10-Q: Montauk Renewables Reports Q3 Loss Amid Revenue Decline

Montauk Renewables, Inc. reported a significant decline in Q3 2025 revenue and a year-to-date net loss, driven by lower RIN prices and increased operating expenses, despite ongoing investments in growth projects.

Summary

• Total operating revenues for Q3 2025 decreased by 31.3% to $45.258 million from $65.917 million in Q3 2024.
• The company reported a net income of $5.205 million for Q3 2025, a 69.5% decrease from $17.048 million in Q3 2024.
• For the nine months ended September 30, 2025, Montauk Renewables recorded a net loss of $0.746 million, compared to a net income of $18.186 million for the same period in 2024.
• Adjusted EBITDA for Q3 2025 was $12.823 million, down from $29.430 million in Q3 2024, a 56.4% decrease.
• Year-to-date Adjusted EBITDA for Q3 2025 was $26.643 million, a 41.9% decrease from $45.863 million in Q3 2024.
• Cash and cash equivalents significantly decreased to $6.766 million as of September 30, 2025, from $45.621 million as of December 31, 2024.
• Capital expenditures for the nine months ended September 30, 2025, increased to $75.106 million from $53.334 million in the prior year, primarily for development projects.
• Average realized RIN price decreased by 31.4% to $2.29 in Q3 2025 from $3.34 in Q3 2024.
• The company had 749 RINs generated but unseparated and 10 RINs in inventory from 2025 RNG production as of September 30, 2025.
• The Blue Granite RNG Facility project faces a significant setback as the local utility is no longer accepting RNG into its distribution system, leading to a $1.983 million impairment loss.
• The Montauk Ag Renewables project in North Carolina is expected to commence production and revenue generation in Q1 2026, with a projected total investment of $180 million to $220 million.
• The company is converting its Tulsa, Oklahoma Renewable Electric Generation facility to an RNG project, targeting commissioning in 2027 with an estimated capacity of 1,500 MMBtu per day.
• A new joint venture, GreenWave Energy Partners, LLC, was formed in Q1 2025 to expand RNG utilization for transportation, with a capital investment of up to $4.5 million.
• The Tax Reconciliation Act, signed July 4, 2025, extends the Production Tax Credit and implements 100% bonus depreciation for qualifying assets, potentially impacting future tax attributes.

Sentiment

Score: 3

Explanation: The company experienced significant declines across key financial metrics including revenue, net income (to a loss year-to-date), operating income, and Adjusted EBITDA. Cash reserves have substantially diminished. While there are ongoing development projects, several face delays or regulatory headwinds, and the immediate market for environmental attributes (RINs) is challenging with lower realized prices. The heavy capital investment in future projects contrasts with current operational underperformance, indicating a high-risk, long-term growth strategy with near-term financial weakness.

Positives

• RNG production volumes increased by 3.8% in Q3 2025 (1,445 MMBtu) and 1.4% year-to-date (4,247 MMBtu) compared to the prior year periods.
• The Second Apex RNG Facility was commissioned in June 2025, contributing to increased production.
• The company is actively pursuing significant growth projects including the Bowerman RNG Facility ($85M-$95M capital, 3,600 MMBtu/day capacity, 2027 commissioning), European Energy CO2 capture ($65M-$75M capital, 2027 delivery start), and Tulsa RNG conversion ($25M-$35M capital, 1,500 MMBtu/day capacity, 2027 commissioning).
• The collaboration with Emvolon for green methanol production at the Atascocita facility has exceeded anticipated pilot project results, with plans for significant deployment by 2030.
• The GreenWave joint venture has begun matching RNG capacity to dispensing opportunities and separating RINs, with increased benefits expected in Q4 2025.
• The Tax Reconciliation Act (July 4, 2025) extends the Production Tax Credit and implements 100% bonus depreciation, which could provide future tax benefits.
• The company maintains compliance with all financial covenants under its Amended Credit Agreement.

