Q4 2022 Methanex Corp Earnings Call
Speaker 1: Apr
Speaker 2: Good morning, my name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Methanex Corporation 2022 Fourth Quarter Results Conference call. All lines have been placed on mute to prevent any background noise.
Speaker 3: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to the Director of Investor Relations at Met the Nex, Ms. Sarah Harriet, please go ahead. Thank you. Good morning, everyone. Welcome to our fourth quarter 2022 results conference call. Our 2022 fourth quarter news release, management discussion analysis and financial.
Speaker 4: information.
Speaker 5: Please refer to our fourth quarter 2022 MD&A and our 2021 Annual Report for more information.
Speaker 6: I would also like to caution our listeners that any projections provided today regarding Methanex's future financial performance are effective as of today's date. It is our policy not to comment on or update this guidance between quarters.
Speaker 7: For clarification, any references to revenue, average realized price, EBITDA, adjusted EBITDA, cash flow, adjusted income, or adjusted earnings per share made in stage remarks, reflects our 63.1% economic interest in that list of facilities, our 50% economic interest in the Egypt facility.
Speaker 8: and are 60% interest in waterfront shipping. In addition, we report adjusted EBITDA and adjusted net income to exclude the mark-to-mark impact on share-based compensation and the impact of certain items associated with specific identified events. These items are non-GAAT measures and ratios that do not have any standardized meaning.
Speaker 9: prescribed by GAAP and therefore unlikely to be comparable to similar measures presented by other companies. This computation will also non balrful for scratch manual gameplay for those of you who
Speaker 10: We report these non-GAAP measures in this way because we believe they are a better measure of underlying operating performance, and we encourage analysts covering the company to report their estimates in this manner.
Speaker 11: I would now like to turn the call over to Methanex's President and CEO , Mr. Rich Thumner, for his comments and a question and answer period.
Speaker 12: Thank you, Sarah, and welcome to all of you. We appreciate you joining us today as we discuss our fourth quarter and full year 2022 results. I'm excited to be leading the company and be having my first hearing call since becoming CEO of Methanex on January 1st. In December , we announced changes to the Executive Leadership Team or ELT.
Speaker 13: to a review of our fourth quarter and full year 2022 financial results. For the fourth quarter, our average real-life price of $373 per ton generated adjusted EBITDA of $160 million and adjusted net income of 73 cents per share.
Speaker 14: adjusted EBITDA was lower in the fourth quarter, primarily due to lower proceeds from the redirection and sale of natural gas in Egypt, partially offset by the benefit of a declining gas and logistics costs. In 2022, we recorded annual adjusted EBITDA of $932 million.
Speaker 15: and robust adjusted net income of $343 million or $4.79 per share. Combined, 2021 and 2022 are the highest adjusted EBITDA and operating cash flows in the company's history. I'm proud of the team for delivering another year of strong financial results and I'm very excited for the Geismer 3 plan.
Speaker 16: coming online this year as it will further enhance our cache generation capability.
Speaker 17: We estimate that global methanol demand increased slightly in 2022 to 88 million tons. Methanol demand in the fourth quarter was down approximately 5% compared to the third quarter of 2022, primarily driven by lower MTO operating rates.
Speaker 18: MTO affordability was under pressure from low-voltage prices, leading to lower operating rates and some plant outages.
Speaker 19: Demand from traditional chemical applications was also slightly lower due to lower consumer spending, year-end to stocking in Europe and Asia, and continued lackluster demand in China due to COVID-19 restrictions.
Speaker 20: Demand from Energy Related Applications was relatively stable in the fourth quarter.
Speaker 21: Industry operating rates in the fourth quarter were similarly to the third quarter with lower operating rates in China and Iran due to the seasonal diversion of natural gas meet power demand offset by stronger operating rates from the Atlantic region.
Speaker 22: Thank you..
Speaker 23: High coal pricing in China continues to provide support to the methanol cost curve. We estimate the industry cost curve based on the marginal coal producer cost in China to be approximately $330-$350 per tonne with coal pricing continuing to remain well above 1000 R&B per tonne levels.
Speaker 24: Based on these industry supply and demand fundamentals, we are seeing relatively balanced markets in the Atlantic and tight markets across Asia and China underpinned by high energy pricing globally.
Speaker 25: Our February posted prices remained stable in North America and increased in Asia and China. Less volatile spot prices in the fourth quarter, primarily in China, led to a lower discount rate of 20.5% compared to 21.5% in the third quarter.
