Good day, everyone, and welcome to CF Industries' First Quarter of 2024. I would now like to hand the presentation over to 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, Executive Vice President and Chief Operating Officer; and Bert Frost, Executive Vice President of Sales, Market Development and Supply Chain. CF Industries reported its results for the first quarter of 2024 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 will 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 results for the first quarter of 2024 in which we generated adjusted EBITDA of $460 million. Our performance reflects a challenging quarter for our production network. Plant outages caused by severe cold in January, as well as other unplanned downtime, resulted in a significant loss of production and maintenance activity. Even with the production outages and associated expenses, our business generated strong cash flow for the quarter. Net cash from operations from the first quarter was $445 million, and free cash flow was approximately $200 million. Longer term, we expect the global energy cost structure to continue to provide significant margin opportunities for our North American production network and for clean energy to provide a growth platform for the company. As a result, we expect to have significant free cash flow available to both invest in growth and return capital to shareholders. We remain focused on disciplined investments in clean energy that offer returns well above our cost of capital. These include decarbonization projects within our existing network and potential new low-carbon ammonia capacity. We also remain committed to returning capital to shareholders through our dividend and share repurchases. In the first quarter, we returned $445 million, including repurchasing 4.3 million shares. We have approximately $2.2 billion remaining on our current share repurchase authorization, which we intend to complete by the end of next year. With that, let me turn it over to Bert, who will discuss the global nitrogen market conditions in more detail. Bert?

Thanks, Tony. The global nitrogen market has experienced rapidly changing dynamics throughout 2024, including in North America. The spring application season began earlier than normal in late February, with demand for ammonia applications brought forward from the second quarter into the first, but weather at the end of March subsequently stalled field work and fertilizer purchases, with the region now on a normal application and planting pace. Overall, we expect nitrogen demand in North America to be positive, with approximately 91 million acres of corn planted. Good soil moisture supports higher application rates than in previous years, and farm economics remain constructive, though weaker than the record highs from previous and recent years. We believe the spring ammonia season will see fewer tons of ammonia applied this year. However, total ammonia application volumes for the fertilizer year, which runs from July 2023 through June 2024, should be comparable to previous years, given the strong fall ammonia season. As the pace of the spring application season has normalized, the lineup for urea and UAN imports for the region has grown. These tons will be necessary to meet expected demand, given low inventories in the region at the start of the year and production disruptions in January. Even with the imports, we expect that inventory in the North American nitrogen channel across all products will be low at the end of the season. This activity is occurring as the global nitrogen market supply position has loosened, leading to lower global prices than we saw earlier this year. Lower imports of urea to India, including the impacts of lower volumes taken in the recent tender, lower-than-expected deferred demand in Europe and other countries, and good production from Europe, the Gulf, and North Africa, all played a role. We do not believe demand during the spring season in North America will resolve the length in the global nitrogen market by itself. As North America hits its traditional pricing reset in the summer, Brazil, India, and China will provide the most important signals regarding the state of the market. We project that urea consumption and imports in Brazil will grow in 2024, maintaining that country's status as the world's largest importer of urea. India will remain a major importer of urea, though they have lower requirements today, reflecting their commitment to increase domestically produced urea. China continues to prioritize lower fertilizer prices for their farmers, with export restrictions playing a significant role in that effort. We expect China to export approximately 4 million metric tons of urea this year, but actual volumes will depend on the timing and duration of when exports are allowed. Even with these sources of near-term uncertainty, North American producers remain firmly positioned on the low end of the global cost curve. Forward energy curves continue to show wider spreads between North America and Europe, which is home to the industry's marginal high-cost production. As a result, we expect attractive margin opportunities for our network in the near and longer term. With that, let me turn the call over to Chris.

