Methanex Corp (MEOH) 2005 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Methanex Corporation Third Quarter Earnings conference call. (Operator Instructions)

I would like to now turn the conference over to Miss Wendy Bach, Director Investor Relations. Please go ahead.

First, I would like to remind our listeners that our comments and answers to your questions may contain forward looking information. This information, by its nature is subject to risks and uncertainties that may cause this dated outcome to differ materially from the actual outcome. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections which are included in the forward looking information. Please refer to the bottom of our latest news release and to our 2004 management discussion and analysis for more information.

Before I continue with the third quarter call, I would like to take this opportunity to remind our analysts and our shareholders of our upcoming investor conference in New York on November the 7th. If you're planning on coming and you haven't yet RSVP'd please do so as soon as possible and if you're an analyst or shareholder and you did not receive an invitation and would like to attend please contact me at the telephone number listed at the bottom of the Q3 press release as soon as possible.

Now, I'd like to turn the call over to Methanex's President and CEO, Mr. Bruce Aitken for his comments.

Good. Thank you Wendy and good morning everyone. Welcome to the Methanex third quarter investor conference call. I'm in Vancouver and I have a number of colleagues with me in the room who will be available to answer question a little later.

The key message from our comments today is that while the third quarter has been quite a difficult quarter for us, most of the events and issues that have impacted our results are unusual and we are looking forward to a significantly improved result in the fourth quarter.

So to quickly summarize the key numbers for the third quarter. Income before unusual items and after taxes for the quarter was $24 million or $0.21 per share. This result was close to consensus forecast. I'll not repeat all of the details of the production losses that we experienced during the quarter as these are thoroughly covered in our disclosure documents. However, I would like to provide a brief update on the issues that caused production losses and the current situation with regard to those issues.

So first thing, the gas curtailments in Chile, we have not suffered and curtailments of natural gas as a result of redirection orders from the Argentinean government since mid August. This is the same as our experience in 2004 when curtailments ceased at the same time in that year. It was our expectations that curtailments were more likely in those southern hemisphere winter period and this year, this has also been the case.

I have talked on earlier conference calls about the optimism of our Chilean gas supply to find and develop new gas resources in southern Chile that would help to offset losses of gas supply from Argentina. There is nothing new to report other than to confirm that our gas supply is proceeding with the drilling plans and that we would expect to know more about volumes of gas and time lines in the first quarter of 2006.

We certainly see this activity as mitigating our risk related to Argentinean gas. In the absence of the development of new gas resources in either southern Chile or southern Argentina, we would expect further gas curtailments during the southern hemisphere winter of 2006.

The second issue that caused production loss was that our gas supplier in Chile suffered a number of technical problems with their infrastructures. They now advise us that repairs have been completed and we do not expect any further significant disruptions.

Thirdly, also during the quarter, in order to mitigate some of the risk of gas curtailments, we purposefully accelerated 2 planned turnarounds in Chile, we have no further planned turnarounds in Chile until the third quarter 2006, when the Chile 1 plant will be taken down for normal maintenance.

Fourthly, in Trinidad we lost almost 150,000 tons of production during the third quarter as a result of unplanned outages at both of our plants. Repairs were completed during the quarter and both plants have operated at more than name rate (ph) capacity since the beginning of September.

And finally our Chile 4 plant, achieved commercial production in June. However we had a number of teething problems that reduced production rates in July and August. I'm happy to advise that this plant has now completed all of its performance and reliability tests and it has also been operating at above nameplate capacity since early September.

We believe, therefore that most of the issues that we had with our low cost clients in the third quarter are behind us, and indeed, rates of production have improved significantly since the beginning of September. This is perhaps a good place to note that our inventories are a little higher at the end of September than they have been for a number of quarters. The explanation for this is that rates of production were much higher in September and that these increases have not moved through our supply chain to convert into higher levels of sales. However, we expect significant improvement in sales volumes amid more of our low cost plants during the current quarter.

During our August conference call we advised of 2 other one-off issues that affected our third quarter result. High natural gas prices in North America have caused us to lose cash from our Kitimat plant during September and we expect further losses in October.

