Good morning, and welcome to the Green Plains Inc. and Green Plains Partners Second Quarter 2023 Earnings Conference Call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in listen-only mode. I will now turn the call over to your host, Phil Boggs, Executive Vice President, Investor Relations. Mr. Boggs, please go ahead.

Thank you, and good morning, everyone. Welcome to Green Plains Inc. and Green Plains Partners second quarter 2023 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer; Jim Stark, Chief Financial Officer; and Leslie van der Meulen, EVP, Product Marketing and Innovation. There is a slide presentation available, and you can find it on the Investor page under the Events and Presentations link on both corporate websites. During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press releases and the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Todd Becker.

Thanks Phil, and good morning, everyone and thanks for joining our call today. So during the quarter, we were challenged by several events that held us back a quarter from showing you the results of the transformation as we experienced several significant events that negatively impacted what would have been a good quarter. The first was our Wood River incident, which took one of our largest locations down for most of the quarter. This impacted the company was over $18 million in total and we expect some recovery from insurance in the last half of the year so some of this will be coming back. In addition, during Q2 our platform was in need of significant upgrades to prepare for 2024 and beyond. And while we had some planned downtime, we also experienced a high level of unplanned downtime in Gen 1, which also had an impact on Gen 2 production volumes and sales and hedges that we had in place already to lock the quarter in. The challenges that our other plants came later in the quarter and really was a June event in the highest margin environment, which we were unable to take advantage of. With that said, we had put Q2 hedges onto locking over $0.20 a gallon in results and unfortunate timing of these events took most of that away. On the last call, we indicated $0.12 to $0.17 a gallon opportunity on paper and we were tracking accordingly and better through the end of May, but did not get Wood River released back to us and up and running until weeks later than expected. In addition to unplanned outages, with this downtime behind us, we are now operating at near full rate for both ethanol and ultra-high protein operations. And even more important, Wood River…

Thank you, Todd and good morning everyone. Green Plains consolidated revenues for the second quarter were $857.6 million, $154.8 million or approximately 15% lower than the same period a year ago. The lower revenues correlate to the lower production gallons of approximately 16% year-over-year for the second quarter, our plant utilization rate was 81.5% during the quarter comparing to the 96.9% run rate reported in the same period last year. As Todd mentioned earlier in the call, we anticipate our plants to perform much better in the second half of 2023. Targeting utilization rates in the low to mid 90 percentage range of our stated capacity with all plants now operating. For the quarter, we reported net loss attributable to Green Plains of $52.6 million or an $0.89 loss per diluted share that compares to net income of $46.4 million or $0.73 per diluted share for the same period in 2022. Adjusted EBITDA for the quarter was a negative $14.9 million compared to the $56.7 million in the prior year as well as 2022. Depreciation and amortization expense was higher by $3.7 million versus a year ago. Due to the addition of the MC technology builds all on a line and operating at the end of last year. We realized a $0.01 per gallon consolidated crush for Q2 of 2023 that compares to $0.28 per gallon crush in the prior year. On a sequential quarter-to-quarter basis, we saw the consolidated crush margin per gallon strength in $0.08 when compared to the first quarter of this year. Our Ag and Energy segment recorded a $2.9 million in EBITDA that's about $7.9 million lower than the prior year. This decline was driven by lack of opportunities on our merchant businesses, which ebbs and flows with each year, quarter-to-quarter. For the second quarter,…

Thanks Jim. So there’s a lot to talk about and I know we have limited time. And while Q2 was challenging, the last half of 2023 and 2024 looks solid and our path forward is gaining traction and looking better. For a couple years now we have been talking about the transformation to a 2.0 ag-tech sustainable producer of high value ingredients focused on the four pillars of protein, renewable corn oil, clean sugar and decarbonization. And the future is now. Quickly on decarbonisation which is a bit out of our normal order, but probably under appreciated. This is one of the several reasons we are gaining traction in our clean sugar technology products and protein. Carbon scores do matter. We are now less than two years away from what we believe is a significant financial opportunity when we decarbonize a majority of our platform as the incentive structures are firmly in place. Don’t underestimate or discount our carbon and pipeline strategy, as we believe all roads will lead to alcohol to jet sustainable aviation fuel production. Importantly though, CI, carbon intensity of all of our ingredients will be reduced even further, which is a key selling point for our Ultra-High Protein today and our clean sugar technology dextrose in the future. We literally received our latest protein lifecycle carbon intensity yesterday score, which shows a 46% lower score for our high protein products comparing to corn gluten meal globally, aligning this data with PEF, ISO and ISCC PLUS rules. This is very important to pet food and aquaculture producers globally. In addition, our CST, carbon intensity cannot be matched by current products in the market today, which is why we are in significant negotiations with more demand than we can supply over the next several years, more later on…

Thank you. [Operator Instructions] Your first question comes from Craig Irwin from ROTH Capital. Craig, please go ahead.

