|Bid||6.87 x 1400|
|Ask||7.60 x 800|
|Day's range||6.79 - 7.49|
|52-week range||6.45 - 32.25|
|Beta (5Y monthly)||0.77|
|PE ratio (TTM)||N/A|
|Earnings date||04 Feb 2020|
|Forward dividend & yield||0.58 (7.50%)|
|Ex-dividend date||28 Oct 2019|
|1y target est||11.83|
(Bloomberg) -- At least five of America’s coal producers went bankrupt in 2019. Prices for the fossil fuel have plunged 40% since a 2018 peak. And some of the nation’s largest miners are retrenching and slashing their dividends. But don’t be mistaken: The fight against climate change hasn’t killed off Coal Country yet.Instead of pouring money into dividends and buybacks, the nation’s largest coal producers say they’re hoarding cash to weather what they see as an impermanent storm. Overall, the industry returned more than $1 billion to investors last year before retrenching. The goal this year: Be ready to start mining again and paying dividends at the first sign of a market revival. They’re betting that prices will bottom out in the first half of 2020 before rising in the second half as production declines and global consumption gains.That’s spurred a new “mantra” at Peabody Energy Corp., according to Chief Executive Officer Glenn Kellow. It is “to live within our means,” he said during his Feb. 5 earnings call.A year ago, Peabody announced its biggest dividend ever, and said it would return to shareholders all of its free cash flow. On Feb. 5, the message was very different: The nation’s leading coal producer said it was suspending its dividend, halting buybacks and cutting capital expenditures.Hope has been in short supply for coal miners. The industry has been battered as much of the world forsakes the fuel to fight climate change, and as low natural gas prices squeezes its economics. Coal once accounted for more than half of all U.S. power generation. Today it’s less than 25%.The decline underscores the limitations of U.S. President Donald Trump’s pro-fossil fuel policies. While the White House has rolled back environmental regulations and tried to rescue coal plants from early retirement, utilities are still shifting to cheaper and cleaner natural gas, wind and solar power. Meanwhile, all of the Democratic presidential candidates have taken a stance against coal.And yet there’s still “a hope that prices have bottomed out and will begin to tick up a bit,” said Michael Dudas, an analyst with Vertical Research Partners, in a telephone interview. “Companies are trying to preserve cash and keep conservative.”Optimism within the industry is probably stronger among companies producing coal used by steelmakers, Dudas said. Still, thermal coal might also see a gain with a hot summer or a colder winter, he said.Because of the lower prices, higher-cost mines are being shut down and there’s been a wave of bankruptcies. The result, according to Dudas: “Supply comes off the market, inventory levels start to get worked off and, eventually, we will have more demand and that will move the price cycle higher.”Peabody’s not alone. Consol Energy Inc. also announced it’s cutting capital expenditures. And while Arch Coal Inc. boosted its dividend, the company said there will be less cash available to return to shareholders through share buybacks. Instead, the money will go toward toward a new mine in West Virginia, expected to open in mid-2021.”We’re confident that Arch is well equipped to weather the current market downturn,” said Arch CEO John Eaves in a Feb. 6 conference call. “And just as well equipped to capitalize on the next market up cycle whenever it occurs.”Jimmy Brock, the Consol CEO, also sees a glimmer on the horizon. “Low prices are starting to drive a supply response,” he said during his earnings call last week. “There are some indications that provide hope for an improvement in the second half of 2020.”Alliance Resource Partners LP too cut its distribution by 26% this month, with CEO Joe Kraft saying it made more sense to keep the cash to ride out a bumpy year.Prices for thermal coal delivered to Amsterdam, Rotterdam and Antwerp, an Atlantic benchmark, are about $52 a metric ton. That’s down almost 50% from an October 2018 peak, and last month it slipped to the lowest in 44 months. Booming natural gas supplies and a mild winter are dragging down demand at power plants, while utilities in the U.S. and Europe continue to shift away from the dirtiest fossil fuel in an effort to curb climate change.Metallurgical coal is also down, sliding more than 40% from an early 2018 high. Prices for the steelmaking ingredient plunged steeply in the second half of last year as global economic trends slowed and trade tensions heated up with China, the world’s biggest producer of the metal.(Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has committed $500 million to launch Beyond Carbon, a campaign aimed at closing the remaining coal-powered plants in the U.S. by 2030 and slowing the construction of new gas plants.)To contact the author of this story: Will Wade in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Reg Gale at email@example.comFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Law) -- Companies seeking tax credits in return for using technology to capture carbon dioxide now have two sure routes to knowing when the IRS thinks their projects actually started—and when they qualify for the tax benefit. Investors spent two years waiting for Wednesday’s guidance, which was needed after lawmakers expanded the credit for carbon capture and sequestration under tax code Section 45Q. Some projects stalled during that time. Time is of the essence: Construction on the projects must start before 2024 to qualify for the credit, and the expansion is effective for tax years that start during the 2018 calendar year. The guidance touched on two of the industry’s top priorities, but left thornier issues for future regulations—such as which uses of sequestered carbon are eligible, said Hunter Johnston, a partner at Steptoe & Johnson LLP, who lobbied Congress on the credit on behalf of Peabody Energy and Lake Charles Methanol as recently as the fourth quarter of last year. Johnson said he expects more guidance within the next month.