• EBITDA of $40.6 million, a 31 percent increase over prior year
• EBITDA per ton in Appalachia of $12.14, $4.78 higher than prior year
• Metallurgical coal guidance of 7.5 million tons for 2010 reiterated
• Recapitalization provides capital for growth

St. Louis, July 27 – Patriot Coal Corporation today reported its financial results for the quarter ended June 30, 2010. The Company reported revenues of $539.0 million, EBITDA of $40.6 million, net loss of $13.6 million and loss per share of $0.15 for the 2010 second quarter. EBITDA for the 2010 second quarter increased $9.7 million, or 31 percent, compared with the year-ago quarter. For the six months ended June 30, 2010, the Company reported revenues of $1.0 billion, EBITDA of $85.8 million, net loss of $9.3 million and loss per share of $0.10. EBITDA for the first six months of 2010 increased $33.0 million, or 63 percent, compared with the first six months of 2009.

"Our EBITDA per ton in the Appalachia segment improved to more than $12 during a quarter made challenging by two longwall moves, a mine closure and increased regulatory activities. Although heightened regulatory oversight is impacting results, Patriot is cooperating with the agencies to improve our already strong safety program," said Chief Executive Officer Richard M. Whiting. "Looking forward, we are encouraged by improving thermal coal markets. And as global economies improve, we expect the benefits of higher metallurgical coal prices we experienced during the quarter to continue."

Financial Overview

Sales in the second quarter totaled 8.1 million tons, including 6.2 million tons of thermal and 1.9 million tons of metallurgical coal. This was slightly lower than the 8.3 million tons sold in the second quarter of 2009, which included 7.3 million tons of thermal and 1.0 million tons of metallurgical coal. Production in the 2010 second quarter was approximately 1.0 million tons lower than the year-ago period due to longwall moves, increased regulatory activities and the closure of the Samples mine in late 2009. Purchased coal and coal sold from inventory brought sales volume up to near the prior-year level. Higher metallurgical coal shipments in the 2010 second quarter reflect the Company's ramping up of met coal, in particular the increased sale of Panther tons as met product.

Revenues in the 2010 second quarter were $539.0 million, compared with $507.0 million in the prior year second quarter. The $32.0 million increase in the 2010 second quarter compared to the prior year largely resulted from higher average selling prices.

EBITDA in the 2010 second quarter was $40.6 million, compared with $30.9 million in the same quarter of 2009. One of the Company's strategies is to actively manage its portfolio. During the quarter, the Company recognized gains of $17.8 million primarily related to transactions that added reserves to enhance the Wells and Corridor G complexes in exchange for non-strategic Central Appalachia reserves. EBITDA for the second quarter 2009 benefited from gains related to renegotiated sales agreements.

During the 2010 second quarter, the Company experienced a major roof fall at the Harris mine. The mine was near the end of its mine life and had been expected to remain in production through mid-2011. Safety considerations led the Company to the decision to close Harris, as conditions around the roof fall continued to deteriorate. The closing of the mine resulted in a restructuring and impairment charge of $14.8 million in the 2010 second quarter. The charge included a $2.8 million non-cash impairment component related to equipment that will be abandoned. Additionally, the charge included a restructuring component totaling $12.0 million for payment of obligations that will be made with no future economic benefit for remaining operational contracts.

Operating cost per ton totaled $56.69 in the 2010 second quarter, compared with $52.41 in the prior year second quarter. More than 60 percent of the increase in cost per ton was a result of lower production due to more comprehensive regulatory inspections and related ventilation adjustments in a number of our mines, as well as roof falls at the Harris and Highland complexes. Additionally, per ton costs in the 2010 quarter were negatively impacted by lower production at the Panther and Federal complexes, where downtime associated with scheduled longwall moves occurred during the quarter.

Production volume played a large role in the year-over-year increase in cost per ton. Patriot's 2010 second quarter production was 0.4 million tons lower than the 2009 level, in addition to a 0.6 million year-over-year reduction in volume from the closing of the Samples mine in late 2009.

Accretion related to shipments on below-market sales and purchase contracts obtained in the Magnum Coal acquisition in July 2008 totaled $33.7 million in the second quarter of 2010, compared with $60.7 million in the prior year and $25.3 million in the 2010 first quarter. Lower accretion in 2010 resulted as certain contracts acquired with Magnum expired at the end of 2009, and the associated accretion was fully recognized by that time.

