In a brutal market for coal producers, Alpha Natural Resources (NYSE:ANR)
management has done a commendable job of cutting costs and enhancing
liquidity. Unfortunately, the $170 to $180 per tonne in met coal pricing
that the company needs for positive free cash flow seems a long way
off. Companies like Anglo American (OTCPK:AAUKY)
have in the past struck lucky when key producing areas have been hit by
significant disruptions and the significant short interest here is a
bit like a coiled spring for any good news. That said, a 10x multiple to
2016 EBITDA discounted back doesn't offer huge upside and this is only a
stock for those who can handle above-average risks and a long wait.
Read more here:
Alpha Natural Resources Can Most Likely Survive, But Can It Thrive?
Showing posts with label Walter Energy. Show all posts
Showing posts with label Walter Energy. Show all posts
Tuesday, July 22, 2014
Wednesday, November 27, 2013
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.
Read the full article at The Motley Fool:
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.
Read the full article at The Motley Fool:
Cutting Costs Won't Solve All of Alpha Natural Resources' Problems
Friday, June 14, 2013
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.
Please follow this link to continue:
http://www.investopedia.com/stock-analysis/061413/peabody-energy-carries-higher-expectations-solid-value-btu-aci-cld-wlt.aspx
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.
Please follow this link to continue:
http://www.investopedia.com/stock-analysis/061413/peabody-energy-carries-higher-expectations-solid-value-btu-aci-cld-wlt.aspx
Thursday, May 10, 2012
Seeking Alpha: Patriot Coal: Different Coal Company, Same Coal Situation
How bad is the coal market? Some electrical utilities are paying coal
companies *not* to ship them any more coal (negotiated deferrals).
Couple that with rapidly escalating costs and heavy regulatory burdens
on underground mining and a wobbly market for coking (metallurgical)
coal, and Patriot Coal (PCX) is in the same leaky boat as Peabody (BTU), Arch Coal (ACI), and Walter (WLT).
There's definitely value at Patriot coal - at current production levels, Patriot's reserves will outlive most of us. The relevant questions for the stock, though, revolve around whether the market can recover fast enough to forebear a difficult liquidity situation and whether the U.S. government will let miners like Patriot stay in business.
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Patriot Coal: Different Coal Company, Same Coal Situation
There's definitely value at Patriot coal - at current production levels, Patriot's reserves will outlive most of us. The relevant questions for the stock, though, revolve around whether the market can recover fast enough to forebear a difficult liquidity situation and whether the U.S. government will let miners like Patriot stay in business.
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Patriot Coal: Different Coal Company, Same Coal Situation
Thursday, January 26, 2012
Investopedia: Coal's Weak, So Buy Peabody
Yes, that title seems counter-intuitive. Why buy a major U.S.-based producer of coal at a time when thermal coal prices are weak and the outlook for metallurgical coal is uncertain? Well, the reality is that it's only when coal markets look terrible, that Peabody Energy (NYSE:BTU) ever looks relatively cheap. While this leading energy company has more work to do in Australia than expected, today's prices represent a relatively good long-term entry point for patient and risk-tolerant investors.
Blame it on the Wombats
Peabody's fourth quarter was not especially strong, and it's mostly the fault of the acquired operations of Ma carthur Coal in Australia. Honestly, few analysts or institutional investors really care about the revenue of a coal company like Peabody, but it was up 26% from last year, with an 8% increase in tons sold and better than 11% growth from the U.S.
Read more here:
http://stocks.investopedia.
Tuesday, October 11, 2011
Investopedia: What's Ailing Coal Stocks?
Coal has gotten very cold very quickly. One of the hottest commodities only a year ago, it feels as though the bottom has fallen out of many of these stocks. If coal follows the common commodity pattern, the overshoot at the top of the market will be coupled by a dive and investors will have the opportunity to pick up some real bargains. Investors thinking that today is the day to buy, should remember that another global recession presents a major downside, even from today's prices, but there are many stocks approaching interesting price levels.
What's Gone Wrong?
A lot of the melt-up in coal was fueled by the economic recovery, as better business conditions promised better demand, both for thermal coal, used to produce electricity, and metallurgical, or met coal, used to produce steel. Since the spring of this year, though, investors have begun to not only accept the end of the recovery, but fear a potential slip back into recession. That has led to a great deal more caution at steel companies and lower orders at utilities. (For related reading, see Industries That Thrive On Recession.)
Read more below:
http://stocks.investopedia.
What's Gone Wrong?
