Good day, everyone, and welcome to CF Industries' presentation for the first nine months and third quarter of 2023. All participants are in listen-only mode. We will have a question-and-answer session at the end of the presentation. I would like to now hand it over to today's host, Mr. Martin Jarosick from CF Investor Relations. Please go ahead, sir.

Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Tony Will, CEO; Chris Bohn, CFO; and Bert Frost, Executive Vice President of Sales, Market Development and Supply Chain. CF Industries reported its results for the first nine months and third quarter of 2023 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. 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 let me introduce Tony Will, our President and CEO.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted our financial results for the first nine months of 2023, in which we generated adjusted EBITDA of approximately $2.2 billion. Our trailing 12 months net cash from operations was $2.9 billion and free cash flow was $2 billion. These results reflect continued strong execution by the CF Industries team, a constructive global nitrogen supply-demand balance and energy spreads favoring North American production. Looking forward, we remain very positive about the opportunities that lie ahead. In the near term, we expect strong demand for the 2024 application season in North America due to low nitrogen inventories across the supply chain. We expect to close the acquisition of the Waggaman ammonia plant this year, adding that facility to our network and production volumes for 2024 and beyond. In the medium term, industry fundamentals point to a tightening global nitrogen supply-demand balance. Over the next four years, construction of new nitrogen production capacity does not keep pace with the expected demand growth of approximately 1.5% per year in traditional applications. Additionally, several important regions are projected to have reduced nitrogen production, given constraints around the cost and availability of natural gas in those regions. Finally, longer term, we expect our clean energy initiatives to provide strong returns and multiple growth opportunities for the company, while helping us to meet our decarbonization goals. Taken together, we are very optimistic about our ability to drive strong cash generation in the years ahead. This will enable us to continue to create value over the long term through disciplined investments in growth opportunities as well as returning capital to shareholders through dividends and share repurchases. With that, let me turn it over to Bert, who will discuss global nitrogen market conditions in more detail. Bert?

Thanks, Tony. The third quarter is often a period of softer demand and softer prices in North America as applications for the current crop are completed and purchasers assess their needs for the next spring. This year, purchases aggressively entered the market early in the third quarter driven by attractive nitrogen values, positive farm economics, strong interest from Europe and low inventories in the North American nitrogen channel. CF Industries built a good order book early in the third quarter and by the end of September, our UAN and ammonia order books stretched well into the fourth quarter. Strong demand early in the quarter helped drive nitrogen prices higher during the quarter. Urea barge prices in New Orleans moved up from below $300 per ton to over $400 per ton in early September. While the Tampa ammonia contract moved from $285 per metric ton to $575 per metric ton during the quarter. We believe nitrogen inventories in North America remain low and substantial future demand will still need to be met as we enter the New Year. We are well positioned for this environment, given our low inventories today, an open order book for the first quarter of 2024 and beyond, and wide global energy spreads that continue to favor our low-cost North American manufacturing base. Outside of North America, we project significant nitrogen demand from India and Brazil in the coming months. As expected, India has been active in the fourth quarter so far, securing 1.7 million tons of urea in their latest tender. We expect demand for urea in Brazil will be robust through February for continence and second crop corn planting. Longer term, agricultural led demand for nitrogen should remain resilient with global green stocks expected to approach averages from the last five years by the end of the 2024 growing season. We also expect continued supply constraints in some key producing regions. Natural gas availability remains an ongoing challenge in Trinidad, which in recent years have seen the loss of nearly 1 million metric tons per year of production compared to the 2018 to 2020 average. High natural gas prices have made ammonia capacity in Europe the global marginal producer. Ammonia production levels are 4 million to 5 million tons lower in the region compared to the 2018 to 2020 averages. This includes the impact of the permanent closure of our U.K. ammonia plants, which accounted for nearly 1 million tons of ammonia capacity. Europe has become CF Industries' top export destination over the last 18 months as purchasers bring in ammonia for upgrade as well as purchase UAN, ammonia nitrate, and urea. In addition to curtailments and closures, government actions continue to restrain participation in the global market from other producing regions. The Chinese government reinstated urea export controls after Chinese producers contributed large volumes for the August India urea tender. Additionally, intermittent natural gas curtailments by the Egyptian government continue to affect nitrogen production in Egypt. And with that, let me turn the call over to Chris.

