Terra Nitrogen Company, L.P. Reports First Quarter Results

Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) reported net income of $33.9 million, on revenues of $118.7 million for the first quarter ended March 31, 2010. This compares to net income of $43.3 million, on revenues of $165.3 million for the 2009 first quarter. Net income allocable to Common Units was $32.9 million ($1.78 per Common Unit) and $27.5 million ($1.49 per Common Unit) for the 2010 and 2009 first quarters, respectively.

On April 28, 2010, TNCLP announced a cash distribution for the quarter ended March 31, 2010, of $1.25 per common limited partnership unit payable May 27, 2010, to holders of record as of May 10, 2010. TNCLP did not pay a distribution on earnings for the quarter ended Dec. 31, 2009, creating a Minimum Quarterly Distribution (MQD) shortfall that must be fulfilled in future quarters. The $1.25-per-Common-Unit cash distribution on first quarter earnings fulfills the MQD shortfall and exceeds current quarterly requirements.

Analysis of Results

Revenues for the 2010 first quarter totaled $118.7 million, compared to revenues of $165.3 million for the 2009 first quarter. This decrease was due to lower ammonia and urea ammonium nitrate (UAN) selling prices and lower ammonia sales volumes, and was partially offset by higher UAN sales volumes. Ammonia and UAN prices were lower than those of the 2009 first quarter when prices, though still elevated, were retreating from the commodity boom level of 2008. The lower ammonia sales volumes were due to wet weather across much of the south, which led to fears of a late spring application season. UAN sales volumes benefited from low starting inventories throughout the supply chain and reduced import volumes.

From the 2009 to the 2010 first quarter, TNCLP’s:

• Ammonia and UAN selling prices decreased by 30 and 36 percent, respectively.
• Ammonia sales volumes decreased by 50 percent and UAN sales volumes increased by 28 percent.
• Natural gas unit costs decreased by 25 percent.

Forward Natural Gas Position

TNCLP’s forward purchase contracts at March 31, 2010 fixed prices for about 12 percent of its next 12 months’ natural gas needs at about $4.0 million above published forward markets at that date. TNCLP has entered into these forward gas positions to secure margins on nitrogen products sold forward at fixed prices.