Foresight Energy LP Reports First Quarter 2020 Results
May 15, 2020 - Foresight Energy LP (“Foresight” or the “Partnership”) (OTC Pink: FELPQ) today reported financial and operating results for the first quarter ended March 31, 2020. Foresight generated quarterly coal sales revenues of $99.1 million on sales volumes of 3.2 million tons, resulting in net income of $35.7 million (which includes $85.1 million in gains on reorganization items associated with the filing under Chapter 11 of the United States Bankruptcy Code) and Adjusted EBITDA of $12.1 million. Foresight mines safely and efficiently produced 3.8 million tons during the quarter.
Filing Under Chapter 11 of the United States Bankruptcy Code
On March 10, 2020 (the “Petition Date”), Foresight filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the “Foresight Chapter 11 Cases”) in the United States Bankruptcy Court for the Eastern District of Missouri (the “Bankruptcy Court”). For additional information on the Foresight Chapter 11 Cases, refer to Foresight’s amended Current Reports on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020.
Consolidated Financial Results
Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019
Coal sales totaled $99.1 million for the first quarter 2020 compared to $267.3 million for the first quarter 2019, representing a decrease of $168.2 million, or 63%. The decrease in coal sales revenue from the prior year period was due to lower coal sales volumes combined with lower coal sales realization per ton sold. Coal sales volumes for the three months ended March 31, 2020 were lower as compared to the prior year period due to lower domestic and export market demand. Lower overall coal sales realizations were primarily due to decreased pricing on export volumes, which were a function of market considerations as well as modified sales terms of our export contracts, whereby our mines are the delivery point of our export volumes in exchange for our customers bearing the responsibility and cost of transporting the coal to export facilities on the Gulf of Mexico.
Cost of coal produced was nearly $80.0 million for the first quarter 2020 compared to nearly $134.0 million for the first quarter 2019. The decrease in cost of coal produced (excluding depreciation, depletion and amortization) from the prior year period was due to an overall decrease in produced tons sold, offset by a slight increase in the cash cost per ton sold. The increase in cash cost per ton sold was primarily due to reduced production in response to challenging market conditions.
Transportation costs during the three months ended March 31, 2020 decreased $57.7 million as compared to the three months ended March 31, 2019. This decrease was due to a decrease in produced tons sold, a larger percentage of our sales going to the export market during the prior year period, as well as modified sales terms of our export contracts, whereby our mines are the delivery point of our export volumes in exchange for our customers bearing the responsibility and cost of transporting the coal to export facilities on the Gulf of Mexico.
The decrease in selling, general and administrative expense for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 was primarily due to decreased sales and marketing expenses resulting from lower export sales volumes.
Interest expense, net for the three months ended March 31, 2020 decreased as compared to the three months ended March 31, 2019 primarily as a result of the Foresight Chapter 11 Cases, in which interest on pre-petition debt obligations subsequent to the Petition Date is not required to be incurred or paid.
Revisions to the mine plans and modifications under a restructuring support agreement with Natural Resource Partners LP (the “NRP Restructuring Support Agreement”) associated with the Foresight Chapter 11 Cases resulted in a decrease of $5.4 million in interest expense on sale-leaseback financing arrangements during the three months ended March 31, 2020 as compared to the prior year period. We account for such changes by adjusting, in the period of the change, the life-to-date interest previously recorded on the sale-leaseback to reflect the new effective interest rate as if it was applied from the inception of the transaction (i.e., retroactively applied).
Reorganization items includes $12.8 million of legal and financial advisor professional fees related to the Foresight Chapter 11 Cases. We expect professional fees to continue to be substantial until such time that these issues are remediated. Also included in reorganization items are gains totaling $97.9 million on the sale-leaseback financing arrangements resulting from modifications under the NRP Restructuring Support Agreement.
Adjusted EBITDA was $12.1 million for the first quarter 2020 compared to $65.5 million for the first quarter 2019. The decrease in Adjusted EBITDA was due primarily to the overall decreased sales volumes and lower coal sales realization per ton in the current quarter.
During the first quarter 2020, Foresight used $12.2 million of cash in operations, had capital expenditures totaling $9.9 million, and had cash provided from financing activities of $49.2 million, consisting of $55.0 million of borrowings on the Partnership’s debtor-in-possession credit facility, offset by fees and other miscellaneous items.
Guidance for 2020
Based on the Foresight Chapter 11 Cases and the uncertainty, social and economic, surrounding the domestic and global impact the coronavirus disease (COVID – 19) pandemic will have on our coal markets, the Partnership is not providing guidance for 2020 at this time.
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