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Intrepid 2Q Income Up on Prices, Demand

Earnings, News, Potash, Specialty

Intrepid Potash Inc., Denver, reported second-quarter net income of $19.5 million ($1.46 per diluted share) on sales of $67.9 million, up from the year-ago loss of $8.9 million ($0.68 per share) and $46.5 million, respectively. Gross margin was $14.2 million, up from the year-ago negative $599,000. Adjusted EBITDA was $16.9 million up from $555,000.

“Second-quarter and first-half results continued to benefit from strong commodity prices and rising potash and Trio® pricing and demand, leading to significant improvements in net income, gross margin, and EBITDA compared to the prior year,” said Bob Jornayvaz, Intrepid Executive Chairman and CEO. “Since announcing another potash and Trio® price increase in June, the fertilizer market continued to move up with buyers eager to secure supply in a limited market.

“We began our HB production season this week and expect to start our Utah solar solution mining facilities in early September. We are well positioned to supply our customers when the fall season begins and have already received strong buyer interest in new orders for fourth quarter delivery. We have been thoughtful in waiting to accept orders as the market remains tight,” he continued.

“We announced a $20 increase to potash prices in May and booked historic volumes for the third-quarter delivery as distributors restocked warehouses after a busy spring,” Matthew Preston, Vice President of Finance told analysts. “Since the May announcement, potash pricing has moved up considerably in the barge and inland warehouse markets as buyers compete over limited supply for third-quarter delivery. We expect the third-quarter average net realized sales price will be between $355-$365/st, with additional upside into fourth-quarter 2021.”

He added that first-half Trio sales volumes exceeded the prior year by 5,000 st as strong customer relationships and robust demand led to record domestic deliveries, which more than offset reduced international volumes. He noted that the company increased Trio pricing $20/st in May and $35/st in June. The company expects a third-quarter Trio net realized price of $310-$325/st.

Zachry Adams, Vice President, Sales and Marketing, told analysts that most buyers in the Midwest have tons in place or on order for what they are going to need to get started this fall. “So we don’t see a lot of liquidity at those levels today.

“We certainly have transacted on some spot tons from our demand side to that point,” he said. “Looking ahead to Q4, we’ve not booked any tons for Q4 yet on the potash side. We’re going to hold off from booking tons there and the market remains tight. And we feel comfortable with what we have for Q3, and we’ll address Q4 later.”

Asked about demand destruction, Adams said that the company is not seeing a downtick in demand from growers.

“I think when you look at farmer economics, they’re doing extremely well right now globally,” added Jornayvaz. “’We tend to look at all commodities that use significant amounts of potash and we’re seeing strength across the board….So, given the strength across the entire spectrum, we believe that we’re finally at what is reasonable market pricing. I think we look at farmers’ economics, we’ve got plenty of room and we should not see any demand destruction at these levels.”

Addressing the Oilfield Solutions segment, Jornayvaz said oilfield activity continues to improve in the Delaware Basin as growth in rig counts and frac crews led to increased produced water royalty and surface use agreement revenue in the second quarter.

“We opportunistically scheduled our water on our South Ranch in the second quarter in anticipation of higher margin jobs, which have materialized, in the second half of the year, Jornayvaz added. “We expect steady growth in our Oilfield Solutions segment over the next six months and into 2022.”

The company said that in May it sold 326 acres of land in Texas for $6.0 million and recognized a gain on the sale of the land of $2.8 million. The company purchased this land in May 2019 for the development of a produced water disposal facility and had permitted two disposal wells on the property.

In June 2021, Intrepid received notice that the Small Business Administration had remitted funds to its bank to fully repay the company’s Paycheck Protection Program (PPP) loan and accrued interest. The company recognized a gain of $10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan.

Six-month net income was $21.9 million ($1.65 per share) on sales of $139.4 million, up from the year-ago loss of $16.3 million ($1.25 per share) and $110.4 million, respectively. Gross margin was $23.3 million, up from $5 million. Adjusted EBITDA was $29.7 million, up from $9.4 million.

