Methanex Corporation (TSX:MX) (NASDAQ:MEOH) announced today that,
in light of the significant uncertainty in the global economy from
the COVID-19 pandemic, resulting in a challenging commodity price
and project execution environment, it is taking action to defer
approximately $500 million of previously announced capital spending
on its Geismar 3 methanol project for up to 18 months. Methanex
also provided an update on other actions it is taking to strengthen
its financial position.
John Floren, President & CEO of Methanex,
commented, “We are taking proactive steps today during these
unprecedented times to further strengthen our balance sheet, while
maintaining long-term value and financial flexibility. We believe
that deferring major capital spending on our advantaged Geismar 3
project, and minimizing near-term spending, is a prudent decision
in the current environment. We have ample liquidity today with
approximately $800 million of cash on the balance sheet and we
continue to evaluate all capital and operating spending as we
navigate this challenging environment.”
This announcement follows the Company’s
previously disclosed decision to idle its Titan plant in Trinidad
effective March 16, 2020 and its Chile IV plant effective April 1,
2020, both for an indefinite period. Those two plants represent
approximately 19% of Methanex’s annual operating capacity of 9.2
million tonnes.
Details on Geismar 3
Project
The Company is placing its Geismar 3 project,
which will be its third methanol plant in Louisiana adjacent to its
existing Geismar 1 and Geismar 2 facilities, on temporary “care and
maintenance” for up to 18 months. The expected capital spending
during a deferral of up to 18 months is the same as the expected
capital spending that would have been incurred if the project was
cancelled outright. This action will enable the Company to complete
this highly advantaged project when market conditions improve.
The Company expects to spend approximately $100
million in Q1 2020 and a further $200 million from April 1, 2020 to
September 30, 2021 on the project, the majority of which is
spending that occurred or was committed during Q1 2020. This new
amount is approximately $500 million lower over the next 18 months
compared to the approximately $800 million that was expected to be
spent over that same period. Construction activity and procurement
of non-critical equipment and bulk materials will be suspended
until market conditions allow the Geismar 3 project to restart.
The Geismar 3 project, which is expected to have
production capacity of 1.8 million tonnes, benefits from
substantial capital and operating cost advantages compared to a
standalone greenfield project and is expected to significantly
enhance the Company’s asset portfolio with additional low-cost
capacity.
Financial Update
The Company is reducing other near-term capital
spending by approximately $25 million by deferring planned
maintenance activities, where prudent and without compromising
safety, to preserve cash and support balance sheet strength. The
Company’s flexible cost structure, where over 60% of natural gas
contracts are linked to methanol prices, along with anticipated
lower logistics costs, mainly through lower bunker fuel prices,
will reduce operating costs in the current environment. Natural gas
for feedstock is the Company’s most significant operating cost.
The Company has fully drawn on its $300 million
revolving credit facility and has drawn $136 million of its $800
million construction credit facility for the Geismar 3 project to
increase its cash position and preserve financial flexibility.
Business Update
Methanex’s number one priority is the safety of
its employees, contractors and the communities in which it does
business. The Company has activated its global and regional
pandemic planning and business continuity teams to monitor and
react to the situation as it evolves and to establish contingency
plans for a range of scenarios.
As of today, four of the Company’s over 1,500
employees are known to have contracted COVID-19. The four, who live
in three separate countries, are either asymptomatic or are
recovering and are self-isolating. COVID-19 has not directly
impacted the Company’s operations or global supply chain to
date.
John Floren commented, “We have not seen a
significant impact on our sales volume in the first quarter of 2020
as a result of COVID-19. While we anticipate lower methanol demand
in the near-term based on reduced manufacturing activity, we think
it is too early to accurately forecast how long or how extensive
the impact of COVID-19, and the resulting economic impact, will be
on the methanol industry and on our business.”
Methanex has implemented extensive preventative
measures across its operations and offices to support the health of
its employees while continuing to operate safely. These measures
include: implementing a no business travel policy across the
Company; moving to minimal staffing levels on-site and implementing
work-from-home arrangements where feasible; increasing social
distancing practices at sites; enhancing cleaning and disinfecting
protocols; and requiring self-isolation for employees who show
symptoms or are in close contact with someone with
symptoms.
