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Methanex Corporation (MX)
Market: CDN Consolidated
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Jul 25, 2014, 2:28 AM EDT
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 24, 2007) - For the third quarter of 2007, Methanex (TSX:MX)(NASDAQ:MEOH)(SSE:Methanex) realized Adjusted EBITDA(1) of $68.6 million and net income of $23.6 million ($0.24 per share on a diluted basis). This compares with Adjusted EBITDA(1) of $76.5 million and net income of $35.7 million ($0.35 per share on a diluted basis) for the second quarter of 2007.

Bruce Aitken, President and CEO of Methanex, commented, "With lower production and a slightly lower methanol price environment, we realized similar Adjusted EBITDA in the third quarter compared to the second quarter. Prices have recently increased significantly. A large number of outages in the industry during the quarter, including our own facility in Chile, combined with continuing strong demand, caused a severe shortage of methanol to occur near the end of the quarter. Contract methanol prices have risen sharply in October and our average non-discounted prices for October are approximately $550/tonne."

Mr. Aitken continued, "Our biggest area of disappointment during the quarter was the continued curtailment of Argentinean natural gas supply to our plants in Chile. Our expectation was that natural gas supply from Argentina would be restored during the third quarter as cold winter conditions ended and gas demand in Argentina was reduced; however, this has not yet occurred and we continue to be limited to operating only one plant in Chile. We are in continuing discussions with our Argentinean natural gas suppliers and various governmental authorities to resolve the situation, and continue to be optimistic that we will have some natural gas supply restored from Argentina which will enable us to increase production in Chile and provide much needed product to the market."

Mr. Aitken added, "Developments regarding incremental natural gas supply from Chile have been positive. Our natural gas suppliers in Chile, ENAP and GeoPark, have recently increased natural gas deliveries to our plant and both have announced commercial discoveries of natural gas near our plants as a result of their ongoing exploration activities. In addition, the Chilean government just announced that it has received fourteen bids for nine natural gas exploration blocks near our plants and that the blocks will be awarded in mid-November."

Mr. Aitken concluded, "With $132 million in cash flow from operations after changes non-cash working capital generated during the third quarter, we continue to be in a very strong financial position to meet the financial requirements related to our methanol project in Egypt, pursue opportunities to accelerate natural 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 Thursday, October 25, 2007 at 11:00 am EST (8:00 am PST) to review these third 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 377227. 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 Third 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, the success of natural gas exploration and development activities in southern Chile and our ability to obtain any additional gas in that region on commercially acceptable terms, actions of competitors and suppliers, actions of governments and governmental authorities, 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 Third 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 Third 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 Third 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 Nine Months Ended September 30, 2007

At October 24, 2007 the Company had 99,167,479 common shares issued and outstanding and stock options exercisable for 1,057,891 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, ON, 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

THIRD QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS

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

This third quarter 2007 Management's Discussion and Analysis should be read in conjunction with the 2006 Annual Consolidated Financial Statements and the Management's Discussion & 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 Nine Months Ended
                                 ----------------------- -----------------
($ millions, except              Sep 30   Jun 30  Sep 30   Sep 30   Sep 30
 where noted)                      2007     2007    2006     2007     2006
-------------------------------------------------------- -----------------
Sales volumes (thousands
 of tonnes)
 Company produced
  Chile and Trinidad                933    1,221   1,419    3,168    3,914
  New Zealand                       140      139      59      404      236
-------------------------------------------------------- -----------------
                                  1,073    1,360   1,478    3,572    4,150
 Purchased methanol                 387      269     222    1,031      813
 Commission sales (1)               168       89     176      396      450
-------------------------------------------------------- -----------------
 Total sales volumes              1,628    1,718   1,876    4,999    5,413
Average realized price
 ($ per tonne) (2)                  270      286     305      334      289
Methanex average
non-discounted posted price
 ($ per tonne) (3)                  303      330     350      390      341
Adjusted EBITDA (4)                68.6     76.5   201.3    382.0    520.9
Operating income (4)               37.4     48.1   170.1    298.6    441.7
Net income                         23.6     35.7   113.2    204.0    310.5
Income before unusual items
 (after-tax) (4)                   23.6     35.7   113.2    204.0    284.7
Cash flows from operating
 activities (4)(5)                 59.9     67.2   161.8    306.1    404.4
Basic net income per common
 share                             0.24     0.35    1.05     1.99     2.82
Diluted net income per
 common share                      0.24     0.35    1.05     1.98     2.82
Diluted income before
 unusual items (after-tax)
 per share (4)                     0.24     0.35    1.05     1.98     2.58
Common share information
 (millions of shares):
 Weighted average number
  of common shares                100.2    102.7   108.0    102.7    110.0
 Diluted weighted average
  number of common shares         100.4    103.0   108.0    103.0    110.3
 Number of common shares
  outstanding, end of period       99.4    101.1   107.2     99.4    107.2
--------------------------------------------------------------------------

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

(thousands                                                   YTD        YTD
 of                     Q3 2007    Q2 2007    Q3 2006    Q3 2007    Q3 2006
 tonnes)    Capacity Production Production Production Production Production
------------------------------- --------------------- ---------------------
Chile and
 Trinidad:
 Chile I, II,
  III and IV     960        233        569        666      1,553      2,420
 Titan           213        191        225        206        641        635
 Atlas (63.1%
  interest)      268        290        234        264        704        790
------------------------------- --------------------- ---------------------
               1,441        714      1,028      1,136      2,898      3,845
Other:
 New Zealand     132        122        120         71        360        293
------------------------------- --------------------- ---------------------
               1,573        836      1,148      1,207      3,258      4,138
------------------------------- --------------------- ---------------------

Our methanol facilities in Trinidad are capable of operating above design capacity. During the third quarter of 2007, our Atlas methanol production facility produced 290,000 tonnes and our Titan methanol production facility produced 191,000 tonnes. During September, we performed unplanned maintenance to resolve technical issues at our Titan facility and this resulted in lost production of approximately 30,000 tonnes.

When operating at capacity, we source approximately 60% 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 contracted from natural gas supplies in Chile from Empresa Nacional del Petroleo (ENAP), the Chilean state-owned energy company, and GeoPark Holdings Limited (GeoPark).

Our methanol facilities in Chile produced 233,000 tonnes during the third quarter of 2007 compared with an operating capacity of 960,000 tonnes. As a result of reductions to our natural gas supply from both Chile and Argentina, we were constrained to operating only one of our four facilities in Chile during the third quarter of 2007. The reductions to our natural gas supply from Chile resulted in approximately 130,000 tonnes of lost production and were a result of our primary natural gas supplier in Chile experiencing ongoing deliverability issues that are expected to continue. Since mid-June, we have not received any of our natural gas supply from Argentina and this resulted in approximately 600,000 tonnes of lost production during the third quarter of 2007. In mid-June, a compressor failure seriously impacted the natural gas delivery infrastructure in the province of Tierra del Fuego in Argentina and this issue, combined with increased domestic demand for natural gas in Argentina as a result of extremely cold temperatures during the winter months, resulted in the curtailment of all of our natural gas supply from Argentina. The compressor issue has been resolved and the domestic demand for natural gas in Argentina has stabilized with warmer temperatures. We believe that there currently is sufficient natural gas production capability in the region to meet our full contracted supply from Argentina and that all pipeline capacity to transport natural gas from southern Argentina to the more populated areas in northern Argentina is full. However, natural gas supply has still not been restored. We are in continuing discussions with our Argentinean natural gas suppliers and various governmental authorities to resolve the situation, and continue to be optimistic that we will have some natural gas supply restored from Argentina which will enable us to increase production in Chile.

