Q2 2024 CF Industries Holdings Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the CF Industries first half and second quarter 2024 earnings call.

Operator: All participants will be in a listen-only mode. 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 toward the end of the presentation. To pose a question at any time, please press star then 1 on your touchtone phone. I would now like to turn the presentation over to our host for today, Mr. Martin Jarosick with CF Investor Relations. Please go ahead.

Speaker Change: All participants will be in a listen-only mode. 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 toward the end of the presentation. To pose a question at any time, please press star, then one, on your touchtone phone.

Speaker Change: I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick with CF Investor Relations. Please go ahead.

Martin Jarosick: Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Tony Will, President and CEO; Chris Bohn, Executive Vice President and Chief Operating Officer; Greg Cameron, Executive Vice President and Chief Financial Officer; and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain.

Speaker Change: Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Tony Will, President and CEO , Chris Bohn, Executive Vice President and Chief Operating Officer, Greg Cameron, Executive Vice President and Chief Financial Officer, and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain.

Martin Jarosick: CF Industries reported its results for the first half and second quarter of 2024 yesterday after the call. 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 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 statement.

Unknown Attendee: and four earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, fall by zero.

Speaker Change: reported its results for the first half and second quarter of 2024 yesterday afternoon. On this call, we'll review the results, discuss our outlook, and then host a question and answer session.

Unknown Attendee: We will facilitate a question-and-answer session toward the end of the presentation. To pose a question at any time, please press star then one on your touch-tone phone.

Speaker Change: Statements made on this call and in the presentation on our website that are not historical facts are forward looking statements.

Speaker Change: 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.

Martin Jarosick: I would now like to turn the presentation over to the host for today. Mr. Martin Jarosick with CF Investor Relations, please go ahead. Good morning and thanks for joining the CF Industries Earnings conference call. With me today are Tony Will, President and CEO, Chris Bohn, Executive Vice President and Chief Operating Officer, Greg Cameron, Executive Vice President and Chief Financial Officer, and Bert Frost, Executive Vice President of Sales, Market Development and Supply Chain.

Speaker Change: more detailed information about factors that may affect our performance might be found in our filings with the sec to available on our website also you'll find reconciliations between gap andn-gaap measures in the press releaseand presentation posted on our website

Martin 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'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now, I'm going to introduce Tony Will.

Tony Will: Thanks, Martin, and good morning, everyone. I'm going to start with a big welcome to Greg Cameron, who joined the CF Industries team as our Chief Financial Officer in June, this being his first earnings call with us. Greg brings a strong background in executive leadership, finance, and clean energy. He is succeeding Chris Bohn, who was promoted to Chief Operating Officer. So welcome, Greg, and congratulations, Chris. Turning to earnings, yesterday, we posted financial results for the second quarter of 2024, in which we generated adjusted EBITDA of over $750 million. This brought adjusted EBITDA for the first half of this year to $1.2 billion.

Tony Welch: Now let me introduce Tony Welch. Thanks, Martin, and good morning, everyone. I want to start with a big welcome to Greg Cameron, who joined the CF Industries team as our chief financial officer in June , this being his first earnings call with us.

Martin Jarosick: CF Industries reported this results for the first half in 2nd quarter of 2024 yesterday afternoon. On this call, we will 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 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 made different materially from what is expressed or implied in any statements.

Speaker Change: Greg brings a strong background in executive leadership, finance, and clean energy. He is succeeding Chris Bohn, who was promoted to Chief Operating Officer. So welcome, Greg, and congratulations, Chris.

Speaker Change: Turning to earnings, yesterday we posted financial results for the second quarter of 2024 in which we generated adjusted EBITDA of over $750 million. This brought adjusted EBITDA for the first half of this year to $1.2 billion.

Martin 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 recommendations between GAF and NONGAF measures in the press release and presentation posting on our website.

Tony Will: We're very pleased with our performance during the quarter, both in terms of how well we operated and also the progress we have made on our decarbonization and clean energy projects. With that, Chris is going to provide more detail on our operating results, as well as on our strategic initiatives. Chris. Thank you.

We're very pleased with our performance during the quarter, both in terms of how well we operate and also the progress we have made on our decarbonization and clean energy projects. With that, Chris is going to provide more detail on our operating results as well as on our strategic initiatives.

Tony Will: Now let me introduce Tony Will. Thanks, Martin and good morning, everyone. I want to start with a big welcome to Greg Cameron to join the CF Industries team as our Chief Financial Officer in June, as being his first earnings call with us. Greg brings a strong background in Executive Leadership, Finance and Clean Energy. He is succeeding Chris Bohn, who was promoted to Chief Operating Officer. So welcome, Greg, and congratulations, Chris. Turning to earnings, yesterday we posted financial results for the second quarter of 2024, in which we generated adjusted EBITDAV over $750 million.

Chris Bohn: Thanks Tony. The CF Industries team delivered outstanding operational performance during the second quarter. We operated our ammonia plants at 99% utilization rates in the second quarter, following a challenging first quarter of production outage. This utilization performance includes the Weggemann Ammonia Production Facility, which has been operating approximately 10 percent above nameplate capacity following its first significant CF-led maintenance event. Most importantly, we operated safely. Our 12-month recordable incident rate at the end of the quarter was.17 incidents per 200,000 labor hours.

Chris Bohn: The CF Industries team delivered outstanding operational performance during the second quarter. We operated our ammonia plants at 99% utilization rate in the second quarter, following a challenging first quarter of production outages.

Speaker Change: this utilization performance includes the wagam ammonia production facility which has been operating approximately ten percent above namplate capacity following its first significancecy up led maintenance of ent

Tony Will: This brought adjusted EBITDAV for the first half of this year to $1.2 billion. We are very pleased with our performance during the quarter, both in terms of how well we operated and also the progress we have made on our decarbonization and clean energy projects.

Speaker Change: Most importantly, we operated safely. Our 12-month recordable incident rate at the end of the quarter was 0.17 incidents per 200,000 labor hours, significantly better than industry averages and one of the company's lowest incident rates ever.

Chris Bohn: Significantly better than industry averages and one of the company's lowest incident rates ever. We continue to advance a series of strategic initiatives. These include our industry-leading carbon capture and sequestration projects that will generate a low-carbon product and a significant 45Q tax credit. The Donaldsonville project is on track, with sequestration expected to begin in 2025. We also recently announced the carbon capture and sequestration project at our Yazoo City, Mississippi complex. We will invest approximately $100 million in the site to enable ExxonMobil to transport and sequester up to a half a million metric tons of carbon dioxide annually. We expect sequestration at Yadu City to begin in 2028.

Christopher Bohn: With that, Chris is going to provide more detail on our operating results, as well as on our strategic initiatives. Chris, thanks, Tony. The CF Industries team delivered outstanding operational performance during the second quarter. We operated our ammonia plants at 99% utilization rate in the second quarter, following a challenging first quarter of production outages. This utilization performance includes the Wagonment Ammonia Production Facility, which has been operating approximately 10% above nameplate capacity, following its first significant CF lead maintenance event.

Speaker Change: We continue to advance a series of strategic initiatives. These include our industry-leading carbon capture and sequestration projects that will generate low-carbon product and significant 45Q tax credits.

Speaker Change: The Donaldsonville project is on track with sequestration expected to begin in 2025. We also recently announced the carbon capture and sequestration project at our Yazoo City, Mississippi complex.

Speaker Change: We will invest approximately a hundred million dollars in the site to enable Exxon Mobil to transport and sequester up to a half a million metric tons of carbon dioxide annually.

Christopher Bohn: Most importantly, we operated safely. Our 12 month recordable incident rate at the end of the quarter was 0.17 incidents per 200,000 labor hours, significantly better than industry averages and one of the company's lowest incident rates ever.

Chris Bohn: Additionally, commissioning for our Green Ammonia Project at Donaldsonville is ongoing as we work to safely integrate the electrolyzer into our ammonia operation. We continue to evaluate construction of a Greenfield Low Carbon Ammonia Facility in Louisiana with global partners. We have made additional progress on our autothermal reforming ammonia plant feed study, which should be complete before the end of the year. We remain focused on a disciplined approach based on the return profile of new capacity, the technologies needed to meet customers' carbon intensity requirements, and the global demand outlook. With that, I will turn it over to Bert to discuss the global nitrogen market.

Speaker Change: We expect sequestration at Yazoo City to begin in 2028. Additionally, commissioning for our green ammonia project at Donaldsonville is ongoing as we work to integrate safely the electrolyzer into our ammonia operations.

Christopher Bohn: We continue to advance the series of strategic initiatives. These include our industry leading carbon capture and sequestration projects that will generate low carbon product and significant 45Q tax. Credits. The Donaldsonville Project is on track with sequestration expected to begin in 2025. We also recently announced the Carbon Capturing Equestration Project at our Yazoo City Mississippi Complex. We will invest approximately $100 million in the site to enable Exxon Mobile to transport and sequester up to a half a million metric tons of carbon dioxide annually.

Speaker Change: We continue to evaluate construction of a Greenfield Low Carbon Ammonia Facility in Louisiana with global partners. We have made additional progress on our Auto-Thermal Reforming Ammonia Plant Feed Study, which should be complete before the end of the year.

Bert: We remain focused on a disciplined approach based on the return profile of new capacity, the technologies needed to meet customers' carbon intensity requirements, and the global demand outlook. With that, let me turn it over to Bert to discuss the global nitrogen market.

Bert Frost: Thanks, Chris. The North American spring application season saw strong demand for urea and UAN driven by higher than expected planted corn acres in the United States. This demand absorbed Urea and UAN imports that were significantly higher in 2024 than the prior year. Spring ammonia applications were low this year following a strong fall 2023 application. However, industrial demand and exports offset the lower spring volume. As a result, we believe the North American Nitrogen Channel exited the spring application season with low inventories across all products.

Christopher Bohn: We expect sequestration at Yazoo City to begin in 2028. Additionally, commissioning for our green ammonia project at Donaldsonville is ongoing as we work to integrate safely the electrolyzer into our ammonia operations. We continue to evaluate construction of a greenfield low carbon ammonia facility in Louisiana with global partners. We have made additional progress on our auto-thermal reforming ammonia plant feed study, which should be complete before the end of the year. We remain focused on a disciplined approach based on the return profile of new capacity, the technologies needed to meet customers' carbon intensity requirements and the global demand outlook.

Bert: Thanks Chris. The North American spring application season saw strong demand for urea and UAN, driven by higher than expected planted corn acres in the United States.

Bert: This demand absorbed urea and UAN imports that were significantly higher in 2024 than the prior year. Spring ammonia applications were low this year, following a strong fall 2023 application season.

Bert: However, industrial demand and exports offset the lower spring volumes.

Bert: as a result we believe the north american nitrogen channel exited the pring application season with low inventories across all products

Bert Frost: This supported our ammonia and UAN fill programs, which achieved prices that were well above last year's programs but also represented value for farmers despite lower corn prices. Corn prices have been declining due to the anticipated high production of corn in the United States and Brazil this year.

Bert: This supported our ammonia and UAN fill programs, which achieved prices that were well above last year's programs, but also represent value for farmers despite lower corn prices.

Bert Frost: With that, let me turn it over to Burke to discuss the global nitrogen market. Thanks, Chris. The North American Spring application season saw strong demand for Eurea and UAN driven by higher than expected planted corn acres in the United States. This demand absorbed Eurea and UAN imports that were significantly higher in 2024 than the prior year. Spring ammonia applications were low this year following a strong fall 2023 application season. However, industrial demand and exports offset the lower spring volumes.

Bert: Corn prices have been declining due to anticipated high production of corn in the United States and Brazil this year. As a result, the outlook for farm economics is softer compared to recent years.

Bert Frost: As a result, the outlook for farm economics is softer compared to recent years, and we have begun to see this ripple through different parts of the agricultural value chain. We don't expect to see a major impact on nitrogen, given the non-discretionary nature of our products, but we may see changes in buyer behavior. Globally, the nitrogen supply-demand balance tightened as the second quarter progressed. Natural gas curtailments in Egypt resulted in widespread nitrogen production outages from late May to early July, reducing global supply. The continued absence of urea exports from China also helped tighten the global market. We expect exports from China to resume at some point in the second half.

Bert: We have begun to see this ripple through different parts of the agricultural value chain. We don't expect to see a major impact for nitrogen, given the non-discretionary nature of our products, but we may see changes in buyer behavior.

Bert Frost: As a result, we believe the North American Nitrogen Channel exited the spring application season with low inventories across all products. This supported our ammonia and UAN fill programs, which achieved prices that were well above last year's programs, but also represent value for farmers despite lower corn prices. Corn prices have been declining due to anticipated high production of corn in the United States in Brazil this year. As a result, the outlook for farm economics is softer compared to recent years.

Speaker Change: globally the nitrogen supply demand balanceced tightened in as the second quarter progressed natural gas curtailments in egypt resulted in widespread nitrogen production outages from late may to early july reducing global supply

Speaker Change: The continued absence of urea exports from China also helps tighten the global market.

Bert Frost: However, we believe total volumes for the year will be much lower than the 4.3 million metric tons of urea exported in 2023, given the Chinese government's focus on domestic fertilizer availability. Brazil and India will be a key focus of the global nitrogen market in the coming months. They continue to project that urea consumption and imports in Brazil will grow in 2024, and Ports of Eurea to India will be lower than in previous years as domestic production is ramped up. However, India has imported less than 2 million metric tons of urea so far in 2024.

Bert: We expect exports from China to resume at some point in the second half. However, we believe total volumes for the year will be much lower than the 4.3 million metric tons of urea exported in 2023, given the Chinese government's focus on domestic fertilizer availability.

Bert Frost: We have begun to see this ripple through different parts of the agricultural value chain. We don't expect to see a major impact for nitrogen given the non-discretionary nature of our products, but we may see changes in buyer behavior.

Bert: Brazil and India will be a key focus of the global nitrogen market in the coming months.

Bert Frost: Globally, the nitrogen supply demand balance tightened as the second quarter progressed. Natural gas curtailments in Egypt resulted in widespread nitrogen production outages from late May to early July, reducing global supply. The continued absence of Urea exports from China also helped tighten the global market. We expect exports from China to resume at some point in the second half. However, we believe total volumes for the year will be much lower than the 4.3 million metric tons of Urea exported in 2023 given the Chinese government's focus on domestic fertilizer availability.

Bert: We continue to project that urea consumption and imports in Brazil will grow in 2024.

Bert: Imports of urea to India will be lower than in previous years as domestic production is ramped up.

Bert: However, India has imported less than 2 million metric tons of urea so far in 2024. As a result, we believe substantial import volumes are required in the coming months to meet urea demand in India.

Bert Frost: As a result, we believe substantial M4 volumes are required in the coming months to meet urea demand. On a longer term basis, we anticipate growing demand for low carbon ammonia and low carbon nitrogen fertilizers for traditional applications. We've had a growing number of conversations with customers who want low-carbon versions of the products they buy today. This is because consumers of agricultural and industrial products, including ethanol producers such as Poet, are increasingly focused on reducing the carbon footprint of their supply chain, which lower-carbon fertilizers will do in a quantifiable and verifiable manner. We expect even greater interest as we bring low-carbon ammonium fertilizers to the market. With that, Greg, we'll cover our financial...

Bert: On a longer term basis, we anticipate growing demand for low carbon ammonia and low carbon nitrogen fertilizers for traditional applications.

Bert: We've had a growing number of conversations with customers who want low carbon versions of the products they buy today.

Bert Frost: Brazil and India will be a key focus of the global nitrogen market in the coming months. We continue to project that Urea consumption in imports in Brazil will grow in 2024. In ports of Urea to India will be lower than in previous years as domestic production is ramped up. However, India has imported less than 2 million metric tons of Urea so far in 2024. As a result, we believe substantial import volumes are required in the coming months to meet Urea demand, in India.

Speaker Change: this is because the consumers of agricultural industrial products including ethanol producers such as poet are increasingly focused on reducing the carbon footprint of their supply chain which lower carbon fertilizers will do itin quantifiable and certifiable manner

Speaker Change: We expect even greater interest as we bring low-carbon ammonia and fertilizers to the market. With that, Greg will cover our financial performance.

Greg Cameron: Thanks Bert. For the first half of 2024, the company reported net earnings attributable to common stockholders of approximately $614 million, or $3.31 per diluted share. EBITDA and adjusted EBITDA were both approximately $1.2 billion. For the second quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $420 million, or $2.30 per diluted share. EBITDA, and Adjusted EBITDA, both $752 million. As you can see on slide 5, the largest driver of adjusted EBITDA variance between these periods and the same periods in 2023 was lower product prices, partially offset by lower realized natural gas costs and our cost of sale.

Greg: Thanks, Bert. For the first half of 2024, the company reported net earnings attributable to common stockholders of approximately $614 million, or $3.31 per diluted share. EBITDA and adjusted EBITDA were both approximately $1.2 billion.

Bert Frost: On a longer-term basis, we anticipate growing demand for low carbon ammonia and low carbon nitrogen fertilizers for traditional applications. We've had a growing number of conversations with customers who want low carbon versions of the products they buy today. This is because the consumers of agricultural and industrial products, including ethanol producers such as Poet, are increasingly focused on reducing the carbon footprint of their supply chain, which lower carbon fertilizers will do it in a quantifiable and certifiable manner.

Greg: For the second quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $420 million, or $2.30 per diluted share. EBITDA and adjusted EBITDA were both $752 million.

Speaker Change: As you can see on slide 5, the largest driver of adjusted EBITDA variance between these periods and the same periods in 2023 was lower product prices, partially offset by lower realized natural gas costs and our cost of sales.

Gregory Cameron: We expect even greater interest as we bring low carbon ammonia and fertilizers to the market. With that, Greg recover our financial performance. Thanks, Burke. For the first half of 2024, the company reported net earnings attributable to common stockholders of approximately $614 million or $3.31 per diluted share. EBITDA and adjusted EBITDA were both approximately $1.2 billion. For the second quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $420 million or $2.30 per diluted share.

Greg Cameron: Our trailing 12-month net cash from operations was $2 billion, and free cash flow was approximately $1.2 billion. We continue to return substantial capital to our shareholders. Over the previous 12 months, we paid $341 million in dividends. We also repurchased 13.1 million shares, approximately 7% of outstanding shares at the start of the period, for $1 billion. We have approximately $1.9 billion remaining on our current share repurchase authorization, which we intend to complete by its expiration in December of 2025.

Greg: Our trailing 12-month net cash from operations was $2 billion, and free cash flow was approximately $1.2 billion.

Greg: We continue to return substantial capital to our shareholders. Over the previous 12 months, we paid $341 million in dividends.

Bert: We also repurchased 13.1 million shares, approximately 7% of outstanding shares at the start of the period for $1 billion.

Gregory Cameron: EBITDA and adjusted EBITDA were both $752 million. As you can see on 5.5, the largest driver of adjusted EBITDA variants between these periods and the same periods in 2023 was lower product prices, partially offset by lower realized natural gas costs in our costs to sales. Our trailing 12-month net cash from operations was $2 billion and free cash flow was approximately $1.2 billion. We continue to return substantial capital to our shareholders. Over the previous 12 months, we pay $341 million in dividends.

Bert: We have approximately $1.9 billion remaining on our current share repurchase authorization, which we intend to complete by its expiration in December of 2025.

Greg Cameron: Share repurchases, coupled with disciplined investment in growth, continue to offer strong returns for our shareholders. We believe our enterprise value remains significantly undervalued. This is reinforced by two recent acquisitions in our industry, the first one focused on traditional nitrogen products and the last driven by low carbon ammonia that transacted at valuations consistent with our view of our assets but significantly above our current enterprise value. With that, Tony will provide some closing remarks before we open the call to Q&A.

Bert: Share repurchases, coupled with disciplined investments in growth, continue to offer strong returns for our shareholders.

Bert: We believe our enterprise value remains significantly undervalued.

Bert: This is reinforced by two recent acquisitions in our industry.

Bert: The first one focused on traditional nitrogen products, and the last driven by low-carbon ammonia that transacted at valuations consistent with our view of our assets, but significantly above our current enterprise value.

Gregory Cameron: We also repurchased $13.1 million shares, approximately 7% of outstanding shares at the start of the period for $1 billion. We have approximately $1.9 billion remaining on our current share repurchase authorization, which we intend to complete by its expiration in December of 2025. Share repurchases coupled with discipline investments in growth continue to offer strong returns for our shareholders.

