Contura Announces Results for the Period from July 26, 2016 to September 30, 2016(1)
BRISTOL, Tenn., Nov. 29, 2016 /PRNewswire/ -- Contura Energy, Inc., a leading U.S. coal supplier, today reported results for the period from July 26, 2016 to September 30, 2016.
Highlights for the reported period include:
- Net Loss of $51 million on revenue of $245 million
- Adjusted EBITDA $26 million
- Well-capitalized balance sheet, including unrestricted cash of $72 million
- Successfully completed the acquisition of high quality coal assets in Central Appalachia, Northern Appalachia and Powder River Basin
- Contura introduces 2017 guidance
| (millions, except per share) |
||
| July 26, 2016 to |
||
| Coal revenues |
$212.9 |
|
| Net loss |
($51.2) |
|
| Net loss per diluted share |
($4.96) |
|
| Adjusted EBITDA 2 |
$25.6 |
|
| Operating cash flow |
$33.7 |
|
| Capital expenditures |
$12.8 |
|
| Tons of coal sold |
9.7 |
|
| 1 |
The reported period as referred to in this document include results from July 26, 2016 through September 30, 2016. |
| 2 |
These are non-GAAP financial measures. A reconciliation of net loss to adjusted EBITDA is included in tables accompanying the financial schedules. |
"With our strong set of coal and logistics assets, well-established customer relationships, and experienced production and sales teams, we are excited to chart a new course for our recently formed company," said chief executive officer, Kevin Crutchfield. "We believe Contura is well-positioned to take advantage of tremendous opportunities in the current market environment, especially in metallurgical coal markets, through our organic production and our Trading and Logistics activities."
Financial Performance
- Coal revenues in the reported period from July 26, 2016 to September 30, 2016 were $212.9 million, with Central Appalachia (CAPP) accounting for $37.2 million and Trading and Logistics accounting for $53.4 million. On the thermal side, Northern Appalachia (NAPP) revenue totaled $42.3 million and Powder River Basin (PRB) generated $80.0 million in coal sales. Freight and handling revenues and other revenues were $29.9 million and $2.6 million, respectively, during the reported period.
During the reported period from July 26, 2016 to September 30, 2016, CAPP metallurgical coal shipments were 0.6 million tons at an average per ton realization of $67.82. Contura shipped 7.4 million tons of Powder River Basin (PRB) coal during the reported period at an average per-ton realization of $10.76, while NAPP shipments totaled 1.0 million tons at an average per-ton realization of $43.62. NAPP volumes were affected by the longwall disruption described below. The Trading and Logistics activities shipped 0.8 million tons of coal at an average price of $65.69 per ton.
- Total costs and expenses during the reported period from July 26, 2016 to September 30, 2016 were $265.8 million. Cost of coal sales was $179.4 million. The cost of coal sales in CAPP during the reported period averaged $60.12 per ton. NAPP cost averaged $41.47 due to an abnormal rock intrusion which reduced production volumes for a majority of September. The estimated cost impact from the rock intrusion for the reported period was approximately $10 per ton compared to expected year-to-date production cost. The longwall has progressed beyond this geologic anomaly and further related disruptions are not anticipated. NAPP production returned to normal levels after a longwall move was completed in mid-October. The cost of coal sales per ton for the PRB mines was $7.90 during the reported period, benefiting from a lower than normal overburden removal, which will likely revert to historical levels during the fourth quarter.
- Selling, general and administrative (SG&A) expense in the reported period was $9.5 million, including approximately $3.5 million of non-recurring expenses associated with the formation of the company. Depreciation, depletion and amortization was $22.2 million during the reported period and amortization of acquired intangibles were $23.6 million. Other expense includes a mark-to-market change in value of warrants totaling $21.9 million, a non-cash charge to earnings.
- Contura recorded a net loss of $51.2 million, or $4.96 per diluted share for the reported period from July 26, 2016 to September 30, 2016.
