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Good day, ladies and gentlemen, and welcome to CF Industries' First 9 Months and Third Quarter of 2026 Conference Call.

[Operator Instructions]

I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick with CF Investor Relations. Sir, please proceed.

Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Chris Bohn, President and CEO; Bert Frost, Executive Vice President and Chief Commercial Officer; and Andrew Scribner, Executive Vice President and Chief Financial Officer. CF Industries reported its results for the first 9 months and third quarter of 2026 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.

Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website. Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now let me introduce Chris Bohn.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we reported results for the first 9 months of 2026 in which we generated adjusted EBITDA of approximately $3 billion. Our results reflect the strength of CF Industries' operational performance and the structural advantages of our business. At the foundation of that performance is our team's relentless focus on safety excellence. We closed the quarter with a trailing 12-month incident rate of 0.1 incidents for 200,000 hours worked, well below industry averages. That outstanding safety performance directly supports reliable production and high asset utilization.

Since the beginning of the year, we have operated our available ammonia capacity at 97% utilization. Along with our consistent operational performance, we benefit from the structural advantages of our low-cost, low-risk North American asset base. Our low-cost position on the global nitrogen cost curve supports our current $2.9 billion mid-cycle EBITDA estimate, while our low-risk network provides upside during periods of global nitrogen market disruption. We have seen that dynamic play out this year with adjusted EBITDA through the first 9 months already exceeding our mid-cycle.

Together, these strengths translate into strong cash generation. CF Industries consistently convert approximately 60% of EBITDA into free cash flow. The highest rate in the materials sector and well above other fertilizer companies. This gives us the financial strength to invest in high-return projects while returning capital to shareholders. Today, we are making tangible progress on investments to grow our advantaged network and enhance margins. Blue Point One began site construction in August. Donaldsonville CCS is operating well and the Yazoo City CCS project is progressing towards start-up in 2028. We expect these projects to add $400 million to our mid-cycle EBITDA estimate by 2030, bringing it to $3.3 billion.

Further out, we have begun a FEED study for our Courtright diesel exhaust fluid project. Alongside those investments, we have returned $1.3 billion to shareholders over the last 12 months through share repurchases and dividends. Over that period, we have repurchased approximately 6% of our outstanding shares bringing total repurchases over the last 3 years to 22% of outstanding shares.

Taken together, our structural advantages, operating performance, growth investments and disciplined capital allocation position us to build on our track record of compounding value for long-term shareholders. With that, I'll turn it over to Bert to discuss the global nitrogen market environment. Bert?

Thanks, Chris. The global nitrogen market environment remained constructive through the third quarter. Demand strengthened as the quarter progressed, while supply remained constrained. Buying activity accelerated in North America, South America and Europe as deferred demand returned to the market. Corn and wheat value strengthened during the third quarter before giving back some of the gains in the fourth quarter. At the same time, nitrogen values remain below the peaks reached during spring applications. We saw that demand pick up clearly in North America. Participation in our fall ammonia program has been very strong.

Weather permitting, we expect fall ammonia volumes to be amongst our highest in the last 10 years. Our UAN fill program also helped us ship nearly 2 million tons in the third quarter, our largest quarterly UAN volume this decade. Globally, demand also remains robust. India has maintained a steady pace of urea tenders, and we expect imports to exceed 10 million metric tons this year. Brazil has been slower to purchase in part because of credit constraints. However, improved crop values in the third quarter supported farmer economics and demand there. With nitrogen inventories low across the global system, including North America, South America, Europe and Southeast Asia, we believe substantial purchasing remains ahead.

On the supply side, geopolitical disruptions remain a significant factor. Since hostilities began in the Middle East in late February, we estimate that the global market has lost approximately 9 million metric tons of urea supply. Shipping availability and significantly higher freight and insurance costs remain constrained. Russia is another source of uncertainty. While production levels and plant availability are difficult to assess, disruptions in the Black Sea shipping lanes have affected traditional routes.

At the same time, high-cost producers remain under pressure. European producers faced challenging economics from high natural gas prices. We believe more than 35% of ammonia capacity in the region is curtailed. Additionally, natural gas availability continues to constrain production in other regions.

Chinese urea exports are helping to fill part of the global supply gap, particularly into India but have not materially loosened the global nitrogen supply-demand balance. We expect the Chinese government to continue to manage export levels in line with its domestic food security policies. Against this backdrop, we expect the global nitrogen supply-demand balance to remain constructive into 2027. Purchasing activity that was delayed earlier this year is now being realized. Global inventories remain low and meaningful portions of global production and trade remain constrained.

Longer term, our outlook has not changed. Nitrogen capacity currently under construction is not sufficient to meet global nitrogen demand growth and expected permanent shutdowns through 2030. Additionally, the timeline and capital costs required to bring future capacity online have become longer and more challenging. This supports a structurally tighter global nitrogen environment through the end of the decade and reinforces the value of CF Industries' low-cost, low-risk North American production and distribution network.

With that, I'll turn the call over to Andrew.

Thanks, Bert, and good morning, everyone. For the first 9 months of 2026, the company reported net earnings attributable to common stockholders of approximately $1.8 billion or $11.60 per diluted share. EBITDA and adjusted EBITDA were both approximately $3 billion. For the third quarter, net earnings attributable to common stockholders were $436 million or $2.87 per diluted share. EBITDA was $822 million and adjusted EBITDA was $833 million. We continue to convert EBITDA into free cash flow at a consistently high rate.

Our trailing 12-month net cash from operations was approximately $3.1 billion, and free cash flow was approximately $2 billion. As you can see on Slide 9, our EBITDA to free cash flow conversion has averaged approximately 60% over the last 5 years. Conversion over the last 12 months has been slightly lower due to $306 million of deposits related to historical U.S.-Canada transfer pricing matter dating back to 2012. These deposits limit the accrual of additional interest in Canada, while the matter is resolved between the 2 governments.

Following resolution, we expect to file amended U.S. federal and state tax returns seeking refunds of related taxes previously paid. Looking ahead, our 2026 consolidated capital expenditure outlook remains approximately $1.3 billion with CF Industries' share at approximately $950 million.

Construction on the Blue Point One ammonia plant is moving forward in line with our expectations. The projected total cost remains $3.7 billion with ammonia production expected to commence in 2029. The cost of Blue Point common facilities also remains our initial estimate of $550 million. Our 40% share of the remaining investment in Blue Point One will be spread over 3 years is manageable given our consistently strong free cash flow generation. At the same time, we continue to return substantial capital to shareholders.

During the third quarter, we repurchased 3 million shares for approximately $367 million. As we discussed last quarter, we believe the market continues to drive too much of our earnings and free cash flow performance to short-term geopolitical factors. The structural advantages as Chris discussed, combined with the global nitrogen supply-demand dynamics Bert outlined, underpin our confidence in CF Industries' mid-cycle earnings power. We do not believe our earnings power is fully reflected in our valuation, supporting our continued opportunistic share repurchases. With that, I'll hand it back to Chris before we open the call for Q&A.

Thanks, Andrew. I want to thank CF Industries employees for their outstanding performance through the first 9 months of 2026. Our team is operating safely and executing exceptionally well while navigating significant disruption in the global nitrogen market. We are especially proud of our team's commitment to safety excellence. Our recordable incident rate at the end of the quarter was the lowest we've ever achieved as a company, a testament to our employees living our Do It Right culture every day. That commitment was also on display in this year's Wilson Award for Safety Excellence. Our Medicine Hat complex earned this year's award, and I want to recognize that team, along with all of our finalists for the innovative approaches to safety they developed and shared. As you've heard today, structural changes in the global nitrogen market are reinforcing the value of CF Industries low-cost, low-risk North American asset base.

Combined with our consistent operational execution, differentiated sales and distribution capabilities and industry-leading free cash flow conversion, we have a strong foundation for long-term shareholder value creation. We are building on that foundation today through disciplined growth investments and capital returns.

As you can see on Slide 10, our current growth projects, combined with our existing share repurchase authorization are expected to increase nitrogen per share by 15% by 2030. These initiatives build on our long track record of compounding value and leave us well positioned to continue to create value for long-term shareholders. With that, operator, we'll open the call to questions.

[Operator Instructions]

The first question comes from Kristen Owen of Oppenheimer.

I just wanted to start with, sort of, your long-term supply outlook. You called out the 37% of European nameplate capacity that's currently curtailed. Just given the volatility in energy prices, never mind the absolute cost challenges. Like what's the structural settling out point? And has your view on the long-term supply backdrop changed?

Kristen, I would say our view has not changed. I think it's something that we've been talking about for quite a while. The only part that has changed -- our view, I should say, in the aggregate, hasn't changed, is we believe it's going to accelerate from what we thought was a 2030 time frame with some of those European shutdowns to occur whether it be 12 months or 18 months sooner than that given the current dynamics that you discussed in the energy volatility. So today, we're seeing like you said, close to 40%, either offline or curtailed in Europe. And additionally, each quarter that this goes on makes it more and more challenging to start up that equipment because the capital cost that would be associated and additionally, to have fixed overhead absorption that continues and the work that's needed to keep that equipment in line to be started up at some unknown date is quite expensive.

So I would say our position on the tightening in the global S&D market has been one that we have back all the way to 2025. It's just being accelerated now. That's also being compounded by what we're seeing in Russia and Ukraine with no true resolution there. And I would even say what we're seeing in the Middle East even if there is some sort of resumption, it will take a while in order for that supply to begin flowing again.

And my follow-up is for Bert, I think you said fall application demand among the highest in 10 years. It's been a pretty dynamic year from a commodity price perspective. Obviously, a pretty healthy crop this year, but just maybe some indications on how you're thinking about acreage in 2027 would be helpful.

The positive implications or directions in our Fall ammonia program, which is one of the highest in 10 years. One, it has to -- weather, we always put in the caveat of weather dependent because we're just starting the program now. We're well through our movement in Canada, and that's moving down into the Dakotas, then we have to move into the Illinois, Iowa and Nebraska states. So right now, that's a little bit delayed just because of the wet weather and elevated temperatures. But the -- right, the indications are with that big program for Fall applications does lead to positive implications for corn planting in 2027.

And what we're looking at is probably in line with what the other recommendations or indications are from the other players, is 95 million to 96 million acres could be elevated depending on pricing. Right now, where corn is settling, one of the positive things for this year is and for farm revenue is a settling of the crop revenue guarantee programs at $4.75 per harvest, that will lead to, I think, some -- a nice floor for a farmer in today's economics.

And then interesting to see what's going to happen globally with yields due to, I think, some under-applications of nutrients around the world and what that does to stocks-to-use ratios and how that correlates then to demand, which we see as healthy in the ethanol and protein markets and then, therefore, drives price. And I would say the expectation is driving price for corn at least up in 2027, which could drive acreage even higher than the 95 or 96 that we're targeting today.

The next question comes from Andrew Wong of RBC Capital Markets.

Just curious your thoughts on how you see the setup on nitrogen in the market today when you compare it to where we were last year. It seems like we're in a tighter situation with a lot of things you mentioned, higher energy prices. We also see stronger crop prices. When you look at nitrogen prices and like, I think, in aggregate, they're maybe only like 10% higher from where we were last year at this time. Like what's your thoughts on that? And why do you think that is?

Yes, I think you're correct. In terms of your 10%, we are trading in the high $380s -- probably $360 to $380s last year and today, trading at $430 for Q4 for a short -- that's on a short ton for NOLA. And I do see a positive market going forward. Just a lot of this demand that has been deferred is going to catch up and then you throw in like we've talked about a lack of supply and the first world countries that can pay and will pay as we go into the Northern Hemisphere planting and application seasons, we see a robust demand coming, and we're actually seeing that with orders for our UAN programs and urea as well. And so my expectation would be we're on a positive trajectory in at least the first half of 2027 for nitrogen pricing.

Okay. Perfect. And then maybe just between the different products, you look at urea, ammonia, UAN, and we've seen more strength in ammonia and UAN recently, which I think is more reflective of what you've been seeing on European nat gas, but then urea seems to have lagged a bit, right? Like why do you think that is? And do you expect some catch-up as well on that?

When you look at the global market in urea, you're trading about 4.5 million to 5 million tons per month seaborne traded. And I think with the Chinese supply that has come in to kind of covering what has been lost from the Middle East, as I said in my prepared remarks, we've probably lost 9 million tons, and it's in our deck of what's been lost and what's been made up with different places. And so as we're trending into the back half of this year and in Q4, I think the market is just in pause as you transition from hemispheres to hemispheres and planting and applications and building of supply.

But inventories are low across the globe in our channel checks. And so I do see a positive movement for urea. UAN has been trading on a higher differential to urea at this time, and we're seeing solid uptake in the UAN program for 2027 as well. Ammonia globally is more impacted, you're correct, European demand and global demand for ammonia. As like Chris' comments mentioned, you're seeing curtailments and shutdowns and inability to source and that has driven ammonia up higher in recent weeks.

The next question comes from James Hooper of Bernstein.

How long do you think that the Northern Hemisphere farmer can wait before buying? I mean are they looking at events this week, thinking the Iran war might end and they can hold on for some time? Is that why pricing is only 10% higher than last year?

Well, I think you're seeing some indications of actual stepping in and buying. Our UAN program from our retail friends has been sold down a lot to farmers. And so that's a product we've already shipped. And we talked about the ammonia program, has been sold down to farmers. And I think ours and the other suppliers in United States and Canada have also done and never had or have prepared a good program for fall, which indicates, again, farmer uptake.

We will launch our spring program for ammonia post the application season this fall, and I expect that to be well updated. I think where you've seen some cutbacks in P&K is a reflection of the higher prices for those products. But I think nitrogen is a very good value, and it's been reflected in purchasing. I think the slowdown, if you're taking the whole Northern Hemisphere and the slowdown in Europe is a reflection of just those natural gas costs and European producers of nitrogen, those prices are much higher than in North America.

And just as a follow-up, can you just expand a little bit more on where you see Chinese urea exports going? I mean it looks like this is the highest level in 10 years. But do you think this could be a new normal or just a one-off with helping India out effectively?

There are 2 Chinas. There's the prilled urea producers and the granular urea producers. What has helped stabilize the market in India and Southeast Asia has been the prilled supply, which is generally not demanded in first-tier, first world markets like South America or the United States or Europe. And so if you extract the prilled supply out, I would say the granular supply out of China has probably given a balanced market at this point. So Chinese -- the export authorizations now total almost 9 million tons.

So it is higher. Historically, last year was just a little under 5 million tons. But again, on a strange year with the limits out of the Middle East, it would -- it made sense for China to open up a little bit more. But it is consistent with, I think, what China has focused on is their own food security and food production and supply of fertilizers to their farmers on an economic basis. And so I think that's the first focus for China and then excess has been exported, whether that's next year, 6 million, 7 million, 8 million, I won't project at this point.

Yes. I think the other thing with China, you said it's their highest export in over 10 years. It would also require them to have their highest asset utilization over a decade. So I'm not so certain some of the 8 million to 9 million tons of export that Bert was talking about there don't move a little bit into early part of the next calendar year as well. And that's where maybe that bumps up against some of the domestic food supply constraints that they're looking at doing there. So a lot to keep our eye on with that. But it is -- it would be quite a bit for them to export before the end of the year here.

The next question comes from Joel Jackson of BMO Capital Markets.

I just want to get an update on Yazoo. And would you expect the level of insurance inflow from Yazoo to be similar in Q4 and Q1, let's say, as Q3 levels? That's the first question.

Yes. So I'll let the numbers in the insurance part go to Andrew. But just on an overall update with Yazoo, our expectations are still that towards the end of the first half of next year that we will be starting up components of that plant. As you recall, we've idled the ammonia, the nitric acid and the AN plants there as we rebuild the AN supply. Additionally, we're looking at as part of that reconfiguration is building out some of the logistics and distribution attributes of the site to make it more flexible than what it's been in the past being able to serve more customers. So we're excited about that plant getting back in operation in the first half of next year. But I'll turn it over to Andrew. He'll talk through a little bit more of the timing of insurance payments.

Yes, Joel. So the way that I would think about it is, I would take a longer view. I think when you look at both the capital build and the timing of when the cash payments will go out, at the end of this year and into next year relative to the insurance pieces, what we expect is that you are going to offset. So if you take a longer-term view and you, kind of, go through once we're complete with the rebuild and this is all wrapped up, we see that the 2 will largely offset. We're not trying to give guidance on what it's going to look like quarter-over-quarter. So -- but I would say feel assured that, that longer-term view will largely offset.

Okay. And then you're just a little bit of months into your partners into construction at Blue Point. Any observations or thoughts you want to share what you've learned so far about the project, things you're thinking about changing or any observations?

Well, I would say we're in very early days related to that. But we have hit some significant milestones with receiving the permits that were required. There's significant civil work that's ongoing down there. Our long lead items have been ordered, and we're looking to begin our module work at the beginning part of next year.

I would say the learning is that I think we are fortunate we made the decision when we did on a timing basis. So we -- if you think about it, we made FID 18 months ago, but about 6 months prior to that, we had put in orders on electrical gear given we knew that to get in queue there was important. So we're really 2 years ahead on some of our ordering of equipment. And I would say if you were to announce a project today, and look to build a world-class plant of something as similar to that, no matter where it is globally, you probably would have an extension of the duration by 12 to 18 months in completion of that.

So I think the one thing that we're happy that we made was the decision when we did and also the preordering of some of that critical equipment prior to the start. Operator, we can move to the next?

The next question is Lucas Beaumont of UBS.

I just wanted to ask about the controllable non-gas costs. So they have been running up about $200 million year-to-date year-on-year, which is about a 12% increase. So I mean it's been choppy quarter-to-quarter that has generally been higher. Could you just kind of talk us through the drivers there and how you see that evolving into the fourth quarter and into next year?

Lucas, this is Andrew. Let me kind of talk you through Q3 because I think what you'll see in Q3 was also consistent with Q2, and now I'll give you some context here. So if you look at Q3, our cost of sales were up 11%. If you tease out the impact of volume, it was up about 4%. You probably saw within the quarter, we had some gas favorability. But I know what you're focused on is kind of what are some of those offsets. There were really 3 things that were coming through there, and I'll kind of put them in materiality order. There's a couple of ones I want you to make connections on. So the biggest impact that we saw coming through was higher cost of purchased ammonia and this is largely in support of our U.K. operations. Just keep in mind, we benefit from higher ammonia selling prices. And so there's kind of an overall -- when you think about the overall P&L, that flows through our fixed costs, but it's not necessarily structurally disadvantageous to us in aggregate.

The second piece is fixed cost absorption. We do have puts and takes between timing of turnarounds of this year versus last year. But the net of what's coming through is the Yazoo City rebuild that we're doing and the fixed cost absorption coming through.

The other connection I want to make there is, I know it would be intuitive potentially to say, I'm going to tease out the impact of the insurance costs and just look at the fixed costs, but those 2 need to ride in tandem because that insurance recovery is in part to offset those higher fixed costs we're actually seeing coming through. And so I would kind of think about those 2 things together. And then the third bucket, which is probably the smallest of the 3, but it does have an impact is distribution and logistics. And there's 2 things happening within that.

One, you do have some mode mix, where we're seeing some shifting from more -- shifting from barge into rail. That's really a function of our order book, and we're really focused on our netback. But you do see some of those costs coming through from a mix standpoint. But you do see that's a little bit more sticky as you do see increases in rail itself and some fuel surcharges. But I think when you tease that out, what we've been seeing for the last couple of quarters, it's largely been the purchased ammonia and Yazoo City fixed costs flowing through has been the primary driver that you've been seeing come through. Hopefully, that helps.

Great. And then you said -- you mentioned that you've sort of seen Middle East and urea exports tracking at about half the levels they were previously sort of coming out of the region since the conflict began. How has that been trending over time? Are you -- is that improving? Is it slowing? Is it stable? And how do you, kind of, see the outlook there short of us getting a full resumption in open trade?

So the Middle East has been a question of fairly opaque at first when hostilities began in late February and March, there are vessels that were tracked behind, unloaded or empty as well as loaded. That delayed months to get out. So there was a period of time when it kind of opened up and things moved in May and June and then obviously froze up again. And there's been a lot of vessels that have moved with transponders turned off. And so it's kind of difficult to track those. But outside of Oman, we're probably considering 500,000 to 550,000 tons per month has been exiting the Gulf and then throwing Oman on top of that because it sits outside the Gulf, you're probably around 800,000 tons out of 1.5 million to 1.7 million normally per month. Iran has been moving some tons but less than their previous capacities. And so when you consider that, you're probably losing close to 700,000 to 1 million tons per month out of the Gulf consistently.

How quickly that recovers is another question because of the risks and costs of going in and out of the Gulf today, it will take a long time not only to untangle what's there, but for vessels to reposition themselves to load and just the costs associated with freight. So if hostilities were to end tomorrow, I would think it would take months to get back to what is a "normal" volume. And then you've got to consider what -- which of those plants have not -- are inoperable or operating at a suboptimal rate due to some activities with drones or with inattention or maintenance. So I think those 2 or 3 things combined would say you're going to be 4 to 6 months if everything ended today.

The next question comes from Edlain Rodriguez of Mizuho.

Just a philosophical question. So when you look at the overall ag complex, corn prices have been down sharply since the last WASDE report, whether it gets revised down or not next week, who knows? So farmers' income is under pressure. Like what do you think this is doing to farmers' psychology and their willingness to pay higher prices for crop inputs?

Well, you have to start with the premise, that's the business that they're in is to plant the crop, harvest a crop.

Farmers have to plant, yes.

And so as coming from a farm family and with a lot of friends growing up in Kansas, that's just what you do. Now relative to cost, there has been a lot of money from the federal government in the 3 tranches to support farm income. And then from my earlier comment about the crop -- kind of the crop -- it's called the crop guarantee or revenue guarantee program with a minimum price set at $4.75 for harvest. That's much more attractive than where cash is today.

So you have another kind of form of support, but I do see with what's going on around the world, those farmers who have the ability to inventory or store their crops through a cycle, probably some good opportunities in the forward market relative to the impact of El Niño around the world, the impact of lower nutrient levels utilized for the crop that's being put in the ground and the stocks use ratios that are in the market relative to demand being strong with ethanol and protein production. So we've got some positives in line to support crop prices, which can therefore, support farmer income and that's a knock on wood.

Yes. And I would just say from CF's perspective, the area that we focus on is providing as much supply as we can globally by our production, and that's operating our sites like we have at a utilization rate at 97%, making consistent investments over the year into those assets. So they're safe and have that high reliability that we can serve the farmer and then increasing production, whether it be through debottlenecks at our plants or even our distribution network in order to make certain that we can get the product to the farmer at the lowest cost and move it through the system when they need it for application. So our whole focus is really on the supply side of the S&D balance here in order to assist our end customer, the farmer.

The next question comes from Ben Theurer of Barclays.

A lot being talked about already on the supply side and obviously, the ups and downs here, but wanted to dig into one of the demand drivers, particularly Brazil and what you're expecting here for the next, call it, 1 to 2 quarters, trending behind on a year-to-date basis in terms of imports, but you still have, at least based on your presentation, a pretty sizable uptick into the fourth quarter. So given the volatility of Brazilian politics, the BRL, the corn price and so on as well as soybean prices. How confident are you about the level of potential uptake for urea in Brazil? That would be my first question.

Yes, I think with the rally in Q3 that we saw in corn, if hedging had taken place at the $5 level was pretty attractive for second crop corn in Mato Grosso. So Safrinha gets planted generally late January through early March. But we are seeing -- it is a credit constrained issue with a lot of kind of carrying costs that the suppliers of nutrients have to have long-dated credit and getting repaid. That has delayed purchasing from the importers, which has delayed sales to the farmers. And so our estimates today is that for urea, Brazil would be down probably 1 million tons compared to 2025.

And overall, with NPK, probably down 7 million to 9 million tons of total fertilizer demand cut due to an inability to pay for it in terms of being competitive and again, these credit issues. But I think one of the overhangs of Brazil today is this super El Niño that all the weather prognosticators are predicting is the impact when it's dry, and you're planting at the tail end of the rainy season and does that come really impact yields, which would be a very difficult move for Brazilian farmer moving forward.

Okay. And then my follow-up question, maybe help us understand with this very big spread on gas prices and European being in the high 20s, almost $30 MMBtu, obviously completely out of money where the prices are. So why has that not driven higher prices globally just yet? Is it just because the demand is not there? Is it because of the supply from China? What is holding back a better pricing just given what the cost for the last producer, so to speak is versus what the cost for you guys is that has been very, very stable on a 9-month basis?

I think you have seen a supply contraction with our estimates of 35% of European production is either shut down or curtailed and the impact then on ammonia, you've seen $100, $200 rally in ammonia prices and seeing North African as well as North America and ammonia moving towards Europe to supply those producers that can import ammonia and produce CAN or AN or UAN and so I think with what the supply constraint in Europe relative to the total global supply is lower. And I think you'll be seeing some deferred purchasing around the world that is also probably not impacted. Supply hasn't had to move into those positions yet. So when you combine demand deferral globally with prompt demand in Europe, I think that's why we're not escalating in price to the level that probably you would expect.

The next question comes from David Symonds of BNP Paribas.

Just a question on the announcement of some of these modular ammonia plants coming internally in the U.S. Do you have any view on where those guys might land on the cost curve and whether it impacts distribution margins or if it's just a move of removal of imports in favor of domestic production?

Some of these discussions that are coming through are part of the FIELDS program that the USDA had with expanding production that the top 4 producers were not eligible to participate in. But a lot of those are very, very small. And you sort of question on scale, their efficiency and really their capital cost per ton that could happen. And then on some of the other announcements related to FIELDS you're looking at some pretty small debottlenecks. Things that we look at through our network all the time to increase efficiency.

And obviously, we believe given our technical expertise, we're going to do that on a lower cost per ton than anybody else. But in the end, those announcements, you're looking at sizes that are in the 50,000 to 150,000 ton ranking here where our Blue Point at minimum is going to be 1.5 million tons. So you're kind of just nipping around the edges from what it's going to do from the overall supply standpoint. And I think that just really touches why our view, both near, mid and long term is so constructive on nitrogen.

We're seeing demand, as Bert said, yes, there's some deferral, but it directly affects yield with the lack of nitrogen. So demand continues to grow, but we've seen not only what's happening with geopolitical, but European shutdowns occur, and then there's a lack of new supply being bid into the market and then add on top of that, as I mentioned earlier, the duration to start up a new plant is longer. So all of this even though we hear these announcements of these smallers are not moving the needle to the tightness we're seeing in the global S&D balance not only this year but over the next several years.

The next question comes from Vincent Andrews of Morgan Stanley.

I want to come back to Yazoo for a moment. At this point, when you're talking about first half of '27. Does that mean at some point the complex will restart then? Or does that mean you think the ramp of the restart will be completed by the end of the first half. So any color you could provide on that would be helpful.

Yes, Vincent, that's a good question. Really, we're seeing that as the ramp begin at that particular time, we'll maybe even slightly earlier than that as we start to bring up the ammonia plant, but then may take it down just given the amount of storage capacity. But obviously, this plant will have been down for basically about 1.5 years. So our intention is in the first half of the year, we're ramping it up, doing it safely, making certain that we have -- we're able to -- when the AN side is completely ready to go that we can move into AN production in the second half of the year. In addition to that, also as we're ramping it up, you'd be looking at some of the construction on that logistics flexibility that we're looking at, whether that be through DEF loadout, ammonia loadout, et cetera, would be part of that.

Okay. And then for Bert, another question on China is slightly different, though. We saw -- I think it was last week, they're starting to put quotas on ammonium sulfate exports. So obviously, urea is up more than we all thought, but AS, which had been something that they let, kind of, run wild the last few years. Now they seem to be holding back on that. And any thoughts on what's going on there?

That was a surprise. I think the -- on top of the amazing amount of ammonium sulfate that has gone out in the world, over 20 million tons and it's just been kind of a cheap replacement for urea, but I think it's related to sulfur and the cost of sulfur, the cost of production and the need for sulfuric acid for other applications and so that was just a tightening in a restriction of the ammonium sulfate to be produced or exported.

The next question comes from Chris Parkinson of Wolfe Research.

Ever since summer fill, you've undergone, for all intents and purposes, looks like very solid demand through the fall in terms of reactions to that program. And you've seen a continuation of that in the price on a quarter-on-quarter basis. How are you thinking about building order books in the spring and ultimately maxing your network on a net unit basis based on where prices reside at least today.

When you look at the summer fill program, Mike and the team have done a great job putting that out in early July, and the roll up was very fast. We took over probably 2 -- over 2 million tons of orders and have been shipping against that. But -- and then in parallel, building the book through Q4 and now we're sold into Q1. And the pricing on that was, we started in the high like $280, $290 and you saw that reflected in the positive price of $322 as an average price for Q3, and that has continued to escalate. One is a reflection of just the need for nitrogen. Two is a reflection of the global market and kind of just, I think, a migration to UAN.

Parallel to that, we've exported a lot less of UAN and have kept a lot more one of our decision earlier in the year to keep tons for the North American farmer or the American farmer. And as we position for spring, I think we always compare between the nitrogen products and try to stay in relation, but we're seeing a very positive spring demand, I think coming again back to the corn acres that are going to be planted and applied as well as what we expect to have a better corn price for spring.

And just a quick follow-up, perhaps a slightly longer-term question. But a couple of years ago, India, there were very brief talks about India trying to be independent on urea side, which has been anything bought over the last 2 years. And obviously have, I'd say, disappointed in production, obviously, at periodic times over that frame. How are you kind of thinking about that market over the longer term in terms of market growth versus perhaps U.S. LNG contracts towards the end of this decade. Is that something where you're looking at it sustainably, let's say, in the high single millions in terms of the market, in terms of the import market? Do you see that declining slightly? Do you see it growing? Just trying to get, kind of, a grasp on how you're viewing the longer-term supply-demand dynamic based on them.

Yes. So today, India is approaching 40 million tons of total consumption and production of around 30 and imports of around 10 million tons. So imports have ranged between 5 million to 10 million tons over the last several years. They have had a -- the Modi government has directed a Made in India program. They have built new plants. But those -- some of those that are gas supplied are expensive. So if you're paying the world price for natural gas today at $25 to $30 and you're competing against import urea, it makes much more economic sense to not operate those plants and import urea, especially from China, which is the cheapest source of -- and they're a big buyer of prilled urea.

So I would look at it in that range of -- there is a new plant coming on in 2027, about 1 million-ton plant in India that is slated to come into production. So I would make that range or think about that range in that 6 million to 9 million tons into 2027. And if gas prices are expensive, it should be on the high side.

The next question comes from Matthew DeYoe of Bank of America.

Yes. How are you seeing ammonia demand for phosphates transpire? Obviously, the last 6 months, 1 direction, but we're starting to see some capacity come back. So what do you expect there? And how does -- how do you think about the circular reference for price of ammonia and perhaps some of the ability for the phosphate players to actually restart?

Yes. It's been a difficult road for the phosphate producers because of sulfur and the price of sulfur elevating to over $1,000 a ton as an ammonia supplier, and we do supply some of the major producers and have very good relationships with them and both contractually and spot tons we sell and through conversations with them, we're expecting demand for ammonia to increase in 2027 based on 2 drivers. One, we expect sulfur to come back in line, maybe not back to historical values yet, but trending that way as well as just overall demand for phosphates, which globally have been cut 20% or 30%. You've had under applications in all the major markets for phosphate and that, again, eventually will have a yield impact and then an ability then to pay for phosphate. So we're constructive, I think, in 2027, probably more positive going into 2028 for ammonia demand from the phosphate producers.

The next question comes from Salvator Tiano of KeyBanc Capital Markets.

Yes. Firstly, you made a comment before some of the higher costs you incurred outside of gas were due to higher shipping costs, but you focus on the net back. And on that front, I wanted to understand a little bit with your Midwest corn belt ammonia operations. Can you talk to a little bit about what is -- what percent or what dollar amount of the spread between say NOLA ammonia price and Midwest is part of the cost of transportation and perhaps storage versus what's kind of the premium netback view as CF can get by having access to barges and storage network. And also, can you shed some light into what volume you ship to the corn belt kind of on an annual basis?

So how we look at ammonia through the Midwest and the terminal system. We have our terminal distribution that is principally supplied by the Sunoco pipeline that starts in NOLA at our Donaldsonville plant and then intersects and then splits off into Indiana and Iowa up through Nebraska. And we ship about 1 point -- total ammonia for corn applications or wheat would be about 1.3, 1.4 for CF. And so then we stair-step the costs, the most economically advantaged ton is shipped by the pipeline, and we maximize our volume through that.

