Earnings call transcript Q4 2022

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash Inc. Fourth Quarter 2022 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Evan Mapes, Investor Relations. ahead. go Please

Evan Mapes

Bob Good questions discuss Chris. Marketing, President With Adams. Thanks joining our and is and for today Also remarks Matt Thank me prepared the with review morning, Sales Q&A Intrepid’s of Zachary to today CEO, Chairman Executive and Intrepid’s to results. Vice and fourth us and CFO, is Preston. answer you, available Co-Founder, everyone. Jornayvaz during quarter our me following XXXX session

information remarks including obligation today forward-looking – we SEC, here described U.S. and with answers our subject questions that from those currently to which forward-looking statements by update could your anticipated. that to risks advised in defined include filed actual incorporated These results and securities the to be be assume our and Please available statements arise uncertainties today, no cause uncertainties the that to These are statements on are materially risks to them. could reports as are reference. different These periodic us laws. by based are

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

press SEC intrepidpotash.com. on Our and releases our filings available are website at

to now will call over turn Bob. I the

Bob Jornayvaz

We Evan and attendance your appreciate and call. fourth our your earnings you, Thank in XXXX good morning joining to quarter interest Intrepid. everyone

begin results, will of quarter our my with market. getting Before current fourth on I state some remarks to the potash commentary the

resulting global having and the in market Ukraine of on importance of high around and and volatility access invasion continued potash Belarusian The supplies. three to Western measures, Belarusian potash and rounds Russians from witnessed other and exports extraordinary EU two the U.S production a of we markets, reminder of uncertainty sanctions have months, XX the comparable pricing, good potash targeting effectively countries the adopting conflict. past has several been the Over effect removing reliable industry, events,

with coming second constrained emphasize Eastern supply we the market, was XXXX deescalation. XX% still an XXXX is expected, Europe, where minimal want a global potash supply in half than a the we and supply showing is to will signs to slower XXXX potash In still of XX% equation, production show think potash XXXX tight of risk While begin we that higher which demand solid demand from regions is and rebound. estimated

financial market that XXXX will now a of Following provide I performance. quick overview, recap our

the This of income $XXX During is performance XXXX, among obviously adjusted company fertilizer our we history, being with key our the financial adjusted while generated best million, $XX approximately approximately prices EBITDA products. in million. net totaled for higher driver

price to compared realized per Our XXXX the ton, for net average up was prior sales $XXX over year. potash XXX%

XX% ton, over And net compared the our $XXX sales XXXX. realized cash average XXXX, $XX for third Trio, from per million flow price $XX up our refund. was which operations of is customer quarter totaled to In net million,

our improving solution Our with and of approach was unit HB, begin of growth cash from number projects numerous Moab to directly mines, strong our investments in economics benefiting goal increasing per our generation using our the and one solar the to Wendover. the potash production

share roughly shareholders form X%. returning roughly reduce of the Secondly cash by some repurchases, in outstanding capital reward $XX million shares in with to the our of our which

mines to continue to reliable plan help solar that we more XXXX, high-grade brine. in assets to have invest solution For our our ensure potash

high-quality reliable economics potash and improvements can more of business, As generation reserved a assets, higher now our unit the lives will have strongly many is significant higher on sustain fixed help reduce cost cash variances brine grade cost side production production and increased time drive these throughout invest advantage of remaining take fully which potash to believe to us the decades. in allow will which in cycle, measured the our We assets.

to for today, farmers have seen finding good strong pricing As at value where prepare start are back is for buyers a and we we as where spring season. XXXX application stand potash levels the

back primary for a affordability concern During the of was farmers. fertilizer half XXXX,

very The particularly economics their futures where are context in for the strong. today curves commodities been have forward extremely of good, However, look most trading.

