Montauk Renewables Inc

Previous wording

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A.–Risk Factors” of our 2023 Annual Report and elsewhere in this report.

Current wording

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A.–Risk Factors” of our 2023 Annual Report, our Form 10-Q for the period ending March, 31 2024 and elsewhere in this report.

Previous wording

Our profitability is highly dependent on the market price of Environmental Attributes, including the market price for RINs. As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. We made a strategic determination to not transfer all available D3 RINs generated and available for transfer during the first quarter of 2024. As a result, we have approximately 3,351 RINs in inventory from 2024 RNG production but we sold all of our RINs generated and available for sale from our 2023 RNG production in the first quarter of 2024. We have not entered into commitments to transfer these RINs from 2024 production in inventory nor have we entered into agreements to transfer future RINs generated from forecasted future production. The average D3 RIN index price for the first quarter of 2024 was approximately $3.12.

Current wording

Our profitability is highly dependent on the market price of Environmental Attributes, including the market price for RINs. As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. We made a strategic decision to not transfer all available D3 RINs generated and available for transfer during the second quarter of 2024. As a result, we had approximately 4,707 RINs in inventory from 2024 second quarter RNG production. We have since entered into commitments to transfer all of these RINs during the third quarter of 2024, at an average realized price of approximately $3.32, higher than the D3 RIN index price for the second quarter of 2024 of $3.20. We have also entered into commitments to transfer approximately 44.1% of our third quarter RNG production with an average realized RIN price of approximately $3.33.

Previous wording

The following summarizes our ongoing development growth plans expected capacity contribution, anticipated commencement of operations, and capital expenditure estimate, respectively excluding Montauk Ag Renewables Development Project:

Current wording

The following summarizes our ongoing development growth plans expected capacity contribution, anticipated commencement of operations, and capital expenditure estimate, respectively excluding the Montauk Ag Renewables Development Project:

Previous wording

During the first quarter of 2024, we successfully commissioned the last expansion of our digestion capacity which is necessary to process the final tranche of anticipated increased feedstock expected to be received in 2025. However, we are processing all current feedstock and continue to expect to ramp up production through the second quarter of 2024. With the increased digestion capacity, we produced approximately 39% more MMBtu during the first quarter of 2024 as compared to the first quarter of 2023. We still anticipate that our dairy host will deliver the final increase in feedstock volumes in 2025, at which point we will make the final contractual payment to the dairy host.

Current wording

During the first quarter of 2024, we successfully commissioned the last expansion of our digestion capacity which is necessary to process the final tranche of anticipated increased feedstock expected to be received in 2025. We are processing all available feedstock and expect to continue our optimization of our total digestion processing capacity through 2024. With the increased digestion capacity, we produced approximately 39% more MMBtu during the first half of 2024 as compared to the first half of 2023. We still anticipate that our dairy host will deliver the final increase in feedstock volumes in 2025, at which point we will make the final contractual payment to the dairy host.

Previous wording

In 2022, we announced the planned construction of a second RNG processing facility at the Apex landfill. Currently, the landfill host is providing biogas feedstock in excess of our existing processing capacity, therefore triggering the addition of a second facility based on our existing fuel supply agreement. As the landfill host continues to increase waste intake, we believe that the additional 2,100 MMBtu per day of production capacity will allow us to process the currently forecasted increase in biogas feedstock volumes. While the landfill host continues to increase waste intake, we expect there could be a period where we have excess available capacity after the second facility is commissioned. We continue to incur capital expenditures for this project and currently expect commercial operations in the first quarter of 2025. We do not expect a material operational production impact in 2024 based on the commissioning of the second facility.

Current wording

In 2022, we announced the planned construction of a second RNG processing facility at the Apex landfill. The construction of a second facility under our existing fuel supply agreement was triggered by biogas feedstock volumes exceeding production capabilities and discussions with the landfill host waste intake forecasted projections. As the landfill host continues to increase waste intake, we believe that the additional 2,100 MMBtu per day of production capacity will allow us to process the currently forecasted increase in biogas feedstock volumes. While the landfill host continues to increase waste intake, we expect there could be a period where we have excess available capacity after the second facility is commissioned. We continue to incur capital expenditures for this project and currently expect commercial operations in the second quarter of 2025. We do not expect a material operational production impact in 2024 based on the commissioning of the second facility.

Previous wording

In 2023, we announced the planned entrance into South Carolina with the development of a new landfill gas-to-RNG facility. The planned project is expected to contribute approximately 900 MMBtu per day of production capacity upon commissioning. We continue to design and plan for the development and location of the facility as we continue to incur capital expenditures. We continue to review various alternatives related to interconnection opportunities as part of our considerations for offtake options with the understanding those alternatives may differ from initial development project assumptions. We expect the utility interconnection initially included in our development assumptions to accept the production from this facility but will require other upgrades not impacting our interconnection. However, these upgrades have delayed our expectation of commissioning of the facility into 2026. Our pace of capital deployment for this project will match the expected timing related to the utility interconnection.

