All Posts from August 2, 2019

Pacific Coast NH3 Project Still on Table Despite Delay

Ammonia, Featured, News, Pacific N.W.

With the release of its draft environmental impact statement delayed by about a year, Houston-based Pacific Coast Fertilizer remains committed to constructing a $1 billion ammonia fertilizer plant near Longview, Wash., a company spokesman told Green Markets.

Company spokesman David Richey said the project’s scope will be reduced by eight acres from its original 60 acres, but that it is still planned for the plant to produce about 1,500 mt/d of anhydrous ammonia.

The company has found a number of related actions that required more survey in conjunction with the draft EIS, including how to prevent excessive noise levels in nearby residential and industrial vicinities, Richey said. The draft impact statement should be completed by year’s end – about 12 months later than originally planned.

In addition to exploring the possibility of reducing the size of its processing area, Pacific Coast intends to avoid damaging wetlands northeast of the building site. Nearly 1,000 construction jobs and up to 100 permanent jobs are expected once the project gets under way and is completed. Operators, maintenance workers, superintendents, engineers, IT support, accountants, and other professionals would be needed.

In 2016, Pacific Coast proposed building the plant in the heart of the Longview Mint Farm Industrial Park. The Longview City Council unanimously approved the company’s purchase of acreage there in 2017. The property was developed two decades ago by the city and Weyerhaueser, one of the world’s largest timber owners.

The city has been involved in the permitting process. Pacific Coast volunteered to undergo a full EIS process, although it had the option of less exhaustive permitting. After the final EIS is completed following several public comment opportunities, the project’s construction schedule will be firmed up. Construction now tentatively would begin in 2020 and be finished by late 2022 or early 2023, taking into account the permitting delay. The 2020 construction date is pushed back from 2019 (GM May 11, 2018).

The project’s advantages include good water supply and discharge systems, access to the Columbia River and Pacific Coast, and proximity to a pipeline that would provide natural gas essential to the production of nitrogen-based fertilizers such as anhydrous ammonia.

Concerns have been raised about the leaking potential of the existing Nippon Dynawave pipeline that will pump about 50 million cubic feet of natural gas into the proposed plant. Liquid ammonia would be stored on site. Richey said Pacific Coast may need to assess the impact of offsite parking, storage areas, and stormwater drainage lines on cultural resources and wetlands.

Some Longview residents and environmentalists have strongly opposed the project, expressing concerns for public safety, spills, and explosions, but Richey said Pacific Coast fully intends to minimize impacts on neighboring communities and the environment while providing Pacific Northwest farmers with affordable fertilizer they now are denied due to transportation costs.

Pacific Northwest growers have been paying premium costs of $150-$200 a ton more for anhydrous ammonia than their Gulf Coast counterparts. About 80 percent of it is shipped by rail from Canadian sources. The rest comes via the Panama Canal by ship from Trinidad and Tobago.

Richey stressed that unlike ammonium nitrate, anhydrous ammonia is not potentially explosive and will be trucked to agricultural markets in Washington, Oregon, Idaho, Montana, and possibly northern California. None of it will be shipped by rail. Monthly shipments by barge also could be sent overseas.

Lower Columbia College and the Kelso/Longview union building trades have been especially supportive of the project, Richey said. During the scoping process, Pacific Coast also has been working closely with stakeholder groups, citizens, and elected officials examining and analyzing the project’s potential impacts.

Pacific Coast has selected Saipem, an Italian oil and gas industry company, as its Engineering, Procurement, and Construction (EPC) contractor, partnering with JH Kelly, a Longview industrial mechanical contractor. Haldor Topsoe and Saturn Gas Chemicals also are development partners.

LSB 2Q Results Up Despite Wet Weather; Company Upbeat for 2H, 2020

Featured, News

LSB Industries Inc., Oklahoma City, reported second-quarter net income of $6.6 million on revenues of $121.5 million, up from a year-ago loss of $27.5 million and revenues of $103.2 million. Operating income was $11.3 million, up from a year-ago loss of $5.9 million.

Despite the uptick, LSB still had a loss attributable to common stockholders of $1.5 million ($0.05 per share), compared to the year-ago loss of $35 million ($1.27 per share). However, adjusted EBITDA was up at $30.5 million from $17.8 million.

“We significantly improved results relative to the second quarter of 2018, despite the continued impact of bad weather in the Midwest on demand from our agricultural markets,” said LSB President and CEO Mark Behrman. “Net sales and adjusted EBITDA increased as a result of higher production volumes at all of our facilities for both agricultural and industrial products and, to a lesser extent, higher pricing for agricultural products relative to last year.

