OPAL Fuels (OPAL) Soars on Strong RNG Growth and Project Momentum

Investors are sending opal fuels inc. (NASDAQ: OPAL) shares higher this week following a robust earnings update that underscored the company’s progress in scaling renewable natural gas (RNG) production and fuel station services. The May 9 earnings call revealed a 31% year-over-year revenue surge, driven by booming demand for RNG and strategic project advancements. Here’s why the stock is catching fire—and what risks remain.

A Catalyst in Renewable Natural Gas

The company’s RNG division has emerged as a key driver of growth. Q1 RNG revenue hit $27.6 million, a 56% jump from the prior year, while RNG production rose to 1.1 million MMBtu—up 38%—as projects like the Atlantic RNG facility near completion. RNG, which displaces fossil fuels in transportation, is critical to decarbonizing Class 8 trucks, a market OPAL is targeting aggressively.

The pending monetization of $15.1 million in RNG credits (including RIN and LCFS credits) adds further upside. These credits, which reward companies for reducing carbon emissions, act as a cash register for OPAL as regulatory support for RNG grows.

Financial Fortitude Amid Expansion

The numbers paint a company in execution mode:
- Revenue: $85.4 million in Q1, up 31% year-over-year, with fuel station services also rising 36%.
- Adjusted EBITDA: $20.2 million, a 33% increase, signaling operational efficiency.
- Liquidity: $239.9 million in cash and credit facilities, providing a cushion for future investments.

The company’s reaffirmed 2025 guidance suggests confidence in hitting targets, even as capital expenditures dropped 56% to $11.6 million. This reflects a shift toward leveraging partnerships and equity investments—like the $8.9 million ITC sale in Q1—to fund growth without over-leveraging.

Projects on Track, Delays Loom

While most projects are advancing, two California dairy RNG projects—Hilltop and Vander Schaaf—are delayed due to contractor disputes. These delays could temporarily crimp RNG output, though the Atlantic RNG facility (slated for Q3 2025) and 2026 projects (including the 1.8 million MMBtu Burlington/Cottonwood/Kirby complex) should offset the setback.

The Elephant in the Room: Policy Risk

OPAL’s RNG business is a direct beneficiary of federal and state incentives, such as California’s LCFS and federal RIN credits. If subsidies weaken—or if competing fuels like hydrogen or electrification gain traction faster than expected—OPAL’s growth could stall.

Conclusion: A Buy for the Green Transition, But Watch the Headwinds

OPAL’s stock surge this week is justified by its execution in RNG, which is a core pillar of the decarbonization push in heavy transport. The company’s liquidity ($239.9 million) and on-schedule projects (Atlantic RNG in Q3, 2026’s 1.8 million MMBtu capacity) position it to capitalize on demand.

However, investors must weigh these positives against risks: project delays, policy uncertainty, and the sheer capital intensity of scaling RNG infrastructure. For now, the fundamentals—31% revenue growth, 38% RNG production gains, and $15.1 million in pending credits—suggest OPAL is a leader in a sector with long-term tailwinds. But as with any green energy play, the path to profitability hinges on both execution and external policy winds.

Ask Aime: "Is OPAL Fuels Inc. a buy after 31% revenue surge?"