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Q1 2025 Opal Fuels Inc Earnings Call

Adam Comora; Co-Chief Executive Officer; Opal Fuels Inc Jonathan Maurer; Co-Chief Executive Officer; Opal Fuels Inc Kazi Hasan; Chief Financial Officer; Opal Fuels Inc Adam Bubes; Analyst; Goldman Sachs Betty Zhang; Analyst; Scotiabank Craig Shere; Analyst; Tuohy Brothers Operator Good day and thank you for standing by. Welcome to the Opal Fuels, first quarter 2025 earnings results conference call. (Operator Instructions) Please be advised that today's conference is being recorded.I would now like to turn the conference over to your speaker for today, Todd Firestone, please go ahead. Thank you and good morning, everyone. Welcome to the Opal Fuels first quarter 2025 earnings conference call. With me today are co-CEO's Adam Comora; John Maurer; and Kazi Hasan, Opal's Chief Financial Fuels released financial and operating results for the first quarter of 2025 yesterday afternoon, and those results are available on the Investor Relations section of our website at and access to the webcast for this call are also available on our website. After completion of today's call, a replay will be available for 90 days. Before we begin, I'd like to run our remarks, including answers to your questions, contain forward-looking statements which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such factors that could cause or contribute to such differences are described on Slides 2 and 3 of our presentation. These forward-looking statements reflect our views as of the date of this call, and Opal Fuels does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this this call will contain discussion of certain non-GAAP measures, a definition of non-GAAP measures used in a reconciliation of these measures to the nearest GAAP measure is included in the appendix of the release and will begin today's call by providing an overview of the core's results and recent highlights and an update on our strategic and operational priorities. John will then give a commercial and business development update after which Kazi will review financial results. We'll then open the call for now I'll turn the call over to Adam Comora, co-CEO of Opal Fuels. Adam Comora Thanks, Todd. Good morning, everyone, and thank you for participating in Opal fuel's first quarter 2025 earnings quarter results were in-line with expectations. Performance across our business segments were solid, and we continue to execute on our strategic and operational objectives. First quarter adjusted EBITDA was $20.1 million, over 30% higher compared to the same period last first quarter, 2025 fuel station services segment EBITDA was approximately $12.5 million, 80% higher versus the first quarter of 2024. RNG fuel production for the quarter was 1.1 million MBTUs, up nearly 40% versus the same period last year and in-line with our Fuel Station Services segment continues to exhibit strong growth. As we often discuss, the strategic value of our vertical integration, which maximizes the value of RNG that we produce and makes us an attractive partner for new RNG business development opportunities, this segment also provides steady, predictable, and growing cash flow that improves economic returns to the overall business and dampens commodity price are maintaining our full year guidance set out in March and expect to see sequential quarterly RNG production growth throughout the year as our newer projects continue to ramp. We also anticipate continuing growth at our existing landfill RNG we are pleased with our execution, we are also cognizant of the uncertain macro and regulatory environments. Although we don't expect our business to be materially impacted by tariffs, recent trade policy uncertainties are causing delays in investment decisions in our customers and partners, including some of our logistics and trucking fleet delays are not materially enough for us to change our guidance regarding fuel station services, EBITDA growth for the year, but we are not yet seeing the acceleration of CNG, RNG adoption for heavy duty said, we are very encouraged by numerous factors supporting long-term adoption. Our view is driven by product availability of the Cummins 15-liter engine, which Freightliner now moving into production and addition, a new regulatory outlook has recognized the challenges of zero emission vehicles for the heavy duty market. This significantly expands the potential for adoption of RNG, CNG powered heavy duty this regulatory shift has positive implications for the continued growth of fuel station services, we are still waiting for regulatory clarity for the RNG fuel segment. We are continuing to monitor 45 implementation, final EPA rulings on the proposed partial waiver introduced in November of last year, and the upcoming set Rule 2, which will include volumes and other market balancing we are waiting for the regulatory backdrop to clarify, there is still strong bipartisan support for American biofuels and investment in that, I'll turn it over to John. John? Jonathan Maurer Thank you, Adam. And good morning, everyone. As Adam mentioned, our first quarter production results were 38% higher compared to the first quarter of 2024, driven primarily by increasing production at the facilities commissioned in the fourth