Illinois coal producer Foresight Energy LP (NYSE: FELP) on Feb. 6 reported financial and operating results 2014, when it set new records for coal production, sales volumes, coal sales revenue and Adjusted EBITDA.
Coal sales revenue for the year grew to $1.1bn, up 16% from 2013, contributing to record Adjusted EBITDA of $404.5m and record net income attributable to controlling interests of $135.2m. Foresight’s full-year results were negatively impacted by a fourth quarter prepaid royalty impairment charge of $34.7m, but benefited by $57.1m in unrealized gains on coal derivative contracts.
For the quarter ended December 31, 2014, Foresight also set records for coal sales revenue and Adjusted EBITDA. The increased production from FELP’s second longwall mine at its Sugar Camp complex drove record coal sales revenue of $300m and Adjusted EBITDA of $112.5m, an increase over the prior year fourth quarter of 12% and 13%, respectively. It reported net income attributable to controlling interests of $29.1m for the fourth quarter 2014, which was impacted by the aforementioned $34.7m prepaid royalty impairment and $23.4m in unrealized gains on coal derivative contracts.
“We are pleased to report record results for 2014, including new records for coal production, sales volumes, coal sales revenue and Adjusted EBITDA,” said Michael Beyer, President and Chief Executive Officer. “The results reflect the continued strong operating performance of our mining operations, which includes the three most productive underground coal mines in the United States in 2014, as reported by MSHA and measured by clean tons produced per man hour worked. Our teams at the mines and throughout the organization continue to perform at the highest levels driving exceptional results and growth in a very challenging market. We thank them for their effort and dedication.”
The start-up of the second longwall at the Sugar Camp complex in June 2014 and a higher committed sales position drove record coal sales revenue and record sales volumes in 2014. The increase in coal sales revenue of $152m from the prior year was offset by a $1.17 per ton, or 2%, decrease in coal sales realization per ton caused by a lower mix of international shipments as well as a small decline in the average realization per ton on both international and domestic sales.
The cost of coal produced increased $89m, or 25% from the prior year, due to higher sales volumes as noted above, as well as a $1.34 increase in the cost per ton. The increase in cost per ton was driven by increased production costs at the Sugar Camp and Hillsboro operations. The impact at the Sugar Camp complex during this period was due to the introduction of additional continuous miner development units and higher water handling costs, including those associated with the reverse osmosis system that was installed during the year. The Hillsboro mine was unfavorably impacted during 2014 by an underground fire which halted production for most of August and resulted in direct incremental costs of $2.5m.
Record coal sales revenue of $300m for the fourth quarter of 2014 was up 12% compared to the prior year. The increase in sales volumes to 5.9 million tons was driven by the start-up of the second longwall at the Sugar Camp complex in June 2014.
Cost of coal produced increased $21.8m, or 21%, compared to the fourth quarter of 2013 due to higher sales volumes and a $1.66 increase in cost per ton. The increase in cost per ton was driven by the introduction of additional continuous miner development units at the Sugar Camp complex and increased subsidence, repairs and maintenance costs at the Hillsboro mine.
For 2015, Foresight is providing this guidance for its operating and investment activities:
- Sales Volumes – During 2015, sales volumes are currently estimated to be between 22.8 million and 25.2 million tons. Foresight has current commitments for 20.8 million tons for 2015.
- Adjusted EBITDA – FELP currently expects to generate Adjusted EBITDA in a range of $385m to $425m, comparable to 2014 results at the midpoint.
- Capital Expenditures – Total 2015 capital expenditures are estimated at $115m-$130m, including maintenance capital estimates of $80m-$90m for distributable cash flow purposes.
Foresight Energy, founded by coal operator Chris Cline, is a leading producer and marketer of thermal coal controlling over 3 billion tons of coal reserves in the Illinois Basin. Foresight currently operates four mining complexes in Illinois (Williamson, Sugar Camp, Hillsboro and Macoupin), with four longwall systems. Foresight’s operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets.