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Executives

Paul H. Vining - Chief Commercial Officer

Kurt D. Kost - President

Frank J. Wood - Chief Financial Officer, Executive Vice President and Chairman of Safety, Health, Environmental & Sustainability Committee

Todd Allen - Vice President of Investor Relations

Kevin S. Crutchfield - Chief Executive Officer, Director and Member of Safety, Health, Environmental & Sustainability Committee

Analysts

Shneur Gershuni – UBS

Brian Gamble – Simmons and Company

Michael Dudas – Sterne, Agee & Leach

James Rollyson – Raymond James

Lucas Pipes – Brean Murray Carret

Kuni Chen – CRT Capital Group

Brett Levy – Jefferies & Company, Inc

Mark Levin – BB&T

Brandon Blossman – Tudor, Pickering, Holt

Justine Fisher – Goldman Sachs

Chris Haberlin – Davenport & Co

Alpha Natural Resources, Inc. (ANR) Q4 2011 Earnings Call February 24, 2012 10:00 AM ET

Operator

Greetings and welcome to the Alpha Natural Resources' Fourth Quarter 2011 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Todd Allen, Vice President of Investor Relations for Alpha Natural Resources. Thank you, Mr. Allen. You may begin.

Todd Allen

Thank you operator. And thank everyone for participating in today's Alpha Natural Resources fourth quarter 2011 earnings conference call.

Before I turn the call over to Kevin, I would like to remind our listeners that we will be meeting with investors at several conferences in the near future including the JPMorgan High Yield and Leveraged Finance Conference in Miami on February 27th, the BMO Capital Markets 2011 Global Metals & Mining Conference in Hollywood, Florida on 28, the Brean Murray Carret 2012 Global Resource and Infrastructure Conference in New York on February 29, and finally the Simmons 12th Annual Energy Conference in Las Vegas on March 1st.

Now joining me on the call today are Kevin Crutchfield, Alpha Natural Resources' CEO who will summarize our fourth quarter and full year 2011 results and provide a brief market outlook; Frank Wood, our CFO who will comment on Alpha's financial results and update our guidance; and Kurt Kost, President of Alpha Natural Resources. Along with Kurt, Paul Vining, Alpha's Chief Commercial Officer will be available to address operational and marketing questions following our prepared remarks.

Please let me remind you that various remarks that we make on this call concerning future expectations for the Company constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's views and assumptions, regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements are contained in our filings with the United States Securities and Exchange Commission, including our Annual Report on Form 10-K and subsequently filed Form 10-Qs.

This call is being recorded and will be available for replay for a period of two weeks. The call can also be heard live on the Internet and both a replay and a downloadable podcast of the event will be archived on our website at alphanr.com, for a period of three months.

With that, I'll turn it over to Kevin.

Kevin Crutchfield

Thanks Todd and good morning everyone. Alpha continued to demonstrate excellent safety performance since our last earnings call. Six of our operations recently received the 2011 Mountaineer Guardian Award including the Edwight surface mine, the Green Valley processing plant, Rockspring's Camp Creek Number 1 mine, the Ewing Number 1 mine, the Hatfield Energy mine; and White Flame's mine Number 10.

Also, we recently received notice that two of the legacy Massey mines, Randolph and Revolution were removed from MSHA's potential pattern of violation or PPOV list. The removal of these two operations from PPOV status is just one indication of the success that we have achieved thus far in integration of Massey following the June 1, 2011, acquisition.

As safety performance improved in the fourth quarter, we experienced a market decrease in MSHA enforcement actions, with MSHA orders down approximately 45% compared to the previous quarter. Employee engagement, through running right, is very strong across all of Alpha's operations. Turnover has improved steadily for several months and is now solidly in the middle single digits for both legacy Massey and the entire organization, reduced turnover, heightened employee engagement and vastly improved safety performance is expected to drive improvements in efficiency and productivity as well as improved cost performance going forward. So, we continue to be confident that significant operating synergies will be realized in 2012 and Alpha remains on track to achieve our previously stated synergy target of $220 million to $260 million annually by mid-2013.

While our integration efforts have proven successful, the market environment turned out to be challenging in the fourth quarter. Alpha reported fourth quarter of 2011 adjusted EBITDA from continuing operations of $261 million compared to $369 million in the preceding quarter. Frank will discuss the fourth quarter results in more detail in just a moment, but the sequential decrease in adjusted EBITDA was primarily due to lower shipments in the east, particularly met shipments as some European customers stretched out delivery schedules as well as the mainly volume driven increase in cost of coal sales per ton in the east.

By now the headwinds facing U.S. coal producers are well known to most everyone on the call. The industry continues to confirm a general lack of permit issuances in the east and regulatory uncertainties stemming from a rap of pending regulations be it CSAPR, MACT, the new source performance standards for greenhouse gases among others, that have collectively been dubbed train wrecks.

In addition, the challenges facing the industry have intensified in the last few months due to concerns about global economic growth impacting the steel market, extremely mild weather in much of the United States and competition from natural gas, which recently hit decade low prices, driving incremental fuel switching and effectively capping thermal coal prices at levels that render a portion of Central Appalachia products uneconomic. Alpha responded swiftly to these changes in market conditions and on February 3rd we announced 4 million tons of production cutbacks in Central Appalachia, including approximately 2.5 million tons of thermal coal and 1.5 million tons of high-vol B metallurgical coal, in order to match our production with anticipated demand. We believe these actions are sufficient at this time.

However, in light of this dynamic environment, in which we find ourselves, we'll continually review our operations with the goal of deploying capital prudently to maximize free cash flow generation.

There's another implication of the fairly sudden change in market condition for Alpha as well. Based on the results of Alpha's recently completed annual goodwill impairment testing, we are required by U.S. generally accepted accounting standards to record a non-cash goodwill impairment charge of $745 million, due to changes in market outlook, particularly for thermal coal source from Central Appalachia as well as expected lower production and higher cash operating cost for both legacy Alpha and legacy Massey operations.

Alpha's recent level of soft market capitalization is also a significant consideration in the revised valuation of goodwill. This will permanently lower the value of goodwill carried on our balance sheet going forward, no matter what happens to Alpha's market value or the economics of these assets in the future.

Obviously we view this charge to be a consequence of the current accounting convention as well as the timing of when the Massey transaction closed and we've excluded this charge from our adjusted EBITDA and adjusted income from continuing operations. It is also excluded in the definition of EBITDA used for covenant calculation purposes under our credit agreement.

