Q3 2023 Methanex Corp Earnings Call
[music].
Speaker 1: transcript
Speaker 1: Good morning, my name is Julianne and I'll be your conference operator today.
Good morning, My name is Julie Anne and I'll be your conference operator today.
Speaker 1: transcript
Speaker 1: At this time, I would like to welcome everyone to the Messenix Corporation 2023 third quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker.
At this time I would like to welcome everyone to the Methanex Corporation 2023 third quarter results Conference call.
All lines have been placed on mute to prevent any background noise. After.
After the Speakers' remarks, there will be a question and answer session.
Speaker 1: transcript
Speaker 1: If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one on your telephone keypad.
If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question. Please press star one again.
Speaker 1: transcript
Speaker 1: I would now like to turn the conference call over to the Director of Investor Relations at Messenix, Ms. Sarah Harriot. Please go ahead, Ms. Harriot.
I would now like to turn the conference call over to the director of Investor Relations at Methanex Ms. Sarah here yet. Please go ahead Ms Harriet.
Speaker 2: transcript
Speaker 2: Thank you. Good morning, everyone. Welcome to our third quarter, 2023 Results Conference call. Our 2023 third quarter news release, management discussion and analysis, and financial statements can be accessed from the Reports tab on the Investor Relations page on our website at messenex.com. I would like to remind our listeners that our comments and answers to your questions today, they contain more looking information. Thank you.
Thank you good morning, everyone welcome to our third quarter 2023 results Conference call. Our 2023 third quarter news release management's discussion and analysis and financial statements can be accessed from the reports tab of the Investor Relations page on our website.
I would like to remind our listeners that our comments and answers to your questions. Today may contain forward looking information and information by its nature is subject to risks and uncertainties that may cause the stated.
Speaker 2: transcript
Speaker 2: This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome.
Come to differ materially from the actual outcome.
Speaker 2: transcript
Speaker 2: Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections, which are included in the forward-looking information.
Material factors or assumptions were applied in drawing the conclusions or making the forecast or projections, which are included in the forward looking information.
Speaker 2: transcript
Speaker 2: Please refer to our third quarter 2023 MD&A and our 2022 annual report for more information.
Please refer to our third quarter, 2023, and DNA and our 2022 annual report for more information.
Speaker 2: transcript
Speaker 2: I would also like to caution our listeners that any projections provided today regarding meth and ex-usure financial performance are effective as of today's date. It is our policy not to comment on or update that's guidance between quarters.
I would also like to caution our listeners that any projections provided today regarding <unk> future financial performance are effective as of todays date. It is our policy not to comment on or update this guidance between quarters.
Speaker 2: transcript
Speaker 2: For clarification, any references to Revenue, EBITDA, Adjusted EBITDA, Cash Flow, Adjusted Income, or Adjusted Earnings per Share, Native Saves Remarks, Reflect our 63.1% economic interest in that list facility, our 50% economic interest in the Egypt facility, and our 60% interest in water-proofing.
For clarification any references to revenue EBITDA adjusted EBITDA cash flow adjusted income or adjusted earnings per share made in today's remarks reflect our 63, 1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility.
Our 60% interest in Waterford shipping and.
Speaker 2: transcript
Speaker 2: In addition, we report our adjusted EBITDA and adjusted net income to exclude the market impact on our share-based compensation and the impact of certain items associated with specific identified events. These items are non- GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore unlikely to be comparable to similar measures presented by other companies.
In addition, we report our adjusted EBITDA and adjusted net income to exclude the mark to market impact on our share based compensation and the impact of certain items associated with specific identified events. These are that these items are non-GAAP measures and ratios I do not have any standardized meaning prescribed by GAAP and therefore are likely to become.
Terrible to similar measures presented by the company. We report these non-GAAP measures in this way because we believe that they are a better measure of underlying operating performance and we encourage analysts covering the company to report their estimates in this manner.
Speaker 2: transcript
Speaker 2: We report these non-gotten measures in this way because we believe that they are a better measure of underlying operating performance and we encourage analysts covering the company to report their estimates in this manner.
Speaker 2: transcript
Speaker 2: I would now like to turn the call over to MethodX's president and CEO , Mr. Rich Thumbner, for his comments and a question and answer period.
Now I'd like to turn the call over to <unk>, President and CEO, Mr. Rich Sumner for his comments and a question and answer period.
Speaker 3: transcript
Speaker 3: Thank you, Sarah, and good morning, everyone. We appreciate you joining us today as we discuss our third quarter 2023 result.
Thank you Sarah and good morning, everyone. We appreciate you joining us today as we as we discuss our third quarter 2023 results.
Speaker 3: transcript
Speaker 3: For the third quarter, our average realized price of $303 per ton and produced sales of approximately 1.5 million tons generated adjusted EBITDA of $105 million and adjusted net income of two cents per share. Adjusted EBITDA was lower compared to the second quarter due to a lower average realized price and lower produced sales.
For the third quarter, our average realized price of $303 per ton and produce sales of approximately one 5 million tons generated adjusted EBITDA of $105 million and adjusted net income to <unk> <unk> per share.
Adjusted EBITDA was lower compared to the second quarter due to a lower average realized price and lower produce sales.
Speaker 3: transcript
Speaker 3: Through the third quarter, we saw improving method market conditions with stronger demand from certain sectors, as well as moderation and global operating rates, mainly from various supply outages in North America, Middle East and Southeast Asia. Methanol demand improvements were primarily driven by stronger demand in China, with increased demand for MTB and other fuel applications, as well as improved demand for methanol to olefins, with a number of MTO plans restarting operations in the third quarter.
Through the third quarter, we saw improving market conditions with stronger demand from certain sectors as well as moderation in global operating rates, mainly from various supply outages in North America, Middle East and Southeast Asia.
Methanol demand improvements were primarily driven by stronger demand in China with increased demand for MTBE, another fuel applications as well as improved demand for methanol to olefins with a number of MTO plants restarting operations in the third quarter.
Speaker 3: transcript
Speaker 3: We are currently seeing very high operating rates across the MTO sector, which we believe is driven by the completion of planned downstream expansions, as well as some improvements in affordability from a higher energy and all of them pricing during the board. However, we believe an economic pressure remains on this sector under current barbecue conditions.
We are currently seeing very high operating rates across the MTO sector, which we believe is driven by the completion of planned downstream expansions as well as some improvements and affordability from a higher energy and olefins pricing during the quarter. However, we believe economic pressure remains on this sector under current market conditions.
Speaker 3: transcript
Speaker 3: We can continue to carefully monitor this low-black, macroeconomic environment, and during the third quarter, we saw relatively flat demand outside of China for methanol into traditional chemical applications compared with the second.
We can continue to carefully monitor the global.
Dominic environment and during the third quarter, we saw relatively flat demand outside of China for methanol into traditional chemical applications compared with the second quarter coal pricing in China increased during the third quarter from around 800 RMB per ton to above 1000 RMB per ton currently which we believe was primary.
Speaker 3: transcript
Speaker 3: cold pricing in China increased during the third quarter from around 800 RMB per ton to above a thousand RMB per ton currently, which we believe was primarily driven by various industries combined as well.
Driven by various industry supply disruptions. We currently estimate the global cost curve to be over $300 per ton based on current coal pricing in China.
Speaker 3: transcript
Speaker 3: We currently estimate the global cost per to be over $300 per ton based on current coal pricing in China.
Speaker 3: transcript
Speaker 3: Overall, continued high energy pricing and improved supply demand fundamentals has led to slightly higher pricing throughout the third quarter and into the fourth quarter. Our November posted prices in North America, Asia Pacific and China were posted at $549, $370 and $360 per metric ton, respectively.
Overall continued high energy pricing and improved supply demand fundamentals has led to slightly higher pricing throughout the third quarter and into the fourth quarter.
November posted prices in North America, Asia Pacific and China were posted at 549, 370 and $360 per metric ton respectively.
Speaker 3: transcript
Speaker 3: And our fourth quarter European price was posted at 375 euros per metric tonn. Based on our October and November posted prices, we estimate our global average realized price to be approximately 310 to 320 dollars per metric tonn for these two months.
And our fourth quarter European price was posted at 375 euros per metric ton based on our October and November posted prices, we estimate aircrafts global average realized price to be approximately 310 to $320 per metric ton for these two months.
Speaker 3: transcript
Speaker 3: In the third quarter we had lower production due to schedule turnarounds and new steeland and chilly and seasonal gas restrictions and chilly.
In the third quarter, we had lower production due to scheduled turnarounds in New Zealand, and Chile, and seasonal gas restrictions in Chile. We are encouraged by the pace of gas development in Argentina, and the continued supply rates from Ian Abbott in Chile, increasing gas supply from Argentina allowed us to restart our second Chilean plantains.
Speaker 3: transcript
Speaker 3: We are encouraged by the pace of gas development in Argentina and the continued supply rates from ENA Benchilli. Increasing gas supply from Argentina allowed us to restart our second Chilean plant in September , earlier than previous year.
September earlier than previous years, we expect both plants to run at full rates from the end of September through April 2020 for the southern Hemisphere summer months and are increasing our Chile production guidance for 2023 from a range of 800 to 900000 tons to a range of 900000 to 1 million tons.
Speaker 3: transcript
Speaker 3: We expect both plants to run at full rates from the end of September through April 2024, the Southern Hemisphere summer months, and our increasing arch of 900,000 to 1 million tons based on improved gas availability from Argentina.
