Methanex Corporation (MX) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone. We're about to get started. Hello. My name is Kevin Price. I'm the SVP and General Counsel at Methanex and it's my absolute pleasure to welcome you to the 2025 Investor Day for Methanex Corporation. And that welcome is not just for you here in Toronto, but also the many people we have attending via webcast. Now before I hand over the day to Rich and my other colleagues, I've just got a couple of housekeeping items to go through. First, a safety note, and this is for those who are in attendance today. In case of an emergency, the hotel will activate their emergency response team and if you hear an intermittent alarm, please stand by and prepare to leave the building and listen to the instructions given over the emergency voice communication system. Now if you hear a continuous alarm, please evacuate using the stairwells. Now the stairwells for us, the main ones are just behind you. So there's also another set over to the right through where the food was. Now both stairwells, they lead to the rear alley and onto Bay Street by the loading dock entrance. And after exiting, please proceed north to the evacuation site at the Bay and Adelaide Center. And second, I would like to remind the audience as well as our listeners on the webcast that any information in the presentation materials are presented orally either in prepared remarks or in response to questions may contain forward-looking information. Actual results could differ materially from those contemplated by the forward-looking statements. For more information, please refer to our 2024 annual and third quarter management discussion and analysis. And lastly, this presentation uses certain non-GAAP measures that do not have any standardized meaning prescribed by GAAP and are, therefore, unlikely to be comparable to similar measures presented by other companies. These measures represent the amounts that are attributable to Methanex Corporation and may exclude the impact of specific items. And with that, I'd like to turn the presentation over to Methanex's President and CEO, Mr. Rich Sumner.

All right. Thank you, Kevin. Good afternoon, everyone. I want to welcome all of you. Welcome to those that are on the webcast, and also official welcome to all of you that are here with us today in Toronto. Thank you for taking the time on your busy schedules, and we're really excited about our Investor Day today. You will see that you have a Giftii in front of you, that Giftii is a replica of the Methanex dual-fuel vessels. You'll also be happy to know that we had a different idea that got canceled, which was a stick-build methanol plant that you would have had to build and assemble, and you had to do that correctly to take it home. But we know better than anyone how hard it is to build a methanol plant. So I guess what I want to first say is I'm really excited to be here today: One, because it's the first time in 3.5 years; two, because it's the first for me as CEO; and thirdly, it's because we have such a great story to tell for shareholders. I'm also excited that it's not just me and that it's my executive team joining me in the presentation. So I'm going to do a quick introduction for the team joining me today. So maybe just a raise of hand. So first, it will be Dean Richardson, our Senior Vice President of Finance and CFO. Next, is Kevin Maloney, our CFO -- sorry, our Senior Vice President of Corporate Development. I'm using my glasses necessary. Next is Gustavo Parra, our Senior Vice President of Manufacturing. Next is Karine Delbarre, our Senior Vice President of Global Marketing and Logistics. And last, but not least it's Mark Allard, our Senior Vice President of Low Carbon Solutions. Some facts about the team here. So we all started in our roles about three years ago when I took over as CEO. But across this group, we have about 150 years of Methanex experience across this group that will help me go through our story today. So a huge amount of experience, some more than others. And the other fact about the entire executive team is that we've lived in every and led teams in every major marketing and production site across the Methanex globe. So extensive experience, huge talent and very excited that they're here with me, and we're very proud to be leading this team at this point in the company's future. Turning to the next slide. We will have a main presentation, the main presentation will be provided by that -- the team here. We are also going to do two panel discussions. The first panel discussion will talk about global manufacturing and really about how we manage our assets from a Center of Excellence perspective. And Gustavo Parra will host a panel discussion with Paul Daoust, our VP of Projects and Turnarounds. And Matthew Geary, our VP of Reliability and Asset Integrity. The second panel discussion that we will have will be on low carbon -- low carbon methanol is an area that we get asked a lot of questions about. It obviously is an evolving area. It has a lot of debts to it. So Mark will host a panel discussion with Renato Monteiro, our VP of Low Carbon Methanol Supply and Roger Strevens, our Director of Low-Carbon Regulations and Advocacy. So on to the first slide here, and that is the theme of today. The theme here is Methanex turning the corner from investment to impact. Why the name? First, it's the investments we've done. We've had an intentional build-out of assets in North America. And combined with the OCI acquisition, this is really the cornerstone of Methanex's global asset portfolio. How do we turn the corner? It's taking those assets. It's leveraging our global capabilities in manufacturing and sales and supply chain to then get to impact, which is really focusing on how you do that with a stronger asset base and focusing on free cash flow generation. Of course, it all has to happen also in the framework of the markets, and we'll talk about the methanol markets and why we think it's a very constructive market for us to be able to execute over the next few years. So how will we walk through that story? The first section will be a section called methanol, a quietly constructive market. I'll go through the markets methanol supply and demand dynamics, talk about the existing structural tightness we see and how that actually gets tighter as we move forward in the next 3 to 5 years. The next section will be presented by Kevin Maloney. He'll talk about how we have transformed our asset base with that intentional build-out in North America. And that, combined with some of the gas basins for both Chile and Egypt, are supporting our base production today in prolific gas basins that really support our asset portfolio. The third section will be on leveraging our global capabilities, and that will be presented first by Gustavo and he'll go through our Center of Excellence around manufacturing. Karine will then talk about our global leadership position and really how that's unique in our industry. And then finally, we'll talk about, again, how we translate all that into stronger free cash flow generation going forward. Dean will present that section. He'll talk about our approach to deleveraging, getting a stronger balance sheet. And then I'll finish with our disciplined capital allocation, both a look back in history and then also thinking forward for the next few years. So we do hope that all of those things will weave the story on how we're turning the corner from investment to impact. Before I get into the first section, I do want to stop on the OCI acquisition. For us, this was a transformative opportunity to acquire North American -- world-scale North American assets that access abundant North American gas supply. The acquisition price was lower than the brownfield reinvestment economics. We think that this was also an attractive time from where we are in the market cycle with no one building methanol plants and also the existing supply being constrained. And obviously, this is a fit for our business. This is our business, methanol, and these assets are fitting -- fit very nicely into our business and should be easy to integrate. Now integration is never easy. What we have seen so far, though, is a really well-planned integration. I think we're seeing really good results from the assets. We're still very early, and Gustavo will talk about this. In fact, this will be weaved throughout everyone's discussion. So Kevin will talk about how this fits within the purpose of investing in North America. Gustavo will talk about our approach to integration and how that's really important when we look at our newly acquired assets. Then Karine will talk about our global supply chain, which starts with our assets and how that bolsters our leadership position in the industry. And then Dean will talk about actually integration time lines, how we're progressing on synergies. So it is a big theme, and it's a big focus. But so far, so good, and I really want to thank our teams, both from a due diligence perspective, but also from an integration planning perspective. Still early, lots of work, but things are going really well. So start of the first section. This is Methanex, we're calling methanol a quietly constructive market. Why are we calling it that? We -- I think everyone in this room painfully knows that commodity chemicals have been in a tough -- we're going through a tough period. And we're not immune to it. But I think there is a difference in terms of the structure here, certainly on the supply side for methanol that makes it a quietly constructive market. So we'll go through the -- both the outlook for demand, which we do have a moderated outlook for demand. I think where we are today is a moderated outlook in terms of GDP growth. We're also being quite conservative in looking at new applications. But even with a moderated demand forecast, you look at no one building new methanol plants and also the constraints on existing supply, we see a constructive market today and one that gets more tight as we move forward. I will start with demand, and we did think that we'd play a little video that contextualizes the diversified end uses of methanol and where it goes. So we'll start a video now, and please watch. [Presentation]