quarter of we mentioned in March on our last earnings call, production from these facilities is growing, and we continue to see positive performance across our other operating facilities. We maintain our 2025 RNG production guidance of 5.0 million MMBTU to 5.4 million MMBTU, which at the midpoint is a 37% increase versus our in construction portfolio we have four landfill RNG projects in construction at Atlantic, Burlington, Cottonwood, and Kirby, which remain on schedule and represent in aggregate 2.1 million MMBTU of annual design expect Atlantic to commence commercial operations in the third quarter of this year and the next three during development pipeline has numerous near-term opportunities with secured gas rights, and we are maintaining our guidance to place 2 million MMBTU into construction in 2025. In fuel station services we have 45 stations in construction, of which 19 are Opal are maintaining our guidance to grow fuel station services 2025 adjusted EBITDA 30% to 50% versus 2024. 2025 is off to a good start and despite the mentioned near term uncertainties, longer term market fundamentals are supportive of our business plan and growth potential. Successful disciplined execution will result in increasing shareholder value.I'll now turn the call over to Kazi to discuss the quarter's financial performance. Kazi? Kazi Hasan Thank you, John, and good morning to everyone joining today's call. Last night, we issued our earnings press release outlining our results for the first quarter ended March 31, expect to file our Form 10-Q on Monday. Revenue and adjusted EBITDA for the quarter were $85.4 million, and $20.1 million respectively, compared to $64.9 million and $15.2 million in the same period last income was $1.3 million, up from $0.7 million in Q1 2024. This year-over-year quarterly growth reflects the continued ramp up of RNG production at facilities commissioned in 2024, along with the growth in our fuel station services in these results is Opal's share of adjusted EBITDA from equity method investments, which was $3.4 million for the quarter versus $6.5 million in Q1 2024. The year-over-year decrease is primarily driven by the timing of last year's ring sales and startup related expenses at new joint venture expenditures for the quarter total $17 million, including $5.4 million related to our equity method investments. As Adam mentioned, we maintain our full year 2025 guidance provided in March. We continue to expect adjusted EBITDA between $90 million and [$110] million, supported by RNG production of 5.0 million to 5.4 million guidance assumes D3 ring pricing of $2.60 per gallon for entire 2025. As of March 31, our total liquidity was $240 million. This includes $40 million plus of cash equivalents and short-term investments. More than $178 million of undrawn availability under our term credit facility. And little over $21 million of remaining capacity under our March, we also monetized approximately $8 million in investment tax credit, net proceeds, and expect roughly $50 million in total ITC sales in 2025, which bolsters our operating cash flow. We believe our current liquidity position combined with the operating cash flows will be sufficient to fund our existing capital plan and near term growth that, I'll now turn the call back over to John for closing remarks. Jonathan Maurer In closing, we are pleased with our first quarter of results. We remain well positioned for continued disciplined execution of our strategic growth objectives and the expansion of Opal's vertically integrated platform.I'll turn the call over now to the operator for Q&A. Thank you all for your interest in Opal Fuels. Operator (Operator Instructions) Derrick Whitfield, Texas Capital. Good morning all, and great update. Adam Comora Thanks, Derrick. Good morning. Well, my, first question, I wanted to lean in on your production trajectory for the year. Well, while flattish, so Q1 flattish versus Q4, your guidance implies a material increase in production over the course of the year as recent projects ramp and gas collection you perhaps speak to the cadence of production expectations for the year and then the improvement you're expecting in inlet design capacity utilization over the course of the year? Jonathan Maurer Hi, Derrick, John. I'll take this one. So production for the quarter was within our band of expectations, and production was somewhat affected by a couple factors, including an unusually cold winter affecting our landfill gas addition, we had some availability issues at our virtual pipeline projects. Which are not generally as reliable as direct connect projects. However, as you mentioned, we are expecting good sequential growth through the next several quarters consistent with our guidance, and this will come from improvements at existing projects, including landfill gas collection expansions at our open and growing landfills that are occurring typically this time of year and through the addition, our Polk project is going to be transitioning to a direct connect interconnection this month, which should serve to increase that reliability. We've also put in place a number of key additions over the last 5 months or so in the operating team there which should result in increasing efficiencies and availability across those projects and as