Terra Industries Inc. reports second quarter results
Operating income up $103 million from Q2/06

S U M M A R Y

Q2/07 vs. Q2/06 results:

• Income from operations up $103 million.

• Revenues up $170 million, or 33%.

• UAN and AN selling prices up 36% and 13%, respectively.

• UK natural gas costs down 48%.

Outlook:

• Projected grain inventories should encourage another year of increased planted acres of corn and wheat, which should lead to continued strong nitrogen demand.

• Nitrogen prices should exhibit normal seasonal decreases during the 2007 second half.

Sioux City, Iowa (July 26, 2007)—Terra Industries Inc. (NYSE: TRA) announced today net income available to common shareholders of $69.4 million, or $.66 per diluted share, on revenues of $693.8 million for the quarter ended June 30, 2007. Net income available to common shareholders for the 2006 second quarter was $5.0 million, or $.05 per diluted share, on revenues of $523.5 million.

Terra reported operating income of $128.8 million for the 2007 second quarter, compared to operating income of $26.2 million for the 2006 second quarter.

For the 2007 first half, Terra posted net income to common shareholders of $75.3 million, or $.73 per share, on revenues of $1.2 billion. For the comparable 2006 period, Terra recorded a net loss to common shareholders of $20.3 million, or $.22 per share, on revenues of $922.4 million.

Analysis of second quarter results
The $170 million improvement in revenues from the 2006 to 2007 second quarter was due to higher sales volumes and selling prices. Ammonia, nitrogen solutions (UAN) and ammonium nitrate (AN) sales volumes increased by 3, 23 and 21 percent, respectively from the 2006 to the 2007 second quarter. Ammonia, UAN and AN selling prices improved 7, 36 and 13 percent, respectively, in the same period. The improved sales volumes and selling prices were primarily due to strong demand driven by significantly more U.S. acres of planted corn.

Cost of sales for the 2007 second quarter increased by $44.9 million, or 9 percent, over the 2006 second quarter, due to higher sales volumes and North American natural gas costs. Second quarter equity earnings declined $7.7 million from 2006 due to an extended plant outage and turnaround at the Point Lisas Trinidad nitrogen facility, which resumed normal operating rates during May.

Selling, general and administrative expense for the 2007 second quarter increased by $15.2 million over the 2006 second quarter, approximately $12.3 million of which was due to incentive and share-based compensation. Terra recorded no incentive compensation during the 2006 second quarter. The increased share-based compensation, which vests over three years, included $7.6 million for the prior service effects of increases in the 2007 second quarter price of Terra’s common shares and expectations that awards would vest at maximum levels.

Analysis of first half results
The $273.7 million year-to-date revenue improvement from 2006 to 2007 was mainly due to higher sales volumes and selling prices, driven by strong nitrogen products demand. For the half, ammonia, UAN and AN sales volumes increased by 4, 35 and 24 percent, respectively, over the 2006 first half. For the same period, UAN and AN selling prices increased by 21and 8 percent, respectively.

The $195.4 million year-to-date operating income improvement from 2006 to 2007 was due to higher sales volumes and selling prices, and lower natural gas costs, partly offset by increased expenses for incentive and share-based compensation.

Forward natural gas position
Terra’s forward purchase contracts at June 30, 2007, fixed prices for about 23 percent of its next 12 months’ natural gas needs at about $28.2 million above the published forward market prices at that date. The majority of these forward purchase contracts support nitrogen sales commitments.

Cash balances and share buybacks
Cash balances totaled $287.0 million at June 30, 2007. During the 2007 second quarter, Terra repurchased one million of its common shares for $19.2 million. Since announcing its authorization to repurchase up to 9.5 million of its outstanding common shares by June 30, 2008, Terra has repurchased 3.7 million shares.

CEO’s remarks
“Terra delivered a strong performance in the second quarter,” noted Terra President and CEO Michael Bennett. “Demand was strong throughout the period as U.S. farmers planted a reported 93 million acres of corn this spring. Terra capitalized on this environment by realizing nitrogen products selling prices and sales volumes that were significantly improved over those of the 2006 second quarter.”

