Arch Resources and Peabody Energy reported solid earnings for the coal companies’ operations in Wyoming for the first quarter of 2023.
In quarterly earnings calls Thursday, executives of the two largest coal producers in the United States weren’t discussing any overall turnaround for their Wyoming operations. But they also didn’t discuss any certain end to their operations in the Cowboy State mines, particularly in the Powder River Basin, which produces about 40% of the nation’s thermal coal.
Continued Operations
Arch shook Campbell County when it announced in February 2021 that it intends to close its Coal Creek and reduce operations at its Black Thunder mine. Both are located south of Gillette. In October 2022, Arch executives were still talking of eventually shutting down and reclaiming its Wyoming mine operations, though no specific dates were discussed.
For the past two quarterly earnings calls, the topic hasn’t come up, and according to federal data, 76 Arch employees still work at the Coal Creek mine.
In Thursday’s call, Arch CFO Matt Giljum said that despite a number of challenges, the company’s thermal sector had managed to pull $46.3 million in profit with only $5.5 million in capital expenditures.
Modest Opportunity
Giljum said there is pressure from lower coal prices and competition from natural gas, and the “thermal market has gotten tougher.”
However, he added, utilities aren’t seeing their coal inventories where they’d like them to be and are looking to bolster their stockpiles.
“So there’s still some modest opportunity,” Giljum said.
President Joe Biden’s administration, however, continues to pressure coal power plants to close. The EPA is expected to announce new limits on greenhouse gas emissions.
Utilities also are making plans in line with the expectations that regulatory pressure will limit coal use. In its latest future planning documents, PacifiCorp plans to eliminate 2,614 megawatts of coal-fired generation entirely and convert four coal-fired units to natural gas, all by 2032.
Almost all coal in Wyoming is thermal coal, which burns clean and cooler than metallurgical coal and is used primarily for electrical generation, unlike metallurgical coal that’s used in heavy industry.
Arch’s thermal operations include the Black Thunder mine in Wright and the West Elk mine in Somerset, Colorado.
The three mines in its thermal operations sold 17 million tons of coal in the first quarter of this year, which was down from the same quarter in 2022, when they sold 18.2 million tons. Last quarter, the company sold 16.1 million tons from its thermal mines.
Rail Capacity
Rail capacity has been cited since October as an impediment to the company’s ability to ship coal to customers, and the mines generate no revenues for production until the coal is delivered.
Last October, Arch COO John Drexler called the problems with rail “persistent,” and Arch CEO Paul Lang said in February that the service had continued to deteriorate.
Giljum said Thursday that there has been some improvement in rail service, but it continued to be “suboptimal” in the first quarter.
Union Pacific and Burlington Northern Santa Fe railroad companies have blamed labor shortages for the problems providing enough rail service to meet Wyoming mine demand.
Arch’s thermal segment, Giljum said, which includes the West Elk mine, generated $1.3 billion over the past 6.5 years, with a total of $144 million in capital spent.
Peabody Energy
Peabody Energy reported Thursday its Powder River Basin operations were doing better than previous quarters, and the company executives said rail service also has improved.
Mark Spurbeck, chief financial officer for Peabody, said that “challenging weather made for some pretty rough numbers” for U.S. rail service in January and February.
“For us, March was a significant improvement,” Spurbeck said.
In the first quarter of 2023, the company had a profit of $35.8 million, which was an increase from the $12.18 million it earned in the first quarter of 2022. Earnings were mostly flat from the previous quarter.
Peabody runs the Rawhide, Caballo and North Antelope Rochelle mines near Gillette.
Coal production at the mines was 22 million tons sold in the first quarter of this year, 21.2 million tons in the fourth quarter of last year and 20.6 million tons in the first quarter of last year.