Current wording

In 2023, we announced the planned entrance into South Carolina with the development of a new landfill gas-to-RNG facility. The planned project is expected to contribute approximately 900 MMBtu per day of production capacity upon commissioning. We continue to review various alternatives related to interconnection opportunities as part of our considerations for offtake options with the understanding those alternatives may differ from initial development project assumptions. We expect the utility interconnection initially included in our development assumptions to accept the production from this facility but will require other upgrades for their system to accommodate our interconnection. These utility upgrades do not directly impact our interconnection project but have delayed our commissioning expectation of the facility in 2026. Our pace of capital deployment for this project will match the expected timing related to the utility interconnection but do not expect to incur significant capital expenditures on this project through the rest of 2024.

Previous wording

In 2023, we announced a planned development of a renewable natural gas landfill project in Irvine, CA at the Frank R. Bowerman Landfill. The project is anticipated to process the large and growing volumes of biogas in excess of the existing capacity of the REG facility. We continue to target commissioning in 2026, we continue to expect the capital investment to range between $85,000 - $95,000, which is anticipated to have production nameplate capacity of approximately 3,600 MMBtu per day, assuming currently forecasted biogas feedstock volumes that are projected to be available from the host landfill at the time of commissioning. We continue to incur capital expenditures for this project.

Current wording

In 2023, we announced a planned development of a renewable natural gas landfill project in Irvine, CA at the Frank R. Bowerman Landfill. The project is anticipated to process the large and growing volumes of biogas in excess of the existing capacity of the REG facility. We continue to target commissioning in 2026 and expect the capital investment to range between $85,000 - $95,000. The project is anticipated to have production nameplate capacity of approximately 3,600 MMBtu per day, assuming currently forecasted biogas feedstock volumes that are projected to be available from the host landfill at the time of commissioning. We continue to incur capital expenditures for this project.

Previous wording

In February 2024, we signed a contract for the delivery of 140 thousand tons per year of biogenic carbon dioxide (“CO2”) from our four Texas facilities. We intend to capture, clean and liquefy CO2 at select Texas facilities, at which point it will be transported to EE North America (“EENA”), a Texas-based e-methanol facility. The delivery term is expected to last at least 15 years and we continue to expect first delivery to begin in 2027. We continue to anticipate commissioning to begin in 2027 and we continue to expect the capital investment to be approximately $15,000 per facility with anticipating spend beginning second half of 2024, though we have not yet committed capital to this project.

Current wording

EE North America's (“EENA”), Texas-based e-methanol facility. The delivery term is expected to last at least 15 years and we continue to expect delivery to begin in 2027. During the second quarter of 2024, we completed initial site surveys related to locating the CO2 processing equipment and received the first site plans from EENA. We continue to anticipate commissioning to begin in 2027 and we continue to expect the capital investment to be approximately $15,000 per facility with anticipating spend beginning in the second half of 2024, although we have not yet committed capital to this project.

Previous wording

In 2021, through a wholly-owned subsidiary Montauk Ag Renewables, we completed an asset purchase related to developing technology to recover residual natural resources from the waste streams of modern agriculture and to refine and recycle such waste products through proprietary and other processes in order to produce high quality renewable natural gas to generate electricity, North Carolina swine RECs, and micronutrient organic fertilizer alternatives (the “Montauk Ag Renewables Acquisition”).

Current wording

In 2021, through a wholly-owned subsidiary Montauk Ag Renewables, we completed an asset purchase related to developing technology to recover residual natural resources from the waste streams of modern agriculture and to refine and recycle such waste products through proprietary and other processes in order to produce high quality renewable natural gas to generate renewable electricity, to generate North Carolina swine RECs, and to produce micronutrient organic fertilizer alternatives (the “Montauk Ag Renewables Acquisition”).

Previous wording

We continue to engage with regulatory agencies in North Carolina to confirm that power generation from swine waste will be eligible for Renewable Energy Credits under North Carolina’s Renewable Energy Portfolio Standards in anticipation of commercial production. In early 2024, we received notification from the North Carolina Utilities Commission that the Turkey, NC location was approved for a New Renewables Energy Facility ("NREF") designation and Certificate of Public Convenience and Necessity. In the first quarter of 2024, we submitted an amendment to our NREF application and expect a decision on the NREF designation in 2024. Obtaining this designation could have an impact on the timing of utility infrastructure at the location. We signed a receipt interconnection agreement with Piedmont Natural Gas for the Turkey, NC location. This agreement is structured to coincide with the development timeline at the Turkey, NC location.

