Terra Nitrogen Company, L.P. Reports Fourth Quarter and Full-Year Results, Declares Cash Distribution

TNCLP also announced a cash distribution for the quarter ended Dec. 31, 2008, of $2.97 per common limited partnership unit payable Feb. 27, 2009, to holders of record as of Feb. 17, 2009. Cash distributions depend on TNCLP's earnings, which can be affected by nitrogen selling prices, natural gas costs, seasonal demand factors, production levels and 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

Fourth quarter

TNCLP's improvement in fourth quarter earnings over those of the 2007 fourth quarter was due to higher nitrogen products selling prices, partially offset by lower sales volumes and higher natural gas costs. Strong third quarter demand resulted in the higher nitrogen selling prices that carried over into some fourth quarter sales. The lower sales volumes were due to depressed nitrogen demand in the fourth quarter caused by the global economic slowdown and unfavorable weather. Natural gas costs were affected by global energy price volatility. From the 2007 to the 2008 fourth quarter, TNCLP's:

-- Ammonia and urea ammonium nitrate (UAN) selling prices increased by 78 and 46 percent, respectively.

-- Ammonia and UAN sales volumes decreased by 37 and 20 percent, respectively.

-- Natural gas unit costs increased by 46 percent.

The fourth quarter 2008 broad-based economic decline reduced 2008 year-end Cornbelt ammonia and UAN spot prices by approximately 25 percent compared to year-end 2007 spot prices. Due to the late fourth quarter pricing pressures, TNCLP recorded $5.8 million on fourth quarter charges related to derivative and inventory valuation.

Full year

TNCLP's full-year earnings improvement over last year was due to higher nitrogen products selling prices, partially offset by lower sales volumes and higher natural gas costs. Full-year results were generally affected by the same factors affecting fourth quarter results. From 2007 to 2008, TNCLP's:

-- Ammonia and UAN selling prices increased by 62 and 47 percent, respectively.

-- Ammonia and UAN sales volumes decreased by 13 and 2 percent, respectively.

-- Natural gas unit costs increased by 26 percent.

Forward natural gas position

TNCLP's forward purchase contracts at Dec. 31, 2008, fixed prices for about 31 percent of its next 12 months' natural gas requirements at $31 million above published forward markets at that date. 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.

TNCLP Distributions

This release serves a qualified notice to nominees and brokers as provided for under Treasury Regulation Section 1.1446-4(b). Please note that 100 percent of the Partnership's distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate.

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.

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 2007 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.

Terra Nitrogen Company, L.P. Condensed Consolidated Statements of Income (in thousands except per-unit amounts) (unaudited) Three Months Ended Years Ended December 31, December 31, 2008 2007 2008 2007 Revenues: Product revenues $ 225,083 $ 197,491 $ 902,578 $ 635,510 Other income 146 69 439 798 Total revenues 225,229 197,560 903,017 636,308 Costs and expenses: Cost of goods sold 118,687 123,315 470,805 414,686 Gross profit 106,542 74,245 432,212 221,622 Operating expenses 2,917 8,069 15,750 21,169 Income from operations 103,625 66,176 416,462 200,453 Interest expense (82 ) 17 (327 ) (324 ) Interest income 891 1,591 6,250 5,653 Net income $ 104,434 $ 67,784 $ 422,385 $ 205,782 Net income allocable to Common Units $ 65,654 $ 66,431 $ 275,712 $ 201,670 Net income per Common Unit $ 3.55 $ 3.59 $ 14.90 $ 10.90

Nitrogen Volumes and Prices Note: All UAN data are expressed on a 32% nitrogen basis. 2008 2007 Sales Average Sales Average Volumes Unit Price Volumes Unit Price (000 tons) ($/ton)(1) (000 tons) ($/ton)(1) Fourth quarter Ammonia 81 707 128 397 UAN 420 366 527 250 Full year Ammonia 303 616 349 380 UAN 1,980 330 2,013 224 Natural Gas Costs/MMBtu(2) Three Months Ended Years Ended December 31, December 31, 2008 2007 2008 2007 $ 10.54 $ 7.24 $ 8.59 $ 6.84 1. After deducting outbound freight costs. 2. Including effect of settled hedged natural gas position.

Terra Nitrogen Company, L.P. Condensed Consolidated Balance Sheets (in thousands) (unaudited) December 31, 2008 2007 Assets Cash and cash equivalents $ 154,681 $ 246,140 Accounts receivable 38,053 49,635 Inventory 57,207 19,343 Prepaid expenses and other current assets 11,815 4,906 Total current assets 261,756 320,024 Property, plant and equipment, net 68,208 71,289 Other long-term assets 11,442 22,473 Total assets $ 341,406 $ 413,786 Liabilities and partners' capital Accounts payable and accrued liabilities $ 24,844 $ 41,866 Customer prepayments 45,067 154,644 Derivative hedge liabilities 43,315 7,959 Total current liabilities 113,226 204,469 Other long-term liabilities 871 2,218 Total liabilities 114,097 206,687 Partners' Capital Limited partners' interests, 18,502 Common Units 218,918 221,726 and 184 Class B Common Units authorized and outstanding General partners' interest 39,172 (9,928) Accumulated other comprehensive income (loss) (30,781) (4,699) Total partners' capital 227,309 207,099 Total liabilities and partners' capital $ 341,406 $ 413,786

SOURCE: Terra Nitrogen Company, L.P.

Terra Nitrogen Company Joe A. Ewing, 712-277-7305 jewing@terraindustries.com