Tony Will: Thanks, Greg. A year ago, on our second quarter earnings call, I expressed dissatisfaction with our safety record, as we had experienced an unacceptable number of very preventable injuries. I am really proud of the team for their response and focus on this front, and we have achieved fantastic results both on safety as well as on asset utilization and on-stream factors. So really well done to Chris, Ashraf, Sean, Kelvin, and the entire manufacturing team. I also want to recognize the rest of the organization.

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

Tony Welch: Thanks Greg. A year ago, on our second quarter earnings call, I expressed dissatisfaction with our safety record, as we had experienced an unacceptable number of very preventable injuries.

Tony: I am really proud of the team for their response and focus on this front, and we have achieved fantastic results both on safety as well as our asset utilization and on-stream factors.

Gregory Cameron: We believe our enterprise value remains significantly undervalued. This is reinforced by two recent acquisitions in our industry. The first one focused on traditional nitrogen products and the last driven by low carbon ammonia that transacted at valuations consistent with our view of our assets, but significantly above our current enterprise value.

Bert: So, really well done to Chris, Ashraf, Sean, Kelvin, and the entire manufacturing team.

Tony Will: We are operating extremely well, not only in manufacturing but across the whole company. Our price realizations were strong. We ended the quarter in a fantastic position from an inventory perspective, and we are doing a great job on the supply chain side with logistics and gas procurement. Before we turn to your questions, I do want to highlight one other thing that Greg touched on during his remarks.

Bert: I also want to recognize the rest of the organization. We are operating extremely well, not only in manufacturing, but across the whole company.

Tony Will: With that, Tony will provide some closing remarks before we open the call to Q&A. Thanks, Greg.

Bert: Our price realizations were strong. We ended the quarter in a fantastic position from an inventory perspective. And we are doing a great job on the supply chain side with logistics and gas procurement.

Tony Will: A year ago on our second corner earnings call, I expressed just satisfaction with our safety record as we had experience an unacceptable number of very preventable injuries. I am really proud of the team for their response and focus on this run. We have achieved fantastic results both on safety as well as our asset utilization and on-stream factors. Really well done to Chris, Ashraf, Sean, Kelvin, and the entire manufacturing team. I also want to recognize the rest of the organization.

Bert: Before we turn to your questions, I do want to highlight one other thing that Greg touched on during his remarks.

Tony Will: We've seen two significant transactions recently by knowledgeable, successful companies acquiring production assets in North America. One transaction, as Greg mentioned, was by a long-term entrenched industry participant on the agriculture side. The other was by an energy company looking to capitalize on the clean energy attributes of low-carbon ammonia. Both transactions place values on production assets in North America, roughly the new build or replacement cost of those assets.

Speaker Change: We've seen two significant transactions recently by knowledgeable, successful companies acquiring production assets in North America.

Bert: One transaction, as Greg mentioned, was by a long-term entrenched industry participant in the agriculture side of the business.

Bert: The other by an energy company looking to capitalize on clean energy attributes of low-carbon ammonia.

Bert: Both transactions place values on production assets in North America, roughly new build or replacement cost of those assets.

Tony Will: We are operating extremely well, not only in manufacturing but across the Our price realizations were strong. We ended the quarter in a fantastic position from an inventory perspective, and we are doing a great job on the supply chain side logistics and gas procurement.

Tony Will: So it is clear that knowledgeable companies are looking at the space, and seeing higher cash generation and more persistence of that cash generation than the general market recognizes. With our operations really hitting on all cylinders and our world-class EBITDA-to-cash conversion efficiency... We are in a unique position to continue creating significant value for our long-term shareholders. In fact, over the last 15 years, we have leveraged our cash generation to buy back half of the outstanding shares of the company while increasing our production capacity by over a third.

Bert: so it is clear that knowledgeable companies looking at the space

Speaker Change: see higher cash generation and more persistence of that cash generation than the general market recognizes.

Tony Will: Before we turn to your questions, I do want to highlight one other thing that Greg touched on during his remarks. We've seen two significant transactions recently by knowledgeable, successful companies acquiring production assets in North America. One transaction, as Greg mentioned, was by a long-term entrenched industry participant in the agriculture side of the business. The other by an energy company looking to capitalize on clean energy attributes of low carbon ammonia. Both transactions placed values on production assets in North America, roughly new build or replacement cost of those assets. So it is clear that knowledgeable companies looking into space see higher cash generation and more persistence of that cash generation than the general market recognizes.

Speaker Change: with our operations really hitting on all cylinders and our world-class EBITDA to cash conversion efficiency.

Speaker Change: We are in a unique position to continue creating significant value for our long-term shareholders.

Speaker Change: In fact, over the last 15 years, we have leveraged our cash generation to buy back half of the outstanding shares of the company, while increasing our production capacity by over a third.

Tony Will: This formula of adding capacity in a disciplined way while reducing the outstanding share count has driven the best total shareholder return results in the industry. As we look forward, we see the opportunity to continue with this winning approach, providing superior returns for our shareholders. With that, Operator, we will now open the call to your questions.

Speaker Change: This formula of adding capacity in a disciplined way while reducing the outstanding share count has driven the best total shareholder return results in the industry.

Bert: As we look forward, we see the opportunity to continue with this winning approach, providing superior returns for our shareholders.

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

Operator: We'll now begin the question and answer session. To ask a question, you may press the star, then one, on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Tony Will: With our operations really hitting on all cylinders and our world-class EBITDA cash conversion efficiency, we are in a unique position to continue creating significant value for our long-term shareholders. In fact, over the last 15 years, we have leveraged our cash generation to buy back half of the outstanding shares of the company while increasing our production capacity by over a third. This formula of adding capacity in a disciplined way while reducing the outstanding share count has driven the best total shareholder return results in the industry.

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

Speaker Change: To ask a question, you may press star, then 1 on your touch-tone phone.

Speaker Change: if you were using a speaker phone please pick up your handset before pressing the keys if at any time your question has been addressed and you would like to withdraw your question please for star than two at this time we will pause momentmateriily to assemble our roster

Speaker Change: Our first question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Andrew Wong: Hey, good morning. Thanks for taking my questions. It sounds like you're receiving more interest in low-carbon ammonia from the agriculture side of things, which I think is a bit of a shift from about a year ago when we were all kind of talking about more interest on the industrial side of things. So, can you talk about that shift and what that might mean for the pricing of low-carbon ammonia?

Andrew Wong: Hey, good morning. Thanks for taking my questions.

Tony Will: As we look forward, we see the opportunity to continue with this winning approach, providing superior returns for our shareholders.

Andrew Wong: It sounds like you're receiving more interest in low-carbon ammonia from the agriculture side of things, which I think is...

Unknown Attendee: With that operator, we will now open the call to your questions. So now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

Speaker Change: A bit of a shift from about a year ago when...

Speaker Change: Well, we were all kind of talking about more interest on the industrial side of things. So can you talk about that shift and what that might mean for pricing of low-carbon ammonia?

Bert Frost: Hey, good morning, Andrew. This is Bert.

Bert Frost: I think the question is a focus of where we are driving our business in all different formats. So energy is a focus, industry is a focus, and agriculture is a focus. And because we're net back driven or value driven, we're going to pursue each of those vectors with vigor in the context of what it can do for the company to move these products. As Chris mentioned in his remarks, we're leading the industry in bringing these products to market and also discussing that with our customers.

Speaker Change: good morning er this is for ten

Speaker Change: I think the question is a focus of where we are driving our business in all different formats. So energy is a focus, industry is a focus, and ag is a focus. And because we're net back driven or value driven,

Unknown Attendee: At this time, we will pause momentarily to assemble our roster.

Andrew Wong: Our first question comes from Andrew Wong with RBC Capital Markets. Please go ahead. Good morning, thanks for taking my questions.

Speaker Change: We're going to pursue each of those vectors with vigor in the context of what it can do for the company to move these products. As Chris mentioned in his remarks, we're leading the industry in bringing these products to market.

Bert Frost: It sounds like you are receiving more interest in low-carbon ammonia from the agriculture side of things, which I think is a bit of a shift from about a year ago when we were all talking about more interest from the industrial side of things. So we talked about that shift and what that might mean for pricing of low-carbon ammonia. Good morning, Andrew. This is Bert. And I think the question is a focus of where we are driving our business in all different formats.

Bert Frost: And as I said in my remarks, the feedback is that folks and customers are looking at their scope and their process, whether that be CPGs or industry or ag or ethanol. Low carbon products will play a valuable part of that solution. And so that's where we're talking about increased activity. Regarding pricing, we believe, and we have already discussed that in the context of those discussions, that a valuable part of our component, not only what we receive from the tax credits, but as we put these products to market, we're expecting to receive a superior value to conventional.

Speaker Change: and also discussing that with our customers. And as I said in my remarks, the feedback is, as folks and customers are looking at their scope missions and their process, whether that be CPGs or industry or ag or ethanol,

Speaker Change: Low-carbon products will play a valuable part of that solution. And so that's where we're talking about increased activity.

Speaker Change: Regarding pricing, we believe, and we have already been discussing that, in the context of those discussions...

Bert Frost: So energy is a focus, industry is a focus, and ag is a focus. And because we're net back driven or value driven, we're going to pursue each of those vectors with a vigor in the context of what it can do for the company to move these products. As Chris mentioned in his remarks, we're leading the industry and bringing these products to market, and also discussing that with our customers. And as I said in my remarks, the feedback is as folks and customers are looking at their scope missions and their process, whether it be CPGs or an industry or Ag or ethanol.

Speaker Change: that a valuable part of our component, not only what we receive from the tax credits.

Speaker Change: But as we put these products to market, we're expecting to receive a superior value to conventional.

Tony Will: And Andrew, I'm just going to add one other thing. It's not that we've seen a diminution or a reduction on the industrial or energy side for these products. It's just that, on the agricultural side, we've seen demand develop that we hadn't previously recognized. What we're also seeing is a lot of interest from potential industrial companies in looking at new low carbon intensity ammonia production for a variety of potential industries that they're focused on as well. We're not only seeing this in terms of demand across the product space but also demand from companies that are looking to vertically integrate their inputs.

Speaker Change: And Andrew, I'm just going to attack on one other thing. It's not that we've seen a...

Andrew Wong: A demunition or a reduction on the industrial or energy side for these products. It's just what has happened is on the agricultural side we've seen demand develop that we hadn't previously recognized.

Bert Frost: Low-carbon products will play a valuable part of that solution. And so that's where we're talking about increased activity. Regarding pricing, we believe and we've already been discussing that in the context of those discussions, that a valuable part of our component, not only will we receive from the tax credits, but as we put these products to market, we're expecting to receive a superior value to conventional. Andrew, I'm just going to tack on one other thing.

Andrew Wong: What we're also seeing is a lot of interest from other potential industrial companies in looking at new...

Andrew Wong: Low Carbon Intensity Ammonia Production for a variety of potential industries that they're focused on as well so we're not only seeing it in terms of

Andrew Wong: Demand across the product space, but also demand from companies that are looking to vertically integrate their inputs.

Bert Frost: Yeah, and I would just add one point to that. I think the agricultural side is also seeing how they can benefit from the industrial side. So, for example, with some of the incentives related to the 40B and the 45Z, how low-carbon corn production or agricultural production could work into fuel standards, whether it be sustainable aviation fuel. So it sees the whole value chain and where they participate in that.

Bert Frost: It's not that we've seen a diminution or a reduction on the industrial or energy side for these products. It's just what has happened on the agricultural side. We've seen demand develop that we hadn't previously recognized. What we're also seeing is a lot of interest from other potential industrial companies and looking at new low carbon intensity ammonia production for a variety of potential industries that they're focused on as well. So we're not only seeing it in terms of demand across the product space, but also demand from companies that are looking for vertically integrated inputs.

Speaker Change: Yeah, and I would just add one point to that. I think the the agricultural side is also seeing how they can benefit

Bert Frost: Yeah, and now we just add one point to that. I think the agricultural side is also seeing how they can benefit through the industrial side. So for example, with some of the incentives related to the 40B and the 45Z, how low carbon horn production or agricultural production could work into fuel standards, whether it be sustainable aviation fuel. So it's seeing the whole value chain and where they participate in that.

Speaker Change: through the industrial side. So for example, with

Unknown Attendee: Okay, that's great.

Speaker Change: some of the incentives related to the forty b in the forty five z how low carbon corn production or agricultural production could work into fuel standards whether it be sustainable aviation fuel so it's seeing the whole value chain and where they participate in that

Tony Will: Okay, that's great. And then maybe building on top of that, then we talk a lot about the potential for more new ammonia supply and the potential for oversupply. But given we're seeing building demand trends around different industrial applications, and maybe on the agricultural side as well, like, is it possible there's a scenario where maybe the demand for low-carbon ammonia could be strong enough to maybe just tighten the overall market, just because of how long it takes to build some of these plants? And obviously, we know that that doesn't always go smoothly. Yeah, Andrew, I think what we're seeing right now.

Speaker Change: Okay, that's great. And then maybe building on top of that, then, you know, we talk a lot about the potential for

Speaker Change: more pneumonia supply and the potential for oversupply, but.

Speaker Change: Given we're seeing building demand trends around

Speaker Change: different industrial applications and maybe on the eggs as well, like is it possible there's a scenario where maybe the demand for low-carbon ammonia could be strong enough to maybe just tighten the overall market just because of how long it takes to build some of these plants and obviously we know that that doesn't always go smoothly.

Tony Will: Yeah, Andrew, I think what we're seeing right now is just based on kind of expected nitrogen demand growth, even in traditional applications. Looking forward, expected new demand is outpacing the amount of new construction that is already occurring. And so we expect a natural tightening in the S&D balance, even before you layer on top new sources of, you know, demand for decarbonized products. So we absolutely think there's going to be a tightening of the overall S&D balance on the nitrogen side. And that's one of the reasons we're so optimistic about what the future looks like for us.

Speaker Change: andw i think what we're seeing right now is just based on kind of expected

Andrew Wong: nitrogen demand growth even in traditional applications looking forward

Andrew Wong: And then maybe building on top of that, then, you know, we talk a lot about the potential for more new ammonia supply and the potential for oversupply, but given we're seeing building demand trends around different industrial applications and maybe on the eggs as well. Is it possible there's a scenario where maybe that the man for low carbon ammonia could be strong enough to maybe just tighten the overall market just because of how long it takes to build some of these plants and obviously you know that that doesn't always feel smoothly.

Andrew Wong: expected new demand is outpacing the amount of new construction that's that is already occurring and so we expect a natural tightening in the S&D balance.

Andrew Wong: even before you layer on top.

Andrew Wong: New sources of demand for decarbonized products. So we absolutely think there's going to be a tightening in the overall S&D balance on the nitrogen side. And that's one of the reasons we're so optimistic about what the future looks like for us.

Andrew Wong: Yeah, Andrew, I think what we're seeing right now is just based on kind of expected nitrogen demand growth, even in traditional applications, looking forward expected new demand is outpacing the amount of new construction that is already occurring. And so we expect a natural tightening in the S&D balance even before you layer on top new sources of, you know, up to me and for decarbonized products. So we absolutely think there's going to be a tightening in the overall S&D balance on the nitrogen side, and that's one of the reasons we're so optimistic about what the future looks like for us.

Operator: The next question comes from Josh Spector with UBS. Please go ahead.

Speaker Change: ategic

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

Joshua Spector: Yeah, hi, good morning. I actually want to follow up on a comment Tony made towards the end, and Greg talked about it with the value of transactions that are out there. And I mean, to the extent that you're willing to kind of opine a little bit here.

Josh Spector: Yeah, hi, good morning. I actually want to follow up on a comment, Tony, you made towards the end, and Greg talked about it, with the value of transactions that are out there.

Josh Spector: and I guess to the extent you're willing to kind of opine a little bit here.

Speaker Change: I mean, the OCI transaction, obviously, there's...

Speaker Change: like hydrogen feed and some other shared economic facility, but it was call it $2,100 a ton nitrogen.

Speaker Change: The Koch Acquisition.

Tony Will: I mean, the OCI transaction, obviously, there's like hydrogen feed and some other shared economics in that facility, but it was called $2,100 a tonne of nitrogen. The Coke acquisition that was done was maybe close to $4,000 a tonne. So I wonder if you could talk about those two different dynamics and, you know, what you would view as the right value for your assets, given the quite a wide range that's been provided by the market lately.

Speaker Change: that was done with maybe close to $4,000 a ton.

Speaker Change: So, I wonder if you could talk about those two different dynamics and what you would view as the right value for your assets given that quite a wide range that's been provided by the market lately.

Tony Will: Yeah, Josh, I think it's a great question that you bring up, but I think you're thinking about this a little wrong. So the way to think about the Woodside OCI transaction is you take a conventional plant, and you basically cleave it in half between the front end of the plant and the back end of the plant. And what's essentially happened is, I think Lindy is putting about $1.8 billion in the ground to create the front end of a plant.

Joshua Spector: The next question comes from Josh Specter with UBS, please go ahead. Yeah, hi, good morning. I actually want to follow up on comment Tony, you may have made towards the ending and Greg talked about it with the value of transactions that are out there. And I guess the expenditure willing to kind of open a little bit here, I mean the OCI transaction, obviously there's like hydrogen feed and some other shared economics not facility, but it was call it $2,100 a ton nitrogen, the coke acquisition that was done was maybe close to $4,000 a ton.

Speaker Change: Yeah, Josh, I think it's a great question that you bring up, but I think you're thinking about this a little wrong.

Tony Will: And now you've got Woodside that's paying $2.35 for the back end of that plant. So you add those together to really look at what an integrated plant looks like, and you're north of $4 billion. Now, the piece that Lindy is building is a bit larger from a capacity standpoint than just the requirements of the back-end ammonia plant, but you do get efficiencies of scale when you start getting into large production volumes, and so that doesn't scale on a linear basis.

Speaker Change: so the way to think about theum

Speaker Change: The Woodside OCI transaction is you take a conventional plant and you basically cleave it in half between the front end of the plant and the back end of the plant. And what essentially happened is, I think Lindy is putting about $1.8 billion in the ground to create the front end of a plant.

Speaker Change: and now you've got Woodside that's paying $2.35 for the back end of that plant. So you add those together to really look at what an integrated plant looks like and you're north of $4 billion.

Joshua Spector: So I wonder if you could talk about those two different dynamics and, you know, what you would view as the right value for your assets given that quite a wide range that's been provided by the market lately.

Speaker Change: Now, the piece that Lindy is building is a bit larger from a capacity standpoint than just the requirements of the back-end ammonia plant.

Joshua Spector: Yeah, Josh, you know, I think it's a great question that you bring up, but I think you're you're thinking about this a little wrong. So the way to think about the the Woodside OCI transaction is you take a conventional plant and you basically cleave it in half between the front end of the plant and the back end of the plant. And what's essentially happened is I think Lindy is putting about $1.8 billion in the ground to create the front end of a plant.

Joshua Spector: And now you've got, you know, Woodside that's paying 2.35 for the back end of that plant. So you add those together to really look at what an integrated plant looks like in your north of 4 billion. Now, the, you know, the piece that Lindy is building is a bit larger from a capacity standpoint than just the requirements of the back end of your plant. But you do get efficiencies of scale when you start getting into large production volumes.

Speaker Change: but you do get efficiencies of scale when you start getting into large.

Lindy: production volumes, and so, you know, that doesn't scale on a linear basis. If you drop that plant down to kind of just what's required on the input basis, you're still probably talking about $1.3 to $1.5 billion. So, you know, you're looking at a...

Tony Will: If you drop that plant down to just what's required on an input basis, you're still probably talking about $1.3 to $1.5 billion. You're looking at an integrated equivalency plant that's probably pushing $3.75 to $3.4 on that basis, so you really need to think about it in terms of what the total cost of construction of that plant is, and by the way, Lindy has got a take or pay on the inputs that they're providing across the fence line to what's now going to be the Woodside plant, and they're expecting a good rate of You really have to look at what they're paying for, the hydrogen, the nitrogen, the oxygen, and then factor that back into the full cost of what a plant is.