Okay. So hopefully, that puts it into perspective. You can touch and feel a few of the places that methanol goes. I get the pleasure of presenting the first graph of today. There's going to be lots of graphs. This one, what we're trying to show here is achieve a couple of objectives. First is looking at the current makeup of demand in terms of the broad sectors of downstream applications as well as the regional breakdown. The circles are meant to contextualize size of the markets. And then the colors are reflecting our views of demand growth over the next 5 years. So I'm going to start regionally. And when you look at -- starting from left to right, so we have the Atlantic markets, it's about 20 million tonnes of annualized demand. Asia, ex-China is about 15 million to 20 million tons of annualized demand. And then China is the biggest market, about 60 million tonnes of annualized demand. So think 100 million tonne market or thereabouts. When we look at the breakdown, the first application is broad-based chemical demand. So think formaldehyde, acetic acid, methyl methacrylate, silicone. This is going effectively into endless consumer, residential, commercial applications, really GDP driven. And what you can see is the breakdown of our demand forecast. So green means over 2%. This is not -- we're not projecting big strong growth like we would have seen in the past. And remember that when methanol demand shows up, it shows up where industrial manufacturing will happen in support of global GDP demand growth. So China, what we look forward in terms of industrial production, both to support their local economy, but also export markets is where we see industrial production and demand consumption for chemicals happening. You can see then we go over to Asia Pacific, which is slightly lower and then the Atlantic markets, which is where we kind of moderate down the most. The energy applications, this is where methanol is being used as a transportation fuel. It's in MTBE, which is a gasoline oxygenate as well as in biodiesel and the production of biodiesel. So those are the big two outside of China. In China, they're using methanol as well to replace coal in boilers and kilns and as a cooking fuel. And that's where we see the strongest growth. Again, moderated down from what you would have seen in the past. The other thing I'd mention here is we haven't put any meaningful upside in marine demand into those numbers. So we've taken a conservative approach in terms of the outlook. The last sector is the methanol to olefins market, and that's about anywhere from about 15 million to 20 million tonnes of demand, all in China where methanol is being used as a feedstock in the production of ethylene and propylene. What we see here is we've got a yellow with a question mark. And I think the reason you see a question mark is because of when I overlay the demand growth even with conservative assumptions and you overlay that against the forward look on supply, we do see a tightness there that we'll need to balance. And when we look at -- in that frame, we think about that as a marginal consumer and the olefins market today is the marginal consumer. One thing to note is that within the next 5 years, there's going to be a start-up of 3 more MTO units, representing about 4 million to 5 million tonnes of demand. We haven't put that -- all of that into our numbers because of the constraint from a supply side, which I'll show in the coming slides. Okay. So this next slide, two big points are. We're looking at what's the forecast of new capacity additions in the industry and also a bit more color and breakdown of why we say current existing supply is constrained. The graph on the left shows the forecast of new capacity additions in methanol. If you look at the dotted line, the dotted line shows average of the past 5 to 10 years. And then you look at the forward line, that's the average for the next 5 years. You can see that average is around 2 million tonnes a year, whereas in previous, we saw above 5 million. Really, that comes down to why is that? We've seen, first, the cost to actually build a new methanol plant has increased significantly. And we've also seen the market today not pricing at a level that is really encouraging reinvestment in the industry. Those asset additions are mainly -- going forward are mainly in China. And I'd also say that when we look at the other areas, it's Middle East, which is mainly Iran. And when Iran has added capacity, they've had a real hard time actually delivering supply because of the gas feedstock constraints in that country. So there's a question mark on whether that will actually result in production. So that's the first side. We move over to the right-hand side. This is the breakdown of the existing market. And what you see in a lot of analyst reports that study methanol is there's around 160 million tonnes of capacity. And then the industry operates at around 65%, 70%, which I always think is a very low number. And we're trying to break that down. The first yellow line or yellow bucket there is plants that are effectively mothballed. In China, as an example, they've been progressively shutting down small inefficient plants. Plants were built out in a big way in the early 2000s. So these are plants that have been shut down for more than two years, 100,000 to 500,000 ton plants. The economic and political challenges to restarting are significant. Also in this bucket will be existing capacity that is structurally constrained because of feedstock. So think Trinidad, 8 million tonnes of capacity, operates 4 million to 5 million tonnes. Think Europe, 5 million tonnes of capacity, operating less than one million tonnes a year. Equatorial Guinea, a plant -- 1 million tonne plant that's been permanently shut down and gas rediverted into LNG. New Zealand, 2.5 million tonnes of capacity. We're operating one plant less than full capacity. So you really look at that as being significantly structurally constrained. Then on the right, the next bar is talking about where you see seasonal restrictions or sanctions. So Iran has 15 million tonnes of capacity. They operate 9 million tonnes a year with added pressure as we see from sanctions. Russia is sanctioned, has 5 million tonnes of capacity, operates 3 -- and in the wintertime, we get significantly restricted in China as natural gas gets shut down and coal gets redirected. So where we think effective capacity in the industry is more at around 110,000 tonnes. And when you think about a 100 million tonne market and you have to have plants turnarounds and there's always unplanned things that happen, we're at a really high required operating rate to meet current demand. So now we take both those, and we put them together. On the left-hand side, what you see is a 16 million tonne demand growth, which we talked about being moderated for GDP, conservative around new energy applications. So we have 16 million tonnes of demand, 9 million tonnes of new capacity split between China and Middle East -- we put a yellow line, which is at risk. That could be at risk because of the new projects and their ability to actually deliver production or further constraints on existing supply. What you see there is a supply-demand gap of around 10 million tonnes. That's where ultimately, we all know demand and supply have to equal. And we do think what's that going to mean is pressure on the consumers in the industry. So what does that mean in terms of pricing? In the short run, ultimately, it will be driven by cost curve. The marginal cost of production, we foresee remaining marginal coal and natural gas producers in China. But increasingly, as we move forward, we think that the price is set by the marginal consumer, and that's the olefins consumer. The olefins market has been structurally under pressure. When we look forward, the big rebalancing is what's being forecast. It will take time. We're seeing actions being taken in Europe, in Korea, in Japan. China is talking about anti-involution and its work back to chemicals. So it will take time, but we see structural improvement as we move forward. Timing is dependent on demand and the pace of restructuring. So that is something that we're focused on. We think today, a reminder that the MTO affordability and the cost curve is really set in China and all markets trade at a premium to China, and Karine is going to talk about how that works in our portfolio and how we -- where we sell in the world and how that achieves an average realized price above that. In the long run, pricing ultimately needs to move back to encourage new supply into reinvestment economics. Given the current environment around commodity chemicals, we do think it takes time. So we don't project that happening in the next 3 to 5 years, but we will be looking at that very closely. What that means for our portfolio is with small structural improvement, we're realizing today $350 methanol price with small structural improvements. We think that it bodes really well for us as we bring these new assets on and deliver really strong free cash flows. So that's the main conclusion. So -- I think we got a little summary here. Industry is constrained both from existing supply with limited new capacity. We think increasingly, it's the olefin market that we look -- we will be looking forward to get direction on pricing. It will take time to get back to reinvestment economics, but we expect that the structural improvement is going to be puts a really good environment for us to execute on what we need to do over the next few years. So with that, I'm going to turn it over to Kevin, who will talk about our investing in North America.