Thanks, Bert. For the first nine months of 2023, the company reported net earnings attributable to common stockholders of approximately $1.25 billion or $6.42 per diluted share. EBITDA and adjusted EBITDA were approximately $2.2 billion. At the end of September, cash on the balance sheet was $3.25 billion. We have earmarked $1.25 billion of cash for the acquisition of the Waggaman ammonia facility, which we expect to close on December 1st. As a result, our pro forma available cash at the end of September was approximately $2 billion. We expect company-wide gross ammonia production to be between 9 million and 9.5 million tons in 2023. We expect gross ammonia production to be significantly higher in 2024 as we add roughly 900,000 tons of ammonia capacity from the Waggaman facility to our network. We project that capital expenditures for 2023 will be in the range of $450 million to $500 million. Our green ammonia project at the Donaldsonville complex is nearing mechanical completion. We also continue to advance the carbon dioxide dehydration and compression unit at Donaldsonville, which will enable us to permanently sequester 2 million tons of CO2 per year. This project, which offers a return profile well above our cost of capital and will accelerate progress towards our 2030 decarbonization goal, is on track for startup in early 2025. Along with decarbonizing our existing network, we continue to evaluate low carbon ammonia capacity growth that is well timed with demand. We expect the FEED study for our proposed joint venture with Mitsui to be complete before the end of the year, which is one of the many outputs into a final investment decision. We also remain committed to returning excess capital to shareholders, given our free cash generation outlook. Since the start of the year, we have repurchased more than 5 million shares for approximately $355 million. We expect to continue to favor opportunistic purchases layered in at attractive levels. With that, Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Chris. Before we move on to your questions, I want to thank everyone at CF Industries for all they did during the first nine months of 2023. Their teamwork continues to deliver outstanding results. In closing, I want to highlight two slides from our materials. Page 16 provides a recap of our consistent approach to creating long-term value. We thoughtfully and selectively add production capacity to our network, the Waggaman ammonia plant being the latest example, while we steadily reduce our outstanding share count. Since 2009, we have increased the participation in our business by approximately 4x, a 10% CAGR over this time horizon. I also want to highlight Page 15 that demonstrates we are the best operators in the world of these types of assets. We have a long track record of unmatched asset utilization enabled by a safety culture without peer. I’m essentially proud of our team's collective commitment to safety excellence and their focus on continuous innovation. Nowhere is this more evident than in our annual Wilson Safety Awards. Our winner this year was the Courtright Ontario complex, but all the finalists were outstanding and helped to drive continuous improvement across the organization. I encourage everyone to learn more about these innovations on the company's website. We believe CF Industries has a bright future. In the near and medium terms, we are well positioned for what we expect will be a tightening global nitrogen supply-demand balance with strong margin opportunities. Longer term, our disciplined investments in low carbon ammonia production provide a robust growth platform for the company. As a result, we expect to generate strong free cash flow in the years ahead, enabling us to create substantial value for long-term shareholders. With that, operator, we will now open the call to your questions.

We will now begin the Question-and-Answer Session. At this time, we will take our first question from Joel Jackson with BMO Capital Markets. Please go ahead.

Hi, good morning.

Good morning, Joel.

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

Yes. As you noted, Joel, the situation shifts from high third quartile to high fourth quartile, depending on weather patterns, storage conditions, and costs elsewhere. If we consider what Bert mentioned earlier, there's likely a reduction of about 4 million to 5 million tons of ammonia production compared to five years ago, indicating a challenging operating environment. However, there are times when Asia or other regions face similar challenges due to factors like export controls or government-imposed gas restrictions. Nigeria and Egypt experienced some of this earlier this year. It's a dynamic and changing situation. Nevertheless, we can confidently say that the U.S. is at the low end of the supply curve, and we have reliable access to gas. We are quite satisfied with our network and plans.

