OCI Partners LP - FORM 10-Q - November 12, 2014

OCI Partners LP - FORM 10-Q - November 12, 2014

Attached files

Attached files

OCI Partners LP Reports

file	filename
EX-31.2 - EX-31.2 - OCI Partners LP	d800663dex312.htm
EX-32.1 - EX-32.1 - OCI Partners LP	d800663dex321.htm
EX-32.2 - EX-32.2 - OCI Partners LP	d800663dex322.htm
EXCEL - IDEA: XBRL DOCUMENT - OCI Partners LP	Financial_Report.xls
EX-31.1 - EX-31.1 - OCI Partners LP	d800663dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-36098

OCI PARTNERS LP

(Exact name of registrant as specified in its charter)

Delaware

90-0936556

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


Mailing Address:		Physical Address:
P.O. Box 1647		5470 N. Twin City Highway
Nederland, Texas 77627		Nederland, Texas 77627

(Address of principal executive offices) (Zip Code)

(409) 723-1900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ (The registrant became subject to such requirements on October 3, 2013, and it has filed all reports so required since that date.)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of September 30, 2014, the registrant had 80,500,000 common units outstanding.

OCI PARTNERS LP

Form 10-Q

Table of Contents


Part I — Financial Information
Item 1.	OCI PARTNERS LP Condensed Consolidated Balance Sheets	3
	OCI PARTNERS LP Condensed Consolidated Statements of Operations	4
	OCI PARTNERS LP Condensed Consolidated Statements of Member’s Capital and Partners’ Capital	5
	OCI PARTNERS LP Condensed Consolidated Statements of Cash Flows	6
	Notes to OCI PARTNERS LP Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	48

Part II — Other Information
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	Signatures	52

PART I. FINANCIAL INFORMATION

OCI PARTNERS LP

Condensed Consolidated Balance Sheets

September 30, 2014 and December 31, 2013

(Unaudited)

(Dollars in thousands, except per unit data)


	As of
	September 30, 2014		December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	66,611	$	182,977
Restricted cash		—		282
Accounts receivable		28,594		45,014
Inventories		4,880		3,986
Advances due from related parties		97		350
Other current assets and prepaid expenses		2,222		3,629

Total current assets		102,404		236,238
Property, plant, and equipment, net of accumulated depreciation of $50,792 and $33,584, respectively		479,947		361,007
Other non-current assets		12,076		7,135

Total assets	$	594,427	$	604,380

Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	27,581	$	19,430
Accounts payable—related party		40,498		30,097
Other payables and accruals		4,928		2,603
Current maturities of the term loan facility		3,980		4,000
Accrued interest		2,371		2,647
Accrued interest—related party		169		—
Other current liabilities		6,539		2,581

Total current liabilities		86,066		61,358
Term loan facility		388,429		390,876
Accrued interest—related party		—		17
Other non-current liabilities		1,074		758

Total liabilities		475,569		453,009

Partners’ capital:
Common unitholders — 80,500,000 units issued and outstanding at September 30, 2014 and December 31, 2013		118,858		151,371
General partner’s interest		—		—

Total partners’ capital		118,858		151,371

Total liabilities and partners’ capital	$	594,427	$	604,380

See accompanying notes to condensed consolidated financial statements.

OCI PARTNERS LP

Condensed Consolidated Statements of Operations

Three and Nine-Month Periods Ended September 30, 2014 and 2013

(Unaudited)

(Dollars in thousands, except per unit data)


	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2014		2013		2014		2013
Revenues	$	90,471	$	95,790	$	303,497	$	314,852
Cost of goods sold (exclusive of depreciation)		56,295		48,813		164,729		143,266
Depreciation expense		5,852		5,549		17,208		16,627
Selling, general and administrative expenses		5,314		5,369		17,843		21,815

Income from operations before interest expense, other income and income tax expense		23,010		36,059		103,717		133,144
Interest expense		4,157		5,015		14,694		11,698
Interest expense—related party		51		3,998		152		12,435
Loss on extinguishment of debt		—		2,493		—		2,493
Other income		80		7		835		18

Income from operations before tax expense		18,882		24,560		89,706		106,536
Income tax expense		283		428		1,174		1,402

Net income	$	18,599	$	24,132	$	88,532	$	105,134

Earnings per limited partner unit:
Common unit (basic and diluted)	$	0.23	$		$	1.10

Weighted average number of limited partner units outstanding:
Common units (basic and diluted)		80,500,000				80,500,000

See accompanying notes to condensed consolidated financial statements.

OCI PARTNERS LP

Condensed Consolidated Statements of Member’s Capital and Partners’ Capital

Nine-Months Ended September 30, 2014 and 2013

(Unaudited)

(Dollars in thousands, except per unit data)


	Member’s Capital (deficit)			Retained Earnings		Total Member’s Capital			Common Units					Total Partners’ Capital
	Member’s Capital (deficit)			Retained Earnings		Total Member’s Capital			Units		Amount			Total Partners’ Capital
Balance, December 31, 2012	$	4,000		$	52,118	$	56,118			—	$	—		$	—
Distributions		(260,000	)		—		(260,000	)		—		—			—
Net income		—			105,134		105,134			—		—			—

Balance September 30, 2013	$	(256,000	)	$	157,252		(98,748	)		—	$	—		$	—

Balance, December 31, 2013	$	—		$	—	$	—			80,500,000	$	151,371		$	151,371
Distributions		—			—		—			—		(121,045	)		(121,045	)
Net income		—			—		—			—		88,532			88,532

Balance, September 30, 2014	$	—		$	—	$	—			80,500,000	$	118,858		$	118,858

See accompanying notes to condensed consolidated financial statements.

OCI PARTNERS LP

Condensed Consolidated Statements of Cash Flows

Nine-Months Ended September 30, 2014 and 2013

(Unaudited)

(Dollars in thousands, except per unit data)


	2014			2013
Cash flows from operating activities:
Net income	$	88,532		$	105,134
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		17,208			16,627
Amortization of debt issuance costs		2,025			2,780
Loss on extinguishment of debt		—			2,493
Deferred income tax expense		316			568
Decrease (increase) in:
Restricted Cash		282			—
Accounts receivable		16,420			539
Inventories		(894	)		(1,178	)
Prepaid interest		—			(2,363	)
Advances – related party		253			(8,131	)
Other current assets and prepaid expenses		947			(4,285	)
Increase (decrease) in:
Accounts payable		(2,477	)		(5,324	)
Accounts payable – related party		1,196			2,368
Other payables, accruals, and current liabilities		4,173			(3,126	)
Accrued interest		(4,278	)		1,544
Accrued interest - related party		152			(20,201	)

Net cash provided by operating activities		123,855			87,445

Cash flows from investing activities:
Purchase of property, plant, and equipment		(92,681	)		(20,811	)

Net cash used in investing activities		(92,681	)		(20,811	)

Cash flows from financing activities:
Proceeds from borrowings		—			354,600
Repayment of debt		(2,990	)		(125,000	)
Debt issuance costs		(5,983	)		(11,864	)
Cash Distribution to Member		—			(260,000	)
Initial public offering expenses		—			(2,570	)
Remittance of cash to OCI USA for transferred trade receivables		(17,522	)		—
Distribution to Unitholders		(121,045	)		—

Net cash provided by (used in) financing activities		(147,540	)		(44,834	)

Net increase (decrease) in cash and cash equivalents		(116,366	)		21,800
Cash and cash equivalents, beginning of period		182,977			41,708

Cash and cash equivalents, end of period	$	66,611		$	63,508

Supplemental cash disclosures:
Cash paid during the period for income taxes	$	1,350		$	900
Cash paid during the period for interest, net of amount capitalized		12,944			6,999
Cash paid during the period for interest, net of amount capitalized – related party		—			35,000
Supplemental non-cash disclosures:
Accruals of property, plant and equipment purchases	$	14,623		$	1,209
Accruals of property, plant and equipment purchases – related party		27,187			4,600
Capitalized interest		4,002			—

See accompanying notes to condensed consolidated financial statements.

OCI PARTNERS LP

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Note 1 — Business and Basis of Presentation

Description of Business

OCI Partners LP (the “Partnership,” “OCIP,” “we,” “us,” or “our”) is a Delaware limited liability partnership formed on February 7, 2013 to own and operate a recently upgraded methanol and anhydrous ammonia production facility that is strategically located on the U.S. Gulf Coast near Beaumont, Texas. The facility commenced full operations during August 2012. In addition, OCIP has pipeline connections to adjacent customers and port access with dedicated methanol and ammonia import/export jetties, allowing it to ship both products along the Gulf Coast.

We are currently the largest merchant methanol producer in the United States with a maximum annual methanol production capacity of approximately 730,000 metric tons and a maximum annual ammonia production capacity of approximately 265,000 metric tons. During the first quarter of 2014, we began construction on a debottlenecking project that includes a maintenance turnaround and environmental upgrades, which we collectively refer to as our “debottlenecking project.” This project will increase our maximum annual methanol production capacity by 25% to approximately 912,500 metric tons and our maximum annual ammonia production capacity by 15% to approximately 305,000 metric tons. In January of 2015, we expect to shut down our facility for approximately seven to eight weeks for the methanol production unit and four weeks for the ammonia production unit, in order to complete our debottlenecking project.

As discussed further below, the Partnership completed its initial public offering (“IPO”), and OCI USA, Inc. (“OCI USA”) contributed all of its equity interests in OCI Beaumont LLC (“OCIB”) to the Partnership on October 9, 2013. Prior to the completion of the IPO, OCIB was a direct, wholly-owned subsidiary of OCI USA, a Delaware corporation, which is an indirect wholly-owned subsidiary of OCI Fertilizer International B.V. (“OCI Fertilizer”), a Dutch private limited liability company. OCI Fertilizer is an indirect wholly-owned subsidiary of OCI N.V. (“OCI”), a Dutch public limited liability company, which is the ultimate parent for a group of related entities. OCIB is a Texas limited liability company formed on December 10, 2010 as the acquisition vehicle to purchase the manufacturing facility and related assets offered for sale by Eastman Chemical Company on May 5, 2011 for $26,500. OCI, through its subsidiaries, is a global, nitrogen-based fertilizer producer and engineering and construction contractor. OCI is listed on the NYSE Euronext Amsterdam and trades under the symbol “OCI.”

Initial Public Offering

On October 3, 2013, the Partnership priced 17,500,000 common units in its IPO to the public at a price of $18.00 per unit, and on October 4, 2013, the Partnership’s common units began trading on the New York Stock Exchange under the symbol “OCIP.” On October 9, 2013, the Partnership closed its IPO of 17,500,000 common units. In connection with the closing of the IPO, OCI USA contributed its interests in OCIB to the Partnership, and the Partnership issued an aggregate of 60,375,000 common units to OCI USA on October 9, 2013. On November 4, 2013, in connection with the expiration of the underwriters’ over-allotment option period, the Partnership issued an additional 2,625,000 common units to OCI USA pursuant to the terms of the underwriting agreement and contribution agreement entered into in connection with the IPO.

Unless the context otherwise requires, references in this report to the “Predecessor,” “Company,” “we,” “our,” “us,” or like terms, when used in a historical context (periods prior to October 9, 2013, the closing date of the IPO), refer to OCIB, our Predecessor for accounting purposes. References in this report to “OCI Partners LP,” “Partnership,” “we,” “our,” “us,” or like terms, when used in the present tense or prospectively (after October 9, 2013, the closing date of the IPO), refer to OCI Partners LP and its subsidiaries.

Prior to the completion of the IPO, certain assets of OCIB were distributed to OCI USA. In October 2013, OCIB distributed $56,700 of cash and $35,616 of accounts receivable to OCI USA, which was comprised of $8,056 of advances due from related party and $27,560 of trade receivables. All collections of transferred advances due from related parties have been received directly by OCI USA and all collections of transferred trade receivables have been received by the Partnership and will be remitted to OCI USA. As of September 30, 2014, we have remitted $17,522 of the collections of the transferred trade receivables to OCI USA, and the remaining balance of $10,038 is recorded in accounts payable – related party on the unaudited condensed consolidated balance sheet as of September 30, 2014.

OCI PARTNERS LP

Notes to the Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X, neither of which requires all of the information and footnotes required by GAAP. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, and accordingly, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (the “SEC”) on March 19, 2014. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the Partnership’s financial position as of September 30, 2014, and the consolidated results of operations and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements include the accounts of the Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating results for the nine-months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other reporting period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accuracy of estimates is based on accuracy of information used. Significant items subject to such estimates and assumptions include the useful lives of property, plant, and equipment, the valuation of property, plant, and equipment, and other contingencies.

Note 2 — Recently Issued Accounting Standards not yet adopted

On May 28, 2014 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Partnership on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Partnership is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Partnership has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Note 3 — Inventories

As of September 30, 2014 and December 31, 2013, the Partnership’s inventories consisted of finished goods produced from normal production, and the Partnership had no raw materials and/or work-in-progress inventories. Below is a summary of inventory balances by product as of September 30, 2014 and December 31, 2013:


	As of
	September 30, 2014		December 31, 2013
Ammonia	$	3,285	$	2,090
Methanol		1,595		1,896

Total	$	4,880	$	3,986

Note 4 — Property, Plant and Equipment


	As of
	September 30, 2014		December 31, 2013
Land	$	3,371	$	3,371
Furniture and Fixtures		164		—
Plant and equipment		347,729		337,093
Vehicles		104		63
Construction in progress		179,371		54,064

		530,739		394,591
Less: accumulated depreciation		50,792		33,584

	$	479,947	$	361,007

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Note 5 — Debt

(a) Debt – Related Party

On August 20, 2013, OCIB entered into a $40,000 intercompany revolving facility agreement with OCI Fertilizer (the “Intercompany Revolving Facility”), with a maturity date of January 20, 2020. The amount that can be drawn under the Intercompany Revolving Facility is limited by the Amended Revolving Credit Facility (as defined below) to $40,000 minus the amount of indebtedness outstanding under the Amended Revolving Credit Agreement. Borrowings under the Intercompany Revolving Facility bear interest at a rate equal to the sum of (i) the rate per annum applicable to the Term B-3 Loans discussed in note 5(b), plus (ii) 0.25%. OCIB pays a commitment fee to OCI Fertilizer under the Intercompany Revolving Facility on the undrawn available portion at a rate of 0.5% per annum, which is included as a component of interest expense – related party on the condensed consolidated statements of operations. The Intercompany Revolving Facility is subordinated to indebtedness under the Amended Term Loan Facility (as defined below) and the Amended Revolving Credit Facility. As of September 30, 2014, OCIB has not drawn under the Intercompany Revolving Facility.

On September 15, 2013, three separate intercompany loan agreements between OCIB and OCI Fertilizer were replaced with a new intercompany term facility agreement with OCI Fertilizer (the “Intercompany Term Facility”), with a borrowing capacity of $200,000, and a maturity date of January 20, 2020. Borrowings under the Intercompany Term Facility are subordinated to the Term Loans (as defined below) under the Term Loan B Credit Facility (as defined below). Prior to the completion of the IPO, borrowings under the Intercompany Term Facility accrued interest at an interest rate equal to the one-month London Interbank Offered Rate (“LIBOR”) plus 9.25%. Upon the completion of the IPO, borrowings under the Intercompany Term Facility bear interest at a rate equal to the sum of (i) the rate per annum applicable to the Term B-3 Loans discussed in note 5(b) plus (ii) 0.25%.

On November 27, 2013, OCIB utilized the funds borrowed under the Incremental Term Loan (see note 5(b)) to repay amounts owing under the Intercompany Term Facility and entered into Amendment No. 1 to the Intercompany Term Facility (the “Intercompany Term Amendment”). Under the terms of the Intercompany Term Amendment, the borrowing capacity under the Intercompany Term Facility was reduced to $100,000. As of September 30, 2014, OCIB has not drawn under the Intercompany Term Facility.