Current wording

We continue to engage with regulatory agencies in North Carolina to confirm the means and methods of power generation from swine waste which will be eligible for Renewable Energy Credits under North Carolina’s Renewable Energy Portfolio Standards in anticipation of commercial production. In early 2024, we received notification from the North Carolina Utilities Commission that the Turkey, NC location was approved for a New Renewables Energy Facility ("NREF") designation and Certificate of Public Convenience and Necessity. In the first quarter of 2024, we submitted an amendment to our NREF application and the public staff of the North Carolina Utilities Commission ("NCUC") deemed our amendment complete and in August 2024 we received notice from the NCUC that our NREF amendment application was approved. While this approval is a critical path item in the timing of the utility infrastructure design and other balance-of-plant componentry at our Turkey, NC facility, we continue to work through the regulatory process and with utility providers to confirm the means and methods of power generation from swine waste in NC. We signed a receipt interconnection agreement with Piedmont Natural Gas for the Turkey, NC location. This agreement is structured to coincide with the development timeline at the Turkey, NC location.

Previous wording

In connection with the build-out of the Turkey, NC processing facility, we believe that we have substantially completed the engineering of the reactors to be installed. We have placed orders for significant components related to the construction of the reactors, certain electrical componentry, and expect to enter into an engineering, procurement, and construction contract during the second quarter of 2024 to enable us to meet our commissioning schedule.

Current wording

In connection with the build-out of the Turkey, NC processing facility, we have substantially completed the engineering of the reactors to be installed. We have placed orders for significant components related to the construction of the reactors, certain electrical componentry, and expect to enter into an engineering, procurement, and construction contract during the last quarter of 2024 to enable us to meet our commissioning schedule.

Previous wording

We expect to have the first of the eight processing lines operational in the second quarter of 2024 and, we are currently planning for a rolling commissioning schedule for the remaining processing lines beginning in the second half of 2024 through the second half of 2025. We expect to begin generating revenues in 2025 and have sufficient capacity to satisfy the Duke REC agreement upon final commissioning during the second half of 2025.

Current wording

During the second quarter of 2024, we commissioned the pilot reactor we relocated from Magnolia, NC to our Turkey, NC processing facility. We do not expect this reactor to be operating commercially during 2024, but it will be operated to allow various data collection and testing activities to occur. In connection with the hog space cycle times with our feedstock supply partners, we expect to use this first reactor to test and refine feedstock conveyance, equipment processing, product gas composition, and the composition of the solid output. Though this relocated reactor was previously operated prior to the 2021 Montauk Ag Renewables Acquisition, we plan to use this commissioning process to test the improvements made to the reactor. We are also continuing to staff the Turkey, NC location. We continue to plan for a rolling commissioning schedule for the remaining processing lines through the second half of 2025. We expect to begin generating revenues in 2025 and have sufficient capacity to satisfy the Duke REC agreement after final commissioning during the second half of 2025.

Previous wording

In April 2024, we signed our second feedstock supply agreement which includes our ability to access more than twice the hog spaces we are currently contracted for at our future discretion. When added to the first feedstock supply agreement signed in December 2023, we believe we are on pace to target the 120 thousand hog spaces which will provide sufficient feedstock under our Duke Energy REC agreement signed in July 2023. We also believe these agreements are strategic because they will allow us to bring additional hog spaces under contract as we commission our first phase of development for Montauk Ag Renewables.

Current wording

We believe we are on pace to secure approximately up to 200 thousand hog spaces which will provide sufficient feedstock under our Duke Energy REC agreement signed in July 2023. We also believe these agreements are strategic because they will allow us to bring additional hog spaces under contract as we commission our first phase of development for Montauk Ag Renewables.

Previous wording

These feedstock supply agreements have allowed us to continue to refine our expected feedstock collection process. This process will involve installing equipment on the farms under agreements to collect feedstock and process the waste through multiple phases of solids concentration at both the farm and our Turkey, NC location.

Current wording

These feedstock supply agreements have allowed us to continue to refine our expected feedstock collection process. This process will involve installing equipment on the farms under agreements, collect feedstock and process the waste through multiple phases of solids concentration at both the farm and our Turkey, NC location. During the second quarter of 2024, we have completed the majority of the installation of collection process equipment on two farms for which we have feedstock agreements.

Previous wording

Impact of Higher Selling, General and Administrative Expenses Prior to the Commencement of a Project’s Operation: We incur significant expenses in the development of new RNG projects. Further, the receipt of RINs is delayed, and typically does not commence for a period of four to six months after the commencement of injecting RNG into a pipeline, pending final registration approval of the project by the EPA and then the subsequent completion of a third party quality assurance plan certification. During such time, the RNG is either physically or theoretically stored and later withdrawn from storage to allow for the generation of RINs. Under the Biogas Regulatory Reform Rule, effective July 1, 2024, storage of RNG for future RIN generation prior to receiving EPA registration will not be permitted.

Current wording

Impact of Higher Selling, General and Administrative Expenses Prior to the Commencement of a Project’s Operation: We incur significant expenses in the development of new RNG projects. Under the Biogas Regulatory Reform Rule, effective July 1, 2024, theoretical storage of RNG for future RIN generation prior to receiving EPA registration is no longer permitted and the receipt of RINs will no longer be delayed after injecting RNG into a pipeline. We expect the elimination of theoretical storage, when combined with more timely EPA registration, to not materially impact the commencement of RIN revenue generation after pipeline injection.