The next step is our barges, which we own and lease some and we move up to our river-served terminals and then some are served by truck that as we moved excess ammonia from maybe our Oklahoma system or extraneous tons from Courtright, Ontario into one of those facilities. That just balances it out. So that's your stair-stepping in costs from pipe to barge through truck and rail.

And yes, costs were up a little bit. But as Andrew said earlier, a lot of that is a reflection of the increased volume that we moved and then we expect to receive as those tons go out and are applied the revenue and the margin from that, which is also higher than our export or our industrial gas-based business.

I think the real benefit is our unmatched distribution facility organization where we can keep all our plants running at high utilization rates, as we've shown year after year, and it's really because of the movements that Bert was mentioning from plant by plant to location by location to distribution facility by distribution facility that there's never any type of curtailment from our production network, given that our production network, it really dovetails directly into our distribution system.

Perfect. And I wanted to ask also a little bit about low carbon ammonia. Can you refresh us firstly on where you stand with any sales commitments or volume commitments from Donaldsonville before, whether it's ammonia, urea and the premiums that we had first disclosed a year ago. And are you seeing any new markets gaining traction? It seems like there have been some ammonia-powered vessels now in the -- that have been manufactured? Are you seeing anything there or in the energy market incremental versus a few months ago?

Yes. So I'll start with the first part of your question, Bert's team has done just a fabulous job of month-by-month building the low-carbon book that we have, and we're starting to see significant volume move through that. What I would say is probably an average price, a little over $20 per ton. And that was primarily focused on ammonia. We now have our certifications that we're working through on UAN. So we're beginning to see UAN come through that, not only because of the sequestration we're doing with the CO2 on the ammonia production side, but also our abatement projects on our nitric acid plants that we're seeing at a couple of our plants as well.

So that's a market that we just continue to see as really upside opportunity that once again, just demonstrates the differentiation between our network and others in our space and really the leadership that we're doing through the low-carbon network.

So we continue to build that book. Our expectation is next year with CBAM and some of the pending details on certification process getting worked out, we'll see that expand quite a bit more.

Our next question comes from Mazahir Mammadli of Rothschild & Company.

Just a question on sort of high-level ag fundamentals. I'm curious to hear your opinion on the current crop price environment, do you think the current new crop futures reflect the reality on the ground in terms of what the yields could be -- could turn out for corn and other important crops.

Regarding yield, we're almost an information taker as well. We do have our channel checks and different farmers we talk to. I am surprised by some of the farm yields or corn yields I'm hearing about in the northern tier, like in North Dakota on dry land as well as the irrigated performance in Nebraska and Kansas. But overall, I was surprised on the USDA's revision compared to Pro Farmer and some of the other information that came out. So whether we move from 181 average yield to 183, which is what's projected. But taking a step back and going from a global perspective, I do see a challenged market, again, weather-related nutrient, lack of nutrient related in South America, specific to Mato Grosso, is a potential for yield cuts there. I think Argentina is expected to have adequate rains and performance. So when you take a step back on where we are on demand, I would hope to see corn value start to rally as we get into 2027.

Ladies and gentlemen, that is all the time we have for questions for today. I would like to turn the call back to Martin Jarosick for closing remarks.

Thanks, everyone, for joining us today and we look forward to seeing you at upcoming conferences.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, ladies and gentlemen, and welcome to CF Industries First Half and Second Quarter of 2026.

[Operator Instructions]

I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick, with CF Investor Relations. Sir, please proceed.

Good morning, and thanks for joining the CF Industries' Earnings Conference Call. With me today are Chris Bohn, President and CEO; Bert Frost, Executive Vice President and Chief Commercial Officer; and Andrew Scribner, Executive Vice President and Chief Financial Officer.

CF Industries reported its results for the first half and second quarter of 2026 yesterday afternoon. On this call, we'll review the results, discuss our outlook, and then host a question-and-answer session.

Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.

Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Now let me introduce Chris Bohn.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first half of 2026, in which we generated adjusted EBITDA of $2.2 billion. These results reflect the CF Industries team's strong operational performance and a tight global nitrogen supply-demand balance, which was further strained by the conflict with Iran. Most importantly, our teams continue to embrace our Do It Right culture to deliver outstanding safety performance.

We closed the quarter with a trailing 12-month incident rate of 0.16 incidents per 200,000 hours worked, well below industry averages. That focus on safety directly supported high asset utilization in the first half. We operated our available ammonia capacity at nearly 98%, enabling us to meet demand from our domestic retail, wholesale, and cooperative customers, who supply North American farmers.

In addition to our strong operating performance, we are making steady progress on our strategic initiatives. At Blue Point, we have received all necessary permits to begin construction. Nearly all long-lead items are ordered, and module fabrication is set to begin later this year.

Within our existing network, we expect our Yazoo City Complex to resume operations in the first half of 2027 after completing work to improve the site's long-term sustainability and operational flexibility.

We also continue to be disciplined as we evaluate high-return projects across our network to unlock further value.

As you saw in our presentation, we have raised our mid-cycle EBITDA and free cash flow expectations. In a moment, Andrew will address more of this, but I want to address the broader market context first.

Right now, we believe the market views a disproportionate amount of our EBITDA and free cash flow growth primarily through the lens of short-term geopolitical friction in the Middle East. That view misses a fundamental structural shift in our industry that has been occurring over the years and exposed to the recent global nitrogen supply chain dislocation.

Higher global capital costs have structurally raised the incentive price required for new global nitrogen capacity, lifting CF Industries' baseline mid-cycle earnings power while reinforcing the value of our existing manufacturing and distribution network. This is before we factor in any geopolitical premium.

To be clear, our low-cost, low-risk North American asset base, and not geopolitical risk, is the foundation of our profitability. Our ability to operate at high utilization rates during disruptions enhances our stable mid-cycle return profile above and beyond the strong free cash flow generation already embedded in our outlook. This, in turn, augments our ability to invest in high-return projects and return capital to shareholders.

With that, I'll turn it over to Bert to discuss the global nitrogen market. Bert?

Thanks, Chris. The first half of 2026 saw a rapidly changing global nitrogen market dynamics. Global prices rose significantly as an already tight supply-demand balance was further constrained by supply disruptions from the conflict with Iran. In regions where application seasons occur in the second half of the year, many customers deferred purchases. In North America, agricultural demand remained strong through most of the first half of 2026, led by ammonia and urea.

Our team created significant value by leveraging our operational flexibility to prioritize urea production over UAN. It also enabled us to deliver our second-highest DEF volumes in the first half, our highest-margin product.

In June, however, our customers slowed purchases of the nitrogen channel drew inventories down to a very low level. Those low inventory levels and positions ultimately drove strong participation in our UAN and ammonia fill programs in July. As a result, we built a substantial UAN order book that extends into November and expect a strong fall ammonia season.

Looking at the broader market, global nitrogen fundamentals remain tight even before factoring in geopolitical conflicts. Rising capital costs, permanent closures, and the limited pace of new capacity additions have kept supply growth constrained relative to demand. Additionally, a meaningful portion of global nitrogen capacity remains exposed to geopolitical uncertainty.

And this exposure has further tightened the global nitrogen supply-demand balance. We believe this will continue to affect supply availability, delivery confidence, and pricing due to higher logistics and insurance costs.

Additionally, high LNG prices continue to pressure production economics for marginal nitrogen producers and are likely to limit operating rates. We do expect China to export urea volumes similar to last year. Those exports are necessary to meet global demand, but they are not enough to materially loosen market fundamentals.

On the demand side, we expect purchasing activity to recover in deferred regions such as Brazil and India. We also expect North American demand to remain firm through the upcoming application seasons. Taken together, we expect the global nitrogen market to remain tight into 2027. Looking further ahead, we see continued structural tightening through the end of the decade as nitrogen capacity currently under construction falls short of historical demand growth.

Finally, our low-carbon sales program continues to gain momentum. Approximately 10% of our ammonia sales volumes in the first half were low-carbon that earned an average premium of more than $20 per ton.

With that, I'll turn it over to Andrew.

Thanks, Bert, and good morning, everyone. For the first half of 2026, the company reported net earnings attributable to common stockholders of $1.3 billion, or $8.71 per diluted share. EBITDA and adjusted EBITDA were both $2.2 billion.

For the second quarter of 2026, the company reported net earnings attributable to common stockholders of $727 million, or $4.73 per diluted share. EBITDA and adjusted EBITDA were both $1.2 billion.

We continue to efficiently convert EBITDA into free cash flow. Our trailing 12-month net cash from operations was approximately $3 billion, and free cash flow was approximately $1.8 billion.

As you can see on Slide 10, our EBITDA to free cash flow conversion is consistently high, producing predictable and stable free cash flow. Over the last 12 months, we've returned nearly $1.3 billion of free cash flow to shareholders. This includes repurchasing 10.6 million shares for $958 million and $314 million in dividend payments. In July, the Board increased our quarterly dividend by 20% to $0.60 per share.

As we have reduced the number of shares outstanding over time, we are able to reward the remaining shareholders with a higher dividend. For context, since the start of 2021, shares outstanding have decreased 29%. And over that time, our dividend has doubled.

Looking ahead, we continue to project approximately $1.3 billion of capital expenditures in 2026, of which CF Industries' portion is approximately $950 million. With the construction of Blue Point expected to begin in August, the pace of capital expenditures will accelerate.

We continue to focus on mitigating our cost exposure through fixed-fee contracts.

As we have advanced Blue Point activities and evaluated additional projects, it has become clear that the cost of building new nitrogen capacity in regions with low-cost natural gas has increased, narrowing the construction cost advantage those regions have historically enjoyed.

As you can see on Slide 9, these higher costs mean that the urea price required to bring new capacity online has gone up as well. Based on our analysis, this supports a baseline mid-cycle EBITDA for CF Industries of approximately $2.9 billion and free cash flow of $1.7 billion.

You can also see that decarbonization, Blue Point, and other margin-enhancing projects provide upside to our baseline. By 2030, we expect these strategic initiatives that are in flight to raise our mid-cycle EBITDA to approximately $3.3 billion. And as Chris noted, this is before any geopolitical premium for higher freight and insurance costs and constrained global supply. These near-term dynamics provide fuel for growth and a greater ability to return capital to shareholders.

With that, I will hand it back to Chris before we open the Q&A.

Thanks, Andrew. I want to thank CF Industries employees for their commitment and dedication during the first half of 2026. The team continues to deliver safety and operational excellence while skillfully navigating our ever-changing global marketplace.

As you can see on Slide 12, CF Industries has a long track record of driving value for long-term shareholders by increasing production capacity and decreasing the number of shares outstanding. This has increased investor participation in our underlying assets by more than 40% since 2020. We expect to build on this track record in the near and long term. We have a premium-grade asset base, proven operational capabilities, financial strength, and substantial high-return strategic opportunities.

The global nitrogen fertilizer supply-demand balance remains tight, and rising capital costs across the globe have structurally elevated our baseline mid-cycle earnings. Against that backdrop, we believe CF Industries stands apart. As our mid-cycle EBITDA expectations continue to strengthen and our free cash flow generation remains highly predictable and durable, we are well positioned to continue to create value for long-term shareholders.

With that, operator, we'll open the call to questions.

[Operator Instructions]

The first question comes from Ben Isaacson of Scotiabank.

My question is on your new mid-cycle price of $410 a short ton for CF. Can you talk about how much of that change is related to capital cost inflation versus how much is related to any structural or sticky changes that you see as a result of the conflict in the Middle East?

Yes. Thanks, Ben. Maybe for starters, I'd just take a step back and just say, as I look back at our performance since the beginning of 2020, we've averaged over and above that $1.7 billion free cash flow that we have as the mid-cycle by quite some amount. So it's not as if the empirical data and how we've performed and really how we've set up the company by increasing our production capacity and also lowering our fixed charges to get our free cash flow conversion where it is hasn't been successful, and sometimes we don't always feel like that's being recognized, but we have been performing at that.

What I would say is construction costs, the gap between the U.S. and the rest of the world has closed. You're seeing labor, procurement timing, different things with being able to use module yards where that difference between a U.S. project and a global project has changed drastically, I think.

And then, to your point, there are certain costs associated with the geopolitical events that are going to remain structural. So if you look at freight, for instance, freight, we have basically from the Middle East to the Gulf now is about $70, where a year ago, it was $35. Do we expect that to snap back to $35 and not have any type of structural piece to that? Probably not.

But is that $5 to $10 there? Is there few dollars in insurance costs, different vessel configurations, and a risk premium based on where those assets and really the supply offtake is happening.

So I think as we look at it really from a NOLA price, we're saying we've moved from $355 NOLA urea on a short ton to $385. Of that $30, there's probably $10 that may be associated with structural changes that don't go away as a result of these geopolitical events. And then the remaining amount probably exists due to higher capital costs and really a closing of that gap between U.S. construction and outside of the U.S.

Yes. And maybe let me add a little color -- Ben, this is Andrew as well. As you look at that price going from $355 to $385, the underlying assumptions that we have is this is for, call it, 1.3 million to 1.4 million-ton capacity sites with a CapEx estimate of about $2.6 billion to $2.8 billion. If we assume $3.50 natural gas with a 10% to 12% financial return, that's how you get to the $385 price. You then use our economics and it gets to our EBITDA of $2.9 billion.

One piece that I want to call out of what's in there and what's not in there is we also gave some color context around $400 million over time by 2030 that will get you to $3.3 billion.

Out of that $400 million, $300 million of that is Blue Point and $100 million is additional carbon capture benefits, we'll get out of Donaldsonville and Yazoo City. The way to think about that, what's not in there, I will do this illustratively, you likely saw that we're pursuing a FEED study for DEF. Because that has not been officially green-lit yet, that is not in that $400 million. If we get to that point through an investment decision, it will go in there.

Likewise, in that $2.9 billion, as we're starting to realize the benefits of Donaldsonville on carbon capture, that's actually shifted left into that $2.9 billion. So it's really a function of the capital cost. And as Chris mentioned, there's probably some context around a little bit of geopolitical premium there, but it's really the capital costs and sort of realizing the benefits on carbon capture. So hopefully that helps.

The next question comes from Joel Jackson of BMO Capital Markets.

It seems like looking at yourself and your peers' results, ignoring some of the lower volumes in Yazoo City, there's a bit of a buyer's holiday in nitrogen in Q2, and we all know what happened with commodity prices and nitrogen prices across the quarter, urea, as the war started and prices came down.

But I wonder if you could talk about that, what does that set up for the second half of the year coming out of the last, I don't know, 5, 6 months of volatility?

Yes, interesting view, Joel. And I think that did happen in different places around the world. As prices escalated, especially in April and May, you definitely had a pullback in South America -- Central and South America, where the necessity to purchase, it's really to put into inventory because applications are further later in the year specific to the big applications in Brazil. But you also had pullbacks from Australia, from Southeast Asia.

And the Northern Hemisphere was completing the application season. We did see some movement in North America, as I mentioned in my comments, with movements amongst products with additional urea. So we pivoted and produced more urea as well as DEF and that limited a little bit to what our UAN availability was.

But I think overall, prices did impact some places where you could defer demand, and we saw that happen. And we see a little bit, I would say, as the data is coming in with a possible small cut in consumption in North America, but not as big as relative to the other nutrients.

And in the second half, we're bullish on the second half. When you look at what we've put together with our UAN fill program, the team did a great job of working with our customers, organizing that and getting it executed well. And the average price on that is probably close to $300 and where our program extends into Q4. And so good solid demand, good movement. We're already seeing that. And as I mentioned in my prepared remarks about the fall ammonia season with a very good uptake for that.

And we're just now positioning product at our terminals to serve that demand in November.

And so when we look at where we are in the ag cycle, where we are with pricing and the customer uptake on the retail wholesale side for us, which we know has been pushed down into the farmer, we see good positive traction through 2027.

The next question comes from Lucas Beaumont of UBS.

Yes, I kind of just wanted to sort follow up on the outlook there. I mean, I guess, just given kind of the soft demand here in the second quarter like a more compressed kind of time frame for deliveries in the second half. We've got the still impacted global supply issues and like now increasing cost curve support as well from European gas.

So I guess just how do you kind of see the setup there for pricing as we move into the fall and the spring? Is there a point here where the market's going to kind of rapidly tighten and expose low inventory levels as demand picks -- backs up? And I guess when do you think that would sort of be timing-wise? And is that setting us up for like much higher in-season U.S. premiums again coming up?

Yes. Good morning, Lucas, and I think -- this is Bert. Regarding the soft Q2 demand and the deferrals that I mentioned in the Southern Hemisphere, we do believe that's going to catch up, and you're seeing that in India with the most recent tender. We anticipate India to be an import demand of 9 million to 10 million tons, which is over what they were last year. We're seeing positive movement in South America.

And some -- I expect to see some grain movements, some grain pricing movements, which will incentivize additional consumption. But you're right, the compressed deliveries is just -- it's going to be a poor lineup for some of these folks. But the values have come back down to attractive levels. And as I think lower pricing will incent demand. And so -- but you're right, the EU gas structure is at a disadvantage with $18 to $20 gas at a differential to the world makes European operations constrained that we believe.

And so probably a higher level of imports there.

And so with where we are in the ag cycle with pricing for the feed grains and the consumption of nitrogen, we're constructive for the back half of this year as well as 2027.

And I do think there will be some tight pricing to come. When you look at -- we still lost 5 million tons from the Middle East or from those countries that were unable to get LNG. We're seeing a little bit of movement out of China for exports to replace some of that, but that's probably in the 5 million to 6 million-ton range, so kind of a net zero. And then with those places that are constrained with LNG or cannot afford, you'll see probably some production cut backs.

So balance on balance, we see a tight market through next year.

And I think, Bert talked about just what's happening in Europe, as we see those prices come down, but not the feedstock cost of that come down, you'll probably see more constraints on that as we've seen over the years where we're seeing curtailments and shutdowns occur. But on top of that, it's probably the one area we don't know is really what happens in the Gulf area.

As Bert mentioned, that's a significant amount of volume that still needs to supply the world here. And if you're seeing curtailments in Europe and still some on and off again stuff in the Gulf area, that's really what's going to determine pricing from that. Volume-wise, as you mentioned, I think we feel very strong about what we're seeing.

Great. And then I guess just on Yazoo City. So I mean the repairs have sort of been pushed back a little bit into the first half of '27, so I was just wondering kind of what the sort of swing factors there are in terms of sort of hitting the timeline. Anything to share sort of on the business interruption insurance that are there in terms of like the income and cost coverage?

And just will you -- are you looking to do anything different at the site sort of with the rebuild that could sort of deliver benefits to you after it's finished?

Okay. I'll take -- this is Chris. I'll take some of the first parts of that question and then turn the insurance discussion over to Andrew here. But I think the biggest part is, we've gotten more information when we put out that we thought it would be late 2026, that was preliminary information on what needed to be done with a particular site and what the procurement timelines would be.

As we've seen with a lot of projects globally here, you are seeing procurement timelines extend some and that was primarily for electrical gear. And that's why we've moved it into the first half of next year from a timing standpoint, just as we've gained more information and better insight into that.

Related to the site itself, we are changing how that site is going to be configured. We will no longer be prilling ammonium nitrate down there. We'll be doing ammonium nitrate solution along with ammonia and DEF down there. And really, what we're building out in that particular location is probably increased flexibility, both from an operational and a logistics standpoint, where we'll have a broader customer base that we can start to supply throughout the years here.

So I think we're excited about what the opportunities and what we're changing at that particular site to make it a more sustainable site long term. So I'll turn it over to Andrew now to talk through some of the insurance side of it.

Lucas, so I'll give a little bit of color on kind of 3 buckets, accounting, I would say the insurance piece and a little bit of how to think about capital. From an accounting standpoint, in Q4 of last year, we recorded $25 million impairment on machinery and equipment. And then you'll see or have seen in Q2, we took another further impairment of $23 million for equipment we will no longer be able to use.

And so total, that's just shy of $50 million of impairments that we've taken. On the insurance recovery to date, it's been about $75 million. We had $25 million of property damage that we recorded in Q1 and received in Q2, then we've had $50 million of business interruption insurance.

When you look at it to date, it's been about a 2:1 ratio. Longer term, it will probably play out more like a 3:1 ratio. That business interruption insurance covers us for about 18 months as you look at that.

Now you will note, I just want to make sure this is clear, we are not included in our capital guidance and assumption for Yazoo City, and there's kind of 2 fundamental reasons. One, we expect the insurance recovery to offset that capital build cost; and two, the timing is dynamic. When you look at the timing of the capital between the back half of this year and first half of next year, it will be dynamic and the insurance recovery is going to be dynamic.

So when you look at that over a longer time frame, they will offset each other, but that's why we're not specifically guiding that right now.

The next question comes from Benjamin Theurer of Barclays.

This is Rahi on for Ben. Maybe on S&D, are you seeing any impact from the extra Texas capacity this year, like Gulf Coast ammonia, Woodside? Or is this just largely offsetting Trinidad volumes? And maybe long -- or medium or long term, how do you expect this to affect supply and demand once the impact from Iran settled down?

When you look at the Texas plants, there has been a long lead to their full production. And I don't think they're still at full production. And so those tons have been absorbed. They've been moving around the world. They've had some contracts. And now with Yara purchasing the Gulf Coast plant, I assume a lot of that product will go to Europe, offsetting production cutbacks.

But you're correct. There have been offsets throughout the world. Trinidad is one that has taken tonnage off market. There has also -- on the demand side, there's also been some negative impacts with, as you've heard from the phosphate producers with their cutbacks due to limited supply of sulfur and sulfuric acid that has limited phosphate production, which therefore has limited their ability to consume more ammonia.

So the market has come off the highs of Q2 and is today balanced in the $600 to $700 range, depending on destinations. But we see these 2 plants, the Gulf Coast plant and the Woodside plant, both coming up to full production, and it will be absorbed into the market.

And I think longer term, we've talked about this that the global S&D is tightening, independent of what was happening in the Gulf during this particular time frame. And if you look at the slate of new projects that are projected to come online between now and 2029 or 2030, there's just not enough to meet demand.

And if there were some sort of resolution in the Gulf, as Bert mentioned, you're going to have other demand pieces that will grow because you can have sulfur, some more phosphate there. So we still think that there is just very much a tightening that continues to go on between now and the end of the decade in the nitrogen market here.

Got it. And just a quick follow-up for Yazoo. Can you just walk us through the thought process of that you're going to make AN, UAN, et cetera there? Why not just do urea given the margin structure has been superior in the last 10 years? That should be it from us.

Yes. From a urea standpoint, you're right. Urea is really the catalyst as to why we're going to see the global nitrogen market get tighter. So there are upgrade projects that we're looking at, one of which is even for DEF, that's a urea project at Courtright.

As you look at Yazoo City, the urea plant there would have to be a full-blown new urea plant, world-scale plant there. And we look at what we have opportunity-wise that Bert's commercial team has put together both from an ANS, UAN, and DEF that it wouldn't really make sense to put in that type of capital at that particular site.

I also think when you look at how we're configured and structured asset-wise and our distribution of those assets and the modes and how we move the product through rail, truck, barge, vessel, or whatever pipeline, Yazoo is a unique asset and that it's our main -- or only ANS plant. But as we work through this new structure, we're going to be improving the load-outs, improving capabilities, and having different access to different modes, and that will give even more flexibility to Yazoo City.

The next question comes from Kristen Owen of Oppenheimer.

So I wanted to follow up on capital allocation. This is clearly an and strategy, not an or just given the strong cash flow you've generated thus far. You raised the dividend, you're increasing the buybacks, and you're coming into peak CapEx period. But the one that I actually really wanted to ask about is this FEED study on DEF.

So can you just give us a little bit of background here how you're thinking about the demand and economics for, say, industrial applications versus over-the-road applications? I know we've got some EPA changes coming up. So just a little bit of color on the DEF study.

Yes. So I'll let Bert start on the market and what we see that's interesting us in the market in the different areas where it is. And then I'll speak a little bit more specific to the project itself.

DEF has been an interesting product for us in that it's just about 15 years old in terms of how long DEF has been an active part of our portfolio, and we produce it at different plants, but the growth from basically 0 to today, 2.2 million tons of -- and this is a urea equivalent tons. So in effect, 2 world-scale plants of urea are now being consumed in North America, where that just didn't exist 15 years ago.

And when you look at the growth of demand as new power units come into service and the dosing rate has increased from a very low level 15 years ago to all 0 before that, but -- and as these power units get replaced and an average power unit can last 9 to 11 years. And so the replacement rate is slow, but we see that taking place.

And with the additional dosing rate continuing to increase for better efficiency on that miles per gallon as well as emissions control, we see this market by the early part of next decade, 2030, 2031, hitting 3 million tons or over. And so a lot of growth opportunity. And again, where we're positioned asset-wise, Courtright makes a lot of sense to serve the East Coast market, which is a heavy demand market.

The one thing I would add is this isn't really our thoughts on the growth of DEF and in isolation. Essentially, we worked with OEM engine manufacturers all the way down to the retail side to make certain that we're aligned as to the growth that we see going forward. And I think all parties are seeing the same thing there.

As Bert mentioned, Courtright provides a unique opportunity for us. Today, Courtright has a net long position in ammonia that is a little bit logistically constrained both by what rail line it's on, and therefore, having a lower-margin ammonia that comes out of that particular plant. And because it's such a low-margin ammonia that comes out of that plant, it's providing a better opportunity to put in an upgrade unit there.

And the rail line, it happens to be on, can feed the East Coast, the Mid-Atlantic area better than any of our other sites that are producing DEF today. So as we look at this, provided what comes out of the engineering and design study from a capital cost, but we feel that this is going to be a project that is not only going to grow into a market that is an industrial ratable market, very strong for us, but it's additionally something that's going to be well above our cost of capital just given the configuration of that site today.

That super helpful. My follow-up is question on, your expectations for mix in the back half of the year, just given what you said about the fill programs, what fall application looks like? Obviously, the economics moved around quite a bit here in Q2, but just how you're thinking about mix of product in the back half of the year would be helpful.

Yes, I would say we're looking at a normal slate in terms of the economics. As we look product by product to where the economic advantage is against our order book, which is a very positive order book, I would anticipate a normal slate for the back half.

We're going to work on our inventory levels, which built up during Q2. I think that was one of the issues on the write-up was that we had a limited volume on UAN, but what we did was move more of that to urea and DEF in Q2. And any inventory we have, we expect to disgorge in the back half of the year and run at normal rates.

The next question comes from Christopher Parkinson of Wolfe.

Totally understand the second half outlook in terms of steady demand, a lot of lost tonnage out of [indiscernible] as well as some of the Iranian tonnage to see the market tight for the foreseeable future. But at the same time, I'm curious on your interpretation of the U.S. and coastal benchmarks typically trading at a discount.

It seems like the international opportunities, especially in the third quarter should have been a little bit better.

It should be at least improving in terms of that prospective market tightness. So I'd love to get your perspective across both ammonia and downstream in terms of how you see the dynamics playing out just in terms of like the ripple effects from lack of production in the first quarter or 2?

Yes. So when you look at what -- the tonnage that was lost, urea and ammonia out of the Gulf as well as tonnage lost due to lack of LNG to those countries or companies that rely on LNG to produce, it's substantial. And so back to how do you backfill that supply. And some of it is through, I think, the Chinese tons that everybody is expecting to come out as well as just solid operating rates.

And in terms of trading values and looking into what markets we would move our tons to, you mentioned that we're trading at a discount in NOLA, we are, and so you've seen us build an export book on urea that's probably higher than normal. And so when I look at where these benchmarks go and where we are in terms of pricing for the world, I think you're going to see a market that improves in terms is tight and will tighten as this demand has been deferred, comes back into -- has purchased and moved.

Got it. And just as a quick follow-up to that, I'd love to hear your perspective that in the U.S. alone, and I apologize if I'm missing one, you've seen basically 7 cancellations in terms of low-carbon or blue ammonia over the last several quarters and perhaps a project or 2 are technically on lifelines.

Chris, I'd love to hear your perspective on just kind of your intermediate longer-term outlook. It also seems like the demand side of it has been a little bit more quiet versus some positive events back in '25. I'd love to just hear your dynamics in terms of market development, your position, how you're thinking about the overall Blue Point complex, and any incremental opportunities you see fit based on the fact that a lot of others have given up?

Yes. And I think to start with, Chris, the ones that have given up are participants that were not necessarily in the market to begin with, okay? So if we go back a few years ago, I've said this before, there was like 107 green and blue plants announced, of which I think there's 4 in construction today, of which ours is 1 of them. So there is a lot of hype about what clean energy was going to be. Our analysis never showed more than we were thinking, maybe 7 of that 107 million would be built. So I think we've been more pragmatic in this.

As you look at that clean energy market, it's really similar to the DEF market that Bert mentioned. The 1 million tons that will be going both to JERA and Mitsui, our partners, is 1 million tons of incremental demand that didn't exist just a few years ago. And we're continuing to see some growth opportunities in Japan and other pieces of Asia, but it's going to be at a slower pace than what I think the original hype was on that.

What benefits us is whether we have a low-carbon ton or a conventional ton. We produce it the same way, we store it the same way, we transport it the same way.

So all those operational efficiencies that we have as an organization to lower our cost per ton on new construction and also the distribution of it reside with us and accrue to us that others don't have. And I think that's why you're seeing us continue to be bullish on both Blue Point and maybe even a Blue Point 2 is because of those assets and really that ability we have to move that product and to produce that product.

Well, I would say low-carbon or not, or gray or conventional, however you want to define it, we are competitive globally. And even with the premium, we're competitive globally, and we're proving that by our contracts that are in place and what we're sending to different places today, and that will only grow. And I do believe that the low-carbon value, especially in Europe, is going to continue to be valued and grow, and that demand will grow as well.

The next question comes from Vincent Andrews of Morgan Stanley.

Chris, I wanted to ask you on the dividend, maybe separately on another part of capital allocation. Just sort of what your thought process is? Obviously, as the share count comes down, you can pay a higher dividend without spending more money.

So is that just the plan going forward? And should we be anticipating maybe getting to more annual dividend increases versus I think the last one was maybe '23.

And then separately, from an M&A perspective, in the U.S., obviously, there's a limited number of assets, but one just traded.

Do you still have scope from a regulatory perspective where you think if other things became available you would still look at that? Or should we be thinking about volume growth from here being more along the DEF or as you just mentioned, Blue Point 2?

Yes. So I'll just start with the dividend part and then maybe -- actually, let me start with the second question first, and then I'll go to the dividend and pass it over to Andrew as well. But on the M&A scope, so we did see the Gulf Coast Ammonia plant transfer to Yara is in the process of that. We do believe that we still have some room from an M&A scope. I mean, I think if anything, what CF has demonstrated just based on the prior answer I had given is that assets in our hands produce more production volume.

Whether we go back to what we did when we acquired Terra back in the day with the investments we made, our best practice teams, we're just looking recently at Waggaman, where we've increased that, consistent production there, but by over 30%. So our ability to increase volume within a market, I think, is a key to allowing us to continue to do particular assets acquisition.

Now as we look at those acquisitions, we want to be someplace that isn't in the third quartile or some place out that, from an operations standpoint, could be constrained as time goes on. We like our low-cost position. We like the low-cost, low-risk that North America from a geopolitical standpoint brings. So that's primarily where we're going to focus going forward, both organic and inorganic there.

From the dividend before I turn it over to Andrew to get into some of the specifics. I think one of the underlying reasons is just our faith in where we see our mid-cycle and our free cash flow generation, not just this current year or next year, but over the entire cycle.

We did see a stronger that we've been very focused on reducing fixed charges, of which dividends are one of them. But I think as we're seeing that free cash flow conversion and generation goes up, just makes us more confident in increasing it as time goes on there.

Yes. This is Andrew. The piece that I would share is our overall strategy on capital allocation has not changed. The hierarchy of driving strategic growth, share repurchases, and dividend, when you think about the dividend, I think of it as 2 fundamental principles. One, we want to be competitive with the marketplace. So the increase that we did took it from a 1.8% yield to 2.1% compared to the S&P of 1.1%.

The second principle what I would share is, we're conscious of what we spend in absolute. And you can look and you can probably see there's a range that we tend to target. It's not a hard and fast rule, but it's a range, and that range allows us to fuel growth into the top of our pyramid on strategic growth. So those kind of principles that we apply as we look through it.

But it should also be noted, as we've said in the past, we believe our shares are still incredibly undervalued. And this whole geopolitical swings that we trade off of rather than the underlying fundamentals that we see going forward, we're going to continue to be aggressive in share repurchases as our #1 outlay of our capital allocation towards shareholders.

The next question comes from Andrew Wong of RBC Capital Markets.

So just kind of following up on that last thought there, Chris. And in the presentation, too, there's a couple of slides where you highlight the valuation disconnect that you see versus some of your peers, can you just talk about why you think that that's the case? What's driving that disconnect? And then what can you do at CF to kind of close that gap?