Speaker 26: In 2022, we had an average discount rate of 21%, and in 2023, we had a similar discount rate.
Speaker 27: We continue to monitor the macroeconomic and energy price environment.
Speaker 28: We see potential demand upside from the reopening in China following the Lunar New Year given the significant methanol demand in China as well as Asian countries with strong economic ties to China. We continue to see a high global energy price environment which enhances methanol's cost competitiveness against alternative fuels supporting the mangrove.
Speaker 29: Interest from the brain industry and orders for dual fuel vessels able to run on methanol continue to grow. Based on existing dual fuel ships and orders to date, demand potential grows from approximately 300,000 tons today to 3 million tons over the next few years. On the supply side, we did not anticipate the impact of the Owen Webb Energy Group update – the most recent update started that day, and we do
Speaker 30: any capacity additions outside of Charna in 2023 besides our Guizmer 3 project, which is expected to start in the production in the fourth quarter.
Speaker 31: Turning to operations, our production levels were higher in the fourth quarter compared to the third quarter. As the Egypt plant restarted after an extended turnaround, we had higher gas availability in Chile and New Zealand and no plant turnarounds. We did experience unplanned outages in Geysmer.
Speaker 32: Chile and Trinidad that impacted the fourth quarter production. In 2023, we have three planned turnarounds which will be undertaken sequentially and complete by September . Our forecasted production for 2023 is approximately 6.5 million equity tons, excluding production from G3. Although actual production may vary by quarter based on timing of these turnarounds, the total production will be about 1.5 million tons.
gas availability, unplanned outages, and unanticipated events.
We ended the fourth quarter in a strong financial position with approximately $806 million of cash, excluding non-controlling interest and including our share of cash in the Atlas joint venture and with $600 million of drawn backup liquidity.
Construction on our Advantage G3 project is progressing safely on time and on budget with production expected in the fourth quarter of this year. The expected G3 capital spend remains unchanged at 1.25 to 1.3 billion and we spend approximately 910 million dollars before capitalized interest to the end of the fourth quarter.
The remaining $415 to $465 million of capital expenditures, and including approximately $75 million in accounts payable, is fully funded with cash on hand.
We are looking forward to adding G3 to our asset portfolio as it will enhance our cash flow generation capability and lower the CO2 intensity of our portfolio.
Looking ahead to the first quarter of 2023, we continue to see a strong methanol pricing environment and we expect slightly higher production in the first quarter compared to the fourth quarter. I'd also mentioned that our sales of produced product were meaningfully lower than our production for the fourth quarter. As a result, we're expecting much higher sales of produced product and higher adjusted even down in the first quarter of 2023 compared with the...
We expect G3 to generate approximately $250 million of EBITDA per year. With our G3 project being fully funded with cash on hand and our ability to generate meaningful cash flows across a wide range of methanol prices, we are well positioned during this period of economic uncertainty to maintain a strong balance sheet for suit economic value added growth opportunities.
use and continue returning excess cash to shareholders.
We would now be happy to answer questions.
At this time, I would like to remind everyone in order to ask a question, press star, and the number one on your telephone keypad. Our first question comes from the line of Joel Jackson with BMO capital markets. Please go ahead.
Hi, good morning, Rich. Congrats on your first quarter as CEO .
Thanks, Bill. If I look at what's going on in the market, I think it's a little bit different.
pricing is about similar in Q1, Q4. Gas prices are lower. You're going to have a lot more sales. Would you not say that Q1 earning should be significantly higher than Q4? Is there anything you can do to quantify a bit more?
I think you probably can put it together. I think the much higher on produce sales, you know, do that if you kind of look at production and then think about our inventory balance, you can probably project what that means in terms of produce sales and be right chill within this environment where margins are strong.
looks a bit like there's not growth there. I'm wondering if there's one of the turnarounds happening in Chile this year.
and then more generally like i know we're in twenty three but
Can you maybe talk about as you get to 24 how my chilly New Zealand volumes look better? Like what's on the table considering all the things going on in those countries?
Argentina. Sure, yeah. Maybe I'll start with New Zealand. So in New Zealand, as I think you know, we've got gas contracts that...
go out to the end of the decade. We're a big gas consumer there, so we work closely with our gas suppliers on their drilling campaigns to support our contracts. Our 2023 forecast is based on what we see a relatively tight market in 2023.
