Methanex Corp (MEOH) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Methanex Corporation fourth-quarter results conference call. As a reminder, this call is being recorded on Thursday, January 31, 2013. I would now like to turn the conference call over to Mr. Jason Chesko, Director of Investor Relations. Please go ahead Mr. Chesko.

Good morning, ladies and gentlemen, our 2012 fourth-quarter report along with presentation slides summarizing the Q4 results can be accessed at our website www.Methanex.com. I would like to remind our listeners that our comments and answers to your questions today may contain forward-looking information. This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. Certain material factors or assumptions are applied in drawing the conclusions or making the forecasts or projections which are included in the forward-looking information. Please refer to our latest MD&A, to our 2011 annual report for more information.

For clarification, any references to EBITDA, cash flow, or income made in today's remarks reflect our 60% economic interest in the Egypt project. In addition, we report our adjusted EBITDA and adjusted net income to exclude the mark-to-market impact on share-based compensation and expenses, impairment charges related to our Chile assets, and charges related to a Louisiana project. We report our results in this way to make it a better measure of underlying operating performance. And we encourage analysts covering the Company to report the results in this matter. I would now like to turn the call over to Methanex's President and CEO, Mr. John Floren, for his comments and a Question-and-Answer period.

Thanks, Jason. Good morning, everybody. As you'll have seen from our results we delivered a very strong quarter with EBITDA up about 14%, from $104 million to $119 million. A few comments on the market. In 2012 demand grew in the industry, if we exclude the integrated MTO projects, by about 3 million tonnes. With this kind of demand growth, the industry would need 2 to 3 world scale plants per year just to keep even. The current markets are relatively snug.

We continue to see supply-side issues with operating rates at a number plants lower than expected. This has led to a higher price environment with the Atlantic basin having a premium of around $60 over the Pacific basin. By this time, usually when you see these kinds of basin imbalances you expect the pricing to normalize and we haven't seen that yet. We don't expect to see that in the coming months.

Demand remained solid. I think you'll know that the Ningbo MTO project is starting in the process of starting up. At full rates it's consuming about 5,000 tonnes of methanol per day. There's another project later in the year in the Nan-Xing area which will consume about a 1 million tonnes of methanol a year at full rates.

Fuel blending continues to grow. It's growing in China and outside China. Israel recently announced trials on methanol 15% blends in gasoline. In addition to gasoline blending we're seeing methanol now being used in other energy applications. Stena announced recently they plan to convert 25 ships to run on methanol by 2018. So long term, the industry outlook is very positive with solid demand growth and very limited supply over the coming years.

Just switching to our operations, our plants operated very well in the quarter. We had our highest level of production since 2007. And as you know we're looking to increase our production capacity by 60%, or 3 million tonnes over the next few years. We're making great progress on our Geismar relocation. This plant will service our North American customers with added production in North America. You'll noted that we recently signed a ten-year gas deal with Chesapeake to underpin this project. Right now the project is on time and on budget. And we have planned to have the first shipment of equipment from Chile in the May, June period of this year.

We will make a decision on relocating a second Chile plant during the first half of this year. We are currently doing some work and spending some money to understand the capital costs. Currently, we believe it'll be around $75 million to $100 million less than the first one, but we're doing some work to clarify that number. You'll note in the December of last year we had a bond finance, financing and we increased our credit limit and we believe these moves along with our solid balance sheet and liquidity will allow us to move both plants from Chile to Geismar using our existing balance sheet and cash flow.

In New Zealand we plan to be operating at a rate of around 2.2 million tonnes by the end of this year. Current operating rates are about 1.5 million tonnes. In order to get to 2.2 million tonnes we plan to spend about $130 million in capital. And prior to making the investment in the Waitara Valley site, we certainly would want to have another gas contract which we believe we are close to settling on and should have something to announce in the coming quarter. In addition, we have an opportunity to secure high CO2 gas in New Zealand. And we believe we can add additional capacity in New Zealand by about 200,000 tonnes by mid-2014 by securing this high CO2 gas.

As you know, in Chile, we are most likely going to have to idle our operation there in a few months due to a lack of gas. I'll remind you this represents less than 5% of our current capacity. You'll have noticed in our results we took an impairment charge of $297 million related to the assets in Chile, which leaves us a carrying value of around $245 million. We're looking right now to put conditions in place to run the plant for an extended period of 12 to 18 months later this year. And we'll have more to announce on that in the coming months.

