Earnings call transcript Q4 2022

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Operator

Greetings and welcome to the LSB Industries Fourth Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Fred Bonacor, Vice President of Investor Relations.

Fred Bonacor

Good morning, everyone.

Mark Chief Chief Financial are Cheryl Officer; today our Maguire, Officer. me Behrman, Executive our and Joining Please note company's materially. that of could and and because cause today's they future call will statements projections, results variety based include performance are the and on of not actual the are current a expectations the intent, guarantees forward-looking factors statements, differ to

for of press include information lsbindustries.com As non-GAAP the the to statements will forward-looking to reconciliations further see references non-GAAP release this our Investors and section call please results, in results website, results. regarding of GAAP

time, ahead over call like this At I'd to and turn Mark. go the to

Mark Behrman

in and our the Thank in cash adjusted significant year our record our the was substantially year-over-year our and we outlook opportunity return at first share EBITDA year you, financial shareholders strong balance our quarter today of have improving generated time a sales and about We pivotal to to through XXXX you We're XX% increases repurchases of flow of Fred. to full respectively. which XXXX. speak and while fourth XXXX with for company's and results same portion delivered happy sheet. the full We with year a XXX% history. results quarter

margins, reliably reflects sell strong Our facilities ability production to performance all all products strategic prices operate of our across to of attractive and in our at our selling thanks the commercial favorable trends our coupled efforts. our with

of their and safety at we Additionally, improve completed reliability. turnarounds our facilities further two to major

projects two for for of thank development their and no we LSB like a I'd a excellence energy of culture of developing signed at begin to quarter another our leader to making all In of in at a facilities. Industries. ammonia excellent the industry, becoming and employees major low carbon commitment carbon our this clean step agreements towards to emerging

dedication work deal in up to a a year. put in team XXXX, our Our successful the in us hard have which put team leading – of to put put and great together – position years a

While our safety. is results important, strong are very financial focus primary

core in our consistently we environment. set of incidents operate policies communities health to our contractors, which protect that standards, matters, very where One high zero what the our and recordable we achieving procedures is injuries. zero well-being protect employees, We've and in aimed safety strive values of and the goal to at

have to we to made work we where in years, towards get do still While progress be. goal have want this recent to we much

and will We will we've safely we expect that investments our years. and XXXX, strides respect with make help coming us in made make in in XXXX meaningful operating facilities in quarters the to

early delivered as during on having Cherokee we Page despite the facilities solid Looking XXXX environment our of had execution. generated summarized favorable on Notably, results impact weather turnaround our year-over-year quarter in the growth at presentation, aided fourth part and the Dorado quarter, we December. final and by week of and three pricing the freezing a of continued the prior of strong El these

markets. end of parts our South of good corn global provide including ratios the of two America a take continued remain above in we X to lows bring three an to stock-to-use our will prices growing conditions of demand. worldwide line ratios to in averages. historical with averages, stock-to-use and Corn and for corn believe us it back and variety Domestic US by driven of that at Page leading drought On the seasons multiyear years presentation, factors strong remain overview multiyear global

and remain corn this attractive, XX increase pointing an this million that XX million USDA We and of year. in estimates million in expect profitability stay last prices corn XXXX acres versus planted an that current be XXXX planted near year. to acres acres that farm high The will approximately levels will approximately spring through to XX were will planted

demand that season further wheat in planted This an fertilizers be will will the increasing once increase is nitrogen nitrogen planting expected there also XXXX, that gets acres supports be coming demand in underway view fertilizers. in the strong for weeks. in It the

respect on whole, our supportive end-use to With Asia, demand Domestic in stronger markets remains products, stable. to continue which our industrial is be and those than for the Europe business.

throughout mining and impacting other are chemical remains industry, see economic the that pressures manufacturing and activity While some continuing of parts this we strong inflation year.

for we from improvement auto that suppliers and indicate automotive unfold degree further some production manufacturers in the demand that announcements recent produce. of acid Additionally, nitric XXXX, supporting could during

come While business nitrogen in our and be European demand historical above largely decline trends gas remains prices, natural recent down due to months in across pricing solid has averages. products pricing for to a continue

scheduled no positioned our we and year, With turnaround in a this year-over-year at are facilities strong well sales for production volume. increase

robust another As and of cash such, year we profitability expect flow.

outlook. Now, Cheryl? to I'll over who turn the will QX Cheryl, and our discuss results call

Cheryl Maguire

good and Mark, morning. Thanks

record adjusted a Our for fourth quarter. quarter performance the is $XXX million in of EBITDA fourth us

