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Methanex Corporation (MX)
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VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - July 24, 2007) - For the second quarter of 2007, Methanex (TSX:MX)(NASDAQ:MEOH)(SSE:Methanex) realized Adjusted EBITDA(1) of $76.5 million and net income of $35.7 million ($0.35 per share on a diluted basis).

Bruce Aitken, President and CEO of Methanex, commented, "Our average realized price in the second quarter was $286 per tonne, similar to our Q2-2006 average realized price of $279 per tonne. We commented at the end of the first quarter that our pre-tax earnings would be lower in the second quarter by $35 million as a result of selling higher cost opening inventory. This fact, together with the disappointing level of production from our assets in Chile, reduced earnings below what we would regard as normal in the current positive operating environment in the methanol industry."

Mr. Aitken added, "While our operational performance in Chile during the second quarter was disappointing, our production outlook for the second half of the year looks much better. As recent technical issues impacting gas supply are currently being resolved, we expect to restart our plants in Chile on a staged basis and have all four production plants operating by the fourth quarter."

Mr. Aitken continued, "Industry fundamentals continue to be positive, with markets expected to remain balanced under a normal industry operating environment. As expected, under the current price environment, China reverted back to being a net importer of methanol during the second quarter. Industry pricing remains healthy, with July posted contract prices averaging approximately $300 per tonne in all of the major regions. Overall, the global demand outlook for traditional chemical derivatives remains strong, as does the longer-term outlook for significant new methanol demand growth from emerging energy related uses including biodiesel, DME, and fuel blending."

Mr. Aitken concluded, "With $124 million in cash flow from operations generated during the second quarter, we continue to be in a very strong financial position with liquidity to meet the financial requirements related to our methanol project in Egypt, pursue opportunities to accelerate gas development in southern Chile, pursue other strategic growth initiatives, and continue to deliver on our commitment to return excess cash to shareholders."

A conference call is scheduled for Wednesday, July 25, 2007 at 11:00 am EST (8:00 am PST) to review these second quarter results. To access the call, dial the Telus Conferencing operator ten minutes prior to the start of the call at (416) 883-0139, or toll free at (888) 458-1598. The passcode for the call is 45654. A playback version of the conference call will be available for fourteen days at (877) 653-0545. The reservation number for the playback version is 377224. There will be a simultaneous audio-only webcast of the conference call, which can be accessed from our website at www.methanex.com. In addition, an audio recording of the conference call can be downloaded from our website for three weeks after the call.

Methanex is a Vancouver based, publicly-traded company engaged in the worldwide production and marketing of methanol. Methanex shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol "MX", on the NASDAQ Global Market in the United States under the trading symbol "MEOH", and on the foreign securities market of the Santiago Stock Exchange in Chile under the trading symbol "Methanex". Methanex can be visited online at www.methanex.com.

FORWARD-LOOKING STATEMENTS

Information in this press release and the attached Second Quarter 2007 Management's Discussion and Analysis contains forward-looking statements. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections that are included in these forward-looking statements. Methanex believes that it has a reasonable basis for making such forward-looking statements. However, forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The risks and uncertainties include those attendant with producing and marketing methanol and successfully carrying out major capital expenditure projects in various jurisdictions, the ability to successfully carry out corporate initiatives and strategies, conditions in the methanol and other industries including the supply and demand balance for methanol, actions of competitors and suppliers, changes in laws or regulations in foreign jurisdictions, world-wide economic conditions and other risks described in our 2006 Management's Discussion & Analysis and the attached Second Quarter 2007 Management's Discussion and Analysis. Undue reliance should not be placed on forward-looking statements. They are not a substitute for the exercise of one's own due diligence and judgment. The outcomes anticipated in forward-looking statements may not occur and we do not undertake to update forward-looking statements. These materials also contain certain non-GAAP financial measures. Non-GAAP financial measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures used by other companies. For more information regarding these non-GAAP measures, please see our 2006 Management's Discussion & Analysis and the attached Second Quarter 2007 Management's Discussion and Analysis.

(1) These items are non-GAAP measures that do not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to Supplemental Non-GAAP Measures in the attached Second Quarter 2007 Management's Discussion and Analysis for a description of each Supplemental Non-GAAP Measure and a reconciliation to the most comparable GAAP measure.

Interim Report For the Six Months Ended June 30, 2007

At July 24, 2007 the Company had 100,537,554 common shares issued and outstanding and stock options exercisable for 1,112,867 additional common shares.


Share Information

Methanex Corporation's common shares are listed for trading on the Toronto
Stock Exchange under the symbol MX, on the Nasdaq Global Market under the
symbol MEOH and on the foreign securities market of the Santiago Stock
Exchange in Chile under the trading symbol Methanex.

Transfer Agents & Registrars

CIBC Mellon Trust Company
320 Bay Street
Toronto, Ontario, Canada M5H 4A6
Toll free in North America:
1-800-387-0825

Investor Information

All financial reports, news releases and corporate information can be
accessed on our website at www.methanex.com. 

Contact Information

Methanex Investor Relations
1800 - 200 Burrard Street
Vancouver, BC Canada V6C 3M1

E-mail: invest@methanex.com
Methanex Toll-Free: 1-800-661-8851

SECOND QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS

Except where otherwise noted, all currency amounts are stated in United States dollars.

This second quarter 2007 Management's Discussion and Analysis should be read in conjunction with the 2006 Annual Consolidated Financial Statements and the Management's Discussion and Analysis included in the Methanex 2006 Annual Report. The Methanex 2006 Annual Report and additional information relating to Methanex is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.


                                       Three Months Ended Six Months Ended
                                  ----------------------- ----------------
($ millions, except                Jun 30  Mar 31  Jun 30   Jun 30  Jun 30
 where noted)                        2007    2007    2006     2007    2006
--------------------------------------------------------- ----------------
--------------------------------------------------------- ----------------
Sales volumes (thousands of tonnes)     
 Company produced     
  Chile and Trinidad                1,221   1,015   1,241    2,236   2,495
  New Zealand                         139     125     110      264     177
--------------------------------------------------------- ----------------
                                    1,360   1,140   1,351    2,500   2,672
Purchased methanol                    269     375     294      644     591
Commission sales (1)                   89     139     133      228     274
--------------------------------------------------------- ----------------
 Total sales volumes                1,718   1,654   1,778    3,372   3,537
Average realized price ($ per
 tonne) (2)                           286     444     279      362     281
Methanex average non-discounted
posted price ($ per tonne) (3)        330     537     340      433     338
Operating income (4)                 48.1   213.1   128.7    261.3   271.6
Net income                           35.7   144.7    82.1    180.4   197.3
Income before unusual items
 (after-tax) (4)                     35.7   144.7    82.1    180.4   171.5
Cash flows from operating
 activities (4)(5)                   67.2   179.0   129.4    246.2   242.6
Adjusted EBITDA (4)                  76.5   236.9   153.0    313.4   319.6
Basic net income per common share    0.35    1.38    0.75     1.74    1.78
Diluted net income per common share  0.35    1.37    0.75     1.73    1.77
Diluted income before unusual items
 (after-tax) per share (4)           0.35    1.37    0.75     1.73    1.54
Common share information (millions
 of shares):     
 Weighted average number of common
  shares                            102.7   105.1   109.7    103.9   111.0
 Diluted weighted average number of
  common shares                     103.0   105.6   110.0    104.3   111.5
 Number of common shares
  outstanding, end of period        101.1   104.2   108.6    101.1   108.6
--------------------------------------------------------------------------

(1) Commission sales represent volumes marketed on a commission basis.
    Commission income is included in revenue when earned. 

(2) Average realized price is calculated as revenue, net of commissions
    earned, divided by the total sales volumes of produced and purchased
    methanol. 

(3) Methanex average non-discounted posted price represents the average of
    our non-discounted posted prices in North America, Europe and Asia
    Pacific weighted by sales volume. Current and historical pricing
    information is available at www.methanex.com. 

(4) These items are non-GAAP measures that do not have any standardized
    meaning prescribed by Canadian generally accepted accounting principles
    (GAAP) and therefore are unlikely to be comparable to similar measures
    presented by other companies. Refer to Supplemental Non-GAAP Measures
    for a description of each non-GAAP measure and reconciliation to the
    most comparable GAAP measure. 

(5) Cash flows from operating activities in the above table represent cash
    flows from operating activities before changes in non-cash working
    capital. 
--------------------------------------------------------------------------
--------------------------------------------------------------------------

PRODUCTION SUMMARY


                   Q2 2007      Q1 2007  Q2 2006  YTD Q2 2007  YTD Q2 2006
(thousands             Produc-   Produc-  Produc-      Produc-      Produc-
 of tonnes)  Capacity    tion      tion     tion         tion         tion
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Chile and
 Trinidad:
 Chile I, II,
  III and IV     960      569       751      872        1,320        1,754
 Titan           213      225       225      214          450          429
 Atlas (63.1%
  interest)      268      234       180      273          414          526
--------------------------------------------------------------------------
               1,441    1,028     1,156    1,359        2,184        2,709
Other:     
 New Zealand     132      120       118      118          238          222
--------------------------------------------------------------------------
               1,573    1,148     1,274    1,477        2,422        2,931
--------------------------------------------------------------------------

Our methanol facilities in Trinidad are capable of operating above design capacity. For the second quarter of 2007, our Titan methanol production facility produced 225,000 tonnes or 106% of design capacity. Our Atlas methanol production facility produced 234,000 tonnes during the second quarter of 2007. This facility could have produced an additional 54,000 tonnes if it were not for planned maintenance activities that were completed in mid-April.

Our methanol facilities in Chile produced 569,000 tonnes during the second quarter of 2007 compared with an operating capacity of 960,000 tonnes. During the second quarter, we experienced reductions in natural gas supply from our primary natural gas supplier in Chile who has been experiencing ongoing issues with delivery infrastructure and production. Also during the second quarter of 2007, one of our natural gas suppliers in Argentina was undertaking repairs to natural gas delivery infrastructure which we expect to be completed by the fourth quarter of 2007. As a result of these two issues, we lost production of approximately 130,000 tonnes and 90,000 tonnes, respectively, and in order to optimize the efficiency of our plants, we made the decision in May to operate three of our four plants in Chile. In addition, compressor failures in June seriously impacted the natural gas delivery infrastructure in the province of Tierra del Fuego in Argentina and disrupted all of the natural gas supply from this province. This issue, combined with increased domestic demand for natural gas in Argentina as a result of extremely cold temperatures during the current winter months, resulted in a disruption to all of our natural gas supply from Argentina. This resulted in approximately 170,000 tonnes of lost production during the quarter and constrained us to operating only one of our four plants from mid-June. The compressor repairs in Tierra del Fuego are being resolved and we expect to be operating two of our four plants in Chile over the next few weeks. As resolution to this situation continues and with the expected completion of repairs by our Argentinean supplier, we expect the natural gas supply for our Chile facilities to continue to improve over the remainder of the year which should allow us to have all four plants operating by the end of 2007.

