`

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39919

MONTAUK RENEWABLES, INC.

(Exact name of registrant as specified in its charter)

Delaware	85-3189583
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
5313 Campbells Run Road, Suite 200 Pittsburgh, Pennsylvania	15205
(Address of Principal Executive Offices)	(Zip Code)

(412) 747-8700

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MNTK	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock on May 3, 2024 was 143,698,263 shares.

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION		6
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 4.	CONTROLS AND PROCEDURES	41
PART II OTHER INFORMATION		42
ITEM 1.	LEGAL PROCEEDINGS	42
ITEM 1A.	RISK FACTORS	42
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	42
ITEM 4.	MINE SAFETY DISCLOSURES	42
ITEM 5.	OTHER INFORMATION	42
ITEM 6.	EXHIBITS	43
SIGNATURES		44

```

Glossary of Key Terms

This Quarterly Report on Form 10-Q uses several terms of art that are specific to our industry and business. For the convenience of the reader, a glossary of such terms is provided here. Unless we otherwise indicate, or unless the context requires otherwise, any references in this Quarterly Report on Form 10-Q to:

•“ADG” refers to anaerobic digested gas.

•“CARB” refers to the California Air Resource Board.

•“CNG” refers to compressed natural gas.

•“CI” refers to carbon intensity.

•“D3” refers to cellulosic biofuel with a 60% GHG reduction requirement.

•“EPA” refers to the U.S. Environmental Protection Agency.

•“Environmental Attributes” refer to federal, state and local government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy.

•“FERC” refers to the U.S. Federal Energy Regulatory Commission.

•“GHG” refers to greenhouse gases.

•“JSE” refers to the Johannesburg Stock Exchange.

•“LCFS” refers to Low Carbon Fuel Standard.

•“LFG” refers to landfill gas.

•“MMBtu” refers to Metric Million British Thermal Unit.

•“PPAs” refers to power purchase agreements.

•“RECs” refers to Renewable Energy Credits.

•“Renewable Electricity” refers to electricity generated from renewable sources.

•“RFS” refers to the EPA’s Renewable Fuel Standard.

•“RINs” refers to Renewable Identification Numbers.

•“RNG” refers to renewable natural gas.

•“RVOs” refers to renewable volume obligations.

3

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of U.S. federal securities laws that involve substantial risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. Forward-looking statements may include words such as “anticipate,” “assume,” “believe,” “can have,” “contemplate,” “continue,” “strive,” “aim,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “might,” “objective,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “would,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. For example, all statements we make relating to our future results of operations, financial condition, expectations and plans, including expected benefits of the Pico digestion capacity increase, the Montauk Ag project in North Carolina, the Second Apex RNG Facility, the Blue Granite RNG Facility, the Bowerman RNG Facility, the delivery of biogenic carbon dioxide volumes to European Energy, the resolution of gas collection issues at the McCarty facility, the mitigation of wellfield extraction environmental factors at the Rumpke facility, and weather-related anomalies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to:

•our ability to develop and operate new renewable energy projects, including with livestock farms, and related challenges associated with new projects, 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;

•the inability to complete strategic development opportunities;

•widespread manmade, natural and other disasters (including severe weather events), health emergencies, dislocations, geopolitical instabilities or events, terrorist activities, international hostilities, government shutdowns, political elections, security breaches, cyberattacks or other extraordinary events that impact general economic conditions, financial markets and/or our business and operating results;

•continued inflation could raise our operating costs or increase the construction costs of our existing or new projects;

•rising interest rates could increase the borrowing costs of future indebtedness;

•the potential failure to attract and retain qualified personnel of the Company or a possible increased reliance on third-party contractors as a result, and the potential unenforceability of non-compete clauses with our employees;

•the length of development and optimization cycles for new projects, including the design and construction processes for our renewable energy projects;

•dependence on third parties for the manufacture of products and services and our landfill operations;

•the quantity, quality and consistency of our feedstock volumes from both landfill and livestock farm operations;

•reliance on interconnections with and access to electric utility distribution and transmission facilities and gas transportation pipelines for our Renewable Natural Gas and Renewable Electricity Generation segments;

•our projects not producing expected levels of output;

•potential benefits associated with the combustion-based oxygen removal condensate neutralization technology;

•concentration of revenues from a small number of customers and projects;

•our outstanding indebtedness and restrictions under our credit facility;

•our ability to extend our fuel supply agreements prior to expiration;

•our ability to meet milestone requirements under our PPAs;

•existing regulations and changes to regulations and policies that effect our operations;

•expected benefits from the extension of the Production Tax Credit and other tax credit benefits under the Inflation Reduction Act of 2022;

4

•decline in public acceptance and support of renewable energy development and projects, or our inability to appropriately address environmental, social and governance targets, goals, commitments or concerns, including climate-related disclosures;

•our expectations regarding Environmental Attribute volume requirements and prices and commodity prices;

•our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act (“JOBS Act”);

•our expectations regarding future capital expenditures, including for the maintenance of facilities;

•our expectations regarding the use of net operating losses before expiration;

•our expectations regarding more attractive CI scores by regulatory agencies for our livestock farm 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 our planned livestock farm projects;

•sustained demand for renewable energy;

•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, changing weather patterns and conditions, and natural disasters;

•failure of our information technology and data security systems;

•increased competition in our markets;

•continuing to keep up with technology innovations;

•concentrated stock ownership by a few stockholders and related control over the outcome of all matters subject to a stockholder vote; and

•other risks and uncertainties detailed in the section titled “Risk Factors” in our latest Annual Report on Form 10-K and as otherwise disclosed in our filings with the SEC.