Speaker Change: at an integrated equivalency plant has probably push in three seven five to four

Speaker Change: on that basis. So you really need to think about it in terms of what the total cost of construction of that plant is. And by the way,

Speaker Change: windy has got a a takeror pay on the input that they're providing to across the fencese line to

Speaker Change: what's now going to be the woodside plant and they're expecting a good rate of return on that so you know you can't just look at the back end of the plant and try to do the math on it you really have to look at what they're paying for

Joshua Spector: And so, you know, that doesn't scale on a linear basis. If you drop that plant down to kind of just what's required on the input basis, you're still probably talking about 1.3 to 1.5 billion. So, you know, you're looking at an integrated equivalency plant that's probably pushing 3.75 to 4 on that basis. So, you know, you really need to think about it in terms of what the total cost of construction of that plant is.

Speaker Change: The hydrogen, the nitrogen, the oxygen, and then capitalize that back into the full cost of what a plant is.

Tony Will: Yeah, and I think what you'll find when you do that, Josh, is that it's pretty similar to what the Iowa transaction was as well. And that really leads to Tony's comments that you have two sophisticated buyers who are making these investments, one for agriculture, and one for energy, but they both see the sustainable free cash flow generation that underlies those assets. And specifically, you know, our assets are similar, if not identical in some cases to that, but all the way on the low end of the cost curve in the first quarter.

Josh Spector: Yeah, and I think what you'll find when you do that, Josh, is that it's pretty similar to what the Iowa transaction was as well, and that really leads to Tony's comments that

Greg Cameron: That's really helpful. I appreciate it. Definitely a different way to look at it.

Tony Welch: You have two sophisticated buyers who are making...

Joshua Spector: And by the way, Lindy has got a, you know, a take or pay on the inputs that they're providing to across the fence line to what's now going to be the Woodside plant. And they're expecting a good rate of return on that. So, you know, you can't just look at the back end of the plant and try to do the math on it. You really have to look at what they're paying for the hydrogen, the nitrogen, the oxygen, and then capitalize that back into the full cost of what a plant is.

Tony Welch: These investments, one for agricultural, one for energy, but they both see the sustainable free cash flow generation that underlies those assets.

Speaker Change: And specifically, you know, our assets are similar, if not identical in some cases to that, but all the way on the low end of the cost curve in the first quarter.

Joshua Spector: I wanted to follow up and just ask a little bit more on the blue ammonia offtake or really your decision on FID for the Greenfield facility. I think you've been helpful about thinking about the milestones needed within Japan, Korea, et cetera, to kind of say when they're comfortable knowing what they're willing to pay in terms of contract for difference to maybe enable some of those contracts. So is there any update you can provide on the timeline there beyond your feed study that would be required for decisions to be made? Thank you. Yeah. So many were published yesterday.

Speaker Change: So that's really helpful. Appreciate it. Definitely a different way to look at it.

Speaker Change: I wanted to follow up and just ask a little bit more longer term on the blue ammonia offtake or really your decision on FID for the Greenfield facility.

Joshua Spector: Yeah. And I think what you'll find when you do that, Josh, is that it's pretty similar to what the Iowa transaction was as well. And that really leads to Tony's comments that you have two sophisticated buyers who are making these investments, one for agricultural, one for energy, but they both see the sustainable, free cash flow generation that underlies those assets. And specifically, you know, our assets are similar, if not identical in some cases to that, but all the way on the lowland of the cost curve and the first quarter. [inaudible] That's really helpful. Appreciate it. Definitely a different way to look at it.

Speaker Change: I think you've been helpful about thinking about the milestones needed within Japan, Korea, etc.

Speaker Change: to kind of say when they're comfortable knowing what they're willing to pay in terms of contract for difference to maybe enable some of those contracts. So is there any update you can provide on the timeline there beyond your feed study that would be required for decisions to be made? Thank you.

Chris Bohn: Yeah, so METI published yesterday, I would say, the closest thing to the timeline that they have right now. So they put out some of the requirements for the carbon intensity, and then it's in the public comment period right now for the next 30 to 60 days. So if you think about it, it's really public comment that is this good for Japan in total, bringing in low-carbon ammonia and co-firing it with coal.

Speaker Change: Yes, so METI published yesterday.

Speaker Change: I would say the closest thing to the timeline that they have right now.

Speaker Change: So they put out some of the requirements for the carbon intensity and then it's in public comment period right now for the next 30 to 60 days.

Unknown Attendee: I want to follow up and just ask a little bit more longer term on the Blue ammonia offtake or really your decision on FID for the Greenfield facility. I think you've been helpful about thinking about the milestones needed within Japan, Korea, etc., to say when they're comfortable knowing what they're willing to pay in terms of contract for difference to maybe enable some of those contracts. So is there any update you can provide on the timeline there beyond your FID study that would be required for decisions to be made?

Speaker Change: So if you think about it, it's really, public comment is this good for Japan in total, bringing in low carbon ammonia and co-firing it with coal. Once that...

Chris Bohn: Once that period is gone through, and METI is the Ministry of Economic and Trade for Japan, they're the ones that are going to be making the recommendation to the government for the contract for difference, just to be specific about that. So once they have that timeline, applications and submissions will go in. So that'll be like the end of October or November for our projects with our partners. MEDI then will probably have three to four months to choose which projects, both on the hydrogen side and on the low carbon ammonia side, that they would give the contract for difference for.

Speaker Change: period is gone through. And METI is the Ministry of Economic and Trade for Japan. They're the ones that are going to be making the recommendation to the government for the contract for difference, just to be specific on that.

Speaker Change: So once they have that timeline, applications and submissions will go in, so that will be like the end of October-November for our projects with our partners.

Unknown Attendee: Thank you. Yeah, so many published yesterday, I would say the closest thing to the timeline that they have right now. So they put out some of the requirements for the carbon intensity and then it's in public comment period right now for the next 30 to 60 days. So if you think about it, it's really public comment is this good for Japan in total bringing in low carbon ammonia and co-firing it with coal.

Speaker Change: Many then will have probably three to four months to choose which projects, both from a hydrogen side and a low-carbon ammonia side, that they would give the contract for difference for. So we're looking now at a more, I would say, more clarity on, call it mid-Q1.

Chris Bohn: So we're looking now at more, I would say more clarity on, call it mid Q1 for that to be determined. But as Tony mentioned, I think the one thing that we're seeing is a little bit more interest from other industrials globally on this low carbon front, both from an agricultural but also from industrial applications as well. So, a lot of activity that we're feeling pretty good about with our project. But again, all this is based on waiting for the feed study to be completed by the end of the year.

Speaker Change: For that to be determined, but as Tony mentioned I think the one thing that we're seeing is a little bit more interest around from other industrials Globally on this low carbon front both from an agricultural, but also from industrial applications as well

Unknown Attendee: So once that period is gone through and METI is the ministry of economic and trade for Japan, they're the ones that are going to be making the recommendation to the government for the contract for difference just to be specific on that. So once they have that timeline, applications and submissions will go into that. It'll be like the end of October, November for our projects with our partners. METI then will have probably three to four months to choose which projects both from a hydrogen side and a low carbon ammonia side that they would give the contract for difference for.

Speaker Change: So a lot of activity that we're feeling pretty good about with our project. But again, all this is based on waiting for the feed study to be completed by the end of the year.

Operator: The next question comes from Steve Byrne with Bank of America. Please go ahead.

Speaker Change: right thank you

Stephen Byrne: Yes, thank you. Bert, you were talking about the strong ammonia applications last fall. I would like to drill into your brain on what your expectations are for this coming fall. You've got the outlook for grower margins looking tighter, and you've got the soybean-corn ratio looking like there might be a shift back to soybeans. Do you have a view on the strength of the fall season, or could the uncertainty lead to a shift more towards next spring?

Speaker Change: Next question comes from Steve Byrne with Bank of America. Please go ahead.

Unknown Attendee: So we're looking now at a more clarity on called METI Q1 for that to be determined. But as Tony mentioned, I think the one thing that we're seeing is a little bit more interest around from other industrials globally on this low carbon front both from an agricultural but also from industrial applications as well. So a lot of activity that we're feeling pretty good about with our project. But again, all this is based on waiting for the fee study to be completed by the end of the year.

Steve Byrne: Yes, thank you

Bert: Bert, you were talking about...

Speaker Change: The Strong Ammonia Applications last fall.

Steve Byrne: would like to drill into your brain on what your expectations are for this coming fall.

Unknown Attendee: Great.

Speaker Change: The outlook for grower margins looks tighter, and you know, you've got...

Speaker Change: The soybean-corn ratio looks like there might be a shift back to soybeans. Do you have a view on the strength of the fall season? Or could the uncertainty lead to a shift more towards next spring?

Unknown Attendee: Thank you.

Bert Frost: Good morning, Steve. Regarding the fall of 2023, it was a big season for us, and in the spring this year, as I mentioned, it was lighter. However, for the fall programs, whether that be urea, UAN, or ammonia, there's been very good uptake, and it's a good value. The value that we put out for the fall application program was well received from a broad array of customers, and so we're expecting a solid fall application, weather permitting.

Steve Bern: Next question comes from Steve Bern with Bank of America. Please go ahead. Yes, thank you. Bert, you were talking about the strong ammonia applications last fall would like to drill into your into your brain on what your expectations are for this coming fall. You got you got the outlook for grower margins looks tighter and you know you got the soybean corn ratio looks like that might be a shift back to soybeans. Do you have a view on on whether the on the strength of the fall season or could the uncertainty lead to kind of a shift more towards the next spring?

Speaker Change: Good morning, Steve. So regarding the fall of 2023, it was a big season for us, and then the spring this year, as I mentioned, was lighter.

Speaker Change: However, for the fall programs, whether that be urea, UAN, or ammonia, there's been very good uptake, and it's a good value. The value that we put out for the fall application program was well received from a broad array of customers.

Bert Frost: And the outlook, yes, the grower outlook at $4 corn today, we're sub $4 in the cash market, forward market for Dec 2025 is in the 450 range, which is acceptable. And so it's a question of how farmers are managing their economics, but fertilizer in general, that is, NP and K, on a revenue basis is still in that 20% range, which is acceptable. We think that nitrogen is good value today, and it will be well absorbed.

Speaker Change: and so we're expecting a solid fall application weather permitting

Speaker Change: And the outlook, yes, the grower outlook at $4.00 corn today, we're sub $4.00 in the cash market, forward market for DEES 2025.

Speaker Change: is in the 450 range, which is acceptable. And so it's a question of how farmers are managing their economics.

Bert Frost: Yeah, good morning, Steve. And so regarding the fall of 2023 was a big season for us. And in the spring this year as I mentioned was lighter. However, for the fall programs, whether that be Urea, UAN or ammonia, there's been very good uptake and it's a good value. The value that we put out for the fall application program was well received from a broad array of customers. And so we're expecting a solid fall application, whether permitting.

Speaker Change: But fertilizer in general, that's N, P, and K, on a revenue basis is still in that 20%.

Speaker Change: range which is acceptable we think that nextxgen is a good value today and it will be well uptaken we're expecting the ninety plus million acres of corn for next year which will then support i think not only ourselves but the imports would come in

Bert Frost: We're expecting 90 plus million acres of corn for next year, which will then support, I think, not only ourselves but the imports that come in. And so we're positive about 2025 and the fall application of 2025.

Speaker Change: And so we're positive for 2025 and the fall application of 2024.

Stephen Byrne: Very good. And Chris, I want to just drill into the feed studies a little bit with you. You have the feed study for a new SMR plant, which you know that technology well, and you're working on one with an ATR. And you need a carbon capture control technology to add on to the SMR. Is it fair to assume that what you're looking for there might have something like 75% control, just so that the overall carbon capture is roughly the same as the ATR approach?

Bert Frost: And the outlook, yes, the overall look at $4 corn today were sub $4 in the cash market, forward market for DS 2025 is in the 450 range, which is acceptable. And so it's a question of how farmers are managing their economics, but fertilizer in general, that's NP and K, on a revenue basis is still in that 20% range, which is acceptable. We think that nitrogen is a good value today, and it will be well uptake, and we're expecting 90 plus million acres of corn for next year, which will then support, I think, not only ourselves, but the imports that come in. And so we're positive for 2025 in the fall application of 2024. Very good.

Speaker Change: Very good. And Chris, I want to just drill into the feed studies a little bit with you.

Chris Bohn: You have the feed study for a new SMR plant, which you know that technology well, and you're working on one with an ATR.

Speaker Change: And you need a, you know, a carbon capture control technology to add on to the SMR. Is it fair to assume that what you're looking for there might have something like a 75 percent control?

Speaker Change: Just so that the overall carbon capture is roughly the same as the ATR approach And are you looking at a variety of technologies and maybe even something that would be more modest in control? Maybe lower CapEx

Stephen Byrne: And are you looking at a variety of technologies and maybe even something that would be more modest in control, maybe lower capex? If the Japanese authorities, you know, don't require 90 to 95% to qualify as blue?

Unknown Attendee: And Chris, I wanted to drill into the feed studies a little bit with you. You have the feed study for a new SMR plant, which you know that technology well, and you're working on one with an ATR, and you need a carbon capture control technology to add on to the SMR. Is it fair to assume that what you're looking for there might have something like a 75% control, just so that the overall carbon capture is roughly the same as the ATR approach. And are you looking at a variety of technologies, and maybe even something that would be more modest in control, maybe lower CAPX, if the Japan authorities don't require 90 to 95% to qualify as blue?

Speaker Change: If the Japan authorities, you know, don't require 90 to 95%.

Tony Will: Good morning, Steve. I'm going to start, and then I'll hand the questions over to Chris.

Speaker Change: to qualify as blue.

Speaker Change: Good morning, Steve. I'm going to start and then I'll hand the questions over to Chris.

Chris Bohn: You know, so we are going through a flue gas capture feed study right now, and part of that is, does it make sense if we were going to do a new build on an SMR? But part of it is also informing us in terms of the path forward of how we're going to approach getting to net zero by 2050. And there's definitely going to have to be a flue gas capture component of how we get there in order to make it work.

Speaker Change: Um...

Chris Bohn: So we are going through a flue gas capture feed study right now, and part of that is

Speaker Change: does it make sense if we were going to do a a new build on an ssmr but part of it also is informing us in terms of the path forward of how 're in a long term

Chris Bohn: approach getting to net zero by 2050 and and there's definitely going to have to be a a flue gas capture component of ultimately how we get there in order to make it work. So this is not only good for the current but good for the long term as well.

Chris Bohn: So this is not only good for the current, but good for the long term as well. And as you say, I think you can design these things at different levels of carbon reduction coming out of the flue. The problem is that that sort of thing affects the geometries of the vessels, and so if you were going to go to all of the pain and hassle and expense of putting in flue gas capture, it's fairly short-sighted, I think, to undersize that unit or to make it so that it's not terribly efficient because then ultimately if your goal long term is to get to net zero, you're going to have to mostly, you know, replace or rebuild all of that capital you've already put in the ground.

Unknown Attendee: Yeah, good morning, Steve. I'm going to start now, I'll hand the questions over to Chris. So we are going through a flu gas capture feed study right now, and part of that is, does it make sense if we were going to do a new build on an SMR, but part of it also is informing us in terms of the path forward of how we're going to launch. A long-term approach getting to net zero by 2050, and there's definitely going to have to be a flu gas capture component of ultimately how we get there in order to make it work.

Speaker Change: And as you say, I think you can design these things that...

Unknown Attendee: So this is not only good for the current, but good for the long-term as well. And as you say, I think you can design these things at different levels of carbon reduction coming out of the flu. The problem is that sort of thing affects the geometries of the vessels, and so if you were going to go to all of the pain and hassle of an expense of putting in flu gas capture, it's fairly short-sighted, I think, to undersize that unit or to make it so that it's not terribly efficient, because then ultimately if your goal, long-term, is to get to net zero, you're going to have to mostly replace or rebuild all of that capital you've already put in the ground.

Speaker Change: Different levels of carbon reduction.

Speaker Change: Coming out of the flu that the problem is it that sort of thing affects the geometries of the vessels and so if you were going to go to all of the pain and and hassle of

Speaker Change: an expense of putting in flu gas capture it's fairly short-sed i think

Speaker Change: to undizze that unit or to make it so that it's not terribly efficient because then ultimately if your're goal long term is to get to n zero you're going to have to mostly you know replace or rebuild all of that

Chris Bohn: But it is certainly something that we're looking at and evaluating. We actually believe that the value of a superior decarbonized product is going to be such in the marketplace from a demand standpoint that extracting as much carbon out of it as you can is going to pay for itself. Not only do you get the 45Q benefit, but also, the market demand and premium that would be accompanying a decarbonized product will carry the debt. Yeah, really not much to add to that, but just to agree.

Speaker Change: capital you've already put in the ground but it is certainly something that we're we're looking at and evaluated we actually believe

Speaker Change: that the value of a, you know, a superior decarbonized product is going to be such in the marketplace from a demand standpoint.

Speaker Change: that extracting as much carbon out of it as you can is going to pay for itself.

Chris Bohn: Not only do you get the 45-Q benefit, but also the market demand for and premium that would be accompanying

Chris Bohn: Yeah, really not much to add to that, but just to agree with Tony that I think over time, the carbon intensity and the more you can reduce it, the more incentives or the more premium you'll get for that. If you look at the CBAM, that'll be going in place, you know, really at the end of 2025 here, beginning in 2026, with some of the carbon charges to it going to be based on carbon intensity and how much you get charged based on that. So having the lowest you possibly can will be better. Same thing as we look in Asia, primarily because the biggest reduction of carbon is going to be the most beneficial for us.

Chris Bohn: A decarbonized product I think will carry the day.

Chris Bohn: Yeah, really not much to add from that but just to agree with Tony that I think over time

Speaker Change: The Carbon Intensity and the more you can reduce it, the more incentives or the more premium you'll get for that. If you look at the CBAM, that'll be going in place.

Unknown Attendee: But it is certainly something that we're looking at and evaluating. We actually believe that the value of a superior decarbonized product is going to be such in the marketplace from a demand standpoint, that extracting as much carbon out of it as you can is going to pay for itself, not only do you get the 45Q benefit but also the market demand for an premium that would be accompanying a decarbonized product I think will carry the diet.

Chris Bohn: You know, really at the end of 2025.

Chris Bohn: Here, beginning in 2026 with some of the carbon charges to it is going to be based on carbon intensity and how much you get charged based on that. So having the lowest you possibly can will be better.

Chris Bohn: Same thing as we look in Asia, primarily is for the biggest reduction of carbon is going to be the most beneficial for us.

Operator: The next question comes from Chris Parkinson with Wolf Research. Please go ahead.

Speaker Change: Thank you.

Unknown Attendee: Yeah, really not much to add from that but just to agree with Tony that I think over time the carbon intensity and the more you can reduce it, the more incentives or the more premium you'll get for that. If you look at the CBAM that'll be going in place really at the end of 2025 here beginning in 2026 with some of the carbon charges to it is going to be based on carbon intensity and how much you get charged based on that so having the lowest you possibly can will be better. Same thing as we look in Asia primarily is for the biggest reduction that we the biggest reduction of carbon is going to be the most beneficial for us.

Chris Bohn: The next question comes from Chris Parkinson with Wolf Research. Please go ahead.

Christopher Parkinson: Thank you. Let's switch it up a little bit. When I'm thinking about the second half of 2024 and into 2025, can you just update us on your current views of, let's say, production rates in both India and China, as well as import trends in India and export trends or lack thereof in China? Just, you know, what is your latest thought process based on the developments over the last few months? Thank you.

Speaker Change: Thank you. We'll switch it up a little bit.

Unknown Attendee: Thank you.

Speaker Change: When I'm thinking about the second half of 2024 and into 2025,

Chris Parkinson: Can you just update us on your current views of both, let's say, production rates in both India and China, as well as import trends in India and export trends, or lack thereof, in China? Just, you know, what is your latest thought process based on the developments over the last few months? Thank you.

Bert Frost: When you're looking at India, there has been, as we've communicated, a growth in domestic production, which has been the Made in India movement by Prime Minister Modi, and they've been successful in that. However, taking a step back and looking at those investments, with the cost of LNG being 60% of their gas needs, those are expensive operations, not only from a CapEx point of view, but from an operational and a delivered basis. Doing what it is, that's what they've chosen to do.

Speaker Change: When you're looking at India, there has been, as we've communicated, a growth in domestic production which has been the Made in India movement by Prime Minister Modi.

Speaker Change: and they've been successful in that. However, taking a step back and looking at those investments, with the cost of LNG being 60% of their gas needs, those are expensive operations, not only from a capex position, but from an operational and a delivered basis.

