Earnings Call: Q2 2019

Aug 1, 2019

Ladies and gentlemen, thank you for standing by. Welcome to the Methanex Corporation Q3 2019 Earnings Call. I would now like to turn the conference call over to Ms. Kim Campbell. Please go ahead, Ms. Campbell. Thank you. Good morning, everyone. Welcome to our second quarter 2019 results conference call. Our 2019 second 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 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 forecast or projections, which are included in the forward looking information. Please refer to our second quarter 2019 MD and A and to our 2018 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 percent 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 manner. 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. For the second quarter of 2019, we recorded adjusted EBITDA of $146,000,000 and adjusted net income of $26,000,000, or $0.34 per share. As we announced on our last earnings call, as of January 1, 2019, our financials now include the impact of IFRS 16 substantial change to lease accounting standards. The impact of IFRS 16 increased adjusted EBITDA by $27,000,000. And I want to remind everyone that the IFRS 16 does not change the total cash flows or underlying economics of our business. There were a few different factors that impacted our earnings this quarter. We generated our earnings primarily from sales of methanol that we produce. Our sales of Methanex produced methanol of 1,700,000 tons were approximately 250,000 tons lower than the first quarter and approximately 150,000 tons lower than our 2nd quarter production, primarily due to the timing of inventory flows which impact our mix of produced versus purchased methanol sales. A lower proportion of methanol produced methanol sales relative to our total sales volume also resulted in higher costs. In addition, we incurred higher logistics costs and higher selling and administrative expenses related to events during the quarter. Our average realized price of $3.26 per ton declined slightly in the second quarter based on lower posted prices in North America and Asia in June and a discount of approximately 17%. Higher methanol industry operating rates in the quarter and volatility in oil and olefins prices impacts methanol affordability into energy related application impacted methanol prices. The industry cost curve sets the floor for methanol prices and we estimate the cost curve to be in the range of $2.60 to $2.80 per tonne and current prices in China are below this range. We have observed some high cost methanol producers to start to reduce operating rates as spot prices have dipped below the lower end of the cost curve. Methanol demand in the second quarter of 2019 was approximately 3% higher compared to the second quarter 2018 and steady compared to the first quarter of 2019. Most methanol to olefins or MTO facilities ran at high rates during Q2 despite very low olefins prices. At the end of the second quarter, 2 new MTO plants started up that have a combined capacity to consume 3,600,000 tons of methanol annually at full operating rates. We expect them to progress to full operating rates over the coming months. The methanol industry supply operated well in the second quarter as several plants restarted following planned and unplanned outages in the first quarter. Now, turning to our operations. In New Zealand, we produced 446,000 tons in the 2nd quarter compared to 437,000 tons in the first quarter. Our New Zealand facilities experienced gas constrained primarily as a result of natural gas suppliers completing planned maintenance activities. We expect upstream maintenance activities to continue in the third quarter. In Geismar, we produced 530,000 tons in the 2nd quarter, which was a quarterly site record. This compares to 405,000 tons in the 1st quarter when our production was impacted by our tons during the second quarter compared to 429,000 tons in the first quarter. Production was lower quarter over quarter as we completed a turnaround at our Titan facility and experienced a short unplanned outage at our Atlas facility. We continue to guide to approximately 85% operating rates for our Trinidad operations. In Chile, we produced 290,000 tons during the second quarter compared to 241,000 tons in the first quarter. We've continued to receive reliable gas deliveries from our suppliers in Chile and Argentina over the last few months. We continue to resolve the technical issues we faced with the startup of our Chile IV facility, which is now running on a stand alone basis. We have begun the 1st phase of our Chile 1 plant refurbishment scheduled to match expected lower gas deliveries during the Southern Hemisphere winter months. We expect that our current gas arrangements will allow for a 2 plant operation in Chile for approximately 9 months of the year with lower operating rates during the winter months when gas deliveries are lower. We continue to guide to an annual operating rate of up to 75% of a 2 plant operation or annual production of up to approximately 1,300,000 tons per year. In Egypt, we experienced an outage in early April that required the plant to be shut down. We are continuing to complete the necessary repairs and expect to restart the plant later month. We estimate that the Egypt outage had an impact of approximately $25,000,000, reflecting our 50% share of Egypt on