(b) Debt – Third Party


	September 30, 2014		Interest Rate	Interest Rate as of September 30, 2014			Maturity Date
Term Loan B Credit Facility	$	396,010	4% + Adjusted LIBOR		5.00	%	August 20, 2019
Less: Current Portion		3,980
Less: Debt Discount		3,601

Total Long-term Debt-External Party	$	388,429


	December 31, 2013		Interest Rate	Interest Rate as of December 31, 2013			Maturity Date

Term Loan B Credit Facility	$	399,000	5% + Adjusted LIBOR		6.25	%	August 20, 2019
Less: Current Portion		4,000
Less: Debt Discount		4,124

Total Long-term Debt-External Party	$	390,876

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Prior Credit Facility

On April 26, 2012, OCIB entered into a term loan facility agreement with a syndicate of lenders, including Credit Agricole Corporate and Investment Bank, as facility agent (the “Prior Credit Facility”), and borrowed $125,000 under the Prior Credit Facility. On April 30, 2012, OCIB utilized the borrowings under the Prior Credit Facility to repay in full all of $92,500 of debt outstanding and subsequently terminate its then-existing related party term loan and revolving loan. The Prior Credit Facility was repaid in full with the proceeds of the Bridge Term Loan Credit Facility discussed below.

Bridge Term Loan Credit Facility

On May 21, 2013, OCIB entered into a $360,000 senior secured term loan credit facility agreement with a group of lenders (the “Bridge Term Loan Credit Facility”). The Bridge Term Loan Credit Facility was comprised of a $125,000 Bridge Term B-1 Loan and $235,000 Bridge Term B-2 Loan. OCIB utilized $125,000 of the funds borrowed under the Bridge Term B-1 Loan to repay amounts owed under the Prior Credit Facility. Approximately $230,000 of proceeds from the Bridge Term B-2 Loan was distributed to OCI USA and approximately $4,025 of proceeds from the Bridge Term B-2 Loan was used to pay bank and legal fees associated with the Bridge Term Loan Credit Facility.

Term Loan B Credit Facility and Amendments Thereto

On August 20, 2013, OCIB entered into a $360,000 senior secured term loan facility agreement (the “Term Loan B Credit Facility”) with a syndicate of lenders, comprised of two tranches of term debt in the amounts of $125,000 (the “Term B-1 Loan”) and $235,000 (the “Term B-2 Loan” and together with the Term B-1 Loan, the “Term B Loans”), respectively. Upon entry into the Term Loan B Credit Facility, OCIB utilized the funds borrowed under the facility to repay amounts owing under the Bridge Term Loan Credit Facility, after which the Bridge Term Loan Credit Facility was terminated. Prior to the completion of the IPO, interest on the Term B Loans accrued, at OCIB’s option, at adjusted LIBOR plus 5.00% per annum or the alternate base rate plus 4.00%. After the completion of the IPO, if OCIB has received both (a) a corporate credit rating of B from S&P and (b) a corporate family rating of Ba3 from Moody’s (in each case with at least a stable outlook), or better, such rates will immediately be reduced by 0.50% until such time, if any, as such ratings are no longer in effect. Pursuant to the terms of the Term Loan B Credit Facility, upon the completion of the IPO, the Partnership utilized proceeds of approximately $126,085 received from the IPO to repay in full outstanding borrowings under the Term B-1 Loan of approximately $125,000 and $1,085 of accrued interest, leaving only the Term B-2 Loan outstanding.

On November 27, 2013, OCIB, the Partnership and OCI USA entered into Amendment No. 1 to the Term Loan B Credit Facility (the “Term Loan Amendment No. 1”) with Bank of America, as administrative agent, collateral agent and incremental term loan lender, and the other lenders party thereto. Pursuant to the terms of Term Loan Amendment No. 1, OCIB borrowed an incremental $165,000 term B-2 loan (the “Incremental Term Loan”) under the Term Loan B Credit Facility (collectively with the existing Term B-2 Loan, the “Term B-2 Loans”). OCIB utilized the proceeds of the Incremental Term Loan to repay amounts owing under the Intercompany Term Facility (see note 5(a)). Term Loan Amendment No. 1 also adjusted the amortization schedule for the Term B-2 Loans to encompass the new tranche composed of the Incremental Term Loans. In addition, Term Loan Amendment No. 1 clarified that the maximum principal amount of Incremental Term Loans that may be incurred under the Term Loan B Credit Facility is the sum of (and not the greater of) (a) $100.0 million and (b) such other amount such that, after giving effect on a pro forma basis to any such incremental facility and other applicable pro forma adjustments, the first lien net leverage ratio is equal to or less than 1.25 to 1.00.

On April 4, 2014, OCIB, the Partnership and OCI USA entered into Amendment No. 2 and Waiver (“Term Loan Amendment No. 2”) to the Term Loan B Credit Facility, with Bank of America, as administrative agent, collateral agent and additional term loan lender, and the other lenders party thereto. Pursuant to the terms of Term Loan Amendment No. 2, OCIB refinanced the Term B-2 Loans through the cashless repayment of the Term B-2 Loans and the simultaneous incurrence of a new tranche of loans (the “Term B-3 Loans”). The Term B-3 Loans have terms and provisions identical to the Term B-2 Loans, except as specifically modified by Term Loan Amendment No. 2. Term Loan Amendment No. 2 (i) reduced the interest rate margin on the outstanding term loans under the Term Loan B Credit Facility such that OCIB may select an interest rate of (a) 4.00% above LIBOR for LIBO Rate Term Loans (as defined in the Term Loan B Credit Facility) or (b) 3.00% above the base rate for base rate loans, (ii) decreased the minimum LIBO Rate (as defined in the Term Loan B Credit Facility) from 1.25% to 1.00%, (iii) reset the prepayment premium of 101% on voluntary prepayments of the Term B-3 Loans for twelve months after the closing of Term Loan Amendment No. 2, and (iv) provided for delivery of financial information from the Partnership instead of OCIB, with reconciliation information to the financial information for OCIB.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

The Term B-3 Loans, as well as related fees and expenses, are unconditionally guaranteed by OCI USA, the Partnership and certain of its future subsidiaries other than OCIB. The Term B-3 Loans mature on August 20, 2019 and are subject to certain mandatory prepayment obligations upon the disposition of certain assets and the incurrence of certain indebtedness. The Term B-3 Loans, and related fees and expenses, are secured by a first priority lien on substantially all of OCIB’s and the Partnership’s assets (OCI USA does not provide any security with its guarantee; upon completion of the IPO, all security provided by OCI USA was released, and the Partnership entered into an all-assets pledge, including its ownership interest in OCIB).

On June 13, 2014, OCIB, the Partnership and OCI USA entered into Amendment No. 3 (“Term Loan Amendment No. 3”) to the Term Loan B Credit Facility (as amended by Term Loan Amendment No. 1, Term Loan Amendment No. 2 and Term Loan Amendment No. 3, the “Amended Term Loan Facility”) with Bank of America, as administrative agent. Term Loan Amendment No. 3 (i) amended Section 10.01(ii) by adding that the liens permitted by such section cannot be for debt that is overdue, (ii) revised the intercompany subordination agreement entered into in connection with Term Loan B Credit Facility to clarify that intercompany debt will be subordinate to the obligations owed to counterparties under hedge agreements that are secured pursuant to the terms of the Amended Term Loan Facility and (iii) made certain technical changes to certain defined terms.

The Amended Term Loan Facility contains customary covenants and conditions. Upon the occurrence of certain events of default under the Amended Term Loan Facility OCIB’s obligations under the Amended Term Loan Facility may be accelerated. In addition, OCIB may not permit, on the last day of any fiscal quarter, beginning December 31, 2013 (i) the consolidated senior secured net leverage ratio to exceed (x) in the case of each fiscal quarter ending prior to March 31, 2015, 2.00 to 1.00 and (y) in the case of the fiscal quarter ending March 31, 2015 and each fiscal quarter ending thereafter, 1.75 to 1.00, and (ii) the consolidated interest coverage ratio on the last day of any fiscal quarter to be less than 5.00 to 1.00. The Term B-3 Loans are subject to mandatory quarterly repayments equal to 0.25% of all Term B-3 Loans outstanding on the Term Loan Amendment No. 2 effective date. The Amended Term Loan Facility contains various nonfinancial covenants, which include, among others, undertaking with respect to reporting requirements, maintenance of specified insurance coverage, and compliance with applicable laws and regulations. The Amended Term Loan Facility contains financial covenants related to maintaining maximum leverage ratios and a minimum interest coverage ratio, in each case, on a quarterly basis. As of September 30, 2014, the Partnership was in compliance with all these covenants.

Scheduled maturities with respect to the Amended Term Loan Facility are as follows:


Fiscal Year
2014	$	995
2015		3,980
2016		3,980
2017		3,980
2018		3,980
Thereafter		379,095

Total	$	396,010

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Revolving Credit Facility and Amendments Thereto

On April 4, 2014, OCIB as borrower, the Partnership as a guarantor, Bank of America, N.A. as administrative agent and a syndicate of lenders entered into a new $40,000 revolving credit facility agreement (the “Revolving Credit Facility”), with an initial aggregate borrowing capacity of up to $40,000, including a $20,000 sublimit for letters of credit. On June 13, 2014, OCIB, the Partnership and OCI USA entered into Amendment No. 1 (“Revolving Credit Amendment No. 1”) to the Revolving Credit Facility (as amended by Revolving Credit Amendment No. 1, the “Amended Revolving Credit Facility”) with Bank of America, as administrative agent. Revolving Credit Amendment No. 1 (i) amended Section 10.01(ii) by adding that the liens permitted by such section cannot be for debt that is overdue, (ii) amended Section 10.01(xiv) to clarify that such sub-section permits the granting of liens in connection with hedge agreements permitted under the terms of the Amended Revolving Credit Facility, (iii) revised the intercompany subordination agreement entered into in connection with the Revolving Credit Facility to clarify that intercompany debt will be subordinate to the obligations owed to counterparties under hedge agreements that are secured pursuant to the terms of the Amended Revolving Credit Facility and (iv) made certain technical changes to certain defined terms.

The Amended Revolving Credit Facility has a one-year term that may be extended for additional one-year periods subject to the consent of the lenders. OCIB is required to repay in full all outstanding revolving loans under the Amended Revolving Credit Facility on the last business day of each June and December. OCIB’s obligations under the Amended Revolving Credit Facility are guaranteed by the Partnership and certain of its future subsidiaries other than OCIB. All proceeds will be used by OCIB for working capital, capital expenditures and other general corporate purposes.

OCIB’s obligations under the Amended Revolving Credit Facility are secured by a first priority lien (which is pari passu with the first priority lien securing obligations under the Amended Term Loan Facility) on substantially all of the tangible and intangible assets of OCIB and the Partnership. In addition, the Amended Revolving Credit Facility contains covenants and provisions that affect OCIB and the Partnership, including, among others, customary covenants and provisions:

•

prohibiting OCIB from incurring indebtedness under the Intercompany Revolving Facility Agreement, dated as of August 20, 2013, by and between OCIB, as borrower, and OCI Fertilizer, as lender, that exceeds $40,000 minus the amount of indebtedness outstanding under the Amended Revolving Credit Facility

•

limiting OCIB’s ability and that of the Partnership from creating or incurring specified liens on their respective properties (subject to customary exceptions);

•

limiting OCIB’s ability and that of the Partnership to make distributions and equity repurchases (which shall be permitted if no default exists and in the case of distributions and equity repurchases from a subsidiary to its parent); and

•

prohibiting consolidations, mergers and asset transfers by OCIB and the Partnership (subject to customary exceptions).

Under the Amended Revolving Credit Facility, OCIB is also subject to certain financial covenants that are tested on a quarterly basis. OCIB must maintain a consolidated senior secured net leverage ratio not greater than 2.00 to 1.00 for each fiscal quarter ending prior to March 31, 2015, and not greater than 1.75 to 1.00 thereafter. Furthermore, OCIB may not permit the consolidated interest coverage ratio to be less than 5.00 to 1.00.

Outstanding principal amounts under the Amended Revolving Credit Facility bear interest at OCIB’s option at either LIBOR plus a margin of 2.75% or a base rate plus a margin of 1.75%. OCIB pays a commitment fee of 1.10% per annum on the unused portion of the Amended Revolving Credit Facility.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

The Amended Revolving Credit Facility contains events of default customary for credit facilities of this nature, including, but not limited to, the failure to pay any principal, interest or fees when due, failure to satisfy any covenant, untrue representations or warranties, impairment of liens, events of default under any other loan document under the new credit facility, default under any other material debt agreements, insolvency, certain bankruptcy proceedings, change of control and material litigation resulting in a final judgment against any borrower or subsidiary guarantor. Upon the occurrence and during the continuation of an event of default under the Amended Revolving Credit Facility, the lenders may, among other things, accelerate and declare the outstanding loans to be immediately due and payable and exercise remedies against OCIB, the Partnership and the collateral as may be available to the lenders under the Amended Revolving Credit Facility and other loan documents.

Prior Credit Facility

OCIB incurred $3,000 of debt issuance costs related to the Prior Credit Facility during April 2012. The debt issuance costs related to investment banking fees, legal, and other professional fees directly associated with entering into the Prior Credit Facility. OCIB amortized debt issuance costs related to the Prior Credit Facility of $0 during each of the three and nine-month periods ended September 30, 2014, respectively, compared to $0 and $1,000 during the three and nine-month periods ended September 30, 2013, respectively. The amortization of the debt issuance costs is presented as a component of interest expense in the accompanying unaudited condensed consolidated statements of operations.

Bridge Term Loan Credit Facility

The Bridge Term Loan Credit Facility included $4,025 of debt issuance costs related to investment banking fees, legal, and other professional fees directly associated with entering into the Bridge Term Loan Credit Facility. OCIB recorded the debt issuance costs in other long-term assets in the accompanying unaudited condensed consolidated balance sheets and was amortizing them over the term of the Bridge Term Loan Credit Facility using the straight-line method. OCIB amortized debt issuance costs related to the Bridge Term Loan Credit Facility of $0 during each of the three and nine-month periods ended September 30, 2014, respectively, and $525 and $1,532 during the three and nine-month periods ended September 30, 2013, respectively. The amortization of the debt issuance costs is presented as a component of interest expense in the accompanying unaudited condensed consolidated statement of operations. These debt issuance costs were written off in connection with the repayment of the Bridge Term B-1 Loan and Bridge Term B-2 Loan on August 20, 2013, resulting in a loss on extinguishment of debt in the three-month period ended September 30, 2013 of $2,493.

Term Loan B Credit Facility and Amendments Thereto

The Term Loan B Credit Facility included a 1.5% debt discount of $5,400 that was withheld from the proceeds of the loans, a 1.5% arranger fee of $5,400, as well as $2,500 of associated legal and structuring fees. OCIB recorded the debt discount as a reduction of long-term debt, and the arranger fees and legal and structuring fees in other long-term assets in the accompanying unaudited condensed consolidated balance sheet. Upon the completion of our IPO, the Partnership repaid in full all amounts outstanding under the Term B-1 Loan, and wrote off the debt discount and debt issue costs that were deferred relating the Term B-1 Loan, resulting in a loss on extinguishment of debt in the three-months ended December 31, 2013 of $4,498.

The Incremental Term Loan included a 0.5% debt discount of $825 that was withheld from the loan proceeds, a 0.75% arranger fee of $1,237, as well as $295 of associated legal and structuring fees. OCIB and OCI Fertilizer agreed to reduce the amount owing under the Intercompany Term Facility by a total of $2,562, $2,172 of which was comprised of debt discount, arranger fee and a portion of the associated legal and structuring fees, and the remaining $390 represented the amount of prepaid interest – related party. OCIB recorded the debt discount as a reduction of long-term debt, and the arranger fees and the legal and structuring fees in other long-term assets in the accompanying unaudited condensed consolidated balance sheet. OCIB recorded the reduction of the amount owing under the Intercompany Term Facility as a contribution of partners’ capital.

The Amended Term Loan Facility included a 1.0% soft-call fee of $3,980, a 0.25% arranger fee of $995, as well as $25 of other fees and expenses. OCIB recorded the soft-call fee, arranger fee and other fees and expenses in other long-term assets as a deferred financing cost.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

All debt discount and debt issuance costs are being amortized over the term of the Amended Term Loan Facility using the effective-interest method. The amortization of the debt issuance costs related to the Amended Term Loan Facility was $642 and $1,770 during the three and nine-month periods ended September 30, 2014, respectively, and $249 during each of the three and nine-month periods ended September 30, 2013. The amortization of the debt issuance costs is presented as a component of interest expense in the accompanying condensed consolidated statements of operations.

