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 cautions regarding forward-looking statements contained in the earnings materials or made on this call. John, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Montauk Renewables Third Quarter 2021 Earnings Conference Call. I'm John Ciroli, Vice President, General Counsel and Secretary, at Montauk. Joining me today are Sean McClain, Montauk's Chief Executive Officer and President, and he will discuss business developments; and Kevin Van Asdalan, Chief Financial Officer, to discuss our third quarter of 2021 results. During this call, certain statements we make will be forward looking and based on management's beliefs and assumptions and information currently available to management at this time, including without limitation, statements relating to the company's future results of operations and financial conditions as well as our expectations and plans for the company, such as with our Montauk Ag Renewables asset acquisition, the Pico Improvement Project and Pico CI score. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our safe harbor provision for forward-looking statements that can be found in our third quarter 2021 earnings press release, in our Form 10-Q for the third quarter of 2021 and our most recent annual report on Form 10-K and in our other reports on file with the SEC, that provide further detail about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated. And except as required by law, we undertake no obligation to update any forward-looking statement. Our remarks today may also include non-GAAP financial measures. 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 third quarter 2021 earnings release and Form 10-Q issued and filed this afternoon. These are available on our website at ir.montaukrenewables.com. After our prepared remarks, we will open the call to questions. [Operator Instructions]. With that, I will turn the call over to Sean.

Thank you, John. Good day, everyone, and thanks for joining our call. I would like to start this call with an update on two important developments we are focused on as we continue to grow. In May 2021, we completed the Montauk Ag Renewables asset acquisition in North Carolina to purchase 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, bio oil, and bio char. During the third quarter of 2021, we continued to execute on our plans for Montauk Ag Renewables. In August 2021, we were granted a patent over 24 specific aspects of continuous feed closed-loop reactor technology acquired in the acquisition. We believe that the reactor enables near-zero emissions conversion of agricultural waste into multiple nonfossil renewable fuel alternatives, is capable of producing multiple units of renewable energy for each unit of conventional energy consumed, and is capable of sequestering multiple tons of greenhouse gas equivalent emissions for every ton emitted. We expect the reactor with certain enhancements to better address some of the environmental challenges of industrial agriculture, including lagoon capacity constraints, watershed contamination, motor issues, nutrient abundances, and containment and disposal of organic waste regardless of location or size. The reactor is operational, and we continue to make improvements to the reactor to optimize its functionality, and currently expect this facility to be commissioned with these improvements during 2022. In October of 2021, we also closed on a $5.4 million transaction to acquire approximately 146 acres and an existing approximately 500,000 square foot structure, which we plan to use as we expand the production processes acquired in the Montauk Ag Renewables acquisition. We have also executed master service agreements that provide access to waste feedstock for Montauk AG to process. The waste feedstock will be sourced from swine waste contained in anaerobic lagoons, and its removal will help to improve lagoon water flow and reduce capacity in the lagoons. As we commission and increase our production capabilities, we intend to add additional farms to these agreements as feedstock sources, which have the potential to secure more feedstock for our facility. I also want to provide an update on our Pico facility in Jerome, Idaho. During the third quarter of 2021, and as part of our overall previously announced capacity expansion at the Pico facility, we undertook significant efforts to improve the performance of the existing digestion process at our Pico facility. We have temporarily idled RNG production at this facility in order to clean out settled solids in the digester, replace the cover of the digester, and make various other efficiency improvements. After the improvements are completed, we expect production to measurably increase from the current production levels of approximately 150 MMBtus per day once we resume full operations at the Pico facility, currently expected during the first quarter of 2022. The improvement project has impacted the timeline for modeling Pico's initial CI score pathway model and subsequent auditing approval by the California Air Resource Board. We currently expect to submit the CI pathway model and reapply for a temporary CI pathway in the fourth quarter of 2021. The results of this approval could have a significant impact on our ability to generate LCFS revenues in 2022 on our 2021 production. And with that, I will turn the call over to Kevin.

