CF Industries Holdings, Inc. Price & Performance (CF)

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 twenty twenty four. Which we generated adjusted EBITDA of $562,000,000 Adjusted EBITDA for the full year was $2,300,000,000 This strong performance enabled us to return $1,900,000,000 to our shareholders through dividends and share repurchases 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 on stream 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 2,600,000 tons of gross ammonia in the fourth quarter. Which reflects 100% ammonia utilization rate. We finished the year with 9,800,000 tons of gross ammonia [indiscernible] 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 10,000,000 tons of gross ammonia in '20 We are making good progress on our key strategic initiatives The completion of our carbon capture and sequestration project at our Donaldsonville complex [indiscernible] commissioning activities for the carbon dioxide dehydration and compression unit have begun alongside final construction activities. We expect startup of carbon sequestration and 45 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. [indiscernible] 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 twenty twenty five for final investment [indiscernible] 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 twenty twenty four 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 believe the North American channel is at low levels as well. Due to lower than normal imports into North America. As we move through the fourth quarter, began to appreciate how much the global supply demand balance has tightened Nowhere was this more evident [indiscernible] inability to secure the volumes they targeted for their 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, demand that we expect to be very strong World corn stocks and world corn stocks to use ratios excluding China are at a thirteen and thirty 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 a global nitrogen's 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.

For the full year 2024, the company reported net earnings attributable to common stockholders approximately $1,200,000,000 or $6.74 per diluted share. EBITDA and adjusted EBITDA were both approximately $2,300,000,000 For the fourth quarter of twenty twenty four, the company reported net earnings attributable to common stockholders of approximately $328,000,000 or $1.89 per diluted share. EBITDA was $582,000,000 and adjusted EBITDA was $562,000,000 Net cash from operations was $2,300,000,000 and free cash flow was approximately $1,450,000,000 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 five.

We returned approximately $1,900,000,000 shareholders in 2024 This included $364,000,000 in dividend payments and over $1,500,000,000 in share repurchases. For the year, we repurchased 18,800,000.0 shares representing 10% of the outstanding shares at the beginning of twenty twenty four. Entering 2025, we had a little over $1,000,000,000 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 we have the capacity to repurchase approximately 7% of our outstanding shares through the end of twenty twenty five. As Chris mentioned, we completed the FEED study for 1,400,000 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 $4,000,000,000 will be divided among the equity partners. At this level of capital investment, with the incentives of carbon capture and an ammonium price of $450 per metric ton we'd expect to earn a return above our cost of capital. There is an additional $500,000,000 required for scalable common infrastructure. Which would be CF Industries sole responsibility. And could be leveraged for future growth at the Blue Plant 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 call to Q and 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 the startup 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 eight, in the last decade, since most of this team has been together running CS, we have increased production capacity by almost 20% while reducing our shares outstanding by almost 30%.

We What this drives is clearly shown on Slide five of our deck.

And we have boxed the most relevant data. This is how we run our business to generate more free cash flow while reducing our share 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 will continue to build on this track record. The 45 Q tax credits 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 another roughly 7% 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 continue to drive that all important golden ratio shown on Slide five. Creating substantial value for our long term shareholders. With that operator, we will now open the call to your questions. The first question comes from Joel Jackson with BMO Capital Markets. Todd, 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 past. Looks like you did quite well in Q4 to get ahead of the higher gas prices. We've now seen, of course, U. S. Gas prices surge Talk about how open you are or what your gap is 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 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 months 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 our system.

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. I mean 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. North America with some of the the largest resource, most dependable production and quickest to respond. And so while we'll continue to evolve our thinking around hedging and burden and team continue to do that actively. I think that the most important thing is where we built our plants. And then can ask a second question.

Sure.

An observation I had last night and I'd like you to maybe comment on it is you gave and I appreciate it, a new sensitivity table you do every year around now based on 2024 numbers where you show what your EBITDA level is, in a grid for different gas price realizations and different urea price realizations. It looks like when you look at the '24 table, versus '23 table on a similar volume around 19,000,000 tons, at any given cell in that grid so any combination of urea, you're pointing to EBITDA being maybe $200,000,000 or $300,000,000 lower you talk about what that means, if it means anything?

