Sandra Daycock - Director of IR John Floren - President and CEO.

Daniel Jester - Citi Jacob Bout - CIBC Joel Jackson - BMO Capital Markets Hassan Ahmed - Alembic Global Jonas Oxgaard - Bernstein Nelson Ng - RBC Capital Markets Cherilyn Radbourne - TD Securities John Roberts - UBS Matthew Blair - Tudor, Pickering, Holt Chris Shaw - Monness Crespi.

Ladies and gentlemen, thank you for standing by. Welcome to the Methanex Corporation Q3 2017 Earnings Call. I would now like to turn the conference call over to Ms. Sandra Daycock, Director of Investor Relations. Please go ahead, Ms. Daycock..

Thank you. Good morning, ladies and gentlemen. Welcome to our third quarter 2017 results conference call. Our 2017 third quarter news release, management's discussion and analysis and financial statements can be accessed from the Reports tab of the Investor Relations page on our website at www.methanex.com.

I would like to remind our listeners that our comments and answers to your questions today may contain forward-looking information. This information, by its nature, is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome.

Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections, which are included in the forward-looking information. Please refer to our third quarter 2017 MD&A and to our 2016 annual report for more information.

I would also like to caution our listeners that any projections provided today regarding Methanex's future financial performance are effective as of today's date. It is our policy not to comment on or update this guidance between quarters.

For clarification, any references to revenue, EBITDA, cash flow or income made in today's remarks reflect our 63.1% economic interest in the Atlas facility and our 50% economic interest in the Egypt facility.

In addition, we report our adjusted EBITDA and adjusted net income to exclude the mark-to-market impact on share-based compensation and the impact of certain items associated with specific identified events.

We report these non-GAAP measures in this way to make them a better measure of underlying operating performance, and we encourage analysts covering the company to report their estimates in this matter.

As I mentioned, at our September 15 Investor Day in Toronto I have moved to a new role within the company, effective next week Dean Richardson, Vice President, Treasury and Investor Relations will assume responsibility for the Methanex Investor Relations function.

Kim Campbell has also joined the team as Manager, Investor Relations and will work with me in going forward. I would now like to turn the call over to Methanex's President and CEO, Mr. John Floren, for his comments and a question-and-answer period..

Good morning. Q3 2017 was a solid quarter and demonstrates the company's ability to generate cash at lower methanol prices. Pricing improved throughout the quarter, and we delivered record sales volumes.

Our production also improved significantly versus Q2 notwithstanding us completing our Egypt turnaround and planned maintenance at our Geismar facility. We recorded adjusted EBITDA of $143 million during the third quarter of 2017.

This was $31 million lower than the EBITDA of $174 million that we achieved in the second quarter of 2017, primarily due to the impact of lower average realized methanol pricing. Adjusted net income was $52 million or $0.60 per share in the third quarter compared to $74 million or $0.85 per share in the second quarter.

Our average realized price decreased from $327 per tonne in Q2 to $307 per tonne in Q3. We achieved record sales volume of 2.8 million tonnes in the quarter, reflecting a 12% increase compared to sales volumes in Q2. As we move into the fourth quarter, we are encouraged to see an improvement in methanol prices.

In Asia, our October posted price increased by $50 per tonne to $400 per tonne, and in North America, our October posted price increased by $10 per tonne to $396 per tonne. In Europe our Q3 price increased by €10 per tonne to €330 per tonne. We believe that the improvement in methanol pricing is supported by strong supply and demand fundamentals.

Methanol demand in Q3 2017 was approximately 6% higher year-over-year compared to Q3 2016.

Demand from the methanol-to-olefins or MTO sector was strong as most of the MTO facilities that underwent planned maintenance or experienced technical issues during the second quarter of 2017, resumed production early in the third quarter and have been running at high operating rates.

We expect three other MTO plants currently under construction to be completed in 2018, with combined capacity consume over 3 million tonnes of methanol annually at full operating rates. Demand from traditional chemical applications was also solid in the quarter.

