The fossil-fuel based Trailblazer plant is expected to be among the world’s cleanest power plants. The plant will act as a strategic source of carbon dioxide for enhanced oil recovery (EOR) applications in West Texas. Moreover, Trailblazer will supply the Texas economy with an additional 600 megawatts of clean, secure, reliable electric generating capacity.

In capturing 85% to 90% of the carbon dioxide emissions from the plant, Trailblazer will emit 70% less carbon dioxide than the cleanest natural gas-based power plants.  Moreover, Trailblazer will ship the captured carbon dioxide to the nearby Permian Basin, where it will be used to boost oil production and extend the life of that critically important domestic energy resource.

Arch will supply the center’s fuel needs for its first 20 years, utilizing its Wyoming-based Power River Basin operations.

A recent Electric Reliability Council of Texas (ERCOT) report projects that Texas will need to add more than 55 gigawatts of new and replacement power-generating capacity over the next two decades to meet projected demand growth.

Today’s announcement is consistent with Arch’s ongoing strategy of making small but strategic investments in technology companies focused on making coal use cleaner.  In addition to Trailblazer, Arch’s technology portfolio includes an equity interest in DKRW Advanced Fuels, which is planning to convert coal into clean-burning transportation fuel on Arch reserves in southern Wyoming, and ADA-ES, a leading-edge emissions control company.

St. Louis, Missouri-based Arch Coal is one of the largest coal producers in the U.S. Arch Coal primarily conducts its business through three operating segments: Powder River Basin (PRB), having operations in northeastern Wyoming and southeastern Montana; Western Bituminous, having operations in western Colorado, eastern Utah and southern Wyoming; and Central Appalachian, having operations in eastern Kentucky, Tennessee, Virginia and southern West Virginia. Coals mined from the PRB region have very low sulfur content and low heat value.

Arch Coal has a significant amount of reserves and is a top-three producer in the PRB. In our opinion, PRB coal will be in great demand over the coming years. Going forward, the significant coal-fired power plant build-out will increase annual thermal coal demand by more than 43 million tons; most of which will be fueled by PRB coal.

Zacks Investment Research

(ACI) Arch Coal Buys Stake in Texas Power Plant

BHP continues with its long-term strategy of investing in value-added projects. During fiscal year 2009, the company sanctioned four growth projects with a capital investment of $5.9 billion.

With its diversified portfolio of low cost and high quality assets and a strong balance sheet, BHP Billiton is well positioned to benefit from a market recovery. Thus, we upgrade the recommendation on the stock from Neutral to Outperform.

Zacks Investment Research

(BHP) BHP Billiton Limited – Bull of the Day

For the full year 2009, earnings were significantly down to 19 cents per share from 89 cents in 2008.

Revenue dropped to $183.5 million from $265.2 million in the fourth quarter of 2008. The company attributed the falling sales and profits to lower demand for titanium stemming from production delays at Boeing Co. (BA).

Titanium’s Mill product shipments were down 31% to 2,645 million tons while average selling prices declined 18% to $21.50 per kg. Melted product volumes improved 5% to 835 million tons. Average selling prices were $56.25 per kg compared with $57.10 in the same quarter of the previous year.

For the full year 2009, Mill product shipments slipped 24% to 11,425 million tons while that of Melted product was down 29% to 2,750 million tons. Average realized prices were down 8% and 16%, year over year, for Mill product and Melted product, respectively.

Operating income for the reported quarter was $9.3 million, down 74% from the year-ago period. Operating income for 2009 was $54.9 million compared to $219.7 million during 2008, primarily reflecting the effects of lower volumes and average selling prices for Melted and Mill products.

Lower capacity utilization in 2009 negated the positive impact of declining raw material costs, especially titanium scrap. Titanium reported higher per-unit overhead costs as well as unabsorbed fixed overhead costs resulting from abnormally low production throughout its major manufacturing operations.

However, Titanium remains optimistic on the long-term outlook of the aerospace industry, which is focusing on fuel-efficient aircraft requiring a higher proportion of titanium metal. According to the company, its major customer — Chicago-based Boeing — is planning to start delivering its new 787 airplane to customers by the fourth quarter of this year. We believe this is likely to drive production across the commercial aerospace supply chain and thereby create demand for Titanium’s products.

Zacks Investment Research

(TIE) Titanium Metals Corporation Net Earnings Down – Outlook Up

The projects would be developed using GreatPoint’s proprietary Bluegas technology, an alternative to conventional gasification. This technology utilizes catalytic hydromethanation to create pure hydrogen and substitute natural gas.

According to the U.S. Department of Energy’s National Energy Technology Laboratory, catalytic hydromethanation combined with advanced power generation eliminates more than 90% of carbon emissions and nearly doubles the efficiency of conventional coal combustion or Integrated Gasification Combined Cycle power plants.

This technology captures the carbon dioxide (CO2), which can be used for domestic oil production through enhanced oil recovery.

The U.S. Department of Energy estimates that there are more than 60 billion barrels of stranded U.S. oil, and the International Energy Agency estimates there are more than 200 billion barrels of stranded oil worldwide. These resources could be recovered with injection of captured CO2.

The hydrogen produced at the plants will be used for industrial applications or combusted to generate near-zero carbon electricity. The substitute natural gas produced at the plants can be transported in the existing pipeline infrastructure and used as fuel in home heating, power plants or industrial processes.

Zacks Investment Research

(BTU) Peabody Energy Corporation to Cut CO2 Emissions

For the full year 2009, the partnership reported adjusted earnings of $1.27 per unit, above the Zacks Consensus Estimate of $1.16 and marginally above last year’s earnings of $1.26.

Total revenue in the quarter increased 19.6% year over year to $194.9 million, driven by increased revenue at its midstream segment. For the full year, the partnership reported total revenue of $656.7 million, down 25.5% year over year.

Results by Segment

The Coal and Natural Resource Management segment’s revenue, net of coal royalties expense, decreased 15% to $34.6 million in the quarter. This was primarily due to lower coal royalties revenue, a decrease in other revenues resulting from decreased lessee minimum rental payments and coal transportation fees, and a decrease in oil and gas royalties and timber revenue resulting from lower commodity prices.

Coal royalties revenue, net of coal royalties expense, of $28.6 million ($3.38 per ton) decreased 11.7% from $32.4 million ($3.72 per ton) last year. Penn Virginia’s coal production by lessees was 8.5 million tons in the reported quarter versus 8.7 million tons a year ago.

In 2009, Penn Virginia’s coal production by lessees was a record 34.3 million tons with average coal royalties per ton of $3.51 ($3.34 net of coal royalties expense) as compared to 33.7 million tons with average coal royalties per ton of $3.65 ($3.36 net of coal royalties expense) in 2008.

Natural Gas Midstream (PVR Midstream) segment revenue increased 31% year over year to $155.9 million in the fourth quarter. Quarterly System throughput volumes decreased 6.4% to 27.9 billion cubic feet (Bcf) from 29.8 Bcf last year. Adjusted Midstream gross margin was $35.9 million ($1.29 per Mcf) as compared to $17.6 million ($0.59 per Mcf).

