By Greg Johnson
February 27, 2019 - To say the past three months have been rocky for Cloud Peak Energy would be a gross understatement.
Just how rocky is anyone’s guess, as the publicly traded company has yet to release its 2018 year-end financial report. In fact, Cloud Peak hasn’t even scheduled a release date for a public earnings call, which is mandated by federal law to happen within 60 days after the end of the fiscal year, which is Friday.
The company could file for a 15-day extension, but hasn’t announced any intention to do that, either. Cloud Peak declined to respond to repeated requests for information about when it will file its 2018 year-end financials.
With the thermal coal industry already buzzing that Cloud Peak Energy is on the brink of bankruptcy, its silence about the 2018 fourth-quarter and year-end reports only encourages more speculation, said Robert Godby, director of the Department of Economics and Finance at the University of Wyoming and one of the state’s leading energy industry economists.
“It’s a tough market for them and this will be a really important annual report and really important earnings call,” he said. “People are really going to want to know the company’s outlook going forward.”
He said it’s not a surprise Cloud Peak also hasn’t filed for an extension. That’s a move that would happen at the last minute and only puts off having to make the year-end report by a short time. It also sends a negative message to the marketplace.
“You don’t want to file for an extension unless you absolutely have to … because it can also be misread,” he said. “They have to really worry about how people read between the lines in the marketplace.”
How the company performed in the fourth quarter is going to be telling and will include information about if and/or how much of its contractual obligations were missed because of an especially challenging year that saw a dramatic reduction in production at Cloud Peak’s flagship Antelope mine, said Bob Burnham, a longtime independent coal analyst based in Colorado.
He said it’s easy to speculate about what Cloud Peak’s silence means, but he warns against reading too much into it.
“This just tells me that they are holding their cards close while they’re still trying to figure out some things,” Burnham said. “It very well could be they’re planning (a bankruptcy) or working on a buyout, but who knows?”
Still, Burnham admits that especially during a time when the market can change on a tweet or social media post, making guesses about what could be happening behind closed doors at Cloud Peak Energy is going to happen.
Those fourth-quarter facts are what everybody’s waiting for, Godby said. What we know is that Cloud Peak had a bad first three quarters of 2018. Whether that continued for the fourth quarter and how much of an overall impact the year had on the company is what industry analysts are waiting for, he said.
“The big question is what is the news on that strategic alternatives play?” Godby said, referencing a Nov. 13 announcement that Cloud Peak is considering its financial options, up to and including selling the company.
What’s really dragging the company’s bottom line is its debt load, he said. About $300 million of its overall $400 million in debt is due in a couple of years. Cloud Peak just isn’t mining enough coal and not realizing enough of a return on the coal it can sell to make those payments.
Over the past year, the company has made several cost-saving moves to trim any excess fat from its bottom line. Cloud Peak closed its downtown Gillette office and moved its administration to the Cordero Rojo mine. It has since sold that building to Campbell County for nearly $3 million. It eliminated health care coverage for retirees, and last week announced the layoffs of 15 salaried employees, mostly from its legislative affairs and public relations departments.
Because the debt deadline is still two years out, there’s no hurry for Cloud Peak or its creditors to act, Godby said. It also means it’s likely other large Powder River Basin coal producers like Arch Coal and Peabody Energy will take a wait-and-see approach to how it all shakes out.
“What the Powder River Basin really needs is consolidation (of production),” he said. “But you really can’t close a mine, because the moment you do the remediation is put into full swing.
“If a company is going to do gown now, you might as well wait and watch what happens. There’s no rush. The payments are still two years out and everybody can wait and see where Cloud Peak’s going.”
But until Cloud Peak finally files its much-anticipated 2018 year-end report, speculation will continue to swirl, Burnham said.
“That’s real easy to do,” he said. “All you can do is try to clamp down and avoid rumors, but by clamping down you also can start rumors. You get the conspiracy folks out there who think everything’s going wrong and it’s a big plot. Rumors are more damaging than facts.”