Cloud Peak Energy To Export 55-60 Million Ton With Current Commitments To Sell 56 Million Tons
GILLETTE,WY - Colin Marshall, President and Chief Executive Officer of Cloud Peak Energy Inc. said, “Our lower operating costs reflect the many cost control and efficiency initiatives we put in place during 2016 to adapt to lower shipments. We delivered a solid operational and financial performance in the first quarter as the industry environment continued to improve. During the quarter, we continued to increase our export shipments, although the volume ramp-up was challenged by severe weather in the Pacific Northwest that negatively impacted rail performance. We currently have contracted 3.3 million tons to be exported during 2017, with additional sales anticipated as the year progresses.”
Shipments during the first quarter of 2017 were stronger than the first quarter of 2016, supported by higher natural gas prices. Utility coal-fired power plants continued to run during the quarter and drew down coal inventories, although not as much as anticipated due to the very mild winter.
Revenue from the Owned and Operated Mines segment increased four percent in the first quarter of 2017 compared to the first quarter of 2016 due to higher shipments, partially offset by lower average realized prices per ton.
The Company exported 0.5 million tons to Asian customers during the first quarter of 2017. This reflected the continued start-up of export shipments announced in the third quarter of 2016, driven by increased international thermal coal demand and pricing. The Company has currently contracted 3.3 million tons to export during 2017 and is planning to export approximately 5 million tons during the full year, which will largely be dependent on rail and port performance and prevailing prices.
For 2017, the Company is currently planning to ship between 55 and 60 million tons, with current commitments to sell 56 million tons, which includes 3.3 million tons with export customers. Of this committed production, 55 million tons are under fixed-price contracts with a weighted-average price of $12.19 per ton. The approximately 2 million committed tons for 2017 that the Company priced during the first quarter of 2017 were at an average price of $11.39 per ton, in line with the prevailing prices at that time.
The Company is currently contracted to sell 29 million tons in 2018, all to domestic customers. Of this committed production, 27 million tons are under fixed-price contracts with a weighted-average price of $12.51 per ton. Utilities continue to delay new coal purchases due to their elevated stockpiles after the very mild winter. While this maximizes their flexibility, it could lead to some price support for coal during periods of increased natural gas prices and electricity demand.
“The current outlook for U.S. thermal coal producers is a lot brighter than it was at this time last year. After good first quarter shipments, many of our customers are indicating that they will continue to take their contracted tons and will buy more coal for in-year delivery, if summer demand is elevated. We remain optimistic that the PRB could see year-over-year demand grow by approximately 10 million tons or more if natural gas prices remain above $3.00 per MMBtu, and we have a normal summer,” said Marshall.
International thermal coal prices remained solid during the first quarter of 2017 as China continued to manage its domestic production levels and increase imports. This left international coal supplies better matched to demand. Disruptions to Australian coal producers caused by Cyclone Debbie in late March are forecast to impact the rail system until early May. While metallurgical coal prices have risen rapidly, Newcastle thermal coal prices have stabilized above $80 per tonne. It will take some time for the full impacts of the disruption from Cyclone Debbie to work their way through the system as buyers wait for supply to resume or find alternative coal sources.
Sustained international prices have allowed the Company to book export sales of 3.3 million tons for delivery throughout 2017. Strong demand should allow total 2017 export sales volumes of approximately 5 million tons dependent on the capacity of the rail and port system to increase shipment rates. The Company continues to receive strong interest from Asian customers for its Spring Creek coal and will seek to layer in sales for the remainder of 2017 as opportunities arise.