CF Industries Holdings Inc (CF) — Q4 2024 Earnings Call Transcript

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 full year and fourth 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 these statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website. Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now, let me introduce Tony Will.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the fourth quarter of 2024, in which we generated adjusted EBITDA of $562 million. Adjusted EBITDA for the full year was $2.3 billion. This strong performance enabled us to return $1.9 billion to our shareholders through dividends and share repurchases in 2024, which is our highest level of capital return in more than a decade. The CF team is operating at a high level, advancing our strategic initiatives and, most importantly, working safely. Given our fully engaged employees, our low-cost manufacturing system with the highest onstream factors in the industry, our expansive distribution and logistics network, and very constructive nitrogen industry fundamentals, we are well-positioned to continue our track record of generating superior free cash flow that enables the company to both grow and return substantial capital to shareholders. With that, I'll turn it over to Chris to provide more details on our operating results and the status of key initiatives. Chris?

Thanks, Tony. Our production network operated extremely well through year-end. We produced over 2.6 million tons of gross ammonia in the fourth quarter, which reflects a 100% ammonia utilization rate. We finished the year with 9.8 million tons of gross ammonia production. Our manufacturing network has continued to operate well to start 2025 and did not experience any significant disruptions from recent winter weather events. We expect to produce approximately 10 million tons of gross ammonia in 2025. We are making good progress on our key strategic initiatives. The completion of our carbon capture and sequestration project at our Donaldsonville complex is in sight. Commissioning activities for the carbon dioxide dehydration and compression unit have begun alongside final construction activities. We expect the start-up of carbon sequestration and 45Q tax credit generation this year. Our evaluation of a greenfield low-carbon ammonia plant at our Blue Point complex in Louisiana is also nearing completion. As Greg will detail shortly, we completed the FEED study for an auto thermal reforming ammonia plant, marking a major milestone towards this strategic initiative. We continue to assess the project in light of our outlook for the global nitrogen supply-demand balance, customer requirements for carbon intensity, and the regulatory environment. We are working to complete the partnership structure. We expect that our ownership of the project will range from 40% to 75% depending on the number of equity partners at the outset. If we were to make a positive final investment decision at a 75% ownership level, we believe we would have the option to sell down that level if we chose to, given ongoing discussions with other potential partners. We continue to target the first quarter of 2025 for a final investment decision. With that, let me turn it over to Bert to discuss the global nitrogen market.

Thanks, Chris. CF Industries had a positive fourth quarter of 2024 that has carried over into 2025. We had a very strong fall ammonia application season and have built a strong order book for all products as retailers and wholesalers layer in product tons for what they believe will be a good spring application season. We ended the year at lower-than-average inventory levels in our network, and we believe the North American channel is at low levels as well due to lower-than-normal imports into North America. As we move to the fourth quarter, global nitrogen market participants began to appreciate how much the global supply-demand balance has tightened. Nowhere was this more evident than India's inability to secure the volumes they targeted for the last two urea tenders. Given the high urea consumption in the country and lower-than-targeted production, we expect India to issue another tender later in the first quarter just as the Northern Hemisphere demand ramps up for spring, a demand that we expect to be very strong. World corn stocks and the world's corn stocks-to-use ratios, excluding China, are at a 13- and 30-year low, respectively. Given the need to replenish global corn stocks and a corn-to-soybean ratio favorable to corn, we expect robust planted corn acres and strong nitrogen demand in the United States in 2025. Longer-term, we expect the global nitrogen supply-demand balance to tighten through the end of the decade. Capital availability, long-term feedstocks and costs, and global events have limited the number of new projects. As a result, projected new capacity growth is not keeping pace with demand growth for traditional fertilizer and industrial applications. We believe demand for low-carbon ammonia for new applications, such as power generation, would only further tighten the global supply-demand balance. With that, Greg will cover our financial performance.