XX of crop trading traded January the highest new start corn in over features $X the first bushel, the year. level the which of day As for per just is for last years

highest years with of the soybeans the new trading first crop for trading bushel, level Soybeans under the year. were XX per just $XX similar also day in

$XX.XX new $X.XX futures levels Current prices, bushel and and XXXX. at roughly and is futures historically corn we global the bushel has that both futures respectively, trading higher crop and per at of trading similar saw still corn the further at per Offering closely market crop prices support for with production. are even levels watching region beginning soybean inventory low soybeans are the at year U.S. Argentina Brazil, levels. to been One and this January

which have downward a strong year, putting has the been even projected drought estimates. on a the in still to of production is very pressure middle Brazil While February, is experiencing frost production and severe Argentina soft country’s

we now given we strong to application in believe throughout crop will prices, Lastly, the is back ratios trading are to normal line fertilizer affordability spring. more compared levels, rates lead potash now where seeing which to

ready Consequently, markets The much global maximize areas supply turn have risk remarks, And XXXX. higher seen in a supply to better three, in eyes should To today concerns we strong Europe, Eastern incentivized this believe key our historically. farmers buy. The market and demand throughout crops constrained futures products key potash still like highly farmer. be demand yields for year, for supply fine drive and obviously steady is summarize U.S. which with very than my their looks potash affordability of should the is prepared these is the we farmer to present.

I’ll ahead. Matt. go over the call to now turn Please

Matt Preston

adjusted of million. company income approximately solid delivered and EBITDA the XXXX The throughout $XX Bob. that of quarter, generating Thanks net performance fourth the $XX million into with financial Intrepid continued adjusted

release HB. the HB reduce the quarter impacted of by our at quality fourth extraction evaporation similar to estimate As facility abandonment of are for results brine XXXX press and will noted we yesterday, our be upcoming will at the approximately plug year calendar This our available resulting failure And well XXX,XXX XXXX summer season. and a production new in at tons.

some per As price Bob Trio, and our the sales of be the quarter quarter our our helped saw in while mix the strong performance defeat it potash our until fill fertilizer and prices the potash average averaged was noted, decisions of purchase and high for industrial key sales another $XXX We Trio driver strong announcement fourth ton. netbacks for in early program customers agricultural continues behind for of net drive XXXX, to $XXX although diverse defer per ton, Intrepid. for January in

of potash a fourth which our figures year tons, our ago XX,XXX XXX,XXX compares sales tons In tons XXXX volumes quarter totaled segment, totaled respectively. to production and tons XX,XXX our XX,XXX while

XXX,XXX expense, compares production and carrying our sales tons and XXXX, XXX,XXX reduced to For inflationary other volumes last XXX,XXX of per our per In tons production year. our production totaled tons, increased due XXX,XXX ton average rates, royalty weighted pressures. increase our ton which segment, while cost to general totaled tons potash

sales sales range guidance potash QX ton. for volumes price of with to XX,XXX the quarter to expect in of ‘XX, per terms $XXX the of we net tons an In XX,XXX $XXX first realized average

fourth XX,XXX segment, down year as volumes our to Trio In in the XX,XXX from volumes tons, buyers reluctant of tons period quarter XXXX declining to totaled in anticipation sales remain of prior commit our prices.

‘XX. quarter of from XX,XXX down XX,XXX the Our tons slightly production fourth in tons, totaled

tons ‘XX year production full of year-over-year. XXX,XXX just at our total For while XXX,XXX XX% slightly was down were tons, about sales volumes down

quarter net between for guidance, ton. and As realized XX,XXX sales price with will sales $XXX $XXX we Trio the per average XXXX of fall expect range volumes tons, an XX,XXX to first in

XXX gross In activity oilfield sales margin total XXXX, with wells to peak up of in XXX XXXX June XXX year, December. solutions, correlates the year at completed with million approximately of the year. the this to oilfield million, general, in January $X.X year in in our increased from completion from roughly from ‘XX from at we Permian. and horizontal in about rigs XXX at at Permian prior and rigs end in coming the $X.X $XX wells closely increased in saw in $XX the increase in segment performance our by million end million XXX activity In of Last beginning ‘XX monthly the XXXX

So activity far Permian slightly has in ‘XX been flat up. trending to

increasing mines. XXXX our production to capital reliability our remains Moving as solution program, and solar mentioned, our focus at Bob on the

first set in quarter, to budget infrastructure increase rig after capital And due permitting capital our facility, sustaining $XX to to our crossings, be rail an HB range we approximately At million projects. the will for and well. in $XX XXXX progressing the million the the improved $XX delays some million, remainder of is growth into system expect $XX is installation capabilities to for million small Our second pipeline the mine. which injection place of with

infrastructure phase year. we second begin and in-line hope being of which to is maintain an of end project, The the process to the currently permitted cleanup includes of near the injection rates, installation help that

brine fourth quarter access We a of the in also in pool originally XXXX the high-grade significant expect to drill of well that second half of another extraction we to targeted XXXX.