Christopher Parkinson: The next question comes from Chris Parkinson with Wolf Research. Please go ahead. Thank you.

Unknown Attendee: Let's switch up a little bit. When I'm thinking about the second half of 2024 and into 2025, can you just update us on your current views of both production rates in both India and China as well as import trends in India and export trends or lack thereof in China just what is your latest thought process based on the developments over the last few months. Thank you. When you're looking at India, there has been as we've communicated a growth and domestic production, which has been the maiden Indian movement by Prime Minister Modi and they've been successful in that.

Bert Frost: And so exports or imports to India have declined over time, and we're projecting those to be in the 5 to 6 million ton range for 2024. To date, and that's a January to date.

Chris Bohn: But, doing what it is, that's what they've chosen to do, and so imports to India have declined over time, and we're projecting those to be in the 5-6 million ton range for 2024 to date, and that's a January to date.

Bert Frost: India has imported about 2 million tons, including their ALMISCO tons, and so we would expect over the next several months, September, October, November, December, you would probably see approximately 3 million tons. India is still a significant importer, but it has now fallen to second place as Brazil has taken over the lead for the largest importing country at approximately 8 million tons. And that's been a tremendous growth of demand reflected in their exports of corn and other products.

Speaker Change: India has imported about 2 million tons, including their ALNISCO tons. And so we would expect over the next several months, September , October , November , December , you would probably see approximately 3 million tons.

Unknown Attendee: However, taking a step back and looking at those investments with the cost of LNG being 60% of their gas needs, those are expensive operations not only from a CapEx position but from an operational and a delivered basis. But doing what it is, that's what they've chosen to do. And so exports are imports to India have declined over time. And we're projecting those to be in the five to six million ton range for 2024 to date.

Chris Bohn: And so, India is still a significant importer, but has now fallen into second place.

Chris Bohn: as Brazil has taken over the lead for the largest importing country at approximately 8 million tons. And that's been a tremendous growth of demand reflected in their exports of corn and other products. So Brazil is the agricultural powerhouse we've been projecting for years.

Bert Frost: So, Brazil is the agricultural powerhouse we've been projecting for years and will continue to grow in its imports of nitrogen. When you look at China, the second part of your question, that has been a great moderator to the supply of urea for the world. China has been in the 3 to 5 million ton export range for the last several years, and this year, it's almost insignificant because it's almost zero of their exports to date.

Chris Bohn: and will continue to grow in their imports of nitrogen.

Speaker Change: When you look at China, the second part of your question, that has been a great moderator to the supply of urea for the world.

Unknown Attendee: And that's a January to date. India is imported about two million times, including there on this cotons. And so we would expect over the next several months of September, October, November, December. You would probably see approximately three million tons. And so India still a significant importer but has now fallen to the second place as Brazil has taken over the lead for the largest importing country at approximately eight million tons. And that's been a tremendous growth of demand reflected in their exports of corn and other products. So Brazil is the agricultural powerhouse we've been projecting for years. And we'll continue to grow in their imports of nitrogen.

Speaker Change: China has been in the 3-5 million ton export range for the last several years, and this year it's almost insignificant because it's almost zero of their exports to date.

Bert Frost: We have talked about them being in the 2 to 3 million ton range. I even think that's a questionable volume. And so when you put that in perspective, the world export vessel traded market is approximately 55 million tons, taking 3 to 4 million tons out of that supply is a great supporter of the current price structure where we are. That, as well as the Egyptian loss of production in May through July, is what has been supporting the price structure that we have today.

Chris Bohn: We have talked about them being in the 2 to 3 million ton range. I even think that's a questionable volume.

Chris Bohn: And so when you put that in perspective of if the world export vessel traded market is approximately 55 million tons, taking 3 to 4 million tons out of that supply is a great supporter of the current price structure where we are. That as well as the Egyptian...

Bert Frost: When you look at China, the second part of your question, that has been a great moderator to the demand or the supply of Urea for the world. China has been in the three to five million ton export range for the last several years. And this year it's almost insignificant because it's almost zero of their exports to date. We have talked about them being in the two to three million ton range. I don't even think that's a questionable volume.

Chris Bohn: loss of production in May through July as what has been thwarting the price structure that we have today.

Christopher Parkinson: Got it. Just a quick follow-up, you know, over time you've traditionally converted, correct me if I'm wrong, about 70 and, if you just were taxing a few years ago, probably close to 80% of EBITDA and free cash flow. Can you just help us, you know, especially given your remarks about some transactions in the space? Can you, you know, give us how the market should be thinking about buyback activity versus potential CapEx outflows in terms of the cadence, not only in 24 but also when, you know, CapEx could even rise in the future? So just help us think about the balance of capital allocation over the next, you know, 18 months or so, just given that Thank you so much.

Bert Frost: And so when you put that in perspective of if the world export vessel traded market is approximately 55 million tons, taking three to four million tons out of that supply is a great supporter of the current price structure where we are. That as well as the Egyptian loss of production in May through July has what has been porting the price structure that we have today.

Speaker Change: Got it. Just a quick follow-up, you know, over time you've traditionally converted, correct me if I'm wrong, about 70 and if you adjust for a tax payment a few years ago probably, you know, close to 80% of, you know, EBITDA and free cash flow. Can you just help us, you know, especially given your remarks about some transactions in the space, can you, you know, give us...

Speaker Change: How the market should be thinking about, you know, buyback activity versus potential capex outflows in terms of the cadence, not only in 24.

Chris Bohn: But also when CapEx could even rise in the future. So just help us think about the balance of capital allocation over the next 18 months or so, just given that conversion rate. Thank you so much.

Chris Bohn: All right, I'll start with the CapEx part, Chris. You know, our CapEx that we have is right now in the range of $550 million. As you know, having followed our company long enough, Q3 is when we do a lot of our planned maintenance. So we'll probably see a little heavier spend in Q3 here, along with some of the production being a little bit lower, but with the full year still being at gross ammonia production of 9.8 million tons.

Speaker Change: All right, I'll start with the CapEx part, Chris. You know, our CapEx that we have is right now in the range of $550 million. As you know, having followed our company long enough, that Q3 is when we do a lot of our planned maintenance.

Unknown Attendee: Scott, just a quick follow-up, you know, over time you've traditionally converted correctly from wrong, about 70, and if you adjust for a taxi in a few years ago, probably, you know, close to 80% of, you know, even then, for cashflow. Can you just help us, you know, especially given your remarks about some transactions in the space, can you, you know, give us how the market should be thinking about, you know, buyback activity versus potential cat-backs outflows in terms of the cadence, not only in 24, but also when, you know, cat-backs could even ride in the future.

Speaker Change: So, we'll see probably a little heavier spend in Q3 here, along with some of the production being a little bit lower, but with the full year still being at gross ammonia production of the 9.8 million tons.

Chris Bohn: As we get into an FID and say it's a positive FID to move forward with a new plant, the spending really occurs over five years, and it's almost just like a standard distribution a little bit with the beginning spend being relatively thin and then getting into years back half of the second year, third and fourth year heavier, and then the tail back on the fifth year. So a bit longer of a spending trajectory than the actual construction of the plant itself is how we plan that out based on whatever our share component of that will be. I'll let Greg talk about maybe share repurchase.

Speaker Change: Talked about.

Speaker Change: As we get into an FID and say it's a positive FID to move forward.

Chris Bohn: with a new plant.

Unknown Attendee: So just help us think about the balance of cat-bellocation over the next, you know, 18 months or so, just given that conversion rate. Thank you so much. All right, let's start with the cat-backs part, Chris. You know, our cat-backs that we have in, is right now in the range of $550 million, as you know, having followed our company long enough that Q3 is when we do a lot of our plan maintenance.

Speaker Change: The spending really occurs over five years, and it's almost just like a standard distribution a little bit, with the beginning spend being relatively thin, and then getting into years back half of the second year, third and fourth year heavier, and then the tail back on the fifth year.

Speaker Change: So a bit longer of a spend trajectory than the actual construction of the plant itself is how we plan that out based on whatever our share component of that will be. I'll let Greg talk about maybe share repurchases.

Unknown Attendee: So we'll see probably a little heavier spend in Q3 here, along with some of the production being a little bit lower, but with the full year still being at gross ammonia production of a 9.8 million tons we talked about. As we get into an FID and say it's a positive FID to move forward with a new plant, the spending really occurs over five years, and it's almost just like a standard distribution, a little bit with the beginning spend being relatively thin, and then getting into years back half of the second year, third and fourth year heavier, and then the tail back on the fifth year.

Greg Cameron: So, as I said in the remarks, we have about $1.9 billion left in our current authorization, and we plan to complete that opportunistically by the end of December of 2025. Yeah, and I would just add one thing.

Greg: So, as I said in the remarks, we have about $1.9 billion left in our current authorization and we plan to complete that opportunistically by the end of December of 2025.

Tony Will: Yeah, and I would I would just add one thing Chris, which is you know that the good news You mentioned our best-in-class EVA data cash conversion, and you know I think somewhere Fairly traditionally in the 60 to 70 percent range is pretty normal for us. We were a little lower Given kind of some of the operating challenge We we had in in q1 with the weather related outages and then the ripple on in terms of what that meant from some of our industrial ammonia contracts, but But I would expect us to kind of get back into that range That's pretty pretty normal for us and at that kind of conversion efficiency and cash generation it's not an either-or question it's a both and you know even if illustratively, you're talking about a, you know, a greenfield project, if we decided to go forward with it, that's in the range of, you know, what the what the Woodside slash Lindy project is trading at, if we're only doing kind of 50% of the capital on that spread over four or five years, it's not such a heavy capital load on us, given our cash generation, that we can't continue to do pretty significant share repo at the same time.

Greg: Yeah, and I would just add one thing, Chris, which is, you know, the good news...

Greg: You mentioned our best-in-class EBITDA to cash conversion and...

Chris: You know, I think somewhere...

Chris Bohn: Fairly traditionally in the 60 to 70 percent range is pretty

Unknown Attendee: So a bit longer of a spend trajectory than the actual construction of the plant itself is how we plan that out based on whatever our share component of that will be. I'll let Greg talk about maybe share repurchases. Yep, so as I said in the remarks, we have about $1.9 billion left in our current authorization, and we plan to complete that opportunistically by the end of December of 2025. Yeah, and I would just add one thing, Chris, which is, you know, the good news, you mentioned our best in class, EVA.Cache Conversion, and I think somewhere fairly traditionally in the 60 to 70% range is pretty normal for us.

Chris Bohn: normal for us we were a little lower given had some of the operating challenge we had in q one with the weather-related outages and then the ripplelot in terms of what that meant from some of our industrial ammonia contracts but

Chris Bohn: I would expect us to get back into that range, that's pretty normal for us, and that kind of conversion efficiency and cash generation, it's not an either or question, it's a both.

Speaker Change: illustratively you're talking about a you know a greenfield project if we decided to go forward with it that's in the range of

Speaker Change: You know what the what the Woodside slash Lindy

Unknown Attendee: We were a little lower given some of the operating challenge we had in Q1 with the weather-related outages, and then the ripple on in terms of what that meant from some of our industrial ammonia contracts, but I would expect us to kind of get back into that range. That's pretty normal for us, and that that kind of conversion efficiency and cash generation, it's not an either or question, it's a both. And, you know, even if illustratively you're talking about a green field project, if we decided to go forward with it, that's in the range of, you know, what the woodside slash Lindy project is trading out.

Speaker Change: Project is trading at if we're only doing kind of 50% of the capital on that spread over four or five years

Chris Bohn: It's not such a heavy...

Tony Will: So, you know, our view is that the formula that we have used in the past of disciplined and, you know, addition of capacity while reducing our share count, we think works on a go forward basis, and we expect to continue to generate superior returns.

Chris Bohn: capital load on us, given our cash generation, that we can't continue to do pretty significant share repo at the same time.

Speaker Change: You know, our view is it's the formula that we have used in the past of disciplined and, you know, addition of capacity while reducing our share count, we think works on a go-forward basis and we expect to continue to generate superior returns.

Operator: The next question comes from Adam Samuelson with Goldman Sachs. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question comes from Adam Samuelson with Goldman Sachs. Please go ahead.

Adam Samuelson: Yes, thank you. Good morning, everyone. Good morning, Adam. Good morning.

Adam Samuelson: So, Bert, in your prepared remarks, you alluded to potential changes in buyer marketing patterns over the balance of the year. And I just wanted to clarify, is that a lot of the global pieces that you were just answering in response to Chris's question, or are there shifts you're seeing amongst your U.S. domestic customers in the fertilizer space? And if so, could you just elaborate a little bit on what is changing in terms of how people are buying fertilizer for the second half of the year?

Unknown Attendee: But if we're only doing kind of 50% of the capital on that spread over four or five years, it's not such a heavy capital load on us given our cash generation that we can't continue to do pretty significant share repo at the same time. So, you know, our view is it's the formula that we have used in the past of discipline and, you know, a addition of capacity while reducing our share count. We think works on a go forward basis, and we expect to continue to generate superior returns.

Adam Samuelson: Yes, thank you. Good morning, everyone.

Adam: Morning Adam

Adam: Morning. So, Bert, in your prepared remarks, you alluded to potential changes in buyer marketing patterns over the balance of the year, and I just wanted to clarify, is that a lot of the global pieces that you were just answering in response to Chris's question, or was there shifts you're seeing amongst your U.S. domestic customers?

Unknown Attendee: Thank you.

Speaker Change: in the fertilizer space, and if so, could you just elaborate a little bit on what is changing in terms of how people are buying fertilizer for the second half of the year?

Bert Frost: Yeah, there's been a trend. Good morning, Adam.

Bert Frost: There's been a trend with buyer behavior of deferring or delaying purchases over the last couple years. And I think, as a reflection of the ag market cycle and lower corn prices to farmers and, therefore, lack of farmer liquidity or maybe financial stress, those purchases could be delayed to the retail sector. And so based on that, we've gone into a little more of a defensive mode. We've worked on our – we've kept our inventories low, and we have moved our programs forward with a successful launch of our fall and fill programs, as I mentioned.

Bert: Yeah, there's been a trend. Good morning, Adam. There's been a trend.

Bert: with buyer behavior of deferring or delaying purchases over the last couple years. And I think as a reflection of the ag market cycle and lower corn prices to farmers, and therefore lack of farmer liquidity or maybe financially stressed.

Adam Samuelson: The next question comes from Adam Samuelson with Goldman Sachs. Please go ahead. Yes, thank you. Good morning, everyone. Good morning, Adam. Good morning. So, Bert, in your prepared remarks, you alluded to potential changes in buyer marketing patterns over the balance of the year. And it's wanted to clarify is that a lot of the global pieces that you were just answering in response to Chris's question or were there shifts you're seeing amongst your US domestic customers in the fertilizer space?

Adam Samuelson: And if so, could you just elaborate a little bit on what is changing in terms of how people are buying fertilizer for the second half of the year? Yes, there's been a trend. Good morning, Adam. There's been a trend with buyer behavior of deferring or delaying purchases over the last couple of years. And I think as a reflection of the ag market cycle and lower corn prices to farmers and therefore lack of farmer liquidity or maybe financially stressed, those purchases could be delayed to the retail sector.

Bert: Those purchases could be delayed to the retail sector and so based on that we've gone into a little more of a defensive mode we've worked on our We've kept our inventories low and we have moved our programs forward and a successful launch of our fall and fill programs as I mentioned

Bert Frost: And so how we're operating is in the context of if that eventuality of delayed purchases were to happen, we wouldn't be constrained as a company. So we've leveraged the utilization that's at our fingertips of exports, distribution, modes of distribution, production allocations, as well as our communication with our customers to make sure we always position CF Industries in the most opportunistic way.

Speaker Change: And so how we're operating is in the context of if that eventuality of delayed purchases were to happen.

Speaker Change: we won't be constrained as a company. So we've leveraged the utilization that's at our fingertips of exports, distribution, modes of distribution, production allocations, as well as our communication with our customers to make sure we always position CF Industries in the most opportunistic way.

Bert Frost: That's helpful. And if I could just ask a follow-up question, I believe you had the supply agreement for ammonia to mosaic for most of the last decade. I believe that you have exercised your right to terminate that supply agreement beginning in January. How do we think about the non-trivial amounts of your own ammonia volumes? How do we think about... How are you thinking about marketing that next year, or are you working to renegotiate the terms of that agreement?

Speaker Change: That's helpful. And if I could just ask a follow-up, I believe you've had the supply agreement for ammonia to mosaic for most of the last decade. I believe that

Adam Samuelson: And so, based on that, we've gone into a little more of a defensive mode. We've worked on our, we've kept our inventories low and we have moved our programs forward with a successful launch of our fall and fill programs, as I mentioned. And so, how we're operating is in the context of if that eventuality of delayed purchases were to happen, we won't be constrained as a company. So, we've leveraged the utilization that's at our fingertips of exports, distribution, modes of distribution, production allocations, as well as our communication with our customers to make sure we always position CF industries in the most opportunistic way.

Speaker Change: You exercise your right to terminate that supply agreement beginning in January . How do we think about the non-trivial amounts of your own ammonia volumes? How do we think about...

Speaker Change: How you're thinking about marketing that next year or you working to renegotiate the terms of that that agreement. Thanks

Bert Frost: Mosaic has been a fantastic customer. That was a partnership that resulted from us selling the phosphate production assets to them in Florida, which they were, I think, a more economical owner of, as well as then associating the ammonia contract, a long-term, very large supply contract, which was beneficial to CF when we were starting up our new production assets in Donaldsonville to have an outlet. As we've rolled forward, I think both companies realize that we were the one to execute the contract and terminate it, but we're in negotiations and conversations with them to continue supply, and we anticipate Mosaic to always be a fairly large customer of CF Industries, and we have a great relationship with them, and they're doing a good job.

Speaker Change: And Mosaic has been a fantastic customer and that was a partnership that was a result of us selling the assets, the phosphate production assets, to them in Florida, which they were I think a more economic owner of, as well as then associating

Bert Frost: That's helpful. And if I just ask a follow-up, I believe that you had the supply agreement to for ammonia and mosaic for most of the last decade, I believe that you've exercised your right to terminate that supply agreement beginning in January. Just how do we think about it's a non-trivial amount of your own ammonia volume? Is that what we think about how you're thinking about marketing that next year or are you working to really go see the terms of that agreement?

Speaker Change: The Ammonia Contract, a long-term, very large supply contract, which was beneficial to CF when we were starting up our new production assets in Donaldsonville to have an outlet. As we've rolled forward, I think both companies realize that

Speaker Change: We were the one to execute the contract and terminate it, but we're in negotiations and conversations with them to continue supply, and we anticipate Mosaic to always be a fairly large customer of CF Industries, and we have a great relationship with them, and they're doing a good job.

Bert Frost: However, there are additional tons, which we have been working on over the years, to market, and we do have additional outlets. We've been active in the export market, both moving ammonia to different locations, as well as enhancing our industrial contracts and customers to have a more balanced portfolio.

Bert Frost: Thanks. Mosaic has been a fantastic customer and that was a partnership that was a result of us selling the assets, the phosphate production assets to them in Florida, which they were I think a more economic owner of, as well as then associating the ammonia contract, a long-term, very large supply contract, which was beneficial to CS when we were starting up our new production assets in Donaldsonville to have an outlet. As we've rolled forward, I think both companies realize that we were the one to execute the contract and terminate it, but we're in negotiations and conversations with them to continue supply and we anticipate mosaic to always be a fairly large customer of CF industries and we have a great relationship with them and they're doing a good job.

Speaker Change: However, there are additional tongues which we have been working on over the years to market, and we do have additional outlets. We've been active in the export market, both with

Speaker Change: moving ammonia to different locations, as well as augmenting our industrial contracts and customers to have a more balanced portfolio.

Bert Frost: Yeah, and I think as Europe implements the financial aspects of the CBAM going forward, too, there may be more alternatives that provide a higher netback for that low-carbon ammonia that will be in production next year for Bert and his team to evaluate as well.

Speaker Change: Yeah, and I think as Europe implements the financial aspects of the CBAM going forward too, there may be more alternatives that provide a higher netback for that low-carbon ammonia that will be in production next year for Bert and his team to evaluate as well.

Adam Samuelson: All right, that's a very helpful caller. I'll pass it on. Thanks.

