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Coffeyville reports $154.4 M loss in 1Q; cites derivative trades, petroleum turnaround

News

The generally glowing reports from Coffeyville Resources were a little off kilter for the first quarter ending March 31, 2007, with the company posting a net loss of $154.4 million on sales of $390.5 million, versus the year-ago net income of $22.1 million and $669.7 million.

Most of the negative numbers came from the petroleum business, where the company incurred $137.0 million in losses on derivatives versus the year-ago derivatives loss of $17.6 million.

Coffeyville’s refinery completed a turnaround in April 2007 at a cost of $77 million. It processed crude until Feb. 11, 2007, at which time a staged shutdown began. The refinery recommenced operations March 22, and all key units were back up by April 23. Additional capital expenditures of $156 million will be required to finish the expansion currently scheduled for completion by the end of 2007. After completion, processing capacity will be increased by 115,000 barrels per day. Coffeyville said while the turnaround had a significant adverse impact on first quarter results, the impact will not be as significant on the second quarter.

The petroleum business had an operating loss of $63.5 million on sales of $352.5 million, versus the year-ago income of $41.6 million on sales of $619.6 million. Due to the turnaround, volumes were off significantly. Prices were also.

Nitrogen results were off in the first quarter to an operating income of $9.3 million on sales of $38.6 million, versus the year-ago $24.0 million and $51.5 million, respectively.

Coffeyville reported lower nitrogen prices in the first quarter. It sells a good deal of its product on a forward basis, and as a result was not as able to take advantage of rising spot prices. Ammonia and UAN prices were off 16 and 13 percent from year-ago levels. The average first-quarter plant gate prices for ammonia and UAN prices were $347/st and $169/st, versus the year-ago $410/st and $195/st FOB, respectively.

The nitrogen business also saw decreased ammonia volumes, which it said was due to unscheduled downtime at the fertilizer plant because it had to transfer hydrogen to the petroleum unit to facilitate sulfur recovery in the ultra low sulfur diesel production unit. Ammonia capacity utilization was off at 87 percent for the quarter, versus the year-ago 103.8 percent. UAN capacity utilization was up at 122.7 percent from 118.8 percent.

Ammonia production and sales were off at 86,200 st and 20,700 st for the first quarter, down from the year-ago 102,700 st and 35,600 st. UAN production was actually up at 165,700 st, though sales were down slightly at 166,800 st. Year-ago UAN numbers were 160,400 st and 170,100 st, respectively.

In the meantime, the owners of Coffeyville are in the midst of an IPO (GM May 21, 2007, p. 1). On that front, the company is now planning to sell $375 million worth of stock versus $300 million. The company is still eyeing a $40 million nitrogen upgrade that would boost UAN capacity by 50 percent, to 1 million st/y.

As of March 31, 2007, Coffeyville says it has $775 million in term loans and $150.0 million in funded letters of credit outstanding under its credit facility and availability of $114.1 million under its revolving credit facility. Also at the end of March, net property, plant, and equipment was valued at $1.113 billion.

PotashCorp to look at smaller mine expansion

News Briefs, Southeast

Aurora, N.C.-The Army Corps of Engineers has asked PCS Phosphates, a unit of Potash Corp. of Saskatchewan, to evaluate a smaller area for mine expansion than was initially proposed by the company (GM March 19, 2007). The PCS mining proposal seeks to mine 3,412 acres, with 2,408 of those wetlands. PCS maintains that only 49 of those acres are actually marsh or open wetlands. The expansion plan drew the opposition of local environmentalists, who argue that it would significantly impact the local river system and fisheries.

ISX pursues Saskatchewan potash exploration

News Briefs, Potash, Saskatchewan, Vancouver

Vancouver-ISX Resources Inc. reports that it has received acceptance of the TSX Venture Exchange Inc. of its acquisition of up to a 100 percent interest in the KP-289 Subsurface Mineral Permit located in southern Saskatchewan, adjacent to the Belle Plaine Potash Solution Mine operated by The Mosaic Co., from Invictus Minerals Corp. ISX also says it obtained a National Instrument 43-101 compliant Technical Report, dated Feb. 8, 2007, on the Permit Area that shows the mineral resource in the form of potash mineralization is sufficient to justify the expenditure of funds to undertake further work designed to confirm the quality of the potash mineral resource within the permit area, and to determine the quality, quantity, and extent of the potash resource in the areas surrounding the Findlater and Bethune pilot test areas. ISX says the report has been accepted by the exchange and is available for review under the company’s profile on the SEDAR website at www.sedar.com. The first site consists of drill holes and a pilot test plant undertaken by Imperial Oil at Findlater (in the northwestern portion of the permit), and the second site consists of drill holes and a pilot plant undertaken by Lumsden Potash Development Co., Ltd., at Bethune in the east-central portion of the permit.

Chemtrade evaluates strategic alternatives

Canada, News Briefs

Toronto-Chemtrade Logistics Income Fund reiterated June 13 in response to industry speculation that it continues to evaluate strategic alternatives available to maximize unitholder value. Chemtrade said it has done so since February. It said there can be no assurance that the review will result in any specific transaction, or that such a transaction can be consummated at or above the current trading price of the units. Chemtrade is one of the world’s largest suppliers of sulfuric acid, liquid sulfur dioxide, and sodium hydrosulphite, and is a leading processor of spent acid. Chemtrade is also a leading regional supplier of sulfur, sodium chlorate, phosphorous pentasulphide, and zinc oxide.

