May 11, 2017 - Rhino Resource Partners LP (OTCQB: RHNO) ("Rhino" or the "Partnership") announced today its financial and operating results for the quarter ended March 31, 2017. For the quarter, the Partnership reported a net loss of $2.0 million and Adjusted EBITDA of $4.8 million, compared to a net loss of $1.2 million and Adjusted EBITDA of $6.6 million in the first quarter of 2016. Diluted net loss per common unit was $0.22 for the quarter compared to diluted net loss per common unit of $0.33 for the first quarter of 2016. Total revenues for the quarter were $53.6 million, with coal sales generating $51.8 million of the total, compared to total revenues of $39.3 million and coal revenues of $36.7 million in the first quarter of 2016. (Refer to "Reconciliations of Adjusted EBITDA" included later in this release for reconciliations to the most directly comparable GAAP financial measures).
The Partnership continued the suspension of the cash distribution for its common units for the current quarter. No distributions have been paid for common or subordinated units for the quarter ended March 31, 2017.
Rick Boone, President and Chief Executive Officer of Rhino's general partner, stated, "The recovery in the met coal markets had a significant positive impact on the operating results for the first quarter of 2017. Revenue grew for the quarter and year-over-year as well as our EBITDA. In the first quarter of 2017, we fully contracted our met and thermal forecasted production for the year. We expect the improved market situation will continue to provide positive financial results for the remainder of 2017. We continue to explore additional met coal sales to international customers, which could lead to additional financial upside for Rhino. We will expand our met production to meet the increased demand as additional contracts are finalized in the second quarter of 2017. Met coal test shipments to various international customers during the first quarter of 2017 were positive and we remain optimistic a long-term sales agreement can be reached which will further improve our financial results for the remainder of 2017.
We continue to explore different financing alternatives for our existing credit facility and we believe a financing solution will be finalized in the next few months. The continued support of our sponsor, Royal Energy Resources, Inc. (OTCQB: ROYE) ("Royal"), as well as our strong financial partner, Yorktown Partners LLC, provide us with a strong foundation for growth. We continue to keep our debt at historically low levels while we have invested capital dollars during the first quarter to expand our met coal production capabilities in our Central Appalachia operations. We believe our low debt level, strong balance sheet and additional met coal production capabilities position Rhino to be a significant competitor in the world-wide coal markets.
We continually focus on safety as we have increased our year-over-year coal production capabilities to meet our committed sales during 2017. Our commitment to safety was recently evident as our Sands Hill operation in Ohio received recognition for the prevention of accidents in the workplace and celebrated over 500,000 hours of injury-free operations from June 2012 through December 2016. We are very proud of the employees that received this recognition and their commitment to a safe working environment.
The continued resurgence in coal prices, particularly met coal prices, allowed us to execute favorable sales contracts for 2017 that provide us with substantial upside opportunity if we can continue to control our costs. We invested additional capital at our Central Appalachia mining complexes in the first quarter to increase production and all of our complexes in Central Appalachia are currently operating as we have strong contracted sales positons for our steam and met coal production for 2017. Our additional production capacity for 2017 in Central Appalachia allows us to take advantage of the resurgent met coal market and obtain additional coal sales that could provide us financial upside for the remainder of the year.
Pennyrile improved their operational capabilities which led to productivity improvements. Pennyrile was a positive cash flow producer for Rhino during the first quarter of 2017 and we are confident this trend will continue throughout 2017 as we are fully contracted and the mining cost has improved from historical periods.
In Northern Appalachia, we shipped on our base-load sales contract at our Hopedale operation during the first quarter of 2017 and we continue to seek additional sales contracts for Hopedale to bring it to full production capacity for the remainder of 2017. Our Sands Hill operation in Northern Appalachia continued to produce positive results in the first quarter as we continue to control costs as we prepare this operation to cease coal production toward the end of the second quarter of 2017. The Sands Hill operations continued limestone sales exceeding the forecast and this helped bolster the financial results for this operation.
At Rhino Western, we have a fully contracted sales position for the first half of 2017 at our Castle Valley operation as well as a base level of sales for the last six months of 2017. We continue to explore additional sales opportunities for our remaining open positions in the back half of 2017and we expect this operation to be a positive cash flow contributor for 2017.
Overall, we are encouraged by the rally in prices in the coal markets and we believe upside exists for Rhino for the remainder of 2017 as we continue to focus on cost and cash generation to bring added value to our unitholders."
Coal Operations Update
Pennyrile's long-term sales contracts have committed sales of 1.3 million tons for full-year 2017, which represents Rhino's total capacity at current production levels.
Sales volume was 341,000 tons, versus 316,000 in the prior year and 286,000 in the prior quarter. For the first quarter, coal revenues per ton increased to $49.32 compared to $46.98 in the prior year and $47.57 in the prior quarter due to higher contracted sales prices.
Cost of operations per ton was $41.55 versus $40.16 in the prior year and $40.14 in the prior quarter. The increase was primarily due to the increase in production period-over-period.
