Earnings Call: Q2 2021

Jul 29, 2021

Ladies and gentlemen, thank you for standing by. Welcome to the Methanex Corporation Q2 twenty twenty one Earnings Call. I would now like to turn the conference over to Ms. Kim Campbell. Please go ahead, Ms. Campbell. Good morning, everyone. Welcome to our Q2 2021 results conference call. Our 2021 Q2 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 atmethanex.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 Q2 2021 MD and A and to our 2020 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, adjusted 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. These items are non GAAP measures that do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. 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. I would now like to turn the call over to Methanex's President and CEO, Mr. John Florin for his comments and a question and answer period. Thanks, Kim. Good morning, everyone. Today, I'm pleased to discuss our excellent second quarter 2021 financial results. In addition, we will share our view of the methanol markets, review our operational results and discuss our outlook entering the Q3. We'll also make a few remarks regarding our decision to restart construction on our Geismar III project, Our strategic shipping partnership and our priorities around capital allocation, including the recent announcement to increase the quarterly dividend, then we will open up Now turning to our financial results. We increased our average realized price In the Q2 to $3.76 per ton, a $13 increase compared to the Q1. Adjusted EBITDA increased to $262,000,000 in the 2nd quarter, an increase of $20,000,000 compared to the 1st quarter. We also recorded higher adjusted net income of $95,000,000 or $1.24 per share in the 2nd quarter, An increase of $13,000,000 or $0.17 per share compared to the Q1. These results illustrate the significant leverage that our earnings have to Methanol prices. Now turning to the methanol market. Over the last 12 months, methanol prices have rebounded as the global Economic recovery continues and vaccine rollout worldwide. Current methanol industry dynamics are favorable, Supported by strong methanol demand, low global inventory levels, ongoing industry supply challenges and a constructive energy price environment. We estimate that the global demand methanol demand increased by approximately 3% in the Q2 compared to the Q1. We anticipate that global methanol demand will surpass pre pandemic levels later this year. Strong methanol demand combined with ongoing industry supply challenges around the world and the delayed start up of new industry Capacity additions supported higher prices in the 2nd quarter with tight market conditions continuing into the 3rd quarter. We estimate that the industry cost curve set in China has increased to approximately $300 to $3.20 per ton, supported by rising coal and natural gas prices. We recently posted our August prices, which remained at $5.42 per in North America and $4.20 per ton for Asia Pacific. We set our European contract price quarterly and our Q3 posted price €410 or approximately $4.85 per ton. As we mentioned on our call in mid July, over the last few months, We completed a comprehensive review of the medium to long term industry outlook. We reviewed our expectations for demand growth, the Based on that work, we believe that the methanol industry medium term outlook is positive. A new industry supply will be needed to meet growing methanol demand over the next five Now turning to our operational results. Our Q2 2021 production of 1,500,000 tons was lower than the Q1, primarily due to the lower gas availability in New Zealand and Chile. In New Zealand, our production was lower in the second To make natural gas available to support a tight New Zealand electricity market. As a result, we temporarily oiled 1 of our Montney plants for approximately 3 months. We expect the margin from the sale of gas will be offset the margin loss from the lower forecast Production volume of 85,000 tons. We estimate that production in New Zealand for 2021 of 1,400,000 tons. The upstream gas sector is completing several field development projects that could improve gas availability over the coming years. In Geismar, our production in the 2nd quarter was higher than the Q1 as we completed a planned turnaround at our Geismar II facility in the Q1. We finished the debottlenecking project at our Geismar II plant in the Q2 of 2021, following the work completed at our Geismar I plant late in 2020. As a result, our operating capacity for our Geismar facilities is now 2,200,000 tons on an annual basis, An increase of 10%. Completed for our capital costs were approximately $125 per ton for the additional 200,000 tons of capacity. In Trinidad, our production in the Q2 was higher than the Q1 as we received full gas deliveries. Based on current gas deliveries, we estimate that Production in Trinidad