A lot of the melt-up in coal was fueled by the economic recovery, as better business conditions promised better demand, both for thermal coal, used to produce electricity, and metallurgical, or met coal, used to produce steel. Since the spring of this year, though, investors have begun to not only accept the end of the recovery, but fear a potential slip back into recession. That has led to a great deal more caution at steel companies and lower orders at utilities. (For related reading, see Industries That Thrive On Recession.)
Read more below:
http://stocks.investopedia.
Friday, August 5, 2011
Investopedia: Penn Virginia Still A Solid Resource Income Play
Coal has stayed in the news throughout 2011, as companies like Peabody Energy (NYSE:BTU), Alpha Natural Resources (NYSE:ANR) and Walter Energy (NYSE:WLT) have all been active in trying to build their thermal coal positions. Powder River Basin coal, too, has been a hot topic as more and more utilities switch to this plentiful and (arguably) less environmentally damaging coal reserve.
And Penn Virginia Resource Partners (NYSE:PVR) is involved in exactly none of that. Still, the fact remains that leasing thermal coal reserves and operating midstream gas assets is a cash-generating proposition, and Penn Virginia offers investors a tax-advantaged income stream tied directly to natural resources without much of the volatility seen in the sector.
Read the full article at Investopedia:
http://stocks.investopedia.
Wednesday, July 13, 2011
Investopedia: Peabody Tries Again To Get Macarthur Coal
Give credit where credit is due - Peabody Energy (NYSE:BTU) does not give up easily when management sees a valuable asset that could improve its business. In this case, the company is trying again to acquire Australian metallurgical coal miner Macarthur Coal (OTCBB:MACDY). While the price that Peabody is offering is a little high, it is not too out of line with recent deals, and the operating leverage that Peabody has should allow the company to make a decent return even at these levels.
A New Bid for an Old Target
Peabody has been interested in Macarthur Coal and its 175 million tons of attributable coal reserves for some time now. About a year ago, Peabody bid A$15 a share for the company, but ultimately found rejection from the target's board (and its large shareholders).
Now Peabody is trying again, but this time it's bringing a buddy. ArcelorMittal (NYSE:MT) already owns about 16% of Macarthur and was previously not in favor of selling out to Peabody. Now Peabody wants the company to be a partner, and the companies have launched a joint 60/40 bid for the company with Peabody as the projected controlling partner.
The link below leads to the full piece:
http://stocks.investopedia.
A New Bid for an Old Target
Peabody has been interested in Macarthur Coal and its 175 million tons of attributable coal reserves for some time now. About a year ago, Peabody bid A$15 a share for the company, but ultimately found rejection from the target's board (and its large shareholders).
Now Peabody is trying again, but this time it's bringing a buddy. ArcelorMittal (NYSE:MT) already owns about 16% of Macarthur and was previously not in favor of selling out to Peabody. Now Peabody wants the company to be a partner, and the companies have launched a joint 60/40 bid for the company with Peabody as the projected controlling partner.
The link below leads to the full piece:
http://stocks.investopedia.
Thursday, March 10, 2011
Investopedia: Can James River Thrive On Luck And Timing?
Sometimes it is better to be lucky than good. It was not all that long ago that James River (Nasdaq:JRCC) was in serious trouble, but the company leveraged a boom in coal prices by locking up a lot of its forward production at attractive prices and a boom in coal stock prices by issuing equity and cleaning up its balance sheet. With contracts rolling off and James River still operating with a relatively unattractive cost structure, will the company be able to leverage its assets with similar dexterity?
The Quarter That Was
James River reported a so-so end to its 2010 year. Coal revenue did rise nearly 9%, but overall revenue was still a bit shy of analyst expectations. Realized prices looked alright (up more than 12%), but shipments were a little sluggish as the company shipped about 4% less coal this quarter (despite producing almost 3% more).
The company's profitability is likewise still a bit of a muddle. COGS per ton jumped 9%, though, while adjusted EBITDA per ton increased 30%. On a per-share basis it looks like James River missed the average analyst target this quarter once a sizable tax benefit is excluded from the results.
Please click here for the full piece:
http://stocks.investopedia.
The Quarter That Was
James River reported a so-so end to its 2010 year. Coal revenue did rise nearly 9%, but overall revenue was still a bit shy of analyst expectations. Realized prices looked alright (up more than 12%), but shipments were a little sluggish as the company shipped about 4% less coal this quarter (despite producing almost 3% more).
The company's profitability is likewise still a bit of a muddle. COGS per ton jumped 9%, though, while adjusted EBITDA per ton increased 30%. On a per-share basis it looks like James River missed the average analyst target this quarter once a sizable tax benefit is excluded from the results.
Please click here for the full piece:
http://stocks.investopedia.
