Good day, ladies and gentlemen, and welcome to the First Quarter 2019 CF Industries Holdings Earnings Conference Call. My name is Justin and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We'll facilitate a question and answer session towards the end of the presentation. [Operator Instructions] I would now like to turn the presentation over to your host for today, Martin Jarosick with CF Investor Relations. Sir, please proceed.

Good morning. And thanks for joining the CF Industries’ First Quarter Earnings conference call. I'm Martin Jarosick, Vice President, Investor Relations for CF. With me today are Tony Will CEO; Dennis Kelleher, CFO; Bert Frost, Senior Vice President of Sales, Market development and Supply Chain and Chris Bohn, Senior Vice President of Manufacturing and Distribution. CF Industries reported its first quarter 2019 results yesterday afternoon. On this call, we'll review the CF Industries’ results in detail, 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 these statements. More detailed information about the factors that may affect our performance may be found in our filings with the SEC that 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 Tony Will, our President and CEO.

Thanks, Martin. And good morning everyone. Last night, we posted our financial results for the first quarter of 2019 in which we generated adjusted EBITDA of $305 million after taking into account the items detailed in our earnings release. We're really pleased with this performance, especially against the backdrop of another first quarter with cold and wet weather that delayed the application season even more so than last year. Despite lower sales volumes we exceeded our first quarter adjusted EBITDA from last year as selling prices were significantly higher for urea, UAN, NAN. We also operated extremely well. We set a quarterly production record for urea and ammonia production was our third highest ever. Most importantly, we continue to work safely as our rolling 12-month recordable incident rate remained at 0.6 incidents per 200,000 work hours. As we have said many times in the past we plan our business on a six-month increment. Weather patterns may move product shipments out of one quarter and into another but we run our plants 24/7, 365 and over the course of the year, we're going to ship everything we make. We believe this year will be no different. April saw much improved shipments and we are now ahead of where we were a year ago on volume. As Bert will outline shortly, we expect high demand for nitrogen due to increased corn acres in the United States amplified by low ammonia applications last fall. At the same time, we expect continued disruptions to barge and rail transportation due to the lingering effects of weather. This is tested in the industries logistics capabilities to move upgraded products to farmers, when and where they needed. We believe these challenges plays right into our strengths. We have significant in region production, unparalleled logistics capabilities and an expansive distribution network, these position us well as the spring application season progresses. Longer term, these same operational advantages, along with our structural advantage of operating in an import dependent region and our access to low cost North American natural gas will continue to drive our cash generation capability. Before I turn it over to Bert, I want to comment on the expected impacts of the European Commission's announcement of provisional duties on imports of UAN. We strongly disagree with the Commission's conclusions, which we believe ignore the market fundamentals of the globally traded commodities like UAN. See our purchase is natural gas our primary input at prevailing market prices. We use that in our highly efficient plants to produce UAN and then sell it at prevailing market prices. The key difference between CS and Eastern European producers is that we have newer, more efficient, more reliable, more climate-friendly and lower GHG plants than they did. We also have access to low cost North American natural gas. That said, we fully expect that these duties will impact global UAN trade flows and that will take some time for the industry to adjust. Fortunately, CF has more options than many others. And we have been taking appropriate steps to mitigate the financial impact to our company. We exported roughly 850,000 tons of UAN to Europe last year, and this is how we think about realigning those tons going forward. We'll make more granular urea unless UAN which will absorb between 300,000 to 700,000 tons of that depending upon the specific production mix decisions we make. We continued to build demand in South America and leverage our relationships there and so we expect to increase our exports into that region. Finally, in the last six months we have leased additional access to UAN space within North America. Based on those, based on these actions that Burt and Chris and their teams have taken, we can easily realign those tons that we previously sent to Europe without a significant financial impact. In the short term we also benefit from an increase in corn acres in North America which coupled with poor fallout, ammonia applications will significantly increase UAN demand here this year. So net-net we're well prepared to deal with the loss of access to the European market. With that let me turn it over to Bert who will talk more about the spring application season. Then Dennis will cover a few financial items before I offer some closing remarks. Bert?

