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Signature Sponsor
May 10, 2018 - Rhino Resource Partners LP (OTCQB: RHNO) has announced its financial and operating results for the quarter ended March 31, 2018. For the quarter, the Partnership reported a net loss of $2.8 million and Adjusted EBITDA of $4.5 million, compared to a net loss of $2.0 million and Adjusted EBITDA of $4.8 million in the first quarter of 2017. Diluted net loss per common unit was $0.22 for the quarter compared to diluted net loss per common unit of $0.22 for the first quarter of 2017. Total revenues for the quarter were $54.8 million, with coal sales generating $54.3 million of the total, compared to total revenues of $51.5 million and coal revenues of $51.3 million in the first quarter of 2017.
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, 2018.
Rick Boone, President and Chief Executive Officer of Rhino’s general partner, stated, “We continued to produce positive financial results in the first quarter of 2018 with strong cash flow from operations that exceeded $8.3 million. Market demand has remained solid, especially in Central Appalachia, and met coal prices have held steady in the first part of this year. Our continued focus on direct relationships with international met coal customers has resulted in numerous spot sales in the first and second quarters of 2018. We expect these relationships will result in long-term sales agreements for our met coal that will provide us with potential financial upside for the remainder of 2018.
While we had positive results for the first quarter, we were adversely affected by weather conditions that caused delays in barging coal and poor rail service that affected our export shipments. The storms along the east coast created delays in getting vessels to port and created a backlog in rail service. Sales volumes were nearly 120,000 tons below forecast due to the items mentioned previously. We expect to catch up on our barge shipments in the second quarter at our Pennyrile operation and conversations with the railroads indicate that rail backlogs will be cleared by the end of the second quarter, which will help improve results for our NAPP and CAPP operations.
Our three year financing agreement completed at the end of 2017 has provided us the financial stability to focus on our operations and concentrate on growing Rhino. Our new financing partner, Colbeck, coupled with the continued support of our sponsor, Royal Energy Resources, Inc. (OTCQB: ROYE), as well as our financial partner Yorktown Partners LLC, provides a solid foundation to expand our business through organic growth projects or potential acquisitions.
Our continued commitment to safety was recently evident as our Rob Fork processing facility won the 2017 Sentinels of Safety Award for Small Coal Processing. Our Rob Fork employees worked 19,789 hours without a reportable or lost time injury. In addition, our Tug Fork prep plant was the recipient of the 2017 West Virginia Joseph A. Holmes Safety Award. We are very proud of the employees that received these awards and we applaud their commitment to a safe working environment.
At our Central Appalachia operations, we have contracted for all of our 2018 projected steam coal production and we have a small amount of 2018 met coal tons remaining to be booked. We continue to execute various spot sales with international met coal customers at attractive prices and we have been negotiating with domestic utility and industrial customers for steam coal sales for 2019 and 2020. Our production at Pennyrile and Castle Valley are completely sold out for 2018. We have contracted with various utility customers for steam coal sales in 2019 and 2020 at both Pennyrile and Castle Valley and we are responding to multiple utility solicitations for two and three year sales contracts that could increase our contracted sales positions at these operations. In Northern Appalachia, our Hopedale operation is sold out for the remainder of 2018 and we are seeking additional multi-year sales agreements to increase our future contracted sales position at this operation.
Our positive financial results for the first quarter of 2018 despite reduced coal shipments shows our potential to bring value to our unitholders and we are confident the remainder of 2018 will be positive for Rhino.”
Coal Operations Update
Central Appalachia
Coal revenues were $30.9 million, versus $23.3 million in the prior year and $25.1 million in the prior quarter. The increase in revenue was primarily due to the increase in demand for met and steam coal tons sold from this region. Coal revenues per ton in the quarter was $67.43 versus $72.00 in the prior year and $67.60 in the prior quarter. Metallurgical coal revenue per ton in the quarter was $90.58 versus $84.82 in the prior year and $85.83 in the prior quarter. Steam coal revenue in the quarter was $47.43 per ton versus $52.31 in the prior year and $53.45 in the prior quarter. Sales volume was 458,000 tons in the quarter versus 324,000 in the prior year and 371,000 tons in the prior quarter.
Cost of operations per ton in the quarter was $58.67 versus $56.82 in the prior year and $50.85 in the prior quarter. The increase in cost per ton was primarily due to the increase in the price of diesel fuel in the current quarter compared to prior periods.
