"We achieved solid EBITDA of more than $25 million this quarter, validating the steps we have taken in our Management Action Plan in 2009. We are seeing positive results from our ongoing emphasis on cash and cost control, as well as rationalization of higher-cost production. We are also benefiting from our commercial initiatives, as we work closely with our customers to restructure certain contracts," said Patriot Chief Executive Officer Richard M. Whiting in a prepared statement. "Productivity this quarter improved at a number of our operations, including mines in our Wells and Corridor G complexes. Additionally, as we further managed our production base by closing the Samples mine, we stepped up our brokerage activity and were opportunistic in purchasing third-party coal."
Tons sold in the third quarter included 6.3 million tons of thermal and 1.5 million tons of metallurgical coal, compared to 7.3 million and 1.0 million tons of thermal and metallurgical coal, respectively, in the 2009 second quarter. Metallurgical volumes were higher in the third quarter as customers took more consistent delivery of contracted tons.
Sales volume in the 2009 third quarter declined 300,000 tons from the prior year, largely a result of rationalized production related to lower demand for thermal coal. For the first nine months of 2009, shipments of 24.6 million tons represented an increase of 5.4 million from the prior year.
Revenues in the 2009 third quarter were $506.2 million, comparable with revenues of $507.0 million in the 2009 second quarter. Slightly higher revenues in the Appalachia Mining Operations segment were offset by slightly lower revenues in the Illinois Basin segment.
Revenues in the 2009 third quarter increased $16.6 million over the prior year amount, as a result of higher average selling prices, partially offset by lower tons sold. Revenues for the first nine months of 2009 compared to 2008 increased $428.5 million.
During the quarter, the Company successfully restructured three thermal coal contracts, resulting in compensation for shortfalls in contracted shipments. These restructurings increased sales contract accretion by $25.0 million in the 2009 third quarter, as shipments in future periods were reduced.
As of September 30, 2009, Patriot had no borrowings on its revolving credit facility, and a cash balance of $48.6 million. Letters of credit at September 30, 2009 were $349 million, leaving unused borrowing capacity of $174 million on its $522.5 million facility. Including the Company's cash balance, Patriot had available liquidity of $222 million at September 30, 2009.
Capital expenditures totaled $19.3 million in the 2009 third quarter, as the Company continued to tightly control spending. Total debt was $205.4 million as of September 30, 2009, consisting mainly of the 3.25 percent convertible debt due in 2013.
"Looking forward, we continue to see signs of strength in the metallurgical coal market, as domestic steel mill utilization has improved for 25 consecutive weeks and currently stands at 62 percent. We expect this market to continue to strengthen throughout 2010," continued Patriot Chief Executive Officer Richard M. Whiting. "At Patriot, we have the ability to essentially double our met volume from the current run-rate of approximately 5.0 million tons to around 9.5 million tons, as market conditions warrant. This ramp-up could take place in a relatively short period of time with a fairly modest capital outlay. Our decisions to increase met production will clearly be based on the pricing and duration of new sales commitments with our long-established customer base."
"In international markets, higher fixed asset investments in China have led to higher steel production and increased met coal imports. While U.S. coal producers have not historically shipped large quantities of met coal to China, there have been a number of U.S. exports to China in recent months," added Whiting. "In fact, Patriot recently entered into an agreement that we believe will represent the first meaningful shipments of U.S. high volatile met coal to China."
"We are also seeing an improvement in customer sentiment on the thermal side, even though inventory levels remain high. In just the last month, customers who had previously indicated that they wanted to discuss delivery deferrals are now indicating that these discussions are no longer necessary. We believe this is the result of concerns over coal supply and permitting issues, as well as higher natural gas prices," noted Whiting.
Patriot Coal Corporation is a leading producer and marketer of coal in the eastern United States, with 14 current mining complexes in Appalachia and the Illinois Basin. The Company ships to domestic and international electric utilities, industrial users and metallurgical coal customers, and controls approximately 1.8 billion tons of proven and probable coal reserves. The Company's common stock trades on the New York Stock Exchange under the symbol PCX.
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