Trinidad has operated very well in the quarter. We still continue to see some gas restrictions in the country, but we don't anticipate the restrictions in 2013 to be as bad as 2012. We've made the decision to go forward on the Medicine Hat de-bottleneck. We've made good progress on the project. And the current plan is to have it up and running by the end of Q3 2013. Our run rate Medicine Hat after this expansion will be around 580,000 tonnes per year. As well in Medicine Hat, our cash cost will continue to go down during 2013 as we start using cheaper natural gas that we've procured in Western Canada. Egypt, the guidance that we've given of 70% operating rates in 2013 is still okay. Although we do expect to see some seasonal variability. I'll stop there and start to take some questions.

Thank you.

(Operator Instructions)

Jacob Bout with CIBC World Markets.

So some questions on the Chile gas supply. How long do you think the capacity will be shut down? I think you made the comments about March and then in their winter it's going to be shut down. And where is this gas coming from shorter-term? And then if we look a little longer term is the plan still to get gas from the nonconventional sources like Chile's gas?

So the current plan, Jacob, is to bring the facility back up and running later this year. We are working with the upstream to put gas supply in place post the Chile winter. That'll allow us to run for a period of 12 to 18 months. We have some work to do to get there. All of the gas that we would be using would be gas found in Chile and all of the gas that we're getting today to run our plants in Chile has been found in the last years.

There is a very active drilling program happening in Chile. I think there's double the rig count in 2013 than 2012. Over 50 wells are being drilled. So gas is being found. It's mainly unconventional gas. And so we are working with the upstream to put these conditions in place to be able to take the gas later this year.

Because at the analyst day in Medicine Hat, I think ENAP was talking about they needed gas close to $5.00 to make themselves whole on some of this nonconventional supply. Is that still the thinking?

Well, we have contracts in place with ENAP and others with pricing much lower than that. We are still working with the upstream to understand gas beyond those contracts, what those pricing numbers would look like, so I think it's a little early to guess at those numbers.

What I'm trying to get at is when do we actually switch from the conventional to that non-conventional as far as the gas supply?

Well, I think it's going to be a blend. But I'd say most of the new gas that's coming in would be unconventional.

Thank you, very much.

Steve Hansen with Raymond James.

John, recognizing the sensitivities of the recent Chesapeake contract and the specificity of it all, I'm just trying to get a bit of a better sense or trying to narrow down the range of the cost that you expect that plant to have. I think in the past you'd suggested it could have a delivered cost basis somewhere in around the $200 per tonne range. Can you nudge us one way or another off of that number to get a sense of how those economics might lie?

Thanks for the question. I think is commercially sensitive, Steve, so I'm not going to nudge you one way or the other. What I will say is that the contract is similar to our other contracts set up a wide range of methanol pricing. We are competitive.

I think depending on what the price of methanol is we have a sharing formula in place so the cash cost will fluctuate depending on the price of methanol. But we think that contract is a real solid one and will underpin that asset for 10 years. And the cost associated with it, I think most point to the cycle that we're thinking about now. Most recently we've seen in 2009 prices hit $200. That's the lowest we've seen in a long time so we are confident we'll be able to run that plant for 10 years based on this contract.

Okay. That's helpful. And just one on the pricing environment of the dichotomy that you mentioned in between the Atlantic and Pacific basins. What's keeping that traditional arbitrage from retracing? Typically the traders would step in and push product across the water. And then just as a follow-on to that, how do you see the Atlantic basin trending throughout the year?

I don't have the answer to that question. It's an interesting phenomenon because when we've seen this happen in the past, the $60 difference, most of the Middle Eastern suppliers that had flex in their system would prefer to get more money and sell into Europe or North America, mainly Europe. That tells me that maybe they don't have as much flexibility in their system as they used to in years past. Maybe what's happening is there has been more contracted methanol and less spot methanol that's able to move between the basins. But it's a bit of a mystery to me as well, Steve.

Going forward, we haven't seen any reaction at this point. Pricing has been remarkably stable in the spot market for the last 30 to 45 days in both the Atlantic and the Pacific basin. So we continue to see ups. Sorry, suppliers having production issues and that doesn't seem to be abating. So there is nothing that I see currently that would impact that differential.

Okay. Very good. Thank you.

Ben Isaacson with Scotiabank.

