Montauk Renewables, Inc. - Quarter Report: 2022 March (Form 10-Q)

 

 

 

 

 

 

 

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule of the Exchange Act:

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).    Yes  ☐    No  ☒

The number of outstanding shares of the registrant’s common stock on , 2022 was 143,603,681 shares.

 

 

 

 

10-Q

10-Q

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of U.S. federal securities laws that involve substantial risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “assume,” “believe,” “can have,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “might,” “objective,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “would,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. For example, all statements we make relating to future results of operations, financial condition, expectations and plans of the Company, including expected benefits of the Pico amendment and the Montauk Ag project in North Carolina, the anticipated completion of the engine repairs and resumption of operations at the Security facility, the resolution of gas collection issues at the McCarty facility, our estimated and projected costs, expenditures, and growth rates, our plans and objectives for future operations, growth, or initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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We make many of our forward-looking statements based on our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

10-K.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

 

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		As of March 31, 2022				As of December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	59,794			$	53,266
Accounts and other receivables			5,578				9,338
Related party receivable			8,940				8,940
Prepaid expenses and other current assets			3,655				2,846
Assets held for sale			—				777
Total current assets		$	77,967			$	75,167
Restricted cash - non-current		$	328			$	328
Property, plant and equipment, net			178,263				180,893
Goodwill and intangible assets, net			13,898				14,113
Deferred tax assets			10,806				10,570
Non-current portion of derivative asset			368				—
Operating lease right-of-use assets			231				305
Other assets			5,121				5,104
Total assets		$	286,982			$	286,480
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,118			$	4,973
Accrued liabilities			9,351				10,823
Current portion of lease liability			225				296
Current portion of derivative liability			3,621				650
Current portion of long-term debt			7,828				7,815
Total current liabilities		$	26,143			$	24,557
Long-term debt, less current portion		$	69,427			$	71,392
Non-current portion of lease liability			25				27
Non-current portion of derivative liability			—				189
Asset retirement obligation			5,379				5,301
Other liabilities			2,587				2,721
Total liabilities		$	103,561			$	104,187
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 690,000,000 shares; 143,603,681 and 143,584,827 shares  issued at March 31, 2022   and December 31, 2021, respectively ; 141,057,772 and 141,015,213    shares outstanding at March 31, 2022   and December 31, 2021, respectively		$	1,410			$	1,410
Treasury stock, at cost, 959,344 and 950,214 shares at March 31, 2022 and December 31, 2021, respectively			(10,904	)			(10,813	)
Additional paid-in capital			198,558				196,224
Retained deficit			(5,643	)			(4,528	)
Total stockholders’ equity		$	183,421			$	182,293
Total liabilities and stockholders’ equity		$	286,982			$	286,480

		Three Months Ended March 31,
		2022				2021
Total operating revenues		$	32,169			$	31,447
Operating expenses:
Operating and maintenance expenses		$	13,201			$	10,612
General and administrative expenses			8,495				20,452
Royalties, transportation, gathering and production fuel			7,206				6,218
Depreciation, depletion and amortization			5,153				5,737
Gain on insurance proceeds			(313	)			(82	)
Impairment loss			51				626
Transaction costs			27				88
Total operating expenses		$	33,820			$	43,651
Operating loss		$	(1,651	)		$	(12,204	)
Other (income) expenses:
Interest expense		$	32			$	646
Net gain on sale of assets			(293	)			—
Other (income) expense			(17	)			33
Total other (income) expenses		$	(278	)		$	679
Loss before income taxes		$	(1,373	)		$	(12,883	)
Income tax (benefit)   expense			(258	)			1,382
Net loss		$	(1,115	)		$	(14,265	)
Loss per share:
Basic		$	(0.01	)		$	(0.10	)
Diluted		$	(0.01	)		$	(0.10	)
Weighted-average common shares outstanding:
Basic			141,045,477				141,015,213
Diluted			141,045,477				141,015,213

