Q4 2023 CF Industries Holdings Inc Earnings Call

February 15, 2024

Operator: Good day, ladies and gentlemen, and welcome to CF Industries' full year and fourth quarter 2023 conference call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. We will facilitate a question and answer session towards the end of the presentation. To pose a question at any time, please press star then 1 on your touchtone phone.

Operator: Please note, this event is being recorded. I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick with CF Investor Relations. Please, proceed.

Martin A. Jarosick: Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Tony Will, CEO, Chris Bohn, Executive Vice President and Chief Operating Officer, and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain. CF Industries reported its results for the full year and fourth quarter of 2023 yesterday after.

Martin A. Jarosick: On this call, we'll review the results, discuss our outlook, and then host a question and answer session. Statements made on this call and in the presentation on our website that are not historical facts are for, These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement.

Martin A. Jarosick: More detailed information about factors that may affect our performance may be found in our filings with the FDIC, which are available on our website. Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now, I'd like to introduce Tony Will, our President and CEO. Thanks, Martin. And good morning, everyone.

Tony Will: Yesterday afternoon, we posted financial results for the full year 2023, in which we generated adjusted EBITDA of approximately $2.8 billion. Net cash from operations was also $2.8 billion, and free cash flow was $1.8 billion. These results reflect a healthy nitrogen supply-demand balance and global energy spreads that favor our low-cost production base in North America. They also represent outstanding execution by the CF Industries team. We worked safely, ran our plants well, and navigated dynamic industry conditions. Our investments in people, safety, and reliability have built the industry's highest performing manufacturing network, as you can see on slide 6. Looking ahead, over the next four years, the confirmed construction of new nitrogen production capacity is not sufficient to keep pace with the historical nitrogen demand growth rate of roughly 1.5% per year in traditional applications.

Tony Will: Adding to this tight supply-demand situation is the risk that existing ammonia production capacity in several important regions remains on the verge of permanent closure due to constrained availability and costs of natural gas. Meanwhile, emerging demand for low-carbon ammonia in clean energy applications should further tighten the already strained global supply-demand balance. As a result, we are confident that our cash generation will remain strong, as underscored by the recent increase in our quarterly dividend and continued share repurchase. We look to continue to invest in high-return organic and inorganic projects to grow our cash generation. As such, we continue evaluating a new low-carbon ammonia production plant at our Blue Point complex in Louisiana with our partner Mitsui. Our companies share a belief that North America is the best location for the production of low-carbon ammonia, given natural gas cost advantages and access to CCS sites and expertise.

Tony Will: As you can see on slide 8, the economic value of North American nitrogen assets continues to increase over time, supporting returns greater than the cost of capital in new projects. We at Mitsui are targeting a final investment decision in the second half of 2024 when we have additional information on low-carbon ammonia production technologies and better clarity on customer requirements for carbon intensity levels along with regulatory developments. While taking a disciplined approach to growth, we will continue to return capital through our dividends and share repurchases. We have approximately $2.6 billion remaining on our current share repurchase authorization and fully expect to complete it before its expiration at the end of 2025. With that, I'll turn it over to Bert. He'll discuss the global nitrogen market conditions in more detail. Bert?

Bert A. Frost: Thanks, Tony. The fourth quarter of 2023 was an active period for our team. This is highlighted by the largest fall ammonia application season in North America in years. A strong fall application season indicates a commitment to nitrogen-consuming crops on these acres and robust demand for additional urea and UAN applications through the first half of 2024. This, along with Strong Ag Fundamentals, supports our outlook for a positive spring application. We expect 91 million acres of corn to be planted in the United States. As we continue to work with customers in advance of spring applications, we believe supply is more constrained in the North American nitrogen channel than industry expectations. Inventories were below average entering the year, and net imports of nitrogen into the region are not making up the difference.

Bert A. Frost: The cold snap we experienced in North America during January has exacerbated this situation. We believe that there has been a significant volume of domestic nitrogen production lost due to weather-related shutdowns across the region's supply base. We estimate that CF Industries lost approximately 150,000 tons of ammonia production in January from our own network due to the weather. Unexpected supply tightness often leads to follow-on logistics challenges, and early spring would further strain the supply chain.

Bert A. Frost: We believe that our in-region production and extensive logistics and distribution capabilities will serve us well in this environment. Global grain stocks use ratios have returned to normal levels after two robust growing seasons. However, we do not project a significant impact on global nitrogen demand given the imperative to seed growing populations. We expect continued supply constraints in key producing regions. Most notably, ammonia production economics in Europe remain challenging. Global ammonia spot prices continue to align with the full cost of European ammonia production, confirming Europe as the industry's marginal producer.

Bert A. Frost: This continues to support elevated imports of nitrogen products into Europe compared to a decade ago. Beyond Europe, natural gas availability continues to affect ammonia and UAM production in Trinidad. And based on its actions in the fourth quarter of 2023, we believe the Chinese government will limit exports through the first half to ensure supply availability and urea price stability for the Chinese domestic market.

Bert A. Frost: Looking ahead, the Ford Energy Curve suggests continued favorable energy spreads between low-cost North American production and high-cost production in Europe and Asia. We believe this will support sustained margin opportunities for our low-cost manufacturing assets. With that, I will turn the call over to Chris.

Christopher D. Bohn: Thanks, Bert. For the full year 2023, the company reported net earnings attributable to common stockholders of approximately $1.5 billion, or $7.80 per diluted share. EVTA was $2.7 billion, and adjusted EVTA was approximately $2.8 billion. In the fourth quarter, we completed the acquisition of Instatech Pivot's Wagaman ammonia production facility. After adjustments and accounting for the value assigned to the long-term supply agreement with IPL's Dino Nobel subsidiary, our cash purchase price was approximately $1.2 billion. The Weggemann facility has operated as expected since closing and has generated margin commensurate with our existing ammonia sector. Looking ahead to 2024, we expect capital expenditures for the year to be in the range of $550 million and for gross ammonia production to be near $10 million. As Bert said, we experienced unplanned weather-related outages in our network during January.

Christopher D. Bohn: During these outages, we pulled forward some planned maintenance activities. This should reduce scheduled downtime later this year, mitigating some of the production loss in January. As a result, we expect gross ammonia production for the year to be near our projection. The commissioning of our Green Ammonia Project at Donaldsonville is underway.

Christopher D. Bohn: We are currently evaluating the purchase of renewable energy credits to pair with the start-up of the electrolyzer to enable green ammonia production and maximize the value of the 45B production tax credit. We expect that the CO2 Dehydration and Compression Unit at Donaldsonville will be ready for startup in 2025. This will enable low-carbon ammonia production and generate a substantial 45Q tax credit. We are also making progress on other CCS opportunities with returns above our cost of capital. Turning to the potential new low-carbon ammonia plant at our Blue Point complex in Louisiana, we completed our feed study on a conventional steam methane reformer ammonia plant with CCS technology. The FEED Study estimates the cost of an ammonia plant at approximately $2.5 billion. We estimate another $500 million for scalable infrastructure, such as storage tanks and loading docks. Our feed studies focus on autothermal reforming or ATR ammonia production technology, and flue gas capture are progressing well.

Christopher D. Bohn: Alongside our disciplined clean energy investments, we are committed to returning capital to long-term shareholders. In 2023, we returned almost $900 million to shareholders through share repurchases and dividend payments despite being locked out of the repurchases for part of the year. We expect share repurchase activity to increase over the two remaining years on our current authorization. As you can see on slides 7 and 8, on both a free cash flow yield and a precedent transaction basis, our enterprise value is significantly undervalued, supporting continued share repurchase. With that, Tony will provide some closing remarks before we open the call to Q&A. Thanks, Chris.

Tony Will: Before we move on to your questions, I want to thank everyone at CF Industries for their contributions to an outstanding year. I especially want to highlight the progress our team made in the second half of the year regarding our safety performance. After a challenging start to 2023, we ended the year with a 12-month recordable incident rate of 0.36 incidents per 200,000 workouts, in line with our performance in recent years and significantly better than the industry average.

Tony Will: Our operational excellence and significant structural advantages underpin our cash generation. This enables us to invest in the business to further increase cash generation and drive increased shareholder participation in our free cash flow. In the last three years, we acquired the Wagaman ammonia production facility.

Tony Will: The Advanced High-Return Clean Energy Initiative, increased our dividend by 67%, and deployed $2.5 billion to repurchase more than 31 million shares, which represented approximately 15% of the outstanding share count at that time. Additionally, we have strengthened our balance sheet to provide us tremendous flexibility as we are able to grow our business at the same time as return significant cash to shareholders. This approach has had a dramatic impact.

Operator: As you can see on slide 10, shareholder participation in our business has increased 80% in the last 10 years. We're excited about the opportunity ahead of us to build on this track record. In the near term, we expect industry fundamentals to remain favorable to our low-cost production network. In the longer term, disciplined investments in low-carbon ammonia production can provide a robust growth platform for the company. Together, we expect to continue creating substantial value for long-term shareholders. With that, operator, we will now open the call to your questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad.

Operator: To withdraw your question, please press star then 2. As a courtesy to others on the call, we ask that you limit yourself to one question. The first question is from Adam Samuelson with Goldman Sachs. Please go ahead. Yes, thank you. Good morning, everyone. Good morning, Adam. Good morning.

Tony Will: So, I guess, Tony, I guess the first question is whether we should pursue additional speed studies on the Blue Point complex, evaluating the different technologies. Help us frame it. The increment in carbon reduction that could come from either ATR or flue gas capture and maybe any additional color on the policy drivers of your potential offtakers as they evaluate what threshold is needed to commit to taking the blue ammonia volumes. Yeah, Adam, so one of the reasons that we're evaluating all the different kinds of possible paths forward is to really have a comprehensive set of solutions depending upon the carbon intensity levels that are ultimately demanded by customers. And conventional CCS, the way that we've implemented it in Donaldsonville today, allows for the process CO2 to be stripped out and sequestered.

Tony Will: And that means you can reduce, uh... the carbon intensity uh... you know by about uh.., almost 70% versus kind of conventional ammonia, particularly given that the plant that we're talking about, having implemented that on is among one of the most efficient newest plants in the world. So it already is a fairly low footprint relative to older plants. If you look at doing flue gas capture in conjunction with processed gas, CCS, you know, we think we can get rid of in excess of 95% of the CO2 emissions coming out of, you know, that that particular plant. If you look at auto-thermal reforming, you know, the estimates are you can get to the 90 to 95% reduction level, but the problem with that is.

Tony Will: Because the way that the technology works, you have to have a very, very large air separation unit to introduce the nitrogen back into the process that you don't get when you're not doing steam methane reform, and the electricity draw on a large AIRSEP unit like that is tremendous, which adds to the cost of the project as well as operational cost. And based on the grids we're thinking about, the scope two emissions become substantial. So that means you've got to do a bunch of things in order to potentially limit the emissions of scope two that you'd otherwise pick up in order to get to the 90 or 95% reduction levels. And that brings with it all of its own set of costs and op-ex, and cap-ex things. So that's really why we're looking at kind of all of these different possible paths to give us kind of the full suite of optionality and really understand op-ex, and cap-ex costs in order to hit certain thresholds that customers may ultimately demand in terms of the product. But the other point is that we have a very large network.

Tony Will: In the longer term, we are focused on getting to carbon neutrality in the next 25 years. And so flue gas capture is going to play an important role in that process as we continue to move forward. And so us kind of getting more heavily involved in that and really understanding the different potential paths is an important thing for us longer term, strategically anyway. And this is a good time for us to really kind of dive in, as we're contemplating making an investment decision on new production. All right, that's very helpful.

Bert A. Frost: And if I could just squeeze a quick market question just on natural gas. As you think about the decline recently in TTF and LNG prices, broadly, it doesn't seem like you expect a quick restart of idled or high-cost European production. Just how are you thinking about that over the course of the year? Adam, good morning. This is Bert.