Well, what I would say that we can do to close that gap is continuing just to perform as we do at the highest level. Like I said, if you look at our free cash flow over the last 6 years on average is significantly higher than what we're suggesting the new mid-cycle is. So this isn't just a 1-year, 2-year type of thing.

So for us, it's to continue to move forward and perform as we do from an operational looking for margin enhancement, whether that be a DEF project, other utilization or debottlenecks, or whether that's organic and inorganic growth that has return profiles well above our cost of capital.

One of the reasons why I personally believe we trade in this is, I think people are still trading 10 years ago on CF. We've increased our production volume by almost 40%. We've reduced our share count by almost 60%.

And yet people are still thinking we're this over-levered company that is doing expansion projects. We're a significantly different company today based on what our capital structure is, our free cash flow conversion, that hasn't happened by accident. That's come through very methodical.

Our SG&A and our working capital are the lowest in the industry and by the industry, I mean basic materials, I mean, chemicals, everything. And there's almost this ignoring of that just to say, well, they're a fertilizer company, and we're going to place them against these 3 or 4 other peers, which I think is a complete mistake. And as long as our shares are undervalued, we'll continue to buy our shares back.

I also think there's a misunderstanding of our assets and the leverage points that we have in terms of where our plants are located, the diversity of the products that we make, the modes that we're able to ship, and then the terminals, where we're able to distribute as well as export to any country in the world. So we have all this flexibility on top of some of the lowest gas costs in the world, we are going to be a low-cost producer in a high-valued market with the best farmland in the world.

And so when you put all those together, it's a unique mix that only we can satisfy and the rest of the world can't. None of our operating competitors can do that. That's why we think we should be valued differently.

Yes. I mean as you look out -- I mean, as you can see, we're $500 million into a $2.0 billion program. And as we try to look at our intrinsic value and what it should be, I mean, we're looking at DCF analysis, comps, replacement value, every calculation that we do suggests that there's an opportunity there, and so we'll continue to be opportunistic as we go.

And then maybe just one on costs. When I look at COGS and I ex out gas and [indiscernible], it does look like it's trended up a little bit in the past couple of quarters. Can you just speak to that? Is it mostly just the Yazoo City or anything like maybe some extra turnarounds or anything like that?

Yes. Let me give some color on costs in Q2. If you strip out the impact of volume and gas, our fixed costs were up about $75 million. And I'll do this kind of simply and illustratively, but it'll give you the context. So let's call that $70 million for the context that I'll share. About $10 million of that was distribution and logistics, and that was probably the smaller piece of the puzzle where you saw some load mix going from barge into rail, and the rate on rail itself has gone up a bit.

The other $60 million is about a 50-50 split between higher purchased ammonia costs flowing through and the rest is fixed cost absorption tied to Yazoo City being down. So that kind of gives you the 3 pieces that are coming through there from a COGS standpoint.

And I would say that purchased ammonia, obviously, we have benefits of that, that flow through the revenue line and it is providing a margin, but it does provide higher COGS during that time frame.

Additionally, one of the turnarounds we started during that time was ammonia 6. Ammonia 6, obviously, is our -- it's almost like comparable with 2 plants. So the costs associated with that in the years in which we do Ammonia 6 are always going to be slightly higher from a turnaround standpoint.

The next question comes from Matthew DeYoe of BOA.

I just wanted to reconfirm, for CapEx on Blue Point, like what -- what's your mix on fixed versus nonfixed EPC work? And...

Well, what I was going to say is essentially, when we looked at the Blue Point project, the one thing we tried to do was mitigate our overall costs related to that. And we did that in a couple of different ways. One was through our partnerships where we partnered with Linde and even Oxy's 1PointFive on the CCS unit.

But additionally, even with Mitsui and JERA, where they're providing some insight and administrative benefits along with, as we go to the module yards in Asia. So I think that is one area where we look to lock down on some of those costs.

What we have fixed is roughly probably about 50% of the CapEx related to that. And that is in a couple of different areas. One is in the engineering and the module yards, the other is in some of the lump sum turnkeys that we try to do on the infrastructure pieces, whether it be the tank or some of the dock and bridge work and things like that.

So we feel pretty confident about how we're managing through this. As I mentioned earlier, we have our long-lead items for Blue Point purchase. So some of those things that we're seeing with extension of lead times or increases in costs related to those, we started those -- some of those critical items having contracts in place even pre-FID on the project itself.

Just as a quick follow-up, I mean labor and assembly and build out, I assume that's just like impossible to fix now in the Gulf?

I mean the portion that will be labor in the Gulf is going to be significantly lower than what we saw when we did the expansion projects back from 2012 to 2016. And that's because a lot of the work from the modular piece is going to be done overseas.

So as a result of that, you're probably going to have maybe 1/3 of what the labor component was compared to what we saw last time. And that does a couple of things. One, that allows you to probably get more skilled labor in there because you have a smaller headcount that you're trying to do there, but also just limits the high-cost labor that would be in the Gulf Coast right now.

And if I could, Bert, I was just wondering about the underlying assumptions for 9 million to 10 million tons in India this year because I mean they obviously ended last year with pretty good balances given all that buy. So I'm just kind of wondering if that 9 million to 10 million assumes maybe shipments from last year into this year or that's really like a back half-loaded period?

If you do it on their fertilizer year, which is April through March, they had the tender for 2.5 million tons and a tender for 1.77 million tons so total to date is 4.27 million tons. They just announced a tender last week for an additional 1.7 million tons. And so you can do that math. That's roughly 6 million tons. We expect another tender by the end of this year.

But they also tendered twice last year -- or in the calendar year, once in January and 1 in February. And so if you go into their fertilizer year, that would extend into January through March. And they did almost 2.2 million tons. So when you add those all up, that gets you to 9 million to 10 million tons expected.

And you have to remember, they were -- they are an LNG importer, and they were running it suboptimally on their domestic operations. We estimate they lost 1.5 million to 2 million tons of domestic production. So rolling all that up and we're still not sure what can come out of the Strait on the forward market, I would say 9 million to 10 million is a pretty good estimate today.

The next question comes from Mazahir Mammadli of Rothschild & Co.

I just wanted to ask a follow-up on the midterm -- mid-cycle EBITDA targets. What is the sort of mid- to long-term market balance is assumed in that? I'm just going to give you an example. For example, India is striving to be more self-sufficient over the medium to long term in urea. You have a number of projects that are in development that should theoretically come online by the end of the decade, and that would theoretically remove demand from the global market. Is stuff like that factored in? How should we think about it?

One is, I think if you look at the overall supply growth over the next 4 to 5 years, India does have a few projects, some of which -- one of which is green that I think you have to start to put probabilities on what is the time frame in which that's going to go. But even with all the announced projects that are happening right now, you're going to have a deficit or an extreme tightness in the S&D balance as we see it going out through 2030.

Now in saying that, just because India wants to become self-sufficient and other countries as well, doesn't mean that there's not a capital cost that's incurred in order to drive and build those particular plants themselves. And if you look at it from an economic standpoint, it may make more sense to continue the import or these particular projects can be delayed.

So how we look at the mid-cycle is we do build in what we have in flight when we're working with engineering teams. And usually, you have a very good visibility, I would say, out 5 years because that's about the time it takes to build a plant. And then we start to manage that as time goes on and readdressing that.

But today, really, as you look at the next few years, there's some plants -- there's a plant in Qatar, there's one in UAE, there's our plant and then one in Nigeria. But outside of that, I would say, the others are a little bit at risk, whether that be Russian plants or some of these Indian plants that are talked about to come on before 2030.

As well as there's constrained areas around the world we've identified in previous conferences or calls, but when you look at Europe and the gas spread and the age and the inefficiency of some of those plants and their long-term viability as well as what's coming out of in terms of LNG constrained areas like Bangladesh and some of the Southeast Asian plants that are also, I think, challenged. So on a going-forward basis, not every plant, which we saw the Brazilian shutdowns, they're talking about revamping, I don't think that's very viable long term with the gas -- the way gas flows there.

And then there's Trinidad that's also limited on gas. So you have new capacity coming in and old capacity, which we believe won't be operable over the long term as well as demand increases over time.

And then I just wanted to sanity check something regarding 45Q. So when I look at Q1, there is $19 million of 45Q income, which, if I sort of divide it by the $85 a ton CO2 price, gives me a CO2 capture of slightly more than 200,000 tons. And as far as we know, Donaldsonville around 500,000 tons CO2 per quarter. Is that calculation missing something? Or is Donaldsonville CO2 still ramping up?

Well, I think there's 2 points there. One, the revenue through the first half of the year is about $45 million associated with the 45Q, not the number that you suggested. The second part is this year, we do expect the overall CO2 to be lower throughout the Donaldsonville facility, primarily because of the turnarounds that took place there.

I mentioned earlier, Ammonia 6, which is effectively 2 ammonia plants with its production went through a turnaround. It's completed that turnaround now, but the turnaround began in June and went through July as well. So as a result of that, you're going to have lower CO2 that was available in order to sequester during that time frame.

But I think the numbers themselves, where show through in the other operating income line are correct, that $45 million. And the one thing I would mention is that we are not taking it to a Class VI as of right now. And so as that is at $60 per ton, we do believe, just to maybe follow up on that, that the Class VI approval will be happening later this year, and then that will move to the $85 a ton.

Economically, we're indifferent because our transfer today is at a 0 cost with Exxon, and it will move up to the contractual rate once the Class VI is in place.

The next question comes from Edlain Rodriguez of Mizuho.

Chris, in terms of the valuation, should we then expect to be more aggressive on the buyback going -- in the second half of the year because the pace seems to be a little slower in the first half? And more importantly, as you noted, late into the second quarter, we saw global urea prices decline. But what was most surprising to me was that in the U.S., prices not only a decline, but they were below last year's level. And that was despite all the supply disruption we had globally. Like how do we explain that?

So from the share repurchase -- I'll start with that, and then I'll let Bert touch on the urea pace. On the share repurchase, we have a significant amount of cash on our balance sheet. We have a program, as Andrew mentioned, is still open with plenty of room there, and we believe that we are trading underneath our intrinsic. So checking all those boxes, we expect to be into the market.

Now having said that, when I look at how we're trading off of what happens on a tweet or basically what Pakistan is saying or something coming out of Oman or whatever, we're trading in the last 6 weeks between $100 and $140.

So we're going to be opportunistic and grab more shares as we see some of that volatility exists. But we are committed to repurchasing shares. We have the cash flow to do it over and above what we're seeing from our strategic initiatives, and we'll continue to do that.

Yes. Regarding the Q2 price correction, you basically refer it back to where we were in the lows of Q1 and went up due to the hostilities in the Gulf and then reverted back down. A lot of that, I think, was trading off of rumors of peace and openness to the Gulf, and then we were at the tail end of our season. So a lot of trader liquidation taking place.

I don't think a lot of physical tons moved at that level, but then we've since corrected back up to the $400, $415 level where we are today. And I think that's where we'll play out. And then as we talked about in earlier calls, earlier questions, the tightness, I think, will be more pronounced as we get to the back half of the year.

The next question comes from David Symonds of BNP Paribas.

Just another one on longer-term outlook. So China is still adding capacity the rest of this decade. Is your view that they can start to export more than the 4 millions to 6 millions tons you expect this year in the next few years? Or do you think they add capacity to replace older plants at this stage?

I think yes and yes. I think they've proven their ability to build new plants, but the amazing thing to me about China is the growth in demand. Today, they're running at about -- we target them at an 82% to 83% operating rate where we run at 98% to 99%.

So you have to take their factor in terms of their capacities. They do have some older plants. There have been, over time, a replacement of urban plants or inefficient plants and into newer, more world-scale plants. And so -- but the growth in demand over the years where there are over 60 million, [indiscernible] million tons of consumption internally, the capability to export is there, but I think what the Chinese government has learned is exporting energy in the form of urea, but you're importing energy and LNG and coal, it's not a value-creating game.

And so what they have determined or what they, over the last several years, have communicated is the urea and the energy basis and the subsidies they've given it should be benefiting the Chinese farmer and the Chinese consumer, and that has happened.

So the domestic price in China is significantly lower than the global price. And over the last, I'd say, year or 2, they've controlled it through these export quotas and allowing certain times, levels, values to be exported which the global economy needs. So where they will be longer term. I think that where they are today in that 4 million to 6 million tons probably for this year and the next and will be determined later in the future.

But I don't think they have identified urea or ammonium sulfate or any of the fertilizer products as an area to focus the attention and again, keep that for the Chinese consumer and farmer.

Ladies and gentlemen, that is all the time we have for questions today. I would like to turn the call back to Martin Jarosick for closing remarks.

Thanks, everyone, for joining us this morning, and we look forward to seeing you at upcoming conferences.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

All right. Good morning, everyone. Welcome to our -- I don't know what the year is. We're in the third decade, I think, of our Global Farm to Market Conference and a Chemicals Conference, too. Very excited for the 2 days we're going to have here together. over 1,000 attendees this year, over 100 companies. It's always bigger and better and very excited about it. Same goal every year.

We really want this to be a forum to explore the key themes across the food value chain. We're going to have lots of fireside chats, presentations. As you know, this conference really spans the entire farms to the market, fertilizer chemicals, agribusiness, protein, food, beverage, distribution, food retail sectors, coconut water. We have it all.

I just want to really thank everybody at our conference here. We have a really great events coordination team here, our sales force. all the corporates that show up, all the investors, really appreciate everyone that shows up for us.

Just talk about a couple of keynotes we're going to have this year. Today, we're going to do a panel, myself and Andrew Strelzik with our -- BMO is a very large commercial ag lender. So we're going to have 4 senior leaders in our commercial ag lending team, and we're going to talk about what's going on across agriculture and farmers in the U.S., really boots on the ground, and we'll see what's going on there.

Tomorrow, we're going to have a keynote presentation from our new Chief Investment Strategist, Francois Trahan. He's going to focus on how investors can think about positioning portfolios for a potentially prolonged period of inflation and what the impact will be on the consumer.

Okay. So we're about 30 seconds early, so let me just drag for 30 seconds to catch up to the webcast. But we really hope that you guys have a great conference, and this really helps you figure out where we want to be invested in food and ag.

Okay. Let's kick off. So we're going to start off today with a fireside presentation with CF Industries, of course, a leading global nitrogen producer with a very large North American nitrogen base. Very happy to have Bert Frost, who's the EVP and Chief Commercial Officer of CF; and Martin Jarosick, who runs Investor Relations and Treasury. So I'll slip over here at 8:00.

Perfect. There you go. Right on time.

All right. So why don't maybe we could start off with a bit of a state of the union. A lot going on in the nitrogen markets. Why don't you maybe talk about what's going on nitrogen this year and what's different this year versus other years?

Each year is different, and it's amazing when we sit down and talk about it here at your conference or on our conference calls and how we reflect on the oscillations of this industry. And you have so many things happening. But if you go back like to 2008 and talk about the peak and trough of that era or 2020 and COVID or Russian-Ukraine invasion, and now we have the Iranian situation or the Middle Eastern situation.

But feathered underneath that are other, I would say, smaller issues in terms of gas issues in certain countries or areas or lack thereof, operational issues. We had a lot of old assets in certain places and inefficiencies. And so -- but the demand continues to grow. And it's an amazing story of continued 1% to 2% demand growth, but not necessarily additional capacity growth.

And so where we are today is a very interesting place, I think, for CF and for North America because all of a sudden, the shift has shifted towards who is the safe place, where is the place to produce this stuff? Who has low-cost gas, who has the rule of law? Who has an area where I can build on top of some of the best farmland in the world. And that's the United States, and that's just a poster for CF Industries.

And so we're very excited about what's -- how this is transpiring, not because of wars or conflicts. That's not something we're pleased with. But it's the structural advantage that we have built of CF Industries and where this industry is headed and the needs of the world, and we're well positioned to satisfy many -- much of those needs.

I mean it's a weird year, right? Like you could say it's like 2022, but it's not exactly because a different conflict, a different situation, the timing of both conflicts start around February, end of February. But this market, we've seen a surge in nitrogen prices just after kind of, I guess, the key stock-up period in the distribution for nitrogen in North America. How is the market playing out right now?

Well, actually, I want to -- I think your first point is very interesting in terms of how this is -- is this similar to 2022 or not? And again, back to these other, I'd say, excursions out of the mean from '08 to '20 to 2022 to now, most of those were demand driven. And so in 2007, 2008, there was, "Oh my God, can I get supply? I need to pull forward. " Well, the world pulled forward a lot of demand and they had a collapse. Same with 2022.

The reality was the product came out of Russia that was being exported, maybe a little bit of a delay, but the world was afraid of not being able to have supply. So again, demand was pulled forward. Today, there are supply limitations. And it's not just what's happening in the Middle East with millions of tons that are not going to be produced and not going to make it out, but the nationalistic moves that have taken place from other places to say, well, wait a second, I'm going to secure my supply. I'm not going to allow exports, Russia, China, other places or needing gas. And so this is a supply, a unique supply limited market where will you get supply? And how long does it -- and what price will you pay for this product.

And so when we look at the forward and you're talking about spring and positioning, when we look at the North American market, our estimates are 80%, 85% of at least nitrogen fertilizer was in place for spring and priced at the Q3, Q4, Q1 average at very attractive levels for the American and Canadian farmer. And so we were pleased with how we have worked with our channel partners, the retailers, the wholesalers and we don't sell to farmers, but that group that serves the farmer to make sure that the product is where it's supposed to be, when it's needed for planting and that's for nitrogen-free folks out there. That's ammonia first, which goes down in the fall and then the spring, UAN, urea and those products.

So we feel very good about that supply, and we will then pivot to the global market once the U.S. and Canada are satisfied and begin exporting.

I forgot to mention that today, right now and for the rest of 2 days, you want to submit questions for these sessions on the app and down the conference app. People have to go in the lobby and then we have the iPad here to get your questions.

I think we're seeing bifurcated markets right now, right? We've seen U.S. I don't remember it yesterday, I don't think I was reading yesterday, but NOLA is around $600, going to be sub $600 a short ton. Offshore prices are closer to be high $700, $800 a metric ton. So there's some arbitrage or there's some opportunities here, bifurcated markets. Talk about that.

You're correct. And it's an interesting phenomenon in that we are the lowest valued market today in the world at that $600 a short ton where Egypt, Algeria, Nigeria, those that have available tons to export are closer to $800. Part of that's a reflection of, again, the North American market is satisfied. We've imported sufficient volumes. CF has produced and kept those tons in market. And we had a drop in corn acres from 98 million. We were estimating 95 million acres, so a little bit less applied.

We had a very good fall application in spring of ammonia. So when you add up the nitrogen needs, I think there has been sufficient where now the game is buying NOLA tons on a barge and reexporting them. So you're going to see vessels that have brought tons in, put on a barge, put on a vessel and sent out because of that price arbitrage. That will eventually correct. But kind of year in, year out, NOLA is one of the lowest-priced markets in the world, and there's a reason for that.

It's an easy place for, let's just say, Russia, Egypt, Algeria or Nigeria, you're long a vessel, you can send it to NOLA and discharge into the vessel and store it that way, where in Brazil, you can't birth until you have it all sold and paper is nationalized. Most markets operate that way.

So I don't get anybody in trouble. But thinking about the export opportunities and some arbitrage or some better netbacks. I mean the U.S. government, new administration has been very vocal the last bunch of weeks and months with Rollins, other players in the government about fertilizer shortage. I don't think actually Hormuz is closed, but just talking about pricing and things like that. Is there a concern that the government -- if this conflict continues, is there a concern that U.S. could put a new policy like, no, you can't export nitrogen. No, you can't do things like that. Like other countries we've seen. Is that a crazy thought?

Does crazy drive crazy? I don't know. I think you have to take a step back and say, is that something that's in the interest of the government? Is that something that's in the interest of the -- in terms of policy? And is that something that makes long-term and short-term sense? And I would say no, because it's a global market. Things -- products move all over the world. We, at CF, we do export at times, but it's, I would say, a de minimis part of our portfolio. We're heavily focused on North America.

We have an industrial base, and ag base and then that incremental volume that's exported generally during the off-season because you have a bell curve of demand. So you're building inventory until about March, April, and then you're dumping inventory where you're applying that product to the ground.

And so the goal of a retail, our customers is to be at empty by the end of June. That's a good goal because it's a reset. And then we supply those customers. We announced our -- it's called our fill programs where we're filling the inventory. And so during that natural time of declining demand, we're still producing 24/7, 365. We're always going. And so we would -- we have inventory space for probably 2 months, we at CF. And so there is a natural time because of our -- where our assets are located that we can load vessels very efficiently, and that's good for the market because it takes 2 to play in this game. We produce, we want to sell, but we need our customers who want to buy.

And generally, they don't want to commit their capital, their working capital nor their risk capital to fill their inventory maybe in June, July, they prefer to do that in August through December. So it's -- this is a natural oscillating market that there is a need to export at certain times.

So I think it's fair like we're going to -- we're getting into part of the where maybe some of the pressure comes off in the Northern Hemisphere, not so much the Southern Hemisphere, Northern Hemisphere. It's early, but do you have any views on how fill might go versus other prior years?

I always have views. You guys want to hear.

Yes.

No, we believe that this year, fill will do very well because of that earlier comment on there's going to be almost no inventory at the retail level. The focus from our communication and discussions with our customers is we're going to be empty. We want to be empty, and then we want to reassess where the market is, whether that's the corn market or wheat or whatever crops are being supplied, understand the credit needs and position of their customer, the farmer.

And then we like to work synergistically with our channel partners and price based on the world market, but also be attractive that they are willing to buy and commit their capital to this process. So I expect to have a very good fill program.

What we did last year was interesting. We communicated a month before and said to the customer base, we're going to start fill on this date in August, and we will call you on that day and offer you a price and then get your tons, your needs organized with your customers, and it went very efficiently. I anticipate doing the same thing.

What day -- do you know what day in your head right now -- do you think you're going to do that?

I would say sometime in early August.

Okay. So early July, starting talking people about, you have a month.

Yes, we got that, and we have the Southwest Fertilizer Conference where we meet and talk about all things fertilizer.

Okay. And do you think we'll see any change in sort of retail purchasing behavior where maybe they don't want to empty the bins at the end of the season. Maybe they're worried about supply? Or do you think it will be similar behavior?

No, I think they're going to empty the bins. It's -- and this is -- I'm speaking only of nitrogen. So you have nitrogen, phosphate, potash, some sulfur products that -- and then the crop protection and seeds. And so I would anticipate all that is focused on liquidation and repositioning.

So I mean we've known in quotes for 9 months, 10 months that we're going to see an acre reduction -- or acre shift from corn to soy in 2026. And we got our first USDA estimates end of March. And then a lot of people in the industry think well, there will be a more -- a wider shift like more acre reduction, more soybean acres. Do you have a view if the USDA has got it right?

Our view would be whether they're right or wrong, I don't want to comment, but our view is 95% or maybe even higher than that. And there's a reason. The one product you can make, if you're a farmer that you have a yield impact is corn. And so if you're a 200 bushel per acre producer and you are -- you've prepared your land, you've picked your seed optimization and you've got good soil moisture, which all is in place today.

If you fertilize and specific to nitrogen fertilizer, the yield uplift opportunity, and that's the revenue opportunity is there. And so in this kind of market where you're at $5 corn today, we're at $5.03 for December, the corn-to-bean ratio favors corn. But again, if you can get 10, 5 additional bushels per acre, which is highly possible, when you're looking out to the world today, what is going to happen to the supply, the stocks-to-use ratio of corn, you should ask the Bunge and ADM guys this.

But our perspective is that you've got an opportunity because of what's going on in the world and the lack of nitrogen and the lack of movement. And so second crop corn is something place where you might see an impact, but that will be in 2027. And so if you're a farmer here, you shoot for yield, you've got on-farm storage, you hold your crop in the fall of 2026, and we expect to see an increasing value for that output, and that's fantastic for the American farmer.

So I actually spent some time Monday and yesterday with AGCO, right, the big equipment manufacturer in Toronto and Montreal. And the view that they're trying to push is 2027 should be bullish and to get people buying tractors again because sort of some of the things you're touching on, which is that, okay, farmers might apply. Well, their view is farmers are going to apply less nitrogen per acre, yields will go down. This will -- crop prices to go up and so everyone is now going to buy another new tractor next year because they have more money.

Now I don't know if I necessarily subscribe to that because I think sophisticated farmers, if they're going to apply corn, they're going to do their 200 pounds, whatever of nitrogen. And if they don't want to do that, they'll just apply -- they'll plant some other crop that doesn't use nitrogen. Like do you have any views on yields, application rates, what it means for next year?

Well, again, my view on yield is you're going to apply nitrogen for yield. I do think that phosphate is expensive, and so that goes to soybeans. Potash at 350 is probably reasonable.

Cheap.

If I were Canadian, I'd say that. But I do think that around the world, these are the calculations that farmers around the world are making. But on nitrogen, and this goes, again, back to yields is we're short 5 million tons at a minimum coming out of the Gulf. That's not going to be replaced.

Every day that this goes on, the untanglement of the Strait, you got 1,000, 1,500 ships on the West side. You've got ships on the entrance side that need to come in. That's like -- it's a little highway. So you've got this movement of ships that has to -- and what ships go first? Do petroleum goes first? Does refined fuels go second?

No, [indiscernible] sulfur.

So we're short sulfur. I was just on the phone with -- last night, Darla and I were flying in. I was on the phone with a guy I deal with in China, talking about some of the needs and movements and the impacts sulfur on phosphate in China.

We are going to be short phosphate in the world. And -- but we're also short nitrogen. So yields are going to be hit in some places. And who's going to be impacted are those that either can't afford it or can't get it. And so again, back to this in a needs-based world where a majority of -- at least in the United States, corn goes to feed and then to ethanol or corn refining, we have consistent demand for that output for the farmer.

So again, back to where I think the impact is, is rising prices, which we hope leads to rising incomes for the farmer.

Okay. I got a question from someone on the app. Thank you. So you mentioned you were liquidating inventories to reassess. Would that keep prices high and availability tight? How are you managing credit terms to customers?

Credit terms?

So for credit terms, we keep them pretty tight. You can see from our financials, we don't have bad debt expense. We don't have write-offs. So we manage our credit very tightly. And as prices go up, it generally becomes tighter. I would say we manage it very tightly.

We have negative working capital, right? And so it's -- we -- a lot of our product is prepaid. So I think our position, but again, on the pricing issue, it's a global market. So it's -- as much as we would -- I think people like to say that, that's controlled by industry, it's not. And this is a dispersed industry. We're the world's largest producer of ammonia, and we're 5% of that 200 million tons of ammonia is consumed. 200 million tons of urea, we're 5 million of that tonnage.

And so as products move or demanded and during this crisis, I had phone calls from many different places around the world. And it wasn't a question of price. I need a vessel of this product or that product. Can you load it? No, we can't because we're committed to the North American market. When can you? I'll pay this price. And so it's -- that's the kind of drivers that are taking place right now.

So a silly question, but we all get asked every day, the war ends tomorrow, although didn't end in 2 weeks. War ends tomorrow, and things unwind take some time, whatever, some reasonable question, the war ends tomorrow, things start to unwind. How do you see the market sort of normalizing or developing in that ridiculous preposterous impossible to understand scenario?

Yes. I got an answer. Yes, yes.

No, you get my guess.

I do. And I remember on February 28 and March 1, when I got the call -- generally, I wake up and I look at the gas market, I look at the corn market, and it's kind of annoying to my wife. But -- and then I look at the news, what's happening today? And when the hostilities commenced, it was pull pricing.

We -- and let's sit down and assess that then the week after the -- Monday, Tuesday, Wednesday after that was calling customers, what do you need? Where are you at? This is -- what does this mean? -- thinking that was a 2-week issue. Okay, maybe it's a 3-week issue. Okay, maybe it's a month issue.

Well, now it's a 2.5-month issue. And we can end hostilities and open the Strait. Again, I would say it's 2 months just to -- and I don't know if we get back. We don't know -- we know that in terms of operations that are not operating today are nitrogen plants. And that's Bahrain, Qatar, Iran. We don't know what's been, bomb. We don't know what LNG is available. I mean you got to think about -- it's not just urea coming out of the Gulf, it's LNG that goes to India, Bangladesh, Pakistan.

Bangladesh has shut down their 4 plants because they don't have energy. India is operating their plants, they're 60% driven or their 60% of their gas needs are imported LNG. They're operating their nitrogen plants because of that lack of product at 70%. That's just adding more millions of tons of needs. We estimate that India last year imported 10 million tons of urea. We thought this year would be like maybe 7 million, 8 million, 9 million tons. We weren't sure. They're going to be 10 million to 13 million tons.

So you're short, it's not available, but these countries that produce aren't producing, they need more. So the import demand goes up. And these people need -- we need these -- the Middle Eastern producers to be producing again. And then there's China come in. So there's so many questions about supply, where it's going to come from back to nationalistic moves and attitudes and thinking that when you look at the forward market, I don't think we untangle this, and I'm just going to project we're almost in June now. till August.

And I think what's interesting is -- and Martin, you probably hear this, like if we were going back 6 months, 12 months, 24 months, I think a very simplistic investor -- a very simplistic view by a lot of the buy side has been CF is a proxy stock to TTF or Henry Hub gas price. Like if you just have to explain someone in 5 seconds, right? And that was what people were just fixated on. And the last few months have definitely changed the story a bit, right, because it's much more complicated. I don't know if you have any views on what I'm getting at, but now it's not just about gas price, it's about so many other things.

Well, I think that's right. I think the world has changed, and we'll probably have a new normal that's different from where we were in the past and in the not too distant past, the world is running pretty smoothly in our industry and with not a lot of friction and barriers to overcome.

And now you have a a very complicated global situation. It's affecting shipments. It's changing the risk profile of assets that we previously considered first quartile just based on the gas price alone. And now you have to factor in their ability to actually ship that product out.

Yes I think how the market valued nitrogen assets and again, where you're going to build new assets, that has a risk premium that wasn't, I don't think, incorporated. So if you're looking at a cost of capital of X or a return of Y, that needs to -- that calculus needs to change. And again, that's where CF is we're located in the best market with the best gas supply, the best ability to distribute the product, it all works very well.

Speaking of complicated, CBAM has been around now for fertilizer 4.5 months. There's a lot of political discussion about all the time. It seems like it's pretty much in place. Any views on CBAM has changed in the market?

CBAM, it's a difficult -- because you don't know until the end of the year what your actual cost is going to be, my European friends in our industry, it's a struggle to one, you've got older assets, you don't have gas or the price of gas is at $16. We're paying $2.60. It's a much different calculus.

Where I go with that, though, is what -- again, how CF Industries is prepared and how we've thoughtfully worked through this with decarbonizing our footprint. So we've invested hundreds of millions of dollars in decarbonizing first at Donaldsonville, where we now have up to close to 2 million tons of decarbonized product.

We're building the world-scale Blue Point project that will come on in 2029. We will be 95% decarbonized, and we have space for 4 more ammonia plants with our partners or independently. Our partners are JERA and Mitsui, which we're really pleased because they're taking some of that offtake to new applications in Japan for co-firing.

And so CBAM, there's 2 different schools of thought. What the United States did or our government did was give the cart. So the 45 system of decarbonizing, we leaned into that, and we're partnering with Exxon for our decarbonization projects and as well as -- who's the other one? I can't remember. But -- so we are on that path.

[ Venanda ].

I know she's passed. So we are on that path of decarbonizing, one, because we're getting paid for it, but two, we believe it's the right thing to do. And so we're looking to supply some of the nitrogen needs to Europe and meet those CBAM goals.

Okay. Let's talk about that. Since a question just came in as well. You've been running some low-carbon ammonia out of diesel now since third quarter last year, third quarter, fourth quarter, third quarter. How is demand -- how is that going? What are customers saying? And how do you think demand is evolving for sustainable and low-carbon nitrogen?

It's evolving in multi different -- many facets. And so what we've been doing over the years in terms of this journey has been going on for almost 5 years of decarbonization. And so what have we done? We've gone out and worked with and talked to the retail sector, specifically the co-ops, the Land O’Lakes, CHS, Growmark. That's the connection with the farmer and working with them and one, explaining this is what's coming. This is what the uplift is.

And then we've had project -- pilot projects with pilot or POET, the ethanol company, where we're supplying -- and this is where it's called the corn value chain, and we're really excited about this. And so it's -- because we play in -- you have the -- we're the fertilizer supplier that goes to the retailer, that goes to the farmer whose output goes to the processor. But that corn value chain, and that processor could be a feed for cattle and poultry and pork, but the processor we're looking at now is the industrial processor.

