Terra Nitrogen Company, L.P. (TNCLP) (NYSE:TNH) reported net income of $17.3 million, $11.9 million of which is allocable to Common Units ($0.64 per Common Unit), on revenues of $101.5 million for the third quarter ended Sept. 30, 2009. This compares to net income of $106.2 million, $63.2 million of which was allocable to Common Units ($3.41 per Common Unit) on revenues of $246.6 million for the 2008 third quarter.

For the 2009 first nine months, TNCLP reported net income of $121.4 million, $77.4 million of which is allocable to Common Units ($4.18 per Common Unit), on revenues of $409.6 million for the first nine months ended Sept. 30, 2009. This compares to net income of $318.0 million, $210.1 million of which was allocable to Common Units ($11.35 per Common Unit) on revenues of $677.8 million for the 2008 first nine months.

TNCLP also announced a cash distribution for the quarter ended Sept. 30, 2009, of $1.63 per common limited partnership unit payable Nov. 24, 2009, to holders of record as of Nov. 6, 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

Third Quarter

Revenues for the 2009 third quarter totaled $101.5 million, compared to revenues of $246.6 million for the 2008 third quarter. This decline was due to lower ammonia and urea ammonium nitrate solutions (UAN) sales volumes and selling prices, caused by weakness in nitrogen markets due to the general economic slowdown.

Per-unit natural gas costs were 62% lower for the 2009 versus the 2008 third quarter, and partially offset the effects of the lower sales volumes and selling prices.

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

• Ammonia and UAN selling prices decreased by 63 and 60 percent, respectively.
• Ammonia and UAN sales volumes decreased by 15 and 4 percent, respectively.
• Natural gas unit costs decreased by 62 percent.

Third quarter cost of sales reflects $4.0 million related to a maintenance turnaround at the Verdigris facility.

First Nine Months

Revenues for the 2009 first nine months totaled $409.6 million, compared to revenues of $677.8 million for the 2008 period. 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. Ammonia sales volumes benefited from a large first quarter volume increase due to a healthy pre-plant application season.

Lower 2009 first nine months natural gas costs were caused by a favorable supply/demand balance, and mitigated the effects of the lower UAN sales volumes and nitrogen products selling prices.

From the 2008 to the 2009 first nine months, TNCLP’s:

• Ammonia and UAN selling prices decreased by 32 and 35 percent, respectively.
• Ammonia sales volumes increased by 11 percent and UAN sales volumes decreased by 17 percent.
• Natural gas unit costs decreased by 38 percent.

First nine months cost of sales reflects $4.0 million related to a maintenance turnaround at the Verdigris facility.

Forward Natural Gas Position

TNCLP’s forward purchase contracts at Sept. 30, 2009, fixed prices for about 15 percent of its next 12 months’ natural gas needs at about $1.1 million less than published prices for Sept. 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.

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, 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.