IPI - Earnings call transcript Q1 2019

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash Inc.

First Quarter 2019 Earnings Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. will opportunity there ask presentation, the be to an questions. After to I Relations. conference would Instructions] turn now Investor [Operator Preston, like the Matt over to go Please ahead.

Matt Preston

Ivy. are statements as remind by the everyone. our Thanks, laws. today of defined and These future securities parts statements discussion forward-looking that guarantees of I include will U.S. morning Good not you welcome we of based performance and us assume statements believe are on are them. information we obligation today, are based no and assumptions, on update to reasonable. which a to the number available These

about You more with and find future can our performance SEC. our information filed risks reports uncertainties periodic to in the

GAAP to Reconciliations morning’s this are release. today’s we financial included the non-GAAP press During financial comparable and to certain of will measures these operational measures. refer in measures call, directly non-GAAP most

Vice available President and SEC McDonald, available intrepidpotash.com. Co-founder, Vice also on President Bob. the filings Accounting Officer. Development over Wagner, Our Jornayvaz, CEO today and now the releases are and Executive Business and Solutions and call Presenting press our Vice Marketing and Mark turn Oilfield our at Bob to for Montoya, Chief are questions. President call of Chairman, website on Alex I’ll for Sales are of President Joseph

Bob Jornayvaz

potash you, our XXX% the margin industrial the and gross which as X sales, a our took year. on huge morning revenue line our we and strong revenue which Thank of Matt, Ranch in in improvement Growth and to a of bottom quarter related in push increased volumes good byproducts of growth with toward forward completed year. and greater delivered solid Jal compared assets, May highlight domestic potash prior industrial first this and Dinwiddie everyone. We step Trio, diversification, acquisition pricing drove and for to byproduct

which issues agreement a amount we to price As at closing press with last diligence reduced Basin, an these million $XX saw pending and win due to assets, we Delaware expand of $XX in meaningful Oilfield the worth for drilling presence during of an growth we the negotiated as you in provides our and decades additional our Intrepid our believe addition of gas the the look week, release South million Solutions The identified closing, a where operate to certain due will pay up purchase likely us at resolution huge oil process. is strategically, segment. activity for as

Basin approximately barrels the As year of in the adding closing for perfectly sale. of located are Northern we and Delaware per X.X million water ready rights date, permitted

and surrounding and in previous There $X.XX legacy additional located The potential next we is surface be to the volume the revenue various construction disposal decades it in with a around XX months on upside the double will an our on sells this to can million from calls, for the agreements, per average Caprock and wells, we there. the also least rights water cash grow area, meaningful to property. $X.XX sales the and property between able property oil of As road property compared an opportunities and months mentioned two property gas hundreds on from additional to from royalty road to believe, ideal generates we as location and continue seen permit produced XX us water participate and at come. makes barrel. on the wells oil easements, to believe to interest water over water also permitted activity and in The to premium this a sales our gathering pad River and next strongly rights years. and Pecos of barrels and materials, produced operations the XX barrel prices water located per have use we in on close We and the we for system on oilfield acquisition the gas

another next to quarter, to Oilfield record into significant the revenue during we by mixing saw increase we segment customers for gas our in into gain mixing production contributed first of during encouraged oil as the job Powder jobs traction in a River our the Solutions the quarter. led rate growth KCl the – our Solutions quarter, initial During potash one basins. a market continue formations, by benefits Oilfield this are One certain Basin and of and and clear the

partners operations to water is the quarter, develop currently who underway, end pipeline storage infrastructure One our water users to to and capital As several industry. large oil enhance with mentioned gas the we currently and Services, deliver is Energy are investing Select the exciting in significant east on a and our to properties, constructing of of pipeline, last has day project ponds, around the the side our a complete increase the XXXX provide the capacity XXX,XXX barrels more which move much is and capacity area. This for their to a will run than which south in Delaware Basin. expected needed be into heart in will

rights. already we sales potential as excited generating the fill are that springs our storage are for We Caprock and ponds about water

sales the XXXX we’re approximately versus Total to through in approximately perspective, of barrels in day an sales consistent system. previous $X.X barrels currently first day XX,XXX per day XX,XXX quarter. average XX,XXX that million quarters remained with water moving with For per per barrels

year South, high integration the we $XX the the $XX our announced of the in expect end With water revenue Intrepid previously million. of of to range towards million