Thanks, Bert. For the first quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $194 million or $1.03 per diluted share. EBITDA was $488 million, and adjusted EBITDA was approximately $460 million. The production outages that we experienced earlier this year affected our results in two significant ways. Maintenance expenses were approximately $75 million higher in the first quarter of 2024 compared to the first quarter of 2023. Additionally, we had approximately 160,000 fewer tons of ammonia available to upgrade in the quarter compared to the same quarter last year. This equates to approximately 275,000 tons of urea that we would otherwise have been able to produce and sell at higher margins. The production issues continued through the first quarter, and our network is operating at our typical high utilization rates today. We believe we currently project that gross ammonia production for 2024 will be approximately 9.8 million tons, which reflects normal asset utilization rates moving forward. Our forecast for 2024 capital expenditures remains approximately $550 million. Capital expenditures were higher in the first quarter of 2024 compared to the first quarter of 2023, primarily due to a large planned turnaround event. We are making continued progress on our clean energy initiatives. Commissioning activities for our green ammonia projects are nearing completion. We intend to purchase compliant renewable energy certificates to pair with the startup of the electrolyzer to enable green ammonia production and maximize the value of the hydrogen production tax credit. Additionally, construction of the carbon dioxide dehydration and compression unit at Donaldsonville is progressing well. We believe it will be ready for start-up in 2025, at which point our partner, Exxon Mobil, will be able to begin transportation and permanent sequestration of up to 2 million tons of CO2 from the facility per year. This will not only significantly reduce our carbon emissions but also enable low-carbon ammonia production and generate substantial tax credits. Our evaluation of low-carbon ammonia capacity growth continues with potential partners and offtakers. We have made additional progress on our autothermal reforming ammonia plant and flue gas capture studies. These should be complete before the end of the year and will be an important component of our final investment decision. We continue to emphasize 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, 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 their hard work during the difficult first quarter of 2024. In particular, the team did an outstanding job restoring our network to full utilization rates and most importantly, doing so safely. Our 12-month recordable incident rate at the end of the quarter was 0.36 incidents per 200,000 labor hours, significantly better than industry averages. Despite the challenges we faced earlier this year, we believe CF Industries is well positioned for the years ahead. In the near term, the global energy cost structure remains favorable to our North American production network. Longer-term, disciplined investments in low-carbon ammonia production provide a robust growth platform for the company. Taken together, we expect to drive strong cash generation and continue to create substantial value for long-term shareholders. With that, operator, we will now open the call to your questions.

The first question comes from Chris Parkinson with Wolfe Research.

Tony, it has been some time since anyone has asked you this, but what are your current thoughts regarding the global cost curve across the organization? It seems that conditions have largely stabilized in Europe. There’s been ongoing discussion about the timing in the Chinese markets, and a lot is happening in India as well. Considering all these factors, what are your latest insights on how we should approach this over the next year or two?

Yes, Chris, we believe there will be significant challenges for several production facilities in Europe going forward. We expect the utilization rates there to remain difficult, and some of those assets may permanently close. In addition to the challenges in Europe, Trinidad is facing both a depletion of gas and rising gas costs as existing contracts expire. There are also difficulties in parts of Asia and Latin America. Considering all these factors, we can observe a tightening in the existing production network. Furthermore, there isn't enough new production being developed currently to satisfy the traditional growth in normal applications, which leads us to foresee an imbalance in supply and demand, particularly with Europe and Asia positioned at the higher end of the cost curve. Consequently, there will be times when we need to bid for some of that production to address global demand. This situation creates a favorable environment for our North American-focused production network. We are optimistic about both the long-term prospects and the near-term outlook.

Got it. I have a quick follow-up, and I apologize for the very short-term question, but your organization has gone through a lot during the first quarter. Can you provide an additional update on your operational status? I assume Bert's team had to move a lot of products suboptimally towards the end of the quarter. As we consider the process of returning to normal, are we essentially there now, and can you assure us that we should mainly focus on market pricing at this point? How should we ultimately view your pathway forward for the remainder of 2024?

Yes. I think as you look at the first quarter, as Chris said, there were kind of two primary factors that impacted us. One was because we had significant outages both weather-related and other downtime. We ended up with less production of ammonia, and we have existing industrial ammonia contracts that obligate us to kind of meet those needs first. And Waggaman was one of the facilities that experienced some downtime in the quarter. And so we had to make sure that we were meeting the customer commitments out of that facility and other industrial customers as well. And so what that math was, as Chris mentioned, there was ammonia that we were producing that normally we would have upgraded to urea and/or UAN that we needed to ship out as industrial ammonia, which generally is at a bit of a lower margin than agricultural ammonia or ag-based urea/UAN. So the loss of production was both the opportunity cost of lost absolute tons, but also the opportunity costs associated with not being able to upgrade product for higher-margin urea than we normally would. As Chris mentioned, we were able to go ahead and get the plants back up and running and have been running at normal operating utilization rates since the beginning of the quarter. And so we're back to kind of normal operations, and therefore, I think what's been transpiring in the way of spot pricing is appropriate for our volumes as appropriate for the second quarter.