“Product pricing was mixed in the second quarter,” Behrman said. “Net pricing per ton of UAN continued to increase, rising 11 percent compared to the second quarter of 2018.” However, he noted that the company favored ammonia production in the Southern Plains during the quarter due to inland demand and weaker demand for UAN. Ag ammonia prices were up 13 percent. He said HDAN prices were down 2 percent, citing higher imports.

Pricing for Industrial Products was lower due to the continued weak Tampa ammonia benchmark price. The company believes this will improve as ammonia inventories are consumed over the next several months. In the Mining segment, the company noted that it has successfully been shifting sales away from coal to quarry and construction.

“We had another strong quarter of plant operations. Our ammonia plants averaged a collective 94 percent onstream rate across all three facilities for the period, a level we’ve now achieved for four consecutive quarters, consistent with our stated target for 2019,” he added. “This operating performance is unprecedented in LSB’s history and reflects the capital investments we’ve made to ensure greater reliability.”

Behrman noted that LSB recently completed a $35 million offering, with some $20 million to be used for capital projects aimed at enhancing and diversifying revenue streams. Projects include loading and unloading improvements, tank storage, and capital to facilitate gas plant opportunities. It expects those investments to return incremental EBITDA of $7-$10 million when fully completed, which should be in the next 18 months.

LSB is planning a fourteen-day turnaround for the El Dorado facility in August, and a thirty-day turnaround at their Pryor facility beginning in mid-September. Once this planned maintenance is completed, LSB said it is positioned to run all plants at high operating rates for an extended period of time, with no turnarounds scheduled at any of  their facilities in 2020.

The company said near-term El Dorado ammonia sales will be impacted by an eight-week maintenance shutdown on the NuStar ammonia pipeline, which began in mid-July.

Despite the forthcoming turnarounds and the pipeline outage, LSB remains upbeat for the second-half. “Subject to weather, we believe that this year’s fall ammonia application season will be heavier than normal as corn prices have risen to the highest levels since 2014, reflecting lower expected harvested acres and weak yields for this season’s corn crop,” noted Behrman.

“These factors are likely to lead to a lower stock-to-use ratio and result in a significant increase in expected planted acres for the fall planting season. We expect these dynamics to continue into 2020 which, combined with the absence of any planned turnarounds at our plants and the greater level of reliability at our facilities, should have positive implications for LSB’s financial results in the year to come.”

Sector Net Sales $/M 2Q-19 2Q-18 Percentage Change
Agricultural 72.5 58 25
Industrial 37.2 32.8 13
Mining 11.9 12.4 (4)
Total 121.5 103.2 18

 

Ag Product Sold st 2Q-19 2Q-18 Percentage Change
UAN 95,183 110,336 (14)
HDAN 127,124 93,126 37
Ammonia 28,228 12,956 118
Other 10,377 12,822 (19)
Total 260,912 229,240 14

                               

Avg Selling Price $/st 2Q-19 2Q-18 Percentage Change
UAN 198 178 11
HDAN 248 254 (2)
Ammonia 357 316 13

 

 

Industrial Sold st 2Q-19 2Q-18 Percentage Change
Ammonia 78,697 41,194 91
Nitric Acid* 22,271 33,504 (34)
Other 8,948 9,224 (3)
Total 109,916 83,922 31

                               

Mining Sold st 2Q-19 2Q-18 Percentage Change
LDAN/HDAN/AN Sol. 47,000 48,001 (2)

                               

Input Costs 2Q-19 2Q-18 Percentage Change
Avg Nat Gas Cost mmBtu 2.422 2.598 (7)

*Excludes Baytown

LSB reported a net loss for the first six months at $4.9 million on net sales of $215.7 million, compared to the year-ago loss of $33.1 million and $203.6 million, respectively. Operating income was $11.4 million, up from a year-ago loss of $4 million. The company reported a net loss attributable to common stockholders of $20.9 million ($0.75 per share), compared to the year-ago loss of $48.6 million ($1.77 per share). Adjusted EBITDA was up, at $48.6 million from $40.9 million.

Nebraska Co-op Merger Choses Frontier Name

News, News Briefs, Western Cornbelt

The unified Nebraska co-op formed by the merger of Frontier Cooperative in Brainard and Midwest Farmers Cooperative in Elmwood will operate under the Frontier Cooperative name when the merger becomes effective on Sept. 1, the boards of directors of both companies recently announced.

The merger, which was approved by a member vote in late April (GM May 3, p. 1), will create a retail business with approximately 50 grain, agronomy, energy, and feed locations across 14 counties in east-central Nebraska. The unified company’s headquarters will be at 3333 Landmark Circle in Lincoln, Neb. The staff plans to be operating in the new headquarters by Sept. 1.