Previous wording

We report revenues from two operating segments: Renewable Natural Gas and Renewable Electricity Generation. Corporate relates to additional discrete financial information for the corporate function; primarily used as a shared service center for maintaining functions such as executive, accounting, treasury, legal, human resources, tax, environmental, engineering, and other operations functions not otherwise allocated to a segment. As such, the corporate entity is not determined to be an operating segment but is discretely disclosed for purposes of reconciliation to the Company’s consolidated financial statements.

Current wording

We report revenues from two operating segments: Renewable Natural Gas and Renewable Electricity Generation. Corporate relates to additional discrete financial information for the corporate function; primarily used as a shared service center for maintaining functions such as executive, accounting, treasury, legal, human resources, tax, environmental, engineering, and other operations functions not otherwise allocated to a segment. As such, the Corporate segment is not determined to be an operating segment but is discretely disclosed for purposes of reconciliation to the Company’s consolidated financial statements.

Previous wording

Renewable Natural Gas Revenues: We record revenues from the production and sale of RNG and the generation and sale of the Environmental Attributes derived from RNG, such as RINs and LCFS credits. Our RNG revenues from Environmental Attributes are recorded net of a portion of Environmental Attributes shared with off-take counterparties as consideration for such counterparties using the RNG as a transportation fuel. We have certain pathway provider sharing arrangements expiring throughout 2024. If we are unable to renew these arrangements based on our historical counterparty share percentages, our ability to monetize RINs from RNG may be impacted. We monetize a portion of our RNG production under fixed-price agreements which provide floor prices in excess of commodity indices.

Current wording

Renewable Natural Gas Revenues: We record revenues from the production and sale of RNG and the generation and sale of the Environmental Attributes derived from RNG, such as RINs and LCFS credits. Our RNG revenues from Environmental Attributes are recorded net of a portion of Environmental Attributes shared with off-take counterparties as consideration for such counterparties using the RNG as a transportation fuel. We have certain pathway provider sharing arrangements expiring throughout 2024. While we have not experienced a significant increase in Environmental Attributes shared with pathway providers related to our current renewals, our current pathway renewals have been at higher percentages that our historical counterparty share percentages. If these pathway share percentages continue to increase over our historical counterparty share percentages, we will consider monetizing a larger portion of our RNG through fixed-price contracts to mitigate this impact. We monetize a portion of our RNG production under fixed-price agreements which provide floor prices in excess of commodity indices.

Previous wording

Though we collaborate with the landfill host at our Rumpke facility on our gas collection efforts wellfield extraction environmental factors have impacted gas extraction at the site. While the site continues to expand its waste intake and we continue to expand wellfield collection, our volumes could be impacted throughout 2024. Mitigation efforts related to wellfield environmental factors will continue through 2024.

Current wording

Though we collaborate with the landfill host at our Rumpke facility on our gas collection efforts wellfield extraction environmental factors have impacted gas extraction at the site. While the site continues to expand its waste intake and we continue to expand wellfield collection, our volumes have been impacted throughout 2024. Mitigation efforts related to wellfield environmental factors will continue through 2024.

Previous wording

The landfill host at our McCarty facility recently changed its wellfield collection system which has contributed to elevated nitrogen in the feedstock received by our facility. Additionally, the landfill host modified the wellfield bifurcation approach which has impacted the quantity of feedstock received at the facility. We are working with the landfill host but continue to have lower volumes of feedstock available to be processed at the McCarty facility.

Current wording

The landfill host at our McCarty facility changed its wellfield collection system which has contributed to elevated nitrogen in the feedstock received by our facility. Additionally, the landfill host modified the wellfield bifurcation approach which has impacted the quantity of feedstock received at the facility. We are working with the landfill host but continue to have lower volumes of feedstock available to be processed at the McCarty facility.

Previous wording

The sale of RINs, which is subject to market price fluctuations, accounts for a substantial portion of our revenues. We manage against the risk of these fluctuations through forward sales of RINs, although currently we only sell RINs in the calendar year they are generated. We have not entered into commitments to transfer significant RINs generated from 2024 production. Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments.

Current wording

The sale of RINs, which is subject to market price fluctuations, accounts for a substantial portion of our revenues. We manage against the risk of these fluctuations through forward sales of RINs, with heavy emphasis on direct sales to obligated parties. Realized prices for Environmental Attributes monetized in a year may not correspond directly to index prices due to the forward selling of commitments.

Previous wording

Project Operating and Maintenance Expenses: Operating and maintenance expenses primarily consist of expenses related to the collection and processing of biogas, including biogas collection system operating and maintenance expenses, biogas processing, operating and maintenance expenses, and related labor and overhead expenses. At the project level, this includes all labor and benefit costs, ongoing corrective and proactive maintenance, project level utility charges, rent, health and safety, employee communication, and other general project level expenses. Unanticipated feedstock processing or gas conditioning equipment failures occurring outside our planned preventative maintenance program can increase project operating and maintenance expenses and reduce production volumes.