Revolving Credit Facility and Amendments Thereto

The Revolving Credit Facility included $539 of debt issuance costs related to closing fees, legal, and other professional fees directly associated with entering into the Revolving Credit Facility. OCIB recorded the debt issuance costs in other long-term assets in the accompanying unaudited condensed consolidated balance sheets and is amortizing them over the term of the Revolving Credit Facility using the straight-line method. OCIB amortized debt issuance costs related to the Revolving Credit Facility of $140 and $255 during the three and nine-month periods ended September 30, 2014, respectively, and $0 during each of the three and nine-month periods ended September 30, 2013, respectively. The amortization of the debt issuance costs is presented as a component of interest expense in the accompanying unaudited condensed consolidated statement of operations.

Note 6 — Related Party Transactions

The Partnership has maintained and been involved with certain arrangements and transactions with OCI and its affiliates. The material effects of such arrangements and transactions are reported in the accompanying unaudited condensed consolidated financial statements as related party transactions. The Partnership’s IPO on October 9, 2013 and associated contribution by OCI USA of its interests in OCIB gave rise to certain transfers, contributions, and capital distributions described in note 1. In addition, the Partnership entered into certain new contractual arrangements with related parties in connection with the IPO, such as the Omnibus Agreement and other agreements discussed below.

The following table represents the effect of related party transactions of the consolidated results of operations for the three and nine-month periods ended September 30, 2014 and 2013:


	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2014		2013		2014		2013
Cost of goods sold (exclusive of depreciation)	$	3,252	$	—	$	9,869	$	—
Selling, general and administrative expenses (1)		1,172		2,309		3,615		7,630
Interest expense		51		3,998		152		12,435

(1)	Amounts represented in selling, general and administrative expense were incurred to the following related parties:


	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2014		2013		2014		2013
OCI GP LLC	$	598	$	—	$	1,813	$	—
OCI Nitrogen B.V.		37		223		190		1,120
OCI Personnel B.V.		159		—		740		—
Contrack International Inc.		378		170		872		170
OCI Fertilizer		—		—		—		43
Orascom Construction Industries (“OCI Egypt”)		—		1,916		—		6,297

Total selling, general and administrative expenses – related party		1,172		2,309		3,615		7,630

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Our Agreements with OCI

Omnibus Agreement

On October 9, 2013, in connection with the closing of the IPO, the Partnership entered into an omnibus agreement by and between the Partnership, OCI N.V., OCI USA, OCI GP LLC and OCIB (the “Omnibus Agreement”). The Omnibus Agreement addresses certain aspects of the Partnership’s relationship with OCI and OCI USA, including: (i) certain indemnification obligations, (ii) the provision by OCI USA to the Partnership of certain services, including selling, general and administrative services and management and operating services relating to operating the Partnership’s business, (iii) the Partnership’s use of the name “OCI” and related marks and (iv) the allocation among the Partnership and OCI USA of certain tax attributes.

Under the Omnibus Agreement, OCI USA will provide, or cause one or more of its affiliates to provide, the Partnership with such selling, general and administrative services and management and operating services as may be necessary to manage and operate the business and affairs of the Partnership. Pursuant to the Omnibus Agreement, the Partnership will reimburse OCI USA for all reasonable direct or indirect costs and expenses incurred by OCI USA or its affiliates in connection with the provision of such services, including the compensation and employee benefits of employees of OCI USA or its affiliates.

During the three and nine-month periods ended September 30, 2014, costs totaling $3,850 and $11,682, respectively, were incurred under this contract and payable to OCI GP LLC in connection with reimbursement of providing selling, general and administrative services and management and operating services to manage and operate the business and affairs of the Partnership. Of this amount, $3,252 and $9,869 were included in cost of goods sold (exclusive of depreciation) for the wages directly attributable to revenue-producing operations during the three and nine-month periods ended September 30, 2014, respectively. No amounts were incurred under this contract during the three and nine-month periods ended September 30, 2013. Accounts payable – related party include amounts incurred but unpaid to OCI GP LLC of $2,994 and $1,776 as of September 30, 2014 and December 31, 2013, respectively.

The Partnership recorded amounts due to (i) OCI Nitrogen B.V. (“OCI Nitrogen”), an indirect, wholly-owned subsidiary of OCI, (ii) OCI Personnel B.V. (“OCI Personnel”), an indirect, wholly-owned subsidiary of OCI, (iii) Contrack International Inc. (“Contrack”), an indirect, wholly-owned subsidiary of OCI, and (iv) OCI Fertilizer, in selling, general and administrative expense as shown on the unaudited condensed consolidated statement of operations, in relation to officers’ salaries, wages and travel expenses, and asset management information-technology-related project expenses in the amount of $574 and $1,802 during the three and nine-months ended September 30, 2014, respectively, compared to $393 and $1,333 during the three and nine-months ended September 30, 2013, respectively. Accounts payable – related party include amounts incurred but unpaid to the aforementioned parties of $278 and $301 as of September 30, 2014 and December 31, 2013, respectively.

Contribution Agreement

On October 9, 2013, in connection with the closing of the IPO, the Partnership entered into a Contribution, Conveyance and Assumption Agreement (the “Contribution Agreement”) with its general partner, OCI USA and OCIB. Immediately prior to the closing of the IPO, OCI USA contributed to the Partnership its right, title and interest in and to all of the limited liability company interests in OCIB in exchange for 60,375,000 common units. These transactions, among others, were made in a series of steps outlined in the Contribution Agreement. On November 4, 2013, after the expiration of the underwriters’ over-allotment option period, pursuant to the IPO underwriting agreement and the Contribution Agreement, the Partnership issued 2,625,000 additional common units that were subject to the underwriters’ over-allotment option to OCI USA for no additional consideration as part of OCI USA’s contribution of its membership interests in OCIB to the Partnership.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Distributions and Payments to OCI USA and Its Affiliates

Prior to the completion of the IPO, certain assets of OCIB were distributed to OCI USA. In May 2013, OCIB distributed $30,000 of cash and $230,000 of proceeds from the Bridge Term B-2 Loan to OCI USA as a capital distribution. In October 2013, OCIB distributed $56,700 of cash and $35,616 of accounts receivable to OCI USA, which was comprised of $8,056 of advances due from related party and $27,560 of trade receivables. All collections of transferred advances due from related parties have been received directly by OCI USA, and all collections of transferred trade receivables have been received by the Partnership and will be remitted to OCI USA. As of September 30, 2014, we have remitted $17,522 of the collections of the transferred trade receivables to OCI USA, and the remaining balance of $10,038 is recorded in accounts payable – related party on the unaudited condensed consolidated balance sheet as of September 30, 2014.

Intercompany Revolving Facility and Intercompany Term Facility

As indicated above in note 5(a), OCIB had related party debt during the three and nine-month periods ended September 30, 2014 and 2013 and had recorded interest expense of $51 and $152 during in the three and nine-month periods ended September 30, 2014, respectively, compared to $3,998 and $12,435 during in the three and nine-month periods ended September 30, 2013, respectively.

Construction Agreement with Orascom E&C USA Inc.

In March 2013, OCIB entered into a technical service agreement with OCI Construction Limited (“OCICL”), an indirect wholly-owned subsidiary of OCI N.V., for OCICL’s provision of management and construction services relating to the debottlenecking of OCIB’s methanol and ammonia production units (the “Technical Service Agreement”). OCIB incurred $0 and $1,125 during the three and nine-month periods ended September 30, 2013, respectively, of OCICL fees for the provision of management and construction services. No amounts were incurred under this contract during the three and nine-month periods ended September 30, 2014. Accounts Payable – related party include amounts incurred but unpaid to OCICL of $0 and $375 as of September 30, 2014 and December 31, 2013, respectively.

In June 2013, OCIB entered into a procurement and construction contract with Orascom E&C USA Inc., an indirect wholly-owned subsidiary of OCI N.V., pursuant to which Orascom E&C USA Inc. will undertake the debottlenecking of OCIB’s methanol and ammonia production units (the “Construction Contract”). Upon execution of the Construction Contract, the Technical Service Agreement was subsumed within the Construction Contract. Under the terms of the Construction Contract, Orascom E&C USA Inc. will be paid on a cost-reimbursable basis, plus a fixed fee that will equal 9% of the costs of the project, excluding any discounts. The contract allocates customary responsibilities to OCIB and Orascom E&C USA Inc. The agreement does not provide for the imposition of liquidated or consequential damages. Costs (including the fixed fee) were incurred under the Construction Contract in the amount of $34,592 and $76,760 during the three and nine-month periods ended September 30, 2014, respectively, compared to $10,269 and $12,154 during the three and nine-month periods ended September 30, 2013, respectively. All amounts incurred under this contact have been capitalized into construction in progress, which is a component of property plant and equipment shown in the unaudited condensed consolidated balance sheet. Accounts Payable – related party include amounts incurred but unpaid to Orascom E&C USA Inc. of $27,187 and $85 as of September 30, 2014 and December 31, 2013, respectively.

Other Transactions with Related Parties

Equity Commitment Agreement

On November 27, 2013, the Partnership entered into a new intercompany equity commitment agreement with OCI USA (the “Intercompany Equity Commitment”). Under the terms of the Intercompany Equity Commitment, OCI USA shall make an equity contribution not to exceed $100,000 to the Partnership if (a) prior to the completion of the debottlenecking project in 2014, the Partnership or OCIB have liquidity needs for working capital or other needs and the restrictions under the Amended Term Loan Facility or any other debt instrument prohibit the Partnership or OCIB from incurring sufficient additional debt to fund such liquidity needs; or (b) OCIB fails to comply with any of the financial covenants as of the last day of any fiscal quarter. During the nine-month period ended September 30, 2014, no equity contributions were received under this contract. On November 10, 2014, the Partnership drew $60,000 from this facility as discussed further in note 12.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Guarantee of Amended Term Loan Facility and Amended Revolving Credit Facility

The term loans under the Amended Term Loan Facility and related fees and expenses are unconditionally guaranteed by OCIP and OCI USA and are each secured by pari passu senior secured liens on substantially all of OCIB’s and OCIP’s assets, as well as the assets of certain future subsidiaries of OCIP (OCI USA does not provide any security in connection with its guarantee). The revolving loans and letters of credit under the Amended Revolving Credit Facility (see note 5) and related fees and expenses, are unconditionally guaranteed by OCIP and are secured by pari passu senior secured liens on substantially all of OCIB’s and OCIP’s assets, as well as the assets of certain future subsidiaries of OCIP.

Standby Letter of Credit

On August 28, 2012, OCIB obtained a standby letter of credit (the “Letter of Credit”) from Citibank, N.A., in the amount of $282 in support of OCI USA’s office lease obligations. On August 10, 2014 OCIB assigned all duties, liabilities and obligations under the Letter of Credit to OCI USA, and in return, OCI USA remitted $282 to OCIB.

Management Support Fees

During the three and nine-month periods ended September 30, 2013, OCIB had related-party transactions with Orascom Construction Industries (“OCI Egypt”) in the amount of $1,916 and $6,297, respectively, related to management support fees, which are recorded in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. As indicated above, on October 9, 2013, in connection with the closing of the IPO, the Partnership entered into the Omnibus Agreement that, among other things, addresses certain aspects of the Partnership’s relationship with OCI and OCI USA, including the provision by OCI USA to the Partnership of certain services, including selling, general and administrative services and management and operating services relating to operating the Partnership’s business. Our obligation to pay management support fees to OCI Egypt was terminated after the completion of the IPO.

Note 7 — Significant Customers

During the three and nine-month periods ended September 30, 2014 and 2013, the following customers accounted for 10% or more of the Partnership’s revenues:


Customer name	Three-Months Ended September 30, 2014			Nine-Months Ended September 30, 2014
Methanex		33.9	%		34.1	%
Koch ⁽¹⁾		25.8	%		26.4	%
Rentech		19.2	%		14.6	%
Lucite International		10.6	%		8.2	%

Customer name	Three-Months Ended September 30, 2013			Nine-Months Ended September 30, 2013

Methanex		28.4	%		32.5	%
Trammo, Inc. (f/k/a Transammonia, Inc.)		23.9	%		17.9	%
Koch ⁽¹⁾		22.3	%		23.2	%
Rentech		10.5	%		14.1	%

(1)	Figure presented includes sales to Koch Nitrogen International Sarl, Koch Nitrogen, LLC and Koch Methanol, LLC.

The loss of any one or more of the Partnership’s significant customers noted above may have a material adverse effect on the Partnership’s future results of operations.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Note 8 — Earnings per Limited Partner Unit

The following table sets forth the computation of basic and diluted earnings per limited partner unit for the period indicated:


	Three-Months Ended September 30, 2014		Nine-Months Ended September 30, 2014
Net income	$	18,599	$	88,532
Basic and diluted weighted average number of limited partner units outstanding		80,500,000		80,500,000
Basic and diluted net income per limited partner unit	$	0.23	$	1.10

Note 9 — Commitments, Contingencies and Legal Proceedings

In the ordinary course of business, we may be involved in various claims and legal proceedings, some of which are covered in whole or in part by insurance. We may not be able to predict the timing or outcome of these or future claims and proceedings with certainty, and an unfavorable resolution of one or more of such matters could have a material adverse effect on our financial condition, results of operations or cash flows. Currently, we are not party to any legal proceedings that, individually or in the aggregate, are reasonably likely to have a material adverse effect on our financial condition, results of operations or cash flows.

During July and August 2013, the Partnership experienced 13 days of unplanned downtime as the Partnership took its methanol unit offline to repair its syngas machine, including replacing a rotor and installing new bearings. The Partnership’s claim for losses associated with this unplanned downtime was approximately $11,300 with a net recovery of approximately $6,400 (after incurring a deductible of approximately $4,900). The Partnership received insurance proceeds of $5,085 in connection with this insurance claim during the fourth quarter of 2013, and the effect of the receipt of these insurance proceeds was included in other income (expense) in the Partnership’s Consolidated Statement of Operations for the year ended December 31, 2013. On April 15, 2014, the Partnership reached a final settlement under this insurance claim, whereby the insurance provider agreed and paid a final installment of $600, and the effect of the receipt of these insurance proceeds is presented in other income (expense) in the accompanying unaudited condensed consolidated statement of operations.

The Partnership’s facilities could be subject to potential environmental liabilities primarily relating to contamination caused by current and/or former operations at those facilities. Some environmental laws could impose on the Partnership the entire costs of cleanup regardless of fault, legality of the original disposal or ownership of the disposal site. In some cases, the governmental entity with jurisdiction could seek an assessment for damage to the natural resources caused by contamination from those sites. The Partnership had no significant operating expenditures for environmental fines, penalties or government-imposed remedial or corrective actions during the three and nine-month periods ended September 30, 2014 and 2013.

Note 10 — Fair Value

The Partnership’s receivables and payables are short-term in nature and, therefore, the carrying values approximate their respective values as of September 30, 2014. Debt accrues interest at a variable rate, and as such, the fair value approximates its carrying value as of September 30, 2014 and December 31, 2013.

OCI PARTNERS LP

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2014 and 2013

(Dollars in thousands, except per unit data)

Note 11 — Distributions

The Partnership declared the following cash distributions to its unitholders of record for the periods presented:

Period of Cash Distribution

Distribution Per
Common Unit ⁽¹⁾

Total Cash
Distribution

Date of
Record

Date of Distribution

First Quarter, ended March 31, 2013 ⁽²⁾

N/A

Second Quarter, ended June 30, 2013 ⁽²⁾

N/A

Third Quarter, ended September 30, 2013 ⁽²⁾

N/A

Fourth Quarter, ended December 31, 2013 (from October 9, 2013) ⁽³⁾

0.61367

49,400

March 31, 2014

April 7, 2014

First Quarter, ended March 31, 2014

0.41

33,005

May 22, 2014

May 29, 2014

Second Quarter, ended June 30, 2014

0.48

38,640

August 22, 2014

August 28, 2014

Third Quarter, ended September 30, 2014

0.26

21,709

November 21, 2014

December 03, 2014

(1)	Cash distributions for a quarter are declared and paid in the following quarter.

(2)	Our common units did not commence trading on the NYSE until October 4, 2013, and consequently, no distributions were declared or paid for any periods prior to this date.

(3)	The distribution paid for the fourth quarter of 2013 represents our quarterly distribution prorated for the period beginning immediately after the date of the closing of our IPO, October 9, 2013, and ending on December 31, 2013.

