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Arlington Asset Investment Corp. Message Board

jrad52 155 posts  |  Last Activity: Jul 31, 2014 6:28 PM Member since: Jul 25, 1999
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  • FWIW. Hopedale mine was a disaster last Q, but things are getting better. But not a whole lot better, apparently. Sales volume was 260,000 tons and when a caller asked if they thought they could get back to 325,000 tons per Q like last year, the answer was to expect 275,000 tons. I can't figure out how that ties into the comment that they had mined more coal in the last 4 weeks from a particular seam in the mine than they had mined in the prior 6 months, but don't expect wonders from the mine.

    The company has essentially zero committed and priced 2015 tons from CAPP. They expect Pennyrile production to offset the drop in CAPP production.

    Pennyrile is on target for expected production under the current 800,000 tons/year contract, and RNO is hopeful that it will get additional orders from other utilities. In answer to a question, they said they could hit 2 million tons per year by mid-2015 (which would be great) but they warned it depended on getting orders from utilities, which hasn't happened yet (altho they are optimistic).

    Now the scary part - they essentially paid off all debt in Q1 (down to $ 7 MM), but debt has now risen to $ 25 MM at Q2. My comment - this covers the $ 20 MM of cap ex, the $ 7.5 MM distribution with a little positive cash flow. But they have available financing of about $ 150 MM and they are looking at 2 distressed assets that are on the market. They wouldn't say where; one caller asked if these were transformative (big) deals or bolt-on mines close to RNO's current mines. They wouldn't say. I'd say that if they are going to go back into dent to buy coal assets, they only have 1 shot at it; then their available financing will be used up. They had better be right with their 1 chance.

    I sold a bit of my RNO a few days ago, but when the price jumped back up just before the ex- date I figured things weren't as bad as I feared so I held onto most of my units. Not looking like the right decision just now.

  • Reply to

    missed profit targets

    by ronn49 Jul 31, 2014 10:14 AM
    jrad52 jrad52 Jul 31, 2014 2:21 PM Flag

    Not a good day to disappoint people.

  • Reply to

    this is the only smart way to play coal

    by mertxesapp Jul 21, 2014 7:51 PM
    jrad52 jrad52 Jul 31, 2014 9:52 AM Flag

    Still think so?

  • Since no one is posting, I simply point out that SSP is up 10% pre-market on very low volume. JRN is up 20% on slightly higher (but still low) volume. It's going to be a pretty complicated deal, I would think.

  • Reply to

    Foresight fighting fire in Hillsboro, Ill., mine

    by fuelspotpaul Jul 18, 2014 10:24 AM
    jrad52 jrad52 Jul 30, 2014 3:19 PM Flag

    Thank you, Foresight, for the update. I know absolutely nothing about the actual process of coal mining, and fighting underground fires. I guess it takes a while, and now they will have to figure out when mining can continue.

  • Reply to

    Ex-Dividend?

    by higherstandard2011 Jul 29, 2014 1:16 PM
    jrad52 jrad52 Jul 30, 2014 3:16 PM Flag

    No. You have to own on Thursday and to do that, you had to place your buy by COB on the 29th (Tuesday). Take a look at Yahoo's historical prices - you will see the 44.5 cent charge on the 29th.

  • Reply to

    Ex-Dividend?

    by higherstandard2011 Jul 29, 2014 1:16 PM
    jrad52 jrad52 Jul 29, 2014 3:25 PM Flag

    Went ex today, 44.5 cents.

  • Reply to

    CC notes.....

    by trader_george007 Jul 29, 2014 10:29 AM
    jrad52 jrad52 Jul 29, 2014 11:46 AM Flag

    I tried searching for local papers near Hillsboro to find any update, but no success. I guess we'll have to wait until the earnings call. I owned FELP very briefly after the IPO, hoping for a jump that never came, but I'm out now. So I have no skin in that game; it's just frustrating that the company is starting off with very little disclosure - nothing at all about the Murray Energy lawsuit, and not much about the fire.

    As to AHGP/ARLP, AHGP outperformed ARLP by quite a bit up until a little more than a year ago when things reversed. I don't see the great outperformance by AHGP returning any time soon but AHGP's distribution should grow 27% faster than ARLP, so when the yield is the same, AHGP seems like the better buy. The distribution should continue to be better, and who knows? They might do some sort of transaction that would jump start AHGP's price - merge the companies, reset the IDRs, whatever.

  • Reply to

    CC notes.....

    by trader_george007 Jul 29, 2014 10:29 AM
    jrad52 jrad52 Jul 29, 2014 11:08 AM Flag

    3 points/questions: 1. Most importantly, has FELP made an announcement that the mine will be closed for a few months? I saw the 2 announcements about the fire, and the company said it would update investors as more information was known, but all I've heard is silence since last Monday. Since the stock jumped later last week, I assumed someone knew the problem wasn't that bad. Have you seen something specific?