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 approximately $2.25 per mmbtu. This duty is reviewed quarterly and is adjusted with reference to a basket of international energy prices. At the beginning of the fourth quarter of 2007, we estimate that the export duty will be adjusted to $2.70 per mmbtu. 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.

With respect to these export duties, 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. The amount of export duties charged to earnings in a period is primarily dependant on sales volumes of Chile production that is produced with natural gas sourced from Argentina. During the third quarter, we did not produce any methanol with natural gas from Argentina. However, we sold inventory that was produced with natural gas from Argentina in the second quarter of 2007 and the amount charged to earnings related to the cost of sharing export duties on this inventory was $10 million.

We cannot provide assurance as to when and to what extent our natural gas supply from Argentina will be restored or that we will be able to reach continuing arrangements with our natural gas suppliers, or that the impact of these issues will not continue to have an adverse effect on our results of operations and financial condition.

We continue to work on sourcing additional natural gas supply for our Chile facilities from alternative sources. We are pursuing investment opportunities with ENAP and GeoPark to help accelerate the discovery and development of natural gas in southern Chile. Our primary Chilean natural gas supplier, ENAP, and GeoPark are undertaking gas exploration and development programs in areas of southern Chile that are relatively close to our production facilities and their exploration and development efforts continue to be encouraging. ENAP and GeoPark recently announced discoveries of commercial gas in this area and increased deliveries to our plants. We also signed a memorandum of understanding with GeoPark to 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 and increase over time. The government of Chile is in the process of completing its first international bidding round to assign natural gas exploration areas which lie close to our production facilities. In July, we signed an agreement in a consortium with Wintershall Energia S.A. and GeoPark for the joint evaluation and bidding for natural gas development concessions in this bidding round. The bidding round covers ten blocks spanning 32,356 square kilometres in the Magallanes basin in southern Chile. On October 10, fourteen final bids were submitted for nine of the ten natural gas exploration blocks subject to the process including our consortium bid for three blocks. The blocks are expected to be awarded to the successful bidders by mid-November, with exploration work expected to commence in 2008.

We cannot provide assurance that ENAP, GeoPark or others will be successful in the exploration and development of natural gas or that we would obtain any additional natural gas on commercially acceptable terms.

We produced 122,000 tonnes at our Waitara Valley facility in New Zealand during the third quarter of 2007. We have sufficient contracted natural gas supply to allow us to produce at this facility at least until early 2008. We have scheduled maintenance activities which are planned to commence in October 2007 and are working to secure additional natural gas supply to further extend production from this facility. 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

Our core production facilities in Chile and Trinidad are underpinned by 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.

In addition, 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 third quarter of 2007 we recorded Adjusted EBITDA of $68.6 million and net income of $23.6 million ($0.24 per share on a diluted basis). This compares with Adjusted EBITDA of $76.5 million and net income of $35.7 million ($0.35 per share on a diluted basis) for the second quarter of 2007 and Adjusted EBITDA of $201.3 million and net income of $113.2 million ($1.05 per share on a diluted basis) for the third quarter of 2006.

For the nine months ended September 30, 2007, we recorded Adjusted EBITDA of $382.0 million and net income and income before unusual items (after-tax) of $204.0 million ($1.98 per share on a diluted basis). This compares with Adjusted EBITDA of $520.9 million, net income of $310.5 million ($2.82 per share on a diluted basis) and income before unusual items (after-tax) of $284.7 million ($2.58 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 Nine Months Ended
                                 ----------------------- -----------------
                                 Sep 30  June 30  Sep 30   Sep 30   Sep 30
($ millions)                       2007     2007    2006     2007     2006
-------------------------------------------------------- -----------------
Net income                     $   23.6 $   35.7 $ 113.2 $  204.0 $  310.5
Add/(deduct) unusual item:
 Future income tax recovery
  related to change in tax
  legislation                         -        -       -        - $  (25.8)
-------------------------------------------------------- -----------------
Income before unusual items
 (after-tax)                   $   23.6 $   35.7 $ 113.2 $  204.0 $  284.7
-------------------------------------------------------- -----------------

Refer to the Income Taxes section of this Management's Discussion and Analysis and note 6 to our third 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:


                                     Q3 2007        Q3 2007    YTD Q3 2007
                               compared with  compared with  compared with
($ millions)                         Q2 2007        Q3 2006    YTD Q3 2006
--------------------------------------------------------------------------
Chile and Trinidad
 facilities (1):
 Average realized price         $        (15)  $        (35)  $        118
 Sales volumes                           (37)           (85)          (120)
 Total cash costs                         34            (11)          (164)
--------------------------------------------------------------------------
                                         (18)          (131)          (166)
Changes in cash margin
 related to sales of:
 New Zealand production                    1              4             30
 Purchased methanol                        9             (5)            (3)
--------------------------------------------------------------------------
                                $         (8)  $       (132)  $       (139)
--------------------------------------------------------------------------
1  For the definitions and calculations in our Adjusted EBITDA analysis,
   refer to HOW WE ANALYZE OUR BUSINESS.


Average realized price

                                      Three Months Ended Nine Months Ended
                                 ----------------------- -----------------
($ per tonne, except             Sep 30   Jun 30  Sep 30   Sep 30   Sep 30
 where noted)                      2007     2007    2006     2007     2006
-------------------------------------------------------- -----------------
Methanex average
 non-discounted
 posted price (1)                   303      330     350      390      341
Methanex average
 realized price (2)                 270      286     305      334      289
Average discount                     11%      13%     13%      14%      15%
-------------------------------------------------------- -----------------

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 disclosed above is calculated as revenue, net of
   commissions earned, divided by the total sales volumes of produced and
   purchased methanol. For the purposes of our Adjusted EBITDA analysis,
   we compare our average realized price for sales of our Chile and
   Trinidad production. The average realized price for sales of our Chile
   and Trinidad production will differ from the price disclosed above as
   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.

We commenced the third quarter of 2007 in a balanced methanol market environment with a slight moderation in pricing from the second quarter of 2007. Our average non-discounted posted price for the third quarter of 2007 was $303 per tonne compared with $330 per tonne for the second quarter of 2007 and $350 per tonne for the third quarter of 2006. Our average realized price for the third quarter of 2007 was $270 per tonne compared with $286 per tonne for the second quarter of 2007 and $305 per tonne for the third quarter of 2006. The change in our average realized price for the third quarter of 2007 decreased our Adjusted EBITDA by $15 million compared with the second quarter of 2007 and decreased our Adjusted EBITDA by $35 million compared with the third quarter of 2006.

