IPI - Earnings call transcript Q4 2020

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash, Inc. Q4 and Year-End 2020 Results 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 President conference would Instructions] turn of now Vice [Operator Preston, like the Matt over Finance. to go Please ahead.

Matt Preston

to us morning, me President answer Q&A today With Stone the available and call that Co-Founder, for Thanks, forward-looking cause be subject CEO, that These statements XXXX the and Intrepid’s on during uncertainties to include currently in results from risks we incorporated actual risks everyone. information Vice is are Sales by our and Chairman, questions and session assume Brian your the and statements These fourth quarter as Operating good joining today, to here periodic by reports could Officer, Teresa, obligation our to us our forward-looking uncertainties be available and Executive are discuss to today prepared based SEC filed Zachry with anticipated. will reference. defined no Bob Intrepid’s those materially which questions Marketing, following results. remarks also on the These Chief to advised are our to statements Thanks are President Adams. including them. update different Laws. of and be our Please U.S. Securities Jornayvaz, answers described remarks

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

call over at are on website the I’ll and intrepidpotash.com. now releases filings turn Bob. press available SEC Our to our

Bob Jornayvaz

everyone. morning, and Matt, you, good Thank

optimistic we of are significant COVID-XX last news the quarter emerging that begin show The strength combat relax a populations well. end we’ve that encouraging year. seen Solid markets trends our vulnerable and in the our to both, we as commodity quarter most couple ability cash wish We as cities unique and improvements months, protected. fourth pandemic, in and portions will a of fertilizer continue our sustained are put positive the and continuing to the spring on now are flow world the gradual highlighted yet across segments. EBITDA restrictions, good The oilfield saw fourth in our

is significant Our has ended above February first potash slowed $XX bottom and and the announced hasn’t expectations. business on levels. fill another our Trio nutrient increase in the move in prices buying summer occurring the to the summer are fill have values. up farmers to product some who been secure your to second a eager pricing cotton strength demand. throughout through with replenish spring to wheat, year increasing ton, our We quarter. potash market coffee nutrients and pricing with November continuing quarter also per continue have higher volumes And $XX per locked as Strong prices. $XXX strong Customers in sugar, corn, call. of additional potash momentum called seen spot demand the earnings down crop demand price global in palm ton market posted oil, per in the and prices and recent at market all ton exceeded the cocoa than has in commodity at our posted eager We soybeans, bottoms currently today’s and in

initiatives regulatory treated gas on with space, water emphasis demand management full the for water recycling. environmentally assets environmental minimizing produced of responsible and the on in leading produced aspect in so variety ESG we the and goals rights uniquely governments, water produced friendly water with and of disposal. the clear to many means ourselves become a full leader capitalize for cycle Delaware disposal traditional management. used sustainability water source its potential center handling to management cycle front and teams, and the water touching Delaware With and and every water to and Basin, quarter, a Intrepid market of Basin. the the position During of return fourth delivery and is of to Mexico Full continued the innovative use oilfield Southeast in brine New reuse water and and recycled the bodies water to positioned capturing the need from is key with fresh oil

our system early the drilled the water well water of to disposal of and of should in We’re south year. this adjacent produced half in construction first have a ranch first our stages produced

a to As we provide with finalize working our operators demand solid capital our plans, that of commitments investments. we’re support on will volume base minimum also

cost expect We appropriate million. the complete will our the for facilities incremental surface time. is and capital $X facilities Total and will million $X for well at the approximately estimated produced water first surface well capital

wells expect commitments million and $X of approximately We each. additional a can cost as added demand be volume require

services In addition increasingly in an capabilities infrastructure ESG-focused to to produced necessary deliver in to the and our products we’re water, investing and recycling operate environment. expanding

business XXXX we’re demand for of of with currently months. their are talks water significantly improved Northern brine revisit seeing oil water and Northern cycle exciting is leverage new sourced full fresh long-term, and expectations per Delaware Frac ever. are our We areas water multiple have Intrepid water about partnering will well-capitalized Delaware and full our these companies of that the many management increasing focused, oilfield position, unique as higher in of and in assets prices Basin. than inherent across demands recent optionality completion and is in operators, operators

