UPDATED: 03/22/2018 — see Change Log

OWNER: Pryor Chemical Company (LSB Industries Inc)
PROJECT: Ammonia-UAN plant, expansion[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

EXISTING PLANT:
COST (reported): None given
JOB CREATION (reported): 145 permanent — see Job Openings [LINK]
START-UP DATE (reported): 1954, 1966, 1975, 1997, 2010 restart, 2013 expansion

EXPANSION:
COST (reported): None given
JOB CREATION (reported): None given
START-UP DATE (reported): None given

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia	210,000 mtpy	235,000 stpy	[Membership required]	[Membership required]
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] LSB investor presentations. Sources: linked below. [3] [Membership required]. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Operational
LSB Industries restarted the Pryor ammonia-UAN plant in 2010, after it had lain idle for a decade, and expanded it in 2013. Ammonia has been produced on this site since 1954; the current plant was commissioned in 1997. Reliability continues to be a major problem at Pryor; most recently, in September 2017, “a minor fire” put the plant out of operation for two and a half months.

EXISTING PLANT:
COST: None given
JOB CREATION: 145 permanent — see Job Openings [LINK]
START-UP DATE: 1954, 1966, 1975, 1997, 2010 restart, 2013 expansion

EXPANSION:
COST: None given
JOB CREATION: None given
START-UP DATE: None given
LIKELIHOOD: Dead — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia	210,000 mtpy	675 stpd 235,000 stpy GROSS 85,000 stpy NET	770 stpd	254,964 mtpy GROSS 77,111 mtpy NET
Urea		115,500 stpy	480 stpd	158,939 mtpy GROSS
Nitric Acid		115,500 stpy	820 stpd	271,520 mtpy GROSS
Ammonium Nitrate		146,200 stpy	1,140 stpd	377,480 mtpy GROSS
UAN		350,000 stpy		317,515 mtpy
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] LSB investor presentations and 2016 10-K. Sources: linked below. [3] Oklahoma DEQ PSD Permits. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; gross capacities based on permit data; net capacities based on company data. See Methodology.

FEEDSTOCK: Natural gas
END PRODUCTS: Ammonia, UAN, Carbon Dioxide

RESEARCH NOTES:
LSB Industries has operated the Pryor fertilizer plant since it restarted in 2010.

In September 2017, LSB announced that “a minor fire” at the ammonia plant had put it out of service for about six weeks. LSB “expects the repairs to be completed and ammonia production to resume by the end of October 2017.” As is too often the case, the company underestimated the outage: production wasn’t back up until December.

Like LSB’s other assets in El Dorado, AR, and Cherokee, AL, the Pryor plant is old and unreliable, and has required numerous unplanned repairs, which take it out of service for considerable periods – for example, in August 2015, from November 2015 to January 2016, again during the Fall 2016 turnaround when restart was delayed. The latest fire, in September 2017, and the two and a half month outage that followed, appears to be standard operating practice.

LSB acknowledges that the Pryor facility experiences more unplanned outages than most – it used to be the only ammonia plant in the US whose owner calculated its capacity based on a 330-day operating year (for discussion of operating days, see What Does Capacity Mean?). However, the company has been focused on making the site more reliable, and now calculates capacity assuming “21 turnaround days” per year.

According to LSB’s Q1 2016 earnings call, in May 2016:

We are spending a lot of time at that plant really looking at ways to improve it with expandable ways that we really plan for a turnaround. And we would expect by the beginning of 2017 for that ammonia plant to be running at 95%.

By February 2017, when it reported its Q4 2016 earnings, Pryor had “operated at an on-stream rate of 98% or better for the past four months. We expect this to continue throughout 2017.”

Unfortunately, it didn’t: an unplanned power outage brought the plant down again in Q2 2017 but LSB made the best of the situation by completing the 21-day turnaround work, scheduled for Q4, during the Q2 outage:

Pryor’s second quarter ammonia plant on-stream rate was approximately 78%, impacted by an unplanned outage. In early July, the site experienced an electrical outage which shut off power to the facility and given that Pryor was already down and considering the low agricultural selling price environment, and other maintenance that needed to be completed, we elected to pull forward the turnaround we had previously scheduled for October. We successfully completed the turnaround on July 21st for a total downtime of 17 days, in line with previously issued guidance.
LSB Industries 2Q 2017 Earnings Announcement, 07/25/2017

In the Q4 2016 earnings call, company reps explained their hope to “extend our turnaround,” meaning that they would only take the plant out of service for maintenance every two years instead of every year. The effect of this would be to increase production by increasing the annual on-stream rate.