And so low carbon fertilizer in that corn value chain can lower the carb score for ethanol by about 10%. So as these ethanol plants decarbonize themselves, you've got a full decarbonized value chain that we think adds what we believe it adds we're getting paid for that decarbonization and then what the value of that -- in that corn value chain that the farmer will benefit. The retailer has consistent movement and the processor as well. But so you've seen our announcements with Pepsi on low-carbon initiative with UAN. And then we have contracts for low-carbon products into Europe to industrials as well as farm or fertilizer companies.

You like Intel inside, like CF in size on the Pepsi bottle?

Everybody is going to buy that. No.

That's good for you. And you guys have talked about the premium pricing, you'd hope to get the blue -- I guess, we call it the blue premium. I think you talked about $25 to $50 a ton on blue ammonia diesel. And then as you get to Blue Point in a few years, maybe more than that. Is that right?

So where we are today is we are getting a premium, and it's on the lower side of that, that $20 to $30. And we're being very prescriptive to our customers and to the market of this is a new product and demand is going to build.

Demand is going to build because of CBAM anyway. So as these penalties increase and we're able to produce under that, there's a value that's associated with that. There's also the CPG companies and their own scope emissions. And what we're finding is a lot of them want to partner with us to lower those emissions themselves or those that Scope 3.

And so all of the above, but what we're investing for now is we're being paid for by the 45 system, and we see that market pricing being associated and increasing over time.

And Blue Point, things are on pace now. You kept your CapEx trajectory on earnings and release last week. Anything going on there? Talk about any concerns about inflation risk?

For me, I don't -- in terms of the inflation risk, we're out -- we've already partnered with and we know where we're going to be producing these modules. We're going to be bringing them in. So we're in the -- in terms of what we're doing with groundwork and pilings and building our -- the bridge that's going to go over the highway. And so it's infrastructure work today. We have a great team that's focused on that. And so the inflation risk in terms of the modules, I don't think that's a great risk to us.

So again, back to the U.S. government, which has had a little bit of a chatty these days about fertilizer supply and building more capacity in the states. You're building a new plant. It wasn't designed really to be sold to farmers. It could be, right? I mean in the end if some of the low carbon opportunities weren't as attractive.

But I've already heard questions from people saying, with all the windfall fast, are you going to get what's going on in the war, could you guys build more nitro capacity? Could you build a Blue Point 2? We're only in the early days of Blue Point 1. What do you think about that?

Well, I think we have demonstrated in terms of we're the one company that has added capacity. Over the last 15 years, we spent -- well, we purchased Terra in 2010, so let's go back 16 years and then really revamped that system and invested hundreds of millions of dollars in bringing that capacity -- increasing that capacity through higher throughputs.

Then in 2012, we announced the building of Donaldsonville and Port Neal. So that was $5.2 billion for 2 world-scale plants, one in Louisiana, one in Iowa. Then we purchased Waggaman a few years -- 2 years ago maybe, which was an ammonia plant run by Dyno Nobel, which was running about 800,000 tons a year. We took that to over 900,000.

So when we have purchased, whether it's Terra or our own assets, we run them at 100 over nameplate. The new plants are running at 110% of capacity, of static capacity. So we're the company that is skilled. We have a great engineering team. We have, I think, a very focused staying within the things we're capable of doing and improving on. And we've demonstrated that. And that's our communication to our government, the U.S. government at least is we are committed to growing and investing in our United States.

I'd say North America, we have 2 plants in Canada. Our North American asset base, but that includes plants and distribution capabilities. We have 20-plus ammonia terminals in the United States as well as UAN terminals. We have our own barges that move products -- and we have 5,000 railcars. So when you integrate all that together, we are about serving the American or the North American market, and we could invest. We look at projects all the time.

And I think you're right, we're throwing off a lot of free cash. We're the free cash company. And that will be used for CapEx, for buybacks, for dividends and for new investments.

So I guess in the interim, I mean, as you're generating this extra free cash flow right now than you're expecting 3 months ago, I mean, I imagine you'd be going to the buyback. Is that fair? Or would you be trying to build a bit of cash balance for some dry powder?

If you look at our history, we've done both, right? We've built cash in times when we're generating very large amounts of free cash. And then -- but if you look over like last year, we bought back 10% of the outstanding shares. A year before that, we bought back 10% of the outstanding shares. And so we have a consistent track record of redeploying that capital either into our own network through accretive projects or through share repurchases.

I mean it's a bit -- now this year is a bit different. You got some more earnings, but you have a bigger CapEx profile because Blue Point starting with your partners are spending money on it. So does that change the calculus at all sort of both sides of the equation are moved up cost and inflow?

Well, we like to maintain a high degree of financial flexibility. So you've seen our balance sheet has a fair amount of cash on it. That enables us to do a lot of things that that are opportunistic, whether it's buying Waggaman where we had cash on the balance sheet, we just wrote a check for that entire plant or to have the dry powder to execute the share repurchase program.

I think something we've learned also is we've been through the tough times of 2016 when EBITDA was low and debt was high. We now have a wonderful balance sheet. We're well positioned and things happen in this industry and opportunities come, it's better to have cash on hand or opportunities with that and a good balance sheet to execute.

That's a good part -- like I mean, I lived through the times when you guys are like, "Oh CF going bankrupt. " Like I remember those months, right? That was just after the OCI deal kind of broke and you had a bit of interesting debt on the balance sheet. What was your sort of biggest takeaways from that? And what takeaways have been from like the peak times?

Cash matters.

Yes.

And having -- in terms of how Martin manages our treasury book and the people we work with, a good balance sheet is something always to work for. We're a commodity business. And so the oscillations of the products that we make against the products our products make against the products that our products make and that's just the price of corn. If corn is $4, a farmer cannot afford it. If corn is $7, he's happy. He's going to go to AGCO and buy that new tractor.

And so -- but it's the same thing as cattle. If your protein price is high, then that corn -- that feed value to your -- to the beef, pork or poultry is high. So that's another revenue source. And so in our industry, the oscillations of gas, the oscillations of price, the oscillations of the output can be punishing, and we learned that in 2016, and we don't want to live that.

So you're a nitrogen company, right? That's what you do. That's any ideas to want to get into other commodities, a little more downstream, I don't know, any ideas?

Nitrogen is pretty awesome right now. So I'm pretty happy to be in nitrogen. We've looked at a lot of different things over the years. We -- you talked about OCI. We almost partnered with them. We almost partnered with Yara. We did purchase Terra. We used to be in phosphate. We sold the phosphate business to Mosaic in 2014.

And I think that was a very elegant solution for CF. It was something that we had an asset that they had the land surrounding our land. So our phosphate resources were limited. This is a good transaction for Mosaic.

And then we had an ammonia supply contract. We make the ammonia. We did an ammonia supply contract with them. I think that demonstrates that they do what they do or different industries, but we're very satisfied being in the nitrogen space.

And then are you -- I mean, are you a North American nitrogen producer? I know you've got some assets in Trinidad or JV. But I mean, are you a North American nitrogen producer? Is that -- would you consider branching out? I mean you have in the past like you are and OCI some deals, but would you branch out?

So we have our U.K. asset that we produce ammonium nitrate there and we import ammonia. We have our Trinidadian asset that's a joint venture with Coke.

Like in U.K. it's small, smallish, right?

And we do some. We have the 2 plants in Canada.

[indiscernible].

That's right. So again, a lot of things come our way. So we look at things and we talk about things. I'm not going to say -- I would say, never say never. But we do enjoy the benefits of being a North American producer are substantial, and we do like our asset base.

What would it take for you to get conviction to look at another -- to look at another like greenfield or is there a greenfield opportunity? Is there a brownfield you have sitting in your portfolio that would make some sense? And what would you need to see to conviction to go down that road?

Yes. I think we're always -- I want to be thoughtful that we're always looking at things towards the future. And DEF is a very good example of that, diesel exhaust fluid. It's urea liquor. So urea liquor goes into make urea, which is a dry product. Urea liquor goes into make UAN, which is urea, ammonium nitrate. But it's substream now where we're the largest producer, I think, in the world, at least for sure in North America, and that diesel exhaust fluid as Class 8 trucks, power units have been dosing from, let's say, starting in 2010 as those new engines came in and dosing rates went from 2% to 4% and increasing up.

That has been a very good business for us, but it's a good example of identifying something early, building capacity to need it, and we would look at other opportunities in the same way.

And are there any other -- like are there any other Waggaman out there like plants that are available or could be available to name them that you think you could maybe run a bit better on your radar?

I don't have anything specific to announce or to talk about.

But just things -- I'm not asking to announce a transaction right now live in you.

I think -- but our skill set is running these plants very well. And our safety record, I do want to give a shout out to our team, our engineering and management and production teams. Our safety record is the best in the industry. And we focus on that. And so we believe safe operations lead to better operations. And our do-it-right culture is something that if we were to take on another asset, we would embed that with that performance and as well as the investments to take an asset to max capacity.

Start to wrap this up, what is kind of your base case how -- like going back to we were talking me half an hour ago, but what is sort of your base case and how -- and you just reviewed, how the next 6 months are going to play out and how CF positioned for that to maximize it for CF?

So we're in, let's say, June 1. So the first half is over. We've had a very good first half. We've supplied the North American market. We've kept our customers supplied. They're happy. They're ending up with a good performance. We got Darren from the ARA and can speak for the retailers, but we believe we've done a very good job of partnering with our retail partners. Now it shifts to the farmer and yields.

We're in an El Nino year. So the risk on climate and a severe El Nino with what that means for drought and for South America as well, we have to watch. But this goes to, I think, with the lack of nutrients that are available in the world, I think you're going to see underperformance in other areas of the world.

That's going to move to lack of yield, price increases for those carbohydrate products, corn, wheat, cotton, soybeans -- corn, wheat, cotton, rice, sugar. So I would think that there'll be higher values to the farmer at the tail end of the year. And I think North America is very, very well positioned for that eventuality with serving the world with the food that is needed.

Gentlemen, thank you very much.

Thank you.

Good day, ladies and gentlemen, and welcome to CF Industries' First Quarter of 2026. [Operator Instructions] I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick, with CF Investor Relations, sir. Sir, please proceed.

Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Chris Bohn, President and CEO; Bert Frost, Executive Vice President and Chief Commercial Officer; and Rich Hoker, Vice President, Interim CFO and Chief Accounting Officer. CF Industries reported its results for the first quarter of 2026 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session.

Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website. Also, you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted.

Now let me introduce Chris Bohn.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first quarter of 2026, in which we generated adjusted EBITDA of $983 million. These results reflect a continued focus on safety, operational excellence and disciplined execution by our team.

Starting with safety. Our trailing 12-month recordable incident rate at the end of the quarter was 0.16 incidents per 200,000 hours worked. This is a direct result of how our team lives our do-it-right culture every day. Operationally, we had another strong quarter running available ammonia capacity at nearly 100%. And our commercial, logistics and distribution teams ensured we met customers' requirements leading into the North American spring application season. Our performance in the quarter also reflected the tight global nitrogen supply demand balance that carried into 2026.

Late in the quarter, the conflict with Iran severely tightened the global nitrogen market, a dynamic we expect to continue for some time. Lost production cannot be recovered. Damaged nitrogen and upstream feedstock capacity must be restored and global trade flows will require time to recalibrate.

In addition, the Russia-Ukraine war continues to disrupt nitrogen production at Russian facilities. From a macro perspective, we believe recent geopolitical disruptions are driving a fundamental shift in our global industry's risk-return framework. First quartile producers have historically been defined by low natural gas costs alone. Recent supply disruptions from the Middle East and Russia show that low-cost feedstock is no longer enough. As a result, we see a clear divide within the first quartile. North America, where we have intentionally invested billions of dollars over decades to build the leading nitrogen manufacturing and distribution network, is low-cost and low-risk, representing premium-grade assets.

This is in stark contrast to the approximately 50% of first quartile capacity that is fragile and exposed with low natural gas costs that are offset by extreme geopolitical exposure. We believe the geopolitical risk premium that fragile and exposed producers face will be an enduring structural headwind, increasing the cost of capital and adding cost and uncertainty for moving product to customers.

In our view, this has strengthened mid-cycle economics across the nitrogen industry with a higher urea price now required to incentivize investment in new capacity in the Middle East to offset geopolitical risk or to build in higher-capital-cost, low-risk regions. With that, I'll turn it over to Bert to discuss the global nitrogen market environment. Bert?

Thanks, Chris. As we have discussed in our last several earnings calls, the global nitrogen supply demand balance has been structurally tight for more than a year. Global nitrogen demand has been robust. At the same time, supply has been constrained by geopolitical conflicts, elevated natural gas prices in Europe, export restrictions and declining natural gas availability in several key producing regions.

The conflict with Iran and the closure of the Strait of Hormuz introduced a significant supply shock into this already tight market. Exports of urea and ammonia from the region have been severely limited, removing a meaningful portion of low-cost supply during peak nitrogen season.

Additionally, producers that use imported LNG for nitrogen production have curtailed or shut down facilities due to fuel availability issues. These dynamics have substantially raised the global clearing price to meet nitrogen demand. During this period, our focus has been on our long-standing North American customer base, which includes retailers, wholesalers and cooperatives. We've been moving product to our customers for the spring 2026 planting season since July of 2025. Based on what we see today, inventory for both pre-plant and post-plant applications appears well covered. We continue to work with our customers to meet the last layers of demand for this season.

This includes leveraging our manufacturing, logistics and distribution capabilities to increase nitrogen availability this spring. For example, we temporarily delayed a turnaround at Donaldsonville, allowing us to produce about 100,000 additional tons of urea for the season. We also repurposed Yazoo City Rail assets to move urea from Donaldsonville into the Corn Belt and to ship ammonia from Medicine Hat, Canada into our U.S. distribution network.

We continue to evaluate all our operations and distribution channels to ensure product availability through the end of the season. While CF Industries has flexibility to support our customers globally, there are not many options to overcome a supply disruption of this magnitude. Indeed, we are seeing several nations restrict exports further removing supply from global trade flows. China remains an ensuring -- remains focused on ensuring their domestic agricultural industry is well supplied with exports of nitrogen largely restricted. While we expect controlled and limited urea exports to begin later in the second quarter, volumes are unlikely to fully offset lost Middle Eastern supply.

Russia had also implemented export restrictions to prioritize their domestic agriculture. And this week, Egypt moved to apply a $90 per metric ton duty on nitrogen fertilizer exports. With global nitrogen supply constraints, there will be intense competition for available supply.

We expect India, which entered 2026 with low inventories, to lead the way. Given urea volumes not delivered under a previous tender, and lower-than-expected domestic urea production, we believe India's urea imports requirements will be substantial in 2026, potentially rising to 10 million to 12 million metric tons. This would be approximately 10% to 30% higher than 2025 and nearly double their 2024 imports.

With this environment, we expect to see unmet demand in certain parts of the world. We believe Latin America, Africa and Southeast Asia are areas where we'll see lower fertilizer consumption. As application volume per acre decreases globally, yields will decline, which we expect to result in higher prices for corn, wheat, rice, cotton and sugar. Looking ahead, even with some incremental supply later in the year, we expect global nitrogen markets to remain tight through 2026 and into 2027. We also expect further structural tightening through the end of the decade as new nitrogen capacity under construction today falls short of the traditional nitrogen demand growth rate. With that, let me turn it over to Rich.

Thanks, Bert, and good morning, everyone. For the first quarter of 2026, the company reported net earnings attributable to common stockholders of approximately $615 million or $3.98 per diluted share. EBITDA was approximately $1 billion, and adjusted EBITDA was $983 million. These results reflect a gain of approximately $170 million from a previously disclosed litigation settlement with Orica and Nelson Brothers. We recorded the gain in the first quarter and received the proceeds in April. As a result, it will be reflected in our cash flow statement next quarter. On a trailing 12-month, net cash from operations was approximately $2.7 billion. And free cash flow was approximately $1.65 billion. We continue to efficiently convert EBITDA to free cash flow at industry-leading margins, positioning the company well to continue to invest in accretive growth and return capital to shareholders.

Our capital expenditure projection for 2026 remains approximately $1.3 billion on a consolidated basis. CF Industries' portion of this is approximately $950 million, which includes $550 million for sustaining CapEx for our existing network plus approximately $400 million relating to both the Blue Point joint venture and the Blue Point common infrastructure we're building at the site. Construction on the Blue Point ammonia plant is expected to commence this year once applicable permits have been received.

We continue to be pleased by the progress that has been made on this high-return project that will add over 1.5 million tons of gross ammonia capacity in the United States when it begins operation late in 2029. Finally, we repurchased approximately 150,000 shares of our common stock for $15 million in the first quarter. We expect to continue to be opportunistic and disciplined as we execute the remainder of our current share repurchase program. With that, Chris will provide some closing remarks before we open the call to Q&A.

Thanks, Rich. I want to thank CF Industries' employees for their commitment and dedication during the first quarter of 2026. They worked safely, delivered outstanding operational performance and stayed closely engaged with our customers as industry dynamics evolve rapidly. CF Industries is well positioned for the near, medium and long term. Our North American footprint, operational excellence and consistent industry-leading free cash flow conversion set us apart. Alongside our structural and operational advantages, we are realizing decarbonization opportunities today that provide incremental free cash flow. And our Blue Point complex and additional opportunities within our existing network provide a robust growth platform for the future.

With our capital allocation strategy, to grow our production base, enhance network margins and return capital to shareholders, we expect to continue to create substantial value for long-term shareholders. As a result, the intrinsic value of CF's assets, durable advantages and growth initiatives has increased. That value proposition is becoming even more relevant against the current global backdrop. The conflict with Iran represents the third major supply and demand shock to the global nitrogen market in the last 6 years and has exposed the fragile nature of the global nitrogen supply chain. This fragility is not limited to production assets.

It includes feedstock assets such as LNG and logistical assets such as shipping that are essential to the way our global industry operates. In an environment of frequent geopolitical disruptions, we see distinct value in the true stability of our hard-to-replicate network and superior assets, strengthening mid-cycle expectations and the predictability of the substantial free cash flow we generate. As we continue to execute our strategy, we believe this CF premium will become increasingly evident. With that, operator, we'll open the call to questions.

[Operator Instructions] The first question comes from Kristen Owen with Oppenheimer.

I actually wanted to start out with this sort of CF premium idea and sort of phrase a longer-term position here where if we're in the scenario of higher-for-longer sustained energy arbitrage advantage in the U.S., like how are you thinking about the calculus now on your Blue Point economics as you think about the export opportunity and just given the excess cash generation, how that all factors together into those unit economics for that new capacity?

Yes. Thanks, Kristen. Related to really the structural changes that are happening with the longer, I would say, natural gas differential that you're talking about. I think all it does for our Blue Point project is really increase the return profile that we have put in place. We're always very disciplined in our investment decisions and almost to the point of being conservative. But I think what we're seeing here, as we talked about, is a structural shift in how the world views low cost. And low cost isn't just low-cost feedstock like what we have, but it's also breaking out what other costs are involved in that from transport costs to even operational efficiency. So what we see in place there is just an increased return profile and really, I think, if anything, the conflict is shedding a light on the strength of our strategy, being very intentional where we build and expand our assets here in North America that allow us not only low-cost inputs but allow us to be able to move product throughout the world, whether it be export or up into the Midwest where it's required.

And I think regarding the premium, we're seeing that today in the market as we have brought on our low-carbon product ammonia and upgraded products in Donaldsonville and then the future Blue Point, which will be 95% or more decarbonized, we're seeding the market today, building those relationships and putting in place those contracts, all with the premium on the current market. And so we're seeing very significant uptake and positive receptivity to our program.

The next question comes from Mike Sison with Wells Fargo.

In terms of the -- you mentioned that in '27, you felt supply-demand would remain pretty tight for nitrogen. And given -- when you think about the conflict here and the damage that is occurring in the Middle East, I mean how tight do you think it will be? Do you think nitrogen and the prevailing products will stay above the average? And just kind of a feel for kind of the longevity of this elevated pricing.

Yes. Thanks, Mike. I'll start and then Bert will probably add some additional color related to it. But I think what we will see here is a longer tail. Even if we are able to see the Strait open up and begin to see product flow move through there.

As you mentioned, there's a lot of damaged assets that will have to be assessed. The vessel movement itself is going to take a significant amount of time, normal transport would be 30 to 40 days. But then you can add something to that and to get those assets back. And even the quality of the product in those particular vessels, I think, is going to be a question.

And then these assets that have been shut down during this part that haven't been damaged to bring those back up is going to take some time as well. The thing we're seeing is probably some longer lasting where there will be some increased costs related to inflation, risk premiums, even vessel insurance as we go forward. And that's really the underlying thesis where what we've been saying over the years has only been strengthened more where we're seeing the mid-cycle of urea costs increase during that time frame. I'll let Bert talk about maybe the 2027 S&D balance side of it.

I think probably an informal comparison as the world has been operating like a Ferrari, where it's been operating on all cylinders, just-in-time inventory delivered, it's worked. Supply has moved efficiently and effectively to all parts of the world and bid a common number for a global market. All that is disrupted. You've got 1,000 to 1,500 vessels stuck behind the Strait. You've got to untangle all of that. You've got the repairs that Chris talked about. But when you look to the production or the products that our products produce, you've got a pretty tight supply and demand stocks-to-use ratio for corn and other nitrogen related products.

So I see that demand has elevated, one, due to lack of LNG. And so you're going to see Bangladesh, India, Pakistan, that rely on LNG that have had sub-operating levels for their nitrogen are going to have to import more. There's going to be a tightness on that import that's going to be bid in for a price. And so I see this 2027 number ahead of probably the average pricing that we've been expecting over the last several years. And then it's what does it do for food.

The next question comes from Joel Jackson with BMO Capital Markets.

Maybe, Bert, you could opine we're seeing as we get into the end of the spring season here, some interesting behavior in domestic nitrogen markets, urea markets to be specific. I mean we've seen NOLA come down a fair bit, the seasonality. There's also what's going on in the Middle East. Also some commentary that the imports into the U.S. in Q1 were stronger than many people thought. Maybe you can give your opinions on the bifurcation we're seeing in U.S. nitrogen prices versus offshore pricing, seasonality and the strength of imports into the U.S.

And it is an interesting dynamic in that the U.S. is the lowest priced market in the world today. And if you look at pricing that has been offered this week of plus or minus $600 per short ton or $650 to $660 a metric ton, compare that with North Africa, which is producing and shipping at over $800 per metric ton. So a gigantic differential. And I think North America is well supplied for spring with July -- or Q3 of 2025 through Q1 of 2026.

All that product has been produced and shipped and is in place for the retail sector to supply the farmer. And so I think what's happening on that retail and co-op side of the equation is it's inventory liquidation. Prices are high based on a historic level. A lot of those customers don't want to take additional open risk without having a buyer on the back side, that being a farmer. And so you have an inventory liquidation that's going to take place.

And then for second and third applications, you're going to see those retailers coming back to us to buy at those -- whatever the market price is. And so this spring has been, I think, well supplied. I think there's been a little bit of anxiety probably overexpressed in terms of supply availability and the price -- the average price that has been to the retail sector into the farmer this year has been on a historic level, pretty good.

And so then it's as we come out of this into Q3 and what does the rest of the year look like? We've talked about, still a very tight market and probably a higher price market. And I think you'll see the United States or the -- let's say, the NOLA market probably come into more equalization with the world price.

The next question comes from Vincent Andrews with Morgan Stanley.

I just wanted to ask on the buyback in the quarter, it was $15 million. Were you buying throughout the quarter? Were you locked up in some way? And if you weren't -- how should we think about buybacks for the rest of the year? Is there a share price level now that you're more comfortable in versus others? Or just any update would be great.

Yes. So maybe I'll start with the back end of that question that we continue to be a buyer of our shares. We -- as I mentioned in the prepared remarks, we think they're trading below the intrinsic value for not only what's happened just recently, but what has been occurring over the last couple of years where we've talked about our assets and accruing more value related to the consistent free cash flow.

So we have $1.7 billion remaining on our open authorization for the share repurchase. And our intention is to execute that just as we've done historically. In Q1 here, we generally go about and we set a grid in place. We had a grid in place that we ended up keeping in place and then the conflict broke out, and we weren't certain the duration of the conflict at that particular time. So as a result of that, we are probably a little lighter during that time frame. But it has no indication on what we see as the value of our shares. As I said, we still have $1.7 billion open. Our intention is that we're going to execute that before the expiration time of it.

The next question comes from Ben Theurer with Barclays.

Just two quick ones, kind of like related here. So one thing you've talked about the China restrictions on the export side, Egypt, et cetera. So I just want to understand with those markets putting in more of the export restrictions here or incremental duties, what does that do in terms of like just the pricing globally in your view and the benefits that you might have particularly in the North American market? And then just as a follow-up, you mentioned on the shutdown of some of the facilities that might not be damaged. How long -- remind us, how long does it take to run something up again, assuming conflict ends tomorrow and we can basically be back online. How long would it take for some of those nitrogen facilities to be properly operational back online?

Okay, Ben, this is Bert. And I'll take the China restrictions and just kind of the market and what's going on. It is an interesting nationalistic move a lot of these supply countries are making to restrict supply for their citizens. And that's one of the things that China has done with exports still restricted in 2026 and expected to come out sometime in Q2. And so last year in 2025, about 5 million tons came out of China. We need all of that and more to balance the world supply. I don't think that's going to be able to happen with what's going on in the Gulf and the current capacity that's off-line, either damaged, destroyed or just not operating.

So I would expect that China comes out like they did last year, maybe June through October, 1 million-plus tons a month. And we mentioned earlier, Egyptian restrictions or costs and Russian restrictions. And then it's back to the suboptimally operating plants specific to India, that's estimated today to be operating at 70% driving that additional import need to meet their demands. So a tight market pricing today, as we mentioned, in the North Africa that has available supplies in the $800 to $850 per metric ton. As we look to the back half of the year, I think the global market is expecting some price moderation, I just can't give you an estimate today of what that price would be.

Yes. And then related to the operational side and the shutdowns, I think there's 2 parts to that. The first being getting the equipment back up and there's a lot of rotating equipment if these were, as we understand, shut down and put down, you're looking at 1 to 3 months depending on what type of maintenance was being performed during that particular time frame and what type of procurement they may have to do on some of the parts that would be required to bring those back up.

So I would use conservatively like a 1- to 3-month time frame. But in addition, a lot of these particular plants had loaded inventory before they shut down, they had loaded up their inventory. And when you're looking at that vessel movement that we talked about earlier, you could be months away from getting vessels back where you can start to deplete that inventory and really bring up that production as well.

So I think there's a lot of different components here, and that's why there's going to be a much longer tail and knock-on effect, secondary effects that some of which we don't even know right now in order to get the entire system operating again.

Just to put some numbers behind what's shut down. It's estimated 31 ammonia plants in the Middle East have been directly impacted by the conflict or shut down production, 49 plants in India, Pakistan and Bangladesh are either curtailed or shut down due to constrained feedstock. And in Russia, at least 20 to 21 plants have been associated with being droned by Ukraine, so the impact is widespread.

The next question comes from Chris Parkinson with Wolfe Research.

Got it. I think we could all debate the degree of the windfall of free cash flow you're going to have presumably by year-end, and we could all debate even further into '27, '28 and then you have the Secretary of Treasury and the Secretary of Agriculture pleading for new capacity. And on top of that, you have, by my count, up to 7, probably at least 6 or 7 other either blue or gray nitrogen facilities either canceled or suspended indefinitely.

When you think about those factors in the intermediate to longer term, how are you thinking about Blue Point #2, is there anything else that you think the industry should be doing to work with in terms of U.S. policymakers? I'd love to get your perspective.

Yes. So Chris, I think you characterized it well. And this goes on top of what we've been talking about really for the last couple of years that the market was already tight, as Bert said, coming into 2026. And now having some of these fundamental additional costs, how things are being reviewed, we needed new capacity before. We're probably going to need even more right now.

I think there is going to be an increased cost into where that capacity goes around the world and it makes our decision to move forward with Blue Point look even better. So I said on the first question here, we're probably going to see a higher return profile than what we thought. And we continually, because this has been our view for a while, look at production expansion.

I think there's still some things we want to get a better understanding at Blue Point #1 before we would move into Blue Point #2. But whatever the decision that's going to be made, again, I think you've worked with us long enough that it's a very disciplined investment decision.

Now that being said, the amount of cash flow, just given our efficiency in converting that cash flow is going to be significant over the next several years. And I think we see opportunities, whether it be within our network or elsewhere to enhance our margins or increase our production on a very value high return profile type of return.

Got it. And just a quick follow-up for either you or Bert. Obviously, there's a lot of things moving in terms of when we would generally think about summer fill prices. Do you have -- in terms of international dynamics versus domestic surety of supply, the balance between urea availability versus perhaps UAN. Are you thinking about things presumably a little bit differently this year? Or how should we think about that?

Yes. That's a question we ask ourselves pretty much every day. And the team looks at that. And every year has been different in my 18 years at CF of how we looked at fill, when it's offered, the communication with our customers. And I've got to give Mike Hamm and his team a lot of credit from last year, communicating openly and ahead of time on the date we were going to launch, giving our customer friends time to prepare and put things in place on what their needs were in terms of volume and price expectations, and a very successful campaign. And we're probably looking to replicate that in terms of thematics for this year. Now it does get to the price and then the timing because we're in a highly volatile world and you're right.

We look at the balance internally what is the best use of the molecule. So the nitrogen molecules that work through the system from ammonia to urea to UAN to ammonium nitrate to DEF or any of the products we produce and we look at where is the highest value, where is the need? What is our inventory system, what does the export opportunities look like and then we make judgments and seek a consensus with the team and leadership on moving forward. So I expect that to happen, but I would expect this to be a Q3 event.

The next question comes from Edlain Rodriguez with Mizuho.

As nitrogen prices have moved up higher, like what do you think farmers can or will do to lower the fertilizer cost basket? And related to that, in a typical year, like how much of the nitrogen needs do farmers prepay for like earlier in the year?

Yes, Edlain, very good question, especially in the high-priced, high-cost environment, the best thing that could happen is we see a rally in corn. And that's why I mentioned in my prepared remarks, the impacts to some parts of the world that I expect to take place with under applications of fertilizer leading to underperforming yields. And that could happen in Brazil for the second crop that gets planted in January and February or if there's a weather event, an El Nino in Argentina or something like that. But N prices are high. We are in a high-priced environment. And a lot of times, supply and demand get -- or more demand gets impacted by high prices.

But nitrogen is the one nutrient that you really can't skip on. And this is a year, I think, for North America because the majority of our tons are consumed in North America. We're talking with our retail and cooperative friends as well as our agribusiness partners like ADM and those people who are dealing with the output of the farmer. And when you're looking at the opportunity of corn today in North America, there's 2 ways to -- you can cut costs or you can increase yield to improve your revenue per acre.

And in this type of environment, we don't expect a cut in nitrogen in North America with the yield opportunity that's available, whether that be dry or irrigated land. And so -- and we're seeing that in terms of behavior and purchasing and positioning of nitrogen. And so the typical applications from -- for nitrogen, you can apply ammonia in the fall, and we had an extremely good fall ammonia season in November of 2025 and we've had a very good one for spring this year for ammonia. And so that, to me, communicates, one, farmer planning; two, yield expectations; and three, they bought low-cost product as all of that was priced earlier, the spring as well as the fall, earlier in the year at attractive prices.

And so then, it gets to what kind of secondary and third applications are added to that for yield. And we had a phenomenal yield in 2025, I think, of 187 bushels per acre. And I would expect that to fall a little bit, but we're hoping for farmers to make money and to do that with nitrogen.

The next question comes from Lucas Beaumont with UBS.

I just wanted to follow up on how you're kind of seeing the outlook for nitrogen pricing as we kind of move through the next couple of quarters. So I mean, there's been no improvement yet in terms of trade flows and then we have a significant portion of global production offline. But as we sort of get past the peak Northern Hemisphere demand period, however, there's probably likely to be less incentive for people to, I guess, restock during the year than what you would kind of see normally.

I mean offsetting that Brazil demand will kind of pick up for the third quarter with imports. And we have shortages in sort of the other importing regions globally, coupled with just how the normal sort of seasonal factors would play out. So I guess could you just help us understand how do you sort of see the interplay of those factors there together and sort of what you think is going to happen kind of sequentially as we move forward over the next few months?