Thank you, Sean. I will be discussing our third quarter of 2021 financial and operating results. Please refer to our earnings press release and the supplemental slides that have been posted to our website for additional information. Total revenues in the third quarter of 2021 were $39.7 million, an increase of $11.5 million or 40.7% compared to $28.3 million in the third quarter of 2020. An increase in the number of rigs sold accounted for over half or $6.9 million of the increase during the third quarter of 2021. Increased natural gas index prices of approximately 79.8% contributed to increases in our gas commodity revenues over the comparable period in the prior year. Higher revenues of approximately $1.3 million recognized under counterparty sharing agreements also contributed to this increase. As a reminder, we entered 2021 with forward commitments of approximately 50% of our expected 2021 RIN generation. These forward commitments were based on D3 rent index prices at the time of the commitment, which is now below the D3 rent index. As a result, realized prices for environmental attributes monetized in a year may not correspond directly to index prices in the current year due to the forward selling of commitments. Our current RIN commitments expected to be recognized during the fourth quarter of 2021 will be realized at an approximate average realized price of $2.09. We do not have any 2022 vintage RINs currently committed. Total general and administrative expenses were $7.5 million for the third quarter of 2021, an increase of $3.4 million or 82% compared to $4.1 million for the third quarter of 2020. Of the total quarter of 2021, $2.6 million related to stock-based compensation costs primarily associated with the IPO and reorganization transactions. Excluding the impact of IPO-related stock-based compensation, general and administrative expenses increased approximately $0.8 million. Corporate insurance for the third quarter of 2021 increased approximately $0.8 million or 99.64% compared to the third quarter of 2020 due to increased premiums associated with the IPO. Turning to our segment operating metrics. I'll begin by reviewing our renewable natural gas segment. We produced 1.5 million MMBtu of RNG during the third quarter of 2021, a decrease of less than 0.1 million MMBtus or 0.7% over the 1.5 million MMBtus produced in the third quarter of 2020. Of the third quarter 2021 volumes, 31,000 MMBtu of RNG was produced from development sites commissioned during 2020. Of the $0.1 million lower MMBtus of RNG produced at our other locations, this reduction relates primarily to wellfield issues at our McCarty facility. The collection system at the McCarty facility has been hampered by increased volumes of water impacting collection. As water volumes vary or increase, the ability to draw feedstock can be reduced. We are working with the landfill host to mitigate these matters but expect this issue to continue into the fourth quarter of 2021. Revenues from the Renewable Natural Gas segment in the third quarter of 2021 were $35.0 million, an increase of $11.0 million or 45.9% compared to $24.0 million in the third quarter of 2020. The primary driver for this increase relates to RIN volumes sold during the first nine months of 2021. During the third quarter of 2021, we sold 13.3 million RINs, representing a $2.8 million increase or 27% compared to $10.4 million in the third quarter of 2020. The increase was primarily related to inter-period timing of transfers of RINs as the majority of our RINs are self-marketed, resulting in higher commitments for the third quarter of 2021 versus the third quarter of 2020. Average pricing realized on RIN sales during the third quarter of 2021 was $1.65 as compared to $1.54 in the third quarter of 2020, an increase of 7.1%. This compares to the average D3 rent index price for the third quarter of 2021 of $3.11, which is double the average D3 RIN index price of $1.55 in the third quarter of 2020. Operating and maintenance expenses for our R&D facilities in the third quarter of 2021 were $8.7 million, a decrease of $0.3 million or 3% as compared to $9.0 million in the third quarter of 2020. Approximately $1.3 million of the third quarter 2020 operating and maintenance expenses related to development sites commissioned during 2020. Exclusive