We make many of our forward-looking statements based on our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in our other Securities and Exchange Commission (“SEC”) filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties. See the “Risk Factors” section in our latest Annual Report on Form 10-K and our other filings with the SEC.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

5

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

	Page
Montauk Renewables, Inc.
Unaudited condensed consolidated financial statements
Unaudited consolidated balance sheets	7
Unaudited consolidated statements of operations	8
Unaudited consolidated statements of stockholders’ equity	9
Unaudited consolidated statements of cash flows	10
Notes to unaudited condensed consolidated financial statements	11

6

MONTAUK RENEWABLES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data):

	as of March 31,			as of December 31,
ASSETS	2024			2023
Current assets:
Cash and cash equivalents	$	63,277		$	73,811
Accounts and other receivables		9,669			12,752
Current restricted cash		8			8
Income tax receivable		98		—
Current portion of derivative instruments		766			785
Prepaid expenses and other current assets		2,801			2,819
Total current assets	$	76,619		$	90,175
Non-current restricted cash	$	443		$	423
Property, plant and equipment, net		231,373			214,289
Goodwill and intangible assets, net		18,178			18,421
Deferred tax assets		1,827			2,076
Non-current portion of derivative instruments		580			470
Operating lease right-of-use assets		4,275			4,313
Finance lease right-of-use assets		17			36
Related party receivable		10,148			10,138
Other assets		11,229			9,897
Total assets	$	354,689		$	350,238
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	12,323		$	7,916
Accrued liabilities		12,127			12,789
Income tax payable	—				313
Current portion of operating lease liability		447			420
Current portion of finance lease liability		7			26
Current portion of long-term debt		8,878			7,886
Total current liabilities	$	33,782		$	29,350
Long-term debt, less current portion	$	52,651		$	55,614
Non-current portion of operating lease liability		4,056			4,133
Non-current portion of finance lease liability		9			10
Asset retirement obligations		6,001			5,900
Other liabilities		3,860			4,992
Total liabilities	$	100,359		$	99,999
Commitments and contingencies (Note 20)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 690,000,000 shares; 143,732,811 shares issued at March 31, 2024 and December 31, 2023; 141,986,189 shares outstanding at March 31, 2024 and December 31, 2023		1,420			1,420
Treasury stock, at cost, 984,762 shares March 31, 2024 and December 31, 2023		(11,173	)		(11,173	)
Additional paid-in capital		216,619			214,378
Retained earnings		47,464			45,614
Total stockholders' equity		254,330			250,239
Total liabilities and stockholders' equity	$	354,689		$	350,238

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

7

MONTAUK RENEWABLES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except for share and per share data):

	for the three months ended March 31,
	2024			2023
Total operating revenues	$	38,787		$	19,154
Operating expenses:
Operating and maintenance expenses		14,451			14,182
General and administrative expenses		9,427			9,475
Royalties, transportation, gathering and production fuel		6,518			3,933
Depreciation, depletion and amortization		5,434			5,196
Impairment loss		528			451
Transaction costs		61			83
Total operating expenses	$	36,419		$	33,320
Operating income (loss)	$	2,368		$	(14,166	)
Other expenses (income):
Interest expense	$	1,165		$	1,675
Other (income) expense		(1,060	)		7
Total other expenses	$	105		$	1,682
Income (loss) before income taxes	$	2,263		$	(15,848	)
Income tax expense (benefit)		413			(12,060	)
Net income (loss)	$	1,850		$	(3,788	)
Income (loss) per share:
Basic	$	0.01		$	(0.03	)
Diluted	$	0.01		$	(0.03	)
Weighted-average common shares outstanding:
Basic		141,986,189			141,633,417
Diluted		142,369,219			141,633,417

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

8

MONTAUK RENEWABLES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data):