We currently source approximately 62% of our natural gas requirements for our production facilities in Chile from natural gas suppliers in Argentina that are affiliates of international oil and gas companies. The remaining natural gas requirements are supplied from gas reserves in Chile, mainly by Empresa Nacional del Petroleo (ENAP), the Chilean state-owned energy company.

Effective July 25, 2006, the government of Argentina increased the duty on exports of natural gas from Argentina to Chile, which have been in place since May 2004, from approximately $0.30 per mmbtu to $2.25 per mmbtu. Exports of natural gas from the province of Tierra del Fuego were exempt from this duty until late October 2006 when the government of Argentina extended this duty to include this province at the same rates applicable to the other provinces. As a result, the increased duty on exports of natural gas applies to all of the natural gas feedstock that we source from Argentina. Assuming we receive all of our Argentinean natural gas entitlements, the total annual cost of the export duty to our natural gas suppliers from Argentina has increased to approximately $200 million. While our natural gas contracts provide that natural gas suppliers are to pay any duties levied by the government of Argentina, we have been contributing towards the cost of these duties and are in continuing discussions with our Argentinean natural gas suppliers regarding the impact of the increased export duty.

We have interim agreements in place with all of our Argentinean natural gas suppliers. In principle, we have agreed to share the cost of duties based in part on prevailing methanol prices while providing a minimum price to our natural gas suppliers. At methanol prices below approximately $250 per tonne, we pay substantially all of the export duty. We have also gained considerable flexibility to take the natural gas depending on prevailing methanol market conditions, and to the extent that these arrangements are not economic then we will not purchase the natural gas. We cannot provide assurance that we will be able to reach continuing arrangements with our natural gas suppliers, that the amount of the export duties will not be revised by the government of Argentina, or that the impact of this export duty will not have an adverse effect on our results of operations and financial condition. During the second quarter of 2007, we received approximately 55% of our Argentinean natural gas entitlements and we accrued $17 million to record the estimated cost of sharing export duties for this natural gas which was used in production. The amount of export duties charged to earnings in a period is primarily dependent on the sales volumes of Chile production in that period. During the second quarter of 2007, our sales volumes of Chile production were significantly higher than our production volumes as a result of lower production rates in Chile. The amount charged to earnings related to the cost of sharing export duties during the second quarter of 2007 was $29 million.

We continue to work on sourcing additional natural gas supply for our Chile facilities from alternative sources. Our primary Chilean natural gas supplier, ENAP, and Geopark Holdings Limited (Geopark) are undertaking gas exploration and development programs in areas of southern Chile that are relatively close to our production facilities. In early May, ENAP announced a discovery of commercial gas in this area. We also signed a memorandum of understanding with Geopark which could provide long-term supply from the development of natural gas reserves in Southern Chile. If these programs are successful we believe that some additional gas could be available during 2007. In addition, we are pursuing investment opportunities with ENAP, Geopark and others to help accelerate the discovery and development of natural gas in Southern Chile. The government of Chile recently announced its first international bidding round to assign exploration areas which lie close to our production facilities. In July, we signed an agreement where we have a 10% interest in a consortium with Wintershall Energia S.A. and Geopark for the joint evaluation and bidding for upstream gas development concessions in this upcoming bidding round. The bidding round will cover ten blocks spanning 32,356 square kilometres in the Magallanes basin in southern Chile. The blocks are expected to be awarded to the successful bidders by the end of the year, with exploration work expected to commence in early 2008. However, there can be no assurance that ENAP or others will be successful or that we would obtain any additional natural gas on commercially acceptable terms.

We produced 120,000 tonnes at our Waitara Valley facility in New Zealand during the second quarter of 2007. We have sufficient contracted natural gas supply to allow us to produce at this facility at least until early 2008. This facility has been positioned as a flexible production asset with operations dependent upon methanol industry supply and demand and the availability of natural gas on commercially acceptable terms.

EARNINGS ANALYSIS

A core element of our strategy is to strengthen our position as a low cost producer. Our core production facilities in Chile and Trinidad are underpinned by long-term take-or-pay natural gas purchase agreements with pricing terms that vary with methanol prices. These production hubs have an annual production capacity of 5.8 million tonnes and represent over 90% of our current annual production capacity. The operating results for these facilities represent a substantial proportion of our Adjusted EBITDA and, accordingly, we separately discuss the impact of the changes in average realized price, sales volumes and total cash costs related to these facilities.

Over the last few years we have been shutting down our high cost production which was exposed to volatile prices for natural gas. Our facilities in New Zealand have been positioned as flexible production assets with future operations dependent on securing natural gas on commercially acceptable terms. As the operating results for these facilities represent a smaller proportion of our Adjusted EBITDA, the impact of changes in average realized price, sales volumes and total cash costs have been combined and presented as the change in cash margin related to these facilities in our analysis of Adjusted EBITDA.

For a further discussion of the definitions and calculations used in our Adjusted EBITDA analysis, refer to How We Analyze Our Business.

For the second quarter of 2007 we recorded Adjusted EBITDA of $76.5 million and net income and income before unusual items (after-tax) of $35.7 million ($0.35 per share on a diluted basis). This compares with Adjusted EBITDA of $236.9 million and net income and income before unusual items (after-tax) of $144.7 million ($1.37 per share on a diluted basis) for the first quarter of 2007 and Adjusted EBITDA of $153.0 million and net income and income before unusual items (after-tax) of $82.1 million ($0.75 per share on a diluted basis) for the second quarter of 2006.

For the six months ended June 30, 2007, we recorded Adjusted EBITDA of $313.4 million and net income and income before unusual items (after-tax) of $180.4 million ($1.73 per share on a diluted basis). This compares with Adjusted EBITDA of $319.6 million, net income of $197.3 million ($1.77 per share on a diluted basis) and income before unusual items (after-tax) of $171.5 million ($1.54 per share on a diluted basis) during the same period in 2006.

The following is a reconciliation of net income to income before unusual items (after-tax):


                                       Three Months Ended Six Months Ended
                                  ----------------------- ----------------
                                   Jun 30  Mar 31  Jun 30   Jun 30  Jun 30
($ millions)                         2007    2007    2006     2007    2006
--------------------------------------------------------- ----------------
--------------------------------------------------------- ----------------
Net income                        $  35.7 $ 144.7 $  82.1 $  180.4 $ 197.3
Add/(deduct) unusual item: 
 Future income tax recovery
  related to change in tax
  legislation                           -       -       -        - $ (25.8)
--------------------------------------------------------- ----------------
Income before unusual items
 (after-tax)                       $ 35.7 $ 144.7  $ 82.1  $ 180.4 $ 171.5
--------------------------------------------------------- ----------------

Refer to the Income Taxes section of this Management's Discussion and Analysis and note 6 to our second quarter of 2007 interim consolidated financial statements for further information regarding the future income tax recovery related to a change in tax legislation.

Adjusted EBITDA

The increase (decrease) in Adjusted EBITDA resulted from changes in the following:


                                     Q2 2007        Q2 2007    YTD Q2 2007
                               compared with  compared with  compared with
($ millions)                         Q1 2007        Q2 2006    YTD Q2 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Chile and Trinidad facilities:
 Average realized price        $        (178) $           9  $         160
 Sales volumes                            56             (3)           (39)
 Total cash costs(1)                       6            (69)          (153)
--------------------------------------------------------------------------
                                        (116)           (63)           (32)
Changes in cash margin related
 to sales of:      
 New Zealand production                  (19)             -             24
 Purchased methanol                      (25)           (13)             2
--------------------------------------------------------------------------
                               $        (160) $         (76) $          (6)
--------------------------------------------------------------------------
(1) Includes cash costs related to methanol produced at our Chile and
    Trinidad facilities as well as consolidated selling, general and
    administrative expenses and fixed storage and handling costs.

Average realized price


                                       Three Months Ended Six Months Ended
                                  ----------------------- ----------------
                                   Jun 30  Mar 31  Jun 30   Jun 30  Jun 30
($ per tonne, except where noted)    2007    2007    2006     2007    2006
--------------------------------------------------------- ----------------
--------------------------------------------------------- ----------------
Methanex average non-discounted
 posted price (1)                     330     537     340     433      338
Methanex average realized price (2)   286     444     279     362      281
Average discount                       13%     17%     18%     16%      17%
--------------------------------------------------------- ----------------
(1) Methanex average non-discounted posted price represents the average of
    our non-discounted posted prices in North America, Europe and Asia
    Pacific weighted by sales volume. Current and historical pricing
    information is available at www.methanex.com.
(2) Average realized price is calculated as revenue, net of commissions
    earned, divided by the total sales volumes of produced and purchased
    methanol. 

We commenced 2007 in a tight methanol market environment which began in the latter half of 2006 as a result of a global methanol supply shortage. This resulted in high methanol pricing levels which in a normal supply and demand environment are unsustainable. As the first quarter of 2007 came to an end global inventories recovered and methanol pricing moderated as a result of a more balanced market. Our average non-discounted posted price for the second quarter of 2007 was $330 per tonne compared with $537 per tonne for the first quarter of 2007 and $340 per tonne for the second quarter of 2006. Our average realized price for the second quarter of 2007 was $286 per tonne compared with $444 per tonne for the first quarter of 2007 and $279 per tonne for the second quarter of 2006. The change in our average realized price for the second quarter of 2007 decreased our Adjusted EBITDA by $178 million compared with the first quarter of 2007 and increased our Adjusted EBITDA by $9 million compared with the second quarter of 2006.

The methanol industry is highly competitive and prices are affected by supply/demand fundamentals. We publish non-discounted prices for each major methanol market and offer discounts to customers based on various factors. For the second quarter of 2007 our average realized price was approximately 13% lower than our average non-discounted posted price. This compares with approximately 17% lower for the first quarter of 2007 and 18% lower for the second quarter of 2006. To reduce the impact of cyclical pricing on our earnings, we have entered into long-term contracts for a portion of our production volume with certain global customers where prices are either fixed or linked to our costs plus a margin. We expect the discount from our non-discounted posted prices will narrow during periods of lower methanol pricing. We believe it is important to maintain financial flexibility throughout the methanol price cycle and these sales contracts are a part of our balanced approach to managing cash flow and liquidity.

