Foresight Energy reports jump in coal sales in Q2 2014

Illinois coal producer Foresight Energy LP (NYSE: FELP) said Aug. 5 that coal sales revenues for the second quarter were $266.7m, up 23.5% from the second quarter 2013 and 9.9% from the first quarter of 2014.

Foresight also continued its strong cost performance during the quarter, reporting a cash cost per ton sold of $19.69, resulting in net income attributable to the Partnership of $29.5m and Adjusted EBITDA of $102.9m.

On June 23, Foresight successfully completed its initial public offering on the New York Stock Exchange. The transaction resulted in proceeds of $322.7m, net of $27.3m in underwriting fees and other costs and expenses associated with the IPO. Proceeds from the transaction were used to repay $210m of principal under a term loan and to pay a $115m distribution.

“We are pleased to report another strong quarter of operations with new records for production, sales volumes and Adjusted EBITDA,” said Michael Beyer, President and Chief Executive Officer. “The successful quarter was driven by continued strong performance at our existing operations and the contribution from Viking, our fourth longwall, which commenced operations at the beginning of June. The startup of the Viking longwall adds another low cost mine to Foresight’s portfolio of leading underground mining operations.”

A record 5.4 million tons were sold during the second quarter at an average realized price of $49.14. The increased sales volume reflects a year-over-year increase in coal production and improved domestic demand. Domestic sales volumes during the second quarter 2014 increased 1.3 million tons to 4.2 million tons, a 46% increase over the three months ended June 30, 2013, while sales volumes to international markets declined 0.2 million tons to 1.2 million tons, an 11.2% decline over the comparable prior year period. The mix of domestic and international sales volumes drove the net price lower for the quarter and reflects the relative strength of the domestic market compared to the international market for new business.

Cost of coal produced (excluding depreciation, depletion and amortization) increased $28m for the three months ended June 30, 2014, to $106.6m primarily due to a 28.1% increase in sales volume compared to the same three month period in 2013. Cost of coal produced (excluding depreciation, depletion and amortization) in the June 30, 2014, period was also impacted by a $1.10 per ton increase in the overall cash cost per ton sold due primarily to increased production costs at the Sugar Camp mine as a result of higher roof control and water handling costs as well as higher per unit costs at the Williamson mine caused by delays associated with a longwall move.

Coal sales increased by $60.9m to $509.4m during the six months ended June 30, 2014, compared to the same period in 2013 due primarily to higher sales volumes of 1.6 million tons. This increase was partially offset by a $2.24 per ton, or 4.3%, decrease in coal sales realization per ton. The increase in sales volume reflects a higher committed sales position in 2014 and the relative improvement of demand in the domestic coal market during the first half of 2014. Domestic sales volumes increased by 1.6 million tons over the six months ended June 30, 2013, while international sales volumes shipped were flat. The increased mix of domestic shipments during this period reflects the relative strength of the domestic market compared to the international market for new business.

Foresight Energy is a leading coal producer in the Illinois Basin with over three billion tons of coal reserves currently supporting four mining complexes. Its logistics give each of these mining complexes multiple modes of transportation to reach the end-users of coal, including rail, barge and truck.

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.