Bert A. Frost: When you look at the spreads, what's going on in the world with Henry Hub trading today at $1.60, $1.65, and MVP and TTF in Europe trading in, let's say, the $7 to $8 range. And so you have a pretty big spread. And as I mentioned in my prepared remarks, where we are in the ammonia supply chain, you're bidding close to that full cost range for European and some high-cost Asian producers, especially when you consider carbon costs. And so, you know, the competitiveness; we're still in our position that the European producer is the marginal producer, and that will set the cost floor or the price floor. And we don't see in the short term an improvement in gas supply taking place to lower that value. Yeah, and I would just add to that that the decision goes beyond just the cash costs immediately. It goes into...

Christopher D. Bohn: The idea of cycling these plants is not necessarily good, additional maintenance that may be needed prior to starting those back up, or turnarounds that are coming forward, or even holding inventory at certain periods of time that have a working capital cost to them. So I think gas is obviously the primary driver, but there's a lot of other ancillary drivers that go into factoring whether you restart. Overall, I think, though, the message you're hearing from us is we're very, very optimistic about what the S&P balance looks like and what the demand for our products is on a global basis. It gives BERT a lot of optionality to think about exports and satisfying in-market demand here, and we just have a lot of roads to help get us there, and I appreciate all that color. I'll pass. The next question is from Joel Jackson with BMO Capital Markets. Please go ahead. Good morning.

Joel Jackson: A couple questions. I noticed in your slide deck, your new updated sensitivity table, right, that shows EBITDA for every level of gas price and urea price. It's down in every single cell by a few hundred million dollars at the same gas price and the same US gas price and the same urea price versus what you had in the fall. Can you explain what's going on?

Christopher D. Bohn: And it's at higher volume now; you're at a million tons higher volume. Can you explain the drop in EBITDA at every single cell? Yeah, let's start off with the volume issue first because I think that's an important one to kind of get on the table. And then we'll go through the table in a little more detail. But although we did add, you know, the Wagaman facility to the network, there is a maintenance turnaround event on that facility, and there are also a couple of significant maintenance activities. One of them is on debill number six, which is our, you know, the largest operating ammonia plant in the world. And so when you've got a 40 day outage on a plant like that, that takes our production down.

Tony Will: Now, that is, as Chris and Bert talked about it, we still expect to generate about, you know, circa 10 million tons of ammonia this year, which is in line with what we've historically done. The big issue in terms of last year versus this year was that we entered into last year with a fairly high inventory level. So we had pretty substantial additional sales volumes last year based on inventory drawdown that we're not able to tap into. So our volumes kind of year on year are going to be, by order of magnitude, fairly similar last year to this year. Yeah,

Christopher D. Bohn: And additionally, Joel, I think the big one of the bigger aspects of it is the relationship between the products on a pricing basis was updated to what 2023 was. So we always use the prior year as sort of the structure benchmark from that compared to 2022. So you saw more parity between the products and maybe what was a premium for UAN prior to that. And obviously, we do quite a bit of UAN volume. So this is just based on not only the cost structure of 2023, where we saw higher non-gas costs, primarily through logistics, but then also that new relationship that we experienced over the last 12 months on price. Okay, so my thought will be kind of a two-parter, because first, I just want to follow up on that.

Joel Jackson: So I guess you're saying, at the same gas price and the same urea price, that UAN and ammonia prices are lower at the same urea and gas price. And then my true follow-up question would be, you know, when looking at the, the greenfield Blue Project, Blue Ammonia Project, obviously, we saw a very good valuation cop with Koch and the Weaver plant a couple months ago that you obviously didn't buy. Would it not make sense for you to just buy back stock as much as you can just attack it authorization, don't do any Greenfield plants, because the market's not giving I know it's not exactly one to one, but it doesn't just make sense to buy back stock as much as you can. Yeah, let me, let me take the first one first.

Tony Will: And then we'll come back to your second point, the first one, not really being a full on question, more of a statement. So every year, you know, we try to update the table based on what the relationship was in terms of margin per nutrient ton the previous year. And so the table will naturally evolve up and down and sideways and whatnot, based on the previous year, but it doesn't mean that this is precise because if, you know, if you weigh on starts on a nutrient basis and starts trading at a premium to urea, then, you know, the numbers are going to go up in every cell because of the volume of UAM that we sell. So this is illustrative, as opposed to a, you know, point estimate.

Tony Will: But, you know, your general comment of, "The relative premium of UAN versus Urea dropped last year compared to where it was the year before" is the right kind of takeaway, and that's the basis underlying that sensitivity table. On the second question, we think that the price paid for Weaver is a fair but not a full price for that asset. And, you know, our view is that at any point in time when we have made decisions to expand our network, someone could have made exactly the same argument that you just made, which is, it's cheaper to buy back shares than it is to add capacity, so you should never add back or add capacity. That would have been true, you know, back in 2010 when we bought Terra. That would have been true when we acquired the Medicine Hat piece that we didn't own.

Tony Will: That would have been true when we did the expansion projects at Donaldsonville and Portneal or even probably the Wagman asset that was just acquired. At every stage, you know, we have been able to invest capital and earn a rate of return well above our cost of capital. So that's a value-adding transaction, whereas buying shares back, you know, at market price, by definition, is sort of NPV zero.

Tony Will: You know, our view is that if you look at the aggregate amount of cash that we generate and shareholder participation, sort of the ratio of the number of shares outstanding, our shareholders have been much better off based on the combined approach that we've taken to both add capacity and also take shares out of the marketplace. And that has created a lot of value relative to an exclusive pathway of one versus the other. And so we're going to continue to evaluate the, you know, the attractiveness of adding capacity on the basis of Can we generate returns on a risk-adjusted basis above our cost of capital because generating more cash flow simply allows larger share repurchases in the future?

Tony Will: And it's not necessarily a point-in-time comparison about where we are trading in that moment, because, as you well know, these assets go 40, 50, 60 years in length. And so we really need to take a view of, do we fully expect it to be a positive IRR and PV positive transaction to invest in a new plant? Because we can always default to buying shares back.

Tony Will: And by the way, because of how well the business is operating, it's not an either or question for us; we can actually do both at the same time. The next question is from Steve Byrne with Bank of America. Please go ahead.

Steve Byrne: Yes, thank you. Bert, I have a couple questions about your near term outlook. Could it, could the strong ammonia fall application season erode spring demand for urea, perhaps more than UAN? Is that why maybe your UAN production was so robust in the fourth quarter? And when you look out at, you know, imports coming into the US, you commented about low inventory levels, some lower production in the US. We're hearing that there might be a much lower level of imports this spring than in prior years. Is that consistent with your view? And how much have you sold forward into the second quarter?

Bert A. Frost: Okay Steve, well, good morning and some very good questions and the top of our mind today. Because as we look outside in sunny Chicago, it's 43 degrees, and we've got good soil moisture, and I would anticipate an early spring based on history and what we see throughout the Midwest. What that means is you're pulling forward demand. That earlier opening to river barges means product can move. So there are a lot of synergistic things happening at the same time.

Bert A. Frost: Our outlook is positive. At 91 million acres of corn and good moisture and wheat country, and as well as good values for pasture, you're going to see nitrogen applications in all the segments, probably at or above normal.

Bert A. Frost: When you look at the fall ammonia level, as we said, that was probably our second best fall ammonia level in 10 years. But when you put that into context of how many tons could go out, there is a substantial amount of demand to be satisfied with ammonia, UAN, and urea in the spring. So probably a couple hundred thousand tons more than normal. We believe we were one of the last companies standing due to our logistics capabilities and distribution networks, which we leveraged very well with the product in place. And then we're able to run all the way through November in Q4.

Bert A. Frost: And so I look for very positive spring demand for UAN and urea as well as ammonia. However, imports have been lower, and that's been fairly consistent. When you go back and look at it in totality, the low level of inventory we believe we carried in coupled with the low level of imports to date, and we're tracking vessel nominations and what we think are coming in in Feb, March, and April, it's gonna be a challenge. And then again, weaving into that an early spring impacts that even more. And so it goes.

Bert A. Frost: Our forward call is we're probably going to see, and we are seeing, some price appreciation. You're going to see demand coming forward earlier. And we're prepared, or being prepared, for that eventuality. Even with some of the loss of production we experienced in January, we believe others in our industry experienced as well. But these are the challenges we face, and we will meet them. And maybe just one quick one for you, Chris.

Christopher D. Bohn: In the flue gas carbon capture analysis that you're doing, there are a variety of technologies out there. Are you looking at several different technologies? And are you also looking at potentially using oxygen in the boiler instead of air? Well, I'll say the engineering team has reviewed several different engineering types for the flue gas capture, but we are focusing on one specific as we're moving through the feed study rather than doing multiple feed studies with additional technology providers through that. Thank you. The next question is from Josh Spector with UBS. Please go ahead.

Christopher D. Bohn: Yeah, hi guys, good morning. So I wanted to follow up on the additional feed studies for carbon capture and just specifically ask about if there's been any changes in what you're hearing in terms of policy in Japan. I thought Japan was kind of leading the way that clean ammonia 60-70% lower carbon was something they were comfortable with accepting with their first move to reduce coal intensity. Maybe other countries wanted to push it further. So is anything changed on the Japan side and as that relates to your first potential investment here? Yeah, from from Japan side, I don't think they've come out necessarily with the strict, what are their requirements for carbon intensity, we've had plenty of discussions, not only with our partners, but with the government related to that. There's a few different scenarios that they're playing through. But as to exactly what they want, that hasn't come, they have, as you mentioned, preliminarily said that they would be willing to accept a lower carbon intensity, or I should say.

Assistance, Please signal a conference specialist by pressing the Starkey followed by zero.

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

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

Please note this event is being recorded.

I would now like to turn the presentation over to the host for today, Mr. Martin Jurassic with CF Investor Relations. Sir. Please proceed.

Good morning, and thanks for joining the CF Industries earnings Conference call with me today are Tony will CEO, Chris Bohn Executive Vice President and Chief operating Officer, and Bert Frost Executive Vice President of sales market development and supply chain.

CF industries reported its results for the full year and fourth quarter of 2023 yesterday afternoon. On this call. We'll review the results discuss our outlook and then host a question and answer session.

Good day, ladies and gentlemen, and welcome to CF industries full year and fourth quarter of 2023 conference call.

Statements made on this call and in the presentation on our website that are not historical facts are forward looking statements. These statements are not guarantees of future performance and involve risks uncertainties and assumptions that are difficult to predict.

All participants will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

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

Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements.

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

More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website also you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Please note this event is being recorded.

I'd now like to turn the presentation over to the host for today, Mr. Martin Jurassic with CF Investor Relations. Sir. Please proceed.

Martin A. Jarosick: Good morning, and thanks for joining the CF Industries earnings Conference call with me today are Tony will CEO, Chris Bohn Executive Vice President and Chief operating Officer, and Bert Frost Executive Vice President of sales market development and supply chain.

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

Thanks, Martin and good morning, everyone yesterday afternoon, we posted financial results for the full year 2023 in which we generated adjusted EBITDA of approximately $2 8 billion.

The industry reported its results for the full year and fourth quarter of 2023 yesterday afternoon. On this call. We'll review the results discuss our outlook and then host a question and answer session.

Net cash from operations was also $2 8 billion.

And free cash flow was $1 8 billion.

These results reflect a healthy nitrogen supply demand balance and global energy spreads that favor our low cost production base in North America.

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

They also represent outstanding execution by the CF industries team.

We worked safely ran our plans well and navigated dynamic industry conditions.

Our investments in people safety and reliability have built the industry's highest performing manufacturing network as you can see on slide six.

Martin A. Jarosick: More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website also you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Looking ahead over the next four years confirmed construction of new nitrogen production capacity is not sufficient to keep pace with the historical nitrogen demand growth rate of roughly one 5% per year in traditional applications.

Martin A. Jarosick: Now, let me introduce Tony will our president and CEO.

Tony Will: Thanks, Martin and good morning, everyone yesterday afternoon, we posted financial results for the full year 2023 in which we generated adjusted EBITDA of approximately $2 $8 billion.

Adding to this tight supply demand situation is the risk that existing ammonia production capacity in.

Tony Will: Net cash from operations was also $2 8 billion and free cash flow was $1 $8 billion.

And several important regions remains on the verge of permanent closure due to constrained availability and cost of natural gas.

Tony Will: These results reflect a healthy nitrogen supply demand balance and global energy spreads that favor our low cost production base in North America.