our Q2 adjusted EBITDA results, including higher logistics costs to serve our customers in the Mediterranean. We expect some covers repairs and business interruptions subject to deductibles. However, no insurance recoveries have been recorded to date. We ended the quarter with $228,000,000 in cash on the balance sheet. Methanex share of cash including our proportional share of Atlas and Egypt's cash was 2 $4,000,000. We have a long track record of making disciplined capital investments sheet and returning excess cash to shareholders. Our balanced approach to capital allocation remains unchanged. We believe that we are well positioned to meet our financial commitments, execute our growth projects in Louisiana and Chile and deliver on our commitment to return excess cash to shareholders dividends and share repurchases. Our planned maintenance capital for the second half of twenty nineteen is estimated to be approximately $50,000,000 primarily related preparation for turnarounds to be executed 1st phase of our Chile 1 refurbishment to cost approximately $25,000,000. Provided that we are able to secure sufficient longer term natural gas, we will compete complete the 2nd phase of the refurbishment over the coming years. Our team is continuing to make progress on the de bottlenecking opportunities at our Geismar facilities to increase production by approximately 10% for a few tens of 1,000,000 of dollars of capital. We completed some elements of We plan to complete the additional work required, including construction of a pipeline to bring CO2 to the site and necessary work of the Geismar II plant over the next couple of years. We are extremely pleased to announce that our Board of Directors reached the unanimous final investment decision for the Geismar III project. Geismar III will be a 1,800,000 tonne methanol plant in Geismar, Louisiana, located adjacent to the Geismar I and Geismar II facilities. This project benefits from substantial capital and operating cost advantages, and we expect will deliver outstanding returns. We have a robust and flexible financing plan for the project with an $800,000,000 construction loan facility, a renewed $300,000,000 revolving credit facility, and we expect to access the debt capital markets in the second half of twenty nineteen to pre fund a significant portion of the Geismar 3, 2020 expenditures. We believe we're well positioned to complete this project as we have a rigorous well defined execution plan and experienced team in place in a strong balance sheet and financial flexibility to execute this project. As we have stated previously, we have a preference to have a strategic partner for the project, and we will continue to pursue that option. We expect that Geismar III will significantly enhance our asset portfolio starting in 2023. We have a consistent track record of returning excess cash to shareholders. We repurchased nearly 1000000 shares for $47,000,000 during the quarter under our share repurchase program. Up to 900,000 shares approved under the balance sheet from $200,000,000 to $300,000,000 during the construction of the G3 plant. The pace of the share repurchase program will depend on methanol prices in our ability to generate excess cash. Based on our posted methanol prices so far this quarter, we expect the average realized prices in the third quarter to be lower than second quarter. We expect our production levels in the 3rd quarter to be similar to the 2nd quarter. We expect adjusted EBITDA to be lower in the 3rd quarter compared to the 2nd quarter. I would now be Our first question is from Mike Leithead from Barclays. Please go ahead. Good morning, John. I guess first on the methanol price environment, if you look back just maybe previous deflationary pricing cycles, Can you just talk about what the historic response time has been for supply to moderate when we're seeing prices below the high end of the cost curve? What's your experience in the industry told you about how quickly they are to respond to that? Yes, it takes a few weeks or sometimes a month. What we see happen is that we've rapidly gone through the cost curve here in the last few weeks and we're starting to see people adjust rates and especially in the coal natural gas plants in China. But people look around and see what's the outlook for their expectation for price. So, sometimes they'll last a little longer thinking prices will rebound. I'll remind you, there's a couple of new MTO plants that have just started up in China, which will impact demand. So we see it taking a few weeks to a month to see them shut down. And they have to have a view that prices are going to stay below the cost curve a period of time. Got it. That's helpful. And on Geismar 3, I know you've laid out why you guys are really excited about the opportunity to build this advantage project for $7.50 a ton. But by my math, I think today you're trading for roughly $4.50 a ton in the open market. Which is a pretty wide gap, especially to an asset replacement value of $1100 a ton. So is there a valuation threshold at which you just put the brakes on G3 and say to the market, you guys are really dumb for allowing me to buy myself back at this discount? Or are we moving forward with Geismar 3 And that's just the plan right now. Well, I mean, you can't predict the future. I mean, our plan is to move forward and complete Geismar III. As