Additionally, in we of the adjusted generated quarter. EPS $X.XX

cash sheet page X, to flow key of summary a Turning you'll and metrics. our see balance

average we enabled maintain shares program end $XX in $XXX had XXXX. and we in $XXX liquidity our of Our approximately approximately to strong million $XXX that million XXXX, us XX.X approximately share, million approximately cash a continued began liquidity, repurchased million total of we profitability the the short-term of of investments. May position. stock per an of price including At after exhausting repurchase share is at This

August outstanding by of nine were reduce able shares XX.X bought our who the the and same in of trading to approximately shares a shares, million of of of liquidity stockholder, the we Through secondary offerings time increasing our million November we stock position XXXX. transactions, completed at XX%, while stock. back our largest their portion these from As our in

capital free from we XXXX, million, of expenditures operations $XXX During had into of flow. of generated $XX million million translating cash and cash $XXX flow

program. we our repurchase cash year, free the XX% our For approximately through investors to share returned of flow

time, target leverage mid-cycle net year times. trailing a ratio less in a the with well ended than leverage our debt EBITDA or of normalized XX-month Additionally, X.X below below to ratio pricing environment we one of

adjusted million increased for impact quarter The adjusted shown to Page of the our costs XXXX. of of is net quarter price EBITDA fourth variable million. of EBITDA X versus bridges selling positive $XX fourth the $XXX fourth quarter XXXX

Dorado fourth one quarter weather a the Sales in the planned result and volumes due quarter turnaround production impact Cherokee of the our of concluded lower at of mid-October and as which approximately freezing in were activity the in December. to facility, in loss at of prior late our cold El facilities, fourth week

pricing result bottom distribution we've over contracts Page delivered operational improvement X line This of several new past investments customer trends, to improvements, and mix. optimize we've favorable the our the made years. and strong is illustrates the product

of anticipate us our XXXX still strategy, nitrogen than moderating which peak further we to XXXX, later levels we call. growth Mark a pricing and as in lower be to While result off implement will the expect flow, generate discuss positioning substantial of EBITDA will cash profit

is at Looking UAN a the first quarter, approximately currently Nola at pricing the tonne. benchmark $XXX

Asia. Tampa industrial gas very have settled in metric high ton at ammonia metric levels XXXX February natural ton and change demand Europe, price come The reflects in benchmark Additionally, $XXX last lower and down which versus largely year-over-year prices from per in the Europe February. in softening $X,XXX per

while have costs US quarter our in since feedstock nitrogen approximately $X.XX approximately Europe, gas of our natural gas QX. currently prices per gas to have advantage fraction natural keeping that locked With the US enjoy. a that at XX% producers moderated, MMBtu competitive cost, and first also have cost US intact we of needs declined said, Relative gas do at in for stand the

a With expect X announced, Phase XX, respect higher UAN in sales as first second volumes, volumes with lower quarter, XXXX. to start in assuming production our to delayed reasonable the and we quarter weather resulting of previously production at fertilizer January overall compared and January of on of moving to movement sales facility conditions. resumed The that XXXX, the despite the site as volumes ammonia Cherokee

Additionally, volumes with XXXX. first nitric of be and the line expected quarter acid are healthy AN to in

approximately impacted EBITDA view quarter range mid-January, keep expected freeze million. of expect the adjusted production and our pricing, view million current So and quarter first $XX would million our Please to impact through the on sales mind, gas EBITDA from $XX be we based locked-in volumes given costs in natural Cherokee on that event our the the the range to is pricing. for of in $XX

of considerations can Looking the provide year, forward X year for XXXX. year to production for full full XXXX our volumes sales see and we you on Slides our ammonia X, and balance the of On the Slide expected X.

XXXX, operating improvement a as in Pryor and and turnarounds downstream turnarounds of in in all part the of any well meaningful at products. production El improvement we our as absence to expected our of expect rates, due As result Dorado XXXX year-over-year ammonia in in

million facilities. and to related of during million $XX loading This our improving approximately commercial and balance in of $XX to at XXXX. CapEx investments enhancement million operations, the and footprint safety approximately with storage invest includes our margin investing million to expect the reliability plant expanding in efficiency at We projects for aimed $XX earmarked $XX our facilities of to capabilities our

covers fixed plant of for Slide as range expenses XXXX. a X variable well and as SG&A

key as Our the support expect to expectations our our that other costs. for well we've reflect made in for to effective XX%. wages year be inflation talent Note, growth tax and investments costs rate as fixed we in approximately

XXXX as cash we expect to not we NOLs. continue taxpayer to do However, material our be utilize in a