Yes. So let me just describe how that grid is 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 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 kind of how that grid is created because there's more or less value than across the system based on selling one ton of urea. So it's purely a heuristic It's just a way to kind of 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 kind of across the network, not just in the aggregate because of course, we're consuming the vast majority of our gas and the combination of Henry Hub and AECO so what the other ones with the other pricing points trade at 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 kind of 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.

Yes, 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, pretty heavy maintenance events where at 1.15 of the ammonia plants needed maintenance and that was about $100,000,000 to $150,000,000 So as Tony said, it's really indicative of what could see for the year but it is based off of empirical data rather than what we expect. For the go forward. Thank you. The next question comes from Chris Parkinson with Wolfe Research. Please go ahead. 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 use has between buybacks and then future CapEx? And then on top of that, would you be able to talk about sort of potential for long term offtakes in conjunction with any Blue Point FID? [indiscernible] how does that fit into the picture here as well?

Yes. Andrew, thanks for the question.

It's Greg.

I'll start and pass it over to to Chris. On the capital allocation for the year, we've outlined where our CapEx is expected to be over $500,000,000 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 $1,600,000,000 of share repurchase that we expect to get done by the end of the year. 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 a very very 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. [indiscernible] in relation to long term supply offtake related to the Blue Point 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 purchase ammonia already for The UK, could find its way going to The UK and that that incremental amount that we would have for a long term offtake contract would probably be smaller. So lot of it is 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 kind of people waiting in or making initial announcements and then getting cold feet backing up. [indiscernible] 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's that we have left.

The next question comes from Richard Garchiterina with Wells Fargo.

Please go ahead.

Great. Thanks for taking my question. Just to follow-up on the [indiscernible] to be changed. It will 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 mean, I think the big issue there obviously, the 45 Q is a benefit to the to the project and the required ammonia price to earn above cost of capital return would go up. If we didn't have the 45 But there's nothing really that we're seeing on our end when our government folks talk to people in Washington that indicates to us that the 45 Q is in jeopardy. I think if you were banking on an EV subsidy or credit, then you'd have to think twice about it.

I think the 45Z and 45 potentially have a little more risk [indiscernible] there's really been [indiscernible] news from our perspective that jeopardizes the 45 Q. So we're pretty confident that that's going to stay in place and we're making plans accordingly.

But [indiscernible] there's a lot of moving pieces out there. And there's a lot of policy things that are that are uncertain at the moment. Of all the policy issues, I think that one we feel probably the most certain of. And I do think not delaying, but the process that we're going through is really dotting I's and crossing T's on all of the sub [indiscernible] the thing forward. It's not so much with the partnership structure themselves because we feel really good about that. It's just kind of getting all of the other EPC kind of stuff done.

The next question comes from Please go ahead. [indiscernible] continue on the blue point project. So depending where you guys kind of come in there on that equity range, if you go ahead, it could be quite it's a pretty wide range from sort of $2,000,000,000 up to maybe 3.5 I think what we're previously sort of discussed the outlook there was assumed it would probably get built over the four years and the capital commitments more sort of back half weighted So just given kind of the range you're putting out there now, I was just wondering how you'd look to kind of would you sort of add some more debt in there to do that? I mean it looks like potentially Depending where sort of market prices are, you could do it Out of cash flow, if you sort of didn't have any repurchases anymore, but just wanted to kind of get your latest thoughts on sort of how [indiscernible] Yes. Thanks for the question, Lucie. It's Greg. So when we look forward and look at the You're right. It's going to be determined by the size of the equity we have. Commitment and where that ultimately ends up.