- Adjusted EBITDA was $25.6 million for the reported period, excluding the previously mentioned $21.9 million derivative charge related to warrants issued on July 26, 2016.
Additional Information
For additional financial information about Contura, including its condensed consolidated financial statements and report for the period from July 26, 2016 to September 30, 2016, please visit www.conturaenergy.com/financials.
Liquidity and Capital Resources
Cash provided by operating activities for the reported period from July 26, 2016 to September 30, 2016 was $33.7 million. Capital expenditures for the reported period were $12.8 million.
As of the end of the third quarter of 2016, Contura had $114.5 million in total liquidity, including $72.0 million in unrestricted cash. Total long-term debt, including the current portion of long-term debt as of September 30, 2016, was approximately $304.0 million.
Subsequent to September 30, Contura fully drew on its $42.5 million senior secured term loan facility. The term loan matures on July 26, 2020 and has an interest rate of LIBOR plus 500 basis points with a LIBOR floor of 100 basis points.
Acquisition of Core Coal Assets
On July 26, 2016 Contura acquired certain core coal assets from Alpha Natural Resources. The acquisition consisted of Alpha's operations and reserves in Northern Appalachia (including the Cumberland mine complex) and the Powder River Basin, along with three Central Appalachian mining complexes (the Nicholas mine complex in Nicholas County, West Virginia, and the McClure and Toms Creek mine complexes in Dickenson and Wise Counties, Virginia).
The acquisition also included a 41% stake in a strategic export terminal Dominion Terminal Associates in Eastern Virginia with total export capacity of more than 20 million tons.
Market Overview
The global coal supply/demand dynamic has been very positive over the past few months, with both the thermal and metallurgical markets experiencing marked price improvements.
Metallurgical Coal
Specifically, the Australian benchmark metallurgical coal price has increased from $92.50 in the third quarter of 2016 to $200 per metric ton in the fourth quarter. Even more dramatically, the spot market for Australian hard coking coal has more than tripled, from approximately $100 per metric ton as of August 1, 2016 to over $300 per metric ton currently. This explosive price move has translated into significant strength in the Atlantic Basin with High Volatile A metallurgical coal price currently quoted at $262 per metric ton, up from $102 at the beginning of August, 2016 according to Platts. We believe that a combination of reduced coal production as mandated by the Chinese government, undiminished Chinese steel production, and coal production challenges in Australia due to weather, geology and labor issues are the main drivers of the dramatic surge in metallurgical coal prices. These market trends did not have a significant impact on the reported results for the period from July 26, 2016 to September 30, 2016, however, we expect they will translate into meaningfully higher realizations for Contura's high quality metallurgical coal in the fourth quarter and into 2017.
According to the World Steel Association, the global demand for steel is expected to increase by 0.5% in 2017 after a forecasted 0.2% growth in 2016. More importantly for Contura, the demand in our key customer markets is forecast to grow at 2.9% in 2017 in North America with South and Central America expected to grow at a more robust 4.1%. Given the current trade environment in the US and Europe, we believe the steel trends will continue to favor the Atlantic Basin region, which would bode well for US based coal suppliers, such as Contura.
Thermal Coal
While the price move in the thermal segment has been less robust than in the metallurgical market, it has been a welcome sign after the very difficult price environment experienced over the past few years. The API 2 price has shown strong improvements since August 1, 2016 with a 43% increase from $61.75 to $88.20 per metric ton as of November 15.
On the domestic thermal front, NAPP prices have increased by approximately 35% from $35.10 since August 1, 2016 to $47.20 per ton as of November 15, while CAPP prices have strengthened from $42.75 to $62.50 or 46%. PRB has seen a more modest price move over the same period with current price indications in the $11.70 range for the 8800 BTU coal, up approximately 22%. We believe that the domestic thermal demand has stabilized over the past several months and anticipate that the policies of the incoming administration will be more supportive of a broad range of energy sources.