	Common stock				Treasury stock
	Shares		Amount		Shares		Amount			Additional paid-in capital		Retained earnings			Total equity
Balance at December 31, 2022		141,633,417	$	1,416		971,306	$	(11,051	)	$	206,060	$	30,666		$	227,091
Net loss		—		—		—		—			—		(3,788	)		(3,788	)
Stock-based compensation		—		—		—		—			1,770		—			1,770
Balance at March 31, 2023		141,633,417	$	1,416		971,306	$	(11,051	)	$	207,830	$	26,878		$	225,073
Balance at December 31, 2023		141,986,189	$	1,420		984,762	$	(11,173	)	$	214,378	$	45,614		$	250,239
Net income		—		—		—		—			—		1,850			1,850
Stock-based compensation		—		—		—		—			2,241		—			2,241
Balance at March 31, 2024		141,986,189	$	1,420		984,762	$	(11,173	)	$	216,619	$	47,464		$	254,330

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

9

MONTAUK RENEWABLES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands):

	for the three months ended March 31,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	1,850		$	(3,788	)
Adjustments to reconcile net income (loss) to net cash provided by operating    activities:
Depreciation, depletion and amortization		5,434			5,196
Provision (benefit) for deferred income taxes		249			(13,033	)
Stock-based compensation		2,241			1,770
Derivative mark-to-market adjustments and settlements		(91	)		396
Net loss on sale of assets		22			37
(Decrease) increase in earn-out liability		(849	)		214
Accretion of asset retirement obligations		108			100
Liabilities associated with properties sold		(225	)		—
Amortization of debt issuance costs		90			93
Impairment loss		528			451
Changes in operating assets and liabilities:
Accounts and other receivables and other current assets		1,639			1,033
Accounts payable and other accrued expenses		3,296			(4,307	)
Net cash provided by (used in) operating activities	$	14,292		$	(11,838	)
Cash flows from investing activities:
Capital expenditures	$	(21,986	)	$	(13,278	)
Asset acquisition		(820	)		—
Cash collateral deposits, net		20		—
Net cash used in investing activities	$	(22,786	)	$	(13,278	)
Cash flows from financing activities:
Repayments of long-term debt	$	(2,000	)	$	(2,000	)
Finance lease payments		(20	)		(18	)
Net cash used in financing activities	$	(2,020	)	$	(2,018	)
Net decrease in cash and cash equivalents and restricted cash	$	(10,514	)	$	(27,134	)
Cash and cash equivalents and restricted cash at beginning of period	$	74,242		$	105,606
Cash and cash equivalents and restricted cash at end of period	$	63,728		$	78,472
Reconciliation of cash, cash equivalents, and restricted cash at end of    period:
Cash and cash equivalents	$	63,277		$	78,043
Restricted cash and cash equivalents - current		8			22
Restricted cash and cash equivalents - non-current		443			407
	$	63,728		$	78,472
Supplemental cash flow information:
Cash paid for interest	$	1,237		$	1,211
Cash paid for income taxes		574			63
Accrual for purchase of property, plant and equipment included in accounts    payable and accrued liabilities		7,492			2,995

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

10

MONTAUK RENEWABLES, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per-share amounts)

NOTE 1 – DESCRIPTION OF BUSINESS

Operations and organization

Montauk Renewables’ Business

Montauk Renewables, Inc. (the “Company” or “Montauk Renewables”) is a renewable energy company specializing in the management, recovery and conversion of biogas into Renewable Natural Gas (“RNG”). The Company captures methane, preventing it from being released into the atmosphere, and converts it into either RNG or electrical power for the electrical grid (“Renewable Electricity”). The Company, headquartered in Pittsburgh, Pennsylvania, has more than 30 years of experience in the development, operation and management of landfill methane-fueled renewable energy projects. The Company has current operations at 14 operating projects located in California, Idaho, Ohio, Oklahoma, Pennsylvania, North Carolina, South Carolina and Texas. The Company sells RNG and Renewable Electricity, taking advantage of Environmental Attribute premiums available under federal and state policies that incentivize their use.

