CF工業控股 (CF) 2020 Q2 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the CF Industries Holdings First Half and Second Quarter 2020 Results and Conference Call. My name is Jenny. I'll be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick with CF Investor Relations. Sir, please proceed.

Good morning. And thanks for joining the CF Industries first Half and Second Quarter 2020 Earnings Conference Call. I'm Martin Jarosick, Vice President, Investor Relations for CF. With me today are Tony Will, CEO; Chris Bohn, CFO; and Bert Frost, Senior Vice President of Sales, market development and supply chain.

CF Industries reported its first half 2020 results yesterday afternoon. On this call, we'll review the CF industries results in detail, discuss our outlook and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict, therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website. Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Now let me introduce Tony Will, our President and CEO.

Thanks, Martin, and good morning, everyone. Last night, we posted our financial results for the first half of 2020, in which we generated adjusted EBITDA of $808 million. These results underscore the resilience of our business model and the outstanding performance of the CF team. In the midst of a difficult and uncertain environment, we maintained our focus on safe and reliable operations, worked closely with all of our partners to avoid disruptions due to the pandemic. And delivered company record first half sales volumes. These efforts exemplify our team's sustained operational excellence, which, along with our position on the low end of the global cost curve, drives our cash generation.

On a trailing 12-month basis, we have produced more than 10 million tons of gross ammonia, sold roughly 20 million product tons and generated $973 million in free cash flow.

Most importantly, we have done all of this safely. Our rolling recordable incident rate at the end of June was 0.31 incidents per 200,000 waiver hours, which is a new record low for the company. Protecting the health and well-being of our employees, particularly during the COVID-19 pandemic remains our top focus. Our safety culture, along with the safety protocols we put in place, have kept a number of employees who have tested positive for the virus to a small number, and we have not experienced any known transmission within a CF location. We continue to have in place numerous precautionary measures across our network to protect our employees and those critical contractors who come into our facilities. In contrast to the uncertain challenges facing much of the broader economy, the nitrogen industry has performed well, driven by robust demand and low energy cost.

And over the past few months, our outlook for the next 6 to 12 months has become both clear and much more positive.

As you'll hear from Bert, strong demand in India and Brazil is supporting the global nitrogen market, with urea prices rising significantly in recent weeks. We are also more confident that 2021 corn planted in the U.S. will be within a normal range.

Chinese anthracite based production remains the high cost marginal ton. And despite all the doom and gloom prognostication over the past 12 months, suggesting coal prices in China will fall, that hasn't happened.

As you can see on Slide 13, the cost advantage per metric ton of urea remains robust for North American producers compared to the marginal production. Additionally, we expect that the cost curve which had flattened due to lower energy cost for many producers will steepen again going forward. Since the beginning of the year, U.S. LNG exports have declined significantly.

As this works its way through the market, production costs for Europe and Asian producers should rise. As you can see on Slide 14, futures prices suggest a return to a more normal energy differentials in Europe and Asia. As this occurs, we expect margins for North American nitrogen production to increase compared to producers in these regions, which is particularly important during periods when China isn't exporting. Longer term, we expect to remain on the low end of the global cost curve due to our access to low-cost and abundant North American natural gas. That, combined with the fact that we operate in regions which are import dependent, should enable us to continue to generate substantial free cash flow in both the short and the long term.

With that, let me turn it over to Bert, who will discuss the market. Then Chris will follow to talk about our financial position and capital allocation outlook. Before I return for some closing comments. Bert?

Thanks, Tony. CF had a solid spring that highlighted our team's continued outstanding execution. We had strong production, record sales volumes and navigated the uncertainty related to the pandemic extremely well. We had robust demand across all our products, this was supported both by higher planted corn acres than in 2019 and much more favorable planting conditions, which lengthened the application season.

Early in the second quarter, we did see a pandemic-related decline in demand for industrial uses of our products. Strong agricultural demand and our production flexibility helped mitigate sales volume impacts. Since June, industrial demand appears to have moved closer to normal levels, especially for products such as diesel exhaust fluid. As industrial activity is closely tied to the economy, we will continue to watch this area closely and are prepared to adjust our production mix, again, if needed. Because of our heavy volumes during the first half, we ended the fertilizer year in June with very low inventories of all products. In July, we conducted our prepay and fall fill programs, all of which were in line with our expectations. We believe that those who participated will see a good return in the future given the rapidly changing and improving nitrogen dynamics in North America and around the world.

