Terra Nitrogen Company, L.P. Reports Second Quarter Results; Declares Cash Distribution

SIOUX CITY, Iowa - (Business Wire) Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported net income of $130.2 million, $74.2 million of which is allocable to Common Units ($4.01 per Common Unit), on revenues of $256.7 million for the second quarter ended June 30, 2008. This compares with net income of $57.1 million ($3.02 per Common Unit) on revenues of $177.4 million for the 2007 second quarter. For the 2008 first half, TNCLP reported net income of $211.8 million, $146.9 million of which is allocable to Common Units ($7.94 per Common Unit), on revenues of $431.2 million, compared to net income of $92.4 million ($4.89 per Common Unit) on revenues of $305.6 million for the 2007 first half.

TNCLP also announced a cash distribution for the quarter ended June 30, 2008, of $3.63 per common limited partnership unit payable Aug. 28, 2008, to holders of record as of Aug. 8, 2008. Cash distributions depend on TNCLP’s earnings, which can be affected by nitrogen selling prices, natural gas costs, seasonal demand factors, production levels and weather, cash requirements for working capital needs, and capital expenditures. Cash distributions per limited partnership unit also vary based on increasing amounts allocable to the General Partner when cumulative distributions exceed targeted levels. Those targeted levels were attained in the 2008 first quarter.

Analysis of results

Second quarter

TNCLP’s second quarter earnings improvement over last year was due to higher nitrogen products selling prices and higher ammonia sales volumes, partially offset by lower urea ammonium nitrate solutions (UAN) sales volumes and higher natural gas costs. Strong commodity grain prices supported continued strong U.S. nitrogen demand in the 2008 second quarter, contributing to the improved selling prices. UAN sales volumes were affected by an approximately 6 percent reduction in U.S. corn planted acres due to a cold, wet spring and flooding in the Midwest. From the 2007 to the 2008 second quarter, TNCLP’s:

• Ammonia and UAN selling prices increased by 45 and 46 percent, respectively.
• Ammonia sales volumes increased by 22 percent and UAN sales volumes decreased by 6 percent.
• Natural gas unit costs increased by 13 percent.

First half

TNCLP’s first half earnings improvement over last year was due to higher nitrogen products selling prices, partially offset by lower sales volumes and higher natural gas costs. Year-to-date results were affected by generally the same factors as those affecting the second quarter. From the 2007 to the 2008 first half, TNCLP’s:

• Ammonia and UAN selling prices increased by 47 and 49 percent, respectively.
• Ammonia and UAN sales volumes decreased by 6 and 3 percent, respectively.
• Natural gas unit costs increased by 12 percent.

Forward natural gas position

TNCLP’s forward purchase contracts at June 30, 2008, fixed prices for about 44 percent of its next 12 months’ natural gas requirements at $32.6 million below published forward markets at that date. TNCLP has entered into these forward gas positions to secure margins on nitrogen products sold forward at fixed prices.

About TNCLP

Terra Nitrogen Company, L.P. is a leading manufacturer of nitrogen fertilizer products.

Forward-looking statement

Certain statements in this news release may constitute “forward-looking” statements within the meaning of the Private Litigation Reform Act of 1995. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and TNCLP undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions are used to identify these forward-looking statements. These include, among others, statements relating to:

• financial markets,
• general economic conditions within the agricultural industry,
• competitive factors and price changes (principally, sales prices of nitrogen products and natural gas costs),
• product mix,
• the seasonality of demand patterns,
• weather conditions,
• environmental and other government regulation, and
• agricultural regulations.

Additional information as to these factors can be found in TNCLP’s 2007 Annual Report/10-K, in the sections entitled “Business,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Notes to the consolidated financial statements.

Note: Terra Nitrogen Company, L.P. news announcements are also available on Terra Industries’ Web site, www.terraindustries.com.

Terra Nitrogen Company, L.P.
Condensed Consolidated Statements of Income
(in thousands except per-unit amounts)
(unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2008				2007				2008				2007
Product revenues		$	256,792			$	177,158			$	431,045			$	305,010
Other income			(121	)			282				158				587
Total revenues			256,671				177,440				431,203				305,597
Cost of goods sold			121,861				114,111				213,832				204,881
Total gross profit			134,810				63,329				217,371				100,716
Operating expenses			6,113				7,470				9,637				10,648
Interest expense--net			(1,458	)			(1,198	)			(4,017	)			(2,319	)
Net income			130,155				57,057				211,751				92,387
Net income allocable to Common Units			74,185				55,916				146,889				90,540
Earnings per Common Unit		$	4.01			$	3.02			$	7.94			$	4.89

Nitrogen Volumes and Prices
Note: All UAN data for 2008 and 2007 are expressed on a 32% nitrogen basis.
		2008						2007
		Sales			Average			Sales			Average
		Volumes			Unit Price			Volumes			Unit Price
		(000 tons)			($/ton)(1)			(000 tons)			($/ton)(1)
Second quarter
Ammonia			116			555			95			382
UAN			521			336			552			230
First half
Ammonia			154			546			164			371
UAN			1,023			309			1,054			207
Natural Gas Costs/MMBtu(2)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2008			2007			2008			2007
		$ 7.59			$ 6.72			$ 7.37			$ 6.56
1. After deducting outbound freight costs.
2. Including effect of forward natural gas position.

Terra Nitrogen Company, L.P.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
		June 30,
		2008			2007
ASSETS
Cash and cash equivalents		$	161,320		$	80,732
Demand deposit with affiliate			2,639			5,332
Accounts receivable			50,700			49,999
Inventories			36,960			22,542
Other current assets			42,505			2,471
Total current assets			294,124			161,076
Property, plant and equipment, net			70,374			72,250
Other assets			15,471			13,749
Total assets		$	379,969		$	247,075
LIABILITIES
Accounts payable and accrued liabilities		$	52,719		$	47,481
Customer prepayments			41,471			16,846
Total current liabilities			94,190			64,327
Other liabilities			1,220			1,815
Total liabilities			95,410			66,142
PARTNERS' EQUITY			284,559			180,933
Total liabilities and partners' equity		$	379,969		$	247,075

Terra Nitrogen
Joe A. Ewing, 712-277-7305
jewing@terraindustries.com