Good morning and thanks for taking my questions.

Good morning, Craig.

Todd, so – hey, good morning. So High Pro 900 tons a day, line of sight on 60 Pro. You did exactly what you said you would do, right? There’s been a lot of learning there and it’s kind of been nothing ever goes in a straight line, right? And most investors these days are now starting to look forward to clean sugar. Can you maybe just describe for us some of the things that you learned from the rollout of High Pro that translate into clean sugar? Obviously you’re starting in a different place given the own Fluid Quip here. But I’m sure there’s some important things you can share with us to help us understand what clean sugar looks like from an execution standpoint with all the learnings you’ve had in the last couple years.

Yes. I think – thanks for the question. I think our ramp up for sugar will be significantly different from the learnings we had in our ramp up from protein. We underappreciated the difficulty at times to put a new technology in place. But I think as we rolled out more and more of our sites, we learned every day and then we saw better results in terms of how we built them and how we run them. And we’re even seeing today it just as we optimize our protein technologies, when we built these assets, we thought we’d have a 3 to 3.5 pound per bushel yield. And we now know, based on our partnership with Novozymes as well as things we can do mechanically, we will be able to achieve 5 pounds per bushel consistently, which allows us not only to hit our laid out numbers that we put out there in terms of volumes for 2025, but exceed them as well as we continue to get more and more out of these systems and debottleneck them. It took a little bit longer than I think we appreciate it, but we’re going to take those learnings, apply them to sugar. Sugar is a 200 million to 300 million pound system that we’re building right now. And the difference as well is that we went out and hired what we believe are experts in wet milling and making dextrose, going all quite frankly to crystallize dextrose as well. And so we have set up very, very differently so that it’s not Gen 1 dry grind management running these assets. It’s actually a wet milling team that we hired from several of the largest in the world that wanted to come work for us on this revolutionary technology implementation because…

Thank you for that. So the other big question out there right now is with the MLP, not too many weeks away from being consolidated, right? Let’s hope for a small number. This opens up the field for you to much more easily execute on M&A. And in the past you’ve been very active and even had some interesting situations where one of the chunky portfolios you had an opportunity to offer a vastly superior proposal to one of the sellers, I think because of a tax advantage structure for them. Can you maybe update us on how active you’ve been over the last couple years as far as evaluating assets? And whether or not your appetite is likely to be for single plants or possibly portfolios? And what are the complications these days as far as actually executing acquisitions in the broader sort of ethanol plant market?

Well, that’s a lot to unpack there. But let me just focus on a couple things. We continue to negotiate with complex committee and really can’t talk much more than that. I’m bringing the MLP in and we talked about in the past some of the reasons why we want to do that, and we’ll just leave it at that just because of where we’re at in the process. Secondly, from an acquisition standpoint, we’ve been on the sidelines a bit. They are – ethanol plants in general are harder to buy in the size, scope and scale that we want to apply our technologies to them. And as you saw, we divested a small plant, for us, it just locationally geographically and also the way that the logistics worked out of there just won’t fit our long-term strategy around protein, oil, sugar and decarbonization. But it fits somebody else’s, which is good. But it was a smaller subscale plant to what we want to operate in the future. Acquisitions are hard, they’re expensive. The value of our assets have gone up. If you want to build one today, replacement value for an ethanol plant in the Midwestern – in the Midwest is $2.25 to $2.50 a bushel minimum that’s – gallon, sorry, $2.25 to $2.50 a gallon minimum. And that’s before you add on any of our technologies as well. So M&A is pretty difficult. We absolutely want to begin to re-expand our platform over the next several years and look for opportunities, but everything got more expensive, which replacement cost is meaningful in this industry. And why is it meaningful? Because before you even take a look at ethanol margins have somewhat recovered, blends are going up. We believe our technologies can be applied. But more importantly, if…

Great. Well, thank you for that. I’ll hop back in the queue.

