Q3 2023 CVR Partners LP Earnings Call

Speaker 1: Greetings and welcome to the CVR Partners LP 3rd quarter 2023 conference call. At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation.

Greetings and welcome to the CVR Partners L. P third quarter 2023 conference call at this time, all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is...

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Speaker 1: It is now my pleasure to introduce your host, Richard Roberts, Director of FPNA and IR. Thank you, Mr. Roberts. You may begin.

It is now my pleasure to introduce your host Richard Roberts director of our P&A and I are.

Thank you Mr. Roberts you may begin.

Speaker 2: Thank you, Camilla. Good morning, everyone. We appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer, Dan Newman, our Chief Financial Officer, and other members of Med.

Thank you Phil Good morning, everyone. We appreciate your participation in today's call with me today are Mark <unk>, Our Chief Executive Officer, Dan Newman, Our Chief Financial Officer, and other members of management.

Speaker 2: Prior to discussing our 2023 third quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined under federal securities law. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking.

Prior to discussing our 2023 third quarter results. Let me remind you. This conference call may contain forward looking statements that chairman defined in the federal Securities laws.

Any statements made during this call that are not statements of historical facts may be deemed to be forward. Looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with Securities and Exchange Commission and in our latest earnings release as a result actual operations or results may differ materially from the results discussed in the forward looking statements.

Speaker 2: You were cautioned that these statements may be affected by important factors that fork in our filing for the Screshing Exchange Commission and in our list and in your lease. As a result, actual operations or results made different material from the results discussed in the forward-looking state.

Speaker 2: We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law.

Take no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise except to the extent required by law.

Speaker 2: This call also includes various non-gaft financial measures. The Disclosure Related to Susp Non-Gaft measures, including reconciliation of the most directly comparable GAAP financial measures, are included in our 2023 Third Quarter Earnings Released that we filed with the SEC for the period.

This call also includes various non-GAAP financial measures the disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures are included in our 2023 third quarter earnings release that we filed with the SEC for the period.

Speaker 2: Let me also remind you that we are very well-distribution MLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as it turns our General Partners Board.

Let me also remind you that we are a variable distribution MLP, who will review our finished we establish reserves current cash usage evaluate future anticipated cash needs and neighbors ever amounts for other future cash needs as determined by our general Partners' Board as a result, our distributions if any will vary from quarter to quarter due to several factors, including but not limited to operating performance.

Speaker 3: As a result, our distributions, if any, will vary from quarter to quarter to several factors, including but not limited to operating performance fluctuations in the prices received or finished products, capital expenditures, and cash reserves are the necessary or appropriate and affordable directors of our general partner. With that said, I'll turn the call to Mark Pytosh, our chief executive officer. Mark. Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call.

Fluctuations in the prices received for finished products capital expenditures and cash reserves deemed necessary or appropriate for the board of directors of our general partner.

But that said I will turn the call over to Mark <unk>, Our Chief Executive Officer Mark.

Thank you Richard.

Everyone and thank you for joining us for today's call.

Speaker 3: The summarized financial highlights for the third quarter of 2023 include net sales of $131 million net income of $1 million ebit DA of $32 million and the board of directors declared a third quarter distribution of $1.55 per common unit which will be paid on November 20th to unit holders of record of the close of the market on November 13th.

Summarized financial highlights for the third quarter of 2023 include net sales of $131 million net income of 1 million EBITDA of 32 million and the board of directors declared a third quarter distribution of $1 55 per common unit, which will be paid on November 20th to unitholders of record at the close of the.

Market on November 13.

Speaker 3: Our facilities continue to run well during the third quarter of 2023, with consolidated ammonia plant utilization of 99%.

Our facilities continued to run well during the third quarter of 2023 with consolidated ammonia plant utilization at 99%.

Speaker 3: Combine ammonia production for the third quarter of 2023 was 217,000 growth tons of which 68,000 net tons were available for sale. And UAM production was 358,000 tons.

Combined pneumonia production for the third quarter of 2023 with 217000 gross ton.

Of which 68000 net tons were available for sale and UA in production of 358000 tons.

Speaker 3: During the quarter we sold approximately 387,000 tons of UAN at an average price of $223 per ton and approximately 62,000 tons of ammonia at an average price of $365 per ton.

During the quarter, we sold approximately 387000 tons of UAE.

At an average price of $223 per ton and approximately 62000 tons of ammonia at an average price of $365 per ton.

Speaker 3: Relative to the third quarter of 2022, UA and ammonia sales volumes were higher as a result of both facilities completing planned turnarounds in the third quarter of 2022. Prices for the third quarter declined from the third quarter last year with ammonia prices falling 56% and UAN prices falling 48%.

Relative to the third quarter of 2022 UA in ammonia sales volumes were higher as a result of both facilities continuing planned turnarounds in the third quarter of 2022.

Prices for the third quarter, a decline from the third quarter of last year with ammonia prices falling 56% anyway and prices falling 48%.

Speaker 3: Following the reset of nitrogen fertilizer prices in July , prices steadily rose throughout the summer, driven by a combination of strong demand and reduced supply as a result of planned and unplanned outages across the industry.

Following the reset of nitrogen fertilizer prices in July prices steadily rose throughout the summer driven by a combination of strong demand and reduced supply as a result of planned and unplanned outages across the industry.