Thanks, Rich, and good afternoon, everyone. I'm really excited to have the opportunity to speak with you today about how we've reshaped and strengthened our business and give you an update on our producing regions as well. I'd like to start with this map and the visuals here because I think it really does a good job of illustrating our asset portfolio and how we think about it. What the size of the circles represent is the proportion of earnings that each region contributes to our overall run rate. And the colors of each circle represent our view of the gas risks or opportunities that -- in each region. As you can see, North America clearly dominates our earnings generation capability with access to low cost and abundant natural gas. In Chile and Egypt, we have stable to improving gas supply conditions in both regions. And we have a lot more uncertainty in our Trinidad and New Zealand assets, which today, as you can see, don't contribute meaningfully to our overall business performance. Over the next few slides, I'll describe the journey we've been on reshaping our portfolio over the past 15 years or so. And ultimately, it's a story about recognizing shifts in what was happening with the development of shale oil and gas in the U.S. And by taking a disciplined approach, we were first movers that took advantage of these developments. And we've been able to build out a very significant capability in North America that is now a considerable competitive advantage. But before I get into what we've done in North America, I'd like to provide some context as to how the methanol industry has developed historically, what has changed and why we are well positioned for the future. First, when we think about some of our older assets like New Zealand and Chile, these developments occurred where there were stranded gas in basins that were too small for LNG developments, but also two large to develop for local market demand, typically gas basins with resource size is in the range of 1 to 3 Tcf. This was -- this size of gas resource was the sweet spot for methanol. And this became the business model for project developers, locate smaller stranded gas fields near deepwater ports in countries you're comfortable developing a methanol project. This was the original business model, which led to the development of both New Zealand and Chile. The business model for methanol is, however, quite different now. In particular, as we entered the 2010 period, supported by advancements in shale drilling technology, we began to see upstream investment activity shifting away from smaller basins to larger, low-cost resource basins with shorter investment cycles like the U.S. shale basin. And over the last 15 years, the business model for methanol has been about building or acquiring assets in the U.S., where there's a very significant large low-cost resource base. Today, we have a portfolio that includes 6.7 million metric tonnes of low-cost North American production capacity, which now accounts for 65% of our global capacity and 75% of our earnings -- our run rate earnings generation capability. And over the next couple of slides, I'll talk a little bit more about how we built up this capability and why we're confident about the gas outlook and our future in North America. Another interesting point about the shifting patterns in upstream investment is that we have two assets that are ideally located to benefit from our -- located to benefit from emerging shifts in upstream investment activity. specifically Chile and Egypt. At a very high level, we're seeing meaningful upstream activity happening in other large low-cost resource basins, such as shale gas in Argentina and also conventional resources in the Eastern Med, and we believe both Chile and Egypt will benefit from these developments. I have a couple of slides where I'll talk more about these two regions in a bit more detail and share our perspective. And finally, I'll come back to the slide at the end to quickly comment on both New Zealand and Trinidad. Now turning to -- back to North America. The chart on the bottom here shows the build-out of our North American capabilities. At a high level, without going through each addition of capacity, it shows us growing our North American capability, starting with the restart of our Medicine Hat plant, which we announced in 2010 and the plant came online in 2011. Then the build-out of our -- of our 3 plants in Geismar for 4 million tonnes of capacity and finishing with the acquisition of OCI's methanol business, which we closed earlier this summer. So in total, over this 15-year period, we've added an impressive 6.7 million metric tonnes of low-cost production capacity across 3 production regions in North America. As I'm sure you can appreciate, this is a significant competitive advantage for Methanex. Not only do we have a low-cost structure. But as Karine will share later this afternoon, we're also well situated from a marketing perspective. Now turning to the chart at the top. This shows the history of gas production and pricing over the same period. And I think there are a few kind of key important takeaways from this chart. First, if you look at the -- looking at the blue line, from 2010 to 2025, gas production has essentially doubled, growing from around 55 Bcf per day to 105 Bcf per day today. It's a near 100% increase in the gas market. Second, from a historical gas pricing perspective, looking at the yellow squares on the chart. And if we exclude the 2021 and 2022 period, which we consider a once-in-a-generation event, when the economy was coming out of COVID, compounded by the start of the Ukraine war, we can see that gas pricing has essentially been flat in nominal terms. So what this means is that gas pricing has been declining in real terms. At the same time, gas supply has doubled and easily kept pace with demand. There are several factors that this can be attributed to some of the main drivers being the overall size of the gas resource base in North America, the amount of gas delivery infrastructure that's available. And one thing that I think is underappreciated sometimes is the significant productivity improvements that have been achieved with the development of shale resources. Overall, the main message on the slide here is that we've been very deliberate and measured about building out a significant capability in North America and doing so is we've gained increased confidence in the North American gas market. Now turning to our outlook for North America gas. I have a few charts points to go through to provide some perspective on our views. The first chart here is simply a visualization, which highlights the overall magnitude of the gas resource base in the U.S. The circle at the top represents current annual gas production in the U.S. and the circles below show how much gas resource is estimated to still be available based on analysis from the potential gas committee and also the U.S. Energy Information Agency, the key circle to focus on here is the third one, which shows that there are approximately 50 years or more of gas that can still be produced technically and commercially at today's conditions. So in simple terms, there's a lot of gas that's available to be produced in North America, which gives us a lot of confidence about our long-term availability of gas supply for our North American assets. The next chart here does a great job highlighting the productivity improvements that have been achieved across several shale gas basins in the U.S. In summary, over a 10-year period from 2014 to 2024, new well gas production per rig has increased by 3 to 5x. That's 300% to 500% improvement considering that the cost of drilling is one of the most expensive aspects of producing gas. It's pretty amazing to see how much improvement has been achieved in a relatively short period of time. Now the improvements come from advancements and shale drilling technology such as just increasing the number of wells per pad, longer laterals with some producers now achieving laterals over 4 miles in length, better placement of wells and better fracturing technology, just to name a few. Now it's totally a fair question to ask about whether these productivity improvements will be sustained going forward. But from a learning curve perspective and based on the data in this chart, it doesn't appear like the pace of improvement is flattening or decelerating yet. Plus, if you look at the investor deck so some of the main upstream players operating in these basins like EOG and EQT they're all continuing to set and achieve incremental productivity improvement targets. So for me, it seems sensible to assume that there's much -- there's more opportunity available here. Finally, the last chart is simply the NYMEX forward curve through 2035, taken as of November 7. What this shows is that the forward curve over the 10-year period is trading essentially between $3.50 and $4, an MMBtu on a nominal basis. It's important to remember that the forward curve is not necessarily a prediction of future pricing, but more of a risk clearing market, where counterparties are willing to hedge and lock in pricing and returns for the business. What's interesting to note here is that despite expectation of increased demand for LNG and data centers, the curve is in backwardation, with pricing of the 10-year mark around $3.50 normally, so about $3 on a real basis. Also, while we haven't shown it on this chart, industry observers forecast prices over time to reach $5 in nominal terms. So today, about $4 on a real basis based on the assumption that dryer gas from basins like the Haynesville are going to be needed to balance the market and that productivity improvements are going to slow down. So based on the forward curve and forecasted prices, we believe a long-term range of $3 to $4 real is a sensible planning assumption for our U.S. assets. And as a reminder, we also have exposure to AECO for our Medicine Hat plant and AECO has been trading at around $1.50 discount to Henry Hub. So in summary, for all the reasons mentioned, first, we have a really very large low-cost resource base in North America, which is yet to be produced. Second, I think the very real possibility of achieving even further productivity improvements in drilling. And third, where the forward curve and forecasted prices -- where the forward curve is trading and industry expert forecasts future pricing. For these reasons and others, we continue to believe there will be abundant low-cost gas or North American assets, which we believe makes our capability quite valuable. On this slide here, I wanted to briefly describe how we manage gas price risk across our North American asset base. In really simple terms, based on the chart on the left, we hedge a portion of our North American gas requirements using a laddered hedging strategy where we hedge a higher percentage of our requirements in the near term, and then this percentage steps down over a 10-year period. In the past, while we were building out our North American portfolio, we aim to hedge about 70% of our near-term gas requirements. Now in the context of our current finance strategy, we are making a shift to take a little bit more open exposure and targeting around 50% in the near term. The 50% target is really aimed at striking a balance between protecting against gas price spikes and also benefiting from lower gas prices. And as you can see from the chart on the right here, monthly gas prices over the last 10 years have mostly been below $4, with only a handful of monthly prices above $4. In fact, if we remove the gas prices from the once in a generation event from 2021 to 2022, there's only been one month over the past 10 years where gas prices have been above $4 Also, in terms of managing potential short-term gas price spikes typically linked to more extreme weather events that occur in the South or in the U.S. We can also adjust our production across our North American portfolio. And given the scale and flexibility of our global supply chain, we could resell gas if it made more economic sense to do so. And finally, our 50% near-term target is not a hard target as we have the flexibility to increase our near-term hedge position if we see prices that we really like, but this will be done more so on an opportunistic basis. So in summary, we take a balanced approach to our overall gas price risk management strategy and have additional levers to manage short-term gas price volatility. Now coming back to -- coming back about Chile and Egypt for a moment. As I mentioned earlier, these are 2 assets that we believe will benefit from the significant upstream activity that is taking place in the respective basins. First, let me take -- talk a little bit about Chile. The base load gas supply for our Chile plants, which is roughly about 40% comes from the state-owned energy company, [indiscernible], who is planning to maintain and grow its local gas production. Chile has also been benefiting from upstream activity in Argentina. Activity taking place not only in the Austral Basin in the South, but also from significant activity in the Vaca Muerta formation in the Neuquen Basin. This is a prolific shale gas basin analogous to the U.S. shale basins, which is estimated to contain over 300 Tcf of gas. To help put this into perspective, 1% of this gas or 3 Tcf would supply our Chilean plants for over 50 years. I was in Argentina about 6 months ago, and while they're in the early innings of the game there, what I observed from an upstream investment perspective was absolutely outstanding. The pace of development activity happening there -- is happening very rapidly in Argentina as they leverage U.S. technology and experience, along with building out critical infrastructure like takeaway capacity and development capacity. The upstream developers in Argentina are working very hard to enable growth in both regional exports and also LNG developments. Ten years ago, we were only producing 200,000 metric tonnes in Chile. And this year, we're on pace to produce around 1.4 million metric tons. That's a 700% change. We expect this trend to continue as upstream activity accelerates in Argentina, but the pace of our production improvements will likely be constrained somewhat by export policies and how these evolve over the coming years. At the moment, the current [indiscernible] government is honoring export regulations put in place by the previous government, which are in place through 2028, and we are not expecting major changes here. So in the near term, we expect to receive full gas to operate both plants for about 7 months during the Southern Hemisphere summer period and gas for one plant operation during their winter period, so production of around 1.4 million metric tons per year. Egypt is somewhat of a similar story. The Eastern Med is a large conventional resource basin and virtually every oil major is exploring and developing oil and gas in the region. The gas resource base in the East Med is estimated to be somewhere between 140 and 500 Tcf of undiscovered gas. And given its local demand and existing infrastructure, Egypt is well placed to benefit from increased development activity in the region, both domestic and cross-border, and we expect this will improve overall gas supply security to the country. As an example, earlier this year, the Cypriot and the Egyptian governments signed agreements to pave the way for gas exports from Cyprus to Egypt from the [indiscernible] developments. In Israel, Chevron and its Leviathan partners recently agreed to amend their 2019 agreement with Egypt export gas from Israel increasing volumes by 45% in the near term and then subject to a positive FID on its Leviathan expansion plans targeted for the end of the year, their gas supply commitment would increase by another 85% up to 1.25 Bcf per day over the 2030 to 2040 period. Now while some of you may have seen that the Israeli Minister of Energy has said that he isn't approving this agreement at this point, gas supply from Israel to Egypt is, in fact, seen as a real success story for cross-border developments. And in the past, we have seen pragmatism prevail and think that's likely what will play out this time too. Also another important point that I think is worth noting is that we have a very strong relationship and partnership with the Egyptian government. And during times of gas supply constraints, which are typically seasonal in nature, we have been able to operate at high rates, including this past summer when we operated approximately 70% during this period. So again, the main message here is that there is a tremendous amount of positive upstream activity going on in the Eastern Med and combined with our strong partnership with the Egyptian government and we expect Egypt to benefit from these developments. Now coming back to the slide I started with. And to wrap up the discussion on our portfolio, I wanted to make a few comments on both New Zealand and Trinidad, as we can see from the map here, both New Zealand and Trinidad don't contribute meaningfully to our overall business performance. New Zealand is the oldest asset in our fleet, and it's currently celebrating 40 years of operation. But for the past 5 to 7 years, gas supplies have been in significant decline. The reason for this is essentially twofold. One is that the gas basin itself is quite mature and developing new gas in the basin has become increasingly complex and to be quite frank, any recent upstream activity hasn't been that successful. And second, and probably the more important reason is that the previous New Zealand government implemented a policy in 2018 to ban further oil and gas exploration with other policies that made it more restrictive and uncertain for upstream development. While the current government has reversed the ban on gas exploration and implemented some other policies to improve upstream investor confidence, it's really difficult to say today whether these actions will also lead me enough to improve the situation. Today, we're only producing at a rate of around 400,000 to 500,000 metric tonnes per year in New Zealand. And as we look forward in New Zealand, we're continuing to engage with government and upstream partners to encourage more upstream investment, but we're also taking prudent steps to manage and optimize our business there. Trinidad is similar, but slightly different story to New Zealand. What's similar is that the offshore basin supply in Trinidad are all mature at end of life. Production has gone from a peak of 4.2 Bcf a day in 2010 to around 2.5 Bcf per day today. That's roughly a 40% decline from peak production. But what's different and more important is that the country itself is highly dependent on oil and gas revenues. So unlike New Zealand, there's strong political will of motivation to enable upstream activity in the region. Today, there are a few local offshore developments that are expected to come online in 2027, have the potential to slightly increase current production and sustain that for another couple of years. However, we currently expect gas supply and demand balances to be relatively tight through 2027. Ultimately, to sustain and grow production, grow gas supplies in Trinidad hinges on the ability to develop cross-border supplies with Venezuela, where there's a very large gas resource base but such cross-border developments require the right geopolitical conditions to enable. Today, we're operating our Titan asset in Trinidad and producing around 800,000 metric tonnes per year. And even though we've got -- we've developed good capability in Trinidad. Continued operation will be largely contingent on the gas look and more importantly, our ability to secure future gas supply contracts to profitably sustain longer-term operations in the country. So to conclude, there are a few final takeaways really to sum everything up. The main takeaway is that over the past 15 years, we've reshaped our portfolio and built a significant capability of 6.7 million metric tonnes per year of low-cost production capacity in North America. And this is greatly strengthened the business, enhanced the earnings and cash flow generation capability of our business. In addition, given the size of the North American gas resource base, the potential for further productivity improvements, along with the forward curve and forecasted prices, we continue to expect a long duration of low-cost gas supply for plants, making our North American capability quite valuable. And finally, there are very significant and positive upstream developments happening in Argentina and the Eastern Med, and we expect both Chile and Egypt to benefit from these developments. Now before we stop to take a 10-minute break, we'd like to share a short video, which goes through each of our North American production sites and shares a little bit about each. Thanks. [Presentation]