Based on improved gas availability from Argentina.
Speaker 3: transcript
Speaker 3: Earlier in October , we also announced that we signed a two-year natural gas agreement with the National Gas Company of Trinidad and Tobago to restart our fully-owned Titan plant and simultaneously idle the Atlas plant in September 2024. I want to thank our team for their hard work to ensure that we maintain operations in Trinidad, which is a strategic part of our global portfolio.
Earlier in October we also announced that we signed a two year natural gas agreement with the National gas company of Trinidad and Tobago to restart our fully owned tightened plant and simultaneously idled. The Atlas plant in September 2024, I want to thank our team for their hard work to ensure that we maintained operations in Trinidad which is.
The strategic part of our global portfolio.
Speaker 3: transcript
Speaker 3: The gas situation in Trinidad in the near term is challenging, which is reflected in the short term of the new gas contract.
Gas situation in Trinidad in the near term is challenging which is reflected in the short term of the new gas contract. We remain committed to working with the NGC and the government secured long term economic gas supply.
Speaker 3: transcript
Speaker 3: We remain committed to working with the NGC and the government to secure long-term economic gas supply.
Speaker 3: transcript
Speaker 3: We entered the third quarter in a strong financial position, with approximately $500 million of cash and $300 million of withdrawn backup liquidity. Our capital priorities are to complete the guys of our three projects and allocate any access cash to repay rather than refinance the $300 million bond due at the end of 2024.
We entered the third quarter in a strong financial position with approximately $500 million of cash and $300 million of Undrawn backup liquidity, our capital priorities are to complete the geismar three project and allocate any excess cash to repay rather than refinanced $300 million.
Due at the end of 2024.
Speaker 3: transcript
Speaker 3: Construction of our G3 project is progressing safely to plan. Construction is nearly complete and the team is in the final handover testing and commissioning phases. We expect to achieve commercial production around the end of the year and within our budget range of 1.25 to 1.3 billion. The remaining 140 to 190 million dollars of cash expenditures, including approximately 50 million dollars in accounts payable, is fully funded with cash on hand.
Construction of our <unk> III project is progressing safely to plan construction is nearly complete and the team is in the final handover testing and commissioning phases, we expect to achieve commercial production around the end of the year and within our budget range of one to $5 to $1 3 billion. The remaining 140 to one.
$190 million of cash expenditures, including approximately $50 million and accounts payable is fully funded with cash on hand.
Speaker 3: transcript
Speaker 3: Looking ahead to the fourth quarter of 2023, we're expecting higher adjusted EBITDA with a higher realized methanol price and higher produced sales. We remain focused on delivering strong operational results from our existing assets and completing the G3 project. We are well positioned during this period of economic uncertainty with growing cash flow generation capability from G3 and a portfolio of assets that can generate cash flow across a wide range of methanol prices. We would now be happy
Looking ahead to the fourth quarter of 2023, we are expecting higher adjusted EBITDA with a higher realized methanol price and higher produce sales we remain focused on delivering strong operational results from our existing assets and completing the G. III project, we are well positioned during this period of economic uncertainty with growing <unk>.
<unk> generation capability from G III and our portfolio of assets that can generate cash flow across a wide range of methanol prices, we would now be happy to answer questions.
Speaker 1: transcript
Speaker 1: Thank you. At this time, I would like to remind everyone in order to ask a question, please press star than the number one on your telephone keypad.
Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Speaker 1: transcript
Speaker 1: We ask that you please limit yourself to one question and one follow up for additional questions. Please rejoin.
We ask that you please limit yourself to one question and one follow up for additional questions. Please rejoin the queue.
Speaker 1: transcript
Speaker 1: Our first question comes from Ben Isaacson from Scotiabank. Please go ahead, your line is open.
Our next our first question comes from Ben Isaacson from Scotiabank. Please go ahead. Your line is open.
Speaker 4: transcript
Speaker 4: Thank you very much and good morning everyone. Rich, question on Trinidad. You said that the gas situation has been challenging, which was the reason for the short term deal. Does that mean that you don't have confidence that it'll get better? Is that why? I mean, if it's challenging, presumably it's challenging in the short term.
Thank you very much and good morning, everyone.
Rich a question on Trinidad you said that the gas situation has been challenging which was the reason for the short term.
Deal.
Does that mean that you don't have confidence that it will get better is that why I mean, if it's challenging presumably it's challenging in the short term.
Speaker 4: transcript
Speaker 4: And then as part of that same question, what was the rationale to idle a plant that was running and then bring on CapEx to restart Titan? Is that because there was going to be a major turnaround for Atlas that you wanted to avoid? I'm just trying to understand the whole Trinidad story. And then just maybe as my follow-up, can you just talk about any risk to e-Methanex due to the shutdown of the Tamar platform off at Israel? Thank you.
And then as part of that same question what was the rationale to idle a plant that was running and then bring on and then just on.
Capex to restart tightened is that because there was going to be a major turnaround for outlets that you wanted to avoid just trying to understand the whole Trinidad story and then just maybe as my follow up can you just talk about any risk to E. Methanex due to the shutdown of the tomorrow platform off of Israel. Thank you okay. Thanks Pat.
Speaker 3: transcript
Speaker 3: Um, on Trinidad, I mean, I'll talk about the, you know, the kind of the near term, and the reason we call it challenging is, I think.
On Trinidad.
I'll talk about that.
Kind of the near term and there is we call it challenging as well.
Speaker 3: transcript
Speaker 3: about previously that the gas markets tighten in Trinidad. And in the near term, what we see today is there's about, when you look across LNG, ammonia, and methanol, that's about four and a half BCF of demand per day.
So previously that.
The gas markets tightened in Trinidad and then in the near term what we see today is theres about when you look across LNG ammonia and methanol that's about four five bcf of demand per day.
Speaker 3: transcript
Speaker 3: Current production is in the range of 2.5 to 3 BCF.
Current production is in the range of two five to three Bcf and the government no we haven't.
Speaker 3: transcript
Speaker 3: And the government, no, we haven't, you know, given up on the fact that that situation is going to get better because there's a lot of things happening in Trinidad. And we believe there's a lot of incentives today to restart capacity that is there.
Given up on the fact that that situation is going to get better because there's a lot of things happening in Trinidad and we believe theres a lot of incentives today to restart capacity that is there.
Speaker 3: transcript
Speaker 3: across the estate and these are long assets that have run really reliably over time in that, in turn it adds.
Across the estate and these are long asset set of Brian really reliably over time.
Trinidad so.
Speaker 3: transcript
Speaker 3: So certainly not, we are working to understand all of the initiatives that are being taken.
No certainly not.
We are where we are working to understand all of the initiatives that are being taken.
Speaker 3: transcript
Speaker 3: And we remain really committed to working with NGC as they and the government of Trinidad as we as they work with the upstream on improving that situation. The reason we started.
We remain.
Really committed to working with NGC as they and the government of Trinidad as they work with the upstream on improving that situation.
The reason we started up.
Speaker 3: transcript
Speaker 3: The decision around Titan versus Atlas is because of the near-term situation.
The reason the decision around tightened versus Atlas is because of the.
The near term situation they were offering a fairly short term contract and when you look at the economics under that contract in the short term it made sense around tightening.
Speaker 3: transcript
Speaker 3: They were offering a fairly short-term contract. And when you look at the economics under that contract in the short term, it made sense to run Titan. And as you said, we don't have a turnaround in front of us like we do in Atlas.
And as you said, we don't have a turnaround in front of us like we do in Atlas.
Speaker 3: transcript
Speaker 3: that plant had gone through a major maintenance just before we'd idled it, I think that was back in 2019, so it made sense from an economic perspective and also I would call it an organization perspective. We want to keep our team
That plant had gone through a major maintenance just before we would idle that.
I think that was back in 2019, so it made sense from an economic perspective, and also I would call. It an organization perspective, we want to keep our team.
Speaker 3: transcript
Speaker 3: Our team in place, our global manufacturing team is a huge part of our organization.
Our team in place our global manufacturing team as part of our huge part of our organization.
Speaker 3: transcript
Speaker 3: We're really pleased that we'll have the Titan asset running at the end of next year.
And we're really pleased that we've got that we will have the tightened asset running at the end of next year.
Speaker 3: transcript
Speaker 3: We will shift and create a Titan restart team now that will be focused on getting that plant up and running safely and reliably. You asked about Egypt.
We will we will shift and create a tightened restart team now that will be focused on on getting that plant up and running safely and reliably.
You asked about Egypt.
I'll answer that.
Speaker 3: transcript
Speaker 3: You know, I think as of right now, what we've seen is there has been a shutdown of the so Israel is a is a is an exporter of gas to both Jordan and Egypt.
I think as of right now what we've seen is there has been a shutdown of the so Israel is a as an exporter of gas to both Jordan and Egypt.
Speaker 3: transcript
Speaker 3: Israel has shut in the Tamar field, which has impacted the flow of gas into Egypt. That is not affecting the available of gas to the industrial producers there. We do understand there may be the impact to the to LNG producers, so as of right now that's not impacting our operations or other industrial producers in Egypt.
Israel has shut in the <unk> field.
Which has has impacted the flow of gas into Egypt.
That is not affecting the available of gas to the industrial producers. There. We do understand there may have the impact to the LNG producers. So as of right now that's not impacting our operations our other industrial producers.
