Jul. 22, 2014, 10:59 AM
- Peabody Energy (BTU +1.5%) moves higher after reporting a Q2 loss that was in line with estimates and a ~2% rise in revenue, helped by an increase in shipments and prices at its mining operations in the western U.S.
- Q2 U.S. mining revenue rose 6.2% to $1.03B, while revenue per ton gained 1.1%, but revenue from Australian mining operations fell 5% to $744.8M, with revenue per ton down 15%.
- Issues downside EPS guidance for Q3, now seeing a loss of $0.40-$0.53 vs. analyst consensus expectations for a $0.18 loss.
- Nevertheless, BTU sees market conditions improving, noting that coal's market share of global energy consumption is now 30%, highest since the 1970s, U.S. coal demand has been expanding for the past two years, and seaborne market fundamentals are seen improving into 2015.
Jul. 22, 2014, 8:02 AM
Jul. 21, 2014, 5:30 PM
Jul. 16, 2014, 2:18 PM
- Unloved Alpha Natural Resources (ANR +6.4%), Arch Coal (ACI +1.9%) and Peabody Energy (BTU +2.4%) are popping today thanks to China’s strong GDP reading and CSX’s solid earnings, but FBR analyst Mitesh Thakkar is not optimistic about the coal stocks heading into earnings.
- FBR expects most of the earnings calls to be focused on the two major challenges for coal producers - weak met coal pricing and rail service limiting steam coal volume - over and above company-specific issues.
- The firm lowers its 2014 EBITDA estimates by an average of 12% for the group, and cuts stock price targets for Cloud Peak Energy (CLD +1.2%) and Walter Energy (WLT +5.2%) by a dollar each, preferring steam coal names and/or low-cost met coal assets with solid balance sheets.
Jul. 9, 2014, 5:34 PM
- Peabody Energy (BTU) says it is still in talks with Nathan Tinkler about the sale of its Wilkie Creek mine in Queensland state, following a report that the former Australian billionaire missed a payment for the asset.
- BTU is said to have granted an extension to Tinkler and his New York-based financiers, although it’s not clear for how long.
- BTU agreed in May to sell the mine to Tinkler's company for $70M and the assumption of liabilities including rail and port obligations, but a June 30 deadline for the payment was missed.
Jul. 7, 2014, 12:44 PM
- Coal stocks suffer a beating after Deutsche Bank downgrades Peabody Energy (BTU -3.3%) to Hold from Buy with a $19 price target, down from $23, to reflect lower realized coal prices (particularly metallurgical coal) and anticipated ongoing cost pressures in foreseeable future.
- Consol Energy (CNX -1.7%) is the firm’s only Buy-rated coal stock because of the company’s “fast-growing natural gas business and solid financial position.”
- Although the Deutsche team says its focus is shifting to more company specific stories from an emphasis on sector performance, other coal companies are sharply lower: ACI -4.3%, ANR -4.8%, YZC -1.3%, CLD -2.4%, WLT -3.6%, RNO -1.5%, WLB -2%.
Jun. 6, 2014, 3:43 PM
- Consol Energy (CNX) shares rose to a nearly three-year high before pulling back, after Goldman Sachs raised its rating to Buy and cited CNX's strong free cash flow and growing position in the Marcellus fields.
- Goldman said CNX trades at a deep discount to its sum-of-the-parts value, and points to four pillars to its positive view: improving free cash flow in the coal segment, a major E&P production ramp, potential for asset sales and restructuring, and a strong balance sheet.
- Investors also are optimistic that CNX can weather the EPA's proposed cuts in carbon emissions at U.S. power plants; Sterne Agee thinks CNX is perhaps the best-positioned coal miner to meet the new requirements, "given its low-cost energy production and excess asset value."
- As Goldman praised CNX, it downgraded Peabody Energy (BTU -1.4%) and cut price targets for Alpha Natural Resources (ANR +0.7%), Arch Coal (ACI +3.8%)and Walter Energy (WLT +1.2%).
Jun. 6, 2014, 8:28 AM
- Consol Energy (CNX) +1.6% premarket after Goldman Sachs upgrades shares to Buy from Neutral with a $55 price target, up from $49, to reflect Marcellus and Utica production growth, strong free cash flow in coal and potential catalysts from the upcoming analyst day.
- However, Goldman downgrades Peabody Energy (BTU) to Neutral from Buy and cuts its price target to $15 from $21, citing its expectations for lower international thermal coal and met prices; BTU -1.4% premarket.
Jun. 5, 2014, 3:26 PM
- Gains in coal stocks (KOL) have gone up in smoke thanks to new rules from the EPA that would limit its use as a fuel for power generation, but shares are bouncing a bit today as Stifel analysts make the case for coal as a worthwhile investment.
- Coal’s power market share dropped from 49% to 39% while the natural gas share rose from 19% to 27% from 2005 to 2013, but Stifel argues that much of the investment case for U.S. coal centers on its ability to step in as a low-cost, reliable Plan B if Plan A (gas and renewables) falls short, and the cold weather-impacted Q1 offered a glimpse of what this might look like.
- Stifel favor exposure to U.S. coal mining firms in low-cost regions including the Illinois Basin, Powder River Basin and Northern Appalachia; these include Buy-rated Peabody Energy (BTU +2.2%), Cloud Peak Energy (CLD +2.2%) and Consol (CNX +3.6%).
- Also: ANR +5.6%, WLT +4.8%, ACI +3.4%, WLB +1.2%.
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
Jun. 2, 2014, 3:31 PM
- Walter Energy (WLT -6.3%) shares aren't helped by the coal producer's statement that new EPA proposals aimed at controlling carbon emissions from U.S. power plants should have no material impact on the company; in fact, WLT is down more than peers: CNX +1.1%, BTU +0.1%, CLD -0.3%, ACI -2.8%, ANR -4.6%.
- Long-term losers also will include electric companies that burn lots of coal - such as American Electric Power (AEP +0.1%), Duke Energy (DUK -0.3%), Southern Co. (SO -0.3%) and NRG Energy (NRG -0.1%) - but stiff regulations have been expected for some time.
- Likely winners include companies that pump natural gas and those that use it as their primary fuel, such as Calpine (CPN +0.3%), and companies that operate nuclear plants that generate little carbon but have been expensive to run, such as Exelon (EXC -1%), hope that their aging plants will become more competitive.
- A reduction in coal-fired capacity would increase utilities' demand for natural gas by 3B-10B cf/day from 22B cf/day now, potential benefiting major natural gas producers like Chesapeake Energy (CHK +2.1%), Cabot Oil & Gas (COG -0.8%) and Range Resources (RRC -0.6%).
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, GASL, DUG, IYE, GASX, PXJ, FENY, RYE, UPW, FUTY, RYU, FXN, FXU, DDG, SDP
May. 27, 2014, 5:58 PM
- UBS analyst Kuni Chen thinks it makes more sense to start thinking about bankruptcy in the coal sector two or three years down the road rather than buy-the-dip opportunities, noting that the bonds of Walter Energy (WLT), Alpha Natural Resources (ANR) and Arch Coal (ACI) are edging close to distressed levels.
- Some tranches of WLT debt are trading at $0.60 on the dollar, while ANR and ACI paper trade a bit better at 70-80 for unsecured debt with yields approaching the mid-teen percentages; the equities continue to be weak, with WLT down almost 70% in the last 12 months and ANR down 40%.
- Chen also thinks it makes sense for Peabody Energy (BTU) to sell more stock to pay down its $6B debt load, since it would provide added flexibility to weather the downturn in the seaborne coal markets should prices stay at depressed levels for a longer than expected period of time.
May. 23, 2014, 11:27 AM
- Coal stocks have been creeping higher during the last few months, but opinions differ on whether the sector is turning around.
- Macquarie analysts see positive signs for coal stocks, with utilities and rails believing coal is still available and being delivered while coal producers note higher demand and order books which are close to full; the firm calls Consol Energy (CNX) its top pick, and give Outperform ratings to Cloud Peak Energy (CLD) - an opportunity to buy a well positioned PRB pure play heading into the summer - and Peabody Energy (BTU) - where cash flows from its Powder River Basin operations can support depressed met coal operations.
- But Nomura's Curt Woodworth thinks the market has been too optimistic about a potential Powder River price spike, and sees further downside risks to BTU and Arch Coal (ACI).
May. 16, 2014, 5:03 AM
- The White House is considering forcing power plants to cut carbon emissions by 25% over a 15-year period, Bloomberg reports.
- The problem is that owners can only cut so much of a facility's emissions by increasing efficiency, so a lot of the reduction could have to come by "going outside the fence," such as by deepening the use of renewable energy, improving grid efficiency and encouraging customers to use less electricity.
- Trying to compel operators to rely on such external measures could run afoul of what the government is allowed to do under the Clean Air Act.
- ETFs: KOL, XLU, IDU, VPU, RYU, PUI, UPW, FXU, SDP, PSCU, FUTY, UTLT
- Coal Tickers: PCXCQ, BTU, WLT, CNX, ACI, ANR, JRCC, YZC, ARLP, AHGP, NRP, PVR, PVG, PVA, OXF, CLD, WLB, RNO
- Utilities: ED, POM, PEG, FE, NST, UTL, ETR, EXC, D, NU, PCG, DUK
May. 12, 2014, 6:15 PM
- Peabody Energy (BTU) says Gregory Boyce will remain CEO through June of next year, as the coal company shifts more responsibility to COO Glenn Kellow.
- Boyce's term as chairman and CEO is extended through June 30, 2015, and as executive chairman through June 30, 2016; Kellow is taking on added duties, including corporate strategy and global analytics, as well as overseeing all aspects of the company's global operations.
May. 12, 2014, 12:49 PM
- Morgan Stanley analysts are calling a bottom in coal mining stocks (KOL +2.5%), seeing a recovery in the thermal coal market pulled forward by the recent polar vortex and extreme cold; inventories have been falling rapidly, and the firm believes thermal coal prices will continue to rise.
- Peabody Energy (BTU +2.6%) is viewed as the best way to play the "modest recovery," believing it offers the least downside risk and little value has been assigned to its met portfolio; BTU also has large exposure to preferred thermal coal basins and boasts potential for increased capital return as market conditions improve.
- The report is a big boost to coal shares today: ANR +6.5%, WLT +4.5%, ACI +4.7%, CLD +1.4%.
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