		Common Stock								Treasury Stock												Additional Paid-in Capital				Retained Earnings (Deficit)
		Shares				Amount				Shares				Amount				Member’s Equity												Total Equity
Balance at December 31, 2020			—			$	—				—			$	—			$	159,622			$	—			$	—			$	159,622
Effect of reorganization transactions			138,312,713				1,383				—				—				(159,622	)			158,239				—
IPO common stock			2,702,500				27				—				—				—				15,566				—				15,593
Treasury stock			—								950,214				(10,813	)			—								—				(10,813	)
Net loss			—				—				—				—				—				—				(14,265	)			(14,265	)
Stock-based compensation			—				—				—				—				—				14,598				—				14,598
Balance at March 31, 2021			141,015,213			$	1,410				950,214			$	(10,813	)		$	—			$	188,403			$	(14,265	)		$	164,735
Balance at December 31, 2021			141,015,213			$	1,410				950,214			$	(10,813	)		$	—			$	196,224			$	(4,528	)		$	182,293
Vesting of stock awards			42,559				—				—				—				—				—				—				—
Treasury stock			—				—				9,130				(91	)			—				—				—				(91	)
Net loss			—				—				—				—				—				—				(1,115	)			(1,115	)
Stock-based compensation			—				—				—				—				—				2,334				—				2,334
Balance at March 31, 2022			141,057,772			$	1,410				959,344			$	(10,904	)		$	—			$	198,558			$	(5,643	)		$	183,421

		Three Months Ended March 31,
		2022				2021
Cash flows from operating activities:
Net loss		$	(1,115	)		$	(14,265	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization			5,153				5,737
(Benefit) provision for deferred income taxes			(236	)			1,066
Stock-based compensation			2,334				14,598
Derivative mark-to-market and settlements			2,415				(418	)
Gain on property insurance proceeds			(313	)			(82	)
Accretion of asset retirement obligations			98				138
Net gain on sale of assets			(293	)			—
Amortization of debt issuance costs			108				137
Impairment loss			51				626
Changes in operating assets and liabilities:
Accounts and other receivables and other current assets			2,949				2,634
Accounts payable and other accrued expenses			(1,554	)			(2,402	)
Net cash provided by operating activities		$	9,597			$	7,769
Cash flows from investing activities:
Capital expenditures		$	(2,378	)		$	(1,335	)
Proceeds from insurance recovery			313				82
Proceeds from sale of assets			1,088				—
Net cash used in investing activities		$	(977	)		$	(1,253	)
Cash flows from financing activities:
Repayments of long-term debt		$	(2,000	)		$	(2,500	)
Proceeds from initial public offering			—				15,593
Treasury stock purchase			(91	)			(10,813	)
Related party receivable			—				(7,140	)
Net cash used in financing activities		$	(2,091	)		$	(4,860	)
Net increase in cash and cash equivalents and restricted cash		$	6,529			$	1,656
Cash and cash equivalents and restricted cash at beginning of period		$	53,612			$	21,559
Cash and cash equivalents and restricted cash at end of period		$	60,141			$	23,215
Reconciliation of cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents		$	59,794			$	22,643
Restricted cash and cash equivalents - current			19				—
Restricted cash and cash equivalents - non-current			328				572
		$	60,141			$	23,215

		Three Months Ended March 31, 2022
		Goods transferred at a point in time				Goods transferred over time				Total
Major Goods/Service Line:
Natural Gas Commodity		$	405			$	9,488			$	9,893
Natural Gas Environmental Attributes			22,710				—				22,710
Electric Commodity			—				2,385				2,385
Electric Environmental Attributes			1,649				—				1,649
		$	24,764			$	11,873			$	36,637
Operating Segment:
RNG		$	23,115			$	9,488			$	32,603
REG			1,649				2,385				4,034
		$	24,764			$	11,873			$	36,637

