I am going to listen to ANR, ACI earnings CC next month, they are going to
have a real hard time in 2015, they have to close many CAPP unprofitable
mines to save the cash to stay alive, IMO.
The cash follow is there, but my estimate of $5.75 to $6 earning is
off now because the $71.6 M increase in depreciation, depletion
and amortization. One good point is The coal supply agreements
acquired from Patriot give ARLP the right to deliver approximately 5.1
to 5.6 million tons of coal from 2015 through 2017, 2 MT increase
from Jan news, where does that come from?
Thanks for the comment. ARLP is too conservative in their guidance,
so I assume the 700K to 800K is not in the guidance until the issue is
settled by court next year.
market should reward ARLP for buying up coal reserve, oil and gas interests
at bottom price.
My estimates are off by $40M, ARLP did not ship all the coal ARLP produced, if he did,
Q4 would be 11MT sold. What does it mean: "the impact of a customer breach of an above-market coal supply agreement"?
tomorrow morning, here is my best case:
Revenue: $620M, earnings $1.35
Q4 Coal sold: 10.75MT, in the mid of 40.25 to 41 guidance,
my reason: production 10.2MT same as Q3, plus the delayed shipments of 0.4 MT from Q3,
add 0.15 extra like in Q2, and left 0.35MT inventory, sold out 2014 production, like ARLP has
been done for the last 5+ years.
Ice on the cake: WOR production guide to 2.5+MT for 2015
ARLP provided guidance of 40.25 to 41 MT sales volume on Q1 CC,
so far ARLP has sold 29.68, if ARLP can do the low end of 40.25MT,
then Q4 is 10.57MT, a record Q, let's see what happens next week.
FELP filed $70M credit today, ARLP filed $100M last DEC and bought 3.7MT contract
and reserve, I think this year many high cost mines are going to be closed and low
volume ILB mines to be sold, FELP and ARLP may buy them up to lock up the reserve
for future growth. ARLP already has 10% production volume growth this year.
ARLP CFO said it in DEC 2014, CSX said it last week, BTU CEO said it last
Peabody Energy says it's ready for coal market to turn
"It has huge reserves in the Powder River Basin in Wyoming, where low-sulfur coal that has become the fuel of choice for many coal plant operators can be easily scooped out of surface mines. And it has holdings in the resurgent Illinois Basin, where demand is growing for the dirty coal now that most power plant owners have scrubbers cleaning their emissions."
Do we get the confirmation on ARLP earnings report and CC next week, I think so.
The three states that comprise the ILB currently consume approximately 52% of the region’s total production, while the other large consuming
states include: Florida (10%), Ohio (9%), Tennessee (4%), and Alabama (2%)
― Indiana – retains nearly 75% of their produced coal for electricity generation within the state
― Western Kentucky – keeps a healthy 62% of their production for electricity use; Kentucky is currently the largest consuming state of ILB coal
― Illinois – consumes less than 25% for electricity generation as the majority (90%) of the state’s utilities burn PRB coal
Illiniois power plans may have lot of switching to do, IMO.
Two of the largest ARLP customer: TVA and SO had 26% of ARLP volume in 2013
which is 10.35MT. TVA uses about 30MT/year and 44% of the 33MT come from ILB.
SO uses 33MT/year, only about 10% is from ILB. ARLP may have many MT growth
Southern Company (SO) – Historically a major coal-burning utility at 2/3 of
its generation coming from the fuel, SO more recently brought its coal
share down to 36% in 2012. Its ILB burn is beginning to take share from
CAPP coals, with last year burning 8% ILB coal, up from 2% in 2007. In
2016, the Company expects 29% of its coal consumed to have originated
from the ILB. As a side note, SO anticipates its total burn by 2016 to be
45-50 mmt, with capacity of 60-65mmt.
One thing is for sure, ARLP is going to have lot of more free cash flow
next year because WOR and Gibson south building-up production
investments come to close, both are going to produce income.
No idea how much ARLP can save from lower fuel cost, your 2.8B is too high,
my guess is $2.5 to $2.55B range, 10% revenue growth, earnings is hard to
estimate because WOR income goes right to the bottom line.