The U.S. Department of Agriculture projects 92 million acres of planted corn in the U.S. for 2020, 5 million more acres lower than its earlier forecast. This should alleviate concerns of a substantial oversupply scenario. At the same time, demand for corn globally has increased significantly led by purchases for China. Additionally, we have seen a good recovery in ethanol production and margins, supported by an increase in U.S. vehicle miles traveled. As a result, we believe planted acres in 2021 for the U.S. as well as total nitrogen used will be similar to the 10-year average. This improved North American outlook over a few months ago has been bolstered by positive demand driven developments globally.

Current global nitrogen market sentiment is being driven by India and Brazil. Imports of urea into Brazil are up 13% through the first half of 2020, and we expect continued strong demand through the remainder of the year and into next year. In India, urea sales from April through July are up nearly 50% over 2019 due to favorable growing conditions, which could lead to a second straight year of record urea imports. Global urea prices have risen substantially with this demand as recent Indian urea tenders have secured lower-than-expected volumes. At the beginning of August, India issued its third urea tender in 22 days and at sixth since the end of March. We believe frequent urea tenders by India could continue through the end of the year. These positive demand developments have occurred alongside important though smaller supply developments. We have seen some high-cost ammonia production in Trinidad come off-line, we are also seeing profitable delays in the startup of new capacity due to the pandemic. So as we head into the second half of the year, we feel positive about industry dynamics and, in particular, about the demand outlook.

As always, we are prepared to leverage our manufacturing and distribution network to meet any challenges and capture opportunities that arise.

With that, let me turn the call over to Chris.

Thanks, Bert. For the first half of 2020, the company reported net earnings attributable to common stockholders of $258 million or $1.20 per diluted share. EBITDA was $786 million, and adjusted EBITDA was $808 million. These results reflect the impact of lower year-over-year global nitrogen prices, partially offset by lower natural gas costs and higher sales volume. Natural gas continues to be a strong tailwind for the business. For the first half of the year, our cost of natural gas in the cost of sales was lower by nearly $1 per MMBtu and or about 30% than in the same period the year before. Management focus on strengthening our balance sheet and managing controllable costs responsibly also continues to support our results and financial flexibility.

As we have said before, our fixed charges for 2020 are approximately $190 million lower on an annualized basis compared to 2017. Additionally, controllable cost per ton were lower in the first half of 2020 compared to the first half of 2019, even with the special bonus we provided to operational employees from March through June. This continues to support our cash generation on a trailing 12-month basis, net cash provided by operating activities was approximately $1.5 billion, and free cash flow was $973 million.

Cash and cash equivalents on the balance sheet at the end of the first half were $563 million, and our $750 million revolver is undrawn. As we look ahead, our approach to allocating capital will continue to be balanced. This is especially important given the uncertainty in the broader economy. First, we'll continue to invest in our assets to support safe and reliable operations. As we noted in the press release, we expect capital expenditures to increase in the second half of the year compared to the first half because of increased scheduled maintenance and turnaround activity. These activities will also somewhat reduce gross ammonia production in the second half compared to the first half of 2020. We estimate that capital expenditures for the full year will be approximately $350 million. Second, our focus in the near-term is building liquidity. And given the uncertainty in the broader environment, we expect to be above our target liquidity level in the near term. In line with this approach and similar to most companies, we did not repurchase shares in the second quarter in order to increase cash on the balance sheet. We believe this will give us the flexibility as a response to the pandemic. As conditions in the economy normalize, our approach will also give us additional capacity, along with our free cash flow generation to continue to create long-term shareholder value.

With that, Tony will provide some closing remarks before we open up the call to Q&A.

Thanks, Chris. Before we move on to the questions, I want to thank everyone at CF for a strong first half. Our team continues to demonstrate both their focus and work ethic during trying conditions as well as the resiliency and strength of our business model. We're extremely proud of how our team has navigated the pandemic so far, and that effort continues at all levels of the business. As I said before, in the short term, we see a much stronger nitrogen outlook over the next 6 to 12 months than we did just a quarter ago.

Global demand is strong, and we project 2021 to have a normal corn acres in the U.S. Longer term, CF remains among the best positioned companies in our industry. We have an unparalleled manufacturing, distribution and logistics network that underpins our consistent operational performance. We expect to remain on the low end of the global cost curve and benefit due to operating primarily in import-dependent regions. We are also the most efficient converter of EBITDA into free cash in the industry. We believe these factors, along with our strong balance sheet, will enable us to drive superior free cash flow generation through the cycle. This will allow us to continue to build on our track record of long-term shareholder value creation.

