CF工業控股 (CF) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2012 CF Industries Holdings conference call. My name is Darcel, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation.

(Operator Instructions)

I would now like to turn the presentation over to your host for today, Mr. Dan Swenson, Senior Director of Investor Relations and Corporate Communications. Sir, please proceed.

Good morning, and thanks for joining us on this conference call for CF Industries Holdings, Inc. I'm Dan Swenson, Senior Director of Investor Relations and Corporate Communications. And with me are Steve Wilson, our Chairman and Chief Executive Officer; Dennis Kelleher, our Senior Vice President and Chief Financial Officer; Bert Frost, our Senior Vice President of Sales and Market Development; and Tony Will, our Senior Vice President of Manufacturing and Distribution. CF Industries Holdings, Inc. reported its third-quarter 2012 results yesterday afternoon, as did Terra Nitrogen Company, L.P. On this call, we'll review the CF Industries results in detail and discuss our outlook, referring to several of the slides that are posted on our website. At the end of the call, we'll host a question-and-answer session.

As you review the news releases posted on the Investor Relations section of our website at CFIndustries.com, and as you listen to this conference call, please recognize that they contain forward-looking statements as defined by federal securities laws. All statements on the release and on this call, other than those relating to historical information or current conditions, are considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the Safe Harbor statement included in yesterday's news release and the slides accompanying this call. Consider all forward-looking statements in light of those, and other risks and uncertainties, and do not place undue reliance on any forward-looking statements.

Now, let me introduce Steve Wilson, our Chairman and CEO.

Thanks, Dan, and good morning, everyone. From the perspective of a crop-nutrient manufacturer, especially a nitrogen producer, it would be difficult to imagine a better business setting than the way this year has progressed. An extended spring fertilizer application season, along with an exceptionally large number of corn acres planted in the US, led to very strong demand for fertilizers in the first half of the year. Unfortunately for farmers, the weather that was so conducive to field preparation and planting turned harshly hot and dry, withering crops and sending grain pricing soaring. Thankfully, many farmers had crop insurance, which protected them financially, and should ensure their liquidity going into next year's planting season.

The dry weather, along with early crop maturity, has led to an early harvest, with 95% of the corn crop harvested as of November 4, about four weeks ahead of average. As a result, fields are clear and ready for nutrient applications much earlier than normal, positioning the North American fertilizer industry for a potential extended fall application season. With so much of the harvest complete, recent rains across the Midwest and northern plains have been well timed to alleviate soil-moisture concerns in most areas and have created field conditions conducive to fall ammonia application. These condition, along with the expectation that farmers will plant 97 million acres of corn in 2013, led to exceptionally strong dealer demand for fertilizer for summer fill and fall application and set the stage for us to deliver another strong quarter of financial results.

As detailed in our press release published yesterday afternoon, we realized record third-quarter EBITDA, net earnings, and earnings per share. Our EBITDA of $729 million increased 14% over the prior-year period. Our net earnings of $403 million increased 22%, and our diluted earnings per share of $6.35 was 34% higher than the prior-year period. Low water levels on the river transportation system presented logistical challenges during the quarter, but our team did a great job of overcoming them. In so doing, we proved once again the value of our unmatched production and distribution network. To cite just one example of this capability, a few years ago, we made investments in our Palmyra, Missouri ammonia terminal to expand its capacity to load barges with ammonia that we seized via pipeline from Donaldsonville.

When the low water on the Mississippi caused a shipping bottleneck, we diverted two of our empty south-bound ammonia tows that had been headed to Donaldsonville. Instead, we reloaded them at Palmyra, which is north of the choke point, and then sent those barges up the Illinois River, effectively using our access to the NuStar ammonia pipeline to deliver product around the Mississippi River choke points. When Hurricane Isaac came through Louisiana in August, we did shut down production at Donaldsonville as a precautionary measure. We incurred no significant damage and had the complex back on-stream to begin production within three days.

