OPAL Fuels (OPAL) Q3 2026 earnings review
OPAL Fuels profit rises, but it cuts its production target
OPAL Fuels, which captures landfill gas to fuel heavy trucks, grew operating profit through tax credits while gas output lagged. Third-quarter Adjusted EBITDA (profit before interest, taxes, depreciation and one-offs) jumped 32% to $27 million as federal 45Z clean-fuel tax credits lowered cost of sales and fueling station margins improved. Co-chief executive Jonathan Maurer cut the full-year gas production target, and co-chief executive Adam Comora steered full-year profit to the bottom of the $95 million to $110 million plan, which by our math leaves fourth-quarter profit down 17% from a year ago.
| Revenue | $79.5M -5% from a year ago |
|---|---|
| Adjusted EBITDA (profit excluding one-offs) | $26.7M +32% from a year ago |
| RNG fuel produced | 1.34M MMBtu +7% from last quarter; +5% from a year ago |
| Full-year outlook | Cut on RNG volume EBITDA steered to lower end of $95–110M |
⚖️ Verdict: 🔴 Bearish
The story got worse because OPAL Fuels will miss its annual gas production target for a third straight year while biofuel credit prices dropped. Equipment issues pushed landfill plant efficiency down from a year ago, and quarter-end D3 RIN credit prices fell 16% to $2.26, removing the price cushion that had offset slow production. One bright spot: the fueling station division grew profit 18% and increased its dispensed renewable gas volume.
The question now is whether OPAL Fuels can hold the $95 million bottom of its profit outlook in the fourth quarter and bring three new gas plants online on time in 2027. One side sees tax credits and station growth covering the gap until new capacity arrives; the other sees lower credit prices and recurring plant delays squeezing cash flow as liquidity shrinks. Fourth-quarter realized RIN prices and landfill utilization will settle the near-term debate.
🐂 Bull Case
Tax Credits Lifted RNG Profit Through Flat Sales
OPAL Fuels captures methane from landfills and dairy farms to sell as renewable natural gas (RNG) for heavy trucks. Beginning in 2026, the company earns federal Section 45Z clean fuel production tax credits on each gallon it produces, which both drives profit growth and leaves earnings dependent on government credit rules.
This quarter OPAL Fuels changed its accounting so those 45Z tax credits directly reduce its cost of sales, the expense of running its gas plants and stations. Because of that credit benefit and lower gas purchase costs, total cost of sales dropped by 7.2 percentage points of revenue from a year ago, to 65.1%. That lifted gross margin even though total revenue fell 4.6%, and pushed RNG Fuel segment profit (Adjusted EBITDA, which excludes interest, taxes, depreciation and one-offs) up 34.9% to $20.3 million.
What to watch: fourth-quarter RNG Fuel profit against last year's fourth quarter, which was the first period to include 45Z tax credits. Once the comparison includes credits in both years, profit growth will depend on gas volume and credit prices rather than the new tax regime.
Fuel Station Services Grew Profit and Dispensed Volume
Beyond making gas, OPAL Fuels builds and services natural-gas fueling stations for trucking fleets in its Fuel Station Services division. Co-chief executive Adam Comora said "Fuel Station Services EBITDA grew 18% when compared with the prior year period from increasing fuel volumes and stronger margins", and pointed to diesel price swings as a reason fleets switch to natural gas.
The division dispensed 21.8 million gasoline gallon equivalents (GGEs) of renewable natural gas in the third quarter, up 6.9% from a year ago, while total fuel volume delivered rose 2.8% to 40.0 million GGEs. Division revenue still slipped 3.8% to $49.7 million, but its cost of sales fell faster, lifting segment Adjusted EBITDA by 17.5% to $13.0 million. Contract liabilities — upfront cash from station construction customers — also rose 37.8% from last quarter to $4.2 million after six straight quarters of decline.
What to watch: fourth-quarter Fuel Station Services revenue and contract liabilities. In last year's fourth quarter the division recorded $65.1 million of revenue, so next quarter will show whether station construction activity is recovering or still lagging behind fuel dispensing.
