Good day, ladies and gentlemen, and welcome to CF Industries First Nine Months and Third Quarter 2024. All participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this presentation. I would now like to turn the presentation over to your host for today, Mr. Martin Jarosick with CF Investor Relations. Sir, please proceed.

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

Thanks, Martin, and good morning, everyone. We are an organization that prides itself on unparalleled operational excellence. Our asset utilization and our safety statistics are truly world-class. And so it is with great sadness that I have to report in early October, we lost a member of our team at Donaldsonville, Louisiana due to a fatal vehicular accident. Our thoughts are with and our hearts go out to his family, friends, and colleagues. This is a tragic reminder about why we put safety first and the importance of not being satisfied or becoming complacent with historical performance, but our need to remain focused on the present in everything that we do. I am confident our team will learn from this tragedy as we work together to ensure all our colleagues remain safe every day. Turning to earnings. Yesterday afternoon, we posted results for the third quarter of 2024, in which we generated adjusted EBITDA of $511 million. This brought adjusted EBITDA for the first nine months of the year to $1.7 billion. Additionally, our EBITDA to cash flow conversion efficiency remains strong, and we ended the quarter with more cash on the balance sheet than we began with, even after returning $580 million to shareholders through share repurchases and dividends. We are very pleased with where our business is today. Our team is operating well; global nitrogen demand remains consistently strong, and we continue to make progress on our strategic initiatives. With that, I'll turn it over to Chris to provide more details on our operating results.

Thanks, Tony. Our manufacturing and distribution teams managed operations well through an event-filled third quarter, as we performed our highest level of planned turnaround activities for the year. We also experienced minor production impacts in Louisiana from Hurricane Francine in September. Our Donaldsonville and Waggaman teams did an outstanding job, safely shutting down and starting up those facilities, limiting the downtime from the storm. Despite these events, our ammonia utilization rate for the third quarter was 93%. For the full year, we continue to expect to produce approximately 9.8 million tons of gross ammonia. Our strategic initiatives continue to advance construction of the dehydration and compression unit for our Donaldsonville carbon capture and sequestration project is on track. Startup for sequestration by ExxonMobil and 45Q tax credit generation is expected in 2025. Additionally, commissioning of our green ammonia project at Donaldsonville continues. Finally, our evaluation of the Greenfield low-carbon ammonia plant is advancing well with a final investment decision expected in early 2025. We are nearing completion of our auto-thermal reforming ammonia plant FEED study, giving us greater clarity on the capital required to construct new capacity. Alongside this, we continue to have productive discussions with potential equity partners and other interested parties as well as prospective long-term offtake partners. We continue to assess where the global nitrogen supply-demand balance will be when a new plant would come online. As we look at it today, we expect a tightening global market over the next few years as projected new capacity growth does not keep pace with demand growth for traditional applications, much less for new clean energy applications. With that, let me turn it over to Bert to discuss the global nitrogen market.

Thanks, Chris. Our team had an active quarter that has positioned us well for the rest of 2024. Our UAN and ammonia fill programs were well received by customers and achieved our targets. We continue to take new orders as global prices rose, pushing the order book well into the fourth quarter. This has resulted in much lower than normal inventory in our system, and we believe inventory is low throughout the North American nitrogen channel as well. Strong uptake in our fill program suggests good demand for nitrogen in the months ahead, including for fall ammonia applications if the weather cooperates. Despite U.S. crop prices being under pressure from projected large harvests, today's nitrogen prices continue to represent good value for farmers. As a result, we currently expect North American planted acres in 2025 across all major crops to be similar to this year. Globally, the nitrogen supply-demand balance continues to be constructive. Urea exports from China are 90% lower through September than the prior year, and it is unclear when Chinese producers will be allowed to resume exports. Additionally, lack of natural gas for nitrogen producers in Trinidad and Egypt has reduced available supply in the third quarter at a time when we typically see length in the global market. At the same time, demand has been robust. Brazil and India both appear to have significant urea import requirements to be met through the first quarter of 2025. We have also seen strong demand from smaller importing countries - these include Australia, Thailand, Mexico, and Turkey, among others, that have increased consumption over their three-year averages. Against this backdrop, our manufacturing network remains firmly positioned in the low end of the global cost curve. Forward energy curves continue to suggest substantial energy spreads between North America and Europe, where the industry's marginal high-cost production is located. As a result, we expect attractive margin opportunities globally for our business in the near and longer term. With that, Greg will cover our financial performance.

