Good day, ladies and gentlemen, and welcome to the first 9 Months and Third Quarter 2021 CF Industries Holdings Earnings Conference Call. My name is Erica and I will be your coordinator for today. At this time all participants are in a listen-only-mode. We will facilitate a question-and-answer session towards the end of the presentation. [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. I'm Martin Jarosick, Vice-President Investor Relations. With me today are Tony Will, CEO, Chris Bohn, CFO, and Bert Frost, Senior Vice President of Sales, Market Development and Supply Chain. CF Industries reported its results for the first 9 months and Third Quarter of 2021 yesterday afternoon. On this call, we will review the CF Industries results in detail, discuss our outlook, and then host the 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 will 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 the 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. A - Tony Will: Thanks, Martin. And good morning, everyone. Yesterday afternoon, we posted our financial results for the first 9 months of 2021, in which we generated adjusted EBITDA of $1.5 billion. These results reflect the drastically improving industry fundamentals that we experienced over the course of the year. Nitrogen prices are at their highest levels in over a decade. A strong demand and lower worldwide production have tightened the global supply demand balance considerably. At the same time, energy spreads between North America and high-cost regions have widened dramatically supporting margin expansion for our cost advantage network. The CF team also continues to perform exceptionally well navigating a couple of severe weather events in the U.S. our highest levels of turnaround and maintenance activity ever, and a challenging natural gas situation in the UK. Most importantly, they did so safely. Our recordable incident rate at the end of September was just 0.24 incidents for 200,000 labor hours, significantly better than industry averages. These factors have driven substantial cash generation over the last year. Our trailing 12-month net cash from operations was $1.7 billion and free cash flow was $1 billion. As we look ahead, we're excited about the opportunities to build on this performance. We have good visibility into the fourth quarter of 2021. We have priced virtually all of our product shipments through the end of the year, while also hedging our natural gas requirements. While there is always some uncertainty about the volume of ammonia that will be applied in Q4 given the dependency on weather, we would expect full-year 2021 Adjusted EBITDA to land between $2.2 billion and $2.4 billion. Further out, we believe nitrogen industry conditions will remain positive for an extended period. As Bert will describe in a moment, we see a very strong demand, constrained global supply, and wide energy spreads between North America and Europe to persist for some time. These factors support our ability to continue to generate significant free cash and to deploy that capital to create shareholder value. Our priorities remain the same. Invest in growth where opportunities offer returns above our cost of capital, and return excess capital to shareholders through dividends and share repurchases. We remain focused on disciplined investments, and are excited about the 2 new projects supporting our clean energy growth platform. Once completed, these projects will enable us to produce over a million tons of blue, or carbon-free ammonia. Chris will share more about our announcement yesterday in a moment. We're also pleased to have achieved investment-grade credit ratings, which recognizes and underscores all of the work we have done to remove fixed costs in the business, reduce debt, and highlights the positive industry fundamentals for a North American producer. On the Balance Sheet, we are quickly closing in on our target of $3 billion of gross debt, and expect to repay the remaining $500 million outstanding on our 2023 notes on or before their maturity. However that still leaves a substantial amount of excess free cash flow we expect to generate. And as such, the Board has authorized a new $1.5 billion share repurchase program to facilitate the return of capital to shareholders. With that, let me turn it over to Bert, who will discuss the global nitrogen outlook in more detail. Then Chris will follow to talk about our financial position and clean energy initiatives, before I return for some closing comments, Bert.

Thanks, Tony. The last 6 to 9 months we have seen a dramatic tightening of the global nitrogen supply and demand balance. High crop prices and increased economic activity continue to drive demand. Meanwhile, global -- lower global production and government actions have created a supply constrained global market. The impact of this can be seen on Slides 11 and 12, where both our spot cost curve and 2022 cost curve are much higher and steeper than in recent years. As you can see, the margin opportunities available to our network have expanded greatly due to a wide energy spread between North America and marginal production in Europe. We expect strong global fertilizer demand to last into at least 2023. As you can see on Slide 8, global stocks-to-use ratios for both grains and oil seeds, are at their lowest levels in nearly a decade supporting high crop prices. These prices will support farm profitability in North America, even with higher input prices incentivizing farmers to plant acres and maximize yield. Based on our order book, we expect the fall ammonia application season will be the largest since 2012, demonstrating farmer commitment to planting corn and applying fertilizer. We believe farmers around the world will make similar decisions, with import demand continuing to be led by India and Brazil. We believe global supply will remain constrained in near-term, with relief unlikely to appear anytime soon. We believe inventory in the channel is very low. Global production has been lower in 2021 due to severe weather in North America, higher maintenance worldwide, and ongoing European shutdowns and curtailments. Further, the Russian and Chinese governments are discouraging nitrogen fertilizer exports through the Spring. These factors suggest the potential for strong fertilizer demand to last beyond 2023, even if some regions are unable to secure enough product in this supply constrained environment, resulting in lower yields. If this were to happen, demand will be deferred into future years as it would take more than 2 growing seasons to replenish global grain and oil seed stocks. As we prepare for the spring application season, we continued to receive substantial interest for any product we offer into the marketplace. We are building a solid order book for the first quarter of 2022, at the prices you see in the market today. Similar to what we did for the fourth quarter, we are adding natural gas hedges as we make first quarter product commitments in order to lock in margin and protect against significant energy price spikes. As a result, we believe we're in a strong position heading into 2022. In this dynamic market, we remain focused on leveraging our manufacturing, distribution, and logistics capabilities to serve our customers and look forward to the opportunities before us. With that, let me turn the call over to Chris.