Two of the Company’s key revenue drivers are sales of captured gas and sales of Renewable Identification Numbers (“RINs”) to fuel blenders. The Renewable Fuel Standard (“RFS”) is an Environmental Protection Agency (“EPA”) administered federal law that requires transportation fuel to contain a minimum volume of renewable fuel. RNG derived from landfill methane, agricultural digesters and wastewater treatment facilities used as a vehicle fuel qualifies as a D3 (cellulosic biofuel with a 60% greenhouse gas reduction requirement) RIN. The RINs are compliance units for fuel blenders that were created by the RFS program in order to reduce greenhouse gases and imported petroleum into the United States.

An additional program utilized by the Company is the Low Carbon Fuel Standard (“LCFS”). This is state specific and is designed to stimulate the use of low-carbon fuels. To the extent that RNG from the Company’s facilities is used as a transportation fuel in states that have adopted an LCFS program, it is eligible to receive an Environmental Attribute additional to the RIN value under the federal RFS.

Another key revenue driver is the sale of captured electricity and the associated environmental premiums related to renewable sales. The Company’s electric facilities are designed to conform to and monetize various state renewable portfolio standards requiring a percentage of the electricity produced in that state to come from a renewable resource. Such premiums are in the form of Renewable Energy Credits (“RECs”). The Company’s largest electric facility, located in California, receives revenue for the monetization of RECs as a part of a purchase power agreement.

Collectively, the Company benefits from federal and state government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy, as Environmental Attributes.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the SEC on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024 (the “2023 Annual Report”). The results of operations for the three months ended March 31, 2024 in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2023, has been derived from the audited financial statements as of that date. For further information, refer to the Company’s audited financial statements and notes thereto included for the year ended December 31, 2023 in the 2023 Annual Report.

11

Segment Reporting

The Company reports segment information in three segments: RNG, Renewable Electricity Generation and Corporate. This is consistent with the internal reporting provided to the chief operating decision maker who evaluates operating results and performance. The aforementioned business services and offerings described in Note 1 are grouped and defined by management as two distinct operating segments: RNG and Renewable Electricity Generation. The Corporate segment primarily consists of general and administrative expenses not allocated to RNG and Renewable Electricity Generation. Below is a description of the Company’s segments and other activities.

The RNG segment represents the sale of gas sold at fixed-price contracts, counterparty share RNG volumes and applicable Environmental Attributes. This business unit represents the majority of the revenues generated by the Company.

The Renewable Electricity Generation segment represents the sale of captured electricity and applicable Environmental Attributes. Corporate relates to additional discrete financial information for the corporate function. It is 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.

Use of Estimates

The preparation of financial statements, in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to the current guidance on contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The FASB included a sunset provision within Topic 848 based on expectations of when the LIBOR would cease being published. The sunset provision has been amended from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company’s current debt agreement bears interest at the Bloomberg Short-Term Bank Yield Index Rate plus an applicable margin. LIBOR is no longer utilized as a reference rate.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segments. The amendments in 2023-07 aim to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in 2023-09 aim to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for the Company's Annual Report on Form 10-K for the year ended December 31, 2025, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

NOTE 3 – ASSET IMPAIRMENT

The Company recorded an impairment loss of $528 and $451 for the three months ended March 31, 2024 and 2023, respectively. On February 18, 2024, for one of its REG sites, the Company entered into a bill of sale, assignment and assumption agreement to sell its rights to the existing fuel supply agreement and property back to the site host in advance of the fuel supply agreement termination date and received $1,000 in proceeds. The effective date of the sale, assignment and assumption agreement is October 1, 2024. The Company elected to cease operations prior to the assignment date and consequently the remaining book value of long lived assets and intangibles were impaired for $312. The remaining $216 impairment was for various RNG equipment that was deemed obsolete or inoperable for current operations. The first quarter 2023 impairment was for a feedstock processing machine component at an RNG site that was not in operational use.

NOTE 4 – REVENUES FROM CONTRACTS WITH CUSTOMERS

The Company’s revenues are comprised of renewable energy and related Environmental attribute sales provided under short and medium term contracts with its customers. All revenue is recognized when (or as) the Company satisfies its performance obligation(s)

12

under the contract (either implicit or explicit) by transferring the promised product or service to its customer either when (or as) its customer obtains control of the product or service. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The Company allocates the contract’s transaction price to each performance obligation using the product’s observable market standalone selling price for each distinct product in the contract.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products or services. As such, revenue is recorded net of allowances and customer discounts as well as net of transportation and gathering costs incurred by the customer following the transfer of control of the commodities sold. To the extent applicable, sales, value add and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis.