Thanks, Bert. For the first nine months of 2024, the company reported net earnings attributable to common stockholders of approximately $890 million or $4.86 per diluted share. EBITDA and adjusted EBITDA were both over $1.7 billion. For the third quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $276 million or $1.55 per diluted share. EBITDA and adjusted EBITDA were approximately $510 million. As you can see on Slide 5, our third quarter results benefited from higher average selling prices, driven by our ammonia segment and lower realized gas costs when compared to the third quarter of 2023. Over the past 12 months, our net cash from operations was $2.3 billion, and free cash flow was approximately $1.5 billion. Our free cash flow to adjusted EBITDA conversion rate remains strong at approximately 65%. This cash flow enables us to return substantial capital to our shareholders through share repurchases and dividends. Since the start of 2024, we have repurchased nearly 15 million shares for more than $1.1 billion, reducing our share count by 7.5% over that time. We have just under $1.5 billion remaining on our current share repurchase authorization, which we intend to complete before its expiration in December of 2025. Based on our current market capitalization, this gives us the capacity to repurchase about 10% of our outstanding shares through the end of next year. With that, Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Greg. Before I move on to your questions, I want to thank the entire team here at CF for their hard work and contributions in the third quarter. In what is typically our seasonally lowest volume and price quarter, their efforts enabled us to generate enough cash to cover capital expenditures, return nearly $600 million to shareholders through share repurchases and dividends, and end the quarter with more cash than we began. We remain positive about the near and longer-term outlook for the company. Global nitrogen dynamics remain consistently strong. Longer-term disciplined investments in low-carbon ammonia production provide a robust growth platform for the company. Taken together, we expect to continue to drive strong cash generation and create substantial value for shareholders. With that, operator, we will now open the call to questions.

Thank you. The first question comes from Chris Parkinson with Credit Suisse. Please go ahead.

Thank you, Tony. When I look at the supply-demand dynamics, you've reduced supply from China, Europe, and are facing some gas issues in Trinidad and Egypt. Demand remains strong. How do you view the dynamics for 2025 regarding your expected cash flow, especially with the uncertainties surrounding U.S. and Qatari LNG as we approach the end of the decade? How do you approach capital allocation and cash generation over the next six to twelve months as you work to expand your network for the remainder of the decade? Any insights on this would be appreciated.

Yes, Chris, I would say we have a bias towards deploying capital back into the business for growth if we find projects that we think can earn a rate of return that's above our cost of capital. And so our bias is definitely towards growth as a first step and then certainly returning excess cash to shareholders. As Greg said during his remarks, we have just under $1.5 billion left under our share repurchase authorization, and we expect to be able to complete that by the end of next year, and that should drive an incremental approximately 10% accretion in terms of our shares. And so, we're excited about both the growth aspect as well as our ability to take shares out of the marketplace. And both of those things, we think, will drive value for shareholders.

Got it. And just a quick follow-up. Once again, just taking a step back. The first quarter, obviously, you had some winter storms in the third quarter, so obviously, hurricanes are at unavoidable times. When I look into 2025 and 2026, do you think turnaround activity will be the same level, slightly lower in terms of like how much more you have maximized profitability based on the current nitrogen price deck without all those outages, and how we should think about that framework heading into next year?

Well, I mean, certainly, our hope is that we don't repeat the winter storm freeze-off that we had in the first quarter, or the hurricane outages that we had in the third quarter. But the operations team tries to manage our turnaround activity to be relatively consistent year on year. So we're not throwing the system way up and way down, but we're trying to level-load it. Now that's not always possible because of the timing of when things come. And we do have a couple of larger plants that when they go through turnaround have a noticeably bigger impact. But I would say we pretty much year in and year out going forward should be producing in the neighborhood of about 10 million tons of ammonia, and then we will upgrade as much of that as our upgrade system can manage. And then the other piece of it to think about as we get into next year is we'll begin generating on an annualized basis an incremental roughly $100 million of cash through the 45Q tax credit as we start sequestering CO2. So that's on top of the base business. And again, we're pretty excited about what that looks like.