Thanks, Bert. For the first 9 months of 2021, the Company reported net earnings attributable to common stockholders of $212 million or $0.98 per diluted share. EBITDA was $984 million and Adjusted EBITDA was approximately $1.5 billion. Net earnings and EBITDA reflect the recognition of a non-cash impairment charges related to our U.K. operations. As discussed in the earnings release, our results for the first 9 months in third quarter are preliminary, pending the completion of the impairment analysis and finalization of the non-cash impairment charges. We continue to monitor market conditions for the U.K. assets, which accounted for 2% of our gross margin in 2020. The Billingham complex is operating due to recently improved carbon dioxide contracts and industrial contracts that pass through natural gas costs. Operations at Ince remain halted. Free cash flow -- free cash generation remain strong. The trailing 12 months net cash provided by operating activities was approximately $1.7 billion and free cash flow was $1 billion. We believe we have a good opportunity in 2022 to build on these results, based not only on our positive outlook but also on increased production from our network. In 2021, we completed a record level of maintenance activity that included turnarounds at 7 of our 17 ammonia plants. We will return to a more normal level of turnaround activity in 2022. As a result, we expect to return to our typical high ammonia utilization rates with gross ammonia production between 9.5 million and 10 million tons. We expect to sell everything we produce and achieve sales volume between 19 million and 20 million tons in 2022. As we sell these product volumes into a favorable market environment, we expect to continue to generate substantial free cash flow and create shareholder value. As Tony said, our Board authorized a new $1.5 billion share repurchase program, which becomes effective January 1, 2022. We continue to operate under our existing program which had – has enabled us to acquire more than 11 million shares to be repurchased since 2019. This program expires at the end of the year. At the same time, we'll continue to evaluate clean energy initiatives to meet the demand for ammonia's clean energy capabilities that we expect to emerge in the second half of the decade. This includes positioning our network for the production of blue and green ammonia to support the development of a market for low carbon ammonia. Constructing carbon dioxide dehydration and compression units at Donaldsonville and Yazoo City are necessary step to enable blue ammonia production through carbon capture and sequestration.

These projects leverage our existing asset base, and represented an efficient use of capital with a return profile we expect to be above our cost of capital. Once sequestration is initiated, we'll be able to produce more than 1 million tonnes of blue ammonia annually while reducing our carbon emissions in a meaningful way. With our strong Balance Sheet, we are -- we also have the flexibility to evaluate additional opportunities in the years ahead. We continue to collaborate with global leaders where we can provide value, including jointly exploring with Mitsui the development of blue ammonia projects in the U.S.. With that, Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Chris. Before we move on to your questions, I want to recognize our team here at CF for their strong work so far in 2021. Their commitment and dedication continue to be the foundation of our success. We are excited about what lies ahead for CF Industries. In fact, I think the Company is better positioned today than we have ever been in our history. We are again an Investment Grade Credit issuer, we have the fewest shares outstanding ever. We expect the business to produce between $2.2 billion to $2.4 billion of Adjusted EBITDA this year. And as we look forward to next year, we should have significantly more tons to sell at overall average higher prices than this year. The business should generate all-time records for free cash flow per share. We see demand for low-carbon ammonia developing that should provide a long-term growth platform for the Company. And with our investments in both green and blue ammonia production, we will be at the forefront of this exciting opportunity. Taken together, we have never been in a better position to create value for shareholders. With that, Operator, we will now open the call to your questions.

Thank you. The floor is now open for questions. [Operator Instructions] We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Adam Samuelson from Goldman Sachs. You may please go ahead, sir.

Yes. Yes. Thank you. Good morning, everyone.

Morning, Adam.

So Tony, Bert, Chris, I guess what I'm trying to reconcile and think about is the risk of demand destruction at current nitrogen and fertilizer prices broadly. I mean, you talked about record demand for ammonia in the fall, those prices were also booked several $100 ago relative to where the stock market is. And so, as you think about the order patterns into the First Quarter, do you see any risks on farmers and their application rates? And obviously, nitrogen is less discretionary, but do you think that could have any impact on agronomic yield given where affordability is today?

