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| Statement |
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| Despite lower overall production levels, we've been successful in continuing to grow sales into feed markets to ensure we take advantage of the premium pricing |
| But since commissioning the Eddy Shaft project in October, we've been filling our ponds at HB with some of the highest grade brine in Intrepid's history, which will translate to a production benefit we should see beginning with the fall 2024 harvest |
| During the fourth quarter, we saw continued strong demand for our fertilizer products |
| Overall, we think Intrepid is extremely well positioned |
| So we will have a significant logistical advantage from a transportation standpoint to the wells being – to the hundreds, if not thousands of wells that are currently permanent scheduled to be drilled |
| Longer term, we will remain constructive on the outlook for agriculture and fertilizer markets even with pricing for key crops recently coming down over the past few months |
| Our fourth quarter gross margin was double the prior year figure and our brine business is becoming a steady contributor with room for more organic growth, although we are still subject to quarterly fluctuations based on the timing of larger frac jobs like we saw in the fourth quarter |
| Putting this together, we expect the trend of yield maximization to continue past the upcoming spring application season, which, of course, is positive for fertilizer demand |
| To that extent, I'm excited to share that our recent production execution has put us on the path for a meaningful increase in production starting in the second half of the year |
| The non-potash growth projects already underway, namely sand and lithium, offer attractive returns and upside |
| The improvement in our unit economics will be gradual, but should start to be evident in the second half of 2024 and keep improving from there with the higher levels of potash production |
| So in 2024, it will be the first time in four years where we're injecting significantly more than we're withdrawing, which has very positive long-term benefits to your brine grades and the brine that's available to you |
| We're fortunate that the Eddy Shaft project turned out to be a little bit better than a stop gap, but IP30B will be in the heart of that brine pool of the best brine that's been cooking there for several years since the original IP30 well failed three years ago |
| I firmly believe that for the items we can control, our outlook is the best we've had in many years, and I'm excited in the direction we are going |
| Our next priority is maintaining a solid financial position with a strong balance sheet through the cycle |
| We have a very strong balance sheet, no long-term debt, a cash position of $35 million and $150 million revolver with maturity of August of 2027 |
| farmers over the past three years, they are currently in a very solid financial position |
| As Bob noted, returning our potash production to prior peak historical levels remains the most effective way of improving our margins with the first key inflection expected later this year |
| Market potash pricing has also recently stabilized at levels that are about 35% higher than the previous cycle, and we expect our sales to remain steady ahead of spring application |
| For many years, we've been successful in co-developing our respective interest within the DPA, and this amendment helps ensure that this continues, while also formalizing several items |
| I mean Q1 will certainly be our largest sales quarter for Trio, as Zach said, I mean, we got an early spring season, and then we're seeing strong demand there |
| Our primary business of selling a product that supports crops is forecast to see steady growth, and we are seeing price support for potash |
| So combining with the right strategic partner that understands our seasonality, understands DLE technology and is well financed our primary goals |
| And for 2023, our potash and Trio sales volumes were both up 16% compared to the prior year |
| We wish you a great week, and we really appreciate your interest in Intrepid |
| In Oilfield Solutions, our fourth quarter sales saw an approximately $2 million sequential increase, which was largely attributable to a roughly $3 million increase in our water sales from a large frac job on our South range |
| The current balance sheet cash is close to fully funding our 2024 capital program providing a solid cash runway until we see the positive impacts to our unit economics associated with the higher potash production expected later this year |
| That's where we achieved the highest concentrations of lithium |
| We've included comprehensive project updates in yesterday's earnings release, but for a quick summary on the key takeaway, we will forecast that our total potash production will be at least 10% to 15% in 2024 compared to 2023 with an additional 15% to 20% increase expected the following year and higher upside looking long-term |
| Finally, given our improved financial position and recent period of high investments, I'll end my remarks clarifying our capital allocation priorities as we look ahead |
| Statement |
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| To be clear, the well failure that happened in the fourth quarter of 2022 resulted in lost production somewhere between 60,000 and 100,000 tons at the HB facility |
| While our results continue to be negatively impacted by our current production profile, primarily due to the failure of our HB IP30A well in the fourth quarter of 2022 |
| In the fourth quarter, our potash production totaled 79,000 tons, which brings our 2023 calendar year production to 224,000 tons, reduced brine grades at HB and Wendover were the primary drivers of the lower-than-expected production |
| Significantly higher production costs from our lower production as well as moderating potash prices drove down the decline in profitability this year |
| Although our sales volumes and demand for our key products have remained steady, moderating potash pricing and higher unit costs associated with the lower production levels continue to be headwinds for our financial results |
| For segment highlights, in potash, our Q4 and 2023 sales volumes totaled 45,000 and 258,000 tons, respectively, with the fourth quarter volume down 10% compared to last year, while the full-year sales volumes increased 16% |
| But I want to be clear that we lost somewhere between 75,000 and 100,000 tons from that one big brine pool that we were unable to access still there |
| So that one well failure had a very significant impact on our overall production failure, and that's why I called it out in the early part of my remarks |
| It's just a function of tons and inventory and our 2023 production, obviously, being down |
| Unfortunately, the permitting took an unusual amount of time, it took us almost a year to repermit that replacement well |
| We expect to see the same decrease in our unit economics on potash, 10% to 15% |
| The number one strategic priority at every level within the company has been to correct our declining production trend |
| But like all of our sales seasonality and trends, I mean, we'll certainly see sort of tail off here towards the back half of Q2 |
| But it had a major impact to our production profile |
| Potash production will be inflecting higher following the summer's evaporation season, so we are only a few quarters away from seeing those results |
| farmer incomes off-peak years, which we saw back in 2012 and the period thereafter |
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