[Operator Instructions] The first question comes from Ben Isaacson of Scotiabank.

My question is on your new mid-cycle price of $410 a short ton for CF. Can you talk about how much of that change is related to capital cost inflation versus how much is related to any structural or sticky changes that you see as a result of the conflict in the Middle East?

Yes. Thanks, Ben. Maybe for starters, I'd just take a step back and just say, as I look back at our performance since the beginning of 2020, we've averaged over and above that $1.7 billion free cash flow that we have as the mid-cycle by quite some amount. So it's not as if the empirical data and how we've performed and really how we've set up the company by increasing our production capacity and also lowering our fixed charges to get our free cash flow conversion where it is hasn't been successful, and sometimes we don't always feel like that's being recognized, but we have been performing at that. What I would say is construction costs, the gap between the U.S. and the rest of the world has closed. You're seeing labor, procurement timing, different things with being able to use module yards where that difference between a U.S. project and a global project has changed drastically, I think. And then, to your point, there are certain costs associated with the geopolitical events that are going to remain structural. So if you look at freight, for instance, freight, we have basically from the Middle East to the Gulf now is about $70, where a year ago, it was $35. Do we expect that to snap back to $35 and not have any type of structural piece to that? Probably not. But is that $5 to $10 there? Is there few dollars in insurance costs, different vessel configurations, and a risk premium based on where those assets and really the supply offtake is happening. So I think as we look at it really from a NOLA price, we're saying we've moved from $355 NOLA urea on a short ton to $385. Of that $30, there's probably $10 that may be associated with structural changes that don't go away as a result of these geopolitical events. And then the remaining amount probably exists due to higher capital costs and really a closing of that gap between U.S. construction and outside of the U.S.

Yes. And maybe let me add a little color -- Ben, this is Andrew as well. As you look at that price going from $355 to $385, the underlying assumptions that we have is this is for, call it, 1.3 million to 1.4 million-ton capacity sites with a CapEx estimate of about $2.6 billion to $2.8 billion. If we assume $3.50 natural gas with a 10% to 12% financial return, that's how you get to the $385 price. You then use our economics and it gets to our EBITDA of $2.9 billion. One piece that I want to call out of what's in there and what's not in there is we also gave some color context around $400 million over time by 2030 that will get you to $3.3 billion. Out of that $400 million, $300 million of that is Blue Point and $100 million is additional carbon capture benefits, we'll get out of Donaldsonville and Yazoo City. The way to think about that, what's not in there, I will do this illustratively, you likely saw that we're pursuing a FEED study for DEF. Because that has not been officially green-lit yet, that is not in that $400 million. If we get to that point through an investment decision, it will go in there. Likewise, in that $2.9 billion, as we're starting to realize the benefits of Donaldsonville on carbon capture, that's actually shifted left into that $2.9 billion. So it's really a function of the capital cost. And as Chris mentioned, there's probably some context around a little bit of geopolitical premium there, but it's really the capital costs and sort of realizing the benefits on carbon capture. So hopefully that helps.

The next question comes from Joel Jackson of BMO Capital Markets.

It seems like looking at yourself and your peers' results, ignoring some of the lower volumes in Yazoo City, there's a bit of a buyer's holiday in nitrogen in Q2, and we all know what happened with commodity prices and nitrogen prices across the quarter, urea, as the war started and prices came down. But I wonder if you could talk about that, what does that set up for the second half of the year coming out of the last, I don't know, 5, 6 months of volatility?

Yes, interesting view, Joel. And I think that did happen in different places around the world. As prices escalated, especially in April and May, you definitely had a pullback in South America -- Central and South America, where the necessity to purchase, it's really to put into inventory because applications are further later in the year specific to the big applications in Brazil. But you also had pullbacks from Australia, from Southeast Asia. And the Northern Hemisphere was completing the application season. We did see some movement in North America, as I mentioned in my comments, with movements amongst products with additional urea. So we pivoted and produced more urea as well as DEF and that limited a little bit to what our UAN availability was. But I think overall, prices did impact some places where you could defer demand, and we saw that happen. And we see a little bit, I would say, as the data is coming in with a possible small cut in consumption in North America, but not as big as relative to the other nutrients. And in the second half, we're bullish on the second half. When you look at what we've put together with our UAN fill program, the team did a great job of working with our customers, organizing that and getting it executed well. And the average price on that is probably close to $300 and where our program extends into Q4. And so good solid demand, good movement. We're already seeing that. And as I mentioned in my prepared remarks about the fall ammonia season with a very good uptake for that. And we're just now positioning product at our terminals to serve that demand in November. And so when we look at where we are in the ag cycle, where we are with pricing and the customer uptake on the retail wholesale side for us, which we know has been pushed down into the farmer, we see good positive traction through 2027.