Potash 2Q-21 2Q-20 YTD-21 YTD-20
Sales (000 st) 37,693 24,526 81,270 58,317
Gross Margin ($000) 10,131 2,015 18,803 6,349
Sales Volume (000 st) 92 74 208 173
Production Volume (000 st) 51 4 164 140
Avg Realized Price ($/st) 319 256 300 256
Trio 2Q-21 2Q-20 YTD-21 YTD-20
Sales (000 st) 26,924 19,251 50,619 41,832
Gross Margin ($000) 3,162 (3,225) 3,093 (6,780)
Sales Volume (000 st) 75 64 145 140
Production Volume (000 st) 63 50 119 100
Avg Realized Price ($/st) 271 208 251 200
Oilfield Solutions 2Q-21 2Q-20 YTD-21 YTD-20
Sales (000 st) 3,331 2,747 7,584 10,488
Gross Margin ($000) 906 611 1,411 5,455

CVR Back to Black in 2Q

Ammonia, Earnings, News, Texas, UAN

CVR Partners LP, Sugar Land, Texas, reported second-quarter net income of $7 million ($0.66 per diluted limited partnership unit) on net sales of $138 million, compared to the year-ago loss of $41.6 million ($3.68 per unit) and $105.1 million, respectively. Adjusted EBITDA was $51.5 million, up from the year-ago $38.6 million.

“CVR Partners experienced a solid 2021 second quarter, led by a combined ammonia utilization rate of 98 percent,” said Mark Pytosh, CEO of CVR Partners’ general partner. “Further contributing to the quarter were ideal spring planting conditions and strong shipments of nitrogen fertilizer at both facilities.

“So far in the third quarter, farm economics remain robust, with grain prices nearing a 10-year high and demand for all crop inputs, including nitrogen fertilizer, remaining strong,” he added. “Nitrogen fertilizer pricing also continues to remain firm due to supply constraints resulting from Winter Storm Uri-related production outages and the planned major plant turnarounds scheduled across the industry for the second half of the year.”

Pytosh told analysts that due to COVID-19, many North American nitrogen producers delayed turnarounds in 2020 to 2021 and he believes many of these will begin in the third quarter. As a result, he expects North American nitrogen production for second-half 2021 to be below second-half 2020.

As for the market, Pytosh said, “As compared to the past five years, we did not see the normal seasonal decline in nitrogen fertilizer prices into the summer. Sales for summer ammonia fill, fall prepay and UAN fill were completed in late June and July at price levels comparable to spring spot pricing. We have a solid order book for both UAN and ammonia going into the fall. And our sales effort, we factored in our planned fall turnaround at the Coffeyville plant that is expected to start in early fourth quarter.”

Pytosh outlined other factors that the company is monitoring: possible carbon capture and sequestration at both of its plants; certifying both plants as blue ammonia production; any multi-year change to the UAN market due to the current antidumping and countervailing duty case; and expanded grain and soy consumption for renewable fuels.

CVR also announced a second-quarter 2021 cash distribution of $1.72 per common unit, which is the first distribution paid to unitholders since the fourth quarter of 2019.

CVR reported a six-month net loss of $18.4 million ($1.72 per unit) on net sales of $199 million, compared to the year-ago loss of $62.3 million ($5.51 per unit) and $180.2 million, respectively. Adjusted EBITDA was $56.1 million, up from $49.3 million.

Sales (000 st) 2Q-21 2Q-20 YTD-21 YTD-20
Ammonia        80 111 112 164
UAN 370 337 609 621
Plant Gate Price $/st 2Q-21 2Q-20 YTD-21 YTD-20
Ammonia        403 332 373 310
UAN 237 165 206 166
Productions (000 st) 2Q-21 2Q-20 YTD-21 YTD-20
Ammonia – gross 217 216 404 417
Ammonia – net 70 79 140 157
UAN 334 321 606 638
Feedstock 2Q-21 2Q-20 YTD-21 YTD-20
Petroleum Coke $/st 36.69 31.13 39.73 37.59
Natural Gas ($/mmBtu) 3.04 1.94 3.07 2.18

Compass Minerals Postpones 2Q Release; Restatement of Earnings Planned

Earnings, News, Specialty, Western Cornbelt

Compass Minerals, Overland Park, Kan., said on Aug. 4 it is postponing its second-quarter results after corrections to its interim inventory valuation methodology resulted in the identification of a historical understatement of first-quarter operating income.