When you look across the world and where we are starting with just supply, it's just not there. This is more of a supply constrained market. The demand is definitely there. You're seeing we're desperately trying to pull in tons and we'll continue to do so through, I expect into their next fertilizer year, which begins in April. Brazil is ahead 10% year-on-year and probably will continue at that pace through importing urea, at least through February for their safrinha. And then we hit our spring in the Northern hemisphere. With what's going on in Europe with gas prices in the level of shutdown, there's over 11 million tons of ammonia that is currently not being upgraded into ammonium nitrate, urea, or CAN, and so tons need to flow, which were not planned in the supply and demand scenario to Europe. We were in a supply limited market and that's what's going to keep prices elevated. The demand side of the equation is still very strong and you're correct. What we sold for fall and we're applying today was sold at levels much lower than the current market, which is probably over $1,000 for ammonia. That being said, we're selling $1,000 ammonia for fall application on the -- on incremental tons that are available. Where as I said on my prepared remarks we're selling urea and there is significant demand at that $730, $750 short ton NOLA, it's even higher in the interior at over $800, which we've transacted a poor deal. And you've seen in the publications, the UAN reaction and the demand pulling, and I just looked at the analysis of where we are to date with order books and demand. And again, at a very good place of $550 UAN, calculating all that forward with current trend yield at 177 bushels per acre on the trend yield. That's not considering the Ince dates where you will be 275 bushels. Even with rent as land, at today's economics, your cash positive. You're actually profitable at a pretty healthy level if you own your land even more so. There are ways to economize. And so if you have a firm, you can look at different options, but that's not going to come at the expense of nitrogen and probably even at fertilizer. It's going to come at some other issues. We're constructively, as I have said positive. I would say very positive. And the customer advances continue to come in, and so we are working with our retail partners to make sure that that supply is available and our retail partners are buying that. And moving on there's going to be a substantial amount of cash coming into our retail friends

through year-end as farmers prepare for 2022.

I would just add one thing, Adam, which is, as Bert said, demand is clearly there. If you look at our customer advances, our order book is strong and continue to sell forward, and it looks like farmer economics are positive. But given the supply shortfall, particularly now with both Russia and China, withholding tons from the export marketplace, there is a real shortage of nitrogen and price has got to basically arbitrate who's going to get the scarce tons that are out there. And so it's not so much that you are going to destroy

demand, there's going to be a lot of unmet demand that's going to be pent-up. And so, we do think yield is going to be on a global basis off next year. Again, not because demand destruction, just because there's not enough tonnes available. And what that means is it's going to promote favorable supply-demand dynamics and core screens as we get out into 2023 and probably beyond. Our view is that this is a very, very healthy dynamic that leads to a much longer period of positive fundamentals for our business.

I appreciate all that, Collin (ph). I will pass it on, thank you.

Your next question comes from the line of Joel Jackson from BMO Capital Markets, please go ahead.

Good morning everyone.

Hey Joel.

Just thinking about your order book and Bert I don't want to misquote you, but I think you've talked about before when prices go up, you tend to book more product more floor it can no longer dated order book as prices go up. Prices have really gone up. So would that be the case that really you book more product into Q1 than you normally have at this time, normally have it at the other time?

So we're pleased with our order book and like the position that we've placed ourselves in, with the opportunities that the market has given us and you're right we have seen an accelerated market we started the year at $350 per ton of urea, moved to $400 by April, moved to $500 by July, $600 in September, and $700 in October. We had index contracts at every week price and you can see in the publications we started our fill program in July at $285 NOL equivalent and then moved to $435 in

September and then in October $535. And so as I said, we are booked for Q4 and the majority of the $285 UAN was shipped in Q3 a little bit in Q4. And then those other prices will blend in. As we look forward to Q1, we're starting to book those values today. And so you're looking at that's $530 to $550 for Q1, and $700 to $750 probably for urea. And we have yet to price Q2 ammonia. And once we book out Q1, then we'll look at Q2, but if there's substantial demand for Q2, we would rather sort Q1 first.

Thank you.

Your next question comes from the line of Steve Byrne, from Bank of America. Please, go ahead.

Yes, thank you. You laid out the significant levels of disruption in supply that are going on. And most recently, you have Russia jumping into that theme, and I wanted to get your view on how significant is that? I understand that essentially, all of the ammonium nitrate that Brazil imports comes from Russia. If that is the case, and -- where are they going to get it now? And are there regions of the world that you think are just flat out not going to be able to get nitrogen for the Spring?