“We also experienced a period of relative calm with regard to natural gas costs,” Bennett continued. “In North America we had a fairly mild winter, adequate gas in storage and no hurricane-related carry-over from the prior year, so natural gas costs were quite stable. In the UK, our natural gas unit costs moderated significantly, due primarily to mild weather and high natural gas inventory levels.

“Our plants operated well during the quarter. The Trinidad ammonia facility in which Terra is a 50% partner came back online in early May following a scheduled turnaround during which we also performed some needed repairs.

“Since the quarter’s end, Terra has announced two initiatives that we believe will benefit the business going forward,” said Bennett.

“First, the UK Competition Commission has conditionally approved advancement of the planned combination of Terra and Kemira GrowHow’s UK fertilizer and associated process chemicals businesses. We believe this proposed joint venture is a sustainable option for our UK operations and customers.

“Second, we announced an option agreement to sell our Beaumont, Texas, methanol facility, which we idled in late 2004. The divestment of the Beaumont facility underlines Terra’s focus on nitrogen products.”

Bennett concluded, “Our outlook for the remainder of 2007 and beyond remains positive. We’re experiencing good demand for fall fertilizer fill, and nitrogen prices remain seasonally firm. Corn futures continue at levels that should encourage strong plantings next spring.”

Conference call details
Terra management will conduct a conference call to discuss these second quarter results this afternoon at 3:00 ET. A live webcast of the conference call will be available from Terra’s website at www.terraindustries.com, and will be archived for playback for three months.

About Terra
Terra Industries Inc., with 2006 revenues of $1.8 billion, is a leading international producer of nitrogen products.

Forward-looking statements
This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.’s most recent report on Form 10-K and Terra Industries Inc.’s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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Note: Terra Industries’ news announcements are also available on its website,
www.terraindustries.com.

(Tables follow.)

Terra Industries Inc.
Summarized Results of Operations
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands except per-unit amounts)	2007			2006			2007			2006
Revenues
Nitrogen products	$	680,384		$	516,591		$	1,167,483		$	914,700
Methanol		10,780			5,217			23,311			6,589
Other		2,651			1,712			5,307			1,150
	$	693,815		$	523,520		$	1,196,101		$	922,439
Costs and expenses
Cost of sales		536,043			491,170			962,219			914,686
Equity in loss (earnings)		804			(6,880	)		(4,813	)		(15,021	)
Selling, general and administrative		28,194			13,006			45,251			24,716
Total costs and expenses		565,041			497,296			1,002,657			924,381
Operating income		128,774			26,224			193,444			(1,942	)
Interest income		3,482			1,824			6,369			3,408
Interest expense		(6,871	)		(11,782	)		(15,780	)		(23,554	)
Loss on early retirement of debt		(174	)		—			(38,836	)		—
Income (loss) before income taxes and minority interest		125,211			16,266			145,197			(22,088	)
Income tax benefit (provision)		(40,617	)		(5,766	)		(44,757	)		8,000
Minority interest		(13,939	)		(4,243	)		(22,576	)		(3,647	)
Net income (loss)		70,655			6,257			77,864			(17,735	)
Preferred stock dividends		(1,275	)		(1,275	)		(2,550	)		(2,550	)
Income (loss) available to common shareholders	$	69,380		$	4,982		$	75,314		$	(20,285	)
Income (loss) per common share
Basic	$	.76		$	.05		$	.82		$	(.22	)
Diluted	$	.66		$	.05		$	.73		$	(.22	)
Basic and diluted weighted average shares outstanding:
Basic		91,496			93,317			91,677			93,592
Diluted		107,294			95,212			107,311			93,592

Because of the seasonal nature and effects of weather-related conditions in several of Terra’s marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.

Terra Industries Inc.
Summarized Financial Position
(in thousands)
(unaudited)

	June 30,
	2007		2006
Assets
Cash and cash equivalents	$	286,950	$	85,243
Accounts receivable		241,342		195,504
Inventories		169,674		169,865
Other current assets		23,342		13,194
Total current assets		721,308		463,806
Property, plant and equipment, net		702,106		737,883
Equity investments		165,201		160,691
Deferred plant turnaround costs		41,375		36,848
Other assets		28,003		34,243
Total assets	$	1,657,993	$	1,433,471
Liabilities and Stockholders’ Equity
Customer prepayments		25,166		13,589
Other current liabilities		253,222		181,275
Total current liabilities		278,388		194,864
Long-term debt and capital lease obligations		330,000		331,300
Pension liability		119,407		119,900
Other liabilities		157,799		95,573
Minority interest		105,549		95,905
Total liabilities and minority interest		991,143		837,542
Series A preferred shares		115,800		115,800
Stockholders’ equity		551,050		480,129
Total liabilities and stockholders’ equity	$	1,657,993	$	1,433,471