Thanks, Tony. As has been well-documented wet and cold weather delayed fertilizer applications in North America. However, in April, the weather was favorable for field work and fertilizer applications currently as well in the Midwest and field work has slowed. Over the past several weeks, we saw significant activity at many terminals from Eastern Nebraska to Western Illinois and Northern Missouri. To give you a sense of the movement on one day in April our Albany Illinois term loaded 263 trucks. To do this the loaded trucks for 24 hours straight for more than 5,000 tons of ammonia at just one terminal. And this week urea truck shipments of Port Neal reached nearly 10,000 tons in one day, a record for the facility. Applications have begun to shift North and East more recently as would be expected. In fact CF ammonia shipments are now ahead of last year's pace. We continue to expect nitrogen demand in North America to be strong during the first half of the year, driven by an increase in planted corn acres in the United States. And though, we have had a late spring it is not too late for farmers to catch up on applications and plantings giving the technology they use. If farmers switch to other end products, we have all three ready in position. As of this week corn plantings run pace with 2018. We also anticipate strong demand for upgraded products this spring in order to make up for the lighter than normal fall 2018 ammonia applications. We believe the industry's ability to supply all this volume and the timing manner will be challenged. Most significantly barge transportation has been disrupted by the after effects of the winter and spring rain. Barges are moving slowly and we don't expect regular access to Minneapolis for a couple of weeks. This is the latest opening and at least 30 years. This has two effects. First, prompt urea barges in Orleans so far into the second quarter have been in high demand. Barge need to be moving north for spring applications. Pricing is reflected this has no urea barges pricing approach $300 last week before retreating this week to 270. Second, product already in region is trading at a significant premium to Norway barge prices. CFS then it sort of from this from this due to that our strong production at our Port Neal facility, and inventory and position. We have also leveraged Donaldsonville logistics flexibility by railing urea into the upper Midwest in anticipation of the high demand. All of these factors should enable us to capture higher prices across most segments, compared to the second quarter of last year. The first quarter was challenging because of the weather, but these challenges play into our company's strengths. We're well prepared for the next two months and as a team assets and flexibility to meet our customers’ needs. With that, I'll turn the call over to Dennis.

Thanks, Bert. In the first quarter of 2019 the company reported net earnings attributable to common stockholders of $90 million, or $0.40 per diluted share. EBITDA was $301 million and adjusted EBITDA was $305 million. Our first quarter 2019 net earnings of $0.40 per diluted share included $0.13 per share net income tax benefit. This was the result of the net income tax credit of $30 million recognized during the quarter. As Tony and Bert have described, our results in the quarter were higher than a year ago as higher product price overcame lower sales line, supporting strong cash generation. During the first quarter, net cash provided by operating activities was $306 million. We returned $127 million to shareholders during the quarter, including $60 million to repurchase approximately 1.5 million shares and $67 million in dividend payments. Due to the seasonality of the fertilizer business we evaluate our company's performance against our peers on a rolling 12 month basis. Looking at the most recent period with our reported financials, you can see on Slide 6 the CF generated $1.5 billion operating cash flow in 2018. After deducting capital expenditures and distribution to non-control interest we generated $936 million, significantly higher than our peers in both an absolute sense and as a percentage of our April 30, 2019 equity market capitalization. This demonstrates CF’s free cash flow, power, which we believe provides ample flexibility to repay $500 million in debt on or before its maturity date in May 2020 and deploy excess cash in line with our longstanding capital allocation philosophy that is to pursue growth within our strategic fairway. And in the absence of these opportunities, return excess cash to shareholders through dividends and share repurchase. Capital expenditures for the first quarter of 2019 were $80 million. For the year, we continue to expect this trend before the 450 million. We end quarter with $671 million of cash on the balance sheet. This does not include $55 million in proceeds received in April from the sale of our Pine Bend dry bulk storage and logistics facility in Minnesota. With that, Tony will provide closing remarks before we open the call to Q&A.

Thanks, Dennis. Before I move on to your questions, I want to thank everyone at CF for their great work in the first quarter. They operated safely, made the most of the opportunities and helped us to be well positioned for the remainder of the first half of 2019. When we spoke to you on this call one year ago, our reprices at New Orleans were about to hit the low point of the year at roughly $200 per ton. Today New Orleans barge prices are about $270 per ton and our price for urea in the Midwest is over $370, more than $100 per ton premium, reflecting the logistical challenges the industry sees currently. We are also benefiting from lower natural gas prices, the cost of natural gas at Henry Hub in the first quarter was lower than a year ago and through the end of 2019, Henry Hub natural gas futures remained well below $3 and below 2018 prices. Added to that is the benefit we received from basis differentials in Alberta and Oklahoma. These factors highlight the operational and structural advantages that we enjoy and that will drive our long-term cash generation capability. With that operator, we will now open the call to your questions.

