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spk00: Greetings. Welcome to CVR Partners LP third quarter 2021 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Richard Roberts, director of FP&A and IR. Thank you. You may begin.
spk05: Thank you, Sherry. Good morning, everyone. We appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer, Dane Newman, our Chief Financial Officer, and other members of management. Prior to discussing our 2021 third quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Your caution that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law. Let me remind you that CVR Partners completed a 1 for 10 reverse split of its common units on November 23, 2020. Any per unit references made on this call are on a split adjusted basis. This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2021 third quarter earnings release that we filed with the SEC yesterday after the close of the market. Let me also remind you that we are a variable distribution MLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as determined by our General Partners Board. As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including, but not limited to, operating performance, fluctuations in the prices received for finished products, capital expenditures, and cash reserves deemed necessary or appropriate by the Board of Directors of our General Partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer.
spk11: Mark. Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. The summarized financial highlights for the third quarter of 2021 include net sales of $145 million, net income of $35 million, EBITDA of $64 million, and the Board of Directors declared a third quarter distribution of $2.93 per common unit, which will be paid on November 22, 2021, to unit holders of record at the close of the market on November 12, 2021. During the third quarter of 2021, we operated the plant safely and reliably with consolidated ammonia plant utilization of 94%. We experienced approximately five days of downtime at the Coffeyville facility due to an outage at the third-party air separation facility and approximately two days of downtime at both facilities due to externally driven power outages. During the handful of unplanned outages at Coffeyville this year, we used the downtime to complete enough maintenance work that we were able to safely defer the planned turnaround, allowing us to take advantage of the current strong market conditions. Our combined operations produced approximately 205,000 gross tons of ammonia, of which 65,000 net tons were available for sale for the third quarter of 2021. This compares to production of 215,000 gross tons of ammonia of which 71,000 net tons were available for sale in the prior year period. We produced 314,000 tons of UAN in the third quarter of 2021 as compared to 330,000 tons in the prior year period. During the third quarter of 2021, we sold approximately 322,000 tons of UAN at an average price of $305 per ton and approximately 52,000 tons of ammonia at an average price of $507 per ton. Relative to the third quarter of 2020, UAN ammonia sales volumes were down slightly driven by decline in production volumes due in part to the previously mentioned outages during the quarter. Year-over-year pricing was 118% higher for UAN and 110% higher for ammonia. The rally in nitrogen fertilizer prices that began earlier this year extended through the summer, and prices have continued to move higher in the fall. Fertilizer inventory levels remain tight across the U.S. as heightened turnaround activity over the summer and multiple plant shutdowns following Hurricane Ida further reduced available supply in the market. With the energy crunch in Europe and Asia causing a number of fertilizer plant shutdowns and reducing supplies even further, the primary concern in the market is availability of fertilizers, and that is fueling the persistent move higher in prices, which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results.
spk02: Thank you, Mark. For the third quarter of 2021, we reported net sales of $145 million and operating income of $46 million, compared to net sales of $79 million and an operating loss of $3 million in the third quarter of 2020. Net income for the third quarter of 2021 was $35 million, or $3.28 per common unit, and EBITDA was $64 million. This compares to a net loss of $19 million or $1.70 per common unit and EBITDA of $15 million for the prior year period. There were no adjustments to EBITDA on either period. The year-over-year increase in EBITDA was driven by higher UAN and ammonia sales prices offset slightly by higher fees.costs and operating expenses. Direct operating expenses for the third quarter of 2021 were $48 million compared to $39 million in the prior year period. Third quarter direct operating expenses include an additional $1 million charge for electricity expenses allocated to us by the City of Coffeyville related to Winter Storm Erie. Excluding this charge, as well as inventory and turnaround impacts, direct operating expenses increased by approximately $11 million, primarily related to higher electricity and natural gas costs and higher stock-based compensation as a result of the increased unit price. Turning to capital spending, during the third quarter of 2021, we spent $7 