Q3 2021 CF Industries Holdings Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the first nine months and it's very quiet or 2021 C. S industries holding our news conference call. My name is Erica and that'll be your coordinator for today at this time all participants are in a listen only mode. We will facilitate the question and answer session towards.

The end of the presentation to pose the question at anytime. Please press star one on your Touchtone telephone keypad if at any time. During this call you require assistance. Please press bar zero and a coordinator will be happy to assist you I would not like to turn the presentation over to the host for today Mister Martin Juristic with C F and.

Besser relations Sir please proceed.

Good morning, and thanks for joining the ship industries earnings Conference call.

Vice President of his relations with me today are Tony Wilson, Chris Bones, and burnt Frost.

Sales market development and supply chain.

<unk> reported this results for the first nine months and third quarter of 2021 yesterday afternoon.

We'll review the industry's results in detail discuss your outlook and then what was the question and answer session.

Statements made on this call in in the presentation on their website that are not historical facts are forward looking statements. These days.

This or not guarantee of future performance.

Risks uncertainties and assumptions that are difficult to predict therefore actual outcomes or results may differ materially from what is expressed or implied in any statements.

More detailed information about factors that may affect your performance may be found in our filings with the SEC.

Which are available on our website also you will find the reconciliation between gap and non-GAAP measures in the press release and presentation posted on a web site.

Let me introduce Tony will our president and CEO.

Thanks, Martin and good morning, everyone yesterday afternoon, we posted our financial results for the first nine months of 2021 in which we generated adjusted EBITDA of $1.5 billion.

These results reflect the drastically improving industry fundamentals that we experienced over the course of the year.

Nitrogen prices are at their highest levels in over a decade.

Drug demand and lower worldwide production have tightened the global supply demand balance considerably.

At the same time energy spreads between North America, and high cost regions have widened dramatically supporting margin expansion for our cost advantage network.

The C. F. T. I'm also continues to perform exceptionally well navigating a couple of severe weather events in the U S are highest levels of turnaround and maintenance activity ever and a challenging natural gas situation in the UK.

Most importantly, they did so safely.

Ah recordable incident right at the end of September was just 0.24 incidents for 200000 labor hours significantly better than industry averages.

These factors have driven substantial cash generation over the last year or trailing 12 months net cash from operations was $1.7 billion in free cash flow was $1 billion.

As we look ahead, we're excited about the opportunities to build on this performance.

We have good visibility into the fourth quarter of 2021, we have priced virtually all of our products shipments through the end of the year, while also hedging our natural gas requirements.

While there was always some uncertainty about the volume of ammonia that will be applied in queue for given the dependency on whether we would expect full year of 2021, adjusted EBITDA to land between 2.2 and $2.4 billion.

Further out we believe nitrogen industry conditions will remain positive for an extended period.

As burnt will describe in a moment, we see very strong demand constrained global supply and wide energy spreads between North America, and Europe to persist for some time.

These factors support our ability to continue to generate significant free cash and to deploy that capital to create shareholder value.

Our priorities remain the same.

Invest in growth where opportunities offer returns above our cost of capital and return excess capital to shareholders through dividends in share repurchases.

We remain focused on discipline investments and are excited about the two new projects supporting our clean energy growth platform was completed these projects will enable us to produce over 1 million tons of blue or carbon free ammonia.

Chris will share more about our announcement yesterday in a moment.

We are also pleased to have achieved investment grade credit ratings, which recognizes and underscores all of the work we've done to remove fixed costs in the business reduce debt and highlights the positive industry fundamentals for North American producer.

On the balance sheet were quickly closing in on our target of $3 billion of gross debt and expect to repay the remaining 500 million outstanding on our 2023 notes on or before their maturity.

However that still leaves a substantial amount of excess free cash flow, we expect to generate and as such the board is authorized a new $1.5 billion share repurchase program to facilitate the return of capital to shareholders.

With that let me turn it over to Bert will discuss the global nitrogen outlook in more detail than Chris will follow to talk about our financial position and clean energy initiatives before I returned for some closing comments.

<unk>.

Thanks, Tony.

Six to nine months have seen a dramatic tightening of the global nitrogen supply and demand balance.

Hi, crop prices and increased economic activity continued to drive demand.

Meanwhile, global lower global production in government actions have created a supply constrained global market.

The impact of this can be seen on slides 11, and 12, where both are spot cost curve and 2022 cost curve are much higher and steeper than in recent years as you can see the margin opportunities available to our network have expanded greatly due to a wide energy spread between North America and marginal.

Action in Europe.

We expect strong global fertilizer demand last into at least 2023.

As you can see on slide eight global stocks to use ratios for both grains and oilseeds are at their lowest levels in nearly a decade supporting high crop prices.

These prices will support farm profitability in North America, even with higher input prices incentivising farmers to plant acres and Maximise yield.

Based on our order book, we expect the fall ammonia application season will be the largest since 2012, demonstrating farmer commitment to planting corn and applying fertilizer.

We believe farmers around the world will make similar decisions with important demand continuing to be led by India and Brazil.

We believe global supply will remain constrained in the near term with relief unlikely to appear anytime soon.

We believe inventory in the channel is very low glue.

Global production has been lower than 2021 due to severe weather in North America higher maintenance worldwide and ongoing European shutdowns in curtailments further the Russian and Chinese governments are discouraging nitrogen fertilizer exports through the spring.

These factors suggests the potential for strong fertilizer demand to last beyond 2023, even if some regions are unable to secure enough product and the supply constrained environment, resulting in lower yields. If this were to happen demand would be deferred into future years as it would take more than two growing seasons to replenish global grain.

<unk> feedstocks.

As we prepare for the spring application season, we continued to receive substantial interest for any product we offer into the marketplace. We are building a solid order book for the first quarter of 2022 at the prices you see in the market today.

Similar to what we did for the fourth quarter, we are adding natural gas edges, as we make first quarter product commitments and order a lock in margin and protect against significant energy price spikes.

As a result, we believe we are in a strong position heading into 2022.

In this dynamic market remained focused on leveraging our manufacturing distribution and logistics capabilities to serve our customers and look forward to the opportunities before us.

With that let me turn the call over to Chris. Thanks, Bert for the first nine months of 2021. The company reported net earnings attributable to common stockholders of $212 million or 98 cents per diluted share EBITDA was $984 million and adjusted EBITDA was approximately one.

$5 billion net.

Net earnings and EBITDA reflect the recognition of a non-cash impairment charges related to our UK operations is discussed in the earnings release Ah results for the first nine months in third quarter, our preliminary pending the completion of the impairment analysis and finalization of the non-cash impairment charges.

We continue to monitor market conditions for the UK assets, which accounted for 2% of our gross margin in 2020 Billingham complex is operating due to recently improved carbon dioxide contracts and industrial contracts that pass through natural gas costs.

Operations at inch remain halted.

Free cash flow free cash generation remains strong the trailing 12 months net cash provided by operating activities was approximately $1.7 billion in free cash flow was $1 billion.

We believe we have a good opportunity in 2022 to build on these results based not only on our positive outlook, but also on increased production from our network.

In 2021, we completed a record level of maintenance activity that included turnaround. So it's seven of our 17 pneumonia plants, we will return to a more normal level of turnaround activity in 2022 as a result, we expect to return to our typical high ammonia utilization rates with gross ammonia production.

Queen nine and a half and 10 million tonnes, we expect to sell everything we produced and achieve sales volume between 19 and 20 million tons in 2022.

As we sell these product volumes into a favorable market environment, we expect to continue to generate substantial free cash flow and create shareholder value.

As Tony said, our board authorize the new $1.5 billion share repurchase program, which becomes effective January 1st 2022.

We continue to operate under existing program, which had and has enabled us to.

To acquire more than 11 million shares to be repurchased since 2019. This program expires at the end of the year.

At the same time, we will continue to evaluate clean energy initiatives to meet the demand for ammonia clean energy capabilities that we expect to emerge in the second half of the decade.

This includes positioning our network for the production of Blue and Green ammonia to support the development of a market for low carbon ammonia.

Constructing carbon dioxide dehydration and compression units donaldsonville in Yazoo city are a necessary step to enable blue ammonia production through carbon capture it's cost ratio.

These projects leverage our existing asset base and represented an efficient use of capital with a return profile, we expect to be above our cost of capital.

Once sequestrating has initiate it will be able to produce more than 1 million tons of blue ammonia annually, while reducing our carbon emissions in a meaningful way.

With our strong balance sheet.

We also have the flexibility to evaluate additional opportunities in the years ahead.

We continue to collaborate with global leaders, where we can provide value, including Joan jointly exploring with Mitsui the development of Blue ammonia projects in the United States with that Tonio provide some closing remarks before we open the call to Q&A.

Thanks, Chris before we move on to your questions I want to recognize our team here it's fee for their strong work. So far in 2021 their commitment and dedication continued to be the foundation of our success.

We are excited about what lies ahead for CFO industries. In fact, I think the company has better position today than we have ever been in our history.

We are again, an investment grade credit issuer.

We have the fewest shares outstanding ever.

We expect the business to produce between $2 to $2.4 billion of adjusted EBITDA. This year.

And as we look forward to next year, we should have significantly more tons to sell at.

An overall average higher prices and this year.

So the business should generate all time records for free cash flow per share.

We see demand for low carbon ammonia developing.

That should provide a long term growth platform for the company and with our investments in both green and Blue ammonia production will be at the forefront of this exciting opportunity.

Taken together, we have never been in a better position to create value for shareholders.

Without operator, we will now open the call to your questions.

Thank you the floor is now open for questions. At this time I would like to remind everyone in order to ask a question you Me press, Taiwan on your telephone keypad, what parts for just a moment of compiled the Q&A roster.

Yeah first question comes from the line of items handled let's say from Goldman Sachs gimmick.

Please go ahead, Sir yes, yes.

Yeah. Thank you good morning, everyone running out of.

So Tony Burt, Chris I guess.

What I'm trying to reconcile and think about is the risk of demand destruction.

At current.

Thank you Jane and Fertiliser prices broadly I mean, you're talking about record demand for ammonia in the fall.

