CVR Partners

(UAN)

Danny Swift

2/23/14

Long UAN

Long CVR Partners at $19.82

CVR Partners produces fertilizers

(ammonia and urea ammonium nitrate)

from a plant in Kansas

239,300 tons urea ammonium nitrate,

104,200 tons ammonia

CVR Partners is transitioning to produce

only urea ammonium nitrate

Thesis

CVR Partners had an unscheduled plant

shutdown in August

They also decreased their dividend in Q4

2013

CVR Partners is now oversold

CVR Partners is a small-cap company

($1.3B) in a market with growth potential

Shutdown

Due to “external factors”, the ammonia

production facility experienced

unplanned downtime in late May-early

June

This damaged the catalyst in their reactor,

costing 50 tons/day through June/July

Was not announced until a July 29th 8K

Growth Prospects

CVR Partners is transitioning to 100% urea

ammonium nitrate production

They currently meet 8% of domestic

demand, 23% is imported

UAN 1 year chart

Dividends

Total dividends for 2013 1.745/share

10% yield at current price

Q4 dividends were reduced to 0.36 from

0.583

Research has shown the market typically

overreacts to dividend decreases

Financial Comparison

Why UAN?

UAN has two major competitors: RNF &

TNH

RNF & TNH use natural gas as their primary

feedstock, while UAN uses petcoke

Petcoke has much more stable prices

than natural gas

UAN has contracts guaranteeing 70% of

their petcoke supply through 2027

UAN vs competitors 1 year

Downside Risk

Fertilizer prices crashed in 2013 due to

Chinese deregulation

Further price decreases could hurt

margins

Questions?