Methanex Corp Q3 FY2022 Earnings Call

Welcome to the Methanex Corporation Q3 2022 Earnings Call. I would now like to turn the conference call over to Ms. Sarah Herriott. Please go ahead.

Good morning everyone. Welcome to our third quarter 2022 results conference call. Our 2022 third quarter news release, management's discussion and analysis, and financial statements can be accessed from the Reports tab of the Investor Relations page on our website at methanex.com. I would like to remind our listeners that our comments and answers to your questions today may contain forward-looking information. This information, by its nature, is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. Certain material factors or assumptions were applied in drawing the conclusions or making the forecast or projections, which are included in the forward-looking information. Please refer to our second quarter 2022 MD&A and our 2021 annual report for more information. I would also like to caution our listeners that any projections provided today regarding Methanex's future financial performance are effective as of today's date. It is our policy not to comment on or update this guidance between quarters. For clarification, any references to revenue, average realized price, EBITDA, adjusted EBITDA, cash flow, adjusted income, or adjusted earnings per share made in today's remarks reflects our 63.1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility, and our 60% economic interest in Waterfront Shipping. In addition, we report our adjusted EBITDA and adjusted net income to exclude the mark-to-market impact on share-based compensation and the impact of certain items associated with specific identified events. These items are non-GAAP measures and ratios that do not have any standardized meaning prescribed by GAAP and therefore, unlikely to be comparable to similar measures presented by other companies. We report these non-GAAP measures in this way because we believe they are a better measure of underlying operating performance and we encourage analysts covering the company to report their estimates in this manner. I would now like to turn the call over to Methanex’s President and CEO, Mr. John Floren for his comments and a question-and-answer period.