We continue to be optimistic with their drilling campaigns as well as their well maintenance activities that are going to happen this year on the outlook for more incremental gas to the two plants at Montanudie. Long term or medium to longer term we think it's a favorable.
dynamics in New Zealand. The Taranaki Basin is a well-developed basin. The reserves are there. It's economic gas and in the high energy price there's associated gas that comes with that. We also think we're a big consumer in the region and the other consumption is into power.
increasingly I think New Zealand's recognizing the importance of gas for power generation so you know we're cautiously optimistic there that and we're going to continue to work really closely with with the gas suppliers so that's kind of New Zealand
When we talk about Chile, we've got gas coming into Chile coming from suppliers in Chile, but that gas is happening all year round. And then we also have gas coming from Argentina, which happens outside of the winter months there.
We're forecasting similar gas supply as 2022 and in 2023. We continue to work with, in particular with suppliers in both Chile and Argentina. There's quite positive things happening within Argentina that...
We think it can be significantly changed the balance there. One is that there's a lot of development happening in the NOAA canvases and in the Vachamarta field. There's pipeline connections being made which likely would supply domestic markets there and reduce the need for imports of LNG. And...
And also, it depends on gas and the south where our plants are. And there's investments happening in the south. There's an investment by Total and Winter Shell, $700 million project, where they're developing gas. It's meant to come online in the next year and a half or so. So.
So we're continuing discussions there and remain again optimistic of future guests, but things have to happen in Argentina for that to come forth.
And just finally, I can be greedy here. Can you tell me at G3?
Did commissioning start in January ? As part of that question, how many months did it take from first commissioning to first production of both G1 and G2? And would a similar timeline make sense for G3?
Well, I guess it depends on your definition of commissioning. When we're commissioning a plant,
we what we're doing is as the different systems in the plant are complete we're handing it over to the commissioning team so as of right now the power supply system is being commissioned and hand over to the to the to the team and will continue to to hand over different parts of the plant as they become available so
the commissioning team. You know that all that is built into our timelines when we say production in the fourth quarter and that we think once we actually get to attempting to start up the plant, it's a matter of weeks, not not months because of all of those very different things we have year captions in place
Okay, thank you.
Your next question comes from the line of Ben Isaacson with Scotiabank. Please go ahead.
Thank you very much and good morning everyone. Rich, I'm just trying to figure out 2023 in terms of demand. There's a big story about China starting to reopen this year and the US and the EU perhaps going into...
recession and you mentioned that we had about 88 million tons of demand in 22. Can you talk about where incremental demand comes from in 23 is it going higher, is it going lower, and what about incremental production? So you said that outside of China, G3 is the only asset coming online.
But what's happening in China is how much new production or change in production do you expect to see? Sure.
So the demand, thanks Ben, the demand question is kind of maybe a large one. I'll try to tackle it, that one first. So we break down demand.
We break it into both, I guess, segments as well as regions.
Traditional chemical applications, that's 50% of demand. The MTO is 15 to 20 and then other energy applications.
is 30 to 35%. A significant portion of that demand overall is in China. 60% of overall demand is in China and another 10 to 15% is in other Asian countries. So with a strong linkage to China.
So when we look at it, we're looking at it both regionally and also by derivative. Where demand, you know, we see growing, we see all applications in China and Asia could be help and supported with the reopening of China. We're looking at forecasts today that are...
predicting 4% to 5% or 4% above growth rates in China on reopening. We're going to have to wait and see. We didn't see that demand ahead of the Chinese lunar new year, and we're, but we are seeing a lot of activity.
in that country coming out. So we're going to be cautiously optimistic there on really all applications.
For MTO, what we saw towards the end of last year is a 15% decline in MTO demand. It was really on the back of two large-scale plants, one of which has already restarted. We know one plant is down that consumes over 2 million tonnes.
We think the reason for that continuing to be down is they actually had a refinery expansion and if they're commissioning their nap the cracker ahead of their derivative downstream being commissioned and we believe that MTO they have plans to restart MTO once it's all commissioned.
We think that actually is likely to happen. We also think new Iranian supply after winter would be a logical place for a lot of that to supply into. We look at the old friends market and say yes it's...
it's been under pressure, but we think MTO has been competitive to NASA and there's a likelihood we see more. We have to wait and see. Hopefully that answers some of the questions on demand and we can revisit that. Maybe I'll switch over to China capacity.
