U.S. coal producer Cloud Peak Energy Inc. (CLD) released its second quarter 2013 shipment details and also updated its annual adjusted earnings before interest tax depreciation and amortization (EBITDA) guidance.
The shipments from its three operated mines totaled 20.1 million tons versus 21.1 million tons in the first quarter of 2013 and 20.1 million tons in the second quarter of 2012. The decline in coal shipments in the first half of the year did not come as a surprise as the accumulated stockpiles at the utilities delayed fresh orders.
The sequential decline in shipment of 1 million ton was attributable to weather interruptions, unplanned power plant outages at major customers, and the impact of production interruptions due to planned maintenance outages.
Cloud Peak adjusted its EBITDA guidance for 2013 and expects second quarter EBITDA to be below first quarter results. As a consequence the company decided to lower its full year EBITDA guidance at the midpoint by $15 million. Cloud Peak now expects 2013 EBITDA in the range of $210 million to $250 million.
Coal demand for power generation is expected to revive gradually in the U.S. due to a steady rise in natural gas prices. Moreover, the projected addition of nearly 300 gigawatts of coal power units over the next five years globally will create additional demand for coal.
Cloud Peak Energy is a pure-play Powder River Basin (PRB) coal company. The company has recently received approval to start exploration and development work in a coal mine located in Crow Indian Reservation. The development of this mine will take 5 years and production is expected to touch 10 million tons annually.
Cloud Peak could utilize its increased production capability from the PRB mines to cater to the Asian markets where the demand for thermal coal continues to rise.
Another operator in the sector SunCoke Energy Inc. (SXC) disclosed its preliminary second quarter 2013 domestic coke production figure, which slipped moderately by 1.3% to 1,081 thousand tons from 1,095 thousand tons in the year-ago quarter. The decline in output is attributed to lower production activities in the company’s Indiana Harbor coke making plant.
Cloud Peak Energy currently has a Zacks Rank #4 (Sell). However, other companies in the industry worth considering are Alliance Resource Partners LP (ARLP) and Hallador Energy Company (HNRG). Alliance Resource Partners presently holds a Zacks Rank #1 (Strong Buy) while Hallador Energy has a Zacks Rank#2 (Buy).
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