Mark. to over back it turn I'll now And

Mark Behrman

Thank you, Cheryl.

above continue indicated, gas strong have XXXX volatile costs and due our throughout third winter gas the back prices and recent for the albeit quarter and selling demand. prices offline. remain spike industrial the US facilities in European resulted production natural currently Europe natural natural is and are which gas prices warmer-than-average for prices illustrates nitrogen European XX a in prices paying has $XX has lower natural over and come lower Much still being be $XX European between the we're what how for months, XX-year Cheryl As between of to averages MMBtu trended Still of of as well in XXXX. which historically natural taken Page to to multiple in significantly online, led during course down in US. come this lower XXXX The equivalent, spread of products. widened fluctuating European many gas gas temperatures in

production costs in price to continuing $XXX level provide an translates and cost producers. substantial nitrogen will ammonia to above likely European be ton to gas Europe ammonia into of costs, on advantage domestic average continue approximately a production US significantly per current The

to the For pricing favorable a the nitrogen we relative continued decade. past expect environment year,

initiatives market. We capacity emerging have enhance energy much clean the and our efficiency, company-specific increase enter several also that to opportunity control, our in representing the very our are production

us for our value will increased resulting allow We increase expect these to shareholders. in profitability, ultimately opportunities our

over generated the with actions of expect The growth XX enables a months the will taken year, us we've us XXXX our to sheet and with course this over continue pursue flow provide that past strong the to multiple balance position coupled it with initiatives. liquidity cash

we a XX, page key growth initiatives. summary of our On show

mentioned I good safety our and day focus employee stewards earlier facilities. the our reliability As being every primary of environment the of by is followed single

improvements to and all further We progress. on fronts make continue opportunities significant these have for

and The and our our El work environmental completed will sites Dorado reliability XXXX advance safety Pryor initiatives. at during

capital two rates meaningful we facilities initiatives we into increase profitability. the our Additionally, years to incremental operating should the at believe the manufacturing with making are a next are we combined that contribution over pursuing the our translating investments

we top initiatives. capacity production plants On we debottlenecking of through increase various believe of the our can that,

and our increase volumes We projects significantly currently could multiple are production and profitability. sales evaluating potential our that

end The domestic we and increase production that fertilizer a increasing submitted security grant application of also demands. stated production the $XXX for USDA's farmers In capacity federal regard with goal our program. in assist have meet expansion ensure USDA's of increasing of supply that to million can fertilizer their the nitrogen the production under December, at fertilizer would

We highly build The assets existing believe than a production production to is qualified applicant opportunity manufacturing our any a capacity award under this given maximum million. more of facility. new our in $XXX increase are our program manner we timely

opportunities currently to our be attractive. a have decarbonizing our initiatives, ammonia projects Not and do as ammonia energy of leader and The advance to potential represent we two our footprint, compelling both industry. us have to the projects our result but economics the respect in clean could to emerge for only underway, additionally in we substantial reduction our very we blue carbon strategy. blue believe With in green to continue a green

to captured and in ammonia blue of provides XX blue Page call, on projects. project respect to an and $XX quarter El With the the overview COX an our credit attractive. and project update made of green ton our as of Dorado XXQ economics third per in very sequestered increase we our the this ammonia discussed has

this a and step EPA. approval permit commencing injection A injection to for project well towards a happy the as path we of well. VI earlier a is production was to achieved VI obtaining CCS our I'm operate this on on milestone application say week blue ammonia filed critical Class that with the a the Class

have been at begin that that and timing We expect between take Dorado capturing EPA process and El our Based review months sequestering to XX on in XXXX. months. to told the could COX we continue site XX

emissions Our this that approximately analysis operation, XX%. project our X indicates company's by once carbon in reduce should Scope

XX,XXX Act kilogram production ammonia and customers. of Regarding this sell to that continue to rolled $X we green project, to tons ammonia incentives as of produce for full enable approximately COX project for expect out part our carbon the Reduction qualify the hydrogen per to our will us inflation zero of federal

our We expect second the announce producing end green we this the for quarter. of to work XXXX To proceed in ammonia and early project study XXXX. our we have it completed to some of begin on as late plans feasibility anticipated, expect by extent extensive the

LSB was XXXX, our sheet, a manufacturing highlights same time strengthen materially the significant market environment our to favorable capitalized up it on enhance in investing sum We to of balance the Industries. To our year at capabilities. facilities while for

generate expectation We manufacturing our coupled production volume the the have entered of year enhancements a volume footprint. XXXX this year-over-year through of with the improvements turnarounds increase any opportunities the in we existing absence to with given of significant further

the same LSB in we a low-carbon At no-carbon Industries be leader ammonia continue will position to to production. time,

to of look initiatives the forward And for lead progress profitability these expect discussing years projects. greater with come. collectively we in our to milestones development as to and We critical to increased reach in value our I you our shareholders the

for an Investor XX to back March look the the York of forward I'd there. Day we and many hand session, we in to New I Q&A call operator over that Before the mention like be hosting will seeing to on you

and now prepared our any Thanks. be remarks questions. concludes we to That will take happy

Operator

Please the Our of from first Instructions] Samuelson [Operator Goldman comes with Adam proceed. line question Sachs.