Thank you.

Next question comes from Adam Samuelson from Goldman Sachs. Please go ahead.

Yes. Thank you. Good morning, everyone.

Good morning, Adam.

Hi. So I guess the first question, just maybe making sure we’re clear on kind of the quarter and kind of how you’re framing the second half. I think in the prepared remarks, Todd, you talked to the Wood River issue and the other unplanned and planned downtime kind of potentially leaving up to $0.20 a gallon of margin on the table. As we look forward with the network now operating at high rates, less downtime in the second half of the year and where the forward curves are and your mix of High Pro and corn oil is that kind of margin level or that margin level plus kind of the right way to think about second half EBITDA?

Yes. I mean, it’s ebbing and flowing. We saw a nice expansion back yesterday, but yes, I think you’re not far from those ranges today, if not, potentially even better. And look, I mean, part of our Q2 was also the fact when you don’t run and the market expands and the prices go up, you can’t execute on high price contracts, which then becomes a bit of a double whammy having to buy those in or having to cancel them and to the advantage of the person on the other side. So, for us it was – we were tracking really well and unfortunately all of our big sites hit at the same time. And while we had planned downtimes at several of them, they turned into unplanned downtimes as well. And so, it wasn’t just really just missing the margin, it was actually having to buy in hedges and also buy in sales, high priced protein sales as well, that hurt us. So going forward, if we get clean and when as we’re clean right now that’s when we have the real opportunity to kind of achieve those type of margins and more. And we saw them higher even since then, but they’ve come down a little bit as that corn rally went up very fast and now it’s come down. I think ethanol numbers are improving again. We saw a couple weeks of builds. So I think we’re setting up for a base – a pretty good fundamental outlook for just the base fuel in the last half. And then protein as we indicated, when you have the corn soy spread doing what it’s doing and corn sitting around $5 and soy sitting around – or soy meal sitting over at $440, obviously inverted in the next year. It’s really in the favor of our strategy again. And while we got a lot of questions from our shareholders about a year and a half ago when that spread narrowed, I think this ebbs and flows, but it’s really favorable for not just last half, but 2024 as well. And we’re seeing a good pickup in demand as our product continues to get better and better inclusion rates in rations across all the animal sectors, including pet food and aquaculture.

Okay. No, that’s really helpful. And if I could just ask a follow-up on High Pro commercialization. You talked about a 60% – kind of 60% sales that you’re working on and getting those sales done in the fourth quarter. Can you help us frame where the premium versus regular soy meal or regular UHP would be? Just as we think about the incremental contribution from getting meaningful proportions of your production to a 60% level? And what it will take to push a higher proportion of your High Pro production up into that 60% range.

Yes. Our first step is, is just to start competing really as a replacement for corn gluten meal and soy protein concentrates. And that’s really where our replacement is. As we’ve seen soy meal increase and the corn spread – corn and soy spread go in our favor for 50 Pro when you’re competing against a corn gluten meal, the spread between corn gluten meal and soy meal have narrowed a bit. So, while we’re – we’ll deal with that a little bit, I mean, what we can see today is at least on paper, a $0.14 to $0.17 uplift again, is kind of how we’re thinking about almost a double the margin again. Now that’s a starting point and we want to get involved in these rations, but the demand that we’re seeing at least nearby is coming from outside of the United States in terms of aquaculture for 60 Pro. And then we’re working on significant demand within the United States next year in 2024 for aquaculture and pet and other areas and really in the early stages of swine. So we are just starting to – we have been working significantly hard on the program over the last six to 12 months and getting into different rations and getting through a lot of the evaluation stages. And we’re at the end of those with very, very good high marks. But again, the spread narrow between some of the higher protein products and soybean meal just because of the front end soybean meal curve. But overall, if we had to look at it on paper, we kind of look at the base margin in 50 Pro, some would be kind of $0.15 and $0.18 a gallon today, the base margin in 60 Pro is starting at kind of $0.30 to $0.40 a gallon uplift today. And it really just some of it depends on market, some of it depends on what – where we’re going to go in the world, some of it depends on freight, but overall we see a significant uplift to that and overall great acceptance of the product. What’s really unique and differentiates Green Plains from anybody else is with our new plant JV coming on in early 2024. Our redundancy is a key and critical component and our volume is a key and critical component that we can now sell you 50,000 tons, 100,000 tons, 150,000 tons. It really – there’s no – there’s not a limit there relative to an inclusion rate. And that’s a game changer when you talk to a customer instead of having to sell them 4,000 or 5,000 tons. So redundancy really matters and it’ll matter even more in 60 Pro markets.