Thank you so much.

Thank you. The next question comes from Steve Byrne with Bank of America. Please go ahead.

Yes, thank you. Your press release provides this gross margin per nutrient ton for product. It's always very interesting. And the one that just jumps out is your DEF. And I was just curious what your view is on the outlook for DEF? And maybe more specifically, this problem that occurs with crystallization and so forth. Is that poor-quality DEF? Is that all DEF? Does that affect you? And is there a resolution of that down the road?

Good morning, Steve, this is Bert. Regarding your question on DEF and the opportunity for CF, we've continued to invest in that business since we acquired Terra in 2010, and it has been an exciting path and growth vehicle for us where we're projecting to be close to 800,000 tons of urea equivalent product that trades at a substantial margin increase over granular urea. So what we've done is when we looked at our platform, we have capacity in several of our plants, Courtright, Yazoo City, Woodward, and have substantial capacity in Donaldsonville, which we're augmenting and have added to the system with railcars. So the exciting part about DEF is the dosage rate because when we first acquired this business, it was at a fairly low percentage and what it was cutting out in terms of pollution, where today the projections on dosing rate increase to five and even higher than that percent. This looks at the doubling; we're projecting that the DEF demand, just in North America, could be in excess of 3 million urea equivalent tons, and that's from zero in 2010. So for us, this is a good platform that works very well into our system, and we're going to continue to grow with it. Regarding the crystallization, I'll have Chris answer that.

Yes, Steve, related to that, we - there are very high specs required for DEF in the product, and we haven't experienced any of that. I think the one thing that we've seen is we've always been very diligent about our testing requirements for that. So the issue you bring up, we're not all that familiar with because it hasn't affected any of our product.

Very good. And I'd like to ask a little bit about the Donaldsonville project that you're working with Exxon. Do you have any visibility on when they could get a classic injection well? Is that just an unknown? And does that prevent you from essentially lining up customers for this, and/or do your customers need to invest on their own site, either for storage or to use it as fuel? I'm just curious. If something moves forward in sometime in 2025. Are you going to be in a position where you could start loading a marine ship? In other words? Thanks.

Yes. So we are confident that in 2025, we will be one, sequestering CO2 and, two, receiving the 45Q tax benefit. One of the reasons we chose Exxon as our partner is really just the vast flexibility and alternatives they have, if you recall, their acquisition of the former Denbury pipeline, which is almost 1,000 miles of CO2 pipeline, gives them quite a bit of access to more than a point-to-point storage well. So they could have wells that they have in the queue right now from Louisiana all the way to Texas and all along that route. So our confidence level still remains very high. As I said, we're doing a lot of work on our side of the fence, and Exxon is actually doing a lot of work in piping on their side of the fence to connect. So our confidence level remains high there, as far as being prepared to load vessels and ship out, whether it be to Europe or Asia, we expect that to be occurring next year based on what Bert's team decides is the best use for that particular low-carbon product.

And I would add to that, Steve, that on the systems side, we've spent a lot of time and effort putting in place all of the necessary systems and controls and accounting procedures to be able to not only get the credit but be able to accurately score and certify a carbon intensity on our production. And so that will be kind of among the first tons out there with an actual carbon score associated with that.

Thank you.

Thank you. We have Josh Spector from UBS with the next question. Please proceed.

Yes, hi. Good morning. I was wondering if you could talk a little bit about current nitrogen dynamics. There were some comments the other day about warmer weather being an issue for ammonia applications in the U.S. later in the quarter. And some comments that activity today is slow. I don't know if you had any different characterization of the market today. And when you talk about tighter inventory in North America, is that something we should expect to materialize in higher prices in the spring? Or do you have any different view about how that impacts the market? Thanks.

