Xinergy Announces Results for Fourth Quarter and Full Year 2012

March 21, 2013

KNOXVILLE, TENNESSEE--(Marketwire - March 21, 2013) - Xinergy Ltd. (XRG.TO), a Central Appalachian coal producer, today announced that it had a net loss of $(88.8) million, or $(1.63) per diluted share for the year ended December 31, 2012 and a net loss of $(40.4) million, or $(0.74) per diluted share, for the fourth quarter of 2012. This is compared with a net loss of $(14.1) million, or $(0.25) per diluted share for the year ended December 31, 2011 and a net loss of $(6.5) million or $(0.12) per diluted share in the fourth quarter of 2011. Fourth quarter and full year 2012 adjusted EBITDA was $(7.2) million and $(22.8) million, respectively, compared with $6.7 million and $30.6 million, respectively for the fourth quarter and full year 2011. The Company's Audited Consolidated Financial Statements for the year ended December 31, 2012, together with its Management's Discuss and Analysis ("MD&A") for the corresponding period, have been posted on SEDAR at www.sedar.com and on the Company's website at www.xinergycorp.com.

Matt Goldfarb, Xinergy's CEO, commented: "Last year proved to be an extraordinarily challenging market environment, characterized by the confluence of continued weakness in domestic thermal markets due to oversupply and an abundance of cheap natural gas, and a violent correction in the global met market occasioned by slowing Asian demand and instability in European markets. As we look into 2013, we are cautiously optimistic that both markets have bottomed and are beginning to stabilize. Firming natural gas prices, significant supply rationalization and more seasonal winter weather provide support for a potential rebound in CAPP thermal pricing. In the met market, we see the most recent hard coking coal benchmark settlement of $172/mt as reflecting not only increased demand from China, but also a supply response to the mid-2012 pricing environment that left much of the seaborne met cost curve underwater." 

"The fourth quarter concluded a pivotal year for Xinergy in which we executed well against our objectives of repositioning our asset portfolio with a focus on our premium quality, mid-vol met footprint in West Virginia, while maintaining balance sheet flexibility to withstand the market downturn. The recently announced divestiture of our Kentucky thermal operations accelerates our transformation towards a greater mix of premium quality, mid-vol met coal assets while strengthening our balance sheet to position us to drive long-term shareholder value." 

2012 Annual Results

The following tables show selected operating results for the three month and twelve month periods ended December 31, 2012.

    As at     As at   As at
    December 31     December 31   December 31
($'000)   2012     2011   2010
               
Balance Sheet              
               
  Cash $ 32,325   $ 72,983 $ 17,029
  Total current assets $ 50,723   $ 117,269 $ 47,075
  Total assets $ 188,772   $ 289,701 $ 153,234
  Total current liabilities $ 20,797   $ 40,309 $ 28,659
  Total long term liabilities $ 229,786   $ 224,803 $ 75,449
  Shareholders' (deficit) equity $ (61,811 ) $ 24,589 $ 49,126
                   
                   
$'000, except per share   2012     2011     2010  
                   
Statement of Operations                  
                   
  Coal revenues $ 81,159   $ 166,820   $ 108,841  
  Cost of coal sales $ 95,167   $ 122,092   $ 74,447  
  Gross margin $ (14,008 ) $ 44,188   $ 34,393  
  Loss before taxes $ (70,023 ) $ (24,893 ) $ (2,093 )
  Net loss $ (88,795 ) $ (14,107 ) $ (2,071 )
  Net loss per share $ (1.63 ) $ (0.25 ) $ (0.04 )
                         
                         
    Three months     Three months     Three months     Three months  
    ended     ended     ended     ended  
$'000, except per share   Dec 31, 2012     Sept 30, 2012     June 30, 2012     March 31, 2012  
                         
Statement of Operations                        
                         
  Coal revenues $ 11,547   $ 16,522   $ 23,143   $ 29,946  
  Cost of coal sales $ 17,239   $ 21,051   $ 26,372   $ 30,507  
  Gross margin $ (5,692 ) $ (4,529 ) $ (3,229 ) $ (561 )
  (Loss) income before taxes $ (18,711 ) $ (35,613 ) $ (18,070 ) $ 2,372  
  Net (loss) income $ (40,397 ) $ (35,613 ) $ (14,474 ) $ 1,690  
    Per share, basic and diluted $ (0.74 ) $ (0.65 ) $ (0.27 ) $ 0.03  
               
               
    2012     2011   2010
               
Sales & Operating Statistics              
               
  Tons sold   1,211,166     1,990,447   1,278,585
  Tons produced   983,871     2,037,002   1,332,571
               
    Sale price/ton $ 67.01   $ 83.54 $ 85.13
    COGS/ton sold $ 78.58   $ 61.34 $ 58.23
    Gross margin/ton sold $ (11.57 ) $ 22.20 $ 26.90
    Cash costs/ton produced $ 79.77   $ 59.01 $ 54.16
                       
                       
    Three months     Three months     Three months     Three months  
    ended     ended     ended     ended  
$'000, except per share   Dec 31, 2012     Sept 30, 2012     June 30, 2012     March 31, 2012  
                         
Sales & Operating Statistics                        
                         
  Tons sold   179,584     242,390     363,495     425,697  
  Tons produced   146,790     183,909     272,999     380,173  
                         
