Adam Samuelson: Good morning. So, Mark and Cheryl, I was hoping to maybe take a step back. You did the Investor Day about a year ago now, the time you’d set a mid-cycle kind of EBITDA target of about $200 million, which assumed a $500 a ton Tampa Ammonia price, $260 UAN, and $4 gas. Those happen to be pretty close to the full-year averages for 2023. And on the gas side, close to what you realize in your COGS, even if Henry Hub was lower. The EBITDA was $133 million. Can you help us think about, do you still think that like under that set of pricing and operating conditions, the company is capable of doing $200 million before the benefits of some of the debottlenecking and growth actions? Or has kind of inflation on labor and plant costs and all the other variable expenses kind of eaten into the total company performance?
Mark Behrman: Yes. No, it’s a great question. So it’s one I asked about a month ago to my staff. I’m sitting there thinking the same thing, and quite frankly, I’m really comfortable saying that we’re still around $200 million under those assumptions. So when we look back at 2023, I look at — I think we’re pretty transparent about it, and I think it’s been certainly published that we locked in gas at higher prices than we would have liked to. So a lot of it though has to do with that $200 million is us running our ammonia plants at 95%. And as you can see in our earnings presentation, our target is to add another 60,000 or so tons of ammonia production per year. So that probably gets us another — at those pricing levels, probably another $35 million to $45 million.
And then it’s pretty documented we had some issues with our downstream plants, namely our nitric acid plants, which really did not allow us to upgrade as much product as we would have liked. So I think those two things would factor into the balance of pushing us back up to that $200 million.
Adam Samuelson: Okay. And maybe on the ammonia point, because I was reflecting on the outlook kind of guidance details you gave for ’24, and going back to the ’23 actuals versus what you said you targeted a year ago, and your gross ammonia production for ’23 came in below what you targeted. And I know there was issue with the nitric acid plant, but I don’t recall any major kind of unplanned downtime at the ammonia plant. So, can you talk about kind of what still has to happen to get that ammonia utilization up to where you want it to be?
Mark Behrman: Yes, I mean — it’s I’d say the continued maturation of our operating practices, it’s not significant capital. Most of the capital that will be required is typically within our EH&S and reliability kind of in our annual maintenance capital, which is about $60 million, could take us a little bit of additional capital. But I just think it’s — I think if I look back five years ago, quite frankly, we were probably a bit devoid of technical talent. And we’ve worked really hard to bring on a lot of really high-quality technical people that we’re really comfortable with, and when I look around the industry, I think we’ve got comparable people to what a lot of our competitors have today. So I think it’s just — it’s really a lot of blocking and tackling to really focus on the right operating procedures, the right maintenance procedures, be predictive in our maintenance rather than wait for things to happen, right?
I mean, that’s never good. And I think our expectation would be that over the next 18 months to 24 months probably more like the 24 months that we’re at that 95% rate.
Adam Samuelson: Okay. And if I just squeeze one more in. You alluded to an earlier comment around the weather in January impacting industry production, and at least one of your peers publicly has commented to that effect as well. Did you have any issues in terms of your operating rates with the weather in January or you kind of ran as expected, and didn’t impact your plants and your output?
Mark Behrman: Yes. We had a power outage down at El Dorado or El Dorado site, so that caused some downtime. But we also don’t assume that we’re going to run at 100% it either.
Adam Samuelson: Okay. All right. That’s helpful. I’ll pass it on. Thank you.
Mark Behrman: Thank you.
Operator: Thank you. Our next question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.
Dan Rizzo: Good morning. This is Dan Rizzo on for Laurence. Thank you for taking my question. Is it possible — I know you said — I think you said the industrial demand is somewhat stable. Could we see a restock cycle there now or later in the year, just given some of the low inventories that probably and presumably your customers have?
Mark Behrman: It’s always possible. I actually think that our customers are taking what we expected or more today. So I’d be surprised if it’s got much of an impact on us. Most of our non-fertilizer business is contracted. We do leave some spot tons available. So on those spot tons maybe we could see some firming of price. I don’t think it’s going to be demand.
Dan Rizzo: Okay. And then with the delay in El Dorado, some of the expansion there, I was just wondering how much your expected ROIC has changed in the last twelve months, just given the changing macro environment and how much that’s playing into your thought process now and going forward?
Mark Behrman: Are you talking about kind of our return profile?
Dan Rizzo: Yes.
Mark Behrman: Yes. I don’t think the return profile has changed. I think that generally speaking our hurdle rate is going to be a 15% IRR or better on any project. So, would we consider a lower return on a project if we think it’s got long-term — sustainable long-term benefits to the company? We’d have to take a look at that. But generally speaking, our overall return profile hasn’t changed.
