Montauk Renewables Inc. - MNTK

Back to reality

There really couldn’t have been a better choreographed conclusion to this company’s sudden rise and subsequent fall. 

The company told investors at the end of Q1 that they withheld selling some of the RIN’s they generate because they thought they could get a better price later.  So after holding back on sales in Q1 and taking a bit of a hit to their top and bottom lines, the company padded their revenue and bottom line totals during Q2, Q3, and now Q4 by releasing the amount they have in inventory.  Their realized price from RIN’s went from $3.46 in Q1 to $3.30 in Q2 to $3.49 in Q3 and averaged, according to their 10k, $3.25 for the year.  That tells me the price of RIN’s they realized in Q4 was somewhere in the $2.66 range, up a bit from last year’s $2.30, but down quite a bit from what they were able to get for them earlier in the year.  Turns out that withholding those 5,000 or so RIN’s wasn’t such a great idea.

In Q4, they sold about 12,050 RIN’s compared to 11,729 last year, and they were able to do so at slightly higher prices, so overall revenues for the quarter were up maybe 10% year over year.  However, the $49M they just printed was significantly less than the $59M in Q3 or the $69M in Q2, which is likely why investors are heading out the door.

With their RIN inventory now back to zero (according to their 10k) and with RIN prices returning back to earth, total revenues are expected to decline to the $160M range, up from 2021’s $148M but down quite a bit from 2022’s $205M.  At that level of revenues, earnings will be somewhere about break-even compared to the 25 cents or so they were able to print in 2022. 

Thus ends one of the better choreographed ramps I have seen in quite a while.