The next question comes from Lucas Beaumont of UBS.

Yes, I kind of just wanted to sort follow up on the outlook there. I mean, I guess, just given kind of the soft demand here in the second quarter like a more compressed kind of time frame for deliveries in the second half. We've got the still impacted global supply issues and like now increasing cost curve support as well from European gas. So I guess just how do you kind of see the setup there for pricing as we move into the fall and the spring? Is there a point here where the market's going to kind of rapidly tighten and expose low inventory levels as demand picks -- backs up? And I guess when do you think that would sort of be timing-wise? And is that setting us up for like much higher in-season U.S. premiums again coming up?

Yes. Good morning, Lucas, and I think -- this is Bert. Regarding the soft Q2 demand and the deferrals that I mentioned in the Southern Hemisphere, we do believe that's going to catch up, and you're seeing that in India with the most recent tender. We anticipate India to be an import demand of 9 million to 10 million tons, which is over what they were last year. We're seeing positive movement in South America. And some -- I expect to see some grain movements, some grain pricing movements, which will incentivize additional consumption. But you're right, the compressed deliveries is just -- it's going to be a poor lineup for some of these folks. But the values have come back down to attractive levels. And as I think lower pricing will incent demand. And so -- but you're right, the EU gas structure is at a disadvantage with $18 to $20 gas at a differential to the world makes European operations constrained that we believe. And so probably a higher level of imports there. And so with where we are in the ag cycle with pricing for the feed grains and the consumption of nitrogen, we're constructive for the back half of this year as well as 2027. And I do think there will be some tight pricing to come. When you look at -- we still lost 5 million tons from the Middle East or from those countries that were unable to get LNG. We're seeing a little bit of movement out of China for exports to replace some of that, but that's probably in the 5 million to 6 million-ton range, so kind of a net zero. And then with those places that are constrained with LNG or cannot afford, you'll see probably some production cut backs. So balance on balance, we see a tight market through next year.

And I think, Bert talked about just what's happening in Europe, as we see those prices come down, but not the feedstock cost of that come down, you'll probably see more constraints on that as we've seen over the years where we're seeing curtailments and shutdowns occur. But on top of that, it's probably the one area we don't know is really what happens in the Gulf area. As Bert mentioned, that's a significant amount of volume that still needs to supply the world here. And if you're seeing curtailments in Europe and still some on and off again stuff in the Gulf area, that's really what's going to determine pricing from that. Volume-wise, as you mentioned, I think we feel very strong about what we're seeing.

Great. And then I guess just on Yazoo City. So I mean the repairs have sort of been pushed back a little bit into the first half of '27, so I was just wondering kind of what the sort of swing factors there are in terms of sort of hitting the timeline. Anything to share sort of on the business interruption insurance that are there in terms of like the income and cost coverage? And just will you -- are you looking to do anything different at the site sort of with the rebuild that could sort of deliver benefits to you after it's finished?

Okay. I'll take -- this is Chris. I'll take some of the first parts of that question and then turn the insurance discussion over to Andrew here. But I think the biggest part is, we've gotten more information when we put out that we thought it would be late 2026, that was preliminary information on what needed to be done with a particular site and what the procurement timelines would be. As we've seen with a lot of projects globally here, you are seeing procurement timelines extend some and that was primarily for electrical gear. And that's why we've moved it into the first half of next year from a timing standpoint, just as we've gained more information and better insight into that. Related to the site itself, we are changing how that site is going to be configured. We will no longer be prilling ammonium nitrate down there. We'll be doing ammonium nitrate solution along with ammonia and DEF down there. And really, what we're building out in that particular location is probably increased flexibility, both from an operational and a logistics standpoint, where we'll have a broader customer base that we can start to supply throughout the years here. So I think we're excited about what the opportunities and what we're changing at that particular site to make it a more sustainable site long term. So I'll turn it over to Andrew now to talk through some of the insurance side of it.