Okay. We're going to take a 10-minute break, and we'll come back with the rest of the first presentation. Thank you. [Break]

So I think we'll get started in a minute here. So I'll just go through the agenda for the rest of the day here because I know I didn't complete that in the first discussion, but we'll go through the second half of the presentation here. We'll start with Gustavo talking about our Center of Excellence around manufacturing. Karine will talk about our global leadership position and then Dean is going to talk about our focus on cash flow generation as well as our strengthening of the balance sheet. I will talk about our capital allocation philosophy. And then we will end the first presentation. That will be followed by 30 minutes. We'll take a quick break, followed by 30 minutes of Q&A, and then we'll go into our panel discussions. Okay. So with that, I'll invite Gustavo up to the stage.

Thank you, Rich. Good afternoon, everyone. Before I start talking about manufacturing, Rich mentioned about this 150 years of experience and to be honest, I got a little bit scared because I realized that 25% of that is me. So it's a great opportunity to talk about manufacturing and explain how we work, what our focus areas are and how do we deliver value to the business. So this slide is basically a representation of our global strategy. We really focus on those elements that you see there. But let me start talking about the effort that we put in working as one team using our Center of Excellence approach. We put a lot of effort in transferring our knowledge working with our lessor lens using best practices. Part of that is our team that we have in region, we put a lot of emphasis in developing our team by using our competitive assurance process and also our professional development program. One example that probably reflects that is turnarounds when we execute turnarounds in region, we think about turnarounds as a global initiative for manufacturing and we deploy resources in region that bring expertise into that particular turnaround and then they go back into the other region being those learnings in a way that we continue to learn from each other. A few elements there basically are showing our approach in manufacturing. I will start talking about safety. Safety is really #1 for us. We put a lot of emphasis in working safely in every site that we operate. We really focus on the health and safety of our team and really protected environment and also the community that we operate. Lots of effort in reliability, reliability by doing our proper asset management and operating that with excellence using our systems and practices and standards that we have captured for years of operating experience and also understand the asset, understand the risk and manage those accordingly. In a way, the main message here is that have a global manufacturing strategy that focus in delivering safe, reliable, sustainable operations across our asset portfolio, and we translate excellence into value. A little more color on how we work using our global operational capability and our Center of Excellence approach. We start with a global manufacturing team that is driving our manufacturing strategy, they allocate resources to develop and deliver our key initiatives and also measure performance. In the left side, you see what we call our global expert. They focus in asset assurance. They also manage reliability data and put a lot of emphasis in improving our plant performance. And then on the right side, we have our global functional teams that are basically focusing on delivering and the global key initiatives that we have in manufacturing are working together with the site management team. So I will try to kind of reflect on all of this as an example, Kevin showed the video on North America and the two plants that we relocated from Chile. I have the honor to lead those projects years ago and kind of describe how this model works. You think about this, we have a team in Chile that we built there to find a way to dismantle the plant and find a way to make models of this plant and then put it in vessels and move it to the Louisiana through the Atlantic and over to the Mississippi River. We have another team in Louisiana that was preparing the plant, ensuring that we have the foundations in place to receive those modules and ensure that everything is prepared as soon as we have those models in place. We have to build a big bridge over the [ levy ] in Louisiana to bring those models across and installed this accordingly. Everything fit very nicely. Everything came together very nicely. And then we commissioned and start up those plants very, very well in a year -- in a calendar year. And I have to say those plants are operating very reliable, very safely, and we added very quickly in 4 years extra 2 million tonne capacity. So that's in a way trying to reflect how this model works, and we have been unable to do that without the capacity and the talented team that we have in our company. Moving forward to some of the performance metrics. This slide is showing our safety performance that have been -- we are very proud of that. We have been well below industry benchmark in both [ health ] and safety and also process safety. Notable for me is that we haven't had any major event in the last 2 years. You see 0 there. And that's because of the effort that we put in running those assets safely and protecting our people, as I said before. On the top, you see our reliability performance over the last 5 years is an average of 96%. We do have a target of 97%. We are putting a lot of emphasis in removing all the defects that we have in our assets and manage the risk accordingly. G3 has been a really nice story now. The plant is running extremely well. We are very happy with that asset. It's very reliable. We sort out all the initial operational issues that we have with the plant, and it's a really, really good plant, low emitter, high reliability and high efficiency. And lastly, our capital performance. We put a lot of emphasis in managing those based on risk and based on priorities and based on return of the business. And the number that you see there, the $150 million is basically including our new assets in Beaumont. And we are going to work very hard to keep those numbers on those levels. OCI, Rich spoke about OCI and more colleagues are going to talk about that as -- we are really happy with the assets that we have, really excited what it's going to bring to our company. We have a great team that are running those asset for years. Most of them enjoy and they said that they've worked very nice with us in learning from our background and our best experience in building and operating plans. I'm really excited to go through that process. A couple of comments there. We have -- you saw in the video, our plant in [indiscernible] in Alberta. Beaumont has a lot of similarities in the front end of the plant with that particular plan. So we are bringing all our years of experience into Beaumont. And not gasoline is basically a copy of our Atlas plant in Trinidad that we have a lot of history operating those plants and learning from that particular asset. So I will try to show a little bit of data or analysis how we really are focusing in bringing these new assets on. It's a lot of detail there, so I will try to highlight a few things there. We -- at the beginning, we knew that we need to engage the team well -- so we went back, we follow a very thorough onboarding program, and we are now following a process of competitive assurance and understand what are the gaps that we need to reach and how we work together. Main thing that we did and successfully achieved are the reviews on safety and responsible care. We wanted to do that to ensure that we don't have major compliance issues. That we are protecting the environment well and we have good safety practices to manage our assets accordingly. Happy to say that we didn't identify any bit red flags, and we are going to work through the findings based on using our [ nonop ] processes. We did complete also a deep dive on the assets that we call Asset Assurance and we are going to probably talk a little bit more about that on our panel. But also, we have a very good understanding on the vulnerabilities that we have in the plant and how we are going to overcome those in the next period to come. And lastly, all our technology is coming across. We have all the systems and processes that we use for years, and we are building that into our new organization. For example, we do have strong applications to monitor performance in the plant, and that requires a little bit of training for the new team to understand how we report back and how do we manage those issues. By closing, I think what I would like to do leave with you is kind of 3 messages. Safety is our top priority. We have a strong belief that safe plant is a reliable plant and a reliable plant is more production. So that's the way that we think about this. We are focusing in ensuring and improving our reliability performance and efficiency across the assets and this will bring more methanol. And lastly, we believe that we have a Center of Excellence approach that our team worked together, and we've been valued to the business. So with that, thank you very much first. And with that, I will pass it on to Karine.