In 2009, PVR Midstream system throughput volumes were a record 121.3 Bcf, with adjusted gross margin of $0.90 per Mcf, as compared to 98.7 Bcf, with adjusted gross margin of $0.77 per Mcf.

Balance Sheet

In the fourth quarter, distributable cash flow (DCF) increased 38% to $48.3 million, primarily due to an $18.3 million increase in natural gas midstream segment gross margin and a $1.4 million decrease in other capital expenditures. At year-end, DCF was a record $151.7 million as compared to $129.9 million in 2008.

Penn Virginia continues to manage its financial position well, ending the year with $178.3 million remaining under its revolving credit facility and $8.7 million of cash and equivalents. This provides the company with adequate capital to support modest growth opportunities. At year-end, Penn Virginia had outstanding borrowings of $620.1 million under its $800 million revolving credit facility.

For 2010, the partnership has guided coal royalty tons to be in the range of 31.0-32.0 million tons, with average coal royalties per ton, net of coal royalty expense, to be $3.15-$3.25. Other revenue for 2010 is expected to be in the $21.0-$22.0 million range. System throughput volumes are expected to be in range of 350-360 million cubic feet (MMcf) per day.

For 2010, capital expenditure for the Coal and Natural Resource Management segment is expected to be approximately $6.0-$7.5 million. Capital expenditures for the Natural Gas Midstream segment is expected to be in the $50.0-$60.0 million range.

Zacks Investment Research

(PVR) Penn Virginia Resource Partners L.P. Reports Nicely Above Expectations

Revenues in the reported quarter plunged 22.7% year over year to $583.9 million, reflecting lower demand from electric utilities and steelmakers. In addition, weather, weather-related power outages and disruption of rail and ocean transport significantly impacted Massey’s operations. Produced tons sold in the reported quarter totaled 7.8 million compared to 10.2 million in the year-ago quarter.

Massey Energy’s operating cash margin per ton in the quarter decreased 1% to $14.26 compared to $14.42 in the year-ago quarter. The lower cash margin resulted from an increase of 2% in revenue per ton, which was offset by an increase of 3% in average cash cost per ton.

Average coal revenue per ton for the reported quarter was $64.13 compared to $62.69 in the year-ago quarter. The improvement was driven by price increases for utility and industrial coal and an increase in the proportional mix of metallurgical coal sold during the reported quarter. Average cash cost per ton for the reported quarter was $49.87 compared to $48.27 in the year-ago quarter. The increase was due largely to higher fixed cost absorption on lower total tons sold during the period.

Massey Energy ended fiscal 2009 with $665.8 million in cash and short-term investments compared to $640 million of cash and short-term investments at year-end fiscal 2008. The company had $98.4 million available under its asset-based revolving credit facility at December 31, 2009. Massey Energy had a long-term debt of $1.3 billion at year-end 2009. The company reduced total debt by $5.2 million and net debt by $30.3 million during the fourth quarter of 2009.

Massey Energy expects fiscal 2010 coal shipments to be in the range of 37 to 41 million tons, with average coal realization between $67 and $70 per ton.  The company has approximately 39.6 million tons of coal committed for sale in 2010.  Of these, 33.8 million tons are sold and priced at an average price of approximately $64. Average cash cost per ton for full year 2010 is expected to be in the range of $49 to $52.

Massey Energy expects fiscal 2011 coal shipments in the range of 37 to 44 million tons with average coal realization between $70 and $76 per ton.  The company has commitments for sales of 30.5 million tons of coal in 2011.  Of these, 21.4 million tons would be sold and priced at an average price of approximately $68 per ton. Average cash cost per ton for fiscal 2011 is expected to be in the range of $47 to $53.

Zacks Investment Research

(MEE) Massey Energy Reports Results Meeting Estimates

Net sales and revenues for the quarter declined 35% to $236.3 million, compared to year-ago levels. Operating income totaled $36.9 million, down from last year’s $91.1 million. Both net sales and revenues and operating income were negatively impacted by lower coke and metallurgical coke pricing and sales volumes. Of the revenue decline, 43% and 44% are attributed to lower coking coal prices and volumes, respectively.

In 2009, net sales and revenues were $966.8 million, down 16%, of which 52% is due to lower metallurgical coal pricing and volumes, while the remaining is due to lower coking coal prices and volumes. Operating income for the year declined 41% to $202.2 million, driven by lower coking coal, metallurgical coke and natural gas pricing and lower metallurgical coke volumes.

Total coking coal production and sales volumes in the quarter were 1.4 million tons, down from 1.8 million tons and 1.7 million tons, respectively, in the year ago period. Average coking coal prices in the quarter were $126.48 per short ton (down 24%) of FOB Port. Natural gas sales totaled 1.4 billion cubic feet of gas, down 22% from the prior year, at an average price of $4.09 (down 48%) per thousand cubic feet in the current quarter.

Steam and industrial coal sales were 326 thousand tons (down 10%) and production totaled 300 thousand tons (down 14%) during the quarter, reflecting lower demand in the 2009 period. Walter Coke sold 88,317 tons (down 10%) of metallurgical coke in the current quarter at an average price of $312.11 per ton (down 20%).

The company’s liquidity at year-end was strong at $401.6 million, with cash of $165.3 million and credit facility of $236.3 million. Net debt outstanding was $11.2 million as of December 31, 2009. Capital expenditures were $29.0 million in the quarter, totaling $96.3 million for the year.

For the first quarter of 2010, Walter Energy expects coking coal production to be between 1.7 and 1.8 million tons, with production costs expected to average between $55 and $60 per ton. Coking coke sales are expected to range between 1.7 and 1.9 million tons. Steam & industrial coal sales are expected to be 315,000 – 350,000 tons and coke sales at 125,000 – 135,000 tons.

Furthermore, the company expects to sell about 8 million tons of coking coal in 2010. Looking forward, the company expects Walter Coke to return to full capacity by the end of the first quarter, with full-year 2010 sales totaling 380,000 – 400,000 tons. Walter Minerals is expected to produce and sell 1.3 – 1.4 million tons of steam and industrial coal in 2010.

Walter Energy expects capital expenditures to be approximately $110 million, including maintenance capital of approximately $80 million, for full-year 2010.

Zacks Investment Research

(WLT) Walter Energy Lags Estimates – Sales Down

The company’s quarterly revenue declined 0.6% year over year to $725.5 million. Revenue in 2009 dipped 14% to $2.58 billion on lower sales volume and a lower average sales price due to the weaker economic and coal market conditions that prevailed during 2009.

Behind the Headline Numbers

During the quarter, Arch completed the acquisition of the Jacobs Ranch for $769 million and successfully completed its integration into Black Thunder. The company has already started realizing synergies from the combination. It expects to derive total synergies of $45?$55 million annually from the transaction.

In addition, the company signed a coal lease with Great Northern Properties Limited Partnership (GNP) to secure rights to mine coal resources owned by GNP in the Otter Creek tracts of southeastern Montana, gaining control of roughly 731 million tons of low-ratio, low-sulfur, sub-bituminous coal reserves in the northern Powder River Basin. These reserves are expected to support the future development of a large-scale, dragline-operated surface coal mine.