2017 Outlook
Contura anticipates its 2017 total shipments to be in the range of 43.1 to 50.5 million tons, including 3.5 to 4.3 million tons of captive CAPP coal, 7.6 to 8.2 million tons of Northern Appalachian coal, and 29 to 34 million tons of PRB coal. Included in the total shipments is the Trading and Logistics segment which is expected to generate between 3.0 million and 4.0 million tons of metallurgical coal shipments in 2017. The Trading and Logistics segment includes marketing arrangements with various coal producers and purchased coal activities.
As of November 22, 2016, 30% of the midpoint of anticipated 2017 CAPP coal shipments was committed and priced at an average expected per ton realization of $101.13. Based on the midpoint of guidance, 100% of anticipated 2017 NAPP steam coal shipments were committed and priced at an average expected per ton realization of $42.31, and 94% of the midpoint of anticipated 2017 PRB shipments was committed and priced at an average expected per ton realization of $11.05.
Contura's 2017 guidance for its CAPP cost of coal sales per ton ranges from $63.00 to $68.00, which is an increase as compared to year-to-date 2016 performance. This increase is explained in part by a variable component of cost, such as lease royalties, that is directly related to the sales price of coal. PRB cost of coal sales per ton is estimated at a range of $9.50 and $10.50, while NAPP is estimated in the range of $28.00 to $32.00 per ton. Additionally, costs related to the company's idle operations are expected to be between $12 and $15 million. Capital expenditures for 2017 are expected to be between $90 million and $110 million, including approximately $20 million of expansion and environmental capital expenditures. SG&A guidance is $32 million to $39 million, including any remaining costs related to the company's formation. Depreciation, depletion and amortization for 2017 is expected to be between $125 million and $150 million. We expect 2017 cash interest expense to be between $32 million and $35 million.
| Guidance |
||
| in millions of tons |
Low |
High |
| CAPP |
3.5 |
4.3 |
| NAPP |
7.6 |
8.2 |
| PRB |
29.0 |
34.0 |
| Total Production |
40.1 |
46.5 |
| Contura Trading & Logistics |
3.0 |
4.0 |
| Total Shipments |
43.1 |
50.5 |
| Committed/Priced1,2,3,4 |
Committed |
Average Price |
| CAPP(*) |
30% |
$101.13 |
| NAPP |
100% |
$42.31 |
| PRB |
94% |
$11.05 |
| Costs per ton |
Low |
High |
| CAPP |
$63.00 |
$68.00 |
| NAPP |
$28.00 |
$32.00 |
| PRB |
$9.50 |
$10.50 |
| Margin per ton |
Low |
High |
| Contura Trading & Logistics |
$9 |
$15 |
| In millions (except taxes) |
Low |
High |
| SG&A |
$32 |
$39 |
| Idle Operations Expense |
$12 |
$15 |
| Cash Interest Expense |
$32 |
$35 |
| DD&A |
$125 |
$150 |
| Capital Expenditures |
$90 |
$110 |
| Tax Rate |
20% |
30% |
* CAPP committed tons and price information represent captive Contura production and does not include Trading and Logistics.
| Notes: |
|
| 1. |
Based on committed and priced coal shipments as of November 22, 2016. |
| 2. |
Actual average per ton realizations on committed and priced tons recognized in future periods may vary based on actual freight expense in future periods relative to assumed freight expense embedded in projected average per ton realizations. |
| 3. |
Includes estimates of future coal shipments based upon contract terms and anticipated delivery schedules. Actual coal shipments may vary from these estimates. |
| 4. |
As of November 22, 2016, compared with the midpoint of shipment guidance range. |
ABOUT CONTURA ENERGY
Contura Energy is a private, Tennessee-based company with affiliate mining operations across multiple major coal basins in Pennsylvania, Virginia, West Virginia and Wyoming. With customers across the globe, high-quality reserves and significant port capacity, Contura Energy reliably supplies both metallurgical coal to produce steel and thermal coal to generate power. For more information, visit www.conturaenergy.com.
