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Fri, Jan. 22, 12:33 PM
- Morgan Stanley analyst Evan Kurt expects steel prices to continue to rise and average $445/ton in 2016, which he says may result in downward revisions to Wall Street estimates for U.S. Steel (X -1.2%), AK Steel (AKS -1%) and Nucor (NUE +0.2%).
- Kurt calls Steel Dynamics "the safest way to play a modest steel market recovery,” while heavily shorted names such as X and AKS could squeeze into results, "but we would sell the news."
- The firm rates STLD at Overweight with a $27 price target, while X, AKS and NUE are all rated Equal Weight with respective targets of $19, $5 and $59; Cliffs Natural Resources (CLF -7.3%), rated Underweight with a $2 target, is called a “high cost producer in an oversupplied iron ore market.”
- "No need to own coal names into the quarter,” Kurt writes, as coal market conditions have deteriorated with a warmer than normal winter leading to large build-ups of coal inventories; he downgrades Consol Energy (CNX -0.8%) and Foresight Energy (FELP +11.4%) to Equal Weight with respective $29 and $12 price target.
Dec. 17, 2015, 11:42 AM
- U.S. Steel (X -8.9%), AK Steel (AKS -6.8%), Cliffs Natural Resources (CLF -8.7%) and Foresight Energy (FELP -3.6%) are all downgraded to Sell from Hold at Deutsche Bank, which says balance sheets in the segment have reached distressed levels amid constrained cash flows in the weak commodity price environment.
- Necessary capacity cuts could be slow in coming due to the "momentum and magnitude of new projects still ramping, natural currency hedges in a number of producing countries, continued cost-cutting, barriers to exit and social goals such as maintaining employment in countries such as China," the firm writes.
- In cutting its price target for AKS to $1 from $3, Deutsche Bank says it expects free cash flow to remain constrained for another two years, with the company forced to draw down on its revolver ($748M as of Q3) to fund part of its capex and interest expenses.
Dec. 11, 2015, 9:59 AM
- Foresight Energy (FELP -9.4%) is in default following a Delaware court ruling earlier this week requiring that it buy back $600M in bonds.
- As of September, FELP said it had borrowed ~$377.5M under that credit agreement, originally entered into in 2010.
- FELP said earlier this week it is negotiating with the bondholders who successfully brought suit against the company over its agreement to be acquired by Murray Energy.
Dec. 8, 2015, 12:44 PM
Dec. 8, 2015, 11:29 AM
- Foresight Energy (FELP -27%) plunges following receipt of an adverse opinion regarding bondholder litigation that requires the company to make an offer to purchase the notes for 101% of the $600M principal amount.
- Citigroup downgrades shares to Neutral from Buy with a $3 price target, cut from $8, reflecting the high probability that the distribution will be suspended to preserve liquidity.
- The firm also points out that FELP is facing headwinds from the weak coal markets and a prolonged shutdown at its Deer Run Hillsboro mine.
Dec. 7, 2015, 6:49 PM
- Foresight Energy (NYSE:FELP) -15.5% AH after saying it likely will suspend distributions on its common units by the end of the year.
- A Friday decision by the Delaware Court of Chancery found that Murray Energy’s purchase of a big stake in FELP triggered a debt repurchase provision, which could force FELP to pay 101% of the premium on $600M in bonds it issued two years ago.
- "If discussions with the bondholders are unsuccessful, it could result in an adverse judgment being rendered," FELP says. "We would seek to get such order stayed while the order is appealed to the Delaware Supreme Court, but such a stay could require posting of a bond."
Oct. 29, 2015, 12:53 PM
Oct. 29, 2015, 9:10 AM
- Foresight Energy (NYSE:FELP) says CFO Oscar Martinez will resign effective Nov. 13, and chief accounting officer James Murphy will assume the duties of principal financial officer.
- FELP says the departure is part of the integration plan that combined its corporate functions with Murray Energy due to the partnership formed earlier this year.
- FELP -10.1% premarket after reporting weaker than expected Q3 earnings.
Jul. 22, 2015, 11:34 AM
- J.P. Morgan finally gets around to downgrading Peabody Energy (BTU +11.7%), cutting its rating to Neutral from Overweight, two days after shares hit a 52-week low.
- After Arch Coal ([ACI]] +1.1%) and Alpha Natural’s (ANR +8.1%) share prices fell below $1, the spotlight fell on BTU, the firm explains, adding that the stock is vulnerable to squeezes, as 36% of BTU equity is now shorted; but in view of the firm's cautious commodity view on natural gas into year's end, it says it is "uncomfortable" with its Overweight rating on BTU.
- JPM says its coal Overweights are now restricted to Alliance Resource Partners (ARLP -1.9%) and Foresight Energy (FELP +2.1%).
Jul. 14, 2015, 3:43 PM
- Challenging results should be expected across the spectrum of coal producers, including Peabody Energy (BTU -3.3%), Cloud Peak Energy (CLD -1.5%), Alpha Natural Resources (ANR +0.6%) and Arch Coal (ACI +5.1%), Cowen analysts maintain, seeing average Q2 EBITDA estimates for the group ~4% below consensus.