Julie Ann: Good morning, my name is Julie Ann and I'll be your conference operator today. At this time, I would like to welcome everyone to the Methanex Corporation 2023 Third Quarter Results Conference call. All lines have been placed on mute to prevent any background noise.
In Egypt.
Appreciate it rich thanks, so much.
Yes.
Speaker 1: transcript
Speaker 1: Our next question comes from Joel Jackson from BMO Capital Markets. Please go ahead. Your line is open.
Our next question comes from Joel Jackson from BMO Capital markets. Please go ahead. Your line is open.
Speaker 4: transcript
Speaker 4: Oh, good morning. A couple of questions, short-term, and then I'll do a long-term one. I'll do short-term first. Just looking at some of your guidance for Q4, can you say if you expect Q4 EBITDA to be higher? You said everything will be higher. Will it be higher than Q4 of 22? And when you gave your price guidance of 310 to 320, it looks like you're using a higher discount rate than Q3. And then would you be having some inventory bills in Q4 like you normally do?
Oh good morning, a couple of questions short term and then I'll do a long term all these short term first just looking at some of your guidance for Q4 can you say if you expect Q4 EBITDA to be higher you said that everything will be higher it will be higher than Q4 of 'twenty two and when you gave your price guidance of 310 to $3 21 thing you're using a higher discount rate than Q3.
Julie Ann: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again.
Sarah Herriott: I would now like to turn the conference call over to the director of investor relations at Methanex.
<unk>.
And then would you be having some inventory builds.
Sarah Herriott: Ms. Sarah Herriott, please go ahead and Ms. Herriott. Thank you. Good morning, everyone.
In Q4 like you normally do.
Okay.
Speaker 3: transcript
Speaker 3: Q4, I haven't done that comparison. Our reference was in comparison to Q3, Joel, for higher pricing and higher produced sales.
Sarah Herriott: Welcome to our third quarter 2023 Results Conference call. Our 2023 Third Quarter News Release Management discussion and analysis and financial statements can be accessed from the reports tab on the investor relations page on our website at metanex.com. I would like to remind our listeners that our comments and answers to your questions today may contain more looking information. This information by nature is subject to risks and uncertainties that may cause the stated outcome differ materially from the actual outcome. Through the material factors or assumptions were applied and drawing the conclusions or making the forecast or projections, which are included in the forward looking information.
So for Q4 I haven't done that compares with our reference was in comparison to Q3 jewel for higher higher pricing and higher higher produce sales.
Speaker 3: transcript
Speaker 3: As it relates to the discount rate, we don't expect a big
As it relates to the discount rate, we don't expect a big difference in the discount rate. So maybe we can take that one offline.
Speaker 3: transcript
Speaker 3: the difference in the discount rate. So maybe we can take that one offline.
Speaker 3: transcript
Speaker 3: And then inventory bill, yes, we do, we have seen a number of quarters here with inventory billed on our pretty self. So we probably, you know,
And then inventory build yes, we do we have seen a number of.
Quarters here with inventory build on our produced sales so we've probably.
Speaker 3: transcript
Speaker 3: accounting is accounting, but we would expect that at some point we'll also
Accounting is accounting, but we would expect that that.
At some point, we will also be seeing.
Speaker 3: transcript
Speaker 3: seeing a benefit of pulling through produce sales as well.
A benefit of pulling.
Pulling through reduced sales as well so.
Sarah Herriott: Please refer to our third quarter 2023 MDNA and our 2022 annual report for more information. I would also like to caution our listeners that any projections provided today regarding Methanex's future financial performance are effective as of today's date. It is our policy not to comment on or update this guidance between quarters. For clarification, any references to revenue, EBITDA, adjusted EBITDA, cash flow, adjusted income or adjusted earnings per share made in the stage remarks reflect our 63.1% economic interest in the Atlas facility are 50% economic interest in the Egypt.
Speaker 3: transcript
Speaker 3: So hopefully that answers it's a bit of context to the quarter for you.
So hopefully that answers a bit of better context to the quarter.
For Ya.
Okay, and then my longer term question, yes.
Speaker 5: transcript
Speaker 5: Yes. I just want to ask for 24, but that's a longer term now. Um, yeah, if you look at the production profile for 20, for 24, um, can we talk about like off a basis a little more than 6.5, can we talk about what you expect for 24? So I would imagine you expect G3 could ramp across Q1. You have almost near production there next year. I would imagine, um, you switch over, uh, from Atlas to Titan, but there might be a hiccup there. Would you lose some tons?
Yes, I was wondering for 'twenty, four but thats a longer.
Longer term now.
Yes, if you look at the production profile for 'twenty four 'twenty four.
Can we talk about like off a base of little more than $6. Five can we talk about what you expect for 'twenty four so I would imagine you expect G. III could ramp across Q1 you'd have almost near production. There next year I would imagine you switchover.
From Atlas to tightened, but there might be a hiccup there like would you lose some tons would you be running both plants overlapping for a month or would you be lose some tons on a ramp down in a ramp up or any other changes in new Zealand or anywhere else, maybe better gas in Chile like should we expect.
Sarah Herriott: In addition, we report our adjusted EBITDA and adjusted net income to exclude the market market impact on our share-based compensation and the impact of certain items associated with specific identified events. These items are non-gap measures and ratios that do not have any standardized meaning prescribed by gaps and therefore unlikely to be comparable to similar measures presented by other companies. We report these non-gap measures in this way because we believe that they are a better measure of underlying operating performance and we encourage analysts covering the company to report their estimates in this manner.
Speaker 5: transcript
Speaker 5: Would you be running both plants overlapping for a month? Or would you lose some tons on a ramp down, on a ramp up, any other changes in New Zealand or anywhere else would be better dastard and chilly? Like should we expect?
Speaker 5: transcript
Speaker 5: you know, 2 million tons more in production next year, a million and a half, like, can you just give us some ideas?
2 million tonnes more in production next year a million and a half or can you just give us some ideas.
Speaker 3: transcript
Speaker 3: Yeah, we will update our guidance formally towards the end of this year. But I will, maybe I'll give you kind of some preliminary thoughts there.
We will update our guidance formally towards the end of this year, but I will maybe I'll give you kind of some preliminary thoughts there.
Speaker 3: transcript
Speaker 3: You know, we are, we will for Chile, like I said, we'll be, we'll be operating two plants at full rates until, at least until April of next year. So.
We are we will for Chile like I said, we'll be we'll be operating two plants at full rates until at least until.
Richard Sumner: I would now like to turn the call over to Methanex's president and CEO Mr. Rich Sumner for his comments and a question and answer period. Thank you Sarah and good morning everyone. We appreciate you joining us today as we as we discuss our third quarter 2023 results. For the third quarter our average price of $303 per ton and produced sales of approximately 1.5 million tons generated adjusted EBITDA $105 million and adjusted net income of 2 cents per share.
<unk> of next year so.
Speaker 3: transcript
Speaker 3: already, you know, we've got those gas contracts in place today and we'll be working on the similar contracts for next year. This is the first time in a very long time that we've operated two plants at full rate, so we're really excited about that and we'll be working on
<unk> already got.
Those gas contracts in place today, and we've been working on this similar contracts for next year. This is the first time in a very long time that we've operated two plants at full rates. So we're really excited about about that and we'll be working on.
Speaker 3: transcript
Speaker 3: on on on on you know replicating that out in the in the uh for the summer month period for next year
On on replicating that out in the.
For the summer months period for next year. So I would expect when we were at 800 to 900. This year that that number will be higher for Chile four.
Speaker 3: transcript
Speaker 3: you know, when we were at 800 to 900 this year, that number will be higher for Chile.
Richard Sumner: Adjusted EBITDA was lower compared to the second quarter due to a lower average realized price and lower produced sales. Through the third quarter, we saw improving method market conditions with stronger demand from certain sectors as well as moderation and global operating rates, mainly from various supply outages in North America, Middle East and Southeast Asia. We are currently seeing very high operating rates across the MTO sector, which we believe is driven by the completion of planned downstream expansions, as well as some improvements and affordability from a higher energy and all of them pricing during the quarter.
Speaker 3: transcript
Speaker 3: For Trinidad, we're gonna be working as the gas contracts are working simultaneously. So we will be trying to, I don't expect a lot of overlap there, but it will be kind of a...
Trinidad.
We will we're going to be working.
The gas contracts are working simultaneously, so we will be trying to.
I don't expect a lot of overlap there.
But we will it will be kind of a.
Speaker 3: transcript
Speaker 3: you know, an idling and then a startup of Titan. So you can kind of view the numbers on how that change happens. And then.
No.
And idling and then a startup of tightened. So you can kind of do the numbers on how that change happens and then.
Speaker 3: transcript
Speaker 3: I think the big one will be also G3, you know, intention here is obviously to start up around the end of the year, but it will take time before G3 actually works through our inventory flow. So you probably got a 45 to 70 day inventory bill before G3 starts, you know, kind of coming through the earnings.
I think the big one will be also G III.
The intention here is obviously to start up around the end of the year, but it will take time before G. III actually works through our inventory flows. So you probably got a 45 to 70 day inventory build before <unk> starts.
Coming through the earnings.
Speaker 3: transcript
Speaker 3: Egypt, we would expect similar results to, you know, we've been operating at high rates. And New Zealand, we'll update our guidance. Today, it's at 1.3 to 1.4 million tons. And we'll be, you know, that's probably a similar level we would be at. But we'll update it more formally. And we also have to factor in scheduled, you know, scheduled turnarounds as well. So more to come there.