The Company’s performance obligations related to the sale of renewable energy (i.e. RNG and Renewable Electricity) are generally satisfied over time. Revenue related to the sale of renewable energy is generally recognized over time using an output based upon the product quantity delivered to the customer. This measure is used to best depict the Company’s performance to date under the terms of the contract. Revenue from products transferred to customers over time accounted for approximately 26% and 55% of revenue for the three months ended March 31, 2024 and 2023, respectively.

The nature of the Company’s contracts may give rise to several types of variable consideration, such as periodic price increases. This variable consideration is outside of the Company’s influence as the variable consideration is dictated by the market. Therefore, the variable consideration associated with the contracts is considered fully constrained.

The Company’s performance obligations related to the sale of Environmental Attributes are generally satisfied at a point in time and were approximately 74% and 45% of revenue for the three months ended March 31, 2024 and 2023. The Company recognizes Environmental Attribute revenue at the point in time in which the customer obtains control of the Environmental Attributes, which is generally when the title of the Environmental Attribute passes to the customer upon delivery. In limited cases, title does not transfer to the customer and revenue is not recognized until the customer has accepted the Environmental Attributes.

The following tables display the Company’s disaggregated revenue by major source based on product type and timing of transfer of goods and services for the three months ended March 31, 2024 and 2023:

	Three months ended March 31, 2024
	Goods transferred at a point in time		Goods transferred over time		Total
Major goods/Service line:
Natural gas commodity	$	349	$	7,186	$	7,535
Natural gas environmental attributes		26,332		—		26,332
Electric commodity		—		3,031		3,031
Electric environmental attributes		1,889		—		1,889
	$	28,570	$	10,217	$	38,787
Operating segment:
RNG	$	26,681	$	7,186	$	33,867
REG		1,889		3,031		4,920
	$	28,570	$	10,217	$	38,787

	Three months ended March 31, 2023
	Goods transferred at a point in time		Goods transferred over time		Total
Major goods/Service line:
Natural gas commodity	$	204	$	7,877	$	8,081
Natural gas environmental attributes		6,644		—		6,644
Electric commodity		—		2,621		2,621
Electric environmental attributes		1,808		—		1,808
	$	8,656	$	10,498	$	19,154
Operating segment:
RNG	$	6,848	$	7,877	$	14,725
REG		1,808		2,621		4,429
	$	8,656	$	10,498	$	19,154

13

Practical expedients and remaining performance obligations

The Company recognizes the sale of natural gas and electric commodities using the right to invoice practical expedient. The Company determined that the revenues recognized as of period end correspond directly with the value transferred to customers and the Company's satisfaction of the performance obligations to date. Furthermore, with the application of the right to invoice practical expedient and in consideration that contracts related to future environmental attributes sales do not exceed one year, there are no remaining unsatisfied or partially satisfied performance obligations as of March 31, 2024 and December 31, 2023, respectively.

NOTE 5 – ACCOUNTS AND OTHER RECEIVABLES

The Company extends credit based upon an evaluation of the customer’s financial condition and, while collateral is not required, the Company periodically receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. Reserves for uncollectible accounts, if any, are recorded as part of general and administrative expenses in the consolidated statements of operations. No reserve expense was recorded for the three months ended March 31, 2024 and 2023.

Accounts and other receivables consist of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
Accounts receivables	$	9,431	$	12,557
Other receivables		164		148
Reimbursable expenses		74		47
Accounts and other receivables, net	$	9,669	$	12,752

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024			December 31, 2023
Land	$	1,568		$	748
Buildings and improvements		36,314			30,329
Machinery and equipment		270,112			255,421
Gas mineral rights		35,526			35,526
Construction work in progress		67,113			67,747
Total	$	410,633		$	389,771
Less: Accumulated depreciation and amortization		(179,260	)		(175,482	)
Property, plant & equipment, net	$	231,373		$	214,289

Depreciation expense for property plant and equipment was $5,081 and $4,807 for the three months ended March 31, 2024 and 2023, respectively. Amortization expense for gas mineral rights was $91 and $128 for the three months ended March 31, 2024 and 2023, respectively.