Chile and Trinidad sales volumes

Sales volumes of methanol produced at our production hubs in Chile and Trinidad for the second quarter of 2007 were higher by 206,000 tonnes compared with the first quarter of 2007 and this increased Adjusted EBITDA by $56 million. The increase was a result of a higher proportion of our sales volumes being sourced with our produced methanol during the second quarter of 2007 compared with the first quarter of 2007.

Sales volumes of methanol produced at our production hubs in Chile and Trinidad for the second quarter of 2007 and six months ended June 30, 2007 were lower than comparable periods in 2006 by 20,000 tonnes and 259,000 tonnes, respectively. Lower sales volumes for these periods decreased Adjusted EBITDA by $3 million and $39 million, respectively.

Total cash costs

Our production facilities in Chile and Trinidad are underpinned by natural gas purchase agreements with pricing terms that include base and variable price components. The variable component is adjusted at the time of production in relation to changes in methanol prices above pre-determined prices. As a result of these pricing terms, our natural gas costs are based on methanol pricing at the time of production which may differ from methanol pricing at the time of sale. Accordingly, at the beginning of the second quarter of 2007, the value of our Chile and Trinidad inventory reflected the higher methanol prices in the first quarter of 2007. This higher cost inventory was sold during the second quarter of 2007 and resulted in lower Adjusted EBITDA by $25 million than if the natural gas costs were adjusted to pricing levels in the second quarter of 2007.

Total cash costs for the second quarter of 2007 were lower than in the first quarter of 2007 by $6 million. Our natural gas costs on sales of Trinidad production were lower by $26 million as a result of lower methanol pricing during second quarter of 2007 compared with the first quarter of 2007. These lower cash costs were partially offset by higher cash costs from Argentina export duties, unabsorbed fixed costs and selling, general and administrative expenses. During the second quarter, we had an increase in the cost of Argentina export duties of $7 million as a result of higher sales volumes of Chile production. The amount charged to earnings for the cost of sharing export duties during the second quarter of 2007 was $29 million compared with $22 million for the first quarter of 2007. Unabsorbed fixed costs were higher by $7 million during the second quarter of 2007 compared with the first quarter of 2007 primarily due to lower production rates at our Chile facilities. The remaining change in cash costs of $6 million relates to higher selling, general and administrative expenses during the second quarter of 2007 compared with the first quarter of 2007 primarily as a result of the impact of changes in our share price on our stock-based compensation expense and timing of other expenses.

Total cash costs for the second quarter of 2007 and six months ended June 30, 2007 were higher than comparable periods in 2006 and this decreased Adjusted EBITDA by $69 million and $153 million, respectively. Our natural gas costs on sales of Chile and Trinidad production were higher for the second quarter of 2007 and the six months ended June 30, 2007 compared with the same periods in 2006 as a result of higher methanol prices, and this increased cash costs by $35 million and $91 million, respectively. Natural gas costs on sales of Chile production in the second quarter of 2007 and the six months ended June 30, 2007 compared with the same periods in 2006 were also higher by $29 million and $51 million, respectively, as a result of the impact of sharing export duties with our natural gas suppliers from Argentina. These export duties became effective as of July 2006 and had no impact on the comparable periods. Unabsorbed fixed costs were higher during the second quarter of 2007 and the six months ended June 30, 2007 by $4 million and $5 million, respectively, compared with the same periods in 2006 primarily due to lower production rates our Chile facilities in 2007. The remaining increases in cash costs for the second quarter of 2007 and the six months ended June 30, 2007 of $1 million and $6 million, respectively, compared with the same periods in 2006 primarily relates to higher in-market distribution costs. These higher in-market distribution costs have been substantially recovered from customers and this recovery has been included in revenue.

Margin earned from New Zealand facilities

Our cash margin on the sale of New Zealand production for the second quarter of 2007 was $8 million compared with $27 million for first quarter of 2007 and $8 million for the second quarter of 2006. The decrease in cash margin for the second quarter of 2007 compared with the first quarter of 2007 was primarily as a result of lower methanol pricing. Our cash margin on the sale of New Zealand production for the six months ended June 30, 2007 was $37 million compared with the $13 million for the same period in 2006. The increase in cash margin was primarily due to higher methanol pricing in 2007.

Margin on sale of purchased methanol

We purchase additional methanol produced by others through long-term and short-term offtake contracts or on the spot market to meet customer needs and support our marketing efforts. Consequently, we realize holding gains or losses on the resale of this product depending on the methanol price at the time of resale. During the second quarter of 2007, we had a negative cash margin of $10 million on the resale of 0.3 million tonnes of purchased methanol compared with a positive cash margin of $15 million on the resale of 0.4 million tonnes for the first quarter of 2007 and a positive cash margin of $3 million on the resale of 0.3 million tonnes for the second quarter of 2006. At the beginning of the second quarter of 2007 we were holding the higher cost purchased methanol due to higher methanol pricing during the first quarter of 2007. The negative cash margin of $10 million on resale of purchased methanol during the second quarter is primarily a result of sales of this higher cost inventory. This, combined with the impact of sales of higher cost Chile and Trinidad inventory of $25 million (refer to Total cash costs section), resulted in a pre-tax earnings impact of $35 million during the second quarter of 2007 from selling higher cost inventory that would not have been present in a stable price environment.

During the six months ended June 30, 2007, we had a cash margin of $5 million on resale of 0.6 million tonnes compared with a cash margin of $3 million on the resale of 0.6 million tonnes for the same period in 2006.

Depreciation and Amortization

Depreciation and amortization was $28 million for the second quarter of 2007 compared with $24 million for the first quarter of 2007 and $24 million for the second quarter of 2006. The increase in depreciation and amortization for the second quarter of 2007 is primarily a result of higher sales volumes of Chile and Trinidad production and higher unabsorbed depreciation as a result of lower production rates at our Chile facilities.

For the six months ended June 30, 2007, depreciation and amortization was $52 million compared with $48 million for the same period in 2006. The increase in depreciation and amortization was due to higher unabsorbed depreciation costs as a result of lower production rates at our Chile facilities for the six months ended June 30, 2007 compared with the same period in 2006. This increase was partially offset by lower depreciation as a result of lower sales volume of Chile production during the six months ended June 30, 2007.

Interest Expense & Interest and Other Income


                                       Three Months Ended Six Months Ended
                                  ----------------------- ----------------
                                   Jun 30  Mar 31  Jun 30   Jun 30  Jun 30
($ millions)                         2007    2007    2006     2007    2006
--------------------------------------------------------- ----------------
--------------------------------------------------------- ----------------
Interest expense                  $    11 $    11 $    11  $    22 $    22
--------------------------------------------------------- ----------------
Interest and other income         $    13 $     5 $     4  $    18 $     6
--------------------------------------------------------- ----------------

Interest and other income was $13 million for the second quarter of 2007 compared with $5 million for the first quarter of 2007 and $4 million for the second quarter of 2006. During the second quarter of 2007, we recorded a recovery of $4 million related to the sale of an investment that we had previously written off. The remaining increase in our interest and other income primarily relates to an increase in interest income and the impact on earnings of changes in foreign exchange rates.

Income Taxes

The effective tax rate for the second quarter of 2007 was 28% compared with 30% for the first quarter of 2007 and 32% for the second quarter of 2006. Excluding the unusual item related to the Trinidad tax adjustment, the effective rate for the six months ended June 30, 2007 was 30% compared with 33% for the same period in 2006. The statutory tax rate in Chile and Trinidad, where we earn a substantial portion of our pre-tax earnings, is 35%. Our Atlas facility in Trinidad has partial relief from corporation income tax until 2014. During 2007, we earned a lower proportion of our consolidated income from methanol produced at our Chile facilities and this contributed to lower effective tax rates compared with 2006.

In Chile the tax rate consists of a first category tax that is payable when income is earned and a second category tax that is due when earnings are distributed from Chile. The second category tax is initially recorded as future income tax expense and is subsequently reclassified to current income tax expense when earnings are distributed. Accordingly, the ratio of current income tax expense to total income tax expense is highly dependent on the level of cash distributed from Chile.

During 2005, the Government of Trinidad and Tobago introduced new tax legislation retroactive to January 1, 2004. As a result, during 2005 we recorded a $17 million charge to increase future income tax expense to reflect the retroactive impact for the period January 1, 2004 to December 31, 2004. In February 2006, the Government of Trinidad and Tobago passed an amendment to this legislation that changed the retroactive effective date to January 1, 2005. As a result of this amendment we recorded an adjustment to decrease future income tax expense by a total of $26 million during the first quarter of 2006. The adjustment includes a reversal of the previous charge to 2005 earnings and an additional adjustment to recognize the benefit of tax deductions that were reinstated as a result of the change in the retroactive effective date.

SUPPLY/DEMAND FUNDAMENTALS


Methanex Non-Discounted Regional Posted Prices(1)

                                                       Jul    Apr-Jun
(US$ per tonne)                                       2007       2007
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United States                                          309        336
Europe(2)                                              300        329
Asia                                                   285        320
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(1) Discounts from our posted prices are offered to customers based
    on various factors.
(2) EUR 220 at July 2007 (Apr 2007 - EUR 250) converted to United
    States dollars at the date of settlement.
---------------------------------------------------------------------

We commenced 2007 in a tight methanol market environment which began in the latter half of 2006 as a result of a global methanol supply shortage brought on by planned and unplanned supplier outages. This resulted in high methanol pricing levels which in a normal supply and demand environment we believed were unsustainable. As the first quarter of 2007 came to an end global inventories recovered and methanol pricing moderated as a result of a more balanced market. Into the third quarter of 2007, the methanol market environment remains balanced with a slight moderation in pricing from the second quarter. In July, our average non-discounted posted price across all the major regions is approximately $300 per tonne. We believe, assuming normal industry operating rates, these balanced conditions should continue through the third quarter of 2007.

Over the next twelve months, we expect new capacity and expansions to add approximately 2.7 million tonnes of annual capacity to the global industry, outside of China. The next increment of world-scale capacity is the 1.0 million tonne per year plant in Oman which is under construction and we expect product from this plant to be available to the market in the third quarter of 2007. In addition, there is a 1.7 million tonne per year plant under construction in Saudi Arabia, and we expect product from this plant to be available to the market by mid 2008. Over the same period, we believe that global methanol demand growth combined with the potential shut down of high cost capacity as a result of high feedstock prices could offset this new industry supply.

We believe global demand for methanol for traditional uses remains healthy and is underpinned by strong global economies, particularly in China. In addition, we believe that high energy prices combined with the current methanol environment has improved the economics for energy related derivatives such as biodiesel, MTBE, dimethyl ether (DME) and fuel blending.

