Seeking Alpha: Arch Coal Holding On For An Appalachian-Driven Rebound

U.S. coal stocks have been almost universally pasted, and it's not hard to see why. Many price indexes have carved out new lows, and EBITDA has shrunk to a point where many companies are in a tight squeeze with respect to interest and debt payments. Worse still, there are signs that several key markets may be changing (or have already changed) in ways that fundamentally alter the long-term outlook for U.S. coal producers.

Arch Coal (NYSE:ACI) is one of the companies that finds itself in a tricky spot. While the company should have adequate liquidity for several more years, that liquidity won't last indefinitely, and this is one of the companies potentially at risk from fundamental changes to the markets it has served for so many years. Arch Coal does offer impressive leverage to any near-term recovery in coal prices, akin to what investors have seen with some of the more leveraged and commoditized energy service companies lately, but this is by no means a safe play on a troubled sector.

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Arch Coal Holding On For An Appalachian-Driven Rebound

Seeking Alpha: Cost Reductions Alone Can't Save Alpha Natural Resources

Unlike Cloud Peak Energy (NYSE:CLD) and Peabody Energy (NYSE:BTU), I'm not certain that Alpha Natural Resources (NYSE:ANR) will have the staying power to exploit a recovery in the high-quality coal that it mines in Appalachia. As is the case with commodity stocks, there is a return/quality trade-off here that may seem counterintuitive - Alpha Natural doesn't appear to have staying power at today's coal prices, but a solid recovery in prices would have a much more profound impact on the stock price than for Cloud Peak or Peabody (and likely Arch Coal (NYSE:ACI) as well).

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Cost Reductions Alone Can't Save Alpha Natural Resources

Seeking Alpha: Peabody Energy Not In Serious Danger, But Still Needs Higher Prices

As I work my way through the coal companies that interest me, Peabody Energy (NYSE:BTU) is in a tricky spot. Relative to Alpha Natural Resources (NYSE:ANR) and Arch Coal (NYSE:ACI), I don't think there's really a long-term liquidity problem here, but then the company also needs to see a real recovery in metallurgical coal and I'm not sold on the company's position here.

Peabody's share price still seems to include a quality premium and I don't have a problem with that. The balance sheet isn't pristine, and the company slashed the dividend to preserve liquidity, but the company's well-placed in the U.S. Powder River Basin (or PRB) market and leveraged to growing coal imports in China and India.

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Peabody Energy Not In Serious Danger, But Still Needs Higher Prices

Seeking Alpha: Cloud Peak Energy Dug In For The Long Haul

Cloud Peak Energy (NYSE:CLD) has done better than most of its peer group over the past year, but does that really count for much when the shares are still down almost two-thirds? Making matters worse, pricing for thermal coal continues to be weak both in the U.S. and in the export markets, giving producers like Cloud Peak no place to hide.

Powder River Basin (or PRB) coal is barely competitive with natural gas at current prices and isn't competitive with Australian or Indonesian coal in Asian markets, but there is some hope that coal and gas prices could bottom this year. Cloud Peak also benefits from a low cost basis and a relatively comfortable liquidity position. The shares of coal companies are pretty speculative today, particularly as the industry is likely is long-term decline in the U.S., but Cloud Peak does still offer some worthwhile upside if/when coal prices do finally reach that bottom.

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Cloud Peak Energy Dug In For The Long Haul

Seeking Alpha: Bukit Asam's Production And Delivery Growth Offset Weak Pricing

The coal market has been lousy for most of the major U.S. and international producers, but PT Tambang Batubara Bukit Asam ("Bukit Asam") (OTCPK:TBNGY) has been a notable exception. Between organic production growth, strong domestic prices, and good cost control, Bukit Asam shares have jumped 50% since I wrote about the company in January, handily beating China Shenhua (OTCPK:CSUAY), Peabody (NYSE:BTU), and U.S. producers like Cloud Peak and Arch Coal (NYSE:ACI). I do see some long-term upside from the company's aggressive production growth plans and an eventual seaborne thermal coal price recovery, but I don't see as much near-term value in the shares right now.