FORWARD-LOOKING STATEMENTS
This news release includes forward-looking statements. These forward-looking statements are based on Contura's expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Contura's control. You should also review the risks and uncertainties discussed in the Company's condensed consolidated financial statements and report for the period ended September 30, 2016.
Forward-looking statements in this news release or elsewhere speak only as of the date made. New uncertainties and risks arise from time to time, and it is impossible for Contura to predict these events or how they may affect the Company. Contura has no duty to, and does not intend to, update or revise the forward-looking statements in this news release or elsewhere after the date this release is issued. In light of these risks and uncertainties, investors should keep in mind that results, events or developments disclosed in any forward-looking statement made in this news release may not occur.
FINANCIAL TABLES FOLLOW
Use of Non-GAAP Measures
In addition to the results prepared in accordance with generally accepted accounting principles in the United States (GAAP) provided throughout this press release, Contura has presented the following non-GAAP financial measures, which management uses to gauge operating performance: Adjusted EBITDA, cost of coal sales per ton and coal margin per ton. These non-GAAP financial measures exclude various items detailed in the attached "Reconciliation of Net Income (Loss) to Adjusted EBITDA".
The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends. These measures are not intended to replace financial performance measures determined in accordance with GAAP. Rather, they are presented as supplemental measures of the Company's performance that management finds useful in assessing the company's financial performance and believes are useful to securities analysts, investors and others in assessing the Company's performance over time. Moreover, these measures are not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies.
| Contura Energy Income Statement |
|||
| Period from |
|||
| July 26, 2016 to |
|||
| (Amounts in thousands, except share and per share data) |
September 30, 2016 |
||
| Revenues: |
|||
| Coal revenues |
$ 212,911 |
||
| Freight and handling revenues |
29,903 |
||
| Other revenues |
2,599 |
||
| Total Revenue |
245,413 |
||
| Cost and expenses: |
|||
| Cost of coal sales (exclusive of items shown separately below) |
179,441 |
||
| Freight and handling costs |
29,903 |
||
| Other expenses |
1,092 |
||
| Depreciation, depletion and amortization |
22,230 |
||
| Amortization of acquired intangibles, net |
23,562 |
||
| Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) |
9,547 |
||
| Total costs and expenses |
265,775 |
||
| Loss from operations |
(20,362) |
||
| Other income (expense): |
|||
| Interest expense |
(9,090) |
||
| Interest income |
2 |
||
| Mark-to-market adjustment for warrant derivative liability |
(21,932) |
||
| Miscellaneous income, net |
207 |
||
| Total other income (expense), net |
(30,813) |
||
| Loss before income taxes |
(51,175) |
||
| Income tax expense |
(1) |
||
| Net loss |
$ (51,176) |
||
| Basic loss per common share |
$ (4.96) |
||
| Diluted loss per common share |
$ (4.96) |
||
| Weighted average shares - basic |
10,309,310 |
||
| Weighted average shares - diluted |
10,309,310 |
||