– subscription The wet of saw we quarter. book our to by drove oil segment, the price in increased sales solid with more a at quarter spring and in the customers second geographically gas, country the Byproduct feed another and spring gross quarter, year-over-year net animal salt moving with positioned to pricing margin sales quarter potash the our markets. our of sales parts XXXX, to agricultural are well increase and is of levels. in Moving stable increases. the somewhat highway many de-icing was Intrepid’s compared expected, sales which first with activity weather average Intrepid delayed realized diversified first of into the in a season significant as the

Our on which serve, to during customers. in year, increasingly pricing, from demand this competitors. inventory We a XXXX, serve we half to continued focus half the sell to for as expect back carries result, of where as of on logistical potash in back selective year some first sales when less slightly potential sales focusing industrial the last us generally compared to the to allows hold to the we geographies our premium continue we our the industrial market, compared industrial but be have advantage a see our

our the price potash wet Trio, sales into byproduct year-over-year second Overall, building and weather Similar strategy second quarter. about in earnings very our calls. last acquisition For increases emphasized completing strategic sales early solid domestic some quarter, the are another the sales upon strong we revenue diversification to few we sales, quarter. robust enthusiastic but expect volume see and led that pushed to to we’ve during

experience of property confidence quarters, potential last and the in gives unlock over from production Our related use years and the South transfer in Intrepid the growth history us water sales the in water significant processes, coming our transfer for of the our XX decades. ability months and refined our assets in to water in

calls. leveraging highly We business property Basin. segments South across continue our workforce will Joseph, New to Carlsbad, have opportunities on pursue entire our results integrate into Oilfield now our existing I’ll you call updating who Southeast to segment, and to presence on excited the financial We Solutions potential the trained We’re future a of thoughtfully in in now New over Delaware discuss Mexico to Intrepid physical progress portion the while Mexico. our outlook. turn the the plan forward look we and to that

Joseph Montoya

Thank morning you, Bob good and everyone.

diluted first quarter. or the of drove year’s of generated increased as the realized quarter, million and byproducts first per prices per income sales $X.XX During of improvement share, higher prior $X.X $X.X share over million an net or we $X.XX

per increase sales offset gross the compared realized segment Our generated ton $X.X the an lower the during potash in prior quarter net volumes million sales in as price year. margin to

agricultural in expected, by regions offset prior this compared somewhat the to As weather were average of ton the sales increase increase per levels when $XX of in ton many a wet by sales price in Increases was delayed industrial year. price an although $XX per quarter to XXXX. fourth drove sales realized compared and in the net increase domestic compared prior year the to country,

delayed than pricing due quarter our of the weather generated strong and to sales potash improvements were last quarter, the Similar domestic During which margin byproduct of million. sales, $X.X a $XXX,XXX as year’s our drove sales in gross lower season. to inclement year loss compared first spring first of to application field the last higher gross Trio domestic margin segment

can our lower timing As shipments fourth in net to some cause quarter XXXX. quarter variability results we quarterly of call, mentioned our our of contributed for on and price the that international the sales first realized average

the services. a which as to $X.X shipment schedule of for in was delivered previous decrease remain we with on realized quarter expect Trio increased last sales, although water sizable compared same in quarters. average drive price WIP sales net We potash quarter, conversion a to contributed percentage significantly change XX% water quarter up we Oilfield expect revenue the carry the product, our mixing to significant which inventory first operating to in gross lower as year approximately mixing XXXX compared to These services a margin into and Solutions the second production as an a we of our the in increase good year. to the XX% our sales Trio. international a of compared in premium million than previous Trio margin

million, our in $XX into million expect weighted although infrastructure. at new half we Our We end did began we to the $XX fill in see guidance mentioned, unchanged high revenue, the to remains water of the water the be this on as million cash year. be increase an leading water to million of $XX second quarter the delivering at to more Bob we demand, now Select as towards second of expect to guidance $XX