Thank you. [Operator Instructions] And our first question will come from Adam Samuelson from Goldman Sachs. Your line is now open for questions.

Thanks, good morning everyone.

Good morning.

So I guess I wanted to dig a bit more into the European Union tariffs on UAN, and just the impact both on the company, and you're adjusting and just more high level market impact. In the quarter you've shifted the capacity utilization in the production more heavily to urea versus UAN. I know there is a more room to go based on the flexibility you have at Donaldsonville but, is this a decent representation of what the forward product mix looks like or is it even more skewed urea versus UAN.

I mean, it's really a question of – it's really a question of where prices are for the various products or trading. If we make more UAN, it uses both ammonia that would otherwise go into the nitric acid to AN piece in urea, if we dial back UAN it will make more urea we're getting urea and some excess ammonia out of it. So what Bert and Chris are doing is they're looking at the relative values of the various product prices where we sit in inventory with the demand profile looks like and then are trying to optimize what the production mix looks like. And as we talked about in the comments in the script, we've got sort of pretty ample room to move probably between something like 300,000 to 700,000 tons of what we historically shipped to the EU into granular instead and make that just disappear. We've also got exports and more tank space and it doesn't necessarily have to show up as granular, it can also go out the door as either urea liquor or DEF, which – the demand for that continues to grow. So when we built the projects, we built a lot of flexibility into the product mix side. And Bert and his team have done a great job of continuing to open up additional markets for us. That effort has been on its way – underway for like last four, five years. So I think, even though it's disruptive and it removes a little bit of our flexibility, it's something that we're in a position to manage going forward.

And along those lines and the part, I mean your flexibility will impact certainly, but I mean historically UAN has commanded a premium on a nutrient basis to urea given kind of the value it adds to the farmers from a flexibility perspective and the added transportation logistics costs, is that a liquid product, does that change at all, as the market reorient itself and trade flows readjust.

I mean, I think, they're going to kind of bounce back and forth for a while, as the market sort of adjust the new trade flows and people figure out what sort of product mix – because other people have flexibility, particularly the Russians have some flexibility between NPKs, and AN and other options as well. So I think, what you'll see is those relationships kind of bounce around a little bit. Long term, I think, there needs to be a premium in UAN in order for people to justify putting the incremental capital into acid plants and the UAN plants because otherwise, if it doesn't command a premium, which you'll see us people stop putting maintenance into acid AN plants and just produce granular going forward. So I think long-term eventually, you've got to see that return. But I don't know whether long term in this context means three months, six months or a year and a half, but we feel pretty comfortable that we'll get back there. And in the near term, we've got a lot of options in terms of how we deal with it.

Thank you. Our next question comes from Joel Jackson from BMO Capital Markets. Your line is now open for questions.

Hi, good morning everyone. A couple of questions. Last year during the Q1 release you did talk about, that you should expect that similar volumes in the first half of the year, as the year before you didn't have that commentary in this release. You did speak you can maybe it’s not too late to catch up. Could you give a little more color? Do you think you can get the same volume as last year – first half of the year, sorry?

Yes Joe, I'll turn it over to Bert to give you some specific commentary here in a minute. But through April, we're ahead of where we were on volume shipments last year. And so May or the first quarter was a little bit behind, but we've more than cut that up through April. So we're very comfortable with where we sit from a demand profile, Bert?

Yes, just looking at it from an agronomic swing as you if you're planting corn or nitrogen consuming crops, which we still are estimating 92 million to 93 million acres to be planted them out of the short-cycle or long cycle. We still have a month left of field work in time to get the crop in which is plenty of time. We've proven that the market can move or the farm community can move in a matter of days to weeks with new equipment that's available. And so if you plant you're going to apply nitrogen P&K will take a little more at risk depending on what was put down in the fall. But we have a lot of fall to make up that was lost in terms of ammonia that will be made up as well as if we do have to transition from ammonia to UAN or urea. We think that there is sufficient lease from CF and we would plan to train our inventory to pickup all that volume in Q2. And so I think it's just an understood that we would move that volume in the first half. And so that's probably why it wasn't stated.

That's great. And my second question on pricing. So we see where the Midwest Premium is trading now. We see that you realize for urea and UAN, some of your largest premiums to NOLA benchmarks for realized prices for years. So should we expect in the second quarter elevated realized pricing versus benchmark in NOLA. Thanks.