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 $500,000,000 that would need create an addition. 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 $3,000,000,000 of debt. Obviously got some of that coming due next year that we'll have to look into. But there's a bunch of options as we think about how we would fund it. First, starting with the cash we have on the balance sheet, then we go to cash from operations. To the extent we would want to think about building some more security, there's a number of instruments we could look at. To pull in and we in the process of evaluating that all right now.

I mean, I think if you just look at last year, we generated $1,400,000,000 of free cash And we're going to spend $1,000,000,000 as as Greg said on or a little over on share repo. That still leaves a a big chunk to be able to deploy against the other uses of cash And we've we ended year with over $1,600,000,000 of cash on the balance sheet. So So our uses of cash this year, even though we're going to buy $1,000,000,000 of share back out of the market is not going to dip very hard into our our cash on the balance sheet and 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 gen 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 how we think about about financing a potential project should we go forward.

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

Hey, good morning. Thanks for taking my questions. So our 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 a buyback in terms of raising that nitrogen per share metric and How does that factor into your decision on Blue Point? Yes. I mean, Andrew, I think throughout our this management team's time together, you could have made that comment about anything that's gone on, whether it was the acquisition of Terra back in 02/2009 whether it was the construction of of our capacity expansion projects back in the 12/2016 timeframe, the acquisition of of the third of Medicine Hat that we didn't own or the 15% of Verdigris plant that was traded as an MLP I mean any of those things you could have made that that same argument for and yet look at the share growth in terms of value we've created over that period of time.

And so I think the general strategy and philosophy of if we can deploy capital in our core And then for capital that is in excess of that, we take down share count.

Is a winning formula. And if you look at our one, three, five, seven ten, year TSR against all of our competitive set, we blow them out of the water. So it's just a winning formula. If we can stick to our net end, be very focused, deploy capital in things that we do better than anyone else, which is running ammonia plants. We're going to perform better over the long run and that's how we're focused on running this company. Okay, great. And maybe just one more on Blue Point.

The commentary in the past would highlight how the project can make a good and even now too, it can make a good risk adjusted return even without an offtake or some sort of blue ammonia premium I understand you're looking at that and you're still thinking that that's going to be the case, but CapEx has gone up quite significantly from the beginning of when we started seeing some of the numbers like last year, like what's What's changed on that return profile so that it's that's still the case?

Well, I mean, it's really based on where ammonia pricing is. The market. And as Greg mentioned, earlier, what we need is ammonia price of $450 per mat, so call it $410 per short And the average selling price we had in Last year was above that. And so where the market is right now would support a project with an above the cost of capital rate of return. And we expect, as Chris mentioned, the market to tighten rather than get get Slack And so there's a lot about just industry fundamentals that we feel we're in the best place to really be able to exploit again given our operating history with these kind of assets. The other thing I would say is Bert has done a great job of being out there working with customers on the low carbon intensity or blue product coming out of Donaldsonville that we're going to be generating here later this year. And he is seeing an ability for the market to pay an a premium on that. So that's before we even get it as the premium We're just saying we can this project is is an interesting investment for us before the premium 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 ASMR 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 also say, if you've been following CF long enough, you would understand that a pretty conservative company and we model things straight. We haven't taken into account increased utilization rates, which we've been able to perform on not only assets we've 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 CBAM that would give us a bit of a fast mover advantage where we 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.

The next question comes from Kristen Owen with Oppenheimer.

Hi, good morning. Thank you for taking the question. 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 U. S. And Ukraine on the table? And then I have a follow-up question.

Yes. Good morning, Chris. 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 Australia, Argentina, South Africa, Thailand, Turkey have 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 at its very comparison to 2012 or 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 90,000,000, 91,000,000 acres of corn. And today, we've talked about 93,000,000, but I would say that's to the positive. And every million acres that comes in is just additional nitrogen demand that has to be satisfied. And to date, we're behind North America we're behind on imports. Of urea, of UAN, and we're very close to beginning 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 production is down or some of it 20% to 30% of it is.

