--  EBITDA increases to $30.9 million; 41 percent improvement over prior quarter
--  Key metallurgical and legacy contracts restructured
--  Federal longwall running well
--  Panther longwall move and equipment upgrade underway
--  Operating costs per ton decrease $1.35 compared to first quarter
--  Liquidity exceeds $215 million

St. Louis, July 28 – Patriot Coal Corporation today reported its financial results for the quarter ended June 30, 2009. The Company reported revenues of $507.0 million, EBITDA of $30.9 million, net income of $31.4 million and diluted earnings per share of $0.39 for the 2009 second quarter. EBITDA for the 2009 second quarter improved 41 percent, or $9.1 million over the 2009 first quarter amount. For the first half of 2009, Patriot reported revenues of $1.0 billion, EBITDA of $52.8 million, net income of $63.5 million, and diluted earnings per share of $0.80.

Operating costs and expenses in the second quarter and first half of 2009 were reduced by $61.7 million and $138.5 million, respectively, for accretion related to shipments on below-market sales and purchase contracts obtained in the Magnum Coal acquisition in July 2008.

"During the quarter, Patriot made significant progress restructuring metallurgical and thermal customer contracts. In particular, we restructured an agreement with an important metallurgical coal customer that resulted in a cash payment for reduced shipments. As part of our previously-announced Management Action Plan, we also renegotiated two below-market thermal contracts, improving EBITDA per ton for future shipments," said Patriot Chief Executive Officer Richard M. Whiting.

"Against the backdrop of soft demand and high inventory levels for thermal coal, as well as ongoing surface mining permit delays, we continue to evaluate various operating scenarios in order to quickly respond to challenges and opportunities as they arise," continued Whiting. "Our operating team has responded to the challenges of an extremely depressed coal market in the first half by improving productivity and reducing costs. We continue to refine our operating plans to match the demand for our products, and successful execution against these plans will serve us well as markets return."

Commenting on operating costs for the quarter, Patriot Senior Vice President and Chief Financial Officer Mark N. Schroeder noted, "Our cost per ton in the Appalachia segment was $1.98 lower than in the 2009 first quarter. Although a portion of this decrease was driven by fewer metallurgical tons in our total mix, I am encouraged by the progress our operations have made on cost initiatives. And, the cost per ton improvement came about as we absorbed costs relating to the suspension and closure of mines, as well as reduced work schedules at certain ongoing operations."

Financial Overview

"The Federal mine, producing nearly one million tons each quarter in 2009, is back to its normalized level," added Schroeder. "At the Panther mine, production improved 10 percent compared to first quarter, but is still short of normalized levels. Panther is currently in a longwall move, and importantly, we are upgrading significant components of the longwall mining equipment. We expect productivity and reliability to improve at Panther in future quarters with this new and refurbished equipment, coupled with changes in the mine plan to bypass difficult geologic areas."

Tons sold in the second quarter included 7.3 million tons of thermal and 1.0 million tons of metallurgical coal, compared to 7.1 million and 1.4 million tons of thermal and metallurgical coal, respectively, in the 2009 first quarter. Metallurgical volumes were negatively impacted by customer deferrals. During the quarter, the Company successfully restructured a metallurgical coal contract and received payment to compensate for shortfalls in contracted shipments in the first half of 2009, primarily in the second quarter.

Total sales of 8.3 million tons in the 2009 second quarter represented an increase of 2.4 million tons from the prior year, largely a result of Central Appalachia thermal coal sales from the acquired Magnum mines. For the first half of 2009, shipments of 16.7 million tons represented an increase of 5.8 million from the prior year, also largely driven by the Magnum acquisition.

Revenues in the 2009 second quarter were $507.0 million, a decrease of $21.9 million from the 2009 first quarter. Revenues in the Appalachia Mining Operations segment were down $38.4 million compared to the 2009 first quarter, primarily due to the lower metallurgical volumes. Revenues in the Illinois Basin segment of $70.0 million were in-line with first quarter revenues of $69.4 million.

Revenues in the 2009 second quarter increased $167.3 million over the prior year amount, primarily due to the addition of the Magnum results, partially offset by lower metallurgical coal sales. Revenues for the first half of 2009 compared to 2008 increased $411.9 million, primarily due to the addition of the Magnum results, as well as higher average selling prices.