We strive to extend our turnaround and we are looking at all the locations actually, but yes Pryor … upgrading instrumentation in control systems. That’s one of the things that we are working on over a period of time. It’s pretty expensive and so we kind we do sections of the plant each year to continue and as we improve those controls there is some upgrades and some equipment heat exchangers, proven water treatment things like that that allow us to extend our turnarounds and we are in that process right now. So I would say within say 2019 we are thinking that we will be going to two year turnaround from there on.
LSB Industries, Q4 2016 earnings call, 02/28/2017

Also, in its Q4 2016 earnings presentation from February 2017, LSB stated that it would “begin fabrication of new urea reactor,” this year. As I understand it, LSB hasn’t yet decided to what extent this new urea unit will expand the site’s urea capacity or simply replace the old unit, but any capacity expansion would be minor. According to the 2Q2017 earnings announcement, the new urea reactor is “to be installed in 2018.”

“Pryor facility reliability improvements” were one of four targets in LSB’s “Operational Improvement Plan to Drive Growth and Enhance Shareholder Value,” outlined in LSB’s May 2016 Investor Presentation. Site-specific plans include:

• Additional engineering support
• Extensive monitoring and control equipment
• Remanufacture or replacement of certain key pieces of equipment
• Enhanced and more comprehensive planning of Turnarounds

There was a planned turnaround at Pryor in Fall 2016 – although the cash-strapped company had warned it might need to postpone the work in its Q1 2016 results: “Some of the 2016 planned capital additions, not related to the El Dorado expansion projects, may be deferred should we need to do so.”

The turnaround went ahead but, unfortunately, the planned downtime drifted into more unplanned downtime, and further eroded the company’s income expectations, and investors’ confidence:

Turnaround activities and various operational issues resulted in unplanned downtime at its three primary chemical facilities during the third quarter of 2016 … our main focus has been on proactively identifying and completing the repairs and upgrades necessary to position LSB to deliver significantly improved financial performance in 2017. We are confident that the recent work that we have done at Cherokee, Pryor and El Dorado, and over the past year, will yield improving on-stream rates.”
LSB Industries press release, 10/05/2016

LSB teetered on the edge of bankruptcy in 2015-16 after the expansion costs for new ammonia and nitric acid plants at El Dorado, AR, spun out of control. Since then, the company has done everything it can to bring in cash: it announced a costly financing deal, in November 2015, and then announced the sale of its climate control division, in May 2016, to a Swedish company, NIBE Industrier AB, “for a total cash consideration of $364 million.”

Proceeds from the transaction will primarily be used to pay down debt. As a result, LSB will have greater financial flexibility and an improved capital structure to execute its growth strategies for its core Chemical Business, including improving the Company’s chemical plant on-stream rates.

Dan Greenwell, LSB’s President and CEO, stated, “This transaction represents an important milestone for LSB and our shareholders … As a focused chemicals company, our management team can now concentrate entirely on growing our Chemical Business by leveraging the substantial investments we have made over the last several years to enhance the reliability and profitability of our facilities … Importantly, this transaction will enhance our financial flexibility and allow us to continue to invest in improving our plants.”

LSB closed the sale of its climate control business in July 2016, and is now a pure-play nitrogen producer.

For context looking forward, “general maintenance CapEx in the chemical business will run between $40 million and $60 million,” per year, across all three of LSB’s ammonia producing plants, as well as its upgrading facility at Baytown, TX.

The John Deere Chemical Company, and its subsidiary Grand River Chemical Company, first began operating a fertilizer plant at Pryor in 1954. The original ammonia plant is no longer in existence but, in 1965, Deere built a new, bigger ammonia plant, which currently sits idle.

Also in 1965, Deere sold its fertilizer plants for roughly $20 million, including the Pryor plant and one in Tulsa, OK, to Nipak Inc, the chemicals division of Lone Star Producing Corporation, which was later renamed Enserch Corporation. In 1975, Nipak commissioned a second ammonia plant for $4 million and, in 1979, sold the Pryor fertilizer complex to Kaiser Aluminum and Chemical Corporation. Kaiser idled the plant in 1985.

