Ohio-based coal producer Oxford Resource Partners LP (NYSE: OXF) said Nov. 5 that its adjusted EBITDA was $11m for the third quarter of 2013 compared to $14.2m for the third quarter of 2012.
Adjusted EBITDA declined due to the planned lower sales volume from its western Kentucky (Illinois Basin) operations, which the company has been phasing out due to poor markets and also so it can focus on its base coal mining business in Ohio.
Production in the third quarter was approximately 40,000 tons less than expected, primarily due to an overburden collapse in August which trapped a highwall miner, rendering it inoperable.
The third quarter 2013 cash margin of $6.40 per ton decreased 21.9%, or $1.79 per ton, over the third quarter 2012 cash margin of $8.19/ton. Coal sales revenue increased 2.6% to $50.74/ton, but was offset by a 7.6% increase in cash cost of coal sales to $44.34 per ton as a result of the lower production.
Net loss for the third quarter of 2013 was $5.1m compared to a net loss of $3m for the third quarter of 2012. The net loss for the third quarter of 2013 included a gain of $2.7m relating to the change in fair value of warrants, a $1.1m net gain primarily related to insurance proceeds from the lost mining equipment, and $0.2m of restructuring expenses. Net loss for the third quarter of 2012 included $0.4m in net loss on the disposal of mining equipment and $0.2m of impairment and restructuring expenses. Excluding these items, adjusted net loss would have been $8.8m for the third quarter of 2013 compared to $2.5m for the third quarter of 2012.
“We had a challenging third quarter as the production from one of our two highwall miners was disrupted for close to a month,” said Oxford President and CEO Charles Ungurean. “Fortunately, we were able to expeditiously replace the highwall miner and resume production. Looking forward, we remain committed to successfully navigating through this market downturn by closely managing our capital expenditures and liquidity, and leveraging the assets redeployed from the Illinois Basin to our Northern Appalachian operations.”
Oxford’s projected sales volume is fully committed and priced for the balance of 2013, underscoring the strength of its long-term customer relationships and the strategic importance in its core region of Ohio. For 2014, Oxford has 5.0 million tons of sales committed, of which 3.3 million tons are priced and 1.7 million tons are unpriced.
A major Ohio customer for the company is the Conesville power plant operated by American Electric Power (NYSE: AEP), with that coal moving under a restructured and extended contract.
Continued rationalization of the Illinois Basin operations has allowed for the transfer of excess equipment to the Northern Appalachian mines in Ohio, which has reduced capital spending. Based on current market conditions, Oxford expects to idle all production at its Illinois Basin operations by the end of 2013 and finish redeploying equipment during the first quarter of 2014. A major western Kentucky customer had been Big Rivers Electric.
As of Sept. 30, the Partnership had $2.7m of cash and $8.5m in available borrowing capacity on its revolving credit line under the new credit facilities closed in the second quarter. It continues to pursue the sale of a shovel, which is its remaining piece of excess Illinois Basin equipment to be sold.
Oxford provides the following updated guidance for 2013 based on its current industry outlook:
- It expects to produce between 6.1 million tons and 6.3 million tons and sell between 6.6 million tons and 6.8 million tons of thermal coal. The average selling price is projected to be $50.75 per ton to $51.25 per ton, with an anticipated average cost of $43.75 per ton to $44.25 per ton.
- Adjusted EBITDA is expected to be in the range of $42m to $45m.
- It anticipates capital expenditures of between $22m and $25m, net of reinvested insurance proceeds.