Thanks, Bert. For the full year 2024, the company reported net earnings attributable to common stockholders of approximately $1.2 billion, or $6.74 per diluted share. EBITDA and adjusted EBITDA were both approximately $2.3 billion. For the fourth quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $328 million, or $1.89 per diluted share. EBITDA was $582 million, and adjusted EBITDA was $562 million. Net cash from operations was $2.3 billion, and free cash flow was approximately $1.45 billion. We continue to be efficient converters of EBITDA to free cash flow. Our cash flow to adjusted EBITDA conversion rate for the year was 63%, which far exceeds our peers, as you can see on Slide 5. We returned approximately $1.9 billion to shareholders in 2024. This included $364 million in dividend payments and over $1.5 billion in share repurchases. For the year, we repurchased 18.8 million shares, representing 10% of the outstanding shares at the beginning of 2024. Entering 2025, we had a little over $1 billion remaining on our current share repurchase authorization, which we intend to complete before its expiration in December. Based on market capitalization at the start of the year, we have the capacity to repurchase approximately 7% of our outstanding shares through the end of 2025. As Chris mentioned, we completed the FEED study for a 1.4 million metric tons per year ATR ammonia plant with carbon capture and sequestration technologies. The study estimates that the cost of a project with these attributes would be approximately $4 billion, which will be divided among the equity partners. At this level of capital investment with the incentives of carbon capture, and an ammonia price of $450 per metric ton, we'd expect to earn a return above our cost of capital. There is an additional $500 million required for scalable common infrastructure, which would be CF Industries' sole responsibility and can be leveraged for future growth at the Blue Point complex. Should we move forward, we'd expect the common infrastructure would also earn a rate of return above our cost of capital due to the payments from the ammonia plant owners for the use of the facilities. With that, Tony will provide some closing remarks before we open up the call to Q&A.

Thanks, Greg. Before we move on to your questions, I want to thank everyone at CF Industries for their contributions in the fourth quarter and for the full year. As a company, we have a lot to look forward to in 2025. From constructive global nitrogen industry dynamics to the start-up of our first CCS project and a final investment decision on our Blue Point complex, we're excited for what's ahead. Investing in our business to increase cash generation while dramatically reducing our share count has served our shareholders well. As you can see on Slide 8, in the last decade, since most of this team has been together running CF, we have increased production capacity by almost 20%, while reducing our shares outstanding by almost 30%. What this drives is clearly shown on Slide 5 of our deck, and we have boxed the most relevant data. And this is how we run our business to generate more free cash flow while reducing our share count. It is exactly this ratio that demonstrates the superiority of our business model. In the very near-term, in this year of 2025, we have a couple of initiatives that we'll continue to build on this track record. The 45Q tax credit is expected to begin this year as we sequester CO2 from Donaldsonville. We will also complete our share repurchase authorization, which, as Greg mentioned, should take out another roughly 7% of our outstanding shares pro forma. Over the longer term, we expect investments in our network and low-carbon ammonia production capacity will provide a robust growth platform for the company, add to our cash generation, and continue to drive that all-important golden ratio shown on Slide 5, creating substantial value for our long-term shareholders. With that, operator, we will now open the call to your questions.

Hi. Good morning. I wanted to ask you about your hedging. You talked about in the past couple of quarters that maybe you weren't layering on as many strips or hedging as you had this past, it looks like you quite well in Q4 to get ahead of the higher gas prices. We've now seen, of course, US gas prices surge. Talk about how open you are what your GAAP or like for Q1, Q2 for the rest of the year? And what we're seeing, the more volatility, Tony and team, is this making you rethink your DAS hedging strategy going forward? Thanks.

Hey, good morning. Joel, this is Bert. And how we look at gas is how we look at the dynamic nature of our business, and it's just one reflection of that. In terms of how we manage margin, how we manage costs, how we manage CapEx, gas is a substantial cost for us, and we look at it holistically. And so we have been much more in the cash market in 2024. We do hedge front month for our gas contracts, but we've been much more opportunistic in 2024, believing in the resource base that exists in North America for our system. How we're looking at 2025 is we've approached it very similarly where we were and have been hedging front month for our commitments and then just for the weather volatility of January and February as well. And we anticipate that the gas team will continue to perform very well and position CF in a great place.

And Joel, relative to the second half of your question, I would just say we operate the vast, vast majority of our production capacity in the best place on earth to operate it, which is North America, with some of the largest resources, most dependable production and quickest to respond. And so while we'll continue to evolve our thinking around hedging and Bert and team continue to do that actively, I think that the most important thing is where we've built our plans.

I have a follow-up question. I noticed last night that you provided a new sensitivity table based on 2024 numbers, which I appreciate. This table shows your EBITDA levels in a grid format for different gas and urea price realizations. When I compare the 2024 table to the 2023 table, using similar volumes around 90 million tons, it appears that EBITDA is projected to be about $200 million to $300 million lower across any combination of gas and urea prices. Can you explain what this indicates, if anything?