Yes, Joel, when you look at the gas comparisons, whether it's MVP, TTF, JKM being Europe and Asia, but also feathering in the coal costs and then equating that back to an MMBtu value, you do have just a separation. But then thinking about the age of the plans and the efficiency of the plans, that's when you get into question some of the European or Eastern European or FSU locations that are a combination of high cost and inefficient. And that's how we're able to move some of those and call that the marginal ton and you're seeing that reflected in the level of imports and the inability to operate in even the current environment of $15, $16 gas against ours and others in the world of two to three. And I think you're going to see that dynamic, and it is reflected in the forward gas curve of how these plants will operate and when they'll operate.

I read some of the filings, and I understand that the ammonium nitrate dispute with Oracle and Nelson Brothers might be a sensitive topic. Can you share any insights regarding your plans for volumes and margins in 2019 compared to the past? How should we anticipate that moving forward next year in light of this disagreement?

Yes. Our expectation is that we continue to run our ammonium nitrate capacity at capacity. In the U.S., our AN is really centered around our Yazoo City, Mississippi facility. And in the U.K., although we don't do ammonia production over there anymore, we're importing ammonia and then upgrading it to solid ammonium nitrate. So our expectation is our volumes are going to be the same going forward. And we're largely constructive on margins given the forward gas curve and our opportunity to bring ammonia into Billingham and get a good upgrade margin on it. So overall, AN segment, we're really pleased with. And I can't really comment on the topic that you referenced earlier, because it's a matter that's under dispute at the moment.

Thank you.

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

Thank you. How do you see your Donaldsonville operations evolving after connecting with Waggaman, considering the possibility of moving ammonia tons into the corn belt from Waggaman and potentially increasing upgrades at Donaldsonville? Does that make sense? Additionally, your third quarter volumes showed more ammonia than urea than we anticipated, even with urea prices being higher. Was that likely due to strong refill volumes in ammonia? Any insights on this?

Yes. So Steve, let me start off with a question about Waggaman. The Waggaman facility has existing supply agreements that are in place and those volumes are largely spoken for. We're very pleased with the recipient customers for that facility. And so we're not looking to make any changes in that regard. And our belief is we can get consistently more out of that plant than what historically it's been able to produce. So we're excited about that plant added to the network. Relative to Devil upgrades. We tend to run the upgrades at basically full capacity, at least the urea plants and then we swing back and forth between how much of that's granulated versus how much UAN we make based on relative margin opportunities between the various products. So there's not really an opportunity to dramatically increase the amount of ammonia Donaldsonville build it to upgrade just because we're running upgrade plants full on. Relative to the product mix in the third quarter, we did have an upset at our Medicine Hat, Alberta urea plant that took some production off-line and we had a turnaround in another facility. And so the result of that was just through both planned and unplanned maintenance, lower ability to make granular in the quarter. And therefore, we ended up with a net longer ammonia position. And Bert and his team were really focused on trying to manage kind of inventory levels and took appropriate steps to make sure we could keep the plants running full rates.

That's exactly what happened. The only thing I would add is we did export additional volumes out of Donaldsonville as we balance the system in North America. As Tony said, we had the Medicine Hat issues, so we're moving some of that product down, and then we had some turnaround work at one of our Oklahoma plants and then the balance then was moved to Donaldsonville and that ended up being exports at a lower value, but that's what the values were at the time.

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

That's very helpful. And I want to just pick a brain a little bit about the outlook for blue ammonia, Tony. You have these partnership discussions with several players. It's not just Mitsui. It's LOTTE, it's JERA, it's POSCO. And when you think about this down the road, are these likely to result in one greenfield plant? Or could this be multiple plants? And do you have any kind of conflict in that because some might prefer an autothermal reformer whereas you were also considering steam reforming, does that play into this at all?