Egypt, we would expect similar results to what we've been operating at high rates and.
Richard Sumner: However, we believe economic pressure remains on this sector under current market conditions. We can continue to carefully monitor this low black macroeconomic environment, and during the third quarter we saw relatively flat demand outside of China for methanol into traditional chemical applications compared with the second quarter. Cold pricing in China increased during the third quarter from around 800 RMB per tonne to above 1000 RMB per tonne currently, which we believe was primarily driven by various industry supply disruptions.
New Zealand will update our guidance today is at one three to $1 4 million tonnes.
And we.
<unk> will be.
That's probably a similar level, we would be up but we'll update that more formally and we also have to factor in as scheduled.
Scheduled turnarounds as well so more to come there.
Okay.
Thank you.
Speaker 1: transcript
Speaker 1: Our next question comes from Steve Hansen from Raymond James. Please go ahead, your line is open.
Our next question comes from Steve Hansen from Raymond James. Please go ahead. Your line is open.
Richard Sumner: We currently estimate the global cost curve to be over $300 per tonne based on current cold pricing in China. Overall, continued high energy pricing and improved supply demand fundamentals has led to slightly higher pricing throughout the third quarter and into the fourth quarter. Our November posted prices in North America, Asia Pacific and China were posted at $549, $370, and $360 per metric tonne, respectively, and our fourth quarter European price was posted at $375 per metric tonne.
Speaker 6: transcript
Speaker 6: Yeah, thanks guys. Rich, can you go back to the Tulane gas situation just a little bit more detail? It sounds like on the back of some recent success, there's an opportunity to secure some more gas going forward. Just trying to understand what that means.
Yes, thanks, guys.
Rich could you go back to the delay in gas situation, just a little bit more detail. It sounds like on the back of the recent success. There is an opportunity to secure some more gas going forward just trying to understand what that means for the production profile next year against through the summer months in particular down there and how we should think about maybe even the medium longer term.
Speaker 6: transcript
Speaker 6: For the production profile next year, I guess, through the summer months in particular down there and now we should think about maybe even the medium, longer term. Profile for the, for the production complex, yeah.
Profile for the company.
Yes, Thanks, Steve.
Speaker 3: transcript
Speaker 3: So, a bit of a background on what's happening in Chile, and a lot of this is what's happening in Argentina. Argentina is developing the Vaca Morta field in the Noycan Basin, and this is quite a prolific field. What they're trying to do is, they're investing in pipeline infrastructure, so gas development is, a lot of success around gas development.
So a bit of a background on what's happening.
In Chile, a lot of this is what's happening in Argentina.
Richard Sumner: Based on our October and November posted prices, we estimate our global average realized price to be approximately $310 to $320 per metric tonne for these two months. In the third quarter, we had lower production due to scheduled turnaround in New Zealand and Chile and seasonal gas restrictions in Chile. We are encouraged by the pace of gas development in Argentina and the continued supply rates from China have been chilly. Increasing gas supply from Argentina allowed us to restart our second Chilean plant in September earlier than previous years.
Argentina is developing them back more to.
Field in the <unk> basin and this is quite a prolific field.
What they what they are trying to do is theyre investing in pipeline infrastructure. So gas development is a lot of success around gas development and what they have done is they are working on connecting that field into the major grid in Argentina, Argentina can stay it was about 120 million.
Speaker 3: transcript
Speaker 3: and what they have done is they are working on connecting that field into the major grid in Argentina. Argentina consumes about 120 million cubic meters a day in gas.
In cubic meters a day in gas.
Richard Sumner: We expect both plants to run at full rates from the end of September through April 2024, the Southern Hemisphere summer months, and our increasing our Chile production guidance for 2023 from a range of 800 to 900,000 tons to a range of 900,000 to 1 million tons based on improved gas availability from Argentina. Earlier in October, we also announced that we signed a two-year natural gas agreement with a national gas company of Trinidad and Tobago to restart our fully-owned Titan plant and simultaneously idle the Atlas plant in September 2024.
Speaker 3: transcript
Speaker 3: What they did is they commissioned a pipeline in the third quarter that's now delivering 10 million cubic meters into the grid. They're working on adding compression to that pipeline.
What they did is they they commissioned a pipeline there.
It is now delivering in the third quarter, that's now delivering 10 million cubic meters into the grid. They are working on adding compression to that pipeline.
Speaker 3: transcript
Speaker 3: which would add another 10 million cubic meters per day into the grid as well. So, and that'll happen sometime in the first half of 2024.
Which would add another 10 million cubic meters per day into the grid as well so and that will happen sometime in the first half of 2024.
Speaker 3: transcript
Speaker 3: And then what they are also working on is another pipeline connection, which would double that capacity that would come on in the 2025 timeframe. In addition to that, there's a development that's happening in the Austral Basin by Total and Wintershell and a consortium there called the L-Phoenix Project, and that's really located really close to our plants. So all of these
And then what they are also working on is another pipeline connection, which would double that capacity that would come on in the 2025 timeframe.
Richard Sumner: I want to thank our team for their hard work to ensure that we maintain operations in Trinidad, which is a strategic part of our global portfolio. The gas situation in Trinidad in the near-term is challenging, which is reflected in the short-term of the new gas contract. We remain committed to working with the NGC and the government to secure long-term economic gas supply.
In addition to that there is a development that's happening in the Austral Basin basin by hotel and Wintershall in a consortium their LDL Fenix project and Thats really located really close to our plants. So all of these these developments are significantly.
Speaker 3: transcript
Speaker 3: these developments are significantly improving the domestic gas balances in Argentina, and as well that supports export markets, which we are very well positioned there with our assets.
Richard Sumner: We entered the third quarter in a strong financial position, with approximately $500 million of cash and $300 million of undrawn backup liquidity. Our capital priorities are to complete the guys in our three projects and allocate any excess cash to repay rather than refinance the $300 million bond due at the end of 2024. Construction of our G3 project is progressing faithfully to plan. Construction is nearly complete, and the team is in the final handover testing and commissioning phases.
Improving the domestic gas balances and in Argentina.
As well that supports export markets, which we are very well positioned there with with our assets.
Speaker 3: transcript
Speaker 3: So we're really pleased to say that we're going to be operating two plants at full rates during this sort of eight-month period, and that is, like I said, the first time in a very long time we've been doing that. And we're going to work on that.
So we're really pleased to say that we're going to be operating two plants at full rates during these.
Sort of an eight month period.
Like I said, the first time in a very long time, we've been doing that and we're going to work on on <unk>.
Richard Sumner: We expect to achieve commercial production around the end of the year, and within our budget range of $1.25 to $1.3 billion. Through remaining $140 to $190 million of cash expenditures, including approximately $50 million in accounts payable, it's fully funded with cash on hand. Looking ahead to the fourth quarter of 2023, we're expecting higher adjusted EBITDA with a higher realized methanol price and higher produce sales. We remain focused on delivering strong operational results from our existing assets and completing the G3 project. We are well positioned during this period of economic uncertainty with growing cash flow generation capability from G3 and a portfolio of assets that can generate cash flow across a wide range of methanol prices.
Speaker 3: transcript
Speaker 3: longer-term gas. We think that focusing on the non-winter months is the right thing now and over time we'd also be hoping to improve our gas position during the winter months, but these are things we'll continue to update on as we progress through.
Longer term gas.
Think that focusing on the non winter months is the right thing now and over time, we can also be hoping to improve our our gas position during the winter months, but these are things we will continue to update on as we progress through.
Richard Sumner: We would now be happy to answer questions.
Yes.
Speaker 6: transcript
Speaker 6: Very good, thank you. And just to this one follow up on the G3 in terms of the commissioning and the inventory bill that you described, I know it's early, but can you give us a sense for whether the 45 to 60 or 70, when do you describe will all take place in Q1 from your standpoint today? Or will that start to build through the later part of Q4?
Very good thank you and just one.
One follow up on the <unk> in terms of the commissioning and the inventory build that you described.
I know, it's early but can you give us a sense for whether the 45 to 60 or 70. When do you described will all take place in Q1 from your standpoint today or would that start to build through the later part of Q4.
Speaker 7: transcript
Speaker 7: Yeah, I think right now the way to do is starting in Q1.
Yes, I think right now the way to do is starting in Q1.
Speaker 7: transcript
Speaker 7: know that would be probably the right way to think of it around starting in around
That would be probably the right.
Way to think of it.
Julie Ann: Thank you. At this time, I would like to remind everyone in order to ask a question, please press star than the number one on your telephone keypad.
Around starting in around.
Beginning of the first quarter.
Okay.
Julie Ann: We ask that you please limit yourself to one question and one follow-up. For additional questions, please rejoin the queue.
Okay very helpful. Thank you.
Speaker 1: transcript
Speaker 1: Our next question comes from Hassan Ahmed from Olympic Global. Please go ahead, your line is open.
Our next question comes from Hassan Ahmed from Alembic Global. Please go ahead. Your line is open.
Benjamin Isaacson: Our first question comes from Ben Isaacson from Scotiabank. Please go ahead. Your line is open.
Good morning Rich.
Speaker 8: transcript
Speaker 8: Um, you know, you guys saw a nice uptake across all your regions, obviously, you know.
You guys saw a nice uptake across all your regions obviously.