A few miles away, also in Pryor, another, smaller, ammonia plant was in operation. In 1967, the Oklahoma Ordnance Works Authority had built a 30,000 stpy ammonia plant, and leased it to Cherokee Nitrogen Company, majority owned by Continental Nitrogen and Chemicals, Inc. In 1974, a year after a major explosion at the plant, Cherokee Nitrogen merged into N-Ren Corporation. In 1987, N-Ren declared bankruptcy, and sold the Pryor plant for $4.2 million. It was promptly sold again to Willard Grain & Feed Inc, which operated the plant under the name Wil-Gro Fertilizer Inc.

The next year, Wil-Gro discussed leasing Kaiser’s idle plant, in addition to its own, but it was not until 1997 that Wil-Gro restarted ammonia production at the current Pryor complex. Wil-Gro revamped the plant with new units, bringing the site’s annual capacity to almost 250,000 mtpy. Shortly thereafter, in 1999, Wil-Gro went bankrupt and idled production at both of its locations in Pryor.

In 2001, LSB Industries Inc acquired the larger, newly revamped fertilizer complex out of bankruptcy but had “not determined whether the Pryor Plant will be put in operation in the future, be held for sale or dismantled and used for spare parts.” The site sat idle until LSB finally restarted ammonia production in 2008-2010, but found the plant operating at a lower than expected ammonia capacity of around 500 stpd.

In April 2013, LSB completed a long series of repairs, upgrades, and debottlenecking projects, including replacing six old and unreliable ammonia converters in the primary ammonia line with one modern converter, which brought ammonia production levels up to 700 stpd. According to LSB’s 2014 Annual Report, “Under normal circumstances the Pryor Facility would purchase approximately 7 million MMBtu of natural gas to produce approximately 215,000 tons of ammonia.” The capital investments from 2010 to 2013 came to around $70 million.

LSB had originally planned a different revamp project for 2012-2013: bringing Pryor’s two smaller, older ammonia plants to their full capacity of 60,000 stpy. Although LSB received permits to restart these units in 2012, this project was postponed while they upgraded the primary line. Once most of the work on that primary line was complete, LSB announced that it planned to resume this project in 2014-2015, but stipulated that it would only put these smaller units into production if/when market conditions are favorable.

In its Q4 2014 earnings call, in March 2015, LSB’s then-CEO Barry Golsen provided an update on the potential restart of these mothballed units, saying:

“We brought a completely new management team and new technical team on board at Pryor. And our current thinking is that in looking at the economic cost of bringing those up to an acceptable level of reliability and output versus spending the same amount of money on the base plant that we can probably get a net better result by focusing on the main plant. And at this time that’s what they are doing. It’s possible that at some time in the future we will revisit that, but at this point in time we’ve tabled it.”

There are currently four ammonia plants at Pryor, only one of which is in operation. Ammonia #4 was producing up to 700 stpd in 2015 but, in May 2016, was reliably producing only 690 stpd; the unit is permitted for 770 stpd, and was built in 1995 and started up in 1997, using technology by Pritchard. Ammonia #1, built 1965, and Ammonia #3, built 1975, each have a capacity of 110 stpd, and were included in air permits from 2012, when LSB first considered restarting them. Ammonia #2 remains idle, probably with good reason.

There are two urea plants: Urea #1, built in 1995 with capacity 480 stpd, and Urea #2, built in California in 1965 but relocated to Pryor in 1995 with capacity 80 stpd. According to the 2012 air permits, Urea #2 was idle but LSB was considering restarting it with Ammonia #1 and #3. All of the urea produced at Pryor is upgraded into UAN.

There are four Nitric Acid plants: #1 and #3, built in 1966 with capacities of 240 stpd and 180 stpd respectively, and #4, built in Illinois in 1964 but relocated to Pryor in 1995 with capacity of 400 stpd. Nitric Acid #2 remains on-site but appears to be permanently out of service.

There are two Ammonium Nitrate plants: #1, built in 1966, and #2, built in 1995, each with capacity of 570 stpd.

In its May 2016 Investor Presentation, LSB updated the end product capacities at all its plants. For Pryor, UAN capacity dropped to 270,000 stpy from 300,000 stpy, and its net ammonia capacity rose from 85,000 stpy to 110,000 stpy – presumably this because LSB anticipated upgrading less ammonia to UAN in the future. In June 2017, these numbers were reversed: net ammonia dropped down to 85,000 stpy and UAN increased to 350,000 stpy.

These shifts in marketable end products might have been partly explained by the fact that, in March 2016, LSB terminated its 2009 offtake agreement with Koch Nitrogen for “substantially all of the UAN produced at the Pryor Facility,” and entered into a new purchase agreement with CVR, which can purchase up to 30,000 stpy of UAN, or only about 10% of the facility’s UAN capacity, commencing in June 2016.

