Greetings, and welcome to the CVR Partners LP First Quarter 2023 Conference Call. At this time, all participants are on a listen-only mode. A brief Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Richard Roberts, Vice President of FP&A and Investor Relations. Thank you, Richard. You may begin.
Thank you, Paul. Good morning, everyone. We appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer, Dane Neumann, our Chief Financial Officer, and other members of management. Prior to discussing our 2023 1st quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. You're cautioned that these statements may be affected by important factors set forth in our filing for the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures. Disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2023 first quarter earnings release that we filed with the SEC for the period. Let me also remind you that we are a variable distribution MLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs, and may reserve amounts for other future cash needs as determined by our general partner's board.
As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including, but not limited to, operating performance, fluctuations in the prices received for finished products, capital expenditures, and cash reserves deemed necessary or appropriate by the board of directors of our general partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer. Mark?
Thank you, Richard. Good morning, everybody, and thanks for joining our call today. The summarized financial highlights for the first quarter of 2023 include net sales of $226 million, net income of $102 million, EBITDA of $124 million, and the board of directors declared a first quarter distribution of $10.43 per common unit, which will be paid on May 22nd to unitholders of record at the close of the market on May 15th. Our facilities ran well during the first quarter of 2023, with the combined plants achieving record production levels in the quarter. Consolidated ammonia plant utilization was 105%.
This resulted in combined ammonia production at 224,000 gross tons, of which 62,000 net tons were available for sale, and UAN production of 366,000 tons. During the quarter, we sold approximately 359,000 tons of UAN at an average price of $457 per ton and approximately 42,000 tons of ammonia at an average price of $888 per ton. Relative to the first quarter of 2022, UAN and ammonia sales volumes were higher as a result of improved operations following the completion of the plant turnarounds at both facilities in the third quarter of 2022. Prices for the first quarter declined from the first quarter of last year, with ammonia prices falling 16% and UAN prices falling 8%.
Although first quarter benchmark prices for Corn Belt ammonia and UAN declined by approximately 30% from the fourth quarter, our realized price for UAN increased QoQ and our realized ammonia price was down less than 10% as we sold more than half of our first quarter production in the fourth quarter of 2022 before prices began to decline. Looking ahead, we continue to expect healthy demand for fertilizer in the spring planting season due to strong grain prices and farmer economics, which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results.
Thank you, Mark. For the first quarter of 2023, we reported net sales of $226 million and operating income of $109 million. Net income for the quarter was $102 million or $9.64 per common unit, and EBITDA was $124 million. Relative to the first quarter of 2022, the slight increase in EBITDA was primarily due to higher production in sales volumes and lower operating and SG&A expenses offsetting the decline in prices. Direct operating expenses for the first quarter of 2023 were $58 million.
Excluding inventory impacts, direct operating expenses decreased by approximately $1 million relative to the first quarter of 2022, primarily driven by lower personnel costs related to stock-based compensation, partially offset by higher electricity and natural gas costs and increased repair and maintenance expenses in the current period. During the first quarter of 2023, we spent $4 million on capital projects, which was primarily maintenance capital. We estimate total capital spending for 2023 to be approximately $32 million-$35 million, of which $29 million-$31 million is expected to be maintenance capital. We ended the quarter with total liquidity of $156 million, which consisted of $121 million in cash and availability under the ABL facility of $35 million.
Within our cash balance of $121 million, we had approximately $39 million related to customer prepayments for the future delivery of product. In assessing our cash available for distribution, we generated EBITDA of $124 million and received net cash proceeds of $18 million from the closing of the 45Q transaction in January. The board elected to begin reserving cash for future turnarounds of $3 million, in addition to reserves of $16 million for planned capital projects that Mark will discuss further in his closing remarks. We currently anticipate future quarterly reserves for these projects, subject to further approvals. We also had net cash needs of $13 million for interest costs, maintenance CapEx, other reserves.
A result, there was $110 million of cash available for distribution, and the board of directors of our general partner declared a distribution of $10.43 per common unit. Looking ahead to the second quarter of 2023, we estimate our ammonia utilization rate to be between 95%-100%. We expect direct operating expenses, excluding inventory impacts, to be between $50 million-$55 million, and total capital spending to be between $7 million-$12 million. With that, I will turn the call back over to Mark.
