U.S. Markets open in 2 hrs 38 mins

Edited Transcript of FELP earnings conference call or presentation 8-May-19 6:00pm GMT

Q1 2019 Foresight Energy LP Earnings Call

Saint Louis, Mo May 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Foresight Energy LP earnings conference call or presentation Wednesday, May 8, 2019 at 6:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jeremy J. Harrison

Foresight Energy LP - Principal Financial Officer & CAO of Foresight Energy GP LLC

* Robert D. Moore

Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC

================================================================================

Conference Call Participants

================================================================================

* Jeff Menapace

* Lucas Nathaniel Pipes

B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst

* Matthew Wyatt Fields

BofA Merrill Lynch, Research Division - Director

* Mayur Kenia

IWD Capital Management, LLC - Founder & Portfolio Manager

* Michal Marczak

* Nicholas Jarmoszuk

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* Zachary Bader

Corbin Capital Partners, L.P. - Credit Investment Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Thank you for standing by. Welcome to the Foresight Energy First Quarter 2019 Earnings Call. (Operator Instructions) As a reminder, today's call is being recorded.

I'll turn the conference now over to Mr. Jeremy Harrison, Chief Accounting Officer. Please go ahead, sir.

--------------------------------------------------------------------------------

Jeremy J. Harrison, Foresight Energy LP - Principal Financial Officer & CAO of Foresight Energy GP LLC [2]

--------------------------------------------------------------------------------

Thank you, John. And welcome to Foresight Energy's earnings call for the first quarter of 2019. With me today is Rob Moore, our President and Chief Executive Officer.

Today, we will discuss Foresight Energy's operating and financial results for the first quarter of 2019 and update you on the current operations at our coal mines. Following our prepared remarks, we will open the call to your questions.

Please note that this call contains forward-looking statements that are based upon our current expectations and beliefs, concerning future developments and the potential effect on us. And there can be no assurance that the future developments affecting us will be those that we anticipate. Our business and our financial results involve risk and uncertainties that could cause actual results to differ materially from management's current expectations. For additional information regarding such risk, please see our annual and quarterly reports filed with the SEC and posted on our website.

During the call today, we will also discuss non-GAAP financial measures, including guidance with respect to adjusted EBITDA. Please refer to our earnings release for reconciliations to the most comparable generally accepted accounting principles for historical periods. Also, this call includes only information that is available to us at this time. To the extent you are listening to this call at a later date by a replay, please note that the information may be outdated or incomplete. We undertake no obligation to publicly update or revise any forward-looking statements after the date they're made, whether as a result of new information, future events or otherwise, except as required by law.

I'll now turn the call over to Rob Moore. Rob?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [3]

--------------------------------------------------------------------------------

Thank you, Jeremy. Good afternoon, everyone. Thank you for joining us today. This morning, Foresight Energy announced its first quarter financial results. This quarter presented several challenges, including severe flooding conditions throughout the river systems, including the Convent Marine Terminal near the Gulf. The flooding caused vessel-loading restrictions related to draft levels, vessel size, vessel movements and barge unloading outages at many of the generating stations that we serve on the Ohio River. In fact, loading conditions at Convent Marine Terminal required the diversion of export volumes away from that terminal and to Alabama state docks in Mobile.

Additionally, we experienced an accelerated decline in export prices throughout the quarter. Despite these difficulties, Foresight delivered solid financial performance, selling nearly 5.7 million tons of thermal coal and generating total revenue of over $269 million, which resulted in adjusted EBITDA of $65.5 million. The results for each of these measures are improvements over prior year first quarter results.

Production was strong during the quarter with the mines safely and efficiently producing over 6 million tons of thermal coal. This compares to 6.1 million tons in the most recent quarter ending December 31, 2018, and 5.7 million tons in the first quarter of 2018.

During the quarter, we completed the longwall move scheduled at our Williamson Energy's mock mine and began preparations for the 2 longwall moves at our Sugar Camp complex. The first of these moves was completed in early April, with the second move completed in early May.

Following these longwall moves, we have 1 additional longwall move scheduled in late 2019 at our mock mine. Our mines continue to maintain their position among the most productive underground mines in the country as measured on a clean ton per man-hour work basis. Our 2 longwall complexes, Sugar Camp and Williamson, ranked first and second most productive in the United States, generating 2.7 and 12.3 tons per man-hour work, respectively.