million on capital projects, which was primarily growth capital related to the urea capacity upgrade at Coffeyville. We estimate total capital spending for 2021 to be approximately $20 to $23 million, of which $14 to $15 million is expected to be maintenance capital. This excludes turnaround spending, which we expect will be approximately $2 to $3 million of expense. Looking at the balance sheet, as of September 30th, we had approximately $136 million of liquidity, which is comprised of approximately $101 million in cash and availability under the ABL facility of approximately $35 million. Within our cash balance of $101 million, we had approximately $30 million related to customer prepayments for the future delivery of product. During the quarter, we redeemed $15 million of the remaining 2023 nine and a quarter notes outstanding. As we have discussed previously, we currently intend to take advantage of any improvements in the nitrogen fertilizer market and potential 45Q tax credit income with an intention to repay the remaining 2023 senior notes outstanding over the next two years. In assessing our cash available for distribution, we generated EBITDA of $64 million, had current cash needs of $11 million for interest, $1 million for financing fees, and $2 million for maintenance capital expenditures. added back a net 500 000 non-cash electricity charge from the city of coffeeville while the actual cost may be paid over the next 10 years in addition the board of directors of our general partner established reserves of 15 million dollars to repay a portion of the remaining 2023 senior notes and 3 million for the planned turnarounds at coffeeville and east dubuque in the third quarter of 2022. as a result there was 31 million of cash available for distribution and the board of directors of our general partner declared a distribution of $2.93 per common unit. Looking ahead to the fourth quarter of 2021, we estimate our ammonia utilization rate to be between 90% and 95%. We expect direct operating expenses to range between $45 and $50 million, excluding inventory and turnaround impacts, and total capital spending to be between $9 and $12 million. With that, I'll turn the call back over to Mark.
spk11: Thanks, Dane. Crop conditions were stable throughout the summer, and the harvest is nearly complete. The USDA currently estimates planted corn acres were 93 million with expected yields of 176 bushels per acre, and soybean acres were 88 million with yields of 51 bushels per acre. The expected 2021 inventory carryout of 8.3% for corn and 5.7% for soybeans continues to be at the lower end of the 10-year range. For the 2021-2022 crop year, the USDA estimates the stocks-to-use ratio to rise to 10.1% for corn and 7.3% for soybeans. Crop prices have been a little higher over the past month, with December corn at $5.70 and soybeans at $12.50 a bushel. And we still expect to see good prices for farmers next year. The big story for the nitrogen fertilizers has been on the supply side of the market. As we discussed on our last earnings call, many North American nitrogen fertilizer producers delayed major plant turnarounds scheduled for 2020 into 2021. Many of these turnarounds started in the third quarter and some resulted in longer outages than expected. Additionally, several other plants had unplanned outages and Hurricane Ida caused multiple plants to be down for a few weeks in September. The result of all this downtime was U.S. nitrogen fertilizer production being much lower in the third quarter of 2021 compared to 2020. In the international markets, an energy shortage developed in September in both Europe and China that caused natural gas and coal prices to spike, forcing these regions to curtail or ration energy usage for certain industrial sectors to preserve energy for power generation. In Europe, natural gas prices have spiked to around $30 an MMBTU making fertilizer production uneconomic and forcing a significant amount of nitrogen fertilizer production to be shut in, thereby leading to certain producers and customers scrambling to find available nitrogen supply. In China, escalating coal prices are putting pressure on the government to allocate available supply to power generation. As a result, China has dramatically reduced urea exports and is expected to continue to restrict exports through the winter. All these supply challenges cause global nitrogen prices to escalate dramatically entering the fourth quarter. Prices are much higher in the third quarter versus the second quarter, and they are currently expected to continue to rise in the fourth quarter and carry into the first half of 2022. Forward ammonia prices are currently over $1,000 per ton, and UAN prices are over $500 per ton. We don't think that the supply shortfall will be fully addressed until next summer, as energy available challenges are expected to be continued through the winter, particularly in Europe and China. Fall ammonia application is underway, and if the weather holds, we expect a large fall application season. While prices for ammonia are much higher this fall compared to the fall of 2020 and the spring of 2021, ammonia remains the cheapest form of nitrogen, and customers are eager to apply ammonia this year. At our Coffeyville facility, we postponed our turnaround schedule