for 2021 to be 1,100,000,000 tons, reflecting Methanex's equity interest. In Chile, as expected, our production in the Q2 was lower than the Q1. We typically experienced lower gas deliveries in the Southern Hemisphere winter months Impacting our second and third quarters. We should receive higher gas deliveries in the 4th quarter, and we estimate production in Chile for 1st quarter due to minor technical issues that have been resolved. In Medicine Hat, our production in the 2nd quarter was similar to the 1st quarter As the plant ran at nearly full operating rates. Now turning to our balance sheet. We have a strong financial position with over $750,000,000 cash on our balance sheet at the end of the second quarter. This amount reflects our strong adjusted EBITDA results in the 2nd quarter and The repayment of $173,000,000 drawn on our G3 construction facility. We previously announced a strategic partnership, Shipping partnership with Mitsui OSK Limited or MOL with the proceeds of $145,000,000 expected by the end of 2021. This transaction will not have a material impact on our earnings. Our Waterfront Shipping subsidiary generates revenue from shipping methanol to Methanex Customers and 3rd party backhaul arrangements. As a result of the partnership, MLL will be entitled to a proportional share of Waterfront's Net earnings, which fluctuate based on ship volume and tanker market rates. However, in terms of our financial statements, our ownership Waterfront Shipping now and after this transaction is complete is accounted for on a consolidated basis resulting in 100% of the revenues and We continue to generate meaningful cash flow across a wide range of methanol prices And have an undrawn backup liquidity, including our $600,000,000 G3 construction facility and our $300,000,000 revolving credit facility. Now turning to our Geismar III project. We were pleased to announce that our Board unanimously approved the restart of the construction of our Geismar III project, A unique project with significant capital and operating cost advantages that enhance the project's returns. An abundant low cost natural gas supply in the U. S. Underpins production for this project. In addition, we estimate that G3 will have one of the lowest Generation capability. We believe that Geismar 3 will deliver significant long term value to our shareholders. Our capital cost estimate for the project is $1,250,000,000 to $1,350,000,000 We expect that approximately four $35,000,000 will be committed to the project as we end as of the end of Q3 2021 through the care and maintenance period. We expect approximately $800,000,000 to $900,000,000 remaining capital cost after resuming construction in October 2021. We are confident in our ability to complete this project on time and on budget. We have substantially reduced the project execution risk profile over the last 24 months. We are well positioned from a labor perspective as construction on our project is ahead of other Major capital projects in the region. We have also secured prices for the majority of our bulk material costs. Our remaining budget includes allowances and contingencies for both escalation and the remaining risks on the project. And lastly, turning to our capital allocation priorities. Our capital allocation priorities remain the same. We use the cash that we generate to maintain our business, Pursue value accretive growth opportunities and continue our strong record of returning cash excess cash to shareholders. Going forward, we will increase our emphasis on financial flexibility in 3 ways. We plan to hold more cash, targeting a minimum of $300,000,000 of cash on hand plus our remaining G3 capital costs during construction. We plan to target lower leverage and reduce our debt levels over time to a target of approximately 3 Time's debt to EBITDA at methanol prices between $2.75 to $300 per ton, and we will increase our weighting On flexible vehicles for distributions, such as share buybacks combined with sustainable dividend to return capital to shareholders. We recently announced that we've reset our quarterly dividend to $0.125 per share. We anticipate that we'll have The ability to further delever and increase shareholder distributions such as share buybacks in a few quarters at methanol prices of approximately $3.25 a ton Geismar 3 is the only significant growth capital in our plans over the next few years. We expect that G3 will substantially increase our cash generation capability and support a significant increase in our future shareholder distribution potential. Now turning to the outlook for the Q3. We expect realized methanol prices in the Q3 of 2021 will be similar to the 2nd quarter based on our posted prices so far. We forecasted our 3rd quarter production will be similar to the 2nd quarter. We anticipate our adjusted EBITDA results in the 3rd quarter to be similar to the 2nd quarter. Finally, I want to mention