On a combined basis, the Foresight operations produced nearly 11 tons per man-hour worked during the first quarter. This compares to the national averages for underground mines of 4 tons per man-hour worked. These high levels of productivity allowed us to maintain a very low cost of $23.73 per ton. Despite the difficult market conditions and challenging logistical issues during the first quarter, we exported nearly 2.2 million tons or over 38% of our total sales volumes. Although API2 prices continued to decline, our contracted sales position combined with our low-cost structure allowed us to maintain favorable sales realizations and margins.

Currently, Foresight's export system remains challenged by high and swift water conditions on the Mississippi River. This has led to the continuation of loading restrictions at Convent Marine Terminal as evidenced by the nearly 700,000 tons of coal inventory that we now have in storage at that facility today. Based on the most recent river conditions forecast, we expect vessel-loading restrictions will persist through the second quarter.

Export demand for our product remains strong, but API2 prices remain depressed due to strong renewable power generation and depressed natural gas prices in Europe. We do believe that improved API2 index levels will be recognized as European generators exit the shoulder period. Domestic coal markets have been subdued as a result of a lack of generating demand throughout most of the winter and the current shoulder period.

Updating you on the efforts at our Hillsboro complex, in January 2019, we resumed production with one continuous miner unit. This miner unit continues to develop longwall gate entries to allow for the potential resumption of longwall mine. We are currently operating the continuous miner unit 2 shifts per day as we work to obtain the necessary approvals from MSHA to give us the ability to recommence longwall operations.

With respect to our Hillsboro insurance recoveries, we continue to pursue all available remedies under our insurance policies related to the combustion event due to the ongoing litigation with the insurers that would be the extent of any public comment related to our insurance matters at this time.

At this point, I'll turn the call back over to Jeremy for further discussion of our first quarter financial results.

--------------------------------------------------------------------------------

Jeremy J. Harrison, Foresight Energy LP - Principal Financial Officer & CAO of Foresight Energy GP LLC [4]

--------------------------------------------------------------------------------

Thank you. During the first quarter, we recognized coal sales revenue of $267.3 million on sales volumes of nearly 5.7 million tons, which generated adjusted EBITDA of $65.5 million. This compares to $238.4 million of coal sales revenue on 5.2 million tons, which generated adjusted EBITDA of $65 million during the prior year first quarter. The increase in coal sales revenue was primarily driven by increased coal sales volumes and a $1.44 per ton increase in coal sales realization. The improvement in coal sales realization was primarily due to the year-over-year increase in export volumes.

As Rob mentioned, our operating mines continued to be among the most productive underground mines in the country. We safely and efficiently produced 6.1 million tons during the quarter, with a cash cost per ton sold remaining low at $23.73.

Compared to the first quarter of 2018, transportation cost during the first quarter of 2019 increased by $12.4 million to $58.8 million. This increase is also largely driven by the higher proportion of sales volumes shift into the export market during the current year period.

Finally, from a cash flow perspective. During the first quarter of 2019, we generated operating cash flows of $49.2 million and ended the quarter with a cash balance of $3.5 million and total liquidity of approximately $116 million.

Capital expenditures totaled $35.1 million. We paid down $2.7 million on our long-term debt and lease obligations and paid a $4.9 million distribution to our common unitholders.

With that, I'll turn the call back over to Rob before we take comments and your questions.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [5]

--------------------------------------------------------------------------------

As announced in our press release this morning, Foresight suspended the quarterly distribution to common unitholders for the current quarter. In determining whether to declare a distribution, the Board of Directors of our general partners considers a variety of factors, including our leverage levels, current and future expected market conditions, excess cash flow remaining after required excess cash flow sweeps, and our projected future financial and operating performance.

Based on several factors, including the current export price environment, challenging logistical conditions and the desire to maintain financial stability and flexibility, the Board concluded that our cash resources will be best directed towards other uses primarily liquidity improvement and continued debt reduction. The Board will continue to evaluate these factors in future quarters to determine when to resume distributions, if at all.