for October of this year to July of 2022. We did take a short out last week at Coffeyville to complete the installation of the CO2 compressor and ammonia pump that was planned for the turnaround. These new units are expected to increase production capacity by an additional 100 tons per day of UAN going forward. We made progress on the creation of a structure that would allow us to claim and monetize 45Q tax credits for the carbon capture and sequestration through enhanced oil recovery activities that are ongoing at the Coffeeville plant. Since our last call, we've started discussions with tax equity investors, and we would expect reaching an agreement with a tax equity investor by the first quarter. We continue to monitor the legislation moving through Congress that could provide higher 45Q credit values than the existing rules. We believe that higher 45Q credit values for carbon capture and sequestration could also accelerate the development of one or more proposed third-party sequestration projects in Iowa and Illinois that could be an opportunity for our East Dubuque facility. As Dane mentioned, we reduced our debt outstanding by $15 million in the third quarter. As we've stated on previous calls, we intend to reduce overall debt by an additional $80 million by June of 2023, through a combination of cash flow from operations and proceeds from any monetization of 45Q tax credits. With these two sources of cash, we currently believe we can both pay down debt and make distributions to our unit holders. We are pleased to be paying a distribution this quarter of $2.93 per unit, while also strengthening the balance sheet with the $15 million debt reduction. While fertilizer market conditions are strong, we are maintaining our focus on maximizing cash flow generation by safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors, and communities, prudently managing cost, being judicious with capital, but targeting select investments and reliability projects and incremental additions to production capacity, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint. In closing, I would like to thank our employees for their excellent execution during the third quarter and their continued commitment to being healthy and safe in everything we do. With that, we are ready to take any questions. Sherry?
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2. If you would like to remove the question from the queue, And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. Our first question is from Brian DeRubito with Baird. Please proceed.
spk13: Good morning. First question, Mark, how much of Q4 results or how much of your production in Q4 do you think will be forward sold?
spk11: I'm not really sure I understand the context of that question. Let me try to explain. We sold the third quarter mostly in July and August. That would be typical for seasonal. And for the ammonia, a portion of the ammonia that we sold, that was done in August, September. And so we'll In the fourth quarter, we'll pick up some escalation from the rising market, but we'll fill more of that in the first quarter from where, you know, because it did really start escalating until the end of September and end of October. So we really, at that point, it sold a good chunk of the fourth quarter.
spk13: Okay. So when we entered this year, First quarter results were a bit disappointing because you have forward sold a lot of your volume at lower prices. How should we think about that dynamic going into 2022?
spk11: Well, this year, typically, we would have sold a lot more of the second half in July and August. We did not do that this year. We sold more just for the third quarter. And then the market was escalating into the fourth. And so we were sort of capturing that escalation and then it went, I would call vertical and October. Uh, but, uh, you know, we only capture part of that in the fourth quarter.
spk13: Okay. And then switching gears, you know, early this year, you were contemplating possibly converting, you know, coffee bill from a petco feedstock to, uh, natural gas potentially. Has that thought process changed given the current environment for natural gas?
spk11: Yeah, obviously the economics have flipped there, and petcoke is now more attractive than natural gas, and so we expect that to continue. We always really have that, I call it, option available to us. It's not really that difficult to switch ultimately to natural gas if we choose, but Last year, we were looking at $2 natural gas. Now, we're looking at $5.50 natural gas, so it's not really that attractive to move over. Petcoke is going to be a very competitive feedstock going forward. It gives us good diversity in our portfolio, and we're going to stay the course on Petcoke.
spk13: Okay, good, because I thought it would have been a mistake to switch over to natural gas personally, but... What do I know? I'm only an analyst. Just in terms of debt reduction, did I hear you right that you've reserved $15 million for another pay down of the 23 notes for next year?
spk03: So the reserve and the distribution this quarter was for another pay down of the $15 million, correct?
spk12: Perfect. Thank you so much. Appreciate the time.
spk07: Thanks, Brian.
spk00: Our next question is from William Stein, private investor. Please proceed.