Yes. So let me just describe how that grid is put together. And it is not meant to be strictly speaking instructive about what the future holds. It's based on last year's actual product price differentials between ammonia and urea, UAN, ammonium nitrate and the rest of the products and how they fit in there. And so to the extent that in any given year, you see the differential between urea and say, UAN move one direction or the other, that's going to change how that grid is created because there is more or less value across the system based on selling one ton of urea. So it's purely a heuristic, it's just a way to sanity-check the numbers. It's not a pinpoint estimate of where we're at. To do that, you'd really have to get into the details of where gas is really moving across the network, not just in the aggregate because, of course, we're consuming a vast majority of our gas in the combination of Henry Hub and AECO. And so what the other ones with the other pricing points, trade out matters, but it's very specific to the year movements and the product movements. And so you have to get a little more granular, but at the very high level, that gives you directional information of where it is. And that's why it tends to move one year to the next. It's strictly based on the previous year's differentials.

Yeah, Joel, this is Chris. The other thing I would add, Tony talked about the price and basically the relationship between each of the products. But additionally, since we are using a look back to 2024, our cost structure is also the 2024 cost structure. And if you recall, in Q1, we had pretty heavy maintenance events where at one point, 15 of the 17 ammonia plants needed maintenance, and that was about $100 million to $150 million. So as Tony said, it's really indicative of what you could see for the year, but it is based off of empirical data rather than what we expect for the go forward.

Thank you.

Hey guys, good morning. It's actually Andrew sitting in for Chris. How should the street think about 2025 cash conversion and the balance of uses between buybacks and then future CapEx, and then on top of that, would you be able to talk about the potential for long-term offtakes in conjunction with any BluePoint FID? And how does that fit into the picture here as well?

Yeah. Andrew, thanks for the question. It's Greg. I'll start and pass it over to Chris. On the capital allocation for the year, we've outlined where our CapEx is expected to be over $500 million of our normal run. That would, obviously, change if we went to a positive FID, and we'd update you on those numbers when we made that decision. On the capital allocation, we came into the year with $1.6 billion of share repurchase that we expect to get done by the end of the year. And those would be our primary uses of cash. Don't expect any change in difference on our EBITDA conversion rate. We still expect to be above our peer group on our ability to convert that EBITDA to free cash flow. So no change in that at all. But we'll update you on the CapEx number when and if we make a positive FID, and we've already laid out the share repurchase we expect to do for the year.

Yeah, Andrew. And in relation to long-term supply offtake related to the BluePoint project, I think a lot of that's going to be dependent on where we end up from a partnership equity share piece. If we're at the 75% that CF has as we go through, as I mentioned, we are having discussions with other global partners who are interested in this particular facility with an offtake agreement that would happen there. But if we go with the 40% where we have the Mitsui, JERA, and CF themselves, a large portion of our product, given that we purchased ammonia already for the U.K., could find its way going to the U.K., and that incremental amount that we would have for a long-term offtake contract would probably be smaller. So a lot of it's going to be dependent on what is the final ownership structure that we'll know here in the next couple of weeks.

But I would say, back to Chris' point, there's a lot of interest out there. And I think what you've seen is a bunch of these kinds of people waiting in or making initial announcements and then getting cold feet has led a bit of pent-up demand out there. And so if we ultimately do go forward with a positive FID decision here, I would expect there to be more than adequate demand for the production that we have left.

Great. Thanks for taking my question. Just to follow-up on the Blue Point. Obviously, FEED study completed negotiating with the partners, still nothing determined yet. But I mean, it sounds that basically the outlook from a demand and market perspective, you've found to be, I guess, positive for the project. So I guess in terms of final decision, how much does the potential for 45Q change? I don't have any impact at all? Is it really just a function of marking down where you want to stay in terms of your equity stake whether it's 40% to 75%. And then in terms of just all the final decisions with the partners getting ratified?

Yes. I think the main issue is that the 45Q tax credit is beneficial to the project, and the ammonia price needed to achieve returns above the cost of capital would increase without it. However, our discussions with government representatives indicate that the 45Q is not at risk. If you were relying on an electric vehicle subsidy or credit, you might want to reconsider. The 45Z and 45V credits might carry a bit more risk, but we haven't received any information suggesting that the 45Q is in danger. Therefore, we are fairly confident that it will remain intact and are planning accordingly. That said, there are many variables in play, and several policy matters are currently uncertain. Among all the policy issues, we feel most certain about the 45Q. One factor contributing to the delay in our progress is the need to finalize all the subsidiary contracts required for the construction and advancement of the project. The partnership structure itself is solid; it's mainly about completing the necessary engineering, procurement, and construction details.

