Xinergy Ltd. Announces First Quarter 2012 Financial & Operating Results

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KNOXVILLE, TENNESSEE--(Marketwire -05/10/12)- Xinergy Ltd., (XRG.TO) ("Xinergy" or the "Company"), a Central Appalachian coal producer, today announced financial and operating results for the three months ended March 31, 2012, together with its Management's Discussion and Analysis ("MD&A") for the corresponding period. These documents are posted on SEDAR at www.sedar.com and on the Company's website at www.xinergycorp.com.

The Company reported net income of $1.7 million or $0.03 per diluted share in the quarter ended March 31, 2012 as compared to a net loss of $10.3 million or $0.18 per diluted share last year. EBITDA for the first quarter 2012 was $14.6 million compared to $4.6 million in the same quarter last year. Excluding one-time gains and expenses related to a partial contract buyout and separate contract settlement related to two thermal coal customers, first quarter adjusted EBITDA was ($3.7) million as compared to $4.7 million a year ago.

In the first quarter of 2012, the Company reported coal revenues of $29.9 million on 425,697 tons sold ($70.35 per ton) compared to $43.1 million on 553,485 tons sold ($77.78 per ton) the same quarter a year ago. Total cash costs were $25.5 million or $66.99 per ton compared to $28.5 million or $61.18 per ton a year ago.

Jon E. Nix, Xinergy's Chairman and CEO commented: "Weak market conditions reflecting reduced domestic utility demand, mild weather, record inventory levels, low natural gas prices and an increasingly onerous regulatory environment have converged to create an extremely challenging period for the coal industry. Following our decisive actions several months ago to cut our workforce by a third, match production with sales, limit capital expenditures and control costs, we have strengthened our liquidity and positioned the Company to take advantage of a market recovery. We believe the markets for both thermal and metallurgical coal sales will be challenging in the near term but continue to focus on growing the metallurgical side of our business. During Q1 2012, we successfully added met reserves in both West Virginia and Virginia. At our mid-vol South Fork operation in West Virginia, we added over 21,000 acres bringing our controlled position to 35,800 acres. We shipped our first production out of South Fork in April and have several permit applications that are continuing through the regulatory process which will soon allow us to significantly increase production. At True Energy, we received our much anticipated permit amendment which adds significant reserves to our existing permit. We will utilize the equipment we relocated from our thermal mines to significantly increase production as the high-vol market rebounds. Our active acquisition program has pushed our proven and probable reserves over 114 million tons with roughly a quarter of those reserves metallurgical."

Commenting on liquidity and cost cutting measures, Michael R. Castle, Xinergy's Chief Financial Officer added: "The Company continues to maintain a solid cash position of $69.5 million at March 31, 2012. We believe that cash on hand and cash generated from our operations will be sufficient to fund ongoing working capital requirements, meet our debt service requirements and fund development and capital expenditures. The Company continues to make operational and financial decisions that strengthen our liquidity position including a partial contract buyout and contract settlement with two customers that realized $18.9 million in cash to the company and released an additional $12.0 million in restricted cash. We have re-deployed mining equipment to our metallurgical mines, delayed the construction of the Brier Creek preparation plant and have reduced anticipated capital expenditures by $40.0 to $60.0 million. The Company continues to implement cost reductions at all operations as well as aggressively managing selling, general and administrative costs. We continue to work with customers regarding current and future sales as well as continue to assess markets for thermal and metallurgical coal. With initial sales of met coal from the South Fork mine beginning in April and the permit addition at True Energy that will allow us to increase production we expect to be better positioned to update production and sales guidance in the next few weeks."

Highlights for the Quarter Ended March 31, 2012, and Subsequent Events

 

-- In April, True Energy, our high-vol metallurgical surface mining
operation in Virginia, received a permit that adds additional reserves
that will allow the Company to increase production as market conditions
improve.

-- In April, South Fork, our mid-vol metallurgical surface mine in West
Virginia, began selling coal from initial production.

-- In March, we negotiated a contract settlement and a partial buyout with
two major thermal coal customers realizing $18.9 million in cash to the
Company and releasing an additional $12.0 million of restricted cash.