This is a Shawn stepping in for Ben. I was hoping you could provide a bit more insight into what's happening in Egypt in terms of the operating issues you are seeing. Is simply gas curtailment or is there something else as well?

It's mainly gas issues in Egypt. And I think everybody is watching the news in Egypt and it's pretty chaotic at this point. I was just there about 10 days ago and visited the plant and visited with the upstream and the Minister of Energy. The plant continues to operate extremely well. The best operating plant from a new build we've had I think in the history of the Company.

We have an outstanding workforce there and we are consuming all the gas we get and operating and shipping product. We're a little bit outside the chaos that's going on, but certainly we're keeping a close eye on how the country unfolds. And continue to make methanol and sell methanol.

Thank you. As a follow-up, is there a minimum threshold that you need to reach in terms of operating a plant? For example, 10% utilization, or is it really just a matter on sort of the economics?

Why don't I ask Michael Macdonald, he runs our global operations, to answer that?

Thanks, John. John, the design of a plant is typically around two-thirds of minimum operating rates. Now we've obviously demonstrated we're able to find novel ways of operating low rates as evidenced in Chile. But I think the important thing is we've got a solid operations there. We're [conchuing] all the available gas. And I think John was exactly right in his comments that this is a gas supply and demand balance driven issue. There's nothing else. Here in Egypt.

Thanks, very much.

Laurence Alexander with Jefferies.

Are you seeing any regions where there are signs of demand destruction in response to the recent price increases? Or do you think that pricing can continue to trend higher for the balance of the year?

We haven't seen any demand destruction yet. I would say the area to watch is the DME industry in China. Most of the DME that's being consumed in China is trading at a factor of LPG prices. So depending on what you think LPG prices will do, you should watch that DME space. There is still room for pricing to increase in China and keep that DME demand alive based on current LPG prices. But that would be the area I would be focused on.

And then in terms of moving the facilities, do you have any latitude to accelerate the pace at which you move the facilities up from Chile?

Well, we're on time for the first one I mentioned so the second half of 2014. I also mentioned we're doing some work today to look at the cost for moving a second one. The plan would be if we decide to move a second one to keep the exact teams in place that are doing the first one. So it would be somewhat accelerated from the first one because we have learned a lot about cutting a plant up and moving a plant.

In the plant we're thinking of doing for the second one is a fairly close replica of the first one, keeping the same teams in place. If we make the decision, we would plan to have that one operating by Q1 of 2016.

Just to clarify, when you mentioned some incremental savings if you did it that way. Are you already locking in the contract costs for the teams? Or we're hearing other companies flag cost exhalation as a concern in the middle of the decade.

No, we haven't locked in contracting costs for the second one. We haven't made the decision to move it, so it's a little premature. The savings that we are looking at is by the learnings that we've done by cutting one up, as well as a lot of one-time costs like buying land and some of the facilities don't have to be replicated.

In addition, all of the people that we hired get charged to the project so it's about 130 people total by the time we start up the first one. We do a second one, it's 30 people, so there's a lot of one-time cost but we did look reconciliation inside the house. We think there's about $75 million to $100 million in savings which we're looking to confirm.

Thank you.

Robert Kwan with RBC Capital Markets.

John, if I could just come back and build upon the relocation? Everything is going as planned on the first unit. You've got the gas contract economies of scale and looks like costs are a pretty good amount lower than the initial relocation. So, what are you looking for to see as markers in terms of the second relocation? Or what additional evaluation really is needed, given you've got a pretty good cost buffer in place right now with the initial estimates.

I guess it's just time. We don't have to make the decision today so why make a decision you don't have to make? We are fully focused on doing a good job on the first one. And we will make the decision on the second one as we think the team that is working on the first one will start to roll off. So there's nothing really that I can foresee that would not make us positive about moving a second one, but the world has a way of changing very quickly. So we don't have to make the call, why make the call?

Okay. So there's nocritical path items. You've talked about the world changing. What types of things would you be concerned about that might pop up?

Well, the banking crisis, I wasn't expecting that when I was down in Trinidad with our analysts in August of 2008.

Okay. So you're looking at tail event-type stuff. Is that fair?

That's right.

And then if I could follow-up, I know you don't want to talk too much about the Chesapeake contract. But can you just talk about the internal way of thinking as you were approaching going into that contract with respect to, was there a trade-off of maybe taking a slightly higher gas cost when you think about what the risk mitigation but especially the ability to use the second stranded asset and realize a lot of these economies of scale? Does that factor into the thought process?