Meanwhile, emerging demand for low carbon ammonia into clean energy applications should further tightened the already strained global supply demand balance.

They also represent outstanding execution by the CF industries team.

As a result, we are confident that our cash generation will remain strong as underscored by the recent increase in our quarterly dividend and continued share repurchases.

Tony Will: We work safely ran our plans well and navigate a dynamic industry conditions.

Tony Will: Our investments in people safety and reliability have built the industry's highest performing manufacturing network as you can see on slide six.

We look to continue to invest in high return organic and inorganic projects to grow our cash generation.

As such we continue evaluating the new low carbon ammonia production plant at our Booth Bluepoint complex in Louisiana with our partner Mitsui.

Tony Will: Looking ahead over the next four years confirmed construction of new nitrogen production capacity is not sufficient to keep pace with the historical nitrogen demand growth rate of roughly one 5% per year in traditional applications.

Our companies share a belief that North America is the best location for production of low carbon ammonia, given natural gas cost advantages and access to Ccs sites and expertise.

Tony Will: Adding to this tight supply demand situation is the risk that existing ammonia production capacity.

As you can see on slide eight the economic value of North American nitrogen assets continues to increase over time supporting returns greater than the cost of capital in new projects.

Tony Will: Several important regions remains on the verge of permanent closure due to constrained availability and cost of natural gas.

We and Mitsui are targeting a final investment decision in the second half of 2024, when we have additional information on low carbon ammonia production technologies and better clarity on customer requirements for carbon intensity levels, along with regulatory developments.

Tony Will: Meanwhile, emerging demand for low carbon ammonia into clean energy applications should further tightened the already strained global supply demand balance.

Tony Will: As a result, we are confident that our cash generation will remain strong as underscored by the recent increase in our quarterly dividend and continued share repurchases.

While taking a disciplined approach to growth, we will continue to return capital through our dividends and share repurchases.

Tony Will: We look to continue to invest in high return organic and inorganic projects to grow our cash generation.

We have approximately $2 $6 billion remaining on our current share repurchase authorization and fully expect to complete it before its expiration at the end of 2025.

Tony Will: As such we continue evaluating the new low carbon ammonia production plant at our Booth Bluepoint complex in Louisiana with our partner Mitsui.

With that let me turn it over to Bert will discuss the global nitrogen market conditions in more detail.

Tony Will: Our companies share a belief that North America is the best location for production of low carbon ammonia, given natural gas cost advantages and access to Ccs sites and expertise.

Thanks, Tony the fourth quarter of 2023 was an active period for our team highlighted by the largest fall ammonia application season in North America in years.

Tony Will: As you can see on slide eight the economic value of North American nitrogen assets continues to increase over time supporting returns greater than the cost of capital in new projects.

A strong fall application season indicate a commitment to nitrogen consuming crops on these acres and robust demand for additional urea at UA in applications through the first half of 2024.

Tony Will: And Mitsui are targeting a final investment decision in the second half of 2024, when we have additional information on low carbon ammonia production technologies and better clarity on customer requirements for carbon intensity levels, along with regulatory developments.

This along with strong AG fundamentals support our outlook for a positive spring application season.

We expect 91 million acres of corn to be planted in the United States.

As we continue to work with customers in advance of spring applications. We believe supply is more constrained in the north American nitrogen channel than industry.

Tony Will: While taking a disciplined approach to growth, we will continue to return capital through our dividends and share repurchases.

Tony Will: We have approximately $2 6 billion remaining on our current share repurchase authorization and fully expect to complete it before its expiration at the end of 2025.

Expectations.

Inventories were below average entering the year and net imports of nitrogen to the region are not making up the difference.

With that let me turn it over to Bert will discuss the global nitrogen market conditions in more detail.

The cold snap we experienced in North America during January has exacerbated the situation.

We believe that there has been significant volume of domestic nitrogen production lost due to weather related shutdowns across the region supply base.

Bert A. Frost: Tony the fourth quarter of 2023 was an active period for our team highlighted by the largest fall ammonia application season in North America in years.

We estimate that CF industries lost approximately 150000 tons of ammonia production in January from our own network due to the weather.

Wrong fall application season indicate a commitment to nitrogen consuming crops on these acres and robust demand for additional urea at UA in applications through the first half of 2024.

Unexpected supply tightness often leads to follow on logistics challenges in early spring with further strained the supply chain.

Bert A. Frost: This along with strong AG fundamentals supports our outlook for a positive spring application season.

We believe that our in region production and extensive logistics and distribution capabilities.

Bert A. Frost: We expect 91 million acres of corn to be planted in the United States.

Will serve us well in this environment.

As we continue to work with customers in advance of spring applications. We believe supply is more constrained in the north American nitrogen channel than industry expectations.

Global grain stocks to use ratios have returned to normal levels. After two robust growing seasons.

However, we do not project a significant impact on global nitrogen demand given the imperative to feed growing populations.

Bert A. Frost: Inventories were below average entering the year and net imports of nitrogen to the region are not making up the difference.

We expect to continue.

<unk> continued supply constraints in key producing regions, most notably ammonia production economics in Europe remained challenging.

Bert A. Frost: The cold snap we experienced in North America during January has exacerbated the situation.

Bert A. Frost: We believe that there has been significant volume of domestic nitrogen production lost due to weather related shutdowns across the region supply base.

Global ammonia spot prices continues to align with the forecast of European ammonia production confirming Europe as the industry is marginal producer.

Bert A. Frost: We estimate that CF industries lost approximately 150000 tons of ammonia production in January from our own network due to the weather.

This continues to support elevated imports of nitrogen products into Europe compared to a decade ago.

Bert A. Frost: Unexpected supply tightness often leads to follow on logistics challenges.

Beyond Europe natural gas availability continues to affect ammonia and uhm production in Trinidad.

Bert A. Frost: In early spring with further strained our supply chain.

And based on its actions in the fourth quarter of 2023, we believe the Chinese government will limit exports through the first half to ensure supply availability and urea price stability for the Chinese domestic market.

Bert A. Frost: We believe that our in region production and extensive logistics and distribution capabilities.

Bert A. Frost: We will serve us well in this environment.

Bert A. Frost: Global grain stocks to use ratios have returned to normal levels. After two robust growing seasons.

Looking ahead forward energy curves suggest continued favorable energy spreads between low cost North American production and high cost production in Europe and Asia. We believe this will support sustained margin opportunities for our low cost manufacturing asset base.

Bert A. Frost: However, we do not project a significant impact on global nitrogen demand given the imperative to feed growing populations.

Bert A. Frost: We expect to continue to be.

Bert A. Frost: We expect continued supply constraints in key producing regions, most notably ammonia production economics in Europe remained challenging.

With that let me turn the call over to Chris.

Thanks Bert.

The full year 2023, the company reported net earnings attributable to common stockholders of approximately $1 5 billion or $7 80 per diluted share.

Bert A. Frost: Global ammonia spot prices continues to align with the forecast of European ammonia production confirming Europe as the industry is marginal producer.

Bert A. Frost: This continues to support elevated imports of nitrogen products into Europe compared to a decade ago.

EBITDA was $2 7 billion and adjusted EBITDA was approximately $2 8 billion.

Bert A. Frost: Beyond Europe natural gas availability continues to affect ammonia and uhm production in Trinidad.

In the fourth quarter, we completed the acquisition of instant pivots Wagman ammonia production facility.

After adjustments and accounting for the value assigned to a long term supply agreement with IPL Dyno Nobel subsidiary, our cash purchase price was approximately $1 2 billion.

The <unk> facility has operated as expected since closing and has generated margin commensurate with our existing ammonia segment.

Bert A. Frost: Looking ahead forward energy curves suggest continued favorable energy spreads between low cost North American production and high cost production in Europe and Asia. We believe this will support sustained margin opportunities for our low cost manufacturing asset base with that let me turn the call over to Chris. Thanks Bert.

Looking ahead to 2024, we expect capital expenditures for the year to be in the range of $550 million.

For gross ammonia production to be near 10 million tonnes.

As Bert said, we experienced unplanned weather related outages in our network during January.

Christopher D. Bohn: The full year 2023, the company reported net earnings attributable to common stockholders of approximately one $5 billion or $7 80 per diluted share.

During these outages we pulled forward some planned maintenance activities. This should reduce scheduled downtime later this year mitigating some of the production loss in January.

Christopher D. Bohn: EBITDA was $2 7 billion and adjusted EBITDA was approximately $2 8 billion.

As a result, we expect gross ammonia production for the year to be near our projection.

Christopher D. Bohn: In the fourth quarter, we completed the acquisition of instant pivots Wagman ammonia production facility.

Commissioning of our Green ammonia project at Donaldson Bill is underway.

Christopher D. Bohn: After adjustments and accounting for the value assigned to our long term supply agreement with IPL Dyno Nobel subsidiary, our cash purchase price was approximately $1 $2 billion.

We're currently evaluating the purchase of renewable energy credits to pair with the startup of the Electrolyze to enable green ammonia production and maximize the value of the <unk> 45, the production tax credit.

Christopher D. Bohn: <unk> facility has operated as expected since closing and has generated margin commensurate with our existing ammonia segment.

We expect that the <unk> hydration and compression unit at Donaldson Bill will be ready for startup in 2025.

Christopher D. Bohn: Looking ahead to 2024, we expect capital expenditures for the year to be in the range of $550 million.

This will enable low carbon ammonia production and generate substantial 40 <unk> tax credits.

Christopher D. Bohn: And for gross ammonia production to be near 10 million tonnes as Bert said, we experienced unplanned weather related outages in our network during January.

We are also making progress on other ccs opportunities with returns above our cost of capital.

Turning to the potential new low carbon ammonia plant at our Bluepoint complex in Louisiana, We completed our feed study on a conventional steam methane reformer ammonia plant with Ccs technologies. The feed study estimates estimates the cost of an ammonia plant at approximately $2 5 billion.

Christopher D. Bohn: During these outages we pulled forward some planned maintenance activities. This should reduce scheduled downtime later this year mitigating some of the production loss in January.

Christopher D. Bohn: As a result, we expect gross ammonia production for the year to be near our projection.

Christopher D. Bohn: Commissioning of our Green ammonia project at Donaldson Bill was underway. We are currently evaluating the purchase of renewable energy credits to pair with the startup of the electrolyze to enable green.

We estimate another $500 million for scalable infrastructure, such as storage tanks and loading docks.

Our feed studies focused on auto thermal reforming or ATR ammonia production technology and flue gas capture are progressing well.

Christopher D. Bohn: On your production and maximize the value of the <unk> 45, the production tax credit.

Christopher D. Bohn: We expect that the Cotwo hydration and compression unit at Donaldson Bill will be ready for startup in 2025.

Alongside disciplined clean energy investments, we are committed to returning capital to long term shareholders. In 2023, we returned almost $900 million to shareholders through share repurchases and dividend payments, despite being locked out of the repurchases for part of the year.

Christopher D. Bohn: This will enable low carbon ammonia production and generate substantial 40 <unk> tax credits.

We are also making progress on other ccs opportunities with returns above our cost of capital.

We expect share repurchase activity to increase over the two remaining years on our current authorization.

Christopher D. Bohn: Turning to the potential new low carbon ammonia plant at our Bluepoint complex in Louisiana, We completed our feed study on a conventional steam methane reformer ammonia plant with Ccs technologies. The feed study estimates estimates the cost of an ammonia plant at approximately $2 $5 billion we.

As you can see on slide seven and eight on both a free cash flow yield and a precedent transaction basis. Our enterprise value is significantly undervalued supporting continued share repurchases with that Tony will provide some closing remarks before we open the call to Q&A.

Christopher D. Bohn: Another $500 million for scalable infrastructure, such as storage tanks and loading docks.

Thanks, Chris before we move on to your questions I want to thank everyone at CF industries for their contributions to an outstanding year.

Christopher D. Bohn: Our feed studies focused on auto thermal reforming or ATR ammonia production technology and flue gas capture are progressing well.

I, especially want to highlight the progress our team made in the second half of the year regarding our safety performance.

After a challenging start to 2023, we ended the year with a 12 month recordable incident rate of 0.36 incidents per 200000 work hours.