we see the Atlantic project on track for commercial operations in the third quarter. We should expect to see results from that in the fourth as said, we remain confident in our output, and we'll see that sequential ramp over the course of the year. Terrific and maybe leaning in further just on your in construction RNG projects it appears as you've noted that these are generally progressing on kind of in-line with your expectations. Are you guys experiencing any leading edge inflation associated with tariffs? Adam Comora What you want to Kazi take that? Kazi Hasan Let me take that. Hi, Derrick. So on the tariff related, that we are not seeing any cost increase in our construction projects or even in our operating areas yet. I don't expect there's going to be a lot because all the construction projects has already, all the equipment's have been ordered like a fixed price contracts have been executed. So we don't expect a lot of implications on our current operations as well as the could be in future projects and we'll make those judgments as part of the FID when we make the final decision on the investments. And maybe just any color around how material that could be on future projects. Just from what you guys have been able to size up to date. Adam Comora So just as a guide, some of the future projects you already made qualifying investments for the ITC purposes, and so part of those costs has already been secured, didn't see a whole lot of improvement. You have, -- you remember all of our contents, we try to make it domestic more we, -- there could be implications on steel or aluminum all those areas, but we don't see a major implication. It remains to be seen. We don't know how this whole overall macro situation is going to clarify itself over the next three to six months. But to date, we don't see a major implication. That's great. I'll turn it back to the Operator. Operator Matthew Blair, TPH. Great. Thank you, and good morning. I want to talk about the win pricing you achieved in the first quarter. It was down quarter-to-quarter, but still extremely strong relative to the benchmark index. I think we show you capturing about 112% of the benchmark index. Could you talk about the drivers here and is this something that you might be able to replicate in Q2 and going forward? Adam Comora Yeah. Thanks Matt, Adam Comora here. We did have an average realized written price of about 271 in the first quarter, and we typically -- We don't like to speculate on where in prices are going or where public policy is going to go, and we typically have a philosophy that we are going to sell as we our -- and we also don't like to talk about too much, our trading philosophy and policy. I would say that our second quarter in price will likely be lower than what it was in the first quarter and our position for the year is basically about 50% that we have sold and sort of supported by our outlook for our guidance. Sounds good. And then the growth that you're expecting this year in [FSS] 30% to 50% of EBITDA growth coming off a pretty strong number in 2024. Could you talk about -- and is it possible for you to split, how much of that growth is simply coming from higher volumes, it sounds like you're building 19 of your own stations, and then how much of that growth is coming from expectations of stronger margins due to an increasingly tight dispensing market. Adam Comora Yeah, so this is Adam again, and there are obviously, a few subsegments within fuel station services, and we're seeing good strong performance across all of those and some of that comes from Opal Fuel stations that we own and then charge that tolling or compression had a number of those facilities come online in '24 and a number coming online in '25, so you annualize, the ones that came on throughout the year last year and the new ones coming on this year. Our construction business continues to perform well in terms of anticipated margins and our service business there continues to grow as well as we have sort of full service contracts and those could be on stations that we build and then service after the there is a component to higher utilization and throughput of our dispensing network as RNG volumes continue to flow through there. So it's really all four of those pieces that are that continue to drive growth in fuel station services. Great. Thanks for your comments. Operator Martin Malloy, Johnson Rice and Company. Good morning. Thank you for taking my questions. First question, just bigger picture. Could you maybe talk about how you're thinking about returning capital to shareholders, potentially dividend policy as you achieve, the growth at which you'll -- at which time you'll start to generate some meaningful discretionary free cash flow. Adam Comora Yeah, Matt, this is Adam Comora here, and I appreciate that question because certainly, our largest shareholder and all of our shareholders are interested in maximizing shareholder value and returning value in any number of this really goes to the flexibility that we have in terms of how we deploy capital and what do we do with the free cash flow generation that's going to be coming to maximize and enhance shareholder we're sitting in a position where we have a very strong opportunity set of biogas projects that we can either deploy