Note 12 — Subsequent Events

On November 10, 2014, pursuant to the Intercompany Equity Commitment, the Partnership received a capital contribution of $60,000 from OCIP Holding LLC, an indirect wholly owned subsidiary of OCI, to help finance the shortfall of funding required to complete the debottlenecking project, and, in exchange, the Partnership issued 2,995,372 common units to OCIP Holding LLC. The common units were issued pursuant to a contribution agreement, dated November 10, 2014, by and among the Partnership, OCIP Holding LLC and OCI USA, at a price per common unit equal to the volume-weighted average trading price of a common unit on the NYSE, calculated over the consecutive 20-trading day period ending on the close of trading on the trading day immediately prior to the issue date. Immediately following the issuance of common units to OCIP Holding LLC on November 10, 2014, OCIP Holding LLC held 65,995,372 common units in the Partnership, representing a 79.04% limited partner interest.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition, results of operations and cash flows in conjunction with our unaudited condensed consolidated financial statements and the related notes presented in this report as well as the consolidated financial statements and related notes, together with our discussion and analysis of financial condition and results of operations, included in our Annual Report on Form 10-K for the year ended December 31, 2013 (“Annual Report”).

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “will,” “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our industry, our expected revenues, our future profitability, our expected capital expenditures (including for maintenance or expansion projects and environmental expenditures) and the impact of such expenditures on our performance, and the costs of operating as a publicly traded partnership. These statements involve known and unknown risks, uncertainties and other factors, including the factors described under Item 1A—“Risk Factors” in our Annual Report that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things:

•

our ability to make cash distributions on our common units;

•

the volatile nature of our business, our ability to remain profitable and the variable nature of our cash distributions;

•

the ability of our general partner to modify or revoke our distribution policy at any time;

•

our ability to forecast our future financial condition or results of operations and our future revenues and expenses;

•

our reliance on a single facility for conducting our operations;

•

our limited operating history;

•

planned and unplanned downtime (including in connection with our debottlenecking project and maintenance turnarounds), shutdowns (either temporary or permanent) or restarts of existing methanol and ammonia facilities (including our own facility), including, without limitation, the timing and length of planned maintenance outages;

•

potential operating hazards from accidents, fire, severe weather, floods or other natural disasters;

•

our reliance on insurance policies that may not fully cover an accident or event that causes significant damage to our facility or causes extended business interruption;

•

our lack of contracts that provide for minimum commitments from our customers;

•

the cyclical nature of our business;

•

expected demand for methanol, ammonia and their derivatives;

•

expected methanol, ammonia and energy prices;

•

anticipated production rates at our plant;

•

our reliance on natural gas delivered to us by our suppliers, including a subsidiary of DCP Midstream Partners, LP (“DCP Midstream”) and a subsidiary of Kinder Morgan Energy Partners, L.P. (“Kinder Morgan”);

•

expected levels, timing and availability of economically priced natural gas and other feedstock supplies to our plant;

•

expected operating costs, including natural gas and other feedstock costs and logistics costs;

•

expected new methanol or ammonia supply or restart of idled plant capacity and timing for start-up of new or idled production facilities;

•

our expected capital expenditures;

•

the impact of regulatory developments on the demand for our products;

•

global and regional economic activity (including industrial production levels);

•

a decrease in methanol production;

•

intense competition from other methanol and ammonia producers, including recent announcements by other producers, including other OCI affiliates, of their intentions to relocate, restart or construct methanol or ammonia plants in the Texas Gulf Coast region or elsewhere in the United States;

•

the dependence of our operations on a few third-party suppliers, including providers of transportation services and equipment;

•

the risk associated with changes, or potential changes, in governmental policies affecting the agricultural industry;

•

the hazardous nature of our products, potential liability for accidents involving our products that cause interruption to our business, severe damage to property or injury to the environment and human health and potential increased costs relating to the transport of our products;

•

our potential inability to obtain or renew permits;

•

existing and proposed environmental laws and regulations, including those relating to climate change, alternative energy or fuel sources, and the end-use and application of our products;

•

new regulations concerning the transportation of hazardous chemicals, risks of terrorism and the security of chemical manufacturing facilities;

•

our lack of asset and geographic diversification;

•

our dependence on a limited number of significant customers;

•

our ability to comply with employee safety laws and regulations;

•

the success of our debottlenecking project;

•

our potential inability to successfully implement our business strategies, including the completion of significant capital programs;

•

additional risks, compliance costs and liabilities from expansions or acquisitions;

•

our reliance on our senior management team;

•

the potential shortage of skilled labor or loss of key personnel;

•

our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;

•

restrictions in our debt agreements on our ability to distribute cash or conduct our business;

•

potential increases in costs and distraction of management resulting from the requirements of being a publicly traded partnership;

•

exemptions we will rely on in connection with New York Stock Exchange corporate governance requirements;

•

control of our general partner by OCI;

•

the conflicts of interest faced by our senior management team, which operates both us and our general partner;

•

limitations on the fiduciary duties owed by our general partner to us and our limited partners under our partnership agreement; and

•

changes in our treatment as a partnership for U.S. federal income or state tax purposes.

You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs, forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

OVERVIEW

We are a Delaware limited partnership formed in February 2013 to own and operate a recently upgraded, integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont. On October 9, 2013, we completed our initial public offering (“IPO”) of 17,500,000 common units at a price to the public of $18.00 per common unit and issued 60,375,000 common units to OCI USA, Inc. (“OCI USA”). On November 4, 2013, in connection with the expiration of the underwriters’ over-allotment option period, we issued an additional 2,625,000 common units to OCI USA pursuant to the terms of the underwriting agreement and Contribution Agreement entered into in connection with the IPO.

Both methanol and ammonia are global commodities that are essential building blocks for numerous end-use products. Methanol is a liquid petrochemical that is used in a variety of industrial and energy-related applications. The primary use of methanol is to make other chemicals, with approximately two-thirds of global methanol demand in 2013 being used to produce formaldehyde, acetic acid and a variety of other chemicals that form the foundation of a large number of chemical derivatives. These derivatives are used to produce a wide range of products, including adhesives for the lumber industry, such as plywood, particle board and laminates, for resins to treat paper and plastic products, and also in paint and varnish removers, solvents for the textile industry and polyester fibers for clothing and carpeting. Methanol is also used outside of the United States as a direct fuel for automobile engines, as a fuel blended with gasoline and as an octane booster in reformulated gasoline. Ammonia, produced in anhydrous form (containing no water) from the reaction of nitrogen and hydrogen, constitutes the base feedstock for nearly all of the world’s nitrogen chemical production. In the United States, ammonia is primarily used as a feedstock to produce nitrogen fertilizers, such as urea and ammonium sulfate, and is also directly applied to soil as a fertilizer. In addition, ammonia is widely used in industrial applications, particularly in the Texas Gulf Coast market, including in the production of plastics, synthetic fibers, resins and numerous other chemical derivatives.

Our Debottlenecking Project

We have begun a project to expand our existing methanol and ammonia production capacity and have incurred, and expect to incur additional, significant costs and expenses for the construction and development of the project. We expect that the debottlenecking project will be completed in the first quarter of 2015 and currently estimate the total cash expenditures to complete the project has increased by approximately $70.0 million to $80.0 million, to a total of approximately $240.0 million to $250.0 million (including costs associated with a turnaround and environmental upgrades). Our estimate of total capital expenditures to complete the debottlenecking project is subject to numerous risk and uncertainties, and the actual amount of total capital expenditures required to complete the debottlenecking project may be greater than our current estimate. The increase in our forecasted remaining cost to complete the debottlenecking project is due to additional piping and structural steel quantities needed to complete the project, as well as, an increase in labor. In addition, management has decided to increase the scope of the turnaround project and replace additional equipment and refractories, which are heat-resistant materials that constitute the linings for high-temperature furnaces and reactors, during the upcoming planned downtime to improve reliability. We expect that we will shut down our facility for approximately seven to eight weeks for the methanol production unit and four weeks for the ammonia production unit, in January of 2015 in order to complete our debottlenecking project (including completion of the associated turnaround and environmental upgrades).

As of September 30, 2014, we had incurred approximately $161.7 million in expenditures related to the project, as shown in the table below. In addition, we received our Texas Commission on Environmental Quality (the “TCEQ”) permit on July 22, 2014, and our U.S. Environmental Protection Agency (the “EPA”) permit on August 1, 2014, which constitutes an important milestone in the overall progress of the project. We expect our depreciation expense will increase from the additional assets placed into service from our debottlenecking project. To the extent that we successfully complete our debottlenecking project, we expect that our production and sales volumes will be greater, and our raw material costs per unit will be lower in subsequent periods than in prior periods. As a result, our results of operations for periods prior to, during and after the completion of our debottlenecking project may not be comparable.

Below is a summary of the debottlenecking project costs incurred as of September 30, 2014:

Debottlenecking Project Costs

As of September 30, 2014

(in millions)


Project Expenditures paid as of September 30, 2014	$	120.0
Accrued Project Expenditures		37.5
Capitalized Interest		4.2

Total	$	161.7

Key Industry Factors

Supply and Demand

Revenues and cash flow from operations are significantly affected by methanol and ammonia prices. The price at which we ultimately sell our methanol and ammonia depends on numerous factors, including the global supply and demand for methanol and ammonia.

Methanol. The primary use of methanol is to make other chemicals, with approximately 60-65% of global methanol demand being used to produce formaldehyde, acetic acid and a variety of other chemicals that form the foundation of a large number of chemical derivatives. These derivatives are used to produce a wide range of products, including adhesives for the lumber industry, such as plywood, particle board and laminates, resins to treat paper and plastic products, paint and varnish removers, solvents for the textile industry and polyester fibers for clothing and carpeting.

Energy-related applications consume the remaining 35-40% of global methanol demand. Over the last few years, high oil prices have driven strong demand for methanol in energy applications such as gasoline blending, biodiesel and as a feedstock in the production of dimethyl ether (“DME”) and Methyl tertiary-butyl ether (“MTBE”), particularly in China. Methanol blending in gasoline is currently not permitted in the United States, but outside of the United States, methanol is used as a direct fuel for automobile engines, as a fuel blended with gasoline and as an octane booster in reformulated gasoline.

Historically, demand for methanol in chemical derivatives has been closely correlated to levels of global economic activity, energy prices and industrial production. Because methanol derivatives are used extensively in the building industry, demand for these derivatives rises and falls with building and construction cycles, as well as the level of production of wood products, housing starts, refurbishments and related customer spending. Demand for methanol is also affected by automobile production, durable goods production, industrial investment and environmental and health trends. Methanol is predominately produced from natural gas, but is also produced from coal, particularly in China. Lower natural gas prices and improving economic conditions have recently resulted in an increase in methanol supply in the United States.

The methanol industry experienced a wave of global plant closures between 1998-2007 due to high natural gas prices as well as generally weaker demand for chemicals. During this period, numerous U.S. methanol facilities were shut down or relocated to other countries, resulting in the inability of current U.S. production capacity to meet current U.S. methanol demand. However, a long period of stable and low natural gas prices in the United States has made it economical for companies to upgrade existing plants and initiate construction of new methanol and nitrogen projects. For example, Methanex Corporation (“Methanex”), LyondellBasell Industries B.V. (“LyondellBasell”), Celanese Corporation (“Celanese”), Valero Energy Corporation (“Valero”) and OCI N.V. (“OCI”) have each announced plans to relocate, restart or construct methanol plants in the U.S. Gulf Coast region over the next few years, which will increase overall U.S. production capacity and the availability of methanol supply.

Ammonia. The fertilizer industry is the major end-user of ammonia, with approximately four-fifths used for the production of various fertilizers or, to a much lesser extent, for direct application into the ground. Ammonia is also used to produce various industrial products including blasting/mining compounds (ammonium nitrate); fibers and plastics (acrylonitrile, caprolactam and other nylon intermediates, isocyanates and other urethane intermediates, amino resins); and NOx emission reducing agents (ammonia, urea) among others. While these non-fertilizer applications only account for approximately one-fifth of global ammonia demand, this sector plays a much more significant role in demand for imported ammonia, accounting for more than one-third of global trade in ammonia.

In the United States, there is a meaningful correlation between demand for nitrogen fertilizer products and crop prices. Demand for fertilizers is affected by the aggregate crop planting decisions and fertilizer application rate decisions of individual farmers. Individual farmers make planting decisions based largely on the prospective profitability of a harvest, while the specific varieties and amounts of fertilizer they apply depend on many factors, including crop prices, their current liquidity, soil conditions, weather patterns and the types of crops planted. High crop prices incentivize farmers to increase fertilizer application in order to maximize crop yields. Thus, high crop prices tend to buoy fertilizer demand, resulting in higher demand for ammonia.

While the ammonia industry experienced a massive wave of plant closures in the late 1990s and early 2000s due to high natural gas prices that ultimately led to higher imports into the United States of ammonia and nitrogen fertilizers, current market trends have led to significant expansion, and, plans are now in place to build as much, if not more, new ammonia capacity in the United States than was previously lost. These factors can impact, among other things, the level of product in the market, resulting in price volatility and a reduction in product margins.

Natural Gas Prices

Natural gas is the primary feedstock for our production of methanol and ammonia. Operating at full capacity, our methanol and ammonia production units together require approximately 80,000 to 90,000 MMBtu per day of natural gas. Accordingly, our profitability depends in large part on the price of our natural gas feedstock. In recent years, increased natural gas production from shale formations in the United States has increased domestic supplies of natural gas, resulting in a relatively low natural gas price environment. As a result, the competitive position of U.S. methanol and ammonia producers has been positively impacted relative to the methanol and ammonia competitive position of producers outside of the United States where the natural gas price environment is generally higher.

For the three-months ended September 30, 2014, natural gas feedstock costs represented approximately 49.6% of our total cost of goods sold (exclusive of depreciation), as compared to 49.1% during the three-months ended September 30, 2013. During the three-months ended September 30, 2014, we spent approximately $27.9 million on natural gas feedstock supplies, which equaled an average cost per MMBtu of approximately $4.28, as compared to approximately $24.0 million on natural gas feedstock supplies and an average cost per MMBtu of approximately $3.74 during the three-months ended September 30, 2013.

For the nine-months ended September 30, 2014, natural gas feedstock costs represented approximately 60.9% of our total cost of goods sold (exclusive of depreciation), as compared to 58.6% during the nine-months ended September 30, 2013. During the nine-months ended September 30, 2014, we spent approximately $100.3 million on natural gas feedstock supplies, which equaled an average cost per MMBtu of approximately $4.67, as compared to approximately 84.0 million on natural gas feedstock supplies and an average cost per MMBtu of approximately $3.80 during the nine-months ended September 30, 2013.

We have connections to one major interstate and three major intrastate natural gas pipelines that provide us access to significantly more natural gas supply than our facility requires and flexibility in sourcing our natural gas feedstock. We currently source natural gas from DCP Midstream and Kinder Morgan. In addition, our facility has connections to a natural gas pipeline owned by Florida Gas Transmission and a natural gas pipeline owned by Houston Pipe Line Company. We believe that we have ready access to an abundant supply of natural gas for the foreseeable future due to our location and connectivity to major natural gas pipelines.

According to the Annual Energy Outlook 2014 published by the Energy Information Administration (the “EIA”) in April 2014, total annual U.S. natural gas consumption is expected to grow from approximately 25.6 Tcf in 2012 to approximately 31.6 Tcf in 2040, or 0.8% per year on average. During the same time period, U.S. natural gas production is expected to increase from approximately 24.1 Tcf to approximately 37.5 Tcf, or 2.0% per year on average. U.S. natural gas production is expected to exceed U.S. natural gas consumption by 2018, which is expected to spur the growth of net U.S. natural gas exports to approximately 5.8 Tcf in 2040.

As a result of the previously described fundamentals for natural gas in the United States, the EIA expects natural gas prices to remain relatively low for the foreseeable future, with price increases in the near term to be driven by faster growth of consumption in the industrial and electric power sectors. More specifically, in the EIA’s 2014 Annual Energy Outlook, the EIA expects Henry Hub average natural gas prices to reach $4.96 per MMBtu in 2020. As natural gas is the feedstock for the majority of global methanol and ammonia production, having a low cost natural gas feedstock is a significant competitive advantage for U.S. producers.

Key Operational Factors

Product Sales Contracts

We are party to methanol sales contracts with Methanex, Koch Methanol LLC, ExxonMobil, Arkema and Lucite. Our customers have no minimum volume purchase obligations under these contracts, may determine not to purchase any more methanol from us at any time and may purchase methanol from other suppliers. Consistent with industry practice, our methanol sales contracts set our pricing terms to reflect a specified discount to a published monthly benchmark methanol price (Argus or Southern Chemical), and our methanol is sold on an FOB basis when transported by barge, pipeline, and our methanol truck loading facility. The payment terms under our methanol sales contacts are net 25-30 days. For the nine-months ended September 30, 2014, methanol sales contracts with Methanex and Koch Methanol, LLC accounted for approximately 34.1% and 22.0%, respectively, of our total revenues.