of the effects of these development sites, operating and maintenance expenses for the third quarter of 2021 were $7.4 million, a decrease of $1.5 million or 17% compared to the third quarter of 2020. Due to fewer media changeouts and disposal expenses at our McCarty, Atascacita, and Apex facilities, operating and maintenance expenses decreased approximately $0.2 million, $0.2 million, and $0.6 million, respectively, compared to the third quarter of 2020. Our Rumpke facility had decreased operating and maintenance expenses of approximately $0.5 million in the third quarter of 2021 due to general preventative maintenance work related to an annual planned outage. We produced approximately 43,000 megawatt hours in renewable electricity during the third quarter of 2021, a decrease of 6,000 megawatt hours from the 49,000 megawatt hours or 12.2% produced in the third quarter of 2020. The decrease is a result of engine maintenance at our Bowerman facility or 3,000 megawatt hours, and our security facility having zero production in the third quarter of 2021 due to previously announced engine failures compared to 2,000 megawatt hours produced in the third quarter of 2020. Operating and maintenance expenses for our renewable electric facilities in the third quarter of 2021 were $3.5 million, an increase of $1.2 million or 51.4% compared to $2.3 million in the third quarter of 2020. We reported the results of Pico within the renewable electric generation segment until October 2020. And Pico contributed $0.6 million to the 2020 period. Exclusive of Pico, renewable electricity facility operating and maintenance expenses increased in the third quarter of 2021 compared to the third quarter of 2020 by $1.8 million or 102.1%. The increase is primarily a result of the timing of scheduled engine preventive maintenance intervals at our Bowerman facility, which was approximately $1.6 million higher in the third quarter of 2021 over the third quarter of 2020. Operating profit in the third quarter of 2021 was $6.7 million, an increase of $1.9 million or 39.2% compared to operating profit of $4.8 million in the third quarter of 2020. R&D operating profit for the third quarter of 2021 was $16.0 million, an increase of $6.5 million or 68.1% compared to $9.5 million in the third quarter of 2020. Renewable electric generation operating loss for the third quarter of 2021 was $1.4 million, a decrease of $0.9 million or 198.5% compared to an operating loss of $0.5 million for the third quarter of 2020. During the third quarter of 2021 associated with our risk-adjusted analysis of the assessment of our Pico facility earn-out obligation, we recorded a reduction to the liability of $0.7 million, which was reported within royalties, transportation, gathering, and production fuel in our RNG segment. Turning to the balance sheet. As of September 30, 2021, $22.5 million was outstanding under our term loan and $36.7 million was outstanding under the revolving credit facility. The company's capacity available for borrowing under the revolving credit facility was $39.4 million. During the first nine months of 2021, we generated $21.3 million of cash from operating activities, a 5.9% decrease from the first nine months of 2020 of $22.6 million. For the first nine months of 2021, our capital expenditures were $7.7 million, of which approximately $2.4 million of our first nine months of 2021 capital expenditures were related to optimization projects at our recently commissioned facilities and $1.0 million related to the Pico feedstock amendment. Including acquisition costs of $0.3 million, we acquired assets for the Montauk Ag Renewables acquisition in North Carolina totaling $4.1 million. 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. Adjusted EBITDA for the 3 months ended September 30, 2021, was $12.8 million, an increase of $2.7 million or 27.2% over adjusted EBITDA of $10.1 million for the 3 months ended September 30, 2020. The increase in adjusted EBITDA in the third quarter of 2021 is primarily from our $11.0 million increased net income as compared to net income in the third quarter of 2020. This increase was partially offset by an increase in our income tax expense of $9.7 million as compared to our income tax benefit in the third quarter of 2020. I'll now turn the call back over to Sean.