Additionally, X, as water selling after May Intrepid ramp up on the out South continues. already of this we’re expect will our and year acquisition

We are gas area, with anticipate we in the the into lasting given renegotiating well and and relationships agreements activity surface-use the future. oil these operators,

due fees. in to $XX expense SG&A million SG&A first $XX million and admin still $X.X first quarter legal Our quarter expect We increased between will million. be to XXXX the labor and increased

will that be million liquidity we and additional facility. expect projects the in $XX May returns. After $XX $XX under the to acquisition, our acquisition, remain capital although for on down later wraps X, liquidity an credit the with although facility, hand, since half a after had we total million borrow and $XX solid $XX the opportunity on our million available to we approximately have paid favorable ag of investment season albeit cash normal, the facility, on we $XX on Turning drawn a million between situation, million, than of up. Overall, as of good approximately spring year million

to We remarks compared in believe and operations take meet in expect to increase positioned the from our debt cash are That questions. are quarter continuing first prepared we the well grow to quarter an to our our obligations, operator, second and flow ready we business. while concludes we

Operator

Thank you.

Please We first question will Stephens Mark begin Inc. Our ahead. [Operator question-and-answer Connelly go the comes Instructions] session. now with from

Mark Connelly

Thank Two things. Bob. you,

I’m my of of one. off little anticipated your whether bit California? is customers normal my And to taking tell a expect less us curious are growth big might margins, that giving end faster Trio your geographic many California services they Are the in have leading to the investments terms and your you pace you discrete than simple that water going breadth is are – a the you’re more second and this mix keeps in given whether investments. the Obviously, to by inventories and QX. be in up? see planting late about making if Trio a shift a business outlook of lot of also of impact and question make us if can you – mix or your and particularly mix First, to more

Bob Jornayvaz

immediately. what small as categorize almost they would revenue and I them in are of are really, but highly Yes, material, each not accretive of terms adding

we’re something on doesn’t So an spending immediate any return. that have not capital high-quality

geographic a So good. differences you of are base. the differences, add we new don’t see answer but I’ll material significant with Mark, yes warehousing space, I up continue Trio, diversify customer to customers them give associated flavor, the that, returns continue to and let we bit pick but any our quite to and little is, or any

And strong. that. is keep our diversification help that little think going I us to let Mark I’ll bit pricing a So, to add

Mark McDonald

Thanks, Bob. Yes, Mark McDonald here.

Trio, the Bob mentioned, of is on diversification. part as think I strategy our

as with crops marketplace and at opportunities see that in on different the needs we Trio United and growing potash lot magnesium components. crops advantages, there well we see with on the So trees, see that of try States, as fruits, are And here specifically is there. agronomic the vines, we sell a marry a We that significant certainly sulfate the types. California, different opportunity the nuts,

time in the the largest last it was economy I checked, think I world. fifth ag

So we locations. certainly there as input some as good as Bob some that, have, with warehouse mentioned, well

Mark Connelly

on late is has it affect so you Mark, and impact going your had year? planting a far big to

Mark McDonald

market? Specifically to potash Trio or the

Mark Connelly

and mostly. I’m Trio California thinking about

Mark McDonald

I’d say, no.

Midwest, been think hasn’t delayed certainly market I of the that know You as Illinois, throughout seen we’ve the I-states Iowa, maybe Indiana. as

market very we there. headlines got state touch good there. and the haven’t points diverse I throughout we’ve seen is and culture, think anything and the that read whole everyone’s their it’s California,

Mark Connelly

Fantastic. you. Thank

Bob Jornayvaz

I’d gone spite strong, Mark, weather. its that add wet gone Texas in the has strong like to PNW Yes, just of has

that So, states, geographies serve movement. that the good are seeing we really the we’re non-I

Mark Connelly

Great.

