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OCI NV
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Hello, everyone, and welcome to the OCI N.V. Third Quarter 2022 results call. My name is Serb, and I'll be the operator for your call today. [Operator Instructions]
We'll now hand over to Hans Zayed, Director of Investor Relations to begin the call.
Good afternoon, and good morning to our audience in the U.S. Thank you for joining the OCI N.V. Third Quarter 2022 Conference Call. With me today are Ahmed El-Hoshy, our Chief Executive Officer; and Hassan Badrawi, our Chief Financial Officer. On this call, we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook. As usual, at the end of the call, we will host a Question-and-Answer Session. Quarterly reports and the presentation are available on our IR website, and I would like to remind you that any forward-looking statements made on this call involve risks and the actual results could differ materially from those statements.
With that, let me hand over to Ahmed.
Thank you, Hans. Thank you all for joining us today. Hassan and I will provide some more perspective on the results we published this morning. We are pleased that our EBITDA and ability to generate cash remain consistent even during the third quarter, which is normally a quiet period for our business due to typical seasonality. Our adjusted EBITDA on LTM period of around $4.3 billion and our free cash flow of more than $2.7 billion have allowed us to make substantial distribution to shareholders this year and reduce our consolidated net debt to almost 0, while maintaining and growing our business.
I'd like to thank all our employees for this achievement as well as their strong commitment to safety, which is always our top priority. Our focus rolling reportable incident rate at the end of September was 0.36 incidents per 200,000 man hours, at a slightly lower level as of the end of Q2, and despite being below industry averages, we continue to stress our relentless focus on operational projects for the safety as part of our operational excellence program.
Before I hand it over to Hassan, I'd like to make one quick remark. In the previous 2 quarters, we have highlighted the performance of our European nitrogen operations, which has been excellent despite the difficult circumstances. I can't thank the team enough for their hard work, creativity and versatility to safely operate downstream units and provide essential fertilizers and chemical products in Europe despite extremely volatile conditions.
This quarter, the continued performance of our IFCo facility and our drive into DEF highlights our U.S. nitrogen operations starting to reach their potential and becoming an important source of free cash flow. Similarly here, the dedication of our operations team and the ingenuity of our commercial team have been the perfect addition to extract strong results out of our advantaged Midwest location state-of-the-art asset with its impressive logistical capabilities. Hassan?
Thank you, Ahmed. We recorded another good quarter with consolidated revenue up 52% to $2.3 billion, and adjusted EBITDA higher by 92% compared to the same quarter last year to just below $1 billion. You can see all the details in the press release and the presentation. I will not dwell too much on these, but I would like to highlight 2 features of our third quarter results as the year-to-date numbers.
First is the free cash flow generation and our capital allocation and the second, as Ahmed mentioned, for the performance of our nitrogen operations in the U.S. On cash flow, during the third quarter, we generated $392 million of free cash flow before growth CapEx and reduced net debt by a further $377 million. This is after deducting $333 million of dividends paid to non-controlling interest, mostly to Sonatrach, our partner in Algeria, as part of the annual dividend distribution for profits made that are attributable to the fiscal year in 2021.
In addition to some other minorities and Fertiglobe subsidiary, EBIC, our ammonia facility in Egypt, and another $50 million related to our methanol group minority distributions. We also spent $50 million of growth CapEx, the biggest part of which was spent on our blue ammonia project in Texas, which we announced in September, and I believe, Ahmed, will elaborate further on the progress being made on that front.
Our cash flows combined with extremely low leverage allow for robust variable dividends. And after the close of the quarter on 31st of October, we returned approximately $740 million of cash to our shareholders related to our first half 2022 performance with bringing total distributions to $1.1 billion this calendar year or about EUR 5 per share. In our press release this morning, we announced the proposal to distribute cash to shareholders of another EUR 3.5 per share or approximately $730 million based on current FX rates with respect to the second half of 2022 to be paid in April 2023.
Separately, Fertiglobe, which is 50% owned by OCI and fully consolidated, also announced today guidance for a cash distribution of a minimum of $700 million for the second half of 2022, and the final number would be confirmed in February. OCI share of the dividends will be there for a minimum of $350 million, the other half to be paid as usual to minority to the shareholders, which includes our strategic partner, ADNOC and other minority investors on the Abu Dhabi Stock Exchange. We continue to operate within investment-grade parameters, balancing our growth with returning capital to shareholders.
