UAN - NYSE

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to fourth quarter 2025 CVR Partners LP Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Richard Roberts, Vice President, FP&A and Investor Relations. You may begin.

Thank you. Good morning, everyone. We appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer; Dane Neumann, our Chief Financial Officer; and other members of management. Prior to discussing our 2025 fourth quarter and full year results, let me remind you that this conference call may contain forward-looking statements as that term is defined under Federal Securities Laws. For this purpose, any statements made during this call are not statements of historical facts may be deemed to be forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2025 fourth quarter earnings release that we filed with the SEC on Form 10-K for the period and will be discussed during the call. Let me remind you that we are a variable distribution MLP, and we'll review our previously established reserves, current cash usage, evaluate future anticipated cash needs and may reserve amounts for other future cash needs as determined by our general partner's Board. As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including, but not limited to, operating performance, fluctuations in the prices received for finished products, capital expenditures and cash reserves deemed necessary or appropriate by the Board of Directors of our general partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer. Mark?

Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. Before we get into the results, I would like to introduce our new Chief Operating Officer, Mike Wright. Mike also serves as COO of CVR Energy, a position he's held since January of 2022. Mike is nearly 35 years of experience in the refining and petrochemicals industries in a variety of operations and commercial roles, and we are excited to have him leading our fertilizer operations teams. Turning to the results for the fourth quarter of 2025. We reported net sales of $131 million, a net loss of $10 million, EBITDA of $20 million. The Board of Directors declared a fourth quarter distribution of $0.37 per common unit, which will be paid on March 9, to unitholders of record at the close of the market on March 2. For the full year 2025, we reported EBITDA of $211 million and distributions of $10.54 per common unit. We had another year of solid operations from our facilities with an ammonia utilization rate of 88% for the year. For the fourth quarter of 2025, our ammonia plant utilization was 64%, which was impacted by the planned turnaround and subsequent delayed start-up at the Coffeyville facility. While the turnaround was completed in early November as scheduled, we experienced additional downtime following approximately 3 weeks of start-up issues at the third-party air separation plant. Although production and sales volumes were lower than we expected, pricing for nitrogen fertilizers remain strong throughout the quarter, and we continue to be optimistic about the spring planting season, which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results.

Thank you, Mark. Turning to our results for the full year 2025. We reported net sales of $606 million and operating income of $129 million. Net income for the year was $99 million or $9.33 per common unit and EBITDA was $211 million. For the fourth quarter of 2025, we reported net sales of $131 million and an operating loss of $3 million. Net loss for the fourth quarter was $10 million or $0.97 per common unit and EBITDA was $20 million. Relative to the fourth quarter of 2024, EBITDA decreased primarily due to lower production and sales volumes and higher direct operating costs associated with the planned turnaround of Coffeyville. Total ammonia production for the fourth quarter was 140,000 gross tons, of which 62,000 net tons were available for sale and UAN production was 169,000 tons. During the quarter, we sold approximately 182,000 tons of UAN at an average price of $355 per ton and approximately 81,000 tons of ammonia at an average price of $626 per ton. Relative to the fourth quarter of 2024, UAN and ammonia sales volumes were lower as a result of the planned turnaround and subsequent start-up issues at Coffeyville that Mark discussed previously. Fourth quarter prices for UAN increased approximately 55% and ammonia prices increased approximately 32% relative to the prior year period. Direct operating expenses for the fourth quarter of 2025 were $81 million, which included turnaround expenses of approximately $14 million. Excluding inventory and turnaround impacts, direct operating expenses increased by approximately $9 million from the fourth quarter of 2024, primarily related to higher repair and maintenance and personnel expenses. Capital spending for the fourth quarter was $27 million, of which $17 million was for maintenance capital. Capital spending for the full year 2025 was $57 million, of which $35 million was maintenance capital. We estimate 2026 maintenance capital spending to be $35 million to $45 million and growth capital spending to be $25 million to $30 million. As a reminder, we expect a significant portion of the 2026 growth capital spending will be funded from the cash the Board elected to reserve over the past several years. We ended the quarter with total liquidity of $117 million which consisted of $69 million in cash and availability under the ABL facility of $48 million. Within our cash balance of $69 million, we had approximately $3 million related to customer prepayments for the future delivery of product. In assessing our cash available for distribution, we generated EBITDA of $20 million and had net cash needs of approximately $16 million for interest costs, maintenance CapEx and other reserves. As a result, there was $4 million of cash available for distribution and the Board of Directors of our general partner declared a distribution of $0.37 per common unit. Looking ahead to the first quarter of 2026, we estimate our ammonia utilization rate to be between 95% and 100%. We expect direct operating expenses to be $57 million to $62 million, excluding inventory impacts, and total capital spending to be between $25 million and $30 million. With that, I will turn the call back over to Mark.

