Terra Nitrogen Co L P 8-K Terra Nitrogen Company, L.P. reports second quarter results; declares cash distribution

Terra Nitrogen Company, L.P. reports second quarter results;
declares cash distribution

Sioux City, Iowa (July 26, 2007)—Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported net income of $57.1 million, or $3.02 per limited partnership unit, on revenues of $177.4 million for the second quarter ended June 30, 2007. This compares with net income of $17.4 million, or $0.92 per limited partnership unit, on revenues of $119.2 million for the 2006 second quarter. For the 2007 first half, TNCLP’s net income was $92.4 million, or $4.90 per unit, on revenues of $305.6 million, compared to net income of $14.9 million, or $0.79 per unit, on revenues of $214.6 million for the 2006 first half.

TNCLP also announced a cash distribution for the quarter ended June 30, 2007, of $3.00 per limited partnership unit payable Aug. 27, 2007, to holders of record as of Aug. 9, 2007. Cash distributions depend on TNCLP’s earnings, working capital requirements and capital expenditures. TNCLP’s quarterly earnings can be affected by nitrogen products selling prices, natural gas costs, production levels and weather.

Analysis of results
Second quarter
TNCLP’s second quarter earnings improvement was due to higher sales volumes and UAN selling prices, partially offset by higher natural gas costs. The 2007 second quarter significantly benefited from increased nitrogen demand associated with record levels of U.S. planted corn acres. From the 2006 to the 2007 second quarter, TNCLP’s:

• Ammonia and UAN sales volumes increased by 40 and 11 percent respectively.

• UAN selling prices increased by 43 percent, and ammonia selling prices were approximately the same.

• Natural gas unit costs increased by 12 percent.

First half
TNCLP’s first half earnings improvement was due to higher sales volumes and UAN selling prices, and lower natural gas costs, partially offset by lower ammonia selling prices. 2007 first half results were affected by the same factors affecting second quarter results, and lower first quarter 2007 natural gas costs. From the 2006 to the 2007 first half, TNCLP’s:

• Ammonia and UAN sales volumes increased by 37 and 21 percent, respectively.

• Ammonia and UAN selling prices decreased by 6 percent and increased by 24 percent, respectively.

• Natural gas unit costs decreased by 17 percent.

Forward natural gas position
TNCLP’s forward purchase contracts at June 30, 2007, fixed prices for about 37 percent of its next 12 months’ natural gas requirements at $13.1 million above published forward markets at that date. TNCLP has entered into these forward gas positions to secure margins on nitrogen products sold forward at fixed prices.

About TNCLP
Terra Nitrogen Company, L.P. is a leading manufacturer of nitrogen fertilizer products.

Forward-looking statements
This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about TNCLP’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in TNCLP’s most recent report on Form 10-K and TNCLP’s other documents on file with the Securities and Exchange Commission. TNCLP undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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Note: Terra Nitrogen Company, L.P. news announcements are also available on Terra Industries’ website, www.terraindustries.com.

(Tables follow)

Terra Nitrogen Company, L.P.
Condensed Consolidated Statements of Income
(in thousands except per-unit amounts)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Product revenues	$	177,158		$	119,109		$	305,010		$	214,587
Other income		282			42			587			21
Total revenues		177,440			119,151			305,597			214,608
Cost of goods sold		114,111			100,105			204,881			196,215
Total gross profit		63,329			19,046			100,716			18,393
Operating expenses		7,470			2,027			10,648			4,065
Interest expense—net		(1,198	)		(346	)		(2,319	)		(600	)
Net income	$	57,057		$	17,365		$	92,387		$	14,928
Earnings per limited partnership unit	$	3.02		$	0.92		$	4.90		$	0.79

The amount of net income allocable to the Limited Partners’ interest is based on the Partnership’s net income and the proportionate share of cash distributed to the Limited Partners and the General Partner.

Nitrogen Volumes and Prices

	2007				2006
	Sales		Average		Sales		Average
	Volumes		Unit Price		Volumes		Unit Price
Second quarter	(000 tons)		($/ton)1		(000 tons)		($/ton)1
Ammonia		95		382		68		381
UAN		631		201		571		141
First half
Ammonia		164		371		120		394
UAN		1,205		181		998		146

Natural Gas Costs/MMBtu²

Three Months Ended				Six Months Ended
June 30,				June 30,
2007		2006		2007		2006
$	6.72	$	6.02	$	6.56	$	7.94

1.	After deducting outbound freight costs.
2.	Including effect of forward natural gas position.

Terra Nitrogen Company, L.P.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

	June 30,
	2007		2006
ASSETS
Cash and cash equivalents	$	80,732	$	33,110
Demand deposit with affiliate		5,332		7,469
Accounts receivable		49,999		31,340
Inventories		22,542		27,362
Other current assets		2,471		1,350
Total current assets		161,076		100,631
Property, plant and equipment, net		72,250		75,125
Other assets		13,749		7,467
Total assets	$	247,075	$	183,223
LIABILITIES
Accounts payable and accrued liabilities		47,481		24,456
Customer prepayments		16,846		7,138
Total current liabilities		64,327		31,594
Other liabilities		1,815		289
Total liabilities		66,142		31,883
PARTNERS’ EQUITY		180,933		151,340
Total liabilities and partners’ equity	$	247,075	$	183,223