Good morning. I hope everyone is staying safe and healthy. This morning, we have Rich Sumner on the call, who will take on the role of our new President and CEO starting January 1, 2023. Serving as Methanex's President and CEO for the last 10 years has been a privilege. I am excited to see Rich work towards enhancing our global market leadership and maintaining our strong focus on safety and operations in his new role. Today, we will discuss our third quarter 2022 financial results, provide insights into the methanol markets, review our operational outcomes, and present our outlook for the near term. After that, we will open the line for questions. Our average realized price of $377 per ton generated adjusted EBITDA of $192 million and adjusted net income of $49 million or $0.69 per share. The adjusted EBITDA decreased in the third quarter compared to the second due to a drop in average realized prices, lower sales of Methanex-produced methanol caused by scheduled turnarounds and some unexpected outages, and higher spot gas costs in North America that affected EBITDA by about $10 million. However, we partially offset this by redirecting and selling our contracted natural gas in Egypt. Global methanol demand remained steady in the third quarter relative to the second quarter of 2022. Demand from traditional chemical applications slightly decreased, with acetic acid mining restarts in North America countered by other planned outages and logistical challenges across various downstream sectors, as well as a slowdown in demand growth mainly in Europe and China. Demand for methanol to olefins remained stable, supported by the startup of a new Bohai chemical MTO plant, which is expected to consume up to 1.8 million tons of methanol and reached 70% utilization in the third quarter. This mitigated lower operating rates from existing plants in July and August amidst affordability challenges for MTO. We saw an increase in energy-related demand in the third quarter as China eased COVID-19 restrictions, leading to higher demand for MTBD and other fuel applications. Industry operating rates fell in the third quarter due to prolonged turnarounds and both planned and unplanned outages globally. We estimate the industry cost structure based on marginal coal producer costs in China is about $350 per ton. Our November posted prices remained robust. North American prices held steady at $585 per ton, while Asia-Pacific and China prices remained unchanged at $410 and $395 per ton, respectively. Our European contract price is set quarterly, and we reduced our fourth quarter 2022 price by €45 per ton to €510 per ton. The less volatile spot prices in the third quarter, particularly in China, resulted in a significant discount rate of 21.5% compared to the second quarter. Demand trends are similar to those seen in the third quarter. However, we acknowledge potential downside risks to demand due to the energy crisis in Europe, ongoing COVID-19 lockdowns in China, inflation pressures globally, and the impact of rising interest rates on consumer sentiment and demand. Elevated global energy prices have enhanced methanol's cost competitiveness against alternative fuels, which may drive increased methanol demand. Growth in the shipping industry continues, and based on current dual-fuel ships and orders, we expect demand to rise from about 300,000 tons today to 2 million tons in the coming years. Our production levels decreased in the third quarter compared to the second quarter due to two scheduled turnarounds, some unplanned outages, and redirection of contracted gas sales in Egypt, which I will elaborate on after providing an update on our other sites. In Medicine, production was lower in the third quarter due to a storm-related unplanned outage in July affecting the plant's power supply. Geismar also saw reduced production this quarter due to an unplanned outage in July, which we extended because of high gas prices at that time. At the end of September, the utility supplier for Geismar faced a prolonged power outage due to a failed transformer, lasting until mid-October. During this downtime, the team seized the opportunity to advance some critical projects at Geismar. For the fourth quarter, we forecast a natural gas price of approximately $580 MMBtu for the 35% spot portion of our uncontracted natural gas purchases. In Chile, third quarter production was lower, although higher than in the same quarter of 2021, as only Chile One was operational due to limited gas availability from Argentina. Typically, we experience reduced gas deliveries during the southern hemisphere winter months, which impact our second and third quarters. In October, Chile resumed operations with gas supplies from Argentina, which we expect will enable both plants to run through the first quarter of 2023. We project 2022 production to be about 0.9 million tons. In New Zealand, we successfully completed a turnaround at Motunui 1, which we started in mid-September. Motunui 2 operated throughout the third quarter, albeit at lower levels due to gas availability restrictions from non-gas fuel. We anticipate both plants will be functioning at full capacity by the fourth quarter. Considering our production levels today and the outlook for natural gas in New Zealand, we estimate that 2022 production will be between 1.2 million and 1.3 million tons. Our production from Egypt was low in the third quarter as we concluded an extended planned turnaround. The timing of this turnaround allowed us to enter an agreement to redirect and sell the plant's contracted natural gas from late July to late October. This represented a unique opportunity to leverage excess LNG capacity in Egypt during a period of high LNG prices in Europe and was executed in partnership with our Egyptian government allies. We estimate that the sale and redirection of our gas provided an incremental benefit of about $35 million in the third quarter compared to using this gas for methanol production during the downtime. The plant is in the process of restarting. We ended the third quarter in a solid financial position with around $890 million in cash, excluding non-controlling interests and including our share of joint venture cash. We also have $600 million in undrawn backup liquidity. Our commitment to disciplined capital allocation remains strong, as we focus on sustaining our business while seeking economic value-add growth opportunities that outstrip our cost of capital by three percentage points and returning excess cash to shareholders. The construction of our Advantage G3 project is progressing safely and is on track for completion in the fourth quarter of next year. By the end of the third quarter, we've spent about $810 million before capitalized interest and expect an additional $450 million to $500 million in remaining capital costs before capitalized interest, which is fully funded by our cash reserves. Our asset portfolio and cash flow generating capacity are set to significantly increase once G3 becomes operational next year. With our G3 project fully funded and our strong cash position, alongside our capability to generate substantial cash flow across a broad range of methanol prices, we are well-positioned to continue returning cash to shareholders amid economic uncertainty through a sustainably growing dividend and share buybacks, including our 5% share buyback announced in mid-September. For the fourth quarter, we expect production to be around 1.6 million tons, significantly higher than in the third quarter. We anticipate building our produced inventory over the quarter, as the methanol sold in this period will lean more towards purchased product due to our FIFO inventory practices. Based on our posted prices in October and November and expected higher produced sales, we anticipate increased adjusted EBITDA in the fourth quarter compared to the third quarter, excluding the one-time benefit of the $35 million from the Egyptian natural gas sale. In the medium term, the outlook for the methanol market remains positive as we enhance our cash flow generation capability with G3 coming online next quarter. At a methanol price of $375 per metric ton and $4 MMBtu gas, we project G3 to generate about $250 million in EBITDA annually. We maintain a strong balance sheet and are committed to fulfilling our capital allocation strategies of returning excess cash to shareholders. Looking ahead, our geographical diversity and favorable feedstock cost position, with 85% of our natural gas needs in North America hedged for next year, combined with our unique global supply chain, will allow us to remain the supplier of choice for methanol and create value for our shareholders. We are now ready to take your questions.