Good morning. I would like to discuss the Blue Point project further. Depending on the equity range you are considering, it could be between $2 billion and $3.5 billion. Previously, we talked about an outlook where the project would likely be completed over four years, with more capital commitments occurring in the later years. Given the range you're presenting now, I am curious about your funding strategy. Will you consider adding more debt? Based on market conditions, it seems feasible to finance it through cash flow if repurchases aren't happening, but I would like to hear your latest thoughts on this progress.

Yes. Thanks for the question, Lucas. It's Greg. So, when we look forward and look at the commitment, you're right, it's going to be determined by the size of the equity we have commitment and where that ultimately ends up. If you looked at it at the 40% and you thought about it over four years, and even including the common facilities, it's roughly about $500 million that we would need to create additionally. Given where we are on a free cash flow basis and the investments that we tend to make within our network on a year-to-year basis, including the growth CapEx that we put in, it's not dramatically larger. It's obviously larger but not dramatically larger. So as we think about where we are from a capital standpoint, we've got $3 billion of debt. We've obviously got some of that coming due next year that we'll have to look into. But there are a bunch of options as we think about how we would fund it, first, starting with the cash that we have on the balance sheet and go to cash from operations. And to the extent we would want to think about building some more security, there are a number of instruments we could look at to pull in, and we're in the process of evaluating that all right now.

I mean, I think if you just look at last year, we generated $1.4 billion of free cash. And we're going to spend $1 billion, as Greg said on share repurchases. That still leaves a big chunk to be able to deploy against the other uses of cash, and we ended the year with over $1.6 billion of cash on the balance sheet. So our uses of cash this year, even though we're going to buy $1 billion of shares back out of the market, is not going to dip very hard into our cash on the balance sheet during this period of time. We have indications that the pricing environment today is stronger than it was a year ago. And so that portends very well for cash generation in 2025 versus 2024. So I think all of that is a way of saying we think the business model is kind of hitting really well, and it gives us a lot of flexibility in terms of how we think about financing a potential project should we go forward.

Hey good morning. Thanks for taking my questions. So, long-term focus for CF has been on increasing nitrogen production or participation per share over time, which has gone up pretty significantly. When you look at Blue Point, given the increase in CapEx, while the shares are roughly flat year-over-year right now, like how would you compare the project versus potentially using that cash for more of buybacks in terms of raising that nitrogen per share metric? And how does that factor into your decision on Blue Point?

Yes, Andrew, throughout the time this management team has been together, similar comments could have been made regarding various developments, such as the acquisition of Terra in 2009-2010, the construction of our capacity expansion projects from 2012 to 2016, or the acquisition of the remaining one-third of Medicine Hat and the 15% of the Verdigris plant traded as an MLP. For all of these instances, the same argument could apply, yet we have seen significant share value growth during that time. The core strategy is to deploy capital in our main business while achieving returns above the cost of capital. For any surplus capital, we reduce the share count, which has proven to be an effective strategy. Our total shareholder return over one, three, five, seven, and ten years greatly outperforms our competitors. It is a successful approach. By focusing on capital deployment in areas where we excel, like running ammonia plants, we anticipate continued long-term performance, and that remains our focus for managing this company.

Okay. Great. And perhaps one more question about Blue Point. Previous commentary indicated that the project could yield a good risk-adjusted return even in the absence of an off-take or a blue ammonia premium. I understand you are still considering this, but I noticed that capital expenditures have increased significantly since we first began reviewing the numbers last year. What has changed regarding the return profile, and is it still expected to hold?

It's really based on the current ammonia pricing in the market. As Greg mentioned earlier, we need the ammonia price to be around $450 per metric ton, which translates to about $410 per short ton. Last year, our average selling price was above that level. Given where the market stands now, it supports a project that can yield a return exceeding the cost of capital. As Chris pointed out, we expect the market to tighten rather than loosen. The industry's fundamentals suggest we are well-positioned to take advantage of this, especially given our operating history with these types of assets. Additionally, Bert has been doing an excellent job engaging with customers regarding the low carbon intensity or Blue product we'll be producing in Donaldsonville later this year, and he is seeing that the market is willing to pay a premium for it. So before we even factor in the premium, we're confident that this project represents an attractive investment for us.