Operator

Our Josh with UBS. from ahead. next is Please Spector go question

Josh Spector

so guys, and impact you a acquisition when Is I I the filed that year, next ago, the Hey X-K that of you over look million around in months? guess, at questions the guys last sales had number earnings. XX for I around sort right the believe. you the about if couple doubling a well, $XX or about think the week the just to of

Bob Jornayvaz

and appropriate that the number that said, I can we months is months XX double. we think to XX as Well,

Josh Spector

add Is other great. some think guys? And you’ve items a reasonable estimate historically, around much margins-ish. modeling Okay, you you that own I think about your this in terms that. sales water will of just XX% D&A property do And for and talked this around new how to gross

Bob Jornayvaz

Joseph... margins. of kind Same

Joseph Montoya

there nothing Yes. or to major With respect mentioned, Bob CapEx, significant. is as

planning aren’t will impact be We huge minimal. major the D&A projects. relatively infrastructure any and so

Josh Spector

guys. thanks right. All Okay.

Operator

with next ahead. Our go question Joel Please is Jackson Capital Markets. BMO from

Robin Fiedler

This Hi. my for taking is Thanks on Robin Joel. for questions.

water guidance from sales So, come the there does your asset increase Dinwiddie in are of solely the or other... addition

Bob Jornayvaz

No.

Robin Fiedler

No?

Joseph Montoya

of Caprock. Select talked remarks, partnering a No. about we’re prepared the in bit water sell Services quite the the we to Energy as off with –

So, few things. it’s a of a combination different

Bob Jornayvaz

entire So, side our Caprock The we’re the of portion that our activity if covered water to that down Southeast of entire New Mexico, infrastructure cover you coming building of side look at north Select our east. part locations. system pipeline we east is property by takes now, the the the well is care of the

which property are if Our the the side. west complete south rights, on the now, of you west will, Pecos side the Intrepid will South property water the on handle our And rectangle side.

ramp as basin, northern we see the to So, the because – we continue the presence as it up. the have a now basin, entire ability physical in portion of we to see capacity well to ability the

increased on in the color already. movement were side. brief around XXXX the It’s in virtually we you I As we’re of that east heard gave prepared one where just double, my remarks, bit seeing

Robin Fiedler

going achieve one to Okay, but and doubling plan please, last out talked access you had thank of just for about can are main months, couple – that revenue the before, months you asset of Dinwiddie the I for just you. know next further guys forward? XX growth question. over you’ve that elaborate what has buckets this now another And us you to XX can that again, months, Thanks. this

Bob Jornayvaz

disposal. having on a having taking different lot them caliche scales new – just a course. it buckets. into pits as way to all fresh tech variety of assets traditional saltwater are basis those much Well, occurs. There’s managed. professional sort pits certain as adding property. and of located the I increased a more It’s just and buckets other of opportunities these weeds, there’s as – products re-permitting of water it’s wells the increased to the if silly I sales go – a revenue using sounds, at and in of mean were couple all It’s this standard the of professionalism of That’s sales It’s

the buckets. those So major – are but

Joseph Montoya

takeaway we’re was in run a the there, a think is, going just the business. previously family I major for going run to ranche as mentioned, to what decades, as it this Bob we’re Dinwiddie Robin

opportunity these them there’s turning turning And – them of that assets into we’re so lots business. to and take acquiring a

Robin Fiedler

Okay. thank you.

Operator

next Our go Vincent is Please ahead. from question Andrews Morgan with Stanley.

Jeremy Rosenberg

you missed on Hi, you my mentioned in this are XQ? into to wanted specifically the XQ, and Vincent. you potash. for I start is apologies just XQ about thinking know lost have for a I of prepared up if for Jeremy on But in make remarks. can taking Thanks Trio, much potash volumes for push but the I questions. you this volumes how how

Joseph Montoya

As it up. we the said in it we feel easily make will remarks, prepared

moved lost they not quarter. they’re quarter So, have to from tons, just

Jeremy Rosenberg

ton come then for over going Okay, given run on gross as we quarters. of that new past forward? kind down? rate Should is, rate have costs just $XXX per pricing where the where new that Is profit run kind be like potash, about of seen we’ve the thinking few

Bob Jornayvaz

probably fair, very that’s in pricing. Yes, although subjective to relational

So, in sure your keeping model. just you’re make that

an that but going peers indicator happens second and something some remain indicated impact. other half that by in is the competitors We event is of have every our that being strong, pricing the to will in have