On the supply side, a number of planned and unplanned outages in the Middle East and Southeast Asia contributed to tighter market conditions in the quarter. Thermal coal prices in China, continued to rise in the third quarter increasing the middle portion of the cost curve.

Natural gas prices in China remained unchanged and natural gas-based methanol production continues to set the high-end of the cost curve. We estimated the current cost curve to be in the range of $280 to $320 per metric tonne. Spot methanol prices in China, today are above this range.

Our plants continue to run well during the quarter and they produced 1.8 million equity tonnes, an increase over our Q2 production of 1.6 million equity tonnes. In North America, our Geismar plants continue to perform very well. Our Medicine Hat plant also operated at a high rate during the quarter.

In Egypt, I am pleased to report that we completed a successful turnaround of the plant in August, which was the first since the plant started up in 2011. Our share of Egypt production was 71,000 tonnes in the third quarter compared to 159,000 tonnes in the second quarter.

Excluding the turnaround period, the plant has been receiving 100% of its contracted gas supply and operating at capacity since mid-November, 2016. We are advised by the Egyptian government that the overall outlook for the gas supply and demand balance in the country is improving.

We continue to be optimistic that we will receive strong allocations of gas at this facility for the foreseeable future. And as a result, are increasing our guidance to 85% annual operating rates in Egypt going forward.

We would expect close to full supply for the majority of the year with some modest risk of curtailments that could reduce operating rates during the Egyptian summer months, when electricity demand is at its peak. The Chile plant produced 78,000 tonnes during the third quarter compared to 60,000 tonnes in the second quarter.

The plant operated solely on natural gas from Chile during Q3. The production level in the third quarter reflects lower gas deliveries during the southern hemisphere winter months.

We remain optimistic that our underutilized 1.7 million tonne Chile facilities represent a very low capital cost growth opportunity for Methanex, due to the progress in developing natural gas reserves in the area.

We continue to progress discussions to contract additional gas supply in the region to enable the restart of Chile IV, which is targeted for Q3, 2018. However, major capital spending on the project is subject to our ability to contract additional natural gas beyond our current commitments that extend through mid-2018.

In Trinidad, our share of production was 457,000 tonnes in the third quarter compared to 449,000 tonnes produced in the second quarter. We expect to receive approximately 85% of our contracted gas supply for the foreseeable future. We returned $109 million to shareholders through dividends and share repurchases during the quarter.

Since commencement of our normal course issuer bid in March of 2017, we have repurchased nearly 6 million common shares or roughly 6.2 -- or roughly 6.2 million common shares approved for a cost of approximately $277 million. We plan to complete the normal course issuer bid by the end of October 2017.

This illustrate -- this continues to illustrate the company's commitment to return excess cash to shareholders. We ended the quarter with $307 million in cash on the balance sheet. Methanex share of the cash, including our proportionate share of Egypt and Atlas cash, was $272 million.

We generated cash from operating activities, before changes in noncash working capital, of $151 million during the quarter compared to $178 million during the second quarter of 2017. Our cash balance declined in the third quarter, primarily as a result of share buybacks.

Our near-term cash requirements, excluding any changes in working capital, are expected to be limited. Expected maintenance capital for the remainder of 2017 is $20 million, and the next bond maturity is at the end of 2019.

Other than our planned $55 million investment in Chile, we do not anticipate any significant growth capital expenditures in the near-term. We believe we are in excellent liquidity position and recently extended the term of our $300 million revolving credit line by 3 years to December 2022.

Our priority for excess cash will be to return it to shareholders through share buybacks.

Our outlook for the fourth quarter is positive, based on our posted methanol contract prices thus far in the quarter, we expect average methanol prices in the fourth quarter of 2017, to be higher than the third quarter, and we anticipate that production and sales of produced product in Q4 2017 will be higher.

As a result, we expect EBITDA to be higher in Q4 2017 compared to Q3 2017. I would now be happy to respond to any questions..

Thank you.[Operator Instructions] The first question is from Daniel Jester of Citi. Please go ahead..

Hey good morning everyone.

So could you give us an update on getting the natural gas contract for Chile's expansion? And I think you said that right now contract for third quarter 2018 to get finished, is there any delays in getting a settlement? At what point does that maybe tip into 2019?.