As a result of our operating and financial results for the first quarter of 2019 and current and expected market conditions, we are updating our guidance for sales volumes, adjusted EBITDA and capital expenditures.

Based on our current contract position and outlook for the domestic and export coal markets, we expect 2019 sales volumes to be between 20 million and 22 million tons, with at least 6 million tons being sold to the export market. At these volumes, we're expecting to generate adjusted EBITDA ranging between $260 million to $300 million.

Based on our current operating plans and recent capital spending, we expect 2019 capital expenditures to total between $70 million and $85 million, including projected spending at Hillsboro.

With that, we'll open the line up to questions. John?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And first, we'll go to the line of Nick Jarmoszuk with Stifel.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [2]

--------------------------------------------------------------------------------

A question for you on the EBITDA guidance of $260 million to $300 million. What does it take to hit $260 million? What needs to happen to get to the higher end of $300 million in terms of -- is it based on the export API2 pricing? Can you just talk about upper end, lower end here?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [3]

--------------------------------------------------------------------------------

It's really driven by the sales volume range, Nick. The 20 million to the 22 million.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [4]

--------------------------------------------------------------------------------

Okay. And what assumption do you have for API2 for the rest of the year?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [5]

--------------------------------------------------------------------------------

We have assumed the forward curve for the rest of the year. We have not assumed any improvement to what we're seeing right now.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [6]

--------------------------------------------------------------------------------

Okay. And of the 6 million tons that are going to the export market, how much of that is pricing locked in? And how much is subject to market?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [7]

--------------------------------------------------------------------------------

We have about 4 million tons that's locked in right now. We have approximately 2 million then that would be open market sales.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [8]

--------------------------------------------------------------------------------

And are those 2 million tons towards the latter half of the year?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [9]

--------------------------------------------------------------------------------

Yes. As we see it right now. We should be through the 4 million tons by midyear, which would leave us about 2 million tons over the remainder of the year.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [10]

--------------------------------------------------------------------------------

On Hillsboro, you're still doing the underground development with continuous miners. Can you talk about what the plan there is, given the weak market conditions? Do you still plan on firing up the longwall equipment? Or do you wait for the market to improve?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [11]

--------------------------------------------------------------------------------

No, market conditions are continually changing. And what we plan to do at Hillsboro, as I said before, is I plan to have the longwall panel developed and ready to take advantage of markets as I deem appropriate. I've said in the past and I'll say it here again today, we have very-low cost operation there. I'm not going to do something that brings volume online without a plan for that production. It's not my intent or desire to artificially depress domestic markets. And I'm going to be strategic as to where those tons go and when they go.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [12]

--------------------------------------------------------------------------------

And can you remind us with what the production capacity would be? And what the mining costs are?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [13]

--------------------------------------------------------------------------------

So the mining cost would be sub-20. And the capacity is anywhere from 5 million to potentially 9 million tons, depending on how we opt to operate the mine.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [14]

--------------------------------------------------------------------------------

Okay. And in terms of the portfolio of underground mines that you have in the ILB, would it ever make sense to transfer or transition production from Sugar Camp, say, to Hillsboro because it is lower cost?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [15]

--------------------------------------------------------------------------------

No.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

Next, we'll go to Michal Marczak with DoubleLine Capital.

--------------------------------------------------------------------------------

Michal Marczak, [17]

--------------------------------------------------------------------------------

Just a quick follow-up. Is there any assumption on potential insurance proceeds in full year 2019 guidance?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [18]

--------------------------------------------------------------------------------

No. We have not layered in any receipt of any the remaining insurance proceeds that are due from our providers.

--------------------------------------------------------------------------------

Michal Marczak, [19]

--------------------------------------------------------------------------------

And kind of understanding the commentary on challenging conditions, particularly in the export market for second quarter. Is there any more -- any incremental commentary or guidance that you can provide for kind of second quarter results? Any puts and takes? If I look at first quarter, $65 million. Could cost come up -- go up, go down in the second quarter? And then realized pricing is a little lower than, I guess, I would have expected. So maybe kind of commentary on what you're seeing, that would be very helpful.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [20]