Negatives

• Total operating revenues decreased significantly by 31.3% in Q3 2025 and 10.2% year-to-date, primarily due to lower realized RIN prices and fewer RINs self-marketed.
• Net income for Q3 2025 decreased by 69.5%, and the company reported a net loss of $0.746 million for the nine months ended September 30, 2025, compared to a net income in the prior year.
• Operating income for Q3 2025 plummeted by 80.4% and by 90.4% year-to-date.
• Adjusted EBITDA saw substantial declines of 56.4% in Q3 2025 and 41.9% year-to-date.
• Cash and cash equivalents decreased sharply from $45.621 million at year-end 2024 to $6.766 million at September 30, 2025.
• Average realized RIN prices decreased by 31.4% in Q3 2025 and 28.0% year-to-date.
• The Blue Granite RNG project faces a major setback with the local utility no longer accepting RNG, resulting in a $1.983 million impairment loss and a pause in capital expenditures.
• Wellfield extraction environmental factors continue to impact gas extraction at the Rumpke and Apex facilities, affecting volumes.
• Changes by the landfill host at the McCarty facility have led to elevated nitrogen in feedstock and reduced feedstock quantity.
• The EPA's BRRR K2 separation rules, effective January 1, 2025, have temporarily impacted the timing of RIN separation and sales, leading to 749 RINs generated but unseparated at period end.
• The USDA Advanced Biofuel Payment Program, which provided approximately $200,000 annually, was eliminated by the Full-Year Continuing Appropriations and Extensions Act, 2025.
• The proposed California Senate Bill SB-237 includes a potential cap on LCFS credit prices at approximately $75/ton, which could negatively impact profitability.

Risks

• Ability to develop and operate new renewable energy projects, including with livestock farms, and related challenges such as identifying suitable locations and potential delays in acquisition financing, construction, and development.
• Reduction or elimination of government economic incentives to the renewable energy market, including RINs, RECs, and LCFS credits, due to regulatory or political changes.
• Inability to complete strategic development opportunities.
• Impacts from widespread manmade, natural, and other disasters (including severe weather events), health emergencies, geopolitical instabilities, government shutdowns, security breaches, or cyberattacks on general economic conditions, financial markets, and business operations.
• Increased operating costs or construction costs due to taxes, tariffs, duties, other assessments on equipment, or continued inflation.
• Rising interest rates increasing the borrowing costs of future indebtedness.
• Failure to attract and retain qualified personnel or increased reliance on third-party contractors.
• Lengthy development and optimization cycles for new projects, including design and construction processes.
• Dependence on third parties for the manufacture of products and services and landfill operations.
• Variations in the quantity, quality, and consistency of feedstock volumes from landfill and livestock farm operations.
• Reliance on interconnections with and access to electric utility distribution and transmission facilities and gas transportation pipelines.
• Inability to renew pathway provider sharing arrangements at historical counterparty share percentages, potentially leading to higher shared percentages.
• Projects not producing expected levels of output.
• Concentration of revenues from a small number of customers and projects.
• Restrictions under the company's credit facility and outstanding indebtedness.
• Ability to extend fuel supply agreements prior to expiration.
• Ability to meet milestone requirements under Power Purchase Agreements (PPAs).
• Existing regulations and changes to regulations and policies that affect operations.
• Decline in public acceptance and support of renewable energy development and projects.
• Market volatility and fluctuations in commodity prices and the market prices of Environmental Attributes, and the impact of any related hedging activity.
• Regulatory changes in federal, state, and international environmental attribute programs and the need to obtain and maintain regulatory permits, approvals, and consents.
• Profitability of planned livestock farm projects.
• Potential liabilities from contamination and environmental conditions.
• Potential exposure to costs and liabilities due to extensive environmental, health, and safety laws.
• Impacts of climate change, extreme and changing weather patterns and conditions, and natural disasters.
• Failure of information technology and data security systems.
• Increased competition in markets.
• Challenges in keeping up with technology innovations.
• Concentrated stock ownership by a few stockholders and related control over the outcome of matters subject to a stockholder vote.
• Impacts of EPA actions associated with implementation of BRRR K2 separation and the extension of the 2024 RIN compliance period on commitment timing of RIN sales.
• Landfill hosts delaying installation of wellfield collection infrastructure, impacting feedstock gas and production increases.
• Wellfield extraction environmental factors continuing to impact gas extraction at Rumpke and Apex sites.
• Changes made by landfill host to the wellfield collection system at the McCarty facility, contributing to elevated nitrogen and reduced feedstock quantity.
• Utility interconnection, both inbound to and outbound from the centralized Turkey, NC processing facility for Montauk Ag Renewables, is dependent on factors outside of the company's control.
• Regulatory developments and offtake negotiations could delay the ability to fully optimize or meet timing expectations related to revenue producing activities for Montauk Ag Renewables.
• Construction timeline and costs for Montauk Ag Renewables are subject to delays or cost increases.
• The proposed California Senate Bill SB-237, which includes a potential cap on LCFS credit prices of approximately $75/ton, could reduce net credits in the program.
• The duration of the US federal government shutdown and any residual impacts on EPA staffing may extend finalization of RFS rules into 2026.