far as what we're trading per ton, I'll remind you, all assets are not created equal. I mean, our Geismar assets are worth quite a bit more than some of our other assets in other regions. We think as we complete Geismar III, it's going to be at the top end of our portfolio. And worth substantially more than the $7.50 per ton that we're going to build it for. To me, it's about now, it's about executing the project safely and reliably and get a very reliable plan. So, we'll continue to focus on completing the plant on time and safely and monitor the markets. I'm a big believer in cost curves. This industry has demonstrated in the past, two times we've had lower prices that the cost curve kicks in and pricing were down. So we have the ability to sustain 2 years of really low pricing, in our financing plan and still complete Geismar 3. So to think about stopping it now, it'd be a little reactionary and a little knee jerk. And we think long term, we don't think quarter by quarter. If you did, you wouldn't make ever make an investment in anything. And we think this project will have tremendous returns for shareholders over the long term. Thank you. Thank you. Our next question is from Joel Jackson from BMO Capital Markets. Please go ahead. Hi, John. Maybe following up on that question a bit more on the buyback and cap allocation though. Is the toggle point about $300 a ton with a buyback doesn't make sense or or put it below that, the buyback doesn't make sense or put it another way. Will you be if methanol prices stay here for the rest of the year, will Methanex still do more buybacks? Thanks. Yes. Our plan is to have a balanced approach to capital allocation, as I've mentioned many, many times. Are at $300 a tonne. Our forecast would be that we have about $400,000,000 in free cash before G3 dividends and buybacks. If you look at the pace of spend on the equity portion of G3, the non debt portion, it's about $180,000,000 a year. Our dividend is about $105,000,000. So at around $300,000,000, we still can continue the share buyback. And like I said in my remarks, we've increased our cash target on our balance sheet by $100,000,000 as we build G3. So from 200 to 300. But our plan will remain the same of above $300,000,000 return excess cash to shareholders through buybacks. So no change. Okay. Just on Egypt, but maybe broader. So as you discovered the issue in Egypt, my understanding is, you had sort of discovered a part of your process in determining maybe some imperfections, some of the metal or some of the piping. That that process wasn't working properly. I imagine you've gone through all your plans to make sure if you're using that process, at other plants to see if there's any other issues. Can you maybe see if there's any other issues beyond just Egypt dynamic? Yes. So that was an issue that was related to the fabrication of certain equipment, when the plant was being built. We, you know, the codes were met, but as we've investigated the issue, the codes were probably not robust enough to catch this potential, process safety issue, which happened. So obviously, a couple of things. We've looked at all of our other plants, as you've mentioned, to identify if this issue is present. We haven't seen it anywhere else yet. We'll have to change our inspection programs to look at these particular wells in this particular material going forward. Our plan is to share our what we found widely with the industry because I think for us safety is the number one thing that we look at each and every day and this issue could have been really a serious safety issue if we hadn't if it hadn't happened at 5:30 in the morning in Egypt. So our plan is share with the industry, not only methanol, but as widely as we can because this is not just a methanol industry issue. And we learned as well that this might have happened one time before, but wasn't shared widely. So if we had a maybe been aware because this had happened before somewhere else, then we have prevented this. So, our plan will be to share this quite widely with the industry. Thank you. Our next question is from Jacob Bout from CIBC. Please go ahead. Hey, John. I had a couple of questions just wanted to go back to G III. So is there any flexibility here at all as far as pushing out some of the expenditures on G III say, Methanol markets were to decline even further? Yes, we have a really robust financing plan in place for G3. So as I mentioned, We can withstand really 2 years of really low prices for methanol and continue with the project. So we don't believe that's going to if that was our belief. Obviously, we wouldn't have sanctioned the project. We believe in the cost curve. I've mentioned the cost curve is $2.60 to $2.80. We've seen pricing rebounding in China in the last couple of days, but that's early days. We start starting to see production turn off. So if you have that two you to $2.80, that'll lead to a $300 price realized globally. And at that price, we can continue our balanced approach to capital allocation. So The fire belief was, you know, 2.50 or lower pricing for 2 years, we wouldn't ever sanction the G3 project. But what I'm getting at is, do you have the flexibility to push out the construction, say, from a 3 to 5 year period? Well, we have flexibility to do whatever we want and we'll, you know, we'll examine all options at any given point of the methanol