Thank you, Gustavo, and good afternoon, everyone. So you heard from Rich how the methanol supply and demand balances are getting tighter. And you also heard from Kevin and from Gustavo, how our reliable assets are becoming even more reliable and stronger supported by natural gas in North America. So what does this mean for our strategy, our marketing strategy? What you will hear from me on the next few slides is that we are the global leader in the methanol industry. We have a global reach supplying customers in all major continents that we create value with our supply chain, our global supply chain, creating reliability for our customers, and a lot of flexibility. And those two elements are really critical in today's world where the methanol markets, as I said, are getting tighter, making reliability even more so valuable and geopolitical environment are creating added constraints when you want to move product around. So I mentioned about our global reach. And as I said, we have access to all major consuming regions. We can do business pretty much with any customers around the world. And let me just explain what I mean by this global reach. We spoke about our global asset base. We have 6.7 million tons in North America, our assets in Chile, in Egypt, in Trinidad, in New Zealand. And from those manufacturing sites, we supply our -- the local demand first, and then we export to the consuming regions. To manage those exports, we use our own vessel fleet, which is a very key component. You'll see what I mentioned afterwards. And so once the product gets into the region, we have marketing offices around the world that make sure that through our extensive network, we make sure to deliver product to our customers on time. So why is reliabilities becoming so much more important. As Rich explained, there is a lack of new capacity coming in the market. And if you noticed the new capacity is actually coming from China, from Iran and from Russia mostly. And brief point about China. It's mostly Inland coal-based Chinese production that we're talking about. It's about 50% of the global production that's coming from Inland China. And really, it's the market that's not truly accessible. So the rest, as I mentioned, of those new assets are mostly coming from Iran and Russia. And today, our customers cannot buy product from those two countries, their sanctioned product. We also mentioned about the attrition that we foresee in the future. But just also to give you a sense of what happened to the existing capacity that's running today. In the past 5 years, the production of the three world-scale plants that was built in North America was actually offset by the shutdown in Equatorial Guinea, in Trinidad and in Europe. So that really tells you how the non-sanctioned product is getting actually quite tighter. So that makes definitely reliability and flexibility, truly important features. And I would say that we stand out in the methanol industry with our capabilities. And as you can see on the graph on the right-hand side, we've put here our estimated market share, excluding, again, the inland domestic China market. And methane exercise is twice as you can see, the nearest of our competitors. I would add that there's many producers in the world in methanol. There's a long tail list of producers after these few names you see here. And most of our competitors are actually regionally focused. They either run single -- their single plant operator or they run out of a single region, which makes them much less flexible when it comes to, as I mentioned earlier, sanctions or navigation restrictions. And maybe a quick point on sanctions. About 30% of the global production outside of China is actually today subject to sanctions, it's a significant amount, obviously. And I just also mentioned about navigation restriction, and this is really very much felt in the Suez Canal. I am sure everybody is aware that there is significant restriction to go through the canal at the moment. And it's truly impacting the ability for Middle Eastern producers to go through the Suez and bring product into the European markets. So we stand out very different supply chain that we are running with this very complex and comprehensive global footprint. Let me try to give you a sense as to not only how are we set up, what's the supply chain setup, but also how are we actually running our supply chain. It took us years to develop this very sophisticated end-to-end process that I'm going to try to give you a sense of. So on this map here, we're trying to provide a snapshot. It all starts, as I said before, from our manufacturing sites. Those are the purple dots on the map. We supply local demand. It's mostly in South America, North America and in Europe that we supply regional local markets, and then we export the balance using our own fleet. Waterfront Shipping is our subsidiary, manages exclusively Methanex methanol and brings product to the market. And they are today, contracting 30 deep-sea methanol tankers under long-term time charter. And what that means is that we actually control and direct where those vessels are going. It's a fully integrated fleet that we manage and can send constantly those vessels different directions. It's what those arrows on the map here represent. We have different options, obviously, as to where we send the product. Once the product gets into the market, we lease about 25 terminals around the world. Those are the yellow dots you see on the map. And we also discharge into our customers' terminals, for instance, in the mediterranean sea, we have our Egyptian plant. And from there, we're going to be supplying customers directly into their storage facilities along the mediterranean coast. And we dropped in about 70 terminals around the world directly into our customers' facilities. From there, once the product gets into the market, our teams, regional teams, we have 8 marketing offices around the world, take over the product and make sure to safely and on time, deliver it to our customers using all kind of mode of transportation, which I'll explain in a minute. Most of the demand, I would say, in China, in Asia and in Latin America is really along the coast, it's very close to those big import hubs. But when you think about North America and Europe, there is a lot of inland demand, and we actually use what we call the hub-and-spoke terminal concepts where we bring product into these large hubs. And then from there, we dispatch the product to the end and location. And you can see that we have about 400 delivery points that we supply. And as I said, mostly in North America and Europe. I just want to point your attention to the 1,400 railcars that we lease. It's mostly North America that we lease those cars, again, because there's a lot of inland demand. And Gustavo mentioned the attention we pay to the focus we pay to safety in our manufacturing site. And the same holds true for our transportation -- for the transportation safety. I'm very proud to share that we are one of the two chemical industry -- sorry, one of the two chemical companies in North America that have been awarded for the tenth consecutive year the so-called Grand Slam Award from the Class 1 railroad for no non-accidental release on their network. That was a mouthful, but it's a very nice testament of the -- of our dedication and focus on transportation safety. So that's the setup of our supply chain. How do we actually run the supply chain. We have an extensive team, very talented team that's constantly looking at supply and demand balances. So looking at our production forecast, looking at our customer forecasts, and then making sure that we, in a very cost-optimized way, match both of them, making sure that we supply our customers on time. It's true for global movements, our global supply chain team as well as obviously, in region movements. We always focus on cost. We're running a commodity business, as you well know, and we are paying close attention to our logistics cost. And from that perspective, we have a few levers that we use to minimize cost. We keep open position in each of the regions. So we are active in the spot market. We are purchasing in the spot market. And that allows us to balance supply and demand subject to the volatility and minimizes our transportation cost. We also organized swaps with coproducers. And because we have such a global footprint, we are really able to organize several kind of swaps with many different counterparties and that those swaps obviously reduce your logistics costs. And lastly, Vodafone Shipping also minimizes shipping cost. And to do so, they use what we call back home. So they're bringing third-party cargoes into the ships rather than the ships returning back empty to the load region. And we actually bring over 95% of the vessels coming back from the Asian markets coming back to New Zealand or the Americas are actually carrying third-party cargoes, which definitely brings you revenue and reduces your shipping costs. So in summary, we have a very extensive supply chain, a very sophisticated end-to-end process that we have developed over many years, significant improvement in -- sorry, significant investment in physical assets as well as in our teams around the world. And this brings a lot of reliability of supply, obviously, to our customer, and that will be our next topic. It's what's our customer portfolio looking like. So on the left-hand side of this chart, you see the sales mix and the different delivery modes that we use to supply our customers. We sell about 60% of our volume into the Atlantic Basin, defined as the Americas and Europe. This is aligned, obviously, with the production profile we talked about earlier, but it's also aligned with our capabilities and the complexities of those markets. And you can see in the number of modes of transportation that we use, how much of these inland markets they are mostly in North America and in Europe. So we supply our customers by vessel and pipeline, that's the easy ones, and then we do a lot of trucking, barging and rail supply. And then obviously, we supply 40% of our sales into the Pacific Basin, which is the growing market. So we're very comfortable that we have a high-quality portfolio. We have a good sales mix of geographically differentiated geographies and industries. We typically align with customers who are industry leaders, which means that they're growing and that they need suppliers who are able to support their growth. We also have long-standing relationship with our customers. 75% of our customers, we've done business for over 10 years. 50% of our customers, we've done business for over 20 years. And in the past few years, I've been celebrating a few 30 years anniversary. And I can tell you that feels pretty special. It's quite neat. And finally, I point you to the graph at the bottom of the slide here, where you see the green, the bottom green line represents the China price. The blue line represents Methanex's global average realized price. And the gray bar represents the differential between those 2 on a dollar per metric tonne basis. So what does this chart tell us? We mentioned the fact that the China prices is under pressure. In the past 3 years, it's been below $300 and it's really a function of the pressure of the sanctioned product. China is the clearing market in the methanol industry, imports about 15 million tonnes, 2/3 of that is coming from sanctioned countries, it's Iran and Russia. And those 2 countries have no other home to go to, but China. So definitely, a lot of pressure from sanctioned product, but also the fact that the MTO segment, which exists only in China is lacking affordability because of this olefin overhang that Rich mentioned earlier. So lots of pressure on the China price. When you look at our global ARP, our global average price, it is reflective of the sales mix that I just described. So those different geographies and those different markets that we serve, the region. The deep in-region market that command very specific service level and different requirements, those attract higher netback and premium pricing. So this is why our price in the past 3 years has been above $350 per metric tonne. And now when you look at those gray bars, you see that they've been existing for a number of years now. Over 7 years, we've had a recurring differential over the China price. And this is really becoming a function of this -- the tightness of the non-sanctioned product. And we really believe that the international product is becoming tighter and structurally trading at a premium to the China price. And these differentials are really exacerbated when you have supply disruption. And this is exactly what happened in Q4 and Q1 this year. I'll just give you an example to try to make you feel what I'm talking about. There was a number of outages that happened, unplanned outages that happened starting Q4 last year, compounded by some gas diversion in Q1. Some plants were selling to the gas grid rather than producing methanol. And the European market experienced a very significant tightness and prices in Europe increased over $120 above China. And what we saw is that ultimately, trade flows rebalance, but this took a very long time to actually happen and the prices stayed elevated for a number of months. And the reason is that one element is that the producers are contracted. Customers want term supply, but producers are contracted. There is only a very limited amount of spot noncontracted volume. So it's really difficult to actually have access to excess volume for one. And the second element is that, as I mentioned earlier, navigation is really restricted around the Suez. And guess what, to get to Europe, you have to mostly use the Suez to pivot from the Middle East. So it really creates a lot of length and time for flows to adjust or very high prices. It takes high prices to actually see those flows to readjust. And because of our flexible supply chain, when such disruption happen, we're actually able to benefit and capitalize from it. We stop our purchasing activity, for instance, we redirect our vessels to those different higher netback regions. We organize swaps. So we have a number of levers to take -- to capitalize on these disruptions. So in summary, I hope you understood that we are the global leader in the methanol industry. We are in a very unique position with our very sophisticated global supply chain, a very integrated process that we are running that took us years to develop and would be very hard to replicate. It gives us a lot of reliability proposal into our -- for our customers and a lot of flexibility in a world that's becoming increasingly constrained by geopolitical events. Thank you for your attention. I'm going to now turn it over to Dean.

