Q3 2023 CF Industries Holdings Inc Earnings Call

Good day, ladies and gentlemen, and welcome to CF industries first nine months and third quarter of 2023.

Speaker 1: Good day, ladies and gentlemen, and welcome to CF Industries first nine months and third quarter of 2023.

Speaker 1: All participants will be in a listen-only mode. And should you need any assistance during the call, please signal a conference specialist by pressing the star key followed by zero.

All participants will be in a listen only mode and should you need any assistance during the call. Please signal a conference specialist by pressing the star key followed by zero.

Speaker 1: We will facilitate a question and answer session towards the end of the presentation.

We will facilitate a question and answer session towards the end of the presentation.

Speaker 1: To pose a question at any time, please press star, then 1 on your touchstone.

To pose a question at any time. Please press Star then one on your Touchtone phone.

Speaker 1: I would now like to turn the presentation over to the host for today, Mr. Martin Jurasic with CF Investor Relations. Sir, please proceed. Good morning and thanks for joining us.

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 with me today are Tony will CEO, Chris Bohn, CFO, Bert Frost Executive Vice President of sales market development and supply chain.

Speaker 2: With me today are Tony Will, CEO , Chris Bone, CFO , and Burt Frost, Executive Vice President of Sales, Market Development, and Supply.

Speaker 2: EF Industries reported its results for the first nine months in third quarter of 2023 yesterday afternoon. On this call we will review the results, discuss our outlook, and then host the question and answer session.

Yep industries reported its results for the first nine months and third quarter of 2023 yesterday afternoon. On this call. We'll review the results discuss our outlook and then host a question and answer session.

Speaker 2: Statements made on this call and in the presentation on our website that are not historical facts are for looking state

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.

Speaker 2: These statements are not guaranteed to be a 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 state.

Speaker 2: More detailed information about factors that may affect your performance may be found in our filings with the SCT which are available on our website.

More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.

Speaker 2: Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now let me introduce Tony Will.

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

Let me introduce Tony will our president and CEO.

Speaker 2: Thanks, Martin and good morning, everyone. Yesterday afternoon, we posted our financial results for the first nine months of 2023 in which we generated a just a debit d'av approximately $2.2 billion. Our trailing 12 months in that cash from operations was $2.9 billion and free cash flow was $2 billion.

Thanks, Martin and good morning, everyone yesterday afternoon, we posted our financial results for the first nine months of 2023 in which we generated adjusted EBITDA of approximately $2 $2 billion. Our trailing 12 months net cash from operations was $2 $9 billion and free cash flow was 2 billion.

Speaker 2: These results reflect continued strong execution by the CF Industries team, a constructive global nitrogen supply demand balance, and energy spreads favoring North American production.

These results reflect continued strong execution by the CF industries team.

Constructive global nitrogen supply demand balance and energy spreads favoring North American production.

Speaker 3: Looking forward, we remain very positive about the opportunities that lie ahead.

Looking forward, we remain very positive about the opportunities that lie ahead.

Speaker 3: In the near term, we expect strong demand for the 2024 applications these in the North America due to low nitrogen inventories across the supply chain. We expect to close the acquisition of the Wagon and Mone you plant this year adding that facility to our network and production volumes for 2024 and beyond.

In the near term, we expect strong demand for the 2024 application season in North America due to low nitrogen inventories across the supply chain.

We expect to close the acquisition of the Wagman ammonia plant. This year added in that facility to our network and production volumes for 2024 and beyond.

In the medium term industry fundamentals point to a tightening global nitrogen supply demand balance.

Speaker 3: In the medium term, industry fundamentals point to a tightening global nitrogen supply-demand balance. Over the next four years, construction of new nitrogen production capacity does not keep pace with the expected demand growth of approximately 1.5% per year in traditional applications.

Over the next four years construction of new nitrogen production capacity does not keep pace with the expected demand growth of approximately one 5% per year in traditional applications.

Speaker 3: Additionally, several important regions are projected to have reduced nitrogen production, given constraints around the cost and availability of natural gas in those regions.

Additionally, several important regions are projected to have reduced nitrogen production given constraints around the cost and availability of natural gas in those regions.

Speaker 3: Finally, longer term we expect our clean energy initiatives to provide strong returns and multiple growth opportunities for the company while helping us to meet our decarbonization goals.

Finally longer term, we expect our clean energy initiatives to provide strong returns and multiple growth opportunities for the company, while helping us to meet our decarbonization goals.

Speaker 3: Taken together, we are very optimistic about our ability to drive strong cash generation in the years ahead.

Taken together, we are very optimistic about our ability to drive strong cash generation in the years ahead.

Speaker 3: This will enable us to continue to create value over the long term through disciplined investments in growth opportunities, as well as returning capital to shareholders through dividends and share repurchases.

This will enable us to continue to create value over the long term through disciplined investments and growth opportunities as well as returning capital to shareholders through dividends and share repurchases.

Speaker 2: With that, let me turn it over to Bert and we'll discuss global nitrogen market conditions in more detail. Bert, thanks, Tony. The third quarter is often a period of softer demand and softer prices in North America. As applications for the current crop are completed and purchasers assess their needs for the next spring.

With that let me turn it over to Bert who'll discuss global nitrogen market conditions in more detail first thanks, Toni the third quarter is also in a period of softer demand and softer prices in North America as applications for the current crop are completed and purchasers assess their needs for the next spring.

Speaker 4: This year, Purchase aggressively entered the market early in the third quarter, driven by attractive nitrogen values, positive farm economics, strong interest from Europe , and low inventories in the North American Nitrogen Channel.

This year purchases aggressively entered the market early in the third quarter driven by attractive nitrogen values positive farm economics strong interest from Europe, and low inventories in the North American nitrogen channel.

Speaker 4: CF Industries built a good order book early in the third quarter, and by the end of September , our UN and ammonia order books stretch well into the fourth quarter.

CF industries built a good order book early in the third quarter and by the end of September our U N and pneumonia order books stretch well into the fourth quarter.

Speaker 4: Strong demand early in the quarter helped drive nitrogen prices higher during the quarter.

Strong demand early in the quarter helped drive nitrogen prices higher during the quarter.

Speaker 4: Yuria Barge prices in New Orleans moved up from below $300 per ton to over $400 per ton in early September . While the Tampa-Monia contract moved from $285 per metric ton to $575 per metric ton during the quarter.

Urea barge prices in New Orleans moved up from below $300 per ton to over $400.

Per ton in early September.

The Tampa ammonia contract moved from $285 per metric ton to $575 per metric ton during the quarter.

Speaker 4: We believe nitrogen inventories in North America remain low and some substantial future demand will still need to be met as we enter the new year. We are well positioned for this environment giving our low inventories today an open order book for the first quarter of 2024 and beyond and wide global energy spread that continue to favor our low cost North American manufacturing base.

We believe nitrogen inventories in North America remained low and substantial future demand will still need to be met as we enter the new year.

We are well positioned for this environment, giving our low inventories today and open order book for the first quarter of 'twenty, 'twenty, four and beyond and wide global energy spreads there continue to favor our low cost North American manufacturing base.

Speaker 4: Outside of North America, we project significant nitrogen demand from India and Brazil in the coming months. As expected, India has been active in the fourth quarter so far, securing 1.7 million tons of Urea in their latest tender.

Outside of North America, we project significant nitrogen demand from India, and Brazil in the coming months as expected India has been active in the fourth quarter, so far securing $1 7 million tons of urea and their latest tender.

Speaker 4: We expect demand for Yoree in Brazil will be robust through February for cotton and second crop corn planting.

We expect demand for urea in Brazil will be robust through February for cotton and second crop corn planting.

Speaker 4: Longer term, agricultural led demand for nitrogen should remain resilient, with global green stocks expected to approach averages from the last five years by the end of the 2024 growing.

Longer term agricultural led demand for nitrogen should remain resilient with global grain stocks expected to approach averages from the last five years by the end of the 2024 growing season.

Speaker 4: We also expect continued supply constraints in some key producing regions. Natural gas availability remains an ongoing challenge in Trinidad, which in recent years has seen the loss of nearly 1 million metric tons per year of production compared to the 2018 to 2020 average.

We also expect continued supply constraints in some key producing regions natural gas availability remains an ongoing challenge in Trinidad which in recent years <unk> seen the loss of nearly 1 million metric tons per year of production compared to the 2018 to 2020 average.

High natural gas prices have made ammonia capacity in Europe, the global marginal producer.

On your production levels are four to 5 million tons lower in the region compared to the 2018 to 2020 averages.

This includes the impact of the permanent closure of our U K ammonia plants, which accounted for nearly 1 million tons of ammonia capacity.

Speaker 4: Europe has begun the CF Industries top export destination over the last 18 months as purchasers bring in ammonia for upgrade as well as purchase UAN, ammonia nitrate and urea.

Europe has begun to CF industries top export destination over the last 18 months as purchaser to bring in ammonia for upgrade as well as purchase U a N ammonium nitrate and urea.