And when we look forward, we're seeing maybe about 1.5 to 2 million tons of new capacity in China this year. We also will net that off of most of that coming from co-king gas plants. We'll net that off of also the fact that there's a continued...
shutdown of smaller inefficient plants in China. So call it a million and a half tons.
is not that meaningful when you look at overall demand and overall demand growth. So maybe I'll stop there and see if you have any follow-up questions.
Yeah, no, that's perfect. And then just a quick one on the cost curve. I was very surprised that through China's lockdown last year, we didn't really see that thermal coal price drop a lot. And so the methanol, the marginal cost of methanol held in really well. And now in 2023, we're going to see China starting to reopen.
What is the downside to that call price, if any? I mean, it seems like the cost curve has a lot of support either where it is or potentially higher. Do you have an idea of what could derail the cost curve in 23?
It's hard to see within a high energy price environment. China is importing a lot of energy, LNG and oil. And coal production, they had a real difficult time increasing coal supply through the last year. We understand that that's... I'm expected to see face cover from 500 million sh
partially on the back of labor and COVID restrictions getting people to mine. So some of that could free up, but we also understand a lot of these minds are quite, I've already been mine quite deep and going any further causes safety concerns and other factors and it's not easy to...
to invest in a large-scale mine. It takes time to bring production on. We kind of forecast out and think there's likely tight coal markets. It does seem like China might be trying to open up more imports.
talk about lifting the ban on Australian coal imports, but imports into China represents between 5 and 10% of overall thermal coal demand, so it's hard to see that being a major swing in the coal pricing.
Hopefully that helps. That's great. Thanks so much.
Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead. Okay.
Just a quick clarification question on the discount rate, Richard. I think you referenced the 23 rate as being similar to what we saw in the fourth quarter, but I just wanted to clarify some of your opening remarks.
Yeah, that's correct Steve. We're guiding to 21%.
We're guiding to 21% for 2020.
And perfect, and I thank you for your time. And then just a follow on Joel's question earlier around some of the production basins. I just wanted to clarify a bit more in New Zealand. I think the guidance relatively flatish on the year, but it was just curious because you did have a couple large turnarounds or there was a turnaround in the period last year. And so is there just, is it?
Is it a conservative guidance that we can't get an uplift this year or is it just a gap supply? I reckon so, the two.
No, it's similar to last – the gas profile is similar to last year.
Okay, so okay, fair enough. And then just lastly, around capital allocation, you got, you know, a good cash position here, finished off G3. When should we start to think about sort of like the next stage of capital allocation in terms of comfortability on?
on accelerating the buyback or pursuing the buyback more aggressively as the cash flow opportunity starts to cream here.
Yeah, so we're really happy with where we are today, our balance sheets.
in really good position with about 800 million on the balance sheet with 465 million left to spend on G3. And we're maintaining our binocash balance at 300. So we don't see a lot of excess today. We will be generating at today's methanol prices with our assets operating, generating strong cash flow.
We're obviously going to be cautiously watching things. We're still moving through a period of economic uncertainty here. But we have options for excess cash. So like you said, we can accelerate the current bid. There's still around over $100 million at today's share price. That number is getting bigger every day.
And then if we can upsize the bid as well, which would mean going to 10% of the public vote would be another around $100 million. And then we've said that we want to repay rather than refinance our $300 million bond coming June 2024.
completed.
I appreciate the time. Thank you.
Your next question comes from the line of GIG about with CIBC. Please go ahead.
Good morning.
Jacob? Yeah, I wanted to go back to that discussion on China and your thoughts on the low MTO affordability that we're dealing with right now. When does that improve? Because I thought part of the discussion there was just the overcapacity.
situation we're in for the Chinese off-lean market given the ramp in new capacity there.
Chinese off lean market given the ramp in new capacity there.
Yeah, so the elephant's market's been under pressure for well over a year. That's on the back. Both, like you said, the new capacity that's been coming on into the market as well as the...
economic demand for a pro-elephant. So, kind of a double whammy there. That's impacted the affordability for both Asian NAFTA producers as well as MTO. We think MTO has been competitive to NAFTA through that period.
but it's been tough for all producers in that sector. When it gets back into balance, it's sort of hard to...
predict. We think that on the demand side, certainly the opening up of China could help support on the demand, but there is a new capacity and required rationalization of operating rates. We don't really think, you know, all offense pricing is so low right now.