We experienced strong ammonia volume and prices during the third quarter. Volume was higher than last year's third quarter, as farmers were busy applying ammonia to winter wheat across Texas, Oklahoma, and Kansas, and as dealers and distributors who had their own storage sought to secure product inventory in anticipation of the strong application season we are currently seeing across the corn belt. Along with the strong demand, tight global ammonia supplies due to ongoing gas curtailments in Trinidad and production outages in the Middle East and Russia, caused ammonia prices to increase significantly compared to a year ago. Expectations of robust farm-level nitrogen demand also prompted strong buying interest when we launched our UAN summer fill program back in June, resulting in an increase in UAN shipments during the third quarter of 2012 versus the prior year. However, UAN imports during July and August were 28% higher than last year, which constrained prices.

Urea imports during July and August were up about 14% from a year ago, and India's year-to-date purchases as of the end of September were approximately 9% below last year. Exports from China were higher than anticipated, and the year-to-date export volume through September was 2.6 million tons, versus 1.9 million tons in 2011. These factors resulted in lower market prices than a year ago, as you can see in the industry price graphs on slide 6. However, the pattern of our Company's order flow led to an 11% increase in realized prices.

Of course, we continue to realize benefits from the low cost of natural gas in North America. Gas prices moved up during the quarter, but are still lower than a year ago, a benefit that contributed to our strong nitrogen segment gross margin. Our phosphate business continued to perform well, as our sales volume was up year-over-year and sequentially, due to domestic sales, which increased as dealers and distributors geared up for a strong fall application season. Export sales declined, as shipments to Central and South America slowed during the quarter. Our operating costs were stable during the quarter, and the segment generated a gross margin in line with its performance earlier in the year. This quarter once again was characterized by excellent execution. The effectiveness of our employees in serving customers enabled us to turn these favorable conditions into exceptional financial results for our shareholders. We ran our combined ammonia operations at 99% of capacity and our phosphate operations at 98% of capacity.

We noted in the release that our Donaldsonville complex achieved 6 million safe work hours in the third quarter. On October 24, the Donaldsonville team surpassed the 10-year mark without a lost-time accident. This is a complex that includes five ammonia plants, four urea plants, three nitric acid plants, and two UAN plants, plus all of the associated handling, storage, transportation, and support services. It's the largest nitrogen complex in North America, and about to become larger. I would like to commend Lou Frey, our Vice President and General Manager at Donaldsonville, and every member of his team who has worked at the complex during the last decade. This is a remarkable safety achievement. The principal beneficiaries of safe operations are, of course, the employees themselves. The Company's management and Board of Directors are proud to recognize this milestone.

With that, let me now turn the call over to Dennis for some details on our financial results.

Thanks, Steve, and good morning, everyone. During the third quarter of 2012, the Company reported net earnings attributable to common stockholders of $403 million, or $6.35 per diluted share. This compares to $331 million, or $4.73 per diluted share, in the third quarter of 2011. Our third-quarter 2012 earnings included a non-cash mark-to-market gain on natural gas derivatives of approximately $40 million and an $11 million gain related to a change in employee post-retirement benefits. The net impact of these two items was an increase of $0.50 in after-tax earnings per share.

Our nitrogen business performed exceptionally well during the second quarter. We delivered 3 million tons of nitrogen products and achieved a gross margin of 58%, which you can see on slide 6. The increase in segment gross margin reflects realized natural gas costs of $3.34 per MMBtu during the third quarter of 2012, as compared to $4.45 a year ago. It also reflects the non-cash mark-to-market gain of $40 million on natural gas derivate contracts in the third quarter of 2012 as compared to a loss of $14 million in the prior-year period. At the end of the quarter, we had hedged positions for approximately 60% of our expected natural gas purchases for the final quarter of 2012.

During the third quarter of 2012, we sold 416,000 tons of ammonia at an average price of $622 per ton. Ammonia volume for the third quarter of 2012 was 3% higher than a year ago, primarily due to strong ammonia application on winter wheat, as well as customers' purchases of inventory in anticipation of a strong fall application for corn. Our average price for ammonia was 13% higher than in the third quarter of last year, due to tight industry-wide inventory and strong demand. Third-quarter granular urea volume decreased by 20% year-over-year to 559,000 tons. This decrease reflects the facts that the third quarter of 2011 had higher beginning inventory, higher production volume, and a higher level of export sales compared to the third quarter of 2012. Our average price of $470 per ton was 11% higher than in the third quarter of 2011 due to the pattern of the Company's order flow. During the third quarter of 2012, we sold 1.6 million tons of UAN, an average increase of about 3% from the third quarter of 2011. Average UAN price realizations were $296 per ton, a decrease of 7%, due to a higher level of UAN imports during the third quarter of 2012 as compared to 2011.