“The Frontier name is a nod to the company’s heritage but also an expression of its brand and purpose – to always be visionaries, tirelessly looking for new ways to support its farmer-centric communities,” the two co-ops said in a statement.

The unified co-op will be led by current Midwest Farmers CEO Jeremy Wilhelm, with a board made up of 18 directors, nine from each co-op. The merger will result in a new Frontier Cooperative logo, which features an underlined “O” to emphasize “a visual limitless horizon line.” The new brand, which will appear on the company’s trucks, offices, and uniforms, “also gives the word Frontier a distinctive visual treatment and helps set the brand apart from others, similar to its philosophy of giving customers a unique experience that is better than anyone else,” the companies said.

The current Frontier operation is a full-service, member-owned co-op offering grain, agronomy, energy, and feed products and services from 22 locations in eastern Nebraska. The company has 200 full-time and part-time employees. Midwest is also farmer-owned, with grain, agronomy, energy, and feed divisions operating from 28 locations in southeastern Nebraska.

 

Western Resources Corp. – Management Brief

Management Briefs, Vancouver

Western Resources Corp., Vancouver, announced that wholly-owned subsidiary Western Potash Corp. appointed Fritz Venter as new CEO and President, effective Aug. 1. He has also been appointed as COO and board director of Western Resources Corp. He will lead the team to successfully develop the Milestone Potash Phase I Project in Saskatchewan (GM July 19, p. 1).

The company said he has over 34 years of experience with major engineering and construction firms, and that prior to joining Western Potash, he was Senior Vice President and General Manager for a major EPC company in Canada, responsible for its Global Mining & Metallurgy.

Venter has a mechanical engineering background, and holds an M.S. in Industrial Engineering (operations management) and a Master of Project Management.

CHS Inc. – Management Brief

Management Briefs

CHS Inc., St. Paul, Minn., announced on July 29 that Tim Skidmore, Executive Vice President and Chief Financial Officer, is retiring effective Dec. 31, 2019. Skidmore joined CHS in those two roles in 2013, leading the company’s finance organization through a time of “significant growth and change,” CHS said, with a focus on hiring, developing finance talent, and realigning the organization “to provide increased value through an enterprise finance shared services model, enhanced financial planning and analysis, and deeper business partnerships.”

Skidmore will continue as the company’s CFO through the filing of CHS’s Form 10-K for its fiscal year 2019. CHS said a search for the company’s next CFO will begin immediately.

“We would like to thank Tim for his dedicated service to CHS, his focus on building a strong finance organization to support the changing needs of the company, and his commitment to adding value to our owners,” said Jay Debertin, CHS President and CEO. “Tim also made strengthening relationships with owners a priority. He spent time listening to and talking with owners, always communicating our focus on maintaining a strong balance sheet.”

Crystal Peak Publishes FEIS

Canada, News, News Briefs, Specialty, Sulfate of Potash

Junior sulfate of potash (SOP) producer Crystal Peak Minerals Inc., Toronto, on July 29 announced publication in the Federal Register of the notice of availability of the final environmental impact statement (FEIS) for its Sevier Playa Project, located in Millard County in southwestern Utah. The company said the publication is consistent with previously released timelines. A statutory 30-day period is all that remains before issuance of the Record of Decision for the project. Notice to Proceed is expected shortly thereafter.

“The publication of the Final EIS is a major milestone and another key step in de-risking the Sevier Playa project,” said Crystal Peak CEO John Mansanti. “It represents the culmination of many hours of work by regulatory agencies, Crystal Peak, and our respective consultant teams. We are very happy to have arrived at this critical juncture in our project schedule and wish to thank everyone involved.”

With a brine mineral resource known to contain potassium, magnesium, sulfate, and other minerals, Crystal Peak is targeting the production of SOP and other specialty fertilizers and associated products through the use of brine extraction and a solar evaporation process.

Nutrien Reports Strong 2Q, Lowers Guidance, Expects Strong Rebound in 2020

Featured, News, Saskatchewan

Nutrien Ltd., Saskatoon, reported second-quarter results that either matched or exceeded analyst expectations in light of the dismal spring planting season. Net earnings from continuing operations were up, at $858 million ($1.47 per diluted share) on sales of $8.6 billion from the year-ago $741 million ($1.17 per share) and $8.1 billion, respectively. While net earnings were down at $858 million, the year-ago $1.42 billion reflected asset sales that were required for the merger to create the company. Adjusted EBITDA was $1.86 billion, up from $1.6 billion.