Yes, without going down the rabbit hole of technology too much here. As Chris indicated in his comments, we're finishing up the FEED study on the conventional steam methane reforming plant, basically a carbon copy of Donaldsonville #6, which I believe is the highest operating rate ammonia plant in the world. And the fact that they're so close together allows us to not only basically make a carbon copy of it and train operators just down the road, but also share common spare parts. And we think that the opportunity to get fantastic asset utilization out of a plant like that, right from the beginning is quite high. But as you mentioned, there are different appetites in different jurisdictions for carbon intensity. And ultimately, that's the notion of blue ammonia or green ammonia, this convenient shorthand ultimately, where we're going to have to get to is a measure of carbon intensity and the possibility for autothermal reforming does provide at least at first blush, a lower carbon intensity than steam methane reforming does. So we are engaged in a FEED study also on an integrated stand-alone auto thermal reforming technology plants that cost estimates from those probably won't be in for about another 12 months. We're also engaged in a study on doing flue gas capture so that theoretically, the alternative to get to a very, very low carbon intensity number could be auto thermal. It could be a conventional steam methane reformer with flue gas capture technology added to it. So we've got a number of different potential pathways going forward. And we're excited about the developing appetite and new demand applications for clean ammonia. As I mentioned in my earlier comment, we're also very excited about the fact that even in traditional applications, we think the world is going to be nutrient short going forward. So I think the demand is clearly out there. We are, as I said, the best operators of these kinds of assets in the world. And given North America's access to plentiful low-cost natural gas and a very favorable framework around rule of law as well as carbon capture and sequestration. This is increasingly recognized as the place to be. So I think all of that sets up very well for us in terms of evaluating these different types of opportunities. And we are, as you said, engaged in conversations with numerous parties. They all look to us because we are the global leader in this space. And we think we can navigate any kind of conflicts and manage that situation through a variety of ways, including the fact that we're going to have multiple sources of decarbonized ammonia from a production standpoint, not only potentially if we build a new plant at our BluePoint complex, but also at Donaldsonville, Waggaman once we add TCS there, our Yazoo City, Mississippi facility once we add CCS there. And so we'll have multiple points of production, multiple ways of navigating potential conflict should they arise. And honestly, we're just really excited about the opportunities ahead of us.

Thank you.

And our next question will come from Richard Garchitorena with Wells Fargo. Please go ahead.

Great. Thank you. Just with the Waggaman acquisition, closing December 1st. I was wondering if you could give us an update in terms of your thoughts on the ramp-up once you take ownership. I believe the plant was running probably sub-90% operating rates under IPL. So how long do you think it can take you to get those operations up to the rest of your plants? And related to that, any synergies that you think you've sort of unveiled given the recent work that you've done since you first announced the acquisition would be great?

Yes. I mean I think the biggest synergy from our perspective is the fact that we think we can consistently run that plant at higher rates and get incremental tons that come out of it into the network. And so that's where basically all those incremental tons are purely at variable cost and therefore, at very high margins, and that's first and foremost the most important aspect of this. I think it also gives us some flexibility as we think about scheduling turnarounds and chip from ship to locations. It's a plant that is on the pipeline, so it's got access into the terminaling system in the Midwest. And it just gives Bert some additional flexibility in terms of how he thinks about minimizing aggregate logistics and transportation costs. So that's really kind of how we're thinking about the plan. But first and foremost, the biggest value is we're buying it, I think, at an attractive value for us. I think it's attractive for IPL as well, and we think we can get more tons of production out of it that should generate some very nice incremental margin for us.

Okay. And then just as a follow-up, your CapEx guide this year, $450 million to $500 million, is there anything in there for prep work for Waggaman. And how should we think about 2024 CapEx levels given that as well as the progress on the Donaldsonville to CF? Thank you.