Our first question is from Joel Jackson with BMO Capital Markets. Your line is open.

Hi, good morning, John.

Hey Joel.

We're wrapping up a call like this. I noticed that you didn't provide a production volume forecast for Q4. Could you share your expectations for Q4 compared to Q3? Additionally, should we anticipate the gas resale benefits in Egypt to be significantly lower than the $35 million per month that was seen in August and September, considering that gas prices have decreased?

Yes, so the age that we realized all the benefits in Q3. So, that was all realized in Q3. So, that $35 million is all a benefit of redirecting that gas for LNG and obviously sharing with the government, et cetera. So, it's based on selling prices through the three-month period. As far as production, yes, it's 1.6 million tons for Q4 is our forecasted production.

My next question is a fun one. Are you ready? Okay, John, it's been a long time. Over the last decade or so as CEO, what would you say you are most proud of? And what would you consider the one opportunity that got away?

I would say our safety record is what I'm most proud of, along with our internal succession process and developing people. Those are the two things I'm most proud of. We've experienced a lot of volatility over the last 10 years, but I believe we've emerged as a stronger company because of our teamwork. While there were many missed opportunities, I prefer not to go into the specifics, but there was certainly a lot of noise during that time.

Okay, thank you.

Thanks Joel.

The next question is from Ben Isaacson with Scotiabank. Your line is open.

Thank you very much and good morning, everyone. In other petrochemical chains, we've observed a volume decrease of 10% to 15% in Europe, a similar trend in China, while the rest of Asia and North America seem to be holding steady. You mentioned that Q3 volume remained flat compared to Q2, and currently, it is still flat. You also pointed out the risks present in Europe and China. When you describe the volume as flat, does that indicate that some regions are performing better while others are weaker? Is your observation consistent with what is happening in other chemical chains? If not, could you discuss real-time demand on a regional basis?

Yes, I'll ask Rich to answer that question.

Yes. Morning Ben. Yes, so you're right to say that it's not the same across all regions. So, in the third quarter, we saw stronger demand for traditional applications in North America, part of that was the return of operating rates for acetic acid producers. But we are seeing still healthy demand in North America. Things are pulling fairly strong there. And we actually do think that there is some impact of lower operating rates in Europe that may be shifting some industrial production into North America. In Europe, we are seeing traditional demand down and so that in that region, there's a bit of a offset there. We're continuing to track China, or traditional demand growth, we would say that that's been relatively flat. And there is some pressure obviously with zero COVID lockdowns and a slowdown in housing there. So, we're watching those things closely. But we haven't seen a significant pullback in demand in any region. Europe is the one that we have seen some modest pullback. So, we're continuing to watch all of it across all applications. We have had some offset obviously, with higher stronger demand in other energy applications in China. And Q2 was a period where COVID lockdowns were quite restrictive and Q3 some of that eased off which meant there was better demand for transportation fuels as well as other thermal applications. And we would see that continuing with higher energy pricing as well as some if COVID lockdowns continued to ease. So, we're watching all markets right now and things are still probably trending at Q3 levels.

Yes, and I just add the new plant we’ve added in Bohai. So, that’s new demand. That’s 1.8 million tons. So, we watch the other customers, what they're reporting as well, we're just not seeing that in our business yet. But we're certainly cautious about what could be coming. Thank you.

Thank you. And then just a quick follow-up. You mentioned, John, that I think you said both plants in New Zealand will be up and running sometime in Q4. Does that mean that this Maui gas field issue is now behind us? And as we look into 2023 in the absence of any turnarounds, we should be kind of back to normal production in New Zealand, all else equal?

Yes, both plants are running now, Ben. I think my remark was the full rates in the quarter. So, that’s our expectation. So, we expect to be running both plants at full rates next year, provided there's not any further disruptions in the gas supply. That's what our gas suppliers have told us and that's what we're expecting.

Great. Thank you very much.

The next question is from Nelson Ng with RBC Capital Markets. Your line is open.