--------------------------------------------------------------------------------

So as it relates to the cost structure, we should see cost at about the same level. We did have the 1 longwall move in the first quarter, with 2 longwall moves occurring in the second quarter, albeit they were short in duration, not our standard move times, much shorter than what we would typically see. So there'll be cost in around that same range. In terms of the river conditions. First quarter, we probably missed on 1 million tons of shipments during the Q1 period. The second quarter river system situation is not improved. We were hopeful that we would see some improvement through the late May time frame, given the amount of rainfall that we have received in the Midwest and surrounding areas. Those river conditions, as I said earlier, are going to persist through the second quarter, making loadings at our Convent Marine Terminal challenging. So in terms of the amount of export volume, you should expect less over that quarter unless we start to see some improvement that we're not expecting right now, which I highly doubt we will. Realization-wise, we do have certain of our customers that have had planned outages throughout the first quarter that now come back on. So realizations should be helped by the fact that we now have some of our larger domestic customers taking more volume at some higher levels.

--------------------------------------------------------------------------------

Michal Marczak, [21]

--------------------------------------------------------------------------------

That's actually very helpful. Because one of the kind of concerns, I guess, we had is if you annualize first quarter, you basically barely hit the low end of guidance when API price is coming down. It seemed like the stretch to think that you could come in even to kind of midpoint of guidance. But it sounds like first quarter realizations were kind of somewhat impacted negatively by which you described and perhaps should improve on the domestic -- because of the domestic market into the next, at least, quarter. I guess is that a fair assessment?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [22]

--------------------------------------------------------------------------------

We should see some -- as I said, we will definitely have more volume going into the domestic market versus where we were with certain of these customers coming back online and taking the volumes.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

Our next question is from Jeff Menapace with FTN Financial.

--------------------------------------------------------------------------------

Jeff Menapace, [24]

--------------------------------------------------------------------------------

Was there any insurance recovery in the first quarter number?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [25]

--------------------------------------------------------------------------------

No. There was not.

--------------------------------------------------------------------------------

Jeff Menapace, [26]

--------------------------------------------------------------------------------

And then with respect to the export market, you've previously commented that you typically do better or have recently done better than API2 because there are more favorable markets outside of Northern Europe. Is that still the case? And any particular markets you're seeing strength?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [27]

--------------------------------------------------------------------------------

There are markets where we receive a premium to API2 levels. We've been successful putting coal into Egypt, into South America. We've moved some tons into Asia as well, where we have received premium to API2.

--------------------------------------------------------------------------------

Operator [28]

--------------------------------------------------------------------------------

And next, we'll go Mayur Kenia with Iwd Capital Management.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [29]

--------------------------------------------------------------------------------

So I had couple. One is around the sales volume guidance. The -- mostly the change in the guidance around sales volume due to export markets, given like transportation issues on the river?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [30]

--------------------------------------------------------------------------------

That's right. We missed probably 1 million tons of sales through the Gulf during the first quarter as a result of the challenges that I've made reference to here today.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [31]

--------------------------------------------------------------------------------

Okay. And that's helpful. And then in terms of the export markets and kind of following up with the previous person's question. You mentioned that you guys get a premium to API2 into those markets that you listed. Does that -- pricing into those markets, is it connected or linked to API2 pricing or is it separate?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [32]

--------------------------------------------------------------------------------

There are -- in certain cases, it's linked. But there are also times where buyers will opt to do a fixed-price transaction to avoid any risk that they see in the API2 index. And if we're able to exercise a transaction with those counterparties on that basis, we're seeing a benefit in the form of a premium to API2. And there are also some quality premiums that we'll receive as well.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [33]

--------------------------------------------------------------------------------

Okay. So it does sound like it is somewhat linked to API2 pricing into those markets.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [34]

--------------------------------------------------------------------------------

It's definitely a market that they look at and trying to determine a fair fixed price, yes.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [35]

--------------------------------------------------------------------------------

Okay. That's helpful. And then in terms of Hillsboro, how much of the cost per ton that you guys put out this quarter was linked to Hillsboro?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [36]

--------------------------------------------------------------------------------

About $0.15.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [37]

--------------------------------------------------------------------------------

1-5.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [38]

--------------------------------------------------------------------------------

1-5, yes.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [39]

