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Terra Nitrogen Company, L.P. Reports Fourth Quarter
DEERFIELD, IL (February 15, 2017)—Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported net earnings of $44.1 million on net sales of $93.4 million for the quarter ended December 31, 2016. This compares to net earnings of $79.2 million on net sales of $151.3 million for the 2015 fourth quarter. Net earnings allocable to common units was $34.3 million ($1.85 per common unit) and $46.2 million ($2.49 per common unit) for the 2016 and 2015 fourth quarters, respectively. Results for the fourth quarter of 2016 included an unrealized net mark-to-market gain on natural gas derivatives of $13.6 million compared to a loss of $12.6 million in the fourth quarter of 2015. The derivative portfolio at December 31, 2016 includes natural gas derivatives that hedge a portion of natural gas purchases through 2018.
For the full year 2016, TNCLP reported net earnings of $209.3 million on net sales of $418.3 million. This compares to net earnings of $306.9 million on net sales of $581.7 million for the full year 2015. Net earnings allocable to common units was $139.9 million ($7.56 per common unit) and $186.2 million ($10.06 per common unit) for the full year 2016 and 2015, respectively. Results for the full year 2016 included an unrealized net mark-to-market gain on natural gas derivatives of $35.3 million compared to an unrealized net mark-to-market loss of $23.1 million for the full year 2015.
Analysis of Results
Net sales for the fourth quarter of 2016 totaled $93.4 million, compared to $151.3 million for the fourth quarter of 2015, as lower average realized selling prices for ammonia and UAN and decreased sales volumes of ammonia were partially offset by increased sales volumes of UAN. Ammonia and UAN average selling prices declined in the fourth quarter of 2016 compared to the fourth quarter of 2015 due to excess global nitrogen supply. Ammonia sales volume decreased 16 percent in the fourth quarter of 2016 compared to the fourth quarter of 2015 as unfavorable weather and farm level economic considerations, including declining year-over-year farmer disposable income and crop futures prices favoring soybeans over corn, led many farmers to delay fertilizer application and planting decisions until spring. UAN sales volume increased 15 percent in the fourth quarter of 2016 compared to the fourth quarter of 2015 as customers built inventories in preparation for spring after delaying purchases earlier in the year.
Comparing the fourth quarter of 2016 to 2015, TNCLP’s:
Ammonia average selling prices decreased by 43 percent and UAN average selling prices decreased by 40 percent;
Ammonia sales volume decreased by 16 percent and UAN sales volume increased by 15 percent; and
Realized natural gas cost per MMBtu increased by 12 percent.
Cash distributions depend on TNCLP’s earnings as well as cash requirements for working capital needs and capital and other expenditures. For the full year 2016, capital expenditures were $33.1 million as compared to $87.8 million in 2015, with the decrease primarily due to the large plant turnaround activities in 2015 that did not recur in 2016. In 2017, TNCLP expects to make capital expenditures in the range of $75 million to $85 million. Approximately $40 million of the projected capital expenditures relate to a plant turnaround scheduled to start in the third quarter of 2017 and continuing into the fourth quarter of 2017, and the calculation of available cash for the fourth quarter of 2016 included a reserve of approximately one-third of that amount. The plant turnaround will result in lower ammonia and UAN production, lower sales and lower profitability during the period, which will reduce available cash for distributions to unitholders. Additionally, planned maintenance, capital expenditures, and turnarounds are subject to change due to delays in regulatory approvals, and/or permitting, unanticipated increases in cost, changes in scope and completion time, performance of third parties, adverse weather, defects in materials, workmanship, labor or material shortages, transportation constraints, and other unforeseen difficulties. Capital expenditures also reduce the available cash for unitholder distributions.
TNCLP reported on February 6, 2017, the declaration of a cash distribution for the quarter ended December 31, 2016, of $1.22 per common unit payable February 28, 2017 to holders of record as of February 17, 2017. This compares to a cash distribution of $2.88 per common unit for the quarter ended December 31, 2015.
The following information was filed by Terra Nitrogen Co L P De (TNH) on Wednesday, February 15, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.