price cycle and make the best option for long term shareholder value. But there's no financial costs for that? I didn't say that. I think anytime you extend a project, there's definitely financial costs. Okay. And then while you're working on G III, is there any period that G1 and G2 will be shut down either during connection or thing, whether it be an impact in production? No. The only time, well, G1, we just done the first turnaround. We do turnarounds every 4 to 5 years on a plan. So you can work out when G2 started and when we might think about doing a turnaround there. But that would be part of our normal turnaround procedures. And at that time, we'll do what we did similar to G1 to tie in the CO2 for the debottlenecking, but as we build G3, you shouldn't be thinking of any downtime for G1 or G2, going forward. Okay. Last question here. Logistics costs and SG and A, Does any of that lead into third quarter? A little bit for Egypt. I mean, we are servicing our customers in the med with a different supply chain. Than we had. We have always talked about how privileged the Egypt plant is because it's we can use small vessels to get into many ports in the Mediterranean and that's where we sell most the product. So when we're bringing it from somewhere else, I. E. Trinidad or the U. S. Or elsewhere, you can imagine the logistics costs are quite different. So that we're going to start that plan up later this month, as I mentioned. So we've got a month and a half of these higher logistics costs for Egypt. We also had that incident in Houston at one of our big terminals. So we had some additional logistics costs to service our customers. From other locations. And the water level in the Mississippi was quite high, way longer than normal. So that, that led to some additional costs as well. The water levels still relatively high, but it's come down quite a bit. And ITC where we had the issue is back and running. So probably a little bit, but not to the same extent we saw in Q2. The next question is from Eric Petrie from Citi. Wanted to ask, what is your sentiment on the incremental MTO demand given lower polymer prices and polymer capacity expansions in the U. S? Yes. So what we've seen, with really low, all of our pricing, we've seen the ethylene at 800, which is extremely low. We've seen very high operating rates on the MTO facilities. So at current methanol prices, they're very affordable and We understand a couple of plants are taking some downtime for turnarounds for a few weeks and the other 2 new plants. Are ramping up. So until we see differently, we would expect these plans to run at very high rates. Okay. Secondly, what do you think is attributing to the lower deflationary methanol price environment, especially the spot market? Demand doesn't seem to be that bad. It's up 3%. So maybe your energy applications are growing 5 to 6 and traditional are flat. So Is it supply related or appreciate any views or commentary on that front? Yes, I mentioned in my remarks that we saw supply operating very well in the second quarter. I mean, the ITC event certainly disrupted supply chains in North America. And I'll remind you, North American Europe spot market very illiquid. Only a few 1000 tons get traded, unlike China, which is a more robust spot market. So that had impact on supply chains and the amount of methanol that was probably being kept in storage. And in the quarter, we saw a couple of 100,000 tons of of material go to Europe that usually would have gone to Asia because at that time when those decisions were made, the European pricing was much higher. So we're seeing that work its way through as well. So it's a point in time, that we've seen these prices go down. And when it's a very liquid market in Europe and North America, it doesn't take too many extra molecules to really impact the spot market. But in those markets, we look at the the contract market is the important marker and certainly in China, spot is really more significant and that certainly leads to what we talked about the cost curve in that $2.60 to $2.80 and we're pretty confident that's where we are today on the cost curve and we're starting to see producers react to the below 260 pricing. Our next question is from Sharon Radbourne from TD Securities. Please go ahead. Good morning. I just had a couple of questions on Geismar III. The first one being whether you could give us any color on your intentions regarding the gas apply for that plant? Yes. So we've completed our gas arrangements for that plant. So we've struck a 10 year deal for about a third of the requirements of that plant. But I'll I'll say that that gap doesn't have to go to G III. It's totally fungible for the site. So, you know, this is going to be a 3 year, construction. So we won't start getting that gas until 2023. But we don't have to take it to to Geismar III. We can take it across the site. So we're comfortable now with what we've got covered in G1 and G2. And now G3, for either under hedges or fixed price contracts and the balance will be open to the spot market. So we have a very balanced coach to our gas strategy in Geismar. And then regarding the preference for a strategic partner, can you indicate whether you're still in dialogue with some potential partners? Yes. Anything else you can add? We're in dialogue with potential partners. Thank you. Next question is from Hassan