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Hallador Energy - A Free Cash Flow Generator On Sale

Oct. 04, 2021 10:53 PM ETHallador Energy Company (HNRG)14 Comments
Houman Tamaddon profile picture
Houman Tamaddon


  • Hallador Energy has generated free cash flow consistently for the past decade.
  • The company’s earnings do not accurately reflect its potential for generating cash for investors.
  • The stock price has also been punished due to Hallador’s business of mining high sulfur coal.

Power plant

ilbusca/E+ via Getty Images

Company Overview

Hallador Energy (NASDAQ:HNRG) has been in business since 1951. Throughout most of its history it focused on oil and gas exploration and production. In 2006 the company acquired a 60% stake in Sunrise, an Indiana coal

This article was written by

Houman Tamaddon profile picture
Anesthesiologist. Allocating more of my time from medicine to investing. Invest for the long term and am willing to sacrifice short term returns for a large return in the future.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of HNRG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

jmoore13 profile picture
Thank you for this article! I think an update is due since the company has just dodged a major bullet by acquiring the Hoosier Energy Merom plant. It was scheduled to be decommissioned in 2023 and was one of their largest customers. This move of integration reminds me of the transformation of CLF through the acquisition of AK Steel and Arcelor Mittal's North American assets.
Mr market gave his verdict of q3… not pretty..
Timothy Stabosz profile picture
I really like your work here, and writing style. I am adding stock in here again. I don’t understand the pullback, when you look at where ARCH, ARLP, CEIX, etc. are right now (although, admittedly, BTU has pulled back considerably).

But what I really didn’t understand was the pullback to the low $2’s, after the earnings release a while back. Very bullish here. HNRG is still not getting enough “love” in the marketplace.
@Timothy Stabosz - The issue is that they are 100% committed for this year and 65% committed for 2022 @ around $39.25.

So, not sure how much they can capitalize on current high coal prices.

I was long at $2.30+ and sold 75% of my position when prices hit $4.40.
@Timothy Stabosz Only concern is that they seem to have all of 2022 contracts already locked in from earlier last year at much lower rates - do you think they'll be able to capitalise on the rising prices as effectively as the other players you mentioned?
I heard in news that because of the inflation ahead of us, that heating cost is going up. And cause coal to increase by 50%. Is there any true to this and will it really affect the cost of coal to go up?
@bampa2518 - Cost of coal is already way up there i.e. from $55 to $240 in 1 year.

All prices are going up > Oil, Natural Gas, Coal, Metallurgical Coal, Aluminum, Copper, Iron Ore, Steel, Ocean Shipping Charges, Lumber, Home Prices, Home Rentals etc....there are lot of narrations/stories......Hard to tell what's going on for real here?
Vince Stanzione profile picture
Great write up, and I am a big coal investor, with Thungela TGA.LS being my biggest holding. I have a small holding in Hallador and am in touch with their IR as they are doing a poor job at selling themselves to investors. No investor presentation and the CEO has not done any media interviews. I really agree this stock should be trading at $5+ but need Management to do a better job at explaining their story. If you are a shareholder please contact:
rpalumbo@halladorenergy.com we are on the same side here!
@Vince Stanzione Great write up ?...really ??

Correct me if I'm wrong BUT:
Author failed to disclose that HNRG has sold their production for 2021 and a big chunk for 2022...

Tell me given that, how do they benefit with these high coal prices ???
@Contemplating Retirement agreed that would have warranted a fuller disclosure but it wasn't the premise of his bull case which rests on consistent cash flow. be interesting to see what prices they can get for the remainder of FY22 which wasn't pre-sold as of date of Q2 call.
@willallen - 65% of production committed for 2022 @ $39.25. So, if they can contract rest of 2022 production and also at least 65% of 2023 production for the half the current price i.e. $115 then they can print money > 8 mt x $115 = 920 million revenue. Even at $80, they can print money as their cost is around $30+.

Will have to wait for their next quarter earnings to see what they did with their rest of 2022 production and plans for 2023 production.
Thanks for the article on this gem. I have been buying HNRG from .65 through the 3.15 range, and selling along the way. Sold some yesterday @ 3.46. It is still one of my larger positions. I hope to continue the ride into the coming years.
Huge upside if ILB coal normalizes to where Nat Gas is priced. The added benefits of 6 years of cost cutting, debt pay down and competitors shuttering will also be on display. Rational experienced management too.
Nice piece of work. Good background and succinct thesis. Tables lay it out very clearly. I traded from 1.60 to 2.80 earlier in the year and am now back in at 2.20 and holding. I should add that it's Timothy Stabosz's advocacy which prompted me to look deeper
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