Thank you, Karine, and good afternoon, everyone. I hope you can see from the discussion that our full team is committed to operational excellence across the business and whether that's about investments, gas supply, supply chain, working capital, we're all focused together on a safe, sustainable business that ultimately drives strong free cash flow. I'm also going to talk about our balance sheet and update our leverage target. Starting with this chart here in the upper left, this builds off of Gustavo's earlier discussion on reliability. And what you can see is we're talking here about onstream time. Onstream time is the combination not only of the reliability of our plants, but also of our feedstock supply. And so you can see we've split the chart between North America and rest of world. And when we don't have feedstock constraints, our plants run at very high rates. The rest of world has had its challenges as we've seen there. And I will point out that running at higher rates not only helps from a plant efficiency perspective, but Karine's talked about our global supply chain. So you can think about how a stable supply of methanol and a predictable supply allows us to optimize our supply chain, things like backhaul, et cetera. The bottom left builds off of Kevin's discussion of our portfolio transformation. And it just shows the evolution over the past 10 years to where we now have a full 2/3 of our production capacity in the U.S. with a further 20% in Chile and Egypt, and 12% in Trinidad and New Zealand, which we were calling here a challenging outlook today. If you translate that to earnings on the right, you can see our run rate at a $350 average realized price. And a full 95% is now coming gas basins where we feel we have a long, strong future with 5% in Trinidad and New Zealand. I'll take my turn talking about the OCI acquisition. I know it's been threaded through the presentation today, and this has been a full effort across our team over the past year or so. The due diligence phase, it was very detailed. It involved all our functions from manufacturing, gas supply, finance, et cetera. And of course, we had a long time to plan as we work through the approval process, culminating in the June 27 closing date. All this culminated in being ready to run what we call our day 1 to 90 integration, and we are ready to really get in there and make sure that we address the high-risk, high-value items. An example I can give is with Karine's team who runs our marketing and customer service. Within 30 days, we had transformed -- or transferred all of the new customers, new logistics onto our systems, which not only allowed for continued reliable to supply to our customers and our new customers but it also allowed us to start getting after synergies, things like looking at terminal contracts, consolidating delivery, barges, et cetera. So that's one example of many that have done across the business, and we are making progress towards our $30 million synergy target. There's other things, of course, that are going to take a little more time, of course, IT systems and some of those changes, which involve multiple layers of people and processes. We're working diligently through that, and we are on target to hit our $30 million synergy target within that second year. Of course, as a business, we're looking beyond that, that is the starting point. We've always said those are hard achievable costs that we know we could get at -- the real value here is running the plants at high operating rates. We've talked about how we -- on our deal, we sort of modeled them in the 90% range. And of course, our target is 97%. So Gustavo and team are working hard at that. We had a great Q3, which we're very pleased about. But of course, we're not sitting on our laurels that has to be sustained over multiple quarters and years, and we're working very hard at that. Karine similarly on the supply chain side. So we think there's upside there, and we're working very hard to get at it over the next couple of years. This shows a bridge of our EBITDA evolution over the past couple of years. And you can see in 2024 when we had a $355 realized price, what we realized on EBITDA. And after adjusting for Trinidad and New Zealand, you can see what our building blocks to get to our current run rate expectations, particularly G3 and OCI, including the synergies. We've -- I hope you've seen from my colleagues here that we collectively are very focused on delivering operational excellence to get to that level. And we do believe there is further upside through the newly acquired assets as well as Chile and -- Chile and Egypt gas supply, which in our run rate, we don't have full rates there. So we are looking to continue to deliver on that expectation. One thing that's really near and dear to my heart, of course, is translating earnings into cash flow. And for us, that's defined as operating cash flow less our interest payments, our lease payments, our CapEx payments and all that's reflected here on this screen. And you can see that we do have a good transfer of EBITDA into cash flow, particularly when you think about the -- over the last 5 years, the capital that we've put into the business, and once you adjust for that and take Rich's comments that we don't have much growth capital in the horizon, we compare very favorably to a peer group. This shows the last 5-year history, and towards the right, you can see what our run rate are expectations are and that we're working towards. And as a team, we are working very focused on that point there. Turning to the balance sheet. A strong resilient balance sheet is critical to us in the commodity industry. And when we think about this, we think through the cycle, so we know we're in a commodity industry, we prepare for low prices. And when we think about our balance sheet, we specifically think about a $300 to $400 window where we think it's reasonable to have a leverage target. So we're seeing our leverage target at 2 to 2.5x at a $350 price. Importantly, down on the bottom left, you can see what that does through the cycle. And we're very focused on making sure that we have reasonable leverage through that range. We do prepare for prices below that as we go through crisis points that we know we've seen in the past, and we will see again in the future. And that is through protecting with a sustainable low cost structure and ample liquidity. From a leverage perspective, we think this is the right target for Methanex because of the protection it provides to shareholders through the reduction of risk. It is investment in great quality, as you can see on the right with our peers. That's really important to us because it provides us flexibility, low covenant structures and also Kevin talked about the hedging opportunities that we have and having a strong balance sheet and access to credit is critically important our business. So for all these reasons, we think that this is the right target for Methanex and we're working towards that. Of course, as you know, in the near term, we are directing all free cash flow towards repaying our term loan A as our #1 priority. And in the next section, Rich will talk about how we're thinking beyond that as we move towards our ultimate capital allocation philosophy. So wrapping up this section, I think that it's really building on the work of my colleagues who have really talked about our collective efforts around portfolio transformation, delivering excellent can cash flows, ultimately having a strong balance sheet and preparing us for the future. So thank you. I'll turn it over to Rich now.