We believe methanol demand in China will continue to grow at high rates as a result of very strong traditional demand driven by industrial production growth rates and additional demand related to non-traditional uses for methanol such as gasoline blending and DME. In the first quarter of 2007, the methanol price outside of China was significantly higher than the Chinese domestic methanol price and this created an incentive to export and resulted in China being a net exporter of methanol. During the second quarter of 2007, the lower price environment relative to the first quarter of 2007 resulted in China being a net importer of methanol once again. A recent decision by the government of China to reduce tax rebates offered to Chinese exporters of methanol and the continued appreciation of the Chinese currency has increased the cost for Chinese producers to export. In the current methanol price environment, we expect China will remain a net importer of methanol and that substantially all domestic methanol production will be consumed within the local market. We also expect that imports of methanol into China will grow over time.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities before changes in non-cash working capital in the second quarter of 2007 were $67 million compared with $129 million for the same period in 2006. The decrease in cash flow from operating activities before changes in non-cash working capital is primarily due to lower earnings. During the second quarter of 2007, our non-cash working capital decreased and this increased our cash flow from operating activities by $57 million. The decrease in our non-cash working capital is primarily due to lower inventory levels and a decrease in our trade receivables partially offset by a decrease in our trade payables balances during the second quarter of 2007.

During the second quarter of 2007, we repurchased for cancellation a total of 3.2 million common shares at an average price of US$24.79 per share, totaling $79 million. This includes 1.9 million common shares repurchased under a normal course issuer bid that expired May 16, 2007 and 1.3 million common shares repurchased under a new normal course issuer bid that commenced May 17, 2007. On closing of the normal course issuer bid that expired at May 16, 2007, we had repurchased a total of 7.5 million common shares at an average price of US$23.85 per share, totaling $179 million. On May 7, 2007, the new normal course issuer bid was approved. This bid commenced May 17, 2007 and expires May 16, 2008 and allows us to repurchase for cancellation up to 8.7 million common shares.

Also during the second quarter of 2007, our Board of Directors approved a 12% increase in our regular quarterly dividend to shareholders, from US$0.125 per share to US$0.14 per share. During the second quarter of 2007 we paid quarterly dividends of approximately $14 million.

In May 2007, we reached financial close for our project to construct a 1.3 million tonne per year methanol facility at Damietta on the Mediterranean Sea in Egypt. We are developing the project through a joint venture in which we have a 60% interest. The joint venture has secured limited recourse debt of $530 million. We expect commercial operations from the methanol facility to begin in early 2010 and we will purchase and sell 100% of the methanol from the facility. The total estimated future costs to complete the project over the next three years, excluding financing costs and working capital, are expected to be approximately $800 million. Our 60% share of future equity contributions, excluding financing costs and working capital, over the next three years is estimated to be approximately $215 million and we expect to fund these expenditures from cash generated from operations and cash on hand.

We have excellent financial capacity and flexibility. Our cash balance at June 30, 2007 was $484 million and we have a strong balance sheet with an undrawn $250 million credit facility. Our planned capital maintenance expenditure program directed towards major maintenance, turnarounds and catalyst changes is currently estimated to total approximately $90 million for the period to the end of 2009.


The credit ratings for our unsecured notes at June 30, 2007 were as
follows:

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Standard & Poor's Rating Services                     BBB- (negative)
Moody's Investor Services                                Ba1 (stable)
Fitch Ratings                                            BBB (stable)

Credit ratings are not recommendations to purchase, hold or sell
securities and do not comment on market price or suitability for a
particular investor. There is no assurance that any rating will
remain in effect for any given period of time or that any rating
will not be revised or withdrawn entirely by a rating agency in
the future.
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We are well positioned to meet our financial requirements related to the methanol project in Egypt, complete our capital maintenance spending program, pursue new opportunities to enhance our leadership position in the methanol industry, pursue opportunities to invest to accelerate the development of natural gas in Southern Chile, investigate opportunities related to new methanol demand for energy applications and continue to deliver on our commitment to return excess cash to shareholders.

SHORT-TERM OUTLOOK

We believe the global methanol industry fundamentals continue to be favourable and are underpinned by high global energy prices. We also believe there is considerable potential for demand growth for methanol use in traditional and emerging applications, including fuel blending, biodiesel and DME. The methanol price will ultimately depend on industry operating rates, the rate of industry restructuring and the strength of global demand. We believe that our excellent financial position and financial flexibility, outstanding global supply network and asset position will provide a sound basis for Methanex continuing to be the leader in the methanol industry.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

These interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) on a basis consistent with those followed in the most recent annual consolidated financial statements, except as described in Note 2 to our interim consolidated financial statements. Certain of our accounting policies are recognized as critical because they require management to make subjective or complex judgments about matters that are inherently uncertain. Our critical accounting policies and estimates relate to property, plant and equipment, asset retirement obligations, and income taxes. For further details, refer to pages 29 to 30 of our 2006 Annual Report.

CHANGES IN ACCOUNTING POLICIES OR ESTIMATES

On January 1, 2007, we adopted, on a prospective basis, the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1530, Comprehensive Income, Section 3251, Equity, Section 3855, Financial Instruments - Recognition and Measurement, Section 3861, Financial Instruments - Disclosure and Presentation, and Section 3865, Hedges. These standards, and the impact on our financial statements, are discussed in Note 2 to our interim consolidated financial statements.

CONTROLS AND PROCEDURES

For the three months ended June 30, 2007, no changes were made in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ADDITIONAL INFORMATION - SUPPLEMENTAL NON-GAAP MEASURES

In addition to providing measures prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP), we present certain supplemental non-GAAP measures. These are Adjusted EBITDA, income before unusual items (after-tax), diluted income before unusual items (after-tax) per share, operating income and cash flows from operating activities before changes in non-cash working capital. These measures do not have any standardized meaning prescribed by Canadian GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. We believe these measures are useful in evaluating the operating performance and liquidity of the Company's ongoing business. These measures should be considered in addition to, and not as a substitute for, net income, cash flows and other measures of financial performance and liquidity reported in accordance with Canadian GAAP.

Adjusted EBITDA

This supplemental non-GAAP measure is provided to assist readers in determining our ability to generate cash from operations. We believe this measure is useful in assessing performance and highlighting trends on an overall basis. We also believe Adjusted EBITDA is frequently used by securities analysts and investors when comparing our results with those of other companies. Adjusted EBITDA differs from the most comparable GAAP measure, cash flows from operating activities, primarily because it does not include changes in non-cash working capital, other cash payments related to operating activities, stock-based compensation expense, other non-cash items, interest expense, interest and other income, and current income taxes.

The following table shows a reconciliation of cash flows from operating activities to Adjusted EBITDA:


                                    Three Months Ended    Six Months Ended
                            -------------------------- -------------------
                            Jun 30    Mar 31    Jun 30    Jun 30    Jun 30
($ thousands)                 2007      2007      2006      2007      2006
------------------------------------------------------ -------------------
------------------------------------------------------ -------------------
Cash flows from operating
 activities              $ 123,825 $ 191,102 $ 143,420 $ 314,927 $ 163,333
Add (deduct):      
 Changes in non-cash
  working capital          (56,601)  (12,109)  (14,003)  (68,710)   79,295
 Other cash payments         3,518       740     1,851     4,258     7,901
 Stock-based compensation
  expense                   (6,588)   (3,522)   (7,463)  (10,110)  (13,482)
 Other non-cash items       (3,670)   (2,647)   (1,094)   (6,317)   (2,077)
 Interest expense           11,159    11,067    10,945    22,226    21,903
 Interest and other income (12,606)   (5,072)   (3,772)  (17,678)   (6,307)
 Current income taxes       17,478    57,326    23,129    74,804    68,993
------------------------------------------------------ -------------------
Adjusted EBITDA          $  76,515 $ 236,885 $ 153,013 $ 313,400 $ 319,559
------------------------------------------------------ -------------------

Income before Unusual Items (after-tax) and Diluted Income before Unusual Items (after-tax) Per Share

These supplemental non-GAAP measures are provided to assist readers in comparing earnings from one period to another without the impact of unusual items that management considers to be non-operational and/or non-recurring. Diluted income before unusual items (after-tax) per share has been calculated by dividing income before unusual items (after-tax) by the diluted weighted average number of common shares outstanding.

The following table shows a reconciliation of net income to income before unusual items (after-tax) and the calculation of diluted income before unusual items (after-tax) per share:


($ thousands,
 except number                  Three Months Ended        Six Months Ended
 of shares    ------------------------------------------------------------
 and per share      Jun 30      Mar 31      Jun 30      Jun 30      Jun 30
 amounts)             2007        2007        2006        2007        2006
--------------------------------------------------------------------------
Net income       $  35,654   $ 144,706   $  82,097   $ 180,360   $ 197,274
Add (deduct)
 unusual item:      
 Future income
  tax recovery
  related to
  change in
  tax
  legislation            -           -           -           -   $ (25,753)
--------------------------------------------------------------------------
Income before
 unusual items
 (after-tax)     $  35,654   $ 144,706   $  82,097   $ 180,360   $ 171,521

Diluted
 weighted
 average number
 of common
 shares        102,973,271 105,597,445 110,013,684 104,278,109 111,451,670
Diluted income
 before unusual
 items
 (after-tax)
 per share       $    0.35   $    1.37   $    0.75   $     1.73   $   1.54
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Operating Income and Cash Flows from Operating Activities before Non-Cash Working Capital

Operating income and cash flows from operating activities before changes in non-cash working capital are reconciled to Canadian GAAP measures in our consolidated statements of income and consolidated statements of cash flows, respectively.

QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected financial information for the prior eight quarters is as follows:


                                             Three Months Ended      
                                ------------------------------------------
($ thousands, except per share     Jun 30     Mar 31     Dec 31     Sep 30
 amounts)                            2007       2007       2006       2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue                         $ 466,414  $ 673,932  $ 668,159  $ 519,586
Net income                         35,654    144,706    172,445    113,230
Basic net income per common
 share                               0.35       1.38       1.62       1.05
Diluted net income per common
 share                               0.35       1.37       1.61       1.05
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                                             Three Months Ended      
                                ------------------------------------------
($ thousands, except per share     Jun 30     Mar 31     Dec 31     Sep 30
 amounts)                            2006       2006       2005       2005
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue                         $ 460,915  $ 459,590  $ 459,615  $ 349,291
Net income (loss)                  82,097    115,177     48,574    (21,789)
Basic net income (loss) per
 common share                        0.75       1.02       0.42      (0.19)
Diluted net income (loss) per
 common share                        0.75       1.02       0.42      (0.19)
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HOW WE ANALYZE OUR BUSINESS

We review our results of operations by analyzing changes in the components of our Adjusted EBITDA (refer to Supplemental Non-GAAP Measures for a reconciliation to the most comparable GAAP measure), depreciation and amortization, interest expense, interest and other income, unusual items and income taxes. In addition to the methanol that we produce at our facilities, we also purchase and re-sell methanol produced by others. We analyze the results of produced methanol sales separately from purchased methanol sales as the margin characteristics of each are very different.