Terra Industries Inc.
Summarized Cash Flows
(in thousands)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Net income (loss)	$	70,655		$	6,256		$	77,864		$	(17,735	)
Non-cash charges and credits:
Depreciation and amortization		27,718			26,414			54,360			52,696
Deferred income taxes		27,708			5,766			34,981			(8,000	)
Minority interest		13,939			4,244			22,576			3,647
Distributions in excess of (less than) equity earnings		1,804			1,804			(3,813	)		9,944
Non-cash loss on derivatives		1,292			(4,288	)		(1,541	)		1,573
Share-based compensation		10,813			1,176			13,681			2,317
Amortization of intangible and other assets		2,144			3,769			4,485			5,165
Loss on early retirement of debt		—			—			4,662			—
Change in assets and liabilities:
Accounts receivable		(42,214	)		(57,552	)		(39,347	)		16,200
Inventories		66,664			45,344			48,192			27,994
Accounts payable and customer prepayments		(98,625	)		(6,512	)		(65,789	)		(49,790	)
Other assets and liabilities, net		21,355			(6,721	)		32,530			(1,928	)
Net cash flows from operating activities		103,253			19,700			182,841			42,083
Purchase of property, plant and equipment		(6,760	)		(14,532	)		(13,496	)		(26,636	)
Plant turnaround costs		(11,478	)		(10,645	)		(20,320	)		(22,112	)
Return of investment in unconsolidated affiliates		—			8,066			—			9,660
Proceeds from sale of property, plant and equipment		—			275			—			275
Debt issuance		—			—			330,000			—
Debt repayments		(2,500	)		(4	)		(331,300	)		(30	)
Payments for debt issuance costs		(969	)		—			(6,398	)		—
Distributions to minority interests		(7,240	)		—			(11,714	)		—
Changes in restricted cash		—			—			—			8,595
Payments under share repurchase program		(19,211	)		(14,428	)		(19,211	)		(14,428	)
Stock issuance		130			363			406			363
Preferred share dividends paid		(1,275	)		(1,275	)		(2,550	)		(2,550	)
Other		(310	)		5,712			(325	)		3,657
Increase (Decrease) in cash and short-term investments		53,640			(6,768	)		107,933			(1,123	)
Cash and short-term investments at beginning of period		233,310			92,011			179,017			86,366
Cash and short-term investments at end of period	$	286,950		$	85,243		$	286,950		$	85,243

Terra Industries Inc.
Summarized Information
(volumes in thousands)

Volumes and Prices

	Three Months Ended June 30,
	2007				2006
	Sales		Average		Sales		Average
	Volumes		Unit Price1		Volumes		Unit Price1
Ammonia (tons)		568	$	347		552	$	323
Nitrogen solutions (tons)		1,310		200		1,064		147
Urea (tons)		32		317		46		265
Ammonium nitrate (tons)		403		255		332		226
Methanol (gallons)		8,523		1.12		4,572		0.87
Natural gas costs2
North America	$7.03				$6.60
United Kingdom	$4.06				$7.74

	Six Months Ended June 30,
	2007				2006
	Sales		Average		Sales		Average
	Volumes		Unit Price1		Volumes		Unit Price1
Ammonia (tons)		988	$	339		951	$	340
Nitrogen solutions (tons)		2,384		182		1,769		151
Urea (tons)		65		308		84		280
Ammonium nitrate (tons)		688		245		556		226
Methanol (gallons)		18,560		1.11		4,757		0.86
Natural gas costs2
North America	$6.89				$8.01
United Kingdom	$4.54				$8.01

1	After deducting outbound freight costs
2	Per MMBtu. Includes all transportation and other logistical costs and any gains or losses on financial derivatives related to natural gas purchases.

Because of the seasonal nature and effects of weather-related conditions in several of its marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.