We will permanently shut this plan down in 4 days time. One-off closure costs were $29 million in the third quarter and in addition to losses on the sale of Kitimat inventories there will be a third of $12 million of closure costs brought to account in the fourth quarter.

We've also recently announced an arrangement with EnCana related to our Kitimat site. Over the next year or so this arrangement has the potential to recoup a good part of our closure costs. However, accounting rules prevent us from bringing any value to account in the current quarter. Nevertheless from a shareholder value perspective, there is a substantial offset between the closure costs and the value from the EnCana arrangement.

We have also disclosed in our public documents details regarding redirected tax changes in Trinidad. This has caused us to make an additional provision for tax of $17 million in the third quarter. As we have noted in our MD&A, the government of Trinidad and Tobago has indicated that it is reconsidering the richer actus (ph) application date. And if they do this, than the additional provision that we have taken in Q3, will be substantially eliminated. We would hope to clarify this issue in the fourth quarter.

So, just to reiterate, we've had a number of mostly well off issues in Q3 and we are looking forward to a significant improvement in the fourth quarter.

I'll change topics now and talk a little bit about current market conditions. While global ethanol prices drifted a little lower in the third quarter, significant events have occurred in the industry. Natural gas prices surged in North America and Europe. As methanol prices did not follow this increase in feed stock costs, high costs producers in these regions have experienced negative cash flows. Including our plants in New Zealand and Kitimat, there are to our knowledge, since the beginning of September 8 methanol plants that have either shut in or are running at reduced rates.

On a per annum basis these rationalizations represent almost 3 million metric tons of annual capacity. In addition there's still about 1.3 million metric tons of capacity operating in North America that as a result of exposure to high feed stock costs we believe may shut down before the end of 2006.

The only new non-Chinese incremental supply in 2005, other than our Chile 4 plant is the new 1.8 million ton plant in Trinidad. This plant is reported to be starting up quite well and the owners of the plant expect to be shipping product in October. However, as you can see from the numbers, rationalization of supply has exceeded new supply and this is translated into upward pressure on prices. We announced increases of $20 per metric ton in October in all global markets. And spot markets in all regions are trading higher in October than they were during Q3.

We believe that there are 4 key factors that will influence pricing in the coming months. Firstly, operating rights for the global industry. Industry operating rights for less than 85% as a result of operational issues and seasonal outages in the third quarter. All other factors being equal and if this low rate is repeated in the fourth quarter we believe the world will be short of methanol.

Secondly, demand is clearly a major determinant of the industry's fortunes. During Q3 demand has continued to be steady to strong in most derivatives. The major risk is slowing global economies.

However we have not, to date, seen any evidence of a significant slowdown in demand from ethanol. The hurricanes in the US Gulf did cause a loss of some 100,000 tons of methanol demand and in passing this is another contributor to our higher than normal inventories at the end of September. A number of our customers on the Gulf suffered outages that deferred sales. Longer term however, natural disasters tend to be good for demand as rebuilding occurs.

The third factor that may affect prices in the coming months is energy prices. Energy prices globally are significantly impacting feed stock costs; the mini-producers and further volatility in energy pricing could flow through to methanol pricing.

The fourth factor that will influence pricing is the behavior of the Chinese market. There has been much written on the Chinese market in recent months and I would like to spend a few minutes discussing the factors that we observe in this market. Firstly, despite a significant increase in domestic production in recent years, imports into China remained reasonably stable, between 1 and 1.5 million tons per year. The reason for this is that there is a growing proportion of customers who prefer the quality of natural gas based methanol and the reliability provided by international suppliers.

Customers have explained to us they have difficulty sourcing locally produced methanol that arrived on time agrees with the quantity ordered is of acceptable quality. In addition some customers have expressed doubts about the long-term viability of the Chinese domestic industry.

The second observation is that domestic production rates do vary with pricing. Pricing in China in the third quarter declined by about 11% while in the same period domestic production declined by about 60,000 metric tons per month. Or 7% and this is despite all of the new plants for the sale of operation this year.