Produced Methanol

The key drivers of changes in our Adjusted EBITDA for produced methanol are average realized price, sales volume and cash costs. We provide separate discussion of the changes in Adjusted EBITDA related to our core Chile and Trinidad production hubs and the changes in Adjusted EBITDA related to our New Zealand facility.

Our production hubs in Chile and Trinidad are underpinned by long-term take-or-pay natural gas purchase agreements and the operating results for these facilities represent a substantial portion of our Adjusted EBITDA. Accordingly, in our analysis of Adjusted EBITDA for our facilities in Chile and Trinidad we separately discuss the impact of changes in average realized price, sales volume and cash costs.

Over the last few years we have been shutting down our high cost production which was exposed to volatile prices for natural gas. Our facilities in New Zealand have been positioned as flexible production assets with future operations dependent on securing natural gas on commercially acceptable terms. As the operating results for these facilities represent a smaller proportion of our Adjusted EBITDA, the impact of changes in average realized price, sales volumes and total cash costs have been combined and presented as the change in cash margin related to these facilities in our analysis of Adjusted EBITDA.

The price, cash cost and volume variances included in our Adjusted EBITDA analysis for produced methanol are defined and calculated as follows:

PRICE

The change in our Adjusted EBITDA as a result of changes in average realized price is calculated as the difference from period-to-period in the selling price of produced methanol multiplied by the current period sales volume of produced methanol. Sales under long-term contracts where the prices are either fixed or linked to our costs plus a margin are included as sales of produced methanol. Accordingly, the selling price of produced methanol will differ from the selling price of purchased methanol.

COST

The change in our Adjusted EBITDA as a result of changes in cash costs is calculated as the difference from period-to-period in cash costs per tonne multiplied by the sales volume of produced methanol in the current period plus the changes in unabsorbed fixed cash costs and Argentina export duties costs on our Chile production. The change in selling, general and administrative expenses and fixed storage and handling costs are included in the analysis of methanol produced at our Chile and Trinidad facilities.

VOLUME

The change in our Adjusted EBITDA as a result of changes in sales volume is calculated as the difference from period-to-period in the sales volume of produced methanol multiplied by the margin per tonne for the prior period. The margin per tonne is calculated as the selling price per tonne of produced methanol less absorbed fixed cash costs per tonne and variable cash costs per tonne (excluding Argentina export duties costs per tonne).

Purchased Methanol

The cost of sales of purchased methanol consists principally of the cost of the methanol itself, which is directly related to the price of methanol at the time of purchase. Accordingly, the analysis of purchased methanol and its impact on our Adjusted EBITDA is discussed on a net margin basis.

FORWARD-LOOKING STATEMENTS

Information in this press release and the attached Second Quarter 2007 Management's Discussion and Analysis contains forward-looking statements. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections that are included in these forward-looking statements. Methanex believes that it has a reasonable basis for making such forward-looking statements. However, forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The risks and uncertainties include those attendant with producing and marketing methanol and successfully carrying out major capital expenditure projects in various jurisdictions, the ability to successfully carry out corporate initiatives and strategies, conditions in the methanol and other industries including the supply and demand balance for methanol, actions of competitors and suppliers, changes in laws or regulations in foreign jurisdictions, world-wide economic conditions and other risks described in our 2006 Management's Discussion & Analysis and the attached Second Quarter 2007 Management's Discussion and Analysis. Undue reliance should not be placed on forward-looking statements. They are not a substitute for the exercise of one's own due diligence and judgment. The outcomes anticipated in forward-looking statements may not occur and we do not undertake to update forward-looking statements.


Methanex Corporation
Consolidated Statements of Income (unaudited)
(thousands of U.S. dollars, except number of common shares and per share
 amounts)
 
                          Three Months Ended              Six Months Ended
               -----------------------------  ----------------------------
                         Jun 30       Jun 30         Jun 30         Jun 30
                           2007         2006           2007           2006
--------------------------------------------------------------------------
 
Revenue           $     466,414  $   460,915  $   1,140,346  $     920,505
 
Cost of sales and
 operating expenses     389,899      307,902        826,946        600,946
Depreciation and
 amortization            28,373       24,338         52,112         47,961
--------------------------------------------------------------------------
Operating income
 before undernoted
 items                   48,142      128,675        261,288        271,598
Interest expense        (11,159)     (10,945)       (22,226)       (21,903)
Interest and other
 income                  12,606        3,772         17,678          6,307
--------------------------------------------------------------------------
Income before
 income taxes            49,589      121,502        256,740        256,002
Income taxes:
 Current                (17,478)     (23,129)       (74,804)       (68,993)
 Future                   3,543      (16,276)        (1,576)       (15,488)
 Future income tax
  recovery related to
  change in tax
  legislation (note 6)        -            -              -         25,753
--------------------------------------------------------------------------
                        (13,935)     (39,405)       (76,380)       (58,728)
--------------------------------------------------------------------------
Net income        $      35,654  $    82,097  $     180,360  $     197,274
--------------------------------------------------------------------------
 
Net income per
 common share:
 Basic            $        0.35  $      0.75  $        1.74  $        1.78
 Diluted          $        0.35  $      0.75  $        1.73  $        1.77
 
Weighted average
 number of common
 shares outstanding:
 Basic              102,697,808  109,658,750    103,894,611    111,016,514
 Diluted            102,973,271  110,013,684    104,278,109    111,451,670
 
Number of common
 shares outstanding
 at period end      101,120,704  108,580,667    101,120,704    108,580,667
 
See accompanying notes to consolidated financial statements.


Methanex Corporation
Consolidated Balance Sheets (unaudited)
(thousands of U.S. dollars)
 
                                                     Jun 30         Dec 31
                                                       2007           2006
--------------------------------------------------------------------------
 
ASSETS
Current assets:
 Cash and cash equivalents                      $   484,167    $   355,054
 Receivables                                        258,072        366,387
 Inventories                                        179,529        244,766
 Prepaid expenses                                    29,759         24,047
--------------------------------------------------------------------------
                                                    951,527        990,254
Property, plant and equipment (note 3)            1,385,865      1,352,719
Other assets                                         92,670        100,518
--------------------------------------------------------------------------
                                                $ 2,430,062    $ 2,443,491
--------------------------------------------------------------------------
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued liabilities        $   206,982   $   309,566
 Current maturities on long-term debt (note 5)        14,032        14,032
 Current maturities on other long-term liabilities    18,968        17,022
--------------------------------------------------------------------------
                                                     239,982       340,620

Long-term debt (note 5)                              493,024       472,884
Other long-term liabilities                           69,160        68,818
Future income tax liabilities (note 6)               353,494       351,918
Non-controlling interest (note 13)                    27,444             -
Shareholders' equity:
 Capital stock                                       457,692       474,739
 Contributed surplus                                  13,980        10,346
 Retained earnings                                   775,439       724,166
 Accumulated other comprehensive income (loss)          (153)            -
--------------------------------------------------------------------------
                                                   1,246,958     1,209,251
--------------------------------------------------------------------------
                                                 $ 2,430,062   $ 2,443,491
--------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


Methanex Corporation
Consolidated Statements of Shareholders' Equity (unaudited)
(thousands of U.S. dollars, except number of common shares)
 
                                          Number of
                                             Common    Capital Contributed
                                             Shares      Stock     Surplus
--------------------------------------------------------------------------
Balance, December 31, 2005              113,645,292  $ 502,879  $    4,143
 Net income                                       -          -           -
 Compensation expense recorded for
  stock options                                   -          -       8,568
 Issue of shares on exercise of
  stock options                             680,950      7,519           -
 Reclassification of grant date fair
  value on exercise of stock options              -      2,365      (2,365)
 Payments for shares repurchased         (8,525,300)   (38,024)          -
 Dividend payments                                -          -           -
--------------------------------------------------------------------------
Balance, December 31, 2006              105,800,942    474,739      10,346
 Net income                                       -          -           -
 Compensation expense recorded for
  stock options                                   -          -       2,638
 Issue of shares on exercise of
  stock options                             137,350      2,139           -
 Reclassification of grant date fair
  value on exercise of stock options              -        662        (662)
 Payments for shares repurchased         (1,739,200)    (7,805)          -
 Dividend payments                                -          -           -
 Other comprehensive income (loss)                -          -           -
--------------------------------------------------------------------------
Balance, March 31, 2007                 104,199,092    469,735      12,322
 Net income                                       -          -           -
 Compensation expense recorded for
  stock options                                   -          -       2,237
 Issue of shares on exercise of
  stock options                              93,175      1,674           -
 Reclassification of grant date fair
  value on exercise of stock options              -        579        (579)
 Payments for shares repurchased         (3,171,563)   (14,296)          -
 Dividend payments                                -          -           -
 Other comprehensive income                       -          -           -
--------------------------------------------------------------------------
Balance, June 30, 2007                  101,120,704  $ 457,692  $   13,980
--------------------------------------------------------------------------
 
See accompanying notes to consolidated financial statements.
 