Great, thanks. And congrats, John, on your upcoming retirement and congrats to you Rich on your new role. So, first question is, it sounds like Egypt was a special situation where you were able to use excess LNG capacity to divert gas. But can you talk about whether there's any other opportunities to resell gas or divert gas because I remember in New Zealand, recently, you agreed to reduce production to allocate more gas to power plants. So, can you just give us a bit of color on whether there's other opportunities in other regions to divert gas?

Yes, we're in the business of producing methanol and selling methanol. I think the Egypt opportunity was unique because we had a planned turnaround at the same time, which only happens every four years and the conditions were such that there was excess LNG capacity and a high price in Europe. So, I mean, but those were very rare unique conditions, and if those conditions happen at some point in the future, that hasn’t happened in the last 30 years? So, who knows, but certainly we're in the business of producing and selling methanol.

Okay, got it. And then you talked about G3 and your expectation of, I think, $250 million of EBITDA per year. Is that assuming that it's operating close to 90% to 100% utilization? And then on the back of that, can you give us an update on your hedging position in North America?

Yes, so our hedging position hasn't changed during the quarter, we haven't added any hedges. So, it remains unchanged. And yes, we plan to run G3 at full rates.

Okay, thanks. I'll leave it there.

Thanks.

The next question is from Steve Hansen with Raymond James. Your line is open.

Yes, good morning, guys. I'll just echo the congratulations comments earlier to both of you. A question to start is just around regional contract spreads. I know we've been in a position like we have for some time now, but I just want to ask about the refill spreads being extremely wide relative to history here, particularly in the Atlantic Basin, is that a situation that you expect to carry through 2023? And perhaps beyond just given the market dynamics you're seeing? Or how would you think about that spread going forward?

I'll ask Rich to answer that one.

Hi Steve. It has certainly been dynamic. We're currently in contract season, which is just beginning, so it's difficult to provide guidance on that. In the Atlantic Basin, we've observed a significant spread that has resulted from new capacity being added over time. Currently, we haven't seen any new capacity except for G3 and our outlook does not indicate any. We'll need to monitor the situation closely. We will provide guidance on anticipated discount levels moving forward.

I think it's important to note the realized prices, and the Atlantic Basin remains our best realized price across the company. Spreads are definitely a focus when examining realized prices. If I could secure a price of $377 for the next decade, or if Rich could do the same, I’m sure both of us would be very pleased.

No, fair enough. That's helpful. And maybe it's a related question then, because you've introduced this new China contract that sort of breaks apart the traditional Asia-China combined contract, and maybe just could you speak to the benefit that you've seen from that, and whether it's been effective from what you originally planned? Thanks.

Yes, I believe the greatest advantage is that the Asia-Pacific region has many unique characteristics. By treating the China market separately from the broader Asian market, we recognize that these markets do not behave in the same manner. This separation allows us to remain competitive with our customers in these areas and respond more quickly. Overall, I think our approach is working effectively with our customers in those regions and helps us remain competitive on a monthly basis. So, yes, it has been functioning as we had hoped.

Yes, I think when we put a BCP in 10 years ago, the radium product wasn't only destined for China. And I think that dynamic has really changed the Chinese import market. So, the traditional freight differential from China to the other parts of Asia changed as a result. So, having the two prices, I think, allows us to stay more in tune with the different markets in Asia.

Appreciate that. Thanks.

The next question is from Josh Spector with UBS. Your line is open.

Yes. Hey, thanks for taking my question. So, just to follow up on the Egypt gas sale and understand it's not because you don't want that to be your normal mode of operation. But assuming Europe prices for gas go up again, was this a unique kind of discussion with the government to make this happen? And you'd characterize it as more of a one-off? Or if opportunities open up, is that something you could quickly switch to if it was advantageous for you to do that?

Well, we own 50% of that plant. We operate. We have a partner there and that's mainly the government. So, any ideas we talk about with our partners, we explore. I'd say, this is a unique opportunity for us because we are in a planned turnaround anyways, and we won't have another planned turnaround for probably three or four years. So, the dynamics would be different if we're operating fully versus a planned turnaround. So I don't want to predict the future. I'm not very good at it. But certainly, this was very unique and hasn't happened in our 30-year history. Yes, we did do something in New Zealand, but that was more of a need for the country, needing the gas for electricity. So it was very different circumstances than what happened here in Egypt.