Current wording

Project Operating and Maintenance Expenses: Operating and maintenance expenses primarily consist of expenses related to the collection and processing of biogas, including biogas collection system operating and maintenance expenses, biogas processing, operating and maintenance expenses, and related labor and overhead expenses. At the project level, this includes all labor and benefit costs, ongoing corrective and proactive maintenance, project level utility charges, rent, health and safety, employee communication, and other general project level expenses. Unanticipated feedstock processing or gas conditioning equipment failures occurring outside our planned preventative maintenance program can increase project operating and maintenance expenses and reduce production volumes. The timing of gas conditioning and process equipment preventative maintenance intervals could impact the timing and amount of our operating and maintenance expenses within a given quarter.

Previous wording

General and Administrative Expenses: General and administrative expenses primarily consist of corporate expenses and unallocated support functions for our operating facilities, including personnel costs for executive, finance, accounting, investor relations, legal, human resources, operations, engineering, environmental registration and reporting, health and safety, IT and other administrative personnel and professional fees and general corporate expenses. From time to time, we may be parties to legal proceedings arising in the normal course of business which could increase our legal expenses. We expect increased general and administrative expenses associated with our ongoing development of Montauk Ag Renewables in 2024. We also expect increased general and administrative expenses associated with share-based compensation related to the board of directors approval of grants of stock options to the executives of the Company in 2023. The Company accounts for share-based compensation related to grants made through its equity and incentive compensation plan under FASB ASC 718. For more information, see Note 14 to our unaudited condensed consolidated financial statements related to share-based compensation.

Current wording

General and Administrative Expenses: General and administrative expenses primarily consist of corporate expenses and unallocated support functions for our operating facilities, including personnel costs for executive, finance, accounting, investor relations, legal, human resources, operations, engineering, environmental registration and reporting, health and safety, IT and other administrative personnel and professional fees and general corporate expenses. From time to time, we may be parties to legal proceedings arising in the normal course of business which could increase our legal expenses. We expect increased general and administrative expenses associated with our ongoing development of Montauk Ag Renewables in 2024. We also expect continued general and administrative expenses associated with share-based compensation related to the board of directors approval of grants of stock options to the executives of the Company in 2023. In August 2024, we accelerated the vesting of certain restricted share awards to non-executives which were unvested as of June 30, 2024 as a result of the termination of an employee. We recognized $2,911 of non-cash stock compensation expense within general and administration expenses which will not be recurring. We account for share-based compensation related to grants made through its equity and incentive compensation plan under FASB ASC 718. For more information, see Note 14 to our unaudited condensed consolidated financial statements related to share-based compensation.

Previous wording

The following table summarizes the key operating metrics described above, which metrics we use to measure performance.

Current wording

The following table summarizes the key operating metrics described above, which are metrics we use to measure performance.

Previous wording

Total revenues in the first quarter of 2024 were $38,787 an increase of $19,633 (102.5%) compared to $19,154 in the first quarter of 2023. The increase is primarily related to an increase in self-monetized RINs in the first quarter of 2024 compared to the first quarter of 2023 as a result of our strategic decision in the first quarter of 2023 to not self market a significant amount of RINs from 2023 RNG production due to our belief that first quarter of 2023 D3 RIN index volatility was temporary. Of the 7,889 RINs sold in the first quarter of 2024, 4,000 RINs were related to 2024 RNG production. Also contributing to the increase is an increase in Realized RIN pricing of approximately 61.7% during the first quarter of 2024 compared to the first quarter of 2023.

Current wording

Total revenues in the second quarter of 2024 were $43,338 a decrease of $9,918 (18.6%) compared to $53,256 in the second quarter of 2023. The decrease is primarily related to a strategic decision in the second quarter of 2024 to not self-market a significant amount of RINs from 2024 RNG production due to the volatility in the second quarter of 2024 D3 RIN index. As of June 30, 2024, our RINs in inventory have been committed and sold at pricing above the average index for D3 RINs in the second quarter of 2024. The decrease is partially offset by an increase in realized RIN pricing of approximately 44.4% during the second quarter of 2024 compared to the second quarter of 2023.

Previous wording

Revenues from the Renewable Natural Gas segment in the first quarter of 2024 were $33,988, an increase of $19,203 (129.9%) compared to $14,785 in the first quarter of 2023. Average commodity pricing for natural gas for the first quarter of 2024 was $2.24 per MMBtu, 34.5% lower than the first quarter of 2023. During the first quarter of 2024, we self-monetized 7,889 RINs, representing a 4,940 increase (167.5%) compared to 2,949 in the first quarter of 2023. Average pricing realized on RIN sales during the first quarter of 2024 was $3.25 as compared to $2.01 in the first quarter of 2023, an increase of 61.7%. This compares to the average D3 RIN index price for the first quarter of 2024 of $3.12 as compared to $2.03 in the first quarter of 2023, an increase of approximately 53.7%. At March 31, 2024, we had approximately 384 MMBtu available for RIN generation and we had approximately 3,351 RINs generated and unsold. At March 31, 2023, we had approximately 418 MMBtu available for RIN generation and 8,266 RINs generated and unsold.