Speaker 3: Looking ahead, we believe market conditions have firmed for the fourth quarter, and we're optimistic about nitrogen fertilizer demand for 2024, which I will discuss in my closing remarks. I will now turn the call over to Dane to discuss our financial results. Thank you, Mark.

Looking ahead, we believe market conditions are affirmed for the fourth quarter and we're optimistic about nitrogen fertilizer demand for 2024, which I will discuss in my closing remarks, I will now turn the call over to Dane to discuss our financial results. Thank you Mark.

Speaker 2: through the third quarter of 2023, we reported net sales of 131 million and operating income of 8 million.

For the third quarter of 2023, we reported net sales of 131 million and operating income of 8 million.

Speaker 2: That income for the quarter was $1 million for 7 cents per common unit and Iveda was $32 million.

Net income for the quarter was 1 million or seven cents per common unit and EBITDA was $32 million.

Speaker 2: Relative to the third quarter of 2022, the increase in EBITDA was primarily due to higher production and sales volumes and lower operating expenses as both facilities completed plan turnarounds in the prior year period.

Relative to the third quarter of 2022, the increase in EBITDA was primarily due to higher production and sales volumes and lower operating expenses as both facilities completed planned turnarounds in the prior year period.

Speaker 2: Direct operating expenses for the third quarter of 2023 or 58 million.

Direct operating expenses for the third quarter of 2023 were $58 million.

Speaker 2: excluding inventory impacts, direct operating expenses decreased by approximately 38 million relative to the third quarter of 2022, primarily driven by a combination of lower turnaround and repair and maintenance expenses, along with reduced stock-based compensation expenses.

Excluding inventory impacts direct operating expenses decreased by approximately 38 million relative to the third quarter of 2022, primarily driven by a combination of lower turnaround and repair and maintenance expenses, along with reduced stock based compensation expense.

Speaker 2: During the 3rd quarter of 2023, we spent 8 million on capital projects, which was primarily maintenance capital.

During the third quarter of 2023, we spent 8 million on capital projects, which was primarily maintenance capital we.

Speaker 2: We estimate total capital spending for 2023 to be approximately 29 to 32M, of which 26 to 28M is expected to be maintenance capital.

We estimate total capital spending for 2023 to be approximately 29 to 32 million of which 26 to 28 million is expected to be maintenance capital.

Speaker 2: During the 3rd quarter, we amended our ABL credit facility to increase the maximum availability from 35M to 50M and extended the maturity from 2024 to 2028.

During the third quarter, we amended our ABL credit facility to increase the maximum availability from $35 million to $50 million and extended the maturity from 2024 to 2028.

Speaker 2: We ended the quarter with total liquidity of 137 million, which consisted of 89 million in cash and availability under the ABL facility of 48 million.

We ended the quarter with total liquidity of 137 million, which consisted of $89 million in cash and availability under the ABL facility of 48 million.

Speaker 2: Within our cash balance of $89 million, we had $30 million related to customer prepayments for the future delivery of products.

Within our cash balance of 89 million, we had $30 million related to customer prepayments for the future delivery of product.

Speaker 2: In assessing our cash available for distribution, we generated the EBITDA of 32 million and had net cash needs of 16 million for interest costs, maintenance gap X and other reserves.

In assessing our cash available for distribution, we generated EBITDA of $32 million and had net cash needs up 16 million for interest costs maintenance Capex and other reserves.

Speaker 2: Within that total is a release of $8 million from the reserve taken in the second quarter of 2023 for expected working capital needs, along with $6 million of reserves for future turnarounds and planned capital projects.

Within that total as it release of $8 million from the reserve taken in the second quarter of 2023 for expected working capital needs, along with 6 million of reserves for future turnarounds and planned capital projects.

Speaker 2: As a result, there was 16 million of cash available for distribution and the boarded directors of our general partner declared a distribution of $1.55 per common unit. The remainder of the working capital reserve taken in the second quarter of 2023 may be released in the future if determined by the board.

As a result, there was $16 million of cash available for distribution. The board of directors of our general partner declared a distribution of $1 55 per common unit.

The remainder of the working capital reserve taken in the second quarter of 2023 may be released in the future if determined by the board.

Speaker 2: Looking ahead to the 4th quarter of 2023, we estimate our ammonia utilization rate to be between 90 and 95%.

Looking ahead to the fourth quarter of 2023, we estimate our ammonia utilization rate to be between 90, and 95%. We expect direct operating expenses, excluding inventory impacts to be between 55 and $60 million and total capital spending to be between 10 and $15 million with that I will turn the call back over to Mark.

Speaker 3: We expect direct operating expenses, excluding inventory impacts, to be between $55 and $60 million, and total capital spending to be between $10 and $15 million. With that, I will turn the call back over to Mark. Thanks, Dane. In summary, we were pleased with our third quarter results. We had another quarter of strong production from our facilities, and we navigated the resetting of the nitrogen fertilizer market this summer.

Thanks, Dave in summary, we were pleased with our third quarter results. We had another quarter of strong production from our facilities and we navigated the resetting of the nitrogen fertilizer market. This summer.

Speaker 3: We believe market conditions are firming and we are well positioned for the fourth quarter in 2024.

We believe market conditions are affirming.

We are well positioned for the fourth quarter and 2024.

Speaker 3: With harvest nearly complete and weather conditions being favorable, fall among application began last week, a little earlier than normal. Weather permitting over the next month, we expect a strong fall among application season this year and have a good book of orders.