Speaker Change: Alright, that's a very helpful caller. I'll pass it on. Thanks.

Operator: The next question comes from Ben Toiver with Barclays. Please go ahead.

Speaker Change: to

Bert Frost: However, there are additional terms which we have been working on over the years to market and we do have additional outlets. We've been active in the export market both with moving ammonia to different locations, as well as augmenting our industrial contracts and customers to have a more balanced portfolio. Yeah, and I think as Europe implements the financial aspects of the CBAM going forward too, there may be more alternatives that provide a higher netback for that low carbon ammonia that will be in production next year for Bert and his team to evaluate as well. All right, that's a very helpful color.

Benjamin Theurer: Good morning, gentlemen. And first of all, congratulations on a very strong second quarter.

Speaker Change: The next question comes from Ben Teuver with Barclays. Please go ahead.

Ben Teuver: Yeah, good morning, gentlemen.

Bert Frost: I'll pass it on. Thanks.

Benjamin Theurer: Just wanted to get your thoughts around just the cost piece of it, gas pricing, and obviously what it potentially does in Europe right now from a capacity point of view. As you highlighted in your prepared remarks, it was offsetting a little bit the price decline clearly during the quarter from an EDADA perspective and also on a first half basis. So as we see it right now, where do you think the spread's going to trend out, just also given the geopolitical tension in the Middle East? And have you done any sort of contracting, hedging, et cetera, just to lock in those lower costs that are pervading right now in the North American market? That would be my first one.

Ben Teuver: Good morning.

Ben Teuver: and first of our conress on a very strong second quarter just wanted to give you a thoughts around just the cost piece of it gas pricing and obviously what it potentially does in europe right now from from a capacity point of view

Speaker Change: Unknown Speaker You've highlighted in your prepared remarks it was offsetting a little bit the price decline clearly during the quarter from an EDAD perspective and also on a first half basis.

Speaker Change: as we...

Speaker Change: see it right now. Where do you think the spread's going to trend out, which is also given the geopolitical tension in the Middle East? And have you done any sort of contracting, hedging, et cetera, just to lock in those lower costs that are pervading right now in the North American market? That would be my first one.

Ben Toyver: The next question comes from Ben Toyver with Barclays. Please go ahead. Yeah, good morning, gentlemen. Good morning.

Ben Toyver: First of all, congrats on a very strong second quarter. I just wanted to get you a thoughts around just the cost piece of it, gas pricing, and obviously what it potentially does in Europe right now from a capacity point of view. You've highlighted and you're prepared to mark. It was an offsetting a little bit the price decline clearly during the quarter from from any adopt perspective. And all of a sudden, it was on a first half basis.

Chris Bohn: So Ben, I'll just, Chris, I'll start with the European side. So, as you mentioned, we continue to see Europe being challenged by energy costs, even before some of the geopolitical events that have happened over the last few days in Ukraine and also in the Middle East. So that's something that we see continuing. And then, on top of that, we've done a pretty in-depth analysis of the European assets, and we're seeing pretty large maintenance events that are going to be coming forward for some of these plants.

Ben Toyver: So as we see it right now, what where do you think the spreads going to trend out, which is also given the geopolitical tension in the Middle East, and have you done any sort of like contracting, hedging, et cetera, just to lock in those lower costs that are providing right now in the North American market. So Ben, I'll, this Chris, I'll start with the European side. So as you mentioned, we continue to see Europe being challenged by the energy cost, even before some of the geopolitical events that have happened over the last few days in Ukraine and also in the Middle East.

Speaker Change: Ben, this is Chris, I'll start with the European side. So, as you mentioned, we continue to see Europe being challenged by the energy cost, even before some of the geopolitical events that have happened over the last few days in Ukraine and also in the Middle East.

Speaker Change: So that's something that...

Speaker Change: We see continuing and then on top of that We've done a pretty in-depth analysis of the European assets, and we're seeing

Speaker Change: pretty large maintenance events that are going to be coming forward for some of these plants.

Chris Bohn: And they have to make the decision whether to make those significant capital investments or whether to curtail or shut down completely. I mean, as we've talked about before, the best example of that is what we did in the UK, where some of those capital expenditures were going to be so large that we're better off importing ammonia and then just upgrading it from there. So our expectation is that between now and 2030 we will see even more tightening in the supply market in Europe related to those two factors, both energy and then just the additional capital costs.

Speaker Change: And they have to make the decision whether you make those significant capital investments or whether you curtail or shut down completely.

Speaker Change: I mean, as we've talked about before, the best example of that is what we've done in the UK, where some of those capital expenditures were going to be so large we were better off.

Ben Toyver: So that's something that we see continuing. And then on top of that, we've done a pretty in depth analysis of the European assets. And we're seeing pretty large maintenance events that are going to be coming forward for some of these plants. And they have to make the decision whether you make those significant capital investments or whether you curtail or shut down completely. I mean, as we've talked about before, the best example of that is what we've done in the UK where some of those capital expenditures were going to be so large, we're better off importing ammonia and then just upgrading it from there.

Speaker Change: importing ammonia and then just upgrading it from there so our expectation is for between now and two thousand and thirty that we see even more tightening in the supply market in europe related to those two factors both the energy and then just the additional capital cost coming

Chris Bohn: And that really is what we see as an opportunity for us out of Donaldsonville, where we have the export capability and we'll be the first to have low-carbon ammonia and low-carbon products. So we see it as a carbon arbitrage opportunity, given that we'll be the first mover on low-carbon to Europe. But I'll let Bert talk about our hedging strategy.

Speaker Change: And that really is what we see as an opportunity for us out of Donaldsonville, where we have the export capability, and we'll be the first to have low-carbon,

Speaker Change: ammonia and low carbon products. So we almost see it as a carbon arbitrage opportunity, given that will be the first mover on low carbon to Europe . But I'll let Bert talk about our hedging strategy.

Bert Frost: Everywhere we are on gas, and you see it reflected in our Q2, exceptional performance and great job on gas, is that we're wide open in the cash market, and we're believers in the future of North American production. Today, we're running at a rate of about 102 BCF.

Bert: Everywhere we are on gas and you see it reflected in our Q2, exceptional performance and great job to the gas team.

Bert: We're wide open in the cash market and we're believers in the future of North American production. Today we're running at a rate of about 102 BCF.

Bert Frost: And with exports still in the 12 to 13 BCF per day range and the spreads, you're still injecting and building inventory, and that's what's driving and keeping the Henry Hub price lower. And so the spread against the international market, TTF, or JKM, that would be Europe and Asia is over $10. That's an exceptional place for us to be as operators of these assets. But when you look at the trends, see what happened in Egypt when it turns to summer and they want gas for electricity or other purposes, they're now a large importer of LNG or Trinidad because of the gas constraints that we're experiencing with our own assets.

Ben Toyver: So our expectation is between now in 2030 that we see even more tightening in the supply market in Europe related to those two factors, both the energy and then just the additional capital cost coming. And that really is what we see as an opportunity for us out of Donaldsonville where we have the export capability and will be the first to have low carbon ammonia and low carbon products. So we almost see it as a carbon arbitrage opportunity given that will be the first mover on low carbon to Europe.

Bert: And with exports still in the 12 to 13 BCF per day, and the spreads, you're still injecting and building inventory, and that's what's driving and keeping the Henry Hub price lower. And so the spread against the international market, TTF.

Bert: or JKM, that would be Europe and Asia, is over $10, and that's an exceptional place for us to be as operators of these assets. But when you look at the trends...

Christopher Bohn: But what Bert talked about our hedging strategy. Where we are on gas and you see it reflected in our Q2 exceptional performance and great job to the gas team is we're wide open in the cash market and we're believers in the future of North American production. Today we're running at a rate of about 102 BCF and with exports still in the 12 to 13 BCF per day and the spreads you're still injecting and building inventory.

Speaker Change: You've seen what happened in Egypt when it turns to summer and they want the gas for electricity or other purposes. They're now a large importer of LNG or Trinidad on the gas constraints that we're experiencing with our own assets.

Bert Frost: And so what will happen when you combine the EU and North Africa and Trinidad, combined with their production assets and the global S&D for the products that those plants produce? It places again, like Chris said, an exporter or a producer like CF Industries in a fantastic place, outside of what could happen in the Middle East with all the disruption in Gaza and the Red Sea. So I think we're well positioned. I'd also add that

Speaker Change: And so, what will happen when you combine the EU and North Africa and Trinidad combined with their production assets and the global S&D for the products that those plants produce, it places, again, like Chris said, an exporter or a producer like CF Industries in a fantastic place.

Christopher Bohn: And that's what's driving and keeping the Henry hub price lower. And so the spread against the international market and TTF or JKM where the Europe and Asia is over $10. That's an exceptional place for us to be as operators of these assets. But when you look at the trends. You've seen what happened in Egypt when it turns to summer and they want to gas for electricity or other purposes. They're now a large importer of LNG or Trinidad on the gas constraints that we're experiencing with our own assets.

Speaker Change: outside of what could happen in the Middle East with all the disruption in Gaza and the Red Sea.

Tony Will: I'd also add that, you know, what we're seeing, and some of this is being driven by machine learning and AI applications and the proliferation of that, is the number of data centers that are going up globally is significant, and the expected energy draw against those, you know, per data center installation is really large. And I think some of the estimates that we've seen are that by the end of this decade, there will be about 4 BCF of incremental gas conversion into electricity just for data centers in the U.S. alone.

Chris: I think we're well positioned. I'd also add that...

Speaker Change: You know, what we're seeing, and some of this is being driven by machine learning and AI applications.

Speaker Change: and the proliferation of that, is the number of data centers that are going up globally is significant and the expected energy draw against those per data center installation.

Christopher Bohn: And so it will happen when you combine the EU and North Africa and Trinidad combined with their production assets and the global SMD for the products that those plants produce. It places, again, like Chris said, an exporter or a producer like CF Industries and a fantastic place outside of what could happen in the Middle East with all the disruption in the Gaza and the Red Sea. So I think we're well positioned.

Speaker Change: is really large and I think some of the estimates that we've seen is by the end of this decade there's going to be about 4 BCF of incremental gas

Tony Will: And so, you know, energy is not, or the world is not reducing electricity demands. On the contrary, it's going up quite heavily. And so to be in a place in that environment where energy is short and tight, where we have the kind of resource space that we do have in the U.S., you really couldn't be in a better place. And I think that's one of the reasons why assets over here are trading the way they are.

Speaker Change: conversion into electricity just for data centers in the US alone. And so

Speaker Change: You know, the energy is not, or the world is not reducing the electricity demands.

Christopher Bohn: I also add that, you know, what we're seeing and some of this is just being driven by machine learning and AI applications and the proliferation of that. It's a number of data centers that are going up globally is significant and the expected energy draw against those, you know, per data center. Their installation is really large. And I think some of the estimates that we've seen is by the end of this decade, there's going to be about four BCF of incremental gas conversion into electricity just for data centers in the US alone.

Speaker Change: To the contrary, it's going up quite heavily. And so to be in a place in that environment where energy is short and tight, where we have the kind of resource base that we do have in the U.S.

Speaker Change: You really couldn't be in a better place, and I think that's one of the reasons why assets over here are trading the way they are.

Benjamin Theurer: And then just following up, you've talked a little bit about the Vagamon integration, but just wanted to understand where you are in terms of like efficiency at Vagamon versus your own legacy assets, what is still the potential? And just like from an operating run rate perspective, where are you at right now? And where do you want to be maybe by year end or in the first half of 2025?

Speaker Change: Perfect. And then just following up, you've talked a little bit about the Vagabond integration, but just wanted to understand where you...

Speaker Change: where you're at in terms of like efficiency at Vagabond versus

Speaker Change: your own legacy assets, where is still the potential? And just like from an operating run rate perspective, where are you at right now and where do you want to be maybe by year end or in the first half of 2025?

Christopher Bohn: And so, you know, that the energy is not, or the world is not reducing the electricity demands to the contrary. It's going up quite heavily. And so to be in a place in that environment where energy is short and tight, where we have the kind of resource base that we do have in the US, you really couldn't be in a better place. And I think that's one of the reasons why assets over here are trading the way they are.

Chris Bohn: Yeah, so what I would say, Ben, is right now the plant is currently operating at about 10% above its nameplate capacity, and that's pretty much in lockstep with a lot of our legacy plants that we have in the CF network. We haven't really evaluated doing any de-bottlenecks there at this particular time. I think our goal is just to have upstream on time to be the plant operating more consistently, which it has been since we took it down.

Unknown Attendee: Perfect.

Speaker Change: Yes, so what I would say Ben is right now the plant is currently operating at about 10% above its main plate capacity and that's

Speaker Change: That's pretty much in lockstep with a lot of our legacy plants that we have in the CF network.

Speaker Change: We haven't really evaluated doing any de-bottlenecks there at this particular time. I think our goal is just to have...

Unknown Attendee: And then just following up, you've talked a little bit about the Vagamin integration, but just wanted to understand where you were at in terms of like efficiency at Vagamin versus your own legacy assets. What is still the potential and just like from an operating run rate perspective, where are you at right now and where do you want to be maybe by year end or in the first half of 25. Yeah, so what I would say then is, right now, the plants is currently operating at about 10% above its name plate capacity and that's pretty much in lockstep with a lot of our legacy plants that we have in the CF network.

Speaker Change: upstream on time to be that.

Chris Bohn: If you recall, in the first quarter, it was one of the sites where we had an outage. Our team pulled ahead some of the work and got in there and accomplished a significant amount of maintenance work during that particular time frame, and since then, the plant's been operating fantastically. So from that integration standpoint, we feel very comfortable that where we're running now is where we'll run for the remaining part of the year. As time goes on, we'll look at other projects that may involve a de-bottleneck and definitely will involve carbon sequestration.

Speaker Change: the plant operating more consistently, which it has been.

Speaker Change: Since we took it down, if you recall, in the first quarter, it was one of the sites where we had an outage.

Speaker Change: Our team pulled forward some of the work and got in there and accomplished a significant amount of maintenance work during that particular time frame.

Speaker Change: And since then, the plant's been operating fantastic. So from that integration standpoint...

Speaker Change: We feel very comfortable that where we're running now is where we'll run for the remaining part of the year.

Speaker Change: As time goes on, we'll look at other projects that may involve a de-bottleneck and definitely will involve carbon sequestration.

Tony Will: The other thing I'd just add is, from an efficiency standpoint, I think I'm right in saying that this is the most efficient plant we have in the entire network. And we're running at, I think, under 30 mmBtu per ton of ammonia, where, you know, the legacy systems, not including the recent expansion plants, but the legacy systems are more like 33, 32, and even the expansions are, you know, in So not only is it a fantastic plant from being able to operate, you know, above nameplate, but it's the most efficient plant in the system. And we've got a really engaged workforce down there. We could not be happier with that. It's awesome.

Unknown Attendee: We haven't really evaluated doing any de bottlenecks there at this particular time. I think our goal is just to have upstream on time to be the plant operating more consistently, which it has been since we took it down. If you recall in the first quarter, it was one of the sites where we had an outage. Our team pulled forward some of the work and got in there and accomplished a significant amount of maintenance work during that particular time frame. And since then, the plant's been operating fantastic. So from that integration standpoint, we feel very comfortable that where we're running now is where we're running for the remaining part of the year.

Speaker Change: The other thing I'd just add is, from an efficiency standpoint, I think I'm right in saying that is the most efficient plant we have in the entire network.

Benjamin Theurer: Awesome. Thank you very much for the caller.

Speaker Change: and we're running at, I think, under 30 mmBtu per ton of ammonia.

Speaker Change: where the legacy systems, not including the recent expansion plans, but the legacy systems are more like 33.

Speaker Change: 32

Speaker Change: and even the expansions are in the 30 range. So not only is it a fantastic plant from being able to operate above nameplate, but it's the most efficient plant in the system, and we've got a really engaged workforce down there. We could not be happier with that acquisition.

Unknown Attendee: As time goes on, we'll look at other projects that may involve a de bottleneck and definitely will involve carbon sequestration. The other thing I just add is, from an efficiency standpoint, I think I'm right in saying that is the most efficient plant we have in the entire network. And we're running at, I think, under 30 MMBTU per ton of ammonia, where the legacy systems, not including the recent expansion plants, but the legacy systems are more like 33, 32.

Unknown Attendee: And even the expansions are in the 30 range. So not only is it a fantastic plant from being able to operate above name plate, but it's the most efficient plant in the system. And we've got a really engaged workforce down there. We could not be happier with that act.

Speaker Change: Awesome. Thank you very much for the caller.

Operator: The next question comes from Richard Garchitorena with Wells Fargo. Please go ahead.

Speaker Change: The next question comes from Richard Garchitorena with Wells Fargo. Please go ahead.

Richard Garchitorena: Great, thanks. Good morning, everyone.

Chris Bohn: So I was wondering if you could maybe give us an update in terms of how you're thinking about the market environment for clean ammonia today versus when you started your process to build out the strategy. Obviously, the recent OCI transaction would confirm the value that's out there. And then also, we've had conflicting views out there in terms of the viability of more green ammonia than blue ammonia, but maybe just some updated thoughts would be great.

Richard Garchitorena: Great. Thanks. Good morning, everyone.

Richard Garchitorena: So I was wondering if you could maybe give us an update in terms of how you're thinking about the market environment for clean ammonia today versus when you started your process to build out the strategy, obviously, the recent OCI transaction would confirm, I guess.

Speaker Change: value that's out there. And then also, just, we've had conflicting views out there in terms of the viability of more green ammonia than blue ammonia, but maybe just some updated thoughts would be great.

Chris Bohn: Well, I'll start with one. We're extremely positive. We think the transaction, I should say, is positive for the industry with Woodside because it pretty much, you know, validates not only our clean energy strategy but the conversations they're having globally. They're seeing the sort of the same type of demand shoots in new centers starting to evolve, whether it be in power generation or in just marine fuel, or just in really supply releasing or supplanting higher carbon nitrogen today.

Unknown Attendee: Opposition.

Unknown Attendee: Thank you very much for the call.

Speaker Change: Well, I'll start. One, we're extremely positive. We think the transaction, I should say, is positive for the industry with Woodside because it's...

Unknown Attendee: I'll pass it on.

Richard Garchitorena: The next question comes from Richard Garchitorena with Wells Fargo. Please go ahead. Great. Thanks. Good morning, everyone.

Speaker Change: you know, pretty much validates not only our clean energy strategy, but the conversations they're having globally. They're seeing the same type of demand.

Bert Frost: I was wondering if you could maybe give us an update in terms of how you're thinking about the market environment for clean ammonia today versus when you started your process to build out the strategy. Obviously, the recent OCI transaction would confirm, I guess, value that's out there. And then also just we've had conflicting views out there in terms of the viability of more green ammonia than blue ammonia, but maybe just about to be great.

Speaker Change: Shoots and new centers starting to evolve, whether it be in power generation

Chris Bohn: So very positive on that. I think what we've seen change over time is what Bert talked about in the beginning is that we're largely industrial focused, and we're seeing the pull happen more from the power gen and marine side, and even sustainable aviation fuel. Now, what we're seeing is the agricultural side is probably seeing where they fit into that, and then there's also the demand-pull side that's coming more from the CPGs who want a lower carbon product as they're moving forward.

Speaker Change: or in just marine fuel, or just in really sublacing.

Speaker Change: are supplanting higher carbon nitrogen today. So very positive on that.

Speaker Change: I think what we've seen change over the time is what Bert talked about in the beginning is that we're largely industrial focused.

Bert Frost: Well, I'll start one. We're extremely positive. We think the transaction, I should say, is positive for the industry with woodside because it pretty much, you know, validates not only our clean energy strategy, but the conversation is there having globally, they're seeing the sort of the same type of demand, shoots and new centers starting to evolve, whether it be in power generation, or in just marine fuel, or just in really subplacing or supplanting higher carbon nitrogen today.

Bert: And we're seeing the poll happen more from PowerGen and Marine.

Speaker Change: side, and even sustainable aviation fuel, now what we're seeing is the agricultural side is probably seeing where they fit into that. And then there's also the demand pull side that's coming more from the CPGs who want a lower carbon product as they're moving forward.