    2. ARLP also commented on an unnamed competitor in the Illinois Basin (sure sounded like FELP to me). Around the 27 minute mark, ARLP talked about 2015/2016 pricing, and said the IB was strong on demand and a little short on expected production, so they thought pricing would firm up slightly (they said to model flat to slightly higher prices). But, they said if other operators ramp up volume, pricing may suffer. I thought the comment was a little funny, since ARLP/WOR have quite a bit of volume coming on line during 2015/2016, but I thought they were warning that if FELP's production projections come true, things could get a bit ugly. From their comments, I inferred that FELP has already had an effect on pricing. ARLP also indicated the export market has been soft and they were not modeling any improvement in exports in ARLP's pricing projections. They said that if the export market improves, there's a chance for upside in ARLP's pricing projections. My comment is that FELP seems to be the IB producer that is most dependent on exports. If exports are weak, FELP will have to cut domestic prices to move coal. A bit of a concern.

    3. And finally, AHGP is once again yielding slightly more than ARLP. And with the comment that they expected to raise ARLP's distribution 1.5 cents per Q and AHGP's distribution by 2.25 cents per Q, the yield disparity should grow. I still favor AHGP.

    And finally finally, I note Mr Craft's comment that it would take more certainty (favorable certianty, that is) in the regulatory approach to raise the distro quicker.

  • Reply to

    ARLP versus BTU

    by get_on_your_job Jul 28, 2014 4:28 PM
    jrad52 jrad52 Jul 28, 2014 7:24 PM Flag

    Simplistically, the issues are met coal versus thermal coal, Central Appalachia versus Illinois Basin, high debt versus reasonable debt, and throw some Australian problems in.

    Met coal pricing has been getting hammered for over a year now, and demand isn't that great. WLT is essentially 100% met coal, ANR is about 20% met coal, I don't see the percentage for ACI, but it has a lot of met coal mines, and BTU has a huge met coal operation in Australia. ARLP is purely thermal coal.

    CAPP coal is dying because of high costs, and because utilities that have installed scrubbers can use cheaper Illinois Basin coal. ANR is big in CAPP (probably overlaps somewhat with its met coal operation); ACI has lots of CAPP. My geography isn’t good enough to tell if BTU’s Eastern operations are in CAPP or NAPP, but it spun most of its Illinois Basin operations off years ago with Patriot. ARLP has some operations in Northern App, but it closed its only CAPP mine a year ago. Other than that, it’s all in the Illinois Basin, which is the hottest place to be in coal just now.

    WLT’s debt is greater than 4 times its equity; through careful planning, very little principal is due in the next few years, but the interest expense is killing WLT. ACI’s debt is more than 2 times equity. BTU’s debt is about 1 ½ times equity. And ANR’s debt is about equal to its equity. I could probably figure out the multiple of debt to EBITDA for each of the companies, but I didn’t bother – the multiple is high is all cases. ARLP’s debt is slightly less than equity, and it’s just slightly more than 1 times EBITDA.

    And finally, BTU’s biggest problem is Australia – its operations there are mostly met coal, plus there have been currency problems as well.

    ARLP is the biggest miner in the Illinois Basin, and its mines are low cost (other than Foresight, which is also in the IB, ARLP has the lowest cost mines I have seen on an overall basis. It’s purely thermal coal and it has good relationships with enough utilities that it has been able to lock in sales of its coal at reasonable prices. And it’s doing great.

    So no met coal, no CAPP coal, no crazy leverage, and no Australia.

    FWIW.

  • jrad52 jrad52 Jul 28, 2014 11:17 AM Flag

    I assume you mean 2016? I don't see many people worrying about pricing in 90 years. :)

    Actually, for 2016, I'm more worried about being able to sell all the new production at White Oak.

    I just got home and missed the call. I'll listen to the replay, and hope they talk about WOR.

  • Reply to

    Optimism and coal in the same sentence

    by jrad52 Jul 28, 2014 7:59 AM
    jrad52 jrad52 Jul 28, 2014 9:40 AM Flag

    I don't think ARLP sells much coal on the spot market. At the start of Q2. they had sold something like 97% of expected Q2 production. So maybe a few percentage points of Q2 sales were on the spot market.

  • Take a look at ARLP's earnings release this AM. Great numbers for any mining company, but unbelievable for a coal miner. Volume way up, pricing stable, and a huge bottom line.

    And just so this post has something to do with NRP, ARLP is a lessee of NRP's. Not a big enough lessee to matter a whole lot, but a lessee nonetheless. Unfortunately, while NRP mentioned many of its mines as having had strongs quarters, the 1 mine leased from NRP (ARLP calls it Mettiki, NRP calls it Beaver Creek) is not mentioned as having had a strong Q.

    FWIW.

  • Reply to

    This is good news for ARLP earnings.....

    by trader_george007 Jul 16, 2014 10:01 AM
    jrad52 jrad52 Jul 28, 2014 7:32 AM Flag

    Other than the distribution, you were right on schedule, not a Q or 2 early, as I had thought.

    I hope they say more about White Oak on the call.