Well, as we went through the first part of the year, we positioned product in interior. We have the tanks for UAN, as well as the ammonia, we have the dry storage for urea the barge capacity to move it, the rail capacity to move it and the relationships in place to receive it if it's even not under our own control. So with that being said, yes, there is a premium to NOLA today and has been, and it has been expanding. I think it's also expanding for P&K. And that's the reflection of proper planning and distribution. And so I do think you'll see that carry through in the for Q2 realizations a nice spread.

It's a nice conversation to have as suppose to us trying to defend the notion of an in-market premium being sustainable when people a few years ago, were talking about, that's getting wiped out in the fact of the matter is the evidence doesn't support that thesis. Like we're trading in a $100 in market premium right now because of supply disruptions and another issues and that's kind of what we've said all along. And we really enjoy the benefit of our network. As a result of that.

Thank you. Our next question comes from Ben Isaacson from Scotiabank. Your line is now open for questions.

Thank you and good morning. On the logistic challenges and you talk about your in region production and transportation distribution network, how are their advantages. Can you talk about that $100 premium and how much of that you benefit from and how much of that is the cost?

Well the costs haven't really changed. I think there were some disruptions in Q1, which I think have been communicated to the market relative to flooding that took place, that limited some rail service from the BN and UP as well as just poor service from the CP coming out of Canada. That has been corrected. The barge logistics, there has been a lot of accumulation of barges in the northern end of for river opening. But I think part of it is just a dislocation. Some tons were sold short not supplied and so, a bit of a squeeze got put on. And also I just think that with the additional acres and the timing that moves to our advantage with our assets in place and our short moves from where our assets are in the heart of the Corn Belt and so that spread has expanded and we've followed that and taken advantage of it.

But I think also Ben on that point, the big issue is we've got a lot of rolling stock, we've got access to multiple rail lines , we've got our own barge network in our contract in place and traders and people that are bringing tons over who don't have access to that. And so what the in-market premium is really kind of reflecting is that there is instantaneous challenges of moving products from the Gulf other ports into the interior and we've got an ability to move diesel tons into the interior. We also have Port Neal and Verdigris and other end market plants that are already there. And so from the coast it's probably or from diesel, it's $30 to $40 to move most of those tons kind of up into the Corn Belt. And so the spread between that price and what we're realizing today is it is sort of just the arbitrage that Bert was talking about earlier of either short squeezes or inability for traders to move tons because they don't have access to logistic.

Great. And just quickly. My second question is, maybe just to expand on Joe's question you talked about how you are through April you're ahead of where you were a year ago. I think you mentioned for ammonia specifically, but what about urea, UAN and ammonium nitrate?

Yes, I mean shipments in aggregate are off at this point year-on-year. So we feel very comfortable both with kind of how demand is shaping up for this year what are, what our inventory position is what our book looks like and kind of again where prices are and where gas is, we're well ahead of what last year look like. So all of that shaping up to be a really solid first half for us.

Great, thank you.

Our next question comes from Michael Piken from Cleveland. Your line is now open for questions.

Yes, hi, good morning. Wanted to touch base a little bit more in terms of the outlook for Chinese exports. You said that you're looking for relatively flat levels of Chinese exports, year-on-year. Where do you see them on the cost curve and where do you see the Europeans right now?

Yes, relative to China they're producing due to some of the shutdowns and lower operating rates. We estimate the 53 million to 54 million metric tons per year run rate. They did export more in Q1. We believe that was a reflection of a couple of issues, one being the higher prices in Q4 that were realized and then product moved into position and exported in January and February as well as possibly some of the Iranian tons that have come in and have been re-exported. And so for that reason we're fairly confident with where pricing is worldwide and where it's whether you're looking at the Arab Gulf, Asia price, NOLA price and the cost curve with their cost generally driven by coal. Gas today is around $5 in China, the forward strip, especially for Q4 late Q3 and Q4 is back in the $7 to $9 range. And so that would curtail you would expect if we stay at this current pricing level. And so that's why we feel fairly comfortable estimating in the two million ton range for China to export.

Okay, great. And then if you could talk a little bit about your expectation for the Iranian urea in terms of how much product is theoretically available at this point. If you think India, who has been aggressive in tenders, or is it China, or where could the product theoretically go and what's your expectation?

