fixed-priced contracts. Our Renewable Electricity Generation segment commodity production is primarily monetized under fixed-priced PPAs. |
• | Production of Environmental Attributes: We monetize Environmental Attributes derived from our production of RNG and Renewable Electricity.We carry-over a portion of the RINs generated from RNG production to the following year and monetize the carried over RINs in such following calendar year. A majority of our Renewable Natural Gas segment Environmental Attributes are self-monetized, though a portion are generated and monetized by third parties under counterparty sharing agreements. A majority of our Renewable Electricity Generation segment Environmental Attributes are monetized as a component of our fixed-price PPAs. |
• | Average realized price per unit of production: Our profitability is highly dependent on the commodity prices for natural gas and electricity, and theEnvironmental Attribute prices for RINs, LCFS credits, and RECs. Realized prices for Environmental Attributes monetized in a year may not correspond directly with that year’s production as attributes may be carried over and subsequently monetized. Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments. |
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The following table summarizes the key operating metrics described above, which metrics we use to measure performance.
(in thousands, unless otherwise indicated) | Three Months Ended March 31, | Change | Change % | |||||||||||||
2022 | 2021 | |||||||||||||||
Revenues | ||||||||||||||||
Renewable Natural Gas Total Revenues | $ | 32,666 | $ | 28,123 | $ | 4,543 | 16.2 | % | ||||||||
Renewable Electricity Generation Total Revenues | $ | 3,971 | $ | 3,324 | $ | 647 | 19.5 | % | ||||||||
RNG Metrics | ||||||||||||||||
CY RNG production volumes (MMBtu) | 1,369 | 1,348 | 21 | 1.5 | % | |||||||||||
Less: Current period RNG volumes under fixed/floor-price contracts | (310 | ) | (453 | ) | 143 | 31.6 | % | |||||||||
Plus: Prior period RNG volumes dispensed in current period | 372 | 353 | 19 | 5.4 | % | |||||||||||
Less: Current period RNG production volumes not dispensed | (410 | ) | (350 | ) | (60 | ) | 17.1 | % | ||||||||
Total RNG volumes available for RIN generation (1) | 1,021 | 898 | 123 | 13.7 | % | |||||||||||
RIN Metrics | ||||||||||||||||
Current RIN generation ( x 11.727) (2) | 11,967 | 10,534 | 1,433 | 13.6 | % | |||||||||||
Less: Counterparty share (RINs) | (1,216 | ) | (1,147 | ) | (69 | ) | (6.0 | %) | ||||||||
Plus: Prior period RINs carried into CY | 128 | 110 | 18 | 16.4 | % | |||||||||||
Less: CY RINs carried into next CY | — | — | — | — | ||||||||||||
Total RINs available for sale (3) | 10,879 | 9,497 | 1,382 | 14.6 | % | |||||||||||
Less: RINs sold | (6,485 | ) | (8,875 | ) | 2,390 | 26.9 | % | |||||||||
RIN Inventory | 4,394 | 622 | 3,772 | 606.4 | % | |||||||||||
RNG Inventory (volumes not dispensed for RINs) (4) | 410 | 350 | 60 | 17.1 | % | |||||||||||
Average Realized RIN price | $ | 3.46 | $ | 1.91 | $ | 1.55 | 81.2 | % | ||||||||
Operating Expenses | ||||||||||||||||
Renewable Natural Gas Operating Expenses | $ | 16,345 | $ | 13,134 | $ | 3,211 | 24.4 | % | ||||||||
Operating Expenses per MMBtu (actual) | $ | 11.94 | $ | 9.74 | $ | 2.20 | 22.6 | % | ||||||||
Renewable Electricity Generation Operating Expenses | $ | 3,737 | $ | 3,393 | $ | 344 | 10.1 | % | ||||||||
$/MWh (actual) | $ | 83.04 | $ | 71.70 | $ | 11.34 | 15.8 | % | ||||||||
Other Metrics | ||||||||||||||||
Renewable Electricity Generation Volumes Produced (MWh) | 45 | 47 | (2 | ) | (4.2 | %) | ||||||||||
Average Realized Price $/MWh (actual) | $ | 88.27 | $ | 70.24 | $ | 18.03 | 25.7 | % |
(in thousands, unless otherwise indicated) | Three Months Ended September 30, | Change | Change % | |||||||||||||
2022 | 2021 | |||||||||||||||
Revenues | ||||||||||||||||
Renewable Natural Gas Total Revenues | $ | 54,343 | $ | 35,002 | $ | 19,341 | 55.3 | % | ||||||||
Renewable Electricity Generation Total Revenues | $ | 4,351 | $ | 3,872 | $ | 479 | 12.4 | % | ||||||||
RNG Metrics | ||||||||||||||||
CY RNG production volumes (MMBtu) | 1,437 | 1,510 | (73 | ) | (4.8 | %) | ||||||||||
Less: Current period RNG volumes under fixed/floor-price contracts | (333 | ) | (333 | ) | — | — | ||||||||||
Plus: Prior period RNG volumes dispensed in current period | 367 | 309 | 58 | 18.8 | % | |||||||||||
Less: Current period RNG production volumes not dispensed | (439 | ) | (379 | ) | (60 | ) | 15.8 | % | ||||||||
Total RNG volumes available for RIN generation (1) | 1,032 | 1,107 | (75 | ) | (6.8 | %) | ||||||||||
RIN Metrics | ||||||||||||||||
Current RIN generation ( x 11.727) (2) | 12,100 | 12,985 | (885 | ) | (6.8 | %) | ||||||||||
Less: Counterparty share (RINs) | (1,399 | ) | (1,415 | ) | 16 | (1.1 | %) | |||||||||
Plus: Prior period RINs carried into CY | 1,547 | 1,586 | (39 | ) | (2.5 | %) | ||||||||||
Less: CY RINs carried into next CY | — | — | — | — | ||||||||||||
Total RINs available for sale (3) | 12,248 | 13,156 | (908 | ) | (6.9 | %) | ||||||||||
Less: RINs sold | (10,850 | ) | (13,250 | ) | (2,400 | ) | (18.1 | %) | ||||||||
RIN Inventory | 1,398 | (94 | ) | 1,492 | (1587.2 | %) | ||||||||||
RNG Inventory (volumes not dispensed for RINs) (4) | 439 | 379 | 60 | 15.8 | % | |||||||||||
Average Realized RIN price | $ | 3.49 | $ | 1.65 | $ | 1.84 | 111.5 | % | ||||||||
Operating Expenses | ||||||||||||||||
Renewable Natural Gas Operating Expenses | $ | 23,785 | $ | 14,916 | $ | 8,869 | 59.5 | % | ||||||||
Operating Expenses per MMBtu (actual) | $ | 16.55 | $ | 9.88 | $ | 6.67 | 67.5 | % | ||||||||
Renewable Electricity Generation Operating Expenses | $ | 2,525 | $ | 3,961 | $ | (1,436 | ) | (36.3 | %) | |||||||
$/MWh (actual) | $ | 51.53 | $ | 93.00 | $ | (41.47 | ) | (44.6 | %) | |||||||
Other Metrics | ||||||||||||||||
Renewable Electricity Generation Volumes Produced (MWh) | 49 | 43 | 6 | 14.0 | % | |||||||||||
Average Realized Price $/MWh (actual) | $ | 88.80 | $ | 90.93 | $ | (2.13 | ) | (2.3 | %) |
(1) | RINs are generated in the month that the gas is dispensed to generate RINs, which occurs the month after the gas is produced. Volumes under fixed/floor-price arrangements generate RINs which we do not self-market. |
(2) | One MMBtu of RNG has the same energy content as 11.727 gallons of ethanol, and thus may generate 11.727 RINs under the RFS program. |
(3) | Represents RINs available to be self-marketed by us during the reporting period. |
(4) | Represents gas production which has not been dispensed to generate RINs. |