EBITDA of $30.9 million in the 2009 second quarter grew by $9.1 million, compared to the 2009 first quarter. Higher EBITDA was driven by reduced costs, contract restructurings and a gain from a property transaction in which Patriot exchanged surface land for reserves contiguous to its Highland operation. EBITDA was $41.1 million in the year-ago quarter. EBITDA for the first six months of 2009 was $52.8 million, compared to $58.2 million for the first half of 2008.

Credit and Capital

In June, the Company completed a public offering of 12 million shares of its common stock, netting proceeds of $89.1 million. A portion of the proceeds was used to repay the outstanding balance on the revolving credit facility.

As of June 30, 2009, Patriot had no borrowings on its revolving credit facility, and a cash balance of $49.2 million. Letters of credit decreased slightly in the quarter to $332 million, leaving unused borrowing capacity of $168 million on its $500 million facility. Including the Company's cash balance, Patriot had available liquidity of $217 million at June 30, 2009.

Total debt was $204.8 million as of June 30, 2009, consisting mainly of the 3.25 percent convertible debt due in 2013. Capital expenditures totaled $15.8 million in the 2009 second quarter, as the Company continued to tightly control spending. Capital expenditures are expected to be less than $100 million for the full year, which is significantly lower than historical averages for the combined operations.

"We started the quarter with minimal cash and $65 million in borrowings against our facility. We ended the quarter with almost $50 million of cash and no borrowings. In addition to the roughly $90 million generated from the equity offering, our operations generated about $20 million cash during the quarter," continued Schroeder. "We expect cash from operations to continue to fund our 2009 capital expenditure needs."

Subsequent to June 30, the Company increased its revolving credit facility by $22.5 million, with two new financial institutions entering the syndication. The facility, which matures in October 2011, now totals $522.5 million. Concluded Schroeder, "We are delighted to welcome new institutions into our credit facility consortium, and appreciate their vote of confidence in Patriot's future and the expectation of future improvement in coal markets."

Safety

Maintaining safe operations continues to be a top priority at Patriot. During the first half of the year, Patriot's safety incidence rate improved to 3.49 per 200,000 hours worked. This compares to a safety incidence rate of 3.75 per 200,000 hours worked during 2008.

Market Overview

Thermal coal markets remained challenging in the second quarter, as soft demand for electricity, low natural gas prices and high coal inventory levels set the tone. In the U.S., electricity generation for the quarter was down 4.8 percent, primarily due to reduced industrial demand. These factors contributed to a 7.0 percent reduction of thermal coal consumption at U.S. electric generation facilities during the quarter. Inventories at eastern facilities at the end of second quarter were approximately 31 million tons higher than a year ago. U.S. thermal coal spot pricing has remained relatively flat in the second quarter, at levels in some cases below the industry's cost of production.

Steel production in the U.S. increased 4.7 percent from the prior quarter, due to restocking and increased demand. Utilization of U.S. steel mills improved from 40 percent early in the second quarter to 49 percent by quarter-end. Global blast furnace iron production increased 7.0 percent from the prior quarter, driven by China, Russia, South Korea and India. As a result, domestic and global demand for metallurgical coal has stabilized, and steel producers are accepting more consistent deliveries of coal, with fewer deferrals.

Coal production has continued to decrease in response to reduced demand and low spot prices. The Company now estimates 2009 U.S. production will be reduced by more than 100 million tons from 2008 levels. As the global economy improves, the Company expects metallurgical coal demand to rebound and thermal coal inventory levels to decline in the first half of 2010. As demand for electricity and steel returns to more normal volumes, the Company expects the global energy shortage, and specifically the coal shortage, to once again be very apparent.

Outlook

For 2009, the Company anticipates sales volume in the range of 33.5 to 35.0 million tons, including 17.0 to 18.5 million tons for the July to December period. Full-year cost per ton is expected to be in the range of $55.00 to $58.00 for the Appalachian segment and $36.00 to $38.00 for the Illinois Basin segment. The Company will continue to balance production with demand in a disciplined manner, recognizing that permitted reserves of quality coals will provide a better return in future markets.