August 3, 2018 - Foresight Energy LP (NYSE: FELP) today reported financial and operating results for the second quarter ended June 30, 2018. Foresight generated coal sales revenues of nearly $270.0 million on sales volumes of 5.9 million tons resulting in a net loss attributable to limited partner units of $29.2 million, Adjusted EBITDA of $104.1 million, and cash flows from operations of $30.6 million. Net loss attributable to limited partner units reflects the receipt of $44.1 million of insurance proceeds related to the combustion event at the Partnership’s Hillsboro operation and includes a $110.7 million non-cash impairment charge and a $69.1 million non-cash contract benefit related to the previously announced closure of the Partnership’s Hillsboro operation.
“The second quarter was another successful period for Foresight, as we were able to take advantage of a strong export market to realize significant year-over-year improvements in our sales volumes,” said Mr. Robert D. Moore, Chairman, President and Chief Executive Officer. “Foresight remains well-positioned to continue capitalizing on the strong export market for our product. Furthermore, with all of our calendar year 2018 longwall moves completed, we expect to continue to improve on our industry-leading cost structure over the remainder of the year.”
Foresight also announced that due to the Partnership’s operating performance during the second quarter, the Board of Directors of its General Partner approved a quarterly cash distribution of $0.0565 per unit from retained excess cash flow. The distribution is payable on August 31, 2018 for unitholders of record on August 21, 2018.
Second Quarter Consolidated Financial Results
Coal sales totaled nearly $270.0 million for the second quarter 2018 compared to $204.5 million for the second quarter 2017, representing an increase of $65.5 million, or 32%. The increase in coal sales revenues was due to higher coal sales volumes combined with higher coal sales realization per ton sold. Coal sales volumes and coal sales realization per ton sold were higher due to increased export sales, which experienced more favorable API2 pricing during 2018.
Cost of coal produced was $137.0 million, or $23.70 per ton sold, for the second quarter 2018 compared to $105.8 million, or $21.88 per ton sold, for the second quarter 2017. The increase was due to an increase in produced tons sold as well as a higher cash cost per ton sold resulting primarily from increased expenses relating to royalties, subsidence, and two longwall moves during the second quarter. The higher royalty and subsidence expenses are functions of which coal reserve leases and land parcels that we currently mine. Royalty expense also increased because of higher coal sales realizations per ton.
Transportation costs increased approximately $30.7 million from the second quarter 2017 to the second quarter 2018 due to a higher percentage of sales going to the export market during the current year period and the additional transportation and transloading costs associated therewith.
In April 2018, the permanent closure of the Hillsboro complex was announced. As a result, Foresight recorded an aggregate impairment charge of $110.7 million in the second quarter of 2018. Also related to the permanent closure of Hillsboro, Foresight recognized a benefit of $69.1 million associated with the write-off of an unfavorable royalty agreement during the second quarter of 2018.
Other operating (income) expense, net increased $29.5 million for the second quarter 2018 compared to the second quarter 2017 primarily due to the receipt of $43.0 million in payments from the insurance companies in the current period compared to $12.8 million in the prior year period. An additional $1.1 million of insurance proceeds related to the recovery of mitigation costs was recorded to cost of coal produced (excluding depreciation, depletion and amortization). Foresight continues to pursue additional remedies under its insurance policies; however, there can be no assurances that Foresight will receive any further insurance recoveries related to the Hillsboro combustion event.
During second quarter 2018, Foresight generated operating cash flows of $30.6 million and ended the period with $38.8 million in cash and $124.0 million of available borrowing capacity, net of outstanding borrowings and letters of credit, under its revolving credit facility. Capital expenditures for the quarter ended June 30, 2018 totaled $15.7 million compared to $21.7 million for the quarter ended June 30, 2017.
Guidance for 2018
Based on Foresight’s remaining contracted position, second quarter and year-to-date performance, and its current outlook on pricing and the coal markets in general, the Partnership is affirming and updating the following guidance for 2018:
Sales Volumes – Based on current committed position and expectations for the remainder of 2018, Foresight is projecting sales volumes to be between 22.0 and 22.8 million tons, with at least 8.5 million tons expected to be sold into the international market.
Adjusted EBITDA – Based on the projected sales volumes and operating cost structure, Foresight currently expects to generate Adjusted EBITDA in a range of $300 to $330 million.
Capital Expenditures – Total 2018 capital expenditures are estimated to be between $70 and $80 million.
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