In February 2024, the Company completed an Asset acquisition with a privately-held entity. The Company paid $820 for land located in North Carolina. The Asset acquisition was accounted for as an asset purchase in accordance with ASC 805, Business Combinations, and the purchase price has been allocated all to land within Property, plant and equipment, net on the Company's Consolidated Balance Sheet.

14

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill and intangible assets consist of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
Goodwill	$	60	$	60
Intangible assets with indefinite lives:
Land use rights		328		329
Total intangible assets with indefinite lives:	$	328	$	329
Intangible assets with finite lives:
Interconnection, net of accumulated amortization    of $4,032 and $3,847	$	14,401	$	14,584
Customer contracts, net of accumulated    amortization of $17,295 and $17,254		3,389		3,448
Total intangible assets with finite lives:	$	17,790	$	18,032
Total Goodwill and Intangible assets	$	18,178	$	18,421

As of March 31, 2024, the weighted average remaining useful life for both customer contracts and interconnections were 15 years. Amortization expense was $243 for both the three months ended March 31, 2024 and 2023.

NOTE 8 – ASSET RETIREMENT OBLIGATIONS

The Company accounts for asset retirement obligations by recording the fair value of the liability in the period in which it is incurred. The Company estimates the fair value of asset retirement obligations by calculating the estimated present value of the cost to retire the asset. Factors that are considered when determining the present value of the cost to retire the asset include future inflation and discount rates, along with estimates date(s) of retiring the asset. Additionally, changes in legal, regulatory, environmental, and political environments can affect the fair value of the obligations. As such, asset retirement obligations are considered a level 3 financial instrument.

The $218 change in estimates for the three months ended March 31, 2024 were due to RNG fuel supply agreement extensions and an RNG project that necessitated reassessments. The $225 decrease in the liability was due to an REG site sale as described in Note 3.

The following table summarizes the activity associated with asset retirement obligations of the Company as of March 31, 2024 and December 31, 2023:

	Three months ended March 31,			Year ended December 31,
	2024			2023
Asset retirement obligations—beginning of period	$	5,900		$	5,493
Accretion expense		108			407
Changes in estimate		218		—
Liabilities associated with properties sold		(225	)	—
Asset retirement obligations—end of period	$	6,001		$	5,900

NOTE 9 – DERIVATIVE INSTRUMENTS

To mitigate market risk associated with fluctuations in interest rates, the Company utilizes swap contracts under a board-approved program. The Company does not apply hedge accounting to any of its derivative instruments, and all realized and unrealized gains and losses from changes in derivative values are recognized in earnings each period. As a result of the economic hedging strategies employed, the Company had the following realized and unrealized gains and losses in the consolidated statements of operations for the three months ended March 31, 2024 and 2023:

		Three months ended March 31,
Derivative Instrument	Location	2024		2023
Interest rate swaps	Interest expense		91		(396	)
Net gain (loss)		$	91	$	(396	)

15

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s assets and liabilities that are measured at fair value on a recurring basis include the following as of March 31, 2024 and December 31, 2023, set forth by level, within the fair value hierarchy:

	March 31, 2024
	Level 1		Level 2		Level 3			Total
Interest rate swap derivative asset	$	—	$	1,346	$	—		$	1,346
Asset retirement obligations		—		—		(6,001	)		(6,001	)
Pico earn-out liability		—		—		(4,260	)		(4,260	)
	$	—	$	1,346	$	(10,261	)	$	(8,915	)

	December 31, 2023
	Level 1		Level 2		Level 3			Total
Interest rate swap derivative asset	$	—	$	1,255	$	—		$	1,255
Asset retirement obligations		—		—		(5,900	)		(5,900	)
Pico earn-out liability		—		—		(5,109	)		(5,109	)
	$	—	$	1,255	$	(11,009	)	$	(9,754	)

The three levels of the fair value hierarchy under authoritative guidance are described as follows:

Level 1: Observable inputs that reflect unadjusted quoted market prices in active markets for identical assets or liabilities.

Level 2: Inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices for similar assets or liabilities in inactive markets and other observable information that can be corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data, but significant to the fair value measurement.