Chris, the only additional thing I would add to what Tony said is not only that it was discrete production issues contained in Q1 but also where the product mix was and being produced. We had incremental distribution costs that went over and above the margin loss that Tony spoke about and also the $75 million approximate higher maintenance expense. So it was a pretty tough quarter from that, but all of that, as you said, is sort of in the rearview mirror and our distribution and production assets are back to their historical levels.

The next question comes from Joel Jackson with BMO Capital Markets.

Just a couple of things to ask. Are you open for Q2 regarding gas? Could you discuss the price drop we’ve seen, which is well below where you were in Q2 moving into Q3? You mentioned 9.8 million tons of gross ammonia production in 2024. What is your projection for gross ammonia production in 2025, assuming improvements at Waggaman and that the issues from Q1 are resolved?

Joel, this is Bert. And on gas, yes, we are wide open, and we do have fixed contracts that are gas-based that will fix in the beginning of the month. And we do have bases that we've covered in places more of a winter item. We'll have some Q1 gas purchases trail into Q2. But in effect, the gas values that you're seeing through the various hubs, you can bleed into your model, and that's what we're doing.

Yes. From a production standpoint, Joel, I think you can look at 2025 and going forward similar to what we had announced earlier this year at around 10 million tons of gross ammonia production. And then based on where the margin potentials are, that's going to change the product mix related to the total product that we do. But give or take, 100,000 tons on either side of that is generally where we look to produce.

The next question comes from Andrew Wong with RBC Capital Markets.

So my first one is really on Blue Point. I understand the plan is to go with mostly sales that are based on like a fixed margin type offtake. Just curious, how does the ammonia market pricing affect your thinking on the investment decision there?

Well, Andrew, as you know, once we make an investment decision, if we decide to move forward with it, it's going to be approximately 4 years between when that decision is made and when production commences. So what's happening in the very near-term ammonia market from a pricing perspective, it is an important starting point. But what you really need to do is project where we are 4 years going forward and take a look at where we think the supply and demand balance will be at that time. We do expect the supply and demand balance to tighten, as I talked about earlier, both in terms of existing production capacity that will not be running at historic utilization rates, principally in Europe and some in Asia and Latin America. But also because the new capacity that is currently under construction doesn't meet traditional growth of about 1.5% to 2% within the nitrogen markets, let alone any new applications for clean ammonia going into either electricity generation or into marine fuels or some of the other applications that are beginning to develop. So as we look forward, the development of those new markets is an important input as well as just our assessment of where the supply and demand balance is going to be on a global basis. And so again, where we are today is a starting point, but it's not really that useful in determining what the future is going to look like 4 to 5 years out.

Okay. That's fair. And maybe just going on to the clean ammonia market and demand, it's been a few years here now since you started talking about it, and it feels like things have started to develop over the past couple of years. So as we get closer and closer to some of these use cases that are maybe later 2020 into 2030, do you have a sense on like how to quantify that demand, let's say, by the time we get to 2030? And what would be the primary use cases by then? Would that still be co-firing in power generation, maybe marine is coming up a little bit faster? Just curious.

Yes. I believe five power stations in Japan have been approved for conversion to co-fire with ammonia. This includes two from JERA and three others. The estimated volume of ammonia for these applications, assuming a 20% dosage rate, is approximately 2 million tons annually. This represents a significant increase in demand, expected to be operational by around 2030, if not sooner. Furthermore, we anticipate demand developing in the marine sector, and Bert can discuss some emerging applications for a decarbonized fertilizer product in agriculture, not just for consumer packaged goods companies but also for creating traceable sustainable aviation fuel and ethanol that complies with California's low carbon fuel standard.