Agrium upbeat about 2Q

Alberta, News Briefs

Calgary-Agrium Inc. said June 18 that it expects second quarter results to be at, or slightly above, the upper end of its previously provided guidance range of $1.45-$1.55 diluted earnings per share. “Although the quarter is not over, we are seeing an extended application season and increased side-dress activity supporting both our Retail and Wholesale operations, and as a result are optimistic about second quarter results,” said Mike Wilson, Agrium President and CEO. In other financial news,Wilson rang the Closing Bell at the New York Stock Exchange June 18, 2007.

The Andersons upgrade earnings outlook

Eastern Cornbelt, News Briefs

Maumee, Ohio-The Andersons Inc. on June 20 announced revised full-year earnings per share estimates that are expected to exceed previous projections. In early May, the company indicated it anticipated full-year earnings in the range of $2.35-$2.60 per diluted share. The company is now forecasting its 2007 earnings per diluted share to be between $2.80 and $3.05. “Our earnings outlook for 2007 has increased primarily because of strong second quarter performance in our agricultural businesses,” said President and CEO Mike Anderson. “When we last provided guidance, planting progress within our region was behind historical norms. Planting has now been successfully completed. This has had a positive impact on the earnings outlook for our Grain & Ethanol and Plant Nutrient Groups. Specifically, our Plant Nutrient Group has benefited from the increased corn acreage and associated higher volume and margins. Additionally, our new ethanol plant in Clymers, Ind., has begun producing ethanol, and both ethanol plants are realizing better margins and throughput than our earlier projections envisioned.”

Organic fertilizer firm has rapid growth

News Briefs, Southeast

Alpharetta, Ga.-Advanced Growing Systems, Inc., which produces organic fertilizer and operates a growing network of nurseries, is reporting that May 2007 company-wide sales of $1,607,894 were more than double compared with $709,496 in 2006. According to an AGS news release, the Advanced Nurseries Inc. subsidiary continues to increase revenues at its three locations in southeastern U.S. and is selecting sites for adding three more. Current plans call for a fourth nursery location to come online by the middle of fall 2007. The Organic Growing Systems Inc. subsidiary has initiated a series of steps to improve and increase production of its “scientifically advanced” fertilizer at the Monticello, Miss., factory by adding new personnel and revamping the production process. “The goal is to double production levels by August with the introduction of a new, single pass dryer and a replacement hammer mill. A second pellet mill is already on site to enable the future creation of a second production line while limiting down time if the original pellet mill needs maintenance,” stated AGS President Dr. Martin Reiner.

Another plant getting phos from wastewater

News Briefs, Pacific N.W., Phosphate

Durham, Ore.-Clean Water Services’ advanced treatment facility, which serves six cities in the area and portions of Clackamas and Multnomah counties, has become the second plant in the U.S. to install a new Canadian-developed system that removes phosphorus and other nutrients from the wastewater and recycles the minerals into a granular commercial fertilizer. Although still in the pilot phase, Clean Water is confident enough in the process to show it off recently to the press and other water treatment officials from both Oregon and Washington. The technology was developed by Ostara Nutrient Recovery Technologies Inc. of Vancouver, B.C., to help treatment plants solve environmental problems, increase plant capacity, and reduce maintenance costs, while also creating a revenue-producing byproduct. Hampton Roads Sanitation at Suffolk, Va., recently completed a successful test the Ostara system and evaluating a full-scale installation.

Pennsylvania goes on-line with ag info

News Briefs, Northeast

Harrisburg, Pa.-Fertilizer producers won’t have to wait for the mail any longer to get results of tests taken by the state at their facilities. “It used to be a pretty slow process,” admitted Earl Haas, director of the Agriculture Dept.’s bureau of plant industries. “Back then we wouldn’t mail out the results until all the tests were completed.” Now, according to Haas, that information is online “live and right up to the second” for manufacturers and dealers to easily access with the department’s newly introduced PA Plants. Ag Secy. Dennis Wolff boasted, “We’re bringing today’s technology to Pennsylvania’s plant industry. PA Plants will provide producers with convenient tools to help manage their businesses and better regulate the state’s plant products.” Haas said the same instant access is also available for pesticide dealers and applicators, who can review their certification credit status and search for the location of training meetings and exam sites. License status can be checked and information changes submitted for the department to enter. Plans also are being made to allow license renewals on-line with a credit card. In the coming year, reported Wolff, PA Plants will integrate new components, ranging from apiary and nutrient management licenses to feed and lime tonnage reporting. Information on pesticide product registration and pesticide disposal will also be available.

Research institute to look into fertilizer runoff

News Briefs, Northeast

Danville, Pa.-Fertilizer and pesticide runoff will be included in studies by two prestigious research institutes on what are considered the country’s most pressing environmental health problems, but a spokeswoman for one of them said she is unable to say what are the concerns and how or when they will be investigated. The Geisinger Center for Health Research and Johns Hopkins Bloomberg School of Public Health have formed the Environmental Health Institute for this purpose. Patti Urosevich, Geisinger Center national media manager, said the studies are in the early stages and “I was told it (fertilizer and pesticide runoff) is a topic that they will probably look into at a future time.” On the list of five general topics, farm runoff of fertilizer nutrients and pesticides are listed under agricultural and animal husbandry issues. Other main headings are poisons in the environment such as pesticides and metals, land use issues such as sprawl, the effect of abandoned mines on ecosystem and community health, and how green building design may promote worker and community health. The Fertilizer Institute declined to comment specifically on the studies, but spokeswoman Harriet Wegmeyer remarked that TFI continues to promote the use of the right product at the right place, right time, and right rate, and supports nutrient management planning to best protect the environment. One of the co-directors, Geisinger’s Dr. Walter Stewart, noted that a number of projects have already been initiated studying environmental challenges in central and northern Pennsylvania, and the new relationship will focus on “poorly managed industrial, manufacturing and commercial growth which have contributed to ecosystem degradation in this area.”