Credit and Capital

During the quarter, the Company enhanced its liquidity through a comprehensive recapitalization. Patriot extended the maturity of its revolving credit facility through 2013, with commitments totaling $427.5 million. The Company also completed a public debt offering, issuing $250 million of 8.25 percent senior debt due in 2018. And Patriot expanded the borrowing capacity under its accounts receivable securitization program to $125 million.

As of June 30, 2010, Patriot had a cash balance of $239.2 million and no borrowings on its revolving credit facility or its receivables securitization program. Available liquidity was over $450 million at June 30, 2010, more than twice the Company's liquidity at the end of 2009.
Capital expenditures totaled $28.6 million in the 2010 second quarter, compared with $15.8 million in the year-ago quarter. Capital expenditures in the second quarter included spending at the Black Oak mine, which is expected to begin producing high-quality metallurgical coal by the end of the third quarter.

Safety

During the quarter, seven of the Company's operations were recognized for their strong 2009 safety performance by the West Virginia Office of Miners Health, Safety & Training. Additionally, the Samples Highwall Miner operation in the Paint Creek complex was presented the 2009 District 4 Pacesetter Award by the U.S. Mine Safety and Health Administration.

Market Overview

"Global blast furnace utilization in the steel industry continues to be in the 85 to 90 percent range, while U.S. utilization has stabilized at 70 to 75 percent. Typically, global markets slow in the third quarter as a result of vacations, especially in Europe. However, long-term fundamentals remain intact," noted Whiting. "Looking to Asia, over many years the Chinese government has consistently demonstrated an ability to drive solid growth in their economy. We believe Chinese GDP and demand for steel will remain strong as we look toward 2011, driving continued strength in met coal imports."

"Metallurgical coal markets remain strong, particularly in the higher grades. Grade A high-vol met coal remains in short supply and continues to command a very favorable price. Supply of grade B met coal is currently not as tight, causing pricing to ease somewhat from a few months ago," commented Whiting. "However, pricing remains very favorable compared to historical levels."

"As we have previously disclosed, we expect to sell about 7.5 million tons of met coal in 2010. Production from our Black Oak mine, as well as incremental Panther production sold as met, are expected to offset the loss of Harris tons," continued Whiting. "We intend to open the Black Oak mine this year, installing the initial continuous miner unit by the end of the third quarter. A second unit is expected to be operational in early 2011," continued Whiting.

"Patriot has a number of organic met coal projects in various stages of development that will use our existing infrastructure, including a mine in the Peerless seam at the Kanawha Eagle complex, several projects feeding into the Rocklick complex, and the Washington mine in Logan County. As we move through 2011, we will move forward on these projects in a disciplined manner," stated Whiting.

"Turning to thermal markets, cooling degree days in the eastern U.S. in May and June were more than 40 percent above normal levels, which has lowered coal inventories. Additionally, higher natural gas prices in 2010 compared with 2009 will likely result in coal regaining market share this year," noted Whiting. "Increasing customer demand and lower inventory levels, coupled with supply constraints in Central Appalachia, should improve thermal markets as we look forward. We believe pricing for high-Btu Central Appalachian thermal coal, in particular, will further strengthen as a result."

Outlook

For 2010, the Company currently anticipates full year sales volume in the range of 32.0 to 34.0 million tons, with sales of 16.0 to 18.0 million tons for the July to December period. This includes metallurgical coal sales of approximately 7.5 million tons for the year.

Cost per ton for the remainder of 2010 is expected to be in the range of $56.00 to $59.00 for the Appalachia segment. Cost per ton for the Illinois Basin segment is expected to be in the $39.00 to $42.00 range for the remainder of 2010. Volumes were negatively impacted by increased regulatory activity and more conservative interpretations of existing regulations in the 2010 second quarter. The Company expects a heightened level of regulatory oversight will continue through the balance of the year, resulting in lower production and increased cost per ton in both operating segments.

"We priced approximately 0.3 million tons of metallurgical coal for 2010 delivery at an average price of nearly $185 at the mine. This brings the average price of our booked metallurgical business up to $115 per ton for the remainder of the year," noted Patriot Senior Vice President and Chief Financial Officer Mark N. Schroeder.

"At this point, we are largely committed and priced for 2010 business, with about 0.5 million tons remaining unpriced. Of this amount, about 0.3 million are met quality, primarily representing production from our Panther mine," concluded Schroeder.