Those prices were also book several hundred dollars ago relative toward the spot market isn't so as you think about the order of patterns into the first quarter do you see any risks on farmers and their.

Nation rates, obviously nitrogen is less discretionary, but do you think that could have any impact on agronomic yield.

Given where affordability it today.

You look across the world and where we are starting with just supply.

Just not there. So this is a more of a supply constrained market. The demand is definitely there you are seeing.

Desperately trying to pull in tons and will continue to do so through I expect into their next fertilizer year, which begins in April Brazil.

Brazil is ahead, 10%.

Iran year, and probably will continue at that pace through importing urea at least three.

Through February for their <unk>, and then we hit our spring in the northern Hemisphere with what's going on in Europe with gas prices and the level of shutdowns. It's over 11 million tons of ammonia that is currently not being upgraded into ammonium nitrate urea R. Cin.

And so tons need to flow, which were not planned in the supply and demand scenario to Europe. So we were in a supply limited market and that's what's going to keep prices elevated the demand the side of the equation is still very strong and you are correct. What we sold for fall and we're applying today.

Let's hold it levels are much lower.

Then the.

The current market, which is probably over $1000 for ammonia that being said, we're selling thousand dollar ammonia for fall application on the incremental tons that are available.

As I said in my prepared remarks were selling your area and there are significant demand at 730 $750 short to NOLA, it's even higher than the interior at over $800, which we've transacted a port Neil and you've seen in the publications, the UA and reaction and the demand pulling and I just looked at the analysis of <unk>.

Where we are to date with order books and demand and again in a very good place at $550.

Uhm calculating all of that forward with current trend yielded 177.

Bushels per acre on the trend yield that's not considered in the states, where you will be 200 to 275 bushels, even with renters land at today's economics. Your your your cash positive you are actually profitable at a pretty healthy level. If you own your land even more so there are ways to economize and so if.

You are a farmer you can look at different options, but that's not going to come at the expense of nitrogen and probably even at fertilizer, it's going to come.

Some other issues so weird.

We're constructively as I said positive I would say very positive and the customer advances continue to come in and so we're working with our retail partners to make sure that that supply is available in our retail partners or buying that and moving there's gonna be a substantial amount of cash coming into a retail friends through here.

M as farmers prepared for 2022, I would just add one thing Adam which is.

Said demand is clearly there if you look at our customer advances our order book is strong you can continue to sell forward.

And.

And it looks like a farmer economics are positive, but given the supply shortfall, particularly now with both Russia and China.

With holding tons from the export market place there is a real shortage of nitrogen and price has got to basically arbitrate who's going to get this scares tons that are out there and so it's not so much that you are going to destroy demand there's going to be a lot of unmet demand that's going to be pent up.

And so we do think yield is going to be on a global basis off next year again, not because demand destruction, just because there's not enough tons available and what that means is where it's going to promote favorable supply demand dynamics and of course screens as we get out into 2023 and probably beyond so.

<unk>.

Our view is that this is a a very very healthy dynamic that leads to a much longer period of positive.

Fundamentals for our business.

I appreciate all that Colorado pass it on thank you.

Your next question comes from the lineup Jello check city from BMO capital markets. Please go ahead.

Hi, good morning, everyone.

Joe.

Just thinking about your order book and Bert I don't want me to quote you, but I think you've talked about before when when prices go up and you tend to book more product more floor table kind of a longer dated order book.

Thanks have really gone up so would that be.

Would that be the case that really you book more product into Q1 and you normally have at this time normally have it at the at the time.

So we're pleased with our order book and like the position that we've placed ourselves in with the opportunities that the market has given us and you're right. We have seen an accelerated market. We started the year at $350.

Per ton of urea move to $400 by April moved to $500 by July.

$600 in September and $700 in October we have index contracts that every week price and you can see in the publications. We started our fill program in July.

At $285 NOLA equivalent and then moved to $435 in September and then in October $535 and so as I said, we are booked for Q4 and the majority of the $285 and.

And was shipped and.

Two three a little bit in Q4, and then those other prices when we bled in as we look forward to Q1, we're starting to book those those values today and so you are looking at that $5 35, 550 for Q1 in 700 750, probably for urea and we have yet to price Q2 ammonia.

And once we book out Q1, and we will look at Q2, but there are substantial demand for Q2, we would rather so Q1 first.

Thank you.

Your next question comes from the line of Steve Bank from Bank of America. Please go ahead.

Yes. Thank you so he laid out.

The significant levels of disruption in supply.

That are going on and most recently you have Russia jumping into that.

So the theme and I wanted to get your view on how.

How significant is that.

I understand that essentially all of the ammonium nitrate that Brazil imports comes from Russia.

If that is the case.

And what are they gonna get it now.

And are there or the regions of the world that you think are just flat out not gonna be able to get nitrogen for the spring.

Yeah. So when you look at the Russia announcement, I would say in contextually. The Chinese announcement is much more significant because of what has come out traditionally from China. The four to 5 million tons of urea exports and also phosphates.

That is going to have it because that's the incremental ton that is continually bid in so in a world of 50 million tons of world traded urea to take out up to 10% is going to be fell on top of the demand as I mentioned earlier from Europe that needs to move so you're going to see north African tons, moving into Europe, and there's going to be a whole.

Like Tony said somebody is going to have to struggle or pay up the Russia announcement.

A little bit of a surprise.

The Russian demand for nitrogen Fertilisers has been fairly consistent and that $5 five to six 5 million tonnes.

Demand per year, and they exploited the remainder and so when you look at from year on year, what Russia is consumed in what Russia has exported on the margin, there's probably going to be a shortage of up to a half a million tonnes. So brazil will be able to get their ammonium nitrate and I believe the suppliers from Russia Euro camaca on and the others will do that.

As well as supply.

Some of the portion that's needed and in Europe.

So it's going to come again on the margin every month there'll be less tons available from an expected source, which further exacerbates.

Supply demand balance that we've been discussing.

Maybe a question for <unk> for Chris.

Decision to.

To focus on Yazoo City is another carbon capture your project. In addition to Donaldsonville do you have any more clarity about where the the demand is gonna be coming from for for this.

The blue ammonia R. U R U increasingly confident that you can move those tones in January to.

Sufficient premium to offset your your capital investment and generate a return.

Yeah, Thanks, Steve Yazoo City as you know as excess C O two and that's why that was one of the sites also chosen.

To do the dehydration and compression unit there as with Donaldsonville we're in.

Pretty extended discussions with different.

Sequester Asian areas, whether it be EUR or people, who are in the process of filing their classics permits related to both those areas I think when you look at the economics, Steve both a depot in Yazoo City, given what's been proposed from the 45 Q tax incentive.

It allows us to not only more than fund those particular capital expenditures, but also see a return above our cost of capital and the reason for that is you know better than a lot of people do is because we're already capturing.

The C O two off of our ammonia process today, so that equipment's already in place and that's limited the amount of Capex that we would need and therefore increases our return profile on that but.

I think guys. Steve we are confident we will be able to move that product into position.

And even if that demand as international make.

Make that.

Actively show up at the Bill for not very much cost and and be able to exploit it is appropriate.

It's not very far from Sudan to email and.

We feel comfortable that there is a ready market for that time for those times. The other thing that makes yazoo attractive as Chris that has a lot of excess C. O. Two it's very close to.

Existing.

C O two pipeline.

Capacity with Danbury, and there's a lot of options in the area of the geology, there is really attractive so.

Yazoo was an obvious add on with the Devo project and I think when these projects do come online because it it will take two to three years you also see domestic demand for blue.

Specifically at the levels that would be being produced zoo.

Thank you.

Your next question comes from the line of <unk> from J P. Morgan. Please go ahead.

Thanks very much.

When do you expect to produce 1.25 million tons of blue ammonia and.

How do you think about the price of Blue ammonia is it relative to the price.

Agricultural ammonia or is it independent or it's relative to fuel prices.

And so with all with those kinds of.

Issues I think how do you figure out the returns on selling to how about you.

Yeah.

So relative to kind of the value of blue ammonia at a minimum I would say the value is equivalent to a regular conventional ton plus whatever carbon jurisdiction you are talking about.

In the euro up you're talking about.

50 or above euro a ton in the UK, it's more like 50 pounds.

Other regions are going to have different.

Cost structures were regulatory environment, and so at a minimum I would say you are able to get whatever prevailing value of carbon is on top of.

A regular sorted traded ton.

And is is Chris highlighted.

If you think about.

The total variable cost required to produce a ton of blue ammonia.

We probably have somewhere in the neighborhood of five to $10 a ton of electricity costs.

On plant site.

And then we're in and pretty advanced discussions with a number of potential parties on.

The transport and an injection and believes that that is a very manageable number from an overall cost standpoint, and so the all in the the variable costs that we incur is less than the value of the 45 Q credit and so the differential will go to.

Toward paying back the capital even before you put any premium on blue ammonia. So just on the value of the 45 Q.

We feel comfortable that we will get returns above our cost of capital and then to the extent you are able to realize margins and additional premium on on blue.

Further adds to.

Attractiveness of.

Investment for us.

Okay.

And for my follow up.

Some farmers say that they really can't cure.

Nitrogen product.

For the second quarter.

And in your commentary you you said, you're really trying to put together here first quarter order book.

Is that a generally correct description that farmers can't really get farmers can't really get commitments into the second quarter just yet.

Yes, I would say, that's not necessarily true and and we don't deal directly.

Actually with farmers, we deal with.

The retail wholesale trader group first retail than some wholesalers and a little bit trading for exports.

But we are selling are are tons are being moved to the market and so those are in the hands of the retail group. They have tons available to sell were producing record amounts of Yue and and you can see with some of the disruptions.

From the hurricane and weather problems, we did lose some tons, but we are moving our tons into the market. We have a record number of.

Uhm toes in service since I've been here and as well none of our railcars are in storage, which is the first time since I've been here 13 years that all of our railcars are occupied so product is moving to market.

<unk> is available now that being said CF is not pricing Q2 as of yet and that's a pricing and position that's not a volume nor a commitment situations. So.