All right, great. That’s all helpful color. I’ll pass it on. Thanks.

Thank you very much.

Next question from Kristen Owen from Oppenheimer. Please go ahead.

Hi. Good morning. Thank you for taking the question. Just dovetailing on that last response. Todd, you mentioned in the prepared remarks that you’re planning to move a single facility or about 20% dedicated capacity to 60 Pro. So can you just talk us through what you’re hearing in the market that’s giving you the confidence that you can allocate that capacity to that that higher level protein?

What we’re hearing is really preparing for shipments, hopefully in September to satisfy Q4 demand that we’re working on today in late stage negotiations. So we can’t just turn it on overnight. It takes about a week or two just to start to get the plant fully switched over from 50 to 60 Pro. We got to make sure that we work with our biology partners to make sure we have the adequate inputs that we need in fermentation. That just takes time. So a little bit you have to anticipate what stages you are in discussions, and when we look at the size of the discussions we have to convert one of our plans fully to 60 Pro is going to be the best outcome so we can satisfy it. It’s a bit of chicken the egg, when they want it, you better have it. And I think we learned that in our 50 Pro is that we built inventories on 50 Pro and it took a little time to work through those inventories, but because we had those inventories, we were able to really start to get traction in the 50 Pro market. We’re going to have to do the same thing in 60 Pro. Start to build inventories later this quarter so that we can satisfy what we believe is demand. And we’re not just seeing demand from a standpoint of ship me a truck or ship me a tote or even a container. We’re actually starting to see enough volume that we’re potentially starting to ship pieces of vessels as well around the world. So there’s enough – it gives us enough confidence that it’s time to make a switch to one of our plants and have the product available in the market.

And just a clarifying question on that. We’re talking multiple customers and multiple end markets or just a little bit more color that you can provide on the customer standpoint.

Multiple customers, multiple end markets, multiple geographies, some as big as vessel holds, not vessel quantity, not a full vessel. And even down to one truck at a time and we just want to be prepared to ship and be ready to go. We’ve been in significant trials, evaluations, you can go on and on tests, labeling all the things that are really important to our customers. We’ve been working on that for well over a year as we had been indicating to everybody. It takes – it’s a long process to get here. We thought it would take us three to five years and it’s as we said, it took us three to five months to make it. Now it takes about another year to kind of get through all of the evaluations. Because once we made it, it’s been in the supply chain, it’s been in evaluation and so far we haven’t really seen any market that has come back to us to say, hey, that didn’t work for us. And so our opportunity and what we can propose to customers around everything from performance taste, as well as carbon intensity is extremely beneficial.

That all sounds very positive. One follow-up question unrelated. Just given some of the discussion around re-rating of the asset footprint and replacement cost. Any indication that you can give us on the transaction value for Atkinson? What we should anticipate in terms of cash on the balance sheet from that? Thank you.

Yes. We’re in confidentiality with both sides of this transaction. And it was a smaller site and from that – and it didn’t have rail. I mean, there’s a lot of things on this site that didn’t match what we wanted. So relatively speaking, it’s not really a material transaction, but it’s definitely enough cash for our balance sheet that makes a difference as well. But we’re in really great financial strength without this as well. I mean, that’s just one more step. And as I indicated, our free cash flow generation, at least based on current markets, should pretty much cover a lot of our CapEx in terms of our growth initiatives, which really this leaves us in a very similar financial position at the end of the year, going to 2024 with potentially Madison or Fairmont getting their permit later this year, especially Madison, Fairmont will take a little bit longer than that. So we just want to make sure we were positioned from the standpoint of being able to execute on where we can really make the money and be accretive. And that’s why we executed on this transaction. But we would not have put any of our technology at this site. So it really didn’t match our long-term needs.