We are party to ammonia sales contracts with Rentech, Koch Nitrogen, LLC, Transammonia, Lucite, and DuPont. Our customers have no minimum volume purchase obligations under these contracts, may determine not to purchase any more ammonia from us at any time and may purchase ammonia from other suppliers. Consistent with industry practice, these contracts set our pricing terms to reflect a specified discount to a published monthly benchmark ammonia price (CFR Tampa), and our ammonia is sold on an FOB basis when delivered by barge and pipeline. The payment terms under our ammonia sales contacts are net 30 days. For the nine-months ended September 30, 2014, ammonia sales contracts with Rentech accounted for approximately 14.6% of our total revenues.

During the nine-months ended September 30, 2014, we delivered approximately 50.2% of our total sales by barge, 47.8% of our total sales by pipeline, and approximately 2.0% of our total sales through our methanol truck loading facility.

Facility Reliability

Consistent, safe and reliable operations at our facility are critical to our financial performance and results of operations. Unplanned downtime at our facility may result in lost margin opportunity, increased maintenance expense and a temporary decrease in working capital investment and related inventory position. We acquired our facility (which had been idled by the previous owners since 2004) in May 2011, commenced an upgrade that was completed in July 2012 and began operating our facility at full capacity in the fourth quarter of 2012. Our newly renovated facility began ammonia production in December 2011 and began methanol production in July 2012, with revenues first generated from ammonia sales in the first quarter of 2012 and from methanol sales in the third quarter of 2012.

During the three-month period ended September 30, 2014, our methanol and ammonia production units were in operation for 72 days and 85 days, respectively, as compared to 71 and 92 days, respectively, during the three-month period ended September 30, 2013. During the three-month period ended September 30, 2014, our methanol and ammonia production units were shut down for 20 days and 7 days, respectively, due to electrical power outages and repairs to our reformer. During the three-month period ended September 30, 2013, we experienced 21 days of unplanned downtime as we took our methanol unit offline to repair our syngas machine.

During the nine-month period ended September 30, 2014, our methanol and ammonia production units were in operation for 239 days and 249 days, respectively, as compared to 251 and 257 days, respectively during the nine-month period ended September 30, 2013. There was a period of unplanned downtime early in the first quarter of 2014, as a result of an electrical power outage and in the third quarter of 2014, as a result of electrical power outages and repairs to our reformer.

We expect to perform maintenance turnarounds approximately every four years, which will typically last approximately 40 days and cost approximately $24.0 million per turnaround. We will perform significant maintenance capital projects at our facility during a turnaround to minimize disruption to our operations. We will capitalize the costs related to these projects as property, plant and equipment and will classify the amounts as maintenance capital expenditures. We plan to undertake a turnaround as part of our debottlenecking project that is expected to be completed in January of 2015, which will result in approximately seven to eight weeks of downtime in the methanol production unit and four weeks of downtime in the ammonia production unit. We expect that the next turnaround after the completion of the debottlenecking project will occur in 2018.

How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our results of operations and profitability and include capacity utilization, EBITDA (as defined below), and cost of goods sold (exclusive of depreciation). We view these metrics as important factors in evaluating our profitability and frequently review these measurements to analyze trends and make decisions.

Capacity Utilization

The amount of revenue we generate primarily depends on the sales and production volumes of methanol and ammonia. These volumes are primarily affected by the utilization rates of our production units, which is the total production volume for a production unit for a given period divided by the production capacity of that production unit. Production capacity is 726 metric tons per day for our ammonia production unit and 2,000 metric tons per day for our methanol production unit. Maintaining consistent and reliable operations at our facility are critical to our financial performance and results of operations. Efficient production of methanol and ammonia requires reliable and stable operations at our facility due to the high costs associated with planned and unplanned downtime.

We produced approximately 62,276 metric tons of ammonia and approximately 136,307 metric tons of methanol during the three-months ended September 30, 2014, representing capacity utilization rates of 93% and 74% for the ammonia and methanol production units, respectively, as compared to production of approximately 63,885 metric tons of ammonia and 131,756 metric tons of methanol during the three-months ended September 30, 2013, representing capacity utilization rates of 96% and 72% for the ammonia and methanol production units, respectively.

We produced approximately 191,116 metric tons of ammonia and approximately 461,440 metric tons of methanol during the nine-months ended September 30, 2014, representing capacity utilization rates of 96% and 85% for the ammonia and methanol production units, respectively, as compared to production of approximately 192,787 metric tons of ammonia and 479,200 metric tons of methanol during the nine-months ended September 30, 2013, representing capacity utilization rates of 97% and 88% for the ammonia and methanol production units, respectively. Our capacity utilization rate for the nine-months ended September 30, 2014 was lower than the capacity utilization rate for the nine-months ended September 30, 2013 due to the unplanned downtime experienced in the first and third quarters of 2014.

EBITDA

EBITDA is defined as net income plus (i) interest expense and other financing costs (ii) income tax expense, (iii) depreciation expense and (iv) net loss on extinguishment of debt. EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:

•

the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; and

•

our operating performance and return on invested capital compared to those of other publicly traded partnerships, without regard to financing methods and capital structure.

EBITDA should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA may have material limitations as a performance measure because it excludes items that are necessary elements of our costs and operations. In addition, EBITDA presented by other companies may not be comparable to our presentation because each company may define EBITDA differently.

Cost of Goods Sold (exclusive of depreciation)

Our cost of goods sold (exclusive of depreciation) consists of costs related to the production of methanol and ammonia. Raw material purchases, such as natural gas and hydrogen, represent the largest component of our total cost of goods sold (exclusive of depreciation). For the three and nine-months ended September 30, 2014, natural gas feedstock costs represented approximately 49.6% and 60.9%, respectively, of our total cost of goods sold (exclusive of depreciation) compared to approximately 49.1% and 58.6% during the three and nine-months ended September 30, 2013, respectively. Our remaining cost of goods sold (exclusive of depreciation) typically consists of purchases of hydrogen and nitrogen feedstock, as well as monthly fixed charges related to labor, maintenance and utilities expenditures.

SELECTED FINANCIAL DATA

The following table includes selected summary financial data for the three and nine-months ended September 30, 2014 and 2013. The data below should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report. The data below is in thousands, except for per unit data, product pricing, $ per MMBtu and on-stream factors.


	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2014		2013		2014		2013
	(in thousands)				(in thousands)
Net income	$	18,599	$	24,132	$	88,532	$	105,134
Add:
Interest expense		4,157		5,015		14,694		11,698
Interest expense – related party		51		3,998		152		12,435
Income tax expense		283		428		1,174		1,402
Depreciation expense		5,852		5,549		17,208		16,627
Loss on extinguishment of debt		—		2,493		—		2,493
EBITDA	$	28,942	$	41,615	$	121,760	$	149,789


	Production (in tons)				Capacity Utilization Rate¹ (%)						Price of Natural Gas² ($ per MMBtu)
	For Three-Months Ended September 30,
	2014		2013		2014			2013			2014		2013
Ammonia		62,276		63,885		93	%		96	%	$	4.28	$	3.74
Methanol		136,307		131,756		74	%		72	%	$	4.28	$	3.74

	For Nine-Months Ended September 30,
	2014		2013		2014			2013			2014		2013
Ammonia		191,116		192,787		96	%		97	%	$	4.67	$	3.80
Methanol		461,440		479,200		85	%		88	%	$	4.67	$	3.80

(1)	Calculated by total production volumes for a production unit for a given period, divided by the production capacity of that production unit

(2)	Average purchase price of natural gas ($ per MMBtu) which is the Houston Ship Channel price plus a delivery fee, for a given period

THE RESULTS OF OPERATIONS FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO THE THREE-MONTHS ENDED SEPTEMBER 30, 2013:

Revenues


	For the Three-Months Ended September 30,
	2014		2013
	(in thousands)
Total revenues	$	90,471	$	95,790


	For the Three-Months Ended September 30, 2014				For the Three-Months Ended September 30, 2013
	Metric Tons		Revenue		Metric Tons		Revenue
	(in thousands)				(in thousands)
Revenues:
Ammonia		56.0	$	28,456		75.9	$	35,782
Methanol - Procured		—		—		3.6		1,589
Methanol - Produced		157.0		61,836		131.9		58,061
Other		—		179		—		358
Total		213.0	$	90,471		211.4	$	95,790

Our total revenues were approximately $90.5 million for the three-months ended September 30, 2014 compared to approximately $95.8 million for the three-months ended September 30, 2013. Our methanol revenues were approximately $61.8 million for the three-months ended September 30, 2014 compared to approximately $59.7 million for the three-months ended September 30, 2013, representing a 3.5% increase. Our ammonia revenues were approximately $28.5 million for the three-months ended September 30, 2014 compared to approximately $35.8 million for the three-months ended September 30, 2013. This 20.4% decrease in ammonia revenues was due to a decrease in our ammonia sales volumes, partially offset by an increase in our realized ammonia sales price per metric ton.

We sold approximately 157,000 metric tons of methanol during the three-months ended September 30, 2014 compared to 131,900 metric tons of produced methanol and 3,600 metric tons of procured methanol during the three-months ended September 30, 2013, which represents an increase in sales volumes of 15.9%. During the second quarter of 2014, customers deferred purchases in anticipation of lower prices as a result of high industry inventory levels and strong global production. This led to an accumulation of methanol inventory at the end of the second quarter of 2014, which was subsequently sold during the three-months ended September 30, 2014. During July and August 2013, we experienced unplanned downtime as we took our methanol unit offline to repair our syngas machine. During this unplanned downtime we purchased and sold methanol to meet additional sales commitments to our customers. The average sales prices per metric ton for methanol during the three-months ended September 30, 2014 was $393.86 per metric ton compared to $440.22 per metric ton for the three-months ended September 30, 2013, which represents a decrease in average sales prices of 10.5%. During late 2013 and early 2014, methanol sales volumes and prices were elevated due to global supply disruptions caused by production issues, natural gas supply restrictions or, in some cases, higher natural gas prices. During the three-months ended September 30, 2014, methanol prices fell as global production recovered and outpaced demand growth. Sales of methanol comprised approximately 68.3% of our total revenues for the three-months ended September 30, 2014 compared to 62.3% of our total revenues for the three-months ended September 30, 2013.

Set forth below is a table showing average methanol sales prices per metric ton, per quarter for the previous eleven fiscal quarters.


	Average Methanol Sales Prices
	2014		2013		2012
For the Three-Months Ended:
March 31	$	529.43	$	410.97	$	458.08
June 30	$	470.09	$	443.43	$	398.54
September 30	$	393.86	$	440.22	$	367.12
December 31		—	$	484.92	$	378.50

We sold approximately 55,950 metric tons of ammonia during the three-months ended September 30, 2014 compared to approximately 75,900 metric tons of ammonia during the three-months ended September 30, 2013, which represents a decrease in sales volumes of 26.3%. At the end of the second quarter of 2013, there was an accumulation of excess ammonia inventory which was subsequently sold in the third quarter of 2013, causing a decrease in sale volumes in 2014 as compared to the comparable period in 2013. The average sales prices per metric ton for ammonia during the three-months ended September 30, 2014 was $508.14 per metric ton compared to $471.44 per metric ton for the three-months ended September 30, 2013, which represents an increase in sales prices of 7.8%. Ammonia prices fell during late 2013 and early 2014, as a result of poor weather conditions in the United States. During late March 2014 and early April 2014, the spring planting season commenced in the United States causing an increase in demand for ammonia, as well as an increase in ammonia prices. Sales of ammonia comprised approximately 31.5% of our total revenues for the three-months ended September 30, 2014 compared to 37.4% of our total revenues for the three-months ended September 30, 2013.

Set forth below is a table showing average ammonia sales prices per metric ton, per quarter for the previous eleven fiscal quarters.


	Average Ammonia Sales Prices
	2014		2013		2012
For the Three-Months Ended:
March 31	$	408.18	$	640.76	$	442.66
June 30	$	511.46	$	569.84	$	491.53
September 30	$	508.14	$	471.44	$	662.71
December 31		—	$	452.61	$	679.92

Cost of Sales (exclusive of depreciation)


	For the Three-Months Ended					For the Three-Months Ended
	September 30, 2014					September 30, 2013
	$ in thousands		% of Total			$ in thousands		% of Total
Natural Gas	$	27,941		49.6	%	$	23,979		49.1	%
Hydrogen		5,971		10.6			6,549		13.4
Nitrogen		1,633		2.9			1,544		3.2
Maintenance		7,445		13.2			4,925		10.1
Labor		4,473		7.9			2,407		4.9
Other		8,832		15.7			9,409		19.3

Total	$	56,295		100.0	%	$	48,813		100.0	%

Cost of goods sold (exclusive of depreciation) was approximately $56.3 million and 62.2% of revenue for the three-months ended September 30, 2014 compared to cost of goods sold (exclusive of depreciation) of approximately $48.8 million and 51.0% of revenues for the three-months ended September 30, 2013. This increase in cost of goods sold (exclusive of depreciation) for the three-months ended September 30, 2014 compared to the three-months ended September 30, 2013 was primarily due to increased natural gas prices. Our purchase price for natural gas increased from an average of $3.74 per MMBtu for the three-month period ended September 30, 2013 to an average of $4.28 per MMBtu for the three-month period ended September 30, 2014, an increase of 14.4%. During the first quarter of 2014, our purchase price of natural gas rose to $5.07 due to the extremely cold winter weather experienced in the United States which resulted in an increase in demand and a reduction in supply reserves. Since the first quarter of 2014, our purchase price of natural gas has decreased by 15.6%.

Depreciation Expense

Depreciation expense was approximately $5.9 million for the three-months ended September 30, 2014 compared to approximately $5.5 million for the three-months ended September 30, 2013. This increase was primarily due to assets placed in service in 2014.

Selling, General and Administrative Expense

Our selling, general and administrative expenses were approximately $5.3 million for the three-months ended September 30, 2014 compared to approximately $5.4 million for the three-months ended September 30, 2013. This 2.0% decrease is due to a management fee paid to Orascom Construction Industries (“OCI Egypt”) that was terminated and subsequently replaced with the Omnibus Agreement (as defined below) upon the completion of the IPO and a consulting contract that has since been terminated. Please read note 6 – Related Party Transactions to the unaudited condensed consolidated financial statements included in this report for additional information.

On October 9, 2013, in connection with the closing of the IPO, the Partnership entered into an omnibus agreement by and between the Partnership, OCI N.V., OCI USA, OCI GP LLC and OCIB (the “Omnibus Agreement”) pursuant to which OCI USA and its affiliates agreed to provide us with selling, general and administrative services, and we will reimburse OCI USA and its affiliates for all direct or allocated costs and expenses incurred by OCI USA and its affiliates in providing such services. In addition, our partnership agreement requires us to reimburse our general partner for (i) direct and indirect expenses it incurs or payments it makes on our behalf (including salary, bonus, incentive compensation and other amounts paid to any person, including affiliates of our general partner, to perform services for us or our subsidiaries or for our general partner in the discharge of its duties to us and our subsidiaries), and (ii) all other expenses reasonably allocable to us or our subsidiaries or otherwise incurred by our general partner in connection with operating our business (including expenses allocated to our general partner by its affiliates). Our general partner is entitled to determine the expenses that are allocable to us and our subsidiaries.

Interest Expense

Interest expense was approximately $4.2 million for the three-months ended September 30, 2014 compared to $5.0 million for the three-months ended September 30, 2013. We capitalized $1.8 million of interest expense in three-months ended September 30, 2014, as compared to no interest capitalized in the three-months ended September 30, 2013. Capitalized interest costs are determined by applying a weighted average interest rate paid on borrowings to the average amount of accumulated capital expenditures in the period. This increase in capitalized interest is due to the commencement of the debottlenecking project.

Interest expense–related party was approximately $51,000 for the three-months ended September 30, 2014 compared to $4.0 million for the three-months ended September 30, 2013. Interest expense–related party relates to interest on our intercompany debt and the commitment fee on the unused portion of our Intercompany Revolving Facility owed to OCI Fertilizer International B.V. (“OCI Fertilizer”). This decrease is due to the repayment of our Intercompany Term Facility on November 27, 2013.

