Methanex Reports Strong 2rd Quarter 2021 Results

Source: www.gulfoilandgas.com 10/27/2021, Location: South America

- Methanol prices reached multi-year highs leading to net income attributable to Methanex shareholders of $71 million and Adjusted EBITDA of $264 million
- Restarted construction on our advantaged Geismar 3 project which has been substantially de-risked and is well-positioned to be completed on-time and on budget with commercial operations targeted by late 2023/early 2024
- Recently announced a reset of our quarterly dividend to $0.125 per share and approval of a 5% share repurchase program
- Robust outlook for the fourth quarter as global energy shortages and rising feedstock costs are leading to a sharp increase in methanol prices and a significant steepening of the industry cost curve
- In early October, restarted production at our Chile IV plant (annual operating capacity of 830,000 tonnes), which was idle for 18 months

For the third quarter of 2021, Methanex reported net income attributable to Methanex shareholders of $71 million ($0.93 net income per common share on a diluted basis) compared to net income of $107 million ($1.31 net income per common share on a diluted basis) in the second quarter of 2021. The decrease in net income is due to the change in the mark-to-market impact of share-based compensation. Adjusted EBITDA for the third quarter of 2021 was $264 million and Adjusted net income was $99 million ($1.29 Adjusted net income per common share). This compares with Adjusted EBITDA of $262 million and Adjusted net income of $95 million ($1.24 Adjusted net income per common share) for the second quarter of 2021.

Our Adjusted EBITDA results of $264 million, reflecting a higher average realized price offset by lower sales of Methanex-produced methanol, continue to highlight the significant leverage that our earnings have to methanol prices. Methanol market conditions remained tight with continuing industry supply challenges through the third quarter of 2021. We increased our average realized price to $390 per tonne in the third quarter, a $14 per tonne increase compared to $376 per tonne in the second quarter.

We ended the third quarter with $932 million in cash. We recently finalized definitive agreements for our recently announced strategic shipping partnership between Methanex, Waterfront Shipping (a Methanex subsidiary) and Mitsui O.S.K. Lines, Ltd. ("MOL") whereby MOL will acquire a 40% minority interest in Waterfront Shipping for $145 million. The closing is subject to all customary conditions being met, including regulatory approval.

We recently restarted construction on our Geismar 3 project, a 1.8 million tonne methanol plant adjacent to our existing Geismar 1 and Geismar 2 plants. Our Geismar 3 project has distinct project advantages and robust project economics that will strengthen our asset portfolio and significantly increase our future cash generation capability.

John Floren, President & CEO of Methanex, said, “Our outlook for the methanol industry is positive, and we believe that new industry supply will be needed to meet growing methanol demand over the coming years. Our strategy of industry leadership, low cost and operational excellence enables us to generate robust free cash flow across the methanol price cycle. Our capital allocation priorities remain the same. We are well positioned to maintain our business, pursue value accretive growth opportunities and continue our long track record of returning excess cash to shareholders through a sustainable dividend and share buybacks.”