As prices in China approach $200 per metric ton, production backed off. As prices returned to around today's levels of $230 per ton, most producers are profitable and we would expect to see increases in domestic production in the fourth quarter.

A third observation is that the domestic methanol that competes with imports in the coastal provinces is for the most part, high cost. Methanol plants located close to the consuming markets in eastern and southern China are, relative to our standards, high cost. Other plants generally need to transport methanol production that is not consumed locally to long, expensive and not very reliable supply chains to reach consuming markets. Many of the newer plants that have been built in inland provinces have access to much lower cost coal.

One key fact that appears to be missed by one analyst who has written a number of reports on the Chinese methanol industry is that low cost - low quality coal requires high capital costs to make syn gas and methanol. In an example of a new technology coal based project, quoted by Cydogen (ph) the capital cost per metric ton of methanol is about $650, this does not include many of the costs that we would typically include in a western analysis of capital. Costs such as owner's costs and capitalized interest. If these costs were included capital for a new technology plant would be more than $700 per metric ton. This compares with the capital for our most recent plants in Chile and Trinidad of around $300 to 350 per ton.

However, most coal based plants in China use a local technology. And while the capital for this technology is a lot lower, it requires higher grade, more expensive anthracite coal as a feed stop.

One of the factors that should not be underestimated. As we have all seen over the last year, China is deeply concerned with its own energy security. It appears that the objective behind some of the investment in methanol in inland provinces is not to supply the chemical markets, but is actually to extend gasoline.

At a recent industry forum in Houston, Texas, a representative of a Chinese group involved in methanol gasoline blending addressed the forum. He explained China's need for energy sources, the political support for the development of methanol fuel and some of the technology developed in China to overcome the issues related to methanol fuel. He expressed the view that because the expectation of demand growth in methanol fuels that the Chinese methanol supply will likely see a huge shortage.

We reach a number of conclusions from this analysis; firstly, the only impact of China on the world methanol market is near imports into that country. Much of the demand and supply that is occurring in inland provinces had little influence of global balances.

Secondly, we anticipate the continued market for imports, driven mainly by customer needs. And thirdly as methanol prices decline to around $200 per metric ton we expect to see reduced levels of methanol production in China and an increase in imports. We believe that there is clear evidence today that China is already providing a floor and a ceiling on methanol prices. However linking these comments regarding China, I would acknowledge that our information is not perfect. We spent a lot of time developing an understanding of the market, but as you would ass recognize China is a dynamic place and change is constant. We have an office in Shanghai and in the next month or so we are relocating our Asian regional headquarters to Hong Kong as we appreciate that China will be an important factor determining the future of the methanol industry.

So just to recap, methanol prices in the coming months will be influenced by the operating rate of the industry, overall demand, energy prices and economics in China. I'd like to avoid offering call casts, however if we look at recent history as a guide, it is not unreasonable to assume that industry operating rates will continue to be constrained, that barring a major recession demands should be strong and that imports will continue to play a balancing roll in China. All these factors point to continue relative strength in methanol pricing.

I'll change topics now and make a few comments regarding liquidity. Our cash flows from operating activities for Q3 were $29 million. During the quarter we issued a very successful $150 million bond and repaid $250 million in maturing bonds, thereby reducing our long-term debt by $100 million.

Our cash balance by the end of the quarter was a healthy 152 million and we have an undrawn credit line of $250 million. Our balance sheet is very strong. We continue to focus on having an appropriate balance between the short term and long term priorities for the company and the short term, we continue to buy back shares and to date we have repurchased about 40% of the shares approved under our normal course issue event.

At the current rate of repurchasing, we will complete the normal course issue (inaudible) early in Q1 2006. We believe that repurchases represent an excellent use of cash as our stock is trading at a substantial discount to our assessment of intrinsic value.

For the longer term we continue to believe that there are influent opportunities to extend our franchise in the methanol industry. We continue to work on a project in Egypt which is making slow but steady progress. In the coming quarter we will commit to much higher spending on pre-engineering, which should lead us to a formal investment decision in 2006.