And so demand market for the products that [indiscernible] corn you have a tight supply market with product needed in a number of places. And if there's an India 10 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 or TTF 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 on Russia and Ukraine, would say it really doesn't matter right now. Well, yes, Russian tons have been making it out throughout the last couple of years even with sanctions.

And I would just say, we certainly all hope for a resolution to the the conflict and ending the suffering and the image 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 additional production, whether that be Eastern Europe or Western Europe or even Ukraine kind of back up and running. It's going to miss the first half of the 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 peaceful resolution. To that and other conflicts going on.

Thank you 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. There anything we should be thinking about here in the first quarter given some of the earlier ice storms across the Southeast and how that will compare or influence your 10 ton outlook? Thank you.

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 teams doing an outstanding job at the particular sites. So the 10,000,000 ton gross ammonia number, which is higher than the $9,800,000 we did this year, is still our expectation for full year 2025 Thank you. The next question comes from Stephen Byrne with Bank of America Securities.

Please go ahead.

Yes, thank you. Bert, I'd like to hear your view on your order book through the rest of the first quarter. And what that order book looks like for the second quarter? How would you compare it to historical levels as of mid February? And does this reflect your views of being The U. S. Being behind on imports.

Yes. Thanks for the question, Steve. And we're pleased with our order book. I think the team has done a great job.

Of watching participating and layering in Normally in this time of year, we try to be I'd say [indiscernible] sold or with orders on the books I think this year had been a little bit different because of the positive anticipation that we saw with relative to the last question on a tight market, and some dynamics globally that are taking place.

And we positioned ourselves well [indiscernible] have been capturing as the market has escalated. What you've seen over the last eight weeks has been pretty amazing. We've seen $100 rally in urea at NOLA from about $320,000,000 to $4.20 which is since stalled out. But we believe that you're going to see additional demand. We're behind on imports, as I said earlier, And we believe you need to bring in 700,000 to 800,000 tons per month, March, April, May to satisfy demand as well as domestic production and remain fully operating And so as we look to Q2, we've got a lot of open orders to satisfy. And we'll be executing that into the market and as Chris said earlier, our plants are operating at 100%. And we're positioning product now for that eventual demand. So that gives you the Q1, Q2 outlook. Very good. Thank you. I just wanted to follow-up a little bit on the on the brownfield project at Deville for the blue ammonia.

Do you have any any idea when that actually could start up? I'm not sure whether you're still in installation or whether you are in commissioning mode, but do you have a better idea when that might start?

And perhaps more importantly, do you have do you have an order book for that blue ammonia that you could be selling sometime this year and does it not make some sense to to wait for that to be on stream and to see what demand really looks like when you have that product available before you commit to FID on the greenfield project?

I think there's a bunch of questions in there. We'll start off with [indiscernible] the dehydration compression plant coming, when to go on and then what's the what's the premium or the demand profile look like? And then finish up with the answer to the last one, but 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 second quarter. And what we're looking at is that we've been commissioning and ready to sequestering it really second quarter first half of second half of the year here. As we look at that.

Continue to work with Exxon. Is there evaluating different areas for their Class six 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 second half of this year, we'll have low carbon product that we can feed to Burton and his team. Regarding the premium, we've been actively Discussing marketing and preparing for that whether that be ammonia or upgraded products, And I think the first Mover is 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 [indiscernible] 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, don't need to wait until we're producing it. We've already if 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 On the new project.

So if it's 1,400,000 tons and we get [indiscernible] Just say as a number. We're looking at $700,000 as Chris mentioned We're going to consume 350,000 tons of that in our upgrade in plants in The UK. So we'll have low carbon Aon product in in The UK 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 expression of interest that can consume the full 2,000,000 tons coming out of D. V. Thank you.

Next question comes from Vincent Andrews with Morgan Stanley. Thank you and good morning everyone.