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The following table summarizes our revenues, expenses and net income for the periods set forth below:
(in thousands, except per share data) | Three Months Ended March 31, | Change % | ||||||||||||||
2022 | 2021 | Change | ||||||||||||||
Total operating revenues | $ | 32,169 | $ | 31,447 | $ | 722 | 2.3 | % | ||||||||
Operating expenses: | ||||||||||||||||
Operating and maintenance expenses | 13,201 | 10,612 | 2,589 | 24.4 | % | |||||||||||
General and administrative expenses | 8,495 | 20,452 | (11,957 | ) | (58.5 | %) | ||||||||||
Royalties, transportation, gathering and production fuel | 7,206 | 6,218 | 988 | 15.9 | % | |||||||||||
Depreciation and amortization | 5,153 | 5,737 | (584 | ) | (10.2 | %) | ||||||||||
Gain on insurance proceeds | (313 | ) | (82 | ) | (231 | ) | (281.7 | %) | ||||||||
Impairment loss | 51 | 626 | (575 | ) | (91.9 | %) | ||||||||||
Transaction costs | 27 | 88 | (61 | ) | (69.3 | %) | ||||||||||
Total operating expenses | 33,820 | 43,651 | (9,831 | ) | (22.5 | %) | ||||||||||
Operating loss | $ | (1,651 | ) | $ | (12,204 | ) | $ | 10,553 | 86.5 | % | ||||||
Other (income) expenses: | (278 | ) | 679 | (957 | ) | (140.9 | %) | |||||||||
Income tax (benefit) expense | (258 | ) | 1,382 | (1,640 | ) | (118.7 | %) | |||||||||
Net loss | $ | (1,115 | ) | $ | (14,265 | ) | $ | (13,150 | ) | (92.2 | %) | |||||
(in thousands, unless otherwise indicated) | Three Months Ended September 30, | Change % | ||||||||||||||
2022 | 2021 | Change | ||||||||||||||
Total operating revenues | $ | 55,860 | $ | 39,749 | $ | 16,111 | 40.5 | % | ||||||||
Operating expenses: | ||||||||||||||||
Operating and maintenance expenses | 14,134 | 13,123 | 1,011 | 7.7 | % | |||||||||||
General and administrative expenses | 8,466 | 7,520 | 946 | 12.6 | % | |||||||||||
Royalties, transportation, gathering and production fuel | 12,188 | 6,636 | 5,552 | 83.7 | % | |||||||||||
Depreciation and amortization | 5,167 | 5,666 | (499 | ) | (8.8 | %) | ||||||||||
Gain on insurance proceeds | — | (157 | ) | 157 | (100.0 | %) | ||||||||||
Impairment loss | 2,273 | — | 2,273 | — | ||||||||||||
Transaction costs | — | 232 | (232 | ) | (100.0 | %) | ||||||||||
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Total operating expenses | 42,228 | 33,020 | 9,208 | 27.9 | % | |||||||||||
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Operating income | $ | 13,632 | $ | 6,729 | $ | 6,903 | 102.6 | % | ||||||||
Other (income) expenses: | (95 | ) | 1,314 | (1,409 | ) | (107.2 | %) | |||||||||
Income tax expense (benefit) | 2,540 | (3,481 | ) | 6,021 | (173.0 | %) | ||||||||||
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Net income | $ | 11,187 | $ | 8,896 | $ | 2,291 | 25.8 | % | ||||||||
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Revenues for the Three Months Ended March 31,September 30, 2022 and 2021
Total revenues in the firstthird quarter of 2022 were $32,169,$55,860 an increase of $722 (2.3%$16,111 (40.5%) compared to $31,447$39,749 in the firstthird quarter of 2021. The increase is primarily related to an increase in realized pricing of gas commodity indices and average realized RIN pricing during the firstthird quarter of 2022 compared to the firstthird quarter of 2021. Realized gasGas commodity indices increased 84.0%104.5% in the firstthird quarter of 2022 of $4.95to $8.20 compared to $2.69$4.01 in the firstthird quarter of 2021. Realized RIN pricing increased 81.2%111.5% during the firstthird quarter of 2022 compared to the firstthird quarter of 2021. The increase was offset by lowerthere being no revenues recognized under our counter partycounterparty sharing agreements of $187 in the firstthird quarter of 2022 compared to $3,787$2,795 in the firstthird quarter of 2021. Also offsetting the increase are losses recognized on in the first quarter of 2022 related to gas commodity hedging settlements of $3,451.
Renewable Natural Gas Revenues
We produced 1,3691,437 MMBtu of RNG during the firstthird quarter of 2022, an increasea decrease of 2173 MMBtu over the 1,3481,510 MMBtu (1.5%(4.8%) produced in the firstthird quarter of 2021. Our GalvestonApex facility produced 6626 fewer MMBtu more in the firstthird quarter of 2022 compared to the firstthird quarter of 2021 as a result of higher inlet gas duelandfill filling patterns resulting in lower production. Also contributing to wellfield changes and plant efficiency optimization of process equipment. Offsetting the increase are lower production volumes atdecrease is our McCarty and Atascocita facilities. Our McCarty facility produced 31producing 53 fewer MMBtu in the firstthird quarter of 2022 compared to the firstthird quarter of 2021 due to wellfield changes by our landfill host. Also, our Atascocita facility produced 24 fewer MMBtuas a result of increased contaminants in the first quarter of 2022 compared to the first quarter of 2021 due to a process equipment failure that has since been repaired.
Revenues from the Renewable Natural Gas segment in the firstthird quarter of 2022 were $32,666,$54,343, an increase of $4,543 (16.2%$19,341 (55.3%) compared to $28,123$35,002 in the firstthird quarter of 2021. Average commodity pricing for natural gas for the firstthird quarter of 2022 was $4.95$8.20 per MMBtu, 84.0%104.5% higher than the firstthird quarter of 2021. During the firstthird quarter of 2022, we self-monetized 6,48510,850 RINs, representing a 2,3902,400 decrease (26.9%(18.1%) compared to 8,87513,250 in the firstthird quarter of 2021. The decrease was primarily related to our prior period decision not to self-marketforward commit a significant amountlarger portion of expected RIN sales. We also sold market purchased RINs due to our belief that D3 RIN index volatility was temporary.during the third quarter of 2021. Average pricing realized on RIN sales during the firstthird quarter of 2022 was $3.46$3.49 as compared to $1.91$1.65 in the firstthird quarter of 2021, an increase of 81.2%111.5%. This compares to the average D3 RIN index price for the firstthird quarter of 2022 of $3.25$2.83 being approximately 28.0% higher8.8% lower than the average D3 RIN index price in the firstthird quarter of 2021. At March 31,September 30, 2022, we had approximately 410439 MMBtu available for RIN generation and we had approximately 4,3941,398 RINs generated and unsold. At March 31,September 30, 2021, we had approximately 350379 MMBtu available for RIN generation and approximately 622no RINs generated and unsold.