Taking a slightly longer and more circumspect view of the markets, we continue to believe Alpha is well positioned for growth in both the seaborne met and seaborne thermal markets and we expect an eventual normalization of demand and pricing for thermal coal in United States.

Following three consecutive quarters of decreasing benchmark prices from seaborne met coal, prices appear to be stabilizing in the low $200s per metric ton. Australian supply has largely recovered from the extreme flooding in early 2011 that drove the benchmark to a record high of $330 per metric ton. At this point the European debt crisis appears to be backed into the demand estimates for seaborne coking coal for 2012.

Chinese steel production growth while moderating slightly is projected to be in the mid-single digits in 2012 and beyond. And the world continues to have a limited supply of high quality coking coals produced by only a few regions including Australia, Western Canada and the Eastern United States.

As the third largest supplier of coking coal in the world with the largest port capacity of any U.S. coal producer Alpha is well positioned to an improving global met coal market.

U.S. thermal coal exports rose by approximately 50% in 2011 to nearly 40 million tons, U.S. is likely to become a permanent and meaningful source of thermal supply into the Atlantic basin instead of its historical role as a swing supplier due to the fact that Europe's traditional supply of South African coal has shifted almost entirely into Asia.

Up to this point Alpha's thermal coal exports have been modest, just a couple of million tons per year. However with 25 million and 30 million tons of export terminal capacity we control more terminal capacity than any other U.S. producer and we are positioned well to capitalize on this growing opportunity for thermal coal exports.

Finally the U.S. thermal coal market is currently being impacted by mild weather large utility stockpiles which approximate 180 million tons nationwide and fierce competition from natural gas. The combination of virtually unrestrained production and mild winter weather has driven gas prices to 10-year lows, levels at which gas producers have reduced their dry gas rig counts by about 20% and the largest gas producer Chesapeake has announced a curtailment of CapEx dedicated to dry gas production.

In short, we believe that the prices of both gas and coal are unsustainably low and will gradually normalize as utilities work to their excess supply of fuels. In this market Alpha's three pronged strategy that we laid out over three months ago has never been more important.

First, we’ll support and augment our higher margin metallurgical coal business; second, we’ll adjust our production in order to create a sustainable and profitable thermal coal portfolio; finally, through our ongoing optimization efforts we will address the operations that do not align well with these long range objectives. It remains a work-in-progress, but we are acutely aware of the environment and you can expect us to deal with it proactively.

With the near term environment in the coal industry has its share of challenges, we are taking full advantage of this opportunity to position Alpha for success over the long haul.

With that, I’ll now turn the call over to Frank for a discussion of our financial results and our expectations for the current year.

Frank Wood

Thank you, Kevin, and good morning everyone. As I discuss our fourth quarter financial performance, I will often compare our fourth quarter 2011 operational result not only with the year ago period, but also with the third quarter 2011 because last two quarters are more directly comparable to each other given that they both contain a full three months of combined Company results following the acquisition of Massey.

Coal revenues during the fourth quarter were $1.8 billion versus $0.9 billion in the prior year and $2 in the third quarter. Total revenues were $2.1 billion compared to $1 billion in the fourth quarter of 2010 and $2.3 billion in the preceding quarter. Compared to the fourth quarter of 2010, the year-over-year increases are primarily due to the inclusion of Massey operations in the fourth quarter of 2011 and the 36% year-over-year increase in average per ton realizations on metallurgical coal. While the sequential decreases are primarily the result of decreased eastern shipments, particularly metallurgical coal shipments that more than offset the impact of increase PRB shipments.

During the fourth quarter, Alpha shipped 31.1 million tons of coal, including 5.3 million tons of metallurgical coal, 11.9 million of eastern steam coal and 13.9 million tons of Powder River Basin coal. Total tons in the fourth quarter did not change much compared to 31.2 million tons in the third quarter, but the mix shifted meaningfully, with fourth quarter met shipments down approximately 600,000 tons and eastern thermal shipments down approximately 800,000 tons compared to the prior quarter. Offsetting lower eastern shipments, Alpha's Powder River Basin shipments rose 1.3 million tons in the fourth quarter compared to the third quarter of 2011.

Average realizations for metallurgical coal were $156.48 per ton in the fourth quarter compared to $114.87 in the fourth quarter of 2010 and $168.49 in the prior quarter. Eastern steam coal realizations were $66.93, essentially flat compared to $67.04 last year and $67.07 in the prior quarter. Realizations in the Powder River Basin were $11.96, up from $10.94 in the year ago period and flat compared to $11.98 in the third quarter of 2011.

Total costs and expenses were $2.8 billion in the fourth quarter, including the $745 million non-cash goodwill impairment charge, compared to $980 million last year and $2.2 billion in the third quarter. The fourth quarter cost of coal sales was $1.6 billion, versus $670 million last year and $1.7 billion in the third quarter. The fourth quarter cost of coal sales included UBB charges, of pretax $25 million, merger-related expenses of pretax $13 million and non-cash mineral lease termination expense of $8 million. Excluding these items, Alpha's fourth quarter adjusted cost of coal sales in the east was $78.50 per ton compared to $63.73 in the year ago quarter and $76.20 in the third quarter.

The year-over-year increase in adjusted eastern cost of coal sales per ton during the fourth quarter primarily reflects a combination of higher variable cost driven by higher average realizations on metallurgical coal sales, increased volume of higher-cost purchased coal, a mix shift with more high-cost underground metallurgical production versus low-cost Pennsylvania longwalls contributing a smaller percentage of overall eastern production, as well as increases to input costs and regulatory impacts. The sequential increase is primarily volume driven.

The adjusted cost of coal sales in Powder River Basin during the fourth quarter was $9.44 per ton compared to $7.87 in the year ago period and $10.34 in the third quarter 2011. The year-over-year increase was driven by higher expenses for mining inputs, equipment repairs and variable cost tied to sales revenues and the absence of capitalized pit development cost in the current year.

The sequential decrease in our western cost of coal sales per ton was primarily due to the 1.3 million ton increase, Powder River Basin shipments which reduced fixed cost on a per ton basis.

During the fourth quarter, Alpha's adjusted weighted-average coal margin was 17% compared to 24% in the year ago period and 23% in the third quarter. Compared to the third quarter, the reduced average coal margin reflects an increased proportion of Powder River Basin shipments and proportionately lower metallurgical coal shipments. Alpha reported a fourth quarter 2011 net loss, and net loss from continuing operations of $733 million or $3.34 per diluted share compared with net income and income from continuing operations of $11 million, $0.09 per diluted share in the fourth quarter of 2010.