Secondly, zooming in on IFCo's results, IFCo's own trajectory to demonstrate this potential with an LTM adjusted EBITDA of $700 million at the end of the third quarter. If you exclude the trading results of the N-7 joint venture and one-offs, EBITDA margins were 60% in Q3 and around 70% year-to-date, which is one of the highest margins in our system and in the market. So as that cash conversion of our young IFCo plans are amongst the highest in the group and industry having successfully refinanced that earlier this year, also removing all historical up streaming restrictions. In addition to our Midwest advantage, our U.S. DEF business is growing to become an important contributor to this performance. We have the second largest market share in the U.S. DEF market, which are significantly tightened in 2022 with healthy pricing and premiums compared to urea.
The higher netbacks of DEF compared to other nitrogen products has driven an increased focus of DEF and our flexible product mix and enabled us to continue to enhance returns for our U.S. nitrogen operations going forward. We have also started decoupling DEF contract pricing from fertilizer and linked NOLA urea pricing, which further provides diversified stability for our U.S. business that is appreciated by our customers in terms of predictability going forward.
With that, I will hand over to, Ahmed, to provide further commentary on our outlook and strategic initiatives. Ahmed, back to you.
Thanks, Hassan. Our short-term and long-term outlook have not changed directionally or meaningfully since we last spoke in August, despite short-term volatility in markets. Nitrogen fundamentals remain supportive based on 4 key paradigm shifts outlined in our press release and presentations, providing support for pricing to remain well above historical averages in the coming years.
Number 1 is tight supply and demand fundamentals in our urea and ammonia markets over the next 3 to 4 years, just because of the barriers that entry to build new plans and no surprises on the supply side. Number 2, crop fundamentals and higher farmer profitability remains positive for nitrogen demands with critical grain stocks at decade lows. Number 3, structurally a higher gas price environment in Europe for all periods, increasing marginal cost of production for the central nitrogen products. And number 4, the push towards focus on climate change, the environmental focus, limiting outright great capacity indebted additions and providing significant demand for upside -- demand for potential clean ammonia in the future as a field source.
Shorter-term nitrogen market fundamentals in '23 are expected to remain tight given the forward curves for grain, which is essentially supporting nitrogen application, and the forward curve for European gas, combined with slowing supply additions. We have a solid order book in the U.S. for fall ammonia with farmers taking over 90% coverage at a higher pricing levels that we witnessed this year, indicative of healthy pharma economics.
We're also ahead of last season on fall ammonia application with around 10% prompt demand left to cover in the Midwest, depending on how the weather pans up. Weather has been favorable so far, and we anticipate that the rapid pace of harvest will support strong fall in ammonia demand and normal application areas of nitrogen. UAN and urea coverage for the spring is lagging behind last year with significant pent-up demand expected in the coming months, particularly with the larger corn acres expected to be planted in this coming season versus the one we just finished.
In Europe, we have a good order book on nitrates. Farmers in Germany and France are on par with last year, but other regions are likely behind due to limited supply and loss production due to curtailments that we've seen so far this season. Farmers in Europe typically buy more once they have sold their harvest and farmers have hedged around 60% to 70% of their new crop and sowing of winter crops is on track, which is positive for demand. The good harvest in summer also mean that the nitrogen contents to oil is low, and there is real need to replenish and we expect high application rates in Europe in this upcoming season. We're seeing strong urea demand in India with another tender issued just today on the back of the stronger Rabi season sales season.
So far, a nutrient-based subsidies publish this week are in favor of urea over season case. We expect India to buy over a million tons, taking total imports in 2022 to almost 9 million tons, which compares to 7 million tons imported in 2021. At least one more Indian tender is expected to be issued in Q1 2023, and we expect robust Indian imports in 2023 of over 7 million tons. Might do the increase this year to 9 million tons is a factor of very low inventories at the start of this year versus 2021, which had some inventories at the beginning of that year going into 2021.