The other thing I would add, this is Chris, is that when we were looking at some of those CapEx numbers about a year ago, those CapEx were based on SMR technology, so existing what we have in our plants. The ATR technology will give us two different things; one, about 10% more in production, even just that nameplate than what we're producing on our other units. And then also 50% greater carbon capture with the 45Q that allows a significant benefit there. So with those two additional pieces put in, I would say, if you've been following CF long enough, you would understand that we're a pretty conservative company and we model things straight. So we haven't taken into account increased utilization rates, which we've been able to perform on not only assets we built but assets we've acquired. Additionally, if there is any low-carbon premium that Tony announced or suggested there. And then lastly, would be anything related to the carbon border adjustment mechanism that would give us a bit of a fast mover advantage where we'd see additional margin. And then lastly, I'd just add this new technology and what we'd be doing is why we have the partners we have. It's fostering new demand that just makes that balance that we believe is tight enough just with conventional ammonia all the tighter by the time this particular plant comes online.

Okay. Thank you. Very helpful.

Hi, good morning. Thank you for taking the question. I wanted to ask a little bit more on some of the fundamentals for 2025. Specifically, your expectation of things really remaining quite tight. The cost curve has changed or at least been fairly volatile over the last several weeks. I'm just wondering, can you speak to what your expectations are in terms of the cost curve now with a potential resolution between US and Ukraine on the table? And then I have a follow-up question.

Yeah, good morning. This is Bert. And we do see the fundamentals. They have improved and they are improving. When you look at what has transpired globally, you do have a tight nitrogen balance. And that's driven by very healthy demand in India and Brazil and a lot of secondary countries like secondary in terms of demand of urea. Australia, Argentina, South Africa, Thailand, and Turkey had pulled more in 2024 than they have historically. And then you look at the tight corn balance that we've talked about for stock-to-use ratios, whether that's domestic or globally and where we are, it's very comparable to 2012 or 2013, where we saw a very nice rally in the price of corn that's driving acres and additional acres to corn. And I would have said a couple of months ago, we would have expected 90 million, 91 million acres of corn. And today, we've talked about 93 million, but I would say that's to the positive. And every one million acres that comes in is just additional nitrogen demand that has to be satisfied. And to date, we're behind in North America, we are behind on imports of urea or UAN, and we're very close to the beginning of the spring application season that could begin as early as March, and so that product has to be put into position for supply. So tight North America, tight globally, and the fundamentals of where we are with gas in Europe. Europe's production is down or some of it, 20% to 30% of it is. And so, you have a tight demand market for the products that use nitrogen being corn, you have a tight supply market with product needed in a number of places, and if there's an India tender in the next couple of weeks, it gets even tighter. And so relative to the cost curve, then, we're at $3 to $4 gas in North America, and the world for LNG or JKM-TTF being Japan and Europe are at $14 to $15. So your cost curve, you need to bid in very expensive tons to satisfy this global demand that's coming. And your last question about Russia and Ukraine, I would say, it really doesn't matter right now. Those Russian tons have been making their way out throughout the last couple of years even with sanctions.

And I would just say we certainly all hope for a resolution to the conflict and ending the suffering and damage going on over there. To Bert's point, all of the Russian production is making its way out into the global marketplace. So that doesn't change. And our expectation is it would take quite some time to get additional production, whether that be Eastern Europe or Western Europe or even Ukraine kind of back up and running, and it's going to miss the first half of the application season in the Northern Hemisphere anyway. And so from our perspective, the first half, while I wouldn't call it baked yet, is looking very positive based on the factors that Bert just highlighted there. But we're certainly all hoping for a peaceful resolution to that and other conflicts going on.

Thanks for that color. One follow-up question related to your own production. You did call out some of the maintenance costs last year, some of the shutdown time that you experienced in Q1. Just anything we should be thinking about here in the first quarter and some of the earlier ice storms across Southeast and how that will compare or influence your ton-to-ton outlook?

Yes. So as I mentioned in the prepared remarks, through Q1, so far, the manufacturing operations have been operating just as well as they were in Q4, even with some of the significant weather events. Some of that's from the learnings that we had last year. And just the team is doing an outstanding job at the particular sites. So the 10 million-ton gross ammonia number, which is higher than the 9.8 million we did this year, is still our expectation for full year 2025.

Thank you.

Thank you, Bert. Can you share your perspective on the order book for the remainder of the first quarter and how it looks for the second quarter? How does it compare to historical levels as of mid-February? Does this align with your views on the U.S. being behind on imports?