In the quarter, Arch Coal’s sales volumes increased 30.2% sequentially to 37.9 million tons, primarily due to the acquisition of Jacobs Ranch. Average selling price and operating costs in the quarter declined more than $2 per ton to $18.01 per ton and $13.86 per ton, respectively, reflecting a larger percentage of Powder River Basin production.

Sales volume in 2009 decreased 9% from last year to 125.0 tons due to planned volume reductions across Arch’s operating regions, offset by the addition of Jacobs Ranch volume. Average selling price fell 2.0% because of lower price realizations on metallurgical coal volume in Central Appalachia as well as a larger percentage of Powder River Basin production.

Cash margin per ton in the quarter fell to $4.15 from $4.30 in the last quarter, while operating margin per ton fell to $1.83 from $1.86 in the third quarter of 2009. For fiscal 2009, cash margin per ton and operating margin per ton declined to $4.03 and $1.63, respectively.

In the reported quarter, Arch Coal sold 30.1 million tons of coal (up 40% sequentially) from the Powder River Basin, driven by the addition of Jacobs Ranch volumes, at an average selling price of $11.85 per ton (down 3.3% sequentially). Western Bituminous region sales volume amounted to 4.8 million tons (up 4.3%) at an average selling price of $29.38 per ton (up 1.0%). Sales volume totaled 3.0 million tons (flat sequentially) in the Central Appalachian region at an average selling price of $61.70 (down
1.2%) per ton.

At year-end 2009, Arch had available total liquidity of $691 million, consisting of cash on hand of $61 million and $630 million available under the company’s short-term borrowing facilities. Total debt outstanding at December 31, 2009, was $1.8 billion, with a debt-to-capital ratio of 46%, compared with $1.3 billion in total debt and a 43% debt-to-capital ratio at December 31, 2008.

Looking Ahead

Management believes 2010 will be a transformative year for the coal industry. With expectations of a coal market recovery in 2010, the company expects annual sales volumes to be in the range of 145 million to 155 million tons. This includes projected sales of 4 million to 5 million tons of metallurgical coal.

Furthermore, the company has committed roughly 5 million tons of Powder River Basin coal for 2010 delivery at double-digit pricing on average and 3 million tons of Central Appalachian coal for 2010 delivery at prices 20% above the fourth quarter realized price in the region. The company has also committed 5 million tons of Powder River Basin coal for 2011 delivery at attractive pricing levels relative to the forward curve.

Based on expected production levels and sales commitments signed in the reported quarter, Arch now has uncommitted coal volumes of between 5 million and 8 million tons in 2010, 70 million to 80 million tons in 2011, and 100 million to 110 million tons in 2012. In addition, the company has 13 million tons of coal committed but not yet priced for 2010, and roughly 20 million tons committed but not yet priced for both 2011 and 2012.

Arch Coal has guided 2010 earnings, on a GAAP basis, to be in the range of 37 cents–86 cents. Adjusted earnings for 2010 are expected to be in the 50 cents?$1.00 range. It projects to spend $200?$220 million as capex in 2010, including reserve additions.

Zacks Investment Research

(ACI) Arch Coal Misses Expectations – Profits Fall

The price of thermal coal recently broke through the psychological $100 barrier for the first time in more than a year, just as a wave of brutally cold weather and heavy snow hit China. That storm disrupted mining operations and railway transportation, causing widespread panic buying among Chinese utilities that rely on thermal coal to fire their power plants, especially since they were running low even beforehand.

Those shortages strongly indicate a major market change, as China changes from a coal exporter to an importer, despite it having the world’s third largest coal reserves. It began months ago, with Beijing clamping down on illegal and unsafe mining, a move that forced hundreds of small mines in the key coal producing province of Shanxi to shut down.

That meant China had to begin purchasing large amounts of thermal coal from overseas, including some areas outside of its traditional supply bases of Australia, Indonesia and Vietnam, where it obtains over half of its intake. It even had to go further than Russia, Mongolia and Canada, its second-tier suppliers. In fact, it had to turn to Columbia for the first time ever last month.

The preliminary import data for 2009 show that January – November 2009, Chinese coal imports rose almost 500%, while coal imports for November alone increased almost six times more than the previous year. And analysts estimate China had net imports of more than 50 million tons of thermal coal altogether last year, a huge U-turn when compared to the 70 – 80 million tons the country exported just five years ago.

Those are the kinds of signs savvy investors pay attention to…

Thermal Coal: Demand From China Runs This Market

Before China shifted from exporter to importer, mining companies had to deal with low prices due to lackluster demand in Japan, South Korea and Taiwan, the traditional markets for thermal coal. But according to most industry insiders, China is set to continue buying significant quantities of thermal coal from overseas, ushering in a new age for the commodity.

• Clinton Dines, former China CEO for BHP Billiton ADR (NYSE: BHP) – the world’s largest mining company and a significant coal producer – believes: “China is going to be a coal importer of some scale from now on.”
• Richard Navarre, president of Peabody Energy (NYSE: BTU), the world’s largest private-sector coal company, agrees: “We think that China is going to continue as a net importer of coal.” And he added that consumption in the Asia-Pacific basin “is continuing to strengthen.”

It looks likely that the thermal coal price rally could continue during this current quarter on increasing electricity and coal demand from China, not to mention the rest of Asia, as Mr. Navarre pointed out. Analysts expect India especially to continue importing large amounts of thermal coal this year, as it expands its power generation capacity.

Just to compound the problem further, as demand increases, export infrastructure constraints tighten the seaborne market further. At Newcastle, Australia’s largest thermal coal export port, the ship queue recently reached a two-year high, with 60 vessels waiting to upload their cargo.

Eight Thermal Coal Stock and ETF Investments

Between rising demand and supply bottlenecks, the spot price for the benchmark thermal coal in the Australian market has risen to about $105 a ton, the highest it’s been since November 2008, and up 60% from the March 2009 low of $61 a ton.

It’s an important indication, considering that the commodity is relying much more on contracts linked to the spot market and less on fixed annual prices, mirroring other bulk commodities like iron ore and coking coal. And since none of those offer any financial futures, their price movements reflect supply and demand much more accurately.

Although spot coal prices are still well below their July 2008 high of over $210 per ton, the recent rally and China’s changing tide indicate a good year for global mining companies. Investors can play it straight with a number of businesses, including:

• BHP Billiton ADR (NYSE: BHP)
• Rio Tinto ADR (NYSE: RTP)
• Peabody Energy (NYSE: BTU)
• Consol Energy (NYSE: CNX)
• Anglo American ADR (PINK: AAUKY)
• Xstrata ADR (PINK: XSRAY)

Or they can choose from two solid ETFs devoted strictly to coal:

• The PowerShares Global Coal Portfolio (Nasdaq: PKOL)
• And the Market Vectors Coal ETF (NYSE: KOL)

Any one of them should heat up nicely this winter and onward into the rest of the year.

Good investing,

Tony Daltorio

View original at: Investment U

(BHP) Thermal Coal Investments: China Fires Up a New Age for This Commodity

Net revenue in the quarter decreased marginally (by 0.47%) to $1,238.0 million compared to $1,242.7 million a year ago. The slight revenue decline in the quarter is attributed to lower sales in the metallurgical coal and gas segments, almost offset by an increase in thermal coal revenues.