Tuesday, February 1, 2011
Alpha Looks To Be The Big Dog In U.S. Met Coal
This weekend's announcement from Alpha Natural Resources (NYSE:ANR) that it reached an agreement to acquire Massey Energy (NYSE:MEE) not only ends months of speculation about Massey's future, but it also represents yet another tremor through the metallurgical coal world. With steel prices already on the rise, met coal trading at about twice the price of steam coal and relatively modest near-term supply coming online, it seems a safe bet that met coal pricing is going to be a popular topic this year.
Alpha's Deal
Alpha agreed to pay over $7 billion in cash and stock to acquire Massey. The deal is being structured as a mix of equity and cash, with Massey shareholders getting 1.025 shares of Alpha (and thereby owning about 46% of the combined company) and $10 in cash. That is not only a 21% premium to where Massey closed on Friday (and the stock has been strong since the summer of 2010), but a rather high multiple relative to normal historical coal stock metrics. (For more, see Coal Burns Bright Despite Pressures.)
Alpha may have felt that it needed to make an impressive bid for Massey in order to fend off potential rivals. Though unattributed rumors are hardly proof, it does not seem unreasonable that companies like Arch Coal (NYSE:ACI) or ArcelorMittal (NYSE:MT) may have been interested in Massey as well.
What Alpha Will Be
With this deal, Alpha acquires 2.9 billion tons in coal reserves, with 1.3 billion of those being the more valuable metallurgical coal. All told, the combined company will have more than 5 billion tons in coal reserves and will become a real player in the global met coal market. Though BHP Billiton (NYSE:BHP), Mitsubishi and Teck Resources (NYSE:TCK) will still have roughly 40% of the world met coal market, the new Alpha will crack into the double-digits in terms of share of the global seabourne market.
Please click below for the full piece:
http://stocks.investopedia.
Alpha's Deal
Alpha agreed to pay over $7 billion in cash and stock to acquire Massey. The deal is being structured as a mix of equity and cash, with Massey shareholders getting 1.025 shares of Alpha (and thereby owning about 46% of the combined company) and $10 in cash. That is not only a 21% premium to where Massey closed on Friday (and the stock has been strong since the summer of 2010), but a rather high multiple relative to normal historical coal stock metrics. (For more, see Coal Burns Bright Despite Pressures.)
Alpha may have felt that it needed to make an impressive bid for Massey in order to fend off potential rivals. Though unattributed rumors are hardly proof, it does not seem unreasonable that companies like Arch Coal (NYSE:ACI) or ArcelorMittal (NYSE:MT) may have been interested in Massey as well.
What Alpha Will Be
With this deal, Alpha acquires 2.9 billion tons in coal reserves, with 1.3 billion of those being the more valuable metallurgical coal. All told, the combined company will have more than 5 billion tons in coal reserves and will become a real player in the global met coal market. Though BHP Billiton (NYSE:BHP), Mitsubishi and Teck Resources (NYSE:TCK) will still have roughly 40% of the world met coal market, the new Alpha will crack into the double-digits in terms of share of the global seabourne market.
Please click below for the full piece:
http://stocks.investopedia.
Friday, January 7, 2011
Investopedia: Will Aussie Flooding Rain On China's Parade?
Australia's summer has brought more than its usual wet season to parts of the country. This year the large northeastern state of Queensland has seen devastating flooding; the sort of flooding that leads to world news clips of people paddling boats through streets and animals seeking refuge wherever they can from the waters. Though the human toll of the disaster is likely to be severe for Australians, there are economic impacts that will stretch beyond the country and be felt throughout 2011.
Trouble In Coal
Australia is a major producer of metallurgical coal, and mines in Queensland produce about half of the country's supply of this critical steel component. In particular, China is critically dependent upon Australia's met coal mines to feed its ever-hungry steel sector. With about 90 million tonnes of met coal already subject to force majeure, it would seem that steel customers in Asia are going to have to scramble (and pay up) to find the coal to fuel their blast furnaces.
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Wesfarmers and Xstrata all have major met coal operations in Australia. Even for those companies and mines that are relatively less affected, there is the issue of the ports and rails - flooding has damaged infrastructure and delayed ship loadings, and it will take some time to work through the backlog. While companies like Xstrata do have other producing areas (South Africa for Xstrata, for instance), there is only so much coal to go around. Likewise, for companies like Peabody (NYSE:BTU), which does have some operations in New South Wales (in addition to Queensland), there is only so much they can do to increase mine production in the short term.
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I realize this isn't really "news" anymore ... unfortunately, it got held up in queue.