Next question from Manav Gupta, UBS. Please. Manav, go ahead.

Hi. I wanted to understand a little bit better. We are seeing a rebound in corn oil prices, but we are also seeing rebound in animal tallow, soybean oil. So it appears all – pretty much all RD feed stocks are on up trend. Help us understand what’s driving it. Is it a function of the plants running a lot more reliably now ramp, or does it have to do something with the supply side also Argentina, just not being able to supply enough soybean oil, so the whole market is tight? If you could just talk about the dynamics of the RD feedstock market.

Yes, it was interesting. When the market was in the 40s and 50s we were selling – we were still selling our oil at kind of $0.05 to $0.12 over that market. So that was just the market for corn oil distillers – renewable corn – as we call it, renewable corn oil. Now that the soybean market has rallied on the front end a little bit, those sales obviously from the standpoint of doing basis sales are beneficial to us. But beyond that, we are still selling at a premium to that. I mean, I think there’s just multiple factors. I think there’s not – I don’t know that the supply is the issue. I think demand is just becoming so robust that we’re starting to see really good uptakes of oils into renewable diesel. More importantly though, when you kind of look at some recovery in LCFS, when you look at the value of CI points for what we produce, and even tallows, when you look at the low CI feed stocks we have not really seen anywhere where those will trade anywhere that discounts the soybean oil anymore. And in fact, as we move towards 2025, which is just not that far away, we have a benefit to the end users because of the IRA to use more corn oil. So we’re really in a really good position. What we didn’t mention Manav as well is that Fluid Quip continues to see in their technology expanded yields before we even get to SFCT technology. So, we are implementing one of their technologies, new technologies in Wood River over the next several months, which we believe has the capability to increase our yields at an MSC facility to kind of 1.3, 1.4. And they've already seen those results at an earlier application at a non-Green Plains plant that they had a different system running already. They upgraded it. So now we're going to take those findings and apply it. So we're very confident in our ability to produce oil, but I think it's really just demand is finally showing up. And I think supply has not really grown, quite frankly. I mean, we're not making any more oil as an industry. We're not making it soybean oil. There's not a bunch of new plants that started up in soy crushing that's coming, but so the supply hasn't really expanded while demand is finally kind of exceeding it again.

Okay. And a quick follow up here is the Wood River outage kind of hit you multiple ways. It hit your ethanol production, corn oil, also your ultra-high pro. Help us a little understand a little bit better during the OSHA investigation or otherwise. What are some of the lessons learned here and what can be done to make sure something like this does not happen again? Thank you.

Well, we don't want ever want it to happen. I think it was an unfortunate event. It was during the shutdown, we can't really get into a lot of the details. OSHA has released the plant back to us, and we were already preparing during the end of that to bring that plant up as fast as we could. Took a little while to get protein and oil running, we just want to make sure the team was good and stable. But look, these are incidents that we never want to happen. So, I mean, we learned from every incident like this. It's unfortunate. It is hard on the team. It's hard on the company overall. It's not just the Wood River facility. We are certainly cognizant of what it can do to our employees, and I think it just had multiple effects across the company. But there is as we move on, we'll just take our learnings. But I think overall we are running that plant full out again and the team is in good shape and OSHA has released the plant back to us. So we just – we'll move on and learn from that.

Next question comes from Salvator Tiano, Bank of America. Salvator, please go ahead.

Yes, thank you very much. I actually want to get a little bit more color on the rest of the outages. So firstly, if I understood correctly, given the $0.15 to $0.20 impact that you said on consolidated margins, it seems to us that it's probably another $10 million to $20 million impact that you saw in other facilities besides Wood River. And does this make sense? And also, what type of outages were they, did you uncover essentially things during plant turnaround that needed to be repaired or what they or simply things broke down throughout the quarter?