Our average realized price for the nine months ended September 30, 2007 was $334 per tonne compared with $289 per tonne for the same period in 2006. The change in our average realized price in 2007 compared with the same period in 2006 increased our Adjusted EBITDA by $118 million. The increase in 2007 was primarily due to the high pricing levels during the first quarter of 2007.

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 third quarter of 2007 our average realized price was approximately 11% lower than our average non-discounted posted price. This compares with approximately 13% lower for the second quarter of 2007 and 13% lower for the third 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. For the nine months ended September 30, 2007, these sales have represented approximately 20% of our total sales volumes. We expect the discount from our non-discounted posted prices will narrow during periods of lower methanol pricing.

Chile and Trinidad sales volumes

Sales volumes of methanol produced at our production hubs in Chile and Trinidad for the third quarter of 2007 were lower by 288,000 tonnes compared with the second quarter of 2007 and this decreased Adjusted EBITDA by $37 million. Sales volumes of methanol produced at our production hubs in Chile and Trinidad for the third quarter of 2007 and nine months ended September 30, 2007 were lower than comparable periods in 2006 by 486,000 tonnes and 746,000 tonnes, respectively. Lower sales volumes for these periods decreased Adjusted EBITDA by $85 million and $120 million, respectively.

As previously described in the Production Summary section, during the second and third quarter of 2007, we experienced a reduction in natural gas supply to our Chile facilities which resulted in lower production in Chile. The lower sales volumes of methanol produced in Chile and Trinidad as described above were primarily a result of lower production from our Chile facilities.

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.

Our total cash costs for the third quarter of 2007 compared with the second quarter of 2007 were lower by $34 million. Our natural gas costs during the third quarter of 2007 were lower compared to the second quarter of 2007 by $20 million primarily due to high cost Chile and Trinidad inventory sold in the second quarter that reflected higher methanol pricing at the time of production. During the third quarter of 2007, we also had a decrease in the amount charged to earnings related to the cost of sharing export duties from Argentina by $19 million. The amount charged to earnings related to the cost of sharing export duties on Chile inventory sold during the third quarter was $10 million compared with $29 million during the second quarter of 2007. During the third quarter, we did not produce any methanol with natural gas from Argentina. However, in the third quarter, we sold inventory that was produced with natural gas from Argentina in the second quarter of 2007. These lower cash costs were partially offset by higher unabsorbed fixed costs of $5 million primarily due to lower production rates at our Chile facilities.

Total cash costs for the third quarter of 2007 compared with the third quarter of 2006 were higher by $11 million. Cash costs were higher by $10 million as a result of the impact of sharing export duties with our natural gas suppliers from Argentina. These duties became effective during the third quarter of 2006 and had no impact on earnings in that period. During the third quarter of 2007, we also had higher unabsorbed fixed costs of $7 million compared with the third quarter of 2006 primarily as a result of lower production rates at our Chile facilities. These higher cash costs were partially offset by lower natural gas costs on sales of our Trinidad production and lower stock-based compensation expense as a result of changes in our share price.

Total cash costs for the nine months ended September 30, 2007 compared with the same period in 2006 were higher by $164 million. Cash costs were higher by $61 million as a result of the impact of sharing export duties with our natural gas suppliers from Argentina during 2007. Our natural gas costs on sales of Chile and Trinidad production for the nine months ended September 30, 2007 were also higher than the same period in 2006 as result of higher methanol pricing, and this increased cash costs by $89 million. The remaining increase in cash costs for the nine months ended September 30, 2007 compared with the same period in 2006 of $14 million is primarily due to higher unabsorbed fixed costs as a result of lower production rates at our Chile facilities.

Margin earned from New Zealand facilities

Our cash margin on the sale of New Zealand production for the third quarter of 2007 was $9 million compared with $8 million for second quarter of 2007 and $5 million for the third quarter of 2006. Our cash margin on the sale of New Zealand production for the nine months ended September 30, 2007 was $45 million compared with the $15 million for the same period in 2006. The increase in cash margin was primarily due to higher methanol pricing and higher sales volumes 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 third quarter of 2007, we had a negative cash margin of $1 million on the resale of 0.4 million tonnes of purchased methanol compared with a negative cash margin of $10 million on the resale of 0.3 million tonnes for the second quarter of 2007 and a positive cash margin of $4 million on the resale of 0.2 million tonnes for the third quarter of 2006.

During the nine months ended September 30, 2007, we had a cash margin of $4 million on resale of 1.0 million tonnes compared with a cash margin of $7 million on the resale of 0.8 million tonnes for the same period in 2006.

Depreciation and Amortization

Depreciation and amortization was $31 million for the third quarter of 2007 compared with $28 million for the second quarter of 2007. Depreciation and amortization increased as a result of higher unabsorbed depreciation costs. For the third quarter of 2007 and nine months ended September 30, 2007 depreciation and amortization was $31 million and $83 million, respectively, compared with $31 million and $79 million for the same periods in 2006.

Interest Expense & Interest and Other Income


                                      Three Months Ended Nine Months Ended
                                 ----------------------- -----------------
                                 Sep 30   Jun 30  Sep 30   Sep 30   Sep 30
($ millions)                       2007     2007    2006     2007     2006
-------------------------------------------------------- -----------------
Interest expense before
 deduction of capitalized
 interest                        $   13   $   11  $   12   $   35   $   33
Less capitalized interest            (2)       -       -       (2)       -
-------------------------------------------------------- -----------------
Interest expense                 $   11   $   11  $   12   $   33   $   33
-------------------------------------------------------- -----------------
Interest and other income        $    7   $   13  $    4   $   24   $   10
-------------------------------------------------------- -----------------

In May 2007, we reached financial close and secured limited recourse debt of $530 million for our joint venture project to construct a 1.3 million tonne per year methanol facility in Egypt. During the third quarter of 2007, interest costs related to this project were capitalized.

Interest and other income was $7 million for the third quarter of 2007 compared with $13 million for the second quarter of 2007. 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 decrease in our interest and other income during the third quarter of 2007 compared with the second quarter of 2007 primarily relates to the impact on earnings of changes in foreign exchange rates. Interest and other income for the third quarter of 2007 and the nine months ended September 30, 2007 was $7 million and $24 million, respectively, compared with $4 million and $10 million for the same periods in 2006. The increase in interest and other income is primarily due to higher interest income earned in 2007.