Thanks, Dane. In summary, we were very pleased with our first quarter results, driven by record production from our facilities with a combined ammonia utilization rate of 105%. We also executed well on our marketing plan from last fall, where we forward sold a significant portion of our first quarter production in advance of softening prices. Spring pre-plant season is off to a good start, where we saw activity levels pick up in the Southern Plains in late March in the Corn Belt in April. Overall, activity levels seem consistent with the USDA estimates of spring 2023 planted corn acres of 92 million, compared to 88.6 million acres in 2022, an increase of 4%. Planted soybean acres are estimated to be flat with 2022 levels at 87.5 million acres.
Inventory carry-out levels continue to be estimated at approximately 9% for corn and 5% for soybeans, keeping inventories at or below the low end of the 10-year range. As a result, grain prices have remained strong, with corn at $5.85 per bushel and soybeans at $14.30 per bushel. These strong grain prices are continuing to generate attractive farmer economics, which should bode well for nitrogen fertilizer demand for the planting season. We believe that the length of this upward demand cycle will in large part be driven by grain prices staying at elevated levels, and we see fundamentals for grains remaining strong. As we discussed on the fourth quarter earnings call, warmer than expected weather in Europe and the U.S. starting in December has led to increased natural gas inventories and lower prices in the U.S. and Europe.
As a result, spot prices for all nitrogen fertilizer products have fallen from the high levels in the fall. With sustained lower natural gas prices in Europe in the first quarter, we have seen some of the offline European nitrogen production capacity come back online. Recent estimates indicate European nitrogen production operating at around 80% of capacity, up from 60% in the fall of 2022. Natural gas market dynamics have driven nitrogen fertilizer prices to largely be set by the marginal price of European natural gas for production input cost plus logistical cost. While prices of nitrogen fertilizer in the US have fallen since the winter, natural gas prices have also fallen into the area of $2.20 per MMBtu, setting US nitrogen fertilizer production costs at the low end of the global cost curve.
While the extreme pressure on natural gas inventories has subsided for now, we do not believe that the structural market issues in Europe have been resolved and should remain in effect over the next two to three years. We believe there is likely more upside than downside to European natural gas prices from here. On our decarbonization efforts, we've been studying the potential installation of a nitrous oxide abatement unit in our number one acid plant at the Coffeyville facility and have set aside a capital reserve this quarter for the expected cost of the installation. We expect the project to be completed by 2025, and it should further reduce our carbon footprint at the Coffeyville facility, which we believe already has one of the lowest carbon footprints of any nitrogen fertilizer plant in the U.S.
We reserved $5 million of the 45Q proceeds we received in January to fund this additional decarbonization project, in essence, leveraging our previous decarbonization proceeds to fund the next step. We also continue to explore various CO2 sequestration opportunities for our East Dubuque facility, which, if approved, could reduce its carbon footprint over the next several years. We already have installed nitrous oxide abatement units in both of East Dubuque's nitric acid plants. We recover a portion of our CO2 stream to make food-grade CO2. We are proud of our efforts to reduce the carbon footprint at the Coffeyville facility. We're focused on opportunities to further reduce the carbon footprint at East Dubuque. Over the past year, we've been evaluating brownfield development projects at both of our production facilities that could be attractive targeted capacity increases to our existing footprint.
As a result of this review, we've identified several projects that, even without a full expansion project, could improve the facility's reliability and production levels. Our board approved an initial reserves this quarter expected to be spent over the next two-three years to progress these potential projects. We are also exploring a potential project at the Coffeyville facility intended to improve pet coke handling and storage. This project, if approved, would address a key environmental issue at the facility through reduced truck loading and unloading and better storage containment. The board also approved initial reserves for this project this quarter, and we anticipate future quarterly reserves as we further develop these projects. The first quarter demonstrated the benefits of focusing on reliability and performance.
In the quarter, we executed on all of the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors, and communities, prudently managing costs being judicious with capital, but targeting select investments in reliability projects and incremental additions to production capacity, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint. In closing, I'd like to thank our employees for their excellent execution, achieving record plant production and solid delivery on our marketing and logistics plans, resulting in a distribution of $10.43 per common unit in the first quarter. With that, we're ready to take questions. Paul?
Thank you. We'll now be conducting a Q&A session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Thank you. Our first question is from Rob McGuire with Granite Research. Please proceed with your question.
Good morning, Mark, Dane, and Richard. Congratulations on a well-executed quarter.
Thank you. Good morning, Rob.
Would you give us an idea of how much of your second quarter volumes are pre-sold and how much are set up to be sold in spot?