spk06: Hey, Mark. Thanks so much for taking my question. It's about pricing, but it sounds like you've already noted that prices are rising, so that shouldn't be a surprise as we move forward. But there's an aspect of your reporting that I just want to better understand. In the press releases, you have this section that refers to key market indicators. I think there are a lot of investors that view that as current spot prices, but I suspect this relates more to retail pricing. Can you give us maybe just walk through an example as to how your prices realized at gate in a given corner relate to those key market indicators? Are those at all
spk11: forward-looking or is that just more informative about the quarter that's already closed and should not be relied upon for sort of forecasting um well the the prices that are in there are i would call it current uh spot price and so to the extent that we would sell spot loads today from either of the two facilities um that would be i think representative there the um Green markets is a retail price, so you have to take away the markup there from a retail perspective. But if we sell spot loads today or this week or next week, that's kind of representative of the current pricing. Generally, we would have sold a good portion of a quarter in advance of coming into the quarter. We don't generally sell everything spot. But as an example, we're going through the ammonia run at East Dubuque. and it'll be this week and next few weeks, and there will be, we think, incremental demand, and the demand will be spot loads, and those will be at spot prices. Now, we had sold previously part of our ammonia back in kind of the August-September timeframe, and obviously prices have escalated quite a bit, so the spot price will be much higher than the contracted price, but We've been in a rising pricing environment really since the spring, and we've been capturing it as we go. But again, as I mentioned in the previous answer, as we get into the first quarter, we're going to see kind of the full brunt of the vertical pricing that's occurred here in the fourth quarter.
spk06: Thanks, Mark. And one follow-up, if I can. I think many investors noted with great interest and excitement that you bought shares on the open market during the quarter. I'm guessing that that might relate to your view as to the longevity of the current cycle and certainly the better trajectory that we're in now than we've been in the last few years. Can you talk about the longevity of this cycle as you see it? Thank you.
spk11: You know, I think the key to longevity of any cycle is the underlying customer economics. And so crop pricing is really critical for length. And I feel really good about 2022 because, you know, you look out at demand for grains. And actually, kind of the sleeper out there is wheat. Wheat's emerged here in the last couple months at probably 10-year high prices. Wheat is a good crop for us around the Coffeyville facility in Kansas. Kansas is wheat country. And so grain prices are key to longevity. If farmer economics stay high like they are now, I think we can have an extended cycle. And to me, I feel very good about just generally the demand over 22 and even starting to think about 23 because of the farmer economics. And obviously, we have a lot of major global energy issues to deal with, which is creating, you know, even more pressure on the production for fertilizer. And I don't really see an easy answer to fixing the global energy shortage here in the next quarter or two. So I feel really good about where we're headed, but we're not going to lose any focus. We're going to do what we do well, which is run our plants well and market our product well.
spk01: Great. Thanks for taking my questions.
spk00: As a reminder, it is star 1 on your telephone keypad. If you would like to ask a question, we will just pause for a brief moment to poll for questions. Our next question is from Rob McGuire with Granite Research. Please proceed.
spk04: Good morning, Mark, Dane, and Richard. Can you just talk a little bit about the anti-dumping and countervailing duty investigations? And do you have a view as to, would this impact pricing? Would a favorable ruling result in higher prices? Or is this more a removal of a threat of potential negative imports negatively impacting pricing?
spk11: Rob, this is Mark. I think that what I would see there is, if it is a favorable ruling, that it probably just extends the supply issues we have in the United States, because if we did reduce or eliminate the Russian and Trinidadian UAN, I think that that would create additional supply issues in the U.S. over time, but the market globally is trying to adjust to this, and so it's kind of hard to say that would that factor alone really change the pricing environment compared to the energy issues that we see globally. It would be a factor, but it would be one of several factors there, but I you know, from my perspective, um, typically in these cases, you know, I think if they decide to go forward with it, they, they, and many times they, they do, uh, end up imposing some sort of duty here. And I think it's very clear that that product is, um, subsidized from a natural gas perspective. And you can see that globally kind of where prices are in the markets where they're producing versus, um, like European gas pricing. So, um, I think it would probably just extend out the supply issues that we have in the U.S. compared to current market. So it could extend out this supply issue.
spk07: Thank you. I have no further questions. Thanks, Rob.
spk00: We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing comments.
spk11: Well, thanks, everybody, for being on the call today, and we look forward to sharing with you our fourth quarter results in February. Thank you very much.