Income Taxes

The effective tax rate for the third quarter of 2007 was 29% compared with 28% for the second quarter of 2007 and 30% for the third quarter of 2006. Excluding the unusual item related to the Trinidad tax adjustment, the effective tax rate for the nine months ended September 30, 2007 was 30% compared with 32% 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

We entered the third quarter of 2007 in a balanced methanol market environment and our average non-discounted posted price across all the major regions was approximately $300 per tonne. During the third quarter of 2007, significant planned and unplanned production outages across the methanol industry, including our own facilities in Chile, led to a significant depletion of global inventories and extremely tight market conditions. As a result, there was a sharp increase in spot methanol pricing in September and contract methanol pricing in October. The Methanex non-discounted posted price in the United States is $565 per tonne for October, compared with $319 per tonne in September. The Methanex European quarterly contract price for the third quarter of 2007 is EUR 390 (US$555 per tonne compared with US$300 per tonne for the second quarter of 2007). The Methanex non-discounted posted price in Asia is $520 per tonne for October, compared with $300 per tonne in September.

Over the next twelve months, excluding the impact of the 1.0 million tonne per year plant in Oman, which started production last month, we expect the only new capacity to the global industry, outside of China, to be the 1.7 million tonne per year plant under construction in Saudi Arabia. We understand that product from this plant should be available to the market by mid-2008. Over the same period, we believe that global methanol demand growth combined with the potential shutdown of high cost capacity as a result of high feedstock prices could offset this new industry supply.


Methanex Non-Discounted Regional Posted Prices (1)

                          Oct            Sep          Jul-Aug
(US$ per tonne)          2007           2007             2007
-------------------------------------------------------------
United States             565            319              309
Europe (2)                555            300              300
Asia                      520            300              285
-------------------------------------------------------------
1  Discounts from our posted prices are offered to customers
   based on various factors.
2  EUR390 at Oct 2007 (Jul 2007 - EUR220) converted to
   United States dollars at the date of settlement.
-------------------------------------------------------------

We believe global demand for methanol for traditional uses remains healthy and is underpinned by the strong global economy, particularly in China. In addition, we believe that high energy prices are positive for energy related derivatives such as dimethyl ether (DME) and fuel blending, biodiesel, and MTBE.

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. China is a net importer of methanol. 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 environment of very high methanol prices, we believe China has the incentive to operate at higher production rates and potentially export more methanol. However, we believe in a lower price environment substantially all domestic methanol production will be consumed within the local market and 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 third quarter of 2007 were $60 million compared with $162 million for the same period in 2006. This decrease was primarily due to lower earnings. During the third quarter of 2007, our non-cash working capital decreased and this increased our cash flow from operating activities by $73 million. The decrease in our non-cash working capital was primarily due to lower inventory levels and lower trade receivables.

During the third quarter of 2007, we repurchased for cancellation a total of 1.7 million common shares at an average price of US$24.02 per share, totaling $41 million, under a normal course issuer bid that expires May 16, 2008. At September 30, 2007, we have repurchased a total of 2.9 million common shares of the maximum allowable under this bid of 8.7 million common shares. For the nine months ended September 30, 2007, we repurchased a total of 6.6 million common shares at an average price of US$24.92 per share, totaling $165 million, inclusive of 3.7 million common shares repurchased in 2007 under a normal course issuer bid that expired May 16, 2007.

During the third quarter of 2007 we paid a quarterly dividend of US$0.14 per share, or $14 million. For the nine months ended September 30, 2007 we paid total dividends of US$0.405 per share or $41 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 $740 million. Our 60% share of future equity contributions, excluding financing costs and working capital, over the next three years is estimated to be approximately $195 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 September 30, 2007 was $533 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 $80 million for the period to the end of 2009.

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.


The credit ratings for our unsecured notes at September 30,
2007 were as follows:
------------------------------------------------------------
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.
------------------------------------------------------------

SHORT-TERM OUTLOOK

We believe that the large number of recent planned and unplanned production outages across the methanol industry, including our own facilities in Chile, have led to a significant depletion of global inventories and higher methanol pricing. We also believe the global methanol industry fundamentals continue to be favourable and are underpinned by high global energy prices. There is considerable potential for demand growth for methanol use in traditional and emerging applications, including fuel blending, biodiesel and DME. Ultimately, the methanol price will depend on industry operating rates, new supply to the industry, 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 September 30, 2007, no changes were made 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   Nine Months Ended
                        ------------------------------ -------------------
                           Sep 30     Jun 30    Sep 30    Sep 30    Sep 30
($ thousands)                2007       2007      2006      2007      2006
------------------------------------------------------ -------------------
Cash flows from
 operating activities    $132,497   $123,825  $155,773  $447,424  $319,106
Add (deduct):
 Changes in non-cash
  working capital         (72,609)   (56,601)    6,027  (141,319)   85,322
 Other cash payments          598      3,518     3,809     4,886    11,710
 Stock-based
  compensation expense     (5,386)    (6,588)   (9,015)  (15,655)  (22,497)
 Other non-cash items      (4,282)    (3,670)   (3,490)  (10,469)   (5,568)
 Interest expense          10,807     11,159    11,586    33,033    33,489
 Interest and
  other income             (6,601)   (12,606)   (3,607)  (24,279)   (9,913)
 Current income taxes      13,571     17,478    40,221    88,375   109,214
------------------------------------------------------ -------------------
Adjusted EBITDA          $ 68,595   $ 76,515  $201,304  $381,996  $520,863
------------------------------------------------------ -------------------

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       Nine Months Ended
 of shares and ----------------------------------- -----------------------
 per share          Sep 30      Jun 30      Sep 30      Sep 30      Sep 30
 amounts)             2007        2007        2006        2007        2006
--------------------------------------------------------------------------
Net income    $     23,610 $    35,654 $   113,230 $   203,970 $   310,504
Add (deduct)
 unusual item:
 Future income
  tax recovery
  related to
  change in tax
  legislation            -           -           -           - $   (25,753)
--------------------------------------------------------------------------
Income before
 unusual items
 (after-tax)  $     23,610 $    35,654 $   113,230 $   203,970 $   284,751

Diluted
 weighted
 average
 number of
 common shares 100,417,273 102,973,271 108,036,188 102,977,021 110,300,912
Diluted
 income before
 unusual items
 (after-tax)
 per share    $       0.24 $      0.35 $      1.05 $      1.98 $      2.58
--------------------------------------------------------------------------

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         Sep 30       Jun 30        Mar 31      Dec 31
 per share amounts)            2007         2007          2007        2006
--------------------------------------------------------------------------
Revenue                   $ 395,118    $ 466,414    $  673,932   $ 668,159
Net income                   23,610       35,654       144,706     172,445
Basic net income per
 common share                  0.24         0.35          1.38        1.62
Diluted net income per
 common share                  0.24         0.35          1.37        1.61
--------------------------------------------------------------------------


                                         Three Months Ended
                          ------------------------------------------------
($ thousands, except         Sep 30       Jun 30        Mar 31      Dec 31
 per share amounts)            2006         2006          2006        2005
--------------------------------------------------------------------------
Revenue                   $ 519,586    $ 460,915    $  459,590   $ 459,615
Net income                  113,230       82,097       115,177      48,574
Basic net income per
 common share                  1.05         0.75          1.02        0.42
Diluted net income per
 common share                  1.05         0.75          1.02        0.42
--------------------------------------------------------------------------

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 natural gas 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 Third 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, the success of natural gas exploration and development activities in southern Chile and our ability to obtain any additional gas in that region on commercially acceptable terms, actions of competitors and suppliers, actions of governments and governmental authorities, 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 Third 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 refer to Additional Information - Supplemental Non-Gaap Measures section of the Third Quarter 2007 Management's Discussion and Analysis.