Good morning, Josh. So regarding the current dynamics, I would say they are constructive in that when you go around the world, where we are on supply, is, as I mentioned earlier, the absence of Chinese tons available to the market is a 3 million to 5 million ton pool, which could be up to 10% of global seaborne traded product. And then you go through different places that have experienced gas issues or high-cost gas issues like in Europe, where we've seen Yara and others take production offline, you have a, I would say, an appropriate or a limited supply basis right now. And then when you look at demand with India stepping in for another tender and asking for 1 million tons to be shipped by middle December, and then continued demand in South America and Brazil and Argentina, then you'll roll into Q1 for the Northern Hemisphere, and we believe that the U.S. and Europe are behind. And so where we are as a company - I mentioned in my prepared remarks that our inventory is limited. It is. When you look at what has been imported and what has been exported for a net balance and then what we think others lost in production, we think the nitrogen supply and inventories, whether that be with retailers or with producers is limited. And so that sets up a positive environment as we head into the application season for the spring. Now regarding your question about fall applications, that is due to start about now, the fall application of ammonia. Our ambient temperature and soil temperature around 50 degrees. We're hitting close to that in the northern tier. We've had a very good season in Canada. As the weather moves south and gets cooler, we'll see those applications pick up. The commentary about limited or limiting applications possibly has been due to soil moisture, not necessarily temperature. And so what you need for a healthy ammonia season is appropriate soil moisture for the ammonia to bind in the soil. That is what we're looking for as these rain patterns sweep across the northern tier and Iowa. Then you'll see applications take off. Over the last several years, applications have gone well into December. If that's the case, our order book, which we believe is in a very good position. We've positioned product in our terminals, and they're ready to go. That will have a good season, probably a better season than last year. We have those orders already in the system.

Thanks, that's helpful context. I'll pass it on.

Thank you. The next question comes from Joel Jackson with BMO Capital Markets. Please go ahead.

Just a couple of questions. First, a little short term, maybe dovetailing with this last question. Typically, you do more sales in Q4 than in Q3, I think in five years in a row of a higher Q4 than Q3. Any reason not to expect that this year?

In terms of how we take orders and then move that to - those tons through the system and as sales, each year is different. The fill programs tend to take place either in late Q2 or early Q3. This year was early Q3. We built our order book and then continue to take additional orders on top of that fill program. So today, our order book, as I said in my prepared remarks, is healthy through Q4. We're going to start taking Q1 orders shortly based on our price expectations. Regarding whether it's bigger or smaller Q4, Q3, we don't look at it that way. We look at what we've got, our production rates, our allocations to tons, and we move the tons out in an orderly fashion.

And then on the Greenfield blue ammonia project that you're expecting the FEED study done by the end of the year, any color you can give, maybe higher level, what you need to still get this approved with your partners, capital running $3 billion or $4 billion? Do you think that's still reasonable? Anything sort of pick up incremental in the last couple of months to give us an idea of what we could expect early next year in some of your decision-making processes?

Yes. I think the number in the neighborhood of $4 billion all-in is an approximate number. We're finalizing the FEED study, and that should narrow the range a little bit to kind of a plus/minus 10% range. But I think as the numbers are kind of rolling up with a bit more uncertainty, that $4 billion is where we think it's going to come in. At that kind of number, we do think that it is a project that makes sense, particularly given what Chris was saying about longer-term projected growth of nitrogen demand even in traditional applications exceeds what the new capacity brought online is. That's before you get into some of the capacity shutdowns that we expect to continue to happen in Europe and some other places. The partners that we're having conversations with I think are similarly comfortable being able to invest in a project in that kind of range and look at a return profile that is favorable. To get there, we need to finish up the FEED study. We need to try to get the partnership agreements and all of the ongoing governance and everything kind of put together, and then it's going to be a decision for the board ultimately to make. But we're targeting kind of middle first quarter of next year to be in a position to make that decision.

Yes. The only thing I would add to that, Joel, this is Chris, is that as we look at our partnership selection, you had brought that up in part of the question, we actually have a lot of benefits related to that. We have our Japanese equity counterparts that we're in discussions with. But as Tony mentioned, recently, even more industrial primarily due to some of the energy issues going on, primarily in Europe, are also stepping in to understand the project dynamics. In all cases, sort of the capital number or range that Tony is putting out there, they all seem ready to move forward with the project as well on those type of capital parameters.