Lucas, so I'll give a little bit of color on kind of 3 buckets, accounting, I would say the insurance piece and a little bit of how to think about capital. From an accounting standpoint, in Q4 of last year, we recorded $25 million impairment on machinery and equipment. And then you'll see or have seen in Q2, we took another further impairment of $23 million for equipment we will no longer be able to use. And so total, that's just shy of $50 million of impairments that we've taken. On the insurance recovery to date, it's been about $75 million. We had $25 million of property damage that we recorded in Q1 and received in Q2, then we've had $50 million of business interruption insurance. When you look at it to date, it's been about a 2:1 ratio. Longer term, it will probably play out more like a 3:1 ratio. That business interruption insurance covers us for about 18 months as you look at that. Now you will note, I just want to make sure this is clear, we are not included in our capital guidance and assumption for Yazoo City, and there's kind of 2 fundamental reasons. One, we expect the insurance recovery to offset that capital build cost; and two, the timing is dynamic. When you look at the timing of the capital between the back half of this year and first half of next year, it will be dynamic and the insurance recovery is going to be dynamic. So when you look at that over a longer time frame, they will offset each other, but that's why we're not specifically guiding that right now.

The next question comes from Benjamin Theurer of Barclays.

This is Rahi on for Ben. Maybe on S&D, are you seeing any impact from the extra Texas capacity this year, like Gulf Coast ammonia, Woodside? Or is this just largely offsetting Trinidad volumes? And maybe long -- or medium or long term, how do you expect this to affect supply and demand once the impact from Iran settled down?

When you look at the Texas plants, there has been a long lead to their full production. And I don't think they're still at full production. And so those tons have been absorbed. They've been moving around the world. They've had some contracts. And now with Yara purchasing the Gulf Coast plant, I assume a lot of that product will go to Europe, offsetting production cutbacks. But you're correct. There have been offsets throughout the world. Trinidad is one that has taken tonnage off market. There has also -- on the demand side, there's also been some negative impacts with, as you've heard from the phosphate producers with their cutbacks due to limited supply of sulfur and sulfuric acid that has limited phosphate production, which therefore has limited their ability to consume more ammonia. So the market has come off the highs of Q2 and is today balanced in the $600 to $700 range, depending on destinations. But we see these 2 plants, the Gulf Coast plant and the Woodside plant, both coming up to full production, and it will be absorbed into the market.

And I think longer term, we've talked about this that the global S&D is tightening, independent of what was happening in the Gulf during this particular time frame. And if you look at the slate of new projects that are projected to come online between now and 2029 or 2030, there's just not enough to meet demand. And if there were some sort of resolution in the Gulf, as Bert mentioned, you're going to have other demand pieces that will grow because you can have sulfur, some more phosphate there. So we still think that there is just very much a tightening that continues to go on between now and the end of the decade in the nitrogen market here.

Got it. And just a quick follow-up for Yazoo. Can you just walk us through the thought process of that you're going to make AN, UAN, et cetera there? Why not just do urea given the margin structure has been superior in the last 10 years? That should be it from us.

Yes. From a urea standpoint, you're right. Urea is really the catalyst as to why we're going to see the global nitrogen market get tighter. So there are upgrade projects that we're looking at, one of which is even for DEF, that's a urea project at Courtright. As you look at Yazoo City, the urea plant there would have to be a full-blown new urea plant, world-scale plant there. And we look at what we have opportunity-wise that Bert's commercial team has put together both from an ANS, UAN, and DEF that it wouldn't really make sense to put in that type of capital at that particular site.

I also think when you look at how we're configured and structured asset-wise and our distribution of those assets and the modes and how we move the product through rail, truck, barge, vessel, or whatever pipeline, Yazoo is a unique asset and that it's our main -- or only ANS plant. But as we work through this new structure, we're going to be improving the load-outs, improving capabilities, and having different access to different modes, and that will give even more flexibility to Yazoo City.

The next question comes from Kristen Owen of Oppenheimer.

So I wanted to follow up on capital allocation. This is clearly an and strategy, not an or just given the strong cash flow you've generated thus far. You raised the dividend, you're increasing the buybacks, and you're coming into peak CapEx period. But the one that I actually really wanted to ask about is this FEED study on DEF. So can you just give us a little bit of background here how you're thinking about the demand and economics for, say, industrial applications versus over-the-road applications? I know we've got some EPA changes coming up. So just a little bit of color on the DEF study.

Yes. So I'll let Bert start on the market and what we see that's interesting us in the market in the different areas where it is. And then I'll speak a little bit more specific to the project itself.