For 2021, this correction resulted in shifting approximately $12 million of previously reported Salt segment operating expenses from the first quarter of 2021 to subsequent quarters. It said the understatement is completely offset in subsequent quarters, with no impact to FY results.

The adjustments to the statement of operations will be reflected in the quarterly information presented as an amended Annual Report on Form 10-K for the year ended Dec. 31, 2020, and an amended Quarterly Report on Form 10-Q for the period ended March 31, 2021. It also intends to restate other immaterial prior-period items.

Compass had originally planned to release second-quarter results on Aug. 4 and have an earnings call on Aug. 5.

The company is rescheduling its quarterly earnings conference call, and it intends to file its Quarterly Report on Form 10-Q for the period ended on June 30, 2021, on Aug. 9, 2021, or as promptly as possible thereafter.

Compass anticipates reporting a material weakness in internal control over financial reporting with respect to interim inventory controls related to interim financial reporting. The company is remediating controls around its interim inventory accounting process. It said these controls will be tested for effectiveness in future periods.

Fertilizantes Heringer Reports 2Q Earnings Surge; Volumes Up 29 Percent

Brazil, Earnings, Specialty

Fertilizantes Heringer, Viana, Brazil, reported a 407.3 percent surge in second-quarter earnings to R$144.7 million on net revenue of R$568.6 million, compared to the year-ago loss of R$47.1 million on revenue of R$293.8 million. EBITDA was R$105.9 million, up from the year-ago R$16.8 million.

Second-quarter fertilizer sales volumes were up 29 percent to 237,769 mt from the year-ago 184,495 mt. Second-quarter specialty fertilizers represent 52 percent of volumes at 123,000 mt, with conventional at 48 percent at 115,000 mt. This compares to the year-ago period, when specialty represented only 45 percent at 83,000 mt, versus conventional at 55 percent and 102,000 mt.

Six-month net income was R$137.3 million on net revenue of R$1.31 billion, up from the year-ago loss of R$252.1 million and revenue of R$680.9 million. EBITDA was R$209.7 million, up from the year-ago R$20.2 million.

Six-month sales volumes were up 34.4 percent, to 614,319 mt from the year-ago 457,137 mt. Specialty products represented 49 percent of sales at 304,000 mt, with conventional at 51 percent at 310,000 mt. The year-ago mix was 43 percent for specialty at 198,000 mt and 57 percent for conventional at 259,000 mt.

ADNOC, Fertiglobe Sell First Blue Ammonia Cargo to Japan’s Itochu for Fertilizer Production

ADNOC - Abu Dhabi, Ammonia, Featured, Japan, News

The Abu Dhabi National Oil Co. (ADNOC) announced on Aug. 3 that, in partnership with Fertiglobe, it has sold its first cargo of blue ammonia to Itochu Corp. in Japan for use in fertilizer production. The company said the sale builds upon recently announced joint efforts to enhance industrial cooperation between the UAE and Japan and support the development of new UAE-Japan blue ammonia supply chains.

Fertiglobe, a 58-42 partnership between OCI NV and ADNOC, will produce blue ammonia at its Fertil plant in the Ruwais Industrial Complex in Abu Dhabi for delivery to ADNOC’s customers in Japan. ADNOC said the shipments were sold at an attractive premium to gray ammonia and underscore the favorable economics for blue ammonia as an emerging source of low-carbon energy. It said they represent the first production milestone of a planned scale-up of blue ammonia production capabilities in Abu Dhabi, which is expected to include a low-cost debottlenecking program at Fertil.

While the ammonia Fertil produces is typically considered as “gray” ammonia, the plant will be fitted with CO2 liquefaction units, and CO2 will be transferred to – and reinjected into – underground reservoirs by the ADNOC Al Reyadah carbon capture and storage plant to facilitate the production of blue ammonia.