                                                        Accumu-
                                                         lated
                                                         Other
                                                       Compreh-      Total
                                                        ensive       Share-
                                           Retained     Income     holders'
                                           Earnings      (Loss)     Equity
--------------------------------------------------------------------------
Balance, December 31, 2005               $  442,492  $       -  $  949,514
 Net income                                 482,949          -     482,949
 Compensation expense recorded for
  stock options                                   -          -       8,568
 Issue of shares on exercise of
  stock options                                   -          -       7,519
 Reclassification of grant date fair
  value on exercise of stock options              -          -           -
 Payments for shares repurchased           (148,755)         -    (186,779)
 Dividend payments                          (52,520)         -     (52,520)
--------------------------------------------------------------------------
Balance, December 31, 2006                  724,166          -   1,209,251
 Net income                                 144,706          -     144,706
 Compensation expense recorded for
  stock options                                   -          -       2,638
 Issue of shares on exercise of
  stock options                                   -          -       2,139
 Reclassification of grant date fair
  value on exercise of stock options              -          -           -
 Payments for shares repurchased            (37,467)         -     (45,272)
 Dividend payments                          (13,072)         -     (13,072)
 Other comprehensive income (loss)                -       (380)       (380)
--------------------------------------------------------------------------
Balance, March 31, 2007                     818,333       (380)  1,300,010
 Net income                                  35,654          -      35,654
 Compensation expense recorded for
  stock options                                   -          -       2,237
 Issue of shares on exercise of
  stock options                                   -          -       1,674
 Reclassification of grant date fair
  value on exercise of stock options              -          -           -
 Payments for shares repurchased            (64,318)         -     (78,614)
 Dividend payments                          (14,230)         -     (14,230)
 Other comprehensive income                       -        227         227
--------------------------------------------------------------------------
Balance, June 30, 2007                   $  775,439  $    (153) $1,246,958
--------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


Consolidated Statements of Comprehensive Income (unaudited)
(thousands of U.S. dollars)

                                                 Three months   Six months
                                                        ended        ended
                                                 -------------------------
                                                       Jun 30       Jun 30
                                                         2007         2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income                                       $     35,654  $   180,360
Other comprehensive income (loss):      
Change in fair value of forward exchange
 contracts, net of tax (note 11)                          227         (153)
--------------------------------------------------------------------------
Comprehensive income                             $     35,881  $   180,207
--------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


Methanex Corporation
Consolidated Statements of Cash Flows (unaudited)
(thousands of U.S. dollars)
 
                          Three Months Ended              Six Months Ended
               -----------------------------  ----------------------------
                         Jun 30       Jun 30         Jun 30         Jun 30
                           2007         2006           2007           2006
--------------------------------------------------------------------------
CASH FLOWS FROM
 OPERATING ACTIVITIES
 Net income           $  35,654    $  82,097     $  180,360     $  197,274
 Add (deduct) non-
  cash items:
  Depreciation and
   amortization          28,373       24,338         52,112         47,961
  Future income taxes    (3,543)      16,276          1,576        (10,265)
  Stock-based compens-
   ation expense          6,588        7,463         10,110         13,482
  Other                   3,670        1,094          6,317          2,077
Other cash payments      (3,518)      (1,851)        (4,258)        (7,901)
--------------------------------------------------------------------------
Cash flows from
 operating activities
  before undernoted      67,224      129,417        246,217        242,628
Changes in non-cash
 working capital
(note 10)                56,601       14,003         68,710        (79,295)
--------------------------------------------------------------------------
                        123,825      143,420        314,927        163,333
--------------------------------------------------------------------------
 
CASH FLOWS FROM FINANCING
 ACTIVITIES
 Payments for shares
  repurchased           (78,614)     (52,128)      (123,886)      (117,235)
 Dividend payments      (14,230)     (13,611)       (27,302)       (25,850)
 Proceeds from Egypt
  limited recourse
  debt, net of financing
  costs (note 13)        26,849            -         26,849              -
 Equity contribution by
  non-controlling
  interest (note 13)     12,424            -         12,424              -
 Repayment of Atlas
  limited recourse debt  (7,016)      (7,016)        (7,016)        (7,016)
 Proceeds on issue of
  shares on exercise of
  stock options           1,674        2,376          3,813          4,265
 Changes in debt service
  reserve accounts       (1,560)      (2,301)           916         (2,301)
 Repayment of other
  long-term liabilities  (1,539)      (2,515)        (2,549)        (3,725)
--------------------------------------------------------------------------
                        (62,012)     (75,195)      (116,751)      (151,862)
--------------------------------------------------------------------------
 
CASH FLOWS FROM INVESTING
 ACTIVITIES
 Property, plant and
  equipment and other
  assets                (12,043)     (16,092)       (25,674)       (20,500)
 Plant and equipment
  construction costs 
 (note 13)              (36,051)      (5,114)       (40,678)        (8,239)
 Changes in non-cash
  working capital
 (note 10)               (3,471)      33,540         (2,711)        32,044
--------------------------------------------------------------------------
                        (51,565)      12,334        (69,063)         3,305
--------------------------------------------------------------------------
 Increase in cash and
  cash equivalents       10,248       80,559        129,113         14,776
 Cash and cash equiv-
  alents, beginning of
  period                473,919       92,972        355,054        158,755
--------------------------------------------------------------------------
 Cash and cash equiv-
  alents, end of
  period              $ 484,167    $ 173,531     $  484,167     $  173,531
--------------------------------------------------------------------------
 
SUPPLEMENTARY CASH FLOW
 INFORMATION
 Interest paid        $   5,638    $   5,567     $   19,061     $   18,564
 Income taxes paid,
  net of amounts
  refunded            $  52,985    $  25,507     $   82,105     $   61,374
 
See accompanying notes to consolidated financial statements.

Methanex Corporation

Notes to Consolidated Financial Statements (unaudited)

Except where otherwise noted, tabular dollar amounts are stated in thousands of U.S. dollars.

1. Basis of presentation

These interim consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada on a basis consistent with those followed in the most recent annual consolidated financial statements, except as described in note 2 below. These accounting principles are different in some respects from those generally accepted in the United States and the significant differences are described and reconciled in note 14. These interim consolidated financial statements do not include all note disclosures required by Canadian generally accepted accounting principles for annual financial statements, and therefore should be read in conjunction with the annual consolidated financial statements included in the Methanex Corporation 2006 Annual Report.

2. Changes in accounting policies

On January 1, 2007, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1530, Comprehensive Income, Section 3251, Equity, Section 3855, Financial Instruments - Recognition and Measurement, Section 3861, Financial Instruments - Disclosure and Presentation, and Section 3865, Hedges. These new accounting standards, which apply to fiscal years beginning on or after October 1, 2006, provide comprehensive requirements for the recognition and measurement of financial instruments, as well as standards on when and how hedge accounting may be applied. Section 1530 establishes standards for reporting and presenting comprehensive income, which is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income that are excluded from net income calculated in accordance with generally accepted accounting principles.

Under these new standards, financial instruments must be classified into one of five categories and, depending on the category, will either be measured at amortized cost or fair value. Held-to-maturity, loans and receivables and other financial liabilities are measured at amortized cost. Held for trading and available-for-sale financial assets are measured on the balance sheet at fair value. Changes in fair value of held-for-trading financial assets are recognized in earnings while changes in fair value of available-for-sale financial instruments are recorded in other comprehensive income until the investment is derecognized or impaired at which time the amounts would be recorded in earnings. Under adoption of these new standards, the Company classified its cash as held-for-trading, which is measured at fair value. Accounts receivable are classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued liabilities, long-term debt, net of debt issuance costs, and other long-term liabilities are classified as other financial liabilities, which are also measured at amortized cost.

Under these new standards, derivative financial instruments, including embedded derivatives, are classified as held for trading and are recorded on the balance sheet at fair value unless exempted as a normal purchase and sale arrangement. The Company records all changes in fair value of derivative financial instruments in earnings unless the instruments are designated as cash flow hedges. The Company enters into and designates as cash flow hedges certain forward exchange sales contracts to hedge foreign exchange exposure on anticipated sales. The effective portion of changes in these forward exchange sales contracts is recognized in other comprehensive income. Any gain or loss in fair value relating to the ineffective portion is recognized immediately in earnings.

These standards have been adopted on a prospective basis beginning January 1, 2007. For additional information, see note 11.

3. Property, plant and equipment


                                               Accumulated        Net Book
                                      Cost    Depreciation           Value
--------------------------------------------------------------------------
--------------------------------------------------------------------------
June 30, 2007     
 Plant and equipment         $   2,753,181   $   1,494,166   $   1,259,015
 Plant and equipment under
  Construction                      71,998               -          71,998
 Other                             103,503          48,651          54,852
--------------------------------------------------------------------------
                             $   2,928,682   $   1,542,817   $   1,385,865
--------------------------------------------------------------------------
December 31, 2006     
 Plant and equipment         $   2,728,837   $   1,451,162   $   1,277,675
 Other                             118,896          43,852          75,044
--------------------------------------------------------------------------
                             $   2,847,733   $   1,495,014   $   1,352,719
--------------------------------------------------------------------------

4. Interest in Atlas joint venture

The Company has a 63.1% joint venture interest in Atlas Methanol Company (Atlas). Atlas owns a 1.7 million tonne per year methanol production facility in Trinidad. Included in the consolidated financial statements are the following amounts representing the Company's proportionate interest in Atlas:


                                                         Jun 30     Dec 31 
Consolidated Balance Sheets                                2007       2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash and cash equivalents                            $   36,824 $   19,268 
Other current assets                                     28,829     62,420 
Property, plant and equipment                           269,368    264,292 
Other assets                                             16,448     22,471 
Accounts payable and accrued liabilities                 25,001     28,644 
Long-term debt, including current
 maturities (note 5)                                    125,233    136,916 
Future income tax liabilities                            10,590     10,866 
--------------------------------------------------------------------------

                                   Three Months Ended     Six Months Ended
                                  ------------------- --------------------
Consolidated                         Jun 30    Jun 30     Jun 30    Jun 30
 Statements of Income                  2007      2006       2007      2006 
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Revenue                           $  22,436  $ 43,479  $  88,770  $ 91,930 
Expenses                            (31,607)  (36,244)   (89,896)  (76,089)
----------------------------------------------------- --------------------
Income before income taxes           (9,171)    7,235     (1,126)   15,841 
Income tax recovery
 (expense) (note 6)                   1,419    (2,532)      (254)   11,246 
----------------------------------------------------- --------------------
Net income                         $ (7,752) $  4,703  $  (1,380) $ 27,087
----------------------------------------------------- --------------------

                                   Three Months Ended     Six Months Ended
                                  ------------------- --------------------
Consolidated                         Jun 30    Jun 30     Jun 30    Jun 30 
 Statements of Cash Flows              2007      2006       2007      2006
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Cash inflows from
 operating activities             $  10,306  $ 16,607  $  37,344  $ 25,261 
Cash outflows from
 financing activities                (8,576)   (9,317)    (6,100)   (9,317)
Cash outflows from
 investing activities                (3,730)     (322)   (13,688)     (399)
----------------------------------------------------- --------------------

5. Long-term debt:


                                                         Jun 30     Dec 31 
                                                           2007       2006 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Unsecured notes
 8.75% due August 15, 2012                           $  197,926 $  200,000
 6.00% due August 15, 2015                              148,323    150,000
--------------------------------------------------------------------------
                                                        346,249    350,000
Egypt limited recourse debt facilities                   35,574          - 
Atlas limited recourse debt facilities                  125,233    136,916
--------------------------------------------------------------------------
                                                        507,056    486,916 
Less current maturities                                 (14,032)   (14,032)
--------------------------------------------------------------------------
                                                     $  493,024 $  472,884
--------------------------------------------------------------------------
--------------------------------------------------------------------------

During the second quarter of 2007, the Company achieved financial close to construct a methanol plant in Egypt (see note 13). The debt facilities are for an aggregate maximum of $530 million with interest payable semi-annually based on rates of LIBOR plus approximately 1.1% to 1.2% during construction and increasing to approximately 1.4% to 1.6% by the end of the loan term. Principal is paid in 24 semi-annual payments which will commence in September 2010. Under the terms of the Egypt limited recourse facilities, the Egypt entity can make cash or other distributions after fulfilling certain conditions.