I believe if retailers wanted to take that out or a farmer wanted to get a quote or an offer that should be available in the market and there will be sufficient tons to meet spring demands not only from CF, but from the broader industry group imports are up domestic production will recover and yes, we will have a spring.

Jeff I realized I didn't sorry to answer your first part of the question about the little ammonia in terms of when is it going to be available.

We've gone ahead and launched those projects now we anticipate probably end of 2024.

Or early 2025, so by 2025, we expect.

Basically a full year of operating on that basis.

Okay, great. Thank you so much.

Your next question comes from the line of Vincent Andrew from Morgan Stanley. Please go ahead.

Thank you and good morning, everyone.

Tony would love to get your thoughts on just sort of as we think about the next few years of three to five years or how are we going to frame. It we're not carry a situation now obviously very tight grain stocks and now he's had this spike in gas and coal prices and so forth and we're having a lot of food inflation.

And Bert laid out a very plausible scenario, where we can have lower yields because of.

The inability of everybody get nitrogen and so forth. So what do you think the global response to this is going to be.

Over time in terms of trying to manage the food supply and make sure that we don't get into extreme situations like this into into perpetuity, but.

But at the same time, we need to balance our our sort of climate goals in our in our green energy aspiration and so forth. So how does this new you'll get thread in your in your view.

That's a that's a great question and I think as you point out there are a lot of competing priorities out there that have second order in tertiary kind of knock on effects that not everyone understands well so the push to reduce availability and affordability of.

Fossil fuels.

Because of a focus on climate change and move towards renewable.

Think is directly part of what's going on in in Europe, right now with extremely high natural gas costs.

And and that means that all of those plants that bird talked about earlier curtailed or.

Or offline.

At the same time, you've got a number of governments around the world that are very focused on trying to limit right of nitrogen fertilizer in particular, because they're concerned about nutrient loss to the environment and run off and whether it's.

Nitrous oxide produced on the field.

Pretty potent greenhouse gas or whether it's other kinds of runoff into waterways and so forth. There is a real push in some areas cannot Canada, notably in other places as well to reduce.

Application right and if you do that you're going to have a year when the impact on yields. So there are a number of I would say competing priorities out there.

All of which.

Generally speaking.

I would say benefit North American producers, because we do have ready access to low cost gas were on the very low end of the supply curve and as yield to continue to struggle due to either lack of availability of nutrients or these programs designed to reduce nutrient application.

Just going to keep grain prices higher for longer I mean, ultimately I think where this goes as governments are going to have to capitulate to the.

The requirements of their people and provide affordable food, which means some of those priority is that they have here to four held out as being these holy grails, they're going to probably have to take a back seat for awhile.

Just to make sure that we can feed the people of the world but.

I think that you will see people backing off I mean again.

Germany is decommission their nukes and they brought on coal fired power plants, that's not exactly what I would call a green initiative.

You've seen the same thing and.

Kinda as well in the UK in Continental Europe are struggling with high gas costs. So I do think there is going to have to be a reassessment of what is required for the planet to be able to eat and fuel itself.

Thanks, very much I appreciate all the stuff.

Your next question comes from the line of John Roberts from UBS. Please go ahead.

Thank you and back on the earlier question on the Blue ammonia do you expect to sell it as fuel or do you expect to sell it as fertilizer and have some carbon credit broker get you the revenue for the sequestration values, yes, John.

So.

Chris mentioned and we've highlighted earlier, we do have this.

Mou in place with Mitsui, we're having very productive conversations with them I think there is a real emphasis particularly in Japan, but in some other regions as well to go into.

Co combustion of ammonia with call to reduce.

The C O two emissions out of those plants and we think that.

It is something that.

Will.

Develop into a pretty sizeable market estimates can be as much as 5 million tons by the time you get.

Two.

23rd year, possibly even before and that that's a huge increase in terms of the total amount of ammonia being consumed, particularly when you've got curtailments in outages in.

Across broad swathes of the production universe here and.

And.

In Europe and the UK.

And so.

We're <unk>.

Excited about that clean energy attribute that blue ammonia has we think that that's probably.

Where the majority of value sit at least in the near term, while I think there's certainly the possibility to get some incremental value off of.

Carbon sequestration in the soils from an agricultural application given that most of that is going into the voluntary marketplace today, where values trade it.

A pretty small discount to wear structured carbon trades and the rest of the world.

I think that's probably the.

The last place just because of lower values that that we would go now.

Develop say.

A more structured approach to the cost of carbon and you can get a scientific valuation placed on.

Carbon capture and sequestration in the soil that may change the math, but I think in the near term what we're really looking at is more of a clean energy source and we're working very closely with.

Mitsui to to help develop that and bring that about the other the other point, though that I would say is.

We believe these projects are attractive.

Just based on the 45 Q credit.

We ought to be able to generate a return.

On these projects.

Without any embedded premium on blue now our expectation is there's going to be a sizeable premium on blue but.

To be clear.

We are able to make the math work pretty easily just with a 45 Q credit.

And then how are you thinking about the pace of buyback under the new authorization is it going to be opportunistic or are you thinking something that's just going to be more structured over the two years.

Yeah, I think based on what we're looking at in terms of not only current year performance, but our expectations for next year.

There's going to be a lot of cash that needs to find the home and so well.

Certainly by more on Dave sort of lower prices I think it needs to be.

The volume that we're talking about is sizeable enough that it probably needs to be a bit of a structured leg in there as well so ultimately probably a combination of approaches.

Thank you.

Your next question comes from the line of Crazy Parkinson from Mizuho. Your line is helping great. Thank you. So just over the last five years, there's been a plethora of variables, that's still driving a bit of volatility in need and unit, you and pricing versus urea.

Given current supply and demand dynamics trade flow adjustments over the last two.

Two years.

The recent <unk>.

Do you see case can you just comment on your outlook for you and pricing for 22 23 as it pertains.

Two and unit sources urea. Thank you so much.

You are correct in terms of a lot of variables a lot of volatility in the last year and a half we've traded as low as $115 a short ton for.

And as high as $550 and NOLA, what drove that volatility. We believe we were pushed down-low because of excessive imports of subsidized products and consigned products and therefore, we took the case forward too.

The department of Commerce, and the ITC in and were successful. We're pleased with that result, and we believe that that information will come out with what the ruling will be and how that will be applied step one and so the discount to urea took.

Took place for several years and that was an inappropriate response to a more a valued product and expensive invested product an asset basically we've invested several billion dollars to maintain and construct.

So we're entering.

Probably a normalised market now were you in again is trading at a premium to urea for the reasons I just articulated and it should.

So through spring.

Most definitely it will trade at a premium will reset in July as we always do we believe at a higher level for the reasons. We have articulated we are in a different differentiated global market driven by a lack of supply with high levels of demand that is not going to correct itself probably for a couple more years and so in there.

That context, we see you and trading at at advantaged position to urea as well as ammonia and ammonium nitrate and that market.

We don't see demand destruction, we just see see differences of supply availability.

That's a great color and just as a quick follow up just given given what's going on in China.

What's your intermediate to long term view of export trends.

And what the ultimate price will be for those pundant tons on an <unk> basis. Thank you.

Yeah, So where you're looking at export trends I would look at the at the Chinese economy, Holistically and looking at what they are trying to do with energy and where they are you have got the risk of entering winter and Grand moment may not be able to have heat and and some of these big cities are you going to value urea production are you going to.

Now you have the population and the ability of heat homes and to produce.

Value added products or a commodity product I would bet on the latter than the former.

And so are the former rather than the latter there you go.

So.

What we're seeing in China as a result of several factors coming to play whether that pollution.

Economically driven decisions.

Higher polluting level proud of our production taken offline and then this restriction to have products available you have seen their production capacity.

Full static capacity fall from 90 million tons of its peak to probably 75 million tonnes. Today and then you take an operating right that's range from 55% to 75%.

In China, you only have available probably 53% to 55 million tons of urea per year.

Domestic consumption has rebounded and is over 50 million tonnes. So there is not that substantial amount of tonnage to export NY export value destructive product, that's where we see the future of China.

And and other production is going to have to come on stream in other locales. So you have Nigeria coming up Russia coming up.

We need more and some more construction will probably take place, but it's long data so you're not going to see those market correct for the arrival of new production, even though we need it but then I would also add Chris just based on what the forward curves look like.

It's moved.

Really Europe in particular, eastern Europe into what I would call the marginal production ton in the world as opposed to out of China, but the factors that Bert was talking about.

Means that China is not going to overwhelm the global marketplace with access.

Exports and so that's going to maintain what we believe is going to be a relatively tight supply side equation and just based on the energy spread differentials that you can look forward. It's a much steeper supply curve that it's been.

Recently and that gives us a lot of opportunity here.

To generate cash in the U S. So we're we're very constructive about all of these trends.

Great colors always thank you so much.

Question comes from the Linus B J took the car from city or 90 Hilton.

Hi, good morning.

Good morning PJ.

That is all this resource nationalism going on about nitrogen that you talked about.

But you are still a net importer of urea. So how does this play out.

Growers switch from corn soybeans at the margin or maybe the industrial demand has to back down to make room for agriculture demand and your mind, how does this play out.

In the medium term.

I mean.

I think that the U S based on crop prices and efficiency of growers.

And.

Requirements on the industrial side is able to bid away tons from other parts of the world that are less able to do so, particularly those economies that required government subsidies in which too.

To bring tons in and.

And so our expectation is.

That there's there's going to be availability of product here.

In North America and honestly.

I don't see a scenario, where you where industrial demand starts backing off based on.

AG demand I see a situation, where you end up with inflation in terms of the industrial goods as opposed to some reduction in economic output.

But I think ultimately as per talked about you see some.

A new projects on the drawing board, but not very many and particularly not.

Enough with respect to some of the closures and shutdowns or even curtailments that you see out there right now so ultimately I think what's going to have to happen is you end up seeing more capacity added because the world just needs more than what's available that's before you even get to clean energy.

Applications for ammonia going forward. So I think the net of all of that suggests that there are new plants that.

That the world is going to need to construct in order to be able to feed itself and utilize ammonia. In these these kind of new alternative applications versus what we've seen in the past.

I think it's a false narrative VJ that.