As shown on slide 7, our phosphate segment achieved total revenue during the quarter of $264 million, down about 8% from third quarter of 2011. Total sales volume was 517,000 tons, 2% higher than in the third quarter of 2011. Domestic sales volume increased 36% due to US dealers and distributors replenishing inventory, while export sales volumes decreased by 35%, primarily due to lower sales to Central and South America. Average phosphate selling prices declined for both DAP and MAP due to lower overall global demand. The segment generated a 24% gross margin, down from 30% a year ago, due to lower average selling prices. These quarterly results contributed to record-setting year-to-date earnings for CF Industries.

For the 9 months ended September 30, 2012, the Company set records across a number of financial metrics, including revenues, EBITDA, earnings, and earnings per share. Total year-to-date revenues were $4.6 billion, compared to $4.4 billion in the prior-year period. Total EBITDA for the nine-month period increased 17% to a record $2.5 billion, while gross margin as a percentage of sales increased to 53% from 46%, driven by both higher selling prices and lower natural gas costs. These items contributed to a 25% increase in net earnings to common stockholders to a record $1.4 billion, and along with our lower share count, increased earnings per diluted share by 38% to $21.19.

Now let me turn it back to Steve.

Thanks, Dennis. I anticipate that most of you are anxious to discuss our recent capacity-expansion announcement, but first, I would like to address our near-term outlook. The fundamentals of our business are very attractive for the remainder of this year and going into 2013. With an anticipated 97 million acres of corn to be planted, crop nutrients, especially nitrogen, should be in very high demand. We currently have an attractive order book for nitrogen. A very strong ammonia movement began last week, and we anticipate great fall movement if the weather continues to cooperate. The ammonia market generally is very tight going into next year, and we will be focused on effectively meeting the customer commitments we have in place. We are comfortable with our order book for UAN and anticipate that demand will continue to be strong into the spring.

Conditions in the urea market are expected to remain stable as we progress through the fourth quarter. We anticipate that continuing global demand, India purchases to meet its urea needs for the year, the end of the low-tariff Chinese export season, and production impacts from gas curtailments in other producing regions will be beneficial to the urea market in the coming months. We will have product available, and we will be prepared to meet demand as it develops. In the phosphate market, we will move through the normal low-season conditions in November and December and watch how this market develops. We do anticipate good phosphate demand in 2013, as both domestic and international crop planning intentions are very high, requiring significant crop nutrient application. We believe the cost advantage that is created by the low cost of North American natural gas should enable us to continue to earn very attractive margins as we move forward. To provide perspective on the earnings power of our business, consider that the average cash margin for a nitrogen producer in the Gulf region, with urea at $400 per ton, and natural gas at $3.50 per MMBtu, is over 65%. This speaks to the strength of the earnings profile of our nitrogen business.

Now I would like to conclude by providing you with some perspective on the capacity-expansion projects we announced last week. We are very excited to be proceeding with the major projects at Donaldsonville and Port Neal. They are indications of the strength of our Company and our belief in the sustainability of the fundamentals of the nitrogen business in North America. We believe that we are the best-positioned player in the industry today and that these projects will solidify that position for many years to come. As you know, our thinking has progressed from possible de-bottlenecks and upgrades at various facilities to the two much larger-scale projects we have decided to build. The evolution resulted from very detailed analysis of incremental opportunities throughout our nitrogen production network.

At the same time we were exploring those specific incremental opportunities at each of our complexes, we were completing FEED study work we had commissioned for the larger integrated approach at our brownfield sites. Following completion of the FEED work, we concluded that the two integrated ammonia and upgrade projects will provide attractive economics with less risks than the incremental approach, and we continue to retain the ability to do the de-bottlenecks at individual, discrete projects at later dates in a sequential fashion that would minimize associated execution risk. As we noted in our release, we believe that we will be able to bring our new production online before most, if not all, of our competitors' projects. This is based upon our experience and the advanced status of design, site layout, infrastructure, and our contracts with UDAF. We expect to file our permit applications in Louisiana this month, and those in Iowa will follow close behind.