spk00: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Thank you. Thank you. Thank you. We'll be right back. Thank you. you you you Thank you.
spk09: Thank you.
spk00: Greetings. Welcome to CVR Partners LP third quarter 2021 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Richard Roberts, Director of FP&A and IR. Thank you. You may begin.
spk05: Thank you, Sherry. Good morning, everyone. We appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer, Dane Newman, our Chief Financial Officer, and other members of management. Prior to discussing our 2021 third quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Your caution that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law. Let me remind you that CVR Partners completed a one-for-ten reverse split of its common units on November 23rd, 2020. Any per-unit references made on this call are on a split-adjusted basis. This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2021 third quarter earnings release that we filed with the SEC yesterday after the close of the market. Let me also remind you that we are a variable distribution MLP. we will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as determined by our General Partners Board. As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including, but not limited to, operating performance, fluctuations in the prices received for finished products, capital expenditures, and cash reserves deemed necessary or appropriate by the Board of Directors of our General Partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer. Mark.
spk11: Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. The summarized financial highlights for the third quarter of 2021 include net sales of $145 million, net income of $35 million, EBITDA of $64 million, and the Board of Directors declared a third quarter distribution of $2.93 per common unit, which will be paid on November 22, 2021, to unit holders of record at the close of the market on November 12, 2021. During the third quarter of 2021, we operated the plant safely and reliably with consolidated ammonia plant utilization of 94%. We experienced approximately five days of downtime at the Coffeyville facility due to an outage of the third party air separation facility and approximately two days of downtime at both facilities due to externally driven power outages. During the handful of unplanned outages at Coffeyville this year, we used the downtime to complete enough maintenance work that we were able to safely defer the planned turnaround, allowing us to take advantage of the current strong market conditions. Our combined operations produced approximately 205,000 gross tons of ammonia, of which 65,000 net tons were available for sale for the third quarter of 2021. This compares to production of 215,000 gross tons of ammonia, of which 71,000 net tons were available for sale in the prior year period. We produced 314,000 tons of UAN in the third quarter of 2021 as compared to 330,000 tons in the prior year period. During the third quarter of 2021, we sold approximately 322,000 tons of UAN at an average price of $305 per ton, and approximately 52,000 tons of ammonia at an average price of $507 per ton. Relative to the third quarter of 2020, UAN ammonia sales volumes were down slightly driven by decline in production volumes due in part to the previously mentioned outages during the quarter. Year-over-year pricing was 118% higher for UAN and 110% higher for ammonia. The rally in nitrogen fertilizer prices that began earlier this year extended through the summer and prices have continued to move higher in the fall. Fertilizer inventory levels remain tight across the U.S. as heightened turnaround activity over the summer and multiple plant shutdowns following Hurricane Ida further reduced available supply in the market. With the energy crunch in Europe and Asia causing a number of fertilizer plant shutdowns and reducing supplies even further, the primary concern in the market is availability of fertilizers, and that is fueling the persistent move higher in prices which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results.
