OPAL Fuels Inc. (OPAL) Earnings

Management highlights

- Market Opportunity for Heavy-Duty CNG/RNG - Momentum is building for new CNG/RNG fleet deployments in the large untapped heavy-duty trucking market, which currently holds only a 2% share of the 45 billion gallon U.S. heavy-duty diesel market - Key catalysts include high and volatile diesel pricing, regulatory clarity for natural gas combustion engines, and successful testing of the Cummins X15N 15-liter natural gas engine - CNG/RNG offers strong economic value and helps fleets meet ESG goals, and abundant low-cost North American natural gas is expected to maintain a cost advantage over oil long-term - New deployments will start at small percentages within large fleets, with capitalization on market opportunity expected to unfold over a multi-year timeline - Upstream Operational Performance - Upstream RNG facilities outperformed prior year production even amid an extraordinarily cold Q1 winter, with 9% year-over-year production growth driven by operational efficiency improvements - More than 2 million MMBTU of annual design capacity from in-construction projects is expected to come online over the next 12 months - Operational improvements and technology upgrades (including AI adoption) are being implemented across existing facilities to improve gas collection, uptime, and utilization, with consistent annual growth in biogas resources - Market and Environmental Credit Updates - The EPA released its final rule with 2026 and 2027 renewable volume obligation (RVO) targets aligned with industry expectations - D4, D5, and D6 RIN prices have risen dramatically to over $2, and D3 RIN prices now exceed $2.50, with further increases expected through 2026 - Financial and Capital Position - Opal Fuels completed $288 million in financing transactions in Q1 2026, including an $180 million preferred stock facility and full drawdown of the remaining $109 million on its term loan - The company ended Q1 with $233 million in total liquidity, consisting of $133 million in cash/short-term investments, $60 million in undrawn preferred facility commitments, and $39 million in revolver availability - The company also monetized $11.5 million in ITC credits and completed a $100 million multi-year agreement to monetize Section 45Z production tax credits - Strategic Model - Opal's vertically integrated model (upstream RNG production + downstream fueling network) creates competitive advantages for both new upstream project development and downstream fleet customer acquisition

Guidance

- Management maintained full-year 2026 financial guidance, unchanged from prior releases - Production growth is expected to accelerate starting in Q2 2026, following Q1 winter-related disruptions, with full-year production targets on track to be met - Year-over-year earnings comparisons will be easier starting in Q2 2026, with the toughest comparable period expected to be Q4 2026 due to a very low SG&A base in Q4 2025 - No material full-year decline in Fuel Station Services EBITDA is expected in 2026, with growth anticipated but not outsized - Initial contributions from new heavy-duty fleet deployments will not appear in 2026 financial results, with first modest contributions expected in 2027 - Management expects meaningful long-term growth starting in 2027 and beyond driven by accelerating adoption of CNG/RNG in heavy-duty trucking

Segment performance

Upstream RNG segment: First quarter 2026 revenue contribution is not explicitly split, but RNG production hit 1.2 million MMBTU, up 9% year-over-year. Adjusted EBITDA for the overall company was $16.7 million, down $3.4 million from $20.1 million in Q1 2025, with a $0.30 decline in D3 RIN realized prices reducing EBITDA by approximately $4 million. Total company revenue was $73.3 million, down from $85.4 million in Q1 2025. Fuel Station Services segment: First quarter 2026 EBITDA was $9.2 million, down $1.7 million from $10.9 million in Q1 2025. The decline was driven by lower construction revenues, lower RIN prices, and timing of maintenance expenses. Opal-owned stations generate contracted, volume-based tolling revenue with limited RIN pricing exposure, as variable costs are passed through to customers.

Risks & headwinds

- Extreme winter weather can disrupt RNG production via frozen collection systems, freezing at project facilities, and unexpected power outages, while also increasing operating expenses - RIN price volatility materially impacts near-term earnings, with D3 RIN price declines driving a $4 million EBITDA headwind in Q1 2026 - Fuel station construction revenue and maintenance expenses can be lumpy based on project timing, creating quarterly earnings volatility - Large-scale heavy-duty fleet adoption of CNG/RNG is expected to unfold over multiple years, with limited financial impact in the near term - Capital allocation requires balancing multiple competing priorities (existing platform improvements, new upstream RNG projects, new downstream fueling stations, M&A) to avoid overexposure to any single segment

Analyst Q&A

• Q: What factors are driving momentum around fleet conversions, and when will this translate into higher dispensing volumes? /

  A: High and volatile diesel pricing, regulatory clarity for natural gas combustion engines, and successful testing of the Cummins X15N engine have combined to push large fleets toward decision-making. Initial deployments will begin in 2026, but small starting penetration means the first material contributions to volumes and earnings will not appear until 2027. This is the start of a multi-year, long-term sector conversion process.

• Q: How much impact did Q1's extreme cold weather have, and how will production progress through the rest of 2026 to meet full-year guidance? /

  A: Cold weather caused freezing in collection systems and RNG projects, plus unplanned power outages, and also increased Q1 operating expenses. Despite these disruptions, production still grew year-over-year. The company is adding cold-resilience improvements like heat tracing and insulation to assets. Production growth is expected to accelerate starting in Q2 as weather warms and well field expansion projects come online, with full-year guidance still on track.

• Q: What is management's current thinking on returning capital to shareholders via a dividend? /

  A: Management currently sees far stronger risk-adjusted returns from reinvesting capital into high-opportunity projects on both the upstream RNG and downstream fuel station sides of the business. The company will only consider implementing a dividend or other capital return policies when attractive reinvestment opportunities are no longer available.

• Q: How does M&A fit into current capital allocation strategy, relative to greenfield projects? /

  A: The recent Amoresco-Haasi transaction provided intriguing valuation signals for the upstream RNG sector, and many independent RNG developers are facing execution challenges that create M&A opportunities. Opal's vertical integration gives it a unique advantage in evaluating potential acquisitions. Capital remains disciplined: cash will first fund committed in-construction projects, then remaining dry powder will be allocated to the highest return opportunities across greenfield upstream projects, downstream stations, and M&A, with a focus on long-term portfolio stability.