Spoke to Beth in investors relations today. She said that rising Nat Gas prices will greatly help JRCC's bottom line. She said Nat Gas is currently around $4.20 and she has seen it as low as $1 and as high as $15. She went on the say at $4.40 JRCC is in the green. She also said there is a large short interest in the stock. In my opinion any big rise in Nat Gas prices will lead to a massive short covering rally.
Including the "Revolver" JRCC had debt of $284,000,000 as of 12/31/2010, $582,193,000 as of 12/31/2011, and $607,207,000 as of 12/31/2012. Their first BIG DEBT payment is $121,000,000 due 12/1/2015, 2.5 years out in time. It appears to me that JRCC needs natural gas prices at, or above, $6/mcf.
Natural gas wells deplete rapidly. I think that the average well production in the Bakken is under 60 bpd. Also, we we start exporting it, using it as a transition fule for cars, etc. we will burn through it faster than we think and prices will be above $6, probably above $7.
JRCC needs $6 gas pretty soon though so they can get needed volumes and margins.
JRCC would be very leveraged to higher natural gas prices...one would think anyway...
Right now though, it is possible they could be put in Chapter 11 too. Unlikely maybe, but this can't be ruled out. JRCC needs higher natural gas prices, that's all there is to it.
These are numbers I captured form a "Natural Resource Partners" chart.
PRB = Powder River Basin = $3.25 Natural Gas (IN THE GREEN)
ILB = Southern Illinois Coal = $4.00 Natural Gas (IN THE GREEN)
NAPP = Northern Appalachian Coal = $4.75 Natural Gas
CAPP = Central Appalachian Coal = $6.00 Natural Gas
I'm surprised that JRCC is "in the gree" at $4.40/mcf natural gas. On the flip side of the coin, I think that the "all in" costs for natural gas production generally is around $7/mcf. In addition, there is a huge difference in natural gas prices regionally. Perhaps JRCC is operating in an area where natural gas is more expensive. Does anyone know the natural gas price in JRCC's target market area?
In the long term every lump of coal will be burned. Can JRCC survive until volumes and margins improve?