Mon, Jun. 29, 11:38 AM
- Coal stocks (KOL +0.3%) are rallying after the Supreme Court threw out the EPA’s first-ever rules requiring coal-fired power plants to cut emissions of mercury and other toxic air pollutants, saying the agency should have weighed the cost of compliance in deciding whether to regulate.
- The ruling means the EPA must go back to the drawing board, which possibly could push any new emissions rules past Pres. Obama’s time in office.
- Coal companies are enjoying hefty gains: WLT +28.2%, ACI +15.1%, BTU +11.2%, ANR +5.4%, CLD +5.2%, RNO +3.9%, WLB +1.9%, CNX +1.4%.
- Select utility names also are seeing some strength: AEP +1%, PCG +0.9%, D +0.6%, NEE +0.6%, EXC +0.3%.
Fri, Jun. 26, 11:38 AM
- Peabody Energy (BTU -10.2%) sees continued weakness, down ~10% so far today and 20% on the week, although all coal mining shares (KOL -1.5%) have been hammered in recent days.
- Moody's downgraded BTU's corporate credit rating last night to B3 from B2 with a negative outlook, reflecting the rating agency's expectation of a more precipitous deterioration in the company's credit metrics than previously forecast due to the ongoing decline in the seaborne met coal markets.
- The firm sees BTU's debt/EBITDA ratio approaching 9x in 2015 and leverage remaining elevated at ~7x in 2016; absent asset sales, BTU is seen generating negative free cash flows in 2015 and 2016.
- However, BTU and other coal names have been sliding all week; Barron's Ben Levisohn speculates investors may be worried about the pending Supreme Court decision - in light of the Court's "having tilted leftward in its rulings" this week - on whether EPA rules that caused utilities to shutter some coal-fired plans are legal.
- Related tickers: ACI, WLB, CLD, ANR, WLT, CNX, NRP.
Wed, Jun. 24, 2:50 PM
- A bill to require California's state pension funds to sell their investments in companies that generate at least half their revenue from coal mining has passed a committee vote in the state Assembly.
- Calpers says it invests in 20-30 thermal coal mining companies as defined under the bill, valued at $100M-$200M, including Peabody Energy and Arch Coal; Calstrs has coal holdings of ~$40M.
- Pension funds are under pressure from environmental activists to halt investing in fossil fuels; Norway's parliament voted recently to cut coal investments by its $880B sovereign wealth fund, while some U.S. universities have made similar moves.
- Coal stocks already were trading lower before the news: BTU -10.1%, ACI -9.4%, ANR -7.4%, WLB -2.7%, CNX -1.8%, KOL -0.4%.
Wed, Jun. 17, 7:17 PM
- Benchmark prices for metallurgical coal used in steelmaking have plunged an additional 15% from levels that had already hit a six-year low, as Japanese buyers reportedly are signing contracts that pay $93/metric ton, the lowest price since 2004.
- This summer’s price decline is so steep that it could force cutbacks around the world, even at mines that were profitable as recently as the spring, says Doyle Trading's Ted O’Brien, adding that more U.S. mines likely will be forced to close.
- Prices for both met and steam coals are not likely to recover substantially through at least 2016, putting U.S. miners in a position where they cannot avoid losing money, BB&T analyst Mark Levin says.
- Relevant tickers: KOL, BTU, WLB, CLD, ANR, ACI, WLT
Fri, Jun. 12, 3:11 PM
- Peabody Energy (BTU -8.1%) and Arch Coal (ACI -12.3%) plunge to all-time intraday lows amid concerns that they will have to pay more for insurance that covers environmental damage.
- "Investors don’t know how to handicap this self-bonding issue,” says Doyle Trading CEO Ted O’Brien. "Until the companies come out and give Wall Street certainty that they know how to deal with it, I think we’re going to be stuck in this vortex."
- Wyoming regulators have told Alpha Natural Resources (ANR -10.6%) that it no longer qualifies for a self-bonding program which allows coal producers to cheaply insure their clean-up costs in case of bankruptcy, and are reviewing financial data from BTU and ACI to see if they still qualify.
- Two other coal miners, Cloud Peak Energy (CLD -6.7%) and Walter Energy (WLT -8.2%), also have sunk to record intraday lows.
- ETF: KOL
Wed, Jun. 10, 2:45 PM
- U.S. coal companies worried about the Obama administration’s proposed clean air rules actually face a bigger threat: cheap, abundant natural gas, which is crushing coal prices with no letup in sight, according to a Bloomberg report.
- Shale formations in the eastern U.S. are yielding record amounts of gas, pushing prices of the fuel in the region below coal, which already had been 60% less expensive on average since 2001; as power generators use more gas, coal is piling up at the fastest rate since 2009.
- U.S. utilities are on track to end 2015 with 171M tons of coal in reserve, the highest since 2012, says a BB&T analyst - “It’s going to be ugly,” says Doyle Trading's Hans Daniels. “When stocks build up like that, it just defers the pain for the coal companies.”
- Most coal names are sharply lower: BTU -2.1%, ANR -9.7%, ACI -8.4%, CLD +0.9%, WLB -1.9%, CNX -1.1%, WLT -1.6%.
- ETFs: UNG, UGAZ, DGAZ, KOL, BOIL, GAZ, KOLD, UNL, DCNG
Tue, Jun. 9, 2:24 PM
- The D.C. Circuit Court of Appeals dismisses a challenge to an Obama administration proposal to cut carbon emissions from U.S. power plants, ruling the lawsuit was premature.
- Coal companies (NYSEARCA:KOL) and 14 coal-dependent states sued to stop the draft regulation that is a priority for the Obama administration, but the court said the challengers cannot challenge the EPA’s proposal until the administration issues a final regulation, which is expected in August.
- The challengers said the regulation - which, if enacted, would result in a 30% cut in power-plant carbon emissions by 2030 based on emissions levels in 2005 - was such a dramatic, labor-intensive overhaul that it was an immediate threat to the U.S. coal industry.
- Coal equities are mostly higher today: BTU +6.8%, ANR +0.4%, ACI +0.9%, CLD -1.6%, WLB -0.3%, WLT +0.6%.
Mon, Jun. 8, 11:48 AM
- Walter Energy (WLT -30.8%) plunges in reaction to a report late Friday that it is working with its lenders to finalize plans for filing for Chapter 11 bankruptcy, and share prices of other coal producers also are lower.
- Cowen analysts say a WLT bankruptcy filing was widely expected but more are likely to come as companies evaluate their options; some may be able to steer clear of bankruptcy but will exit the downturn shackled by major debt service and competing with others that reorganize and exit the downturn leaner and meaner, the firm says.
- Also: BTU -0.9%, ACI -1.9%, ANR -0.6%, CLD -1.2%.
Thu, Jun. 4, 5:45 PM
- The U.S. Interior Department says it is examining the government "self-bonding" program that gives coal companies a discount on insuring their clean-up costs in case of bankruptcy, to determine whether companies such as Peabody Energy (NYSE:BTU) still qualify for the break.
- BTU - which had ~$1.38B in clean-up liabilities insured by self-bonding as of the end of March - says it and its various operating subsidiaries remain entitled to use the program, but the subsidiaries also are under scrutiny because BTU is relying on their balance sheets to self-bond as its own finances worsen.
- "If a parent company is not fit to self bond, how can the subsidiary qualify? That is something we're looking at now," Reuters quotes one government official as saying.
- Last week, coal regulators in Wyoming stripped Alpha Natural Resources (NYSE:ANR) of its right to self bond after determining that its finances were too weak; ANR's right to self bond in West Virginia was frozen after its 2014 securities filings showed it did not meet crucial financial benchmarks.
Wed, Jun. 3, 11:59 AM
- Short sellers have noted coal’s recent struggles, as U.S. coal firms had an average of 3.5% of shares out on loan 18 months ago but rose to a high of 7.5% in the opening week of April.
- Markit says short interest in the sector is now somewhat off its recent highs, with Alpha Natural Resources (ANR -0.7%) and Arch Coal (ACI -0.3%) both seeing covering in the last month; both firms are down by more than a third in the last month and short sellers appear to be taking some of the profits from their trades.
- Markit says the covering in ACI and ANR has coincided with an increase in demand to borrow shares in Peabody Energy (BTU -7.5%), Cloud Peak Energy (CLD -2.6%) and Westmoreland Coal (WLB +1.2%), which could represent a shift in the sector’s short positions.
Mon, Jun. 1, 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.
Fri, May 29, 2:55 PM
- Alpha Natural Resources (ANR -6.7%) says it was notified by Wyoming's environmental regulator that it no longer qualified for "self bonding," which had allowed it to avoid insurance or provisions of ~$400M for cleanup of mines.
- ANR says it disagrees with the state's assessment and is reviewing options to "reverse or rectify" the judgment.
- ANR earlier had warned that losing its right to self bond and the increased costs of surety bonds could weigh on its balance sheet.
Fri, May 29, 8:57 AM
- Steel companies are poised for a strong H2 2015, Credit Suisse analyst Nathan Littlewood says, eyeing success on legislative changes, a trade case filing, and an end market restock cycle in coming months.
- The firm continues to like U.S. Steel (NYSE:X) for both its long term self-help story as well as shorter term leverage to the trade case story, although the entire steel sector is expected to benefit if H2 plays out as expected.
- Service center business such as Reliance Steel (NYSE:RS), Worthington Industries (NYSE:WOR) and Olympic Steel (NASDAQ:ZEUS) are favorably leveraged to a drop in import volumes as a result of likely market share gains, Littlewood says.
- Raw material suppliers such as Arch Coal (NYSE:ACI), Alpha Natural Resources (NYSE:ANR) and Cliffs Natural Resources (NYSE:CLF) also may benefit if U.S. domestic blast furnace production increases as a result of less import competition.
Thu, May 28, 3:28 PM
- A federal judge orders Alpha Natural Resources (ANR -0.3%) to pay the legal fees of former Massey Energy CEO Don Blankenship stemming from a criminal investigation and upcoming trial.
- Blankenship is charged with conspiring to violate safety standards at the Upper Big Branch mine in West Virginia, where an explosion killed 29 men in April 2010; ANR bought Massey for $7.1B in 2011.
- In February, Massey refused to continue paying Blankenship's defense costs, arguing he was no longer entitled to the benefit after he was indicted.
Wed, May 27, 2:56 PM
- A day after Credit Suisse warned that coal miners such as Arch Coal (NYSE:ACI) and Alpha Natural Resources (NYSE:ANR) were in "dire straits," Citigroup analysts say it will be "survival of the fittest" for the world’s coal miners.
- While Citi believes current coal prices are below sustainable long-run levels, it does not expect a return to prices anywhere near the levels seen a few years ago; the firm cuts its long-run thermal coal price forecast to $80/ton from $90 and its met coal price forecast to $125/ton from $170.
- The firm sees China and India as the largest sources of downside risk to its long-run forecasts, particularly for met coal, where China could re-emerge as a net exporter.
- Most coal stocks are extending yesterday's heavy losses: ACI -12.1%, ANR -11.1%, BTU +0.9%, CLD -1.7%, WLB -0.5%, KOL -0.3%.
Tue, May 26, 3:19 PM
- Credit Suisse analysts find little reason to favor coal equities amid a "dire outlook" for the group, initiating Arch Coal (ACI -12.2%) and Alpha Natural Resources (ANR -12.3%) with Underperform ratings and $0.50 share price targets, and Peabody Energy (BTU -5.8%) with a Neutral view and $4.50 target.
- ANR suffers the greatest liquidity risk, the firm says, as negative free cash flow and upcoming debt maturities eat into its existing liquidity position, while ACI fares somewhat better but still is likely to burn through cash for the next several quarters; both companies are limited in their ability to borrow more debt and both face revolver maturities in mid-2016.
- Cloud Peak Energy (CLD -0.9%) - the coal stock “least likely to cause sleepless nights” - is started with an Outperform rating and $11 price target.
- Adding to ACI's woes are Friday's news that the company is in talks with restructuring advisers as it looks to reduce its debt, and the receipt of delisting notice from the NYSE.
- KOL -2.4%.
ANR vs. ETF Alternatives
Alpha Natural Resources Inc along with its subsidiaries is engaged in extracting, processing and marketing steam and metallurgical coal from surface and deep mines, and sells it to electric utilities, steel and coke producers, and industrial customers.
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