DEF has been an interesting product for us in that it's just about 15 years old in terms of how long DEF has been an active part of our portfolio, and we produce it at different plants, but the growth from basically 0 to today, 2.2 million tons of -- and this is a urea equivalent tons. So in effect, 2 world-scale plants of urea are now being consumed in North America, where that just didn't exist 15 years ago. And when you look at the growth of demand as new power units come into service and the dosing rate has increased from a very low level 15 years ago to all 0 before that, but -- and as these power units get replaced and an average power unit can last 9 to 11 years. And so the replacement rate is slow, but we see that taking place. And with the additional dosing rate continuing to increase for better efficiency on that miles per gallon as well as emissions control, we see this market by the early part of next decade, 2030, 2031, hitting 3 million tons or over. And so a lot of growth opportunity. And again, where we're positioned asset-wise, Courtright makes a lot of sense to serve the East Coast market, which is a heavy demand market.

The one thing I would add is this isn't really our thoughts on the growth of DEF and in isolation. Essentially, we worked with OEM engine manufacturers all the way down to the retail side to make certain that we're aligned as to the growth that we see going forward. And I think all parties are seeing the same thing there. As Bert mentioned, Courtright provides a unique opportunity for us. Today, Courtright has a net long position in ammonia that is a little bit logistically constrained both by what rail line it's on, and therefore, having a lower-margin ammonia that comes out of that particular plant. And because it's such a low-margin ammonia that comes out of that plant, it's providing a better opportunity to put in an upgrade unit there. And the rail line, it happens to be on, can feed the East Coast, the Mid-Atlantic area better than any of our other sites that are producing DEF today. So as we look at this, provided what comes out of the engineering and design study from a capital cost, but we feel that this is going to be a project that is not only going to grow into a market that is an industrial ratable market, very strong for us, but it's additionally something that's going to be well above our cost of capital just given the configuration of that site today.

That super helpful. My follow-up is question on, your expectations for mix in the back half of the year, just given what you said about the fill programs, what fall application looks like? Obviously, the economics moved around quite a bit here in Q2, but just how you're thinking about mix of product in the back half of the year would be helpful.

Yes, I would say we're looking at a normal slate in terms of the economics. As we look product by product to where the economic advantage is against our order book, which is a very positive order book, I would anticipate a normal slate for the back half. We're going to work on our inventory levels, which built up during Q2. I think that was one of the issues on the write-up was that we had a limited volume on UAN, but what we did was move more of that to urea and DEF in Q2. And any inventory we have, we expect to disgorge in the back half of the year and run at normal rates.

The next question comes from Christopher Parkinson of Wolfe.

Totally understand the second half outlook in terms of steady demand, a lot of lost tonnage out of [indiscernible] as well as some of the Iranian tonnage to see the market tight for the foreseeable future. But at the same time, I'm curious on your interpretation of the U.S. and coastal benchmarks typically trading at a discount. It seems like the international opportunities, especially in the third quarter should have been a little bit better. It should be at least improving in terms of that prospective market tightness. So I'd love to get your perspective across both ammonia and downstream in terms of how you see the dynamics playing out just in terms of like the ripple effects from lack of production in the first quarter or 2?

Yes. So when you look at what -- the tonnage that was lost, urea and ammonia out of the Gulf as well as tonnage lost due to lack of LNG to those countries or companies that rely on LNG to produce, it's substantial. And so back to how do you backfill that supply. And some of it is through, I think, the Chinese tons that everybody is expecting to come out as well as just solid operating rates. And in terms of trading values and looking into what markets we would move our tons to, you mentioned that we're trading at a discount in NOLA, we are, and so you've seen us build an export book on urea that's probably higher than normal. And so when I look at where these benchmarks go and where we are in terms of pricing for the world, I think you're going to see a market that improves in terms is tight and will tighten as this demand has been deferred, comes back into -- has purchased and moved.

Got it. And just as a quick follow-up to that, I'd love to hear your perspective that in the U.S. alone, and I apologize if I'm missing one, you've seen basically 7 cancellations in terms of low-carbon or blue ammonia over the last several quarters and perhaps a project or 2 are technically on lifelines. Chris, I'd love to hear your perspective on just kind of your intermediate longer-term outlook. It also seems like the demand side of it has been a little bit more quiet versus some positive events back in '25. I'd love to just hear your dynamics in terms of market development, your position, how you're thinking about the overall Blue Point complex, and any incremental opportunities you see fit based on the fact that a lot of others have given up?

