Despite the slower-than-expected progress in bringing up the long-idled Pryor, Okla., nitrogen plant, LSB Industries Inc. President Barry Golsen told analysts Aug. 6 that Pryor is a valuable asset that will contribute to earnings for many years to come. “Even considering the delays and increased costs at Pryor, we anticipate completing Pryor for a fraction of the cost of a comparable new plant.”
Golsen added that LSB is enthusiastic about its relationship with Koch Nitrogen Co. on this project, which should facilitate the growth of this business for LSB. Koch has the contract to market the product from Pryor.
Pryor’s latest delay was caused by a fire in the primary reformer of the ammonia plant in June. LSB expects the plant to be back up by the end of September, and said that the delay is due to lead time to get replacement parts. While the plant began producing ammonia early in the year and produced some 14,000 st of UAN before the fire, LSB said it had not achieved full production.
Once it achieves full production, the Pryor ammonia plant is expected to start off producing 525 st/d. After upgrades to UAN, some 35,000 st/y should be available for the market. UAN production is expected to be 325,000 st/y. Thereafter, the company can boost that to a rate of 700 st/d. The company has the option in the future to bring up two smaller ammonia plants at the site as well. Their capacity is a combined 200 st/d, which would make a total ammonia production of 900 st/d possible.
LSB said the combined ammonia and UAN sales from Pryor in the second quarter were $5.7 million. Operating expenses were $6.2 million, while Pryor had an operating loss of $2 million. Pryor capital expenditure requirements for the rest of 2010 are about $14 million, most of which will occur in the third quarter. This amount includes $8 million to rebuild and repair the damaged reformer, and $6 million for other rebuilds and improvements. LSB expects that most of the costs to rebuild the reformer will be covered by insurance, with a $1 million deductible.
The company said it had a significant increase in agricultural product sales volumes in the second quarter, which was due to strong demand as a result of a late start to the spring season. Ag product sales were $51 million, up 48 percent from year-ago levels. Total ag product shipped was 45 percent higher than a year ago. Industrial chemical sales were $32.8 million, up 53 percent from year-ago levels; however, tons shipped were up only 44 percent. Mining product sales were $22.6 million, up 61 percent from year-ago levels, while tons shipped were up 33 percent.
Going forward, LSB said its entire nitrogen distribution system is virtually empty. “Our plants are currently sold out and we’re optimistic about the near-term future,” said Golsen. “We also remain bullish about the long-term demand for agricultural products we produce.”
In other news, LSB announced that it has signed a three-year labor contract with the union at its El Dorado, Ark., nitrogen plant.
On the Climate Control side of the business, LSB said that it will not be proceeding with the purchase of a heating and air-conditioning business in China. “What we found while doing our due diligence was not what we expected to find,” said Jack Golsen, LSB chairman and CEO.