multiple extended horizontal Once the expand well brine summer potash complete. anticipate to track high-grade we the drilling also the will drill is to in slightly although timeline, laterals summer four to first be for two wells, of rig evaporation complete, evaporation design the mid-March, Moab, the four on the additional the season. expect we the At season. laterals, moving by and cavern the was brine cavern expect which made access time from we laterals is We over for additional still sump decision

potash while payoff growth does time injection harvests. sustained the through given a we investments increased evaporation these ultimately we higher underground, cycle progress production As see brine take and reminder, tons of residence summer some of time our and before sold. This the form final in projects,

ready now the to we Q&A call. the take are Operator, portion for of

Operator

Josh Instructions] Spector The question is [Operator first with UBS. from

open. is line Your

Lucas Beaumont

Beaumont to Josh. production. Yes, just morning. This on is Good on for start potash the wanted Lucas

this expecting realization that you tons So you I got the coming have you there. sort half XXX second try in projects sort improve of But the mentioned mean, of are now. the and year that to are

get walk to XXX, to you sort of you kind through of your the head back XXX runs production maybe of that now couple of over next ton years sort kind your us could how pathway in just So of historically? see

Bob Jornayvaz

Bob the grades. which allows you increases injection which that brine pipeline the which happens HB. in abandoned increases of at through The underground mining is the system, turn injectivity, this building walk in the us increase turn, to Yes, I’ll potash mines, in

dry failure. drilled mechanical was a As if we said, hole, a will. It we you

there that that replace in know will XX% X will have the is of brine quarter million in we third we to believe XXX barrels sitting on. so back brine we that And well billion pool. and that We

so And at it. we simply to HB. access That’s need

where wells lateral right So a of and the drilling be us HB. cavern the at cavern which combination four brine additional will the to with need we At X Moab infrastructure we are is system. get now,

been the in very complete. undercutting a of pier we successful begin will brine First It’s the two. was days, start cavern lateral the pumping being potash of start before platter on within with in terms into ponds that

We the what pretty original are in mine. in that Texas will move from Gulf potash sumps drill significant some five

have there. will So mine exists skid just X the to over those into the And laterals high-grade then that old keep and collect Wendover. it we we rig some drilled will we we investments – at and drill know made brine Aztec

to to We production have the season of precipitation a at have need that have had successful we Wendover Wendover. the brine

So as focused high grades our on brine we HB, our take facilities that Moab at our out solution they much extremely Wendover solution, and variability get can increase production. to be as to solar are as

Lucas Beaumont

market Great, going sort comments, that you your more challenged depending you it mean, likely there. remain I at structurally then, least like and how we X agree demand thanks. global million I to is going of generally tons from to sort this be estimate kind year. of And measure sounds outlook of the it’s mean, short,

flowing you of here. quarter kind move first on expecting you the you how pricing in wondering quarter? and year? seems progressing through pricing how So about just of that’s spot here between going guys was trends this May like do It thinking through of sort to kind see in bit a I the in So, into sort you that seasonal the to outlook reset fourth are pricing But year? up of outperformed

Bob Jornayvaz

taker. As know, you price a we are

XXXX farmers and the incredible had curves globally, so – given record in nature a the forward the look globally price we have to have – but and fundamentals, look if year now opportunity great And XXXX. if at we market, supply a at that constrained talking economics and I of the am an farmers

justification every they’ve maximize yields. So to got and reason

economics, when if talking crop a to So we’ve situation. that’s at I today, constrained we not is as on of in And And the regardless strong. that statistics about, reason upward fundamentals of what the strong we we underlying think farmers the are market got are and not bullish market, great remain this our supply-demand believe. no a It’s is on have us up it just look supply – there we’re that pressure for And pricing. have just back as that. fundamentals

Lucas Beaumont

will on. on side, then Great. Thanks. pass cost more Maybe I just the one it

of on portion But having X structural just am guys kind as years, step-up about potash you So, on a sort mean with of costs a some of ton. large the in the I volume. moved higher mean components of last of is absorption I this cost $XX it’s assuming kind everyone over lower just are trying sort the up in sort as issues I obviously, there to cash think well. inflation the else, of through probably

you think years, traditional sort you your of you to then is or could as sort recoverable just and versus production us for we year break what out structural So, costs, what out kind that more a think kind if of somehow sort kind sort between absorption of I of wondering back increasing was kind get of of of any is you sort levels? of move of and X