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Bukit Asam's Production And Delivery Growth Offset Weak Pricing

Seeking Alpha: Cloud Peak Energy Still Generating Cash In A Tough Market

I had my doubts earlier this year as to whether the optimism over coal would last and it hasn't - the major pure-play producers are all looking at double-digit declines in their stocks. I did think that Cloud Peak Energy (NYSE:CLD) was better-positioned than most and the shares have performed relatively better - down about 12% versus a nearly 20% decline for Peabody Energy (NYSE:BTU), a 30% decline for Arch Coal (NYSE:ACI), and a nearly 50% decline for Alpha Natural Resources (NYSE:ANR).

Is this the right time to jump back into Cloud Peak? I continue to believe that Cloud Peak has the best long-term cost structure of the U.S.-based miners and that Powder River Basin coal (which is all that the company mines) will be the "last man standing" even if utilities turn even more toward gas and renewables for the long term. The upside here if thermal coal prices recover is pretty attractive, not to mention the long-term upside of Asian exports, but this is an idea where investors have to be willing and able to wait a while for the value opportunity to develop.

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Cloud Peak Energy Still Generating Cash In A Tough Market

Seeking Alpha: Peabody Energy Still Waiting For Better Days

Discussions of relative performance always need to anchored with the question of "relative to what?". Peabody Energy (NYSE:BTU) has been one of the best-performing U.S. coal companies year-to-date and over the last year (edged out in both cases by Cloud Peak (NYSE:CLD), and handily beaten by quasi-coal company CONSOL Energy (NYSE:CNX)), but the coal sector has continued to get thumped on weak met coal pricing, long-term concerns about EPA regulations for thermal coal, and rail shipments from the Powder River Basin.

I continue to believe that Peabody Energy is the best-positioned U.S. coal company for the long term. This year may see the company go FCF-negative, but Peabody can generate positive free cash flow at coal prices well below the breakeven levels for Alpha Natural (NYSE:ANR) or Arch Coal (NYSE:ACI). I also like the company's asset base (Illinois and Powder River Basin in the U.S., Australian met coal). While Alpha Natural has more upside if met coal prices suddenly shoot up again, I think Peabody is the better risk-adjusted pick overall.

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Peabody Energy Still Waiting For Better Days

Seeking Alpha: China Shenhua Muddling Through Better Than Most

Six months ago I was pretty down on Yanzhou Coal (YZC), as I didn't like the company's asset mix or cost structure relative to other Chinese coal companies like China Shenhua Energy (OTCPK:CSUAY) or Indonesia's PT Bukit Asam (OTCPK:TBNGY). Since mid-December, Yanzhou's ADRs have fallen more than 13%, while Shenhua's shares have fallen about 7% and Bukit Asam's have risen about 5%. In that time, coal markets really haven't improved much as supply continues to stay well ahead of demand and producers are loath to close capacity.

Not all coal companies are the same, though, and this could be a reasonable time to consider China Shenhua. The company has large thermal coal reserves, but also highly integrated coal-fired power generation and railway assets. Though I'm not expecting a fast turnaround in Chinese coal prices, Yanzhou has one of the best cost structures in the business and its parent company could inject addition value-creating assets into the business. At a somewhat distressed multiple of 6x EBITDA these shares offer a decent total return, while a more normalized 7x multiple would offer a good return.

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China Shenhua Muddling Through Better Than Most

Seeking Alpha: Peabody Energy Looks For A Better Mix To Drive A Better Outcome

While it's U.S. peers like Arch Coal (ACI), James River Coal (JRCC), and Alpha Natural Resources (ANR) groan under the strain of less competitive Appalachian thermal and met coal assets, Peabody Energy (BTU) has neither. Peabody long ago got out of the Appalachian coal business and instead now offers relatively competitive thermal assets in the Powder River and Illinois Basins and met assets in Australian. Though these are far from fat times for Peabody, the company's asset mix, cost structure, and debt maturity schedule give it one of the stronger operating profiles today.

