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

Terra Nitrogen Company, L.P. (TNCLP) (NYSE:TNH) reported net income of $60.8 million, $38.0 million of which is allocable to Common Units ($2.05 per Common Unit), on revenues of $142.8 million for the second quarter ended June 30, 2009. This compares to net income of $130.2 million, $74.2 million of which was allocable to Common Units ($4.01 per Common Unit) on revenues of $256.7 million for the 2008 second quarter.

For the 2009 first half, TNCLP reported net income of $104.1 million, $65.5 million of which is allocable to Common Units ($3.54 per Common Unit), on revenues of $308.1 million for the first half ended June 30, 2009. This compares to net income of $211.8 million, $146.9 million of which was allocable to Common Units ($7.94 per Common Unit) on revenues of $431.2 million for the 2008 first half.

TNCLP also announced a cash distribution for the quarter ended June 30, 2009, of $2.22 per common limited partnership unit payable Aug. 27, 2009, to holders of record as of August 7, 2009. Cash distributions depend on TNCLP’s earnings, which can be affected by nitrogen selling prices, natural gas costs, seasonal demand factors, production levels, weather, cash requirements for working capital needs and capital expenditures. Cash distributions per limited partnership unit also vary based on increasing amounts allocable to the General Partner when cumulative distributions exceed targeted levels. Those targeted levels were attained in the 2008 first quarter.

Analysis of Results

Second Quarter

Revenues for the 2009 second quarter totaled $142.8 million, compared to revenues of $256.7 million for the 2008 second quarter. This decline was due to lower ammonia and urea ammonium nitrate solutions (UAN) sales volumes and selling prices, caused by continued weakness in nitrogen markets due to the general economic slowdown, and customers’ reluctance to build inventories.

Lower natural gas costs for the 2009 second quarter mitigated the effects of the lower sales volumes and selling prices. The lower natural gas costs reflect a trend that began in the 2009 first quarter as a result of the economic slowdown.

From the 2008 to the 2009 second quarter, TNCLP’s:

• Ammonia and UAN selling prices decreased by 20 percent and 33 percent, respectively.
• Ammonia and UAN sales volumes decreased by 29 and 21 percent, respectively.
• Natural gas unit costs decreased by 44 percent.

First Half

Revenues for the 2009 first half totaled $308.1 million, compared to revenues of $431.2 million for the 2008 first half. This decline was due to lower UAN sales volumes and lower ammonia and UAN selling prices, partially offset by higher ammonia sales volumes. The lower UAN sales volumes were due generally to the same factors affecting second quarter volumes. First half ammonia sales volumes benefited from a large first quarter volume increase due to a healthy pre-plant application season.

Lower 2009 first half natural gas costs were caused by reduced demand and ample supplies related to the overall sluggish economy, and mitigated the effects of the lower UAN sales volumes and nitrogen products selling prices.

From the 2008 to the 2009 first half, TNCLP’s:

• Ammonia and UAN selling prices decreased by 19 and 17 percent, respectively.
• Ammonia sales volumes increased by 21 percent and UAN sales volumes decreased by 24 percent.
• Natural gas unit costs decreased by 23 percent.

Forward Natural Gas Position

TNCLP’s forward purchase contracts at June 30, 2009, fixed prices for about 16 percent of its next 12 months’ natural gas needs at about $1.1 million more than published prices for June 30, 2009 forward markets. TNCLP has entered into these forward gas positions to secure margins on nitrogen products sold forward at fixed prices.

About TNCLP

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

Forward-Looking Statements

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

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

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

Additional information as to these factors can be found in TNCLP’s 2008 Annual Report/10-K, in the sections entitled “Business,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Notes to the consolidated financial statements.

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

1. After deducting outbound freight costs.

2. Excluding the impact of hedge costs, natural gas cost was $3.05 per MMBtu and $3.31 per MMBtu for the 2009 second quarter and first half, respectively.