Yes. So we're negotiating with ENAP, which is the primary gas supplier down there. I think the good news is the volume of gas is there. We haven't come to an agreement yet on the economics.

So until we come to an agreement that makes sense for both parties on the economics, we won't spend the significant capital that we're planning for the restart of Chile IV. I'd say if we don't contract by the end of the year, probably the schedule will slip from the Q3 2018 that we've guided to.

There's other gas that we have contracted in the region from people like GeoPark, beyond mid-next year, and the mid-next year contract is with ENAP. So we have some gas contracted beyond mid-next year, but not enough to really spend the entire $55 million that we guided to, to restart Chile IV..

Okay, that's helpful thank you. And then, just a couple of quick ones on the quarter.

I noticed the purchase volumes were up pretty substantially compared to the trend over the past year or so, anything notable there? And I know that you -- your plant in Louisiana, wasn't maybe directly impacted by the hurricane, but in the quarter, did you have any hurricane-related incremental cost? Thanks..

Yes. So on the purchase product, I think I've guided to 80% of our sales were the -- our equity tonnes, and that's still good guidance. I think you'll notice, Dan we had record sales in the quarter. And as a result our produced product was about the same as Q3 -- Q2. A little higher, so we had to supplement our sales with purchase product.

And that was as a result of the plant maintenance in Egypt and Geismar. So I think in the fourth quarter, I would expect to be more in the 80% kind of area. But it will fluctuate a little bit up and down each quarter, as the inventory works its way through the different FIFO layers. As far as the hurricane, our plants were not impacted at all.

We had some logistics issues in the Houston area, which may have added a few dollars to our cost structure, but nothing significant. We managed to keep all of the customers that continue to run.

Some of them couldn't run because of the flooding, but we kept all the ones that were running fully supplied from our other facilities like Geismar and Medicine Hat. So anybody that wanted methanol from us, got it. And I think that's a tribute to our logistics chain and our team in Dallas..

Okay, thank you very much and that’s a lot [Indiscernible].

Thank you. The following question is from Jacob Bout of CIBC. Please go ahead..

Hi, John..

Hi, Jacob..

I had a question on the discount rate to start off. Discount rate was relatively low given average contract pricing was down in the quarter.

Is there something structurally to change there? Or how should we be thinking about that?.

No, I think we've guided to 15% on average. And I'm still very comfortable with that guidance. So in your models, I would be using 15% discount rate. Some quarters when prices are increasing, we'll do a little better, and some quarters when pricing is decreasing, we'll do a little worse. But I'm still very comfortable with the 15% on average..

Okay. Maybe turning to the share buybacks. So it sounds like it's going to be complete end of this month. Can you talk a bit about any flat methanol price environment.

What you're thinking, is it 5% or 10%, kind of what we should be thinking about?.

Well, assuming pricing today continues for the foreseeable future, we're going to generate significant free cash flow. And 10% is easily doable in that kind of environment. We'll complete the NCIB end of the month. We won't have the ability to start another one until March of next year.

So we'll, over the next coming months, accumulate cash on the balance sheet. And depending on the price of methanol and how much cash we accumulate, we could consider a substantial issuer bid. But right now we'll complete the NCIB and then -- and look forward to generating free cash.

What I would say is, before we did a substantial issuer bid, we'd want to have the cash on the balance sheet, and we wouldn't be borrowing money to do that. So we'll see how the methanol price and market evolves. But I think our view is, it's going to be pretty good pricing environment until the next new production comes on stream.

And we're not expecting any new production till late first quarter next year at the earliest. So we'll see how things evolve..

Thank you..

Thank you. The following question is from Joel Jackson of BMO Capital Markets. Please go ahead..

Hi, good morning John..

Hey Joel..

Going back to Dan's question in the purchase type product, can you give us a little color, did you make money on and did you -- were those profitable sales for you this quarter. And I think you built about 200,000 tonnes of methanol inventory. I mean, was there opportunity here? Did you make money, I guess, that's what I am trying to get at..