Okay. Thanks. That's helpful. And just a follow-up on the methanol for fuel demand in the marine market. I mean, you talk about the 2 million tonnes of potential demand to be added. Curious if you could provide any color like within that calculation are you assuming a mix of fuel in those dual fuel engines similar to what it's at today, which is kind of a low level of methanol? Are you assuming that's all methanol? Just curious depending on how that shakes out today versus how you're seeing that maybe shift over the next couple of years?

So the 2 million number that we've provided is demand potential that assumes all those vessels run on methanol 100% of the time. What fuel will be the choice will be dependent on each of the shipping companies and what they're operating. At a time, we think certainly that the shipping companies are choosing methanol because of, one, its clean burning attributes, as well as its future pathway to low carbon. So we think that methanol has been the choice they've made because of that, and they’re looking and seeking the economics of methanol as well as its ability to decarbonize over time. So all of that will have to play out. We think that that 2 million tonnes is what's on order today. And there's a lot of other discussions that are going on which we would expect to see that order book continuing to increase over time.

And regulations will continue to get tighter and tighter, and maybe some of the alternatives today won't be alternatives in the future. So it's really, if all the chips that are on order, or are on the water today were to run 100% on methanol, it would be 2 million in demand.

Got it. Very helpful. Thank you.

The next question is from Jacob Bout with CIBC. Your line is open.

Good morning.

Hi, Jacob.

Wanted to talk to about methanol demand and increasing concern about a recession here going into 2023. Maybe just walk us through how you're thinking about methanol demand, and either kind of a moderate or severe recession scenario. And what could be different this time than what we've seen historically?

When analyzing the industry's demand, it appears to be between 85 million tonnes and 90 million tonnes, with around 45 million tonnes attributed to the traditional demand segment. We are monitoring this segment closely for any recessionary effects. At the start of the year, we projected a demand growth of 3% to 4% for those derivatives, but currently, that trend appears flat as we discussed in the third quarter. We will keep an eye on the 45 million tonnes of demand and evaluate its impact across various regions. Typically, the demand in this segment correlates with GDP growth, so our forecasts for GDP will influence it. Additionally, we observe that in a high energy price environment, there are signs of potential recessionary impacts, which may drive methanol demand growth. Therefore, the interaction between these factors will ultimately shape demand, and we believe that higher energy prices are beneficial in supporting this growth.

And are you more or less concerned about China this time around?

We're watching China really closely. I think zero COVID has had an impact certainly on demand. What happens post the national progress in and around policies there will ultimately determine how that's going to impact us. So we're watching the China market very closely right now.

Yes. We're probably most concerned about the MTO. So I mean, that's always been our biggest concern, but the operating rates, although they're a little bit lower, there's still quite healthy. So, again, that's something our team watches on a very regular basis.

I’ll leave it there, and good luck to you, John.

Thanks, Jacob.

Thanks. The next question is from Hassan Ahmed with Alembic Global. Your line is open.

Good morning, John, and congratulations.

Thanks, Hassan.

John, a question around demand, just revisiting something you said earlier. I mean, obviously, sequentially, you guys talked about demand being flat, obviously, a bit different from other commodities, which has seen a fair bit of destocking, in some cases 10%, 15%, 20%. Can you chat a bit about inventory levels, where they are right now, as more of these recession fears sort of spreads through the market? Is there a genuine concern around maybe heightened degrees of destocking?

Hi, Hassan. This is Rich. In terms of inventory levels, we experienced flat demand during the quarter, but there was a noticeable pullback in industry operating rates by about 2% to 3%. Overall, we observed a reduction in inventories during the quarter, primarily due to production outages in Iran affecting several plants. Additionally, there were outages in North America, and European refinery units were running at low capacity. Other factors included our own maintenance activities in Egypt and New Zealand. When we assessed the balance between demand and production, we noted a draw during the quarter, especially in the import markets to China, which currently have very low inventory levels. This situation has contributed to some price strengthening in the Chinese market during the quarter. We are witnessing tight to balanced inventory levels across the board today.