Christopher D. Bohn: Alongside disciplined clean energy investments, we are committed to returning capital long term shareholders. In 2023, we returned almost $900 million to shareholders through share repurchases and dividend payments, despite being locked out of the repurchases for part of the year.

In line with our performance in recent years and significantly better than industry averages.

Our operational excellence and significant structural advantages underpin our cash generation.

Christopher D. Bohn: We expect share repurchase activity to increase over the two remaining years on our current authorization.

This enables us to invest in the business to further increase cash generation and drive increased shareholder participation in our free cash flow.

Christopher D. Bohn: As you can see on slide seven and eight on both a free cash flow yield and a precedent transaction basis. Our enterprise value is significantly undervalued supporting continued share repurchases with that Tony will provide some closing remarks before we open the call to Q&A.

In the last three years, we acquired the wagman ammonia production facility <unk>.

Advanced high return clean energy initiatives.

<unk> increased our dividend by 67%.

And deployed $2 5 billion to repurchase repurchased more than 31 million shares which represented approximately 15% of the outstanding share count at that time.

Thanks, Chris before we move on to your questions I want to thank everyone at CF industries for their contributions to an outstanding year.

Tony Will: I, especially want to highlight the progress our team made in the second half of the year regarding our safety performance.

Additionally, we have strengthened our balance sheet to provide us tremendous flexibility as we are able to grow our business at the same time has returned significant cash to shareholders.

Tony Will: After a challenging start to 2023, we ended the year with a 12 month recordable incident rate of 0.36 incidents per 200000 work hours in.

This approach has had a dramatic impact as.

As you can see on slide 10 shareholder participation in our business has increased 80% in the last 10 years.

Tony Will: In line with our performance in recent years and significantly better than industry averages.

We're excited about the opportunity ahead of us to build on this track record.

Tony Will: Our operational excellence and significant structural advantages underpin our cash generation.

In the near term, we expect industry fundamentals to remain favorable to our low cost production network.

Tony Will: This enables us to invest in the business to further increase cash generation and drive increased shareholder participation in our free cash flow.

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

In the last three years, we acquired the wagon in ammonia production facility Advair.

Taken together, we expect to continue creating substantial value for long term shareholders.

Tony Will: Advanced high return clean energy initiatives.

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

Tony Will: <unk> increased our dividend by 67% and.

We will now begin the question and answer session.

Tony Will: And deployed $2 5 billion to repurchase repurchased more than 31 million shares which represented approximately 15% of the outstanding share count at that time.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Additionally, we have strengthened our balance sheet to provide us tremendous flexibility as we are able to grow our business at the same time has returned significant cash to shareholders.

As a courtesy to others on the call. We ask that you limit yourself to one question.

The first question is from Adam Samuelson with Goldman Sachs. Please go ahead.

Tony Will: This approach has had a dramatic impact.

Yes, Thank you and good morning, everyone.

Tony Will: As you can see on slide 10 shareholder participation in our business has increased 80% in the last 10 years.

Adam.

So I guess Tony just the first question is do we think about.

The decision to pursue additional feed studies on bluepoint complex evaluating the different technologies just help us frame.

Tony Will: We're excited about the opportunity ahead of us to build on this track record.

Tony Will: In the near term, we expect industry fundamentals to remain favorable to our low cost production network.

Tony Will: Longer term disciplined investments in low carbon ammonia production can provide a robust growth platform for the company.

The increment on carbon reduction that would could come from either ATR or the flue gas capture.

And maybe any additional color on the policy drivers of your potential off takers as they evaluate.

Tony Will: Taken together, we expect to continue creating substantial value for long term shareholders.

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

What threshold as needed to commit to taking the blue ammonia volumes longer term.

Speaker Change: We will now begin the question and answer session.

Yeah, Adam So one of the reasons, we're evaluating all the different kind of possible paths forward is to really have a comprehensive set of solutions, depending upon the carbon intensity levels that are ultimately demanded by by customers.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: To withdraw your question. Please press Star then two as.

Speaker Change: As a courtesy to others on the call. We ask that you limit yourself to one question.

Speaker Change: The first question is from Adam Samuelson with Goldman Sachs. Please go ahead.

And conventional.

Ccs the way that we've implemented at in Donaldson Bill today.

Adam Samuelson: Yes, Thank you and good morning, everyone.

Adam Samuelson: So I guess, Tom I guess, the first question as we think about.

For the.

The process.

Adam Samuelson: The decision to pursue additional feed studies on bluepoint complex evaluating the different technologies.

Two to be stripped out and sequestered and that means you can reduce.

The carbon intensity.

Adam Samuelson: Help us frame.

By about.

Adam Samuelson: The increment on carbon reduction that would could come from either ATR or the flue gas capture.

Almost 70% versus kind of conventional ammonia, particularly given that the plant that we're talking about having implemented that AWN is among one of the most efficient newest plants in the world. So it already has a fairly low.

Tom: And maybe any additional color on the policy drivers of your potential off takers as they evaluate.

Tom: What threshold as needed to commit to taking the blue ammonia volumes longer term.

<unk> footprint relative to older plants.

Tom: Yeah, Adam So one of the reasons, we're evaluating all the different kind of possible paths forward is to really have a comprehensive set of solutions, depending upon carbon intensity levels that are ultimately demanded by by customers.

You look at doing flue gas capture in conjunction with processed gas Ccs.

We think we can get rid of in excess of 95% of.

The <unk> emissions coming out of.

Adam Samuelson: And conventional.

That particular plan.

Adam Samuelson: Ccs the way that we've implemented at in Donaldson Bill today.

If you look at auto thermal reforming.

Adam Samuelson: <unk> for the.

The estimates are you can get to the 90% to 95% reduction level, but the problem with that is.

Adam Samuelson: The process.

Adam Samuelson: <unk> to be stripped out and sequestered and that means you can reduce.

Because the way that the technology works you have to have a very very large air separation unit.

Adam Samuelson: Carbon intensity.

Adam Samuelson: By about.

Introduced the nitrogen back into the process that you don't get.

Adam Samuelson: Almost 70% versus kind of conventional ammonia, particularly given that the plant that we're talking about having implemented that on is among one of the most efficient newest plants in the world. So it already has a fairly low.

Because youre not doing steam methane reforming.

The electricity draw on a large ers up unit like that is a tremendous.

At her two to <unk>.

Adam Samuelson: Footprint relative to older plants.

Cost of the project as well as op costs and based on the grids, where we're thinking about the scope two emissions become substantial so that means you got to do a bunch of things in order to potentially limit the emissions of scope to that you'd otherwise pick up in order to get to the 90% 95% reduction levels.

Adam Samuelson: If you look at doing flue gas capture in conjunction with processed gas seat Ccs.

Adam Samuelson: We think we can get rid of in excess of 95% of.

Adam Samuelson: <unk> emissions coming out of.

That particular plan.

And that brings with it all of its own set of cost in Opex Capex.

If you look at auto thermal reforming.

So that's really why we're looking at kind of all of these different possible paths to give us kind of the full suite of Optionality and really understand.

The estimates are you can get to the 90% to 95% reduction level, but the problem with that is because of the way that the technology works you have to have a very very large air separation unit.

Opex capex cost in order to hit certain thresholds that customers.

<unk> introduced the nitrogen back into the process that you don't get when Youre, because youre not doing steam methane reforming.

May ultimately.

Demand in terms of the product.

The other point is we have a very large network.

Adam Samuelson: And the electricity draw on a large air SAP unit like that is a tremendous.

Longer term that we are focused on.

Getting to carbon neutrality on in the next 25 years and so flue gas capture is going to play an important role in that process as we continue to move forward and so us kind of getting.

Adam Samuelson: At her two.

Adam Samuelson: Cost of the project as well as op cost and based on the grids, where we're thinking about the scope two emissions become substantial so that means you've got to do a bunch of things in order to potentially limit the emissions of scope to that you'd otherwise pick up in order to get to the 90% 95% reduction levels.

More heavily involved in that and really understanding the different potential paths is an important thing for us longer term strategically anyway and this is a good time for us to really kind of dive in as we're contemplating making an investment decision in new production.

Adam Samuelson: And that brings with it all of its own set of cost in Opex Capex things. So that's really why we're looking at kind of all of these different possible paths to give us kind of the full suite of Optionality and really understand.

Alright.

That's very helpful and I can just squeeze a quick market question in just on natural gas as you think about the decline recently in Tcf in LNG prices broadly it doesn't seem like you expect a quick restart of <unk>.

Adam Samuelson: Opex capex cost in order to hit certain thresholds that customers.

Adam Samuelson: May ultimately demand in terms of the product.

Idled or high cost European production, just how are you thinking about that over the course of the year.

Adam Samuelson: But the other point is we have a very large network.

Adam Good morning. This is Bert when you look at the spreads what's going on in the world with.

Adam Samuelson: Longer term that we are focused on.

Adam Samuelson: Getting to carbon neutrality on in the next 25 years.

Henry hub trading today at $1, $60, 65, and NDP in TTS and Europe trading in.

Adam Samuelson: So flu gas capture is going to play an important role in that process as we continue to move forward and so us kind of getting.

Let's say seven to $8 range and so you have a pretty big spread and as I mentioned in my prepared remarks, where we are in the ammonia supply chain youre bidding close to that full cost rail.

On more heavily involved in that and really understanding the different potential paths is an important thing for us longer term strategically anyway and this is a good time for us to really kind of dive in as we're contemplating making an investment decision in new production.

Our range for European and some high cost Asian producers.

Especially when you consider carbon costs.

And so the competitiveness, we're still and our position of that Europe. The European producer is the marginal producer and that will set the cost floor or the price floor.

Adam Samuelson: Alright.

Speaker Change: That's very helpful and I can just squeeze a quick market questions just on natural gas.

Speaker Change: Think about the decline recently in Tcf in LNG prices.

And we don't see in the short term and improvement in gas supply takes.

Speaker Change: Broadly it doesn't seem like you expect to.

Speaker Change: Quick restart of idled or high cost European production, just how are you thinking about that over the course of the year.

Taking place.

<unk> lowered that value.

Yeah, and I would just add to that that the decision goes beyond just the cash cost immediately goes into.

Speaker Change: Adam Good morning. This is Bert when you look at the spreads what's going on in the world with hence.

Adam Samuelson: Henry hub trading today at a $1 $60 65, and NDP in TTS and Europe trading in.

The idea of cycling. These plants is not necessarily good additional maintenance that may be needed prior to starting those backup or turnarounds that are coming forward or even holding inventory at certain periods of time, but have a working capital cost to them. So I think gas is obviously the primary driver, but theres a lot of other answer.

Bert A. Frost: Let's say seven to $8 range and so you have a pretty big spread and as I mentioned in my prepared remarks, where we are in the ammonia supply chain youre bidding close to that full cost rail.

Bert A. Frost: Our range for European and some high cost Asian producers.

Larry drivers that go into factoring whether you'd restart.

Overall, I think though the message you're hearing from US is we're very.

Bert A. Frost: Especially when you consider carbon costs.

Bert A. Frost: And so the competitiveness, we're still our position of that Europe. The European producer is the marginal producer and that will set the cost floor or the price floor.

We're very optimistic about what the SMB balance looks like and what the demand for our for our products are on a global basis. It gives bert a lot of Optionality to think about.

Bert A. Frost: And we don't see in the short term and improvement in gas supply takes.

Exports in satisfying end market demand here and we just have a lot of roads to.

Bert A. Frost: Taking place.

Bert A. Frost: Due to lower that value.

Help get us there.

Speaker Change: Yeah, and I would just add to that that the decision goes beyond just the cash cost immediately goes into.

And I appreciate all that color I'll pass it on thanks.

The next question is from Joel Jackson with BMO capital markets. Please go ahead.

Speaker Change: The idea of cycling. These plants is not necessarily good additional maintenance that may be needed prior to starting those back up or turnarounds that are coming forward or even holding inventory at certain periods of time that have a working capital cost to them. So I think gas is obviously the primary driver, but theres a lot of other answer.

Good morning, a couple of question I noticed in your slide deck during new updated sensitivity table right that shows EBITDA for every level of.

Gas price in urea price, it's down in every single cell.

<unk> hundred million dollars at the same gas price in the U S gas pricing theme.