| Contura Energy Balance Sheet |
|||
| 2016 |
|||
| (Amounts in thousands) |
(Unaudited) |
||
| Assets |
|||
| Current assets: |
|||
| Cash and cash equivalents |
$ 72,047 |
||
| Trade accounts receivable, net |
102,642 |
||
| Inventories, net |
49,720 |
||
| Other current assets |
24,526 |
||
| Total current assets |
248,935 |
||
| Property, plant, and equipment, net |
354,919 |
||
| Other non-current assets |
223,829 |
||
| Total assets |
$ 827,683 |
||
| Liabilities and Stockholders' Equity |
|||
| Current liabilities: |
|||
| Trade accounts payable |
$ 60,924 |
||
| Current portion of long-term debt |
1,356 |
||
| Other current liabilities |
130,102 |
||
| Total current liabilities |
192,382 |
||
| Long-term debt |
302,631 |
||
| Asset retirement obligations |
201,622 |
||
| Other non-current liabilities |
135,639 |
||
| Total liabilities |
832,274 |
||
| Stockholders' Equity |
|||
| Total stockholders' equity |
(4,591) |
||
| Total liabilities and stockholders' equity |
$ 827,683 |
||
| Contura Energy Cash Flow Statement |
|||
| Period from |
|||
| July 26, 2016 to |
|||
| (Amounts in thousands) |
September 30, 2016 |
||
| Operating activities: |
|||
| Net loss |
$ (51,176) |
||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
|||
| Depreciation, depletion and amortization |
22,230 |
||
| Amortization of acquired intangibles, net |
23,562 |
||
| Accretion of acquisition-related obligations discounts |
2,633 |
||
| Mark-to-market adjustment for warrants derivative liability |
21,932 |
||
| Accretion of asset retirement obligations |
4,569 |
||
| Stock-based compensation |
1,941 |
||
| Other, net |
1,567 |
||
| Changes in operating assets and liabilities |
6,412 |
||
| Net cash provided by operating activities |
33,670 |
||
| Investing activities: |
|||
| Capital expenditures |
(12,826) |
||
| Proceeds from sale of property, plant and equipment |
453 |
||
| Net cash used in investing activities |
(12,373) |
||
| Financing activities: |
|||
| Principal repayments of capital lease obligations |
(83) |
||
| Principal repayments of notes payable |
(167) |
||
| Net cash used in financing activities |
(250) |
||
| Net increase in cash and cash equivalents |
21,047 |
||
| Cash and cash equivalents at beginning of period |
51,000 |
||
| Cash and cash equivalents at end of period |
$ 72,047 |
||
| Supplemental disclosure of non-cash investing and financing activities: |
|||
| Accrued capital expenditures |
$ (6,976) |
||
| Issuance of equity in connection with acquisition |
$ 44,644 |
||
| Contura Energy Adjusted EBITDA Reconciliation Table |
||||||||||||
| Segment Information |
||||||||||||
| Period from July 26, 2016 to September 30, 2016 |
||||||||||||
| (Amounts in thousands) |
CAPP |
NAPP |
PRB |
Trading |
All |
Consolidated |
||||||
| Total revenues |
$ 38,069 |
$ 42,808 |
$ 80,942 |
$ 83,490 |
$ 104 |
$ 245,413 |
||||||
| Depreciation, depletion and amortization |
$ 3,540 |
$ 2,537 |
$ 16,015 |
$ - |
$ 138 |
$ 22,230 |
||||||
| Amortization of acquired intangibles, net |
$ - |
$ - |
$ - |
$ 23,562 |
$ - |
$ 23,562 |
||||||
| Adjusted EBITDA |
$ 5,154 |
$ 2,663 |
$ 21,201 |
$ 5,800 |
$ (9,181) |
$ 25,637 |
||||||
| Capital expenditures |
$ 1,001 |
$ 7,485 |
$ 3,793 |
$ - |
$ 547 |
$ 12,826 |
||||||
| Reconciliation of Non-GAAP measures |
||||||||||||
| Period from July 26, 2016 to September 30, 2016 |
||||||||||||
| (Amounts in thousands) |
CAPP |
