Peabody Energy Reports $787M Loss in 2014; Powder River Coal Remains Strong

(Casper Star Tribune, January 27) – A record year at the North Antelope Rochelle coal mine was not enough to propel Peabody Energy into the black in 2014, as the world’s largest private coal company reported a $787 million loss for the year.

Those results underscored the dynamic facing coal companies mining in Wyoming. Operations in the Cowboy State remain robust, but falling profits elsewhere mean coal companies are awash in red ink.

“2014 was a turbulent year for the coal markets, as slowing near-term demand growth and strong seaborne supplies resulted in continued coal price declines,” said Glenn Kellow, who will become Peabody CEO in May.

Coal companies have struggled recently, as cheap natural gas has eroded their market share. At the same time, the industry is facing a glut of coal. High prices in previous years prompted companies to boost production and bring new mines online. Increased output coincided with a slowdown in the Chinese economy, helping to drive prices lower.

Peabody’s Western mines were a notable bright spot. North Antelope Rochelle, in the Powder River Basin, mined nearly 118 million tons of coal in 2014, setting an annual production record.  That increase came despite delays in rail shipments, which hindered deliveries from mines throughout the basin.

Production across Peabody’s western mines increased to 166 million tons on the year, compared with 158 million the year before, while profits on Western coal increased from $4.39 a ton in 2013 to $4.63 per ton in 2014.

Yet those increases were not enough to offset losses elsewhere. Peabody’s margins on Australian coal fell from $9.08 per ton in 2013 to $1.94 per ton in 2014. Midwestern mines reported profits of $12.07 per ton in 2014, down from $16.27 per ton the year before.

Peabody’s revenues suffered accordingly. The $6.8 billion in revenue reported in 2014 was down from $7 billion the year before.  Overall, the company reported losing $777.3 million in 2014. The year before, Peabody posted a loss of $512 million.

“Peabody continues to drive improvements in safety, costs and productivity as we respond to challenging market conditions with additional cost reduction programs, capital efficiency initiatives and non-core asset sales,” said Peabody CEO Gregory H. Boyce said in a statement. “While we expect coal fundamentals to improve over time, we are implementing further steps in our comprehensive plan to improve competitiveness and maintain adequate liquidity.”

U.S. coal demand is projected to decline 50 million tons to 60 million tons nationwide in 2015, but consumption of Powder River Basin coal is expected to increase between 10 million tons and 20 million tons, the company said.

Demand for Powder River Basin and Illinois Basin coal is projected to increase 50 million tons to 70 million tons by 2017.

Original article here.