capital and accelerate growth if they still achieve our required unlever rates of return, that free cash flow generation can also be used in M&A opportunities to enhance the platform and be a creative to shareholder value or if those things don't materialize and you're no longer achieving rates of return that you want on new capital have the flexibility to delever and return cash to shareholders through those mechanisms that you were talking about or, I know we're trying to achieve, better float and liquidity, and we've taken some actions to be doing that with our shareholder buybacks in the future could always be something that you look at right now, we like the opportunity set that we have in front of us to continue to deploy capital and grow our company in these new types of projects and by the way, it could either come in fuel station services where we think there could be a real robust opportunity coming for CNG, RNG in the heavy duty trucking market or, some real attractive large RNG projects to deploy capital there and we're also cognizant of other ways to create shareholder value from the free cash flow. Thank you for that answer. And for my second question, I want to ask about potential on the electric power side, with respect to your facilities. Maybe if you could talk about what you're seeing there from customer interest or potential projects. Adam Comora Yeah, this is Adam again. Because the renewable power segment we don't really talk a lot about and I think it's a really interesting use for smaller biogas or biogenic methane abatement, quite frankly, and I think people understand the benefits of renewable power from biogas where its base load power enhances grid typically in rural areas or municipality owned, and there are a number of different ways to accelerate or incentivize development in that area, and we think that's going to be. Now, we have talked historically about an RIN policy as being something that could be really effective to drive investment in that space and create incremental value for Opal if it's not the RIN policy, we think that there could be other interesting offtake markets for that. I know a lot of data centers were looking for low carbon intensity base load renewable electricity, and we'll see if those types of offtake markets develop and provide that good economic return and that sort of we don't have anything to report on that front just yet today, and I think also if you look at our financial statements, you'll see we're not making a lot of money on renewable electricity today, and this is also something we try and educate the folks in DC about is that, not there's not one size fits all. We always think there's this good, better, best policy with what to do with biogenic think the worst answer is to flare it locally and we think a good answer is to turn it into renewable electricity for the reasons that we said. And if you have a high enough by if you have a large enough emissions source, your best answer is to turn it into RNG where you're capturing the full value, the full energy there because those landfill gas electric projects aren't the most efficient. They do take higher heat rates to create your we think, that resonates with folks. We just haven't seen yet, where that shakes out in terms of how to best structure either policy around it or seeing it that commercial offtake, but we do think it's going to be coming. Jonathan Maurer And I'll just add that as always our electric project portfolio has represented, the raw material for converting these long-term gas rights into RNG projects, and we expect to see that continuing over the course of this year and next. Great, thank you. I'll turn it back. Operator Adam Bubes, Goldman Sachs. Adam Bubes Hi, good morning. I was wondering if you could just update us on your latest thoughts around potential timelines and outcomes of the next iteration of biogas policy. Adam Comora Adam, this is Adam here, and there's a lot going on. So when you talk about biogas policy, obviously we have a lot of things happening within the EPA with the renewable fuel standard, and there's a lot of tax policy coming as maybe I'll start on the tax policy first, and then we can move into the RFS and on the tax policy, it seems like, from the news that I've been reading. We could be seeing, some new tax bills coming out, any day next week, and it sounds like there could be some energy tax policy included in that. And if you recall when we gave guidance for the year, we had a minimum to very small amounts of 45Z included in our guidance feels like -- And I want to just talk from a super high level about what it is that we do again and why, we think that there is Republican and bipartisan support for the capture of this, biogenic methane from organic waste, which by the way, will are going to continue to have biogenic methane coming from that organic waste that we create and the animals that we use for our food supply create and it is broadly supported that we should be doing something about that biogenic it pertains to the tax policy, the one that we're waiting for clarity on that 45Z, we think, we'll be seeing that pretty quickly and it's also pretty interesting too because when we talk about our vertical integration. It also gives us diversity to public policy outcomes as