and own During we operators. positive existing water water supplement infrastructure meet quarter, at to requirements parties the first increasing from of sourced third volume margins the rights to our

the to into tap significant few we and with ability our the our will over from a expand in of the meeting apart for and sets Matt capable to Basin coming other and to results in of operators water and operators this a offers. sourced both next strategy Intrepid full-cycle the the on water opportunity pivotal water strong with providers significant gas us our any midstream relationships and to months. Delaware as execute Basin. meet oil operating are refresh for Delaware The Our to sourced review those business essential rights, quarters And in the their be financial potential value Proper goals I’ll will call now, turn business management management provide over ESG single the outlook. of the unlocking ability and

Matt Preston

Thanks, Bob.

compared an quarter increase million, quarter of the across XXXX. of segments. gross highlighted quarter in our fertilizer and We increased by over was oilfield fourth all Our good drove fourth $X million, strong EBITDA earnings and margin improvements business an of quarter fundamentals the outlook third as $X.X recorded third to improving EBITDA adjusted compared to

potash to the in good with fall commodity the of quarter, potash in quarter, strong announced potash noted, after the a market really that country prior the up significantly the evidenced Customers As sold look from XX,XXX tons weather three the year. off took application rising season inventories prices. replenish Bob across by and fourth increases, price was

Looking at spring. by will the XX%, towards the varying exceed in into fourth X% prior throughout price in despite large half continue layered to to year second as realized the XXXX, we still potash expect to quarter. sales volumes the about first price sales ag we’ve increase quarter levels net volumes Average

expect to per XXXX in net for sales quarter second ton to with some quarter We volumes expect increase have fourth second our price realized fourth our fully the at per about in quarter realized of from the the to current XXXX spot $XXX net our tons additional ton realized said, the and quarter pricing. $XXX pricing increases we price between the first $XXX two. of quarter All halfway

OMRI Going and continue the [ph] where potash forward, we to we feed specialty into significant areas markets, on effort growth saw XXXX. significant premium expanding focus our in sales, specifically

For fourth in as large the US. continue key market last the due Total markets throughout grow quarter volumes to sales of down Trio to saw demand slightly great early in fourth segment, quarter international year in sales our the to XXXX. fourth sales we domestic compared were quarter season the

posted Our into up levels, at pricing we seeing is good compared the $XX price subscription fill current spring. are the per and summer to ton now

the segment as realized to sales in from quarter, XXXX. contracts per clearly months the in Operators expect sales of water second sources Total significantly bottom We were increase an they $XXX Delaware including crews quarter a are to first QX will $XXX Northern the a oilfield our quarter improved of class the ton ago, sales margin byproducts $XXX in is water reserves $XXX and million per of to world few expect The increased benefiting X.X our QX, adding than Basin. commodity approximately just X.X net line. ton pricing in higher to of increase over XXXX. supportive in third more million the compared to price and

loan. PPP XX with which unchanged to the of Our the relates debt quarter is XX since position million million outstanding, third

in million forgiveness reviewed our year. the million, opportunity full $XX $XX operations at the XX-day of million the to ended period which of and XXXX projects. million Our year XXXX sustaining capital investment the review be $XX million. April. was application at We fourth with from $XX at in been with flow to potential million credit $XX.X was has the for capital, will capital capital $XX investment million remainder quarter estimate facility $XX SBA as Availability $XX.X year-end. by million our Cash ending

position to change. today have and early capital Operator, plans in With concludes for the investment We debt change prepared our That XXXX as our to significant today. in XXXX, questions. our take for our is $XX season, adjust strong million opportunity our no our end. may spring year we from over ready start cash we’re outstanding discretion investments expectations remarks with a

The We Markets. BMO will Instructions] ahead. from first Joel Please go question-and-answer session. comes with now [Operator question begin the Jackson Capital

Bria Murphy

much channel Did Bria earlier is potash for pulled much buy my U.S. or And Murphy to How in Thanks the for forward inventories how taking currently? usual? the does for potash that spring -- lead fall? the how that Joel. use demand does than on growers questions.