Yes, I think it was a little bit of everything you're talking about. And on top of that, you have the domino effect of having good hedges on in an expanding market, having good sales on of high protein in a decreasing market, which then you lose those and you have exit some of those opportunities. And so it was, yes, it was a combination of the fact that we were in shutdowns that took a significantly longer to bring back up as we found more areas that we needed to repair. And then overall, we had some significant unplanned downtimes of things that just happened during the quarter. It was a bit of a perfect storm. We weren't expecting it. But what we were able to do then is during those, our operations team again we brought in a new head of operations. He's built a team around him, they got their head around it. We are highly skilled and highly competent across that team. We brought in people across industries from refining all the way into wet milling all the way into dry milling, and built a really new team as we had turned that team over. And they had kind of hit it hard and set us up so that during that time at least we were able to quickly mobilize, take advantage and get through some of the things we would have done in the last half at our normal shutdowns fall shutdowns. And we're not going to have to do some of those now, which is going to be helpful. So it was just a bit of a perfect storm that hit us. Unfortunately, we had ourselves set up for a pretty good quarter. And then between Wood River, the spiral effect of locking things in and then having unplanned downtimes just hit us hard and we'll move on from that and just run full out as best we can during the last half and show everybody what this is capable of, because we could have shown it in the second quarter and it just was not able to execute because of those couple of reasons.

Perfect. And as a follow up, you mentioned you were in the final stage of negotiations for the 60 Pro volumes in Q4. I personally at least was under the impression things were more firm in terms of sales there. So is there any risk that negotiations may not yield the outcome that you would like and you may actually not sell 60 Pro volumes here, and it's been a while since we announced obviously the fish mill partnership with Riverence. So how are things progressing there as well?

Yes, so I don't think we gave anybody a certainty of sale, but what we did say is we're negotiating in the fourth quarter. We feel like now we're in such late stages that we're even negotiating destinations, price, all those type of things. So we know we'll make it into some rations into the fourth quarter. And that's why we're now starting to ramp up. It'll take us a good 30 days to get into full production rate, even though we can start to hit it within a few days. But just to get consistent and make sure that the plants lined out running well. But that's why our confidence has gone up. Relative to starting up one of our 60 Pro plants, even earlier than probably we thought we were going to do, our Riverence partnership remains strong. We are already in one of their rations through one of their third-party suppliers. We know that for a fact, we're working on getting into another ration of theirs. We know that our product is very valuable. Our partnership is remains strong. We're looking at kind of their volume going forward and what we can do together and where we should really place our asset. It's a long game when you think about the feeding cycles for what they do and what the other salmon producers do around the world, this is a two year cycle almost from the time you start till the time you harvest an end product. And so we have plenty of time, but the partnership remains strong. The asset base is starting to be thought of, there is an asset in the middle of that already. And we hopefully will start to see the benefit, the full benefit of that partnership over the next kind of year or two. But it's a long game when you think about the feeding cycle of these companies and the growth cycle of these companies, and not many better than Riverence in the world. And I can only assure you that our partnership is strong in place and looking for where we're going to continue to expand it.

Thank you very much.

Next question comes from Laurence Alexander, Jefferies. Please go ahead.

Hi, this is Dan Rizzo on for Laurence. Just a quick question, are there any lingering costs associated with the combination with GPP that's going to occur later in the next couple months?

Yes, I would say there's – depending on where we get to in the transaction, there's still absolute merger costs that could happen. We need shareholder votes, we need, there's lawyers, there's several things in terms of filing. So I mean, I would say, there's deal fees, all those type of things have to happen. And but overall, we could break those out and if they're all one-timers, but I think the overall benefit of bringing them in would greatly exceed that if we can get this deal done.

And I'm sorry if I forgot this, but have you quantified what the synergies are with doing this? The cost of the cost savings are?

Yes, I mean, what we said is, number one by bringing the partnership back in, obviously we don't send some of our money out the door in terms of fees. We get that back in, but we're paying for that, some savings in SG&A and so overall interest savings as well, potentially as we will look to do, see what we do with that piece of that. But we're still negotiating with the conflict committee and we should have more on that during the quarter.

All right. Thank you very much.

Next question comes from Jordan Levy, Truist Securities. Please go ahead.

Hey all, I appreciate all the commentary and the improved outlook you talked to in the back half of the year. Maybe if we could just unpack that a little bit more and help frame up how we should be thinking about what run rate EBITDA might look like given the levels you're running at on protein right now and what you're seeing in crush and DCO?