spk02: Thank you, Mark. For the third quarter of 2021, we reported net sales of $145 million and operating income of $46 million, compared to net sales of $79 million and an operating loss of $3 million in the third quarter of 2020. Net income for the third quarter of 2021 was $35 million, or $3.28 per common unit, and EBITDA was $64 million. This compares to a net loss of $19 million, or $1.70 per common unit, and EBITDA of $15 million for the prior year period. There were no adjustments to EBITDA in either period. The year-over-year increase in EBITDA was driven by higher UAN and ammonia sales prices offset slightly by higher fees.costs and operating expenses. Direct operating expenses for the third quarter of 2021 were $48 million compared to $39 million in the prior year period. Third quarter direct operating expenses include an additional $1 million charge for electricity expenses allocated to us by the City of Coffeyville related to Winter Storm Erie. Excluding this charge, as well as inventory and turnaround impacts, direct operating expenses increased by approximately $11 million, primarily related to higher electricity and natural gas costs and higher stock-based compensation as a result of the increased unit price. Turning to capital spending, during the third quarter of 2021, we spent $7 million on capital projects, which was primarily growth capital related to the urea capacity upgrade at Coffeyville. We estimate total capital spending for 2021 to be approximately $20 to $23 million, of which $14 to $15 million is expected to be maintenance capital. This excludes turnaround spending, which we expect will be approximately $2 to $3 million of expense. Looking at the balance sheet, as of September 30th, we had approximately $136 million of liquidity, which is comprised of approximately $101 million in cash and availability under the ABL facility of approximately $35 million. Within our cash balance of $101 million, we had approximately $30 million related to customer prepayments for the future delivery of product. During the quarter, we redeemed $15 million of the remaining 2023 nine and a quarter notes outstanding. As we have discussed previously, we currently intend to take advantage of any improvements in the nitrogen fertilizer market and potential 45Q tax credit income with an intention to repay the remaining 2023 senior notes outstanding over the next two years. In assessing our cash available for distribution, we generated EBITDA of $64 million, had current cash needs of $11 million for interest, $1 million for financing fees, and $2 million for maintenance capital expenditures. added back a net $500,000 non-cash electricity charge from the City of Coffeyville while the actual cost may be paid over the next 10 years. In addition, the Board of Directors of our General Partner established reserves of $15 million to repay a portion of the remaining 2023 senior notes and $3 million for the planned turnarounds at Coffeyville and East Dubuque in the third quarter of 2022. As a result, there was $31 million of cash available for distribution and the board of directors of our general partner declared a distribution of $2.93 per common unit. Looking ahead to the fourth quarter of 2021, we estimate our ammonia utilization rate to be between 90% and 95%. We expect direct operating expenses to range between $45 and $50 million, excluding inventory and turnaround impacts, and total capital spending to be between $9 and $12 million. With that, I'll turn the call back over to Mark.
spk11: Thanks, Dane. Crop conditions were stable throughout the summer, and the harvest is nearly complete. The USDA currently estimates planted corn acres were 93 million with expected yields of 176 bushels per acre, and soybean acres were 88 million with yields of 51 bushels per acre. The expected 2021 inventory carryout of 8.3% for corn and 5.7% for soybeans continues to be at the lower end of the 10-year range. For the 2021-2022 crop year, the USDA estimates the stocks to use ratio to rise to 10.1% for corn and 7.3% for soybeans. Crop prices have been a little higher over the past month with December corn at $5.70 and soybeans at $12.50 a bushel. And we still expect to see good prices for farmers next year. The big story for the nitrogen fertilizers has been on the supply side of the market. As we discussed on our last earnings call, many North American nitrogen fertilizer producers delayed major plant turnarounds scheduled for 2020 into 2021. Many of these turnarounds started in the third quarter and some resulted in longer outages than expected. Additionally, several other plants had unplanned outages and Hurricane Ida caused multiple plants to be down for a few weeks in September. The result of all this downtime was U.S. nitrogen fertilizer production being much lower in the third quarter of 2021 compared to 2020. In the international markets, an energy shortage developed in September in both Europe and China that caused natural gas and coal prices to spike, forcing these regions to curtail or ration energy usage for certain industrial sectors to preserve energy for power generation. In Europe, natural gas prices have spiked to around $30 in MMBTU making fertilizer production uneconomic and forcing a significant amount of nitrogen fertilizer production to be shut in, thereby leading to certain producers and customers scrambling to find available nitrogen supply. In China, escalating coal prices are putting pressure on the government to allocate available supply to power generation. As a result, China has dramatically reduced urea exports and is expected to continue to restrict exports through the winter. All these supply challenges cause global nitrogen prices to escalate dramatically entering the fourth quarter. Prices are much higher in the third quarter versus the second quarter, and they are currently expected to continue to rise in the fourth quarter and carry into the first half