We believe that these projects will provide very attractive returns for our stockholders and that they will yield the best return-risk relationships among available investment options. To put these projects in perspective, we estimate that even at an average urea price substantially below current levels, and an average natural gas cost substantially above current levels, these projects will provide internal rates of return significantly above our cost of capital. You may ask whether this announcement impacts the share repurchase program we approved in August. We believe that our financial profile and cash flow outlook are supportive of completing both that program and these projects in the time frames we have indicated. We're proud to be the leading producer of nitrogen fertilizers in North America and look forward to generating even more value for our owners with these major initiatives.

With that, Darcel, would you please open the line for questions?

(Operator Instructions)

Vincent Andrews, Morgan Stanley.

Thank you, and good morning, everyone. Wanted to ask a little bit about the new projects, and maybe to follow up on your comment, Steve, about the return profile and your cost of capital. When we modeled out the two plants and did a similar idea of you of higher gas prices, assuming the strip during that time period and lower product prices assuming a marginal cost of production at the high end of the cost curve around $9 for gas, we were coming up with about 10% return profile for both plants. Would you agree with that?

Vincent, I appreciate that you have tried to replicate our analysis, but we would like to keep the details of our analysis to ourselves for competitive reasons.

Okay. Second question would then be if we were to fast-forward, and assuming we're on the second quarter call in 2015 and the Donaldsonville expansion is up and running, if we also assumed that the current MLP market remains as it exists today with a pretty big valuation discrepancy between [CF to C-corp] and Terra Nitrogen holdings, the MLP where you're the general partner and the largest unit holder, would you consider beginning to drop down these new projects as the MLP market would allow into that Terra Nitrogen vehicle?

Let me provide a little bit of perspective on that, and I will start by certainly acknowledging that we run an MLP today as a general partner. We own a little more than 75% of the limited-partner units. We also own two-thirds of the Medicine Hat complex, which operates as a cooperative. So we have experience running entities in addition to our C-corp mothership, if you will. Now is if I zoom out a little bit and I look at our total Company profile, we're running 13 ammonia plants at 7 sites in North America. It's a complex network, and if we go back to the Terra acquisition, the synergy opportunity of running that as a single unit was very substantial, and we worked very hard to optimize our production storage, distribution, and transportation network. We think we've done a really great job in doing that.

If I think about the prospect of, for example, imposing into that network legal structures at individual facilities, even within individual facilities, it adds a degree of complexity and frankly, adds some operating complications that would make it much more difficult for us to optimize this great network that we have. Our focus is on maximizing our ability to optimize the whole network and generate the most economic value we can find in the whole enterprise. We really would not welcome complications related to transfer pricing. And then I'll just add one more thought about that, and that is that it would create two major classes of holders of our securities. MLPs are generally held by retail investors, and as you know, CF industries is held largely by institutions. So having to manage the differing expectations of those two investor bases, again would add complication to a system that, frankly, works really well as it is.

Thanks. Appreciate hearing your thoughts on that. I'll pass it along.

Don Carson, Susquehanna Financial.

Thank you. Steve, a couple more questions on your expansions. For some time, you've been somewhat cautious on your ability to get carbon permitting for new facilities, or major de-bottlenecks, so just wondering what has changed there, whether you made a prediction on today's election? But why you think you can get the permits that you need? And what have you done, if anything, no secure a source of long-term natural gas for these expansions from a pricing standpoint?

Okay. I'll respond to your second question and then ask Tony Will to respond to the first one. We have operated in the North American natural gas market our entire history, and one of the main reasons driving this decision, perhaps the main reason driving this decision, is the availability of low-cost natural gas and the sustainability of that supply in the US. We are comfortable operating in the spot market going forward, with occasional excursions like we did this year to [fix] gas. If someone were to come along and offer us the deal of a lifetime, of course we would sign up for it, but we don't see any deals like that available to us, but we remain open to it. And then, Tony, would you comment on the permitting issue?

