Terra Nitrogen Company, L.P. Reports Second Quarter 2017 Results

August 3, 2017

www.cfindustries.com.

TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED BALANCE SHEETS

	(unaudited)
	June 30,		December 31,
	2017		2016
	(in millions, except for units)
ASSETS
Current assets:
Cash and cash equivalents	$	67.1	$	39.5
Due from affiliates of the General Partner	12.9		4.0
Accounts receivable	0.4		0.6
Inventories	11.4		8.6
Prepaid expenses and other current assets	0.5		7.9
Total current assets	92.3		60.6
Property, plant and equipment—net	297.5		301.3
Other assets	10.0		11.4
Total assets	$	399.8	$	373.3
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses	$	19.7	$	27.8
Due to affiliates of the General Partner	3.0		4.1
Other current liabilities	2.5		—
Total current liabilities	25.2		31.9
Other liabilities	2.2		2.6
Partners' capital:
Limited partners' interests, 18,501,576 common units authorized, issued and outstanding	312.4		286.7
Limited partners' interests, 184,072 Class B common units authorized, issued and outstanding	2.1		1.8
General partner's interest	57.9		50.3
Total partners' capital	372.4		338.8
Total liabilities and partners' capital	$	399.8	$	373.3

TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2017		2016		2017		2016
	(in millions, except per unit amounts)
Net sales:
Product sales to affiliates of the General Partner	$	95.9	$	126.5	$	214.8	$	234.4
Other income from an affiliate of the General Partner	0.2		0.2		0.3		0.3
Total	96.1		126.7		215.1		234.7
Cost of goods sold:
Materials, supplies and services	45.8		17.1		111.2		74.8
Services provided by affiliates of the General Partner	6.8		6.9		13.8		14.1
Gross margin	43.5		102.7		90.1		145.8
Selling, general and administrative services provided by affiliates of the General Partner	4.0		3.9		7.9		7.8
Other general and administrative expenses	0.1		0.2		0.6		1.7
Earnings from operations	39.4		98.6		81.6		136.3
Interest income	0.1		0.1		0.1		0.1
Net earnings	$	39.5	$	98.7	$	81.7	$	136.4
Allocation of net earnings:
General Partner	$	11.7	$	38.1	$	14.7	$	48.7
Class B common units	0.4		0.9		0.8		1.3
Common units	27.4		59.7		66.2		86.4
Net earnings	$	39.5	$	98.7	$	81.7	$	136.4
Net earnings per common unit	$	1.48	$	3.22	$	3.58	$	4.66

TERRA NITROGEN COMPANY, L.P.
SUMMARIZED OPERATING INFORMATION
(unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2017		2016		2017		2016
Sales volume (tons in thousands):
Ammonia	112		112		239		203
UAN⁽¹⁾	407		454		939		816

Average selling prices (dollars per ton):
Ammonia	$	303	$	371	$	294	$	372
UAN⁽¹⁾	152		187		$	154	$	194

Cost of natural gas (dollars per MMBtu):
Purchased natural gas costs⁽²⁾	$	2.77	$	1.74	$	2.92	$	1.85
Realized derivatives loss⁽³⁾	0.04		0.70		—		0.78
Cost of natural gas	$	2.81	$	2.44	$	2.92	$	2.63

_________________________________________________

⁽¹⁾		The nitrogen content of UAN is 32% by weight.
⁽²⁾		Represents the cost of natural gas purchased during the period for use in production.
⁽³⁾		Represents realized gains and losses on natural gas derivatives settled during the period. Excludes unrealized mark-to-market gains and losses on natural gas derivatives.

Contacts

Terra Nitrogen Company, L.P.
Martin Jarosick
Vice President, Investor Relations
847-405-2045
[email protected]

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DEERFIELD, Ill.–(BUSINESS WIRE)–Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported net
earnings of $39.5 million on net sales of $96.1 million for the quarter
ended June 30, 2017. This compares to net earnings of $98.7 million on
net sales of $126.7 million for the 2016 second quarter. Net earnings
allocable to common units was $27.4 million ($1.48 per common unit) and
$59.7 million ($3.22 per common unit) for the 2017 and 2016 second
quarters, respectively. Results for the second quarter of 2017 included
an unrealized net mark-to-market loss on natural gas derivatives of
$2.9 million compared to a gain of $27.3 million in the second quarter
of 2016. The derivative portfolio at June 30, 2017 includes natural gas
derivatives that hedge a portion of natural gas purchases through
December 2018.

For the first six months of 2017, TNCLP reported net earnings of $81.7
million on net sales of $215.1 million. This compares to net earnings of
$136.4 million on net sales of $234.7 million for the first six months
of 2016. Net earnings allocable to common units was $66.2 million ($3.58
per common unit) and $86.4 million ($4.66 per common unit) for the first
six months of 2017 and 2016, respectively. Results for the first six
months of 2017 included an unrealized net mark-to-market loss on natural
gas derivatives of $10.8 million compared to an unrealized net
mark-to-market gain of $25.0 million for the first six months of 2016.