Loss on extinguishment of debt

Loss on extinguishment of debt was approximately $2.5 million for the three-months ended September 30, 2013. This loss was due to the repayment of our borrowing under the $360.0 million senior secured term loan credit facility agreement (the “Bridge Term Loan Credit Facility”) in August 2013 and the resulting recognition of an expense for all remaining bridge loan fees in the quarter ended September 30, 2013. There were no such losses on extinguishment of debt during the three-months ended September 30, 2014.

THE RESULTS OF OPERATIONS FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO THE NINE-MONTHS ENDED SEPTEMBER 30, 2013:

Revenues


	For the Nine-Months Ended September 30,
	2014		2013
	(in thousands)
Total revenues	$	303,497	$	314,852


	For the Nine-Months Ended September 30, 2014				For the Nine-Months Ended September 30, 2013
	Metric Tons		Revenue		Metric Tons		Revenue
	(in thousands)				(in thousands)
Revenues:
Ammonia		185.3	$	88,794		189.4	$	104,558
Methanol - Procured		—		—		3.6		1,589
Methanol - Produced		463.1		214,306		484.2		208,347
Other		—		397		—		358
Total		648.4	$	303,497		677.2	$	314,852

Our total revenues were approximately $303.5 million for the nine-months ended September 30, 2014 compared to approximately $314.9 million for the nine-months ended September 30, 2013. Our methanol revenues were approximately $214.3 million for the nine-months ended September 30, 2014 compared to approximately $208.3 million for the nine-months ended September 30, 2013. This 2.9% increase in methanol revenues was due to an increase in our methanol sales volumes, partially offset by a reduction in our realized methanol sales price per metric ton. Our ammonia revenues were approximately $88.8 million for the nine-months ended September 30, 2014 compared to approximately $104.6 million for the nine-months ended September 30, 2013. This 15.1% decrease in ammonia revenues was due to a decrease in our realized ammonia sales price per metric ton, coupled with a decrease in our ammonia sales volumes.

We sold approximately 463,100 metric tons of methanol during the nine-months ended September 30, 2014 compared to 484,200 metric tons of produced methanol and 3,600 tons of procured methanol during the nine-months ended September 30, 2013. This represents a decrease in sales volumes of 5.1%, partially attributed to the unplanned downtime experienced in the first and third quarters of 2014. The average sales prices per metric ton for methanol during the nine-months ended September 30, 2014 was $462.76 per metric ton compared to $430.29 per metric ton for the nine-months ended September 30, 2013. While prices were 7.0% higher compared to the comparable period in 2013, they were 25.6% lower during the three-months ended September 30, 2014, than the average sales price during the three-months ended March 31, 2014. During late 2013 and early 2014, methanol sales volumes and prices were elevated due to global supply disruptions caused by production issues, natural gas supply restrictions or, in some cases, higher natural gas prices. During the nine-months ended September 30, 2014, methanol prices fell as global production recovered and outpaced demand growth. Sales of methanol comprised approximately 70.6% of our total revenues for the nine-months ended September 30, 2014 compared to 66.7% of our total revenues for the nine-months ended September 30, 2013.

Set forth below is a table showing average methanol sales prices per metric ton, per quarter for the previous eleven fiscal quarters.


	Average Methanol Sales Prices
	2014		2013		2012
For the Three-Months Ended:
March 31	$	529.43	$	410.97	$	458.08
June 30	$	470.09	$	443.43	$	398.54
September 30	$	393.86	$	440.22	$	367.12
December 31		—	$	484.92	$	378.50

We sold approximately 185,300 metric tons of ammonia during the nine-months ended September 30, 2014 compared to approximately 189,400 metric tons of ammonia during the nine-months ended September 30, 2013, which represents a decrease of 2.2%. The average sales prices per metric ton for ammonia during the nine-months ended September 30, 2014 was $479.19 per metric ton compared to $552.05 per metric ton for the nine-months ended September 30, 2013. While prices were 13.2% lower compared to the comparable period in 2013, they were 24.5% higher during the three-months ended September 30, 2014, than the average sales price during the three-months ended March 31, 2014. Ammonia prices fell during late 2013 and early 2014, as a result of poor weather conditions in the United States. During late March 2014 and early April 2014, the spring planting season commenced in the United States causing an increase in demand for ammonia, as well as an increase in ammonia prices. Sales of ammonia comprised approximately 29.3% of our total revenues for the nine-months ended September 30, 2014 compared to 33.2% of our total revenues for the nine-months ended September 30, 2013.

Set forth below is a table showing average ammonia sales prices per metric ton, per quarter for the previous eleven fiscal quarters.


	Average Ammonia Sales Prices
	2014		2013		2012
For the Three-Months Ended:
March 31	$	408.18	$	640.76	$	442.66
June 30	$	511.46	$	569.84	$	491.53
September 30	$	508.14	$	471.44	$	662.71
December 31		—	$	452.61	$	679.92

Cost of Sales (exclusive of depreciation)


	For the Nine-Months Ended September 30, 2014					For the Nine-Months Ended September 30, 2013
	$ in thousands		% of Total			$ in thousands		% of Total
Natural Gas	$	100,274		60.9	%	$	83,954		58.6	%
Hydrogen		18,266		11.1			17,794		12.4
Nitrogen		4,745		2.9			5,048		3.5
Maintenance		18,265		11.1			14,162		9.9
Labor		12,340		7.5			7,063		4.9
Other		10,839		6.6			15,245		10.6
Total	$	164,729		100.0	%	$	143,266		100.0	%

Cost of goods sold (exclusive of depreciation) was approximately $164.7 million and 54.3% of revenue for the nine-months ended September 30, 2014 compared to cost of goods sold (exclusive of depreciation) of approximately $143.3 million and 45.5% of revenues for the nine-months ended September 30, 2013. This increase in cost of goods sold (exclusive of depreciation) for the nine-months ended September 30, 2014 compared to the nine-months ended September 30, 2013 was primarily due to increased natural gas prices as well as repair costs associated with the unplanned downtime during the first and third quarters. Our purchase price for natural gas increased from an average of $3.80 per MMBtu for the nine-month period ended September 30, 2013 to an average of $4.67 per MMBtu for the nine-month period ended September 30, 2014, an increase of 22.9%. During the first quarter of 2014, our purchase price of natural gas rose to $5.07 due to the extremely cold winter weather experienced in the United States which resulted in an increase in demand and a reduction in supply reserves. Since the first quarter of 2014, our purchase price of natural gas has decreased by 15.6%.

Depreciation Expense

Depreciation expense was approximately $17.2 million for the nine-months ended September 30, 2014 compared to approximately $16.6 million for the nine-months ended September 30, 2013. This increase was primarily due to assets placed in service in 2014.

Selling, General and Administrative Expense

Our selling, general and administrative expenses were approximately $17.8 million for the nine-months ended September 30, 2014 compared to approximately $21.8 million for the nine-months ended September 30, 2013. This 18.3% decrease is due to a management fee paid to OCI Egypt that was terminated and subsequently replaced with the Omnibus Agreement upon the completion of the IPO and a consulting contract that has since been terminated. Please read note 6 – Related Party Transactions to the unaudited condensed consolidated financial statements included in this report for additional information.

In connection with the IPO, we, our general partner and OCI USA entered into the Omnibus Agreement pursuant to which OCI USA and its affiliates agreed to provide us with selling, general and administrative services, and we will reimburse OCI USA and its affiliates for all direct or allocated costs and expenses incurred by OCI USA and its affiliates in providing such services. In addition, our partnership agreement requires us to reimburse our general partner for (i) direct and indirect expenses it incurs or payments it makes on our behalf (including salary, bonus, incentive compensation and other amounts paid to any person, including affiliates of our general partner, to perform services for us or our subsidiaries or for our general partner in the discharge of its duties to us and our subsidiaries), and (ii) all other expenses reasonably allocable to us or our subsidiaries or otherwise incurred by our general partner in connection with operating our business (including expenses allocated to our general partner by its affiliates). Our general partner is entitled to determine the expenses that are allocable to us and our subsidiaries.

Interest Expense

Interest expense was approximately $14.7 million for the nine-months ended September 30, 2014 compared to $11.7 million for the nine-months ended September 30, 2013, due to an increase in borrowings at an increased rate. We capitalized $4.0 million of interest expense in nine-months ended September 30, 2014, as compared to no interest capitalized in the nine-months ended September 30, 2013.

Capitalized interest costs are determined by applying a weighted average interest rate paid on borrowings to the average amount of accumulated capital expenditures in the period. This increase in capitalized interest is due to the commencement of the debottlenecking project.

Interest expense–related party was approximately $0.2 million for the nine-months ended September 30, 2014 compared to $12.4 million for the nine-months ended September 30, 2013. Interest expense–related party relates to interest on our intercompany debt and the commitment fee on the unused portion of our Intercompany Revolving Facility owed to OCI Fertilizer. This decrease is due to the repayment of our Intercompany Term Facility on November 27, 2013.

Loss on extinguishment of debt

Loss on extinguishment of debt was approximately $2.5 million for the nine-months ended September 30, 2013. This loss was due to the repayment of our borrowing under $360.0 million the Bridge Term Loan Credit Facility in August 2013 and the resulting recognition of an expense for all remaining bridge loan fees in the quarter ended September 30, 2013. There were no such losses on extinguishment of debt during the nine-months ended September 30, 2014.

LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity requirements are to finance current operations, fund capital expenditures, service our debt and pay distributions to our partners. We expect to fund our operating needs, including debottlenecking, turnaround, and maintenance capital expenditures, primarily from a combination of operating cash flow, cash-on-hand and our sources of liquidity. Pursuant to the

Intercompany Equity Commitment (as define below), we will also fund a portion of the costs of our debottlenecking project with a $60.0 million capital contribution that was made on November 10, 2014, by OCIP Holding LLC, an indirect wholly owned subsidiary of OCI. We believe that our current and expected sources of liquidity, including the $60.0 million capital contribution by OCIP Holding LLC, will be adequate to fund these operating needs and capital expenditures for the next 12 months.

Our sources of liquidity include $40.0 million of borrowing capacity under the Intercompany Revolving Facility with OCI Fertilizer, $100.0 million of borrowing capacity under the Intercompany Term Facility with OCI Fertilizer, $40.0 million of remaining liquidity available through the Intercompany Equity Commitment (as defined below) with OCI USA (following the $60.0 million capital contribution on November 10, 2014), $100.0 million of borrowing capacity under the Term Loan B Credit Facility (as defined below) that we may draw upon subject to the agreement of the lenders under that facility, and $40.0 million of borrowing capacity under the Revolving Credit Agreement (as defined below) with a letter of credit sublimit of $20.0 million and a swing-line sublimit of $5.0 million. Combined borrowings under the Revolving Credit Agreement and the Intercompany Revolving Facility shall not exceed $40.0 million. We intend to continue to fund the costs of our debottlenecking project primarily with a portion of the proceeds from our IPO, as well as the $60.0 million capital contribution by OCIP Holding LLC under the terms of the Intercompany Equity Commitment. However, our future capital expenditures and other cash requirements could be higher than we currently expect as a result of various factors. In the event that we pursue any other expansion projects or acquisitions, in addition to the debottlenecking project, we would likely require additional external financing.

Cost overruns related to our debottlenecking project could impair our ability to comply with financial and other covenants contained in our Term Loan B Credit Facility and Revolving Credit Facility. Our ability to comply with the covenant restrictions contained in our debt agreements is affected, among other things by the timing and costs to complete, and operating results following the completion of, the debottlenecking project. In the event that we were, or would be in default under our applicable debt covenants, we would attempt to cure the default by one or a combination of (i) amending the covenant restrictions contained in our debt agreements, subject to the lenders’ agreement (ii) additional capital contributions under the Intercompany Equity commitment, and (iii) borrowings under the Intercompany Term Loan Facility.

Our Initial Public Offering

Our IPO closed on October 9, 2013, and we sold 17,500,000 common units to the public. The price to the public was $18.00 per common unit, and the aggregate gross proceeds totaled $315.0 million. The net proceeds from the IPO of approximately $295.3 million, after deducting the underwriting discount of $18.9 million and the structuring fee of approximately $0.8 million, were used to: (i) repay the Term B-1 Loan (as defined below) in the amount of approximately $125.0 million and accrued interest on the Term B-1 Loan (as defined below) of approximately $1.1 million and (ii) provide us cash of approximately $169.2 million, with the funds to be utilized to fund post IPO working capital balances and to pay a portion of the costs of our debottlenecking project and other capital projects incurred after the completion of the IPO.

Distributions

Under our current cash distribution policy, we intend to distribute 100% of the cash available for distribution that we generate each quarter. Cash available for distribution for each quarter will be determined by the board of directors of our general partner following the end of such quarter. We expect that cash available for distribution for each quarter will generally equal our cash flow from operations for the quarter less cash needed for capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs that the board of directors of our general partner deems necessary or appropriate. We do not intend to maintain excess distribution coverage for the purpose of maintaining stability or growth in our quarterly distribution or otherwise to reserve cash for distributions, nor do we intend to incur debt to pay quarterly distributions.

Because our policy is to distribute 100% of cash available for distribution each quarter, without reserving cash for future distributions or borrowing to pay distributions during periods of low cash flow from operations, our unitholders will have direct exposure to fluctuations in the amount of cash generated by our business. We expect that the amount of our quarterly distributions, if any, will vary based on our operating cash flow during each quarter. Our quarterly cash distributions, if any, will not be stable and will vary from quarter to quarter as a direct result of, among other things, variations in our operating performance and variations in our cash flow caused by fluctuations in the price of natural gas, methanol and ammonia as well as our working capital requirements, planned and unplanned downtime and capital expenditures and our margins from selling our products. These variations may be significant. The board of directors of our general partner may change our cash distribution policy at any time and from time to time. Our partnership agreement does not require us to pay cash distributions to our unitholders on a quarterly or any other basis.

On March 19, 2014, the board of directors of our general partner declared a cash distribution to our common unitholders for the period October 9, 2013 through and including December 31, 2013 of $0.61367 per unit, or approximately $49.4 million in the aggregate. The cash distribution was paid on April 7, 2014 to unitholders of record at the close of business on March 31, 2014.

On May 12, 2014, the board of directors of our general partner declared a cash distribution to our common unitholders for the period January 1, 2014 through and including March 31, 2014 of $0.41 per unit, or approximately $33.0 million in the aggregate. The cash distribution was paid on May 29, 2014 to unitholders of record at the close of business on May 23, 2014.

On August 8, 2014, the board of directors of our general partner declared a cash distribution to our common unitholders for the period April 1, 2014 through and including June 30, 2014 of $0.48 per unit, or approximately $38.6 million in the aggregate. The cash distribution was paid on August 28, 2014 to unitholders of record at the close of business on August 22, 2014.

On November 7, 2014, the board of directors of our general partner declared a cash distribution to our common unitholders for the period July 1, 2014 through and including September 30, 2014 of $0.26 per unit, or approximately $21.7 million in the aggregate. The cash distribution will be paid on December 3, 2014 to unitholders of record at the close of business on November 21, 2014.

Credit Facilities

Intercompany Revolving Facility

On August 20, 2013, OCI Beaumont (“OCIB”) entered into a $40.0 million intercompany revolving credit facility agreement (the “Intercompany Revolving Facility”) with OCI Fertilizer, as the lender, which will mature on January 20, 2020. The amount that can be drawn under the Intercompany Revolving Facility is limited by the Amended Revolving Credit Facility (as defined below) to $40.0 million minus the amount of indebtedness outstanding under the Amended Revolving Credit Facility. Interest on borrowings under the Intercompany Revolving Facility accrue at the rate equal to the sum of (a) the rate per annum applicable to the Term B-3 Loans (including as such per annum rate may fluctuate from time to time in accordance with the terms of the Amended Term Loan Facility), plus (b) 25 basis points. We pay a commitment fee to OCI Fertilizer on the unused portion of the Intercompany Revolving Facility equal to 0.5% per annum, which is included as a component of interest expense – related party on the consolidated statements of operations. Borrowings under the facility are subordinated to indebtedness under the Amended Term Loan Facility and the Amended Revolving Credit Facility. There have been no borrowings under the Intercompany Revolving Facility.