that We published our annual sustainability report. We have publicly reported on our sustainability performance since 1997 And continue to enhance our sustainability and ESG related disclosure to align with evolving best practice and to support greater transparency and comparability. This year, our disclosures align with the Sustainability Accounting Standards Board, or SASB, reporting standards for the chemical and marine transportation sectors. Also, our disclosures reference some aspects of the task force on Climate Related Financial Disclosures, or TCFD, and some requirements of the Global Reporting Initiative or GRI. We will continue to look at ways that we can improve our sustainability performance And the first question is from Steve Hansen from Raymond James. In the past, you've gone through the effort of refurbishing Chile 1 and then starting Chile 4, this is all pre COVID. But just give us a sense for where the gas availability might lie there in the region right now and any plans you might have over time to think about the 2 plant operation. I understand that COVID required some reshuffling of the production asset profile, but just getting a sense for now that we're in recovery mode here, where you think about Yes, the gas profile in Argentina has improved a lot in the last 12 months. We're running our plant Right now on Chile Gas and that profile has also improved in the last 12 months. So our expectation, Steve, today is by The 3rd late Q3, early Q4 that we'll be running both plants in Chile. Okay, great. That's That's very helpful. And just can you clarify, I missed the number, but the metric that you cited on the cost per ton to complete the G1, G2 debottlenecking? And just now that those two projects are now complete, any other debottlenecking projects that you might be contemplating across the portfolio? Thanks. Yes. We're always looking to get more nuts and all out of our existing kits. So we're always have lots of ideas that we look at and execute if they So we are continuing to look for other debottlenecking opportunities, but nothing to report today, Steve. The cost for completing the $200,000 additional debottleneck in Geismar was $125 per ton. The next question is from Ben Isaacson from Scotiabank. Thank you very much. First question is, given the changing operating rates in your portfolio over the past year or so, can you update us as To what percentage of your sales go into each of the 3 or 4 major methanol markets depending on whether you break China out of Asia or not? And based on the review that you conducted of the methanol market to restart G3, do you see G3 impacting your regional sales allocation in the future, how do you see that changing? Yes. So we've earmarked 100% of G III to go to Asia In the modeling that we've done for the economics and the IRR calculations that we've shared, so that hasn't changed. So if we're able to do better than that and place I'm in the Atlantic Basin. Obviously, that makes the economics even more attractive than what we've already published, really attractive economics. We don't disclose, Ben, where our product goes around the world. It's a very fluid supply chain and we move product To optimize our netbacks as well as to take advantage of certain spot In situations that may arise in different parts of the world and to balance out our supply chain and inventory. So we don't really disclose what product goes where. Thank you. And my follow-up is, can you just talk about how the freight market is impacting the company? Maybe discuss the magnitude of freight rates versus normal? Who's bearing additional costs? Is it Methanex? Or is it built into prices? And I guess, you being an active shipper and an owner of Waterfront, do you have an outlook In terms of how freight rates will evolve? Well, we wish they were a lot higher. I mean, despite what we're seeing in container markets and dry bulk, Liquid tankers for chemicals are still not that great, below what I'd call average prices. So we'd like to see higher prices Because obviously, we make more money with higher prices, and we think we have a competitive advantage on our shipping. So There seems to be still lots of tanker capacity in the world, and we're not seeing the same thing that the world is seeing on drybulk and containers. Great. Thank you. Thank you. The next question is from John Roberts from UBS. Please go ahead. Your line is now open. Thank you. LyondellBasell had an unfortunate incident With their acetic acid plant, is that methanol unit running? Do you know? And will that come into the Merchant market here until they can get the acetic acid plant back up again. Yes, I don't have any more information about that than what's been reported in the press, and I haven't seen anything reported regarding operations. My understanding based on what I've read, They were in planned turnaround for the acetic acid unit. So it was a plan they were