Jeremy Rosenberg

Okay. And last then a one. quick

in last terms quarter, of couple of second sort higher of the freight quarters? levels the of are kind In similar expecting freight expenses, you expenses to still

Bob Jornayvaz

right. say Yes. I would that’s

don’t don’t in any Mark, have changes, an perspective? mix you touch terms I if we we can major it but on from our variations. fluctuations, few availability As of expect know quarter-over-quarter,

Mark McDonald

will sent to particularly, via would more �� little into season. I as add the is we bit product quarter quarter, a thing – rail, warehouse we a is this this fill freight one that similar mix bit and advance second first think little I change the our

As Ones with side day two the a have these will or of the things. that – seen trucks some more we busy amplitudes truck move into where we times of weather maybe be some there inclement with the second shift is become quarter, in-between of of into extremely the some available.

So, right advantage truck quarter second of move now, those we’re take on of opportunities the of as positioned side things. we some the to into well

Joseph Montoya

though, add Jeremy. will I

expense. remarks, as bears As in shipment QX. the that we freight some prepared are And in well planning mentioned additional you are international aware

year-to-year be will thing from that changes So that the quarter-to-quarter. or

Jeremy Rosenberg

Got it.

Okay, great. you. Thank

Operator

[Operator go Holdings. Jason Ursaner Instructions] comes Please ahead. from Our with question Bumbershoot next

Jason Ursaner

on Good to start the morning. strong year. a congratulations

side kind as business how down talk little bit did out of the and MLP For we potash, the what producing about compaction potash the for – in the Moab versus take salt the you can looks many specifically, to year? in of going dynamic a terms the and is like and of production of impact that rest layout of that’s you days to how look changeover

Bob Jornayvaz

to how opportunity Well, we we run it. have the

either the here... We you evaporation the have have or extra if opportunity let opportunity to makes we run given got and as to run I’ll run system you Hugh there, sense. that salt, sitting salt out we’ve potash that that’s there, know,

Hugh Harvey

on salt. This until out Hugh Harvey, of is harvesting right. mid-May can extra we and Yes. up and weeks Bob, of mid-April typically harvest to to produce pretty add additional We from anywhere Moab that’s

year-over-year that salt So that depending mix potash salt market program. and on varies

Bob Jornayvaz

we’re salt feed today, everything good a expand selling softener a into as much that road variety we’ve markets salesman. a greater markets sell been our so we’ve What’s of into salt animal from diversity that designated is water of to salt. and salt, we seen hired salt

salesman facilities. at nothing, three really sales we having our produce opportunities just – four salt by salt facilities and does but of ramping alone up a salt our at our all of direct that We’re

Joseph Montoya

color to XXXX in XX% sales $X.X almost to our of add by million of QX that, QX increased in salt on million versus $X.X And a with little just year-over-year XXXX.

Jason Ursaner

back on just of grades. the Okay. I year going to guess commentary evaporation the production – last some on the

right the it extra it? we should maybe in salt QX on harvest the like way of that of run from took in you base, the that to potash that’s production I into If to Is QX think that. see sounds about mean time some additive the these to kind QX or

Joseph Montoya

The and No, it or basically salt can that is turn ramp back we not our is into really. production the potash amount we recycle. produce byproduct up of fixed then a stream

matter potash a really it’s salt, of the is the but pretty adjusting So, fixed.

Jason Ursaner

fixed of later it In than terms production that? QX would normally when would flows for kind it have potash some of that we been in through, of see

Joseph Montoya

That’s true. would into It Yes. carry QX.