Yes, Lucas, we're still -- this is Bert. And we're at the peak of our movement for North America. So at CF, we're focused on supplying our North American customers to make sure we make it through spring applications with adequate supply and communicating daily with our customers. But the outlook for, I would say, Q3 and Q4 is higher than normal. And I can't give an exact price. I do think what Chris said in terms of what is going to come back and when it comes back from the Middle Eastern suppliers, that's 30% of global urea, but it's 20% of LNG. And so there are a lot of countries that produce nitrogen that are dependent upon that LNG to make those nitrogen plants operate. And I think you're going to lose some of that capacity. So in a 56 million-ton export traded market with, let's say, 18 million of that on an annualized basis taken out, so on a monthly basis, you have 1.5 million to 2 million tons not available from March, April and now May. So adding up just to be conservative, maybe 5 million tons.

So you need all of China to come out, and aggressively so, to balance that. I don't think that's possible. And then you go to the importing countries like we mentioned India, which has imported between, let's say, 6 million to 9 million tons over the last several years, we're expecting them to be 10 million to 13 million tons because of the low operating rate of their import -- their LNG import dependent plants.

So you've lessened supply, you've increased demand specific to that country as well as in South America. I don't see their import needs changing or going down, unless they're going to have an impact on grains and oilseed production. And so trade flows right now are -- you're having to ship longer distances to cover immediate needs.

Freight rates are high, much higher than normal, probably double. So the outlook for N pricing is higher than normal for longer. And the restock -- I don't know if the restock can be done in time without severe disruptions, as in demurrage at the Brazilian ports or late arrivals for some other locations. So you're going to have shortages.

Yes. I think that's why we're very confident in how this pushes into 2027. And I think the one part that Bert touched on earlier was really the nationalism and kind of the regionalism of energy in general and are these countries going to want to export what they have exported historically to even fill some of those gaps that are already tight.

So this is something where we see going through 2027 and allowing us to provide probably or generate significant free cash flow even during that particular time frame as well.

The next question comes from Andrew Wong with RBC Capital.

I just wanted to ask about your expansion plans, just given elevated nitrogen prices, both now and into the future, plus the tightness in feedstock like you mentioned and obviously, the competitive advantage in North America and the better return profile for North American nitrogen. Does that change how you think about expansion plans? Could you accelerate to add more capacity?

Well, it's -- thank you, Andrew, for the question. It's something that we review consistently around the organization, and we have quite a bit going on right now with projects that we're looking at that go over and above what is with Blue Point. But I think what we're looking at is, given the bandwidth and where we are right now is just seeing that those particular investments that are in motion or that we're considering are seeing higher return profiles than what we expected.

As I mentioned earlier on the call, we are continuing to evaluate what we would do at the site, the Blue Point site. It is a site that we can expand on over time. But I think there are certain answers that we want on the first unit before we had moved forward. One is to get the permitting through. The second plant there would see some efficiencies given the infrastructure would already be in place, that being the dock, tanks, off-sites, et cetera.

So it's something we're considering, but nothing that is imminent at this particular time frame. What I would say is with the cash that we've generated so far and what we expect over these next several years, our capital allocation philosophy hasn't changed. We're going to be extremely disciplined in how we look at investments and critical as to how we evaluate them. And then in addition to that, I think what we have on the table, we have excess free cash flow that we're expecting to generate that will return in the form of either share repurchases or dividends to our shareholders.

The next question comes from Jeff Zekauskas with JPMorgan.

If I can ask you a speculative question. Given the confusion over CBAM and of carbon dioxide emissions generally and given the shortages in the nitrogen markets, do you expect new plants in the United States to be steam methane reformers again rather than autothermal reactors? Or is it too difficult to tell?

Well, one, I think the confusion over CBAM may be a little overstated. CBAM is in place today. And I think if you've been following what the European Commission and European Parliament, there really hasn't been any change of course. If anything, I would say it's almost gotten stronger that CBAM is going to remain in place. We view the decarbonization, I can really only speak for ourselves, as providing incremental opportunity that doesn't exist to others.

I think if you look at what we've done, both with the 45Q, with the shipments we're making at a premium into Europe and then our recent announcement with Pepsi and other CPG companies that we're looking at working with, we can -- we look at decarbonization as creating value and see the value in doing an autothermal to recover as much of that CO2 as we possibly can. So I can't necessarily speculate for others, but I know what our path forward and the value that we're seeing not only in the future, but that we're accruing today.

Okay. Do you think -- thanks for that. Have the contractual terms for ammonia with industrial customers changed over time? And do you think that there's room to make those financial terms more attractive to producers as the nitrogen markets have tightened through the years?

Yes. Regarding the contractual terms, so how we look at our business and we segment the majority of our tons go to agriculture. And then we have an export portion, then we have an industrial portion that's fairly ratable. And we look at those dynamics each year to make sure we're placing the tons where they're most valued and those relationships are obviously contributing to both sides. So many conversations regarding contractual terms. But the actual terms haven't changed, but the implementation of low carbon and the low carbon premium that we're receiving and that we're communicating consistently to our industrial customers, our export customers who are under CBAM issues are attractive.

And as I think industrial companies look to their own scope emissions and want to improve those, and Pepsi is a very good example of that partnership as well as POET on ethanol and talking with other similar producers, we're seeing a positive receptivity and wanting to align with CF. So this is a growth platform for us. It's economically attractive. It's returning a good investment for us, and it's aligning us with what I think are good goals both thematically, culturally and environmentally with ourselves and with our customers.

The next question comes from Mazahir Mammadli with Rothschild.

Just a follow-up on the gas cost. So the Q1 came in at $4.50. What would you expect the trajectory to be during the rest of the year?

Yes. I'll start and then Bert or Rich can add any color to it. But I think the first quarter, we experienced a couple of different things in that, both January and February, we saw elevated Henry Hub gas costs here with, I think, February even settling at over $7 per MMBtu. Since that time frame, it was a pretty acute portion of the quarter or of the year in which that occurred. We've seen gas come down significantly, where today, I think it's trading in the $2.60 type of range. And we're seeing, as the curve goes out, it flattens even more.

So our expectation is that we're going to see the gas costs for the remaining part of the year, very close to what we're seeing in the NYMEX strip today.

Yes. And we're not hedged on a forward basis. So we're open and receiving those prices that are represented in the NYMEX.

And just a follow-up on the production volumes. I believe early in the year, you communicated the intent to switch to UAN from urea to take advantage of better production margins. Has that strategy effectively been reversed with urea price having surged much higher than UAN?

Well, the interesting thing about our capabilities is we can switch on a shift. So a shift, an 8- to 10-hour shift at a plant and that is well coordinated with our team on economic value. And so as the urea values increased and probably exceeded the opportunities with UAN, you would expect that we would -- in terms of the capabilities of the specific plants, we would be achieving that.

The next question comes from Kristen Owen with Oppenheimer.

I didn't think I was going to get one. Just wanted to ask on your maintenance. I think you've made some public comments out there about maybe delaying some maintenance in order to ensure domestic supply. Just if you can help us on how you're thinking about that maintenance schedule for the rest of the year.

Yes. The maintenance that we had shifted and we did it after evaluating to ensure that we could do it safely was at one of our particular sites. And we were -- it was already scheduled to be late in May, and we just shifted it to late in June. So it wasn't a significant amount of a shift that we were doing, but allowed us to get, as Bert mentioned, about another 100,000 tons of urea up into the market in order to go down for this application season. Other than that, I would say we have it pretty well where it's going to be the typical maintenance that we've done historically, and you can use that as a benchmark.

Thank you. Ladies and gentlemen, that is all the time we have for questions for today. I would like to turn the call back over to Martin Jarosick for any closing remarks.

Thanks, everyone, for joining us, and we look forward to seeing you at upcoming conferences.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.

Welcome back, everybody. We'll get started. I'm sure people continue to file in. With me today, we have Bert Frost, the EVP and Chief Commercial Officer of CF; and Martin Jarosick, VP, Treasury and Investor Relations. Bert, stalwart here at the conference. I don't know that I have to like fully introduce you here, I feel like most people are fairly aware of who you are.

I didn't -- you don't have any presentations or anything like that, Martin, if you want to kind of lead off and maybe provide just a quick overview of 2025, the year as it was, and we can kind of pick it up from there, if that makes sense.

Sure. So 2025 was another strong year for CF. We had $2.9 billion of EBITDA, $1.8 billion of free cash flow. Ran the assets at 97% utilization and had a really strong safety numbers. So all told, a really solid year of execution for the team.

Yes. So maybe we start, obviously, just nitrogen markets, easy enough. It's pretty important for you. Ammonia, right? On the call, You'd pointed some potential weakness given capacity expected. Obviously, start-ups or start-ups. Spreadsheet math is very easy to conceptualize the plant starting up. But in reality, often and always does take longer. But as BofA, that's been one of our concerns, right, if we look at the globally traded ammonia market. So how do you see this playing out in the short and the medium term as it relates to global ammonia? And then I want to kind of hone in on the U.S. side, which you obviously have some very real structural advantages and we can touch on that. But first, it seems like most of these plants are going to go international. So what -- how do you see that kind of playing out here?

It is an interesting market, an interesting dynamic. I think what has happened over the years on the analyst side, there's been -- it's coming, it's coming, it's coming and negative, negative, negative, but we've had a positive, positive, positive market where we've exceeded expectations each year since 2021 in terms of an EBITDA performance or a free cash flow performance. And so the ammonia market today is structurally strong. And you have globally traded ammonia.

You have 200 million tons of ammonia demand per year. only 15 million to 17 million of that is globally traded on seaborne traded. A lot of that's going to Europe to backfill idled capacity or a product that's not coming from Russia as well as just for phosphate production in Morocco or imports into the United States. And so you have 2 dynamics taking place. You have idle capacity or capacity in Europe is not fully operating. You have gas supply issues in Trinidad has taken the nutrient plants, and I think other plants that are constrained today.

And so you have a supply limited market and the expectation that this new capacity in the United States, Gulf Coast and Woodside will be coming on. But we're 3 years now waiting for some of that capacity to come on and demand continues to grow. And we continue to supply some of that with our new low carbon product as well as just participating in the market today is $600 to $700 a ton for ammonia on the globally traded market. And our cost today at $3 gas is about $120, $130. And so it's very attractive for us today.

And then you talk about why CF is differentiated in the ammonia market. It's our capability to store, well, let's say, produce at a low cost, move that ton at a low cost through the pipeline in our barge system into our terminaling system that's in the heartland of the United States of the most -- and Canada as well as the most fertile ground in the world.

And with high-yield in corn, you have a ready demand base for the ammonia -- much of the ammonia that we produce as well as our industrial customers. So how we see, yes, this capacity will come on eventually, but we have a very strong and stable market today.

So Woodside in Gulf Coast ammonia, 2 projects starting up basically along the U.S. Gulf. If I had the ability to move it to the corn belt, I would, but not everybody does. And so when we think about your advantage with NuStar and that market. Like if ammonia globally comes under pressure, does that spread to -- like corn belt expand because you can't get the product there? Does it stay consistent? Or does it compress because they'll just -- I know maybe ammonia is not easy to put a rail, but like will they just -- will the incentive be too strong to move it to the corn belt that the product will find a way?

And so when you look at how it does ammonia move today, you're right, it's pipeline, but it's fully subscribed ourselves, coke and others because you have to have a destination to receive it. So it's one point to produce it, you have to have the ability to receive it. We have that. But again, the pipeline is at capacity. And so -- but would that ton from Gulf Coast or Woodside make it to Iowa, probably not in the context of just that structure that's in place and how we optimize it but it's also with the differential between the Midwest and the world market.

It's really a nitrogen calculation. So you have a farmer producer has options of urea, UAN or ammonia. And so he's going to -- he or she is going to choose those options based on economics. And so you have to stay. It's a global economy, it's a globally traded ton of nitrogen. So you have to stay within range, and we do that on an economic basis. But again, we're a low-cost producer, we have low-cost gas and low-cost capabilities to move our tons.

So as I think about this, right, because fundamentally, you can't just like move ammonia into a urea loop, right? You have to have the on-site production of ammonia. So you have the CEO to make the urea. If -- because on your earnings call, I should say, like there was some comments around potential softening in ammonia, but urea remains fundamentally very strong. And quite honestly, the supply-demand dynamics for urea are pretty favorable. There's really not much new supply. So how do we balance the view of maybe urea itself being fairly tight with a softer ammonia dynamics? Should it develop? Is there that fungibility that create softness? Or is it just not enough product on an end unit basis to do that?

Well, this is why generally, you upgrade your max potential because the value creation process of urea, UAN, DEF or other products, ammonium nitrate are generally consistently above the value for ammonia. However, we produced 10 million tons of ammonia, and then we upgrade about 5 million tons of urea, about 7 million tons of UAN.

And the remaining ammonia ton is -- a lot of that moves again into the Midwest. But we have the capabilities of Midwest export, and we have industrial contracts that are consistent, 360, 24/7 demand pulls. And so that's how we balance the system. So we're always looking at how do we optimize how do we profit and how do we leverage those capabilities and consistently, where you will find is we're upgrading to the maximum capability and then moving the ammonia.

DEF, talking about kind of upgrading a bit. It's been a growth market for you as it relates to incremental investment. When we talk to our trucking analyst, the conversation amongst most of the truckers is DEF consumption is expected to grow. I got a question from this from an investor yesterday and I didn't have an answer for them, so I figured I would just ask you. We've also seen some commentary from farmers that given new -- like the policy around some of the Obama administration guidelines that are lapping might mean farmers don't have to use DEF. Is that like -- I don't know, like what's your expectation around just DEF sales and as it relates to a growth engine for the CF?

So DEF is diesel exhaust fluid. And it's really a market that didn't exist 15 years ago. In 2010, when we acquired the Terra assets and DEF was one of the components that we purchased from the core [ lite ] plant where they were producing it, it was in its infancy. And so you have a couple of things in parallel happening. One of them is just the generation of power units of trucks.

So as new equipment comes online, initially, the dosing rate was a certain percentage. And as we've matured in this market from the equipment suppliers, that dosing rate has increased. And so the objections for dosing rates in the -- as the new units coming online and now and in the future for emissions control will be double or triple what they were 15 years ago. So you just have a natural growth rate with that. And then it's as new equipment has come into new applications like let's just use Deere or Caterpillar for different applications, that has also driven growth. And so what the Trump administration came out with recently on DEF for farming equipment is the frustration of a farmer, if you're out in your field and your DEF runs out in your equipment that, that can slow down or the efficiency of the operating rate of the equipment while it's on the farm.

And so they want to give more of a flex period to resupply that those -- that farming equipment in the future. And so it's not that you don't use it because it's a very good DEF in the operation of the diesel engine allows for higher burning and more efficient burning. And so it's actually a very good product. And if you drive down the highway and don't see emissions coming out of the truck, you could think DEF. So we're excited. It's a growth market we have invested and we will continue to invest.

As I think about maybe before I pivot, like nitrogen demand in '26. '25 was a strong year for sales, obviously, record corn crop in the U.S. But we saw strong planted acreage in Brazil. We saw a better landed acreage in Ukraine. Do you think the market can grow in '26 versus '25? I guess perhaps early winter will be helpful as it relates to installed applications of ammonia moving into this year. But what do you expect for growth for this year?

The beautiful thing about our business is people like to eat. And so that drives consumption. And so as diets improve and as diets have improved globally, what you've seen in China over the last 20 years, what we've seen in India over the last 10 years, and then what you've seen in the acreage growth in Brazil, but what you're seeing with governmental changes in Argentina growth.

And the 98 million acres of corn, that was planted in North America was a substantial change. We didn't expect that, we were projecting 93 million, 95 million acres. And so 98 million was, I think, the highest since 2012. We do see positive growth, one, because the stocks-to-use ratios are adequate, but not high. You're having good demand for ethanol production and the export of the incremental ton of ethanol. You have the cattle herd at its lowest level in 75 years. So cattle on feed are going to grow or cattle on feed for longer periods of time and the efficiency of cattle feeding does that. So you require more carbohydrates in that feed ration. And so we do see positive dynamics globally for -- especially where we produce, which is North America, but globally as well.

To maybe look at global trade flows a little bit, CBA coming into effect, then theoretically, maybe pause, maybe not, not, but what do you make of the flotations out of Europe around C-band? And what -- I mean, can they really pause C-band, but not also put a pause to their own domestic carbon tech because like that would implicitly kind of grew in their domestic industry wholesale. But how do you navigate that? I mean it's maybe not as important because you're U.S.-based, but like clearly, as a commercial person who's looking at trying to capture the best value you can for product, how do you navigate a market that seemingly wishy washy like a pretty -- what has been a pretty vocal policy?

So back to it is a global market. So as a global participant in that market, you have to pay attention to these various oscillations that happen, whether it's political or economic or structural. And this is an issue C-band implementing without knowing exactly what is going to be implemented and the cost has been very confusing for our European friends. And we do supply product whether both ammonia and UAN to Europe, and we have some very good customer positions that they. We have not been shipping UAN since the start of 2026 because it's an unsure situation. What is the actual cost?

How will that be paid and who will absorb that? And so we're quite comfortable to move our tons domestically or other places. But I think as this unfolds, will it change? Will it be canceled? Will it be -- according to our European customers and friends, it's -- yes, it will be implemented. Yes, it's going to be confusing, and we have to get through 2026 to figure out that cost. The good thing about CF is we have low carbon product available today, and we're producing -- we will be producing in a few years, even lower carbon, 95% decarbonized which we will supply to the world, and we think we'll be advantaged into Europe with that product.

Just pivoting on to that point with -- outside of Europe, you have seen regulatory clarity in other parts of the world. So in Japan did move forward with the contract for difference for our partners so that they have their regulatory certainty for that project. So it's going to evolve over time. But as Bert mentioned, we're in a great position. We're a low-cost producer. We have the product, and we've got all the options to send anywhere in the world that basically provides the best netback. .

Yes. And I want to touch a little bit on that next. But I guess I'd heard similarly like product moving to Europe now is frozen because of this general uncertainty. So what does that ultimately mean as it relates to how European supply/demand plays out for this year? Is this just we'll figure it out and they get the product that they need or there is...

I think the risk for this spring is that there could be a short for that incremental ton that was not brought in for a period of time. But then as we go into the back half of the year, and the question marks around what is brought in, the timing around that because generally, we exported in June, July, August, September, October, November tons to Europe. So I think we'll see. And then as inventory built by the European producers in anticipation of an unknown. So I think it would be a difficult position today to be a European operator.

Yes. Yes. Clearly, [indiscernible] dealing with some existential stuff in that regard. But to touch back on Japan, to your point, happy to see that JERA and Mitsui were able to get the contract for difference because I think in that regard, candidly, your partnered very strong positionally for that. But we've also seen some comments just given the CapEx inflation.

A lot of -- given -- through these blue and green ammonia project budgets, Japan might be spread across or I should say the amount of money they wanted to commit might be spread across fewer tons over time. Do you see this as a risk? Does that impact Blue Point 2 or 3 or -- because I know this is supposed to be an iterative project over time. And do you expect that the commitment from your partners might change?

I think when we look at the growth of ammonia demand of any color of any type, we do see that steady growth in ammonia. There's always going to be a place for low-carbon ammonia. It will be the first product that people buy because of the low carbon attributes. And I think you are going to see inflation in the -- and you have seen inflation in the cost to construct new capacity for someone with a large installed base of world-class and low-cost assets. That's not necessarily a bad thing.

And it's something that we'll continue to navigate as we look at potential further development on the Blue Point site, it will be based on the demand and the economics and as those 2 develop.

I think for us, we're really excited with the partners that we're with. Both JERA and Mitsui are solid and have the -- this is all going to new demand and that doesn't exist today. So it's -- when you take the structure of 1.4 million tons, the 60% is going to Japan that is not entering the globally traded market. We also have a backstop for our in the U.K. So we are -- the inbound calls and meetings regarding Blue Point future is positive.

And I agree with Martin, the 95% decarbonized product, you're not going to see many of these green plans move forward. And so green being 0 carbon. It's just too high cost, and it's a great idea until somebody has to pay for it. And so for us, at 95% decarbonized we have a lot of opportunity and options in front of us.

Yes. And the comments around the electrolyzer on the quarter, I think, speak to ultimately some of that. But I agree. Blue Point, JERA and Mitsui are highly advantaged as it relates to the access for the Japanese market. And kind of ultimately what is expected to be a pretty good sync for ammonia as we look at cogen and firing there. 2030 kind of more of the framework for when Blue Point commissions, which I agree, should be a better market. So as we look at this 15 million to 17 million-ton globally traded ammonia market, what do you think 2030 looks like? And is there a ramp there that's kind of consistent? Or is this going to be something that is maybe more of a back-end weighted demand profile as some of these other markets and ammonia ships or whatever come to market as demand?

So I think, Matt, we can all agree it's going to be awesome. But all kidding aside, but I do think what we've have been surprised with when we laid out some of the initial plans for how we viewed the market and shared them with the analyst side and the investor side, was in 2020, 2021, when we initially began our journey on the low-carbon future, was projecting what was going to happen in the market and the tightness at the end of the decade based on build-out based on demand, based on changes in the dynamics around low carbon. .

The surprising thing today is how tight the market is today. I think from the analyst side and from your side, it's been something that negative is going to happen. It's going to happen, it's going to happen, and it just doesn't happen. It's going to be China this year. That's going to be bad. China is not exporting to the capability that they were. I don't think they're going to be. But it's this tightness of geopolitical upsets, whether last year was the Iranian/Israeli conflict and -- or lack of gas for Egypt. The continued conflict in Russia and Ukraine, lack of gas in certain places like Trinidad. That is driving more structural places that used to have guests who used to operate aren't as much, and we're in this very high cost of new investment that is limiting of the 120 projects that were announced a handful are going to get built, but they needed to be built just for future growth and demand and again, limits of where our supply is today.

So we are in a positive market, and we see that tightening coming earlier than we had expected. And then at the end of the decade, probably tighter than even we had projected several years ago.

And as you kind of hit on this a few separate times, just CapEx inflation, right? Your -- I don't know, neighbor. But across the river, right, at Darrel, we're hearing about that. It's tangible. The CapEx budget gets revised up. Their plant is highly specific. But it's kind of the reality of doing business on the Gulf Coast and building plants in the U.S. So how do you manage CapEx inflation and the risks around it. And when you look at what should be ultimately is devised to be a pretty large complex, how do you go about limiting risks around that?

So for us, it started with doing extensive FEED studies to get more detailed engineering and more detailed estimates about what the cost would be. And then second, we went with a modular construction design for the ammonia plant, which is basically a turnkey. So the ammonia unit, which is probably half of the cost, is being constructed by Technip offshore and shipped over in modules. And that's a fixed price contract.

So that element of it has been capped. And that does a couple of things. It reduces the amount of exposure to cost plus labor in the United States. It also separates the development of the site from the construction of the ammonia plant. So we don't have -- instead of them being in sequence, they're in parallel. So we don't have to pay as much overtime and spend the money to accelerate the development of the infrastructure of the site to then stick build the plant piece by piece on site because the plant won't actually show up until 2028. So it gives us a lot more time to prepare the site to receive the plant. And we will continue to look at those other components and do fixed-price contracts for tanks and other components that are on the development of the Blue Point side itself.

And I think one of the differences is this is what we do. This will be the third plant we have built in the last 10 years. And we built -- and we're operating those plants the -- the other 2 at 110% of capacity. So we're good at the design. We're good at working with our partners. We're good at estimating like Martin said, planning. And this is the core of what CF is about. And so we are very confident in our ability to bring it in at budget. .

Okay. Switching to Trinidad. I got a little bit of a flavor for this because I was talking to Ken about this morning, new government in Venezuela. Maybe that matter, maybe it doesn't. But if you were to think about the potential for gas moving from Venezuela to Trinidad and Ken's comments. Like it's always just in 3 years, we've been waiting for a while. But as you assess that region, does that change your longer-term views around the profitability of that production base? Or is that too early to say? What do you -- how do you gauge?

So we've been active in Trinidad for 15 years, and I was on the board probably 10 years ago, a PLNL. And it was -- in 2 to 3 years, we're going to have gas. We're now 10 years later, and we don't have gas. I think all of us on the island that are operating us, Coke, Yara, Proman are facing difficulties. And questions about what is the future, what -- can we count on, what level of investment should we have or maintain for those assets. Our asset at PLNL has been a good asset over the years. We value it, but we obviously need gas and need commitments from the government and from the NGP that NGP, NGC.

And we'll see how that unfolds. I think Ken is -- was at the forefront of some of these decisions, and we're going to have to have those discussions as well.

Yes. I mean his comment was that in particular, they are pushing for higher gas prices. And sympathetic to the fact that Trinidad has its own needs as a country, but given the cost basis and the operation consistency of that region, it's hard to warrant gas price increases, right? And that's the standard that he's making. So do you face kind of similar pressures in that market?

So we are under discussion with that group of what the future supply and contract obligations are and -- but we're in the middle of it.

Okay. Gas cost, right? Martin, I'll put you on this one. It's like $3.20 in MMBtu in the fourth quarter. Very good. Lower than the Nutrient, even because then they have a AECO, right? And so how are you able to do this? And then look at -- as we look at 1Q, I think we were surprised a bit to hear about $5, $5.50 kind of range for the first quarter. There's always volatility in gas markets. That's just the nature of your business. But how is hedging playing here because it's not something that we typically think of for CF outside of basis, regional basis. But how is the ebb and flow? How did you get so good in the fourth quarter? And then what happened in 1Q? And is there any bleed out into 2Q in that regard?

I think when you think about how we hedge gas, we do like to take care of the basis so that we switch it from smaller hubs, down the -- Henry Hub was easier to manage the risk. And then we do tend to look at prices for gas that we're going to see across the winter, and we do that in various ways over the years. And sometimes, it's well in advance of the winter and sometimes it's much closer to the actual month of consumption.

And that process yielded a really nice result in the fourth quarter. We were able to take advantage of the opportunities to hedge effectively and then see the settlement settle higher than that. And we've seen so far in January and February. You're seeing higher NYMEX settlements. We had a winter storm that basically hit on top of a NYMEX settlement. And so those settlements are going to be higher, and we will do our -- do well. I'm sure we'll do well against those benchmarks. But over time, our objective with hedging is to minimize the negative shocks of these events. And so we tend to be somewhere around or in between the what you've gotten with cash daily pricing or what you've gotten if you'd locked it in with the NYMEX settlement.

And Bart and I sit on the Gas committee, but I have to give a shout out to the team, with Marty [ Melk ] he's the guy who runs our gas group. But we're students of the -- we view those -- the product markets and the gas and the operations, they're all separate decision-making that come together as a whole. But we look at gas independently. We don't necessarily for forward sold, have to lock in the gas.

And we do play a lot of the cash market during the year would -- has been at advantageous for us. But in terms of your reference to Q1 2026, this volatility is the word. We had $70 gas at the Port Neal site and $90 gas on the daily at [indiscernible] in Canada. So it has been incredibly volatile. I think the team has done a very good job of understanding that, covering what Martin talked about and being in the position that's good for CF.

Okay. I do want to open it up to anybody in the audience, if you have any questions, feel free to raise your hand and jump in. But I didn't want to ask a little bit on the policy side, and maybe this is -- I don't know, maybe it is, maybe it is an outside our real house bird. But if we were to think about the Trump administration, right, they've been keenly focused on farmer profitability, farmer sentiment, farmer affordability, nitrogen is maybe in the middle of potash and phosphate from an affordability perspective, right? It's not the primary pain point, but prices are high. So what do you get from the administration on that? Like are they actively in discussions with CF around capacity or tariffs or rebates? Is there any kind of discussion there? Is there any push. I mean I know you weren't necessarily listed between your 2 U.S. or North American peers as it relates to price solution, right? But it seems like the microscope is on nutrient companies and price. So does that resonates to CF at all?

A couple of things that you referenced -- resonates with me personally as well as professionally in the company. We're a global market. And we're the largest producer of nitrogen in the world, and we're less than 5% of capacity. It's produced in Russia. It's produced in the Middle East. It's produced in China. It's produced in India. It's produced in the United States or North America. And all of those places had the -- most of those have the capability to export. And so tons are moving all around, and they're priced at different -- for different products at different times, but the price in India today is basically the price in NOLA.

And if India goes up, NOLA goes up because we had to call that import ton. We're an import-independent market. And so we have to incentivize those tons to move. And so it's -- and -- but in terms of fertilizer, you need NP&K plus some S now in most growing cultures. And so the fertilizer market is integrated in many different ways. But I think the point of your question is and where the government is going is the farmer. And we do think about the farmer and how -- one, how can we help them to have the product in position to be a low-cost producer, which we are a low-cost mover in supplier partnering with our retail friends the co-ops and the public retail suppliers to the farmer because we don't sell to the farmer directly. And that whole chain has to work together to be efficient, to be low cost, and to make sure the product is in place at the time it's needed, but it is a globally priced product.

Yes. No, I know.

I know you do, but I -- sometimes...

Sometimes I wonder about the administration.

It gets separated or an isolated issue like in Iowa, it's this. Well, pretty much you can do the freight, the price in Iowa equates back to the Middle East. .

Is there any push for logistical improvements then domestically? Like do you see talk or within a policy perspective about pushing for new pipelines or relaxing some of the restrictions that impact our ability to source barges?

So the work that's being done, we're a multi-mode company, rail, truck, barge, pipe, vessel. So we're moving product in any 1 of those 5 modes at any different time. So what the core of engineers does in terms of the lock work on the Mississippi, on the Arkansas and the Illinois, very important. .

We need to keep that barge cost, and what the ADMs of the world do with moving grains and oil seeds down, we're moving fertilizer right back up. And so the pipeline, the Sunoco Pipeline is now 40 or 50 years old, if not more. And so proper maintenance of that -- the only existing ammonia pipeline is very important. And then it's very difficult to move ammonia by rail. So we almost don't do much of that, but the rail systems are very important. So this -- whether the UP hooks up with the NS or our work with the BN, that is a key component. So the low-cost delivery of the product is -- it's not just the production site, it's an integrated chain that we do focus on.

And if I think about rail, like boring, right? Nobody wants to move corn.

Any of the TIH, ethylene oxide, chlorine, ammonia.

So that was my point on ammonia. Is there some government restrictions around it? Or is it really just it's hazardous and corrosive and you just -- you don't want to move it by rail. And so there's like an implicit pushback from the rail companies themselves.

It's priced out more than just -- they still move it. It's just priced out. But we do have some very good relationships with our rail partners and need to continue to work on that as well as regulatory support to make the efficient moving of ammonia, possible. .

I'm happy to. Well, so -- I don't know if you have a question. We have one question up front. Sal, you want to raise your hand. But otherwise, get that hand up.

So since we're talking about logistics and might brought up the whole U.S. Gulf tons going to the corn belt. Can you give us a little bit more clarity? Essentially, if there is a plant on the U.S. Gulf Coast, what stops them from, let's say, chartering a barge that has the ability to be in the shallow orders of the U.S. Gulf and then going of the river. Is the cost prohibitive? Do they need to have access to tanks in the Midwest that they don't? What essentially stops them from doing that?

Yes and yes. One is when you're over in Houston to barge all the way to the mouth of the river where we already are as a cost. Two, is the destination point, where are you going to off load that barge where most of the producers have the tanks. So you need to build a tank or partner with those who do, and those tanks are limited.

So I do believe some tons could in the theoretical move up into the river system, it just has to be coordinated with the receiving points and the barge companies as well.

I have one more, and I'm sure Steve has asked you this question every time he sees you. But I got to carry the torture a little bit now. I mean as we think about microbes and nitrogen delivery to the corn plant. Everybody is -- not everybody, but there's a lot of companies working on it, right? We'll have a biologic panel right after you with Corteva, Mosaic and Pivot. All 3 of them are working on nutrient bioavailability. So how do you address this longer term domestically, internationally and opportunity as a company who has made a lot of money with synthetic nitrogen.

Anything that's good for the American farmer, the world farmer is good for the system. And so yes, we follow it. Yes, I've been following for decades. It's always -- this is another one of those promises that is going to come in the future is just the future is always in the future.

And so when that comes, and we have met with many of those companies and have exchange of ideas, but a plant is like a child and you feed your child daily. And then when they reach puberty consumption increases. And our corn crop is just like that. It has different growth spurts and it needs a concentrated form of specific nitrogen in order to reach maturity and to have a full head or ear of corn that's where the value sits is in that 1 year. Every plant produces 1 year of corn, maybe 2, but the second one is a dwarf.

And so you have to -- if you're a farmer you want to use what works and what has consistently worked. And for decades, nitrogen has worked very well in that growth cycle. That's why we've gotten better at our precision ag multiple applications of nitrogen. And so we've gone from yielding when I was a young person, 130 bushels an acre to today, 180 bushels. That's the average, but you have some farms that are at 300 bushels of acre.

That hasn't come with microbes, maybe that has supported it a little bit, but the fundamentals of our business, we produce a product that is demanded, consumed and applied in appropriate ways, and we're getting better at that. And so our future is bright for nitrogen.