Sure. We today, obviously, operate across all of our facilities with air and water permits and have a pretty constructive relationship with the regulators. We've been working with them very closely over the past year or so doing extensive modeling, and the plants that we are building are state-of-the-art. [The term of art] is BACT, or best available control technology in environmental permitting world. And these plants are certainly best available control technology plants. They're the lowest-emissions, most efficient plants that can be built. We feel comfortable based on that what it is that we're designing and building, in our past relationship with regulators and existing conversations, that we can get the permitting done.

Kevin McCarthy, Bank of America Merrill Lynch.

Hi, yes, good morning. Thank you. Steve, you alluded to some logistics challenges related to the water on the Mississippi. In the release, you discuss sending more product by truck and rail. Did that have an appreciable impact on your financials in the quarter? And, if so, what was the aggregate amount of that?

Good morning, Kevin. I would characterize it as being negligible and perhaps difficult to extract from our overall financials. It really didn't move the needle.

Okay. And would that be true for the Hurricane Isaac outage of three days at Donaldsonville as well?

Correct.

Okay. Very good. Second question, if I may, on natural gas, in December of 2011, you chose to layer in some fairly significant hedges for the forward year. Perhaps you could comment on your current disposition with regard to the gas market and whether or not you have any hedges currently in place for 2013?

Okay. I'll ask Dennis to respond to that.

Yes, Kevin. Good morning. Like we said in the text of the speech, we have got 60% of the gas that we're going to buy in the fourth quarter of this year hedged pursuant to the hedge we put in place back at the back end of last year.

Right.

And then as we look into 2013, we don't really have very much hedged at all, other than stuff that we have for -- that we may have sold on the forward-pricing program. But we haven't taken on any big blanket hedges like we did at the end of 2011.

Okay. Thank you very much.

Mark Connelly, CLSA.

Should we assume that overseas growth opportunities are off the table for now, or do you still see yourself as having financial flexibility to pursue additional opportunities offshore?

Mark, our focus for the next three years or so will be on executing the projects that we announced. We are always open, of course. And several years ago, before we had the shale gas revolution, we were intent upon expanding our footprint in the direction of being offshore. Today, if you look at the global cost curve, North America is the best-positioned, least risky place to be. If there's another part of the world that pops up as being essentially equally attractive, of course we would be interested, but our focus right now is on Donaldsonville and Port Neal.

Okay. One more question, would you expect to see unusually high urea imports this winter, given the current prices? And do you see the system having the ability to handle a big surge in imports?

Okay, I'll ask Bert Frost to address that.

We anticipate urea imports to be consistent. We saw a higher level in August and September, level of arrivals. Through the fourth quarter, we anticipate that those -- that the market will be sending urea to the United States, and we're seeing it today. Acres are going to be high at 97 million. You're seeing some wetness in the northern territory, which is an ammonia area. That area could move to urea pretty quickly. Should we have a high degree of demand, we will need to import, and that's why you're seeing us at our capacity, additions focused on urea, because we think we are in a good place to capture that market in future years.

That's super. Thank you.

P.J. Juvekar, Citi.

Steve, you increased your CapEx forecast from your previous forecast, your CapEx. So what is your outlook on supply? And how many of these proposed nitrogen plants -- I think there are 13 that have been proposed -- how many of them you think will come online?

P.J., may I just make sure I understand your first comment? You're talking about we've increased the amount of money we're committing to our expansion projects. Is that correct?

That is correct.

Not our CapEx for 2012? That's not --

No, that's right.

Okay. My only comment on that, P.J., is that the Company that we all operate is committed to building these two projects. We are quite far down the road. We have already begun to spend money, and these projects will be built. I don't have any way of predicting whether any one or any group of projects may materialize. But clearly, our projects are right in the heart of the marketplace. We're building on strength. We're clearly not the marginal project. We are building projects that are needed in the marketplace. How many of the other ones get built, I don't know. It's up to other people, but I certainly expect some are going to fall off the list, but I couldn't tell you which ones, or when.

Okay. You talked about a robust summer fill activity, and then some other companies are talking about that dealer inventories are quite low. So how do you reconcile those two statements? Who's doing the summer refill? Is it the dealers? Is it the farmers?