Yes, our inventory is quarter-over-quarter the same. So we didn't build any inventory during the quarter. As far as making money, we make our money on our equity tonnes that we produce. That's where we make significant EBITDA between $50 to $150 a tonne depending on the methanol price and where we are in the cycle.

I've guided before that on purchase product, on average, we breakeven over the cycle. Some quarters when prices are rising we'll make a few million dollars. Some quarters when prices are declining we'll lose a few million dollars. So I'd focus on the 80% of our equity sales and the EBITDA generating depending on the methanol price.

That's where we make our money..

Okay. I'm not sure if you can comment yet, that's my second question. I'm not sure you can comment the Southern Chemical just posted flat posting for November versus October.

Is that sort of in sync with what you think November contract pricing will do in North America, above flat?.

Well, we'll announce both Asia and North American contract pricing by the end of the month..

Nothing to suggest wide swings either way?.

We'll announce by the end of the month..

Okay, John thanks..

Thank you. The following question is from Hassan Ahmed of Alembic Global. Please go ahead..

Good morning, John.

Good morning, Hassan..

John, I came across this interesting article I believe, it was an ISIS article, which talked about a March shift in sort of the Iranian methanol strategy.

I mean, this article, I think it came out maybe like a week ago or so, was talking about how Iran is no longer considering sort of giving out licenses to -- for standalone methanol facilities, number one. Number two, even the existing facilities, it seems, or at least this article seem to suggest, they were thinking of converting into MTO facilities.

So I would love to hear your thoughts about what you're hearing whether this is actually going to happen.

What it may do to trade flows and the likes?.

Yes, I think that article you're referring to was quoting some government officials in Iran. So I read the same stuff that you did. Basically, reiterating what you said, they said, going forward, they're not going to approve any more methanol projects unless they have a derivative associated with the plant, similar to what we've seen in China.

And I think what they've said is that the economics of producing methanol from their gas just to sell methanol is not as attractive as the derivatives, and they want to have more downstream including MTO in the country.

And the article did go on to say that even existing methanol production or methanol production that's under construction, they would be encouraging those owners to diversify and have derivatives for their current production.

So I think that's extremely positive for us and the methanol market, because one of the overhangs that many analysts have been talking about is including ISIS, 10 million tonnes, 15 million tonnes of production from Iran over the next three or four years, which we've never agreed with.

But I think the Iranians themselves are now guiding the rest of the world what their plans are for their gas. And what they're going to do with their gas including methanol and methanol derivatives. So I think overall, if this is carried out as policy, it's extremely positive for us..

Very interesting. As a follow-up on the Chinese side of things, can you just give us a sense of -- I know you've talked about obviously MTO operating rates kind of normalized.

Where do you -- did you see through the course of Q3, these operating rates being on the methanol side of things? And did you see any sort of curtailment, the pollution-related or the likes?.

Well, there's ongoing curtailments both on methanol production and derivative production in areas in Eastern China because of -- they call them inspections. It's related to the environmental issues that we've been talking about for quite some time.

As far as the MTO, it operated at 88% in Q3, which really is full operating rates because one of the plants, the Fund Energy plant was -- had been shut down since the end of March. So if you exclude them, we ran at 100 plus rates in the quarter. And I was just in China, a few weeks ago.

I met with many of our MTO customers, and they're quite bullish about the outlook for MTO and their own operating rates. There's a plant today that's gone down for maintenance, that is planning -- as part of that maintenance to debottleneck, their current MTO facility which will add another 400,000 tonnes of methanol demand.

And people I spoke with that are in this business are planning to do similar things next year. So although there may not be that second wave, there's another three plants under construction of 3 million tonnes of demand at full rates. We're going to see these continued debottlenecking opportunities.

And we would expect this sector to continue to provide a very healthy demand for methanol going forward..

Perfect. Very helpful John, thanks so much..

Thanks Hassan..

Thank you. The following question is from Jonas Oxgaard of Bernstein. Please go ahead..

Good morning, John..

Good morning..

A very quick follow-up on the Iranian question and then I have a different question if you don't mind.