just starting the turnaround is what I understand, And that's why the contractors were entering the unit. I don't know any more than that, John. Okay. Yes, I agree. It's a really tragic event, I think it really illustrates all the attention that we put on safety and process safety, and you can never take your eye off the ball because There was another event in Germany this week as well in Leiperkosen where 2 other people were killed. So, really tragic events. And then, since you just updated your longer term industry outlook, what did you assume longer term for your gas constrained plants? Did you do you assume An eventual restart at Titan or an eventual restart at Huaterra Valley in the longer term outlook or How long do you wait before you think about other options for the equipment that's there? Yes, we're optimistic that over time we'll get those plants So restarted, we put a little bit in our 5 year outlook, but certainly not full rates for those two sites. The next question is from Joel Jackson from BMO Capital Markets. Please go ahead. Your line is now open. Hi, good morning, John. Good morning, Joe. A couple of questions. I'll go 1 by 1. John, thanks for giving the guidance for Q3. It looks like you're guiding to a 19% discount rate again in the 3rd quarter, So 3rd quarter in a row of that. Is it fair to say that based on your contracts and what's going on here that we should be modeling as a placeholder now 19% discount rate, not 17%. Last quarter, you had said that the 19% discount rate, a little bit higher than 17, Was it because of some weak Chinese spot prices? Chinese spot prices rose a fair bit in the 3rd quarter. Can you help us reconcile all this? Yes. So I'm not changing my guidance, Joel, on the discount rate at this time. If we think it's a permanent structural change, we'll certainly change the guidance. So I'm comfortable On 17, I would look at the overall net netback price. That's what we look at. Dollars 3.75 for the quarter was an excellent quarter and Generated over $1,000,000,000 run rate. So we're very happy with the realized price in the quarter, and we're expecting strong pricing to continue In the second half of this year. Thank you for that. So my other question is, obviously, different investors want different things. You know that being in this role for a long time. And you've laid out and thank you for this a couple of weeks ago what your strategy is will be around buybacks. You want to make sure on your balance sheet you have Your cash buffer, I think you said $300,000,000 and then you won't have enough cash on the balance sheet built up to finish Q3. So one other question for you is looking at what the share price is doing, there's a clear valuation disconnect, I think, between the stock price And where your earnings and free cash flow power are, where commodity price levels are, typically the finance book says you should be doing share buybacks, Right. You should be going to market buying your stock and reducing that disconnect. You have G3. It makes sense why you're doing it. But does this all make you think about maybe changing some of your thoughts that maybe you should take on a bit more risk and buy back stock a bit earlier before having all the cash for G3 on the balance sheet. Yes. So our financial strategy has not changed. I mean, we fine tuned it, as you pointed out a couple of weeks ago. But uses for cash that's generated from the business are to maintain the business, grow the business with value accretive projects like G3 and then return excess cash to shareholders. The slight tweak is to Have a little bit less on a fixed return to shareholders. So we reset the dividend at 12.5 and had more flexibility to return cash in a flexible way to shareholders. So at $3.25 per ton and higher of methanol realized prices, we think in a few quarters as we De lever a little bit and increase a little bit of cash on the balance sheet for G III that will be able to enter into a share buyback. But our policy of Borrowing money is not to buy back shares. So any cat money that we borrow is for The project G3. And I'll remind you, we did change our strategy there during COVID where our plan was to use the construction loan And to draw on it as we continued on the project and with COVID, we decided to and then replace that sort of construction loan with bonds over time. And we decided to because the markets were open last September to just go out and get all the bonds at that time. So that's why we have Quite a bit of cash on our balance sheet, but it's allocated for G3, and we're not going to use it to buy back shares. Thank you. The next question is from Eric Petrie from Citi. Please go ahead. Your line is now open. Hey, good morning, John. Methanex's posted methanol price spread Between Asia and North America is kind of at a record of roughly $100 a ton. So how do you think about it? Is it sustainable? And going forward, How do