All products are shipped out by truck or rail. [/memberful]

View larger map with all ammonia plants.

ADDRESS: 4463 Hunt St, Pryor Creek, OK 74361, United States

WEBSITE: http://www.lsbindustries.com/PCC

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• EPA Emissions data: Greenhouse Gas Emissions from Large Facilities: PRYOR CHEMICAL COMPANY [LINK]
• Risk Management Plan: Right to Know Network: Pryor Chemical Company [LINK]
• Air Permit (PSD) documents: Oklahoma DEQ Final Issued PSD Permits [LINK] / restart, 2009 [PDF] / Ammonia #4 permit, 2012 [PDF] / Ammonia #1 and #3, 2012 [PDF]
• US Securities and Exchange Commission regulatory filings: EDGAR Search Results, LSB Industries Inc CIK#: 0000060714 [LINK]

NEWS SOURCES:

• 12/06/2017: LSB Industries press release: LSB Industries, Inc. Announces That Its Pryor, Oklahoma Facility Resumes Production [LINK]
• 09/28/2017: LSB Industries press release: LSB Industries, Inc. Provides Operational Update on Its Pryor, Oklahoma Facility [LINK]
• 07/25/2017: LSB Industries press release: LSB Industries, Inc. Provides Update on Its Strategic Alternatives Review Process [LINK]
• 07/25/2017: LSB Industries press release: LSB Industries, Inc. Reports Improved Operating Results for the 2017 Second Quarter [LINK]
• 06/19/2017: LSB Industries investor presentation: June 2017 [PDF]
• 11/2016: LSB Industries investor presentation: November 2016 [PDF]
• 10/19/2016: LSB Industries press release: LSB Industries, Inc. Provides Update on Its Pryor, Oklahoma Facility [LINK]
• 10/05/2016: LSB Industries press release: LSB Industries, Inc. Provides Operational Update on Its Chemical Manufacturing Facilities, Revises Product Sales Volume Outlook for 2016 [LINK]
• 07/01/2016: LSB Industries press release: LSB Industries, Inc. Announces Closing of Sale of Climate Control Business to NIBE Industrier AB [LINK]
• 05/12/2016: LSB Industries press release: LSB Industries, Inc. to Sell Climate Control Business to NIBE Industrier AB [LINK]
• 05/05/2016: Seeking Alpha earnings call transcript: LSB Industries Q1 2016 Results [LINK]
• 05/04/2016: LSB Industries press release: LSB Industries, Inc. Reports Operating Results for the 2016 First Quarter [LINK]
• 01/20/2016: LSB Industries press release: LSB Industries, Inc. Announces That Its Pryor, Oklahoma Facility Resumes Production [LINK]
• 01/08/2016: Pryor Daily Times: Pryor chemical plant sues contractor [LINK]
• 12/30/2015: LSB Industries press release: LSB Industries, Inc. Provides Update on the Status of Its Cherokee, Alabama and Pryor, Oklahoma Facilities [LINK]
• 12/17/2015: LSB Industries press release: LSB Industries, Inc. Provides Operational Update on Its Cherokee, Alabama and Pryor, Oklahoma Facilities [LINK]
• 03/02/2015: Seeking Alpha earnings call transcript: LSB Industries Q4 2014 Results [LINK]
• 11/06/2013: Seeking Alpha earnings call transcript: LSB Industries Q3 2013 Results [LINK]
• 08/09/2013: Seeking Alpha earnings call transcript: LSB Industries Q2 2013 Results [LINK]
• 04/24/2013: LSB Industries press release: LSB Industries, Inc. Reports That Its Chemical Business’ Pryor, Oklahoma Facility Commences Production [LINK]
• 03/01/2013: Seeking Alpha earnings call transcript: LSB Industries Q4 2012 Results [LINK]
• 06/29/1989: Tulsa World: State firms win awards [LINK]
• 06/27/1987: News OK: Fertilizer Plant in Pryor Sold Again [LINK]
• 04/16/1987: News OK: Fertilizer Plant in Pryor May Be Sold at Auction [LINK]
• 03/09/1982: News OK: Suit Claims Fort Gibson Lake Polluted [LINK]
• 02/28/1974: The Malakoff News: Nipak Inc. Announces Plant Expansion [LINK]
• 05/28/1965: The Malakoff News: Nipak Inc. Buys John Deere Chemical Company in Okla. [LINK]