Richard Sumner: Thank you very much and good morning, everyone. Rich question on Fernodad, you said that the gas situation has been challenging, which was the reason for the short-term deal. Does that mean that you don't have confidence that it will get better? Is that why? If it's challenging, presumably it's challenging in the short term.
Speaker 8: transcript
Speaker 8: your pricing wise, Europe's obviously for the quarters of no reflection there is yet. I'm just trying to understand the delta between North American pricing and China's voltage breakthrough of a UA land class Asian price.
Europe pricing wise Europe, so obviously for the quarter. So no no reflection data as yet I'm just trying to understand the delta.
Between between sort of North American pricing in China, Slash Asian pricing I mean, even if I were to discount.
Speaker 8: transcript
Speaker 8: I mean, even if I were to discount North American pricing, there is still, you know, as much as a $70, $80 a ton delta between those pricing levels and the regions. So just trying to get a better sense of why that exists. I mean, it seems to be...
Richard Sumner: And then as part of that same question, what was the rationale to idle a plant that was running and then bring on, and then it's been capex to restart Titan? Is that because there was going to be a major turnaround for Atlas that you wanted to avoid? Just kind of understand the whole Fernodad story.
North American pricing there is still call it as much as a 70 to $80 a ton delta between those pricing levels in the regions. So just just trying to get a better sense of why that exists.
I mean, it seems to me a little bit would be on shipping.
Richard Sumner: And then just maybe as my follow-up, can you just talk about any risk to E-Meth and X due to the shutdown of the Tamar platform off of this role? Thank you. Thanks, Ben. On Trinidad, we all talk about the kind of the near term, and the reason we call it challenging is I think about previously that the gas market's tight in Trinidad. And in the near term, what we see today is there's about, when you look across LNG, Emonia, and Methanol, that's about four and a half BCF of demand per day.
Speaker 3: transcript
Speaker 3: Yeah, I found thanks for the question. I think I think.
[laughter].
Yes, Sean Thanks.
Thanks for the question I think I think.
Speaker 7: transcript
Speaker 7: Hopefully I'll answer your questions the right way here for you to make sense of it. I think if you were to look at discount levels across the regions rather than our global discount, you would, you can't really apply the average discount to all the prices.
Hopefully I'll answer your question the right way here for you to make sense of it I think if you were to look at discount levels across the regions rather than our global discount because you can't really apply the average discount to all the prices.
Speaker 7: transcript
Speaker 7: It's really that each region does have its own kind of market discount levels, which do vary quite widely depending on which region you're looking at. So our ARPs.
It's really that each region does have its own kind of market discount levels, which do vary quite widely depending on which region you're looking at so our arpus for you to look at our AARP by region.
Speaker 3: transcript
Speaker 3: to look at our ARPs by region, that would probably make more sense and probably more reflective of kind of, you know,
Richard Sumner: Current production is in the range of two and a half to three BCF. And the government, no, we haven't given up on the fact that that situation is going to get better because there's a lot of things happening in Trinidad. And we believe there's a lot of incentives today to restart capacity that is there in across the estate. And these are long assets that have run really reliably over time in Trinidad.
That would probably make more sparse.
And probably more reflective of.
Kind of.
Speaker 7: transcript
Speaker 7: reasonable pricing differentials between those. So it's hard to look at the global discount and apply that and try to make sense for those prices, just to say spot or other mark.
Reasonable.
Pricing differentials between between those so it's hard to look at the global discount and apply that and try to make sense of those prices relative to say.
Spot or other other markers.
Speaker 8: transcript
Speaker 8: understood understood and uh... you know just coming back to uh... uh... sort of broader question i know it's uh... all sort of recent occurrences in the like in the middle east but i mean are you guys seeing any meaningful shifts uh... as a result of that uh... in trade flows i mean i guess more specifically uh... what do you guys hearing in terms of iranian product
Understood understood.
Just coming back to sort of broader question I know, it's all sort of recent occurrences in the like in the Middle East, but I mean are you guys seeing any meaningful shifts.
Richard Sumner: So certainly not, we are working to understand all of the initiatives that are being taken. And we remain really committed to working with NGC as they, and the government of Trinidad, as they work with the upstream on improving that situation. The reason we started up, the decision around Titan versus Atlas is because of the near term situation, they were offering a fairly short term contract. And when you look at the economics under that contract in the short term, it made sense to run Titan.
As a result of that in trade flows I mean, I guess more specifically.
What are you guys hearing in terms of Iran.
Iranian product.
Speaker 7: transcript
Speaker 7: Yeah, so as of right now, we're not hearing any disruptions as of today.
Yeah. So so as of right now we're not we're not hearing any disruptions as of today.
Speaker 3: transcript
Speaker 3: You know, first we are monitoring this situation very closely and you know, really hoping for a peaceful and sustainable resolution here for everyone. But we haven't seen any disruption.
First we are monitoring the situation very closely and really hoping for a peaceful and sustainable resolution here for everyone, but we.
Richard Sumner: And as you said, we don't have a turnaround in front of us like we do in Atlas. That planted gone through a major maintenance just before we'd idle it. I think that was back in 2019. So it made sense from an economic perspective. And also, I would call it an organization perspective. We want to keep our team, our team in place, our goal manufacturing team is part of our, a cute part of our organization.
We haven't seen any disruption.
Speaker 3: transcript
Speaker 3: You know, Israel doesn't have any meaningful, really, methanol demand, nor is there any supply.
Israel doesn't have any meaningful really methanol demand or is there any supply and in the area. There theres no methanol trade routes that are impacted now if this were to escalate.
Speaker 3: transcript
Speaker 3: And in the area there, there's no methanol trade roots that are impacted. Now, if this were to escalate,
In the region, a lot of things could be impacted including methanol. So.
Speaker 3: transcript
Speaker 3: A lot of things could be impacted, including methanol. So, but we haven't seen any of those disruptions yet, but you know, that could impact crude, it could impact LMG trade flows, methanol trade flows.
But we haven't seen any of those disruptions, yet, but that could impact crude it could impact LNG trade flows methanol trade flows.
Richard Sumner: And we're really pleased that we, we've got that we'll have the Titan asset running at the end of next year. And we will, we will shift and create a Titan restart team now that will be focused on getting that plant up and running safely and reliably.
Speaker 7: transcript
Speaker 7: And so those could have really meaningful impacts on the industry, but we haven't seen any of that yet, but we're really closely monitoring to see.
And so those could have really meaningful impacts on the industry, but we haven't seen any of that yet, but we are really closely monitoring.
Good to see.
Speaker 7: transcript
Speaker 7: you know, obviously what's gonna, how this is gonna unfold.
Obviously, what what's going to how this is going to unfold.
Richard Sumner: You asked about Egypt? I'll answer that. You know, I think at the right now what we've seen is there has been a shutdown of the, so Israel is an exporter of gas to both Jordan and Egypt. Israel has shut in the Tamar field, which has had the impact of the flow of gas into Egypt. That is not affecting the available gas to the industrial producers there. We do understand there may be the impact to the, to LNG producers. So as of right now, that's, that's not impacting our operations or other industrial producers in, in Egypt. I appreciate it, Rich.
Very helpful. Thanks, so much.
Benjamin Isaacson: Thanks so much.
Speaker 1: transcript
Speaker 1: Our next question comes from Matthew Blair from Tudor Pickering Hall. Please go ahead to line his up.
Our next question comes from Matthew Blair from Tudor Pickering Holt. Please go ahead. Your line is open.
Speaker 9: transcript
Speaker 9: Hey, good afternoon. Um, or good morning, sorry. Could you talk about any opportunities you're looking at for your underutilized assets? Is there a chance that you could, you know, take a part atlas, move it to the US like you did with coming to your chili plants a long time ago? Or is there an opportunity for converting those assets into an e-messimal plant? You
Hey, good afternoon.
Good morning, sorry could you talk about any opportunities you are looking at for your underutilized assets is there a chance that you could.
Click per Atlas move it to the U S. Like you did with some of your Chile plans for a long time ago or is there an opportunity for converting those assets into an E methanol plant.
Yeah.
Yeah. So so.
Speaker 3: transcript
Speaker 3: In terms of relocation and turn it out at this point, we remain committed to turn it out. And we are...
In terms of relocation and Trinidad at this point, we remain committed to Trinidad and we are.
Speaker 3: transcript
Speaker 3: You know, we think there's a lot of incentives today to get assets under utilized assets, uh, operating in place where they, you know, where they are today and that asset's operated really well for us and turn it at. So we are focused there now. We have.
We think theres a lot of incentives today to get assets underutilized assets.
Joel Jackson: Our next question comes from Joel Jackson, from BMO Capital Markets. Please go ahead. Your line is open. Oh, good morning. A couple of questions, short term, and then I'll do a long term one. I'll be short term first. Just looking at some of your guidance for Q4. Can you say if you expect Q4 EBDA to be higher, you said everything will be higher will be higher than Q4 or 22. And when you gave your price guidance of 310 to 320, it looks like you're using a higher discount rate than Q3.
Operating in place, where they where they are today in that assets operated really well for us in Trinidad. So we our focus there now we have we do have experienced relocating plants, we moved Chile, two and three to Geismar our experience on plant relocation is that the capital call.
Joel Jackson: And then would you be having some inventory bells in Q4? Like I'm going to do. Okay, so Q4 haven't done that comparison. We were there our reference was in comparison to Q3 dual for higher, higher pricing and higher, higher pretty sales. As it relates to the discount rate, we don't expect a big difference in the discount rate.