Yes. So when you look at the Russia announcement, I would say in -- contextually, the Chinese announcement is much more significant. Because of what has come out traditionally from China, the 4 to 5 million tons of urea exports and also phosphates that is going to have a -- because that's the incremental ton that is continually bid in. So in a world of 50 million tonnes of world traded urea to take out up to 10% is going to be felt on top of the demand as I mentioned earlier from Europe, that needs to move. So you're going to see North African tonnes moving into Europe and there's going to be a hole. Like Tony said, somebody is going to have to struggle or pay up. The Russia announcement was a little bit of a surprise. The Russian demand for nitrogen fertilizers has been fairly consistent in that 5.5 million to 6.5 million tons of demand per year, and they've exported the remainder. And so when you look at from year-on-year what Russia has consumed and what Russia has exported, on the margin, there's probably going to be a shortage of up to 0.5 million tons. So Brazil will be able to get their ammonium nitrate. And I believe the suppliers from Russia; EuroChem, Macron, and the others, will do that, as well as supply some of the portion that's needed in Europe. So It's going to come again on the margin and every month there'll be less tons available from an expected source, which further exacerbates this supply-demand imbalance that we've been discussing.

Maybe a question for Chris, the decision to focus on Yazoo City as another carbon capture project in addition to Donaldsonville, do you have any more clarity about where the demand was going to be coming from for the blue ammonia. Are you increasingly confident that you can move those tons and generate a sufficient premium to offset your capital investment and generate a return?

Yes. Thanks, Steve. Yazoo City, as you know, has excess CO2 and that's why that was one of the sites also chosen to do the dehydration and compression unit there. As with Donaldsonville, we're in pretty extended discussions with different sequestration areas whether it'd be EOR or people who are in the process of filing their Class VI permits related to both those areas. I think when you look at the economics, Steve, both at [Indiscernible] and Yazoo City, given what's been proposed from the 45Q tax incentive. It allows us to not only more than fund those particular capital expenditures, but also see a return above our cost of capital. And the reason for that, as you know better, that a lot of people do is because we're already capturing the CO2 off of our ammonia process today. That equipment is already in place and that's limited the amount of capex that we will need, and therefore increases our return profile on that.

But I think, Steve, we are confident we'll be able to move that product into position. And even if that demand is international, make that effectively show out at E - ville (ph) for not very much cost and be able to export it as appropriate. It's not very far from Yasuda to D - ville. And we feel comfortable that there's a ready market for that time for those times. The other thing that makes Yazoo attractive as Chris said is a lot of excess CO2 it's very close to existing CO2 pipeline capacity with [Indiscernible] and there's a lot of options in the area. The geology there is really attractive. So Yazoo was an obvious add-on with the D - ville project.

And I think when these projects do come online, because it will take 2 to 3 years, you'll also see domestic demand for blue specifically at the levels that we've been producing at Yazoo.

Thank you.

Your next question comes from the line of Jeff Zekauskas from JPMorgan. Please go ahead.

Thanks very much. When do you expect to produce 1.25 million tons of blue ammonia? And how do you think about the price of blue ammonia? Is it relative to the price of agricultural ammonia or is it independent or it's relative to fuel prices? And so with all -- with those issues, how do you think about the returns on selling blue ammonia?

Relative to the value of blue ammonia, at a minimum, I would say the value is equivalent to a regular conventional ton plus whatever carbon jurisdiction you're talking about. In Europe, you're talking about EUR50 or above a ton. In the U.K. it's more like PS50. Other regions are going to have different cost structures from a regulatory environment. And so at a minimum, I would say you're able to get whatever prevailing value of carbon is on top of a regular traded ton and, as Chris highlighted, if you think about the total variable cost required to produce a ton of blue ammonia, we probably have somewhere in the neighborhood $5 to $10 a ton of electricity cost on plant site. And then we're in pretty advanced discussions with a number of potential parties on the transport and injection. And believe that that is a very manageable number from an overall cost standpoint and so the all-in the variable costs that we incur is less than the value of the 45Q credit. And so the differential will go towards paying back the capital even before you put any premium on blue ammonia. So just on the value of the 45Q, we feel comfortable that we'll get returns above our cost of capital. And then to the extent you're able to realize margins and additional premium on blue. That just further adds to the attractiveness of this investment for us.

Okay, and for my follow-up, some farmers say that they really can't secure nitrogen product for the second quarter. And in your commentary, you said you're really trying to put together your first quarter order book. Is that a generally correct description that farmers can't really get commitments into the second quarter just yet?

Yeah I would say that's not necessary true and we don't deal directly with farmers we do what we're -- kind of the retail, wholesale trader group: first retail than some wholesalers and a little bit trading for exports. But we are selling -- our tons are being moved to the market. And so those are in the hands of the retail group they have tons available to sell we're producing record amounts of UAN. And you can see with some of the disruptions from the hurricane and weather problems we did lose some tons but we are moving our tons into the market, we have a record number of UAN [Indiscernible] in service since I've been here and as well none of our railcars are in storage,

which is the first time since I've been here in 13 years that all of our railcars are occupied. Product is moving to market, product is available. Now that being said, CF is not pricing Q2 as of yet. And that's a pricing position. That's not a volume nor a commitment situation. I believe if retailers wanted to take that out or a farmer wanted to get a quote or an offer that should be available in the market. And there will be sufficient tons to meet spring demand, is not only from CF, but from the broader industry group. Imports are up, domestic production will recover, and yes, we will have a spring. Jeff, I realize I didn't -- sorry -- I didn't see your first part of the question about blue ammonia in terms of when is it going to be available.