Yes. Okay. All right. Well, I'll end it there. Bert, thank you so much, Martin, as well. I appreciate you coming out and participating.

Good day, and welcome to the CF Industries Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions].

This event is being recorded. I would now like to turn the conference over to Martin Jarosick. Please go ahead.

Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Chris Bohn, President and CEO; Bert Frost, Executive Vice President and Chief Commercial Officer; and Rich Hoker, Vice President, Interim CFO and Chief Accounting Officer.

CF Industries reported its results for the full year and fourth quarter of 2025 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements.

More detailed information about factors that may affect our performance may be found in our filings with SEC, which are available on our website. Also, you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website.

Now let me introduce Chris Bohn.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the full year 2025, in which we generated adjusted EBITDA of approximately $2.9 billion. These strong results reflect outstanding operational performance by the CF Industries team, the enduring advantages of our manufacturing and distribution network and constructive global nitrogen industry dynamics that have persisted into 2026.

Starting with -- our full year recordable incident rate was 0.26 incidents or 200,000 hours worked, and we experienced our lowest ever number of process safety events. This enabled us to produce 10.1 million tons of gross ammonia in 2025, which represents a 97% utilization rate.

However, that performance is tempered by the incident, our as -- city complex in Mississippi experienced in November. While there are no significant enures,this event is a reminder of why we emphasize individual and process safety every day across our entire network. We do not expect the Yazoo City complex to resume production until the fourth quarter of 2026 at the earliest, given the long lead times required to fabricate and deliver certain equipment. As a result, we expect our network to produce approximately 9.5 million tons of gross ammonia in 2026.

Turning to Blue Point, our joint venture with JERA and Mitsui, the project has progressed well from positive FID in April through hitting all our pen milestones by the end of the year. This included our partner securing offtake from new low-carbon ammonia demand sources and receiving contract for difference awards from the Japanese government. We expect to begin civil work at the Blue Point site in the second quarter of 2026.

Finally, we continue to efficiently convert adjusted EBITDA to free cash flow. At a rate outpacing material and industrial sector averages, as you can see on Slide 10. Net cash from operations in 2025 was $2.75 billion, and free cash flow was approximately $1.8 billion. We returned $1.7 billion to shareholders in 2025. This included deploying over $1.3 billion to repurchase 16.6 million shares, approximately 10% of the outstanding shares at the beginning of the year.

Given our high-performing, high-margin business, progress on strategic initiatives and what we believe are constructive global nitrogen industry dynamics ahead, we expect to continue to generate substantial free cash flow. As a result, we remain firmly committed to our capital allocation framework, investing in the business for growth and returning capital to long-term shareholders.

With that, I'll turn it over to Bert to discuss the global nitrogen market environment. Bert?

Thanks, Chris. For the last 12 to 18 months, we had expected the global nitrogen market to be more balanced in this time frame as new capacity was slated to come online with significant tightening through the end of the decade to follow. However, the global nitrogen market remains tighter than expected. New capacity has been delayed, global production has not maintained historical levels and demand continues to grow. Nowhere is this more apparent than in our indicative global urea cost curve, which we share on Slide 13. Global urea prices are currently trading well above even the high end of the cost for range.

Strong demand led by India, Brazil and North America as well by European buyers securing volumes before the EU's carbon border adjustment mechanism was implemented has pushed demand to the right. At the same time, supply is constrained by natural gas availability in Trinidad and Iran, challenging production economics in Europe and the end of seasonal Chinese urea exports in 2025. Additionally, geopolitical concerns for the Middle East loom over the market.

Through the first half of this year, we do not see any catalysts that would move prices toward the cost curve floor levels. India's February urea tender is atypical for this time of year, suggesting demand continues to meaningfully outstrip lower-than-expected domestic production. CF Industries had a very strong fall 2025 ammonia application season in North America as we position supply well, enabling farmers to capture good value per nitrogen unit from ammonia. This, along with continued strong global corn demand suggests to us that 2026 will be another year of high planted corn acres domestically, helping support nitrogen demand. From a supply perspective, we believe global nitrogen channel inventories are lower than historical averages.

Chinese urea exports are also unlikely to return until the end of the Northern Hemisphere spring application season. However, we do expect that new North American ammonia capacity should come online at full rates will affect prices for globally traded ammonia but will not impact tightness for urea or UAN. As a result, we expect the global nitrogen market to remain constructive in the near term. At the same time, interest in low-carbon ammonia and low carbon nitrogen products continues to grow, both for tonnes from our Donaldsonville complex and for our portion of Blue Point volumes. In the near term, global customers have demonstrated a willingness to pay a premium for low carbon ammonia given the benefits for their sustainability goals. We also expect demand to continue to grow from customers in Europe and Africa, seeking to reduce additional costs from EU regulations on carbon.

We're also excited about the progress we're making domestically as we work with domestic retailers and end users of ag and industrial products to lower carbon footprint of their value chain. Most significantly, we have advanced our pilot project with POET, the world's largest producer of biofuels and with retailers in the U.S. to enable the production of low-carbon ethanol. We expect the project will be a model or building a low-carbon ammonia and nitrogen fertilizer supply chain in the U.S. and in North America.

With that, I'll turn it over to Rich.

Thanks, Bert, and good morning, everyone.

For the full year 2025, the company reported net earnings attributable to common stockholders of approximately $1.5 billion or $8.97 per diluted share was approximately $2.8 billion and adjusted EBITDA was approximately $2.9 billion. For the fourth quarter of 2025, we reported net earnings attributable to common stockholders of $404 million, or $2.59 per diluted share. EBITDA for the quarter was $731 million and adjusted EBITDA was $821 million.

For the fourth quarter, we recorded 2 impairment charges totaling $76 million, of which $51 million was related to the electrolyzer pilot project at the Donaldsonville complex in Louisiana. We made the decision not to continue to invest in this pilot project given its return profile. We also recorded a $25 million impairment charge related to the incident at Yazoo City that Chris mentioned earlier. We satisfied the business interruption insurance deductible in December and expect to begin receiving insurance proceeds based on lost profitability during 2026.

During the fourth quarter of 2025, we also completed a $1 billion senior notes offering. We did this both to refinance $750 million in debt that was coming due in December 2026, and to further strengthen our financial flexibility. Looking ahead, we expect capital expenditures in 2026 to total approximately $1.3 billion on a consolidated basis. CF Industries portion of this is approximately $950 million, which includes $550 million for sustaining CapEx for our existing network, plus approximately $400 million relating to both the Blue Point joint venture and the common infrastructure we are building.

Finally, we repurchased 4.1 million shares for $340 million in the fourth quarter. These repurchases completed our $3 billion share repurchase program, which was authorized in 2022. After this was completed, we commenced our $2 billion program, which was authorized by our Board in 2025. Approximately $1.7 billion remains on the 2025 program, which expires in December 2029.

With that, Chris will provide some closing remarks before we open the call to Q&A.

Thanks, Rich. First and foremost, I want to thank CF Industries employees for their contributions to our success in 2025. They delivered fantastic results in the midst of the tumultuous global nitrogen market and did so with a focus on safety. We're extremely proud of what our 2,900 employees can accomplish when moving in the same direction towards shared goals.

2025 showed how much we can do. from operational excellence and positive FID for Blue Point to completing 2 major decarbonization projects and securing our first low-carbon ammonia sales for our premium. This level of execution is not a [ 1-year ] story, but rather has been consistently delivered over time. This, along with our operational advantages and structural advantages in where we operate underpins our ability to invest in growth and return in capital. This, in turn, increases long-term shareholder participation in our underlying assets and the free cash flow they generate.

As you can see on Slide 9, we have increased nitrogen participation per share by over 35% in just the last 5 years. Given our strong core business, strategic growth initiatives in our near medium and long-term outlook for tightening global nitrogen market, we believe we are well positioned to build on this track record and continue to create substantial value for long-term shareholders.

With that, operator, we'll now open the call to questions.

[Operator Instructions]. Our first question from Andrew Wong of RBC Capital Markets.

I just wanted to ask about the pace of spending at the Blue Point project, it looked like some of the project might have been pushed years -- just talk about that just the [indiscernible].

Andrew, I think you broke up a little bit, but I believe your question was related to the slide we had in the deck on Slide 12, just the capital cost related -- excuse me, Slide 15, the capital costs related to the Blue point. So the overall expenditure for Blue Point hasn't changed our -- it's still projected at $3.7 billion. But with any project of this size, as you get closer and get into it, both from ordering some of the long lead items like we've done and engaging the modular contractors, you get a better idea of not only what the costs are, which haven't changed here but also the timing of when that cost is going to occur.

So we thought it would be worthwhile just given that we've moved into that stage just to reupdate what the cash flow outflow will look like over the next 5 years. I think the important part of that slide on Slide 15 is the bottom line where it shows what's our annual cash outflow as a company. And given our free cash flow generation and the strength of it at $1.8 billion last year, $1.5 billion the year before.

You can see the level of CapEx going out each of those years. is not something that we're concerned about affecting other capital allocation decisions in which we're making. And that's really one of the reasons why with this growth platform that we structured the deal the way we did, taking a 40% interest in it so that we'd be able to manage and continue to be strategic in how we do other growth projects, but also return cash to our shareholders.

Okay. Great. And then maybe just a little bit more on Blue Point here. I recall there being quite a lot of room for expansion nearby on that site. CF is obviously building themselves some of the logistics and infrastructure there potentially to handle more volumes in the future. And so I know it's still early days here, but if we're thinking longer term, like 5, 10 years from now, does it make sense that we'll see a larger complex there? And is there a timing where it's more efficient to like so that you have workers that are already working at Blue Point to move to the second side? Like how should we think about that?

Yes. So initially here, I would say our focus is on the first site. But you're right, the common infrastructure we're building, there'll be synergies where if we were to build a second plant, we wouldn't have near the level of expense that we would have for this first site. And the site itself that we purchased could hold up to 5 ammonia plants world scale the size of this one, 1.5 million metric tons. So it is an organic growth platform that we're looking at here, what the timing is where we had moved into a second site, I'm not certain that we know that just yet. There are some questions that we want to answer as we get into these modular yards.

But I think as we look at the long-term dynamics of the nitrogen market, there's just not enough new supply coming on to meet demand. So as we see that going forward, we do think there will be a tightening in the S&D that will provide other organic opportunities for us, but nothing to mention right now.

Our next question comes from Joel Jackson of BMO Capital Markets.

I want to talk to you about CBAM, obviously, a lot in the news on CBAM. So what I want to ask you about is it different scenarios. If CBAM for fertilizers goes as is, if there's some suspension on fertilizer, if you get some offsets and other cost subsidies that sort of offset it. What does that mean for a, your business, sort of this year? And then what does it mean for returns on Blue Point as you have modeled it in the different CBAM areas?

Yes. So maybe I'll start with CBAM, and then I'll get to the implications on the business in Blue Point. So CBAM, today, while there's a lot of uncertainty around it, it's in place. And so it's happening. We are continuing to see our European customers show interest in low-carbon product and willingness to pay a premium for it. So I think that speaks to their thoughts that it's going to maintain. I think the weather CBAM stays or goes is probably more of an issue for European producers than it is for our North American centric production base.

We view CBAM as one of several opportunities and -- team and the Clean Energy team have been working on many different sales that go outside of Europe that we're receiving premiums on some here building in the U.S., others in Asia and Africa, that we don't necessarily have everything tag where it has to be from a CBAM standpoint.

Now what I'll say is if CBAM's altered or goes away. At some point, there's going to be some type of carbon program in Europe. And us having low carbon product, these benefits should accrue to us in that. regarding how this is going to affect our business, I would say, as we talked about before, we did not model in any type of premium from Blue Point or even in our Donaldsonville production with related to low-carbon products.

So all of that is upside to our internal rate of returns on that. So when you think about the CCS project, we started online last year at Donaldsonville. We weren't looking at anything besides the 45Q benefit that we would get from that. Now we're realizing that we're able to sell that at a premium. So that's building on that. And similar with Blue Point, our analysis was without looking at any type of product premium.

Okay. And then second question. On Yazoo City, when the plant starts, hopefully, end of the year, will it look the same as it did before. Will the mix be the same? And maybe you can just elaborate a little bit more on, is there specifically for equipment that you really need to get in that that's the manufacturing schedule that you have to hit to get in Q4?

Yes. Just to remind everybody on the Yazoo plant, so where the incident occurred within the ammonium nitrate plant, the site itself has an ammonia plant, a urea liquor plant and nitric acid plants. All that has been effect -- has been unaffected. However, given there's the site's not logistically equipped to move that much net ammonia if the upgrades are not operating, that's why the entire plant is down right now.

So the only point that we're looking to rebuild here is the ammonium nitrate plant. And I would say it's too early to judge on a lot of different aspects of that, but our intent is to get the pent up as soon as possible. The time frame that we've given with late Q4 here in 2026 is just as we've gone out to get switchgear and some of the electrical stuff, which is longer lead time items, we've been given those dates as delivery.

If it comes in sooner, that would be excellent. But we're right now just basing it on that. Maybe I'll -- just on this particular point with Yazoo City, I'll have Rich talk through some of the economics for 2026.

Yes. Thanks, Chris. Joel, in terms of the economics, the full year EBITDA impact of not running the Yazoo complex, is it going to be in the $200 million range. And again, that's an EBITDA number. But I also want to highlight, we mentioned in our prepared remarks that we have business interruption insurance for the site. And so we are working with our insurance carriers we're pulling together all of those claims, and we would expect to be receiving those business interruption proceeds during 2026.

And our goal is to see if we can offset most or all of that kind of loss with the insurance proceeds because that's the program that we have. I'll also mention that the timing of those insurance proceeds are going to be a little bumpy because we will record those as they come in to the company, but that's the impact.

Our next question comes from Ben Theurer of Barclays.

Just wanted to kind of like get a little more commentary around the current tightness in the market. And you've laid this out as '25 was expected to be not as tight and it was actually tightest at the end of it, and we saw this you guys doing almost $3 billion in EBITDA versus the $2.5 million that you talked about kind of on the current mid-cycle.

So as we look into 2026 and some of the drivers that you think can take you towards the mid-cycle of $3 billion, some of them might come already in 2026. So how should we think about, a, the market and be some of these drivers over more EBITDA generation, the tax credits, et cetera, as we move through 2026, considering the $200 million miss on -- asset related expansion?

Ben, this is Bert. And relative to 2025, a very interesting market as things unfolded globally. And because we're -- we participate in the global market, A lot of those issues drive what happens in different regions. And starting off with the conflict in the Middle East, which shut down production in Iran and in Egypt, and then you had high demand levels in India throughout the year, much higher than expected. I think the industry expected $6 million, we were close to $10 million and additional demand for Brazil and then European difficulty due to high gas cost took production down and it required higher levels of imports. And then the United States planting 98 million acres of corn, incremental tons were needed to satisfy that demand. even though we carried in lower inventory levels into fertilizer year '26. So a very interesting market and the combination of lack of supply and high demand drove the market to levels that were unexpected.

That dynamic is carrying forward into 2026. We expect -- the USDA came out with 93 million acres of corn. I think the industry would say it's that or higher. So consistently, I would say, over the last 10 years, higher corn acres, so higher demand. And you're seeing additional needs for India, the current tender that was announced or opened on Wednesday, when those numbers will be probably disclosed tomorrow or early next week.

And then you're seeing, again, around the world with $11 gas in Europe and CBAM issues, you're seeing higher levels of imports eventually will come there. and South America as well. So again, a positive demand and probably limited supply. So you're seeing today in NOLA, urea pricing at $450 a short ton which is $100 higher than it was in December of 2025. So exceptionally positive dynamics driving the industry in North America where the preponderance of our production is located and we're participating in that market.

Then you have the positive gas dynamics that are taking place. Today, we're at $3 for the forward market, positive economics for that structure as well. So we see 2026 as being at least through the first half having a challenging market on supply and high demand going forward.

Yes, Ben, and I think you framed it nicely when you talked about 2025 that we thought would be balanced, some people thought a little bit long, same thing with '26. And as Bert just mentioned, '25 came out with $2.9 billion in EBITDA and the first half of '26 certainly looks very strong here. And all of that is sort of bridging those years to where the market gets what I think is going to be even tighter given the lack of new supply coming on, saying that's up for when Blue Point does come on the market.

And that's why in our commentary, we said we see the near, medium and long-term nitrogen dynamics, very strong because we've bridged kind of a little bit of that time frame where we thought we'd be balanced during this, and it's actually tighter.

Related to the tax credit piece for next year, we will have a full year of the carbon capture and sequestration unit operating at Donaldsonville. Last year, we did about 700,000 tons we had sequestered. This year, it will be just under 1.5 million tons that will sequester. And that number is really based on just amount of process CO2 we have remaining after we do upgrades and with the plant turnaround schedules with ammonia plants being down. So we're going to max out the most we can sequester during that particular time frame. And right now, we're thinking that's around 1.5 million tons for 2026.

Our next question comes from Mike Sison of Wells Fargo.

Yes, I just had a quick question on CBAM, again. So if it goes away, does that make difficult or maybe impossible to get a premium price for Blue Point? And if it stays, then there's a good chance to get a premium for Blue Point? And then just curious what you're all hearing in terms of timing when we'll find out on a decision for that by the...

Yes. So with CBAM, I mean, I think it's more complicated than just whether CBAM stays or not because you have the whole scheme over there that gives free allowances that are beginning to stop. Does that continue where they don't receive those free allowances, which then would basically push European producer cost even higher without CBAM. And I think on the premium side, I'll let Bert comment on this a little bit more, but I think it goes beyond what we're hearing from European customers about buying low-carbon product when it comes to the premium.

The premiums in place, we have contracts in place for 2026 in demand for more. So we are constructive. We continue to have further dialogue. I agree with Chris, that this is set in motion, CBAM that is in carbon pricing. This is a train that has left the station, I believe. And so how that transpires to CBAM and our premiums were constructive. And we're even seeing that now across the globe with industrial customers and agricultural customers desiring low-carbon products. So I don't see that decreasing at all.

Got it. And then just 1 quick follow-up. Given the dynamics you shared for nitrogen this year. Is your bias that pricing kind of stays at this level and maybe the biases may be potentially to go up from here? Or how do you sort of see the kind of the scenarios for potential pricing there?

Yes. I'm never biased. I'm just correct. I think that because this is a global market, and you have so many different dynamics driving the world price structure with different producers and different localities producing this product that don't consume it. And you have some very gigantic producing places like China that are sometimes in and sometimes out of the market. And then you couple that with 3 to 4 months of demand in North America of actually using this product in 6 to 7 months of inventory build. And so you have to be a student of the market and follow these things. And we had an opinion coming out of Q4 or in Q4 that because of the supply demand dynamics I had explained earlier, we were on an uptick of pricing, a positive uptick in pricing, and that has transpired. How much further it goes. There's all kinds of expectations in the market today. I think there is still room to go, especially in North America. But I do think there will be a correction in the back half of the year like there always is, as we move from the Northern Hemisphere to the Southern Hemisphere of planting.

Our next question comes from Kristen Owen of Oppenheimer.

Carbon opportunities and maybe double-click on the agreement with POET for the low carbon fertilizers. Just given some of the proposed changes in the 45 guidelines, practice changes, I'm wondering how you're thinking about low CI fertilizer demand opportunity domestically. And if those 45 tax credits maybe help improve the unit economics or pricing premium that you're seeing here in the U.S.

Yes. So for the -- we missed a little bit of the first part of your question, but it's about low carbon and low carbon ag sector and the consumption of that product and the demand profile going forward. And our agreement with POET is exciting. POET is a super strong company and the leader in biofuels. We're also talking to other ethanol producers.

But the vision is about the core value chain. And how do you take a low-carbon corn? Well, how do you create that with low carbon fertilizer, who supplies that we do and who has plenty of supply for our customers, we're building it. And so as you take that low carbon product through the value chain and as the ethanol plants decarbonize themselves, there's a tremendous opportunity for domestic and export ethanol demand to be satisfied by the United States. And we're the one place that can supply that in terms of the gasoline blends globally.

And then for low carbon or low CI score fertilizer as well, we're seeing -- we're having conversations. We're seeing demand through the retail sector driven by the CPGs and other food producers as they look at their sustainability goals and Scope 3 and scope emissions.

Yes. And I think anything related to the 45V is just going to be an upside to us. As Bert mentioned, he's hearing enough activity even though at this particular point, low carbon fertilizer is not recognized in the 45V now that is up for comment right now as the USDA is defining what are those qualifying activities and you would think low-carbon fertilizer, which would be an attractive pathway as it's very easy to verify what is the carbon score of that. So we're hopeful that gets included. But as Bert mentioned, he's already getting interest in that, even with it not being included in the 45V just yet.

Super interesting. My follow-up question is a little more boring and on the modeling. So you -- can you just remind us your operating costs in 2026 you threw out the $200 million EBITDA headwind from Yazoo City, I imagine there are some stranded costs or overhead costs that won't be recoverable through the BI insurance just some thoughts around operating costs and any sort of turnaround that we should be thinking about in 2026?

Yes. In terms of the BI, our hope is that virtually all those costs are going to be recovered through we're not expecting anything major outside of that. And as we go through the rest of the year, our turnaround schedule, I think, is projected to be pretty normal in terms of what we would normally expect. So I don't really have anything I want to highlight.

Our next question comes from Christopher Parkinson of Wolfe Research.

Just a short-term question and a lot of questions for me. The short term, just Bert. Going back to some of the things you were discussing before, how are you thinking about order book flexibility into this year? I mean farmers are just now getting some deferred direct payments. you're waiting news RVO EO15 and then you mentioned India, Iran, Trinidad out, Texas capacity and it seems like there are more moving parts now than in previous years. at least going back to '22, let's say. How are you thinking about that with your team? Are you leaving some flexibility as you enter spring? Or are you happy with prices where they are now?

Yes. In general, we're pleased with our order book. And as I highlighted earlier, coming out of 2025 into 2026, we carried some inventory in to 2026 on purpose because of these dynamics that we're laying out that -- and this has been the discussion. We just finished the TFI, The Fertilizer Institute meetings in Orlando this week with all of our major customers. And the message is we're heading into a logistics game that as good as the weather has been that it's been warm. We're seeing applications already start Texas, Kansas, Oklahoma and Nebraska. And I think that's going to be even more pronounced and we could see in early spring, similar to what we did in 2012.

If that is the case or even if it's normal, we're approaching where the need to get products where you have difficulties on the river due to low water, you have, we believe, shortages or lower inventories in the upper Midwest. There's been a number of plant issues in our sector in Canada and through the winter storm that came through in January, we think there's been some downtime. All that equates to lower levels of available product and we're having 93 million, 94 million, 95 million acres of corn.

So in terms of the flexibility, we're all about execution right now, identifying where the product needs to be, where are the orders placed against our terminals and plants and communicating with our customers where they believe they're going to be requiring tons and then communicating about those -- getting those orders placed and in the process and working with our freight providers, the railroads, the barge companies to move it. So this is all about execution from now forward.

And perhaps a slightly longer-term question. There's obviously been a few questions here already on CBAM. But switching over to the other side of the Blue Point equation and heading to the east, Pan has actually been moving as far as I can tell, further forward, you've seen as of December medi certifications further go forward on a $20 billion hydrogen hub a lot of those consumers and potential have lost supply agreements with others based on 3 project cancellations, 1 long-term deferral and 1 final blue -- blue ammonia facility that's, let's say, currently a flux for the next 6 months. As much as everybody is focusing on Europe, do you think the buy side and the Street is missing something more pronounced in Japan that's still ongoing?

Yes. I think it's an excellent point, Chris. I mean, as we mentioned every 1 years ago thought that there was just going to be this big wave of low-carbon supply coming online. And we had said, it's easy to announce a project, it's difficult to execute on it. And so as you mentioned, a lot of those projects have fallen off. Now what we're continuing to see a lot of interest in, and it goes beyond Japan and Asia, but it is in low carbon. And I think the JERA and the Mitsui and others over there are the leaders in this.

I think more importantly, it's not only the low carbon aspect of it, it's for a new demand source. And that's something that when you look at the Medi agreement and what they were able to do with the contract for difference, their 60% of this new plant is going to a new demand source that didn't exist a year ago. And so we're optimistic that we continue to build out on that along with continuing to see additional demand growth in the legacy agricultural business of sort of that 1% to 2% a year. And all those factors are why we are suggesting that longer term, not enough supply coming on, new demand centers coming on and then just the regular legacy growth that we're going to have a very tight market when Blue Point does come up.

Our next question comes from Lucas Beaumont of UBS.

I just wanted to go back to the sort of difference between the pricing outlook and the cost curve. So I mean, we've had like strong pricing to start the year. Cost care has moved up a bit. but not as much. And I mean the sort of premium there is going to widen. And as we look further out, the energy futures curve continues to ship lower kind of now into like the [ $7 to $8.50 ] range kind of later in the decade. So I just wanted to sort of get your view on how is that sort of resolved with your view of sustained market shortages on the supply side? Does this kind of need to correct in some way? Or do you expect it to persist, I guess, through this year and then into the medium term?

Yes. Maybe I'll start. So on that, from a longer-term standpoint, there is the gas differential that you're talking about. And today, that sits at around $7 to $8 per MMBtu delta. We do expect that, that will converge a little bit with Henry Hub by no means do we think that goes away or flattens to a level that doesn't keep us economically competitive.

But I think there's another side of that, that we've just been talking about on many of these questions through here, which is the SMB side. So yes, you have the COGS side of what it would cost, but you have to bring on new capital in order to meet that demand growth without even clean energy growth coming into this, just the incremental growth of demand is going to push the cost curve demand side farther to the right, having to pull in either higher cost production than we have today or require new plants to be built. And like I said, our plants alone at $3.7 billion, capital costs are only going up. And with that, people are going to expect returns.

So I think as we look at -- we expect the natural gas differential to continue, but we also expect that we're going to see demand move to the right on the cost curve and also the cost curve to be supported by new plants that are going to be needed and required or high-cost production to remain in.

And that also doesn't consider just what's going on dynamically around the world with energy and shortages of energy in certain locales like Trinidad or high-cost energy in Europe and suboptimally operating at 80% or less as well as other specific locations of limited production. Brazil is going to be bringing back. They're supposedly, their plants that would have been -- not been operating over the last several years. And so supply is limited that we see in the forward demand continues to grow, but also supply continues to be cut in other locations, making for a very solid structural market, as Chris explained.

All right. And then I guess just maybe a bit of a short-term question on the Middle East tensions with Iran. So I mean, they're about 10% of the global urea export markets. I guess, how would you see the market dealing with any disruption to production there and the impact on pricing? And I guess how would that sort of need to flow through from a timing perspective in terms of, I guess, disruption to the shipments before it's really starting to have an impact and how long it would be down.

Yes. If you look at the Middle East and the suppliers that are located there, the producers, are in Iran, Oman, Qatar, Saudi Arabia and UAE for urea, that's about 20 million tons. So in a globally traded ocean going traded ton, that's about 35% of the world's supply that goes through the straight of homes or close to it.

However, you also have to look at ammonia where those same countries referenced are about 5 million tons or also 30% of the globally traded ammonia ton. And so if something were to happen, the constraining factor to supply would be pronounced. As well as LNG, about 25% of the world's LNG also transit through that the straight. So if conflict were to occur, it would be, I would think, even more difficult or more challenging than the current situation in Russia and Ukraine and moving out of the Black Sea.

Our next question comes from Vincent Andrews of Morgan Stanley.

This is Justin Pellegrino on for Vincent. Thank you for all the commentary on where prices and market commentary are headed over the last few weeks. But I kind of wanted to step back and go back to Blue Point for a second. You mentioned earlier in the call that as you kind of started going through the process, permitting or whatever, that the time line might have you shifted around a little bit. And I was just curious, where have the pressure points been as you started to go through the process, whether that be tariffs, labor, whatever it may be? And then can you kind of just flag anything that we should be watching as that project starts to progress through the stages and anything else that's worth talking about there?

Yes. Thanks, Justin. The timing really hasn't shifted at all. So our expectation is still in 2029, the plant will come on by timing, I mean timing of payments. In which case, as you get closer into these larger projects and you're actually talking to the -- whether it be the modular yards to civil contractors, you've engaged different things like that, you have a better idea of when those payments would be going out. Nothing's changed from our time line on the particular project.

I think as far as milestones go, as I mentioned, we've pretty much achieved the milestones that we have in place where the next big ones would be the air permit and Army Core permit as we look to build the heavy haul bridge that will bring the modules over Additionally, as we start to do some of the civil work, which our expectation is here in the next couple of months, we'll start moving ground, driving piles. We've already driven test piles.

So I think right now, there isn't much of these milestones other than the permitting process, which, like I said, our expectation is that we will have that going here in the next couple of months. The other part that I should mention is of our $3.7 billion in total capital spend, we still have about $500 million of that, that is built in as contingency.

So not knowing really where tariffs are going to fall out based on Supreme Court and also that a lot of this lead time -- longer lead time stuff doesn't come for 3 years, but we do have a sizable contingency built into this particular project.

Our next question comes from Edlain Rodriguez of Mizuho.

Just 1 quick 1 for me. We've had some affordability issues with phosphate. And of course, you don't produce that, but you know what's going on there. And with urea prices moving higher, like any concerns about affordability in nitrogen, like is it better to be as affordable as possible just to prevent a bunch of issues or the market will just determine where nitrogen lands on the affordability spectrum, and we just have to deal with it?

Yes. Edlain, I think you raised an important issue because we're a part of a value chain that the farmer plays the most important role because he or she is planting and harvesting and storing many times those crops and then there's a payout. And so we do study that. We do study where that lays out for the major crops, corn, soybeans, wheat, cotton, sugar, at least for North America and what those economics look like.

We are in a global market, however, and product moves pretty freely around the world from the Middle East to North America, from North America to Europe from Russia to North to the United States and like same thing with corn and soybeans. And so I think we're aware of that. We're looking at what that means for -- in terms of return on variable costs, return on full cost.

And I think the Trump money that flowed down from Washington is helpful for in terms of balance of payments. I do think there are some credit issues in certain parts of at least the United States, I'm aware of that retailers are holding and those are conversations with how they balance their year, and so yes, we're aware, yes, we're following it. And yes, we want to be a part of the solution for the American and Canadian farmer.

Our next question comes from Matthew DeYoe of Bank of America.

I don't know. You had mentioned Brazil, and so I wanted to tap in a little bit on that and the plants that were being restarted. I know it's not your plants, and so companies don't often like to highlight or talk about that a little bit. But at least from a headline basis, there's like 1 million tons of urea in that production. And effectively, it was supposed to be started up or starting to start up by the back half of last year. seems like you're calling for Brazilian urea to be flat on an import basis year-over-year. Is there some expectation that growth is in there? Or are you treating that plant -- those plants is 0? Or is it they'll take too long to ramp and demand will offset. I'm just kind of wondering your thoughts on that. And in general, I guess, like recommissioning in the commissioning cycle in plants and how that's creating or can create gaps in supply.

Yes. Brazil has been an amazing story over the last 25 years with their consumption of urea and especially on imports because they become one of the drivers of the glow of demand. But if you go back to those earlier years, it was about 2 million, 2.5 million tons of imports to today, almost 8 million tons of imports, but parallel to that ammonium sulfate coming in at also around 8 million tons.

So on the molecule or the end product, the nitrogen product coming into Brazil has grown substantially, onionitrate being fairly consistent. And so what has happened, though, during that time period, these plants are -- you have the plant in Parana -- close to Paranagua and in Camacari and some of the plants in [ Suci bay ] that are up north. Those plants are not well placed, at least the northern plants to where demand is, and they've struggled to operate over the years, one that they're inefficient to that their high logistics costs to move the product to the high-demand areas.

Brazil continues to grow in acres and acres planted and especially with the double cropping being economically viable. And so we do see these plants coming on, and they've also talked about reinitiating construction [ Planadas de sul ] that was stopped about 10 or 15 years ago. And so Brazil has the capability. What they don't have is the gas where these plants are producing or enough as that's been an issue as well. So they get to an initiative of the Lula government [ Ifetroban ] to continue to invest and serve their domestic farmers as they can. But Brazil will still be a major importer, a major driver of urea demand or nitrogen demand worldwide.

Yes. And just from the urea supply side in Brazil, I'm probably a little more skeptical than others on this just from my time in manufacturing and what the cost would be to bring plants that have been idle, but likely were not necessarily taken down just because of the number of years they've been down. I think the capital -- the upfront capital cost to do that and then the efficiency of those particular plants after they are up would cause a lot of issues. So I'm still in a wait and see what happens with those particular facilities.