Looking at the timeline of MTO conversion I'm assuming we're looking at maybe five to 10 years out, is not really a near-term thing, correct?.

Well, I would disagree with you on that. I think you know what you start to build one of these MTO plans, its couple years. So it depends on how quickly they move. They haven't been clear in what I've read, how quickly they’re going to move with existing capacity or capacity that's under construction.

As far as any new sanctions I think they’ve been very clear, they’ll have to be an associated derivative. So these things can be built. We’ve seen in China these examples in a couple years. So your estimation have seem to be a little long assuming they go forward and start to convert some of these existing units.

I think it's too early to make that assumption at this time..

Okay. That makes sense. Now something different, when the OCI plant comes online in the U.S. it looks like that’s going to back out a lot of the Trinidadian volume would have to go elsewhere, most likely Asia.

How are you thinking about your Trinidadian volumes or your Trinidadian trade flows?.

Yes, we have -- we run an integrated supply chain. So we on a weekly, monthly, quarterly basis, look at optimizing our supply chain based on where we think we're going to produce, based on plant turnarounds, based on our sales volume.

So, right now there is quite a significant amount of methanol flowing from the Atlantic Basin to the Pacific Basin already. You're right, as Natgasoline comes up in sometime next year and runs well, you would expect more production to have to flow to the Pacific Basin from the Atlantic Basin.

And our own situation is probably not going to change that much because our sales for next year is going to be in that similar guidance to what we've given by region this year. It will be up 50% in Asia and the balance in Europe, North America and South America. So our own situation won't change, there's tremendous opportunities here for swaps.

And we're ongoing, talking with lots of people about swaps. So I think as NATGAS comes on, there will be a lot more opportunities to do swaps, where a lot of it will stay in North America and other product will flow elsewhere and optimize the supply chains for everybody else.

Look at our Geismar site, we have now the ability to sell 600,000 tonnes on the pipeline on that site. And it's not all of our own sales, but there's lots of opportunities to prevent or to avoid product coming into that area from places like Trinidad or Venezuela, and just supply on a swap basis those molecules elsewhere.

So I think you're going to continue to see all suppliers look to optimize their cost structures and their supply chains as new production comes on, not only in United States, but in Iran as well..

Okay. Thank you..

Thank you. The following question is from Nelson Ng of RBC Capital Markets. Please go ahead..

Great. Thanks. John, I think you mentioned in the past that you expected to see some Argentinean gas later this year.

Have you seen any so far, like in Q4? And is it still your expectation that you'll see some gas under the tolling agreement this year?.

Yes, we signed the tolling agreement like you mentioned. We would have expected to get some of that volume by now and we haven't. So we're still optimistic we'll get some this year and that's what we're being told. But we're now almost into November. So if we do get any, it will be not significantly move the needle for this year.

But in general, Argentina is looking more and more positive as a gas supplier over the medium-term. If you look at what they've developed, not only in the shale gas, but in the same gas areas that we used to get our supply from, there's a lot of activity and a lot of developments.

There's this disagreement between Chile and Argentina that's been publicly discussed about sharing energy, not just gas, but all forms of energy more openly going forward. And it was just an election in Argentina where the current government did extremely well.

So they are directionally wanting to have a more cooperative relationship with countries like Chile and their neighbors. So I think that's all positive for us. I don't think it's going to move the needle in the next quarter or two.

But certainly, if you look out through the end of the decade as we're looking to get back to a two-plant operation in Chile, I think the solution for that is not only the current negotiations we're having with ENAP, but Argentina. A lot of work to do to get there, so I'm optimistic, but we really have a lot of work to do.

And having that tax removed from gas exports was another step in the right direction. So not next quarter, but I wouldn't be surprised when we got some Tolling volume for Q4. But it's not going to be a significant amount, but going forward, I think more and more solution for the two-plant operation is both Chile and Argentina..

I see. And then, just a quick question on Egypt regarding the debt on the cash. So the cash is equal to about half of the debt outstanding on that project.

I was just wondering given that Egypt is operating at a high rate, do you expect that the covenants will be met in the next quarter or two? And would the cash then be freed up? Or like, if not, what are your thoughts in terms of just like refinancing or just paying down the debt at the project level with the cash?.