It's low, low. It's hard to see it going further down from here, but we'll see what happens. So we think there is some positive signs with demand that can help balance things out, but still need rationalization in that industry.
Okay, and then my second question just on the Trinidad gas contract, maybe just talk through where you are in the negotiations there for Titan and this contract for Atlas, will you be doing this at the same time? And then, you know, what are the structures of the gas contracts being considered?
For Trinidad, we certainly want to be talking to the National Gas Company of Trinidad for both Titan and Atlas.
NGC is really
It's really in a number of different discussions right now. One is with the upstream And so they're in discussions with the the major players in the in the upstream there They're also been working towards getting a standard ownership interest across all the LNG trains
and then they'll obviously start the discussions with the downstream. So, positive progress on fronts. We understand they've done one contract, upstream contract with BP. We also understand that they've reached agreement on the unitization of the LNG and that's said to be done in the first quarter and complete.
think that both those things are creating a better environment for
for now us getting into commercial discussions on the petrochemical side. So we will be having those discussions this year. Some other positive news is recently the Biden administration.
just granted a license to Trinidad to develop a field, the Dragon Field in Venezuela, which is a Fort TCF field. You know, that's positive because there's also an even larger field that borders, it's more than double the size that borders Trinidad and Venezuela, so it opens up the possibility for that to happen.
Lauren, Alexander with Jeffries. Please go ahead.
Good morning. Could you give some detail on how you're seeing the evolution of the Marine Methanol App Demand and your line of sight to demand growth over the next couple of years and what you're seeing in China for both DME and industrial boiler demand?
Sure, I'll start with the marine fuel. This is a really, you know, really exciting area for us.
We're seeing a lot of interest right now.
As of today, there's...
both ships that are on the water as well as orders that are on the books today. It's over 100 vessels that if run on methanol, 100% of the time would be 3 million tons of demand. But we also know that all major shipping companies are looking at methanol, either committed to methanol or looking at methanol in the container space.
Costco, HMM, Maris, CMA, CGM, and others. So really exciting there, but we're also seeing interest in all other sectors. Cruise lines, Disney just committed to their first large cruise vessel. Farry Stena is the first converted Farry vessel.
Then we know tug, barge, dry bulk, etc. We're really interested in supporting that area. We expect to see it grow, continue to grow. We're supporting it in a number of different ways, trying to really help with shipping companies understand the technology of methanol.
the logistics, the availability of methanol. We just did some demonstrations in the port of Gothenburg with Stena doing the first ship-to-ship bunkering in Sweden as well as for a ferry. So we're supporting this in a lot of different ways and we're also trying to understand their interest in low carbon methanol.
is about coal boilers and kills we asked about DME. DME we don't see demand growing there that's that's sort of a what I'll say is a sort of a mature application not seeing investment in that space but it's sort of steady demand.
about 4 million tons of demand per year, and with a lot of growth rates on that. Coal boilers and kilns, we see that that convergence continue to happen, mainly in the smaller commercial applications for commercial and residential heating.
is promoting a number of different applications, M100 vehicles, heavy duty trucks, as well as hybrid sedans. So they have some quite optimistic marketing plans for especially heavy duty trucks. So.
Yeah, so those are the applications for watching and continuing to track.
Okay, thank you. And can you also just speak to kind of your philosophy or viewing what method x's strategy should be on green, methanol? And also what you see is the current kind of state of the market. I think as far as I've been able to keep track, I think there's about one and a half million tons of projects already announced, but I'm not sure if we're catching everything. So just curious about what you see in terms of...
the pace of those projects is something that we're watching.
You know as it relates to Methonex, we're looking at a number of different areas and when it relates to low carbon first the first and easiest thing for us to do is renewable natural gas So we're certified in North America in our guys mark plants and we're active in the renewable natural gas market where we buy
renewable gas and a premium and create green methanol and supportive of downstream customers. When it comes to investments, we're looking at the feasibility of carbon capture in the U.S. and that's on the back of the benefits and taxes under the inflation reduction act as well as sequestration availability in Louisiana.
technology, understanding capital, and you know, these things will take government support as well as customer demand and willingness to pay. So I think our strategy is to try to make sure we're positioning the company the right way as those things advance and there's...
and the conditions for investment improvement. Thanks, and just to clarify on the bio gas route, are you making the same profit per gallon using the bio gas as you are on regular gas? So I guess the answer is yes, and I guess the.