Ahmed from Alembic Global. Please go ahead. Good morning. John, wanted to visit the conventional demand side of things. In the press release, you guys talked about how acetic demand was a bit weak in Q2. And I guess you attributed that to a series of planned and unplanned outages in the quarter. So just as we look at Q3 or the second half of the year, have those facilities come back online, just broad thoughts on how we should think about the CDIC demand in the back half? Yes, I'll ask Vanessa James, who runs our marketing group to answer that Yes. So as you said, we saw a decline in acetic acid demand over the quarter related to both demand and outages. And I'll remind you, acetic acid is less than 10% of the demand for global methanol. So we'll watch it, but I think we've had other commentators say that I think it's a slower rebound in acetic acid, but for other traditional derivatives like formaldehyde, we've seen them recover from a slower Q1 and leap outweigh any methanol demand impact we've seen from acetic acid. Understood. Now moving on to MTO, and I know this was asked earlier, but just wanted to dig a bit deeper into it. You know, spot ethylene's come down and come down quite hard. And just here in the U. S. Alone, over the next couple of months, we should see north of 3,000,000 tons of ethylene supply come online. Now obviously a bunch of cross currents, like you mentioned, there's some new MTO plants that have come online. So I would expect as you've started those plants, even if ethylene market conditions deteriorate, you're not really going to sort of take down production. But maybe you have some of the older facilities who after a couple of months of being in the red, may actually think about taking down operating rates. So just wanted to get a better sense of assuming that the market weakens from here on the ethylene side what we should think about in terms of these crop currents? Well, we saw ethylene prices hit 800 in China, and that's historically low. Prices. They bound rebounded from there somewhat. At the 800, we didn't see anybody shut down for so called economic reasons. So I don't think how they look at their economics is well understood by the market and industry experts. Each site's a little different. Depending on what derivatives they're making and the relative prices of those derivatives as well as the price of methanol. So we look at that quite seriously when we're looking at our pricing decisions on a on a month by month basis. So I said consistently, we look at the economics of each site and calculate the affordability of methanol. And then we look at their behaviors. So, nobody has shut down for so called economic reasons. I mentioned earlier, there's a couple of plants that are taking 2 to 3 week turnarounds here. But right now, the affordability based on even relatively low Olefins prices is quite good. So I can't predict the future. I don't know what the ethylene price will do in China next year. But we certainly look at the affordability as we make our pricing decisions. Thank you. Our next question is from Nelson Ng from RBC Capital Markets. Please go ahead. Just diving into your Q3 outlook, you mentioned that production levels will be similar, but pricing and EBITDA would be lower than Q2. So are you expecting further inventory build or a reversal Q3, was it too early to say? Yes, I've guided before that as we've grown our sales, our inventories will will be a little higher than they have been in the past. And I've guided to 1.1,1.2. I think we're a bit higher than that in 3. So, I mean, going into Q3. So, again, it really depends on how our sales hold up and how our production does, but our guidance is still around that 1.1to1.2 for inventories. Okay. And then just some other factors in Q3. I think you mentioned earlier that logistics costs will improve relative to Q2. And then in terms of the cost to repair the Egypt facility, are those going to be a lot higher in Q3 relative to Q2 or are they capitalized or I'm just trying to figure out some of the moving parts? Yes, I'll ask Ian to Yes Nelson, so in terms of the, each its outage, right now, all the repair costs are being charged to the earning statement. And then when we file a claim, we will recover a portion of those subject to deduct deductibility. So deductible, I should say. So, you will see some more repair costs in the third quarter. We've also taken the opportunity while the plant's been down to do some other work, would have been done during a normal turnaround. So That'll obviously be obviously capitalized going forward as well. Okay, got it. And then just switching gears in terms of your debt financing plan. So I think you plan to refinance one of your tranches later this year and also upsize it Obviously, interest rates are down, but I guess given the weakness in the chemical market or just general sentiment, how's the environment on the credit side? Yes. So our plan is we have a bond coming due at the end of the year. We plan to renew that $350,000,000 bond and upsize it as you mentioned. The markets are quite robust right now. You know, we expect to get a very good interest rate for that bond. And, there's a lot of appetite, for, that kind of level of bond for around 10 years is what we're looking at. So, stay tuned. So the lenders are not that sensitive to, I guess, the near term methanol price