Following Cloud Peak Energy's 10-K report filed March 15, and the producer's decision to delay an interest payment, analysts expect the company to file for Chapter 11 bankruptcy by April 14, when the interest payment is due.
Seaport Global analysts Mark Levin and Nathan Martin wrote Saturday morning they will discontinue coverage of Cloud Peak going forward given the expectation of Chapter 11 bankruptcy.
Additionally, Seaport does not expect a buyer for the company's assets.
Cloud Peak, the analysts wrote, is likely "already ceding market share to Arch and Peabody as customers are well aware of the company's troubles."
For 2019, the producer projects 50 million mt, relatively flat with 2018 shipments of 49.7 million mt. Cash flow this year, Seaport wrote, is expected to be "significantly reduced," given lower pricing and higher costs.
Prices have declined, in particular, for 8,400 Btu/lb coal, which Cloud Peak produces at its Cordero Rojo mine. Rising costs from higher strip ratios at the mine have "made these tons largely uneconomic," the report said.
At Cloud Peak's Antelope mine, with higher heat content coal of about 9,300 Btu/lb, the producer has faced several weather-related production issues, causing strip work to be deferred and raising 2019 costs. Compared with capital expenditure of $14 million in 2018, capex for 2019 is budgeted at $16 million.
In terms of logistics, the Kalimantan 5000 GAR index price fell 14% in Q4 to $46/mt, "a level at which the business would not generate positive returns," Seaport wrote. Since then, prices have risen to the mid-$50s, but "management has noted in the past that an ideal level is over $60/mt."
Cloud Peak could not be reached for comment.