Bob Jornayvaz

because But, we’re I’ll more very little color market, all are a crops seeing you a let is Zach diverse on that. what up. give

States, inventories. the pretty So, across look we’re entire low if United chain distribution seeing our across we entire

about strong potato growers the the Mississippi. product are that of much as great buying the one things means delta So, growers prices of across having in cotton commodity the as the board

you the throughout so, prices you drawdown the that have across when And country. kind see board, strength, of commodity

not good we’re of is, the seeing countries. European from other level the news The imports

standpoint, entirety we’re that. to I’ll an let XXXX be I positioned Zach see some a extremely think that from color add year. So, solid very to well

Zachry Adams

to the field, Bob. season. really with application out there, April into application we that saw really the a Thanks, on seen think we’ve on continue But, the fall historical quarter far Yes, continued May. based we’re just there. realization XXXX due low through just And, very expecting the the Yes. I the so said, inventories be close strong that. spring strong spring with as mentioned, well first think values commodity out in of the and that’ll Bob -- strength to We the even

Bob Jornayvaz

Does that answer your question?

Bria Murphy

I Yes. of Thank about turning That’s think trajectory should in just versus levels? XXXX water, helpful. water sales then, to XXXX And guess you. how we the

Bob Jornayvaz

We’re New of Interior how more going than Office sell I we much follow don’t you definitely Department State XXXX. in to water in lot XXXX a did policy. know policy, Mexico Land

benefits well. is very freshwater also of has on One of water that we significant, top our rights as the non-potable Intrepid on rights

unique also it we mix brine and the taking water, a ability means water. market recycling recycling water, taking mentioned basis, earlier have water we So, cycle reselling full service, water some on as to fresh the which produced a and to some

walk Intrepid investor robust hope under to day working doing, we And disposal an the season. beyond has fuller next we’re recycling the so, on is give infrastructure have COVID through XX in a our that really is XXXX fly construction, have underway, that of the and picture XX been that that much the is projects days during where everything we full to

Bria Murphy

of Okay, then, a you now? for from the given me. your margin just one margin great. quarters Trio in last negative talk about XXXX, Can just outlook And few

Matt Preston

Sure.

QX I the versus reasons, don’t and international really the price, domestic and rebound that -- on we didn’t our really in of of QX to mentioned in our that domestic $XX up. for that in expect As full a realize mix as results variety see price see we we QX

the side, sold we’ve goods now. here as of steady pretty while cost think, on been state for far a As I

low the fall increased pretty line. potash so, to And with on competitors of to about rates XX% the nice certainly business those compared the part your bottom prices about side, royalty

So, we XXXX. improvements into expect forward going

Bob Jornayvaz

add on increase, we tech price would last also Trio I potash not increase. Yes. did a the price

market the additional as potential think And upside so, Trio I positioned for market is well. well in

Don’t So, I just at to see we’ll got continued as well. think capacity also continue our very plant forget, improvements. opportunities we’ve

for market Trio the overall dramatically. seeing improve just we’re pretty So,

Bria Murphy

you. Thank

Operator

Stephens. with Connelly question go The from comes next Please ahead. Mark

Mark Connelly

up, Thanks. in Yes. pace things bottlenecks I there’s done get ramp development. the Are just sense can little in what uncertainty as catch up but to much how not very quickly wonder, ahead? coming this seems the back a you’re of ramping a I’m more to there Bob, working of now yourself terms are if yourselves bit now obviously give fast. us just you And with? it you there that is racing are a you just Obviously, of could little you so wondering, be partners but are comes? And -- finding or quickly of

Bob Jornayvaz

thing we’re we’re levels up is ramping from. up people that I keeping one don’t would we as are that everything. ramp say, seeing up the with The forget

supplying of we’re communication as to. ramp we still the And see I the can’t partners level describe just major so, we’re not levels. that the with up, XXXX to back And

daily, communication of what current what they availability, suspension, they allow, frac So, will if daily around working through won’t allow. twice, Interior the crews virtually there’s not Department

collaboration the companies a just the tremendous there’s So, providers. amount service between of oil and

So, able to be the we collaborate going we’re with in we are. fashion I if to just think it continue fine to up keep

