Cloud Peak Announces a $91 Million Third-Quarter Profit

(Casper Star Tribune, October 30) – Cloud Peak Energy recorded net income of $91 million in the third quarter of 2014, the company announced Wednesday, capping off a successful three-month period that included the Gillette coal miner selling its share in the Decker Mine and increasing its export capacity.

Cloud Peak’s earnings report represented a welcome bit of news for an industry battered by an oversupplied market and weak prices. Peabody Energy and Arch Coal recently announced third-quarter losses of $150 million and $97 million, respectively.

Many coal companies had their balance sheets dragged down by high costs at Appalachian mines and a weak market for metallurgical coal, which is used to make steel.

Cloud Peak, by contrast, is solely based in the Powder River Basin, where the open-pit mines carry considerably lower operational costs, and mines thermal coal used for heating.

Tuesday’s results reversed Cloud Peak’s losses of $15.6 million and $2.1 million in the first and second quarters, respectively. The company’s net income through the first nine months of the year was $73.3 million, up from $38.1 million a year ago.

“In such a challenging environment, we are proud to be able to deliver these operational and financial results for the quarter,” Cloud Peak CEO Colin Marshall said in a statement.

A series of moves during the quarter accounted for Cloud Peak’s improved position. The company sold its 50-percent stake in Montana’s Decker Mine to Ambre Energy. Ambre assumed liability of $67 million in reclamation and lease bonds at Decker as part of the terms.

The company also made a final payment of $45 million to Rio Tinto under a tax receivable agreement. Cloud Peak, which spun off from Rio Tinto in 2009, owed $103 million under the agreement as of the end of June.

And in a third deal, Cloud Peak paid $37 million to gain more space at Westshore Terminals in British Columbia, boosting the company’s Asian export capacity. The deal is expected to increase Cloud Peak’s exports by 25 million tons through 2024.

Production at Cloud Peak’s mines lagged slightly behind last year’s levels. The company mined 62.6 million tons of coal through the first nine months of the year, compared with 63.4 million over the same period last year. Revenue also failed to keep pace with last year’s levels. Cloud Peak reported$828 million through the first nine months of 2014. In 2013, the company recorded $848 million in revenue over the same period.

Cloud Peak has committed to sell 70 million tons in 2015, 58 million of which will sell at the average fixed price of $13.10 In 2016, the company has committed to selling 46 million tons. The average price for 36 million tons in 2016 is $13.80.

Marshall said rail congestion remains an issue but noted rail traffic is expected to improve in 2015.

Original article here.