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Peabody Energy Looks For A Better Mix To Drive A Better Outcome

Seeking Alpha: Arch Coal Can't Catch A Break

Maybe the best thing that can be said about Arch Coal (ACI) recently is that the company's management has been able to execute a few transactions to give the company more breathing room. Pricing for Powder River Basin (or PRB) coal has been improving lately, but metallurgical coal pricing has continued to weaken, and Appalachian thermal coal just isn't competitive with natural gas today.

Some have called Arch Coal a long-dated call option on thermal and metallurgical coal price recoveries, and I suppose that is true to a point. It certainly has been the case in past cycles that improving prices benefit struggling operators more, so Arch Coal would likely offer more upside than Peabody Energy (BTU) or Cloud Peak Energy (CLD), were PRB prices to move into the high teens and/or met coal recovery above $160/ton.

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Arch Coal Can't Catch A Break

Seeking Alpha: Bukit Asam Offers Attractive Growth And Costs To Offset Weak Coal Prices

The coal story today is a global story, and Indonesia is no exception. While PT Tambang Batubara Bukit Asam (OTCPK:TBNGY) ("Bukit Asam") offers some of the best volume growth potential of any coal company and attractive cheaper-to-mine coal reserves, weak global coal prices have weighed heavily on the shares.

I believe this is a good time for risk-tolerant investors to consider a company like Bukit Asam. It will be difficult for countries like Indonesia, China, India, and Vietnam to reach their growth ambitions without expanding their electricity output and coal is likely to remain the backbone of those utility infrastructures for the time being. Moreover, Bukit Asam offers exception volume growth potential over the next few years and the prospect of lower transportation costs. Even if Bukit Asam's historical valuation multiples decline to a level more akin to global coal norms, these shares look more than 20% undervalued today.

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Bukit Asam Offers Attractive Growth And Costs To Offset Weak Coal Prices

Seeking Alpha: James River Coal Fighting A Losing Battle With Time

Cold weather and higher natural gas prices have arrived in force, but it may be too little too late for James River Coal (JRCC) and its investors. This Appalachian coal company has made under-appreciated strides in lowering its production cost base and rationalizing production levels to prevailing prices, but it may not be enough. With liquidity running thin and coal prices still short of where they need to be, James River is going to have to pull a rabbit or two out of its hat to maintain enough liquidity to see any benefit from a 2015/2016 recovery in coal prices.

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James River Coal Fighting A Losing Battle With Time

Seeking Alpha: Cold Weather, Low Costs, And Higher Gas Helping Cloud Peak Energy

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.

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Cold Weather, Low Costs, And Higher Gas Helping Cloud Peak Energy

The Motley Fool: Cutting Costs Won't Solve All of Alpha Natural Resources' Problems

In what has remained a stubbornly miserable market for coal stocks, Alpha Natural Resources (NYSE: ANR  ) stands out, perhaps, as one of the less-bad names this year. While coal companies like Arch Coal, Peabody, Cloud Peak, Walter Energy, and James River have seen double-digit stock price declines in the past year (with the last two down nearly 50%), Alpha Natural has somehow squeaked out a tiny gain as of this writing.

To be sure, Alpha Natural's management deserves praise for the cost cuts that they have already achieved and the benefit of the doubt with respect to additional targeted cost cuts for 2014. The problem, though, is that I don't see how any coal company, and particularly a met-coal company like Alpha Natural, can cost-cut its way back to prosperity.

Unless European and Brazilian steel mills get moving again with respect to product and seaborne thermal-coal prices improve, it seems likely to me that the cost cuts will simply keep Alpha Natural in the game. For the stock to work, you must believe that better coal prices are coming soon, or at least that the Street will believe that, and production guidance doesn't seem to be pointing in that direction.