The limited recourse debt facilities of Egypt and Atlas are described as limited recourse as they are secured only by the assets of the Egypt project and the Atlas joint venture, respectively.

6. Future income tax recovery related to change in tax legislation:

During 2005, the Government of Trinidad and Tobago introduced new tax legislation retroactive to January 1, 2004. As a result, during 2005 we recorded a $16.9 million charge to increase future income tax expense to reflect the retroactive impact for the period January 1, 2004 to December 31, 2004. In February 2006, the Government of Trinidad and Tobago passed an amendment to this legislation that changed the retroactive date to January 1, 2005. As a result of the amendment we recorded an adjustment to decrease future income taxes by a total of $25.8 million. The adjustment is made up of the reversal of the previous charge to 2005 earnings of $16.9 million and an additional adjustment of $8.9 million to recognize the benefit of tax deductions that were reinstated as a result of the change in the implementation date.

7. Net income per common share:

A reconciliation of the weighted average number of common shares outstanding is as follows:


                              Three Months Ended          Six Months Ended
                        ------------------------ -------------------------
                             Jun 30       Jun 30       Jun 30       Jun 30 
                               2007         2006         2007         2006 
------------------------------------------------ -------------------------
------------------------------------------------ -------------------------
Denominator for
 basic net income
 per common share       102,697,808  109,658,750  103,894,611  111,016,514 
Effect of dilutive
 stock options              275,463      354,934      383,498      435,156 
------------------------------------------------ -------------------------
Denominator for
 diluted net income
 per common share       102,973,271  110,013,684  104,278,109  111,451,670
------------------------------------------------ -------------------------

8. Stock-based compensation:

a) Stock options:

(i) Incentive stock options:

Common shares reserved for outstanding incentive stock options at June 30, 2007:


                 Options Denominated in CAD $  Options Denominated in US $
                 ---------------------------- ----------------------------
                                     Weighted                     Weighted 
                        Number of     Average        Number of     Average 
                            Stock    Exercise            Stock    Exercise 
                          Options       Price          Options       Price 
--------------------------------------------- ----------------------------
--------------------------------------------- ----------------------------
Outstanding at
 December 31, 2006        162,250  $     8.40        2,404,925  $    18.76 
 Granted                        -           -        1,109,491       24.96 
 Exercised                (11,800)      12.13         (125,550)      16.05 
 Cancelled                 (6,500)      13.65                -           - 
--------------------------------------------- ----------------------------
Outstanding at
 March 31, 2007           143,950  $     7.86        3,388,866  $    20.89 
 Granted                        -           -                -           - 
 Exercised                      -           -          (93,175)      17.90 
 Cancelled                      -           -          (13,300)      20.21 
--------------------------------------------- ----------------------------
Outstanding at
 June 30, 2007            143,950  $     7.86        3,282,391  $    20.97 
--------------------------------------------- ----------------------------

Information regarding the incentive stock options outstanding at June 30, 2007 is as follows:


                                    Options Outstanding Options Exercisable
                                                     at                  at
                                          June 30, 2007       June 30, 3007
                          ----------------------------- -------------------
                           Weighted                  
                            Average    Number              Number          
                          Remaining        of                  of          
                            Contrac-    Stock  Weighted     Stock  Weighted
                               tual   Options   Average   Options   Average
                               Life       Out- Exercise   Exercis- Exercise
Range of Exercise Prices     (Years) standing     Price      able     Price
-------------------------------------------------------- ------------------
-------------------------------------------------------- ------------------
Options denominated in CAD                                                 
 $ 3.29 to 11.60               2.7    143,950 $    7.86   143,950 $    7.86
---------------------------------------------------------------------------
 
Options denominated in USD                                                 
$ 6.45 to 9.23                 5.4    196,325 $    8.37   196,325 $    8.37
$ 11.56 to 25.10               5.9  3,086,066     21.78   739,442     19.57
---------------------------------------------------------------------------
                               5.9  3,282,391 $   20.97   935,767 $   17.22
---------------------------------------------------------------------------

(ii) Performance stock options:

As at June 30, 2007, there were 50,000 shares reserved for performance stock options with an exercise price of CAD $4.47. All outstanding performance stock options have vested and are exercisable.

(iii) Compensation expense related to stock options:

For the three and six month periods ended June 30, 2007, compensation expense related to stock options included in cost of sales and operating expenses was $2.2 million (2006 - $2.4 million) and $4.9 million (2006 - $3.1 million), respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


                                                           2007       2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Risk-free interest rate                                    4.5%       4.9%
Expected dividend yield                                      2%         2%
Expected life                                           5 years    5 years
Expected volatility                                         31%        40%
Expected forfeitures                                         5%         5%
Weighted average fair value of
 options granted (US$ per share)                     $    7.06   $   8.82
--------------------------------------------------------------------------

b) Deferred, restricted and performance share units:

Deferred, restricted and performance share units outstanding at June 30, 2007 are as follows:


                                  Number of         Number of    Number of 
                             Deferred Share  Restricted Share  Performance 
                                      Units             Units  Share Units
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Outstanding at
 December 31, 2006                  318,746           518,757      406,082 
 Granted                             28,561             6,000      325,779 
 Granted in-lieu of dividends         1,923             2,771        3,880 
 Redeemed                                 -                 -            - 
 Cancelled                                -            (4,392)      (3,238)
--------------------------------------------------------------------------
Outstanding at
 March 31, 2007                     349,230           523,136      732,503 
 Granted                              2,409                 -            - 
 Granted in-lieu of dividends         1,535             2,814        3,923 
 Redeemed                           (75,649)           (4,731)           - 
 Cancelled                                -                 -      (13,600)
--------------------------------------------------------------------------
Outstanding at
 June 30, 2007                      277,525           521,219      722,826 
--------------------------------------------------------------------------

Compensation expense for deferred, restricted and performance share units is initially measured at fair value based on the market value of the Company's common shares and is recognized over the related service period. Changes in fair value are recognized in earnings for the proportion of the service that has been rendered at each reporting date. The fair value of deferred, restricted and performance share units at June 30, 2007 was $37.5 million compared with the recorded liability of $25.6 million. The difference between the fair value and the recorded liability of $11.9 million will be recognized over the weighted average remaining service period of approximately 1.6 years.

For the three and six months ended June 30, 2007, compensation expense related to deferred, restricted and performance share units included in cost of sales and operating expenses was $4.4 million (2006 - $5.0 million) and $5.2 million (2006 - $10.3 million). For the three and six month period ended June 30, 2007, the compensation expense included $2.1 million (2006 - $2.4 million) and $0.3 million (2006 - $4.9 million) related to the effect of the change in the Company's share price. As at June 30, 2007, the Company's share price was US$25.14 per share.

9. Retirement plans:

Total net pension expense for the Company's defined contribution and defined benefit pension plans during the three and six month periods ended June 30, 2007 was $1.6 million (2006 - $1.8 million) and $3.5 million (2006 - $3.0 million), respectively.

10. Changes in non-cash working capital:

The change in cash flows related to changes in non-cash working capital for the three and six month periods ended June 30, 2007 and 2006 were as follows:


                                   Three Months Ended     Six Months Ended
                                  ------------------- --------------------
                                     Jun 30    Jun 30     Jun 30    Jun 30 
                                       2007      2006       2007      2006
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Decrease (increase)
 in non-cash working capital:                                              
 Receivables                      $  65,037  $ 21,199  $ 108,315  $  8,528 
 Inventories                         95,892     1,956     65,237   (23,399)
 Prepaid expenses                    (8,644)   (6,787)    (5,712)   (5,594)
 Accounts payable and
  accrued liabilities               (97,363)   39,261   (102,584)  (19,560)
----------------------------------------------------- --------------------
                                     54,922    55,629     65,256   (40,025)
Adjustments for items not
 having a cash effect                (1,792)   (8,086)       743    (7,226)
----------------------------------------------------- --------------------
Changes in non-cash working
 capital having a cash effect     $  53,130  $ 47,543  $  65,999  $(47,251)
----------------------------------------------------- --------------------
 
These changes relate to
 the following activities:                                             
 Operating                        $  56,601  $ 14,003  $  68,710  $(79,295)
 Investing                           (3,471)   33,540     (2,711)   32,044 
----------------------------------------------------- --------------------
Changes in non-cash
 working capital                  $  53,130  $ 47,543  $  65,999  $(47,251)
----------------------------------------------------- --------------------

11. Derivative financial instruments:

a) Forward exchange contracts:

As at June 30, 2007, the Company had forward exchange contracts to sell 26 million Euro in exchange for US dollars at an average exchange rate of 1.3388 maturing in 2007. The carrying value of the forward exchange sales contracts was negative $0.4 million which approximates the fair value of these contracts. The effective portion of changes in these forward exchange sales contracts is recognized in other comprehensive income.

b) Interest rate swap contract:

The Company has an interest rate swap contract recorded in other long-term liabilities with a carrying value of negative $0.7 million which approximates fair value.

12. Argentina export duty costs:

Effective July 25, 2006, the government of Argentina increased the duty on exports of natural gas from Argentina to Chile, which have been in place since May 2004, from approximately $0.30 per mmbtu to $2.25 per mmbtu. Exports of natural gas from the province of Tierra del Fuego were exempt from this duty until late October 2006 when the government of Argentina extended this duty to include this province at the same rates applicable to the other provinces. As a result, the increased duty on exports of natural gas applies to all of the natural gas feedstock that the Company sources from Argentina. Assuming the Company receives all of its Argentinean natural gas entitlements, the total annual cost of the export duty to its natural gas suppliers from Argentina has increased to approximately $200 million. While the Company's natural gas contracts provide that natural gas suppliers are to pay any duties levied by the government of Argentina, the Company has been contributing towards the cost of these duties and is in continuing discussions with its Argentinean natural gas suppliers regarding the impact of the increased export duty.