Bert Frost: I agree with Chris. In terms of where we are in our evolution in this process, we're focused on the business and where we can generate higher revenues and higher profitability. And clean products are going to be a part of that. And it's amazing the receptivity from the processors. Again, when you look at the corn value chain in and of itself, of what low-carbon product, low-carbon ammonia or ammonium upgraded as UAN or as ammonium nitrate, what that can do in that value chain for corn or wheat as you take it through to the farmer and the farmer does beneficial practices that are being focused on today through the processor and as we sequester that CO2 from the, let's say, the ethanol producer, you have a very low carbon, a very low carbon finished product that can go into sustainable aviation fuel or ethanol and those, that's where we're focusing our attention on the ag cycle.

Speaker Change: I agree with Chris. In terms of where we are in our evolution in this process,

Speaker Change: You know, we're focused on the business and where we can generate.

Speaker Change: higher revenues and higher profitability and clean products are going to be a part of that and it's amazing the receptivity from the processors again when you look at the corn value chain in and of itself

Bert Frost: So very positive on that. I think what we've seen change over the time is what Bert talked about in the beginning is that we are largely industrial focus. And we are seeing the poll happen more from power gen and marine side and even sustainable aviation fuel. Now what we're seeing is the agricultural side is probably seeing where they shed in it into that. And then there's also the demand poll side that's coming more from the CPGs who want a lower carbon product as they're moving forward.

Speaker Change: of what low-carbon product, low-carbon ammonia or ammonium upgraded as UAN or as ammonium nitrate.

Speaker Change: what that can do in that value chain for corn or wheat.

Speaker Change: As you take it through to the farmer and the farmer does beneficial practices that are being focused on today.

Speaker Change: through the processor and as we sequester that.

Bert Frost: I agree with Chris, in terms of where we are and our evolution in this process, we're focused on the business and where we can generate higher revenues and higher profitability and clean products are going to be a part of that. And it's amazing the receptivity from the processors. Again, when you look at the corn value chain in and of itself of what low carbon product can low carbon ammonia or ammonium to upgrade it as UN or as ammonium nitrate, what that can do in that value chain for corn or wheat as you take it through to the farmer and the farmer that does beneficial practices that are being focused on today through the processor.

Speaker Change: CO2 from, let's say, the ethanol producer, you have a very low carbon finish product that can go into sustainable aviation fuel or ethanol. And that's where we're focusing our attention on the ag cycle.

Chris Bohn: And I would say the discussion about blue and green, I would just call it, it's all going to be, as I mentioned earlier, on carbon intensity. I think to get to zero carbon, even as we start to commission our particular plant down there, which is about only 20,000 tons a year, the cost of being green is just very significant, and the energy pull on that without having the renewable energy sources in place, it's going to be very difficult to leapfrog low carbon and get right to zero.

Speaker Change: And I would say the discussion about blue and green, I would just call it, it's all going to be, as I mentioned earlier, on a carbon intensity.

Speaker Change: I think to get to zero carbon, even as we start to commission our particular plant down there, which is about only 20,000 tons a year.

Speaker Change: The cost of the green is just very significant and the energy pull on that without having the renewable energy sources in place.

Chris Bohn: I think as time goes on, and by time meaning decades, you'll start to see it evolve to that. But today, when you can get to 65 to 95 percent carbon reduction, that's what's going to lead the day today. And I think that's where you see the start.

Bert Frost: And as we sequester that CO2 from the let's say the ethanol producer, you have a very low carbon finish product that can go into sustainable aviation fuel or ethanol. And that's where we're focusing our attention on the ag cycle. And I would say the discussion about blue and green, I would just call it it's all going to be as I mentioned earlier on a carbon intensity. I think to get to zero carbon even as we start to commission our particular plant down there, which is about only 20,000 tons a year.

Speaker Change: It's going to be very difficult to leapfrog low carbon and get right to zero. I think as time goes on, and by time meaning decades, you'll start to see it evolve to that. But today...

Speaker Change: When you can get to 65 to 95% carbon reduction, that's what's going to lead the day today. And I think that's where you see the stalling globally of the green projects, where you see CF and others leaping ahead with low-carbon products.

Chris Bohn: And I think that's where you see the stalling, globally, of green projects, where you see CF and others leaping ahead with low-carbon products.

Chris Bohn: Okay, got it. And then during the quarter, you also move forward with Yazoo City, CCS. Given how well Wagaman is running, can you maybe talk about potential moving forward with other projects, you know, on TCS, maybe in that regard? Yeah, as we've talked about all along, we have.

Speaker Change: Okay, got it. And then during the quarter you also move forward with Yazoo City CCS.

Bert Frost: Because the green is just very significant and the energy pull on that would not without having the renewable energy sources in place can be very difficult to leapfrog low carbon and get right to zero. I think it's time goes on and by time, meaning decades, you'll start to see it evolve to that. But today, When you can get to 65 to 95% carbon reduction, that's what's going to lead today today. And I think that's where you see the stalling globally of the green projects where you see CF and others leaping ahead with low carbon products.

Speaker Change: Given how well Wagaman is running, can you maybe talk about potential moving forward?

Chris Bohn: Yeah, as we've talked about all along, we have a hierarchy of plants that we were hitting that were the most attractive and the soonest to execute, so we could move on those. The first being Donaldsonville, the second being Medicine Hat, and Yazoo City. So we've executed with Yazoo City, and we're working on Medicine Hat. Weigaman, you know, our initial goal there was just the utilization rate and getting that stable and moving forward with the projects we have in place from a maintenance standpoint.

Speaker Change: with other projects, you know, on CCS maybe in that regard.

Speaker Change: Yeah, as we've talked about all along, we have...

Unknown Attendee: Okay, got it.

Speaker Change: hiarchy of plants that we were hitting that were the most attractive and the soonas to execute so we could move on those the first being donaldsonville the second being medicine had yzi cities so we've executed yzi city so we're working on medicine had

Speaker Change: Weigemann, you know, our initial goal there was just the utilization rate and getting that stable and moving forward with the projects we have in place from a maintenance standpoint. But that definitely is probably the next on the list after Medicine Hat that we begin to look at CCS.

Unknown Attendee: And then during the quarter, you also move forward with the other city, PCS, given how well Benjamin is running, he may talk about potential moving forward with other projects, you know, on CCS maybe in that regard. Yeah, as we've talked about, along we have a hierarchy of plants that we were hitting that were the most attractive and the soonest to execute so we could move on those. The first being Donaldson Bill, the second being medicine had Yazoo City, so we've executed with Yazoo City, so we're working on medicine hat.

Speaker Change: in that particular region.

Speaker Change: Great, thank you.

Chris Bohn: But that definitely is probably the next on the list after Medicine Hat that we should begin to look at CCS in that particular region. Great, thank you. The next question comes from Edlain Rodriguez with Mizzouho Securities. Please go ahead.

Speaker Change: Next question comes from Edlain Rodriguez with Mizzouho Securities. Please go ahead.

Operator: Thank you, and good morning everyone.

Edlain Rodriguez: Thank you and good morning everyone. Tony, I have a quick question for you.

Speaker Change: Like you talk about like the stock being undervalued and those two transactions clearly prove you right

Unknown Attendee: Wagamin, you know, our initial goal there was just utilization rate and getting that stable and moving forward with the projects we have in place from the maintenance standpoint, but that definitely is probably the next on the list after medicine hat that we begin to look at CCS in that particular region. Great, thank you.

Edlain Rodriguez: The question is, how do you unlock the value? Like, what do you need to do, or what can you do to make investors see the light?

Edlain Rodriguez: Yeah, I mean, from our perspective, Edlain, we're gonna continue to do what we have done, which is just continue to buy the shares out of the marketplace. We've taken 50% of the company's outstanding share count out already, and that has benefited significantly the long-term shareholders that have been with us on that journey, and we're gonna continue to do that. And, you know, eventually, those that are left will, you know, be able to recognize and see the amazing amount of aggregate cash flow and the small number of shares out, and that'll, by definition, have to translate into a share price that is, I would say, more reflective of the value of the asset base. But until that time, we're happy to be patient and continue to buy shares out for the benefit of our long-term believers.

Tony Welch: Yeah, I mean, I think from our perspective,

Speaker Change: you know i'd laay that that

Speaker Change: We're going to continue to do what we have done, which is just continue to buy the shares out of the marketplace. We've taken 50% of the company's outstanding share count out already, and that has benefited significantly.

Ed Lane: Next question comes from Ed Lane, Ron Reedus with Mizzaho Securities. Please go ahead. Thank you.

Tony Will: Good morning, everyone. Tony, it's like a quick question for you. Like you talk about like the stock being undervalued and those two transactions clearly prove you right. The question is, how do you unlock the value? Like what do you need to do or what can you do to make investors see the light? Yeah, I mean, I think from our perspective, you know, Ed Lane, that we're going to continue to do what we have done, which is just continue to buy the shares out of the marketplace.

Edlain Rodriguez: The long-term shareholders that have been with us on that journey, and we're going to continue to do that.

Speaker Change: You know, eventually those that are left will, you know, be able to recognize and see the amazing amount of aggregate.

Speaker Change: Cashflow and the few number of shares out and that'll by definition have to translate into a share price that is that is, I would say, more reflective of the value of the asset base.

Tony Will: We've taken 50% of the company is outstanding share count out already, and that has benefited significantly the long-term shareholders that have been with us on that journey, and we're going to continue to do that. And, you know, eventually those that are left will, you know, be able to recognize and see the amazing amount of aggregate cash flow and the few number of shares out, and that will, by definition, have to translate into a share price that is, I would say, more reflective of the value of the shares. But until that time, we're happy to be patient and continue to buy shares out and for the benefit of our long-term believers. Okay, thank you.

Unknown Attendee: That's all I have.

Speaker Change: But until that time, we're happy to be patient and continue to buy shares out for the benefit of our long-term believers.

Speaker Change: Okay, thank you. That's all I have.

Tony Will: The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

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

Operator: Thank you. Can I just start off by saying I just want to clarify a few things that have come up on the Blue Project. One would be that, is FID still intended for later this year, or did the MEDI thing push it into one queue? And I guess on top of that, it sounds like you're seeing a lot more demand from multiple factions compared to before. So is there any scenario where the scope of the plant increases, or is there a second plant?

Vincent Andrews: Thank you. Can I just start off by, I just want to clarify a few things that have come up on the Blue Project. One would be that...

Speaker Change: Is FID still intended for later this year, or did the MEDI thing push it into one queue? And I guess on top of that, it sounds like you're seeing a lot more demand from multiple factions versus previously.

Operator: Or does that incremental interest make you willing to move forward, maybe with ahead of MEDI or without take or pay contracts or any change in sort of the way that you want to have everything postured before making FID?

Speaker Change: This is a scenario where the scope of the plant increases or is there a second plant.

Speaker Change: or does that incremental interest

Speaker Change: Thank you very much.

Vincent Andrews: The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Thank you.

Vincent Andrews: Yeah, so I think the MEDI decision timeframe is one aspect of our partnership with JIRA where they would feel comfortable moving forward once they know what the contract for difference is. However, in saying that, what is really the gating item initially right now is completion of the feed study and our understanding that's going to inform what the capex is, what the volume we believe we can get off of that, and then out of that, what the return profile is.

Vincent Andrews: Can I just start off by clarifying a few things that have come up on the blue project. One would be that, is FID still intended for later this year, or did the METI thing push it into one queue? And I guess on top of that, it sounds like you're seeing a lot more demand, you know, from multiple factions versus previously. So is there any scenario where the scope of the plant increases, or is there a second plant, or does that incremental interest make you, you know, willing to move forward, you know, maybe with, you know, maybe with ahead of METI or without take or pay contracts or standing change in sort of the way that you want to have everything postured before making FID.

Speaker Change: Yeah, so I think the MEDI decision timeframe is one aspect that's in our partnership with JIRA where they would feel comfortable moving forward once they know what the contract for difference is.

Speaker Change: However, in saying that, what is really the gating item initially right now is completion of the FEED study and our understanding that's going to inform what is the CapEx.

Speaker Change: What is the volume we believe we can get off of that, and then out of that, what is the return profile? And if that's significantly above...

Vincent Andrews: And if that's significantly above our capital, our cost of capital, there are other partners that we're also in discussions with that could accelerate that. So I wouldn't say it's 100% pinned to MEDI, just given some of the other activity that we've seen around that.

Speaker Change: are a cost of capital.

Speaker Change: There's other partners that we're also in discussion with that could accelerate that. So I wouldn't say it's 100% pin to METI, just given some of the other activity that we've seen around that. I think given the size of the project.

Chris Bohn: I think given the size of the project, there are two ways we look at partnership. One would be an equity investment, and one would be a long-term offtake, no differently than we've done in the past with CHS and as Bert talked about earlier with Mosaic. To move to a second plant right away, I think we would need, you know, probably really to be ensured that we had partnerships and the cash flow.

Vincent Andrews: Yeah, so I think the many decision time frame is one aspect that's in our partnership with Jera where they would feel comfortable moving forward once they know what the contract for differences. However, in saying that what is really the gating item initially right now is completion of the feed study and our understanding that's going to inform what is the cat backs, what is the volume we believe we can get off of that, and then out of that what is the return profile.

Bert: There's two ways we look at partnership. One would be in an equity investment and one would be a long-term offtake, no differently than we've done in the past with CHS and as Bert talked about earlier.

Speaker Change: To move to a second plant right away, I think we would need, you know, probably really to be ensured that we had partnerships and the cash flow. As Tony said,

Chris Bohn: As Tony said, we're looking at this in a very disciplined way while continuing to do capital allocation back to the shareholders, but also growing, and we think right now our focus is on that first plant at the Blue Point site.

Vincent Andrews: And if that's significantly above our capital or cost of capital, there's other partners that we're also in discussion with that could accelerate that. So I wouldn't say it's 100% pin to metty to speak given some of the other activity that we've seen around that. I think given the sides of the project, there's two ways we look at partnership one would be in an equity investment and one would be a long term offtake, no differently than we've done in the past with CHS.

Speaker Change: We're looking at this in a very disciplined way while continuing to do capital allocation back to the shareholders But also grow and we think right now our focus is on that first plant at the Blue Point site Yeah, and I I would just echo that which is

Tony Will: I would just echo that, which is having partners that are in there with us, not only to share the capital commitment but also take the product offtake is an important aspect of this from our standpoint, just in terms of risk mitigation. The METI thing, relative to JIRA being a potential partner, does elongate that time horizon, but as Chris mentioned, there's a lot of other interest from other parties that we feel like if the project holds water from a return profile perspective, there won't be an issue with respect to us having others join us.

Speaker Change: having partners that are in there with us, not only on the

Speaker Change: to kind of share the capital commitment, but also take the product off take.

Speaker Change: It's an important aspect of this from our standpoint, just in terms of risk mitigation. And so, you know, that the METI thing...

Vincent Andrews: And as Burke talked about earlier with Mosaic, to move to a second plant right away, I think we would need, you know, probably really to be insured that we had partnerships and the cash flow. As Tony said, we're looking at this in a very disband way while continuing the capital allocation back to the shareholders but also grow. And we think right now our focus is on that first plant at the blue point side.

Speaker Change: Relative to JIRA being a potential partner, does it elongate that time horizon? But as Chris mentioned, there's a lot of other interest from other parties that we feel like if the project...

Chris: holds water from a return profile perspective. There won't be an issue with respect to us having others join us.

Vincent Andrews: Thanks very much. I'll leave it there.

Vincent Andrews: Yeah and I would just echo that which is having partners that are in there with us, not only on the kind of share the capital commitment but also take the product offtake is an important aspect of this from our standpoint just in terms of risk mitigation. And so that the many thing relative to GERA being a potential partner does a long gave that time horizon but as Chris mentioned there's a lot of other interests from other parties that we feel like if the project holds water from a return profile perspective there won't be an issue with respect to us having others join us.

Speaker Change: Thanks very much. I'll leave it there.

Operator: The next question comes from Jeff Zekauskas with J.P. Morgan.

Speaker Change: The next question comes from Jeff Zekauskas with J.P. Morgan. Please go ahead.

Jeffrey Zekauskas: Thanks very much. I think you sold 47 million emissions credits. Is that 47 million that benefited EBITDA in the quarter, or is the number larger or smaller?

Jeff Zekauskas: Thanks very much. I think you sold 47 million of emissions credits.

Speaker Change: Thank you.

Jeff Zekauskas: Is that 47 million that benefited EBITDA in the quarter, or is the number larger or smaller?

Tony Will: Now that does, and it's actually fairly comparable to what we did a year ago. Those were credits that were, you know, provided by the UK government as part of the overall ETS emissions. And we are, at this point, given the fact that our ammonia production is offline, kind of largely through that bank of credits, but on a comp basis quarter over quarter from last year versus this, that number didn't change dramatically.

Speaker Change: Now that that does and it's actually fairly comparable to what we did a year ago those were credits that were you know that that were

Speaker Change: provided by the UK government as part of the overall ETS emissions.

Vincent Andrews: Thanks very much I'll leave it there.

Speaker Change: scheme in the UK. And we are at this point, given the fact that our ammonia production is offline, kind of largely through that bank of credits.

Jeff Sikaskas: The next question comes from Jeff Sikaskas with JP Morgan. Please go ahead. Thanks very much. I think you sold 47 million of emissions credits. Is that 47 million that benefited EBITDA in the quarter or is the number larger or smaller? Now that does and it's actually fairly comparable to what we did a year ago. Those were credits that were provided by the UK government as part of the overall ETS emissions scheme in the UK.

Speaker Change: But on a comp basis, quarter over quarter from last year versus this, that number didn't change dramatically.

Jeffrey Zekauskas: Okay, and looking at the language that you've described, Donaldsonville and the Mississippi plant, it looks like the Deville carbon dioxide will go into enhanced oil recovery, whereas the Mississippi plant will have carbon dioxide that's sequestered in the new plant that you want to build, the new greenfield plant. Does it make a difference to the carbon footprint? If you have to go an enhanced oil recovery route versus sequestration, or how much of a difference does it make, if it makes a difference?

Speaker Change: And looking at the language that you described, Donaldsonville and the Mississippi plant, it looks like the Deville carbon dioxide will go into enhanced oil recovery, whereas the Mississippi plant will

Speaker Change: have carbon dioxide that's sequestered.

Speaker Change: In the new plant that you want to build, the new greenfield plant,

Jeff Sikaskas: And we are at this point given the fact that our ammonia production is offline kind of largely through that bank of credits but on a count basis quarter or quarter from the last year versus this you know that number didn't change from that. And looking at the language that you describe, Donaldsonville and the Mississippi plant, it looks like the Deville carbon dioxide will go into enhanced oil recovery, whereas the Mississippi plant will have carbon dioxide that's sequestered.

Speaker Change: Does it make a difference to the carbon footprint?

Speaker Change: If you have to go an enhanced oil recovery route versus a

Tony Will: It matters a little bit in terms of the value of the 45Q tax credit; the payment is higher if you go into a class 6 well than EOR. The agreement that we have with ExxonMobil was contemplated on a class 6 well, and so that is still, for both plants, both Deville and Yazoo City, so that is still the expectation of where we're going to end up longer term. There is a question in terms of whether class 6 permitting will be completed by the time that we're ready to begin injection from our side, and so there may be some transition period that we are talking about whether that makes sense to accelerate and go into EOR for a period of time before class 6, but more to come on that front.

Speaker Change: Sequestration Roots.

Speaker Change: or how much of a difference does it make?

Speaker Change: Thank you.

Speaker Change: Yeah, it matters a little bit in terms of the value of the 45Q tax credit, the payment's higher if you go into a Class 6 well than EOR. The agreement that we have with ExxonMobil was...

Speaker Change: contemplated on a class six well. And so that is still for both plants, both Deville and Yazoo City. So that is still the expectation of where we're gonna end up longer term.

Jeff Sikaskas: In the new plant that you want to build the new Greenfield plant, does it make a difference? To the carbon footprint, if you have to go and enhance oil recovery route versus a sequestration route, or how much of a difference does it make? It matters a little bit in terms of the value of the 45 Q tax credit payment higher if you go into a class six well than EOR. The agreement that we have with Exxon Mobile was contemplated on a class six well and so that is still for both plants, both Deville and Yazoo City.

Speaker Change: There is a question in terms of whether Class 6 permitting will be completed by the time that we're ready to begin injection from our side.

Speaker Change: And so there may be some transition period that, you know, we are talking about whether that makes sense to accelerate and go into EOR for a period of time before class six. But more to come on that front.