I think the dynamic, Hassan, is that as we get into Q4 and Q1, those are traditionally the low end for production because of gas diversion for heating and electricity in places like Iran, the higher gas prices in North America impacted the supply in Q3. Obviously, prices of gas now have come down to around five or six, which is somewhat a little bit more affordable. If you're not hedged they're fixed like we are. And then you got the high cost curve in China, right? That's the coal price. They're setting a very high cost curve. So yes, even if demand was to go down somewhat, I think there's the supply issues are going to be probably more impacting what the ultimate price of methanol is going to be versus somewhat of a drop in demand.

Very helpful. And as a follow-up, I noticed that sequentially, logistics costs were up around $12 million. Now looking at sort of shipping rates coming down, coming down pretty hard. Should that be a nice tailwind for you guys as we think about Q4 and beyond?

This is one of our key competitive advantages, our integrated logistics. We did pay more for fuel when prices were high, but costs have decreased slightly and we are using methanol wherever possible on our ships. In contrast to the dry cargo market a few years ago, the tanker market has reacted differently, remaining relatively low. Recent developments in Russia and longer shipping times have caused the tanker market to rise significantly. If you're not integrated like we are and are purchasing on the spot market, you're facing rates that are double or more compared to last year. Additionally, around 35% of what we transport is on a backhaul basis, meaning those rates are notably higher this year compared to last. Our supply chain, shipping, and integrated logistics provide a competitive advantage in delivering products on time and ensuring the quality our customers expect. Given the strength of the tanker market moving forward and new restrictions in Europe preventing the export of Russian methanol and petroleum products, we anticipate continued pressure on those supply chains and a tight tanker market for much of next year.

The next question is from Matthew Blair with TPH. Your line is open.

Hey, good morning. Could you talk about MTO economics currently? Is it fair to say that they're a little bit better than in Q3 levels? And what are your expectations for MTO operations in Q4 into 2023?

MTO affordability currently stands at approximately $280, which is below $300. We have observed a disconnect in the market; typically, in a high oil price environment, we would expect higher MTO affordability tied to oil prices. However, due to weaker demand in the olefins market and sufficient supply, this relationship has shifted. We are monitoring this closely, as different factors influence economic decisions regarding MTO units. It's essential to consider what is produced downstream and the synergies with other parts of their operations. It’s not a straightforward calculation for their operational choices. Presently, a few plants are not in operation, but this has been balanced by the recent start-up of 1.8 million tonnes in North China. Currently, we estimate that MTO operating rates are just below 80%. There is latent demand, but restarting operations is challenging with low inventories in China. Given the current pricing of $330 per tonne in China, we will be cautious and likely maintain operating rates around 80% while observing upcoming operational decisions.

Great. Thanks for all the color. You also mentioned that your ships are running on methanol whenever possible. What's the economic benefit there? What's the spread between methanol and like a low sulfur fuel oil or low sulfur diesel?

Yes, so earlier in the year when oil pricing was well above $100 a barrel, we saw methanol on an energy equivalent basis being quite a bit more affordable than the other alternatives of marine gas oil or ultra-low sulfur diesel oil or is probably a discount on an energy equivalent basis about 20% to 30%. We've seen those prices come down recently to where it's actually more on a fairly neutral level of pricing. So still looks attractive to be burning methanol against the alternatives.

Our next question is from Chris Shaw with Monness Crespi. Your line is open.

Yes. Hi, good morning, everyone. How are you doing?

Hey, Chris.

I have a longer-term question about the availability of natural gas, considering both your current operating plans and any potential future plans or expansions. With the situation regarding Russian gas and the ongoing conflict in Ukraine, Europe is importing significantly more LNG and seems to be expanding their capacity. Do you anticipate any changes in supply, either where you are now or in other areas, particularly from natural gas producers looking to liquefy more and transport it to Europe in the future? Or is this actually prompting further development that could lead to improved supplies? How do you envision this evolving in the next 4 to 10 years?