well, because not only in the tax policy are people talking about 45Z, but they're also talking about this RNG incentive Act, which really would accrue to the downstream fuel station services. Whether it's an RNG dispensing tax credit or something that comes back on the fuel usage so we think that we'll start to get a little bit of clarity around that probably in the coming we'll see where it shakes out on how the Greek model is going to work and whether or not it's at the novel tip for dispensing or whether it's on the production side for 45Z or maybe some combination of both, but it does feel like there's broad-based bipartisan support for some of that stuff to be included on the tax on the RFS. I'm seeing reports and I'm sure you guys are seeing reports as well that you know the EPA is really trying to keep the timelines on when they put out rules and establish their rule making cadence and timeline so we read the same things that everybody else reads where we could see that coming in the coming as far as, the RFS goes, there has been a considerable amount of focus and attention on liquid biofuels, and I can understand that, there was a lot of investments made. In converting refiners to be able to create renewable diesel, and I think previous set rules, weren't as supportive for a lot of the investments that were made in that area and you saw that sort of played through in various (inaudible) pricing for various categories and I think there's been a lot of focus on that side of there hasn't been as much attention paid to the cellulosic category or as much as we would like to see and the interesting thing there is we actually want the same things as a lot of the liquid advanced biofuels in terms of strong volumes across advanced you have a holistic view on how you're managing the RFS, we think the cellulosic waiver credit, can make a lot of sense so that the obligated parties can achieve their compliance. And if you've got, sort of, a functioning working RIN market across the spectrum of those advanced. Biofuels, then you can have that price cap that can really work and support new RNG if you do the math on what it can look like, in '26 and '27 or however long they do a set rule for, it's really supportive of new investment in RNG and that sort of thing and it's not to say, it's always a straight line and we don't know exactly how the rules are going to be, but we do feel like what we do, is does have that broad bipartisan support and we don't know, where all these things necessarily shake I can tell you is that. It does feel like investment in these sort of RNG products projects and the productive use of that biogenic methane, is broadly supported, whether it be renewable natural gas in heavy industries like heavy duty trucking or potentially marine fuel and capturing those smaller emission sources for renewable electricity and we'll see where potentially there's positive tax policy or potential positive outcomes out of the RFS, and we -- I do believe that we will start getting that regulatory clarity over the next, I don't know, a month or two, and we'll see how long it takes to finalize any of those rules.I would say on the 45Z, that starts Jan 1, 2025. We obviously haven't created any of those tax credits or sold any, but that is something that, would be, active for the entire answer because it's a there's many layers to that onion. Absolutely. And I appreciate all the thoughts there. And then my last question, it looks like your RNG, EBITDA per (inaudible) is around $18 in the quarter. Just wondering if you can help us think about puts and takes around the trajectory of EBITDA per MMBTU from one hand, it sounds like, the three RIN credit prices might step slightly lower sequentially on the other, I would imagine as you ramp up projects OpEx [prime] maybe moves lower as you spread that OpEx over more production. So just how are you thinking about the trajectory of EBITDA per MMBTU from here? Adam Comora So Kazi here. Let me answer that question. I think it's a bit, -- it's a simpler than what it may sound. If you think about John has mentioned the secular growth in our RNG production throughout the year from the existing facilities plus the ramp up of projects we put in construction end of last that production would be, what the RIN price going to look like. We already mentioned that we have done pretty well on the RIN price last quarter. It will be less for the second quarter and third quarter and fourth quarter, depending on the weather RIN price are, we are assuming for the rest of the year it is going to show up at 260. And so it's simpler, sequentially growing and moderated by how the RIN price is shaping up. Adam Bubes Great, thanks so much. Operator Betty Zhang, Scotiabank. Betty Zhang Great, thanks. Good morning. So my first question, I was wondering if you could talk about the renewable power segment. In the first quarter, it looks like revenues were down quite a bit and as results were down quite a bit as well. So just curious what the drivers were there. Jonathan Maurer So on this John, in the renewable power segment, last year we had the ISCC pathway in that segment and that -- those contracts terminated, so there was a substantial decrease from those contracts being terminated in the fourth that's principally where