Yes. And I think to start with, Chris, the ones that have given up are participants that were not necessarily in the market to begin with, okay? So if we go back a few years ago, I've said this before, there was like 107 green and blue plants announced, of which I think there's 4 in construction today, of which ours is 1 of them. So there is a lot of hype about what clean energy was going to be. Our analysis never showed more than we were thinking, maybe 7 of that 107 million would be built. So I think we've been more pragmatic in this. As you look at that clean energy market, it's really similar to the DEF market that Bert mentioned. The 1 million tons that will be going both to JERA and Mitsui, our partners, is 1 million tons of incremental demand that didn't exist just a few years ago. And we're continuing to see some growth opportunities in Japan and other pieces of Asia, but it's going to be at a slower pace than what I think the original hype was on that. What benefits us is whether we have a low-carbon ton or a conventional ton. We produce it the same way, we store it the same way, we transport it the same way. So all those operational efficiencies that we have as an organization to lower our cost per ton on new construction and also the distribution of it reside with us and accrue to us that others don't have. And I think that's why you're seeing us continue to be bullish on both Blue Point and maybe even a Blue Point 2 is because of those assets and really that ability we have to move that product and to produce that product.

Well, I would say low-carbon or not, or gray or conventional, however you want to define it, we are competitive globally. And even with the premium, we're competitive globally, and we're proving that by our contracts that are in place and what we're sending to different places today, and that will only grow. And I do believe that the low-carbon value, especially in Europe, is going to continue to be valued and grow, and that demand will grow as well.

The next question comes from Vincent Andrews of Morgan Stanley.

Chris, I wanted to ask you on the dividend, maybe separately on another part of capital allocation. Just sort of what your thought process is? Obviously, as the share count comes down, you can pay a higher dividend without spending more money. So is that just the plan going forward? And should we be anticipating maybe getting to more annual dividend increases versus I think the last one was maybe '23. And then separately, from an M&A perspective, in the U.S., obviously, there's a limited number of assets, but one just traded. Do you still have scope from a regulatory perspective where you think if other things became available you would still look at that? Or should we be thinking about volume growth from here being more along the DEF or as you just mentioned, Blue Point 2?

Yes. So I'll just start with the dividend part and then maybe -- actually, let me start with the second question first, and then I'll go to the dividend and pass it over to Andrew as well. But on the M&A scope, so we did see the Gulf Coast Ammonia plant transfer to Yara is in the process of that. We do believe that we still have some room from an M&A scope. I mean, I think if anything, what CF has demonstrated just based on the prior answer I had given is that assets in our hands produce more production volume. Whether we go back to what we did when we acquired Terra back in the day with the investments we made, our best practice teams, we're just looking recently at Waggaman, where we've increased that, consistent production there, but by over 30%. So our ability to increase volume within a market, I think, is a key to allowing us to continue to do particular assets acquisition. Now as we look at those acquisitions, we want to be someplace that isn't in the third quartile or some place out that, from an operations standpoint, could be constrained as time goes on. We like our low-cost position. We like the low-cost, low-risk that North America from a geopolitical standpoint brings. So that's primarily where we're going to focus going forward, both organic and inorganic there. From the dividend before I turn it over to Andrew to get into some of the specifics. I think one of the underlying reasons is just our faith in where we see our mid-cycle and our free cash flow generation, not just this current year or next year, but over the entire cycle. We did see a stronger that we've been very focused on reducing fixed charges, of which dividends are one of them. But I think as we're seeing that free cash flow conversion and generation goes up, just makes us more confident in increasing it as time goes on there.

Yes. This is Andrew. The piece that I would share is our overall strategy on capital allocation has not changed. The hierarchy of driving strategic growth, share repurchases, and dividend, when you think about the dividend, I think of it as 2 fundamental principles. One, we want to be competitive with the marketplace. So the increase that we did took it from a 1.8% yield to 2.1% compared to the S&P of 1.1%. The second principle what I would share is, we're conscious of what we spend in absolute. And you can look and you can probably see there's a range that we tend to target. It's not a hard and fast rule, but it's a range, and that range allows us to fuel growth into the top of our pyramid on strategic growth. So those kind of principles that we apply as we look through it.

But it should also be noted, as we've said in the past, we believe our shares are still incredibly undervalued. And this whole geopolitical swings that we trade off of rather than the underlying fundamentals that we see going forward, we're going to continue to be aggressive in share repurchases as our #1 outlay of our capital allocation towards shareholders.