Analysis of Results

Net sales for the second quarter of 2017 totaled $96.1 million, compared
to $126.7 million for the second quarter of 2016, due to lower average
selling prices for both ammonia and urea ammonium nitrate (UAN) as well
as lower sales volume for UAN compared to the prior period.

Sales volumes for ammonia were flat year-over year while sales volumes
for UAN decreased 10 percent as flooding on the Arkansas River limited
shipments and unfavorable weather resulted in late planting and delayed
UAN purchases and applications, exacerbated by customers increasingly
favoring just-in-time deliveries rather than carrying inventory. Ammonia
and UAN average selling prices declined in the second quarter of 2017
compared to the second quarter of 2016 due to greater global nitrogen
supply availability.

Comparing the second quarter of 2017 to the second quarter of 2016,
TNCLP’s:

Ammonia sales volume was flat and UAN sales volume decreased by 10
percent;
Ammonia average selling prices decreased by 18 percent and UAN average
selling prices decreased by 19 percent; and
Realized natural gas cost per MMBtu increased by 15 percent.

Cash Distribution

Cash distributions depend on TNCLP’s earnings as well as cash
requirements for working capital needs and capital and other
expenditures. For the first six months of 2017, capital expenditures
were $21.4 million as compared to $20.2 million in 2016.

For the full year 2017, TNCLP expects capital expenditures to be in the
range of $30 million to $40 million. TNCLP previously announced that it
expected to make capital expenditures for the full year 2017 in the
range of $75 million to $85 million, with approximately $40 million of
the projected capital expenditures related to a plant turnaround
scheduled to start in the third quarter of 2017. Subsequent to that
announcement, TNCLP postponed the turnaround due to a delay in receiving
certain equipment. TNCLP anticipates the plant turnaround will occur in
the third quarter of 2018 and expects it to cost approximately $40
million. The calculation of Available Cash for the three months ended
June 30, 2017, included a reserve of approximately one-half of that
amount.

TNCLP reported on August 2, 2017, the declaration of a cash distribution
for the quarter ended June 30, 2017, of $1.60 per common unit payable
August 29, 2017 to holders of record as of August 15, 2017. This
compares to a cash distribution of $2.58 per common unit for the quarter
ended June 30, 2016.

Cash distributions per common unit also vary based on increasing amounts
allocable to the General Partner when cumulative distributions exceed
targeted levels. With this distribution, TNCLP cumulative distributions
continue to exceed targeted levels.

This release serves as a qualified notice to nominees and brokers as
provided for under Treasury Regulation Section 1.1446-4(b). Please note
that 100 percent of TNCLP’s distributions to foreign investors are
attributable to income that is effectively connected with a United
States trade or business. Accordingly, TNCLP’s distributions to foreign
investors are subject to federal income tax withholding at the highest
effective tax rate.

About TNCLP

Terra Nitrogen Company, L.P. is a leading manufacturer of nitrogen
fertilizer products.

Terra Nitrogen, Limited Partnership (TNLP), owner of the Verdigris,
Oklahoma manufacturing facility and related assets, is a subsidiary of
TNCLP. Terra Nitrogen GP Inc., an indirect, wholly owned subsidiary of
CF Industries Holdings, Inc., is the General Partner of TNCLP and TNLP
and exercises full control over all of TNCLP’s and TNLP’s business
affairs.

Forward-Looking Statements

All statements in this communication, other than those relating to
historical facts, are forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to a
number of assumptions, risks and uncertainties, many of which are beyond
TNCLP’s control, which could cause actual results to differ materially
from such statements. Important factors that could cause actual results
to differ materially from expectations include, among others:

Risks related to TNCLP’s reliance on one production facility;
The cyclical nature of TNCLP’s business and the agricultural sector;
The global commodity nature of TNCLP’s fertilizer products, the impact
of global supply and demand on TNCLP’s selling prices, and the intense
global competition from other fertilizer producers;
Conditions in the U.S. agricultural industry;
The volatility of natural gas prices in North America;
Difficulties in securing the supply and delivery of raw materials,
increases in their costs or delays or interruptions in their delivery;
Reliance on third party providers of transportation services and
equipment;
The significant risks and hazards involved in producing and handling
TNCLP’s products against which it may not be fully insured;
Risks associated with cyber security;
Weather conditions;
Potential liabilities and expenditures related to environmental,
health and safety laws and regulations and permitting requirements;
Future regulatory restrictions and requirements related to greenhouse
gas emissions;
The seasonality of the fertilizer business;
Risks involving derivatives and the effectiveness of TNCLP’s risk
measurement and hedging activities;
Limited access to capital;
Acts of terrorism and regulations to combat terrorism;
Risks related to TNCLP’s dependence on and relationships with CF
Industries;
Deterioration of global market and economic conditions;
Risks related to TNCLP’s partnership structure and control of TNCLP’s
General Partner by CF Industries;
Changes in TNCLP’s available cash for distribution to its unitholders,
due to, among other things, changes in its earnings, the amount of
cash generated by its operations and the amount of cash reserves
established by its General Partner for operating, capital and other
requirements;
The conflicts of interest that may be faced by the executive officers
of TNCLP’s General Partner, who operate both TNCLP and CF Industries;
and
Tax risks to TNCLP’s common unitholders and changes in TNCLP’s
treatment as a partnership for U.S. or state income tax purposes.