Speaker 7: transcript
Speaker 7: you have experienced relocating plants, we moved Chile two and three to guys more.
Speaker 7: transcript
Speaker 7: Our experience on plant relocation is that
Speaker 7: transcript
Speaker 7: The capital cost savings are really not that meaningful. It's really about speed. The construction time frame can probably be...
Cost savings are really not that meaningful it's really about speed.
The construction timeframe can probably be.
Speaker 7: transcript
Speaker 7: you know, we could probably save a year on in terms of the construction time frames versus building news. So, so it has advantages there. We're not considering that today for for for atlas as we want to work on on getting longer term sustainable gas in Trinidad. But that is something that that we've done before we have a lot of experience with.
We could probably save a year in terms of the Kentucky construction Timeframes versus building new so so it has advantages there.
We're not considering that today for for Atlas as we want to work on on getting longer term sustainable gas in Trinidad, but that is something that we've done before we have a lot of experience with and there is that speed advantage.
Richard Sumner: So maybe we can take that one offline. And then inventory bill. Yes, we do. We have seen a number of quarters here with inventory build on our pretty sales. So we probably, you know, accounting is accounting, but we would expect that that at some point will also be seeing a benefit of pulling through pretty sales. As well. So so hopefully that answers it's a bit of bit of context to the to the quarter for you.
Speaker 7: transcript
Speaker 7: And there is that speed advantage in the event that you wanted to move quickly on a project.
In the event that you wanted to move quickly on a project.
Speaker 10: transcript
Speaker 10: Sounds good. And then, could you talk a little bit about the moving parts on cash flows in 2024? Should we think of your CAF X moving down to the, I don't know, $150 to $200 or $200 million range? I think you mentioned the debt paydown of about $300 million next year.
Sounds good and then.
Could you talk a little bit about the moving parts on cash flows in 2024 should we think of your Capex moving down to the I don't know 150 to $200 or $200 million range.
Richard Sumner: Okay, and then my longer term question. Yes, I just want to ask the 24 if that's a longer term now. Yeah, look at the production for 24 for 24. Can we talk about like off a basis, little more than 6.5. Can we talk about what you expect for 24. So I would imagine you expect G3 can ramp across Q1. You have almost near production there next year. I would imagine you switch over from the Titan, but there might be a hiccup there.
I think you mentioned the debt pay down about $300 million next year.
Speaker 10: transcript
Speaker 10: There's also the dividend, the 50 million plus, potentially a working capital build as you ramp up G3.
Also the dividend the dividend of $50 million plus potentially a working capital build as you ramp up Q3 with the remainder of any any remaining cash flow.
Speaker 10: transcript
Speaker 10: Would the remainder any remaining cash flow go to buybacks in that scenario?
Buybacks in that scenario.
Speaker 3: transcript
Speaker 3: Yeah, so I think the right number to use is on the CAPEX is the lower of your range, they're on 150 million. And I think you've, you've got all the numbers in terms of the other cash outlays. So yeah, we're focused on the $300 million bond. And I think as of today, you know, today's pricing.
Yeah, So I think the right number to use.
The Capex is at the lower of your raised around $150 million.
Richard Sumner: Like, would you lose some tons. Would you be running both plants overlapping for a month, or would you lose some tons on our ramp down on a ramp up on any other changes. New Zealand or anywhere else, we'd better gas and chili. Like should we expect, you know, 2 million tons more production next year, a million and a half. Like can you just give us some ideas.
But I think you have.
You've got all the numbers in terms of the other.
Cash outlays. So yes, we're focused on the $300 million bond and I think as of today at today's pricing.
Speaker 7: transcript
Speaker 7: We're probably that's the main focus. You know, we generate...
Richard Sumner: Yeah, we will update our guidance formally towards the end of this year, but I will maybe I'll give you kind of some preliminary thoughts there. You know, we are we will for chili. Like I said, we'll be we'll be operating two plants that full rates until at least until April of next year. So already, you know, we've got those gas contracts in place today. And we'd be working on the similar contracts for next year.
We're probably that's the main focus.
We.
Speaker 7: transcript
Speaker 7: a little over 200 million in free cash, but with G3, at $300, a month, and all price above that, you know, then you're probably getting above the bond. If you get closer to $350, we still see the market environment today. It's supportive of what we need to repay the bond, but we're really focused on that.
Generate.
A little over $200 million in free cash flow with G. III at $300 methanol price above that then.
You're probably getting above the bond if you get closer to 350, we still see the market environment. Today is supportive of what we need to repay the bond, but we're really focused on that if we were to have a really stronger methanol market. Then you start looking at free cash flow beyond beyond.
Speaker 7: transcript
Speaker 7: If we were to have a really stronger methanol market, then you start looking at free cash flow beyond the debt repayment. We don't have any major capital ahead of us. And so it would be looking at returning excess cash and likely some balanced approach between looking at the balance sheet further on delivery. But we're really focused on the 300 million bond today.
Richard Sumner: We this is the first time in a very long time that we we've operated two plants at full rates. So we're really excited about about that. And we'll be working on on on on, you know, replicating that out in the in the in the for the summer month periods for next year. So I would expect. You know, when we were at 800 to 900 this year that that number we hire for chili for Trinidad, you know, we will we're going to be working as the gas contracts are working simultaneously.
The debt repayment, we don't have any major capital ahead of us and so it would be looking at returning excess cash and likely some balanced approach between looking at the balance sheet further on delevering, but we're really focused on the 300 million bond today.
Great. Thank you.
Speaker 1: transcript
Speaker 1: Our next question comes from Josh Sector from UBS. Please go ahead, your line is open.
Our next question comes from Josh Spector from UBS. Please go ahead. Your line is open.
Richard Sumner: So we will be trying to I don't expect a lot of overlap there. But we will try it will be kind of a, you know, an idling and then a startup of Titan. So you can kind of do the numbers on how that change happens. And then I think the big one will be also G3, you know, we'll intention here is obviously to start up around the end of the year. But it will take time before G3 actually works through our inventory flow. So you probably got a 45 to 70 day inventory bill before G3 starts, you know, kind of coming through the earnings. Egypt, we expect similar results to, you know, we've been operating at high rates.
Speaker 7: transcript
Speaker 7: Yeah, hi. Thanks for taking my question. I guess first I just wanted to ask a follow up on the cash flow side. So when you think about the working capital bill next year with the G3 startup, I mean, you're already purchasing and reselling some tons. So is there a way to size kind of the net impact as you would expect that to be in terms of cash use to build that inventory?
Yeah, Hi, Thanks for taking my question I guess first I actually wanted to ask a follow up on the cash flow side. So when you think about the working capital build next year with the G III startup.
Purchasing and reselling some tons. So is there a way to size kind of the net impact that you would expect that to be in terms of cash used to build that inventory.
Yes.
Yes.
Speaker 7: transcript
Speaker 7: Yeah, I would not really concern with the working capital build up here. I don't think that there's any.
Yes.
We're not really concerned with.
Working capital buildup here I don't think that Theres any strategies, we're having in terms of managing that.
Speaker 7: transcript
Speaker 7: strategies we're having in terms of managing that Downward we're you will see we are buying a lot of product today which we we will significantly reduce With G3 coming online because we're not going to be growing ourselves by 1.8 million tons Next year we've already grown ourselves. You'll see a lot of Purchase product being displaced by produced product which would be a supportive of lower inventory values anyway
Downward.
You will see we are buying a lot of product today, which we will significantly reduce with G. III coming online because we're not going to be growing our sales by one 8 million tons next year, we've already grown our sales so you'll see a lot of purchase product being displaced by produced product, which would be supportive of lower.
Richard Sumner: And New Zealand will update our guidance. Today it's at 1.3 to 1.4 million tons. And we'll be, you know, that's probably a similar level we would be at.
Richard Sumner: But we'll update it more formally.
Lori values anyways.
Speaker 7: transcript
Speaker 7: Yeah, so I appreciate that. I guess that's where I was kind of going. And so, does it do kind of net offset each other? So it's not really a major cashews. Is that kind of what you're saying? Or should we be thinking about it as a somewhat of a cashew?
Yes, I appreciate that I guess, that's where I was kind of going into is it still kind of net offset each other so it's not really a major kashi is that kind of what you are saying or should we be thinking about it.
Richard Sumner: And Thank you.
Steve Hansen: Our next question comes from Steve Hansen from Raymond James. Please go ahead, your line is open. Yeah, thanks guys. We can go back to the Chilean gas situation just a little bit more detailed. It sounds like on the back of the recent success. There's an opportunity to secure some more gas going forward to try to understand what that means for the pressure and profile next year. I guess through the summer months in particular down there. And now we should think about maybe even the medium longer term profile for the direction.
One of the casualties.
Yes.
Speaker 7: transcript
Speaker 7: Okay. And then the other question I have was just more on cost curve and just methanol price support. And if I heard your comment correctly, you talked about $300 a ton, methanol price support. You're posting pricing and China's higher. I guess what do you view as the pricing driver here? Is it the fuel value? Is it coal? And then how does that evolve to next year in your view?
Okay and then the other question I had was just more on a cost curve. It is methanol price support I mean, if I heard your comment correctly, you talked about $300 a ton methanol price support you posted pricing in China is higher I guess, what do you view as the pricing driver here or is it the fuel value is at coal and then how does that evolve into next year.