Future Outlook

Montauk Renewables anticipates significant revenue generation from its Montauk Ag Renewables project in North Carolina starting in Q1 2026, with total investment projected between $180 million and $220 million. The company expects commissioning of the Bowerman RNG Facility, first CO2 deliveries to European Energy, and the Tulsa RNG conversion project in 2027. Increased benefits from the GreenWave joint venture are expected in Q4 2025. The company projects non-development capital expenditures between $14 million and $16 million and development capital expenditures between $90 million and $120 million for 2025. Management believes it has sufficient cash flows from operations and borrowing availability to meet debt service and anticipated capital expenditures for the next 12 to 24 months. The EPA's BRRR K2 separation rules are expected to impact RIN timing only in 2025. The company is reviewing the impacts of the Tax Reconciliation Act on future tax attributes and the proposed California Senate Bill SB-237 on LCFS credit prices.

Management Comments

• Our business model and technology are highly scalable given availability of biogas from agriculturally derived sources, which will allow us to continue to grow through prudent development and complimentary acquisitions.
• We expect this timing between RINs generated but unseparated and RINs available for sale to only impact 2025 which is the year BRRR became effective.
• We continue to expect to develop CO2 at select Texas facilities and are in discussions with EENA regarding our agreement.
• 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.
• While we believe these prices will not be based on solar REC prices seen in other US markets, those indices are more illustrative of our expectations of North Carolina swine REC prices than US market wind REC prices.
• We do not expect short term financial benefits from this joint development venture nor a disruption to our operations.
• We expect increased benefits from Greenwave in the fourth quarter of 2025 and have not directly recognized any significant share of profits.
• We have paused further capital expenditures related to this site while we consider all alternatives and continue discussions with the landfill host.
• We believe the impacts of the EPA BRRR reform and the 2024 proposed partial waiver of the 2024 RVO have temporarily impacted 2025 RIN purchase activity of RFS obligated parties.
• We strive to proactively address any issues that may arise through preventative maintenance, process improvement and flexible redeployment of equipment to maximize production and useful life.
• We are working with the landfill host but continue to have lower volumes of feedstock available to be processed at the McCarty facility.
• We place a primary focus on managing production volumes and operating and maintenance expenses as these factors are more controllable by us.
• We continue to expect increased general and administrative expenses associated with our ongoing development of Montauk Ag Renewables in 2025.
• We believe that we will have sufficient cash flows from operations and borrowing availability under our credit facility to meet our debt service obligations and anticipated required capital expenditures (including for projects under development) for the next 12 to 24 months.

Industry Context

The renewable natural gas industry is experiencing dynamic regulatory changes, including the EPA's RFS program adjustments (BRRR K2 separation, volume requirement waivers, SRE reallocations) and state-level initiatives like California's LCFS. While these programs aim to drive demand for RNG and its environmental attributes, they also introduce volatility and uncertainty in credit pricing. The proposed LCFS credit price cap in California and the elimination of the USDA Advanced Biofuel Payment Program highlight potential headwinds for revenue streams. However, the extension of the Production Tax Credit and enhanced bonus depreciation under the Tax Reconciliation Act offer favorable tax incentives for renewable energy projects. The industry continues to see investment in new development, particularly in agricultural waste-derived biogas, as companies like Montauk Renewables seek to expand capacity and diversify feedstock sources, despite challenges in project development and utility interconnections.

Corporate Governance

Legal Proceedings

• The company is not currently a party, nor is its property subject, to any material pending legal proceedings as of September 30, 2025.

Related Party Transactions

• The company entered into a Loan Agreement and Secured Promissory Note with Montauk Holdings Limited (MNK), an affiliate. The current principal balance of the loan is $10,690,000, due December 31, 2033, secured by 976,623 shares of the company's common stock held by MNK.
• On December 31, 2024, the company became the primary beneficiary of MNK, a variable interest entity, and consolidated MNK. This involved consolidating MNK's current assets ($85,000), current liabilities ($632,000), and long-term liabilities ($16,000), and eliminating the intercompany loan.
• The company recorded a noncash acquisition of Treasury stock ($8,309,000) related to the consolidation of the 976,623 shares of its common stock collateralizing the Fifth Amended Promissory Note.
• On March 5, 2025, the company repaid the RP47 loan (approximately $650,000) on MNK's behalf, as required under the TIA, after its Board of Directors approved the repayment on February 2, 2025.
• In September 2024, the company hired a landowner in North Carolina as an employee to assist in procuring additional long-term leases for feedstock collection systems, following a long-term lease signed in December 2023 with the same landowner.