Excluding a number of items detailed in our press release Alpha's fourth quarter 2011 adjusted loss from continuing operations was $16 million or $0.07 per diluted share. Adjusted EBITDA from continuing operations which excludes goodwill impairment, merger related expenses, UBB expenses, mineral lease termination expense. The change in fair value and settlement of derivative instruments and loss on early extinguishment of debt was $261 million compared to $163 million for Alpha standalone last year.

Capital expenditures during the fourth quarter were approximately $214 million compared with $86 million for Alpha standalone in the fourth quarter last year.

For the full year 2011 Alpha reported record revenue of $7.1 billion and record coal revenue of $6.2 billion primarily due to the inclusion of seven months of operating results from the Legacy Massey operations and a 42% increase in metallurgical coal realizations. EBITDA from continuing operations was $77 million in 2011 compared to $769 million in 2010.

Excluding the various items detailed in our earnings release adjusted EBITDA from continuing operations was a record $1.2 billion up 15% from the $808 million reported in 2010.

For the full year 2011 Alpha reported net loss from continuing operations of $677 million for the year of 2011 compared with net income of $97 million in 2010. And excluding the various items detailed in our earnings release, Alpha's adjusted income from continuing operations for 2011 was $287 million or $1.57 per diluted share compared to $271 million or $2.23 per diluted share in the prior year. Capital expenditures for 2011 totaled $529 million compared to $309 million in 2010.

After these expenditures Alpha generated free cash flow, which we define as cash flow from operations minus capital expenditures including lease by application installment payments of approximately $93million during 2011.Free cash flow for 2011 was reduced by approximately $198 million of merger related and expenses and UBB costs including cash payments associated with a non-prosecution agreement, and MSHA settlement during the fourth quarter.

Turning to a discussion of guidance, we currently expect to ship between 107 and 124 million tons of coal in 2012, including between 20 and 25 million tons of eastern met coal, between 42 and 48 million tons of eastern steam coal and between 45 and 51 million tons of PRB coal. As of February 8, we had 50% of the midpoint of anticipated met coal shipments committed in price at an average per ton realization of $152.91 including tons locked in during 2011 at more attractive prices than are prevailing in the marketplace.

As of that same day, we had 92% of the midpoint of our eastern steam coal shipment guidance committed in price at an average per ton realization of $68.17 and we had a 100% of the midpoint of our PRB shipments committed in price at an average per ton realization of $12.78. Also as of February 8, we had 430,000 tons of metallurgical coal committed in price for 2013 at an average realization of $131.18 per ton and another 9.9 million tons committed and unpriced.

We had 9.7 million tons of eastern steam coal committed and priced at an average realization of $68.19 per ton, had another 7.6 million tons committed and priced and we have 34.7 million tons of PRB coal committed and priced at an average realization of $13.12 per ton.

We currently expect Alpha's cost of coal sales to range between $72 and $77 per ton in the east, between $10.50 and $11.50 per ton in the west. We are reducing our expected selling, general and administrative expenses to a range of $220 million to $240 million for 2012 and we're leaving our guidance for both DD&A and interest expense unchanged at ranges of $1.05 billion to $1.15 billion and $175 million to $185 million, respectively. We are also reducing 2012 capital expenditure guidance range by $100 million to a range of $550 million to $750 million.

As of December 31, Alpha's available liquidity stood at approximately $1.8 billion, including cash and equivalents and marketable securities of $687 million, which are in addition to approximately $1.1 billion available under the Company's various credit facilities. In light of current market conditions, Alpha remains focused on free cash flow generation and will strive to maintain maximum liquidity and flexibility in the near-term.

In light of this objective, we do not anticipate additional share repurchases during the first quarter of 2012. Our near-term focus on liquidity and flexibility will enable Alpha to best manage through the current market headwinds and position the Company to rapidly take advantage of more favorable conditions as they emerge. In this way, we believe that Alpha will be able to maximize shareholder return over the long-term.

That concludes our prepared remarks. Operator, we will now open the call for questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator instructions) our first question comes from Shneur Gershuni, with UBS. Please proceed with your question.

Shneur Gershuni – UBS

Good morning, guys. First question, 2011 was kind of a bit of bumpy year with respect to the integration of Massey. In your prepared remarks in the press release you seem to indicate that things are moving in the right direction on integration efforts. I was wondering if you can expand a bit on kind of your government relations issues. We see some of the mines are now off the PPOV list and violations are down. I was wondering if you can potentially quantify the impact of the productivity and if you could also talk about the negative free cash flow lines that you couldn't close because of contracts in the past if that's easier now because thermal coal pricing is falling?

Kevin Crutchfield

Let me add a little color to those and then I think Kurt can address the specifics of part of your question and Frank or Paul perhaps on the other. I think as we described on the last call, part of that strategy as we closed the acquisition was – I think I used the term on the last call to get the table set, so there's an extreme focus on laying a foundation with respect to running right, what are rules of engagement going to be, how we're going to run the Company going forward, and we expanded something on the order of 63,000 hours of classroom training to get everybody skilled in the process of running right. And we're beginning to see that bear fruit now as we talked about the orders are down significantly, the oil rate is down, roughly 25% through the end of the year, TRIR is down about 17% something like that.

We've been able to stabilize the turnover rate pretty substantially, we are kind of somewhere in the mid-single-digits now which, as you recall, it was beyond in excess of 20% there for a while and through the slightest reduction that we announced some weeks ago. We obviously freed out some folks in trying to get those spiced up now so that we can not only run our operations more appropriately staffed, but obviously with the best talent that's available as well. So I think in terms of getting the table set, we've done a pretty good job there now, but then clearly we'd like to have the market tailwinds that we had when we announced the deal last January, but now obviously we've got some headwinds. So that's just going to necessarily mean that we are going to accelerate some of our efforts. So anything you'd like to add to that Kurt.

Kurt Kost

I think just along the lines that we were very successful in pulling together the team. That required a herculean effort to get two mines off of the PPOV that ran off in revolution. We've learned a lot from that experience, and we are looking to take those lessons and go forward and apply them to other parts of the organization. As of today we do have one property is under PPOV. But we are highly confident that by the end of the first quarter we will have that mine off of that status and we'll be able to move forward with and focusing on the productivity and maintaining the good safety performance that we've been able to work on here over the past six months.