A summary of change in the fair value of the Company’s Level 3 instrument, attributable to asset retirement obligations, for the three months ended March 31, 2024 and the year ended December 31, 2023 is included in Note 8. The Company’s earn-out fair value liability at its Idaho digester site is determined by calculating the estimated present value of the future obligation. The present value is assessed quarterly and is based on macro-economic factors such as inflation and risk free US Treasury rates. Company specific estimates utilized include current and future interest rates, digester inlet gas flow and projected EBITDA. A weighted average probability approach is utilized for the variables discussed above. The earn-out is classified as a Level 3 financial instrument and changes in the balance are recorded in Accrued liabilities and Other liabilities within the Consolidated Balance Sheets and in the Royalties, transportation, gathering and production fuel within the Consolidated Statements of Operations. Interest rate swap derivatives are classified as Level 2 financial instruments and are valued utilizing quoted forward Bloomberg Short-Term Bank Yield Index Rates. In addition, certain assets are measured at fair value on a non-recurring basis when an indicator of impairment is identified and the assets’ fair values are determined to be less than its carrying value. See Note 3 for additional information.

NOTE 11 – ACCRUED LIABILITIES

The Company’s accrued liabilities consists of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
Accrued expenses	$	2,285	$	3,983
Payroll and related benefits		1,940		2,355
Royalty		5,673		3,897
Utility		1,394		1,653
Accrued interest		764		827
Other		71		74
Accrued liabilities	$	12,127	$	12,789

16

NOTE 12 – DEBT

The Company’s debt consists of the following as of March 31, 2024 and December 31, 2023:

	March 31, 2024			December 31, 2023
Term loans	$	62,000		$	64,000
Less: current principal maturities		(9,000	)		(8,000	)
Less: debt issuance costs (on long-term debt)		(349	)		(386	)
Long-term debt	$	52,651		$	55,614
Current portion of long-term debt		8,878			7,886
Total debt	$	61,529		$	63,500

Amended Credit Agreement

On December 12, 2018, Montauk Energy Holdings LLC (“MEH”), a wholly owned subsidiary of the Company, entered into the Second Amended and Restated Revolving Credit and Term Loan Agreement (as amended, “Credit Agreement”), by and among MEH, the financial institutions from time to time party thereto as lenders and Comerica Bank, as the administrative agent, sole lead arranger and sole bookrunner (“Comerica”). The Credit Agreement (i) amended and restated in its entirety MEH’s prior revolving credit and term loan facility, dated as of August 4, 2017, as amended, with Comerica and certain other financial institutions and (ii) replaced in its entirety the prior credit agreement, dated as of August 4, 2017, as amended, between Comerica and Bowerman Power LFG, LLC, a wholly-owned subsidiary of MEH.

On March 21, 2019, MEH entered into the first amendment to the Credit Agreement (the “First Amendment”), which clarified a variety of terms, definitions and calculations in the Credit Agreement. The Credit Agreement requires the Company to maintain customary affirmative and negative covenants, including certain financial covenants, which are measured at the end of each fiscal quarter. On September 12, 2019, the Company entered into the second amendment to the Credit Agreement (the "Second Amendment"). Among other matters, the Second Amendment redefined the Fixed Charge Coverage Ratio (as defined in the Credit Agreement), reduced the commitments under the revolving credit facility to $80,000, redefined the Total Leverage Ratio (as defined in the Credit Agreement) and eliminated the RIN Floor (as defined in the Second Amendment) as an Event of Default. In connection with the Second Amendment, the Company paid down the outstanding term loan by $38,250 and the resulting quarterly principal installments were reduced to $2,500.

On January 4, 2021, the Company, Montauk Holdings Limited (“MNK”) and Montauk Holdings USA, LLC (a direct wholly-owned subsidiary of MNK at the time, “Montauk USA”) entered into a series of transactions, including an equity exchange and a distribution collectively referred to as the “Reorganization Transactions,” that resulted in the Company owning all of the assets and entities (other than Montauk USA) previously owned by Montauk USA, and Montauk Renewables became a direct wholly-owned subsidiary of MNK. In connection with the completion of the Reorganization Transactions and the IPO, the Company entered into the third amendment to the Credit Agreement (the “Third Amendment”). This amendment permitted the Change of Control provisions, as defined in the underlying agreement, to permit the Reorganization Transactions and the IPO to be completed.

On December 21, 2021, MEH entered into the fourth amendment to the Second Amended and Restated Revolving Credit and Term Loan Agreement ("the Fourth Amendment"). The current credit agreement, which is secured by a lien on substantially all assets of the Company and certain of its subsidiaries, provides for a $80,000 term loan, a $120,000 revolving credit facility, and includes a $75,000 accordion feature. The term loan amortizes in quarterly installments of $2,000 through 2024, then increases to $3,000 from 2025 to 2026, with a final payment of $32,000 in late 2026.