Yeah, thanks.

We've gone ahead and launched those projects now, we anticipate probably end of 2024 or early 2025. So by 2025, we expect basically a full year of operating on that basis.

Okay. Great. Thank you so much.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Please go ahead.

Thank you and good morning, everyone. Tony, what -- would love to get your thoughts on just sort of as we think about the next few years or 3 to 5 years or you want to frame it. When you carry a situation now with obviously very tight grain stocks and now we've had this spike in gas and coal prices and so forth and having a lot of food inflation and Bert laid out a very plausible scenario where we could have lower yields because of the inability of everybody get nitrogen and so forth. So what do you think the global response to this is going to be over time in terms of trying to manage the food supply and make sure that we don't get into extreme situations like this into perpetuity, but at the same time we need to balance our climate goals and our green energy aspirations and so forth. So how does this [Indiscernible] get thread in your view?

It's a great question. And I think as you point out, there are a lot of competing priorities out there that have second order and tertiary knock-on effects that not everyone understands well. So the push to reduce availability and affordability of fossil fuels because of a focus on climate change and move towards renewable, I think is directly part of what's going on in Europe right now with extremely high natural gas costs. And that means that all of those plants that Bert talked about earlier curtailed are offline. At the same time, you've got a number of governments around the world that are very focused on trying to limit the rate of nitrogen fertilizer in particular because of their concerned about nutrient loss to the environment and runoff and whether it's nitrous oxide produced on the field, but it's pretty potent greenhouse gas, or whether it's other run-off into waterways and so forth. There is a real push in some areas, Canada notably and in other places as well to reduce application rate. And if you do that, you're going to have a year with impact on yields. There are a number of, I would say, competing priorities out there. All of which generally speaking, I would say benefit North America producers. Because we do have ready access to low-cost gas. We're on the very low end of the supply curve. And as yields continue to struggle due to either lack of availability of nutrients or these programs designed to reduce nutrient application, that's just going to keep grain prices higher for longer. Ultimately, I think where this goes as governments are going to have to capitulate to the requirements of their people and provide affordable food which means some of those priority is, that they have here before held out as being these holy grails. They are going to probably have to take a backseat for a while, just to make sure that we can feed the people the world. But I think that you will see people backing off. Again, Germany has decommissioned their nukes and they've brought on coal-fired power plants. That's not exactly what I would call a green initiative. You've seen the same thing in China as well in the UK, and Continental Europe are struggling with high gas costs. I do think there is going to have to be a reassessment of what is required to -- for the planet to be able to eat and fuel itself.

Thanks very much. I appreciate all those thoughts.

Your next question comes from the line of John Roberts from UBS. Please, go ahead.

Thank you. And back on the earlier question on the blue ammonia, do you do you expect to sell it as fuel or do you expect to sell it as fertilizer, and have some carbon credit broker gets you the revenue for the sequestration values?

Yes, John. As Chris mentioned, and we've highlighted earlier, we do have this in place with Mitsui, we're having very productive conversations with them. I think there is a real emphasis, particularly in Japan, but in some other regions as well to go into, coal combustion of ammonia with coal to reduce the CO2 emissions out of those plants. And we think that that is something that I will develop into a pretty sizable market. Estimates can be as much as 5 million tonnes by the time you get to 2030, or possibly even before. And that's a huge increase in terms of the total amount of ammonia being consumed, particularly what you've got curtailments and outages and -- across broad swaths of the production universe here in Europe and the U.K. And so we're excited about the Clean Energy attributes that blue ammonia has. We think that that's probably where the majority of value sits, at least in the near term. Well, I think there is certainly the possibility to get some incremental value off of carbon sequestration in the soil from an agricultural application given that most of that is going into the voluntary marketplace today where values are traded at a pretty small discount to where structured carbon trades and the rest of the world. I think that's probably the last place just because of lower values that we would go now that the U.S. develops a more structured approach to the cost of carbon and you can get a scientific valuation placed on carbon capture to sequestration and the soil than that may change the math. But I think in the near term what we're really looking at is more of a clean energy source and we're working very closely with Mitsui to help develop that and bring that about. The other point though that I would say is we believe these projects are attractive just based on the 45Q credit that we ought to be able to generate a return on these projects without any embedded premium on Blue. Now, our expectation is there's going to be a sizable premium on Blue. But to be clear, we're able to make the math work pretty easily just with the 45Q credit.

And then how are you thinking about the pace of buyback under the new authorization? Is it going to be opportunistic, or are you thinking something that's just going to be more structured over the 2 years?