CONSOL produced 0.9 million tons of metallurgical coal during the quarter versus 1.2 million tons in the year-earlier quarter. The average realized price in the quarter declined 12.0% from a year ago to $108.24 per ton. The company’s thermal coal production declined by 1.6 million tons from last year to 14.6 million tons, with the average price increasing 16.5% to $54.17 per ton in the quarter.

CNX Gas Corporation (CXG), 83.3% of which is owned by CONSOL Energy, reported a record production of 25.1 billion cubic feet (Bcf) in the quarter, up 13.1% from 22.2 Bcf produced a year ago. The average realized gas price declined $1.88 per Mcf to $6.47 per Mcf in the quarter.

At quarter end, CONSOL’s liquidity was $482.1 million, with cash of $64.5 million, $101.0 million of accounts receivable securitization facility and $316.6 million of credit facility. CNX Gas had $57.8 million of short-term debt and $128.4 million in liquidity, with $1.1 million of cash and $127.3 million of credit facility.

CONSOL Energy’s capital expenditures in the quarter were $231.0 million, with $63.4 million attributable to CNX Gas.

Guidance

CONSOL Energy is targeting to produce 56 million tons of thermal coal for calendar year 2010 (to supply domestic customer demand and thermal coal exports). CNX Gas retained its production guidance of 100 Bcf of gas for calendar year 2010.

CONSOL expects to invest $1.0 billion in its coal and gas businesses during calendar year 2010. Of this, $500 million will be allocated for coal operations, $400 million for CNX Gas, and $100 million for other (non-gas) activities.

Zacks Investment Research

(CNX) CONSOL Energy Reports Better Than Expected Earnings

Revenues declined 27% year over year to $815.7 million in the quarter, representing lower shipments and raw material surcharges across all major segments.

High-Performance Metals

Sales in the segment declined 30% to $312.4 million on a 29% decline in shipments of titanium and titanium alloys and nickel-based and specialty alloys. The fall was primarily due to a lower demand from the commercial aerospace market. Shipments of exotic alloys improved 9%, primarily due to growing demand in the nuclear energy market.

Average selling prices declined 21% for titanium and titanium alloys and 11% for nickel-based and specialty alloys. Average selling prices for exotic alloys, however, increased 8% due to an increased demand for certain products and a favorable product mix.

Flat-Rolled Products

Sales in the segment were down 22% year over year to $438.5 million. Shipments of standard stainless products (sheet and plate) increased 24% while total high-value product shipments decreased 14%. Average transaction prices for all products, which include surcharges, were 25% lower due primarily to significantly reduced raw material surcharges.

Engineered Products

Sales of $64.8 million in this segment were 35% lower than the previous year. Demand for Allegheny’s tungsten and tungsten carbide products, forged products and cast products remained weak while demand for its precision finishing business improved.

Allegheny has achieved gross cost reductions of over $173 million in 2009, exceeding its cost reduction target of $150 million. Cash in hand was about $709 million at the end of the quarter, and net debt to total capitalization was 15.3%.

Allegheny’s new titanium and superalloy forging facility in North Carolina became operational in 2009. With the acquisition of assets worth $40.95 million from the New York-based Crucible Compaction Metals and Crucible Research, Allegheny has forayed into advanced powder metal products.

Allegheny expects a gradual and steady improvement in most of its global markets in 2010. The company plans to improve its cost structure further and targets cost savings of $100 million in 2010. We believe Allegheny’s solid balance sheet, limited debt maturity and cost reduction efforts position it much better than in the previous downturns. Its growth projects will give it increased leverage in the next upturn.

Zacks Investment Research

(ATI) Allegheny Technologies Incorporated Net Down in Fourth Quarter

Peabody’s revenues declined to $1.55 billion in the quarter from $1.89 billion a year ago. The company’s revenue for 2009 declined 8% to $6.01 billion from $6.56 billion in 2008, led by an 11% rise in U.S. revenues per ton. The company’s second half 2009 revenues rose $430 million over the first half, led by increased metallurgical coal sales to China and other Asian nations.

The company’s total sales volumes in the quarter were 61.2 million tons, down from 69.3 million tons a year ago. For the full year, Peabody sold 243.6 million tons compared to 255.0 million tons in 2008, driven by planned Powder River Basin (PRB) reductions offset by higher Midwestern volumes and the full operation of the low-cost El Segundo Mine in the Southwest.

Australian volumes totaled 22.3 million tons for the year, including 6.9 million tons of metallurgical coal and 9.6 million tons of seaborne thermal shipments. Australian coal volumes in the second half 2009 increased 37% over the first half, driven by growing customer demand.

Peabody’s expenses during the quarter continued to decline with its cost containment programs showing results. Along with reducing costs the management is keen on exercising tight capital discipline and reducing inventories. The company’s balance sheet was further strengthened by a record $1.04 billion in operating cash flows at year end, leading to cash of approximately $989 million.

Peabody expects its first quarter 2010 EBITDA to be in line with the fourth quarter of 2009. For 2010, the company is targeting total sales of 240 to 260 million tons, including trading and brokerage volumes.

Australian sales are expected to increase to 26 to 28 million tons, including 7.5 to 8.5 million tons of metallurgical coal and 12.5 to 13.0 million tons of thermal exports, while U.S. volumes are expected to be 185 to 195 million tons. Higher expected seaborne metallurgical and thermal coal prices are anticipated to benefit Peabody’s results beginning in the second quarter.

The company continues to exercise tight capital discipline and is targeting 2010 capital expenditure in the range of $600 – $650 million, which includes investments in the large Bear Run Mine in the Midwestern United States and Australian projects serving the growth markets in Asia.

In Australia, Peabody is advancing projects that would approximately double 2009’s export volumes by 2014. Furthermore, the company’s targeted 2014 capacity includes 12 to 15 million tons per year of seaborne metallurgical coal and 15 to 17 million tons per year of export thermal coal. Peabody believes it has the necessary logistics capacity to deliver the higher volumes, based on previous acquisitions and port investments.

The company’s growth going forward is expected to be driven by continued strength in United States and Australia (Pacific markets), led by China’s and India’s demand for metallurgical coal for steelmaking. The seaborne Pacific coal markets are expected to increase 8% in 2010. Moreover, global steel production is expected to increase 9% in 2010, with continued growth from China and India and increased output from traditional steel-producing nations.

Peabody has significant leverage to the improving prices for seaborne metallurgical and thermal coal. The company has 4.5 to 5.5 million tons of Australia metallurgical coal unpriced for 2010, and 9 to 10 million tons unpriced for 2011. Peabody has 6.5 to 7.0 million tons of Australia thermal coal exports still unpriced for 2010, and 9 to 10 million tons unpriced for 2011.

Zacks Investment Research

(BTU) Peabody Energy Corporation Tops Expectations – Outlook Robust

The partnership projects coal production in 2010 to be essentially flat, ranging from 41 to 50 million tons. The partnership guided total revenue in 2010 to be in the $235-$285 million range, with coal royalty revenue of $175-$205 million. This represents a 10% increase in total revenue and a 2% rise in coal royalty revenue, over the respective projected revenues for 2009.