All right. Well, thanks, Dean, and to the whole team for setting me up with a nice -- to be the cleanup hitter here. So I want to start by talking about capital allocation at Methanex. Our primary principles around capital allocation is to have a strong balance sheet, have a sustainable dividend. Find long-term value creation and then return excess cash for shareholders. And we think we have a really, really nice track record in terms of a balanced and disciplined approach here. And we think that the significant investments we've made in strengthening the asset base set us up really well for that. So I'm going to start with a little bit of history on our capital allocation. And if you look at the graph on the right, that shows our capital allocation balance for the last close to 10 years. And now I'll point you to pre 2025. If you look at that allocation, have close to $2 billion in shareholder returns and about $1.3 billion in investment, and that was mainly G3. So the balance there, about 60% returns to shareholders via dividends and share repurchases. At the same time, building G3, which was done at $750 per installed tonne. So well, well, well discounted below where reinvestment pricing in the industry would be. We're now -- obviously, the acquisition of OCI is the big focus. This, again, was an opportunity for us to acquire world-scale assets, North America feedstock immediate cash flows, no construction risk and no time frame of a new build. So our big focus now, as Dean said, is on deleveraging. I'm going to get to that in a few slides, but really a balanced approach, and we believe we're set up well for how we move in the future here. This next slide shows a little graph on our production per 1,000 shares and how that's grown over time. So if you look from 2015 to today, we've doubled the production per share on a 1,000 tonne per share -- 1,000 tonne share basis. I'd say you can also see that, that has been done 2 ways, adding capacity, but at the same time buying back shares. I would also highlight that we think that, that's a significant improvement in the asset base itself. So the quality of the production that's in those -- in that per share production is something that we think is significant and, and we certainly recognize when we look forward. Now the time frames and capital allocation. So Dean spoke to it, I think when we're looking forward and we're setting our target leverage to 2x, 2.5x, you can think of this -- these bars as being around a 2- to 3-year time frame. Our first focus is on the left-hand side, and we -- our commitment to shareholders. And certainly, the feedback we received when we did the OCI transaction was about balance sheet and balance sheet focus. And we've committed to getting ourselves back to 3x debt-to-EBITDA, which is our pre-deal leverage. You can think of that as the term loan A number. There's $425 million on our term loan A at the end of September, but we're also carrying excess cash around $100 million. So on a net basis, it's probably $325 million to $350 million left to go. Once we get there, we're still thinking majority focused towards debt. We have a 2027 bond coming due, it's a $700 million bond and our target is approximately half of that to be paid down and then refinance the rest. So you can also see that we acknowledge that today's share price is very attractive from an investment opportunity to buy back the company for existing shareholders. And so we're also looking to start to return cash to shareholders. Where that leaves us is once we made progress on the deleveraging, we're going to position where we're really, really well positioned from a flexibility perspective to be able to either step into the market in an increased way to buy back shares are also positioned for longer-term growth. Again, over these 2 to 3 -- on a 2- to 3-year time frame, we're not expecting to be making any big decisions on major capital. So we're set up really well from a cash flow perspective. And I do want to start by reiterating the point around the debt. We do think that having a lower debt target, that there's a perception of risk on our industry that's really important. We think that getting the debt to the right level broadens our set of shareholders as well and helps us close the valuation gap that we see today. So certainly a big focus for us. So where do we want to be? The left-hand side says as a -- for our business, we want to be focused on our sustaining CapEx. Gustavo talked about that as a big focus is making sure we get safe, reliable assets, while at the same time optimizing our, our capital. We have a commitment to -- we're going to -- as we delever, we'll take down our interest and lease payments over the next few years and we have a commitment on the dividend. And one thing that we have a minimum commitment there that it's a commitment to the overall dividend level that we see today. So we're close to $60 million a year in dividend payments. We're committed to that cash outlay. So as we buy back shares, should increase yield for existing shareholders. Ultimately, we want to get to our target leverage. And on the right-hand side, we think it positions us extremely well for flexibility in terms of how we invest on behalf of you, the shareholders. And this is just a snapshot. There's a lot of different pieces of information here. I think I'll start with the chart on the left -- the bottom left-hand side, which really talks about our share price performance. And you can see that clearly, the commodity chemical space has been very challenged over the past 3 years. Our share price has performed, obviously, reasonably well, relatively well. But we still see a lot of upside. And the graph on the right-hand side talks about our free cash flow yield at -- on either consensus basis or a run rate that Dean spoke to. That's a very high yield, we think, very inexpensive cash flows, certainly an upside valuation for shareholders. The other -- on the top left-hand side, I do want to highlight that we obviously are always talking about risks. We're always talking about where the pushback on the shares is. And we'll highlight some of the big ones, which is methanol markets and macro risk. I hope we've -- I believe we've shown the structural constructive forces around methanol that we of today and as we look into the future. The other is around asset performance, G3 and the newly acquired assets. I hope you believe we've shown how focused we are around our center of excellence on both our newly acquired assets as well as our existing platform. And then the last part is around leverage in the balance sheet. And hopefully, you also see that we are very focused on that. So all around, we see a lot of upside for shareholders, and we're really focused on delivering results. So just to pull it back. We think we've had a long history, a very balanced and disciplined approach to capital allocation with our -- underpinned by our over 6.5 million tons of North American supply as well as our assets in Chile and Egypt that provide really stable gas and prolific gas basins to support production there. I think we're well positioned for strong free cash flow and also taking a very balanced and consistent approach to capital allocation. So final takeaways. Well, I think I'll just walk you through what we believe we showed is a quietly constructive methanol market, how we've taken assets and our investments in North America, including the OCI acquisition to really make the cornerstone, that the cornerstone of our production to transform the business. Focus now is on taking that and leveraging our global capabilities and Gustavo and Karine talked about that. And then converting that strong asset position into free cash flow generation and disciplined capital allocation. And ultimately, that's all about turning the corner from investment to impact for you, the shareholders. So that ends the presentation. I really want to say thank you. We're going to take a 10-minute break. We're going to come back, that will give you some time to think about questions. We're going to come back with a 30-minute Q&A, and that will be followed by our panel discussions. So thank you very much. [Break]

Okay. So welcome back. We're going to start the 30-minute Q&A. We're going to do a balance of the questions from the audience here as well as there are some questions coming in from the webcast. So we're going to start it off with questions from the floor here. And so why don't we -- yes.

Ben Isaacson from Scotia. I have 2 questions. First question, if we don't think about New Zealand, is it possible that each plant can be free cash flow neutral or positive at all points in the cycle. Is that an aspiration or is that possible?

No, I'll -- I mean, right now, we -- first and foremost, even Trinidad and New Zealand are free cash flow positive, and that's an important element to both -- at certain points, we have flexibility, okay? So now the other assets that we see today are assets in Egypt, Chile and the U.S., we see those very much on the low end of the cost curve. So in terms of operating at all points in the methanol cycle, that's an important thing that we do in terms of when we look at an asset and when we run it for long term, we try to get a gas price that does allow us to do that. So we think we're very comfortable in North America, Chile and Egypt. And then right now, we're very focused in both Trinidad and New Zealand about ensuring that we're free cash flow positive, and obviously, pricing would impact that.

And then just a follow-up question. You showed on one of the slides, the operating rate of the industry. And my question was, if we go back in time and this maybe 20 years ago, when methanol prices were super high, maybe $1,000 a tonne. How much did the industry operate at when there was an incentive for everyone to make money, what was the most we've ever seen in the industry?

Yes. I mean, going back in time, and I can get some of my colleagues' views on this, but we've almost always seen an operating rate in the industry 70%. And a lot of that is because of the capacity in China. Capacity in China has changed over time because we've got to think that half of the global methanol production is there. What we have seen is that in China, you had inefficient plants that operate at lower end of the rates. So that meant China's operating capacity was limited to around 60%. We have seen, as they modernized plants, they've been able to get higher. But you've always, always seen the industry operating at 60% in China and then 70% outside of China, and we've had this average because of the constraints, constraints have been there, but we are seeing a significantly increase in constraints, particularly because of geopolitics as well as certain gas basins and being mature. We also have to think that there's been a pretty big run on LNG pricing as well, which means diversion of gas into LNG, it can make more sense from a [ naphtha ] perspective. But maybe, Karine I don't know if you -- longer-term operating rates, what's the highest we've ever seen us be able to do even when methanol pricing was extremely high.

Yes. I mean I would have to go back, obviously, to see the data, but as you described, today, there's not a lot of latent capacity for sure. And in the past, it was a bit more, but we've seen this massive rationalization taking place in China. That really means that in the past, call it, 4 for 5 years, China has been operating at a very high level even though when coal prices were high, coal prices were low, we've seen some pretty sustained high operating rates in China, and we really think there's not much latent that was much more in the past, those years you just mentioned, it was definitely more.

It's Joel from BMO. I'll ask 2 questions one by one as well. Maybe Rich and team kind of together in -- let's connect your dots. So you've shown a lot of slides today. So what you're saying is you generate a 350 methanol, about $500 million of free cash flow, correct? And when you pay off the remaining 325, 350 of the term A of the loan, you'll get into a more balanced capital allocation with buyback and debt, okay? So $500 million free cash flow you want to pay off half of the $7 million of the 27s over a couple of years, the 27s. So that's about $175 million a year. So $500 million free cash flow, $175 million of debt repayments starting after you started buyback, you should be doing a 300 million on your buybacks. Is that correct?

Well, if you look at where -- how it will pace, we're going to be mid next year when we about -- this is depending all methanol price dependent, but it should be sometime mid next year a little later when we get past the initial deleveraging. We have now a little over around, I think, Dean, around 15 months to go until we have to refinance the 27 bonds. So we're going to need to build up that 350 over a shorter time frame than two years. So it will probably be -- what we would expect is it will be lower on share repurchase lower than $300 million for the next 15 to 18 months following our initial deleveraging.

Okay. My next question is looking at Slide 35, which is showing how your average realized price premium has really expanded for the last 5 years or so over the China price. And obviously, we talk about the posted price premiums over many, many years. So obviously, your mix changes now even more with Beaumont, not gas in that you have a bigger North American mix. Can you -- why will the premiums stay where it is over China? Other concerns you may get normalization and that premium comes back down, ignoring mix effects that you now have more or production.

Yes. I think Karine explained it well when you said, when you look at where a lot of those constraints are happening, those -- the constraints on supply in the industry are happening in, in volume that is non-sanctioned internationally traded, and that market is getting tighter. And as we look forward, we -- demand continues to grow, but no supply is being added into that market. And so when we move forward and on top of that, what we continue to see is greater barriers in terms of tariffs and other dislocations that's disrupting supply. . So what -- where we see things is there is a structural premium there and that as things get tighter, that's going to come under more pressure. And when there's a dislocation like the one we talked about earlier with the Suez Canal, then that actually makes that temporarily expand even greater. So where we are today is we think there's a structural premium that stays and it likely gets stronger as we move forward and that increased dislocations probably stretch that for periods of time as well. I don't know, Karine, if you have anything else to add to that.

I think you have summarized it really well.

Josh Spector with UBS. I wanted to just follow up on the change in the leverage target. And kind of why now? So a year ago, you thought less than 3 was right. You talked about the peers, but I think if you look at that peer list, 60% of them aren't covering their dividend or recently cut their dividend to address free cash flow. So you guys have significantly outperformed, I think, in what's been the bottom of the cycle from cash generation. So why now do you think you need to go lower? Why not consider terming out that 2027 loan to push that into multiple tranches versus, say, today, you need to pay half of that off?

