Arch Resources Inc. reported Thursday its 2024 first quarter performance fell short of expectations as thermal coal demands dipped from its Powder River Basin mines in northeastern Wyoming — with layoffs a possibility.
Arch said that operations in the country’s largest coal producing region slipped into the red fiscally in the first quarter, principally due to competitive pressures from cheap natural gas and stockpiling of coal by utilities after a mild winter.
Overall, Arch President John Drexler said that thermal coal performance — including PRB — was essentially “break-even” as the company saw a 10% decline in coal production from the end of 2023 levels.
“Winter was less than ideal,” said Drexler. “We ‘ve seen gas prices that are displacing electric generation from coal. Just a lot of pressure,” said Drexler on a call with Wall Street analysts Thursday.
“Everybody has been feeling it there. What I’m real proud is that the team at PRB does a fabulous job, they’ve been through this before,” said Drexler after his St. Louis-based company announced 2024 first quarter financial results.
“They know what to do, and unfortunately it is not something that just happens overnight,” he said. “They are in the process of adjusting schedules, eliminating overtime, managing headcount, laying down equipment. Typically, this takes several quarters.”
Layoffs In Limbo
At the end of the first quarter, Arch employed 1,016 people at its Black Thunder mine, one of the largest coal mines in the United States, and 41 at its smaller Coal Creek mine, according to the company’s reports to the federal Mine Safety and Health Administration.
In its first quarter, Powder River Basin mines owned by Arch entered January on a solid footing, with its coal production shipment levels expected to significantly exceed first quarter shipment expectations.
But the outlook was tempered as the quarter wore on.
In its announcement, Arch said that it’s in the process of realigning “stripping rates” — which is a key measure Arch follows on how much ore is actually mined — and operational activities with lower demand levels.
Deck Sloan, senior vice president and chief financial officer with Arch, wasn’t immediately available to clarify how many layoffs were a possibility with the two PRB mines.
Arch said that it doesn’t expect an immediate turnaround in PRB operations, and that it anticipates another negative cash contribution from the Power River Basin operations in the company’s current second quarter results covering the April 1 to June 30 period.
The company expects “benefits” in its second half with PRB results due to cost-cutting and improved management of operational activities.
Besides the PRB, the company was hurt financially by the collapse of the Francis Scott Key Bridge in Baltimore more than four weeks ago. The Baltimore Harbor was a critical export route for coking coal, used in steelmaking, and had forced Arch to pursue a temporary but balanced approach going forward by shipping through an alternative terminal in Newport News, Virginia.
The coal export market congestion on the East Coast is expected to ease once the Baltimore Harbor reopens in late May.
Slow Coal Sales
Overall, the PRB will continue to remain a challenge.
Thermal coal dug from the Powder River Basin remains a tough sell as natural gas trades at a sub-$2 per million BTU price point, making it a desired commodity option for utilities to buy.
Coal sales also were slowed down in the first quarter due to “utility stockpiles at historically high levels after the mild winter,” the company said.
PRB assets “operated efficiently,” but lost cash despite “the rapidly cooling domestic thermal demand environment,” Drexler said on the call.
Arch is on pace to produce 55 million tons of coal in 2024 in the PRB, in line with its earlier guidance of 50-56 million tons. An executive on the call said shipments could drop as low as 45 million tons, but that the 50-56 million range is a reasonable target.
The trend on PRB coal production has generally been down in recent years.
In 2023, Arch’s Coal Creek mine produced 2.3 million tons of coal, down 39% from 3.8 million tons in 2022, as the company closes in on it announced closure of that mine.
The Black Thunder mine showed a 2.6% drop in production last year, going from 60.6 million tons of coal produced in 2023 versus 62.2 million tons in 2022.
But this production volume level pales in comparison to the mine’s historic production. In 2014, Black Thunder produced 101 million tons of coal, which makes last year’s tally a 40% drop over the last decade.
In its first quarter ended March 31, Arch profit fell 72% to $56 million while revenue dropped 22% to $680.2 million, versus profit of $198.1 million on revenue of $869.9 million in the same quarter last year.
Arch shares traded at $166.25 in midday trading, up 7%.
Pat Maio can be reached at pat@cowboystatedaily.com.