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Renewable Electricity Generation Revenues
We produced 45approximately 49 MWh in Renewable Electricity duringin the firstthird quarter of 2022, a decreasean increase of 26 MWh (4.2%(14.0%) over the 47from 43 MWh produced in the firstthird quarter of 2021. Our Security facility produced approximately 3 MWh in the third quarter of 2022 compared to no production in the third quarter of 2021 as a result of the prior period engine restoration project. Our Bowerman facility produced 24 MWh lessmore in the firstthird quarter of 2022 compared to the firstthird quarter of 2021 as a result of preventative engine maintenance performed during the third quarter of 2021. Our Tulsa facility produced approximately 1 MWh less in the third quarter of 2022 compared to the third quarter of 2021 due to preventative engine maintenance.
Revenues from Renewable Electricity facilities in the firstthird quarter of 2022 were $3,971,$4,351, an increase of $647 (19.5%$479 (12.4%) compared to $3,324$3,872 in the firstthird quarter of 2021. OurThe increase is primarily driven by the increase in our Bowerman facility was impacted in the fourth quarter of 2020 by the California wildfires forcing it to temporarily shut down the facility. This shut down delayed the timing of monetization of the Environmental Attributes associated with the Bowerman facility and resulted in approximately $598 in reduced revenues in the first quarter of 2021 as compared to the first quarter of 2022.
In the firstthird quarter of 2022, 100%99.6% of Renewable Electricity Generation segment revenues were derived from the monetization of Renewable Electricity at fixed prices associated with underlying PPAs, as compared to 100% in the firstthird quarter of 2021. This provides the Company with certainty of price resulting from our Renewable Electricity sites.
Corporate Analysis
In the firstthird quarter of 2022, our gas commodity hedge program was priced at rates below actual index prices, resulting in realized lossesprices. However, we did recognize a gain of $3,451.$367 as a result of favorable index price movements under our gas commodity hedge activities. We did not have any gas hedge programs in the firstthird quarter of 2021. Based on current rates, we expect our gas commodity hedge program to continue to be priced below actual index prices through the year-end 2022 at which time the hedge program will expire.
Expenses for the Three Months Ended March 31,September 30, 2022 and 2021
General and Administrative Expenses
Total general and administrative expenses were $8,495$8,466 for the firstthird quarter of 2022, a decreasean increase of $11,957 (58.5%$946 (12.6%) compared to $20,452$7,520 for the firstthird quarter of 2021. Of the total in the first quarter of 2021, $14,353 related to stock-based compensation costs associated with the IPO and Reorganization Transactions. Employee related costs, including stock-based compensation, decreased approximately $11,938 (71.0%) in the first quarter of 2022 as compared to the first quarter of 2021. This decrease is related to our accounting for the cancellation of MNK options and recording approximately $2,050 in previously unvested stock-based compensation expense. We recorded approximately $12,549 in stock-based compensation expense associated with the grants of restricted stock,
Renewable Natural Gas Expenses
Operating and maintenance expenses for our RNG facilities in the firstthird quarter of 2022 were $9,560,$12,052, an increase of $1,958 (25.8%$3,344 (38.4%) as compared to $7,602$8,708 in the firstthird quarter of 2021. The primary reason for this increase is because our Houston based facilities were favorably impacted by lower utility rates duringOur McCarty facility incurred increased preventative maintenance expenses of approximately $314. Our Apex facility operating and maintenance expenses increased approximately $950 as a result of timing of preventative maintenance and increased waste disposal costs in the firstthird quarter of 2022 as compared to third quarter of 2021. Certain ofUtility expense for our utility contracts have provisions that when we are not using utilities, the providers are able to contribute that capacity back into the market and we receive credit against our future bills. The weather event that occurredRNG facilities in the firstthird quarter of 2021 temporarily impacted our Houston facilities’ utility consumption and resulted in our RNG utilities being2022 increased approximately $2,183 lower in the first quarter of 2021 as$2,224 (68.4%) compared to the firstutility expense for our RNG facilities in the third quarter of 2022.
Royalties, transportation, gathering and production fuel expenses for the Company’s RNG facilities for the firstthird quarter of 2022 were $6,785,$11,733, an increase of $1,253 (22.7%$5,525 (89.0%) compared to $5,532$6,208 in the firstthird quarter of 2021. Royalties, transportation, gathering and production fuel expenses increased as a percentage of RNG revenues to 20.8%21.6% for the firstthird quarter of 2022 from 19.7%17.7% in the firstthird quarter of 2021. The increase in royalties, transportation, gathering and production fuel expenses is primarily related to the increase in RNG revenues in the firstthird quarter of 2022 compared to the firstthird quarter of 2021.
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Renewable Electricity Expenses
Operating and maintenance expenses for our Renewable Electricity facilities in the firstthird quarter of 2022 were $3,316, an increase$2,070, a decrease of $350 (11.8%$1,463 (41.4%) compared to $2,966$3,533 in the firstthird quarter of 2021. The increasedecrease is primarily related to scheduled preventative engine maintenance at our Bowerman facility, which was approximately $457$1,598 higher in the firstthird quarter of 20222021 compared to the firstthird quarter of 2021.
Royalties, transportation, gathering and production fuel expenses for our Renewable Electricity facilities for the firstthird quarter of 2022 were $421, a decrease$455, an increase of $6 (1.4%$27 (6.3%) compared to $427$428 in the firstthird quarter of 2021. As a percentage of Renewable Electricity Generation segment revenues, royalties, transportation, gathering and production fuel expenses decreased to 10.6%10.5% from 12.8%11.1%. This decrease relates to an increase in grid access fees that were incurred in first quarter of 2021 as a result of the 2020 California wildfires, that did not occur in the first quarter of 2022.
Royalty Payments
Royalties, transportation, gathering, and production fuel expenses in the firstthird quarter of 2022 were $7,206,$12,188, an increase of $988 (15.9%$5,552 (83.7%) compared to $6,218$6,636 in the firstthird quarter of 2021. We make royalty payments to our fuel supply site partners on the commodities we produce and the associated Environmental Attributes. These royalty payments are typically structured as a percentage of revenue subject to a cap, with fixed minimum payments when Environmental Attribute prices fall below a defined threshold. To the extent commodity and Environmental Attributes’ prices fluctuate, our royalty payments may fluctuate upon renewal or extension of a fuel supply agreement or in connection with new projects. Our fuel supply agreements are typically structured as
Depreciation
Depreciation and amortization in the firstthird quarter of 2022 was $5,153,$5,167, a decrease of $584 (10.2%$499 (8.8%) compared to $5,737$5,666 in the firstthird quarter of 2021. The decrease is associated with assets remaining in service being fully amortized and depleted.
Impairment loss
We calculated and recorded an impairment loss of $51$2,273 in the firstthird quarter of 2022, a decrease2022. The impairment loss recorded of $575 (91.9%) compared$2,133 is primarily related to $626REG facility where forecasted cash flows did not exceed the carrying value of the long-lived assets. We did not have an impairment loss in the firstthird quarter of 2021. The impairment
Other (Income) Expenses
Other income in the firstthird quarter of 2022 was related to computer software and hardware no longer being utilized. The impairment in the first quarter of 2021 was due to decommissioning a previously converted electricity site to RNG as we had been contractually obligated to maintain the site.
Income Tax Expense (Benefit)
Income tax expense for the three months ended March 31,September 30, 2022 was calculated using an estimated effective tax rate which differs from the U.S. federal statutory rate of 21% primarily due to the adjustment for production tax credits.
The effective tax rate of 18.8%18.5% for the three months ended March 31,September 30, 2022 was higher than the rate for the three months ended March 31,September 30, 2021 of (10.7)%(64.3%) primarily due to current period pre-tax income increases and a required Code Section 162(m) executive compensation limitation permanent adjustment. The September 30, 2022 rate also includes utilization of production tax credits and certain discrete items.