That's exactly right, Tony. In terms of the low carbon value chain, we see developing for agriculture and the pull-through that will take place from the consumer packaged goods companies and consumers. But when you look at whether that be corn or wheat, the principal consuming crops for nitrogen, as a low or no carbon ammonia is passed through corn to the ethanol plant, which is decarbonized. You have a very good upside for a decarbonized product coming from that corn value chain of starch, ethanol, fructose, and the same thing with the wheat value chain. So we're working on that with several players, and more to come.

We have the next question from Adam Samuelson with Goldman Sachs.

Picking up on the previous topic, earlier this week the treasury department released rules for the new 40B tax credit for sustainable aviation fuel, which will see a change in tax rates next year. One of the requirements for converting ethanol to jet fuel involves utilizing climate-smart agriculture, specifically the use of enhanced efficiency nitrogen fertilizer by corn growers. I would like to hear your thoughts on how disruptive this could be to the existing domestic nitrogen market and the availability of enhanced efficiency nitrogen fertilizer, considering the various factors involved. What impact could this have on domestic demand by product or form, along with the associated opportunities and risks as you evaluate the CF network?

I don't view it as a threat. I view it as an opportunity because of the first mover advantage with low-carbon ammonia as the largest ammonia supplier to corn production in North America, that's just right up our wheelhouse. And so working with the co-ops, CHS, and Land O'Lakes, and others as well as the ethanol producers, POET, ADM, CHS. Those are the people that will drive through their management area in our area, the responsibility is as we started with decarbonized product. But we have the pipeline through a terminal, it's traceable, it's producible, it's manageable. And so each of these steps, we're getting tighter and better, and that time frame that I would have thought was longer dated is, I would think, being pulled closer. There is some more development. We'll be communicating this over the next quarters and years. But that's where I see this going. Climate smart agriculture, regenerative agriculture, precision agriculture, there are a lot of names for this. A lot of this is already being utilized, some of it incorporating the seed companies and the crop protection. So our whole industry is working towards this future that's coming, and we're going to play a vital part of it.

That's helpful. And if I could just ask a follow-up on the spring demand here. Obviously, the ammonia side of things is more complete. Can you talk about kind of where we are on UAN from a side dress and topdress perspective and kind of when you start to think that in-season pull will really start to materialize?

We are just beginning as we mentioned, with planting and product movement and field work starting earlier than expected in February and early March. However, the cold, rainy weather in March caused further delays in field work, applications, and planting. Currently, I believe we are on a good pace with excellent soil moisture from the Texas panhandle up into Canada. The UAN season has not yet begun, but we have been positioning product and utilizing our logistics team to manage additional tons of UAN through our terminals and those of our customers. Moving forward, we anticipate a strong demand because the pricing structure for UAN is appealing relative to the price of corn, which is around $4.60 to $4.70 for December. We expect that the lower volume of spring ammonia applied will shift to UAN.

The next question comes from Steve Byrne with Bank of America.

Yes. Thank you. I'd like to continue that discussion there, Bert. You had production issues this year. You had fewer imports into the U.S. China's exports of urea in the first couple of months were almost 0. We were thinking that there was going to be some strength going into the application season, but yet over the last month, pricing has fallen. Just curious what you think of that? Has there been less application rates of nitrogen than maybe you expected? Or was there significant ammonia application in the fall that may have reduced some of the near-term demand? Or is this a shift towards UAN? Curious of your view of where that price trajectory on Slide 8 goes.

Yes. Welcome to my confusing world because that is exactly that you've listed the dynamics that we deal with every day. And then just pointing to the CF system of what Tony and Chris articulated with the difficulties with the weather and the production and the maintenance issues that created on the sales side or at least the commercial side, different product allocation and movements. I give a lot of credit to our logistics team for moving that product around. But yes, when you look at the overall market, and I would have expected what you thought coming in a strengthening market or at least a firm market, but a lot of work has gone into detail this. And you've really had some pullback in demand in some areas. I would say the EU when you look at Italy, Germany, Belgium, France on this year basis and on a fertilizer both a fall in demand along with Mexico, Philippines, and then there's India tender that took place where they had a tender, had 3 million tons put into the tender, announced 750,000 tons of purchases with LOIs issued and then canceled that, would not cancel, but cut it to 350,000 tons. The traders and producers that had positions allocated towards that then had to move that into the market and got aggressive. And that, coupled with some additional production coming on in different places, but also India, Russia, Iran, and Nigeria coming back on production because several places were limited on gas, probably overwhelmed a little bit the second quarter market. And so what we would have thought was tight inventory is probably looser inventory and the U.S. won't resolve that long, but lower prices tend to incent additional demand. So as we work through Q2, I think we'll still be in the state of where we are today with pricing probably a line plus or minus where we are today and work towards the back half of the year.