Tony Will: You know, our perspective is the world is going to continue to need that oil, and whether it's our CO2 or whether it's CO2 that comes out of naturally occurring sources like Jackson Dome in Mississippi or other places, that oil is going to get produced. This is a net reduction in the amount of emissions that we're providing that are going into the ground and staying there, and the oil is coming out anyway. And so, you know, our perspective is that this is nothing but good for the environment.

Speaker Change: You know that our perspective is the world is going to continue to need that oil and whether it's our co2 or whether it's co2 that comes out of naturally occurring

Speaker Change: sources like Jackson Dome in Mississippi or other places.

Jeff Sikaskas: So that is still the expectation of where we're going to end up longer term. There is a question in terms of whether class six permitting will be completed by the time that we're ready to begin injection from our side. And so there may be some transition period that we are talking about whether that makes sense to accelerate and go into EOR for a period of time before class six. But more to come on that front, our perspective is the world is going to continue to need that oil and whether it's RCO2 or whether it's CO2 that comes out of naturally occurring sources like Jackson Dome and Mississippi or other places, that oil is going to get produced.

Speaker Change: That oil is going to get produced.

Speaker Change: This is a net reduction in the amount of emissions that we're providing.

Speaker Change: that's going into the ground and staying there, and the oil is coming out anyway. And so, you know, our perspective is this is nothing but good for the environment.

Tony Will: I think different potential customers may have different perspectives on that, and we've got to align, you know, with customer requirements. But in the near term, the difference really is about the value of the 45Q tax credit. But longer term, the intent of all of our agreements is Class VI permits.

Speaker Change: I think different potential customers may have different perspectives on that and we've got to align, you know, with customer requirements.

Speaker Change: But in the near term, the difference really is about the value of the 45Q tax credit. But in the longer term, the intent of all of our agreements is Class VI permit.

Jeffrey Zekauskas: Now, I get it that there's a different remuneration if it's sequestered versus EOR, but what I was wondering is in terms of the way the carbon footprint is thought of by, say, the Japanese. Are they going to do a different calculation, or do you do a different calculation?

Speaker Change: Now I get it that there's a different remuneration if it's sequestered versus EOR, but what I was wondering is in terms of the way the carbon footprint is thought of by, say, the Japanese.

Jeff Sikaskas: This is a not reduction in the amount of emissions that we're providing that's going into the ground and staying there and the oil is coming out anyway. And so our perspective is this is nothing but good for the environment. I think different potential customers may have different perspectives on that and we've got to align with customer requirements. But in the near term, the difference really is about the value of the 45 Q tax credit.

Chris Bohn: Yeah, I think that's what Tony was trying to explain, that certain customer bases are going to view EOR differently than permanent sequestration. So as you look to Asia, it's more that permanent sequestration is a requirement. I think as you look here in the U.S. and some of the other regions around the world, EOR, given his points that he made, the sequestering of CO2 will still be acceptable. We look at it both on a strategic basis from that, but also on the economic, as he explained. Okay, that's clear. Thank you.

Speaker Change: Are they going to make a different calculation, or do you make a different calculation? I think that's what Tony was trying to explain, that certain customer bases are going to view EOR differently than permanent sequestration.

Speaker Change: So as you look to Asia, it's more permanent sequestration.

Speaker Change: is a requirement. I think as you look here in the U.S. and some of the other regions around the world, EOR, given his points that he made, it's still sequestering the CO2.

Jeff Sikaskas: But our longer term, the intent of all of our agreements is class six permitting. No, I get it that there's a different remuneration if it's sequestered versus EOR, but what I was wondering is in terms of the way the carbon footprint is thought of by say the Japanese. Are they going to make a different calculation or do you make a different calculation? Yeah, I think I think that's what Tony was trying to explain that certain customer bases are going to view EOR differently than permanent sequestration.

Speaker Change: We look at it both on a strategic basis from that, but also on the economic, as he explained as well. Okay. That's clear. Thank you.

Martin Jarosick: Ladies and gentlemen, that is all the time we have for questions today. I would like to turn the call back to Martin Jarosick for closing remarks. Thanks, everyone.

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

Operator: Thank you everyone for joining us today, and we look forward to seeing you at upcoming conferences. The conference is now concluded. Thank you for attending today's presentation.

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

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [music]

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

Jeff Sikaskas: So as you look to Asia, it's more permanent sequestration is a requirement. I think as you look here in the US and some of the other regions around the world, EOR given his points that he made, it's still sequestering a CO2 will be acceptable. We look at it both on a strategic basis from that, but also on the economic, as he explained as well.

Operator: BF-WATCH TV 2021 [music]

Speaker Change: https://www.youtube.com.uk https://www.youtube.com.uk

Speaker Change: [music]

Martin Jarosick: Good day, ladies and gentlemen, and welcome to the CF Industries first half and second quarter 2024 earnings call. All participants will be in a listen only mode. 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 toward the end of the presentation. To pose a question at any time, please press star then 1 on your touchtone phone. I would now like to turn the presentation over to our host for today, Mr. Martin Jarosick with CF Investor Relations. Please go ahead.

Speaker Change: Good day, ladies and gentlemen, and welcome to the CF Industries first half and second quarter 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: We will facilitate a question and answer session toward the end of the presentation. To pose a question at any time, please press star then 1 on your touchtone phone.

Jeff Sikaskas: Okay, that's clear. Thank you.

Speaker Change: I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick with CF Investor Relations. Please go ahead.

Martin Jarosick: Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Tony Will, President and CEO; Chris Bohn, Executive Vice President and Chief Operating Officer; Greg Cameron, Executive Vice President and Chief Financial Officer; and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain.

Speaker Change: and

Speaker Change: Good morning and thanks for joining the CF Industries Earnings Conference Call. With me today are Tony Will, President and CEO , Chris Bohn, Executive Vice President and Chief Operating Officer, Greg Cameron, Executive Vice President and Chief Financial Officer, and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain.

Martin Jarosick: CF Industries reported its results for the first half and second quarter of 2024 yesterday after the call. 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 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 statement.

Speaker Change: CF Industries reported its results for the first half and second quarter of 2024 yesterday afternoon. On this call, we'll review the results, discuss our outlook, and then host a question and answer session.

Speaker Change: Statements made on this call and in the presentation on our website that are not historical facts are forward looking statements.

Speaker Change: 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.

Martin 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'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now, I'm going to introduce Tony Welch.

Unknown Attendee: Ladies and gentlemen, that is all the time we have for questions today.

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

Speaker Change: Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Tony Will: Thanks, Martin, and good morning, everyone. I'm going to start with a big welcome to Greg Cameron, who joined the CF Industries team as our Chief Financial Officer in June, this being his first earnings call with us. Greg brings a strong background in executive leadership, finance, and clean energy. He is succeeding Chris Bohn, who was promoted to Chief Operating Officer. So welcome, Greg, and congratulations, Chris. Turning to earnings, yesterday, we posted financial results for the second quarter of 2024, in which we generated adjusted EBITDA of over $750 million.

Speaker Change: Now let me introduce Tony Well.

Tony Well: Thanks, Martin, and good morning, everyone. I want to start with a big welcome to Greg Cameron, who joined the CF Industries team as our Chief Financial Officer in June , this being his first earnings call with us.

Speaker Change: Greg brings a strong background in executive leadership, finance, and clean energy.

Speaker Change: He is succeeding Chris Bohn, who was promoted to Chief Operating Officer. So welcome, Greg, and congratulations, Chris.

Speaker Change: Turning to earnings, yesterday we posted financial results for the second quarter of 2024, in which we generated adjusted EBITDA of over $750 million.

Tony Will: This brought adjusted EBITDA for the first half of this year to $1.2 billion. We're very pleased with our performance during the quarter, both in terms of how well we operated and also the progress we have made on our decarbonization and clean energy projects. With that, Chris is going to provide more detail on our operating results, as well as on our strategic...

Speaker Change: This brought adjusted EBITDA for the first half of this year to $1.2 billion.

Speaker Change: We're very pleased with our performance during the quarter, both in terms of how well we operate and also the progress we have made on our decarbonization and clean energy projects.

Martin Jarosick: I would like to turn the call back to Martin Jarosick for closing remarks. Thanks everyone for joining us today. We look forward to seeing you at upcoming conferences.

Unknown Attendee: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. .

Unknown Attendee: The Good day, ladies and gentlemen, and welcome to the CF Industries first half and second quarter, 2024 earnings call.

Unknown Attendee: All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key, fall by zero. We will facilitate a question and answer session toward the end of the presentation. To pose a question at any time, please press star than one on your touchstone phone.

Martin Jarosick: I would now like to turn the presentation over to the host for today. Mr. Martin Jarosick with CF Investor Relations, please go ahead. Good morning and thanks for joining the CF Industries earnings conference call. With me today are Tony Will, President and CEO, Chris Bohn, Executive Vice President and Chief Operating Officer, Greg Cameron, Executive Vice President and Chief Financial Officer, and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain.

Martin Jarosick: CF Industries reported this results for the first half and second quarter of 2024 yesterday afternoon. On this call, we will 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 looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict.

Martin Jarosick: Therefore, actual outcomes and results made different materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, available on our website. Also, you will find recommendations between GAF and NONGAF measures in the press release and presentation posting on our website.

Tony Will: Now let me introduce Tony Will. Thanks Martin and good morning everyone. I'm going to start with a big welcome to Greg Cameron to join the CF Industries team as our Chief Financial Officer in June, as being his first earnings call with us. Greg brings a strong background in executive leadership, finance, and clean energy. He is succeeding Chris Bond who was promoted to Chief Operating Officer, so welcome Greg and congratulations Chris.

Christopher Bohn: Turning to earnings, yesterday we posted financial results for the second quarter of 2024 in which we generated adjusted EBITDAV over $750 million. This brought adjusted EBITDAV for the first half of this year to $1.2 billion. We're very pleased with our performance during the quarter, both in terms of how well we operate and also the progress we have made on our decarbonization and clean energy project. With that, Chris is going to provide more detail on our operating results as well as on our strategic initiatives.

Christopher Bohn: Chris, thanks Tony. The CF Industries teams delivered outstanding operational performance during the second quarter. We operated our ammonia plants at 99% utilization rate in the second quarter, following a challenging first quarter of production outages. This utilization performance includes the Wagamin ammonia production facility, which has been operating approximately 10% above nameplate capacity, following its first significant CF lead maintenance event. Most importantly, we operated safely. Our 12 month recordable incident rate at the end of the quarter was 0.17 incidents per 200,000 labor hours, significantly better than industry averages and one of the company's lowest incident rates ever.

Christopher Bohn: We continue to advance a series of strategic initiatives. These include our industry leading carbon capture and sequestration projects that will generate low carbon product and significant 45Q tax credits. The Donaldsonville project is on track with sequestration expected to begin in 2025. We also recently announced the carbon capture and sequestration project at our Yazoo City Mississippi complex. We will invest approximately $100 million in the site to enable Exxon mobile to transport sequester up to a half a million metric tons of carbon dioxide annually.

Christopher Bohn: We expect sequestration at Yazoo City to begin in 2028. Additionally, commissioning for our green ammonia project at Donaldsonville is ongoing as we work to integrate safely the electrolyzer into our ammonia operations. We continue to evaluate construction of a greenfield low carbon ammonia facility in Louisiana with global partners. We have made additional progress on our auto thermal reforming ammonia plant feet study, which should be complete before the end of the year. We remain focused on a discipline approach based on the return profile of new capacity, the technologies needed to meet customers carbon intensity requirements and the global demand outlook.

Bert Frost: With that, let me turn it over to Bert to discuss the global nitrogen market. Thanks, Chris. The North American Spring application season saw strong demand for Eurea and UN driven by higher than expected planted corn acres in the United States. This demand absorbed Eurea and UN imports that were significantly higher in 2024 than the prior year. Spring ammonia applications were low this year following a strong fall 2023 application season. However, industrial demand and exports offset the lower spring volumes.

Bert Frost: As a result, we believe the North American nitrogen channel exited the spring application season with low inventories across all products. This supported our ammonia and UN fill programs, which achieved prices that were well above last year's programs, but also represent value for farmers to fight lower corn prices. Corn prices have been declining due to anticipated high production of corn in the United States in Brazil this year. As a result, the outlook for farm economics is softer compared to recent years.

Bert Frost: We have begun to see this ripple through different parts of the agricultural value chain. We don't expect to see a major impact for nitrogen given the nondiscretionary nature of our products, but we may see changes in by our behavior. Globally, the nitrogen supply demand balance tightened as the second quarter progressed. Natural gas curtailments in Egypt resulted in widespread nitrogen production outages from late May to early July, reducing global supply. The continued absence of urea exports from China also helps tighten the global market.

Bert Frost: We expect exports from China to resume at some point in a second half. However, we believe total volumes for the year will be much lower than the 4.3 million metric tons of urea exported in 2023, given the Chinese government's focus on domestic fertilizer availability. Brazil and India will be a key focus of the global nitrogen market in the coming months. We continue to project that urea consumption in imports in Brazil will grow in 2024.

Bert Frost: In ports of urea to India will be lower than in previous years as domestic production is ramped up. However, India has imported less than 2 million metric tons of urea so far in 2024. As a result, we believe substantial import volumes are required in the coming months to meet urea demand in India. On a longer term basis, we anticipate growing demand for low carbon ammonia and low carbon nitrogen fertilizers for traditional applications.

Bert Frost: We've had a growing number of conversations with customers who want low carbon versions of the products they buy today. This is because the consumers of agricultural industrial products, including ethanol producers such as Poet, are increasingly focused on reducing the carbon footprint of their supply chain, which lower carbon fertilizers will do it in a quantifiable and certifiable manner. We expect even greater interest as we bring low carbon ammonia and fertilizers to the market.

Gregory Cameron: With that, Greg will cover our financial performance. Thanks, Burke. For the first half of 2024, the company reported net earnings attributable to common stockholders of approximately $614 million, or $3.31 per diluted share. EBITDA and adjusted EBITDA were both approximately $1.2 billion. For the second quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $420 million, or $2.30 per diluted share. EBITDA and adjusted EBITDA were both $752 million.

Gregory Cameron: As you can see on slide five, the largest driver of adjusted EBITDA variants between these periods and the same periods in 2023 was lower product prices, partially offset by lower realized natural gas costs in our costs of sales. Our trailing 12-month net cash from operations was $2 billion, and free cash flow was approximately $1.2 billion. We continue to return substantial capital to our shareholders. Over the previous 12 months, we pay $341 million in dividends.

Gregory Cameron: We also repurchased $13.1 million shares, approximately 7% of outstanding shares at the start of the period, for $1 billion. We have approximately $1.9 billion remaining on our current share repurchased authorization, which we intend to complete by its expiration in December of 2025. Share repurchases coupled with discipline investment in growth continue to offer strong returns for our shareholders. We believe our enterprise value remains significantly undervalued. This is reinforced by two recent acquisitions in our industry. The first one focused on traditional nitrogen products, and the last driven by low carbon ammonia that transacted evaluations consistent with our view of our assets, but significantly above our current enterprise value.

Tony Will: With that, Tony will provide some closing remarks before we open the call to Q&A. Thanks Greg. A year ago on our second corner earnings call, I expressed just satisfaction with our safety record as we had experience an unacceptable number of very preventable injuries. I am really proud of the team for their response and focus on this run.

Tony Will: And we have achieved fantastic results both on safety as well as our asset you look[inaudible] Our first question comes from Andrew Wong with RBC Capital Markets. Please go ahead. Good morning, Andrew. This is Bert. I think the question is a focus of where we are driving our business in all different formats. So energy is a focus, industry is a focus, and ag is a focus. Because we're net back driven or value driven, we're going to pursue each of those vectors with a vigor in the context of what it can do for the company to move these products.

Tony Will: As Chris mentioned in his remarks, we're leading the industry and bringing these products to market and also discussing that with our customers. And as I said in my remarks, the feedback is, as folks and customers are looking at their scope missions and their process, where that be CPGs or an industry or Ag or ethanol, low carbon products will play a valuable part of that solution. And so that's where we're talking about increased activity.

Tony Will: Regarding pricing, we believe and we've already been discussing that in the context of those discussions, that a valuable part of our component, not only will we receive from the tax credits, but as we put these products to market, we're expecting to receive a superior value to conventional. And I'm just going to tack on one other thing. It's not that we've seen a diminution or a reduction on the industrial or energy side for these products.

Tony Will: It's just what has happened on the agricultural side. We've seen demand develop that we hadn't previously recognized. What we're also seeing is a lot of interest from other potential industrial companies and looking at new low carbon intensity ammonia production for a variety of potential industries that they're focused on as well. So we're not only seeing it in terms of demand across the product space, but also demand from companies that are looking for vertically integrated inputs.

Tony Will: Now we just add one point to that. I think the agricultural side is also seeing how they can benefit through the industrial side. So for example, with some of the incentives related to the 40B and the 45Z, how low carbon horn production or agricultural production could work into fuel standards, whether it be sustainable aviation fuel. So it's seeing the whole value chain and where they participate in that. Okay, that's great.

Andrew Wong: And then maybe building on top of that, then, you know, we talk a lot about the potential for more new ammonia supply and then the potential for oversupply, but given we're seeing building demand trends around different industrial applications and maybe on the eggs as well. Is it possible there's a scenario where maybe that the man for low carbon ammonia could be strong enough to maybe just tighten the overall market just because of how long it takes to build some of these plants and obviously we know that that doesn't always go smoothly.

Andrew Wong: Andrew, I think what we're seeing right now is just based on kind of expected nitrogen demand growth, even in traditional applications looking forward, expected new demand is outpacing the amount of new construction that is already occurring. And so we expect a natural tightening in the S&D balance, even before you layer on top new sources of, you know, up to the end for decarbonized products. So we absolutely think there's going to be a tightening in the overall S&D balance on the nitrogen side, and that's one of the reasons we're so optimistic about what the future looks like for us. Thank you.

Andrew Wong: The next question comes from Josh Spector with UBS, please go ahead. Yeah, hi, good morning. I actually want to follow up on comment Tony, you may have made towards the end and Greg talked about it with the value of transactions that are out there. And I guess the expenditure willing to kind of open a little bit here. I mean the OCI transaction, obviously there's a hydrogen feed and some other shared economics not facility, but it was call it $2,100 a ton nitrogen, the coke acquisition that was done was maybe close to $4,000 a ton.

Andrew Wong: So I wonder if you could talk about those two different dynamics and what you would view as the right value for your assets given that quite a wide range that's been provided by the market lately. Yeah, Josh, I think it's a great question that you bring up, but I think you're thinking about this a little wrong. So the way to think about the Woodside OCI transaction is you take a conventional plant and you basically cleave it in half between the front end of the plant and the back end of the plant.

Andrew Wong: And what's essentially happened is I think Lindy is putting about $1.8 billion in the ground to create the front end of a plant. And now you've got Woodside that's paying $2.35 for the back end of that plant. So you add those together to really look at what an integrated plant looks like in your north of 4 billion. Now the piece that Lindy is building is a bit larger from a capacity standpoint than just the requirements of the back end of your plant.

Andrew Wong: But you do get efficiencies of scale when you start getting into large production volumes and so that doesn't scale on a linear basis. If you drop that plant down to kind of just what's required on the input basis, you're still probably talking about $1.3 to $1.5 billion. So you're looking at an integrated equivalency plant that's probably pushing $3.75 to $4 on that basis. So you really need to think about it in terms of what the total cost of construction of that plant is.

Andrew Wong: And by the way, Lindy has got a take or pay on the inputs that they're providing to across the fence line to what's now going to be the Woodside plant. And they're expecting a good rate of return on that. So you can't just look at the back end of the plant and try to do the math on it. You really have to look at what they're paying for the nitrogen, the nitrogen, the oxygen, and then capitalize that back into the full cost of what a plant is.

Andrew Wong: And I think what you'll find when you do that, Josh, is that it's pretty similar to what the Iowa transaction was as well. And that really leads to Tony's comments that you have two sophisticated buyers who are making these investments, one for agricultural, one for energy. But they both see the sustainable, free cash flow generation that underlies those assets. And specifically, our assets are similar, if not identical in some cases to that, but all the way on the low end of the cost curve and the first quarter. No, that's really helpful. Appreciate it. Definitely a different way to look at it.