🐻 Bear Case
RNG Production Will Miss Its Target Again
OPAL Fuels has relied on tuning its existing landfill gas plants to hit its 2026 production plan of 5.4 to 5.8 million MMBtu (million British thermal units, a measure of gas energy). Co-chief executive Jonathan Maurer said "While we are encouraged by the sequential production growth, which is continuing in the fourth quarter, the operational improvements took longer to implement. We now expect 2026 RNG production to be modestly below our guidance range."
Third-quarter gas production reached 1.34 million MMBtu, up 7% from the second quarter, but well below the 1.5 to 1.7 million MMBtu quarterly pace required by the prior full-year plan, by our math. Despite Maurer's emphasis on operating progress, the company's landfill plants actually ran less efficiently than a year ago because "Utilization was impacted by various equipment-related operational issues".
- Inlet design capacity utilization (share of plant capacity receiving raw landfill gas): 76.0%, down from 79.5% a year ago
- Utilization of inlet gas (share of raw gas converted into RNG fuel): 75.0%, down from 77.1% a year ago, vs an 80–90% target
- Combined landfill utilization: 57.0% by our math, down from 61.3% a year ago
This marks the third straight year OPAL Fuels will fall short of its initial annual production target, after missing in both 2024 and 2025. Because every extra unit of gas from an existing plant carries little added cost, lower plant efficiency directly caps earnings.
What to watch: fourth-quarter combined landfill utilization and total 2026 RNG output. A utilization reading above 61% would show the equipment fixes worked, while another quarter near 57% would mean existing plants are still not gaining efficiency.
D3 RIN Credit Prices Dropped 16% Since June
OPAL Fuels earns a large share of its revenue by selling federal biofuel credits called D3 RINs (Renewable Identification Numbers) generated when its gas fuels trucks. The company built its 2026 outlook on an average realized D3 RIN price of $2.45 per gallon, and notes that each $0.10 move shifts annual Adjusted EBITDA by $5 million to $6 million.
During the third quarter, the market price of D3 RINs at quarter-end fell 15.7% from $2.68 on June 30 to $2.26 on September 30. OPAL Fuels still realized an average sale price of $2.47 in the quarter (down from $2.50 in the second quarter), because realized prices usually trail quarter-end market prices by about one quarter. With both credit prices and gas output softer, Comora said "Third quarter Adjusted EBITDA of $26.7 million was in line with our expectations and support full year Adjusted EBITDA results to be within the lower end of our guidance range".
What to watch: the average realized D3 RIN price in the fourth quarter. If fourth-quarter sales track the $2.26 September market price instead of previously locked-in forward contracts, fourth-quarter profit will face a direct headwind.
Liquidity Fell $40M as Preferred Costs Mounted
Building landfill gas plants requires heavy upfront spending before a facility produces cash, and OPAL Fuels funds that gap with project debt and 12% preferred stock held mainly by an affiliate. Total liquidity — cash plus unused credit lines and undrawn preferred stock — fell by $40.3 million during the third quarter to $122.0 million.
By our math, OPAL Fuels generated $6.9 million of operating cash flow in the third quarter while spending $18.3 million on property, plant and equipment, resulting in negative free cash flow of $11.4 million (and negative $40.4 million over nine months). Meanwhile, accretion on redeemable preferred stock — the growing redemption value owed to preferred holders before common shareholders get paid — jumped 149% from a year ago to $6.5 million in the quarter. That charge turned $1.7 million of total net income into a $0.9 million net loss for Class A common shareholders.
What to watch: total liquidity and unused revolver capacity at year-end. Unused revolver capacity was down to $10.8 million on September 30, so continued construction spending will test whether the company draws the remaining $25.2 million preferred facility.
Risks this quarter didn't answer
Three standing construction, legal and financial risks received little or no detail in the third-quarter earnings release.