Bert?

Our focus on our trader wholesale and retail segments that we supply. We have constant communication with our customers that are represented by those segments. Those segments have been purchasing to position the products for their customers, which are the farmers. Obviously, because of 2008, and the oscillations in the market, certain segments are reticent to take on tremendous, or even marginal, risk. We believe that those products that we have sold are working their way down through the value chain to the farmer, and we have seen consistent demand from our customers to serve their customers.

Thank you.

Jeff Zekauskas, JPMorgan.

I notice that you didn't repurchase any shares in the quarter. Why was that?

Jeff, as we have said, I think several times, we will be reporting on share repurchases as and when we do them. Our record on share repurchases going back to the first round in 2008 I think has been quite successful, and we intend to continue to successfully repurchase our shares in a fashion that I think we hope will be recognized in retrospect as being effective.

Okay. I think the highest price at which you've repurchased shares has been at about $180 per share. So is it safe to think that if your stock price remains above, I don't know where it is now, say $205 or $206, through the course of 2013, you wouldn't repurchase shares in 2013?

Jeff, we will be reporting on our share repurchases after we do them.

Okay. Great. Thank you very much.

Matthew Korn, Barclays.

Good morning, gentlemen, just a question on the global nutrient markets overall. It seems that over the past few months, it's been a dual-track market where North America demand has been steady to good, while overseas demand, as you mentioned, Central and South America in particular, have been somewhat lackluster. And any commentary you can offer on why that's persisting? It seems as though prices are good. Global stocks are low. I don't know if it's higher residual inventory, if there's more [macros] conversion. What's the [element there] for how that may converge or to show spread in demand?

Bert?

You're seeing several different factors impacting the price of urea, and it is a world product. Pricing in the United States is affected by different factors of supply and demand. And so you referenced Central and South American demand, and that demand has been consistent. There's been some issues with Brazil and their long lines at the ports due to earlier purchases and a high volume of [NPNK] products that have been directed to Brazil. That has pushed the arrival and some demand issues, but we expect their second-crop corn and cotton crop to be fully fertilized, which will require additional purchases. Argentina has had some spot issues also, but that's some due to climate. India has been -- has purchased -- as of now, we mentioned in our script that they were 9% below through the quarter, but their recent tender brought them current with last year's demand.

One of the impacts has been the addition of supply. China has increased, or the amount coming out of China, is higher than CF, as well as the industry expectations, and then you have additional supply out of Indonesia and other spot markets. There is some uncertainty in Europe on demand. So when you couple all that together, product has made its way to the United States, and that has impacted the NOLA price, as well as the interior price. When you look at -- again, I would go back to the macro. When you look at what is going on in the market, and where we are on pricing, we're in a stable market. Pricing has oscillated between $400 and I would say $440 over the last several months, and that's a very attractive place to be. Referencing Steve's comment, with current gas and pricing at $400, that's a 65% margin, cash margin, for a urea producer. When we look at the market, think it's positive, and has a positive trajectory for the future quarters.

Got it. So it sounds as though really, the level of demand has been [looking] fairly constant then, or steady, whereas region to region, product to product, maybe you have some fluctuations in available supply that impact where that's being actual [manifest], in other words, whether to buy from you, or from, like you said, some of the imports coming in.

If I understand your question correctly, yes, additional supply has negatively impacted the market, but demand has been fairly consistent.

All right. Thanks much.

Joel Jackson, BMO Capital Markets.

The CapEx for your expansion did go up from about $2 billion to about $3.8 billion. Obviously, you've added about 1 million tons of integrated ammonia with the new capacity. If you could speak about what changed in your plans to decide to make the new capacity completely integrated for ammonia? And also, could you comment, the new 1 million tons of ammonia is roughly the $1.8 billion difference in incremental CapEx? Thanks.

I think in my prepared remarks I made some general comments about the evolution of our thinking. One aspect of this was as we looked at the de-bottleneck opportunities available to us in ammonia, and we were looking at de-bottlenecking of large number of plants, and added up the amount of ammonia, and we compared that with the amount of upgrade product that we were seeking to produce, that we were actually reducing our free ammonia supply. That's when we began to think that significantly more ammonia production was required to get us to the outcome that we wanted. I think it's also important for you to note that in addition to having more ammonia production, we've added 1.3 million tons of urea to the mix here. So we're getting a substantially big bang for the additional bucks we're spending.