Operating Profit (Loss) for the Three Months Ended September 30, 2022 and 2021
Operating profit in the third quarter of 2022 was $13,632, an increase of $6,903 (102.6%) compared to $6,729 in the third quarter of 2021. RNG operating profit for the third quarter of 2022 was $26,828, an increase of $10,873 (68.1%) compared to $15,955 in the third quarter of 2021. Renewable Electricity Generation operating loss for the third quarter of 2022 was $1,670, a decrease of $246 (17.3%) compared $1,424 for the third quarter of 2021.
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Results of Operations
Comparison of Nine Months Ended September 30, 2022 and 2021
The following table summarizes the key operating metrics described above, which metrics we use to measure performance.
(in thousands, unless otherwise indicated) | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | Change | Change % | |||||||||||||
Revenues | ||||||||||||||||
Renewable Natural Gas Total Revenues | $ | 151,577 | $ | 90,707 | $ | 60,870 | 67.1 | % | ||||||||
Renewable Electricity Generation Total Revenues | $ | 12,652 | $ | 11,290 | $ | 1,362 | 12.1 | % | ||||||||
RNG Metrics | ||||||||||||||||
CY RNG production volumes (MMBtu) | 4,275 | 4,274 | 1 | 0.0 | % | |||||||||||
Less: Current period RNG volumes under fixed/floor-price contracts | (972 | ) | (1,273 | ) | 301 | 23.6 | % | |||||||||
Plus: Prior period RNG volumes dispensed in current period | 372 | 353 | 19 | 5.4 | % | |||||||||||
Less: Current period RNG production volumes not dispensed | (439 | ) | (379 | ) | (60 | ) | 15.8 | % | ||||||||
Total RNG volumes available for RIN generation (1) | 3,236 | 2,975 | 261 | 8.8 | % | |||||||||||
RIN Metrics | ||||||||||||||||
Current RIN generation ( x 11.727) (2) | 37,951 | 34,883 | 3,068 | 8.8 | % | |||||||||||
Less: Counterparty share (RINs) | (3,961 | ) | (3,810 | ) | (151 | ) | 4.0 | % | ||||||||
Plus: Prior period RINs carried into CY | 140 | 110 | 30 | 27.3 | % | |||||||||||
Less: CY RINs carried into next CY | — | — | — | — | ||||||||||||
Total RINs available for sale (3) | 34,130 | 31,183 | 2,947 | 9.5 | % | |||||||||||
Less: RINs sold | (31,773 | ) | (30,875 | ) | (898 | ) | 2.9 | % | ||||||||
RIN Inventory | 2,357 | 308 | 2,049 | 665.3 | % | |||||||||||
RNG Inventory (volumes not dispensed for RINs) (4) | 439 | 379 | 60 | 15.8 | % | |||||||||||
Average Realized RIN price | $ | 3.43 | $ | 1.77 | $ | 1.66 | 93.8 | % | ||||||||
Operating Expenses | ||||||||||||||||
Renewable Natural Gas Operating Expenses | $ | 65,735 | $ | 44,004 | $ | 21,731 | 49.4 | % | ||||||||
Operating Expenses per MMBtu (actual) | $ | 15.38 | $ | 10.30 | $ | 5.08 | 49.3 | % | ||||||||
Renewable Electricity Generation Operating Expenses | $ | 10,546 | $ | 10,130 | $ | 416 | 4.1 | % | ||||||||
$/MWh (actual) | $ | 74.79 | $ | 74.00 | $ | 0.79 | 1.1 | % | ||||||||
Other Metrics | ||||||||||||||||
Renewable Electricity Generation Volumes Produced (MWh) | 141 | 137 | 4 | 2.9 | % | |||||||||||
Average Realized Price $/MWh (actual) | $ | 89.73 | $ | 82.47 | $ | 7.26 | 8.8 | % |
(1) | RINs are generated in the month that the gas is dispensed to generate RINs, which occurs the month after the gas is produced. Volumes under fixed/floor-price arrangements generate RINs which we do not self-market. |
(2) | One MMBtu of RNG has the same energy content as 11.727 gallons of ethanol, and thus may generate 11.727 RINs under the RFS program. |
(3) | Represents RINs available to be self-marketed by us during the reporting period. |
(4) | Represents gas production which has not been dispensed to generate RINs. |
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The following table summarizes our revenues, expenses and net income for the periods set forth below:
(in thousands, unless otherwise indicated) | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | Change | Change % | |||||||||||||
Total operating revenues | $ | 155,916 | $ | 102,872 | $ | 53,044 | 51.6 | % | ||||||||
Operating expenses: | ||||||||||||||||
Operating and maintenance expenses | 42,205 | 36,954 | 5,251 | 14.2 | % | |||||||||||
General and administrative expenses | 25,715 | 35,280 | (9,565 | ) | (27.1 | %) | ||||||||||
Royalties, transportation, gathering and production fuel | 34,484 | 18,840 | 15,644 | 83.0 | % | |||||||||||
Depreciation and amortization | 15,453 | 17,062 | (1,609 | ) | (9.4 | %) | ||||||||||
Gain on insurance proceeds | (313 | ) | (238 | ) | (75 | ) | 31.5 | % | ||||||||
Impairment loss | 2,393 | 626 | 1,767 | 282.3 | % | |||||||||||
Transaction costs | 32 | 357 | (325 | ) | (91.0 | %) | ||||||||||
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Total operating expenses | 119,969 | 108,881 | 11,088 | 10.2 | % | |||||||||||
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Operating income (loss) | $ | 35,947 | $ | (6,009 | ) | $ | 41,956 | (698.2 | %) | |||||||
Other (income) expenses: | (124 | ) | 2,726 | (2,850 | ) | (104.5 | %) | |||||||||
Income tax expense | 6,847 | 1,286 | 5,561 | 432.4 | % | |||||||||||
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Net income (loss) | $ | 29,224 | $ | (10,021 | ) | $ | 39,245 | (391.6 | %) | |||||||
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Revenues for the Nine Months Ended September 30, 2022 and 2021
Total revenues in the first nine months of 2022 were $155,916, an increase of $53,044 (51.6%) compared to $102,872 in the first nine months of 2021. The increase is primarily related to an increase in pricing of gas commodity indices and average realized RIN pricing during the first nine months of 2022 compared to the first nine months of 2021. Gas commodity indices increased 112.9% in the first nine months of 2022 to $6.77 compared to $3.18 in the first nine months of 2021. Realized RIN pricing increased 93.8% during the first nine months of 2022 compared to the first nine months of 2021. The increase was offset by lower revenues recognized under our counterparty sharing agreements of $1,246 in the first nine months of 2022 compared to $12,725 in the first nine months of 2021.
Renewable Natural Gas Revenues
We produced 4,275 MMBtu of RNG during the first nine months of 2022, consistent with the 4,274 MMBtu (0.0%) produced in the first nine months of 2021. Our Pico facility produced 86 MMBtu more in the first nine months of 2022 compared to the first nine months of 2021 as a result of improvements related to the existing digestion process. Our Galveston facility produced 98 MMBtu more in the first nine months of 2022 compared to the first nine months of 2021 as a result of higher inlet gas due to wellfield changes and plant efficiency optimization of process equipment. Offsetting the increase are lower production volumes at our McCarty, Atascocita, and Apex facilities. Our McCarty facility produced 33 fewer MMBtu in the first nine months of 2022 compared to the first nine months due to wellfield changes by our landfill host. Also, our Atascocita facility produced 100 fewer MMBtu in the first nine months of 2022 compared to the first nine months of 2021 due to a process equipment failure that has since been repaired. Our Apex facility produced 40 fewer MMBtu in the first nine months of 2022 compared to the first nine months of 2021 due to landfill filling patterns resulting in lower production.