More detailed information about factors that may affect TNCLP’s
performance may be found in its filings with the Securities and Exchange
Commission, including its most recent periodic reports filed on Form
10-K and Form 10-Q, which are available through CF Industries’ website.
Forward-looking statements are given only as of the date of this release
and TNCLP disclaims any obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.

Terra Nitrogen Company, L.P. news announcements are also available on
CF Industries’ website, www.cfindustries.com.

TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED BALANCE SHEETS

	(unaudited)
	June 30,		December 31,
	2017		2016
	(in millions, except for units)
ASSETS
Current assets:
Cash and cash equivalents	$	67.1	$	39.5
Due from affiliates of the General Partner	12.9		4.0
Accounts receivable	0.4		0.6
Inventories	11.4		8.6
Prepaid expenses and other current assets	0.5		7.9
Total current assets	92.3		60.6
Property, plant and equipment—net	297.5		301.3
Other assets	10.0		11.4
Total assets	$	399.8	$	373.3
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable and accrued expenses	$	19.7	$	27.8
Due to affiliates of the General Partner	3.0		4.1
Other current liabilities	2.5		—
Total current liabilities	25.2		31.9
Other liabilities	2.2		2.6
Partners’ capital:
Limited partners’ interests, 18,501,576 common units authorized, issued and outstanding	312.4		286.7
Limited partners’ interests, 184,072 Class B common units authorized, issued and outstanding	2.1		1.8
General partner’s interest	57.9		50.3
Total partners’ capital	372.4		338.8
Total liabilities and partners’ capital	$	399.8	$	373.3

TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2017		2016		2017		2016
	(in millions, except per unit amounts)
Net sales:
Product sales to affiliates of the General Partner	$	95.9	$	126.5	$	214.8	$	234.4
Other income from an affiliate of the General Partner	0.2		0.2		0.3		0.3
Total	96.1		126.7		215.1		234.7
Cost of goods sold:
Materials, supplies and services	45.8		17.1		111.2		74.8
Services provided by affiliates of the General Partner	6.8		6.9		13.8		14.1
Gross margin	43.5		102.7		90.1		145.8
Selling, general and administrative services provided by affiliates of the General Partner	4.0		3.9		7.9		7.8
Other general and administrative expenses	0.1		0.2		0.6		1.7
Earnings from operations	39.4		98.6		81.6		136.3
Interest income	0.1		0.1		0.1		0.1
Net earnings	$	39.5	$	98.7	$	81.7	$	136.4
Allocation of net earnings:
General Partner	$	11.7	$	38.1	$	14.7	$	48.7
Class B common units	0.4		0.9		0.8		1.3
Common units	27.4		59.7		66.2		86.4
Net earnings	$	39.5	$	98.7	$	81.7	$	136.4
Net earnings per common unit	$	1.48	$	3.22	$	3.58	$	4.66

TERRA NITROGEN COMPANY, L.P.
SUMMARIZED OPERATING INFORMATION
(unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2017		2016		2017		2016
Sales volume (tons in thousands):
Ammonia	112		112		239		203
UAN⁽¹⁾	407		454		939		816

Average selling prices (dollars per ton):
Ammonia	$	303	$	371	$	294	$	372
UAN⁽¹⁾	152		187		$	154	$	194

Cost of natural gas (dollars per MMBtu):
Purchased natural gas costs⁽²⁾	$	2.77	$	1.74	$	2.92	$	1.85
Realized derivatives loss⁽³⁾	0.04		0.70		—		0.78
Cost of natural gas	$	2.81	$	2.44	$	2.92	$	2.63

_________________________________________________

⁽¹⁾		The nitrogen content of UAN is 32% by weight.
⁽²⁾		Represents the cost of natural gas purchased during the period for use in production.
⁽³⁾		Represents realized gains and losses on natural gas derivatives settled during the period. Excludes unrealized mark-to-market gains and losses on natural gas derivatives.