LSB Industries Inc. said Oct. 5 that planned and unexpected turnarounds during the third quarter will negatively impact EBITDA by some $25-$26.5 million. The turnarounds occurred at three plants – Cherokee, Ala., Pryor, Okla., and El Dorado, Ark. LSB said they resulted in lost production, lost fixed-cost absorption, and repair expenses.
“Our third-quarter 2016 results will reflect the impact of planned and unplanned maintenance activities at our three primary chemical facilities,” said Dan Greenwell, LSB president and CEO. “While the reduced production associated with the various unplanned outages during the quarter will collectively serve to bring our results in below our expectations for the period, importantly, our main focus has been on proactively identifying and completing the repairs and upgrades necessary to position LSB to deliver significantly improved financial performance in 2017. We are confident that the recent work that we have done at Cherokee, Pryor, and El Dorado, and over the past year, will yield improving on-stream rates, translating into greater revenue and EBITDA in the coming quarters.”
At Cherokee, although a scheduled bi-annual turnaround was completed Aug. 19, during startup a head gasket failure required repairs, reducing ammonia capacity to 340 st/d. It returned to nameplate capacity of 510 st/d Sept. 22. The impact on EBITDA was $4.0-$4.5 million.
The Pryor plant went down for a planned turnaround Aug. 26, and the company opted to keep it down longer for additional work on the ammonia and urea plants. As a result, the ammonia and nitric acid plants are now not due up until Oct. 10 and urea Oct. 15. LSB said the turnaround reduced ammonia and UAN production. EBITDA is expected to be impacted by $7-$7.5 million.
The El Dorado plant returned to production July 31 after being down two weeks due to a lightning strike. However, the ammonia plant was taken down for a total of 18 days over the course of the third quarter to address heat exchanger tube leaks and to make modifications to the process vent system design to improve safety and reliability. The ammonia plant has now had continuous operation since Sept. 22. EBITDA impact is put at $14-$14.5 million.
Despite the unplanned downtime, LSB was able to satisfy customer commitments during the third quarter by utilizing product from inventory. It said this inventory would have otherwise been sold during the fourth quarter of 2016. Management believes the impact to fourth-quarter 2016 EBITDA resulting from lower sales from lower beginning inventory, reduced production, related lost fixed-cost absorption, and repair expense will be in the range of $5-$5.5 million.
LSB has also revised its previously disclosed outlook for full-year 2016 Chemical Business sales volumes.
| Products | Revised Outlook – Sales (tons) | Previous Outlook – Sales (tons) |
| Agriculture: | ||
| UAN | 395,000 – 400,000 | 435,000 – 445,000 |
| HDAN | 210,000 – 220,000 | 210,000 – 220,000 |
| Ammonia | 100,000 – 110,000 | 110,000 – 120,000 |
| Industrial, Mining and Other: | ||
| Nitric acid | 525,000 – 535,000 | 525,000 – 540,000 |
| LDAN/HDAN | 70,000 – 75,000 | 75,000 – 85,000 |
| Ammonium nitrate solution | 68,000 – 73,000 | 68,000 – 73,000 |