Okay. Following up on that, I assume that you're giving the guidance in some of your comments today that maintenance CapEx right now is about $350 million to $400 million for the Company. Could you also give us an -- jus please comment on that? And could you also give us an idea of once the new capacity is online, where maintenance CapEx could be around? Thank you.

I think your introductory comment is fair. $350 million to $400 million is a reasonable steady-state estimate for today. I can't project what our maintenance capital will be in 2016. I guess I would say it will be modestly higher. Tony, you want to add to that?

Yes, I would say you'll see probably more impact from inflationary factors than you do from the fact that we have got a couple of additional operating units that go through turnarounds periodically. But I wouldn't expect, absent changes in inflation, for it to be radically outside the range of $350 million to $400 million that we're in today.

Thank you.

(Operator Instructions)

Michael Piken, Cleveland Research.

Good morning. I just want to talk about the forward purchase program. It seems like you're further ahead on UAN than some of the other products, and I was wondering if that was something that you think was more your customers' choice, or just what you guys made available to the customers?

On our specific product, our forward sole position, I would say we're adequately sold. We're pleased with our forward sold book. Each of the product have a different profile. And you mentioned UAN, and we're pleased with where we are with UAN. But we're active in the market every day, and selling products, and still have a remaining position to sell.

Okay. Great. Phrased differently, does it reflects the fact that you're further ahead, at least on UAN, does that reflect that you and the dealers have more of the same expectations of where that market is headed versus, let's say, ammonia prices, which have been particularly strong over the last couple months?

I would take it over an end perspective. Because of the high acres expected to be planted in corn and the need to get nitrogen every year to the ground, when we did our fall sell, or fall filling period, for UAN, that started around the end of June and continued through July, I would say all of our customers took positions that they were comfortable with. Parallel to that, we were selling ammonia for the fall application period, which is where we are today. As we mentioned earlier on a previous call, urea has been coming in, and our customers have been purchasing that, also. So I would say that they all have been -- our customers have been active in all three nitrogen products.

Charles Neivert, Dahlman Rose.

Good morning, guys. A couple quick questions. One, you guys said the ammonia applications season is beginning, and the way things look, it should be a good year, weather permitting. So far, is weather cooperating, or are we not getting the cooperation we would like to see at this point? I know we have time, but --

Go ahead, Bert.

I would say when you look at the weather map today, it's been ideal. We received the moisture in late August through September and early October, where some of the areas that were severely impacted by the drought are actually on a soil-moisture basis doing very well. There are some areas that have received excess moisture in the form of rain and now snow, and that would be in North Dakota. But you have to look at the total picture with harvest coming off in places four weeks early, which allowed for adequate soil preparation, or ground preparation, [NPNKs] went down, and now they're putting down ammonia. So it's going well, and weather permitting, we anticipate that we will have a normal ammonia application season.

Okay. And the other, you said that a number of things that impacted ammonia prices to the upside earlier, with outages and things of that nature. For the most part, are those back online now, or are we still seeing the same or similar outages, or where do we stand? And in conjunction with that, how about the nitrogen start-ups that were supposed to be coming through in I guess it was Algeria and the Middle East, [Qatar], I believe?

What you're referencing on ammonia, that's a world that's driven by producers outside of the United States, and Trinidad has been suffering through a shortage of gas that's hit all the producers. You have, as well as that, announced over the last several weeks, cutbacks in Egypt on gas supply, and we've had a high level of operating rates for the phosphate producers. So demand has been very positive. So supply and demand impacted together has driven prices up over the $700 metric ton [Tampa], so that's very -- that has also driven the United States in terms of what is available on ammonia. Your second question on start-ups, the QAFCO plants are running. We are not anticipating -- we are following the [sulphur] urea, or non-export of product out of the sulphur plants, and we're not exactly sure when they will begin exporting products.