That those two are competing but I think we're in the.

You have to go back to in the United States or in North America. We're in the resource Rich region of natural gas and energy products, we have the capability to construct move with the infrastructure. That's in place where that'd be rail large truck pipe and we are setup to do that very efficiently. So what I could see over time.

These other economies progress into lower carbon.

Output lower carbon consumption, using natural gas or renewables, you're going to see in the natural gas spreads continued to expand their stay expanded maybe not at its current level today of $20 per Emmett btu, but maybe it's $10 rather than six and that maintains.

North America as a low cost.

Hi margin region in the World and I think you'll see maybe some.

Industrial production in other areas compromise that would be Europe, and maybe some even in China over time, as we move to a new market.

On the corn soybean competition today, it's favoring corn and it has been and this is the time when it makes sense that when it is very good for us to have that favorability because that's when today or in this period is when farmers are making that spring planting decision in allocating their resources accordingly, and therefore booking fertilizer, which is positive.

For us, we're seeing very strong industrial demand in our book and we balanced both of those we think well as well as our industry. So I think it's a net positive.

Great. That's good color and just one quick one Tony when you talked about and thank you for giving the details on blue all shades of gray ammonia. It seems like blue ammonia will be more costly to make by 20 or $30 or something like that for a ton.

And so why would grow worse by more expensive ammonia unless that incentive to buy them and what is the mechanism for them too.

And Ah spend more yes.

So I remember 20 to $30 and that might be in the range or it might be a little high relative to our expectations, but.

Not a crazy number remember the 45 Q tax credit the way that it was originally constructed was going to be it.

45 ish to $50.

In the current.

Rags, it's substantially above that right. So, although it's a little bit more expensive for us to make if you'd net against it the 45 Q tax credit it's actually.

Discount relative to conventional ammonia from a producer side.

But the reason why a grower would pay for it is if they want to be able to make.

Carbon labeling claims that go into consumer products companies, because they are going to care about that.

Or if you are trying to produce low carbon ethanol that might be.

Qualify for California's clean fuel standards that might be a reason for it or even in the voluntary market. If you can get five to $10 a tonne for sequestering carbon in the soil being a grower.

A high profile transactions that happened along those.

Lines, a couple of months ago, I think there's a lot of value there potentially for growers.

To try to differentiate what they are doing versus just.

Commodity bushel of corn and so.

Based on kind of where some of those pockets of value or we would expect there to be some margin opportunity for us or at least some incremental.

Demand.

For that that product and again to the extent that the us actually adopt some more regulated and structured cost of carbon.

Then there is real economics available to the farmer, if they can demonstrate the sequestration and sell those credits into a structured marketplace. So.

Yeah, I was just going to add to that I think one of the benefits of this is the incremental demand that Tony speaking of.

The agricultural is already using ammonia, but as you start to see more of the industrial move and that's where you'll start to see the bidding on an ammonia would go up and more constrained. So it's really about the demand addition that we think is going to occur here plus.

Plus you have to remember if it's $50 more a ton, let's take it there than conventional to a farmer that's $10 an acre. That's two bushels. So the cost is insignificant to the farmer based on the benefits that Tony articulated and we already have people wanting to buy blue ammonia. So we think there's going to be a demand <unk>.

<unk>, which is very good for our business in the future years. That's also honestly why.

Donaldsonville in Yazoo.

The city or not the last dehydration compression projects that we're likely to build we want to continue to evaluate other places with ready access to sequestration and continue to build out our network because our our belief is it's a project that pays for itself and also gives upside opportunity.

On.

Access in the clean energy market in a way that is differential for us versus.

Other market participants.

Thank you you guys always give a great color. Thank you very much.

Your next question comes from the <unk> from Cleveland Research. Please go ahead.

Yes, hi, Thanks for the question just wanted to discuss in a little bit more detail on the status of your UK operations I know they were down for a couple of days and then you guys were reached an agreement with the government to restart it when you talked about getting back to that kind.

19, and a half to 20 million times the implication I assume there is that those plants are gonna run pull next year. So maybe you could just talk about 10 as soon as they.

It can be profitable what type of which ones were looking at them give them the higher gas costs.

Michael Thanks.

So the first thing that I wanted to just highlight is the relative importance of the UK in terms of the overall portfolio as Chris mentioned, if you look back to our results in 2020. It represented 2% of our total gross margin so from an aggregate.

Profitability standpoint at the time, the small end of the scale now.

Does provide.

A little bit of a natural hedge for us when we.

Global energy costs are low and relatively flat then we earn.

The better return there when energy costs are high we earn a much better return to the us on a larger production base. So it's a little bit of.

A natural hedge in that regard, but as you mentioned because of a huge spike in gas costs. In September we took the plants offline. We worked I would say very constructively with.

UK government.

To restart the facility at Billingham and be able to provide.

<unk> into the UK marketplace, that's pretty critical for the normal functioning of a number of different industries over there and during that period of time. The UK governmental. So it was very helpful. In us working with us and the C O two off cake.

Company is the industrial gas companies from Billingham to restructure those contracts in a way that makes that plant viable. So.

We're really pleased with how that whole process.

Developed and billing implant is up and operational and we expect that to be.

Bible in the long term the to the plant in the northwest is is not yet back online we're evaluating a number of different.

Options and scenarios they are including.

Being able to secure a vessel to bring ammonia into the facility. So we can at a minimum run the upgrade plants.

Given again, the high cost of natural gas through the winter. It doesn't look like ammonia production there is going to make a lot of sense, but being able to bring in ammonia.

Will allow us to run the upgrades and make a.

Inappropriate.

Return on.

On those products.

So we're kind of in a little bit of a wait and see.

Mode in terms of what the longer range situation develops in the UK, but I think for now.

Billingham is up and operational we expect that to happen then and again, we expect to be able to turn the back end of.

The fertilizer portion of the plant up and running.

Hopefully soon within the next couple of weeks once we get the ammonia vessel squared away.

Great and then just understanding a little bit longer term by the time somebody blew ammonia projects are up and running I mean is this going to increase your number of product ton just gonna come out of some of your other products like how should we be thinking about the cadence severe product tons I sold over the next call at three to five years.

Thanks, Yeah.

Yes.

We already run our ammonia plants.

At full operating right.

With the with the one exception of the UK, which we just talked about right.

And.

And so it's not necessarily a situation where there is new tons, unless we engage in some debottlenecks or new capacity or other things like that.

So this is definitely a.

Pulling tons away from the least profitable portion of our segment of our business and reallocating them to a higher margin application and so it's a margin upgrade as opposed to new new production at this time.

Great. Thanks.

Your next question comes from the line is Andrew Wong from RBC capital markets. Please go ahead.

Hey, Thanks for taking my question just going back on blue-green ammonia here.

Can you talk about how the blue green ammonia market could impact the dynamics around the gray ammonia market in the future I mean, we have we have projects like detail in Yazoo.

Turning some some other volumes from gray to Blue and.

As those tons are sold in to clean ammonia applications like maybe with Matsui.

How does that effectively mean, a loss of supply for the greater ammonia market and then on the demand side like the molecules are the same.

Could there be a scenario where demand and supply maybe aren't matched up properly. So some applications that maybe need blue-green pneumonia, but if there isn't enough you use a little bit of gray.

Just in general does the emergence of a lucrative ammonia market mean, potentially a tighter gray market in the future things.

I certainly think.

That's where we see things headed I also think Thats, where.

Not wanting to.

Interpret things for them, but I think that that's consistent also with where air products and others see things headed hence the announcement both of the Neon project in Saudi Arabia, but also the recent announcement they had in Louisiana around a blue project and I think.

A number of market participants see this comment and then ultimately what that's gonna mean is you've got more demand than what current suppliers and ammonia, it's going to be it in new.

New production, new capacity, which the world is going to need and that that's pretty attractive relative devaluing existing assets. So we think overall.

Overall this is a terrific set of.

Factors.

Create a reevaluation are we thinking about what the value of our asset base is being that.

The largest ammonia producer in the world.

Great. Thank you and I think the situation is not unlike what we've got today right which is.

Today is bird mentioned, it's more of a supply side constraints, given a bunch of curtailments in shutdowns in other disruptions, but in the future. Even if those plants are off and running and you see demand continue to exceed where where supplies capable of reaching you see price escalation like we're like we're experiencing right now.

Yeah that makes a lot of sense. Thank you very much.

Your next question comes from the line of Adrienne to mono from there and burn your line is open.

Hello, good money, so I just Wanna look from the previous questions from the industry's perspective the combination.

Well being Shaw ammonia Jake is quite.

And your current technical difficulty to make things he can Williams.

Look up on the way.

Would that make you.

U C.

Thinking about Greenfield Greenfield pneumonia at some point in time on account of question for Ya.

Well, we constantly are evaluating.

Ways to add capacity appropriate I think our biggest focus area and the thing that we use as a lens to make all of those decisions is ultimately cash flow for sure.

And if we can find an opportunity that allows us to expand capacity, whether that's a debottleneck.

Inorganic acquisition or an organic kind of growth, where we believe that that's going to grow our free cash per share then we'll take a serious run at it I think in these kind of context, we would be much more likely to.

Think about partnership structures or other things like that if we were going to move forward on any of those things, but I do think it's a a positive sign when others out there are making announcements about adding capacity I do believe we're the best operators of ammonia plants in the world.

And so if there is.

There's opportunities for new capacity additions, we ought to be thinking about that along with other people.

And I do think the world's going to need it. It's a question of.

When in the interim are you better off buying existing assets are debottlenecking, which you already have versus building, new but I think.

Those are.

Appropriate questions.

That anyone in the industry today is kind of mulling over and really thinking about.

Thank you.

Ladies and gentleman that is all the time, we have a question today I would like to take the call back to Martin Gary sick for closing remarks.

Thanks, everyone for joining us and we look forward to speaking with you throughout the quarter.

That's gonna teach today's conference call. Thank you all for joining you may now disconnect.

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Good day, ladies and gentlemen, and welcome to the first nine months and third quarter 'twenty 'twenty. One V. S Industries Holdings earnings Conference call. My name is Erica and I will be your coordinator for today at this time all participants are in a listen only mode. We will facilitate a question and answer session towards the end of the presents.

