Patriot Coal is projecting something of a rebound in coal sales through 2018, though that growth would pretty much be right away, with expected sales of 22.1 million tons in 2013, growing to 24.2 million tons in 2014, then coming in at only 24.3 million tons in 2018.
Those figures were in a series of 2013-2018 financial and operational projections that Patriot offered in a plan of reorganization and disclosure statement filed Oct. 9 at the U.S. Bankruptcy Court for the Eastern District of Missouri. Patriot, a major coal producer in western Kentucky and in both northern and southern West Virginia, sought Chapter 11 protection in July 2012 as the coal market tumbled and its legacy costs remained high.
Patriot recently lined up new, post-bankruptcy financing and has also settled long-running disputes with Peabody Energy (NYSE: BTU), Arch Coal (NYSE: ACI) and the United Mine Workers of America (UMWA) union. Much of what is currently Patriot are unionized operations formerly owned by Peabody and Arch. Patriot also has other, non-unionized mines in southern West Virginia that were bought in 2008.
The coal sales projections for the 2013-2018 period, broken down by metallurgical and thermal coal, are:
- 2013 – 6.7 million tons met, 15.4 million tons thermal, total 22.1 million tons;
- 2014 – 7.8 million tons met, 16.4 million tons thermal, 24.2 million tons total;
- 2015 – 8.5 million tons met, 16.4 million tons thermal, 24.9 million tons total;
- 2016 – 9.2 million tons met, 17 million tons thermal, 26.1 million tons total;
- 2017 – 9.9 million tons met, 16 million tons thermal, 25.9 million tons total; and
- 2018 – 10.1 million tons met, 14.2 million tons thermal, 24.3 million tons total.
Patriot has mines in western Kentucky (in the Illinois Basin) that it has sharply cut back in recent months that produce only thermal coal. It has mines in southern West Virginia (Appalachia) that produce a mix of thermal and met coal, and the Federal No. 2 longwall mine in northern West Virginia (Appalachia) that produces thermal coal from the Pittsburgh seam. Its projected coal sales broken down by production region are:
- 2013 – Appalachia (17.5 million tons), Illinois Basin (4.5 million tons);
- 2014 – Appalachia (18.8 million tons), Illinois Basin (5.4 million tons);
- 2015 – Appalachia (19.4 million tons), Illinois Basin (5.5 million tons);
- 2016 – Appalachia (20.6 million tons), Illinois Basin (5.5 million tons);
- 2017 – Appalachia (20.4 million tons), Illinois Basin (5.5 million tons); and
- 2018 – Appalachia (18.8 million tons), Illinois Basin (5.5 million tons).
There are various other operational points of note from the filing. Like in a section on UMWA-represented operations, Patriot said the Logan County complex in southern West Virginia is to be idled in 2014 and that there are schedule changes to be completed in 2014 at the Corridor G mining complex, also in southern West Virginia.
There are also some met coal sales price figures at the very end of the filing. In one section, Patriot compared its second quarter 2013 met sales prices to a benchmark price of $172/tonne. High vol A pricing (Rocklick/Wells) averaged $97/ton. 2014 sales consist of a Rocklick/Wells mix at a blended price of $97/ton. Panther sales averaged $85/ton. Excluding one large short-term sale in early April, the average realized price on new Panther bookings has been $89/ton.
There is also a list of 16 met coal sales contracts arrived at in the second quarter of this year, with the names of the customers not given, Out of the 16 deals, 14 were for export coal and the other two for domestic. One domestic deal, for barge delivery of Panther coal, covered the month of May, was for 6,000 tons, and was at a price of $86/ton. The other domestic deal, for 230,000 tons during the June-December 2013 period out of Rocklick, was for rail delivery at a price of $97/ton.
Patriot is projecting average thermal coal sales prices of $67/ton in both 2013 and 2014, $74/ton in 2015, $77/ton in 2016, $81/ton in 2017 and $85/ton in 2018.
Patriot ships coal to domestic and international electricity generators, industrial users, steel mills and independent coke producers, as well as brokers that ultimately sell the coal to these same types of customers. Coal is shipped via various company-owned and third-party loading facilities, multiple rail and river transportation routes and ocean-going vessels.
In 2012, Patriot sold a total of 24.9 million tons of coal, with 75% of this coal going to domestic and global electricity generators and industrial customers and the remaining 25% to domestic and global steel and coke producers. In 2012, 45% of the total sales volume was comprised of export sales. In the first six months of 2013, Patriot sold 11.2 million tons of coal, with 51% of total volume in export sales.