Adam Samuelson

Good morning, everyone.

Mark Behrman

morning Good Adam.

Cheryl Maguire

morning. Good

Adam Samuelson

morning. Good

North to make to pretty tonnage. your like nitrogen would pretty has market. in been So, get question the channel I'd guess, the and the first distributor I spring on relates rapidly application the inventory seem And perspective love buying to It in significant America approaches. reticent a

So supply book you that is to see probably order for would going be into you me? and up your how frame, think do spring shaping how current might where to demand pockets of difficult

Mark Behrman

Yeah.

It's So obviously as is of Europe put in gas coming of prices. you're interesting coming an is and on first few therefore, that's right. months in Europe been production cost of pricing natural this down, pressure year down

generally prices you a And so see buyers tend lower. step thinking when when prices that to back, happens, falling to go that take continue

up retailers the for and distributors as bit a setting time, sitting back at it's ultimately product opportune of sell and farmer think a spring and back been producers sitting I between well. the So wanting an to standoff then

this spring, some at into been starting season. helpful. helped. kick which that this head we're beginning though, is really weeks, see we'll the had the We've good to And spring. And We've think weather we just expect into very point two off least for really head over next of has I I really rain, the the start patterns. we to some weather As I buying had this to as planting three see also think at would

Adam Samuelson

you any UAN and that that? large been than on actually certainly it's on see helpful. [indiscernible] resulting switching interesting an is do differentiation ammonia cheaper And there any urea from I product and basis ammonia some the That's there versus think how

Mark Behrman

that to has relative other some seen products given we've been Well, so switching cheap urea urea to products.

I a tender India announced yesterday. think,

prices. think that should give I So some urea to support

there'll think other other general. And fertilizer we'll increase see as we in I to products. pricing, I more urea, demand for be think start prices support see in

of marketplace, been in I and lot start the as again, urea funny and where a of to period a will not higher prices buying there's liquidity see in think, up start than I and move much both think ammonia. kind So we're the -- see that prices in see I we you'll UAN think to liquidity support believe market. And in we've the faster I we

Adam Samuelson

I Okay. more, in could Mark. one And squeeze if

You only a on actual your one Dorado. XX-month that one talked slew in understanding approved company by XX prepared permit there's about Class only to than plastics, CCS remarks the X for an mean, well pending. well time El permits line or ever whole I gotten plastic in at

getting about that confidence of just So EPA? you're that from the think level can the you us timing process on approval help

Mark Behrman

Yeah.

To and permit right. is of there It that has XXXX number you're it back ago X ADM was date was in Class site. only an and approved. it's a So one years been

which So of out Dallas. in there -- we're are VI, office is the Region the EPA

So that includes Arkansas. Louisiana, Texas,

of applications filed. So there are been a that number have permit

We Energy, have we our want I work a developing the interacting job, see. with what the did lot did EPA took really our we told on they partner talking about to really them Lapis a to and think And application, the time been and of really good and geology.

about the the So that and application I most we've to it comprehensive think, we feel is been application really submitted, told that we good date.

at true least that's or that's whether not, And don't been I told. what but know, we've

of any yet IRA, that, odd staff. folks of carbon they the the Washington through increased in is through getting made because think Washington to to some from I going capture add be the moving through, allocations to approvals more -- these to to of little some EPA, pressure that it's they me on applications is EPA, there's and bit to really -- a there a invest the incentivized budgetary I really kind lot haven't start believe it's in changes

think And I of into approvals, put start not that the that's IRAs. think part the they're pressure going is because EPA they the getting without these through incentives, the a to they've the get from going that little permit So, I results see to problem. want Washington, from to

is So, XX months I an XX the to by EPA. more do think estimate the

could I So, planning It's time XX- in than But that of it that? really, to kind go XX-month think we're frame. possible. faster

