Last night a read most of BTU's 2012 annual report. The thing I was wondering most about was whether BTU could avoid bankruptcy as they grind through this low volume low margin period. I concluded that they had made roughly $500 million in balance sheet improvement over the course of CY'2012. Accordingly, I think BTU will be one of the survivors after this wash out period. One, or more, of the coal companies has to wash out yet though.
Coal consumption may be flat in the U.S. for a while, but it is going to grow massively worldwide. Also, costing out "all in" costs for natural gas, the breakeven point is in the vicinity of $7/mcf. These gas finds are not going to change the peak oil story. Liquid gas has become more expensive in recent years. BTU has its production in the PRB, ILB, and Australia. PRB coal is at breakeven point with natural gas at $2.60/mcf gas prices. ILB coal is at breakeven with natural gas prices at a gas price of $3.50/mcf. Natural gas is now at $4.20/mcf. Natural gas prices are going to be a lot higher as we go forward in time. This means coal, even in the U.S. will be burned, because we like cheap.
Short term, BTU could go down lower, who knows maybe even $10. But if it does, it will be a great long term buy. Longer term, BTU will be a lot higher than $18,70. So buy it when its cheap, hold on, and sell someday at a much higher price.
I personally think BTU will go below $15, simply because global growth is slowing. Commodity companies generally built too much capacity. Now with slowing global growth, they will produce down to variable cost levels for a while as the weak producers get washed out. A bit of a cleansing process if you wish.
BTU is the best publicly traded coal company, so long term BTU will more than likely prove to be a great investment. Remember though, things take time.
If you believe (as I do) that BTU is best of breed in the coal sector, it desperately needs to have something good to report tomorrow or this could just be the beginning of a long summer slide. Some signal that a turnaround is in sight . IMO "poor visibility" is the last thing the market wants to hear.