Intercompany Term Facility

On September 15, 2013, OCIB entered into a new intercompany term facility agreement (the “Intercompany Term Facility”) with OCI Fertilizer, which replaced three separate intercompany loan agreements between OCIB and OCI Fertilizer. As of September 30, 2014, OCIB had no borrowings outstanding under the Intercompany Term Facility. The Intercompany Term Facility was initially established to fund the upgrade of our facility that was completed in July 2012, satisfy working capital requirements and for general corporate purposes. The Intercompany Term Facility matures on January 20, 2020 and borrowings under the facility are subordinated to indebtedness under the Amended Term Loan Facility and the Amended Revolving Credit Facility. In connection with the Intercompany Repayment from the proceeds of the Incremental Term Loans described above, on November 27, 2013, OCIB entered into Amendment No. 1 (the “Intercompany Term Amendment”) to the Intercompany Term Facility. Pursuant to the Intercompany Term Amendment, OCI Fertilizer agreed to lend up to $100.0 million to OCIB after the effectiveness of the Intercompany Repayment. Borrowings under the Intercompany Term Facility bear interest at an interest rate equal to the sum of (i) the rate per annum applicable to the Term B-3 Loans discussed below, plus (ii) 0.25%.

Intercompany Equity Commitment

In connection with entering into Term Loan Amendment No. 1 (as defined below), on November 27, 2013, we and OCI USA entered into a letter agreement providing for OCI USA’s obligation to make equity contributions to us under certain circumstances (the “Intercompany Equity Commitment”). Pursuant to the Intercompany Equity Commitment, (i) if prior to the completion of our debottlenecking project in 2014, we or OCIB have liquidity needs for working capital or other purposes and the restrictions under the Amended Term Loan Facility or any other debt instruments of ours or OCIB prohibit us or OCIB from incurring sufficient additional debt to fund such liquidity needs, then upon notice from us, OCI USA (or an affiliate designated by OCI USA) will provide such liquidity to the extent of such needs in the form of an equity contribution to us and (ii) in the event OCIB fails to comply with any of the financial covenants contained in the Amended Term Loan Facility as of the last day of any fiscal quarter, then upon notice from us, OCI USA (or an affiliate designated by OCI USA that is not a party to the Term Loan B Credit Facility) will make cash contributions to us as common equity in the amount of the cure amount and by the date required by the Amended Term Loan Facility, so that we can further contribute such funds to OCIB to cure such non-compliance, subject to and in accordance with the terms and conditions of the Amended Term Loan Facility. OCI USA will not be obligated to make aggregate equity contributions to us in excess of $100.0 million pursuant to the Intercompany Equity Commitment.

On November 10, 2014, OCIP Holding LLC, an indirect wholly owned subsidiary of OCI, made a $60.0 million capital contribution to use pursuant to the Intercompany Equity Commitment in exchange for 2,995,372 common units.

Term Loan B Credit Facility

On August 20, 2013, OCIB, as borrower, and OCI USA, as guarantor, entered into a $360.0 million senior secured term loan credit facility (the “Term Loan B Credit Facility”) with a syndicate of institutional lenders and investors and Bank of America, N.A., as administrative agent, to repay borrowings under OCIB’s previous Bridge Term Loan Credit Facility. The Term Loan B Credit Facility was initially comprised of two term loans in the amounts of $125.0 million (the “Term B-1 Loan”) and $235.0 million (the “Term B-2 Loan”), respectively. In connection with the closing of the IPO, OCIB repaid in full and subsequently terminated the Term B-1 Loan. Upon completion of the IPO, all security provided by OCI USA under the Term Loan B Credit Facility was released, and OCIP granted a security interest to the secured creditors under the Term Loan B Credit Facility in OCIP’s ownership interest in OCIB, as well as any other assets OCIP may acquire in the future. The Term Loan B Credit Facility also obligates OCIP to cause certain future subsidiaries of OCIP to grant a security interest to the secured creditors under the Term Loan B Credit Facility.

On November 27, 2013, OCI USA, OCIB and OCIP entered into Amendment No. 1 (“Term Loan Amendment No. 1”) to the Term Loan B Credit Facility. Pursuant to the terms of Term Loan Amendment No. 1, OCIB borrowed $165.0 million in incremental term loans (the “Incremental Term Loans”) under the Term Loan B Credit Facility. The Incremental Term Loans have terms and provisions identical to the Term B-2 Loan, and the Incremental Term Loans and the Term B-2 Loan collectively comprise a single tranche of Term B-2 Loans under the Term Loan B Credit Facility (the “Term B-2 Loans”). OCIB used the proceeds from the Incremental Term Loans to (i) repay all of its outstanding intercompany indebtedness under the Intercompany Term Facility (as defined above) (such repayment of intercompany indebtedness, the “Intercompany Repayment”) and (ii) pay fees and expenses related to the foregoing repayment and the Incremental Term Loans. Term Loan Amendment No. 1 also adjusted the amortization schedule for the Term B-2 Loans to encompass the new tranche composed of the Incremental Term Loans. In addition, Term Loan Amendment No. 1 clarified that the maximum principal amount of Incremental Term Loans that may be incurred under the Term Loan B Credit Facility is the sum of (and not the greater of) (a) $100.0 million and (b) such other amount such that, after giving effect on a pro forma basis to any such incremental facility and other applicable pro forma adjustments, the first lien net leverage ratio is equal to or less than 1.25 to 1.00.

On April 4, 2014, OCIB, the Partnership and OCI USA entered into Amendment No. 2 and Waiver (“Term Loan Amendment No. 2”) to the Term Loan B Credit Facility, with Bank of America, as administrative agent, collateral agent and additional term loan lender, and the other lenders party thereto. Pursuant to the terms of Term Loan Amendment No. 2, OCIB refinanced the Term B-2 Loans through the cashless repayment of the Term B-2 Loans and the simultaneous incurrence of a new tranche of loans (the “Term B-3 Loans”). Term Loan Amendment No. 2 also (i) reduced the interest rate margin on the outstanding term loans under the Term Loan B Credit Facility such that OCIB may select an interest rate of (a) 4.00% above adjusted LIBOR for LIBO Rate Term Loans or (b) 3.00% above the base rate for base rate loans, (ii) decreased the minimum LIBO Rate from 1.25% to 1.00%, (iii) reset the prepayment premium of 101% on voluntary prepayments of the term loans under the Term Loan B Credit Facility for twelve months after the closing of Term Loan Amendment No. 2, and (iv) provided for delivery of financial information from the Partnership instead of OCIB, with reconciliation information to the financial information for OCIB.

Other than as specifically modified by Term Loan Amendment No. 2, the Term B-3 Loans have terms and provisions identical to those that applied to the Term B-2 Loans. The Term B-3 Loans mature on August 20, 2019 and are subject to certain mandatory prepayment obligations upon the disposition of certain assets and the incurrence of certain indebtedness. The Term B-3 Loans, and related fees and expenses, are unconditionally guaranteed by OCIP and OCI USA and are secured by pari passu senior secured liens on substantially all of OCIB’s and OCIP’s assets, as well as the assets of certain future subsidiaries of OCIP (OCI USA does not provide any security in connection with its guarantee). The Term B-3 Loans are subject to mandatory quarterly repayments equal to 0.25% of the aggregate principal amount of the Term B-3 Loans outstanding on the Term Loan Amendment No. 2 effective date. Interest on the Term B-3 Loans accrues, pursuant to the terms of Term Loan Amendment No. 2, at OCIB’s option, at adjusted LIBOR plus 4.00% per annum or the alternate base rate plus 3.00%, but if OCIB has received both (a) a corporate credit rating of B from S&P and (b) a corporate family rating of Ba3 from Moody’s (in each case with at least a stable outlook), or better, such rates will immediately be reduced by 0.50% until such time, if any, as such ratings are no longer in effect. The Term Loan B Credit Facility contains customary covenants and conditions. Upon the occurrence of certain events of default under the Term Loan B Credit Facility, OCIB’s obligations under the Term Loan B Credit Facility may be accelerated. In addition, OCIB may not permit, on the last day of any fiscal quarter, (i) the consolidated senior secured net leverage ratio to exceed (x) in the case of each fiscal quarter ending prior to March 31, 2015, 2.00 to 1.00 and (y) in the case of the fiscal quarter ending March 31, 2015 and each fiscal quarter ending thereafter, 1.75 to 1.00, and (ii) the consolidated interest coverage ratio on the last day of any fiscal quarter to be less than 5.00 to 1.00. As of September 30, 2014, OCIB’s consolidated senior secured net leverage ratio was 1.75 to 1.00, and its consolidated interest coverage ratio was 8.74 to 1.00.

The consolidated senior secured net leverage ratio is defined as the ratio of (i) (A) consolidated senior secured debt less (B) the aggregate amount of unrestricted cash and cash equivalents included on the consolidated balance sheet to (ii) consolidated EBITDA for the last four quarters. The consolidated interest coverage ratio is defined as the ratio of (i) consolidated EBITDA for the last four quarters to (ii) consolidated interest expense for the last four quarters.

On June 13, 2014, OCIB, the Partnership and OCI USA entered into Term Loan Amendment No. 3 (“Term Loan Amendment No. 3”) to the Term Loan B Credit Facility (as amended by Term Loan Amendment No. 1, Term Loan Amendment No. 2 and Term Loan Amendment No. 3, the “Amended Term Loan Facility”) with Bank of America, as administrative agent. Term Loan Amendment No. 3 (i) corrected an inconsistency in the definition of “Hedging Agreement”, (ii) amended Section 10.01(ii) by adding that the liens permitted by such section cannot be for debt that is overdue, (iii) revised the intercompany subordination agreement entered into in connection with Term Loan B Credit Facility to clarify that intercompany debt will be subordinate to the obligations owed to counterparties under hedge agreements that are secured pursuant to the terms of the Amended Term Loan Facility and (iv) made certain technical changes to certain defined terms.

On September 18, 2014, Standard & Poor’s (“S&P”) assigned its “B” (Stable) corporate credit rating to OCIB, and, its “B” rating to the Term Loan B Credit Facility.

The operating and financial restrictions and covenants in the Amended Term Loan Facility will adversely affect our ability to finance future operations or capital needs or to engage in other business activities. We expect these restrictions and covenants will limit our ability, among other things, to:

•

incur additional indebtedness;

•

create liens on assets;

•

engage in mergers or consolidations;

•

sell assets;

•

pay dividends and distributions or repurchase our common units;

•

make investments, loans or advances;

•

prepay certain subordinated indebtedness;

•

make certain acquisitions or enter into agreements with respect to our equity interests; and

•

engage in certain transactions with affiliates.

As a result of these covenants, we will be limited in the manner in which we conduct our business and we may be unable to engage in favorable business activities or finance future operations or capital needs. In addition, to the extent that we are unable to refinance our debt at maturity on favorable terms, or at all, our ability to fund our operations and our ability to make cash distributions could be adversely affected.

Revolving Credit Facility

On April 4, 2014, OCIB as borrower, the Partnership as a guarantor, Bank of America, N.A. as administrative agent and a syndicate of lenders entered into a new $40.0 million revolving credit agreement (the “Revolving Credit Facility”), with an initial aggregate borrowing capacity of up to $40.0 million, including a $20.0 million sublimit for letters of credit. On June 13, 2014, OCIB, the Partnership and OCI USA entered into Revolving Credit Amendment No. 1 (“Revolving Credit Amendment No. 1”) to the Revolving Credit Facility (as amended by Revolving Credit Amendment No. 1, the “Amended Revolving Credit Agreement”) with Bank of America, as administrative agent. Revolving Credit Amendment No. 1 (i) corrected inconsistencies in the definition of “Guaranteed Creditors” and in the definition of “Hedging Agreement”, (ii) amended Section 10.01(ii) by adding that the liens permitted by such section cannot be for debt that is overdue, (iii) amended Section 10.01(xiv) to clarify that such sub-section permits the granting of liens in connection with hedge agreements permitted under the terms of the Amended Revolving Credit Facility and (iv) revised the intercompany subordination agreement entered into in connection with the Revolving Credit Facility to clarify that intercompany debt will be subordinate to the obligations owed to counterparties under hedge agreements that are secured pursuant to the terms of the Amended Revolving Credit Facility.

The Amended Revolving Credit Facility has a one-year term that may be extended for additional one-year periods subject to the consent of the lenders. OCIB is required to repay in full all outstanding revolving loans under the Amended Revolving Credit Facility on the last business day of each June and December. OCIB’s obligations under the Amended Revolving Credit Facility are guaranteed by the Partnership and certain of its future subsidiaries other than OCIB. All proceeds of the Amended Revolving Credit Facility will be used by OCIB for working capital, capital expenditures and other general corporate purposes. OCIB’s obligations under the Amended

Revolving Credit Facility are secured by a first priority lien (which is pari passu with the first priority lien securing obligations under the Amended Term Loan Facility) on substantially all of the tangible and intangible assets of OCIB and the Partnership and certain future subsidiaries of the Partnership. In addition, the Amended Revolving Credit Facility contains covenants and provisions that affect OCIB and the Partnership, including, among others, customary covenants and provisions:

•

prohibiting OCIB from incurring indebtedness under the Intercompany Revolving Facility Agreement, dated as of August 20, 2013, by and between OCIB, as borrower, and OCI Fertilizer, as lender, that exceeds $40.0 million minus the amount of indebtedness outstanding under the Amended Revolving Credit Facility;

•

limiting OCIB’s ability and that of the Partnership from creating or incurring specified liens on their respective properties (subject to customary exceptions);

•

prohibiting consolidations, mergers and asset transfers by OCIB and the Partnership (subject to customary exceptions).

Capital Expenditures

We divide our capital expenditures into two categories: maintenance capital expenditures and expansion capital expenditures. Maintenance capital expenditures are capital expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets or for the acquisition of existing or the construction or development of new capital assets) made to

maintain, including over the long term, our production capacity, operating income or asset base (including capital expenditures relating to turnarounds), or to comply with environmental, health, safety or other regulations. Maintenance capital expenditures that are required to comply with regulations may also improve the output, efficiency or reliability of our facility. Major maintenance capital expenditures that extend the life or improve the safety or efficiency of the asset are capitalized and amortized over the period of expected benefits. Routine maintenance costs are expensed as incurred. A turnaround is capitalized and amortized over a four year period, which is the time lapse between turnarounds. Expansion capital expenditures are capital expenditures incurred for acquisitions or capital improvements that we expect will increase our production capacity, operating income or asset base over the long term. Expansion capital expenditures are capitalized and amortized over the period of expected benefits.

We recorded maintenance capital expenditures of $3.3 million and $7.9 million for the three and nine-months ended September 30, 2014, respectively, compared to approximately $0.3 million and $0.4 million for the three and nine-months ended September 30, 2013, respectively. We expect to perform maintenance turnarounds approximately every four years, which will typically last approximately 40 days and cost approximately $24.0 million per turnaround. We will perform significant maintenance capital projects at our facility during a turnaround to minimize disruption to our operations. We will capitalize the costs related to these projects as property, plant and equipment and will classify the amounts as maintenance capital expenditures. We plan to undertake a turnaround as part of our debottlenecking project that is expected to be completed in January of 2015, which will result in approximately seven to eight weeks of downtime for the methanol production unit and four weeks of downtime for the ammonia production unit. We expect that the next turnaround after the completion of the debottlenecking project will occur in 2018.

Our expansion capital expenditures totaled approximately $62.0 million and $127.7 million for the three and nine-months ended September 30, 2014, respectively, compared to $15.3 million and $30.4 million for the three and nine-months ended September 30, 2013, respectively, for expenditures related to our debottlenecking project and other budgeted capital projects. We expect that the debottlenecking project will be completed in the first quarter 2015 and currently estimate the total cash expenditures to complete the project has increased by approximately $70.0 million to $80.0 million, to a total of approximately $240.0 million to $250.0 million (including costs associated with a turnaround and environmental upgrades). Our estimate of total capital expenditures to complete the debottlenecking project is subject to numerous risk and uncertainties, and the actual amount of total capital expenditures required to complete the debottlenecking project may be greater than our current estimate. The increase in our forecasted remaining cost to complete the debottlenecking project is due to additional piping and structural steel quantities needed to complete the project, as well as, an increase in labor. In addition, management has decided to increase the scope of the turnaround project and replace additional equipment and refractories, which are heat-resistant materials that constitute the linings for high-temperature furnaces and reactors, during the upcoming planned downtime to improve reliability. We expect that we will shut down our facility for approximately seven to eight weeks for the methanol production unit and four weeks for the ammonia production unit, in January 2015 in order to complete our debottlenecking project (including completion of the associated turnaround and environmental upgrades). As of September 30, 2014, we had incurred approximately $161.7 million in expenditures related to the project, as shown in the table below. In addition, we received our TCEQ permit on July 22, 2014, and our EPA permit on August 1, 2014, which constitutes an important milestone in the overall progress of the project.