you see that level trending? Yes. We've said for a number of years, despite lots of analysts writing to the contrary, that we think the basin balance And price differentials will continue and they are higher than we would have even assumed and that's based Production issues in the Atlantic Basin. So, how long this record, I don't know if it's a record, but it is On the higher end of the differential goes, it really depends on what we and our competitors do with product that we're producing in the Atlantic Basin. I can't predict what our competitors are going to do. We know what we're going to do, and we would expect that the basin differentials to continue, Maybe not at their current levels, but they will continue. Okay, helpful. And then my follow-up question, You mentioned higher China coal prices and natural gas prices. I think coal was trading around RMB 1,000 per metric ton, Double that from recent lows. So how do you see prices of coal going forward in the cost curve Evolving into 2022. Yes, there's coal remains quite we understand not readily available in China. They're Consuming a lot for our generation. So if economic activity continues, we would expect coal to continue to be Price higher than what we were thinking. There's 2 markets in China for coal, just remember. There's the power generation market, which really set by the government and that's not anywhere near 1,000 RMD per ton. And then there's the spot market or the other traded market, which chemicals and others get their call and the reason it's 1,000 is because of supply demand fundamentals. You're right to find out gas has really shot up not only in North America, it's almost close to $4 in MMBtu now, but in Europe, it's at $12 and nobody was predicting that a year ago, and that's really impacted methanol production in Europe. There's 2 plants in Holland. 1 is shut down and the other one is operating at minimal rates because of the high gas prices. And It's hard to see at this point that those gas prices coming down in the near future based On the inventories that we see in the United States, but these things have a way of changing quickly and nobody predicted $12 gas, but I think it's a function of a couple of years of $150 gas with no investments. I always say the cure for high prices is high prices and the cure for low prices is low prices, and that's what we see in commodities. The next question is from Hassan Ahmad from Alembic Global Advisors, please go ahead. Your line is now open. Good morning, John. Good morning. John, a question on demand. You mentioned Sequentially, global demand was up according to your estimates by, I believe, 3%. And if I remember correctly, sequentially in Q1, Demand was down. So, the question is, what are you guys seeing or what are you forecasting in terms of Demand growth for the remainder of the year. And I guess, where I'm going with this question is that, again and again, you mentioned Over the last couple of months, inventory is being lean, people sort of backfilling sort of orders, Probably a function of winter storm Yuri as well. So just trying to get a sense of where you feel underlying demand is and could we even Like I said in my remarks, we expect To get back to pre pandemic levels later this year, so that is increased demand. In Q3, there are some MTO plants that are taking some planned maintenance. The MTO industry has been operating at really high rates for a couple of years. In Q2, they operated at 92%, which is above our even estimates. So we expect to have them to have some maintenance, which could impact demand, but we expect demand to continue to grow through the second half of this year. A couple of applications that are still lagging are the fuel applications, MTBE, biodiesel, those kinds of applications because we're still not seeing globally a return to normal driving habits Because of the pandemic, so we expect those to improve as we get back to more normal habits as People are vaccinated and the pandemic is brought under somewhat of a control. Understood. And the other side of the equation, on the supply side, obviously, a healthy Pricing environment and pricing continues to tick up. Obviously, you guys announced the restart of or work on Geismar But what are you guys seeing broadly speaking in terms of the broader industry supply response? And are you seeing any sort of project delays or maybe even people sort of ratcheting up Their plans in terms of bringing online new supply? Yes. I think having the price environment that we just come through for Almost 2 years, a lot of projects that were being thought about were shelved or canceled altogether. We expect the coke plant to run at some point. No, we understand that they ran for a bit in July, but they will get lined up and run at some point during this year is our current expectation. Beyond that, we have a bit of supply coming on in Iran. How it runs is anybody's guess. Certainly, the