Okay. So QAFCO is back in the market, all six -- five, six operations they've got, and you're just waiting for the Algerian stuff. Now again, Algeria was a combination of ammonia, urea, but it's going out as urea? Is that the case there?

And I am not sure. And regarding QAFCO, yes, it's our assumption that all six are operating.

Okay. Thank you.

Edlain Rodriguez, Lazard Capital Markets.

Thank you. Good morning, guys. Steve, quick question. You have committed significant capital over the next three years between Medicine Hat, share repurchase, and the extension of projects. Can you talk about how you plan on funding for all those projects? Is it going to be from cash flow, or you going to have to take debt and so forth?

Good morning, Edlain. So I'll do the math for everybody. We had $3 billion under the share repurchase program, to almost $1 billion for the one-third of Medicine Hat to $3.8 billion to expansion projects. I think the total comes to $7.7 billion, which is a lot of money. On the other hand, the cash flow profile of this Company is very robust, and our balance sheet is in excellent shape. So we don't know, obviously, the pattern of our cash flow on the inflow side over the next several years, but we continue -- we think it will continue to be very strong. We'll be mapping out our cash outflows, looking at the capital projects and our own internal assumptions about share repurchase, et cetera. It is possible that in order to make this all fit together, that we would access the capital markets, and if we do so, we will be doing so from strength, and we have an investment-grade credit rating today. We intend to maintain the metrics that are consistent with an investment-grade rating, and we feel quite confident that we can do that.

Okay. Thank you. That's all I have.

Michael Cox, Piper.

Good morning, guys. My first question is on the wheat crop. Given some of the dry conditions, do you expect any impact for winter wheat nitrogen demand?

Winter wheat is -- the soil or the ground preparation takes place in August and September, with the application of ammonia ending around the beginning of October. So that season has already passed. Yes, it has been dry. Some of those farmers plant wheat without fertilizer because the crop emerges, then it goes dormant, and then you can apply again in February. So what we have seen out of the wheat region is positive consumption, and we anticipate a robust application season, probably starting in January, February, when wheat crop emerges from dormancy.

Thanks. That's helpful. And then just quickly on the urea market. Given the softness we've seen in pricing there, and the likely drop-off in export activity, have you held back on any forward sales of urea to account for that?

Softness is depending on what side you're sitting on. Again, at $400 is where we are today. Historically, that's a very -- it's a good number, and we're pleased with that and pleased with our performance in the market. So, yes, you do see oscillations that are driven by supply and demand. I do think we will receive additional imports from various exporting countries to the United States. However, we do believe that inventories are low throughout the world, whether that be South America or Europe. We see a positive market going forward for urea, no matter if these additional plants come online or not. You have China that will be ceasing their export window, or has -- the export window has closed, and what remains in the bonded warehouse will be exported. But we think come January that market should -- the urea market around the world should be positive.

I would like to add a more general comment about this urea market. We have now seen for the last 1.5 years or so urea prices in a range from, let's say $350 or $400, up to as high as $700. And if we live in that world of urea prices going forward, our shareholders should be very happy with our investment decisions. That's a great place for the urea market to oscillate between.

Thank you.

Paul Massoud.

Hi, thanks. Yes, it's Paul Massoud from Stifel. I had a question on nitrogen price. Given where pricing has gone for the different products, have you seen any pushback from dealers with respect to where ammonia prices have gone, for example? And potentially -- can you talk about the potential for substitution between the different products?

A general comment about nitrogen prices and fertilizer prices. Traditionally, the cost of fertilizer takes about 19% of the farmer's revenue dollar. Today we're in the range of 15%, 16%. The price of fertilizer is not a problem for farmer economics, even though, of course, farmers will complain about the price of inputs, no matter how much money they are making. That's just what it's like being a farmer. With respect to individual products, even at today's price level, ammonia is still the best value per unit of nitrogen. That's why farmers who have experience applying ammonia, and who are comfortable continuing to apply it, will almost always choose ammonia if field conditions allow them to do so.

All right. Thank you.

I would now like to turn the call over to Mr. Dan Swenson for closing remarks.

Thank you, Darcel. We would like to thank everyone who participated on the call today. If you need more information about CF Industries or our results, please feel welcome to contact me.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.