Speaker Change: Larry drivers that go into factoring whether you'd restart.

Urea price versus what you had in the fall can you explain what's going in at that higher volume now Youre, asking 1 million tonnes higher volume can you explain the drop in EBITDA at every single cell yes.

Speaker Change: Overall, I think though the message you're hearing from US is we're very.

Speaker Change: We're very optimistic about what the SMB balance looks like and what the demand for our for our products are on a global basis. It gives bert a lot of Optionality to think about.

Let's start off with the volume issued first because I think that's the important one to kind of get on the table and then we'll go through kind of the table and a little more detail but.

Speaker Change: Exports in satisfying end market demand here and we just have a lot of roads to.

Although we did add.

Good.

<unk> facility into the network.

Speaker Change: Help get us there.

There is.

Speaker Change: And I appreciate all that color I'll pass it on thanks.

Maintenance turnaround event on that facility and Theres also.

Speaker Change: The next question is from Joel Jackson with BMO capital markets. Please go ahead.

A couple of significant maintenance activities one of them is on detailed number six which is our.

Joel Jackson: Good morning, a couple of question I noticed in your slide deck, your new updated sensitivity table right that shows EBITDA for every level of gas.

The largest operating ammonia plant in the world and so when you've got a.

<unk> 40 day outage on a plant like that.

Joel Jackson: Gas price in urea price, it's down in every single cell.

That takes our production down now that said as Chris <unk> talked about it we still expect to generate about.

Speaker Change: <unk> hundred million dollars at the same gas price in the U S gas prices seen.

Circa 10 million tons of ammonia this year, which is in line with what we've historically done the big issue in terms of last year versus this year was we had we entered.

Speaker Change: Urea price versus what you had in the fall can you explain what's going on at that higher volume now Youre, asking 1 million tonnes higher volume can you explain.

Speaker Change: The drop in EBITDA at every single cell yes.

In the last year with a fairly high inventory level. So we had pretty substantial additional sales volumes last year.

Speaker Change: Let's start off with the volume issue first because I think thats important one to kind of get on the table and then we will go through kind of the table and a little more detail but.

Based on inventory draw down that we're not able to tap into so our volumes kind of year on year are going to be order of magnitude fairly similar last year to this year and Additionally, Joel I think one of the bigger aspects of it is the relationship between the products on a pricing basis was updated.

Speaker Change: Although we did add.

The wagon facility into the network.

Speaker Change: There is.

Speaker Change: Maintenance turnaround event on that facility and Theres also.

Speaker Change: A couple of significant maintenance activities one of them is on detailed number six which is our.

Speaker Change: The largest operating ammonia plant in the world and so when you've got a.

To what 2023 was so we always use the prior year as sort of the structure benchmark from that compared to 2022. So you saw more parity between the products and maybe what was the premium for UA and prior to that and obviously, we do quite a bit of UAS volume. So this is just based on <unk>.

Speaker Change: <unk> 40 day outage on on a plant like that.

Speaker Change: That takes our production down now that said as Chris <unk> talked about it we still expect to generate about.

Speaker Change: Circa 10 million tons of ammonia this year, which is in line with what we've historically done the big issue in terms of last year versus this year was we had we entered.

Not only the cost structure of 2023, which we saw higher non gas cost primarily through logistics, but then also that new relationship that we experienced over the last 12 months on pricing.

Speaker Change: In the last year with a fairly high inventory level. So we had pretty substantial additional sales volumes last year.

Okay. So my follow up will be kind of a two parter first just wanted to follow up on that so I guess youre seeing at the scene gas price and senior price at your REIT excuse me UAS and ammonia prices are lower at the scene urea in gas price and then a true follow up question would be when looking at the.

Speaker Change: Based on inventory draw down that we're not able to tap into so our volumes kind of year on year are going to be order of magnitude fairly similar last year to this year and Additionally, Joel I think one of the bigger aspects of it is the relationship between the products on a pricing basis was updated.

The blue.

Greenfield Blue project Blue ammonia project.

Obviously, we saw a very good valuation comp with Coke and the wever plant a couple of months ago.

Speaker Change: To what 2023 was so we always use the prior year as sort of the structure benchmark from that compared to 2022. So you saw more parity between the products and maybe what was the premium for UAS prior to that and obviously, we do quite a bit of UA and volume so.

Know that you obviously.

Hi.

Would it not make sense for you to just buy back stock as much as you can see the packet authorization.

Do any greenfield plans, because the market's not giving you the valuation that coke is obviously, giving to wever I know, it's not exactly one to one but isn't it just makes sense to buy back stock as much as you can.

Speaker Change: So this is just based on not only the cost structure of 2023, which we saw higher non gas cost primarily through logistics, but then also that new relationship that we experienced over the last 12 months on pricing.

Yes, let me.

Let me take the first one first and then we'll come back to your second point. The first one not not really being a full one question more of a statement. So every year, we try to update the table based on what the relationship was in terms of margin per nutrient ton of the previous year until the table will naturally evolve.

Okay. So my follow up will be kind of a two parter first just wanted to follow up on that so I guess youre seeing at the scene gas price and senior price at <unk> excuse me UA in an ammonia prices are lower at the scene to re gas price and then a true follow up question would be.

Up and down and sideways and whatnot based on previous year, It doesn't mean that.

This is precise because if.

Speaker Change: When looking at the <unk>.

Speaker Change: The Blue Greenfield Blue project Blue Mountain project, obviously, we saw a very good valuation comp with Coke and the wever plant a couple of months ago.

If you answered.

On a nutrient basis starts trading at a premium to urea then.

The numbers are going to go up in every cell because of the volume of UAS that we sell.

Speaker Change: You, obviously and buy.

So this is illustrative.

Speaker Change: Would it not make sense for you to just.

Speaker Change: Buyback stock as much as you can just pocket authorization don't do any greenfield plans because the market is not giving you devaluation that coke is obviously keeping to libre I know, it's not exactly one to one but isn't it just makes sense to buy back stock as much as you can.

As opposed to.

To a point estimate.

But your general comment of.

The.

Relative premium out of <unk>.

UA on versus urea dropped last year compared to where it was the year before as the right kind of takeaway and that's the basis on underlying that sensitivity table on the second question.

Speaker Change: Yes, let me.

Speaker Change: Let me take the first one first and then we'll come back to your second point. The first one not really being a full on question more of a statement. So every year, we try to update the table based on what the relationship was in terms of margin per nutrient ton of the previous year and so the table will naturally evolve.

We think that the price paid for Weaver is is a fair bit of a full price for that asset.

And.

Our view is that at any point in time, where we have made.

Speaker Change: <unk> up and down and sideways and whatnot based on previous year. It doesn't mean that that this is precise because if.

Decisions to expand our network someone could have made exactly the same argument that you just made which is it's cheaper to buy back shares than it is to add capacity. Therefore, you should never add back or add capacity that would have been true back.

Speaker Change: <unk> starts.

Speaker Change: On a nutrient basis starts trading at a premium to urea then.

Speaker Change: The numbers are going to go up in every cell because of the volume of UAS that we sell.

Back in 2010, when we bought terra that would've been true when we acquired the medicine hat slice. So we didn't known that would've been true when we did the expansion projects at Donaldson Bill in Port Neal or even probably the wagman asset was just acquired.

Speaker Change: So this is illustrative.

Speaker Change: As opposed to.

Speaker Change: To a point estimate.

Speaker Change: But your general comment of.

Speaker Change: The.

Speaker Change: Relative premium of UA on versus urea dropped last year compared to where it was the year before as the right kind of takeaway and that's the basis on underlying sensitivity table on the second question.

At every stage.

<unk>.

We have been able to invest capital and earn a rate of return well above our cost of capital. So that's a value adding <unk>.

Speaker Change: We think that the price paid for <unk> is a fair bit of a full price for that asset.

Transaction, whereas buying shares back at market price by definition is sort of NPV zero.

Speaker Change: And.

Speaker Change: Our view is that at any point in time, where we have made.

Our view is if you look at the aggregate amount of cash that we generate and shareholder participation sort of the ratio of the number of shares outstanding our shareholders have been much better off based on the combined approach that we've taken to both disciplined.

Speaker Change: Decisions to expand our network someone could have made exactly the same argument that you just made which is it's cheaper to buy back shares than it is to add capacity. Therefore, you should never add back or add capacity that would have been true back.

Add capacity and also take shares out of the marketplace and that has created a lot of value relative to.

Speaker Change: Back in 2010, when we bought terra that would've been true when we acquired the medicine hat slice. So we did known that would've been true when we did the expansion projects at Donaldson Bill in Port Neal or even probably the wag of an asset that was just acquired.

An exclusive pathway of one versus the other.

So we're going to continue to evaluate.

The.

The attractiveness of adding capacity on a on a basis of.

Speaker Change: At every stage.

Can we generate returns on a risk adjusted basis above our cost of capital.

<unk>.

We have been able to invest capital and earn a rate of return well above our cost of capital. So that's a value adding <unk>.

Because generating more cash flow simply.

Speaker Change: Transaction, whereas buying shares back at market price by definition is sort of NPV zero.

Simply allows larger share repurchases in the future.

And it's not necessarily a point in time comparison about where were trading.

Speaker Change: Our view is if you look at the aggregate amount of cash that we generate and shareholder participation sort of the ratio of the number of shares outstanding our shareholders have been much better off based on the combined approach that we've taken to both disciplined.

In that moment because.

As you all know these assets go 40, 50 60 years in length.

And so we really need to take.

Our view of do we fully expect it to be a positive IRR NPV positive transaction to invest in a new plant.

Speaker Change: Add capacity and also take shares out of the marketplace and that has created a lot of value relative to.

Because we can always default to buying shares back and by the way because of how well the business is operating it is not an either or.

Speaker Change: An exclusive pathway of one versus the other.

And for US we can actually do both at the same time.

Speaker Change: So we're going to continue to evaluate.

Speaker Change: The.

Okay.

Speaker Change: The attractiveness of adding capacity on a on a basis of.

The next question is from Steve buyer with Bank of America. Please go ahead.

Speaker Change: Can we generate returns on a risk adjusted basis above our cost of capital.

Yes. Thank you Bert I got a couple of questions about your near term outlook.

Speaker Change: Because generating more cash flow.

Speaker Change: Simply allows larger share repurchases in the future.

Could the strong ammonia fall application season erodes, the spring demand for urea.

Speaker Change: And it's not necessarily a point in time comparison about where were trading.

Perhaps more than UAE and is that why maybe you're you're UAS production was so robust in the fourth quarter.

Speaker Change: And in that moment.

Speaker Change: As you all know these assets go 40, 50 60 years in length.

And when you look at it.

And so we really need to take.

Imports coming into the U S. You commented about low inventory levels.

Speaker Change: Our view of do we fully expect it to be.

Some lower production in the U S. We're hearing that there might be.

Speaker Change: Positive IRR NPV positive transaction to invest in a new plant.

Much less.

Speaker Change: Because we can always default to buying shares back and by the way because of how well the business is operating its not an either or.

The level of imports this spring and.

In prior years is that consistent with your view and how much have you sold forward into the second quarter.

Speaker Change: And for US we can actually do both at the same time.

Okay, Steve will good morning, and some very good questions.

Speaker Change: Okay.

And top of the of our mind today.

Speaker Change: The next question is from Steve buyer with Bank of America. Please go ahead.

Because as we look outside and Sunny Chicago, It's 43 degrees and we've got good soil moisture and I would anticipate in early spring based on.

Steve Buyer: Yes. Thank you Bert I got a couple of questions about your near term outlook.

Steve Buyer: Could the strong ammonia fall application season erodes, the spring demand for urea.

Historically and what we see throughout the Midwest. What that means is you are pulling forward demand that encompassing earlier opening two river barges means product can move so a lot of synergistic things happening at the same time, our outlook is positive at 91 million acres of corn and good moisture and wheat country.

Steve Buyer: Perhaps more than UAE and is that why maybe you're you're UAS production was so robust in the fourth quarter.

Steve Buyer: And when you look at it.

Steve Buyer: Imports coming into the U S. You commented about low inventory levels.

And as well as good value surpassed youre going to see nitrogen applications in all of the segments.