		Three Months Ended March 31, 2021
		Goods transferred at a point in time				Goods transferred over time				Total
Major Goods/Service Line:
Natural Gas Commodity		$	3,976			$	6,695			$	10,671
Natural Gas Environmental Attributes			17,452				—				17,452
Electric Commodity			—				2,273				2,273
Electric Environmental Attributes			1,051				—				1,051
		$	22,479			$	8,968			$	31,447
Operating Segment:
RNG		$	21,428			$	6,695			$	28,123
REG			1,051				2,273				3,324
		$	22,479			$	8,968			$	31,447

		March 31, 2022				December, 31 2021
Accounts receivables		$	5,518			$	9,281
Other receivables			35				26
Reimbursable expenses			25				31
Accounts and other receivables		$	5,578			$	9,338

		March 31, 2022				December, 31 2021
Land		$	595			$	595
Buildings and improvements			28,967				28,693
Machinery and equipment			247,667				246,670
Gas mineral rights			34,551				34,551
Construction work in progress			12,698				12,725
Total			324,478				323,234
Less: Accumulated depreciation and amortization			(146,215	)			(142,341	)
Property, plant & equipment, net		$	178,263			$	180,893

		March 31, 2022				December 31, 2021
Goodwill		$	60			$	60
Intangible assets with indefinite lives:
Land use rights			329				329
Intangible assets with finite lives:
Interconnection, net of accumulated amortization of $3,241 and $3,034		$	12,320			$	12,526
Customer contracts, net of accumulated amortization of $17,094 and $17,085		$	1,189			$	1,198
Total intangible assets with finite lives:		$	13,509			$	13,724
Total Goodwill and Intangible assets		$	13,898			$	14,113

		Three Months Ended March 31, 2022				Year Ended December 31, 2021
Asset retirement obligations - beginning of period		$	5,301			$	5,689
Accretion expense			98				(160	)
Decommissioning			(20	)			(228	)
Asset retirement obligations - end of period		$	5,379			$	5,301

						Three Months Ended
Derivative Instrument		Location				March 31, 2022				March 31, 2021
Commodity contracts:
Realized natural gas			Gas commodity sales			$	(1,016	)		$	—
Unrealized natural gas			Other income				(3,451	)			—
Interest rate swaps			Interest expense				1,036				418
Net gain (loss)						$	(3,431	)		$	418

		March 31, 2022
		Level 1				Level 2				Level 3				Total
Commodity derivative liability		$	(3,451	)			—				—			$	(3,451	)
Interest rate swap derivative asset			—				368				—				368
Interest rate swap derivative liability			—				(170	)		$	—			$	(170	)
Asset retirement obligations			—				—				(5,379	)			(5,379	)
Earn-out liability			—				—				(2,721	)			(2,721	)
		$	(3,451	)		$	198			$	(8,100	)		$	(11,353	)

		December 31, 2021
		Level 1				Level 2				Level 3				Total
Interest rate swap derivative liability		$	—			$	(839	)		$	—			$	(839	)
Asset retirement obligations			—				—				(5,301	)			(5,301	)
Earn-out liability			—				—				(2,721	)			(2,721	)
		$	—			$	(839	)		$	(8,022	)		$	(8,861	)

		March 31, 2022				December 31, 2021
Accrued expenses		$	4,042			$	3,551
Payroll and related benefits			1,340				1,239
Royalty			2,458				4,630
Utility			1,152				1,274
Other			359				129
Accrued liabilities		$	9,351			$	10,823

		March 31, 2022				December 31, 2021
Term Loans		$	78,000			$	80,000
Less: current principal maturities			(8,000	)			(8,000	)
Less: debt issuance costs (on long-term debt)			(573	)			(608	)
Long-term Debt		$	69,427			$	71,392
Current Portion of Long- term Debt			7,828				7,815
		$	77,255			$	79,207

		Three Months Ended
		March 31, 2022				March 31, 2021
(Benefit) expense provision for income taxes		$	(258	)		$	1,382
Effective tax rate			18.8	%			(10.7	)%