Asian to pose a question at any time. Please press star one on your Touchtone telephone keypad if at any time. During this call you require assistance. Please press star zero and a coordinator will be happy to assist you I would now like to turn the presentation over to the host for today, Mr. Martin Jurassic with CF Investor Relations.

Sir Please proceed.

Good morning, and thanks for joining the CF Industries earnings Conference call I'm, Martin drastic Vice President Investor Relations with me today are Tony will CEO, Chris Bohn, CFO and Bert Frost Senior Vice President of sales market development and supply chain CF industries reported its results for the first nine months and third quarter of 2021 yesterday afternoon on this call.

We'll review the CF industries' results in detail discuss our outlook and then host a question and answer session.

Statements made on this call and in the presentation on our website that are not historical facts are forward looking statements. These statements are not guarantees of future performance and involve risks uncertainties and assumptions that are difficult to predict therefore actual outcomes and results may differ materially from what is expressed or implied in any statements.

More detailed information about factors that may affect our performance may be found in our filings with the SEC.

If you are available on our website.

Also you will find the reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Now, let me introduce Tony will our president and CEO.

Thanks, Martin and good morning, everyone yesterday afternoon, we posted our financial results for the first nine months of 2021 in which we generated adjusted EBITDA of $1 5 billion.

These results reflect the drastically improving industry fundamentals that we experienced over the course of the year.

Nitrogen prices are at their highest levels in over a decade.

<unk> demand and lower worldwide production have tightened the global supply demand balance considerably.

At the same time energy spreads between North America, and high cost regions have widened dramatically supporting margin expansion for our cost advantage network.

The CF team also continues to perform exceptionally well navigating a couple of severe weather events in the U S. Our highest levels of turnaround and maintenance activity ever and a challenging natural gas situation in the UK.

Most importantly, they did so safely.

Our recordable incident rate at the end of September was just 0.24 incidents per 200000 labor hours significantly better than industry averages.

These factors have driven substantial cash generation over the last year, our trailing 12 month net cash from operations was $1 7 billion and free cash flow was $1 billion.

As we look ahead, we're excited about the opportunities to build on this performance.

We have good visibility into the fourth quarter of 2021, we have priced virtually all of our product shipments through the end of the year, while also hedging our natural gas requirements.

While there is always some uncertainty about the volume of ammonia that will be applied in Q4, given the dependency on whether we would expect full year 2021, adjusted EBITDA to land between two two and $2 4 billion.

Further out we believe nitrogen industry conditions will remain positive for an extended period.

As Bert will describe in a moment, we see very strong demand constrained global supply and wide energy spreads between North America, and Europe to persist for some time.

These factors support our ability to continue to generate significant free cash and to deploy that capital to create shareholder value.

Our priorities remain the same invest in growth where opportunities offer returns above our cost of capital and return excess capital to shareholders through dividends and share repurchases.

We remain focused on disciplined investments and are excited about the two new projects supporting our clean energy growth platform. Once completed these projects will enable us to produce over a million tons of blue carbon free ammonia.

Chris will share more about our announcement yesterday in a moment.

We're also pleased to have achieved investment grade credit ratings, which recognizes and underscores all of the work we have done to remove fixed cost in the business reduce debt and highlights the positive industry fundamentals for North American producer.

On the balance sheet, we are quickly closing in on our target of $3 billion of gross debt and expect to repay the remaining 500 million outstanding on our 2023 notes on or before their maturity.

However that still leaves a substantial amount of excess free cash flow, we expect to generate and as such the board has authorized a new $1 $5 billion share repurchase program to facilitate the return of capital to shareholders.

With that let me turn it over to Bert who will discuss the global nitrogen outlook in more detail then Chris will follow to talk about our financial position and clean energy initiatives before I return for some closing comments.

Thanks, Tony for the last six to nine months have seen a dramatic tightening of the global nitrogen supply and demand balance.

High crop prices and increased economic activity continued to drive demand means.

Meanwhile, global lower global production and government actions have created a supply constrained global market.

The impact of this can be seen on slides 11, and 12, where both our spot cost curve and 2022 cost curves are much higher and steeper than in recent years as you can see the margin opportunities available to our network have expanded greatly due to a wide energy spreads between North America and marginal.

<unk> in Europe.

We expect strong global fertilizer demand to last into at least 2023.

As you can see on slide eight global stocks to use ratios for both grains and oilseeds are at their lowest levels in nearly a decade supporting high crop prices.

These prices will support farm profitability in North America, even with higher input prices incentivising farmers to plant acres and maximize yield.

Based on our order book, we expect the fall ammonia application season will be the largest since 2012, demonstrating farmer commitment to planting corn and applying fertilizer.

We believe farmers around the world will make similar decisions with import demand continuing to be led by India and Brazil.

We believe global supply will remain constrained in the near term with relief unlikely to veer anytime soon.

We believe inventory in the channel is very low.

Global production has been lower in 2021 due to severe weather in North America higher maintenance worldwide and ongoing European shutdowns and curtailments further the Russian and Chinese governments are discouraging nitrogen fertilizer exports through the spring.

These factors suggest the potential for strong fertilizer demand to last beyond 2023, even as some regions are unable to secure enough product in this supply constrained environment, resulting in lower yields.

This were to happen demand will be deferred into future years as it would take more than two growing seasons to replenish global grain and oilseed stocks.

As we prepare for the spring application season, we continued to receive substantial interest for any product we offer into the marketplace. We are building a solid order book for the first quarter of 2022 at the prices you see in the market today.

Or to what we did for the fourth quarter, we are adding natural gas hedges as we make first quarter product commitments in order to lock in margin and protect against significant energy price spikes.

As a result, we believe we're in a strong position heading into 2022 in this dynamic market. We remain focused on leveraging our manufacturing distribution and logistics capabilities to serve our customers and look forward to the opportunities before us.

With that let me turn the call over to Chris. Thanks, Bert for the first nine months of 2021. The company reported net earnings attributable to common stockholders of $212 million or <unk> 98 per diluted share.

EBITDA was $984 million and adjusted EBITDA was approximately $1 $5 billion.

Net earnings and EBITDA reflect the recognition of a noncash impairment charges related to our U K operations.

As discussed in the earnings release, our results for the first nine months and third quarter are preliminary pending the completion of the impairment analysis and finalization of the noncash impairment charges.

We continue to monitor market conditions for the UK assets, which accounted for 2% of our gross margin in 2020.

Billingham complex is operating due to recently improved carbon dioxide contracts and industrial contracts that pass through natural gas costs.

Operations at <unk> remain halted.

Free cash flow free cash generation remains strong the trailing 12 months net cash provided by operating activities was approximately $1 7 billion and free cash flow was $1 billion.

We believe we have a good opportunity in 2022 to build on these results based not only on our positive outlook, but also an increased production from our network.

In 2021, we completed a record level of maintenance activity that included turnarounds at seven of our 17 ammonia plants.

We will return to a more normal level of turnaround activity in 2022.

As a result, we expect to return to our typical high ammonia utilization rates with gross ammonia production between nine and a half and 10 million tons, we expect to sell everything we produce and achieved sales volumes between 19% and 20 million tons in 2022.

As we sell these products volumes into a favorable market environment, we expect to continue to generate substantial free cash flow and create shareholder value is.

As Tony said, our board authorized a new one 5 billion share repurchase program, which becomes effective January one 2022.

We continue to operate under our existing program, which had has enabled us to.

To acquire more than 11 million shares to be repurchased since 2019. This program expires at the end of the year.

At the same time, we'll continue to evaluate clean energy initiatives to meet the demand for ammonia as clean energy capabilities that we expect to emerge in the second half of the decade.

This includes positioning our network for the production of Blue and Green ammonia to support the development of a market for low carbon ammonia.

Constructing carbon dioxide dehydration and compression units at Donaldson, Bill and Yazoo City are a necessary step to enable blue ammonia production through carbon capture and sequestration. These.

These projects leverage our existing asset base and represented an efficient use of capital with a return profile, we expect to be above our cost of capital.

Once sequestration is initiated we will be able to produce more than 1 million tons of blue ammonia annually, while reducing our carbon emissions in a meaningful way.

With our strong balance sheet.

We also have the flexibility to evaluate additional opportunities in the years ahead.

We continue to collaborate with global leaders, where we can provide value, including Joan jointly exploring with Mitsui the development of Blue ammonia projects in the United States with that Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Chris before we move on to your questions I want to recognize our team here at CF for their strong work. So far in 2021 their commitment and dedication continues to be the foundation of our success.

We are excited about what lies ahead for CF industries. In fact, I think the company is better positioned today than we have ever been in our history.

We are again as an investment grade credit issuer.

We have fewer shares outstanding ever.

We expect the business to produce between two two to $2 $4 billion of adjusted EBITDA. This year.

And as we look forward to next year, we should have significantly more tons to sell.

At overall average higher prices and this year.

So the business should generate all time records for free cash flow per share.

We see demand for low carbon ammonia developing.

This should provide a long term growth platform for the company and with our investments in both green and Blue ammonia production, we will be at the forefront of this exciting opportunity.

Taken together, we have never been in a better position to create value for shareholders with.

With that operator, we will now open the call to your questions.

Yes.

Thank you the floor is now open for questions. At this time I would like to remind everyone in order to ask a question you May press star one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Adam Samuelson from Goldman Sachs.

Please go ahead, Sir yes, yes.

Yes. Thank you good morning, everyone. Good morning, Adam.

Okay.

So Tony and Bert Chris I guess.

What I'm trying to reconcile and think about is the risk of demand destruction.

At current nitrogen.

Thank you Jane and fertilizer prices broadly I mean, you talked about record demand for ammonia in the fall.

Prices were also booked several hundred dollars ago relative to where the spot market is and so as you think about the order patterns into the first quarter or do you see any risks on farmers.

Their application rates and obviously nitrogen is less discretionary, but do you think that could have any impact on agronomic yield.

Given where affordability is today.

When you look across the world and where we are starting with just supply.