Just on Blue Point, if I could ask you Tony, the $4,000,000,000 and the $500,000,000 I assume that's the standard midpoint of there's a plus or minus 15% on that or is there something different about this? And is there any part of that that you think you can really lock in 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. Sort of learned our lesson last time when we began this the projects back in 2012, which was more or less the midpoint. And then we saw escalation happen and it was painful process to have to get out there on conference calls and talk about [indiscernible] 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 achieve And there's quite a bit of contingency baked into that. So if you just think about the $4,000,000,000 for the the plant itself, We are taking a different approach. The 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 [indiscernible] put together. Because of that, We can take almost $2,000,000,000 of the production and have it be lump sum fixed.

In terms of these module construction. So the amount of kind of potential open to overrun is dramatically reduced in this instance relative to way we approach 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 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 because so much of it would already be modularized and that we feel comfortable with 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, didn't even have full FEED studies on those particular. 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 per I mean, it sounds like you're very confident in terms of band outlook and so forth. So I'm just curious why what's going to drive the delta for you between the 4075%?

I mean, in one case, you have complete control over the project. And 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% Yes.

I think to be sort of perfectly honest, it's whether it's with one partner or two, And the we have received very strong degree of confidence that it's going to be both partners And because we have been on this journey for such a long time, we've made a commitment to them that they're in if they want to be in. And so you're not over the finish line until everyone signs on the dotted line and you make an announcement, But that's the difference. And at the end of the day, Vincent, part of what we're trying to do with this first plant is to help spur development of new applications for clean ammonia because we think that's just good for our business in general, good for the world from an environment standpoint. And having more people involved that are going to be direct to consumers and [indiscernible] take this all the way to its to its final use is I think good in helping develop this marketplace. And so so we're doing a little, I would call primary demand stimulation by having these people participate with us.

Okay.

Thank you very much.

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

Thank you. Good morning, everyone. A quick one for me. I think earlier, Bert, you talked about the past [indiscernible] 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.

Yes. Thanks for the question, Elaine.

I always look at the risks and I always I'm probably a nitrogen nerd when it comes to following the global markets and producers, suppliers, consumers and where that's going to go and how it's going to go.

We modeled that out on a continual basis with what's going on in the world. [indiscernible] feathering in geopolitical impacts And so where we are on the drivers, it is a strict supply and demand market today.

Quickly approaching Northern Hemisphere demand we believe Europe is undersupplied or the Northern Hemisphere over there.

And we believe North America's United States is undersupplied with the positive dynamic of the nitrogen consuming crops not only prices increasing, which is profitability to the farmer, which is then willingness to utilize nitrogen capabilities for crop yields, you have that dynamic that maybe a couple of years with the stocks to use ratios that we talked about earlier on corn, And so there are always risks on the up and downside or I'd say on the supply side with potential outages due to gas, or geopolitical issues that we've seen in Ukraine or just limits or and then it's economic. Do customers purchase at the right time, have it right place when it's needed? And are there spot differentials that take place and we believe that will happen in The United States. With the different the normal differentials to NOLA to the Midwest to Canada have already expanded and may expand even more So we do see a positive first half. And as Tony said, earlier, the second half we'll cross that bridge when we come to it.

Okay. Thank you very much. The next question comes from Jeff Zekauskas with JPMorgan.

Please go ahead.

Thanks very much.

I'd like I'm still a little puzzled about the sequestration of carbon dioxide from Donaldsonville.

I don't think any anybody has been granted a Class six Permit to sequester carbon dioxide and even if you are granted a Class six permit, then you have to build the well So how is it that you can sequester carbon dioxide sometime in 2025 or by sequester, 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. It would take some time for the well piece to be implemented. However, most of the pipeline work towards the areas where we're looking to sequester given some the acquisition work that Exxon has done. We believe that we will be able to. Think EOR is always an opportunity. However, our agreement is for Class six permitted wells [indiscernible] 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. We still feel confident that second half of the year we will be sequestering CO2 from this 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 [indiscernible] When you think over a longer period of [indiscernible] 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 sort of a more peaceful globe is negative four profits and profitability over a longer period of time. Or do you think that it really doesn't matter and the market has it wrong?