Matt Preston

some by in Yes. continuing continue but that to as certainly rate early abatement we low-XXXs, the we great the of a just due expense. we that, going not see ‘XX in that costs whole to then Certainly as much seeing. has No, of that, in pressures and pricing, our are just lower see into to ready mid-XXXs. obviously, guidance unit nature reduced increase production improvement are of Lucas, increase that far question. of inflationary some royalty little a pretty give offset economics. of to a minor number kind as cost a been We to not mines into out, bit move Kind lot on Certainly, see fixed production of sizable per a lot and as is continues should XXXX we overall ton our

Lucas Beaumont

Got it. Thank you.

Operator

Andrews with Stanley. The next question is from Vincent Morgan

is Your open. line

Will Tang

we through for Hi frac to Thanks the the size previously, are Vincent. taking mined then I tons something of year? in is thinking like to you for guys, if question are you is this per that’s Tang here. I on still sand about wondering ton sand, my Will margin $XX $XX from And the that confidence giving am what can you walk plants have that be market targeting believe you how should of per seeing us it? increase

Bob Jornayvaz

so than we the thought core Bennett the frac and location. holes, at From reserve right is we reserve originally defined the now, additional have with sand, bigger

for have sand, numerous companies, had with and you companies, etcetera we demand will. those supply frac negotiating discussions of are that with companies currently agreements, off-take terms In if

waiting XXX hoped. tremendous gone well making core identifying we we back amount as the plus as still confident the being the because that thought. New approximately as the think frac permitting about, taking have are etcetera, and I much reliability with in there. permitting, big the we first longer the sand reserve We operation hoes, And out reserve as feel it’s then reserves drilled Southeast is than holes, is Mexico, But we work so of had sure as on of

of off-take margins have in margins be. sign what in participate what going end think not at achieve of or of But terms have spot the margin be the opportunity choose to spot we a our that to or term to in the whether based going longer kind the that’s opportunity, we every make we a market, you terms deal we a of to market are So, discussed. function if agreement I on

Will Tang

of delaying I the the further of wondering that could there. you Got kind signposts it. to is that kind I last mentioned progress that, And guess permitting, major construction then of follow-up things the and production and or look should the into at other are – there? sales there have delay into be like there you that get to eventually am get production for, post able you pipeline

Bob Jornayvaz

it’s believe We just permitting.

needed, as We are originally, have never we to they literally thought sand facility we required, dealing with agencies, that etcetera, a new gave us agencies permits permitted guidance have And frac had regulatory they when regulatory before. would relationships trying trying we as additional to our as to industry, needs. maintain things agencies. with We with see, amenable meeting and to can like the to up their that they were be to this come what

hate Southeast But ever things environment. changing at just it’s I Mexico. I will regulatory New Southeast Mexico. leave to an So, New it it’s blame on that.

Will Tang

Got it. Thank you.

Operator

is Markets. question next from The BMO Capital Joel Jackson with

open. is line Your

Joel Jackson

Hi. you Good maybe I morning. in Good have maybe afternoon. would wait like conversation. this think to Bob,

in the will Can of weeds the current and you when channel. prices of a trade non-producers, why a question, into like you much producers, the you journals commentaries there interact, deep it’s weird kind all get – the go going at one, right potash comments we guess commodity its normal And no reason is all the producers, as crop is to we see on aren’t strength. buy what farmers strong, what is the know includes why market I so debate? going me dynamics. are potash yourself be market and then it, all now supply And your of makes kind into bit, there to bearish market, is constrained debate today are saying So, the that based the