Thanks, Kevin. In closing, we want to provide our fourth quarter 2021 outlook. We expect RNG production volumes to range between 1.4 million and 1.7 million MMBtu with corresponding R&D revenues between $38 million and $46 million. We expect renewable energy electricity production volumes to range between 47,000 and 57,000 megawatt hours with corresponding renewable electricity revenues between $3.8 million and $4.7 million. And with that, we'll now pause for any questions.

[Operator Instructions]. Your first question comes from the line of [indiscernible].

A 2.5% sequential increase in revenue and a $0.1 million increase in RNG from the second quarter is certainly a step in the right direction. But it looks like your RIN hedges that are considerably below market are still limiting your upside. Can you elaborate on the sequential improvement from the second quarter and provide some color as to the extent to which below-market hedges are rolling off into the fourth quarter and first quarter '22?

Sure, Craig. Thank you very much for that question. Yes, as we noted, when we entered the fourth quarter of 2021, we had forward commitments throughout 2021 for now below market hedges. Those will be rolling. We're still working through a few of those commitments in the fourth quarter of 2021, but we anticipate having more reasonable, and consistent with these RIN price commitments recognized in the fourth quarter this year, bringing that average realized RIN price up to $2.09, however, still significantly below the existing D3 rent index. But we're working through the vast majority of those order commitments that are pulling down our realized sales price compared to the existing index.

And will all that be done by the first quarter '22? And any more color on -- I know you talked year-over-year, but any more color on the sequential improvement?

Yes, we do not currently have any 2022 vintage RINs committed starting in January 2022. So unlike last year at this time when we had 50% of our expected production forward sold, we do not currently have any commitments for 2022 vintage RINs. So the underperformance of the RINs that we've recognized throughout this year will clear itself by the end of the fourth quarter. Regarding the RIN sales improvement, we're -- it's associated with clearing through these inter-period transfers that we've experienced throughout the rest of the year. And finally, clearing off the closing out of the 2021 vintage by the end of the fourth quarter.

[Operator Instructions]. There are no further audio questions at this time. I will now turn the call over to Sean McClain for closing remarks. We still have the question of [indiscernible].

Sorry. I thought we're limiting to a question, but if it's okay, I'll just try to finish off, if that's all right. So the Pico dairy RNG digester improvements, are those seen ultimately improving the CI score? I assume that they're intended to increase ultimate volume. And any idea if we could get a final CARB CI score in the first half of next year? Or could it take as late as the second half?

The first question that you asked, Craig, relative to whether some of the changes that we're making will improve the CI score, making it more negative for that Pico project. The answer is yes, it can. It can in a couple of different factors. One of the factors is the convergence of the manner in which we can enhance the digestion capacity through boilers as opposed to the legacy electric engines that we have onsite. That can have a positive impact to make the CI score more negative. The second piece of that is how the expansion of the herd by the five separate farms that we support for that project are allocated and the representation of the cattle that are under roof, which yields a higher collection of the organic material volumes, which can have a positive benefit and a more negative CI score as opposed to what the project had pre-expansion. As far as the second piece is concerned, we are in process of applying for those CI pathways. It is possible, but not definitive, that we can receive that score during mid to late 2022.

Got you. And what drove that sequential drop of 4-megawatt hour, 4,000 megawatt hours from the second quarter in REG? And is the security project's engine repairs all done at this point?

Craig, I'll jump in. It's Sean. The Bowerman facility has ongoing preventative maintenance on an engine at a time; the Bowerman facility has seven production engines. Manufacturer's suggested PM schedules have us taking an engine offline for routine preventative maintenance throughout 2021. That's generally the explanation for the decrease of Bowerman as compared to 2020 as all seven engines were operational during 2020. Regarding security, yes, our existing expectation is that facility will be up and running in the fourth quarter of 2021 and producing renewable electricity for us.

Great. And the guidance -- I mean things are getting better, but the guidance ranges are very wide. Is there a point in the future? Or what would it take for future guidance in coming quarters to narrow?

It's a good question, Craig. We have not historically given any forward-looking guidance in the past. Obviously, this is the first time the company has issued guidance, albeit only for the fourth quarter. And we're looking to continue to refine that process and to give more helpful, more detailed, narrower guidance to help drive modeling and investment purposes.