Management indicated that the partnership completed six acquisitions during 2009, which will contribute to a higher production in 2011 and 2012. It expects this increase to coincide with growing demand for both coal and aggregates as the economy recovers. Additionally, the partnership expects this increased production to generate escalating cash flows in 2011 and beyond.

For 2010, Natural Resource Partners expects earnings per unit to grow roughly 35% in the 75 cents to $1.25 range. Furthermore, the partnership expects 2010 distributable cash flow to increase 10% to the range of $150-$185 million.

Along with issuing its guidance for 2010, Natural Resource Partners’ general partner also declared a fourth quarter distribution of 54 cents per unit. The distribution is payable on February 12, 2010, to unitholders of record on February 5, 2010. The general partner expects to maintain this distribution rate throughout 2010.

Market Scenario

The partnership is noticing signs of recovery in the global economy. It expects strong prices in 2010 compared to 2009, provided the current trend of steel production continues. The partnership generates approximately one-fourth of its coal and 30-35% of its coal royalty revenue from metallurgical coal used to produce steel. Thus, the partnership’s income is affected by the pricing of this commodity.

Furthermore, the partnership does not expect the U.S. steam market to recover until the second half of 2010. The factors affecting the steam market include weather, industrial demand and fuel switching. However, it expects the stronger industrial demand due to a strengthening economy to have a positive impact on the steam coal market.

Zacks Investment Research

(NRP) Natural Resource Partners L.P. Issues 2010 Earnings Guidance

Company Description

Walter Energy produces coking coal for the steel industry. Additionally, the company provides steam and industrial coal, metallurgical coke and methane gas.

Beat the Street

On Oct 20 Walter Energy reported third-quarter results that showed a 35% jump in coking cola sales, to 1.9 million tons. Net income came in at $24.4 million, or 45 cents per share.

Headed into the announcement, analysts were expecting just 27 cents, making it the fifth consecutive earnings surprise.

Comments from the CEO

Victor Patrick, Walter Energy’s CEO, said “We continue to see improving market conditions for our product and we are on track to achieve sales of approximately 3.5 million tons in the second half.”

Estimates Surge

The Zacks Consensus Estimate for full-year 2009 is split and now projects EPS of $2.64. However, 9 upward revisions have been submitted for 2010, bringing the consensus to $6.75, from $6.40 in the past 3 months. This would be a growth rate of 155%.

The Chart

Shares of WLT are trading at just under 11 times forward earnings. Also, despite some volatility, the overall trend for Walter Energy is up. Take a look at the chart below.

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service

Zacks Investment Research

(WLT) Walter Energy Incorporated – Fifth Consecutive Earnings Surprise

Under the agreement, Jindal will be responsible for identifying various underground coal mining projects in India and other countries and obtaining necessary licenses, permits and approvals from the respective government authorities. Massey’s responsibility extends to providing technical mining expertise and developing detailed underground mine project plans. Massey will also provide the technical manpower and project management to ensure continuity and successful project implementation.

The companies expect the combination of Massey’s technical expertise in underground mining with Jindal’s broad portfolio of international assets and businesses will enable them to establish profitable joint ventures that will both extend Massey’s coal producing opportunities and provide lower cost, more stable energy supply for Jindal’s planned global expansion.

Separately, Massey announced that it has started the development of a new metallurgical coal mine. Massey’s Rowland reserves are located adjacent to its Marfork operation, having low and mid volatile reserves of about 56 million tons.

Massey first announced its intent to develop this reserve on October 28, 2009. It expects the new mine, along with other planned mining group on the Rowland reserve, to produce nearly two million tons of metallurgical coal annually and employ over 500 miners. Massey acquired most of the Rowland reserve in 1998 and added to it with several small acquisitions in 2008. Initial development of the property and construction of the mine is expected to be completed in time for the 2011 export season.

Richmond, Virginia-based Massey Energy Company, together with its subsidiaries, engages in the production, processing, and sale of bituminous coal of steam and metallurgical grades through its processing and shipping centers called resource groups. The company’s steam coal is purchased by utilities and industrial clients as fuel for power plants. Its metallurgical coal is used to make coke, used in the manufacturing of steel. We believe Massey controls some of the best remaining coal reserves in Central Appalachia, and is likely be in a stronger competitive position when coal demand recovers.

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(MEE) Massey Energy Company Inks Contract With Jindal

The sale of a Panamax vessel of approximately 82,000 short tons is destined for merchant coke plants in the Tianjin/Guafeng area of China. The vessel will be loaded at CONSOL’s Baltimore terminal.

CONSOL Energy is enthusiastic about this sale. It hopes to receive a significant premium for its Bailey Mine coal when compared to its local thermal market. It believes that this sale will establish CONSOL as a premium brand in Asia. Xcoal has representative offices in Beijing, Seoul, Tokyo and Singapore.

Last week, CONSOL’s board approved a $1 billion capital budget for 2010, which included $400 million for CNX Gas Corporation (CXG). The budget focuses on the goals of improving the efficiency and productivity of its fleet of mines, while funding meaningful production growth in the gas business.

CONSOL Energy has budgeted $500 million for coal and $100 million for other (non-gas) activities. The $400 million slated for CNX Gas is almost evenly split between shale programs and coalbed methane programs, with the single largest program consisting of $160 million for the Marcellus Shale. Included in the coal budget is $130 million in efficiency projects for longwall face extensions and overland conveyor systems. These projects are follow-throughs on commitments made prior to the economic downturn, and should help improve unit costs.

CONSOL Energy’s deep and diversified portfolio, primarily comprising coal and natural gas, is well positioned to benefit from the growing energy demand around the world and provides the company with significant long-term growth potential. It is and a low-cost coal producer in the Northern Appalachian basin, besides being the largest, thus operating a low-risk profile compared to its peers. Additionally, management deploys capital in a way that increases mining efficiencies and improves margins.

Based in Canonsburg, Pennsylvania, CONSOL Energy is a multi-fuel energy producer as well as an energy services provider, primarily catering to the U.S. power producers. The company principally operates two business lines: Coal and Natural Gas. It has 12 bituminous coal mining complexes in six states and reports proven and probable coal reserves of 4.5 billion tons. It is also a majority owner of CNX Gas Corporation, a leading Appalachian gas producer, with proved reserves of over 1.4 trillion cubic feet.

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(CNX) CONSOL Energy Sells First Coal to China

The ruling granted relief to CONSOL’s Fola Coal subsidiary against the Nov 24, 2009 ruling, which found deficiencies in the permit notification process by the U.S. Army Corp of Engineers. The Nov ruling was followed by a stay issued for 60 days, in order to allow Fola to appeal or seek other relief.

The recent ruling is a rejoicing news for Fola’s 500 employees, who were issued a WARN notice on Dec 8 stating that the company would cease mining operations from Jan 23, 2010 and begin lay-offs on Feb 7, 2010. With the favorable Fola ruling, the company plans to operate the Fola complex safely, efficiently and in an environmentally sound manner.

CONSOL Energy, based in Canonsburg, Pennsylvania, is a multi-fuel energy producer as well as energy services provider, primarily catering to the U.S. power producers. The company’s deep and diversified portfolio, primarily comprising coal and natural gas, is well positioned to benefit from the growing energy demand around the world and provides it with significant long-term growth potential. The company has 12 bituminous coal mining complexes in six states. At the end of 2008, it had about 4.5 billion tons of proven and probable coal reserves, the second largest among U.S. coal producers, and 1.4 trillion cubic feet of net proven natural gas reserves, of which around 97% were coal-bed methane.

