Methanex Corporation (TSX:MX) (NASDAQ:MEOH) announced today that
its Board of Directors unanimously approved two key decisions
aligned with its capital allocation priorities:
- A restart of construction on the Company’s advantaged Geismar 3
project, and
- A reset of the quarterly dividend to $0.125 per share from
$0.0375 per share
These decisions complement a separate
announcement yesterday on an agreement with Mitsui O.S.K. Lines,
Ltd. (MOL) on key commercial terms for a strategic shipping
partnership. The agreement is expected to realize strategic
benefits for our Waterfront Shipping business and unlock $145
million in non-dilutive capital to further strengthen our financial
position.
John Floren, President & CEO of Methanex,
commented, “We are very pleased to announce these important steps
that we believe will deliver long-term value to our shareholders.
The timing is right to restart construction on our Geismar 3
project as the methanol industry outlook is positive, we have a
strong financial position to fund the project and the project has
been significantly de-risked and is well positioned to be completed
on-time and on budget. Geismar 3 will strengthen our asset
portfolio as it will be one of our lowest cost plants, with access
to abundant and low-cost natural gas and have one of the lowest CO2
emissions intensity profiles in the industry.”
“We expect our future cash generation capability
will be enhanced by Geismar 3, a unique project with significant
capital and operating cost advantages. Geismar 3 is our only major
growth capital project expected over the next few years. We are
pleased to announce an increase in our dividend, and we expect that
Geismar 3 will support a substantial increase in our shareholder
distribution potential in the years to come.”
Geismar 3 will benefit from favourable
methanol industry fundamentals
Current methanol industry fundamentals are
positive as growing methanol demand, low global inventory levels,
ongoing industry supply challenges and a rising energy price
environment have supported higher methanol prices. Over the medium
term, we believe that the industry will need new supply to meet
growing methanol demand.
We expect strong methanol demand growth of
approximately 16 million tonnes or 20% (~4% CAGR) over the next
five years. That compares with just 14 million tonnes of new
industry capacity additions over that same period, including
Geismar 3. With limited project commitments beyond 2022, industry
operating rates will need to increase to meet growing demand.
Strong financial position to restart
Geismar 3 construction
We recently completed deleveraging initiatives
and credit facility amendments to further strengthen our balance
sheet and enhance our financial flexibility:
- Repaid $173 million drawn on our Geismar 3 construction
facility;
- Reduced the size of the Geismar 3 construction facility by $200
million to $600 million;
- Extended the maturity date on our $600 million Geismar 3
construction facility to 2025 from 2024; and
- Extended the maturity date on our $300 million revolving credit
facility to 2026 from 2024.
These completed credit arrangements supplement
the proceeds of $145 million from our strategic shipping
partnership with MOL.
As a result, we have a healthy cash balance
underpinned by access to $900 million of undrawn backup liquidity
beyond the expected Geismar 3 construction period.
Geismar 3 is de-risked, on budget and
on-track for commercial operations by late 2023/early
2024
We now estimate the total capital costs for the
Geismar 3 project to be $1.25 to $1.35 billion, lower than our
prior estimate of $1.3 to $1.4 billion. This revised estimate is
based on a significant reduction in the project’s execution risk
profile. We expect that approximately $435 million will be
committed to the project as of the end of Q3 2021 through the care
and maintenance period. We expect approximately $800 to $900
million of remaining capital costs after resuming construction in
October 2021.
We plan to fund construction with cash on hand
and future cash flow (without incurring incremental debt) at
methanol prices of approximately $275 per tonne and higher. In
addition, if sustained methanol prices are approximately $325 per
tonne or higher, we anticipate that we will have the ability to
further de-lever and increase shareholder distributions during the
Geismar 3 construction period.
Commercial operations are targeted for the end
of 2023 or early 2024.
Consistent capital allocation priorities
with emphasis on financial flexibility
Our capital allocation priorities remain
unchanged to (1) maintain our business, (2) pursue profitable
growth opportunities, and (3) return excess cash to shareholders.
Within this framework, we are increasing our emphasis on financial
flexibility. This means that we will target higher cash balances,
lower leverage and a greater weighting on flexible vehicles for
distributions, such as share buybacks, on top of a sustainable
dividend. Today, we reset our regular quarterly dividend to $0.125
per share from $0.0375 per share.
