By Greg Johnson, Cowboy State Daily
greg@cowboystatedaily.com
Increased U.S. coal-fired power production, higher prices for Powder River Basin coal and improved access to rail transportation combined for Peabody Energy to be nearly $38 million in the black for the third quarter this year.
The company’s legacy Wyoming thermal coal mines produced 22.3 million tons of coal in the third quarter, which ended Sept. 30, and realized a $1.70 per ton profit. That’s a significant improvement from the 11 cents a ton the company’s PRB mines lost in the second quarter.
Overall, the Wyoming mines – Caballo, North Antelope Rochelle and Rawhide – accounted for about 10% of Peabody’s overall net income of about $384 million in the quarter.
“The coal market continues to be very tight” in the United States, said Peabody Chief Executive Officer Jim Grech in a Thursday morning earnings call.
Combined with strong electricity demand that was up 3% over the same quarter in 2021 and some loosening of a nationwide rail squeeze, the Wyoming mines were able to produce more for less per ton, Grech said.
Power Generation
Coal-fired power plants are buying coal, but not burning as much as they build up their stockpiles, Grech said, adding that a trend in recent years of accelerating the retirement of coal-fired plants is reversing some.
“Across the U.S., we continue to see caution regarding the transition” to renewable energy sources, Grech said, adding that some coal plant retirements are now being delayed.
“This speaks to continued strong coal demand for U.S. coal,” he said.
Breakdown
The third quarter’s $38 million income from Peabody Energy’s Wyoming mines accounts for about 87% of that segment’s overall $43.5 million seen so far through the first nine months of 2022. That compares to $112.6 million through the first nine months of 2021.
Of the 22.3 million tons sold in the quarter, North Antelope Rochelle produced 16.1 million tons, followed by Caballo at 3.4 million and Rawhide with 2.8 million tons.
The performance was an improvement, especially given that rail service during the quarter was only meeting about 83% of customer needs, said Mark Spurbeck, Peabody’s executive vice president and chief financial officer.
Looking Forward
The company is in a good position to finish the year with a strong fourth quarter, both Grech and Spuerbeck said.
“With higher projected volumes … and continues strong margins,” Grech said the Powder River Basin is expected to meet company projections to produce 80 million to 90 million tons. “The coal market continues to be very tight.”
He also said access to rail transportation for Wyoming coal is expected to improve going forward.
“We are cautiously optimistic for improving rail performance going into the fourth quarter,” Grech said.
The Wyoming mines are expected to produce 23 million tons in the final quarter of 2022 and generate about $46 million in cash after costs.
Overall
Including Peabody’s metallurgical and Australian coal operations, Peabody has posted a net income of $673.6 million for the first nine months of the year, a significant jump from the $140.3 million loss for the same period of 2021.
That’s allowed the company to continue to retire some of its senior debt load, including $186 million in this latest quarter.