With harvest nearly complete and weather conditions being favorable fall ammonia application began last week.

It'll earlier than normal weather permitting over the next month, we expect a strong fall ammonia application season, this year and have a good buffer waters.

Speaker 3: Overall, grain market condition remains steady and bowed well for nitrogen fertilizer demand for 2024. Current USDA estimates indicate 95 million acres of corn were planted in the spring of 2023. A 7% increase compared to 89 million acres in 2022. Pondid soybean acres are estimated to be 84 million in 2023 down 5% from 2022 levels of 88 million.

Overall grain market conditions remain steady and bode well for nitrogen fertilizer demand for 2024.

Current USDA estimates estimates indicate 95 million acres of corn were planted in the spring of 2023, 7% increase compared to 89 million acres in 2022 plant.

Planted soybean acres are estimated to be $84 million in 2023 down 5% from 'twenty to 'twenty two levels of $88 million.

Speaker 3: With the drought conditions during the spring in the Midwest, yield estimates were reduced to 173 bushels per acre for corn and 50 bushels per acre for soybeans. The USDA is now projecting grain inventory carryout levels to be approximately 15% for corn and 5% for soybeans, resulting in inventories near the 10-year average for corn and at the low end of the range for soybeans.

With the drought conditions during the spring in the Midwest field estimates were reduced to 173 bushels per acre for corn and 50 bushels per acre for soybeans. The USDA is now projecting grain inventory carryout levels to be approximately 15% of corn at 5% personally means.

And inventories near the 10 year average for corn and at the low end of the range for soybeans.

Speaker 3: Graeme prices have remained steady with December corn at $4.80 per bushel, and November solide means a nearly $13 per bushel. These grain prices coupled with the lower reset fertilizer prices support attractive farmer economics, which should both well for nitrogen fertilizer demand for 2024.

Grain prices have remained steady with December corn at $4 80 per bushel in November slightly maintain nearly $13 per bushel.

These grain prices, coupled with a lower reset fertilizer prices support attractive farmer, economics, which should bode well for nitrogen fertilizer demand for 2024.

Speaker 3: We believe that the length of this upward cycle, demand cycle, will in large part be driven by grain prices staying at elevated levels, and we see fundamentals for grains remaining steady.

We believe that the length of this upward cycle demand cycle will in large part be driven by grain prices staying at elevated levels and we see fundamentals for grain remaining steady.

Speaker 3: Since July , production of nitrogen fertilizer has experienced a combination of unplanned production outages, a heavy plant turnaround schedule, and natural gas availability issues in several geographies.

Since July production of nitrogen fertilizer has experienced a combination of unplanned production outages are heavy plant turnaround schedule and natural gas availability issues in several geographies.

Speaker 3: These supply issues coupled with steady demand from customers to replenish inventory is depleted in the spring, have tight and supplied demand balances and have led to a significant firming of prices in the market.

These supply issues, coupled with steady demand from customers to replenish inventories depleted in the spring have tightened supply demand balances and have led to a significant firming of prices in the market.

Speaker 3: As I mentioned on the last earnings call, customer purchasing patterns have evolved to more rateable purchasing due to higher carrying costs over the past year from higher interest rates. We think this buying pattern matches well with our production schedule.

As I mentioned on the last earnings call customer purchasing patterns have evolved to more ratable purchasing due to higher carrying cost over the past year from higher interest rates, we think just buying pattern matches well with our production schedule.

Speaker 3: Geopolitical risk continued to represent a wild card for the nitrogen fertilizer industry, with meaningful fertilizer production capacity residing in countries across the Middle East and North Africa.

Geopolitical risks continue to represent a wildcard for the nitrogen fertilizer industry with meaningful fertilizer production capacity residing in countries across the middle East and North Africa.

Speaker 3: As we enter the fourth quarter, the current fourth quarter price for TT at match grass has been arranged at $12 to $18 per MNBTU, which should drive Europe back to the high end of the global nitrogen production cost curve.

As we enter the fourth quarter, the current fourth quarter price for our T. T. F. Natural gas has been a range of $12 to $18 per M. N V to you.

Which should drive Europe back to the high end of the global nitrogen production cost curve natural gas prices in the U S had been in the range of $3 350 program N V to you in October place in the U S. At the low end of the global cost curve.

Speaker 3: Natural gas prices in the US have been in the range of $3.350. For MMBT in October , place in the US at the low end of the global malls curve.

Speaker 3: Europe has been importing some ammonia and we expect this to continue in the coming months. We do not believe that the structural natural gas market issues in Europe have been resolved and will likely remain in effect over the next two to three years.

Europe has been importing some ammonia and we expect this to continue in the coming months, we do not believe that the structural natural gas market issues in Europe had been resolved and will likely remain in effect over the next two to three years.

Speaker 3: On our decarbonization efforts, we continue to make progress on the installation of a nitrous oxide abatement unit in the number one acid plant at the Caulfigal Facility and expect that project to be completed by 2025.

On our decarbonization efforts, we continue to make progress on the installation of the nitrous oxide abatement unit and the number one the acid plant at the Coffeyville facility and expect that project to be completed by 2025.