Mark Connelly

in position the good is because a current you’re behind still sort But XXXX. Okay. demand of

not where with to are you Okay. today? up racing catch you’re So, just

Bob Jornayvaz

gradually see just I crews frac continually, No. coming on continually. and

As There’s not planning just we’re a operators we frac variety “appear”. with, seeing we’re this of that’s time. crews the that on amount talk going tremendous to dealing of

programs, participation timing they’re I of was the bankers, so there’s their downturn hedging the -- -- a more in lot their think operators, hedging programs. they’re active that their vicious, XXXX the because because with

that their And amount hedge sure just well-funded get of operators the so, that right. an inordinate to make collaboration just did there’s timing

very-sustained, occurring in thoughtful Northern I’m lot see So, of organized, probably more a question. I answering the development your Delaware. But

Mark Connelly

That’s super helpful.

off production just just question. a weather we Just year? anywhere. wondering I’m if enough expectations was for you what to through Has track affected this your went fertilizer throw

Bob Jornayvaz

power thrown of four The everywhere relates market would fine. in New Mexico. place water a more We challenge business. or I just only Mexico were else we say got say some as we Texas was and we the freezing Texas that New and provided Southeast it days had products, track to off weather it in that I’d five our outages. brief fertilizer for

So that’s behind us.

operators seeing turning everybody, making job Southeast the repair. think total sure in And the weather coming, What New the of state of I shutting terms pretty electrical did much in back is they good things down. some when in a we’re now, Mexico Texas of major happened of saw things just the was on unprecedented. and everything grid,

the the So, news working. happened, has things good and everyone’s check are is things repair out,

we’re so, back on. everything bringing just slowly And

Mark Connelly

just And Trio. on Okay. one then, quick question

product you best for come the that over how year think and just versus You international are where of curious on terms last going you sort about year thoughts the where had or of your a talk where made two? year. bigger You Can of just domestic market versus you the and a shipments. sales where out international? is size opportunities last Trio of about I’m changes in lot next

Bob Jornayvaz

Well, we’ve really customers certain we enjoy very business with a world. part two that of in got doing the specific

Given not one we to you are. going have favorite I’m tell who only customers our competitor,

of door. And until so, they are imagine back we’ll be they we’re There’s not on that to to would to just customers. a and it’s I continue service markets -- work knock other that part joy choosing Because with. those come our really

know, the you extremely competitive. As we’re last years, several

other chose take certain and And that markets business. to so, we exit let people

door. Some coming and people are on of back our those knocking

more reenter years the we we’re several just than market so, to much ago. thoughtfully global And did going

Mark Connelly

that’s of performance not uneven Thank specialties. it. value. the We’ve appreciate get That’s seen struggling for just I lot to paid And across you. it’s a nutrient helpful. Trio obviously,

Bob Jornayvaz

Sure.

Operator

Vincent The next ahead. Andrews Stanley. Please with question comes go Morgan from

Steve Haynes

Hi. This on is Steve Haynes for Vincent.

in Just I a ton about able on there and in being I to a the about kind per comment in the press it guess, quick evaporation think to XXXX, ask one operate cost to also, -- above-average was wanted talked spring. longer bit expectations your in release. yes, for you then a the as of regard

as volumes comments around well? any your So, production

Bob Jornayvaz

had great we say, years. evaporation just I’ll

had variability. dependent it is of As weather, you know, evaporation the is upon and the we’ve it and being solar business you’re creates that in -- cyclical part

And evaporation, achieve able we years costs higher slightly there margin because and where advantage to so, are where a goes years higher increased have take cost structure touch. and we’re a our down

So, that Matt let want I’ll some Matt, you -- to if with some to specificity? add with

Matt Preston

some production. potash and operate a few a wasn’t event bit weather our earlier freezing change impact pond touched real major for We weather it but precipitation on very that days, our inventory. our on from the Yes, in would really didn’t cold It little year, no previous the we and was of a no comments. impact

evaporation, certainly above-average we still the to equal, per just think So, ponds. through help And longer XXXX. ton get cost operate all a than normal bit else do into heading we’ll will that our

Operator

from comes question with John ahead. go UBS. next The Please Roberts

John Roberts

much brine resources increase you? the available to the water transition How does to