of 2022. Forward ammonia prices are currently over $1,000 per ton, and UAN prices are over $500 per ton. We don't think that the supply shortfall will be fully addressed until next summer, as energy available challenges are expected to be continued through the winter, particularly in Europe and China. Fall ammonia application is underway, and if the weather holds, we expect a large fall application season. While prices for ammonia are much higher this fall compared to the fall of 2020 and the spring of 2021, ammonia remains the cheapest form of nitrogen, and customers are eager to apply ammonia this year. At our Coffeyville facility, we postponed our turnaround scheduled for October of this year to July of 2022. We did take a short out last week at Coffeyville to complete the installation of the CO2 compressor and ammonia pump that was planned for the turnaround. These new units are expected to increase production capacity by an additional 100 tons per day of UAN going forward. We made progress on the creation of a structure that would allow us to claim and monetize 45Q tax credits for the carbon capture and sequestration through enhanced oil recovery activities that are ongoing at the Coffeeville plant. Since our last call, we've started discussions with tax equity investors, and we would expect reaching an agreement with a tax equity investor by the first quarter. We continue to monitor the legislation moving through Congress that could provide higher 45Q credit values than the existing rules. We believe that higher 45Q credit values for carbon capture and sequestration could also accelerate the development of one or more proposed third-party sequestration projects in Iowa and Illinois that could be an opportunity for our East Dubuque facility. As Dane mentioned, we reduced our debt outstanding by $15 million in the third quarter. As we've stated on previous calls, we intend to reduce overall debt by an additional $80 million by June of 2023, through a combination of cash flow from operations and proceeds from any monetization of 45Q tax credits. With these two sources of cash, we currently believe we can both pay down debt and make distributions to our unit holders. We are pleased to be paying a distribution this quarter of $2.93 per unit, while also strengthening the balance sheet with the $15 million debt reduction. While fertilizer market conditions are strong, we are maintaining our focus on maximizing cash flow generation by safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors, and communities, prudently managing cost, being judicious with capital, but targeting select investments and reliability projects and incremental additions to production capacity, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint. In closing, I would like to thank our employees for their excellent execution during the third quarter and their continued commitment to being healthy and safe in everything we do. With that, we are ready to take any questions. Sherry?
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove the question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. Our first question is from Brian DeRubito with Baird. Please proceed.
spk13: Good morning. First question, Mark, how much of Q4 results or how much of your production in Q4 do you think will be forward sold?
spk11: I'm not really sure I understand the context of that question. Let me try to explain. We sold the third quarter mostly in July and August. That would be typical for seasonal. And for the ammonia, a portion of the ammonia that we sold, that was done in August, September. And so we'll... In the fourth quarter, we'll pick up some escalation from the rising market, but we'll fill more of that in the first quarter from where, you know, because it didn't really start escalating until the end of September and end of October. So we really, at that point, it sold a good chunk of the fourth quarter.
spk13: Okay. So when we entered this year, First quarter results were a bit disappointing because you have forward sold a lot of your volume at lower prices. How should we think about that dynamic going into 2022?
spk11: Well, this year, typically, we would have sold a lot more of the second half in July and August. We did not do that this year. We sold more just for the third quarter. And then the market was escalating into the fourth. And so we were sort of capturing that escalation and then it went, I would call vertical and October. Uh, but, uh, you know, we only capture part of that in the fourth quarter.
spk13: Okay. And then switching gears, you know, early this year, you were contemplating possibly converting, you know, coffee bill from a petco feedstock to, uh, natural gas potentially. Has that thought process changed given the current environment for natural gas?
spk11: Yeah, obviously the economics have flipped there, and petcoke is now more attractive than natural gas, and so we expect that to continue. We always really have that, I call it, option available to us. It's not really that difficult to switch ultimately to natural gas if we choose, but Last year, we were looking at $2 natural gas. Now, we're looking at $5.50 natural gas, so it's not really that attractive to move over. Petcoke is going to be a very competitive feedstock going forward. It gives us good diversity in our portfolio, and we're going to stay the course on Petcoke.
spk13: Okay, good, because I thought it would have been a mistake to switch over to natural gas personally, but... What do I know? I'm only an analyst. Just in terms of debt reduction, did I hear you right that you've reserved $15 million for another pay down of the 23 notes for next year?
spk03: So the reserve and the distribution this quarter was for another pay down of the $15 million, correct?
spk12: Perfect. Thank you so much. Appreciate the time.
spk07: Thanks, Brian.
spk00: Our next question is from William Stein, private investor. Please proceed.