Kevin Crutchfield

What was your question Shneur on the contract?

Shneur Gershuni – UBS

You had some contracts that were, were forcing you to keep some of your mines operational that you kind of indicated you wanted to close and so forth, the thermal prices falling, does that make it easier to renegotiate, to be able to close a mine that's negative free cash flow that's linked to one of those contracts?

Kevin Crutchfield

The plan is to deliver into the every contractual commitment that we have. I think the big issue was the over-the-counter exposure that we had. And as you will recall, I think when we closed the deal I think we marked everything to about $640 million, sort of that amount, and obviously,, that amount changes through time, so interestingly with the change in the market, things that were underwater and now above water vis-à-vis the OTC market anyway. So, it is giving us some flexibility, but as I think everybody knows at this point the market is fairly soft and to some extend even notional at least in the east for the near term. Anything you want to add there Paul?

Paul Vining

No.

Shneur Gershuni – UBS

One final thing on the synergies. You have maintained you synergies, yet you’ve touched your production guidance. Is it fair to conclude that if operations or market conditions were a little bit better than where they are right now that you would be talking about a better synergy number at this point?

Kevin Crutchfield

Yeah, because if you think about the sales and marketing synergies for example, you do think to increase your business, you have to free up tons to put into the met market or whatever. So, the uplift there is clearly not as great as it was a year ago when we started talking about these things. That's the bad news. The good news is, as we continue to look, we continue to find additional opportunities which gives us confidence that the numbers we’ve talked about here before are still very appropriate and we are still very highly confident that we will be on pace to achieve those just as we laid out if not a little better.

Shneur Gershuni – UBS

Great. Thank you very much guys.

Operator

Our next question comes from Brian Gamble with Simmons and Company. Please proceed with your question.

Brian Gamble – Simmons and Company

Hoping to touch on the met side mines, the 5.3 in Q4, obviously disappointing when you relate it to Q3, maybe you could walk through where – bucket out where that shortfall came from and then relate that to the guidance for next year, 20 to 25, a pretty wide range, if you could speak to how you get to both ends of that range?

Kevin Crutchfield

Let me talk about the latter part of that and then I'll ask Paul to talk about the fourth quarter. The other thing I'd tell you too is we are under a tornado watch here, so in a couple minutes, if nobody is here to answer your question, you'll understand why. In terms of the guidance, it obviously is a little bigger range. I mean the midpoint of that's 22.5, I think before we were at 25 in terms of midpoint. As we announced, what we did was we took offline a 1.5 million tons with that adjustment we made some weeks ago and reached the point when the markets gets soft, you have the spreads move between the various qualities and we've begun to observe, the spread’s starting to move a little wider with respect to some of the lower quality metallurgical coals and then it reaches a point when the question of whether you can sell it or not. And our view was, you don't force it into the market right now that really didn't want it. So, let's just shut it in and if it comes back later we can re-up if necessary. So that's gets you from kind of 25 to 23.5 and then what we did was we just built in another layer of conservatism around some of the lesser quality metallurgical coals, because we want to be diligent and prudent about how we place these coals. If it makes sense to do so and we can generate a margin that makes sense, we'll do it, and if not, we'll hold it and do it at a later date. It does not reflect -- the one thing I did want to be clear on is, it does not reflect capacities that we've talked about in the past. All that lighten capacity is still there. We just want to be prudent about how we dispatch into choppy market. You want to comment on the fourth quarter…

Paul Vining

Yeah, the fourth quarter I'd say there was a little bit of slippage on the export side and certainly less spot activity than we'd seen in the certainly the first half of the year when the pricing was a lot stronger.

Brian Gamble – Simmons and Company

Great. And then maybe to follow-up, on the thermal side, obviously weakness in the eastern market utility is not burning as much coal. You mentioned your port capacity is excellent – position to have, what is your – what are your capabilities in '12 or '13 to increase that 2 million to 3 million tons of thermal throughput to the export market.

Kevin Crutchfield

It's about pricing, it's not about logistics or capacity. I mean we've got the capacity to move 30 million tons out of the country and we've got a lot of headroom in terms of thermal both going down the river and off the East Coast.

Kurt Kost

Brian right now from a netback point of view, the APIP is obviously slipped off a fair amount and kind of brings you back to Central App sort of circa low to mid-60s. But longer term, we'd certainly like to see that a little better, but as Paul said, it's not really about capacity, it's about at what price points does it makes sense and at what price point do you make further adjustments to your asset base?

Brian Gamble– Simmons and Company

Great guys, I appreciate it.

Operator

Our next question comes from Michael Dudas, with Sterne, Agee. Please proceed with your question

Michael Dudas – Sterne, Agee & Leach

Good morning gentlemen. For Kevin or Paul, as we look out to the uncommitted metallurgical product for sale in 2012, help us with timing where export or domestic and maybe a quality check on when and how those coals would be put out through the rest of the year?

Kevin Crutchfield

Let's talk about the domestic side and then get into the lower stuff. The North American business is pretty well tucked in, and baked into what we would have under the committed category. So the influence going forward in '12 on any new additional sales relative to anything into North America is pretty minimal. What's left out there is a fairly big chunk of export across the quality spectrum. One of the areas if you look at the uncommitted or un-priced, I think it's about 17% of anticipated production if you do the math on the mid-point that comes out close to 4 million tons. And I'd say you can assume those 4 million tons are largely on a lower end of the quality scale and somewhat at risk relative to either pricing and/or demand and that's one of the reasons driving the fairly wide spread between the 20 million to 25 million tons. Timing wise still a lot of discussions going on the export side right now quite frankly both in Asia and overseas. I think that the settlement or the appearance of a settlement and we certainly don't have direct knowledge we just know what we read in the press like everybody here on phone. That there is – it’s some sort of benchmark settlement will at least set the stage for some discussion for some of our overseas customers on the coming weeks.

Michael Dudas – Sterne, Agee & Leach

And how have you found the legacy Massey customers relative to Alpha in the quality of coals and such? Has there been a much more acceptance with the change in ownership and is there a bit more thought relative to the security and scarcity of supply that certainly may not be evident today but may be evident as we move forward?

Kevin Crutchfield

Pretty positive actually. The quality is really between the two companies. They overlap somewhat, but there is just the portfolio we've got relative to both blends and the spectrum of qualities is probably bigger than quite frankly any other company in the world. So from I guess a menu list when we are moving in with customers, we flip the switch, move right in and they look to us as the supplier of choice, certainly out of the U.S.

