Thu, Jul. 2, 3:58 PM
- Peabody Energy (BTU +4.7%) and Thompson Creek Metals (TC -12.9%) at downgraded to Sell at Deutsche Bank, citing strained balance sheets and an uncertain deleveraging path forward.
- The firm trims its 12-month BTU price target to $1.30 from a prior $6 based on 0.5x (prior 0.8x) revised NAV of $2.6 (prior $8) and a 0.5% terminal growth rate.
- In downgrading TC, Deutsche Bank cites weak copper and moly prices, a highly levered balance sheet, further spending needs and a lack of expected near-term company catalysts.
Wed, Jul. 1, 6:56 PM
- Peabody Energy (NYSE:BTU) tumbled 19% in today's trade, touching an all-time low, after warning of a deeper than expected Q2 loss because of adverse weather and lower coal prices.
- Stifel analysts view an investment in BTU shares as "appropriate only for investors with a high tolerance for risk and uncertainty," as a highly levered balance sheet combined with an aggressive anti-coal U.S. policy environment and low natural gas prices all work together to increase risk levels to historic highs.
- Nevertheless, Sterne Agee stands by its Buy rating on the beaten-down coal miner, citing the new CEO's urgency in driving cost, productivity and liquidity improvements during the current difficult market, and further cost and asset sale news should serve as catalysts.
Wed, Jul. 1, 6:21 PM| Wed, Jul. 1, 6:21 PM | 6 Comments
Wed, Jul. 1, 8:58 AM
- Peabody Energy (NYSE:BTU) -2.5% premarket after warning of a deeper than expected Q2 loss due to weather-related shipment difficulties in the Southern Powder River Basin and lower seaborne coal pricing; in April, BTU had projected an adjusted per-share loss of $0.49-$0.59.
- BTU expects a ~$40M timing-related charge in Q2 from rain and flooding that reduced production by 5M-5.5M tons; it says normal production levels have largely resumed and expects to make up the deferred shipments in Q3 and Q4.
- BTU also sees Q2 earnings lowered by $20M due to lower pricing on Australian metallurgical coal, and another $20M-$25M in charges related to job cuts affecting corporate and regional staff and some of its Australian coal mining operations.
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%.
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. 24, 12:45 PM
Tue, Jun. 23, 6:07 PM
- NiSource spinoff Columbia Pipeline Group (CPGX) is taking Allegeheny Technologies' (NYSE:ATI) spot in the S&P 500. Allegheny will join the S&P MidCap 400.
- Also joining the S&P 400: Casey's General Stores (NASDAQ:CASY), Graham Holdings spinoff Cable One, DuPont spinoff Chemours, and the post-spinoff Energizer (NYSE:ENR).
- Getting dropped to the S&P SmallCap 600 from the 400: Unit Corp. (NYSE:UNT), Harsco (NYSE:HSC), and Semtech (NASDAQ:SMTC).
- Also joining the S&P 600: Nektar (NASDAQ:NKTR), Masco spinoff TopBuild, and the new/post-spinoff Gannett (NYSE:GCI). Gannett's broadcast/digital spinoff Tegna (Pending:TGNA) will have old Gannett's spot in the S&P 500.
- Getting dropped from the S&P 600, and not moving up: Aeropostale (NYSE:ARO), Paragon Offshore (NYSE:PGN), PetroQuest (NYSE:PQ), Quiksilver (NYSE:ZQK), and FXCM.
- Leaving the S&P 400, and not moving elsewhere: Peabody (NYSE:BTU) and AOL (acquired by Verizon).
- ATI -1% AH. UNT -0.7%. ARO -1.1%. PQ -1.9%. BTU -1.1%. NKTR +5.2%.
- Press Release (.pdf)
Fri, Jun. 19, 8:22 AM
- Peabody Energy (NYSE:BTU) reportedly is seeking to sell most of its Queensland coal exploration portfolio, in what could be the first step in executing a wider exit of its Australian portfolio.
- BTU's Australian mines are lower-cost than its U.S. operations but it is getting squeezed on the quality of its coal down under, according to the Australian Financial Review.
- The report notes that the Queensland coal market is awash with assets for sale, but very few sellers are distressed and deals have failed to materialize despite an extended price malaise that shows little sign of improving.
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, 3:44 PM
- Peabody Energy (BTU +6.8%) CEO Glenn Kellow deserves praise for cutting 250 corporate positions and “not sitting idle while the storms in the coal markets continue to buffer the industry," Barclays analysts say, even while cutting their stock price target to $4.
- Cost cuts and production cuts help, but weak demand and low profitability remain widespread, Barclays says; China’s coal imports last month fell 40% Y/Y for the 11th consecutive monthly decline and 25% M/M to 14.2M metric tons, reiterating just part of the challenge for coal.
- BTU shares are not likely to rebound meaningfully until Asian import demand stabilizes and U.S. natural gas production growth turns downward, the firm concludes.
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%.
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