Powder River Basin coal specialist Cloud Peak Energy (CLD) is a fairly simple coal play. Unlike Peabody Coal (BTU), Alpha Natural (ANR), or Arch Coal (ACI)
that rely to varying degrees on metallurgical coal, exports, and/or
thermal coal mined in Appalachia, Cloud Peak is a US-focused play on the
lower-sulfur coal mined in the PRB region. If natural gas prices remain
above $3.50/mmBTU, Cloud Peak should be able to log solid margins and
generate good cash flow and if the U.S. gets even more stringent with
rules concerning sulfur emissions, it will only help Cloud Peak.
Cloud
Peak's leverage to gas prices is not lost on the Street. As PRB coal
prices have marched from around $8/ton at the start of the fall to
around $12/ton, so too have the shares moved up around 20%. It remains
to be seen if natural gas prices will prove sticky enough to maintain
good PRB coal pricing (and/or whether companies like Arch Coal will
expand production), but it looks like Cloud Peak is still priced to
offer a better return than normal market averages if you believe that
PRB coal prices can stay at $14/ton or higher for the long term.
Continue reading here:
Cold Weather, Low Costs, And Higher Gas Helping Cloud Peak Energy
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