In your view.
Speaker 7: transcript
Speaker 7: Our posted price is higher, but after discount we're probably in a, you know, we're kind of closer to that, those levels.
Our posted prices higher but after discount were probably in kind of closer to that those levels. What's driving the price today is really it's going to be the marginal producer cost, which is a coal producer cost in China and then the other factor that we look very closely at is the affordability of methanol.
Richard Sumner: Yeah, thanks, Steve. So a bit of a background on what's happening in Chile. And a lot of this is what's happening in Argentina. Argentina is developing the back of more to field and annoy can't base. And this is quite a prolific field. What they what they're trying to do is they're investing in pipeline infrastructure. So gas development is a lot of success around gas developments. And what they have done is they are working on connecting that field into the major grid in Argentina.
Speaker 7: transcript
Speaker 7: What's driving the price today is really it's going to be the marginal producer cost, which is a co-producer cost in China.
Speaker 3: transcript
Speaker 3: And then the other factor that we look very closely at is the affordability of methanol into primarily into the elephant's industry. And I think right now we would say that both of those factors are kind of pointing to the levels where we are today in China around 200.
Into.
Primarily into the olefins.
Industry and I think right now we would say that both of those factors are kind of pointing to the levels, where we are today in China and around 200 spot pricings and around $280 to $300.
Speaker 3: transcript
Speaker 3: Spot pricing is around $280 to $300.
Speaker 7: transcript
Speaker 7: You know, we have seen some improvement in the elephant's market. And I would say that that sector relative to oil pricing today is pricing well under where it would be on a kind of mid cycle basis. So we've seen tons of pressure on that sector that we would in a normal, in a kind of mid cycle energy pricing at $90.
We have seen some improvement in the olefins market and I would say that that sector relative to oil pricing today.
Richard Sumner: Argentina consumes about 120 million cubic meters a day in gas. What they did is they commissioned a pipeline that is now delivering in the third quarter that's now delivering 10 million cubic meters into the grid. They're working on adding compression to that pipeline, which would which would add another 10 million cubic meters per day into the grid as well. And that will happen sometime in the first half of 2024. And then what they are also working on is another pipeline connection, which would double back capacity that would come on in the 2025 timeframe.
Is pricing well under way.
Would it be on a kind of mid cycle basis. So we've seen tons of pressure on on that sector that we would in a normal and a kind of mid cycle energy pricing at $90 oil.
Speaker 7: transcript
Speaker 7: oil we would expect much much higher pricing and especially when
Oil, we would expect much much higher pricing and especially when.
Speaker 7: transcript
Speaker 7: MTO is operating at the highest rates. I think we've ever seen today as an example that that sector is operating at 90% operating rates over a very high base because we've added MTO plants last year. So if we had a better market there, I would expect that would be driving that's in all prices higher than where we are today.
<unk> is operating at the highest rates I think we've we've ever seen today as a as an example that sector's operating at 90% operating rates over a very high base because we've added MTO plants last year. So so if we had a better market there I would expect that.
Richard Sumner: In addition to that, there's a development that's happening in the astral base, based in by total and winter shell and a consortium there called the alfinix project and that's relocated really close to our plants. So all of these developments are significantly improving the domestic gas balances in in Argentina, and as well that supports export markets, which we are very well positioned there with with our assets. So we're really pleased to say that we're going to be operating two plants at full rates during these this sort of eight months period.
It would be driving methanol prices higher than where we are today.
Okay. Thank you very much.
Okay.
Speaker 1: transcript
Speaker 1: Again, if you'd like to ask a question, press star then the number one on your telephone keypad.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Speaker 2: transcript
Speaker 2: Our next question comes from Lawrence Alexander from Jeffries. Please go ahead to line.
Our next question comes from Laurence Alexander from Jefferies. Please go ahead. Your line is open.
Speaker 11: transcript
Speaker 11: Hi, good morning. This is actually Kevin S. Buc on the Lawrence Alexander. So it looks like most of my questions have been asked, but I guess I was wondering if you could give maybe any updates from simple ask calls around your strategy on a green and blue methanol. And I guess maybe how current interest rates might impact future investments. I guess I'm just going to get a sense of your rate sensitive to as a really good strategy.
Hi, Good morning, this is actually Kevin Estok on for Laurence Alexander.
So it looks like most of my questions have been asked but I guess I was wondering if you could give maybe any updates since the last calls around your strategy on a green green and Blue methanol and I guess, maybe how current interest rates and that impact future investments I guess I'm, just trying to get a sense of your rate sensitivity.
Richard Sumner: And like I said, the first time in a very long time, we've been doing that and we're going to work on on longer term gas. We think that focusing on the non-winter months is the right thing now and over time, we also be hoping to improve our gas position during the winter months, but these things will continue to update on as we progress through.
As it relates to your strategy. Thank you.
Yeah. Thanks.
Speaker 7: transcript
Speaker 7: Maybe when you think about the low carbon space, the strategy is really looking at both sides, both the demand and the supply side.
Maybe when you think about the low carbon space. The strategy is really looking at both sides, both both the demand and the supply side.
Steve Hansen: Very good. Thank you.
Speaker 7: transcript
Speaker 7: been mentioned in the opening comments, but there continues to be a lot of momentum and marine fuels. Right now over 200 ships plan to be in the water in the 27, 28 time.
Didn't mention it in the opening comments, but there continues to be a lot of momentum in marine fuels.
Right now over 200 ships planned to be in the water and the 2728 timeframe. It represents around 7 million tons of demand. If those ships that are run on our methanol 100% of the time. So we are working with major international shipping companies. This is a container shipping segments, leading it.
Speaker 7: transcript
Speaker 7: It represents around seven million tons of demand if those ships were to run on a methanol 100% of the time. So...
Richard Sumner: And just to just one follow up on the G3 in terms of the commissioning and the inventory bill that you described. I know it's early, but can you give us a sense for whether the 45 to 60 or 70 when do you describe will all take place in Q1 from your standpoint today or will that start to build through the later part of Q4?
Speaker 7: transcript
Speaker 7: We are working with major international shipping companies. This is it.
Speaker 7: transcript
Speaker 7: Containers shipping segments leading the way for there's interest in drive-all tankers and and so
The way, but there is interest in dry bulk tankers.
And so at cruise ships. So we're working with that actually we've got a number of Mou signed working closely with the shipping industry on their desire for.
Speaker 3: transcript
Speaker 3: So we're working with that actually, we got a number of MOU sign working closely with the shipping industry on their desire for green blue conventional methanol. Say green looks like for green methanol, it's mainly being driven by European market for in shipping. And that a lot is on the back of what's happening on the emissions trading scheme as well as EU maritime regulations around carbon emissions.
Richard Sumner: Yeah, I think right now the way to do is starting in Q1, you know, that would be probably the right way to think of it around starting and around the beginning of the first quarter. Okay, we're helpful. Thank you.
Green Blue conventional methanol say grain it looks like for green methanol, it's mainly being driven by the European market for in shipping and that a lot is on the back of what's happening on the.
Hassan Ahmed: Our next question comes from Hassan Ahmed from Olympic Global. Please go ahead. Your line is open.
Emissions trading scheme as well as EU maritime regulations around around carbon emissions.
Richard Sumner: Morning, Rich. You know, you guys saw a nice uptake across all your regions, obviously, you know, your pricing wise, Europe's obviously for the quarters of no reflection there is yet. I'm just trying to understand the delta between between sort of North American pricing and China's clash Asian pricing. I mean, even if I were to discount North American pricing, there is still, you know, as much as a $70, $80 a ton delta between those pricing levels in the regions.
Speaker 7: transcript
Speaker 7: We're having a lot of other discussions around blue and conventional methanol as well. So, and then on this supply side, we're working on...
We're having a lot of other discussions around blue and conventional methanol as well so.
Then on the supply side, we're working on a number of projects.
Speaker 7: transcript
Speaker 7: projects. I would say first and foremost, we've been certified to be able to purchase our renewable natural gas in North America and produce green math and all. Our guides, our plants and our marketing regions are certified to be able to sell that product through to customers, certified product, through to customers. And then we're looking at the feasibility of projects at our sites and that would be using renewable hydrogen and CO2.
I would say first and foremost we've been certified to be able to.
Purchase our renewable natural gas in North America, and produce green methanol at our Geismar plants in our marketing regions are certified to be able to sell that product through to customers certified products to customers and then we're looking at the feasibility of projects at our sites and that would be huge.
Richard Sumner: So just just trying to get a better sense of why that exists. I mean, it seems to me a lot than beyond shipping. Yeah, Hassan, thanks for the question. I think hopefully I'll answer your questions the right way here for you to make sense of it. I think if you were to look at discount levels across the regions rather than our global discount, you would you can't really apply the average discount to all the prices.
<unk> renewable hydrogen and Cotwo.
Speaker 7: transcript
Speaker 7: to sort of green the assets and we're looking at multiple feasibility within our existing sites. We're also in discussions with other projects that are out there that would like to work with us on off-takes. And so we're trying to understand how we can open up as many.
Sort of green the assets that we're looking at multiple feasibility within our existing existing sites were also in discussions with other projects that are out there that would like to work with us on off takes and.
So we're trying to understand.
How we can open up as many.
Speaker 7: transcript
Speaker 7: economically efficient supply alternatives for the marine industry around green and the marine method on. But there's a lot of discussions happening and we'll hope to be able to report more as we progress in this area.