The Al Reyadah facility is the first commercial-scale carbon capture plant in the Middle East, and the world’s first commercial facility to capture CO2 from the iron and steel industry. The CO2 is subsequently used in ADNOC Onshore’s Rumaitha and Bab fields, where it is stored underground. Each year, Al Reyadah captures up to 800,000 mt of CO2 from local UAE steel production.

In addition, it was announced in June that Fertiglobe will join ADNOC and ADQ as a partner in a new world-scale 1 million mt/y blue ammonia project at Ta’ziz in Ruwais, subject to regulatory approvals (GM June 25, p. 33). The design contract for this project has already been awarded, with a final investment decision for the project expected in 2022, and start-up targeted for 2025.

Kalium Continues to Target Late September for First SOP Production

Australia, News, News Briefs, Specialty, Sulfate of Potash

Junior sulfate of potash (SOP) producer Kalium Lakes Ltd., Balcatta, Western Australia, said on Aug. 4 it is still targeting late September 2021 (GM May 14, p. 33) for its first SOP production at its Beyondie SOP Project, located about 160 km southeast of Newman, Western Australia. The company reported that it has stockpiled 90,000 mt of potassium salts, equivalent to approximately 9,000 mt of SOP production.

“I am delighted that our forethought, careful planning, and well executed production readiness strategy is delivering results,” said CEO Rudolph van Niekerk. “Having installed a robust network of brine supply and evaporation ponds, we continue to reap the bounty of large volumes of potassium salts above the plant feed cut-off grade, which are harvested and delivered to the ROM pad. With this ample supply of potassium salts, we have expanded our stockpile area and will soon be ready to move from commissioning to production.”

Kalium’s projected initial SOP production capacity is 90,000 mt/y of SOP. However, in March, it indicated that at least 100,000 mt/y capacity might be achievable, and revealed that additional work was underway to increase production beyond 100,000 mt/y, and that the potential to increase throughput up to 120,000 mt/y has been identified through some short-term, low capital intensity improvements (GM March 26, p. 36).

The company has a binding 10-year offtake agreement for Beyondie with Germany’s K+S Group for the purchase of up to 90,000 mt/y of SOP.

Strike Reports Plenty of Interest in Proposed Urea Production

Australia, News, News Briefs, Urea

Strike Energy Ltd., Thebarton, South Australia, which has proposed Project Haber, a 1.4 million mt/y urea project adjacent to Geraldton Port, Western Australia, said on Aug. 4 it has closed the second round of its urea offtake process, with some 4.75 mt/y of firm proposals with attractive pricing formulas received. It said the offers were for up to 15 years in length, which can support future bankability of the proposed development.

Strike said it has subsequently short-listed parties to proceed to negotiate binding agreements and will look to conclude those negotiations over the coming quarter. Once binding offtake agreements are in place, Strike will then move to market and sell down the equity in the project, and has appointed Azure Capital to support this process.

Strike’s Board of Directors will meet in the September quarter to review the pre-FEED outcomes from Technip Energies and Haldor Topsoe and will look to make recommendations on the ownership and operating structure for the proposed development.

It said these recommendations, in conjunction with the latest capital estimate from the pre-FEED, will be critical for informing the equity sell down process and subsequent debt sizing and structuring programs, where Azure Capital will be supported in debt advisory by Natixis and ANZ.

The second round was a formal “Request for Proposal” process with the proposed offtakers, with a view to converting initial expressions of interest into binding long term offtake agreements.

In June, Strike concluded the first round of its urea offtake process, and said it received expressions of interest from “numerous” potential offtakers for both Australian and international sales. According to Strike, it received expressions of interest totaling more than 3.5 million mt/y (GM June 11, p. 29).

Mosaic Beats Analyst Consensus on Net Income, Adjusted EBITDA

Earnings, News, Phosphate, Potash Muriate, Tampa

The Mosaic Co., Tampa, reported second-quarter net income attributable to the company of $437.2 million ($1.14 per diluted share) on net sales of $2.8 billion, up from the year-ago $47.4 million ($0.12 per share) and $2.04 billion, respectively. Adjusted EBITDA was $829 million, up from $383 million.