I have another question on the MTO market in China. You mentioned that there was a new Naptha cracker coming up. I just wondered if the competitive dynamics might change with a shiny new Naptha cracker. Will it become a new Naptha cracker?
more cost competitive in some way that could in any way affect the demand for methanol in that market. And secondly, you know, there's a considerable amount of
A new capacity coming up, I think VASF is putting up a huge plant there. Not sure if they would have any offtake on, I mean, any supply of methanol that might change the competitive dynamics of methanol in that market. Yep.
So let me clarify what I was talking about with that MTO unit.
The MTO site I'm talking about is
The MTO unit is on the same site as the refinery expansion. Today, the MTO unit is feeding into derivative downstream. They've now built out a new refinery project on the same site right next door with both the NAFTA cracker as well as new derivative downstream.
So once that all the site is fully commissioned, they actually need both in terms of feed. When we look at economics, MTO today looks more competitive than NAPDA. And I'm if you also include the fact that MTO is buying a considerable amount of product from Iran at discounted prices to international prices, it makes it even more attractive. So...
We would expect to see that that that that plan starts up. So it's really a very site specific issue, but it obviously has big demand impact given it. This is the 70 unit concerns over two million tons per year.
Okay, yeah, thanks, that is very helpful. I was a little confused as to what you were saying about that. All right, thanks. And anything on the BASF plant and other big chemical expansions there, whether they might in some ways produce.
byproduct of methadol in any way that would affect the competitive market for methadol in China? Not that not familiar with that but certainly I mean what we're seeing is not the expansions you know we consider that in the mix of all the capacity that's being added I'm sure but nothing specific to mention that should or all that
Thanks very much. Have a good day.
As a reminder, to ask a question, simply press star 1 on your telephone keypad. Your next question comes from the line of Joshua Spector with UBS. Please go ahead.
Hey guys, this is James Cannon on Pajash. Just looking at kind of where gas costs have come down to at this point in 2023.
He's starting to hear
Some comments on potential reopening and not reopening, but improvement in Europe as things become more affordable and potentially seeing some rebuild in feed stock inventories of the downstream production. Can you comment on what you're seeing in that market versus what what we were seeing through Destocking and Bork you?
So...
So, yeah, so I guess when we...
We talked about our fourth quarter, our fourth quarter we saw.
you know, traditional chemical applications decline about by above 3% and a lot of that was driven by both Europe and Asia. Right now certainly we think that the decrease in natural gas prices is supported. You know, supported producers and manufacturing base in Europe . As of right now we would say that you know it's
It's likely got a little upside from where we were towards the end of the year, but we got to wait and see. I think our customer base is a little more optimistic than what they were three months ago. So, but still got to wait and see and see how operating rates are impacted. But I would say modest, modest, modest improvement in outlook there.
Okay, thank you. And then just as a follow-up to that, with gas now below 250 in the US, do you have any update to your views on your hedging strategy with gas now below 250 in the US?
2023 at 85% and.
how we should think about looking out to 2024 and beyond.
how we should think about looking out to 2024 and beyond. Here.
So when we, you quoted, yeah we have 85% hedge. When we look at our North America natural gas exposure, we consider both Medicine Hat and Geismarck in our mix of North American gas. We have a team that looks at how we want to manage that on an active basis.
Our target is to have around 70% per year hedged for our assets there. We do that in two ways. One is through longer term fixed price physical contracts with suppliers and then the second is through commodity hedging in the financial markets.
We're hedged 85% for 2023 and then we're close to our 70% levels for both 2024 and 2025 after considering G3 at full production rate. We feel really good where we are in the medium term. We're going to continue to be active in the market. Obviously today's... We're going to continue to be active in the market.
spot price is supporting our unhedged exposure and that's quite a benefit from where we were last year when we saw that pricing up in the $8-$9 in MMBTUs so we think that's a positive for our cost structure in 2023.
Okay, great. Thank you. There are no further questions at this time. I will now turn the call back over to Mr. Rich Sumner.
Thank you for your questions and interest in our company. Looking forward, we are well positioned with our current asset portfolio and a strong balance sheet. Our G3 project is fully funded, progressing safely, on time and on budget, and we expect to be in production in the fourth quarter of this year.
We hope you will join us in April when we update you on our first quarter results. Thank you. Ladies and gentlemen, that concludes today's conference. Thank you all for joining. You may now disconnect.