you're seeing the differences there, otherwise it's a pretty consistent performer. In the future, you might see decreases as projects move from renewable power into construction or operation as RNG projects, but otherwise, it should be fairly seeing good opportunities for a contracting the power output of those projects as well as RIN prices in certain, -- [wreck] prices in certain markets as well. So other than that, Betty, I think that's the principal driver of the change. Adam Comora Yeah, this is Adam here. I just want to follow up on that. I think, as people might remember we were enjoying an international export market for through renewable power and that lapsed in November of last year. So there will be a couple more quarters of that which was already baked into our guidance and factored into our business plan for it opened up a, sort of a, it made me think about a little broader conversation on tariffs because we did get that first earlier question on tariffs which don't have a material impact on the projects in construction and as Kazi had mentioned, we don't think we'll have two material an impact as we're evaluating some of the new project opportunities in front of -- but it made me think again about, with some of those indirect implications on tariffs, when we talk about RNG and we're talking about, US public policy and how the RFS potentially plays out and what's happening in our domestic tax policy here, an indirect effect of tariffs are we don't have an export market currently for the RNG that we produce and we think that that's going to be a really interesting opportunity, once all that stuff shakes out, when those international markets open up again, whether it be for renewable power or other potential markets for RNG, and there, once those sorts of things shake out and you get European pathways back, we think that's an interesting opportunity for us. Betty Zhang Great, that's helpful. Thanks. In the first quarter, I also wanted to ask about, what looks like a pretty substantial income tax benefit, around $8 million. So just curious if there was anything to point out there. Adam Comora Yeah, those are the sale of our ITC section 48 tax credits. If folks remember we don't include the cash proceeds from the sale of the Section 48 ITC Tax credits and it's not included in our EBITDA guidance, but it is included in net income and cash flow. So that's what that $8 million was -- where Kazi was referring earlier somewhere anticipated to be about $50 million in 2025. Betty Zhang Got it. Thank you. Operator (operator Instructions) Craig Shere, Tuohy Brothers. Craig Shere Hi, thanks for taking the questions. Even a hazy at the moment RNG margin outlook, pending regulatory certainty certainly looks a hell of a lot better these days than E-RIN's prospects. Depending on what we see in coming weeks and months, is there room to accelerate conversion of biofuel power projects to RNG. Adam Comora Yeah, I mean that's what excited about. We have a number of projects that we've got secured biogas rights on. And a number of conversion projects and quite frankly, a number of those are sizable projects and wherever that public policy shakes out, it really, defines what your opportunity set is, right?So if there is RIN price volatility, we still have a lot of subset of larger projects that we can still underwrite and make a lot of sense. So and at the same time we're being disciplined and prudent, the way our business is structured is, these projects do require a significant amount of take ballpark 18, 24 months to develop and finish out construction on. So you typically spend the money early and up front and then you recognize, significant free cash flow for a long period of time once the projects are we also balance, how quickly we move on our development, based on whatever the externalities are, be it public policy, capital markets, what have you. So we've really got the ability to either accelerate development and grow faster or be prudent and manage the balance sheet effectively as well to make sure that you don't, as our Chairman likes to say, get over your skis and so we've got the ability to either, lean in and accelerate development or stage it out as the projects come online and you deliver the free cash flow. Craig Shere Great, and my second kind of big picture question, obviously we're, you're hearing from multiple, parties that downstream continues to look strong. You obviously have a nice construction program going on there, but uptake on the 15 litre CMI engines seems to be slower than kind of thinking into the end of the decade, macro Trump administration policies obviously support accelerated domestic liquids production and production from our allies, as well as heavily stair stepping LNG exports. So a really fearful, worst case scenario outlook. Might envision, what are we going to do if there's $50 or lower crude and $4 higher systemically Henry Hub gas. Are you hearing any concerns about that? Adam Comora This is Adam again, and I would say no. I think natural gas is going to stay cheap to oil for as long as the eye can see, specifically here in North America, and I want to remind everybody, when we got into the fuel station service segment, I don't know, 13 years ago or so, we always had the eye that ultimately there was