Steve Buyer: Some lower production in the U S. We're hearing that there might be.

Probably at or above normal when you look at the fall ammonia.

Much less the level of imports this spring than in <unk>.

Level as we said that was our probably our second best fall ammonia in 10 years, but when you put that in context of how many tons could go out there is a substantial amount of demand to be satisfied with ammonia and urea in the spring.

Steve Buyer: For years is that consistent with your view and how much have you sold forward into the second quarter.

Speaker Change: Okay, Steve well, good morning, and some very good questions and top of the of our mind today.

Steve Buyer: Because as we look outside and Sunny Chicago, It's 43 degrees and we've got good soil moisture and I would anticipate in early spring based on.

So are probably a couple hundred thousand tons more than normal. We believe we were one of the last company standing due to our logistics capabilities and distribution networks, which we leveraged very well with product in place and then we're able to run all the way through November and Q4.

Steve Buyer: Historically and what we see throughout the Midwest what that means is you're pulling forward demand that encompassing earlier opening two river barges means product can move so a lot of synergistic things happening at the same time, our outlook is positive at 91 million acres of corn and good moisture and wheat country.

So I look for a very positive spring demand for UA and in Korea, as well as ammonia the imports have been lower and thats been fairly consistent but when you go back and look at it in totality.

Steve Buyer: And as well as good value surpassed youre going to see nitrogen applications in all the segments.

The low level of inventory, we believe that we carried in coupled with the low level of imports to date and we're tracking vessel nominations in what we think are coming in and said March and April.

Steve Buyer: Probably at or above normal when you look at the fall ammonia.

Steve Buyer: Level as we said that was our probably our second best fall ammonia in 10 years, but when you put that in context of how many tons could go out there is a substantial amount of demand to be satisfied with ammonia and urea in the spring.

Is going to be a challenge and then again <unk>.

Into that an early spring impacts that even more and so.

Our forward call is we're probably going to see and we are seeing some price appreciation youre going to see demand coming forward earlier, and we are prepared or being prepared for that eventuality, even with some of the loss of production. We experienced in January we believe others are.

Steve Buyer: So are probably a couple hundred thousand tons more than normal. We believe we were one of the last company standing due to our logistics capabilities and distribution networks, which we leveraged very well with product in place and then we're able to run all the way through November and in Q4.

Our industry experienced as well.

But these are the challenges we face and we will meet them.

And maybe just one quick one for you Chris.

Steve Buyer: And so I look for a very positive spring demand for <unk> and urea as well as ammonia the imports have been lower and that's been fairly consistent but when you go back and look at it in totality the low level of inventory. We believe that we carried in coupled with the low level of imports to date and we're tracking very.

Flue gas <unk>.

Carbon capture and analysis that Youre doing there is a variety of technologies out there or are you looking at several different technologies and are you also looking at potentially.

Using oxygen in the boiler instead of air.

Well I'll say.

Nominations in what we think are coming in and said March and April.

Engineering team has reviewed several different engineering types for the flu gas capture but we are focusing on one specific as we're moving through the feed study rather than doing multiple feed studies with additional.

Steve Buyer: It's going to be a challenge and then again.

Steve Buyer: Into that an early spring impacts that even more and so.

Steve Buyer: Our forward call is we're probably going to see and we are seeing some price appreciation youre going to see demand coming forward earlier, and we're prepared or being prepared for that eventuality, even with some of the loss of production we experienced in January we believe others.

Additional.

Technology providers through that.

Okay.

Thank you.

The next question is from Josh Spector with UBS. Please go ahead.

Steve Buyer: Our industry experienced as well.

Yes, hi, guys good morning.

Steve Buyer: But these are the challenges we face and we will meet them.

I wanted to follow up on the additional feed studies for carbon capture and just specifically ask about if theres been any changes in what youre hearing in terms of policy in Japan.

Speaker Change: And maybe just one quick one for you Chris.

Speaker Change: Flue gas <unk>.

Speaker Change: Carbon capture and analysis that Youre doing there is a variety of technologies out there or are you looking at several different technologies and are you also looking at potentially.

Japan was kind of leading the way that clean ammonia 60, 70% lower carbon was something they were comfortable with the accepting with their first move to reduce coal intensity, maybe other countries wanted to push it further so has anything changed on the Japan side and how does that relates to your first potential investment here.

Speaker Change: Using oxygen in the boiler instead of air.

Christopher D. Bohn: Well I'll say.

Christopher D. Bohn: The engineering team has reviewed several different engineering types for the flu gas capture but we are focusing on one specific as we're moving through the feed study rather than doing multiple feed studies with additional.

Yes from from Japan side, I don't think they've come out necessarily with the strict what are their requirements for carbon intensity. We've had plenty of discussions not only with our partners, but with the government related to that.

Additional tech.

Christopher D. Bohn: Technology providers through that.

Christopher D. Bohn: Okay.

A few different scenarios that they are playing through but as to exactly what they want that hasnt come. They have as you mentioned preliminarily said that they would be willing to accept a lower carbon intensity or I should say lower carbon intensity.

Speaker Change: Thank you.

Speaker Change: The next question is from Josh Spector with UBS. Please go ahead.

Yes, hi, guys good morning.

Josh Spector: I wanted to follow up on the additional feed studies for carbon capture and just specifically ask about if theres been any changes in what youre hearing in terms of policy in Japan.

Amount there, whereas some of the other nation, specifically Korea are looking for.

Josh Spector: Japan was kind of leading the way that clean ammonia 60, 70% lower carbon was something they were comfortable with accepting with their first move to reduce coal intensity, maybe other countries wanted to push it further so has anything changed on the Japan side and how does that relates to your first potential investment here.

Carbon intensity.

Basically it has 90% reduction and Thats why were looking at some of these other options as well to do that so more to come on the clarity as Tony mentioned in his prepared remarks in his questions about whats happening out of Japan now one of the things that is occurring in Japan right now is the cabinet.

Speaker Change: Yes from from Japan side, I don't think they've come out necessarily with the strict what are their requirements for carbon intensity. We've had plenty of discussions not only with our partners, but with the government related to that.

As move forward with a package.

For this towards the diet, so we should see some sort of.

Approval from essentially of the diet in the next several months and then from there many will be able to.

Speaker Change: A few different scenarios that they are playing through but as to exactly what they want that hasnt come. They have as you mentioned preliminarily said that they would be willing to accept a lower carbon intensity or I should say.

Allocate those funds and we begin to put it in the applications for the projects with our partners. So nothing has changed from where we stood three months ago or six months ago, but we are looking at many different alternatives as Tony mentioned.

Okay. Thanks, and just on Wagman I don't believe you mentioned and all of that anything update on what Youre doing in terms of potential Ccs at that site. So just curious if you have any thoughts there on what that could look like timeline wise and if theres anything to know about why capex.

<unk> or even Opex I guess as you think about sending in a pipeline for tickets sequent straight sequestered, if that's meaningfully different versus what youre doing in Donaldson bill or similar.

Well I think wagman is just another site within our whole entire network now too we're <unk>.

<unk> Wagman similarly to how we are reviewing all of our sites when it comes to the Ccs that being specifically the Yazoo City in medicine hat in Alberta, some of the projects that are a little bit further along but our team is evaluating.

Ccs at Wagaman, but again similar to what how were evaluating at all other sites.

I would say from from our pipeline and the sequestration I think with Louisiana getting primacy on class six we should be seeing.

A little bit more expedited approvals of those classics, specifically in Louisiana, and Thats going to help move things along much more quickly and I think based on some of where those class six wells, particularly our are also going to direct us where we're going to put more of our time on each of our networks.

For Ccs, so more to come on that but we continue to evaluate and be very optimistic about wagaman. Just since we are at Donaldson build today.

Okay. Thank you.

The next question is from Jeff Zekauskas with Jpmorgan. Please go ahead.

Thanks very much.

Yes.

Who are the natural buyers for your green ammonia and how do you think about the price at which you might sell it.

So what we're working on now is just that the volume of product that we will be producing.

Could be digestible, and a vessel, which could go to Europe, we're working with some of the ethanol producers for our low carbon corn value chain, which we believe will lead then to sustainable aviation fuel and low carbon fuel products, we're talking to some of the food companies and some of their labeling ventures.

And how do we do that and incorporate that so both blue and green or let's just call low carbon and no carbon products.

We're moving forward and we think we have.

Quite a few opportunities to market those products at a value.

Value over conventional products.

If you look at it Jeff.

Both similar with Blue and Green, we're going to be the first to market with with these and as you look at the Green Theres just not a lot of supply there too as Berke mentioned youre, probably going to see a premium based on that product that is significantly above our cost I would say just because it's a smaller amount as we bring on blue.

Lou will be the first in the world with any measurable amount of volume with that and I think there's a lot of activity at FERC said on the demand pull side that we're beginning to see that we feel fairly confident that we'll be able to receive some sort of premium audit what that is.

Yet to be determined a 100% at this time.

Okay and then.

Natural gas prices have fallen pretty sharply, but you also hedge.

Do you expect much hedging penalty in the first quarter.

So how do we talk about gas as that is just that we do hedge and we saw that the reason why in January with the spikes up to $50.

In our Iowa facilities, and actual availability or lack thereof in some other facilities so hedging in securing supply during the cold months of Dis Jan and February are important but you are correct on the reverse side of that is.

Those hedges were taken at higher values than we are in the cash market today. So your first quarter Valley.

Value for gas will be over what the cash value is and more to come on that I would say, though the offset to that Jeff is we're not we're clearly not 100% hedged.

We do.

To <unk> point, I'd like to do basis hedging more than.

Henry hub.

Fairly hedging and so we are benefiting from.

The drop in the daily.

Cash rate on a piece of it as well and so in some cases.

Fixed price there could be some swaps or some collars that are in there and so we do get to participate in.

A portion of that reduction in gas costs, but really what we're trying to do is protect the margin against.

Unusual weather events that can blow out against us and if you end up giving up.

A nickel or a dime along the way in order to protect against.

The.

Potential blowout <unk>.

A reasonable insurance policy from our perspective, but Q2 forward is open.

Okay, great. Thank you.

The next question is from Richard Garcetti Arena with Wells Fargo. Please go ahead.

Thanks, Good morning.

So my first question is just on the updates.

To the Mitsui JV.

In the clean energy project as it looks like the initial Capex estimate.

From the feed studies roughly $3 billion.

Just curious.

Where does that compare to the original estimate when you signed the Mou back in.

Early 2022.

How much capacity does that entail.

And then also what protocols that you're putting in place too.

To maintain that cost that cost estimates as you progress through development.

Yes, so we have not made.

A final investment decision on that yet.

We have an estimate that we think is within kind of plus minus 10% ish of.

The final cost.

But we have not made a decision to proceed with that.

And therefore, there is nothing that we've done to kind of quote unquote lock in that price.

Because no decision has been made the progress.

Relative to when we initially.

Began talking with Mitsui and created Canada, the Mou around the joint venture to pursue this project.

We had.

I'd say, some very high level estimates of where we thought the costs might come in but we certainly have not gone through the process of doing the feed study to get an accurate cost estimate and so it was just directional at bass.

I would say that the.

The cost to complete including the.

Site level and a scalable infrastructure that Chris mentioned in his comments.

Is a bit higher than what we had maybe initially thought but I think thats reflective of.

But relatively tight labor market and inflation in general.

Particularly around some of the exotic metals that are required.

But what that also suggest is that the value of existing assets is that much higher.

As we saw with the.

The sale of the Weaver asset here, just recently and suggests that the value of the rest of our network is.

As again, even that much higher as well so we're we're still in process of evaluating.

Whether there is a project that we want to fund here or not.

And as part of that we are evaluating different production technologies and different amounts of carbon reduction levels and we'll make that ultimate decision sometime in the back half of this year, along with our partner Mitsui.

Okay, great. Thanks for that and then just talking about the nitrogen market it looks like.

You cited about 40% of ammonia capacity in Europe being shut down in early January and Thats up versus around 25% I believe.

Early November and this is during a period when European natural gas prices have actually come down over 40%. So I guess what is driving that is that is part of that curtailments maintenance shutdowns or are these.

Part of the permanent shutdowns.

Continued through.