Thank you for the question, Steve. We're satisfied with our order book, and the team has done an excellent job in managing participation and layering in. Typically, this time of year, we aim to have one to two months of orders on the books. This year is somewhat different due to the positive market expectations and global dynamics. We've positioned ourselves effectively and have been capturing opportunities as the market has risen. Over the past eight weeks, we’ve witnessed a significant increase in urea prices at NOLA, rising from about $320 to $420. We anticipate further demand; we are behind on imports and need to bring in 700,000 to 800,000 tons per month from March through May to meet demand alongside domestic production. Looking at Q2, we have numerous open orders to fulfill, and we will be actively executing those. Our plans are fully operational, and we are preparing our products for anticipated demand. This outlines our outlook for Q1 and Q2.

Very good. Thank you. I wanted to follow up on the brownfield project for diesel related to blue ammonia. When do you expect that to start? Are you still in the installation phase or have you moved into commissioning? Additionally, do you have a clearer timeline for when it might begin? More importantly, have you secured any orders for blue ammonia that you could fulfill this year? Would it be wise to wait until the product is available to gauge actual demand before making a final investment decision on the greenfield project?

I believe there are several questions there. Let's begin with the status of the dehydration compression plant and when it might be operational, as well as the demand profile for it. Finally, I'll address the last question.

Steve, this is Chris. So we're continuing. We are not in commissioning yet, so we're still in installation, but our expectation is that we will finish that here in the second quarter. And what we're looking at is that we're being commissioning and ready to begin sequestering it really, in the second half of this year as we look at that we continue to work with Exxon as they're evaluating different areas for their Class 6 permit that they have in there, given the flexibility they have with the Denbury pipeline. So all that continues to move well. And so I would say our estimation is by the second half of this year, we'll have low carbon product that we can feed to Bert's team.

And regarding the premium, we've been actively discussing marketing and preparing for that, whether that be ammonia or an upgraded product. And I think the first mover, it looks to be industrial where we have a number of participants or customers desiring to have low carbon products in their system. And then we're working, obviously, agriculturally with our co-op and retail customers to market a whole package to the farming community of how that can benefit their system and their carbon scores. And so yes, I do believe there will be a premium. And yes, that product is coming for the back half of the year.

And finally, Steve, because of the success Bert has had and the level of interest that he's had, we don't need to wait until we're producing it. We've already got registration of interest from more parties than we have tons to be able to sell at this point. And again, let me just remind you of the kind of the math on the new project. So, if it's 1.4 million tons, and we get a 50% share, just say, as a number. We're looking at 700,000 tons, Chris mentioned, we're going to consume 350,000 tons of that in our upgrade at plants in the U.K. So, we'll have low-carbon AN product in the U.K. with access to the European market. That only leaves us 300,000, 350,000 tons left to go in terms of places to sell it, and we have more than enough interest to be able to move that because we've already got expressions of interest that can consume the full 2 million tons coming out of Donaldsonville.

Thank you.

Thank you and good morning everyone. Just on Blue Point, if I could ask you, Tony, the $4 billion and the $500 million, I assume that's the standard midpoint of the estimate. Or is there something different about this? And is there any part of that, that you think you can really lock in, whether it's labor, equipment, what have you to really sort of ring-fence the risk around that estimate moving too far in the wrong direction?

Yes, Vincent, thanks for the question. This is a little bit different than the midpoint of the estimate. We sort of learned our lesson last time when we began these projects back in 2012, which was more or less the midpoint. And then we saw escalation happen, and it was a painful process to have to get out there on conference calls and talk about both delays and overruns. So I would call this a number that we're putting forward to the marketplace that we feel highly confident in our ability to achieve and there's quite a bit of contingency baked into that. So, if you just think about the $4 billion for the plant itself, we are taking a different approach. The previous projects were what I would call stick construction where everything was individually built. And in this approach, we're doing more modular construction where large sections of the plant will be constructed overseas, shipped here, and then they're basically positioned and put together. Because of that, we can take almost $2 billion of the production and have it be lump-sum fixed in terms of these module constructions. So, the amount of kind of potential opens to overrun is dramatically reduced in this instance relative to the way we approached these in the past. And then there's other sections whether it's the ammonia storage tanks or the docks or a variety of other things that we can convert into fixed-fee kind of arrangements as well. So there's much less, I would call, at risk in that quote, which is why we're highly confident we can deliver the project.

