Westmoreland Coal reports net loss, lower coal sales in Q3 2015

Westmoreland Coal (NasdaqGM:WLB) on Oct. 23 announced third-quarter 2015 results, including a $46.6 million net loss, and also updated its full year guidance.

Revenues for the quarter were $349.8 million versus $337.8 million in the same quarter in 2014. Adjusted EBITDA for the third quarter of 2015 was $48.0 million, while Adjusted EBITDA for the third quarter of 2014 was $41.7 million. Adjusted EBITDA for this quarter included results of Westmoreland Resource Partners LP and the Buckingham operations, which were not present during the third quarter of 2014. Net loss for the quarter was $46.6 million versus $49.3 million in the same quarter in 2014.

“The quarter was a steady one despite very mild weather and customer outages,” said CEO Keith E. Alessi. “Strength in our historical US Coal operations offset weakness in our Ohio operations.” Westmoreland Resource Partners, a master limited partnership (MLP), holds the Ohio operations, which were formerly part of Oxford Resource Partners.

“As we now have greater visibility, we are updating our guidance for the year,” said Alessi. “Since issuing original guidance, we have seen numerous impacts on EBITDA and changes in capital spending. We still anticipate the free cash flow we generate for 2015 will service cash interest and additionally retire approximately $44 million in debt, or $2.45 per share. This falls within the range of outcomes of our previous guidance for EBITDA and capital.

“While our core business remains solid, we have experienced a prolonged plant outage at the largest customer of the MLP and Buckingham,” Alessi added. “The customer expected to be fully operational in the third quarter but continuing operational problems have delayed returning to full capacity until mid-November. The cumulative EBITDA impact of this outage in 2015 is $15.0 million versus our original guidance. Additionally, the high level of M&A activity conducted during the third quarter resulted in approximately $5.0 million in incremental professional services fees. We have adjusted our EBITDA guidance by $20.0 million to reflect these two items and we narrowed the range. We have also reduced our projected capital expenditures for the year due to lower tons sold and outstanding management of capital projects. A table reflecting these guidance updates is shown within this press release.

“During the quarter, we completed diligence on several potential acquisitions which we chose not to pursue because they did not meet our criteria. We will remain disciplined in our approach to business development. We intend to close the San Juan transaction before December 31, subject to closing conditions and approvals, using a combination of cash on hand and debt financing.”

San Juan is a coal mining operation in New Mexico, currently owned by international miner BHP Billiton, that serves the minemouth San Juan power plant.

Updated Guidance









Guidance Summary

 

 

Original Range

 

 

Revised Range

(in millions)

   

Low

 

 

High

   

Low

 

 

High

Tons

   

56.0

     

60.0

     

54.0

     

56.0

Adjusted EBITDA

   

$

235.0

     

$

270.0

     

$

215.0

     

$

225.0

Capital Expenditures

   

$

74.0

     

$

92.0

     

$

70.0

     

$

75.0

Per Ton

   

$

1.32

     

$

1.53

     

$

1.30

     

$

1.34

At the U.S. operations, the company sold 6 million tons this past quarter, down from 6.5 million tons in the third quarter of 2014. Third quarter 2015 U.S. coal segment revenues increased primarily due to the Buckingham acquisition. U.S. coal Adjusted EBITDA decreased due to continued unfavorable weather conditions at the Jewett lignite mine in Texas as well as customer outages affecting several locations.

The company sold 6.2 million tons out of its western Canadian mines in the third quarter, down from 6.6 million tons in the year-ago period. Third quarter 2015 revenue decreased due to lower export prices impacting the Coal Valley operations and the continued weakening of the Canadian dollar. Operating income and Adjusted EBITDA increased as a result of operational improvements.

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 (Buckingham), 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, a publicly-traded coal master limited partnership.

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.