Adam Samuelson

we hop you. Okay. all have. That’s now. Thank I’ll

Mark Behrman

Adam. Thanks,

Operator

line Our Please UBS. comes of the from proceed. Josh next Spector question with

Josh Spector

there. my taking for blue follow-up ammonia time just Thanks line the a question. the Actually, on on

start Should about and So I to think has two parallel equipment of your permit mean, we most that. if Lapis built the years. plan you're takes reiterating the XXXX, up in that basically, sequestration in infrastructure to

So that's turn line relatively years, if some until that? does of you on, or quick two push see it's start out your a of to the benefits that time

Mark Behrman

It's to the a not are facility approved. as hope good question. wait going going a design, we permit occurring build they're we that is I'm there that, and sit speak. to get But and say engineering and there

capital in that investment for there's would are lead on long order. that will those suspect that, So items necessary. go time I

the of the the the then And until, think comes, process. waiting so, the hitting by the get start time permit to we period we've permit I shortened button and

things actually. done there and in So and build but I are to parallel, think, I some they're sit just believe would facility I nor going a wait don't that

Josh Spector

talking mean reductions. Thanks. stable. about demand, on mean, Okay. chemical pretty in your capacity derivatives are just that lot seeing And as the it's it of I even a I significant more America, industrial North you're interesting,

being industry utilization demand curious, tons your you stable, is or Are on, else reconcile the you other versus is that just how declining. I'm something missing? going So placing of and those nitric derivatives for elsewhere, we're there could some

Mark Behrman

of optimizing our one key I our I No. really commercial is think organization aspects the where of go. products mean,

degree nitric, haven't -- in ability -- market. we we industrial we, softening production up seeing high in some which AN we're have start and as should some and to ramp seen both But could some nitric while see, to to that. in density, to slowdown date, fertilizer products we certainly sell the even So demand our is see

Josh Spector

you. Thank Okay.

Operator

line Please comes the proceed. question Andrew Capital RBC of from Wong next Our with Markets.

Andrew Wong

can looking more taking for there's Thanks on about I timing just the funding application like the Just they're talk morning. and USDA of some questions, good the capacity the USDA on kind for? decision? on maybe the for the expansions, what a looking that. you bit for just is the little like to regarding And criteria different then, limits things size know and Hi,

Mark Behrman

backwards. work I'll Well,

is were be. they've would don't Your think as timing ever two guess the that, announced would good I as there on tell what you mine I submission timing. periods.

they first was of one then And of number part projects November. comment qualified and months, they that the The chose opened period. latter after a a up funding two for about

second we what was when end which applied, is the window, The of -- December.

that, middle and hope from our would And same we two-and-a-half this hearing the back of I project of to USDA the end So, is it's or positively next we're month go months. two, the steps. March, approved can by the that

as what production looking think, four the in to from the US. and domestic fertilizer of increase were top the As far basic I for, was the USDA they producers away focus to it diversify

small in enough number we're US. So the six top We're we're that a four. not producer

there. So we qualify

we that and at El -- production is really production Dorado urea build nitric is to our acid El our and at Dorado, a plant to then, expand ammonia facility. UAN project Our submitted,

would increase XXX,XXX our year. that a ultimately production by tons UAN about So

upgraded for that an product So would us. be

the we're and alternatives on. that that evaluating focused back, of one I together as that path couple that site team think other We've sit is well. come we down has As at a got

a so, the and them modifications conversation back to if it them project, to we comes to interesting will And And about that do about that maybe USDA have we see that. be project should with -- then that and can project. decide conversation approves some

Andrew Wong

something just the funding USDA? how negotiate relative a And Okay. it or to is Like, is work percentage cost the you with to potential does it LSB?

Mark Behrman

says fund… their they'll Well, that guideline

Cheryl Maguire

XX.

Mark Behrman

XX% to with of a per the maximum total project. $XXX million project of the cost up -- of

of north million. $XXX bit a is project Our

USDA. that max funding So be million the $XXX from would

percentage, So up a on the because I there's don't negotiation know I to. stated think that been it's

seeking. we're what that's So

Andrew Wong

general. And Thanks. just, a then on maybe in the Perfect. market, just question Okay.

looks UAN, like I'm they're other the the better be And even. what holding consistent that you're markets, the seeing? it ammonia markets? than that Is Looking talking at urea, ag prices why products, with And the ammonium nitrate might in up case?

Mark Behrman

Yes, we are.

basis a is been always nitrogen premium premium on of a the specialty product a United here it is It's some So products. to product. other the in equivalent States. It a

we're the so, with fertilizer And happy is the products. pricing where to relative today

Andrew Wong

Thanks. Okay.