--------------------------------------------------------------------------------

Okay, cool. And in terms of the CapEx guidance, in the range -- in the release you kind of explained the increase in the -- because the CapEx was higher this quarter than previous quarters. Was it evenly spread across the 3 buckets that you highlighted in the release?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [40]

--------------------------------------------------------------------------------

So in terms of the CapEx, we had some pretty significant land acquisitions that we needed to do in the first quarter. Those land acquisitions pressed almost the $8 million, $9 million level in total. They were for strategic properties that we needed for future refuse expansion and the remainder related to some of the Hillsboro development that was around $7 million, $8 million. And we also had the build-out of the Sugar Camp [Aiken] portal, that was a couple of million dollars, and those were the most significant. With respect to our Sugar Camp portal for M class, we should be in that portal in the July time frame. We plan to move our people across around the July 4 break.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [41]

--------------------------------------------------------------------------------

Okay. And I appreciate the color around that. So is the portal, is it fair to assume that, that's like sort of a ramp down into the mine? Is that what a portal kind of refers to when you...?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [42]

--------------------------------------------------------------------------------

It's a shaft into the mine. So it's an elevator shaft and material shaft.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [43]

--------------------------------------------------------------------------------

Okay. And then last question I had was, are there any limitations -- I know you guys suspended the distribution, but is there any limitation around using the excess cash flow to repurchase common units, given where they're trading currently?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [44]

--------------------------------------------------------------------------------

No. It would just be a use of the RP baskets that we have.

--------------------------------------------------------------------------------

Mayur Kenia, IWD Capital Management, LLC - Founder & Portfolio Manager [45]

--------------------------------------------------------------------------------

When you say RP, what are you referring to?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [46]

--------------------------------------------------------------------------------

The restricted payment baskets that we have available to us under our credit facility.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

Next, we'll go to Lucas Pipes with B. Riley FBR.

--------------------------------------------------------------------------------

Lucas Nathaniel Pipes, B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst [48]

--------------------------------------------------------------------------------

I wanted to ask, are you currently contracting or committing additional tons into the export market, either for 2019 or 2020?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [49]

--------------------------------------------------------------------------------

We are looking at contracting for 2019 and for 2020, yes.

--------------------------------------------------------------------------------

Lucas Nathaniel Pipes, B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst [50]

--------------------------------------------------------------------------------

What is your current contract position on the export and domestic sites for 2019?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [51]

--------------------------------------------------------------------------------

I have 4 million tons under contract and 2 million tons open. As I said earlier, we'll ship the 4 million tons through the first half of the year with 2 million tons that are open to market over the remainder of the year, assuming we stay at the 6 million level.

--------------------------------------------------------------------------------

Lucas Nathaniel Pipes, B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst [52]

--------------------------------------------------------------------------------

And you're fully committed on the domestic side?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [53]

--------------------------------------------------------------------------------

No. I have -- we have a position -- in terms of total contract position, we're about 83% contracted right now.

--------------------------------------------------------------------------------

Lucas Nathaniel Pipes, B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst [54]

--------------------------------------------------------------------------------

Got it. And then in terms of pricing, should we assume that what you have contracted is similar to Q1 levels? Or how is -- how will the cadence evolve over the course of the year?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [55]

--------------------------------------------------------------------------------

It's going to be similar. You'll see variations of realizations quarter-over-quarter just depending on sales mix.

--------------------------------------------------------------------------------

Lucas Nathaniel Pipes, B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst [56]

--------------------------------------------------------------------------------

That's helpful. And then maybe going back to my first question regarding the contracting activity in the export market. Is -- are you close to signing additional deals? Or do you look for the market to maybe recover a little bit? What's your strategy?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [57]

--------------------------------------------------------------------------------

We are actively booking business. Right now, we're seeing netbacks anywhere from the high 20s to low 30s for our product at the mine in terms of what's going through the export terminals.

--------------------------------------------------------------------------------

Lucas Nathaniel Pipes, B. Riley FBR, Inc., Research Division - Senior VP & Equity Analyst [58]

--------------------------------------------------------------------------------

And this would be on the 2019 kind of curve?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [59]

--------------------------------------------------------------------------------

It'll be on the 2019 prompt type levels.