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(CNX) CONSOL Energy’s Fola to Resume Operations

The $175 million expansion is expected to generate an additional production of about 2.0 million tons of in 2010 and up to 3.5 million tons in 2012. The additional production will increase Walter Energy’s rated capacity for premium coking coal to approximately 9.5 million tons in 2012. The expansion covers an area of approximately 19.5 square miles and has sufficient reserves for approximately 20 years of production.

Mine No. 7 produces some of the highest quality coking coal in the world. The company believes that the expansion of the mine to an annual capacity in excess of 6 million tons makes it the largest low-volume hard coking coal mine in North America. It believes the expansion is ideally timed to meet expected growth in demand for premium, low-volume hard coking coal.

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(WLT) Walter Energy Starts Longwall Coal Production

Massey secured rights to the reserves through an auction in the bankruptcy of Appalachian Fuels. The acquisition was announced last month and completed on Nov. 13. The company expects the value of the reserves to increase significantly as conditions in the metallurgical coal market improve. The acquisition is Massey’s second from Appalachian. In September, Massey bought 23 million tons of reserves and other assets in West Virginia’s Fayette County from Appalachian for $5.1 million.

Massey Energy is the fourth largest coal company in the US and the largest in Central Appalachia. The company is continuously making acquisitions of coal mining assets and reserves. The Dante Coal acquisition has raised the company’s current total coal reserves to 2.3 billion tons. Of the total current reserves, 1.0 billion ton is metallurgical coal. The company had recently acquired the mining assets from Appalachian.

At more than $5.1 million, the assets include 23 million tons of coal reserves, permitted deep and surface mines, a permitted preparation plant and some mining equipment. These assets are located in Fayette County, West Virginia, close to Massey’s existing Mammoth and Nicholas Energy resource groups.

Over half of the acquired reserves are metallurgical coal in the Powellton and Eagle Coal Seams. Massey plans to resume mining metallurgical coal in the Powellton Seam in the near term. However, it has no immediate plans to start the other idled deep and surface mines acquired in the transaction. The coal produced will be processed at Massey’s Mammoth preparation plant. Massey expects the acquisition to be immediately accretive to earnings.

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(MEE) Massey Energy Company Acquires Coal Reserve

Total revenues in the quarter declined 45% year over year to $155.6 million, driven by lower revenue across the company’s business segments due to lower commodity prices.

Coal and Natural Resource Management segment’s revenues, net of coal royalties expense, decreased 15% to $33.6 million, primarily due to lower coal royalties revenue, oil and gas royalties revenues resulting from lower commodity prices, and timber and other revenues. Coal royalties revenues, net of coal royalties expense, of $28.2 million ($3.37 per ton) decreased 9.6% from $31.2 million ($3.67 per ton) last year. Penn Virginia’s coal production by lessees was 8.4 million tons versus 8.5 million tons a year ago, benefiting from the long-term contract prices its lessees had previously negotiated with their customers.

Natural Gas Midstream (PVR Midstream) segment revenues declined 51% year over year to $120.4 million. System throughput volumes increased 7% to 29.8 billion cubic feet (Bcf) from 27.7 Bcf last year, primarily due to contributions from expansions and acquisitions completed in 2008 and 2009, along with successful results at the company’s gathering systems. While system throughput volumes declined 6% sequentially, processed volumes increased due to the acquisition of a processing plant and expanded capacity in the Panhandle system.

Penn Virginia continues to manage its financial position well, ending the third quarter with $170 million remaining under its revolving credit facility.  This provides the company with adequate capital to support modest growth opportunities. At quarter-end, Penn Virginia had outstanding borrowings of $628.1 million under its $800 million revolving credit facility and $11.3 million of cash and equivalents.

For 2009, the company has guided coal royalty tons to be in the range of 33-34 million tons, with average coal royalties per ton, net of coal royalty expense, to be $3.25-$3.35. System throughput volumes are expected to be in range of 330-340 million cubic feet (MMcf) per day, down 20 MMcf per day from previous guidance, reflecting lower expected system throughput volumes. However, the company expects processed volumes to increase.

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(PVR) Penn Virginia Resource Partners L.P. Beats but Revenues Dip

The coal lease provides a future growth opportunity for Arch to build a significant position in the Northern Powder River Basin coal region. We believe investment in these low-ratio reserves would support the future development of a large-scale, dragline-operated surface coal mine. It will also give Arch a future cost advantage in the domestic and international energy markets.

The State of Montana also has about half of the ownership interest in the Otter Creek area. The materialization of the Arch-GNP Otter Creek Coal Lease has come with the State of Montana potentially putting its interests in the Otter Creek coal reserves up for lease as well.

The future development of the Montana coal reserves will help competitively serve the northern U.S. power generation market, provide Arch with an additional supply source to export into the fast growing Pacific Rim coal market or possibly house the site of a future coal-conversion facility.

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(ACI) Arch Coal and Great Northern Properties Limited Partnership Sign Coal Lease Pact

Results were driven by improved reported revenues as well as lower expenses during the quarter, offset by increased units outstanding due to the issuance of an additional 4.6 million units for an acquisition in 2009. However, net income declined 35% from 55 cents posted in the year-ago period.

Total revenues declined 16% year over year to $64 million, while it rose 8% sequentially, driven by higher coal royalty revenues as a result of increased realizations for coal royalty per ton. Coal production in the quarter decreased 24% over last year and 4% from the previous quarter to 11.3 million tons, while coal royalty revenues declined 15% and 6%, respectively, to $49.3 million. Average coal royalty revenue per ton this quarter increased 12% year over year and 11% sequentially, to $4.37.

Natural Resource Partners reported distributable cash flow (DCF) of $30.1 million in the quarter, down 44% from last year and 39% from the second quarter, predominantly due to changes in working capital that offset improvements in revenues. In addition, distributable cash flow was impacted by higher semi-annual interest payments that were made in the third quarter and an increase of $3.8 million in the accrual for future principal payments.

Total operating expenses were $22.6 million in the quarter, flat versus last year. Depreciation, depletion and amortization expenses were down $4.1 million due to lower production in 2009, offset by $4.2 million in higher general and administrative expenses and property and franchise taxes. These expenses were higher due to fluctuations in NRP’s long-term incentive plan accrual, as well as higher property taxes in several states.

In the quarter, the company acquired coal reserves associated with the Deer Run mine in the Illinois Basin for an initial payment of $10 million. The future acquisitions of reserves at Deer Run, totaling $245 million are to be completed over the next 27 months.

Following the initial acquisition at Deer Run, NRP had $22 million outstanding on it credit facility with an additional $278 million available. The company made $25.2 million in annual principal and semi-annual interest payments during the quarter, however, its cash and cash equivalents at quarter-end amounted to $60.9 million.