With that, operator, we will now open the call to your questions.

(Operator Instructions) And we have our first question from Joel Jackson from BMO Capital Markets.

Can you talk about what you're seeing now for the setup of the fall season in the states? I guess, in Canada, too. A lot of moving parts going on. Is it a normal order book? What have you locked in? Where are the cautious -- where is the caution? Where is the opportunities?

Yes. So Joel, we're seeing it's pretty interesting because we've come off this year of 97 million, now it's 92 million acres of corn, a little bit weaker kind of grain and oilseed market. But amazingly, we had a fill program for ammonia, which is fairly small and then started building the book for the fall application season. As you remember, those tons sit in our inventory. So whether we sell them now or sell them in the fall. We're very comfortable with our ability to move those tons and get them into position, had to navigate a few river issues, river closures. But we feel very, very good about the ammonia season for the fall. Setting up, one with how the current crop is maturing and will come off and then have time for applications, both soybeans and corn. And then just the pricing structure.

So what we think is a fair level for ammonia is out there and has been taken up.

The next one is UAN, which is a bigger program. And we've had different size fill programs in the past from 1 month or 1.5 months’ worth of supply all the way up to maybe 4 -- let's say, 4 to 6 months. And this year was right in line with the average. We had good uptake. I think prices were very attractive, and I had those in my prepared remarks about the opportunities available to some of our channel partners.

And so you've seen us be active in the export market. So again, a balanced approach to the market. And I think fall will kind of roll out in a good way. We're expecting in the 88 million to 90 million acres of corn for next year. So there'll be good application in the corn states. And we're also seeing with, as I mentioned, globally, what's happening with the other large agricultural markets like India, Brazil, Argentina, devaluations, coupled with support and just good pull and good movement to China on the demand side for those products like corn and soybeans as well as protein, supports a nice global level. And that's why you've seen urea bounce all the way up to now in NOLA, $250 or even $255 has been done for August. So setting up, I believe, very nicely for the fall and then into 2021.

And our next question comes from P.J. Juvekar from Citigroup.

Yes. My question is a little different. Companies like Air Products are getting into green ammonia as a means of hydrogen transport. And I feel like no one knows making it transporting ammonia better than CF. It's just that you may not have experience in green ammonia or green hydrogen. But is that something you would consider in the future? Or is that not interesting to you?

As the world leader in ammonia production, we're very focused on all potential applications and uses for ammonia. And I think moving forward, particularly as the world is challenged with traditional hydrocarbon-based fuels and looks for cleaner fuel solutions that a hydrogen based economy using ammonia as a carrying plate for that is an outstanding solution. So it's certainly something that we are focused on and spending time on. As you know, we have a pretty deep relationship with Thyssenkrupp Uhde. They built our last 2 large expansion projects. I think they're one of the world leaders right now in the electrolysis. And so it is conversation and investigation, we're spending a lot of time on. And it would not surprise me to see us move into a situation where we have a full slate of offering at some point here in the near future with anything from conventional ammonia to blue ammonia to green ammonia. And some various combinations. But I think longer term, it's certainly the direction the world is moving and needs to move, and I think we are going to be a significant beneficiary of that because we're that -- we've already got all of the back end plus logistics and capability in place. And it's about modifications on the front end. And again, we're in the best position to capitalize on that. So we're pretty excited about that.

And our next question comes from Michael Piken from Cleveland Research.

Just wanted to get your take in terms of what's happening with the Chinese urea exports. It looks like they haven't been as active in some of the recent India tenders. And just sort of wanted to get your sense in terms of how you see their production and operating rates playing out in the back half of the year? And is there any kind of [chirannean] urea that's in the market as well?