--------------------------------------------------------------------------------

Operator [60]

--------------------------------------------------------------------------------

And we do have a follow-up from Nick Jarmoszuk with Stifel.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [61]

--------------------------------------------------------------------------------

Commentary on the debt reduction. Can you talk about how you think about purchasing term loans and/or bonds and your preference for the two?

--------------------------------------------------------------------------------

Jeremy J. Harrison, Foresight Energy LP - Principal Financial Officer & CAO of Foresight Energy GP LLC [62]

--------------------------------------------------------------------------------

When I look at the trading levels on the second lien, it's been in the high 70s. I think that's a pretty good opportunity. So that is definitely one of the pieces of paper that we're going to be focused on. And in terms of the term loans, if we see opportunity, we'll look at that. In terms of liquidity that's available in the seconds, then we'll make our determination as we see those opportunities.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [63]

--------------------------------------------------------------------------------

Are there any limitations under the RP basket for the open market purchases of bonds?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [64]

--------------------------------------------------------------------------------

No limitations other than what I have available in terms of the restricted payment baskets.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [65]

--------------------------------------------------------------------------------

And can you share what that balance is?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [66]

--------------------------------------------------------------------------------

No, I am not going to share that, Nick.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [67]

--------------------------------------------------------------------------------

Okay. And then you talked about some of the shipments to the domestic customers being delayed to the higher river conditions. Are any of them shot inventory presently? Is there -- how are they sitting in terms of being able to -- or how many days inventory do they have?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [68]

--------------------------------------------------------------------------------

I missed the first part of that. Could you repeat that, Nick? I just didn't hear clearly.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [69]

--------------------------------------------------------------------------------

You mentioned that your domestic shipments were impacted by about 1 million tons due to high river conditions.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [70]

--------------------------------------------------------------------------------

No. I didn't say that. I said that we were impacted by 1 million tons through the export.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [71]

--------------------------------------------------------------------------------

Oh, it was export, okay. But there was some impact to shipments to your domestic customers. Is that correct?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [72]

--------------------------------------------------------------------------------

Yes. We had -- we did have disruption on the river. Certain of our customers were not able to unload. And at times, we were not able to load on the river because of the river levels and the swiftness of the river.

--------------------------------------------------------------------------------

Nicholas Jarmoszuk, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [73]

--------------------------------------------------------------------------------

So how are your customers' inventory positions at this point?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [74]

--------------------------------------------------------------------------------

We have certain of the plants that we serve on the river that have very low levels. And we have others that, I will say, have very normal levels in terms of inventory position. It's going to be on a plant-by-plant basis, Nick.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

And we'll go to Zach Bader with Corbin.

--------------------------------------------------------------------------------

Zachary Bader, Corbin Capital Partners, L.P. - Credit Investment Analyst [76]

--------------------------------------------------------------------------------

Just as a follow-up to the debt-reduction question. I'm trying to get a sense of what your expectation is for excess cash flow at the end of the year to get a sense of what the suite to the term loan will be?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [77]

--------------------------------------------------------------------------------

When we look at the excess cash flow as we've updated our forecast for the remainder of the year, we're somewhere around the, call it, $45 million to $55 million level right now.

--------------------------------------------------------------------------------

Zachary Bader, Corbin Capital Partners, L.P. - Credit Investment Analyst [78]

--------------------------------------------------------------------------------

That's excess cash flow or P&L south of the term loan?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [79]

--------------------------------------------------------------------------------

Yes. That would be excess cash flow.

--------------------------------------------------------------------------------

Zachary Bader, Corbin Capital Partners, L.P. - Credit Investment Analyst [80]

--------------------------------------------------------------------------------

Got it. And what do you expect the leverage level to be at the end of the year?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [81]

--------------------------------------------------------------------------------

On the total secured or on the first lien?

--------------------------------------------------------------------------------

Zachary Bader, Corbin Capital Partners, L.P. - Credit Investment Analyst [82]

--------------------------------------------------------------------------------

On the total secured, essentially, I'm trying to get a sense of the percentage of cash that's left. So are you going to do 4x?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [83]

--------------------------------------------------------------------------------

No. We'll be above the 4x if you use the mid of the guidance that we're at right now.

