Oxford reports Q2 2014 net loss; imminent Big Rivers payout

Ohio-based coal producer Oxford Resource Partners LP (NYSE: OXF) reported on Aug. 5 that it had adjusted EBITDA of $13m for the second quarter of 2014 compared to $13.9m for the second quarter of 2013.

The decrease was driven by a 2.1% decrease in cash margin to $8.11 per ton for the second quarter of 2014 from $8.28 per ton for the second quarter of 2013, as well as a 158,000 ton decrease in tons sold.

Cash coal sales revenue increased 2.5% to $52.49 per ton for the second quarter of 2014 from $51.21 per ton for the second quarter of 2013. For the second quarter of 2014, cash cost of coal sales increased by 3.4% to $44.38 per ton from $42.93 per ton for the second quarter of 2013, primarily due to higher diesel fuel costs.

Net loss was $3.4m for the second quarter of 2014 compared to a net loss of $4.1m for the second quarter of 2013.

“While coal markets continue to present challenges, we are pleased to report second quarter results that are in line with our expectations,” said Oxford President and Chief Executive Officer Charles Ungurean. “Also, we settled the Big Rivers lawsuit in mid-July for an amount that substantially compensates us for our lost profits from the wrongful termination of our coal supply agreement. We are to receive the settlement payment of $19.5 million by mid-August.”

Ungurean continued: “With the settlement proceeds, we will pay down between $12.5 and $17.5 million of our first lien debt, enhance our liquidity by $2.0 to $7.0 million, and save $1.0 to $1.4 million in cash interest expense on an annual basis.”

He is referring to a now-settled lawsuit with western Kentucky power producer Big Rivers Electric over a terminated, 800,000 tons per year coal contract. Since the loss of that contract, Oxford has shut down its western Kentucky mining operations to focus on its mainstay Ohio mines.

Oxford’s projected sales volume is 98.1% committed and priced for 2014, underscoring the strength of its long-term customer relationships and its strategic importance in its core region of Ohio. Oxford has the ability to increase annual production by up to 0.5 million tons with little additional capital investment if additional demand materializes. For 2015, projected sales volume is 69.8% committed (with 12.3% of the projected sales volume priced and 57.5% of the projected sales volume unpriced).

Oxford expects in 2014 to produce between 5.7 million tons and 5.9 million tons and sell between 5.8 million tons and 6.0 million tons of thermal coal. The average selling price is anticipated to be in the range of $52.30 per ton to $53.30 per ton, with an anticipated average cost in the range of $44.50 per ton to $45.50 per ton.

Adjusted EBITDA for 2014 is expected to be in the range of $38.5m to $42.5m.

Oxford is a low-cost producer of high-value thermal coal in Northern Appalachia. Oxford markets its coal primarily to large electric utilities with coal-fired, base-load scrubbed power plants under long-term coal sales contracts. The Conesville power plant in Ohio is a mainstay customer. It is headquartered in Columbus, Ohio.

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.