OPAL Fuels Inc. (OPAL) Earnings

Management highlights

- Core Financial & Production Results * Delivered adjusted EBITDA of $23.1 million, a 40% year-over-year increase, driven by 45Z production tax credits, FSS segment growth, and $3.2 million in G&A cost savings versus Q2 2025 * Ended the quarter with $162.2 million in total liquidity, including $91.4 million in cash, $19.3 million in available revolver capacity, and $51.6 million in undrawn preferred capital commitments * Invested over $52 million in the first half of 2026 in RNG construction projects, company-owned fuel stations, and finance transformation initiatives while maintaining strong financial flexibility - Strategic & Operational Growth Initiatives * Prioritizing low-capital production improvement initiatives at existing facilities, including technology upgrades to improve landfill gas collection quantity and quality, and operational efficiency training. These initiatives deliver high operating leverage, with nearly all incremental revenue flowing to EBITDA, as the only major variable cost is royalties to feedstock hosts * The company has 2 million MMBTU of annual design capacity under construction expected to come online over the next 12 months (Cottonwood, followed by Burlington, then CMS RNG), with an additional 1 million MMBTU of annual design capacity at the Stone's Throw and Grady Road joint venture projects planned to come online in 2028. Total incremental capacity of 3 million MMBTU per year is expected to come online within 24 months * The company has 3-5 additional renewable power projects being evaluated for conversion to RNG facilities, with top candidates totaling 4 million MMBTU of design capacity and additional opportunities adding 1-2 million MMBTU more * Upstream growth is supported by the company's vertically integrated model, with downstream fleet offtake from its fuel station business - Long-Term Market Positioning * The Renewable Fuel Standard is a stable long-term regulatory fixture, and the industry benefits from bipartisan support for Production Tax Credit and Investment Tax Credit programs that support biogas development * Opal is positioned to capture a large long-term energy arbitrage opportunity from fuel switching from diesel to natural gas/RNG in the $44 billion gallon U.S. heavy-duty diesel market, enabled by the new 15-liter engine technology. The company holds a strategic advantage selling RNG that combines natural gas' low-cost structural advantage with added sustainability benefits

Guidance

- Management maintained full-year 2026 adjusted EBITDA guidance originally provided at the start of the year - The maintained guidance implies $55-$70 million in adjusted EBITDA for the second half of 2026, up from ~$40 million in the first half of the year, driven by expected ramping production growth and modestly stronger RIN pricing in the second half - Production is expected to trend toward the lower end of the company's original full-year production guidance, but management remains confident overall results will land within the full-year guidance range due to financial discipline - SG&A is expected to increase in Q3 2026 as professional services, organizational investments, and transformation initiatives normalize, with these costs already incorporated into the full-year plan - Performance hitting the upper end of the guidance range is dependent on stronger-than-expected production growth and stronger RIN pricing; multiple levers including cost management and downstream segment performance also contribute to results

Segment performance

Opal Fuels reported consolidated Q2 2026 revenue of $83.4 million, a 4% year-over-year increase. 1. RNG Fuel Segment: Adjusted EBITDA increased to $18.6 million, up from $13.3 million year-over-year, with growth driven by 45Z production tax credits and higher production, offset by flat RIN pricing. RNG production hit 1.3 million MMBTUs, an 8% year-over-year increase, though production came in modestly below internal expectations. 2. Fuel Station Services (FSS) Segment: Adjusted EBITDA increased to $12.5 million, up from $10.9 million year-over-year, making it the primary driver of consolidated revenue growth in the quarter. 3. Renewable Power Segment: Adjusted EBITDA fell to $0.3 million, down from $2.2 million year-over-year. Lower performance is expected going forward as the company converts existing renewable power assets to RNG facilities, and the segment recorded a non-cash impairment in Q2 related to decommissioning for the CMS RNG project.

Risks & headwinds

- Q2 2026 RNG production came in modestly below management expectations, and current portfolio utilization is in the high 50% range of nameplate capacity, which management has stated it is not satisfied with - Implementation of plant improvement initiatives takes time for installation and coordination with landfill owners, so full production benefits may not be realized immediately - There is uncertainty around the timing and content of the upcoming EPA Set Rule 3 for the Renewable Fuel Standard, including unclear prospects for expanded eRIN pathways that could benefit the RNG industry - Pipeline interconnection risk remains for the CMS RNG project, though the company has a temporary backup virtual pipeline solution that will not impact project timing - Forward RIN prices for 2027 and beyond are dependent on regulatory policy outcomes for future RVO mandates, creating uncertainty for long-term pricing

Analyst Q&A

• Q: Can you elaborate on your most impactful existing plant improvement initiatives and their potential production upside?

  A: Production has natural seasonality, with Q1 cold weather followed by Q2 well field drilling that typically drives improvements in H2. Key initiatives include operational team training to improve efficiency and asset availability, plus new technology to improve landfill gas collection quantity and quality. These improvements have been deployed at two projects and will roll out to more facilities through 2026 and 2027. A 5-10% improvement across the company's 9 million MMBTU of existing nameplate capacity would deliver significant bottom-line growth due to the business' high operating leverage.

• Q: What are the RNG industry's policy priorities for the upcoming EPA Set Rule 3, and is there a chance for revised eRIN pathways?

  A: The industry wants the EPA to recognize RNG's potential as a transportation fuel, incentivize growth in the cellulosic category as required by existing statute, and acknowledge the projected RNG adoption curve. Policymakers broadly recognize that RNG-fueled natural gas heavy-duty transportation supports bipartisan goals of domestic energy dominance, lower inflation, job creation, and cleaner air. Expanded new eRIN pathways are unlikely to be a focus of this rulemaking, which will center more on policy for imported feedstocks, an area where Opal has no major stake as a fully domestic producer.

• Q: What is the size of the renewable power conversion pipeline and are there capex savings for conversion versus greenfield projects?

  A: The CMS RNG project, currently under development, is converted from an existing renewable power asset, and the company has 3-5 additional conversion candidates in its portfolio. Top candidates total 4 million MMBTU of design capacity, with another 1-2 million MMBTU of additional potential opportunities. There are no direct capital cost savings for conversions, but existing on-site infrastructure and pre-existing gas collection networks give the company better insight into project potential and reduce development uncertainty.

• Q: What is the timing for utilization improvements at newer plants and what is the status of 2026 and 2027 D3 RIN forward hedging?

  A: Management is not satisfied with current high-50% utilization across the portfolio and has concrete plans for improvements. Implementation takes time for coordination with landfill owners and technology installation, with meaningful improvements expected to start appearing in H2 2026. Meaningful forward trading volume for 2027 RINs typically does not open up until Q4, so Opal has not engaged in material 2027 hedging yet. Opal does not disclose granular hedging details for 2026, but confirms it is an active market participant and continues to hedge as appropriate.