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 were this past year in 2024, they were up over 1,000,000 tons from the prior year. So over 9,000,000 tons were being So similar to the Iran sanctions, product is moving globally. It's moving to different locations and maybe at lower margins for those far as the European gas movement, you look at Russia's gas pre war and where they exist today, gas is still flowing into Europe via pipeline about four 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. Think the availability of gas, the actual volume, quantity has been sold by Europe and it's been remarkable how quickly they were able to do that through LNG imports from The U. S. And from The Middle East as well. So while we do see maybe some contraction that may or happen with TTF as 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% CF the ammonia production [indiscernible] turnarounds come up where you have $50,000,000 maintenance decisions to make, our expectation is that 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 [indiscernible] [indiscernible] for ammonia that's going to have to be sourced from other places around the globe. Yes. Jeff, this is Bert. In further comments to that, is what Tony said earlier, is the principal position of we want peace everywhere.

And there is no need to be fighting over some of the things that are being fought over. That's the tragedy. But moving forward, and the Russian tons are making their way out to the market, they're fully supplied whether that's urea, UAN. The limit has been ammonia, which Chris referenced even if there's fees declared, ammonia is not going to be loaded out of usually anytime soon.

And maybe that's Teman, maybe that's the Baltic ports of Husluca, okay.

So that can happen.

Maybe the Ukrainian tons come back up, but there weren't that big of a world. But you have to take a step back and remember this is a global market of 200,000,000 tons of products that's produced and demanded every year and we've had gas limitations in Europe gas limitations in Trinidad, Egypt, [indiscernible] we've had product export limitations of China.

So there are different places in the world where this is again back to the puts and takes to how we get to the market that we get to, and it's not necessarily determined by one company or country being sanctioned or inability to move And again, that's where I think benefit of CF and our global look, global reach and team and how we're able to execute against these continued changes. 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 U. K. 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 plant would still be operating on the third or fourth quartile as opposed to deploying capital in The U. S. Where we've got first quartile kind of cost structure.

And that was one of the reasons we down the road of [indiscernible] and closing The UK ammonia plants. And so I think again, it's where your plants are located and I'm really happy with with where ours are. And on the volatility of our share price, I mean, yes, it is unreasonably volatile for all kinds of reasons. I don't pretend to understand. As Greg mentioned earlier, coming into this year, we had a little over $1,000,000,000 to spend And at that time, it was 7% 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 the fundamentals and the value of the way that we do.

Great. Thank you so much.

The next question comes from Aaron Catcherlli with Berenberg.

Please go ahead.

I have one on Blue Point. And you clearly mentioned strong interest in the asset And I remember the 1,400,000 tons was the plant with Jera. And incremental to that, there was evaluation for another plant of at least 1,000,000 tons with Mitsui. So maybe can you help me understand the announcement you made yesterday does it include potentially Mitsui as well? And therefore, you are not going to [indiscernible] with the second plant. How do I relate this considering the comments you made on really strong demand. Does 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. So The first plant that we began to do the analysis around that we had announced in conjunction that we were evaluating it with Mitsui, conventional steam methane rich former SMR plant very similar to our Donaldson Build No.

Six plant.

And that's a bit of a smaller plant compared to the ATR, the auto thermal reformer Chris, talked about today and Greg talked about today. We were evaluating two different technologies. And in between those technologies. We also brought Mitsui is still part of the evaluation process and part of the partnership, but Jira has also joined as well. And so what we've done is we've gone from at the time what was one partner looking at an SMR of a little over 1,000,000 tons or 1,200,000 to two partners looking at an auto thermal reformer of $1,400,000 So the SMR, kind of the smaller, more conventional plant is not being actively considered at this time. It is really the auto thermal that we're focused on and that's with both Jira and Matsui as potential partners.

Thank you very much.

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

I would like to turn the call back to Martin Jurasek for closing remarks. Thanks everyone for joining us and we look forward to seeing you at upcoming conferences.

The conference has now concluded.

Thank you for attending today's presentation. You may now disconnect.