Sure. A lot of things factored into the thought process. I think we're looking to hire I mentioned 130 people. And you know we certainly want to attract the very best talent to that organization. And having a 10-year gas contract as opposed to spot gas certainly gives us certainty to our new employees saying we've got a life here for at least 10 years. So don't be afraid to join us that we might not be operating. That was a big factor.

Second of all, like I mentioned we were hiring 130 people and this is first time we've done this. So de-risking a plant was part of the strategy. So as we look to move a second one, we were very uncomfortable having 2 million tonnes there exposed to spot gas. In Medicine Hat we're running at about a 500,000 tonnes today on some sort of let's say to two- to three-year strip gas.

So it's a lot of methanol to be exposed to spot markets that we don't expect to be back to where they were at $10, $11 some years ago. But certainly it gives us a lot more comfort to move a second plant now that we have the first plant underpinned by a contract.

That's great. Thank you.

Hassan Ahmed with Alembic Global.

I just wanted to touch on a few different production basins. First and foremost, I think you already just said this, but barring quote unquote a tail event, I mean it seems that the second relocation seems to almost be a done deal. Is that fair to assume that?

Well, we haven't made the decision. We don't need to make the decision today. If you asked me if I had to make that decision today, yes, we'd go forward with it. But I don't have to, so you shouldn't interpret that that's a done deal.

Fair enough. Now on the Egyptian side of things, again, gas curtailments and the like, but is there any pushback that you hear of in terms of the contract itself?

The contract, at this time, is being honored and it continues to deliver gas. I think the issue on the gas is more of a demand issue. Demand for electricity has gone up by about 22% in the last year. A lot of reasons for that. The country is going through a big change since the revolution and there is a number of issues with the demand side and the upstream side. We think they're short-term issues. There's 75 TCF to 80 TCF of gas in Egypt as reserves.

I met with all the upstream when I was there 10 days ago. There's lots of gas in the western desert. I think not much has been done in the last couple of years for obvious reasons. So I think the issues in Egypt are short-term and we're going to have a really great long-term project there.

Very good. And finally on Trinidad. Some ups and downs in terms of some gas curtailment and the like, but do you near- to medium-term foresee some hiccups like that continuing or that's a non issue?

Like I said in my opening remarks, I think 2013 will experience some curtailments. We don't expect them to be as bad as 2012. Beyond 2013, we, based on everything we know, we expect to be back to a more normal situation. But the future is a little hard to predict. I would say in Trinidad the situation with the shale gas in the US has certainly changed the dynamics in that market as well. So we're pretty positive long-term gas availability in Trinidad is going to be positive for us to run our plants for a long time.

Very good. Thank you, so much.

Paul D'Amico with TD Securities.

Sorry to make you repeat yourself a bit. I just wanted to go back a bit. So on the Trinidad, could you quantify from what to what in terms of saying, okay, yes, there were some challenges on the feed stock for 2012, improvement in 2013. Are we talking a very nominal improvement? Is there any way you can give us some framework on that?

I wish I could but I can't. We just have 30 days under our belt here. And we're talking to the upstream and to the government about what we should expect this year. So I can't really give you specific guidance on percentages.

Okay. How about this? In terms of what the 30 days we're talking about so far, that is better than say the last 90?

It's really too short a time to give you that much specific guidance. I think our expectation is we will run at higher rates in 2013 than 2012. And I'll remind you we had two large outages with our big Atlas plant in 2012 for technical and turnaround reasons. So if you exclude those, we still expect to run at higher rates based on gas availability.

No, I was asking excluding those. It's too short. That's fine. You mentioned in the early remarks in terms of the high CO2 gas and talking about incremental 200,000 tonnes by mid-2014. And my extrapolating too much, you sounded pretty confident on that. Is there any color you can give us with respect to confidence to get that?

Yes. I think we're pretty confident that the gas is there. The high CO2 gas is there in the country and it certainly got value to us and it's just a commercial discussion with a couple of potential suppliers. So we're optimistic we are going to get that high CO2 gas, which gets us back to that 2.4 million tonnes at the site. But I don't want to promise something that hasn't been done.

Okay. One last one on the relocation of the potential second plant. I know it's been beaten to death, but Jim, you said you don't have to make the decision but I'm curious. What sort of things would need to be shown at this point? Is it a question of showing more progress with respect to the first move? Or is it something with respect to the infrastructure that you want to see? Is there anything in particular? Or is it just that, like you said, it's just not something that you need to look at right now.