Yes. I think based on what we're looking at in terms of not only current year performance but our expectations for next year, there's going to be a lot of cash that needs to find a home. And so while -- we'll certainly buy more on dips or at lower prices, I think it needs to be the volume that we're talking about is sizable enough that it probably needs to be a bit of a structured leg in there as well. So ultimately, probably a combination of approaches.

Thank you.

Your next question comes from the line of Chris Parkinson from Mizuho. Your line is open.

Great, thank you. Just over the last 5 years, there's been a plethora of variables that's still driving a bit of volatility in the end unit UAN pricing versus urea. Just given the current supply and demand dynamics, trade flow adjustments over the last few years, and the recent DOC case, can you just comment on your outlook for UAN pricing for '22, '23 as it pertains to UAN versus urea. Thank you so much.

You're correct, in terms of a lot of variables, a lot of volatility. In the last year-and-a-half, we've traded as low as $115 a short ton for UAN, and as high as $550 in NOLA. What drove that volatility? We believe we were pushed down low because of excessive imports of subsidized products and consigned products. And therefore, we took the case forward to the Department of Commerce and the ITC, and were successful. We're pleased with that result, and we believe that that information will come out with what the ruling will be and how that will be applied. Step 1. And so the discount to urea took place for several years, and that was an inappropriate response to a more

valued product and expensive invested product and an asset base that we've invested several billion dollars to maintain and construct. So we're entering probably a normalized market now where UAN again, is trading at a premium to urea for the reasons I just articulated, and it should. So through spring, most definitely it will trade at a premium, will reset in July as we always do. We believe at a higher level for the reasons we have articulated. We're in a differentiated global market driven by a lack of supply with high levels of demand that is not going to correct itself probably for a couple of more years.

And so in that context, we see UAN trading at advantaged position to urea, as well blue ammonia and ammonium nitrate. And that market, we don't see demand destruction, we see differences of supply availability.

That's great color. And just as a quick follow-up, just given on -- given what's going on in China, what's your intermediate to long-term view of export trends and what the ultimate price will be for those tons on an MMBtu basis? Thank you.

Yeah. So while you're looking at export trends, I would look at the globe -- at the Chinese economy holistically. And looking at what they're trying to do with energy and where they are, you've got the risk of entering winter and grammar may not be able to have heat in some of these big cities. Are you going to value the urea production, are you going to value of the population and the ability to heat homes and to produce value-added products or a commodity product? I would bet on the latter than the former. And so -- or the former rather than the latter. There you go. And so what we're seeing in China is a result of several factors coming to play, whether that's pollution, economically driven decisions, higher polluting level production taken offline. And then this restriction to have products available. You've seen their production capacity for static capacity fall from 90 million tons of it's peak to probably 75 million tons today. And then you take an operating rate that's ranged from 55% to 75%. In China, you only have available probably 53 to 55 million tons of urea per year. Domestic consumption has rebounded and is over 50 million tons. So there is not that substantial amount of tonnage to export. And why export a value destructive product? That's where we see the future of China and

other production's going to have to come on-stream in other locale. You have Nigeria coming up, Russia coming up; we need more. And so more construction will probably take place, but it's long dated. So you're not going to see this market correct for the arrival of new production, even though we need it.

But -- and I would also add, Chris, just based on what the forward curves look like, it's moved really Europe, and in particular Eastern Europe, into what I would call the marginal production ton in the world as opposed to out of China. But the factors that Bert was talking about means that China's not going to overwhelm the global marketplace with excess exports. And so that's going to maintain what we believe is going to be a relatively tight supply side equation. And just based on energy spread differentials that you can look forward, it's a much steeper supply curve than it's been recently, and that gives us a lot of opportunity here to generate cash in the U.S. So we're very constructive about all of these trends.

Great color as always. Thank you so much.

Your next question comes from the line of P.J. Juvekar from Citi. Your line is open. P.J. Juvekar: Hi. Good morning.

Good morning, P.J. P.J. Juvekar: There's all these resource nationalism going on about nitrogen that you talked about, but yours is still a net importer of urea. So how did this play out? Would growers switch from corn to soybeans at the margin, or maybe the industrial demand has to back down to make room for agricultural demand. In your mind, how does this play out in the medium-term?

I think that the U.S. based on crop prices inefficiency of growers and requirements on the industrial side is able to bid away tons from other parts of the world that are less able to do so. Particularly those economies that require government subsidies in which to bring tons in. And so our expectation is that there's going to be availability of products here in North America. And honestly, I don't see a scenario where industrial demand starts backing off based on ag demand. I see a situation where you end up with inflation in terms of the industrial goods as opposed to some reduction in economic output. But I think ultimately, as Bert talked about, you see some new projects on the drawing board, but not very many, and particularly not enough with respect to some of the closures and shutdowns or even curtailments that you see out there right now. Ultimately, I think what's going to have to happen is, you end up seeing more capacity at it because the world just needs more than what's available. That's before you even get to clean energy applications for ammonia going forward. So I think the net of all of that suggests that there are new plants that the world is going to need to construct in order to be able to feed itself and utilize ammonia in these kind of new alternative applications versus what we've seen in the past.