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(NRP) Natural Resource Partners L.P. Tops Expectations

Revenues of $181.4 million declined 39% year over year. Volumes in the melted product segment were down 39% to 675 million tons while prices weakened 20% to $23.9 per ton from $29.85 per ton last year. Shipments in the mill product business plummeted 31% to 3.8 billion tons and prices dropped 6% to $56 per ton from $59.4 per ton. Lower sales were followed by a significant 93% fall in operating income to $3.5 million. Cost of sales declined about 36% to $163.7 million on lower raw material costs. However, low utilization of production capacity more than offsets the favorable impact of declining raw material costs. Hence, gross margin as a percent of sales went down to 17.7% from 72.9% in the year-ago quarter.

Titanium Metals stated that the near-term demand outlook remains unclear. However, the company said that its major customer, the Chicago-based Boeing Company (BA), recently announced an expected first flight for the Boeing 787 prior to the end of 2009 and first commercial delivery during the fourth quarter of 2010. This is likely to drive production throughout the commercial aerospace supply chain and, thereby, create demand for Titanium products.

Titanium Metals Corporation is the second-largest producer of titanium worldwide and the largest producer in the US. Products include titanium sponge, melted products, mill products and industrial fabrications that are finding their growing adoption in commercial aerospace, defense, energy and several other industries.

We believe commercial and defense aerospace will be the key growth driver for Titanium Metals. The company is also seeing its adoption in geothermal energy extraction and oil & natural gas production. Chemical processing, consumer and sporting goods are some of the other areas of growth.

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(TIE) Titanium Metals Corporation Down in the Third Quarter

In the quarter, Arch Coal sold 29.1 million tons of coal at an average selling price of $20.05 per ton. Sales volume decreased 16.3% year over year but increased 6% sequentially, reflecting larger volumes sold at Western Bituminous and Central Appalachian regions in the overall volume mix. Average selling price fell 1.6% because of lower price realizations. Cash margin per ton fell to $4.30 from $5.79 last year but improved from $3.17 in the previous quarter. Operating margin per ton fell to $1.86 from $3.73 a year ago and rose from 69 cents in the second quarter of 2009.

Arch Coal sold 21.5 million tons (down 17.9%) of coal of the Powder River Basin at an average selling price of $12.26 per ton (up 9.4%). Western Bituminous region sales volume amounted to 4.6 million tons (down 9.8%) at an average selling price of $29.08 per ton (down 8.7%). Sales volume totaled 3.0 million tons (down 14.3%) in the Central Appalachian region at an average selling price of $62.44 (down 20.9%).

Although Arch Coal’s top line as well as bottom line tumbled during the first half of the year, management believes that coal markets are in the early stages of recovery after having suffered a record decline in coal consumption during 2009. Going forward, Arch Coal plans to implement its strategy of matching production levels to expected market demand and retain its flexibility to respond to improving coal market fundamentals.

With expectations of integrating Jacobs Ranch into Black Thunder during the fourth quarter, Arch Coal now expects to sell 121?125 million tons of coal, excluding coal purchased from third parties. It projects to spend $160?$170 million as capex, excluding reserve additions. Arch Coal estimates earnings of 28 to 43 cents per diluted share for the full year 2009.

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(ACI) Arch Coal Tops Consensus Estimates

Revenues in the quarter plunged 6% year over year to $6.4 billion, reflecting a 15% drop in sales volumes and a 4% decline in prices. Metallurgical coal accounted for 22% of total shipments, down from 24% in third-quarter 2008. According to company estimates, a fire that destroyed a southern West Virginia preparation plant in August curtailed production by 300,000 tons during the quarter.

Massey and its peers including Arch Coal Inc. (ACI), CONSOL Energy Inc. (CNX) and Peabody Energy Corp. (BTU) were impacted by the weak coal demand. Demand for coal decreased with lower electric power generation and increased use of natural gas as a substitute for coal in power generation. Massey expects coal demand to drop by about 9% for the rest of 2009 on weak demand from user industries. According to the World Steel Association, global crude steel output declined 18% for the first eight months of 2009 as compared to the same period in 2008. Steel production in the U.S. was down 49% year over year in the first eight months of 2009.

However, a 22% year-over-year rise in crude steel production in China in the month of August and a 5% acceleration year to date make Massey optimistic about exports. Massey has also restarted about 40 previously idled facilities, representing over 60 million tons. In addition, natural gas prices have increased nearly 60% since September this year, which is expected to fuel demand for coal for electric power generation.

For the full year, Massey expects coal shipments to be between 37.5 and 38.5 million tons, with average produced coal realization between $63.00 and $63.50 per ton. Average cash cost per ton for the full year 2009 is expected to be between $50.50 and $51.00. For 2010, Massey sees coal shipments of 37 to 41 million tons. Average sales price is, however, expected to increase to $64 to $67 per ton. Massey has about 39 million ton sales contract for 2010. Of this, 33 million tons have been priced at an average of $63 per ton. Massey expects cash costs for 2010 to be in the range of $48 to $51 per ton.

At the end of the quarter, Massey had cash and cash equivalents of $640 million, up 5.4% from $607 million at Dec 31, 2008. Total debt at quarter end stood at $1.3 billion. Debt to capitalization ratio improved to 52.2% from last year’s 53.8%.

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(MEE) Disappointing Quarter for Massey Energy

Net revenue in the quarter decreased 7% to $1,094.5 million compared to $1,173.1 million a year ago. Revenue decline in the quarter is attributed to lower revenues in the metallurgical coal and gas segments, offset by an increase in thermal coal revenues.

Consol produced 0.6 million tons of metallurgical coal during the quarter versus 0.9 million tons in the year-earlier quarter. The average realized price in the quarter declined 17.6% from a year ago to $97.07 per ton. The company’s thermal coal production declined by 1.0 million tons from last year to 12.9 million tons, with the average price increasing 24% to $58.07 per ton in the quarter.

CNX Gas Corporation (CXG), 83.3% of which is owned by Consol Energy, reported a record production of 22.5 billion cubic feet (Bcf) in the quarter, up 20% from 18.8 Bcf produced a year ago. The average realized gas price declined $2.92 per Mcf to $6.71 per Mcf in the quarter.

At quarter end, Consol’s liquidity was $426.7 million, with cash of $31.4 million and $395.3 million of credit facility. Short-term debt was $336.9 million at quarter end. CNX Gas had $73.1 million of short-term debt and $113.0 million in liquidity, with $1.0 million of cash and $112.0 million of credit facility.

Consol Energy’s capital expenditures in the quarter were $192.7 million, with $49.3 million attributable to CNX Gas.

Guidance
Consol Energy retained its production target of 58 million tons for calendar year 2009, including 1.9 million tons of metallurgical coal. CNX Gas now expects to produce 89 Bcf of gas versus its previous guidance of 92 Bcf for calendar year 2009.

Consol expects to invest $1.0 billion in its coal and gas businesses during calendar year 2009. The company continues to monitor and evaluate capital spending to ensure adequate liquidity and preserve options for possible external investment.

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(CNX) Consol Energy Posts In-line Results

However, earnings were lower compared to $1.26 per share posted a year ago. Net sales and revenues for the quarter declined 10% to $278.3 million compared to a year ago, and operating income totaled $42.4 million, down $67.2 million from a year ago. Both net sales and revenues and operating income were negatively impacted by lower coke sales as well as lower realized prices for coking coal compared to last year’s all-time highs.