I really don't want to get into the analytics of that. Like we did in the first quarter, we have pre-sold I'd say a good chunk of the second quarter, particularly in the ammonia side, which is typical for this you know, for the industry. We sold that back in the fourth quarter, a good percentage of the ammonia pre-plant. We were forward selling into the second quarter during the first quarter. We also pre-sold a decent percentage in the second quarter.
Thank you. Can you discuss running at 105% utilization coming out of your turnaround? Is that normal or is there something unusual that occurred? How much longer do you anticipate that run rate to continue?
You know, we talked about it a lot last year. We struggled with some of the performance issues last year with the plants. We had identified what we thought were reliability challenges for us. We thought we had addressed those in the turnaround. You know, we were very pleased to see the run rates that we had. You know, I won't promise 105% for the forward quarters, but, you know, we feel like we've addressed some of the reliability issues. You know, our target is to operate at 95%-100% of nameplate.
You know, as we're already thinking ahead to the next reliability, sets of reliability projects, which I identified in my comments, we think reliability is everything in on the production side of this business. We got paid for the effort that we put in, and we're basically preparing for the next, you know, round of that for the next two to three years. You know, I hope that we can run at high rates. We have in the past at various points in time. Again, we had big turnarounds last year, a long stretch of outages, and we dealt with the issues that we thought, but we have other opportunities, we think, at the plant to improve. So, I'm hoping that we'll continue on.
We typically run better after the turnaround, you know, once the plants are lined out. Again, our focus has been for the last, you know, several years, but will continue to be, if anything, you know, more focused on reliability.
Well done. you talked about European natural gas and some of the production returning over in Europe, and that's led to lower nitrogen prices. Have you seen any other notable influences behind the continued drop in nitrogen prices?
I would say that, probably the one area that we have seen, in terms of, I think causing some of the softness is maybe some of the industrial demand for ammonia overseas has been lighter, and that's created length in the ammonia side. If you look at the going back to European natural gas, if you look at the forward curve for the fourth quarter, you know, as we get into the next winter, prices are much higher there. We think that a window may open like it did last fall for export, from the US to Europe again in the summer and the fall, because we think that the economics for European production are gonna be challenged next winter.
What most of the European producers are saying is that they will only restart if they think they have economics that hold together for a year. If you look at the gas curve, you know, I think you'd be challenged to assume that you're gonna be able to make it a year where you're gonna be cost competitive. We, we do think that there's, there are opportunities for export out of the Gulf to Europe for ammonia for, you know, either for upgrade production in Europe starting, you know, maybe this summer or fall. The good news for us in the U.S. is that our cost to produce is the lowest. You know, we're right at the low end of the cost curve in the world. There at these prices, there's still very good margin for us.
You know, with where natural gas has come way down from where it was, but it's still, you know, the pricing and the marketplace is still much higher than it's been historically in the nitrogen for the last five years or seven years.
I appreciate it. Then last question, if you can just give me your thoughts on, urea has obviously bounced back here, and there are logistical issues out there. Perhaps you could cite if there are other reasons behind that, and do you anticipate any type of price movement for UAN and ammonia due to logistical issues or finishing out the season and trying to get product out to the farmer?
Yeah, I think that, you know, we're seeing a pretty good, the pre-plant, you know, we think that sidedress and topdress season are gonna be really strong for nitrogen. I think that our customers and even down to the farm level have been more reluctant. They're purchasing more just in time, which is hard to imagine just in time purchasing in this industry, given the logistical challenges which the flooding in the Mississippi shows you know, it's not a good bet to bet on reliable logistics. I think that part of it, for urea, is a demand issue. Part of it are logistics. We think that the upper Midwest is gonna be challenged logistically, which favors producers that have production capacity in the north.
We expect demand to be strong in the northern plains because there won't be the ability to get product up the river, we think in time to meet sidedress and topdress. I think it's a confluence of factors there and, you know, this industry has a history of when you try to purchase just in time, a lot of times you end up short. You don't purchase enough, and there's not, you can't quickly relieve market pressure in the spring when it's needed. The timing of it is critical, you need the fertilizer at the right time in the right location.
It needs a lot of pre-planning, and this year I think people tried to play it a little bit too cute with, the customers did with when they purchased.
Thank you so much.
Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.
All right. Well, thank you very much for participating in the call today. We look forward to reviewing our second quarter results in later in July. Thank you very much.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.