It is even better if the Patriot coal contracts is from a new big customer,
it is not easy for power companies to switch coal suppliers.
ARLP may see EBITDA growth 20+% in 2015 because Gibson South
is going to ramp up to 3MT production, adding WOR production, ARLP
may see 10% sales and production growth in 2015 to 44MT. WOR'
mine produce higher quality coal which command a higher price and
ARLP should line up power companies to buy them, with reasonable
price, WOR's coal may save them more money. There may be many surprises
on this earnings CC, we will see.
White Oak’s (ARLP) No.1 Mine – 11,870 Btu/lb with 1.7-2.4% sulfur (medium sulfur),
historically a$6-$13/ton differential between the medium sulfur and high sulfur products.
This is the conversation on CSX earnings CC:
Matthew Troy - Nomura
Okay and Illinois Basin is that -- you're not hearing anything about switching from those customers you have?
Michael J. Ward - Chairman, President and CEO
Well, I'm not sure exactly what you're asking about but what we're seeing is a lot of our customers are moving to the Illinois Basin coal, which is good for us because it gives us a longer length of haul, gives us higher RPU and it's a good thing for us.
Matthew Troy - Nomura
Well, I was just more talking about the switching sensitivities in the various sourcing basins, but I got it. Okay, thank you.
Listen to CSX earnings CC, at 53:30 time mark, one analyst ask if more
customers moving to ILB coal and CSX CEO says yes. It will be interesting
to listen ARLP earning CC on Jan 28 if ARLP gets more coal volume signed
up. The coal stock weakness cross board is caused weak exports in 2015
according to CSX.
Correction: CFO provided guidance on Q2 earning CC of
Q3 =Q1 and Q4 =Q2. So far, Q3 beat Q1, no reason Q4 can
not beat Q2 too.
You are right of "ARLP is the Rodney Dangerfield of stocks", no respect.
I see ARLP looks like AAPL of coal industry, ARLP gets 70%(?) the profits
in the US thermal market, but market always doubts what is next for growth,
CEO of AAPL and ARLP are keeping proving market is wrong for many
years now. The way I look at, ARLP is very profitable if coal remains
at this low price level and many other(ANR ACI WLT) may not survive in
two years, if coal price goes up, all goes to the ARLP bottom line, ARLP
can do no wrong, may be some delay of shipping in some Qs, IMO.
If you want to time it perfect, DEC 16 low of 38.19 is low we may see
today, today is the cycle low IMO, and Q4 earnings run should start
tomorrow. If we believe CFO, Q4 should = Q3, ARLP beats its own estimates
often, we should see $600M revenue and $1.30+ earnings, ARLP
may provide 2015 guidance of EBITDA $875 to $950M, may see
earnings $5.75 to $6, fair price for ARLP is 50+, IMO.
On DEC 9 presentation, CFO says many electricity companies
are considering switching more coal to ILB basin supply, let's
see if ARLP gets more orders, TVA, one of ARLP 10+% customer
is short of coal inventory:
"The transportation constraints gave utilities a need to diversify supply," Ted O'Brien, chief executive officer of Doyle Trading Consultants, a Grand Junction, Colorado-based coal analysis company, said by phone Dec. 11.
The Tennessee Valley Authority has cut generation this year to preserve coal stocks, Ben Jones, the company's manager of coal origination, said at a conference in New York this month.
"Our main concern has been -- can we get the coal we've bought into our system," he said. "We started trucking coal to the plants."
Xcel Energy's stockpiles are "significantly low," Craig Romer, the Minneapolis-based company's director of fuel supply operations, said by phone Oct. 28.
"Normally in the fall we try to build up those inventories in anticipation of weather events," he said. "Right now, we're just not getting the service to build those winter stockpiles."
52% of ARLP coal is transported by barge and trucks, and there were 0.5MT coal delayed by
shipping schedule in Q3, it happened few times, and ARLP always make it up next Q.
"Timing differences in shipments to Illinois Basin customers from our Dotiki, Gibson North and River View mines drove total coal sales volumes down by 5.2% compared to the Sequential Quarter. "