Yes. So all of that is baked in there. The finishing up of the green ammonia plant this year as part of this year's CapEx continuing progress and basically getting, if not to mechanical completion darn close to it on our dehydration compression project next year at Donaldsonville plus what we're expecting to do at Waggaman in the way of turnaround and process improvement is all embedded in there, as well as some of the ongoing improvement things we've got on our end from an IT and a systems perspective. So including the integration of Waggaman into our systems and our network. So all of that is rolled into the number that Chris gave you. We are very consistently year in and year out in the range of $400 million to $500 million and I think this is one area that Ashraf has brought great discipline to from an operations standpoint of being able to get world-class onstream factors and asset utilization without having to gold plate stuff, but we keep all the processes incredibly safe and high running and our people safe as well. So I would say this is an area where we really excel.

Yes, Richard, this is Chris. I just want to add that Q3 has historically been our peak maintenance and turnaround period. After this period, we adjusted our expectations from a range of $500 million to $550 million down to $450 million to $500 million. This adjustment is due to gaining clarity on the costs associated with these extensive turnarounds and the projects we can complete by the end of the year. As Tony mentioned regarding the Waggaman site, since we may not have that site for a full year, we are considering what will be included in the 2024 CapEx numbers as we move forward.

Thank you.

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

Yes, hi. Thanks for taking my question. First, I wanted to ask near-term, Bert, we've seen some decline in urea prices over the last month despite kind of entering kind of the stronger North America season. I guess, one, what do you attribute that to? And two, what's your view when you look over the coming months here?

Urea has experienced an interesting journey. We started Q3 with prices between $285 and $295 and saw a significant increase through the quarter, fueled by global factors such as India's demand and China's restrictions, which pushed prices over $400. Recently, prices have settled back down to around $355 to $370 for NOLA. Looking ahead, we anticipate strong demand from India and Brazil, with a transition to increased demand in North America and Europe in the New Year. Overall demand remains robust. On the supply side, we've encountered more restrictions, particularly related to gas in Trinidad and Europe, which impacts urea and other upgraded products, along with ongoing restrictions from China. The market appears tight, with the supply-demand balance shifting more towards demand. We are in a decent pricing range and expect improvements as we approach Q1 and Q2, along with accelerating demand. We anticipate planted acres for the 2024 crop will be slightly below 2023, around 90 million to 91 million acres, with strong wheat performance and good results anticipated from South America’s second crop. Demand is solid globally, and while urea prices are volatile, particularly due to gas price fluctuations, we believe we are positioned well.

Thanks. I appreciate that. And just longer term, Tony, I wanted to ask just more about the timing here for the JV with Mitsui. So you have the FEED study completing shortly from our prior conversations, talked about the milestone in Japan with Medi talking about some subsidy support or how that evolves, is that timing still early to mid-next year? And does that mean you make a decision to invest later next year, mid-to-late next year? Or is there any reason that timeline will be off from how you're thinking about it?

Yes, I think the situation with Medi and Gara's decision-making is somewhat uncertain, resembling the typical pattern of many governments where progress often feels like one step forward and two steps back. Therefore, it's challenging to determine precisely when they will reach a conclusion regarding their evaluation and implement the subsidy schemes that will ultimately drive the marketplace. However, we firmly believe that this will eventually happen and will serve as a crucial tool for continued decarbonization in both Japan and Korea. In fact, our discussions with potential end users are becoming increasingly solid and persuasive, rather than diminishing due to government actions. We remain very optimistic about how demand will evolve; the real question is when the governments will finalize their plans and allow participants to move forward. We are continuing to engage in constructive dialogues with our potential partners in this project, as Chris mentioned regarding the FEED study, which is a vital factor in our investment decision-making process. We hope to provide more clarity on this during our fourth quarter and full-year call in February. So, Josh, I would suggest staying tuned for updates at that time.

Okay, thank you.

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

Hi, thank you. Good morning everyone.

Good morning, Adam.

