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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Is BTU a good proxy for NRP? BTU's US coal ops look like almost entirely thermal, and nothing in CAPP/NAPP. We might see an indication of world-wide met coal pricing (because of BTU's Australian mines), and we may get some directional guidance as to Illinois Basin coal, but I don't know exactly how that information will translate for NRP.
Also, on Thursday Foresight disclosed a fire at its Deer Run mine (an NRP property), and today they updated the news without saying much. The fire may or may not be out yet, which I guess means the mine isn't re-opening real soon. Foresight will know more when it figures out if the fore is out, and can investigate the damage. NRP has minimum royalties, so there shouldn't be any damage to NRP's financial results, I think. But it's always better if your coal properties aren't on fire.
Thanks, I agree.
Do you know how to simply get the current issue on the new site? You know, where they list all the stocks they cover in a given industry, and then you look at each company's page? The new tutorial doesn't help, and for the past week I've been going to the local library and looking at the paper service, which is a pain.
VALU doesn't work as well as it used to, so this is probably a blessing. But it's frustrating.
Last month, Mr Cline filed SEC Form 4, reporting that he owned 32,779,281 FELP units. Tonight, oops! He files a correction, saying there was a typo mistake in the original filing. Actually, he owns 47,048,812 units. I'm not sure I see any typo in this - it's not a transposition error, obviously. And how could he or his attorney miss the 15 million units? I think there's more to this story that we will never know.
No big deal. Just like the lawsuit filed by Murray Energy against Foresight is probably no big deal (Mr Murray is no angel himself). And the fire at Hillsboro is probably no big deal. But the "no big deals" are starting to add up.
I'd love those numbers, but I think you're a quarter or 2 early. On the last call, management said that Q2 would be impacted (negatively) by a Tunnel Ridge long wall move in May and a long wall move at Mettiki in April. They also reminded everyone that the Annual Miners' Vacation is in June and July and that would affect Q2 as well. I think they were pushing their increased 2014 guidance more towards the second half of the year. Certainly there has to be some catch-up for the slow Q1, but I don't think I get to your numbers. I like them, though.
And yes, unless you believe FELP's growth prospects and its ability to sell the increased production, FELP is way overvalued compared to ARLP. I own both, but FELP isn't a long-term holding for me. FELP is trying to sell its immediate growth prospects, while ARLP's growth seems more in 2015 and 2016 when Gibson South and White Oak come into full production. The catch-up at White Oak once full production starts will be a tremendous pick-up at ARLP's level. It gets all sorts of preferred returns once production starts in full.
The thermal coal market is certainly strengthening, but imports have nothing to do with it. And the US doesn’t seem to import any coal at all from Russia.
Per the EIA, the US imported a grand total of 3,380 tons thru April of this year (latest data available), compared to 2,101 tons same period last year, for an increase of 60%. For comparison, total US production during the 4-month period was about 325,000 tons, so imports were about 1% of the total.
And almost all of our coal imports come from Colombia, Indonesia and a bit from Canada. The EIA doesn’t even show any coal imported from Russia in the past 3 years, unless Russia takes over the Ukraine, which does import a trickle of coal to the US. I can't figure out the logistics of that one.
It's not a question of clean coal; the CAPP produces the "cleanest" coal in the US and it's dying. With the widespread use of scrubbers, clean coal isn't needed - even clean coal needs to be scrubbed, and that favors the use of the cheapest coal (Illinois Basin), not the cleanest coal. Obviously, this is good for ARLP.