Revenues from the Renewable Natural Gas segment in the first nine months of 2022 were $151,577, an increase of $60,870 (67.1%) compared to $90,707 in the first nine months of 2021. Average commodity pricing for natural gas for the first nine months of 2022 was $6.77, 112.9% higher than the first nine months of 2021. During the first nine months of 2022, we self-monetized 31,773 RINs, representing an 898 increase (2.9%) compared to 30,875 in the first nine months of 2021. The increase was primarily related to inter-period timing on transfers of RINs as the majority of our RINs are self-marketed resulting in higher commitments for the first nine months of 2022 versus the first nine months of 2021. Average pricing realized on RIN sales during the first nine months of 2022 was $3.43 as compared to $1.77 in the first nine months of 2021, an increase of 93.8%. This compares to the average D3 RIN index price for the first nine months of 2022 of $3.10 being approximately 6.5% higher than the average D3 RIN index price in the first nine months of 2021. At September 30, 2022, we had approximately 439 MMBtu available for RIN generation and we had approximately 2,357 RINs generated and unsold. At September 30, 2021, we had approximately 379 MMBtu available for RIN generation and approximately 308 RINs generated and unsold.
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Renewable Electricity Generation Revenues
We produced 141 MWh in Renewable Electricity during the first nine months of 2022, an increase of 4 MWh (2.9%) over the 137 MWh produced in the first nine months of 2021. Our Security facility produced approximately 7 MWh in the third quarter of 2022 compared to zero production in the third quarter of 2021 as a result of our engine restoration project. Our Pico facility produced 4 MWh less in the third quarter of 2022 compared to the third quarter of 2021 due to preventative engine maintenance.
Revenues from Renewable Electricity facilities in the first nine months of 2022 were $12,652, an increase of $1,362 (12.1%) compared to $11,290 in the first nine months of 2021. Our Bowerman facility was impacted in the fourth quarter of 2020 by the California wildfires forcing it to temporarily shut down the facility. This shut down delayed the timing of monetization of the Environmental Attributes associated with the Bowerman facility and resulted in approximately $600 in reduced revenues in the first nine months of 2021 as compared to the first nine months of 2022. Also contributing to the increase is our Security engine restoration resulting in $466 in higher revenues for the first nine months of 2022 as compared to zero in first nine months of 2021.
In the first nine months of 2022, 99.5% of Renewable Electricity Generation segment revenues were derived from the monetization of Renewable Electricity at fixed prices associated with underlying PPAs, as compared to 100% in the first nine months of 2021. This provides the Company with certainty of price resulting from our Renewable Electricity sites.
Corporate Analysis
In the first nine months of 2022, our gas commodity hedge program was priced at rates below actual index prices, resulting in recognized losses of $1,440. We did not have any gas hedge programs in the first nine months of 2021. Based on current rates, we expect our gas commodity hedge program to continue to be priced below actual index prices through the year-end 2022 at which time the hedge program will expire. In the first nine months of 2021, we recorded revenue of $875 related to the RINs purchased in the second quarter of 2021. This is included within operating revenues in the unaudited condensed consolidated financial statements for the period ended September 30, 2021. Also in the first nine months of 2021, we recorded an adjustment of $710, associated with our purchase of RINs, to reduce the carrying value of those RINs to net realizable value. This adjustment was included within operating and maintenance expenses in the unaudited condensed consolidated statement of operations. We did not have market purchased RINs or other purchases of environment attributes during the first nine months of 2022.
Expenses for the Nine Months Ended September 30, 2022 and 2021
General and Administrative Expenses
Total general and administrative expenses were $25,715 for the first nine months of 2022, a decrease of $9,565 (27.1%) compared to $35,280 for the first nine months of 2021. Employee related costs, including stock-based compensation, decreased approximately $10,764 (41.2%) in the first nine months of 2022 as compared to the first nine months of 2021. This decrease is primarily related to our accounting for the cancellation of MNK options and January 2021 grants of restricted stock, non-qualified stock options, and restricted stock units to the Company’s employees. Our corporate insurance premiums increased approximately $342 (8.5%) during the first nine months of 2022 compared to the first nine months of 2021, primarily related to premium increases. Our board of directors approved the payments of cash fees to non-employee directors resulting in increased fees of approximately $336 in the first nine months of 2022.
Renewable Natural Gas Expenses
Operating and maintenance expenses for our RNG facilities in the first nine months of 2022 were $32,592, an increase of $6,124 (23.1%) compared to $26,468 in the first nine months of 2021. The increase is driven by increased RNG utilities of approximately $5,206 (77.5%) in first nine months of 2022 compared to the first nine months of 2021. The increase is caused by a weather event in the first quarter of 2021 impacting our Houston based facilities being favorably impacted by lower utility rates.
Royalties, transportation, gathering and production fuel expenses for the Company’s RNG facilities for the first nine months of 2022 were $33,142, an increase of $15,606 (89.0%) compared to $17,536 in the first nine months of 2021. Royalties, transportation, gathering and production fuel expenses increased as a percentage of RNG revenues to 21.9% for the first nine months of 2022 from 19.3% in the first nine months of 2021. The increase in royalties, transportation, gathering and production fuel expenses is primarily related to the increase in RNG revenues in the first nine months of 2022 compared to the first nine months of 2021. We also recorded an increase to the Pico facility earn-out liability of $1,122 during the first nine months of 2022 compared to a reduction of $694 during the third quarter of 2021.
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Renewable Electricity Expenses
Operating and maintenance expenses for our Renewable Electricity facilities in the first nine months of 2022 were $9,204, an increase of $378 (4.3%) compared to $8,826 in the first nine months of 2021. The increase is primarily related to operating expenses related to Montauk Ag Renewables Acquisition.
Royalties, transportation, gathering and production fuel expenses for our Renewable Electricity facilities for the first nine months of 2022 were $1,342, an increase of $38 (2.9%) compared to $1,304 in the first nine months of 2021. As a percentage of Renewable Electricity Generation segment revenues, royalties, transportation, gathering and production fuel expenses decreased to 10.6% from 11.5%.
Royalty Payments
Royalties, transportation, gathering, and production fuel expenses in the first nine months of 2022 were $34,484, an increase of $15,644 (83.0%) compared to $18,840 in the first nine months of 2021. We make royalty payments to our fuel supply site partners on the commodities we produce and the associated Environmental Attributes. These royalty payments are typically structured as a percentage of revenue subject to a cap, with fixed minimum payments when Environmental Attribute prices fall below a defined threshold. To the extent commodity and Environmental Attributes’ prices fluctuate, our royalty payments may fluctuate upon renewal or extension of a fuel supply agreement or in connection with new projects. Our fuel supply agreements are typically structured as 20-year contracts, providing long-term visibility into the margin impact of future royalty payments.
Depreciation
Depreciation and amortization in the first nine months of 2022 was $15,453, a decrease of $1,609 (9.4%) compared to $17,062 in the first nine months of 2021. The decrease is associated with assets remaining in service being fully amortized and depleted.