Speaker 4: In addition to a contaminants and closures, government actions continue to restrain participation in the global market from other producing Bead.

In addition to curtailments and closures government actions continue to restrain participation in the global market from other producing regions.

Speaker 4: Chinese government reinstated Urea export controls after Chinese producers contributed large volumes for the August India Urea tender. Additionally, intermittent natural gas croutamlets by the Egyptian government continue to affect nitrogen production in Egypt. And with that, let me turn the call over to Chris.

The Chinese government reinstated urea export controls after Chinese producers contributed large volumes for the August India urea tender. Additionally, intermittent natural gas curtailments by the Egyptian government continued to affect nitrogen production in Egypt, and with that let me turn the call over to Chris Thanks for for the <unk>.

Speaker 5: Thanks, Kurt. For the first nine months of 2023, the company reported net earnings attributable to common stockholders with approximately $1.25 billion dollars. We're $6.42 per diluted chair.

First nine months of 2023, the company reported net earnings attributable to common stockholders of approximately $125 billion or $6 42 per diluted share.

Speaker 5: DVDA and adjusted DVDA were approximately $2.2 billion.

EBITDA and adjusted EBITDA were approximately $2 $2 billion.

Speaker 5: At the end of September , cash on the balance sheet was $3.25 billion.

At the end of September cash on the balance sheet with $3 billion to $5 billion.

We have earmarked $1 billion to $5 billion of cash for the acquisition will wait a minute ammonia facility, which we expect to close on December one.

Speaker 5: We have year marked 1.25 billion dollars of cash for the acquisition of the Wagon and ammonia facility, which we expect to close on December 1st.

Speaker 5: As a result, our pro forma available cash at the end of September was approximately $2 billion.

As a result, our pro forma available cash at the end of September was approximately $2 billion.

Speaker 5: We expect company-wide Rosamonia production to be between 9 and 9.5 million tons in 2020.

We expect companywide gross ammonia production to be between 90, and 95 million tons in 2023.

Speaker 5: We expect gross ammonia production to be significantly higher in 2024 as we add roughly 900,000 tons of ammonia capacity from the Wegman facility to our network.

Gross ammonia production to be significantly higher in 2024, because we had roughly 900000 tons of ammonia capacity from the wegman facility to our network.

Speaker 5: The project that Capitalist Fenderto's for 2023 will be in the range of $450 to $500 million. Our Green Abundia project at the Donald Simil complex is nearing mechanical completion. We also continue at Advanced the Carbon Dioxide Dehydration and Compression Unit at Donald.

We project our capital expenditures for 2023 will be in the range of $450 to $500 million.

Our green ammonia project at the Donaldson.

Is nearing mechanical completion.

Also continue to advance the carbon dioxide dehydration and compression unit F Alisonville, which will enable us to permanently sequester 2 million tonnes as tier two per year.

Speaker 5: which will enable us to permanently sequester 2 million tons of CO2 per

Speaker 5: This project, which offers a return profile well above our cost of capital, and will accelerate progress towards our 2030 decarbonization goal. It's on track for start-up in early 2025.

This project, which offers a return profile well above our cost of capital and will accelerate progress towards our 2030 de carbonization Paul.

On track for start up in early 2025.

Speaker 5: Along with decarbonizing our existing network, we continue to evaluate low-carbon ammonia capacity growth that is well-timed with demand.

Along with Decarbonising, our existing network, we continue to evaluate low carbon ammonia capacity growth that is well timed with demand.

Speaker 5: We expect the feed study for our proposed joint venture with Mitsui to be complete before the end of the year, which is one of the many outputs into the future.

The feed study for our proposed joint venture with Mitsui.

To be completed before the end of the year.

Which is one of the many outputs into a final investment decision.

Speaker 5: We also remain committed to returning excess capital to shareholders, given our free cash generation outlook.

We also remain committed to returning excess capital to shareholders, given our free cash generation outlook.

Speaker 5: At the start of the year, we have repurchased more than 5 million shirts for approximately $355 million.

It started the year, we have repurchased more than 5 million shares for approximately $355 million.

Speaker 5: We expect to continue to favor opportunistic purchases layered in at attractive levels. With that, Tony will provide some closing remarks before we open the call to Q and A.

We expect to continue to favor opportunistic purchases layered in at attractive levels.

With that Tony will provide some closing remarks before we open the call to Q&A.

Speaker 3: Thanks, Chris. Before we move on to your questions, I want to thank everyone at CF Industries for all they did during the first nine months of 2023. Their teamwork continues to deliver outstanding results.

Thanks, Chris before we move on to your questions I want to thank everyone at CF industries for all they did during the first nine months of 2023 their teamwork continues to deliver outstanding results.

Speaker 3: In closing, I want to highlight two slides from our materials. Page 16 provides a recap of our consistent approach to creating long-term value. We thoughtfully and selectively add production capacity to our network, the Wagaman ammonia plant being the latest example, while we steadily reduce our outstanding share count.

In closing I want to highlight two slides from our materials page.

Page 16 provides a recap of our consistent approach to creating long term value.

We thoughtfully and selectively add production capacity to our network the wagon and ammonia plant being the latest example.

While we steadily reduced our outstanding share count.

Speaker 3: Since 2009, we have increased the participation in our business by approximately four times, a 10% CAGR over this time horizon.

Since 2009, we have increased the participation in our business by approximately four times, a 10% CAGR over this time horizon.

Speaker 3: I also want to highlight page 15 that demonstrates we are the best operators in the world of these types of assets.

I also want to highlight page 15 demonstrates we are the best operators in the world of these types of assets, we have a long track record of unmatched asset utilization enabled by a safety culture without peer.

Speaker 3: We have a long track record of unmatched asset utilization enabled by a safety culture without peer.

Speaker 3: I'm especially proud of our team's collective commitment to safety excellence and their focus on continuous innovation.

I'm, especially proud of our team's collective commitment to safety excellence and their focus on continuous innovation.

Speaker 3: Nowhere is this more evident than in our annual Wilson Safety Awards.

Nowhere is this more evident than in our annual Wilson Safety Awards.

Speaker 3: Our winner this year was the Courtright Ontario Complex, but all the finalists were outstanding and helped to drive continuous improvement across the organization. I encourage everyone to learn more about these innovations on the company's website.

Our winter this year was the Courtright, Ontario complex, but all the finalists were outstanding and helped to drive continuous improvement across the organization.

I encourage everyone to learn more about these innovations on the Companys website.

Speaker 3: We believe CF Industries has a bright future. In the near and medium terms, we are well positioned for what we expect will be a tightening global nitrogen supply-demand balance with strong margin opportunities.

We believe CF industries has a bright future.

In the near and medium terms, we are well positioned for what we expect will be a tightening global nitrogen supply demand balance with strong margin opportunities.

Speaker 3: Longer term, our disciplined investments in low carbon ammonia production provide a robust growth platform for the company.

Longer term, our disciplined investments in low carbon ammonia production provide a robust growth platform for the company.

Speaker 3: As a result, we expect to generate strong free cash flow in the years ahead, enabling us to create substantial value for long-term shareholders. With that, operator, we will now open the call to your questions.

As a result, we expect to generate strong free cash flow in the years ahead, enabling us to create substantial value for long term shareholders.

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

We will now begin the question and answer session.

Speaker 1: To ask a question, you may press star and one on your touchtone phone.

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Speaker 1: If you're using a speakerphone, please pick up your handset before pressing the keys. And if you would like to withdraw a question, please press star, then two.

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Speaker 1: At this time, we will take our first question, which will come from Joel Jackson with BMO Capital Markets. Please go ahead.

At this time, we will take our first question, which will come from Joel Jackson with BMO capital markets. Please go ahead.

Hi, good morning.

Good morning Joel.

So a big question is whether European production is the marginal cost or not it seems like in the last couple of years as we've gone through a lot of geopolitical issues higher gas prices lower gas prices. Sometimes it is kind of an event do you think that the European tonnes are marginal production can you elaborate on that eternal anything else you can provide would be.

Speaker 6: So, you know, a big question is, you know, whether European production is the marginal cost or not. Seems like in the last couple of years that we've gone through a lot of geopolitical issues and higher gas prices, lower gas prices. Sometimes it is, sometimes it isn't. Do you think that the European tons are marginal production? Can you elaborate on that? It's seasonal. Anything else you can provide would be great.

Great. Thanks.

Speaker 3: Yeah, I mean, I think, as you point out, Joel, it shifts from sort of

Yes, I mean, I think as you.

Point out Joel it shifts from sort of high third quartile to the high fourth quartile and back and forth kind of depends upon.

Speaker 3: high third quartile to the high fourth quartile and and back and forth kind of depends upon weather patterns and what's going on with storage and and honestly costs and other places But I I think if you

Weather patterns, and whats going on with storage and honestly costs in other places, but I think if you look at it.