- Among the coal names, Cowen says it is farthest below consensus for ACI (13% below consensus) and ANR (27% below consensus); amid deteriorating financial conditions, self-bonding capacity has become a hot topic for these companies and will be at the forefront of Q2 earnings calls.
- Cowen considers Alliance Resource Partners (ARLP +0.2%) its top pick and believes the company's White Oak transaction solidifies distribution growth potential; the firm rates ARLP, ACI and Foresight Energy (FELP -2.3%) at Outperform, and Natural Resource Partners (NRP -1.3%) and Teck Resources (TCK -0.2%) at Market Perform.
Jun. 30, 2015, 11:25 AM
- Coal companies (KOL -0.8%) are surrendering much of the gains they enjoyed following yesterday's Supreme Court decision against the EPA's mercury emissions regulations, as the initial reaction may prove rosier than the actual benefit to the coal industry.
- The consensus is that the ruling might force the EPA to be less aggressive about its efforts to cut pollution but will not help coal overcome competition from gas and alternative energy; also, the oversupply of natural gas likely will continue to depress the price of gas and reduce coal sales.
- The ruling could prove too late to provide a reprieve for most of the utilities that already had spent the resources to retrofit or retire, Sterne Agee analysts say, but lower MATS compliance operating costs could help some PRB coal power plants compete more aggressively on the margin with gas-fired power plants.
- Citigroup notes the news has important implications for the Clean Power Plan proposal scheduled to be finalized mid-summer 2015, and views the ruling as a net positive for the U.S. thermal coal market and miners such as Peabody Energy (BTU -11.3%), Alliance Resource Partners (ARLP +1.5%),Alliance Holdings (AHGP -0.1%) and Foresight Energy (FELP +0.1%).
- Also: ACI -4.7%, ANR -6.9%, CLD -7%, WLB -2.9%, WLT -12.9%.
Jun. 1, 2015, 3:24 PM
- Peabody Energy (BTU -9%) and Cloud Peak Energy (CLD -9.3%) are sharply lower after Goldman Sachs recommends investors sell shares, seeing BTU as something of a proxy for its bearish view on met coal prices - which the firm expects to remain pressured through 2017 - and CLD as a pure-play exposure to Powder River Basin thermal coal.
- However, the firm sees "idiosyncratic opportunities" for substantial gains in the coal sector, identifying Illinois Basin thermal coal as the one thermal coal segment where fundamentals are not negative and naming Foresight Energy (FELP +3.5%) a Buy for its pure-play exposure to the IB and attractive drop-down potential following the recent Murray Energy transaction.
- Goldman also maintains its Buy rating on SunCoke Energy (SXC -1.2%) given low-cost, organic growth from dropdowns, a strong balance sheet that improves prospects of inorganic growth and attractive valuation.
- The firm also maintains its Neutral rating on Arch Coal (ACI +2.8%) while upgrading Alpha Natural Resources (ANR +2.6%) to Neutral from Sell.
Feb. 26, 2015, 2:45 PM
- J.P. Morgan analysts see some encouraging signs for coal (NYSEARCA:KOL), which would be good news for companies such as Peabody Energy (BTU -5.7%), Cloud Peak Energy (CLD -5%), Alliance Resource Partners (ARLP +0.9%) and Foresight Energy (FELP -1.2%).
- Coal equities have bounced off lows, the JPM crew says, which meshes with its belief that the greater financial challenges faced by oil and gas E&Ps should reduce natural gas supply and help coal prices later this year and into 2016.
- JPM has Overweight ratings on the two MLP coal miners ARLP and FELP, which it expects to benefit as the gas market tightens in 2016 and with the added attraction of yield in a yield-starved world; BTU and CLD enjoy stronger balance sheets, which should see the companies through what could still be a sloppy coal market in 2015.
- Alpha Natural Resources (ANR -6.9%) and Arch Coal (ACI -4.3%), however, acquired so much debt that their equity effectively has become primarily an “option" on fluctuations in the coal market, the analysts say.
Nov. 6, 2014, 3:35 PM
- “The fundamental case for coal is strengthening but requires several years of patience," and coal miners (NYSEARCA:KOL) still pose too much short-term risk for investors, J.P. Morgan analyst John Bridges says.
- The coal sector is "very much a weather trade" which is sensitive to this winter’s temperatures, Bridges says, "consequently, without another particularly cold winter or a direct cyclonic hit on Australia’s coking coal mines, coal prices and thus the coal equities are likely to remain volatile through the 2014-15 winter."
- In the sector, Bridges recommends Consol Energy (CNX +0.6%), Alliance Resource Partners (ARLP -0.4%) and Foresight Energy (FELP +1.7%), as only high-yielding coal MLPs are resonating with investors.
- Most big coal names are adding to yesterday's gains, as the IEA predicts world coal demand to grow 2.3% in 2015, mostly undaunted by stricter clean air regulations and competition from cheap natural gas: ANR +5.1%, ACI +4.7%, BTU +0.5%, WLT -1.1%, CLD +0.9%.
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