I mean, our expectation is that all of that production finds its way out in the public marketplace. There is enough people and the world demands that product and there's enough people kind of willing to chase the dollars that we're just planning on all of that production coming out. So we don't believe all of a sudden, there's going to be some huge disruption to the supply side. That said, if the U.S. actually does get on sanctions and makes it more difficult bidders there's possible upside there for us, but we're certainly not planning on per year there.

No, I agree, I think the surprise was the tonnage has gone to Brazil that was partnered for soybeans or corn that was a new development. I think you're seeing further restrictions and especially the sanctions that were announced recently that tighter full on sanctions royal which will transition to urea. We believe it does make it difficult for those extraneous markets and then I think there is an issue to the sustainability of their production with an inability to work with the providers of services and products and materials at longer-term if this stays would make that probably a question mark on production.

Thank you. Our next question comes from Mark Connelly from Stephens Inc. Your line is now open for questions.

Thank you. So a big seed company surprised us recently by saying that it sees corn acres moving back to soy or maybe moving back to soy. So I'm curious what your market intelligence says about the extent of that risk.

At this point, I think it's too early to tell, you can if you look at the, really it's an economic decision on the corn to being spread and that's still attractive to corn and if I were to look at it and being able to yield it on trend with corn and/or soybeans, looking at what the difficulties could be out there with soybeans and the production that's expected to come out of South America and already has as well as the consumption in China with the possible impact of the African swine fever that – what that could be or communicated demand. So I think of safer choice would be to stay with corn, I don't think we have gone through wet years, we've gone through dry years and as Tony articulated and as Dennis and I did also that there is still plenty of time to plant and we believe that people will make an economic choice.

I mean, the other thing I'd add Bert if I can, Mark is if you look at stocks to use soy is really high and corn is actually kind of down to 2012 or below levels. And so as we just look at our own we don't have Intel that the seed guys do. But as we look at our order book and where product prices are for nitrogen, as we look at with the in-market premium is and the urgent demand for our products and just kind of what the overall shipment pattern has been despite it being a pretty tough first quarter. We are very comfortable with Canada, what the acreage numbers look like and what we see developing for the first half of the year.

It makes a lot of sense to me. I don't know how easy it is to separate the sales, but how are you thinking about transportation costs this year versus last and first half versus second half, we obviously got hit a lot with transportation last year, but now we got all this logistics noise. So, just curious if you can figure out what's happening and whether we're going to see a benefit in the second half.

I would say it's probably roughly flat, maybe up or down just up a little bit is what I'm getting the math around the table. But I think it's, whatever small amount gets moved there if you think about it on a per MMBTU kind of cost in terms of the gas content of the product, we're going to see that a favorable impact in terms of the price that we're buying gas relative to the distribution costs. So net-net, on a COGS basis in terms of moving those tons in the market, they ought to be at a lower aggregate cost. I think we're also seeing a movement in the form of transportation. We're seeing a little less barge availability just given what's going on in terms of the river and as Bert talked about Iselux still in the Northern part, inability to access Minneapolis and so forth. So we're seeing a bit more rail and probably a bit more truck less parts. So that's a little bit higher mode. Cost, but I think it's not going to be one of those things that jumps off the page is all the sudden Wow I'm shocked that this numbers is what it is.

I guess Mark, the only other thing I'd add is, as I said in my prepared remarks, we think of our business is a six month business at least, more like a year and I've been in this company now for eight years and I've never seen a so called typical first quarter, typical second quarter and what we saw and where we saw it, differs every year and that changes the mix on transportation.

Thank you. Our next question comes from Chris Parkinson from Credit Suisse. Your line is now open for questions.

Hi, good morning everyone. This is Graeme Welds on for Chris. Piggybacking on an earlier question around the global cost curve, you mentioned the fact that you expect gas prices in China increases as we go through the years kind of curious, you had a flat a couple quarters back that kind of spoke to the average range that you saw for NOLA pricing kind of based on the global cost curve. I'm curious, if there any updates on that kind of roughly where those ranges would kind of shake out based on what you're seeing now.

Yes, I mean, I would give you just a quick jest and I'll toss it over to Dennis. But we publish kind of an estimated cost curve for the year, only about once a year and it’s one of the things that change is very dynamically. I mean obviously the day that it's published, which tends to be October, it's already out of date because the stuff moves very quickly. Obviously, because of a fair bit of a lot of LNG gas prices in Europe for instance are lower than the normal sort of oil index basis would have traditionally had then pegged that, but if you look at the forward curve for NBP and TTF, it's got to going back to $7 plus by the fourth quarter. So we think in the near term there's a little bit of dislocation, but honestly, if you look at where the price curve was that we published, last October it projected price range of like $260 to $300 and we traded within that range and we're still within that range today. So even though it's kind of a little bit older, and some of those buyers have moved. It's not wildy inaccurate that’s still where urea is trading today.