Speaker 3: As Bert mentioned earlier, probably somewhere in the neighborhood of 4 to 5 million tons of ammonia production that has come out relative to where they were operating just, you know, five years ago, it's pretty evident that it's a challenged environment to operate there. But to your point, there are times where

As Bert mentioned earlier, probably somewhere in the neighborhood of four to 5 million tons of ammonia production that has come out relative to where they were operating just five years ago, it's pretty evident that it's a challenged environment to operate there but to your point there are there are times, where.

Speaker 3: Asia is you know equally challenged or other parts of the world whether it's because of

Asia is equally challenged.

Or other parts of the world, whether it's because of.

Speaker 3: Export controls, or as Bert said, government-enforced gas curtailments. I think Nigeria had some of that earlier this year, and Egypt as well. So it is a situation that's dynamic and in flux, but the one thing we can definitely say is, the U.S. is firmly at the low end of the supply curve, and, you know, we have consistent access to gas. So we're really happy with our network and where our plants are.

Export controls are as Bert said government enforced gas.

Gas curtailments, I think Nigeria had some of that earlier this year in Egypt as well so.

It is a.

A situation that dynamic in influx, but the one thing we can definitely say is the U S is firmly at the low end of the supply curve and we have consistent access to gas. So we're really happy with our network and where our plants are.

Speaker 4: Yeah, Joe, when you look at the gas comparisons, whether it's MBP, TTF, JKM, being Europe and Asia, but also feathering in the coal costs and then equating that back to an MMBTU value, you do have just a separation, but then thinking about the age of the plants and the efficiency of the plants, that's when you get into question some of the European or Eastern European or FSU locations.

Yes, Joe when you look at the gas comparisons whether its MVP DTF JK M being Europe and Asia, but also feathering in.

The coal costs, and then equating that back to an M N btu value.

Do have a just a separation, but then <unk>.

Thinking about the age of the plants and the efficiency of the plants. That's when you get into question some of the European or eastern European or FSU.

Locations.

Speaker 4: that are a combination of high-cost and inefficient, and that's how we're able to move some of those and call that the marginal ton. And you're seeing that reflected in the level of imports and the inability to operate in even the current environment of 15, $16 gas against ours and others in the world of two to three. And I think you're gonna see that dynamic, and it is reflected in the forward gas curve of how these plants will operate and when they'll operate.

Net or a combination of high costs and inefficient and Thats, what how we're able to move some of those and call that the marginal ton and youre seeing that reflected in the level of imports and the inability to operate and even the current environment of $15 $16 gas against ours and others in the world of two to three.

And I think youre going to see that dynamic.

As reflected in the forward gas curve.

Of how these plants will operate and window operate.

So again, a follow up I forget.

Speaker 6: Go for it. Okay, I forgot. Okay, just really quickly, I read some of the filings. It's probably a sensitive topic on the ammonium nitrate dispute you're having with Oracle and the Nelson brothers. I'm sure it's a sensitive topic there, but anything you can talk about as we're thinking about the plan, you know, your ammonium nitrate volumes and your margins versus the past, how should we think about that going forward for next year, considering what's going on in that disagreement?

Go for it.

Okay, I forgot sorry, just really quickly I read some of the filings, it's probably a sensitive topic on the ammonium nitrate to speak you are having with them or kind of Nelson brothers.

I'm sure some times a topic there, but anything you could talk about as Youre thinking about the plan and only 19 volumes in your margins versus the past how should we think about that going forward for next year.

Considering what's going on in that disagreements.

Speaker 3: Yeah, our expectation is that we continue to run our ammonium nitrate capacity at capacity in the U.S. Our R.A. on.

Our expectation is that we continue to run our ammonium nitrate capacity at capacity in the U S. R. R E on.

Speaker 3: is really centered around our Yazoo City, Mississippi facility.

It's really centered around our Yazoo City, Mississippi facility.

Speaker 3: And in the UK, although we don't do ammonia production over there anymore, we're importing ammonia and then upgrading it to...

And in the UK.

Although we don't do ammonia production over there anymore, we're importing ammonia and then upgrading it to <unk>.

Speaker 3: the solid ammonium nitrate. So our expectation is our volumes are going to be the same going forward and we're largely constructive on, you know, on,

Solid ammonium nitrate. So our expectation is our volumes are going to be the same going forward and were.

Largely constructive on.

<unk>.

Speaker 3: margins given the forward gas curve and our opportunity to bring ammonia into Billingham and and get a good upgrade margin on it. So overall, our AN segment, you know, we're we're real pleased with and I can't really comment on the

Margins, given the forward gas curve and our opportunity to bring ammonia into billingham and get a good upgrade margin. So overall, our <unk> segment.

We're real pleased with and I can't really comment on the.

Speaker 3: topic that you referenced earlier because it's a matter that's under dispute at the moment.

Topic that you referenced earlier, because it's Matt.

Matt.

Under dispute at the moment.

Thank you.

And our next question will come from Stephen Byrne with Bank of America. Please go ahead.

Speaker 1: And our next question will come from Stephen Byrne with Bank of America. Please go ahead.

Speaker 7: Yes, thank you. How do you think your Donaldsonville operations might change posts the connection with Wagon and given you can, you could move those ammonia tons up into the corn belt from Wagon and then maybe upgrade more at Donaldsonville is that logical and maybe to that.

Yes. Thank you how do you think your Dawsonville operations might change post the.

The connection with Waggling, given you can you could move those ammonia tons up into the corn belt from wagon and then maybe upgrade more at Donaldson Bill is that logical end and maybe to that topic.

Speaker 7: your third quarter volumes were more ammonia than urea than we expected even though, you know, pricing was so much better in urea. Was that just summer fill volumes were really robust in ammonia? Any comments on that?

Third quarter volumes were more ammonia than.

Then urea than we expected even though.

Reising was so much better in urea was that just just summer fill volumes were really robust in ammonia.

Any comments on that.

Speaker 3: Yeah, so Steve, let me start off with the question about Waggaman. The Waggaman facility has existing supply agreements that are in place, and those volumes are largely spoken for. We're very pleased with the recipient customers for that facility, and so we're not looking to make any changes in that regard. And our belief is we can get...

Yeah, So Steve let me start off with the question about wagman.

The wagman facility has existing <unk>.

Supply agreements that are in place and those volumes are largely spoken for.

We're very pleased with.

The recipient customers for that facility and so we're.

I'm not looking to make any changes changes in that regard and our belief is we can get.

Speaker 3: consistently more out of that plant than what historically it's been able to produce. So we're excited about that.

Consistently more out of that plant than what historically its been able to produce so we're excited about that.

Plan.

Speaker 3: added to the network. Relative to devil upgrades, we tend to run the upgrades at...

Added to the network relative to D Ville.

Upgrades, we tend to run the upgrades.

Speaker 3: basically full capacity, at least the urea plants, and then we swing back and forth between how much of that's granulated versus how much UAN we make based on relative margin opportunities between the various products. So there's not really an opportunity to dramatically increase the amount of ammonia at Donaldsonville that's upgraded just because we're running upgrade plants full-on.

At basically full capacity at least the urea plants and then we swing back and forth between how much of that is granulated versus how much UA and we make baked based on relative margin opportunities between the various products. So there's not really an opportunity to dramatically increase the amount of <unk>.

Ammonia Donaldson build into upgraded just because we're running upgrade plants full on.

Speaker 3: relative to the product mix in the third quarter, we did have an upset at our medicine hat, Albert Eurea Plant that took some production offline.

Relative to the product mix in the third quarter. We did have an upset at our medicine hat, Alberta urea plant that took some production offline and we add turnaround.

Speaker 3: and we had turn around in another facility.

And and another facility and so that.

Speaker 3: And so, you know, the result of that was...

The result of that was just through both planned and unplanned maintenance.

Speaker 3: Just through both planned and unplanned maintenance, lower ability to make granular in the quarter and therefore we ended up with a net.

Lower ability to make granular in the in the quarter and therefore, we ended up with a net longer.

Speaker 3: longer ammonia position and Bert and his team were really focused on trying to manage kind of inventory levels and and took appropriate steps to make sure we could keep the plants running full rates.

Ammonia position and Bert and his team are really focused on trying to manage inventory levels and took the appropriate steps to make sure. We can keep the plants running at full rates.

Speaker 4: That's exactly what happened. The only thing I would add is we did export additional volumes out of Deville as we balance the system.

And Thats exactly what happened the only thing I would add is we did export additional volumes out of <unk> as we balanced the system in North America as Tony said, we had the medicine had issues. So we're moving some of that product down and then we had some turnaround work at one of our Oklahoma plants and and then the balance then was moved to.

Speaker 4: in North America. As Tony said, we had the medicine hat issue, so we're moving some of that product down.

Speaker 4: And then we had some turnaround work at one of our Oklahoma plants, and then the balance then was moved to Donaldsonville, and that ended up being exports at a lower value, but that's what the values were.

Donald will build that ended up being exports at a lower value, but thats, what the values where at the time and the good news is we're back up out of that maintenance activity is and we're running full on in terms of our urea production network again, so we're looking forward to the fourth quarter and the first half of next year.