Michael Dudas – Sterne, Agee & Leach

I appreciate those comments. One final question for you, Kevin. You mentioned in your prepared remarks about thermal market and sustainability. Could you maybe expand on that a little bit? Have to come to any conclusion what sustainability might be in Central App? Is it still a work in progress given such the headwinds that you have put forth? Ad how difficult might it be for Alpha to manage through that given your combined thermal exposure in Central App?

Kevin Crutchfield

That's a good question, Michael. It is a function of having a longer term view versus a snapshot view because I mean this is a marathon, it's not a sprint. We want to be thoughtful and prudent about how we comb through our portfolio to figure out what makes sense. But I do think longer term – I think Paul would agree that there is a place for Central Appalachian high BTU coal on the Atlantic seaborne markets. It's got a huge BTU advantage over really any of its competitors. The key for us is going to be sorting out logistics from a standpoint of where these assets sit and how you get it into the seaborne markets and then longer term what do you think is sustainable. But clearly in a $2.5 gas environment and winter days like today, 67 degrees here this morning, I’m not sure that's a good point in time to take a snapshot because things are going to change from here. I just don't think what we’re going through right now is sustainable by any stretch.

But I would also vocally acknowledge, I think we've been fairly transparent about this so far, that as we get through the number one thing of protecting the met franchise and augmenting it where we can, but then creating the durable long lasting sustainable thermal franchise, we're going to end up with a list of stuff that doesn't fit in either one of those buckets and we're going to have to sort that out. We are on it. We're aggressively pursuing it. We've got some of the most talented people in the Company looking at it. I don't think we will do anything that's imprudent or ill timed. But we are working very diligently through that process now. And our goal would be to keep everybody posted as we work our way through that. So that's where we are right now, Michael. I hope that answers your question.

Michael Dudas – Sterne, Agee & Leach

That’s very good, Kevin. I appreciate your thoughts. Thank you.

Operator

Our next question comes from Jim Rollyson with Raymond James. Please proceed with your question.

James Rollyson – Raymond James

Hey, good morning guys. Kevin, following up a little bit on Michael's question. Just, as you go through the process to sort out what you think is a sustainable steam coal portfolio, what falls through the cracks that doesn't make the cut. Is that something you would anticipate selling mines off or just shutting things down or just basically some combination?

Kevin Crutchfield

I think there are multiple paths there. I'm not sure we want to get into a whole lot on the call this morning, but there are assets that would certainly have some value to someone. But the question is under what sort of scenario, what sort of structure might you be looking at. Probably a pretty tough time to be, to take your example, selling thermal assets. It’s probably not a real good time to be doing that. So we just want to be diligent and thoughtful as we go to the process and end up in a good place and do something that makes good strategic sense for us long-term for assets that don't really fit the strategic profile of those first two categories. I think there's a host of options that you can pursue and that we're thinking about now. It’s just not really ready for prime time this morning, Jim. I hope you can appreciate that.

James Rollyson – Raymond James

Yeah, absolutely. Also, you referenced a couple of times in the write-up just the – your announcement from earlier in the month where you're cutting back idling some mines. You referenced the 4 million ton number. Just curious just to maybe point out or clarify, when I look at the midpoint of your old production guidance for '12 and the new production guidance for '12, the delta is about 9.5 million tons. So I presume some of the delta between those two is just where you're cutting out maybe shifts at mines or other ways of reigning in production to mask the current environment. Is that a fair assessment?

Kurt Kost

That's a piece of it and the other pieces, just against our position regarding some of the pushback we're seeing from the customers. We’re just being conservative in our forecasting going forward.

James Rollyson – Raymond James

Okay. And Frank, thoughts on what your tax rate might be for '12?

Frank Wood

Yeah, I thought a lot about that as I was being ready for the call, Jim. Kind of got my mind twisted up a bit. What you're going to find as you go through the '11 numbers, as you make the adjustments and try to relate taxes to adjusted pretax income – you're going to find I think a tax rate of about 11%. What we have found is as our numbers hover in that breakeven GAAP adjusted range; it actually goes all over the place. So what I – long-term we think it will revert eventually to 20%. I don't think that will necessarily happen in 2012 given the range of possible outcomes there. So I guess I would guide you just loosely sort of into the range of maybe roughly zero to 10%.

James Rollyson – Raymond James

Okay. That’s very helpful. Thank you.

Operator

Our next question comes from Lucas Pipes with Lucas Pipes with Brean Murray Carret. Please proceed with your question.

Lucas Pipes – Brean Murray Carret

Hey, good morning gentlemen. First maybe for a bit more color on your eastern cost. Could you walk us through the drivers that you think could push our costs lower in 2012 versus fourth quarter levels? And then also what do you think is the impact of the mine closings on your cost in the east?

Kevin Crutchfield

If it’s okay let me take a shot and give some overarching color and then let Frank and Kurt back me up. I think that number one our longwalls are actually running well right now, and as you know they have a big impact. We have a very, very good January. I don’t know if we are ready to disclose the numbers, but a very good January. As we talked about, the synergies are continuing to ramp up and will continue to ramp up through the year. We think just from a standpoint of running right amount (inaudible) inspections and orders and delays associated with that, we are going to continue to see downward pressure there which should help production and productivity. We talked earlier, at least notionally about the turnover was down and we think it's going to be pretty stable. Just in light of the circumstances, Central App is in with bit a fair amount of announced cutbacks already. There is going to be certain amount of reduced pressure on the labor pool. As Kurt and his team are working through the optimization process, this is going to lead to making sure that best employees are being retained and also having better and appropriately staffed coal mines.

And then I think last but not least is just in the market that we are in. At least for the time being purchased coal cost and pressures to do that are going to abate to some degree. Fighting against that obviously is, as you are shrinking your footprint, the rate at which you can absorb the fixed cost is going to be something that is moving the other direction, along with – when you think about the portfolio from a mine closure point of view, the remnant footprint is more met oriented and inherently the met coal mines are more expensive to run than the thermal coal mines. So that's going to create some, I would call that, enterprise cost pressure, not a particular coal mine and then obviously, with what we see going on in the world of fuel, a little bit of pressure there. But we actually feel pretty good about that because we are already about 62% hedged for this year at numbers that are well, well below the current spot market prices for fuel. So, I would look to Frank and Kurt to augment that further from a cost standpoint.