Bob Jornayvaz

water rights I your do Is guess, many understand how of or more question… we have I question, brine, the don’t

John Roberts

brine, Difficulty] over of to of order fresh? develop have big as or it, the don’t brine know, time or I I how is a your [Technical relative availability sense magnitude of freshwater you don’t

Bob Jornayvaz

is That’s freshwater do we much but water in rights of currently half easier. a that as about We terms getting great own the brine, an question. appropriation

get to farmers municipalities. because because composition or so, approved And are brine, TDS you it’s wells get competing protest non-potable, an don’t high it’s of much and the appropriation supplemental easier have that

sense that an it’s just appropriation So, an the is transition standpoint. -- if transition, from easier makes

John Roberts

to how need you having full that? acquire to how addressable adding of to opportunity offer doing does previously? it, partner cycle measure fully water customer versus capabilities your then, increase or what were do you per market capabilities additional maybe And the know revenue able don’t what’s or it kind full And much be I by management, Okay. barrel, cycle but to

Bob Jornayvaz

the No. of opportunity use XXXX but was recycling the hate equipment to brought necessary. from I really, already and acquire on, beauty. a the some experience. companies That’s to capital in lot upgrade, team oil with purchased of spent part vast we the that word We that that used XXXX we’ve the an as -- We’ve came significant members talent of

right We’re under now. construction

take freshwater months better, We’re you of barrel From several standpoint, if running. margin a it the which are to a water you of because matter can produced a recycle be looking than -- to, barrel times. produced up the and margins take times, at of equal and same resell not a water multiple means

You small and fixed small are a then, have a cost. cost mobile they chemical labor units. actually And

outlet so, that And allows produced on side we’re backside that the capacity. having water developing a us

out it’s the in to the that we’ll project throughout the modular in having So, water the basin recycling different future well. as we have water, forms, then as geographically, sourced capacity speak, we’re disposal interesting months talking of variety be building having an as well the the that ability sourced as literally all and having about

Operator

comes Please Holdings. Ursaner with question ahead. next from go Bumbershoot Jason The

Jason Ursaner

either traction success be is investors have signify looking what business, about? in for the Day quarters or the or the of kind would that Just there. to that going you are next business. you anything Investor you planned that not Is point that that could couple on guess, of pivotal following mentioned there answer that that up last would be I to for getting would be the

Bob Jornayvaz

blip. lot planned that projects of because it’s regulatory The them helping fulfill think I we’ll get touch for, agenda, of Interior what the the want we be teams agencies to around everything of state a get designed, regulatory get just to. accomplished Department We suspension exactly the I’ll honest, legislative them spent them, a Mexico we’re New their trying Jason. work of was right a through That’s agencies. XXXX

we we’re that look able to share creating lot market doing with really to and the a transparency. So, forward being the things more

Day gone what COVID this we it that into I is quarter, quarter. But in where we’d having COVID be is. think, not had are, Investor first the

are And bodies so, regulatory and virtually, still systems, slows certain legislative Court we’re still finding things it agencies. all down. operating

in we’re with. get terms that legislatively just a things week of or able is dealing regulatory done of life improving It being reality that’s to So, to wise. week, either

I we that every projects ensuring wanting we getting nature the transparency. So, intention question And a as we answering as hope more I’m that the your of have it can, the lot is know quickly are really market of ongoing.

Jason Ursaner

but to numbers? contracts, is the like guess, the announce I where just or or showing answer. it to it start in able be to up you’d customer of the is waiting type be business That going it’s wins really for

Bob Jornayvaz

It’d be both. of a little

Some working recycling, some on, you we’re being need those that necessarily and don’t projects contract of other we the big and of were discussed all a as negotiated speak. the

Jason Ursaner

been or but then, Okay. it’s going lithium reserves that the update any a quarters, there? on had couple tests of And been the on

Bob Jornayvaz

We’ve now been come reapproached a Lilac That results. The is for company. back us, that a great company the original with by couple question. has testing did of promising

know, you a has been lithium market the As bumpy ride.