Speaker 3: And the good news is, you know, we're back up out of that maintenance activities and we're running full on in terms of our urea production network again. So we're looking forward to the fourth quarter and the first half of next year.

Speaker 7: That's very helpful. And wanted to just pick a brain a little bit about the outlook for Blue Amonia Tony. You know, you have these partnership discussions with several players. It's, you know, it's not just Mitsui, it's Lote, it's Gera, it's Pasco. And when you think about this down the road,

That's very helpful.

Wanted to just pick your brain, a little bit about the outlook for blue ammonia Tony.

You have these partnership discussions with several players. It's you know it's not just mitsui its low <unk>.

It's possible.

And when you when you think about this down the road are likely to result in one greenfield plants or could this be multiple plants and do you have any kind of conflicts in that because some might prefer.

Speaker 7: Are these likely to result in one green field plant or could this be multiple plants and do you have any kind of a conflict in that because some might prefer an auto thermal reformer whereas you were also considering.

<unk> and Otto thermal reformer, whereas you were also considering.

Speaker 7: you know, steam reforming, does that play into this at all?

Steam reforming does that does that play into this little.

Speaker 3: Yeah, Steve, without going down the rabbit hole of technology too much here, as Chris indicated in his comments, we're finishing up.

Without.

Going down the rabbit hole of technology too much here.

As Chris indicated in his comments, we're finishing up.

Speaker 3: The feed study on the conventional, you know, steam methane reforming plant, basically a carbon copy of DALT to build number six, which I believe is.

The feed study on the conventional.

Steam methane reforming plant basically a carbon copy of Dow to build number six which I believe is the.

Speaker 3: the highest operating rate ammonia plant in the world. And the fact that they're so close together allow us to not only basically make a carbon copy of it and train operators just down the road but also share common spare parts and we think that the opportunity to get fantastic asset utilization out of a plant like that right from the beginning is you know it's quite high.

The highest operating rate ammonia plant in the world and the fact that Theyre. So close together allow us to not only basically make a carbon copy of it and train operators just down the road, but also share common spare parts.

And we think that the opportunity to get fantastic asset utilization out of a plant like that right from the beginning as you know is quite high.

Speaker 3: But as you mentioned, there is different appetites in different jurisdictions for carbon intensity. And ultimately that...

But as you mentioned there is different appetites in different jurisdictions for carbon intensity and ultimately that's.

Speaker 3: You know, the notion of blue ammonia or green ammonia is convenient shorthand. Ultimately, where we're going to have to get to is a measure of carbon intensity.

The notion of Blue ammonia agreement Green ammonia is convenient shorthand ultimately, where we're going to have to get to as a measure of carbon intensity.

Speaker 3: And the possibility for autothermal reforming does provide at least, you know, at first blush, a lower carbon intensity than steam methane reforming does. So we are engaged in a feed study also on a integrated standalone.

And the possibility for auto thermal reforming.

Does provide at least.

At first blush, a lower carbon intensity than steam methane reforming does so we are engaged in a feed study also on a integrated stand alone.

Speaker 3: Biotothermal reforming technology plant, that cost estimates from those probably won't be in for about another 12 months.

Auto thermal reforming technology plant.

That debt cost estimates from though is probably won't be in for about another 12 months.

Speaker 3: We're also engaged in a study.

We're also engaged in a Ah study on doing flue gas capture so that theoretically the alternative to get to a.

Speaker 3: on doing flugas capture so that theoretically you know the alternative to get to a very very low carbon intensity number could be auto thermal it could be a conventional speed methan reformer with flugas capture technology added to it. So we've got you know a number of different potential pathways going forward.

A very very low carbon intensity number could be auto thermal it could be a conventional steam methane reformer with flu gas capture technology added to it. So we've got a number of different potential pathways going forward.

Speaker 3: And we're excited about the developing appetite and new demand.

And.

We're excited about the developing appetite and.

New demand applications for clean ammonia as I mentioned in my earlier comment. We're also very excited about the fact that even in traditional applications. We think the world is going to be nutrient short going forward. So I think the demand is clearly out there we are.

Speaker 3: applications for Queen ammonia as I mentioned in my earlier comment. We're also very excited about the fact that even in traditional applications we think the world is going to be nutrient short going forward. So I think the demand is clearly out there. We are, as I said, the best operators of these kind of assets in the world and given North America's

As I said, the best operators of these kind of assets in the world and given north Americas.

Speaker 3: access to plentiful low-cost natural gas and a very favorable framework around rural over the why as well as carbon capture and sequestration.

Access to plentiful low cost natural gas and.

A very favorable framework around rule of law as well as carbon capture and sequestration.

Speaker 3: This is increasingly recognized as the place to be. So I think all of that sets up very well for us in terms of evaluating these different types of opportunities.

This is increasingly recognized as the place to be so I think all of that sets up very well for us in terms of evaluating these different types of opportunities and we.

Speaker 3: And we are, as you said, engaged in conversations with numerous parties. They all look to us because we are the global leader in this space.

We are as you said engaged in conversations with numerous parties. They all look to us because we are the global leader in this space and we think we can navigate any kind of conflicts.

Speaker 3: And we think we can navigate any kind of conflicts and manage that situation through a variety of ways, including the fact that we're gonna have multiple sources of.

And and manage that situation through a variety of ways, including the fact that we're going to have multiple sources of decarbonize. The ammonia from a production standpoint, not only potentially if we build a new plant at our bluepoint complex, but also at Donaldson Bill Wagman once we add.

Speaker 3: decarbonized ammonia from a production standpoint, not only potentially if we build a new plant that are blue-point complex but also at Donaldsonville, Wagman once we add TCS there.

Tcs there are our Yazoo city, Mississippi facility once we add Ccs there and so we will have multiple multiple points of production multiple ways of navigating potential conflicts should they arise and honestly. We're just really excited about the opportunities ahead of us.

Speaker 3: our Yazoo City Mississippi facility once we add CCS there. And so we'll have multiple points of production, multiple ways of navigating potential conflicts should they arise. And honestly, we're just really excited about the opportunities ahead of us.

Thank you.

Speaker 1: And our next question will come from Richard Gartiterino with Wells Fargo. Please go ahead.

And our next question will come from Richard <unk> with Wells Fargo. Please go ahead.

Great. Thank you.

Speaker 8: Great, thank you. Just with the Wagumin acquisition closing December 1st, I was wondering if you could give us an update in terms of your thoughts on...

Just with the wagon acquisition closing December 1st I was wondering if you could give us an update in terms of your thoughts on.

Speaker 8: The ramp up once you take ownership, I believe the plan was running probably sub 90% operating rates under IPL. So how long do you think it can take you to get those operations up to the rest of your plans? And related to that, any energy that you think you've unveiled given recent work that you've done.

The ramp up once you take ownership.

Cloud was running.

Sub 90% operating rates under IPL, So how long do you think it can.

Taking you to get those operations up to the rest of the year plants and.

Related to that any synergies that you think you've.

Sure unveiled.

Given recent work that you've done.

Speaker 3: Since you first announced the acquisition, I would be great. Yeah, I mean, I think the biggest synergy from our perspective is the fact that we think we can consistently run that plant at higher rates and get incremental tons that come out of it into the network.

Since you first announced the acquisition.

Would be great, yes, I mean, I think the biggest synergy from our perspective is the fact that we think we can consistently run that plant at higher rates and get incremental tons that come out of it into the network and so that's.

Speaker 3: And so, you know, that's where basically all those incremental tons are purely at variable cost and therefore at very high margins. And that's, you know, first and foremost the most important aspect of this. I think it also gives...

Thats, where basically all those incremental tons are purely at variable cost and therefore at very high margins and and that's first and foremost the most important aspect of this I think it also gives us some flexibility as we think about scheduled turnarounds and chip from ship to locations.

Speaker 3: Some flexibility as we think about scheduling turnarounds and ship from ship two locations, if the plant that is on the pipeline, and so it's got access into the termiling system in the Midwest, and it just gives birth some additional flexibility in terms of how he thinks about minimizing aggregate.

Plant that is on the pipeline and so it's got access into the Terminalling system in the Midwest and it just gives bert some additional flexibility in terms of how he thinks about minimizing aggregates.

Speaker 3: logistics and transportation costs. So that's really kind of how we're thinking about the plant, but first and foremost, the biggest value is...

Logistics and transportation costs. So that's really kind of how we're thinking about the plant, but first and foremost the biggest value is.

Speaker 3: We're buying it. I think it's an attractive value for us. I think it's attractive for IPL as well. And we think we can get more time to production out of it that should generate some very nice incremental margin for us.

We are.

We're buying it I think at an attractive value for us I think it's attractive for IPL as well and we think we can get more tons of production out of it.

That should generate some very nice incremental margin for us.

Okay, and then just as a follow up Capex guide. This year 450 to 500 is there anything in there for prep work.

Speaker 8: for a wagon and how should we think about 2024 CapEx levels given that as well the progress on the Donaldsonville CCF?

Wagon and how should we think about 2024 capex levels given that as well.