The next question comes from Andrew Wong of RBC Capital Markets.

So just kind of following up on that last thought there, Chris. And in the presentation, too, there's a couple of slides where you highlight the valuation disconnect that you see versus some of your peers, can you just talk about why you think that that's the case? What's driving that disconnect? And then what can you do at CF to kind of close that gap?

Well, what I would say that we can do to close that gap is continuing just to perform as we do at the highest level. Like I said, if you look at our free cash flow over the last 6 years on average is significantly higher than what we're suggesting the new mid-cycle is. So this isn't just a 1-year, 2-year type of thing. So for us, it's to continue to move forward and perform as we do from an operational looking for margin enhancement, whether that be a DEF project, other utilization or debottlenecks, or whether that's organic and inorganic growth that has return profiles well above our cost of capital. One of the reasons why I personally believe we trade in this is, I think people are still trading 10 years ago on CF. We've increased our production volume by almost 40%. We've reduced our share count by almost 60%. And yet people are still thinking we're this over-levered company that is doing expansion projects. We're a significantly different company today based on what our capital structure is, our free cash flow conversion, that hasn't happened by accident. That's come through very methodical. Our SG&A and our working capital are the lowest in the industry and by the industry, I mean basic materials, I mean, chemicals, everything. And there's almost this ignoring of that just to say, well, they're a fertilizer company, and we're going to place them against these 3 or 4 other peers, which I think is a complete mistake. And as long as our shares are undervalued, we'll continue to buy our shares back.

I also think there's a misunderstanding of our assets and the leverage points that we have in terms of where our plants are located, the diversity of the products that we make, the modes that we're able to ship, and then the terminals, where we're able to distribute as well as export to any country in the world. So we have all this flexibility on top of some of the lowest gas costs in the world, we are going to be a low-cost producer in a high-valued market with the best farmland in the world. And so when you put all those together, it's a unique mix that only we can satisfy and the rest of the world can't. None of our operating competitors can do that. That's why we think we should be valued differently.

Yes. I mean as you look out -- I mean, as you can see, we're $500 million into a $2.0 billion program. And as we try to look at our intrinsic value and what it should be, I mean, we're looking at DCF analysis, comps, replacement value, every calculation that we do suggests that there's an opportunity there, and so we'll continue to be opportunistic as we go.

And then maybe just one on costs. When I look at COGS and I ex out gas and [indiscernible], it does look like it's trended up a little bit in the past couple of quarters. Can you just speak to that? Is it mostly just the Yazoo City or anything like maybe some extra turnarounds or anything like that?

Yes. Let me give some color on costs in Q2. If you strip out the impact of volume and gas, our fixed costs were up about $75 million. And I'll do this kind of simply and illustratively, but it'll give you the context. So let's call that $70 million for the context that I'll share. About $10 million of that was distribution and logistics, and that was probably the smaller piece of the puzzle where you saw some load mix going from barge into rail, and the rate on rail itself has gone up a bit. The other $60 million is about a 50-50 split between higher purchased ammonia costs flowing through and the rest is fixed cost absorption tied to Yazoo City being down. So that kind of gives you the 3 pieces that are coming through there from a COGS standpoint.

And I would say that purchased ammonia, obviously, we have benefits of that, that flow through the revenue line and it is providing a margin, but it does provide higher COGS during that time frame. Additionally, one of the turnarounds we started during that time was ammonia 6. Ammonia 6, obviously, is our -- it's almost like comparable with 2 plants. So the costs associated with that in the years in which we do Ammonia 6 are always going to be slightly higher from a turnaround standpoint.

The next question comes from Matthew DeYoe of BOA.

I just wanted to reconfirm, for CapEx on Blue Point, like what -- what's your mix on fixed versus nonfixed EPC work? And...

Well, what I was going to say is essentially, when we looked at the Blue Point project, the one thing we tried to do was mitigate our overall costs related to that. And we did that in a couple of different ways. One was through our partnerships where we partnered with Linde and even Oxy's 1PointFive on the CCS unit. But additionally, even with Mitsui and JERA, where they're providing some insight and administrative benefits along with, as we go to the module yards in Asia. So I think that is one area where we look to lock down on some of those costs. What we have fixed is roughly probably about 50% of the CapEx related to that. And that is in a couple of different areas. One is in the engineering and the module yards, the other is in some of the lump sum turnkeys that we try to do on the infrastructure pieces, whether it be the tank or some of the dock and bridge work and things like that. So we feel pretty confident about how we're managing through this. As I mentioned earlier, we have our long-lead items for Blue Point purchase. So some of those things that we're seeing with extension of lead times or increases in costs related to those, we started those -- some of those critical items having contracts in place even pre-FID on the project itself.