Frank Wood

Yeah. Kevin, I think you’ve hit on all the major factors that are going to impact it. I think it will, as you all have seen, quarter-to-quarter will move around a little bit primarily, probably driven by where the volumes will tend to move. But I feel pretty confident, particularly with what we are seeing on the synergy realization side and some of that that we are going to able to hold the line on cost, which is essentially what the guidance projection indicates. I mean we are at $74 – we were just shy of $75 for total year 2011, with Massey in there for seven months and we are projecting to be basically in that same range for 2012 all in.

Lucas Pipes – Brean Murray Carret

Thank you. That’s helpful. And then as a quick follow-up. You mentioned supporting and growing your met coal production and then a couple of questions on the back of that. First, what percentage do you think of your CapEx is associated with growing met coal production? And then some of your competitors mentioned that they essentially keep their met coal mines in hot idle. Is that also what you're planning to do? And then lastly, Rowland and Mariana, the developments there, are they still on track for opening in 2013, 2014?

Kurt Kost

Yeah, those projects were still on track, particularly the Mariana project is on track for production beginning in 2013. And if we look at our overall capital portfolio for this coming year, we have roughly $30 million to $40 million targeted for Mariana and probably another $10 million to $20 million associated with other metallurgical just expansion of existing operations on the metallurgical side. So it's a key part of our focus going forward. The Rowland properties are probably still a few years out in advance, but our development and expansion at Deep Mine 41 is another area along with the Mariana. And when the market comes up to the point where it's ready to sustain and accept the higher levels of production, we'll have the high quality coking coals to deliver.

Lucas Pipes – Brean Murray Carret

What do you think is your met coal production capacity, let's say, two years out or so in a reasonably healthy met coal environment?

Kevin Crutchfield

It doesn't change from what we've talked about before. I would still characterize it very strongly in the 28 million to 30 million ton range. There is upside from there, but that's what we've talked about publicly so far. Want to go back to the Mariana project just for a second that Kurt was talking about. That's a project (inaudible) low quality perspective that is really (inaudible) world class coal. I mean it's sub-20 vol low ash, low sulfur and that coal is going to have a market under any set of markets circumstances and that's why we’ve decided to proceed full bore on that one.

Lucas Pipes – Brean Murray Carret

That’s very helpful. I appreciate all the information. Thank you.

Operator

Our next question comes from Kuni Chen with CRT. Please proceed with your question.

Kuni Chen – CRT Capital Group

Hi. Good morning everybody. I guess just first-off, Frank, can you just run through the – what's committed in price for 2013 again on the eastern thermal and mets. You ran through that kind of quickly in your earlier comments.

Frank Wood

I'll be happy to do that Kuni. Just bear with me while I find that place in my prepared remarks. Yeah, this is as of the early part of this month, Kuni. We had 430,000 tons of metallurgical coal committed and priced at a price of $131.18. There's another 9.9 million tons that are committed but un-priced. And with regard to Eastern steam coal, we had 7.9 million tons committed and priced at an average realization of $68.19 and then another 7.6 million tons that are committed but not priced. And in the PRB we have 34.7 million tons of coal committed and priced at an average realization of $13.12. In the case of PRB, we don't have any committed non-priced.

Kuni Chen – CRT Capital Group

Okay. Great. Thanks. Then I guess just on the production cuts, obviously the 4 million makes sense and you think that's sufficient at this time. Is there any way to give us some sensitivity? Let's say if there were more production cuts down the road, let's say on the order of 1 million tons, what that might do to your unit cost?

Frank Wood

It's going to depend on the exact configuration of where those tons are cut so to speak. I mean because again our mines run the gamut on cost, and so sometimes it will help the average, sometimes it will hurt the average. Also depends a little bit on how we do that, whether we maintain the mines. So I'd be hesitant to try to give you a figure that encompasses all circumstances.

Kuni Chen – CRT Capital Group

Okay. Fair enough. I’ll turn it over. Thanks.

Operator

Our next question comes from Brett Levy with Jefferies & Company. Please proceed with your question.

Brett Levy – Jefferies & Company, Inc

Yeah, most of my questions have been asked. In terms of the breakdown of the goodwill write down between Massey and legacy Alpha, was that for the 7.45?

Kevin Crutchfield

Yeah. Let me try to respond to that as best I can. Goodwill, like cash, becomes fungible once you put it on the balance sheet. So it doesn't necessarily have a marker with it. However, when you look at our balance sheet prior to Massey, what you find is we had just shy of $400 million of goodwill. So obviously the total amount of the charge exceeded what we previously had. So that would lead myself and all of you to conclude that some of it is related to Massey. Whether that's the exact number that relates to Massey in terms of that difference, I really can't say. But there is a portion of it that would relate to Massey. It’s also conceivable by the mechanics of the way it works. The portion of it did relate to prior goodwill, but I think it's fair to say the majority would relate to Massey.

Brett Levy – Jefferies & Company, Inc

Got it. This is kind of a bigger picture question. It used to be that you'd see eastern thermal coal was twice as many BTUs per dollar versus natural gas. Obviously the pricing has moved closer to purity. Do you have a sense as to where you guys come out in terms of the BTUs per dollar versus natural gas at current prices? And then also, do you have a sense that any customers on the eastern thermal side or even PRB are saying, you know what, we are looking at perhaps changing our frontend from coal fired to natural gas fired or any projects that were on the table, they have gotten canceled as a result of this? I am trying to look at a couple of more years and see if the demand destruction is going to be any more severe than a gradual version of this?

Kevin Crutchfield

Go ahead, Paul.

Paul Vining

Thanks, Kevin. Yeah, I think – but it's very geographic driven. There are some parts of the country where coal is still very strong, very much in the money. Certainly at $2.50, there is a lot of public studies out there and information flowing around about gas plants, particularly the high efficiency, newer combined-cycle plants moving up on the dispatch curve and kicking some of the older less efficient coal plants down the dispatch curve. So in a broad sense you can say there definitely is some substitution and some pushing and shoving on the dispatch curve and it's going to be a function going forward of transportation rates, coal pricing and really what happens in the gas markets.

Brett Levy – Jefferies & Company, Inc

In terms of what you are hearing from your customers though, has there – you guys obviously meet with these guys on a regular basis. You are talking 2013, you are probably thinking about 2014. Has anyone said we are looking into the idea of switching some of our frontend based on what we see for natural gas here?