Stakeholder Impact

• **Shareholders:** Significant decline in revenue, net income, and EBITDA, coupled with a substantial decrease in cash, could negatively impact shareholder value. Heavy capital expenditures for future growth projects represent both potential long-term upside and near-term financial strain and risk.
• **Employees:** Accelerated vesting of restricted share awards due to an employee termination indicates potential management or key personnel changes, which could affect morale or strategic direction. The company's 401(k) plan with matching and safe harbor contributions continues to support employee benefits.
• **Customers:** The Blue Granite RNG project's setback (utility no longer accepting RNG) could impact potential customers for that facility. The GreenWave joint venture aims to provide expanded RNG transportation pathways, potentially benefiting third-party RNG producers and users.
• **Suppliers/Partners:** Delays in wellfield collection infrastructure by landfill hosts and issues at McCarty facility (elevated nitrogen, reduced feedstock) highlight challenges in supplier relationships. The Emvolon collaboration and GreenWave joint venture represent new partnership opportunities.
• **Creditors:** The company remains in compliance with all financial covenants under its Amended Credit Agreement, providing some assurance. However, increased debt and reduced cash flows could be a concern if financial performance does not improve.

Next Steps

• Continue development efforts for the Montauk Ag Renewables project in North Carolina, with expected production and revenue generation to commence in Q1 2026.
• Negotiate remaining uncontracted Renewable Energy Credits (RECs) from projected first phase production volumes for Montauk Ag Renewables.
• Continue design and planning for the Turkey, NC facility for commercial production and use the Magnolia, NC location for various feedstock processing needs.
• Contract with additional farms to secure feedstock sources for future production processes for Montauk Ag Renewables.
• Continue incurring capital expenditures for the Bowerman RNG project, targeting commissioning in 2027.
• Continue discussions with European Energy North America (EENA) regarding the CO2 delivery agreement, targeting commissioning in 2027.
• Continue incurring capital expenditures for long lead items for the Tulsa RNG conversion project, targeting commissioning in 2027.
• Review various alternatives related to interconnection opportunities and other energy production for the Blue Granite RNG Facility, following the utility's refusal to accept RNG.
• Continue collaboration with landfill hosts to mitigate wellfield extraction environmental factors at Rumpke and Apex sites.
• Continue working with the landfill host at the McCarty facility to address elevated nitrogen and reduced feedstock volumes.
• Incur capital expenditures for long lead time equipment for the Rumpke RNG relocation project, targeting commissioning in 2028.
• Monitor and respond to regulatory developments, including the finalization of EPA RFS rules and CARB LCFS amendments.
• Evaluate the applicability and impacts of new tax attribute stack-ability and other amendments to energy tax credits enacted under the Inflation Reduction Act of 2022 and the Tax Reconciliation Act.

Key Dates

Recommendation

The company's Q3 2025 results and year-to-date performance show a substantial deterioration in key financial metrics, including significant declines in revenue, net income (to a loss), operating income, and Adjusted EBITDA. Cash and cash equivalents have fallen sharply. While Montauk Renewables is investing heavily in future growth projects, these are long-term endeavors with considerable capital requirements and inherent execution, regulatory, and market risks. The immediate outlook is clouded by lower realized RIN prices, regulatory uncertainties, and operational challenges at several facilities. Given the magnitude of the financial underperformance and the near-term headwinds, a seasoned investor would likely recommend selling the stock to mitigate further downside risk, despite the long-term potential of the renewable natural gas sector.

Keywords

Renewable Natural Gas, RNG, Renewable Electricity, Environmental Attributes, RINs, LCFS credits, RECs, Biogas, Landfill Gas, Anaerobic Digested Gas, Carbon Intensity, SEC Filing, 10-Q, Financial Results, Energy Transition, Sustainability, Clean Energy, Montauk Ag Renewables, Bowerman RNG, European Energy, Tulsa RNG, GreenWave, Emvolon, Capital Expenditures, Regulatory Risk, EPA RFS, CARB LCFS, Production Tax Credit, Inflation Reduction Act