Impairment loss
We calculated and recorded an impairment loss of $2,393 in the first nine months of 2022, an increase of $1,767 (282.3%) compared to $626 in the first nine months of 2021. The impairment loss recorded in the first nine months of 2022 was primarily related to an REG facility where forecasted cash flows did not exceed the carrying value of the long-lived assets.
Other (Income) Expenses
Other income in the first nine months of 2022 was $124, an increase of $2,850 (104.5%) compared to other expenses of $2,726 in the first nine months of 2021. Of the increase, $1,725 is related to our favorable interest rate swap contract resulting in reduction of interest expense from the first nine months of 2022 compared to the first nine months of 2021. Also impacting the increase is $865 relating to asset disposal costs at our Galveston and Pico facilities in the first nine months of 2021.
Income Tax Expense
Income tax expense for the nine months ended September 30, 2022 was calculated using an estimated effective tax rate which differs from the U.S. federal statutory rate of 21% primarily due to the useadjustment for production tax credits.
The effective tax rate of year19.0% for the nine months ended September 30, 2022 was higher than the rate for the nine months ended September 30, 2021 of (14.7%) primarily due to date current period pre-tax income increases used to complete the effective tax rate calculation and a required Code Section 162(m) executive compensation limitation permanent adjustment. The March 31,September 30, 2022 rate includedalso includes utilization of production tax credits and certain discrete items.
Operating LossProfit for the ThreeNine Months Ended March 31,September 30, 2022 and 2021
Operating lossprofit in the first quarternine months of 2022 was $1,651, a decrease$35,947, an increase of $10,553 (86.5%$41,956 (698.2%) compared to an operating loss of $12,204$6,009 in the first quarternine months of 2021. The primary driver of the decrease relates to stock-based compensation expense of $14,598 recognized in the first quarter of 2021, which was related to the IPO and Reorganization Transactions. RNG operating profit for the first quarternine months of 2022 was $12,973,$75,040, an increase of $2,378 (22.4%$40,886 (119.7%) compared to $10,595$34,154 in the first quarternine months of 2021. Renewable Electricity Generation operating loss for the first quarternine months of 2022 was $1,471,$4,226, a decrease of $747 (33.7%$600 (16.5%) compared to an operating loss of $2,218$3,626 for the first quarternine months of 2021.
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Non-GAAP
The following table presents EBITDA and Adjusted EBITDA,
The following table provides our EBITDA and Adjusted EBITDA for the periods presented, as well as a reconciliation to net income:
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net loss | $ | (1,115 | ) | $ | (14,265 | ) | ||
Depreciation and amortization | 5,153 | 5,737 | ||||||
Interest expense | 32 | 646 | ||||||
Income tax (benefit) expense | (258 | ) | 1,382 | |||||
Consolidated EBITDA | 3,812 | (6,500) | ||||||
Impairment loss (1) | 51 | 626 | ||||||
Net gain on sale of assets | (293 | ) | — | |||||
Transaction costs | 27 | 88 | ||||||
Non-cash hedging charges | 3,451 | — | ||||||
Adjusted EBITDA | $ | 7,048 | $ | (5,786 | ) | |||
Three Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Net income | $ | 11,187 | $ | 8,896 | ||||
Depreciation and amortization | 5,167 | 5,666 | ||||||
Interest expense | 36 | 697 | ||||||
Income tax expense (benefit) | 2,540 | (3,481 | ) | |||||
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Consolidated EBITDA | 18,930 | 11,778 | ||||||
Net loss on sale of assets | 43 | 822 | ||||||
Impairment loss (1) | 2,273 | — | ||||||
Unrealized gains on hedging activities | (367 | ) | — | |||||
Transaction costs | — | 232 | ||||||
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Adjusted EBITDA | $ | 20,879 | $ | 12,832 | ||||
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(1) | During the three months ended |
The following table provides our EBITDA and Adjusted EBITDA for the periods presented, as well as a reconciliation to net income, which is the most directly comparable GAAP measure, for the nine months ended September 30, 2022 and 2021:
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Net income (loss) | $ | 29,224 | $ | (10,021 | ) | |||
Depreciation and amortization | 15,453 | 17,062 | ||||||
Interest expense | 339 | 2,064 | ||||||
Income tax expense | 6,847 | 1,286 | ||||||
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Consolidated EBITDA | 51,863 | 10,391 | ||||||
Net (gain) loss on sale of assets | (250 | ) | 822 | |||||
Impairment loss (1) | 2,393 | 626 | ||||||
Unrealized losses on hedging activities | 1,440 | — | ||||||
Transaction costs | 32 | 357 | ||||||
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Adjusted EBITDA | $ | 55,478 | $ | 12,196 | ||||
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(1) | During the nine months ended September 30, 2022, we recorded an impairment loss of $2,393. The impairment loss recorded of $2,133 is primarily related to REG facility where forecasted cash flows did not exceed the carrying value of the long-lived assets. During the nine months ended September 30, 2021, $626 of impairment was recorded related to a landfill hosts request for us to decommission a facility previously converted to an RNG facility. |
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Liquidity and Capital Resources
Sources of Liquidity
At March 31,September 30, 2022 and March 31,September 30, 2021, our cash and cash equivalents, net of restricted cash, was $59,794$95,619 and $22,643$20,892 respectively. We intend to fund near-term development projects using cash flows from operations and borrowings under our revolving credit facility. We believe that we will have sufficient cash flows from operations and borrowing availability under our credit facility to meet our debt service obligations and anticipated required capital expenditures (including for projects under development) for at least the next 12 months. However, we are subject to business and operational risks that could adversely affect our cash flows and liquidity.
At March 31,September 30, 2022, we had debt before debt issuance costs of $78,000,$74,000, compared to debt before debt issuance costs of $80,000 at December 31, 2021.
Our debt before issuance costs (in thousands) are as follows:
March 31, 2022 | December 31, 2021 | |||||||
Term Loans | $ | 78,000 | $ | 80,000 | ||||
Revolving Credit Facility | — | — | ||||||
Debt before debt issuance costs | $78,000 | $80,000 | ||||||
September 30, 2022 | December 31, 2021 | |||||||
Term Loans | $ | 74,000 | $ | 80,000 | ||||
Revolving Credit Facility | — | — | ||||||
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Debt before debt issuance costs | $ | 74,000 | $ | 80,000 | ||||
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Amended Credit Agreement
On December 21, 2021, the Company entered into the Fourth Amendment to the Second Amended and Restated Revolving Credit and Term Loan Agreement (the “Amended Credit Agreement”), with Comerica Bank (“Comerica”) and certain other financial institutions. The Amended Credit Agreement,current credit agreement, which is secured by a lien on substantially all of our assets and assets of certain of our subsidiaries, provides for a five-year $80,000 term loan and a five-year $120,000 revolving credit facility.
As of March 31,September 30, 2022, $78,000$74,000 was outstanding under the term loan and we had no outstanding borrowings under the revolving credit facility. The term loan amortizes in quarterly installments of $2,000 through 2024, then increases to $3,000 through 2026, with a final payment of $32,000 in late 2026 with an interest rate of 2.40%3.28% and 2.91% at March 31,September 30, 2022 and December 31, 2021, respectively. The revolving and term loans under the Amended Credit Agreement bear interest at the Bloomberg Short-Term Bank Yield Index Rate plus an applicable margin based on our Total Leverage Ratio (in each case, as those terms are defined in the Amended Credit Agreement).