Tony, if I could just fit one more in on that. I may have misunderstood that. But are you suggesting that the economics of the plant around $4 billion might be justifiable even if some of the clean ammonia math and benefits weren't there? I may have misunderstood that, if that's what you're trying to get at?

Yes. I think the way that we're looking at it, Chris, is - Joel, I'm sorry, is that with the average sale price in the neighborhood of $450 a metric ton along with the 45Q benefit that we would expect to be able to generate, that should earn a reasonable rate of return on the kind of investment that we're looking at making here. If you look at the market today, it's well above that. Now does it does move around. When you see a new plant come on like Gulf Coast ammonia or whatever, there will be some lumpiness and some volatility. But as we project forward, we expect a tightening in the S&D balance even in traditional applications. We think the market is going to support that kind of a price. Even before you get to new applications for clean ammonia, there's an argument to be made that, that plant is justifiable. I think if we are successful in bringing on a couple of the potential partners that we are deeply in discussions with that want to take some of that production into brand-new applications, it even justifies it further. We're very optimistic about the return profile of what this plant looks like.

Thank you.

Thank you. We have the next question from Richard Garchitorena with Wells Fargo. Please go ahead.

All right, thanks. Good morning, everyone. First question on the nitrogen market outlook. You pointed out Chinese urea exports basically now expected less than 1 million tonnes this year. What do you think is going on there in terms of how the China government is thinking? Is this something that may be extended indefinitely, and that supports your comments on the much tighter outlook going forward? Maybe that's the first question?

When you look at China over the last 20, 25 years, we've seen many different Chinas in terms of being the world's largest importer of urea in the '90s to entering the export market in the early 2000s to overwhelming the world market with almost 14 million tons of exportable tons in 2015 and '16 to slowly ramping that down to nine to seven to five to three to two, and now eliminated. It's been surprising and something is not easy to predict because as many things are happening in China. Some of those are opaque or governmental decisions. Today, the expectation is, at least from the investor community, has been the next quarter, they're coming the next quarter, they're coming. Well, they haven't. I think part of that is a reflection of what's going on in China. You're seeing growth in demand. Today, it looks like demand for industrial and ag applications is close to 60 million tons, that's 6-0. That's a gigantic consumer of urea, and most of that is produced using coal or imported domestic coal. The Chinese government wants to keep that product available for their consumers, their farmers to make the food that they want, and keep that at a reasonable cost. To me, that's a rational decision-making process. When you're exporting for almost zero value to the - or at least to China and subsidizing the world with cheap urea, another parallel path on this has been the exported tons of ammonium sulfate out of China that have grown substantially from several million tons to, I think, close to 16 million or 17 million tons, a lot of that going to Brazil and secondary markets. That's a lot of nitrogen that's still going out of China. The market is seeming to project that they'll be able to export tons in 2025. That remains to be seen, and we'll cross that bridge when we come to it.

Great. Thanks. And then as a follow-up, just on the clean energy projects, I was just curious, as you work through the FEED study and you look at the environment right now, what's your view in terms of the announced proposed capacity that's supposed to be coming out from various companies and start-ups? The proposed capacity is supposed to be out there for clean ammonia. What do you think is the likelihood that maybe half that comes online in the quarter? Sorry, any high-level views on that? Thank you.

Yes. I think as we look at those announcements, you have to look at them and assess probabilities related to them. Two years ago, we ran all the projects that had been announced globally that were low carbon. There were over 107 projects, of which we thought maybe less than 10 would actually be built. I would say, out of that list, I would say it's probably even fewer than that going forward. The nice thing about our industry is you have pretty good visibility into new projects starting, given the engineering firms that have worked on them. The timeline to build one is four to 4.5 years. That also provides you an understanding of what happens with the S&D balances that develops. What we're seeing between now and when we would have a new project come online is there is a limited net ammonia production that's coming online. You're seeing here in the U.S., you have the Gulf Coast ammonia that Bert mentioned, which is not low carbon. But you have the Woodside OCI plant, which we're expecting early '26. Outside of that, it's really not until 2028 where Qatar has a project that's announced. A long way to say, we don't believe that the true projects that are moving forward are building that supply side. That's why Tony talks about seeing a tightening in the S&D market just under traditional applications, let alone if we add in any type of clean energy demand to that.