outlook? Well, I think they're like us, they take a long term view of methanol prices. And I've mentioned many times based on the cost curve and MTO affordability. We believe we'll be trading in a range of $300 to $400 a ton. We've seen that in the last 12 months. So that's pretty recent history. And the average price for the last 10 years has been $3.50. So you're going to see times when prices are higher than that than $3.50 and lower. And We've seen it all in 12 months. So, I think our lenders know this, know our industry, know our company, know our balanced approach and our wanting money to maintain an investment grade. You know, so they look through these short term cycles, whether it's high prices or low prices. Okay, thanks John. I'll get back in the queue. You may rejoin the queue by pressing star 1 if you have further questions. The next question is from Matthew Blair from Tudor, Pickering, Holt. Please go ahead. Hey, good morning, John. I was hoping you could talk about any contribution from the Iranian methanol facilities in 2Q. It seems like there might have been some production issues at Kva and Marjan. Do you feel like you saw the full production power from those facilities, in the quarter, any insight there? Well, I mean, there's lots of issues going on in Iran and, those plants did run during the quarters, not at full rates. You know, I think going forward, it's hard to predict what we're going to see out of our run because of the sanctions and and the extra insurance now to get shipping in and out of there. And, things normal maintenance repairs, catalysts, all of those things. So we expect we haven't seen them shut down. We've seen them continue to run on an intermittent basis and that's what our would expect in the future unless we see something different, but it's really hard to predict what's going to happen in Iran with methanol plants and shipping, etcetera. But we do watch it as closely as we can. Sounds good. I'll leave it at that. Thanks. Thank you. Our next question is from Jonas Oxgaard from Bernstein. Please go ahead. It seems that for Geismar III, your, in your prices, you're still assuming that U. S. Price will be well above Asia. We talked about the cost curve at 2.70 ish and then transferring that to U. S. Price well above 300. How do you square that with U. S. Getting longer and longer on methanol as time goes by? And particularly when Geismar 3 finally comes online, becomes pretty massively long, that premium really shouldn't be persisting. Yes, we've chatted about this for a long time. You know, we expect the freight differentials to remain intact. So the Middle Eastern producer to be swinging between the Atlantic Pacific based on the freight. And that's our assumptions today. And obviously, we expect additional demand in the Atlantic Basin and The next new plant is, sometime away, you hung, it's going to be completed at some time over the next couple of years. So our, our, our expectation is that the U. S. And Europe will continue to trade at a premium to, to China based on freight differential until we see it different, that's our expectation. Okay. And if you were to see that go away, coming back to the previous question on on flexibility in pushing the plant out, is that something you would do? Well, our anticipation is a range of $300 to $400 in all pricing. This project will have a cash cost delivered into Asia in the low 200s, which means you'd have to see around 16,000,000 to 17,000,000 tons of methanol demand to go away, because that's the high cost production above that. I guess anything's possible. You can, you know, but, that's certainly not our expectation or why we think if we think the pricing are going to be below 200, why would we go ahead with the project? So I guess anything is possible that we can dream up all types of scenarios. Thank you. Our next question is from Steve Hansen from Raymond James. Please go ahead. Yeah. Hey guys, just a quick one. John, the gas contract you described earlier on the call here, I think speaks to some risk mitigation efforts on your part for G3. I'm thinking on the other side of the output side, how are you guys contemplating the marketing plan for G3, whether it be domestic international or otherwise and just how you might be able to sign some sort of offtake that might again provide some visibility or risk mitigation to investors? Yes. So, our plan in, in, in the economics that we've shared is to ship 100% of it to Asia. And we have flexibility in our supply chain, whether that's China or other parts of Asia. And we've looked at different scenarios, if the trade war continues and we see high tariffs into China. So we're comfortable with that. Obviously, the more we can keep in North America, the better it is the overall economics. So you should expect us to be trying to contract as much as we can of this product in North America at the same time. So But even if the worst case scenario is that all of it goes to China, it's a low 200, delivered cash cost and gets our cost of capital back below $300 a ton and full returns at $3.25. So other people in the industry are going forward with $1100 projects, thinking of a different set of pricing than that to get a return. So again, the future is hard to predict, but I think there's a good range of pricing between $3 $400 a ton. And that's what we anticipate the methanol price to be over