The Company has interim agreements in place with all of its Argentinean natural gas suppliers. In principle, the Company has agreed to share the cost of duties based in part on prevailing methanol prices while providing a minimum price to its natural gas suppliers. At methanol prices below $250 per tonne, the Company pays substantially all of the export duty. The Company has also gained considerable flexibility to take the natural gas depending on prevailing methanol market conditions, and to the extent that these arrangements are not economic then the Company will not purchase the natural gas. The Company cannot provide assurance that it will be able to reach continuing arrangements with its natural gas suppliers, that the amount of the export duties will not be revised by the government of Argentina, or that the impact of this export duty will not have an adverse effect on its results of operations and financial condition. During the second quarter of 2007, the Company received approximately 55% of its Argentinean natural gas entitlements and the Company accrued $17 million to record the estimated cost of sharing export duties for this natural gas which was used in production. The amount of export duties charged to earnings in a period is primarily dependent on the sales volumes of Chile production in that period. During the second quarter of 2007, the Company's sales volumes of Chile production were significantly higher than our production volumes as a result of lower production rates in Chile. The amount charged to earnings related to the cost of sharing export duties during the second quarter of 2007 was $29 million.

13. Egypt methanol project:

During the second quarter of 2007, the Company reached financial close for its project to construct a 1.3 million tonne per year methanol facility at Damietta on the Mediterranean Sea in Egypt. The Company owns 60% of Egyptian Methanex Methanol Company S.A.E. ("EMethanex"), which is the company that is developing the project. EMethanex has secured limited recourse debt of $530 million. The Company expects commercial operations from the methanol facility to begin in early 2010 and the Company will purchase and sell 100% of the methanol from the facility. The total estimated future costs to complete the project over the next three years, excluding financing costs and working capital, are expected to be approximately $800 million. Our 60% share of future equity contributions, excluding financing costs and working capital, over the next three years is estimated to be approximately $215 million and we expect to fund these expenditures from cash generated from operations and cash on hand.

Our investment in EMethanex will be accounted for using consolidation accounting. This will result in 100% of the assets and liabilities of the Egypt entity being included in our balance sheet. Our partners' interest will be presented as "non-controlling interest" on our balance sheet.

14. United States Generally Accepted Accounting Principles:

The Company follows generally accepted accounting principles in Canada ("Canadian GAAP") which are different in some respects from those applicable in the United States and from practices prescribed by the United States Securities and Exchange Commission ("U.S. GAAP").

The significant differences between Canadian GAAP and U.S. GAAP with respect to the Company's consolidated statements of income for the three and six month periods ended June 30, 2007 and 2006 are as follows:


                                   Three Months Ended     Six Months Ended
                                  ------------------- --------------------
                                     Jun 30    Jun 30     Jun 30    Jun 30 
                                       2007      2006       2007      2006
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Net income in accordance with
 Canadian GAAP                     $ 35,654  $ 82,097  $ 180,360 $ 197,274
Add (deduct) adjustments for:     
 Depreciation and amortization (a)
 Stock-based compensation (b)          (478)     (478)      (956)     (956)
                                        (14)       17        151      (128)
 Uncertainty in income taxes (c)     (1,020)        -     (2,809)        -
 Income tax effect of above
  adjustments (d)                       167       167        335       335
----------------------------------------------------- --------------------
Net income in accordance with
 U.S. GAAP                         $ 34,309  $ 81,803  $ 177,081 $ 196,525
----------------------------------------------------- --------------------
Per share information in accordance
 with U.S. GAAP:     
 Basic net income per share        $   0.33  $   0.75  $    1.70 $    1.77
 Diluted net income per share      $   0.33  $   0.74  $    1.70 $    1.76
----------------------------------------------------- --------------------

The significant differences between Canadian GAAP and U.S. GAAP with respect to the Company's consolidated statements of comprehensive income for the three and six month periods ended June 30, 2007 and 2006 are as follows:


--------------------------------------------------------------------------
                                         Three Months Ended
--------------------------------------------------------------------------
                                 June 30, 2007               June 30, 2006
------------------------------------------------------------ -------------
                     Canadian GAAP Adjustments    U.S. GAAP    U.S. GAAP(1)
------------------------------------------------------------ -------------
------------------------------------------------------------ -------------
Net income           $      35,654 $    (1,345) $    34,309  $      81,803
Change in fair value
 of forward exchange
 contracts, net of
 tax                           227           -          227              -
Change related to
 pension, net of
 tax(e)                          -         224          224              -
--------------------------------------------------------------------------
Comprehensive income $      35,881 $    (1,121) $    34,760  $      81,803
--------------------------------------------------------------------------
 
 
--------------------------------------------------------------------------
                                           Six Months Ended
--------------------------------------------------------------------------
                                 June 30, 2007               June 30, 2006
------------------------------------------------------------ -------------
                     Canadian GAAP Adjustments    U.S. GAAP    U.S. GAAP(1)
------------------------------------------------------------ -------------
------------------------------------------------------------ -------------
Net income           $     180,360 $    (3,279) $   177,081  $     196,525
Change in fair value
 of forward exchange
 contracts, net of
 tax                          (153)          -         (153)             -
Change related to
 pension, net of tax
 (e)                             -         449          449              -
--------------------------------------------------------------------------
Comprehensive income $     180,207 $    (2,830) $   177,377  $     196,525
--------------------------------------------------------------------------

(1) A Consolidated Statement of Comprehensive Income was introduced under
    Canadian GAAP upon the adoption of Section 1530 on January 1, 2007.
    Accordingly, there is no reconciliation of Canadian GAAP to U.S. GAAP
    for the prior periods.

(a) Business combination:

Effective January 1, 1993, the Company combined its business with a methanol business located in New Zealand and Chile. Under Canadian GAAP, the business combination was accounted for using the pooling-of-interest method. Under U.S. GAAP, the business combination would have been accounted for as a purchase with the Company identified as the acquirer.

(b) Stock-based compensation:

The Company has 31,350 stock options that are accounted for as variable plan options under U.S. GAAP because the exercise price of the stock options is denominated in a currency other than the Company's functional currency or the currency in which the optionee is normally compensated. For Canadian GAAP purposes, no compensation expense has been recorded as these options were granted in 2001 which is prior to the effective implementation date for fair value accounting under Canadian GAAP.

(c) Accounting for uncertainty in income taxes:

On January 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for income taxes recognized in a Company's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes (SFAS 109). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, and transition. In accordance with the interpretation, the Company has recorded the cumulative effect adjustment as a $4.8 million increase to opening retained earnings, with no restatement of prior periods.

(d) Income tax accounting:

The income tax differences include the income tax effect of the adjustments related to accounting differences between Canadian and U.S. GAAP.

(e) Defined benefit pension plans:

U.S. GAAP requires the Company to measure the funded status of a defined benefit pension plan at its balance sheet reporting date and recognize the unrecorded overfunded or underfunded status as an asset or liability with the change in that unrecorded funded status recorded to accumulated comprehensive income. Under U.S. GAAP, all deferred pension amounts from Canadian GAAP are reclassified to accumulated other comprehensive income. For the three and six month periods ending June 30, 2007, the amortization of these deferred pension amounts was reclassified from comprehensive income to earnings.

(f) Interest in Atlas joint venture:

U.S. GAAP requires interests in joint ventures to be accounted for using the equity method. Canadian GAAP requires proportionate consolidation of interests in joint ventures. The Company has not made an adjustment in this reconciliation for this difference in accounting principles because the impact of applying the equity method of accounting does not result in any change to net income or shareholders' equity. This departure from U.S. GAAP is acceptable for foreign private issuers under the practices prescribed by the United States Securities and Exchange Commission.


Methanex Corporation
Quarterly History (unaudited)

                              YTD
                             2007    Q2    Q1  2006    Q4    Q3    Q2    Q1
---------------------------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced            2,500 1,360 1,140 5,310 1,160 1,478 1,351 1,321
Purchased methanol            644   269   375 1,101   288   222   294   297
Commission sales(1)           228    89   139   584   134   176   133   141
---------------------------------------------------------------------------
                            3,372 1,718 1,654 6,995 1,582 1,876 1,778 1,759
---------------------------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
Chile                       1,320   569   751 3,186   766   666   872   882
Titan, Trinidad               450   225   225   864   229   206   214   215
Atlas, Trinidad (63.1%)       414   234   180 1,057   267   264   273   253
New Zealand                   238   120   118   404   111    71   118   104
Kitimat                         -     -     -     -     -     -     -     -
---------------------------------------------------------------------------
                            2,422 1,148 1,274 5,511 1,373 1,207 1,477 1,454
---------------------------------------------------------------------------
AVERAGE REALIZED METHANOL
PRICE(2)
 ($/tonne)                    362   286   444   328   460   305   279   283
 ($/gallon)                  1.09  0.86  1.34  0.99  1.38  0.92  0.84  0.85
 
PER SHARE INFORMATION ($
per share)
 Basic net income (loss)   $ 1.74  0.35  1.38  4.43  1.62  1.05  0.75  1.02
 Diluted net income (loss) $ 1.73  0.35  1.37  4.41  1.61  1.05  0.75  1.02
 
 
                             2005    Q4    Q3     Q2    Q1
----------------------------------------------------------
METHANOL SALES VOLUMES
(thousands of tonnes)
Company produced            5,341 1,504 1,130  1,332 1,375
Purchased methanol          1,174   285   325    269   295
Commission sales(1)           537   158    75    158   146
----------------------------------------------------------
                            7,052 1,947 1,530  1,759 1,816
----------------------------------------------------------
METHANOL PRODUCTION
(thousands of tonnes)
Chile                       3,029   916   684    702   727
Titan, Trinidad               715   195   184    135   201
Atlas, Trinidad (63.1%)       895   251   157    252   235
New Zealand                   343     -   120    103   120
Kitimat                       376    34   102    120   120
----------------------------------------------------------
                            5,358 1,396 1,247  1,312 1,403
----------------------------------------------------------
AVERAGE REALIZED METHANOL
PRICE(2)
 ($/tonne)                    254   256   240    256   262
 ($/gallon)                  0.76  0.77  0.72   0.77  0.79
 
PER SHARE INFORMATION 
 ($ per share)
 Basic net income (loss)   $ 1.41  0.42 (0.19)  0.53  0.63
 Diluted net income (loss) $ 1.40  0.42 (0.19)  0.53  0.63
 
----------------------------------------------------------
(1) Commission sales represent volumes marketed on a commission basis.
    Commission income is included in revenue when earned.
 
(2) Average realized price is calculated as revenue, net of commissions
    earned, divided by the total sales volumes of produced and purchased
    methanol.


FOR FURTHER INFORMATION PLEASE CONTACT:

Methanex Corporation
Jason Chesko
Director, Investor Relations
(604) 661-2600


Website: www.methanex.com

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