Good morning. Tony, you mentioned some supply disruptions in ammonia recently, which is positively affecting the overall nitrogen balance. Additionally, there are many blue ammonia projects emerging in the market, possibly with less thoroughness in pre-engineering or customer offtake agreements compared to your approach. How do you view the merchant ammonia market in the next few years? Are you concerned that some blue ammonia might enter the market before adequate end-demand is established, or do you still believe there is enough tightness in the fertilizer nutrient market to accommodate that if necessary?

Yes, Adam, so one of the things I mentioned in my prepared remarks and certainly able to kind of provide more details of this offline as it makes sense, is that if you look globally at the number of projects that are under construction right now, and it basically takes four years before when you announce and actually break ground to have something that is in production. So you have a very good visibility in terms of how much capacity is coming online in the next four years. The amount of new net capacity coming online does not keep up with a 1% to 1.5% demand growth in traditional fertilizer applications. And so we think that just based on the fundamentals in the marketplace, we are going to experience an S&D tightening and that's before you layer in some of the supply disruptions Bert talked about with Trinidad being down one million tons of production, Europe being down four million to five million tons of production, other disruptions elsewhere in the world. So we are very constructive on the S&D balance globally over the next four years. I think it remains to be seen how many new blue plants that are actually announced get built. Capital cost continues to go up and it's easy to announce when it's a lot harder to actually get financial close and build one and get it run in. So I think as we look out the next four years are very promising. We think based on the partnerships that we have lined up, we're in a really good position, having secured end user demand to go forward with these things if we can make the math work. And others, it's hard for me to speculate on where they are. We've seen a couple of projects that have been announced that people have walked away from. So I would just say again, more to come. Stay tuned. At the end of the day, I think some level of discipline and rationality is going to prevail here. Because it is a big expense to build one of these things. And if you're an end user, do you want to line up with someone that's got single facility risk? Or do you want to line up with someone that's got multiple sources of production for a decarbonized product and can guarantee supply even through turnaround periods and so forth. So we feel really good about our position in this marketplace.

I’d like to add a few more thoughts. When it comes to ammonia, we noted earlier the issues with gas supply in Trinidad and the challenges in Europe. If you factor in Brazil, which is currently idle, along with the pipeline issues out of Russia and Ukraine, you can see several million tons impacted. By estimating a reduction of four to five million tons from Europe, one from Trinidad, and potentially three to four from Brazil and Russia, we are looking at a significant decrease in the available ammonia supply. This explains why the market reacted when prices hit lows, quickly rebounding to the $500 to $600 range globally, which is favorable for us. As for our Blue and other low-carbon products, we anticipate launching our low-carbon ammonia and related offerings from Donaldsonville in 2025. We’re seeing considerable interest for both industrial and agricultural uses across the globe. I am very optimistic about our progress and the position we will hold in the short, medium, and long term with these products and the market’s response.

There is a lot of helpful color there. I appreciate. I will hop back.

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

Hey, good morning. So just looking at the balance sheet, I mean there's a pretty large cash balance even after taking into account Waggaman and you're generating some pretty significant cash flow, which I think can pay for most of these projects that you're considering over the next several years. Your shares are also trading at an attractive valuation. I think you would agree with that. So are there any plans to maybe just do a larger share buyback?

So let me give just a little bit of color, Andrew, on this one, which is going back to the beginning of last year, we've purchased, I think something close to 20 million shares back, which is about 10% of our outstanding float. During that same period of time, we have invested in some new capabilities, both in terms of green production and dehydration compression, blue production and build cash on the balance sheet. So we have been able to do sort of all of the above. We do have an open $3 billion share repurchase authorization. And the approach that we have opted to go for is to be sort of disproportionately opportunistic when we see attractive valuations and as opposed to just a consistent and steady return of capital. So you will continue to see us jump in deeper during those periods of time. And then there may be weeks or months where we're kind of sitting on the sidelines. But the whole idea is to make sure that we disproportionately reward our long-term shareholders by taking out as many shares at the lowest value as we can. And I think it actually is a good strategy. I'm not really that worried one quarter to the next if we flex up or flex down a little bit. And as Chris mentioned, we expect to close the Waggaman transaction here within a month. And so $1.25 billion is already spoken for in that regard.