Great, thank you.

Thank you. The next question comes from Ben Theurer with Barclays. Please go ahead.

Good morning and thanks for taking my question. Congrats on another very strong quarter. Just a quick follow-up. As you think about the ammonia segment and the strength that you had in the quarter, which kind of was a little bit of a surprise on the volume side, I think at least versus ours and consensus estimate. So how do you think about just segment itself, like not the fervor process, but the ammonia piece and the demand for that as you go into the fourth quarter? And maybe a little bit related to Joel's question, just like the revenue piece that then translates into Q4 and as you move into it. How much volume can you actually produce and sell as ammonia now that you have Waggaman?

Well, I would compare our products, ammonia, urea, UAN, DEF, ammonium nitrate. We love all our children. Ammonia is one of those segments. I give a shout-out to the ammonia team of Amanda and Bob and Chello that have done a great job in the rest of the sales team this year. The interesting thing about CF, and I think this is one of the undervalued aspects of our company, is the flexibility we have in our production locations, the flexibility we have with our modes, which is truck, rail, pipe, barge vessel, and then our distribution system. By leveraging all those points, we could become agnostic on the product and focused on the margin and what product creates the most margin at that time because our team is rewarded on the company's performance; we move tons freely between the segments. If that segment is profiting more than the other, that's what you saw in ammonia with good demand globally. We've been a fairly large exporter of tons out of Donaldsonville. That creates, again, optionality for the rest of the team. Our volume, I think it's the exported ton, that's the incremental increase. As we go into Q4, that is the ammonia application season, and weather permitting, our volume will be higher than Q3. We have a substantial book already built, and those values are in the publications. We're well within those ranges. This year could be a fairly big year for fall ammonia because it's a very good agronomic product for a corn farmer in these dense organic soils of the Midwest. The ammonia position for CF is solid, and how much product can we put in that segment? Traditionally, it's been around 4 million tons, but it could be 3.5 million to 4 million tons in any given year.

Okay, perfect. Thanks for that clarification.

Thank you. The next question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Hi, good morning. Thanks for taking my questions. Today, if we look at Europe generally as the marginal cost producer, but we're also seeing some changes in that region. There's capacity that's maybe shutting down and that could reduce how much to contribute to that cost curve, but there's also C-band that gets implemented in 2026, which raises our cost position. I'm curious how you think about Europe as that marginal cost producer as you kind of go forward and look out a couple of years from now?

As we've talked about before, this past summer, we did a pretty in-depth analysis of what's happening in Europe because we're seeing it much the way you described it that given the cost of energy and the differential, which now sits at $10 and really goes there through 2026, that it's going to be very difficult for European producers who are not integrated to continue to produce ammonia. You saw that last week with one of our peers shutting down an ammonia plant just to do an upgrade, very similar to what we did with our U.K. ammonia plants. We expect that to continue. By 2030, we would see that there'd probably be another 3 million to 4 million nutrient tons of imports required into Europe. Some of that will take the form of upgraded products. Some of it will be just gross ammonia that's going over there for upgrades through their terminaling system into those products. We see that specifically with our low carbon because with the CBAM, as you mentioned, if we have a low-carbon product and we're competing against conventional, the conventional cost is going to be higher, and that will provide us a margin advantage as the CBAM goes into effect at the end of next year. By 2034, where there are no free allowances offered anymore, you could see that differential between someone who has an ATR that's sequestering 95% in conventional being something that could be a $150 per metric ton benefit. It's a really sort of look, although we don't build that into our modeling, it is something that provides, as Tony talked about us being a fast mover and having that carbon arbitrage opportunity as we see Europe begin to contract production.

Okay, that's really helpful in Europe. That kind of brings in another question on just how does that global cost look like three or four years from now with the changes in Europe, Chinese exports, and impacts from clean ammonia given how the S&D looks like? Like how does that change? Because we've seen different changes in the past decade or so, how does that look like three or four years from now?