I just want to just expand a little bit on Tony's point. If you look at Western Europe and Eastern Europe, you get gas or oil linked contracts. If you look at those forward curves into the next two years or so, what you see is that the gas price restores to it's sort of, if you will, relationship to oil around 60% to 65% price on an energy equivalent basis. So although we see it as sort of anomalous period right now with – in LNG glut because of the warm winter in Asia affecting Europe, both Eastern and Western, their market certainly expects the historical relationship between oil and gas to be restored in the relatively near-term.

Thank you. Our next question comes from Steve Byrne from Bank of America. Your line is now open.

Hi guys, this is actually Luke Washer on for Steve. I wanted to touch on the logistics challenges in the upper Midwest. I appreciate the detail there. But do you see – and I know you talked about your in region production, but do you have any urea in barges that are – can't get to the upper Mississippi, you talked about challenges in Minnesota because of these lot closures and flooding, and is there any risk that some of your product was could be challenged in getting to the retail channel, a little bit too late.

No, I think for how we manage our relationships with our customers who are the retailers and the wholesalers, we're actively selling that product on an FOB basis NOLA and if we send barges up the river selling them along the way. And then we have barges, the only place that we received CF material is in Minneapolis, which Tony mentioned, we've been supplying by rail. We do have barges set to go up to Minneapolis, but we also supply Cincinnati, which is a rented facility by barge that has not been constrained. And so when you look across our network in Medicine Hat, where we ship out by rail and truck Port Neal. Also, as I mentioned, we shipped one day of 10,000 tons by truck that's not constrained at all. So we leverage each of those points which the each of the modes possible in order to operate them efficiently, safely and with the economic receiver opportunity available to us.

Thank you. Our next question comes from Andrew Wong from RBC Capital Markets. Your line is now open for questions.

Hi, good morning. I just wanted to ask about capital allocation plans, so beyond your current repurchase program and the debt payments that you have planned, what thoughts do you have on just growing the business either organically through debottlenecks expansions or maybe just looking externally and adding to your business. Thanks.

Yeah, I mean we obviously look at all kinds of things whether it's organic or inorganic and I don't see us do a big sort of bold brownfield or greenfield kind of expansion, like we did back in 2012 because assets trade are trading below replacement cost. So there's no reason to go out and do that kind of thing. What you have seen that the industry undertaking a fair bit of upgrade kind of projects, so Coke and nutrient and the coal gas and others have taken on urea projects and other things that have been converting more ammonia into urea and those are – it doesn't change the nutrient balance from an SMB standpoint, but it improves economics for those people to do it largely because there is a very expensive transportation logistics costs around ammonia. And then when you have, weather vagaries and in the fall and in the spring, sometimes you're not able to move as much ammonia as you want in the ag space. And so it's just more predictable and reliable, if you've got upgraded products. So we certainly would think about that debottleneck or do on some upgrades. I don't know that we need a lot more ammonia right now, just because we've got a lot of ammonia as it is, but I could envision us thinking about doing debottlenecks on some of the upgrades and converting more ammonia into upgraded product. And we're constantly looking at logistics players and other things to make our existing network more efficient, whether it's exporting out of D’Ville or moving product into the interior, giving us different access to multiple modes of transportation, so we can – our different lanes and so forth. That's kind of what we're thinking about. And on the inorganic side, it's always a question of, is it cash flow accretive or are there other alternatives and if there's something that we can find that fits within our capability set where we can leverage our skills and create some value that's cash flow accretive, we think about it, but in the absence of that we're very comfortable continuing to drive and improve our existing network.

Okay. Thanks.

Thank you. Our next question comes from Don Carson for Susquehanna Financial. Your line is now open.

Thank you. Tony a question on offshore ammonia, we've seen the Tampa price just hit $237 for May which is a 20 month low. So what's going on in offshore ammonia? Is this pressure for just lower cost product out of, say Iran or the lower global cost curve? And what business imply for your export opportunities in ammonia at these kind of price levels?