“Nutrien delivered earnings growth in the first half of 2019 despite unprecedented wet conditions in the U.S., demonstrating the strength of our business model and asset mix,” said Nutrien President and CEO Chuck Magro. “Nutrien remains focused on factors under its control and creating long-term value for stakeholders. We expect to achieve over $650 million in annual run rate synergies by the end of 2019, have made strategic investments to grow our Retail business, and returned $5.2 billion to shareholders through share repurchases and dividends over the past 18 months.

“U.S. weather in the first half was so severe it nearly eliminated global demand growth for crop inputs,” he added. “However, demand for grains and oilseeds is still growing, and with lower crop inventories and higher prices, we expect a strong rebound in 2020.”

Nutrien sees 2019 corn acres at 85-87 million acres, compared to the USDA’s June 28 forecast of 91.7 million. Nutrien puts soybean acres as 80 million. In all, it said some 10 million acres of major crops were not planted this year. Nutrien Retail CEO Michael Franks told analysts it is easy to see 95-plus million acres of corn being set up for 2020.

Nutrien lowered its full-year adjusted net earnings per share guidance to $2.70-$3.00 from the previous $2.80-$3.20 per share, and its adjusted EBITDA guidance to $4.35-$4.7 billion from $4.4-$4.9 billion. It lowered Retail EBITDA guidance to $1.2-$1.3 billion from $1.3-$1.4 billion.

Citing weather and policy-related issues impacting the second-half, Nutrien lowered its projections for global potash deliveries to 65-67 million mt, down from 67-69 million. Its annual potash sales volume guidance is down, at 12.6-13 million mt from 13-13.4 million mt.

The company said North American potash movement was impacted by the wet weather, and only a portion of that is expected to be made up in the fall. It estimated that North America lost some 800,000 mt of potash applications in the first half. It said Chinese demand could be deferred due to import policies, while potash demand in India is being negatively impacted by a below-normal monsoon.

On the positive side, the company said its potash fill program was quickly snapped up, and that new production has been slow to ramp up.

The company said dry phosphate prices continue to be pressured by the combination of increased supply from Saudi Arabia and Morocco, strong Chinese exports, and weakness in raw material prices.

The company believes ammonia inventories will tighten as demand continues to grow and few new plants are to come online.

Wall Street was not deterred by the downward guidance. Nutrien shares rose 7.26 percent to close at $54.21 on July 30.

Nutrien announced a 5 percent increase in the expected quarterly dividend payout to $0.45 per share, commencing with the quarterly dividend having a record date at the end of third-quarter 2019.

Six-month net earnings from continuing operations were $899 million ($1.52 per share) on sales of $12.3 billion, up from the year-ago $740 million ($1.16 per share) and $11.8 billion, respectively. Net earnings were $899 million versus the year-ago $1.41 billion. Adjusted EBITDA was $2.56 billion, up from $2.17 billion.

Retail (millions) 2Q-19 2Q-18 YTD-19 YTD-18
EBITDA 836 886 810 876
Gross Margin 1,440 1,432 1,849 1,840
Total Sales 6,512 6,302 8,551 8,372
CN Sales 2,626 2,326 3,313 3,010
CN Margins 540 474 671 597
CN Volumes (000 mt) 5,617 5,506 7,196 7,209
Avg $/mt 467 423 460 418
Margin per $/mt 96 86 93 83

*CN = crop nutrient
 

Potash (millions) 2Q-19 2Q-18 YTD-19 YTD-18
EBITDA 553 386 1,014 714
Gross Margin 531 364 956 659
Total Sales 848 638 1,544 1,212
Sales Volumes (000 mt) 3,455 3,179 6,375 6,304
Avg $/mt 246 201 242 192

 

Nitrogen (millions) 2Q-19 2Q-18 YTD-19 YTD-18
EBITDA 459 353 733 624
Gross Margin 294 279 460 432
Total Sales 802 736 1,348 1,311
Sales Volumes (000 mt) 3,147 3,149 5,386 5,524
Avg $/mt 255 234 250 237

 

Phosphate (millions) 2Q-19 2Q-18 YTD-19 YTD-18
EBITDA 38 63 106 127
Gross Margin (10) 24 4 48
Total Sales 367 331 686 677
Sales Volumes (000 mt) 863 760 1,558 1,586
Avg $/mt 424 436 440 427

Nutrien Divestments Under Review in Australia

Australia, News, News Briefs

The Australian Competition & Consumer Commission (ACCC) said on July 29 it is seeking views on a proposed undertaking offered by Nutrien Ltd. in relation to its proposed acquisition of Ruralco (GM March 1, p. 1). The proposal seeks to address some of the preliminary competition concerns identified by ACCC in June (GM June 14, p. 25).