If price doesn't bid in that higher-cost production and there's new demand coming on, you'll probably see a lowering of the cost curve to some extent. That's really why when we look at our particular project, we wanted to be integrated because we think having the lowest OpEx related to some of these projects where you're buying hydrogen over the fence and then upgrading it later puts you in the third or fourth quartile of production. You are no different than a European producer. We do see that demand growth, so you're going to continue to need to see new supply come on. We do not believe that new supply meets demand. Some of these high-cost assets that you may think are going away are probably going to remain online until we have some sort of balance between supply and demand.

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

Thank you and good morning everyone. Tony, I just wanted to follow up with you on the prospective blue ammonia facility and just get your latest thoughts in terms of what you're seeking in terms of terms. I recall you want to own at least 50% of it. Is anything changing in terms of how many partners you want to bring in both in terms of the amount of equity they would want to provide, or do you have more of a willingness now, maybe to fund it yourself, but just have offtake for a very large percentage of the plant? Or is there anything evolving in sort of your own thought process or what the other counterparties are interested in doing?

I would say, in general, we have more interest than probably a percentage of equity to go out. Initially, we were focused on or structured an agreement around 52% equity. I could see a scenario that would have us take less than 50% total equity, based on the desires of a couple of the partners we're talking to. We would want operating control and voting control in that kind of joint venture scenario. It's entirely possible that we would end up at or below 50% of the total equity; I wouldn't want to go too much lower than that because we are putting our organizational expertise and effort to really take on the design and the build and the construction and then the ongoing operation of the plant. We want there to be enough participation in a project like that to make it worth our while to put all that time and effort into it. From a standpoint of having strong partners that want the offtake, that bring good expertise and capital into the project, and reduce our risk profile, we're really optimistic about this project and what it looks like going forward.

Okay. And just as a follow-up, how are you thinking about Henry Hub prices, not near much the next 12 months, but if you look out 12, 24, 36 months, you got all this LNG coming in the U.S. We've got electricity increasing demand-wise from data centers, and everything else. Any thoughts there?

When you look at the spreads or actually the strip, you're well into 2026, and you're still at $3. The differential to the world, not necessarily the Henry Hub price because if the Henry Hub goes to $6, but the spread goes to 10 or five continues in the $10 to $15 range, that just makes those other producers that are having to use imported LNG that much more expensive. When you look around the world where gas is, where gas is available, and how that gas is going to move, the United States plays a substantial role in that. We've demonstrated we as a country that when it was going from 70 to 90 to 100 to 105 Bcf per day of production, there's additional capacity out there to grow as the LNG demand grows. Yes, LNG is going to go from, let's say, 14, 15, 16 Bcf a day up into the 20s. We anticipate that supply to be there as well. The cost structure today to tap those wells to bring that production online is still very attractive. Yes, I think energy demand, you're seeing that spread apart, whether it's renewable or now bringing nuclear back. It's going to be something interesting to watch, I think, more as we get later in the decade.

Thanks, guys.

Thank you. The next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Thanks very much. When you think about the Donaldsonville dehydration and compression unit, and the 45Q credits that you might get in '25, is your base case that the credits would come from enhanced oil recovery?

So our agreement with Exxon is for CCS. It is not for enhanced oil recovery. It is for a Class 6 permit in which it would be sequestered, and we expect to receive the $8 per metric ton tax grant related to that. As I said earlier, we still feel confident that next year we will be sequestering in Class 6 permits, given the flexibility and really the alternatives that Exxon has across both Louisiana and Texas with different sequestration permits that are in process right now, both with the State of Louisiana and also with the EPA and the federal government.

So I don't think ExxonMobil has completed any permit filings in Louisiana just yet. So why are you - and in Texas, you need EPA approval. There have been no Class 6 permits that have even been issued. Are you really so confident that you can achieve this in 2025 on EOR area?

Yes. What I would say is, Jeff, is as you point out, there is - in Texas, it is federal, and they do have sequestration wells that they have permits put in place for Texas as well. That's really where the optionality of that almost 1,000-mile CO2 pipeline that Denbury acquired from Denbury allows them to work different paths and different alternatives to get there. All our discussions with Exxon suggests that they will have Class 6 permitting. That's what I'm basing it on.

