(SNL, October 24) – As Peabody Energy Corp. continues to work its way through a bankruptcy reorganization, the company appears to be ramping up production.
An S&P Global Market Intelligence analysis of U.S. Mine Safety and Health Administration data showed Peabody’s U.S. coal mines that have reported third-quarter production have ramped up volumes by more than 32% quarter to quarter. The company’s mines produced about 41.9 million tons in the third quarter, approaching the 45.9 million tons produced in the year-ago period ahead of steep production cuts across the industry.
Historical totals in the analysis include only production from active mines producing more than zero tons of coal in the recent quarter.
At the beginning of the year, before petitioning the bankruptcy court, Peabody projected sales guidance of 150 million tons to 160 million tons of coal. However, when the company drafted a presentation discussing the company’s debtor-in-possession, or DIP, financing, it showed the company’s key assumptions for its DIP budget relied on production of just about 132.6 million tons.
After the first half of the year, Peabody’s production, according to an S&P Global Market Intelligence analysis, was roughly in line with its lower production projections. However, the significant boost in third-quarter production means Peabody has produced 107.5 million tons in the first three quarters of the year. Annualizing those three quarters puts Peabody’s production at 143.3 million tons, well over the DIP assumption. If fourth-quarter production totals the same elevated production rate of the third quarter, Peabody would produce about 149.4 million tons, closer to its pre-bankruptcy sales guidance.
Suggesting that Peabody has found ways to improve productivity, the company managed to boost its production by almost one-third quarter to quarter with just 17 additional mine employees over the 4,250 employees in the third quarter. The employment data comes from self-reported average employment over the entire quarter and may not reflect the exact number of miners at any given date.
The increase in production appears to follow a broader sector trend. Across the U.S., production was up about 18.0%, according to early reported production data , as news of pricing improvement in domestic and export coal markets has increased. Peabody was party to a deal with Nippon Steel & Sumitomo Metal Corp. that sharply raised the premium coking coal benchmark out of a multiyear slump.
Peabody’s North Antelope Rochelle Mine, accountable for more than half of Peabody’s U.S. coal footprint, led the increase with a 33.4% boost in production. The Wyoming mine is the largest surface mine in the country by coal tonnage.
Peabody also significantly increased production at its Caballo and Rawhide mines in Wyoming.
A bankruptcy judge recently approved an extension of Peabody’s bankruptcy reorganization to Dec. 14. A spokeswoman for Peabody declined to comment ahead of a securities filing that she said was expected to be filed in November.
In a recent securities filing, Peabody said it was “uncertain” whether any proposed plan of reorganization would allow for distributions from Peabody’s equity or other securities. The company said it “urges caution with respect to existing and future investments in its equity or other securities.”
“It is likely that Peabody Energy equity securities will be canceled and extinguished upon confirmation of a proposed plan of reorganization by the bankruptcy court, and that the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests,” the filing states. “In the event of cancellation of Peabody Energy equity or other securities, amounts invested by the holders of such securities would not be recoverable and such securities would have no value.”
According to its monthly operating report, Peabody generated about $254.7 million in sales in September. The company reported a net loss attributable to shareholders of $66.0 million for September.