Under the proposal, Nutrien’s Landmark unit would divest three rural merchandise stores located in Broome, Alice Springs, and Hughenden to a purchaser approved by the ACCC. Nutrien told analysts on July 30 that it expects the Ruralco acquisition to close late in the third quarter.

“The release of undertakings for public comment should not be interpreted as a signal that the ACCC will ultimately accept them and clear the transaction,” said ACCC Deputy Chair Mick Keogh. “The undertaking seeks to address only local issues in Broome, Alice Springs, and Hughenden, and does not seek to address possible issues at the national or wholesale levels.

“At the national level, the transaction combines two of the biggest suppliers of rural merchandise to farmers,” he added. “It also combines two of the largest wholesalers to independent retail outlets. We are continuing to investigate the potential impact of this transaction at the national and wholesale levels.”

ACCC said parties wishing to make submissions should do so by Aug. 5.

Nutrien’s Landmark supplies rural merchandise through its 225 retail stores across the country, as well as supplying independent stores on a wholesale basis. It also provides wool brokering, livestock agency and export services, real estate agency, and agricultural insurance brokering services. Landmark has been part of rural Australia (through predecessor organizations) for more than 150 years.

Ruralco, a publicly-listed company in Australia, has been operating (through predecessor organizations) for more than 150 years. Ruralco provides a very similar range of services to Landmark. It operates 106 rural merchandise stores nationally (operating under a number of brands, but notably Roberts and Rodwells), and also supplies member stores via its wholesale arm, CRT. These members may be branded as either CRT or Town & Country. In addition to those other services offered by Landmark, Ruralco also offers water brokering services.

Intrepid, NGL Partner on Water, Add Texas Acreage

News, News Briefs

Intrepid Potash Inc., Denver, announced that it will partner with NGL Energy Partners, Tulsa, in its burgeoning water sales business, and also said the two are acquiring acreage in Texas. Intrepid and NGL have entered into a five-year joint marketing agreement under which Intrepid will be responsible for the development, transportation, marketing, and sale of water across approximately 185,000 acres in the heart of the Northern Delaware Basin.

The agreement covers the developed and undeveloped water rights Intrepid acquired in the acquisition of the Dinwiddie Jal Ranch (GM May 10, p. 1; March 15, p. 1; Feb. 15, p. 23), now operated as Intrepid South, and NGL water rights on the neighboring Beckham Ranch and McCloy Ranch. Together, these ranches form a contiguous 185,000-acre footprint. Intrepid and NGL will share the associated revenues, expenses, and capital costs based on the respective proportions of their permitted and usable water rights.

“This agreement will allow Intrepid and NGL to quickly and economically expand the water infrastructure footprint of the three ranches,” said Bob Jornayvaz, Intrepid Executive Chairman of the Board, President, and CEO. “We are taking what would otherwise be three separate water systems and plan to combine them into one of the most complete water infrastructure systems in southeast New Mexico, vertically integrated from the wellhead to the end user.

“Over the next year, we plan to modernize our entire system, adding automation and new, permanent infrastructure that will enhance the reliability and lower the operating costs of moving water as we work to meet the growing demand for water on our properties,” Jornayvaz added. He said partnering with NGL, the leading water midstream company in the Delaware Basin, is a natural fit and will allow both companies to focus on their strengths.

The two have also announced the purchase of 652 acres in Loving County, Texas, which is near the Intrepid South ranch, for the purpose of developing a produced water disposal facility, which is expected to further enhance and facilitate the companies’ water recycling plans. The land was purchased for $6 million, with the companies each holding a 50 percent interest. After the acquisition, the companies successfully permitted five disposal wells on the property. Once complete, this facility is expected to have a total disposal capacity of 100,000-125,000 barrels per day.

“We believe this property is an ideal location to expand our oilfield solutions footprint, and it represents the type of small project with solid expected returns that we envisioned when we acquired the Intrepid South ranch,” added Jornayvaz.

Two Workers Overcome by Fumes

Houston, TX, News, News Briefs

The Houston Fire Department (HFD) reported on July 29 that two workers were found dead inside a hydro-seeding spreader truck at a local high school sports field. HFD said the workers were preparing to use the spreader when one opened the hatch and was overcome by fumes. He fell inside, and another worker attempted to assist him and was also overcome. A third worker called 911.

HFD initially identified the product involved as an organophosphate or a fertilizer. While a local media report also identified it as hydrogen sulfide, an OSHA spokesman said it would not be releasing the type of chemical until after its own report was complete.

The spreader truck was identified as being owned by Hy-Turf Seeding of Houston.

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