FINANCIAL AND OPERATIONAL DATA
- We recorded net income attributable to Methanex shareholders of $71 million during the third quarter of 2021 compared to net income of $107 million in the second quarter of 2021. The decrease in net income is due to the change in the mark-to-market impact of share-based compensation. We recorded Adjusted EBITDA of $264 million for the third quarter of 2021 compared with $262 million for the second quarter of 2021.
- We recorded Adjusted net income of $99 million for the third quarter of 2021 compared to Adjusted net income of $95 million for the second quarter of 2021. Adjusted EBITDA and Adjusted net income for the third quarter of 2021 are marginally higher than the second quarter of 2021 primarily due to the increase in our average realized methanol price to $390 per tonne from $376 per tonne, offset by lower sales of Methanex-produced methanol.
- We sold 2,757,000 tonnes in the third quarter of 2021 compared to 2,830,000 tonnes for the second quarter of 2021. Sales of Methanex-produced methanol were 1,435,000 tonnes in the third quarter of 2021 compared with 1,582,000 tonnes in the second quarter of 2021.
- Production for the third quarter of 2021 was 1,480,000 tonnes compared with 1,505,000 tonnes for the second quarter of 2021. Production is lower for the third quarter of 2021 primarily due to the temporary idling of one plant in New Zealand which was partially offset by higher operating rates in Egypt.
- We recently restarted construction on our Geismar 3 project, a 1.8 million tonne methanol plant adjacent to our existing Geismar 1 and Geismar 2 plants. The project has been significantly de-risked and is well-positioned to be completed on-time and on budget. We have capitalized $455 million on the project, before capitalized interest and finance charges. We estimate $800-900 million of capital expenditure to complete the project, for a total of $1.25 - $1.35 billion. Commercial operations are targeted at the end of 2023 or early 2024.
- During the third quarter of 2021 the Board of Directors approved a 5% normal course issuer bid to repurchase up to 3,810,464 common shares. To September 30, 2021, we repurchased 85,607 common shares under the bid for $4 million.
- In the third quarter of 2021 we paid a $0.125 per common share quarterly dividend to shareholders for a total of $10 million.
- At September 30, 2021, we have a strong liquidity position including a cash balance of $932 million and $900 million of undrawn backup liquidity.

Key production and operational highlights during the third quarter and production outlook for 2021 include:
- New Zealand produced 268,000 tonnes compared with 306,000 tonnes in the second quarter of 2021. In New Zealand, our production levels were lower in the third quarter of 2021 compared to the second quarter of 2021 as the short term commercial arrangement with Genesis Energy to idle one plant and make natural gas available to support a tight New Zealand electricity market completed in late August. Subsequently, both Motunui plants have been operating.
- As a result of the above and the previous idling of Waitara Valley, we now estimate production in 2021 to be 1.3 million tonnes compared to our production of 1.7 million tonnes in 2020. The upstream gas sector in New Zealand is completing several field development projects that could improve gas availability over the coming years.
- Geismar produced 478,000 tonnes during the third quarter of 2021 compared to 484,000 tonnes during the second quarter of 2021. Geismar production is comparable for the second and third quarters of 2021 as the benefits of increased capacity for a full quarter following the completion of our Geismar 2 debottlenecking project during the second quarter were offset due to a precautionary outage during Hurricane Ida for approximately two weeks. Hurricane Ida did not damage the site and following the precautionary outage both plants returned to production. The Geismar 1 and Geismar 2 debottlenecking projects increased our operating capacity for our Geismar facilities by 10%, to 2.2 million tonnes on an annual basis.
- Trinidad produced 296,000 tonnes (Methanex interest) during the third quarter of 2021 compared with 294,000 tonnes in the second quarter of 2021. Production levels in Trinidad were similar in the third quarter of 2021 compared to the second quarter of 2021 as we continued to run our Atlas plant at high operating rates. Based on current gas deliveries, we estimate Trinidad production in 2021 of approximately 1.1 million tonnes (Methanex interest). Titan remains idled indefinitely.
- Chile produced 124,000 tonnes during the third quarter of 2021 compared to 128,000 tonnes during the second quarter of 2021. Production for the third quarter of 2021 is similar compared to the second quarter of 2021 as we experienced lower gas availability during the second and third quarters of 2021 over the Southern hemisphere winter months when seasonal demand for natural gas in the region is at its peak. Early in October, we restarted our Chile IV plant after idling the plant in April 2020 in response to the global pandemic and then due to lower gas availability. We expect to have sufficient gas to operate both Chile plants through the Southern hemisphere summer months to the end of April 2022. We estimate production in 2021 of 0.8 million tonnes.
- Egypt produced 310,000 tonnes (Methanex interest - 155,000 tonnes) in the third quarter of 2021 compared to 268,000 tonnes (Methanex interest - 134,000 tonnes) in the second quarter of 2021. Production levels in Egypt were higher in the third quarter compared to the second quarter of 2021 due to improved operating rates. We expect to receive 100% of our contracted gas supply for the foreseeable future in Egypt.
- Medicine Hat produced 159,000 tonnes during the second and third quarters of 2021.


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