track record has not been great. And then China will add a bit of capacity in the Inner Mongolia, backward integrate a couple of MTO plants and some other plants will come out as More and more restrictions on the East Coast of China. So net net, we're not expecting much new supply beyond what's coming in From Coke and Iran over the coming 3 to 5 years. Understood. Very helpful, John. Thanks so much. Thank you. The next question is from Nelson Ng from RBC Capital Markets. Great. Thanks. Good morning, John. Good morning. Just a quick question for you. So you mentioned earlier that you were optimistic on Gas availability in the various regions going forward. In New Zealand, in particular, I think gas production has been pretty low this year. Do you have any color on production levels going forward in terms of like production issues, drilling activity And whether current prices are like incentivizing more exploration? Yes. I'll remind you, the gas in New Zealand is very wet gas. So there are lots of barrels of liquids with an oil price of 70 that really helps the economics and they're really going after the liquids. So The higher energy complex in general is positive for our business, and that's one of the reasons it incentivizes more exploration and development. Yes. The situation in New Zealand really was the Pokhara field failed and lost 30% of its production late last year, and Nobody is expecting that, and that's caused the gas market to tighten up quite substantially. The current situation in their winter, as They had a lack of rainfall, which is leading to lower than expected hydro power. It's rained again in New Zealand, so that situation is behind us now. And there's drilling going on. I think that's the positive thing for us is that the upstream owners of the field, Maui and Ocarora, Our drilling and planning to drill more. So we'll know a little bit more in the next 12 months the results of those drilling. And Like I said, we're certainly contracted for 2 plants for the end of the decade. We're optimistic the drilling will be successful, and we'll see The 3rd plant have a reasonable opportunity to start up as well. This is not new in New Zealand. We've seen this before, and They pretty well developed the reserves as the country needs them. So yes, we're optimistic, but really, I think we'd be modeling a 2 plant operation The next question is from Laurence Alexander from Jefferies. Hi there. Could you give an update on what line of sight you have to the amount of Global shipping capacity that is ordered or under construction that would use methanol as a flex fuel and what that could mean for methanol demand over the next 4, 5 years. And similarly, what you're seeing in the Chinese industrial boiler market development? Yes. So we have 8 of our own ships on order. Proman, our competitor out of TunerNet has 6 And Mayersk has 1. That puts on order at this time, but lots of other interest. So Takes about 2 years to build the ship, Morris. So I don't know how many more orders are going to be placed in the next few years, but we would expect more. Each ship around a 50,000 deadweight vessel running on methanol, 100% of the time would consume between 10000,012,000 tons. So you Good. Do the math there. As far as boilers, yes, we continue to see that market replacing coal, but there's other potentials natural gas as well and diesel. So that market continues to be a couple of 1,000,000 to 3,000,000,000 tons of methanol demand, and we would expect And so forth, what the kind of level of pent up demand is? I mean, downstream companies are talking about having lost 1% to 2 Yes, I'd be guessing, Lawrence, and I probably don't have a good guess, but I would agree with the assumptions that are pent up demand. Yes, thanks. The next question is from Matthew Blair from Tudor, Pickering, Holt. Good morning, John. It looks like Trinidad natural gas production is down about 21% Year to date versus same period last year, you raised your Trinidad volume guidance pretty meaningfully. So is that just good work from your procurement team or is there anything else going on there? We've been being supplied 100% of our gas Allocation for Atlas for most of the year and that's what we've been told to expect for the balance of the year and that's the guidance we provided. Great. Sounds good. And then on our modeling, your implied costs seem to drift up a little bit in Q2. Would you agree and were there any factors that you can point to? And then as we look at Q3, and just thinking about The higher net gas environment in the U. S, I know you're hedged, but could you talk about whether this would be something we should be thinking about for Q3 modeling? Yes, nothing abnormal in our cost structure. Quarter to quarter, there could be a few things here or there, but nothing really. Our cost structure is actually quite a bit lower than it was last year as we've taken a lot of steps to