Good afternoon, everyone, and thank you for participating in today's conference call. I would like to turn the call over to Mr. John Ciroli as he provides some important cautious -- important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings material or made on this call. John, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Montauk Renewables earnings conference call to review the second quarter 2023 financial and operating results and developments. I'm John Ciroli, Chief Legal Officer and Secretary at Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments and Kevin Van Asdalan, Chief Financial Officer, to discuss our second quarter 2023 financial and operating results. At this time, we would like to direct your attention to our forward-looking disclosure statement. During this call, certain comments we make constitute forward-looking statements and as such, involve a number of assumptions, risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed or implied by such forward-looking statements. These risk factors and uncertainties are detailed in Montauk Renewables' SEC filings. Our remarks today may also include non-GAAP financial measures. We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide presentation and in our second quarter 2023 earnings press release and Form 10-Q issued and filed this afternoon, which are also available on our website, ir.montaukrenewables.com. After our prepared remarks, we will open the call to questions. We ask that you please keep to one question to accommodate as many questions as possible. And with that, I'll turn the call over to Sean.

Thank you, John. Good day, everyone, and thank you for joining our call. On June 21, 2023, the Environmental Protection Agency announced final rules for the Renewable Fuel Standard for the 2023 through 2025 years. While the final rules did not finalize the eRIN program, it did set final volumes for cellulosic biofuel at 838, 1,090 and 1,376 million RINs for the years 2023, 2024 and 2025 respectively. Though noting the delayed eRIN program, the finalization of the rules had an appreciable impact on the D3 RIN index price. The average D3 RIN index price from June 22 through June 30 was approximately 31% higher than the index price average from June 1 through June 21. As planned, we monetized a significant number of RINs after the announced final rules, prioritizing obligated parties and benefiting from the notable rise in D3 RIN index price. We monetized all RINs generated and unsold as of June 30, 2023 and committed the majority of our expected 2023 third quarter RIN generation. We have not yet entered into forward sale commitments beyond the fourth quarter of 2023 RIN generation. The average realized price of these July 2023 commitments were priced at or above the July 2023 average D3 RIN index price. The final rule also included significant changes to the existing RFS program referred to as biogas regulatory reform, requiring the RNG industry to modify how all RINs are generated. New RFS participating facilities that register on or after July 1, 2024, will have to meet the biogas regulatory reform provisions beginning July 1, 2024. Existing RFS participating facilities that registered prior to July 1, 2024, will have until January 1, 2025, to come into compliance with biogas regulatory reforms. For existing registrants, registration updates must be submitted by October 1, 2024. On January…

Thank you, Sean. I will be discussing our second quarter of 2023 financial and operating results. Please refer to our earnings press release and the supplemental slides that have been posted through our website for additional information. Total revenues in the second quarter of 2023 were $53.3 million, a decrease of $14.6 million or 21.5% compared to $67.9 million in the second quarter of 2022. The decrease is primarily related to a decrease in pricing of gas commodity indices and average realized RIN pricing during the second quarter of 2023 compared to the second quarter of 2022. Gas commodity indices decreased 70.7% during the second quarter of 2023 compared to the second quarter of 2022. Realized RIN pricing decreased during the second quarter of 2023 to $2.16 as compared to $3.38 in the second quarter of 2022, which also contributed to the decrease in total revenues. Additionally, contributing to the decrease was the expiration of the gas commodity hedge and the elimination of our counterparty sharing agreements. We recognized gains in the second quarter of 2022 of $1.6 million related to a gas commodity hedge program. We reported the impacts of our gas commodity hedge program within our corporate segment. We have not currently entered into any gas commodity hedge programs for 2023. We also recognized revenues of approximately $1.1 million in the second quarter of 2022 under our previous counterparty sharing agreements. Total general and administrative expenses for the second quarter of 2023 were $8.7 million, which was flat as compared to $8.7 million for the second quarter of 2022. Increased rental expense and stock-based compensation expense as a result of stock option grants to our executives in the second quarter of 2023 and the 2022 amendments to the Montauk Ag renewables acquisition stock awards were offset by the…

Thank you, Kevin. In closing, we would like to provide an updated full year 2023 outlook. While we don't provide guidance on our expectations of future environmental attribute pricing, volatility and index pricing does impact our revenue expectations. We continue to expect RNG production volumes to range between 5.7 million and 6.1 million MMBtus and have increased the corresponding RNG revenues to between $160 million and $175 million. We expect renewable electricity production volumes to range between 195,000 megawatt hours and 200,000 megawatt hours with corresponding renewable electricity revenues between $18 million and $19 million. And with that, we will pause for any questions.

