Thu, Oct. 1, 12:34 PM
- Coal stocks (KOL -0.7%) are broadly lower after Moody's issues a weak forecast for the North American coal industry, saying the outlook "remains negative amid ongoing challenges for both metallurgical and thermal coal, including declining coal consumption and low met coal prices."
- The ratings agency forecasts a ~10% Y/Y decline in the industry's EBITDA for 2016, following the 25% drop it anticipates for 2015.
- BTU -10.7% after allowing for a 1-for-15 reverse split that took effect today; also ACI -5.4%, CNX -6.4%, WLB -5.1%, CLD -3%, ARLP -0.7%.
Wed, Sep. 2, 3:23 PM
- Volatility in U.S. coal equities (NYSEARCA:KOL) has reached the highest level since March 2010, as miners that fell more than 90% jumped to a two-week rally that abruptly ended yesterday when they slid as part of the stock market's wider selloff.
- Short sellers are a big factor: Last week's bounce suggests short sellers were fleeing their positions, which pushed up prices - Peabody Energy (BTU -3.6%), for example, had averaged ~15M trades/day for a month before Thursday, when it totaled nearly 60M.
- The companies also are trying to restructure their debt: After reports said Arch Coal (ACI +6.8%) was looking to compromise with lenders opposed to its proposed debt swap, and thus stave off the threat of bankruptcy, shares soared 633% in nine trading days.
- But Bloomberg says ACI is having trouble completing the swap, with senior lenders still opposed, and bond traders do not think the deal would be enough to fend off a bankruptcy.
- Also: CLD +1.3%, WLB +3%, ARLP -2.2%.
Tue, Sep. 1, 3:39 PM
- Coal stocks (KOL -4.4%) are surrendering large chunks of their recent gains, as might be expected, but J.P. Morgan analysts think coal's share of the U.S. power market might have hit its low point, seeing grid inflexibility making a reduction in coal’s share below ~30% difficult without more investment in the grid, pipelines and more gas power plants.
- The JPM team thinks it is reasonable to assume that once the U.S. gas market begins to balance and the gas price picks up, coal’s market share will recover to the mid or even high 30s prior to the introduction of the greenhouse gas rule, assuming the rule overcomes its many legal challenges.
- Meanwhile, the firm cuts its 2016 EPS estimate on Alliance Resource Partners (ARLP -1.7%) to $0.83 from $0.89, and imitates a 2016 estimate on Peabody Energy (BTU -17.98%) for a loss of $0.37, Arch Coal (ACI -28.9%) for a loss of $6.78, and Cloud Peak Energy (CLD -22.1%) for a loss of $0.21.
Fri, Jul. 31, 6:16 PM
- Alliance Resource Partners (ARLP -1.7%) says it's completed acquiring the rest of the White Oak Resources equity interests that it didn't already own, and has updated production and financial guidance accordingly.
- The move means an Alliance unit takes operating control of White Oak Mine No. 1 in Illinois, producing 6M tons/year of high-sulfur coal.
- The company now guides to coal production of 42.8M-43.5M tons for the year, and sales volumes of 42.7M-43.8M tons.
- It also sees 2015 revenues (excluding transportation) of $2.37B-$2.41B -- above consensus of $2.36B -- and full-year EBITDA of $765M-$795M (in line) and net income of $405M-$435M.
- Alliance paid $50M at closing and may owe contingent consideration in the future. The company will hold a conference call to talk about the guidance on Monday at 11 a.m. ET.
Wed, Jul. 22, 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%).
Tue, Jul. 14, 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.
Tue, Jun. 30, 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%.
Thu, Feb. 26, 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.
Tue, Jan. 27, 11:28 AM
- Peabody Energy's (BTU -6.7%) move to slash its quarterly dividend to less than a penny a share is helping push coal company stocks (NYSEARCA:KOL) lower: WLT -1.6%, ACI -1%, CNX -1.8%, CLD -2%, WLB -5.4%, ARLP -1.2%.
- Cowen analysts see the move as "a prudent move amid uncertain coal markets," and Sterne Agee says the dividend cut will save BTU $100M in annual cash payments.
- Citigroup's Brian Hu maintains a Buy rating on BTU, saying that although management expects U.S. thermal coal demand to fall by 50M-60M tons in 2015, "BTU is better insulated due to their heavily contracted position and Y/Y improvement in Southern PRB rail performance.”
Dec. 11, 2014, 11:19 AM
- Consol Energy (CNX +2.3%) is higher after announcing late yesterday that it is preparing to spin off some of its coal operations, creating an MLP for its thermal coal business and approving a $250M stock buyback.
- Sterne Agee says it would add to or introduce positions, citing CNX’s strong relative cash flow generation, overcapitalized balance sheet, and expected continued execution within its unconventional gas assets as allowing for valuation support and expansion.
- FBR Capital believes the thermal coal MLP could potentially provide a material uplift of $3-$9 per share by pulling forward the value of the coal assets and providing growth capex for CNX's E&P business (Briefing.com).
- Citigroup’s Brian Yu, however, does not see how the MLP creates value for CNX; given the lack of growth in CNX’s coal assets, Yu thinks it would be tough to trade at the same valuation as Alliance Resource Partners (NASDAQ:ARLP) or Alliance Holdings (NASDAQ:AHGP).
Nov. 28, 2014, 10:25 AM
- OPEC's Thursday decision to keep oil production unchanged has sparked a commodity stock rout, one that hasn't left coal stocks unscathed.
- Major decliners: BTU -6%. ACI -6.6%. ANR -6.2%. CLD -4.3%. CNX -2.8%. NRP -3.5%. ARLP -3%. CLF -3.6%.
- Thermal coal prices have already fallen sharply this year.
- ETF: KOL
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%.
Sep. 25, 2014, 3:40 PM
- Coal stocks take a pounding as the quarterly benchmark price for metallurgical coal drops to a six-year low, according to Doyle Trading, amid a global oversupply and a slowdown in Chinese demand (KOL -2%).
- Australian coal producers and Japanese steel mills agreed to a Q4 price of $119/metric ton, down $1 Q/Q, dashing hopes for a rebound in the steelmaking coal which has slumped 64% since reaching $330 in 2011.
- CLF -9.2%, WLB -6.6%, ANR -4.9%, ARLP -3.7%, WLT -3.5%, BTU -3%, ACI -2.9%, CLD -2%, YZC -1.9%, CNX -1.2%.
Jul. 29, 2014, 10:33 AM
- Arch Coal (ACI +3.5%) moves higher after its Q2 earnings loss came in better than expected as operating costs per ton fell 7%.
- Q2 sales fell 7% Y/Y to $713.8M, missing analyst consensus, but operating costs per ton fell to $20.55 from $21.19.
- ACI lowers its FY 2014 sales volume targets, including cutting its thermal sales volumes forecast to 124M-130M tons from 124M-132M tons to reflect the effects of transportation bottlenecks and the impact of a fall in steel production.
- Other coal names also are higher: ANR +4.3%, ARLP +2.4%, PVA +1.9%, WLB +1.9%, BTU +1.4%, RNO +0.9%, WLT +0.8%, KOL +0.4%.
Jul. 28, 2014, 11:46 AM
- Alliance Resource Partners (ARLP +4.9%) rallies to all-time highs after reporting Q2 results that included new quarterly records in coal sales volumes, revenues and net income.
- ARLP's Q2 net income climbed 32% Y/Y to $1.37/unit, revenues rose 8% to nearly $599M while coal volumes sold totaled more than 10M tons.
- Says it has essentially fully priced and committed its estimated 2014 coal sales volumes, securing during Q2 new coal sales commitments for the delivery of ~8.1M tons through 2017.
Jun. 3, 2014, 12:45 PM
- EPA chief Gina McCarthy says she expects for significant changes in proposed state emission goals before a final rule is issued next year if the individual states show they can’t meet the targets.
- McCarthy says the agency made changes when developing its rules on mercury pollution in 2012 after utilities complained, and says she "wouldn’t be surprised if we made significant” revisions to the carbon proposal.
- McCarthy notes "confusion" around the targeted 30% emission cuts, saying it’s not a goal of the plan but an estimate of what the EPA thinks can be achieved.
- Coal names are broadly lower: WLT -4.4%, ACI -3.7%, ANR -2%, ARLP -1.9%, CNX -1.3%, CLD -0.3%, BTU -0.2%.
- Big utilities are mostly higher: EXC +1.6%, AEP +1%, NRG +0.7%, D +0.5%, XEL +0.4%, SO +0.3%, PEG +0.2%, NEE +0.1%, DUK -0.2%
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, IYE, GASX, PXJ, RYE, FENY, UPW, RYU, FUTY, FXN, FXU, DDG, SDP
ARLP vs. ETF Alternatives
Alliance Resource Partners LPis a diversified producer and marketer of coal to United States utilities and industrial users. It operates ten underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia.
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