(Wyoming Business Report, July 29) – After a snail’s pace start to the year, the recent heat dome that brought record high temperatures to many parts of the U.S. may help to bring some relief to at least one Wyoming coal producer. At least that’s what a lot of Wall Street investors have been thinking today.
Propelled by news that first-half earnings had well exceeded analyst’s expectations, Cloud Peak Energy’s stock was active and moving upward in trading on the New York Stock Exchange Friday, with close to 7.5 million shares traded and the price up almost 25 percent from yesterday’s closing price to $3.39.
One year ago — prior to the complete crash of the coal industry — shares were trading at $3.51. Gillette-based Cloud Peak posted a net loss of $52.9 million for the second quarter of 2015.
Yesterday, the company (NYSE:CLD) released its earnings for the first six months of 2016, which included a second-quarter net income of $35.3 million. The company said it had an adjusted profit of 48 cents per share, after most analysts had stated they were expecting to see a loss of up to 35 cents per share heading into the quarter. Cloud Peak reported total revenues of $174.2 million.
“Increasing natural gas prices and a warm start to summer are beginning to improve the overall outlook towards the coal industry,” said Colin Marshall, Cloud Peak president and CEO. “We expected the second quarter to be slow and it was, with high coal stockpiles, low natural gas prices and reduced electricity demand.
“We only shipped 3.2 million tons in April and 3.9 million in May.”
Marshall said things began to turn around in June, as shipments increased to 4.7 million tons, and that so far in July Cloud Peak is shipping at a 5.5 million ton rate “with an improved forecast for the rest of the quarter.”
“Several of our customers took their coal plants offline last winter when demand was low and natural gas cheeked due to the mild winter and they only restarted them in June to meet predicted summer demand,” Marshall said. “If the summer remains hot, we will expect to see a meaningful reduction in stockpiles as burn initially exceeds shipments and then a steady monthly increase in shipments to give us a strong second half to the year.”
The earnings report showed that Cloud Peak’s shipments for the second quarter of 2016 were 11.8 million tons, down from 16.0 million tons for the same period in 2015, and that the cost per ton was $10.50, down from $10.75 last year. Cloud Peak’s available liquidity was $523 million, including cash and cash equivalents of $64.1 million, as of June 30.
There was a lot of positive buzz about Cloud Peak heading up to the earnings report. Share prices had increased by 32.37 percent in the last 20 days and rose 8.3 percent in the previous five trading sessions alone.
Good news for Cloud Peak — the nation’s third largest coal company, and the only one based in Wyoming — may be a positive bellwether for the rest of the coal industry in the state, as well. As the only pure-play coal company in the Powder River Basin, excitement about Cloud Peak could be taken as a sign that investors are becoming bullish about coal’s near-term future as key energy resource. (Cloud Peak operates the Antelope and Cordero Rojo mines in Wyoming, as well as the Spring Creek Mine in Montana.)
A pure-play company is one that is publicly traded and focused on only one product or commodity. Pure-play companies are popular with investors who want to make specific bets on particular products. For these investors, buying a company with several diversified business lines forces them to take risks in industries in which they do not want to invest.