--------------------------------------------------------------------------------

Operator [84]

--------------------------------------------------------------------------------

Next question is from Matthew Fields with Bank of America Merrill Lynch.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [85]

--------------------------------------------------------------------------------

Just want to follow up on that cash flow. So $45 million to $55 million, is the sort of free cash flow assumption from the current guidance. It sort of implies a completely neutral working capital amount throughout the year. Is that the right way to think about it?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [86]

--------------------------------------------------------------------------------

No. There would be some positive benefit from the working capital release.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [87]

--------------------------------------------------------------------------------

Can you quantify that for us?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [88]

--------------------------------------------------------------------------------

In terms of just ranges, call it, $15 million to $20 million.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [89]

--------------------------------------------------------------------------------

Okay. And then any other chunky uses of cash that we should think about?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [90]

--------------------------------------------------------------------------------

No. Not if we're looking over the rest of this year.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [91]

--------------------------------------------------------------------------------

And just to be clear, excess cash flow is reduced if you make open purchases of second-lien notes, isn't that right?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [92]

--------------------------------------------------------------------------------

No. We do not get the benefit of that.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [93]

--------------------------------------------------------------------------------

Okay. And then just going back to the cadence of export. So 6 million tons, 4 basically are contracted, right, which means -- and they're sort of based around the first half so that means 2 million tons still under contract in Q2 with maybe the remaining 2 tons -- 2 million tons spread over the back half. Is that the right way to think about it?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [94]

--------------------------------------------------------------------------------

Yes. That's a reasonable way to look at it.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [95]

--------------------------------------------------------------------------------

All right. So if realizations were in the first quarter on the international side, similar to what they were in fourth quarter, which is I think high $50 a ton prior to the transportation cost of getting it back to the river. Can we think about a similar level in Q2 based on the fact that they're still under presumably the same sort of mix of contracts?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [96]

--------------------------------------------------------------------------------

Can you repeat that? I'm not sure I'm following that.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [97]

--------------------------------------------------------------------------------

So you've been very helpful in giving us the breakout between domestic and international coal sales in your Ks and Qs. So we can kind of back into a international price, which I got to high $50 per ton in the fourth quarter, like $57 a ton. And you said in your release that in the first quarter, it was a level similar to this -- to last quarter because of your contracted position. So I'm assuming it's the same kind of $57, $58, $56, whatever dollar per ton realization.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [98]

--------------------------------------------------------------------------------

You're talking about vessel prices prior to backing up transportation.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [99]

--------------------------------------------------------------------------------

Correct. So do we expect a similar type of price in Q2? And then a more kind of spot market or strip-based price for the 3Q and 4Q?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [100]

--------------------------------------------------------------------------------

It's slightly less in the Q2 period.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [101]

--------------------------------------------------------------------------------

Okay. So it sounds like the first half of the year is going to be a lot better than the second half of the year?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [102]

--------------------------------------------------------------------------------

No. I'm not going to say that. I don't think that's necessarily correct. I mean that's where you have to factor in the cost structure, just looking at back half of the year where the mines are set up having longwall moves out of the way. And then also the mix in terms of the domestic customers coming back on stronger than where they were beginning of the year and then just overall volumes as well. No. I think I would not agree that necessarily, the first half is going to be better than the second half, no.

--------------------------------------------------------------------------------

Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [103]

--------------------------------------------------------------------------------

Okay. Great. And then lastly, what's the underlying kind of cash cost per ton assumption underlying your current $260 million to $300 million EBITDA guidance?

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [104]

--------------------------------------------------------------------------------

So in terms of the cost level, you saw our Q1 numbers. You would expect it to be better than the Q1 for the average of 2019 overall. It's going to be lower than that.

--------------------------------------------------------------------------------

Operator [105]

--------------------------------------------------------------------------------

And Mr. Moore, we have no further questions in queue. I'll turn it back to you for any closing comments.

--------------------------------------------------------------------------------

Robert D. Moore, Foresight Energy LP - Chairman, CEO & President of Foresight Energy GP LLC [106]

--------------------------------------------------------------------------------

Okay. John, thank you. I appreciate everyone being on the call today and look forward to speaking with you next quarter.

--------------------------------------------------------------------------------

Operator [107]

--------------------------------------------------------------------------------

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.