We don't have to make the decision until people are starting to roll off the first relocation, which is not today and not in the next few months. What we are looking at, it's the first time we've done a relocation. We've never done it before. We're learning lots as we do it. I mentioned the first ship of the big pieces is being cut into 30 big pieces. Will leave in the May, June period. So we are going to learn a lot between now and then. So it's just a matter of why make a decision that you don't have to at this time?

Okay. Thank you.

Steve Hansen with Raymond James.

John, I just wanted to circle back on the concept of smaller opportunistic de-bottleneck type projects. I think it was a year and a half ago you guys laid out a whole raft of them. And you've been able to quickly execute on pretty much all of them here at least through the next year. But as you look beyond then that timeframe, beyond the CO2 foot, which would be the last one. What else is out there from a de-bottleneck, or small incremental improvement capacity growth-type opportunity as opposed to the large scale Chilean relocation?

I think we're pretty well reaching the limits on those kinds of small projects. We do still have two plants in Chile and depending on what our view on the gas market is there, I think we're always going to have production capacity in Chile. Our current view is that two-plant operation. But if that changes at some point in the future we do have the ability to relocate another plant if that's what we decide. But I think we want to get really comfortable with relocating one and then maybe a second one. I'd say beyond either more production in Chile or relocating, you're looking at a new build for any additional capacity.

Fair enough. And just back to the broader methol markets if I could for a moment. The growth in demand on this MTO side, MTP side, is quite intriguing and could be potentially disruptive. But do you get a sense for these two plants that you spoke to in your initial remarks, whether or not they've contracted the methanol they're going to need in the timeframe over which they will scale up?

I think the first one we know a little bit better. They put in place contracts for methanol. They've been buying methanol both contracted and spot. I think their plan is to have a combination of local methanol and imported methanol. If you're using 5,000 tonnes a day, that's a lot of barges of rail cars. So I think they'd like to have some imported in large quantities and security supply is a big issue for them as well.

The second one is company called [wesawn] which does produce methanol today. I think they produce around 300,000 tonnes per year. So they have some of their own supply and that'll be taken away from the merchant market where today they sell that product to other people. And they will then look to contract for the balance of 700,000 tonnes at full rates.

I see; that's great. And just on that same line of thought, are you seeing the plans? There's been a dozen or two dozen of these plants that have been proposed and talked about. Are you seeing any acceleration or deceleration in the growth of those plans on MTO and MTP side?

It's a little bit hard to predict, but these two that are right in front of us are happening. Like you mentioned, there has been a lot of announcements, both integrated and other merchant plants. Like any other place in the world, not everything gets built. We're watching it closely and really focused on things that are happening as opposed to announcements.

Great. The last one if I may, on the supply side, is there's been similar talk about the US Gulf as an opportunity for new methanol plants and new builds. But are you getting a sense for whether anyone is actually close to striking out with the new greenfield?

There's a lot of announcements there as well. When we look at the economics, based on what's available to contract gas at, the forecasted methanol price and the capital which we are assuming is around $800 to $900 for new builds, the economics don't work very well. I'm sure we don't have exclusivity around that type of analysis. I'm sure others are seeing the same thing. That tells me that in order for these things to work, the methanol price will have to be a lot higher in the future than it has been in the past. But time will tell.

I think we're in a very unique position to be able to relocate and de-bottleneck sites for very modest capital versus new build, and in a very compressed time so within three years adding 3,000,000 tonnes of capacity increasing our capacity by 60% in a time where the industry really needs the new supply because the rapid growth of specially on the energy applications. These windows don't open that often and we're doing all we can to walk through it as quickly as we can.

Very good. Thanks. Appreciate it.

Ben Isaacson with Scotiabank.

Hi. It's Shawn again. I just wanted to go back to your comments about Chile a few minutes ago. I realize it's somewhat premature given where you are with the second relocation, but if you were to move in the third plant outside of Chile, could either the Geismar or Medicine Hat locations support that kind of a move?

We're getting way ahead of ourselves here. Our plan is to focus on a two-plant operation in Chile. If that plan doesn't come to fruition, then we have some options. When you are relocating plants, they are in 30 big pieces. So you don't want to be moving those across vast areas of land. So a site that has water where you can unload these big pieces off a ship right onto a site makes the most sense from a risk and cost point of view. If we were to relocate another plant from Chile it would be probably somewhere where you could do it by just loading it off a ship.

