Coffeyville nitrogen results up despite flood

CVR Energy Inc.’s nitrogen fertilizer operating income was $13.8 million on sales of $40.8 million for the third quarter ending Sept. 30, 2007, compared to a year-ago loss of $3 million on sales of $32.5 million. CVR’s nitrogen unit is Coffeyville Resources Nitrogen Fertilizers. The results were up despite a flood June 30 that took the nitrogen plant down for 18 days. Higher nitrogen prices offset a slight decrease in volumes. Third-quarter ammonia prices were up 28 percent, while UAN was up 66 percent.

Nine-month nitrogen operating income was $34.9 million on sales of $115.1 million, compared to the year-ago $34.1 million and $128.2 million, respectively.

CVR-wide third-quarter net income was $13.4 million on sales of $586.0 million, versus the year-ago $129 million and $778.6 million.

Adjusted for the unrealized gain from the company’s cash flow swap, CVR reported a net loss for the quarter of $40.8 million, versus the year-ago $21.7 million.

CVR reported a net loss of $40.9 million for the first nine months on sales of $1.82 billion, versus the year-ago net income of $170.8 million and sales of $2.33 billion. Nine-month adjusted net income was $18.2 million, versus the year-ago $122.5 million. The current nine month reflects the flood, as well as several months in the spring when the refinery was shut down for a turnaround or periodic maintenance. It also reflects a $251.9 million in derivative losses.

“Our refinery and nitrogen fertilizer facilities in Coffeyville, Kan., recovered rapidly from the devastating floods which swept across the area beginning June 30, and in fact, our refinery is now operating significantly above pre-flood rates,” said Jack Lipinski, CVR CEO. “In addition, the nitrogen fertilizer plant, which was less affected by the flood and therefore lost only 18 days of production, continues to perform well. It is the lowest-cost nitrogen fertilizer producer in North America.”

CVR told analysts that it expects total expenditures for the 2007 flood to be over $130 million, with that amount posted through the end of September. To date, the company has received $20 million from insurers and has not filed its final claim.

Lipinski said CVR will continue to evaluate its options about a possible fertilizer initial public offering. He said there is no timetable for such, but that it is clearly on everyone’s agenda. On Oct. 26, 2007, CVR consummated its own IPO of 23 million shares of its common stock. The IPO price was $19.00. The net proceeds to CVR from the sale were $408.5 million before offering costs of approximately $11.4 million. The net proceeds were used to repay $380 million of debt, including $50 million of outstanding indebtedness under CVR’s revolving credit facility.

Lipinski noted that Moody’s on Dec. 5 upgraded the company’s ratings to stable. They had been downgraded previously due to the flood.

Going into the fourth quarter, CVR confirmed that its UAN plant was down for two weeks in early October for an unscheduled repair.

CVR Chief Operating Officer Stan Reimann expects a very good fertilizer year in 2008, with sizeable corn acreage. He said UAN prices for the first quarter are in the $260s/st FOB, with $275-$280/st FOB for the second quarter. He put first quarter ammonia at $350-$400/st FOB and said spring prepay was sold at $450-$500/st FOB.

CVR is involved in engineering and scoping studies to double its UAN production to 1 million st. This could be up and running by the end of 2009. Lipinski added that ammonia production should go up as new hydrogen capacity has been added at the refinery, so hydrogen will not have to be pulled away from ammonia production.