Methanex Corporation
Consolidated Statements of Income (unaudited)
(thousands of U.S. dollars, except number of common shares and per share
 amounts)
                            Three Months Ended         Nine Months Ended
                      ------------------------  ------------------------
                           Sep 30       Sep 30       Sep 30       Sep 30
                             2007         2006         2007         2006
------------------------------------------------------------------------

Revenue               $   395,118  $   519,586  $ 1,535,464  $ 1,440,091

Cost of sales and
 operating expenses       326,523      318,282    1,153,468      919,228
Depreciation and
 amortization              31,245       31,191       83,358       79,151
------------------------------------------------------------------------
Operating income
 before undernoted
 items                     37,350      170,113      298,638      441,712
Interest expense          (10,807)     (11,586)     (33,033)     (33,489)
Interest and other
 income                     6,601        3,607       24,279        9,913
------------------------------------------------------------------------
Income before
 income taxes              33,144      162,134      289,884      418,136
Income taxes:
 Current                  (13,571)     (40,221)     (88,375)    (109,214)
 Future                     4,037       (8,683)       2,461      (24,171)
 Future income tax
  recovery related to
  change in tax
  legislation (note 6)          -            -            -       25,753
------------------------------------------------------------------------
                           (9,534)     (48,904)     (85,914)    (107,632)
------------------------------------------------------------------------
Net income            $    23,610  $   113,230  $   203,970  $   310,504
------------------------------------------------------------------------
------------------------------------------------------------------------

Net income per
 common share:
 Basic                $      0.24  $      1.05  $      1.99  $      2.82
 Diluted              $      0.24  $      1.05  $      1.98  $      2.82

Weighted average
 number of common
 shares outstanding:
 Basic                100,215,472  107,984,976  102,654,755  109,994,897
 Diluted              100,417,273  108,036,188  102,977,021  110,300,912

Number of common
 shares outstanding
 at period end         99,442,254  107,158,817   99,442,254  107,158,817

See accompanying notes to consolidated financial statements.


Methanex Corporation
Consolidated Balance Sheets (unaudited)
(thousands of U.S. dollars)

                                                     Sep 30         Dec 31
                                                       2007           2006
--------------------------------------------------------------------------
ASSETS
Current assets:
 Cash and cash equivalents                     $    533,207   $    355,054
 Receivables                                        211,777        366,387
 Inventories                                        148,804        244,766
 Prepaid expenses                                    24,222         24,047
--------------------------------------------------------------------------
                                                    918,010        990,254
Property, plant and equipment (note 3)            1,455,866      1,362,281
Other assets                                         95,208        100,518
--------------------------------------------------------------------------
                                               $  2,469,084   $  2,453,053
--------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued liabilities      $    210,548   $    309,979
 Current maturities on long-term debt (note 5)       15,282         14,032
 Current maturities on other long-term
  liabilities                                        20,276         17,022
--------------------------------------------------------------------------
                                                    246,106        341,033
Long-term debt (note 5)                             553,544        472,884
Other long-term liabilities                          74,074         68,818
Future income tax liabilities (note 6)              349,457        351,918
Non-controlling interest                             29,657          9,149
Shareholders' equity:
 Capital stock                                      450,737        474,739
 Contributed surplus                                 15,817         10,346
 Retained earnings                                  751,892        724,166
 Accumulated other comprehensive income (loss)       (2,200)             -
--------------------------------------------------------------------------
                                                  1,216,246      1,209,251
--------------------------------------------------------------------------
                                               $  2,469,084   $  2,453,053
--------------------------------------------------------------------------
--------------------------------------------------------------------------

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)

                                                        Accumu-
                                                         lated
                                                         Other
                                                        Compre-      Total
             Number of              Contri-            hensive       Share-
                Common   Capital     buted   Retained   Income     holders'
                Shares     Stock   Surplus   Earnings    (Loss)     Equity
---------------------- ---------------------------------------------------
---------------------- ---------------------------------------------------

Balance,
 December
 31,
 2005      113,645,292 $ 502,879 $   4,143 $  442,492 $      -  $  949,514
 Net income          -         -         -    482,949        -     482,949
 Compensation
  expense
  recorded
  for stock
  options            -         -     8,568          -        -       8,568
 Issue of
  shares on
  exercise
  of stock
  options      680,950     7,519         -          -        -       7,519
 Reclassi-
  fication
  of grant
  date fair
  value on
  exercise
  of stock
  options            -     2,365    (2,365)         -        -           -
 Payments
  for shares
  re-
  purchased (8,525,300)  (38,024)        -   (148,755)       -    (186,779)
 Dividend
  payments           -         -         -    (52,520)       -     (52,520)
---------------------- ---------------------------------------------------
Balance,
 December
 31,
 2006      105,800,942   474,739    10,346    724,166        -   1,209,251
 Net income          -         -         -    180,360        -     180,360
 Compensation
  expense
  recorded
  for stock
  options            -         -     4,875          -        -       4,875
 Issue of
  shares on
  exercise
  of stock
  options      230,525     3,813         -          -        -       3,813
 Reclassi-
  fication
  of grant
  date fair
  value on
  exercise
  of stock
  options            -     1,241    (1,241)         -        -           -
 Payments
  for shares
  re-
  purchased (4,910,763)  (22,101)        -   (101,785)       -    (123,886)
 Dividend
  payments           -         -         -    (27,302)       -     (27,302)
 Other
  comprehensive
  income
 (loss)              -         -         -          -     (153)       (153)
---------------------- ---------------------------------------------------
Balance,
 June 30,
 2007      101,120,704   457,692    13,980    775,439     (153)  1,246,958
 Net income          -         -         -     23,610        -      23,610
 Compensation
  expense
  recorded
  for stock
  options            -         -     2,236          -        -       2,236
 Issue of
  shares on
  exercise
  of stock
  options       23,550       350         -          -        -         350
 Reclassi-
  fication
  of grant
  date fair
  value on
  exercise
  of stock
  options            -       399      (399)         -        -           -
 Payments
  for shares
  re-
  purchased (1,702,000)   (7,704)        -    (33,182)       -     (40,886)
 Dividend
  payments           -         -         -    (13,975)       -     (13,975)
 Other
  comprehensive
  income
 (loss)              -         -         -          -   (2,047)     (2,047)
---------------------- ---------------------------------------------------
Balance,
 September
 30,
 2007       99,442,254 $ 450,737 $  15,817 $  751,892 $ (2,200) $1,216,246
---------------------- ---------------------------------------------------
---------------------- ---------------------------------------------------
See accompanying notes to consolidated financial statements.


