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%.
May. 8, 2014, 12:40 PM| 1 Comment
Apr. 24, 2014, 3:34 PM
- Peabody Energy (BTU +2.8%) powers steadily higher, reversing early losses after CEO Gregory Boyce says during this morning's earnings call that the company is looking seriously at closing some of its met coal operations.
- Some analysts also have come to BTU's defense: Brean Capital's Lucas Pipes wrote that investors should be relieved by the company’s ability to continue to navigate the low price environment relatively well, Simmons' analysts said BTU's downside guidance was reasonable given lower benchmark met and thermal coal prices ahead, and Cowen said it would be buyers on share price weakness.
- Most other coal names also are up: ANR +3.9%, ACI -1.5%, YZC +0.2%, CLD +0.4%, WLT +0.9%, CNX +2.8%.
Apr. 24, 2014, 8:59 AM
- Peabody Energy (BTU) -2% premarket after reporting an unexpected Q1 loss and slightly lower than expected revenues, as a 7% increase in sales volumes to 61.3M tons of coal was offset by weak pricing for steelmaking coal.
- BTU sees a Q2 EPS loss of $0.14-$0.39 vs. consensus $0.14 loss; sees FY 2014 shipments of 245M-265M tons.
- Australian revenue of $612M was hit by a 17% decline in revenues per ton, while Australian sales totaled 8.2M tons, including 3.2M tons of met coal and 3.1M tons of seaborne thermal coal.
- U.S. mining revenues rose to $985M as a 10% increase in western shipments overcame a 7% decline in U.S. revenues per ton.
- Reduced unit costs in both U.S. and Australian operations by 4% and kept capital spending at 10-year lows, improving liquidity to $2.1B while cash rose to $508M.
Apr. 24, 2014, 8:13 AM
Apr. 24, 2014, 12:05 AM
- AAL, ABC, AET, ALXN, AMAG, ASPS, AVT, AZN, BC, BHE, BKU, BMS, BTU, CAB, CAJ, CAM, CAT, CCE, CELG, CFX, CLFD, CLI, CMS, CNMD, COG, COR, CRR, CRS, CSH, CWEI, DFT, DGX, DHI, DLPH, DLX, DNKN, DO, DST, EQM, EQT, ETR, FAF, FCX, FNFG, GM, GMT, GPK, GTI, HOT, HP, HSY, IMAX, IVC, JBLU, KKR, LAD, LLY, LSTR, LTM, LUV, MDP, MHO, MJN, MMM, MO, NBL, NDAQ, NLSN, NTCT, NUE, NVS, NYT, ODFL, ORI, OSTK, PAG, PENN, PHM, POT, PTEN, RCL, RS, RTIX, RTN, RYL, SCG, SFE, SIAL, SILC, SIRI, SONS, SQNS, STC, SWK, TKR, TROW, TWC, TWI, UA, UAL, UFS, UPS, USG, UTEK, VDSI, VIVO, VLY, VZ, WCC, WM, WYN, YNDX, ZMH
Apr. 23, 2014, 5:30 PM
- AAL, ABC, AET, ALXN, AMAG, ASPS, AVT, AZN, BC, BHE, BKU, BMS, BTU, CAB, CAJ, CAM, CAT, CCE, CELG, CFX, CLFD, CLI, CMS, CNMD, COG, COR, CRR, CRS, CSH, CWEI, DFT, DGX, DHI, DLPH, DLX, DNKN, DO, DST, EQM, EQT, ETR, FAF, FCX, FNFG, GM, GMT, GPK, GTI, HOT, HP, HSY, IMAX, IVC, JBLU, KKR, LAD, LLY, LSTR, LTM, LUV, MDP, MHO, MJN, MMM, MO, NBL, NDAQ, NLSN, NTCT, NUE, NVS, NYT, ODFL, ORI, OSTK, PAG, PENN, PHM, POT, PTEN, RCL, RS, RTIX, RTN, RYL, SCG, SFE, SIAL, SILC, SIRI, SONS, SQNS, STC, SWK, TKR, TROW, TWC, TWI, UA, UAL, UFS, UPS, USG, UTEK, VDSI, VIVO, VLY, VZ, WCC, WM, WYN, YNDX,ZMH
Apr. 22, 2014, 2:57 PM
- Coal shares are mostly lower after Arch Coal's (ACI -8.1%) big earnings miss on lower than expected margins across all regions and guidance for reduced shipments of met coal this year as prices and demand remain weak: ANR -2.7%, BTU -1.1%, CLD -3.4%, CNX -1.2%, WLT +0.9%, WLB +0.3%.
- ACI said in its earnings call that its main market for met coal demand is healthy, citing U.S. steel utilization trending above the five-year average and auto sales projected to reach nearly 16.5M units in 2014, the highest level since 2006.
- Looking for a silver lining in the Q1 results, Sterne Agee says ACI’s attention to cost control, improved thermal competitive economics with natural gas, supportive balance sheet liquidity and a continued long-term role of U.S. coal into the global markets should support a cyclical valuation turn.
- Citigroup’s Brian Yu, meanwhile, expects ANR to follow ACI and WLT in cutting met coal production.
Apr. 17, 2014, 10:39 AM
- Cloud Peak Energy (CLD -1.5%) is "a good stock in a dirty business," Barron's says in making the case for a potential 30% upside in what it sees as undervalued shares, but CLD isn't enjoying the usual Barron's bounce.
- CLD trades at a discount to its larger peers despite its clean balance sheet and improving free cash flow profile, and a rise in thermal coal prices could have a dramatic impact on profits and the stock; every $1/ton increase in the Powder River spot price adds ~$46M to CLD's EBITDA.
- Most other coal names also are lower: BTU -1.5%, CNX -0.3%, ACI +0.2%, ANR -1.3%, WLT -2.1%, WLB -0.1%.
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