The Amended Credit Agreement contains customary covenants applicable to us and certain of our subsidiaries, including financial covenants. The Amended Credit Agreement is subject to customary events of default, and contemplates that we would be in default if, for any fiscal quarter (x) the average monthly D3 RIN price (as determined in accordance with the Amended Credit Agreement) is less than $0.80 per RIN and (y) the consolidated EBITDA for such quarter is less than $6,000. Consolidated EBITDA is defined under the Amended Credit Agreement as net income plus (a) income tax expense, (b) interest expense, (c) depreciation, depletion, and amortization expense,
Under the Amended Credit Agreement, we are required to maintain the following ratios:
a Total Leverage Ratio (as defined in the Amended Credit Agreement) of not more than 3.50 to 1.00 as of the end of any fiscal quarter from December 31, 2021 through June 29, 2023, 3.25 to 1.00 as of the end of any fiscal quarter from June 30, 2023 through June 29, 2024, and 3.00 to 1.00 as of the end of any fiscal quarter from June 30, 2024 and thereafter.; and
as of the end of each fiscal quarter, a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.2 to 1.0
As of March 31,September 30, 2022, we were in compliance with all applicable financial covenants under the Amended Credit Agreement.
The Amended Credit Agreement replaced our prior credit agreements with Comerica and a portion of the proceeds of the term loan made under the Amended Credit Agreement were used by us to, among other things, fully satisfy an aggregate of $59,197 outstanding principal under such credit agreements. For additional information regarding the Amended Credit Agreement, see Note 13—14— Debt to our unaudited condensed consolidated financial statements.
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Capital Expenditures
We have historically funded our growth and capital expenditures with our working capital, cash flow from operations and debt financing. We expect our non-development 2022 capital expenditures to range between $10,000$12,000 and $12,000.$14,000. Our 2022 capital plans include annual preventative maintenance expenditures, annual wellfield expansion projects, other specific facility improvements, and information technology improvements. Additionally, we currently estimate that our existing 2022 development capital expenditures will range between $25,000 and $30,000. The majority of our 2022 development capital expenditures are related to our Pico digestion capacity increase, the ongoing development of Montauk Ag Renewables, and our recently announced second Apex facility. Our Amended Credit Agreement provides us with a $120,000 revolving credit facility, with a $75,000 accordion option, providing us with access to additional capital to implement our acquisition and development strategy. We are currently in various stages of discussions regarding a variety of strategic growth opportunities. Included amongst these opportunities are: approximately sixup to eight LFG RNG sites, multiple ADG sites and waste water treatment to RNG opportunities. If we ultimately enter into definitive agreements for any of these opportunities, we expect to incur material capital expenditures related to either acquisition costs or development costs, or both. As we continue to explore strategic growth opportunities and while we have entered into nonbinding letters of intent for certain of these opportunities, we provide no assurances that our plans related to any or all of these strategic opportunities will progress to definitive agreements. We believe that our existing cash and cash equivalents, cash generated from operations, and credit availability under our Amended Credit Agreement would allow us to pursue and close on our identified strategic growth opportunities.
Cash Flow
The following table presents information regarding our cash flows and cash equivalents for the threenine months ended March 31,September 30, 2022 and 2021:
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net cash flows provided by operating activities | 9,597 | $ | 7,769 | |||||
Net cash flows used in investing activities | (977 | ) | (1,253 | ) | ||||
Net cash flows used in financing activities | (2,091 | ) | (4,860 | ) | ||||
Net increase in cash and cash equivalents | 6,529 | 1,656 | ||||||
Restricted cash, end of period | 347 | 572 | ||||||
Cash and cash equivalents and restricted, end of period | 60,141 | 23,215 |
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Net cash flows provided by operating activities | 59,809 | $ | 21,298 | |||||
Net cash flows used in investing activities | (11,270 | ) | (11,414 | ) | ||||
Net cash flows used in financing activities | (6,106 | ) | (9,860 | ) | ||||
Net increase in cash and cash equivalents | 42,433 | 24 | ||||||
Restricted cash, end of period | 426 | 691 | ||||||
Cash and cash equivalents and restricted, end of period | 96,045 | 21,583 |
For the first quarternine months of 2022, we generated $9,597$59,809 of cash from operating activities, a 23.5%180.8% increase from $7,769$21,298 in the first quarternine months of 2021. For the first quarternine months of 2022, income and adjustments to income from operating activities provided $9,165were $60,141 compared to $21,802$28,082 in first quarternine months of 2021.Working2021. Working capital and other assets and liabilities provided $1,395used $(333) in the first quarternine months of 2022 compared to using $232$(6,784) used in the first quarternine months of 2021.
Our net cash flows used in investing activities has historically focused on project development and facility maintenance. Our capital expenditures for the first quarternine months of 2022 were $2,377,$12,750, of which $1,116$5,439 and $1,604 were related to the ongoing development of the Pico facility digestion capacity increase and the Montauk Ag Renewables in North Carolina.Carolina, respectively. Partially offsetting this use were proceeds of $1,088 related to the sale of NOx emissions allowance credits in the first quarternine months of 2022.
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Our net cash flows used in financing activities of $2,091$6,106 for the first quarternine months of 2022 decreased by $2,769$3,754 compared to cash provided byused in financing activities in the first quarternine months of 2021 of $4,860.$9,860. The closing of our January 2021 IPO provided $12,401 in proceeds after payment of commissions and expenses. In connection with withholding shares from restricted stock awards pursuant to elections made by employees under Section 83(b) of the Code, the Company reacquired 950,214 shares with a value of approximately $10,813. Additionally, in connection with the Distribution, we loaned $8,940, in the aggregate to MNK for its dividends tax liability arising under the South African Income Tax Act, 1962, as amended. AsThe Company has a security for this loan, MNK hasinterest in 800,000 shares of the Company’sits common stock to Montauk andowned by MNK, which if sold by MNK, MNK has agreed to use the proceeds from the sale of such shares to repaytowards repaying this loan.
Contractual Obligations and Commitments
Off-balance
The Company has contractual obligations involving asset retirement obligations. See Note 910 in the unaudited condensed consolidated financial statements for further information regarding the asset retirement obligations.
The Company has contractual obligations under our debt agreement, including interest payments and principal repayments. See Note 1314 in the unaudited condensed consolidated financial statements for further discussion of the contractual commitments under our debt agreements, including the timing of principal repayments. During the first quarternine months of 2022, we had approximately $3,905 of
The Company has contractual obligations involving operating leases. See Note 1920 in the unaudited condensed consolidated financial statements for further information related to the lease obligations. In 2022, the companyCompany entered into a new, ten year corporate office lease with monthly rent payments of approximately $43 per month beginning in 2023, the first full year of the lease. The lease includes annual rent increases.
The Company has other contractual obligations associated with our fuel supply agreements. The expiration of these agreements range between
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Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in conformity with GAAP and require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates, and such estimates may change if the underlying conditions or assumptions change.
Revenue Recognition
Our revenues are comprised of renewable energy and the related Environmental Attribute sales provided under long-term contractsa variety of short-term and medium-term agreements with our customers. All revenue is recognized when we satisfy our performance obligation(s) under the contract (either implicit or explicit) by transferring the promised product to the customer either when (or as) the customer obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. We allocate the contract’s transaction price to each performance obligation using the product’s observable market standalone selling price for each distinct product in the contract.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring our products. As such, revenue is recorded net of allowances and customer discounts.discounts as well as net of transportation and gathering costs incurred. To the extent applicable, sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. The nature of our long-term contracts may give rise to several types of variable consideration, such as periodic price increases. This variable consideration is outside of our control as the variable consideration is dictated by the market.