Yes, this is Chris. I would just add to that. As Tony mentioned, really just being opportunistic with patience. So there will be periods where we have higher cash balances on the balance sheet. I think if you look at the overall macro uncertainty, whether that be geopolitical in Ukraine, or the Middle East or even here at home from whether they will be funding approved by Congress in the next couple of weeks. And then even the higher interest rate market and having companies deal with that through that time. We're probably going to see periods where that macro uncertainty goes counter to the fundamentals of the company that Bert and Tony have talked about today. And as a result of that, that's Tony said, we'll go in deeper and more shares during that particular time, really rewarding the long-term shareholders for their patience.

I would also say that we were blocked out for Q1 because we were in kind of the final throes of negotiation with InsTech on the Waggaman acquisition. And so we couldn't be in the market buying our shares back. So that kind of thing may happen here or there. But we are focused on continuing to drive the underlying fundamentals of what underpins that Page 16 that I referenced in our materials, which is selectively adding capacity where it makes sense and otherwise returning capital and buying our share count down.

That's great. It makes a lot of sense. I would like to direct a question to Bert regarding Europe as a marginal cost producer. On a global scale, we tend to focus on urea, but Europe primarily operates in the ammonia and nitrates market. Should we consider being more product specific when discussing marginal costs? Currently, ammonia prices are relatively close to the marginal costs in Europe, so maybe it’s not the right approach to focus solely on urea. What are your thoughts on this?

Yes and no. I think regarding your question, urea is a placeholder globally that is the most traded product that 190 million tons of consumption, 56 million tons moved globally on a ship. And so it becomes the placeholder that is basically used on every continent. So it's a good measure of nitrogen values. You're correct that Europe is more of a nitrogen or ammonium nitrate, calcium ammonium nitrate consumer or UAN, but there's still a large importer of urea. I think 4 million to 5 million tons per year. So they do participate by a lot of North African and Nigerian tons and some Middle Eastern tons make it up there. And so that's what I talked about in the Northern Hemisphere moves into its high-demand period here starting in January, they become a pretty good importer as well. So yes, you need to look at it that way. But ammonium nitrate is not really consumed that much on for agriculture outside of Europe and maybe Russia and Ukraine as well, maybe 1 million tons in Brazil. And so that's falling in North America, so we don't really talk about it outside of the explosive sector in North America. So we do look at all those factors. But again, urea is more of the easy placeholder for everyone to understand.

But I think the other important thing, Andrew, that I wanted to just highlight here and you mentioned it. If you think about from a natural gas cost differential, the difference between the cost of production in the U.S. versus the cost of production in Europe right now and even on the forward curve, is about $400 to $500 spread. So whether we're talking about ammonia or whether we're talking about urea, whether we're talking about UAN, North American production network has a huge economic advantage. And that's one of the reasons we're so happy with where our plants are located.

Yes, good morning and thank you very much for taking my question. I wanted to go back to some of the demand expectations you've talked about and particularly the gap of imports or what you expect at least for Brazil and India. We've seen a lot of like peers in the industry talking about just the softness in Brazil and the more spontaneous buying as you go as you need kind of purchases. What's your level of confidence as it relates to this demand for the imports and what you flagged in the 3 million to 4 million ton range just in the fourth quarter to basically wrap this up. And then obviously, similar to India because it's also a very sizable number. So just about the level of confidence you're having for this demand?

