Alpha execs optimistic for 2014 despite lean 2013 - Beckley, Bluefield & Lewisburg News, Weather, Sports

Alpha execs optimistic for 2014 despite lean 2013

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Alpha Natural Resources recorded a net loss for 2013, but the company's executives say they expect better markets this year.

In last week's quarterly conference call with analysts, Alpha President Paul Vining described 2013 as "a challenging year" for one of the nation's largest coal producers, but he gave four reasons for optimism:

 

  • Alpha accessed receptive capital and bank markets to extend the maturity of its debt obligations.
  • The company monetized some of its acreage in the Marcellus Shale region.
  • Alpha reduced its operating and overhead cost structure, which could save the company $200 million this year.
  • Alpha met its safety improvement goals, which resulted in a record low rate of reported injuries.

 

Earnings

On Feb. 12, Alpha reported a net loss of $358.8 million in the fourth quarter of 2013 and a net loss of $1.1 billion for the full year. Those compare with net losses of $127.6 million in the fourth quarter of 2012 and $2.4 billion for the full year.

Alpha shipped 86.9 million tons of coal in 2013, compared with 108.8 million tons in 2012. Metallurgical coal shipments were 20.1 million tons, down from 20.3 million. Shipments of Powder River Basin coal and Eastern steam coal were 38.2 million tons and 28.6 million tons, respectively, compared with 46.7 million tons and 41.8 million tons in 2012.

Steam coal production was reduced to match production with demand, Alpha said in its earnings release.

Met Coal

Kevin Crutchfield, Alpha's chairman and CEO, described several events changing the market for metallurgical coal, particularly on world markets. The Australian dollar is weak, Australian mines have increased production and Chinese inventories are well-stocked, he said. Those have caused weakness in the market, he said.

On the demand side, global demand for steel is forecast to be 3.3 percent greater this year. In Europe, the demand for steel should grow 2.1 percent as opposed an estimated 3.8 percent decline last year, he said. Also, markets in Central and South America should improve, he said.

"While near-term pricing is clearly depressed, we've seen improved supply-demand balance on the mid-term horizon, as demand growth has expected to continue while supply growth should be much smaller in 2014, compared to 2013 and essentially flat after 2014," Crutchfield said. 

Thermal Coal

"The persistent cold spells we've experienced over the last several weeks have resulted in increased demands and interest in coal-fired electrical generation," Crutchfield said.

Coal stockpiles Dec. 31 were down 38 million tons from the previous year, he said. The year-end inventory stood at 64 days of burn compared to 84 days in December 2012, he said.

Stockpiles at power plants supplied by the Powder River Basin and Northern Appalachia are below their historical five-year averages. Stockpiles at plants supplied by Central Appalachian mines improved to 118 days from 155 days at the end of 2012, which is still higher than their historical average burn rate, he said.

Along with that, the price of natural gas stood at more than $5 per million BTUs compared with just over $3 in early 2013, he said.

"These dynamics have resulted in near-term price firmness in most regions, especially in Central App, where thermal prices as measured by NYMEX have risen approximately 10 percent from late November to late January," Crutchfield said.

Safety

Vining said Alpha achieved its safety goals despite moving people around from mine to mine, which normally hurts mine safety efforts.

"We had several thousand people that we sent home and probably equally as many that moved around the different seats or different mines and different parts of the organization," Vining said. "There was a lot of fluid movement. Whenever you have that, it's even a bigger challenge to keep people focused on their jobs and operating safely and productively.

"I haven't ever seen a particularly low-cost, productive profitable mine with a terrible safety rate. They go hand in hand, and it reflects typically the training of the workforce, the attention to detail and ultimately the attitude and the drive of the workforce that all come together to produce positive results on safety as well as productivity and cost."