Arch Coal's thermal coal franchise showed mixed results in the first quarter, as "still-inflated" utility stockpiles dampened domestic demand, though stronger natural gas prices bode well for coal demand for the rest of the year, the company said Tuesday.
The St. Louis-based coal producer said in its Q1 earnings statement that it is "encouraged by the persistent strength" in natural gas prices despite "an exceptionally mild winter and significant recent increases in drilling activity."
Should gas track near the current average for the 2017 strip at $3.39/MMBtu, "Arch expects the vast majority of Powder River Basin-served coal plants to dispatch in front of natural gas-fueled power plants," said the company.
"In fact, several large customers have re-entered the market in recent weeks to shore up their coal supplies in the face of improving coal consumption," the company said.
Arch's Powder River Basin sales came to 21.3 million st in the first quarter, down 2.3% from the prior quarter but up 29% from the year-ago quarter.
The average sales price in Q1 totaled $12.57/st, up from $12.41/st in Q4 but down from $13.24/st in the year-ago quarter. The quarterly increase was attributed to a more favorable mix of customer shipments.
Average cost per ton sold came to $10.33/st in Q1, up from $9.88/st in the previous quarter and $14.79/st in the year-ago quarter.
The quarterly increase was attributed to increased repair and maintenance expenses as well as higher fuel costs.
The company said it is maintaining its full-year cost guidance at $10.20/st to $10.70/st.
In Arch's "Other Thermal" segment, which includes its West Elk mine in Colorado and its Viper mine in the Illinois Basin, Q1 sales totaled 2.3 million st, down 8% from the prior quarter but up 184% from the year-ago quarter.
Average sales price totaled $35.51/st compared with $34.01/st last quarter and $32.55/st in the year-ago quarter, while average cost per ton sold came to $23.82/st in Q1 compared with $21.79/st in the prior quarter and $45.37/st in the year-ago quarter.
The increase in sales price was attributed to stronger export pricing from West Elk, though sales volumes declined due to fewer utility shipments from the mine due to the mild winter.
For the full-year, Arch said roughly 70.2 million st of PRB coal have been committed at an average price of $12.51/st, and 2.8 million st have been committed but unpriced. For 2018, the company said 33.8 million st of PRB coal have been committed at average sales price of $12.21/st.
In its other thermal segment, the company said 6.8 million st have been committed for 2017 at an average sales price of $35.65/st, and 2.9 million st have been committed in 2018 at an average sales price of $38.04/st.
Including metallurgical coal sales, the company?s Q1 earnings came in at $51.7 million, on revenues of $601 million compared with a loss of $207 million on revenues of $428.1 million in the year-ago quarter.