And the only thing I would add to that is, on those last projects, what really caused the cost overrun was the labor expense. And as Tony mentioned, with process modules, a lot of that labor percentage is going to be significantly lower than what we've seen in the past. So for instance, on those particular projects, we may have had 5,000 contractors on site at one point. In this particular one, maybe at peak, we would have had 1,500 because so much of it would already be modularized, and that we feel comfortable within that contingency. The other part I would say that is probably one of the primary differences just beyond the experience the team has with doing the last projects is, we did a complete FEED study this time. We've been analyzing this for over two years, what would be the best technology, understanding exactly how we would go about doing this. If you think about the last project, our speed to move as fast as we could, we didn't even have full FEED studies on those particulars. So I think the planning process, the reduction in actual construction labor time is going to be helpful in this as well.

Okay. And just as a follow-up on the 40% versus 75%. I mean, it sounds like you're very confident in terms of the demand outlook and so forth. So I'm just curious what is going to drive the delta for you between the 40% and 75%. I mean, in one case, you have complete control over the project. In the other case, you don't. So what makes it in your best interest to bring it down to 40% versus just going out at 75%?

I believe to be completely honest, whether it’s with one partner or two, we have received strong confidence that it will involve both partners. Since we have been on this journey for a long time, we’ve made a commitment to them that they can be part of it if they wish. However, you're not fully secure until everyone signs the agreement and an announcement is made, but that's the distinction. Ultimately, part of what we aim to achieve with this first plant is to encourage the development of new applications for clean ammonia, which we consider beneficial for our business and the environment. Having more participants who will engage directly with consumers and bring this to its final usage is advantageous for developing this marketplace. Thus, we're engaging in primary demand stimulation by collaborating with these participants.

Thank you. Good morning, everyone. Quick one for me. I think earlier, Bert, you talked about the positive drivers for the nitrogen market. Like do you see any risk at all that could have an impact on supply demand and prices? Like any concerns whatsoever that we should be thinking of?

Thank you for the question, Edlain. I always consider the risks involved. I'm quite passionate about tracking global markets, as well as the users, suppliers, and consumers in the nitrogen space. We continuously model the dynamics in the world while factoring in geopolitical influences. Currently, the market operates on strict supply and demand principles as we near the peak demand season in the Northern Hemisphere. We believe that Europe is undersupplied, as is the United States, which presents a positive scenario for nitrogen-consuming crops. Rising prices lead to increased profitability for farmers, which encourages them to utilize more nitrogen for better crop yields. This trend may reflect stock-to-use ratios we discussed earlier for corn. However, there are always risks on both sides. On the supply side, potential outages due to gas shortages or geopolitical tensions, like those in Ukraine, could pose challenges. Additionally, economic factors come into play, such as whether customers purchase at the right time and location, and whether spot price differentials arise. We expect to see these dynamics unfold in the U.S., where the usual pricing differentials between NOLA, the Midwest, and Canada have already widened and may widen further. Overall, we anticipate a positive first half, and as Tony mentioned, we will address any issues in the second half when they arise.

Thanks very much. Still a little puzzled about the sequestration of carbon dioxide from Donaldsonville, I don't think any company has been granted a Class 6 permit to sequester carbon dioxide. And even if you are granted a Class 6 permit, then you have to build the well. So how is it that you can sequester carbon dioxide sometime in 2025 or by sequestration, do you mean enhanced oil recovery?

Hey, Jeff, this is Chris. I think in both instances, it's not as if they're things that are not moving in parallel. You are correct, there would take some time for the well piece to be implemented. However, most of the pipeline work towards the areas we're looking to sequester, given some of the acquisition work that Exxon has done. We believe that we will be able to. I think EOR is always an opportunity. However, our agreement is for Class 6 permitted wells. So one of the reasons we went with Exxon is our confidence in the work that they've done not only at the sequestration points that they have listed themselves but some of the partnerships that they're looking at as well. So we still feel confident that in the second half of the year, we will be sequestering CO2 from the Donaldsonville project.

Okay. And then as a second question, the value of CF Industries goes up and down. I guess, more recently, it's come in. And it seems to be because people believe that the probability of there being a resolution in Ukraine is higher. When you think over a longer period of time, and you think about what the gas price in Europe might be or what nitrogen production in Russia might be. Is it the case that for North American companies a more peaceful globe is negative for profits and profitability over a longer period of time? Or do you think that it really doesn't matter and the market has it grown?