About Methanex
Methanex is a Vancouver-based, publicly traded
company and is the world's largest producer and supplier of
methanol to major international markets. Methanex shares are listed
for trading on the Toronto Stock Exchange in Canada under the
trading symbol "MX" and on the NASDAQ Global Market in the United
States under the trading symbol "MEOH”. Methanex can be visited
online at www.methanex.com.
FORWARD-LOOKING INFORMATION WARNING
This news release contains forward-looking
statements with respect to us and our industry. These statements
relate to future events or our future performance. All statements
other than statements of historical fact are forward-looking
statements. Statements that include the words “believes,” "will,"
"anticipates," and “expects,” or other comparable terminology and
similar statements of a future or forward-looking nature identify
forward-looking statements.
More particularly and without limitation, any
statements regarding the following are forward-looking
statements:
- expected demand for methanol and its derivatives;
- expected shutdowns (either temporary or permanent) or restarts
of existing methanol supply (including our own facilities),
including, without limitation, the timing and length of planned
maintenance outages;
- expected methanol and energy prices;
- our expected capital expenditures;
- anticipated operating rates of our plants;
- expected operating costs, including natural gas feedstock costs
and logistics costs;
- availability of committed credit facilities and other
financing;
- commercial viability and timing of, or our ability to execute
future projects, plant restarts, capacity expansions, plant
relocations or other business initiatives or opportunities,
including our Geismar 3 Project;
- our financial strength and ability to meet future financial
commitments;
- expected global or regional economic activity (including
industrial production levels); and
- the potential future impact of the COVID-19 pandemic.
We believe that we have a reasonable basis for
making such forward-looking statements. The forward-looking
statements in this document are based on our experience, our
perception of trends, current conditions and expected future
developments as well as other factors. Certain material factors or
assumptions were applied in drawing the conclusions or making the
forecasts or projections that are included in these forward-looking
statements, including, without limitation, future expectations and
assumptions concerning the following:
- the supply of, demand for and price of methanol, methanol
derivatives, natural gas, coal, oil and oil derivatives;
- operating rates of our facilities;
- operating costs, including natural gas feedstock and logistics
costs, capital costs, tax rates, cash flows, foreign exchange rates
and interest rates;
- the availability of committed credit facilities and other
financing;
- timing of completion and cost of our Geismar 3 Project;
and
- global and regional economic activity (including industrial
production levels); and
- operating costs, including natural gas feedstock and logistics
costs, capital costs, tax rates, cash flows, foreign exchange rates
and interest rates.
However, forward-looking statements, by their
nature, involve risks and uncertainties that could cause actual
results to differ materially from those contemplated by the
forward-looking statements. The risks and uncertainties primarily
include those attendant with producing and marketing methanol and
successfully carrying out major capital expenditure projects in
various jurisdictions, including, without limitation:
- conditions in the methanol and other industries including
fluctuations in the supply, demand and price for methanol and its
derivatives, including demand for methanol for energy uses;
- the price of natural gas, coal, oil and oil derivatives;
- the ability to carry out corporate initiatives and
strategies;
- actions of competitors, suppliers and financial
institutions;
- our ability to meet timeline and budget targets for our Geismar
3 Project, including cost pressures arising from labour costs;
- actions of governments and governmental authorities, including,
without limitation, implementation of policies or other measures
that could impact the supply of or demand for methanol or its
derivatives;
- import or export restrictions, anti-dumping measures, increases
in duties, taxes and government royalties and other actions by
governments that may adversely affect our operations or existing
contractual arrangements;
- world-wide economic conditions;
- the future impact of the COVID-19 pandemic; and
- other risks described in our 2019 Annual Management’s
Discussion and Analysis.
Having in mind these and other factors,
investors and other readers are cautioned not to place undue
reliance on forward-looking statements. They are not a substitute
for the exercise of one’s own due diligence and judgment. The
outcomes implied by forward-looking statements may not occur and we
do not undertake to update forward-looking statements except as
required by applicable securities laws.
For further information, contact:
Kim CampbellManager, Investor RelationsMethanex
Corporation604 661 2600 or Toll Free: 1 800 661
8851www.methanex.com
Methanex (NASDAQ:MEOH)
Historical Stock Chart
From Aug 2024 to Sep 2024
Methanex (NASDAQ:MEOH)
Historical Stock Chart
From Sep 2023 to Sep 2024