Speaker 3: We also continue to explore various CO2 sequestration opportunities for the EAS to be a facility which if approved could reduce its carbon footprint over the next several years. Two of the major CO2 pipeline projects in the Upper Midwest have faced opposition and one project sponsored by Navigator and Belaro has been canceled. Ultimately we believe these journals will lead to a longer development schedule.

We also continue to explore various C O two sequestration opportunities for the east Dubuque facility, which if approved could reduce its carbon footprint over the next several years.

Two of the major C O two pipeline projects in the upper Midwest have faced opposition and one project sponsored by navigator and Valero has been cancelled ultimately we believe these hurdles will lead to a longer development schedule.

Speaker 3: We've not made commitments to any projects at this point, but we will continue to monitor their progress.

We've not made commitments to any projects at this point, but we will continue to monitor their progress.

Speaker 3: We also continue to pursue the certification of production at Coffeyville as Blue Ammonia and UAN and have received customer interest in low carbon nitrogen fertilizer.

We also continue to pursue the certification of production at Coffeyville is blue ammonia in UAE and have received customer interest in low carbon nitrogen fertilizer.

Speaker 3: We continue to evaluate brownfield development projects at both the production facilities that could be attractive targeted capacity increases to our existing footprint.

We continue to evaluate brownfield development projects at both the production facilities that could be attractive targeted capacity increases to our existing footprint.

Speaker 3: the board elected to continue reserving capital that we expect to spend over the next two to three years to progress these potential projects.

The board elected to continue reserving capital that we expect to spend over the next two to three years to progress these potential projects.

Speaker 3: The third quarter continued to demonstrate the benefit to focusing on reliability and performance. In the quarter, we executed on all the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors and communities.

The third quarter continued to demonstrate the benefits of focusing on reliability and performance in.

In the quarter, we executed on all of the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees contractors and communities.

Speaker 3: Brutally managing cost, being judicious with capital, but targeting select investments and reliability projects, incremental additions to production capacity, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint.

Suddenly managing cost being judicious with capital, but targeting select investments in reliability projects and incremental additions to production capacity, maximizing our marketing and logistics capabilities and targeting opportunities to reduce our carbon footprint.

Speaker 3: In closing, I'd like to thank our employees for their excellent execution, achieving 99% among the utilization and solid delivery on our marketing and logistics plans, resulting in a distribution of a dollar 55 per common unit from the third quarter and over $16 declared year to date. With that, we're ready to answer questions Camilla.

In closing I'd like to thank our employees for their excellent execution, achieving 99% ammonia utilization.

Solid delivery on our marketing and logistics plans, resulting in a distribution of $1 55 per common unit for the third quarter and over $16 declared year to date with that we're ready to answer questions Camillo.

Speaker 1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Information to allow them to keep that your line is in the question queue.

You May press star two if he would like to turn will be a question from the queue.

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One moment please.

Speaker 4: Our first question comes from the line of Rob McGuire with Granite Research. Please proceed with your question. Good morning, Mark, Dan, and Richard.

Our first question comes from the line of Rob Maguire with Granite Research. Please proceed with your question.

Okay.

Good morning, Martin and Richard Thank you for taking my questions.

Good morning, Rob.

Speaker 5: The strike at East Dubuque, is there any color that you can provide us around the strike? You know, there have been strikes in the past, if so, as a prolonged strike. Is that impacting your utilization, or do you anticipate that impacting your utilization in the fourth quarter?

The strike at East Dubuque and is there any color that you can provide us around the strike there been strikes in the past. So it was a prolonged strike and is that impacting your utilization or do you anticipate that impacting your utilization in the fourth quarter.

Speaker 3: Yes, Rob Lee. The strike started about two weeks ago with the local union there. We've been bargaining in good faith and expect to continue to do so. But we don't expect any disruption in the operations and any change in utilization based on that. We're fully manned and we expect to run safely and reliably on a continuous basis 24-7.

Yes, yes, where I believe the strike started about two weeks ago with the local union there we've been bargaining in good faith and expect to continue to do so but.

But we don't expect any disruption in the operations or any change in utilization based on that we.

We're fully manned and we expect to run safely and reliably on a continuous basis 24 seven.

Speaker 5: I notice that you're targeted, used to buc ammonia utilization for the fourth quarter is 85 to 90 percent and in the past quarter you across the board you put up I think 99 percent. Is that, is the fourth quarter in line with the last quarter or is that a little lower and are there other issues there that could be impact utilization?

Yeah, I I noticed that your targeted east Dubuque ammonia utilization for the fourth quarter was 85% to 90% and in the past quarter you across the board you put up I think 99% is that.

It is just the fourth quarter in line with the last quarter or is that a little lower.

Are there other issues there that could be impacting utilization.

Speaker 3: Yeah, it's unrelated to the strike. We had a mechanical issue right at the end of the third quarter. And that carried in October . That completed a repair a few weeks ago. And so that's why we lowered our forecast for the utilization. It's not related to the strike.

It's not it's all related to the strike we had a mechanical issue right at the end of the third quarter and that carried into October that we completed a repair or a few weeks ago and so that's why we lowered our forecast for the utilization, it's not related to the strike.

Speaker 5: Okay, I appreciate that. Thank you. And then last quarter, you talked about how customers were only advanced purchasing by say two to three months versus the normal four to six months. Did that buying pattern persist throughout all of the third quarter? And is it currently occurring in the fourth quarter as well?

Okay I appreciate that thank you and then.