Current wording

Revenues from the Renewable Natural Gas segment in the second quarter of 2024 were $38,838, a decrease of $9,771 (20.1%) compared to $48,609 in the second quarter of 2023. Average commodity pricing for natural gas for the second quarter of 2024 was $1.89 per MMBtu, 10.0% lower than the second quarter of 2023. During the second quarter of 2024, we self-monetized 10,000 RINs, representing a 7,441 decrease (42.7%) compared to 17,441 in the second quarter of 2023. Average pricing realized on RIN sales during the second quarter of 2024 was $3.12 as compared to $2.16 in the second quarter of 2023, an increase of 44.4%. This compares to the average D3 RIN index price for the second quarter of 2024 of $3.20 as compared to $2.16 in the second quarter of 2023, an increase of approximately 48.1%. At June 30, 2024, we had approximately 357 MMBtu available for RIN generation and we had approximately 4,707 RINs generated and unsold. At June 30, 2023, we had approximately 367 MMBtu available for RIN generation and 2,966 RINs generated and unsold.

Previous wording

In the first quarter of 2024, 100.0% of Renewable Electricity Generation segment revenues were derived from the monetization of Renewable Electricity at fixed prices associated with underlying PPAs, as compared to 99.8% in the first quarter of 2023. This provides us with certainty of price resulting from our Renewable Electricity sites.

Current wording

In the second quarter of 2024, 100.0% of Renewable Electricity Generation segment revenues were derived from the monetization of Renewable Electricity at fixed prices associated with underlying PPAs, as compared to 100.0% in the second quarter of 2023. This provides us with certainty of price resulting from our Renewable Electricity sites.

Previous wording

Operating and maintenance expenses for our Renewable Electricity facilities in the first quarter of 2024 were $2,292, a decrease of $569 (19.9%) compared to $2,861 in the first quarter of 2023. Our Bowerman facility operating and maintenance expenses decreased approximately $298 which was primarily driven by the timing of annual original equipment manufacturer preventative maintenance expenses. Our Security facility operating and maintenance expenses decreased approximately $303 which was driven by the nonrecurring reversal of our asset retirement obligation liability related to the sale of the site.

Current wording

Operating and maintenance expenses for our Renewable Electricity facilities in the second quarter of 2024 were $4,717, an increase of $1,281 (37.3%) compared to $3,436 in the second quarter of 2023. Our Bowerman facility operating and maintenance expenses increased approximately $932 which was primarily driven by the timing of annual original equipment manufacturer preventative maintenance expenses, which are non-linear period over period. Our Tulsa facility operating and maintenance expenses increased approximately $410 which was driven by wellfield collection enhancements.

Previous wording

Royalties, transportation, gathering and production fuel expenses for our Renewable Electricity facilities for the first quarter of 2024 were $521, an increase of $54 (11.6%) compared to $467 in the first quarter of 2023. As a percentage of Renewable Electricity Generation segment revenues, royalties, transportation, gathering and production fuel expenses increased to 10.9% from 10.7%.

Current wording

Royalties, transportation, gathering and production fuel expenses for our Renewable Electricity facilities for the second quarter of 2024 were $508, an increase of $18 (3.7%) compared to $490 in the second quarter of 2023. As a percentage of Renewable Electricity Generation segment revenues, royalties, transportation, gathering and production fuel expenses increased to 11.3% from 10.6%.

Previous wording

Depreciation and amortization in the first quarter of 2024 was $5,434, an increase of $238 (4.6%) compared to $5,196 in the first quarter of 2023. The increase is associated with timing of capital investment placed into service in the fourth quarter of 2023 compared to the fourth quarter of 2022.

Current wording

Depreciation and amortization in the second quarter of 2024 was $5,823, an increase of $572 (10.9%) compared to $5,251 in the second quarter of 2023. The increase is associated with timing of capital investment placed into service related to our Pico Digestion Capacity Increase project.

Previous wording

The effective tax rate of 18.2% for the three months ended March 31, 2024 was lower than the rate for the three months ended March 31, 2023 of 76.1% primarily due to the increase in pre-tax income for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Current wording

The effective tax rate of (93.5)% for the three months ended June 30, 2024 was higher than the rate for the three months ended June 30, 2023 of 92.2% primarily due to discrete events related to the vesting of restricted stock grants on stock compensation as compared to the year to date pre-tax book income.