Thanks, Dane. In summary, although we were disappointed about the extended downtime associated with the third-party air separation unit during the quarter, nitrogen fertilizer market conditions continue to be constructive and pricing has remained robust. With the 2025 harvest complete, the USDA is now estimating a record crop year with corn yields of nearly 187 bushels per acre on nearly 99 million acres of corn planted. Soybean yields are estimated to be 53 bushels per acre on over 81 million planted acres. U.S. inventory carryout levels are expected to be above the 10-year average for corn and below for soybeans. Despite the record harvest, May, corn prices remain around $4.45 per bushel, and current expectations are for approximately 95 million acres of corn to be planted in 2026. At this level of planting, we expect to see continued strong demand for nitrogen fertilizers through the spring. On the supply side of the equation, inventory levels around the world continue to appear tight. Geopolitical tensions remain a key risk to nitrogen fertilizer supplies, given the significant production capacity reside in countries across the Middle East, North Africa and Russia. We continue to monitor developments in the Middle East that could impact energy and fertilizer markets, and we expect 2026 will likely be a continued period of higher than historical volatility in the business. Natural gas prices in the U.S. saw a sharp increase earlier this year due to extreme cold weather across several regions of the country. However, prices have since declined and have been trending between $3 and $4 per MMBtu. Meanwhile, natural gas prices in Europe averaged over $10 per MMBtu for the fourth quarter and had been over $13 since the beginning of the year. The cost to produce ammonia in Europe has remained durably at the high end of the global cost curve. And production remains below historical levels, which creates opportunities for U.S. Gulf Coast producers to export ammonia to Europe for upgrade. We continue to believe Europe faces a structural natural gas supply issues that will likely remain in effect through 2026. We continue to execute certain debottlenecking projects at both plants that are expected to improve reliability and production rates. The goal of these projects is to support our target of operating our plants at utilization rates above 95% of nameplate capacity, excluding the impact of turnarounds. For 2026, we are focused on water and electricity reliability and quality at both plants and expanding our DEF production and load-out capacity among other projects. We also continue working on construction and design plans for the feedstock diversification and ammonia expansion project at the Coffeyville facility. As a reminder, this project should provide us the ability to choose the optimal mix of natural gas and third-party pet coke depending on prevailing prices. The Board elected to continue reserving capital for these projects in the fourth quarter that we expect to spend over the next 2 years. Our focus is on improving reliability and redundancy at the 2 plants in efforts to provide better production rates and lower downtime in the future. The funds needed for the 2026 projects are coming from the reserves taken over the last several years. The fourth quarter demonstrated the benefits of focusing on reliability and performance. In the quarter, we continue to focus on all of the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors and communities, prudently managing costs, being judicious with capital, maximizing our marketing and logistics capabilities and targeting opportunities to reduce our carbon footprint. In closing, I would like to thank our employees for all their hard work during the Coffeyville turnaround and continuing to deliver on our marketing and logistics plans, resulting in a distribution of $0.37 per common unit for the fourth quarter. With that, we're ready to take any questions.

[Operator Instructions] Your first question comes from the line of Rob McGuire of Granite Research.

Just a few questions. One is, what are you seeing in terms of UAN imports out there? Are you seeing a dearth of imports from Trinidad? And in particular, what are you seeing from Russia and any other color you can give to us?

I wouldn't say that we are seeing anything outside the norm. We're still importing some tonnage. The one big item in Trinidad is obviously the Nutrien plant is down, an upgrade is down. So there's less tonnage coming in from Trinidad. So I think that's keeping the market tight for UAN in particular, in the states. And I just -- I've seen some of the commentary from Nutrien and it doesn't feel like that plant is likely to return to service soon. So there's a combination of ammonia and UAN tightness that was a product that was being imported here. The Russian product has been -- that's been pretty consistently flowing. And I wouldn't say there's any new up or down. The market is watching closely. There have been some drone strikes on either Russian fertilizer plants or export terminals. And so that -- the market is watching that to see. And -- but I would say, generally, it feels like the supply-demand balance in UAN is pretty, I would say, on the tight end of the curve.

Switching topics. The current deferred revenue was $23 million at year-end, and that was down from $51 million year-over-year. Does that mean there was less product presold this year rather than relative to last year?

Yes. And I would just say it was a timing issue because it was not -- we typically would see more activity in December for tax planning purposes by the customer base, but we didn't see as much this year, but that's all been picked up in January and first part of February here. So we're, I'd say, normal, if anything, maybe a little bigger book or for the spring than we typically see. So it was just -- it didn't fall in December like normal, but the customers were in buying product, and we've got a big book on for the spring.

And then is it safe to assume that ammonia and UAN pricing will increase sequentially, heading into the first quarter of 2026?