Last quarter, you talked about how customers were only advanced purchasing by say two to three months versus the normal four to six months does that buying pattern persists throughout all of the third quarter and as it currently occurring in the fourth quarter as well.

Speaker 3: Yeah, it's been, it's really been pretty consistently buying two to three months at a time.

Yeah, it's been it's really been pretty consistently do well.

By two to three months at a time I would tell you that we do expect the prepay season to be normal which is typically towards the end of the calendar year, there would be a prepaid purchasing for the spring.

Speaker 3: I would tell you that we do expect the pre-pay season to be normal, which is typically towards the end of the calendar year, there would be pre-pay purchasing for the spring, particularly for ammonia application. So we do expect that to be consistent with past practice. But I would say generally, the customers are more radibly buying, they're not caring as much inventory for the lengthy periods of time.

Particularly for ammonia application.

So we do expect that to be consistent with past practice, but but I would say generally the customers are more ratably buying they're not carrying.

And as much inventory for lengthy periods of time.

Is that what what do you think is causing that.

Speaker 3: Cost of basically cost of money is probably double digits for a retailer or a farmer. And so to carry fertilizer, if you bought it in July , it carried it to April . If you have a 10 or 12% cost of money, that's a pretty expensive carry for nine months. So that's, I would say that that's the biggest driver.

Cause that basically cost of money is probably double digits for the retailer or a farmer and so to carry fertilizer. If he bought in July carrying until April.

If you're out of 10 or 12% cost the cost of money you know that's a pretty expensive carry for nine months. So that's I would say that that's the biggest driver.

Speaker 5: Got it? And can you give us an idea of how much fourth quarter production has been sold so far? And you mentioned spring sales. Have any spring sales begun at this point?

Got it and can you give us an idea of how much fourth quarter production has been sold so far and you mentioned spring sales of any spring sales begun at this point.

Speaker 3: So first on the fourth quarter, we're largely sold through the fourth quarter at this point. I don't want to say exactly where we are, but we're in good hands for the fourth quarter. And we have made some sales into the first quarter or spring. And so we have a window on kind of what spring is beginning to look like.

So first on the fourth quarter were largely sold through the fourth quarter. At this point I don't want to say exactly where we are but but we're in good good hands for the fourth quarter and we have made some sales into the to the first quarter, our spring and and so we have.

The window on kind of a wet spring is beginning to look like.

Speaker 5: Alrighty, and then I, I'm gonna hold you to this, but do you have an opinion Mark, I'm we're ammonia and UAM pricing will end up in the fourth quarter relative to the third quarter.

Alrighty and then.

I won't hold you to this but do you have an opinion on where ammonia and uhm pricing will end up in the fourth quarter relative to the third quarter.

Speaker 3: We don't, we don't give that kind of information, so I don't want to.

We don't we don't give that kind of information. So I don't want to put it out there and you know if you listened in to the first part of my comments, we've had a nice lift in both ammonia and UA and since July since the reset in the marketplace and that we do see.

Speaker 3: put it out there. You know, if you listen to the first part of my comments, we've had a nice lift in both Among You and UAN since July , since the reset in the marketplace. And that, you know, we do see that carrying into 24. And so there's been a significant increase. If you look at the publications, you can kind of see where fertilizer prices are today. And that's kind of where the market is.

That carrying into 'twenty, four and so theres been a significant increase if you look at the publications you can kind of see where fertilizer prices are today and that's that's kind of where the market is and again, that's the pricing that they carry and delayed into later in the fourth quarter and into the end of the 2024 season.

Speaker 3: And again, that's the pricing that they carried late into later in the fourth quarter and into the end of the 2024 season.

Operator: Greetings and welcome to the CVR Partners LP 3rd quarter 2023 conference call. At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation.

Speaker 5: That's fair. Thank you. And just lastly, um...

That's fair thank you.

Lastly.

Speaker 5: Build up a healthy level of reserves for maintenance catbacks. Can you discuss what led to that build up and will-

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

You built up a healthy level of reserves for maintenance Capex can you discuss what's led to that buildup and will it continue.

Speaker 3: Yes, so we have several projects that we're pursuing and we're continuing to do work and we're reserving for these are combination of reliability and expansion projects and we'll continue to get, we leave

Uh Huh, yeah. So we have we had several projects that we're pursuing and we're continuing to do work and we're reserving for these are these are.

Richard Roberts: It is now my pleasure to introduce your host, Richard Roberts, Director of FPNA and IR. Thank you, Mr. Roberts. You may begin. Thank you, Camilla. Good morning, everyone. We appreciate your participation in today's call. With me today, our Mark Pytosh, our chief executive officer, Dane Neumann, our chief national officer, and other members of management.

A nation of reliability and expansion projects and we will continue to reserve.

Speaker 3: As you can see probably from the earlier this year to now, we've kind of lowered that quarterly carry on that or the amount we're reserving. But it will all depend on kind of the outcome of those projects. So if we reach a conclusion that we're not going to move forward with one or more of the projects and we will either stop reserving or, you know, we'll probably let that reserve loose.

As you can see probably from the earlier this year till now we've kind of lowered that quarterly carry on that or the amount, we're reserving, but it will all depend on kind of the outcome of those projects. So if we reach a conclusion that we're not going to move forward with one or more of the projects and we will either stop reserving or you know well.