NAPP |
PRB |
Trading |
All |
Consolidated |
||||||
| Adjusted EBITDA |
$ 5,154 |
$ 2,663 |
$ 21,201 |
$ 5,800 |
$ (9,181) |
$ 25,637 |
||||||
| Interest expense |
(35) |
(68) |
(112) |
- |
(8,875) |
(9,090) |
||||||
| Interest income |
- |
- |
- |
- |
2 |
2 |
||||||
| Income tax benefit (expense) |
- |
- |
- |
- |
(1) |
(1) |
||||||
| Depreciation, depletion and amortization |
(3,540) |
(2,537) |
(16,015) |
- |
(138) |
(22,230) |
||||||
| Change in fair value of warrants |
- |
- |
- |
- |
(21,932) |
(21,932) |
||||||
| Amortization of acquired intangibles, net |
- |
- |
- |
(23,562) |
- |
(23,562) |
||||||
| Net income (loss) |
$ 1,579 |
$ 58 |
$ 5,074 |
$ (17,762) |
$ (40,125) |
$ (51,176) |
||||||
| Contura Energy Results of Operations |
||
| Period from July 26, 2016 |
||
| to September 30, 2016 |
||
| (In thousands, except for per ton data) |
||
| Total |
% of Total |
|
| Revenues: |
||
| Coal revenues: |
||
| Steam |
$ 119,173 |
49% |
| Metallurgical |
93,738 |
38% |
| Freight and handling revenues |
29,903 |
12% |
| Other revenues |
2,599 |
1% |
| Total revenues |
$ 245,413 |
|
| Tons sold: |
||
| Steam |
8,332 |
85% |
| Metallurgical |
1,431 |
15% |
| Total |
9,763 |
|
| Coal sales realization per ton(1): |
||
| Steam |
$ 14.30 |
|
| Metallurgical |
$ 65.51 |
|
| Average |
$ 21.81 |
|
| (1) Calculated as coal revenues divided by tons sold. |
||
| Contura Energy Results of Operations (cont'd) |
|
| Period from July 26, 2016 |
|
| to September 30, 2016 |
|
| (In thousands, except for per ton data) |
|
| Coal Revenues(1) |
|
| CAPP Operations |
$ 37,235 |
| NAPP Operations |
$ 42,308 |
| PRB Operations |
$ 79,960 |
| Trading and Logistics Operations |
$ 53,408 |
| Tons Sold(1) |
|
| CAPP Operations |
549 |
| NAPP Operations |
970 |
| PRB Operations |
7,431 |
| Trading and Logistics Operations |
813 |
| Coal sales realization per ton(1)(2): |
|
| CAPP Operations |
$ 67.82 |
| NAPP Operations |
$ 43.62 |
| PRB Operations |
$ 10.76 |
| Trading and Logistics Operations |
$ 65.69 |
| Average |
$ 21.81 |
| (1) Our All Other Category, which has no coal sales or coal production, is not presented. |
|
| (2) Calculated as coal revenues divided by tons sold. |
|
| Contura Energy Results of Operations (cont'd) |
|
| Period from July 26, 2016 |
|
| to September 30, 2016 |
|
| (In thousands, except for per ton data) |
|
| Cost of coal sales (exclusive of items shown |
$ 179,441 |
| Freight and handling costs |
29,903 |
| Other expenses |
1,092 |
| Depreciation, depletion and amortization |
22,230 |
| Amortization of acquired intangibles, net |
23,562 |
| Selling, general and administrative expenses |
9,547 |
| Total costs and expenses |
$ 265,775 |
| Cost of coal sales(1): |
|
| CAPP Operations |
$ 33,006 |
| NAPP Operations |
$ 40,223 |
| PRB Operations |
$ 58,672 |
| Trading and Logistics Operations |
$ 47,787 |
| Tons Sold(1): |
|
| CAPP Operations |
549 |
| NAPP Operations |
970 |
| PRB Operations |
7,431 |
| Trading and Logistics Operations |
813 |
| Cost of coal sales per ton(1)(2): |
|
| CAPP Operations |
$ 60.12 |
| NAPP Operations |
$ 41.47 |
| PRB Operations |
$ 7.90 |
| Trading and Logistics Operations |
$ 58.78 |
| (1) Our All Other Category, which has no coal sales or coal production, is not presented. |
|
| (2) Calculated as cost of coal sales divided by tons sold. |
|
SOURCE Contura Energy, Inc.
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