Okay. Thank you.

Winfried Fruehauf from W. Fruehauf Consulting.

Thank you. Regarding the Chesapeake contract, is the initial price related to [henryhaab] or is it a negotiated price?

The contract is very similar to our other contracts, where there's a price and then a sharing mechanism with the supplier depending on the methanol price. So it depends on what the methanol price is at the time will determine the price that we pay for gas.

And how often would the gas price be adjusted? Would it be monthly or annually?

I think that's commercially sensitive. I'm not really prepared to disclose that.

Okay. And last part of my question is, if Chesapeake is for some reason unable to supply the contractual quantity of gas, is it required to find replacement gas?

Again, that's pretty commercially sensitive type of information. What I will say is Chesapeake is the second-largest supplier of gas in North America. They have numerous reserves to supply this contract with, and this contract is less than 5% of their overall gas supply obligations. So we are very satisfied that Chesapeake will be able to fulfill its requirements under this contract from a supply point of view.

Thank you very much.

Max Salk with PPM America.

With regards to the possibility of the second or I guess third brought up, seems a little far down the line, but the second move. Talking about financing. Obviously, you guys have talked about keeping pretty conservative balance sheet. So when would you expect CapEx for that hypothetically to ramp up? And would you go back to the bond markets? Or would you use what you've got on the balance sheet from operations?

Why don't I asked Ian Cameron to answer that question, our CFO?

Thanks, Patrick. As you know we went through a financing round in December where we raised $350 million bond and we also extended our bank facility and increased the size of that bank facility. And that was all to set us up to make sure that we could, as John refers to, jump through the window of opportunity that we have in front of us. So we believe the combination of cash on our balance sheet and cash from operations and a backup liquidity that we have a financial capability to execute these unit expansions and also the relocation projects.

Right. Does that apply to the second relocation, though?

That would apply to the second one as well.

Okay. I got it. Thank you, very much.

Peter Butler with Glenn Hill Investment.

During your presentation there wasn't any mention about future earnings. And so far the analysts in the Q&A session haven't brought up the subject. And normally earnings are about the most important investment consideration. So can I volunteer to ask how the year is looking?

Absolutely. The year is looking quite positive. In the current pricing environment, if we continue to produce at the current rate, it's going to be a fantastic year.

That sounds good. And do you have plans to distribute any of the cash to owners?

I think you'll see in our slide deck that we put out with our MD&A, there is a slide at the back that shows the cash generation ability of the Company as we execute these projects. Our current focus is to do a good job and execute on these projects in front of us to get us another 2 million to 3 million tonnes of produced molecules.

If you get to 7 million to 8 million tonnes of produced molecules at the current pricing, you are well north of a $1 billion in EBITDA generation per year. Our sustaining capital, we think at that type of environment, is around $100 million tax and interest. We should have free cash of around $700 million to distribute.

I would say if our stock price continues to trade at a large discount to replacement cost of the industry, why build more new capacity with that money, you might as well buy back your own capacity through share buybacks? So our plan would be to retain a balanced approach to grow the Company, have a sustainable growing dividend, and return excess cash to shareholders. And we will look at that as we execute and deliver on these projects.

You have had a valuation model for your stock for many years. Going all the way back to Pierre, I think. And how does that look to you now? How much of a discount are you selling at?

I think there's a lot of ways to value companies and we certainly have our ways and the street has their ways. If I look at the chemical industry, companies trade typically between 5 and 6 times EBITDA. So if we're trading or we're generating $1 billion and you put a 5 to 6 multiple on that and we've got 95 million shares outstanding. It's quite a bit higher than where we are at today.

Okay. Good luck. Thanks for the help.

I always like luck, so thanks very much.

Kunal Banerjee with Brigade Capital.

I just had a general, broader industry question. And actually one that is relevant to you, with your moving out of Chile potentially up to US Gulf Coast. I was just wondering what the cost to serve is out of Chile and out of the US Gulf Coast, specifically into the Pacific basin? And as a corollary to that, with all the capacity that's coming up in the US Gulf Coast, could you see that arbitrage essentially be eliminated over time and maybe even flip to the point where you see higher Pacific basin prices?