Consolidated Statements of Comprehensive Income (unaudited)
(thousands of U.S. dollars)
                                                 Three months  Nine months
                                                        ended        ended
                                                 -------------------------
                                                       Sep 30       Sep 30
                                                         2007         2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income                                       $     23,610  $   203,970
 Other comprehensive income (loss):
  Change in fair value of forward
   exchange contracts, net of tax (note 11)                29         (124)
  Change in fair value of interest
   rate swap contracts, net of tax (note 11)           (2,076)      (2,076)
--------------------------------------------------------------------------
                                                       (2,047)      (2,200)
--------------------------------------------------------------------------
Comprehensive income                             $     21,563  $   201,770
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.


Methanex Corporation
Consolidated Statements of Cash Flows (unaudited)
(thousands of U.S. dollars)

                            Three Months Ended         Nine Months Ended
                      ------------------------  ------------------------
                           Sep 30       Sep 30       Sep 30       Sep 30
                             2007         2006         2007         2006
------------------------------------------------------------------------

CASH FLOWS FROM OPERATING
 ACTIVITIES
 Net income           $    23,610  $   113,230  $   203,970  $   310,504
 Add (deduct)
  non-cash items:
  Depreciation and
   amortization            31,245       31,191       83,358       79,151
  Future income taxes      (4,037)       8,683       (2,461)      (1,582)
  Stock-based
   compensation expense     5,386        9,015       15,655       22,497
  Other                     4,282        3,490       10,469        5,568
 Other cash payments         (598)      (3,809)      (4,886)     (11,710)
------------------------------------------------------------------------
 Cash flows from
  operating activities
  before undernoted        59,888      161,800      306,105      404,428
 Changes in non-cash
  working capital
  (note 10)                72,609       (6,027)     141,319      (85,322)
------------------------------------------------------------------------
                          132,497      155,773      447,424      319,106
------------------------------------------------------------------------

CASH FLOWS FROM
 FINANCING ACTIVITIES
 Payments for shares
  repurchased             (40,886)     (33,873)    (164,772)    (151,108)
 Dividend payments        (13,975)     (13,431)     (41,277)     (39,281)
 Proceeds from limited
  recourse debt (note 5)   61,000            -       96,574            -
 Financing costs                -            -       (8,725)           -
 Equity contribution
  by non-controlling
  interest                  2,213            -       20,508        4,730
 Repayment of limited
  recourse debt                 -            -       (7,016)           -
 Proceeds on issue of
  shares on exercise
  of stock options            350        1,397        4,163        5,662
 Changes in debt service
  reserve accounts            (16)           -          900       (2,301)
 Repayment of other
  long-term liabilities    (1,220)      (1,109)      (3,769)      (4,834)
------------------------------------------------------------------------
                            7,466      (47,016)    (103,414)    (187,132)
------------------------------------------------------------------------

CASH FLOWS FROM
 INVESTING ACTIVITIES
 Property, plant and
  equipment               (26,307)     (12,079)     (52,074)     (32,490)
 Plant and equipment
  construction costs
  (note 13)               (67,982)      (3,504)    (114,118)     (15,819)
 Other assets              (5,271)         (42)      (5,178)        (131)
 Changes in non-cash
  working capital
  (note 10)                 8,637       (2,121)       5,513       29,269
------------------------------------------------------------------------
                          (90,923)     (17,746)    (165,857)     (19,171)
------------------------------------------------------------------------
 Increase in cash and
  cash equivalents         49,040       91,011      178,153      112,803
 Cash and cash
  equivalents,
  beginning of period     484,167      173,531      355,054      158,755
------------------------------------------------------------------------
 Cash and cash
  equivalents, end of
  period              $   533,207  $   264,542  $   533,207  $   271,558
------------------------------------------------------------------------
------------------------------------------------------------------------

SUPPLEMENTARY CASH
 FLOW INFORMATION
 Interest paid        $    13,751  $    11,982  $    32,813  $    30,546
 Income taxes paid,
  net of amounts
  refunded            $    20,889  $    36,655  $   102,994  $    98,029

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
------------------------------------------------------------  ------------
September 30, 2007
 Plant and equipment             $  2,759,200   $  1,515,927  $  1,243,273
 Plant and equipment under
  construction                        139,979              -       139,979
 Other                                123,757         51,143        72,614
------------------------------------------------------------  ------------
                                 $  3,022,936   $  1,567,070  $  1,455,866
------------------------------------------------------------  ------------
December 31, 2006
 Plant and equipment             $  2,728,837   $  1,451,162  $  1,277,675
 Plant and equipment under
  construction                         25,861              -        25,861
 Other                                102,597         43,852        58,745
------------------------------------------------------------  ------------
                                 $  2,857,295   $  1,495,014  $  1,362,281
------------------------------------------------------------  ------------

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:


                                                      Sep 30        Dec 31
Consolidated Balance Sheets                             2007          2006
--------------------------------------------------------------------------
Cash and cash equivalents                          $  30,348     $  19,268
Other current assets                                  43,919        62,420
Property, plant and equipment                        265,536       264,292
Other assets                                          16,464        22,471
Accounts payable and accrued
 liabilities                                          28,754        28,644
Long-term debt, including
 current maturities (note 5)                         126,070       136,916
Future income tax liabilities                         13,707        10,866
--------------------------------------------------------------------------


                               Three Months Ended        Nine Months Ended
                              -------------------  -----------------------
Consolidated Statements of       Sep 30    Sep 30     Sep 30        Sep 30
 Income                            2007      2006       2007          2006
-------------------------------------------------  -----------------------
Revenue                       $  55,324 $  67,642  $ 144,094     $ 159,572
Expenses                        (44,835)  (49,499)  (134,731)     (125,588)
-------------------------------------------------  -----------------------
Income before income taxes       10,489    18,143      9,363        33,984
Income tax recovery (expense)
 (note 6)                        (3,302)   (2,508)    (3,556)       10,684
-------------------------------------------------  -----------------------
Net income                    $   7,187 $  15,635  $   5,807     $  44,668
-------------------------------------------------  -----------------------

                               Three Months Ended        Nine Months Ended
                              -------------------  -----------------------
Consolidated Statements of       Sep 30    Sep 30     Sep 30        Sep 30
 Cash Flows                        2007      2006       2007          2006
-------------------------------------------------  -----------------------
Cash inflows from operating
 activities                   $   3,791 $  16,287  $  41,135     $  39,247
Cash outflows from financing
 activities                         (16)        -     (6,116)       (7,016)
Cash outflows from investing
 activities                        (171)   (2,384)   (13,859)       (2,783)
-------------------------------------------------  -----------------------

5. Long-term debt:


                                                      Sep 30        Dec 31
                                                        2007          2006
--------------------------------------------------------------------------
Unsecured notes
 8.75% due August 15, 2012                         $ 197,850     $ 200,000
 6.00% due August 15, 2015                           148,332       150,000
--------------------------------------------------------------------------
                                                     346,182       350,000
Atlas limited recourse debt facilities               126,070       136,916
Egypt limited recourse debt facilities                81,574             -
Other limited recourse debt                           15,000             -
--------------------------------------------------------------------------
                                                     568,826       486,916
Less current maturities                              (15,282)      (14,032)
--------------------------------------------------------------------------
                                                   $ 553,544     $ 472,884
--------------------------------------------------------------------------

Other limited recourse debt is payable over 12 years in equal quarterly principal payments beginning October 2007. Interest on this debt is payable quarterly at LIBOR plus 0.75%.