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Cutting Costs Won't Solve All of Alpha Natural Resources' Problems

Investopedia: Peabody Energy Carries Higher Expectations, But Solid Value

Having recently examined Arch Coal (NYSE:ACI) and Cloud Peak Energy (NYSE:CLD), it's time to examine the largest U.S. coal producer – Peabody Energy (NYSE:BTU). There is a lot to like about Peabody at first glance, as this company has attractive U.S. thermal coal exposure (with minimal Appalachian reserves) and heavily China-leveraged met coal exposure.

On the other hand, Peabody is arguably the most well-respected coal miner out there (and maybe one of the best-regarded natural resource companies overall) and investors and analysts consistently award the stock a higher multiple than its peers. Consequently, while Peabody may the highest-quality coal stock to own today, the upside in these shares to a thermal (and/or met) coal recovery doesn't seem as great as in its rivals.

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Investopedia: Cloud Peak Energy May Have A Steeper Road To Recovery

Multiple sell-side analysts keep talking about the thermal coal recovery, but Wall Street seems to be responding with “that's okay, after you...”. On a six-month, year-to-date, and three-month basis, the shares of most of the major U.S. coal producers are in the red, with the met-coal miners like Peabody (NYSE:BTU), Arch Coal (NYSE:ACI), and Alpha Natural (NYSE:ANR) under-performing the thermal-focused Cloud Peak Energy (NYSE:CLD).

It's true that natural gas prices have risen of late, making coal more cost-competitive. It's also true that coal inventories have been worked down at utilities and that miners have been relatively responsible in idling marginal mines.

It's still not abundantly clear that Cloud Peak Energy offers a great opportunity today. While this is a very well-run miner with solid assets, the counter-intuitive reality is that it's offer the lesser operators that see the biggest stock price improvements early in a recovery. It's also not certain that this “recovery” has legs or will show up in the numbers anytime soon, as there is ample capacity, prices are still weak, and margins are very thin. While I think Cloud Peak is on balance a good play on an eventual thermal coal recovery, investors are going to need patience for this stock to work.

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Investopedia: Bull Vs. Bear - Wall Street May Like A Republican President

Question: Would Wall Street love or hate a republican president?
Love Side
No matter what an investor's personal leanings and preferences are, it's always helpful to evaluate each side of a binary outcome, and the upcoming Presidential election is very definitely a binary outcome - either a republican or democrat will win. With that in mind, it is useful to consider which industries/sectors may do well under four years of a republican administration. Although data suggests that the stock market does better during democratic administrations, there are, nevertheless, sectors that seem likely to do well (or better) under a Romney administration.

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Investopedia: Peabody Is The Best Of A Mangy Breed

As investors have come back around to the idea that maybe coal isn't forever doomed, shares of leading coal company Peabody Energy (NYSE:BTU) have rebounded over the past quarter. Better still, Peabody delivered the sort of quarter that ought to remind investors that it is indeed a high-quality operator in the sector. Although Peabody's recent stock market action has taken away a fair bit of the easy money, long-term investors could still have reason to own this name, albeit with some above-average risks.

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Investopedia: Can Alpha Natural Resources Find The Bottom?

It's been a pretty miserable summer for coal companies, as low natural gas prices and sluggish steel production have eviscerated prices for both thermal and metallurgical coal. As a debt-heavy company with major exposure to the very much out-of-favor Appalachia region, Alpha Natural Resources (NYSE:ANR) has seen its stock take an absolute pounding. Although valuation suggests extreme pessimism, investors cannot afford not to consider the risk that conditions could get even worse.

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Seeking Alpha: Peabody Energy Still In Limbo; How Low Can It Go?

The investment thesis on Peabody Energy (BTU) continues to be that it's the best house on a pretty scary street - a street that increasingly looking like Elm Street for long-suffering investors. If there's good news in the company's second quarter results, it's that the Street seems to still be washing out expectations despite some signs of improvement in the U.S. coal business. While this remains an interesting asset-driven company for the long term, the coal sector has shown in spades that the answer to the question of how much worse things can get is "a lot worse".

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Peabody Energy Still In Limbo; How Low Can It Go?