Previous wording

We produced 1,411 MMBtu of RNG during the first quarter of 2024, an increase of 59 MMBtu (4.4%) over the 1,352 MMBtu produced in the first quarter of 2023. Our Coastal facility produced 38 MMBtu more in the first quarter of 2024 compared to the first quarter of 2023 as a result of plant processing equipment improvements and wellfield operational enhancements. Our McCarty facility produced 24 MMBtu more in the first quarter of 2024 as compared to the first quarter of 2023 as a result of wellfield enhancements by our landfill host. Our Galveston facility produced 19 MMBtu more in the first quarter of 2024 compared to the first quarter of 2023 as a result of a temporary reduction of feedstock inlet during modifications to process equipment in the first quarter of 2023. Our Pico facility produced 9 MMBtu more in the first quarter of 2024 compared to the first quarter of 2023 as a result of commissioning our dairy digestion expansion project. Offsetting the improvements was our Rumpke facility which produced 55 MMBtu less in the first quarter of 2024 compared to the first quarter of 2023 as a result of a process equipment failure that occurred during the first quarter of 2024.

Current wording

We produced 2,794 MMBtu of RNG during the first six months of 2024, an increase of 11 MMBtu (0.4%) over the 2,783 MMBtu produced in the first six months of 2023. Our Coastal facility produced 82 MMBtu more in the first six months of 2024 compared to the first six months of 2023 as a result of plant processing equipment improvements and wellfield operational enhancements. Our Pico facility produced 22 MMBtu more in the first six months of 2024 compared to the first six months of 2023 as a result of commissioning our dairy digestion expansion project. Our Raeger facility produced 18 MMBtu more in the first six months of 2024 compared to the first six months of 2023 as a result of plant processing equipment improvements. Offsetting these increases was our Rumpke facility which produced 105 MMBtu less in the first six months of 2024 compared to the first six months of 2023 as a result of reduced feedstock inlet and, process equipment failures which have since been corrected, in the first six months of 2024.

Previous wording

We produced approximately 54 MWh in Renewable Electricity in the first quarter of 2024, an increase of 8 MWh (17.4%) from 46 MWh in the first quarter of 2023. Our Security facility produced approximately 3 MWh more in the first quarter of 2024 compared to the first quarter of 2023 as a result of the completion of prior period engine maintenance. Our Bowerman facility produced approximately 3 MWh more in the first quarter of 2024 compared to the first quarter of 2023 primarily related to the timing of preventative engine maintenance.

Current wording

We produced approximately 99 MWh in Renewable Electricity in the first six months of 2024, an increase of 4 MWh (4.2%) from 95 MWh in the first six months of 2023. Our Tulsa facility produced approximately 2 MWh more in the first six months of 2024 compared to the first six months of 2023 as a result of engine component failures that occurred in the first six months of 2023. Our Bowerman facility produced approximately 1 MWh more in the first six months of 2024 compared to the first six months of 2023 primarily related to the preventative engine maintenance that was completed in the first six months of 2023.

Previous wording

Revenues from Renewable Electricity facilities in the first quarter of 2024 were $4,799, an increase of $430 (9.8%) compared to $4,369 in the first quarter of 2023. The increase is primarily driven by the increase in our Security and Bowerman facility production volumes.

Current wording

Revenues from Renewable Electricity facilities in the first six months of 2024 were $9,300, an increase of $284 (3.1%) compared to $9,016 in the first six months of 2023. The increase is primarily driven by the increase in our Tulsa and Bowerman facility production volumes.

Previous wording

Total general and administrative expenses were $9,427 for the first quarter of 2024, a decrease of $48 (0.5%) compared to $9,475 for the first quarter of 2023. Employee related costs, including stock-based compensation costs were $5,724 in the first quarter of 2024, an increase of $731 (14.6%) compared to $4,993 in the first quarter of 2023. Our corporate insurance fees increased approximately $167 (12.2%) in the first quarter of 2024 compared to the first quarter of 2023. Our professional fees decreased approximately $1,006 (48.7%) in the first quarter of 2024 compared to the first quarter of 2023.

Current wording

Total general and administrative expenses were $18,166 for the first six months of 2024, a decrease of $54 (0.3%) compared to $18,220 for the first six months of 2023. Our professional fees decreased approximately $1,263 (41.8%) in the first six months of 2024 compared to the first six months of 2023. Employee related costs, including stock-based compensation costs were $11,090 in the first six months of 2024, an increase of $913 (9.0%) compared to $10,177 in the first six months of 2023. Our corporate insurance fees increased approximately $100 (3.6%) in the first six months of 2024 compared to the first six months of 2023.

Previous wording

Operating and maintenance expenses for our RNG facilities in the first quarter of 2024 were $12,141, an increase of $799 (7.0%) as compared to $11,342 in the first quarter of 2023. Included in our first quarter of 2024 total operating and maintenance expenses for our RNG facilities is utility expense of $3,942 an increase of $103 (2.7%) compared to $3,839 in the first quarter of 2023. Our Rumpke facility operating maintenance expenses increased approximately $668 primarily related to the timing of annual preventative maintenance expenses. Our Atascocita facility operating maintenance expenses increased approximately $533 as a result of utility expense and timing of annual preventative maintenance. Our Pico facility operating and maintenance expenses decreased approximately $313 primarily related to a decrease in utility expense.