The Bloomberg Consensus, the average from a survey of major analysts, projected Mosaic earnings at $328.2 million on revenues of $2.92 billion, with adjusted EBITDA of $803.1 million (GM July 30, p. 29).

“Mosaic’s results for the second quarter of 2021 highlight the benefits of our transformation efforts in a strong pricing environment,” said Joc O’Rourke, Mosaic President and CEO. “Underlying agricultural markets remain constructive, and this is driving demand for fertilizer. The second half of 2021 is expected to be one of our strongest periods in more than a decade.”

Second-quarter phosphate revenues were up 54 percent over the year-ago quarter as a result of strong price increases. However, sales volumes were down 11 percent year-over-year to 2.0 million mt, as sales were limited by production. The company said sulfur availability negatively impacted production volumes, which totaled 1.8 million mt, but said this issue has been resolved with the recovery of U.S. Gulf refinery operating rates. Production volumes in second-half 2021 are expected to return to normal levels.

Second-quarter potash sales volumes were 2.3 million mt, down 9 percent, and were negatively impacted by rail issues that slowed Canpotex sales. In early June, Mosaic shut down its K1 and K2 shafts, accelerated the shift of ore production to the new K3 project at Esterhazy, and began the process to restart operations at Colonsay. The company now expects the net negative impact to sales volumes to be approximately 500,000 mt in the second-half 2021, down from the original estimate of 800,000 mt.

Company-wide, six-month net earnings were $593.9 million ($1.55 per share) on sales of $5.1 billion, up from the year-ago loss of $155.6 million ($0.41 per share) and $3.84 billion, respectively.

O’Rourke told analysts that second-half 2021 is set up to be one of the strongest periods in over a decade. Mosaic said third-quarter phosphate and potash segment sales are approximately 90 percent committed and priced. It said the phosphate average realized prices in the third-quarter are expected to be $90-$100/mt higher than second-quarter realized prices.

However, raw material costs in the third quarter are expected to increase $15-$25/mt per mt versus second-quarter costs. Third-quarter potash average realized prices are expected to be $25-$35/mt higher than second-quarter realized prices.

“All of this implies higher earnings in the third-quarter and very strong results in the fourth and into 2022,” added O’Rourke.

Mosaic said that in three of the four major fertilizer markets – North America, Brazil, and China – domestic crop prices continue to incent nutrient application to drive higher yields. It said while in India normal monsoon and good crop prices are incentivizing growers to maximize yields, supply may be limited by importer economics, where margins are negative given the market prices, current subsidy, and the government set retail price.

It said India shipments are likely to remain constrained until the situation changes. Regardless, even with the situation in India, it said global markets are expected to remain tight.

In addition, Mosaic said Chinese exports are expected to decline in the second half due to in-country seasonal demand, and noted that China’s National Development and Reform Commission (NDRC) has asked fertilizer manufacturers to temporarily stop the arrangement of exports in order to ensure domestic supply (GM July 30, p. 32).

Potash 2Q-21 2Q-20
Sales Volume (million mt) 2.3 2.6
Gross Margin (million $) 217 132
Gross Margin per $/mt 93 51
Sales (million $) 663 555
MOP Selling Price $/mt 243 182
Phosphates 2Q-21 2Q-20
Sales Volume (million mt) 2.0 2.2
Gross Margin (million $) 309 18
Gross Margin per $/mt 156 7
Sales (million $) 1,200 762
DAP Selling Price $/mt 544 287
Mosaic Fertilizantes 2Q-21 2Q-20
Sales Volume (million mt) 2.3 2.6
Gross Margin (million $) 185 101
Gross Margin per $/mt 78 39
Sales (million $) 1,000 787
Brazil MAP Price $/mt 589 314
Avg Finished Price (Dest.) 442 308

Japanese, Russian Firms Advance Study of Siberian Blue Ammonia Plant

Ammonia, Japan, News, News Briefs, Russia

Japan’s Itochu Corp., Japan Oil, Gas and Metals National Corp. (JOGMEC), and Toyo Engineering Corp., and Russia’s Irkutsk Oil Co. (IOC), last month agreed to undertake a detailed study for the commercialization of a blue ammonia value chain between Eastern Siberia and Japan. The parties are already at Phase 2 of the project, as Phase 1 was implemented in 2020.