spk06: Hey, Mark. Thanks so much for taking my question. It's about pricing, but it sounds like you've already noted that prices are rising, so that shouldn't be a surprise as we move forward. But there's an aspect of your reporting that I just want to better understand. In the press releases, you have this section that refers to key market indicators. I think there are a lot of investors that view that as current spot prices, but I suspect this relates more to retail pricing. Can you give us maybe just walk through an example as to how your prices realized at gate in a given corner relate to those key market indicators? Are those at all
spk11: forward-looking or is that just more informative about the quarter that's already closed and should not be relied upon for sort of forecasting um well the the prices that are in there are i would call it current uh spot price and so to the extent that we would sell spot loads today from either of the two facilities um that would be i think representative there the um Green markets is a retail price, so you have to take away the markup there from a retail perspective. But if we sell spot loads today or this week or next week, that's kind of representative of the current pricing. Generally, we would have sold a good portion of a quarter in advance of coming into the quarter. We don't generally sell everything spot. But as an example, we're going through the ammonia run at East Dubuque. and it'll be this week and the next few weeks, and there will be, we think, incremental demand, and the demand will be spot loads, and those will be at spot prices. Now, we had sold previously part of our ammonia back in kind of the August-September timeframe, and obviously prices have escalated quite a bit, so the spot price will be much higher than the contracted price, but We've been in a rising pricing environment really since the spring, and we've been capturing it as we go. But again, as I mentioned in the previous answer, as we get into the first quarter, we're going to see kind of the full brunt of the vertical pricing that's occurred here in the fourth quarter.
spk06: Thanks, Mark. And one follow-up, if I can. I think many investors noted with great interest and excitement that you bought shares on the open market during the quarter. I'm guessing that that might relate to your view as to the longevity of the current cycle and certainly the better trajectory that we're in now than we've been in the last few years. Can you talk about the longevity of this cycle as you see it? Thank you.
spk11: You know, I think the key to longevity of any cycle is the underlying customer economics. And so crop pricing is really critical for length. And I feel really good about 2022 because, you know, you look out at demand for grains and actually the kind of the sleeper out there is wheat. Wheat's emerged here in the last couple months at probably a 10-year high prices. Wheat is a good crop for us around the Coffeyville facility in Kansas. Kansas is wheat country. And so grain prices are key to longevity. If farmer economics stay high like they are now, I think we could have an extended cycle. And to me, I feel very good about just generally the demand over 22 and even starting to think about 23 because of the farmer economics. And obviously, we have a lot of major global energy issues to deal with, which is creating, you know, even more pressure on the production for fertilizer. And I don't really see an easy answer to fixing the global energy shortage here in the next quarter or two. So I feel really good about where we're headed, but we're not going to lose any focus. We're going to do what we do well, which is run our plants well and market our product well.
spk01: Great. Thanks for taking my questions.
spk00: As a reminder, it is star 1 on your telephone keypad. If you would like to ask a question, we will just pause for a brief moment to poll for questions. Our next question is from Rob McGuire with Granite Research. Please proceed.
spk04: Good morning, Mark, Dane, and Richard. Can you just talk a little bit about the anti-dumping and countervailing duty investigations? And do you have a view as to, would this impact pricing? Would a favorable ruling result in higher prices? Or is this more a removal of a threat of potential negative imports negatively impacting pricing?
spk11: Rob, this is Mark. I think that what I would see there is, if it is a favorable ruling, that it probably just extends the supply issues we have in the United States, because if we did reduce or eliminate the Russian and Trinidadian UAM, I think that that would create additional supply issues in the U.S. over time, but the market globally is trying to adjust to this, and so it's kind of hard to say that would that factor alone really change the pricing environment compared to the energy issues that we see globally. It would be a factor, but it would be one of several factors there, but I from my perspective, typically in these cases, I think if they decide to go forward with it, many times they do end up imposing some sort of duty here. And I think it's very clear that that product is subsidized from a natural gas perspective. And you can see that globally kind of where prices are in the markets where they're producing versus like European gas pricing. So I think it would probably just extend out the supply issues that we have in the U.S. compared to the current market. It could extend out this supply issue.
spk07: Thank you. I have no further questions. Thanks, Rob.
spk00: We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing comments.
spk11: Well, thanks everybody for being on the call today, and we look forward to sharing with you our fourth quarter results in February. Thank you very much.
spk00: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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