It's been an interesting year for watching China as we've gone year after year with lower, lower level than last year, a little bit of an uptick on their exports. We expected 3 million to 4 million tons for this year, and we're trending lower than that through the first 7 months of the year. So their operating rates have been around, let's say, high 60s, low 70s percent, which we equate to about 53 million to 55 million tons of available supply. Domestic consumption seems to have been higher. Similar to India, incentivizing domestic production for supply of corn and rice and other -- obviously, fruits and vegetables are about 50% of their urea demand. But that has correlated well with internal demand and they're not pushing product out to the international market. I think when the market hit on a metric ton basis, $235, $240, we had expected more supply to come out of China. It did not. They've avoided the last 2 India tenders, just kind of on a perfunctory basis participated. And so looking at this tender that will open early next week, I would expect some additional tons, but those tons have now have been bid and sold in the $250, even up to $270 a ton FOB. So very supportive to the international market, very supportive trend for the remainder of the year, in which we believe will be probably fewer than last year export tons and at higher prices.

And our next question comes from Steve Byrne from Bank of America.

And our next question comes from Ben Isaacson from Scotiabank.

This is Ziad on for Ben. How has industrial demand for ammonia progress over the last quarter? And how are you seeing that recovery over the rest of the year and then also into 2021, particularly with how it's impacting your realized ammonia prices?

So we had a -- there are 2 sides to the ammonia equation. One, like you mentioned, is the industrial side, which if you can include and upgrades for that segment, ammonium nitrate urea, UAN. And then the industrial as a chemical intermediate or into nitric acid or phosphate production. And so we did see a dip in demand on the industrial side, due to COVID, some of that on the phosphate production, but just overall industrial capacity declining. We're seeing that recover and seeing a good pull from our customers for that part of our business, which is a healthy percentage of our ammonia business. It's a 365/24/7 type business for us where the agricultural applications are really a few weeks in November and 1.5 months, maybe in April and May and into June.

For the fertilizer side, we saw a nice recovery for ammonia. We've had some difficult application years in '18 and '19 due to whether it was cold, wet weather in the fall or cold weather in the spring, which delayed and moved some of that consumption to the upgraded products of UAN and urea. So we're pleased this year to see that and see our channel partners work with us on the custom application business. So feel good about where we are and what that or pushes forward for us is a healthy, lower inventory level going into the fall, and we expect to see, as I said earlier, a good fall application season.

And our next question comes from Adam Samuelson from Goldman Sachs.

I was hoping just on capital allocation. Was hoping to get the views on what it would take to restart repurchases? It sounds like the outlook on the market has improved. Cash position -- liquidity position is good. Just how do we think about the decision process from here on buybacks?

Yes. Adam, I think the big issue is just kind of the broader economic uncertainty. I think we feel very good about nitrogen and in our business, particularly here in the U.S. and the U.K. So it's not really an issue around anything to do with the fundamentals of our business. Much more so just kind of broadly what's going on in the economy. And I think during periods like that, holding more cash rather than less is the sensible thing to do. We always have the opportunity to then turn around and distribute that cash when there is a solution to this pandemic situation. We do have a little more clarity around broader economic certainty. And so -- but I just think in the near term, it makes all the sense in the world for us just to play the long game here and not rush into share repurchases.

So we'll be building cash, as you know, and Chris talked about it. We've got $250 million coming due next year that we've committed to redeem some notes to on or before the maturity date. And as we start getting kind of the world moves past the pandemic situation, will return to norm course repurchases.

And our next question comes from Chris Parkinson from Crédit Suisse.

Just given the recent urea rally, just how should we think about the sustainability of the run-up in terms of just how you're thinking about the SD dynamics in the second half of '21 as well as the cost curve? So if I'm just sitting back, thinking about FX and then relative input costs, on an MMBtu basis, fourth quartile versus first quartile, where do you see the current spread versus earlier this year versus your presumed outlook for 2021?

So Chris, I think based on where emphasize is today, it would suggest about a $260 delivered NOLA price. That's above where we are today. So we're continuing to trade at a little bit of a discount to international parity, which is not really that uncommon given that when people need to find liquidity for cargoes, this is the place they come. That said, I think we're trading in a range that reflects actual underlying economics. And I think that's been shown the last couple of Indian tenders when you haven't seen huge participation coming out of China. And I think the world is operating very rationally, at least within the nitrogen industry today. As I said, we expect, given the absence of LNG cargoes, that once the surplus has kind of worked its way through the system, you'll see energy costs in Europe and Asia climb back up to an appropriate differential off of Henry Hub again.

And so almost regardless of whether held prices move, what we really look at is that differential cost. And that differential becomes increasingly important during periods when China isn't exporting. And so we're very constructive about what the margin structure of this business looks like going forward, which we kind of indicated the next 6, 12, 18 months look pretty positive from our perspective.