Richard Sumner: It's really that each region does have its own kind of market discount levels, which would do very quite wide leave, depending on which region you're looking at. So our ARPs, if you're to look at our ARPs by region, that would probably make more sense and probably more reflective of kind of, you know, reasonable pricing differentials between between those. So it's hard to look at the global discount and apply that and try to make sense of those prices, relatives to say spot or other other markers.
Economically efficient supply alternatives for the marine industry around green methanol and.
There's a lot of a lot of discussions happening in.
We'll hope to be able to report more as we progress.
In this area.
Great. Thank you very much.
Speaker 2: transcript
Speaker 2: There are no further questions at this time. I will now turn the call back over to Mr. Rich Sumner.
There are no further questions at this time I will now turn the call back over to Mr. Rich Sumner.
Yeah.
Speaker 7: transcript
Speaker 7: All right, well, thank you for your questions and interest in our company. We hope you will join us in February when we update you on our fourth quarter results.
Alright, well. Thank you. Thank you for your questions and interest in our company. We hope you will join US in February when we update you on our fourth quarter results.
Richard Sumner: Understood, understood, and you know, just coming back to sort of broader question. I know it's all sort of recent occurrences in the like in the Middle East, but I mean, are you guys seeing any meaningful shifts as a result of that in trade flows? I mean, I guess more specifically, what are you guys hearing in terms of Iranian product? Yeah, so so as of right now, we're not we're not hearing any disruptions as of today.
This concludes today's conference call you may now disconnect.
Okay.
[music].
Yes.
[music].
Yeah.
Richard Sumner: You know, first we are we're monitoring this situation very closely and you know, really hoping for a peaceful and sustainable resolution here for everyone, but we haven't seen any disruption. You know, is Israel doesn't have any meaningful really methanol demand, or is there any supply? And in the area there, there's no methanol trade routes that are impacted. Now, if this were to escalate in the region, a lot of things could be impacted, including methanol.
[music].
Richard Sumner: But we haven't seen any of those disruptions yet, but you know, that could impact crude, it could impact LNG trade flows, methanol trade flows. And so those could have really meaningful impacts on the industry, but we haven't seen any of that yet, but we're really closely monitoring to to see, you know, obviously what what's going to how this is going to unfold.
Okay.
Hassan Ahmed: Very helpful, Rich. Thanks so much.
Matthew Blair: Our next question comes from Matthew Blair from Tudor Pickering Hole. Please go ahead, your line is open. Hey, good afternoon. Good morning, sorry. Could you talk about any opportunities you're looking at for your underutilized assets? Is there a chance that you could take a part atlas, move it to the US, like you did when you were chilly plants a long time ago? Or is there an opportunity for converting those assets into an e-messimal plant?
Richard Sumner: Yes, so we in terms of relocation and training at this point, we remain committed to training at and we are, you know, we think there's a lot of incentives today to get assets under utilized assets, operating in place where they, you know, where they are today and that asset's operated really well for us and turn it at. So we are focused there. Now we have, we do have experienced relocating plants. We move chilly two and three to guys more.
Richard Sumner: Our experience on plant relocation is that the capital cost savings are really not that meaningful. It's in time frame can probably be, you know, we could probably save a year on in terms of the construction time frames versus building new. So it has advantages there. We're not considering that today for atlas as we want to work on getting longer term sustainable gas in Trinidad. But that is something that we've done before we have a lot of experience with and there is that speed advantage in the event that you wanted to move quickly on a project. Sounds good.
Richard Sumner: And then, could you talk a little bit about the moving parts on cash flows in 2024?
Richard Sumner: Should we think of your, your catbacks moving down to the, I don't know, $150 to $200 or $200 million range? I think you mentioned the debt paydown of about 300 million next year. There's also the dividend, the $50 million plus potentially a working capital build as you ramp up G3. Would the remainder any remaining cash flow go to buybacks in that scenario? Yeah, so I think the right number to use is on the catbacks is the lower of your rancher on $150 million.
Richard Sumner: And I think you've got all the numbers in terms of the other cash outlays. So yeah, we're focused on the $300 million bond. And I think as of today's pricing, we're probably, that's the main focus. We generate a little over $200 million in free cash, but with G3, at $300 methanol price above that, then you're probably getting above the bond. If you get closer to $350, we still see the market environment today.
Richard Sumner: It's supportive of what we need to repay the bond, but we're really focused on that. If we were to have a really stronger methanol market, then you start looking at free cash flow beyond the debt repayment. We don't have any major capital ahead of us. And so it would be looking at returning excess cash and likely some balanced approach between looking at the balance sheet further on delivery. But we're really focused on the $300 million bond today.
Richard Sumner: Great.
Richard Sumner: Thank you.
Joshua Spector: Our next question comes from Josh Spector from UBS. Please go ahead, your line is open. Yeah, hi. Thanks for taking my question. I guess first I just wanted to ask a follow-up on the cash flow side. So when you think about the working capital build next year with the G3 startup, I mean you're already purchasing and reselling some tons. So is there a way to size kind of the net impact as you would expect that to be in terms of cash use to build that inventory?
Joshua Spector: Yeah, I would not really concerned with the working capital build up here. I don't think that there's any strategies we're having in terms of managing that down. You will see we are buying a lot of product today which we will significantly reduce with G3 coming online because we're not going to be growing ourselves by 1.8 million tons next year. We've already grown ourselves. You'll see a lot of purchase product being displaced by produced product which would be supportive of lower inventory values anyways.
Joshua Spector: Yeah, so I appreciate that. I guess that's where I was kind of going. So this is too kind of net offset each other. So it's not really a major cash use. Is that kind of what you're saying or should we be thinking about it as a sum of the cash use? And then the other question I have is just more on cost curve and just methanol price support. And if I heard your comment correctly, you talked about $300 a ton, methanol price support.
Joshua Spector: You're posting pricing in China tire. I guess what do you view as the pricing driver here? Is it the fuel value? Is it coal? And then how does that evolve to next year in your view? Our posted price is higher, but after discount, we're probably in a kind of closer to those levels. What's driving the price today is really it's going to be the marginal producer cost, which is a coal producer cost in China.
Joshua Spector: And then the other factor that we look very closely at is the affordability of methanol into primarily into the elephant industry. And I think right now, we would say that both of those factors are kind of pointing to the levels where we are today in China around 200 swap pricing and around $280 to $300. You know, we have seen some improvement in the elephant's market. And I would say that that sector relative to oil pricing today is pricing well under where it would be on a kind of mid cycle basis.
Joshua Spector: So we've seen tons of pressure on that sector that we would in a normal in a kind of mid cycle energy pricing at $90 oil, we would expect much much higher pricing. And especially when MTO is operating at the highest rates, I think we've ever seen today as an example that that sector is operating at 90% operating rates over a very high base because we've added MTO plants last year. So if we had a better market there, I would expect that would be driving methanol prices higher than where we are, today.
Julie Ann: Okay, thank you very much. Again, if you'd like to ask a question, press star than the number one on your telephone keypad.
Kevin Estok: Our next question comes from Laurence Alexander from Jeffries, please go ahead, your line is open. Hi, good morning. This is actually Kevin Estok on the Laurence Alexander.
Richard Sumner: So it looks like most of my questions have been asked, but I guess I was wondering if it could give maybe any updates from simple last calls around your strategy on a green and blue methanol. And I guess maybe how current interest rates may impact future investments, I guess you can get a sense of your rates as it is, too, as a really good strategy. Thank you. Yeah, thanks. Maybe when you think about the low carbon space, the strategy is really looking at both sides, both the demand and the supply side.
Richard Sumner: I didn't mention it in the opening comments, but there continues to be a lot of momentum and marine fuels. Right now over 200 ships plan to be in the water in the 27, 28 time frame. It represents around 7 million tons of demand if those ships were to run on a methanol 100% of the time. So we are working with major international shipping companies. This is a container shipping segments leading the way, but there's interest in drywall tankers.
Richard Sumner: And so a cruise ships. So we're working with with that. Actually, we got a number of MOU sign working closely with the shipping industry on their desire for green blue conventional methanol say green. It looks like for green methanol, it's mainly being driven by European market for green shipping. And that a lot is on the back of what's happening on the emissions trading scheme as well as EU maritime regulations around around carbon emissions.
Richard Sumner: We're having a lot of other discussions around blue and conventional methanol as well. And then on the supply side, we're working on a number of projects. I would say first and foremost, we've we've been certified to be able to purchase our renewable natural gas in North America and produce green methanol and our guys more plants and our marketing regions are certified to be able to sell that product through to customers certified product through to customers.
Richard Sumner: And then we're looking at the feasibility of projects at our sites. And that would be using renewable hydrogen and CO2 to sort of green the assets. And we're looking at multiple feasibility within our existing existing sites. We're also in discussions with other projects that are out there that would like to work with us on off-takes. And so we're trying to understand how we can open up as many economically efficient supply alternatives for the marine industry around green methanol. And there's a lot of lot of discussions happening. And, you know, we'll hope to be able to report more as we progress in this area.
Julie Ann: All right. Thank you very much. There are no further questions at this time.
Richard Sumner: I will now turn the call back over to Mr. Rich Sumner. Thank you for your questions and interest in our company. We hope you will join us in February when we update you on our fourth quarter results.
Julie Ann: This concludes today's conference call. You may now disconnect.