The Company accounted for the Fourth Amendment as both a debt modification and debt extinguishment in accordance with ASC 470, Debt (“ASC 470”). In connection with the Credit Agreement, the Company paid $2,027 in fees. Of this amount, $326 was expensed and $1,701 was capitalized and will be amortized over the life of the Credit Agreement. Amortized debt issuance expense was $90 and $93 for the three months ended March 31, 2024 and 2023, respectively, and was recorded within interest expense on the consolidated statement of operations.

As of March 31, 2024, $62,000 was outstanding under the term loan. In addition, the Company had $2,505 of outstanding letters of credit as of March 31, 2024. Amounts available under the revolving credit facility are reduced by any amounts outstanding under letters of credit. As of March 31, 2024, the Company’s capacity available for borrowing under the revolving credit facility was $117,495. Borrowings of the term loans and revolving credit facility bear interest at the Bloomberg Short-Term Bank Yield Index Rate plus an applicable margin. Interest rates as of March 31, 2024 and December 31, 2023 were 6.18% and 6.11%, respectively.

As of March 31, 2024, the Company was in compliance with all applicable financial covenants under the Credit Agreement.

17

NOTE 13 – INCOME TAXES

The Company’s provision for income taxes in interim periods is typically computed by applying the estimated annual effective tax rates to income or loss before income taxes for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. For the three months ended March 31, 2024, the Company utilized an estimated effective tax rate.

	Three months ended
	March 31, 2024			March 31, 2023
Expense (benefit) provision for income taxes	$	413		$	(12,060	)
Effective tax rate		18	%		76	%

The effective tax rate of 18% for the three months ended March 31, 2024 was lower than the rate for the three months ended March 31, 2023 of 76% primarily due to reported pre-tax income for the three months ended March 31, 2024 and a reported pre-tax loss for the three months ended March 31, 2023.

Income tax expense for the three months ended March 31, 2024 was calculated using an estimated effective tax rate which differs from the U.S. federal statutory rate of 21% primarily due to the adjustment for production tax credits.

NOTE 14 – SHARE-BASED COMPENSATION

The board of directors of Montauk Renewables adopted the Montauk Renewables, Inc. Equity and Incentive Compensation Plan (“MRI EICP”) in January 2021. Following the closing of the IPO, the board of directors of Montauk Renewables approved the grant of non-qualified stock options, restricted stock units and restricted share awards to the employees of Montauk Renewables and its subsidiaries in January 2021. In connection with the restricted share awards, the officers of the Company made elections under Section 83(b) of the Code. Pursuant to such elections, the Company withheld 950,214 shares of common stock from such awards at a price of $11.38 per share from such awards. The Company records and reports restricted shares and restricted stock units when vested and in the case of options, when such awards are settled in the Company’s common stock. Stock compensation expense related to these awards was $357 and $543 for the three months ended March 31, 2024 and March 31, 2023, respectively.

In connection with a May 2021 asset acquisition, 1,250,000 restricted share awards (“RS Awards”) were granted to two employees that were hired by the Company in connection with such acquisition. The RS Awards were to vest over a five-year period and subject to the achievement of time and performance-based vesting criteria over such period. In May 2022, the RS Awards were amended to remove the performance-based vesting criteria and will only be subject to time-based vesting requirements over a five-year period. The awards were revalued at $15,500. Stock compensation expense related to the two awards was $1,227 for both the three months ended March 31, 2024 and 2023.

In April 2023, the board of directors of the Company approved the grant of non-qualified stock options to the executive officers of the Company, which vest ratably over a period of three to five years. In September 2023, the board of directors approved the grant of non-qualified stock options to a new executive officer of the Company, which vest ratably over a period of three to five years. Stock compensation expense related to these awards was $657 for the three months ended March 31, 2024.

The restricted shares, restricted stock units and option awards are subject to vesting schedules and are subject to the terms and conditions of the MRI EICP and related award agreements including, in the case of the restricted share awards, each officer having made an election under Section 83(b) of the Code.

Options granted under the MRI EICP allow the recipient to receive the Company’s common stock equal to the appreciation in the fair market value of the Company’s common stock between the grant date and the exercise and settlement of options into shares as of the exercise dates. The fair value of the MRI EICP options was estimated using the Black-Scholes option pricing model. Three

18

blocks of options have been awarded since inception of the plan with the following weighted-average assumptions (no dividends were expected):

	September 2023 Awards
Options awarded		225,000
Risk-free interest rate	4.44%-4.65%
Expected volatility	71%-73%
Expected option life (in years)	3.5-5.5
Grant-date fair value	$