And interesting personnel so, to appropriate on project. retargeted lithium we’ve a have that It’s the got opportunity. back

today. And prepared I discuss to I about have asking for But, it. of so, I’m to head lithium and just we’re I you share. not the my with don’t honest, to be off me prepared the to got honest. remarks, top -- my numbers thank I be got as

apologize. I So

Jason Ursaner

long-term potentially some cost the methods? being Does -- it to in gigafactory, in the though reserves would out viability the No that matter versus the get proximity of of the other problem. with terms

Bob Jornayvaz

Well, do degree know, as to all of function lithium, you a to it want you it’s what to. process

would given in lithium using interested be where obtainable to there facility that that somewhat located, theoretically And sources we’re nearby. our other are process companies are so, from

So about it degree all process do to. is to lithium you what

to and look Combine lithium still further. to on lithium a sources it. take other through that a the We with focused it allowing it entity. either that. We’d we don’t want understand on to have, lithium royalty structure think I we’re reserves we lithium or from monetize full-service site. to processing that be continue rather So, someone process

Operator

with Please from ahead. comes question go Farwell The Matt Capital. next Roth

Matt Farwell

million my acre could make that I just amount I a clarification, if Company that if on caught it. XX,XXX I’m there’s the notes certain if was water not I have have I because the of point business, a you water in resources quite of sure one, a are or wondering have owns. included your addition understand in feet to reserves if this slide the presentation. the XXXX may August market. this wondering but barrels. in you I’m or XXX you’ve disclosed on data There’s the reserves to at also I not brine the fingertips,

Bob Jornayvaz

included. not They’re

Matt Farwell

Okay, great.

Bob Jornayvaz

quite as follow And Mexico on the policy, follow land what’s we if legislature if today, there in you policy, state speak the frankly, New going office you are several bills.

So, we’ve of we’ve only ESG legislature. on administration change state what’s the in as been very the But, not going adaptive adaptive to been to on the land New requirements well the going Mexico what’s several state with companies. federally as office,

Matt Farwell

I’m forward into peek And say. Investor a I might still the Okay. what looking trying you to guess, I’m Day. definitely to get

is it earlier as and disposal? you So, water bit does in market little that recycling -- or it I’ll opportunity does rights now, the fresh perhaps see compare water tangible ask, how or stage? Is how opportunity, equal more a that’s the greater to

Bob Jornayvaz

I sourced think, every to fresh or frankly, a towards start component, you need the Quite to move it’s greater. flywheel. trying water company is water, water, either recycling brackish but single oil

to say, But, can XX% it from take the despite so, we’re of there. now, XX%. that right recycled of it percentages claims high water, XX% grow the in XXXX in it’s And and easily very operators’ to I’d seeing technology

It want cetera. take water, it et so we’re water, on battles or to page everyone same river [ph] politicians see we get the not it and ESG where it enables regulators that the forward. So, move and and over as first fighting foremost, to the

Matt Farwell

Can with obvious great. Company cash the of be last other give financial in initiatives? flow repayment Okay, question us a strength obviously, that the prices, there’s cash debt strength generates improvement equity of might uses or free this free be? higher terms and/or of the in you year, markets. idea high it And is, Would the there’s potential an what probability in -- financial

Bob Jornayvaz

the more there. when any to admit program shareholders. would than like right would it’s to announce able to don’t in now, I nothing debt -- risk more. the to a We largest return real ratio and buyback bit good We’d I’m have I first first, reduce say, because our little a shareholder, shape. to financially one we’re is to I’m money love leverage

companies As that made other know, we like XXXX. through all done oil XXXX, it in have we many had never we’d

it’s So, urging thing good people. many of despite the a we didn’t,

that to the we we But, our as that. hear I is one. it will. funds I as can’t goal to return we say as to If that. So, clearly, do, any possibly we I on just how We think, quickly can appreciate can. understand lucky do just shareholders need stress We got that. I much more

Operator

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

Bob Jornayvaz

We thank healthy I time and Intrepid. everyone everyone with just that want their forward in to their you. interest hope for stays and look to up catching

you Have great a interest. thank day. and for you, thank your So,

Operator

call. today’s concludes conference This

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

Intrepid Potash (IPI) 2 Mar 212020 Q4 Earnings call transcript