When you look at – what has been taking place in ammonia globally. There has been additional supply that has come on the Russian plant that came on recently the full world scale, there are others in terms of new additions. But with – we have also seen a weakness in phosphate and so a little bit less industrial demand not only in North Africa but in – with Mosaic shutdown of Faustina – not Faustina, excuse me, of the Florida asset. And so with less available demand at this point and additional supply the pricing had – I think come down to a level that where it has, and that's also reflective of some of the gas movements that we've seen globally. We do expect that to improve have obviously as gas prices modulator move back to what Dennis talked about on a global comparison to its – to the energy equivalent of oil, as well as some of the other high-cost plants coming off an increased demand as phosphates and industrial demand improved. We see that improving.

But obviously Don, the current prevailing prices, ammonia exports in the industrial space are kind of our last resort. So that goes into the math as we think about mixed decisions on UAN versus urea and whether we've got options domestically to take more of that product or we’re forced to export some of it and ammonia exports right now don't look good for anybody regards urea.

And then as a follow-up, there is some talk north of the border of extending the carbon tax to industrial uses of natural gas. If that happens what does that do for the competitiveness of Alberta production and could that raise the price floor in the Midwest, given all the urea and ammonia that’s coming down from Western Canada to the Corn Belt.

Yes, I mean carbon is one of those things, and we spent a fair bit of time talking to regulators on both sides of the border about this which is as long as any regime that's put in place is applied to imports as well as local production then it just raises the bar for everybody and ultimately it's passed on to the consumer. And the problem is, if you just apply it for domestic production and don't apply it to imports, then what you're doing is shifting production and jobs offshore and you're going to end up effectively closing domestic manufacturer and that's just poor economic policy because it's carbon leakage. We operate some of the most efficient plants in Canada. There's already a tax regime on carbon in Alberta and we're working with the regulators up there. It's obviously changing dynamic given the new parties in power in the provinces and that's a shifting dynamic. But I don't anticipate that it's going to have a dramatic effect one way or another on pricing in the U.S. or in Canada or in terms of our financial results.

Thank you.

Thank you. Our next question comes from P.J. Juvekar from Citi. Your line is now open.

Yes, hi guys. It's Dan Jester on for P.J. So with all the talk on the call today about the in-market premium and logistics challenges. I'm wondering if you could just comment, why you chose to sell your Pine Bend facility in-market-logistics facility? And just maybe to longer-term, is there an opportunity for a bit of investment in sort of the upper Midwest to capture a few extra incremental tonnes whether it's storage or logistics more broadly. Thanks.

Yes. I mean we view Pine Bend the same we do, for instance, our phosphate business back in the day and so forth, which is we divest economic owner for it or somebody else. Are we getting maximum value. What's the return on capital employed as we think about what is – what the market values worth and can we solve that at different direction? That asset was the legacy from the period of time where we were a co-op and we were sourcing all kinds of products for our member owners and holding it there and moving it around and it became sort of incrementally less valuable to us when we sold our phosphate business because we used to move a lot of phosphate there and also became incrementally less important when we built the urea plant at Port Neal because that gave us access to that same region on a truck reach basis and the fact of the matter is we were just under utilized in that space, there's over 200,000 tons of space there, and we were using, about 20 of it. And so it didn't make sense for us to continue to own it. The agreement that we reached with Mosaic it gives us access to be able to continue to put tons through that facility, and they are much better economic owner of that asset, it’s good for them, it's good for us and so like any other decision we make this is strictly on who is the right owner.

Yes. And looking at it, we were already working with Mosaic and a few others providing services and we just didn't see ourselves as a service provider in that space. As Tony said, they were the best economic owner and kind of reverse flow that we became a service-taker and moving our products on an as needed basis. So we have an agreement to move our urea up to Pine Bend for utilizing the space that we need and then Mosaic has the rest for P&K. And we have 130 maybe a little more 1,000 tons of space of Port Neal, as well as space in Medicine Hat. We have been out not acquiring, but at leasing and opening up new space for our UAN throughout the Midwest, so that has been accretive to us also.

Great, thank you. And then just a quick one for Dennis about the free cash flow conversion from EBITDA. You've got this nice chart in your slide deck. I'm just wondering over the cycle is that two-thirds of EBITDA in the free cash flow a reasonable benchmark or is there been onetime factors over the past year or two which has boosted that. Thanks.