reduce it. And as far as yes, you're right, we hedged About 70% of our requirements for G1 and G2. So we're exposed about 30% to the spot market. So depending on what Price you're using for Q3 versus what you're having your model, it would impact us by about 30% of our gas Thank you. The next question is from Roland Roesch from Crown Extra Investments. Please go ahead. Your line is now open. Hey, good morning, Sean. How are you? Good morning. Good. Thanks. Well, congratulations on another good quarter. I would like to ask a 2 pronged question around liquidity and capital returns, also coming back to one of your comments previously around there is quite a bit of cash on your balance sheet. So if I run the updated numbers, I see that company has paid down $200,000,000 in debt so far this year. It's over $750,000,000 in cash. If I pro form a the shipping transaction, That's around $900,000,000 in cash, plus there's a $900,000,000 in lines of credits with the $300,000,000 undrawn RCF and the $600,000,000 So that gets you to a total of $1,800,000,000 of liquidity. And then you just guided for another Q3 in line. So I assume we are looking at $2,000,000,000 in cash and lines of credits by the end of September versus a total G3 that's only kicking in next So why do you and your Board do not think the shareholders deserve a large dividend For a clear share buyback program, and I want to come back to one comment you made on your recent announcement on the call where At what prices you would start buyback the shares? Obviously, we're on year to date lows. So do you consider the current share price level as attractive to buy back shares? Thank you. Yes, it's attractive to buy back shares at the current price level. I would agree with that. We stated pretty clearly our financial strategy around what we want to do with our balance sheet and returning cash To shareholders, that hasn't changed. So we want to maintain $300,000,000 of cash plus The additional whatever G3 spend is left on the balance sheet, once we've achieved that, we will start to return more cash to shareholders flexibly like we've described, and that would include buybacks. We reset the dividend and fixed dividend of $0.125 and our plan hasn't changed. We'll grow the company and we've over the last 10 years grown the company Endell is spending about $3,000,000,000 and we've returned over $2,000,000,000 to shareholders in the same period through dividends and buybacks. So our balanced approach is the same. Right now, we're having cash generation going towards G3 project in addition to what's on our balance sheet. And once that is achieved, then we will look to return cash to shareholders. So nothing has really changed. Question is from Cherilyn Radbourne from TD Securities. Please go ahead. Your line is now open. Thanks very much and good morning. In terms of the outlook for methanol supply, I was hoping you could give some perspective And what you think the current environment is like to contemplate a new methanol plant as far as being able to lock in a fixed cost with an E and C partner in light of inflationary Sure. And what sort of price deck financial institutions might be prepared to lend on? Yes, it's a good question. Obviously, that's If we're assuming Greenfield, there's 2 projects that have been recently completed there's public information around, And that's the coke methanol plant that's in the process of starting up and the OCI Nat Gasoline plant. Both of them are around 1,700,000 to 1,800,000 tons, give or take, and they were well north of $2,000,000,000 to complete based on public information that we saw. So if you use those numbers, that's public, that's over $1100 a ton. And assuming gas pricing in the $3,000,000 to $3.50 range And a double digit return of around 10% to 11%, you would need $400 methanol to get or higher to get that return. We certainly like and we love $400 methanol for 20 years to get a payback on a project like that, but We've seen quite a bit of volatility in the last 12 years in our commodity, and I think that would if I'm a bank looking to lend money to a potential project With those kinds of returns and what you're seeing on methanol price, it seems in the hard to do category. But Having said that, there's lots of seems to be lots of money out there trying to find a home. So we'll see what happens. But those are the kind of the numbers, Sheryl. And then second one is, just could you speak to the company's confidence in the view that MTO demand for methanol will be stable over the coming 5 years? Yes. Well, I guess we can only look at what has happened in that industry and what's It's been going on in a high price and low price environment. So, the industry started up 4, 5 years ago. That was what we call the 1st wave, which is just about being completed now. There's a couple more plants that one is close to completion and one will probably get in the next couple of