Yes, I mean, I think when you kind of look at it, it's on paper similar or better to the margins we locked in during Q2 overall. And depending on where we see ethanol perform, we've got to watch the corn market closely. I mean, bombing a Black Sea Port from the Ukraine to Russia, doesn't help our crush. But overall, the crush expanded, the numbers came back in line, run rates were over overly stated in our opinion last week at 10, 90. It's probably not possible, just doesn't stay there very long. And I think we'll get some better EIA data going forward. I think we're below last year's stocks levels, blending continues to increase. RIN values have not broken since the updated RVOs at all. So, if you look at kind of retailers, they're making plenty of money blending ethanol, we're seeing more and more E15 type 88 octane sales happen to the consumer. We've even seen uptick in E85 sales, which we didn't know how much traction that will continue to maintain over the years. But when you look at corn oil alone, relative to the first half just take prices where they're at today, I mean, that alone is in that $75 million to $80 million range, just contribution where the first half was more of a – because of prices and the volatility is more on that $50 million to $60 million range in the first half. So that alone gets us back. We got the question once. How did you come up with $0.70, $0.60 or $0.70 a pound in your long-term view of oil? And I think it's taking shape nicely. And so protein on as well, we've got to deliver on some of these 60 Pro sales, but overall we should…

That's promising. Thanks Todd. Maybe just shifting gears over to the regulatory front. Looks like the administration's working through how to think about ethanol as a feedstock for SAF. Just curious what your thoughts are there and how they might look to approach that and what implications that might have?

So I have Devin here with us, who you guys met on our IRA Teach-in except to say, and I'll just lead it and I'll let Devin give you a little more color. And we're very focused on making sure that the regulations are in place that give ethanol as good of a shot as anything else. And alcohol, the first step is to decarbonize, which is why we're very happy with the choices we've made around our decarbonization strategy and being upper, what we believe will be earlier than a large part of the industry because of the choices we made. But overall it looks like we're getting good bipartisan support for making sure that the modeling is thought of correctly. And I'll let Devin comment on that a little bit.

So, like we said on the IRA Teach-in, we want to see the Department of Energy's Argonne GREET model used that allows for decarbonized ethanol to serve as primary feedstock for alcohol-to-jet SAF. We saw some encouraging comments from the president just last week in Maine where he said that farmers have a vital role to play in producing SAF. So that was encouraging. We expect to see regulations put out by treasury as early as next month, September on the current 40B SAF tax credit, and then shortly thereafter for 45Z. And there's a lot of discussion. But as Todd mentioned, tremendous amount of bipartisan support from both the House and the Senate to continue to encourage the administration to allow for decarbonized ethanol to serve as a feedstock and help to meet the SAF Grand Challenge goal of 3 billion gallons by 2030, which we don't believe is possible unless you use these agriculture row based feedstocks.

Very helpful. Thank you.

Thank you.

Next question comes from Eric Stine, Craig-Hallum. Please go ahead.

Good morning everyone.

Good morning.

Good morning.

Hey, just going back to 60 Pro, I mean, is this a matter more of the market or your place in the market developing? I mean, is there any reason as we think long-term that your entire platform isn't 60 Pro? And just to confirm, I believe you said fit in the near-term, you are hoping 20% to 30% would be 60 Pro.

It's why we built them, Eric. I mean, we didn't build our systems to run 50 Pro. We built them because we knew with our partnership with Fluid Quip and our investment there that we've made and the amazing technology they have and the consistency of their product and the way it flows and the way it looks and the color of it, it's very different than any anything else available on the market. The way we dry it, the way we process it, it's just consistent. We have no problem consistently making 50, 52 anything we want to make on demand and gaining large our yield increases, which is why we did it as well. But we bought Fluid Quip and we invested in Fluid Quip with our partners to make 60% protein and more and greater and so our whole platform and our whole marketing efforts getting into 2024 and 2025 have been to maximize our market penetration in 60% protein. And that's where we believe we're heading when we look at a new plant and where we want to build the next one. We basically have to say if we push yield and we push protein, we also know that what is our fiber product going to look like as well, because we are creating new products, we are creating yeast products, we're creating fiber products when we make 60 Pro, it's a very different outcome. But yes, our intent and our plan is to go as far as fast and as quickly as we can in the highest amount of volumes to move to a 60 Pro market. And we are focused on doing that. It will take a while because it has to be a global outcome. And so now we're working with partners globally as well for distribution and talking with potential partners on distribution as well, because you're going to have to this is a global product and we think that's where the best places to really get max penetration against products. Everything from corn, gluten meal to soy protein concentrates, all the way to what we're doing on our biological opportunities in terms of taste and texture and profiles to even start to think about things like fish meal replacement as well. And that's really where – that's the ultimate Pandora's box that we continue to try to solve for every day.