Yes. If you look at our book of business today, it's at higher prices than the fourth quarter. And so yes, there will be an uptick. It won't be dramatic, but there'll be an uptick from the fourth quarter to the first quarter.

Great. And then do you feel confident about the air separator issue at Coffeyville being resolved at this point? Might you receive compensation from the operator for downtime and related shortfall on that?

So let me start -- I'm confident that the issues that caused the delayed startup have been dealt with. We are not happy with the performance. And we are in discussions with that service provider about the go-forward strategy for the operations and maintenance of that facility. So we're working on, I'd call it not an amended contract, but an amended business plan which would involve us being more active with the ongoing activities there. And so we're not going to just sit by and just accept those events. We're going to engage and work on a different approach than what happened in November. The contract does have penalties and there were some penalties paid for that, but it's a fraction of our lost production level at the facility. So -- it is a thorn in the side, and it's meant to incentivize the provider to provide us really good service and onstream, but it can't make up for the shortfall of lost production. So -- but again, we're revisiting our -- how we do business together. And in the coming quarters, we'll talk more about what the go-forward strategy is there, but it won't be status quo.

I appreciate that. And then last question, Mark. I always appreciate your commentary on the market acreage is supposed to be down for corn this year, as you mentioned in your opening remarks. And I'm just kind of curious I would think that would hurt demand just a little bit, then again, there are more supply constraints. So can you kind of just give us how you feel the spring is going to work out? And why are you feeling so optimistic about it?

Sure. Well, if you asked me 3 years ago and said it was going to be 95 million acres of corn, we'd be thrilled. 95 million acres is really at the top end of -- except for last year. And so that's a large amount of acreage and it's going to -- because of the 99 million acres and how much we planned, we've -- corn consumes nitrogen from the soil, so you have to replenish it. So the soil has been depleted of nitrogen and you got to come back in and fertilize it. And so to your point, it's going to be a really good demand season. Last year was peak. And we don't -- I would say, even when 99 million acres are planted, sometimes the application rates can be lower. So it's not apples-to-apples. So you can't just take 99 million and 95 million and compare them because if on the acreage that you plant, if you plant more productive acreage and you want higher yields, you're going to put more fertilizer on. So it's hard to -- the nuance there is the apples-to-apples. But the supply side of the equation continues to be and we can talk about every region of the world. There are reasons why the supply is constrained. There's been natural gas availability issues in certain countries. There's still ongoing conflicts in certain areas. We're watching what's going to happen with Iran. Iran is a big producer of nitrogen, big exporter. If there's some activity in the Strait of Hormuz or some activity with that constrains Iran's ability to produce, that can have a -- we're right on top of the spring coming up here in 6 weeks. So that's going to -- we got to keep our eye on that. But the supply side has really been even a bigger issue. Demand side has been super solid, but the supply side is not able to keep up with the demand side. I would just tell you, suggest, we're seeing -- I know it was cold a few weeks ago, but -- if you look in the Midwest, we're already seeing ammonia movement across a pretty broad swath of up into even Iowa and Illinois to a degree but all the way down into the Southern Plains. And so that's a good omen for the spring when we have the ammonia running this early. We're only -- we're third week of February. So really feel -- I think, generally, the optimism is high for the spring, and we've got a good jump on it. When you get a good start to it, it really could lead to a much better spring. So we feel really good about where we are. We have a good book of business for the company. We've got a good order book, and we just need to run like we normally have, except for the last quarter. So they will run at a high utilization and move the product for our customers.

That was really helpful. And just one other follow-on is just with product moving at this point, is there a change in trend in terms of the farmer living food-to-mouth? Or are they starting to plan early at this point in time or it's just that the application is starting earlier given the weather opportunities.

I think it's your last comment there, the conditions have come into place here in February rather than March. So I would say it's probably pulled up by maybe a couple of weeks or 3 weeks. I mean, it doesn't seem like a lot, but in farming -- in farmland, that's a lot. And so if you can get a jump on -- if you're a farmer and you can get a jump on your ammonia application, that really helps you get prepared for the spring. And so that always makes everybody feel better when the ammonia runs starts earlier because then you can have a longer process of getting it applied and planting behind it. So just a lot of optimism around conditions. We started the year with super cold everywhere, all the way to the Canadian border, but we've turned the corner here from a weather perspective. And so we are able to -- been able to move -- we've been moving product from our plants out to the field.

There are no questions at this time. I will now turn the call back over to Mark Pytosh for closing remarks.

Again, I'd like to thank all of you for your interest in CVR Partners and being on the call today and our employees for their hard work and commitment towards safe, reliable and environmentally responsible operations. And we look forward to reviewing our first quarter results here in a couple of months. Thank you for being here today. Thanks.