Yes, so when you look at Brazil, the substantial growth in Brazilian agriculture is amazing over the last 20 years, going from an exporter of soybeans and corn to a major #1 position for soybeans and corn in a subsequent or a parallel increase in fertilizer demand going from 2000, let's say, 23 years ago, 16 million tons to today 44 million tons. Well, what does it take to bring that in when you're only producing a little bit of phosphate? That means all the potash, most of the nitrogen and almost all of the phosphate also needs to be imported. And what does that look like when you have just a few ports, Paranagua and Santos and some of the others that are congested? And so you have lineups that it's expensive to have demurrage. So when you calculate the movements of products, why we have confidence is the acres will be planted. That will be fertilized, the profitability for especially a farmer for second crop corn, even factoring in 100 bushels per acre is positive. And that's basically a cover crop for them. So that is at minimum an application of urea. So when you look at our expectation of 7.5 million tons more or less for an annualized basis of Urea for Brazil, and where they are today, that import will last through February. So we've got November, December, January, February, four months at around 700,000 tons more or less per month and the demand is there. So we expect to see that, and it's pretty consistent over the last several years, again, consistent with our growth and production of feed grains and oilseeds. In India, we've seen a different dynamic with the construction of the plants that have taken place with the Modi government Build and Buy India program that, that production has gone up to close to 30 million tons of the 36 million, 37 million tons of demand. So our expectation is more or less 7 million tons. That's off of the 9 million to 10 million tons of imports over the previous few years, but still sizable. That puts India well, now puts Brazil as the #1 importing country, India #2 and United States or North America region #3. And again, those numbers are trending exactly that way.

Okay, perfect. And then just coming back quickly on the capital allocation side. Just as we think about it, you talked about the buybacks to be opportunistic, obviously and accelerating here when prices are lower and dividends to be sustained. Now if we think about the projects that you have pending and you have obviously the Waggaman cost next year and then roughly $450 million to $500 million in CapEx, but it still leaves a very substantial amount for excess cash, so if it's not buybacks because you don't think price is low enough to aggregate the value, how do you think about inorganic growth opportunities similar to Waggaman? Are there any things you're looking at? Do you feel there is meat of doing something? Or with the projects you have on decarbonization and clean energy, plenty of CapEx to be spent on anyway?

Well, we don't really think about it in terms of trying to look for a home on how to spend capital. We haven't opened $3 billion share repurchase authorization that runs through the end of 2025. And our expectation is that we are going to complete that program. And historically, we tend to complete those ahead of schedule in terms of when they expire. So I'm not worried about the pacing or the timing of getting out there and repurchasing that volume of shares. We're just trying to get the most bang for our buck when we go do it. We do have an awful lot of interesting potential growth opportunities that we're evaluating, but we evaluate them very rigorously in a disciplined approach and we do keep our eye on inorganic growth as a possibility and we were very pleased with the Waggaman acquisition. We think that will create a lot of value for us and we're excited about it. But those things tend to be fairly sporadic as opposed to consistently available. They also tend to be fairly large bites when they do come out just because the replacement cost is so high for existing assets. So we're evaluating all of those things, but I'm not worried about our ability to buy the $3 billion of share repo back.

Okay, thank you.

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

Thanks. Hopefully, you didn't get to this to hop off for a moment. But Bert, could you talk a little bit about where you think U.S. dealer inventories are going to end this Fall season or customers behaving a little bit more normal now? Or are they still looking to have empty bins where is sentiment?

I think sentiment is positive. We've seen this actually on a global basis. I can take it back to North America, but the increases in and pull from places like Turkey and importing countries has been remarkable compared to 2022. And North America is similar. You're right, the buying behavior from 2022 was basically a risk off, prices were falling and inventory built with the producer until prices came to an attractive level in the Spring of 2023. We're seeing the opposite effect for this fertilizer year, which began in July of healthy demand, healthy pull for our fill programs and fall application of ammonia program. We actually think inventories trending into the 2024 fertilizer year were low based on acreage consumption and then just actual demand and our channel checks. And we think they still remain lower than normal and we think a lot of buying is still to take place. Even with the lower import levels, the November lineup for urea is still fairly weak as with December. So I think that will have to be made up in Q1 and Q2, and so that's why I think you can view from our comments, we're constructively positive of what will take place in North America relative to demand and pricing. So I think behavior is back to normal.

I'll leave it there. Thanks guys.

Ladies and gentlemen, this will conclude our question-and-answer session. I'd like to turn the call back over to Martin Jarosick for any closing remarks.

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

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