Just as a quick follow-up, I mean labor and assembly and build out, I assume that's just like impossible to fix now in the Gulf?

I mean the portion that will be labor in the Gulf is going to be significantly lower than what we saw when we did the expansion projects back from 2012 to 2016. And that's because a lot of the work from the modular piece is going to be done overseas. So as a result of that, you're probably going to have maybe 1/3 of what the labor component was compared to what we saw last time. And that does a couple of things. One, that allows you to probably get more skilled labor in there because you have a smaller headcount that you're trying to do there, but also just limits the high-cost labor that would be in the Gulf Coast right now.

And if I could, Bert, I was just wondering about the underlying assumptions for 9 million to 10 million tons in India this year because I mean they obviously ended last year with pretty good balances given all that buy. So I'm just kind of wondering if that 9 million to 10 million assumes maybe shipments from last year into this year or that's really like a back half-loaded period?

If you do it on their fertilizer year, which is April through March, they had the tender for 2.5 million tons and a tender for 1.77 million tons so total to date is 4.27 million tons. They just announced a tender last week for an additional 1.7 million tons. And so you can do that math. That's roughly 6 million tons. We expect another tender by the end of this year. But they also tendered twice last year -- or in the calendar year, once in January and 1 in February. And so if you go into their fertilizer year, that would extend into January through March. And they did almost 2.2 million tons. So when you add those all up, that gets you to 9 million to 10 million tons expected. And you have to remember, they were -- they are an LNG importer, and they were running it suboptimally on their domestic operations. We estimate they lost 1.5 million to 2 million tons of domestic production. So rolling all that up and we're still not sure what can come out of the Strait on the forward market, I would say 9 million to 10 million is a pretty good estimate today.

The next question comes from Mazahir Mammadli of Rothschild & Co.

I just wanted to ask a follow-up on the midterm -- mid-cycle EBITDA targets. What is the sort of mid- to long-term market balance is assumed in that? I'm just going to give you an example. For example, India is striving to be more self-sufficient over the medium to long term in urea. You have a number of projects that are in development that should theoretically come online by the end of the decade, and that would theoretically remove demand from the global market. Is stuff like that factored in? How should we think about it?

One is, I think if you look at the overall supply growth over the next 4 to 5 years, India does have a few projects, some of which -- one of which is green that I think you have to start to put probabilities on what is the time frame in which that's going to go. But even with all the announced projects that are happening right now, you're going to have a deficit or an extreme tightness in the S&D balance as we see it going out through 2030. Now in saying that, just because India wants to become self-sufficient and other countries as well, doesn't mean that there's not a capital cost that's incurred in order to drive and build those particular plants themselves. And if you look at it from an economic standpoint, it may make more sense to continue the import or these particular projects can be delayed. So how we look at the mid-cycle is we do build in what we have in flight when we're working with engineering teams. And usually, you have a very good visibility, I would say, out 5 years because that's about the time it takes to build a plant. And then we start to manage that as time goes on and readdressing that. But today, really, as you look at the next few years, there's some plants -- there's a plant in Qatar, there's one in UAE, there's our plant and then one in Nigeria. But outside of that, I would say, the others are a little bit at risk, whether that be Russian plants or some of these Indian plants that are talked about to come on before 2030.

As well as there's constrained areas around the world we've identified in previous conferences or calls, but when you look at Europe and the gas spread and the age and the inefficiency of some of those plants and their long-term viability as well as what's coming out of in terms of LNG constrained areas like Bangladesh and some of the Southeast Asian plants that are also, I think, challenged. So on a going-forward basis, not every plant, which we saw the Brazilian shutdowns, they're talking about revamping, I don't think that's very viable long term with the gas -- the way gas flows there. And then there's Trinidad that's also limited on gas. So you have new capacity coming in and old capacity, which we believe won't be operable over the long term as well as demand increases over time.

And then I just wanted to sanity check something regarding 45Q. So when I look at Q1, there is $19 million of 45Q income, which, if I sort of divide it by the $85 a ton CO2 price, gives me a CO2 capture of slightly more than 200,000 tons. And as far as we know, Donaldsonville around 500,000 tons CO2 per quarter. Is that calculation missing something? Or is Donaldsonville CO2 still ramping up?