So, before stopping for questions. I will make a couple of comments regarding Q4. I've already made mention of the state at our low cost methanol plants and our expectation of higher operating rates that will translate into higher levels of sales from low cost capacity.

I've also talked about prices and barring any unforeseen changes it is reasonable to expect that our realizations in Q4 will be a little higher than Q3. I've also mentioned that Kitimat will incur losses from the sale of its inventories and that there is some one-off closure costs that will be brought to account during the quarter.

We are unsure of whether we will run the New Zealand time in the fourth quarter, we are currently in discussions with gas supplies and subject to a satisfactory outcome of these discussions we may restart the plant. We will only take this action if we are able to generate worthwhile positive earnings and cash flows. All in all we expect Q4 to be a big improvement over Q3. So at this point I will stop and ask for any question.

The first question is from Sam Kanes of Scotia Capital Markets. Please proceed with your question.

Good morning, Bruce.

Good morning, Sam.

The question is regarding the Kitimat, having physically been there, it's not just a methanol terminal, of course it's also an ammonia terminal. I'm just curious if you've been approached or have approached nitrogen producers because that plant has also been used as sort of the storage, over the years sporadically, when the arms spread is right with Korean or Japanese ammonia prices to export out of Alberta.

But given where gas costs are today, the opposite seems to be likely to make a fair amount of sense, as well. I'm just wondering if there might be a chance to get all your money back and then some from that terminal?

To sort out a few questions, no we haven't Sam. I guess I would have a doubt over the long term viability of manufacturing products like methanol or ammonia in North America. As long as gas prices stay where they are it simply doesn't make any sense. So I guess our focus is on what can be imported into that terminal.

That's what I'm asking.

Oh, in terms of importing.

With $14 gas --

Sure. Okay, well no we haven't, so thank you for the idea. We ought to pursue that.

Maybe an addition on that site, Enbridge, they've now selected Kitimat and of course your future partner in Canada has selected your site for tankage. I presume therefore that Enbridge will eventually, if their project goes ahead, interconnect via pipeline through your terminal area?

Yes, I don't know. We've limited our discussions to in Canada and I guess all the Enbridge announcement does for me is affirm that there is a huge demand for condensating Alberta and that our site is valuable. Whether EnCana choose to cooperate with Enbridge in the future, that's for them to decide.

I think what it does for me is just confirm that we have a unique site there, we have all the permitting that's necessary. And we will generate some nice value out of that at a point in the future.

Okay, last question for me, I'll get out. You had estimated a million-ton reduction of methanol demand for U.S. MTBE for next summer, with oil prices and gas prices being where they are have you seen any ship sentiment for that?

No, I think the sentiment is being driven by the Energy Act which provided for 270 days until the oxygen standard expired, so a number of the refiners and manufacturers of MTBE have said that they will continue to consume MTBE up until that 270-day period. But after that they believe the legal liability increases to a point where they would prefer not to expose themselves to litigation.

Now whether that's politicking and positioning in order to try and have an extension to the oxygen standard, nobody knows. There's a bit of speculation that that might be the case, but certainly the U.S. gasoline pool doesn't need to lose another million-odd tons of methanol or that translates into three million tons of MTBE. So something might happen, but we've seen no evidence of things happening so far, Sam.

Thank you, Bruce.

Thank you, the next question comes from Bob Hastings with Canaccord, please proceed with your question.

Yes, thank you Bruce. Look to the fourth quarter one of the things you mentioned is that you do have some higher inventories in production in September. It's hard to always get this, but off the balance sheet it looks like the inventory is worth about a $150 a ton.

So I guess I have two questions on that. How much increased sales can you have over your own internal production from the inventories? And is there much of an impact from higher cost production sitting on the balance sheet?

The inventories from memory are nearly 900,000 tons, so that's a little higher than they had been for quite a number of quarters and I think I touched on the two reasons for that. One, that our production from a low-cost plant was much higher in September than they had been in August and July and it takes time to move from Trinidad and Chile into sales, to translate those higher production levels.