Yes. Well, I would start with the fact that, as Bert mentioned, product is getting out. If you even look at what your Russian urea exports for this past year in 2024, they were up over 1 million tons from the prior year. So over 9 million tons were being exported. So similar to the Iran sanctions, product is moving globally. It's just moving to different locations and maybe at lower margins for those particular producers in that area. As far as the European gas movement, if you look at Russia's gas prewar and where they exist today, gas is still flowing into Europe via pipeline, about 4 Bcf per day. And it's mainly going to those particular countries that are willing to take Russian gas post the resolution or even pre the resolution that would happen. I think the availability of gas, the actual volume quantity has been sold by Europe, and it's been pretty remarkable how quickly they were able to do that through LNG imports from the US and from the Middle East as well. So while we do see maybe some contraction that may happen with TTF as if a cease-fire were to be announced, there's still that spread there. And then I think you're talking about the timing in which that would occur. These plants, as Bert mentioned, you have 25% of the ammonia production down already. I think what we've seen is continually as these turnarounds come up where you have $50 million maintenance decisions to make. Our expectation is that the plants that are down will not start back up, and other plants will continue to come down. So even post the resolution, you're still going to have that short that we show in our earnings slides in Europe for ammonia that's going to have to be sourced from other places around the globe.

Yes, Jeff, this is Bert. To add to what Tony mentioned earlier, our main stance is that we desire peace worldwide. There's no need for conflict, and it's unfortunate that people are fighting over certain issues. Looking ahead, Russian products are entering the market and are fully supplied, including urea and UAN. The limitation has been ammonia, as Chris pointed out. Even with some production declared, ammonia will not be shipped for use in the near future. This could involve places like Tayman or the Baltic ports of Ust-Luga. It's also possible that Ukrainian products may re-enter the market, though they were not a significant supplier globally. We need to remember that this is a global market producing and requiring 200 million tons of products annually. We've faced gas supply restrictions in Europe and Trinidad, as well as export limitations in China, Egypt, and Iran. Various factors influence how we access these markets; it isn't solely determined by one company or a country facing sanctions or logistical challenges. This is where CF’s global perspective, reach, and capability to adapt to ongoing changes come into play.

I would echo kind of both those things, and in particular what Chris said about once the European plants have been offline and curtailed for a period of time, they're not coming back. I mean, we had two manufacturing facilities, two ammonia plants in the UK. And we talked long and hard about whether it was worth kind of the option value of being able to bring them back online if gas costs in the UK came down. And our conclusion was the cost of doing that was fairly high to maintain their ability to be brought back. And even so the plan would still be operating on the third or fourth quartile, as opposed to deploying capital in the US, where we've got a first quartile cost structure, and that was one of the reasons we went kind of down the road of wage in and closing the U.K. ammonia plants. And so I think again, it's where your plants are located, and I'm really happy with where ours are. And on the volatility of our share price, I mean, yes, it is unreasonably volatile for all kinds of reasons that I don't pretend to understand. But what that does is it gives us the opportunity to be very opportunistic on our share repurchases. And as Greg mentioned earlier, coming into this year, we had a little over $1 billion to spend. And at that time, it was 7%. The way the volatility is when we disproportionately buy on the dips, we can probably do well better than that. So it really does benefit our long-term shareholders that there is that volatility because it allows us to opportunistically take shares from people that don't see the fundamentals and the value the way that we do.

Thank you so much.

Hello. Thanks for taking my question. I have one on Blue Point, and you clearly mentioned strong interest in the asset. And I remember the 1.4 million tons was the plant with JERA. And incremental to that was a valuation for another plant of at least 1 million tons with Mitsui. So maybe you can help me understand the announcement you made yesterday. Does it include potentially Mitsui as well and therefore, you are not going to go ahead with the second plant? How do I relate this considering the comments you made on really strong demand? Is it just a risk management approach where you want to start maybe a little bit smaller? How can I think about that? Thank you.

Yes. We are considering two different plants. The first one is a conventional steam methane reformer (SMR) plant that we began analyzing in partnership with Mitsui, which is similar to our Donaldsonville number 6 plant. This plant is smaller compared to the auto thermal reformer (ATR) that Chris and Greg discussed today. We have been evaluating both technologies. During this process, Mitsui remains involved, and JERA has also joined as a partner. Initially, we were looking at an SMR plant with one partner, which would produce just over 1 million tons. Now, with two partners, we are focusing on an ATR with a capacity of 1.4 million tons. Therefore, we are not actively considering the smaller SMR plant at this time; our focus is on the ATR with the potential partners, JERA and Mitsui.

Thanks, everyone, for joining us, and we look forward to seeing you at upcoming conferences.