Through 2024, but I think it can be it can be both a that there is also an issue of if you can acquire deepwater traded ammonia at a cost that's lower than what you can produce it using domestic gas. There is no reason not to do it if you.

To make that ultimate decision kind of sometime in the back half of this year, along with our partner Mitsui.

Or in a facility primarily doing nitrates as opposed to urea you don't.

<unk>.

And I think a reflection of.

Okay, great. Thanks for that and then just talking about the nitrogen market looks like.

The gas.

Current gas price today is in the cash market that was not available just a short time ago and so the reflection of 40% as I look back on Q4 and entering into Q1.

You cited about 40% of ammonia capacity in Europe being shut down in early January and that's up versus around 25% I believe as of early November and this is during a period when European natural gas prices have actually come down.

Youre, probably going to see some of those plants restart, especially with the Russian announcement.

Limiting ammonium nitrate exports that just came out today that.

Over 40%, so I guess what is driving that.

That's going to have a substantial impact on eastern Europe, and central Europe, and probably the ability to export for the Western European producers, who can export for example, Brazil had a 1 million ton consumption consumer of ammonium nitrate and Central America will need someone to supply that so.

That is part of that curtailments maintenance shutdowns or are these.

Part of the permanent shutdowns.

Two continued through through 2024, but I think it can be it can be both a that there is also an issue of if you can acquire deepwater traded ammonia at a cost that's lower than what you can produce it using domestic gas. There is no reason not to do it if you.

Let's say today.

It's $8 gas that's doable in relation to the absence of the product coming out of Russia. So things are changing.

In a facility primarily doing nitrates as opposed to urea you don't need the C O two.

And I think the gas as well as the supply market is as well.

Think a reflection of.

The gas.

Current gas price today is in the cash market that was not available just a short time ago and so the reflection of 40% as I look back on Q4 and entering into Q1.

The next question is from Edlin Rodriguez with Mizuho. Please go ahead.

Thank you and good morning, everyone. This is Tony or maybe for but I mean, if you compare where we are today.

Youre, probably going to see some of those plants restart, especially with the Russian announcement of limiting ammonium nitrate exports that just came out today.

Four five months ago are you more positive or less positive on the prospects of the industry.

That's going to have a substantial impact on eastern Europe, and central Europe, and probably the ability to export for the western European producers, who can export.

For 2000, 2024, and that's looking at some of the big drivers like corn prices corn acres wage the energy complex supply demand.

For example, Brazil had a 1 million ton consumption consumer of ammonium nitrate and Central America will need someone to supply that.

And also you want to address like yet.

You see things being more are you more or less positive. Thank you.

Let's say today at eight.

$8 gas that's doable in relation to the absence of the product coming out of Russia. So things are changing.

Yes, I mean, I think gas has been very constructive for us are our costs it looks like as they're shaping up for the balance of the year.

And I think the gas as well as the supply market is as well.

Should be down substantially relative to where we were back in November when we put together.

The next question is from Edlin Rodriguez with Mizuho. Please go ahead.

Our thoughts of where we expected the year to come out.

I also think that some of the other changes kind of structurally whether it's.

Thank you and good morning, everyone.

This is for Tony or maybe for bird I mean, if you compare where we are today with 345 months ago are you more positive or less positive on the prospects of the industry.

Okay.

Potential.

Imports running.

Slower than than expected in early spring.

What we believe is lower channel inventories than kind of <unk>.

In CF for 2000, 2024, and that's looking at some of the big drivers like corn prices corn acres wage the energy complex supply demand like anything else you want to address like yet do you see things being more are you more or less positive. Thank you.

Many expect out there all of those things I think are net positives for.

For our business, particularly for the first half.

So overall my sense is we're feeling pretty good about the way the year is shaping up I agree in terms of where we were coming into a falling market falling urea price market in Q4 and now in Q1 are rising urea market why is that.

Yes, I mean, I think gas has been very constructive for us are our costs it looks like as they're shaping up for the balance.

Related to energy is of course, and the inability of or the <unk>.

Non economic position of the European producer and higher imports, but youre seeing.

In terms of the global market of a very tight market <unk> had downtime in Malaysia export restrictions in Indonesia export restrictions in China as well as heavy imports and continued imports into India, but heavy imports into Brazil, and we're just entering our season as we've talked about previously with.

A tight market and needing to be to bring in product and so you've got a tighter global market and then that's reflected in price for the the values for the feed grains corn at $4 $64 70 is very attractive, especially when you look at trend yield over 180 and yields in Iowa.

Illinois, Indiana above 200, it's very profitable this will be the fourth best year in 10 years for the American farmer.

So when you couple that all together.

As well as global supply and demand I would say we're positive for 'twenty 'twenty 2024.

Of the global market of a very tight market you've had downtime in Malaysia export restrictions in Indonesia export restrictions in China as well as heavy imports and continued imports into India, but heavy imports into Brazil, and we're just entering our season as we've talked about previously with.

Okay. Thank you that's all I have.

The next question is from Venezuela with Barclays. Please go ahead.

Hey, good morning, Thanks for taking my question.

I just wanted to follow up a little bit on the international trade dynamics.

A tight market and needing to be to bring in product and so you're going to have a tighter global market and then that's reflected in price for the the values for the feed grains corn at $4 $64 70 is very attractive, especially when you look at trend yield over 180 and yields in Iowa.

In particular, the export markets versus the important markets, where youre seeing.

Especially in south.

South America, Brazil inventory levels, we've talked about the north Americans be low, but we all know Brazil has been a little bit more of an issue. So.

Within that.

Tom.

Need.

Illinois, Indiana above 200, it's very profitable this will be the fourth best year in 10 years for the American farmer.

What's your sense on the ground inventories in Brazil, right now and how does that shape up for your opportunities to potentially export into the region. Thank you.

So when you couple that altogether.

Yes, so <unk> is an active exporter of our major products ammonia and urea and ammonium nitrate.

As well as global supply and demand I would say we're positive for 2000 22024.

The UAE is predominantly gone to Europe, Argentina, and Australia, and urea is more spot and situational.

Okay. Thank you that's all I have.

The next question is from Ben Theurer with Barclays. Please go ahead.

This is where we are in Brazil today with about 44 million tons of consumption of N PK and the targets for 2024 are closer to 46 million tons youre going to need our projections are over 8 million tons of urea imports to Brazil.

Hey, good morning, and thanks for taking my question.

I just wanted to follow up a little bit on the international trade dynamics and.

In particular, the export markets versus the important markets, where youre seeing.

Especially in South America, Brazil inventory levels, we've talked about the north Americans being low, but we all know Brazil has been a little bit more of an issue. So.

Calendar year.

And that's a very positive move that they've pushed Brazil to the largest importing country, surpassing India, who is between 6% and 7 million tonnes now.

Within that seven to 8 million tonne of important need.

Brazil did have high levels of inventories in imports entering the year much of that was consumed during the suffering a season of which is January February or March of applications.

What's your sense on the ground inventories in Brazil, right now and how does that shape up for your opportunities to potentially export into the region. Thank you.

Yes. So <unk> is an active exporter of our major products ammonia, UA and urea and ammonium nitrate.

And they are low level importers to 300000 tonnes a month there we'd application starts in April and then we move to corn applications. In July August September and then carton later in the year and again repeating the cycle. So Brazil is the positive.

The UAE is predominantly gone to Europe, Argentina, and Australia, and urea is more spot and situational.

Say consumption train.

Where we are in Brazil today, with about 44 million tons of consumption of PK and the targets for 2024 are closer to 46 million tons youre going to need our projections are over 8 million tons of urea imports to Brazil.

And the world of fertilizer economies and its going to continue to play a major part and.

So the SMB right now is balanced globally for urea.

Thank you.

Calendar year.

The next question is from Andrew Wong with RBC capital markets. Please go ahead.

And that's a very positive move that pushed Brazil to the largest importing country, surpassing India, who is between 6% and 7 million tonnes now.

Hey, good morning.

So regarding your hurdle rate that's required for the investment decision at some point.

Brazil did have high levels of inventories in imports entering the year much of that was consumed during the suffering a season of which is January February and March of applications.

If you say, if you get to take or pay offtake with steady volumes and steady margins does that lower the rate or the hurdle versus some of your other projects or buybacks or anything else you'd be considering.

And they are low level importers to 300000 tonnes a month or we'd application starts in April and then we move to corn applications. In July August September and then carton later in the year and again repeating the cycle.

Yes, I think as you look at any any return on a project.

Set return with a risk premium based in there if you have take or pay that's offtake on a ratable basis.

Brazil is the positive I'd say consumption train.

Willing to take a lower return profile on that.

And the world of fertilizer economies and its going to continue to play a major part and so.

<unk> allows a lot of additional synergies that run throughout the entire network as we see with our mosaic contract with them, taking ammonia on a ratable basis lower inventory lower.

So the SMB right now is balanced globally for urea.

Thank you.

<unk> different things like that lower risk involved and therefore that allows you to have a lower risk premium and therefore, taking a slightly lower return on that.

The next question is from Andrew Wong with RBC capital markets. Please go ahead.

Hey, good morning.

So regarding your hurdle rate that's required for the investment decision at some point.

Okay, Great and then just regarding the Donaldson available ammonia project could you just provide the latest update for the injection well permits.

If you say like if you guys take or pay.

Offtake with steady volumes and steady margins does that lower the rate or the hurdle versus some of your other projects or buybacks or anything else you would be considering.

And I think.

You mentioned this Louisiana gaming primacy on our classics wells.

What does that mean and how quickly can you get approvals there and how quickly can drilling to be completed.

Yes, I think as you look at any any return on a project.

Set return with a risk premium based in there if you have take or pay that's offtake on a ratable basis.

Yes, so the approval.

Timeline on that is really based on our partner Exxon and what Theyre doing both with the classics and some of Thats, probably been accelerated some by their acquisition of the Denver pipeline because it allows them other access to <unk>.

Are we willing to take a lower return profile on that I mean that.

<unk> allows a lot of additional synergies that run throughout the entire network as we see with our mosaic contract with them, taking ammonia on a ratable basis lower inventory lower receivables different things like that lower risk involved and therefore that allows you to have a low.

Different states with with classics that may have.

I would say a shorter queue time than what Louisiana, where some of the other states. So we are we are confident that in 2025, we will economically be.

Operator: The risk premium and therefore, taking a slightly lower return on that.

Receiving a benefit related to the 45 Q.

Speaker Change: Okay, Great and then just regarding the Donaldson available ammonia project could you just provide the latest update for the injection well permits.

And therefore, we'll have low carbon ammonia ready.

That's great. Thank you.

Operator: And I think you mentioned this Louisiana gaming primacy on our classics wells.

The next question is from Vincent Andrews with Morgan Stanley. Please go ahead.

Operator: What does that mean and how quickly can you get approvals there and how quickly can drilling to be completed.

Thank you Tony on the Blue ammonia JV with Mitsui.

I guess a couple of questions one.

Operator: Yes, so the approval.

Yeah.

Timeline on that is really based on our partner Exxon and what Theyre doing both with the classics and some of Thats, probably been accelerated some by their acquisition of the <unk> pipeline because it allows them other access to <unk>.

If we get to the second half of 'twenty, four and I assume that's probably the third quarter call.

Maybe you'll have an update.

And youre not moving forward at that point.

What's happened do you think.

And then just secondly.

Secondly, I believe there are several other potential use of JV partners that you have out there is there any update.

Martin A. Jarosick: Different states with with classics that may have.

Martin A. Jarosick: I would say a shorter queue time than what Louisiana or some of the other states. So we are we are confident that in 2025, we will economically be.

On those or is that all pending the outcome with mitsui.

Yes, we were.

Very happy with the agreements that we have in place and the partners that we have lined up.

Martin A. Jarosick: Receiving a benefit related to the 45 Q.

To pursue these kinds of opportunities with us.

Martin A. Jarosick: And therefore, we'll have low carbon ammonia ready.

A lot of them that we have come out publicly with tend to be.

Speaker Change: That's great. Thank you.

Asian focus so a couple of Japanese firms as well as South Koreans.

Speaker Change: The next question is from Vincent Andrews with Morgan Stanley. Please go ahead.

I would say that the.