  • Reply to

    NRP down again.

    by ayscuew Jul 25, 2014 4:54 PM
    jrad52 jrad52 Jul 27, 2014 11:42 AM Flag

    BTW, if those are the coal stocks you follow, I can understand your pessimism. Even though none of them have significant debt due in the next few years, they must have all sorts of loan covenants that will be violated soon, which might be just as bad as a default.

    There's hope for CLF if management gets replaced this week as people expect will happen at the annual meeting. But I can't see the others surviving without a debt restructuring, which will kill the shareholders.

  • Reply to

    NRP down again.

    by ayscuew Jul 25, 2014 4:54 PM
    jrad52 jrad52 Jul 27, 2014 11:30 AM Flag

    I gave up on met coal miners quite a while ago. ARLP once mined a little met coal, but they stopped several years ago. I think RNO has a very little met coal operation, but I only rent RNO for the distribution. I can't see owning it on a long-term basis.

    I don't see ARLP as a really long-term investment, either. I am hoping that after their 2 new mines come on line this year and next year, they stop investing in coal and just increase the distribution. If they continue to invest in coal, I'm probably gone.

    My biggest problem with NRP is that they don't do earnings calls, where they take questions. So the numbers don't look terrible (compared to reduced expectations) but we have no idea how long their met coal leases last, or when they get renegotiated. I did an amateur analysis of SXC's proposed sale of its met coal mine based on publicly available data, and met coal is even more of a disaster than I thought. Of course, that might be specific to SXC's mine, which is small, but since NRP doesn't say much, I'm assuming the worst for its future, even though Q2 probably won't look too bad.

  • Reply to

    NRP down again.

    by ayscuew Jul 25, 2014 4:54 PM
    jrad52 jrad52 Jul 26, 2014 8:04 PM Flag

    ARLP is within 75 cents of its all time high. AHGP is within 6 cents of its all time high. RNO is within 25 cents of its 52-week high, but RNO has more issues than I care to see.

    And BTW, ARLP/AHGP report Q2 earnings on Monday morning before the market opens. I'm expecting/hoping for the best. If they produce again, they'll hit new highs. If they stumble, well I don't want to think about that. And ARLP is a small lessee of NRP's.

    And SXC's hoped-for sale of a met coal mine looks like CAPP met coal mines are pretty close to worthless. That's an exaggeration, of course, but not by much.

    FWIW.

  • Reply to

    Foresight fighting fire in Hillsboro, Ill., mine

    by fuelspotpaul Jul 18, 2014 10:24 AM
    jrad52 jrad52 Jul 25, 2014 1:35 PM Flag

    On Monday, FELP came out with an updated press release about the weekend efforts to put the fire out, saying they weren't sure yet if the fire was out or not, or the extent of any damages. It would be nice if they remembered they are a public company, and update people on the status of the mine. I can only assume they still don't know, which is worrisome.

  • Reply to

    Another brutal day for coal

    by ayscuew Jul 23, 2014 4:52 PM
    jrad52 jrad52 Jul 23, 2014 8:53 PM Flag

    Not quite so brutal. Besides NRP being up 2%, ARLP and AHGP were both up 1%, RNO was up 1% and FELP was about flat for the day. SXCP, a coal-related MLP (they make coke out of met coal), was also up 1%. So at least the coal MLPs didn't do so badly. I'm ignoring OXF.

    But here's an interesting item: SunCoke (the parent of SXCP) mostly operates coke making facilities, but it also operates met coal mines, producing 1.3 MM tons of met coal in 2013 at a loss, even though it got premium pricing for the coal. Most of the met coal is used by SunCoke to make coke. A while back, SunCoke said it was exploring the sale of the met coal operations. Tonight, it said it thought it could get a sale done by year-end. It will take an impairment charge of $ 103 MM for the mines on its Q2 earnings statement, and it will cost another $ 10 - $ 13 MM in expenses to complete the sale. Now the interesting part - I was curious as to who might be buying met coal mines in this market, at any price. I think SunCoke is basically giving the mines away (and it "thinks" it can get the deal done at that price!) The carrying value of SunCoke's coal reserves was $ 52 MM at December 2013, plus it had some undisclosed carrying value for the coal mining equipment. I'd guess the $ 103 impairment charge will basically write everything off to zero. SunCoke will be doing an earnings call tomorrow and I assume they will talk more about this, but for now it looks like they're trying to give the mines away.

    Not a good sign for met coal unless the buyer simply shuts down the mines.

    FWIW.

  • Reply to

    New Website is a joke!

    by k2tradez Jul 19, 2014 1:15 PM
    jrad52 jrad52 Jul 22, 2014 9:23 AM Flag

    Thanks. That solved 1 of my issues. But the web site's organization is still weird.

    I guess VALU's problem is that the people most likely to know of and use the service skew towards the older range of investors. And that age group isn't big on change, unless they can see an improvement. I see change, but no improvement.

    They just made me another in an endless stream of offers to renew at a lower rate. I don't think so.

    But thank you for the explanation.

AI
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