We have seen volatile urea pricing in the last few weeks, trading largely on sentiment amidst bearish headlines relative to weaker European gas prices and lower NOLA urea -- lower urea barge values due to issues in the river system. This bodes well for our Midwest positioning at Iowa Fertilizer in terms of the pricing outlook. However, the fundamental outlook remains supportive, and we have started to see pricing recovering and most of the length in North Africa having been sold this week, which combined with the latest in the intender, supportive of pricing recovering further in the coming months, especially as seasonal buying kicks off.
European urea production is operating at around 40%. Chinese exports remain curtailed and they're significantly lower than last year. And we're still seeing gas and other related curtailments in Nigeria and Trinidad. Urea pricing and demand is further supported by government-backed demand that we've seen in Pakistan, Bangladesh, and Ethiopia combined with higher seasonal imports in the United States, Europe, Brazil, and Australia ahead of the application season in the first half of 2023, providing a solid backdrop for Fertiglobe and OCI Nitrogen.
For methanol, the volatility in the macro environment has had some effect on prices in Q3. But last week, the U.S. contract price for November 2022 settled at $584 a ton at the same level as both September and October, and prices have been relatively range bound. We are currently seeing stable methanol markets going into 2023 and continued downstream demand from a diversified customer base for the product. Medium to long-term, we see meaningful additional upside from hydrogen fuel demand, notably for power and road and marine fuel applications, and we continue to make good progress with our pipeline of projects to capture these accretive opportunities.
Number 1, we see that in 2024 -- starting 2024, we'll see meaningful uptick in methanol as it gains traction as the shipping fuel or demand on that side. For example, France's CMA CGM ordered 6 -- 15,000 TEU ships and COSCO shipping also ordered 12 methanol dual-fuel 24,000 TEU container ships just last week. COSCO vessels alone would amount to up to 1 million tons of methanol demand. And based on current orders anticipated from the container vessel segment alone, we see more than potentially 2 million tons of demand in methanol, which is quite significant on a 110 million tons a year market. Engineering from MAN Energy Solutions also expects methanol propulsion to take as much of 30% of dual-fuel engine orders within a few years.
And recently, the Pacific Basin announced the following a feasibility study conducted together with Nihon Shipyard, and the company and Mitsui, that methanol propulsion will be the best choice for its first generation of zero-emission vessels. Further, Atlantic bulk carriers and trading firm cargo separately announced intentions to be operated -- operating methanol fuel bunkers within the next few years, all of this boding well for our methanol business and particularly the leader in the growing bio-methanol and low-carbon methanol business globally as we speak.
Number 2 was 2025 plus you see the introduction of ammonia as a clean fuel in the power sector. Regulations in Europe as well as in Asia, for example, the CBAM or the Carbon Border Adjustment Mechanism in Europe in 2026 is expected to accelerate the transition and raise the marginal cost floor for nitrogen, creating significant opportunities for us in our global businesses.
Specifically, we expect to also benefit from the startup of our recently announced Texas Blue project in 2025, well before any other announced projects will come online, particularly with many of them still pre-FID. Our Blue Ammonia project in Texas of 1.1 million tons is well underway with the EP contract, already awarded in March of this year, all long-lead equipment items ordered and preliminary site preparation work expected to be completed by the end of this year with a groundbreaking next month in December.
We will be the first world-scale low-carbon ammonia projects to commission and will be utilizing existing infrastructure at our Beaumont site to export ammonia to the Midwest -- to the U.S. Midwest fertilizer market as well as the U.S. Gulf Coast market, serving growing clean ammonia demand worldwide as well with strategic advantage supply to Europe using our Rotterdam terminal, which, as we all know, is tripling its capacity to 1.2 million tons per annum by late next year, early 2024. In the future, we can serve the full value chain by delivering the blue ammonia using new ammonia fuel vessels ensuring a minimal carbon footprint.
To conclude, we are proud of what OCI and the Fertiglobe teams have achieved so far and are excited about the prospects for the company. Fundamentals provide solid support for our 2023 and 2024 and '5 outlooks for our end markets, and we're excited to see significant upside potential from both operational improvements through manufacturing excellence program and our low carbon growth initiatives, where we believe we are one of the best places in the industry with our global footprint and diversified product offerings.
With that, we will open the lines for questions.
[Operator Instructions] The first question today comes from Christian Faitz from Kepler.