Operator

question Stifel. the line Vincent comes of Our Anderson proceed. Please with from next

Vincent Anderson

Yes. Thanks one and good of nitrate morning. question to time. was I hoping kind revisit more that

If you more the recall. could HDAN maybe a from flexibility provide mining margin to bit but because you've your perspective, I on tried exposure, your a I detail deemphasize know there, product is pretty good if

just of quantify what to rates could could you amount nitric redirected you if realistic a that really think those keep So up? be of kind you into markets, operating is had

Mark Behrman

got sell to XXX,XXX nitrate. on the got I our I we've the tons annual pelletized into that to solution Solution. Nitrate or year high-density got a the or -- operations. XXX,XXX market tons XXX,XXX well. ammonium Well, of mean, And -- ammonium we an about to of we've ability mean you've as so of do basis. XXX,XXX and low-density before that's about And talking produce course produce prilling Ammonium some about And ability then nitrate mining

we've drop ammonium nitrate, to off flexibility to we I prior. think demand nitric So in upgrade should that see solution some or either got

at not perspective. we're density from those mean, So maximums. low I a

seeing are comments, my nice in As I mentioned demand. we prepared really

So out we there. sold are

is mining the are market. that gravitating given some density We as tightness using high in and density. of that well to seeing clients And kind what we're also our which have some the high in interesting buying density low flexibility also is

Vincent Anderson

going be strategy in discussing Okay. UAN, I given then, and importantly time year, interesting a partnership, changes No. your without with assets? into helpful. CVR while you you. of to maybe and commercial any first That's high-level Thank this logistics kind for mind guess, if will maybe the this CVR's just your And don't more

Mark Behrman

Yeah.

our good quality Commercial Chief folks really our lead UAN has in Officer job to effort. done a So recruiting

about product directly. selling our So we're excited

their to products. think, then companies use rather directly their I most distribute a would sell product distributor

in into than the going we We're past. more in the a than actually So niches past. hadn't had we relationships in further that the we're finding lot past. developing sold We're have maybe we've

going result selling And advantage should in so a get the netback. that we net-net to higher product that by think ourselves we're the

Now mentioned of -- that not it whether our CVR's got that you to some we'll could use we logistics all see But logistics assets. the of in materializes year and play own I figure if our if of business. We've we the end assets analysis have at out out. other kind that or type think in of parts

So have and the build other a think little to the But handle bit to happy so we're really railcar that, sales. we than fleet efforts did UAN far. additional I with our increase

Vincent Anderson

right, All of excellent. year. luck Well, good on along. I'll it the pass the rest

Mark Behrman

Thank you.

Operator

Neivert comes question next Please from Sandler. Charles Our the line Piper of with proceed.

Charles Neivert

beyond for into like of through Have have us going guys year any have forward the I or you XQ done than be Yeah. guys quarter this. missed the market What the are than we is spot end XQ? basically may other hedging first price looks remainder price where to the you that, gave what other year? you buyers gas going of your

that's what outstanding? given stand get re-up, the currently on that on a program I guess are intention would repurchase the those things And then, is And in left where earning way both the that share but situation? as probably do follow-up of we is --

Cheryl Maguire

Charlie. morning, Good

more XX% months, So then, of of around year in locked to in the $X the winter the for Generally, $X.XX we'll XX% gas of $XXX price you that's XXXX lock when kind same the gas in balance we're million because for that highest about and risk have range. second for for the quarter volatility.

volatility to see months, us So just you'll first lock just first I it take call month of think gas gas forward next of month. the going over the six over out month any

million. generally a fully with are from -- strategy respect perspective. buyback exhausted we our that share So to $XXX purchases the gas And that's we

kind we that's stand of where so And today.

Mark Behrman

the would generation flow now. I that, you cash that's program in buyback that we're for this discussions us given year say see anticipating Yeah. could and another share implement

Charles Neivert

you. Okay. me. for been answered has Thanks. Everything Thank else

Mark Behrman

Thanks, Charles

Operator

proceed. Rob the Research. next Our of comes from question McGuire line Please with Granite

Rob McGuire

morning. Good

Mark Behrman

Rob. Hey,

Cheryl Maguire

Rob. Hey,

Rob McGuire

discuss drought the an years that's the you expectation last occurring the year? couple and this for Would your US of impact in been

Mark Behrman

the drought been that's as So United States really well droughts bad from in conditions extreme I'd there's and extreme suffered – well. documented. the Argentina pretty say plains in

So I from crops think good some and conditions both crop Brazil those to should expected really had soybean. corn in really both seeing REITs Argentina conditions. I of those think and has production And in reach persist. we're Conversely, drought record suffering