Okay. And just a question on the green ammonia plant that you're commissioning. Just curious if you've signed any contracts for that product and any of your partners in Japan or South Korea interested in bringing green ammonia into their facilities? Or do they really prefer the blue?

Well, the volume is not really sufficient to be able to meet the application for co-firing. We're only going to be able to make about 20,000 tons a year. And even the smallest of the power stations is going to require somewhere in the neighborhood of 350,000. And because that is a part of a broader program with some incentives provided by the government, they are going to be, I think, focused on the most economically available decarbonized product. And so that's going to be a blue product as opposed to green. But we are in conversations with a number of companies, particularly some companies in Europe that are focused on the extremely low carbon attributes of the green product. And we need to begin making it and very likely building some level of inventory for probably half a year before we've got sufficient volume to be able to ship. So more to come on that, Steve, but we're excited about being able to both start that plant up as well as what the future holds for us.

And we're looking at two options. Like Tony said, as we build inventory, that could be for a vessel to a customer that wants only 0 carbon product or it could go up to one of our terminals, which our terminals are about that size, where we can isolate an area with 0 carbon ammonia, again, back to the corn value chain. So working on several different fronts at this time.

The next question comes from Josh Spector with UBS.

So I wanted to ask on all the projects you guys are evaluating. So particularly, I guess, with JERA, converting to a JDA, how many separate plants are you now considering at this point? And I guess, as you look at all these separate agreements, could that combine together to be more offtakes from a smaller number of plants? And would CF be interested in a very small stake and maybe more of an operator role? Or do you see yourself as requiring majority control over the facilities you built?

Yes, Josh. While we're evaluating a couple of different projects, principally, what we're looking at is different technology pathways to get us to a very low carbon intensity solution. Realistically, at least at this time, we're focused on one plant as opposed to multiple plants and doing the evaluation, as I said, should that be just a straight steam methane reformer, should it be an SMR with flue gas capture? Should it be an auto thermal reformer? Kind of what's the right technology to deliver on both an operating and capital expense basis the most competitive returns for us and our partners? And on the second question about the role that we would play, I think we're open to a variety of different structures, some of which would have us with majority control and other structures might have us on equal footing or even, as you say, more of an operator of the asset but with a smaller equity participation. So we're pretty open to different ways of structuring the agreements. And we're in those discussions at the same time as doing the technology evaluation, but we're really only looking at building one plant initially and seeing how the market develops, then we'll make some decisions as that continues moving forward.

I would also say, Josh, that all three of the studies that we have ongoing, the SMR, the ATR and then the flue gas, all the partners that Tony just spoke of are all participants in that even though the result agreements may look different. So all the partners are working collaboratively to determine what we need to do from a carbon intensity standpoint, how does that influence the technology we choose, and as Tony said, and then really the contract for difference and the economics that come out of that in the end.

The next question comes from Ben Isaacson with Scotia Bank.

Just one question from me. Tony or Bert, can you talk about the situation in Russia when it comes to nitrogen supply? If we break down ammonia, urea, and nitrates, where are we right now in terms of supply? Where have we come from, and where are we going? And I'm also referring to the pipeline that's being built right now.

Yes, Ben, this is Bert. The situation in Russia is both uncertain and somewhat clear. It's a mix because certain regions won't accept Russian products, while others will. The United States is surprisingly the largest market for these products, alongside the EU. Over the past year, following the invasion, there has been a restructuring of the distribution channels for Russian goods. A significant amount is now directed to Brazil and primarily to the United States, with some also going to Europe. Recent restrictions on ammonium nitrate, which had been stored in St. Petersburg, may have been influenced by Ukraine's ability to disrupt exports; consequently, some shipments have been halted, leading to a slight shortage in certain markets. Regarding ammonia, the pipeline through Ukraine has been inactive since the war began, and it likely won't be restored soon. They have established a new export corridor via the port of Taman, with expectations to start exporting around Q3. Exports from the Baltics are projected to increase from 0.5 million tons to approximately 1.5 to 2 million tons over the next year, likely positioning products in the Mediterranean and Morocco. For Urea and UAN, a significant amount of UAN production is shipped to NOLA, the East Coast, and Europe. Data indicates that UAN imports from Russia have risen, while those from Trinidad have decreased, but the overall balance appears stable. Moving forward, Russia aims to increase their export volumes; although there are some new export restrictions, they seem manageable.