Ahmed, in your speech, you already answered quite a few of my questions. So the -- certainly, the current fall application season and ammonia take off. But can you tell us a bit more about CapEx and scheduling for your blue ammonia project in Houston? Can you also, in that respect, benefit from any special tax breaks pertaining to the U.S. Inflation Reduction Act? And can you actually perhaps quantify those.
So I'm happy that with the prepared remarks, we were able to answer some of your questions preemptively. But with regards to the Texas Blue project, in terms of spending and in terms of the profile, we'd say that it's a sub-billion total CapEx number. We'll provide more details over the coming few months and quarters. But I can say that at this point, with regards to the tax rates under the IRA or the Inflation Reduction Act, one of the areas where we intend to -- that we intend to leverages the 45Q program, which provides $85 a ton of tax credits for 12 years once you bring into service the flat when you have carbon sequestration, we're sequestering over 9% in CO2 from this project.
You're talking about for a 1.1 million ton ammonia plant, something in the order of 1.7 million tons of CO2 sequestered -- so we take the $85 as gross from the government, let's say, you spent $15, $20 to kind of get it in the ground. Roughly, if you use just rough math, $70 a ton net times 1.7 million tons, that's $119 million a year that's coming as an additional tax credit that we can utilize to offset taxes or sell to third parties as well.
So that's kind of one of the tax attributes that's supportive of the economics of the project in addition to obviously having U.S. Gulf Coast gas as a feedstock into the overall complex, which has access to many different pipelines and the location to be able to export to global markets, replacing what we did -- what we expect to see some shutdowns in Europe over the coming few years ammonia production as well as accessing the domestic markets in the U.S. Gulf Coast and as I said, Midwestern markets.
Our next question comes from Faisal Azmeh from Goldman Sachs.
Congratulations on the strong set of numbers. Maybe just a quick question on Chinese exports. I guess one from some recent discussions with some consultants, they do tend to feel that maybe some of those experts are making or could make their way to the market at some point or some of the volumes out of China can make its way to the market at some point. Is that a risk that you think that could materialize anytime soon or sooner than the middle of next year?
And another question is, are you seeing any supply response at all from some of the other markets. We've heard that Nigeria could potentially be thinking about adding some capacity. Is that something that also you would think about or you've heard about and you can take that it can pose some upside risk to the supply figures over the next couple of years?
Obviously, we've discussed the extension of some of the restrictions for Chinese exports, but there are tons leaving China now. I mean usually you see them happening post the middle of the year and post their season in early July. We think that there have been 1.6 million tons year-to-date exported from China. And by the end of this year, we'll probably be at around 2 million tons exported from China. And I think that's necessary to kind of supply the global markets. Recently, the Chinese trader was awarded, I think, 0.5 million tons to go to Ethiopia and the most recent tender through Q2 of next year.
And so if they do less than -- if they do 100, 150 a month, they can achieve that. But we -- it still has yet to be seen because we've seen awards happen and whether they're fulfilled or not the question, but that would take a decent portion of the tons going up.
We've also continued to see the environmental controls and operating rates being lower in China, and obviously see China is importing a lot of the energy to support production there to get that going. And they are focused on not having prices go up too much domestically. So I think they're going to continue to focus on not having that get out of control in their mind, and we don't see the export restrictions subsiding before with preannounced, which is July 1 of next year.
And then can you remind me with you your next question was?
Just on Nigeria and supply growth as you're seeing in activity market.
I mean it's the same situation. I mean we don't see any surprises, right, in terms of what comes to the market. Generally, if there's new announcements, and I think there could be new feeds and everything like that, to try to FID a project that's still you're talking 3, 4 years down the line at best, best case. But there is -- there has been production that came online from Dangote and there are more recently, and I think there's some that's projected. I think most recently, there have been some issues with the flooding there and some of the infrastructure on gas. But they're already having tons making their way to the market in the year-to-date S&Ds. But any new kind of announced projects as you know, will take 3, 4 years to best case make the market.
And maybe if I could squeeze with just one just a question. Just on the methanol assets, I mean you've monetized a small portion at the beginning of the year. Any potential to monetize an additional stake at some point? Is that something that you and your partners are actually in discussions about? Or do you think that's the maximum that it can go down to?