Just not there. So this is more of a supply constrained market. The demand is definitely there youre seeing interest.

Desperately trying to pull in tons and we will continue to do so through I expect into their next fertilizer year, which begins in April Brazil.

Brazil is ahead, 10% year on year, and probably will continue at that pace through importing urea at least through February for their suffering and then we hit our spring in the northern hemisphere with what's going on in Europe with gas prices and the level of shutdowns is over 11 million tons of ammonia.

That is currently not being upgraded into ammonium nitrate urea or <unk>.

And so tons need to flow, which were not planned in the supply and demand scenario to Europe. So we were in a supply limited market and that's what's going to keep prices elevated the demand side of the equation is still very strong and youre correct, while we sold for fall and we're applying today.

Was sold at levels much lower.

And in the current market, which is probably over $1000 for ammonia that being said, we're selling thousand dollars ammonia for fall application on the incremental tons that are available where as I said in my prepared remarks, we're selling urea and there is significant demand at that 730, $750 a short ton NOLA.

It's even higher in the interior at over $800, which we've transacted at Port Neal and you've seen in the publications, the UAS and reaction and the demand pulling and I just looked at the analysis of where we are to date with order books in demand and again in a very good place at $550.

Uhm calculating all of that forward with current trend yield at 177.

Bushels per acre on the trend yield that's not considering the I states, where youll be 200 to 275 bushels, even with rented land at today's economics.

Sure.

Your cash positive you are actually profitable at a pretty healthy level. If you own your land even more so there are ways to economize and so if you are a farmer you can look at different options, but thats not going to come at the expense of nitrogen and probably even at fertilizer, it's going to come.

At some other issues so we're.

We're constructively as I said positive I would say very positive and the customer advances continue to come in and so we're working with our retail partners to make sure that that supply is available and our retail partners are buying that and moving that theres going to be a substantial amount of cash coming into our retail friends through year end.

As farmers prepare for 2022.

I would just add one thing Adam which is.

Bert said demand is clearly there if you look at our customer advances our order book is strong you can continue to sell forward.

And.

And it looks like farmer economics are positive, but given the supply shortfall, particularly now with both Russia and China.

Withholding tons from the export marketplace. There is a real shortage of nitrogen and price has got to basically arbitrate, who is going to get this scarce tons that are out there.

So it's not so much that youre going to destroy demand there is going to be a lot of unmet demand that's going to be pent up and so we do think the yield is going to be on a global basis off next year again, not because demand destruction, just because theres not enough tons available and what that means is we're going to promote favorable.

Supply demand dynamics in core screens, as we get out into 2023 and probably beyond so our.

Our view is that this is a very very healthy dynamic that leads to a much longer period of positive.

Fundamentals for our business.

I appreciate all that color I'll pass it on thank you.

Your next question comes from the line of Joel Jackson from BMO Capital markets. Please go ahead.

Hi, good morning, everyone.

Joe.

Just thinking about your order book and burn I don't want Misquote, you, but I think you've talked about before when you know when prices go up you tend to book more product more forward CFO kind of a longer dated order book starts to go.

Prices have really gone up so would that be.

Would that be the case that really you book more profit in Q1 and you normally have at this time, you don't really have it out there.

Uh huh.

So we're pleased with our order book and like the position that we've placed ourselves in with the opportunities that the market has given us and youre right. We have seen an accelerated market. We started the year at $350 per.

Per ton of urea move to $400 by April move to $500 by July $600 in September and $700. In October we have index contracts that every week price and you can see in the publications. We started our fill program in July at $285 NOLA equivalent and then moved.

$435 in September and then in October $535, and so as I said, we're booked for Q4.

And the majority of the $285.

<unk> was shipped in Q3, a little bit in Q4, and then those other prices will be bled in as we look forward to Q1, we are starting to book those those values today.

And so youre looking at that $5 35 to $5 50 for Q1, and 700 to 750, probably for urea and we have yet to price Q2 ammonia and once we book out Q1, and then we will look at Q2, but there is substantial demand for Q2, we would rather sell Q1 first.

Thank you.

Your next question comes from the line of Steve Byrne from Bank of America. Please go ahead.

Yes. Thank you so you laid out.

The significant levels of disruption in supply.

That are going on and most recently you have Russia jumping into that.

And so that theme and I wanted to get your view on how.

<unk> is that I.

Stand that essentially all of the ammonium nitrate that Brazil imports comes from Russia.

If that is the case.

And what are they going to get it now.

And are there are there regions of the world that you think are just flat out not going to be able to get nitrogen for the spring.

Yes, so when you look at the Russia announcement, I would say in contextually. The Chinese announcement is much more significant because of what has come out traditionally from China. The four to 5 million tons of urea exports and also phosphates.

That is going to have it because thats the incremental ton that is continually bid in so in a world of 50 million tons of world traded urea to take out up to 10% is going to be felt on top of that demand as I mentioned earlier from Europe that needs to move so youre going to see North African tons, moving into Europe, and theres going to be a whole.

Like Tony said somebody is going to have to struggle or pay up the Russia announcement.

A little bit of a surprise.

The Russian demand for nitrogen fertilizers has been fairly consistent in that five 5% to $6 5 million tonnes.

Demand per year, and the export of the remainder and so when you look at from year on year, what Russia is consumed about Russia is exported on the margin there is probably going to be a shortage of up to a half a million tons. So Brazil will be able to get their ammonium nitrate and I believe the suppliers from Russia, <unk> and the others, we will do that.

As well as supply.

Some of the portion that's needed and in Europe.

So it's going to come again on the margin in every months there'll be less tons available from an expected source, which further exacerbates this supply demand imbalance that we've been discussing.

Maybe a question for Chris.

Decision too.

Two focus on Yazoo City is another carbon capture project in addition to Donaldson Bill.

Do you have any more clarity about where the demand is going to be coming from four for this.

The Blue ammonia are you are you increasingly confident that you can move those tons in January to.

Sufficient premium to offset your capital investment and generate a return.

Yeah. Thanks, Steve Yeah, Yes, the city as you know has excess cotwo and that's why that was one of the sites also chosen to.

Do the dehydration and compression unit there as with Donaldson Bill we're in.

Pretty extended discussions with different.

So <unk> areas, whether it would be EUR or people, who are in the process of filing their classics permits related to both those areas I think when you look at the economics, Steve both at <unk> and Yazoo City, given whats been proposed from the 45 Q tax incentive.

It allows us to not only more than fund those particular capital expenditures, but also see a return above our cost of capital and the reason for that is you know better than a lot of people do is because we're already capturing.

The cotwo off of our ammonia process today, so that equipments already in place and that's limited the amount of Capex that we would need and therefore <unk>.

Creases, our return profile on that.

I think Steve <unk>.

Confident we'll be able to move that product into position.

And even if that demand is international make.

Make that.

Actively show up at D. Ville for not very much cost in and be able to export it as appropriate.

It's not very far from Yasuda to E mail and.

We feel comfortable that there is a ready market for that time for those times. The other thing that makes yazoo attractive as Chris said is a lot of excess cotwo, it's very close to.

Existing.

<unk> pipeline.

Capacity with Danbury, and Theres a lot of options in the area of the geology, there is really attractive so.

Yes, it was an obvious add on with the <unk> project and I think when these projects do come online because it will take two to three years you also see domestic demand for blue.

Specifically at the levels that would be being produced at Yazoo.

Thank you.

Your next question comes from the line of Jeff Zekauskas from JP Morgan. Please go ahead.

Thanks very much.

When do you expect to produce 125 million tons of blue ammonia.

<unk>.

How do you think about the price of Blue ammonia is it relative to the price.

Agricultural ammonia or is it independent of ours relative to fuel prices.

So with all with those kinds of.

Issues.

How do you figure out the returns on selling ammonia.

Yes.

So relative to kind of the value of flu ammonia at a minimum I would say the value is equivalent to a regular conventional ton plus whatever carbon jurisdiction you are talking about so in Europe, you're talking about.

50 or above euro a ton in the U K, it's more like 50 pounds.

Other regions are going to have different.

Cost structures from a regulatory environment and so at a minimum I would say you are able to get whatever prevailing value of carbon is on top of.

A regular sort of traded ton.

And as you know as Chris highlighted.

If you think about.

The total variable costs required to produce a ton of blue ammonia.

We probably have somewhere in the neighborhood of $5 to $10 a ton of electricity cost on on plant site.

And then we're in pretty advanced discussions with a number of potential parties on.

<unk>.

The transport and an injection and believes that that is a very manageable number from an overall cost standpoint, and so that all in.

The variable costs that we incur is less than the value of the 45 to <unk> credit and so that differential will go toward paying back the capital even before you put any premium on blue ammonia. So just on the value of the 45 Q.

We feel comfortable that we will get returns above our cost of capital and then to the extent you are able to realize margins and additional premium on on blue.

That just further adds to.

Attractiveness of.

Investment for us.

Okay.

Okay.

And for my follow up.

Some farmers say that they really can't secure.

Nitrogen product.

For the second quarter.

And in your commentary you said you are really trying to put together a year first quarter order book.

Is that generally correct description that farmers can't really get farmers can't really get commitments into the second quarter just yet.

Yes, I always say, that's not necessarily true in and we don't deal directly with farmers we deal with.

The retail wholesale trader group first retail then some wholesalers and a little bit trading for exports.

But we are selling are our tons are being moved to the market and so those are in the hands of the retail group they have tons available to sell we're producing record amounts of UA in and you can see with some of the disruptions.

From the hurricane and weather problems, we did lose some tons, but we are moving our tonnes into the market we have a record number of.

UA and toes in service since I've been here and as well none of our railcars are in storage, which is the first time since I've been here 13 years at all of our railcars are occupied so product is moving to market product is available now that being said <unk> is not pricing in Q2 as of yet.

And Thats a pricing.

Position thats, not a volume nor our commitment situations. So.

I believe if retailers wanted to take that out or a farmer wanted to get a quote or an offer that should be available in the market and there will be sufficient tons to meet spring demand not only from CF, but from the broader industry group imports are up domestic production will recover.

And yes, we will have a spring.

Jeff I realize I didn't sorry to answer your first part of the question about Hulu ammonia in terms of when is it going to be available.