I think it's a false narrative, PJ, that those two are competing. I think we're in the -- you have to go back to -- in the U.S. or in North America, we're in the resource-rich region of natural gas and energy products. We have the capability to construct and move with the infrastructure that's in place, whether that be rail, barge, truck, pipe. And we are set up to do that very efficiently. What I can see over time is these other economies progress into lower carbon output or lower carbon consumption using natural gas or renewables. You're going to see the natural gas spreads continue to expand or stay expanded. Maybe not at its current level today of $20 per MMBtu, but maybe it's $10 rather than $6. And that maintains North America as a low-cost, high-margin region in the world. And I think you'll see maybe some industrial production and other areas compromise that would be Europe, and maybe some even in China over time as we move to a new market.

On the corn to soybean competition, today, it's favoring corn and it has been. And this is the time when it makes sense -- that when it's very good for us to have that favorability because that's when today or in this period is when farmers are making that spring planting decision and allocating their resources accordingly and therefore booking fertilizer, which is positive for us. We're seeing very strong industrial demand in our book and we balanced both of those. We think well as well as our industry, so I think it's a net positive. P.J. Juvekar: Great. That's good color. And just one quick one. Tony, when you talked about, and thank you for giving the details on blue versus green ammonia. It seems like blue ammonia will be more costly to make by $20 or $30 or something like that per ton. And so why would growers buy more expensive ammonia unless they're incented to buy? What's the mechanism for them to spend more?

So remember, $20 to $30, that might be in the range or it might be a little high relative to our expectations, but that's not a crazy number. Remember, the 45Q tax credit, the way that it was originally constructed was going to be 45 - ish to $50. In the current RAGs, it's substantially above that. Although it's a little bit more expensive for us to make, if you net against it the 45Q tax credit, it's actually a discount relative to conventional ammonia from a producer side. But the reason why a grower would pay for it is if they want to be able to make carbon labeling claims that go into consumer products companies because they're going to care about that; or if you're trying to produce low carbon ethanol that might be qualify for California's clean fuel standards, that might be a reason for it; or even in the voluntary market, if you can get $5 to $10 a ton for sequestering carbon in the soil being a grower. There are a couple of high-profile transactions that happened along those a couple of months ago. I think there's a lot of value there potentially for growers to try to differentiate what they're doing versus just a commodity bushel of corn. And so based on where some of those pockets of value are, we would expect there to be some margin opportunity for us or at least some incremental demand for that product. And again, to the extent that the U.S. actually adopt some more regulated and structured cost of carbon. Then there is real economics available to the farmer if they can demonstrate the sequestration and sell those credits into a structured marketplace.

I was just going to add to that. I think one of the benefits of this is the incremental demand that Tony is speaking of, is the agriculture is already using ammonia, but as you start to see more of the industrial move in, that's where you'll start to see the bidding on ammonia go up and more constraint. So it's really about the demand addition that we think is going to occur here.

Plus you have to remember, if it's $50 more a ton, let's take it there then conventional, to a farmer that's $10 an acre. That's two bushels. So the cost is insignificant to the farmer based on the benefits that Tony articulated. And we already have people wanting to buy blue ammonia. So we think there's going to be a demand challenge, which is very good for our business in the future years.

And that's also honestly why Donaldsonville and Yazoo City are not the last dehydration compression projects that we're likely to build. We want to continue to evaluate other places with ready access to sequestration and continue to build out our network, because our belief is it's a project that pays for itself and also gives upside opportunity on access in the clean-energy market in a way that is differential for us versus other market participants. P.J. Juvekar: Thank you. You guys almost give great color. Thank you very much.

Your next question comes from the line of Michael Piken from Cleveland Research. Please, go ahead.

Hi. Thanks for the question. Just wanted to discuss in a little bit more detail on the status of your U.K. operations. I know they were down for a couple of days, and then you guys were -- reached an agreement with the government to restart it. When you talked about getting back to the 19.5 million to 20 million tons, the implication I assume there is that those plants are going to run full next year. Maybe you could just talk about the status of those plants? And are they going to be profitable, or -- what type of returns we're looking at there, given the higher gas costs?