Got you. And then I mean, I guess not to totally try to pin you down, but I mean, in terms of timing, you said it'll take a while. I mean, is that two, three years out or is that it's going to take five plus years?

No, it's not five years. I can assure you – I mean, I can almost assure you of that, every time I say I can assure you it's probably not the best thing to say, but it's not five years out. I mean, our program has fully been designed and the people we brought in to help market this product and sell it all have experience at the higher protein levels and customer base. So it's just time. It's not going to be matter. And our view, it's not a matter of if, can we do the whole thing? We should be able to, I mean, there's 10 million tons of demand globally, if not greater than just for things like corn, gluten meal and more for corn, or soy protein isolates and soy protein concentrates and those type of things. And we brought a new leader to the team that came out of Cargill that spent his time globally in different protein and aquaculture businesses. And he's now running our protein marketing as well. And so we're tracking that type of talent to this company so that, when they show up at the door, they have great customer relationships, but also a lot of credibility from where they came from to where to where we're going. And we've built teams around all of our products, clean sugar and protein. Cornell's a little easier. They just call and they buy it. But in those products we wanted to make sure that we staff those with deep technical and marketing experience and that this really didn't exist in the Gen 1 industry. So we're tapping that from all of our larger counterparts in agriculture and energy.

Okay. Thank you.

Thank you.

Our last question comes from Andrew Strelzik from BMO Capital Markets. Please go ahead, Andrew.

Hey guys, this is Ben on for Andrew. Just one quick one on the ultra-high protein EBITDA build. Todd, I think you alluded to this earlier, but you guys seem to still be on track for $150 million run rate by the end of 2024. If you could just briefly kind of walk us through the path as to how that looks. Obviously, we've heard a bunch on 60 Pro at the beginning of the year, but just trying to bridge that gap into 2025. Thanks.

Yes, so when we look at it, basically when we think about it, today we have 560 million gallons converted, and we're going to have half the Tharaldson JV, half of our turnkey. So that's about 85 million gallons converted. And then when you add at least one of the two Fairmont or Madison, that's 760 million gallons converted. When you look at how much corn we grind there at eight in terms of a yield, and then you take that times what we believe will be, by the time we get there, four and a half to five pounds a bushel, and then you're hitting higher targets volumetrically than what we had outlined. And then when we look at 2024 and as we leave 2024 with 20% to 30% of our capacity in 60 Pro and going to 2025, when you put all that into the calculator, and we'll be very happy to do that. I don't – I can't do that right now on this call. It meets or exceeds those targets relative to $0.15 to $0.18 a gallon uplift on 50 Pro, $0.30 to $0.40 a gallon uplift on 60 Pro, not including all the other opportunities that our innovation team works on to increase value of our products even further in terms of that product suite and things like dry yeasts and 60 dry yeast, 60 Pro yeast, those type of things. And when we've kind of put that all in, we are even more confident today with the things that we're seeing driven by yield, driven by protein, driven by price spreads, driven by innovation that we can hit that $150 million to $200 million mark that we laid out and then build from there.

Awesome. Thanks Todd. Have a great weekend.

Thank you very much.

I will now turn the call back over to Mr. Becker, CEO for closing remarks.

Yes, hey, thanks everybody for being on the call. A lot of questions, a lot of great questions. We really appreciate it. As you can see, we're making great progress across our product suite, challenging second quarter. We appreciate that. We've come out of it better than where we were in it. Plants are running better, protein is running great, sugar's on track. Oil markets have recovered significantly from the quarter lows where we're down into the 40s, now we're up into the 70s again, high 60s. So overall we think we're in a good place to show what the opportunity is in the last half and deliver a few quarters and make sure you're confident that we can deliver on 2024 and 2025. And our takeaways from 2023 going to 2024 and our exit run rate in 2024 goes into 2025. And that's why we're extremely confident between decarbonization, which those numbers have only gotten better to hit those 2025 numbers that we laid out and begin to hit those in 2024 as well. So we appreciate your support and we'll talk to you next quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.