Joshua Spector: I want to follow up and just ask a little bit more longer term on the blue ammonia offtake or really your decision on FID for the Greenfield facility. I think you've been helpful about thinking about the milestones needed within Japan, Korea, etc, to kind of say when they're comfortable knowing what they're willing to pay in terms of contract for difference to maybe enable some of those contracts. So is there any update?

Joshua Spector: You can provide on the timeline there beyond your FID study that would be required for decisions to be made. Thank you. Yeah, so many published yesterday. I would say the closest thing to the timeline that they have right now. So they put out some of the requirements for the carbon intensity and then it's in public comment period right now for the next 30 to 60 days. So if you think about it, it's really public comment is this good for Japan in total.

Joshua Spector: Bringing in low carbon ammonia and co-firing it with coal. Once that period is gone through a many is the ministry of economic and trade for Japan. They're the ones that are going to be making the recommendation to the government for the contract for difference just to be specific on that. So once they have that timeline, applications and submissions will go in so that will be like the end of October, November for our projects with our partners.

Joshua Spector: Many then will have probably three to four months to choose which projects both from a hydrogen side and a low carbon ammonia side that they would give the contract for difference for. So we're looking now at a more clarity on call it mid Q1 for that to be determined. But as Tony mentioned, I think the one thing that we're seeing is a little bit more interest around from other industrials globally on this low carbon front both from an agricultural but also from industrial applications as well. So a lot of activity that we're feeling pretty good about with our project. But again, all this is based on waiting for the feet studied to be completed by the end of the year. Great.

Unknown Attendee: Thank you. Next question comes from Steve Bern with Bank of America. Please go ahead. Yes, thank you. Bert, you were talking about the strong ammonia applications last fall would like to drill into your into your brain on what your expectations are for this coming fall. You got you got the outlook for grow or margins looks tighter and you know you got the soybean corn ratio looks like that might be a shift back to soybeans.

Unknown Attendee: Do you have a view on on whether the on the strength of the fall season or could the uncertainty lead to kind of a shift more towards the next spring? Yeah, good morning, Steve. So regarding the fall of 2023 was a big season for us. And then the spring this year, as I mentioned, was lighter. However, for the fall programs, whether that be Urea, UAN or ammonia, there's been very good uptake.

Unknown Attendee: And it's a good value. The value that we put out for the fall application program was well received from a broad array of customers. And so we're expecting a solid fall application, whether permitting. And the outlook, yes, the go-over outlook at $4 corn today were sub $4 in the cash market, forward market for D's 2025 is in the 450 range, which is acceptable. And so it's a question of how farmers are managing their economics, but fertilizer in general, that's NP and K, on a revenue basis is still in that 20% range, which is acceptable.

Unknown Attendee: We think that nitrogen is a good value today, and it will be well uptaken, we're expecting 90 plus million acres of corn for next year, which will then support, I think, not only ourselves, but the imports that come in. And so we're positive for 2025 in the fall application of 2024.

Unknown Attendee: Very good, and Chris, I wanted to drill into the feed studies a little bit with you. You have the feed study for a new SMR plant, which you know that technology well, and you're working on one with an ATR, and you need a carbon capture control technology to add on to the SMR, is it fair to assume that what you're looking for there might have something like a 75% control, just so that the overall carbon capture is roughly the same as the ATR approach, and are you looking at a variety of technologies, and maybe even something that would be more modest in control, maybe lower capex, if the Japan authorities don't require 90 to 95% to qualify as blue.

Unknown Attendee: Yeah, good morning, Steve. I'm going to start now, I'll hand the questions over to Chris. So we are going through a flu gas capture feed study right now, and part of that is, does it make sense if we were going to do a new build on an SMR, but part of it also is informing us in terms of the path forward of how we're going to want to. A long term approach, getting to net zero by 2050, and there's definitely going to have to be a flu gas capture component of ultimately how we get there in order to make it work.

Unknown Attendee: So this is not only good for the current, but good for the long term as well. And as you say, I think you can design these things at different levels of carbon reduction coming out of the flu. The problem is that sort of thing affects the geometries of the vessels, and so if you were going to go to all of the pain and hassle of an expense of putting in flu gas capture, it's fairly short-sighted, I think, to undersize that unit or to make it so that it's not terribly efficient, because then ultimately if your goal, a long term, is to get to net zero, you're going to have to mostly replace or rebuild all of that capital you've already put in the ground.

Unknown Attendee: But it is certainly something that we're looking at and evaluating. We actually believe that the value of a superior decarbonized product is going to be such in the marketplace from a demand standpoint, that extracting as much carbon out of it as you can is going to pay for itself. Not only do you get the 45Q benefit, but also the market demand for an premium that would be accompanying a decarbonized product I think will carry the diet.

Unknown Attendee: Yeah, really not much to add from that but just to agree with Tony that I think over time the carbon intensity and the more you can reduce it, the more incentives or the more premium you'll get for that. If you look at the CBAM, that'll be going in place really at the end of 2025 here beginning in 2026 with some of the carbon charges to it is going to be based on carbon intensity and how much you get charged based on that so having the lowest you possibly can will be better. Same thing as we look in Asia primarily is for the biggest reduction, the biggest reduction of carbon is going to be the most beneficial for us. Thank you.

Christopher Parkinson: The next question comes from Chris Parkinson with Wolf Research. Please go ahead. Thank you. Let's switch up a little bit. When I'm thinking about the second half of 2024 into 2025, can you just update us on your current views of both production rates in both India and China as well as import trends in India and export trends or lack thereof in China? Just what is your latest thought process based on the developments over the last few months?

Christopher Parkinson: Thank you. When you're looking at India, there has been as we've communicated a growth and domestic production, which has been the made in India movement by Prime Minister Modi and they've been successful in that. However, taking a step back and looking at those investments with the cost of LNG being 60% of their gas needs, those are expensive operations not only from a CAPX position, but from an operational and a delivered basis.

Christopher Parkinson: But doing what it is, that's what they've chosen to do and so exports are imports to India have declined over time. We're projecting those to be in the five to six million ton range for 2024 to date. That's a January to date. India is imported about two million times, including there on this cotons. And so we would expect over the next several months of September, October, November, December, you would probably see approximately three million tons.

Christopher Parkinson: And so India is still a significant importer but has now fallen to the second place as Brazil has taken over the lead for the largest importing country at approximately eight million tons. That's been a tremendous growth of demand reflected in their exports of corn and other products. So Brazil is the agricultural powerhouse we've been projecting for years and will continue to grow in their imports of nitrogen. When you look at China, the second part of your question, that has been a great moderator to the supply of Urea for the world.

Christopher Parkinson: China has been in the three to five million ton export range for the last several years. And this year, it's almost insignificant because it's almost zero of their exports to date. We have talked about them being in the two to three million ton range. I don't even think that's a questionable volume. And so when you put that in perspective of if the world export vessel traded market is approximately 55 million tons, taking three to four million tons out of that supply is a great supporter of the current price structure where we are. That as well as the Egyptian loss of production in May through July has what has been porting the price structure that we have today.

Unknown Attendee: Scott, just a quick follow-up. Over time, you've traditionally converted correctly from wrong about 70, and if you just are taxing for years ago, probably close to 80% of even in free cash flow.

Unknown Attendee: Can you just help us, especially given your remarks about some transactions in the space, can you give us how the market should be thinking about, you know, buyback activity versus potential cat-backs outflows in terms of the cadence, not only in 24, but also when, you know, cat-backs could even ride in the future. So just help us think about the balance of cat-back allocation over the next, you know, 18 months or so, just given that conversion rate. Thank you so much.

Gregory Cameron: All right, let's start with the cat-backs part, Chris. You know, our cat-backs that we have is right now in the range of $550 million, as you know, having followed our company long enough that Q3 is when we do a lot of our plan maintenance. So we'll see probably a little heavier spend in Q3 here, along with some of the production being a little bit lower, but with the full year still being at gross ammonia production of the 9.8 million tons we talked about.

Gregory Cameron: As we get into an FID and say it's a positive FID to move forward with a new plant, the spending really occurs over five years, and it's almost just like a standard distribution a little bit with the beginning spend being relatively thin. And then getting into years back half of the second year, third and fourth year heavier and then the tail back on the fifth year. So a bit longer of a spend trajectory than the actual construction of the plant itself is how we plan that out based on whatever our share component of that will be.

Gregory Cameron: I'll let Greg talk about maybe share repurchases. Yeah, so as I said in the remarks, we have about $1.9 billion left in our current authorization, and we plan to complete that opportunistically by the end of December of 2025. Yeah, and I would just add one thing, Chris, which is, you know, the good news. You mentioned our best in class, evit.acash conversion, and I think somewhere fairly traditionally in the 60 to 70% range is pretty normal for us.

Gregory Cameron: We were a little lower given kind of some of the operating challenge we had in Q1 with the weather related outages and then the ripple on in terms of what that meant from some of our industrial ammonia contracts. But I would expect us to kind of get back into that range. That's pretty normal for us. And at that kind of conversion efficiency and cash generation, it's not an either or question. It's a both.

Gregory Cameron: And, you know, even if illustratively you're talking about a greenfield project, if we decided to go forward with it that's in the range of, you know, what the what the woodside slash Lindy project is trading out. But if we're only doing kind of 50% of the capital on that spread over four or five years, it's not such a heavy capital load on us given our cash generation that we can't continue to do pretty significant share repo at the same time.

Gregory Cameron: So, you know, our view is it's the formula that we have used in the past of discipline and, you know, addition of capacity while reducing our share count. We think works on a go forward basis and we expect to continue to generate superior returns.

Adam Samuelson: Thank you. The next question comes from Adam Samuelson with Goldman Sachs. Please go ahead. Yes, thank you. Good morning, everyone. Good morning, Adam. Good morning. So, Bert, in your prepared remarks, you alluded to potential changes in buyer marketing patterns over the balance of the year. And it's one of the clarifies that a lot of the global pieces that you were just answering in response to Chris' question, or was there shifts you're seeing amongst your US domestic customers in the fertilizer space?

Adam Samuelson: And if so, could you just elaborate a little bit on what is changing in terms of how people are buying fertilizer for the second half of the year? Yes, there's been a trend. Good morning, Adam. There's been a trend with buyer behavior of deferring or delaying purchases over the last couple of years. And I think as a reflection of the ag market cycle and lower corn prices to farmers and therefore lack of farmer liquidity or maybe financially stressed, those purchases could be delayed to the retail sector.

Adam Samuelson: And so based on that, we've gone into a little more of a defensive mode. We've worked on our, we've kept our inventories low and we have moved our programs forward, a successful launch of our fall and fill programs, as I mentioned. And so how we're operating is in the context of if that eventuality of delayed purchases were to happen, we won't be constrained as a company. So we've leveraged the utilization, it's at our fingertips of exports, distribution, modes of distribution, production allocations, as well as our communication with our customers to make sure we always position CF industries in the most opportunistic way. That's helpful.

Bert Frost: And if I just ask a follow-up, I believe you had the supply agreement for ammonia and mosaic for most of the last decade, I believe that you've exercised your right to terminate that supply agreement beginning in January. And you just, how do we think about, it's a non-trivial amount of your own ammonia volume. So how do we think about how you're thinking about marketing that next year or you're working to really go shoot the terms of that agreement?

Bert Frost: Thanks. And mosaic has been a fantastic customer. That was a partnership that was a result of us selling the assets, the phosphate production assets, to them in Florida, which they were I think the more economic owner of, as well as then associating the ammonia contract, a long-term, very large supply contract, which was beneficial to CF when we were starting up our new production assets in Donaldsonville to have an outlet. As we've rolled forward, I think both companies realize that we were over the one to execute the contract and to terminate it, but we're in negotiations and conversations with them to continue supply.

Bert Frost: And we anticipate mosaic to always be a fairly large customer of CF industries and we have a great relationship with them and they're doing a good job. However, there are additional terms which we have been working on over the years to market. And we do have additional outlets. We've been active in the export market, both with moving ammonia to different locations, as well as augmenting our industrial contracts and customers to have a more balanced portfolio.

Bert Frost: Yeah, and I think as Europe implements the financial aspects of the CBAM going forward too, there may be more alternatives that provide a higher netback for that low carbon ammonia that will be in production next year for Bert and his team to evaluate as well. All right, that's a very helpful color.

Bert Frost: I'll pass it on. Thanks.

Ben Toyver: The next question comes from Ben Toyver with Barclays. Please go ahead. Yeah, good morning, gentlemen. Good morning. First of all, congrats on a very strong second quarter. Just wanted to get you a thoughts around just the cost piece of it. Gas pricing and obviously what it potentially does in Europe right now from a capacity point of view. You've highlighted and you're prepared to mark. It was an offsetting a little bit the price declined clearly during the quarter from from any adopt perspective.

Ben Toyver: And all of a sudden, it was on a first half basis. So as we see it right now, what where do you think the spreads going to trend out, which is also given the geopolitical tension in the Middle East? And have you done any sort of like contracting, hedging, et cetera, just to lock in those lower costs that are privating right now in the North American market. That's one. So Ben, all this crystal start with the European side.

Ben Toyver: So as you mentioned, we continue to see Europe being challenged by the energy cost, even before some of the geopolitical events that have happened over the last few days in Ukraine and also in the Middle East. So that's something that we see continuing. And then on top of that, we've done a pretty in depth analysis of the European assets and we're seeing pretty large maintenance events that are going to be coming forward for some of these plants.

Ben Toyver: And they have to make the decision whether you make those significant capital investments or whether you curtail or shut down completely. I mean, as we've talked about before, the best example of that is what we've done in the UK where some of those capital expenditures are going to be so large, we're better off importing ammonia and then just upgrading it from there. So our expectation is between now in 2030 that we see even more tightening in the supply market in Europe related to those two factors, both the energy and then just the additional capital cost coming.

Ben Toyver: And that really is what we see as an opportunity for us out of Donaldsonville where we have the export capability and will be the first to have low carbon ammonia and low carbon products. So we almost see it as a carbon arbitrage opportunity given that will be the first mover on low carbon to Europe. But what Bert talked about our hedging strategy. Where we are on gas and you see it reflected in our Q2 exceptional performance and great job to the gas team is we're wide open in the cash market and we're believers in the future of North American production.

Ben Toyver: Today we're running at a rate of about 102 BCF and with exports still in the 12 to 13 BCF per day and the spreads you're still injecting and building inventory. And that's what's driving and keeping the Henry hub price lower. And so the spread against the international market, TTF or JKM where the Europe and Asia is over $10. And that's an exceptional place for us to be as operators of these assets.

Ben Toyver: But when you look at the trends. You've seen what happened in Egypt when it turns to summer and they want the gas for electricity or other purposes. They're now a large importer of LNG or Trinidad on the gas constraints that we're experiencing with our own assets. And so it will happen when you combine the EU and North Africa and Trinidad combined with their production assets and the global SMD for the products that those plants produce.

Ben Toyver: It places again like Chris said, an exporter or a producer like CF Industries and a fantastic place outside of what could happen in the Middle East with all the disruption in the Gaza and the Red Sea. So I think we're well positioned. I also add that, you know, what we're seeing and some of this is just being driven by machine learning and AI applications and the proliferation of that. It's a number of data centers that are going up globally is significant and the expected energy draw against those, you know, per data center.

Ben Toyver: Their installation is really large and I think some of the estimates that we've seen is by the end of this decade, there's going to be about four BCF of incremental gas conversion into electricity just for data centers in the US alone. And so, you know, that the energy is not, or the world is not reducing the electricity demands to the contrary, it's going up quite heavily. And so to be in a place in that environment where energy is short and tight where we have the kind of resource base that we do have in the US, you really couldn't be in a better place. And I think that's one of the reasons why assets over here are trading the way they are.

Christopher Bohn: Perfect. And then just following up, you've talked a little bit about the Vagamon integration, but just want to do understand where you were at in terms of like efficiency at Vagamon versus your own legacy assets. What is still the potential and just like from an operating run rate perspective, where are you at right now? And where do you want to be, maybe by your end or in the first half of 25?

Christopher Bohn: Yeah, so what I would say then is right now the plant is currently operating at about 10% above its main plate capacity, and that's pretty much in lockstep with a lot of our legacy plants that we have in the CF network. We haven't really evaluated doing any de bottlenecks there at this particular time. I think our goal is just to have upstream on time to be the plant operating more consistently, which it has been since we took it down.

Christopher Bohn: If you recall in the first quarter, it was one of the sites where we had an outage. Our team pulled forward some of the work and got in there and accomplished a significant amount of maintenance work during that particular timeframe. And since then, the plant's been operating fantastic. So from that integration standpoint, we feel very comfortable that where we're running now is where we'll run for the remaining part of the year.

Christopher Bohn: As time goes on, we'll look at other projects that may involve a debattlemack and definitely will involve carbon sequestration. The other thing I just add is from an efficiency standpoint, I think I'm right in saying that is the most efficient plant we have in the entire network. And we're running at, I think, under 30 MMBTU per ton of ammonia, where the legacy systems, not including the recent expansion plants, but the legacy systems are more like 33, 32, and even the expansions are in the 30 range.

Christopher Bohn: So not only is it a fantastic plant from being able to operate above nameplate, but it's the most efficient plant in the system. And we've got a really engaged workforce down there. We could not be happier with that act.

Richard Garchitorena: Thank you very much for your call, President. The next question comes from Richard Garchitorena with Wells Fargo.

Bert Frost: Please go ahead. Great, thanks. Good morning, everyone. I was wondering if you could maybe give us an update in terms of how you're thinking about the market environment for clean and lonely today versus when you started your process to build out the strategy. Obviously, the recent OCI transaction would confirm, I guess, value that's out there. And then also just we had conflicting views out there in terms of the viability of more green ammonia than the blue ammonia, but maybe just about the impossibly great.

Bert Frost: Well, I'll start. One, we're extremely positive. We think the transaction, I should say, is positive for the industry with wood side because it pretty much, you know, validates. Not only our clean energy strategy, but the conversations they're having globally, they're seeing the sort of the same type of demand shoots and new centers starting to evolve, whether it be in power generation or in just marine fuel. We're just in really subplacing or supplanting higher carbon nitrogen today.

Bert Frost: So very positive on that. I think what we've seen change over the time is what Bert talked about in the beginning is that we were largely industrial focus. And we are seeing the poll happen more from power gen and marine side and even sustainable aviation fuel. Now what we're seeing is the agricultural side is probably seeing where they should in it into that. And then there's also the demand poll side that's coming more from the CPGs who want a lower carbon product as they're moving forward.

Bert Frost: I agree with Chris. In terms of where we are in our evolution in this process, we're focused on the business and where we can generate higher revenues and higher profitability. And clean products are going to be a part of that. And it's amazing the receptivity from the processors. Again, when you look at the corn value chain in and of itself of what low carbon product can low carbon ammonia or ammonium to upgrade it as UAN or as ammonium nitrate, what that can do in that value chain for corn or wheat as you take it through to the farmer and the farmer that does beneficial practices that are being focused on today.

Bert Frost: Through the processor and as we sequester that CO2 from the let's say the ethanol producer, you have a very low carbon, a very low carbon finish product that can go into sustainable aviation fuel or ethanol. And that's where we're focusing our attention on the ag cycle. And I would say the discussion about blue and green, I would just call it, it's all going to be, as I mentioned earlier, on a carbon intensity.

Bert Frost: I think to get to zero carbon, even as we start to commission our particular plant down there, which is about only 20,000 tons a year. The cost of the green is just very significant, and the energy pull on that without having the renewable energy sources in place is going to be very difficult to leapfrog low carbon and get right to zero. I think it's time goes on, and by time, meaning decades, you'll start to see it evolve to that, but today...

Bert Frost: When you can get to 65 to 95% carbon reduction, that's what's going to lead the day today. And I think that's where you see the stalling globally of the green projects, where you see CF and others leaping ahead with low carbon products.

Bert Frost: Okay, got it. And then during the quarter, you also move forward with the other city, PCS, given how well Benjamin is running, he may talk about potential moving forward with other projects on CCS maybe in that regard. Yeah, as we've talked about all along we have a hierarchy of plants that we were hitting that were the most attractive and the soonest to execute so we could move on those. The first being Donaldsonville, the second being medicine had Yazoo City, so we've executed with Yazoo City, so we're working on medicine hat.

Bert Frost: Weigman, you know, our initial goal there was just utilization rate and getting that stable and moving forward with the projects we have in place from the maintenance standpoint. But that definitely is probably the next on the list after medicine hat that we begin to look at CCS in that particular region.