Rentech Nitrogen Partners, L.P. (NYSE: RNF) announced today that its Board of Directors has declared a cash distribution of $0.05 per common unit for the fourth quarter of 2013, payable on February 28, 2014 to holders of record as of February 24, 2014. This distribution will bring cumulative cash distributions for the twelve months ended December 31, 2013 to $1.67 per unit. The $0.05 per unit fourth quarter distribution compares to the Partnership’s existing guidance of a distribution as low as zero. The Partnership’s results for 2013 were heavily affected by significant unanticipated declines in nitrogen prices, which ended the year 20% to 30% below price levels at the beginning of the year. Unusually high volumes of low-priced urea exports from China drove down prices of urea and of competing nitrogen products, and a very wet spring application period throughout our U.S. markets delayed and reduced demand for products. Several factors have improved the balance of global supply and demand, including the closing of China’s low-tariff export window in late October, and strong urea demand from India. As a result, urea prices began to stabilize entering the 2013 fall application period, followed by increases in the prices of urea and other nitrogen products to their current levels. Rentech Nitrogen’s results for the fourth quarter were also affected by previously-disclosed production limitations at both of the Partnership’s facilities, which resulted in lost revenue and increased costs. The Pasadena Facility was off-line for approximately 2.5 weeks in December 2013 to conduct scheduled debottlenecking and reliability improvement projects, which, when combined with several small unplanned disruptions in the quarter, contributed to lower production and higher per-unit cost of sales. The Partnership expects that the projects completed in December will increase production and improve on-stream factors in the future. The East Dubuque Facility operated at reduced rates following the scheduled 2013 bi-annual turnaround in early October after the discovery of the need for repairs to the foundation of one of its syngas compressors. In addition, production at the East Dubuque Facility was shut down in late November and much of December 2013 during repairs that followed a fire at the ammonia converter. All of these factors contributed to significantly negative net income and cash available for distribution in the fourth quarter.
The Partnership has completed all repairs relating to the East Dubuque Facility’s compressor foundation and fire at lower cost and more quickly than the estimates disclosed when those problems occurred, and the Facility is currently running at nameplate capacity. The Partnership filed an insurance claim for approximately $3 million related to damage caused by the fire, and incurred the $1 million deductible under its property insurance policy in 2013. Rentech Nitrogen expects to receive full payment of $2 million for the claim in early 2014. The Board took all of these factors into account in determining the fourth quarter cash distribution of approximately $2 million.Commentary on 2014 The Partnership believes that a number of factors may contribute to improved operating and financial results in 2014 compared to 2013. Capacity expansion projects have been completed that should increase production at both facilities, and projects to improve efficiency and reliability have been completed at the Pasadena Facility. Both facilities are forecasted to operate at upgraded capacity in 2014, with no scheduled down-time for East Dubuque and no scheduled interruptions to production of ammonium sulfate, other than normal scheduled maintenance for Pasadena. The Partnership currently expects positive EBITDA at the Pasadena Facility this year due to improved margins and operating rates. Recent increases in prices for nitrogen products from lower levels experienced late in 2013 are encouraging. However, the current market environment is different this year relative to early 2013, with lower corn prices and somewhat lower, albeit strong, anticipated corn plantings. These factors and the dynamics that affect input prices could rapidly change based on weather patterns and other conditions, and could positively or negatively affect product prices, margins, deliveries and cash distributions. Cash distributions in 2014 may be significantly less than cash available for distribution if the Company elects to replenish working capital reserves that were diminished by the negative cash available for distribution in the fourth quarter of 2013.
To assist investors in assessing the impacts of possible changes in the pricing of key inputs and products on Rentech Nitrogen’s results for 2014, the Partnership has provided a sensitivity matrix below. The matrix uses independent forecasts from Blue Johnson for average 2014 product prices and NYMEX Henry Hub natural gas futures contract pricing as reference points; the matrix is not intended to show the Company’s forecast for 2014 prices or results. The high and low cases were constructed by changing only the prices for key products and raw materials by the amounts indicated in the table, with other important metrics such as fixed costs and product deliveries held constant. Product deliveries assumed in the matrix are those contained in the Partnership’s guidance issued on November 7, 2013.Due to the current uncertainty about spring sales, and about pricing of products and natural gas, Rentech Nitrogen anticipates providing guidance regarding expected results for 2014 later in the year, after the spring season has developed and the Partnership has greater visibility into forecast results than it does at this time. The following matrix is provided primarily to illustrate the incremental effects of changing prices for products and inputs, and does not represent the Partnership’s forecast. Actual results may vary due to factors in addition to product and input pricing.