Okay. And when you contemplate the building of a new blue ammonia facility, and you look at an ATR versus an SMR with flue gas capture. Are those very different costs? Like is there a, I don't know, a $1 billion difference between doing one or doing the other? Or is it much smaller?

It's much smaller by the time you add on potential flue gas capture. I think what you'd end up seeing is the numbers would kind of be in the approximate range of each other. One of the big differences is more tonnage of production coming out of an ATR in general than the SMR. The largest one plant in the world is Donaldsonville number 6. Even though its nameplate is the same size as a number of other plants out there, we're getting about 10% or a little over 10% additional production above nameplate. That is currently the largest plant in the world, and the ATR would be quite a bit larger than that plant even. One of the benefits of the ATR is compared to the SMR with flue gas; on a comparable capital basis, you get more tonnage of production and all those incremental tons are really at a variable cost, and so the return profile looks really attractive against those incremental tons. That's kind of the direction that we're targeting.

The other part I would add, Jeff, is based on that incremental tons, which could be 10% higher than our ammonia 6, you're now also capturing probably about 50% more CO2 than you would on a comparable conventional SMR. You would be obtaining the 45Q, whether it be through the Class 6 or in EOR, you would have a benefit that would be significant over what a traditional SMR plant would be.

Okay. Great. Thank you very much.

Thank you. The next question comes from Edlain Rodriguez with Mizuho. Please go ahead.

Yes, sorry about that. Good morning, everyone. Tony, a quick one for you. Can you talk about changes if any, you see in farmers or retailers' behavior given the more challenging prices we have now? And how has that changed go-to-market behavior accordingly?

Yes. I'll give a real quick high-level answer, and I'll hand it over to Bert to give some additional color. But in general, because nitrogen is a nondiscretionary nutrient, we've seen strong demand for our product globally even though crop prices are a little more muted today than they were a year ago or two years ago. I think generally, where you see farmer behavior looking to be different in an evolving crop price marketplace has to do with some of the other inputs. Whether it's P&K that you might cut back on a little bit, or you end up going with a generic seed and chemicals as opposed to some of the ones that are still on patent, et cetera. You see the reduction in cost in other places, but nitrogen really doesn't provide an option for farmers to reduce; otherwise, you see a direct year-one impact on yield. That's why we continue to see very strong demand for our product.

Yes, I agree with Tony. Some of the interesting things that are going on in the farm community, and we're very well connected with our customers. We don't sell to farmers, but the co-ops that we work with Growmark, CHS, Wind Field, and some of the others as well as our public companies and private companies like Simplot and ADM. We have a lot of conversations. I think one of the issues is that it needs to be managed on the farmer's side is debt and cash management. You're seeing delayed purchases, delayed purchases and positioning for the spring. One of the things like Tony talked about, all the ancillary issues of products used for planting and growing a crop, it's land values as well. We need to watch that over time. For us, it's - we focus on what we can control, and that's lowering our costs, keeping our costs attractive related to the market in terms of our production mix, running the plants very well and efficient. Utilizing the export capabilities that we have. We're a global participant. We're active in Brazil, Argentina, Australia, and Europe, and that gives us insight into global farming practices and needs. We manage our book, and we always have a healthy book on. The management of the pricing that's available to us, so we're capturing good value. The gas team keeping our gas costs low, which have been a very good job. So in conjunction with our insight into the market, our relationships, our capabilities, we're positioned very well. I think the farmer with some droughts going on in Brazil and some of the demand and low prices tend to help demand increase; the pricing hopefully will recover in the forward market.

And then as we exit 2024 and enter into 2025, I think the way you talk about the outlook for nitrogen is very encouraging. But is there anything that concerns you at all? Anything that makes you think keeps you wait?

I sleep very well, but there are things in this market that I do think about, and I'm always looking over the horizon on. I think there are issues with currencies, on what countries are devaluing their currency in order to participate. Concerns with Europe and gas; we are a participant or a producer in the U.K., so we're following that market. We have good customers and what their long-term opportunities are or challenges. And then it's geopolitics or the geopolitical environment that we're currently in with what's going on in the Middle East and in Ukraine. These have impacts on real people and real decisions on how people eat, but how they live. We have to be mindful of those things in the energy markets and how we run our business.

Okay, thank you very much.

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