The nature of the Company’s long-term contracts may give rise to several types of variable consideration, such as periodic price increases. This variable consideration is outside of the Company’s influence as the variable consideration is dictated by the market. Therefore, the variable consideration associated with the long-term contracts is considered fully constrained.
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RINs
We generate D3 RINs through our production and sale of RNG used for transportation purposes as prescribed under the RFS program. Our operating costs are associated with the production of RNG. The RINs are government incentives that are generated through our renewable operating projects and not a result of physical attributes of our RNG production. The RINs that we generate are able to be separated and sold as credits independently from the energy produced. Therefore, no cost is allocated to the RIN when it is generated. Revenue is recognized on these Environmental Attributes when there is an agreement in place to monetize the credits at an agreed upon price with a customer and transfer of control has occurred. We enter into forward commitments to transfer RINs. These forward commitments are based on D3 RIN index prices at the time of the commitment. Realized prices for RINs monetized in a year may not correspond directly to index prices due to the forward selling of commitments.
RECs
We generate RECs through our production and conversion of landfill methane into Renewable Electricity in various states, including California, Oklahoma, and Texas. These states have various laws requiring utilities to purchase a portion of their energy from renewable resources. Our operating costs are associated with the production of Renewable Electricity. The RECs are generated as an output of our renewable operating projects. The RECs that we generate are able to be separated and sold independently from the electricity produced. Therefore, no cost is allocated to the REC when it is generated. Revenue is recognized on these Environmental Attributes when there is an agreement in place to monetize the credits at an agreed upon price with a customer and transfer of control has occurred.
Income Taxes
We are subject to income taxes in the U.S. federal jurisdiction and various state and local jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.
Our net deferred tax asset position is a result of net operating losses (“NOLs”), fixed assets, intangibles, and tax credit carryforwards. The realization of deferred tax assets is dependent upon our ability to generate sufficient future taxable income during the periods in which those temporary differences become deductible, prior to the expiration of the tax attributes. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and forecasting future profitability by tax jurisdiction.
We evaluate our deferred tax assets at reporting periods on a jurisdictional basis to determine whether adjustments to the valuation allowance are appropriate considering changes in facts or circumstances. As of each reporting date, management considers new evidence, both positive and negative, when determining the future realization of our deferred tax assets. We account for uncertain tax positions using a
Intangible Assets
Separately identifiable intangible assets are recorded at their fair values upon acquisition. We account for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other.Other. Finite-lived intangible assets include interconnections, customer contracts, and trade names and trademarks. The interconnection intangible asset is the exclusive right to utilize an interconnection line between the operating project and a utility substation to transmit produced electricity. Included in that right is full maintenance provided on this line by the utility. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful life. We evaluate our finite-lived intangible assets for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable. Events that could result in an impairment include, among others, a significant decrease in the market price or the decision to close a site.
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If finite-lived or indefinite-lived intangible assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The fair value is determined based on the present value of expected future cash flows. We use our best estimates in making these evaluations, however, actual future pricing, operating costs and discount rates could vary from the assumptions used in our estimates and the impact of such variations could be material.
Our assessment of the recoverability of finite-lived and indefinite-lived intangible assets is determined by performing monitoring assessment of the future cash flows associated with the underlying gas rights agreements. The cash flows estimates are performed at the operating unit level and based on the average remaining length of the gas rights agreements. Based on our analysis, we concluded the cashflows generated to be well in excess of the carrying amounts. Changes in market conditions related to the various price indexes used in estimating these cash flows could adversely effectaffect these estimates.
Finite-Lived Asset Impairment
In accordance with FASB Accounting Standards Codification (“ASC”)ASC Topic 360, Property, Plant and Equipment and intangible assets with finite useful lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group. Such estimates are based on certain assumptions, which are subject to uncertainty and may materially differ from actual results, including considering project specific assumptions for long-term credit prices, escalated future project operating costs and expected site operations. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is generally determined by considering (i) internally developed discounted cash flows for the asset group, (ii) third-party valuations, and/or (iii) information available regarding the current market value for such assets. We use our best estimates in making these evaluations and consider various factors, including future pricing and operating costs. However, actual future market prices and project costs could vary from the assumptions used in our estimates and the impact of such variations could be material.
During the third quarter of 2022, we performed interim recoverability tests for our Tulsa facility asset group when it was determined it was more likely than not the carrying value of the long-lived asset group would not be recoverable. The results of our testing indicated that the long-lived assets related to the Tulsa facility within our REG segment had carrying values in excess of the asset group’s fair value. Based upon level 3 unobservable inputs, we incorporated assumptions that we believe would be a reasonable market participant’s view in a hypothetical transaction in developing a cash flow analysis. Significant level 3 inputs included estimates of future revenue growth, gross margin, EBITDA, and positive cash flow generation. As a result of the analysis, the Company recorded a $2,089 property, plant and equipment impairment related to the REG site for the three and nine months ended September 30, 2022. As to the remaining long lived asset groups, the Company further concluded, based on our annualinterim cashflow assessment conducted for monitoring potential indicators of impairment, we concludedthat the cashflows to be generated are significantly in excess of their carrying values of our operating sites primarily due to the lengths of the underlying gas rights agreements.agreements and the Company did not record any other impairments related to its cash flows assessment. Separate from our cash flows assessment, we identified discrete events and recorded impairment of $51$233 and $626 for the first quarter ofnine months ended September 30, 2022 and 2021, respectively. See Note 3 in the unaudited condensed consolidated financial statements for further information related to asset impairments.
Emerging Growth Company
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act allows emerging growth companies to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies. We intend to utilize these transition periods, which may make it difficult to compare our financial statements to those of
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Recent Accounting Pronouncements
For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2, “Summary of Significant Accounting Policies” of Part I, Item 1 of our unaudited condensed consolidated financial statements in this report.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There have been no material changes since our disclosure in Quantitative and Qualitative Disclosures About Market Risk included as Item 7A in our 2021 Annual Report.
ITEM 4. | CONTROLS AND PROCEDURES |
Management’s Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
From time to time, we and our subsidiaries may be parties to legal proceedings arising in the normal course of our business. We and our subsidiaries are currently not a party, nor is our property subject, to any material pending legal proceedings.
ITEM 1A. | RISK FACTORS |
We face a number of risks that could materially and adversely affect our business, results of operations, cash flow, liquidity, or financial condition. A discussion of our risk factors can be found in Part I, “Item 1A Risk Factors” in our 2021 Annual Report. The impact of
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Use of Proceeds from Sale of Registered Securities
On January 21, 2021, our Registration Statement on Form
The IPO closed on January 26, 2021. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.
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Since the closing of the IPO, approximately $12.3$12.8 million of the net proceeds from the IPO have been used by Montauk Renewables in connection with due diligence and the consummation of the Montauk Ag AssetRenewables Acquisition in May 2021, the purchase of the real estate and property in October 2021 related to Montauk Ag Renewables, and subsequent development activities related to Montauk Ag Renewables. An immaterial amount has been used relating to other possible acquisitions and projects. The remaining net proceeds of approximately $2.7$2.2 million is held as cash.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
ITEM 5. | OTHER INFORMATION |
None.
ITEM 6. | EXHIBITS |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MONTAUK RENEWABLES, INC. | ||||||
By: | /s/ SEAN F. MCCLAIN | |||||
Sean F. McClain | ||||||
President, Chief Executive Officer and Director (Principal Executive Officer) | ||||||
By: | /s/ KEVIN A. VAN ASDALAN | |||||
Kevin A. Van Asdalan | ||||||
Chief Financial Officer (Principal Financial and Accounting Officer) |
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