    Sales price/ton $ 64.30   $ 68.16   $ 63.67   $ 70.35  
    COGS/ton sold $ 95.99   $ 86.85   $ 72.55   $ 71.66  
    Gross margin/ton sold $ (31.69 ) $ (18.69 ) $ (8.88 ) $ (1.31 )
    Cash costs/ton produced $ 94.55   $ 95.17   $ 79.22   $ 66.99  
                     
                     
    2012  
      Metallurgical     Thermal     Total  
Tons sold     116,373     1,094,793     1,211,166  
Ton produced     125,318     858,553     983,871  
                     
Sale price/ton   $ 104.00   $ 63.08   $ 67.01  
COGS/ton sold   $ 168.02   $ 69.07   $ 78.57  
Gross margin/ton sold   $ (64.02 ) $ (5.99 ) $ (11.57 )
  Total revenues   $ 12,102,171   $ 69,057,040   $ 81,159,211  
  Total cost of sales   $ 19,552,817   $ 75,614,451   $ 95,167,268  
  Gross margin   $ (7,450,646 ) $ (6,557,411 ) $ (14,008,057 )
                     
Cash costs:                    
                     
  Cost of coal sales   $ 19,552,817   $ 75,614,451   $ 95,167,268  
  Inventory change   $ 493,509   $ (11,566,429 ) $ (11,072,920 )
  Purchase coal         $ (5,616,902 ) $ (5,616,902 )
  Cash cost   $ 20,046,326   $ 58,431,121   $ 78,477,447  
                     
    Tons produced     125,318     858,553   $ 983,871  
    Cash costs/ton produced   $ 159.96   $ 68.06   $ 79.76  
       
       
    Three months ended December 31, 2012  
    Metallurgical     Thermal     Total  
                     
Tons sold     27,511     152,073     179,584  
Ton produced     17,718     129,072     146,790  
                     
Sale price/ton   $ 98.04   $ 58.20   $ 64.30  
COGS/ton sold   $ 189.38   $ 79.09   $ 95.99  
Gross margin/ton sold   $ (91.34 ) $ (20.89 ) $ (31.69 )
  Total revenues   $ 2,697,127   $ 8,850,355   $ 11,547,482  
  Total cost of sales   $ 5,210,143   $ 12,027,591   $ 17,237,734  
  Gross margin   $ (2,513,016 ) $ (3,177,236 ) $ (5,690,252 )
                     
Cash costs:                    
                     
  Cost of coal sales   $ 5,210,143   $ 12,027,591   $ 17,237,734  
  Inventory change   $ (712,594 ) $ (1,937,507 ) $ (2,650,101 )
  Purchase coal         $ (709,293 ) $ (709,293 )
  Cash cost   $ 4,497,549   $ 9,380,791   $ 13,878,340  
                     
    Tons produced     17,718     129,072     146,790  
    Cash costs/ton produced   $ 253.84   $ 72.68   $ 94.55  

Liquidity and Capital Resources

As of December 31, 2012, we had total cash and cash equivalents (excluding restricted cash) of $32.3 million, compared with $73.0 million at December 31, 2011. As of December 31, 2012, after giving effect to the Straight Creek sale, the Company's liquidity profile is as follows:

Cash........................................... $ 32.3 million
Term Loan B Commitment................. $ 9.8 million
  Liquidity................................... $ 42.1 million
     
Restricted Cash............................ $ 49.5 million
     
     

In connection with the Straight Creek sale, approximately $38 million has been placed in a "Collateral Proceeds Account" pursuant to the terms of the Indenture governing our 9.25% Senior Secured Notes. The Company anticipates funding its capital expenditures requirements over the balance of 2013 from this account.

2013 Production and Capital Expenditures Guidance

The Company does not anticipate any thermal coal production in 2013, after giving effect to the Straight Creek transaction. Previously anticipated 2013 thermal coal sales from Raven Crest/Brier Creek have been pushed into 2015 by reason of a March 2013 amendment to a supply agreement covering the sale of 360,000 tons per annum previously scheduled to cover a 2-year period beginning January 2013. The amended supply agreement provides for the delivery of 360,000 tons per annum beginning January 2014, and continuing through December 2015, at index-based pricing. 

2013 metallurgical coal sales guidance remains unchanged from prior guidance at 300,000 to 400,000 tons from our South Fork operation. The Company anticipates capital expenditures of $35.0 to $40.0 million for fiscal 2013, of which approximately $8.5 million has been spent to date. 

Mr. Goldfarb continued: "Construction of our preparation plant and rail loading facility at South Fork remains on track to be completed by the end of the second quarter. Notwithstanding the challenging market environment, the excitement surrounding our crown jewel asset coming online meaningfully is evident amongst the entire Xinergy family."

Conference Call, Webcast and Replay

The Company will hold its quarterly conference call to discuss fourth quarter and full year 2012 operating results on Friday, March 22, 2013 at 9:00 a.m. EDT. The conference call will be open to the public toll free at (877) 317-6789. International callers should use (412) 317-6789, and Canadian callers should use (866) 605-3852. The conference call can also be accessed via webcast on the Company's website with a replay available shortly after the event.

About Xinergy Ltd.

Headquartered in Knoxville, Tennessee, Xinergy Ltd., through its wholly owned subsidiary Xinergy Corp. and its subsidiaries, is engaged in coal mining in eastern Kentucky, West Virginia and Virginia. Xinergy sells high quality thermal and metallurgical coal to electric utilities, steelmakers, energy trading firms and industrial companies. For more information, please visit www.xinergycorp.com.