Toyo and Itochu will proceed with a Phase 2 study on behalf of JOGMEC and will establish a master plan for the value chain that converts natural gas produced by IOC in Eastern Siberia into ammonia and transports it to Japan.

In Phase 2, a conceptual design to produce ammonia from natural gas produced in IOC’s oil fields in Eastern Siberia will be executed. It is expected that CO2 emitted during the production process of ammonia will be utilized for carbon dioxide enhanced oil recovery to increase oil production in IOC’s oil and gas fields with other carbon capture, utilization, and storage methods also employed. For the inland transportation of ammonia, a railway cargo or pipeline are envisaged.

Itochu already operates a joint venture with IOC to explore, develop, and produce crude oil in Eastern Siberia.

WOTUS Public Hearings Scheduled for August

Featured, News, U.S.

The Environmental Protection Agency (EPA) and the U.S. Department of the Army on July 30 announced plans for a series of virtual public meetings in August to seek input on their efforts to revise the definition of “Waters of the United States” (WOTUS).

The agencies said they are committed to “developing a reasonable, effective, and durable definition of WOTUS that protects public health, the environment, and downstream communities while supporting economic opportunity, agriculture, and other industries.”

The agencies said they intend to revise the definition of WOTUS following a process that includes two rulemakings. An initial foundational rule would restore the regulations defining WOTUS that were in place prior to 2015, with updates to be consistent with relevant Supreme Court decisions. A separate, second rulemaking process would then refine this regulatory foundation and establish an updated WOTUS rule.

“We are committed to crafting an enduring definition of WOTUS by listening to all sides so that we can build on an inclusive foundation,” said EPA Administrator Michael S. Regan. “Uncertainty over the definition of WOTUS has harmed our waters and the stakeholders and communities that rely on them. I look forward to engaging all parties as we move forward to provide the certainty that’s needed to protect our precious natural water resources.”

The public meeting schedule follows an announcement in June (GM June 11, p. 1) that the EPA and Army intended to revise WOTUS after a “broad array of stakeholders” complained of destructive impacts to critical water bodies in the wake of the 2020 Navigable Water Protection Rule (NWPR), the Trump administration’s replacement rule that significantly scaled back the 2015 WOTUS definition drafted by the Obama-era EPA.

The NWPR was identified in President Biden’s Jan. 20 Executive Order 13990, which directs federal agencies to review all existing regulations, orders, guidance documents, policies, and any other similar agency actions promulgated, issued, or adopted between January 20, 2017, and January 20, 2021. The U.S. Department of Justice on June 9 filed a motion requesting remand of the NWPR.

To help ensure “collaborative partnerships” with states, tribes, local governments, and stakeholders during the process, EPA and the Army said all future engagement activities will be developed in coordination with the U.S. Department of Agriculture (USDA).

“It is vital that farmers and rural Americans have a seat at the table and a voice in this process so that the rule responds to concerns and realities on the ground,” said USDA Secretary Tom Vilsack on July 30. “The engagement in the coming months is important and I encourage all stakeholders to provide their experiences and views in order to help shape future policy.

The virtual public meetings will be held as web conferences on Aug. 18 at 3-5 p.m. ET; Aug. 23 at 1-3 p.m. ET; Aug. 25 at 3-5 p.m. ET; Aug. 26 at 6-8 p.m. ET; and Aug. 31 at 3-5 p.m. ET. Information on how to participate is available at www.epa.gov/wotus.

An additional date is reserved in September, if needed. The agencies said they also intend to host a series of dialogues with state and tribal co-regulators this fall to discuss the WOTUS revision.