years. That's what we call the 1st wave. And as the 1st wave was being commissioned, there was a second wave. And Certainly, with oil prices in the $40 range and naphtha in the $400 range, it made more sense to look to naphtha crackers than to MTO plants. So, We never expected a second wave and we're not anticipating. So what we think will happen is what's there will run. We have 85% to 90% operating rates. And I think we can only go on to history. When we had 400 plus methanol pricing in 2018, they all ran in high rates. When we had a low olefin cycle last year because of COVID, They ran at high rates and they continue to run at high rates. So it's something we watch very closely because it is a big demand driver for methanol. And Like most things, it's hard to predict the future. But based on what we've seen today, we would expect that 85% to 90% operating rate. The next Question is from Chris Shaw from Monness Crespi. If one were to take a really pessimistic view on, I guess, global gas availability going forward Outside of, say, your Medicine Hat, Geismar, what can you remind me what both the Potential for moving any of your other plants, a la the first two Geismar plants or To another site, and it doesn't have to be, I guess, Geismar specifically, but not only the potential, but I guess the economics and I mean, is that a possibility at all on any of those plants in the future? I would say very unlikely. When we looked at the kit That we have in the other locations, the way it was built, the way it's installed, pretty expensive to move. We had a unique opportunity. We had 2 twin plants in Chile and the way they were built, we could lift them up and move them, but I think that was unique to Chile 1 sorry, to Chile 2 and 3, which are now Geismar 1 and 2. But we look at things all the time, but right now our focus is to get those plants running and where they are. And we're not giving up any hope yet that we won't be able to achieve gas contracts to allow us to run all of our kits Over time. So we've seen this in the history of our company. I mean, we didn't have any production in North America for the longest time, and We're going to have $4,500,000 here pretty soon, dollars 4,700,000 I guess with the debottlenecking. So yes, our focus is trying to get those plants And then just a reminder, do you know I could probably have done the math, but not off the top of my head. But the your cost per ton for Geismar 3 relative to what it would be for the when you say Geismar 2, When you move that, is it similar or is one lower? No, about the same. We've got it to a bit lower, but not significantly. And that's modeling it. Going to Asia, as you mentioned, because the gas efficiency on the Geismar III plant It's much superior to Geismar 1 and 2. Got it. Thanks a lot. And the last question is from Steve Hansen from Raymond James. Hey, John, just one quick follow-up, if I may. How do you feel about your human resources capabilities across The existing operating complex today, it strikes me that everywhere we look, we're hearing about strained labor resources, both skilled And unskilled. I'm not so focused on the G3, but just on your existing operating complex today. Are you well positioned right now? Are you looking for people? How should we think about that and whether you're well positioned going forward here? Yes. One of the benefits that we've enjoyed in our company is a low turnover rate. I mean, if you compare our turnover rate on average to the in-depth industry, not just ethanol, but chemicals and other Yes, just for applications like that, we were very low. So we're that doesn't mean we don't have turnover and retirements are So, I don't have any concern today that we're at risk of not being able to run our plants efficiently because of labor, but it's something we talk about all the time. So things like diversity, inclusion are really important to our company and To really expand our labor potential where we can look for new team members is really, really important, and Each region is a little unique. In Trinidad, we have all kinds of labor today because of what's happened on that island. In Egypt, we're employer of choice. And Certainly, I'm not concerned in the short term, but it's something we think about all the time and we want to make sure that we're a great place to work. We pay good wages and that we have people stay for a long, long time and we're not planning on changing that strategy and philosophy. Financial results with you today. We continue to generate meaningful cash flow across a wide range of methanol prices. Our capital allocation priorities remain the same. We use the cash that we generate to maintain our business, pursue value accretive growth opportunities and continue our strong track record of returning excess cash to shareholders. Thank you for joining us today and we will speak with Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.