Yes. For us, we certainly -- when we did the OCI deal, we got a lot of feedback on the balance sheet and is at the right level for a company like ours. Taking a look at where we want to be through the cycle, and we really are looking at $300 to $400 range, meaning a low to high cycle as a normal cycle for methanol. We think that, that firmly puts us even at the low end of the range at a 4x debt to EBITDA. I think that, that is value for shareholders, because there's a perception of risk and asymmetric risk to the downside in terms of taking risk on Methanex, which broadens the shareholder group. At the same time, it makes us more opportunistic, too. So when it comes to share buybacks, when there's a big dislocation, it makes us more opportunistic there as well as being positioned for longer-term growth. I think being a cyclical commodity is tough and getting the right leverage is really important. It's important for the long-term value for shareholders, and we think that, that's the right level for us. We're not going to go -- we're not going all the way there completely, and we acknowledge that at today's share price, there's value in terms of reinvesting some money back into the business for the remaining shareholders. So we're going to be taking a balanced approach with majority to debt until we get there. But Dean, I don't know if you want to take any more that.

Yes. I'll just comment the 2027 bond is in October. So when we look to just under 2 years away, and we wouldn't want to wait right until the last minute, I think option of building up $700 million cash on the balance sheet and just waiting to repay it is not what we see as an efficient use. So we're setting a long-term target that we think is sustainable company that sets us up for the next phase. And it's a balanced approach is how we're looking at it. So I think that's the same comment.

And just quickly in terms of -- you talked about the 5% of EBITDA from Trinidad, New Zealand. So it's about $50 million of your target. What is that in free cash flow?

Yes. No, you're right with that. I think one of the key differentiators when we were running -- we started up Titan versus Atlas was that Titan had recently had a turnaround done and whereas Atlas needed a large turnaround. So what it means is that it's capital CapEx light. And I would say similarly in New Zealand, we're being very prudent with our capital. The other element that would be in there would be the taxes. And so at these levels, there's not a high level of accounting earnings, so there's -- so I think you can assume it's pretty close to that 50%, maybe slightly lower, but mostly in that same area.

Jeff Zekauskas from JPMorgan. Why is it in Trinidad that there's more methanol exported than there is ammonia? And if some of the ammonia plants don't run -- does that mean there's more gas for the methanol plants? And then secondly, for Dean, when you look at your comparables, why don't you include CF industries.

Okay. I'll take the Trinidad question. So right now, Trinidad has got methanol, ammonia and LNG, pretty much across the board in terms of gas 4 Bcf a day of gas demand and 2.5 Bcf a day of production. So across all end uses there, LNG, methanol and ammonia, there's been everyone's taking a haircut on operations there. We -- there is the recent announcement of Nutrien and backing out of Trinidad, and what happens to gas. We do believe not certain is that what's going on there? It's obviously not our -- it's not for us to speak to that situation. But we do think, on a short-term basis, some gas may have been rediverted into methanol. But I think everyone has taken a haircut across the whole downstream sector. And right now, our focus on Trinidad is again operating at cash positive. There are developments that Kevin spoke to that could allow Trinidad both within Trinidad to develop gas in the short term, but also then longer term, it's around geopolitics in Venezuela and to unlock there. So today, our focus would be on the Titan asset that we have. We've got a gas contract coming up in September 2026. Our base case scenario is that we get another two year gas contract there, on similar terms, and we don't have a turnaround on Titan until the end of that -- what would be that term of a contract. So Dean, maybe I'll turn it over to you on the next question.

On the comparable, sure. No, obviously, there's not a lot of direct comparables for Methanex given our industry nature. So we look to a broad set of peers. No specific reason why we've excluded CF. We do look at CF from time to time. I don't have a specific answer for you on that one, Jeff.

Nelson Ng from RBC Capital Markets. So Karine you're giving more color in terms of the realized price globally versus in China. So is it safe to assume that China and probably India absorbs all the sanctioned products. But I just want to ask you, given that you sell about 15% to 20% of your product to China, what's your strategy there? Is that -- that's your lowest -- is that your lowest margin market? And how do you approach selling product into that region?

Go ahead, Karine.

Yes. So you're correct that this is the lost netback region that we serve. That said, it's a very important market. It's a market that's growing, that's very easy to serve in some regions, in some part of the China market as well as some other areas of the demand that's located in very unique location where we actually differentiate as well. So it's not necessarily the lowest of our net backs. There are also some pockets of very specific regional demand that we serve here with additional services.

And my last question is, I guess, you guys talked about moving the Chilean facilities to Louisiana. Can you just -- I know you don't want to look at any large capital projects over the next few years, but is there an opportunity to move 1 of the 10 -- sorry, 1 of the Trinidad facilities or 1 or 2 of the New Zealand facilities to another location?

I think I'll turn that over to you, [indiscernible].

Yes. No, it's something that we look at. What I would say is it sort of depends on the state of the plant and then also the jurisdiction that you might be going to because a lot of it has to do how much of the plant can you move to a different location? And does it actually give you an advantage to do that. And a lot of it has to do with the piping or the pressure envelope that you can move. So we do look at it we've got studies at what I would say are sort of on the shelf and if there's opportunities that emerge, it's -- we'll look at that. But it's not something that we're actively pursuing today.

The main advantage moving is about speed, less about capital savings. And so we don't see the market really demanding us to move with speed because the pricing signals aren't there today. So it's unlikely that exploring that. But like Kevin says, we're always studying to say if that was an option, how and which asset would make sense.

Laurence Alexander with Jefferies. Just a very quick one on the shortfall slide, the 9 million to 11 million tonnes of shortfall. Can you play out the regulatory barriers to addressing that shortfall? How you think about customer shutdown economics and the price elasticity that you think you can observe in the methanol market. So if you get a 2% or 3% tight market for a few quarters where prices go?

Yes. It's a great question because that's why we put a question mark on it. I think the first thing is on building new capacity, building new capacity is isn't easy to do, and it's certainly not easy to do on tight time frame. So even if you really supercharge a project, you're talking about 3 or 4 to do a methanol project. In terms of restrictions and where we have seen the restrictions, there's quite a bit in China now. There was rapid expansion in the early 2000s in China. But since then, there's a huge amount of government scrutiny around new methanol plants has to be the latest technology, has to be world scale, has to come with downstream derivative with it. And those are just not being sanctioned nearly as loosely as there was in the past. In fact, they're more on page of shutting down inefficient plants on basis of energy uses and energy efficiency in the country. So it's a big question on what's going to happen, how does that supply demand gap get filled. That's why we're pointing to the consumer, and it likely has to balance where would it balance is we think it balances on your marginal consumer unless something changes, and that's the olefins market, how sticky that is and where that ultimately lands. Logic would say that the most inefficient plants would have to either shut or significantly reduce down rates. And we are -- we have actually started see that happen. Some of -- there's one older inefficient MTO unit that we think is actually permanently shut in. And you've got new plants starting up. So there's going to be a competition there. logic would say that as the older inefficient plants shut down that the ability to pay becomes greater, because you have more competitiveness of the remaining industry, but we're going to be watching that very closely. So -- on that basis, you don't even -- you don't need the rebalancing to happen within olefins to still get some pricing improvement. But obviously, a big question mark and something we study very closely.

Thanks for arranging these guys. Rich, I thought this was a very tight Analyst Day. So kudos to you guys and the team. Let's start with supply demand. One question on supply, another one on demand. On the supply side first, maybe sort of building on what Laurence asked earlier. You guys laid out 2 million to 4 million tonnes of at-risk production, right? And that's kind of what's baked into your $9 million to $11 million tonne shortfall. From the sounds of it, that's primarily Russia, if I heard correctly and Iran. What are you baking in, in terms of anti-evolution? I mean we're beginning to, in a phased manner, here, some rumblings, right? I mean the other day, PetroChina came out, talked about shutting some refineries, some sort of olefins capacity. Nothing much has really come out on the methanol side. So let me start with that on the supply side, and then I have 1 or 2 more.

Yes, we don't -- or at least it hasn't hit our radar that it's going to affect methanol. And they've already been -- they have been restructuring that industry for quite some time, already shutting down the small inefficient plants. And like I said in our kind of yellow bar that I showed you, those are -- there's quite a bit of small plants, 100,000, 200,000, 300,000 tonne plants that were built in the early 2000s that that are permanently mothballed from our perspective and would face significant political and economic hurdles to ever restarting again. So we do think some -- a lot of that has place in methanol. There aren't big projects today that we would say on the books that they would either slow down or count or cancel because of anti-involution. Again, a lot of that is already on the books. It's coming with downstream integration. So we don't see a big impact there. The one area that we are watching more closely is the olefins market. What does that do in terms of slowing down new projects that might be on the books, what does it do potentially of shutting down older inefficient plants which would certainly be a benefit to us as we're seeing across other regions like Korea and Japan and Europe and the restructurings that are happening there. So China would be a big impact, and that's something we're paying close attention too. Karine I don't know if you want to add anything to it.

Just the only point I wanted to add is the fact that you mentioned about massive rationalization that already took place in China. And just to give you a sense about 1/3 of the Chinese production has actually started in the past 5 years. And so there's been a number of rationalization that took place, a very significant improvement in the quality and the reliability of the plants. And that's why we have such higher operating rates now in China compared to what we had in the past. But at the same time, you definitely have rationalization of older industries in general, it's true for methanol, but if you put refineries and such, you see a lot of rationalization taking place already.