The second one was the hurricane pushed up some sales for us. Those are the two reasons our inventories were higher. We would expect by the end of December the inventories will be a bit lower. So in addition to whatever production we have during the quarter, we would expect to sell some of our volume in inventories.

We've traded I think between 700,000 tons and 900,000 tons of inventory in the last 4 or 5 quarters and the bottom of that range is a bit too low and the top of that range is about right. So we would expect to be somewhere in that range. The inventory is not a big deal, I think one thing that I should emphasize is that in Kitimat you mentioned the 150 number, I think the average cost is a little bit higher than that, it might be closer to 160.

So to blame it on a mindset (ph) is all of our low-cost production from Trinidad and Chile and our high-cost production from Kitimat. So if you look at Kitimat standing alone by itself, there is over a month's production in inventory, plus October productions. That will be held in inventory at over $300 a ton, so a much bigger impact on our results from Kitimat than we would have liked.

And when I look at the atlas breakout in the notes, if I take their operating expenses and divide it by their production, I know that's not going to give me the exact numbers because some stuff goes to inventory or whatever. But it looks like about $160 a ton, am I missing something there?

Give me two seconds here.

Or if you want to get back later in the call that's fine.

I think you are missing something because that looks too high.

I thought so. And it might just be that more inventory in September, for example.

So sales volumes were low and some inventories are higher. That's exactly it. So that's what caught you out there, I think Bob.

Okay. I thought that's what it might be. I just wanted to confirm that was it. And then, just for clarification, the interest income included some foreign exchange income. Can you elaborate on that?

I'll just ask Ian Cameron to make some comments on that.

Yes, Bob. I think you're referring to the interest and other income of $7 million. That consists of a little bit of interest, a little bit of foreign exchange, and some small net realizations related to sale of assets in New Zealand.

I saw the $3 million from the net asset sales, I just wasn't sure if the remaining $4 million was all OpEx or if it was pretty evenly split.

No, bits and pieces. A couple of million dollars of interest income and a little bit of foreign exchange on the asset sales.

Okay, and before I get off here, maybe since I've got you on the line, can you give us a little guidance on fourth quarter tax rates if that's even possible.

No, that's fine. Our sense is that today we would expect a little bit lower tax rate, excluding the $12 million that's remaining for the shutdown costs in Kitimat. But if you take out that, we think around 35% looks like the right tax rate for the fourth quarter.

Okay, thank you very much.

Thank you. The next question comes from Jacob Bout with CIBC World Markets. Please proceed with your question.

Hi. Good morning. Just following on in that last question, what is the effective tax rate going forward into 2006? And your expectations of current and future tax expense, what the breakout would be?

Okay, so going into 2006, we would expect to see a similar tax rate that we expect in the fourth quarter which is around 35%. In terms of current deferred split, right now we are around 60-40% on a running rate. We would expect that to continue and maybe the current split goes a little bit higher than that as we go into 2006.

Okay, and then just a question on the demand side for methanol. Excluding the demand destruction from MTBE in 2006 and the expectations there, how do you see things playing out as far as year-on-year growth in China and Asia and Europe, that type of thing, some of your major markets?

I'll ask John Floren, our senior vice president of marketing to answer that question, Jacob.

Yes, we would expect demand to continue to grow at some sort of combination of GDP and IP, so our current numbers are showing growth of around 3-4% through 2006 and 2007. Certainly the high cost of energy and the impact on derivatives could change those numbers, but as Bruce mentioned in his comments, we don't see anything in the market today, except some isolated formaldehyde and uses that are being affected at all in a demand way, so we would expect things to continue to be quite robust going into 2006.

And any variability in the markets outside of the U.S.?

You mean regionally? Well, China and Asia are growing faster than Europe and North America.

And what are you looking for there?

China double digits and Asia, more in the 5-6%.

Okay. Perfect. Thanks guy.

Thank you, the next question comes from Jared Anderson with UBS Securities. Please proceed with your question.

Great. Thanks very much. You've heard of the fact that the majority operating issues in the third quarter seem to be behind you as September, can you just confirm that other than the gas supply issues in Chile, which I guess come back in the second or third quarter of 2006, that there's no planned downtime at all for the fourth quarter in Chile or Trinidad.