Conference call and webcast
Methanex management will host a conference call
on Friday July 16, 2021 at 10:00am Eastern Time (7:00am Pacific
Time).
Presentation materials can be found at
www.methanex.com/investor-relations
To access the call:
- A simultaneous
audio-only webcast of the conference call can be accessed from our
website at www.methanex.com/investor-relations/events and will also
be available following the call.
- Dial the
conferencing operator fifteen minutes before the start of the call
at (416) 340-2217, or toll free at (800) 806-5484. Passcode
2006427#.
- A playback version
of the conference call will be available until August 16, 2021 at
(905) 694-9451, or toll free at (800) 408-3053. The passcode for
the playback version is 5267544#.
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,"
"expects," "may," "will," "should," "potential," "estimates,"
"anticipates," "aim," "goal", "targets", "plan," "predict" 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 new methanol supply or restart of idled capacity and
timing for start-up of the same,
-
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,
-
expected levels of methanol purchases from traders or other third
parties,
-
expected levels, timing and availability of economically priced
natural gas supply to each of our plants,
-
capital committed by third parties towards future natural gas
exploration and development in the vicinity of our plants,
-
our expected capital expenditures and anticipated timing and rate
of return of such capital expenditures,
-
anticipated operating rates of our plants,
-
expected operating costs, including natural gas feedstock costs and
logistics costs,
-
expected tax rates or resolutions to tax disputes,
-
the timing of the closing of the sale of a minority interest in our
Waterfront Shipping subsidiary,
-
expected cash flows, cash balances, earnings capability, debt
levels and share price,
-
availability of committed credit facilities and other
financing,
-
our ability to meet covenants associated with our long-term debt
obligations, including, without limitation, the Egypt limited
recourse debt facilities that have conditions associated with the
payment of cash or other distributions,
-
our shareholder distribution strategy and expected distributions to
shareholders,
-
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 GDP growth,
-
expected outcomes of litigation or other disputes, claims and
assessments,
-
expected actions of governments, governmental agencies, gas
suppliers, courts, tribunals or other third parties, 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,
-
our ability to procure natural gas feedstock on commercially
acceptable terms,
-
operating rates of our facilities,
-
receipt or issuance of third-party consents or approvals or
governmental approvals related to rights to purchase natural
gas,
-
the establishment of new fuel standards,
-
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,
-
the expected timing and capital cost of our Geismar 3 Project,
-
global and regional economic activity (including industrial
production levels) and GDP growth,
-
absence of a material negative impact from major natural
disasters,
-
absence of a material negative impact from changes in laws or
regulations,
-
absence of a material negative impact from political instability in
the countries in which we operate, and
-
enforcement of contractual arrangements and ability to perform
contractual obligations by customers, natural gas and other
suppliers and other third parties.
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,
-
our ability to obtain natural gas feedstock on commercially
acceptable terms to underpin current operations and future
production growth opportunities,
-
the ability to carry out corporate initiatives and strategies,
-
actions of competitors, suppliers and financial institutions,
-
conditions within the natural gas delivery systems that may prevent
delivery of our natural gas supply requirements,
-
our ability to meet timeline and budget targets for the Geismar 3
Project, including the impact of any cost pressures arising from
labour costs,
-
the signing of definitive agreements and the receipt of regulatory
and other customary approvals in respect of the sale of a minority
interest in our Waterfront Shipping subsidiary,
-
competing demand for natural gas, especially with respect to any
domestic needs for gas and electricity,
-
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,
-
changes in laws or regulations,
-
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 impacts of the COVID-19 pandemic, and
-
other risks described in our 2020 Annual Management’s Discussion
and Analysis and this Second Quarter 2021 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:
Investor inquiries:Kim
CampbellDirector, Investor RelationsMethanex Corporation604 661
2600 or Toll Free: 1 800 661 8851invest@methanex.com
Media Inquiries:Jim
FitzpatrickDirector, Global CommunicationsMethanex Corporation604
661 2600 or Toll Free: 1 800 661 8851publicaffairs@methanex.com
www.methanex.com
Methanex (NASDAQ:MEOH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Methanex (NASDAQ:MEOH)
Historical Stock Chart
From Jul 2023 to Jul 2024