Well, you've highlighted a number of options that we're looking at, so good for you. You know, Ian and his team are working really hard to find the solutions to allow us to access the cash. Not only us, but for our partners, who are the Egyptians, would like to have the cash as well for funding many things that they're doing in the country.

So we're working hard on that. We don't have anything to announce today. But you're right to point out the debt and the cash at current methanol pricing we're going to build quite a bit of cash in Egypt. And we think there is a win-win solution here with the debt holders and we're pursuing that aggressively, but nothing to report today.

As far as once the debt is paid or refinanced to some extent, what we'll do, it's probably premature. What I'd like to see is the plant run and run well as it has been. After the turnaround, we're really running at excellent rates and good efficiencies as well as the gas availability has been 100%. So this is all good news.

If I get another quarter like that under my belt then I think we'll have a lot more confidence to consider all kinds of things for Egypt, including debt retirement or issuing new debt. But I think it's a little premature. We just came out of the turnaround in August. And here we are about six to eight weeks later. So stay tuned..

But just on that like if the plant runs well for a few quarters, would that meet the covenants? Or they're more complicated than that?.

They haven't been specific about what covenants there are, but I think if the plant runs well for two quarters and we're in the current methanol price, I don't see it's going to be an issue as far as covenants or otherwise. So we're working hard to get a result this quarter.

But until we have a result, we have nothing to report in that matter and the cash will continue to be trapped until we can get a resolution, which like I said, we're working hard to do..

Okay. Thanks John..

Thank you. The following question is from Laurence Alexander of Jefferies. Please go ahead..

This is Jeff on for Laurence. There've been some reports in China angling to potentially adopt E10 as a strategy, which could be highly capital intensive. I believe M15 infrastructure is already in play there.

Has there any been any change lately in the discussions of using methanol in fuel blending of late?.

No, just more continued -- moving forward with the trials. I think what we've seen change and this has not been in the last quarter, it's been in the last year, is a focus on the high-level blend.

The M100s, the M85, so Geely making the 100% methanol engine, et cetera, so they seem to be focused more on the high-level blends because of the clean burning aspects of methanol and air quality. If you looked at the most recent Congress, it's continuing to get a lot of attention, not just air quality, but environment in general.

So I think you're going to see them continue to focus on high-level blends, not low-level blends. Why E10? I'm not privy to the information -- I understand I have an excess amount of corn right now. I don't know if that's driving it.

But when I've talked to the Chinese officials over the years, they were pretty clear on saying, they're not going to use their food to make fuel. So it was a bit of a surprise to us when we read what you read. But we haven't in our discussions heard anything more than what was written in that announcement I think a few weeks ago.

So I think on the methanol side, the focus will be on high-level blends. Not saying low-level blends aren't going to continue, but I think the growth will be in high-level blends..

Thank you..

Thank you. The following question is from Cherilyn Radbourne of TD Securities. Please go ahead..

Thanks very much and good morning. Wanted to ask just on the three MTO plants that are currently under construction. I have seen it suggested that one or perhaps two of those might come on by the end of 2017, effectively in advance of the next methanol supply increments.

Does that a scenario that you foresee or consistent with your outlook? Would you see those plants as more 2018 events?.

Yes, we're almost getting to the end of 2017 here. So I guess that’s how you expect things to develop. The Kano [ph] plant, which is Zinland [ph], is in the process of starting up. How successful and how long, anybody knows. But I think as far as significant methanol demand, it's an early 2018 story if they're successful.

The other two plants, we're continuing to monitor. And we say 2018, probably midway is as good as any expectations. And I guess it depends on what your view for NATGAS in the Iranian production. The industry experts, like ISAAC [ph], were saying Q3 of this year and here we are in Q4 and no sign of completion of either of those projects.

So I think there's a lot of work to do to get those plants running still. So until they run and produce and produce on spec and reliable, I think the demand will continue to grow. And we'll continue to see very favorable supply/demand balances for methanol..