I impact indirect an an think way. more could have in of it

and for plants. and have increased usage months that's Drought also in northern So hay cattle southern during non-winter conditions resulted in especially the

continue expected cattle kind inventories are the with see an to cattle of prices today. trend, as of we and hay historically low an So should US in production ultimately increase upward

So that planted XX% of year. increase million an acres nitrogen demand hay another X.X upwards potential tons last of of points towards in the probably probably from and

it month hay. But a But to positive think areas I some if think, I on for I demand impact going don't a to enough. impact. an have demand have nitrogen get the we it any last know or the planted acres we that suppose, severe have based So don't do effect two could weeks it's in a rain over that seen I have drought corn precipitation on throughout for not soybeans. could

Rob McGuire

or renewed you get here, repurchase And it program today? that. appreciate is mentioned attractive I debt your more to repurchase reduce but stock the

Mark Behrman

debt next to year. bonds a think XXXX, great in are I and table that something That's talk so question. about, ultimately, around reduce and the callable sit we'd some It's like we

So of year. it's next September

So shares we the build call of cash I balance bonds combination price then the call of or some of we a both. additional at to repurchase stock some or think either,

we're I those having. that So are think the discussions

Rob McGuire

answering my That's it for me. Thank questions. for you

Mark Behrman

Rob. Thanks, Sure.

Operator

Our DiRubbio with Baird. of next the proceed. question line Please comes from Brian

Brian DiRubbio

Good morning.

initiatives key you could low versus your acquisitions priority sense give versus at the COX strategy? clean look of me accretive your I growth as on a organic Just energy

Mark Behrman

Sure.

So the energy way clean zero And now capital. it's the we think the way, up the strategy. capture project is requires about carbon set right

we'll they relative The So going obviously, the capital. and earnings other COX our say us. partner require that. to But put from the going not significant. projects to is capital buy generate then M&A I'd green ammonia would to all they're or will capital activities And up project be from

the debottlenecking about call. on talked we've side, organic the this From

So the funds whether it project. I for USDA think we be will get from to – that interesting see

or $XXX $XXX million that it's mentioned, done us deep study. engineering between haven't at high difference million us. and million study big a to And level. for that's I certainly approximately As But do $XXX feasibility for the a project. an We

as never far would know M&A that could activity you but good become my experience company in when be you assets identify As fit strategically you your for available. think they

we an some for we thought tell And an those was for up from shelf from so good and fit I put the trump it give for that know for that on and standpoint to us. at it forever. year hard whereas I kind sale them you growth organic sale a kind than and a strategic a flavor standpoint, don't something That can buy that. of you down you in. then act look for the road it's a up may doesn't on capital us mean, something of we could to projects for we came come don't it how that it because at acquisition sense was made a two and period fits of if accretive or time price likely is if more

Brian DiRubbio

about guess some I for is and does. comment pursuing And is in understanding that. this, to asset to these not sort want Dyno of Waggaman there on projects think of of an plant just an It but probably maybe sort get as directly going sale Nobel the of up that to you versus

Mark Behrman

that comment not what's to Development, for there our sale out or and and our at it on see Well, strategically just Corporate you're right. myself a if process. of assets make to asset look jobs us. are and say for a would I'm sense go Head and would going between I specific

So some Xthat things for bit a sale look it's a good taking it at we're

Brian DiRubbio

mean, me balance something markets? did the possibly down a debt balance Understood. And that final for as USDA you think about I raise additional on maybe funding and -- think is fund then in is the How or we sitting Would sheet you're you million the cash today. on Should that road about that possibly transaction amount you a TAP the via of the cash from about expansion you million that? that? fair potentially $XXX then the just plus. debt question ammonia year you funding talked would last of $XXX

Mark Behrman

No.

want at the all I where additional think to debt sheet. organic debottlenecking Dorado we use We that that. the raise things not balance our do El that being that we'd any cash equal expansion would on to do

Brian DiRubbio

Very good. all Thank the thoughts. Appreciate you.

Mark Behrman

Yes.