Now loan on that, Bert, I just wanted to know what the -- your input.

Our next question comes from David Symonds of BNP.

I just wanted to ask on your assumption of a 4 million to 6 million tonne export quota from China in 2026. That's pretty much flat year-on-year versus what they did in 2025. And my understanding is they've got 4 million tonnes of additional capacity coming online at some point through the year and I think inventories are still quite high. So I've been penciling in a little bit more than 6 million, like 6 million, 7 million tonnes. Just curious to hear your thoughts on that.

I think that's possible. I think we've seen a different China in most years from the heydays of their export activity in 2015, '16, '17 to really pulling that back and recognizing the economic and political benefit of exporting that urea is fairly de minimis. But keeping that product in country for the Chinese farmers and the growth of Chinese production has been important to them. So I think there is a differential between the domestic price and the international opportunity.

Last year, you're correct, it was around 5 million tons of exports, and we're penciling in. We're being conservative to say that, that maybe something that the government is initiating. But if you take their capacity and run it at an 80% plus or minus run rate, they really don't have that much to export, and that's about the run rate they've been running over the last several years. So I would say your number might be a little high, but we'll have to have a coffee over that number next at the end of the year.

This concludes our question-and-answer session. I would like to turn the conference back over to Martin Jarosick for closing remarks.

Thank you, everyone, for joining us today. We look forward to seeing you at upcoming conferences.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Well, listen, thanks, everybody, for coming out this morning. Always good to get up like the ag space we got here, farmers wake early, so we're starting at 8. I just got to read a quick disclaimer. And then after that, we'll jump into some Q&A. We're very happy to welcome the CF team up here with us today. Again, it's a company I've known through, I guess, 25 years now. So a lot of change in that 25 years. So it's always a fun discussion. Ag is really close to my heart as I kind of grew around ag on a couple of farms. So it's an interesting space for me.

But we're required to make certain disclosures and public appearances about Goldman Sachs relationships with companies that we discuss. The disclosures relate to investment banking relationships, compensation received and 1% or more ownership. We're prepared to read aloud disclosures for any issuer upon request. However, these disclosures are available on our most recent reports available to you as clients on our firm's portal. So anyway, with that, again, Martin, Bert, thanks so much for spending some time with us today.

Maybe start off. Let's just kind of level set 2025. When you look back, if you were on Jan 1, kind of what you expected this year versus what's played out, what ended up being better, what ended up being worse? And then kind of a follow-on from that, we'll go to how does that set us up for 2026 then?

I think the amazing thing about our space in fertilizer is that it's the surprises that come throughout the year and how do you manage for them and against them in your system. It's a global market. And so we're competing globally. We at CF are moving products globally. But you have to remember, most countries and most places that consume our products have one application per year. So you have in the North American market, April, May, June and in the South American market with 2 crops, a little more.

And so you're always looking to where inventories are, production rates, how products are moving, how products are being priced. And I think the surprises of 2025 were -- the first one is the war. And so what that did to production. And so this was a supply -- a lack of supply-driven market and prices reflected that. So you took off uranium production due to weather, which is the cold weather and they generally use the gas for domestic consumption. And then the war probably took 2 million tons off the market. Same thing with Egypt, lack of gas from Israel from the lithium field.

And so those 2 combined and then increased demand in India, which has been tendering throughout the year, very positive demand in Brazil. And then obviously, high gas costs in Europe, limited production there, so more imports to Europe. I would say supply constrained, demand driven and that created a market where we hit almost $500 a ton in June for urea in the United States. And so that is, again -- we have to attract tons into the United States. I think the tariff disruptions of April 1 that were announced and basically the Trump administration tariff to everybody, except Russia, and those tons then it slowed down imports. Producers, let's take Algeria. Algeria, it's not my problem. It's the traders' problem. The traders is not my problem. It's the destination has to pay. The destination market being the United States, I don't want to pay for that.

So we had a lack of supply coming in right during our peak months. I think that also had an impact on pricing. Where we are today as we're exiting 2025 is a more moderated market. So pricing has come off those highs for today and for urea at $360 plus or minus. And that -- I think supply has come back into the market. China was a surprise in the back half with exporting. India continuing to buy. So we're -- as we exit the year, we're at a balance to a still tight supply market with good demand dynamics heading into 2026.

Fair enough. And then maybe discuss how you view farmer economics. Obviously, we read a lot of stuff in the Wall Street Journal, New York Times about the stress that farmers are seeing. I'm a little bit of a skeptic. I mean it's not as good as it was 3 years ago, 4 years ago, but we still don't need to rule out Willie Nelson for farm aid yet at least. But do you think that's having an impact or will have an impact on your business next year that farmers are making less money than they were a couple of years ago? Are you seeing that?

So we track that. And we -- just like you, I come from a family -- farm family or family with a farm and ours in Colorado, I think yours is in Nebraska. I grew up in an ag community in Kansas, went to Kansas State, have contacts to kind of pressure test. Where are you? What's going on? What are the drivers? We talked about the corn-soybean ratio, what crops should be planted and as well as my contacts in the ag space with ADMs, cargoes and those folks.

So I think it has been challenged. And you're right, we had some very good years earlier, 2022, 2023 and a more challenged year on the revenue side. What people don't remember or don't calculate is the revenue guarantee programs because of the crop insurance. And so with the price that was set at $470 with good yields, you're going to have -- you're going to cash flow okay, especially in the I states, Indiana, Illinois, Iowa and Nebraska, we'll call an I state. But we've had -- and if you look at the yields this year in the dry land areas of North Dakota, South Dakota, that trend yield is 188 million. That tells you that the more challenged areas had higher yields. So again, more revenue.

I think the issues with soybeans and the exports to China or lack thereof, where it's a challenge of movement, and that then hit pricing. We're starting to see some escalation in pricing that will positively impact the farm center. As we look to 2026, I still say corn is the favorite product to plant. We have a good -- with the feed ration what's going on in the protein sector with beef, pork and poultry, we have a very good demand base there that will consume a good portion.

Then the ethanol business, I think that's a little bit more challenged with petroleum at $60, but it's still -- we've got a good demand base just based on regulated demand. And then it's the exports of corn that don't go to China, they go to Mexico and other places. So we have -- I would say 98 million acres of corn that were planted in 2025, fantastic. People don't understand how much that -- how many acres that is. We'll probably be down to 92 million, 93 million, but still good for 2026.

Okay. And that drop of -- let's say, it's 5 million, 98 million to 93 million, just for round number 5 million. How big of an impact does that have on your business on AN consumption in the U.S., because there's a couple of ways to look at it. You had such a huge crop this year, you've mined a lot of AN from the soil this year. So maybe a 2-part question. So how are you seeing the fall application season progress in the U.S.? And then what do you think that does to AN demand next year, let's say, 5 million less acres of corn maybe going to soy?

So how we look at it because we're a supplier of the major AN products, ammonia, urea and UAN. Urea and UAN are applied in the spring, ammonia can be applied in the fall and the spring. And so we have a fall -- like you talk about a fall season that is only in November. Ambient temperature has to hit 50 degrees, soil temperature has to hit with good soil and moisture.

We had a very good -- and this is a nice indication for 2026. We had a very good fall application season, could have been even better, but it was limited by weather. This -- you're not seeing in New York like we're seeing in Chicago, but the 8 inches of snow we got right at Thanksgiving and the cold weather, that just absolutely stops it. And so -- but inventories are low. The trend in what this to me signifies is healthy corn acres again. We could have sold more. We'll have to push that to spring, and that will be a March, April application period for ammonia.

Okay. And then do you -- but if you've got fewer acres theoretically next year, does that hit demand next year enough that it's a speed bump for you or you don't think you'll feel it much at all?

I think it's a speed bump. When you -- let's call it, 5 million to 6 million acres. And in terms of pounds per acre and you calculate that out, you'll see additional wheat acres. That will take some AN demand and probably other products will take -- the land won't be fallow. And so if it does go to soybeans, you'll have more phosphate and potash, not as -- probably not any nitrogen on that, but for CF who has the ability to store, to export, to move it and we have these long-standing relationships with our customers, we feel very good about our position going into 2026.

Okay. And what about when you look at the different inventory levels throughout the channel, the different AN products? How do those sit today versus maybe a year ago or kind of the average in the last several 3 or 4 years?

The interesting thing about inventory is, again, the psychological position of a buyer of what is he or she comfortable handling, carrying because there's a cost. There's a cash cost, there's a market risk cost. And so we check that globally. We have channel checks in Brazil. We have channel checks in India. We have channel checks in China. Just to see where are we. Europe, we produce in the U.K. And coming out, the fertilizer year is July through June.

So coming 2025, July was really globally, again, exacerbated by the factors I articulated in the first question of low production and low inventories, high prices. People don't want to carry. So we had low carry-ins to this year and then lost some production on our own in some of our producer friends in the United States. So we believe inventory is low at the retail sector as well as the producer sector. And this is -- a lot of conversations are coming from our customers, and we've tracked them. Probably at this point, I would say they're 30% to 50% bought for spring, where normally they're 70% bought. So a lot of catch-up needs to take place. And I think this is a good market and good price structure for them to do that.

Fair. And then you've mentioned a few hiccups that the industry has had this year. Again, you could throw in Trinidad, some others. How do you track that? I guess some people would talk about kind of unplanned outages. When you look at that this year versus a normal year, how much bigger was the supply disruption, the unexpected supply disruption this year? And when you look at those different issues, is it likely that next year continues to be a bigger-than-average unplanned supply disruption? Or when you look at those, most of them kind of onetime things, you replace a valve, whatever it is, and now you're off to the races again. And so you actually might have more supply next year relative to that?

Yes. I think that's a hard one to project, but it's an easy one to look back on. And so when you look back on Saudi Arabia, for example, Maaden being down for, I think, 6 months. And the lack of supply from the new production that has not come from Gulf Coast and Woodside that has been projected, projected, projected and it hasn't come. We had some disruptions in production. And then you're right, Trinidad with gas is a reality. Europe with gas cost is a reality. Nothing is operating in Brazil. They have several plants that are down and have been down for at least a couple -- a year or 2. And so you can go around the world, Bangladesh, another area that are challenged and then the expectation of additional supply from certain areas, again, back to the earlier comments, didn't come, makes it tight.

Okay. And then if let's say, Ukraine-Russia thing is resolved in some way, so the business can resume, what do you think that does to the global supply-demand balance for AN? How quickly will they be able to -- I don't know the extent of damage to the pipelines and some of the plants and stuff like that, but what's your view? How much do you expect to come out of that area, the Black Sea area incrementally if there is a solution?

So separating the 2, Russia has done a very good job. And one of our frustrations is how much Russian tonnage is coming to the United States. And we've talked about that many different times that we're not -- the one country we're not sanctioning or tariffing is Russia, confusing, but it's still coming. So the product is coming out.

I think the Russian producers, EuroChem, Akron and EuroChem with the EU have done a very good job of creating options coming out of the Baltic with Ust-Luga, which is one of their ports and how they're bringing ammonia. They've also converted or upgraded more ammonia to urea. They've done a good job of investing. The Black Sea really hasn't opened up for exports. The Port of Taman that they've built to export is exposed today where product used to flow through Ukraine to us is shut down. And I don't know if that's going to come back. That was connected to Togliatti, one of the big operations in Russia. That will have to wait until peace is declared and some time is spent.

Sure. Okay. So I guess -- let's exclude that. But how do you see supply-demand next year versus this year, again, kind of across the different AN products? Do things get tighter? Do things get looser in your view? Kind of setting aside the unplanned stuff, but just the book numbers, how do you have that for next year?

So starting with the demand side of where we think demand will be, the stock-to-use ratios of feed grains and what's happening with consumption is positive. That's for protein, for just the movement of feed grains.

I think the question on supply is, generally, we go through some weather issues in the Middle East and Iran is shutting down again for gas use for domestic consumption. I think we're seeing in Europe at $9 to $10 gas, not $20 gas, but I don't think that incentivizes production levels any higher than they were in 2025.

I think Trinidad is still challenged. I would say more supply is available, but not -- we just looked at this internally, our agribusiness analytics group just looked at this week of those numbers and what is the -- when you look at the cost curve, what ton are you bidding in and at what cost level does that take? And that's what happened in 2025. And I think that probably moves a little bit to the left with more supply.

And then the question is China. And we've been pretty consistent with China, has the capability and the kind of consistency of around 4 million tons. That's what happened in 2025. There's discussions that those tons will come out in Q2 of 2026, again, with the licensing or the approvals to export. And if that happens again, then there'll be better supply in Asia.

Okay. So you think it will be roughly the same tons, but a little bit bigger window for next year is how you would handicap China at this point?

Today.

Yes. Okay. Fair enough. And then when you look at the internal Chinese market, because, again, it seems like that's kind of what's driven their decision on how much to export. How do you see the internal supply-demand balance? Is that 4 million the right number to balance that? Or does that leave them either short or long internally in your view?

So it's a good -- I mean that's the opaque question of the day. So when you look at static capacity, which is public and the run rates, which are public and then the amazing thing to me in China is how much of that domestic demand for ag industry and whatever has increased. And so when you look at North America or it kind of goes China, India, North America in terms of overall consumption, India is about 39 million, 40 million tons probably today. China is over 60 million. North America of urea is like 15 million, 16 million. And so it's just a gigantic demand. And China has done a very good job, a centrally controlled country with a lot of power centralized. And if the goal was inexpensive urea for Chinese domestic consumption for Chinese farmers to stay on the farm, goal achieved. Do they care about the export market? I think there are some companies that were -- that build plants to export, and it sounds like they're allowing that to happen on a measured basis.

Okay. And then the Indian impact on AN this year is more positive than it's been in a while. I guess, looking back what do you attribute that to? Do you think that is something that now is sustainable kind of at these higher levels, more active levels of tenders? Or does that turn out to be kind of a onetime blip where they bounced up a little bit maybe to take care of a little bit of a deficit and now they call it even for a while until the farmers scream again?

So the level of imports did surprise the level of demand for the imported ton that I would have said 6 million tons, it's going to be 7 million, 8 million, 9 million tons, which is very positive to the market. And the way they have tendered at 1 million tons at a time to 2 million tons has been consistent. And we expect one more tender probably for January and then they go quiet until their fertilizer year starts in April. But continued demand, a little bit challenged on domestic production. And just the way they subsidize, you have a very consistent good growth of demand of nitrogen, especially against high-cost phosphate. So when you have a choice as a farmer in India, when you're going to buy the stuff that you know works and is reasonably priced.

Okay. And then just because it consumes ammonia, what are you hearing on what the North Africans want to do with DAP-MAP production over the next 3, 4, 5 years? Does that -- are they growing that where that becomes -- would that be a market for you? Or would you look at that as just sopping up a competitor's ton somewhere that gives you more play kind of with direct sales of ammonia?

So the Bakkens are a customer of ours. We do talk with them regularly. They're very good buyers. They're very good operators, and they are growing and their projected growth of investment and their rock situation, the phosphate rock reserves that they have should drive them. And with the pricing of phosphate today being on a historic basis, high. They have every incentive, and we believe they will continue to grow. And yes, we have conversations with them. We ship them one of our first cargoes of low-carbon ammonia. So they're testing how can they be more active in the low-carbon space, which enters new markets for them. So we're excited about what's happening in North Africa.

Yes. You mentioned low carbon, so maybe we can take just a couple of minutes and talk about your effort. So maybe writ large, how does CF approach the low-carbon ammonia market? What are you seeing as far as demand trends go there? Obviously, we know the capital you've kind of already FID, but how are you thinking about future projects or future capacity in this space?

So we're the company to do it. And when we identified this opportunity 4, 5 years ago and communicated that to our investor and customer community that there is a potential, one, because of the geology that's understood in North America; two, the price of natural gas and the capability to access low cost; three, we're the company that does this and operates well and can achieve the higher level of capacity and invest in and get it done on time, on budget.

And so as we approach the market, communicated these -- our situation and the potential, the inbound requests from Asia, Korea, Japan, from Europe for CBAM and low carbon from Morocco for low-carbon products going to -- for phosphate and so -- and other markets. And so where we are, there are a lot of projects announced. I would say over 120 ammonia or low-carbon or hydrogen-focused projects, hardly any of them are going to be built, ours will. And we're already in process.

And -- so we have been very active over these ensuing years of how do we aggregate demand. And so it's with the chemical companies in Europe, the fertilizer companies in Europe for low carbon focused on CBAM. That's going to happen. We already have contracts in place. And then it's the domestic market that we're working on in the ag value chain as well as our industrial customers. We have a fairly large industrial book. And then it's the contract commitments that we already have with our partners, JERA and Mitsui that will focus on Asia. So it's a multipronged effort to make sure that as we come on and that production comes on stream in 2029, that it's allocated, it's understood and it's moving, and we're aggregating value.

Okay. And maybe has the decision been made on the percentage of your Japanese partner in the plant? I know it's like by the end of the year, we're okay. But the goal is still hopefully by the end of the year that there's an announcement on that. Okay. All right.

And I guess, obviously, you're still in communications. The great hope was that particularly in Asia, Korea, Japan, you would use a lot of ammonia kind of maybe coal -- burn it with coal and stuff like that. How are your customers seeing that market develop for them? Obviously, you've got your commitment on your tons, but if we're talking about something that can grow over 10 or 20 years, does it feel like that market is developing as you would have hoped? Or I think what a lot of investors worry about is with kind of Trump backpedaling on a lot of stuff here, that drags a lot of other countries backwards on kind of the carbon commitments. So just, I guess, as we're getting towards the end of the year, what are you seeing as far as the development of the low carbon market in Asia in particular for ammonia?

What I would say is 2 things. These plants are built and like Donaldsonville is almost 60 years old, the first plant, still operating and still doing great. These plants are long-lived and these oscillations that are political or geopolitical or economic or trade-related have a duration as well that are generally short term. And so we have a long-term trend of environmental and improved operations. We are believing in that as well as our partners are as well. And so we have conversations with other companies on future projects and future ideas.

Again, I think North America is the place to invest, and we are the company that can do it, and we have the capability for space and future investments if those partners and rate of return are acceptable to what other options give us. But I do believe that these trends, I think marine is longer dated, but there's still a lot of work being done with the engines and investments. Hydrogen, there's still a lot of conversations going on, but probably a little longer dated, but co-combustion is happening.

Yes. Okay. Fair enough. And just because you mentioned marine, to me, it's always kind of interest. Does ammonia win, does methanol win, does hydrogen win? When you look over this year, has there been any change between the competitiveness of those 3 that would move one or the other further? I mean there's been no technological breakthroughs. But I mean, as you look at that market, is one improved relative to the other 2?

I would say ammonia ships that are moving ammonia and have the capability generally to go LNG or ammonia, that's an easy growth platform. I think the questions around methanol, the questions around kind of the development of the bunkering system is still to come.

Okay. Fair enough. And then our internal view for natural gas is somewhat negative for you guys. I mean we have natural gas going up a decent amount next year relative to this year. And we actually then have globally traded natural gas prices coming down quite a lot that would make Europe fairly competitive where that ratio would come well under 2. When you think about the benefit that we've gotten in the U.S. from very high natural gas in Europe, what does that ratio have to get to that kind of unwinds in your mind? Where did -- I don't want to say where does Europe become competitive because we'll always be lower cost. But it's been pretty easy for us to ship stuff there relative to their cost and we can kind of land stuff cheaper than they can make it there. What's the ratio or what's the level that you would get worried about European gas prices?

So we'll just start with the premise that you're wrong. No, I think that these are -- it's -- there are so many factors in the energy construct of the world, whether the different forms of energy that are used, how those energies are processed and what is set up to process, load, ship, receive and consume. When you look at natural gas, the amazing thing to me, if you have tracked natural gas in North America from 1980 until 2010, it was about 40 to 45 Bcf a day. Fairly consistent. And then just the rocket ship up as the whole shale revolution and then the demand base for the same product.

So today, we're at 108, 109 Bcf a day, amazing, what is happening, okay? So parallel to that is LNG has gone from 0 to 4 to 6 to 8 and just a few months ago, it's 15. Now it's 18 Bcf. So almost, let's say, 18% of the product is being shipped out. Where else in the world is that happening? Australia, Qatar, so there are different places where is it not happening? Well, Trinidad is going down because they don't have the resources. And so this -- the reserves of natural gas in the world where they are and where they need to be and then the demand for those molecules being AI and new generation that's taking place, not only in North America, but Europe and natural gas is going to be the replacement product longer term, I think, over renewables.

And so the project -- this is my opinion, the projection of that compression of global gas to North American gas, I would say, you'll have still remaining -- if you have a compression and the marginal producer is unable to export, most of these people have contracts connected to their LNG operations that you're either going to see much cheaper gas in North America, okay, so maybe it compresses globally. But I don't think -- this is again, my belief, not to the level that Goldman Sachs has put out there. And again, it doesn't take, I don't think, in the full need of what that demand for the molecule is going to be.

Okay. And when you -- because one way I look at it, if you're a global potent, right, you could say, we're gas-rich, Europe's gas short. So we could send it over there as natural gas and produce ammonia there for their farmers or we can produce ammonia or urea or whatever derivative, ship it. And that's a cheaper way to contain basically the natural gas molecule to get it to Europe, right? It's just easier to ship urea than it is with all the compression. Have you done the work on like how much -- like do you look at it the same way and then say, okay, if it is cheaper to do it that way, that's kind of my worst-case buffer at least? It can't get worse than that. And when I do that, it's like $40 a ton on ammonia equivalent. I don't know if that sounds right to you or...

So we look at it -- we've done study after study of looking at -- so you have -- we start with the efficiency of the plants that exist and the age of the plants and the necessary investment. A turnaround is $60 million. If you're not making money, and this is our decision in the U.K. Those plants were older plants, inefficient plants, and we came up to a turnaround and your gas cost is here, your price -- your product pricing is here, that's going to be the question of longer-term investment in Europe and does it -- there was a good article in the Wall Street Journal about just the whole chemical side. Ammonia is in that mix.

And so then you throw in carbon costs, we're going to have low carbon products, and we're going to be taking that to our U.K. operations, and we're going to have low-carbon ammonium nitrate that we produce in the U.K. So there -- I think there are a number of options that have to be looked at for us. We see 3 million or 4 million tons of ammonia still to come offline in Europe due to some of those factors. And then it's -- the cost curve works. And so you bid in the marginal ton when prices are high and that when prices move into a lower level, the high-cost producer shuts down. And today, those are in a few different countries. That's what balances supply and demand.

Fair. Okay. Maybe if we could jump -- we'll run out of time here. I'd love to ask questions for another hour. But capital allocation, I guess, what should investors expect from you guys over the next several years as far as where your capital is going to end up going? Obviously, we're making a lot of money today with where nitrogen prices are this year and what it looks like in the next year. So we're at a good point in the cycle. What do we end up doing with that cash in your view? Or what would you like to do with that cash?

I think you're going to see a continuation of the balanced and disciplined capital allocation we've had for the last 5, 10 and 15 years. We first look to invest in our existing assets and existing capacity in high-margin projects or to add capacity like purchasing the Waggaman ammonia facility or investing in new capacity additions like Blue Point and decarbonizing projects like our Donaldsonville CCS project.

And then beyond that, we look to return capital to shareholders primarily through share buybacks. And if you look back over those 5-, 10- and 15-year periods, there's some pretty large share repurchase activity, the largest use of cash in those periods. And we repurchased 19% of the company with our last authorization. And since 2010, we've repurchased over half of the shares.

Yes, which is admirable. I'm a fan. But I guess when you look back, well, a couple of things, do you think the fertilizer industry has the right structure right now, both kind of the Americas and then globally? And if you don't, would you guys be a participant in kind of reshaping that inorganically?

I think we always look at opportunities to add to our network. It is a global business, as Bert mentioned. And we've looked at all the assets that have pretty much ever been available globally. And it's hard to make things work outside of North America.

Okay.

I think it's an exciting time in our space. There's so many moving parts and dynamics and the things to pay attention to, not only as an investor, but as an operator and how we manage our cash and how we manage those investments and the things that we're doing with our cash and positioning ourselves for the future. The CF of today is amazing from where it was the CF of yesterday and how we are the market leader in so many ways of whether that's low carbon or in terms of our performance and free cash flow and what we do with that and how we are, I think, shareholder-friendly.

Okay. And the idea of maybe going away from nitrogen, is there anything that you guys would look at? Obviously, you've had a competitor that's done that historically when you look over the last 30 years, kind of put together all the nutrients gotten into retail. Some others do stuff around biologics because they feel like they got a connection to the farmer. When we look 5 or 10 years from now, is CF going to be just a nitrogen company like it's always been? Or is there a chance that there might be another leg in there?

Well, I would say, not just. Well, should I? I don't want to minimize it.

That's a phenomenal business.

And I think the way -- we are very good at what we do, very safe in how we operate. We have a great employee base. We're well positioned. And we sold off our phosphate business in 2014 to Mosaic. That was a very good decision because mine life was for us and them. And so I did retail in Brazil for 8 years. It's a tough business. We are very happy with our channel partners. The co-ops do a great job and they take care of the farmer in so many ways. And so we want to be a part of that, but that doesn't mean we need to be in that space.

Fair enough. Well, listen, thank you guys so much for coming and spend a little time with us today. Thanks, Bert. And thanks, Martin. Thank you.

Thank you.

Thank you.

Good day, and welcome to the CF Industries Q3 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Martin Jarosick, Vice President of Treasury and Investor Relations. Please go ahead.

Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Tony Will, President and CEO; Chris Bohn, Executive Vice President and Chief Operating Officer; Bert Frost, Executive Vice President of Sales, Market Development and Supply Chain; and Greg Cameron, Executive Vice President and Chief Financial Officer. CF Industries reported its results for the first 9 months and third quarter of 2025 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session.

Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.

Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Before we begin today's call, I want to provide an update on the incident we experienced at our Yazoo City, Mississippi complex last evening. All employees and contractors are safe and have been accounted for, and there are no significant injuries. The incident has been contained, and an investigation is underway. Now let me introduce Tony Will.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first 9 months of 2025 in which we generated adjusted EBITDA of $2.1 billion. These results reflect outstanding execution by the CF Industries team across all aspects of our business. And most importantly, our team continued to work safely. At the end of the quarter, our trailing 12-month average recordable incident rate was 0.37 incidents per 200,000 work hours.

Five years ago, October 2020, we announced a significant shift in the company's strategic direction, including an ambitious plan to begin decarbonizing our production network, a plan to become the world's leader in clean ammonia and a model example of environmental stewardship and how to abate an energy-intensive business in a financially responsible way. Today, that vision has been realized. I'm very excited to announce that the plans we launched 5 years ago have begun delivering real value to our shareholders and broader benefits to the society as a whole.

We have made great strides over the last 5 years and have reduced our GHG emissions intensity by whopping 25% from our original baseline. And every single one of the initiatives that contributed to this remarkable achievement have been highly NPV positive, creating substantial value for shareholders. We are the best example of how being environmentally responsible can actually go hand-in-hand with creating significant shareholder value. On our journey, we have executed all of the following initiatives.

We closed 2 of our least efficient, highest emissions plants that were also borderline uneconomic to continue operating. We commissioned 2 new highly efficient, lower emissions plants that have return profiles exceeding 20% IRR. We acquired the Waggaman, Louisiana ammonia plant, a very efficient plant with relatively low GHG emissions intensity and increased production at that facility significantly from 750,000 tons annually to over 900,000 tons, resulting in an IRR of over 20%.

We installed N2O abatement systems into certain nitric acid plants, the resulting carbon credits from which are being sold at high values, more than recovering our costs within just a single year. And finally, we have begun sequestering approximately 2 million metric tons per year of CO2 from our Donaldsonville complex. The 45Q tax credits from this project will more than pay our installation costs within 2 years, generating an IRR over 20%. And we are currently selling the resulting low-carbon ammonia at a premium.

What is otherwise a commodity product, chemically identical to ammonia produced anywhere else in the world has become differentiated and now commands a premium in the marketplace. These initiatives have helped reduce our emissions intensity by roughly 25% from our baseline while creating significant value for our shareholders. And now we are embarking on the development of the world's largest ultra-low emissions ammonia plant at our Blue Point complex in Louisiana.

We have 2 world-class equity partners, JERA and Mitsui with us in this venture, and I fully expect the financial and societal benefits will be equally as impressive as the initiatives we have already completed. Additionally, we have a second carbon capture and sequestration project underway at our Yazoo City, Mississippi complex and numerous other initiatives yet to be announced.

The end result is that we have a robust high-return growth trajectory in front of us through the end of the decade that will continue to dramatically reduce our GHG emissions intensity while providing exceptional financial returns. Before I turn the call over to Chris to talk more about our operating results, I do want to take a moment and highlight what I consider to be a great misconception in the market. I want to refer you all to Slides #10, 11 and 12 in our materials. Slides 10 and 11 show our consistently strong free cash flow generation and our relentless share repurchase program.

Slide 12 shows our remarkable free cash flow conversion efficiency from EBITDA and yet amazingly how we trade at a shockingly low valuation. Oftentimes, CF Industries is compared to agricultural companies, and yet we are very different from most of those. The seed and chemical companies face challenges of products coming off patent and declining margins or of distribution channels being stuffed full and having to go through the pain of destocking.

We are also very different from capital equipment companies or those selling more discretionarily applied products like phosphate and potash who are really and truly subject to grower profitability. However, our sole product, nitrogen, is fundamentally different. Even in periods of relatively weak grower profitability, nitrogen demand is unaffected, almost completely inelastic.

This year, when there was great hand ringing due to subdued grower profitability, high planted corn acres and global nitrogen supply production disruptions in other parts of the world, created a situation where nitrogen demand and resulting pricing was very, very strong. As Bert will talk about in a few minutes, we see the same strong demand dynamic shaping up for next year. Nitrogen and certainly CF Industries' financial performance is not impacted by most of the factors affecting the rest of the ag sector companies.

While other times, we are compared to industrials or material sectors, again, we have very little in common with most of those companies either, especially the chemical companies. We do not suffer from global overcapacity nor from sluggish or declining demand. Our free cash flow generation is consistently high. And yet as shown on Page 12, we have traded at an anemic average cash flow multiple of barely 7.5x free cash flow. Realistically, that should be the low end of an EBITDA multiple, not a cash flow multiple.

Oddly, businesses that are on the whole more volatile and structurally way less advantaged than CF trade at a higher valuation. The industrial sector trades at 27x cash flow. The materials sector trades at 30x cash flow, while our consistently high cash flow generation on average has traded at a sickly 7.6x. All of this is a long way of saying the market doesn't really understand our business or our consistently high free cash generation. As Greg will talk about shortly, we have made great progress on our share repurchases and continue to do so.

We, around this table, believe CF represents an amazing value, especially when only trading at an average 7.5x cash flow. And we will continue aggressively repurchasing shares from the nonbelievers and those that don't take the time to understand why we are fundamentally different from most ag, industrial and materials companies. With that, I'll now turn it over to Chris to provide more details on our operating results. Chris?

Thanks, Tony. CF Industries manufacturing network has operated well throughout the year with a 97% ammonia utilization rate for the first 9 months of 2025. As is typical for the third quarter, we had significant maintenance activity, which reduced production volumes compared to the first 2 quarters. We continue to expect to produce approximately 10 million tons of gross ammonia for the full year. We also have made significant progress on strategic initiatives that are now generating EBITDA and free cash flow growth for the company.

In August, we were able to fully utilize expanded diesel exhaust fluid rail loadout capabilities at our Donaldsonville complex for the first time. This enabled us to capture incremental high-margin DEF sales and led to a monthly record for DEF shipments from the site. Also at Donaldsonville, the carbon dioxide dehydration and compression unit, which was commissioned in July, continues to run well. We are generating 45Q tax credits and moved to full rate safely through the quarter.

Finally, in October, we completed a nitric acid plant abatement project at our Verdigris, Oklahoma facility. This project is expected to reduce carbon dioxide equivalent emissions at the site by over 600,000 metric tons on an annual basis, which we are monetizing through the sale of carbon credits. By the end of the decade, we expect the returns generated by our CCS projects, along with the Verdigris abatement project will add a consistent incremental $150 million to $200 million to our free cash flow.

Longer term, we remain excited about the compelling growth opportunity that the Blue Point project offers us, particularly given the sales team's success in selling low-carbon ammonia from Donaldsonville for a premium. Detailed engineering activities and the regulatory permitting process are progressing well with capital expenditures for 2025 expected to be within the range we projected earlier this year. We expect site construction to begin in 2026. With that, let me turn it over to Bert to discuss the global nitrogen market and the growing interest in low-carbon ammonia. Bert?

