Westmoreland Coal offers 2015 guidance, integrates Oxford operations

Westmoreland Coal (NasdaqGM: WLB), a major producer in both the U.S. and Canada, on Feb. 11 announced guidance on key financial metrics for 2015.

The guidance represents the consolidated projections of Westmoreland Coal and Westmoreland Resource Partners LP (NYSE: WMLP). The consolidated 2015 projections are based on the below key assumptions and guidance ranges.

  • Production is projected to be between 56.0 and 60.0 million tons
  • Consolidated 2015 Adjusted EBITDA is projected to be between $235m and $270m
  • Consolidated capital expenditures are projected to be between $74m and $92m

Included in the guidance is $7.5m of capital expenditures in Canada related to the expansion of the activated carbon facility, which is currently projected to come online in 2017.

“We see customer demand across our entire business being at historical levels in 2015. Our low cost mine mouth model allows us to deliver coal to our customers at prices significantly below natural gas equivalents, even at today’s gas prices,” noted Keith E. Alessi, Westmoreland’s Chief Executive Officer. “Furthermore, the regulated power markets that most of our Canadian customers operate in provide additional protection as they are assured dispatch under purchase power arrangements. The predictable nature of our business model enables us to project positive cash flow generation.

“2014 was a busy year for Westmoreland. We successfully integrated the Canadian acquisition and realized significant savings,” noted Alessi. “Unfortunately, these improvements were offset by year-on-year decreases in the value of the Canadian dollar and PJM power prices. We have reduced production levels and costs at the Coal Valley export mine that should allow us to mitigate the effects of a weak export market. ROVA also largely benefitted in early 2014 from the impact severe winter weather conditions had on power prices.”

Discussing the 2015 guidance, Alessi noted that “the 2015 guidance we are providing reflects a CDN$:US$ exchange rate of $0.80, current Newcastle coal pricing of US $65.00/metric ton, and average 2015 PJM power prices of approximately $45.00 per MW. Included in our guidance is $7.5 million of capital expenditures in Canada related to the expansion of the activated carbon facility, which is currently projected to come online in 2017. We have historically adjusted capital expenditures during the year, as needed, to reflect changes in business conditions and we will continue to do so this year.”

He said: “We closed on the Oxford transaction on the last day of 2014 and we have begun integration of that operation with a focus on cost controls, efficiencies and distributable cash flow. Our 2015 guidance reflects the current business configuration. As we have discussed previously, we anticipate beginning a drop down strategy from WLB to WMLP during 2015. The impact of any drop downs that will occur during 2015 is not reflected in our current guidance. I would anticipate a drop down in the second or third quarter and we will adjust guidance accordingly at such time.”

“We will continue to remain focused on our core competency of safe, stable, low cost production,” said Mr. Alessi. “I look forward to discussing this guidance further on our 2014 earnings release and investor call on February 27, 2015.”

Westmoreland Coal is the oldest independent coal company in the United States. Westmoreland’s coal operations include sub-bituminous and lignite surface coal mining in the Western United States and Canada, an underground bituminous coal mine in Ohio, a char production facility, and a 50% interest in an activated carbon plant. Westmoreland also owns the general partner of and a majority interest in Westmoreland Resource Partners, formerly Oxford Resource Partners LP, a publicly-traded coal master limited partnership. Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina.

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.