Progress on the Dallas Ccs. Thank you, yes. So all of that is baked in there the finishing up of the green ammonia plant this year.

Speaker 3: Yeah, so all of that is baked in there. The finishing up of the green ammonia plant this year, you know, is part of this year's cat-backs, continuing progress and basically getting, if not too mechanical completion darn close to it, on our dehydration compression project at next year at...

As part of this year's Capex, continuing progress and basically getting if not two mechanical completion darn close to it on our dehydration compression project at next year at.

At Donaldson Bill plus what we're expecting to do a wagon in the way of.

Speaker 3: at Donaldsonville, plus what we're expecting to do at Waggerman in the way of.

Speaker 3: turn around and process improvement is all embedded in there as well as some of the ongoing improvement things we've got on our end from an IT and the systems perspective. So including the integration of Wagon into our systems and our networks. So all of that is rolled into the number that Chris gave you we are.

Turnaround and process improvement is all embedded in there as well as some of the ongoing improvement things we've got on our end from it.

In the systems perspective so.

<unk> the integration of wagman into our into our systems and our network. So all of that is is rolled into the number that Chris gave you we are very consistently year in and year out.

Speaker 3: very consistently year in and year out.

Speaker 3: you know, in the range of 400, 450 to 500 million.

In the range of $404 $50 million to $500 million and I think this is one area that ash RAF has brought great discipline to from an operation standpoint of being able to get world class.

Speaker 3: and i think you know this is one area that ashraft has brought great discipline to from an operations the point of being able to get world-class

Speaker 3: on-stream factor and asset utilization without having to go play stuff, but we keep all the processes incredibly safe and high running and our people safe as well. So I would say this is an area where we really excel.

Onstream factor in asset utilization without.

Having to gold plate stuff, but we keep we keep all the processes incredibly safe and high running and our people safe as well so.

I would say this is an area, where we really excel, yes, Richard if I could just Chris if I could just add on to that so Q3 is generally our historically been our higher maintenance and turnaround period.

Speaker 5: Yeah, Richard, if I could do this Chris, if I could just add on to that. So Q3s generally are historically been our higher maintenance and turnaround period. And after that period, we actually reduced what the range was from 500 to 550, down the 450 to 500.

After that period, we actually reduce what the range was from 500 to $5 50 down the $4 50 to 500, and we did that because once we get through this heavier turnaround period, we have better line of sight on what the spending was for those particular turnarounds, but also what we can accomplish project flags until the end of the year.

Speaker 5: And we did that because once we get through this heavier turnaround period, we have better line of sight on what the spending was.

Speaker 5: for those particular turnarounds, but also what we can accomplish project lives until the end of the year. I think as Tony was speaking about the wagon and site because we don't necessarily have that site yet and we will only have that for 12 months. It's pretty much looking at what will be built in into the 2024 cat-backed number as we go forward.

I think as Tony was speaking about the wagon and site because we don't necessarily have that site, yet and we will only have it for 12 months pretty much looking at what will be built in into the 2024 Capex number as we go forward.

Thank you.

Speaker 1: And our next question will come from Josh Spector with UBS. Please go ahead

And our next question will come from Josh Spector with UBS. Please go ahead.

Speaker 9: Yeah, hi. Thanks for taking my question. First, I wanted to ask your term. You know, Bert, we've seen some decline in your EO prices over the last month despite kind of entering kind of the stronger North America season. I guess one, what do you attribute that to and to look with your view, what do you look over the coming months here?

Yeah, Hi, Thanks for taking my question first I wanted to ask the near term.

Bert we've seen some decline in urea prices over the last month, despite kind of entering kind of a stronger north American season, I guess, one what do you attribute that to and to like what's your view when you look over that.

Months here.

Speaker 4: Yes, so Yuri has been in an interesting ride. As I mentioned in the prepared remarks, we entered Q3 at 285, 295, and then accelerated through the quarter, based on some global issues being India's demanded China's restrictions.

Yes. So you know he has been an on an interesting ride as I mentioned in the prepared remarks, we entered Q3 at $2 85 to 95, and then accelerated through the quarter.

Based on some global issues being India has demanded China's restrictions.

Speaker 4: to over $400 and then a cent settled out uh... and it probably dropped back down into the for no uh... three fifty five to three seventy range today and uh... when you look across

Over $400 and then since settled out.

Probably dropped back down into the for NOLA $3 55 to $3 70 range today.

And when you look across.

Speaker 4: where the demand will come from, we still see significant demand out of India and from Brazil, South America, and then we'll transition to the Northern Hemisphere in the new year and a lot of demand to be fulfilled in North America and Europe . So demand is solid, we've seen on the supply side more restrictions. The gas issues that we mentioned in Trinidad and Europe affect Urea and as well as the other upgraded product.

Where the demand will come from we still see significant demand out of India and from Brazil, South America, and then we will transition to the northern hemisphere, and the new year and a lot of demand to be fulfilled in North America and Europe. So demand is solid we've seen on the supply side more restrictions the gas issue.

<unk> that we mentioned in Trinidad in Europe affect urea and as well as the upgrade of other upgraded products.

Speaker 4: and they continue restrictions out of China. So the market we believe is tight and that supply demand balance probably has moved more towards demand. And we're in an okay range. We expect pricing to improve as we go into Q1 and Q2 as well as demand to accelerate.

And there are continued restrictions out of China. So the market. We believe is it's tight.

And that supply demand balance probably.

It moved more towards demand and we're in an okay range, we expect pricing to improve as we go into Q1 and Q2 as well as demand too.

Accelerate.

Speaker 4: We're looking at planted acres for the 2024 crop below 2023, but not significantly so, more than 91 million acres and then solid wheat, but good performance out of South America for second crop. So demand is good globally.

We're looking at planted acres for the 2020 for crop below 2023, but not significantly so more in the 90 to 91 million acres, and then solid wheat, but good performance out of South America for a second crop. So demand is good globally.

Speaker 4: and pricing is like Yuri is, it's volatile. There's the volatility with gas, but I think we're in a good spot.

And <unk>.

Pricing is.

Urea is it's volatile.

The volatility with gas.

I think we're in a good spot.

Speaker 9: Thanks, don't appreciate that. And just longer term, Tony, I wanted to ask just more about the timing here for the JV with Mitsui. So you have the feed study completing shortly. So from our prior conversations, talked about.

Thanks, Dan I appreciate that and just longer term Tony I wanted to ask it's more about the timing here for the JV with Mitsubishi you had the heat study completing shortly.

Our prior conversations talked about.

Speaker 9: The milestone in Japan with METI talking about some subsidy support or how that evolves. Is that timing still early to mid next year and does that mean you make a decision to invest?

The milestone in Japan, with Medi talking about some subsidy support or how that evolves.

Is that timing still early to mid next year and does that mean you make a decision to invest later next year mid to late next year or is there any reason that timeline would be off for how you're thinking about it.

Speaker 9: later next year, mid to late next year, or is there any reason that timeline would be off from how you're thinking about it?

Speaker 3: I think the situation with Medi and Jarrah's decision making might be a little fluid. It feels a little bit like many governments one step forward, two steps back. So it's hard to know with precision exactly when they're going to come to conclusion on their evaluation and putting in place.

Yes, I'd say I think the situation with <unk> and <unk> decision, making might be a little fluid it feels a little bit like many government. One step forward two steps back so it's hard to know with precision exactly when theyre going to come to.

Conclusion on their evaluation and putting in place the.

Speaker 3: the subsidy schemes that are ultimately going to drive that marketplace, but we remain.

The subsidy schemes that are ultimately going to drive that marketplace, but we remain.

Speaker 3: you know strong believers in the fact that it's ultimately gonna happen it's gonna be an important tool for ongoing decarbonization both in japan and in korea and if anything are

Strong believers in the fact that it's ultimately going to happen, it's going to be an important tool for ongoing de carbonization, both in Japan and in Korea.

And if anything our.

Speaker 3: you know our conversations with the potential and users are becoming more firm and and kind of more compelling as opposed to softening based on what's going on with the government. So, you know, we're very optimistic about

Our conversations with the potential end users are big.

Becoming more firm in.

And kind of more compelling as opposed to softening based on what's going on with the government. So.

We're very optimistic about how that demand profile develops its more a question of when the governments kind of finalize things and people are able to step forward.

Speaker 3: how that demand profile develops the more question of when the government can finalize things and people are able to step forward. You know, we are continuing to have, as Chris mentioned, the fee study is one important input into the process in making investment decision. We're continuing to have ongoing, very constructive dialogues with our potential, you know, partner slash partners in that project.

We are continuing to have as Chris mentioned the feed study is one important input into the process and making investment decision. We're continuing to have ongoing very constructive dialogues with our potential partner slash partners in that in that project.

Speaker 3: and we're hopeful to be able to...

And.

We're hopeful to be able to.

Be a little more definitive about things.

Speaker 3: be a little more definitive about things. I'm gonna stop short of saying making a final decision, but being more definitive about things on our fourth quarter full year call in February . So I would just say, Josh, stay tuned. That's probably a good time horizon for us to really update where we're at.

Stop short of saying, making a final decision, but being more definitive about things.

On our fourth quarter full year call in February.

I would just say Josh state stay tuned that's probably a good time horizon for us.

To really update where we're at.

Okay. Thank you.

Speaker 1: And our next question will come from Adam Samuelson with Goldman Sachs. Please go ahead.

And our next question will come from Adam Samuelson with Goldman Sachs. Please go ahead.

Speaker 8: uh... thank you i can want everyone morning uh... so to meet with about the the kind of some of the supply disruptions in ammonia uh... in the near term which is certainly helping kind of the overall nitrogen balance there's also a lot of

Yes, Thank you and good morning, everyone.

Adam Good morning.

Tony can you talk a little bit about the kind of some of the supply disruptions in ammonia.

In the near term, which is certainly helping kind of the overall nitrogen balance Theres also a lot of.

Speaker 8: blue ammonia and new kind of project activity happening in this market, maybe with a little bit less diligence in terms of kind of the pre-engineering or customer offtake agreements than you seem to be pursuing. But how do you look at that merchant ammonia market over the next couple of years, or do you see any concerns that there might be some...

Blue ammonia and new kind of project activity happening in this market, maybe with a little bit less diligence in terms of kind of the pre engineering, our customer off take agreements and then you seem to be pursuing but how do you look at that merchant ammonia market over the next.

Over the next couple of years or do you see any concerns that there might be some.

Speaker 8: Some blue ammonia that comes to market before some of the end of the man use Really is in place yet more useless and comfortable that there's a sufficient kind of tightness in the nutrient on the fertilizer side to absorb that

Some blue ammonia that can it comes to market before some of the end demand us.

Really is in place yet Mark do you still feel comfortable that there is a.

Sufficient kind of tightness in the nutrient on the fertilizer side to absorb that if needed.

Speaker 3: Yeah, Adam, so one of the things I mentioned in my prepared remarks and certainly able to.

Yes.

Adam.

So one of the things I mentioned in my prepared remarks.

Certainly able to.

Ken will provide more details of this offline as it makes sense is that if you look globally at the number of projects that are under construction right now.

It basically takes four years before.

When you announced and actually break ground to have something that is in production.

So you have a very good visibility in terms of how much capacity is coming online in the next four years the amount of new net capacity coming online does not keep up with a one to one 5% demand growth in traditional fertilizer applications and so we think that just based on the <unk>.

Speaker 3: The amount of new net capacity coming online does not keep up with a 1 to 1.5% demand growth in traditional fertilizer applications.

The metals in the marketplace, we are going to experience some SMB tightening and Thats before you layer in some of the supply disruptions Bert talked about with Trinidad being down 1 million tonnes of production in Europe being down four to 5 million tons of production.

Speaker 3: And that's before you layer in some of the supply disruptions Bert talked about with, Trinidad being down a million tons of production, Europe being down four to five million tons of production, other disruptions elsewhere in the world. So we are very constructive on the SMD balance globally over the next four years.

Other disruptions elsewhere in the world. So we are very constructive on the SMB balanced globally over the next four years.

Speaker 3: I think it remains to be seen how many new blue plants that are actually announced get built.

It remains to be seen how many new blue plans that are actually announced get built.

Speaker 3: You know, capital cost continues to go up, and it's easy to announce one. It's a lot harder to actually get financial close and build one and get it running. So, you know, I think as we look out.

Capital cost continues to go up.

Its easy to announce one it's a lot harder to actually get financial close and build one and get it running so.

I think as we look out.

Speaker 3: The next four years are very promising. We think based on the partnerships that we have lined up, we're in a really good position having secured and user demand.

The next four years are very promising.

We think based on the partnerships that we have lined up we're in a really good position having secured end user demand.

Speaker 3: to go forward with these things if we can make them artwork.

To go forward with these things if we can make the math work and others. It's hard for me to speculate on where they are we've seen a couple of projects that have been announced that people have walked away from them. So.

Speaker 3: and others, you know, it's hard for me to speculate on where they are. You know, we've seen a couple projects that have been announced that people have walked away from. So I would just say, again, it's more to come, stay tuned at the end of the day.

I would just say again.

More to come stay tuned at the end of the day I think.

Speaker 3: Some level of discipline and rationality is going to prevail here because it is a big expense to build one of these things. And if you're an end user, do you want to line up with someone that's got single facility risk or do you want to line up with?

Some level of discipline and rationality is going to prevail here because it is.

A big expense to build one of these things and if you are an end user do you want a lineup with someone that's got single facility risk or do you want to line up with someone that's got multiple sources of production for a decarbonize product and can guarantee supply even through turnaround periods and so forth. So we feel really good about.

Speaker 3: someone that's got multiple sources of production for a decarbonized product and can guarantee supply even through turnaround periods and so forth. So we feel really good about our position in this marketplace.

Our position in this marketplace and just some additional comments. This is Bert Adam when you look at ammonia and we mentioned in the prepared remarks about lack of gas in Trinidad and the difficulties in Europe, but if you feather in Brazil's not operating and the totally Audi pipeline coming out of Russia, Ukraine is not operating.

Speaker 4: And just some additional comments, this is Burt Adam. When you look at ammonia, and we mentioned in the prepared remarks about lack of gas in Trinidad and the difficulties in Europe , but if you feather in Brazil's not operating.

You've taken additional several million tons out so if we calculate four to five out of Europe, one out of Trinidad.

Speaker 4: and Brazil and Russia could be up to three or four, you've got a substantial amount of...

And Brazil, and Russia could be up to three or four you have got a substantial amount of.

Movable ammonia out of the market and Thats why I think you saw.

Speaker 4: movable ammonia out of the market. And that's why I think you saw on.

Speaker 4: the reflection in the market when it hit the lows it quickly bounced up back into the five then now six hundred dollar range uh... for global pricing which is a very attractive range for us now with regarding blue and let's just call a low carbon product

The reflection in the market when it hit the lows it quickly bounced up back into the $5 and now 600 dollar range for global pricing, which is a very attractive range for us now regarding blue and let's just call it low carbon products.

We will be coming on in 2025 with our Donaldson Bill.

Low carbon ammonia and products and we're seeing.

A substantial interest whether that be for industrial applications or agricultural and thats globally.

Speaker 4: So I'm very excited about the progress and the...

So I'm very excited about the progress.

Speaker 4: position we will be in a short medium and long term with these products and the receptivity in the marketplace. All right, there's a lot of help across.

The position, we will be in the short medium and long term with these products.

The receptivity in the marketplace.

There's a lot of helpful color I appreciate it I'll pass it on.

Speaker 1: And our next question will come from Andrew Wong with RBC Capital Markets. Please go ahead.

And our next question will come from Andrew Wong with RBC capital markets. Please go ahead.

Speaker 8: Hey, good morning. So just looking at the balance sheet, there's a pretty large cash balance, even after taking the account wagon in, and you're generating some pretty significant cash flow, which I think can pay for most of these projects that you're considering over the next several years.

Hey, good morning, So just looking at the balance sheet. There is a pretty large cash balance even after taking into account wagging them in and you're generating some pretty significant cash flow, which I think can pay for most of these.

Projects that youre considering over the next several years.

Speaker 8: Your shares are also trading on attractive valuation. I think you would agree with that. So are there any plans to maybe just do a larger share buy back?

Your shares are also trading at an attractive valuation I think you would agree with that.

Or are there any plans to maybe just doing a larger share buyback.

Speaker 3: So let me give just a little bit of color you know, and drum this one, which is going back to the beginning of last year.

So let me give just a little bit of color.

Andrew on this one which is going back to the beginning of last year, we purchased I think something close to 20 million shares back.

Speaker 3: We've purchased, I think, something close to 20 million shares back, which is about 10% of our outstanding float. During that same period of time, we have invested in some new capabilities, both in terms of green production and dehydration, compression, blue production, and built cash on the balance sheet. So, you know, we have been able to do sort of all of the above.

Which is about 10% of our outstanding float during that same period of time, we have invested in some new capabilities. Both in terms of green production in and dehydration compression blue production and built cash on the balance sheet. So.

We have been able to do sort of all of the above.

Speaker 3: We do have an open $3 billion share repurchase authorization. And the approach that we have opted to go for is to be a...

We do have an open $3 billion share repurchase authorization and the approach that we have.

<unk> to go for us.

Has to be.

Yes.

Speaker 3: sort of disproportionately opportunistic when we see attractive valuations and as opposed to just a consistent and steady return of capital. So, you know, you will continue to see us jump in. You know.

Sort of disproportionately opportunistic when we see it.

<unk> evaluations.

And.

As opposed to just a consistent and steady return of capital. So we.

You will continue to see us.

Jump in.

Deeper during those periods of time, and then and then there may be weeks or months, where we're kind of sitting on the sidelines, but the whole idea is to make sure that we disproportionately reward our long term shareholders by taking out as many shares at below is at the lowest values we can.

Speaker 3: deeper during those periods of time and then there may be weeks or months where we're kind of sitting on the sidelines. But the whole idea is to make sure that we disproportionately reward our long-term shareholder by taking out as many shares at the lowest values we can. And I think it actually is a good strategy. I'm not really that worried.

And I think it actually is.

Good strategy I'm, not really that worried one quarter to the next if reflects off reflects down a little bit and as Chris mentioned, we expect to close the wagman transaction here within a month and so.

Speaker 3: one quarter of the next if we flexed out, or flexed down a little bit. And as Chris mentioned, we expect to close the waggling transaction here within a month. And so...

Speaker 3: You know, 1.25 billion is already spoken for in that regard.

One 5 billion is already spoken for in that regard.

Speaker 5: Yeah, this is Chris. I would just add to that, you know, as Tony mentioned, really just being opportunistic, but patient. So there will be periods where we have higher cash balances on the balance sheet.

This is Chris I would just add to that.

<unk> mentioned really just being opportunistic that patient. So there will be periods, where we have higher cash balances on the balance sheet.

Speaker 5: I think if you look at the overall macro uncertainty, whether that be geopolitical in Ukraine,

If you look at the overall macro uncertainty whether it be geopolitical in Ukraine, or the middle east or even.

Speaker 5: or the Middle East or even, you know, here at home from whether there will be funding approved by Congress in the next couple weeks.

Here at home from whether there'll be funding approved by Congress in the next couple of weeks and then even the higher interest rate market and having companies deal with that through that time.

Speaker 5: And then even the higher interest rates market and having companies deal with that through that time.

Speaker 5: that we're probably going to see periods where that macro uncertainty goes counter to the fundamentals of the company that Bert and Tony have talked about today.

We're probably going to see periods, where that market macro uncertainty goes counter to the fundamentals of the company.

Tony I've talked about today and as a result of that as Tony said, we'll go in deeper and more shares during that particular time really rewarding our long term shareholders for their patient I would also say that we were blocked out for Q1.

Speaker 5: And as a result of that, that's, Tony said we'll go in deeper and more shares during that particular time, really rewarding the long-term chair. Well, there's for their pace.

Speaker 3: I would also say that we were blocked out for Q1 because we were in kind of the final throws of the negotiation.

Q1, because we were in kind of the final throes of negotiation with its attack on Wagman acquisition and so we couldnt be in the market buying our shares back so that kind of thing may happen here or there but.

Speaker 3: with Instaq on the Wagman acquisition. And so we couldn't be in the market buying our shares back. So, you know, that kind of thing may happen here there, but...

Speaker 3: We are focused on continuing to drive the underlying fundamentals of what underpins that page 16 that I referenced in our materials, which is selectively adding capacity where it makes sense. And otherwise returning capital and buying our share count down.

We are focused on continuing to drive.

The underlying fundamentals of what underpins that page 16 that I referenced in our materials, which is selectively adding capacity, where it makes sense and otherwise returning capital in buying our share count down.

That's great. Thanks, a lot of sense and maybe just maybe a first question over to Bert.

Speaker 8: That's great. It makes a lot of sense. Maybe I'll throw a question over to Bert. Just going back to the question on Europe as a marginal cost producer, globally we tend to look at urea a lot, but Europe is more of an ammonia and nitrates kind of market, so should we be maybe more product specific when we talk about marginal cost, like if you look at it today?

Just going back to the question on Europe is the marginal cost producer.

Globally, we tend to look at year over year a lot.

But Europe is Marvin ammonium nitrate as kind of market so should we be.

Maybe more product specific let me talk about marginal cost if you look at it today.

Speaker 9: You know, ammonia prices aren't that far off from European marginal costs.

Ammonia prices arent that far off on European marginal costs.

Speaker 9: and maybe just looking at it area more specific isn't the right way to look at it. Like, how do you think?

And maybe just looking at it year over year more specific isn't the right way to look at it.

Speaker 4: Yes and no. I think regarding your question, Urea is a placeholder globally that is the most traded product at 190 million tons of consumption, 56 million tons moved globally on a ship. And so it becomes the placeholder that is basically used on every continent. So it's a good

Yes, no I think.

Regarding your question urea as a placeholder globally that is the most traded product that 190 million tons of consumption 56 million tons move globally on a ship and so it becomes the place holder is basically used on every continent. So it's a good.

Speaker 4: measure of nitrogen values. You're correct that Europe is more of a nitrogen or a monimitriate calcium monimitriate consumer or UAN.

Measure of nitrogen values, you are correct that Europe is more of a nitrogen ammonium nitrate calcium ammonium nitrate consumer or UA in.

Speaker 4: but there's still a large importer of a urea, I think four to five million tons per year. So they do participate by a lot of North African and Nigerian tons and some Middle Eastern tons make it up there. So that's what I talked about when the Northern hemisphere moves into it.

But there is still a large importer of urea I think four to 5 million tonnes per year. So they do participate by a lot of north African and Nigerian tons, and some middle eastern tons make it up there.

So that's why I talked about when the northern hemisphere moves into it.

Speaker 4: high demand period and here starting in January they become a pretty good importer as well.

High demand period here starting in January they become a pretty good importer as well.

Speaker 4: So yes, you need to look at it that way, but ammonium nitrate is not really consumed that much for agriculture outside of Europe , and maybe Russia and Ukraine as well.

Yes, you need to look at it that way, but ammonium nitrate is not really consume that much on for agriculture outside of Europe, and maybe Russia, and Ukraine as well.

Speaker 3: maybe a million tons in Brazil. And so that's falling in North America, so we don't really talk about it outside of the explosive sector in North America. So we do look at all those factors, but again, UREA is more of the easy placeholder for everyone to understand. But I think the other important thing, Andrew, that I want to just highlight here, and you mentioned it.

Maybe 1 million tonnes in Brazil, and so thats falling in North America. So we don't really talk about it at outside of the explosive sector in North America. So we do look at all of those factors, but again urea is more of the easy place holder for everyone to understand but I think the other important thing Andrew that I wanted to just highlight here.

You mentioned it.

Speaker 3: If you think about from a natural gas cost differential.

Think about from a natural gas cost differential.

Speaker 3: The difference between the cost of production in the U.S. versus the cost of production in Europe right now, and even on the forward curve, is about $400 to $500 spread.

The difference between the cost of production in the U S versus the cost of production in Europe, right now and even on the forward curve is about four to $500 spread so whether we're talking about ammonia or whether we're talking about urea rather we are talking about UA on North American production network.

Speaker 3: So whether we're talking about ammonia, or whether we're talking about urea, or whether we're talking about UAN, North American production network has a huge economic advantage. And that's one of the reasons we're so happy where our plants are located.

Work is a huge economic advantage.

That's one of the reasons, we're so happy where our plants are located.

That's great. Thank you very much.

Speaker 1: And our next question will come from Ben Turr with Barclays. Please go ahead.

And our next question will come from Ben Theurer with Barclays. Please go ahead.

Speaker 10: Yeah, good morning and thank you very much for taking my question. I want to go back to some of the demand expectations you've talked about and particularly the gap of imports or what you expect at least for Brazil and India.

Hey, Yeah. Good morning, and thank you very much for taking my question wanted to go back.

To sum up the demand expectations, you've talked about and particularly the big gap of imports or would you expect at least four.

Brazil and India.

Speaker 10: We've seen a lot of peers in the industry talking about just the softness in Brazil and the more spontaneous buying-as-you-go-as-you-need kind of purchases. What's your level of confidence as it relates to this demand for the imports and what you flagged in the 3 to 4 million ton range just in the fourth quarter to basically wrap this up? And then obviously similar to India, because it's also very sizable numbers, just about the level of confidence you're having for this demand.

Seen a lot of like peers in the industry talking about just the softness in Brazil, and the more spontaneous buying as Joe has unique kind of purchases.

What's your level of confidence as it relates to this demand for the imports and what you flagged in the three to 4 million ton range just in the fourth quarter to basically wrap this up.

And then obviously similar to India, because it's also a very sizable numbers. It's just about the level of confidence you are having for this demand.

Speaker 4: So when you look at Brazil, the substantial growth in Brazilian agriculture is amazing over the last 20 years. Going from, you know, an exporter of soybeans in corn to a major number one position of for soybeans in corn in a subsequent or parallel increase in fertilizer demand. Going from 2000, let's say 23 years ago, 16 million tons.

Yes, so when you look at Brazil.

The substantial growth in Brazilian agriculture is amazing over the last 20 years going from.

No.

And exports of soybeans and corn to a major number one position for soybeans and corn.

Subsequent or a parallel increase in fertilizer demand going from 2000, let's say 23 years ago 16 million tonnes.

Speaker 4: to today 44 million tons. Well, what does it take to bring that in when you're only producing a little bit of phosphate? That means all the potash, most of the nitrogen, and almost all the phosphate as well needs to be imported. And what does that look like when you have just a few ports, Paranaguá and Santos and some of the others?