Okay, that's helpful. And then just more minor question on New Zealand production in the quarter, clearly, it rebounded versus Q2. But it was a bit lower than is normal for that complex.

Is that just a function of the composition of the gas that you received in the quarter?.

No, I wouldn't -- we're still guiding to 2.2 million tonnes or 550,000 tonnes per quarter. So you're right. We were a little lower in the third quarter. And our expectation is it will bounce back to that more 550,000 tonnes in Q4, so nothing really significant, a few minor issues, but nothing significant.

And 550,000 tonnes per quarter is still the proper guidance. We are working. And now that Shell and Todd have separated their assets. The high CO2 gas that we used to get I think is more -- going to be more available to us.

We haven't secured it yet, but if we're successful in securing that high CO2 gas that we used to get, we can get back to 2.4 million tonnes. But right now, I'm comfortable with the guidance of 550,000 tonnes per quarter assuming no technical issues..

Great. Thank you. That’s all my questions..

Thank you..

Thank you. The following question is from John Roberts of UBS. Please go ahead..

Thank you. I think before you said that $200 million in cash is kind of your minimum level.

Should we expect that you'll always be material above the minimum that that really truly is a minimum only if kind of you got a bad condition or something came up unexpected? And I ask that because again you could have finished out your buyback program I think during the quarter if you wanted to, but you didn't and maybe, it's the rate, at which you buy back stock was the third quarter, kind of a good example of what a maximum rate might be?.

I think it's a bit of a weak plan. I mean, whether we bought it back by the end of October, the end of September, it still precludes us from doing anything else on a normal course until March of next year. And like I said earlier in my opening comments, we want to build the cash on the balance sheet before we execute a substantial issuer bid.

So, there's a lot of experts predicting very low pricing in Q4, just a few months ago. So why blow all of our cash if it didn't make any difference to how we're going to redistribute cash to shareholders. So we've demonstrated again at low methanol pricing our ability to generate excess cash and return it to shareholders.

As far as our minimum cash balances, we've said $100 million to run the company and about $100 million to execute on the Chile projects. So that's where the $200 million comes from. If you look at the net cash, we worked too much higher than that as we ended Q3, because I'll remind you that the cash in Egypt is trapped.

So you have to exclude that cash and if you look at our cash just around our equity basis, you're not much north of $200 million when you go through the math. So we're exactly where we said we'd be.

And I think now you're going to see cash balances start to increase because we don't have the ability to return it through the NCIB after we complete the bid that were currently and I think, I've said before that a substantial issuer bid, we'll want to do something significant, so $200 million, $300 million.

So we'll have to build that kind of cash on the balance sheet before we execute on a substantial issuer bid.

So offered -- you should expect us to increase our cash balances in the current methanol price environment until we execute on a normal course -- sorry, a substantial issuer bid or re-launch a normal course issuer bid, right in line with what I....

Okay. And then on U.S. Gulf Coast natural gas prices, any changes to your thinking and how you'll be hedged as we go across the winter months here? I think you've 40% hedged, is that correct? And just remind me if I'm wrong there..

Yes, John, there is no change. We're 100% contracted on Geismar I. 40% hedged on Geismar II, and 60% spot. You should expect any change to that.

Why that rate, well, at 140 -- or sorry, that gives us the ability to run both plants at minimum rates if the gas was to blowout in the U.S., which we're not anticipating, but I think it allows us the flexibility to run both plants. And benefit from low spot gas as -- that we're experiencing today.

So I wouldn't expect any change to our strategy there in Geismar..

Great. Thank you..

Thank you. The following question is from Matthew Blair of Tudor, Pickering, Holt. Please go ahead..

Hey, John. Good morning..

Hi, Matthew..

I had a question on methanol supply and I guess, specifically, the potential of seeing mothballed methanol capacity restarting. So you're looking into this in Chile, I think one of your competitors was planning to restart the mothball plant in the Netherlands, later in 2018.

What's your outlook going forward? Do you think this is going to become a theme in the industry? It looks like there is quite a bit of mothballed methanol capacity just sitting out there. So any thoughts on this would be helpful..