Obviously it was contributed to our accelerated deleveraging the 15% -- the monetization, a 15% stake, which obviously has some strategic considerations built into it for the future. But given -- I would not -- I would say we're not pressed or to consider any further M&A at this moment. But as you know, we always evaluate opportunities that come our way and our DNA. So if something does make sense strategically, we will definitely look at it. But right now, we're just focused on delivering on our growth and plans and our de-carbonization objectives. And in the meantime, we're also focused on managing our -- an optimal balance sheet.
And I'll just add to that, basically, if you think about how we see methanol being valued by our investor base within our company, we think that the best is still yet ahead for methanol. In terms of what I just walked through with regards to the marine fuel demand really kicking off in 2024 in a strong way and not much new supply coming over the next 3 to 4 years, then I think that we do think there are brighter days ahead there. So we want to make sure that we opportunistically, as Hassan said, look at what makes the most sense for us.
The incremental movement in that market, given the size based on what could come from shipping fuel alone can be transformational for this market for the -- in the next 3 to 4 years or so. We'll see how that plays out.
And I guess maybe a reverse question there, then maybe -- I mean, would you think about adding more capacity given the opportunity and the strong balance sheet that you have today? Or expanding some of your existing facilities?
So anything we've been looking at on a growth CapEx basis, as you've seen when it comes to the kind of organic growth has been trying to leverage our existing facilities. We know in OCI Beaumont, we added 10% debottlenecking, which made a lot of sense. And we rank all our growth investment opportunities, whether it's in the methanol group in our nitrogen assets in Europe or the U.S. or in Fertiglobe look at what makes the most sense in terms of capital allocation. And I'd say that the ability to decarbonize and get more bio-methanol or low-carbon methanol is going to be one of the key areas of focus, not necessarily having more tons, but having some lower carbon tons. And if we can get some more tons out of it in the process, so be it.
Our next question comes from Mubasher Chaudhry from Citi.
The first one is on European capacity restarts. I think you mentioned that the urea capacity to remain about 40% off-line. Can you make a couple of comments around the ammonia side of things, please? And where you see that at the moment across Europe in terms of utilization? And second question is kind of related to that but on a more medium-term footing. Do you need to take some sort of impairment to your current asset footprint in Europe, given the lack of profitability and therefore need to impair the assets? I assume on your ranking of investments on organic projects, organic growth projects, Europe come quite low down at the moment, but more around kind of the existing asset footprint? Do you need to take any impairment around that?
So I mean, Mubasher, with regards to where we see things running right now. We do think that they're on the back of some lower European gas prices over the last, call it, 6 to 8 weeks where they had really came down. We do think there has been some resorts that have taken us probably brought online 4 million tons out of the 11.5 million that were shut down at peak, so call it, 7 -- 7.5 million tons remaining still offline in Europe. That could change, obviously, if they had shot up today. And the month-ahead numbers are in values, I think above, $1,200 - $1,300 a ton, including CO2. So they're pretty marginal and people are afraid -- sorry, excluding CO2 closer to 1,500, including CO2.
So people are afraid to start stop. So it's a difficult decision. It's one that we have to think about in Geleene as well in our Dutch facility. So we do think some have come online. But in short, I think that it's challenging to see them -- see a lot coming more online until you see higher prices versus same period so that you can kind of hedge some gas and make a margin.
With regards to the impairment, I'll turn it over to Hassan, who can walk through that.
In regards to the Dutch operation, we don't have any real impairment risk because these assets are fully depreciated. Obviously, there is some CapEx over the years that has to do with replenishing equipment. So there might be some minor numbers there, but nothing substantive. This complex is one of the older complexes in our ecosystem. But yes, so no downside there. Not material downside there.
I mean remember, we bought these assets in 2009 for…
2010.
2010 for EUR 310 million. But also I'll say that in our complex in Geleene, we've made pretty strong margins in the last 3 months -- 3 quarters. And it's probably you're referring to, Mubasher, the question around just the ammonia plant because we run only 1 or 2 plants for the last year generally. But all the downstream, I think, has done quite well, and there's no reason to review impairment.
As we have continue to operate.
Yes. Does that answer your question?
Yes, yes, very helpful.
Our next question is from Adrien Tamagno from Berenberg.