[Operator Instructions] Our first question will come from Manav Gupta with UBS. Your line is open.

Guys, I just want to say, lot of times we see companies trying to make trading decisions and they completely mess it up. Your decision to not sell RINs in 1Q was an absolute masterstroke. I have never seen a strategy executed so well. So congratulations on that. My question here is you announced something very interesting in agreement with Duke Energy. Can you talk a little bit more about why it makes strategic sense, how it adds value over a period of time and the benefits of this agreement?

Sure, Manav. One, thank you very much for the compliment regarding the RIN strategy. The company continues to focus its monetization strategy by prioritizing its sales directly to the obligated parties under the renewable fuel standard. And by doing that and synchronizing the timing at which they satisfy their obligations throughout the year, the timing of the release -- the favorable release of the obligations for 2023 through 2025 couldn't have been better matched with the timing of that demand side coming from the obligated parties. So thank you. With respect to the Duke agreement, it's highly beneficial in a number of ways. One, you start to see the advancement of sort of the regulatory environment in North Carolina that is starting to acknowledge and prioritize renewable electricity credits coming from the conversion of swine waste into renewable energy. The second and equally is important for that first project that we are developing with that newly patented reactor technology is the fact that it is a fixed commodity price. Businesses, as you indicated through your comment initially, you end up at some measured degree of volatility in monetizing your attribute pricing, to be able to bolster a phenomenal project for the environment and for the diversification of our product suite to be able to do that under a fixed price contract further underpins the security or the revenue and the EBITDA streams to allow for us to continue our strategy on the floating piece of the business in the form of the timing and to who the offtakers are of our environmental attributes.

Thank you. Our next question will come from Craig Shere with Tuohy Brothers. Your line is open.

Hi, I'd like to dig in a little more on your comments around the Duke REC agreement. If I recall correctly, the swine opportunity in North Carolina was envisioned as possibly 20 projects over five years. How does this kind of, in terms of its size and chunkiness, kind of fit into that?

Craig, yeah, that's a great question. The Duke arrangement represents the first stage of not a 20-project deployment, but a deployment of up to 20 reactors. The primary focus is on the collection and the processing on a per ton basis of swine waste in and around those communities of Eastern North Carolina. The Duke arrangement allows for the first deployment of the tranche of reactors that we're continuing to optimize and increasing the throughput that will continue to create a diversity of environmental projects -- products in the form of biochar and natural gas, renewable natural gas and renewable electricity and in the RECs. And so it is an anchor arrangement that starts that monetization process and gives us a line of sight as to when the project will in turn contribute to EBITDA.

Thank you.

Thank you. One moment for our next question. We have a question from Matthew Blair with TPH. Your line is open.

Hey, Sean and Kevin, congrats on the strong results. I wanted to just dig in a little bit more on the details of the RIN monetization in Q2. I believe you said that 17.4 million RINs were monetized at the $2.16, I guess, price. Is your regular run rate on RIN generation per quarter, approximately $12 million? So just doing the math there, the 17 minus 12 times the $2.16, should we think about that extra boost in Q2 at around $10 million, maybe $11 million of EBITDA? And then as we look into Q3, it sounded like the remaining 3 million of RIN inventory were sold at $3.06, so that would be roughly a $9 million boost as we look into Q3 on top of your regular operations. Is that the right way to think about those moving parts on the RIN inventory?