We've gone ahead and launched those projects now we anticipate probably end of 2024.

Our early 2025 by 2025, we expect basically a full year of operating on that basis.

Okay, great. Thank you so much.

Okay.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Please go ahead.

Thank you and good morning, everyone Tony.

Tony We would love to get your thoughts on just sort of as we think about the next few years, a three to five years or however, you want to frame it.

<unk> situation now with obviously very tight grain stocks and now we've had this spike in gas and coal prices and so forth.

We're having a lot of food inflation.

And Bert laid out a very plausible scenario, where we could have lower yields because of.

The inability of everybody get nitrogen and so forth. So what what do you think the global response to this is going to be.

Over time in terms of trying to manage the food supply and make sure that we don't.

Don't get into extreme situations like this into into perpetuity.

But at the same time, we need to balance our sort of climate goals in our in our green energy aspiration and so forth. So how does this new youll get threat in your view.

Yeah, Vincent it's a great question and I think as you point out there are a lot of competing priorities out there that have second order and tertiary kind of knock on effects that not everyone understands well so the push to reduce.

Availability and affordability of fossil fuels.

Because of our focus on climate change and move towards renewable.

I think as directly part of what's going on in Europe, right now with extremely high natural gas costs.

And.

And that means that all of those.

<unk> talked about earlier curtailed our.

Or offline.

At the same time, you've got a number of governments around the world that are very focused on trying to limit right of nitrogen fertilizer in particular, because they're concerned about nutrient loss to the environment in run off and whether it's.

Nitrous oxide produced on the field has pretty potent greenhouse gas or whether it's other kinds of run off into waterways and so forth. There is a real push in some areas cannot Canada, notably in other places as well to reduce.

Application rate and if you do that youre going to have a year one impact on yield. So there are a number of I would say competing priorities out there.

All of which.

Generally speaking.

I would say benefit North American producers, because we do have ready access to low cost gas. We're on the very low end of the supply curve and as yields continue to struggle due to either lack of availability of nutrients or these programs designed to reduce nutrient application.

Just going to keep grain prices higher for longer.

Ultimately I think where this goes as governments are going to have to capitulate to.

The requirements of their people and provide affordable food, which means some of those priority is that they have heretofore held out as being these holy grails are going to probably have to take a back seat for a while.

To make sure that we can feed the people of the world but.

I think that you will see people backing off I mean again.

Germany is decommissioned their nukes and they've brought on coal fired power plants, that's not exactly what I would call a green initiative.

<unk> seen the same thing again.

In China as well in the UK and Continental Europe are struggling with high gas cost. So I do think there is going to have to be a reassessment of what is required for the planet to be able to eat and fuel itself.

Thanks, very much I appreciate all that stuff.

Your next question comes from the line of John Roberts from UBS. Please go ahead.

Thank you and back on the earlier question on the Blue ammonia.

Do you expect to sell it as fuel or do you expect to sell it as fertilizer and have some carbon credit broker gets you the revenue for the sequestration values, yes, John.

So.

As Chris mentioned and we've highlighted earlier, we do have this.

Sure.

Mou in place with Mitsui, we're having very productive conversations with them I think there is a real emphasis particularly in Japan, but in some other regions as well to go into.

Co combustion of ammonia with coal to reduce.

The.

<unk> emissions out of those plants, and we think that that.

That is something that.

Will.

Develop into a pretty sizable market estimates can be as much as 5 million tonnes by the time you get.

Two.

23rd year, possibly even before and.

That's a huge increase in terms of the total amount of ammonia being consumed, particularly when you've got curtailments and outages in <unk>.

Cross broad swaths of the production universe here.

In the.

In Europe, and the U K.

And so.

We're excited.

Excited about that clean energy attributes that blue ammonia has we think that thats probably.

Where the majority of value sits at least in the near term while I think there is certainly the possibility to get some incremental value off of.

Carbon sequestration in the soils from an agricultural application given that most of that is going into the voluntary marketplace today, where values trade at.

Pretty small discount to where structured carbon trades and the rest of the world.

I think thats probably the.

The last place just because of lower values that that we would go now.

<unk> develops a.

A more structured approach to the cost of carbon and you can get a scientific valuation placed on.

Carbon capture and sequestration and the soil that may change the math, but I think in the near term what we're really looking at is more of a clean energy source and we're working very closely with.

Mitsui too.

To help develop that and bring that about the other the other point, though that I would say is we.

We believe these projects are attractive.

Just based on the 45 to <unk> credit.

Doug.

Sure.

We ought to be able to generate a return.

On these projects.

Without any embedded premium on blue now our expectation is there's going to be a sizable premium on blue but.

To be clear.

We're able to make the math work pretty easily just with the 45 to <unk> credit.

And then how are you thinking about the pace of buyback under the new authorization.

Is it going to be opportunistic.

How are you thinking something thats, just going to be more structured over the two years.

Yes, I mean.

I think based on what we're looking at in terms of not only current year.

Performance, but our expectations for next year.

There's going to be a lot of cash that needs to find a home and so.

Wow.

Certainly buy more on dips are at lower prices I think it needs to be.

<unk>.

The volume that we're talking about is sizable enough that it probably needs to be a bit of a structured leg in there as well so ultimately probably a combination of approaches.

Thank you.

Your next question comes from the line of Chris Parkinson from Mizuho. Your line is open great. Thank you. So just over the last five years, there's been a plethora of variables, that's still driving a bit of volatility in need and unit, you and pricing versus urea.

Given current supply demand dynamics trade flow adjustments over the last two.

Two years.

The recent Tuc case can you just comment on your outlook for pricing for 'twenty, two 'twenty three as it pertains.

To end units versus urea. Thank you so much.

Youre correct in terms of a lot of variables a lot of volatility in the last year and a half we've traded as low as $115 a short ton for.

UA and as high as $550 in NOLA, what drove that volatility. We believe we were pushed down low because of excessive imports of subsidized products and consigned products and therefore, we took the case forward too.

The department of Commerce, and the ITC and we're successful we're pleased with that result, and we believe that that information will come out with what the ruling will be and how that will be applied step one and so.

The discount to urea took.

Took place for several years and that was an inappropriate response to a more a valued product and expensive invested product.

In our asset base, we've invested several billion dollars to maintain and construct.

So we're entering.

Probably a normalized market now where you are and again as trading at a premium to urea for the reasons I just articulated and it should.

So through spring.

Most definitely it will trade at a premium will reset in July as we always do but we believe at a higher level for the reasons. We have articulated we are in a different or a differentiated global market driven by a lack of supply with high levels of demand that is not going to correct itself probably for a couple more years and so in.

That context, we see UA and trading it at advantaged position to urea as well as ammonia and ammonium nitrate and that market.

We don't see demand destruction, we see differences of supply availability.

That's great color and just as a quick follow up just given on given what's going on in China.

What's your intermediate to long term view of export trends.

And what the ultimate price will be for those tons and tons on an <unk> btu basis. Thank you.

Yes. So what are you looking at export trends I would look at the at the Chinese economy, Holistically and looking at what they are trying to do with energy and where they are you've got the risk of entering winter and Grandma may not be able to have heat in some of these big cities are you going to value. The urea production are you going to do.

Value of the population and the ability to heat homes and to produce.

Value added products or a commodity product.

On the latter than the former.

So are the former rather than the latter there you go.

So.

What we're seeing in China as a result of several factors coming to play whether that's pollution.

Economically driven decisions.

Uh huh.

Higher polluting level product our production taken offline and then this restriction to have products available you've seen their production capacity.

Full static capacity fall from 90 million tons of its peak to probably 75 million tons. Today, and then you take an operating rate that's ranged from 55% to 75%.

In China, we only have available probably 53 to 55 million tons of urea per year.

Domestic consumption has rebounded and has over 50 million tons. So there is not that substantial amount of tonnage to export and why export value destructive product, that's where we see the future of China and.

Other production is going to have to come on stream and other locales. So you have Nigeria coming up Russia coming up.

We need more and so more construction will probably take place, but it's long dated so youre not going to see this market correct for the arrival of new production, even though we need it but I would also.

So add Chris just based on what the forward curves look like.

It's moved.

Really Europe and in particular eastern Europe into what I would call the marginal production ton and the world as opposed to out of China, but the factors that Bert was talking about.

Means that China is not going to overwhelm the global marketplace with access.

Exports and so that's going to maintain what we believe is going to be a relatively tight supply side equation and just based on energy spread differentials that you can look forward. It's a much steeper supply curve that it's been.

Recently and that gives us a lot of opportunity here.

To generate cash in the U S. So we're we're very constructive about all of these trends.

Great great color as always thank you so much.

Yes.

Yeah.

Your next question comes from the line of P. J <unk> from Citi. Your line is open.

Yes, hi, good morning.

Good morning P J.

No.

There is always resource nationalism going on about nitrogen that you talked about.

But U S is still a net importer of urea. So how does this play out.

Grower switching from corn to soybeans at the margin or maybe the industrial demand has come back down to make room for agricultural demand in your mind, how does this play out.

In the medium term.

I mean.

I think that the U S based on crop prices and efficiency of growers.

<unk>.

Requirements on the industrial side is able to bid away tons from other parts of the world that are less able to do so, particularly those economies that require government subsidies in which to.

To bring tons in and.

So.

Our expectation is.

That there is theres going to be availability of product here.

In North America and honestly.

I don't see a scenario, where you where industrial demand starts backing off based on AG demand I see a situation, where you end up with inflation in terms of the industrial goods as opposed to some reduction in economic output.

But I think ultimately as Bert talked about you see some.

New projects on the drawing board, but not very many.

And particularly not.

Enough with respect to some of the closures and shutdowns or even curtailments that you see out there right now so ultimately I think what's going to have to happen is you end up seeing more capacity added because of the world just needs more than what's available that's before you even get to clean energy.

Applications for ammonia going forward so.

I think the net of all of that suggests that there are new plants that.

But the world is going to need to construct in order to be able to feed itself and utilize ammonia and these these kind of new alternative applications versus what we've seen in the past, yes, I think it's a false narrative P. J.