I have a couple of questions on DEF. So in the U.S., you have ramped up a lot of the capacity there in Iowa. I was curious to see if your distribution agreements are flexible in terms of volumes. And if you can switch back to UAN and urea, let's say, in spring next year, if you have a tight inventory situation in the U.S. And on the pricing there, you said that it has been depot from urea. So can you maybe help us how to think about it? Is it going to be like big for the next couple of years or more color here would be helpful. And lastly, tips for the year, but in the Netherlands, what incremental capacity, just to see if this would replace on urea production in the Netherlands.
Sure. Really good questions. So your first question, do we have the flexibility in our logistics and everything to switch back to UAN and the answer is absolutely. So we could go to 0 DEF and Iowa if we wanted to. We don't expect to with the tightens of the DEF market and the advantages we have relative to imports for DEF and the growth in DEF demand. But we have the ability to do 0 DEF we can go over 1 million tons at that site at IFCo as well, just supervising what's in the market.
To your second question with regards to the pricing, yes, our ability to get more predictability for the customers as well as ourselves around pricing was something that I think is well-received, particularly because at the end market, DEF is not priced at the truck stop on NOLA urea basis. And so I think that's been helpful for the customer base. And for us in this tighter market, I think the team has done a good job of securing volumes outside of that linkage NOLA. And that also helps us because what is our feedstock is based on Henry Hub gas, and we've actually hedged a decent portion of that through 2027, 2028. So trying to create some more predictability around portions of one of our highest free cash flow generating assets has been the goal here, and kind of can help kind of solidify a portion of the results there on an EBITDA and free cash flow basis.
Your third question was around, I think DEF in Europe, which we just announced that we're -- we've undertaken an FID to project to do that. What that means is that we will have the ability to produce Diesel Exhaust Fluid instead of, for example, UAN and/or potentially use more of our urea. We don't always our urea lime to the full. It's usually -- you use it for melamine and then we kind of flex up and down for UAN based on nitric acid availability between UAN and CIS. So this will allow us, if we decide to produce more CAN and less UAN and for example, import UAN from the United States, which our trading team has done a great job of doing to meet needs in Europe, then we can produce and sell DEF in the local Finolex market with strong logistics, and we anticipate having that online in early 2024. And as you saw, we're already starting to make sales via product from Fertiglobe.
[Operator Instructions] There are no other audio questions at this time. So I'll hand the floor to Hans for any webcast questions.
So there's a few questions on the webcast. So the first one is from Apker Battenhouse. We are now halfway Q4 and gas prices in Europe have dropped quite some amount. Do you expect a further decline in ammonia and urea pricing this quarter and start of next spring season.
So yes, gas prices have decreased quite a bit, but we've seen that be more in the day ahead current spot market rather than in kind of the forward markets. For 2023, you're seeing gas pricing at a level that has -- they're actually not even for 2023. Let's start with December. Based on December, gas pricing, ammonia is at $1,500 a ton cash cost in urea is at $900 a ton cash cost both well above where the markets are priced right now. And for 2023, that number is 1545 for 2023 ammonia cash cost in Europe marginal and EUR 925 million per urea cash cost marginal.
So like we said earlier, there's been some volatility in the markets. And the way the market works is that often buyers will wait to find a floor or bottom before stepping in. So that kind of creates a self-fulfilling proxy when prices are going down as we saw over the last couple of months, but we have seen a sharp rebound in the last year to be exacerbated by the recently announced India tender.
The next question is, are you considering besides dividends, a share buyback program, it's becoming common in the sector nowadays because of the large free cash flows that the sector generates at the moment.
OCI has some unique circumstances, and we try to address firstly, 2 parts to answer. The first part is that we have an efficient way of returning capital to our investors with almost no taxes for all shareholders due to the sort of reserve that we have associated when we domicile the company in the Netherlands that allows us to do capital reductions and distribute cash without any leakage. So we have an efficient mechanism that we've been using. And that's why we've been all competing an EGM every 6 months through the capital reduction process and a creditor opposition period. So quite a bit of logistics that we go through to make this an efficient distribution.