Operator

And our DeForest Hinman. next question comes from of the line

DeForest Hinman

wise have you that wasn't pre-sizable still XXXX? dollar-wise discussed. couple in for believe that expectation NOLs about either or we your I I was of a cash a don't think Hey, Can talk rate questions. taxes

Cheryl Maguire

we XXXX. have cash For us. no payments tax No material in

DeForest Hinman

a then going the people on what's been And understand maybe and couple could take deployment you a That's if step capital just back on. Okay. help of and just helpful. questions there's

of where have You at balance cash in dollar kind sizable you a you sizable balance time pretty debt, but pretty strange same of situation have guys a simultaneously. the are a

capital pretty a pretty at attractive of But look if to the $XXX repurchase million authorization going and using additional share did markets You not really context you seemingly sizable for the of it debt anything. pricing. and raising

You're sheet. kind that putting on balance arbitrage of getting by the a debt negative

cash So pause can balance of a and and I'll thinking that the context? happen level thought about So balance be repurchases understand happen? sheet? the us the share if appropriate there. help going you what's it on And we're investments then deal going there debating to should that just idea cash the forward we the was didn't of organic dollar Was

Mark Behrman

Sure. Good morning.

had raise just So materialize. we yes, of it did that of last $XXX we we million I'll did use a March say but thought year. million for proceeds in $XXX that

negative little X% and that rates that debt the is time spread X%, here up on a we've as opportune moved it. given at invested or we we additional As than less interest where have an sit today, raised

was indicated going many So don't how I some purpose look six I know projects you a we it rates Fed internal we back now, time. was interest but times, times. I five rates up – really I there And maybe think had the that if and knew we that. to the fallback at mean was were think times it the the raised Fed's also do knew

able levels today. So we would never to those at raise debt the be

thought did someone how it. So the we with raised. cash happy million of to But we We available or earlier asked would expansion we an on And would about about think include that question it using how it. that now we've in debottlenecking fund I'm disciplined were sheet, I would our which we a got kind be us. $XXX balance and that

a different got all with really we've where of projects. the think capital To that's now kind fund to and I me the number exciting. So of

think projects. think, allocation and From cash a sheet first versus I thinking projects capital smaller we buybacks on debt about stock about standpoint mean, enhancement about to and Cheryl off versus we refer talks our when margin the balance I

All IRR them that. of all those have move are higher to many we've than projects on elected forward that minimum of and

projects. there So a is rate in hurdle investing to those

I think stock. we bought XX back million of about shares

our actually we reduced shares XX%. So float outstanding our by about by

think us I So that last for was attractive year.

investing return, the As I in back ultimate stock shareholder where think highest we some have balance, ultimately our we're buying we debt. it's move think just generate or whether reducing projects, do to internal forward, to going we

what's the give shareholders. is long-term that go through, thinking think anything companies best really to the to most cash don't of I use other they're where and about So our different going best it's returns than

Deforest Hinman

project sort inside we're of sheet, when it, already Does that submission x And have next that if mean of document our the grant sheet? funding is use about for six this on a That's look hypothetical. mean amount the just is have self-funded for I'll that proposal, a is word amount going of of someone thinking balance of part grant that cash like maybe than color balance portion Okay. else then to third-party. we the better helpful. They hypothetical get we the certain the we're from other at I to of there have has any – that our submission? says, months,

Mark Behrman

So balance it seek a point that actually USDA of funding We've that's was application that lot the grant. that our a projects to a sheet. great our in got we the point. addition And cash other unlike in in yes, might stressed

waiting if sitting a $XXX to need there $XXX is project we dollars. So, It's million and happen. million own our to of invest

that think We I it is. is So, a differentiator. believe

into So, I play. that would hope really that comes

only can there to an building not about It's brownfield move don't invest. or but existing sitting debottlenecking we So to because we're have capital. rather raising facility greenfield, we ready worry faster than

how long there? does So, it have sit to

happens, they're hear a cash balance once we grant grant if feedback our us we're that that, to imagine ultimately, I'm on that keep $XXX sure we that positive the would if enough not going from sheet. I USDA to have lucky the million

fungible. amount of I generating think cash. is fair a cash We're also free

don't as see that I really So, an issue.

question didn't balance and one minimum about you that had our earlier asked that cash I on balance address sheet. was

cash determined ultimately, our I million think to internally, we'd we've balance $XXX sheet. that of like keep on

volatility, I it's think, to but prudent price of also prices, the gas. do given natural selling that our not of price

so have impact And that on margins. could an

DeForest Hinman

taking so questions. you the much Thank for Okay.

Operator

Thank you.

through turn remarks. reached call the like I'd session. We the question-and-answer end Behrman closing for of Mark to back the to have

Mark Behrman

for to got see going far. Investor our what of we've everyone got see a accomplished opportunity lot joining accomplish you the Day. We've thank Hopefully, LSB that want beyond in I hope we're so Thanks and high Industries. we've so I in at conference to XXXX. expectations for all your to of call and for interest you much. a lot XXXX

Operator

concludes This today's conference.

this for time. may and You a great your have participation disconnect Thank day. your at you lines

LSB Industries (LXU) 23 Feb 232022 Q4 Earnings call transcript