Bob Jornayvaz

fertilizer farmers, Board And were a XXXX, of feeling value bought they commercial Well, saying commercial for on they their December knowing extremely they got a reason, large getting good prepay like have farmers. our all going we in of big forward. were what on two farmers two big

league each farmers. So, of major individuals these are

XX So, on farmers somewhat marketplace. lots market. ground tight from, into anyone see are that we when tens is what of have to a Russians potash five farmers their they they the acquiring the get this paying. major, that potash up thousands of it to the in opinions distribution that job how out call United The I like doubt is that we market are million that down the prices of don’t if to they the assets Russians. no globally that were were the And What they the year I acres see would million go bought of especially still to of it fine is actually and market fertilizer going the all XX their the to comes production four go say done doing great ton spoke metric we in a can farming bought. Belarus air. paying States and coming you There the is to will, are bringing a distribution where is their and of assets, suggest felt

to highly of are States lot So, of their of unaware politicians they actually are the United is coming through that assets talk there Russian when a into lot distribution you a politicians, got. how potash much

do and are access Russian continues think think be to. as politicians buying of the and I only farmers conflict, fertilizer Russian that to about that So, are amount there the the not concerned that are American have situation but escalate aware, I a

saying I So, a case, not bullish it’s clear but to to would there think Joel. cut, a be hear am good very I love that for debate. is I do reason bear case your there made. is

Joel Jackson

XXX,XXX ask understand I of just I opinion case, face. wanted bear the there if also, I Bob, was bear you say math, a debate. if your didn’t I asking I the to said your for of was you do about year. potash about you you Your tons team you said – last correct? think will XXX think production year, this to right? today, And that that’s will do similar

Bob Jornayvaz

Yes.

Joel Jackson

kind what much, because match out does help your sell how drive were me down you that you year? maximum to Like imply this Can inventory you if year to of for there? push reasonable we a potash figure the case are able volume to potash much this like, sales could you if XXXX? and bowl reasonable demand – sales in still if was level, a How a

Bob Jornayvaz

of much at tons from you on can built for what it’s Yes. about and QX, just I I mean about sales. tons of like of always, I something getting talk are obviously, given I that we not would mean variability it’s production just Joel, we swing. XX,XXX inventory, that tons XXXX, to XXX,XXX know mean how XXX,XXX

we for So, to it we of certainly more But looks if the down like. ‘XX sales ‘XX, ahead and want what push how spring just to all we can it’s volumes. like much comes in would historical commit

inventory I numbers. into over on you mean think I at easily changed production, back kind pretty kind can so the number our of of sales it’s you a And look if just years based overall

a So just sorry, ahead, great your don’t can question, for have answer Go I a on I but there number out Joel. a put high side.

Joel Jackson

crash. No, lithium, sorry, you lithium before it’s I know years then a turning I number the of to looked something And at ago, interrupted.

boomed your them lithium to maybe reassess. some And you for tests some that see been, start Now, would out has DLE prior I where takes and technologies again. comment then and others think wait

Utah, together units. trialing putting So, we competitors now seeing some were some are commercial they in or

to throwing around how if market. can DLE The DoE for Is see the this next year, see seeing something want here - maybe lithium do assets? you of is in almost as We your results year results some technologies, to eventhe monetize the there having well anything maybe DoD some next world. will around money you

Bob Jornayvaz

to the Joel, have believe cut suitors if got code, lithium will, just separating on broken you from chase, several we Yes. magnesium. finally to have that we the

nice lithium a all so have know And reserve. we as we we said along, got

suitors we bench and technologies. tested gone certain have beyond we think now scaling so actually And that have

make we it’s a than are couple the talk are We about about said in think always ideas place us we I invest happy once more talk of concrete We lithium we you got can I and So, me And we our more ago. began to those deal think to years be deal a there. of evolve, that assets. that assets, like, needed want at different give share. lithium. looks fortunate technology have to a what And we that were will and to people to

Joel Jackson

DLE to And would trialing something technology, that expect? like look

Bob Jornayvaz

a technologies as is there Well, different you couple know. of

so one, technology which And am prefer. which we not I going get into to

male got hired lithium one a a have that’s which we three research PhD look have we is the tremendous on work and that us We because attached to technologies companies our side best done think evaluate lithium different of suits with to at amount their magnesium is what to.

a the to that discuss So, down work do of better we at good without we for continuing details, going news us over technology and evolved in would the job developing into with And assets. our has look lithium the the is education to lot years. testing technology forward Windham have chain are doing a moving Windham. that people and lithium of And chain

Joel Jackson

Thanks Bob.

Operator

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

Bob Jornayvaz

day. really today. to answering for Intrepid want it and later I your you. Have We just everyone thank interest great and questions a to time appreciate your on. Thank forward in look

Operator

This conference today’s call. concludes

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

Intrepid Potash (IPI) 7 Mar 232022 Q4 Earnings call transcript