Bob Jornayvaz

have to flexibility right. QX. into That’s carry We some

Jason Ursaner

you Okay. in made like back And the the year? then pricing Joseph, terms earlier on sounded QX you half of just – of what made was commentary on something it or the

Joseph Montoya

really expect we as I relative to made a That’s only said pricing Trio. pricing thing that now. to note pricing, The right remain and of international have was I were thing only I far the shipment an earlier, we the about know as shipment, to going we talked stable

Jason Ursaner

is said is for pricing, now I very QX through QX MLP thought that of you’re sort mean, you strong or of pricing I – was guess, something sort about I what you. halfway than just where more actually,

asking. am why I that’s So

Joseph Montoya

We for No. be year, the it Jason. of the believe to rest stable

Jason Ursaner

been already or to how years seen look it of back forward those versus did growth where compare consistent of has from troughs, remain to Okay. guess and of two the River versus should where excitement some piece, the of think look and kind the the the Basin true it I Bob, couple look years, Services then Powder you’ve a there’s at I going couple Basin, Basin at Permian last of up you When How take from you market. maybe still the of just looking in on additional sales When the from Oilfield there’s fresh you stick in do just piece look confusion. almost of geographies division, water I if the you just even these around still Permian separate, a with a growth, mentioned water had freshwater services or growth some Permian? guess, the think kind you like, you at here? in some lot fresh obviously you the that building and that but I just hockey kind

Bob Jornayvaz

I stick. a pseudo would say hockey

it’s started. think just I getting

the EOG, – we at on and they’re are with look or just increasingly meet a we when like producing are are coming just it schedules in and so XTOs And starting, drilling wells to even not Exxon to stage. truly the higher in world, these feels multi-year mature schedules, Devon begin their And that Concho, completion levels. the their plays drill

So, the technology and see continues the we beginning. to just improve as it

Jason Ursaner

And from Okay. last question just me.

alluded described of You think physical fourth think presence system and said seeing New maybe covering water kind the expecting next presence that’s you of the Southern in presentations that now entirety to new stuff. physical I something of in in infrastructure the terms corporate Mexico should last maps of that over I and – you or quarter, some Delaware sort sort the shelf. And we Is still quarter? the of be

Bob Jornayvaz

Yes. Absolutely.

Jason Ursaner

great. Okay, Congrats.

Bob Jornayvaz

much. Thank you very

Operator

with Our Please Jon CG pardon – Capital question next is SG Evans from me. Capital, go ahead.

Jon Evans

the to continue or is this able think slower customer? just have ramped just to Can anticipated, you largest your year Do you receive know line water the too us you’ve recognition you you to on been give with revenue outlook more cash for from contract the tough it’s an it with in cash. I your a than received discern? you’ll but update be

Bob Jornayvaz

We ever-changing we forecasts. meet with and quarterly quarterly them so get

we’ll Carlsbad line. get point, we’ll area much crews in – everything they I So, and see go the I get and the the think into frac more think area want, that all a at button, when catch-up they the and can Hobbs some see they hit

of the certain a area. there’s crews aren’t still Carlsbad And in frac number physically that so located

on we look so in to what rig And the used really frac count, who’s frac now, you and location. all at got but what crews, spreads and focus

in why customers. our target, a much all time So, of with spend it’s that’s moving constantly we but so Midland

just companies think we’re virtually the zero on of with, we every had you different down on most meeting we and week about states with Midland where now in – calling dealing were we’re that the in groups. terms XX and of ago, oil months If calling presence

move with – around bit, as little contract, get the number as think think So, it a and plants up their catch develop, will I will one I customers, they one, – especially it up. more we even the

Jon Evans

you so much. Okay. Thank

Operator

over session. I the Bob to concludes back closing remarks. Jornayvaz This conference question-and-answer the to would for turn any like

Bob Jornayvaz

just We the in everyone your interest join day. you Thank you taking time Thank to great thank want and to us. for Intrepid have very for a much.

Operator

call. This conference concludes today’s

may pleasant day. have disconnect Thank you participating a for your You lines. and

Matt Preston	Investor Relations
Bob Jornayvaz	Co-founder, Executive Chairman, President and Chief Executive Officer
Joseph Montoya	Vice President and Chief Accounting Officer
Mark McDonald	Vice President of Sales and Marketing
Hugh Harvey	Executive Vice Chairman of the Board
Mark Connelly	Stephens Inc.
Josh Spector	UBS
Joel Jackson	BMO Capital Markets
Vincent Andrews	Morgan Stanley
Jason Ursaner	Bumbershoot Holdings
Jon Evans	SG Capital

Intrepid Potash (IPI) 7 May 192019 Q1 Earnings call transcript