Well, I think there's 2 points there. One, the revenue through the first half of the year is about $45 million associated with the 45Q, not the number that you suggested. The second part is this year, we do expect the overall CO2 to be lower throughout the Donaldsonville facility, primarily because of the turnarounds that took place there. I mentioned earlier, Ammonia 6, which is effectively 2 ammonia plants with its production went through a turnaround. It's completed that turnaround now, but the turnaround began in June and went through July as well. So as a result of that, you're going to have lower CO2 that was available in order to sequester during that time frame. But I think the numbers themselves, where show through in the other operating income line are correct, that $45 million. And the one thing I would mention is that we are not taking it to a Class VI as of right now. And so as that is at $60 per ton, we do believe, just to maybe follow up on that, that the Class VI approval will be happening later this year, and then that will move to the $85 a ton. Economically, we're indifferent because our transfer today is at a 0 cost with Exxon, and it will move up to the contractual rate once the Class VI is in place.

The next question comes from Edlain Rodriguez of Mizuho.

Chris, in terms of the valuation, should we then expect to be more aggressive on the buyback going -- in the second half of the year because the pace seems to be a little slower in the first half? And more importantly, as you noted, late into the second quarter, we saw global urea prices decline. But what was most surprising to me was that in the U.S., prices not only a decline, but they were below last year's level. And that was despite all the supply disruption we had globally. Like how do we explain that?

So from the share repurchase -- I'll start with that, and then I'll let Bert touch on the urea pace. On the share repurchase, we have a significant amount of cash on our balance sheet. We have a program, as Andrew mentioned, is still open with plenty of room there, and we believe that we are trading underneath our intrinsic. So checking all those boxes, we expect to be into the market. Now having said that, when I look at how we're trading off of what happens on a tweet or basically what Pakistan is saying or something coming out of Oman or whatever, we're trading in the last 6 weeks between $100 and $140. So we're going to be opportunistic and grab more shares as we see some of that volatility exists. But we are committed to repurchasing shares. We have the cash flow to do it over and above what we're seeing from our strategic initiatives, and we'll continue to do that.

Yes. Regarding the Q2 price correction, you basically refer it back to where we were in the lows of Q1 and went up due to the hostilities in the Gulf and then reverted back down. A lot of that, I think, was trading off of rumors of peace and openness to the Gulf, and then we were at the tail end of our season. So a lot of trader liquidation taking place. I don't think a lot of physical tons moved at that level, but then we've since corrected back up to the $400, $415 level where we are today. And I think that's where we'll play out. And then as we talked about in earlier calls, earlier questions, the tightness, I think, will be more pronounced as we get to the back half of the year.

The next question comes from David Symonds of BNP Paribas.

Just another one on longer-term outlook. So China is still adding capacity the rest of this decade. Is your view that they can start to export more than the 4 millions to 6 millions tons you expect this year in the next few years? Or do you think they add capacity to replace older plants at this stage?

I think yes and yes. I think they've proven their ability to build new plants, but the amazing thing to me about China is the growth in demand. Today, they're running at about -- we target them at an 82% to 83% operating rate where we run at 98% to 99%. So you have to take their factor in terms of their capacities. They do have some older plants. There have been, over time, a replacement of urban plants or inefficient plants and into newer, more world-scale plants. And so -- but the growth in demand over the years where there are over 60 million, [indiscernible] million tons of consumption internally, the capability to export is there, but I think what the Chinese government has learned is exporting energy in the form of urea, but you're importing energy and LNG and coal, it's not a value-creating game. And so what they have determined or what they, over the last several years, have communicated is the urea and the energy basis and the subsidies they've given it should be benefiting the Chinese farmer and the Chinese consumer, and that has happened. So the domestic price in China is significantly lower than the global price. And over the last, I'd say, year or 2, they've controlled it through these export quotas and allowing certain times, levels, values to be exported which the global economy needs. So where they will be longer term. I think that where they are today in that 4 million to 6 million tons probably for this year and the next and will be determined later in the future. But I don't think they have identified urea or ammonium sulfate or any of the fertilizer products as an area to focus the attention and again, keep that for the Chinese consumer and farmer.

Ladies and gentlemen, that is all the time we have for questions today. I would like to turn the call back to Martin Jarosick for closing remarks.

Thanks, everyone, for joining us this morning, and we look forward to seeing you at upcoming conferences.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.