Okay. And last question for me, sorry to go on so long. I know you've historically focused on diversification and flexibility across your revenue streams, including project types, offtakers, emission credit regimes as well as limiting the duration of your fixed or floor price offtake. If I understand that your fixed floor price offtake on RNG is maybe 3 to 5 years. But after the close, a pure landfill gas operator announced a 21-year fixed price RNG offtake agreement with a gas utility. Do you plan to continue to limit the duration of offtake hedges? Or could you start laddering your offtaker contracts to diversify across time as well?

Our intentions and our strategy that we're currently deploying for fixed versus market attributes, predominantly the RNG, is to ensure that the fixed component is sufficient for all of our working capital purposes, sufficient for a near-term line of sight to the development capital that we need for any due diligence, any transactional costs in the initial stages of any additional expansion projects or expansions of existing projects or potential acquisitions of portfolios or projects or technology like we did with the North Carolina acquisition for Montauk Ag. The reason for that is the growth of the attribute programs under which we monetize. And with that growth has come opportunities to not only look at potentially locking those opportunities longer than your 3- to 5-year duration but more importantly, it has made opportunities like what we do to enable the export of our fuel products into the EU at prices that are starting to become more and more competitive with the domestic attributes opportunities that we have on the spot market today. As we continue to move into 2022, we're optimistic to look to continue that balance of walking what we have to ensure the working capital needs but allowing for the monetization of those attributes at prices that are more conducive similar to your first question about when our market prices will be more in line with what you see in the attribute spaces for RINs and LCFS credits today. We're committed to having a portion, a majority of our portfolio start to reflect those current prices while at the same time constantly keeping abreast of opportunities that allow for us not necessarily to be limited to utilities or 10- or 20-year agreements, but look at long-term fixed price offtakes, domestic and abroad.

Your next question comes from the line of Craig Irwin of Roth Capital Park.

That's close. Congratulations on the really strong quarter here. So I just want to ask about the Carty Road facility. The facility had some bumps along the way. It's still a very large chunk of your RNG production capacity. How should we look at potential volatility there? Is this something that every year or two, there are items that you come across and have to address? Is this a highly unusual situation given that you've owned this facility for many years? And how volatile is the production out of major facilities like this?

That's a great question, Craig. One of the difficult challenges of highlighting a specific facility in your earnings releases is it does bring into question the reliability of the facility itself or the predictability of the facility. That large facility in the Houston area is well maintained. It is an older facility that has a very strong regimen of operating and maintenance protocols. It has been subjected to a number of failure incidents in the last two years that were specific, isolated, and are not expected to reoccur. The items that resulted in those failures were met with a combination of insurance coverage or met with a combination of critical spare deployments and even so much as the larger componentry of the compressors that were at those facilities and were immediately responded to with any adjustments or enhancements of our maintenance protocols as long as the replacement of the critical spares themselves. So the expectation is that those items are isolated and they won't reoccur. The overall volatility of the type of production in our RNG facilities will always be subjected to some form of ebbs and flows in the landfill itself, everything from the type or componentry of the waste intake. Large weather events can bring in high degrees of construction materials, which could elevate levels above the normal or optimized production capability or removal capability of our production facilities. Weather events can cause water and changes in filling patterns of landfills as they move from one phase of the landfill to the next, causing a sort of follow-on adjustment or pairing with our ability to maintain and enhance the collection system itself. All of those items are relatively balanced over the life cycle of these projects, and they're done so to prioritize production and also do so as a complement to what the landfills are doing themselves. But definitively, we would not look at this facility as an anomaly that would have a disproportionate level of occurrences either in terms of mechanical failures or systemic issues associated with the landfill. It just so happens that this particular facility has had a number of events that have been sequential in reporting periods.

Understood. So my second question is, you guys were the first RNG company, a pure-play RNG company to go public, right? I guess, [indiscernible] had their portfolio that was pretty successful for a while between here and there. There's been a lot of others that work to chase you into the market. People are excited about the carbon reduction potential and the profit that's available in that. But there have been a couple of sale transactions, companies that have gone out with business plans and lists of projects they look to build, but with limited real-world experience. Some of them got substantial capital upfront before they really even got anything built. And I was hearing that they were pushing prices on different opportunities out there and that site hosts were skeptical, but others weren't. Can you maybe talk a little bit about the market psychology out there on the part of your customers? You do work with many of the biggest names in environmental waste. What's the appetite for new project development? Are people rational about their expectations for projects that are available for investment? How do you see this playing out for Montauk over the next few years?