Secondly, given the nature of the construct of our ownership were acutely conscious of the -- of our liquidity. And you've noticed that over the last year, OCI's liquidity has improved dramatically, not just because of the notional value of the share, but also overall various initiatives were undertaken to improve and we would like to maintain this liquidity standard going forward, which I think is extremely attractive. It makes us more attractive for invest the investment community overall.
So the next question is from Sam Thompson. Could you guide us on the magnitude of distribution to minorities for 2023, Sonatrach, EGPC, et cetera, given they are backward looking.
Well, it's a good question. I think if you assume that Sorfert in Q4 for the sake of getting to a number, achieves a similar EBITDA to the previous quarters. And as you know, Sorfert has one annual distribution usually in Q3 related to the prior year, ad combined with some of the withholding tax that we have, that gets us to a number of around $880 million. You then have some other leakage associated with our metco minorities of 15% and also -- sorry, back to Fertiglobe also, our EBIT minorities of 15% there as well. I would say the 35%, that's correct. I mean, I would say that the total minority leakage would probably be in the ordinance of around $950 million.
At the OCI level, then you would have to add to that, whatever is the 50% leakage associated with the distribution of dividends from Fertiglobe to OCI. So for every $500 million incremental dividend, that's $250 million of leakage.
Next question is from Michael Hughes. Could you please talk about U.S. inventory levels in the channel and at the farm level.
So with regards to the U.S. inventory levels, we did see some extra inventory because of the lower planting in this last season and a poor spring application for ammonia. So what has happened since the middle of the year since planting in Q2 is we've seen exports of ammonia at a record basis from the U.S. Gulf Coast. We've seen exports of UAN and also record places. And we've seen exported urea also on record basis. So a lot of that inventory has worked its way out of the U.S. system.
So I think we're at a relatively healthy level right now in terms of market, and we did see quite a lot of appetite, as I mentioned in the prepared remarks, of 90% prepaid on the ammonia for fall application. And so far, with the strong and with the harvest completing and the weather being favorable, we've seen very good movement from our Iowa Fertilizer Company site just in the last few days. And from what it looks to be, we should see a very strong fall application and then we'll see people looking at spring prepaid for ammonia in December as well as urea and UAN demand kind of really picking up to make sure they can secure enough volumes before they make their way -- I mean the U.S. farmer is going to have to compete against exports to Europe basically. We're also going to be looking for volumes at the same time as gone a little bit earlier. So I see that there's quite a bit of tightness, particularly on urea in United States as well given all those historic exports.
The next question, I think we've already discussed a bit, but at current spot net gas prices in EU plants would produce roughly at breakeven. Do you see any EU mothball capacity back to reopen?
Yes. I mean I think that with regards to the decision to restart, the way we think about it and look at it is, can you sell the product forward and can you hedge the gas at a reasonable level and make a margin. And from what we can see for the restart, yes, it would have made sense this month with the benefit of hindsight. But December Q1, Q2 of next year have all been relatively elevated at over EUR 130 a megawatt hour at levels of cash costs that I just walked through, around $1,500 from only $900 per urea that we haven't seen in some one. And that's just variable cash cost, not even fixed costs.
So when you think about it, that decision is a tough one to do to be able to bring it online. I think that we've seen some brought online for batch level production, but you don't sell the fertilizer out long enough so that you can hedge the gas and the gas wasn't conducive for a proper margin as well. And the only other way to kind of beat that is to buy ammonia in and produce off of bout ammonia, but you can't buy ammonia in more than a few months now.
So I think there's quite a bit of a challenge. It's something that, like I said, that's why the first thing I said here was we need to comment -- we need to really thank the team in Europe for trying to produce as much downstream products as possible in this volatile environment. So yes, so that's where we stand right now. I think I also gave some statistics earlier on 2023 and 2024 breakeven -- sorry, 2022 and 2023 breakeven ammonia and urea. But for 2024 and 2025, gas is still at $27 MMBtu in the forward curve. And so if you include CO2 costs of the forward curve for CO2, that's $1,120 ammonia and $680 urea implied by the forward curve for marginal costs in Europe through the end of 2025.
I think we've got all the questions on certain topics that we're here, unless there's anything coming up on the other side. Otherwise, I'll get hand back to Ahmed.
All right. Thanks, everyone, for joining the call and speak to you next quarter.
Thank you. This concludes today's conference call. You may now disconnect your lines.