Yes, I agree. I think the nice -- I think where we are today and where we are -- I think we were projecting with the India tenders alone, taking the producer longs from North Africa and Arab Gulf into September, that kicks those positions forward, but you still have substantial buying, probably 0.5 million tons per month for Brazil through January and into February. Projections today are India will be over 10 million tons of consumption of imports, which is -- will be an all-time record. And so the rally, I believe, lasts for at this point into Q4. And then the United States has to start buying for its spring demand. And we are -- we believe the channel inventory in North America is fairly low coming out of our application season as well as production turnarounds that ours as well as others will have taken place.

And so when you look at the cost curve, where anthracite coal is today on an MMBtu basis, that's about $6.50 to $7 on gas. And if they're able to export those numbers, those are -- that's very positive for the market because those tons are being bid in, and they need to make it all the way to the port, which are even additional cost. So a good floor right now for the market.

Our next question comes from Vincent Andrews from Morgan Stanley.

Just looking at Slide 17, the potential Indian range and just you mentioned that it is a record this year. I mean, do you think that, I guess, the monsoon would have to repeat next year in the same way to get the same amount of demand. But where do you think the actual base level of demand is in India that we should be thinking about for '21?

Well, I mean, I think part of the issue, Vincent, is not only just the underlying demand. It's the -- what's going on from a production standpoint. People have been, again, kind of very gloomy about the notion of new production start-ups and what that was going to portend for imports into India and a number of those plants,[Thromble,] Matix and others have started up and similarly, older plants have shut down or curtailed substantially. So yes, while this year looks like it's a pretty strong year from the standpoint of application. A lot of it is just, I think, the recognition that it's more efficient from the standpoint of the general industry Indian economy to be importing urea as opposed to being trying to run older, high cost, inefficient facilities. So we're -- again, we're very constructive about the direction that this whole market is headed, [burn] in the other.

It's exactly right. And with the level of imports, coupled with domestic production, be an all-time high for urea consumption. But you have to remember, we're going to approach, again, 50 million tons of kind of the export market. So this is a global rally. It's not just dependent on India. There are a number of countries that are consuming more. And we've seen a few shutdowns. So it's a balanced position to what's driving. And we seem to have something like these things happen every year or 2, a positive push to the market, and we're in the middle of one.

I think to tack on to that, in the situation where you've got the huge global disruptions like the pandemic, the move towards food security is something that most governments really want to push toward and so optimal fertilization, trying to encourage complete growth is something that is top of mind, I think, for many regimes out there. So I think, again, underpinning the strong demand in nitrogen, we've actually been in an odd way, potentially somewhat beneficiaries of the whole situation.

And our next question comes from Mark Connelly from Stephens.

I'm just wondering about freight rates. If they stay low, how much does that affect CF, given all this positive outlook for India and Brazil? And if things do change and you ended up needing to export more in the second half, a fall application came up short. How would that affect your overall expectation about your competitiveness?

Well, generally speaking, high freight rates are good for us because we operate in import-dependent regions. So anything that adds frictional cost into the freight market is great for us. When we think about fall application, the fall application really is an ammonia story. It's not a urea UAN story. And so if it's lower application, you're talking incrementally, not that much from an export because the way that bird has managed the system from a balanced standpoint. So fall application isn't really going to have a tremendous impact in terms of what our export profile looks like. Our exports are really going to be driven more on what's the netback opportunity to move product out versus keep it here. And I think right now, again, if you look at where things are trading and the margin opportunity available to us, even in a low freight environment, we're feeling really good about how the business is performing. And if freight rates climb again even better?

Yes. When you look at freight rates, where we are globally, they are weaker, especially for dry products, you've probably got $17 to $20 from the ag to Brazil or North America. And so that is probably a little more attractive than it's been in the past, a little bit higher depending on the product coming from the Baltic. But when I look at or think about freight, I think of it as a destination to our customer, and that includes rail and truck and terminals. And we've been working very closely with our rail partners. Some have been more supportive, some have not. But in a weaker economic environment, all of a sudden, we might become popular again, and we've had some of those discussions and are working on new terminaling opportunities, leveraging some of those options available to us as well as truck. So I like where we are structurally on the whole freight equation. And we're looking -- you've seen CF be an efficient operator, and that's all or at least we drive that through our analysis of costs and where we can squeeze out additional value for the shareholder, and that is representative freight and freight costs, such as railcars and things like that, that we're aggressively looking at.

