December 19, 2017 Read More →

Contura Sale of 2 Wyoming Mines Unlikely to Ease Powder River Basin’s Low-Price Problem

SNL:

Coal prices in the Powder River Basin are low, and the recent sale of Contura Energy Inc.’s two mines in the region is unlikely to change that, according to analysts.

Seaport Global Securities LLC analysts Mark Levin and Nathan Martin estimated in a Dec. 18 note that about 93 million tons of PRB coal had yet to be priced at the end of the third quarter — about 26% of total production in the region.

“We think this is one major reason why PRB production will likely come in lower than flat in 2018,” they said. “Moreover, with so much coal yet to be priced, we are beginning to believe that absent a big move in natural gas prices and/or a very cold rest of December through February, PRB producers will put out 2018 volume guidance in late January/early February that is well below flat YOY.”

The analysts called Contura’s decision to sell its Eagle Butte and Belle Ayr mines to Blackjewel LLC “a good one, maybe even a great one,” noting the move reduces Contura’s balance sheet asset retirement obligation from $200 million to $83 million, frees up $25 million in unrestricted cash, create significant income tax deductions, provides $50 million in royalty payments and reduces capital expenditures by $10 million to $12 million.

However, the move will not likely help prices in the PRB.

More: Western coal faces declining output, stagnant pricing despite Contura mine sale

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