That those two are competing and I think we are in the.

You have to go back to in the United States or North America. We're in the resource Rich region of natural gas and energy products, we have the capability to construct and move with the infrastructure. That's in place whether that'd be rail barge truck pipe and we are set up to do that very efficiently. So what I could see over time.

These other economies progress into lower carbon.

Output lower carbon consumption using natural gas or renewables.

Going to see in the natural gas spreads continued to expand our stay expanded maybe not at its current level today.

The $20 per <unk>, but maybe it's $10 rather than six and that maintains.

North America is a low cost.

High margin region in the World and I think Youll see maybe some.

Industrial production in other areas compromise that would be Europe, and maybe some even in China over time, as we move to a new market.

On the corn to soybean competition today, it's favoring corn and it has been and this is the time when it makes sense and when it's very good for us to have that favorability because thats when today or in this period is when farmers are making that spring planting decisions and allocating their resources accordingly, and therefore booking fertilizer, which is positive.

For us, we're seeing very strong industrial demand in our book and we balance both of those we think well as well as our industry. So I think it's a net positive.

Great. That's good color and just one quick one Tony when you talked about and thank you for giving the details on blue Gray ammonia. It seems like it's a little ammonia it will be more costly to make by 20 or $30 or something like that per ton.

And so why would growers buy more expansion of ammonia unless that incentive to buy I mean, what is the mechanism for them too.

And a spend more.

So remember, 20% to $30 that might be in the range or it might be a little high relative to our expectations, but that's not a crazy number remember the 45 <unk> tax credit the way that it was originally constructed was going to be.

Sort of 45 ish to $50.

Current Reg.

Reg substantially above that right. So, although it's a little bit more expensive for us to make if you net against at the 40 <unk> tax credit its actually.

A discount relative to conventional ammonia from a producer side.

But the reason why a grower would pay for it is if they want to be able to make.

Carbon labeling claims that go into consumer products companies, because theyre going to care about that.

Or if you are trying to produce low carbon ethanol that might be.

Now qualify for California's clean fuel standards that might be a reason for it or even in the voluntary market. If you can get five to $10 a ton for sequestering carbon in the soil being a grower.

Couple of high profile transactions that happened along those.

Lines, a couple of months ago, I think there is a lot of value there potentially for growers.

To try to differentiate what they are doing versus just <unk>.

Commodity bushel of corn and so.

Based on kind of where some of those pockets of value are we would expect there to be some margin opportunity for us or at least some incremental.

Demand.

For that that product and again to the extent that the U S actually adopt a more regulated and structured cost of carbon.

Then there is real economics available to the farmer, if they can demonstrate the sequestration and sell those credits into a structured marketplace. So.

Yes, I was just going to add to that I think one of the benefits of this is the incremental demand that Tony speaking up.

The agricultural is already using ammonia, but as you start to see more of the industrial move and Thats, where youll start to see the bidding on.

On ammonia would go up.

A more constrained so it's really about the demand addition that we think is going to occur here plus.

Plus you have to remember if it's $50 more a ton lets take it there than conventional to a farmer that's $10 an acre thats two bushels. So the cost is insignificant to the farmer based on the benefits that Tony articulated.

And we already have people wanting to buy blue ammonia. So we think theres going to be a demand.

Challenge, which is very good for our business in the future years. That's also honestly why.

Donaldson, Bill and Yazoo city or not the last dehydration and compression projects that were likely to build we want to continue to evaluate other places with ready access to sequestration and continue to build out our network because our belief is it's the <unk>.

<unk> that pays for itself and also games upside opportunity on.

Accessing the clean energy market in a way that is differential for us versus.

Other market participants.

Thank you you guys always give great color. Thank you very much.

Your next question comes from the line of Michael <unk> from Cleveland Research. Please go ahead.

Yes, hi, Thanks for the question just wanted to discuss in a little bit more detail on the status of your U K operations I know they were down for a couple of days and then you guys were reached an agreement with the government to restart it when you talked about getting back to.

$19 five to 20 million tonnes. The implication I assume there is that those plants are going to pull.

Full next year. So maybe you could just talk about.

Also as planned.

Are they going to be profitable or what type of returns, we're looking at they're keeping more higher gas costs.

Yes.

Michael Thanks.

So the first thing that I wanted to just highlight is the relative importance of the U K in terms of the overall portfolio as Chris mentioned, if you look back to our results in 2020. It represented 2% of our total gross margin so from an aggregate.

Profitability standpoint, it's on the small end of the scale now.

Does provide.

A little bit of a natural hedge for us win.

Global energy costs are low and relatively flat and we earn.

The better return there when energy costs are high we earn a much better return in the U S. On a larger production base. So it's a little bit of a kind.

Kind of a natural hedge in that regard, but as you mentioned because of a huge spike in gas cost in September we took the plants offline.

I would say very constructively with the UK government.

To restart the facility at billing and then be able to provide <unk> into the UK marketplace. So that's pretty critical for the normal functioning of a number of different industries over there and during that period of time. The UK government also is very helpful. In us working with us and the Cotwo offtake.

Nick.

Company is the industrial gas companies from Bellingham to restructure those contracts in a way that makes that plant viable.

So.

We're really pleased with how that whole process.

Developed in.

The billing and plant is up and operational and we expect that to be.

<unk> in the long term.

The <unk> plant in the northwest is is not yet back online, we're evaluating a number of different <unk>.

Options and scenarios they are including.

Being able to secure a vessel to bring ammonia into the facility. So we can at a minimum run the upgrade plans.

Given again, the high cost of natural gas through the winter. It doesn't look like ammonia production there is going to make a lot of sense, but being able to bring in ammonia.

We will allow us to run the upgrades and make.

And appropriate.

Return on.

On those products.

So we're kind of in a little bit of a wait and see.

Mode in terms of what the longer range situation develops in the U K, but I think for now.

Billingham this up and operational we expect that to happen and again, we expect to be able to turn in the back end of.

The fertilizer portion of the plant up and running.

Hopefully soon within the next couple of weeks once we get the ammonia vessel squared away.

Great and then just understanding a little bit longer term.

At the time some of these new ammonia projects are up and running I mean is this going to increase your number of product tons. This is going to come out of some of your other products like how should we be thinking about the cadence of your product tons sold over the next call. It three to five years.

Yes.

We already run our ammonia plants.

At full operating rates.

With the one exception of the UK, which we just talked about right.

And.

And so it's not necessarily a situation where there is new tons unless we <unk>.

Engaging some debottleneck or new capacity or other things like that.

And so this is definitely a.

Pulling tonnes away from the least profitable portion of our a segment of our business and reallocating them to a higher margin applications and so it's a margin upgrade as opposed to new new production at this time.

Great. Thanks.

Your next question comes from the line of Andrew Wong from RBC Capital markets. Please go ahead.

Hey, Thanks for taking my questions just going back on Blue Green ammonia here.

Can you talk about how the blue green ammonia market could impact the dynamics around the gray ammonia market in the future.

We have projects like <unk> and <unk>.

I'm, turning some some of the volumes from greater blue in it.

Those tons are sold into clean ammonia applications like maybe with Mitsui.

Does that effectively mean, a loss of supply for the greater ammonia market and then on the demand side like the molecules are the same.

Could there be a scenario where demand and supply maybe aren't matched up properly. So you have some applications that maybe need blue green ammonia, but if there isn't enough you use a little bit of gray.

Just in general the margins of a lucrative ammonium market mean potentially a tighter gray market in the future.

Yes.

I certainly think.

That's where we see things headed.

Also think Thats, where.

Not wanting to.

Interpret things for them, but I think that's consistent also with where air products and others see things headed hence the announcement both of the Neon project in Saudi Arabia, but also the recent announcement they had in Louisiana around a blue project.

And I think <unk>.

Number of market participants see this coming I think ultimately what that's going to mean is you've got more demand than what current supply is an ammonia it's going to be it in new.

New production, new capacity, which the world is going to need.

And that that's pretty attractive relative to valuing existing assets. So we think.

Overall this is a terrific set of <unk>.

Factors.

Create a reevaluation or rethinking about with the value of our asset base as being that.

We're the largest ammonia producer in the world.

Great. Thank you I think the situation is not unlike what we've got today rates, which is.

Today as Bert mentioned, it's more of a supply side constraint, given a bunch of curtailments and shutdowns and other disruptions, but in the future. Even if those plants are off and running and you see demand continue to exceed where where supply is capable of.

Reaching you see price escalation like we're like we're experiencing right now.

Yes that makes a lot of sense. Thank you very much.

Your next question comes from the line of Adrienne to mono from therein Baird. Your line is open.

Hello, Good morning, yes.

Follow up from the previous question from the industry perspective.

The combination of.

Well being sure ammonia as you described.

And we continue to make significant volume.

<unk> come a long way.

Would that make sense.

Hugh.

Thinking about Greenfield Greenfield ammonia at some point in time all kinds of question for you.

Well I mean, we constantly are evaluating.

Ways to add capacities are appropriate I think our biggest focus area and the thing that we use as a lens to make all of those decisions is ultimately cash flow per share.

And if we can find an opportunity that allows us to expand capacity, whether that's a debottleneck.

Inorganic acquisition or an organic kind of growth, where we believe that that's going to grow our free cash per share then.

We'll take a serious run at it.

And these kind of context, we'd be much more likely to.

Think about partnership structures or other things like that if we were going to move forward on any of those things, but I do think it's a.

A positive sign when others out there are making announcements about adding capacity I do believe we're the best operators of ammonia plants in the world and so if there's.

If there's opportunities for new capacity additions, we ought to be thinking about that along with other people.

And I do think the world's going to need it. It's a question of.

When in the interim are you better off buying existing assets or Debottlenecking, which you already have versus building, new but I think.

Those are.

Appropriate questions.

That anyone in the industry today is kind of mulling over and really thinking about.

Thank you.

Ladies and gentlemen that is all the time, we have for questions today I would like to turn the call back to Martin <unk> for closing remarks.

Thanks, everyone for joining us and we look forward to speaking with you throughout the quarter.

This concludes today's conference call. Thank you all for joining you may now disconnect.