That's correct. No planned down \time.

Okay. Secondly, regarding the options you're looking in terms of getting other gas supplies in Southern Chile, is there any way you can quantify for us sort of volumes you're looking at relative to the 100,000 tons sort of curtailment that we saw in the last couple of quarters?

It's hard to judge here, but I think in 2004 we lost 50,000 tons of production and in 2005 we've lost 100,000 tons of production. We will have a little more capacity next year because the Chile 4 plant will be running throughout the winter period. We do have a planned turnaround at our Chile 1 plant, we've planned that for July. So that's usually the middle of the winter. So that tends to mitigate some of the losses.

There has been a little bit of expansion of pipeline capacity in Argentina which takes more gas to the north, but at the same time our suppliers in Argentina tell us that they have more capacity to supply gas next year. So there's a whole bunch of factors there. I think we should probably expect another 100,000 tons of loss next year. Maybe a little bit worse, maybe a little bit better. But I can't see it getting dramatically worse or dramatically better until someone develops more gas reserves.

And just to clarify, that's 100,000 tons off of the new capacity including full operations at Chile 4, not versus this year?

That's correct. Yes. I'd say there's a little bit of risk on that being a little bit higher rather than a little bit lower.

Thanks very much.

Thank you, the next question comes from Peter Butler with Glenhill Investments. Please proceed with your question.

If you guys are projecting 3% to 4% volume growth globally next year, things can't be so bad. You're going to have curtailments, outages, et cetera. Doesn't that speak for higher prices and higher earnings next year? A lot higher?

Well, I don't know what your definition of a lot is (Peters, but our outlook for 2006 is pretty optimistic at the moment. When we look forward at the demand-supply balances and taking into account all the factors that I've mentioned this morning, we're certainly seeing methanol shortages and prices directionally higher.

Well. If you model, showing your evaluation of intrinsic value, it probably is showing that you're undervalued in the stock market by more than $10 a share. Doesn't that speak for a very large step up in your share repurchases, perhaps using even leverage?

I guess we're asked this question regularly and for us it's a continual balancing act between the short term and the long term. It's certainly tempting to use more of our cash today to buy back shares, because it looks like it is a great investment on behalf of shareholders.

At the same time, we have a franchise in this industry that I think has been very valuable and we have opportunities to continue to grow and develop that. So I think it's a longer term opportunity and I think blowing all of that cash today in buying back shares, I think is devaluing the future value of this company. So it is keeping that balance between the short and the long term appropriate, and certainly as I mentioned before, we're buying back at a rate that will finish up early in 2006 and that will have another view of the market at that state and we'll make more decisions at that stage.

I think it's just retaining this appropriate balance between short and long term, Peter, that drive our decisions.

But you know, you can borrow money at 5.1% to 5.2% these days, pretax. Stock is undervalued by $10, that looks like a pretty damn good investment.

Well $10 is your number, not mine. I should emphasize that for a start. I won't be sucked in to saying what our intrinsic value is. We do think that the stock is under priced where it is today and I think as management, our job is to maintain this balance in the short term and long term and to maintain some prudence as well.

It's the third element of our approach to how we manage this company. We recognize we're in a separate commodity and we'll continue to be a bit prudent through the cycles. We will keep some cash on our balance sheet and we'll all continue to maintain our leverage targets.

You've gone through a real tough patch, we're all behind you. Let's turn out some numbers now.

Good.

Thank you. The next question comes from Adam Camarro (ph) with AmTrust Capital. Please proceed with your question.

Yes, hi. I guess I was just after estimates on maybe being a little bit more aggressive on share repurchase especially given what the outlook looks like and what maintenance CapEx looks like for the next couple of years. My question is if you could just help us understand a little bit more what the fourth quarter might look like in terms of -- obviously there was a de-leveraging effect that you only produced 1 million tons out of the 1.4 million that you could have, so obviously your EBITDA per ton that you produced looks a little bit lower than it would have obviously if you were running at full production.