The question is where do you sit with sort of your operating cash flow and sort of EBITDA. If you think about our CapEx, what we said is we intend to be sort of around $4 million [ph] to $400 million a year that's kind of flattish. So that piece of the equation, we're showing doesn't change. Obviously as the EBITDA and cash flow of our company's CF changes, it changes as well for a non-controlling interest distribution, which is to CHS and obviously they own a piece of our biggest subsidiary, CF, and so that's going to move up and down. So what I'd say is, a lot of the pieces are going to move up and down with EBITDA in that equation except for CapEx, so that fixed portion will have somewhat muting effect on that.

Okay. Thank you.

Thank you. And our next question comes from Vincent Andrews from Morgan Stanley. Your line is now open.

Hi, this is Jeremy on for Vincent. Thanks for taking my questions. So I wanted to start on the Chinese export, I just wanted to circle back on that. We've seen some data that suggest that China may even be considering importing urea in the near-term. Does the kind of expectation for flat urea exports depend on that dynamic?

No, I think that has been a reflection of kind of where market pricing was in Q1, you saw the Qataris move some prilled urea into China into the northern ports. I think as well as the Iranian tonnage that has been moved up into the same area and where the preponderance of production is in the south. And so I don't think that's an unreasonable expectation over time that as these inefficient plants go offline or cost to transport become more market-based that you would see additional imports or incremental imports into China during that Q1 as they're ramping up into their peak consumptions season. I think that's a positive for the market.

I also think it demonstrates a real commitment on the part of the Central Government around their environmental policy, which is urea production, particularly in China, which tends to be largely coal-based that carries a very large environmental footprint, whether it's scarce water usage particular matter emissions and so forth. And I think with the question of the rightfully asking, is this something we need to be doing given the toll it’s taken on the environment, and I think the answer is no there is plenty of freely traded urea out there, they're importing soy, they’re importing corn, they’re importing other things why go out of their way to be self sufficient to our core access and urea production when it carries a big hole. And I think you're seeing a recognition that doesn't really make a lot of sense.

Thank you. Our next question comes from Charles Neivert from Cowen. Your line is now open for questions.

Good morning, guys. Just one question, given the fact that things seem to be delayed and then maybe there is a chance that some of the N that would typically go down pre-plant, it’s going to go – isn't going to get down? Does it look like there is going to be a longer-than-normal side-dress season? Or larger than amount of normal product going in on side-dress and therefore maybe getting pricing and volume that extends out maybe even into early 3Q this year, as opposed to normally sort of ending – during the late part of 2Q?

Yes. For sure. I mean, I think you're spot on, just because it's not in the pre-plant does not mean that you lose that you get the post-plant side-dress, top-dress, the application technology that's available as well as, this is why we're aligned with the retail network. And why the retail network adds value and why we want to have these relationships with our customers like CHS and grow market nutrient and people like that, Helena, that are active in the market dealing with these issues. They can run 24/7 and will and will move from end-to-end to make sure that that product gets supplied and the crops are fed. So I can see us going well into – not well into, but into July for sure. And we normally do with the pivot season in Nebraska in the irrigated acres does go into July. I would bet more of that – more tons move that direction because of this later application.

Thank you. Our next question comes from John Roberts from UBS. Your line is now open for questions.

Yes, thank you. So bit of a tangential question, does IMO 2020 reflects some of the global trade in fertilizers late this year? It's lot of ocean-going product obviously and they've got a sort of time. I guess the switchover in their fuels that’s there. So maybe some shipments occur earlier in the year, so they're not right at the year-end deadline when the shipping companies have to deal with that issue?

Go ahead, Bert.

Well we've experienced similar issues with positive train control and the changes that are required legislatively or by government bodies and this is something that the industry has been watching. I'm not sure if there will be delays or extensions allowed. But it is a big change going from the bunkering system that we have today and how either vessels are retrofitted or just jumped and new vessels are built to accommodate these issues. I think that we – for us there is more to come.

Okay. You're not hearing anything at this point about maybe doing shipments earlier in the year just to avoid a year end kind of logistical challenge possibly.

No, I mean I think the issue though is the industry runs 24/7/365, and so it's hard to kind of quote unquote pre-ship stuff because it's not that you're running on a shift basis and building a bunch of inventory disgorging it. You got to ship it as you produce it. And so, there really isn't that kind of opportunity to do that in any meaningful way.

Okay. Thank you.

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

Thanks everyone, and we look forward to speaking with you in the next few weeks and then we'll see many of you at several conferences over the next month.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.