Thank you Tony on the Blue ammonia JV with Mitsui.

Korean government and the customers as a result are a little bit.

Tony Will: I guess a couple of questions one.

Tony Will: Yeah.

The hind from a timeline perspective.

Tony Will: If we get to the second half of 'twenty, four and I assume that's probably the third quarter call.

Compared to the Japanese and so we'll likely be making.

Tony Will: Maybe you'll have an update.

Decision around our plan.

And youre not moving forward at that point.

Principally targeting the Japanese market first and then will eventually look at both.

Tony Will: What's happened do you think and then just secondly, I believe there are several other potential use of JV partners that you have out there is there any update.

The Korean market.

Potentially European.

Tony Will: On those or is that all pending the outcome with mitsui.

Partners that we've discussed with as well further out.

Yes.

Tony Will: We're very happy with the agreements that we have in place and the partners that we have lined up to pursue these kinds of opportunities with us.

That could be served by one of the St planter.

Might have different requirements associated with it.

But.

Hi.

A lot of them that we have come out publicly with tend to be.

We decided not to proceed.

I think it's a combination of.

Tony Will: Asian focus so a couple of Japanese firms as well as South Koreans.

Very likely just.

Tony Will: I would say that.

Aggregate cost associated with.

Tony Will: Korean government and the customers as a result, our.

With moving forward.

Tony Will: Or a little bit.

And lack of line of sight on making sure that we can earn an appropriate risk adjusted rate of return against.

Tony Will: Behind from a timeline perspective.

Compared to the Japanese and so we'll likely be making.

A decision around our plan.

Against that cost not.

Tony Will: <unk> targeting the Japanese market first and then will eventually look at both.

Relative to.

The global Essen D. I think I kind of went through that a bit in my.

Prepared remarks, which is we're constructive on where we sit right now.

Tony Will: Korean market and potentially European.

Tony Will: Partners that we've discussed with as well further out.

Our results last year were with <unk>.

Strong we're looking at another good year this year longer term traditional applications for nitrogen continued to grow in the kind of one and a half plus or minus percent range per year, and there's not enough new projects that are currently under construction globally to meet that requirement.

That could be served by one in the same plant.

Tony Will: Might have different requirements associated with it but.

Tony Will: But.

Tony Will: Hi.

Tony Will: If we decide not to proceed.

Tony Will: I think it's a combination of.

Tony Will: Very likely just.

Adding into the.

Tony Will: Aggregate cost associated with.

Either supply deficit or demand increase.

Tony Will: With moving forward.

Increase.

As you've got.

Tony Will: And lack of line of sight on and making sure that we can earn an appropriate risk adjusted rate of return against.

Some plants around the world, including Trinidad.

Europe.

That are facing challenges with gas availability and gas cost and then you've got new or potentially new applications for ammonia.

Tony Will: Against that cost not.

Tony Will: Relative to.

Tony Will: The global Essen D. I think I kind of went through that a bit in my prepared remarks, which is we're constructive on where we sit right now.

That are also developing so all of those things lead to a.

A tighter global SMB marketplace bidding and higher and higher cost of production around the world and that provides I think a reasonable backdrop.

Bert: Our our results last year, where we're strong we're looking at another good year. This year longer term traditional applications for nitrogen continued to grow in the kind of one and a half plus or minus percent range per year, and there's not enough new projects that are currently under construction.

For us to be considering building new production capacity, but we have to at the end of the day be comfortable that.

We can earn an appropriate rate of return thats well above our cost of capital for us to want to proceed with the project like that.

Bert: <unk> globally to meet that requirement.

Great. Thanks very much.

Bert: Adding into the.

The next question is from Aaron <unk> with Bahrenburg. Please go ahead.

Bert: Either supply deficit or demand.

Bert: Increase.

Bert: As you've got.

Hi, Good morning, Thanks for taking my question. My first one is about the comments you made on farmer incomes in your press release, you talked about improving.

Bert: Some plants around the world, including Trinidad.

Bert: Europe.

Bert: That are facing challenges with gas availability and gas cost and then you've got new or potentially new applications for ammonia.

Improving farmer incomes in North America and in 2024.

I was wondering whats the thought process here considering that we saw John Deere today being a little bit more downbeat and Athene USDA report last month was a little bit downbeat too.

Bert: That are also developing so all of those things lead to a.

Bert A. Frost: A tighter global SMB marketplace bidding and higher and higher cost of production around the world and that provides I think a reasonable backdrop.

My second question is around Blue ammonia and <unk>.

The news around the potential partnership with <unk> is there any color you can provide about the implied blue premium you are assuming or you had in mind and my final one is on.

For us to be considering building new production capacity, but we have to at the end of the day be comfortable with that.

Bert A. Frost: We can earn an appropriate rate of return.

Well above our cost of capital for us to want to proceed with the project like that.

Exports from China.

Kiara last week in Europe.

Speaker Change: Great. Thanks very much.

You mentioned that.

Chinese exports could potentially come back a little bit messaging today in the presentation since that.

The next question is from Aaron Crlf with Baron Berg. Please go ahead.

There could be some temporary windows about when.

Aaron Crlf: Hi, good morning, Thanks for taking my question.

Aaron Crlf: I just wanted to ask about the comments you made on the operating comes in your press release, you talked about improved.

Chinese crude exports. So just wondering if you see that situation changing.

We would expect again, a very tight export market from from China at this stage. Thank you.

Aaron Crlf: Improving farmer incomes in North America and in 2024.

Speaker Change: I was wondering whats the thought process here considering that we saw John Deere today being a little bit more downbeat and Athene USDA report last month was a little bit downbeat too.

Hey, good morning regarding the farmer income comment at what might come there was it's the fourth best in about 10 years. So when you look at.

As compared to last year the year before.

Speaker Change: My second question is around Blue ammonia and <unk>.

Youre referencing John Deere or some of the chemical or seed suppliers.

Speaker Change: The news around the potential partnership with <unk> is there any color you can provide about the implied blue premium you are assuming or you had in mind and my final one is on.

Not.

It's.

Lower but it's still at $4 $64 70, <unk> corn for December corn pricing today, and what was Hedgeable not just a few months ago at $5 10 to 520.

Exports from China.

Very attractive again based on just trend yield of 180 bushels, an acre which is what we're targeting for 2024.

Bert A. Frost: Kiara last week in Europe.

Bert A. Frost: You mentioned that.

Bert A. Frost: Chinese exports could potentially come back a little bit your messaging today in the presentation it seems that.

But most high state farmers are in the 200 to 250 bushels. So.

Bert A. Frost: There could be some temporary windows.

Very profitable even with the drop in fertilizer prices the drop in diesel prices and so you have to look at the total cost structure for a farmer, whether that's owned land rented land variable cost against fixed costs and putting that whole structure together.

Bert A. Frost: <unk>.

Bert A. Frost: Chinese crude exports. So just wondering if you see that situation changing pretty much you would expect again, a very tight export market from China at this stage. Thank you.

Hey, good morning regarding the farmer income comment.

My comment was it's the fourth best in about 10 years. So when you look at.

It's still a good time to be a farmer that was the point regarding the exports from China, we've seen a different China about every other year in our prepared remarks and communication about what we expect out of China is that the government restrictions are in place for urea and some phosphate products they will continue through or into.

Speaker Change: Compared to last year the year before.

Speaker Change: Youre referencing John Deere or some of the chemical or seed suppliers.

Bert A. Frost: Not.

Bert A. Frost: It's lower but it's still at $4 $64 70, <unk> corn for December corn pricing today, and what was Hedgeable not just a few months ago at $5 10 to $5 20.

Q2.

And our expectations for for China are that they will export they will return to the export market and being that in the past five years has been between 2% and 5 million tons. We would say three to 4 million tonnes of exports of logical volume for 2024.

Bert A. Frost: Very attractive again based on just trend yield of 180 bushels, an acre which is what we're targeting for 2024.

Bert A. Frost: But most high state farmers are in the 200 to 250 bushels. So.

And then relative to <unk>.

Chris: Very profitable even with the drop in fertilizer prices the drop in diesel prices and so you have to look at the total cost structure for a farmer, whether that's one lender rented land variable cost against fixed costs and putting that whole structure together.

Blue ammonia premium.

Blue ammonia for us makes great economic sense.

Even if there were no premium in the marketplace because of the 45 Q.

Tax credit I think we've kind of gone through that math, a little bit in the past, but we expect.

Bert: It's still a good time to be a farmer that was the point regarding the exports from China, we've seen a different China about every other year in our prepared remarks and communication about what we expect out of China is that the government restrictions are in place for urea and some phosphate products. They will continue through.

Our net benefit from the Donaldson Bill Blue.

Ammonia project.

Order of magnitude of roughly about $100 million net benefit to us per year.

So just on the face of it that's a great investment for US now that said, we have had I would say ever increasing interest levels in blue ammonia from a variety of different constituents, including a number of our existing.

Bert: Our into Q2.

Bert: And our expectations for for China are that they will export they will return to the export market and being that in the past five years has been between two and 5 million tons. We would say three to 4 million tonnes of exports of logical volume for 2024.

Customers, but also some some other folks that have reached out and so based on a relatively small volume.

Bert: And then relative to blue ammonia premium.

Decarbonize or blue ammonia, that's going to be available principally just from us beginning in 2025 and in the <unk>.

Bert: Blue Mountain view for Us makes great economic sense.

Bert: Even if there were no premium in the marketplace because of the 45 Q.

Appetite in the marketplace.

We absolutely believe that.

Bert: Tax credit I think we've kind of gone through that math, a little bit in the past, but we expect.

It's going to be a.

Commodity is scarce supply relative to the appetite for it and so it will carry with it a premium in the marketplace just on an S&P theres more demand than there is supply on it.

Bert: Our net benefit from the Donaldson Bill Blue.

Christopher D. Bohn: Ammonia project.

Christopher D. Bohn: Order of magnitude of roughly about $100 million net benefit to us per year.

We have not formalized exactly.

How were thinking about selling that in because we want to begin.

Actually producing it and thats going to be dependent to some extent on the timing of of our partner Exxonmobil and this deal, but we feel very good about the likelihood of a.

Christopher D. Bohn: Customers, but also some some other folks that have reached out and so based on a relatively small volume of <unk>.

A reasonable premium that adds on to what's a very attractive regulatory framework.

Blue plus ill add one more positive comment for the team for the company.

Christopher D. Bohn: Carbonized or blue ammonia, that's going to be available principally just from US beginning in 2025 and an appetite in the marketplace.

For what we are about as a company with the do it right culture, we have the highest on stream factor we have the best safety statistics in the world and we're going to lead the world in this move to low carbon ammonia because it's the right thing to do and the government is incentivizing us.

Christopher D. Bohn: We absolutely believe that.

Christopher D. Bohn: It's going to be a.

Christopher D. Bohn: Commodity is scarce supply relative to the appetite for it and so it will carry with it a premium in the marketplace just on an SMT theres more demand than there is supply on it.

And our shareholders want us to do this and so theres a lot of positive energy going forward with that and what we will bring to the market.

Christopher D. Bohn: We have not formalized exactly.

Thank you very much.

Christopher D. Bohn: How were thinking about selling that in because we want to begin.

Yeah.

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

Christopher D. Bohn: Actually producing it and thats going to be dependent to some extent on the timing of of our partner Exxonmobil and this deal, but we feel very good about the likelihood of.

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

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

Christopher D. Bohn: A reasonable premium that adds on to what's a very attractive regulatory framework.

Speaker Change: Blue plus I'll add one more positive comment for the team for the company.

Tony Will: And for what we are about as a company with the do it right culture, we have the highest onstream factor, we have the best safety statistics in the world and we're going to lead the world in this move to low carbon ammonia because it's the right thing to do and the government is incentivizing us.

And our shareholders want us to do this and so theres a lot of positive energy going forward with that and what we will bring to the market.

Speaker Change: Thank you very much.

Speaker Change: Yeah.

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

Martin: Thanks, everyone for joining us today, we look forward to seeing you at upcoming conferences.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

[music].

Tony Will: Yes.

Tony Will: [music].

Tony Will: Yes.

Tony Will: Okay.

[music].

Q4 2023 CF Industries Holdings Inc Earnings Call

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