		Grant Date
Risk-free interest rate			0.5	%
Expected volatility			32.0	%
Expected option life (in years)			5.5
Grant-date fair value		$	3.44

		Restricted Shares								Restricted Stock Units								Options
		Number of Shares				Weighted Average Grant Date Fair Value				Number of   Shares				Weighted Average Grant Date Fair Value				Number of Shares				Weighted Average Exercise Price
End of period - December 31, 2021			2,569,613			$	10.08				377,984			$	10.23				950,214			$	11.38
Beginning of period - January 1, 2022			2,569,613			$	10.08				377,984			$	10.23				950,214			$	11.38
Granted
Vested			(23,705	)			11.38				(27,984	)			11.38				(950,214	)			11.38
Forfeited			—				—												—				—
Exercised																			—				—
End of period - March 31, 2022			2,545,908			$	10.07				350,000			$	10.13				—			$	—

		Restricted Shares								Restricted Stock Units								Options
		Number of Shares				Weighted Average Grant Date Fair Value				Number of Shares				Weighted Average Grant Date Fair Value				Number of Shares				Weighted Average Exercise Price
End of period - December 31, 2020			—			$	—				—			$	—				—			$	—
Beginning of period - January 1, 2021			—			$	—				—			$	—				—			$	—
Granted			2,092,836				11.38				29,568				11.38				950,214				11.38
Vested			(950,214	)			11.38				—				—				—				—
Forfeited			—				—				(792	)			11.38				—				—
Exercised			—				—				—				—				—				—
End of period – March 31, 2021			1,142,622			$	11.38				28,776			$	11.38				950,214			$	11.38

		Three Months Ended March 31, 2022
		RNG				REG				Corporate				Total
Net Income (loss)		$	12,940			$	(1,178	)		$	(12,877	)		$	(1,115	)
Depreciation and amortization			3,680				1,392				81				5,153
Interest expense			—				—				32				32
Income tax benefit			—				—				(258	)			(258	)
EBITDA		$	16,620			$	214			$	(13,022	)		$	3,812
Impairment loss			—				—				51				51
Net gain on sale of assets			(293	)											(293	)
Transaction costs			—				—				27				27
Non cash hedging charges			—				—				3,451				3,451
Adjusted EBITDA		$	16,327			$	214			$	(9,493	)		$	7,048

		Three Months Ended March 31, 2021
		RNG				REG				Corporate				Total
Total Revenue		$	28,123			$	3,324			$	—			$	31,447
Net Income (Loss)			10,561				(2,241	)			(22,585	)			(14,265	)
EBITDA			14,779				(765	)			(20,514	)			(6,500	)
Adjusted EBITDA (1)			14,779				(139	)			(20,426	)			(5,786	)
Total Assets			157,436				50,156				45,770				253,362
Capital Expenditure			1,306				23				6				1,335

		Three Months Ended March 31, 2021
		RNG				REG				Corporate				Total
Net Income (loss)		$	10,561			$	(2,241	)		$	(22,585	)		$	(14,265	)
Depreciation and amortization			4,218				1,474				45				5,737
Interest expense			—				—				646				646
Income tax expense			—				2				1,380				1,382
EBITDA		$	14,779			$	(765	)		$	(20,514	)		$	(6,500	)
Impairment loss			—				626				—				626
Transaction costs			—				—				88				88
Adjusted EBITDA		$	14,779			$	(139	)		$	(20,426	)		$	(5,786	)

		Three Months Ended March 31, 2022
		RNG				REG				Corporate				Total
Customer A			24.3	%			—				—				24.3	%
Customer B			16.1	%			—				—				16.1	%
Customer C							11.2	%			—				11.2	%
Customer D			10.6	%			—				—				10.6	%
Customer E			10.3	%											10.3	%

		Three Months Ended March 31, 2021
		RNG				REG				Corporate				Total
Customer A			26.2	%			—				—				26.2	%
Customer B			13.1	%			—				—				13.1	%
Customer C			11.0	%			—				—				11.0	%
Customer D			10.0	%											10.0	%