Below is a summary of the debottlenecking project costs incurred as of September 30, 2014:

Debottlenecking Project Costs

As of September 30, 2014

(in millions)


Project Expenditures paid as of September 30, 2014	$	120.0
Accrued Project Expenditures		37.5
Capitalized Interest		4.2

Total	$	161.7

Our estimated capital expenditures are subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects. For example, we may experience increases in labor or equipment costs necessary to comply with government regulations or to complete projects that sustain or improve the profitability of our facility. Our future capital expenditures will be approved by the board of directors of our general partner.

In May 2014, we announced implementation of our state-of-the-art methanol truck loading facility, a former expansion capital expenditure. We have sold approximately 12,800 metric tons of methanol as of September 30, 2014, and expect to sell up to approximately 80,000 metric tons of methanol on an annual basis via the new truck loading facility.

CASH FLOWS

Our profits, operating cash flows and cash available for distribution are subject to changes in the prices of our products and natural gas, which is our primary feedstock. Our products and feedstocks are commodities and, as such, their prices can be volatile in response to numerous factors outside of our control.

The following table summarizes our unaudited condensed consolidated statements of cash flows:


	For the Nine-Months Ended September 30,
	2014			2013
	(in thousands)
Net cash provided by (used in):
Operating activities	$	123,855		$	87,445
Investing activities		(92,681	)		(20,811	)
Financing activities		(121,045	)		(44,834	)
Net increase (decrease) in cash and cash equivalents	$	(116,366	)	$	21,800

Operating Activities

Net cash provided by operating activities for the nine-months ended September 30, 2014 was approximately $123.9 million. We had net income of approximately $88.5 million for the nine-months ended September 30, 2014. During this period, we recorded depreciation expense of $17.2 million and amortization of debt issuance costs of $2.2 million. Accounts receivable, which is approximately equal to one month of revenue, decreased by $16.4 million during the nine-months ended September 30, 2014. The decrease in accounts receivable is due to a decrease in the realized methanol sales prices and volumes in September 2014 compared to December 2013. Monthly sales decreased to $27.8 million in September 2014 as compared to $45.3 million in December 2013. Other current assets and prepaid expenses decreased by $0.9 million due to the amortization of prepaid insurance policies. Accounts payable (excluding non-cash accruals of property, plant and equipment) decreased by $2.5 million due to the settlement of obligations to our suppliers. Accounts payable – related party (excluding non-cash accruals of property, plant and equipment) increased by $1.2 million due to expenses incurred under the Omnibus Agreement for reimbursement of providing selling, general, and administrative services and management and operating services to manage and operate our business. Please read note 6 – Related Party Transactions to the unaudited condensed consolidated financial statements included in this report for additional information. Other payables, accruals and current liabilities (excluding non-cash accruals of property, plant and equipment) increased by $4.2 million due to a realization of expenses in connection with a long-term incentive bonus to be paid out to all employees in January 2015. Accrued interest (excluding capitalized interest) decreased by $4.3 million due to the capitalization of $4.0 million in interest expense in connection with the debottlenecking project.

Net cash provided by operating activities for the nine-months ended September 30, 2013 was approximately $87.4 million. We had net income of $105.1 million for the nine-months ended September 30, 2013. During this period, we recorded depreciation expense of $16.6 million and amortization of debt issuance costs of $2.8 million, and a loss on the extinguishment of debt of $2.5 million. At

September 30, 2013, the Company had advances due from related party of $8.1 million related to expenditures paid by the Company (a) to fund a related party’s construction of a facility which will be owned and operated by the related party and (b) to fund a separate related party’s start-up expenses. Prepaid interest (related party) increased by $2.4 million, while accrued interest (related party) decreased by $20.2 million during the nine-months ended September 30, 2013. This is due to a $35.0 million related party interest payment made to OCI Fertilizer in March 2013 to pay $24.6 million in accrued interest (related party), leaving $10.4 million of prepaid interest (related party). Monthly interest expense (related party) on the OCI Fertilizer intercompany loans were offset against the original $10.4 million of prepaid interest (related party). As of September 30, 2013 the balance in prepaid interest (related party) was $2.4 million. Other current assets and prepaid expenses increased by $4.3 million during the nine-months ended September 30, 2013 as the Company paid $4.0 million to obtain a new business interruption insurance policy in August 2013. Accounts payable and other payables, accruals and current liabilities (excluding non-cash accruals of property, plant and equipment) decreased by $5.3 million and $3.1 million, respectively, due to the settlement of obligations to contractors that assisted with the refurbishment of our methanol unit. Accounts payable (related party) increased by $2.4 million due to management fees accrued and payable to OCI Egypt.

Investing Activities

Net cash used in investing activities was approximately $92.7 million and $20.8 million, respectively, for the nine-months ended September 30, 2014 and 2013. The increase in net additions of property, plant, equipment and construction in progress of $71.9 million for the nine-months ended September 30, 2014 compared to the nine-months ended September 30, 2013 was primarily due to the commencement of the debottlenecking project.

Financing Activities

Net cash used in financing activities was approximately $147.5 million for the nine-months ended September 30, 2014 compared to $44.8 million net cash used by financing activities for the nine-months ended September 30, 2013. During the nine-months ended September 30, 2014, we repaid borrowings of $3.0 million on the Term B Loan Credit Facility, remitted $17.5 million of the transferred trade receivables to OCI USA, paid cash distributions to unitholders of $121.0 million and paid $6.0 million in deferred financing costs associated with Amendment No. 2 to the Term Loan B Credit Facility and the Revolving Credit Facility. Please read note 5 – Debt to the unaudited condensed consolidated financial statements included in this report for additional information.

During the nine-months ended September 30, 2013, we received net proceeds from borrowings of $342.7 million (after debt issuance costs of $11.9 million), repaid borrowings of $125.0 million to extinguish the Prior Credit Facility, and made distributions of $260.0 million to OCI USA, and capitalized expenses of $2.6 million related to the IPO.

CONTRACTUAL OBLIGATIONS

The following table lists our significant contractual obligations and their future payments at September 30, 2014:


Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Term B-3 Loan – Principal Payments		396,010		3,980		7,960		384,070		—
Interest Payments on third party debt ⁽¹⁾		96,116		20,227		39,449		36,440		—
Interest Payments on related party debt		1,077		203		406		406		62
Hydrogen supply contract⁽²⁾		187,000		26,400		52,800		52,800		55,000
Natural gas supply contract⁽²⁾		12,103		12,103		—		—		—
Nitrogen supply contract ⁽²⁾		54,863		7,079		14,158		14,158		19,468
Purchase commitments		31,043		31,043		—		—		—
Orascom E&C USA Inc. ⁽³⁾		48,031		48,031		—		—		—

Total		826,243		149,066		114,773		487,874		74,530

(1)	Interest rate on floating rate debt is based on the rate of 5.00% for the Term Loan B Credit Facility.

(2)	Quantities of feedstock to be purchased are subject to change based on our current and expected production, market dynamics and market reports.

(3)	Please read Item 13—“Certain Relationships and Related Transactions, and Director Independence—Construction Agreement with Orascom E&C USA Inc.” in our Annual Report and note 6 to the unaudited condensed consolidated financial statements included in this report for additional information.

OFF-BALANCE SHEET ARRANGEMENTS

None.

RECENTLY ISSUED ACCOUNTING STANDARDS

On May 28, 2014 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in accounting principles generally accepted in the United States of America (“GAAP”) when it becomes effective. The new standard is effective for the Partnership on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Partnership is evaluating the affect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Partnership has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Accuracy of estimates is based on the accuracy of information used. There has been no material change to our critical accounting policies and estimates from the information provided in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. We are exposed to interest rate risk related to our borrowings. As of September 30, 2014, interest on borrowings under the Term Loan B Credit Facility accrued, at OCIB’s option, at adjusted LIBOR plus 4.00% per annum or the alternate base rate plus 3.00%. If OCIB receives both (a) a corporate credit rating of B from S&P and (b) a corporate family rating of Ba3 from Moody’s (in each case with at least a stable outlook), or better, such rates will immediately be reduced by 0.50% until such time, if any, as such ratings are no longer in effect. Interest on borrowings under the Intercompany Revolving Facility will accrue at the rate equal to the sum of (a) the rate per annum applicable to the Term B-3 Loans (including as such per annum rate may fluctuate from time to time in accordance with the terms of the agreement governing the Term Loan B Credit Facility), plus (b) 25 basis points. Under the terms of the Intercompany Term Facility, interest on the intercompany term loan will accrue at the rate equal to the sum of (a) the rate per annum applicable to the Term B-3 Loans (including as such per annum rate may fluctuate from time to time in accordance with the terms of the agreement governing the Term Loan B Credit Facility), plus (b) 25 basis points. Based upon the outstanding balances of our variable-interest rate debt at September 30, 2014, and assuming interest rates are above the applicable minimum, a hypothetical increase or decrease of 100 basis points would result in an increase or decrease to our annual interest expense of approximately $4.0 million.

Commodity Price Risk. We are exposed to significant market risk due to potential changes in prices for methanol, ammonia and natural gas. Natural gas is the primary raw material used in the production of the methanol and ammonia manufactured at our facility. We have supply agreements with Kinder Morgan and DCP Midstream to supply natural gas required for our production of methanol and ammonia. As of September 30, 2014, a hypothetical increase or decrease of $1.00 per MMBtu of natural gas would result in an increase or decrease to our annual cost of goods sold (exclusive of depreciation) of approximately $31.0 million.

In the normal course of business, we produce methanol and ammonia throughout the year to supply the needs of our customers. Our inventory is subject to market risk due to fluctuations in the price of methanol and ammonia, changes in demand, natural gas feedstock costs and other factors. Methanol prices have historically been, and are expected to continue to be, characterized by significant cyclicality. As of September 30, 2014, a hypothetical increase or decrease of $50 per ton in the price of methanol would result in an increase or decrease to our annual revenue of approximately $36.5 million, based on an annual methanol volume of 730,000 metric tons. As of September 30, 2014, a hypothetical increase or decrease of $50 per ton in the price of ammonia would result in an increase or decrease to our annual revenue of approximately $13.3 million, based on an annual ammonia volume of 265,000 metric tons.

ITEM 4. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-15 promulgated under the Exchange Act to ensure that our consolidated financial statements are prepared in accordance with generally accepted accounting principles and present fairly our financial results of operations. As reported in our Annual Report on Form 10-K for the year ended December 31, 2013, during 2013, we identified a number of deficiencies, in the aggregate, that resulted in a material weakness in our internal control over financial reporting related to the design, implementation and effectiveness of our general information technology controls (“GITCs”) over financial reporting. In particular, these deficiencies related to the configuration set-up of the information technology system and related financial applications, segregation of duties, user access and change management controls that are intended to ensure that access to applications and data, and the ability to place program changes into production for such applications and data, are adequately restricted to appropriate internal personnel.

Management has taken steps to remediate the GITC deficiencies, including enhancing its internal documentation and monitoring approach to ensure that all GITC procedures designed to restrict access to applications and data are operating in an optimal manner in order to provide management with comfort that access is properly limited to the appropriate internal personnel. Management began to implement these remedial steps during the first quarter of 2014 and expects that these steps will be substantially implemented and tested by December 31, 2014. In accordance with our internal control compliance program, the material weakness is not considered remediated until the remediation processes have been operational for a sufficient period of time and successfully tested. Solely as a result of the material weakness in internal control over financial reporting relating to GITC deficiencies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2014 (the end of the period covered by this Quarterly Report on Form 10-Q).

The Securities and Exchange Commission (the “SEC”), as required by Section 404 of the Sarbanes-Oxley Act, adopted rules that generally require every registrant that files reports with the SEC to include a management report on such registrant’s internal control over financial reporting in its annual report. In addition, those rules generally require our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting. Our Annual Report on Form 10-K for the year ended December 31, 2013, which was our first Annual Report on Form 10-K, did not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm under a transition period established by SEC rules applicable to new public registrants. Management will be required to provide an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2014. We are not required to comply with the independent registered public accounting firm attestation requirement of Section 404 of the Sarbanes-Oxley Act while we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A description of the legal proceedings to which the Partnership and its subsidiary are a party is contained in note 9 to the unaudited condensed consolidated financial statements, “Commitments, Contingencies and Legal Proceedings,” included in Part I of this report.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risks under the heading “Risk Factors” in our Annual Report, as well as our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, which risks could materially affect our business, financial condition, cash flows or results of operations. These risks are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, cash flows or results of operations. There have been no material changes to the risk factors described in our Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, except for the risk factor set forth below.

Cost overruns related to our debottlenecking project could raise the likelihood that we breach a financial covenant contained in our debt agreements. If we were unable to comply with applicable financial covenants contained in our debt agreements in any quarter, our ability to pay distributions to unitholders could be adversely affected.

Cost overruns related to our debottlenecking project could impair our ability to comply with financial and other covenants contained in our term loan credit facility and revolving credit facility. We currently expect that the debottlenecking project will be completed in the first quarter of 2015 and currently estimate the total cash expenditures to complete the project has increased by approximately $70.0 million to $80.0 million, to a total of approximately $240.0 million to $250.0 million (including costs associated with a turnaround and environmental upgrades). Our estimate of total capital expenditures to complete the debottlenecking project is subject to numerous risk and uncertainties, and the actual amount of total capital expenditures required to complete the debottlenecking project may be greater than our current estimate. As of September 30, 2014, we had $396.0 million of debt outstanding, excluding an unamortized debt discount of approximately $3.6 million. Our ability to pay distributions to our unitholders is subject to covenant restrictions under the agreements governing our indebtedness. We expect that our ability to make distributions to our unitholders will depend, in part, on our ability to satisfy applicable covenants as well as the absence of a default or event of default under the agreements governing our indebtedness. If we were unable to comply with any such covenant restrictions in any quarter, our ability to pay distributions to unitholders would be adversely affected. In addition, any failure to comply with these covenants could result in a default under our debt agreements. Our ability to comply with the covenant restrictions contained in our debt agreements is affected by, among other things, the timing and costs to complete, and operating results following the completion of, the debottlenecking project. Upon a default, unless waived or cured, our lenders would have all remedies available to a secured lender and could elect to terminate their commitments, cease making further loans, cause their loans to become due and payable in full, institute foreclosure proceedings against us or our assets and force us and our subsidiaries into bankruptcy or liquidation. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities.”

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

Exhibit

Filing Date

SEC File No.

3.1^*

Certificate of Limited Partnership of OCI Partners LP

S-1

3.1

June 14,

2013

333-189350

3.2^*

Certificate of Amendment to Certificate of Limited Partnership of OCI Partners LP

S-1

3.2

June 14,
2013

333-189350

3.3A^*

First Amended and Restated Agreement of Limited Partnership of OCI Partners LP, dated as of October 9, 2013

8-K

3.1

October 15,
2013

001-36098

3.3B^*

Amendment No. 1, dated as of March 26, 2014, to the First Amended and Restated Agreement of Limited Partnership of OCI Partners LP, dated as of October 9, 2013

8-K

3.1

March 26,
2013

001-36098

10.1*

Amendment No. 1, dated as of June 13, 2014, among OCI Beaumont LLC, OCI Partners LP and Bank of America, N.A., as administrative agent and a lender, to the Revolving Credit Agreement dated as of April 4, 2014

8-K

10.1

June 19,
2014

001-36098

10.2*

Amendment No. 3, dated as of June 13, 2014, among OCI Beaumont LLC, OCI USA Inc., OCI Partners LP and Bank of America, N.A., as administrative agent, to the Term Loan Credit Agreement dated as of August 20, 2013

8-K

10.2

June 19,
2014

001-36098

31.1^†

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2^†

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1^†

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2^†

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS

XBRL Instance Document

101.SCH

XBRL Schema Document

101.CAL

XBRL Calculation Linkbase Document

101.LAB

XBRL Labels Linkbase Document

101.PRE

XBRL Presentation Linkbase Document

101.DEF

XBRL Definition Linkbase Document

*	Incorporated by reference into this Quarterly Report on Form 10-Q as indicated.

†	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						OCI PARTNERS LP BY: OCI GP LLC, ITS GENERAL PARTNER

Dated: November 12, 2014						/s/ Fady Kiama
						Fady Kiama
						Vice President and Chief Financial Officer
						(Duly Authorized Officer and Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company