Thanks, Chris. The global nitrogen supply-demand balance remained tight in the third quarter of 2025. Demand led by North America, India and Brazil was robust. Additionally, product availability remained constrained due to low global inventories and outages during both the third quarter and earlier in 2025. China's re-entry into the urea export market provided tons the world needed, but did not substantially alter these dynamics. Looking ahead, we expect the global nitrogen supply-demand balance to remain constructive.

We believe supply availability will continue to be constrained. Global inventories are low, including in North America. Additionally, major planned and unplanned outages are occurring now while geopolitical issues and natural gas availability, particularly in Trinidad, remain a challenge. The start-up of new capacity also continues to be delayed. At the same time, we expect global demand to remain strong. India is likely to tender for urea in the near term, especially given the result of their most recent tender.

Nitrogen demand in Brazil and Europe has picked up recently. And in North America, economics favor corn planting over soybeans next spring based on the December 2026 corn contract, which is currently priced at approximately $4.70 per bushel. Farmer economics across the globe remain a key focus as crop prices have not kept price up -- pace with the price of inputs, equipment, rent and other costs. That said, we believe nitrogen offers clear value for farmers relative to other nutrients for its immediate impact on yields.

Given where crop prices are today, we expect farmers to focus on optimizing yield, which should support healthy nitrogen applications. We believe that the strong uptake of our UAN fill program and our robust fall ammonia program and the order book that supports it will support that outlook. We're also preparing for the implementation of the European Union's Carbon Border Adjustment Mechanism, or CBAM, which takes effect in less than 2 months. While there remains some uncertainty about the final structure of these regulations, we feel very confident about our competitive position.

Thanks to our Donaldsonville CCS project, we have the largest certified low-carbon ammonia volume in the world. And over the last few years, our team has put in a great deal of time to build relationships with customers, including those who will be affected by CBAM. This has enabled us to sell certified low-carbon ammonia at a premium to conventional ammonia today as customers begin to adapt their supply chains.

Based on our conversation with customers, we also believe CBAM will drive significant demand for other low-carbon nitrogen products such as UAN. We see this as a tremendous opportunity for CF Industries on top of our already high-performing nitrogen business. We look forward to working with customers to build out a low-carbon ammonia and nitrogen derivatives supply chain. With that, I'll turn it over to Greg.

Thanks, Bert. For the first 9 months of 2025, the company reported net earnings attributable to common stockholders of approximately $1.1 billion or $6.39 per diluted share. EBITDA and adjusted EBITDA were both approximately $2.1 billion. For the third quarter of 2025, we reported net earnings attributable to common stockholders of $353 million or $2.19 per diluted share. EBITDA and adjusted EBITDA were both approximately $670 million. On a trailing 12-month basis, net cash from operations was $2.6 billion and free cash flow was $1.7 billion.

We continue to be efficient converters of EBITDA to free cash flow. Our free cash flow to adjusted EBITDA conversion rate for this time period was 65%. As you saw in the press release, we updated our projection for capital expenditures on our existing network to approximately $575 million for 2025. This reflects additional maintenance we were able to complete efficiently during planned outages as well as the timing of strategic investments that Chris mentioned this morning, and he spoke about at our Investor Day in June.

We returned $445 million to shareholders in the third quarter of 2025 and approximately $1.3 billion for the first 9 months. In October, we completed our 2022 share repurchase authorization, having repurchased 37.6 million shares, which represents 19% of the outstanding shares at the start of the program. Our share repurchase program continues to create strong value for long-term shareholders. Net earnings increased approximately 18% compared to the first 9 months of 2024, while earnings per share were approximately 31% higher, reflecting our significantly lower share count.

The same positive impact can be seen in our shareholders' participation in our production capacity and the free cash flow it generates. We are now executing the $2 billion share repurchase program authorized in 2025 with over $1.8 billion of cash on hand at the end of the third quarter. We are well positioned to continue returning substantial capital to our shareholders while also investing in growth through Blue Point and other strategic projects. With that, Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Greg. For me, this is earnings conference call #48 and my very last one as CEO of CF Industries. Over the past 12 years, traditionally at this point in the call is when I have thanked the entire CF Industries team for their hard work and contributions to our success. I'm eternally grateful to the entire team. Today may be more so than usual, and I am particularly aware of what an amazing team we have here. So indeed, thank you all said perhaps a bit more heartfelt than the past 47 times.

I'm exceptionally proud of the company and the organization I'm leaving. The highly ethical way in which we conduct ourselves, our unwavering commitment to employee safety and our absolute focus on value creation. In addition to the entire CF team, I also want to thank our Board of Directors who have always been supportive of me, providing insight and guidance through the years and importantly, always aligned with me on the objective of value creation.

I also want to particularly thank the CF senior leadership team with whom it has been a truly great pleasure to work alongside. I can honestly say this is the best group one could possibly hope for and not only respect them as individuals along with their business acumen, but I also thoroughly enjoy their company and our camaraderie. Finally, I want to thank and congratulate Chris Bohn on being named CEO.

Chris has been a consistent thought partner and devil's advocate working with me as we navigated foundational decisions like the Terra acquisition, the sale of our phosphate business, the capacity expansion projects, our strategic repositioning of the company, the Waggaman acquisition, and most recently our Blue Point joint venture. Chris has been hugely successful in leadership roles across the company, including heading FP&A, supply chain, manufacturing, CFO, and his current role as COO. Chris has my complete faith and confidence that he will successfully lead the company to new heights.

Again, thank you, and congrats. It has been some kind of a thrilling ride for me as CEO, an incredible honor and a very great privilege. We've accomplished many things over the years. As I say, success has many parents and indeed, all of our successes were team efforts, and I'm delighted to say that the team remains in place. Therefore, I'm steadfastly confident that the company's best years are in front of it. With that, operator, we will now open the call to your questions.

Before Q&A, I want to take a moment to acknowledge Tony's retirement and his contributions to CF over his 18-year tenure. Tony's influence and impact on CF cannot be overstated. From his time leading manufacturing where he generated and championed the do-it-right phrase is a core statement of CF's values and culture to his relentless pursuit of personal and process safety. CF has improved through his leadership. Tony's leadership, which can be best described as bias towards action.

This has been exemplified through the growth the company has experienced under his guidance through the CHS transaction, Donaldsonville and Port Neal expansion projects, Waggaman acquisition to the recent announcement of the Blue Point joint venture, increasing CF ammonia production and free cash flow generating assets by 45% during his time as CEO and over 200% since he started at CF as a member of the senior leadership team.

His safety-first mentality, keen decision-making and focused on disciplined investments and execution is what has positioned CF where we are today, tremendous safety performance, industry-leading asset utilization and superior capital allocation. Over the years, he's not only been a great mentor, but also a great friend. I look forward to building on what Tony has established and wish him the best in his next act. Thank you, Tony.

Thank you.

[Operator Instructions] First question comes from Ben Theurer from Barclays.

So first of all, Tony, all the best in retirement. I'm pretty sure you have plenty of things you want to do. So enjoy that. And that's -- it was quite a run, I guess. So that's never bad. So enjoy that piece. And maybe as well for you, Chris, all the best on your new assignment as CEO. So 2 quick questions I have. So one, you've talked about in your presentation material about the mid-cycle where you are right now and the mid-cycle where you think you're going to be in 3, 4 years' time as you get these additional projects come through.

So I just want to understand the current market conditions obviously still seem to a degree, stretched, right, with the European gas price somewhat elevated versus what maybe mid-cycle in the past was. So I wanted to get your view in terms of the bull versus the bear around that $2.5 billion mid-cycle mark and how we should think about that evolving from a feed cost standpoint of view into the period of 2030? And then I have a very quick follow-up on pricing premiums.

Yes. So I'll start. It's Greg. So clearly, today, right, when we built the $2.5 billion, we had a $3.50 gas strip in there for Henry Hub and a price -- realized price on urea at $3.85. As of today and through the year, we've obviously traded below that on the Henry Hub. So from a feedstock, we've been benefiting in our results. And then lately, you've definitely seen a price move up through the course of the year on the urea. So from a results standpoint, hopefully, you're seeing that and appreciating that in the results that we printed at $2.1 billion of EBITDA through the first 3 quarters.

I think as you think about it going forward and the spread between what we see here in the U.S. and in Europe, our view is that there'll be some tightening there, we expect to have a competitive advantage and remain lower priced on a nominal basis as well as relative basis versus what we're seeing in European production, which is -- will continue to be a tailwind to us for our financial performance.

I mean, I guess it's a long way of saying, Ben, that we would agree with you that current conditions are well above mid-cycle and our expectation just based on history of how fourth quarter paces against the other quarters should deliver full year results well above mid-cycle this year. And I think that's consistent with kind of what you said, industry conditions, gas price in Europe, kind of what's going on in terms of the energy space and overall demand, it does feel stronger than, I would say, mid-cycle, but we're delivering against it.

And the only other point I would add is on the growth that Greg talked about going to the $3 billion, that is identified in motion being executed on today. So that is not things that are in the pipeline that is what we know today and that will likely grow as time goes on as well.

Okay. Got it. And then that price premium on the ammonia you're selling in Europe, the blue ammonia that you're getting out of Donaldsonville, can you give us a little sense of magnitude as to the premium that you're getting here with your customers?

Sure. This is Bert. And we've been fairly consistent with our goals of as we build the supply, which has come on stream and over time, as we add additional locations and then Blue Point, we want to build correspondingly demand. And so we've been working very synergistically with our European customers, North African customers and even in the United States. So today, the premium is $20 to $25 per ton. As demand grows and we don't see the supply, we would anticipate that those will be matched on as demand grows. So very positive for CF.

But again, Ben, that was never contemplated as being part of the economics when we went with the dehydration compression plant. So the cost of the plant was just under $200 million. The 45Q benefit when we're sequestering at a rate of 2 million tons a year is going to be about $100 million of cash. And then we're adding another roughly almost 40-ish to 50 from product premium. So we're picking up an extra 50% EBITDA that was never initially part of the justification of that project. And so it's kind of nothing but goodness across the board in terms of our -- that project.

The next question comes from Edlain Rodriguez from Mizuho.

Tony, clearly, you will be missed. That's clearly the case, and good luck with everything. So a quick question, again, maybe for you, Tony, and maybe for Bert. In terms of -- I mean, as you noted, the nitrogen outlook looks very constructive. But if you were digging for possible bogeyman in terms of trying to find something to worry about in the near or medium term, like where would you look?

Well, actually, we do every day, assess the forward market, the spot market, the prompt market, and we try to be constructive in terms of how we build our order book and thinking about the customer base. That's why we're broad-based in terms of ag business, industrial business, export business, and we're levering those along with our terminaling activity, how do we enter and exit the market and play the market.

But when you look at the market today, then it's a global market, you're seeing a constrained supply, and that happened through the global conflicts as well as plants coming offline in Saudi Arabia, Bangladesh and a few other places and gas limitations in Trinidad, high-cost gas in Europe and not a lot of new capacity coming online in low-cost areas. So constructively, supply is, I would say, consistent on a limited basis, while demand continues to grow at that 1% to 2% per year.

And we're seeing very healthy demand in India, Brazil, North America, and we plan to continue with that level of demand. And so when I look at the negatives, I think what -- it's -- from your side, it's always yes, but yes -- but this is going to be negative. And we've been hearing about China for 10 years. We've been hearing about other issues for years, and we continue to outperform the market. So looking at the negatives, I would say I like the current market.

I think the current market is going to extend into 2026. That's as far as we give a viewpoint. But China's demand internally to consume the tons they produce is pretty well tied to that. So these 4 million tons of exports that we see coming out in 2025 is probably needed. And then India hasn't performed on their production internally. They've been importing consistently high levels of urea and Brazil continues to grow. So I have a hard time finding a negative bogeyman out there.

See, I was -- Edlain, I'm going to give you a little more flip in answer. I was going to say all you have to do is read some of your other colleagues out there in the industry, you'll get kind of where the bogeyman sits, even though we don't really believe a lot of that is accurate.

So one quick follow-up for you, this is for Tony and Chris. I mean, Tony, you've talked about the valuation disconnect in your shares. Clearly, I guess, like you failed to convince those jittered investors. Like what else do you think Chris -- and Chris, you could answer that, too. What else do you think you will need to do to convince investors of that valuation gap that you've clearly seen?

I mean we did a European roadshow this summer or this fall and talked to investors over there. And there was a little bit of kind of not understanding why the valuation was what it was, but also -- there was also, frankly, a little bit of just we trade you as part of this broader group of other companies. And when there's a lot of automated trading going on and there's something that affects, like I said, either the ag sector or something else, all of the company's kind of move.

And I think there just isn't a recognition that we're -- our financials are very different from most of the companies in that sector. And I think at some point, when there are few enough shares out, we'll start getting a more realistic valuation against what's remaining. And I think, fortunately, we're generating enough cash, and the shares are such a screaming value that I think continuing just to buy shares out of the market is the only way we can eventually get there.

Yes. And the only thing I would add to that is when you ask what should we do, it's to continue to do what we are doing. We have exceptional operational performance focused on safety and a conversion to free cash flow that I think we, as a company, reflect on more than anybody else that I see both in the chemical and the agri and really all industries. And so at some point, that has to resonate with people. Cash is king and whether it's buying back the shares, as Tony said, or making high-growth investments that have great return profiles, it will pay off at some point. So it's continuing to execute the way we're executing.

The next question comes from Joel Jackson from BMO Capital Markets.

Tony, congrats again. A couple of questions. If you brought forward $75 million of maintenance CapEx this year, does that mean that next year, you should be run rating $425 million CapEx on your non-Blue Point network?

Yes. Joel, I'll start with that and then if anybody needs to add something to it. But that increase, we were probably a little light on the $500 million. Generally, we start the year running at about a $550 million is kind of the range we're performing in, but it's really affected by 3 things. One, we completed more projects than we typically do at this time. There's a lot more, I would say, smaller dollar projects that are easier to finish during this particular timeframe.

And then we also -- part of it was a timing of a nitric acid precious metal purchase, which was quite a bit that we do from time to time. And then we had, to be honest, slightly higher labor and capital costs related to some of the inflation by a few percentage points than what we had been forecasting. So as I look at 2026, I would still use the $550 million as our range going forward for sort of, let's call it, our base CapEx and then adding CF's component of Blue Point on top of that.

Okay. And I know it's early, very early, and it's great that no significant injuries. But do you know if what's happening in Yazoo City, is this going to be an outage that's order of magnitude days, weeks or months?

Yes. It's way too early to speculate on that. I would say the ammonia plant was not directly affected. It's still operating as of this morning. But at some point, you run into inventory containments depending upon how long the upgrades are down. So we're thankful that everyone is accounted for and is safe and that really there is only just a couple of very minor injuries, nothing serious or significant. That was our biggest concern. And then also that there is -- the site has been secured.

Now we're in the process of kind of really understanding what the condition of things are and what the root cause was, and then we'll start worrying about turning things on after we do a thorough investigation. I would say, Joel, that this is our smallest segment and a relatively small plant in our smallest segment. So we're not focused on kind of potential financial implications at this time. And as Chris said, we're still expecting to be able to produce the 10 million tons of ammonia this year like we had planned on.

The next question comes from Chris Parkinson from Wolfe Research.

Awesome. Tony, I'm not one to always say like say great quarter, but I'll give you a shout out and I'll say great 12 years and through all the debate, agreements and at times disagreements, you've always challenged me. So I'd like to personally thank you for that. It's been a pleasure. A question to both you and Bert. There's been -- and it shows you outside the market to me. There's been a lot of inconsistency of supply throughout the entirety of this year.

And you have things in Russia, Germany, Poland, Romania. I mean perhaps this becomes a broader intermediate to longer-term question. But how much of the demand and the price strength do you attribute to the supply side of it versus the fact that demand, I think, broadly speaking, throughout the year-to-date has also been pretty healthy and kind of led to these price rallies at times at nonseasonal time. So I'd really appreciate your perspectives and kind of how to think about '26 in the context of what we've actually been seeing experience and what we've been experiencing in 2025.

I think the demand piece of the equation is much easier to forecast going forward. And as Bert said earlier, given where the different products are priced at in the corn-to-bean ratio and just looking at what we saw in the way of the UAN fill program as well as fall application of ammonia that's going on right now, we're anticipating the demand side of the equation to be very strong for the planting year of '26. The supply side is a little harder to kind of peel back. And as you said, it's an integrated kind of question in terms of how much it is the S and how much of it is the D.

I would say a lot of the places that you mentioned, not so much Russia and Iran, but a lot of the places that you mentioned where there were some supply disruptions are on the relatively higher end of the cost curve. So those tons don't necessarily move things dramatically up in terms of price. But there's no doubt the conditions that we saw this year due to both the S and the D side were quite strong, and that's why our anticipation is delivering a result that's well above what our mid-cycle numbers when Greg talked about it at Investor Day, what he gave, we expect to be well above that.

I think for CF in particular, how we view the world and being students of the world geopolitically, economically and systematically and how it affects our business. Tony touched on the specifics, but we did lose 5 million tons from the market through the conflicts for Iran and Egypt, Algeria and some in Russia and Turkmenistan. And then I think the lack of China or the late coming in of China in June probably pushed the market higher than anticipated. But we're still tight.

And like Tony articulated in terms of demand with India pulling 8 million to 9 million tons, Brazil, 7 million to 8 million tons, North America, 6 million tons and Europe producing less and not having the access and the lack of inventory in any major destination market sets up 2026, I think, very well. And we're going to see, I think, higher-than-anticipated corn acres in North America due to just the economic opportunities and impacts, which is constructive for CF.

Got it. And just as a quick follow-up, I mean, Tony, you've gone through your fair share of capacity expansions, both -- well I should say, very large brownfields and other brownfields and everything within your network. What have you, Bert and Chris learned the most from all of those efforts over the last 12 or so years that Chris and his team can essentially apply the Blue Point to perhaps mitigate a lot of the things. Is there kind of a track record of lessons that you can really apply here? Or is it just going to be every project is different at the end of the day?

Yes. I would say we learned a ton that is currently in direct application of this project, one of which was we did a full-blown FEED study and detailed engineering of this plant before we announced it, went to FID. And so we have a much better perspective of the actual construction hours, and the unit build material lifts than we did when we announced the expansion projects back in 2012.

The other thing I would say is the size of our network and the expertise we have across the network and the scale we have brings tremendous skill sets and capabilities to bear against a project like this. And you see that when you're looking at other people that are trying to start up ammonia plants that are years late because they just don't have the capability and expertise running ammonia. And there are a few of those out there right now.

And so I think both the fact that a number of the people involved in this construction project were also involved in the big Port Neal, Dville expansions in 2012 through '16 as well as just some of the broader lessons like the engineering and FEED study, I feel very confident in this. And we also have expertise from our partners that we're going to be able to leverage as well with JERA and Mitsui that are equally, if not even more so, comfortable doing very, very large capital projects like this, and they're bringing some of their best resources to bear as well.

I would say, as Chris said in his comments, Tony, being bold and -- but that boldness is based on market knowledge, understanding -- we've looked at plants all around the world. We've looked at a lot of opportunities over the years. We've had some great debates and discussions and disagreements at times on where to go and how to grow. But in the end, have made some very good decisions on that. And Blue Point is a good example. We're the company that does it right, builds -- stays within, I think, our fairway and brings these plants on safely, and they operate above nameplate. And so it's that bold step of taking it when the market is growing and needs these tons.

Yes. And the only thing I would add is that's different from last time, Chris, as we've talked about before, is we're going with modular construction. Last time on a stick build time and material, you started to see labor costs get out of control. So I think that was something that we did a lot of evaluation on and also looking at who we're going to select to build those modules.

And then lastly, something that we'll do that we did last time that the whole team is working on, which is we begin hiring operators and engineers today, even though the plant will not be up for 4.5, 5 years or whatever. And what that allowed us last time was to get to over nameplate production within a couple of months after start-up, which nobody else was able to do. So again, as Tony said, leveraging our overall network, not just for engineering expertise, but to train operators and other individuals that will be working at these sites.

The next question comes from Andrew Wong from RBC Capital Markets.

Just echoing everybody else's comments, Tony, congratulations on a very successful career and guiding CF through a lot of market ups and downs. We've seen a lot. So enjoy your next chapter.

Thank you, Andrew.

Yes. And so just maybe on the comments you made earlier around the valuation, I think you made some very fair points. So maybe a question for you and also for Chris. Just given the value in shares and buybacks seem to be the path to kind of realize that value, you have a very strong balance sheet. Would there be any consideration for using debt to fund Bluepoint and then maybe using the cash flows and the cash generation to buy back shares? Like would that make more sense right now.

I think the problem with doing that a little bit, Andrew, is its sort of a onetime sort of benefit that you get and then you're living with much higher fixed costs as you go. And I think one of the things that we've seen in this business is having a balance sheet with low fixed cost and a lot of liquidity gives us opportunities to move when there's things that are available to us like the Waggaman deal, which we did in cash.

And so instead of this being a kind of trying to rush an equity swap for debt, which benefits kind of near-term shareholders. We're really playing the long game here, and it's about trying to make sure that we retain all of the long-term operating and strategic flexibility and at the same time, rewarding the truly long-term shareholders who eventually, I think, will start valuing the company properly. But given my perspective, I'm not going to be here in a couple of months. So this is probably -- Chris and Greg can talk about it.

Yes. From my perspective, well, just for starters, I think the numbers that Greg presented and where we're seeing this year, where we're seeing next year and even the mid-cycle, we're going to have enough cash to do both at a significant level, just as we've done over the last decade under Tony, where we've been able to grow and also do significant share repurchases. So the ability to do both.

I would echo Tony's comments, like having fixed charges in line, having a, I would say, flexible balance sheet is very important when you're in a commodity business. As we're seeing more of our business here go to ratable, more industrial with premiums and things, we can make different decisions from there. But I think the cash flow that we're generating due to the conversion rate that we do allows us to do whatever we want to do really.

Yes. The only thing I would add to it is just emphasize the numbers that we talked about today, right? $1.3 billion of cash back to the shareholders for the first 3 months, $700 million in CapEx, so $2 billion, and we have $1.8 billion of cash on hand today. That creates incredible flexibility for the company.

Okay. Understood. And then maybe just one on costs. I think SG&A looked still just a little bit elevated for the quarter, obviously, not hugely, but just curious if there's anything there. And then also on just some of the non-gas costs, I suspect that the turnarounds this quarter contributed to some of that. Just I'm wondering if there's anything to flag or anything to add.

It's Greg. On the SG&A side, we continue to just update our bonus accrual for the company for the year, and there was a small catch-up as well as a plan for the third. So that's the elevated level on the SG&A. On the non-gas side of production cost, really the one that stuck out to me as I climbed through them was really around ammonia in that segment.

And the point to make there is we did have an increased mix around our purchased tons, which obviously come into the system at a higher value than what we can produce them at, but it also contributed to gross margin dollars in the ammonia segment being up 30% year-over-year. So other than that and the timing of some turnarounds, there was really nothing to speak of in the non-production cost.

Yes. And on the purchase front, just to remind you, the tons that are produced in Trinidad, we purchased, and we realize the value in Trinidad and then that comes through equity earnings instead of directly into the ammonia segment. And then into the U.K., we're purchasing ammonia and then upgrading it to a margin, and then that's going to come through kind of our other ops segment. But the price because we're buying it at market shows up in COGS for ammonia. So that kind of helps dimensionalize what Greg was talking about.

The next question comes from Kristen Owen from Oppenheimer.

I do want to start with a more strategic long view here, just given some of the prepared remarks about the valuation disconnect. And given your comments on whether it's CBAM, where those Blue Point ammonia tons will go, even some of your comments on DEF, help us understand if we're looking at this business model in that 2030 framework, how much exposure really is ag anymore versus some of these more industrial applications? And how should we think about that mix contributing to that sort of mid-cycle framework?

Yes. I mean ag is still going to represent the lion's share for the foreseeable future of where we sell our products. And the simple reason for that, Kristen, is that the margins in ag are far superior to the margins in industrial. We could move all of our products into the industrial marketplace, which tends to be ratable and then -- but we would end up doing it at a significantly lower price point, and we wouldn't get the benefit of our distribution and logistics network by doing so. And so some of the -- even though it is kind of "a little bit less predictable," it's at a lot higher volatility.

And I'm going to refer back to, I think, sort of something I've heard attributed to Warren Buffett, which is give me a 15% spiky return over a 10% flat, we'd way rather have a spiky to the upside return profile associated with serving the ag marketplace than we would the other way. Now we're starting to build some and that will continue to increase. That does tend to be a little more ratable with predictable margin structures. But we're going to be -- we're 75%, 80% in ag company today, and it's going to be like that for a very long time.

I think you have to also think about how our company is structured with our unique distribution and terminaling assets that are throughout the Midwest on the best farmland in the world with the lowest cost access logistically, if you compare our cost to get to the middle of Iowa for, let's say, $30 for urea against taking that to Mato Grosso from Paranagua or Santos, it's significantly cheaper and the yields are significantly better and the farmer economics is better as well.

On top of, we have low-cost gas in those regions. So we are structured to serve the ag business, which, as Tony mentioned, is spiky but profitable. But we balance that with this industrial book and export book that places us in, I think, globally, a very unique position, and we're benefiting from that.

Sure. And I appreciate that. And perhaps a little clarification on my side. I'm not suggesting that there's some major move out of the ag markets. It's more just how much more meaningful can the earnings potential be on the industrial side given the uplift of some of these markets. So perhaps a slight clarification there. And while I'm here, I'll just ask my follow-up question. Just given the cost curve in China, a little bit more affordable to keep those a little bit more domestic affordability. So just any thoughts on China exports in 2026?

We've been fairly consistent regarding China in that 3 million to 5 million ton range, and that's how they seem to perform. We're expecting them in 2025 to be in the 4 million to 4.5 million ton range. And they've announced this additional export quota. They haven't announced their program for 2026, but I would just bet on the same, probably coming out in sometime in Q2 with exports, May, June and exporting into the early part of Q4. Because their domestic market is so big, their domestic demand, both ag and industrial and where they are capacity-wise and operationally, that 4 million to 5 million -- 3 million to 5 million tons of exports makes sense as you build kind of what their structure should be.

Yes. Kristen, I'll just add one thing back to your first question. If you think about the 45Q tax credit associated with both Dville and Yazoo City when it comes online, we'll probably be close to $150 million of cash, and that's not net of taxes and everything that is not dependent upon where market pricing is for any of our products.

Between what Bert is able to realize in price premium and some of the other initiatives we have like selling carbon credits, there could be another $25 million to $50 million of additional value that accrues to us that is also not tied to the market. So you're starting to get to the point where there's probably -- could be $200 million-ish a year that's coming in that is very ratable and predictable and just part of the base then that, everything else kind of rides above.

The next question comes from Lucas Beaumont from UBS.

Good luck with your retirement, Tony. Congrats on your career [indiscernible] the others. Yes, I just wanted to kind of ask you about Blue Point. So you guys noted that you'd procured all the long lead time equipment now. So kind of just where did the costs come in there compared to the budget? Kind of what percent of the project spend was that. And kind of just remind us of any cost escalation components that are built in there for like inflation and tariffs, et cetera, between now and sort of when the delivery occurs?

Yes. Thanks. This is Chris. Well, for starters, I would say the projects were way too early in the phase to say we're under significantly or we're slightly over or whatever. I would say we're right where we thought we'd be. The products that we -- or the equipment that we ordered as long lead time is like your boilers, your compressors, different equipment like that. The modular equipment, which is going to be the significant dollar amount that we'll be selecting the modular yard here shortly.

And those have been fixed fee bids in which we had -- which was part of our overall $3.7 billion. So that part, we still feel very confident about. As we look at, I think, your question probably with tariffs, I mean, with the Supreme Court hearing arguments right now, there's still a lot of uncertainty what happens. A lot of the equipment that would be tariffed is most likely going to be coming in, in 3 years from now. So there's still quite a bit of time frame, and I'm certain more will change between now and then. But what I would say is we forecasted quite a bit into tariffs.

We're slightly higher than that, that's going into our $500 million contingency, but not anything that would have us concerned at this time. I think additionally, there potentially could be upside dependent on what the Supreme Court rules, but I'm certain there would be some reactions by the administration as well on additional tariffs and other areas. So again, tariff side, a little uncertain, but we feel like we're covered there. Long lead items, those are in path, but those are more some of the more engineered complex items like compressors and such.

And then I guess just on the pricing outlook, I mean, you guys are kind of talked at length about it. I mean, ammonia has been very tight. The pricing is strong. UAN and ammonia imports are sort of running below trends heading into the fall and spring. So I mean the near-term setup looks quite attractive. I mean, at the same time, the TTF futures have sort of been coming off the past couple of months have sort of gone from 12 and looking flattish year-on-year, sort of low 10s kind of now down about $1.50. So I guess just how do you kind of see those 2 factors resolving each together as we go through '26? Or I guess, if you don't think they'll resolve, then why not?

Maybe I'll start with the gas side with the TTF -- I mean, TTF has come off about $1. So you're still sitting near $11 on the forward strip with that with the U.S. sitting anywhere from $3.50 to $4. So you still have that differential that is very constructive. As Greg said, longer term, when we get into '28, '29, we may see that contract some, but not nearly to the level just given that the projects being built have to have return profiles with those as well and the additional demand that will be drawing on LNG. So from a constructive standpoint, we still think the gas differential is going to be very strong even if it comes in $1 or $2 from where it is today.

Regarding the market and the tightness we're experiencing today, with Saudi, the plant -- the ammonia plant being down and the late start of some of these new capacities, as well as Trinidad and then suboptimally operating in Europe. The ammonia market is, I think, going to maintain tightness until these new plants come on, and we'll see what happens.

But the United States today is at a net import negative on UAN and ammonia, probably balanced on urea. And so again, looking around the world where we participate and where we have communication, you have a tight inventory position in all of the destination markets. And so looking at gas and costs and kind of upside, I think we roll very well into 2026 and probably through the first half easily in a positive way.

The next question comes from Vincent Andrews from Morgan Stanley.

I'm actually late to something else, but I wanted to stick around and just congratulate you, Tony and say thank you and good luck in the future.

Thank you, Vincent. I appreciate that.

The next question comes from Matthew DeYoe from Bank of America.

Tony, congrats on the run. I know I didn't cover you directly for much of the time, but Steve always held you with the highest regard. So I know that goes for the rest of us here at Team BofA. I wanted to ask, I guess, a little bit on the slide where we talk about like ammonia expansions and closures. Certainly, we don't disagree that a number of European plants need to close chemicals across like a lot of chains.

But if we look at that 3 to 4 number, I mean, what's the -- how much of that has been announced? What do you think the rates are that those plants are running? And then like I just know that closing plants is expensive and not really done easily. So I'd love a little bit more kind of commentary around your outlook for that capacity.

Yes. So this, as you may recall, is a study we did about 1.5 years ago where we analyzed every ammonia plant in Europe based on how its ownership structure was, what its maintenance structure, what its cost structure was going to be to try to identify which of those plants would come off. In Europe used to have about 48 ammonia assets that we're operating and how we have it leveled was red, yellow, green. And what we've seen is the red plants have come off as we expected.

And in fact, we're probably ahead of that particular schedule with a number of curtailments and shutdowns that are occurring in Europe from that. But that 48 assets today is probably around 30 assets or maybe 31 assets. And we expect that to drop another 4 to 5 assets over the next couple of years. You have to remember, the decision we made in the U.K. was because we had a significant turnaround coming forward. And these turnarounds are $50 million to $60, so when you're entering into that, you have to make certain you're going to get that return on that cash.

Additionally, where TTF is today at the $10 to $12 range makes it difficult to be producing throughout 12 months of the year for really selling in what may be 3 months a year, maybe 4 months a year. So you're making a risk decision based on that. So what we're seeing today is with some of the pricing, there's just a little bit more curtailment going on. But eventually, through our study and what we've seen, you're going to see some of those plants continue to go off.

So the European side, we feel very confident that, that 3 million to 4 million is going to come off. Now whether all that gets imported as net ammonia or as upgraded product, that will be determined. But I think the other aspect here is, as Bert mentioned, there is just not a lot of new supply coming on. we have visibility of what plants are being built. And with the exception of ours and the 2 in the Gulf Coast that are about to come on probably sometime in 2026 and one in Qatar, there's really not much coming on.

And the other plants that are coming on are upgrade plants that are consuming ammonia and making the ammonia market even tighter. So what we see is a strong constructive gas differential where we'll make money off of that versus TTF. And then we also see a very tight S&D balance that not only continues here into 2026 but really goes all the way to 2030.

This concludes our question-and-answer session. I would like to turn the conference back over to Martin Jarosick for closing remarks.

Thanks, everyone, for joining us today. We look forward to speaking with you at future conferences.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.