Pennyrile
Pennyrile’s long-term sales contracts have committed sales of 1.3 million tons for full-year 2018, which represents Rhino’s total capacity at current production levels.
Sales volume was 300,000 tons, versus 341,000 in the prior year and 325,000 in the prior quarter. Barge shipments were lower in the first quarter of 2018 due to high water levels that delayed shipments.
For the first quarter, coal revenues per ton decreased to $38.67 compared to $49.32 in the prior year and $45.18 in the prior quarter due to lower contracted sales prices.
Cost of operations per ton was $40.01 versus $41.55 in the prior year and $39.39 in the prior quarter.
Rhino Western
Coal revenues per ton in the quarter was $35.95 versus $38.19 in the prior year and $36.49 in the prior quarter. Coal revenues per ton decreased year-over-year due to lower contracted prices for coal from our Castle Valley operation.
Sales volume was 224,000 tons versus 191,000 tons in the prior year and 282,000 tons in the prior quarter. The decrease in coal sales in the first quarter of 2018 compared to the prior quarter was due to lower customer demand for coal from our Castle Valley operation.
Cost of operations per ton was $26.87 versus $35.26 in the prior year and $29.17 in the prior quarter. The decrease in the cost of operations per ton was the result of lower operating costs.
Northern Appalachia
Sales volume was 90,000 tons, versus 91,000 tons in the prior year and 130,000 tons in the prior quarter. Sales were lower period-over-period due to decreased sales volumes from our Hopedale operation due to weak demand for coal from the Northern Appalachia region.
For the first quarter, coal revenues per ton was $41.14 versus $42.31 in the prior year $40.86 in the prior quarter. The decrease was the result of lower contracted sales prices at our Hopedale operation compared to the same period in 2017.
Cost of operations per ton was $57.21 compared to $49.42 in the prior year and $46.92 in the prior quarter. The increase was primarily due to an increase in maintenance costs and costs for outside services at our Hopedale operation.
Capital Expenditures
Maintenance capital expenditures for the first quarter were approximately $3.4 million.
Expansion capital expenditures for the first quarter were approximately $5.8 million.
Overview of Financial Results
Results for the three months ended March 31, 2018 included:
Adjusted EBITDA from continuing operations of $4.5 million and net loss from continuing operations of $2.8 million compared to Adjusted EBITDA from continuing operations of $4.7 million and a net loss from continuing operations of $1.9 million in the first quarter of 2017. Including net loss from discontinued operations of approximately $0.1 million, total net loss for the three months ended March 31, 2017 was $2.0 million while Adjusted EBITDA was $4.8 million. We did not incur a gain or loss from discontinued operations for the first quarter of 2018.
Basic and diluted net loss per common unit from continuing operations of $0.22 compared to basic and diluted net loss per common unit from continuing operations of $0.22 for the first quarter of 2017.
Coal sales were 1.1 million tons, which was an increase of 13.3% compared to the first quarter of 2017, primarily due to increased sales from Central Appalachia operations.
Total revenues and coal revenues of $54.8 million and $54.3 million, respectively, compared to $51.5 million and $51.3 million, respectively, for the same period of 2017.
Coal revenues per ton of $50.60 compared to $54.15 for the first quarter of 2017, a decrease of 6.6%.
Cost of operations from continuing operations of $49.7 million compared to $43.2 million for the same period of 2017 as production was increased in the Central Appalachia region to meet the increase demand for met and steam coal during the first quarter of 2018. We also experienced a cost increase for diesel fuel at our Central Appalachia mining operations.
Cost of operations per ton from continuing operations of $46.29 compared to $45.68 for the first quarter of 2017, an increase of 1.3%.
Total coal revenues increased approximately 5.9% period-over-period primarily due to an increase in met and steam tons sold in Central Appalachia due to increased demand for met and steam coal from this region. Coal revenues per ton decreased primarily due to lower contracted sales prices during the first quarter of 2018 compared to the same period in 2017. Total cost of production increased by 14.8% during the first quarter of 2018 primarily due to an increase of $8.5 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 and steam coal from this region.
Segment Information
The Partnership produces and markets coal from surface and underground mines in Kentucky, West Virginia, Ohio and Utah. For the quarter ended March 31, 2018, the Partnership had four reportable business segments: Central Appalachia, Northern Appalachia, Rhino Western and Illinois Basin. Additionally, the Partnership has an Other category that includes its ancillary businesses.
About Rhino Resource Partners LP
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.
To read the full quarterly report with financial figures, please click here.
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