Ohio-based coal producer Oxford Resource Partners LP (NYSE: OXF), which has slashed production in western Kentucky due a poor coal market, said May 15 that its net loss for the first quarter of 2013 was $6.3m compared to a much higher net loss of $15.7m for the first quarter of 2012.
Net loss for the first quarter of 2013 included $0.1m of impairment and restructuring expenses and a $0.5m loss on disposal of assets. Net loss for the first quarter of 2012 included $8.4m in impairment and restructuring expenses and a $1.1m loss on disposal of assets.
Cash margin per ton increased 7.9% to $6.40 in the first quarter of 2013 from $5.93 in the first quarter of 2012. This was driven by a 3.3% increase in coal sales revenue per ton to $50.65, partially offset by a 2.7% increase in cash cost of coal sales per ton to $44.25 as a result of the planned lower production from the western Kentucky operations and increased purchased coal volume. The company sold 1.67 million tons of coal in the first quarter, down from 1.93 million tons in the year-ago quarter.
“I am pleased to report that the year is off to a good start with first quarter Adjusted EBITDA performance showing a $1.0 million improvement over the fourth quarter,” said Oxford President and CEO Charles Ungurean. “We have been working diligently to address the upcoming credit facility maturity and expect to announce a comprehensive resolution within the next few weeks. With this increased financial flexibility, we will be better positioned to participate in a coal market rebound. We are encouraged by the recent decline in utility stockpiles and higher natural gas prices in our region, both of which should drive increasing demand in our market. Our recent actions to improve cash margins set the stage for us to generate further profitability improvement on higher future coal volumes.”
Oxford’s projected sales volume is almost fully committed and priced for 2013, underscoring the strength of its long-term customer relationships and its strategic importance in its core region of Ohio. (A major customer is the Conesville power plant in Ohio of American Electric Power (NYSE: AEP)). For 2014, projected sales volume is 79% committed (with 47% of the projected sales volume priced and 32% of the projected sales volume unpriced).
As a leading low-cost producer of thermal coal and the largest producer of surface mined coal in Ohio, Oxford is focused on its core Northern Appalachia operations. Continued rationalization of its western Kentucky operations has allowed for the transfer of excess equipment to the Northern Appalachian mines, which has reduced capital spending. Based on current market conditions, Oxford expects to idle production at its western Kentucky operations and conclude its restructuring activities by the end of 2013.
Much of this western Kentucky cutback came after the loss last year of an 800,000 tons per year contract to supply Big Rivers Electric, which provoked litigation between the two parties.
As of March 31, 2013, Oxford had $5.3m of cash with no available borrowing capacity on its credit facility. In February 2013, it enhanced liquidity with the receipt of a settlement of $2.1m from an unnamed purchase coal supplier to settle a contract dispute. Oxford continues to pursue the sale of excess western Kentucky equipment which had a net book value of $6.1m at the end of the first quarter.
Oxford’s current revolving credit facility matures in July 2013. It said it has been in negotiations addressing this upcoming maturity and expects to announce a comprehensive resolution within the next few weeks. Because this resolution is not yet finalized and Oxford is now in default of certain financial covenants, the borrowings under the credit facility of $147.5m are presented as a current liability in its March 31, 2013, consolidated financial statements. Oxford has obtained a forbearance agreement from the lenders under the credit facility pursuant to which the lenders have agreed to forbear from seeking any remedies for such defaults for a period of 30 days.
Oxford in 2013 expects to produce between 6.0 million tons and 6.5 million tons and sell between 6.4 million tons and 6.9 million tons of thermal coal. The average selling price is projected to be $50.50 per ton to $52.50 per ton, with an anticipated average cost of $42.85 per ton to $44.85 per ton.