Yes. It's surprising, and I believe Yara might mention this in their call too. What's shocking is that while there's a strong emphasis on not funding the Russian war machine and avoiding Russian gas, the U.S. continues to import urea and UAN from Russia, which is essentially derived from converted natural gas. The U.S. seems to be funding the very military efforts it condemns. This is quite astonishing, although perhaps not unexpected given the current political climate and the election year. Similar trends can be observed in Europe, where Russian nitrogen is being integrated into the market, replacing what was previously sourced from gas.

And maybe just a quick follow-up on that. Can you talk about Ukraine? I mean, before the invasion, I think, in 2014, Ukraine was a major exporter. And where do they stand right now? Are they self-sufficient for the net importer?

When considering the acres that are planted, applied, and harvested compared to previous years, particularly before the war, there is a noticeable loss of acreage in the contested regions, especially in prime agricultural land. Additionally, several plants are offline, including the OPZ plant in Odessa, which efforts are being made to restore.

Although that one was struggling economically even well prior to the war.

So there are gas questions on gas supply. And yes, they have imported product. And so it's a question of why I think getting through the current crisis to see where we are coming out of it.

The next question comes from Ben Theurer with Barclays.

I wanted to touch on the global dynamics, particularly regarding Russia, but let's focus on China and India for a moment. In your press release, you mentioned that China is likely to resume exporting around 4 million tons, and India is becoming more active in managing its internal supply. You've also discussed the tender and its implications. Considering these two markets along with what you mentioned about Russia, how do you see this affecting pricing? What are your thoughts on pricing in the medium term, assuming cost structures remain as they are, given the potential supply from China and India as well as the situation in Russia?

The positive aspect is that we operate within a global market where production and consumption are distributed across various countries. With a growing population and increasing demand to feed the world, along with the rising importance of nitrogen for pollution control—especially in domains like DEF, power generation, and clean energy—there is steady demand. For instance, the current global urea market stands at approximately 55 million tons traded via vessels out of a total production of about 190 million tons. China's potential exports are approximately 4 million metric tons, representing less than 10%. India, a significant player in urea imports, is expected to reduce its imports from between 7 million to 9 million tons down to about 5.5 million to 6.5 million. This reduction will impact global trade. However, countries like Brazil are experiencing significant growth, projected to reach 8 million tons, up from around 3 million tons fifteen years ago. Additionally, there are increases in urea consumption in countries such as Argentina, Australia, Ethiopia, South Africa, Turkey, and Thailand. Currently, the price of urea around $300 is quite appealing for agricultural production and pollution control. The main challenge for China moving forward stems from current export controls that require prepayment, a defined shipment date, destination, and product price to be established in the contract before applying for export. Prepayment must occur before the cargo departs for the port, creating a complex transactional process that may hinder China from achieving 4 million tons in exports. Consequently, our outlook is somewhat uncertain regarding how the market will evolve. However, I anticipate that China will engage in the international market after the spring season, and we will observe how pricing trends from that point onward.

Okay. And then just a quick follow-up on that industrial versus agriculture use, the impact you had in the first quarter that shift towards the lower profitability on the industrial use just because of fulfilling those contracts. Has that already normalized now that we're like early May, so that was really just like kind of a one-time? Should we think about that volume balance to be more normal and not as skewed towards the raw ammonia because of the industrial needs?

Yes. As we talked about, a lot of the issues that occurred in Q1 were discrete to Q1 and that those are passed us both from a production and also a sales perspective. But as you mentioned, we did take 167,000 tons of what would normally have been upgraded to urea, which, as I said in my remarks, would be about 275,000 tons of urea. So you see the urea decrease in sales and the increase we had in ammonia. But when you put that on a nutrient margin basis of what the quarter was for the industrial ammonia versus the ag urea, you're looking at something that was almost about a $30 million margin impact. And that, combined with that $75 million of approximate maintenance expense really is what set the quarter back. But again, can emphasize enough that those are discrete items to Q1.

