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Arch Coal Inc. Message Board

  • paperinfire2011 paperinfire2011 Mar 28, 2012 2:14 PM Flag

    Coal to Liquids

    On reassessment CTL may be one of the best hopes for coal-digger-investors to recover any capital.

    - plants at pitthead ==> railroads are not able to siphon off any earnings that may be available
    - strong demand for petroleum liquids - people like to ride high in a pick-up or SUV and kill/maim other road users.

    Economics
    1. Assuming a 60% loss of original fossil energy content (40% conversion efficiency) we have 1 billion tonnes of coal producing 400 million tonnes of burnable liquid fuel
    2. 400 million tonnes burnable fuel is equiv to 2.8 billion barrels
    3. Use refined pricing - $120 Brent + $10 refinery crack = $130*2.8 = $364 billion annual revenue.
    4. Coal cost at $20 per tonne is $20 billion. that leaves $344 billion for conversion, profits, higher coal costs, etc.
    5. fossil fuel in liquid form is high value - can be shipped by truck (one tanker of 15000 gallons needs only $500 to drive to a market from PRB). Keeps the railroads honest.

    >If done most profits will go to new capital that has the technology and finance for this venture, e.g. XOM.
    > However by taking supply off the market ACI will benefit slightly. Additionally long-term ACI contracts will likely give digging cost + some profit for ACI.

    By the time this comes to fruition many coals may be in Chapter 11. Survival is important - dividend cut anyone ?

 
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