the coming years. Follow-up, if I may, on New Zealand has shown some improvement here in recent quarters, but we're still running below sort of what would be normalized rates. So where we at there on the gas apply in the upstream and just the future operating rates there? Yes. So we had a sale of the Shell assets, which was the the largest one of the larger owners of assets in New Zealand completed last year and the OMB that bought those assets We're doing quite a bit of maintenance on those assets, which we think is a good thing long term. If they're investing significant money in those assets. They must be thinking they're going to sell gas to somebody over the long term. And if it's not us, then there's 50% of the gas market goes away. So I think we're in a good position there to get gas longer term. There's ongoing development of existing blocks onshore and offshore. And like I said, we're a big chunk of that gas market. I'll remind you, the gas there is very heavy in liquids. So the economics on the gas itself is not what's driving, people to explore or do maintenance. It's the liquids which trade, you know, some are more with oil than with natural gas. So we think the dynamics there are really good. I mean, we can we think we're going to get gas for a 3 plan operation for the foreseeable future. But if we don't, then, we have flexibility there as well. So we're talking to our gas suppliers all the time. And I know that we're a big part of that market and they want us to continue to run 3 plants. And we have good alignment on our with our gas suppliers. And we're optimistic we'll continue to see good gas deliveries there. I think the maintenance is something that should be viewed as positive because if people are investing, in these fields, then they're thinking more than the next year for gas supplies. Thank you. Next question is from Chris Shaw from Monness Christie. Please go ahead. Hi, good morning, everyone. How are you doing? Good morning, Chris. Just a quick one. I do see, is there any meaningful impact from tariffs at this point, either on costs or pricing, anything you've taken away? Not in the methanol market. So there's very I don't think there's any methanol that's imported from the United States into China. Certainly there are other end use products that may be affected, but really we, We haven't seen any real impact on methanol demand and supply as a result of tariffs. The tariffs aren't good for Global trade and global growth. We're operating a global business and we're big, big proponents of free trade and a more free the trade, then I think the better the world is off. But, you know, these things happen. There were there's trade disputes between countries and regions and I think long term free trade has proven to be good for everybody. And, but that doesn't mean you're not going to get these, disagreements from time to time like we're seeing now. But we have tremendous flexibility in our supply chain. I guess if you had a view that, you know, Trinidad and New Zealand are going to be a part of a a larger trade war, you know, would would reduce our flexibility, but certainly not our view. Great. Thank you. Thank you. The next question is from John Roberts from UBS. Please go ahead. Thank you, John. Could you talk a little bit about why you haven't been able to attract a partner given the favorable economics that you show on the project? Is it the, again, back to the trade issue maybe, with China or the low NTO economics? Or is it just a disagreement on the methanol outlook? Catch it from getting a partner? No, we've said we want a strategic partner, not a financial partner. So we obviously not going to go out and talk to twenty people at the same time. So we take we took a very targeted approach to that and we were very close to having an arrangement with one party due to the trade war, I just mentioned, that precluded them from making the investment that they wanted to do. So that was the end of last year. So since then, we've been targeting other potential strategic partners and, sharing the economics and now that we've made the FID, each month that goes by and the project gets more and more de risked, then people should be more comfortable, but obviously the buy in price goes up. So in order to not just going to give away a third of the value of an advantage project to, to, to, get a part So there's a negotiation ongoing about the relative, benefits for both parties. So we'll continue to have these discussions and Our preference is to have a strategic partner, but we're not going to give away tons of value to achieve that. So there's a balance here and, that's how we'll go forward. Thank you. Thank you. This was the last question. So I'll return the meeting back over to you. Thank you. The strategic investments we've made in our business over the last few years have strengthened our asset base significantly increased our global production capacity enhanced our ability to serve customers and substantially improved our earnings capability and cash generation potential over a wide range of methanol prices. Our balanced approach to capital allocation remains unchanged. Our priorities are to meet our financial commitments, execute on our growth projects in Louisiana and Chile, and return excess cash to shareholders through dividends and share repurchases. Thank you. The conference has now ended.