-- The Company recorded net income of $1.7 million or $0.03 per diluted
share in the quarter ended March 31, 2012 as compared to a net loss of
$10.3 million or $0.18 per diluted share in quarter ended March 31,
2011.

-- The Company continues to maintain a solid cash position of $69.5 million
at March 31, 2012.

-- As of the date of this filing, inventory levels have been reduced by
27%, or approximately 100,000 tons, from the year end.

Financial Overview

The following tables present selected balance sheet, statement of operations and coal production and sales data as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011.

 


As of As of
March 31 December 31
($ '000) 2012 2011
----------------------------------------------------------------------------

Balance Sheet

Cash $ 69,465 $ 72,983
Total current assets 103,688 117,269
Total assets 282,854 289,701
Total current liabilities 30,835 43,309
Total long term liabilities 225,308 224,803
Shareholders' equity 26,711 24,589



For the three For the three
months ended months ended
($ '000, except per share) March 31, 2012 March 31, 2011
----------------------------------------------------------------------------

Statement of Operations

Total coal revenues $ 29,946 $ 43,051
Cost of coal sales 30,507 35,067
Gross margin (561) 7,983
Income (loss) before taxes 2,372 (12,845)
Net income (loss) 1,690 (10,251)
Basic net income (loss) per share 0.03 (0.18)
Diluted net income (loss) per share 0.03 (0.18)



For the three For the three
Months ended Months ended
Statistics March 31, 2012 March 31, 2011
----------------------------------------------------------------------------

Tons sold 425,697 553,485
Tons produced 380,173 465,620

Sale price/ton 70.35 77.78
COGS/ton sold 71.66 63.36
Gross margin/ton sold (1.31) 14.42
Cash costs/ton produced 66.99 61.18

Project Update

During the first quarter of 2012, we successfully added met reserves in West Virginia and Virginia. At South Fork, in Greenbrier County, West Virginia, we added approximately 21,300 acres which brought our controlled position to 35,800 acres. We presently have a sub-surface exploration program in progress and hope to update our NI-43-101 later this year. Our South Fork permit applications continue to progress through the regulatory system. We currently have our Blue Knob surface application, South Fork No.2 underground application, and the Clear Fork preparation plant and rail loadout application in the review process with the West Virginia Department of Environmental Protection and anticipate requisite approvals by the third quarter of this year.

At our True Energy Mine in Wise County, Virginia, we received a permit amendment from the Virginia Department of Mine, Minerals, and Energy that adds significant reserves to our existing permit. True Energy now has production capacity of 18,000-23,000 tons per month, after giving effect to the permit amendment and additions to our equipment fleet. We anticipate updating our NI-43-101 on our True Energy project as well as our South Fork project by then end of the year.

Conference Call

The Company will hold a conference call to discuss first quarter 2012 results on Friday, May 11, 2012 at 10:00 a.m. ET. Interested parties are invited to participate in the conference call, during which prepared remarks from the Company's management team will be followed by a question and answer session. The conference call will be webcast live on the Internet with a replay available on the Company's website shortly after the event.

 

Event: Conference call to discuss first quarter 2012 financial results

Timing: Friday, May 11, 2012 at 10:00 a.m. Eastern Time

Phone: Dial In 877-317-6789 (International 412-317-6789) Canada 866-
605-3852 five to ten minutes prior to scheduled start and
reference Xinergy conference call

Internet: Log on to the Company's website, http://www.xinergycorp.com/
five to ten minutes prior to scheduled start, follow links to
Investors page.

Replay: A telephonic replay will be available approximately 1 hour after
conclusion of the call through May 28, 2012 at 9:00 AM ET by
calling 877-344-7529 (International 412-317-0088) and entering
conference number 10013940. Replay of the webcast will also be
available on the Company's website.

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. Currently, Xinergy sells high quality thermal coal to electric utilities and industrial companies throughout the south-eastern United States as well as metallurgical coal. For more information, please visit www.xinergycorp.com.

Contact:

Xinergy Ltd.
Chris Halouma
Director, Investor Relations
865-474-7000
Xinergy Ltd.
Michael R. Castle
Chief Financial Officer
865-474-7000
www.xinergycorp.com

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