Generally, Matthew, yeah, you can look at it that way. And also don't forget, you're going to have to account for the carryover RINs exiting the first quarter that would have been sold, recognizing revenues and monetized in the second quarter as well. Into the third quarter, we highlighted the D3 index price, but did make a comment that our third quarter commitments of the RINs generated and unsold in July of 2023 were at or above net index price. So generally, how you're getting to your math of contribution from RIN pricing in the second quarter and the third quarter is generally geographically aligned to what we're trying to convey.

Thank you. And our next question comes from Ryan Pfingst with B. Riley. Your line is open.

Hey guys, congrats on all the recent developments here. Kind of a higher-level question around the RVO. With it being the first time we've had a multiyear RVO, can you talk about what that might mean for the industry and how it could benefit you guys in particular as a producer?

In general, Ryan, we do not comment on pricing speculation for the attributes. But definitively, having a demand range of clarity for multiple years does and will likely shape the landscape of development opportunities, acquisition opportunities, as folks are starting to determine the level of supply that will go across the industry. We are active participants in renewable natural gas coalition and that information is routinely aggregated for EPA comment as they go through the RVO. And so there's always a mindset where we are trying to determine what that supply/demand mechanic looks like, particularly in the absence of a formal cellulosic waiver credit. But beyond that, we typically don't focus on guidance or commentary associated with what the pricing outlook could look like for those attributes in this year and beyond.

Thank you. Looks like we have a follow-up from Matthew Blair with TPH. Your line is open.

Hey, thanks for taking my follow-up. On the swine RNG efforts, you seem to be making good progress and I would say Montauk is certainly a leader in this space. Could you just talk about what's your competitive edge on swine RNG? Is it technology? Is it people? Is it relationships or maybe something else?

Sure, Matthew. As we have disclosed in previous quarters, our patented reactor technology allows for a very efficient processing of the swine waste in sort of a spoken hub type of fashion that allows for the optimal conversion of the swine waste into the various elements of biochar, renewable natural gas and renewable electricity. It is essentially an opportunity to do what traditional digestion methods do in a fraction of the time with a more compact, more reliable piece of technology and demonstrate that with folks like Duke Energy and with other folks as we look to monetize all of the commodity and attribute streams of that project. So in general, that would be our largest competitive advantage.

Thank you. We have one more follow-up from Manav Gupta with UBS. Your line is open.

Quickly on this carbon dioxide agreement with the European Energy. This is somewhat a newer concept for us. Help us understand some of the benefits of this. I understand the deliveries are starting in '26, but help us understand where this can take you and what are the real benefits of delivering this to this European Energy company? Thank you.

Sure, Manav. The opportunity for us to take a natural consequence of our operational facilities in the form of biogenic CO2 that is being destroyed in our thermal oxidizer has routinely only been available for the generation of tax credits requiring you to be able to utilize those tax credits coming out of the Inflation Reduction Act and the evolution of those credits that are also tradable, alongside of that has been the opportunity to actually monetize the CO2. And in this opportunity, partnering with an exemplary business that has been able to utilize that for the creation of E-methanol. The opportunity to look beyond this initial arrangement definitively exists across our entire portfolio and exists in the form of actual CO2 that is destroyed in our thermal oxidation process, but also exists in the form of CO2e, an avoidance that happens at projects similar to what we are doing in North Carolina, where the CO2e would be primarily focused on the generation of tax credits because the equivalent obviously cannot be sold as a commodity. All of our operating facilities are capturing and destroying carbon dioxide, which can be used as a commodity as we start to look across the portfolio. So we're very excited for this first opportunity. And again, the benefits to us, similar to the Duke arrangement that we have done in North Carolina, is bolstering the business with fixed price revenue streams and the ability to allow for a stronger, more patient ability to monetize our environmental attributes in the hands of the obligated parties and allow for that timing to unfold throughout the year.

Thank you. And I'm showing no other questions in the queue. I'd like to turn the call back over to Sean McClain for any closing remarks.

Well, thank you, and thank you all for taking the time to join us on the conference call today. We look forward to speaking with you on our 2023 third quarter conference call.

Thank you. This concludes today's conference call. You may now disconnect.