So today 44 million tons, but what does it take to bring that in when you are only producing a little bit of phosphate that means all the potash most of the nitrogen and almost all of the the phosphate as well needs to be imported and what does that look like when you have just a few ports Paraguay in Santos and some of the others.

Speaker 4: that are congested and so you have lineups that it's expensive to have demurrage.

Our congestion and so you have lineups.

Sensitive to have demurrage. So when you calculate the movements of products why we have confidence as the acres will be planted.

Speaker 4: So when you calculate the movements of products, why we have confidence is the acres will be planted, they will be fertilized, the profitability for, especially a farmer in Mato Grosso, for second crop corn, even factoring in 100 bushels per acre, is positive. And that's basically a cover crop for them. So that is, at minimum, an application of urea.

There will be fertilize the profitability for especially a farmer in Mato Grosso for a second crop corn, even factoring in a 100 bushels per acre is positive yes.

Basically a cover crop for them so that is.

At minimum and application of urea.

Speaker 4: So when you look at our expectation of 7.5 million tons, more or less, for an annualized basis of IRIA for Brazil, and where they are today, that import will last through February . So we've got November , December , January , February , four months at around 700,000 tons, more or less, per month.

So when you look at our expectation of $7 5 million tons more or less for an annualized basis of urea for Brazil, and where they are today.

That import will last through February. So we've got November December January February four months at around 700000 tons more or less per month and the demand is there. So we expect to see that and it's pretty consistent over the last several years again consistent with the growth in production of feed grains and oilseeds in India.

Speaker 4: And the demand is there. So we expect to see that. And it's pretty consistent over the last several years. Again, consistent with their growth and production of feed grains and oil seeds.

We've seen a different dynamic with the construction of the plant that have taken place with the Modi government.

Speaker 4: We've seen a different dynamic with the construction of the plants that have taken place with the Modi government, you know, build and buy India program.

Build and buy India program.

Speaker 4: that that production has gone up to close to 30 million tons of the thirty six thirty seven million tons of demand so our expectation is more or less seven million tons that's off of the nine to ten million tons of imports of the previous few years but still sizeable that puts india well now it could put brazil is the number one importing country india number two and united states or north america region number three and again those numbers are trending exactly that way

That production has gone up to close to 30 million tons of the 36 to 37 million tons of demand so our.

Expectation is more or less 7 million tons thats off of the nine to 10 million tons of imports of the previous few years, but still sizable that puts India now put Brazil is the number one importing country, India number two.

In the United States or North America region number three and again those numbers are trending exactly that way.

Speaker 10: Okay, perfect. And then just coming back quickly on the capital allocation side, just as we think about it, you talked about the buybacks to be opportunistic, obviously, and accelerating here when prices are lower and dividends to be sustained. Now, if we think about the projects that you have pending, and you have obviously the Bagemann cost next year, and then roughly 450 to 500 million in capex, but it still leaves a very substantial amount for excess cash. So if it's not buybacks, because you don't think

Okay, Perfect and then just coming back quickly on.

On the capital allocation side.

If we think about it do you.

<unk> talked about the.

The buybacks to be optimistic obviously.

And accelerating here when prices are lower.

Dividend to be sustained if we think about the project.

Pending and you have obviously the Bakken cost next year, and then roughly $450 million to $500 million in capex, but it still leaves a very substantial amount for excess cash. So if it's not buybacks because you don't think prices low enough to aggregate the value. How do you think about inorganic growth opportunities similar to <unk>.

Speaker 11: discourage prices

Speaker 10: low enough to aggregate the value. How do you think about other inorganic growth opportunities similar to Vagamon? Are there any things you're looking at? Do you feel there is need of doing something? Or with the projects you have on decarbonization and clean energy, plenty of capex to be spent on anyway?

Are there any things you are looking at do you do you feel there is need.

<unk> something or with the projects you have on de carbonization, and clean energy plenty of capex to be spend on anyway.

Speaker 3: Well, you know, we don't really think about it in terms of trying to look for a home and how to spend the capital we, you know, we have an open $3 billion share repurchase authorization that runs through the end of 2025. And our expectation is that we are going to complete that program. And historically, we tend to complete those

We don't really think about it in terms of trying to look for a home and how to spend the capital.

We have an open $3 billion share repurchase authorization that runs through the end of 2025 and our expectation is that we are going to come.

Complete that program and historically, we tend to complete those.

Speaker 3: ahead of schedule in terms of when they expire, so I'm not worried about the pacing or the timing of getting out there and repurchasing that volume of shares. We're just trying to get the most bang for our buck when we go do it. We do have an awful lot of

Ahead of <unk>.

Schedule in terms of when they expire so I'm not worried about the pacing or the timing of getting out there and repurchased in that volume of shares. We're just trying to get the most bang for our back when we go do it.

That we do have an awful lot of <unk>.

Speaker 3: interesting potential growth opportunities that we're evaluating, but we evaluate them very rigorously and, you know, in a disciplined approach. And we, you know, we do keep our eye on

Interesting potential growth opportunities that we're evaluating but we evaluate them very rigorously and.

The disciplined approach and we we do keep our eye on inorganic growth as a possibility.

Speaker 3: inorganic growth as a possibility, and we were very pleased with the Wagman acquisition. We think that'll create a lot of value for us, and we're excited about it, but those things tend to be fairly...

And we were very pleased with the Wagman acquisition, we think that will.

Create.

A lot of value for us and we're excited about it but those things tend to be fairly.

Speaker 3: sporadic as opposed to consistently available. They also tend to be fairly large bites when they do come out just because.

Sporadic as opposed to consistently available. They also tend to be fairly large bite when they.

When they do come out just because of it.

Speaker 12: replacement cost is so high for existing assets. So, you know, we're evaluating all of those things, but I'm not worried about our ability to buy the $3 billion of share repo back. Okay. Thank you.

The replacement cost is so high for existing assets. So.

We're we're evaluating all of those things.

But I'm not worried about our ability to buy the $3 billion a share repo back.

Thank you.

Yes.

Again, if you have a question please press star one.

Speaker 1: Our next question will come from Vincent Andrews with Morgan Stanley . Please go ahead.

Our next question will come from Vincent Andrews with Morgan Stanley. Please go ahead.

Speaker 13: Thanks. Hopefully you didn't get to this day to hop off for a moment. But, Bert, could you talk a little bit about where you think US dealer inventories are gonna end this fall season or are customers behaving a little bit more normal now or are they still looking at empty bins or where is sentiment?

Thanks, hopefully you didn't get to this I had to hop off for a moment, but could you could you talk a little bit about where you think.

U S dealer inventories youre going to end this fall season, or our customers behaving a little bit more normal now or are they still looking to have empty bins or sentiment.

Speaker 4: I think sentiment is positive. We've seen this actually on a global basis, if I can take it back to North America, but the increases in pull from places like Turkey and

I think sentiment is.

As positive we've seen this actually on a global basis I can take it back to North America, but the increases in <unk>.

And pull from places like Turkey and <unk>.

Speaker 4: importing countries has been remarkable compared to 2022.

40 countries has been remarkable compared to 2022.

Speaker 4: And North America is similar. You're right, the buying behavior from 2022 was basically a risk-off. Prices were falling, and inventory built with the producer until prices came to an attractive level in the spring of 2023. We're seeing the opposite effect for this fertilizer year, which began in July , of healthy demand, healthy pull for our fill programs and fall application of ammonia program. We actually think inventories trending into 2024 fertilizer year were low based on acreage consumption and then just actual demand.

North America is similar.

You're right the buying behavior from 2022 was a basically a risk off prices were falling and inventory built with the producer until prices came to an attractive level in the spring of 2023, we're seeing the opposite effect.

For this fertilizer year, which began in July of healthy demand healthy pull for our fill programs fall application of ammonia program, we actually think inventories trending into 2020 for fertilizer year were low based on acreage consumption and then just actual demand and our channel.

Speaker 4: and our channel checks and we think they still remain lower than normal and we think a lot of buying is still to take place.

Checks and we think they still remain lower than normal and we think a lot of buying is still to take place.

Speaker 4: Even with the lower import levels, the November lineup for urea is still fairly weak, as is December . So I think that will have to be made up in Q1 and Q2. And so we're – that's why I think you can view from our comments, we're constructively positive of what will take place in North America relative to demand and pricing. So I think behavior is back to normal. I'll leave it there. Thanks, guys.

Even with the lower import levels. The November lineup for urea is still fairly weak.

December so I think that will have to be made up in Q1 and Q2.

So we're that's why I think you can view from our comments, we're constructively positive of what will take place in North America relative to demand and pricing.

So I think behaviors back to normal.

I'll leave it there thanks guys.

Ladies and gentlemen, this will conclude our question and answer session.

Speaker 1: I'd like to turn the call back over to Martin Jarosik for any closing remarks.

I'd like to turn the call back over to Martin Jurassic for any closing remarks.

Speaker 2: Thanks everyone for joining us today. We look forward to seeing you at an upcoming conference.

Thanks, everyone for joining us today, we look forward to seeing upcoming.

Coming conferences.

Yes.

Speaker 1: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.