Pryor Chemical Co., a wholly-owned subsidiary of LSB Industries Inc., on March 3, 2016, entered into a UAN purchase and sale agreement with Coffeyville Resources Nitrogen Fertilizers LLC, a unit of CVR Partners LP, and effective June 1, 2016. In doing so, it did not renew an offtake agreement with Koch Nitrogen Co.
Under the agreement, CVR will have the exclusive right (but not the obligation) to purchase all the tons of UAN that Pryor makes available to it (i) that will be produced at the Pryor Chemical Facility in Pryor, Okla. and (ii) that is in excess of the needs of Pryor or its affiliates, which shall be no more than 30,000 short tons per year and no more than 10,000 tons in any calendar quarter. If CVR fails to take delivery of certain tons of UAN produced at Pryor and such failure causes Pryor’s storage capacity to be more than 75 percent utilized or the production unit at the Pryor facility to be slowed down, shut-down or idled, Pryor may immediately sell such unpurchased product to a third-party without restriction.
The initial term of the Pryor-CVR agreement is for three years and automatically continues for one or more additional one-year terms unless terminated by either party by delivering a notice of termination at least twelve months prior to the end of term in effect. However, CVR may unilaterally terminate the agreement upon 180 days advance written notice of termination to Pryor; provided, however, that each party’s rights and obligations pertaining to UAN that CVR committed to purchase before such advance notice will survive termination. Additionally, Pryor can terminate the CVR agreement upon 90 days advance written notice of termination to CVR; provided, however, that each party’s rights and obligations pertaining to UAN that Pryor committed to sell prior to such advance notice will survive termination.
On March 1, 2016, Pryor said it provided notice of termination under the UAN agreement that it had with Koch Nitrogen Co., dated May 7, 2009. The termination will be effective as of May 31, 2016. Under the Koch agreement, Koch had the exclusive right to purchase substantially all of the UAN produced at the Pryor facility and the limited first right to purchase additional amounts. Pryor said it did not incur any early termination penalties in connection with the termination of the Koch agreement.