Foresight coal output sustain record highs

OREANDA-NEWS. Illinois basin coal producer Foresight Energy achieved another record quarter, posting higher coal production despite weaker coal sales revenue and escalating costs.

Foresight's coal production totaled 6.6mn short tons (5.9mn metric tonnes) in the first quarter, with sales volumes at 5.1mn st, a 29pc and 8.4pc increase from the year ago period, respectively.

"The increase in sales volumes during the quarter was supported by additional production from the start-up of the second longwall at our Sugar Camp complex in June 2014," the company said. "However, sales volumes during the quarter were negatively impacted by transportation disruptions, including the high water on the Ohio river that temporarily halted throughput at our Sitran terminal and resulted in sales volumes being pushed into future quarters."

Coal sales revenue also declined on weaker spot sales and pricing \$2-3/st below 2014 levels.

Coal sales revenue fell to \$239mn for the three months ended 31 March, down from \$243mn in the prior year period. The \$3.8mn decrease was driven by a 9pc decline in realized coal prices to \$46.84/st.

"The decline in coal sales realization was primarily the result of a lower mix of international shipments as well as lower realization on domestic and international sales," the company said.

Costs increased by \$17.6mn from the 2014 first quarter to \$110.6mn, or a \$1.93/st increase to \$21.68/st. The company attributes that to its Williamson mine, "which experienced higher labor-related, supply and repair costs" and "decreased production primarily as a result of a longwall move."

Second quarter production and costs will likely reflect the evacuation of the company's Deer Run mine, though the company expects the mine to resume production within the next week. The mine has been out of commission since late March, when high carbon monoxide levels were reported, marking the second time in less than a year that the mine was taken off line due to carbon monoxide.

The company said today that the mine's longwall appears to have sustained no damage and pending further examination and approval by the Mine Safety and Health Administration, the company expects to resume production in the next week. Foresight said adequate inventories supplemented its coal commitments and it did not miss any shipments as a result of the mine evacuation.

Citing expectations of continued weakness in pricing this year, Foresight maintained its 2015 sales volume guidance of 22.8mn-25.2mn st, and so far has commitments in place for 22.1mn st, including at least 4.5mn st for export.

During the first quarter, Foresight's sponsor, Foresight Reserves, contributed its equity interests to the company. And Murray Energy bought a 50pc interest in Foresight's publicly traded limited partnership last month as well as a stake in the general partnership and 77.5pc of that entity's distribution rights.

Combined, the assets are expected to add \$16mn- 21mn/yr to the company's earnings.

Earnings for the first quarter rose by 19.5pc to \$101.5mn.