Can you just help us understand again what the model looks like? If we assume $240 realized price, plus or minus, and we do run at 100% capacity, in theory, EBITDA should be somewhere between $150 to $200 million on a quarterly basis.

You've lost me a bit with the numbers. I don't know. Ian. Would you mind? We could get back to you on this a little later. Your question goes to a bit of detail that I don't like to answer off the cuff, I'd rather make sure that we understood the numbers.

Basically what I did was, in your presentation you usually run through and say assuming $150 a ton methanol price, you guys generate anywhere from $320 to $340 million on an annual basis.

That's correct. Yes.

And every dollar above $150 maybe we capture 70% to 75% of that in incremental EBITDA, so basically I just ran that through, assuming 1.4 million tons of production in the fourth quarter. I just wanted to see if --

Okay. Well what you did doesn't sound unreasonable. The thing I emphasize a number of times is Kitimat. The Kitimat is certainly a bit of a one-off hit for us in the fourth quarter, unfortunately. Hopefully at the end of the fourth quarter we've gotten rid of all of that.

Right. No, absolutely, I meant on an ongoing operational basis --

On an ongoing --

You're going to show us what Kitimat did again in the fourth quarter.

Sure.

All I'm saying is that if you run out that math you get to an EBITDA number somewhere in the $170 to $180 million range on a quarterly basis.

Well your formula sounded good to me Adam.

The formula sounds good but the end point sum is a bit high, so Winnie (ph) will have to work with you on that to understand the difference in the logic.

Okay. Thanks a lot.

Thank you. The next question comes from Richard Cardey (ph) with Morgan Stanley Dean Witter. Please proceed with your question.

Hi Bruce.

Hi there Richard.

A quick question for you, well, a couple of questions, actually. With respect to the atlas plant in Trinidad, in the August call, you cited technical design issues for a total down number of 38 days and that give us around a capacity number of 58 percent. Then you stated that repairs are complete and that the plant was operating at capacity. Can you confirm that that's the case, still, since that date?

That's exactly right. So since the beginning of September, that plant has operated at about 9 plate capacity. So those design issues have been resolved. It was quite a difficult repair, but we've made the repair. It took a little longer than we expected, but the repair has been quite successful.

And then subsequently, in prior conversations, you've represented that the typical turnarounds occur every three to four years per plant.

That's correct.

I know you've mentioned it just a number of times in this call, but can you confirm next year what your expectations are for turnarounds?

I know Chile 1 is in July and that's the only turnaround we have next year.

And then finally, there's been no mention of your negotiations with respect to your Egypt CapEx plants, could you provide some color on that?

Sure. Yes. What I did say is, it's going slowly but diddily. I was in Egypt about 10 days ago and I met with the Minister of Energy there. We've had one or two issues that have been holding the project up. We've now resolved those issues. We're about to initiate some of the first meetings of our joint venture company which in Egypt are procedurally quite important. They're a real signal that things are going and they're going quickly.

What that will initiate then is some pre-engineering and we've spent $5 or $6 million on pre-engineering to understand our capital costs. Another thing that we are spending quite a bit of time and a little bit of money on is looking at the opportunities to relocate, particularly our two New Zealand plants, the two big plants that have shut down. Those two plants were modular in construction, they can be unbolted and put on a boat and shipped somewhere else. And it does seem to us that they represent a significant advantage over anyone else who's trying to build methanol capacity in the world.

So we need to do a bit more engineering on that to understand exactly what the economics are and how the investment would look, but it is another opportunity that we've got for Egypt or elsewhere.

Okay very good. Thank you.

There is currently no additional questions in the cue.

Okay, well thank you everyone for your participation in the call. As I've said a number of times, this has been an awkward quarter for us. I mentioned in our second quarter conference call that we feel as though we've been thrown a few curveballs. I understand how the Houston Astros feel this morning, that they must feel the same way.

But at the end of this month we will only have our low-cost assets in operation, we are superbly positioned to take advantage of the continued positive environment in this industry. So thank you very much again for your interest and good morning to you all.