Foresight Energy LP Reports Second Quarter 2019 Results
August 7, 2019 - Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE: FELP) today reported financial and operating results for the second quarter ended June 30, 2019. Foresight generated second quarter coal sales revenues of $224.5 million on sales volumes of 5.0 million tons, resulting in a net loss of $33.7 million, and Adjusted EBITDA of $45.1 million. Production was strong with the mines safely and efficiently producing 5.4 million tons during the quarter.
“Overall coal demand continues to be affected by mild temperatures and very low natural gas prices. In particular, our export markets experienced declining pricing as well as logistical difficulties owing to high river levels and swift currents near the port facilities. These factors presented significant challenges to our second quarter 2019 results,” remarked Mr. Robert D. Moore, Chairman, President, and Chief Executive Officer. “To compete in this challenging market, we continue to pursue additional outlets for our production volumes, we reduced planned capital spending for the remainder of 2019, and we continue to focus on maintaining our low cost structure so as to maintain financial flexibility and preserve liquidity.”
Second Quarter Consolidated Financial Results
Coal sales totaled $224.5 million for the second quarter 2019 compared to $270.0 million for the second quarter 2018, representing a decrease of $45.5 million, or 16.9%. The decrease in coal sales revenues was driven by a nearly 15%, or approximately 1.0 million ton, decrease in tons sold combined with a decrease in coal sales realizations of 2.5%, or $1.17 per ton sold. The decreases in coal sales volumes and realizations were the result of reduced export sales due to challenging river conditions and depressed export market pricing.
Cost of coal produced was $122.2 million for the second quarter 2019 compared to nearly $137.0 million for the second quarter 2018. The decrease in cost of coal produced was due to an overall decrease in produced tons sold offset by an increase in the cash cost per ton sold. The increase in cash cost per ton sold was primarily related to sales volumes.
Transportation costs decreased approximately $9.2 million from the second quarter 2018 to the second quarter 2019 because of a decrease in produced tons sold during 2019 and a larger percentage of our sales going to the export market during 2018, which have higher associated transportation and transloading costs. These decreases were slightly offset by increased costs owing to high river levels at the export facility near New Orleans.
The decrease in selling, general and administrative expense during the second quarter 2019 was primarily due to decreased sales and marketing expenses resulting from lower sales volumes and legal expenses incurred in the prior year period associated with the Hillsboro and Macoupin litigation matters settled in October of 2018.
Interest expense during the second quarter 2019 was comparable to interest expense during the second quarter 2018 primarily as a result of lower overall outstanding principal balances offset by additional outstanding borrowings on our revolving credit facility.
Adjusted EBITDA was $45.1 million for the second quarter 2019 compared to $104.1 million for the second quarter 2018. The decrease in Adjusted EBITDA was due primarily to the receipt of $44.1 million of insurance proceeds in the prior year period, plus the decreased sales volumes and lower coal sales realization per ton in the current year period.
During the second quarter 2019, Foresight used $8.3 million in cash flows from operations and ended the quarter with nearly $3.0 million in cash on hand. Available borrowing capacity under the revolving credit facility, net of outstanding borrowings and letters of credit, was $44.7 million as of June 30, 2019. Capital expenditures for the second quarter 2019 totaled $26.9 million compared to $15.7 million for the second quarter 2018. The increase in capital expenditures was primarily the result of the completion of a new portal facility at the Sugar Camp complex and the resumption of mining activity at Hillsboro’s Deer Run Mine, including the development of a longwall panel.
Guidance for 2019
Based on Foresight’s contracted position, recent performance, and its current outlook on pricing and the coal markets in general, the Partnership is affirming and updating the following guidance for 2019:
Sales Volumes – Based on current committed position and expectations for 2019, Foresight is projecting sales volumes to be between 21.0 and 22.0 million tons, with over 6.0 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 $240 to $270 million.
Capital Expenditures – Total 2019 capital expenditures are estimated to be between $75 and $85 million.
About Foresight Energy LP
Foresight is a leading producer and marketer of thermal coal controlling nearly 2.1 billion tons of coal reserves in the Illinois Basin. Foresight currently operates two longwall mining complexes with three longwall mining systems (Williamson (one longwall mining system) and Sugar Camp (two longwall mining systems)), one continuous mining operation (Macoupin) and the Sitran river terminal on the Ohio River. Additionally, Foresight has recently resumed continuous miner production at its Hillsboro complex and continues to evaluate potential future mining options. Foresight’s operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets.