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, 3:32 PM
- Peabody Energy (BTU -5.5%) bounces a bit off sharp losses on news it is cutting met coal production at its North Goonyella Mine in Queensland, Australia by an expected 1.5M tons/year from an expected 3M tons; last year, the mine produced 3.8M tons.
- BTU plans to move to one shift per day at the mine and reduce employees and contractors by 35%-40% from a workforce of 519.
- Today's sizeable loss comes despite some positive analyst commentary: Sterne Agee writes glowingly of new CEO Glenn Kellow, and Cowen touts the favorable location of BTU’s coal operations in the low-cost Powder River Basin and Illinois Basin that will continue to supply power generators over the long-term.
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.
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%.
Tue, May 5, 2:14 PM
Fri, May 1, 10:32 AM
- Peabody Energy (BTU -2.9%) is downgraded to Underperform from In-line with a $3.50 price target, cut from $6.50, at Imperial Capital, which says it is bearish on the company's cap structure.
- The firm says it expects all BTU securities other than the term loan to trade lower in coming months, given strong negative headwinds in coal due to sub-$3 natural gas, coal retirements and oversupplied seaborne met coal, but it believes BTU likely will last multiple rounds in the coming shakeout in coal, as upcoming maturities roll into first or second lien debt, the company improves liquidity and reduces cash outflows.
- The firm says it is watching closely for any settlements with Patriot Energy, where $270M of contingent liabilities could materialize.
Fri, Apr. 24, 5:23 PM
- Peabody Energy (NYSE:BTU) held steady a day after a larger than expected Q1 loss triggered a 7.6% pounding in the stock price.
- Sterne Agee's Michael Dudas is optimistic, noting BTU ended Q1 with liquidity of $2.2B following its recent refinancing; at cycle lows for pricing, strong current and anticipated cost reduction efforts, and liquidity to meet estimated fixed outlays, the firm thinks BTU shares should benefit once pricing resets to more normalized levels.
- BTU said during yesterday's earnings call that it has studied creating a coal MLP, and Clarkson analyst Jeremy Sussman says BTU's Illinois Basin and Southwest assets could prove a good fit for an MLP structure because of the long-term nature of contracts and general stability of pricing in those regions.
- However, Nomura reiterates its Reduce rating on the shares, citing concerns about cash flow generation.
Thu, Apr. 23, 11:49 AM
- Peabody Energy (BTU -7.5%) plunges after reporting a much bigger than expected Q1 loss due to lower prices and declining Chinese demand, and issuing disappointing guidance.
- BTU says it now expects a Q2 adjusted EPS loss of $0.59-$0.49, vs. analyst consensus estimate for a loss of $0.35.
- BTU's Australian mining business swung to an operating loss of $24.5M vs. a profit of $1.8M in the year-ago quarter, due to hedging losses; before hedging, Australian operations rose $61.9M from $21M.
- BTU says U.S. coal generation fell 14%, alongside a 14% increase in natural gas generation, and cuts its 2015 U.S. sales forecast to 180M-190M tons from 190M-200M tons previously.
- Q1 revenue fell 5.5% Y/Y to $1.54B, due to lower pricing and a shift in U.S. production mix toward the Southern Powder River Basin; sales volume slipped 1.1%.
- Q1 results include the impact of $103M related to currency and fuel hedging.
- While Q1 results missed, Citi's Brian Yu believes BTU is "structurally different from its weaker U.S. peers," noting that BTU outlined $685M of potential annual cash improvements by early 2017, including $275M of lower cash payments related to PRB reserves and $335M of savings due to lower currency rates and fuel prices as hedges roll off.
Thu, Apr. 23, 8:04 AM
Wed, Apr. 22, 5:30 PM
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Tue, Apr. 21, 4:59 PM
- Peabody Energy (NYSE:BTU) says CEO Gregory Boyce and CEO-Elect Glenn Kellow will take voluntary and temporary 10% pay cuts for the rest of the calendar year, which the company says is part of its cost-cutting strategy.
- Boyce's base salary will be reduced from $1.23M/year to $1.1M annually from May 1 until June 30, and from $900K/year to $810K annually from July 1 until Dec. 31; Kellow's base salary will be cut from $950K/year to $855K from May 1 until the end of the year.
- Both execs will revert to their original salaries at the start of 2016.
Thu, Apr. 16, 12:25 PM
- A federal appeals court begins hearing arguments today in two cases challenging the EPA’s far-reaching proposal to cut pollution from U.S. coal-fired power plants.
- The lawsuits - one from a coalition of 15 states and another brought by privately held coal miner Murray Energy - are part of a growing pushback from opponents who say the move is illegal and will kill jobs, hurt demand for coal and drive up electricity prices.
- The EPA rule proposed last year requires states to cut carbon emissions by 30% by 2030, giving customized targets to each state and leaving it up to them to draw up plans to meet the targets.
- Coal industry arguments will be helped by an unlikely ally: iconic liberal law professor Laurence Tribe, who is representing Peabody Energy (NYSE:BTU) and likens Pres. Obama's climate change policies to "burning the Constitution."
- ETFs: XLE, XLU, VDE, ERX, OIH, KOL, IDU, VPU, ERY, DIG, DUG, IYE, FENY, PXJ, RYE, FUTY, RYU, UPW, FXN, FXU, DDG, SDP
Tue, Apr. 7, 12:59 PM
- Peabody Energy (BTU +7.3%) spikes higher after Balyasny Asset Management's Christian Zann tells CNBC he likes the stock as a value play in the coal space.
- Zann points out that coal is a relatively low capital intensive business vs. shale producers, who must spend considerable sums drilling new wells to maintain a production base.
- Zann likes Schlumberger (SLB +1%) and Halliburton (HAL -1.3%) among oil services stocks, and Marathon Oil (MRO +1.3%) in the E&P group.
Mon, Apr. 6, 5:35 PM
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