Current wording

Operating and maintenance expenses for our RNG facilities in the first six months of 2024 were $26,043, an increase of $3,003 (13.0%) as compared to $23,040 in the first six months of 2023. Included in first six months of 2024 total operating and maintenance expenses for our RNG facilities is utility expense of $7,722, an increase of $393 (5.4%) compared to $7,329 in the first six months of 2023. Our Rumpke facility operating maintenance expenses increased approximately $1,132 primarily related to media change outs and disposal costs. Our McCarty facility operating maintenance expenses increased approximately $462 primarily related to a wellfield operational enhancement program. Our Apex facility operating maintenance expenses increased approximately $629 primarily related to the timing of preventative maintenance related to gas processing equipment.

Previous wording

Royalties, transportation, gathering and production fuel expenses for our RNG facilities for the first quarter of 2024 were $5,997, an increase of $2,531 (73.0%) compared to $3,466 in the first quarter of 2023. We recorded a reduction to our Pico facility earnout of approximately 16.6% during the first quarter of 2024. Royalties, transportation, gathering and production fuel expenses decreased as a percentage of RNG revenues to 17.6% for the first quarter of 2024 from 23.4% in the first quarter of 2023.

Current wording

Royalties, transportation, gathering and production fuel expenses for our RNG facilities for the first six months of 2024 were $14,565, an increase of $1,385 (10.5%) compared to $13,180 in the first six months of 2023. We recorded a reduction to our Pico facility earnout of approximately 10.0% during the first six months of 2024. Royalties, transportation, gathering and production fuel expenses decreased as a percentage of RNG revenues to 20.0% for the first six months of 2024 from 20.8% in the first six months of 2023.

Previous wording

Royalties, transportation, gathering, and production fuel expenses in the first quarter of 2024 were $6,518, an increase of $2,585 (65.7%) compared to $3,933 in the first quarter of 2023. We make royalty payments to our fuel supply site partners on the commodities we produce and the associated Environmental Attributes. These royalty payments are typically structured as a percentage of revenue subject to a cap, with fixed minimum payments when Environmental Attribute prices fall below a defined threshold. To the extent commodity and Environmental Attributes’ prices fluctuate, our royalty payments may fluctuate upon renewal or extension of a fuel supply agreement or in connection with new projects. Our fuel supply agreements are typically structured as 20-year contracts, providing long-term visibility into the margin impact of future royalty payments.

Current wording

Royalties, transportation, gathering, and production fuel expenses in the first six months of 2024 were $15,593, an increase of $1,455 (10.3%) compared to $14,138 in the first six months of 2023. We make royalty payments to our fuel supply site partners on the commodities we produce and the associated Environmental Attributes. These royalty payments are typically structured as a percentage of revenue subject to a cap, with fixed minimum payments when Environmental Attribute prices fall below a defined threshold. To the extent commodity and Environmental Attributes’ prices fluctuate, our royalty payments may fluctuate upon renewal or extension of a fuel supply agreement or in connection with new projects. Our fuel supply agreements are typically structured as 20-year contracts, providing long-term visibility into the margin impact of future royalty payments.

Previous wording

We calculated and recorded impairment losses of $528 in the first quarter of 2024, an increase of $77 (17.1%) compared to $451 in the first quarter of 2023. The impairment losses in the first quarter of 2024 primarily relate to the remaining book value of assets due to our decision to cease operations at the Security facility. We also impaired various RNG equipment that was deemed obsolete for current operations. The first quarter of 2023 impairment relates to feedstock processing machine component at an RNG site that was not in operational use.

Current wording

We calculated and recorded impairment losses of $699 in the first six months of 2024, a decrease of $27 (3.7%) compared to $726 in the first six months of 2023. The impairment losses in the first six months of 2024 primarily relate to the remaining book value of assets at the Security facility and various RNG equipment that was deemed obsolete for current operations. The first six months of 2023 impairment related to specifically identified RNG machinery and feedstock processing equipment that were no longer in operational use

Previous wording

Other expenses in the first quarter of 2024 was $105, a decrease of $1,577 (93.8%) compared to $1,682 in the first quarter of 2023. The decrease is primarily related to proceeds received from the sale of gas rights ahead of the fuel supply agreement expiration of our Security facility.

Current wording

Other expenses in the first six months of 2024 was $1,341, a decrease of $961 (41.7%) compared to $2,302 in the first six months of 2023. The decrease is primarily related to proceeds received from the sale of gas rights ahead of the fuel supply agreement expiration of our Security facility.

Previous wording

Operating Income (Loss) for the Three Months Ended March 31, 2024 and 2023

Current wording

Operating Income (Loss) for the Six Months Ended June 30, 2024 and 2023