The next question comes from Richard Garchitorena with Wells Fargo.

I just wanted to ask about Waggaman. You mentioned that the facility had some downtime from weather in January. I was wondering if you can give us an update in terms of how the ramp-up has been since you'd closed the acquisition, integration of that asset into your facilities? And have you been able to get utilization rates up to sort of typical CF average levels as it was maybe lower than that prior to your ownership?

Yes, you bet. So we had an outage and we took that opportunity to conduct the turnaround that was kind of scheduled for later in the year. And so we were able to take advantage of that downtime. But prior to that and in fact, post turnaround we're operating at rates that reflect north of what nameplate capacity has been on that or is on that unit. And so that reflects kind of more traditional operating rates for CF across our network. And I'd say the integration has gone remarkably well. The team at Waggaman has worked extremely well with the rest of the CF network. And I think it's that kind of partnership and coordination that has led to some of the improvements we've made in terms of onstream factor and operating rate at the location. So we're really pleased with adding Waggaman into the portfolio.

Okay. Great. Regarding the press release about the JDA with JERA, I'm curious about the capacity of 1.4 million tons and JERA's procurement of 500,000 tons. What are your thoughts on the remaining 900,000 tons? Since JERA may take a 48% stake, will they receive a percentage of that amount as well? Are you considering potential merchant sales for that portion, or do you plan to secure it? You mentioned earlier that you have 4 years from decision to production, so how do you plan to manage the amount you want to secure before developing the project?

Yes. So I think just starting, the encouraging thing is that about 0.5 million tons is a home already for it. And as you mentioned, with the next four years, and that provides a lot of opportunity to find basically sales for the remaining amount, along with keeping a little bit for merchant. But the one thing with JERA is that 500,000 is just for one particular unit at their coal plant facility. And they have multiple units they're looking at in addition to that, as you look at what's going on with the JERA test right now, which is a commercial test going on, which is performing to expectations. You could see other areas that JERA has within Asia, also converting to a 20% ammonia injection into the coal, along with some other additional players that are looking at it that Tony mentioned within Japan as well. So I think we're just in the first few innings of where that demand side goes. But I would say that we're very encouraged that we have a large portion of it already taken. Additionally, as Bert mentioned, you're just seeing more and more activity come along, whether it's through the power generation, the marine or the sustainable aviation fuel, or even just on the legacy agricultural business, where decarbonized product is going to have a home from a supply standpoint. So we're pretty encouraged by what we have and what we're seeing going forward.

The next question comes from Aron Ceccarelli with Berenberg.

I wanted to ask you, in the scenario where you go ahead with both the Mitsui plant and the JERA one or, say, a combined one, how should we be thinking about your capital expenditure phasing for the next 3 to 5 years?

Yes. So I think as Chris mentioned in our last earnings call, the study for an SMR steam methane reformer, kind of a copy of Ammonia 6 at Donaldsonville was about $2.5 billion, and then there would be roughly another $500 million for scalable infrastructure that could be leveraged against additional plants on site. So all in for the first one, it would be roughly $3 billion. Now that does not include if required flue gas capture. And we are still in the middle of a study to evaluate what it would look like to do an auto thermal reformer or an ATR. More to come in terms of what the cost of a different approach or different technologies are. But if we had both, let's say, JERA and Mitsui and CF kind of all aligned on one particular project, and it was on a 1/3, 1/3, 1/3 basis, that would be kind of $1 billion per company to do the SMR spent over, say, 4-ish type of years. Now if it's 50% for us and 50% for somebody else, then that increases to $1.5 billion. It just kind of scales appropriately. But it's in that order of magnitude and it's spread over 4 to 5 years of cash outflow. So while it's a meaningful amount of cash compared to the amount of free cash that we're generating, we still have plenty of free cash available to be able to return cash to shareholders in the form of dividends and share repurchases. So it's not going to impede us from being able to execute our return of capital program and other incremental growth opportunities that we have.

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

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