LSB Industries, Inc. Reports Progress On El Dorado, Arkansas And Pryor, Oklahoma Chemical Facilities

LSB Industries, Inc. (the “Company”) (NYSE: LXU) released an update on progress in certain areas of its chemical facilities located in El Dorado, Arkansas (“El Dorado Facility”) and Pryor, Oklahoma (“Pryor Facility”).

El Dorado Facility

The Company announced on May 15, 2012 that the El Dorado Facility suffered major damage to its DSN 98% concentrated nitric acid (“DSN”) plant and peripheral damage to other plants at that location. On June 5, 2012, the Company provided an assessment of the damages and its plan to resume production at the El Dorado Facility. As planned, we restarted regular nitric acid and ammonium nitrate production, on a partial basis in June, and we are on track to increase that production during July and August, as various plants are brought back on-line, as per our originally announced timetable.

Following is a detailed update:
  • DSN concentrated nitric acid plant – We have determined that repair of this plant is not feasible. The Company intends to replace the nitric acid production capacity lost by this event with a new nitric acid plant. Engineering is underway to determine the specification for the new acid plant. Before the May 15 th event, the DSN concentrated nitric acid plant produced approximately 20% of the nitric acid manufactured at the El Dorado Facility.
  • Other “regular” nitric acid plants – The three other nitric acid plants, which produce approximately 80% of the nitric acid at the El Dorado Facility in concentrations from 56% to 63%, sustained less damage and are being brought back on-line. The first of these three nitric acid plants has returned to full production, and the other two should restart later this month and August.
  • Ammonium Nitrate Prill plants – Both the high density and low density ammonium nitrate prill plants are ready for full production as acid production continues to be restored. These prill plants are currently operating at less than full capacity due to limited availability of feedstock.
  • Sulfuric acid plant – Production at this plant should resume before year end. Before the May 15 th event, sulfuric acid was approximately 8% of the El Dorado Facility sales.
  • Transportation – All loading and unloading facilities are fully operational.
  • Control systems – The temporary nitric acid control room is operational and plans are being prepared for a new permanent control facility.
  • General – Repairs to the permanent electrical service and various support facilities are nearing completion.
  • Insurance - The Company is continuing to work with its insurance carriers and is making good progress.

Pryor Facility

During March 2012 the urea plant was taken out of operation to repair a break in the reactor’s stainless steel liner. On April 25 th we determined that the break could not be repaired, so we decided to replace the liner and announced that the urea plant would be down through the second quarter.

The liner replacement is completed and UAN production has resumed. During the time that the urea plant was down, we continued to produce and sell ammonia and downstream products.

The main ammonia plant at the Pryor Facility has been recently producing at approximately 75% of 2012 previous operating rates because of problems with the ammonia converter. We plan to replace the converter with an upgraded design during the first quarter of 2013.

CEO’s Remarks

Jack Golsen, LSB’s Board Chairman and CEO stated, “We are making good progress at our El Dorado Facility. Although the nitric acid capacity we lost when the DSN plant was destroyed only accounted for about 20% of our total nitric acid output from this facility, we intend to replace that capacity as soon as feasible.”

Turning to the Pryor Facility, Mr. Golsen stated, “Despite the fact that our Pryor Facility has been extremely profitable, it has not yet achieved its full potential. We have continually had problems sustaining our targeted ammonia production rate from the main ammonia plant at Pryor. We believe this is primarily due to the design of its ammonia converter, which was part of the plant at the time we acquired it. We have decided to replace that converter and expect that to occur during the first quarter of 2013. We will continue to operate the plant during the replacement process. That replacement should allow us to de-bottleneck the production process and finally achieve our targeted production capacity from this ammonia plant.”

Mr. Golsen continued, “On May 5 th we received permits to operate the two smaller ammonia plants at Pryor. We are in the process of commissioning those plants. We expect those plants to be in production during the fourth quarter of this year, which should increase Pryor’s ammonia capacity by approximately 60,000 tons per year.”

LSB Industries, Inc.

LSB is a manufacturing and marketing company. LSB’s principal business activities consist of the manufacture and sale of commercial and residential climate control products, such as geothermal and water source heat pumps, hydronic fan coils and modular geothermal chillers, and large custom air handlers; and the manufacture and sale of chemical products for the agricultural, mining, and industrial markets.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements generally are identifiable by use of the words “believe,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects” or similar expressions, and such forward-looking statements include, but are not limited to, feasibility or timing of repairs to or replacement of various parts of the El Dorado Facility and timing of resumption of production. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from the forward-looking statements as a result of various factors, including, but not limited to, if for any reason insurance coverage is denied or the insurance carrier refuses to pay a substantial amount of our claim or claims, general economic conditions, inability to repair or replace damaged equipment in a timely manner, inability to fund the necessary repairs or replacements, changes in customer demands, inability to obtain in a timely manner any necessary regulatory approvals as to such repairs or replacements, and other factors set forth under “Risk Factors” in Item 1A of Part 1 and under “A Special Note Regarding Forward-Looking Statements” contained in the Form 10-K for year ended December 31, 2011, and Form 10Q for the period ended March 31, 2012 for discussions of a variety of factors which could cause the future outcome to differ materially from the forward-looking statements contained in this report.

Copyright Business Wire 2010

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