|Major Product Pricing Sensitivities|
|($ stated in millions except for per unit figures)||-20||%||-10||%||IndependentPriceForecast||+10||%||+20||%|
|Ammonia – Mid Cornbelt ($/st)(1)||$||412||$||464||$||515||$||567||$||618|
|Ammonium sulfate ($/st)(2)(3)||$||175||$||197||$||219||$||241||$||263|
|Input Pricing Sensitivities|
|($ stated in millions except for per unit figures)||+20||%||+10||%||IndependentPriceForecast||-10||%||-20||%|
|Natural gas ($/MMBtu)(4)||$||5.48||$||5.03||$||4.57||$||4.11||$||3.66|
|Ammonia – Tampa ($/st)(1)(5)(6)||$||301||$||338||$||376||$||414||$||451|
|($ stated in millions except for per unit figures)||Calculated EBITDA Under Various Pricing Scenarios|
|RNP Consolidated EBITDA||$||55.9||$||89.3||$||123.1||$||156.9||$||190.7|
Note: Each column uses product deliveries as forecast in Rentech Nitrogen's guidance issued on November 7, 2013. Product prices and input prices vary across the columns, while other important variables such as deliveries and fixed costs remain constant.Fourth Quarter and Full Year 2013 Results Conference Call As previously announced, Rentech Nitrogen will host the 2013 fourth quarter and full year conference call on Tuesday, March 11, 2014 at 1:30 p.m. PDT. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing 800-774-6070 or 630-691-2753 and the pass code 6179090#. An audio webcast of the call will be available at www.rentechnitrogen.com within the Investor Relations portion of the site under the Presentations section. A replay will be available by audio webcast and teleconference from 4:00 p.m. PDT on March 11 through 11:59 p.m. PDT on March 21. The replay teleconference will be available by dialing 888-843-7419 or 630-652-3042 and the audience passcode 6179090#. Qualified Notice to Nominees and Brokers This release is intended to serve as a qualified notice to nominees and brokers as provided for under Treasury Regulation Section 1.1446-4(b). Please note that 100 percent of Rentech Nitrogen’s distributions to foreign investors is attributable to income that is effectively connected with a United States trade or business. Accordingly, Rentech Nitrogen’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate. Disclosure Regarding Non-GAAP Financial Measures EBITDA is defined as net income (loss) plus interest expense, income tax expense and depreciation and amortization. EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:
- the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; and
- our operating performance and return on invested capital compared to those of other publicly traded limited partnerships and other public companies, without regard to financing methods and capital structure.
Safe Harbor StatementThis press release contains forward-looking statements about matters such as: expected improvements in the Company’s operating and financial results in 2014; estimated on-stream rates in 2014; expected positive EBITDA at the Pasadena Facility; working capital impacts on cash available for distribution; and receipt of future insurance proceeds. These statements are based on management’s current expectations and actual results may differ materially as a result of various risks and uncertainties. Other factors that could cause actual results to differ from those reflected in the forward-looking statements are set forth in the Partnership’s prior press releases and periodic public filings with the Securities and Exchange Commission, which are available via Rentech Nitrogen’s website at www.rentechnitrogen.com. The forward-looking statements in this press release are made as of the date of this press release and Rentech Nitrogen does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable law. About Rentech Nitrogen, L.P. Rentech Nitrogen ( www.rentechnitrogen.com) was formed by Rentech, Inc. to own, operate and expand its nitrogen fertilizer business. Rentech Nitrogen’s assets consist of two fertilizer production facilities owned by its operating subsidiaries. The East Dubuque Facility is located in the northwestern corner of Illinois, and uses natural gas as a feedstock to produce primarily anhydrous ammonia and UAN solution for sale to customers in the Mid Corn Belt. The Pasadena Facility is located in Pasadena, Texas, along the Houston Ship Channel, and uses ammonia and sulfur as feedstocks to produce ammonium sulfate and ammonium thiosulfate fertilizers, and sulfuric acid. Rentech Nitrogen is the largest producer of synthetic granulated ammonium sulfate fertilizer in North America, with sales in the United States and internationally.