Montauk Renewables maintains 2025 RNG production guidance of 5.8M–6M MMBtu as regulatory uncertainty continues

Earnings Call Insights: Montauk Renewables (MNTK) Q3 2025

MANAGEMENT VIEW

* Sean McClain, President, CEO & Director, emphasized regulatory developments, noting, "On August 22, 2025, the EPA issued decisions on 175 million small refinery exemption or SRE petitions...increased the number of RINs available for obligated parties to use for compliance with the renewable fuel standard or RFS obligations." He added that the EPA's proposed supplemental rules and future renewable volume obligations could be delayed into 2026 due to the recent U.S. federal government shutdown.
* McClain highlighted the GreenWave Energy Partners joint venture, stating, "We have begun to match available RNG capacity to dispensing opportunities through GreenWave's transportation pathways and have separated RINs for a limited amount of volumes. We expect the benefits from this partnership to increase in the fourth quarter of 2025."
* Development in North Carolina remains a priority, with McClain reporting, "We continue our development efforts in North Carolina and continue to expect our production and revenue generation activities to commence in the first quarter of 2026."
* Regarding REC pricing, McClain stated, "We believe our negotiated swine REC prices could fall in the ranges experienced by solar REC indices at $200 to $450 per REC."
* Kevin Van Asdalan, CFO & Treasurer, explained, "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."

OUTLOOK

* McClain reaffirmed, "We expect our RNG production volumes to remain unchanged and range between 5.8 million and 6 million MMBTus with corresponding RNG revenues also unchanged to range between $150 million and $170 million. We expect our 2025 renewable electricity production volumes to range between 175,000 and 180,000 megawatt hours with unchanged corresponding renewable electricity revenues ranging between $17 million and $18 million."
* No changes in guidance language or strategic direction were announced compared to the previous quarter, and no 2026 production guidance was provided.

FINANCIAL RESULTS

* Van Asdalan reported, "Total revenues in the third quarter of 2025 were $45.3 million, a decrease of $20.6 million or 31.3% compared to $65.9 million in the third quarter of 2024."
* The CFO attributed this to, "a decrease in the number of RINs we self marketed from 2025 RNG production in the third quarter of 2025."
* Average realized RIN price for Q3 2025 was $2.29, down from $3.34 in Q3 2024. Adjusted EBITDA was $12.8 million, a decrease of $16.6 million or 56.5% year-over-year. Net income for the quarter was $5.2 million, down from $17 million year-over-year.
* Segment results showed Renewable Natural Gas revenues at $39.9 million, renewable electricity revenues at $4.2 million, and operating income at $4.4 million. Cash and cash equivalents at quarter end were $6.8 million.
* Operating and maintenance expenses for RNG increased to $13.9 million, up $1.3 million year-over-year, primarily due to preventive maintenance and operational enhancements. General and administrative expenses decreased to $6.5 million from $10 million in Q3 2024.

Q&A

* Matthew Blair, Tudor, Pickering, Holt & Co.: "You maintained your 2025 RNG production guide...Could you talk about the drivers of the step up? Is this just better operations? Or is there any sort being that would push things up. And then thinking about your RNG production for 2026...would it be appropriate to think of 2026 RNG production is probably pretty similar to 2025?" Van Asdalan responded, "It's a combination of a variety of factors, improvement in feedstock supply...with some improvements in a newer plan. We continue to work with our rum landfill site to work through those wealth field challenges...we expect a continued uplift in our quarter-over-quarter production as we've been experiencing in 2025."
* Tim Moore: "Can you just kind of speak to that a bit? The OpEx looked good, do you expect any more kind of catch-up maintenance spending in the next couple of quarters? Or are you past it?" McClain answered, "I would view the shift in the operating expenses as less of a catch-up and more of some nonlinear expense items that correspond to the life cycle of the equipment...We do not see any meaningful increase as we go into the outlook of operating expenses other than onboarding, obviously, our new Turkey Creek facility in 2026."
* Y. Zhang, Scotiabank: "Curious what the drivers were for the difference versus last quarter? It seems like this quarter was quite a bit lower versus your run rate." Van Asdalan explained, "The vast majority with that Betty is associated with timing of various professional fees...So there are some blips in the third quarter of last year, second quarter of this year that we're getting through as we get back into a more normalized G&A run rate."

SENTIMENT ANALYSIS

* Analysts asked probing questions about sustainability of guidance, cost trends, and maintenance, reflecting a neutral to slightly cautious tone as they sought clarity on operational and financial normalization and future production potential.
* Management’s prepared remarks were measured and methodical. In the Q&A, the tone remained confident but cautious, with phrases like "we expect a continued uplift" and "we do not see any meaningful increase" signaling controlled optimism. The tone echoed that of the previous quarter, with management providing detailed explanations and reiterating consistency in outlook.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2025 RNG and electricity production and revenue remained unchanged from the previous quarter.
* The company continued to reference EPA regulatory uncertainty and its impact on RIN markets, but reported further progress on the GreenWave joint venture and the North Carolina project timeline.
* G&A expenses normalized in Q3 after being affected by one-time items in Q2. Operating and maintenance expenses for RNG decreased versus Q2, aligning with management’s expectation for lower costs in the second half of the year.
* Analysts’ focus shifted slightly more toward normalization of costs and confirmation of production guidance, compared to prior quarter’s focus on regulatory impacts and project developments. Management’s confidence appeared consistent with the prior quarter.

RISKS AND CONCERNS

* McClain flagged regulatory uncertainty, stating, "the duration of the most recent U.S. federal government shutdown and any residual impacts on EPA staffing after the shutdown concludes, may extend finalization of these items into 2026."
* Van Asdalan reiterated exposure to environmental attribute pricing, especially for RINs, as a key risk factor: "Our profitability is highly dependent on the market price of environmental attributes, including the market price for RINs."
* The company also referenced ongoing negotiations in the North Carolina swine REC market, noting limited market activity and the potential for delays in regulatory approvals affecting revenue timing.

FINAL TAKEAWAY

Montauk Renewables maintained its 2025 RNG production and revenue guidance despite a challenging regulatory and pricing environment, highlighting strategic joint ventures and project development milestones. Management underscored exposure to RIN market volatility and regulatory delays but expressed confidence in operational improvements and cost normalization, while noting continued progress on new project launches and revenue opportunities in North Carolina for 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mntk/earnings/transcripts]

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