Richard Roberts: Prior to discussing our 2023 third quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined in a federal securities law. For this purpose, any statements made during this call are not statements of historical facts, maybe deemed to be forward-looking statements. You were cautioned that these statements may be affected by important factors set forth in our filings for the Security and Exchange Commission and in our latest earnings release.

Richard Roberts: As a result, actual operations or results made different materialy from the results discussed in the forward-looking statements. We undertake no obligations to publicly outstave any forward-looking statements, whether as a result of new information, due to events or otherwise, except to the extent required by law.

Probably the only let that reserve loose.

Speaker 3: But right now we have several promising projects that we're reserving for specifically that we think are going to make sense for the plants longer term.

But right now we have several promising projects that we're reserving for specifically that we think are going to make sense for the plants longer term.

Speaker 5: Okay, I appreciate that. I know I said last question, but I got one other. Just any thoughts on Russian imports of UAN and how that's impacting the market here in the States?

Okay. I appreciate that I know I said last question, but I got one other just any thoughts on Russian imports of viewing on and how that's impacting the margin here in the states.

Richard Roberts: This call also includes various non-gap financial measures. For this close is related to such non-gap measures, including reconciliation to the most directly comparable gap financial measures, are included in our 2023 third quarter earnings release that we filed with the SEC for the period.

Speaker 3: You know, if you go all the way back last year to the beginning, we had a disruption of the flow of Russian UAN to here, but that only lasted till the summer of 22, and we've largely the market.

You know if you go all the way back last year to the beginning there we had a disruption.

The flow of Russian UAS into here.

Richard Roberts: Let me also remind you that we are very well-distribution MLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as it are in our General Partners Board. As a result, our distributions, if any, will vary from quarter to quarter to several factors, including but not limited to operating performance, fluctuation, and the prices received are finished products, capital expenditures, and cash reserves are the necessary or appropriate of the Board and Directors of our General Partner.

But that only lasted until the summer of 'twenty, two and we've largely the markets sort of normalize since the summer of 'twenty, two and we haven't seen any changes.

Speaker 3: sort of normalize since the summer 22. We haven't seen any changes.

Speaker 6: in the marketplace there for Russian UAM. It's been sort of steady and consistent. And it was only really disrupted in the first six months of the war that broke out in the Ukraine. But it's kind of reverted back to normal, I'd say at this point. It's been that way for over like a year, almost a year and a half now. Well, I appreciate the

In the marketplace there for Russia in UA, and that's it's been sort of steady and consistent and it was only really disrupted in the first six months of the war that broke out in the Ukraine, but it's it's kind of reverted back to normal I would say at this point, it's been that way forever like are you almost a year and a half now.

Mark Pytosh: With that said, I'll turn the call to Mark Pytosh, our chief executive officer. Mark. Thank you, Richard.

Well I appreciate the answers. Thank you so much.

Mark Pytosh: Good morning, everyone, and thank you for joining us for today's call. The summarized financial highlights for the third quarter of 2023 include net sales of $131 million, net income of $1 million, EBITDA of $32 million, and the Board of Directors declared a third quarter distribution of a $1.55 per common unit, which will be paid on November 20th to unit holders of record as the close of the market on November 13th. Our facilities continue to run well during the third quarter of 2023, with consolidated ammonia plant utilization at 99%.

Thank you Rob.

Speaker 1: Thank you. We have reached the end of our question and answer session, and now I'd like to turn the floor back over to management for any closing comments.

Thank you we have reached the end of our question and answer session and now I'd like to turn the floor back over to management for any closing comments.

Speaker 3: Well, again, I want to thank everyone for joining the call this morning, and we look forward to reviewing our fourth quarter results in February . Thank you very much.

Well again want to thank everyone for joining the call. This morning, and we look forward a review of our fourth quarter results in February. Thank you very much.

Speaker 1: Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation. Operator, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation. Thank you.

Thank you. This concludes today's teleconference. You may now disconnect your lines at this time.

You for your participation.

Speaker 7: The.

Mark Pytosh: Combined ammonia production for the third quarter of 2023 was 217,000 gross tons of which 68,000 net tons were available for sale, and UAM production was 358,000 tons. During the quarter we sold approximately 387,000 tons of UAM at an average price of $223 per ton, and approximately 62,000 tons of ammonia at an average price of $365,000. Related to the third quarter of 2022, UA and ammonia sales volumes were higher as a result of both facilities completing plan turnarounds in the third quarter of 2022.

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Mark Pytosh: Prices for the third quarter declined from the third quarter of last year, with ammonia prices falling 56%, and UAM prices falling 48%. Following the reset of nitrogen fertilizer prices in July, prices steadily rose throughout the summer, driven by a combination of strong demand and reduced supply as a result of planned and unplanned outages across the industry.

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Mark Pytosh: Looking ahead, we believe market conditions have firmed for the fourth quarter, and we are optimistic about nitrogen fertilizer demand for 2024, which I will discuss in my closing remarks.

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Dane Neumann: I will now turn the call over to Dane to discuss our financial results. Thank you, Mark. To the third quarter of 2023, we reported net sales of 131 million and operating income of 8 million. That income for the quarter was 1 million per 7 cents per common unit, and Yvada was 32 million. Relative to the third quarter of 2022, the increase in Yvada was primarily due to higher production and sales volumes and lower operating expenses as both facilities completed plan turnarounds in the prior year period.