Yes, I would disagree with you that there's quite a bit of methanol mothballed capacity out there. I think you've mentioned the ones that we're aware of the second plant in Holland. Its mothball, but it's also been cannibalized. So it will require a significant amount of capital to get it restarted.

So we have that in our plan about 100,000 tonnes, I think, give or take. There's a couple of plants being relocated, one from Brazil, one from I think it's somewhere in Eastern -- in Middle Asia, I think Slovenia, but don't quote me on that.

Two, West Virginia, 200,000 tonnes, but in the big scheme of things, all the plants that can run are running today because we're well above the cost curve. So anybody that wants to run and make cash can run today and we're still seeing pricing above the cost curve.

So that tells me that the supply demand balance is quite healthy and inventories continue to go down in China.

So I think these are all great signs and we're going to see additional demand, like I said, the -- one of the three MTO plants are starting up as we speak and the other two by sometime mid-next year, and really, not a lot of supply coming on in that similar period.

So we think we're in a really good spot from a supply demand fundamental point of view, which should lead to pretty good pricing and excellent results and cash flow generation. So I don't think -- I wouldn't agree with you there's a lot of idle capacity around the world that's looking to start up..

Okay, okay. Thanks. And then just on turnaround for New Zealand and Egypt so far this year.

Is this safe to say that we're pretty much done for 2017 turnarounds considering that we're already in November?.

Well, I never guided the turnarounds. What I'd say is we have 10 operating plants today. And you should expect on a given turnaround cycle of three to four years, that we'll have two to three turnarounds in any given year. Some years, it'll be two. Some years it'll be three. So we tend to like to do these in the months where it's warm and not cool.

So I think we've executed on 2 like you said, but I'll keep you guessing on 3, but I did guide in my previous remarks that we expect very healthy production in Q4 and sales of produced methanol..

Got it. Thank you..

Thank you. The following question is from Chris Shaw of Monness Crespi. Please go ahead..

Hi.

How you guys?.

Hi, Chris..

Just a quick one around the swap transactions.

Are those just purely sort of neutral beside the costs you save? Is there any other sort of financial arrangement that happened?.

Well, they're not neutral. There's a sharing of the savings. So they're -- they can't be significant savings. So let's take an example, supplier A is in the Middle East and selling in North America. Their freight might be $60, $70. We might be taking product from Trinidad to Asia. So -- and that freight might be $80.

So by just saying to that supplier A deliver to us in Asia, will deliver to you in the U.S. Let's say, that's a $30, $40 saving per tonne, we'll just share that, just as an example. So it can't be quite significant on the saving side. And that just goes into the net logistic cost. So you never really see it.

But I'll point out as we've grown our production, our net logistics cost per tonne has come down quite nice. And it's either a result of more production and the great job our supply chain and marketing team is doing on increasing and executing on these swaps..

Okay. And to that end, the Geismar facility now that's has been running for a year or so, year or two.

What's the sort of -- I remember you were suggesting -- given that you're doing pipeline distribution across the fence and access to rail -- and -- I mean, how much -- can you quantify how much more net logistics savings per tonne or something that you guys have over an average plant at that facility?.

Yes, we don't specify logistics by plants. I think I just mentioned if you look at our net logistics cost per tonne, it's gone down. And as we add more tonnes in Chile, you should expect our net logistic costs per tonne to go down..

Got it. Thank you..

Assuming the fuel remains kind of where it is today. Fuel was to spike and that would impact our logistics cost..

Right. Thanks..

Thank you. There are no further questions registered at this time. I'd like to turn meeting back over to Mr. Floren..

Okay. Thank you. So we believe that the methanol industry fundamentals remains strong. And I'm very pleased with the record sales result we achieved in the third quarter. Our plans continue to run well and I'm also encouraged by the improvement we've seen regarding gas availability in Egypt.

Our assets are in excellent shape and in the current methanol price environment we are well positioned to generate significant cash flows. Our priorities for capital allocation are to meet our financial commitments, meet our near-term growth objectives in Chile, and return excess cash to shareholders. Thank you for the interest in our company.

Have a good day..

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