During the second quarter of 2007, the Company achieved financial close to construct a methanol plant in Egypt (as described in 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. The LIBOR-based interest payments on approximately half of the projected outstanding debt balance have been fixed at 5.1% through interest rate swap agreements for the period September 28, 2007 to March 31, 2015 as described in note 11(c). Principal is paid in 24 semi-annual payments which will commence in September 2010. Under the terms of the Egypt limited recourse debt 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         Nine Months Ended
                         ------------------------  ------------------------
                              Sep 30       Sep 30       Sep 30       Sep 30
                                2007         2006         2007         2006
-------------------------------------------------  ------------------------
Denominator for basic
 net income per common
 share                   100,215,472  107,984,976  102,654,755  109,994,897
Effect of dilutive stock
 options                     201,801       51,212      322,266      306,015
-------------------------------------------------  ------------------------
Denominator for diluted
 net income per common
 share                   100,417,273  108,036,188  102,977,021  110,300,912
-------------------------------------------------  ------------------------

8. Stock-based compensation:

a) Stock options:

(i) Incentive stock options:

Common shares reserved for outstanding incentive stock options at September 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         (218,725)      16.84
 Cancelled                 (6,500)      13.65          (13,300)      20.21
--------------------------------------------------------------------------
Outstanding at
 June 30, 2007            143,950  $     7.86        3,282,391  $    20.97
 Granted                        -           -                -           -
 Exercised                 (4,500)       3.29          (19,050)      17.66
 Cancelled                 (9,000)       9.56          (49,800)      19.68
--------------------------------------------------------------------------
Outstanding at
 September 30, 2007       130,450  $     7.90        3,213,541  $    21.01
--------------------------------------------------------------------------

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


                              Options Outstanding at Options Exercisable at
                                  September 30, 2007     September 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             2.4    130,450 $    7.90    130,450  $     7.90
---------------------------------------------------------------------------

Options denominated in USD
 $6.45 to 9.23              5.1    194,325 $    8.37    194,325  $     8.37
 $11.56 to 25.10            5.7  3,019,216     21.83    728,441       19.60
---------------------------------------------------------------------------
                            5.6  3,213,541 $   21.01    922,766  $    17.24
---------------------------------------------------------------------------

(ii) Performance stock options:

As at September 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 nine month periods ended September 30, 2007, compensation expense related to stock options included in cost of sales and operating expenses was $2.2 million (2006 - $2.7 million) and $7.1 million (2006 - $5.9 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 September 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                             30,970             6,000      325,779
 Granted in-lieu of dividends         3,458             5,585        7,803
 Redeemed                           (75,649)           (4,731)           -
 Cancelled                                -            (4,392)     (16,838)
--------------------------------------------------------------------------
Outstanding at
 June 30, 2007                      277,525           521,219      722,826
 Granted                              3,955                 -            -
 Granted in-lieu of dividends         1,469             3,148        4,380
 Redeemed                           (17,047)           (2,378)           -
 Cancelled                                -            (1,586)      (1,936)
--------------------------------------------------------------------------
Outstanding at
 September 30, 2007                 265,902           520,403      725,270
--------------------------------------------------------------------------

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 September 30, 2007 was $37.4 million compared with the recorded liability of $28.2 million. The difference between the fair value and the recorded liability of $9.2 million will be recognized over the weighted average remaining service period of approximately 1.5 years.

For the three and nine months ended September 30, 2007, compensation expense related to deferred, restricted and performance share units included in cost of sales and operating expenses was $3.2 million (2006 - $6.3 million) and $8.5 million (2006 - $16.6 million). For the three and nine month period ended September 30, 2007, the compensation expense included $0.6 million (2006 - $3.6 million) and $0.9 million (2006 - $8.5 million) related to the effect of the change in the Company's share price. As at September 30, 2007, the Company's share price was US$25.40 per share.

9. Retirement plans:

Total net pension expense for the Company's defined contribution and defined benefit pension plans during the three and nine month periods ended September 30, 2007 was $1.8 million (2006 - $2.7 million) and $5.3 million (2006 - $5.8 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 nine month periods ended September 30, 2007 and 2006 were as follows:


                                 Three Months Ended      Nine Months Ended
                            ----------------------- ----------------------
                                Sep 30       Sep 30     Sep 30      Sep 30
                                  2007         2006       2007        2006
--------------------------------------------------- ----------------------
Decrease (increase) in
 non-cash working capital:
 Receivables                $   46,295  $   (30,739) $ 154,610  $  (22,211)
 Inventories                    30,725         (140)    95,962     (23,539)
 Prepaid expenses                5,537         (472)      (175)     (6,066)
 Accounts payable and
  accrued liabilities            3,566       26,989    (99,431)      6,775
--------------------------------------------------- ----------------------
                                86,123       (4,362)   150,966     (45,041)
Adjustments for items
 not having a cash effect       (4,877)      (3,786)    (4,134)    (11,012)
--------------------------------------------------- ----------------------
Changes in non-cash
 working capital having
 a cash effect              $   81,246  $    (8,148) $ 146,832  $  (56,053)
--------------------------------------------------- ----------------------

These changes relate to
 the following activities:
 Operating                  $   72,609  $    (6,027) $ 141,319  $  (85,322)
 Investing                       8,637       (2,121)     5,513      29,269
--------------------------------------------------- ----------------------
Changes in non-cash
 working capital            $   81,246  $    (8,148) $ 146,832  $  (56,053)
--------------------------------------------------- ----------------------

11. Derivative financial instruments:

a) Forward exchange contracts:

As at September 30, 2007, the Company had forward exchange contracts to sell 12.4 million Euro in exchange for US dollars at an average exchange rate of 1.3640 maturing in 2007. The fair value of the forward exchange sales contracts was negative $0.8 million. 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 at its fair value of $0.9 million in other long-term liabilities.

c) Egypt debt interest rate swap contracts:

On August 29, 2007, the Company entered interest rate swap contracts to hedge the variability in LIBOR-based interest payments on its Egypt limited recourse debt facilities described in note 5. The interest rate swap contracts are effective from September 28, 2007 to March 31, 2015. These contracts swap the LIBOR-based interest payments to a fixed rate of 5.1% on approximately half of the projected outstanding debt for the period September 28, 2007 to March 31, 2015. The interest rate swap contracts are recorded at their fair value of $2.1 million in other long-term liabilities with the effective portion of the change in fair value recorded in other comprehensive income.