I guess it depends on what your LNG price forecast is. I mean, certainly, if it's $30, $40, if that's your forecast, then it makes more sense to use gas to make LNG than making methanol. Unless you have a view of methanol price being $800 a tonne, then I don't think there'll be many new methanol plants being built. And if your alternative is $30 to $40 LNG, I don't know what the future is going to hold for gas prices on LNG, but usually economics prevail, and it's a price that gets you a return on your capital employed above your cost of capital that people make investment decisions on. And certainly, there's an abundance of gas around the world. It's, unfortunately today, because of what's happened in Europe. It's not in the right place. And that's leading to dislocations on pricing. But, I think when we look at the forward curves on gas in North America, it's still in the $4 to $5 range. So you're still lot of gas in North America that can be developed and very economically, at that $4 to $5 range. So assuming past capital allocation and capital that citizens are in the future, you would expect producers of gas to be investing in production, if the demand isn't there. And those kinds of prices, that's usually how commodities work and I don't see anything that I've seen that changes that because of a short-term dislocation because of a war in Europe.

And then, I guess North America is your only market then that has the excess gas to liquefy and send to Europe arriving in New Zealand, Chile, Argentina, all those places. That'd be if they had that much, that'd be probably a good problem to have, right?

Yes, I don't think there's enough gas in Chile or Argentina today. I mean, maybe at some time in the future, as the Neuquén gets developed, they'll develop an export LNG market, but that's sometime in the future as they continue to develop the Neuquén basin. New Zealand, certainly not enough gas to think about an LNG plant. We have, obviously, Trinidad has LNG production and so does Egypt, but Egypt's gas outlook is only getting more and more favorable as it wanting to become a regional hub for Cyprus and Israeli gas plus their additional gas that they're developing. So if all those regions, I would probably expect Egypt to be the most likely to develop more LNG capacity at some point in the future.

Great. That's helpful. Thank you.

Our last question is from Steve Hansen with Raymond James. Your line is open.

Yes. Thanks. Just one quick follow-up. If we think forward here, 12 or 15 months, G3 is up and running fully, which would be a great outcome. How are you going to feel about capital allocation at that time? It might be too early to ask, but if we think about the backdrop of very little incremental capacity being built over the next couple of years, arguably, the market will start to need it. But then at the same time, you're going to have to play this out with your idea around returning cash to shareholders. So I know you've got a strong focus on a balanced approach. But when a lot of that cash flow is flowing, I mean, are you going to be keen on adding the capacity again? Or are you going to be more tilted towards the returning cash side? Thanks.

Yes, it's a great question. I'm glad you asked it. Yes, you're right to point out at any methanol price around where we are today or even much lower. We're going to generate a lot of cash as G3 comes up. We don't have any significant projects in the pipeline today. I mean, G3 is going to certainly satisfy our demand aspiration or supply aspiration growth, and we'll focus on getting Titan and Waitara Valley back up and running if we’re able to secure additional gas, which will take some time. So I think we'll have lots of cash to distribute, whether we invest a little bit in green methanol or other projects like that to be determined. But I think that’s somewhere post G3, one or two years at least. So we do want to grow in line with the market. Most of the questions today have been about demand, and we've seen very little demand growth overall since COVID-19. So it's really since 2020, we've seen basically very, very little demand growth. So, we don't need to grow if we want to maintain our market share, and G3 is going to more than satisfy our growth aspirations. So assuming it will come up and it will run well, we're convinced of that. We've got a great commissioning team, has been a great project, a great executed project, there's nothing that leads us to believe it's not going to commission well and run well. And we'll take the excess cash beyond the maintenance capital and the dividend we have and buy back shares. That's our plan.

Okay, great color. Thanks John. Appreciate it.

I'll add one thing that we do plan to retire the debt that's coming due as well, $300 million. So, retiring the debt and buying back shares.

No further questions. At this time, I'll turn it over to John Floren for any closing remarks.

Yes, thank you for your questions and interest in our company. Before we close the call, I want to emphasize we produce essential chemical building blocks used in hundreds of consumer and industrial products. Methanol is also a cleaner burning fuel that has increasing demand as a marine fuel. We believe that the methanol industry has a positive outlook with growing demand and minimal new capacity additions. Our well-positioned asset portfolio generates meaningful cash flow across a range of methanol prices, which allows us to execute on our capital allocation priorities. We are well-positioned in this period of economic uncertainty with a strong balance sheet, our G3 project fully funded, and coming online next year, which we will expect to add approximately $250 million of EBITDA at $375 methanol price and $4 gas, which will significantly enhance our cash flow generation capability. We hope you'll join us in January when we will update you on our fourth quarter results. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.