And our next question comes from Jonas Oxgaard from Berstein.

This is Catherine Gallagher on for Jonas. Do you see any impact on nitrogen demand with the Chinese flooding we've seen this summer?

That's an interesting one. In terms of when you plant, when you apply and when you harvest, we're in these different cycles and when the flooding took place was post application time. So I would expect you're going to have some either quality with the harvest or the crop that's been planted or the actual availability of that product making it through those rains and flooding situations. So on an aggregate basis and in a generalized answer to your question, I would expect that, that would drive in future use of that agricultural land to achieve higher yields to replace that lost product.

(Operator Instructions) Our next question comes from Jeff Zekauskas from JPMorgan.

I think I have a 3-part question.

Get out our pad and paper here so we can track of all 3 parts.

On Slide 18, you show less production from Brazilian urea players. What happened in Brazil? And does that production ramp back up in 2021? That's the first part.

Well, I -- I'm sorry, go ahead.

Okay. And the second one is in response to PJ's question about green hydrogen, you made some suggestive remarks, but I couldn't tell whether that meant you wanted to build a new ammonia facility that was supplied with green electricity, or what you wanted to do is find a green power source for the ammonia that you've already got? I was wondering if you can clarify that. And then lastly, is your interest in green hydrogen because you believe that the financial returns of green hydrogen will be higher than the financial returns for agricultural ammonia.

So I'll let Bert talk about Petrobras, and then I'll grab the other two.

So the interesting thing in Brazil is those plants, which were owned by Petrobras in Bahia or Parana and then the plant that never got started in Mato Grosso do Sul, have been operating for decades and have been at times exporting plants, generally supplying import needs also. Those were old, inefficient without good gas sources. The plant in now, close to Paranagu was actually supplied by a product from a refinery, which was next door. So they have been, I would say, not profitable for years. And I think through this whole rationalization process that Petrobras is going through, with their whole portfolio of assets and services, that was one area that just made sense. And there was an opportunity for another company to look and take those over and operate them, but that has not been able to happen probably due to gas supply. When you look at the available gas and gas pipeline network in Brazil compared to the United States or any western country or, let's say, European or North American opportunities, it's so small. And so -- and then the Bahia plant, for example, is just out of the market. They were trucking some of that urea all the way across the country, 1,000 miles to Mato Grosso did not make sense. So shutting them down was economically intelligent as well as operationally smart. What that has done is then increase the need for imports. And it's been very good for the international market, as we've talked about in India. So we talk about Brazil. Brazil will now be close to a 7 million-ton import market for urea. That puts the U.S. market as the third largest market, India being first, Brazil second and United States third for import demand. So very good growth for that international ton to move to.

And I'll handle the other 2 questions, Jeff. So in terms of building new green ammonia plants, that's not high on my list of things that we want to do over the next 5 years or so. The economics around that are pretty challenged, I think. And let me describe a couple of different ways that we can, though, participate in all of this. The first one being we are actively investigating geological sequestration for the process CO2 gas that comes out that we capture, some of which we turn into ammonia, but you can -- we can go ahead and sequester that and then get offset as a result of that and certify some set of the production like even today, as blue ammonia, if we were going to do that. Similarly then, the next step would be, you could put in some electrolyzers and put in pre-hydrogen either into the back end of the process or potentially in the front end of the process. And buy renewable energy in a number of our locations, which is available, wind in Port Neal, Iowa, you got hydro in Courtright, Ontario. You've got some green options in the U.K. as well. And then from that, you can actually certify some of the production as green. And all of those things are relatively low capital cost implementations in order to be able to move a section of the portfolio from conventional to green and blue. I think to do a wholesale swap out, you're basically talking about replacing the front end steam methane reformers with huge electrolyzers, and that is a lot more capital economically today, that doesn't make sense because price of North American natural gas is so reasonable compared to other prices of energy, particularly if you're talking about renewable energy. However, a lot of that is dependent upon what the price of carbon is risen. And that the high enough carbon cost or a high enough product price demand for green ammonia, you could absolutely see the justification from an economic return for doing that.