I'm not really good at predicting the future, but I will give you a little color of what could happen. When we relocate plants to the US, that product is not going to go anywhere. It's going to stay in the US. The US market is about 6 million tonnes, if you include the Canada. And even adding a couple million tons of relocated, you are still going to have an import market in the US.

Now over time, if you get to a situation where there is a lot of new builds in the US, where the supply outstrips the demand then that product will have to go somewhere else. And obviously, most of the growth today is coming in Asia, but again the future is hard to predict. There's a lot of energy applications that are starting to emerge in the Atlantic basin.

So if, for whatever reason, the demand in the Atlantic doesn't keep up with the supply, then this is a commodity industry that works on cost curves, and trade is part of that cost curve so the market will always be balanced. It's just will be a matter of what price you need to have the supply demand intersect. And there is a ton of assumptions you have to make around that it in a few years from now to see where that price and what the relative trade is. We watch it very closely. We have a good view, I would say 12, 18 months out. Beyond that there's just too many variables that change.

I guess Geismar would be captive or domestic, but Trinidad, that would be displaced, so that would have to find -- Trinidad in general, not just your capacity -- but in general would have to ship its products somewhere else. My question was really regarding the net backs seem to be higher in the Atlantic basin, relative to the Pacific basin, so there is obviously a product mix issue that might come into play. Because if you do see the net backs come off in the Atlantic basin that might be an issue. But anyway, I just wanted to know what your thoughts were around that. Thank you.

Charles Neivert with Dahlman Rose.

When you used to move up, I guess you still do a little bit of product coming out of Chile, did it come through the Panama Canal when it did? Or did it come around from the other direction? And then, the subsequent to that question, how big a ship are we talking about moving through there?

And this is playing on what Kunal had asked, is the Panama Canal is expected to widen in I think about 2015. So is it possible that any Trinidad stuff if that Asia-Pacific thing hit up, you would be able to move large enough ships and make it pretty reasonable move Trinidad into the Pacific basin. Or are they already big enough to handle that move if that was the way it went?

The canal is big enough to handle the moves that we would plan on doing today or in the future. Our preferred size ship today's is 45,000 ton vessel. We have moved 45,000 ton vessels from Trinidad to Asia in the past and I would expect to continue to do so in the future. And when we do go from Trinidad to Asia, it is through the Panama Canal.

Okay. So the widening wouldn't make any difference in terms of amount moved, potentially amount moved or size or some of the cost structure that might as you move it there at least as you imagine it now?

I think that's accurate.

Okay. Thanks.

Moji Kuye from Telus.

I just want to ask what impact would the low level of the Mississippi have on your relocation right now? Or you don't think any?

The reason we're moving the plants in the May to August time period is the unpredictability of the levels in the Mississippi. Usually it's a high water level as opposed to a low water level and then you've got the hurricane season starts up in August. So it's a little, again, difficult to predict the weather or the future, but I think we are comfortable to be able to move that plant into the, onto the site this summer.

Okay. Let me just ask like a contrary question. What can happen for you not to move the second plant from Chile?

What can happen? Again it's difficult to predict the future. We would have to see some sort of major event like we saw in 2008 where at that time credit markets froze and demand for traditional chemical derivatives dropped by 30% overnight and nobody really knew day to day what was going to happen in the near term. Companies at that point in time took a fairly conservative approach to projects and cash.

It would have to be some major event that I can't even imagine at this particular point. But these black swans have a way of coming forward when you're not expecting them. Does that answer your question?

Do believe you have enough capital to do everything? All the capital spend you will need?

As Ian mentioned in his remarks, yes, the current balance sheet, the liquidity as well as the current earnings will allow us to complete all of the projects that we've talked about to get to that 8 million tonnes of productive capacity by early 2016.

Okay. But you are not disclosing the cost of the second moved yet.

What we've said is we're doing work at this time to confirm the cost. We're spending some money. And our current estimate is $75 million to $100 million less than the first one.

Okay. Thank you. That's it.

Thanks, everybody, for the interest. So a few remarks about Q1. We expect Q1 earnings to be higher than Q4. And it's really as a result of higher sales of produced molecules and a higher realized price. So, as Peter mentioned in his comments, we're in a really good spot in the market. High price environment. Our production continues to perform really well in setting up for a really good 2013. So thanks for the interest in the Company and look forward to talking to you next quarter.

Thank you. The conference call has now ended. Please disconnect your lines at this time. Thank you for your participation.