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. 8, 2014, 11:28 AM
- Walter Energy (WLT -4.4%) discloses Q2 preliminary metallurgical coal production totaled 2.5M metric tons, with preliminary met coal sales of 2.7M metric tons.
- WLT adds that in April it began idling its Canadian operations, including the Wolverine and Brazion coal mines in B.C., having placed the Wolverine mine on idle status in April and the Brazion operations on idle status in June.
- WLT also notes difficult geological conditions at Mine No. 7 during June which adversely affected production, but it believes the issues have been resolved and still expects FY 2014 met coal production of 9M-10M metric tons.
- Earlier, WLT said it commenced a private offering of $320M aggregate principal amount of 9.5% senior secured notes due 2019; proceeds would be used to repay $298M in outstanding debt.
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. 30, 2014, 9:41 AM
- Walter Energy (WLT -3.2%) opens sharply lower after S&P cuts its credit rating to CCC+ plus from B- with a negative outlook, citing "unsustainable" debt given the weak outlook for met coal prices and reduced production expectations for the coal company.
- S&P also foresees very weak credit measures in 2014, with debt leverage above 20x and EBITDA interest coverage of less than 1x in 2014.
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. 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. 29, 2014, 5:37 PM
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. 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, 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. 1, 2014, 3:24 PM
- Shares of Alpha Natural Resources (ANR +5.5%) and Walter Energy (WLT -4.2%) are moving in different directions as ANR beats Q1 earnings expectations and WLT falls well short.
- ANR now expects to ship 15M-18M tons of met coal this year, down from an earlier forecast of 16M-20M tons, but Sterne Agee analysts were pleased to see more industry met supply rationalization; management expects met markets to tighten in 2015 as stockpiles for all regions are now below normal.
- Cowen analysts are gloomy about WLT; with Canadian operations shutting down, the outlook comes down to operating performance at Mine No. 4/7 and maintaining liquidity until seaborne met pricing recovers.
May. 1, 2014, 7:06 AM
Apr. 24, 2014, 3:45 PM
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%.
WLT vs. ETF Alternatives
Walter Energy Inc is engaged in the business of mining and exporting of metallurgical coal for the steel industry from underground and surface mines with mineral reserves located in the United States, Canada and United Kingdom.
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