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 approximately $2.25 per mmbtu. This duty is reviewed quarterly and is adjusted with reference to a basket of international energy prices. At the beginning of the fourth quarter of 2007, we estimate that the export duty will be adjusted to $2.70 per mmbtu. While the Company's natural gas contracts provide that natural gas suppliers are to pay any duties levied by the government of Argentina, it 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.

With respect to these export duties, 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 approximately $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 amount of export duties charged to earnings in a period is primarily dependant on sales volume of Chile production that is produced with natural gas sourced from Argentina. During the third quarter, the Company did not produce any methanol from natural gas from Argentina. However, the Company sold inventory that was produced with natural gas sourced from Argentina in the second quarter of 2007 and the amount charged to earnings related to the cost of sharing export duties on this inventory was $10 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 $740 million. Our 60% share of future equity contributions, excluding financing costs and working capital, over the next three years is estimated to be approximately $195 million and we expect to fund these expenditures from cash generated from operations and cash on hand.

The Company's investment in EMethanex is accounted for using consolidation accounting. This results in 100% of the assets and liabilities of the Egypt entity being included in our balance sheet. Our partners' interest is presented as "non-controlling interest" on our balance sheet. Certain comparative figures related to this investment have been adjusted to conform with the accounting treatment in the current period.

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 nine month periods ended September 30, 2007 and 2006 are as follows:


                                 Three Months Ended      Nine Months Ended
                            ----------------------- ----------------------
                                Sep 30       Sep 30     Sep 30      Sep 30
                                  2007         2006       2007        2006
--------------------------------------------------- ----------------------
Net income in accordance
 with Canadian GAAP         $   23,610  $   113,230  $ 203,970  $  310,504
Add (deduct)
 adjustments for:
 Depreciation and
  amortization (a)                (478)        (478)    (1,433)     (1,433)
 Stock-based
  compensation (b)                 170         (241)       321        (369)
 Uncertainty in
  income taxes (c)                (998)           -     (3,807)          -
 Income tax effect of
  above adjustments (d)            167          167        501         501
--------------------------------------------------- ----------------------
Net income in accordance
 with U.S. GAAP             $   22,471  $   112,678  $ 199,552  $  309,203
--------------------------------------------------- ----------------------

Per share information in
 accordance with U.S. GAAP:
 Basic net income
  per share                 $     0.22  $      1.04  $    1.94  $     2.81
 Diluted net income
  per share                 $     0.22  $      1.04  $    1.94  $     2.80
--------------------------------------------------- ----------------------

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 nine month periods ended September 30, 2007 and 2006 are as follows:


                                          Three Months Ended
                          ------------------------------------------------
                                                              September 30,
                                          September 30, 2007          2006
                          ---------------------------------  -------------
                            Cdn GAAP  Adjustments  U.S. GAAP   U.S. GAAP(1)
------------------------------------------------------------  ------------
Net income                $   23,610  $    (1,139) $  22,471    $  112,678

Change in fair value of
 forward exchange
 contracts, net of tax            29            -         29             -
Change in fair value of
 interest rate swap,
 net of tax                   (2,076)           -     (2,076)            -
Change related to
 pension, net of tax (e)           -          224        224             -
------------------------------------------------------------  ------------
Comprehensive income      $   21,563  $      (915) $  20,648  $    112,678
------------------------------------------------------------  ------------

                                           Nine Months Ended
                          ------------------------------------------------
                                                              September 30,
                                          September 30, 2007          2006
                          ---------------------------------  -------------
                            Cdn GAAP  Adjustments  U.S. GAAP   U.S. GAAP(1)
------------------------------------------------------------  ------------
Net income                $  203,970  $    (4,418) $ 199,552  $    309,203

Change in fair value of
 forward exchange
 contracts, net of tax          (124)           -       (124)            -
Change in fair value of
 interest rate swap,
 net of tax                   (2,076)           -     (2,076)            -
Change related to
 pension, net of tax (e)           -          672        672             -
------------------------------------------------------------  ------------
Comprehensive income      $  201,770  $    (3,746) $ 198,024  $    309,203
------------------------------------------------------------  ------------

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. For the three and nine month periods ended September 30, 2007, an increase to depreciation expense of $0.5 million (2006 - $0.5 million) and $1.4 million (2006 - $1.4 million) respectively, was recorded in accordance with U.S. GAAP.

(b) Stock-based compensation:

The Company has 22,350 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. During the three and nine month periods ended September 30, 2007, a decrease to operating expense of $0.2 million (2006 - an increase of $0.2 million) and $0.3 million (2006 - increase of $0.3 million), respectively, was recorded in accordance with U.S. 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. During the three and nine month periods ending September 30, 2007, adjustments to increase income tax expense by $1.0 and $3.8 million, respectively, were recorded in accordance with U.S. GAAP.

(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 other comprehensive income. Under U.S. GAAP, all deferred pension amounts from Canadian GAAP are reclassified to accumulated other comprehensive income. For the three and nine month periods ending September 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    Q3    Q2    Q1  2006     Q4     Q3     Q2     Q1
---------------------------------------------------------------------------

METHANOL SALES
 VOLUMES
(thousands of
 tonnes)

Company
 produced         3,572 1,073 1,360 1,139 5,310  1,160  1,478  1,351  1,321
Purchased
 methanol         1,031   387   269   375 1,101    288    222    294    297
Commission
 sales (1)          396   168    89   139   584    134    176    133    141
---------------------------------------------------------------------------

                  4,999 1,628 1,718 1,653 6,995  1,582  1,876  1,778  1,759
---------------------------------------------------------------------------

METHANOL
 PRODUCTION
(thousands of
 tonnes)

Chile             1,553   233   569   751 3,186    766   666    872    882
Titan,
 Trinidad           641   191   225   225   864    229    206    214    215
Atlas,
 Trinidad
 (63.1%)            704   290   234   180 1,057    267    264    273    253
New Zealand         360   122   120   118   404    111     71    118    104
Kitimat               -     -     -     -     -      -      -      -      -
---------------------------------------------------------------------------

                  3,258   836 1,148 1,274 5,511  1,373  1,207  1,477  1,454
---------------------------------------------------------------------------

AVERAGE REALIZED
 METHANOL
 PRICE (2)
($/tonne)           334   270   286   444   328    460    305    279    283
($/gallon)         1.00  0.81  0.86  1.34  0.99   1.38   0.92   0.84   0.85

PER SHARE
 INFORMATION
 ($ per share)
Basic net
 income
 (loss)         $  1.99  0.24  0.35  1.38  4.43   1.62   1.05   0.75   1.02
Diluted net
 income
 (loss)         $  1.98  0.24  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
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                                          7,052  1,947  1,530  1,759  1,816
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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
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                                          5,358  1,396  1,247  1,312  1,403
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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

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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:

Jason Chesko
Director, Investor Relations
Methanex Corporation
604 661 2600

Website: www.methanex.com


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