Coal revenues were $23.3 million, versus $5.6 million in the prior year and $16.0 million in the prior quarter. The increase in revenue was primarily due to the increase in coal prices and demand for met coal tons sold from this region. Coal revenues per ton in the quarter was $72.00 versus $56.00 in the prior year and $60.14 in the prior quarter. Metallurgical coal revenue per ton in the quarter was $84.82 versus $81.61 in the prior year and $63.97 in the prior quarter. Steam coal revenue in the quarter was $52.31 per ton versus $51.02 in the prior year and $50.98 in the prior quarter. Sales volume was 324,000 tons in the quarter versus 100,000 in the prior year and 266,000 tons in the prior quarter.
Cost of operations per ton in the quarter was $56.82 versus $68.36 in the prior year. The decrease in cost per ton period-over-period was due to an increase in tons sold that was primarily due to the increase in met coal demand compared to the prior year.
Central Appalachia sales are fully contracted through 2017 at current production levels.
Coal revenues per ton in the quarter was $38.19 versus $38.08 in the prior year and $38.61 in the prior quarter. Coal revenues per ton increased year-over-year due to higher contracted prices for coal from our Castle Valley operation.
Sales volume was 191,000 tons versus 252,000 tons in the prior year and 247,000 tons in the prior quarter. The decrease in coal sales in the first quarter of 2017 was the result of losing approximately two weeks of production due to maintenance issues at our Castle Valley operation. The maintenance issues have been corrected and production has resumed to previous levels. The Partnership expects Castle Valley to ship additional tons in the second quarter of 2017 to make up for the lower tons sold in the first quarter.
Cost of operations per ton was $35.26 versus $32.48 in the prior year and $32.96 in the prior quarter. The increase in the cost of operations per ton was the result of the fixed operating costs being allocated to lower sales at our Castle Valley operation due to the maintenance issues discussed above.
Sales volume was 118,000 tons, versus 123,000 tons in the prior year and 103,000 tons in the prior quarter. Sales were lower period-over-period due to decreased sales volumes from our Sands Hills operation which is ceasing coal production during the second quarter of 2017 due to weak demand for coal from the Northern Appalachia region. The decrease at our Sands Hill operation was partially offset by an increase in sales from our Hopedale operation.
For the first quarter, coal revenues per ton decreased $17.19 to $37.10 due to lower prices at our Hopedale and Sands Hill operations compared to the prior year.
Cost of operations increased by $3.3 million to $6.2 million from $2.9 million in the prior year and $5.9 in the prior quarter. The prior year's cost of operations was impacted by a prior service cost benefit of $3.9 million resulting from the cancellation of the postretirement benefit plan at our Hopedale operation.
Maintenance capital expenditures for the first quarter were approximately $1.8 million.
Expansion capital expenditures for the first quarter were approximately $4.8 million.
Evaluating Financial Results
Rhino management uses a variety of financial measurements to analyze the Partnership's performance, including (1) Adjusted EBITDA, (2) coal revenues per ton and (3) cost of operations per ton.
Adjusted EBITDA. Adjusted EBITDA represents net income before deducting interest expense, income taxes and depreciation, depletion and amortization, while also excluding certain non-cash and/or non-recurring items. Adjusted EBITDA is used by management primarily as a measure of the operating performance of the Partnership's segments. Adjusted EBITDA should not be considered an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Because not all companies calculate Adjusted EBITDA identically, the Partnership's calculation may not be comparable to similarly titled measures of other companies. (Refer to "Reconciliations of Adjusted EBITDA" included later in this release for reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measures).
Coal Revenues Per Ton. Coal revenues per ton sold represents coal revenues divided by tons of coal sold. Coal revenues per ton is a key indicator of Rhino's effectiveness in obtaining favorable prices for the Partnership's product.
Cost of Operations Per Ton. Cost of operations per ton sold represents the cost of operations (exclusive of depreciation, depletion and amortization) divided by tons of coal sold. Rhino management uses this measurement as a key indicator of the efficiency of operations.
Overview of Financial Results
Total coal revenues increased approximately 41.2% period-over-period primarily due to the increase in production in Central Appalachia resulting from recent increases in coal prices and demand for met coal. Coal revenues per ton increased primarily due to a higher mix of higher priced tons sold from Central Appalachia compared to the same period of 2016. Total cost of production increased by 52.4% during the first quarter of 2017 primarily due to an increase of $11.6 million in total cost of operations in Central Appalachia, which was also the result of increased production in Central Appalachia due to increase in demand for met coal from this region. The increase in the cost of operations on a per ton basis was primarily due to the prior service cost benefit recognized in the Northern Appalachia operations for the first quarter of 2016 compared to the current period.
Rhino Resource Partners LP is a diversified energy limited partnership that is focused on coal and energy related assets and activities, including energy infrastructure investments. Rhino produces metallurgical and steam coal in a variety of basins throughout the United States.