going to be this strategic value of vertically integrating with all of our biogas at the same time we were really excited about the prospect of compressed natural gas as a transportation fuel. We always thought if you could take natural gas and turn it into an oil substitute, it was a good way to take, advantage of an energy arb between those two I think that's going to continue for, quite frankly, as long as the eye can see, given what it costs to produce crude versus what it costs to lift that gas. Here in the US and as far as the uptake of the 15 litre engine, we're really encouraged by what we're seeing and people realizing that it is a good answer to even if you're just using CNG, you're going to get 20% emission reductions versus diesel and quite frankly it's disinflationary. When you look at the cost of the fuel versus when we talk about the quote unquote slower uptake or why aren't we there yet, it's been a confluence of factors of product availability where we didn't have a freight line or engine, which is, I don't know, 40% or so of the market until really just now at the at the recent ACT I think and you've also got now this macro, environment where, trade looks like it's a little challenge right now so we've seen really good adoption and our base business is really around more recession -- a resistant kind of businesses refuse, moving food and beverages and that sort of thing around the when we talk about the slower uptake, it's really around those logistics and transportation fleet customers that didn't have a product until this 15 litre engine showed up. And I would also say when we were getting into it 13 or 14 years ago, everybody was doing it for the economics, right?People weren't really as focused on sustainability or emission profiles back then. And back then you were talking about a 60,000 premium for the 12 litre tractor versus where it is today. Now I think this period of uncertainty is also sort of healthy and we think we're getting to a place where the economics are going to work on CNG versus once we do that, we think we're also opening up a whole new area of growth where RNG today is about what, 2% of the diesel market and even if we do a fantastic job, capturing all the biogenic methane, RNG could maybe grow 7, 8, 9, 10 times from where it is an opportunity for CNG, once we get the, maybe the price premium down a little more, which should happen with scale, once -- and a lot of those and there's some structural things we also need to address there and make sure there's a residual market for tractors when people want to trade out of them and a lot of those for higher fleets, typically operate in a 1 to 3 year contract shippers, that was the other thing from Act Expo is we saw a lot of collaboration with the shippers that are hiring these four hire fleets that really want to see them transition into it, and they're starting to realize, hey, maybe we need to do 4 or 5 year contracts so that a 5 year payback, for those tractors, can really, help accelerate we see a lot of positives coming and we see a little, that policy shift away from trying to make that one, zero emission work for every industry shifting, and people are going to lean in on it. So I'm not overly concerned about, what may be, a short term oil price move that that shrinks the economics a little bit, we think long term there's going to be a very attractive economic incentive between CNG and diesel. Craig Shere Do you really think that customers are willing to look at 4 to 5 year paybacks, versus say as little as 1 to 2? Adam Comora That's a really interesting question because I think if you talk to most C-suites out there, they would say a 4 to 5 year payback is pretty attractive on capital. I think if they get contracts that support that kind of time frame and maybe they have better visibility on residual values, I think the answer is Yes.I think a lot of public companies are willing to trade CapEx for OpEx as well. So I think the answer is yes. We'd like to, and by the way, there's some customers obviously that can see shorter paybacks, and right now what happens in the industry is the RNG producers are making RNG more attractive and shrinking the payback by passing along, some of the in value to those yes and no, some companies, yes, and provided they have contracts on the other side of it, yes. If a fleet owns their own tractor and keeps it for 10 years, then the answer is pretty easy for them, right? So we'll see how it all plays that plays out, and we're still trying to work and, hopefully more competition will bring down that incremental price for that I think there's also some coming, DEF requirements that maybe causes that diesel tractor to go up in price and that shrinks the premium. So we're getting there though on the economics of CNG on its own. Not quite there yet, but we're pretty close to getting there. Craig Shere Appreciate the answers. Thank you. Operator Thank you. And this does conclude today's Q&A session. There are no more questions in the queue, and I would like to turn the call back over to Adam Comora for closing remarks. Please go ahead. Adam Comora All right, we thank everybody for your interest in Opal Fuels, and hope everybody enjoys the rest of the day. Operator Thank you for participating. You may all disconnect.