However, sales and revenues increased sequentially on improved coking coal sales volumes. Coking coal sales volumes increased 35.7% to 1.9 million tons in the quarter. Total coking coal production in the quarter was 1.5 million tons versus 1.2 million tons in the prior-year period.

Natural gas sales totaled 1.5 billion cubic feet of gas, lower than the prior year, at an average price of $3.29 per thousand cubic feet in the current quarter. Steam and industrial coal sales were 302,000 tons during the quarter. Production increased to 359,000 tons in the third quarter of 2009 versus 221,000 tons a year ago, primarily from the inclusion of a full quarter of Taft’s production.

Walter Coke sold 38,478 tons of metallurgical coke in the current quarter at an average price of $361.95 per ton. The company’s liquidity at quarter-end was strong at $322.9 million, with cash of $87.8 million and $235.1 million of credit facility. Net debt outstanding was $95.0 million at quarter-end. Capital expenditures were $14.9 million in the quarter.

In the guidance update for the fourth quarter, Walter expects coking coal production to be between 1.4 and 1.5 million tons, with production costs expected to average between $65 and $70 per ton. Coking coke sales is expected to range between 1.6-1.7 million tons. Steam & industrial coal sales are expected to be 300,000-330,000 tons and coke sales to be 78,000-86,000 tons.

The company expects to ship 126,000 tons of hard coking coal at 2008-2009 carryover pricing of approximately $315 per metric ton in the fourth quarter. The company expects capital expenditures to total about $85 million for full-year 2009.

Walter recently finalized its long-range mining plan and expects to produce approximately 8.0 million tons of premium hard coking coal in 2010, driven by incremental production from the company’s Mine No. 7 East expansion. The company also expects to increase coking coal production capacity to 8.5 – 9.0 million tons in 2011 and 9.0 – 9.5 million tons in 2012.

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(WLT) Walter Energy Exceeds Estimates

Peabody’s revenues declined to $1.67 billion in the quarter from $1.89 billion a year ago. The company’s U.S. revenues per ton increased 11% over last year due to higher realized prices. Realized revenues for Australia averaged $82 per ton – $125 per ton for metallurgical coal and $72 per ton for thermal coal – up 33% from the second quarter of 2009.

The company’s total sales volumes were 63.5 million tons, down from 65.6 million tons a year ago. U.S. sales reflected planned Powder River Basin [PRB] reductions. But Australian sales of 6.5 million tons were 30% above the second quarter and Australian metallurgical coal exports were 2.7
million tons, nearly triple the pace of the first half of 2009.

Peabody now expects its 2009 EBITDA to be $1.2-$1.3 billion versus previous target of $1-$1.2 billion. The company is targeting earnings of $1.34 – $1.54 per share, including a tax remeasurement, or $1.60 – $1.80 per share excluding the tax effects.

It expects total sales to be 235 – 245 million tons in 2009, with sales of approximately 190 million tons in the United States and 21 to 23 million tons in Australia. The company continues to exercise tight capital discipline and has lowered its 2009 capital expenditure range to $325 – $375 million.

The company intends to double its exports of Australian coal over the next five years to serve the fast-growing Asian markets. The company growth going forward is expected to be driven by continued strength in United States and Australia (Pacific markets), led by China’s and India’s demand for metallurgical coal for steelmaking.

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(BTU) Peabody Energy Corporation Beats Expectations

Indonesia is the world’s largest source of export thermal coal and the Pacific markets are driving global demand for coal. The company expects these markets to achieve 5% to 10% compound annual growth over the next five or more years. For instance, India is world’s fastest-growing coal importer and is expected to be short by about 200 million tons of coal in the next five years. Also, China – the world’s largest coal consumer – has been importing coal at a record pace in 2009.

Peabody’s Jakarta office will be run by Reynard Hanoppo, a former sales manager for coal producer PT Kideco Jaya Agung. Hanoppo will report to Phillip Smith, the managing director of Asian trading.

Peabody is the world’s largest private-sector coal company. The company’s coal fuels 10% of all U.S. and 2% of worldwide electricity generation. It serves nearly 330 customers in 21 nations on six continents and has trading and business offices in China, Australia, the United Kingdom, Venezuela, Singapore, Indonesia and the United States.

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(BTU) Peabody Energy Arrives in Jakarta, Indonesia

At more than $5.1 million, the assets include 23 million tons of coal reserves, permitted deep and surface mines, a permitted preparation plant and some mining equipment. These assets are located in Fayette County , West Virginia , close to Massey’s existing Mammoth and Nicholas Energy resource groups.

Over half of the acquired reserves are metallurgical coal in the Powellton and Eagle Coal Seams. Massey plans to resume mining metallurgical coal in the Powellton Seam in the near term. However, it has no immediate plans to start the other idled deep and surface mines acquired in the transaction. The coal produced will be processed at Massey’s Mammoth preparation plant. Massey expects the acquisition to be immediately accretive to earnings.

The Richmond, Virginia-based company produces, processes and sells steam and metallurgical grade coal to utilities, industrial customers and steel manufacturers. Massey has increased its total coal reserves from 767 million tons in 1987 to more than 2.3 billion tons until date through acquisitions. Of the total current reserves, 1.0 billion tons have metallurgical qualities and characteristics that have made Massey the largest metallurgical coal reserves holder in the US.

However, lower coal shipments and prices lead a 15.4% year over year decline in Massey’s total revenues in the second quarter of fiscal 2009. The company produced 9.4 million tons of coal in the quarter versus 10.5 million tons in the same quarter of the previous year.

Massey has significantly lowered its guidance for coal shipments for both 2009 and 2010 on the back of the ongoing economic turmoil and the uncertain regulatory environment. For fiscal 2009, the company expects produced coal shipments to be between 38.5 and 40.5 million tons, with average produced coal realization between $61.50 and $63.50 per ton.

For fiscal 2010, it expects produced coal shipments to be in the range of 37.0 to 42.0 million tons, with an average sales price in the range of $60.00 to $65.00 per ton.

We maintain our Neutral recommendation on the stock.

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(MEE) Massey Energy Company Acquires Bankrupt Rival Appalachian Fuels

Appalachian coal receives a premium to other regions in the U.S. due to high heat content (i.e. high Btu). Besides producing high-quality thermal coal, this region is known for its metallurgical coal reserves. Additionally, the relative proximity of the Appalachian Basin to the European and the Asian markets further adds to its attractiveness to foreign buyers.

Patriot Coal has handled the challenges arising from a depressed coal market well by rescheduling production plans, idling high-cost mines, optimizing longwall developments and relocating equipment and miners to higher-margin mines. These actions have strengthened the competitiveness of the company and preserved coal assets for a better pricing environment in the future.

Globally, energy prices have started showing initial signs of recovery, in part because of stronger-than-expected economic activities in emerging economies. The present market outlook indicates a sharp rebound in energy demand driven by an economic recovery.

However, a slowed or weaker-than-anticipated global economic recovery, coupled with excess production capacity and soaring inventories, might throw a wrench into the works.

We see Patriot shares performing in line with the broader market and thus maintain our Neutral recommendation.

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(PCX) Patriot Coal’s Analyst Rating Stays Neutral