Trouble In Coal
Australia is a major producer of metallurgical coal, and mines in Queensland produce about half of the country's supply of this critical steel component. In particular, China is critically dependent upon Australia's met coal mines to feed its ever-hungry steel sector. With about 90 million tonnes of met coal already subject to force majeure, it would seem that steel customers in Asia are going to have to scramble (and pay up) to find the coal to fuel their blast furnaces.
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Wesfarmers and Xstrata all have major met coal operations in Australia. Even for those companies and mines that are relatively less affected, there is the issue of the ports and rails - flooding has damaged infrastructure and delayed ship loadings, and it will take some time to work through the backlog. While companies like Xstrata do have other producing areas (South Africa for Xstrata, for instance), there is only so much coal to go around. Likewise, for companies like Peabody (NYSE:BTU), which does have some operations in New South Wales (in addition to Queensland), there is only so much they can do to increase mine production in the short term.
Please follow the link below:
http://stocks.investopedia.
I realize this isn't really "news" anymore ... unfortunately, it got held up in queue.
Tuesday, December 7, 2010
More M&A In Met Mining?
Global growth is back; and so, too, is demand for commodities. With that in mind, many major resource companies are looking to position themselves for the next wave with a variety of project investments and corporate M&A activity. Following relatively closely on the heels of the deal between Walter Energy (NYSE:WLT) and Western Coal, Rio Tinto (NYSE:RIO) is trying to buy more metallurgical coal assets of its own by making a bid for Australia's Riversdale Mining.
The Deal, As It Might Be
At this point, there is no "done deal" between the two companies, but Riversdale has acknowledged that Rio Tinto has made a bid for the company worth about $3.5 billion. While the Rio Tinto bid was reportedly at A$15 per share (a modest premium for a stock that has risen more than 50% since September), Riversdale shares were recently trading for more than A$16 - suggesting that investors expect (if not demand) a better bid or competing offers. (For more, see The Wacky Worlds Of Mergers And Acquisitions.)
Please follow this link for the complete article:
http://stocks.investopedia.
The Deal, As It Might Be
At this point, there is no "done deal" between the two companies, but Riversdale has acknowledged that Rio Tinto has made a bid for the company worth about $3.5 billion. While the Rio Tinto bid was reportedly at A$15 per share (a modest premium for a stock that has risen more than 50% since September), Riversdale shares were recently trading for more than A$16 - suggesting that investors expect (if not demand) a better bid or competing offers. (For more, see The Wacky Worlds Of Mergers And Acquisitions.)
Please follow this link for the complete article:
http://stocks.investopedia.
Sunday, December 5, 2010
Met-Coal Mash Up
Given all the rumors and discussions about the bid, the actual announcement that Walter Energy (NYSE:WLT) is buying Canada's Western Coal for C$11.50 a share is perhaps something of an anticlimax. That notwithstanding, this deal will create the largest metallurgical coal pure-play and the third-largest met coal producer overall.
The Deal
Under the terms of the deal announced Friday, Walter will offer Western Coal shareholders their choice of C$11.50 in cash or 0.114 shares of Walter Energy, or a combination thereof up to a limit of 70% total cash in the deal. That represents a total deal value of about $3.3 billion and a 56% premium on Western Coal shares before this chatter began.
The New Company
As Walter Energy boasted in its press release on the deal, this combination will create the largest pure-play met coal producer in the world, with some 385 million tons of reserves. Met coal is used primarily in smelting iron and steelmaking, where the higher carbon content (and lower moisture) of this type of coal is necessary. That is different than thermal coal - the coal used to power electrical utilities, and the bulk of the coal produced and sold by companies like Peabody Energy (NYSE:BTU) and Arch Coal (NYSE:ACI). (For more, see Metallurgical Coal Update.)
Please click the link for the full article:
http://stocks.investopedia.
The Deal
Under the terms of the deal announced Friday, Walter will offer Western Coal shareholders their choice of C$11.50 in cash or 0.114 shares of Walter Energy, or a combination thereof up to a limit of 70% total cash in the deal. That represents a total deal value of about $3.3 billion and a 56% premium on Western Coal shares before this chatter began.
The New Company
As Walter Energy boasted in its press release on the deal, this combination will create the largest pure-play met coal producer in the world, with some 385 million tons of reserves. Met coal is used primarily in smelting iron and steelmaking, where the higher carbon content (and lower moisture) of this type of coal is necessary. That is different than thermal coal - the coal used to power electrical utilities, and the bulk of the coal produced and sold by companies like Peabody Energy (NYSE:BTU) and Arch Coal (NYSE:ACI). (For more, see Metallurgical Coal Update.)
Please click the link for the full article:
http://stocks.investopedia.
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