We see the market as the most exciting that we have operated in, at least with my tenure in the organization going on 11 years. The market is very dynamic in terms of opportunities to enhance or convert landfill projects from medium to high to BTU to take landfills that have not yet reached NSPS compliance and make them viable projects. The opportunity of the virtualization of pipelines is making projects that you would normally look at because they aren't big enough to justify the economics of the build and operation feasible, given the prevalence and cost reductions you see with pipeline virtualization across the country. The exciting opportunities to deviate from a core landfill gas business into fuel decarbonization and agricultural projects are very promising. They do come at very commanding multiples oftentimes when these projects are at least initially developed and then put out into the transaction space, but we're seeing such an abundance of opportunities to grow existing projects that we are incorporating already into our portfolio while paving the way into North Carolina to specifically address the swine waste opportunities across that state. There is an abundance of opportunity for folks that know how to develop projects and understand the realistic economics of those projects to easily come in, secure long-term agreements from waste intake, monetize those attributes, and work closely with partners to get those projects off the ground from a material, equipment, and deployment standpoint. So the motion, the tenor of the marketplace right now is still very exciting. It is more aggressive than it's been in previous years in terms of how many projects are coming to market. We have looked at more project opportunities in the past six months than we've probably seen in the past three years. And those opportunities continue to come to a business like Montauk, which has been in this space for nearly four decades and knows how to model those projects effectively, understand the economics, and stress test them to ensure they will thrive in strong attribute markets or even in normalized pricing scenarios, while still being robust contributors to our portfolio. Therefore, we're selective with opportunities that don't meet our project criteria, even if they appear strong on paper.

Perfect. And then last question for me, if I may. You have, I believe, a very large chunk of your RNG production that's hedged, with those specific hedges rolling off at the end of this month. Can you talk to us about your considerations for potentially entering new hedges? Or has Montauk ever historically operated at unhedged on more than half of its production? What do you see as a reasonable outlook?

The company has almost exclusively operated at less than 50% of its production being hedged. The phenomenon that we are rolling off this year is a byproduct of the uncertainty surrounding the 2020 political election, where there was an appropriate amount of production hedged to sort of counterbalance that uncertainty. Coming out of 2021, where Kevin mentioned that none of our 2022 vintage RINs are committed, you will always have a bit of chasing the market index. If the market continues to rise from a pricing standpoint, you'll always be trailing a month or two in terms of the settlements. So you won't be always paired with the markets. However, we intend to track much more closely than we have this particular year. We're always looking to hedge a component of the portfolio. Important to note that hedging isn't just about forward sales of your attributes but also includes fixed price offtake. We'll continue to look for medium to long-term fixed price opportunities. We do explore opportunities to hedge with utilities; they present themselves but full value in this space will typically carry substantial discounts off what the marketability of your environmental attributes would be. Therefore, it’s a carefully calculated equation to determine when makes the most sense for the business regarding the growth trajectory that it's trying to achieve.

And a question of clarification just for people that are maybe new to the story or haven't followed us closely. Can you remind us approximately when those hedges were entered?

Yes. It was throughout the fourth quarter of 2020, Craig. Yes, September, October, November timeframe before the election was settled in January of 2021, definitively or December of 2021. So I think if you track what the D3 index was throughout the fourth quarter of 2020, you'll see some price points that are just significantly below the current trading index price of D3 RINs.

[Operator Instructions]. There are no further questions at this time. I will now turn the call over to Sean McClain for closing remarks.

Thank you, May. And thank you all for taking the time to join us on our conference call today. We look forward to speaking with you again on our 2021 year-end call.