Higher prices and good demand helped Intrepid Potash Inc., Denver, move into the plus column for the fourth-quarter and year-ending Dec. 31, 2021. Fourth-quarter adjusted net income was $8 million ($0.60 per diluted share), up from the year-ago loss of $520,000, while full-year was $21.8 million ($1.63 per share), up from 2020’s loss of $19.3 million.
“The fourth quarter was highlighted by solid cash flow and a significant increase in EBITDA compared to the prior period led by the strong commodity environment and rising fertilizer prices,” said Bob Jornayvaz, Intrepid’s Executive Chairman and CEO. “Pricing and demand strength have continued into the first quarter of 2022, and we expect another quarter of increasing realized prices. The fertilizer and agriculture market outlook remains very strong, and we are poised to drive significant increases in bottom line-results in 2022.”
The uptick came despite a decrease in potash production due to wet, humid, and cooler weather at the HB facility in Carlsbad. As a result, the company recorded fourth-quarter abnormal production costs of $2.4 million and full-year at $6 million.
“We are coming off nearly 18 months of strong potash demand, which, combined with our production shortfalls, has left us with lower inventory levels and less production available for sale than in the first half of 2021,” Matthew Preston, Vice President of Finance told analysts on March 8. “We expect first-half 2022 potash sales of approximately 130-140,000 tons, split evenly between the first and second quarters.” First-half 2021 potash production was 164,000 st.
“Like many industries, we are experiencing some logistical delays with truck availability, which could push sometimes into the second quarter, but will not lower our overall first half sales,” he added. “Product inventory and production are expected to return to historic averages in the second half of the year, which should drive an improvement in our per ton potash cost of goods sold, despite general inflationary pressures.”
“Overall, the outlook in the potash market has arguably never been better,” Jornayvaz told analysts. He added that the company is looking to increase production, including increased solution mining at the HB mine and a new cavern at Moab, as well as bringing on an additional crew at the East Trio facility.
The company added that what is going on globally should provide a good floor for potash prices, and they should be very stable for 12-18 months.
“It obviously works to our benefit that we’ve got fewer tons to supply,” said Jornayvaz. “The domestic market is extremely tight. And so if you look at the threat of the Canadian rail strike, if that were to happen, the U.S. market would become much, much tighter.
“But I would say that the domestic market is a very tight market, and so the price increases that we’ve announced, we’re able to achieve all of them, with very little pushback from customers,” he continued. He added that while potash prices still remain in the 3-5 percent of input cost, farmers are making plenty of money, and the potash that they can find they can surely afford to buy. He said Intrepid’s premium and granular products are on total allocation.
Full-year Trio production was up for the year, though it was off for the fourth quarter. The company said it recently added an extra production shift at its East Trio mine to help it add some much-needed production to meet strong demand and positive outlook for specialty fertilizer through the first half.
“Oilfield activity remains strong in the Delaware Basin, with water volumes and other oilfield services revenue increasing, although segment results have lagged due to increased water purchases and lease, contract labor, and rental expenses,” Jornayvaz added. “We continue to see good demand for water across our South Ranch and expect to benefit from activity closer to our infrastructure during 2022.”
He told analysts that the company has sold out its near-term water book, and is working with third-party providers to source more water. He said due to higher oil prices, oilfield activity quickly picked up.
The company also announced a joint feasibility study alongside the New Mexico Water Consortium and the New Mexico Environment Department to evaluate the potential of using treated produced water from oil and gas operations as injectate for the HB Solar Solution Mine. The mine currently utilizes naturally occurring salt brine and groundwater as permitted injectates.
This green pilot project is preliminarily scheduled to begin testing as early as the third-quarter 2022. The company said if successful, the project will aid in conserving existing groundwater sources in addition to advancing and promoting Intrepid’s Environment, Social, and Governance (ESG) goals.
In other news, in February the Board of Directors approved a $35 million share repurchase program.
Fourth-quarter and full-year net income both surged based on the release of $215.9 million of valuation allowance for deferred tax assets. Fourth-quarter net income was $223.9 million ($16.66 per diluted share) on sales of $71.8 million, compared to the year-ago loss of $711,000 ($0.05 per share) and $48.4 million, respectively.
Fourth-quarter gross margin and operating income were $21.8 million and $15 million, compared to the year-ago $5.8 million and loss of $507 million, respectively. Adjusted EBITDA was $24.8 million, up from the year-ago $9.9 million.
Full-year net income was $249.8 million ($18.66 per share) on sales of $270.3 million, up from the year-ago loss of $27.1 million ($2.09 per share) and $196.9 million, respectively. Gross margin and operating income were $55.8 million and $32.3 million, up from the year-ago $10.5 million and loss of $23.2 million, respectively. Adjusted EBITDA was $67.6 million, up from $20.8 million.
| Potash | 4Q-21 | 4Q-20 | YTD-21 | YTD-20 |
| Sales (000 st) | 38,807 | 27,556 | 151,751 | 108,060 |
| Gross Margin ($000) | 12,516 | 3,847 | 35,845 | 11,551 |
| Sales Volume (000 st) | 61 | 78 | 331 | 317 |
| Production Vol. (000 st) | 86 | 106 | 287 | 308 |
| Avg Realized Price ($/st) | 504 | 248 | 353 | 250 |
| Trio | 4Q-21 | 4Q-20 | YTD-21 | YTD-20 |
| Sales (000 st) | 24,612 | 15,565 | 96,058 | 70,287 |
| Gross Margin ($000) | 7,913 | (375) | 16,442 | (8,505) |
| Sales Volume (000 st) | 48 | 50 | 239 | 230 |
| Production Vol. (000 st) | 53 | 58 | 228 | 213 |
| Avg Realized Price ($/st) | 388 | 188 | 295 | 195 |
| Oilfield Solutions | 4Q-21 | 4Q-20 | YTD-21 | YTD-20 |
| Sales (000 st) | 8,479 | 5,390 | 22,770 | 18,929 |
| Gross Margin ($000) | 1,420 | 2,342 | 3,477 | 7,484 |