“It’s consistent with expectations,” he said, adding that it’s built upon already existing guidance for other renewable energy credits. “It’s essential guidance, but not comprehensive.”Companies must begin the “physical work” of a carbon-capture project, such as making turbines, pumps, cooling towers, and piping, or start work on-site for construction to officially have begun, the agency said in Notice 2020-12. Excavation to change the contour of the land doesn’t count, nor do “preliminary activities” like securing financing, conducting research, getting licenses and permits, exploring, and test-drilling, the IRS said.There’s a second option: If a company already spent 5% of the project’s total cost, the IRS will view construction as having started, and therefore the project is eligible for the credit. But if the overall cost of the project is larger than expected, and that initial cost ends up being smaller than 5%, the company may flunk the safe harbor.For both routes to eligibility, work on the project must be continuous, meaning the companies can’t start construction and then walk away and still get the credit.Deadline ExtendedUnder similar guidance for other renewable energy projects, as part of that continuity mandate, projects must be completed and operational within four years of the start of construction to qualify for this kind of safe harbor or pass the physical work test. Shell, the Basin Electric Power Cooperative, the Carbon Capture Coalition, and others requested that the IRS extend that period to six years for the carbon capture credit—something the agency did in Wednesday’s guidance.“We are especially pleased that the IRS has embraced our recommendation to provide for a longer six-year continuity requirement to complete construction of carbon capture projects,” the Carbon Capture Coalition said in a statement. “Nevertheless, this work took far too long and has delayed hundreds of millions, if not billions of dollars in investments in the development and deployment of carbon capture, use and geologic storage projects.”In a revenue procedure also released Wednesday, the IRS laid out what firms financing the projects would have to do to receive some of the credit. Those investors would have to maintain a minimum investment of 20% of the certain capital investments for as long as they are partners in the projects in order to be guaranteed the credit or a cash equivalent.The partners also can’t be protected from the potential loss of that minimum investment through some arrangement with the other parties involved in the project, such as the entity emitting the carbon, or the project developer, the IRS said. The IRS also said it wouldn’t be issuing letter rulings—or statements of certain tax treatment of a transaction that are specific to the taxpayers that request them—on whether investor partners qualify for the credit. Both pieces of guidance will be effective March 9. If construction began before then, the IRS will treat that date as the date construction began, according to the notice. If developers, investors, and project companies satisfied the revenue procedure prior to that date, the IRS will view the financiers as eligible for the portions of the credit they were allocated for those tax years. Using a later construction start date under the guidance may come in handy meeting completion deadlines for projects already in the works, but there may be few such projects, said Brad Crabtree, vice president of carbon management at the Great Plains Institute, a nonprofit, and director of the Carbon Capture Coalition. The coalition is backing a House proposal to extend the expanded credit’s 2024 deadline for starting construction.“You need that long planning investment horizon,” Crabtree said. “That’s really our top priority right now.”To contact the reporter on this story: Lydia O’Neal in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Patrick Ambrosio at email@example.com; Colleen Murphy at firstname.lastname@example.org(Updates with additional details on guidance beginning in ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Even before publicly vowing to unwind its investments in coal, BlackRock Inc. began cutting its stake in the biggest U.S. miner.The world’s largest asset manager had about 4.87 million shares of Peabody Energy Corp. as of Dec. 31, a 5% stake, according to a regulatory filing Friday. That’s down 14% from the end of January 2019, making it the miner’s sixth-largest holder, according to data compiled by Bloomberg.BlackRock announced last month that it would put climate change at the heart of its strategy, a plan that includes exiting both debt and equity investments in thermal coal companies in its $1.8 trillion active portfolios. Financial companies around the world are facing increasing pressure to back away from the dirtiest fossil fuel to help fight global warming.Climate is now a “defining factor” for the global economy, BlackRock Chief Executive Officer Larry Fink told shareholders in his annual letter.Read More: BlackRock Takes Siemens to Task For Australia Coal ControversyOn Wednesday, Peabody’s biggest shareholder -- activist investor Elliott Management Corp. -- moved to increase control over the mining company. Peabody’s shares are down more than 70% in the past year as the coal industry faces waning demand from utilities and slumping prices, and slipped as much as 7.9% Friday. (Updates with share move in last paragraph. An earlier version corrected the timing of ownership change in the second paragraph and clarified the link to climate strategy.)To contact the reporter on this story: Will Wade in New York at email@example.comTo contact the editors responsible for this story: Joe Ryan at firstname.lastname@example.org, Pratish NarayananFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Arch Coal's (ARCH) Q4 loss is narrower than expected. The company is working on the development of a new mine, which is set to produce high-quality coking coal.
(Bloomberg Opinion) -- There was a time when Australia was the promised land for America’s coal giants. Faced with the decline of coal-fired power and steel-making at home, U.S. miners bought their way into Australian resources situated helpfully on China’s doorstep.Ultimately, it wasn’t enough to stave off bankruptcy. Having emerged from chapter 11 a few years ago, Peabody Energy Corp. finds its Australian business simultaneously a blessing, curse and — following a new agreement with its biggest shareholder, the ever-warm-and-fuzzy Elliott Management Corp. — potential Hail Mary.To say Peabody is in the middle of a perfect storm would be something of an understatement. Its primary product, thermal coal, is the tobacco of the energy world, with demand slumping in its domestic market despite the imaginative efforts of President Donald Trump’s administration to force it on utilities.Steel producers, which use higher-value metallurgical, or coking, coal, are also in a funk amid the trade war. Compounding that, a fire swept through one of Peabody’s coking coal mines in Australia in 2018, taking it out of commission just as prices were peaking. And now coronavirus has ground Chinese industry to a halt, not only taking down demand for energy in general, but hitting already-weak prices for natural gas, making it even more of a cut-throat competitor to thermal coal.Unsurprisingly, Peabody just announced losses for 2019, suspended its dividend and cut capital expenditure plans. Elliott, which gained its stake in Peabody’s bankruptcy, has watched the stock plummet by four-fifths since fire was reported at the North Goonyella mine in 2018. It will now put two of its own on Peabody’s board, including Elliott’s head of U.S. restructuring, and they will be joined by an Australian coal veteran. More importantly, Peabody has agreed to appoint a consultant to review the performance of its Australian mines.Despite the fire, the Australian mines remain the most profitable part of Peabody’s business. While they only account for a sixth of tonnage, they generated more than half of adjusted Ebitda last year, even after accounting for the costs of maintaining the North Goonyella mine. Australian cash margin per ton of about $17 — again, including those fire-related costs — is four times that of the U.S. business. Indeed, ex-depreciation, the difference is even starker:Peabody says it has had “a number of inquiries” about North Goonyella. However, with the whole Australian portfolio under review, the process could ultimately lead to a sale of more or possibly all of the business. After all, an activist shareholder is sitting on 30% of the eviscerated stock and has now pushed onto the board. If some suitor could be persuaded to put a multiple of just 3 times on the Australian business’ adjusted Ebitda, that would equate to $1.4 billion — not far short of the current enterprise value of the entire company.A bull might look at that and conclude Peabody is a bargain. Yet that math has held true for a while, and few seem to be charging in. By late Thursday morning in New York, the stock had already given back almost half of Wednesday’s jump on the back of the Elliott agreement.The implication is that investors are skeptical of Peabody realizing much value in Australia or, perhaps more likely, see little value in the U.S. operations alone. Back in June, Peabody announced a joint venture with rival Arch Coal Inc. to combine their assets in the Powder River Basin. It is a textbook tactic to offset declining volume with cost savings — worth $545 million to Peabody, by its own calculations. Yet the stock has dropped another 60% since then, and the entire market cap is now just $823 million. Even Arch, which has done a good job to date of returning cash to shareholders, has suffered amid weak pricing and an expansion project that will keep capex running high through this year.Beyond the ultimate result of Elliott’s efforts with Peabody, the miner’s resort to austerity and its review carry ominous signals for this industry. The American mines constitute a low-margin, high-volume business in a market where the volume of demand is under sustained pressure. The cost of capital is rising inexorably as a result of shifting attitudes on climate change and falling prices for rival energy technologies. Peabody’s Australian business may yet yield a deal that salves some investors’ wounds. But there is no promised land left to which this industry can turn.With assistance from David FicklingTo contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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