Paul Vining

Yeah, in the rehab merchant generators in totally deregulated markets when we ship to customers like that. That's happening today. I mean gas is clearly displacing coal. Now, is anybody looking at their coal assets and saying, we're going to mothball them or bulldoze them? No. I don't think anybody is doing that, but certainly there is some inventories building in certain regions of the country and there is some heavy gas burning going on in lieu of coal because of the lower gas prices.

Brett Levy – Jefferies & Company, Inc

And then any cancellations in terms of coal-fired plants that we’re going to come on that you have heard get cancelled?

Paul Vining

No, not really. I mean, what's in the pipeline and getting built is going to get finished.

Brett Levy – Jefferies & Company, Inc

Thanks for the time guys.

Operator

Our next question comes from Mark Levin with BB&T. Please proceed with your question.

Mark Levin – BB&T

Hi gentlemen. Just a couple of very quick questions, more market related. When you think of Central Appalachia, how much production do you estimate has cash cost above $75 a ton? And then on the met side, how much production do you think, specifically maybe some of the lower quality met production has cash costs above let's say $85 a ton?

Kevin Crutchfield

Well, that's a hard question. Mark, I think if you think about the cumulative cost curve for Central Appalachia, if you can break it out as steam, what's north of $75, maybe a quartile or maybe even a little less, 20% or something and that's just a guess. And on the met side, how much met production falls above $85 a ton, probably maybe that's just the midpoint or the 6th percentile perhaps.

Mark Levin – BB&T

Okay. Very helpful. Second question has to do with the rails, Kevin. I mean there has been some discussion that the rails have been a little bit more – what’s the word I’m looking for, forgiving when it comes to rates with regard to export thermal coal, but a lot more uncertainty regarding export met movements. And specifically when you think of some of the lower quality mets maybe needing a little bit of help from the rails if you want to become more economic in the export market, is there any reason for optimism this time around with regard to the rails as it pertains to sort of met rates looking at the demand picture as it is today?

Kevin Crutchfield

Yeah. I think in simple terms, yeah there is reason to be – there to be at least some degree of optimism. But as the rails are sitting in a very good position in terms of current rates because they are going to dictate to some extent the number of terms they get exported and if they keep rates where they are or god forbid raise them, that's going to have an impact. Whether it's an adjustment to the tariff or whether there are one off negotiations based on the quality of coal where it's going, et cetera. I think our strong expectation is that we would foresee some rate relief on the near-term and I think your sub division around thermal side is very accurate too. Seems like the rail guys are moving towards a price structure that's more associated with the product that's being hauled as opposed to the weight that's being hauled. So do you want to add anything to that, Paul?

Paul Vining

No.

Mark Levin – BB&T

Great. Thank you very much.

Operator

Our next question comes from Brandon Blossman with Tudor, Pickering, Holt. Please proceed with your question.

Brandon Blossman – Tudor, Pickering, Holt

Good morning gentlemen. We've been doing Central Appalachia for the entire call, so to mix it up a little bit, can we change geography and talk a little bit about the pit (inaudible) production Emerald and Cumberland? Just a review of how it did last quarter and what your expectations are for '12, both on a production standpoint and just any issues around deliverability into customer contracts and demand for the product.

Kurt Kost

On the production side, Brandon, in the fourth quarter, the mines ran pretty solid. We are very pleased with some of the improvements in the geology that we are seeing at our Emerald Mine, Emerald obviously and when you look at the overall annual production struggle in 2011 as a result of sand storm intrusions into the longwall base. But towards the back end of the fourth quarter we saw conditions improve and going forward we are forecasting to see a significant improvement in Emerald over the course of 2012. The Cumberland Mine ran strong last year and we continue to expect Cumberland to run very well going forward in 2012. From a standpoint of overall production, I think the big questions will be more along the lines of customer acceptance. We have the majority of our product booked. But given some of the challenges that we are seeing on the ability to dispatch our coal into the lower priced gas markets, we'll probably end up having some discussions with the customers in trying to work out the issues of deliveries so we can maintain adequate inventories at the coal mines. Also from a cost standpoint, we saw things in the low $40 range and we are expecting to be able to maintain that going forward in 2012.

Kevin Crutchfield

Brandon, one another point of color on what Kurt said and I fully acknowledge that one year or one month is not a year make. But January for example the longwalls I think generated about 1.3 million tons, which is a nice pace compared to where we end. They always want to caveat that because we are talking about longwalls and some interesting geology. But we are off to a very, very good start so far and the trend continues everywhere. So we are off to a very good start in 2012 on the wall.

Brandon Blossman – Tudor, Pickering, Holt

Well, that sounds like great news on that front. And then following up on that, PRB exceptional quarter fourth quarter. What are the expectations kind of both sets of questions around production for '12 and what is changing or moving the needle from fourth quarter down to the '12 guidance and then what as far as incremental tons. It looks like you are fully committed for '12. Is there any chance for plus or minus against that number?

Paul Vining

Yeah. This is Paul Vining. I think Kurt can comment on the production side, but I’d say the outlook for 2012 in the Powder River is very much an issue of execution into certain markets. And you’ll see that we’ve indicated strong sales book, but a fairly wide range in the west and that really is a recognition that there are some customers, particularly long distances down into the south and say, east of the Mississippi in the Midwest that are struggling with some very low natural gas and low power prices, and we are working with those customers. We fully expect to realize the full value of any contracts that we have in place. But what form and shape that takes is yet to be determined.

Kurt Kost

Operationally the mines ramped very well in the fourth quarter. If you annualized that production it was like 55 million, 56 million tons on a full year basis. So capability-wise, execution in the field, the infrastructure is there to do very well. It’s just mainly going to be matter of sales and as Paul mentioned, the ability for the customers to manage with the higher inventories and the production coming out of the basin.

Brandon Blossman – Tudor, Pickering, Holt

Useful color guys. Thank you very much.

Operator

Our next question comes from Justine Fisher with Goldman Sachs. Please proceed with your question.

Justine Fisher – Goldman Sachs

Good morning. So given that you just mentioned that the cost for the Northern App longwalls were in the low 40s, can you tell us what percentage of your Central Appalachian tonnage I guess made a positive cash margin in 2011?

Kevin Crutchfield

Wow, good luck with that, Frank. Let me start with the met side.

Justine Fisher – Goldman Sachs

No, sorry. Just your Central App thermal side, not your met.

Frank Wood

Okay. You’re going to let me get off on the easy start? By and large as we've alluded to, the optimization process, there have been certain operations identified ever since we acquired Massey that when you look at current market prices, as opposed to factoring legacy contracts, there are some operations that don't meet current market, in other words costs are above the current market. That's been moving around a little bit. I'm trying to remember exactly how many tons that encompasses, but I want to say it's – Kurt, you might remember. It’s somewhere in the few million tons, 2 million, 3 million, 4 million range I think. They conceivably are in that situation. Not necessarily that they didn't contribute in 2011 when they were under various contracts, but with regard to where pricing was in the second half of the year and where it's been moving to, they are questionable.

Kurt Kost

Right. Yeah, that's in the ballpark.

Frank Wood

Yes.

Justine Fisher – Goldman Sachs

Okay, great. And then another question just as far as the – I know it's tough to tell because the evaluation of the optimization for Central App hasn't been done yet. But would that change the value of your PP&E on the balance sheet if you said okay, here are some packets of reserves, we don't think we can sell them, but we think that we pretty much are not going to produce them given where the five year Central App coal price forecast goes. Would that end up changing the way you account for the value of those assets on the balance sheet?

Kevin Crutchfield

Well, it depends on whether it's a short-term view or a long-term view. If that were to be a long-term view that those assets are out of the money, yes eventually that would – eventually at the right time that would have an effect on conceivably on the carrying value for those assets.

Justine Fisher – Goldman Sachs

Okay. And is there a timeframe that you guys are looking out to in order to determine whether or not they'd be in the money? Is it five years, is it 10 years?

Kevin Crutchfield

I'd say it's more than that, probably in the three to five year time horizon.

Justine Fisher – Goldman Sachs

Okay, great. And then one last question just on the international market. Given where global prices have gone for API2, what do you think would be needed to drive them up to a level where they would make exports more profitable? Obviously if rail rates can change, that's one thing. But what do you think needs to happen given that a lot the coal from South Africa is going to Asia already. What do you think would need to drive pricing back up?

Paul Vining

This is Paul. That's a good question and I think just backing up for a minute, if you look at what's happened to the API2, you can pretty much correlate it a bit with what's happening in Central App. And in the past couple of months, there's been a shift of Central App production into the Atlantic market. It’s pushed some arbitrage opportunities of actually Columbian coal moving from Atlantic into the pack room as the new castle prices have held up. And somewhat it’s representative of some distress coal that's out there in the part of utilities who don't want to burn it and who are ebbing between $2.50 gas in their contract book.

As we go through the year, we're going to get to a more solid set of economics to come off production and realistic operating cost for Central App producers and we should see the curve move up in API2 and if you look at the carry right now between '12 and '13, it's on the order of $10 or more per ton. That's a recognition that there's going to be a shift here. And if you look at 2013 for instance and you take freight and you take some railroad rates, you can come up with a handle for Central App 12,000 plus BTU coal that's north of $70 a ton at the mine. So from a competitive standpoint, I'm pretty optimistic about the Central App coal shifting some tons, significant tons from these domestic markets into the Atlantic realm.

Justine Fisher – Goldman Sachs

Interesting. So utilities are actually selling their coal to the export market?

Paul Vining

Oh, absolutely and that's part of what's happened. If you take a look at the OTC markets for both – PRB and Central App both, the reason they're so rather ugly quite frankly here in the near quarters is because everybody's book is long and they’re shoving tons into the OTC and they’re doing it because producers like ourselves are holding their feet to the fire on performance and they are taking actions to try to offload those tons and that's shoving some of that product out of the country.

Justine Fisher – Goldman Sachs

Thank you so much. I appreciate it.

Operator

Our next question comes from Chris Haberlin with Davenport. Please proceed with your question.

Chris Haberlin – Davenport & Co

Good morning. On synergies, you had previously talked about reaching $150 million by midyear 2012. I wanted to see if that's still the target and then if you could expand a little bit on maybe what kind of synergies you've generated to-date?

Kevin Crutchfield

We fully expect to be at that run rate by midyear 2012, Chris, absolutely. I think our internal accounting – and we do have a process set up around this so that synergies are verified and real. I think through the end of 2011 we were somewhere circa $40 million and that run rate will continue to build this year. We are looking very hard at the strategic sourcing area just given the buying footprint that Alpha possesses today in addition to a lot of maintenance opportunities, preparation, plant efficiencies and plus the other things we have talked about, we think will contribute very handsomely to that longer term goal.

Chris Haberlin – Davenport & Co

Okay. And then as you look at that longer term goal, how much of that – I guess particularly on the marketing synergies, how much of that is price dependent and what's the risk that if met prices were to continue to fall that that number might get ratcheted down?

Kevin Crutchfield

That's a good question. As I mentioned earlier, it is price dependent because some of these synergies are – you do X, which generates a ton that you are going to sell into the thermal market that now you sell into the metallurgical market and the price is not as good. So it compresses the opportunity value of that particular synergy. But as we've continued to look and own the company now for, I don't know, I guess seven or eight months, we continue to find what we believe are more, very real opportunities, again maintenance and sourcing being one of those. So we think we can make up the in-market compression that we experienced. We can make it up somewhere else, the other synergy buckets that we continue to evaluate. Aand we still feel very comfortable with the numbers we have published today, very comfortable.

Chris Haberlin – Davenport & Co

Okay. And then just switching topics here to met export. You mentioned that you had a couple of customers that had pushed schedules out some. Can you give us an idea of how much met volume was pushed out from Q4 into 2012? And then as we've gone through about two months of this year, what have you seen so far on that side? Are you continuing to see push out or customers starting to take more of the contracted volumes?

Paul Vining

Yeah, I'd say that, it's not unusual, particularly when you get to the end of the year where you have a couple of boats that can move one way or the other. You sit there last week of December hoping to be-all dates 12/31 instead of January 1st. I think you can assume there is probably a few 100,000 tons that slipped from fourth quarter into the first quarter and given what's going out in Europe, there is a few 100,000 tons that have probably rolled from the first quarter into the second quarter. It's a kind of a continuum that's somewhat related to some of the softness primarily in Europe right now.

Chris Haberlin – Davenport & Co

Okay. Thanks very much. I appreciate the color.

Operator

Thank you, ladies and gentlemen. We have come to the conclusion of the allotted time that we have for our Q&A session today. So at this time, I would like to turn the call back over to management for closing comments.

Kevin Crutchfield

We'd like to thank everyone again for their interest in Alpha Natural Resources. We appreciate your participation this morning and pleased to keep you updated as we move forward in these interesting and dynamic times. Thank you very much and have a great day.

Operator

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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