- New plant start dates: Maurer cited "three new RNG projects representing approximately 2.0 million MMBtu of annual design capacity expected to begin commercial operations over the course of 2027", which drops the earlier "first half" wording for Cottonwood and Burlington and leaves the Kirby Canyon project unmentioned.
- Dairy project dispute: the release gave no update on the stalled Hilltop and Vander Schaaf dairy projects in California, which are in contractor arbitration set for May 2027.
- Loan covenants and customer concentration: the release did not update loan covenant headroom after the May 2026 parent equity cure or report how much revenue came from its largest customer; both disclosures typically appear in the quarterly Form 10-Q filing.
👓 Other Themes
Tax Credit Accounting Change Boosted Prior Comparison
In the third quarter, OPAL Fuels voluntarily changed how it accounts for Section 48 investment tax credits and Section 45Z production tax credits, treating them as government grants rather than income tax benefits. Applied retrospectively, the change netted transaction costs against proceeds and increased third-quarter 2025 Adjusted EBITDA by $0.7 million (from $19.5 million to $20.2 million), while shifting 2026 45Z benefits from the tax line into cost of sales.
💲 Other KPIs
OPAL Fuels owns several RNG plants through joint ventures that are not consolidated into its headline revenue. Its proportional share of revenue from these equity method investments grew 30.1% from a year ago to $14.8 million, up from 9.0% growth in the second quarter. However, OPAL's share of Adjusted EBITDA from those partnerships fell 23.7% to $2.9 million as joint venture gross profit narrowed.
This figure measures the market value of gas produced and environmental credits (RINs, LCFS and RECs) held in inventory awaiting sale at quarter-end prices. The balance fell from $16.3 million at the end of June and $23.5 million in March to $14.1 million on September 30, as the company sold nearly all the RINs it generated during the quarter and D3 RIN prices dropped.
Total loans (current and long-term debt net of issuance costs) declined by $24.3 million from $431.7 million at the end of June, though debt remains up $55.3 million from $352.1 million at the end of 2025. Including $90.5 million of total cash and restricted cash, net debt stands at $317.0 million, down $6.8 million since the start of the year by our math.
🔮 Guidance
Unchanged, but steered to the bottom of the range. Management kept the $95 million to $110 million range while stating that third-quarter results support landing "within the lower end". By our math, after $66.5 million in the first nine months, the $95 million floor leaves $28.5 million for the fourth quarter — down 16.7% from $34.2 million a year ago, when the company first recorded 45Z tax credits.
Cut. OPAL Fuels now expects full-year gas production to finish "modestly below" its 5.4 to 5.8 million MMBtu range because plant improvements took longer to put in place. With 3.8 million MMBtu produced in the first nine months, reaching the old 5.4 million MMBtu floor would have required 1.6 million MMBtu in the fourth quarter, by our math, compared with 1.34 million MMBtu in the third quarter.
❓ Key Questions
What is the new 2026 RNG production range?
Management said 2026 output will finish "modestly below" the 5.4 to 5.8 million MMBtu target without giving a number. After 3.8 million MMBtu through September, investors need to know whether fourth-quarter production will exceed 1.4 million MMBtu.
How much Q4 D3 RIN volume was sold forward?
Quarter-end D3 RIN prices fell from $2.68 in June to $2.26 in September, well below the $2.45 full-year outlook assumption. Unless fourth-quarter volumes were locked in earlier at higher prices, lower credit prices will squeeze fourth-quarter profit.
What caused the equipment issues at landfill plants?
Footnote 4 says landfill gas conversion efficiency dropped to 75.0% (against an 80–90% target) due to "equipment-related operational issues". Management has not said which facilities were hit or how much output the corrective fixes have restored so far.
Have Cottonwood, Burlington or Kirby Canyon slipped again?
Co-chief executive Jonathan Maurer said three new RNG projects (~2.0 million MMBtu) will start up "over the course of 2027", whereas last quarter Cottonwood and Burlington were slated for the first half of 2027. Kirby Canyon was not mentioned.