Oxford loses more money in Q3, cuts coal production costs

Oxford Resource Partners LP (NYSE: OXF), a major coal producer in Ohio that has lately shrunk its presence in western Kentucky, said Nov. 6 that its adjusted EBITDA was $14.2m for the third quarter of 2012 as compared to $17.8m for the year-ago third quarter and $14.6m for the second quarter of 2012.

Oxford maintained a cash margin per ton of $8.07 year-over-year for the third quarter as a 5% improvement in cash coal sales revenue per ton was offset by a 6% increase in cash cost of coal sales per ton, predominantly attributable to higher purchased coal prices and increased diesel fuel expense. Lower sales volumes, primarily from Oxford’s western Kentucky operations, drove the year-over-year decline in adjusted EBITDA.

Reported net loss for the third quarter of 2012 was $3.3m, or $0.16 per diluted limited partner unit, compared to breakeven results for the third quarter of 2011, and a net loss of $1.5m, or $0.07 per diluted limited partner unit, for the second quarter of 2012.

“We remain highly focused on our core Northern Appalachian operations and continue to adjust our Illinois Basin operations to better align our production with expected sales volumes,” said Oxford President and CEO Charles Ungurean. “Although current coal markets remain weak, natural gas prices have been increasing, setting up for what we expect will be an increase in thermal coal demand. Given our capacity to increase production, Oxford is well-positioned to participate in a market rebound. In the near term, we are diligently pursuing the sale of our excess Illinois Basin equipment at acceptable values and further reducing capital expenditures to enhance our liquidity.”

Western Kentucky, by the way, is Oxford’s only presence in the Illinois Basin coalfields.

Oxford produced 1.8 million tons of coal in the third quarter, down from 2.2 million tons in the year-ago quarter. It produced 5.3 million tons in the first nine months of this year, down from 6.1 million tons in the same nine-month period of 2011.

Oxford said its sales book is fully committed and priced for the remainder of 2012 and 97% committed and priced for 2013, illustrating the strength of its long-term customer relationships.

Oxford is the largest producer of surface mined coal in Ohio and is a leading low-cost producer of thermal coal in Northern Appalachia. It is a major supplier to the Conesville power plant in Ohio of American Electric Power (NYSE: AEP).

Oxford completed the transfer of certain excess equipment from its western Kentucky mines to its Northern Appalachian mines during the third quarter. Productivity in the Northern Appalachian operations continues to improve from these recent equipment moves, as well as increased production from highwall mining, Oxford’s lowest cost mining method. Oxford continues to optimize its Illinois Basin mine plan in order to minimize production costs. Earlier this year, it lost an 800,000 tons per year contract to supply Big Rivers Electric out of the western Kentucky operations.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.