Illinois coal producer Foresight Energy LP (NYSE: FELP) said Nov. 9 that it had sales volumes of 5.3 million tons during third quarter 2016, generated coal sales revenue of $228.5 million contributing to Adjusted EBITDA of $85.4 million, cash flows from operations of $72.7 million and a net loss attributable to limited partner units of $24.3 million.
Sales volumes for third quarter 2016 increased 4.4% compared to second quarter 2016 and were 7.5% lower as compared to the prior year third quarter. The current quarter benefited from $10.5 million of insurance recoveries for the reimbursement of mitigation costs incurred at its Hillsboro mining operation related to a combustion event. However, third quarter 2016 results were negatively impacted by $13.2 million in debt extinguishment costs, of which $11.0 million were non-cash, $6.1 million of debt restructuring costs, and $6.0 million of losses on commodity derivative contracts.
“Despite challenging market conditions and all of the activities related to the global restructuring of our indebtedness, we delivered very solid operating and financial results for the third quarter. These results demonstrate the superior quality of our asset base and our operational excellence,” said Robert D. Moore, President and Chief Executive Officer. “Our operating costs continue to be best-in-class and allow us to generate positive Adjusted EBITDA margins at all points in the commodity cycle. Additionally, domestic and export realizations showed modest improvement during the quarter allowing us to contract over 4.0 million tons for delivery though 2018.”
During the third quarter, Foresight completed an out-of-court restructuring of more than $1.4 billion in indebtedness. This restructuring resolved the various defaults and events of default related to the December 2015 Delaware Court of Chancery opinion that the equity transaction involving Murray Energy and Foresight Reserves constituted a “change of control.” The restructuring provided for, among other things:
- an amendment and restatement of the Partnership’s senior credit facility, restoring access to a revolving credit facility while also amending certain commitment levels and financial maintenance covenants;
- an amendment and restatement of the Partnership’s receivables securitization facility;
- amendments and waivers related to the Partnership’s longwall equipment leases and financings including a reduction in certain maturities; and
- amendments and other modifications to governance documents and existing agreements by and among the equity sponsors, as well as, the execution of various mutual releases among the participants in the restructuring.
“The resulting transaction addresses the change of control litigation and improves the Partnership’s long-term leverage profile, which better positions the Partnership as it continues to operate in a difficult environment,” added Moore.
Coal sales totaled $228.5 million during third quarter 2016, a decrease of $22.7 million from the prior year third quarter. This decrease was primarily due to reduced sales volumes attributed to difficult coal market conditions driven by oversupply in the market, excess utility stockpiles and continued low natural gas prices. However, during the third quarter, the Partnership began to see some improvement in the international markets as export thermal coal pricing improved significantly.
Cost of coal produced was $110.3 million for third quarter 2016 compared to $128.2 million for the same period 2015. The decrease during the current quarter was due to lower sales volumes, as well as a reduction in cash cost per ton sold, driven largely by synergies related to the transaction with Murray Energy, including lower mine overhead costs and operational efficiencies, plus the benefit of the insurance recoveries for the reimbursement of mitigation costs related to the Hillsboro combustion event which totaled $10.5 million.
Cash flows provided by operations for third quarter 2016 reached $72.7 million and Foresight ended the quarter with $76.8 million in cash and cash equivalents, representing an increase of $31.7 million from second quarter 2016. During third quarter 2016 capital expenditures were $14.7 million and year-to-date capital expenditures are down $41.5 million as compared to the nine months ended Sept. 30, 2015.
Foresight Energy LP is a leading producer and marketer of thermal coal controlling over 3 billion tons of coal reserves in the Illinois Basin. Foresight currently owns four mining complexes (Williamson, Sugar Camp, Hillsboro and Macoupin) in the state of Illinois, with four longwall systems, and the Sitran river terminal on the Ohio River. 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.