Michael, thanks. So the first thing that I want to just highlight is the relative importance of the U.K. in terms of the overall portfolio. As Chris mentioned, if you look back to our results in 2020, it represented 2% of our total gross margin. So from an aggregate profitability standpoint, it's on the small end of the scale. Now, it does provide a little bit of a natural hedge for us when global energy costs are low and relatively flat, then we earn a better return there when energy costs are high, we earn a much better return in the U.S. on a larger production base. It's a little bit of a natural hedge in that regard. But as you mentioned, because of a huge spike in gas cost in September, we took the plants offline. We worked, I would say very constructively with the U.K. government to restart the facility at Billingham and be able to provide CO2 into the U.K. marketplace, that's pretty critical for the normal functioning of a number of different industries over there. And during that period of time, the U.K. government also is very helpful and us -- working with us and the CO2 off take. Company is the industrial gas Company from Billingham to restructure those contracts in a way that makes that plant viable. So we're really pleased with how that whole process developed. And the Billingham plant is up and operational and we expect that to be viable in the long-term. The Ince plant in the Northwest is not yet back online. We're evaluating a number of different options and scenarios there, including being able to secure a vessel to bring ammonia into the facility so we can at a minimum run the upgrade plants. Given again the high cost of natural gas through the winter, it doesn't look like ammonia production there is going to make a lot of sense, but being able to bring in ammonia will allow us to run the upgrades and make an appropriate return on those products. So we're in a little bit of a wait and see mode in terms of what the longer range situation develops in the U.K. But I think for now, Billingham is up and operation al. We expect that to happen. And again, we expect to be able to turn the back end of the fertilizer portion of the plant up and running. And hopefully soon within the next couple of weeks, once we get the ammonia vessel squared away.

Great. And then just understanding a little bit longer-term, by the time some of these blue ammonia projects are up and running, is this going to increase your number of product tons? Is this going to come out of some of your other products? How should we be thinking about the cadence of your product tons sold over the next, call it 3-5 years? Thanks.

Yes. We already run our ammonia plants at full operating rate within -- with the one exception of the U.K. which we just talked about. And so it's not necessarily a situation where there's new tons unless we engage in some debottlenecks, or new capacity or other things like that. And so this is definitely a, pulling tons away from the least profitable portion of our segment of our business, and reallocating them to a higher-margin application. And so it's a margin upgrade as opposed to new production at this time.

Great. Thanks.

Your next question comes from the line of Andrew Wong from RBC Capital Markets. Please go ahead.

Thanks for taking my question. Just going back on blue, green ammonia here, can you talk about how the blue, green ammonia market could impact the dynamics around the gray ammonia market in the future? And we have projects like [Indiscernible] and Yazoo turning some of the volumes from gray to blue. And as those tons are sold in between ammonia applications, like maybe with Mitsui, does that effectively mean a loss of supply for the gray ammonia market? And then on the demand side, like the molecules are the same, could there be a scenario where demand and supply maybe aren't matched up properly. So you have some application that maybe need blue green ammonia, but if there isn't enough, you use a little bit of gray. Just some general, does the emergence of a blue green ammonia market mean potentially a tighter gray market in the future? Thanks.

I certainly think that's where we see things headed. I also think that's where not wanting to interpret things for them, but I think that that's consistent also with where your products and others see things headed. Hence the announcement both of the Neom project in Saudi Arabia, but also the recent announcement they had in Louisiana around a blue project. And I think a number of the market participants see this coming. I think ultimately what that's going to mean is, you've got more demand than what current supply is in ammonia. It's going to be at the end new production, new capacity, which the world is going to need. And that -- that's pretty attractive relative to valuing existing assets. So we think, overall, this is a terrific set of factors that create a revaluation or rethinking about what the value of our asset base is being that we're the largest ammonia producer in the world.

Great. Thank you.

And I think the situation is not unlike what we've got today, which is, today, as Bert mentioned, it's more of a supply side constraint given a bunch of curtailments and shutdowns and other disruptions. But in the future, even if those plants are often running and you see demand continue to exceed where supply is capable of reaching, you see price escalation like we're experiencing right now.

Yes. That makes a lot of sense. Thank you very much.

Your next question comes from the line of Adrien Tamagno from Berenberg. Your line is open.

Hello. Good morning. Yes. As a follow-up from the previous question, from a CF industries perspective, in the combination of the world being shore of ammonia, as you described. And with current technical deficiency to make significant volumes in a low carbon way, would that make you thinking about going for Greenfield ammonia at some point in time or it's out of question for you?

Well, we constantly are evaluating ways to add capacity that are appropriate. I think that our biggest focus area and the thing that we use as a lens to make all of those decisions is ultimately cash flow per share. And if we can find an opportunity that allows us to expand capacity, whether that's a debottleneck inorganic acquisition or an organic kind of growth, where we believe that that's going to grow our free cash per share, then we'll take a serious run out it. I think these context we'd be much more likely to think about partnerships, structures, or other things like that if we were going to move forward on any of those things. But I do think it's a positive sign when others out there are making announcements about adding capacity. I do believe we're the best operators of ammonia plants in the world. And so if there's opportunities for new capacity additions, we ought to be thinking about that along with other people and I do think the world is going to need it. It's a question of when and in the interim, are you better off buying existing assets or debottlenecking what you already have versus building new, but I think those are appropriate questions that anyone in the industry today is moiling over and really thinking about.

Yeah. Thank you.

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, and we look forward to speaking with you throughout the quarter.

This concludes today's conference call. Thank you all for joining. You may now disconnect.