So my answer to that question is we're evaluating all of these different approaches. We haven't made any announcements yet because our belief is rather than a big fanfare of kind of smoke and mirrors and vaporware. We want to wait until we've got something real that we're doing and then announce something at that point in time. But we're evaluating all of this. And we think we've got a great path forward to actually, in the very near term, be able to produce some blue land or green ammonia. But not have it be a huge capital outlay in order to get there. I think longer term, though, if you project out to, let's just take the 2050 number that a lot of people are using you could absolutely see a number of our plants be full on green, running off of renewable fuel here. And I think the benefit that we have is the capital investment in terms of the back end of the process, along with all of the storage and shipping logistics and terminaling capabilities, is that we're in the best position to benefit from it and anything that drives demand for ammonia, whether it's green, blue or otherwise, is good for us because it just increases the price of ammonia globally. So certainly something we're excited about from a development standpoint.

And our next question comes from John Roberts from UBS.

This is Lucas Beaumont on for John. So I was just hoping, could you please talk us through your assumptions around new supply growth the next 2 years that underpin your supply demand assumptions. So I was just wondering, particularly as the change now that we've had a few more months to assess the impact of COVID disruptions on project completions. We'd previously talked about difficulties like getting personnel on the sites and engineering providers being able to provide the required equipment. Additionally, how has your view changed of the industry's ability to complete normal sort of maintenance activity given the similar difficulties? And do you see that impacting supply also?

I'll let Chris go through the nitty-gritty details, but let me just kind of start off with a high-level comment on the -- which is the world has sufficient nitrogen capacity. It's just a matter of at what price does it get bid back into production on. And what you've seen, as Bert indicated in his prepared remarks early on is when deepwater ammonia prices crashed in response, partly to the pandemic situation. You've seen high-cost producers shut down in Trinidad and actually in other parts of the world. And so -- and similarly, when you've had these new plants come online in India, you've had other plants, whether it's Brazil or India or other places in the world shutdown. So while there's tremendous microscopic attention paid to the specifics on supply demand, what ultimately happens in the situation is the market rationalizes how much supply is ultimately available because the high cost production shuts down and where that high-cost production is actually moves around a little bit because Trinidad was viewed as first or second quarter quartile assets for a long time up until just recently, and now they're the ones that are actually shutting down. And so what I would suggest is, while all of the time lines to build, have lengthened substantially and availability of some parts have been pushed out into the future, making it difficult for some people probably to operate. That generally speaking, it's going to be the cost curve and the slope of the energy differentials that are going to drive what the margin opportunity is, not whether there's an extra plant coming on in Turkmenistan or not. But Chris...

There's not a lot to add to that, because I think Tony covered it. But on a more detailed point, we are seeing delays in some of those plants, whether it be in India or Pakistan. So you are starting to see some of those delays. Related to actual turnaround and maintenance activity. I think it's definitely more challenging and maybe extended longer, but I think that's the same challenges you have with just overall operational risk with whether a number of operators get the virus or not as well. So I think you're going to see some of these small disruptions. But as Tony mentioned, there's plenty of capacity, and it's just for that capacity to be bid back into production.

And our next question comes from Duffy Fischer from Barclays.

This is Sean Gilmartin on for Duffy. Just real quickly from me. Early on in the year and granted things have changed, but you had kind of given soft guidelines around EBITDA between $1.4 billion to $1.6 billion, for full year 2020. Just curious, given the solid first half, the dynamics you're seeing in the market today, kind of inflection and positivity, can we get to the upper end of that range in your opinion? And given kind of flat to down a little bit year-on-year, corn acres into 2021, and maybe a bit better pricing dynamics, how would you encourage folks to think about 2021 EBITDA levels?

Yes. We're not really talking 2021 at this point. This business is hard enough to forecast 3 months in the future let alone 18 months into the future. We just -- we see some very positive signals about what demand is likely going to show up. I think the rest of the story is all about what the slope of the curve is and what happens in terms of energy differentials from a region to region basis. So we're going to wait until we get further in the year, maybe even Q1 call before we approach that subject. But we still feel very comfortable with our recent guidance around where we expect the year to show up. We -- as Bert said, we had a successful build program, and that our expectations, both in terms of take rate and pricing. And so as we sit here today, most of Q3 -- or much of Q3 is in the bag already and what we see looking forward through Q4 looks pretty attractive. So we feel very comfortable with our guidance.

And our next question comes from P.J. Juvekar from Citigroup.

(Operator Instructions) And we have no further questions at this time. I would like to turn the call back over to Martin Jarosick for closing remarks.

Thanks, everyone, for joining us today. We look forward to follow-up conversations and some virtual conferences over the next couple of months.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.