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Dane Neumann: Direct operating expenses for the third quarter of 2023 were 58 million. Excluding inventory impacts, direct operating expenses decreased by approximately 38 million relative to the third quarter of 2022, primarily driven by a combination of lower turnaround and repair and maintenance expenses, along with reduced stock based compensation expense. During the third quarter of 2023, we spent 8 million on capital projects, which was primarily maintenance capital. We estimate total capital spending for 2023 to be approximately 29 to 32 million, of which 26 to 28 million is expected to be maintenance capital.

Dane Neumann: During the third quarter, we amended our ABL credit facility to increase the maximum availability from 35 million to 50 million, and extended the maturity from 2024 to 2028. We ended the quarter with total liquidity of 137 million, which consisted of 89 million in cash and availability under the ABL facility of 48 million. Within our cash balance of 89 million, we had 30 million related to customer prepayments for the future delivery of product.

Dane Neumann: In assessing our cash available for distribution, we generated Yvada up 32 million and had net cash needs of 16 million for interest costs, maintenance gap X and other reserves. Within that total is a release of 8 million from the reserve taken in the second quarter of 2023 for expected working capital needs, along with 6 million of reserves for future turnaround and planned capital projects. As a result, there was 16 million of cash available for distribution and the boarded directors of our general partner declared a distribution of $1.55 per common unit.

Dane Neumann: The remainder of the working capital reserve taken in the second quarter of 2023 may be released in the future if determined by the board. Looking ahead to the fourth quarter of 2023, we estimate our ammonia utilization rate to be between 90 and 95 percent. We expect direct operating expenses, excluding inventory impacts, to be between 55 and 60 million, and total capital spending to be between 10 and 15 million.

Mark Pytosh: With that, I will turn the call back over to Mark. Thanks, Dan.

Mark Pytosh: In summary, we were pleased with our third quarter results. We had another quarter of strong production from our facilities and we navigated the resetting of the nitrogen fertilizer market this summer. We believe market conditions are firm and we are well positioned for the fourth quarter and 2024. With harvest nearly complete and weather conditions being favorable, fall among application began last week, a little earlier than normal. Weather permitting over the next month, we expect a strong fall among application season this year and have a good book of orders.

Mark Pytosh: Overall, grain market condition remains steady and bowed well for nitrogen fertilizer demand for 2024. Current USDA estimates indicate 95 million acres of corn were planted in the spring of 2023, a 7% increase compared to 89 million acres in 2022, planted soybean acres are estimated to be 84 million in 2023 down 5% from 2022 levels of 88 million. With the drought conditions during the spring and the Midwest, yield estimates were reduced to 173 bushels per acre for corn and 50 bushels per acre for soybeans.

Mark Pytosh: The USDA is now projecting grain inventory carryout levels to be approximately 15% per corn and 5% per silay means resulting in inventories near the 10-year average for corn and at the low end of the range for silay means. Grain prices have remained steady with December corn at $4.80 per bushels and November solay means at nearly $13 per bushels. These grain prices coupled with the lower reset fertilizer prices support attractive farmer economics, which should bow bowed well for nitrogen fertilizer demand for 2024.

Mark Pytosh: We believe that the length of this upward cycle, demand cycle will in large part be driven by grain prices staying at elevated levels and we see fundamentals for grains remaining steady. Since July production and nitrogen fertilizer has experienced a combination of unplanned production outages, a heavy plan turnaround schedule and natural gas availability issues in several geographies. These supply issues coupled with steady demand from customers to replenish inventory depleted in the spring have tight and supplied demand balances and have led to a significant firming of prices in the market.

Mark Pytosh: As I mentioned on the last earnings call, customer purchasing patterns have evolved to more rateable purchasing due to higher carrying costs over the past year from higher interest rates. We think this buying pattern matches well with our production schedule.

Mark Pytosh: Geopolitical risk continued to represent a wild card for the nitrogen fertilizer industry with meaningful fertilizer production capacity residing in countries across the Middle East and North Africa. As we enter the fourth quarter, the current fourth quarter price for a TTF natural grass has been arranged at $12 to $18 per MMBTU which should drive Europe back to the high end of the global nitrogen production cost curve. Natural gas prices in the U.S have been in the range of $3 to $350 per MMBTU in October, placing the U.S, at the low end of the global cost curve.

Mark Pytosh: Europe has been importing some ammonia and we expect this to continue in the coming months. We do not believe that the structural natural gas market issues in Europe have been resolved and will likely remain in effect over the next two to three years.

Mark Pytosh: On our decarbonization efforts, we continue to make progress on the installation of a plant in the number one acid plant at the Caulfigal Facility and expect that project to be completed by 2025. We also continue to explore various CO2's sequestration opportunities for the EAS-Debute Facility, which if approved could reduce its carbon footprint over the next several years.

Mark Pytosh: Two of the major CO2 pipeline projects in the Upper Midwest have faced opposition and one project sponsored by Navigator and Valero has been canceled. Ultimately, we believe these journals will lead to a longer development schedule. We've not made commitments to any projects at this point but we will continue to monitor their progress. We also continue to pursue the certification of production at Coffeeville as Blue ammonia and UAN and have received customer interest in low carbon nitrogen fertilizer.

Mark Pytosh: We continue to evaluate brownfield development projects at both the production facilities that could be attractive target and capacity increases to our existing footprint. The board elected to continue reserving capital that we expect to spend over the next two to three years to progress these potential projects.

Mark Pytosh: The third quarter continued to demonstrate the benefits of focusing on reliability and performance. In the quarter, we executed on all the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors and communities, brutally managing costs, being judicious with capital, but targeting select investments in reliability projects and criminal additions to production capacity, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint.

Mark Pytosh: In closing, I'd like to thank our employees for their excellent execution, achieving 99 percent among the utilization and solid delivery on our marketing and logistics plants, resulting in distribution of $1.55 per common unit from the third quarter and over $16 declared year to date.

Camilla: With that, we are ready to answer questions Camilla. Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tool will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please.

Rob McGuire: Our first question comes from the line of Rob McGuire with granite research. Please proceed with your question. Good morning, Mark, Dan and Richard. Thank you for taking my questions. Good morning, Rob. The strike at East Dubuque, is there any color that you can provide us around the strike? Have there been strikes in the past? If so, is it a prolonged strike? Is that impacting your utilization or do you anticipate that impacting your utilization in the fourth quarter?

Rob McGuire: Yes, Rob. We started about two weeks ago with the local union there. We've been bargaining in good faith and expected continued to do so. But we don't expect any disruption and the operations and any change in utilization based on that. We were fully manned and we expect to run safely and reliably on a continuous basis 24-7. Yeah, I noticed that you're targeted East to Buick ammonia utilization for the fourth quarter is 85% to 90% and in the past quarter you across the board you put up I think 99% is that is the fourth quarter in line with the last quarter or is that a little lower and are there other issues there that could be impact utilization?

Rob McGuire: Yeah, it's not it's unrelated to the strike. We had a mechanical issue right at the end of the third quarter and that care that we completed a repair a few weeks ago and so that's why we lowered our forecast for the utilization. It's not related to the strike. Okay, I appreciate that. Thank you. And then last quarter you talked about how customers were only advanced purchasing by say two to three months versus the normal four to six months.

Rob McGuire: Did that buying pattern persists throughout all of the third quarter and is it currently occurring in the fourth quarter as well? Yeah, it's been it's really been pretty consistently buying two to three months at a time. I would tell you that we do expect the the prepay season to be normal, which is typically towards the end of the calendar year. There would be prepay purchasing for the spring, particularly for ammonia application.

Rob McGuire: So we do expect that to be consistent with past practice, but but I would say generally, you know, the customers are more randomly buying. They're not carrying as much inventory for lengthy periods of time. Is that what do you think causing that cost the basically cost of money is probably double digits for the retailer or a farmer. And so to carry fertilizer, if you bought it in July, carried it to April, if you have a 10 or 12% cost of cost of money, you know, that's a pretty expensive carry for nine months.

Rob McGuire: So that's I would say that that's the biggest driver got it. And can you give us an idea of how much fourth quarter production has been sold so far and you mentioned spring sales. Have any spring sales begun at this point? So first on the fourth quarter, we're largely sold through the fourth quarter at this point. I don't want to say exactly where we are, but we're we're in good good hands for the fourth quarter.

Rob McGuire: And we have made some sales into the to the first quarter or spring. And so we have a window on kind of what spring is beginning to look like. Alrighty. And then I, I want to hold you this, but do you have an opinion mark on where ammonia and UAM pricing will end up in the fourth quarter, relative to the third quarter? We don't we don't give that kind of information. So I don't want to put it out there.

Rob McGuire: You know, if you if you listen to the first part of my comments, we've had a nice lift in both ammonia and UAM since July since the reset in the marketplace. And that, you know, we do see that carrying into 24. And so there's been a significant increase. If you look at the publication, you can kind of see where fertilizer prices are today. And that's that's kind of where the market is.

Rob McGuire: And again, that's the pricing that they carried laid into later in the fourth quarter and into the end of the 2024 season. That's fair. Thank you. And just lastly, you built up a healthy level of reserves for maintenance catbacks. Can you discuss what led to that build up and will it continue? We have several projects that we're pursuing and we're continuing to do work and we're reserving for these are the combination of reliability and expansion projects and we'll continue to reserve as you could see probably from the earlier this year till now we've kind of lowered that quarterly carry on that or the amount we're reserving but it will all depend on kind of the outcome of those projects so if we reach a conclusion that we're not going to move forward with one or more of the projects and we will either stop reserving or you know we'll probably let that reserve loose but right now we have several promising projects that we're reserving for specifically that we think are going to make sense for the plans longer term.

Rob McGuire: Okay I appreciate that. I know I said last question but I got one other just any thoughts on Russian imports of UAN and how that's impacted the market here in the space. You know if you go all the way back last year to the beginning we had a disruption of the flow of Russian UAN to here but that only lasted till the summer of 22 and we've largely the markets sort of normalized since the summer of 22 we haven't seen any changes in the marketplace there for Russian UAN that it's been sort of steady and consistent and it was only really disrupted in the first six months of the the war that broke out in the Ukraine but it's kind of reverted back to normal I'd say at this point it's been that way for over like a year almost a year and a half now. Well I appreciate the answers thank you so much. Thank you Rob. Thank you.

Mark Pytosh: We have reached the end of our question and answer session and now I'd like to turn the floor back over to management for any closing comments. Well again I want to thank everyone for joining the call this morning we look forward to reviewing our fourth quarter results in February. Thank you very much. Thank you.

Operator: This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.